Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The following discussion should be read in conjunction with the consolidated financial statements appearing elsewhere herein and is based primarily on the consolidated financial statements for the three and six months ended June 30, 2023 and 2022, of UDR, Inc. Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q (this “Report”) to “UDR,” the “Company,” “we,” “our” and “us” refer to UDR, Inc., together with its consolidated subsidiaries, including United Dominion Realty, L.P. (the “Operating Partnership” or the “OP”) and UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership”).

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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, as amended (the “Exchange Act”). Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development activity and capital expenditures, capital raising activities, rent growth, occupancy, rental expense growth and expected or potential impacts of the novel coronavirus disease (“COVID-19”) pandemic. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements.

The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements:

●general market and economic conditions;
●the impact of inflation/deflation;
●unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates, including as a result of COVID-19;
●the failure of acquisitions, developments or redevelopments to achieve anticipated results;
●possible difficulty in selling apartment communities;
●competitive factors that may limit our ability to lease apartment homes or increase or maintain rents;
●insufficient cash flow that could affect our debt financing and create refinancing risk;
●failure to generate sufficient revenue, which could impair our debt service payments and distributions to stockholders;
●development and construction risks that may impact our profitability;
●potential damage from natural disasters, including hurricanes and other weather-related events, which could result in substantial costs to us;
●risks from climate change that impacts our properties or operations;
●risks from extraordinary losses for which we may not have insurance or adequate reserves;
●risks from cybersecurity breaches of our information technology systems and the information technology systems of our third party vendors and other third parties;
●the availability of capital and the stability of the capital markets;
●changes in job growth, home affordability and the demand/supply ratio for multifamily housing;
●the failure of automation or technology to help grow net operating income;
●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 or at expected rent and occupancy levels;
●our failure to succeed in new markets;
●risks that third parties who have an interest in or are otherwise involved in projects in which we have an interest, including mezzanine borrowers, joint venture partners or other investors, do not perform as expected;
●changing interest rates, which could increase interest costs and affect the market price of our securities;
●potential liability for environmental contamination, which could result in substantial costs to us;
●the imposition of federal taxes if we fail to qualify as a REIT under the Code in any taxable year;
●our internal control over financial reporting may not be considered effective which could result in a loss of investor confidence in our financial reports, and in turn have an adverse effect on our stock price; and
●changes in real estate laws, tax laws, rent control or stabilization laws or other laws affecting our business.

A discussion of these and other factors affecting our business and prospects is set forth in Part II, Item 1A. Risk Factors. We encourage investors to review these risk factors.

Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.

Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.

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Business Overview

We are a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, disposes of, and manages multifamily apartment communities in targeted markets located in the United States. We were formed in 1972 as a Virginia corporation. In June 2003, we changed our state of incorporation from Virginia to Maryland. Our subsidiaries include the Operating Partnership and the DownREIT Partnership.

At June 30, 2023, our consolidated real estate portfolio included 162 communities in 13 states plus the District of Columbia totaling 53,832 apartment homes. In addition, we have an ownership interest in 9,956 completed or to-be-completed apartment homes through unconsolidated joint ventures or partnerships, including 5,791 apartment homes owned by entities in which we hold preferred equity investments. The Same-Store Community apartment home population for both the three and six months ended June 30, 2023, was 51,846.

The following table summarizes our market information by major geographic markets as of and for the three and six months ended June 30, 2023:

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​​​​June 30, 2023​Three Months Ended June 30, 2023​Six Months Ended June 30, 2023
​​​PercentageTotal​Monthly​Monthly
​​Number of​Number of​of Total​Carrying​Average​Income per​Average​Income per
​​Apartment​Apartment​Carrying​Value (in​Physical​Occupied​Physical​Occupied
Same-Store Communities​Communities​Homes​Value​thousands)​Occupancy​Home (a)​Occupancy​Home (a)
West Region​​​​
Orange County, CA84,2958.7%$1,360,570​96.3%$2,99996.2%$2,976
San Francisco, CA112,7796.0%​920,995​96.4%​3,47096.6%​3,462
Seattle, WA142,7017.1%1,098,250​97.1%2,82397.0%2,811
Los Angeles, CA41,2253.1%476,903​96.3%3,07396.4%3,141
Monterey Peninsula, CA71,5671.3%194,417​95.7%2,23595.5%2,236
Other Southern California38211.4%223,085​96.9%2,86996.9%2,812
Portland, OR37520.8%123,693​97.1%2,02897.3%2,018
Mid-Atlantic Region​​​​​
Metropolitan D.C.249,03316.5%2,560,469​97.2%2,30997.1%2,291
Baltimore, MD72,2213.6%552,796​95.6%1,88395.4%1,883
Richmond, VA41,3591.1%162,884​96.7%1,80896.7%1,786
Northeast Region​​​​​
Boston, MA114,23411.1%1,713,193​96.7%3,11496.7%3,096
New York, NY62,31810.1%1,565,404​98.0%4,58397.9%4,548
Philadelphia, PA​3​972​2.4%​370,935​96.4%​2,588​96.8%​2,553
Southeast Region​​​​​
Tampa, FL113,8774.3%662,910​96.6%2,12796.5%2,110
Orlando, FL113,4933.6%554,855​96.3%1,92396.1%1,904
Nashville, TN82,2601.6%241,925​95.8%1,76695.8%1,752
Other Florida16360.6%94,988​96.1%2,34996.3%2,327
Southwest Region​​​​​
Dallas, TX145,8136.3%974,524​96.3%1,78096.4%1,772
Austin, TX41,2721.2%188,007​96.1%1,93296.5%1,924
Denver, CO​1​218​1.0%​147,059​95.5%​3,615​95.8%​3,578
Total/Average Same-Store Communities15551,84691.8%14,187,862​96.6%$2,49396.6%$2,479
Non-Mature, Commercial Properties & Other71,9867.5%1,152,554​​​
Total Real Estate Held for Investment16253,83299.3%15,340,416​​​
Real Estate Under Development (b)——0.7%108,432​​​
Total Real Estate Owned16253,832100.0%15,448,848​​​
Total Accumulated Depreciation​(5,951,557)​​​
Total Real Estate Owned, Net of Accumulated Depreciation​$9,497,291​​​
(a)Monthly Income per Occupied Home represents total monthly revenues divided by the average physical number of occupied apartment homes in our Same-Store portfolio.
(b)As of June 30, 2023, the Company was developing two wholly-owned communities with a total of 415 apartment homes, none of which have 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 April 1, 2022 (for quarter-to-date comparison) and January 1, 2022 (for year-to-date comparison) and held as of June 30, 2023. These communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior period, there is no plan to conduct substantial redevelopment activities, and the communities are not classified as held for disposition within the current year. A community is considered to have stabilized occupancy once it achieves 90% occupancy for at least three consecutive months.

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.

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Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations either through operating cash flows, sales of properties, borrowings under our credit agreements, and/or the issuance of debt and/or equity securities. Our primary source of liquidity is our cash flow from operations, as determined by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment homes, and borrowings under our credit agreements. We routinely use our working capital credit facility, our unsecured revolving credit facility and issuances of commercial paper to temporarily fund certain investing and financing activities prior to arranging for longer-term financing or the issuance of equity or debt securities. During the past several years, proceeds from the sale of real estate have been used for both investing and financing activities as we continue to execute on maintaining a diversified portfolio.

We expect to meet our short-term liquidity requirements generally through net cash provided by property operations and borrowings under our credit agreements and our unsecured commercial paper program. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities, the repayment of financing on development activities, and potential property acquisitions, through net cash provided by property operations, secured and unsecured borrowings, the issuance of debt or equity securities, and/or the disposition of properties. We believe that our net cash provided by property operations and borrowings under our credit agreements and our unsecured commercial paper program will continue to be adequate to meet both operating requirements and the payment of dividends by the Company in accordance with REIT requirements. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations, borrowings under credit agreements, the issuance of debt or equity securities, and/or dispositions of properties.

We have a shelf registration statement filed with the Securities and Exchange Commission, or “SEC,” which provides for the issuance of common stock, preferred stock, depositary shares, debt securities, guarantees of debt securities, warrants, subscription rights, purchase contracts and units to facilitate future financing activities in the public capital markets. Access to capital markets is dependent on market conditions at the time of issuance.

In July 2021, the Company entered into an ATM sales agreement under which the Company may offer and sell up to 20.0 million shares of its common stock, from time to time, to or through its sales agents and may enter into separate forward sales agreements to or through its forward purchasers. Upon entering into the ATM sales agreement, the Company simultaneously terminated the sales agreement for its prior at-the-market equity offering program, which was entered into in July 2017. During the three and six months ended June 30, 2023, the Company did not sell any shares of common stock through its ATM program. As of June 30, 2023, we had 14.0 million shares of common stock available for future issuance under the ATM program.

In connection with any forward sales agreement under the Company’s ATM program, the relevant forward purchasers will borrow from third parties and, through the relevant sales agent, acting in its role as forward seller, sell a number of shares of the Company’s common stock equal to the number of shares underlying the agreement. The Company does not initially receive any proceeds from any sale of borrowed shares by the forward seller.

Future Capital Needs

Future development and redevelopment expenditures may be funded through unsecured or secured credit facilities, unsecured commercial paper, proceeds from the issuance of equity or debt securities, sales of properties, joint ventures, and, to a lesser extent, from cash flows provided by property operations. Acquisition activity in strategic markets may be funded through joint ventures, by the reinvestment of proceeds from the sale of properties, through the issuance of equity or debt securities, the issuance of operating partnership units and the assumption or placement of secured and/or unsecured debt.

During the remainder of 2023, we have approximately $0.7 million of secured debt maturing, inclusive of principal amortization, and $250.0 million of unsecured debt maturing, comprised solely of unsecured commercial paper. We anticipate repaying the remaining debt with cash flow from our operations, proceeds from debt or equity offerings, proceeds from dispositions of properties, or from borrowings under our credit agreements and our unsecured commercial paper program.

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.

Guarantor Subsidiary Summarized Financial Information

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UDR has certain outstanding debt securities that are guaranteed by United Dominion Realty, L.P. (the “Operating Partnership”). With respect to this debt, as further outlined below, the Operating Partnership fully and unconditionally guarantees payment of any principal, premium and interest in full to the holders thereof. The Operating Partnership is a subsidiary of UDR, through which UDR conducts a significant portion of its business and holds a substantial amount of its assets. UDR also conducts business through other subsidiaries, including its taxable REIT subsidiaries. In addition to its ownership interest in the Operating Partnership, UDR holds interests in subsidiaries and joint ventures, owns and operates properties, issues securities from time to time and guarantees debt of certain of its subsidiaries. UDR, as the sole general partner of the Operating Partnership, owns 100 percent of the Operating Partnership’s general partnership interests and approximately 95 percent of its limited partnership interests and, by virtue thereof, has the ability to control all of the day-to-day operations of the Operating Partnership. UDR has concluded that it is the primary beneficiary of, and therefore consolidates, the Operating Partnership.

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The Operating Partnership is the subsidiary guarantor of certain of our registered debt securities, including the $300 million of medium-term notes due September 2026, $300 million of medium-term notes due July 2027, $300 million of medium-term notes due January 2028, $300 million of medium-term notes due January 2029, $600 million of medium-term notes due January 2030, $600 million of medium-term notes due August 2031, $400 million of medium-term notes due August 2032, $350 million of medium-term notes due March 2033, $300 million of medium-term notes due in June 2033 and $300 million of medium-term notes due November 2034.

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The Operating Partnership fully and unconditionally guarantees payment of any principal, premium and interest in full to the holders of the notes described above. The guarantee forms part of the indenture under which the notes were issued. If, for any reason, we do not make any required payment in respect of the notes when due, the Operating Partnership will cause the payment to be made to, or to the order of, the applicable paying agent on behalf of the trustee. Holders of the notes may enforce their rights under the guarantee directly against the Operating Partnership without first making a demand or taking action against UDR or any other person or entity. The Operating Partnership may, without the consent of the holders of the notes, assume all of our rights and obligations under the notes and, upon such assumption, we will be released from our liabilities under the indenture and the notes.

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The notes are UDR’s unsecured general obligations and rank equally with all of UDR’s other unsecured and unsubordinated indebtedness outstanding from time to time. As a result, our payment of amounts due on the notes is subordinated to all of our existing and future secured obligations to the extent of the value of the collateral pledged toward any such secured obligation. Our payment of amounts due on the notes also is effectively subordinated to all liabilities, whether secured or unsecured, of any of our non-guarantor subsidiaries because, in the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding with respect to such subsidiaries, we, as an equity holder of such subsidiaries, would not receive distributions from such subsidiaries until claims of any creditors of such subsidiaries are satisfied.

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The following tables present the summarized financial information for the Operating Partnership as of June 30, 2023 and December 31, 2022, and for the three and six months ended June 30, 2023 and 2022. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis (dollars in thousands):

​​​​​​​
​​June 30,​December 31,
​20232022
Total real estate, net$2,314,586$2,353,509
Cash and cash equivalents​10​9
Operating lease right-of-use assets​193,504​195,296
Other assets​67,819​67,186
Total assets$2,575,919$2,616,000
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Secured debt, net​$187,120​$187,537
Notes payable to UDR (a)​​1,208,465​​1,162,308
Operating lease liabilities​​188,738​​190,495
Other liabilities​129,355​118,103
Total liabilities​1,713,678​1,658,443
Total capital​$862,241​$957,557

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​​​​​​​​​​​​​
​​Three Months Ended​Six Months Ended
​​June 30,​June 30,
​​2023202220232022
Total revenue$135,985$124,606​$270,040$245,404
Property operating expenses​(59,160)​(45,859)​(117,169)​(93,629)
Real estate depreciation and amortization​(38,741)​(38,182)​(77,380)​(75,056)
Operating income/(loss)​38,084​40,565​75,491​76,719
Interest expense (a)​(13,993)​(9,938)​(24,753)​(19,101)
Other income/(loss)​1,133​4,375​2,415​7,557
Net income/(loss)$25,224$35,002​$53,153$65,175
(a)All $1.2 billion and $1.2 billion notes payable to UDR as of June 30, 2023 and December 31, 2022, respectively, and $12.9 million and $9.4 million of interest expense on notes payable to UDR for the three months ended June 30, 2023 and 2022, respectively, and $22.6 million and $18.1 million of interest expense on notes payable to UDR for the six months ended June 30, 2023 and 2022, respectively, eliminate upon consolidation of UDR’s consolidated financial statements.

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Critical Accounting Policies and Estimates and New Accounting Pronouncements

Our critical accounting policies are those having the most impact on the reporting of our financial condition and results and those requiring significant judgments and estimates. These policies include those related to (1) capital expenditures, (2) impairment of long-lived assets, (3) real estate investment properties, and (4) revenue recognition.

Our critical accounting policies are described in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in UDR’s Annual Report on Form 10-K, filed with the SEC on February 13, 2023. There have been no significant changes in our critical accounting policies from those reported in our Form 10-K filed with the SEC on February 13, 2023. With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented.

Statements of Cash Flows

The following discussion explains the changes in Net cash provided by/(used in) operating activities, Net cash provided by/(used in) investing activities, and Net cash provided by/(used in) financing activities that are presented in our Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022.

Operating Activities

For the six months ended June 30, 2023, our Net cash provided by/(used in) operating activities was $410.0 million, compared to $398.1 million for the comparable period in 2022. The increase in cash flow from operating activities was primarily due to an increase in net operating income, primarily driven by higher revenue per occupied home, and NOI from additional operating communities, partially offset by a decrease in operating distributions from our unconsolidated joint ventures and changes in operating assets and liabilities.

Investing Activities

For the six months ended June 30, 2023, Net cash provided by/(used in) investing activities was $(60.7) million, compared to $(575.1) million for the comparable period in 2022. The decrease in cash used in investing activities was primarily due to a decrease in acquisitions, an increase in proceeds from sales of real estate, a decrease in spend for development of real estate assets and a decrease in cash investments in unconsolidated joint ventures, partially offset by an increase in capital expenditures, a decrease in distributions received from unconsolidated joint ventures and partnerships, and an increase from the net issuance of notes receivable during the current period compared to the prior year period.

Acquisitions

The Company did not have any acquisitions during the three and six months ended June 30, 2023, other than taking title to a 136 apartment home operating community located in San Francisco, California, through a foreclosure proceeding. The

community was previously owned by a consolidated joint venture of the Company. (See Note 5, Joint Ventures and Partnerships for more information).

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Dispositions

In January 2023, the Company sold the retail component of a development community located in Washington D.C. for gross proceeds of approximately $14.4 million, resulting in an estimated gain of less than $0.1 million.The gross proceeds were received ratably throughout the development of the community and are reflected as a reduction of capital expenditures.

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In June 2023, the Company contributed four wholly owned operating communities, totaling 1,328 apartment homes located in various markets, to a newly formed joint venture in exchange for a 51.0% interest in the venture. The contribution resulted in the Company no longer retaining a controlling interest in the communities, and the Company deconsolidated the operating communities. The Company received approximately $247.9 million in cash proceeds from our joint venture partner at formation. The transaction was accounted for as a partial sale and resulted in a gain of approximately $325.9 million, which was recorded in Gain/(loss) on sale of real estate owned on the Consolidated Statement of Operations, which consisted of the gain on the partial sale and the initial measurement of our retained interest at fair value. (See Note 5, Joint Ventures and Partnerships for further discussion.)

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Capital Expenditures

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

For the six months ended June 30, 2023, total capital expenditures of $143.9 million, or $2,647 per stabilized home, which in aggregate include recurring capital expenditures and major renovations, were spent across our portfolio, excluding development, as compared to $82.8 million, or $1,554 per stabilized home, for the comparable period in 2022.

The increase in total capital expenditures was primarily due to:

●an increase of 171.0%, or $45.7 million, in major renovations, which includes major structural changes and/or architectural revisions to existing buildings; and
●an increase of 47.2%, or $12.0 million, in NOI enhancing improvements, such as kitchen and bath remodels and upgrades to common areas.

The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under development, for the six months ended June 30, 2023 and 2022 (dollars in thousands except Per Home amounts):

​​​​​​​​​​​​​​​​​​
​​​​​​​​​​Per Home
​​Six Months Ended June 30,​Six Months Ended June 30,
​20232022% Change20232022% Change
Turnover capital expenditures​$7,831​$7,2827.5%$144​$1375.1%
Asset preservation expenditures​23,932​21,74510.1%440​4087.8%
Total recurring capital expenditures​31,763​29,0279.4%584​5457.2%
NOI enhancing improvements (a)​37,497​25,47247.2%690​47844.4%
Major renovations (b)​72,454​26,736171.0%1,333​502165.5%
Operations platform​​2,194​​1,561​40.6%​40​​29​37.9%
Total capital expenditures (c)​$143,908​$82,79673.8%$2,647​$1,55470.3%
Repair and maintenance expense​$46,574​$39,97316.5%$857​$75014.3%
Average home count (d)​54,347​53,3062.0%​​​​​​​​
(a)NOI enhancing improvements are expenditures that result in increased income generation or decreased expense growth.
(b)Major renovations include major structural changes and/or architectural revisions to existing buildings.
(c)Total capital expenditures includes amounts capitalized during the year. Cash paid for capital expenditures is impacted by the net change in related accruals.
(d)Average number of homes is calculated based on the number of homes outstanding at the end of each month.

We intend to continue to selectively add NOI enhancing improvements, which we believe will provide a return on investment in excess of our cost of capital. Our objective in redeveloping a community is twofold: we aim to meaningfully grow rental rates while also achieving cap rate compression through asset quality improvement.

Consolidated Real Estate Under Development and Redevelopment

At June 30, 2023, our development pipeline consisted of two wholly-owned communities totaling 415 apartment homes, none of which have been completed, with a budget of $187.5 million, in which we have a gross carrying value of $108.4 million. The remaining homes are estimated to be completed during the second quarter of 2024.

At June 30, 2023, the Company had no communities at which it was conducting substantial redevelopment activities.

Unconsolidated Joint Ventures and Partnerships

The Company recognizes income or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share of the net income or losses of the joint ventures and partnerships. In addition, we may earn fees for providing management services to the communities held by the unconsolidated joint ventures and partnerships.

The Company’s Investment in and advances to unconsolidated joint ventures and partnerships, net, are accounted for under the equity method of accounting. For the six months ended June 30, 2023:

●we made cash investments totaling $25.4 million in our unconsolidated joint ventures and partnerships;
●our proportionate share of the net income/(loss) of the joint ventures and partnerships was $19.4 million; and
●we received cash distributions of $13.8 million, of which $8.1 million were operating cash flows and $5.7 million were investing cash flows.

We evaluate our investments in unconsolidated joint ventures and partnerships when events or changes in circumstances indicate that there may be an other-than-temporary decline in value. We consider various factors to determine if a decrease in the value of the investment is other-than-temporary. The Company did not recognize any other-than-temporary impairments in the value of its investments in unconsolidated joint ventures or partnerships during the six months ended June 30, 2023 and 2022.

Financing Activities

For the six months ended June 30, 2023, our Net cash provided by/(used in) financing activities was $(349.1) million, compared to $177.3 million for the comparable period of 2022.

The following significant financing activities occurred during the six months ended June 30, 2023:

●net repayment of $50.0 million on our unsecured commercial paper program;
●net repayment of $8.0 million on our revolving bank debt;
●payment of $16.9 million of distributions to redeemable noncontrolling interests; and
●payment of $263.3 million of distributions to our common stockholders.

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Credit Facilities and Commercial Paper Program

The Company has a $1.3 billion unsecured revolving credit facility (the “Revolving Credit Facility”) and a $350.0 million unsecured term loan (the “Term Loan”). The credit agreement for these facilities (the “Credit Agreement”) allows the total commitments under the Revolving Credit Facility and the total borrowings under the Term Loan to be increased to an aggregate maximum amount of up to $2.5 billion, subject to certain conditions, including obtaining commitments from one or more lenders. The Revolving Credit Facility has a scheduled maturity date of January 31, 2026, with two six-month extension options, subject to certain conditions. The Term Loan has a scheduled maturity date of January 31, 2027.

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Based on the Company’s current credit rating, the Revolving Credit Facility has an interest rate equal to Adjusted SOFR plus a margin of 75.5 basis points and a facility fee of 15 basis points, and the Term Loan has an interest rate equal to Adjusted SOFR plus a margin of 83.0 basis points. Depending on the Company’s credit rating, the margin under the Revolving Credit Facility ranges from 70 to 140 basis points, the facility fee ranges from 10 to 30 basis points, and the margin under the Term Loan ranges from 75 to 160 basis points. Further, the Credit Agreement includes sustainability adjustments pursuant to which the applicable margin for the Revolving Credit Facility and the Term Loan were reduced by two basis points upon the Company receiving certain green building certifications, which is reflected in the margins noted above.

As of June 30, 2023, we had no outstanding borrowings under the Revolving Credit Facility, leaving $1.3 billion of unused capacity (excluding $2.3 million of letters of credit at June 30, 2023), and $350.0 million of outstanding borrowings under the Term Loan.

The Company has a working capital credit facility, which provides for a $75.0 million unsecured revolving credit facility (the “Working Capital Credit Facility”) with a scheduled maturity date of January 12, 2024. Based on the Company’s current credit rating, the Working Capital Credit Facility has an interest rate equal to Adjusted SOFR plus a margin of 77.5 basis points. Depending on the Company’s credit rating, the margin ranges from 70 to 140 basis points.

As of June 30, 2023, we had $20.0 million of outstanding borrowings under the Working Capital Credit Facility, leaving $55.0 million of unused capacity.

The bank revolving credit facilities and the term loan are subject to customary financial covenants and limitations, all of which we were in compliance with at June 30, 2023.

The Company has an unsecured commercial paper program. Under the terms of the program, the Company may issue unsecured commercial paper up to a maximum aggregate amount outstanding of $700.0 million. The notes are sold under customary terms in the United States commercial paper market and rank pari passu with all of the Company’s other unsecured indebtedness. The notes are fully and unconditionally guaranteed by the Operating Partnership. As of June 30, 2023, we had issued $250.0 million of commercial paper, for one month terms, at a weighted average annualized rate of 5.48%, leaving $450.0 million of unused capacity.

Interest Rate Risk

We are exposed to interest rate risk associated with variable rate notes payable and maturing debt that has to be refinanced. We do not hold financial instruments for trading or other speculative purposes, but rather issue these financial

instruments to finance our portfolio of real estate assets and operations. Interest rate sensitivity is the relationship between changes in market interest rates and the fair value of market rate sensitive assets and liabilities. Our earnings are affected as changes in short-term interest rates impact our cost of variable rate debt and maturing fixed rate debt. We had $297.0 million in variable rate debt that is not subject to interest rate swap contracts as of June 30, 2023. If market interest rates for variable rate debt increased by 100 basis points, our interest expense for the six months ended June 30, 2023 would increase by $2.6 million based on the average balance outstanding during the period.

These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. This analysis does not consider the effects of the adjusted level of overall economic activity that could exist in such an environment or actions we may take to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no change in our financial structure.

The Company also utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow hedges. See Note 11, Derivatives and Hedging Activities, in the Notes to the UDR Consolidated Financial Statements included in this Report for additional discussion of derivative instruments.

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

​​​​​​​
​​Six Months Ended June 30,
​​20232022
Net cash provided by/(used in) operating activities$409,988$398,087
Net cash provided by/(used in) investing activities​(60,694)(575,083)
Net cash provided by/(used in) financing activities​(349,107)177,267

​

​

Results of Operations

The following discussion explains the changes in results of operations that are presented in our Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022.

Net Income/(Loss) Attributable to Common Stockholders

Net income/(loss) attributable to common stockholders was $346.3 million ($1.05 per diluted share) for the three months ended June 30, 2023, as compared to $4.0 million ($0.01 per diluted share) for the comparable period in the prior year. The increase resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

●gains on the sale of real estate of $325.9 million from the partial sale of four operating communities located in various markets during the three months ended June 30, 2023, as compared to no gains recognized on the sale of real estate during the three months ended June 30, 2022;
●an increase in total property NOI of $22.2 million primarily due to higher revenue per occupied home and NOI from additional operating communities, partially offset by a decrease in weighted average physical occupancy and an increase in property operating expenses;
●an increase in income from unconsolidated entities of $20.9 million primarily due to $(0.7) million of investment income/(loss) from RETV I during the three months ended June 30, 2023, as compared to $(16.4) million of investment income/(loss) from RETV I during the three months ended June 30, 2022, which primarily related to unrealized gains/(losses) from one portfolio investment held by RETV I, SmartRent, and an increase in income from our preferred equity investments; and
●an increase in interest income and other income/(expense), net of $7.4 million primarily due to $8.7 million of unrealized gains from investment income/(loss) from our direct investment in SmartRent during the three months ended June 30, 2023, as compared to $(2.2) million of unrealized losses from investment income/(loss) during the three months ended June 30, 2022.

This was partially offset by:

​

●an increase in net income attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership of $22.4 million primarily attributed to the noncontrolling interests’ share of the gain from the partial sale of four operating communities located in various markets during the three months ended June 30, 2023, as compared to none in the same period of 2022; and
●an increase in interest expense of $8.3 million primarily due to an increase in average interest rates during the three months ended June 30, 2023, as compared to the same period in 2022.

Net income/(loss) attributable to common stockholders was $376.1 million ($1.14 per diluted share) for the six months ended June 30, 2023, as compared to $16.6 million ($0.05 per diluted share) for the comparable period in the prior year. The increase resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

●gains on the sale of real estate of $325.9 million from the partial sale of four operating communities located in various markets during the six months ended June 30, 2023, as compared to no gains recognized on the sale of real estate during the six months ended June 30, 2022;
●an increase in total property NOI of $53.7 million primarily due to higher revenue per occupied home and NOI from additional operating communities, partially offset by a decrease in weighted average physical occupancy and an increase in property operating expenses;
●an increase in income from unconsolidated entities of $25.2 million primarily due to $0.8 million of investment income/(loss) from RETV I during the six months ended June 30, 2023, as compared to $(26.6) million of investment income/(loss) from RETV I during the six months ended June 30, 2022, which primarily related to unrealized gains/(losses) from one portfolio investment held by RETV I, SmartRent, and an increase in income from our preferred equity investments, partially offset by $10.6 million of net variable upside participation recorded on the sale of a DCP community for the six months ended June 30, 2022; and
●an increase in interest income and other income/(expense), net of $10.9 million primarily due to $7.8 million of investment income/(loss) from our direct investment in SmartRent during the six months ended June 30, 2023, as compared to $(5.0) million during the six months ended June 30, 2022.

This was partially offset by:

​

●an increase in net income attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership of $23.4 million primarily attributed to the noncontrolling interests’ share of the gain from the partial sale of four operating communities located in various markets during the six months ended June 30, 2023, as compared to none in the same period of 2022; and
●an increase in interest expense of $16.1 million primarily due to an increase in average interest rates during the six months ended June 30, 2023, as compared the same period in 2022.

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 3.25% of property revenue, and land rent. Property management expense covers costs directly related to consolidated property operations, inclusive of corporate management, regional supervision, accounting and other costs.

Management considers NOI a useful metric for investors as it is a more meaningful representation of a community’s continuing operating performance than net income as it is prior to corporate-level expense allocations, general and administrative costs, capital structure and depreciation and amortization.

Although the Company considers NOI a useful measure of operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities as determined in accordance with GAAP. NOI excludes several income and expense categories as detailed in the reconciliation of NOI to Net income/(loss) attributable to UDR, Inc. below.

The following table summarizes the operating performance of our total property NOI for each of the periods presented (dollars in thousands):

​​​​​​​​​​​​​​​​​​
​​Three Months Ended​​​Six Months Ended​​​
​​June 30, (a)​​​June 30, (a)​​​
​20232022% Change20232022% Change​
Same-Store Communities:​​​​​​​​​​​​​
Same-Store rental income​$374,534$350,2606.9%$744,633$692,399​7.5%
Same-Store operating expense (b)​(114,016)(106,161)7.4%(225,174)(211,823)​6.3%
Same-Store NOI​260,518244,0996.7%519,459480,576​8.1%
​​​​​​​​​​​​​​​​​​
Non-Mature Communities/Other NOI:​​​​​​​​​​​​​
Stabilized, non-mature communities NOI (c)​​6,5441,073​509.9%​12,331​​928​NM*
Development communities NOI​178(226)NM*(414)(522)​(20.7)%
Non-residential/other NOI (d)​​2,9942,781​7.7%​7,617​​4,136​84.2%
Sold and held for disposition communities NOI​​6,4876,828​(5.0)%​13,231​​13,370​(1.0)%
Total Non-Mature Communities/Other NOI​16,20310,45655.0%32,76517,912​82.9%
Total property NOI​$276,721$254,5558.7%$552,224$498,488​10.8%
  • Not meaningful
(a)Same-Store consists of 51,846 apartment homes.
(b)Excludes depreciation, amortization, and property management expenses.
(c)Represents non-mature communities that have achieved 90% occupancy for three consecutive months but do not meet the criteria to be included in Same-Store Communities.
(d)Primarily non-residential revenue and expense and straight-line adjustment for concessions.

​

The following table is our reconciliation of Net income/(loss) attributable to UDR, Inc. to total property NOI for each of the periods presented (dollars in thousands):

​​​​​​​​​​​​​​
​​Three Months Ended​Six Months Ended​
​​June 30,​June 30,​
​2023202220232022​
Net income/(loss) attributable to UDR, Inc.​$347,545​$5,084​$378,509​$18,789​
Joint venture management and other fees​(1,450)​(1,419)​(2,692)​(2,504)​
Property management​13,101​11,952​26,046​23,528​
Other operating expenses​4,259​5,027​7,291​9,739​
Real estate depreciation and amortization​168,925​167,584​338,225​331,206​
General and administrative​16,452​16,585​33,932​31,493​
Casualty-related charges/(recoveries), net​1,134​1,074​5,290​309​
Other depreciation and amortization​3,681​3,016​7,330​6,091​
(Gain)/loss on sale of real estate owned​​(325,884)​​—​​(325,885)​​—​
(Income)/loss from unconsolidated entities​(9,697)​11,229​(19,404)​5,817​
Interest expense​45,113​36,832​88,855​72,748​
Interest income and other (income)/expense, net​(10,447)​(3,001)​(11,457)​(561)​
Tax provision/(benefit), net​1,351​312​1,585​655​
Net income/(loss) attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership​22,630​272​24,583​1,151​
Net income/(loss) attributable to noncontrolling interests​8​8​16​27​
Total property NOI​$276,721​$254,555​$552,224​$498,488​

​

Same-Store Communities

Our Same-Store Community properties, those acquired, developed, and stabilized prior to April 1, 2022 (for quarter-to-date comparison) and January 1, 2022 (for year-to-date comparison) and held on June 30, 2023 consisted of 51,846 apartment homes for both periods and provided 94.1% and 94.1% of our total NOI for the three and six months ended June 30, 2023, respectively.

Three Months Ended June 30, 2023 vs. Three Months Ended June 30, 2022

NOI for our Same-Store Community properties increased 6.7%, or $16.4 million, for the three months ended June 30, 2023 compared to the same period in 2022. The increase in property NOI was attributable to a 6.9%, or $24.3 million, increase in property rental income, partially offset by a 7.4%, or $7.9 million, increase in operating expenses. The increase in property rental income was primarily driven by a 7.8%, or $25.5 million, increase in rental rates and a 4.5%, or $1.7 million, increase in reimbursement and ancillary and fee income, partially offset by a $1.2 million increase in bad debt based on probability of collection and a $1.4 million increase in occupancy loss. Weighted average physical occupancy decreased by 0.4% to 96.6% and total monthly income per occupied home increased by 7.3% to $2,493.

The increase in operating expenses was primarily driven by a 12.1%, or $2.5 million, increase in repair and maintenance expense due to the increased use of third party vendors as a result of an increase in the number of homes that turned as well as the impact of inflation on those third party vendor costs and weather related events, a 14.2%, or $2.0 million, increase in utilities, which was primarily due an increase in energy costs, and a 4.6%, or $2.0 million, increase in real estate taxes due to higher assessed valuations.

The operating margin (property net operating income divided by property rental income) was 69.6% and 69.7% for the three months ended June 30, 2023 and 2022, respectively.

Six Months Ended June 30, 2023 vs. Six Months Ended June 30, 2022

NOI for our Same-Store Community properties increased 8.1%, or $38.9 million, for the six months ended June 30, 2023 compared to the same period in 2022. The increase in property NOI was attributable to a 7.5%, or $52.2 million, increase in property rental income, partially offset by a 6.3%, or $13.4 million, increase in operating expenses. The increase in property rental income was primarily driven by an 8.9%, or $57.7 million, increase in rental rates and a 5.0%, or $3.8 million, increase in reimbursement and ancillary and fee income, partially offset by a $4.4 million increase in bad debt based on probability of collection and a $3.6 million increase in occupancy loss. Weighted average physical occupancy decreased by 0.5% to 96.6% and total monthly income per occupied home increased by 8.1% to $2,479.

The increase in operating expenses was primarily driven by a 13.4%, or $5.2 million, increase in repair and maintenance expense due to the increased use of third party vendors as a result of an increase in the number of homes that were turned as well as the impact of inflation on those third party vendor costs and weather related events, a 15.0%, or $4.3 million, increase in utilities, which was primarily due an increase in energy costs, and a 4.7%, or $4.1 million, increase in real estate taxes due to higher assessed valuations, partially offset by a $1.7 million decrease in personnel costs primarily due to a refundable payroll tax credit related to the Employee Retention Credit program.

The operating margin (property net operating income divided by property rental income) was 69.8% and 69.4% for the six months ended June 30, 2023 and 2022, respectively.

Non-Mature Communities/Other

UDR’s Non-Mature Communities/Other represent those communities that do not meet the criteria to be included in Same-Store Communities, which include communities recently developed or acquired, redevelopment properties, sold or held for disposition properties, and non-apartment components of mixed use properties.

Three Months Ended June 30, 2023 vs. Three Months Ended June 30, 2022

The remaining 5.9%, or $16.2 million, of our total NOI during the three months ended June 30, 2023 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased by 55.0%, or $5.7 million, for the three months ended June 30, 2023 as compared to the same period in 2022. The increase was primarily attributable to a

$5.5 million increase in stabilized, non-mature communities NOI due to development communities completed in 2022 becoming stabilized.

Six Months Ended June 30, 2023 vs. Six Months Ended June 30, 2022

The remaining 5.9%, or $32.8 million, of our total NOI during the six months ended June 30, 2023 was generated from our Non-Mature Communities/Other. NOI from Non-Mature Communities/Other increased by 82.9%, or $14.9 million, for the six months ended June 30, 2023 as compared to the same period in 2022. The increase was primarily attributable to an $11.4 million increase in stabilized, non-mature communities NOI due to development communities completed in 2022 becoming stabilized and a $3.5 million increase in non-residential/other NOI due to changes in straight-line rent as a result of decreased tenant rent concessions.

Gain/(loss) on sale of real estate owned

For the three and six months ended June 30, 2023, the Company recognized gain/(loss) on sale of real estate owned of $325.9 million for both periods compared to no gain/(loss) on sale of real estate owned for both the three and six months ended June 30, 2022. The increase in 2023 as compared to 2022 was attributable to the partial sale of four operating communities located in various markets during the three and six months ended June 30, 2023.

Income/(loss) from unconsolidated entities

For the three months ended June 30, 2023 and 2022, the Company recognized income/(loss) from unconsolidated entities of $9.7 million and $(11.2) million, respectively. The increase in 2023 as compared to 2022 was primarily attributable to $(0.7) million of investment income/(loss) from RETV I during the three months ended June 30, 2023 as compared to $(16.4) million of investment income/(loss) from RETV I during the three months ended June 30, 2022, which primarily related to unrealized gains/(losses) from one portfolio investment held by RETV I, SmartRent, and an increase in income from our preferred equity investments.

For the six months ended June 30, 2023 and 2022, the Company recognized income/(loss) from unconsolidated entities of $19.4 million and $(5.8) million, respectively. The increase in 2023 as compared to 2022 was primarily attributable to $0.8 million of investment income/(loss) from RETV I during the six months ended June 30, 2023 as compared to $(26.6) million of investment income/(loss) from RETV I during the six months ended June 30, 2022, which primarily related to unrealized gains/(losses) from one portfolio investment held by RETV I, SmartRent, and an increase in income from our preferred equity investments, partially offset by $10.6 million of net variable upside participation recorded on the sale of a DCP community for the six months ended June 30, 2022

Interest expense

For the three months ended June 30, 2023 and 2022, the Company recognized interest expense of $45.1 million and $36.8 million, respectively. The increase in 2023 as compared to 2022 was primarily due to an increase in average interest rates for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

For the six months ended June 30, 2023 and 2022, the Company recognized interest expense of $88.9 million and $72.7 million, respectively. The increase in 2023 as compared to 2022 was primarily due to an increase in average interest rates for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022.

Interest income and other income/(expense), net

For the three months ended June 30, 2023 and 2022, the Company recognized interest income and other income/(expense), net of $10.4 million and $3.0 million, respectively. The increase in 2023 as compared to 2022 was primarily due to $8.7 million of investment income/(loss) from our direct investment in SmartRent during the three months ended June 30, 2023, as compared to $(2.2) million during the three months ended June 30, 2022.

For the six months ended June 30, 2023 and 2022, the Company recognized interest income and other income/(expense), net of $11.5 million and $0.6 million, respectively. The increase in 2023 as compared to 2022 was primarily

due to $7.8 million of investment income/(loss) from our direct investment in SmartRent during the six months ended June 30, 2023, as compared to $(5.0) million during the six months ended June 30, 2022.

Noncontrolling Interest

For the three months ended June 30, 2023 and 2022, the Company recognized net income attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership of $22.6 million and $0.3 million, respectively. The increase in 2023 as compared to 2022 was primarily attributed to the noncontrolling interests’ share of the gains from the partial sale of four operating communities located in various markets during the three months ended June 30, 2023, as compared to none in the same period of 2022.

For the six months ended June 30, 2023 and 2022, the Company recognized net income attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership of $24.6 million and $1.2 million, respectively. The increase in 2023 as compared to 2022 was primarily attributed to the noncontrolling interests’ share of the gains from the partial sale of four operating communities located in various markets during the six months ended June 30, 2023, as compared to none in the same period of 2022.

Inflation

Inflation primarily impacts our results of operations as a result of wage pressures and increases in utilities and repair and maintenance costs. In addition, inflation could also impact our general and administrative expenses, the interest on our debt if variable or refinanced in a high-inflationary environment, our cost of capital, and our cost of development, redevelopment, maintenance or other operating activities. However, the majority of our apartment leases have initial terms of 12 months or less, which generally enables us to compensate for inflationary effects by increasing rents on our apartment homes. Although an extreme or sustained escalation in costs could have a negative impact on our residents and their ability to absorb rent increases, we do not believe this had a material impact on our results for the three and six months ended June 30, 2023.

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

Funds from Operations

Funds from operations (“FFO”) attributable to common stockholders and unitholders is defined as Net income/(loss) attributable to common stockholders (computed in accordance with GAAP), excluding impairment write-downs of depreciable real estate related to the main business of the Company or of investments in non-consolidated investees that are directly attributable to decreases in the fair value of depreciable real estate held by the investee, gains and losses from sales of depreciable real estate related to the main business of the Company and income taxes directly associated with those gains and losses, plus real estate depreciation and amortization, and after adjustments for noncontrolling interests, and the Company’s share of unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust's (“Nareit”) definition issued in April 2002 and restated in November 2018. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, Nareit created FFO as a supplemental measure of a REIT’s operating performance. In the computation of diluted FFO, if OP Units, DownREIT Units, unvested restricted stock, unvested LTIP Units, stock options, and the shares of Series E Cumulative Convertible Preferred Stock are dilutive, they are included in the diluted share count.

Management considers FFO a useful metric for investors as the Company uses FFO in evaluating property acquisitions and its operating performance, and believes that FFO should be considered along with, but not as an alternative to, net income and cash flow as a measure of the Company’s activities in accordance with GAAP. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of funds available to fund our cash needs.

Funds from Operations as Adjusted

FFO as Adjusted (“FFOA”) attributable to common stockholders and unitholders is defined as FFO excluding the impact of non-comparable items including, but not limited to, acquisition-related costs, prepayment costs/benefits associated with early debt retirement, impairment write-downs or gains and losses on sales of real estate or other assets incidental to the

main business of the Company and income taxes directly associated with those gains and losses, casualty-related expenses and recoveries, severance costs and legal and other costs.

Management believes that FFOA is useful supplemental information regarding our operating performance as it provides a consistent comparison of our operating performance across time periods and enables investors to more easily compare our operating results with other REITs. FFOA is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. We believe that Net income/(loss) attributable to common stockholders is the most directly comparable GAAP financial measure to FFOA. However, other REITs may use different methodologies for calculating FFOA or similar FFO measures and, accordingly, our FFOA may not always be comparable to FFOA or similar FFO measures calculated by other REITs. FFOA should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity.

Adjusted Funds from Operations

Adjusted FFO (“AFFO”) attributable to common stockholders and unitholders is defined as FFOA less recurring capital expenditures on consolidated communities that are necessary to help preserve the value of and maintain functionality at our communities. Therefore, management considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company’s operational performance than FFO or FFOA.

AFFO is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of our operating performance. We believe that Net income/(loss) attributable to common stockholders is the most directly comparable GAAP financial measure to AFFO. Management believes that AFFO is a widely recognized measure of the operations of REITs, and presenting AFFO enables investors to assess our performance in comparison to other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not always be comparable to AFFO calculated by other REITs. AFFO should not be considered as an alternative to net income/(loss) (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flow 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 common stockholders to FFO, FFOA, and AFFO for the three and six months ended June 30, 2023 and 2022 (dollars in thousands):

​​​​​​​​​​​​​​
​​Three Months Ended​Six Months Ended​
​​June 30,​June 30,​
​2023202220232022​
Net income/(loss) attributable to common stockholders​$346,323​$3,975​$376,104​$16,588​
Real estate depreciation and amortization​168,925​167,584​338,225​331,206​
Noncontrolling interests​22,638​280​24,599​1,178​
Real estate depreciation and amortization on unconsolidated joint ventures​8,695​7,489​16,180​15,113​
Net gain on the sale of depreciable real estate owned, net of tax​(324,769)​—​(324,770)​—​
FFO attributable to common stockholders and unitholders, basic​$221,812​$179,328​$430,338​$364,085​
Distributions to preferred stockholders — Series E (Convertible)​1,222​1,109​2,405​2,201​
FFO attributable to common stockholders and unitholders, diluted​$223,034​$180,437​$432,743​$366,286​
Income/(loss) per weighted average common share, diluted​$1.05​$0.01​$1.14​$0.05​
FFO per weighted average common share and unit, basic​$0.63​$0.53​$1.23​$1.07​
FFO per weighted average common share and unit, diluted​$0.63​$0.52​$1.22​$1.06​
Weighted average number of common shares and OP/DownREIT Units outstanding — basic​350,207​339,885​350,157​339,715​
Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding — diluted​353,730​344,024​353,698​344,044​
​​​​​​​​​​​​​​
Impact of adjustments to FFO:​​​​​
Variable upside participation on DCP, net​$(204)​$—​$(204)​$(10,622)​
Legal and other​—​709​(1,258)​1,483​
Realized (gain)/loss on real estate technology investments, net of tax​​257​​(5,886)​​852​​(8,124)​
Unrealized (gain)/loss on real estate technology investments, net of tax​​(8,104)​​20,676​​(8,962)​​36,307​
Casualty-related charges/(recoveries), net​1,134​1,074​5,290​309​
Total impact of adjustments to FFO​$(6,917)​$16,573​$(4,282)​$19,353​
FFOA attributable to common stockholders and unitholders, diluted​$216,117​$197,010​$428,461​$385,639​
​​​​​​​​​​​​​​
FFOA per weighted average common share and unit, diluted​$0.61​$0.57​$1.21​$1.12​
​​​​​​​​​​​​​​
Recurring capital expenditures​(21,345)​(18,411)​(33,644)​(30,215)​
AFFO attributable to common stockholders and unitholders, diluted​$194,772​$178,599​$394,817​$355,424​
​​​​​​​​​​​​​​
AFFO per weighted average common share and unit, diluted​$0.55​$0.52​$1.12​$1.03​

​

The following table is our reconciliation of FFO share information to weighted average common shares outstanding, basic and diluted, reflected on the UDR Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (shares in thousands):

​​​​​​​​​
​​Three Months Ended​Six Months Ended
​​June 30,​June 30,
​2023202220232022
Weighted average number of common shares and OP/DownREIT Units outstanding — basic350,207339,885350,157339,715
Weighted average number of OP/DownREIT Units outstanding(21,250)(21,534)(21,286)(21,534)
Weighted average number of common shares outstanding — basic per the Consolidated Statements of Operations328,957318,351328,871318,181
​​​​​​​​​
Weighted average number of common shares, OP/DownREIT Units, and common stock equivalents outstanding — diluted353,730344,024353,698344,044
Weighted average number of OP/DownREIT Units outstanding(21,250)(21,534)(21,286)(21,534)
Weighted average number of Series E Cumulative Convertible Preferred shares outstanding—(2,918)—(2,918)
Weighted average number of common shares outstanding — diluted per the Consolidated Statements of Operations332,480319,572332,412319,592

​

​

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