UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q FOR QUARTERLY AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to_________ Commission file number 1-10524 ------- UNITED DOMINION REALTY TRUST, INC. ---------------------------------- (Exact name of registrant as specified in its charter) Virginia 54-0857512 - - ------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 400 East Cary Street, Richmond, Virginia 23219-3802 - - -------------------------------------------------------------------------------- (Address of principal executive offices - zip code) (804) 780-2691 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to filing requirements for at least the past 90 days. Yes X No ______ ------ APPLICABLE ONLY TO CORPORATE USERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock as of May 8, 2001: Common Stock, $1 Par Value: 101,291,902
UNITED DOMINION REALTY TRUST, INC. FORM 10-Q INDEX <TABLE> <CAPTION> PAGE ---- <S> <C> PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited) Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000.................. 3 Consolidated Statements of Operations for the three months ended March 31, 2001 and 2000............................................................. 4 Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000............................................................. 5 Consolidated Statement of Shareholders' Equity for the three months ended March 31, 2001...................................................................... 6 Notes to Consolidated Financial Statements.............................................. 7-14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................................................... 15-24 Item 3. Quantitative and Qualitative Disclosures About Market Risk.............................. 25 PART II - OTHER INFORMATION Item 1. Legal Proceedings....................................................................... 26 Item 2. Changes in Securities................................................................... 26 Item 3. Defaults Upon Senior Securities......................................................... 26 Item 4. Submission of Matters to a Vote of Security Holders..................................... 26 Item 5. Other Information....................................................................... 26 Item 6. Exhibits and Reports on Form 8-K........................................................ 26-30 Signatures ..................................................................................... 31 </TABLE> 2
UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) <TABLE> <CAPTION> March 31, December 31, 2001 2000 - - --------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> ASSETS Real estate owned: Real estate held for investment (Note 2) $ 3,666,312 $ 3,758,974 Less: accumulated depreciation (532,739) (506,871) -------------- -------------- 3,133,573 3,252,103 Real estate under development 51,884 60,366 Real estate held for disposition (net of accumulated depreciation of $15,937 and $2,534) (Note 3) 120,585 14,446 -------------- -------------- Total real estate owned, net of accumulated depreciation 3,306,042 3,326,915 Cash and cash equivalents 7,442 10,305 Restricted cash 33,593 44,943 Deferred financing costs 13,650 14,271 Investment in unconsolidated development joint venture (Note 4) 7,886 8,088 Other assets 52,050 49,435 -------------- -------------- Total assets $ 3,420,663 $ 3,453,957 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Secured debt (Note 5) $ 838,014 $ 866,115 Unsecured debt (Note 6) 1,177,438 1,126,215 Real estate taxes payable 21,060 30,554 Accrued interest payable 16,033 18,059 Security deposits and prepaid rent 23,266 22,524 Distributions payable 36,242 36,128 Accounts payable, accrued expenses and other liabilities 54,277 47,144 -------------- -------------- Total liabilities 2,166,330 2,146,739 Minority interests 86,160 88,326 Shareholders' equity Preferred stock, no par value; $25 liquidation preference, 25,000,000 shares authorized; 3,954,920 shares 9.25% Series A Cumulative Redeemable issued and outstanding (3,969,120 in 2000) 98,873 99,228 5,432,109 shares 8.60% Series B Cumulative Redeemable issued and outstanding (5,439,109 in 2000) 135,803 135,978 8,000,000 shares 7.50% Series D Cumulative Convertible Redeemable issued and outstanding (8,000,000 in 2000) 175,000 175,000 Common stock, $1 par value; 150,000,000 shares authorized 101,369,483 shares issued and outstanding (102,219,250 in 2000) 101,369 102,219 Additional paid-in capital 1,073,051 1,081,387 Distributions in excess of net income (397,233) (366,531) Notes receivable from officer-shareholders (7,382) (7,561) Deferred compensation - unearned restricted stock awards (2,194) (828) Accumulated other comprehensive loss (Note 7) (9,114) - -------------- -------------- Total shareholders' equity 1,168,173 1,218,892 -------------- -------------- Total liabilities and shareholders' equity $ 3,420,663 $ 3,453,957 ============== ============== </TABLE> See accompanying notes to consolidated financial statements. 3
UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) <TABLE> <CAPTION> Three Months Ended March 31, 2001 2000 - - ---------------------------------------------------------------------------------------------- <S> <C> <C> REVENUES Rental income $ 152,816 $ 154,057 Non-property income 1,136 1,070 ----------- ---------- Total revenues 153,952 155,127 EXPENSES Rental expenses: Real estate taxes and insurance 17,561 17,483 Personnel 16,050 16,438 Repair and maintenance 8,476 8,532 Utilities 7,638 6,534 Administrative and marketing 5,833 5,923 Property management 3,790 4,643 Other operating expenses 430 402 Real estate depreciation 40,398 33,904 Interest 37,221 39,075 Severance costs and other organizational charges 5,404 - Impairment loss on real estate and investments (Note 3) 3,188 - General and administrative 4,505 3,870 Other depreciation and amortization 881 1,203 ----------- ---------- Total expenses 151,375 138,007 ----------- ---------- Income before gains on sales of investments, minority interests and extraordinary item 2,577 17,120 Gains on sales of depreciable property 4,102 2,533 ----------- ---------- Income before minority interests and extraordinary item 6,679 19,653 Minority interests of unitholders in operating partnerships 244 (668) Minority interests of unitholders in other partnerships (1,004) (177) ----------- ---------- Income before extraordinary item 5,919 18,808 Extraordinary item - early extinguishment of debt (187) (228) ----------- ---------- Net income 5,732 18,580 Distributions to preferred shareholders - Series A and B (5,206) (5,583) Distributions to preferred shareholders - Series D (Convertible) (3,857) (3,825) Discount on preferred share repurchases 23 - ----------- ---------- Net income (loss) available to common shareholders $ (3,308) $ 9,172 =========== ========== Earnings (loss) per common share (Note 8): Basic $ (0.03) $ 0.09 =========== ========== Diluted $ (0.03) $ 0.09 =========== ========== Common distributions declared per share $ 0.2700 $ 0.2675 =========== ========== Weighted average number of common shares outstanding-basic 101,346 103,019 Weighted average number of common shares outstanding-diluted 101,346 103,045 </TABLE> See accompanying notes to consolidated financial statements. 4
UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) <TABLE> <CAPTION> Three Months Ended March 31, 2001 2000 - - ---------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Operating Activities Net income $ 5,732 $ 18,580 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 41,279 35,107 Impairment loss on real estate and investments 3,188 - Gains on sales of investments (4,102) (2,533) Minority interests 760 845 Extraordinary item-early extinguishment of debt 187 228 Amortization of deferred financing costs and other 883 1,057 Changes in operating assets and liabilities: Decrease in operating liabilities (12,989) (8,272) Decrease in operating assets 15,564 3,896 --------------- --------------- Net cash provided by operating activities 50,502 48,908 Investing Activities Proceeds from sales of real estate investments, net 4,236 13,042 Development of real estate assets (11,744) (19,653) Capital expenditures - real estate assets, net of escrow reimbursement (11,322) (6,220) Acquisition of real estate assets, net of liabilities assumed (4,410) - Capital expenditures - non-real estate assets (360) (1,766) 1031 exchange funds held in escrow (7,233) - --------------- --------------- Net cash used in investing activities (30,833) (14,597) Financing Activities Scheduled principal payments on secured notes payable ( 2,709) (3,573) Non-scheduled principal payments on secured notes payable (20,620) (49,645) Proceeds from the issuance of unsecured notes payable - 146,700 Payments on unsecured notes payable (16,993) (8,351) Net borrowing/(repayment) of short-term bank debt 68,300 (83,900) Payment of financing costs (180) (935) Proceeds from the issuance of common stock 1,966 4,305 Distributions paid to minority interests (2,528) (2,393) Distributions paid to preferred shareholders (9,081) (9,355) Distributions paid to common shareholders (27,238) (26,899) Repurchase of operating partnership units (353) - Repurchase of common and preferred stock (13,096) (1,986) --------------- --------------- Net cash used in financing activities (22,532) (36,032) Net decrease in cash and cash equivalents (2,863) (1,721) Cash and cash equivalents, beginning of period 10,305 7,678 --------------- --------------- Cash and cash equivalents, end of period $ 7,442 $ 5,957 =============== =============== Supplemental Information: Interest paid during the period $ 38,711 $ 34,466 Conversion of operating partnership units to common stock 11 626 Issuance of restricted stock awards 1,548 829 Non-cash transactions associated with the acquisition of properties: Secured debt assumed 2,915 - Non-cash transactions associated with the disposition of properties: Reduction in secured debt 7,694 10,367 </TABLE> See accompanying notes to consolidated financial statements. 5
UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands, except per share data) (Unaudited) <TABLE> <CAPTION> Preferred Stock Common Stock ---------------------------------------------------- Shares Amount Shares Amount - - ------------------------------------------------------------------------------------------------------------------------ <S> <C> Balance, December 31, 2000 17,408,229 $ 410,206 102,219,250 $ 102,219 Comprehensive Income Net income Other comprehensive loss: Cumulative effect of a change in accounting principle (Note 7) Unrealized loss on derivative instruments (Note 7) ---------------------------------------------------------------------------------------------------------------------- Comprehensive loss ---------------------------------------------------------------------------------------------------------------------- Issuance of common shares to employees, officers and director-shareholders 33,278 33 Issuance of common shares through dividend reinvestment and stock purchase plan 95,972 96 Purchase of common and preferred stock (21,200) (530) (1,116,856) (1,117) Issuance of restricted stock awards 127,100 127 Adjustment for cash purchase and conversion of minority interests of unitholders in operating partnerships 10,739 11 Principal repayments on notes receivable from officer- shareholders Common stock distributions declared ($.27 per share) Preferred stock distributions declared-Series A ($.54 per share) Preferred stock distributions declared-Series B ($.54 per share) Preferred stock distributions declared-Series D ($.48 per share) Amortization of deferred compensation -------------------------------------------------- Balance, March 31, 2001 17,387,029 $ 409,676 101,369,483 $ 101,369 ================================================== </TABLE> <TABLE> <CAPTION> Distributions in Notes Receivable Paid-in Excess of from Officer - Capital Net Income Shareholders - - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Balance, December 31, 2000 $ 1,081,387 $ (366,531) $ (7,561) Comprehensive Income Net income 5,732 Other comprehensive loss: Cumulative effect of a change in accounting principle (Note 7) Unrealized loss on derivative instruments (Note 7) -------------------------------------------------------------------------------------------------------------------------------- Comprehensive loss 5,732 -------------------------------------------------------------------------------------------------------------------------------- Issuance of common shares to employees, officers and director-shareholders 554 Issuance of common shares through dividend reinvestment and stock purchase plan 1,104 Purchase of common and preferred stock (11,449) Issuance of restricted stock awards 1,421 Adjustment for cash purchase and conversion of minority interests of unitholders in operating partnerships 34 Principal repayments on notes receivable from officer- shareholders 179 Common stock distributions declared ($.27 per share) (27,371) Preferred stock distributions declared-Series A ($.54 per share) (2,286) Preferred stock distributions declared-Series B ($.54 per share) (2,920) Preferred stock distributions declared-Series D ($.48 per share) (3,857) Amortization of deferred compensation ------------------------------------------------------ Balance, March 31, 2001 $ 1,073,051 $ (397,233) $ (7,382) ====================================================== </TABLE> <TABLE> <CAPTION> Deferred Accumulated Compensation - Other Unearned Restricted Comprehensive Stock Awards Loss Total - - ------------------------------------------------------------------------------------------------------------------------------- <S> <C> Balance, December 31, 2000 $ (828) $ - $ 1,218,892 Comprehensive Income Net income 5,732 Other comprehensive loss: Cumulative effect of a change in accounting principle (Note 7) (3,848) (3,848) Unrealized loss on derivative instruments (Note 7) (5,266) (5,266) ---------------------------------------------------------------------------------------------------------------------------- Comprehensive loss (9,114) (3,382) ---------------------------------------------------------------------------------------------------------------------------- Issuance of common shares to employees, officers and director-shareholders 587 Issuance of common shares through dividend reinvestment and stock purchase plan 1,200 Purchase of common and preferred stock (13,096) Issuance of restricted stock awards (1,548) - Adjustment for cash purchase and conversion of minority interests of unitholders in operating partnerships 45 Principal repayments on notes receivable from officer- shareholders 179 Common stock distributions declared ($.27 per share) (27,371) Preferred stock distributions declared-Series A ($.54 per share) (2,286) Preferred stock distributions declared-Series B ($.54 per share) (2,920) Preferred stock distributions declared-Series D ($.48 per share) (3,857) Amortization of deferred compensation 182 182 ---------------------------------------------------------- Balance, March 31, 2001 $ (2,194) $ (9,114) $ 1,168,173 ========================================================== </TABLE> See accompanying notes to consolidated financial statements. 6
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 (UNAUDITED) 1. Basis of Presentation The accompanying consolidated financial statements include the accounts of United Dominion and its subsidiaries, including United Dominion Realty, L.P. (the "Operating Partnership"), and Heritage Communities L.P. (the "Heritage OP"), (collectively, "United Dominion"). As of March 31, 2001, there were 74,486,812 units in the Operating Partnership outstanding, of which 67,693,188 units, or 90.9%, were owned by United Dominion and 6,793,624 units, or 9.1%, were owned by non-affiliated limited partners. As of March 31, 2001, there were 4,535,846 units in the Heritage OP outstanding, of which 3,910,755 units, or 86.2%, were owned by United Dominion and 625,091 units, or 13.8%, were owned by non-affiliated limited partners. The consolidated financial statements of United Dominion include the minority interests of the unitholders in the operating partnerships. The accompanying interim unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. The accompanying consolidated financial statements should be read in conjunction with the audited financial statements and related notes appearing in United Dominion's December 31, 2000 Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of management, the consolidated financial statements reflect all adjustments which are necessary for the fair presentation of financial position at March 31, 2001 and results of operations for the interim periods ended March 31, 2001 and 2000. Such adjustments are normal and recurring in nature. All significant inter-company accounts and transactions have been eliminated in consolidation. The interim results presented are not necessarily indicative of results that can be expected for a full year. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. Certain previously reported amounts have been reclassified to conform to the current financial statement presentation. 2. Real Estate Held for Investment At March 31, 2001 there are 270 communities with 75,488 apartment homes classified as real estate held for investment. The following table summarizes the components of real estate held for investment at March 31, 2001 and December 31, 2000 (dollars in thousands): <TABLE> <CAPTION> March 31, December 31, 2001 2000 ----------------- ----------------- <S> <C> <C> Land and land improvements $ 543,160 $ 668,003 Buildings and improvements 2,936,582 2,902,386 Furniture, fixtures and equipment 186,257 188,321 Construction in progress 313 264 ----------------- ----------------- Real estate held for investment 3,666,312 3,758,974 Accumulated depreciation (532,739) (506,871) ----------------- ----------------- Real estate held for investment, net of accumulated depreciation $3,133,573 $3,252,103 ================= ================= </TABLE> 7
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 (UNAUDITED) 3. Real Estate Held for Disposition At March 31, 2001, United Dominion had six apartment communities with 1,638 homes, eleven parcels of land and three commercial properties included in real estate held for disposition totaling $120.6 million, which is net of $15.9 million of accumulated depreciation. Real estate held for disposition contributed total revenues of $4.4 million and $4.1 million and property operating income (property rental income less property operating expense) of $2.7 million and $2.4 million for the three month periods ended March 31, 2001 and 2000, respectively. Certain assets are secured by mortgage indebtedness, which may be assumed by the purchaser or repaid from the net proceeds. During the first quarter of 2001, United Dominion performed an analysis of the carrying value of all undeveloped land parcels in connection with the Company's plans to accelerate the disposition of these sites. As a result, an aggregate $2.8 million impairment loss was recognized on seven undeveloped sites in selected markets. An impairment loss was indicated as a result of the net book value of the assets being greater than the estimated fair market value less the cost of disposal. 4. Investment in Unconsolidated Joint Venture At March 31, 2001, United Dominion's investment in an unconsolidated joint venture ("the venture") consisted of a 25% partnership interest in a development joint venture in which the Company is serving as the managing partner. No gain or loss was recognized on the Company's contribution to the development joint venture. The venture will develop five apartment communities with a total of 1,438 homes for an aggregate total cost of approximately $103 million. Upon closing of the venture in June 2000, United Dominion contributed the projects in return for its equity interest of approximately $8 million in the venture and was reimbursed for approximately $35 million of development outlays that were incurred prior to closing the joint venture. United Dominion serves as the developer, general contractor and property manager for the venture and recognized fee income, to the extent of the outside partner's interest, of approximately $0.4 million for services provided by the Company to the joint venture for the quarter ended March 31, 2001. As of March 31, 2001, four of the joint venture properties were complete and one property remains under development with completion anticipated to occur in the third quarter of 2001. The Company has the option, but not the obligation, to purchase these properties for fair value upon completion of the projects. Although the legal termination date of the joint venture is December 2006, the Company does not anticipate that the venture's useful life will exceed three years. The following is a summary of the financial position of the joint venture as of March 31, 2001 and December 31, 2000 (dollars in thousands): <TABLE> <CAPTION> March 31, December 31, 2001 2000 -------------- -------------- <S> <C> <C> Assets: Real estate, net $94,014 $85,644 Other assets 3,699 6,507 -------------- -------------- Total assets $97,713 $92,151 ============== ============== Liabilities and partners' equity: Mortgage notes payable $59,227 $49,785 Other liabilities 7,779 11,436 Partners' equity 30,707 30,930 -------------- -------------- Total liabilities and partners' equity $97,713 $92,151 ============== ============== </TABLE> 8
5. Secured Debt Secured debt, which encumbers $1.4 billion or 38.5% of United Dominion's real estate owned ($2.4 billion or 61.5% of United Dominion's real estate owned is unencumbered) consists of the following at March 31, 2001 (dollars in thousands): <TABLE> <CAPTION> No. of Weighted Avg. Weighted Avg. Communities Principal Outstanding Interest Rate Years to Maturity Encumbered ----------------------------- ---------------------------------------------------- March 31, December 31, 2001 2000 2001 2001 2001 - - ---------------------------------------------------------------- ---------------------------------------------------- <S> <C> <C> <C> <C> <C> Fixed Rate Debt Mortgage Notes Payable (a) $511,332 $513,962 7.81% 5.5 74 Tax-Exempt Secured Notes Payable 76,287 79,756 6.80% 13.3 10 Secured Credit Facilities (b) 17,000 17,000 7.04% 12.8 -- ----------------------------- ---------------------------------------------------- Total Fixed Rate Secured Debt 604,619 610,718 7.66% 6.7 84 Variable Rate Debt Secured Credit Facilities (b) 196,340 216,960 7.33% 13.1 20 Tax-Exempt Secured Notes Payable 19,916 19,916 3.57% 24.2 3 Mortgage Notes Payable 17,139 18,521 7.39% 6.1 4 ----------------------------- ---------------------------------------------------- Total Variable Rate Secured Debt 233,395 255,397 7.01% 13.5 27 ----------------------------- ---------------------------------------------------- Total Secured Debt $838,014 $866,115 7.46% 8.4 111 ============================= ==================================================== </TABLE> (a) Includes fair value adjustments aggregating $9.7 million at March 31, 2001 and $10.2 million at December 31, 2000, recorded in connection with the ASR Merger and the AAC Merger on March 27, 1998 and December 7, 1998, respectively. (b) At March 31, 2001, United Dominion had $213.3 million outstanding under two revolving credit facilities with the Federal National Mortgage Association (the "FNMA Credit Facilities"). At March 31, 2001, the FNMA Credit Facilities had a weighted average floating rate of interest of 7.31%. In order to limit a portion of its interest rate exposure, United Dominion has two interest rate swap agreements associated with the FNMA Credit Facilities. These agreements have an aggregate notional value of $17 million under which United Dominion pays a fixed rate of interest and receives a variable rate on the notional amount. The interest rate swap agreements effectively change United Dominion's interest rate exposure on $17 million of secured debt from a variable rate to a weighted average fixed rate of 7.04%. Approximate principal payments due during each of the next five calendar years and thereafter, as of March 31, 2001, are as follows (dollars in thousands): <TABLE> <CAPTION> Amount Year Maturing ----------------------------------------- <S> <C> 2001 $ 52,122 2002 54,284 2003 60,918 2004 124,798 2005 126,537 Thereafter 419,355 ------------ Total $838,014 ============ </TABLE> 9
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 (UNAUDITED) 6. Unsecured Debt A summary of unsecured debt at March 31, 2001 and December 31, 2000 is as follows (dollars in thousands): <TABLE> <CAPTION> 2001 2000 -------------- ------------- Commercial Banks <S> <C> <C> Borrowings outstanding under an unsecured credit facility (a) (b) $ 312,700 $ 244,400 Borrowings outstanding under an unsecured term loan (c) 100,000 100,000 Senior Unsecured Notes - Other 7.60% Medium-Term Notes due January 2002 46,750 48,750 7.65% Medium-Term Notes due January 2003 (d) 10,000 10,000 7.22% Medium-Term Notes due February 2003 11,890 11,900 5.05% City of Portland, OR Bonds due October 2003 7,345 7,345 8.63% Notes due March 2003 78,030 79,030 7.98% Notes due March, 2000-2003 (e) 14,857 22,285 7.67% Medium-Term Notes due January 2004 53,510 54,000 7.73% Medium-Term Notes due April 2005 22,400 22,400 7.02% Medium-Term Notes due November 2005 50,000 50,000 7.95% Medium-Term Notes due July 2006 103,308 107,398 7.07% Medium-Term Notes due November 2006 25,000 25,000 7.25% Notes due January 2007 108,310 110,080 ABAG Tax-Exempt Bonds due August 2008 46,700 46,700 8.50% Monthly Income Notes due November 2008 57,403 57,400 8.50% Debentures due September 2024 (f) 125,500 125,500 Other (g) 3,735 4,027 ------------- ------------ 764,738 781,815 ------------- ------------ Total Unsecured Debt $1,177,438 $1,126,215 ============= ============ </TABLE> (a) Weighted average interest rate of 6.5% and 7.5% at March 31, 2001 and December 31, 2000, respectively. (b) United Dominion had eight interest rate swap agreements associated with commercial bank borrowings with an aggregate notional value of $155 million under which United Dominion pays a fixed rate of interest and receives a variable rate of interest on the notional amounts. The interest rate swaps effectively change United Dominion's interest rate exposure on these borrowings from a variable rate to a weighted average fixed rate of approximately 6.98%. (c) United Dominion had five interest rate swap agreements associated with borrowings under the term loan with an aggregate notional value of $100 million under which United Dominion pays a fixed rate of interest and receives a variable rate of interest on the notional amounts. The interest rate swaps effectively change United Dominion's interest rate exposure on these borrowings from a variable rate to a weighted average fixed rate of approximately 7.53%. (d) United Dominion had one interest rate swap agreement associated with these unsecured notes with an aggregate notional value of $10 million under which United Dominion pays a fixed rate of interest and receives a variable rate on the notional amount. The interest rate swap agreement effectively changes United Dominion's interest rate exposure on the $10 million from a variable rate to a fixed rate of 7.65%. (e) Payable annually in two equal principal installments of $7.4 million. (f) Includes an investor put feature that grants a one-time option to redeem the debentures in September 2004. (g) Includes $3.6 million and $3.8 million at March 31, 2001 and December 31, 2000, respectively, of deferred gains from the termination of interest rate risk management agreements. 10
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 (UNAUDITED) 7. Derivative Instruments and Hedging Activities Statements of Financial Accounting Standards No. 133 and 138, "Accounting for Certain Derivative Instruments and Hedging Activities" became effective on January 1, 2001. The new accounting standards require companies to carry all derivative instruments, including certain embedded derivatives, in the consolidated balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based on the exposure being hedged, as either a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation. At March 31, 2001, all of the Company's derivative financial instruments are designated as cash flow hedges of underlying exposures, and are qualifying hedges for financial reporting purposes. For derivative instruments that qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings during the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in current earnings during the period of change. The adoption of Statements 133 and 138 on January 1, 2001 resulted in a cumulative effect of an accounting change of $(3.8) million all of which was recorded directly to other comprehensive loss. As part of United Dominion's overall interest rate risk management strategy, the Company uses derivative financial instruments as a means to modify the exposure to interest rate risk on variable rate debt obligations or to hedge anticipated financing transactions. The Company's derivative transactions used for interest rate risk management include various interest rate swaps with indices that relate to the pricing of specific financial instruments of United Dominion. Because of the close correlation between the hedging instrument and the underlying exposure being hedged, fluctuations in the value of the derivative instruments are generally offset by changes in the value of the underlying exposures. As a result, United Dominion believes that is has appropriately controlled the risk so that derivatives used for interest rate risk management will not have a material unintended effect on consolidated earnings. The Company does not enter into derivative financial instruments for trading purposes. The fair value of the Company's derivative instruments is reported on balance sheet at their current fair value. Estimated fair values for interest rate swaps rely on prevailing market interest rates. These fair value amounts should not be viewed in isolation, but rather in relation to the values of the underlying hedging transactions and investments and to the overall reduction in exposure to adverse fluctuations in interest rates. Each interest rate swap agreement is designated with all or a portion of the principal balance and term of a specific debt obligation. The interest rate swaps involve the periodic exchange of payments over the life of the related agreements. Amounts received or paid on the interest rate swaps are recorded on an accrual basis as an adjustment to the related interest expense of the outstanding debt based on the accrual method of accounting. The related amounts payable to and receivable from counterparties are included in other liabilities and other assets, respectively. The following table presents the fair values of the Company's derivative instruments outstanding as of March 31, 2001 (dollars in thousands): 11
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 (UNAUDITED) <TABLE> <CAPTION> Notional Fixed Type of Underlying Effective Contract Fair Amount Rate Contract Debt Date Maturity Value ------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> $ 5,000 7.32% Swap Bank Credit Facility 06/26/95 07/01/04 $ (210) 10,000 7.14% Swap Bank Credit Facility 10/18/95 10/03/02 (219) 5,000 6.98% Swap Bank Credit Facility 11/21/95 10/03/02 (96) 10,000 7.65% Swap Medium-Term Notes 01/26/99 01/27/03 (116) 7,000 6.78% Swap FNMA 06/30/99 06/30/04 (227) 10,000 7.22% Swap FNMA 12/01/99 04/01/04 (439) 25,000 7.39% Swap Bank Credit Facility 11/01/00 08/01/03 (932) 25,000 7.39% Swap Bank Credit Facility 11/01/00 08/01/03 (932) 25,000 7.49% Swap Bank Term Loan 11/15/00 05/15/03 (897) 20,000 7.49% Swap Bank Term Loan 11/15/00 05/15/03 (718) 23,500 7.62% Swap Bank Term Loan 11/15/00 05/15/04 (1,114) 23,000 7.62% Swap Bank Term Loan 11/15/00 05/15/04 (1,108) 25,000 7.21% Swap Bank Credit Facility 12/01/00 08/01/03 (828) 8,500 7.26% Swap Bank Term Loan 12/04/00 05/15/03 (265) 25,000 7.21% Swap Bank Credit Facility 12/04/00 08/01/03 (828) 35,000 5.98% Swap Bank Credit Facility 03/13/01 04/01/03 (213) ----------------------------------------------------------------------------------------------------------- $ 282,000 $ (9,142) =========================================================================================================== </TABLE> During the quarter ended March 31, 2001, United Dominion recognized $(3.8) million of a cumulative effect of a change in accounting principle and $5.2 million of unrealized losses in accumulated other comprehensive loss related to the Company's hedging instruments. In addition, United Dominion recognized $(28.0) thousand in net income related to the ineffective portion of the Company's hedging instruments. As of March 31, 2001, United Dominion expects to reclassify $3.7 million of net losses on derivative instruments from accumulated other comprehensive income to earnings (interest expense) during the next twelve months in order to artificially fix the interest rate on the related hedged transactions. 12
8. Earnings (Loss) Per Share Basic earnings (loss) per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is computed based on common shares outstanding plus the effect of dilutive stock options and other potentially dilutive common stock equivalents. The dilutive effect of stock options and other potential common stock equivalents is determined using the treasury stock method based on United Dominion's average stock price. The early extinguishment of debt does not have an effect on the earnings per share calculation for the periods presented. The following table sets forth the computation of basic and diluted earnings (loss) per share (dollars in thousands, except per share data): <TABLE> <CAPTION> Three months ended March 31, 2001 2000 ----------------------------- <S> <C> <C> Numerator for basic and diluted earnings per share- net income (loss) available to common shareholders $(3,308) $ 9,172 Denominator: Beginning denominator for basic earnings per share- weighted average common shares outstanding 101,529 103,019 Non-vested restricted stock (183) - ----------- ----------- Denominator for basic earnings per share 101,346 103,019 Effect of dilutive securities: Employee stock options - 26 ----------- ----------- Denominator for diluted earnings per share 101,346 103,045 =========== =========== Basic earnings (loss) per share: $ (0.03) $ 0.09 =========== =========== Diluted earnings (loss) per share $ (0.03) $ 0.09 =========== =========== </TABLE> The effect of the conversion of the operating partnership units and convertible preferred stock is not dilutive and is therefore not included in the above calculations. If the operating partnership units were converted to common stock, the additional shares of common stock outstanding for the three months ended March 31, 2001 and 2000 would be 7,425,760 and 7,503,570, respectively. If the convertible preferred stock was converted to common stock, the additional shares of common stock outstanding for the three months ended March 31, 2001 and 2000 would be 12,307,692 common shares. The effect of employee stock options for the three months ended March 31, 2001, was not included since its effect would be dilutive due to the net loss to common shareholders incurred during the period. 13
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 (UNAUDITED) 9. Restructuring Charges During the first quarter of 2001, United Dominion announced the appointment of a new chief executive officer and senior management structure. The new management team began a comprehensive review of the organizational structure of the Company and its operations. As a result of this review, the Company recorded a charge of $5.4 million related to workforce reductions and other miscellaneous costs. These charges are included in the Consolidated Statements of Operations within the line item "Severance costs and other organizational charges." All charges came under consideration subsequent to the appointment of the Company's new CEO in February 2001 and were approved by management and the Board of Directors in March 2001. The planned workforce reductions resulted in a charge of $4.5 million and in the planned termination of approximately 200 full time equivalent positions, or 10% of total staffing in corporate functions, including senior management and general and administrative functions, and in apartment operations. Employee termination benefits include severance packages and related benefits and outplacement services for employees terminated. As of March 31, 2001, approximately 220 employees have been terminated. The Company expects that substantially all of the unpaid charge as of March 31, 2001 will be paid during the third quarter of 2001. A reconciliation of the unpaid severance costs for the three months ended March 31, 2001, is presented below: (in millions) ---------------------------------------------------------- Balance, beginning of period $ - Accrued severance costs 4.5 Cash payments (0.9) ---------------------------------------------------------- Balance, end of period $ 3.6 ---------------------------------------------------------- In connection with senior management's review of the Company during the first quarter, United Dominion also recognized $0.4 million related to relocation costs associated with the new executive offices in Denver and $0.5 million in other miscellaneous costs. 10. Subsequent Events In April 2001, United Dominion sold six Florida communities with 1,638 apartment homes for an aggregate sales price of approximately $113.0 million and recognized gains for financial reporting purposes of $21.5 million. Proceeds from the sale were applied primarily to reductions in long-term debt, and to a lesser extent, to complete 1031 exchanges in order to defer taxable gains and to repurchase common and preferred shares. In May 2001, the shareholders of United Dominion approved the Out-Performance Program (the "Program) pursuant to which officers and other key employees of the Company will be given the opportunity to invest in the Company by purchasing performance shares ("Out-Performance Partnership Shares" or "OPPSs") of the Operating Partnership for an initial investment of $1.27 million. To begin the Program, the Company's performance will be measured over a twenty-eight month period beginning with the month of Thomas W. Toomey's employment (February 2001). The Program is designed to provide participants with the possibility of substantial returns on their investment if the Company's total return, defined as dividend income plus share price appreciation, on its common stock during the measurement period exceeds the industry average and is the equivalent of at least a 30% total return or 12% annualized (the "minimum return"). At the conclusion of the measurement period, if United Dominion's total return satisfies these criteria, the holders of the OPPSs will receive distributions and allocations of income and loss from the Operating Partnership equal to the distributions and allocations that would be received on the number of interests in the Operating Partnership ("OP Units") obtained by: (i) determining the amount by which the cumulative total return of the Company's common stock over the measurement period exceeds the greater of the cumulative total return of the peer group index (the Morgan Stanley REIT Index) or the minimum return (such being the "excess return"); (ii) multiplying 4% of the excess return by the Company's market capitalization (defined as the average number of shares outstanding over the 28 month period multiplied by the daily closing price of the Company's common stock); and (iii) dividing the number obtained in (ii) by the market value of one share of the Company common stock on the valuation date, as the weighted average price per day of the common stock for the 20 trading days immediately preceding the valuation date. If, on the valuation date, the cumulative total return of United Dominion's common stock does not meet the minimum return or the total return of the peer group and there is no excess return, then the holders of the OPPSs will forfeit their entire initial investment of $1.27 million. 14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - - ------------------------------------------------------------------------------- OF OPERATIONS ------------- Forward-Looking Statements The following information should be read in conjunction with the United Dominion Realty Trust, Inc. ("United Dominion") 2000 Form 10-K as well as the financial statements and notes included in Item 1 of this report. This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1993, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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", "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 the actual results, performance or achievement of United Dominion 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, unanticipated adverse business developments affecting United Dominion, or its properties, adverse changes in the real estate markets and general and local economies and business conditions. Although United Dominion believes that the assumptions underlying the forward- looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements included in this report will 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 United Dominion or any other person that the results or conditions described in such statements or the objectives and plans of United Dominion will be achieved. Overview United Dominion is a real estate investment trust (REIT) with activities related to the ownership, development, acquisition, renovation, management, marketing and strategic disposition of multifamily apartment communities nationwide. Over the past four years, United Dominion has diversified into new markets to create a national platform, upgraded the quality of the portfolio and invested in infrastructure and technology. The Company continues to review its strategy with a goal of enhancing long-term earnings growth on a sustained basis. At March 31, 2001, United Dominion owned 276 communities with 77,192 apartment homes nationwide. 15
The following table summarizes United Dominion's apartment market information by major geographic markets (including real estate held for disposition and real estate under development): <TABLE> <CAPTION> As of March 31, 2001 March 31, 2001 ---------------------------------------------------------- -------------------------------- Number of Total Percentage of Carrying Quarter Ended Quarter Ended Apartment Apartment Carrying Value Physical Avg Monthly Communities Homes Value (in thousands) Occupancy Rental Rates ---------------------------------------------------------- -------------------------------- <S> <C> <C> <C> <C> <C> <C> Houston, TX 22 5,722 5.9% $ 223,151 93.3% $ 605 Dallas, TX 14 4,533 5.6% 213,079 95.5% 670 Phoenix, AZ 11 3,618 5.5% 209,562 94.1% 699 Orlando, FL 14 4,140 5.2% 199,360 92.6% 697 San Antonio, TX 12 3,827 5.0% 188,050 93.2% 648 Raleigh, NC 9 2,951 4.1% 156,126 89.6% 717 Tampa, FL 10 3,372 4.0% 151,952 94.6% 684 Fort Worth, TX 11 3,561 3.8% 145,399 97.0% 625 San Francisco, CA 4 980 3.7% 139,622 99.1% 1,761 Charlotte, NC 10 2,710 3.5% 134,009 91.0% 676 Columbus, OH 5 2,175 3.2% 122,442 92.2% 663 Nashville, TN 8 2,220 3.1% 118,178 92.2% 685 South Florida 6 1,638 2.7% 103,509 95.7% 863 Greensboro, NC 8 2,123 2.7% 102,755 92.0% 635 Monterey Peninsula, CA 9 1,706 2.5% 96,762 96.1% 824 Memphis, TN 6 1,956 2.5% 95,954 92.1% 631 Richmond, VA 8 2,372 2.5% 94,753 96.1% 698 Southern California 5 1,414 2.4% 89,983 96.0% 869 Wilmington, NC 6 1,869 2.3% 88,284 88.1% 655 Atlanta, GA 6 1,426 1.8% 70,184 93.9% 734 Baltimore, MD 6 1,291 1.7% 66,473 97.8% 791 Columbia, SC 6 1,584 1.6% 61,589 94.4% 582 Seattle, WA 3 628 0.9% 33,668 96.3% 721 Other Northern Markets 38 8,383 9.7% 369,573 94.7% 667 Other Western Markets 23 6,233 8.2% 310,494 95.7% 650 Other Southern Markets 16 4,760 5.9% 221,764 91.9% 640 -------------------------------------------------------------------------------------------- Total Apartments 276 77,192 100.0% $3,806,675 93.9% $ 690 ============================================================================================ </TABLE> 16
Liquidity and Capital Resources United Dominion's primary source of liquidity is its cash flow from operations as determined by rental rates, occupancy levels and operating expenses related to its portfolio of apartment homes. United Dominion routinely uses its unsecured bank credit facility to temporarily fund certain investing and financing activities prior to arranging for longer-term financing. During the past several years, proceeds from the sales of real estate have been used for both investing and financing activities. United Dominion regularly reviews its short and long-term liquidity requirements and considers the adequacy of its cash flow from operations as well as other liquidity sources to meet these requirements. United Dominion believes that it can fund its short-term liquidity needs such as normal recurring operating expenses, debt service payments, recurring capital expenditures and distributions to common and preferred shareholders through cash provided by operating activities and borrowings from the Company's unsecured bank credit facility, as needed (see discussion that follows under "Financing Activities"). To facilitate future financing activities in the public capital markets, management believes that it is prudent to maintain shelf registration statement capacity. In this regard, United Dominion filed a shelf registration statement in December 1999 providing for the issuance of up to $700 million in common shares, preferred shares and debt securities. In March 2000, United Dominion utilized this shelf registration statement to sell $100 million of senior unsecured notes due March 2003 at an interest rate of 8.625%. As of March 31, 2001, $600 million of equity and debt securities remain available for use under the shelf registration. Future Capital Needs Future development expenditures are expected to be funded primarily through joint ventures or with proceeds from the sale of property, and to a lesser extent, cash flows provided by operating activities. Acquisition activity is expected to be limited to the reinvestment of proceeds from the sale of property in order to defer large tax gains and reinvested in targeted markets and sub- markets. During 2001, United Dominion has approximately $63 million of maturing debt which the Company anticipates repaying using proceeds from the sale of apartment communities, mortgage refinancing activity or borrowings under the Company's unsecured credit facility. The following discussion explains the changes in net cash provided by operating activities and net cash used in investing and financing activities which are presented in United Dominion's Consolidated Statements of Cash Flows. Operating Activities For the quarter ended March 31, 2001, United Dominion's cash flow from operating activities of $50.5 million was relatively flat compared to $48.9 million for the same period last year. The moderate increase of $1.6 million in the cash flow from operating activities resulted primarily from a change in the level of operating assets as a result of collections on escrow accounts and joint venture receivables. This increase was offset by a decrease in the level of operating liabilities as a result of the payment of real estate taxes. Investing Activities For the quarter ended March 31, 2001, net cash used in investing activities was $30.8 million compared to net cash used in investing activities of $14.6 million for 2000. Changes in the level of investing activities from period to period reflects United Dominion's strategy as it relates to its acquisition, capital expenditure, development and disposition programs, as well as the impact of the capital market environment on these activities. Real Estate under Development Development activity is focused in core markets that have strong operations managers in place. For the quarter ended March 31, 2001, United Dominion invested approximately $11.7 million on real estate projects, down $8.0 million from its 2000 level of $19.7 million. 17
The following projects were under development at March 31, 2001: <TABLE> <CAPTION> Cost to Budgeted Expected No. of Apt. Completed Date Cost Est. Cost Completion Homes Apt. Homes (In thousands) (In thousands) Per Home Date ----------- ------------ -------------- -------------- ---------- ------------ <S> <C> <C> <C> <C> <C> <C> New Communities: - - --------------- Dominion Place at Kildaire Farm 332 -- $15,000 $25,700 $77,400 1Q02 Raleigh, NC Red Stone Ranch 324 66 14,000 21,700 67,000 4Q01 Austin, TX ----------- ------------ ------------ ------------ ---------- Subtotal 656 66 29,000 47,400 72,300 ----------- ------------ ------------ ------------ ---------- Additional Phases: - - ----------------- Greensview II 192 -- 5,900 16,700 87,000 4Q01 Denver, CO Manor at England Run III 120 -- 2,900 8,800 73,300 4Q01 Fredericksburg, VA The Meridian II 270 -- 3,100 17,400 64,400 1Q02 Dallas, TX ----------- ------------ ------------ ------------ ---------- Subtotal 582 -- 11,900 42,900 73,700 ----------- ------------ ------------ ------------ ---------- Total 1,238 66 $40,900 $90,300 $72,900 =========== ============ ============ ============ ========== </TABLE> The new senior management team performed a comprehensive review of the Company's undeveloped land parcels during the first quarter of 2001. As a result of this review, the Company plans to curtail its development activity in suburban, low barrier to entry sub-markets and plans to sell off suburban development sites which at March 31, 2001, had a carrying value of $10.9 million. Development Joint Venture On June 21, 2000, United Dominion completed the formation of a joint venture that will invest approximately $103 million to develop five apartment communities with a total of 1,438 apartment homes. United Dominion owns a 25% interest in the joint venture and is serving as the managing partner of the joint venture as well as the developer, general contractor and property manager. Upon closing of the venture, United Dominion contributed the projects in return for its equity interest of approximately $8 million in the venture and was reimbursed for approximately $35 million of development outlays that were incurred prior to closing the joint venture. During the first quarter of 2001, United Dominion completed the development of three joint venture communities with a total of 880 apartment homes at a total investment that was below budgeted costs. The Meridian, a 250 home community located in Dallas, Texas was completed in June 2000. Furthermore, United Dominion recognized fee income of approximately $0.4 million for general contracting and developer services provided by the Company to the joint venture. The Company has the option, but not the obligation, to purchase these properties for fair value upon completion of the projects. The following joint venture projects were complete as of March 31, 2001: <TABLE> <CAPTION> Development No. of Cost Cost Per Date Apt. Homes (In thousands) Home Completed % Leased ------------ -------------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> New Communities: - - --------------- Parke 33 264 $17,100 $64,800 2/01 70.1% Lakeland, FL Sierra Canyon 236 15,400 65,300 3/01 70.3% Phoenix, AZ Oaks at Weston 380 28,000 73,700 3/01 53.4% Raleigh, NC ------------ ------------- ------------ Total 880 $60,500 $68,800 ============ ============= ============ </TABLE> 18
The following joint venture project was under development at March 31, 2001: <TABLE> <CAPTION> Cost to Budgeted Expected No. of Apt. Completed Date Cost Est. Cost Completion Homes Apt. Homes (In thousands) (In thousands) Per Home Date ----------- ------------- -------------- -------------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> New Community: - - ------------- Mandolin 308 132 $17,800 $22,100 $71,800 3Q01 Dallas, TX </TABLE> Disposition of Investments For the quarter ended March 31, 2001, United Dominion sold three communities with 251 apartment homes for an aggregate sales price of approximately $15.5 million and recognized gains for financial reporting purposes of $4.1 million. Within each market, United Dominion plans to dispose of selected communities with inferior locations, significant capital expense requirements without the potential of a corresponding increase in rent or insufficient growth potential. Proceeds from the 2001 sales, expected to be at levels below that of 2000, are expected to be used to reduce debt, repurchase common and preferred shares, fund development activity and acquire communities. Subsequent to March 31, 2001, United Dominion sold six Florida communities with 1,638 apartment homes for an aggregate sales price of approximately $113.0 million and recognized gains for financial reporting purposes of $21.5 million. Proceeds from the sale were applied primarily to reductions in long-term debt, and to a lesser extent, to complete 1031 exchanges in order to defer taxable gains and to repurchase common and preferred shares. Acquisitions During the quarter ended March 31, 2001, United Dominion acquired one community with 158 apartment homes at a total cost (including closing costs) of $9.3 million which included the use of tax free exchange funds. As of March 31, 2001, United Dominion had approximately $7.2 million in reverse 1031 exchange funds for the purchase of a property in Columbus, OH. The purchase closed in April 2001. During 2001, the new senior management team currently plans to channel new investments to those markets that are projected to provide the best investment returns for the Company over the next ten years. These transactions will likely occur over time and will only be undertaken on an accretive basis. Markets will be targeted based upon refined criteria including past performance, expected job growth, current and anticipated housing supply and demand, ability to attract and support household formation and local market expertise. Capital Expenditures United Dominion capitalizes those expenditures related to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset. Expenditures necessary to maintain an existing property in ordinary operating condition are expensed as incurred. During the quarter ended March 31, 2001, $7.2 million or $96 per home was spent on capital expenditures for United Dominion's same communities (those acquired or developed prior to January 1, 2000). These capital improvements included recurring capital expenditures, including floor coverings, HVAC equipment, roofs, appliances, landscaping, siding, parking lots and other non-revenue enhancing capital expenditures, which aggregated $4.5 million or $60 per home. In addition, non-recurring revenue enhancing capital expenditures, including water sub-metering, gating and access systems, the addition of microwaves, washer-dryers, interior upgrades and new business and fitness centers totaled $2.7 million or $36 per home for the quarter ended March 31, 2001. United Dominion will continue to selectively add revenue-enhancing improvements that the Company believes will provide a return on investment in excess of United Dominion's cost of capital. Capital expenditures during 2001 are currently expected to be at levels somewhat higher than those experienced in 2000. Financing Activities Net cash used in financing activities during the first quarter of 2001 was $22.5 million compared to $36.0 million for 2000, a decrease of $13.5 million. As part of the plan to improve the Company's balance sheet position, United Dominion used proceeds from its disposition program to pay down secured and unsecured debt, to repurchase shares of common and preferred stock and to complete 1031 exchanges in order to defer taxable gains. 19
As of March 31, 2001, approximately $16.6 million of United Dominion's preferred shares have been repurchased under the $25 million preferred share repurchase program. For the quarter ended March 31, 2001, United Dominion repurchased 14,200 Series A preferred shares at an average price of $23.46 per share and 7,000 Series B preferred shares at an average price of $21.75 per share. For the quarter ended March 31, 2001, the Company repurchased 831,384 common shares at an average price of $11.10 and repurchased 19,941 operating partnership units. As of March 31, 2001, approximately 6.2 million common shares remained available for purchase under the common share repurchase program. Repurchases of shares will be made from time to time in the open market or in privately negotiated transactions. The timing, volume and purchase price will be at the discretion of the Company. During the quarter, the Company repaid $17.0 million of unsecured debt and was relieved of $7.7 million of secured debt in connection with the disposition of properties. Credit Facilities United Dominion has a $375 million three-year unsecured revolving credit facility (the "Credit Facility") which extends until August 2003. At March 31, 2001, $312.7 million was outstanding under the Credit Facility leaving $62.3 million available for use. Under the Credit Facility, the Company may borrow at a rate of LIBOR plus 100 basis points for LIBOR-based borrowings. Under the Credit Facility, the Company pays a facility fee, which is equal to 0.20% of the commitment. The Credit Facility is subject to customary financial covenants and limitations. Information concerning short-term bank borrowings is summarized in the table that follows (dollars in thousands): <TABLE> <CAPTION> Three months ended Year ended March 31, 2001 December 31, 2000 - - ---------------------------------------------------------------------------------------------------------- <S> <C> <C> Total revolving credit facilities $375,000 $375,000 Borrowings outstanding at end of period 312,700 244,400 Weighted average daily borrowings during the period 272,159 195,128 Maximum daily borrowings during the period 315,200 308,000 Weighted average daily interest rate during the period 6.84% 7.3% Weighted average daily interest rate at end of period 6.08% 7.7% </TABLE> Derivative Instruments As part of United Dominion's overall interest rate risk management strategy, the Company uses derivatives as a means to modify the interest rate characteristics of variable rate debt obligations or to hedge anticipated financing transactions. The Company's derivative transactions used for interest rate risk management include various interest rate swaps with indices that relate to the pricing of specific financial instruments of United Dominion. The Company believes that it has appropriately controlled the risk so that derivatives used for interest rate risk management will not have any material unintended effect on consolidated earnings. Derivative contracts did not have a material impact on the results of operations during the first quarter of 2001 (see Note 7 - Derivative Instruments and Hedging Activities). Funds from Operations Funds from operations ("FFO") is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (losses) from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. United Dominion computes FFO for all periods presented in accordance with the recommendations set forth by the National Association of Real Estate Investment Trust's October 1, 1999 White Paper. United Dominion considers FFO in evaluating property acquisitions and its operating performance, and believes 20
that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of United Dominion's operating performance and liquidity. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. The following table outlines United Dominion's FFO calculation for the three months ended March 31, (dollars in thousands, except per share amounts): <TABLE> <CAPTION> 2001 2000 -------- -------- <S> <C> <C> Net income $ 5,732 $ 18,580 Adjustments: Distributions to preferred shareholders (9,063) (9,408) Real estate depreciation, net of outside partners' interest 39,932 33,569 Gains on sale of depreciable property, net of outside partners' interest (3,331) (2,529) Minority interests of unitholders in operating partnership (244) 668 Real estate depreciation related to unconsolidated entities 184 46 Extraordinary item-early extinguishment of debt 187 228 -------- -------- Funds from operations-basic $ 33,397 $ 41,154 ======== ======== Adjustment: Distribution to preferred shareholders-Series D (Convertible) 3,857 3,825 -------- -------- Funds from operations-diluted $ 37,254 $ 44,979 ======== ======== Weighted average number of common shares and OP Units outstanding-basic 108,954 110,523 Weighted average number of common shares and OP Units outstanding-diluted 121,571 122,857 FFO per common share-basic $ 0.31 $ 0.37 ======== ======== FFO per common share-diluted $ 0.31 $ 0.37 ======== ======== </TABLE> Results of Operations Net Income (Loss) Available to Common Shareholders Net income (loss) available to common shareholders was $(3.3) million ($(.03) per share) for the quarter ended March 31, 2001 compared to $9.2 million ($.09 per share) for 2000, representing a decrease of $12.5 million ($.12 per share). The decrease was primarily due to $8.5 million in non-recurring charges recognized in the first quarter of 2001 related primarily to workforce reductions and severance costs, the writedown of seven undeveloped land sites and the Company's investment in an online apartment leasing company and relocation costs for the new executive offices. During the first quarter, United Dominion recognized approximately $6.5 million more of depreciation expense during the first three months of 2001 versus the comparable period in the prior year primarily on communities transferred during the second quarter of 2000 from real estate held for disposition to real estate held for investment as well as depreciation on capitalized expenditures made during the prior twelve months. The increase in expenses was partially offset by higher gains on the sales of depreciable property of $1.6 million and a decrease of $1.9 million in financing costs. 21
Apartment Community Operations United Dominion's net income is primarily generated from the operations of its apartment communities. The following table summarizes the operating performance for United Dominion's total apartment portfolio for each of the periods presented (dollars in thousands): <TABLE> <CAPTION> Three Months Ended March 31, ----------------------------------------- 2001 2000 % Change ----------------------------------------- <S> <C> <C> <C> Property rental income $152,410 $153,657 -0.8% Property rental expenses (excluding depreciation and amortization) (59,644) (59,819) -0.1% ----------------------------------------- Property operating income $ 92,766 $ 93,838 -1.1% ========================================= Weighted average number of apartment homes 77,011 82,067 -6.6% Physical occupancy 93.9% 93.7% 0.2% </TABLE> The decrease in property operating income and property operating expenses by the Company's apartment community operations is due to the disposition of 5,359 apartment homes during 2000 and 2001. As a result of United Dominion's disposition program, the weighted average number of apartment homes declined 6.6% from March 31, 2000 to March 31, 2001. Same Communities United Dominion's same communities (those communities acquired, developed or stabilized prior to January 1, 2000 and held on January 1, 2001 which consisted of 74,987 weighted average apartment homes) provided 97% of its property operating income for the quarter ended March 31, 2001. For the first quarter of 2001, property operating income for the same communities increased 2.9% or $2.5 million compared to the same period in 2000. The growth in property operating income resulted from a $5.9 million or 4.2% increase in property rental income over the same period in the prior year. The increase was driven by a $5.4 million or 3.6% increase in rental rates coupled with a 1.4% increase in physical occupancy. The increase in property operating income was partially offset by higher concessions and an increase in bad debt expense. During this same period, property operating expenses at these same communities increased $3.4 million or 6.3%. The increase in property operating expenses was primarily due to a $1.4 million increase in gas costs (net of reimbursement by residents) caused by the run-up in prices of natural gas experienced during the quarter and a $0.8 million increase in property insurance costs due to a combination of the Company's loss history plus overall increases in market rates. The remaining increase in property operating expense was attributable to a $0.7 million increase in personnel costs due to higher salaries and benefit costs and a $0.6 million increase in repair and maintenance expense. As a result of the percentage changes in total property operating income and total property operating expenses, the operating margin (property operating income divided by property rental income) decreased 0.4% to 61.2%. Non-Mature Communities The remaining 3% of United Dominion's property operating income during the first quarter of 2001 was generated from its non-mature communities (those communities acquired or developed during 2000 and 2001). United Dominion's development communities which included 1,058 apartment homes constructed since January 1, 2000 provided an additional $1.1 million of property operating income for the quarter ended March 31, 2001. In addition, the two communities with 425 apartment homes acquired by United Dominion during 2000 and 2001 provided an additional $0.5 million of property operating income for the first three months of 2001. 22
Real Estate Depreciation Real estate depreciation increased $6.5 million or 19.2% for the three months ended March 31, 2001, over the same period last year. This increase is primarily attributable to the recognition of depreciation expense on communities classified as real estate held for disposition in the first quarter of 2000 that were subsequently transferred to real estate held for investment during the second quarter of 2000 and, to a lesser extent, depreciation taken on fully developed properties since the first quarter of 2000 as well as depreciation on capitalized expenditures made during the previous twelve months. Interest Expense During the first quarter of 2001, interest expense decreased $1.9 million over the corresponding amount in 2000 as the weighted average amount of debt outstanding decreased $112 million ($2.0 billion in 2001 versus $2.1 billion in 2000) and the weighted average interest rate remained constant at 7.5%. The weighted average amount of debt employed during 2001 was lower as disposition proceeds were used to repay outstanding debt. Average interest rates on short- term bank borrowings for the first three months of 2001 were comparable to the same period in the prior year. For the three months ended March 31, 2001 and 2000, total interest capitalized was $0.8 million and $1.0 million, respectively. Restructuring Charges During the quarter ended March 31, 2001, United Dominion undertook a comprehensive review of the organizational structure of the Company and its operations subsequent to the appointment of a new senior management team and CEO. As a result, the Company recorded $4.5 million of expense related to the termination of approximately 10% of United Dominion's workforce, or 200 full-time equivalent positions, in operations and at the Corporate headquarters. Management anticipates that the reduction in workforce will result in an annualized savings of approximately $3.0 to $3.5 million through ongoing cost efficiencies. These reductions will impact both personnel and general and administrative expenses. As of March 31, 2001, approximately $0.9 million of the accrued charge has been paid with the remainder to be paid during the third quarter of 2001. In addition, United Dominion recognized expense in the aggregate of $0.9 million related to relocation costs associated with the new executive offices in Denver and other miscellaneous costs. No adjustments to the existing reserve are contemplated at this time. All charges came under consideration subsequent to the appointment of the Company's new CEO in February 2001 and were approved by management and the Board of Directors in March 2001. Impairment Loss on Real Estate and Investments In connection with the evaluation of the Company's real estate assets and operations, senior management determined that it was in the Company's best interest to dispose of all undeveloped tracts of land at an accelerated pace and redeploy the proceeds elsewhere. This represented a change from prior management in the holding period of these assets and their respective values. Prior management had purchased these tracts of land in 1999 and 2000 with the intent to build apartment communities on them. In order to accelerate the disposition of these undeveloped land sites, the Company recorded an aggregate $2.8 million impairment loss for the write down of seven undeveloped sites in selected markets. The $2.8 million charge represents the discount necessary to dispose of these assets in a short time frame coupled with decreases in market value in 2001 for these properties. In addition, the Company recognized a $0.3 million charge for the write down of United Dominion's investment in an online apartment leasing company. General and Administrative For the quarter ended March 31, 2001, general and administrative expenses increased $0.6 million or 16.4% over 2000. The increase was primarily due to a $0.7 million increase in salaries and bonus expense as the Company continues to invest in professional staffing as well as a $0.3 million increase in consulting expense related to the CEO search. These increases were offset by a $.2 million decrease in both self-insurance costs and legal fees. Gains on Sales of Investments For the three months ended March 31, 2001, United Dominion recognized gains for financial reporting purposes of $4.1 million compared to $2.5 million for the comparable period last year. Changes in the level of gains recognized from period to period reflect the changing level of United Dominion's divestiture activity from period to period as well as the extent of gains related to specific properties sold. Distributions to Preferred Shareholders Distributions to preferred shareholders totaled $9.1 million for the quarter ended March 31, 2001 compared to $9.4 million for 2000. The decrease was due to the repurchase of over 725,000 Series A and Series B preferred shares during 2000 and 2001. Discount on Preferred Share Repurchases For the quarter ended March 31, 2001, United Dominion recognized $23 thousand of discount on preferred share repurchases. The discount on preferred share repurchases represents the difference between the carrying value and the purchase price of the preferred shares. 23
Contingencies During the third quarter of 2000, the Company agreed to settle a class action lawsuit concerning water usage billing in Texas in the amount of $2.7 million. As a result of the settlement, the Company accrued $2.7 million in 2000 for the settlement amount and estimated fees. The settlement received final court approval during the first quarter of 2001 and United Dominion will make payment in the near-term. Individuals in the class action may opt out of the settlement, and in the event that more than 125 persons opt out, United Dominion may elect to withdraw the settlement agreement. Inflation United Dominion believes that the direct effects of inflation on the Company's operations have been inconsequential. Substantially all of the Company's leases are for a term of one year or less which generally minimizes United Dominion's risk from the adverse effects of inflation. 24
Item 3. Quantitative and Qualitative Disclosure of Market Risk United Dominion is exposed to interest rate changes associated with the Company's unsecured credit facility and other variable rate debt as well as refinancing risk on the Company's fixed rate debt. United Dominion's involvement with derivative financial instruments is limited and the Company does not expect to use them for trading or other speculative purposes. United Dominion occasionally uses derivative instruments to manage the Company's exposure to interest rates. See United Dominion's Form 10-K for the year ended December 31, 2000 "Item 7A Qualitative and Quantitative Disclosures About Market Risk" for a more complete discussion of our interest rate sensitive assets and liabilities. As of March 31, 2001, United Dominion's market risk has not changed materially from the amounts reported on the Form 10-K for the year ended December 31, 2000. 25
PART II Item 1. LEGAL PROCEEDINGS - - --------------------------- United Dominion and its subsidiaries are engaged in various litigations and have a number of unresolved claims pending. The ultimate liability in respect of such litigations and claims cannot be determined at this time. United Dominion is of the opinion that such liability, to the extent not provided for through insurance or otherwise, is not likely to be material in relation to the consolidated financial statements of United Dominion. During the first quarter of 2001, United Dominion received final court approval to settle a class action lawsuit concerning water usage billing in Texas for $2.7 million. Item 2. CHANGES IN SECURITIES - - ------------------------------- None Item 3. DEFAULT UPON SENIOR SECURITIES - - ---------------------------------------- None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - - ------------------------------------------------------------- None Item 5. OTHER INFORMATION - - --------------------------- None Item 6. EXHIBITS AND REPORTS ON FORM 8-K - - ------------------------------------------ (a) The exhibits listed on the accompanying index to exhibits are filed as part of this quarterly report. (b) Reports on Form 8-K A Form 8-K was filed with the Securities and Exchange Commission on February 16, 2001. The filing announced Thomas W. Toomey as the new President and CEO of United Dominion as reported on its Press Release issued on February 13, 2001. A Form 8-K was filed with the Securities and Exchange Commission on February 28, 2001. The filing included information that United Dominion will present to current and prospective stockholders and other persons and institutions as first presented on February 27, 2001. A Form 8-K was filed with the Securities and Exchange Commission on March 9, 2001. The filing reported United Dominion's 2000 fourth quarter and year to date results of operations as reported on its Press Release issued on February 1, 2001. A Form 8-K was filed with the Securities and Exchange Commission on March 28, 2001. The filing reported United Dominion's election of a new chairman of the board, the appointment of four new senior executives, the opening of a new executive office in Denver, Colorado and a one time charge related to workforce reduction as reported on its Press Release issued on March 27, 2001. A Form 8-K was filed with the Securities and Exchange Commission on May 4, 2001. The filing reported United Dominion's 2001 first quarter results of operations as reported on its Press Release issued on April 26
30, 2001. EXHIBIT INDEX Item 6(a) The exhibits listed below are filed as part of this Quarterly Report. References under the caption Location to exhibits, forms, or other filings indicate that the form or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. <TABLE> <CAPTION> Exhibit Description Location - - ------- ------------------------------------ ------------------------------------------------- <S> <C> <C> 2(a) Agreement and Plan of Merger dated Exhibit 2(a) to the Company's Form S-4 Registration as of December 19, 1997, between Statement (Registration No. 333-45305) filed with the Company, ASR Investment the Commission on January 30, 1998. Corporation and ASR Acquisition Sub, Inc. 2(b) Agreement of Plan of Merger dated as Exhibit 2(c) to the Company's Form S-3 Registration of September 10, 1998, between the Statement (Registration No. 333-64281) filed with Company and American Apartment the Commission on September 25, 1998. Communities II, Inc. including as exhibits thereto the proposed terms of the Series D Preferred Stock and the proposed form of Investment Agreement between the Company, United Dominion Realty, L.P., American Apartment Communities II, Inc., American Apartment Communities Operating Partnership, L.P., Schnitzer Investment Corp., AAC Management LLC and LF Strategic Realty Investors, L.P. 2(c) Partnership Interest Purchase and Exchange Exhibit 2(d) to the Company's Form S-3 Registration Agreement dated as of September 10, 1998, Statement (Registration No. 333-64281) filed with between the Company, United Dominion the Commission on September 25, 1998. Realty, L.P., American Apartment Communities Operating Partnership, L.P., AAC Management LLC, Schnitzer Investment Corp., Fox Point Ltd. and James D. Klingbeil including as an exhibit thereto the proposed form of the Third Amended and Restated Limited Partnership Agreement of United Dominion Realty, L.P. 3(a) Restated Articles of Incorporation Exhibit 4(a)(ii) to the Company's Form S-3 Registration Statement (Registration No. 333-72885) filed with the Commission on February 24, 1999 </TABLE> 27
<TABLE> <S> <C> <C> 3(b) Restated By-Laws Exhibit 3(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 4(i)(a) Specimen Common Stock Exhibit 4(i) to the Company's Annual Report Certificate on Form 10-K for the year ended December 31, 1993. 4(i)(b) Form of Certificate for Shares Exhibit 1(e) to the Company's Form 8-A of 9 1/4% Series A Cumulative Registration Statement dated April 24, 1995. Redeemable Preferred Stock 4(i)(c) Form of Certificate for Shares Exhibit 1(e) to the Company's Form 8-A of 8.60% Series B Cumulative Registration Statement dated June 11, 1997. Redeemable Preferred Stock 4(i)(d) Rights Agreement dated as of Exhibit 1 to the Company's Form 8-A January 27, 1998, between the Registration Statement dated February 4, 1998. Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent. 4(i)(d)(a) First Amended and Restated Rights Exhibit 4(i)(d)(a) to the Company's Quarterly Agreement dates as of September 14, Report on Form 10-Q for the quarter ended 1999, between the Company and September 30, 1999. ChaseMellon Shareholders Services, L.L.C., as Rights Agent 4(i)(e) Form of Rights Certificate Exhibit 4(e) to the Company's Form 8-A Registration Statement dated February 4, 1998. 4(ii)(e) Note Purchase Agreement dated Exhibit 6(c)(5) to the Company's Form 8-A as of February 15, 1993, between Registration Statement dated April 19, 1990. the Company and CIGNA Property and Casualty Insurance Company, Connecticut General Life Insurance Company, on behalf of one or more separate accounts, Insurance Company of North America, Principal Mutual Life Insurance Company and Aid Association for Lutherans 4(ii)(f) Credit Agreement dated as of Exhibit 4(ii)(g) to the Company's Annual November 14, 2000, between Report on Form 10-K for the year ended the Company and certain subsidiaries December 31, 2000. and a syndicate of banks represented by First Union Nation Bank </TABLE> 28
<TABLE> <S> <C> <C> 10(i) Amended Employment Agreement Exhibit 10(i) to the Company's Annual Report between the Company and John P. on Form 10-K for the year ended McCann dated December 5, 2000. December 31, 2000. 10(ii) Amended Employment Agreement Exhibit 10(ii) to the Company's Annual between the Company and John S. Report on Form 10-K for the year ended Schneider dated December 5, 2000. December 31, 2000. 10(iii) Employment Agreement between Exhibit 10(iii) to the Company's Annual Report the Company and Richard Giannotti on Form 10-K for the year ended December 31, dated December 8, 1998. 1998. 10(iv) Employment Agreement between Exhibit 10(iv) to the Company's Quarterly the Company and A. William Hamill Report on Form 10-Q for the quarter ended dated September 30, 1999. September 30, 1999. 10(v) 1985 Stock Option Plan, as amended. Exhibit 10(iv) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. 10(vi) 1991 Stock Purchase and Loan Plan. Exhibit 10(viii) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997. 10(vii) Third Amended and Restated Exhibit 10(vi) to the Company's Annual Report Agreement of Limited Partnership of on Form 10-K for the year ended December 31, United Dominion Realty, L.P. 1998. Dated as of December 7, 1998. 10(vii)(a) Subordination Agreement dated Exhibit 10(vi)(a) to the Company's Quarterly April 16, 1998, between the Report on Form 10-Q for the quarter ended Company and United Dominion March 31, 1998. Realty, L.P. 10(viii) Servicing and Purchase Exhibit 10(vii) to the Company's Quarterly Agreement dated as of June 24, Report on Form 10-Q for the quarter ended 1999, including as an exhibit June 30, 1999. thereto the Note and Participation Agreement forms. 10(ix) Description of Restricted Stock Exhibit 10(ix) to the Company's Annual Report Awards Program. on Form 10-K for the year ended December 31, 1999. 10(x) Description of United Dominion Exhibit 10(x) to the Company's Annual Realty Trust, Inc. Shareholder Report on Form 10-K for the year ended Value Plan. December 31, 1999. </TABLE> 29
<TABLE> <S> <C> <C> 10(xi) Description of United Dominion Exhibit 10(xi) to the Company's Annual Realty Trust, Inc. Executive Report on Form 10-K for the year ended Deferral Plan. December 31, 1999. 10(xii) Employment Agreement between the Exhibit 10(xii) to the Company's Annual Company and Curtis W. Carter Report on Form 10-K for the year ended dated December 8, 1998. December 31, 1999. 10(xiii) Employment Agreement between Exhibit 10(xiii) to the Company's Annual the Company and Mark E. Wood Report on Form 10-K for the year ended dated March 21, 2000. December 31, 1999. 10(xiv) Employment Agreement between Filed herewith. the Company and A. William Hamill dated December 5, 2000. 10(xv) Retirement Agreement and Covenant Filed herewith. Not to Compete between the Company and John P. McCann dated March 20, 2001. 10(xvi) Retirement Agreement between Filed herewith. the Company and John S. Schneider dated March 16, 2001. 10(xvii) Employment Separation Agreement Filed herewith. between the Company and A. William Hamill dated March 20, 2001. 12 Computation of Ratio of Earnings Filed herewith. to Fixed Charges. </TABLE> 30
SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized. United Dominion Realty Trust, Inc. - - ---------------------------------- (registrant) Date: May 15, 2001 /s/ Christopher D. Genry - - ---------------------------------- --------------------------------- Christopher D. Genry Executive Vice President and Chief Financial Officer Date: May 15, 2001 /s/ Scott A. Shanaberger - - ---------------------------------- --------------------------------- Scott A. Shanaberger Vice President and Chief Accounting Officer 31