8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 27, 2002

UNITED DOMINION REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)

Virginia	1-10524	54-0857512
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer
incorporation of organization)		Identification No.)

1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129
(Address of principal executive offices — zip code)

(720) 283-6120
Registrant’s telephone number, including area code

TABLE OF CONTENTS

	ITEM 5. Other Events
	ITEM 7. Exhibits and Financial Statements
Signatures
Exhibit Index
EX-23.1 Consent of Independent Auditors
EX-99.1 Revised Financial Information

ITEM 5. Other Events

         United Dominion Realty Trust, Inc. (the “Company”) is re-issuing in an updated format its historical financial statements for the fiscal years ended December 31, 2001, 2000 and 1999 in connection with the adoption of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). From January 1, 2002 through November 27, 2002, the Company sold or transferred certain properties into real estate held for disposition and in compliance with SFAS 144 has reported revenue, expenses and gains on sales from these properties as discontinued operations for each period presented in its quarterly reports filed since the date of transfer (including the comparable period of the prior year). Under SEC requirements for transitional disclosure, the same reclassification as discontinued operations required by SFAS 144 following the transfer of properties into real estate held for disposition is required for previously issued annual financial statements for each of the three years shown in the Company’s last Annual Report on Form 10-K, if those financials are incorporated by reference in subsequent filings with the SEC made under the Securities Act of 1933, even though those financial statements relate to periods prior to the date of transfer. This reclassification has no effect on the Company’s reported net income available to common shareholders or funds from operations (“FFO”). The Company elected to re-issue these historical financial statements at this time in preparation for the issuance of a new shelf registration statement.

         This Current Report on Form 8-K updates Items 6, 7 and 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2001 (the “Form 10-K”) to reflect those properties sold or included in real estate held for disposition through November 27, 2002 as discontinued operations. These updated Items of the Form 10-K are attached to this Current Report as Exhibit 99.1. All other items of the Company’s Form 10-K remain unchanged. No attempt has been made to update matters in the Form 10-K except to the extent expressly provided above.

ITEM 7. Exhibits and Financial Statements

         (c)  Exhibits

Exhibit No.	Description
23.1	Consent of Independent Auditors
99.1	Revised financial information for the years ended December 31, 2001, 2000 and 1999 for the adoption of SFAS No. 144 - Discontinued Operations

Index To Exhibit 99.1	Page Number
Selected Financial Data		6
Management’s Discussion and Analysis of Financial Condition and Results of Operations		7
Financial Statements		20

1

Signatures

         Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		UNITED DOMINION REALTY TRUST, INC.
Date:	December 2, 2002	/s/ Christopher D. Genry
		Christopher D. Genry Executive Vice President and Chief Financial Officer
Date:	December 2, 2002	/s/ Scott A. Shanaberger
		Scott A. Shanberger Senior Vice President and Chief Accounting Officer

2

Exhibit Index

Exhibit No.	Description
23.1	Consent of Independent Auditors
99.1	Revised financial information for the years ended December 31, 2001, 2000, 1999 for the adoption of SFAS No. 144- Discontinued Operations

Index to Exhibit 99.1	Page Number
Selected Financial Data		6
Management’s Discussion and Analysis of Financial Condition and Results of Operations		7
Financial Statements		20

3 EX-23.1 3 d01717exv23w1.txt EX-23.1 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the following Registration Statements of United Dominion Realty Trust, Inc. and in the related Prospectus of our report dated January 31, 2002, (except for Notes 13 and 14, as to which the date is November 27, 2002), with respect to the consolidated financial statements and schedule of United Dominion Realty Trust, Inc. included in this Current Report on Form 8-K.

Registration Statement Number Description ----------------------------- ----------- 33-40433 Form S-3, pertaining to the private placement of 900,000 shares of the Company's common stock in May, 1991. 33-48000 Form S-8, pertaining to the Company's Stock Option Plan. 33-58201 Form S-8, pertaining to the Employee's Stock Purchase Plan. 333-11207 Form S-3, pertaining to the private placement of 1,679,840 shares of the Company's Common Stock. 333-15133 Form S-3, pertaining to the Company's Dividend Reinvestment and Stock Purchase Plan. 333-32829 Form S-8, pertaining to the Company's Stock Purchase and Loan Plan. 333-44463 Form S-3, pertaining to the Company's Dividend Reinvestment and Stock Purchase Plan. 333-48557 Form S-3, pertaining to the private placement of 104,920 shares of Common Stock and 104,920 rights to purchase Series C Junior Participating Redeemable Preferred Stock. 333-53401 Form S-3, pertaining to the private placement of 1,528,089 shares of Common Stock and 1,528,089 rights to purchase Series C Junior Participating Redeemable Preferred Stock. 333-58600 Form S-8, pertaining to the Employee's Stock Purchase Plan. 333-64281 Form S-3, pertaining to the private placement of 849,498 shares of Common Stock and 849,498 rights to Purchase Series C Junior Participating Redeemable Preferred Stock. 333-72885 Form S-3, pertaining to the private placement of 130,416 shares of Common Stock and 130,416 rights to purchase Series C Junior Participating Redeemable Preferred Stock.

4

Registration Statement Number Description ----------------------------- ----------- 333-75897 Form S-8, pertaining to the Company's Long Term Incentive Plan. 333-77107 Form S-3, pertaining to the private placement of 1,023,732 shares of Common Stock and 1,023,732 rights to purchase Series C Junior Participating Redeemable Preferred Stock. 333-77161 Form S-3, pertaining to the private placement of 481,251 shares of Common Stock and 481,251 rights to purchase Series C Junior Participating Redeemable Preferred Stock. 333-80279 Form S-8, pertaining to the Company's Open Market Purchase Program. 333-82929 Form S-3, pertaining to the private placement of 95,119 shares of Common Stock and 95,119 rights to purchase Series C Junior Participating Redeemable Preferred Stock. 333-92667 Form S-3, Shelf Registration Statement, pertaining to the registration of $616,058,554 of Common Stock, Preferred Stock and Debt Securities. 333-86808 Form S-3, pertaining to the registration of 12,307,692 shares of Common Stock.

/s/ Ernst & Young LLP Richmond, Virginia November 27, 2002 5 EX-99.1 4 d01717exv99w1.txt EX-99.1 REVISED FINANCIAL INFORMATION EXHIBIT 99.1 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected consolidated financial and other information as of and for each of the years in the five-year period ended December 31, 2001. The table should be read in conjunction with our consolidated financial statements and the notes thereto, and Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, included elsewhere in this Report.

YEARS ENDED DECEMBER 31, 2001 2000 1999 1998 --------------------------------------------------------- In thousands, except per share data and apartment homes owned OPERATING DATA (a) Rental income $ 561,958 $ 572,205 $ 572,798 $ 438,780 Income before gains on sales of investments, minority interests, discontinued operations and extraordinary item 32,125 33,541 46,838 34,940 Gains on sales of investments 24,748 31,450 37,995 26,672 Net income from discontinued operations, net of minority interests 11,703 14,153 12,467 12,006 Extraordinary item-early extinguishment of debt (3,471) 831 927 (138) Net income 61,828 76,615 93,622 72,332 Distributions to preferred shareholders 31,190 36,891 37,714 23,593 Net income available to common shareholders 27,142 42,653 55,908 48,739 Common distributions declared 108,956 110,225 109,607 107,758 Weighted average number of common shares outstanding-basic 100,339 103,072 103,604 99,966 Weighted average number of common shares outstanding-diluted 101,037 103,208 103,639 100,062 Weighted average number of common shares, OP Units and common share equivalents-diluted 120,728 123,005 124,127 103,793 Per share: Basic earnings per share $ 0.27 $ 0.41 $ 0.54 $ 0.49 Diluted earnings per share 0.27 0.41 0.54 0.49 Common distributions declared 1.08 1.07 1.06 1.05 BALANCE SHEET DATA (a) Real estate owned, at carrying value $ 3,907,667 $ 3,836,320 $ 3,953,045 $ 3,952,752 Accumulated depreciation 646,366 509,405 395,864 316,630 Total real estate owned, net of accumulated depreciation 3,261,301 3,326,915 3,557,181 3,636,122 Total assets 3,348,091 3,453,957 3,688,317 3,762,940 Secured debt 974,177 866,115 1,000,136 1,072,185 Unsecured debt 1,090,020 1,126,215 1,127,169 1,045,564 Total debt 2,064,197 1,992,330 2,127,305 2,117,749 Shareholders' equity 1,042,725 1,218,892 1,310,212 1,374,121 Number of common shares outstanding 103,133 102,219 102,741 103,639 OTHER DATA (a) CASH FLOW DATA Net cash provided by operating activities $ 224,411 $ 224,160 $ 190,602 $ 140,597 Net cash (used in)/provided by investing activities (64,055) 58,705 (103,836) (263,864) Net cash (used in)/provided by financing activities (166,020) (280,238) (105,169) 148,875 FUNDS FROM OPERATIONS (b) Net income $ 61,828 $ 76,615 $ 93,622 $ 72,332 Adjustments: Distributions to preferred shareholders (31,190) (36,891) (37,714) (23,593) Real estate depreciation, net of other partnerships' interest 150,206 151,520 120,543 99,588 Gains on sales of depreciable property, net of other partnerships' interest (24,007) (30,300) (37,995) (26,672) Minority interests of unitholders in operating partnership 1,967 2,885 4,434 1,430 Real estate depreciation related to unconsolidated entities Extraordinary item-early extinguishment 1,105 251 181 24 of debt, net of minority interest 3,471 (831) (927) 138 --------------------------------------------------------- Funds from operations-basic $ 163,380 $ 163,249 $ 142,144 $ 123,247 ========================================================= Adjustment: Distributions to preferred shareholders-Series D (Convertible) 15,428 15,300 15,154 986 --------------------------------------------------------- Funds from operations-diluted $ 178,808 $ 178,549 $ 157,298 $ 124,233 ========================================================= Adjustment: Recurring capital expenditures (31,535) (24,794) (43,528) (25,019) --------------------------------------------------------- ADJUSTED FUNDS FROM OPERATIONS-DILUTED (c) $ 147,273 $ 153,755 $ 113,770 $ 99,214 ========================================================= APARTMENT HOMES OWNED Total apartment homes owned at December 31 77,567 77,219 82,154 86,893 Weighted average number of apartment homes owned during the year 76,487 80,253 85,926 70,724

1997 ----------- In thousands, except per share data and apartment homes owned OPERATING DATA (a) Rental income $ 362,294 Income before gains on sales of investments, minority interests, discontinued operations and extraordinary item 48,125 Gains on sales of investments 12,664 Net income from discontinued operations, net of minority interests 9,688 Extraordinary item-early extinguishment of debt (50) Net income 70,149 Distributions to preferred shareholders 17,345 Net income available to common shareholders 52,804 Common distributions declared 88,587 Weighted average number of common shares outstanding-basic 87,145 Weighted average number of common shares outstanding-diluted 87,339 Weighted average number of common shares, OP Units and common share equivalents-diluted 87,656 Per share: Basic earnings per share $ 0.61 Diluted earnings per share 0.60 Common distributions declared 1.01 BALANCE SHEET DATA (a) Real estate owned, at carrying value $ 2,517,398 Accumulated depreciation 245,367 Total real estate owned, net of accumulated depreciation 2,272,031 Total assets 2,313,725 Secured debt 417,325 Unsecured debt 738,901 Total debt 1,156,226 Shareholders' equity 1,058,357 Number of common shares outstanding 89,168 OTHER DATA (a) CASH FLOW DATA Net cash provided by operating activities $ 137,903 Net cash (used in)/provided by investing activities (342,273) Net cash (used in)/provided by financing activities 191,391 FUNDS FROM OPERATIONS (b) Net income $ 70,149 Adjustments: Distributions to preferred shareholders (17,345) Real estate depreciation, net of other partnerships' interest 76,688 Gains on sales of depreciable property, net of other partnerships' interest (12,664) Minority interests of unitholders in operating partnership 278 Real estate depreciation related to unconsolidated entities Extraordinary item-early extinguishment -- of debt, net of minority interest 50 ----------- Funds from operations-basic $ 117,156 =========== Adjustment: Distributions to preferred shareholders-Series D (Convertible) -- ----------- Funds from operations-diluted $ 117,156 =========== Adjustment: Recurring capital expenditures (24,490) ----------- ADJUSTED FUNDS FROM OPERATIONS-DILUTED (c) $ 92,666 =========== APARTMENT HOMES OWNED Total apartment homes owned at December 31 62,789 Weighted average number of apartment homes owned during the year 58,038

(a) In 1998, United Dominion completed the following statutory mergers: (i) ASR Investments Corporation Inc. on March 27, 1998 for an aggregate purchase price of $323 million and; (ii) American Apartment Communities II on December 7, 1998 for an aggregate purchase price of $794 million. 6 (b) 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 depreciation and amortization, less preferred dividends and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust's definition issued in October 1999 which was effective beginning January 1, 2000. United Dominion considers 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 flows as a measure of United Dominion's activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. For 2001, FFO includes a non-recurring charge of $8.6 million related to workforce reductions, other severance costs, executive office relocation costs and the write-down of seven undeveloped land sites along with our investment in an online apartment leasing company. For 2000, FFO includes a non-recurring charge of $3.7 million related to the settlement of litigation and an organizational charge. (c) Adjusted funds from operations is defined as FFO less recurring capital expenditures for our stabilized portfolio. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This annual 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 Realty Trust, Inc. (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. BUSINESS OVERVIEW United Dominion is a real estate investment trust (REIT) that owns, acquires, renovates, develops and manages middle market apartment communities nationwide. From 1996 through 1999, United Dominion acquired other REITs, private portfolios and individual communities to create a national platform. Following this significant acquisition period, the Company upgraded the quality of the portfolio and invested in infrastructure and technology to catch up with the rapid growth of its portfolio of assets. During 2001, United Dominion continued to refine its strategy with the goal of enhancing long-term earnings growth on a sustained basis by focusing on operational issues that management believes will produce above-average net operating income growth, steadily increase cash flow per apartment home and strengthen the capital structure of the Company. The Company's strategy includes the following key initiatives: - Own and operate middle market apartment homes across a geographically diverse platform by enhancing United Dominion's presence in 25 - 30 core markets to enable the Company to capitalize on operating efficiencies. - As local market cycles create opportunities, exit current markets where long-term growth is below the national average (the "non-core markets"). - Employ a strict capital allocation discipline throughout all decision-making processes to enhance performance, improve the strength of the Company's balance sheet and increase financial flexibility. 7 - Lead, manage, measure and reward associates based upon performance specifically tied to key financial and investment indicators, including the growth of funds from operations, adjusted funds from operations and the common share price. Over the long-term, these key initiatives will better position United Dominion to serve its customers, increase profitability and capitalize on changes in the marketplace. At December 31, 2001, United Dominion owned 274 communities with 77,567 apartment homes nationwide. The following table summarizes United Dominion's apartment market information by major geographic market (excluding real estate under development):

YEAR ENDED AS OF DECEMBER 31, 2001 DECEMBER 31, 2001 ---------------------------------------- CARRYING --------------------------- NUMBER OF NUMBER OF PERCENTAGE VALUE AVERAGE AVERAGE APARTMENT APARTMENT OF CARRYING (IN PHYSICAL MONTHLY COMMUNITIES HOMES VALUE THOUSANDS) OCCUPANCY RENTAL RATES ----------- ---------- ----------- ----------- --------- ------------ Dallas, TX 16 5,177 6.7% $ 255,437 95.0% $ 678 Houston, TX 22 5,722 5.9% 227,217 94.0% 623 Phoenix, AZ 12 3,854 5.9% 225,997 93.6% 715 Orlando, FL 14 4,140 5.3% 202,676 92.9% 746 San Antonio, TX 12 3,827 5.0% 190,182 91.6% 677 Raleigh, NC 10 3,283 4.3% 166,411 91.7% 719 Tampa, FL 10 3,372 4.0% 151,867 94.1% 694 Fort Worth, TX 11 3,561 3.9% 148,888 96.6% 638 Columbus, OH 6 2,527 3.9% 148,012 93.4% 691 San Francisco, CA 4 980 3.7% 140,995 97.3% 1,767 Charlotte, NC 10 2,710 3.5% 136,303 89.2% 703 Nashville, TN 8 2,220 3.1% 119,805 94.2% 688 Greensboro, NC 8 2,122 2.7% 103,703 91.0% 642 Monterey Peninsula, CA 9 1,706 2.5% 97,304 95.4% 859 Memphis, TN 6 1,956 2.5% 96,909 92.3% 633 Richmond, VA 8 2,372 2.5% 96,117 95.6% 711 Southern California 5 1,414 2.4% 90,989 95.8% 903 Wilmington, NC 6 1,869 2.3% 89,015 92.6% 661 Metropolitan DC 5 1,291 1.9% 74,599 97.9% 845 Atlanta, GA 6 1,426 1.9% 71,202 93.3% 741 Baltimore, MD 6 1,291 1.7% 67,102 97.1% 817 Columbia, SC 6 1,584 1.6% 62,230 95.0% 586 Jacksonville, FL 3 1,157 1.5% 58,329 92.9% 669 Norfolk, VA 6 1,437 1.4% 54,095 95.4% 665 Lansing, MI 4 1,226 1.3% 48,668 92.4% 661 Seattle, WA 3 628 0.9% 34,031 94.9% 742 Other Western 6 2,594 3.2% 127,729 96.3% 703 Other Florida 8 2,073 2.6% 101,208 91.3% 722 Other Southwestern 9 2,212 2.6% 98,136 93.4% 589 Other Midwestern 10 2,122 2.5% 93,803 93.0% 629 Other Pacific 7 1,757 2.3% 87,156 93.6% 706 Other North Carolina 8 1,893 1.9% 74,453 95.1% 566 Other Mid-Atlantic 5 928 1.1% 42,397 96.6% 770 Other Southeastern 3 764 1.0% 37,428 94.8% 586 Other Northeastern 2 372 0.5% 18,119 96.4% 672 ----------- ---------- ----------- ----------- --------- ------------ TOTAL APARTMENTS 274 77,567 100.0% $3,838,512 93.9% $ 703 =========== ========== =========== =========== ========= ============

8 LIQUIDITY AND CAPITAL RESOURCES Liquidity is the ability to meet present and future financial obligations either through the sale or maturity of existing assets or by the acquisition of additional funds through working capital management. Both the coordination of asset and liability maturities and effective working capital management are important to the maintenance of liquidity. 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 expects to meet its short-term liquidity requirements generally through net cash provided by operations and borrowings under credit arrangements. The Company expects to meet certain long-term liquidity requirements such as scheduled debt maturities, the repayment of financing on development activities and potential property acquisitions, through long-term secured and unsecured borrowings, the disposition of properties and the issuance of debt securities or additional equity securities of the Company. The Company believes that its net cash provided by operations will continue to be adequate to meet both operating requirements and the payment of dividends by the Company in accordance with REIT requirements in both the short- and long-term. The budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations. 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 to facilitate future financing activities in the public capital markets. 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%. In December 2001, United Dominion completed an offering to the public of 4.1 million shares of common stock at a price of $14.40 per share. As of December 31, 2001, $541 million of equity and debt securities remain available for use under the shelf registration, although access to capital markets is dependent on market conditions at the time of issuance. Subsequent to December 31, 2001, the underwriters who sold the Company's stock in December 2001 exercised their over-allotment option for 166,800 shares of common stock at a price of $14.40 per share. In September 2001, Moody's Investors Service lowered its rating on the securities of the Company to Baa3 from Baa2, placing its rating on par with that of Standard & Poors, which had lowered its rating in 2000. This revision did not trigger a material increase in the borrowing rate under the Company's $375 million three-year unsecured revolving bank credit facility or the Company's secured revolving Fannie Mae credit facilities (see discussion under "Credit Facilities"), and United Dominion's debt rating remains "investment grade." Management does not anticipate that this revision will prevent the Company from accessing the public or private markets for either unsecured or secured financing. FUTURE CAPITAL NEEDS Future development expenditures are expected to be funded primarily through joint ventures or from proceeds from the sale of properties, and to a lesser extent, cash flow provided by operating activities. Acquisition activity in strategic markets is expected to be largely financed by the reinvestment of proceeds from the sale of property in non-strategic markets. During 2002, United Dominion has approximately $108.6 million of maturing debt which the Company anticipates repaying using proceeds from mortgage refinancing activity or borrowings under unsecured or secured credit facilities. 9 CRITICAL ACCOUNTING POLICIES 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 2001, $53.1 million or $704 per home was spent on capital expenditures for all of United Dominion's communities excluding development and commercial properties. These capital improvements included turnover related expenditures for floor coverings and appliances, other recurring capital expenditures such as HVAC equipment, roofs, landscaping, siding, parking lots and other non-revenue enhancing capital expenditures, which aggregated $31.5 million or $418 per home. In addition, 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 $21.6 million or $286 per home for the year ended December 31, 2001. The following table outlines capital expenditures and repair and maintenance costs for the Company's total portfolio, excluding real estate under development and commercial properties for the periods presented (dollars in thousands):

YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, (PER UNIT) ----------------------------------- ------------------------------------ 2001 2000 % CHANGE 2001 2000 % CHANGE ------- ------- -------- ------- ---- -------- Turnover capital expenditures $16,776 $14,109 18.9% $ 222 $177 25.4% Other recurring capital expenditures 14,759 10,685 38.1% 196 134 46.3% ------- ------- ---- ------- ---- ---- Total recurring capital expenditures 31,535 24,794 27.2% 418 311 34.4% Revenue enhancing improvements 21,561 16,702 29.1% 286 210 36.2% ------- ------- ---- ------- ---- ---- Total capital improvements $53,096 $41,496 28.0% $ 704 $521 35.1% ======= ======= ==== ======= ==== ==== Repair and maintenance 36,197 36,185 0.0% 480 454 5.7% ------- ------- ---- ------- ---- ---- Total expenditures $89,293 $77,681 14.9% $1,184 $975 21.4% ======= ======= ==== ====== ==== ====

Total capital improvements increased $11.6 million or $183 per home in 2001 compared to the same period in 2000. United Dominion will continue to selectively add revenue enhancing improvements that the Company believes will provide a return on investment substantially in excess of United Dominion's cost of capital. Capital expenditures during 2002 are currently expected to be at approximately the same level as those experienced in 2001. Revenue Recognition United Dominion's apartment homes are leased under operating leases with terms generally of one year or less. The Company's revenue recognition policy approximates a straight-line rent policy; however, United Dominion's revenue recognition policy results in slightly lower revenues in periods of increasing concessions and slightly higher revenues during periods of decreasing concessions. Rental concessions are recognized when incurred rather than using the straight-line rent methodology. During 2001, 2000 and 1999, the Company has experienced increased rental concessions. Derivatives and Hedging Activities United Dominion uses derivative financial instruments in the normal course of business to reduce its exposure to fluctuations in interest rates. As of December 31, 2001, United Dominion had 16 interest rate swap agreements with a notional value aggregating $282 million that are used to fix the interest rate on a portion of the Company's variable rate debt. These derivatives qualify for hedge accounting as discussed in Note 1 to our consolidated financial statements. While we intend to continue to meet the conditions for hedge accounting, if a particular interest rate swap does not qualify as highly effective, the change in the fair value of the derivatives used as hedges would be reflected in earnings. 10 Interest rate swaps, where the Company effectively makes fixed rate payments and receives variable rate payments to eliminate its variable rate exposure, are entered into to manage the interest rate risk in the Company's existing balance sheet mix. These instruments are valued using the market standard methodology of netting the discounted future variable cash receipts and the discounted expected fixed cash payments. The variable cash flow streams are based on an expectation of future interest rates derived from observed market interest rate curves. We have not changed our methods of calculating these fair values or developing the underlying assumptions. The values of these derivatives will change over time as cash receipts and payments are made and as market conditions change. Information about the fair values, notional amounts, and contractual terms of the Company's interest rate swaps can be found in Note 7 to our consolidated financial statements and the section titled "Interest Rate Risk" that follows. Potential losses are limited to counterparty risk in situations where United Dominion is owed money; that is, when United Dominion holds contracts with positive fair values. The Company does not expect any losses from counterparties failing to meet their obligations as the counterparties are highly rated credit quality U.S. financial institutions and management believes that the likelihood of realizing material losses from counterparty non-performance is remote. At December 31, 2001, the Company had unrealized losses totaling $14.9 million on derivative transactions, which if terminated would require a cash outlay. United Dominion presently has no intention to terminate these contracts. There are no credit concerns related to the Company's obligations and it expects to meet those obligations without default (see Note 7 - - Financial Instruments). 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 year ended December 31, 2001, United Dominion's cash flow from operating activities was $224.4 million compared to $224.2 million for 2000. During 2001, 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 offset by a decline in revenues generated from a smaller portfolio of assets. INVESTING ACTIVITIES For the year ended December 31, 2001, net cash used in investing activities was $64.1 million compared to net cash provided by investing activities of $58.7 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 year ended December 31, 2001, United Dominion invested approximately $53.6 million in real estate projects, down $30.8 million from its 2000 level of $84.4 million. 11 The following projects, representing additional phases to existing communities, were under development at December 31, 2001:

NUMBER OF COMPLETED COST TO BUDGETED ESTIMATED EXPECTED APARTMENT APARTMENT DATE COST COST COMPLETION LOCATION HOMES HOMES (IN THOUSANDS) (IN THOUSANDS) PER HOME DATE ---------- --------- --------- -------------- -------------- -------- ---------- Greensview II Denver, CO 192 168 $15,400 $16,700 $87,000 1Q02 Meridian II Dallas, TX 270 86 12,000 17,400 64,400 2Q02 --- --- ------- ------- ------- Total 462 254 $27,400 $34,100 $73,800 === === ======= ======= =======

In addition, United Dominion owns nine parcels of land that it continues to hold for future development that had a carrying value at December 31, 2001 of $12.8 million. Eight of the nine parcels represent additional phases to existing communities as United Dominion plans to add apartment homes adjacent to currently owned communities that are in improving markets. The following projects were complete at December 31, 2001:

NUMBER OF DEVELOPMENT % LEASED APARTMENT COST COST PER DATE AT LOCATION HOMES (IN THOUSANDS) HOME COMPLETED 12/31/01 ------------- --------- -------------- -------- --------- -------- NEW COMMUNITIES: Red Stone Ranch Austin, TX 324 $19,400 $59,900 7/01 76.9% Dominion Place at Kildaire Farm Raleigh, NC 332 23,600 71,100 12/01 49.0% --- ------- ------- 656 43,000 65,500 --- ------- ------- ADDITIONAL PHASES: Manor at England Run III Fredericksburg, VA 120 8,500 70,800 9/01 99.2% --- ------- ------- Total 776 $51,500 $66,400 === ======= =======

DEVELOPMENT JOINT VENTURE On June 21, 2000, United Dominion completed the formation of a joint venture that would invest approximately $101 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 serves 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 the formation of the joint venture. For the years ended December 31, 2001 and 2000, United Dominion recognized fee income of approximately $2.6 million and $3.0 million, respectively, for general contracting, developer and management services provided by the Company to the joint venture. As of December 31, 2001, all five joint venture properties were complete as follows:

NUMBER OF DEVELOPMENT APARTMENT COST COST PER DATE % LEASED LOCATION HOMES (IN THOUSANDS) HOME COMPLETED AT 12/31/01 ------------ --------- -------------- -------- --------- ----------- Meridian I Dallas, TX 250 $16,400 $65,600 6/00 94.4% Parke 33 Lakeland, FL 264 17,100 64,800 2/01 92.0% Sierra Canyon Phoenix, AZ 236 15,400 65,300 3/01 97.9% Oaks at Weston Raleigh, NC 380 28,000 73,700 3/01 82.9% Mandolin Dallas, TX 308 21,100 68,500 9/01 99.4% ----- ------- ------- Total 1,438 $98,000 $68,200 ===== ======= =======

12 On December 28, 2001, United Dominion purchased three of the five apartment communities for a total aggregate cost of $61.3 million. The three communities purchased were Meridian I, Sierra Canyon and Mandolin. The Company has the option, but not the obligation, to purchase the remaining two properties for fair value through December 31, 2006. If neither the Company nor the joint venture partner elects to purchase these properties prior to December 2006, the joint venture will then dispose of the assets to a third party at the then market price. DISPOSITION OF INVESTMENTS For the year ended December 31, 2001, United Dominion sold nine communities with 1,889 apartment homes and five parcels of land for an aggregate sales price of approximately $141.3 million and recognized gains for financial reporting purposes of $24.7 million. Proceeds from the sales were used primarily to repurchase the Company's 9.25% Series A Cumulative Redeemable Preferred stock during the second quarter of 2001, and to a lesser extent, to reduce long-term debt, repurchase common shares and to complete Section 1031 exchanges in order to defer taxable gains. During 2000, United Dominion sold 26 communities with 5,835 apartment homes, one commercial property and a parcel of land for an aggregate sales price of approximately $214.5 million and recognized gains for financial reporting purposes of $31.5 million. During 2002, United Dominion plans to dispose of selected communities in non-core markets or with inferior locations, significant capital expense requirements without the potential of a corresponding increase in rent or insufficient growth potential. Proceeds from 2002 dispositions, expected to be at levels above that of 2001, are planned to be used to acquire communities, fund development activity and to reduce debt. ACQUISITIONS During the year ended December 31, 2001, United Dominion acquired five communities with 1,304 apartment homes and one parcel of land at a total cost (including closing costs) of approximately $92.6 million which included the use of tax free exchange funds. During 2002, management plans to continue to channel new investments to those markets that are projected to provide the best investment returns for the Company over the next ten years. Markets will be targeted based upon refined criteria including past performance, expected job growth, current and anticipated housing supply and demand and the ability to attract and support household formation. FINANCING ACTIVITIES Net cash used in financing activities during 2001 was $166.0 million compared to $280.2 million for 2000, a decrease of $114.2 million. As part of the plan to improve the Company's balance sheet, United Dominion used proceeds from its disposition program and borrowings under its credit facilities to pay down secured and unsecured debt, to repurchase shares of common and preferred stock and to complete Section 1031 exchanges in order to defer taxable gains. In June 2001, the Company completed the redemption of all of the outstanding shares of its 9.25% Series A Cumulative Redeemable Preferred Stock at $25 per share plus accrued dividends utilizing proceeds from asset sales and a new secured credit facility. For the year ended December 31, 2001, United Dominion repurchased 17,600 Series B preferred shares at an average price of $24.42 per share and 3,768,704 common shares and operating partnership units at an average price of $13.21. As of December 31, 2001, approximately 3.2 million common shares and $13.6 million of Series B preferred shares remained available for purchase under the existing authorization for the share repurchase program. In August 2001, United Dominion closed on a $200 million credit facility with ARCS Commercial Mortgage Co., L.P. ARCS is a Fannie Mae DUS Lender. The initial funding on the facility was $139 million. The adjustable rate loan was provided through Fannie Mae DMBS for a five-year term based on three month LIBOR, with an initial interest rate of 3.99%. The Company has the option to extend the facility for an additional five years. The proceeds of the loan were used principally to redeem the Company's 9.25% Series A Cumulative Redeemable 13 Preferred Stock and reduce unsecured debt. The balance of the loan proceeds was used to refinance maturing secured loans. In December 2001, United Dominion closed on a $400 million Fannie Mae revolving credit facility through ARCS Commercial Mortgage Co., L.P. The facility provides for an initial term of ten years with an option by the Company to extend the term an additional five years at the then market rate. The Company has the option of variable or fixed rate tranches. The facility will be funded over the next several months and will be used primarily for the refinancing of existing debt on approximately 30 properties. Although the Company expects to pay prepayment penalties of approximately $23 million, the Company estimates, based upon certain assumptions as to the timing of the refinancings and underlying interest rates, that the positive net present value of the refinancings will range from approximately $17 million to $20 million. Also in December 2001, United Dominion completed an offering to the public of 4.1 million shares of common stock at a price of $14.40 per share. The proceeds were used to purchase apartment communities. For the year ended December 31, 2001, the Company repaid $107.3 million of secured debt and $21.3 million of unsecured debt, assumed $18.2 million of secured debt in connection with the acquisition of properties and was relieved of $28.3 million of secured debt in connection with the disposition of properties. CREDIT FACILITIES United Dominion has four secured revolving credit facilities with the Federal National Mortgage Association (the "FNMA Credit Facilities") with an aggregate commitment of $860 million. As of December 31, 2001, $422.7 million was outstanding under the FNMA Credit Facilities leaving $437.3 million of unused capacity. The FNMA Credit Facilities are for an initial term of five or ten years, bear interest at a floating rate and can be extended for an additional five years at United Dominion's discretion (see Note 4 - Secured Debt). United Dominion has a $375 million three-year unsecured revolving credit facility (the "Bank Credit Facility") that matures August 2003. As of December 31, 2001, $230.2 million was outstanding under the Bank Credit Facility leaving $144.8 million of unused capacity. Under the Bank Credit Facility, the Company may borrow at a rate of LIBOR plus 110 basis points for LIBOR-based borrowings and pays a facility fee, which is equal to 0.25% of the commitment (see Note 5 - Unsecured Debt). The FNMA Credit Facilities and the Bank Credit Facility are subject to customary financial covenants and limitations. DERIVATIVE INSTRUMENTS As part of United Dominion's overall interest rate risk management strategy, the Company uses derivatives as a means to fix the interest rates 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 its interest rate risk through the use of its derivative instruments. Due to the decline in interest rates in 2001, the fair value of the Company's derivative instruments has declined from an unfavorable value position of $3.8 million at December 31, 2000 to an unfavorable value position of $14.9 million at December 31, 2001 (see Note 7 - Financial Instruments). INTEREST RATE RISK United Dominion is exposed to interest rate risk associated with variable rate notes payable and maturing debt that has to be refinanced. United Dominion does not hold financial instruments for trading or other speculative purposes, but rather issues these financial instruments to finance its portfolio of real estate assets. United Dominion's interest rate sensitivity position is managed by the Company's finance department. Interest rate sensitivity is the relationship between changes in market interest rates and the fair value of market rate sensitive assets and liabilities. United Dominion's earnings are affected as changes in short-term interest rates impact its cost of variable rate debt 14 and maturing fixed rate debt. A large portion of United Dominion's market risk is exposure to short-term interest rates from variable rate borrowings outstanding under the unhedged portion of its FNMA Credit Facilities and its Bank Credit Facility, which totaled $405.7 million and $75.2 million, respectively, at December 31, 2001. The impact on United Dominion's financial statements of refinancing fixed rate debt that matured during 2001 was not material. As permitted by the terms of the Company's FNMA Credit Facilities, management intends to convert a significant portion of those borrowings from variable rates to fixed rates in 2002. At December 31, 2001, the notional value of United Dominion's derivative products for the purpose of managing interest rate risk was $282 million, representing interest rate swaps under which United Dominion pays a fixed rate of interest and receives a variable rate. These agreements effectively fix $282 million of United Dominion's variable rate notes payable to a weighted average fixed rate of 7.20%. At December 31, 2001, the fair market value of the interest rate swaps in an unfavorable value position to United Dominion was $14.9 million. If interest rates were 100 basis points more or less at December 31, 2001, the fair market value of the interest rate swaps would have increased or decreased approximately $4.9 million and $5.0 million, respectively. If market interest rates for variable rate debt average 100 basis points more in 2002 than they did during 2001, United Dominion's interest expense, after considering the effects of its interest rate swap agreements, would increase, and income before taxes would decrease by $5.2 million. Comparatively, if market interest rates for variable rate debt had averaged 100 basis points more in 2001 than in 2000, United Dominion's interest expense, after considering the effects of its interest rate swap agreements, would have increased, and income before taxes would have decreased by $3.8 million. If market rates for fixed rate debt were 100 basis points higher at December 31, 2001, the fair value of fixed rate debt would have decreased from $1.32 billion to $1.28 billion. If market interest rates for fixed rate debt were 100 basis points lower at December 31, 2001, the fair value of fixed rate debt would have increased from $1.32 billion to $1.38 billion. These amounts are determined by considering the impact of hypothetical interest rates on United Dominion's borrowing cost and interest rate swap agreements. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate its 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 United Dominion's financial structure. RESULTS OF OPERATIONS Effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 extends the reporting requirements of discontinued operations to include components of an entity that have either been disposed of or are classified as held for sale. Through November 27, 2002, the Company sold or classified certain properties as held for disposition (see Note 13, "Income from Discontinued Operations"). The operating results of these properties have been reclassified as discontinued operations in the consolidated statements of operations for each of the three years in the period ended December 31, 2001 included herein. The following discussion includes the results of both continuing and discontinued operations for the periods presented. Net Income Available to Common Shareholders 2001-vs-2000 Net income available to common shareholders was $27.1 million ($.27 per share) for the year ended December 31, 2001 compared to $42.7 million ($.41 per share) for 2000, representing a decrease of $15.6 million ($.14 per share). Excluding non-recurring charges (see discussion that follows under "Restructuring Charges" and "Impairment Loss on Real Estate and Investments") and extraordinary items, net income available to common shareholders was $41.5 million ($.41 per share) for the year ended December 31, 2001 compared to $45.5 million ($.44 per share) for 2000, representing a decrease of $4.0 million ($.04 per share). Excluding non-recurring charges and extraordinary items, the decrease for the period was primarily due to the overall decrease in the Company's total portfolio of assets that generated rental income of $618.6 million, representing a decrease of $8.0 million from 2000. In addition, the Company recognized lower gains on the sale of investments during 2001 and incurred the write-off of unamortized original issuance costs associated with the redemption of the Company's 9.25% Series A Cumulative Redeemable Preferred Stock during the second quarter of 2001. This decrease was moderated, in part, by a decrease in rental expenses of $4.2 million to $246.2 million and lower interest costs of $144.4 million during 2001 compared to $156.0 million in 2000. 15 2000-vs-1999 Net income available to common shareholders was $42.7 million ($.41 per share) for the year ended December 31, 2000 compared to $55.9 million ($.54 per share) for 1999, representing a decrease of $13.2 million ($.13 per share). The decrease was primarily due to the following factors: (i) property operating income growth generated from the performance of the portfolio during 2000 was offset by the decrease in the size of the portfolio due to the disposition program; (ii) United Dominion recognized $31.5 million ($.31 per share) of gains on the sales of investments in 2000 compared to $38.0 million ($.37 per share) for the comparable period in 1999 and; (iii) real estate depreciation increased significantly in 2000 as a result of the recognition of catch-up depreciation expense on communities transferred from real estate held for disposition to real estate held for investment during the second quarter of 2000 and, to a lesser extent, the impact of completed development communities, acquisitions and capital expenditures (see Note 2 - Real Estate Owned). APARTMENT COMMUNITY OPERATIONS United Dominion's net income is primarily generated from the operation 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):

Year Ended December 31, Year Ended December 31, -------------------------------------- -------------------------------------- 2001 2000 % Change 2000 1999 % Change -------------------------------------- -------------------------------------- Property rental income(1) $618,081 $625,845 -1.2% $625,845 $609,064 2.8% Property rental expense (excluding depreciation and amortization) (228,211) (230,853) -1.1% (230,853) (227,097) 1.7% -------------------------------------- -------------------------------------- Property operating income $389,870 $394,992 -1.3% $394,992 $381,967 3.4% ====================================== ====================================== Weighted average number of homes 76,487 80,253 -4.7% 80,253 85,926 -6.6% Physical occupancy 93.9% 94.2% -0.3% 94.2% 92.6% 1.6%

(1) Includes both continuing and discontinued operations. The decrease in property operating income provided by the Company's apartment community operations is due to the disposition of 7,724 apartment homes during 2000 and 2001. As a result of these dispositions, the weighted average number of apartment homes declined 4.7% from 2000 to 2001. 2001-vs-2000 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 72,997 weighted average apartment homes) provided 95% of the Company's property operating income for the year ended December 31, 2001. In 2001, property operating income for the same communities increased 2.3% or $8.5 million compared to the same period in 2000. The growth in property operating income resulted from a $17.5 million or 3.1% increase in property rental income over the same period in the prior year. The increase was driven by a $22.9 million or 3.9% increase in rental rates. The increased rental rates were partially offset by higher concessions and an increase in bad debt expense. Physical occupancy decreased 0.2% to 94.0% in 2001 compared to 2000. For 2001, property operating expenses at these same communities increased $9.0 million or 4.4%. The increase in property operating expenses resulted primarily from a $3.3 million or 10.6% increase in utility costs experienced by the Company as a result of the increase in prices for natural gas and overall increases in electricity costs. In addition, the Company experienced a $3.0 million or 9.4% increase in repair and maintenance, a $1.6 million or 3.1% increase in taxes and a $1.2 million or 2.1% increase in personnel costs. As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property operating income divided by property rental income) decreased 0.5% to 63.2%. 16 Non-Mature Communities The remaining 5% of United Dominion's property operating income during 2001 was generated from its non-mature communities (those communities acquired or developed during 2000 and 2001). United Dominion's development communities, which included 2,022 apartment homes constructed since January 1, 2000, provided an additional $9.5 million of property operating income for the year ended December 31, 2001. In addition, the six communities with 1,571 apartment homes acquired by United Dominion during 2000 and 2001 provided an additional $3.8 million of property operating income during 2001. 2000-vs-1999 Same Communities United Dominion's same communities (those communities acquired, developed or stabilized prior to January 1, 1999 and held on January 1, 2000 which consisted of 76,267 weighted average apartment homes) provided 94% of its property operating income for the year ended December 31, 2000. In 2000, property operating income for the same communities increased 4.2% or $15.2 million compared to 1999. The growth in property operating income resulted from a $26.8 million or 4.8% increase in property rental income which was driven by a $17.1 million or 2.9% increase in rental rates coupled with a $5.8 million or 1.2% increase in physical occupancy. The increase in rental rates and occupancy was partially offset by higher concessions and bad debt expense. For 2000, property operating expenses at these same communities increased $11.6 million or 5.6%. The increase in property operating expenses was due to (i) a $2.6 million or 5.3% increase in real estate taxes related to the $1.4 billion of real estate acquired in 1998 which had undergone reassessment; (ii) a $4.1 million or 76.3% increase in property insurance costs attributable to a combination of the Company's loss history plus overall increases in market rates; (iii) a $3.1 million or 5.3% increase in personnel costs due to higher salaries and benefit costs and; (iv) a $1.9 million or 6.1% increase in utilities expense. These increases were offset by a $1.3 million or 3.7% decrease in repair and maintenance expense. As a result of the increase in property rental income and increase in property operating expenses, the operating margin decreased 0.4% to 63.1%. Non-Mature Communities The remaining 6% of United Dominion's property operating income during 2000 was generated from its non-mature communities (those communities acquired or developed during 1999 and 2000). United Dominion's development communities, which included 2,470 apartment homes constructed since January 1, 1999, provided an additional $12.3 million of property operating income for the year ended December 31, 2000. In addition, the six communities with 1,497 apartment homes acquired by United Dominion during 1999 and 2000 provided an additional $7.6 million of property operating income during 2000. REAL ESTATE DEPRECIATION During the year ended December 31, 2001, real estate depreciation on continuing and discontinued operations decreased $1.1 million or 0.8% compared to 2000. The decrease in depreciation expense is attributable to the overall decrease in the weighted average number of apartment homes partially offset by the impact of completed development communities, acquisitions and capital expenditures. During the year ended December 31, 2000, real estate depreciation on continuing and discontinued operations increased $31.3 million or 25.7% over 1999. This increase was primarily attributable to (i) the recapture of approximately $10 million in depreciation expense on communities transferred from real estate held for disposition to real estate held for investment during the second quarter of 2000 and approximately $5 million of additional depreciation expense recognized on these assets during 2000 after they were reclassified into real estate held for investment; (ii) over $150 million in development completions in late 1999 and 2000 and; (iii) the effect of 17 approximately $200 million in acquisitions and capital improvements in 1999 and 2000 (see Note 2 - Real Estate Owned). INTEREST EXPENSE During 2001, interest expense on continuing and discontinued operations decreased $11.7 million from the corresponding amount in 2000 primarily due to decreasing interest rates and, to a lesser extent, the overall decrease in the weighted average level of debt outstanding. For the year ended December 31, 2001, the weighted average amount of debt outstanding decreased 2.9% or $60.2 million from 2000 levels and the weighted average interest rate decreased from 7.6% in 2000 to 7.1% in 2001. The weighted average amount of debt employed during 2001 is lower as a portion of disposition proceeds was used to repay outstanding debt. The decrease in the average interest rate during 2001 reflects the ability of the Company to take advantage of declining interest rates through refinancing and the utilization of variable rate debt. During 2000, interest expense on continuing and discontinued operations increased $2.3 million over 1999 as the weighted average amount of debt outstanding decreased 6.0% or $124.7 million from 1999 levels ($2.1 billion in 2000 versus $2.2 billion in 1999) and the weighted average interest rate increased from 7.4% in 1999 to 7.6% in 2000. The weighted average amount of debt employed during 2000 was lower as disposition proceeds were used to repay outstanding debt. The increase in the average interest rate during 2000 reflects the reliance on short-term bank borrowings that had higher interest rates when compared to the prior year. For 2001, 2000 and 1999, total interest capitalized was $2.9 million, $3.6 million and $5.2 million, respectively. RESTRUCTURING CHARGE 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 (ultimately approximately 230 full-time equivalent positions) in operations and at the corporate headquarters. These reductions will impact both personnel and general and administrative expenses. As of December 31, 2001, all of the accrued charge has been paid. 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. 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 (see Note 9 - Restructuring Charges). IMPAIRMENT LOSS ON REAL ESTATE AND INVESTMENTS In connection with the evaluation of the Company's real estate assets and operations during the first quarter of 2001, management determined that it was in the Company's best interest to dispose of a majority of its 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 during the first quarter 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 (see Note 2 - Real Estate Owned). In addition, the Company recognized a $0.4 million charge for the write-down of United Dominion's investment in an online apartment leasing company. During the fourth quarter of 2001, Realeum, Inc., a technology venture through which the Company and two other multifamily REIT entities have been co-developing a web-based property management system, successfully completed a secondary equity offering in which it raised approximately $15 million of new capital in exchange for a 45.6% ownership stake. The additional capital provides Realeum more flexibility as it rolls the product out for beta testing and continues its marketing and system enhancement processes. As a result of the equity offering, the market value of the Company's ownership stake was established at approximately $1.3 million. 18 Although management believes the potential revenue enhancements and cost efficiencies to be derived from an implementation of the system would enable United Dominion to recover its full investment in Realeum, the Company has elected to adopt a more conservative accounting treatment that requires a write-down of this investment to market value. As a result, the Company's $3.5 million aggregate investment was adjusted to $1.3 million. GENERAL AND ADMINISTRATIVE For the year ended December 31, 2001, general and administrative expenses increased $6.0 million or 38.2% over 2000. The increase was primarily due to an increase in incentive compensation expense and adjustments to the Company's accruals for various employee benefits and state and local taxes. During the year ended December 31, 2000, general and administrative expenses increased $1.9 million or 13.5% over 1999, reflecting a full year's impact of United Dominion's investment in professional staff, technology and scaleable accounting and information systems and the effect of additional franchise taxes in Tennessee as a result of a change in the state law regarding franchise taxes. GAINS ON SALES OF INVESTMENTS For the years ended December 31, 2001 and 2000, United Dominion recognized gains for financial reporting purposes of $24.7 million and $31.5 million, respectively. 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. 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. 19 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE UNITED DOMINION REALTY TRUST, INC.

PAGE ---- FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT Report of Ernst & Young LLP, Independent Auditors .................................... 21 Consolidated Balance Sheets at December 31, 2001 and 2000............................. 22 Consolidated Statements of Operations for each of the three years in the period ended December 31, 2001................................. 23 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2001................................. 24 Consolidated Statements of Shareholders' Equity for each of the three years in the period ended December 31, 2001......................... 25 Notes to Consolidated Financial Statements............................................ 26 SCHEDULE FILED AS PART OF THIS REPORT Schedule III - Summary of Real Estate Owned........................................... 47

All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto. 20 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Shareholders United Dominion Realty Trust, Inc. We have audited the accompanying consolidated balance sheets of United Dominion Realty Trust, Inc. (the "Company") as of December 31, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Dominion Realty Trust, Inc. at December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. As discussed in Note 1 to the consolidated financial statements, in 2001 the Company changed its method of accounting for derivative financial instruments. Also, as discussed in Note 13 to the consolidated financial statements, in 2002, the Company adopted the provisions of Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." ERNST & YOUNG LLP Richmond, Virginia January 31, 2002, except for Notes 13 and 14, as to which the date is November 27, 2002 21 UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT FOR SHARE DATA )

DECEMBER 31, ---------------------------- 2001 2000 ---- ---- ASSETS Real estate owned: Real estate held for investment (Note 2) $ 3,858,579 $ 3,758,974 Less: accumulated depreciation (646,366) (506,871) ----------- ----------- 3,212,213 3,252,103 Real estate under development 40,240 60,366 Real estate held for disposition (net of accumulated depreciation of $0 and $2,534) (Note 2) 8,848 14,446 ----------- ----------- Total real estate owned, net of accumulated depreciation 3,261,301 3,326,915 Cash and cash equivalents 4,641 10,305 Restricted cash 26,830 44,943 Deferred financing costs, net 15,802 14,271 Investment in unconsolidated development joint venture (Note 3) 3,355 8,088 Other assets 36,162 49,435 ----------- ----------- Total assets $ 3,348,091 $ 3,453,957 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Secured debt (Note 4) $ 974,177 $ 866,115 Unsecured debt (Note 5) 1,090,020 1,126,215 Real estate taxes payable 28,099 30,554 Accrued interest payable 16,779 18,059 Security deposits and prepaid rent 20,481 22,524 Distributions payable 33,457 36,128 Accounts payable, accrued expenses and other liabilities 66,688 47,144 ----------- ----------- Total liabilities 2,229,701 2,146,739 Minority interests 75,665 88,326 Shareholders' equity: (Note 6) Preferred stock, no par value; $25 liquidation preference, 25,000,000 shares authorized; 0 shares 9.25% Series A Cumulative Redeemable issued and outstanding (3,969,120 in 2000) -- 99,228 5,416,009 shares 8.60% Series B Cumulative Redeemable issued and outstanding (5,439,109 in 2000) 135,400 135,978 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 103,133,279 shares issued and outstanding (102,219,250 in 2000) 103,133 102,219 Additional paid-in capital 1,098,029 1,081,387 Distributions in excess of net income (448,345) (366,531) Deferred compensation - unearned restricted stock awards (1,312) (828) Notes receivable from officer-shareholders (4,309) (7,561) Accumulated other comprehensive loss, net (Note 7) (14,871) -- ----------- ----------- Total shareholders' equity 1,042,725 1,218,892 ----------- ----------- Total liabilities and shareholders' equity $ 3,348,091 $ 3,453,957 =========== ===========

See accompanying notes to consolidated financial statements. 22 UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)

YEARS ENDED DECEMBER 31, --------------------------------------- 2001(1) 2000(1) 1999(1) -------- -------- -------- REVENUES Rental income $ 561,958 $ 572,205 $ 572,798 Non-property income 4,593 5,326 1,942 --------- --------- --------- Total revenues 566,551 577,531 574,740 EXPENSES Rental expenses: Real estate taxes and insurance 59,340 62,009 57,297 Personnel 56,909 59,452 61,058 Utilities 34,479 33,417 33,920 Repairs and maintenance 33,227 32,913 37,438 Administrative and marketing 20,333 21,139 23,045 Property management 17,107 18,392 18,474 Other operating expenses 1,477 1,426 1,539 Real estate depreciation 137,551 140,674 110,972 Interest 138,895 150,896 148,280 Severance costs and other organizational charges 5,404 1,020 -- Litigation settlement charges -- 2,700 -- Impairment loss on real estate and investments 4,661 -- 17,694 General and administrative 21,730 15,724 13,850 Other depreciation and amortization 3,313 4,228 4,335 --------- --------- --------- Total expenses 534,426 543,990 527,902 --------- --------- --------- Income before gains on sales of investments, minority interests, discontinued operations and extraordinary item 32,125 33,541 46,838 Gains on sales of land and depreciable property 24,748 31,450 37,995 --------- --------- --------- Income before minority interests, discontinued operations and extraordinary item 56,873 64,991 84,833 Minority interests of unitholders in outside partnerships .. (2,225) (1,501) (1,245) Minority interests of unitholders in operating partnerships (1,052) (1,859) (3,360) --------- --------- --------- Income before discontinued operations and extraordinary item 53,596 61,631 80,228 Income from discontinued operations, net of minority interests (Note 13) 11,703 14,153 12,467 --------- --------- --------- Income before extraordinary item 65,299 75,784 92,695 Extraordinary item - early extinguishment of debt (3,471) 831 927 --------- --------- --------- Net income 61,828 76,615 93,622 Distributions to preferred shareholders - Series A and B (15,762) (21,591) (22,560) Distributions to preferred shareholders - Series D (Convertible) (15,428) (15,300) (15,154) (Premium)/discount on preferred share repurchases (3,496) 2,929 -- --------- --------- --------- Net income available to common shareholders $ 27,142 $ 42,653 $ 55,908 ========= ========= ========= Earnings (loss) per common share - basic: Income before discontinued operations and extraordinary item, net of minority interests $ 0.19 $ 0.27 $ 0.41 Income from discontinued operations, net of minority interests $ 0.12 $ 0.14 $ 0.12 Extraordinary item, net of minority interests $ (0.03) $ 0.01 $ 0.01 Net income available to common shareholders $ 0.27 $ 0.41 $ 0.54 Earnings (loss) per common share - diluted: Income before discontinued operations and extraordinary item, net of minority interests $ 0.19 $ 0.27 $ 0.41 Income from discontinued operations, net of minority interests $ 0.12 $ 0.14 $ 0.12 Extraordinary item, net of minority interests $ (0.03) $ 0.01 $ 0.01 Net income available to common shareholders $ 0.27 $ 0.41 $ 0.54 Common distributions declared per share $ 1.08 $ 1.07 $ 1.06 Weighted average number of common shares outstanding-basic 100,339 103,072 103,604 Weighted average number of common shares outstanding-diluted 101,037 103,208 103,639

(1) Reclassified as described in Note 13. See accompanying notes to consolidated financial statements. 23 UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

YEARS ENDED DECEMBER 31, --------------------------------------- 2001 2000 1999 --------- --------- --------- OPERATING ACTIVITIES Net income $ 61,828 $ 76,615 $ 93,622 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 155,327 157,361 126,152 Impairment loss on real estate and investments 5,436 -- 19,300 Gains on sales of investments (24,748) (31,450) (37,995) Minority interests 4,192 4,386 5,679 Extraordinary item-early extinguishment of debt 3,471 (831) (927) Amortization of deferred financing costs and other 965 2,551 5,184 Changes in operating assets and liabilities: Decrease in operating liabilities (3,188) (2,333) (4,777) Decrease/(increase) in operating assets 21,128 17,861 (15,636) --------- --------- --------- Net cash provided by operating activities 224,411 224,160 190,602 INVESTING ACTIVITIES Proceeds from sales of real estate investments, net 109,713 160,257 161,140 Proceeds received for excess expenditures over investment contribution in development joint venture -- 30,176 -- Acquisition of real estate assets, net of liabilities assumed (74,372) (4,635) (69,969) Development of real estate assets and other major improvements (53,607) (84,431) (121,073) Capital expenditures-real estate assets, net of escrow reimbursement (53,096) (41,496) (67,004) Capital expenditures-non-real estate assets (1,442) (1,166) (8,062) Other investing activities 8,749 -- 1,132 --------- --------- --------- Net cash (used in)/provided by investing activities (64,055) 58,705 (103,836) FINANCING ACTIVITIES Proceeds from the issuance of secured notes payable 225,171 67,285 201,861 Scheduled principal payments on secured notes payable (55,130) (62,575) (19,100) Non-scheduled principal payments on secured notes payable (52,182) (100,793) (184,993) Proceeds from the issuance of unsecured notes payable -- 248,035 197,345 Payments on unsecured notes payable (21,307) (214,984) (151,117) Net (repayment)/borrowing of short-term bank debt (14,200) (33,200) 37,600 Payment of financing costs (4,807) (5,648) (6,719) Proceeds from the issuance of common stock 66,319 7,660 17,250 Proceeds from the issuance of out-performance partnership shares 1,236 -- -- Distributions paid to minority interests (12,868) (10,272) (9,200) Distributions paid to preferred shareholders (34,308) (36,909) (34,958) Distributions paid to common shareholders (108,511) (110,098) (109,608) Repurchases of operating partnership units and other minority interests (4,267) (341) (11,967) Repurchases of common and preferred stock (151,166) (28,398) (31,563) --------- --------- --------- Net cash used in financing activities (166,020) (280,238) (105,169) Net (decrease)/increase in cash and cash equivalents (5,664) 2,627 (18,403) Cash and cash equivalents, beginning of year 10,305 7,678 26,081 --------- --------- --------- Cash and cash equivalents, end of year $ 4,641 $ 10,305 $ 7,678 ========= ========= ========= SUPPLEMENTAL INFORMATION: Interest paid during the period $ 148,863 $ 152,434 $ 162,236 Conversion of operating partnership units to common stock 74 247 3,947 Issuance of restricted stock awards 1,363 830 460 Non-cash transactions: Secured debt assumed with the acquisition of properties 18,230 10,130 5,750 Reduction in secured debt from the disposition of properties 28,315 45,088 75,566

See accompanying notes to consolidated financial statements. 24 UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS, EXCEPT FOR SHARE DATA)

PREFERRED STOCK COMMON STOCK PAID-IN SHARES AMOUNT SHARES AMOUNT CAPITAL BALANCE, DECEMBER 31, 1998 18,200,000 $ 430,000 103,639,117 $ 103,639 $ 1,090,432 Comprehensive Income Net income -------------------------------------------------------------- Comprehensive income -------------------------------------------------------------- Issuance of common shares to employees, officers and director-shareholders 71,998 72 665 Issuance of common shares through dividend reinvestment and stock purchase plan 1,597,841 1,598 15,049 Purchase of common and preferred stock (85,140) (2,128) (2,687,984) (2,688) (26,746) Issuance of restricted stock awards 46,000 46 414 Adjustment for cash purchase and conversion of minority interests of unitholders in operating partnerships 73,805 74 3,873 Principal repayments on notes receivable from officer-shareholders Notes issued for common shares Common stock distributions declared ($1.06 per share) Preferred stock distributions declared Series A ($2.31 per share) Preferred stock distributions declared Series B ($2.15 per share) Preferred stock distributions declared Series D ($1.89 per share) Amortization of deferred compensation -------------------------------------------------------------- BALANCE, DECEMBER 31, 1999 18,114,860 $ 427,872 102,740,777 $ 102,741 $ 1,083,687 ============================================================== Comprehensive Income Net income -------------------------------------------------------------- Comprehensive income -------------------------------------------------------------- Issuance of common shares to employees, officers and director-shareholders 5,000 5 158 Issuance of common shares through dividend reinvestment and stock purchase plan 767,513 767 6,538 Purchase of common and preferred stock (706,631) (17,666) (1,398,866) (1,399) (9,333) Issuance of restricted stock awards 85,670 86 744 Adjustment for cash purchase and conversion of minority interests of unitholders in operating partnerships 19,156 19 (407) Principal repayments on notes receivable from officer-shareholders Common stock distributions declared ($1.07 per share) Preferred stock distributions declared Series A ($2.31 per share) Preferred stock distributions declared Series B ($2.15 per share) Preferred stock distributions declared Series D ($1.91 per share) Amortization of deferred compensation -------------------------------------------------------------- BALANCE, DECEMBER 31, 2000 17,408,229 $ 410,206 102,219,250 $ 102,219 $ 1,081,387 ============================================================== Comprehensive Income Net income Other comprehensive income: Cumulative effect of a change in accounting principle (Note 7) Unrealized loss on derivative financial instruments (Note 7) -------------------------------------------------------------- Comprehensive income -------------------------------------------------------------- Issuance of common shares to employees, officers and director-shareholders 257,158 258 2,318 Issuance of common shares through dividend reinvestment and stock purchase plan 332,243 332 4,054 Issuance of common shares through public offering 4,100,000 4,100 52,316 Purchase of common and preferred stock (91,900) (2,298) (3,962,076) (3,962) (47,362) Redemption of Series A preferred stock (3,900,320) (97,508) 3,496 Issuance of restricted stock awards 112,433 112 1,251 Adjustment for cash purchase and conversion of minority interests of unitholders in operating partnerships 74,271 74 569 Principal repayments on notes receivable from officer-shareholders Common stock distributions declared ($1.08 per share) Preferred stock distributions declared Series A ($1.05 per share) Preferred stock distributions declared Series B ($2.15 per share) Preferred stock distributions declared Series D ($1.93 per share) Amortization of deferred compensation -------------------------------------------------------------- BALANCE, DECEMBER 31, 2001 13,416,009 $ 310,400 103,133,279 $ 103,133 $ 1,098,029 ==============================================================

DEFERRED DISTRIBUTIONS COMPENSATION- NOTES ACCUMULATED IN UNEARNED RECEIVABLE OTHER EXCESS OF RESTRICTED FROM OFFICER- COMPREHENSIVE NET INCOME STOCK AWARDS SHAREHOLDERS LOSS TOTAL BALANCE, DECEMBER 31, 1998 $(242,331) $ - $ (7,619) $ - $1,374,121 Comprehensive Income Net income 93,622 93,622 ------------------------------------------------------------------- Comprehensive income 93,622 - 93,622 ------------------------------------------------------------------- Issuance of common shares to employees, officers and director-shareholders 737 Issuance of common shares through dividend reinvestment and stock purchase plan 16,647 Purchase of common and preferred stock (31,562) Issuance of restricted stock awards (460) - Adjustment for cash purchase and conversion of minority interests of unitholders in operating partnerships 3,947 Principal repayments on notes receivable from officer-shareholders 139 139 Notes issued for common shares (273) (273) Common stock distributions declared ($1.06 per share) (109,607) (109,607) Preferred stock distributions declared Series A ($2.31 per share) (9,688) (9,688) Preferred stock distributions declared Series B ($2.15 per share) (12,872) (12,872) Preferred stock distributions declared Series D ($1.89 per share) (15,154) (15,154) Amortization of deferred compensation 155 155 ------------------------------------------------------------------- BALANCE, DECEMBER 31, 1999 $(296,030) $ (305) $ (7,753) $ - $1,310,212 =================================================================== Comprehensive Income Net income 76,615 76,615 ------------------------------------------------------------------- Comprehensive income 76,615 - 76,615 ------------------------------------------------------------------- Issuance of common shares to employees, officers and director-shareholders 163 Issuance of common shares through dividend reinvestment and stock purchase plan 7,305 Purchase of common and preferred stock (28,398) Issuance of restricted stock awards (830) - Adjustment for cash purchase and conversion of minority interests of unitholders in operating partnerships (388) Principal repayments on notes receivable from officer-shareholders 192 192 Common stock distributions declared ($1.07 per share) (110,225) (110,225) Preferred stock distributions declared Series A ($2.31 per share) (9,473) (9,473) Preferred stock distributions declared Series B ($2.15 per share) (12,118) (12,118) Preferred stock distributions declared Series D ($1.91 per share) (15,300) (15,300) Amortization of deferred compensation 307 307 ------------------------------------------------------------------- BALANCE, DECEMBER 31, 2000 $(366,531) $ (828) $ (7,561) $ - $1,218,892 =================================================================== Comprehensive Income Net income 61,828 61,828 Other comprehensive income: Cumulative effect of a change in accounting principle (Note 7) (3,848) (3,848) Unrealized loss on derivative financial instruments (Note 7) (11,023) (11,023) ------------------------------------------------------------------- Comprehensive income 61,828 (14,871) 46,957 ------------------------------------------------------------------- Issuance of common shares to employees, officers and director-shareholders 2,576 Issuance of common shares through dividend reinvestment and stock purchase plan 4,386 Issuance of common shares through public offering 56,416 Purchase of common and preferred stock (53,622) Redemption of Series A preferred stock (3,496) (97,508) Issuance of restricted stock awards (1,363) - Adjustment for cash purchase and conversion of minority interests of unitholders in operating partnerships 643 Principal repayments on notes receivable from officer-shareholders 3,252 3,252 Common stock distributions declared ($1.08 per share) (108,956) (108,956) Preferred stock distributions declared Series A ($1.05 per share) (4,111) (4,111) Preferred stock distributions declared Series B ($2.15 per share) (11,651) (11,651) Preferred stock distributions declared Series D ($1.93 per share) (15,428) (15,428) Amortization of deferred compensation 879 879 ------------------------------------------------------------------- BALANCE, DECEMBER 31, 2001 $(448,345) $(1,312) $ (4,309) $(14,871) $1,042,725 ===================================================================

See accompanying notes to consolidated financial statements. 25 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND FORMATION United Dominion Realty Trust, Inc., a Virginia corporation, was formed in 1972. United Dominion operates within one defined business segment with activities related to the ownership, management, development, acquisition, renovation and disposition of multifamily apartment communities nationwide. At December 31, 2001, United Dominion owned 274 communities with 77,567 completed apartment homes and had two additional phases to existing communities with 462 apartment homes under development. 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 December 31, 2001, there were 74,962,675 units in the Operating Partnership outstanding, of which 68,509,601 units or 91.4% were owned by United Dominion and 6,453,074 units or 8.6% were owned by non-affiliated limited partners. As of December 31, 2001, there were 3,492,889 units in the Heritage OP outstanding, of which 3,108,001 units or 89.0% were owned by United Dominion and 384,888 units or 11.0% 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. All significant inter-company accounts and transactions have been eliminated in consolidation. INCOME TAXES United Dominion is operated as, and elects to be taxed as, a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). Generally, a REIT complies with the provisions of the Code if it distributes at least 90% (95% prior to 2001) of its REIT taxable income to its shareholders and will not be subject to U.S. federal income taxes if it distributes at least 100% of its income. Accordingly, no provision has been made for federal income taxes. However, United Dominion is subject to certain state and local excise or franchise taxes, for which provision has been made. The differences between net income available to common shareholders for financial reporting purposes and taxable income before dividend deductions relate primarily to temporary differences, principally real estate depreciation and the tax deferral of certain gains on property sales. The temporary differences in depreciation result from differences in the book and tax basis of certain real estate assets and the differences in the methods of depreciation and lives of the real estate assets. The following table reconciles the Company's net income to REIT taxable income for the three years ended December 31, 2001 (dollars in thousands):

2001 2000 1999 --------- --------- --------- Net income $ 61,828 $ 76,615 $ 93,622 Minority interest expense, less than distributions (1,442) (2,851) (181) Depreciation and amortization expense 45,327 62,828 27,573 Gain on the disposition of properties 343 10,120 (24,654) Revenue recognition timing differences 589 780 1,060 Impairment loss, not deductible for tax 2,788 -- 18,300 Investment loss, not deductible for tax 2,648 -- 1,000 Other expense timing differences 2,787 (2,414) (4,034) --------- --------- --------- REIT taxable income before dividends $ 114,868 $ 145,078 $ 112,686 ========= ========= ========= Dividends paid $ 140,146 $ 147,116 $ 147,321 ========= ========= =========

26 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 For income tax purposes, distributions paid to common shareholders consist of ordinary income, capital gains and return of capital, or a combination thereof. For the three years ended December 31, 2001, distributions paid per common share were taxable as follows:

2001 2000 1999 ---- ---- ---- Ordinary income $0.74 $0.81 $0.62 Long-term capital gain 0.11 0.15 0.13 Unrecaptured section 1250 gain 0.07 0.11 -- Return of capital 0.16 -- 0.31 ----- ----- ----- $1.08 $1.07 $1.06 ===== ===== =====

USE OF ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. RECLASSIFICATIONS Certain reclassifications have been made to amounts in prior years' financial statements to conform with current year presentation. CASH AND CASH EQUIVALENTS Cash and cash equivalents include all cash and liquid investments with maturities of three months or less when purchased. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURE The Company accounts for investments in unconsolidated joint ventures using the equity method when major business decisions require approval by the other partners and the Company does not have control of the assets. Investments are recorded at cost and subsequently adjusted for equity in net income (loss) and cash contributions and distributions. United Dominion eliminates intercompany profits on sales of services that are provided to the venture. Differences between the carrying value of investments and the underlying equity in net assets of the investee are due to capitalized interest on the investment balance and capitalized development and leasing costs that are recovered by the Company through fees during construction (see Note 3 - Investment in Unconsolidated Joint Venture). REAL ESTATE Real estate assets held for investment are carried at historical cost less accumulated depreciation and any recorded impairment losses. Expenditures for ordinary repair and maintenance costs are charged to expense as incurred. Expenditures for improvements, renovations and replacements related to the acquisition and improvement of real estate assets are capitalized at cost and depreciated over their estimated useful lives if the value of the existing asset will be materially enhanced or the life of the related asset will be substantially extended beyond the original life expectancy. United Dominion recognizes impairment losses on long-lived assets used in operations when there is an event or change in circumstance that indicates an impairment in the value of an asset and the undiscounted future cash flows are not sufficient to recover the asset's carrying value. If such indicators of impairment are present, an impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value. For long-lived assets to be disposed of, impairment losses are recognized when the fair value of the asset less estimated cost to sell is less than the carrying value of the asset. Prior to 2000, properties were classified as real 27 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 estate held for disposition when management had committed to sell and was actively marketing the property, and United Dominion expected to dispose of these properties within the next twelve months. Beginning in 2000, properties classified as real estate held for disposition generally represent properties that are under contract for sale. Real estate held for disposition is carried at the lower of cost, net of accumulated depreciation, or fair value, less the cost to dispose, determined on an asset by asset basis. Expenditures for ordinary repair and maintenance costs on held for disposition properties are charged to expense as incurred. Expenditures for improvements, renovations and replacements related to held for disposition properties are capitalized at cost. Depreciation is not recorded on real estate held for disposition and gains (losses) from initial and subsequent adjustments to the carrying value of the assets, if any, are recorded as a separate component of income from continuing operations. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets which is 35 years for buildings, 10 to 35 years for major improvements, and 3 to 10 years for furniture, fixtures, equipment and other assets. All development projects and related carrying costs are capitalized and reported on the Consolidated Balance Sheet as "real estate under development" until such time as the development project is completed. Upon completion, the total cost of the building and associated land is transferred to real estate held for investment and the assets are depreciated over their estimated useful lives. The cost of development projects includes interest, real estate taxes, insurance and allocated development overhead during the construction period. Interest, real estate taxes and incremental labor and support costs for personnel working directly on the development site are capitalized as part of the real estate under development to the extent that such charges do not cause the carrying value of the asset to exceed its net realizable value. During 2001, 2000 and 1999, total interest capitalized was $2.9 million, $3.6 million and $5.2 million, respectively. REVENUE RECOGNITION United Dominion's apartment homes are leased under operating leases with terms generally of one year or less. Rental income is recognized after it is earned and collectibility is reasonably assured. RESTRICTED CASH Restricted cash consists of escrow deposits held by lenders for real estate taxes, insurance and replacement reserves, and security deposits. DEFERRED FINANCING COSTS Deferred financing costs include fees and other external costs incurred to obtain debt financings and are generally amortized on a straight-line basis, which approximates the effective interest method, over a period not to exceed the term of the related debt. Unamortized financing costs are written-off when debt is retired before its maturity date. During 2001, 2000 and 1999, amortization expense was $3.6 million, $5.0 million and $4.0 million, respectively. ADVERTISING COSTS All costs are expensed as incurred. During 2001, 2000 and 1999, total advertising expense was $9.6 million, $9.3 million and $9.7 million, respectively. INTEREST RATE SWAP AGREEMENTS Statements of Financial Accounting Standards No. 133 and 138, "Accounting for Certain Derivative Instruments and Hedging Activities" became effective on January 1, 2001. The 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 28 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 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 December 31, 2001, all of the Company's derivative financial instruments are interest rate swap agreements that are designated as cash flow hedges of debt with variable interest rate features, 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 a $3.8 million loss, all of which was recorded directly to other comprehensive income. As part of United Dominion's overall interest rate risk management strategy, the Company uses derivative financial instruments as a means to artificially fix variable rate debt 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 cash flow exposure being hedged, fluctuations in the value of the derivative instruments are generally offset by changes in the cash flow of the underlying exposures. As a result, United Dominion believes that it 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 hedged 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. Prior to the adoption of Statements 133 and 138 on January 1, 2001, United Dominion also used interest rate swap contracts for hedging purposes. For interest rate swaps, the net amounts paid or received and net amounts accrued through the end of the accounting period were included in interest expense. The fair value of the interest rate swap contracts were not recorded on the Consolidated Balance Sheet and unrealized gains or losses were not recognized in the Consolidated Statements of Operations. Gains and losses on any contracts terminated early were deferred and amortized to income over the remaining average life of the terminated contract. COMPREHENSIVE INCOME Comprehensive income, which is defined as all changes in equity during each period except for those resulting from investments by or distributions to shareholders, is displayed in the accompanying Statements of Shareholders' Equity. Other comprehensive income consists of gains or losses from derivative financial instruments. EARNINGS PER SHARE Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the year. Diluted earnings per common share is computed based upon 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 potentially dilutive common stock equivalents is determined using the treasury stock method based on United Dominion's average stock price. The following table sets forth the computation of basic and diluted earning per share (dollars in thousands, except per share amounts): 29 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001

2001 2000 1999 ---- ---- ---- Numerator for basic and diluted earnings per share - net income available to common shareholders $ 27,142 $ 42,653 $ 55,908 Denominator: Denominator for basic earnings per share - weighted average shares 100,339 103,072 103,604 Effect of dilutive securities: Employee stock options and awards 698 136 35 -------- -------- -------- Denominator for dilutive earnings per share 101,037 103,208 103,639 ======== ======== ======== Basic earnings per share $ 0.27 $ 0.41 $ 0.54 ======== ======== ======== Diluted earnings per share $ 0.27 $ 0.41 $ 0.54 ======== ======== ========

The effect of the conversion of the operating partnership units and convertible preferred stock is not dilutive and is therefore not included as a dilutive security in the earnings per share computation. The weighted average effect of the conversion of the operating partnership units for the years ended December 31, 2001, 2000 and 1999 was 7,281,835 shares, 7,489,435 shares and 8,180,409 shares, respectively. The weighted average effect of the conversion of the convertible preferred stock for the years ended December 31, 2001, 2000 and 1999 was 12,307,692 shares. MINORITY INTERESTS IN OPERATING PARTNERSHIPS Interests in operating partnerships held by limited partners are represented by operating partnership units ("OP Units"). The operating partnerships' income is allocated to holders of OP Units based upon net income available to common shareholders and the weighted average number of OP Units outstanding to total common shares plus OP Units outstanding during the period. Capital contributions, distributions and profits and losses are allocated to minority interests in accordance with the terms of the individual partnership agreements. OP Units can be exchanged for cash or shares of United Dominion's common stock on a one-for-one basis, at the option of United Dominion. OP Units as a percentage of total OP Units and shares outstanding were 6.8% at December 31, 2001 and 2000 and 7.3% at December 31, 1999. MINORITY INTERESTS IN OTHER PARTNERSHIPS United Dominion has limited partners in certain real estate partnerships acquired as part of the acquisition of American Apartment Communities II on December 7, 1998. Net income for these partnerships is allocated based on the percentage interest owned by these limited partners in each respective real estate partnership. STOCK BASED COMPENSATION United Dominion has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") in accounting for its employee stock options because the alternative fair value accounting provided for under Statement 123, "Accounting for Stock Based Compensation," requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of United Dominion's employee stock options equals the market price of the underlying stock on the date of grant, no compensation cost has been recognized. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In February 2002, the FASB rescinded Statement 4, "Reporting Gains and Losses from Extinguishment Debt" (SFAS No. 4). The rescission of SFAS No. 4 will be applied in accordance with the guidance of the FASB, but once applied, United Dominion will be required to reclassify prior period items that do not meet the extraordinary classification criteria in APB 30. The Company from time to time incurs such charges and is currently assessing the impact that these statements will have on the consolidated financial position or results of operations of United Dominion. 2. REAL ESTATE OWNED 30 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 United Dominion operates in 62 markets dispersed throughout 21 states. At December 31, 2001, the Company's largest apartment market was Dallas, Texas, where it owned 6.7% of its apartment homes, based upon carrying value. Excluding Dallas, United Dominion did not own more than 5.9% of its apartment homes in any one market, based upon carrying value. The following table summarizes real estate held for investment at December 31, (dollars in thousands):

2001 2000 ---- ---- Land and land improvements $ 695,923 $ 668,003 Buildings and improvements 2,945,741 2,902,386 Furniture, fixtures and equipment 216,637 188,321 Construction in progress 278 264 ----------- ----------- Real estate held for investment 3,858,579 3,758,974 Accumulated depreciation (646,366) (506,871) ----------- ----------- Real estate held for investment, net $ 3,212,213 $ 3,252,103 =========== ===========

The following is a summary of real estate held for investment by major market (in order of carrying value and excluding real estate under development) at December 31, 2001 (dollars in thousands):

NUMBER OF INITIAL APARTMENT ACQUISITION CARRYING ACCUMULATED COMMUNITIES COST VALUE DEPRECIATION ENCUMBRANCES ----------- ---- ----- ------------ ------------ Dallas, TX 16 $ 221,734 $ 255,437 $ 34,449 $ 40,850 Houston, TX 22 178,188 227,217 33,007 27,336 Phoenix, AZ 12 189,273 225,997 28,374 56,893 Orlando, FL 14 167,524 202,676 42,242 89,823 San Antonio, TX 12 171,241 190,182 25,794 37,072 Raleigh, NC 10 146,686 166,411 34,675 57,754 Tampa, FL 10 132,927 151,867 27,829 57,315 Fort Worth, TX 11 134,671 148,888 23,580 22,786 Columbus, OH 6 111,315 148,012 13,661 43,897 San Francisco, CA 4 136,504 140,995 10,769 21,423 Charlotte, NC 10 109,961 136,303 31,512 12,159 Nashville, TN 8 83,987 119,805 20,254 -- Greensboro, NC 8 85,362 103,703 19,438 -- Monterey Peninsula, CA 9 95,091 97,304 8,394 44,416 Memphis, TN 6 88,467 96,909 15,546 27,092 Richmond, VA 8 74,856 96,117 30,537 66,657 Southern California 5 87,442 90,989 8,512 11,627 Wilmington, NC 6 64,213 89,015 20,305 -- Metropolitan DC 5 57,334 74,599 12,813 38,011 Atlanta, GA 6 57,669 71,202 16,377 19,113 Baltimore, MD 6 58,846 67,102 16,014 29,011 Columbia, SC 6 52,795 62,230 17,337 5,000 Jacksonville, FL 3 44,787 58,329 13,959 23,202 Norfolk, VA 6 42,741 54,095 17,879 7,359 Lansing, MI 4 50,237 48,668 4,397 24,889 Seattle, WA 3 31,953 34,031 3,775 13,311 Other Western 6 122,225 127,729 13,159 42,239 Other Florida 8 69,719 101,208 20,574 --

31 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001

NUMBER OF INITIAL APARTMENT ACQUISITION CARRYING ACCUMULATED COMMUNITIES COST VALUE DEPRECIATION ENCUMBRANCES ----------- ---- ----- ------------ ------------ Other Southwestern 9 90,295 98,136 13,479 19,102 Other Midwestern 10 88,281 93,803 9,149 36,148 Other Pacific 7 86,601 87,156 9,578 45,605 Other North Carolina 8 61,677 74,453 22,659 9,876 Other Mid-Atlantic 5 37,618 42,397 9,123 12,542 Other Southeastern 3 28,691 37,428 8,699 19,285 Other Northeastern 2 14,732 18,119 4,485 5,167 Commercial 10,482 12,448 3,657 3,221 Richmond Corporate 6,597 7,619 375 3,996 ------ ---------- ---------- ---------- ---------- 274 $3,292,722 $3,858,579 $ 646,366 $ 974,177 ====== ========== ========== ========== ==========

At December 31, 2001, real estate held for disposition included four parcels of land with an initial acquisition cost of $9.9 million and a carrying value of $8.8 million. The management of United Dominion periodically reviews its divestiture program, which is designed to better position the Company for achieving more consistent earnings growth and increasing shareholder value over the long-term. The factors considered in these reviews include the age, quality and projected operating income of communities that might be sold, the expected market value for the communities, the estimated timing for completion of sales and the pro forma effect of sales upon United Dominion's earnings and financial position. During the first quarter of 2001, management 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. During the second quarter of 2000, management transferred approximately $197 million of assets from real estate held for disposition to real estate held for investment and, as a result, approximately $10 million in depreciation expense was recognized on the communities transferred in order to reflect depreciation on these properties while they were classified in real estate held for disposition. Furthermore, approximately $5 million of additional depreciation expense was recognized on these assets during 2000 subsequent to their transfer to real estate held for investment. Depreciation expense in 2000 was further inflated by the impact of over $150 million in development completions in late 1999 and 2000 and approximately $200 million in acquisitions and capital improvements in 1999 and 2000. For the year ended December 31, 1999, United Dominion recognized $18.3 million in impairment losses on its real estate owned. Through the review and analysis of communities targeted for strategic disposition, an aggregate $14.8 million impairment loss was recognized on assets held for disposition. An impairment loss was indicated as a result of the net book value of the assets held for disposition being greater than the estimated fair market value less the cost of disposal. In addition, United Dominion recorded a $3.5 million impairment loss on three communities acquired in the ASR merger in 1998 which were classified in real estate held for investment. An impairment loss was indicated as the sum of the estimated future cash flows from the assets were deemed to be less than the carrying amounts. The following is a reconciliation of the carrying amount of real estate held for investment at December 31, (dollars in thousands):

2001 2000 1999 ---- ---- ---- Balance at beginning of year $ 3,758,974 $ 3,577,848 $ 3,643,245 Real estate acquired 91,093 14,898 75,719 Capital expenditures 58,402 46,299 72,096

32 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001

2001 2000 1999 ---- ---- ---- Transfers from development 51,561 68,025 116,787 Transfers (to) from held for disposition, net (98,663) 58,068 (326,499) Impairment loss on real estate (2,788) -- (3,500) Disposal of fully depreciated assets -- (6,164) -- ----------- ----------- ----------- Balance at end of year $ 3,858,579 $ 3,758,974 $ 3,577,848 =========== =========== ===========

The following is a reconciliation of accumulated depreciation for real estate held for investment at December 31, (dollars in thousands):

2001 2000 1999 ---- ---- ---- Balance at beginning of year $ 506,871 $ 373,164 $ 280,663 Depreciation expense for the year* 153,113 154,419 122,884 Transfers to held for disposition, net (13,618) (14,548) (30,383) Disposal of fully depreciated assets -- (6,164) -- --------- --------- --------- Balance at end of year $ 646,366 $ 506,871 $ 373,164 ========= ========= =========

- ---------- * Includes $1,268, $1,425 and $1,157 for 2001, 2000 and 1999, respectively, related to depreciation on non-real estate assets located at the Company's apartment communities, classified as "Other depreciation and amortization" in the Consolidated Statements of Operations. 3. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE At December 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 was created to develop five apartment communities with a total of 1,438 homes for an aggregate total cost of approximately $101 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 for services provided by the Company to the joint venture, to the extent of the outside partner's interest, of approximately $2.6 million and $3.0 million for the years ended December 31, 2001 and 2000, respectively. As of September 2001, construction of all five of the joint venture properties was complete. On December 28, 2001, United Dominion purchased three of the five apartment communities for a total aggregate cost of $61.3 million. The three communities purchased were Mandolin, a 308 home community located in Dallas, Texas, Meridian, a 250 home community located in Dallas, Texas and Sierra Canyon, a 236 home community located in Phoenix, Arizona. The Company has the option, but not the obligation, to purchase the remaining two communities for fair value through December 31, 2006. If neither the Company nor the joint venture partner elects to purchase these properties, the joint venture will then dispose of the assets to a third party at the then market price. 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. 33 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 The following is a summary of the financial position of the joint venture as of December 31, (dollars in thousands):

2001 2000 ---- ---- Assets: Real estate, net $44,290 $85,644 Other assets 930 6,507 ------- ------- Total assets $45,220 $92,151 ======= ======= Liabilities and partners' equity: Mortgage notes payable (a) $30,488 $49,785 Other liabilities 1,720 11,436 Partners' equity 13,012 30,930 ------- ------- Total liabilities and partners' equity $45,220 $92,151 ======= =======

- ---------- (a) Non-recourse to United Dominion with an interest rate of LIBOR plus 250 basis points and a maturity of December 2003. The following is a summary of the operating results of the joint venture as of December 31, (dollars in thousands):

2001 2000 ---- ---- Rental income $ 9,841 $ 1,930 Expenses: Depreciation and amortization 3,684 268 Mortgage interest 3,826 1,557 Operating and other expenses 4,260 549 -------- -------- Total expenses 11,770 2,374 -------- -------- Income before gains on sales of investments (1,929) (444) Gains on sales of depreciable property 913 -- -------- -------- Net loss $ (1,016) $ (444) ======== ========

4. SECURED DEBT Secured debt, which encumbers $1.6 billion or 41.0% of United Dominion's real estate owned, ($2.3 billion or 59.0% of United Dominion's real estate owned is unencumbered) consists of the following at December 31, 2001 (dollars in thousands):

WEIGHTED WEIGHTED AVERAGE NUMBER OF AVERAGE YEARS TO COMMUNITIES PRINCIPAL OUTSTANDING INTEREST RATE MATURITY ENCUMBERED --------------------- ------------- -------- ---------- 2001 2000 2001 2001 2001 ---- ---- ---- ---- ---- FIXED RATE DEBT Mortgage notes payable (a) $450,643 $513,962 7.79% 4.9 67 Tax-exempt secured notes payable 65,806 79,756 6.73% 12.1 9 Secured credit facilities 17,000 17,000 7.04% 12.1 -- -------------------------------------------------------------------- Total fixed rate secured debt 533,449 610,718 7.64% 6.0 76 VARIABLE RATE DEBT Secured credit facilities 405,731 216,960 3.56% 11.6 31 Tax-exempt secured notes payable 19,915 19,916 1.38% 23.5 3 Mortgage notes payable 15,082 18,521 3.71% 6.7 4

34 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001

WEIGHTED WEIGHTED AVERAGE NUMBER OF AVERAGE YEARS TO COMMUNITIES PRINCIPAL OUTSTANDING INTEREST RATE MATURITY ENCUMBERED --------------------- ------------- -------- ---------- 2001 2000 2001 2001 2001 ---- ---- ---- ---- ---- Total variable rate secured debt 440,728 255,397 3.46% 11.9 38 ------- ------- ---- ---- -- TOTAL SECURED DEBT $974,177 $866,115 5.75% 8.7 114 ======== ======== ==== === ===

- ---------- (a) Includes fair value adjustments aggregating $7.9 million in 2001 and $10.2 million in 2000 that were recorded in connection with the assumption of debt associated with two acquisitions consummated in 1998. FIXED RATE DEBT Mortgage notes payable. Fixed rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from February 2002 through June 2034 and carry interest rates ranging from 6.66% to 9.58%. Tax-exempt secured notes payable. Fixed rate mortgage notes payable which secure tax-exempt housing bond issues mature at various dates through November 2025 and carry interest rates ranging from 6.09% to 7.90%. Interest on these notes is generally payable in semi-annual installments. Secured credit facilities. At December 31, 2001, United Dominion's fixed rate secured credit facilities consisted of $17.0 million of the $422.7 million outstanding under four revolving secured credit facilities with the Federal National Mortgage Association (the "FNMA Credit Facilities"). The FNMA Credit Facilities are for an initial term of five or ten years, bear interest at a floating rate and can be extended for an additional five years at United Dominion's discretion. 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 $17.0 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 $17.0 million of secured debt from a variable rate to a weighted average fixed rate of 7.04%. VARIABLE RATE DEBT Secured credit facilities. At December 31, 2001, United Dominion's variable rate secured credit facilities consisted of $405.7 million of the $422.7 million outstanding on the FNMA Credit Facilities. At December 31, 2001, the variable rate FNMA Credit Facilities had a weighted average floating rate of interest of 3.56%. Tax-exempt secured notes payable. Variable rate mortgage notes payable which secure tax-exempt housing bond issues mature at various dates from December 2002 to October 2028. At December 31, 2001, these notes had interest rates ranging from 1.15% to 1.65%. Interest on these notes is generally payable in semi-annual installments. Mortgage notes payable. Variable rate mortgage notes payable are generally due in monthly installments of principal and interest and mature at various dates from January 2002 through September 2027. At December 31, 2001, these notes had interest rates ranging from 3.33% to 4.52%. The aggregate maturities of secured debt for the fifteen years subsequent to December 31, 2001 are as follows (dollars in thousands):

FIXED VARIABLE --------------------------------------- ---------------------------------------- MORTGAGE TAX-EXEMPT SECURED SECURED TAX-EXEMPT MORTGAGE YEAR NOTES BONDS NOTES NOTES NOTES NOTES TOTAL ---- ----- ----- ----- ----- ----- ----- ----- 2002 $ 47,409 $ 833 -- -- $ 2,200 $ 3,168 $ 53,610 2003 25,381 13,326 -- -- -- 370 39,077 2004 119,467 9,422 -- -- -- 392 129,281 2005 119,297 875 -- -- -- 5,139 125,311 2006 42,061 935 -- -- -- 3,795 46,791 2007 17,335 632 -- -- -- 95 18,062 2008 2,949 5,455 -- -- -- 102 8,506 2009 25,607 581 -- -- -- 108 26,296

35 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001

FIXED VARIABLE ----- -------- MORTGAGE TAX-EXEMPT SECURED SECURED TAX-EXEMPT MORTGAGE YEAR NOTES BONDS NOTES NOTES NOTES NOTES TOTAL ---- ----- ----- ----- ----- ----- ----- ----- 2010 26,598 628 -- -- -- 116 27,342 2011 824 673 -- $138,875 -- 123 140,495 2012 889 725 -- -- -- 132 1,746 2013 960 3,850 -- -- -- 141 4,951 2014 1,036 838 $ 17,000 183,000 -- 150 202,024 2015 1,119 13,354 -- 52,956 -- 160 67,589 2016 2,942 583 -- 30,900 -- 171 34,596 Thereafter 16,769 13,096 -- -- 17,715 920 48,500 -------- -------- -------- -------- -------- -------- -------- $450,643 $ 65,806 $ 17,000 $405,731 $ 19,915 $ 15,082 $974,177 ======== ======== ======== ======== ======== ======== ========

For the years ended December 31, 2001 and 2000, United Dominion recognized $3.5 million ($.03 per share) in extraordinary losses and $831 thousand ($.01 per share) in extraordinary gains related to the write-off of deferred financing costs and prepayment penalties. 5. UNSECURED DEBT A summary of unsecured debt at December 31, 2001 and 2000 is as follows (dollars in thousands):

2001 2000 ---- ---- COMMERCIAL BANKS Borrowings outstanding under an unsecured credit facility due August 2003 (a) $ 230,200 $ 244,400 Borrowings outstanding under an unsecured term loan due May 2004 - 2005 (b) 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 (c) 10,000 10,000 7.22% Medium-Term Notes due February 2003 11,815 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 2002 - 2003 (d) 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 49,760 50,000 7.95% Medium-Term Notes due July 2006 103,179 107,398 7.07% Medium-Term Notes due November 2006 25,000 25,000 7.25% Notes due January 2007 105,020 110,080 ABAG Tax-Exempt Bonds due August 2008 46,700 46,700 8.50% Monthly Income Notes due November 2008 57,400 57,400 8.50% Debentures due September 2024 (e) 124,920 125,500 Other (f) 3,134 4,027 ---------- ---------- 759,820 781,815 ---------- ---------- TOTAL UNSECURED DEBT $1,090,020 $1,126,215 ========== ==========

(a) As of December 31, 2001 and 2000, 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 the $155 million of borrowings from a variable rate to a weighted average fixed rate of approximately 6.98%. The weighted average interest rate of the total $230.2 million in commercial borrowings, after giving effect to swap agreements, was 6.1% and 7.5% at December 31, 2001 and 2000, respectively. (b) As of December 31, 2001, 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 36 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 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%. (c) United Dominion has 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%. (d) Payable annually in three equal principal installments of $7.4 million, one of which was paid in 2001. (e) Includes an investor put feature which grants a one-time option to redeem the debentures in September 2004. (f) Includes $3.0 million and $3.8 million at December 31, 2001 and 2000, respectively, of deferred gains from the termination of interest rate risk management agreements. Information concerning short-term bank borrowings is summarized in the table that follows (dollars in thousands):

2001 2000 1999 ---- ---- ---- Total revolving credit facilities at December 31 $375,000 $375,000 $310,000 Borrowings outstanding at December 31 230,200 244,400 277,600 Weighted average daily borrowings during the year 248,367 195,128 223,629 Maximum daily borrowings during the year 347,200 308,000 283,000 Weighted average interest rate during the year 5.2% 7.3% 5.8% Weighted average interest rate at December 31 3.2% 7.7% 6.7% Weighted average interest rate at December 31, after giving effect to swap agreements 6.1% 7.5% 6.8%

United Dominion has a $375 million three-year unsecured revolving credit facility (the "Bank Credit Facility") which matures August 2003. As of December 31, 2001, $230.2 million was outstanding under the Bank Credit Facility. The Company may borrow at a rate of LIBOR plus 110 basis points for LIBOR-based borrowings under the Bank Credit Facility. In addition, the Company pays a facility fee, which is equal to 0.25% of the commitment. The Bank Credit Facility is subject to customary financial covenants and limitations. 6. SHAREHOLDERS' EQUITY PREFERRED STOCK The Series B Cumulative Redeemable Preferred Stock (Series B) has no stated par value and a liquidation preference of $25 per share. With no voting rights and no stated maturity, the Series B is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of United Dominion. The Series B is not redeemable prior to May 29, 2007. On or after this date, the Series B may be redeemed for cash at the option of United Dominion, in whole or in part, at a redemption price of $25 per share plus accrued and unpaid dividends. The redemption price is payable solely out of the sales proceeds of other capital stock of United Dominion. All dividends due and payable on the Series B have been accrued or paid as of the end of each fiscal year. The Series D Convertible Redeemable Preferred Stock (Series D) has no stated par value and a liquidation preference of $25 per share. The Series D has no voting rights, no stated maturity and is not subject to any sinking fund or mandatory redemption and is convertible into 1.5385 shares of common stock at the option of the holder of the Series D at any time at $16.25 per share. The Company has the right to cause the holder of the Series D to convert the Series D to common shares at $16.25 based on twenty trading days at or above $17.06 for the life of the security (the "Option Shares"). The Company has the right to purchase 2 million shares of the Option Shares in accordance with a predetermined schedule, provided that the volume weighted average price of the Company's common shares is $16.25 for a twenty day trading period. The repurchase price payable will be computed in accordance with the table below, expressed as a percentage of the liquidation preference, determined by the period in 37 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 which the Option Shares repurchase date occurs, together with all accrued and unpaid dividends to and including the repurchase date:

OPTION SHARE REPURCHASE DATE OCCURS DURING PERIOD: REPURCHASE PRICE - ----------------------------------------------- ---------------- January 1, 2002 to June 30, 2002 102.0% July 1, 2002 to December 31, 2002 101.5% January 1, 2003 to June 30, 2003 101.0% July 1, 2003 to December 6, 2003 100.5%

After December 7, 2003, United Dominion may, at its option, redeem at any time all or part of the Series D at a price per share of $25, payable in cash, plus all accrued and unpaid dividends, provided that the current market price of the common stock at least equals the conversion price, initially set at $16.25 per share. The redemption is payable solely out of the sale proceeds of other capital stock. In addition, United Dominion may not redeem in any consecutive twelve-month period a number of shares of Series D having an aggregate liquidation preference of more than $100 million. On June 15, 2001, the Company completed the redemption of all of its outstanding 9.25% Series A Cumulative Redeemable Preferred Stock at $25 per share plus accrued dividends. OFFICERS' STOCK PURCHASE AND LOAN PLAN Under the Officer Stock Purchase and Loan Plan (the "Loan Plan"), certain officers have purchased common stock at the then current market price with financing provided by United Dominion at an interest rate of 7%. The underlying notes, totaling $4.3 million, mature between December 2002 and October 2005. A total of 602,000 shares have been issued and 813,000 shares are available for future issuance under the Loan Plan. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN United Dominion's Dividend Reinvestment and Stock Purchase Plan (the "Stock Purchase Plan") allows common and preferred shareholders the opportunity to purchase, through the reinvestment of cash dividends, additional shares of United Dominion's common stock. As of December 31, 2001, 9,437,717 shares of common stock had been issued under the Stock Purchase Plan. Shares in the amount of 4,562,283 were reserved for further issuance under the Stock Purchase Plan at December 31, 2001. During 2001, 332,243 shares were issued under the Stock Purchase Plan for a total consideration of approximately $4.4 million. RESTRICTED STOCK AWARDS United Dominion's 1999 Long-Term Incentive Plan ("LTIP") authorizes the granting of restricted stock awards to employees, officers and directors of United Dominion. The total restricted stock awards under the LTIP may not exceed 15% of the total number of available shares, or 600,000. Deferred compensation expense is recorded over the vesting period and is based upon the value of the common stock on the date of issuance. As of December 31, 2001, 244,103 shares of restricted stock have been issued under the LTIP. SHAREHOLDER RIGHTS PLAN United Dominion's 1998 Shareholder Rights Plan is intended to protect long-term interests of shareholders in the event of an unsolicited, coercive, or unfair attempt to take over the Company. The plan authorized a dividend of one Preferred Share Purchase Right (the "Rights) on each share of common stock outstanding. Each Right, which is not currently exercisable, will entitle the holder to purchase 1/1,000 of a share of a new series of the Company's 38 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 preferred stock, to be designated as Series C Junior Participating Cumulative Preferred Stock, at a price to be determined upon the occurrence of the event, and for which the holder must be paid $45 should the take over occur. Under the Plan, the rights will be exercisable if a person or group acquires more than 15% of United Dominion's common stock, or announces a tender offer that would result in the ownership of 15% of the Company's common stock. 7. FINANCIAL INSTRUMENTS The following estimated fair values of financial instruments were determined by United Dominion using available market information and appropriate valuation methodologies. Considerable judgement is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts United Dominion would realize on the disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts. The carrying amounts and estimated fair value of United Dominion's financial instruments at December 31, 2001 and 2000, are summarized as follows (dollars in thousands):

2001 2000 ----------------------------- ------------------------------ CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE ------ ----- ------ ----- Secured debt $ 974,177 $ 1,013,136 $ 866,115 $ 887,430 Unsecured debt 1,090,020 1,109,380 1,126,215 1,130,100 Interest rate swap agreements -- (14,931) -- (3,847)

The following methods and assumptions were used by United Dominion in estimating the fair values set forth above. CASH AND CASH EQUIVALENTS The carrying amount of cash and cash equivalents approximates fair value. SECURED AND UNSECURED DEBT Estimated fair value is based on mortgage rates, tax-exempt bond rates and corporate unsecured debt rates believed to be available to United Dominion for the issuance of debt with similar terms and remaining lives. The carrying amount of United Dominion's variable rate secured debt approximates fair value at December 31, 2001 and 2000. The carrying amounts of United Dominion's borrowings under variable rate unsecured debt arrangements, short-term revolving credit agreements and lines of credit approximate their fair values at December 31, 2001 and 2000. 39 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 DERIVATIVE FINANCIAL INSTRUMENTS The following table presents the fair values of the Company's derivative financial instruments outstanding, based on external market quotations, as of December 31, 2001 (dollars in thousands):

NOTIONAL FIXED TYPE OF EFFECTIVE CONTRACT FAIR AMOUNT RATE CONTRACT DATE MATURITY VALUE ---------------------------------------------------------------------------------------- SECURED DEBT: FNMA $ 7,000 6.78% Swap 06/30/99 06/30/04 $ (396) 10,000 7.22% Swap 12/01/99 04/01/04 (626) -------------- ---------- ------------ 17,000 7.04% (1,022) UNSECURED DEBT: BANK CREDIT FACILITY 5,000 7.32% Swap 06/26/95 07/01/04 (315) 10,000 7.14% Swap 10/18/95 10/03/02 (386) 5,000 6.98% Swap 11/21/95 10/03/02 (185) 25,000 7.39% Swap 11/01/00 08/01/03 (1,461) 25,000 7.39% Swap 11/01/00 08/01/03 (1,461) 25,000 7.21% Swap 12/01/00 08/01/03 (1,330) 25,000 7.21% Swap 12/04/00 08/01/03 (1,330) 35,000 5.98% Swap 03/13/01 04/01/03 (1,100) -------------- ---------- ------------ 155,000 6.98% (7,568) BANK TERM LOAN 25,000 7.49% Swap 11/15/00 05/15/03 (1,295) 20,000 7.49% Swap 11/15/00 05/15/03 (1,037) 23,500 7.62% Swap 11/15/00 05/15/04 (1,568) 23,000 7.62% Swap 11/15/00 05/15/04 (1,535) 8,500 7.26% Swap 12/04/00 05/15/03 (426) -------------- ---------- ------------ 100,000 7.53% (5,861) MEDIUM-TERM NOTES 10,000 7.65% Swap 01/26/99 01/27/03 (480) -------------- ------------ $ 282,000 $ (14,931) ============== ============

For the year ended December 31, 2001, the Company recognized $11.0 million of unrealized losses in accumulated other comprehensive income, a $60.0 thousand loss in net income related to the ineffective portion of the Company's hedging instruments and a $3.8 million loss as a cumulative effect of a change in accounting principle. In addition, United Dominion recognized $14.9 million of derivative financial instrument liabilities on the Consolidated Balance Sheet. As of December 31, 2001, United Dominion expects to reclassify $9.4 million of net losses on derivative instruments from accumulated other comprehensive income to earnings (interest expense) during the next twelve months on the related hedged transactions. RISK OF COUNTERPARTY NON-PERFORMANCE United Dominion has not obtained collateral or other security to support financial instruments. In the event of non-performance by the counterparty, United Dominion's credit loss on its derivative instruments is limited to the 40 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 value of the derivative instruments that are favorable to United Dominion at December 31, 2001, of which the Company has none. However, such non-performance is not anticipated as the counterparties are highly rated credit quality U.S. financial institutions and management believes that the likelihood of realizing material losses from counterparty non-performance is remote. 8. EMPLOYEE BENEFIT PLANS PROFIT SHARING PLAN The United Dominion Realty Trust, Inc. Profit Sharing Plan (the "Plan") is a defined contribution plan covering all eligible full-time employees. Under the Plan, United Dominion makes discretionary profit sharing and matching contributions to the Plan as determined by the Compensation Committee of the Board of Directors. Aggregate provisions for contributions, both matching and discretionary, which are included in United Dominion's Consolidated Statements of Operations for the three years ended December 31, 2001, 2000 and 1999 were $0.7 million, $1.3 million and $2.2 million, respectively. STOCK OPTION PLAN In May 2001, the shareholders of United Dominion approved the 1999 Long-Term Incentive Plan (the "LTIP"), which supersedes the Company's 1985 Stock Option Plan. With the approval of the LTIP, no additional grants will be made under the 1985 Stock Option Plan. The LTIP authorizes the granting of awards which may take the form of options to purchase shares of common stock, stock appreciation rights, restricted stock, dividend equivalents, other stock-based awards, any other right or interest relating to common stock or cash. The Board of Directors reserved 4 million shares for issuance upon the grant or exercise of awards under the LTIP. Of the 4 million shares reserved, 3.4 million shares are for stock-based awards, such as stock options, with the remaining 600,000 shares reserved for restricted stock awards. The LTIP generally provides, among other things, that options are granted at exercise prices not lower than the market value of the shares on the date of grant and that options granted must be exercised within ten years. The maximum number of shares of stock that may be issued subject to incentive stock options is 10 million shares. Shares under options that expire or are cancelable are available for subsequent grant. Pro forma information regarding net income and earnings per share is required by Statement 123 "Accounting for Stock Based Compensation" ("SFAS No. 123"), and has been determined as if United Dominion had accounted for its employee stock options under the fair value method of accounting as defined in SFAS No. 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2001, 2000 and 1999:

2001 2000 1999 -------- -------- -------- Risk free interest rate 3.2% 5.2% 6.7% Dividend yield 9.1% 7.2% 6.9% Volatility factor 0.171 0.164 0.144 Weighted average expected life (years) 3 7 9

The weighted average fair value of options granted during 2001, 2000 and 1999 was $0.46, $0.65 and $0.76 per option, respectively. For purposes of the pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. United Dominion's pro forma information is as follows (dollars in thousands, except per share amounts):

2001 2000 1999 ---------- ---------- ---------- Net income available to common shareholders As reported $ 27,142 $ 42,653 $ 55,908 Pro forma 26,693 41,705 54,847

41 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 Earnings per common share - diluted As reported $ 0.27 $ 0.41 $ 0.54 Pro forma 0.26 0.40 0.53 A summary of United Dominion's stock option activity during the three years ended December 31, 2001 is provided in the following table:

NUMBER WEIGHTED AVERAGE RANGE OF OUTSTANDING EXERCISE PRICE EXERCISE PRICES ----------- ---------------- --------------- Balance, December 31, 1998 3,359,013 $ 12.89 $7.44 - $15.38 Granted 1,192,333 10.02 9.63 - 11.19 Exercised (46,998) 9.87 9.19 - 10.25 Forfeited (288,756) 13.46 10.88 - 15.38 ---------- -------------- -------------- Balance, December 31, 1999 4,215,592 $ 12.09 $9.19 - $15.38 Granted 653,300 9.91 9.88 - 10.75 Exercised (11,584) 9.19 9.19 Forfeited (364,363) 12.95 9.63 - 15.25 ---------- -------------- -------------- Balance, December 31, 2000 4,492,945 $ 11.71 $9.19 - $15.38 Granted 1,289,484 11.96 10.81 - 14.20 Exercised (356,408) 11.02 9.19 - 14.25 Forfeited (1,200,802) 11.52 9.63 - 15.38 ---------- -------------- -------------- Balance, December 31, 2001 4,225,219 $ 11.90 $9.63 - $15.38 ========== ============== ============== Exercisable at December 31, 1999 2,042,505 $ 13.28 $9.19 - $15.38 2000 2,692,997 12.35 9.19 - 15.38 2001 1,968,265 12.38 9.63 - 15.38

The weighted average remaining contractual life on all options outstanding is 9 years. 1,032,002 of share options had exercise prices between $13.50 and $15.38, 1,509,272 of share options had exercise prices between $11.15 and $13.13 and 1,683,945 of share options had exercise prices between $9.63 and $10.94. At December 31, 2001, stock-based awards for 3,278,500 shares of common stock were available for future grants under the 1999 LTIP's existing authorization and no option shares were available for future grants under the 1985 Stock Option Plan. At December 31, 2000 and 1999, options for 3,684,595 and 4,028,539 shares of common stock, respectively, were available for future grants under the 1985 Stock Option Plan. 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. All of the $5.4 million charge was paid during 2001. The planned workforce reductions resulted in a charge of $4.5 million during the first quarter of 2001 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. 42 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 Employee termination benefits included severance packages and related benefits and outplacement services for employees terminated. As of December 31, 2001, approximately 230 employees have been terminated. 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 related to other miscellaneous costs. 10. COMMITMENTS AND CONTINGENCIES LAND AND OTHER LEASES United Dominion is party to several ground leases relating to operating communities. In addition, United Dominion is party to various other operating leases related to the operation of its regional offices. Future minimum lease payments for non-cancelable land and other leases at December 31, 2001 are as follows (dollars in thousands): 2002 $ 1,792 2003 1,594 2004 1,530 2005 1,386 2006 1,210 Thereafter 24,128 ------- TOTAL $31,640 ======= United Dominion incurred $2.3 million, $2.6 million and $2.8 million, of rent expense for the years ended December 31, 2001, 2000 and 1999, respectively. CONTINGENCIES In May 2001, the shareholders of United Dominion approved the Out-Performance Program (the "Program") pursuant to which executives and other key officers of the Company were 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 28 month period beginning 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 greater of industry average (defined as the total cumulative return of the Morgan Stanley REIT Index over the same period) or a 30% total return (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. The OPPSs, unlike United Dominion's other OP Units, are not convertible into common stock except upon a change of control of the Company. Accordingly, the contingently issuable OPPSs are not included in common stock and common stock equivalents in the calculation of earnings per share. Based upon results through December 31, 2001, 370,718 OPPSs would have been issued. However, since the ultimate determination of OPPSs 43 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 to be issued will not occur until June 2003, and the number of OPPSs is determinable only upon future events, the financial statements do not reflect any additional impact for these events. 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. COMMITMENTS United Dominion is committed to completing its real estate currently under development, which has an estimated cost to complete of $6.7 million at December 31, 2001. 11. INDUSTRY SEGMENTS United Dominion owns and operates multifamily apartment communities throughout the United States that generate rental and other property related income through the leasing of apartment units to a diverse base of tenants. United Dominion separately evaluates the performance of each of its apartment communities. However, because each of the apartment communities have similar economic characteristics, facilities, services and tenants, the apartment communities have been aggregated into a single apartment communities segment. All segment disclosure is included in or can be derived from United Dominion's consolidated financial statements. There are no tenants that contributed 10% or more of United Dominion's total revenues during 2001, 2000 or 1999. 12. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA Summarized consolidated quarterly financial data for the year ended December 31, 2001 is as follows (dollars in thousands, except per share amounts):

THREE MONTHS ENDED ----------------------------------------------------------------------------- MARCH 31(a) JUNE 30 SEPTEMBER 30 DECEMBER 31(b) ----------- --------- ------------ -------------- Rental income(c)(d) $ 141,374 $ 139,306 $ 139,774 $ 141,504 Income before gains on sales of investments, minority interests, discontinued operations and extraordinary item (367) 10,615 11,382 10,495 Gains on the sales of investments 4,102 20,646 -- -- Net (loss) income available to common shareholders (3,308) 20,136 6,778 3,536 Earnings per common share: Basic $ (0.03) $ 0.20 $ 0.07 $ 0.04 Diluted (0.03) 0.20 0.07 0.04

- ---------- (a) The first quarter of 2001 includes $8.6 million of non-recurring charges related to workforce reductions, other severance costs, executive relocation costs and the write-down of land and the Company's investment in an online apartment leasing company. (b) The fourth quarter of 2001 includes a $2.2 million charge related to the write-down of the Company's investment in a web-based property management and leasing system. (c) Rental income for the first and second quarters are restated to include water sub-metering and gas reimbursements previously classified as a reduction in rental expense. (d) Represents income from continuing operations. 44 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 Summarized consolidated quarterly financial data for the year ended December 31, 2000 is as follows (dollars in thousands, except per share amounts):

THREE MONTHS ENDED --------------------------------------------------------------------- MARCH 31 JUNE 30 (a) SEPTEMBER 30 (b) DECEMBER 31 -------- ----------- ---------------- ----------- Rental income (c)(d) $143,004 $144,068 $143,378 $141,755 Income before gains on sales of investments, minority interests, discontinued operations and extraordinary item 12,861 4,308 6,471 9,901 Gains on the sales of investments 2,533 5,928 11,261 11,728 Net income available to common shareholders 9,172 6,233 11,161 16,087 Earnings per common share: Basic $ 0.09 $ 0.06 $ 0.11 $ 0.16 Diluted 0.09 0.06 0.11 0.16

- ---------- (a) The second quarter of 2000 includes $9.9 million of catch-up depreciation expense related to the transfer of properties from real estate held for disposition to real estate held for investment. (b) The third quarter of 2000 includes a $2.7 million charge related to water usage billing litigation and a $1.0 million charge for changes to executive employment agreements. (c) Rental income has been restated to include water sub-metering and gas reimbursements previously classified as a reduction in rental expense. (d) Represents income from continuing operations. 13. INCOME FROM DISCONTINUED OPERATIONS United Dominion adopted Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," as of January 1, 2002. SFAS No. 144 requires, among other things, that the primary assets and liabilities and the results of operations of United Dominion's real properties which have been sold or transferred into held for disposition from January 1, 2002 through November 27, 2002, be classified as discontinued operations and segregated in United Dominion's Consolidated Statements of Operations and Balance Sheets. Properties classified as real estate held for disposition generally represent properties that are under contract for sale and are expected to close within the next twelve months. From January 1, 2002 through November 27, 2002, United Dominion had sold 23 communities with a total of 6,564 apartment homes and one commercial property with 143,000 square feet. As of November 27, 2002, United Dominion had eight communities with 1,475 apartment homes and four parcels of land included in real estate held for disposition. The Company's adoption of SFAS No. 144 resulted in the presentation of the net operating results of these properties sold or transferred to held for disposition from January 1, 2002 through November 27, 2002, as discontinued operations for all periods presented. The adoption of SFAS No. 144 did not have an impact on net income available to common shareholders. SFAS No. 144 only resulted in the reclassification of the operating results of the properties sold or transferred to held for disposition, from January 1, 2002 through November 27, 2002 within the consolidated statements of operations for the years ended December 31, 2001, 2000 and 1999. 45 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 The following is a summary of income from discontinued operations for the year ended December 31, 2001, 2000 and 1999 (dollars in thousands):

TWELVE MONTHS ENDED DECEMBER 31, -------------------------------------------------- 2001 2000 1999 -------- -------- -------- Rental income $ 57,533 $ 55,063 $ 52,305 Rental expenses 24,195 22,282 20,846 Other expenses 19,945 17,602 16,312 Impairment loss on real estate and investments 775 -- 1,606 -------- -------- -------- 44,915 39,884 38,764 Income before gains on sales of investments, minority interests and extraordinary items 12,618 15,179 13,541 -------- -------- -------- Minority interests on income from discontinued operations (915) (1,026) (1,074) -------- -------- -------- Income from discontinued operations, net of minority interests $ 11,703 $ 14,153 $ 12,467 ======== ======== ========

14. SUBSEQUENT EVENTS During the first quarter of 2002, the Company borrowed an additional $253.6 million under its existing Fannie Mae credit facilities and $70.7 million under a new $72 million Freddie Mac revolving facility. In March 2002, the Company completed the sale of 3.0 million common shares at a price of $14.91 per share. The net proceeds of $198.3 million from the issuance were used to reduce outstanding debt under the $375 million unsecured revolving credit facility. In June 2002, the Company issued $200 million of 6.5% senior unsecured notes due in June 2009. The net proceeds of $198.3 million from the issuance were used to reduce outstanding debt under our $375 million unsecured revolving credit facility. In September 2002, the Company launched tender offers to purchase $124.9 million of United Dominion's 8.50% debentures maturing in 2024 and $103.1 million of our 7.95% notes maturing in 2006. Upon completion of the tender offers, which expired September 30,2002 $70.6 million of the 8.5% debentures and $12.6 million of the 7.95% notes had been repurchased. In addition, premiums of $12.6 million were paid during the third quarter of 2002 for the redemption of higher coupon bonds. Management projects a net present value of approximately $1 to $2 million on these redemptions. As of November 27, 2002, the Company has repaid $294.8 million of secured debt, assumed $41.6 million of secured debt in connection with the acquisition of properties and was relieved of $31.1 million of secured debt in connection with the disposition of properties. The Company incurred charges of approximately $15.8 million in the first quarter of 2002 associated with the refinancings. Management believes that the net present value of these refinancing transactions ranges from approximately $17 to $20 million. As of November 27, 2002, the Company had purchased nine communities with 3,041 apartment homes for approximately $254 million. In addition, in June 2002, the Company purchased, for approximately $52 million, the remaining two apartment communities with 644 apartment homes that were part of an unconsolidated development joint venture in which United Dominion owned a 25% interest and served as the managing partner. In August 2002, the Company purchased the 36% outside partnership interest in two properties in California containing 926 apartment homes for $17.3 million. 46 SCHEDULE III SUMMARY OF REAL ESTATE OWNED (IN THOUSANDS)

INITIAL COSTS IMPROVEMENTS ---------------------------- TOTAL CAPITALIZED LAND AND BUILDINGS INITIAL SUBSEQUENT LAND AND ACQUISITION TO ACQUISITION ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS (a) (NET OF DISPOSALS) ---------------------------------------------------------------------------------------------- Woodtrail $ -- $ 1,543 $ 5,457 $ 7,000 $ 2,337 Park Trails -- 1,145 4,105 5,250 848 Green Oaks -- 5,314 19,626 24,940 2,767 Sky Hawk -- 2,298 7,158 9,456 1,935 South Grand At Pecan Grove -- 4,058 14,756 18,814 4,306 Breakers -- 1,527 5,298 6,825 2,142 Braesridge -- 3,048 10,962 14,010 1,837 Skylar Pointe -- 3,604 11,592 15,197 4,018 Stone Canyon -- 900 -- 900 9,447 Briar Park 1,352 329 2,794 3,123 172 Chelsea Park 3,141 1,991 5,788 7,779 1,929 Clear Lake Falls 2,973 1,090 4,534 5,624 (163) Country Club Place 3,379 499 6,520 7,019 911 Arbor Ridge 3,635 1,689 6,684 8,373 296 London Park 4,370 2,018 6,667 8,686 1,687 Marymont -- 1,151 4,155 5,306 716 Nantucket Square 2,619 1,068 4,833 5,901 (530) Riverway 1,144 523 2,828 3,352 194 Riviera Pines 3,162 1,414 6,454 7,868 923 The Gallery 1,561 769 3,358 4,127 226 Towne Lake -- 1,334 5,309 6,643 1,243 The Legend at Park 10 -- 1,995 -- 1,995 11,786 HOUSTON, TX 27,336 39,307 138,881 178,188 49,029 Preston Oaks -- 1,784 6,416 8,200 719 Preston Trace -- 2,196 8,305 10,500 915 Rock Creek -- 4,077 15,823 19,900 4,463 Windridge -- 3,414 14,027 17,442 2,957 Catalina -- 1,543 5,632 7,175 794 Wimbledon Court -- 1,809 10,930 12,739 2,174 Lakeridge -- 1,631 5,669 7,300 1,042 Summergate -- 1,171 3,929 5,100 835 Oak Forest 23,540 5,631 23,294 28,925 10,503 Oaks Of Lewisville 12,265 3,727 13,563 17,290 3,624 Kelly Crossing -- 2,497 9,156 11,653 1,567 Highlands Of Preston -- 2,151 8,168 10,319 1,745 The Summit -- 1,932 9,041 10,973 1,283 Springfield 5,045 3,075 6,823 9,898 1,082 Meridian I -- 2,160 18,523 20,683 -- Mandolin I -- 2,663 20,975 23,638 -- DALLAS, TX 40,850 41,460 180,274 221,734 33,704

GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD -------------------------------- TOTAL LAND AND BUILDINGS CARRYING ACCUMULATED LAND AND VALUE DEPRECIATION DATE OF DATE IMPROVEMENTS IMPROVEMENTS (b) (c) CONSTRUCTION ACQUIRED -------------------------------------------------------------------------------------------- Woodtrail $ 1,752 $ 7,585 $ 9,337 $ 2,069 1978 12/31/96 Park Trails 1,212 4,887 6,098 1,087 1983 12/31/96 Green Oaks 5,821 21,886 27,707 4,227 1985 06/25/97 Sky Hawk 2,712 8,679 11,391 2,000 1984 05/08/97 South Grand At Pecan Grove 4,819 18,301 23,120 3,526 1985 09/26/97 Breakers 1,885 7,083 8,968 1,532 1985 09/26/97 Braesridge 3,378 12,469 15,847 2,403 1982 09/26/97 Skylar Pointe 3,706 15,509 19,215 3,132 1979 11/20/97 Stone Canyon 1,289 9,058 10,347 920 1998 12/17/97 Briar Park 346 2,949 3,295 411 1987 03/27/98 Chelsea Park 2,412 7,296 9,708 1,247 1983 03/27/98 Clear Lake Falls 1,127 4,335 5,462 645 1980 03/27/98 Country Club Place 646 7,284 7,929 1,162 1985 03/27/98 Arbor Ridge 2,043 6,626 8,669 1,222 1983 03/27/98 London Park 2,434 7,939 10,373 1,448 1983 03/27/98 Marymont 1,164 4,858 6,022 699 1983 03/27/98 Nantucket Square 1,075 4,297 5,371 586 1983 03/27/98 Riverway 551 2,995 3,546 514 1985 03/27/98 Riviera Pines 1,439 7,352 8,791 910 1979 03/27/98 The Gallery 791 3,562 4,353 431 1968 03/27/98 Towne Lake 1,576 6,310 7,886 1,157 1984 03/27/98 The Legend at Park 10 3,895 9,885 13,781 1,679 1998 05/19/98 HOUSTON, TX 46,073 181,144 227,217 33,007 Preston Oaks 1,926 6,993 8,919 1,438 1980 12/31/96 Preston Trace 2,385 9,029 11,415 1,773 1984 12/31/96 Rock Creek 4,577 19,786 24,363 4,248 1979 12/31/96 Windridge 4,037 16,362 20,399 3,577 1980 12/31/96 Catalina 1,654 6,314 7,969 1,300 1982 12/31/96 Wimbledon Court 2,828 12,086 14,914 2,328 1983 12/31/96 Lakeridge 1,813 6,529 8,342 1,443 1984 12/31/96 Summergate 1,399 4,536 5,935 1,000 1984 12/31/96 Oak Forest 6,368 33,059 39,428 6,832 1996/98 12/31/96 Oaks Of Lewisville 4,501 16,414 20,914 3,832 1983 03/27/97 Kelly Crossing 2,981 10,239 13,220 2,045 1984 06/18/97 Highlands Of Preston 2,472 9,591 12,063 1,633 1985 03/27/98 The Summit 2,319 9,938 12,257 1,624 1983 03/27/98 Springfield 3,266 7,714 10,980 1,353 1985 03/27/98 Meridian I 2,160 18,523 20,683 23 2000 12/28/01 Mandolin I 2,663 20,975 23,638 -- 2001 12/28/01 DALLAS, TX 47,349 208,089 255,437 34,449

47 SCHEDULE III SUMMARY OF REAL ESTATE OWNED (IN THOUSANDS)

INITIAL COSTS IMPROVEMENTS ---------------------------- TOTAL CAPITALIZED LAND AND BUILDINGS INITIAL SUBSEQUENT LAND AND ACQUISITION TO ACQUISITION ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS (a) (NET OF DISPOSALS) ------------------------------------------------------------------------------------------------------- Fisherman's Village $ -- $ 2,387 $ 7,459 $ 9,846 $ 3,472 Seabrook -- 1,846 4,155 6,001 2,749 Dover Village -- 2,895 6,456 9,351 3,693 Lakeside North 12,440 1,533 11,076 12,609 4,691 Regatta Shore -- 757 6,607 7,364 2,666 Alafaya Woods 8,725 1,653 9,042 10,695 2,181 Vinyards 8,640 1,840 11,572 13,412 2,975 Andover Place 13,320 3,692 7,757 11,449 3,163 Los Altos 12,199 2,804 12,348 15,152 2,734 Lotus Landing -- 2,185 8,639 10,823 1,949 Seville On The Green -- 1,283 6,498 7,781 1,849 Arbors @ Lee Vista 13,383 3,976 16,920 20,896 1,718 Heron Lake 6,171 1,447 9,288 10,734 1,025 Ashton @ Waterford 14,945 3,872 17,538 21,410 289 ORLANDO, FL 89,823 32,168 135,356 167,524 35,152 Paradise Falls -- 1,623 6,171 7,794 2,942 Vista Point -- 1,587 5,613 7,200 1,409 Sierra Palms -- 4,639 17,361 22,000 515 Northpark Village -- 1,519 13,537 15,056 1,706 Stonegate 3,603 735 7,940 8,675 767 Finisterra -- 1,274 26,392 27,666 542 La Privada 15,336 7,303 18,508 25,811 1,915 Terracina 22,413 3,757 34,781 38,538 6,395 Woodland Park -- 3,017 6,706 9,723 985 Sierra Foothills 12,691 2,728 -- 2,728 18,869 Tower Apartments 2,850 3,333 5,975 9,309 679 Sierra Canyon -- 1,810 12,964 14,773 -- PHOENIX, AZ 56,893 33,326 155,947 189,273 36,724 Promontory Pointe -- 7,548 28,052 35,600 2,689 The Bluffs -- 1,901 6,899 8,800 1,470 Ashley Oaks -- 4,591 16,809 21,400 812 Sunflower -- 2,209 7,891 10,100 750 Escalante 3,816 2,702 24,033 26,735 2,183 Cimarron City 3,062 488 4,535 5,023 1,122 Kenton 7,187 2,345 8,917 11,262 1,835 Peppermill 4,221 773 6,873 7,647 2,329 Sunset Canyon 8,655 3,201 10,670 13,871 3,984 Audubon 4,499 771 6,124 6,895 2,262 Grand Cypress 5,631 749 8,609 9,359 993 Inn @ Los Patios -- 3,005 11,545 14,550 (1,489) SAN ANTONIO, TX 37,072 30,284 140,957 171,241 18,940

GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD -------------------------------- TOTAL LAND AND BUILDINGS CARRYING ACCUMULATED LAND AND VALUE DEPRECIATION DATE OF DATE IMPROVEMENTS IMPROVEMENTS (b) (c) CONSTRUCTION ACQUIRED ------------------------------------------------------------------------------------------------------- Fisherman's Village $ 3,116 $ 10,202 $ 13,318 $ 3,363 1984 12/29/95 Seabrook 2,256 6,494 8,750 2,420 1984 02/20/96 Dover Village 3,365 9,678 13,044 3,999 1981 03/31/93 Lakeside North 2,238 15,061 17,299 4,700 1984 04/14/94 Regatta Shore 1,505 8,525 10,030 3,122 1988 06/30/94 Alafaya Woods 2,106 10,770 12,876 3,509 1988/90 10/21/94 Vinyards 2,416 13,971 16,387 4,445 1984/86 10/31/94 Andover Place 4,501 10,111 14,612 3,233 1988 09/29/95 & 09/30/96 Los Altos 3,315 14,571 17,886 3,285 1990 10/31/96 Lotus Landing 2,405 10,367 12,773 1,917 1985 07/01/97 Seville On The Green 1,455 8,174 9,629 1,538 1986 10/21/97 Arbors @ Lee Vista 4,372 18,242 22,614 2,910 1991 12/31/97 Heron Lake 1,615 10,144 11,760 1,581 1989 03/27/98 Ashton @ Waterford 3,892 17,807 21,699 2,219 2000 05/28/98 ORLANDO, FL 38,558 164,118 202,676 42,242 Paradise Falls 1,832 8,903 10,735 1,764 1986 12/31/96 Vista Point 1,717 6,891 8,609 1,512 1986 12/31/96 Sierra Palms 4,745 17,770 22,515 3,241 1996 12/31/96 Northpark Village 1,832 14,930 16,762 2,517 1983 03/27/98 Stonegate 905 8,536 9,442 1,365 1978 03/27/98 Finisterra 1,339 26,869 28,208 3,601 1997 03/27/98 La Privada 7,841 19,885 27,726 3,002 1987 03/27/98 Terracina 4,550 40,383 44,933 6,272 1984 05/28/98 Woodland Park 3,224 7,484 10,709 1,405 1979 06/09/98 Sierra Foothills 4,840 16,757 21,597 2,927 1998 02/18/98 Tower Apartments 3,713 6,274 9,988 769 1980 01/18/01 Sierra Canyon 1,810 12,964 14,773 -- 2001 12/28/01 PHOENIX, AZ 38,350 187,647 225,997 28,374 Promontory Pointe 7,824 30,465 38,289 5,970 1997 12/31/96 The Bluffs 2,098 8,172 10,270 2,091 1978 12/31/96 Ashley Oaks 4,725 17,486 22,212 3,175 1993 12/31/96 Sunflower 2,341 8,509 10,850 1,738 1980 12/31/96 Escalante 2,776 26,143 28,919 2,287 1986/2000 04/16/98 Cimarron City 585 5,560 6,145 774 1983 04/16/98 Kenton 2,458 10,640 13,097 1,600 1983 04/16/98 Peppermill 939 9,036 9,976 1,504 1984 04/16/98 Sunset Canyon 3,598 14,258 17,855 2,640 1984 04/16/98 Audubon 1,025 8,133 9,157 1,522 1985 04/16/98 Grand Cypress 816 9,536 10,352 1,338 1995 04/16/98 Inn @ Los Patios 3,005 10,055 13,061 1,153 1990 08/15/98 SAN ANTONIO, TX 32,190 157,992 190,182 25,794

48 SCHEDULE III SUMMARY OF REAL ESTATE OWNED (IN THOUSANDS)

INITIAL COSTS IMPROVEMENTS ---------------------------- TOTAL CAPITALIZED LAND AND BUILDINGS INITIAL SUBSEQUENT LAND AND ACQUISITION TO ACQUISITION ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS (a) (NET OF DISPOSALS) ---------------------------------------------------------------------------------------------- Bay Cove $ -- $ 2,929 $ 6,578 $ 9,507 $ 3,247 Summit West -- 2,177 4,710 6,886 2,485 Pinebrook -- 1,780 2,458 4,239 3,010 Lakewood Place 10,300 1,395 10,647 12,042 1,406 Hunters Ridge 10,232 2,462 10,942 13,404 1,510 Bay Meadow -- 2,893 9,254 12,146 2,598 Cambridge -- 1,791 7,166 8,957 1,477 Laurel Oaks -- 1,362 6,542 7,904 1,234 Parker's Landing 30,465 10,178 37,869 48,047 1,361 Sugar Mill Creek 6,319 2,242 7,553 9,794 613 TAMPA, FL 57,315 29,207 103,719 132,927 18,941 Autumnwood -- 2,412 8,688 11,100 1,245 Cobblestone -- 2,925 10,528 13,453 2,990 Pavillion -- 4,428 19,033 23,461 1,584 Oak Park 16,236 3,966 22,228 26,194 (16) Southern Oaks -- 1,565 5,335 6,900 839 Hunter's Ridge -- 1,613 5,837 7,450 866 Parc Plaza -- 1,684 5,279 6,963 1,476 Summit Ridge -- 1,726 6,308 8,034 1,497 Greenwood Creek 4,645 1,958 8,551 10,509 1,577 Derby Park 52 3,121 11,765 14,886 1,232 Aspen Court 1,852 777 4,945 5,722 926 FORT WORTH, TX 22,786 26,175 108,496 134,671 14,217 2000 Post Street -- 9,861 44,578 54,438 634 Birch Creek 7,653 4,365 16,696 21,061 1,326 Highlands Of Marin -- 5,996 24,868 30,864 904 Marina Playa 13,770 6,224 23,916 30,141 1,627 SAN FRANCISCO, CA 21,423 26,446 110,058 136,504 4,491 Dominion On Spring Forest -- 1,258 8,586 9,844 3,528 Dominion Park Green -- 500 4,322 4,822 1,567 Dominion On Lake Lynn 16,250 3,622 12,405 16,027 3,296 Dominion Courtney Place -- 1,115 5,119 6,234 2,958 Dominion Walnut Ridge 9,515 1,791 11,969 13,760 2,217 Dominion Walnut Creek 17,050 3,170 21,717 24,888 3,319 Dominion Ramsgate -- 908 6,819 7,727 882 Copper Mill -- 1,548 16,067 17,615 974 Trinity Park 14,939 4,580 17,576 22,155 983 Meadows at Kildaire -- 2,846 20,768 23,614 -- RALEIGH, NC 57,754 21,337 125,349 146,686 19,725

GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD -------------------------------- TOTAL LAND AND BUILDINGS CARRYING ACCUMULATED LAND AND VALUE DEPRECIATION DATE OF DATE IMPROVEMENTS IMPROVEMENTS (b) (c) CONSTRUCTION ACQUIRED -------------------------------------------------------------------------------------------- Bay Cove $ 3,288 $ 9,466 $ 12,754 $ 3,992 1972 12/16/92 Summit West 2,458 6,914 9,371 2,997 1972 12/16/92 Pinebrook 2,004 5,245 7,249 2,665 1977 09/28/93 Lakewood Place 1,628 11,820 13,448 3,498 1986 03/10/94 Hunters Ridge 2,965 11,949 14,914 3,286 1992 06/30/95 Bay Meadow 3,437 11,307 14,744 2,637 1985 12/09/96 Cambridge 2,090 8,344 10,434 1,755 1985 06/06/97 Laurel Oaks 1,539 7,599 9,138 1,553 1986 07/01/97 Parker's Landing 9,272 40,136 49,408 4,478 1991 12/07/98 Sugar Mill Creek 2,385 8,022 10,407 966 1988 12/07/98 TAMPA, FL 31,065 120,802 151,867 27,829 Autumnwood 2,723 9,622 12,345 1,999 1984 12/31/96 Cobblestone 3,154 13,289 16,443 2,667 1984 12/31/96 Pavillion 4,750 20,296 25,045 3,828 1979 12/31/96 Oak Park 5,509 20,669 26,178 4,652 1982/98 12/31/96 Southern Oaks 1,621 6,117 7,739 1,344 1982 12/31/96 Hunter's Ridge 1,822 6,494 8,316 1,413 1992 12/31/96 Parc Plaza 2,136 6,303 8,439 1,410 1986 10/30/97 Summit Ridge 2,198 7,333 9,531 1,456 1983 03/27/98 Greenwood Creek 2,298 9,788 12,086 1,624 1984 03/27/98 Derby Park 3,750 12,368 16,118 2,229 1984 03/27/98 Aspen Court 1,094 5,554 6,648 958 1986 03/27/98 FORT WORTH, TX 31,056 117,832 148,888 23,580 2000 Post Street 9,919 45,154 55,073 3,780 1987 12/07/98 Birch Creek 4,607 17,780 22,387 1,839 1968 12/07/98 Highlands Of Marin 6,078 25,690 31,768 2,452 1991 12/07/98 Marina Playa 6,455 25,313 31,768 2,697 1971 12/07/98 SAN FRANCISCO, CA 27,059 113,936 140,995 10,769 Dominion On Spring Forest 1,710 11,662 13,372 5,482 1978/81 05/21/91 Dominion Park Green 701 5,688 6,389 2,454 1987 09/27/91 Dominion On Lake Lynn 4,136 15,188 19,324 4,324 1986 12/01/92 Dominion Courtney Place 1,442 7,750 9,192 2,789 1979/81 07/08/93 Dominion Walnut Ridge 2,171 13,806 15,977 4,163 1982/84 03/04/94 Dominion Walnut Creek 3,720 24,487 28,207 6,933 1985/86 05/17/94 Dominion Ramsgate 1,030 7,578 8,608 1,625 1988 08/15/96 Copper Mill 1,813 16,775 18,589 3,090 1997 12/31/96 Trinity Park 4,620 18,518 23,138 3,333 1987 02/28/97 Meadows at Kildaire 6,863 16,752 23,614 482 2000 05/25/00 RALEIGH, NC 28,207 138,204 166,411 34,675

49 SCHEDULE III SUMMARY OF REAL ESTATE OWNED (IN THOUSANDS)

INITIAL COSTS IMPROVEMENTS ---------------------------- TOTAL CAPITALIZED LAND AND BUILDINGS INITIAL SUBSEQUENT LAND AND ACQUISITION TO ACQUISITION ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS (a) (NET OF DISPOSALS) ------------------------------------------------------------------------------------------------------ Dominion Olde West $ -- $ 1,965 $ 12,204 $ 14,169 $ 1,950 Dominion Creekwood -- -- -- -- 1,052 Dominion Laurel Springs -- 464 3,120 3,584 1,139 Dominion English Hills 20,044 1,979 11,524 13,503 5,129 Dominion Gayton Crossing 10,400 826 5,148 5,974 6,302 Dominion West End 16,493 2,059 15,049 17,108 2,697 Courthouse Green 8,085 732 4,702 5,434 2,202 Waterside At Ironbridge 11,635 1,844 13,239 15,082 791 RICHMOND, VA 66,657 9,870 64,986 74,856 21,262 Boronda Manor 5,101 1,946 8,982 10,928 246 Garden Court 2,382 888 4,188 5,076 142 Harding Park Townhomes 1,215 549 2,051 2,601 61 Cambridge Court 7,501 3,039 12,883 15,922 511 Laurel Tree 2,993 1,304 5,115 6,419 138 Pine Grove 3,313 1,383 5,784 7,167 92 The Pointe At Harden Ranch 14,081 6,388 23,854 30,242 607 The Pointe At Northridge 4,718 2,044 8,028 10,072 263 The Pointe At Westlake 3,111 1,329 5,334 6,663 153 MONTEREY PENINSULA, CA 44,416 18,870 76,220 95,091 2,213 Sycamore Ridge -- 4,068 15,433 19,501 1,016 Heritage Green -- 2,990 11,392 14,382 9,318 Alexander Court -- 1,573 -- 1,573 21,413 Governour's Square 28,730 7,513 28,695 36,208 2,571 Hickory Creek -- 3,421 13,539 16,961 826 Britton Woods 15,168 3,477 19,213 22,690 1,553 COLUMBUS, OH 43,897 23,042 88,272 111,315 36,697 The Highlands -- 321 2,830 3,152 2,707 Emerald Bay -- 626 4,723 5,349 3,614 Dominion Peppertree -- 1,546 7,699 9,245 1,652 Dominion Crown Point -- 2,122 22,339 24,461 2,098 Dominion Harris Pond -- 887 6,728 7,615 1,349 Dominion Mallard Creek -- 699 6,488 7,187 702 Chateau Village -- 1,047 6,980 8,026 2,322 Dominion At Sharon -- 667 4,856 5,523 1,021 Providence Court -- -- 22,048 22,048 9,526 Stoney Pointe 12,159 1,500 15,856 17,355 1,352 CHARLOTTE, NC 12,159 9,415 100,546 109,961 26,342

GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD -------------------------------- TOTAL LAND AND BUILDINGS CARRYING ACCUMULATED LAND AND VALUE DEPRECIATION DATE OF DATE IMPROVEMENTS IMPROVEMENTS (b) (c) CONSTRUCTION ACQUIRED ------------------------------------------------------------------------------------------------------ Dominion Olde West $ 2,380 $ 13,738 $ 16,119 $ 6,449 1978/82/84/85/87 12/31/84 & 8/27/91 Dominion Creekwood 49 1,003 1,052 147 1984 08/27/91 Dominion Laurel Springs 633 4,090 4,723 1,833 1972 09/06/91 Dominion English Hills 2,806 15,827 18,633 6,986 1969/76 12/06/91 Dominion Gayton Crossing 1,165 11,111 12,276 5,113 1973 09/28/95 Dominion West End 2,647 17,159 19,806 4,375 1989 12/28/95 Courthouse Green 1,079 6,557 7,636 3,433 1974/78 12/31/84 Waterside At Ironbridge 1,972 13,901 15,873 2,202 1987 09/30/97 RICHMOND, VA 12,731 83,386 96,117 30,537 Boronda Manor 1,966 9,208 11,174 948 1979 12/07/98 Garden Court 892 4,326 5,218 460 1973 12/07/98 Harding Park Townhomes 559 2,103 2,662 222 1984 12/07/98 Cambridge Court 3,096 13,337 16,433 1,493 1974 12/07/98 Laurel Tree 1,314 5,244 6,558 597 1977 12/07/98 Pine Grove 1,388 5,871 7,259 582 1963 12/07/98 The Pointe At Harden Ranch 6,412 24,437 30,849 2,601 1986 12/07/98 The Pointe At Northridge 2,060 8,274 10,335 895 1979 12/07/98 The Pointe At Westlake 1,331 5,485 6,816 596 1975 12/07/98 MONTEREY PENINSULA, CA 19,020 78,285 97,304 8,394 Sycamore Ridge 4,215 16,302 20,517 2,168 1997 07/02/98 Heritage Green 3,098 20,602 23,700 2,693 1998 07/02/98 Alexander Court 6,190 16,797 22,986 2,329 1999 07/02/98 Governour's Square 7,763 31,015 38,778 3,592 1967 12/07/98 Hickory Creek 3,492 14,295 17,787 1,694 1988 12/07/98 Britton Woods 3,979 20,264 24,243 1,185 1991 04/20/01 COLUMBUS, OH 28,736 119,276 148,012 13,661 The Highlands 693 5,165 5,858 3,539 1970 01/17/84 Emerald Bay 1,207 7,756 8,963 4,087 1972 02/06/90 Dominion Peppertree 1,860 9,038 10,898 3,092 1987 12/14/93 Dominion Crown Point 3,893 22,665 26,558 4,713 1987/2000 07/01/94 Dominion Harris Pond 1,228 7,736 8,964 2,261 1987 07/01/94 Dominion Mallard Creek 777 7,112 7,889 1,923 1989 08/16/94 Chateau Village 1,432 8,916 10,348 2,458 1974 08/15/96 Dominion At Sharon 903 5,641 6,545 1,321 1984 08/15/96 Providence Court 7,489 24,085 31,574 4,884 1997 09/30/97 Stoney Pointe 1,754 16,953 18,707 3,235 1991 02/28/97 CHARLOTTE, NC 21,236 115,068 136,303 31,512

50 SCHEDULE III SUMMARY OF REAL ESTATE OWNED (IN THOUSANDS)

INITIAL COSTS IMPROVEMENTS ---------------------------- TOTAL CAPITALIZED LAND AND BUILDINGS INITIAL SUBSEQUENT LAND AND ACQUISITION TO ACQUISITION ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS (a) (NET OF DISPOSALS) ------------------------------------------------------------------------------------------------------ Legacy Hill $ -- $ 1,148 $ 5,868 $ 7,015 $ 2,872 Hickory Run -- 1,469 11,584 13,053 1,872 Carrington Hills -- 2,117 -- 2,117 24,643 Brookridge -- 708 5,461 6,169 1,277 Club At Hickory Hollow -- 2,140 15,231 17,371 2,045 Breckenridge -- 766 7,714 8,480 860 Williamsburg -- 1,376 10,931 12,307 1,627 Colonnade -- 1,460 16,015 17,475 622 NASHVILLE, TN -- 11,183 72,804 83,987 35,818 Pine Avenue 11,627 2,158 8,888 11,046 262 The Grand Resort -- 8,884 35,707 44,591 808 Grand Terrace -- 2,144 6,595 8,739 1,182 Windward Point -- 1,768 7,118 8,886 316 Rancho Vallecitos -- 3,303 10,877 14,180 980 SOUTHERN CALIFORNIA 11,627 18,258 69,184 87,442 3,547 Beechwood -- 1,409 6,087 7,496 1,041 Steeplechase -- 3,208 11,514 14,722 12,397 Northwinds -- 1,558 11,736 13,293 1,075 Deerwood Crossings -- 1,540 7,989 9,529 1,202 Dutch Village -- 1,198 4,826 6,024 739 Lake Brandt -- 1,547 13,489 15,036 861 Park Forest -- 680 5,770 6,450 602 Deep River Pointe -- 1,671 11,140 12,811 423 GREENSBORO, NC -- 12,810 72,552 85,362 18,341 Dominion Middle Ridge 14,198 3,311 13,283 16,595 1,061 Dominion Lake Ridge 9,142 2,366 8,386 10,753 1,085 Knolls At Newgate -- 1,726 3,530 5,256 1,717 Greens At Falls Run -- 2,731 5,300 8,031 860 Manor At England Run 14,671 3,195 13,505 16,700 12,544 METROPOLITAN DC 38,011 13,329 44,005 57,334 17,266 Cape Harbor -- 1,892 18,113 20,005 1,039 Mill Creek -- 1,404 4,489 5,894 13,497 The Creek -- 418 2,506 2,924 1,737 Forest Hills -- 1,028 5,420 6,448 2,066 Clear Run -- 875 8,741 9,615 5,370 Crosswinds -- 1,096 18,230 19,326 1,094 WILMINGTON, NC -- 6,713 57,500 64,213 24,802

GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD -------------------------------- TOTAL LAND AND BUILDINGS CARRYING ACCUMULATED LAND AND VALUE DEPRECIATION DATE OF DATE IMPROVEMENTS IMPROVEMENTS (b) (c) CONSTRUCTION ACQUIRED ---------------------------------------------------------------------------------------------- Legacy Hill $ 1,431 $ 8,457 $ 9,887 $ 2,681 1977 11/06/95 Hickory Run 1,726 13,198 14,924 3,223 1989 12/29/95 Carrington Hills 3,718 23,043 26,761 3,520 1999 12/06/95 Brookridge 928 6,518 7,445 1,795 1986 03/28/96 Club At Hickory Hollow 2,697 16,719 19,416 3,468 1987 02/21/97 Breckenridge 980 8,359 9,340 1,623 1986 03/27/97 Williamsburg 1,641 12,293 13,934 2,021 1986 05/20/98 Colonnade 1,609 16,488 18,097 1,923 1998 01/07/99 NASHVILLE, TN 14,729 105,076 119,805 20,254 Pine Avenue 2,168 9,140 11,308 935 1987 12/07/98 The Grand Resort 8,946 36,453 45,399 4,082 1971 12/07/98 Grand Terrace 2,226 7,695 9,921 783 1986 06/30/99 Windward Point 1,804 7,398 9,202 773 1983 12/07/98 Rancho Vallecitos 3,393 11,767 15,160 1,938 1988 10/13/99 SOUTHERN CALIFORNIA 18,537 72,452 90,989 8,512 Beechwood 1,665 6,872 8,537 2,318 1985 12/22/93 Steeplechase 3,871 23,248 27,119 4,377 1990/97 03/07/96 Northwinds 1,743 12,625 14,368 2,725 1989/97 08/15/96 Deerwood Crossings 1,671 9,060 10,731 2,258 1973 08/15/96 Dutch Village 1,282 5,481 6,763 1,438 1970 08/15/96 Lake Brandt 1,809 14,089 15,898 3,112 1995 08/15/96 Park Forest 864 6,188 7,052 1,266 1987 09/26/96 Deep River Pointe 1,804 11,430 13,234 1,944 1997 10/01/97 GREENSBORO, NC 14,709 88,994 103,703 19,438 Dominion Middle Ridge 3,423 14,232 17,655 3,002 1990 06/25/96 Dominion Lake Ridge 2,511 9,326 11,837 2,180 1987 02/23/96 Knolls At Newgate 1,846 5,126 6,972 1,872 1972 07/01/94 Greens At Falls Run 2,877 6,014 8,891 1,584 1989 05/04/95 Manor At England Run 4,821 24,423 29,244 4,175 1990/2000 05/04/95 METROPOLITAN DC 15,478 59,121 74,599 12,813 Cape Harbor 2,254 18,790 21,043 4,070 1996 08/15/96 Mill Creek 1,911 17,480 19,391 4,058 1986/98 09/30/91 The Creek 489 4,172 4,661 1,945 1973 06/30/92 Forest Hills 1,202 7,313 8,514 2,857 1964/69 06/30/92 Clear Run 1,281 13,705 14,986 3,690 1987/89 07/22/94 Crosswinds 1,210 19,210 20,420 3,684 1990 02/28/97 WILMINGTON, NC 8,346 80,669 89,015 20,305

51 SCHEDULE III SUMMARY OF REAL ESTATE OWNED (IN THOUSANDS)

INITIAL COSTS IMPROVEMENTS --------------------------- TOTAL CAPITALIZED LAND AND BUILDINGS INITIAL SUBSEQUENT LAND AND ACQUISITION TO ACQUISITION ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS (a) (NET OF DISPOSALS) ------------------------------------------------------------------------------------------- Gatewater Landing $ -- $ 2,078 $ 6,085 $ 8,163 $ 1,296 Dominion Kings Place 4,430 1,565 7,007 8,572 914 Dominion At Eden Brook 7,565 2,361 9,384 11,745 1,338 Dominion Great Oaks 11,446 2,919 9,100 12,019 3,483 Dominion Constant Freindship -- 903 4,669 5,572 767 Lakeside Mill 5,570 2,666 10,109 12,775 458 BALTIMORE, MD 29,011 12,493 46,353 58,846 8,256 Stanford Village -- 885 2,808 3,692 1,347 Griffin Crossing -- 1,510 7,544 9,054 1,671 Gwinnett Square 8,851 1,924 7,376 9,301 1,730 Dunwoody Pointe 5,465 2,763 6,903 9,666 4,500 Riverwood 4,797 2,986 11,088 14,074 3,807 Waterford Place -- 1,579 10,303 11,882 478 ATLANTA, GA 19,113 11,647 46,022 57,669 13,533 Briar Club -- 1,214 6,929 8,143 2,290 Hunters Trace -- 888 6,677 7,565 1,555 Cinnamon Trails -- 1,887 7,645 9,531 30 The Trails at Mt. Moriah 17,147 5,931 22,095 28,026 2,899 The Trails at Kirby Parkway 9,945 4,457 12,300 16,757 825 Dogwood Creek -- 2,772 15,674 18,446 842 MEMPHIS, TN 27,092 17,149 71,319 88,467 8,441 Forest Lake At Oyster Point -- 780 8,862 9,642 1,960 Woodscape -- 799 7,210 8,008 2,486 Eastwind -- 155 5,317 5,472 1,343 Dominion Waterside At Lynnhaven -- 1,824 4,107 5,931 1,261 Heather Lake -- 617 3,401 4,017 3,562 Dominion Yorkshire Downs 7,359 1,089 8,582 9,671 742 NORFOLK, VA 7,359 5,263 37,477 42,741 11,354 Gable Hill -- 825 5,307 6,132 1,511 St. Andrews Commons -- 1,429 9,371 10,800 1,762 Forestbrook 5,000 396 2,902 3,298 1,925 Waterford -- 958 6,948 7,906 1,526 Hampton Greene -- 1,363 10,118 11,481 1,458 Rivergate -- 1,123 12,056 13,178 1,252 COLUMBIA, SC 5,000 6,093 46,703 52,795 9,435

GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD -------------------------------- TOTAL LAND AND BUILDINGS CARRYING ACCUMULATED LAND AND VALUE DEPRECIATION DATE OF DATE IMPROVEMENTS IMPROVEMENTS (b) (c) CONSTRUCTION ACQUIRED ----------------------------------------------------------------------------------------- Gatewater Landing $ 2,182 $ 7,277 $ 9,459 $ 2,729 1970 12/16/92 Dominion Kings Place 1,653 7,832 9,485 2,595 1983 12/29/92 Dominion At Eden Brook 2,465 10,618 13,083 3,529 1984 12/29/92 Dominion Great Oaks 4,278 11,224 15,502 4,010 1974 07/01/94 Dominion Constant Freindship 1,043 5,296 6,339 1,426 1990 05/04/95 Lakeside Mill 2,674 10,560 13,233 1,725 1989 12/10/99 BALTIMORE, MD 14,297 52,806 67,102 16,014 Stanford Village 1,182 3,858 5,040 2,088 1985 09/26/89 Griffin Crossing 1,869 8,857 10,725 2,798 1987/89 06/08/94 Gwinnett Square 2,200 8,831 11,030 2,379 1985 03/29/95 Dunwoody Pointe 3,324 10,842 14,167 3,562 1980 10/24/95 Riverwood 3,429 14,452 17,880 4,067 1980 06/26/96 Waterford Place 1,649 10,711 12,360 1,482 1985 04/15/98 ATLANTA, GA 13,652 57,550 71,202 16,377 Briar Club 1,564 8,869 10,433 2,754 1987 10/14/94 Hunters Trace 1,186 7,934 9,120 2,412 1986 10/14/94 Cinnamon Trails 2,089 7,473 9,561 1,272 1989 01/09/98 The Trails at Mt. Moriah 6,477 24,447 30,924 4,379 1990 01/09/98 The Trails at Kirby Parkway 4,650 12,932 17,582 2,022 1990 01/09/98 Dogwood Creek 2,986 16,302 19,287 2,707 1997 02/06/98 MEMPHIS, TN 18,951 77,957 96,909 15,546 Forest Lake At Oyster Point 1,167 10,435 11,602 2,938 1986 08/15/95 Woodscape 1,800 8,694 10,494 4,416 1974/76 12/29/87 Eastwind 378 6,436 6,814 2,863 1970 04/04/88 Dominion Waterside At Lynnhaven 2,033 5,158 7,191 1,442 1966 08/15/96 Heather Lake 1,016 6,564 7,580 4,728 1972/74 03/01/80 Dominion Yorkshire Downs 1,250 9,163 10,413 1,492 1987 12/23/97 NORFOLK, VA 7,644 46,451 54,095 17,879 Gable Hill 1,189 6,455 7,643 2,900 1985 12/04/89 St. Andrews Commons 1,877 10,685 12,562 3,788 1986 05/20/93 Forestbrook 654 4,569 5,223 2,176 1974 07/01/93 Waterford 1,264 8,167 9,432 2,527 1985 07/01/94 Hampton Greene 1,895 11,045 12,940 3,202 1990 08/19/94 Rivergate 1,437 12,993 14,430 2,744 1989 08/15/96 COLUMBIA, SC 8,316 53,913 62,230 17,337

52 SCHEDULE III SUMMARY OF REAL ESTATE OWNED (IN THOUSANDS)

INITIAL COSTS IMPROVEMENTS ---------------------------- TOTAL CAPITALIZED LAND AND BUILDINGS INITIAL SUBSEQUENT LAND AND ACQUISITION TO ACQUISITION ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS (a) (NET OF DISPOSALS) ------------------------------------------------------------------------------------------- 2900 Place $ -- $ 1,819 $ 5,593 $ 7,412 $ 264 Brandywine Creek 11,999 4,666 17,514 22,180 (2,417) Lakewood 3,171 1,113 3,878 4,991 231 Nemoke Trail 9,719 3,431 12,223 15,654 353 LANSING, MI 24,889 11,029 39,208 50,237 (1,569) Greentree 12,455 1,634 11,227 12,861 3,938 Westland 10,747 1,835 14,865 16,699 3,846 Antlers -- 4,034 11,193 15,227 5,758 JACKSONVILLE, FL 23,202 7,503 37,285 44,787 13,542 Arbor Terrace 4,124 1,453 11,995 13,448 571 Crowne Pointe 4,765 2,486 6,437 8,924 1,065 Hilltop 4,422 2,174 7,408 9,582 441 SEATTLE, WA 13,311 6,114 25,840 31,953 2,077 Sunset Point, Las Vegas, NV -- 4,295 15,705 20,000 1,301 Greensview, Aurora, CO -- 2,974 12,490 15,464 617 Mountain View, Aurora, CO -- 6,402 21,569 27,971 1,473 Foothills Tennis Village, Roseville, CA 11,339 3,618 14,542 18,160 516 Woodlake Village, Sacramento, CA 30,900 6,772 26,967 33,739 1,339 Silk Oak, Fresno, CA -- 2,325 4,566 6,891 259 OTHER WESTERN 42,239 26,385 95,839 122,225 5,504 Mallards Of Wedgewood, Lakeland, FL -- 959 6,865 7,824 1,746 Brantley Pines, Ft. Myers, FL -- 1,893 8,248 10,141 4,982 Santa Barbara, Naples, FL -- 1,134 8,020 9,154 1,728 Ashlar, Ft. Myers, FL -- 3,952 11,718 15,670 16,489 The Groves, Port Orange, FL -- 790 4,767 5,557 1,779 Lakeside, Port Orange, FL -- 2,404 6,420 8,824 1,345 Mallards Of Brandywine, Deland, FL -- 766 5,408 6,174 1,177 LakePointe, Melbourne, FL -- 1,434 4,940 6,375 2,244 OTHER FLORIDA -- 13,333 56,385 69,719 31,490 Lancaster Commons, Salem, OR 6,268 2,485 7,451 9,936 387 Tualatin Heights, Tualatin, OR 8,608 3,273 9,134 12,407 711 University Park, Portland, OR -- 3,007 8,191 11,199 361 Evergreen Park, Vancouver, WA 5,174 3,878 9,973 13,851 643 Aspen Creek, Puyallup, WA 6,832 1,178 9,116 10,294 260 Beaumont, Tacoma, WA 9,817 2,339 12,559 14,898 446 Campus Commons, Pullman, WA 8,907 1,143 12,873 14,016 (2,254) OTHER PACIFIC 45,605 17,304 69,298 86,601 555

GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD -------------------------------- TOTAL LAND AND BUILDINGS CARRYING ACCUMULATED LAND AND VALUE DEPRECIATION DATE OF DATE IMPROVEMENTS IMPROVEMENTS (b) (c) CONSTRUCTION ACQUIRED ------------------------------------------------------------------------------------------ 2900 Place $ 1,823 $ 5,853 $ 7,676 $ 621 1966 12/07/98 Brandywine Creek 4,748 15,015 19,763 1,821 1974 12/07/98 Lakewood 1,231 3,991 5,222 502 1974 12/07/98 Nemoke Trail 3,495 12,512 16,007 1,453 1978 12/07/98 LANSING, MI 11,298 37,370 48,668 4,397 Greentree 2,343 14,456 16,799 4,554 1986 07/22/94 Westland 2,668 17,877 20,546 4,737 1990 05/09/96 Antlers 4,903 16,082 20,985 4,668 1985 05/28/96 JACKSONVILLE, FL 9,914 48,415 58,329 13,959 Arbor Terrace 1,482 12,537 14,019 1,903 1996 03/27/98 Crowne Pointe 2,520 7,469 9,989 968 1987 12/07/98 Hilltop 2,313 7,710 10,023 905 1985 12/07/98 SEATTLE, WA 6,315 27,716 34,031 3,775 Sunset Point, Las Vegas, NV 4,450 16,851 21,301 3,113 1990 12/31/96 Greensview, Aurora, CO 2,452 13,629 16,081 1,610 1987 12/07/98 Mountain View, Aurora, CO 6,350 23,095 29,445 2,756 1973 12/07/98 Foothills Tennis Village, Roseville, CA 3,709 14,966 18,675 1,596 1988 12/07/98 Woodlake Village, Sacramento, CA 6,981 28,097 35,078 3,209 1979 12/07/98 Silk Oak, Fresno, CA 2,368 4,782 7,150 875 1985 12/07/98 OTHER WESTERN 26,310 101,419 127,729 13,159 Mallards Of Wedgewood, Lakeland, FL 1,252 8,318 9,570 2,378 1985 07/27/95 Brantley Pines, Ft. Myers, FL 835 14,287 15,122 4,983 1986 08/11/94 Santa Barbara, Naples, FL 1,740 9,142 10,882 2,920 1987 09/01/94 Ashlar, Ft. Myers, FL 7,592 24,567 32,159 2,797 1999/2000 12/24/97 The Groves, Port Orange, FL 1,444 5,892 7,336 1,891 1989 12/13/95 Lakeside, Port Orange, FL 2,585 7,585 10,169 1,537 1985 07/01/97 Mallards Of Brandywine, Deland, FL 990 6,361 7,351 1,369 1985 07/01/97 LakePointe, Melbourne, FL 1,778 6,841 8,619 2,699 1984 09/24/93 OTHER FLORIDA 18,216 82,992 101,208 20,574 Lancaster Commons, Salem, OR 2,507 7,816 10,323 1,020 1992 12/07/98 Tualatin Heights, Tualatin, OR 3,370 9,748 13,118 1,269 1989 12/07/98 University Park, Portland, OR 3,020 8,540 11,560 997 1987 03/27/98 Evergreen Park, Vancouver, WA 3,915 10,579 14,494 1,460 1988 03/27/98 Aspen Creek, Puyallup, WA 1,264 9,290 10,554 1,038 1996 12/07/98 Beaumont, Tacoma, WA 2,389 12,955 15,344 1,881 1996 06/14/00 Campus Commons, Pullman, WA 1,224 10,538 11,763 1,913 1972 03/27/98 OTHER PACIFIC 17,688 69,468 87,156 9,578

53 SCHEDULE III SUMMARY OF REAL ESTATE OWNED (IN THOUSANDS)

INITIAL COSTS IMPROVEMENTS ---------------------------- TOTAL CAPITALIZED LAND AND BUILDINGS INITIAL SUBSEQUENT LAND AND ACQUISITION TO ACQUISITION ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS (a) (NET OF DISPOSALS) -------------------------------------------------------------------------------------------- Washing Park, Centerville, OH $ -- $ 2,012 $ 7,565 $ 9,577 $ 1,030 Fountainhead, Dayton, OH 1,485 391 1,420 1,811 134 Jamestown Of Toledo, Toledo, OH 5,764 1,800 7,054 8,854 640 Sunset Village, Flint, MI -- 797 1,829 2,626 199 American Heritage, Waterford, MI 3,097 1,021 3,958 4,979 122 Ashton Pines, Waterford, MI -- 1,822 8,014 9,836 498 Kings Gate, Sterling Heights, MI 3,767 1,181 4,828 6,009 196 Lancaster Lake, Clarkston, MI 11,957 4,238 14,663 18,901 793 International Village, Speedway, IN 10,078 3,934 11,479 15,413 1,185 Regency Park South, Indianapolis, IN -- 2,643 7,632 10,275 725 OTHER MIDWESTERN 36,148 19,839 68,442 88,281 5,522 Colony Village, New Bern, NC -- 346 3,037 3,383 1,968 Brynn Marr, Jacksonville, NC -- 433 3,822 4,254 2,589 Liberty Crossing, Jacksonville, NC -- 840 3,873 4,713 2,898 Bramblewood, Goldsboro, NC -- 402 3,151 3,552 1,556 Cumberland Trace, Fayetteville, NC -- 632 7,896 8,528 835 Village At Cliffdale, Fayetteville, NC 9,876 941 15,498 16,440 1,196 Morganton Place, Fayetteville, NC -- 819 13,217 14,036 616 Woodberry, Asheville, NC -- 389 6,381 6,770 1,118 OTHER NORTH CAROLINA 9,876 4,802 56,874 61,677 12,776 Pecan Grove, Austin, TX -- 1,407 5,293 6,700 470 Anderson Mill, Austin, TX 9,765 3,135 11,170 14,305 3,232 Red Stone Ranch, Cedar Park, TX -- 1,897 17,526 19,422 -- Turtle Creek, Little Rock, AR -- 1,913 7,087 9,000 995 Shadow Lake, Little Rock, AR -- 2,524 8,976 11,500 1,433 Desert Springs, Tuscan, AZ 4,382 1,118 7,094 8,213 685 Posada Del Rio, Tuscan, AZ -- 844 4,288 5,132 (329) Alvarado, Albuquerque, NM -- 1,930 5,970 7,900 700 Dorado Heights, Albuquerque, NM 4,955 1,568 6,555 8,123 654 OTHER SOUTHWESTERN 19,102 16,335 73,960 90,295 7,841 Greens At Hollymead, Charlottesville, VA -- 965 5,250 6,215 679 Brittingham Square, Salisbury, MD -- 650 4,962 5,612 666 Greens At Schumaker Pond, Salisbury, MD -- 710 6,118 6,827 927 Greens At Cross Court, Easton, MD -- 1,182 4,544 5,726 1,052 Greens At Hilton Run, Lexington Park, MD 12,542 2,754 10,483 13,237 1,454 OTHER MID-ATLANTIC 12,542 6,262 31,357 37,618 4,778

GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD -------------------------------- TOTAL LAND AND BUILDINGS CARRYING ACCUMULATED LAND AND VALUE DEPRECIATION DATE OF DATE IMPROVEMENTS IMPROVEMENTS (b) (c) CONSTRUCTION ACQUIRED ------------------------------------------------------------------------------------------ Washing Park, Centerville, OH $ 2,115 $ 8,491 $ 10,607 $ 1,162 1998 12/07/98 Fountainhead, Dayton, OH 391 1,555 1,945 201 1966 12/07/98 Jamestown Of Toledo, Toledo, OH 1,892 7,603 9,494 919 1965 12/07/98 Sunset Village, Flint, MI 814 2,011 2,825 350 1940 12/07/98 American Heritage, Waterford, MI 1,031 4,070 5,101 476 1968 12/07/98 Ashton Pines, Waterford, MI 1,846 8,489 10,334 889 1987 12/07/98 Kings Gate, Sterling Heights, MI 1,218 4,987 6,205 551 1973 12/07/98 Lancaster Lake, Clarkston, MI 4,316 15,378 19,693 1,724 1988 12/07/98 International Village, Speedway, IN 3,999 12,599 16,598 1,754 1968 12/07/98 Regency Park South, Indianapolis, IN 2,713 8,287 11,000 1,123 1968 12/07/98 OTHER MIDWESTERN 20,332 73,471 93,803 9,149 Colony Village, New Bern, NC 560 4,791 5,351 3,026 1972/74 12/31/84 Brynn Marr, Jacksonville, NC 724 6,120 6,844 3,681 1973/77 12/31/84 Liberty Crossing, Jacksonville, NC 1,419 6,192 7,611 3,680 1972/74 11/30/90 Bramblewood, Goldsboro, NC 588 4,521 5,109 2,813 1980/82 12/31/84 Cumberland Trace, Fayetteville, NC 668 8,694 9,362 1,845 1973 08/15/96 Village At Cliffdale, Fayetteville, NC 1,123 16,513 17,636 3,309 1992 08/15/96 Morganton Place, Fayetteville, NC 887 13,765 14,652 2,632 1994 08/15/96 Woodberry, Asheville, NC 655 7,233 7,888 1,674 1987 08/15/96 OTHER NORTH CAROLINA 6,623 67,830 74,453 22,659 Pecan Grove, Austin, TX 1,464 5,706 7,170 1,008 1984 12/31/96 Anderson Mill, Austin, TX 3,478 14,059 17,537 3,552 1984 03/27/97 Red Stone Ranch, Cedar Park, TX 5,380 14,043 19,422 744 2000 06/14/00 Turtle Creek, Little Rock, AR 2,189 7,806 9,995 1,664 1985 12/31/96 Shadow Lake, Little Rock, AR 2,850 10,082 12,933 2,218 1984 12/31/96 Desert Springs, Tuscan, AZ 1,136 7,762 8,898 1,145 1985 03/27/98 Posada Del Rio, Tuscan, AZ 942 3,861 4,803 730 1980 03/27/98 Alvarado, Albuquerque, NM 1,978 6,622 8,600 1,340 1984 12/31/96 Dorado Heights, Albuquerque, NM 1,627 7,150 8,777 1,078 1986 03/27/98 OTHER SOUTHWESTERN 21,044 77,092 98,136 13,479 Greens At Hollymead, Charlottesville, VA 1,058 5,837 6,895 1,491 1990 05/04/95 Brittingham Square, Salisbury, MD 814 5,465 6,279 1,431 1991 05/04/95 Greens At Schumaker Pond, Salisbury, MD 871 6,883 7,754 1,780 1988 05/04/95 Greens At Cross Court, Easton, MD 1,363 5,416 6,779 1,445 1987 05/04/95 Greens At Hilton Run, Lexington Park, MD 3,083 11,608 14,691 2,976 1988 05/04/95 OTHER MID-ATLANTIC 7,188 35,208 42,397 9,123

54 SCHEDULE III SUMMARY OF REAL ESTATE OWNED (IN THOUSANDS)

INITIAL COSTS IMPROVEMENTS ------------------------------ TOTAL CAPITALIZED LAND AND BUILDINGS INITIAL SUBSEQUENT LAND AND ACQUISITION TO ACQUISITION ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS (a) (NET OF DISPOSALS) ------------------------------------------------------------------------------------------- Jamestown Of St. Matthews, St Matthews, KY $ 10,943 $ 3,866 $ 14,422 $ 18,288 $ 922 Patriot Place, Florence, SC 2,200 213 1,601 1,813 5,744 River Place, Macon, GA 6,142 1,097 7,492 8,590 2,071 OTHER SOUTHEASTERN 19,285 5,175 23,516 28,691 8,737 Dover Country, Dover, DE -- 2,008 6,365 8,373 2,636 Greens At Cedar Chase, Dover, DE 5,167 1,529 4,831 6,359 751 OTHER NORTHEASTERN 5,167 3,537 11,196 14,732 3,386 ------------------------------------------------------------------------------------------- TOTAL APARTMENTS $ 966,960 $ 593,463 $2,682,180 $3,275,643 $ 562,869 =========================================================================================== REAL ESTATE UNDER DEVELOPMENT ADDITIONS TO EXISTING COMMUNITIES Greensview II, Aurora, CO $ -- $ 3,476 $ 11,915 $ 15,391 $ -- Meridian II, Carrollton, TX -- 2,370 9,600 11,970 -- Copper Mill II -- 831 -- 831 -- Parkers Landing II -- 1,116 -- 1,116 -- Parke 33 Apartments II -- 1,646 -- 1,646 -- Wimbledon Court II -- 667 -- 667 -- Coit Road -- 2,849 -- 2,849 -- Mandolin II -- 1,351 -- 1,351 -- Coit Road II -- 1,861 -- 1,861 -- Kenton Place II -- 483 -- 483 -- Mountain View II -- 220 -- 220 -- 2000 Post III -- 1,855 -- 1,855 -- LAND HELD FOR FUTURE DEVELOPMENT -- 12,879 -- 12,879 -- ------------------------------------------------------------------------------------------- $ -- $ 18,725 $ 21,515 $ 40,240 $ -- -------------------------------------------------------------------------------------------

GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD -------------------------------- TOTAL LAND AND BUILDINGS CARRYING ACCUMULATED LAND AND VALUE DEPRECIATION DATE OF DATE IMPROVEMENTS IMPROVEMENTS (b) (c) CONSTRUCTION ACQUIRED ---------------------------------------------------------------------------------------------- Jamestown Of St. Matthews, St Matthews, KY $ 3,975 $ 15,235 $ 19,210 $ 1,754 1968 12/07/98 Patriot Place, Florence, SC 1,506 6,052 7,557 3,852 1974 10/23/85 River Place, Macon, GA 1,796 8,864 10,660 3,093 1988 04/08/94 OTHER SOUTHEASTERN 7,276 30,151 37,428 8,699 Dover Country, Dover, DE 2,359 8,650 11,009 2,990 1970 07/01/94 Greens At Cedar Chase, Dover, DE 1,722 5,388 7,110 1,495 1988 05/04/95 OTHER NORTHEASTERN 4,082 14,037 18,119 4,485 ------------------------------------------------------------------- TOTAL APARTMENTS $ 692,575 $3,145,937 $3,838,512 $ 642,334 =================================================================== REAL ESTATE UNDER DEVELOPMENT ADDITIONS TO EXISTING COMMUNITIES Greensview II, Aurora, CO $ 3,476 $ 11,915 $ 15,391 $ -- 2000 12/07/98 Meridian II, Carrollton, TX 2,370 9,600 11,970 -- 2000 01/27/98 Copper Mill II 831 -- 831 -- Parkers Landing II 1,116 -- 1,116 -- Parke 33 Apartments II 1,646 -- 1,646 -- Wimbledon Court II 667 -- 667 -- Coit Road 2,849 -- 2,849 -- Mandolin II 1,351 -- 1,351 -- Coit Road II 1,861 -- 1,861 -- Kenton Place II 483 -- 483 -- Mountain View II 220 -- 220 -- 2000 Post III 1,855 -- 1,855 -- LAND HELD FOR FUTURE DEVELOPMENT 12,879 -- 12,879 -- ------------------------------------------------------------------- $ 18,725 $ 21,515 $ 40,240 $ -- -------------------------------------------------------------------

55 SCHEDULE III SUMMARY OF REAL ESTATE (IN THOUSANDS)

INITIAL COSTS IMPROVEMENTS ------------------------------ TOTAL CAPITALIZED LAND AND BUILDINGS INITIAL SUBSEQUENT LAND AND ACQUISITION TO ACQUISITION ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS (a) (NET OF DISPOSALS) ------------------------------------------------------------------------------------------- LAND HELD FOR DISPOSITION Copperfield $ -- $ 1,620 $ -- $ 1,620 $ -- Copperfield II -- 1,144 -- 1,144 -- Palazzo -- 3,251 -- 3,251 (767) Fossil Creek -- 3,889 -- 3,889 (289) COMMERCIAL PROPERTY Hanover Village -- 1,624 -- 1,624 -- Gloucester Exchange -- 403 2,279 2,682 646 Tri-County -- 276 900 1,176 1,310 Pacific South Center 3,221 1,000 4,000 5,000 10 Richmond Corporate 3,996 245 6,352 6,597 1,022 ------------------------------------------------------------------------------------------- $ 7,217 $ 13,452 $ 13,531 $ 26,983 $ 1,932 =========================================================================================== TOTAL REAL ESTATE ------------------------------------------------------------------------------------------- OWNED $ 974,177 $ 625,640 $2,717,226 $3,342,866 $ 564,801 ===========================================================================================

GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD -------------------------------- TOTAL LAND AND BUILDINGS CARRYING ACCUMULATED LAND AND VALUE DEPRECIATION DATE OF DATE IMPROVEMENTS IMPROVEMENTS (b) (c) CONSTRUCTION ACQUIRED ----------------------------------------------------------------------------------------------------- LAND HELD FOR DISPOSITION Copperfield $ 1,620 $ -- $ 1,620 $ -- $ Copperfield II 1,144 -- 1,144 -- Palazzo 2,484 -- 2,484 -- Fossil Creek 3,600 -- 3,600 -- COMMERCIAL PROPERTY Hanover Village 1,104 520 1,624 450 -- 06/30/86 Gloucester Exchange 608 2,720 3,328 1,419 1974 11/12/87 Tri-County 364 2,122 2,486 1,362 1976/79 01/21/81 Pacific South Center 1,000 4,010 5,010 426 1965 08/28/86 Richmond Corporate 273 7,346 7,619 375 1999 11/30/99 --------------------------------------------------------------------- $ 12,197 $ 16,718 $ 28,915 $ 4,032 ===================================================================== TOTAL REAL ESTATE --------------------------------------------------------------------- OWNED $ 723,497 $3,184,170 $3,907,667 $ 646,366 =====================================================================

a Includes a purchase price adjustment of $8.5 million. b The aggregate cost for federal income tax purposes was approximately $3.1 billion at December 31, 2001. c The depreciable life for all buildings is 35 years. 56 -----END PRIVACY-ENHANCED MESSAGE-----

EX-23.1

                                                                    EXHIBIT 23.1

                         CONSENT OF INDEPENDENT AUDITORS

         We consent to the incorporation by reference in the following
Registration Statements of United Dominion Realty Trust, Inc. and in the related
Prospectus of our report dated January 31, 2002, (except for Notes 13 and 14, as
to which the date is November 27, 2002), with respect to the consolidated
financial statements and schedule of United Dominion Realty Trust, Inc. included
in this Current Report on Form 8-K.



         Registration Statement Number                 Description
         -----------------------------                 -----------
                                       
                  33-40433                Form S-3, pertaining to the private
                                          placement of 900,000 shares of the Company's
                                          common stock in May, 1991.

                  33-48000                Form S-8, pertaining to the Company's Stock
                                          Option Plan.

                  33-58201                Form S-8, pertaining to the Employee's Stock
                                          Purchase Plan.

                  333-11207               Form S-3, pertaining to the private placement of
                                          1,679,840 shares of the Company's Common Stock.

                  333-15133               Form S-3, pertaining to the Company's
                                          Dividend Reinvestment and Stock Purchase
                                          Plan.

                  333-32829               Form S-8, pertaining to the Company's Stock
                                          Purchase and Loan Plan.

                  333-44463               Form S-3, pertaining to the Company's
                                          Dividend Reinvestment and Stock Purchase
                                          Plan.

                  333-48557               Form S-3, pertaining to the private placement of
                                          104,920 shares of Common Stock and 104,920 rights
                                          to purchase Series C Junior Participating
                                          Redeemable Preferred Stock.

                  333-53401               Form S-3, pertaining to the private placement of
                                          1,528,089 shares of Common Stock and 1,528,089
                                          rights to purchase Series C Junior Participating
                                          Redeemable Preferred Stock.

                  333-58600               Form S-8, pertaining to the Employee's Stock
                                          Purchase Plan.

                  333-64281               Form S-3, pertaining to the private placement of
                                          849,498 shares of Common Stock and 849,498 rights
                                          to Purchase Series C Junior Participating
                                          Redeemable Preferred Stock.

                  333-72885               Form S-3, pertaining to the private placement of
                                          130,416 shares of Common Stock and 130,416 rights
                                          to purchase Series C Junior Participating
                                          Redeemable Preferred Stock.



                                       4




         Registration Statement Number                 Description
         -----------------------------                 -----------
                                       
                  333-75897               Form S-8, pertaining to the Company's Long
                                          Term Incentive Plan.

                  333-77107               Form S-3, pertaining to the private placement of
                                          1,023,732 shares of Common Stock and 1,023,732
                                          rights to purchase Series C Junior Participating
                                          Redeemable Preferred Stock.

                  333-77161               Form S-3, pertaining to the private placement of
                                          481,251 shares of Common Stock and 481,251 rights
                                          to purchase Series C Junior Participating
                                          Redeemable Preferred Stock.

                  333-80279               Form S-8, pertaining to the Company's Open
                                          Market Purchase Program.

                  333-82929               Form S-3, pertaining to the private placement of
                                          95,119 shares of Common Stock and 95,119 rights
                                          to purchase Series C Junior Participating
                                          Redeemable Preferred Stock.

                  333-92667               Form S-3, Shelf Registration Statement,
                                          pertaining to the registration of
                                          $616,058,554 of Common Stock, Preferred
                                          Stock and Debt Securities.

                  333-86808               Form S-3, pertaining to the registration
                                          of 12,307,692 shares of Common Stock.




/s/ Ernst & Young LLP

Richmond, Virginia
November 27, 2002


                                       5

EX-99.1

                                                                    EXHIBIT 99.1


ITEM 6.  SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial and other
information as of and for each of the years in the five-year period ended
December 31, 2001. The table should be read in conjunction with our consolidated
financial statements and the notes thereto, and Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations, included
elsewhere in this Report.



                                                                                        YEARS ENDED DECEMBER 31,
                                                                            2001           2000           1999           1998
                                                                       ---------------------------------------------------------
                                                                                                        
In thousands, except per share data and apartment homes owned

OPERATING DATA (a)
     Rental income                                                     $   561,958    $   572,205    $   572,798    $   438,780
     Income before gains on sales of investments,
       minority interests, discontinued operations and
       extraordinary item                                                   32,125         33,541         46,838         34,940
     Gains on sales of investments                                          24,748         31,450         37,995         26,672
     Net income from discontinued operations, net of
       minority interests                                                   11,703         14,153         12,467         12,006
     Extraordinary item-early extinguishment of debt                        (3,471)           831            927           (138)
     Net income                                                             61,828         76,615         93,622         72,332
     Distributions to preferred shareholders                                31,190         36,891         37,714         23,593
     Net income available to common shareholders                            27,142         42,653         55,908         48,739
     Common distributions declared                                         108,956        110,225        109,607        107,758
     Weighted average number of common shares outstanding-basic            100,339        103,072        103,604         99,966
     Weighted average number of common shares outstanding-diluted          101,037        103,208        103,639        100,062
     Weighted average number of common shares, OP Units
       and common share equivalents-diluted                                120,728        123,005        124,127        103,793
     Per share:
       Basic earnings per share                                        $      0.27    $      0.41    $      0.54    $      0.49
       Diluted earnings per share                                             0.27           0.41           0.54           0.49
       Common distributions declared                                          1.08           1.07           1.06           1.05
BALANCE SHEET DATA (a)
     Real estate owned, at carrying value                              $ 3,907,667    $ 3,836,320    $ 3,953,045    $ 3,952,752
     Accumulated depreciation                                              646,366        509,405        395,864        316,630
     Total real estate owned, net of accumulated depreciation            3,261,301      3,326,915      3,557,181      3,636,122
     Total assets                                                        3,348,091      3,453,957      3,688,317      3,762,940
     Secured debt                                                          974,177        866,115      1,000,136      1,072,185
     Unsecured debt                                                      1,090,020      1,126,215      1,127,169      1,045,564
     Total debt                                                          2,064,197      1,992,330      2,127,305      2,117,749
     Shareholders' equity                                                1,042,725      1,218,892      1,310,212      1,374,121
     Number of common shares outstanding                                   103,133        102,219        102,741        103,639
OTHER DATA (a)
     CASH FLOW DATA
     Net cash provided by operating activities                         $   224,411    $   224,160    $   190,602    $   140,597
     Net cash (used in)/provided by investing activities                   (64,055)        58,705       (103,836)      (263,864)
     Net cash (used in)/provided by financing activities                  (166,020)      (280,238)      (105,169)       148,875

     FUNDS FROM OPERATIONS (b)
     Net income                                                        $    61,828    $    76,615    $    93,622    $    72,332
     Adjustments:
         Distributions to preferred shareholders                           (31,190)       (36,891)       (37,714)       (23,593)
         Real estate depreciation, net of other
         partnerships' interest                                            150,206        151,520        120,543         99,588
         Gains on sales of depreciable property, net
         of other partnerships' interest                                   (24,007)       (30,300)       (37,995)       (26,672)
         Minority interests of unitholders in operating partnership          1,967          2,885          4,434          1,430
         Real estate depreciation related to unconsolidated entities
         Extraordinary item-early extinguishment                             1,105            251            181             24
         of debt, net of minority interest                                   3,471           (831)          (927)           138
                                                                       ---------------------------------------------------------
     Funds from operations-basic                                       $   163,380    $   163,249    $   142,144    $   123,247
                                                                       =========================================================
     Adjustment:
     Distributions to preferred shareholders-Series D (Convertible)         15,428         15,300         15,154            986
                                                                       ---------------------------------------------------------
     Funds from operations-diluted                                     $   178,808    $   178,549    $   157,298    $   124,233
                                                                       =========================================================
     Adjustment:
         Recurring capital expenditures                                    (31,535)       (24,794)       (43,528)       (25,019)
                                                                       ---------------------------------------------------------
     ADJUSTED FUNDS FROM OPERATIONS-DILUTED (c)                        $   147,273    $   153,755    $   113,770    $    99,214
                                                                       =========================================================
     APARTMENT HOMES OWNED
     Total apartment homes owned at December 31                             77,567         77,219         82,154         86,893
     Weighted average number of apartment homes owned
     during the year                                                        76,487         80,253         85,926         70,724




                                                                           1997
                                                                       -----------
                                                                    
In thousands, except per share data and apartment homes owned

OPERATING DATA (a)
     Rental income                                                     $   362,294
     Income before gains on sales of investments,
       minority interests, discontinued operations and
       extraordinary item                                                   48,125
     Gains on sales of investments                                          12,664
     Net income from discontinued operations, net of
       minority interests                                                    9,688
     Extraordinary item-early extinguishment of debt                           (50)
     Net income                                                             70,149
     Distributions to preferred shareholders                                17,345
     Net income available to common shareholders                            52,804
     Common distributions declared                                          88,587
     Weighted average number of common shares outstanding-basic             87,145
     Weighted average number of common shares outstanding-diluted           87,339
     Weighted average number of common shares, OP Units
       and common share equivalents-diluted                                 87,656
     Per share:
       Basic earnings per share                                        $      0.61
       Diluted earnings per share                                             0.60
       Common distributions declared                                          1.01
BALANCE SHEET DATA (a)
     Real estate owned, at carrying value                              $ 2,517,398
     Accumulated depreciation                                              245,367
     Total real estate owned, net of accumulated depreciation            2,272,031
     Total assets                                                        2,313,725
     Secured debt                                                          417,325
     Unsecured debt                                                        738,901
     Total debt                                                          1,156,226
     Shareholders' equity                                                1,058,357
     Number of common shares outstanding                                    89,168
OTHER DATA (a)
     CASH FLOW DATA
     Net cash provided by operating activities                         $   137,903
     Net cash (used in)/provided by investing activities                  (342,273)
     Net cash (used in)/provided by financing activities                   191,391

     FUNDS FROM OPERATIONS (b)
     Net income                                                        $    70,149
     Adjustments:
         Distributions to preferred shareholders                           (17,345)
         Real estate depreciation, net of other
         partnerships' interest                                             76,688
         Gains on sales of depreciable property, net
         of other partnerships' interest                                   (12,664)
         Minority interests of unitholders in operating partnership            278
         Real estate depreciation related to unconsolidated entities
         Extraordinary item-early extinguishment                                --
         of debt, net of minority interest                                      50
                                                                       -----------
     Funds from operations-basic                                       $   117,156
                                                                       ===========
     Adjustment:
     Distributions to preferred shareholders-Series D (Convertible)             --
                                                                       -----------
     Funds from operations-diluted                                     $   117,156
                                                                       ===========
     Adjustment:
         Recurring capital expenditures                                    (24,490)
                                                                       -----------
     ADJUSTED FUNDS FROM OPERATIONS-DILUTED (c)                        $    92,666
                                                                       ===========
     APARTMENT HOMES OWNED
     Total apartment homes owned at December 31                             62,789
     Weighted average number of apartment homes owned
     during the year                                                        58,038


(a)   In 1998, United Dominion completed the following statutory mergers: (i)
      ASR Investments Corporation Inc. on March 27, 1998 for an aggregate
      purchase price of $323 million and; (ii) American Apartment Communities II
      on December 7, 1998 for an aggregate purchase price of $794 million.


                                       6


(b)   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 depreciation and
      amortization, less preferred dividends and after adjustments for
      unconsolidated partnerships and joint ventures. This definition conforms
      with the National Association of Real Estate Investment Trust's definition
      issued in October 1999 which was effective beginning January 1, 2000.
      United Dominion considers 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 flows as a measure
      of United Dominion's activities in accordance with generally accepted
      accounting principles and is not necessarily indicative of cash available
      to fund cash needs. For 2001, FFO includes a non-recurring charge of $8.6
      million related to workforce reductions, other severance costs, executive
      office relocation costs and the write-down of seven undeveloped land sites
      along with our investment in an online apartment leasing company. For
      2000, FFO includes a non-recurring charge of $3.7 million related to the
      settlement of litigation and an organizational charge.

(c)   Adjusted funds from operations is defined as FFO less recurring capital
      expenditures for our stabilized portfolio.

      ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS

      FORWARD-LOOKING STATEMENTS

            This annual 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 Realty Trust, Inc. (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.

      BUSINESS OVERVIEW

            United Dominion is a real estate investment trust (REIT) that owns,
      acquires, renovates, develops and manages middle market apartment
      communities nationwide. From 1996 through 1999, United Dominion acquired
      other REITs, private portfolios and individual communities to create a
      national platform. Following this significant acquisition period, the
      Company upgraded the quality of the portfolio and invested in
      infrastructure and technology to catch up with the rapid growth of its
      portfolio of assets. During 2001, United Dominion continued to refine its
      strategy with the goal of enhancing long-term earnings growth on a
      sustained basis by focusing on operational issues that management believes
      will produce above-average net operating income growth, steadily increase
      cash flow per apartment home and strengthen the capital structure of the
      Company. The Company's strategy includes the following key initiatives:

            -     Own and operate middle market apartment homes across a
                  geographically diverse platform by enhancing United Dominion's
                  presence in 25 - 30 core markets to enable the Company to
                  capitalize on operating efficiencies.

            -     As local market cycles create opportunities, exit current
                  markets where long-term growth is below the national average
                  (the "non-core markets").

            -     Employ a strict capital allocation discipline throughout all
                  decision-making processes to enhance performance, improve the
                  strength of the Company's balance sheet and increase financial
                  flexibility.


                                       7


            -     Lead, manage, measure and reward associates based upon
                  performance specifically tied to key financial and investment
                  indicators, including the growth of funds from operations,
                  adjusted funds from operations and the common share price.

            Over the long-term, these key initiatives will better position
      United Dominion to serve its customers, increase profitability and
      capitalize on changes in the marketplace. At December 31, 2001, United
      Dominion owned 274 communities with 77,567 apartment homes nationwide.

            The following table summarizes United Dominion's apartment market
      information by major geographic market (excluding real estate under
      development):



                                                                                                  YEAR ENDED
                                           AS OF DECEMBER 31, 2001                             DECEMBER 31, 2001
                          ----------------------------------------         CARRYING        ---------------------------
                           NUMBER OF      NUMBER OF     PERCENTAGE          VALUE          AVERAGE          AVERAGE
                           APARTMENT       APARTMENT    OF CARRYING         (IN            PHYSICAL          MONTHLY
                          COMMUNITIES        HOMES         VALUE          THOUSANDS)       OCCUPANCY      RENTAL RATES
                          -----------     ----------    -----------      -----------       ---------      ------------
                                                                                        
Dallas, TX                      16           5,177         6.7%          $  255,437           95.0%          $  678
Houston, TX                     22           5,722         5.9%             227,217           94.0%             623
Phoenix, AZ                     12           3,854         5.9%             225,997           93.6%             715
Orlando, FL                     14           4,140         5.3%             202,676           92.9%             746
San Antonio, TX                 12           3,827         5.0%             190,182           91.6%             677
Raleigh, NC                     10           3,283         4.3%             166,411           91.7%             719
Tampa, FL                       10           3,372         4.0%             151,867           94.1%             694
Fort Worth, TX                  11           3,561         3.9%             148,888           96.6%             638
Columbus, OH                     6           2,527         3.9%             148,012           93.4%             691
San Francisco, CA                4             980         3.7%             140,995           97.3%           1,767
Charlotte, NC                   10           2,710         3.5%             136,303           89.2%             703
Nashville, TN                    8           2,220         3.1%             119,805           94.2%             688
Greensboro, NC                   8           2,122         2.7%             103,703           91.0%             642
Monterey Peninsula, CA           9           1,706         2.5%              97,304           95.4%             859
Memphis, TN                      6           1,956         2.5%              96,909           92.3%             633
Richmond, VA                     8           2,372         2.5%              96,117           95.6%             711
Southern California              5           1,414         2.4%              90,989           95.8%             903
Wilmington, NC                   6           1,869         2.3%              89,015           92.6%             661
Metropolitan DC                  5           1,291         1.9%              74,599           97.9%             845
Atlanta, GA                      6           1,426         1.9%              71,202           93.3%             741
Baltimore, MD                    6           1,291         1.7%              67,102           97.1%             817
Columbia, SC                     6           1,584         1.6%              62,230           95.0%             586
Jacksonville, FL                 3           1,157         1.5%              58,329           92.9%             669
Norfolk, VA                      6           1,437         1.4%              54,095           95.4%             665
Lansing, MI                      4           1,226         1.3%              48,668           92.4%             661
Seattle, WA                      3             628         0.9%              34,031           94.9%             742
Other Western                    6           2,594         3.2%             127,729           96.3%             703
Other Florida                    8           2,073         2.6%             101,208           91.3%             722
Other Southwestern               9           2,212         2.6%              98,136           93.4%             589
Other Midwestern                10           2,122         2.5%              93,803           93.0%             629
Other Pacific                    7           1,757         2.3%              87,156           93.6%             706
Other North Carolina             8           1,893         1.9%              74,453           95.1%             566
Other Mid-Atlantic               5             928         1.1%              42,397           96.6%             770
Other Southeastern               3             764         1.0%              37,428           94.8%             586
Other Northeastern               2             372         0.5%              18,119           96.4%             672
                          -----------     ----------    -----------      -----------       ---------      ------------
     TOTAL APARTMENTS          274          77,567        100.0%         $3,838,512           93.9%          $  703
                          ===========     ==========    ===========      ===========       =========      ============



                                       8


LIQUIDITY AND CAPITAL RESOURCES

         Liquidity is the ability to meet present and future financial
obligations either through the sale or maturity of existing assets or by the
acquisition of additional funds through working capital management. Both the
coordination of asset and liability maturities and effective working capital
management are important to the maintenance of liquidity. 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 expects to meet its short-term liquidity requirements
generally through net cash provided by operations and borrowings under credit
arrangements. The Company expects to meet certain long-term liquidity
requirements such as scheduled debt maturities, the repayment of financing on
development activities and potential property acquisitions, through long-term
secured and unsecured borrowings, the disposition of properties and the issuance
of debt securities or additional equity securities of the Company. The Company
believes that its net cash provided by operations will continue to be adequate
to meet both operating requirements and the payment of dividends by the Company
in accordance with REIT requirements in both the short- and long-term. The
budgeted expenditures for improvements and renovations of certain properties are
expected to be funded from property operations.

         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 to facilitate future financing activities in the
public capital markets. 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%. In December 2001, United Dominion completed
an offering to the public of 4.1 million shares of common stock at a price of
$14.40 per share. As of December 31, 2001, $541 million of equity and debt
securities remain available for use under the shelf registration, although
access to capital markets is dependent on market conditions at the time of
issuance. Subsequent to December 31, 2001, the underwriters who sold the
Company's stock in December 2001 exercised their over-allotment option for
166,800 shares of common stock at a price of $14.40 per share.

         In September 2001, Moody's Investors Service lowered its rating on the
securities of the Company to Baa3 from Baa2, placing its rating on par with that
of Standard & Poors, which had lowered its rating in 2000. This revision did not
trigger a material increase in the borrowing rate under the Company's $375
million three-year unsecured revolving bank credit facility or the Company's
secured revolving Fannie Mae credit facilities (see discussion under "Credit
Facilities"), and United Dominion's debt rating remains "investment grade."
Management does not anticipate that this revision will prevent the Company from
accessing the public or private markets for either unsecured or secured
financing.

FUTURE CAPITAL NEEDS

         Future development expenditures are expected to be funded primarily
through joint ventures or from proceeds from the sale of properties, and to a
lesser extent, cash flow provided by operating activities. Acquisition activity
in strategic markets is expected to be largely financed by the reinvestment of
proceeds from the sale of property in non-strategic markets.

         During 2002, United Dominion has approximately $108.6 million of
maturing debt which the Company anticipates repaying using proceeds from
mortgage refinancing activity or borrowings under unsecured or secured credit
facilities.


                                       9


CRITICAL ACCOUNTING POLICIES

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 2001, $53.1 million or $704 per home was spent on capital
expenditures for all of United Dominion's communities excluding development and
commercial properties. These capital improvements included turnover related
expenditures for floor coverings and appliances, other recurring capital
expenditures such as HVAC equipment, roofs, landscaping, siding, parking lots
and other non-revenue enhancing capital expenditures, which aggregated $31.5
million or $418 per home. In addition, 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 $21.6 million or $286 per home for the year ended December 31,
2001.

         The following table outlines capital expenditures and repair and
maintenance costs for the Company's total portfolio, excluding real estate under
development and commercial properties for the periods presented (dollars in
thousands):



                                              YEAR ENDED DECEMBER 31,                YEAR ENDED DECEMBER 31, (PER UNIT)
                                         -----------------------------------       ------------------------------------
                                          2001           2000      % CHANGE          2001          2000        % CHANGE
                                         -------       -------     --------        -------         ----        --------
                                                                                             
Turnover capital expenditures            $16,776       $14,109        18.9%        $   222          $177          25.4%

Other recurring capital expenditures      14,759        10,685        38.1%            196           134          46.3%
                                         -------       -------        ----         -------          ----          ----
  Total recurring capital expenditures    31,535        24,794        27.2%            418           311          34.4%

Revenue enhancing improvements            21,561        16,702        29.1%            286           210          36.2%
                                         -------       -------        ----         -------          ----          ----
  Total capital improvements             $53,096       $41,496        28.0%        $   704          $521          35.1%
                                         =======       =======        ====         =======          ====          ====

Repair and maintenance                    36,197        36,185         0.0%            480           454           5.7%
                                         -------       -------        ----         -------          ----          ----
  Total expenditures                     $89,293       $77,681        14.9%         $1,184          $975          21.4%
                                         =======       =======        ====          ======          ====          ====


         Total capital improvements increased $11.6 million or $183 per home in
2001 compared to the same period in 2000. United Dominion will continue to
selectively add revenue enhancing improvements that the Company believes will
provide a return on investment substantially in excess of United Dominion's cost
of capital. Capital expenditures during 2002 are currently expected to be at
approximately the same level as those experienced in 2001.

Revenue Recognition

         United Dominion's apartment homes are leased under operating leases
with terms generally of one year or less. The Company's revenue recognition
policy approximates a straight-line rent policy; however, United Dominion's
revenue recognition policy results in slightly lower revenues in periods of
increasing concessions and slightly higher revenues during periods of decreasing
concessions. Rental concessions are recognized when incurred rather than using
the straight-line rent methodology. During 2001, 2000 and 1999, the Company has
experienced increased rental concessions.

Derivatives and Hedging Activities

         United Dominion uses derivative financial instruments in the normal
course of business to reduce its exposure to fluctuations in interest rates. As
of December 31, 2001, United Dominion had 16 interest rate swap agreements with
a notional value aggregating $282 million that are used to fix the interest rate
on a portion of the Company's variable rate debt. These derivatives qualify for
hedge accounting as discussed in Note 1 to our consolidated financial
statements. While we intend to continue to meet the conditions for hedge
accounting, if a particular interest rate swap does not qualify as highly
effective, the change in the fair value of the derivatives used as hedges would
be reflected in earnings.


                                       10


         Interest rate swaps, where the Company effectively makes fixed rate
payments and receives variable rate payments to eliminate its variable rate
exposure, are entered into to manage the interest rate risk in the Company's
existing balance sheet mix. These instruments are valued using the market
standard methodology of netting the discounted future variable cash receipts and
the discounted expected fixed cash payments. The variable cash flow streams are
based on an expectation of future interest rates derived from observed market
interest rate curves. We have not changed our methods of calculating these fair
values or developing the underlying assumptions. The values of these derivatives
will change over time as cash receipts and payments are made and as market
conditions change. Information about the fair values, notional amounts, and
contractual terms of the Company's interest rate swaps can be found in Note 7 to
our consolidated financial statements and the section titled "Interest Rate
Risk" that follows.

         Potential losses are limited to counterparty risk in situations where
United Dominion is owed money; that is, when United Dominion holds contracts
with positive fair values. The Company does not expect any losses from
counterparties failing to meet their obligations as the counterparties are
highly rated credit quality U.S. financial institutions and management believes
that the likelihood of realizing material losses from counterparty
non-performance is remote. At December 31, 2001, the Company had unrealized
losses totaling $14.9 million on derivative transactions, which if terminated
would require a cash outlay. United Dominion presently has no intention to
terminate these contracts. There are no credit concerns related to the Company's
obligations and it expects to meet those obligations without default (see Note 7
- - Financial Instruments).

         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 year ended December 31, 2001, United Dominion's cash flow from
operating activities was $224.4 million compared to $224.2 million for 2000.
During 2001, 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 offset by a decline in revenues generated
from a smaller portfolio of assets.

INVESTING ACTIVITIES

         For the year ended December 31, 2001, net cash used in investing
activities was $64.1 million compared to net cash provided by investing
activities of $58.7 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 year ended December 31, 2001, United
Dominion invested approximately $53.6 million in real estate projects, down
$30.8 million from its 2000 level of $84.4 million.


                                       11


         The following projects, representing additional phases to existing
communities, were under development at December 31, 2001:



                                  NUMBER OF     COMPLETED         COST TO         BUDGETED      ESTIMATED      EXPECTED
                                  APARTMENT     APARTMENT          DATE             COST           COST       COMPLETION
                    LOCATION        HOMES         HOMES       (IN THOUSANDS)   (IN THOUSANDS)    PER HOME        DATE
                  ----------      ---------     ---------     --------------   --------------    --------     ----------
                                                                                         
Greensview II     Denver, CO         192            168            $15,400         $16,700         $87,000       1Q02
Meridian II       Dallas, TX         270             86             12,000          17,400          64,400       2Q02
                                     ---            ---            -------         -------         -------
        Total                        462            254            $27,400         $34,100         $73,800
                                     ===            ===            =======         =======         =======


         In addition, United Dominion owns nine parcels of land that it
continues to hold for future development that had a carrying value at December
31, 2001 of $12.8 million. Eight of the nine parcels represent additional phases
to existing communities as United Dominion plans to add apartment homes adjacent
to currently owned communities that are in improving markets.

         The following projects were complete at December 31, 2001:



                                                    NUMBER OF      DEVELOPMENT                                 % LEASED
                                                    APARTMENT          COST         COST PER        DATE          AT
                                    LOCATION          HOMES       (IN THOUSANDS)      HOME        COMPLETED    12/31/01
                               -------------        ---------     --------------    --------      ---------    --------
                                                                                             
NEW COMMUNITIES:
    Red Stone Ranch            Austin, TX              324           $19,400        $59,900          7/01        76.9%
    Dominion Place
          at Kildaire Farm     Raleigh, NC             332            23,600         71,100         12/01        49.0%
                                                       ---           -------        -------
                                                       656            43,000         65,500
                                                       ---           -------        -------
ADDITIONAL PHASES:
    Manor at England Run III   Fredericksburg, VA      120             8,500         70,800          9/01        99.2%
                                                       ---           -------        -------
             Total                                     776           $51,500        $66,400
                                                       ===           =======        =======


DEVELOPMENT JOINT VENTURE

         On June 21, 2000, United Dominion completed the formation of a joint
venture that would invest approximately $101 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 serves 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 the formation of the joint venture.

         For the years ended December 31, 2001 and 2000, United Dominion
recognized fee income of approximately $2.6 million and $3.0 million,
respectively, for general contracting, developer and management services
provided by the Company to the joint venture.

         As of December 31, 2001, all five joint venture properties were
complete as follows:



                                  NUMBER OF    DEVELOPMENT
                                  APARTMENT       COST             COST PER          DATE        % LEASED
                    LOCATION       HOMES     (IN THOUSANDS)         HOME          COMPLETED     AT 12/31/01
                   ------------   ---------  --------------        --------       ---------     -----------
                                                                              
  Meridian I       Dallas, TX        250         $16,400           $65,600           6/00          94.4%
  Parke 33         Lakeland, FL      264          17,100            64,800           2/01          92.0%
  Sierra Canyon    Phoenix, AZ       236          15,400            65,300           3/01          97.9%
  Oaks at Weston   Raleigh, NC       380          28,000            73,700           3/01          82.9%
  Mandolin         Dallas, TX        308          21,100            68,500           9/01          99.4%
                                   -----         -------           -------
          Total                    1,438         $98,000           $68,200
                                   =====         =======           =======



                                       12

         On December 28, 2001, United Dominion purchased three of the five
apartment communities for a total aggregate cost of $61.3 million. The three
communities purchased were Meridian I, Sierra Canyon and Mandolin. The Company
has the option, but not the obligation, to purchase the remaining two properties
for fair value through December 31, 2006. If neither the Company nor the joint
venture partner elects to purchase these properties prior to December 2006, the
joint venture will then dispose of the assets to a third party at the then
market price.

DISPOSITION OF INVESTMENTS

         For the year ended December 31, 2001, United Dominion sold nine
communities with 1,889 apartment homes and five parcels of land for an aggregate
sales price of approximately $141.3 million and recognized gains for financial
reporting purposes of $24.7 million. Proceeds from the sales were used primarily
to repurchase the Company's 9.25% Series A Cumulative Redeemable Preferred stock
during the second quarter of 2001, and to a lesser extent, to reduce long-term
debt, repurchase common shares and to complete Section 1031 exchanges in order
to defer taxable gains. During 2000, United Dominion sold 26 communities with
5,835 apartment homes, one commercial property and a parcel of land for an
aggregate sales price of approximately $214.5 million and recognized gains for
financial reporting purposes of $31.5 million.

         During 2002, United Dominion plans to dispose of selected communities
in non-core markets or with inferior locations, significant capital expense
requirements without the potential of a corresponding increase in rent or
insufficient growth potential. Proceeds from 2002 dispositions, expected to be
at levels above that of 2001, are planned to be used to acquire communities,
fund development activity and to reduce debt.

ACQUISITIONS

         During the year ended December 31, 2001, United Dominion acquired five
communities with 1,304 apartment homes and one parcel of land at a total cost
(including closing costs) of approximately $92.6 million which included the use
of tax free exchange funds.

         During 2002, management plans to continue to channel new investments to
those markets that are projected to provide the best investment returns for the
Company over the next ten years. Markets will be targeted based upon refined
criteria including past performance, expected job growth, current and
anticipated housing supply and demand and the ability to attract and support
household formation.

FINANCING ACTIVITIES

         Net cash used in financing activities during 2001 was $166.0 million
compared to $280.2 million for 2000, a decrease of $114.2 million. As part of
the plan to improve the Company's balance sheet, United Dominion used proceeds
from its disposition program and borrowings under its credit facilities to pay
down secured and unsecured debt, to repurchase shares of common and preferred
stock and to complete Section 1031 exchanges in order to defer taxable gains.

         In June 2001, the Company completed the redemption of all of the
outstanding shares of its 9.25% Series A Cumulative Redeemable Preferred Stock
at $25 per share plus accrued dividends utilizing proceeds from asset sales and
a new secured credit facility. For the year ended December 31, 2001, United
Dominion repurchased 17,600 Series B preferred shares at an average price of
$24.42 per share and 3,768,704 common shares and operating partnership units at
an average price of $13.21. As of December 31, 2001, approximately 3.2 million
common shares and $13.6 million of Series B preferred shares remained available
for purchase under the existing authorization for the share repurchase program.

         In August 2001, United Dominion closed on a $200 million credit
facility with ARCS Commercial Mortgage Co., L.P. ARCS is a Fannie Mae DUS
Lender. The initial funding on the facility was $139 million. The adjustable
rate loan was provided through Fannie Mae DMBS for a five-year term based on
three month LIBOR, with an initial interest rate of 3.99%. The Company has the
option to extend the facility for an additional five years. The proceeds of the
loan were used principally to redeem the Company's 9.25% Series A Cumulative
Redeemable


                                       13


Preferred Stock and reduce unsecured debt. The balance of the loan proceeds was
used to refinance maturing secured loans.

         In December 2001, United Dominion closed on a $400 million Fannie Mae
revolving credit facility through ARCS Commercial Mortgage Co., L.P. The
facility provides for an initial term of ten years with an option by the Company
to extend the term an additional five years at the then market rate. The Company
has the option of variable or fixed rate tranches. The facility will be funded
over the next several months and will be used primarily for the refinancing of
existing debt on approximately 30 properties. Although the Company expects to
pay prepayment penalties of approximately $23 million, the Company estimates,
based upon certain assumptions as to the timing of the refinancings and
underlying interest rates, that the positive net present value of the
refinancings will range from approximately $17 million to $20 million.

         Also in December 2001, United Dominion completed an offering to the
public of 4.1 million shares of common stock at a price of $14.40 per share. The
proceeds were used to purchase apartment communities.

         For the year ended December 31, 2001, the Company repaid $107.3 million
of secured debt and $21.3 million of unsecured debt, assumed $18.2 million of
secured debt in connection with the acquisition of properties and was relieved
of $28.3 million of secured debt in connection with the disposition of
properties.

CREDIT FACILITIES

         United Dominion has four secured revolving credit facilities with the
Federal National Mortgage Association (the "FNMA Credit Facilities") with an
aggregate commitment of $860 million. As of December 31, 2001, $422.7 million
was outstanding under the FNMA Credit Facilities leaving $437.3 million of
unused capacity. The FNMA Credit Facilities are for an initial term of five or
ten years, bear interest at a floating rate and can be extended for an
additional five years at United Dominion's discretion (see Note 4 - Secured
Debt).

         United Dominion has a $375 million three-year unsecured revolving
credit facility (the "Bank Credit Facility") that matures August 2003. As of
December 31, 2001, $230.2 million was outstanding under the Bank Credit Facility
leaving $144.8 million of unused capacity. Under the Bank Credit Facility, the
Company may borrow at a rate of LIBOR plus 110 basis points for LIBOR-based
borrowings and pays a facility fee, which is equal to 0.25% of the commitment
(see Note 5 - Unsecured Debt).

         The FNMA Credit Facilities and the Bank Credit Facility are subject to
customary financial covenants and limitations.

DERIVATIVE INSTRUMENTS

         As part of United Dominion's overall interest rate risk management
strategy, the Company uses derivatives as a means to fix the interest rates 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 its interest rate risk through the use of its
derivative instruments. Due to the decline in interest rates in 2001, the fair
value of the Company's derivative instruments has declined from an unfavorable
value position of $3.8 million at December 31, 2000 to an unfavorable value
position of $14.9 million at December 31, 2001 (see Note 7 - Financial
Instruments).

INTEREST RATE RISK

         United Dominion is exposed to interest rate risk associated with
variable rate notes payable and maturing debt that has to be refinanced. United
Dominion does not hold financial instruments for trading or other speculative
purposes, but rather issues these financial instruments to finance its portfolio
of real estate assets. United Dominion's interest rate sensitivity position is
managed by the Company's finance department. Interest rate sensitivity is the
relationship between changes in market interest rates and the fair value of
market rate sensitive assets and liabilities. United Dominion's earnings are
affected as changes in short-term interest rates impact its cost of variable
rate debt


                                       14


and maturing fixed rate debt. A large portion of United Dominion's market risk
is exposure to short-term interest rates from variable rate borrowings
outstanding under the unhedged portion of its FNMA Credit Facilities and its
Bank Credit Facility, which totaled $405.7 million and $75.2 million,
respectively, at December 31, 2001. The impact on United Dominion's financial
statements of refinancing fixed rate debt that matured during 2001 was not
material. As permitted by the terms of the Company's FNMA Credit Facilities,
management intends to convert a significant portion of those borrowings from
variable rates to fixed rates in 2002.

         At December 31, 2001, the notional value of United Dominion's
derivative products for the purpose of managing interest rate risk was $282
million, representing interest rate swaps under which United Dominion pays a
fixed rate of interest and receives a variable rate. These agreements
effectively fix $282 million of United Dominion's variable rate notes payable to
a weighted average fixed rate of 7.20%. At December 31, 2001, the fair market
value of the interest rate swaps in an unfavorable value position to United
Dominion was $14.9 million. If interest rates were 100 basis points more or less
at December 31, 2001, the fair market value of the interest rate swaps would
have increased or decreased approximately $4.9 million and $5.0 million,
respectively.

         If market interest rates for variable rate debt average 100 basis
points more in 2002 than they did during 2001, United Dominion's interest
expense, after considering the effects of its interest rate swap agreements,
would increase, and income before taxes would decrease by $5.2 million.
Comparatively, if market interest rates for variable rate debt had averaged 100
basis points more in 2001 than in 2000, United Dominion's interest expense,
after considering the effects of its interest rate swap agreements, would have
increased, and income before taxes would have decreased by $3.8 million. If
market rates for fixed rate debt were 100 basis points higher at December 31,
2001, the fair value of fixed rate debt would have decreased from $1.32 billion
to $1.28 billion. If market interest rates for fixed rate debt were 100 basis
points lower at December 31, 2001, the fair value of fixed rate debt would have
increased from $1.32 billion to $1.38 billion.

         These amounts are determined by considering the impact of hypothetical
interest rates on United Dominion's borrowing cost and interest rate swap
agreements. These analyses do not consider the effects of the reduced level of
overall economic activity that could exist in such an environment. Further, in
the event of a change of such magnitude, management would likely take actions to
further mitigate its 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 United Dominion's financial structure.

RESULTS OF OPERATIONS

         Effective January 1, 2002, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting
for the Impairment or Disposal of Long-Lived Assets." SFAS 144 addresses the
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS 144 extends the reporting requirements of discontinued operations
to include components of an entity that have either been disposed of or are
classified as held for sale. Through November 27, 2002, the Company sold or
classified certain properties as held for disposition (see Note 13, "Income
from Discontinued Operations"). The operating results of these properties have
been reclassified as discontinued operations in the consolidated statements of
operations for each of the three years in the period ended December 31, 2001
included herein.

         The following discussion includes the results of both continuing and
discontinued operations for the periods presented.

Net Income Available to Common Shareholders
2001-vs-2000

         Net income available to common shareholders was $27.1 million ($.27 per
share) for the year ended December 31, 2001 compared to $42.7 million ($.41 per
share) for 2000, representing a decrease of $15.6 million ($.14 per share).
Excluding non-recurring charges (see discussion that follows under
"Restructuring Charges" and "Impairment Loss on Real Estate and Investments")
and extraordinary items, net income available to common shareholders was $41.5
million ($.41 per share) for the year ended December 31, 2001 compared to $45.5
million ($.44 per share) for 2000, representing a decrease of $4.0 million ($.04
per share). Excluding non-recurring charges and extraordinary items, the
decrease for the period was primarily due to the overall decrease in the
Company's total portfolio of assets that generated rental income of $618.6
million, representing a decrease of $8.0 million from 2000. In addition, the
Company recognized lower gains on the sale of investments during 2001 and
incurred the write-off of unamortized original issuance costs associated with
the redemption of the Company's 9.25% Series A Cumulative Redeemable Preferred
Stock during the second quarter of 2001. This decrease was moderated, in part,
by a decrease in rental expenses of $4.2 million to $246.2 million and lower
interest costs of $144.4 million during 2001 compared to $156.0 million in 2000.


                                       15


2000-vs-1999

         Net income available to common shareholders was $42.7 million ($.41 per
share) for the year ended December 31, 2000 compared to $55.9 million ($.54 per
share) for 1999, representing a decrease of $13.2 million ($.13 per share). The
decrease was primarily due to the following factors: (i) property operating
income growth generated from the performance of the portfolio during 2000 was
offset by the decrease in the size of the portfolio due to the disposition
program; (ii) United Dominion recognized $31.5 million ($.31 per share) of gains
on the sales of investments in 2000 compared to $38.0 million ($.37 per share)
for the comparable period in 1999 and; (iii) real estate depreciation increased
significantly in 2000 as a result of the recognition of catch-up depreciation
expense on communities transferred from real estate held for disposition to real
estate held for investment during the second quarter of 2000 and, to a lesser
extent, the impact of completed development communities, acquisitions and
capital expenditures (see Note 2 - Real Estate Owned).

APARTMENT COMMUNITY OPERATIONS

         United Dominion's net income is primarily generated from the operation
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):



                                                  Year Ended December 31,               Year Ended December 31,
                                        --------------------------------------   --------------------------------------
                                          2001          2000         % Change       2000          1999        % Change
                                        --------------------------------------   --------------------------------------
                                                                                            
Property rental income(1)               $618,081      $625,845         -1.2%      $625,845      $609,064         2.8%
Property rental expense (excluding
        depreciation and amortization)  (228,211)     (230,853)        -1.1%      (230,853)     (227,097)        1.7%
                                        --------------------------------------   --------------------------------------
Property operating income               $389,870      $394,992         -1.3%      $394,992      $381,967         3.4%
                                        ======================================   ======================================

Weighted average number of homes          76,487        80,253         -4.7%        80,253        85,926        -6.6%
Physical occupancy                         93.9%         94.2%         -0.3%          94.2%         92.6%        1.6%


(1) Includes both continuing and discontinued operations.

         The decrease in property operating income provided by the Company's
apartment community operations is due to the disposition of 7,724 apartment
homes during 2000 and 2001. As a result of these dispositions, the weighted
average number of apartment homes declined 4.7% from 2000 to 2001.

2001-vs-2000
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 72,997 weighted average apartment homes) provided 95% of the
Company's property operating income for the year ended December 31, 2001.

         In 2001, property operating income for the same communities increased
2.3% or $8.5 million compared to the same period in 2000. The growth in property
operating income resulted from a $17.5 million or 3.1% increase in property
rental income over the same period in the prior year. The increase was driven by
a $22.9 million or 3.9% increase in rental rates. The increased rental rates
were partially offset by higher concessions and an increase in bad debt expense.
Physical occupancy decreased 0.2% to 94.0% in 2001 compared to 2000.

         For 2001, property operating expenses at these same communities
increased $9.0 million or 4.4%. The increase in property operating expenses
resulted primarily from a $3.3 million or 10.6% increase in utility costs
experienced by the Company as a result of the increase in prices for natural gas
and overall increases in electricity costs. In addition, the Company experienced
a $3.0 million or 9.4% increase in repair and maintenance, a $1.6 million or
3.1% increase in taxes and a $1.2 million or 2.1% increase in personnel costs.

         As a result of the percentage changes in property rental income and
property operating expenses, the operating margin (property operating income
divided by property rental income) decreased 0.5% to 63.2%.


                                       16


Non-Mature Communities

         The remaining 5% of United Dominion's property operating income during
2001 was generated from its non-mature communities (those communities acquired
or developed during 2000 and 2001). United Dominion's development communities,
which included 2,022 apartment homes constructed since January 1, 2000, provided
an additional $9.5 million of property operating income for the year ended
December 31, 2001. In addition, the six communities with 1,571 apartment homes
acquired by United Dominion during 2000 and 2001 provided an additional $3.8
million of property operating income during 2001.

2000-vs-1999
Same Communities

         United Dominion's same communities (those communities acquired,
developed or stabilized prior to January 1, 1999 and held on January 1, 2000
which consisted of 76,267 weighted average apartment homes) provided 94% of its
property operating income for the year ended December 31, 2000.

         In 2000, property operating income for the same communities increased
4.2% or $15.2 million compared to 1999. The growth in property operating income
resulted from a $26.8 million or 4.8% increase in property rental income which
was driven by a $17.1 million or 2.9% increase in rental rates coupled with a
$5.8 million or 1.2% increase in physical occupancy. The increase in rental
rates and occupancy was partially offset by higher concessions and bad debt
expense.

         For 2000, property operating expenses at these same communities
increased $11.6 million or 5.6%. The increase in property operating expenses was
due to (i) a $2.6 million or 5.3% increase in real estate taxes related to the
$1.4 billion of real estate acquired in 1998 which had undergone reassessment;
(ii) a $4.1 million or 76.3% increase in property insurance costs attributable
to a combination of the Company's loss history plus overall increases in market
rates; (iii) a $3.1 million or 5.3% increase in personnel costs due to higher
salaries and benefit costs and; (iv) a $1.9 million or 6.1% increase in
utilities expense. These increases were offset by a $1.3 million or 3.7%
decrease in repair and maintenance expense.

         As a result of the increase in property rental income and increase in
property operating expenses, the operating margin decreased 0.4% to 63.1%.

Non-Mature Communities

         The remaining 6% of United Dominion's property operating income during
2000 was generated from its non-mature communities (those communities acquired
or developed during 1999 and 2000). United Dominion's development communities,
which included 2,470 apartment homes constructed since January 1, 1999, provided
an additional $12.3 million of property operating income for the year ended
December 31, 2000. In addition, the six communities with 1,497 apartment homes
acquired by United Dominion during 1999 and 2000 provided an additional $7.6
million of property operating income during 2000.

REAL ESTATE DEPRECIATION

         During the year ended December 31, 2001, real estate depreciation on
continuing and discontinued operations decreased $1.1 million or 0.8% compared
to 2000. The decrease in depreciation expense is attributable to the overall
decrease in the weighted average number of apartment homes partially offset by
the impact of completed development communities, acquisitions and capital
expenditures.

         During the year ended December 31, 2000, real estate depreciation on
continuing and discontinued operations increased $31.3 million or 25.7% over
1999. This increase was primarily attributable to (i) the recapture of
approximately $10 million in depreciation expense on communities transferred
from real estate held for disposition to real estate held for investment during
the second quarter of 2000 and approximately $5 million of additional
depreciation expense recognized on these assets during 2000 after they were
reclassified into real estate held for investment; (ii) over $150 million in
development completions in late 1999 and 2000 and; (iii) the effect of


                                       17


approximately $200 million in acquisitions and capital improvements in 1999 and
2000 (see Note 2 - Real Estate Owned).

INTEREST EXPENSE

         During 2001, interest expense on continuing and discontinued operations
decreased $11.7 million from the corresponding amount in 2000 primarily due to
decreasing interest rates and, to a lesser extent, the overall decrease in the
weighted average level of debt outstanding. For the year ended December 31,
2001, the weighted average amount of debt outstanding decreased 2.9% or $60.2
million from 2000 levels and the weighted average interest rate decreased from
7.6% in 2000 to 7.1% in 2001. The weighted average amount of debt employed
during 2001 is lower as a portion of disposition proceeds was used to repay
outstanding debt. The decrease in the average interest rate during 2001 reflects
the ability of the Company to take advantage of declining interest rates through
refinancing and the utilization of variable rate debt.

         During 2000, interest expense on continuing and discontinued operations
increased $2.3 million over 1999 as the weighted average amount of debt
outstanding decreased 6.0% or $124.7 million from 1999 levels ($2.1 billion in
2000 versus $2.2 billion in 1999) and the weighted average interest rate
increased from 7.4% in 1999 to 7.6% in 2000. The weighted average amount of debt
employed during 2000 was lower as disposition proceeds were used to repay
outstanding debt. The increase in the average interest rate during 2000 reflects
the reliance on short-term bank borrowings that had higher interest rates when
compared to the prior year. For 2001, 2000 and 1999, total interest capitalized
was $2.9 million, $3.6 million and $5.2 million, respectively.

RESTRUCTURING CHARGE

         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 (ultimately
approximately 230 full-time equivalent positions) in operations and at the
corporate headquarters. These reductions will impact both personnel and general
and administrative expenses. As of December 31, 2001, all of the accrued charge
has been paid. 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. 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
(see Note 9 - Restructuring Charges).

IMPAIRMENT LOSS ON REAL ESTATE AND INVESTMENTS

         In connection with the evaluation of the Company's real estate assets
and operations during the first quarter of 2001, management determined that it
was in the Company's best interest to dispose of a majority of its 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 during the first quarter 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
(see Note 2 - Real Estate Owned). In addition, the Company recognized a $0.4
million charge for the write-down of United Dominion's investment in an online
apartment leasing company.

         During the fourth quarter of 2001, Realeum, Inc., a technology venture
through which the Company and two other multifamily REIT entities have been
co-developing a web-based property management system, successfully completed a
secondary equity offering in which it raised approximately $15 million of new
capital in exchange for a 45.6% ownership stake. The additional capital provides
Realeum more flexibility as it rolls the product out for beta testing and
continues its marketing and system enhancement processes. As a result of the
equity offering, the market value of the Company's ownership stake was
established at approximately $1.3 million.


                                       18

Although management believes the potential revenue enhancements and cost
efficiencies to be derived from an implementation of the system would enable
United Dominion to recover its full investment in Realeum, the Company has
elected to adopt a more conservative accounting treatment that requires a
write-down of this investment to market value. As a result, the Company's $3.5
million aggregate investment was adjusted to $1.3 million.

GENERAL AND ADMINISTRATIVE

         For the year ended December 31, 2001, general and administrative
expenses increased $6.0 million or 38.2% over 2000. The increase was primarily
due to an increase in incentive compensation expense and adjustments to the
Company's accruals for various employee benefits and state and local taxes.

         During the year ended December 31, 2000, general and administrative
expenses increased $1.9 million or 13.5% over 1999, reflecting a full year's
impact of United Dominion's investment in professional staff, technology and
scaleable accounting and information systems and the effect of additional
franchise taxes in Tennessee as a result of a change in the state law regarding
franchise taxes.

GAINS ON SALES OF INVESTMENTS

         For the years ended December 31, 2001 and 2000, United Dominion
recognized gains for financial reporting purposes of $24.7 million and $31.5
million, respectively. 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.

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.


                                       19


             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

                       UNITED DOMINION REALTY TRUST, INC.



                                                                                               PAGE
                                                                                               ----
                                                                                            
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT

Report of Ernst & Young LLP, Independent Auditors ....................................          21

Consolidated Balance Sheets at December 31, 2001 and 2000.............................          22

Consolidated Statements of Operations for each of
the three years in the period ended December 31, 2001.................................          23

Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31, 2001.................................          24

Consolidated Statements of Shareholders' Equity for
each of the three years in the period ended December 31, 2001.........................          25

Notes to Consolidated Financial Statements............................................          26

SCHEDULE FILED AS PART OF THIS REPORT

Schedule III - Summary of Real Estate Owned...........................................          47


All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the financial statements and
notes thereto.



                                       20

                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
United Dominion Realty Trust, Inc.

      We have audited the accompanying consolidated balance sheets of United
Dominion Realty Trust, Inc. (the "Company") as of December 31, 2001 and 2000,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 2001.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of United Dominion
Realty Trust, Inc. at December 31, 2001 and 2000, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects, the
information set forth therein.

      As discussed in Note 1 to the consolidated financial statements, in 2001
the Company changed its method of accounting for derivative financial
instruments. Also, as discussed in Note 13 to the consolidated financial
statements, in 2002, the Company adopted the provisions of Statement of
Financial Accounting Standard No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets."


                                                ERNST & YOUNG LLP


Richmond, Virginia
January 31, 2002, except for Notes 13 and 14, as to which the date is November
27, 2002


                                       21

                       UNITED DOMINION REALTY TRUST, INC.
                           CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT FOR SHARE DATA )



                                                                                                   DECEMBER 31,
                                                                                            ----------------------------

                                                                                               2001             2000
                                                                                               ----             ----
                                                                                                       
ASSETS

Real estate owned:
      Real estate held for investment (Note 2)                                              $ 3,858,579      $ 3,758,974
           Less: accumulated depreciation                                                      (646,366)        (506,871)
                                                                                            -----------      -----------
                                                                                              3,212,213        3,252,103
      Real estate under development                                                              40,240           60,366
      Real estate held for disposition (net of accumulated depreciation of $0
       and $2,534) (Note 2)                                                                       8,848           14,446
                                                                                            -----------      -----------
      Total real estate owned, net of accumulated depreciation                                3,261,301        3,326,915
Cash and cash equivalents                                                                         4,641           10,305
Restricted cash                                                                                  26,830           44,943
Deferred financing costs, net                                                                    15,802           14,271
Investment in unconsolidated development joint venture (Note 3)                                   3,355            8,088
Other assets                                                                                     36,162           49,435
                                                                                            -----------      -----------
      Total assets                                                                          $ 3,348,091      $ 3,453,957
                                                                                            ===========      ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Secured debt (Note 4)                                                                       $   974,177      $   866,115
Unsecured debt (Note 5)                                                                       1,090,020        1,126,215
Real estate taxes payable                                                                        28,099           30,554
Accrued interest payable                                                                         16,779           18,059
Security deposits and prepaid rent                                                               20,481           22,524
Distributions payable                                                                            33,457           36,128
Accounts payable, accrued expenses and other liabilities                                         66,688           47,144
                                                                                            -----------      -----------
      Total liabilities                                                                       2,229,701        2,146,739

Minority interests                                                                               75,665           88,326

Shareholders' equity: (Note 6)
      Preferred stock, no par value; $25 liquidation preference,
        25,000,000 shares authorized;
           0 shares 9.25% Series A Cumulative Redeemable issued and outstanding
              (3,969,120 in 2000)                                                                    --           99,228
           5,416,009 shares 8.60% Series B Cumulative Redeemable issued and outstanding
              (5,439,109 in 2000)                                                               135,400          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
           103,133,279 shares issued and outstanding (102,219,250 in 2000)                      103,133          102,219
      Additional paid-in capital                                                              1,098,029        1,081,387
      Distributions in excess of net income                                                    (448,345)        (366,531)
      Deferred compensation - unearned restricted stock awards                                   (1,312)            (828)
      Notes receivable from officer-shareholders                                                 (4,309)          (7,561)
      Accumulated other comprehensive loss, net (Note 7)                                        (14,871)              --
                                                                                            -----------      -----------
           Total shareholders' equity                                                         1,042,725        1,218,892
                                                                                            -----------      -----------
      Total liabilities and shareholders' equity                                            $ 3,348,091      $ 3,453,957
                                                                                            ===========      ===========



          See accompanying notes to consolidated financial statements.



                                       22

                       UNITED DOMINION REALTY TRUST, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                                         YEARS ENDED DECEMBER 31,
                                                                 ---------------------------------------

                                                                  2001(1)        2000(1)        1999(1)
                                                                  --------       --------       --------
                                                                                      
REVENUES

      Rental income                                              $ 561,958      $ 572,205      $ 572,798
      Non-property income                                            4,593          5,326          1,942
                                                                 ---------      ---------      ---------
            Total revenues                                         566,551        577,531        574,740
EXPENSES
      Rental expenses:

            Real estate taxes and insurance                         59,340         62,009         57,297
            Personnel                                               56,909         59,452         61,058
            Utilities                                               34,479         33,417         33,920
            Repairs and maintenance                                 33,227         32,913         37,438
            Administrative and marketing                            20,333         21,139         23,045
            Property management                                     17,107         18,392         18,474
            Other operating expenses                                 1,477          1,426          1,539
      Real estate depreciation                                     137,551        140,674        110,972
      Interest                                                     138,895        150,896        148,280
      Severance costs and other organizational charges               5,404          1,020           --
      Litigation settlement charges                                   --            2,700           --
      Impairment loss on real estate and investments                 4,661           --           17,694
      General and administrative                                    21,730         15,724         13,850
      Other depreciation and amortization                            3,313          4,228          4,335
                                                                 ---------      ---------      ---------
            Total expenses                                         534,426        543,990        527,902
                                                                 ---------      ---------      ---------
Income before gains on sales of investments, minority
  interests, discontinued operations and extraordinary
  item                                                              32,125         33,541         46,838
Gains on sales of land and depreciable property                     24,748         31,450         37,995
                                                                 ---------      ---------      ---------
Income before minority interests, discontinued operations
  and extraordinary item                                            56,873         64,991         84,833
Minority interests of unitholders in outside partnerships ..        (2,225)        (1,501)        (1,245)
Minority interests of unitholders in operating partnerships         (1,052)        (1,859)        (3,360)
                                                                 ---------      ---------      ---------
Income before discontinued operations and extraordinary
  item                                                              53,596         61,631         80,228
Income from discontinued operations, net of minority
  interests (Note 13)                                               11,703         14,153         12,467
                                                                 ---------      ---------      ---------
Income before extraordinary item                                    65,299         75,784         92,695
Extraordinary item - early extinguishment of debt                   (3,471)           831            927
                                                                 ---------      ---------      ---------
Net income                                                          61,828         76,615         93,622
Distributions to preferred shareholders - Series A and B           (15,762)       (21,591)       (22,560)
Distributions to preferred shareholders - Series D
  (Convertible)                                                    (15,428)       (15,300)       (15,154)
(Premium)/discount on preferred share repurchases                   (3,496)         2,929           --
                                                                 ---------      ---------      ---------
Net income available to common shareholders                      $  27,142      $  42,653      $  55,908
                                                                 =========      =========      =========

Earnings (loss) per common share - basic:

     Income before discontinued operations and
        extraordinary item, net of minority interests            $    0.19      $    0.27      $    0.41
     Income from discontinued operations, net of minority
        interests                                                $    0.12      $    0.14      $    0.12
     Extraordinary item, net of minority interests               $   (0.03)     $    0.01      $    0.01
     Net income available to common shareholders                 $    0.27      $    0.41      $    0.54

Earnings (loss) per common share - diluted:

     Income before discontinued operations and extraordinary
        item, net of minority interests                          $    0.19      $    0.27      $    0.41
     Income from discontinued operations, net of minority
        interests                                                $    0.12      $    0.14      $    0.12

     Extraordinary item, net of minority interests               $   (0.03)     $    0.01      $    0.01
     Net income available to common shareholders                 $    0.27      $    0.41      $    0.54

Common distributions declared per share                          $    1.08      $    1.07      $    1.06

Weighted average number of common shares outstanding-basic         100,339        103,072        103,604
Weighted average number of common shares outstanding-diluted       101,037        103,208        103,639


(1)   Reclassified as described in Note 13.


          See accompanying notes to consolidated financial statements.

                                       23

                       UNITED DOMINION REALTY TRUST, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)



                                                                                           YEARS ENDED DECEMBER 31,
                                                                                   ---------------------------------------
                                                                                     2001           2000            1999
                                                                                   ---------      ---------      ---------
                                                                                                        
OPERATING ACTIVITIES
       Net income                                                                  $  61,828      $  76,615      $  93,622
       Adjustments to reconcile net income to cash provided
            by operating activities:
             Depreciation and amortization                                           155,327        157,361        126,152
             Impairment loss on real estate and investments                            5,436           --           19,300
             Gains on sales of investments                                           (24,748)       (31,450)       (37,995)
             Minority interests                                                        4,192          4,386          5,679
             Extraordinary item-early extinguishment of debt                           3,471           (831)          (927)
             Amortization of deferred financing costs and other                          965          2,551          5,184
             Changes in operating assets and liabilities:
                  Decrease in operating liabilities                                   (3,188)        (2,333)        (4,777)
                  Decrease/(increase) in operating assets                             21,128         17,861        (15,636)
                                                                                   ---------      ---------      ---------
Net cash provided by operating activities                                            224,411        224,160        190,602

INVESTING ACTIVITIES
       Proceeds from sales of real estate investments, net                           109,713        160,257        161,140
       Proceeds received for excess expenditures over investment contribution
           in development joint venture                                                 --           30,176           --
       Acquisition of real estate assets, net of liabilities assumed                 (74,372)        (4,635)       (69,969)
       Development of real estate assets and other major improvements                (53,607)       (84,431)      (121,073)
       Capital expenditures-real estate assets, net of escrow reimbursement          (53,096)       (41,496)       (67,004)
       Capital expenditures-non-real estate assets                                    (1,442)        (1,166)        (8,062)
       Other investing activities                                                      8,749           --            1,132
                                                                                   ---------      ---------      ---------
Net cash (used in)/provided by investing activities                                  (64,055)        58,705       (103,836)

FINANCING ACTIVITIES
       Proceeds from the issuance of secured notes payable                           225,171         67,285        201,861
       Scheduled principal payments on secured notes payable                         (55,130)       (62,575)       (19,100)
       Non-scheduled principal payments on secured notes payable                     (52,182)      (100,793)      (184,993)
       Proceeds from the issuance of unsecured notes payable                            --          248,035        197,345
       Payments on unsecured notes payable                                           (21,307)      (214,984)      (151,117)
       Net (repayment)/borrowing of short-term bank debt                             (14,200)       (33,200)        37,600
       Payment of financing costs                                                     (4,807)        (5,648)        (6,719)
       Proceeds from the issuance of common stock                                     66,319          7,660         17,250
       Proceeds from the issuance of out-performance partnership shares                1,236           --             --
       Distributions paid to minority interests                                      (12,868)       (10,272)        (9,200)
       Distributions paid to preferred shareholders                                  (34,308)       (36,909)       (34,958)
       Distributions paid to common shareholders                                    (108,511)      (110,098)      (109,608)
       Repurchases of operating partnership units and other minority interests        (4,267)          (341)       (11,967)
       Repurchases of common and preferred stock                                    (151,166)       (28,398)       (31,563)
                                                                                   ---------      ---------      ---------
Net cash used in financing activities                                               (166,020)      (280,238)      (105,169)

Net (decrease)/increase in cash and cash equivalents                                  (5,664)         2,627        (18,403)
Cash and cash equivalents, beginning of year                                          10,305          7,678         26,081
                                                                                   ---------      ---------      ---------
Cash and cash equivalents, end of year                                             $   4,641      $  10,305      $   7,678
                                                                                   =========      =========      =========

SUPPLEMENTAL INFORMATION:
       Interest paid during the period                                             $ 148,863      $ 152,434      $ 162,236
       Conversion of operating partnership units to common stock                          74            247          3,947
       Issuance of restricted stock awards                                             1,363            830            460
       Non-cash transactions:
             Secured debt assumed with the acquisition of properties                  18,230         10,130          5,750
             Reduction in secured debt from the disposition of properties             28,315         45,088         75,566


See accompanying notes to consolidated financial statements.


                                       24

                       UNITED DOMINION REALTY TRUST, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                      (IN THOUSANDS, EXCEPT FOR SHARE DATA)




                                                                    PREFERRED STOCK           COMMON STOCK           PAID-IN
                                                                  SHARES       AMOUNT      SHARES       AMOUNT       CAPITAL
                                                                                                    
BALANCE, DECEMBER 31, 1998                                      18,200,000   $ 430,000   103,639,117   $ 103,639   $ 1,090,432
Comprehensive Income
      Net income
                                                                --------------------------------------------------------------
      Comprehensive income
                                                                --------------------------------------------------------------
      Issuance of common shares to employees,
         officers and director-shareholders                                                   71,998          72           665
      Issuance of common shares through dividend reinvestment
         and stock purchase plan                                                           1,597,841       1,598        15,049
      Purchase of common and preferred stock                       (85,140)     (2,128)   (2,687,984)     (2,688)      (26,746)


      Issuance of restricted stock awards                                                     46,000          46           414
      Adjustment for cash purchase and conversion of minority
         interests of unitholders in operating partnerships                                   73,805          74         3,873
      Principal repayments on notes receivable
         from officer-shareholders
      Notes issued for common shares
      Common stock distributions declared ($1.06 per share)
      Preferred stock distributions declared
         Series A ($2.31 per share)
      Preferred stock distributions declared
         Series B ($2.15 per share)
      Preferred stock distributions declared
         Series D ($1.89 per share)
      Amortization of deferred compensation
                                                                --------------------------------------------------------------
BALANCE, DECEMBER 31, 1999                                      18,114,860   $ 427,872   102,740,777   $ 102,741   $ 1,083,687
                                                                ==============================================================
Comprehensive Income
      Net income
                                                                --------------------------------------------------------------
      Comprehensive income
                                                                --------------------------------------------------------------
      Issuance of common shares to employees,
         officers and director-shareholders                                                    5,000           5           158
      Issuance of common shares through dividend reinvestment
         and stock purchase plan                                                             767,513         767         6,538
      Purchase of common and preferred stock                      (706,631)    (17,666)   (1,398,866)     (1,399)       (9,333)
      Issuance of restricted stock awards                                                     85,670          86           744
      Adjustment for cash purchase and conversion of minority
         interests of unitholders in operating partnerships                                   19,156          19          (407)
      Principal repayments on notes receivable
         from officer-shareholders
      Common stock distributions declared ($1.07 per share)
      Preferred stock distributions declared
         Series A ($2.31 per share)
      Preferred stock distributions declared
         Series B ($2.15 per share)
      Preferred stock distributions declared
         Series D ($1.91 per share)
      Amortization of deferred compensation
                                                                --------------------------------------------------------------
BALANCE, DECEMBER 31, 2000                                      17,408,229   $ 410,206   102,219,250   $ 102,219   $ 1,081,387
                                                                ==============================================================
Comprehensive Income

      Net income
      Other comprehensive income:
         Cumulative effect of a change in accounting principle
           (Note 7)
         Unrealized loss on derivative financial instruments
           (Note 7)
                                                                --------------------------------------------------------------
      Comprehensive income
                                                                --------------------------------------------------------------
      Issuance of common shares to employees,
         officers and director-shareholders                                                  257,158         258         2,318
      Issuance of common shares through dividend reinvestment
         and stock purchase plan                                                             332,243         332         4,054
      Issuance of common shares through public offering                                    4,100,000       4,100        52,316
      Purchase of common and preferred stock                       (91,900)     (2,298)   (3,962,076)     (3,962)      (47,362)
      Redemption of Series A preferred stock                    (3,900,320)    (97,508)                                  3,496
      Issuance of restricted stock awards                                                    112,433         112        1,251

      Adjustment for cash purchase and conversion of minority
         interests of unitholders in operating partnerships                                   74,271          74           569
      Principal repayments on notes receivable
         from officer-shareholders
      Common stock distributions declared ($1.08 per share)
      Preferred stock distributions declared
         Series A ($1.05 per share)
      Preferred stock distributions declared
         Series B ($2.15 per share)
      Preferred stock distributions declared
         Series D ($1.93 per share)

      Amortization of deferred compensation
                                                                --------------------------------------------------------------
BALANCE, DECEMBER 31, 2001                                      13,416,009   $ 310,400   103,133,279   $ 103,133   $ 1,098,029
                                                                ==============================================================




                                                                               DEFERRED
                                                               DISTRIBUTIONS COMPENSATION-      NOTES       ACCUMULATED
                                                                    IN         UNEARNED      RECEIVABLE        OTHER
                                                                EXCESS OF     RESTRICTED    FROM OFFICER-  COMPREHENSIVE
                                                                NET INCOME   STOCK AWARDS   SHAREHOLDERS       LOSS         TOTAL
                                                                                                          
BALANCE, DECEMBER 31, 1998                                      $(242,331)    $     -         $ (7,619)      $      -    $1,374,121
Comprehensive Income
      Net income                                                   93,622                                                    93,622
                                                                -------------------------------------------------------------------
      Comprehensive income                                         93,622                                           -        93,622
                                                                -------------------------------------------------------------------
      Issuance of common shares to employees,
         officers and director-shareholders                                                                                     737
      Issuance of common shares through dividend reinvestment
         and stock purchase plan                                                                                             16,647
      Purchase of common and preferred stock                                                                                (31,562)
      Issuance of restricted stock awards                                        (460)                                            -
      Adjustment for cash purchase and conversion of minority
         interests of unitholders in operating partnerships                                                                   3,947
      Principal repayments on notes receivable
         from officer-shareholders                                                                 139                          139
      Notes issued for common shares                                                              (273)                        (273)
      Common stock distributions declared ($1.06 per share)      (109,607)                                                 (109,607)
      Preferred stock distributions declared
         Series A ($2.31 per share)                                (9,688)                                                   (9,688)
      Preferred stock distributions declared
         Series B ($2.15 per share)                               (12,872)                                                  (12,872)
      Preferred stock distributions declared
         Series D ($1.89 per share)                               (15,154)                                                  (15,154)
      Amortization of deferred compensation                                       155                                           155
                                                                -------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999                                      $(296,030)    $  (305)        $ (7,753)      $      -    $1,310,212
                                                                ===================================================================
Comprehensive Income
      Net income                                                   76,615                                                    76,615
                                                                -------------------------------------------------------------------
      Comprehensive income                                         76,615                                           -        76,615
                                                                -------------------------------------------------------------------
      Issuance of common shares to employees,
         officers and director-shareholders                                                                                     163
      Issuance of common shares through dividend reinvestment
         and stock purchase plan                                                                                              7,305
      Purchase of common and preferred stock                                                                                (28,398)
      Issuance of restricted stock awards                                        (830)                                            -
      Adjustment for cash purchase and conversion of minority
         interests of unitholders in operating partnerships                                                                    (388)
      Principal repayments on notes receivable
         from officer-shareholders                                                                 192                          192
      Common stock distributions declared ($1.07 per share)      (110,225)                                                 (110,225)
      Preferred stock distributions declared
         Series A ($2.31 per share)                                (9,473)                                                   (9,473)
      Preferred stock distributions declared
         Series B ($2.15 per share)                               (12,118)                                                  (12,118)
      Preferred stock distributions declared
         Series D ($1.91 per share)                               (15,300)                                                  (15,300)
      Amortization of deferred compensation                                       307                                           307
                                                                -------------------------------------------------------------------
BALANCE, DECEMBER 31, 2000                                      $(366,531)    $  (828)        $ (7,561)      $      -    $1,218,892
                                                                ===================================================================
Comprehensive Income

      Net income                                                   61,828                                                    61,828
      Other comprehensive income:
         Cumulative effect of a change in accounting principle
           (Note 7)                                                                                            (3,848)       (3,848)
         Unrealized loss on derivative financial instruments
           (Note 7)                                                                                           (11,023)      (11,023)
                                                                -------------------------------------------------------------------
      Comprehensive income                                         61,828                                     (14,871)       46,957
                                                                -------------------------------------------------------------------
      Issuance of common shares to employees,
         officers and director-shareholders                                                                                   2,576
      Issuance of common shares through dividend reinvestment
         and stock purchase plan                                                                                              4,386
      Issuance of common shares through public offering                                                                      56,416
      Purchase of common and preferred stock                                                                                (53,622)
      Redemption of Series A preferred stock                       (3,496)                                                  (97,508)
      Issuance of restricted stock awards                                      (1,363)
                                                                                                                                  -
      Adjustment for cash purchase and conversion of minority
         interests of unitholders in operating partnerships                                                                     643
      Principal repayments on notes receivable
         from officer-shareholders                                                               3,252                        3,252
      Common stock distributions declared ($1.08 per share)      (108,956)                                                 (108,956)
      Preferred stock distributions declared
         Series A ($1.05 per share)                                (4,111)                                                   (4,111)
      Preferred stock distributions declared
         Series B ($2.15 per share)                               (11,651)                                                  (11,651)
      Preferred stock distributions declared
         Series D ($1.93 per share)                               (15,428)                                                  (15,428)
      Amortization of deferred compensation                                       879                                           879
                                                                -------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001                                      $(448,345)    $(1,312)        $ (4,309)      $(14,871)   $1,042,725
                                                                ===================================================================


See accompanying notes to consolidated financial statements.



                                       25

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND FORMATION

      United Dominion Realty Trust, Inc., a Virginia corporation, was formed in
1972. United Dominion operates within one defined business segment with
activities related to the ownership, management, development, acquisition,
renovation and disposition of multifamily apartment communities nationwide. At
December 31, 2001, United Dominion owned 274 communities with 77,567 completed
apartment homes and had two additional phases to existing communities with 462
apartment homes under development.

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 December 31, 2001, there were
74,962,675 units in the Operating Partnership outstanding, of which 68,509,601
units or 91.4% were owned by United Dominion and 6,453,074 units or 8.6% were
owned by non-affiliated limited partners. As of December 31, 2001, there were
3,492,889 units in the Heritage OP outstanding, of which 3,108,001 units or
89.0% were owned by United Dominion and 384,888 units or 11.0% 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. All significant inter-company accounts and transactions have been
eliminated in consolidation.

INCOME TAXES

      United Dominion is operated as, and elects to be taxed as, a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"). Generally, a REIT complies with the provisions of the Code if it
distributes at least 90% (95% prior to 2001) of its REIT taxable income to its
shareholders and will not be subject to U.S. federal income taxes if it
distributes at least 100% of its income. Accordingly, no provision has been made
for federal income taxes. However, United Dominion is subject to certain state
and local excise or franchise taxes, for which provision has been made.

      The differences between net income available to common shareholders for
financial reporting purposes and taxable income before dividend deductions
relate primarily to temporary differences, principally real estate depreciation
and the tax deferral of certain gains on property sales. The temporary
differences in depreciation result from differences in the book and tax basis of
certain real estate assets and the differences in the methods of depreciation
and lives of the real estate assets.

      The following table reconciles the Company's net income to REIT taxable
income for the three years ended December 31, 2001 (dollars in thousands):



                                                          2001           2000           1999
                                                       ---------      ---------      ---------
                                                                            
Net income                                             $  61,828      $  76,615      $  93,622

Minority interest expense, less than distributions        (1,442)        (2,851)          (181)
Depreciation and amortization expense                     45,327         62,828         27,573
Gain on the disposition of properties                        343         10,120        (24,654)
Revenue recognition timing differences                       589            780          1,060
Impairment loss, not deductible for tax                    2,788           --           18,300
Investment loss, not deductible for tax                    2,648           --            1,000
Other expense timing differences                           2,787         (2,414)        (4,034)
                                                       ---------      ---------      ---------
REIT taxable income before dividends                   $ 114,868      $ 145,078      $ 112,686
                                                       =========      =========      =========
Dividends paid                                         $ 140,146      $ 147,116      $ 147,321
                                                       =========      =========      =========




                                       26

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


      For income tax purposes, distributions paid to common shareholders consist
of ordinary income, capital gains and return of capital, or a combination
thereof. For the three years ended December 31, 2001, distributions paid per
common share were taxable as follows:



                                       2001         2000         1999
                                       ----         ----         ----
                                                       
Ordinary income                       $0.74        $0.81        $0.62
Long-term capital gain                 0.11         0.15         0.13
Unrecaptured section 1250 gain         0.07         0.11         --
Return of capital                      0.16         --           0.31
                                      -----        -----        -----
                                      $1.08        $1.07        $1.06
                                      =====        =====        =====


USE OF ESTIMATES

      The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

RECLASSIFICATIONS

      Certain reclassifications have been made to amounts in prior years'
financial statements to conform with current year presentation.

CASH AND CASH EQUIVALENTS

      Cash and cash equivalents include all cash and liquid investments with
maturities of three months or less when purchased.

INVESTMENTS IN UNCONSOLIDATED JOINT VENTURE

      The Company accounts for investments in unconsolidated joint ventures
using the equity method when major business decisions require approval by the
other partners and the Company does not have control of the assets. Investments
are recorded at cost and subsequently adjusted for equity in net income (loss)
and cash contributions and distributions. United Dominion eliminates
intercompany profits on sales of services that are provided to the venture.
Differences between the carrying value of investments and the underlying equity
in net assets of the investee are due to capitalized interest on the investment
balance and capitalized development and leasing costs that are recovered by the
Company through fees during construction (see Note 3 - Investment in
Unconsolidated Joint Venture).

REAL ESTATE

      Real estate assets held for investment are carried at historical cost less
accumulated depreciation and any recorded impairment losses.

      Expenditures for ordinary repair and maintenance costs are charged to
expense as incurred. Expenditures for improvements, renovations and replacements
related to the acquisition and improvement of real estate assets are capitalized
at cost and depreciated over their estimated useful lives if the value of the
existing asset will be materially enhanced or the life of the related asset will
be substantially extended beyond the original life expectancy.

      United Dominion recognizes impairment losses on long-lived assets used in
operations when there is an event or change in circumstance that indicates an
impairment in the value of an asset and the undiscounted future cash flows are
not sufficient to recover the asset's carrying value. If such indicators of
impairment are present, an impairment loss is recognized based on the excess of
the carrying amount of the asset over its fair value.

      For long-lived assets to be disposed of, impairment losses are recognized
when the fair value of the asset less estimated cost to sell is less than the
carrying value of the asset. Prior to 2000, properties were classified as real


                                       27

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


estate held for disposition when management had committed to sell and was
actively marketing the property, and United Dominion expected to dispose of
these properties within the next twelve months. Beginning in 2000, properties
classified as real estate held for disposition generally represent properties
that are under contract for sale. Real estate held for disposition is carried at
the lower of cost, net of accumulated depreciation, or fair value, less the cost
to dispose, determined on an asset by asset basis. Expenditures for ordinary
repair and maintenance costs on held for disposition properties are charged to
expense as incurred. Expenditures for improvements, renovations and replacements
related to held for disposition properties are capitalized at cost. Depreciation
is not recorded on real estate held for disposition and gains (losses) from
initial and subsequent adjustments to the carrying value of the assets, if any,
are recorded as a separate component of income from continuing operations.

      Depreciation is computed on a straight-line basis over the estimated
useful lives of the related assets which is 35 years for buildings, 10 to 35
years for major improvements, and 3 to 10 years for furniture, fixtures,
equipment and other assets.

      All development projects and related carrying costs are capitalized and
reported on the Consolidated Balance Sheet as "real estate under development"
until such time as the development project is completed. Upon completion, the
total cost of the building and associated land is transferred to real estate
held for investment and the assets are depreciated over their estimated useful
lives. The cost of development projects includes interest, real estate taxes,
insurance and allocated development overhead during the construction period.

      Interest, real estate taxes and incremental labor and support costs for
personnel working directly on the development site are capitalized as part of
the real estate under development to the extent that such charges do not cause
the carrying value of the asset to exceed its net realizable value. During 2001,
2000 and 1999, total interest capitalized was $2.9 million, $3.6 million and
$5.2 million, respectively.

REVENUE RECOGNITION

      United Dominion's apartment homes are leased under operating leases with
terms generally of one year or less. Rental income is recognized after it is
earned and collectibility is reasonably assured.

RESTRICTED CASH

      Restricted cash consists of escrow deposits held by lenders for real
estate taxes, insurance and replacement reserves, and security deposits.

DEFERRED FINANCING COSTS

      Deferred financing costs include fees and other external costs incurred to
obtain debt financings and are generally amortized on a straight-line basis,
which approximates the effective interest method, over a period not to exceed
the term of the related debt. Unamortized financing costs are written-off when
debt is retired before its maturity date. During 2001, 2000 and 1999,
amortization expense was $3.6 million, $5.0 million and $4.0 million,
respectively.

ADVERTISING COSTS

      All costs are expensed as incurred. During 2001, 2000 and 1999, total
advertising expense was $9.6 million, $9.3 million and $9.7 million,
respectively.

INTEREST RATE SWAP AGREEMENTS

      Statements of Financial Accounting Standards No. 133 and 138, "Accounting
for Certain Derivative Instruments and Hedging Activities" became effective on
January 1, 2001. The 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



                                       28

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

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 December 31, 2001, all of the Company's
derivative financial instruments are interest rate swap agreements that are
designated as cash flow hedges of debt with variable interest rate features, 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 a $3.8 million loss, all of which was recorded directly to other
comprehensive income.

      As part of United Dominion's overall interest rate risk management
strategy, the Company uses derivative financial instruments as a means to
artificially fix variable rate debt 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 cash flow
exposure being hedged, fluctuations in the value of the derivative instruments
are generally offset by changes in the cash flow of the underlying exposures. As
a result, United Dominion believes that it 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 hedged 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.

      Prior to the adoption of Statements 133 and 138 on January 1, 2001, United
Dominion also used interest rate swap contracts for hedging purposes. For
interest rate swaps, the net amounts paid or received and net amounts accrued
through the end of the accounting period were included in interest expense. The
fair value of the interest rate swap contracts were not recorded on the
Consolidated Balance Sheet and unrealized gains or losses were not recognized in
the Consolidated Statements of Operations. Gains and losses on any contracts
terminated early were deferred and amortized to income over the remaining
average life of the terminated contract.

COMPREHENSIVE INCOME

      Comprehensive income, which is defined as all changes in equity during
each period except for those resulting from investments by or distributions to
shareholders, is displayed in the accompanying Statements of Shareholders'
Equity. Other comprehensive income consists of gains or losses from derivative
financial instruments.

EARNINGS PER SHARE

      Basic earnings per common share is computed based upon the weighted
average number of common shares outstanding during the year. Diluted earnings
per common share is computed based upon 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 potentially dilutive
common stock equivalents is determined using the treasury stock method based on
United Dominion's average stock price.

      The following table sets forth the computation of basic and diluted
earning per share (dollars in thousands, except per share amounts):



                                       29

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001



                                                      2001            2000            1999
                                                      ----            ----            ----
                                                                           
Numerator for basic and diluted earnings
  per share - net income available to common
  shareholders                                      $ 27,142        $ 42,653        $ 55,908

Denominator:
Denominator for basic earnings per share -
    weighted average shares                          100,339         103,072         103,604

Effect of dilutive securities:
    Employee stock options and awards                    698             136              35
                                                    --------        --------        --------

Denominator for dilutive earnings per share          101,037         103,208         103,639
                                                    ========        ========        ========

Basic earnings per share                            $   0.27        $   0.41        $   0.54
                                                    ========        ========        ========
Diluted earnings per share                          $   0.27        $   0.41        $   0.54
                                                    ========        ========        ========


      The effect of the conversion of the operating partnership units and
convertible preferred stock is not dilutive and is therefore not included as a
dilutive security in the earnings per share computation. The weighted average
effect of the conversion of the operating partnership units for the years ended
December 31, 2001, 2000 and 1999 was 7,281,835 shares, 7,489,435 shares and
8,180,409 shares, respectively. The weighted average effect of the conversion of
the convertible preferred stock for the years ended December 31, 2001, 2000 and
1999 was 12,307,692 shares.

MINORITY INTERESTS IN OPERATING PARTNERSHIPS

      Interests in operating partnerships held by limited partners are
represented by operating partnership units ("OP Units"). The operating
partnerships' income is allocated to holders of OP Units based upon net income
available to common shareholders and the weighted average number of OP Units
outstanding to total common shares plus OP Units outstanding during the period.
Capital contributions, distributions and profits and losses are allocated to
minority interests in accordance with the terms of the individual partnership
agreements. OP Units can be exchanged for cash or shares of United Dominion's
common stock on a one-for-one basis, at the option of United Dominion. OP Units
as a percentage of total OP Units and shares outstanding were 6.8% at December
31, 2001 and 2000 and 7.3% at December 31, 1999.

MINORITY INTERESTS IN OTHER PARTNERSHIPS

      United Dominion has limited partners in certain real estate partnerships
acquired as part of the acquisition of American Apartment Communities II on
December 7, 1998. Net income for these partnerships is allocated based on the
percentage interest owned by these limited partners in each respective real
estate partnership.

STOCK BASED COMPENSATION

      United Dominion has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") in accounting for
its employee stock options because the alternative fair value accounting
provided for under Statement 123, "Accounting for Stock Based Compensation,"
requires the use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of
United Dominion's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation cost has been recognized.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In February 2002, the FASB rescinded Statement 4, "Reporting Gains and
Losses from Extinguishment Debt" (SFAS No. 4). The rescission of SFAS No. 4
will be applied in accordance with the guidance of the FASB, but once applied,
United Dominion will be required to reclassify prior period items that do not
meet the extraordinary classification criteria in APB 30. The Company from time
to time incurs such charges and is currently assessing the impact that these
statements will have on the consolidated financial position or results of
operations of United Dominion.

2.    REAL ESTATE OWNED



                                       30

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

      United Dominion operates in 62 markets dispersed throughout 21 states. At
December 31, 2001, the Company's largest apartment market was Dallas, Texas,
where it owned 6.7% of its apartment homes, based upon carrying value. Excluding
Dallas, United Dominion did not own more than 5.9% of its apartment homes in any
one market, based upon carrying value.

      The following table summarizes real estate held for investment at December
31, (dollars in thousands):



                                                2001                 2000
                                                ----                 ----
                                                          
Land and land improvements                  $   695,923         $   668,003
Buildings and improvements                    2,945,741           2,902,386
Furniture, fixtures and equipment               216,637             188,321
Construction in progress                            278                 264
                                            -----------         -----------
Real estate held for investment               3,858,579           3,758,974
Accumulated depreciation                       (646,366)           (506,871)
                                            -----------         -----------
Real estate held for investment, net        $ 3,212,213         $ 3,252,103
                                            ===========         ===========


      The following is a summary of real estate held for investment by major
market (in order of carrying value and excluding real estate under development)
at December 31, 2001 (dollars in thousands):



                               NUMBER OF        INITIAL
                               APARTMENT      ACQUISITION         CARRYING        ACCUMULATED
                              COMMUNITIES         COST             VALUE         DEPRECIATION      ENCUMBRANCES
                              -----------         ----             -----         ------------      ------------
                                                                                    
Dallas, TX                        16          $  221,734        $  255,437        $   34,449        $   40,850
Houston, TX                       22             178,188           227,217            33,007            27,336
Phoenix, AZ                       12             189,273           225,997            28,374            56,893
Orlando, FL                       14             167,524           202,676            42,242            89,823
San Antonio, TX                   12             171,241           190,182            25,794            37,072
Raleigh, NC                       10             146,686           166,411            34,675            57,754
Tampa, FL                         10             132,927           151,867            27,829            57,315
Fort Worth, TX                    11             134,671           148,888            23,580            22,786
Columbus, OH                       6             111,315           148,012            13,661            43,897
San Francisco, CA                  4             136,504           140,995            10,769            21,423
Charlotte, NC                     10             109,961           136,303            31,512            12,159
Nashville, TN                      8              83,987           119,805            20,254                --
Greensboro, NC                     8              85,362           103,703            19,438                --
Monterey Peninsula, CA             9              95,091            97,304             8,394            44,416
Memphis, TN                        6              88,467            96,909            15,546            27,092
Richmond, VA                       8              74,856            96,117            30,537            66,657
Southern California                5              87,442            90,989             8,512            11,627
Wilmington, NC                     6              64,213            89,015            20,305                --
Metropolitan DC                    5              57,334            74,599            12,813            38,011
Atlanta, GA                        6              57,669            71,202            16,377            19,113
Baltimore, MD                      6              58,846            67,102            16,014            29,011
Columbia, SC                       6              52,795            62,230            17,337             5,000
Jacksonville, FL                   3              44,787            58,329            13,959            23,202
Norfolk, VA                        6              42,741            54,095            17,879             7,359
Lansing, MI                        4              50,237            48,668             4,397            24,889
Seattle, WA                        3              31,953            34,031             3,775            13,311
Other Western                      6             122,225           127,729            13,159            42,239
Other Florida                      8              69,719           101,208            20,574                --



                                       31

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001




                               NUMBER OF        INITIAL
                               APARTMENT      ACQUISITION         CARRYING        ACCUMULATED
                              COMMUNITIES         COST             VALUE         DEPRECIATION      ENCUMBRANCES
                              -----------         ----             -----         ------------      ------------
                                                                                    
Other Southwestern                 9              90,295            98,136            13,479            19,102
Other Midwestern                  10              88,281            93,803             9,149            36,148
Other Pacific                      7              86,601            87,156             9,578            45,605
Other North Carolina               8              61,677            74,453            22,659             9,876
Other Mid-Atlantic                 5              37,618            42,397             9,123            12,542
Other Southeastern                 3              28,691            37,428             8,699            19,285
Other Northeastern                 2              14,732            18,119             4,485             5,167
Commercial                                        10,482            12,448             3,657             3,221
Richmond Corporate                                 6,597             7,619               375             3,996
                              ------          ----------        ----------        ----------        ----------
                                 274          $3,292,722        $3,858,579        $  646,366        $  974,177
                              ======          ==========        ==========        ==========        ==========


      At December 31, 2001, real estate held for disposition included four
parcels of land with an initial acquisition cost of $9.9 million and a carrying
value of $8.8 million.

      The management of United Dominion periodically reviews its divestiture
program, which is designed to better position the Company for achieving more
consistent earnings growth and increasing shareholder value over the long-term.
The factors considered in these reviews include the age, quality and projected
operating income of communities that might be sold, the expected market value
for the communities, the estimated timing for completion of sales and the pro
forma effect of sales upon United Dominion's earnings and financial position.
During the first quarter of 2001, management 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.

      During the second quarter of 2000, management transferred approximately
$197 million of assets from real estate held for disposition to real estate held
for investment and, as a result, approximately $10 million in depreciation
expense was recognized on the communities transferred in order to reflect
depreciation on these properties while they were classified in real estate held
for disposition. Furthermore, approximately $5 million of additional
depreciation expense was recognized on these assets during 2000 subsequent to
their transfer to real estate held for investment. Depreciation expense in 2000
was further inflated by the impact of over $150 million in development
completions in late 1999 and 2000 and approximately $200 million in acquisitions
and capital improvements in 1999 and 2000.

      For the year ended December 31, 1999, United Dominion recognized $18.3
million in impairment losses on its real estate owned. Through the review and
analysis of communities targeted for strategic disposition, an aggregate $14.8
million impairment loss was recognized on assets held for disposition. An
impairment loss was indicated as a result of the net book value of the assets
held for disposition being greater than the estimated fair market value less the
cost of disposal. In addition, United Dominion recorded a $3.5 million
impairment loss on three communities acquired in the ASR merger in 1998 which
were classified in real estate held for investment. An impairment loss was
indicated as the sum of the estimated future cash flows from the assets were
deemed to be less than the carrying amounts.

      The following is a reconciliation of the carrying amount of real estate
held for investment at December 31, (dollars in thousands):



                                                         2001                2000               1999
                                                         ----                ----               ----
                                                                                    
Balance at beginning of year                         $ 3,758,974         $ 3,577,848         $ 3,643,245
Real estate acquired                                      91,093              14,898              75,719
Capital expenditures                                      58,402              46,299              72,096




                                       32

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001




                                                         2001                2000               1999
                                                         ----                ----               ----
                                                                                    
Transfers from development                                51,561              68,025             116,787
Transfers (to) from held for disposition, net            (98,663)             58,068            (326,499)
Impairment loss on real estate                            (2,788)               --                (3,500)
Disposal of fully depreciated assets                        --                (6,164)               --
                                                     -----------         -----------         -----------
Balance at end of year                               $ 3,858,579         $ 3,758,974         $ 3,577,848
                                                     ===========         ===========         ===========


      The following is a reconciliation of accumulated depreciation for real
estate held for investment at December 31, (dollars in thousands):



                                                2001               2000              1999
                                                ----               ----              ----
                                                                         
Balance at beginning of year                  $ 506,871         $ 373,164         $ 280,663
Depreciation expense for the year*              153,113           154,419           122,884
Transfers to held for disposition, net          (13,618)          (14,548)          (30,383)
Disposal of fully depreciated assets               --              (6,164)             --
                                              ---------         ---------         ---------
Balance at end of year                        $ 646,366         $ 506,871         $ 373,164
                                              =========         =========         =========


- ----------
* Includes $1,268, $1,425 and $1,157 for 2001, 2000 and 1999, respectively,
related to depreciation on non-real estate assets located at the Company's
apartment communities, classified as "Other depreciation and amortization" in
the Consolidated Statements of Operations.

3.    INVESTMENT IN UNCONSOLIDATED JOINT VENTURE

      At December 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 was created to develop five apartment
communities with a total of 1,438 homes for an aggregate total cost of
approximately $101 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 for services provided
by the Company to the joint venture, to the extent of the outside partner's
interest, of approximately $2.6 million and $3.0 million for the years ended
December 31, 2001 and 2000, respectively. As of September 2001, construction of
all five of the joint venture properties was complete.

      On December 28, 2001, United Dominion purchased three of the five
apartment communities for a total aggregate cost of $61.3 million. The three
communities purchased were Mandolin, a 308 home community located in Dallas,
Texas, Meridian, a 250 home community located in Dallas, Texas and Sierra
Canyon, a 236 home community located in Phoenix, Arizona. The Company has the
option, but not the obligation, to purchase the remaining two communities for
fair value through December 31, 2006. If neither the Company nor the joint
venture partner elects to purchase these properties, the joint venture will then
dispose of the assets to a third party at the then market price. 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.



                                       33

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

      The following is a summary of the financial position of the joint venture
as of December 31, (dollars in thousands):



                                                      2001            2000
                                                      ----            ----
                                                              
Assets:
Real estate, net                                     $44,290        $85,644
Other assets                                             930          6,507
                                                     -------        -------
       Total assets                                  $45,220        $92,151
                                                     =======        =======

Liabilities and partners' equity:
Mortgage notes payable (a)                           $30,488        $49,785
Other liabilities                                      1,720         11,436
Partners' equity                                      13,012         30,930
                                                     -------        -------
       Total liabilities and partners' equity        $45,220        $92,151
                                                     =======        =======



- ----------
(a)   Non-recourse to United Dominion with an interest rate of LIBOR plus 250
      basis points and a maturity of December 2003.

      The following is a summary of the operating results of the joint venture
as of December 31, (dollars in thousands):



                                                     2001             2000
                                                     ----             ----
                                                              
Rental income                                      $  9,841         $  1,930
Expenses:
Depreciation and amortization                         3,684              268
Mortgage interest                                     3,826            1,557
Operating and other expenses                          4,260              549
                                                   --------         --------
       Total expenses                                11,770            2,374
                                                   --------         --------
Income before gains on sales of investments          (1,929)            (444)
Gains on sales of depreciable property                  913             --
                                                   --------         --------
Net loss                                           $ (1,016)        $   (444)
                                                   ========         ========


4.    SECURED DEBT

      Secured debt, which encumbers $1.6 billion or 41.0% of United Dominion's
real estate owned, ($2.3 billion or 59.0% of United Dominion's real estate owned
is unencumbered) consists of the following at December 31, 2001 (dollars in
thousands):



                                                                                       WEIGHTED
                                                                       WEIGHTED        AVERAGE       NUMBER OF
                                                                        AVERAGE        YEARS TO    COMMUNITIES
                                           PRINCIPAL OUTSTANDING     INTEREST RATE     MATURITY     ENCUMBERED
                                           ---------------------     -------------     --------     ----------
                                            2001            2000          2001           2001          2001
                                            ----            ----          ----           ----          ----
                                                                                    
FIXED RATE DEBT
Mortgage notes payable (a)                $450,643        $513,962        7.79%           4.9           67
Tax-exempt secured notes payable            65,806          79,756        6.73%          12.1            9
Secured credit facilities                   17,000          17,000        7.04%          12.1           --
                                          --------------------------------------------------------------------
    Total fixed rate secured debt          533,449         610,718        7.64%           6.0           76

VARIABLE RATE DEBT
Secured credit facilities                  405,731         216,960        3.56%          11.6           31
Tax-exempt secured notes payable            19,915          19,916        1.38%          23.5            3
Mortgage notes payable                      15,082          18,521        3.71%           6.7            4



                                       34

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001



                                                                                       WEIGHTED
                                                                       WEIGHTED        AVERAGE       NUMBER OF
                                                                        AVERAGE        YEARS TO    COMMUNITIES
                                           PRINCIPAL OUTSTANDING     INTEREST RATE     MATURITY     ENCUMBERED
                                           ---------------------     -------------     --------     ----------
                                            2001            2000          2001           2001          2001
                                            ----            ----          ----           ----          ----
                                                                                    
  Total variable rate secured debt         440,728         255,397        3.46%          11.9           38
                                           -------         -------        ----           ----           --
TOTAL SECURED DEBT                        $974,177        $866,115        5.75%           8.7          114
                                          ========        ========        ====            ===          ===


- ----------
(a)   Includes fair value adjustments aggregating $7.9 million in 2001 and $10.2
      million in 2000 that were recorded in connection with the assumption of
      debt associated with two acquisitions consummated in 1998.

FIXED RATE DEBT

      Mortgage notes payable. Fixed rate mortgage notes payable are generally
due in monthly installments of principal and interest and mature at various
dates from February 2002 through June 2034 and carry interest rates ranging from
6.66% to 9.58%.

      Tax-exempt secured notes payable. Fixed rate mortgage notes payable which
secure tax-exempt housing bond issues mature at various dates through November
2025 and carry interest rates ranging from 6.09% to 7.90%. Interest on these
notes is generally payable in semi-annual installments.

      Secured credit facilities. At December 31, 2001, United Dominion's fixed
rate secured credit facilities consisted of $17.0 million of the $422.7 million
outstanding under four revolving secured credit facilities with the Federal
National Mortgage Association (the "FNMA Credit Facilities"). The FNMA Credit
Facilities are for an initial term of five or ten years, bear interest at a
floating rate and can be extended for an additional five years at United
Dominion's discretion. 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
$17.0 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 $17.0
million of secured debt from a variable rate to a weighted average fixed rate of
7.04%.

VARIABLE RATE DEBT

      Secured credit facilities. At December 31, 2001, United Dominion's
variable rate secured credit facilities consisted of $405.7 million of the
$422.7 million outstanding on the FNMA Credit Facilities. At December 31, 2001,
the variable rate FNMA Credit Facilities had a weighted average floating rate of
interest of 3.56%.

      Tax-exempt secured notes payable. Variable rate mortgage notes payable
which secure tax-exempt housing bond issues mature at various dates from
December 2002 to October 2028. At December 31, 2001, these notes had interest
rates ranging from 1.15% to 1.65%. Interest on these notes is generally payable
in semi-annual installments.

      Mortgage notes payable. Variable rate mortgage notes payable are generally
due in monthly installments of principal and interest and mature at various
dates from January 2002 through September 2027. At December 31, 2001, these
notes had interest rates ranging from 3.33% to 4.52%.

      The aggregate maturities of secured debt for the fifteen years subsequent
to December 31, 2001 are as follows (dollars in thousands):



                                    FIXED                                          VARIABLE
                   ---------------------------------------         ----------------------------------------
                   MORTGAGE       TAX-EXEMPT       SECURED         SECURED        TAX-EXEMPT       MORTGAGE
    YEAR            NOTES           BONDS           NOTES           NOTES           NOTES           NOTES           TOTAL
    ----            -----           -----           -----           -----           -----           -----           -----
                                                                                             
      2002        $ 47,409        $    833            --              --          $  2,200        $  3,168        $ 53,610
      2003          25,381          13,326            --              --              --               370          39,077
      2004         119,467           9,422            --              --              --               392         129,281
      2005         119,297             875            --              --              --             5,139         125,311
      2006          42,061             935            --              --              --             3,795          46,791
      2007          17,335             632            --              --              --                95          18,062
      2008           2,949           5,455            --              --              --               102           8,506
      2009          25,607             581            --              --              --               108          26,296




                                       35

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001



                                    FIXED                                          VARIABLE
                                    -----                                          --------
                   MORTGAGE       TAX-EXEMPT       SECURED         SECURED        TAX-EXEMPT       MORTGAGE
    YEAR            NOTES           BONDS           NOTES           NOTES           NOTES           NOTES           TOTAL
    ----            -----           -----           -----           -----           -----           -----           -----
                                                                                             
      2010          26,598             628            --              --              --               116          27,342
      2011             824             673            --          $138,875            --               123         140,495
      2012             889             725            --              --              --               132           1,746
      2013             960           3,850            --              --              --               141           4,951
      2014           1,036             838        $ 17,000         183,000            --               150         202,024
      2015           1,119          13,354            --            52,956            --               160          67,589
      2016           2,942             583            --            30,900            --               171          34,596
Thereafter          16,769          13,096            --              --            17,715             920          48,500
                  --------        --------        --------        --------        --------        --------        --------
                  $450,643        $ 65,806        $ 17,000        $405,731        $ 19,915        $ 15,082        $974,177
                  ========        ========        ========        ========        ========        ========        ========



      For the years ended December 31, 2001 and 2000, United Dominion recognized
$3.5 million ($.03 per share) in extraordinary losses and $831 thousand ($.01
per share) in extraordinary gains related to the write-off of deferred financing
costs and prepayment penalties.

5.    UNSECURED DEBT

      A summary of unsecured debt at December 31, 2001 and 2000 is as follows
(dollars in thousands):



                                                                      2001             2000
                                                                      ----             ----
                                                                              
COMMERCIAL BANKS
         Borrowings outstanding under an
            unsecured credit facility due August 2003 (a)         $  230,200        $  244,400
         Borrowings outstanding under an
            unsecured term loan due May 2004 - 2005 (b)              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 (c)                 10,000            10,000
         7.22% Medium-Term Notes due February 2003                    11,815            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 2002 - 2003 (d)                        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                    49,760            50,000
         7.95% Medium-Term Notes due July 2006                       103,179           107,398
         7.07% Medium-Term Notes due November 2006                    25,000            25,000
         7.25% Notes due January 2007                                105,020           110,080
         ABAG Tax-Exempt Bonds due August 2008                        46,700            46,700
         8.50% Monthly Income Notes due November 2008                 57,400            57,400
         8.50% Debentures due September 2024 (e)                     124,920           125,500
         Other (f)                                                     3,134             4,027
                                                                  ----------        ----------
                                                                     759,820           781,815
                                                                  ----------        ----------
               TOTAL UNSECURED DEBT                               $1,090,020        $1,126,215
                                                                  ==========        ==========


(a)   As of December 31, 2001 and 2000, 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 the $155 million of borrowings from a
      variable rate to a weighted average fixed rate of approximately 6.98%. The
      weighted average interest rate of the total $230.2 million in commercial
      borrowings, after giving effect to swap agreements, was 6.1% and 7.5% at
      December 31, 2001 and 2000, respectively.

(b)   As of December 31, 2001, 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



                                       36

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


      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%.

(c)   United Dominion has 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%.

(d)   Payable annually in three equal principal installments of $7.4 million,
      one of which was paid in 2001.

(e)   Includes an investor put feature which grants a one-time option to redeem
      the debentures in September 2004.

(f)   Includes $3.0 million and $3.8 million at December 31, 2001 and 2000,
      respectively, of deferred gains from the termination of interest rate risk
      management agreements.

      Information concerning short-term bank borrowings is summarized in the
table that follows (dollars in thousands):



                                                           2001             2000             1999
                                                           ----             ----             ----

                                                                                  
Total revolving credit facilities at December 31         $375,000         $375,000         $310,000


Borrowings outstanding at December 31                     230,200          244,400          277,600

Weighted average daily borrowings during the year         248,367          195,128          223,629
Maximum daily borrowings during the year                  347,200          308,000          283,000
Weighted average interest rate during the year                5.2%             7.3%             5.8%
Weighted average interest rate at December 31                 3.2%             7.7%             6.7%
Weighted average interest rate at December 31,
     after giving effect to swap agreements                   6.1%             7.5%             6.8%


      United Dominion has a $375 million three-year unsecured revolving credit
facility (the "Bank Credit Facility") which matures August 2003. As of December
31, 2001, $230.2 million was outstanding under the Bank Credit Facility. The
Company may borrow at a rate of LIBOR plus 110 basis points for LIBOR-based
borrowings under the Bank Credit Facility. In addition, the Company pays a
facility fee, which is equal to 0.25% of the commitment. The Bank Credit
Facility is subject to customary financial covenants and limitations.

6.    SHAREHOLDERS' EQUITY

PREFERRED STOCK

      The Series B Cumulative Redeemable Preferred Stock (Series B) has no
stated par value and a liquidation preference of $25 per share. With no voting
rights and no stated maturity, the Series B is not subject to any sinking fund
or mandatory redemption and is not convertible into any other securities of
United Dominion. The Series B is not redeemable prior to May 29, 2007. On or
after this date, the Series B may be redeemed for cash at the option of United
Dominion, in whole or in part, at a redemption price of $25 per share plus
accrued and unpaid dividends. The redemption price is payable solely out of the
sales proceeds of other capital stock of United Dominion. All dividends due and
payable on the Series B have been accrued or paid as of the end of each fiscal
year.

      The Series D Convertible Redeemable Preferred Stock (Series D) has no
stated par value and a liquidation preference of $25 per share. The Series D has
no voting rights, no stated maturity and is not subject to any sinking fund or
mandatory redemption and is convertible into 1.5385 shares of common stock at
the option of the holder of the Series D at any time at $16.25 per share. The
Company has the right to cause the holder of the Series D to convert the Series
D to common shares at $16.25 based on twenty trading days at or above $17.06 for
the life of the security (the "Option Shares"). The Company has the right to
purchase 2 million shares of the Option Shares in accordance with a
predetermined schedule, provided that the volume weighted average price of the
Company's common shares is $16.25 for a twenty day trading period. The
repurchase price payable will be computed in accordance with the table below,
expressed as a percentage of the liquidation preference, determined by the
period in



                                       37

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

which the Option Shares repurchase date occurs, together with all accrued and
unpaid dividends to and including the repurchase date:



      OPTION SHARE REPURCHASE DATE OCCURS
                DURING PERIOD:                                   REPURCHASE PRICE
- -----------------------------------------------                  ----------------
                                                              
January 1, 2002       to       June 30, 2002                          102.0%

July 1, 2002          to       December 31, 2002                      101.5%

January 1, 2003       to       June 30, 2003                          101.0%

July 1, 2003          to       December 6, 2003                       100.5%


      After December 7, 2003, United Dominion may, at its option, redeem at any
time all or part of the Series D at a price per share of $25, payable in cash,
plus all accrued and unpaid dividends, provided that the current market price of
the common stock at least equals the conversion price, initially set at $16.25
per share. The redemption is payable solely out of the sale proceeds of other
capital stock. In addition, United Dominion may not redeem in any consecutive
twelve-month period a number of shares of Series D having an aggregate
liquidation preference of more than $100 million.

      On June 15, 2001, the Company completed the redemption of all of its
outstanding 9.25% Series A Cumulative Redeemable Preferred Stock at $25 per
share plus accrued dividends.

OFFICERS' STOCK PURCHASE AND LOAN PLAN

      Under the Officer Stock Purchase and Loan Plan (the "Loan Plan"), certain
officers have purchased common stock at the then current market price with
financing provided by United Dominion at an interest rate of 7%. The underlying
notes, totaling $4.3 million, mature between December 2002 and October 2005. A
total of 602,000 shares have been issued and 813,000 shares are available for
future issuance under the Loan Plan.

DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

      United Dominion's Dividend Reinvestment and Stock Purchase Plan (the
"Stock Purchase Plan") allows common and preferred shareholders the opportunity
to purchase, through the reinvestment of cash dividends, additional shares of
United Dominion's common stock. As of December 31, 2001, 9,437,717 shares of
common stock had been issued under the Stock Purchase Plan. Shares in the amount
of 4,562,283 were reserved for further issuance under the Stock Purchase Plan at
December 31, 2001. During 2001, 332,243 shares were issued under the Stock
Purchase Plan for a total consideration of approximately $4.4 million.

RESTRICTED STOCK AWARDS

      United Dominion's 1999 Long-Term Incentive Plan ("LTIP") authorizes the
granting of restricted stock awards to employees, officers and directors of
United Dominion. The total restricted stock awards under the LTIP may not exceed
15% of the total number of available shares, or 600,000. Deferred compensation
expense is recorded over the vesting period and is based upon the value of the
common stock on the date of issuance. As of December 31, 2001, 244,103 shares of
restricted stock have been issued under the LTIP.

SHAREHOLDER RIGHTS PLAN

      United Dominion's 1998 Shareholder Rights Plan is intended to protect
long-term interests of shareholders in the event of an unsolicited, coercive, or
unfair attempt to take over the Company. The plan authorized a dividend of one
Preferred Share Purchase Right (the "Rights) on each share of common stock
outstanding. Each Right, which is not currently exercisable, will entitle the
holder to purchase 1/1,000 of a share of a new series of the Company's



                                       38

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

preferred stock, to be designated as Series C Junior Participating Cumulative
Preferred Stock, at a price to be determined upon the occurrence of the event,
and for which the holder must be paid $45 should the take over occur. Under the
Plan, the rights will be exercisable if a person or group acquires more than 15%
of United Dominion's common stock, or announces a tender offer that would result
in the ownership of 15% of the Company's common stock.

7.    FINANCIAL INSTRUMENTS

      The following estimated fair values of financial instruments were
determined by United Dominion using available market information and appropriate
valuation methodologies. Considerable judgement is necessary to interpret market
data and develop estimated fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts United Dominion would
realize on the disposition of the financial instruments. The use of different
market assumptions or estimation methodologies may have a material effect on the
estimated fair value amounts. The carrying amounts and estimated fair value of
United Dominion's financial instruments at December 31, 2001 and 2000, are
summarized as follows (dollars in thousands):



                                                   2001                                  2000
                                      -----------------------------         ------------------------------
                                       CARRYING             FAIR              CARRYING            FAIR
                                        AMOUNT              VALUE              AMOUNT             VALUE
                                        ------              -----              ------             -----
                                                                                   
Secured debt                         $   974,177        $ 1,013,136         $   866,115        $   887,430
Unsecured debt                         1,090,020          1,109,380           1,126,215          1,130,100
Interest rate swap agreements               --              (14,931)               --               (3,847)


      The following methods and assumptions were used by United Dominion in
estimating the fair values set forth above.

CASH AND CASH EQUIVALENTS

      The carrying amount of cash and cash equivalents approximates fair value.

SECURED AND UNSECURED DEBT

      Estimated fair value is based on mortgage rates, tax-exempt bond rates and
corporate unsecured debt rates believed to be available to United Dominion for
the issuance of debt with similar terms and remaining lives. The carrying amount
of United Dominion's variable rate secured debt approximates fair value at
December 31, 2001 and 2000. The carrying amounts of United Dominion's borrowings
under variable rate unsecured debt arrangements, short-term revolving credit
agreements and lines of credit approximate their fair values at December 31,
2001 and 2000.



                                       39

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


DERIVATIVE FINANCIAL INSTRUMENTS

      The following table presents the fair values of the Company's derivative
financial instruments outstanding, based on external market quotations, as of
December 31, 2001 (dollars in thousands):



                NOTIONAL        FIXED        TYPE OF       EFFECTIVE     CONTRACT         FAIR
                 AMOUNT         RATE         CONTRACT        DATE        MATURITY         VALUE
           ----------------------------------------------------------------------------------------
                                                                     
           SECURED DEBT:
           FNMA
           $        7,000       6.78%          Swap        06/30/99      06/30/04      $      (396)
                   10,000       7.22%          Swap        12/01/99      04/01/04             (626)
           --------------   ----------                                                 ------------
                   17,000       7.04%                                                       (1,022)

           UNSECURED DEBT:
           BANK CREDIT FACILITY
                    5,000       7.32%          Swap        06/26/95      07/01/04             (315)
                   10,000       7.14%          Swap        10/18/95      10/03/02             (386)
                    5,000       6.98%          Swap        11/21/95      10/03/02             (185)
                   25,000       7.39%          Swap        11/01/00      08/01/03           (1,461)
                   25,000       7.39%          Swap        11/01/00      08/01/03           (1,461)
                   25,000       7.21%          Swap        12/01/00      08/01/03           (1,330)
                   25,000       7.21%          Swap        12/04/00      08/01/03           (1,330)
                   35,000       5.98%          Swap        03/13/01      04/01/03           (1,100)
           --------------   ----------                                                 ------------
                  155,000       6.98%                                                       (7,568)

           BANK TERM LOAN
                   25,000       7.49%          Swap        11/15/00      05/15/03           (1,295)
                   20,000       7.49%          Swap        11/15/00      05/15/03           (1,037)
                   23,500       7.62%          Swap        11/15/00      05/15/04           (1,568)
                   23,000       7.62%          Swap        11/15/00      05/15/04           (1,535)
                    8,500       7.26%          Swap        12/04/00      05/15/03             (426)
           --------------   ----------                                                 ------------
                  100,000       7.53%                                                       (5,861)

           MEDIUM-TERM NOTES
                   10,000       7.65%          Swap        01/26/99      01/27/03             (480)
           --------------                                                              ------------
           $      282,000                                                              $   (14,931)
           ==============                                                              ============


      For the year ended December 31, 2001, the Company recognized $11.0 million
of unrealized losses in accumulated other comprehensive income, a $60.0 thousand
loss in net income related to the ineffective portion of the Company's hedging
instruments and a $3.8 million loss as a cumulative effect of a change in
accounting principle. In addition, United Dominion recognized $14.9 million of
derivative financial instrument liabilities on the Consolidated Balance Sheet.

      As of December 31, 2001, United Dominion expects to reclassify $9.4
million of net losses on derivative instruments from accumulated other
comprehensive income to earnings (interest expense) during the next twelve
months on the related hedged transactions.

RISK OF COUNTERPARTY NON-PERFORMANCE

      United Dominion has not obtained collateral or other security to support
financial instruments. In the event of non-performance by the counterparty,
United Dominion's credit loss on its derivative instruments is limited to the

                                       40

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


value of the derivative instruments that are favorable to United Dominion at
December 31, 2001, of which the Company has none. However, such non-performance
is not anticipated as the counterparties are highly rated credit quality U.S.
financial institutions and management believes that the likelihood of realizing
material losses from counterparty non-performance is remote.

8.    EMPLOYEE BENEFIT PLANS

PROFIT SHARING PLAN

      The United Dominion Realty Trust, Inc. Profit Sharing Plan (the "Plan") is
a defined contribution plan covering all eligible full-time employees. Under the
Plan, United Dominion makes discretionary profit sharing and matching
contributions to the Plan as determined by the Compensation Committee of the
Board of Directors. Aggregate provisions for contributions, both matching and
discretionary, which are included in United Dominion's Consolidated Statements
of Operations for the three years ended December 31, 2001, 2000 and 1999 were
$0.7 million, $1.3 million and $2.2 million, respectively.

STOCK OPTION PLAN

      In May 2001, the shareholders of United Dominion approved the 1999
Long-Term Incentive Plan (the "LTIP"), which supersedes the Company's 1985 Stock
Option Plan. With the approval of the LTIP, no additional grants will be made
under the 1985 Stock Option Plan. The LTIP authorizes the granting of awards
which may take the form of options to purchase shares of common stock, stock
appreciation rights, restricted stock, dividend equivalents, other stock-based
awards, any other right or interest relating to common stock or cash. The Board
of Directors reserved 4 million shares for issuance upon the grant or exercise
of awards under the LTIP. Of the 4 million shares reserved, 3.4 million shares
are for stock-based awards, such as stock options, with the remaining 600,000
shares reserved for restricted stock awards. The LTIP generally provides, among
other things, that options are granted at exercise prices not lower than the
market value of the shares on the date of grant and that options granted must be
exercised within ten years. The maximum number of shares of stock that may be
issued subject to incentive stock options is 10 million shares. Shares under
options that expire or are cancelable are available for subsequent grant.

      Pro forma information regarding net income and earnings per share is
required by Statement 123 "Accounting for Stock Based Compensation" ("SFAS No.
123"), and has been determined as if United Dominion had accounted for its
employee stock options under the fair value method of accounting as defined in
SFAS No. 123. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following weighted
average assumptions for 2001, 2000 and 1999:



                                                    2001                 2000                 1999
                                                  --------             --------             --------
                                                                                   
          Risk free interest rate                      3.2%                 5.2%                 6.7%
          Dividend yield                               9.1%                 7.2%                 6.9%
          Volatility factor                          0.171                0.164                0.144
          Weighted average expected life (years)         3                    7                    9


      The weighted average fair value of options granted during 2001, 2000 and
1999 was $0.46, $0.65 and $0.76 per option, respectively.

      For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. United
Dominion's pro forma information is as follows (dollars in thousands, except per
share amounts):



                                                          2001                  2000                  1999
                                                       ----------            ----------            ----------
                                                                                          
         Net income available to common shareholders
           As reported                                 $   27,142            $   42,653            $   55,908
           Pro forma                                       26,693                41,705                54,847



                                       41

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


                                                                                          
         Earnings per common share - diluted
           As reported                                 $     0.27            $     0.41            $     0.54
           Pro forma                                         0.26                  0.40                  0.53



      A summary of United Dominion's stock option activity during the three
years ended December 31, 2001 is provided in the following table:



                                         NUMBER              WEIGHTED AVERAGE              RANGE OF
                                       OUTSTANDING            EXERCISE PRICE            EXERCISE PRICES
                                       -----------           ----------------           ---------------
                                                                               
Balance, December 31, 1998              3,359,013             $        12.89            $7.44 - $15.38
Granted                                 1,192,333                      10.02              9.63 - 11.19
Exercised                                 (46,998)                      9.87              9.19 - 10.25
Forfeited                                (288,756)                     13.46             10.88 - 15.38
                                       ----------             --------------            --------------
Balance, December 31, 1999              4,215,592             $        12.09            $9.19 - $15.38
Granted                                   653,300                       9.91              9.88 - 10.75
Exercised                                 (11,584)                      9.19                      9.19
Forfeited                                (364,363)                     12.95              9.63 - 15.25
                                       ----------             --------------            --------------
Balance, December 31, 2000              4,492,945             $        11.71            $9.19 - $15.38
Granted                                 1,289,484                      11.96             10.81 - 14.20
Exercised                                (356,408)                     11.02              9.19 - 14.25
Forfeited                              (1,200,802)                     11.52              9.63 - 15.38
                                       ----------             --------------            --------------
Balance, December 31, 2001              4,225,219             $        11.90            $9.63 - $15.38
                                       ==========             ==============            ==============


Exercisable at December 31,
1999                                    2,042,505             $        13.28            $9.19 - $15.38
2000                                    2,692,997                      12.35              9.19 - 15.38
2001                                    1,968,265                      12.38              9.63 - 15.38


      The weighted average remaining contractual life on all options outstanding
is 9 years. 1,032,002 of share options had exercise prices between $13.50 and
$15.38, 1,509,272 of share options had exercise prices between $11.15 and $13.13
and 1,683,945 of share options had exercise prices between $9.63 and $10.94.

      At December 31, 2001, stock-based awards for 3,278,500 shares of common
stock were available for future grants under the 1999 LTIP's existing
authorization and no option shares were available for future grants under the
1985 Stock Option Plan. At December 31, 2000 and 1999, options for 3,684,595 and
4,028,539 shares of common stock, respectively, were available for future grants
under the 1985 Stock Option Plan.

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. All of the $5.4 million
charge was paid during 2001.

      The planned workforce reductions resulted in a charge of $4.5 million
during the first quarter of 2001 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.


                                       42

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


Employee termination benefits included severance packages and related benefits
and outplacement services for employees terminated. As of December 31, 2001,
approximately 230 employees have been terminated.

      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 related to other miscellaneous costs.

10.   COMMITMENTS AND CONTINGENCIES

LAND AND OTHER LEASES

      United Dominion is party to several ground leases relating to operating
communities. In addition, United Dominion is party to various other operating
leases related to the operation of its regional offices. Future minimum lease
payments for non-cancelable land and other leases at December 31, 2001 are as
follows (dollars in thousands):

                                     
            2002                        $ 1,792
            2003                          1,594
            2004                          1,530
            2005                          1,386
            2006                          1,210
            Thereafter                   24,128
                                        -------
              TOTAL                     $31,640
                                        =======



      United Dominion incurred $2.3 million, $2.6 million and $2.8 million, of
rent expense for the years ended December 31, 2001, 2000 and 1999, respectively.

CONTINGENCIES

      In May 2001, the shareholders of United Dominion approved the
Out-Performance Program (the "Program") pursuant to which executives and other
key officers of the Company were 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
28 month period beginning 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
greater of industry average (defined as the total cumulative return of the
Morgan Stanley REIT Index over the same period) or a 30% total return (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. The OPPSs, unlike United Dominion's
other OP Units, are not convertible into common stock except upon a change of
control of the Company. Accordingly, the contingently issuable OPPSs are not
included in common stock and common stock equivalents in the calculation of
earnings per share. Based upon results through December 31, 2001, 370,718 OPPSs
would have been issued. However, since the ultimate determination of OPPSs


                                       43

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


to be issued will not occur until June 2003, and the number of OPPSs is
determinable only upon future events, the financial statements do not reflect
any additional impact for these events.

      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.

COMMITMENTS

      United Dominion is committed to completing its real estate currently under
development, which has an estimated cost to complete of $6.7 million at December
31, 2001.

11.   INDUSTRY SEGMENTS

      United Dominion owns and operates multifamily apartment communities
throughout the United States that generate rental and other property related
income through the leasing of apartment units to a diverse base of tenants.
United Dominion separately evaluates the performance of each of its apartment
communities. However, because each of the apartment communities have similar
economic characteristics, facilities, services and tenants, the apartment
communities have been aggregated into a single apartment communities segment.
All segment disclosure is included in or can be derived from United Dominion's
consolidated financial statements.

      There are no tenants that contributed 10% or more of United Dominion's
total revenues during 2001, 2000 or 1999.

12.   UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA

      Summarized consolidated quarterly financial data for the year ended
December 31, 2001 is as follows (dollars in thousands, except per share
amounts):



                                                                                  THREE MONTHS ENDED
                                                       -----------------------------------------------------------------------------
                                                       MARCH 31(a)             JUNE 30           SEPTEMBER 30         DECEMBER 31(b)
                                                       -----------            ---------          ------------         --------------
                                                                                                          
Rental income(c)(d)                                     $ 141,374             $ 139,306            $ 139,774            $ 141,504
Income before gains on sales of investments,
 minority interests, discontinued operations
 and extraordinary item                                      (367)               10,615               11,382               10,495
Gains on the sales of investments                           4,102                20,646                   --                   --
Net (loss) income available to common shareholders         (3,308)               20,136                6,778                3,536


Earnings per common share:
Basic                                                   $   (0.03)            $    0.20            $    0.07            $    0.04
Diluted                                                     (0.03)                 0.20                 0.07                 0.04


- ----------

(a)   The first quarter of 2001 includes $8.6 million of non-recurring charges
      related to workforce reductions, other severance costs, executive
      relocation costs and the write-down of land and the Company's investment
      in an online apartment leasing company.

(b)   The fourth quarter of 2001 includes a $2.2 million charge related to the
      write-down of the Company's investment in a web-based property management
      and leasing system.

(c)   Rental income for the first and second quarters are restated to include
      water sub-metering and gas reimbursements previously classified as a
      reduction in rental expense.

(d)   Represents income from continuing operations.

                                       44

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


      Summarized consolidated quarterly financial data for the year ended
December 31, 2000 is as follows (dollars in thousands, except per share
amounts):



                                                                                  THREE MONTHS ENDED
                                                          ---------------------------------------------------------------------
                                                          MARCH 31          JUNE 30 (a)       SEPTEMBER 30 (b)      DECEMBER 31
                                                          --------          -----------       ----------------      -----------
                                                                                                        
Rental income (c)(d)                                      $143,004            $144,068            $143,378            $141,755
Income before gains on sales of investments,
  minority interests, discontinued operations
and extraordinary item                                      12,861               4,308               6,471               9,901
Gains on the sales of investments                            2,533               5,928              11,261              11,728
Net income available to common shareholders                  9,172               6,233              11,161              16,087

Earnings per common share:
Basic                                                     $   0.09            $   0.06            $   0.11            $   0.16
Diluted                                                       0.09                0.06                0.11                0.16


- ----------

(a)   The second quarter of 2000 includes $9.9 million of catch-up depreciation
      expense related to the transfer of properties from real estate held for
      disposition to real estate held for investment.

(b)   The third quarter of 2000 includes a $2.7 million charge related to water
      usage billing litigation and a $1.0 million charge for changes to
      executive employment agreements.

(c)   Rental income has been restated to include water sub-metering and gas
      reimbursements previously classified as a reduction in rental expense.

(d)   Represents income from continuing operations.

13.   INCOME FROM DISCONTINUED OPERATIONS

      United Dominion adopted Statement of Financial Accounting Standard No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets," as of
January 1, 2002. SFAS No. 144 requires, among other things, that the primary
assets and liabilities and the results of operations of United Dominion's real
properties which have been sold or transferred into held for disposition from
January 1, 2002 through November 27, 2002, be classified as discontinued
operations and segregated in United Dominion's Consolidated Statements of
Operations and Balance Sheets. Properties classified as real estate held for
disposition generally represent properties that are under contract for sale and
are expected to close within the next twelve months.

      From January 1, 2002 through November 27, 2002, United Dominion had sold
23 communities with a total of 6,564 apartment homes and one commercial property
with 143,000 square feet. As of November 27, 2002, United Dominion had eight
communities with 1,475 apartment homes and four parcels of land included in real
estate held for disposition.

      The Company's adoption of SFAS No. 144 resulted in the presentation of the
net operating results of these properties sold or transferred to held for
disposition from January 1, 2002 through November 27, 2002, as discontinued
operations for all periods presented. The adoption of SFAS No. 144 did not have
an impact on net income available to common shareholders. SFAS No. 144 only
resulted in the reclassification of the operating results of the properties sold
or transferred to held for disposition, from January 1, 2002 through November
27, 2002 within the consolidated statements of operations for the years ended
December 31, 2001, 2000 and 1999.


                                       45

                       UNITED DOMINION REALTY TRUST, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


      The following is a summary of income from discontinued operations for the
year ended December 31, 2001, 2000 and 1999 (dollars in thousands):



                                                                                             TWELVE MONTHS ENDED
                                                                                                 DECEMBER 31,
                                                                              --------------------------------------------------
                                                                                2001                 2000                 1999
                                                                              --------             --------             --------
                                                                                                               
Rental income                                                                 $ 57,533             $ 55,063             $ 52,305

Rental  expenses                                                                24,195               22,282               20,846
Other expenses                                                                  19,945               17,602               16,312
Impairment loss on real estate and investments                                     775                   --                1,606
                                                                              --------             --------             --------
                                                                                44,915               39,884               38,764
Income before gains on sales of investments,
   minority interests and extraordinary items                                   12,618               15,179               13,541
                                                                              --------             --------             --------
Minority interests on income from discontinued operations                         (915)              (1,026)              (1,074)
                                                                              --------             --------             --------
Income from discontinued operations, net of minority interests                $ 11,703             $ 14,153             $ 12,467
                                                                              ========             ========             ========


14.   SUBSEQUENT EVENTS

      During the first quarter of 2002, the Company borrowed an additional
$253.6 million under its existing Fannie Mae credit facilities and $70.7 million
under a new $72 million Freddie Mac revolving facility.

      In March 2002, the Company completed the sale of 3.0 million common shares
at a price of $14.91 per share. The net proceeds of $198.3 million from the
issuance were used to reduce outstanding debt under the $375 million unsecured
revolving credit facility.

      In June 2002, the Company issued $200 million of 6.5% senior unsecured
notes due in June 2009. The net proceeds of $198.3 million from the issuance
were used to reduce outstanding debt under our $375 million unsecured revolving
credit facility.

      In September 2002, the Company launched tender offers to purchase $124.9
million of United Dominion's 8.50% debentures maturing in 2024 and $103.1
million of our 7.95% notes maturing in 2006. Upon completion of the tender
offers, which expired September 30,2002 $70.6 million of the 8.5% debentures and
$12.6 million of the 7.95% notes had been repurchased. In addition, premiums of
$12.6 million were paid during the third quarter of 2002 for the redemption of
higher coupon bonds. Management projects a net present value of approximately $1
to $2 million on these redemptions.

      As of November 27, 2002, the Company has repaid $294.8 million of secured
debt, assumed $41.6 million of secured debt in connection with the acquisition
of properties and was relieved of $31.1 million of secured debt in connection
with the disposition of properties. The Company incurred charges of
approximately $15.8 million in the first quarter of 2002 associated with the
refinancings. Management believes that the net present value of these
refinancing transactions ranges from approximately $17 to $20 million.

      As of November 27, 2002, the Company had purchased nine communities with
3,041 apartment homes for approximately $254 million. In addition, in June 2002,
the Company purchased, for approximately $52 million, the remaining two
apartment communities with 644 apartment homes that were part of an
unconsolidated development joint venture in which United Dominion owned a 25%
interest and served as the managing partner. In August 2002, the Company
purchased the 36% outside partnership interest in two properties in California
containing 926 apartment homes for $17.3 million.


                                       46

SCHEDULE III
SUMMARY OF REAL ESTATE OWNED
(IN THOUSANDS)




                                                       INITIAL COSTS                            IMPROVEMENTS
                                                ----------------------------       TOTAL        CAPITALIZED
                                                  LAND AND       BUILDINGS        INITIAL        SUBSEQUENT
                                                    LAND            AND         ACQUISITION    TO ACQUISITION
                                ENCUMBRANCES     IMPROVEMENTS   IMPROVEMENTS     COSTS (a)   (NET OF DISPOSALS)
                              ----------------------------------------------------------------------------------------------
                                                                              
Woodtrail                         $     --        $  1,543        $  5,457        $  7,000        $  2,337
Park Trails                             --           1,145           4,105           5,250             848
Green Oaks                              --           5,314          19,626          24,940           2,767
Sky Hawk                                --           2,298           7,158           9,456           1,935
South Grand At Pecan Grove              --           4,058          14,756          18,814           4,306
Breakers                                --           1,527           5,298           6,825           2,142
Braesridge                              --           3,048          10,962          14,010           1,837
Skylar Pointe                           --           3,604          11,592          15,197           4,018
Stone Canyon                            --             900              --             900           9,447
Briar Park                           1,352             329           2,794           3,123             172
Chelsea Park                         3,141           1,991           5,788           7,779           1,929
Clear Lake Falls                     2,973           1,090           4,534           5,624            (163)
Country Club Place                   3,379             499           6,520           7,019             911
Arbor Ridge                          3,635           1,689           6,684           8,373             296
London Park                          4,370           2,018           6,667           8,686           1,687
Marymont                                --           1,151           4,155           5,306             716
Nantucket Square                     2,619           1,068           4,833           5,901            (530)
Riverway                             1,144             523           2,828           3,352             194
Riviera Pines                        3,162           1,414           6,454           7,868             923
The Gallery                          1,561             769           3,358           4,127             226
Towne Lake                              --           1,334           5,309           6,643           1,243
The Legend at Park 10                   --           1,995              --           1,995          11,786
HOUSTON, TX                         27,336          39,307         138,881         178,188          49,029

Preston Oaks                            --           1,784           6,416           8,200             719
Preston Trace                           --           2,196           8,305          10,500             915
Rock Creek                              --           4,077          15,823          19,900           4,463
Windridge                               --           3,414          14,027          17,442           2,957
Catalina                                --           1,543           5,632           7,175             794
Wimbledon Court                         --           1,809          10,930          12,739           2,174
Lakeridge                               --           1,631           5,669           7,300           1,042
Summergate                              --           1,171           3,929           5,100             835
Oak Forest                          23,540           5,631          23,294          28,925          10,503
Oaks Of Lewisville                  12,265           3,727          13,563          17,290           3,624
Kelly Crossing                          --           2,497           9,156          11,653           1,567
Highlands Of Preston                    --           2,151           8,168          10,319           1,745
The Summit                              --           1,932           9,041          10,973           1,283
Springfield                          5,045           3,075           6,823           9,898           1,082
Meridian I                              --           2,160          18,523          20,683              --
Mandolin I                              --           2,663          20,975          23,638              --
DALLAS, TX                          40,850          41,460         180,274         221,734          33,704




                                      GROSS AMOUNT AT
                              WHICH CARRIED AT CLOSE OF PERIOD
                              --------------------------------     TOTAL
                                  LAND AND       BUILDINGS        CARRYING      ACCUMULATED
                                    LAND            AND            VALUE        DEPRECIATION      DATE OF           DATE
                                IMPROVEMENTS    IMPROVEMENTS        (b)             (c)         CONSTRUCTION      ACQUIRED
                              --------------------------------------------------------------------------------------------
                                                                                                
Woodtrail                         $  1,752        $  7,585        $  9,337        $  2,069            1978        12/31/96
Park Trails                          1,212           4,887           6,098           1,087            1983        12/31/96
Green Oaks                           5,821          21,886          27,707           4,227            1985        06/25/97
Sky Hawk                             2,712           8,679          11,391           2,000            1984        05/08/97
South Grand At Pecan Grove           4,819          18,301          23,120           3,526            1985        09/26/97
Breakers                             1,885           7,083           8,968           1,532            1985        09/26/97
Braesridge                           3,378          12,469          15,847           2,403            1982        09/26/97
Skylar Pointe                        3,706          15,509          19,215           3,132            1979        11/20/97
Stone Canyon                         1,289           9,058          10,347             920            1998        12/17/97
Briar Park                             346           2,949           3,295             411            1987        03/27/98
Chelsea Park                         2,412           7,296           9,708           1,247            1983        03/27/98
Clear Lake Falls                     1,127           4,335           5,462             645            1980        03/27/98
Country Club Place                     646           7,284           7,929           1,162            1985        03/27/98
Arbor Ridge                          2,043           6,626           8,669           1,222            1983        03/27/98
London Park                          2,434           7,939          10,373           1,448            1983        03/27/98
Marymont                             1,164           4,858           6,022             699            1983        03/27/98
Nantucket Square                     1,075           4,297           5,371             586            1983        03/27/98
Riverway                               551           2,995           3,546             514            1985        03/27/98
Riviera Pines                        1,439           7,352           8,791             910            1979        03/27/98
The Gallery                            791           3,562           4,353             431            1968        03/27/98
Towne Lake                           1,576           6,310           7,886           1,157            1984        03/27/98
The Legend at Park 10                3,895           9,885          13,781           1,679            1998        05/19/98
HOUSTON, TX                         46,073         181,144         227,217          33,007

Preston Oaks                         1,926           6,993           8,919           1,438            1980        12/31/96
Preston Trace                        2,385           9,029          11,415           1,773            1984        12/31/96
Rock Creek                           4,577          19,786          24,363           4,248            1979        12/31/96
Windridge                            4,037          16,362          20,399           3,577            1980        12/31/96
Catalina                             1,654           6,314           7,969           1,300            1982        12/31/96
Wimbledon Court                      2,828          12,086          14,914           2,328            1983        12/31/96
Lakeridge                            1,813           6,529           8,342           1,443            1984        12/31/96
Summergate                           1,399           4,536           5,935           1,000            1984        12/31/96
Oak Forest                           6,368          33,059          39,428           6,832         1996/98        12/31/96
Oaks Of Lewisville                   4,501          16,414          20,914           3,832            1983        03/27/97
Kelly Crossing                       2,981          10,239          13,220           2,045            1984        06/18/97
Highlands Of Preston                 2,472           9,591          12,063           1,633            1985        03/27/98
The Summit                           2,319           9,938          12,257           1,624            1983        03/27/98
Springfield                          3,266           7,714          10,980           1,353            1985        03/27/98
Meridian I                           2,160          18,523          20,683              23            2000        12/28/01
Mandolin I                           2,663          20,975          23,638              --            2001        12/28/01
DALLAS, TX                          47,349         208,089         255,437          34,449



                                       47

SCHEDULE III
SUMMARY OF REAL ESTATE OWNED
(IN THOUSANDS)




                                                 INITIAL COSTS                            IMPROVEMENTS
                                          ----------------------------       TOTAL        CAPITALIZED
                                            LAND AND       BUILDINGS        INITIAL        SUBSEQUENT
                                              LAND            AND         ACQUISITION    TO ACQUISITION
                          ENCUMBRANCES     IMPROVEMENTS   IMPROVEMENTS     COSTS (a)   (NET OF DISPOSALS)
                        -------------------------------------------------------------------------------------------------------
                                                                        
Fisherman's Village         $     --        $  2,387        $  7,459        $  9,846        $  3,472
Seabrook                          --           1,846           4,155           6,001           2,749
Dover Village                     --           2,895           6,456           9,351           3,693
Lakeside North                12,440           1,533          11,076          12,609           4,691
Regatta Shore                     --             757           6,607           7,364           2,666
Alafaya Woods                  8,725           1,653           9,042          10,695           2,181
Vinyards                       8,640           1,840          11,572          13,412           2,975
Andover Place                 13,320           3,692           7,757          11,449           3,163
Los Altos                     12,199           2,804          12,348          15,152           2,734
Lotus Landing                     --           2,185           8,639          10,823           1,949
Seville On The Green              --           1,283           6,498           7,781           1,849
Arbors @ Lee Vista            13,383           3,976          16,920          20,896           1,718
Heron Lake                     6,171           1,447           9,288          10,734           1,025
Ashton @ Waterford            14,945           3,872          17,538          21,410             289
ORLANDO, FL                   89,823          32,168         135,356         167,524          35,152

Paradise Falls                    --           1,623           6,171           7,794           2,942
Vista Point                       --           1,587           5,613           7,200           1,409
Sierra Palms                      --           4,639          17,361          22,000             515
Northpark Village                 --           1,519          13,537          15,056           1,706
Stonegate                      3,603             735           7,940           8,675             767
Finisterra                        --           1,274          26,392          27,666             542
La Privada                    15,336           7,303          18,508          25,811           1,915
Terracina                     22,413           3,757          34,781          38,538           6,395
Woodland Park                     --           3,017           6,706           9,723             985
Sierra Foothills              12,691           2,728              --           2,728          18,869
Tower Apartments               2,850           3,333           5,975           9,309             679
Sierra Canyon                     --           1,810          12,964          14,773              --
PHOENIX, AZ                   56,893          33,326         155,947         189,273          36,724

Promontory Pointe                 --           7,548          28,052          35,600           2,689
The Bluffs                        --           1,901           6,899           8,800           1,470
Ashley Oaks                       --           4,591          16,809          21,400             812
Sunflower                         --           2,209           7,891          10,100             750
Escalante                      3,816           2,702          24,033          26,735           2,183
Cimarron City                  3,062             488           4,535           5,023           1,122
Kenton                         7,187           2,345           8,917          11,262           1,835
Peppermill                     4,221             773           6,873           7,647           2,329
Sunset Canyon                  8,655           3,201          10,670          13,871           3,984
Audubon                        4,499             771           6,124           6,895           2,262
Grand Cypress                  5,631             749           8,609           9,359             993
Inn @ Los Patios                  --           3,005          11,545          14,550          (1,489)
SAN ANTONIO, TX               37,072          30,284         140,957         171,241          18,940




                                GROSS AMOUNT AT
                        WHICH CARRIED AT CLOSE OF PERIOD
                        --------------------------------     TOTAL
                            LAND AND       BUILDINGS        CARRYING      ACCUMULATED
                              LAND            AND            VALUE        DEPRECIATION      DATE OF                  DATE
                          IMPROVEMENTS    IMPROVEMENTS        (b)             (c)         CONSTRUCTION             ACQUIRED
                        -------------------------------------------------------------------------------------------------------
                                                                                          
Fisherman's Village         $  3,116        $ 10,202        $ 13,318        $  3,363            1984                   12/29/95
Seabrook                       2,256           6,494           8,750           2,420            1984                   02/20/96
Dover Village                  3,365           9,678          13,044           3,999            1981                   03/31/93
Lakeside North                 2,238          15,061          17,299           4,700            1984                   04/14/94
Regatta Shore                  1,505           8,525          10,030           3,122            1988                   06/30/94
Alafaya Woods                  2,106          10,770          12,876           3,509         1988/90                   10/21/94
Vinyards                       2,416          13,971          16,387           4,445         1984/86                   10/31/94
Andover Place                  4,501          10,111          14,612           3,233            1988        09/29/95 & 09/30/96
Los Altos                      3,315          14,571          17,886           3,285            1990                   10/31/96
Lotus Landing                  2,405          10,367          12,773           1,917            1985                   07/01/97
Seville On The Green           1,455           8,174           9,629           1,538            1986                   10/21/97
Arbors @ Lee Vista             4,372          18,242          22,614           2,910            1991                   12/31/97
Heron Lake                     1,615          10,144          11,760           1,581            1989                   03/27/98
Ashton @ Waterford             3,892          17,807          21,699           2,219            2000                   05/28/98
ORLANDO, FL                   38,558         164,118         202,676          42,242

Paradise Falls                 1,832           8,903          10,735           1,764            1986                   12/31/96
Vista Point                    1,717           6,891           8,609           1,512            1986                   12/31/96
Sierra Palms                   4,745          17,770          22,515           3,241            1996                   12/31/96
Northpark Village              1,832          14,930          16,762           2,517            1983                   03/27/98
Stonegate                        905           8,536           9,442           1,365            1978                   03/27/98
Finisterra                     1,339          26,869          28,208           3,601            1997                   03/27/98
La Privada                     7,841          19,885          27,726           3,002            1987                   03/27/98
Terracina                      4,550          40,383          44,933           6,272            1984                   05/28/98
Woodland Park                  3,224           7,484          10,709           1,405            1979                   06/09/98
Sierra Foothills               4,840          16,757          21,597           2,927            1998                   02/18/98
Tower Apartments               3,713           6,274           9,988             769            1980                   01/18/01
Sierra Canyon                  1,810          12,964          14,773              --            2001                   12/28/01
PHOENIX, AZ                   38,350         187,647         225,997          28,374

Promontory Pointe              7,824          30,465          38,289           5,970            1997                   12/31/96
The Bluffs                     2,098           8,172          10,270           2,091            1978                   12/31/96
Ashley Oaks                    4,725          17,486          22,212           3,175            1993                   12/31/96
Sunflower                      2,341           8,509          10,850           1,738            1980                   12/31/96
Escalante                      2,776          26,143          28,919           2,287       1986/2000                   04/16/98
Cimarron City                    585           5,560           6,145             774            1983                   04/16/98
Kenton                         2,458          10,640          13,097           1,600            1983                   04/16/98
Peppermill                       939           9,036           9,976           1,504            1984                   04/16/98
Sunset Canyon                  3,598          14,258          17,855           2,640            1984                   04/16/98
Audubon                        1,025           8,133           9,157           1,522            1985                   04/16/98
Grand Cypress                    816           9,536          10,352           1,338            1995                   04/16/98
Inn @ Los Patios               3,005          10,055          13,061           1,153            1990                   08/15/98
SAN ANTONIO, TX               32,190         157,992         190,182          25,794



                                       48

SCHEDULE III
SUMMARY OF REAL ESTATE OWNED
(IN THOUSANDS)




                                                      INITIAL COSTS                            IMPROVEMENTS
                                               ----------------------------       TOTAL        CAPITALIZED
                                                 LAND AND       BUILDINGS        INITIAL        SUBSEQUENT
                                                   LAND            AND         ACQUISITION    TO ACQUISITION
                               ENCUMBRANCES     IMPROVEMENTS   IMPROVEMENTS     COSTS (a)   (NET OF DISPOSALS)
                             ----------------------------------------------------------------------------------------------
                                                                             
Bay Cove                         $     --        $  2,929        $  6,578        $  9,507        $  3,247
Summit West                            --           2,177           4,710           6,886           2,485
Pinebrook                              --           1,780           2,458           4,239           3,010
Lakewood Place                     10,300           1,395          10,647          12,042           1,406
Hunters Ridge                      10,232           2,462          10,942          13,404           1,510
Bay Meadow                             --           2,893           9,254          12,146           2,598
Cambridge                              --           1,791           7,166           8,957           1,477
Laurel Oaks                            --           1,362           6,542           7,904           1,234
Parker's Landing                   30,465          10,178          37,869          48,047           1,361
Sugar Mill Creek                    6,319           2,242           7,553           9,794             613
TAMPA, FL                          57,315          29,207         103,719         132,927          18,941

Autumnwood                             --           2,412           8,688          11,100           1,245
Cobblestone                            --           2,925          10,528          13,453           2,990
Pavillion                              --           4,428          19,033          23,461           1,584
Oak Park                           16,236           3,966          22,228          26,194             (16)
Southern Oaks                          --           1,565           5,335           6,900             839
Hunter's Ridge                         --           1,613           5,837           7,450             866
Parc Plaza                             --           1,684           5,279           6,963           1,476
Summit Ridge                           --           1,726           6,308           8,034           1,497
Greenwood Creek                     4,645           1,958           8,551          10,509           1,577
Derby Park                             52           3,121          11,765          14,886           1,232
Aspen Court                         1,852             777           4,945           5,722             926
FORT WORTH, TX                     22,786          26,175         108,496         134,671          14,217

2000 Post Street                       --           9,861          44,578          54,438             634
Birch Creek                         7,653           4,365          16,696          21,061           1,326
Highlands Of Marin                     --           5,996          24,868          30,864             904
Marina Playa                       13,770           6,224          23,916          30,141           1,627
SAN FRANCISCO, CA                  21,423          26,446         110,058         136,504           4,491

Dominion On Spring Forest              --           1,258           8,586           9,844           3,528
Dominion Park Green                    --             500           4,322           4,822           1,567
Dominion On Lake Lynn              16,250           3,622          12,405          16,027           3,296
Dominion Courtney Place                --           1,115           5,119           6,234           2,958
Dominion Walnut Ridge               9,515           1,791          11,969          13,760           2,217
Dominion Walnut Creek              17,050           3,170          21,717          24,888           3,319
Dominion Ramsgate                      --             908           6,819           7,727             882
Copper Mill                            --           1,548          16,067          17,615             974
Trinity Park                       14,939           4,580          17,576          22,155             983
Meadows at Kildaire                    --           2,846          20,768          23,614              --
RALEIGH, NC                        57,754          21,337         125,349         146,686          19,725




                                     GROSS AMOUNT AT
                             WHICH CARRIED AT CLOSE OF PERIOD
                             --------------------------------     TOTAL
                                 LAND AND       BUILDINGS        CARRYING      ACCUMULATED
                                   LAND            AND            VALUE        DEPRECIATION      DATE OF           DATE
                               IMPROVEMENTS    IMPROVEMENTS        (b)             (c)         CONSTRUCTION      ACQUIRED
                             --------------------------------------------------------------------------------------------
                                                                                               
Bay Cove                         $  3,288        $  9,466        $ 12,754        $  3,992            1972        12/16/92
Summit West                         2,458           6,914           9,371           2,997            1972        12/16/92
Pinebrook                           2,004           5,245           7,249           2,665            1977        09/28/93
Lakewood Place                      1,628          11,820          13,448           3,498            1986        03/10/94
Hunters Ridge                       2,965          11,949          14,914           3,286            1992        06/30/95
Bay Meadow                          3,437          11,307          14,744           2,637            1985        12/09/96
Cambridge                           2,090           8,344          10,434           1,755            1985        06/06/97
Laurel Oaks                         1,539           7,599           9,138           1,553            1986        07/01/97
Parker's Landing                    9,272          40,136          49,408           4,478            1991        12/07/98
Sugar Mill Creek                    2,385           8,022          10,407             966            1988        12/07/98
TAMPA, FL                          31,065         120,802         151,867          27,829

Autumnwood                          2,723           9,622          12,345           1,999            1984        12/31/96
Cobblestone                         3,154          13,289          16,443           2,667            1984        12/31/96
Pavillion                           4,750          20,296          25,045           3,828            1979        12/31/96
Oak Park                            5,509          20,669          26,178           4,652         1982/98        12/31/96
Southern Oaks                       1,621           6,117           7,739           1,344            1982        12/31/96
Hunter's Ridge                      1,822           6,494           8,316           1,413            1992        12/31/96
Parc Plaza                          2,136           6,303           8,439           1,410            1986        10/30/97
Summit Ridge                        2,198           7,333           9,531           1,456            1983        03/27/98
Greenwood Creek                     2,298           9,788          12,086           1,624            1984        03/27/98
Derby Park                          3,750          12,368          16,118           2,229            1984        03/27/98
Aspen Court                         1,094           5,554           6,648             958            1986        03/27/98
FORT WORTH, TX                     31,056         117,832         148,888          23,580

2000 Post Street                    9,919          45,154          55,073           3,780            1987        12/07/98
Birch Creek                         4,607          17,780          22,387           1,839            1968        12/07/98
Highlands Of Marin                  6,078          25,690          31,768           2,452            1991        12/07/98
Marina Playa                        6,455          25,313          31,768           2,697            1971        12/07/98
SAN FRANCISCO, CA                  27,059         113,936         140,995          10,769

Dominion On Spring Forest           1,710          11,662          13,372           5,482         1978/81        05/21/91
Dominion Park Green                   701           5,688           6,389           2,454            1987        09/27/91
Dominion On Lake Lynn               4,136          15,188          19,324           4,324            1986        12/01/92
Dominion Courtney Place             1,442           7,750           9,192           2,789         1979/81        07/08/93
Dominion Walnut Ridge               2,171          13,806          15,977           4,163         1982/84        03/04/94
Dominion Walnut Creek               3,720          24,487          28,207           6,933         1985/86        05/17/94
Dominion Ramsgate                   1,030           7,578           8,608           1,625            1988        08/15/96
Copper Mill                         1,813          16,775          18,589           3,090            1997        12/31/96
Trinity Park                        4,620          18,518          23,138           3,333            1987        02/28/97
Meadows at Kildaire                 6,863          16,752          23,614             482            2000        05/25/00
RALEIGH, NC                        28,207         138,204         166,411          34,675



                                       49

SCHEDULE III
SUMMARY OF REAL ESTATE OWNED
(IN THOUSANDS)




                                                       INITIAL COSTS                            IMPROVEMENTS
                                                ----------------------------       TOTAL        CAPITALIZED
                                                  LAND AND       BUILDINGS        INITIAL        SUBSEQUENT
                                                    LAND            AND         ACQUISITION    TO ACQUISITION
                                ENCUMBRANCES     IMPROVEMENTS   IMPROVEMENTS     COSTS (a)   (NET OF DISPOSALS)
                              ------------------------------------------------------------------------------------------------------
                                                                              
Dominion Olde West                $     --        $  1,965        $ 12,204        $ 14,169        $  1,950
Dominion Creekwood                      --              --              --              --           1,052
Dominion Laurel Springs                 --             464           3,120           3,584           1,139
Dominion English Hills              20,044           1,979          11,524          13,503           5,129
Dominion Gayton Crossing            10,400             826           5,148           5,974           6,302
Dominion West End                   16,493           2,059          15,049          17,108           2,697
Courthouse Green                     8,085             732           4,702           5,434           2,202
Waterside At Ironbridge             11,635           1,844          13,239          15,082             791
RICHMOND, VA                        66,657           9,870          64,986          74,856          21,262

Boronda Manor                        5,101           1,946           8,982          10,928             246
Garden Court                         2,382             888           4,188           5,076             142
Harding Park Townhomes               1,215             549           2,051           2,601              61
Cambridge Court                      7,501           3,039          12,883          15,922             511
Laurel Tree                          2,993           1,304           5,115           6,419             138
Pine Grove                           3,313           1,383           5,784           7,167              92
The Pointe At Harden Ranch          14,081           6,388          23,854          30,242             607
The Pointe At Northridge             4,718           2,044           8,028          10,072             263
The Pointe At Westlake               3,111           1,329           5,334           6,663             153
MONTEREY PENINSULA, CA              44,416          18,870          76,220          95,091           2,213

Sycamore Ridge                          --           4,068          15,433          19,501           1,016
Heritage Green                          --           2,990          11,392          14,382           9,318
Alexander Court                         --           1,573              --           1,573          21,413
Governour's Square                  28,730           7,513          28,695          36,208           2,571
Hickory Creek                           --           3,421          13,539          16,961             826
Britton Woods                       15,168           3,477          19,213          22,690           1,553
COLUMBUS, OH                        43,897          23,042          88,272         111,315          36,697

The Highlands                           --             321           2,830           3,152           2,707
Emerald Bay                             --             626           4,723           5,349           3,614
Dominion Peppertree                     --           1,546           7,699           9,245           1,652
Dominion Crown Point                    --           2,122          22,339          24,461           2,098
Dominion Harris Pond                    --             887           6,728           7,615           1,349
Dominion Mallard Creek                  --             699           6,488           7,187             702
Chateau Village                         --           1,047           6,980           8,026           2,322
Dominion At Sharon                      --             667           4,856           5,523           1,021
Providence Court                        --              --          22,048          22,048           9,526
Stoney Pointe                       12,159           1,500          15,856          17,355           1,352
CHARLOTTE, NC                       12,159           9,415         100,546         109,961          26,342




                                      GROSS AMOUNT AT
                              WHICH CARRIED AT CLOSE OF PERIOD
                              --------------------------------     TOTAL
                                  LAND AND       BUILDINGS        CARRYING      ACCUMULATED
                                    LAND            AND            VALUE        DEPRECIATION         DATE OF              DATE
                                IMPROVEMENTS    IMPROVEMENTS        (b)             (c)            CONSTRUCTION         ACQUIRED
                              ------------------------------------------------------------------------------------------------------
                                                                                                
Dominion Olde West                $  2,380        $ 13,738        $ 16,119        $  6,449      1978/82/84/85/87  12/31/84 & 8/27/91
Dominion Creekwood                      49           1,003           1,052             147                  1984            08/27/91
Dominion Laurel Springs                633           4,090           4,723           1,833                  1972            09/06/91
Dominion English Hills               2,806          15,827          18,633           6,986               1969/76            12/06/91
Dominion Gayton Crossing             1,165          11,111          12,276           5,113                  1973            09/28/95
Dominion West End                    2,647          17,159          19,806           4,375                  1989            12/28/95
Courthouse Green                     1,079           6,557           7,636           3,433               1974/78            12/31/84
Waterside At Ironbridge              1,972          13,901          15,873           2,202                  1987            09/30/97
RICHMOND, VA                        12,731          83,386          96,117          30,537

Boronda Manor                        1,966           9,208          11,174             948                  1979            12/07/98
Garden Court                           892           4,326           5,218             460                  1973            12/07/98
Harding Park Townhomes                 559           2,103           2,662             222                  1984            12/07/98
Cambridge Court                      3,096          13,337          16,433           1,493                  1974            12/07/98
Laurel Tree                          1,314           5,244           6,558             597                  1977            12/07/98
Pine Grove                           1,388           5,871           7,259             582                  1963            12/07/98
The Pointe At Harden Ranch           6,412          24,437          30,849           2,601                  1986            12/07/98
The Pointe At Northridge             2,060           8,274          10,335             895                  1979            12/07/98
The Pointe At Westlake               1,331           5,485           6,816             596                  1975            12/07/98
MONTEREY PENINSULA, CA              19,020          78,285          97,304           8,394

Sycamore Ridge                       4,215          16,302          20,517           2,168                  1997            07/02/98
Heritage Green                       3,098          20,602          23,700           2,693                  1998            07/02/98
Alexander Court                      6,190          16,797          22,986           2,329                  1999            07/02/98
Governour's Square                   7,763          31,015          38,778           3,592                  1967            12/07/98
Hickory Creek                        3,492          14,295          17,787           1,694                  1988            12/07/98
Britton Woods                        3,979          20,264          24,243           1,185                  1991            04/20/01
COLUMBUS, OH                        28,736         119,276         148,012          13,661

The Highlands                          693           5,165           5,858           3,539                  1970            01/17/84
Emerald Bay                          1,207           7,756           8,963           4,087                  1972            02/06/90
Dominion Peppertree                  1,860           9,038          10,898           3,092                  1987            12/14/93
Dominion Crown Point                 3,893          22,665          26,558           4,713             1987/2000            07/01/94
Dominion Harris Pond                 1,228           7,736           8,964           2,261                  1987            07/01/94
Dominion Mallard Creek                 777           7,112           7,889           1,923                  1989            08/16/94
Chateau Village                      1,432           8,916          10,348           2,458                  1974            08/15/96
Dominion At Sharon                     903           5,641           6,545           1,321                  1984            08/15/96
Providence Court                     7,489          24,085          31,574           4,884                  1997            09/30/97
Stoney Pointe                        1,754          16,953          18,707           3,235                  1991            02/28/97
CHARLOTTE, NC                       21,236         115,068         136,303          31,512



                                       50

SCHEDULE III
SUMMARY OF REAL ESTATE OWNED
(IN THOUSANDS)




                                                   INITIAL COSTS                            IMPROVEMENTS
                                           ----------------------------        TOTAL        CAPITALIZED
                                             LAND AND        BUILDINGS        INITIAL        SUBSEQUENT
                                               LAND             AND         ACQUISITION    TO ACQUISITION
                            ENCUMBRANCES    IMPROVEMENTS    IMPROVEMENTS     COSTS (a)   (NET OF DISPOSALS)
                          ------------------------------------------------------------------------------------------------------
                                                                          
Legacy Hill                   $     --        $  1,148        $  5,868        $  7,015        $  2,872
Hickory Run                         --           1,469          11,584          13,053           1,872
Carrington Hills                    --           2,117              --           2,117          24,643
Brookridge                          --             708           5,461           6,169           1,277
Club At Hickory Hollow              --           2,140          15,231          17,371           2,045
Breckenridge                        --             766           7,714           8,480             860
Williamsburg                        --           1,376          10,931          12,307           1,627
Colonnade                           --           1,460          16,015          17,475             622
NASHVILLE, TN                       --          11,183          72,804          83,987          35,818

Pine Avenue                     11,627           2,158           8,888          11,046             262
The Grand Resort                    --           8,884          35,707          44,591             808
Grand Terrace                       --           2,144           6,595           8,739           1,182
Windward Point                      --           1,768           7,118           8,886             316
Rancho Vallecitos                   --           3,303          10,877          14,180             980
SOUTHERN CALIFORNIA             11,627          18,258          69,184          87,442           3,547

Beechwood                           --           1,409           6,087           7,496           1,041
Steeplechase                        --           3,208          11,514          14,722          12,397
Northwinds                          --           1,558          11,736          13,293           1,075
Deerwood Crossings                  --           1,540           7,989           9,529           1,202
Dutch Village                       --           1,198           4,826           6,024             739
Lake Brandt                         --           1,547          13,489          15,036             861
Park Forest                         --             680           5,770           6,450             602
Deep River Pointe                   --           1,671          11,140          12,811             423
GREENSBORO, NC                      --          12,810          72,552          85,362          18,341

Dominion Middle Ridge           14,198           3,311          13,283          16,595           1,061
Dominion Lake Ridge              9,142           2,366           8,386          10,753           1,085
Knolls At Newgate                   --           1,726           3,530           5,256           1,717
Greens At Falls Run                 --           2,731           5,300           8,031             860
Manor At England Run            14,671           3,195          13,505          16,700          12,544
METROPOLITAN DC                 38,011          13,329          44,005          57,334          17,266

Cape Harbor                         --           1,892          18,113          20,005           1,039
Mill Creek                          --           1,404           4,489           5,894          13,497
The Creek                           --             418           2,506           2,924           1,737
Forest Hills                        --           1,028           5,420           6,448           2,066
Clear Run                           --             875           8,741           9,615           5,370
Crosswinds                          --           1,096          18,230          19,326           1,094
WILMINGTON, NC                      --           6,713          57,500          64,213          24,802




                                  GROSS AMOUNT AT
                          WHICH CARRIED AT CLOSE OF PERIOD
                          --------------------------------     TOTAL
                              LAND AND       BUILDINGS        CARRYING      ACCUMULATED
                                LAND            AND            VALUE        DEPRECIATION      DATE OF            DATE
                            IMPROVEMENTS    IMPROVEMENTS        (b)             (c)         CONSTRUCTION       ACQUIRED
                          ----------------------------------------------------------------------------------------------
                                                                                            
Legacy Hill                   $  1,431        $  8,457        $  9,887        $  2,681             1977         11/06/95
Hickory Run                      1,726          13,198          14,924           3,223             1989         12/29/95
Carrington Hills                 3,718          23,043          26,761           3,520             1999         12/06/95
Brookridge                         928           6,518           7,445           1,795             1986         03/28/96
Club At Hickory Hollow           2,697          16,719          19,416           3,468             1987         02/21/97
Breckenridge                       980           8,359           9,340           1,623             1986         03/27/97
Williamsburg                     1,641          12,293          13,934           2,021             1986         05/20/98
Colonnade                        1,609          16,488          18,097           1,923             1998         01/07/99
NASHVILLE, TN                   14,729         105,076         119,805          20,254

Pine Avenue                      2,168           9,140          11,308             935             1987         12/07/98
The Grand Resort                 8,946          36,453          45,399           4,082             1971         12/07/98
Grand Terrace                    2,226           7,695           9,921             783             1986         06/30/99
Windward Point                   1,804           7,398           9,202             773             1983         12/07/98
Rancho Vallecitos                3,393          11,767          15,160           1,938             1988         10/13/99
SOUTHERN CALIFORNIA             18,537          72,452          90,989           8,512

Beechwood                        1,665           6,872           8,537           2,318             1985         12/22/93
Steeplechase                     3,871          23,248          27,119           4,377          1990/97         03/07/96
Northwinds                       1,743          12,625          14,368           2,725          1989/97         08/15/96
Deerwood Crossings               1,671           9,060          10,731           2,258             1973         08/15/96
Dutch Village                    1,282           5,481           6,763           1,438             1970         08/15/96
Lake Brandt                      1,809          14,089          15,898           3,112             1995         08/15/96
Park Forest                        864           6,188           7,052           1,266             1987         09/26/96
Deep River Pointe                1,804          11,430          13,234           1,944             1997         10/01/97
GREENSBORO, NC                  14,709          88,994         103,703          19,438

Dominion Middle Ridge            3,423          14,232          17,655           3,002             1990         06/25/96
Dominion Lake Ridge              2,511           9,326          11,837           2,180             1987         02/23/96
Knolls At Newgate                1,846           5,126           6,972           1,872             1972         07/01/94
Greens At Falls Run              2,877           6,014           8,891           1,584             1989         05/04/95
Manor At England Run             4,821          24,423          29,244           4,175        1990/2000         05/04/95
METROPOLITAN DC                 15,478          59,121          74,599          12,813

Cape Harbor                      2,254          18,790          21,043           4,070             1996         08/15/96
Mill Creek                       1,911          17,480          19,391           4,058          1986/98         09/30/91
The Creek                          489           4,172           4,661           1,945             1973         06/30/92
Forest Hills                     1,202           7,313           8,514           2,857          1964/69         06/30/92
Clear Run                        1,281          13,705          14,986           3,690          1987/89         07/22/94
Crosswinds                       1,210          19,210          20,420           3,684             1990         02/28/97
WILMINGTON, NC                   8,346          80,669          89,015          20,305



                                       51

SCHEDULE III
SUMMARY OF REAL ESTATE OWNED
(IN THOUSANDS)




                                                          INITIAL COSTS                           IMPROVEMENTS
                                                   ---------------------------       TOTAL        CAPITALIZED
                                                    LAND AND       BUILDINGS        INITIAL        SUBSEQUENT
                                                      LAND            AND         ACQUISITION    TO ACQUISITION
                                    ENCUMBRANCES   IMPROVEMENTS   IMPROVEMENTS     COSTS (a)   (NET OF DISPOSALS)
                                  -------------------------------------------------------------------------------------------
                                                                                
Gatewater Landing                      $    --        $ 2,078        $ 6,085        $ 8,163        $ 1,296
Dominion Kings Place                     4,430          1,565          7,007          8,572            914
Dominion At Eden Brook                   7,565          2,361          9,384         11,745          1,338
Dominion Great Oaks                     11,446          2,919          9,100         12,019          3,483
Dominion Constant Freindship                --            903          4,669          5,572            767
Lakeside Mill                            5,570          2,666         10,109         12,775            458
BALTIMORE, MD                           29,011         12,493         46,353         58,846          8,256

Stanford Village                            --            885          2,808          3,692          1,347
Griffin Crossing                            --          1,510          7,544          9,054          1,671
Gwinnett Square                          8,851          1,924          7,376          9,301          1,730
Dunwoody Pointe                          5,465          2,763          6,903          9,666          4,500
Riverwood                                4,797          2,986         11,088         14,074          3,807
Waterford Place                             --          1,579         10,303         11,882            478
ATLANTA, GA                             19,113         11,647         46,022         57,669         13,533

Briar Club                                  --          1,214          6,929          8,143          2,290
Hunters Trace                               --            888          6,677          7,565          1,555
Cinnamon Trails                             --          1,887          7,645          9,531             30
The Trails at Mt. Moriah                17,147          5,931         22,095         28,026          2,899
The Trails at Kirby Parkway              9,945          4,457         12,300         16,757            825
Dogwood Creek                               --          2,772         15,674         18,446            842
MEMPHIS, TN                             27,092         17,149         71,319         88,467          8,441

Forest Lake At Oyster Point                 --            780          8,862          9,642          1,960
Woodscape                                   --            799          7,210          8,008          2,486
Eastwind                                    --            155          5,317          5,472          1,343
Dominion Waterside At Lynnhaven             --          1,824          4,107          5,931          1,261
Heather Lake                                --            617          3,401          4,017          3,562
Dominion Yorkshire Downs                 7,359          1,089          8,582          9,671            742
NORFOLK, VA                              7,359          5,263         37,477         42,741         11,354

Gable Hill                                  --            825          5,307          6,132          1,511
St. Andrews Commons                         --          1,429          9,371         10,800          1,762
Forestbrook                              5,000            396          2,902          3,298          1,925
Waterford                                   --            958          6,948          7,906          1,526
Hampton Greene                              --          1,363         10,118         11,481          1,458
Rivergate                                   --          1,123         12,056         13,178          1,252
COLUMBIA, SC                             5,000          6,093         46,703         52,795          9,435




                                          GROSS AMOUNT AT
                                  WHICH CARRIED AT CLOSE OF PERIOD
                                  --------------------------------    TOTAL
                                      LAND AND      BUILDINGS        CARRYING     ACCUMULATED
                                        LAND           AND            VALUE       DEPRECIATION     DATE OF           DATE
                                    IMPROVEMENTS   IMPROVEMENTS        (b)            (c)        CONSTRUCTION      ACQUIRED
                                  -----------------------------------------------------------------------------------------
                                                                                                 
Gatewater Landing                      $ 2,182        $ 7,277        $ 9,459        $ 2,729            1970        12/16/92
Dominion Kings Place                     1,653          7,832          9,485          2,595            1983        12/29/92
Dominion At Eden Brook                   2,465         10,618         13,083          3,529            1984        12/29/92
Dominion Great Oaks                      4,278         11,224         15,502          4,010            1974        07/01/94
Dominion Constant Freindship             1,043          5,296          6,339          1,426            1990        05/04/95
Lakeside Mill                            2,674         10,560         13,233          1,725            1989        12/10/99
BALTIMORE, MD                           14,297         52,806         67,102         16,014

Stanford Village                         1,182          3,858          5,040          2,088            1985        09/26/89
Griffin Crossing                         1,869          8,857         10,725          2,798         1987/89        06/08/94
Gwinnett Square                          2,200          8,831         11,030          2,379            1985        03/29/95
Dunwoody Pointe                          3,324         10,842         14,167          3,562            1980        10/24/95
Riverwood                                3,429         14,452         17,880          4,067            1980        06/26/96
Waterford Place                          1,649         10,711         12,360          1,482            1985        04/15/98
ATLANTA, GA                             13,652         57,550         71,202         16,377

Briar Club                               1,564          8,869         10,433          2,754            1987        10/14/94
Hunters Trace                            1,186          7,934          9,120          2,412            1986        10/14/94
Cinnamon Trails                          2,089          7,473          9,561          1,272            1989        01/09/98
The Trails at Mt. Moriah                 6,477         24,447         30,924          4,379            1990        01/09/98
The Trails at Kirby Parkway              4,650         12,932         17,582          2,022            1990        01/09/98
Dogwood Creek                            2,986         16,302         19,287          2,707            1997        02/06/98
MEMPHIS, TN                             18,951         77,957         96,909         15,546

Forest Lake At Oyster Point              1,167         10,435         11,602          2,938            1986        08/15/95
Woodscape                                1,800          8,694         10,494          4,416         1974/76        12/29/87
Eastwind                                   378          6,436          6,814          2,863            1970        04/04/88
Dominion Waterside At Lynnhaven          2,033          5,158          7,191          1,442            1966        08/15/96
Heather Lake                             1,016          6,564          7,580          4,728         1972/74        03/01/80
Dominion Yorkshire Downs                 1,250          9,163         10,413          1,492            1987        12/23/97
NORFOLK, VA                              7,644         46,451         54,095         17,879

Gable Hill                               1,189          6,455          7,643          2,900            1985        12/04/89
St. Andrews Commons                      1,877         10,685         12,562          3,788            1986        05/20/93
Forestbrook                                654          4,569          5,223          2,176            1974        07/01/93
Waterford                                1,264          8,167          9,432          2,527            1985        07/01/94
Hampton Greene                           1,895         11,045         12,940          3,202            1990        08/19/94
Rivergate                                1,437         12,993         14,430          2,744            1989        08/15/96
COLUMBIA, SC                             8,316         53,913         62,230         17,337



                                       52

SCHEDULE III
SUMMARY OF REAL ESTATE OWNED
(IN THOUSANDS)




                                                               INITIAL COSTS                            IMPROVEMENTS
                                                        ----------------------------       TOTAL        CAPITALIZED
                                                         LAND AND        BUILDINGS        INITIAL        SUBSEQUENT
                                                           LAND             AND         ACQUISITION    TO ACQUISITION
                                        ENCUMBRANCES    IMPROVEMENTS    IMPROVEMENTS     COSTS (a)   (NET OF DISPOSALS)
                                      -------------------------------------------------------------------------------------------
                                                                                      
2900 Place                                $     --        $  1,819        $  5,593        $  7,412        $    264
Brandywine Creek                            11,999           4,666          17,514          22,180          (2,417)
Lakewood                                     3,171           1,113           3,878           4,991             231
Nemoke Trail                                 9,719           3,431          12,223          15,654             353
LANSING, MI                                 24,889          11,029          39,208          50,237          (1,569)

Greentree                                   12,455           1,634          11,227          12,861           3,938
Westland                                    10,747           1,835          14,865          16,699           3,846
Antlers                                         --           4,034          11,193          15,227           5,758
JACKSONVILLE, FL                            23,202           7,503          37,285          44,787          13,542

Arbor Terrace                                4,124           1,453          11,995          13,448             571
Crowne Pointe                                4,765           2,486           6,437           8,924           1,065
Hilltop                                      4,422           2,174           7,408           9,582             441
SEATTLE, WA                                 13,311           6,114          25,840          31,953           2,077

Sunset Point, Las Vegas, NV                     --           4,295          15,705          20,000           1,301
Greensview, Aurora, CO                          --           2,974          12,490          15,464             617
Mountain View, Aurora, CO                       --           6,402          21,569          27,971           1,473
Foothills Tennis Village,
  Roseville, CA                             11,339           3,618          14,542          18,160             516
Woodlake Village, Sacramento, CA            30,900           6,772          26,967          33,739           1,339
Silk Oak, Fresno, CA                            --           2,325           4,566           6,891             259
OTHER WESTERN                               42,239          26,385          95,839         122,225           5,504

Mallards Of Wedgewood, Lakeland, FL             --             959           6,865           7,824           1,746
Brantley Pines, Ft. Myers, FL                   --           1,893           8,248          10,141           4,982
Santa Barbara, Naples, FL                       --           1,134           8,020           9,154           1,728
Ashlar, Ft. Myers, FL                           --           3,952          11,718          15,670          16,489
The Groves, Port Orange, FL                     --             790           4,767           5,557           1,779
Lakeside, Port Orange, FL                       --           2,404           6,420           8,824           1,345
Mallards Of Brandywine, Deland, FL              --             766           5,408           6,174           1,177
LakePointe, Melbourne, FL                       --           1,434           4,940           6,375           2,244
OTHER FLORIDA                                   --          13,333          56,385          69,719          31,490

Lancaster Commons, Salem, OR                 6,268           2,485           7,451           9,936             387
Tualatin Heights, Tualatin, OR               8,608           3,273           9,134          12,407             711
University Park, Portland, OR                   --           3,007           8,191          11,199             361
Evergreen Park, Vancouver, WA                5,174           3,878           9,973          13,851             643
Aspen Creek, Puyallup, WA                    6,832           1,178           9,116          10,294             260
Beaumont, Tacoma, WA                         9,817           2,339          12,559          14,898             446
Campus Commons, Pullman, WA                  8,907           1,143          12,873          14,016          (2,254)
OTHER PACIFIC                               45,605          17,304          69,298          86,601             555




                                             GROSS AMOUNT AT
                                      WHICH CARRIED AT CLOSE OF PERIOD
                                      --------------------------------     TOTAL
                                          LAND AND       BUILDINGS        CARRYING     ACCUMULATED
                                            LAND            AND            VALUE       DEPRECIATION     DATE OF           DATE
                                        IMPROVEMENTS    IMPROVEMENTS        (b)            (c)        CONSTRUCTION      ACQUIRED
                                      ------------------------------------------------------------------------------------------
                                                                                                      
2900 Place                                $  1,823        $  5,853        $  7,676        $    621         1966         12/07/98
Brandywine Creek                             4,748          15,015          19,763           1,821         1974         12/07/98
Lakewood                                     1,231           3,991           5,222             502         1974         12/07/98
Nemoke Trail                                 3,495          12,512          16,007           1,453         1978         12/07/98
LANSING, MI                                 11,298          37,370          48,668           4,397

Greentree                                    2,343          14,456          16,799           4,554         1986         07/22/94
Westland                                     2,668          17,877          20,546           4,737         1990         05/09/96
Antlers                                      4,903          16,082          20,985           4,668         1985         05/28/96
JACKSONVILLE, FL                             9,914          48,415          58,329          13,959

Arbor Terrace                                1,482          12,537          14,019           1,903         1996         03/27/98
Crowne Pointe                                2,520           7,469           9,989             968         1987         12/07/98
Hilltop                                      2,313           7,710          10,023             905         1985         12/07/98
SEATTLE, WA                                  6,315          27,716          34,031           3,775

Sunset Point, Las Vegas, NV                  4,450          16,851          21,301           3,113         1990         12/31/96
Greensview, Aurora, CO                       2,452          13,629          16,081           1,610         1987         12/07/98
Mountain View, Aurora, CO                    6,350          23,095          29,445           2,756         1973         12/07/98
Foothills Tennis Village,
  Roseville, CA                              3,709          14,966          18,675           1,596         1988         12/07/98
Woodlake Village, Sacramento, CA             6,981          28,097          35,078           3,209         1979         12/07/98
Silk Oak, Fresno, CA                         2,368           4,782           7,150             875         1985         12/07/98
OTHER WESTERN                               26,310         101,419         127,729          13,159

Mallards Of Wedgewood, Lakeland, FL          1,252           8,318           9,570           2,378         1985         07/27/95
Brantley Pines, Ft. Myers, FL                  835          14,287          15,122           4,983         1986         08/11/94
Santa Barbara, Naples, FL                    1,740           9,142          10,882           2,920         1987         09/01/94
Ashlar, Ft. Myers, FL                        7,592          24,567          32,159           2,797    1999/2000         12/24/97
The Groves, Port Orange, FL                  1,444           5,892           7,336           1,891         1989         12/13/95
Lakeside, Port Orange, FL                    2,585           7,585          10,169           1,537         1985         07/01/97
Mallards Of Brandywine, Deland, FL             990           6,361           7,351           1,369         1985         07/01/97
LakePointe, Melbourne, FL                    1,778           6,841           8,619           2,699         1984         09/24/93
OTHER FLORIDA                               18,216          82,992         101,208          20,574

Lancaster Commons, Salem, OR                 2,507           7,816          10,323           1,020         1992         12/07/98
Tualatin Heights, Tualatin, OR               3,370           9,748          13,118           1,269         1989         12/07/98
University Park, Portland, OR                3,020           8,540          11,560             997         1987         03/27/98
Evergreen Park, Vancouver, WA                3,915          10,579          14,494           1,460         1988         03/27/98
Aspen Creek, Puyallup, WA                    1,264           9,290          10,554           1,038         1996         12/07/98
Beaumont, Tacoma, WA                         2,389          12,955          15,344           1,881         1996         06/14/00
Campus Commons, Pullman, WA                  1,224          10,538          11,763           1,913         1972         03/27/98
OTHER PACIFIC                               17,688          69,468          87,156           9,578



                                       53

SCHEDULE III
SUMMARY OF REAL ESTATE OWNED
(IN THOUSANDS)




                                                                 INITIAL COSTS                            IMPROVEMENTS
                                                          ----------------------------       TOTAL        CAPITALIZED
                                                           LAND AND        BUILDINGS        INITIAL        SUBSEQUENT
                                                             LAND             AND         ACQUISITION    TO ACQUISITION
                                          ENCUMBRANCES    IMPROVEMENTS    IMPROVEMENTS     COSTS (a)   (NET OF DISPOSALS)
                                        --------------------------------------------------------------------------------------------
                                                                                        
Washing Park, Centerville, OH               $     --        $  2,012        $  7,565        $  9,577        $  1,030
Fountainhead, Dayton, OH                       1,485             391           1,420           1,811             134
Jamestown Of Toledo, Toledo, OH                5,764           1,800           7,054           8,854             640
Sunset Village, Flint, MI                         --             797           1,829           2,626             199
American Heritage, Waterford, MI               3,097           1,021           3,958           4,979             122
Ashton Pines, Waterford, MI                       --           1,822           8,014           9,836             498
Kings Gate, Sterling Heights, MI               3,767           1,181           4,828           6,009             196
Lancaster Lake, Clarkston, MI                 11,957           4,238          14,663          18,901             793
International Village, Speedway, IN           10,078           3,934          11,479          15,413           1,185
Regency Park South, Indianapolis, IN              --           2,643           7,632          10,275             725
OTHER MIDWESTERN                              36,148          19,839          68,442          88,281           5,522

Colony Village, New Bern, NC                      --             346           3,037           3,383           1,968
Brynn Marr, Jacksonville, NC                      --             433           3,822           4,254           2,589
Liberty Crossing, Jacksonville, NC                --             840           3,873           4,713           2,898
Bramblewood, Goldsboro, NC                        --             402           3,151           3,552           1,556
Cumberland Trace, Fayetteville, NC                --             632           7,896           8,528             835
Village At Cliffdale,
  Fayetteville, NC                             9,876             941          15,498          16,440           1,196
Morganton Place, Fayetteville, NC                 --             819          13,217          14,036             616
Woodberry, Asheville, NC                          --             389           6,381           6,770           1,118
OTHER NORTH CAROLINA                           9,876           4,802          56,874          61,677          12,776

Pecan Grove, Austin, TX                           --           1,407           5,293           6,700             470
Anderson Mill, Austin, TX                      9,765           3,135          11,170          14,305           3,232
Red Stone Ranch, Cedar Park, TX                   --           1,897          17,526          19,422              --
Turtle Creek, Little Rock, AR                     --           1,913           7,087           9,000             995
Shadow Lake, Little Rock, AR                      --           2,524           8,976          11,500           1,433
Desert Springs, Tuscan, AZ                     4,382           1,118           7,094           8,213             685
Posada Del Rio, Tuscan, AZ                        --             844           4,288           5,132            (329)
Alvarado, Albuquerque, NM                         --           1,930           5,970           7,900             700
Dorado Heights, Albuquerque, NM                4,955           1,568           6,555           8,123             654
OTHER SOUTHWESTERN                            19,102          16,335          73,960          90,295           7,841

Greens At Hollymead,
Charlottesville, VA                               --             965           5,250           6,215             679
Brittingham Square, Salisbury, MD                 --             650           4,962           5,612             666
Greens At Schumaker Pond,
  Salisbury, MD                                   --             710           6,118           6,827             927
Greens At Cross Court, Easton, MD                 --           1,182           4,544           5,726           1,052
Greens At Hilton Run, Lexington
  Park, MD                                    12,542           2,754          10,483          13,237           1,454
OTHER MID-ATLANTIC                            12,542           6,262          31,357          37,618           4,778




                                               GROSS AMOUNT AT
                                        WHICH CARRIED AT CLOSE OF PERIOD
                                        --------------------------------     TOTAL
                                            LAND AND       BUILDINGS        CARRYING     ACCUMULATED
                                              LAND            AND            VALUE       DEPRECIATION     DATE OF           DATE
                                          IMPROVEMENTS    IMPROVEMENTS        (b)            (c)        CONSTRUCTION      ACQUIRED
                                        ------------------------------------------------------------------------------------------
                                                                                                        
Washing Park, Centerville, OH               $  2,115        $  8,491        $ 10,607        $  1,162          1998        12/07/98
Fountainhead, Dayton, OH                         391           1,555           1,945             201          1966        12/07/98
Jamestown Of Toledo, Toledo, OH                1,892           7,603           9,494             919          1965        12/07/98
Sunset Village, Flint, MI                        814           2,011           2,825             350          1940        12/07/98
American Heritage, Waterford, MI               1,031           4,070           5,101             476          1968        12/07/98
Ashton Pines, Waterford, MI                    1,846           8,489          10,334             889          1987        12/07/98
Kings Gate, Sterling Heights, MI               1,218           4,987           6,205             551          1973        12/07/98
Lancaster Lake, Clarkston, MI                  4,316          15,378          19,693           1,724          1988        12/07/98
International Village, Speedway, IN            3,999          12,599          16,598           1,754          1968        12/07/98
Regency Park South, Indianapolis, IN           2,713           8,287          11,000           1,123          1968        12/07/98
OTHER MIDWESTERN                              20,332          73,471          93,803           9,149

Colony Village, New Bern, NC                     560           4,791           5,351           3,026       1972/74        12/31/84
Brynn Marr, Jacksonville, NC                     724           6,120           6,844           3,681       1973/77        12/31/84
Liberty Crossing, Jacksonville, NC             1,419           6,192           7,611           3,680       1972/74        11/30/90
Bramblewood, Goldsboro, NC                       588           4,521           5,109           2,813       1980/82        12/31/84
Cumberland Trace, Fayetteville, NC               668           8,694           9,362           1,845          1973        08/15/96
Village At Cliffdale,
  Fayetteville, NC                             1,123          16,513          17,636           3,309          1992        08/15/96
Morganton Place, Fayetteville, NC                887          13,765          14,652           2,632          1994        08/15/96
Woodberry, Asheville, NC                         655           7,233           7,888           1,674          1987        08/15/96
OTHER NORTH CAROLINA                           6,623          67,830          74,453          22,659

Pecan Grove, Austin, TX                        1,464           5,706           7,170           1,008          1984        12/31/96
Anderson Mill, Austin, TX                      3,478          14,059          17,537           3,552          1984        03/27/97
Red Stone Ranch, Cedar Park, TX                5,380          14,043          19,422             744          2000        06/14/00
Turtle Creek, Little Rock, AR                  2,189           7,806           9,995           1,664          1985        12/31/96
Shadow Lake, Little Rock, AR                   2,850          10,082          12,933           2,218          1984        12/31/96
Desert Springs, Tuscan, AZ                     1,136           7,762           8,898           1,145          1985        03/27/98
Posada Del Rio, Tuscan, AZ                       942           3,861           4,803             730          1980        03/27/98
Alvarado, Albuquerque, NM                      1,978           6,622           8,600           1,340          1984        12/31/96
Dorado Heights, Albuquerque, NM                1,627           7,150           8,777           1,078          1986        03/27/98
OTHER SOUTHWESTERN                            21,044          77,092          98,136          13,479

Greens At Hollymead,
Charlottesville, VA                            1,058           5,837           6,895           1,491          1990        05/04/95
Brittingham Square, Salisbury, MD                814           5,465           6,279           1,431          1991        05/04/95
Greens At Schumaker Pond,
  Salisbury, MD                                  871           6,883           7,754           1,780          1988        05/04/95
Greens At Cross Court, Easton, MD              1,363           5,416           6,779           1,445          1987        05/04/95
Greens At Hilton Run, Lexington
  Park, MD                                     3,083          11,608          14,691           2,976          1988        05/04/95
OTHER MID-ATLANTIC                             7,188          35,208          42,397           9,123



                                       54

SCHEDULE III
SUMMARY OF REAL ESTATE OWNED
(IN THOUSANDS)




                                                                 INITIAL COSTS                                  IMPROVEMENTS
                                                          ------------------------------         TOTAL          CAPITALIZED
                                                           LAND AND          BUILDINGS          INITIAL          SUBSEQUENT
                                                             LAND               AND           ACQUISITION      TO ACQUISITION
                                        ENCUMBRANCES      IMPROVEMENTS      IMPROVEMENTS       COSTS (a)     (NET OF DISPOSALS)
                                      -------------------------------------------------------------------------------------------
                                                                                              
Jamestown Of St. Matthews, St
Matthews, KY                             $   10,943        $    3,866        $   14,422        $   18,288        $      922
Patriot Place, Florence, SC                   2,200               213             1,601             1,813             5,744
River Place, Macon, GA                        6,142             1,097             7,492             8,590             2,071
OTHER SOUTHEASTERN                           19,285             5,175            23,516            28,691             8,737

Dover Country, Dover, DE                         --             2,008             6,365             8,373             2,636
Greens At Cedar Chase, Dover, DE              5,167             1,529             4,831             6,359               751
OTHER NORTHEASTERN                            5,167             3,537            11,196            14,732             3,386
                                      -------------------------------------------------------------------------------------------
 TOTAL APARTMENTS                        $  966,960        $  593,463        $2,682,180        $3,275,643        $  562,869
                                      ===========================================================================================

REAL ESTATE UNDER DEVELOPMENT
ADDITIONS TO EXISTING COMMUNITIES
Greensview II, Aurora, CO                $       --        $    3,476        $   11,915        $   15,391        $       --
Meridian II, Carrollton, TX                      --             2,370             9,600            11,970                --

Copper Mill II                                   --               831                --               831                --
Parkers Landing II                               --             1,116                --             1,116                --
Parke 33 Apartments II                           --             1,646                --             1,646                --
Wimbledon Court II                               --               667                --               667                --
Coit Road                                        --             2,849                --             2,849                --
Mandolin II                                      --             1,351                --             1,351                --
Coit Road II                                     --             1,861                --             1,861                --
Kenton Place II                                  --               483                --               483                --
Mountain View II                                 --               220                --               220                --
2000 Post III                                    --             1,855                --             1,855                --
LAND HELD FOR FUTURE DEVELOPMENT                 --            12,879                --            12,879                --
                                      -------------------------------------------------------------------------------------------
                                         $       --        $   18,725        $   21,515        $   40,240        $       --
                                      -------------------------------------------------------------------------------------------




                                              GROSS AMOUNT AT
                                       WHICH CARRIED AT CLOSE OF PERIOD
                                       --------------------------------      TOTAL
                                          LAND AND        BUILDINGS         CARRYING       ACCUMULATED
                                            LAND             AND             VALUE         DEPRECIATION      DATE OF          DATE
                                        IMPROVEMENTS     IMPROVEMENTS         (b)              (c)         CONSTRUCTION     ACQUIRED
                                      ----------------------------------------------------------------------------------------------
                                                                                                          
Jamestown Of St. Matthews, St
Matthews, KY                             $    3,975       $   15,235       $   19,210       $    1,754           1968       12/07/98
Patriot Place, Florence, SC                   1,506            6,052            7,557            3,852           1974       10/23/85
River Place, Macon, GA                        1,796            8,864           10,660            3,093           1988       04/08/94
OTHER SOUTHEASTERN                            7,276           30,151           37,428            8,699

Dover Country, Dover, DE                      2,359            8,650           11,009            2,990           1970       07/01/94
Greens At Cedar Chase, Dover, DE              1,722            5,388            7,110            1,495           1988       05/04/95
OTHER NORTHEASTERN                            4,082           14,037           18,119            4,485
                                      -------------------------------------------------------------------
 TOTAL APARTMENTS                        $  692,575       $3,145,937       $3,838,512       $  642,334
                                      ===================================================================

REAL ESTATE UNDER DEVELOPMENT
ADDITIONS TO EXISTING COMMUNITIES
Greensview II, Aurora, CO                $    3,476       $   11,915       $   15,391       $       --           2000       12/07/98
Meridian II, Carrollton, TX                   2,370            9,600           11,970               --           2000       01/27/98

Copper Mill II                                  831               --              831               --
Parkers Landing II                            1,116               --            1,116               --
Parke 33 Apartments II                        1,646               --            1,646               --
Wimbledon Court II                              667               --              667               --
Coit Road                                     2,849               --            2,849               --
Mandolin II                                   1,351               --            1,351               --
Coit Road II                                  1,861               --            1,861               --
Kenton Place II                                 483               --              483               --
Mountain View II                                220               --              220               --
2000 Post III                                 1,855               --            1,855               --
LAND HELD FOR FUTURE DEVELOPMENT             12,879               --           12,879               --
                                      -------------------------------------------------------------------
                                         $   18,725       $   21,515       $   40,240       $       --
                                      -------------------------------------------------------------------



                                       55

SCHEDULE III
SUMMARY OF REAL ESTATE
(IN THOUSANDS)




                                                          INITIAL COSTS                                  IMPROVEMENTS
                                                  ------------------------------         TOTAL          CAPITALIZED
                                                    LAND AND          BUILDINGS         INITIAL          SUBSEQUENT
                                                      LAND               AND          ACQUISITION      TO ACQUISITION
                                ENCUMBRANCES      IMPROVEMENTS      IMPROVEMENTS       COSTS (a)     (NET OF DISPOSALS)
                              -------------------------------------------------------------------------------------------
                                                                                      
LAND HELD FOR DISPOSITION
Copperfield                      $       --        $    1,620        $       --        $    1,620        $       --
Copperfield II                           --             1,144                --             1,144                --
Palazzo                                  --             3,251                --             3,251              (767)
Fossil Creek                             --             3,889                --             3,889              (289)

COMMERCIAL PROPERTY
Hanover Village                          --             1,624                --             1,624                --
Gloucester Exchange                      --               403             2,279             2,682               646
Tri-County                               --               276               900             1,176             1,310
Pacific South Center                  3,221             1,000             4,000             5,000                10
Richmond Corporate                    3,996               245             6,352             6,597             1,022
                              -------------------------------------------------------------------------------------------
                                 $    7,217        $   13,452        $   13,531        $   26,983        $    1,932
                              ===========================================================================================

TOTAL REAL ESTATE             -------------------------------------------------------------------------------------------
   OWNED                         $  974,177        $  625,640        $2,717,226        $3,342,866        $  564,801
                              ===========================================================================================




                                      GROSS AMOUNT AT
                               WHICH CARRIED AT CLOSE OF PERIOD
                               --------------------------------        TOTAL
                                  LAND AND         BUILDINGS          CARRYING        ACCUMULATED
                                    LAND              AND              VALUE          DEPRECIATION       DATE OF           DATE
                                IMPROVEMENTS      IMPROVEMENTS          (b)               (c)          CONSTRUCTION      ACQUIRED
                              -----------------------------------------------------------------------------------------------------
                                                                                                       
LAND HELD FOR DISPOSITION
Copperfield                      $    1,620        $       --        $    1,620        $       --        $
Copperfield II                        1,144                --             1,144                --
Palazzo                               2,484                --             2,484                --
Fossil Creek                          3,600                --             3,600                --

COMMERCIAL PROPERTY
Hanover Village                       1,104               520             1,624               450              --        06/30/86
Gloucester Exchange                     608             2,720             3,328             1,419            1974        11/12/87
Tri-County                              364             2,122             2,486             1,362         1976/79        01/21/81
Pacific South Center                  1,000             4,010             5,010               426            1965        08/28/86
Richmond Corporate                      273             7,346             7,619               375            1999        11/30/99
                              ---------------------------------------------------------------------
                                 $   12,197        $   16,718        $   28,915        $    4,032
                              =====================================================================

TOTAL REAL ESTATE             ---------------------------------------------------------------------
   OWNED                         $  723,497        $3,184,170        $3,907,667        $  646,366
                              =====================================================================



a     Includes a purchase price adjustment of $8.5 million.

b     The aggregate cost for federal income tax purposes was approximately $3.1
      billion at December 31, 2001.

c     The depreciable life for all buildings is 35 years.



                                       56