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10-K 1 d13216e10vk.htm FORM 10-K e10vk

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K


		FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

		For the fiscal year ended December 31, 2003

		or

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

		For the transition period from to

Commission file number 1-10524

United Dominion Realty Trust, Inc.

(Exact name of registrant as specified in its charter)


Maryland		54-0857512
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129 (Address of principal executive offices, including zip code)

(720) 283-6120

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title Of Each Class	Name of Exchange on Which Registered

Common Stock, $1 par value		New York Stock Exchange
Preferred Stock Purchase Rights		New York Stock Exchange
8.60% Series B Cumulative Redeemable Preferred Stock		New York Stock Exchange
8.50% Monthly Income Notes Due 2008		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to filing requirements for at least the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or other information statements incorporated by reference into Part III of this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No o

The aggregate market value of the shares of common stock held by non-affiliates on June 30, 2003 was approximately $1.8 billion. This calculation excludes shares of common stock held by the registrant’s officers and directors and each person known by the registrant to beneficially own more than 5% of the Registrant’s outstanding shares, as such persons may be deemed to be affiliates. This determination of affiliate status should not be deemed conclusive for any other purpose. As of February 18, 2004 there were 127,422,160 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Report, to the extent not set forth herein, is incorporated by reference from the registrant’s definitive proxy statement for the Annual Meeting of Stockholders to be held on May 4, 2004.

TABLE OF CONTENTS


			Page

	PART I.
Item 1.		Business		2
Item 2.		Properties		16
Item 3.		Legal Proceedings		18
Item 4.		Submission of Matters to a Vote of Security Holders		18
	PART II.
Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		18
Item 6.		Selected Financial Data		21
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 7A.		Quantitative and Qualitative Disclosures about Market Risk		40
Item 8.		Financial Statements and Supplementary Data		40
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		40
Item 9A.		Controls and Procedures		40
	PART III.
Item 10.		Directors and Executive Officers of the Registrant		41
Item 11.		Executive Compensation		41
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		41
Item 13.		Certain Relationships and Related Transactions		41
Item 14.		Principal Accountant Fees and Services		41
	PART IV.
Item 15.		Exhibits, Financial Statement Schedules and Reports on Form 8-K		42
Amended and Restated Bylaws
4.25% Medium-Term Note due January 2009
Description of Series B Out-Performance Program
Amended/Restated Agreement of Limited Partnership
Computation of Ratio of Earnings to Fixed Charges
Subsidiaries
Consent of Independent Auditors
Rule 13a-14(a) Certification of CEO
Rule 13a-14(a) Certification of CFO
Section 1350 Certification of CEO
Section 1350 Certification of CFO

PART I


Item 1.	BUSINESS

General

United Dominion Realty Trust, Inc. is a self-administered equity real estate investment trust, or REIT, that owns, acquires, renovates, develops and manages middle-market apartment communities nationwide. At December 31, 2003, our apartment portfolio included 264 communities located in 55 markets, with a total of 76,244 completed apartment homes. In addition, we had three apartment communities under development.

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986. To continue to qualify as a REIT, we must continue to meet certain tests which, among other things, generally require that our assets consist primarily of real estate, our income be derived primarily from real estate, and that we distribute at least 90% of our REIT taxable income (other than our net capital gain) to our stockholders. As a qualified REIT, we generally will not be subject to federal income taxes on our REIT taxable income to the extent we distribute such income to our stockholders. In 2003, we declared total distributions of $1.14 per share to our stockholders, which represents our 27th year of consecutive dividend increases to our stockholders.

We were formed in 1972 as a Virginia corporation. In June 2003, we changed our state of incorporation from Virginia to Maryland. Our corporate headquarters is located at 400 East Cary Street, Richmond, Virginia. Our principal executive offices are located at 1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado. As of February 18, 2004, we had 1,832 full-time employees and 180 part-time employees.

Our subsidiaries include two operating partnerships, Heritage Communities L.P., a Delaware limited partnership, and United Dominion Realty L.P., a limited partnership that changed its state of organization from Virginia to Delaware in February 2004. Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” “the company,” or “United Dominion” refer collectively to United Dominion Realty Trust, Inc. and its subsidiaries.

2003 Accomplishments

• We provided a total stockholder return of 25%.

• We increased our dividend for the 27th consecutive year.

• We lowered the weighted average interest rate on our debt from 5.9% at December 31, 2002 to 5.2% at December 31, 2003.

• We increased the size of our unencumbered pool of assets to $2.8 billion, valued on a historical cost basis.

• We completed over $1 billion of capital transactions in 2003, all of which improved our balance sheet strength and flexibility.

• We were upgraded by Standard & Poor’s Rating Services to a BBB rating with a Stable outlook, and by Moody’s Investors Service to a Positive outlook on an existing Baa3 rating.

• We acquired 5,220 apartment homes in 21 communities for approximately $423.7 million.

• We completed the disposition of seven apartment communities with 1,927 apartment homes for an aggregate sales price of approximately $88.9 million, exiting markets that no longer met our investment criteria. In addition, we sold two commercial properties for an aggregate consideration of $7.3 million.

Business Objectives and Operating Strategies

Our principal business objective is to maximize the economic returns of our apartment communities to provide our stockholders with the greatest possible total return and value. To achieve this objective, we intend to continue to pursue the following goals and strategies:

• own and operate middle-market apartments across a national platform, thus enhancing stability and predictability of returns to our stockholders,

• manage real estate cycles by taking an opportunistic approach to buying, selling and building apartment communities,

• empower site associates to manage our communities efficiently and effectively,

• measure and reward associates based on specific performance targets, and

• manage our capital structure to ensure predictability of earnings and dividends.

Acquisitions

During 2003, using the proceeds from our disposition program and our equity offerings, we acquired 21 communities with 5,220 apartment homes at a total cost of approximately $423.7 million, including the assumption of debt and the use of tax-free exchange funds. In addition, we purchased one parcel of land for $3.1 million.

When evaluating potential acquisitions, we consider:

• population growth, cost of alternative housing, overall potential for economic growth and the tax and regulatory environment of the community in which the property is located,

• geographic location and type of community, including proximity to our existing communities which can deliver significant economies of scale,

• construction quality, condition and design of the community,

• current and projected cash flow of the property and the ability to increase cash flow,

• potential for capital appreciation of the property,

• ability to increase the value and profitability of the property through upgrades and repositioning,

• terms of resident leases, including the potential for rent increases,

• occupancy and demand by residents for properties of a similar type in the vicinity,

• prospects for liquidity through sale, financing, or refinancing of the property, and

• competition from existing multifamily communities and the potential for the construction of new multifamily properties in the area.

The following table summarizes our apartment acquisitions and year-end ownership position for the past five years (dollars in thousands):


	2003		2002		2001		2000		1999

Homes acquired		5,220		4,611		1,304		267		1,230
Homes owned at December 31		76,244		74,480		77,567		77,219		82,154
Total real estate owned, at carrying value	$	4,351,551	$	3,967,483	$	3,907,667	$	3,836,320	$	3,953,045
Total rental income	$	614,297	$	628,869	$	619,745	$	625,717	$	625,105

Dispositions

We regularly monitor and adjust our assets to increase portfolio profitability. During 2003, we sold over 1,900 of our slower growing, non-core apartment homes while exiting some markets in an effort to increase the quality and performance of our portfolio. Proceeds from the disposition program were used primarily to reduce debt and fund acquisitions.

Factors we consider in deciding whether to dispose of a property include:

• current market price for an asset compared to projected economics for that asset,

• potential increases in new construction in the market area,

• areas where the economy is not expected to grow substantially, and

• markets where we do not intend to establish long-term concentration.

At December 31, 2003, there was one apartment community and one parcel of land classified as real estate held for disposition. We are in the market for replacement properties that will correspond with our expected sales activity to prevent dilution to earnings.

Upgrading and Development Activities

During 2003, we continued to reposition properties in targeted markets where there was an opportunity to add value and achieve greater than inflationary increases in rents over the long term. In 2003, we spent $12.2 million to develop 178 apartment homes as an additional phase to an existing community. In addition, revenue enhancing capital expenditures, including water sub-metering, the initial installation of microwaves or washer-dryers and extensive interior upgrades totaled $15.4 million or $207 per home for the year ended December 31, 2003.

The following wholly-owned projects were under development as of December 31, 2003:


		Number of		Completed						Estimated		Expected		Expected
		Apartment		Apartment				Budgeted		Cost		Completion		Stabilized
		Homes		Homes		Cost to Date		Cost		Per Home		Date		Return

2000 Post Phase III
	San Francisco, CA		24		—	$	2,500	$	7,000	$	291,700		3Q04		6.5% – 7.0%
Rancho Cucamonga
	Los Angeles, CA		414		—	$	16,200	$	63,500	$	153,400		4Q05		7.5% – 8.5%
Mandalay on the Lake
	Irving, TX		369		—	$	3,900	$	28,200	$	76,400		1Q06		7.5% – 8.3%

In addition, we owned six parcels of land held for future development aggregating $7.8 million at December 31, 2003. Five of the six parcels represent additional phases to existing properties.

In September 2002, we entered into a development joint venture with AEGON USA Realty Advisors, Inc. in which we are serving as the managing member. The joint venture is expected to develop approximately eight to ten garden-style apartment communities over the next three years, with a total development cost of up to $210 million. The joint venture will obtain bank construction financing for 65% to 80% of total costs and will provide equity contributions for the balance of the costs with AEGON providing 80% and us providing 20%. We are serving as the developer, general contractor and property manager for the joint venture and have guaranteed those project development costs, excluding financing costs (including fees and interest), which exceed the defined project cost budgeted amounts for each respective project, as they come to fruition. We believe that the likelihood of funding guarantor obligations is remote and that the impact to us would be immaterial. In June 2003, we contributed land with a carrying value of $3.8 million to the joint venture.

The following joint venture project was under development as of December 31, 2003:

Number of

Completed

Estimated

Expected

Apartment

Budgeted

Cost

Completion

Stabilized

Homes

Cost to Date

Cost

Per Home

Date

Return

Villa Toscana

Houston

504

—

10,800

28,400

56,300

4Q05

8.0% - 9.0%

We will continue to seek out development and redevelopment opportunities in our core markets and may seek to raise equity with other potential joint venture partners to start new development programs over the next five years.

Financing Activities

As part of our plan to strengthen our capital structure, we utilized proceeds from dispositions, equity offerings and refinancings to extend maturities, pay down existing debt, and acquire apartment communities. The following is a list of our major financing activities in 2003:

• Repaid $40.0 million of secured debt and $214.6 million of unsecured debt.

• Sold 2.0 million shares of common stock at a public offering price of $15.71 per share under our $1 billion shelf registration statement in January 2003. The net proceeds of $31.2 million were used to repay debt and for general corporate purposes.

• Sold $150 million aggregate principal amount of 4.50% medium-term notes due March 2008 in February 2003 under our medium-term note program. The net proceeds of $149.3 million were used to repay debt.

• Negotiated a new $500 million unsecured revolving credit facility to replace our $375 million unsecured revolver and $100 million unsecured term loan in March 2003. The credit facility’s interest rate is 25 and 30 basis points lower than the previous unsecured revolver and term loan, respectively.

• Sold 3.0 million shares of common stock at a public offering price of $16.97 per share under our $1 billion shelf registration statement in April 2003. The net proceeds of $49.2 million were ultimately used to acquire additional apartment communities. We sold an additional 100,000 shares of common stock at a public offering price of $16.97 per share in connection with the exercise of the underwriter’s over-allotment option in May 2003. The net proceeds of $1.6 million were used for general corporate purposes.

• Exercised our right to redeem 2.0 million shares of our Series D Cumulative Convertible Redeemable Preferred Stock in May 2003. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 3,076,923 shares of common stock at a price of $16.25 per share.

• Issued $56.9 million of our Series E Cumulative Convertible Preferred Stock (“Series E”) and 1,617,815 Preferred OP Units totaling $26.9 million in June 2003 as partial consideration for the purchase of four apartment communities in Southern California. Each share of Series E and each OP Unit was priced at $16.61 per share and dividends on the Series E and OP Units carry a fixed coupon of 8.0% until such time as the common share dividend is equal to or exceeds this amount for four consecutive quarters, at which time the Series E and OP Units will be entitled to receive dividends equivalent to the dividends paid to holders of our common stock.

• Sold $50 million aggregate principal amount of 4.50% medium-term notes due March 2008 in August 2003 under our medium-term note program. The net proceeds of approximately $49.9 million were used to repay amounts outstanding on our $500 million unsecured revolving credit facility.

• Sold 4.0 million shares of common stock at a public offering price of $18.40 per share under our $1 billion shelf registration statement in September 2003. The net proceeds of approximately $72.3 million were used for general corporate purposes, including funding acquisitions and development, with the balance used to reduce outstanding variable rate debt under our unsecured credit facilities. We sold an additional 600,000 shares of common stock at a public offering price of $18.40 per share in connection with the exercise of the underwriter’s over-allotment option in October 2003. The net proceeds of $10.8 million were used for general corporate purposes, including funding acquisitions and development, with the remaining balance used to reduce outstanding variable rate debt under our unsecured credit facilities.

• Sold $75 million aggregate principal amount of 5.13% senior unsecured notes due January 2014 in October 2003 under our medium-term note program. The net proceeds of $74.5 million were used to repay amounts outstanding on our $500 million unsecured revolving credit facility.

• Sold $50 million aggregate principal amount of 4.25% senior unsecured notes due January 2009 in November 2003 under our medium-term note program. The net proceeds of $49.8 million were used to fund acquisitions of apartment communities.

• Exercised our right to redeem 4.0 million shares of our Series D Cumulative Convertible Redeemable Preferred Stock in December 2003. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 6,154,000 shares of common stock at a price of $16.25 per share.

Markets and Competitive Conditions

At December 31, 2003, we owned 264 apartment communities in 55 markets in 19 states. Of those markets, 22 markets, or 40%, generated positive same community net operating income growth. We have a geographically diverse portfolio and we believe that this diversification increases investment opportunity and decreases the risk associated with cyclical local real estate markets and economies, thereby increasing the stability and predictability of our earnings.

We believe changing demographics will have a significant impact on the apartment industry over the next two decades. In particular, we believe the annual number of young people entering the workforce and creating households will be significantly higher over the next 10 to 15 years as compared to the number who entered the workforce over the past 10 years. The number of single people and single parent households continues to grow significantly. The immigrant population is also expected to grow at an accelerated pace. Each of these population segments has a high propensity to rent.

Despite a strengthening United States economy, significant productivity growth has adversely affected employment growth, which is the primary driver of demand in our business. In addition, a sustained low mortgage interest rate environment, combined with government and builder incentives to first time home buyers, has further siphoned off what would traditionally be demand for apartment homes. To maintain occupancy levels during these economic conditions, we have increased our marketing expenses and provided certain concessions to our residents.

In most of our markets, competition for new residents is intense. Some competing communities offer features that our communities do not have. Competing communities frequently use concessions or lower rents to obtain temporary competitive advantages. Also, some competing communities are larger or newer than our communities. The competitive position of each community is different depending upon many factors including sub-market supply and demand. In addition, other real estate investors compete with us to acquire existing properties and to develop new properties. These competitors include insurance companies, pension and investment funds, developer partnerships, investment companies and other apartment REITs. This competition could increase prices for properties of the type that we would likely pursue, and our competitors may have greater resources, or lower capital costs, than we do.

We believe that, in general, we are well-positioned to compete effectively for residents and investments. We believe our competitive advantages include:

• a fully integrated organization with property management, development, acquisition, marketing and financing expertise,

• scalable operating and support systems,

• purchasing power,

• geographic diversification with a presence in 55 markets across the country, and

• significant presence in many of our major markets that allows us to be a local operating expert.

Moving forward, we will continue to emphasize aggressive lease management, expense control, increased resident retention efforts and the realignment of employee incentive plans tied to our bottom line performance. We believe this plan of operations, coupled with the portfolio’s strengths in targeting the middle-market of renters across a geographically diverse platform, should position us for continued operational improvement.

Communities

At December 31, 2003, our apartment portfolio included 264 communities having a total of 76,244 completed apartment homes. In addition, we had three apartment communities under development. The overall quality of our portfolio has significantly improved since 2001 with the disposition of non-core apartment homes and the upgrading of most of our communities. The upgrading of the portfolio provides several key benefits related to portfolio profitability. It enables us to raise rents more significantly and to attract residents with higher levels of disposable income who are more likely to accept the transfer of expenses, such as water and sewer costs, from the landlord to the resident. In addition, it potentially reduces recurring capital expenditures per apartment home, and therefore increases future cash flow.

Same Communities

For 2003, same community property operating income decreased 4.2% or $14.9 million compared to 2002. The overall decrease in property operating income was primarily attributable to a 1.8% or $9.9 million decrease in revenues from rental and other income and a 2.5% or $5.0 million increase in operating expenses. The decrease in revenues from rental and other income was primarily driven by a 2.2% or $12.8 million decrease in rental rates. This decrease in income was partially offset by an 11.7% or $1.7 million increase in sub-meter, gas, trash and utility reimbursements, a 5.5% or $1.0 million decrease in concession expense and a 1.7% or $0.7 million decrease in vacancy loss. Physical occupancy remained constant at 93.2% for both 2003 and 2002.

The increase in property operating expenses was primarily driven by a 17.6% or $1.7 million increase in insurance costs, a 4.3% or $1.4 million increase in utilities expense, a 2.4% or $0.9 million increase in repair and maintenance costs, a 3.9% or $0.8 million increase in administrative and marketing costs, a 0.7% or $0.4 million increase in personnel costs, and a 0.8% or $0.4 million increase in taxes, all of which were partially offset by a 17.6% or $0.2 million decrease in incentive compensation.

Customers

We focus on the broad middle-market segment of the apartment market that generally consists of renters-by-necessity. This group includes young professionals, blue-collar families, single parent households, older singles, immigrants, non-related parties and families renting while waiting to purchase a home. We believe this segment provides the highest profit potential in terms of rent growth, stability of occupancy and investment opportunities.

We believe there will be a significant increase in the number of younger renters over the next 10 to 15 years, and that the immigrant population will remain a significant and growing part of the renter base.

Accordingly, we plan to target some of our incremental investments to communities that will be attractive to younger households or to the immigrant populations. These communities will often be located close to where these residents work, shop and play.

Tax Matters

We have elected to be taxed as a REIT under the Internal Revenue Code. To continue to qualify as a REIT, we must continue to meet certain tests that, among other things, generally require that our assets consist primarily of real estate, our income be derived primarily from real estate and that we distribute at least 90% of our taxable income (other than our net capital gain) to our stockholders. Provided we maintain our qualification as a REIT, we will generally not be subject to federal income taxes at the corporate level on our net income to the extent net income is distributed to our stockholders.

Inflation

Substantially all of our leases are for a term of one year or less, which may enable us to realize increased rents upon renewal of existing leases or the beginning of new leases. Such short-term leases generally minimize the risk to us of the adverse effects of inflation, although as a general rule these leases permit residents to leave at the end of the lease term without penalty. Short-term leases and relatively consistent demand allow rents, and therefore cash flow from the portfolio, to provide an attractive hedge against inflation.

Environmental Matters

To date, compliance with federal, state and local environmental protection regulations has not had a material effect on our capital expenditures, earnings or competitive position. However, in the past, the issue has been raised regarding the presence of asbestos and other hazardous materials in existing real estate properties, and within the past year there has been an increase in the number of claims of potential health-related issues allegedly caused by the presence of mold in confined spaces. We have a property management plan for hazardous materials. As part of the plan, Phase I environmental site investigations and reports have been completed for each property we own. In addition, all proposed acquisitions are inspected prior to acquisition. The inspections are conducted by qualified environmental consultants, and we review the issued report prior to the purchase or development of any property. Nevertheless, it is possible that our environmental assessments will not reveal all environmental liabilities, or that some material environmental liabilities exist of which we are unaware. In some cases, we have abandoned otherwise economically attractive acquisitions because the costs of removal or control of hazardous materials have been prohibitive or we have been unwilling to accept the potential risks involved. We do not believe we will be required to engage in any large-scale abatement at any of our properties. We believe that through professional environmental inspections and testing for asbestos, lead paint and other hazardous materials, coupled with a conservative posture toward accepting known risk, we can minimize our exposure to potential liability associated with environmental hazards.

Federal legislation requires owners and landlords of residential housing constructed prior to 1978 to disclose to potential residents or purchasers of the communities any known lead paint hazards and imposes treble damages for failure to provide such notification. In addition, lead based paint in any of the communities may result in lead poisoning in children residing in that community if chips or particles of such lead based paint are ingested, and we may be held liable under state laws for any such injuries caused by ingestion of lead based paint by children living at the communities.

We are unaware of any environmental hazards at any of our properties that individually or in the aggregate may have a material adverse impact on our operations or financial position. We have not been notified by any governmental authority, and we are not otherwise aware, of any material non-compliance, liability, or claim relating to environmental liabilities in connection with any of our properties. We do not believe that the cost of continued compliance with applicable environmental laws and regulations will have a material adverse effect on us or our financial condition or results of operations. Future environmental

laws, regulations, or ordinances, however, may require additional remediation of existing conditions that are not currently actionable. Also, if more stringent requirements are imposed on us in the future, the costs of compliance could have a material adverse effect on us and our financial condition.

Insurance

We carry comprehensive general liability coverage on our communities, with limits of liability customary within the industry to insure against liability claims and related defense costs. We are also insured, in all material respects, against the risk of direct physical damage in amounts necessary to reimburse us on a replacement cost basis for costs incurred to repair or rebuild each property, including loss of rental income during the reconstruction period.

Factors Affecting Our Business and Prospects

There are many factors that affect our business and our results of operations, some of which are beyond our control. The following is a description of some of the important factors that may cause our actual results of operations in future periods to differ materially from those currently expected or desired.

Unfavorable Changes in Apartment Market and Economic Conditions Could Adversely Affect Occupancy Levels and Rental Rates. Market and economic conditions in the metropolitan areas in which we operate may significantly affect our occupancy levels and rental rates and, therefore, our profitability. Factors that may adversely affect these conditions include the following:

• a reduction in jobs and other local economic downturns,

• declines in mortgage interest rates, making alternative housing more affordable,

• government or builder incentives which enable first time homebuyers to put little or no money down, making alternative housing decisions easier to make,

• oversupply of, or reduced demand for, apartment homes,

• declines in household formation, and

• rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs.

The strength of the United States economy has become increasingly susceptible to global events and threats of terrorism. At the same time, productivity enhancements and the increased exportation of labor have resulted in negligible job growth despite an improving economy. Continued weakness in job creation, or any worsening of current economic conditions, generally and in our principal market areas, could have a material adverse effect on our occupancy levels, our rental rates and our ability to strategically acquire and dispose of apartment communities. This may impair our ability to satisfy our financial obligations and pay distributions to our stockholders.

Acquisitions or New Development May Not Achieve Anticipated Results. We intend to continue to selectively acquire apartment communities that meet our investment criteria. Our acquisition activities and their success are subject to the following risks:

• an acquired community may fail to perform as we expected in analyzing our investment, or a significant exposure related to the acquired property may go undetected during our due diligence procedures,

• when we acquire an apartment community, we often invest additional amounts in it with the intention of increasing profitability. These additional investments may not produce the anticipated improvements in profitability, and

• new developments may not achieve pro forma rents or occupancy levels, or problems with construction or local building codes may delay initial occupancy dates for all or a portion of a development community.

Possible Difficulty of Selling Apartment Communities Could Limit Operational and Financial Flexibility. We periodically dispose of apartment communities that no longer meet our strategic objectives, but market conditions could change and purchasers may not be willing to pay prices acceptable to us. A weak market may limit our ability to change our portfolio promptly in response to changing economic conditions. Furthermore, a significant portion of the proceeds from our overall property sales may be held by intermediaries in order for some sales to qualify as like-kind exchanges under Section 1031 of the Internal Revenue Code, so that any related capital gain can be deferred for federal income tax purposes. As a result, we may not have immediate access to all of the cash flow generated from our property sales. In addition, federal tax laws limit our ability to profit on the sale of communities that we have owned for fewer than four years, and this limitation may prevent us from selling communities when market conditions are favorable.

Increased Competition Could Limit Our Ability to Lease Apartment Homes or Increase or Maintain Rents. Our apartment communities compete with numerous housing alternatives in attracting residents, including other apartment communities and single-family rental homes, as well as owner occupied single-and multi-family homes. Competitive housing in a particular area could adversely affect our ability to lease apartment homes and increase or maintain rents.

Insufficient Cash Flow Could Affect Our Debt Financing and Create Refinancing Risk. We are subject to the risks normally associated with debt financing, including the risk that our operating income and cash flow will be insufficient to make required payments of principal and interest, or could restrict our borrowing capacity under our line of credit due to debt covenant restraints. We cannot assure you that sufficient cash flow will be available to make all required principal payments and still satisfy our distribution requirements to maintain our status as a REIT, nor can we assure you that the full limits of our line of credit will be available to us if our operating performance falls outside the constraints of our debt covenants. Additionally, we are likely to need to refinance substantially all of our outstanding debt as it matures. We may not be able to refinance existing debt, or the terms of any refinancing may not be as favorable as the terms of the existing debt, which could create pressures to sell assets or to issue additional equity when we would otherwise not choose to do so.

Failure to Generate Sufficient Revenue Could Impair Debt Service Payments and Distributions to Stockholders. If our apartment communities do not generate sufficient net rental income to meet rental expenses, our ability to make required payments of interest and principal on our debt securities and to pay distributions to our stockholders will be adversely affected. The following factors, among others, may affect the net rental income generated by our apartment communities:

• the national and local economies,

• local real estate market conditions, such as an oversupply of apartment homes,

• tenants’ perceptions of the safety, convenience and attractiveness of our communities and the neighborhoods where they are located,

• our ability to provide adequate management, maintenance and insurance, and

• rental expenses, including real estate taxes and utilities.

Expenses associated with our investment in a community, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in rental income from that community. If a community is mortgaged to secure payment of debt and we are unable to make the mortgage payments, we could sustain a loss as a result of foreclosure on the community or the exercise of other remedies by the mortgage holder.

Debt Level May Be Increased. Our current debt policy does not contain any limitations on the level of debt that we may incur, although our ability to incur debt is limited by covenants in our bank and other credit agreements. We manage our debt to be in compliance with these debt covenants, but subject to compliance with these covenants, we may increase the amount of our debt at any time without a concurrent improvement in our ability to service the additional debt.

Financing May Not Be Available and Could be Dilutive. Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including common and preferred equity. Debt or equity financing may not be available in sufficient amounts, or on favorable terms or at all. If we issue additional equity securities to finance developments and acquisitions instead of incurring debt, the interests of our existing stockholders could be diluted.

Development and Construction Risks Could Impact Our Profitability. We intend to continue to develop and construct apartment communities. Development activities may be conducted through wholly-owned affiliated companies or through joint ventures with unaffiliated parties. Our development and construction activities may be exposed to the following risks:

• we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in increased development costs and could require us to abandon our activities entirely with respect to a project for which we are unable to obtain permits or authorizations,

• if we are unable to find joint venture partners to help fund the development of a community or otherwise obtain acceptable financing for the developments, our development capacity may be limited,

• we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring such opportunities,

• we may be unable to complete construction and lease-up of a community on schedule, or incur development or construction costs that exceed our original estimates, and we may be unable to charge rents that would compensate for any increase in such costs, and

• occupancy rates and rents at a newly-developed community may fluctuate, depending on a number of factors, including market and economic conditions, preventing us from meeting our profitability goals for that community.

Construction costs have been increasing in our existing markets, and the costs of upgrading acquired communities have, in some cases, exceeded our original estimates. We may experience similar cost increases in the future. Our inability to charge rents that will be sufficient to offset the effects of any increases in these costs may impair our profitability.

Failure to Succeed in New Markets May Limit Our Growth. We may from time to time make acquisitions outside of our existing market areas if appropriate opportunities arise. We may be exposed to a variety of risks if we choose to enter new markets, and we may not be able to operate successfully in new markets. These risks include, among others:

• inability to accurately evaluate local apartment market conditions and local economies,

• inability to obtain land for development or to identify appropriate acquisition opportunities,

• inability to hire and retain key personnel, and

• lack of familiarity with local governmental and permitting procedures.

Changing Interest Rates Could Increase Interest Costs and Could Affect the Market Price of Our Securities. We currently have, and expect to incur in the future, debt bearing interest at rates that vary with market interest rates. Therefore, if interest rates increase, our interest costs will rise to the extent our variable rate debt is not hedged effectively. In addition, an increase in market interest rates may lead our security holders to demand a higher annual yield, which could adversely affect the market price of our common and preferred stock and debt securities.

Limited Investment Opportunities Could Adversely Affect Our Growth. We expect that other real estate investors will compete with us to acquire existing properties and to develop new properties. These competitors include insurance companies, pension and investment funds, developer partnerships, investment

companies and other apartment REITs. This competition could increase prices for properties of the type that we would likely pursue, and our competitors may have greater resources than we do. As a result, we may not be able to make attractive investments on favorable terms, which could adversely affect our growth.

Failure to Integrate Acquired Communities and New Personnel Could Create Inefficiencies. To grow successfully, we must be able to apply our experience in managing our existing portfolio of apartment communities to a larger number of properties. In addition, we must be able to integrate new management and operations personnel as our organization grows in size and complexity. Failures in either area will result in inefficiencies that could adversely affect our expected return on our investments and our overall profitability.

Interest Rate Hedging Contracts May Be Ineffective and May Result in Material Charges. From time to time when we anticipate issuing debt securities, we may seek to limit our exposure to fluctuations in interest rates during the period prior to the pricing of the securities by entering into interest rate hedging contracts. We may do this to increase the predictability of our financing costs. Also, from time to time we may rely on interest rate hedging contracts to limit our exposure under variable rate debt to unfavorable changes in market interest rates. If the pricing of new debt securities is not within the parameters of, or market interest rates produce a lower interest cost than that which we incur under a particular interest rate hedging contract, the contract is ineffective. Furthermore, the settlement of interest rate hedging contracts has involved and may in the future involve material charges.

Potential Liability for Environmental Contamination Could Result in Substantial Costs. Under various federal, state and local environmental laws, as a current or former owner or operator of real estate, we could be required to investigate and remediate the effects of contamination of currently or formerly owned real estate by hazardous or toxic substances, often regardless of our knowledge of or responsibility for the contamination and solely by virtue of our current or former ownership or operation of the real estate. In addition, we could be held liable to a governmental authority or to third parties for property damage and for investigation and clean-up costs incurred in connection with the contamination. These costs could be substantial, and in many cases environmental laws create liens in favor of governmental authorities to secure their payment. The presence of such substances or a failure to properly remediate any resulting contamination could materially and adversely affect our ability to borrow against, sell or rent an affected property.

We are Subject to Certain Tax Risks. We have elected to be taxed as a REIT under the Internal Revenue Code. To qualify as a REIT, we must satisfy numerous requirements (some on an annual and quarterly basis) established under highly technical and complex Internal Revenue Code provisions. Only limited judicial or administrative interpretation exists for these provisions and involves the determination of various factual matters and circumstances not entirely within our control. In addition, U.S. federal income tax laws governing REITs and other corporations and the administrative interpretations of those laws may be amended at any time. Future legislation, new regulations, administrative interpretations or court decisions may apply to us, potentially with retroactive effect, and could adversely affect our ability to qualify as a REIT or adversely affect our stockholders. We may receive significant non-qualifying income or acquire non-qualifying assets, which as a result, may cause us to approach the income and assets test limits imposed by the Internal Revenue Code. There is a risk that we may not satisfy these tests. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at corporate rates. We may also be disqualified from treatment as a REIT for the four taxable years following the year in which we failed to qualify. This would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. Even if we continue to qualify as a REIT, we will continue to be subject to certain federal, state and local taxes on our income and property.

Recent Tax Legislation Could Negatively Impact Our Stock Price. In 2003, legislation was enacted that generally reduces the maximum capital gains rate for non-corporate taxpayers from 20% to 15% after May 5, 2003. Under the legislation, the 15% rate is also applicable to “qualified dividend income” from

certain corporations. In general, dividends payable by REITs are not eligible for the 15% tax rate, except to the extent such dividends are attributable to dividends we received from taxable corporations (such as our taxable REIT subsidiaries) or to REIT “capital gain dividends” as defined in the Internal Revenue Code of 1986. The recent legislation also reduces the maximum tax rate of non-corporate taxpayers on ordinary income from 38.6% to 35%.

Although this legislation does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable treatment of regular corporate dividends could cause investors who are individuals to consider stock of other corporations that pay dividends as more attractive relative to stock of REITs. It is not possible to predict whether this change in perceived relative value will occur, or what the effect will be on the market price of our stock.

We may conduct a portion of our business through taxable REIT subsidiaries, which could have adverse tax consequences. We have established several taxable REIT subsidiaries. Despite our qualification as a REIT, our taxable REIT subsidiaries must pay federal income tax on their taxable income. In addition, we must comply with various tests to continue to qualify as a REIT for federal income tax purposes, and our income from and investments in our taxable REIT subsidiaries generally do not constitute permissible income and investments for these tests. While we will attempt to ensure that our dealings with our taxable REIT subsidiaries will not adversely affect our REIT qualification, we cannot provide assurance that we will successfully achieve that result. Furthermore, we may be subject to a 100% penalty tax, or our taxable REIT subsidiaries may be denied deductions, to the extent our dealings with our taxable REIT subsidiaries are not deemed to be arm’s length in nature.

Maryland Law May Limit the Ability of a Third Party to Acquire Control of Us, Which May Not be in Our Stockholders’ Best Interests. Maryland business statutes may limit the ability of a third party to acquire control of us. As a Maryland corporation, we are subject to various Maryland laws which may have the effect of discouraging offers to acquire our company and of increasing the difficulty of consummating any such offers, even if our acquisition would be in our stockholders’ best interests. The Maryland General Corporation Law restricts mergers and other business combination transactions between us and any person who acquires beneficial ownership of shares of our stock representing 10% or more of the voting power without our board of directors’ prior approval. Any such business combination transaction could not be completed until five years after the person acquired such voting power, and generally only with the approval of stockholders representing 80% of all votes entitled to be cast and 66 2/3% of the votes entitled to be cast, excluding the interested stockholder, or upon payment of a fair price. Maryland law also provides generally that a person who acquires shares of our equity stock that represent 10% (and certain higher levels) of the voting power in electing directors will have no voting rights unless approved by a vote of two-thirds of the shares eligible to vote.

Limitations on Share Ownership and Limitations on the Ability of Our Stockholders to Effect a Change in Control of Our Company May Prevent Takeovers That are Beneficial to Our Stockholders. One of the requirements for maintenance of our qualification as a REIT for federal income tax purposes is that no more than 50% in value of our outstanding capital stock may be owned by five or fewer individuals, including entities specified in the Internal Revenue Code, during the last half of any taxable year. Our amended and restated articles of incorporation contain ownership and transfer restrictions relating to our stock primarily to assist us in complying with this requirement. These restrictions include a provision that generally limits a person from beneficially owning or constructively owning shares of our outstanding equity stock in excess of a 9.9% ownership interest, unless our board of directors exempts the person from such ownership limitation, provided that any such exemption shall not allow the person to exceed 13% of the value of our outstanding equity stock. These provisions may have the effect of delaying, deferring or preventing someone from taking control of us, even though a change of control might involve a premium price for our stockholders or might otherwise be in our stockholders’ best interests.

Under the terms of our shareholder rights plan, our board of directors can, in effect, prevent a person or group from acquiring more than 15% of the outstanding shares of our common stock. Unless our board of directors approves the person’s purchase, after that person acquires more than 15% of our outstanding

common stock, all other stockholders will have the right to purchase securities from us at a price that is less than their then fair market value. Purchases by other stockholders would substantially reduce the value and influence of the shares of our common stock owned by the acquiring person. Our board of directors, however, can prevent the shareholder rights plan from operating in this manner. This gives our board of directors significant discretion to approve or disapprove a person’s efforts to acquire a large interest in us.

Executive Officers of the Company

The following table sets forth information about our executive officers as of February 18, 2004. The executive officers listed below serve in their respective capacities for approximate one-year terms.


Name	Age		Office	Since

Thomas W. Toomey		43	Chief Executive Officer, President and Director		2001
W. Mark Wallis		53	Senior Executive Vice President		2001
			Legal, Acquisitions, Dispositions, & Development
Christopher D. Genry		43	Executive Vice President Chief Financial Officer		2001
Richard A. Giannotti		48	Executive Vice President Asset Quality		1985
Ella S. Neyland		49	Executive Vice President Treasurer & Investor Relations		2001
Martha R. Carlin		42	Senior Vice President, Director of Property Operations		2001
Lester C. Boeckel		55	Senior Vice President Acquisitions & Dispositions		2001
Thomas J. Corcoran		57	Senior Vice President Human Resources		1997
Patrick S. Gregory		54	Senior Vice President Chief Information Officer		1997
Michael J. Kelly		36	Senior Vice President Acquisitions		2004
Rodney A. Neuheardt		42	Senior Vice President Finance		2001
Scott A. Shanaberger		35	Senior Vice President Chief Accounting Officer		1994
Thomas A. Spangler		43	Senior Vice President Business Development Services, Chief Risk Officer		1998
Mark E. Wood		51	Senior Vice President Acquisitions and Development		1994
Mary Ellen Norwood		49	Vice President, Legal Administration, and Secretary		2001

Set forth below is certain biographical information about each of our executive officers.

Mr. Toomey joined us as Chief Executive Officer, President and a Director in February 2001. Prior to joining us, Mr. Toomey was with Apartment Investment and Management Company, or AIMCO, a publicly traded real estate investment trust, where he served as Chief Operating Officer for two years and Chief Financial Officer for four years. During his tenure at AIMCO, Mr. Toomey was instrumental in the growth of AIMCO from 34,000 apartment units to 360,000 units. He has also served as a Senior Vice President at Lincoln Property Company, a national real estate development, property management and real

estate consulting company, from 1990 to 1995 and as an Audit Manager serving real estate clients at Arthur Andersen & Co.

Mr. Wallis joined us in March 2001 as Senior Executive Vice President of Legal, Acquisitions, Dispositions and Development. Prior to joining us, Mr. Wallis was the President of Golden Living Communities, a company he established in 1995, involved in the development of assisted and independent living communities. Prior to founding Golden Living, Mr. Wallis was Executive Vice President of Finance and Administration of Lincoln Property Company.

Mr. Genry joined us in March 2001 as Executive Vice President and Chief Financial Officer. Mr. Genry had been Chief Financial Officer of Centex Construction Group, a $1 billion subsidiary of the New York Stock Exchange listed Centex Corporation. As Chief Financial Officer, he provided strategic leadership in the development and management of all financial and information systems, the redesign and oversight of internal audit functions, and the identification and evaluation of acquisition opportunities. Prior to joining Centex, he was with Arthur Andersen & Co. in Dallas, Texas.

Mr. Giannotti joined us as Director of Development and Construction in September 1985. He was promoted to Assistant Vice President in 1988, Vice President in 1989 and Senior Vice President in 1996. In 1998, Mr. Giannotti was promoted to Director of Development-East and was promoted to Executive Vice President of Asset Quality in 2003.

Ms. Neyland joined us in March 2001 as Executive Vice President and Treasurer and is also responsible for Investor Relations. Ms. Neyland had been Chief Financial Officer of Sunrise Housing, Ltd., a privately owned apartment development company that manufactures modular units for the construction of affordable apartment communities. Previously, she served as an Executive Director with CIBC World Markets and as Senior Vice President of Finance of Lincoln Property Company.

Ms. Carlin joined us in March 2001 as a Senior Vice President responsible for operational efficiencies and revenue enhancement and was promoted to Senior Vice President, Director of Property Operations in 2003. Ms. Carlin was previously Senior Vice President of Operations for opsXchange, Inc., a real estate procurement technology developer. Previously, she served as Senior Vice President of Ancillary Services at AIMCO and as a member of Arthur Andersen & Co. Real Estate Services Group in Dallas, Texas.

Mr. Boeckel joined us in July 2001 as Vice President of Acquisitions and Dispositions and was promoted to Senior Vice President in February 2002. Prior to joining us, Mr. Boeckel was the Senior Vice President of Asset Management at AIMCO. Before becoming the Senior Vice President of Asset Management, Mr. Boeckel was a Regional Vice President with operating responsibility for a portfolio of 12,000 apartment homes. Prior to joining AIMCO, Mr. Boeckel had over ten years of real estate experience with various firms including a regional investment banking firm, a regional financial planning firm and a national apartment syndication firm.

Mr. Corcoran joined us in 1997 as Assistant Vice President of Human Resources and was promoted to Vice President in 1998 and Senior Vice President in 1999. Prior to joining us, Mr. Corcoran was the Vice President of Human Resources for Acordia, Inc., a national insurance brokerage firm from 1993 to 1995.

Mr. Gregory joined us in 1997 as Vice President and Chief Information Officer and was promoted to Senior Vice President in 1999. From 1976 to 1997, Mr. Gregory was employed by Crestar Bank as a New Technology Analyst.

Mr. Kelly joined us in 2004 as Senior Vice President of Acquisitions. Prior to joining us, Mr. Kelly was Senior Vice President in charge of national apartment acquisitions for Urdang & Associates, a Philadelphia based pension fund advisor. During his tenure he purchased over 4,100 apartment homes. Prior to Urdang, Mr. Kelly was a Principal with Lend Lease focusing on national apartment acquisitions. From 1993 to 1998, Mr. Kelly was Vice President and part owner of Apartment Realty Advisors, an apartment brokerage company.

Mr. Neuheardt joined us in June 2001 as Vice President, Finance and was promoted to Senior Vice President, Finance in February 2003. Prior to joining us, Mr. Neuheardt was Controller and Treasurer of Sunrise Housing, Ltd., a privately owned apartment development company that manufactures modular units for the construction of affordable apartment communities. Previously, Mr. Neuheardt served as controller of several private energy companies, including Continental Emsco Company. Prior to that, Mr. Neuheardt was a Senior Manager in KPMG, LLP’s audit practice.

Mr. Shanaberger joined us in 1994 as an Accounting Manager and was promoted to Assistant Vice President and Assistant Treasurer in 1997. In 2000, Mr. Shanaberger was promoted to Vice President Corporate Controller and Chief Accounting Officer and was promoted to Senior Vice President in 2002. Prior to joining us, Mr. Shanaberger was employed by Ernst & Young LLP.

Mr. Spangler joined us as Assistant Vice President, Operational Planning and Asset Management in August 1998 and was promoted to Vice President, Director of Operational Planning and Asset Management that same year. Mr. Spangler was promoted to Senior Vice President, Business Development in February 2003 and Chief Risk Officer in September 2003. Prior to joining us, Mr. Spangler spent nine years as an Asset Manager for Summit Enterprises, Inc. of Virginia, a private investment management firm.

Mr. Wood joined us as Vice President of Construction in 1994. He was promoted to Senior Vice President and Director of Development-West in 2000.

Ms. Norwood joined us in 2001 as Vice President, Legal Administration and Secretary. Prior to joining us, Ms. Norwood was employed by Centex Corporation for 15 years, most recently as its Legal Administrator. Centex is a New York Stock Exchange listed company that operates in the home building, financial services, construction products, construction services and investment real estate business segments.

Available Information

We file electronically with the Securities and Exchange Commission our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports on the day of filing with the SEC on our website at www.udrt.com, or by sending an e-mail message to ir@udrt.com.


Item 2.	PROPERTIES

At December 31, 2003, our apartment portfolio included 264 communities located in 55 markets, with a total of 76,244 completed apartment homes. In addition, we had three apartment communities under development. We own approximately 53,000 square feet of office space in Richmond, Virginia, for our corporate offices and we lease approximately 9,700 square feet of office space in Highlands Ranch, Colorado, for our principal executive offices. The table below sets forth a summary of our real estate portfolio by geographic market at December 31, 2003.

SUMMARY OF REAL ESTATE PORTFOLIO BY GEOGRAPHIC MARKET

AT DECEMBER 31, 2003


		Number of		Number of		Percentage			Carrying
		Apartment		Apartment		of Carrying			Value (in		Encumbrances
		Communities		Homes		Value			thousands)		(in thousands)

Southern California			11		2,878		7.0	%	$	302,216	$	48,757
Dallas, TX			15		5,311		6.4	%		277,928		50,190
Houston, TX			23		6,458		6.4	%		277,782		57,954
Metropolitan DC			9		2,921		5.6	%		244,551		75,050
Phoenix, AZ			11		3,635		5.0	%		218,477		61,371
Orlando, FL			14		4,140		4.9	%		212,179		79,290
Raleigh, NC			11		3,663		4.8	%		207,865		58,593
Tampa, FL			11		3,836		4.4	%		188,616		56,312
Arlington, TX			10		3,465		3.7	%		160,674		39,056
Columbus, OH			6		2,530		3.5	%		150,684		41,327
Monterey Peninsula, CA			9		1,704		3.4	%		149,565		—
San Francisco, CA			4		980		3.3	%		142,044		20,780
Charlotte, NC			10		2,711		3.0	%		140,574		11,917
Richmond, VA			9		2,636		3.0	%		132,022		66,657
Nashville, TN			8		2,220		2.8	%		122,210		—
Greensboro, NC			8		2,123		2.4	%		105,923		—
Wilmington, NC			6		1,868		2.1	%		92,231		—
Baltimore, MD			7		1,470		2.1	%		91,451		27,752
Atlanta, GA			6		1,426		1.7	%		73,437		30,446
Columbia, SC			6		1,584		1.5	%		63,747		5,000
Jacksonville, FL			3		1,157		1.4	%		59,993		23,202
Norfolk, VA			6		1,438		1.3	%		55,687		7,359
Lansing, MI			4		1,226		1.2	%		51,778		31,570
Seattle, WA			3		628		0.8	%		34,627		25,830
Other Western			5		2,398		3.5	%		153,744		46,720
Other Pacific			8		2,275		2.9	%		125,456		48,905
Other Southwestern			7		1,795		2.3	%		99,902		9,765
Other Florida			7		1,825		2.1	%		92,451		—
Other North Carolina			8		1,893		1.8	%		77,014		11,550
Other Southeastern			4		1,393		1.6	%		70,926		34,762
Other Midwestern			8		1,357		1.6	%		68,912		26,320
Other Mid-Atlantic			5		928		1.0	%		43,683		12,542
Other Northeastern			2		372		0.4	%		18,401		5,167
Real Estate Under Development			n/a		n/a		0.5	%		22,592		n/a
Land			n/a		n/a		0.3	%		11,606		n/a

	Total Apartments(d)		264		76,244		99.7	%	$	4,340,948	$	1,014,144

[Additional columns below]

[Continued from above table, first column(s) repeated]

Average

Annualized Home Size

Cost Physical Average Monthly Concessions Resident (Square

Per Home Occupancy Rental Rates(a) (b) Turnover(c) Feet)

Southern California
$ 105,009 95.1 % $ 1,041 1.5% 45.2 % 819

Dallas, TX
52,331 95.1 % 660 2.3% 60.5 % 827

Houston, TX
43,014 90.2 % 635 2.3% 57.5 % 820

Metropolitan DC
83,722 95.9 % 986 1.2% 42.1 % 960

Phoenix, AZ
60,104 91.2 % 713 10.5% 73.2 % 924

Orlando, FL
51,251 93.4 % 708 1.6% 71.8 % 937

Raleigh, NC
56,747 93.1 % 696 4.4% 67.4 % 957

Tampa, FL
49,170 93.0 % 710 4.2% 59.2 % 953

Arlington, TX
46,371 94.3 % 655 2.8% 59.9 % 809

Columbus, OH
59,559 93.6 % 677 2.1% 65.4 % 904

Monterey Peninsula, CA
87,773 92.7 % 926 0.9% 54.6 % 727

San Francisco, CA
144,943 95.5 % 1,501 3.6% 54.5 % 776

Charlotte, NC
51,853 94.5 % 602 3.3% 69.9 % 982

Richmond, VA
50,084 94.4 % 712 2.4% 55.8 % 968

Nashville, TN
55,050 92.9 % 657 1.8% 67.5 % 943

Greensboro, NC
49,893 93.5 % 579 1.1% 57.6 % 981

Wilmington, NC
49,374 91.9 % 627 3.2% 74.9 % 952

Baltimore, MD
62,211 95.8 % 898 1.7% 55.1 % 905

Atlanta, GA
51,499 91.0 % 655 2.2% 62.4 % 908

Columbia, SC
40,244 92.9 % 600 2.3% 74.9 % 838

Jacksonville, FL
51,852 95.9 % 679 1.8% 61.7 % 896

Norfolk, VA
38,725 96.2 % 730 0.8% 68.1 % 1,016

Lansing, MI
42,233 93.5 % 653 2.1% 79.1 % 816

Seattle, WA
55,139 93.3 % 737 3.7% 72.3 % 823

Other Western
64,114 90.4 % 804 7.8% 61.9 % 893

Other Pacific
55,145 91.0 % 751 4.5% 66.8 % 915

Other Southwestern
55,656 88.8 % 670 4.6% 70.5 % 863

Other Florida
50,658 94.2 % 736 2.5% 74.4 % 867

Other North Carolina
40,684 94.7 % 577 0.6% 84.7 % 895

Other Southeastern
50,916 90.8 % 578 1.4% 61.6 % 893

Other Midwestern
50,783 93.3 % 667 2.2% 62.1 % 931

Other Mid-Atlantic
47,072 94.9 % 838 1.3% 81.8 % 931

Other Northeastern
49,464 95.4 % 711 0.1% 64.2 % 889

Real Estate Under Development
n/a n/a n/a n/a n/a n/a

Land
n/a n/a n/a n/a n/a n/a

Total Apartments(d)
$ 56,935 93.2 % $ 717 3.0% 63.5 % 895

Number of Number of Percentage Carrying

Apartment Apartment of Carrying Value (in Encumbrances

Communities Homes Value thousands) (in thousands)

Commercial Property
n/a n/a 0.1 % 3,255 —

Richmond — Corporate
n/a n/a 0.2 % 7,348 3,884

Total Real Estate Owned
264 76,244 100 % $ 4,351,551 $ 1,018,028

[Additional columns below]


(a)		Average Monthly Rental Rates represent potential rent collections (gross potential rents less market adjustments), which approximate net effective rents, based on weighted average number of homes.

(b)		Concessions disclosed as a percentage of gross potential rent.

(c)		Annualized Resident Turnover represents the percentage of homes that would be turned in the course of the year if the average weekly move-outs experienced throughout the most recent quarter were duplicated for the entire year.

(d)		Includes real estate held for disposition, real estate under development and land, but excludes commercial property.


Item 3.	LEGAL PROCEEDINGS

We are subject to various legal proceedings and claims arising in the ordinary course of business. We cannot determine the ultimate liability with respect to such legal proceedings and claims at this time. We believe that such liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on our financial condition, results of operations or cash flow.


Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the fourth quarter of the year ended December 31, 2003.

PART II


Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock

Our common stock is traded on the New York Stock Exchange under the symbol “UDR.” The following tables set forth the quarterly high and low sale prices per common share reported on the NYSE

for each quarter of the last two years. Distribution information for common stock reflects distributions declared per share for each calendar quarter and paid at the end of the following month.


					Distributions
	High		Low		Declared

2003
1st Quarter	$	16.7600	$	15.1300	$	.2850
2nd Quarter		17.7200		15.9800		.2850
3rd Quarter		18.9600		17.0700		.2850
4th Quarter		19.5300		17.3900		.2850

2002
1st Quarter	$	16.0100	$	13.9400	$	.2775
2nd Quarter		16.8100		15.2300		.2775
3rd Quarter		16.6500		13.1800		.2775
4th Quarter		16.4200		13.6600		.2775

On February 18, 2004, the closing sale price of our common stock was $18.58 per share on the NYSE and there were 7,287 holders of record of the 127,422,160 outstanding shares of our common stock.

We have determined that, for federal income tax purposes, approximately 71% of the distributions for each of the four quarters of 2003 represented ordinary income, 9% represented long-term capital gain, 2% represented unrecaptured section 1250 gain and 18% represented return of capital to our stockholders.

We pay regular quarterly distributions to holders of shares of our common stock. Future distributions will be at the discretion of our board of directors and will depend on our actual funds from operations, financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code, and other factors. The annual distribution payment for calendar year 2003 necessary for us to maintain our status as a REIT was approximately $0.73 per share. We declared total distributions of $1.14 per share for 2003.

Series B Preferred Stock

The Series B Cumulative Redeemable Preferred Stock has no stated par value and a liquidation preference of $25 per share. The Series B has no voting rights except as required by law. The Series B has no stated maturity and is not subject to any sinking fund or mandatory redemption and is not convertible into any of our other securities. 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 our option, 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 sale proceeds of our other capital stock. All dividends due and payable on the Series B have been accrued or paid as of the end of each fiscal year.

Distributions declared on the Series B in 2003 were $2.15 per share or $.5375 per quarter. The Series B is listed on the NYSE under the symbol “UDRpfb.”

Series D Preferred Stock

price per share of $25, payable in cash, plus all accrued and unpaid dividends, provided that the current market price of our 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; provided, however, that we 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, subject to certain exceptions.

In 2003, we exercised our right to redeem 6.0 million shares of our Series D. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 9,230,923 shares of common stock at a price of $16.25 per share. Because the shares of common stock were sold in a transaction not involving a public offering, the transaction is exempt from registration under the Securities Act of 1933 in accordance with Section 4(2) of the Securities Act.

Distributions declared on the Series D in 2003 were $2.04 per share or $.5089 per quarter. The Series D is not listed on any exchange.

Series E Preferred Stock

The Series E Cumulative Convertible Preferred Stock has no stated par value and a liquidation preference of $16.61 per share. Subject to certain adjustments and conditions, each share of the Series E is convertible at any time and from time to time at the holder’s option into one share of our common stock. The holders of the Series E are entitled to vote on an as-converted basis as a single class in combination with the holders of common stock at any meeting of our stockholders for the election of directors or for any other purpose on which the holders of common stock are entitled to vote. The Series E has no stated maturity and is not subject to any sinking fund or any mandatory redemption.

Distributions declared on the Series E in 2003 were $0.84 per share, $0.18 per share in the second quarter and $0.33 per share in each of the third and fourth quarters. The Series E is not listed on any exchange.

Dividend Reinvestment and Stock Purchase Plan

We have a Dividend Reinvestment and Stock Purchase Plan under which holders of our common and preferred stock may elect to automatically reinvest their distributions and make additional cash payments to acquire additional shares of our common stock. Stockholders who do not participate in the plan continue to receive dividends as declared. As of February 18, 2004, there were 4,000 participants in the plan.

Operating Partnership Units

From time to time we issue shares of our common stock in exchange for operating partnership units, or OP Units, tendered to our operating partnerships, United Dominion Realty, L.P. and Heritage Communities L.P., for redemption in accordance with the provisions of their respective partnership agreements. At December 31, 2003, there were 10,129,492 OP Units and 269,973 OP Units in United Dominion Realty, L.P. and Heritage Communities L.P., respectively, that were owned by limited partners. The holder of the OP Units has the right to require United Dominion Realty, L.P. to redeem all or a portion of the OP Units held by the holder in exchange for a cash payment based on the market value of our common stock at the time of redemption. However, United Dominion Realty, L.P.’s obligation to pay the cash amount is subject to the prior right of the company to acquire such OP Units in exchange for either the cash amount or shares of our common stock. Heritage Communities L.P. OP Units are convertible into common stock in lieu of cash, at our option, once the holder elects to convert, at an exchange ratio of 1.575 shares for each OP Unit. During 2003, we issued a total of 216,983 shares of common stock in exchange for OP Units.


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, 2003. 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.

UNITED DOMINION REALTY TRUST, INC.

SELECTED FINANCIAL DATA

(In thousands, except per share data and apartment homes owned)



			Years Ended December 31,

			2003		2002			2001			2000			1999

Operating Data(c)
	Rental income		$	603,367	$	582,823		$	549,890		$	523,172		$	482,821
	Income before minority interests and discontinued operations			52,585		12,995			26,091			17,088			28,133
	Income from discontinued operations, net of minority interests			18,801		40,678			37,230			59,586			65,937
	Net income			70,404		53,229			61,828			76,615			93,622
	Distributions to preferred stockholders			26,326		27,424			31,190			36,891			37,714
	Net income available to common stockholders			24,807		25,805			27,142			42,653			55,908
	Common distributions declared			134,876		118,888			108,956			110,225			109,607
	Weighted average number of common shares outstanding — basic			114,672		106,078			100,339			103,072			103,604
	Weighted average number of common shares outstanding — diluted			115,648		106,078			100,339			103,072			103,604
	Weighted average number of common shares, OP Units and common stock equivalents — diluted			136,975		127,838			120,728			123,005			124,127
	Per share — basic:
		Income/(loss) from continuing operations to common stockholders, net of minority interests	$	0.06	$	(0.14	)	$	(0.10	)	$	(0.16	)	$	(0.10	)
		Income from discontinued operations, net of minority interests		0.16		0.38			0.37			0.57			0.64
		Net income available to common stockholders		0.22		0.24			0.27			0.41			0.54
	Per share — diluted:
		Income/(loss) from continuing operations to common stockholders, net of minority interests		0.05		(0.14	)		(0.10	)		(0.16	)		(0.10	)
		Income from discontinued operations, net of minority interests		0.16		0.38			0.37			0.57			0.64
		Net income available to common stockholders		0.21		0.24			0.27			0.41			0.54
	Common distributions declared			1.14		1.11			1.08			1.07			1.06
Balance Sheet Data(c)
	Real estate owned, at carrying value		$	4,351,551	$	3,967,483		$	3,907,667		$	3,836,320		$	3,953,045
	Accumulated depreciation			896,630		748,733			646,366			509,405			395,864
	Total real estate owned, net of accumulated depreciation			3,454,921		3,218,750			3,261,301			3,326,915			3,557,181
	Total assets			3,543,643		3,276,136			3,348,091			3,453,957			3,688,317
	Secured debt			1,018,028		1,015,740			974,177			866,115			1,000,136
	Unsecured debt			1,114,009		1,041,900			1,090,020			1,126,215			1,127,169
	Total debt			2,132,037		2,057,640			2,064,197			1,992,330			2,127,305
	Stockholders’ equity			1,163,436		1,001,271			1,042,725			1,218,892			1,310,212
	Number of common shares outstanding			127,295		106,605			103,133			102,219			102,741



		Years Ended December 31,

		2003			2002			2001			2000			1999

Other Data
	*Cash Flow Data*
	Cash provided by operating activities	$	234,945		$	229,001		$	224,411		$	224,160		$	190,602
	Cash (used in)/provided by investing activities		(304,217	)		(67,363	)		(64,055	)		58,705			(103,836	)
	Cash provided by/(used in) financing activities		70,944			(163,127	)		(166,020	)		(280,238	)		(105,169	)
	*Funds from Operations(a)*
	Funds from operations — basic	$	192,938		$	153,016		$	159,202		$	162,930		$	143,070
	Funds from operations — diluted		207,619			168,795			174,630			178,230			158,224
	Funds from operations with gains on the disposition of real estate developed for sale — diluted(b)		208,431			168,795			174,630			178,230			158,224
	*Apartment Homes Owned*
	Total apartment homes owned at December 31		76,244			74,480			77,567			77,219			82,154
	Weighted average number of apartment homes owned during the year		74,550			76,567			76,487			80,253			85,926

(a) Funds from operations (“FFO”) is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of depreciable property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s definition issued in April 2002. We consider FFO in evaluating property acquisitions and our operating performance and believe that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of our activities in accordance with 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.

(b) Gains on the disposition of real estate investments developed for sale is defined as net sales proceeds less a tax provision (such development by REITs must be conducted in a taxable REIT subsidiary) and the gross investment basis of the asset before accumulated depreciation. We consider FFO with gains (or losses) on real estate development for sale to be a meaningful supplemental measure of performance because of the short-term use of funds to produce a profit which differs from the traditional long-term investment in real estate for REITs.

(c) Reclassified to conform to current year presentation as described in Note 3 to the consolidated financial statements.


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


	*Forward-Looking Statements*

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development activity and capital expenditures, capital raising activities, rent growth, occupancy and rental expense growth. Words such as “expects,” “anticipates,” “intends,” “plans,” “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 achievements of United Dominion Realty Trust, Inc. 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 us or our properties, adverse changes in the real estate markets and general and local economies and business conditions. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.


	*Business Overview*

We are a real estate investment trust, or REIT, that owns, acquires, renovates, develops and manages middle-market apartment communities nationwide. We were formed in 1972 as a Virginia corporation, and we changed our state of incorporation from Virginia to Maryland in June 2003. Our subsidiaries include two operating partnerships, Heritage Communities L.P., a Delaware limited partnership, and United Dominion Realty, L.P., a limited partnership which changed its state of organization from Virginia to Delaware in February 2004. Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” “the company,” or “United Dominion” refer collectively to United Dominion Realty Trust, Inc. and its subsidiaries.

At December 31, 2003, our portfolio included 264 communities with 76,244 apartment homes nationwide. The following table summarizes our market information by major geographic markets (includes real estate held for disposition, real estate under development and land, but excludes commercial properties):



											Year Ended
		As of December 31, 2003									December 31, 2003

		Number of		Number of		Percentage of			Carrying		Average			Average
		Apartment		Apartment		Carrying			Value		Physical			Monthly
		Communities		Homes		Value			(in thousands)		Occupancy			Rental Rates

Southern California			11		2,878		7.0	%	$	302,216		95.1	%	$	1,041
Dallas, TX			15		5,311		6.4	%		277,928		95.1	%		660
Houston, TX			23		6,458		6.4	%		277,782		90.2	%		635
Metropolitan DC			9		2,921		5.6	%		244,551		95.9	%		986
Phoenix, AZ			11		3,635		5.0	%		218,477		91.2	%		713
Orlando, FL			14		4,140		4.9	%		212,179		93.4	%		708
Raleigh, NC			11		3,663		4.8	%		207,865		93.1	%		696
Tampa, FL			11		3,836		4.4	%		188,616		93.0	%		710
Arlington, TX			10		3,465		3.7	%		160,674		94.3	%		655
Columbus, OH			6		2,530		3.5	%		150,684		93.6	%		677
Monterey Peninsula, CA			9		1,704		3.4	%		149,565		92.7	%		926
San Francisco, CA			4		980		3.3	%		142,044		95.5	%		1,501
Charlotte, NC			10		2,711		3.2	%		140,574		94.5	%		602
Richmond, VA			9		2,636		3.0	%		132,022		94.4	%		712
Nashville, TN			8		2,220		2.8	%		122,210		92.9	%		657
Greensboro, NC			8		2,123		2.4	%		105,923		93.5	%		579
Wilmington, NC			6		1,868		2.1	%		92,231		91.9	%		627
Baltimore, MD			7		1,470		2.1	%		91,451		95.8	%		898
Atlanta, GA			6		1,426		1.7	%		73,437		91.0	%		655
Columbia, SC			6		1,584		1.5	%		63,747		92.9	%		600
Jacksonville, FL			3		1,157		1.4	%		59,993		95.9	%		679
Norfolk, VA			6		1,438		1.3	%		55,687		96.2	%		730
Lansing, MI			4		1,226		1.2	%		51,778		93.5	%		653
Seattle, WA			3		628		0.8	%		34,627		93.3	%		737
Other Western			5		2,398		3.6	%		153,744		90.4	%		804
Other Pacific			8		2,275		2.9	%		125,456		91.0	%		751
Other Southwestern			7		1,795		2.3	%		99,902		88.8	%		670
Other Florida			7		1,825		2.1	%		92,451		94.2	%		736
Other North Carolina			8		1,893		1.8	%		77,014		94.7	%		577
Other Southeastern			4		1,393		1.6	%		70,926		90.8	%		578
Other Midwestern			8		1,357		1.6	%		68,912		93.3	%		667
Other Mid-Atlantic			5		928		1.0	%		43,683		94.9	%		838
Other Northeastern			2		372		0.4	%		18,401		95.4	%		711
Real Estate Under Development			—		—		0.5	%		22,592		—			—
Land			—		—		0.3	%		11,606		—			—

	Total		264		76,244		100.0	%	$	4,340,948		93.2	%	$	717


	*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 capital management. Both the coordination of asset and liability maturities and effective capital management are important to the maintenance of liquidity. Our primary source of liquidity is our cash flow from operations as determined by rental rates, occupancy levels and operating expenses related to our portfolio of apartment homes. We

routinely use our 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 sale of real estate have been used for both investing and financing activities.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations and borrowings under credit arrangements. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities, the repayment of financing on development activities and potential property acquisitions, through long-term secured and unsecured borrowings, the disposition of properties and the issuance of additional debt or equity securities. We believe that our 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. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations.

We have a shelf registration statement filed with the Securities and Exchange Commission that provides for the issuance of up to an aggregate of $1 billion in common shares, preferred shares and debt securities to facilitate future financing activities in the public capital markets. Throughout 2003, we completed various financing activities under our $1 billion shelf registration statement. These activities are summarized in the section titled “Financing Activities” that follows. As of December 31, 2003, approximately $506.3 million of equity and debt securities remained available for use under the shelf registration statement. Access to capital markets is dependent on market conditions at the time of issuance. In January 2004, we sold $75 million of 5.13% senior unsecured notes due January 2014 under our $1 billion shelf registration statement. The net proceeds of $73.9 million from the issuance were used to repay secured and unsecured debt obligations maturing in the first quarter of 2004.

In July 2003, we entered into a sales agreement pursuant to which we may issue and sell through an agent up to a total of five million shares of common stock from time to time in “at the market offerings,” as defined in Rule 415 of the Securities Act of 1933. These sales will be made under our $1 billion shelf registration statement. The sales price of the common stock will be no lower than the minimum price designated by us prior to the sale. As of December 31, 2003, we had not sold any shares of common stock pursuant to the sales agreement.

In June 2003, Moody’s Investors Service upgraded our rating outlook to Positive from Stable with senior unsecured debt rated at Baa3 and preferred stock rated at Ba1. In September 2003, Standard & Poor’s Rating Services upgraded the rating on our senior unsecured debt to BBB, our preferred stock to BBB-, and our corporate credit rating to BBB/ Stable outlook.

In November 2003, we increased our medium-term note program from $300 million to $500 million.


	*Future Capital Needs*

Future development expenditures are expected to be funded primarily through joint ventures, with proceeds from the sale of property, with construction loans and, to a lesser extent, with cash flows provided by operating activities. Acquisition activity in strategic markets is expected to be largely financed through the issuance of equity and debt securities, the issuance of operating partnership units, the assumption or placement of secured and/or unsecured debt and by the reinvestment of proceeds from the sale of property in non-strategic markets.

During 2004, we have approximately $46.8 million of secured debt and $101.1 million of unsecured debt maturing, and we anticipate repaying that debt with proceeds from borrowings under our secured or unsecured credit facilities or the issuance of new unsecured debt securities or equity.


	*Critical Accounting Policies and Estimates*

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

activities and (4) real estate investment properties. With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented.


	Capital Expenditures

In conformity with accounting principles generally accepted in the United States, we capitalize 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 2003, $53.1 million or $714 per home was spent on capital expenditures for all of our 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, siding, parking lots and other non-revenue enhancing capital expenditures, which aggregated $34.5 million or $464 per home. In addition, revenue enhancing capital expenditures, including water sub-metering, the initial installation of microwaves or washer-dryers and extensive interior upgrades totaled $15.4 million or $207 per home and major renovations totaled $3.2 million or $43 per home for the year ended December 31, 2003.

The following table outlines capital expenditures and repair and maintenance costs for all of our communities, excluding real estate under development and commercial properties for the periods presented:



		Year Ended December 31,							Year Ended December 31,
		(dollars in thousands)							(per home)

		2003		2002		% Change			2003		2002		% Change

Turnover capital expenditures		$	15,044	$	16,474		-8.7	%	$	202	$	216		-6.5	%
Other recurring capital expenditures			19,478		15,867		22.8	%		262		209		25.4	%

	Total recurring capital expenditures		34,522		32,341		6.7	%		464		425		9.2	%
Revenue enhancing improvements			15,408		9,405		63.8	%		207		124		66.9	%
Major renovations			3,216		1,081		197.5	%		43		14		207.1	%

	Total capital improvements	$	53,146	$	42,827		24.1	%	$	714	$	563		26.8	%

Repair and maintenance			40,615		40,078		1.3	%		546		527		3.6	%

	Total expenditures	$	93,761	$	82,905		13.1	%	$	1,260	$	1,090		15.6	%

Total capital improvements increased $10.3 million or $151 per home in 2003 compared to 2002. We will continue to selectively add revenue enhancing improvements which we believe will provide a return on investment substantially in excess of our cost of capital. Recurring capital expenditures during 2004 are currently expected to be approximately $470 per home.


	Impairment of Long-Lived Assets

We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Our cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair market value. Our estimates of fair market value represent our best estimate based upon industry trends and reference to market rates and transactions.

We review the carrying value of our portfolio of assets on a regular basis. During 2002, we pursued our strategy of exiting markets where long-term growth prospects are limited. As a result, 25 apartment communities were placed under contract and two of these assets were ultimately sold at net selling prices

below their net book values. Accordingly, we recorded an aggregate $2.3 million impairment loss for the write down of a portfolio of apartment communities in Memphis, Tennessee. In 2001, in connection with our analysis of the carrying value of all undeveloped land parcels, we recognized an aggregate $2.8 million impairment loss 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.


	Derivatives and Hedging Activities

We use derivative financial instruments in the normal course of business to reduce our exposure to fluctuations in interest rates. As of December 31, 2003, we had five interest rate swap agreements with a notional value aggregating $68.5 million that are used to fix the interest rate on a portion of our 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, any change in the fair value of the derivative used as a hedge would be reflected in current earnings. Furthermore, should any change in management strategy, or any other circumstance, cause an existing highly effective hedge to become ineffective, the accumulated loss or gain in the value of the derivative instrument since its inception may be required to be immediately reclassified from the stockholders’ equity section of the balance sheet to the income statement.

Interest rate swaps, where we effectively make fixed rate payments and receive variable rate payments to eliminate our variable rate exposure, are entered into to manage the interest rate risk in our 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. Any event that impacts the level of actual and expected future interest rates will impact our swap valuations. The fair value of our existing swap portfolio is likely to fluctuate from year to year based on changing levels of interest rates and shortening swap terms to maturity. Information about the fair values, notional amounts and contractual terms of our interest rate swaps can be found in Note 8 to our consolidated financial statements and the section titled “Interest Rate Risk” that follows.

Potential losses are limited to counterparty risk in situations where we are owed money; that is, when we hold contracts with positive fair values. We do not expect any losses from counterparties failing to meet their obligations as the counterparties are highly rated credit quality U.S. financial institutions and we believe that the likelihood of realizing material losses from counterparty non-performance is remote. At December 31, 2003, we had unrealized losses totaling $1.6 million on derivative transactions, which if terminated, would require a cash outlay. We presently have no intention to terminate these contracts. There are no credit concerns related to our obligations and we expect to meet those obligations without default.


	Real Estate Investment Properties

We purchase real estate investment properties from time to time and allocate the purchase price to various components, such as land, buildings and intangibles related to in-place leases and customer relationships in accordance with FASB Statement No. 141, “Business Combinations.” The purchase price is allocated based on the relative fair value of each component. The fair value of buildings is determined as if the buildings were vacant upon acquisition and subsequently leased at market rental rates. As such, the determination of fair value considers the present value of all cash flows expected to be generated from the property including an initial lease up period. We determine the fair value of in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition. The fair value of in-place leases is recorded and amortized as amortization expense over the

remaining contractual lease period. We determine the fair value of in-place leases by considering the cost of acquiring similar leases, the foregoing rents associated with the lease-up period and the carrying costs associated with the lease-up period.

The following discussion explains the changes in net cash provided by operating and financing activities and net cash used in investing activities that are presented in our Consolidated Statements of Cash Flows.


	Operating Activities

For the year ended December 31, 2003, our cash flow provided by operating activities was $234.9 million compared to $229.0 million for 2002. During 2003, the increase in cash flow from operating activities resulted primarily from a $15.8 million decrease in interest expense and an overall increase in operating liabilities primarily due to increased trade payables and an increase in unsecured interest payables as a result of different payment terms on new financings. These increases in cash flow were partially offset by a $15.5 million decrease in property operating income resulting from the overall decrease in our apartment community portfolio (see discussion under “Apartment Community Operations”) and a reduced level of collections on escrows due to lower refinancing activities.


	Investing Activities

For the year ended December 31, 2003, net cash used in investing activities was $304.2 million compared to $67.4 million for 2002. Changes in the level of investing activities from period to period reflects our strategy as it relates to our acquisition, capital expenditure, development and disposition programs, as well as the impact of the capital market environment on these activities, all of which are discussed in further detail below.


	Acquisitions

For the year ended December 31, 2003, we acquired 3,514 apartment homes in 11 communities for an aggregate consideration of $347.7 million and one parcel of land for $3.1 million. In addition, we purchased the remaining 47% joint venture partners’ ownership interest in nine communities with 1,706 apartment homes in Salinas and Pacific Grove, California, for $76.0 million in June 2003.

During the year ended December 31, 2002, we acquired nine communities with 3,041 apartment homes and one parcel of land for approximately $267 million. In addition, in June 2002, we 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 we owned a 25% interest and served as the managing partner. In August 2002, we purchased the outside partnership interest in two properties in California containing 926 apartment homes for approximately $17 million.

Consistent with our long-term strategic plan to achieve greater operating efficiencies by investing in fewer, more concentrated markets, over the last two years, we have been expanding our interests in the fast growing Southern California market. During 2004, we plan to continue to channel new investments into those markets we believe will provide the best investment returns for us over the next ten years. Markets will be targeted based upon defined criteria including past performance, expected job growth, current and anticipated housing supply and demand and the ability to attract and support household formation.


	Real Estate Under Development

Development activity is focused in core markets in which we have operations. For the year ended December 31, 2003, we invested approximately $13.6 million in development projects, down $9.2 million from our 2002 level of $22.8 million.

The following projects were under development as of December 31, 2003:


			Number of		Completed		Cost		Budgeted		Estimated		Expected
			Apartment		Apartment		to Date		Cost		Cost		Completion
	Location		Homes		Homes		(In thousands)		(In thousands)		Per Home		Date

2000 Post III		San Francisco, CA		24		—	$	2,500	$	7,000	$	291,700		3Q04
Rancho Cucamonga		Los Angeles, CA		414		—		16,200		63,500		153,400		4Q05
Mandalay on the Lake		Irving, TX		369		—		3,900		28,200		76,400		1Q06

				807		—	$	22,600	$	98,700	$	122,300

In addition, we own six parcels of land that we continue to hold for future development that had a carrying value as of December 31, 2003 of $7.8 million. Five of the six parcels represent additional phases to existing communities as we plan to add apartment homes adjacent to currently owned communities that are in improving markets.

In December 2003, The Mandolin II, a 178-apartment home community located in Dallas, Texas, was completed. Total development costs for the project as of December 31, 2003, were $12.2 million or $68,500 per home. The community was 65.2% leased at December 31, 2003.


	Development Joint Venture

In September 2002, we entered into a development joint venture with AEGON USA Realty Advisors, Inc. in which we serve as the managing member. The joint venture is expected to develop approximately eight to ten garden-style apartment communities over the next three to five years, with a total development cost of up to $210 million. The joint venture will obtain bank construction financing for 65% to 80% of total costs and will provide equity contributions for the balance of the costs with AEGON providing 80% and us providing 20%. We are serving as the developer, general contractor and property manager for the joint venture, and have guaranteed those project development costs, excluding financing costs (including fees and interest), which exceed the defined project cost budgeted amounts for each respective project, as they come to fruition. We believe that the likelihood of funding guarantor obligations is remote and that the impact to us would be immaterial. In June 2003, we contributed land with a carrying value of $3.8 million to the joint venture.

As of December 31, 2003, Villa Toscana, a 504-apartment home community located in Houston, Texas, was under development and total costs incurred as of December 31, 2003, were $10.8 million. Budgeted costs for the project are estimated to be approximately $28.4 million or $56,300 per apartment home. The project is anticipated to be completed in the fourth quarter of 2005.


	Disposition of Investments

For the year ended December 31, 2003, we sold seven communities with 1,927 apartment homes for an aggregate consideration of $88.9 million, one parcel of land for $1.3 million and two commercial properties for an aggregate consideration of $7.3 million. We recognized gains for financial reporting purposes of $15.9 million on these sales. Proceeds from the sales were used primarily to reduce debt.

For the year ended December 31, 2002, we sold 25 communities with a total of 6,990 apartment homes, one commercial property and one parcel of land for an aggregate sales price of approximately $319 million and recognized gains for financial reporting purposes of $31.5 million. Proceeds from the sales were applied primarily to acquire communities and reduce debt. In addition, during the first quarter of 2002, $3.1 million in proceeds were received on the condemnation of 96 units of a community in Fresno, California that resulted in a gain of $1.2 million.

During 2004, we plan to continue to pursue our strategy of exiting markets where long-term growth prospects are limited and redeploying capital into markets that would enhance future growth rates and economies of scale. We intend to use proceeds from 2004 dispositions to acquire communities, fund development activity and reduce debt.


	*Financing Activities*

Net cash provided by financing activities during 2003 was $70.9 million compared to net cash used in financing activities in 2002 of $163.1 million. As part of the plan to improve our balance sheet, we utilized proceeds from dispositions, equity and debt offerings and refinancings to extend maturities, pay down existing debt and purchase new properties.

The following is a summary of our financing activities for the year ended December 31, 2003:

• Repaid $40.0 million of secured debt and $214.6 million of unsecured debt.

• Sold 2.0 million shares of common stock at a public offering price of $15.71 per share under our $1 billion shelf registration statement in January 2003. The net proceeds of $31.2 million were used to repay debt and for general corporate purposes.

• Sold $150 million aggregate principal amount of 4.50% medium-term notes due March 2008 in February 2003 under our medium-term note program. The net proceeds of $149.3 million were used to repay debt.

• Negotiated a new $500 million unsecured revolving credit facility to replace our $375 million unsecured revolver and $100 million unsecured term loan in March 2003. The credit facility’s interest rate is 25 and 30 basis points lower than the previous unsecured revolver and term loan, respectively.

• Sold 3.0 million shares of common stock at a public offering price of $16.97 per share under our $1 billion shelf registration statement in April 2003. The net proceeds of $49.2 million were ultimately used to acquire additional apartment communities. We sold an additional 100,000 shares of common stock at a public offering price of $16.97 per share in connection with the exercise of the underwriter’s over-allotment option in May 2003. The net proceeds of $1.6 million were used for general corporate purposes.

• Exercised our right to redeem 2.0 million shares of our Series D Cumulative Convertible Redeemable Preferred Stock in May 2003. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 3,076,923 shares of common stock at a price of $16.25 per share.

• Issued $56.9 million of our Series E Cumulative Convertible Preferred Stock and 1,617,815 Preferred OP Units totaling $26.9 million in June 2003 as partial consideration for the purchase of four apartment communities in Southern California. Each share of Series E and each OP Unit was priced at $16.61 per share, and dividends on the Series E and OP Units carry a fixed coupon of 8.0% until such time as the common share dividend is equal to or exceeds this amount for four consecutive quarters, at which time the Series E and OP Units will be entitled to receive dividends equivalent to the dividends paid to holders of our common stock.

• Sold $50 million aggregate principal amount of 4.50% medium-term notes due March 2008 in August 2003 under our medium-term note program. The net proceeds of approximately $49.9 million were used to repay amounts outstanding on our $500 million unsecured revolving credit facility.

• Sold 4.0 million shares of common stock at a public offering price of $18.40 per share under our $1 billion shelf registration statement in September 2003. The net proceeds of approximately $72.3 million were used for general corporate purposes, including funding acquisitions and development, with the balance used to reduce outstanding variable rate debt under our unsecured credit facilities. We sold an additional 600,000 shares of common stock a public offering price of $18.40 per share in connection with the exercise of the underwriter’s over-allotment option in October 2003. The net proceeds of $10.8 million were used for general corporate purposes, including funding acquisitions and development, with the remaining balance used to reduce outstanding variable rate debt under our unsecured credit facilities.

• Sold $75 million aggregate principal amount of 5.13% senior unsecured notes due January 2014 in October 2003 under our medium-term note program. The net proceeds of $74.5 million were used to repay amounts outstanding on our $500 million unsecured revolving credit facility.

• Sold $50 million aggregate principal amount of 4.25% senior unsecured notes due January 2009 in November 2003 under our medium-term note program. The net proceeds of $49.8 million were used to fund acquisitions of apartment communities.

• Exercised our right to redeem 4.0 million shares of our Series D Cumulative Convertible Redeemable Preferred Stock in December 2003. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 6,154,000 shares of common stock at a price of $16.25 per share.


	Credit Facilities

We have four secured revolving credit facilities with Fannie Mae with an aggregate commitment of $860 million and one with Freddie Mac for $72 million. As of December 31, 2003, $676.3 million was outstanding under the Fannie Mae credit facilities leaving $183.7 million of unused capacity. The Fannie Mae credit facilities are for an initial term of ten years, bear interest at floating and fixed rates and can be extended for an additional five years at our discretion. As of December 31, 2003, $70.7 million had been funded under the Freddie Mac credit facility leaving $1.3 million of unused capacity. The Freddie Mac credit facility is for an initial term of five years with an option for us to extend for an additional four-year term at the then market rate. As of December 31, 2003, aggregate borrowings under both the Fannie Mae and Freddie Mac credit facilities were $747 million. We have $305.9 million of the funded balance fixed at a weighted average interest rate of 6.4%. The remaining balance on these facilities is currently at a weighted average variable rate of 1.7%.

We have a $500 million three-year unsecured revolving credit facility that matures in March 2006. The credit facility replaces our $375 million unsecured revolver and $100 million unsecured term loan. If we receive commitments from additional lenders or if the initial lenders increase their commitments, we will be able to increase the credit facility to $650 million. At our option, the credit facility can be extended one year to March 2007. Based on our current credit ratings, the credit facility bears interest at a rate equal to LIBOR plus 90 basis points. As of December 31, 2003, $137.9 million was outstanding under the credit facility, leaving $362.1 million of unused capacity.

The Fannie Mae and Freddie Mac credit facilities and the bank revolving credit facility are subject to customary financial covenants and limitations.


	Derivative Instruments

As part of our overall interest rate risk management strategy, we use derivatives as a means to fix the interest rates of variable rate debt obligations or to hedge anticipated financing transactions. Our 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 the company. We believe that we have appropriately controlled our interest rate risk through the use of derivative instruments. During 2003, the fair value of our derivative instruments has improved from an unfavorable $9.6 million at December 31, 2002, to an unfavorable $1.6 million at December 31, 2003. This decrease is primarily due to the maturity and settlement of eight swaps in 2003 and the normal progression of the fair market value of derivative instruments towards zero as they approach expiration.


	Interest Rate Risk

We are exposed to interest rate risk associated with variable rate notes payable and maturing debt that has to be refinanced. We do not hold financial instruments for trading or other speculative purposes, but rather, issue these financial instruments to finance our portfolio of real estate assets. Interest rate sensitivity is the relationship between changes in market interest rates and the fair value of market rate

sensitive assets and liabilities. Our earnings are affected as changes in short-term interest rates impact our cost of variable rate debt and maturing fixed rate debt. A large portion of our market risk is exposure to short-term interest rates from variable rate borrowings outstanding under the unhedged portion of our Fannie Mae and Freddie Mac credit facilities and our bank revolving credit facility, which totaled $441.2 million and $86.4 million, respectively, at December 31, 2003. The impact on our financial statements of refinancing fixed rate debt that matured during 2003 was immaterial.

At December 31, 2003, the notional value of our derivative products for the purpose of managing interest rate risk was $68.5 million, representing interest rate swaps under which we pay a fixed rate of interest and receive a variable rate. These agreements effectively fix $68.5 million of our variable rate notes payable to a weighted average fixed rate of 8.1%. At December 31, 2003, the fair market value of the interest rate swaps was an unfavorable $1.6 million. If interest rates were 100 basis points more or less at December 31, 2003, the fair market value of the interest rate swaps would have increased or decreased approximately $0.3 million.

If market interest rates for variable rate debt average 100 basis points more in 2004 than they did during 2003, our interest expense, after considering the effects of our interest rate swap agreements, would increase, and income before taxes would decrease by $5.8 million. Comparatively, if market interest rates for variable rate debt had averaged 100 basis points more in 2003 than in 2002, our interest expense, after considering the effects of our interest rate swap agreements, would have increased, and income before taxes would have decreased by $5.3 million. If market rates for fixed rate debt were 100 basis points higher at December 31, 2003, the fair value of fixed rate debt would have decreased from $1.57 billion to $1.46 billion. If market interest rates for fixed rate debt were 100 basis points lower at December 31, 2003, the fair value of fixed rate debt would have increased from $1.57 billion to $1.58 billion.

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


	*Funds from Operations*

Funds from operations (“FFO”) is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We compute FFO for all periods presented in accordance with the recommendations set forth by the National Association of Real Estate Investment Trust’s (“NAREIT”) April 1, 2002 White Paper. Adjusted funds from operations (“AFFO”) is defined as FFO less recurring capital expenditures for our stabilized portfolio of $464 per home in 2003 and $425 per home in 2002. We consider FFO and AFFO in evaluating property acquisitions and our operating performance, and believe that FFO and AFFO should be considered along with, but not as an alternative to, net income as a measure of our operating performance and liquidity. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs.

Historical cost accounting for real estate assets in accordance with generally accepted accounting principles implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical costs depreciation, among other items, from net income based on generally accepted accounting principles. The use of FFO, combined with the required presentations, has been fundamentally beneficial, improving the understanding of operating results

of REITs among the investing public and making comparisons of REIT operating results more meaningful. We generally consider FFO to be a useful measure for reviewing our comparative operating and financial performance (although FFO should be reviewed in conjunction with net income which remains the primary measure of performance) because by excluding gains or losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization, FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different companies. We believe that FFO and AFFO are the best measures of economic profitability for real estate investment trusts.

The following table outlines our FFO calculation and reconciliation to generally accepted accounting principles for the three years ended December 31, 2003 (dollars in thousands):


		2003			2002			2001

Net income		$	70,404		$	53,229		$	61,828
Adjustments:
	Distributions to preferred stockholders		(26,326	)		(27,424	)		(31,190	)
	Real estate depreciation and amortization, net of outside partners’ interest		161,402			148,210			132,825
	Minority interests of unitholders in operating partnership		368			(970	)		(732	)
	Real estate depreciation related to unconsolidated entities		196			471			1,105
Discontinued Operations:
	Real estate depreciation		1,556			9,519			17,381
	Minority interests of unitholders in operating partnership		1,279			2,679			2,699
	Net gains on sales of depreciable property		(15,941	)		(32,698	)		(24,714	)

Funds from operations (“FFO”) — basic		$	192,938		$	153,016		$	159,202

	Distributions to preferred stockholders — Series D and E (Convertible)		14,681			15,779			15,428

Funds from operations — diluted		$	207,619		$	168,795		$	174,630

	Gains on the disposition of real estate developed for sale		812			—			—

FFO with gains on the disposition of real estate developed for sale — diluted		$	208,431		$	168,795		$	174,630

	Recurring capital expenditures		(34,522	)		(32,341	)		(31,535	)

Adjusted funds from operations (“AFFO”) — diluted		$	173,909		$	136,454		$	143,095

Weighted average number of common shares and OP Units outstanding — basic			122,589			113,077			107,741
Weighted average number of common shares, OP Units and common stock equivalents outstanding — diluted			136,975			127,838			120,728

In the computation of diluted FFO, OP Units, out-performance partnership shares and the shares of Series D Cumulative Convertible Redeemable Preferred Stock and Series E Cumulative Convertible Preferred Stock are dilutive; therefore, they are included in the diluted share count. In 2003, distributions to preferred stockholders exclude $19.3 million related to a premium on preferred shares repurchased.

Gains on the disposition of real estate investments developed for sale is defined as net sales proceeds less a tax provision (such development by REITs must be conducted in a taxable REIT subsidiary) and the gross investment basis of the asset before accumulated depreciation. We consider FFO with gains (or losses) on real estate developed for sale to be a meaningful supplemental measure of performance because of the short-term use of funds to produce a profit that differs from the traditional long-term investment in real estate for REITs.

The following is a reconciliation of GAAP gains on the disposition of real estate developed for sale to gross gains on the disposition of real estate developed for sale for the three years ended December 31, 2003 (dollars in thousands):

2003

2002

2001

GAAP gains on the disposition of real estate developed for sale

1,249

—

Less: accumulated depreciation

(437

)

—

Gains on the disposition of real estate developed for sale

812

—

FFO also does not represent cash generated from operating activities in accordance with generally accepted accounting principles, and therefore should not be considered an alternative to net cash flows from operating activities, as determined by generally accepted accounting principles, as a measure of liquidity. Additionally, it is not necessarily indicative of cash availability to fund cash needs. A presentation of cash flow metrics based on generally accepted accounting principles is as follows (dollars in thousands):


	2003			2002			2001

Net cash provided by operating activities	$	234,945		$	229,001		$	224,411
Net cash used in investing activities		(304,217	)		(67,363	)		(64,055	)
Net cash provided by/(used in) financing activities		70,944			(163,127	)		(166,020	)


	*Results of Operations*

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


	Net Income Available to Common Stockholders


	2003-vs-2002

Net income available to common stockholders was $24.8 million ($0.21 per diluted share) for the year ended December 31, 2003, compared to $25.8 million ($0.24 per diluted share) for the year ended December 31, 2002, representing a decrease of $1.0 million ($0.03 per diluted share). The decrease in net income available to common stockholders for the year ended December 31, 2003, when compared to the same period in the prior year resulted primarily from the following items, all of which are discussed in further detail elsewhere within this Report:

• a charge of $19.3 million in 2003 for a premium on preferred share repurchases,

• $16.8 million less in gains recognized from the sale of depreciable property in 2003,

• a $15.5 million decrease in property operating income in 2003,

• a $4.2 million increase in depreciation and amortization expense in 2003, and

• a $1.4 million impairment charge taken in 2003 for the write-off of our investment in Realeum, Inc., an unconsolidated development joint venture.

These decreases in income were offset by a $15.8 million decrease in interest expense in 2003, $37.0 million less in prepayment penalties and premiums paid in 2003 for the refinancing of mortgage debt and the repurchase of unsecured debt, and a $2.3 million impairment charge taken in 2002 related to a portfolio of properties in Memphis, Tennessee.


	2002-vs-2001

Net income available to common stockholders was $25.8 million ($0.24 per diluted share) for the year ended December 31, 2002, compared to $27.1 million ($0.27 per diluted share) for the prior year. The decrease in net income available to common stockholders resulted primarily from charges for prepayment penalties and premiums paid in 2002 in connection with the refinancing of mortgage debt and

the repurchase of unsecured debt, aggregating $37.0 million before minority interests. These charges were partially offset by the following items, all of which are discussed in further detail elsewhere within this Report:

• an $11.4 million decrease in interest expense in 2002,

• $8.0 million more in gains recognized from the sale of depreciable property in 2002,

• a charge of $5.4 million in 2001 for restructuring,

• a $5.4 million charge in 2001 for impairment losses on real estate and investments, and

• a $4.7 million increase in property operating income in 2002.


	*Apartment Community Operations*

Our net income is primarily generated from the operation of our apartment communities. The following table summarizes the operating performance of our total apartment portfolio for each of the periods presented (dollars in thousands):



	Year Ended December 31,									Year Ended December 31,

	2003			2002			% Change			2002			2001			% Change

Property rental income	$	613,550		$	627,625			-2.2	%	$	627,625		$	617,690			1.6	%
Property operating expense*		(234,478	)		(233,071	)		0.6	%		(233,071	)		(227,820	)		2.3	%

Property operating income	$	379,072		$	394,554			-3.9	%	$	394,554		$	389,870			1.2	%

Weighted average number of homes		74,550			76,567			-2.6	%		76,567			76,487			0.1	%
Physical occupancy**		93.2	%		93.0	%		0.2	%		93.0	%		93.9	%		-0.9	%

* Excludes depreciation, amortization, and property management expenses.

** Based upon weighted average stabilized units.

The decrease in total property operating income since December 31, 2002 is primarily due to an overall decrease in same community property operating income.


	2003-vs-2002


	Same Communities

Our same communities (those communities acquired, developed and stabilized prior to January 1, 2002 and held on December 31, 2003, which consisted of 67,814 apartment homes) provided 89% of our property operating income for the year ended December 31, 2003.

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 1.6% to 61.7%.


	Non-Mature Communities

The remaining 11% of our property operating income during 2003 was generated from communities that we classify as “non-mature communities” (primarily those communities acquired or developed during 2002 and 2003, sold properties, and those properties classified as real estate held for disposition). The 21 communities with 6,935 apartment homes that we acquired during 2002 and 2003 provided $30.6 million of property operating income. The seven communities with 1,927 apartment homes sold during 2003 provided $4.6 million of property operating income. In addition, our development communities, which included 972 apartment homes constructed since January 1, 2002, provided $4.8 million of property operating income during 2003, the one community with 100 apartment homes classified as real estate held for disposition provided $0.7 million of property operating income and other non-mature communities provided $1.7 million of property operating income for the year ended December 31, 2003.


	2002-vs-2001


	Same Communities

Our same communities (those communities acquired, developed, and stabilized prior to January 1, 2001 and held on December 31, 2002, which consisted of 66,416 apartment homes) provided 87% of our property operating income for the year ended December 31, 2002.

In 2002, same community property operating income decreased 0.8% or $2.8 million compared to the prior year. The overall decrease in property operating income was primarily driven by a 17.1% or $5.6 million increase in vacancy loss and a 37.1% or $4.5 million increase in concessions. These decreases in income were partially offset by a 32.8% or $3.4 million increase in sub-meter, trash and vacant utility reimbursements, a 0.3% or $1.7 million increase in rental rates and a 13.0% or $2.6 million increase in other income. Physical occupancy declined 0.8% to 93.3% in 2002 compared to 2001.

For 2002, property operating expenses at these same communities increased 0.9% or $1.7 million compared to 2001. This increase in property operating expenses was primarily driven by a 10.6% or $3.3 million increase in repair and maintenance costs and a 3.4% or $1.6 million increase in real estate taxes, both of which were partially offset by a 5.1% or $1.7 million decrease in utilities expense, a 40.2% or $0.9 million decrease in incentive compensation expense and a 9.5% or $1.0 million decrease in insurance costs.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin decreased 0.4% to 63.3%.


	Non-Mature Communities

The remaining 13% of our property operating income during 2002 was generated from our non-mature communities (primarily those communities acquired or developed during 2001 and 2002, sold properties, and those properties classified as real estate held for disposition). The 16 communities with 4,989 apartment homes that we acquired during 2001 and 2002 provided $19.6 million of property operating income. In addition, our development communities, which included 1,238 apartment homes constructed since January 1, 2001, provided $6.7 million of property operating income during 2002. The 25 communities with 6,990 apartment homes sold during 2002 provided $18.1 million of property operating income, the two communities with 363 apartment homes classified as real estate held for disposition provided $1.9 million of property operating income, and other non-mature communities provided $4.6 million of property operating income for the year ended December 31, 2002.


	*Real Estate Depreciation and Amortization*

For the year ended December 31, 2003, real estate depreciation and amortization on both continuing and discontinued operations increased $4.2 million or 2.7% compared to the same period in 2002, regardless of the decrease in the weighted average number of apartment homes experienced from December 31, 2002 to December 31, 2003. The increase was primarily due to the newly acquired properties having a significantly higher per home cost compared to those properties that have been disposed of, and other capital expenditures.

During the year ended December 31, 2002, real estate depreciation on both continuing and discontinued operations increased $7.3 million or 4.8% compared to 2001. The increase in depreciation expense was attributable to the overall increase in the weighted average number of apartment homes as well as the impact of completed development communities, acquisitions and capital expenditures.


	*Interest Expense*

For the year ended December 31, 2003, interest expense on both continuing and discontinued operations decreased $15.8 million or 11.9% from 2002 primarily due to debt refinancings, decreasing interest rates and an overall decrease in the weighted average level of debt outstanding. For the year ended December 31, 2003, the weighted average amount of debt outstanding decreased 1.1% or $23.9 million compared to the prior year and the weighted average interest rate decreased from 6.1% to 5.4% during 2003. The weighted average amount of debt outstanding during 2003 is lower than 2002 primarily due to the high acquisition volume at the beginning of 2002 that was subsequently mitigated by high disposition activity in the second half of 2002. Furthermore, acquisition costs in 2003 that exceeded disposition proceeds were funded, in most part, by equity and OP Unit issuances. The decrease in the average interest rate during 2003 reflects our ability to take advantage of declining interest rates through refinancing and the utilization of variable rate debt.

For the year ended December 31, 2002, interest expense on both continuing and discontinued operations decreased $11.4 million or 7.9% from 2001 primarily due to debt refinancings and decreasing interest rates that were partially offset by the overall increase in the weighted average level of debt outstanding. For the year ended December 31, 2002, the weighted average amount of debt outstanding increased 2.0% or $40.4 million from 2001 levels and the weighted average interest rate decreased from 7.1% to 6.1% for 2002. The weighted average amount of debt outstanding during 2002 is higher than 2001 as we borrowed additional funds to acquire apartment communities. The decrease in the average interest rate during 2002 reflects our ability to take advantage of declining interest rates through refinancing and the utilization of variable rate debt.


	*General and Administrative*

For the year ended December 31, 2003, general and administrative expenses increased $1.3 million or 6.6% over 2002 primarily due to an increase in incentive compensation expense. Over the past two years, we have shifted our long-term incentive reward system from stock options to restricted stock, the cost of which is expensed quarterly during the vesting period.

For the year ended December 31, 2002, general and administrative expenses decreased $2.4 million or 11.0% compared to 2001. The decrease was primarily due to reduced personnel costs and state and local taxes that were partially offset by increased third-party consulting expenses.


	*Impairment Loss on Real Estate and Investments*

In 2003, we recognized a $1.4 million charge for the write-off of our investment in Realeum, Inc., an unconsolidated development joint venture created to develop web-based solutions for multifamily property and portfolio management.

In 2002, we pursued our strategy of exiting markets where long-term growth prospects are limited and the redeployment of capital would enhance future growth rates and economies of scale. During 2002, we

sold 25 apartment communities with a total of 6,990 apartment homes, one commercial property and one parcel of land with an aggregate net book value of approximately $285 million. Although these sales resulted in an aggregate net gain of $32.7 million, certain of these assets were sold at net selling prices below their net book values. As a result, we recorded an aggregate $2.3 million impairment loss during 2002 for the write down of a portfolio of apartment communities in Memphis, Tennessee.


	*Gains on Sales of Land and Depreciable Property*

For the years ended December 31, 2003 and 2002, we recognized gains for financial reporting purposes of $15.9 million and $32.7 million, respectively. Changes in the level of gains recognized from period to period reflect the changing level of our divestiture activity from period to period as well as the extent of gains related to specific properties sold.


	*Premium on Preferred Share Repurchases*

In the second quarter of 2003, we exercised our right to redeem 2.0 million shares of our Series D Cumulative Convertible Redeemable Preferred Stock. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 3,076,923 shares of common stock at a price of $16.25 per share. In December 2003, we redeemed an additional 4.0 million shares of our Series D. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 6,154,000 shares of common stock at a price of $16.25 per share. As a result, we recognized a $19.3 million premium on preferred share repurchases during 2003. The premium amount recognized to convert these shares represents the cumulative accretion to date between the conversion value of the preferred stock and the value at which it was recorded at the time of issuance.


	*Inflation*

We believe that the direct effects of inflation on our operations have been immaterial. Substantially all of our leases are for a term of one year or less which generally minimizes our risk from the adverse effects of inflation.


	*Off-Balance Sheet Arrangements*

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity capital expenditures or capital resources that are material.


	*Contractual Obligations*

The following table summarizes our contractual obligations as of December 31, 2003 (dollars in thousands):



	Payments Due by Period

Contractual Obligations	Total		2004		2005-2006		2007-2008		Thereafter

Long Term Debt Obligations	$	2,132,037	$	147,857	$	241,896	$	594,897	$	1,147,389
Capital Lease Obligations		—		—		—		—		—
Operating Lease Obligations		29,638		1,555		2,533		2,183		23,367
Purchase Obligations		—		—		—		—		—
Other Long-Term Liabilities Reflected on the Balance Sheet Under GAAP		—		—		—		—		—

During 2003, we incurred interest costs of $119.0 million, of which $1.8 million was capitalized.


	*Factors Affecting Our Business and Prospects*

There are many factors that affect our business and the results of our operations, some of which are beyond our control. These factors include:

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

• the failure of acquisitions to achieve anticipated results,

• possible difficulty in selling apartment communities,

• the timing and closing of planned dispositions under agreement,

• competitive factors that may limit our ability to lease apartment homes or increase or maintain rents,

• insufficient cash flow that could affect our debt financing and create refinancing risk,

• failure to generate sufficient revenue, which could impair our debt service payments and distributions to stockholders,

• development and construction risks that may impact our profitability,

• delays in completing developments and lease-ups on schedule,

• our failure to succeed in new markets,

• changing interest rates, which could increase interest costs and affect the market price of our securities,

• potential liability for environmental contamination, which could result in substantial costs, and

• the imposition of federal taxes if we fail to qualify as a REIT in any taxable year.


Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information required by this item is included in and incorporated by reference from Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Report.


Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and related financial information required to be filed are attached to this Report. Reference is made to page 44 of this Report for the Index to Consolidated Financial Statements and Schedule.


Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


Item 9A.	CONTROLS AND PROCEDURES

As of December 31, 2003, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Our disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC reports. In addition, our Chief Executive Officer and our Chief Financial Officer concluded that during the year ended

December 31, 2003, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our internal control over financial reporting is designed with the objective of providing reasonable assurance regarding the reliability of our financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

PART III


Item 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is incorporated by reference to the information set forth under the headings “Election of Directors,” “Audit Committee Report” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 4, 2004.

Information required by this item regarding our executive officers is included in Part I of this Report in the section entitled “Business-Executive Officers of the Company.”

We have adopted a code of ethics for senior financial officers that applies to our principal executive officer and all members of our finance staff, including the principal financial and accounting officer, and a code of business conduct and ethics that applies to all of our employees. Information regarding our codes is available on our website, www.udrt.com, and is incorporated by reference to the information set forth under the heading “Corporate Governance” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 4, 2004. We intend to satisfy the disclosure requirements under Item 10 of Form 8-K regarding an amendment to, or a waiver from, a provision of our codes by posting such amendment or waiver on our website.


Item 11.	EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the information set forth under the heading “Compensation of Executive Officers” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 4, 2004.


Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference to the information set forth under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 4, 2004.


Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to the information set forth under the heading “Certain Business Relationships” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 4, 2004.


Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference to the information set forth under the headings “Audit Fees” and “Audit Fees Pre-Approval Policy” in our definitive proxy statement for our Annual Meeting of Stockholders to be held on May 4, 2004.

PART IV


Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Report:

      1. Financial Statements. See Index to Consolidated Financial Statements and Schedule on page 44 of this Report.

      2. Financial Statement Schedule. See Index to Consolidated Financial Statements and Schedule on page 44 of this Report. All other schedules are omitted because they are not required, are inapplicable, or the required information is included in the financial statements or notes thereto.

      3. Exhibits. The exhibits filed with this Report are set forth in the Exhibit Index.

(b) Reports on Form 8-K.

We filed or furnished the following Current Reports on Form 8-K during the quarter ended December 31, 2003. The information provided under Item 12. Results of Operations and Financial Condition is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.

• Current Report on Form 8-K dated October 27, 2003, furnished to the Securities and Exchange Commission on October 28, 2003, under Item 12. Results of Operations and Financial Condition.

• Current Report on Form 8-K dated November 7, 2003, filed with the Securities and Exchange Commission on November 12, 2003, under Item 5. Other Events and Item 7. Financial Statements and Exhibits.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

UNITED DOMINION REALTY TRUST, INC.

By: /s/ THOMAS W. TOOMEY

Thomas W. Toomey

Chief Executive Officer and President

Date: March 10, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below on March 10, 2004 by the following persons on behalf of the registrant and in the capacities indicated.


/s/ THOMAS W. TOOMEY Thomas W. Toomey Chief Executive Officer, President, and Director		/s/ ROBERT P. FREEMAN ----------------------------------------- Robert P. Freeman Director

/s/ CHRISTOPHER D. GENRY Christopher D. Genry Executive Vice President and Chief Financial Officer		/s/ JON A. GROVE ----------------------------------------- Jon A. Grove Director

/s/ SCOTT A. SHANABERGER Scott A. Shanaberger Senior Vice President and Chief Accounting Officer		/s/ JOHN P. MCCANN ----------------------------------------- John P. McCann Director

/s/ ROBERT C. LARSON Robert C. Larson Chairman of the Board		/s/ THOMAS R. OLIVER ----------------------------------------- Thomas R. Oliver Director

/s/ JAMES D. KLINGBEIL James D. Klingbeil Vice Chairman of the Board		/s/ LYNNE B. SAGALYN ----------------------------------------- Lynne B. Sagalyn Director

/s/ ERIC J. FOSS Eric J. Foss Director		/s/ MARK J. SANDLER ----------------------------------------- Mark J. Sandler Director

		/s/ ROBERT W. SCHARAR ----------------------------------------- Robert W. Scharar Director

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		45
Consolidated Balance Sheets at December 31, 2003 and 2002		46
Consolidated Statements of Operations for each of the three years in the period ended December 31, 2003		47
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2003		48
Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 2003		49
Notes to Consolidated Financial Statements		51
SCHEDULE FILED AS PART OF THIS REPORT
Schedule III — Summary of Real Estate Owned		77

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.

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders

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, 2003 and 2002, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed in the Index at Item 15(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, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, 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 Notes 1, 3 and 8 to the consolidated financial statements, the Company changed its method of accounting for gains and losses on the extinguishment of debt in 2003, changed its method of accounting for the disposal of long-lived assets in 2002, and changed its method of accounting for derivative instruments in 2001.

Ernst & Young LLP

Richmond, Virginia

January 27, 2004

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)



			December 31,

			2003			2002

ASSETS
Real estate owned:
	Real estate held for investment		$	4,305,450		$	3,833,022
		Less: accumulated depreciation		(895,567	)		(734,051	)

				3,409,883			3,098,971
	Real estate under development			30,375			30,624
	Real estate held for disposition (net of accumulated depreciation of $1,063 and $14,682)			14,663			89,155

	Total real estate owned, net of accumulated depreciation			3,454,921			3,218,750
Cash and cash equivalents				4,824			3,152
Restricted cash				7,540			11,773
Deferred financing costs, net				21,425			17,542
Investment in unconsolidated development joint venture				1,673			—
Funds held in escrow from 1031 exchanges pending the acquisition of real estate				14,447			—
Other assets				38,605			23,771
Real estate held for disposition assets				208			1,148

	Total assets		$	3,543,643		$	3,276,136


LIABILITIES AND STOCKHOLDERS’ EQUITY
Secured debt			$	1,018,028		$	1,015,740
Unsecured debt				1,114,009			1,041,900
Real estate taxes payable				30,858			28,949
Accrued interest payable				12,892			11,908
Security deposits and prepaid rent				24,132			20,883
Distributions payable				40,623			35,141
Accounts payable, accrued expenses and other liabilities				45,372			49,442
Real estate held for disposition liabilities				87			1,686

	Total liabilities			2,286,001			2,205,649
Minority interests				94,206			69,216
Stockholders’ equity:
	Preferred stock, no par value; $25 liquidation preference, 25,000,000 shares authorized;
		5,416,009 shares 8.60% Series B Cumulative Redeemable issued and outstanding (5,416,009 in 2002)		135,400			135,400
		2,000,000 shares 7.50% Series D Cumulative Convertible Redeemable issued and outstanding (8,000,000 in 2002)		44,271			175,000
		3,425,217 shares 8.00% Series E Cumulative Convertible issued and outstanding (0 in 2002)		56,893			—
	Common stock, $1 par value; 250,000,000 shares authorized 127,295,126 shares issued and outstanding (106,605,259 in 2002)			127,295			106,605
	Additional paid-in capital			1,458,983			1,140,786
	Distributions in excess of net income			(651,497	)		(541,428	)
	Deferred compensation — unearned restricted stock awards			(5,588	)		(2,504	)
	Notes receivable from officer-stockholders			(459	)		(2,630	)
	Accumulated other comprehensive loss			(1,862	)		(9,958	)

		Total stockholders’ equity		1,163,436			1,001,271

	Total liabilities and stockholders’ equity		$	3,543,643		$	3,276,136

See accompanying notes to consolidated financial statements.

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)



			Years Ended December 31,

			2003			2002			2001

REVENUES
	Rental income		$	603,367		$	582,823		$	549,890
	Non-property income			1,068			1,806			4,593

		Total revenues		604,435			584,629			554,483
EXPENSES
	Rental expenses:
		Real estate taxes and insurance		68,726			63,153			58,401
		Personnel		62,082			59,250			55,673
		Utilities		36,658			33,484			33,581
		Repair and maintenance		39,437			36,659			32,047
		Administrative and marketing		22,596			21,302			19,964
		Property management		16,873			17,240			17,107
		Other operating expenses		1,205			1,203			1,376
	Real estate depreciation and amortization			161,837			149,636			134,464
	Interest			117,185			130,791			139,470
	General and administrative			20,626			19,343			21,730
	Other depreciation and amortization			3,233			4,073			3,308
	Impairment loss on investments			1,392			—			2,648
	Loss on early debt retirement			—			35,500			3,219
	Severance costs and other organizational charges			—			—			5,404

		Total expenses		551,850			571,634			528,392

Income before minority interests and discontinued operations				52,585			12,995			26,091
Minority interests of outside partnerships				(614	)		(1,414	)		(2,225	)
Minority interests of unitholders in operating partnerships				(368	)		970			732

Income before discontinued operations, net of minority interests				51,603			12,551			24,598
Income from discontinued operations, net of minority interests				18,801			40,678			37,230

Net income				70,404			53,229			61,828
Distributions to preferred stockholders — Series A and B				(11,645	)		(11,645	)		(15,762	)
Distributions to preferred stockholders — Series D (Convertible)				(12,178	)		(15,779	)		(15,428	)
Distributions to preferred stockholders — Series E (Convertible)				(2,503	)		—			—
Premium on preferred share repurchases				(19,271	)		—			(3,496	)

Net income available to common stockholders			$	24,807		$	25,805		$	27,142

Earnings per common share — basic:
	Income/(loss) from continuing operations available to common stockholders, net of minority interests		$	0.06		$	(0.14	)	$	(0.10	)
	Income from discontinued operations, net of minority interests		$	0.16		$	0.38		$	0.37
	Net income available to common stockholders		$	0.22		$	0.24		$	0.27
Earnings per common share — diluted:
	Income/(loss) from continuing operations available to common stockholders, net of minority interests		$	0.05		$	(0.14	)	$	(0.10	)
	Income from discontinued operations, net of minority interests		$	0.16		$	0.38		$	0.37
	Net income available to common stockholders		$	0.21		$	0.24		$	0.27
Common distributions declared per share			$	1.14		$	1.11		$	1.08
Weighted average number of common shares outstanding — basic				114,672			106,078			100,339
Weighted average number of common shares outstanding — diluted				115,648			106,078			100,339

See accompanying notes to consolidated financial statements.

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



				Years Ended December 31,

				2003			2002			2001

Operating Activities
	Net income			$	70,404		$	53,229		$	61,828
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			166,637			163,328			155,327
		Impairment loss on real estate and investments			1,392			2,301			5,436
		Gains on sales of land and depreciable property			(15,941	)		(32,698	)		(24,748	)
		Minority interests			2,261			3,122			4,192
		Loss on early debt retirement			—			36,965			3,471
		Amortization of deferred financing costs and other			6,148			5,256			965
		Changes in operating assets and liabilities:
			(Increase)/decrease in operating assets		(2,560	)		12,763			21,128
			Increase/(decrease) in operating liabilities		6,604			(15,265	)		(3,188	)

Net cash provided by operating activities					234,945			229,001			224,411
Investing Activities
	Proceeds from sales of real estate investments, net				93,613			282,533			109,713
	Acquisition of real estate assets, net of liabilities assumed and equity				(314,739	)		(282,600	)		(74,372	)
	Development of real estate assets				(13,640	)		(22,763	)		(53,607	)
	Capital expenditures and other major improvements — real estate assets, net of escrow reimbursement				(53,146	)		(42,827	)		(53,096	)
	Capital expenditures — non-real estate assets				(1,858	)		(1,706	)		(1,442	)
	Increase in funds held in escrow from tax free exchanges pending the acquisition of real estate				(14,447	)		—			—
	Other investing activities				—			—			8,749

Net cash used in investing activities					(304,217	)		(67,363	)		(64,055	)
Financing Activities
	Proceeds from the issuance of secured debt				37,415			324,282			225,171
	Scheduled principal payments on secured debt				(22,442	)		(11,176	)		(55,130	)
	Non-scheduled principal payments and prepayment penalties on secured debt				(17,549	)		(294,662	)		(52,182	)
	Proceeds from the issuance of unsecured debt				323,382			198,476			—
	Payments and prepayment premiums on unsecured debt				(214,591	)		(210,413	)		(21,307	)
	Net repayment of revolving bank debt				(37,900	)		(54,400	)		(14,200	)
	Payment of financing costs				(6,463	)		(5,510	)		(4,807	)
	Issuance of note receivable				(8,000	)		—			—
	Proceeds from the issuance of common stock				179,811			60,252			66,319
	Proceeds from the repayment of officer loans				2,171			—			—
	Proceeds from the issuance of performance shares				657			—			1,236
	Distributions paid to minority interests				(9,756	)		(8,926	)		(12,868	)
	Cash paid to buy out minority interests				—			—			(4,267	)
	Distributions paid to preferred stockholders				(27,532	)		(27,424	)		(34,308	)
	Distributions paid to common stockholders				(128,188	)		(117,116	)		(108,511	)
	Repurchases of common and preferred stock				(71	)		(16,510	)		(151,166	)

Net cash provided by/(used in) financing activities					70,944			(163,127	)		(166,020	)
Net increase/(decrease) in cash and cash equivalents					1,672			(1,489	)		(5,664	)
Cash and cash equivalents, beginning of year					3,152			4,641			10,305

Cash and cash equivalents, end of year				$	4,824		$	3,152		$	4,641

Supplemental Information:
	Interest paid during the period			$	116,057		$	135,223		$	148,863
	Issuance of restricted stock awards				5,297			2,904			1,363
	Non-cash transactions:
		Secured debt assumed with the acquisition of properties			4,865			41,636			18,230
		Issuance of preferred stock in connection with acquisitions			58,811			—			—
		Issuance of preferred operating partnership units in connection with acquisitions			26,872			—			—
		Issuance of operating partnership units in connection with acquisitions			7,135			—			—
		Reduction in secured debt from the disposition of properties			—			35,885			28,315
		Conversion of operating partnership minority interests to common stock			2,206			1,252			643
		(216,983 shares in 2003, 92,159 shares in 2002 and 74,271 shares in 2001)

See accompanying notes to consolidated financial statements.

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except for share data)


																					Deferred						Accumulated
			Preferred Stock						Common Stock									Distributions in			Compensation —			Notes Receivable			Other
															Paid-in			Excess of Net			Unearned Restricted			from Officer —			Comprehensive
			Shares			Amount			Shares			Amount			Capital			Income			Stock Awards			Stockholders			Loss			Total

Balance, December 31, 2000				17,408,229		$	410,206			102,219,250		$	102,219		$	1,081,387		$	(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																										(3,848	)		(3,848	)
		Unrealized loss on derivative financial instruments																										(11,023	)		(11,023	)

	Comprehensive income																		61,828									(14,871	)		46,957

	Issuance of common shares to employees, officers and director-stockholders									257,158			258			2,318															2,576
	Issuance of common shares through dividend reinvestment and stock purchase plan									332,243			332			4,054															4,386
	Issuance of common shares through public offering									4,100,000			4,100			52,316															56,416
	Purchase of common and preferred stock			(91,900	)		(2,298	)		(3,962,076	)		(3,962	)		(47,362	)														(53,622	)
	Redemption of Series A preferred stock			(3,900,320	)		(97,508	)								3,496			(3,496	)											(97,508	)
	Issuance of restricted stock awards									112,433			112			1,251						(1,363	)								—
	Adjustment for cash purchase and conversion of minority interests of unitholders in operating partnerships									74,271			74			569															643
	Principal repayments on notes receivable from officer-stockholders																								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				13,416,009		$	310,400			103,133,279		$	103,133		$	1,098,029		$	(448,345	)	$	(1,312	)	$	(4,309	)	$	(14,871	)	$	1,042,725

Comprehensive Income
	Net income																		53,229												53,229
	Other comprehensive income:
		Unrealized gain on derivative financial instruments																										4,913			4,913

	Comprehensive income																		53,229									4,913			58,142

	Issuance of common shares to employees, officers and director-stockholders									1,000,592			1,001			10,782															11,783
	Issuance of common shares through dividend reinvestment and stock purchase plan									152,343			152			2,347															2,499
	Issuance of common shares through public offering									3,166,800			3,167			41,139															44,306
	Purchase of common stock									(1,145,412	)		(1,146	)		(15,369	)														(16,515	)
	Issuance of restricted stock awards									205,498			205			2,699						(2,904	)								—
	Adjustment for cash purchase and conversion of minority interests of unitholders in operating partnerships									92,159			93			1,159															1,252
	Principal repayments on notes receivable from officer-stockholders																								1,679						1,679

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY — (Continued)

(In thousands, except for share data)


																					Deferred						Accumulated
			Preferred Stock						Common Stock									Distributions in			Compensation —			Notes Receivable			Other
															Paid-in			Excess of Net			Unearned Restricted			from Officer —			Comprehensive
			Shares			Amount			Shares			Amount			Capital			Income			Stock Awards			Stockholders			Loss			Total

	Common stock distributions declared ($1.11 per share)																		(118,888	)											(118,888	)
	Preferred stock distributions declared — Series B ($2.15 per share)																		(11,645	)											(11,645	)
	Preferred stock distributions declared — Series D ($1.98 per share)																		(15,779	)											(15,779	)
	Amortization of deferred compensation																					1,712									1,712

Balance, December 31, 2002				13,416,009		$	310,400			106,605,259		$	106,605		$	1,140,786		$	(541,428	)	$	(2,504	)	$	(2,630	)	$	(9,958	)	$	1,001,271

Comprehensive Income
	Net income																		70,404												70,404
	Other comprehensive income:
		Unrealized gain on derivative financial instruments																										8,096			8,096

	Comprehensive income																		70,404									8,096			78,500

	Issuance of common shares to employees, officers and director-stockholders									1,117,399			1,118			12,185															13,303
	Issuance of common shares through dividend reinvestment and stock purchase plan									91,190			91			1,520															1,611
	Issuance of common shares through public offering									9,700,000			9,700			154,936															164,636
	Issuance of 8.00% Series E Cumulative Convertible shares			3,425,217			56,893									1,905															58,798
	Purchase of common stock									(4,564	)		(5	)		(66	)														(71	)
	Issuance of restricted stock awards									337,936			338			4,959						(5,297	)								—
	Adjustment for conversion of minority interests of unitholders in operating partnerships									216,983			217			1,989															2,206
	Principal repayments on notes receivable from officer-stockholders																								2,171						2,171
	Accretion of premium on Series D redemptions						19,271												(19,271	)											—
	Conversion of 7.50% Series D Cumulative Convertible Redeemable shares			(6,000,000	)		(150,000	)		9,230,923			9,231			140,769															—
	Common stock distributions declared ($1.14 per share)																		(134,876	)											(134,876	)
	Preferred stock distributions declared — Series B ($2.15 per share)																		(11,645	)											(11,645	)
	Preferred stock distributions declared — Series D ($2.04 per share)																		(12,178	)											(12,178	)
	Preferred stock distributions declared — Series E ($0.84 per share)																		(2,503	)											(2,503	)
	Amortization of deferred compensation																					2,213									2,213

Balance, December 31, 2003				10,841,226		$	236,564			127,295,126		$	127,295		$	1,458,983		$	(651,497	)	$	(5,588	)	$	(459	)	$	(1,862	)	$	1,163,436

See accompanying notes to consolidated financial statements.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2003

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and formation

United Dominion Realty Trust, Inc., a Maryland 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, 2003, United Dominion owned 264 communities with 76,244 completed apartment homes and had three communities with 807 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, 2003, there were 130,386,163 units in the Operating Partnership outstanding, of which 120,256,671 units or 92.2% were owned by United Dominion and 10,129,492 units or 7.8% were owned by limited partners (of which 1,853,204 are owned by the holders of the Series A OPPS, See Note 11). As of December 31, 2003, there were 3,518,857 units in the Heritage OP outstanding, of which 3,248,884 units or 92.3% were owned by United Dominion and 269,973 units or 7.7% were owned by limited partners. The consolidated financial statements of United Dominion include the minority interests of the unitholders in the Operating Partnership and the Heritage OP. All significant intercompany 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 meets certain requirements concerning its income and assets, as well as if it distributes at least 90% of its REIT taxable income to its stockholders 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 stockholders 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 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 aggregate cost of our real estate assets for federal income tax purposes was approximately $3.6 billion at December 31, 2003.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table reconciles United Dominion’s net income to REIT taxable income for the three years ended December 31, 2003 (dollars in thousands):


	2003			2002			2001

Net income	$	70,404		$	53,229		$	61,828
Minority interest expense		(3,364	)		(1,137	)		(1,442	)
Depreciation and amortization expense		44,108			49,513			45,327
Gain/(loss) on the disposition of properties		2,363			(186	)		343
Revenue recognition timing differences		1,750			1,272			589
Impairment loss, not deductible for tax		—			—			2,788
Investment loss, not deductible for tax		—			—			2,648
Other expense timing differences		(1,090	)		(3,914	)		2,787
REIT taxable income before dividends	$	114,171		$	98,777		$	114,868

Dividend deduction	$	132,722		$	111,965		$	140,146

For income tax purposes, distributions paid to common stockholders consist of ordinary income, capital gains and return of capital, or a combination thereof. For the three years ended December 31, 2003, distributions declared per common share were taxable as follows:


	2003		2002		2001

Ordinary income	$	0.82	$	0.55	$	0.74
Long-term capital gain		0.10		0.14		0.11
Unrecaptured section 1250 gain		0.02		0.11		0.07
Return of capital		0.20		0.31		0.16

	$	1.14	$	1.11	$	1.08

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.

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 REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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. Our cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. 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. Our estimates of fair market value represent our best estimate based upon industry trends and reference to market rates and transactions.

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. 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.

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. The value of acquired in-place leases is amortized over the remaining term of each acquired in-place lease.

All development projects and related carrying costs are capitalized and reported on the Consolidated Balance Sheet as “Real estate under development.” As each building in a project is completed and becomes available for lease-up, the total cost of the building 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 2003, 2002 and 2001, total interest capitalized was $1.8 million, $0.9 million and $2.9 million, respectively.

Cash and cash equivalents

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

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 2003, 2002 and 2001, amortization expense was $4.7 million, $4.5 million and $3.6 million, respectively.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Investments in unconsolidated development joint ventures

Investments in unconsolidated joint ventures are accounted for using the equity method when major business decisions require approval by the other partners and United Dominion 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 joint ventures. 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 United Dominion through fees during construction.

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 collectability is reasonably assured.

Advertising costs

All advertising costs are expensed as incurred and reported on the Consolidated Statements of Operations within the line item “Administrative and marketing.” During 2003, 2002 and 2001, total advertising expense was $10.6 million, $11.0 million and $9.6 million, respectively.

Interest rate swap agreements

Statements of Financial Accounting Standards No. 133 and No. 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 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. For the three years ended December 31, 2003, all of United Dominion’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 No. 133 and No. 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, we use derivative financial instruments as a means to artificially fix variable rate debt or to hedge anticipated financing transactions. United Dominion’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

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

material unintended effect on consolidated earnings. United Dominion does not enter into derivative financial instruments for trading purposes.

The fair value of United Dominion’s derivative instruments is reported on the 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.

When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income each period until the instrument matures, unless the instrument is redesignated as a hedge of another transaction. If a derivative instrument is terminated or the hedging transaction is no longer determined to be effective, amounts held in accumulated other comprehensive income are reclassified into earnings over the term of the future cash outflows on the related debt.

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 stockholders, is displayed in the accompanying Statements of Stockholders’ Equity. Other comprehensive income consists of unrealized gains or losses from derivative financial instruments.

Stock-based compensation

United Dominion has elected to follow the intrinsic value method under 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 No. 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.

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 stockholders 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, was 6.4% at December 31, 2003, 6.2% at December 31, 2002 and 6.8% at December 31, 2001.

During 2003, we issued 1,617,815 Preferred Operating Partnership Units (“Preferred OP Units”) totaling $26.9 million as partial consideration for the purchase of four communities. The Preferred OP

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Units carry a fixed coupon of 8.0% until such time as the common share dividend is equal to or exceeds this amount for four consecutive quarters, at which time the Preferred OP Units will be entitled to receive dividends equivalent to the dividends paid to holders of common stock.

Minority interests in other partnerships

United Dominion has limited partners in certain real estate partnerships acquired in certain merger transactions. Net income for these partnerships is allocated based upon the percentage interest owned by these limited partners in each respective real estate partnership.

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):


			2003		2002		2001

Numerator for basic and diluted earnings per share —
	Net income available to common stockholders		$	24,807	$	25,805	$	27,142
Denominator:
Denominator for basic earnings per share —
		Weighted average common shares outstanding		114,672		106,078		100,339
Effect of dilutive securities:
Employee stock options and non-vested restricted stock awards				976		—		—

Denominator for dilutive earnings per share				115,648		106,078		100,339

Basic earnings per share			$	0.22	$	0.24	$	0.27

Diluted earnings per share			$	0.21	$	0.24	$	0.27

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, 2003, 2002 and 2001 was 9,690,883 shares, 8,577,918 shares and 7,281,835 shares, respectively. The weighted average effect of the conversion of the convertible preferred stock for the year ended December 31, 2003 was 11,636,293 shares and for the years ended December 31, 2002 and 2001, the weighted average effect was 12,307,692 shares.

Impact of recently issued accounting standards

In May 2003, the FASB issued Statement No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (FAS 150). The statement establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. This statement is effective for all financial instruments created or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. In October 2003, the FASB decided to indefinitely defer the

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

effective date of certain provisions of FAS 150 related to finite life entities and also indicated it may modify other guidance in FAS 150. United Dominion believes that its equity and its partner’s equity reported on the Consolidated Balance Sheets as “Minority interests,” are properly classified.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46). This statement refines the identification process of variable interest entities and how an entity assesses its interests in a variable interest entity to decide whether to consolidate that entity. United Dominion, from time to time, enters into partnership and joint venture arrangements, which may be required to be consolidated under this statement. The provisions of Interpretation 46 were deferred and are now applicable to joint ventures created before February 1, 2003 for the first reporting period that ends after December 15, 2003. United Dominion adopted FIN 46 as of December 31, 2003, with no effect on its consolidated financial statements.

On January 1, 2003, United Dominion adopted Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction” (FAS 145). The provisions of FAS 145 related to the rescission of FAS No. 4 require United Dominion to reclassify prior period items that do not meet the extraordinary classification into continuing operations. During the three years ended December 31, 2003, United Dominion has incurred such expenses, and in compliance with FAS 145, has reported those expenses as a component of continuing operations for each period presented.

2. REAL ESTATE OWNED

United Dominion operates in 55 markets dispersed throughout 19 states. At December 31, 2003, our largest apartment market was Southern California, where we owned 7.0% of our apartment homes, based upon carrying value. Excluding Southern California, United Dominion did not own more than 6.5% 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):


	2003			2002

Land and land improvements	$	847,899		$	699,313
Buildings and improvements		3,231,564			2,927,450
Furniture, fixtures and equipment		225,987			206,007
Construction in progress		—			252

Real estate held for investment		4,305,450			3,833,022
Accumulated depreciation		(895,567	)		(734,051	)

Real estate held for investment, net	$	3,409,883		$	3,098,971

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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


	2003			2002			2001

Balance at beginning of year	$	3,833,022		$	3,461,529		$	3,758,974
Real estate acquired		397,983	(a)		323,990			91,093
Capital expenditures		62,288			51,066			58,174
Transfers from development		12,157			29,816			51,561
Transfers to held for disposition, net		—			(33,379	)		(495,485	)
Impairment loss on real estate		—			—			(2,788	)

Balance at end of year	$	4,305,450		$	3,833,022		$	3,461,529

(a) In connection with one of our acquisitions in 2003, United Dominion received a note receivable for $5 million that is due October 2011. The note bears interest of 9.0% that is payable in annual installments.

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


	2003			2002			2001

Balance at beginning of year	$	734,051		$	585,539		$	506,871
Depreciation expense for the year(b)		163,088			160,331			153,113
Transfers to held for disposition, net		(1,572	)		(11,819	)		(74,445	)

Balance at end of year	$	895,567		$	734,051		$	585,539

(b) Includes $1.0 million, $1.2 million and $1.3 million for 2003, 2002 and 2001, respectively, related to depreciation on non-real estate assets located at United Dominion’s apartment communities, classified as “Other depreciation and amortization” on the Consolidated Statements of Operations. Excludes $1.2 million, in 2003, of amortization expense on the fair value of in-place leases at the time of acquisition.

The following is a summary of real estate held for investment by major geographic markets (in order of carrying value, excluding real estate held for disposition and real estate under development) at December 31, 2003 (dollars in thousands):


	Number of		Initial
	Apartment		Acquisition		Carrying		Accumulated
	Communities		Cost		Value		Depreciation		Encumbrances

Southern California		11	$	278,306	$	302,216	$	19,960	$	48,757
Dallas, TX		15		234,153		277,928		55,803		50,190
Houston, TX		23		220,168		277,782		53,541		57,954
Metropolitan DC		9		222,478		244,551		22,849		75,050
Phoenix, AZ		11		181,479		218,477		45,583		61,371
Orlando, FL		14		167,524		212,179		60,413		79,290
Raleigh, NC		11		179,935		207,865		50,967		58,593
Tampa, FL		11		163,778		188,616		40,652		56,312
Arlington, TX		10		142,462		160,674		34,133		39,056
Columbus, OH		6		111,315		150,684		27,178		41,327

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Number of		Initial
	Apartment		Acquisition		Carrying		Accumulated
	Communities		Cost		Value		Depreciation		Encumbrances

San Francisco, CA		4		136,504		142,044		18,547		20,780
Charlotte, NC		10		109,961		140,574		43,121		11,917
Monterey Peninsula, CA		8		87,924		137,662		14,281		—
Richmond, VA		9		106,325		132,022		39,125		66,657
Nashville, TN		8		83,987		122,210		29,916		—
Greensboro, NC		8		85,362		105,923		26,739		—
Wilmington, NC		6		64,213		92,231		27,366		—
Baltimore, MD		7		80,141		91,451		22,427		27,752
Atlanta, GA		6		57,669		73,437		22,464		30,446
Columbia, SC		6		52,795		63,747		22,155		5,000
Jacksonville, FL		3		44,788		59,993		19,116		23,202
Norfolk, VA		6		42,741		55,687		22,254		7,359
Lansing, MI		4		50,237		51,778		8,134		31,570
Seattle, WA		3		31,953		34,627		6,236		25,830
Other Western		5		144,232		153,744		21,399		46,720
Other Pacific		8		122,608		125,456		19,295		48,905
Other Southwestern		7		92,897		99,902		18,988		9,765
Other Florida		7		60,565		92,451		26,308		—
Other North Carolina		8		61,677		77,014		28,542		11,550
Other Southeastern		4		56,717		70,926		17,513		34,762
Other Midwestern		8		62,593		68,912		11,207		26,320
Other Mid-Atlantic		5		37,619		43,683		12,185		12,542
Other Northeastern		2		14,732		18,401		5,711		5,167
Richmond Corporate		—		6,597		7,348		975		3,884
Commercial		—		3,255		3,255		484		—

		263	$	3,599,690	$	4,305,450	$	895,567	$	1,018,028

The following is a summary of real estate held for disposition by major category at December 31, 2003 (dollars in thousands):


			Initial
	Number of		Acquisition		Carrying		Accumulated
	Properties		Cost		Value		Depreciation		Encumbrances

Apartments		1	$	7,167	$	11,903	$	1,063	$	—
Land		1		3,821		3,823		—		—

			$	10,988	$	15,726	$	1,063	$	—

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of real estate under development by major category at December 31, 2003 (dollars in thousands):


	Number		Initial
	of		Acquisition		Carrying		Accumulated
	Properties		Cost		Value		Depreciation		Encumbrances

Apartments		3	$	22,592	$	22,592	$	—	$	—
Land		6		7,783		7,783		—		—

			$	30,375	$	30,375	$	—	$	—

Total Real Estate Owned			$	3,641,053	$	4,351,551	$	896,630	$	1,018,028

United Dominion is pursuing its strategy of exiting markets where long-term growth prospects are limited and the redeployment of capital would enhance future growth rates and economies of scale. During the first quarter of 2002, United Dominion placed nine assets, with an aggregate net book value of $89.3 million, under contract for sale and reclassified them as real estate held for disposition. These sales closed in the second quarter of 2002 and resulted in our withdrawal from Naples, Florida; Tucson, Arizona; Las Vegas, Nevada; and substantially all of Memphis, Tennessee. Although these sales resulted in an aggregate net gain of $11.5 million, certain of these assets were sold at net selling prices below their net book values at March 31, 2002. As a result, United Dominion recorded an aggregate $2.3 million impairment loss in 2002 for the write down of a portfolio of five apartment communities in Memphis, Tennessee.

During the first quarter of 2001, we performed an analysis of the carrying value of all undeveloped land parcels in connection with United Dominion’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.

3. INCOME FROM DISCONTINUED OPERATIONS

United Dominion adopted FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (FAS 144) as of January 1, 2002. FAS 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 subsequent to January 1, 2002, or are held for disposition subsequent to January 1, 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. For purposes of these financial statements, FAS 144 results in the presentation of the primary assets and liabilities and the net operating results of those properties sold or classified as held for disposition through December 31, 2003, as discontinued operations for all periods presented. The adoption of FAS 144 does not have an impact on net income available to common stockholders. FAS 144 only results in the reclassification of the operating results of all properties sold or classified as held for disposition through December 31, 2003 within the Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001, and the reclassification of the assets and liabilities within the Consolidated Balance Sheets for the years ended December 31, 2003 and 2002.

For the year ended December 31, 2003, United Dominion sold seven communities with a total of 1,927 apartment homes and two commercial properties. At December 31, 2003, United Dominion had one community with 100 apartment homes and a net book value of $10.9 million and one parcel of land with a net book value of $3.8 million included in real estate held for disposition. During 2002, United Dominion sold 25 communities with a total of 6,990 apartment homes, one parcel of land and one commercial

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

property. The results of operations for these properties and the interest expense associated with the secured debt on these properties are classified on the Consolidated Statements of Operations in the line item entitled “Income from discontinued operations, net of minority interests.”

The following is a summary of income from discontinued operations for the years ended December 31, (dollars in thousands):


	2003			2002			2001

Rental income	$	10,930		$	46,046		$	69,855
Rental expenses		5,224			19,851			29,069
Real estate depreciation		1,556			9,519			17,381
Interest		—			2,150			4,909
Loss on early debt retirement		—			1,465			218
Impairment loss on real estate		—			2,301			2,788
Other expenses		11			101			275

		6,791			35,387			54,640
Income before gain on sale of land and depreciable property, and minority interests		4,139			10,659			15,215
Net gain on sale of land and depreciable property		15,941			32,698			24,714

Income before minority interests		20,080			43,357			39,929
Minority interests on income from discontinued operations		(1,279	)		(2,679	)		(2,699	)

Income from discontinued operations, net of minority interests	$	18,801		$	40,678		$	37,230

4. INVESTMENT IN UNCONSOLIDATED DEVELOPMENT JOINT VENTURES


	AEGON Joint Venture

On September 10, 2002, United Dominion entered into a development joint venture with AEGON USA Realty Advisors, Inc. in which United Dominion is serving as the managing member. The joint venture is expected to develop approximately eight to ten garden-style apartment communities over the next three years, with a total development cost of up to $210 million. The joint venture will obtain bank construction financing for 65% to 80% of total costs and will provide equity contributions for the balance of the costs with AEGON providing 80% and United Dominion providing 20%. United Dominion is serving as the developer, general contractor and property manager for the joint venture and has guaranteed those project development costs, excluding financing costs (including fees and interest), which exceed the defined project cost budgeted amounts for each respective project, as they come to fruition. We estimate that the likelihood of funding guarantor obligations is remote and that the impact to United Dominion would be immaterial. In June 2003, United Dominion contributed land with a carrying value of $3.8 million to the joint venture.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of the financial position of the joint venture as of December 31, 2003 (dollars in thousands):


Assets
	Real estate under development		$	10,780
	Cash and cash equivalents			1

		Total assets	$	10,781

Liabilities and Partners’ Capital
	Accounts payable and other accrued liabilities		$	2,034
	Partners’ capital			8,747

		Total liabilities and partners’ capital	$	10,781

Realeum Joint Venture

During the fourth quarter of 2001, we recognized a $2.2 million charge for the write down of United Dominion’s investment in Realeum, Inc., an unconsolidated joint venture created to develop web-based solutions for multifamily property and portfolio management, after our ownership in the joint venture was diluted. In the third quarter of 2003, United Dominion recognized a $1.4 million charge to write-off the remaining balance of this investment once it was determined that we would not pursue this investment as a replacement to our existing property management software.

5. SECURED DEBT

Secured debt on continuing and discontinued operations of United Dominion’s apartment portfolio, which encumbers $1.6 billion or 35.8% of real estate owned ($2.8 billion or 64.2% of United Dominion’s real estate owned is unencumbered) consists of the following as of December 31, 2003 (dollars in thousands):


					Weighted					Number of
					Average			Weighted Average		Communities
	Principal Outstanding				Interest Rate			Years to Maturity		Encumbered

	2003		2002		2003			2003		2003

Fixed Rate Debt
Mortgage notes payable	$	174,520	$	187,927		7.53	%		6.2		13
Tax-exempt secured notes payable		42,540		61,278		6.43	%		13.2		6
Fannie Mae credit facilities		288,875		288,875		6.40	%		7.1		9
Fannie Mae credit facilities — swapped		17,000		17,000		6.74	%		0.4		—

Total fixed rate secured debt		522,935		555,080		6.79	%		7.0		28
Variable Rate Debt
Mortgage notes payable		46,185		11,752		2.38	%		7.9		3
Tax-exempt secured note payable		7,770		7,770		1.08	%		24.2		1
Fannie Mae credit facilities		370,469		370,469		1.73	%		8.4		51
Freddie Mac credit facility		70,669		70,669		1.55	%		3.1		8

Total variable rate secured debt		495,093		460,660		1.76	%		7.9		63

Total secured debt	$	1,018,028	$	1,015,740		4.34	%		7.4		91

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 January 2004 through June 2034 and carry interest rates ranging from 6.12% to 8.50%.

Tax-exempt secured notes payable Fixed rate mortgage notes payable that secure tax-exempt housing bond issues mature at various dates through November 2025 and carry interest rates ranging from 6.09% to 6.75%. Interest on these notes is generally payable in semi-annual installments.

Secured credit facilities At December 31, 2003, United Dominion’s fixed rate secured credit facilities consisted of $305.9 million of the $676.3 million outstanding on an $860 million aggregate commitment under four revolving secured credit facilities with Fannie Mae. The Fannie Mae credit facilities are for an initial term of ten years, bear interest at floating and fixed rates 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 Fannie Mae 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 6.74%.

Variable Rate Debt

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 2005 through July 2013. As of December 31, 2003, these notes had interest rates ranging from 2.01% to 3.99%.

Tax-exempt secured note payable The variable rate mortgage note payable which secures tax-exempt housing bond issues matures in July 2028. As of December 31, 2003, this note had an interest rate of 1.08%. Interest on this note is payable in semi-annual installments.

Secured credit facilities As of December 31, 2003, United Dominion’s variable rate secured credit facilities consisted of $370.5 million outstanding on the Fannie Mae credit facilities and $70.7 million outstanding on the Freddie Mac credit facility. As of December 31, 2003, the variable rate Fannie Mae credit facilities had a weighted average floating rate of interest of 1.73% and the Freddie Mac credit facility had a weighted average floating rate of interest of 1.55%.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The aggregate maturities of secured debt for the fifteen years subsequent to December 31, 2003 are as follows (dollars in thousands):



	Fixed						Variable

	Mortgage		Tax-Exempt		Credit		Mortgage		Tax-Exempt		Credit
Year	Notes		Notes		Facilities		Notes		Notes		Facilities		TOTAL

2004	$	40,841	$	5,595	$	—	$	339	$	—	$	—	$	46,775
2005		18,431		630		—		4,725		—		—		23,786
2006		31,739		670		—		3,706		—		—		36,115
2007		7,169		345		—		—		—		70,669		78,183
2008		5,634		5,145		—		—		—		—		10,779
2009		23,717		245		—		—		—		—		23,962
2010		26,477		265		138,875		—		—		—		165,617
2011		694		280		50,000		—		—		134,513		185,487
2012		751		300		100,000		—		—		52,956		154,007
2013		812		3,390		17,000		37,415		—		183,000		241,617
2014		879		340		—		—		—		—		1,219
2015		950		12,815		—		—		—		—		13,765
2016		1,028		—		—		—		—		—		1,028
2017		1,112		—		—		—		—		—		1,112
2018		1,203		—		—		—		—		—		1,203
Thereafter		13,083		12,520		—		—		7,770		—		33,373

	$	174,520	$	42,540	$	305,875	$	46,185	$	7,770	$	441,138	$	1,018,028

For the year ended December 31, 2002, United Dominion recognized $18.4 million ($0.17 per diluted share) of expenses as a result of prepayment penalties incurred from the refinancing of certain secured loans, using proceeds from the Fannie Mae and Freddie Mac credit facilities and the early payoff of loans on the sale of properties. These prepayment penalties were funded by proceeds of the new credit facilities, proceeds from the related asset sales and from the release of cash escrows retained by former lenders of $14.0 million for the year ended December 31, 2002.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. UNSECURED DEBT

A summary of unsecured debt as of December 31, 2003 and 2002 is as follows (dollars in thousands):


		2003		2002

Commercial Banks
	Borrowings outstanding under an unsecured credit facility due March 2006(a)	$	137,900	$	—
	Borrowings outstanding under an unsecured credit facility due August 2003(a)		—		175,800
	Borrowings outstanding under an unsecured term loan due May 2004-2005(a)		—		100,000
Senior Unsecured Notes — Other
	7.65% Medium-Term Notes due January 2003		—		10,000
	7.22% Medium-Term Notes due February 2003		—		11,815
	8.63% Notes due March 2003		—		78,005
	7.98% Notes due March 2002-2003		—		7,428
	5.05% City of Portland, OR Bonds due October 2003		—		7,345
	7.67% Medium-Term Notes due January 2004		46,585		46,585
	7.73% Medium-Term Notes due April 2005		21,100		21,100
	7.02% Medium-Term Notes due November 2005		49,760		49,760
	7.95% Medium-Term Notes due July 2006		85,374		85,374
	7.07% Medium-Term Notes due November 2006		25,000		25,000
	7.25% Notes due January 2007		92,255		92,265
	4.50% Medium-Term Notes due March 2008(b)		200,000		—
	ABAG Tax-Exempt Bonds due August 2008		46,700		46,700
	8.50% Monthly Income Notes due November 2008		29,081		29,081
	4.25% Medium-Term Notes due January 2009(c)		50,000		—
	6.50% Notes due June 2009		200,000		200,000
	5.13% Medium-Term Notes due January 2014(d)		75,000		—
	8.50% Debentures due September 2024(e)		54,118		54,118
	Other(f)		1,136		1,524

			976,109		766,100

	Total Unsecured Debt	$	1,114,009	$	1,041,900

(a) During the first quarter of 2003, United Dominion closed on a new three-year $500 million unsecured revolving credit facility. The credit facility replaced United Dominion’s $375 million unsecured revolving credit facility and $100 million unsecured term loan. If United Dominion receives commitments from additional lenders or if the initial lenders increase their commitments, United Dominion will be able to increase the credit facility to $650 million. At United Dominion’s option, the credit facility can be extended for one year to March 2007.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of short-term bank borrowings under United Dominion’s bank credit facility at December 31, (dollars in thousands):


	2003			2002			2001

Total revolving credit facilities at December 31	$	500,000		$	475,000		$	475,000
Borrowings outstanding at December 31		137,900			275,800			330,200
Weighted average daily borrowings during the year		171,179			256,493			348,367
Maximum daily borrowings during the year		272,800			411,600			447,200
Weighted average interest rate during the year		2.1	%		3.0	%		5.2	%
Weighted average interest rate at December 31		1.6	%		2.5	%		3.1	%
Weighted average interest rate at December 31 — after giving effect to swap agreements		4.2	%		6.8	%		6.5	%

As of December 31, 2003, United Dominion had three interest rate swap agreements associated with commercial bank borrowings under the revolver with an aggregate notional value of $51.5 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, which mature from May 2004 through July 2004, effectively change United Dominion’s interest rate exposure on the $51.5 million of borrowings from a variable rate to a weighted average fixed rate of approximately 8.5%. As of December 31, 2003, 2002 and 2001, the weighted average interest rate of commercial borrowings, after giving effect to swap agreements, was 4.2%, 6.8% and 6.5%, respectively.

(b) In February 2003, United Dominion issued $150 million of 4.50% senior unsecured medium-term notes due in March 2008. The net proceeds of $149.3 million from the sale were used to repay amounts outstanding on United Dominion’s $375 million unsecured revolving credit facility. In August 2003, United Dominion issued an additional $50 million of 4.50% senior unsecured medium-term notes due in March 2008. The net proceeds were used to repay amounts outstanding on United Dominion’s $500 million unsecured credit facility.

(c) In November 2003, United Dominion issued $50 million of 4.25% senior unsecured medium-term notes due in January 2009. The net proceeds of $49.8 million from the sale were used to fund acquisitions of apartment communities.

(d) In October 2003, United Dominion issued $75 million of 5.13% senior unsecured medium-term notes due in January 2014. The net proceeds of $74.5 million from the sale were used to repay amounts outstanding on United Dominion’s $500 million unsecured revolving credit facility.

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

(f) Includes $1.1 million and $1.5 million at December 31, 2003 and 2002, respectively, of deferred gains from the termination of interest rate risk management agreements.

For the year ended December 31, 2002, United Dominion recognized $18.6 million ($0.17 per diluted share) of expense as a result of premiums paid for the redemption of certain higher coupon notes and debentures and the write-off of deferred financing costs.

7. STOCKHOLDERS’ EQUITY

Preferred Stock

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

into any of our other securities. 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 our option, 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 sale proceeds of our other capital stock. All dividends due and payable on the Series B have been accrued or paid as of the end of each fiscal year.

Distributions declared on the Series B in 2003 were $2.15 per share or $.5375 per quarter. The Series B is listed on the NYSE under the symbol “UDRpfb.”

The Series D Cumulative Convertible Redeemable Preferred Stock has no stated par value and a liquidation preference of $25 per share. The Series D has no voting rights except as required by law. In addition, if Series D dividends are in arrears for any dividend period, the holders of the Series D have rights to notices and voting entitlements of holders of common stock until all accumulated dividends for all past dividend periods and the then current dividend period have been paid or set aside for payment. The Series D has no stated maturity, is not subject to any sinking fund or mandatory redemption, and is convertible into 1.5385 shares of common stock, subject to certain adjustments, at the option of the holder of the Series D at any time. We may, at our 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 our 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; provided, however, that we 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, subject to certain exceptions.

In 2003, we exercised our right to redeem 6.0 million shares of our Series D. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 9,230,923 shares of common stock at a price of $16.25 per share. As a result, we recognized $19.3 million in premium on preferred shares repurchased throughout 2003. The premium amount recognized to convert these shares represents the cumulative accretion to date between the conversion value of the preferred stock and the value at which it was recorded at the time of issuance.

Distributions declared on the Series D in 2003 were $2.04 per share or $.5089 per quarter. The Series D is not listed on any exchange.

On June 15, 2001, United Dominion 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

As of December 31, 2003, United Dominion has $0.5 million of notes receivable from certain officers and directors of United Dominion at an interest rate of 7.0%. The notes mature in June 2004. The purpose of the loans was for the borrowers to purchase shares of United Dominion’s common stock pursuant to

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

United Dominion’s 1991 Stock Purchase and Loan Plan. The loans are evidenced by promissory notes between the borrowers and United Dominion and are secured by a pledge of the shares of common stock (33,000 shares with a market value of $0.6 million at December 31, 2003). The notes require that dividends received on the shares be applied towards payment of the notes.

In addition, United Dominion entered into a Servicing and Purchase Agreement (the “Servicing Agreement”) with SunTrust Bank (the “Bank”) whereby United Dominion has agreed to act as servicing agent for and to purchase certain loans made by the Bank to officers and directors of United Dominion (the “Borrowers”) to finance the purchase of shares of United Dominion’s common stock. The loans are evidenced by promissory notes (“Notes”) between each Borrower and the Bank. The Servicing Agreement provides that the Bank can require United Dominion to purchase the Notes upon an event of default by the Borrower or United Dominion under the Servicing Agreement and at certain other times during the term of the Servicing Agreement. The aggregate outstanding principal balance of the Notes as of December 31, 2003 was $6.3 million (original principal balance was $8.0 million), and all of the Notes mature during 2004. Because certain of the Borrowers elected floating rate loans and others elected fixed rate loans, the interest rates on these loans as of December 31, 2003 range from 2.08% to 7.68%. Each Borrower entered into a Participation Agreement with United Dominion that requires that all cash dividends received on the shares (664,898 shares at December 31, 2003 with a closing market value of $12.8 million) be applied towards payment of the Notes. Based upon the fact that 100% of all cash dividend payments are paid to amortize the Notes and that the Notes are recourse to the Borrowers, United Dominion believes that its exposure to liability under the Servicing Agreement is remote.

Dividend Reinvestment and Stock Purchase Plan

United Dominion’s Dividend Reinvestment and Stock Purchase Plan (the “Stock Purchase Plan”) allows common and preferred stockholders the opportunity to purchase, through the reinvestment of cash dividends, additional shares of United Dominion’s common stock. As of December 31, 2003, 9,681,250 shares of common stock had been issued under the Stock Purchase Plan. Shares in the amount of 4,318,750 were reserved for further issuance under the Stock Purchase Plan as of December 31, 2003. During 2003, 91,190 shares were issued under the Stock Purchase Plan for a total consideration of approximately $1.6 million.

Restricted Stock Awards

United Dominion’s 1999 Long-Term Incentive Plan (“LTIP”) authorizes the grant of restricted stock awards to employees, officers, consultants and directors of United Dominion. 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, 2003, 540,659 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 stockholders in the event of an unsolicited, coercive or unfair attempt to take over United Dominion. 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 1/1000 of a share of a new series of United Dominion’s 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 takeover occur. Under the Plan, the rights will be exercisable if a person or group acquires more than 15% of United Dominion’s common

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

stock or announces a tender offer that would result in the ownership of 15% of United Dominion’s common stock.

8. FINANCIAL INSTRUMENTS

The following estimated fair values of financial instruments were determined by United Dominion using available market information and appropriate valuation methodologies. Considerable judgment 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 as of December 31, 2003 and 2002, are summarized as follows (dollars in thousands):



	2003						2002

	Carrying						Carrying
	Amount			Fair Value			Amount			Fair Value

Secured debt	$	1,018,028		$	1,063,415		$	1,015,740		$	1,051,182
Unsecured debt		1,114,009			1,162,910			1,041,900			1,106,362
Interest rate swap agreements		(1,633	)		(1,633	)		(9,636	)		(9,636	)

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.

Notes receivable

In August 2003, United Dominion received a promissory note in the principal amount of $8 million which is due September 2006. The note is secured by a second lien on a property that United Dominion manages and has an option to purchase. The note bears interest of 10.0% that is payable in monthly installments. In June 2003, United Dominion received a promissory note in the principal amount of $5 million which is due October 2011. The note was received in connection with one of our acquisitions and bears interest of 9.0% that is payable in annual installments.

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 as of December 31, 2003 and 2002. 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 as of December 31, 2003 and 2002.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Derivative financial instruments

The following table presents the fair values of United Dominion’s derivative financial instruments outstanding, based on external market quotations, as of December 31, 2003 (dollars in thousands):


Notional		Fixed		Type of		Effective		Contract		Fair
Amount		Rate		Contract		Date		Maturity		Value

*Secured Debt — FNMA:*
$	10,000		6.92%		Swap		12/01/99		04/01/04	$	(179	)
	7,000		6.48%		Swap		06/30/99		06/30/04		(228	)

	17,000		6.74%								(407	)
*Unsecured Debt — Bank Credit Facility:*
	23,500		8.52%		Swap		11/15/00		05/15/04		(543	)
	23,000		8.52%		Swap		11/15/00		05/15/04		(531	)
	5,000		8.65%		Swap		06/26/95		07/01/04		(152	)

	51,500		8.53%								(1,226	)

$	68,500		8.09%							$	(1,633	)

For the year ended December 31, 2003, United Dominion recognized $8.1 million of unrealized gains in comprehensive income and a $0.3 million realized gain in net income related to the ineffective portion of United Dominion’s hedging instruments. For the year ended December 31, 2002, United Dominion recognized $4.9 million of unrealized gains in comprehensive income and a $0.05 million realized gain in net income related to the ineffective portion of United Dominion’s hedging instruments. For the year ended December 31, 2001, United Dominion recognized $11.0 million of unrealized losses in comprehensive income, a $0.06 million realized loss in net income related to the ineffective portion of United Dominion’s hedging instruments, and a $3.8 million loss as a cumulative effect of a change in accounting principle.

In addition, United Dominion has recognized $1.6 million and $9.6 million, respectively, of derivative financial instrument liabilities on the Consolidated Balance Sheets within the line item “Accounts payable, accrued expenses and other liabilities” for the years ended December 31, 2003 and 2002.

As of December 31, 2003, United Dominion expects to reclassify $1.9 million of net losses on derivative instruments from accumulated other comprehensive loss to earnings (interest expense which, combined with the interest paid on the underlying debt, results in interest expense at the fixed rates shown above) 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 value of the derivative instruments that are favorable to United Dominion at December 31, 2003, of which we have none. However, such non-performance is not anticipated as the counterparties are highly rated credit quality U.S. financial institutions and we believe that the likelihood of realizing material losses from counterparty non-performance is remote.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


9.	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, 2003, 2002 and 2001 were $0.3 million, $0.4 million and $0.7 million, respectively.

Stock Option Plan

In May 2001, the stockholders of United Dominion approved the 1999 Long-Term Incentive Plan (the “LTIP”), which supersedes the 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, and 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. 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 4 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 FASB Statement No. 123 “Accounting for Stock-Based Compensation” (FAS 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 FAS 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 2003, 2002 and 2001:


	2003		2002			2001

Risk free interest rate		—		4.1	%		3.2	%
Dividend yield		—		7.7	%		9.1	%
Volatility factor		—		0.177			0.171
Weighted average expected life (years)		—		4			3

There were no options granted during 2003. The weighted average fair value of options granted during 2002 and 2001 was $0.84 and $0.46 per option, respectively.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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):


		2003			2002			2001

Reported net income available to common stockholders		$	24,807		$	25,805		$	27,142
Stock-based employee compensation cost included in net income			2,213			1,712			879
Stock-based employee compensation cost that would have been included in net income under the fair value method			(2,505	)		(2,092	)		(1,328	)

Adjusted net income available to common stockholders		$	24,515		$	25,425		$	26,693

Earnings per common share – basic
	As reported	$	0.22		$	0.24		$	0.27
	Pro forma		0.21			0.24			0.27
Earnings per common share – diluted
	As reported	$	0.21		$	0.24		$	0.27
	Pro forma		0.21			0.24			0.27

A summary of United Dominion’s stock option activity during the three years ended December 31, 2003 is provided in the following table:


				Weighted
	Number			Average		Range of Exercise
	Outstanding			Exercise Price		Prices

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		(813,649	)		11.52		9.63 – 15.38

Balance, December 31, 2001		4,612,372		$	11.90	$	9.63 – $15.38
Granted		143,548			14.26		14.15 – 14.88
Exercised		(1,000,592	)		11.68		9.63 – 15.38
Forfeited		(87,999	)		11.04		9.63 – 15.25

Balance, December 31, 2002		3,667,329		$	12.01	$	9.63 – $15.38
Granted		—			—		—
Exercised		(1,106,142	)		12.41		9.63 – 15.38
Forfeited		(25,000	)		9.65		9.63 – 9.88

Balance, December 31, 2003		2,536,187		$	11.88	$	9.63 – $15.38

Exercisable at December 31,
2001		1,968,265		$	12.38	$	9.63 – $15.38
2002		2,793,811			11.97		9.63 – 15.38
2003		2,207,685			11.77		9.63 – 15.38

The weighted average remaining contractual life on all options outstanding is 5.5 years. A total of 628,150 of share options had exercise prices between $13.13 and $15.38, 909,296 of share options had exercise prices between $11.15 and $12.23 and 998,741 of share options had exercise prices between $9.63 and $10.88.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2003 and 2002, stock-based awards for 3,028,920 and 3,149,350 shares of common stock, respectively, were available for future grants under the 1999 LTIP’s existing authorization.


10.	RESTRUCTURING CHARGES

In 2001, we undertook a comprehensive review of the organizational structure of United Dominion and its operations subsequent to the appointment of a new senior management team and CEO. As a result, we recorded $4.5 million of expense related to the termination of approximately 10% of United Dominion’s workforce in operations and at the corporate headquarters. In addition, United Dominion recognized expense in the aggregate of $0.9 million related to relocation costs associated with the new executive offices in Colorado and other miscellaneous costs. These charges are included in the Consolidated Statements of Operations within the line item “Severance costs and other organizational charges.”

In addition, in 2001, we performed an analysis of the carrying value of all undeveloped land parcels in connection with United Dominion’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. United Dominion also recognized a $0.4 million charge for the write down of its investment in an online apartment leasing company.


11.	COMMITMENTS AND CONTINGENCIES

Commitments


	Real Estate Under Development

United Dominion is committed to completing its real estate currently under development, which has an estimated cost to complete of $76.1 million as of December 31, 2003.


	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 as of December 31, 2003 are as follows (dollars in thousands):


		Ground		Operating
		Leases		Leases

2004		$	1,060	$	495
2005			1,060		311
2006			1,060		102
2007			1,060		59
2008			1,060		4
Thereafter			23,367		—

	Total	$	28,667	$	971

United Dominion incurred $1.9 million, $2.0 million and $2.3 million of rent expense for the years ended December 31, 2003, 2002 and 2001, respectively.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contingencies


	Series A Out-Performance Program

In May 2001, the stockholders of United Dominion approved the Series A Out-Performance Program (the “Series A Program”) pursuant to which executives and other key officers of United Dominion (the “Participants”) were given the opportunity to invest indirectly in United Dominion by purchasing interests in a limited liability company (the “Series A LLC”), the only asset of which is a special class of partnership units of United Dominion Realty, L.P. (“Series A Out-Performance Partnership Shares” or “Series A OPPSs”), for an initial investment of $1.27 million (the full market value of the Series A OPPSs, at inception, as determined by an independent investment banking firm). The Series A Program measured United Dominion’s performance over a 28-month period beginning February 2001 and ending on May 31, 2003.

The Series A Program was designed to provide Participants with the possibility of substantial returns on their investment if United Dominion’s total return on its common stock, measured by the cumulative amount of dividends paid plus share price appreciation during the measurement period, exceeded the greater of (a) the cumulative total return of the Morgan Stanley REIT Index over the same period; and (b) is at least the equivalent of a 30% total return, or 12% annualized.

At the conclusion of the measurement period on May 31, 2003, United Dominion’s total return satisfied these criteria. As a result, the Series A LLC as holder of the Series A 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 1,853,204 interests in the Operating Partnership (“OP Units”), which distributions and allocations will be distributed to the participants on a pro rata basis based on ownership of the Series A LLC.


	Series B Out-Performance Program

In May 2003, the stockholders of United Dominion approved the Series B Out-Performance Program (the “Series B Program”) pursuant to which certain executive officers of United Dominion (the “participants”) were given the opportunity to invest indirectly in United Dominion by purchasing interests in a limited liability company (the “Series B LLC”), the only asset of which is a special class of partnership units of United Dominion Realty, L.P. (“Series B Out-Performance Partnership Shares” or “Series B OPPSs”) . The purchase price for the Series B OPPSs was determined by United Dominion’s board of directors to be $1 million, assuming 100% participation, and was based upon the advice of an independent valuation expert. The Series B Program will measure the cumulative total return on our common stock over the 24-month period from June 1, 2003 to May 31, 2005.

The Series B Program is designed to provide participants with the possibility of substantial returns on their investment if the cumulative total return on United Dominion’s common stock, as measured by the cumulative amount of dividends paid plus share price appreciation during the measurement period (a) exceeds the cumulative total return of the Morgan Stanley REIT Index peer group index over the same period; and (b) is at least the equivalent of a 22% total return or 11% annualized.

At the conclusion of the measurement period, if United Dominion’s cumulative total return satisfies these criteria, the Series B LLC as holder of the Series B OPPSs will receive (for the indirect benefit of the participants as holders of interests in the Series B LLC) 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 OP Units obtained by:

i. determining the amount by which the cumulative total return of United Dominion’s common stock over the measurement period exceeds the greater of the cumulative total return of the Morgan

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stanley REIT Index, which is the peer group index, or the minimum return (such excess being the “excess return”);

ii. multiplying 5% of the excess return by United Dominion’s market capitalization (defined as the average number of shares outstanding over the 24-month period, including common stock, OP Units, outstanding options and convertible securities) multiplied by the daily closing price of United Dominion’s common stock, up to a maximum of 2% of market capitalization; and

iii. dividing the number obtained in (ii) by the market value of one share of United Dominion’s common stock on the valuation date, determined by the weighted average price per day of 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, then the participants will forfeit their entire initial investment.


12.	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 has 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 2003, 2002, or 2001.

13. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA

Summarized consolidated quarterly financial data for the year ended December 31, 2003, with restated amounts that reflect changes in discontinued operations occurring subsequent to quarter-end but before year-end, is as follows (dollars in thousands, except per share amounts):



	Three Months Ended

	Previously				Previously						Previously
	Reported		Restated		Reported			Restated			Reported		Restated
	March 31		March 31		June 30(a)			June 30(a)			September 30(b)		September 30(b)		December 31(c)

Rental income(d)	$	151,418	$	148,307	$	149,118		$	149,384		$	152,157	$	151,860	$	153,816
Income before minority interests and discontinued operations		12,727		11,723		14,709			14,826			12,863		12,751		13,285
Gain/(loss) on sale of land and depreciable property		1,045		1,045		(112	)		(112	)		7,215		7,215		7,793
Income from discontinued operations, net of minority interests		1,456		2,391		1,077			965			7,911		7,982		7,463
Net income available to common stockholders		6,494		6,494		2,702			2,702			1,242		1,242		14,369
Earnings per common share:
Basic	$	0.06	$	0.06	$	0.02		$	0.02		$	0.01	$	0.01	$	0.13
Diluted		0.06		0.06		0.02			0.02			0.01		0.01		0.12


(a)		The second quarter of 2003 includes $6.3 million of expense due to a premium paid for the conversion of shares of Series D preferred stock into common stock.

(b)		The third quarter of 2003 includes $12.1 million of expense due to a premium paid for the conversion of shares of Series D preferred stock into common stock.

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


(c)		The fourth quarter of 2003 includes $0.9 million of expense due to a premium paid for the conversion of shares of Series D preferred stock into common stock.

(d)		Represents rental income from continuing operations.

Summarized consolidated quarterly financial data for the year ended December 31, 2002, with restated amounts that reflect changes in discontinued operations occurring subsequent to quarter-end but before year-end, is as follows (dollars in thousands, except per share amounts):



	Three Months Ended

	Previously						Previously				Previously						Previously
	Reported			Restated			Reported		Restated		Reported			Restated			Reported		Restated
	March 31(a)			March 31(a)			June 30		June 30		September 30(b)			September 30(b)			December 31(c)		December 31(c)

Rental income(d)	$	142,913		$	142,635		$	144,873	$	144,589	$	146,855		$	146,570		$	149,323	$	149,029
Income/(loss) before minority interests and discontinued operations		(4,863	)		(4,983	)		13,563		13,418		(1,245	)		(1,391	)		6,095		5,951
Gain on sale of land and depreciable property		919			919			11,826		11,826		19,128			19,128			825		825
Income from discontinued operations, net of minority interests		2,885			2,998			14,494		14,629		21,519			21,658			1,258		1,393
Net income/(loss) available to common stockholders		(8,538	)		(8,538	)		20,513		20,513		13,602			13,602			227		227
Earnings/(loss) per common share:
Basic	$	(0.08	)	$	(0.08	)	$	0.19	$	0.19	$	0.13		$	0.13		$	0.00	$	0.00
Diluted		(0.08	)		(0.08	)		0.19		0.19		0.13			0.13			0.00		0.00


(a)		The first quarter of 2002 includes $15.8 million of expense associated with the refinancing of certain mortgages using proceeds from the new Fannie Mae and Freddie Mac credit facilities.

(b)		The third quarter of 2002 includes $12.6 million of expense due to premiums paid for the redemption of certain higher coupon bonds.

(c)		The fourth quarter of 2002 includes $5.2 million of expense due to premiums paid for the redemption of certain higher coupon bonds.

(d)		Represents rental income from continuing operations.

14. SUBSEQUENT EVENTS

On January 15, 2004, United Dominion completed the sale of $75 million of 5.13% senior unsecured notes due January 2014 under its $1 billion shelf registration statement. These notes represent a re-opening of the 5.13% senior notes due January 2014 issued by United Dominion in October 2003, and these notes will constitute a single series of notes, bringing the aggregate principal amount outstanding of the 5.13% senior notes to $150 million. The net proceeds of approximately $73.9 million from this issuance were used to repay secured and unsecured debt obligations maturing in the first quarter of 2004.

UNITED DOMINION REALTY TRUST

SCHEDULE III — REAL ESTATE OWNED

For the Year Ended December 31, 2003

(In thousands)


									Cost of
			Initial Costs						Improvements
									Capitalized
			Land and		Buildings		Total Initial		Subsequent to
			Land		And		Acquisition		Acquisition (Net
	Encumbrances		Improvements		Improvements		Costs		of Disposals)

Pine Avenue	$	11,342	$	2,158	$	8,888	$	11,046	$	2,713
The Grand Resort		—		8,884		35,706		44,590		17,686
Grand Terrace		—		2,144		6,595		8,739		1,292
Windemere at Sycamore Highland		—		5,810		23,450		29,260		209
Harbor Greens		—		20,477		28,538		49,015		48
Pine Brook Village		18,270		2,582		25,504		28,086		193
Windjammer		19,145		7,345		22,623		29,968		22
Huntington Vista		—		8,056		22,486		30,542		85
Pacific Palms		—		12,285		6,237		18,522		102
Missions at Back Bay		—		229		14,129		14,358		7
Rancho Vallecitos		—		3,303		10,877		14,180		1,553
SOUTHERN CALIFORNIA		48,757		73,273		205,033		278,306		23,910
Preston Oaks		—		1,784		6,416		8,200		917
Rock Creek		—		4,077		15,823		19,900		5,208
Windridge		—		3,414		14,027		17,441		3,786
Catalina		—		1,543		5,632		7,175		1,154
Wimbledon Court		—		1,809		10,930		12,739		2,597
Lakeridge		—		1,631		5,669		7,300		1,389
Summergate		—		1,171		3,929		5,100		921
Oak Forest		23,540		5,631		23,294		28,925		11,076
Oaks Of Lewisville		12,265		3,727		13,563		17,290		4,168
Kelly Crossing		—		2,497		9,156		11,653		2,035
Highlands Of Preston		—		2,151		8,168		10,319		1,925
The Summit		8,575		1,932		9,041		10,973		1,931
Springfield		5,810		3,075		6,823		9,898		1,406
Meridian		—		6,013		29,094		35,107		1,053
Mandolin I		—		4,223		27,910		32,133		4,209
DALLAS, TX		50,190		44,678		189,475		234,153		43,775
Woodtrail		—		1,543		5,457		7,000		2,720
Park Trails		—		1,145		4,105		5,250		1,291
Green Oaks		—		5,314		19,626		24,940		3,625
Sky Hawk		—		2,298		7,158		9,456		2,145
South Grand at Pecan Grove		19,509		4,058		14,756		18,814		5,452
Breakers		—		1,527		5,298		6,825		2,527
Braesridge		10,255		3,048		10,962		14,010		2,661
Skylar Pointe		—		3,604		11,592		15,196		4,548
Stone Canyon		—		900		—		900		9,468
Briar Park		—		329		2,794		3,123		294
Chelsea Park		5,390		1,991		5,788		7,779		2,282
Clear Lake Falls		—		1,090		4,534		5,624		127
Country Club Place		4,900		499		6,520		7,019		1,390
Arbor Ridge		5,531		1,689		6,684		8,373		820
London Park		6,125		2,018		6,668		8,686		2,231
Marymont		—		1,151		4,155		5,306		943
Nantucket Square		—		1,068		4,833		5,901		(329	)
Riverway		—		523		2,828		3,351		348
Riviera Pines		6,244		1,414		6,454		7,868		1,270
The Gallery		—		769		3,359		4,128		285

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount at Which

Carried at Close of Period

Land and Buildings Total

Land and Carrying Accumulated

Improvements Improvements Value(A) Depreciation(B) Date of Construction Date Acquired

Pine Avenue
$ 2,832 $ 10,927 $ 13,759 $ 1,805 1987 12/07/98

The Grand Resort
11,784 50,492 62,276 8,054 1971 12/07/98

Grand Terrace
2,228 7,803 10,031 1,584 1986 06/30/99

Windemere at Sycamore Highland
5,812 23,657 29,469 1,591 2001 11/21/02

Harbor Greens
20,476 28,587 49,063 910 1965 06/12/03

Pine Brook Village
2,582 25,697 28,279 803 1979 06/12/03

Windjammer
7,345 22,645 29,990 712 1971 06/12/03

Huntington Vista
8,055 22,572 30,627 713 1970 06/12/03

Pacific Palms
12,291 6,333 18,624 170 1962 07/31/03

Missions at Back Bay
10,617 3,748 14,365 11 1969 12/16/03

Rancho Vallecitos
3,406 12,327 15,733 3,607 1988 10/13/99

SOUTHERN CALIFORNIA
87,428 214,788 302,216 19,960

Preston Oaks
1,962 7,155 9,117 2,055 1980 12/31/96

Rock Creek
4,670 20,438 25,108 6,371 1979 12/31/96

Windridge
4,095 17,132 21,227 5,241 1980 12/31/96

Catalina
1,693 6,636 8,329 1,875 1982 12/31/96

Wimbledon Court
2,861 12,475 15,336 3,383 1983 12/31/96

Lakeridge
1,856 6,833 8,689 2,127 1984 12/31/96

Summergate
1,421 4,600 6,021 1,469 1984 12/31/96

Oak Forest
6,418 33,583 40,001 10,123 1996/98 12/31/96

Oaks Of Lewisville
4,566 16,892 21,458 5,567 1983 03/27/97

Kelly Crossing
2,998 10,690 13,688 3,037 1984 06/18/97

Highlands Of Preston
2,494 9,750 12,244 2,630 1985 03/27/98

The Summit
2,346 10,558 12,904 2,646 1983 03/27/98

Springfield
3,284 8,020 11,304 2,152 1985 03/27/98

Meridian
6,397 29,763 36,160 4,073 2000/2002 1/27/98 & 12/28/01

Mandolin I
6,327 30,015 36,342 3,054 2001 12/28/01

DALLAS, TX
53,388 224,540 277,928 55,803

Woodtrail
1,756 7,964 9,720 3,009 1978 12/31/96

Park Trails
1,281 5,260 6,541 1,620 1983 12/31/96

Green Oaks
5,983 22,582 28,565 6,285 1985 06/25/97

Sky Hawk
2,733 8,868 11,601 3,003 1984 05/08/97

South Grand at Pecan Grove
4,914 19,352 24,266 5,614 1985 09/26/97

Breakers
1,923 7,429 9,352 2,406 1985 09/26/97

Braesridge
3,522 13,149 16,671 3,715 1982 09/26/97

Skylar Pointe
3,750 15,994 19,744 4,986 1979 11/20/97

Stone Canyon
1,327 9,041 10,368 1,934 1998 12/17/97

Briar Park
366 3,051 3,417 658 1987 03/27/98

Chelsea Park
2,446 7,615 10,061 2,172 1983 03/27/98

Clear Lake Falls
1,173 4,578 5,751 1,049 1980 03/27/98

Country Club Place
677 7,732 8,409 1,918 1985 03/27/98

Arbor Ridge
2,098 7,095 9,193 2,010 1983 03/27/98

London Park
2,510 8,407 10,917 2,461 1983 03/27/98

Marymont
1,181 5,068 6,249 1,150 1983 03/27/98

Nantucket Square
1,082 4,490 5,572 936 1983 03/27/98

Riverway
568 3,131 3,699 810 1985 03/27/98

Riviera Pines
1,486 7,652 9,138 1,538 1979 03/27/98

The Gallery
794 3,619 4,413 712 1968 03/27/98

UNITED DOMINION REALTY TRUST

SCHEDULE III — REAL ESTATE OWNED

For the Year Ended December 31, 2003 — (Continued)


									Cost of
			Initial Costs						Improvements
									Capitalized
			Land and		Buildings		Total Initial		Subsequent to
			Land		And		Acquisition		Acquisition (Net
	Encumbrances		Improvements		Improvements		Costs		of Disposals)

Towne Lake		—		1,334		5,309		6,643		1,672
The Legend at Park 10		—		1,995		—		1,995		11,807
The Bradford		—		1,151		40,830		41,981		37
HOUSTON, TX		57,954		40,458		179,710		220,168		57,614
Dominion Middle Ridge		14,198		3,312		13,283		16,595		1,635
Dominion Lake Ridge		9,142		2,366		8,386		10,752		1,277
Presidential Greens		19,832		11,238		18,790		30,028		630
Taylor Place		—		6,418		13,411		19,829		1,754
Ridgewood Apartments		12,363		5,612		20,086		25,698		1,225
Ridgewood Townhomes		—		4,507		16,263		20,770		227
The Calvert		4,844		263		11,188		11,451		35
Commons at Town Square		—		136		10,012		10,148		522
Waterside Towers		—		874		46,852		47,726		199
Waterside Townhomes		—		129		4,621		4,750		249
Greens At Falls Run		—		2,731		5,300		8,031		1,176
Manor At England Run		14,671		3,195		13,505		16,700		13,144
METROPOLITAN DC		75,050		40,781		181,697		222,478		22,073
Vista Point		—		1,588		5,613		7,201		1,575
Sierra Palms		—		4,639		17,361		22,000		776
Northpark Village		—		1,519		13,537		15,056		2,021
Stonegate		5,180		735		7,940		8,675		1,162
Finisterra		—		1,274		26,392		27,666		717
La Privada		15,400		7,303		18,508		25,811		2,299
Terracina		22,413		3,757		34,781		38,538		7,156
Woodland Park		—		3,017		6,706		9,723		1,178
Sierra Foothills		12,691		2,728		—		2,728		18,850
Villagio at McCormick Ranch		5,687		3,333		5,975		9,308		944
Sierra Canyon		—		1,810		12,963		14,773		320
PHOENIX, AZ		61,371		31,703		149,776		181,479		36,998
Fisherman’s Village		—		2,387		7,459		9,846		3,797
Seabrook		—		1,846		4,155		6,001		3,247
Dover Village		—		2,895		6,456		9,351		4,191
Lakeside North		—		1,533		11,076		12,609		5,284
Regatta Shore		—		757		6,607		7,364		7,184
Alafaya Woods		8,725		1,653		9,042		10,695		2,423
Vinyards		8,300		1,840		11,572		13,412		3,645
Andover Place		13,135		3,692		7,757		11,449		3,530
Los Altos		12,199		2,804		12,349		15,153		3,024
Lotus Landing		—		2,185		8,639		10,824		2,174
Seville On The Green		—		1,282		6,498		7,780		2,257
Arbors at Lee Vista		13,383		3,976		16,920		20,896		2,163
Heron Lake		8,603		1,446		9,288		10,734		1,419
Ashton at Waterford		14,945		3,872		17,538		21,410		317
ORLANDO, FL		79,290		32,168		135,356		167,524		44,655
Dominion on Spring Forest		—		1,257		8,586		9,843		4,602
Dominion Park Green		—		500		4,322		4,822		1,919
Dominion on Lake Lynn		16,250		3,622		12,405		16,027		4,287
Dominion Courtney Place		—		1,115		5,119		6,234		3,631
Dominion Walnut Ridge		9,515		1,791		11,969		13,760		2,610

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount at Which

Carried at Close of Period

Land and Buildings Total

Land and Carrying Accumulated

Improvements Improvements Value(A) Depreciation(B) Date of Construction Date Acquired

Towne Lake
1,628 6,687 8,315 1,921 1984 03/27/98

The Legend at Park 10
3,928 9,874 13,802 3,375 1998 05/19/98

The Bradford
6,616 35,402 42,018 259 1990/91 11/20/03

HOUSTON, TX
53,742 224,040 277,782 53,541

Dominion Middle Ridge
3,433 14,797 18,230 4,158 1990 06/25/96

Dominion Lake Ridge
2,548 9,481 12,029 2,988 1987 02/23/96

Presidential Greens
11,341 19,317 30,658 1,952 1938 05/15/02

Taylor Place
6,531 15,052 21,583 1,604 1962 04/17/02

Ridgewood Apartments
5,678 21,245 26,923 1,690 1988 08/26/02

Ridgewood Townhomes
4,510 16,487 20,997 1,321 1983 08/26/02

The Calvert
2,318 9,168 11,486 56 1962 11/26/03

Commons at Town Square
9,154 1,516 10,670 10 1971 12/03/03

Waterside Towers
34,621 13,304 47,925 72 1971 12/03/03

Waterside Townhomes
3,638 1,361 4,999 7 1971 12/03/03

Greens At Falls Run
2,897 6,310 9,207 2,086 1989 05/04/95

Manor At England Run
4,901 24,943 29,844 6,905 1990 05/04/95

METROPOLITAN DC
91,570 152,981 244,551 22,849

Vista Point
1,769 7,007 8,776 2,176 1986 12/31/96

Sierra Palms
4,760 18,016 22,776 4,496 1996 12/31/96

Northpark Village
1,879 15,198 17,077 3,936 1983 03/27/98

Stonegate
905 8,932 9,837 2,194 1978 03/27/98

Finisterra
1,351 27,032 28,383 5,561 1997 03/27/98

La Privada
7,849 20,261 28,110 4,786 1987 03/27/98

Terracina
4,589 41,105 45,694 10,341 1984 05/28/98

Woodland Park
3,264 7,637 10,901 2,310 1979 06/09/98

Sierra Foothills
4,843 16,735 21,578 5,894 1998 02/18/98

Villagio at McCormick Ranch
3,724 6,528 10,252 2,120 1980 01/18/01

Sierra Canyon
1,825 13,268 15,093 1,769 2001 12/28/01

PHOENIX, AZ
36,758 181,719 218,477 45,583

Fisherman’s Village
3,153 10,490 13,643 4,481 1984 12/29/95

Seabrook
2,332 6,916 9,248 3,243 1984 02/20/96

Dover Village
3,451 10,091 13,542 5,213 1981 03/31/93

Lakeside North
2,280 15,613 17,893 6,443 1984 04/14/94

Regatta Shore
1,549 12,999 14,548 4,481 1988 06/30/94

Alafaya Woods
2,132 10,986 13,118 4,506 1988/90 10/21/94

Vinyards
2,424 14,633 17,057 5,882 1984/86 10/31/94

Andover Place
4,511 10,468 14,979 4,418 1988 09/29/95 & 09/30/96

Los Altos
3,350 14,827 18,177 4,726 1990 10/31/96

Lotus Landing
2,417 10,581 12,998 2,893 1985 07/01/97

Seville On The Green
1,483 8,554 10,037 2,342 1986 10/21/97

Arbors at Lee Vista
4,394 18,665 23,059 4,486 1991 12/31/97

Heron Lake
1,620 10,533 12,153 2,617 1989 03/27/98

Ashton at Waterford
3,911 17,816 21,727 4,682 2000 05/28/98

ORLANDO, FL
39,007 173,172 212,179 60,413

Dominion on Spring Forest
1,733 12,712 14,445 6,714 1978/81 05/21/91

Dominion Park Green
720 6,021 6,741 2,990 1987 09/27/91

Dominion on Lake Lynn
4,194 16,120 20,314 5,753 1986 12/01/92

Dominion Courtney Place
1,471 8,394 9,865 3,801 1979/81 07/08/93

Dominion Walnut Ridge
2,198 14,172 16,370 5,344 1982/84 03/04/94

UNITED DOMINION REALTY TRUST

SCHEDULE III — REAL ESTATE OWNED

For the Year Ended December 31, 2003 — (Continued)


									Cost of
			Initial Costs						Improvements
									Capitalized
			Land and		Buildings		Total Initial		Subsequent to
			Land		And		Acquisition		Acquisition (Net
	Encumbrances		Improvements		Improvements		Costs		of Disposals)

Dominion Walnut Creek		17,050		3,170		21,717		24,887		4,394
Dominion Ramsgate		—		908		6,819		7,727		1,355
Copper Mill		—		1,548		16,067		17,615		1,153
Trinity Park		15,778		4,580		17,576		22,156		1,493
Meadows at Kildaire		—		2,846		20,768		23,614		1,983
Oaks at Weston		—		9,944		23,306		33,250		503
RALEIGH, NC		58,593		31,281		148,654		179,935		27,930
Bay Cove		—		2,929		6,578		9,507		4,495
Summit West		—		2,176		4,710		6,886		2,980
Pinebrook		—		1,780		2,458		4,238		3,374
Lakewood Place		10,300		1,395		10,647		12,042		1,743
Hunters Ridge		10,232		2,462		10,942		13,404		2,128
Bay Meadow		—		2,892		9,254		12,146		2,956
Cambridge		—		1,791		7,166		8,957		1,759
Laurel Oaks		—		1,362		6,542		7,904		1,509
Parker’s Landing		28,360		10,178		37,869		48,047		2,571
Sugar Mill Creek		7,420		2,242		7,553		9,795		925
Inlet Bay		—		7,702		23,150		30,852		398
TAMPA, FL		56,312		36,909		126,869		163,778		24,838
Autumnwood		—		2,412		8,688		11,100		1,614
Cobblestone		—		2,925		10,527		13,452		3,380
Pavillion		—		4,428		19,033		23,461		2,187
Oak Park		16,236		3,966		22,228		26,194		963
Parc Plaza		—		1,684		5,279		6,963		1,814
Summit Ridge		7,700		1,726		6,308		8,034		1,715
Greenwood Creek		—		1,958		8,551		10,509		1,851
Derby Park		11,130		3,121		11,765		14,886		2,028
Aspen Court		3,990		777		4,945		5,722		1,103
The Cliffs		—		3,484		18,657		22,141		1,557
ARLINGTON, TX		39,056		26,481		115,981		142,462		18,212
Sycamore Ridge		13,160		4,068		15,433		19,501		1,316
Heritage Green		—		2,990		11,392		14,382		9,588
Alexander Court		—		1,573		—		1,573		21,536
Governour’s Square		28,167		7,513		28,695		36,208		3,492
Hickory Creek		—		3,421		13,539		16,960		1,381
Britton Woods		—		3,477		19,214		22,691		2,056
COLUMBUS, OH		41,327		23,042		88,273		111,315		39,369
2000 Post Street		—		9,861		44,578		54,439		943
Birch Creek		7,607		4,365		16,696		21,061		1,441
Highlands Of Marin		—		5,996		24,868		30,864		976
Marina Playa		13,173		6,224		23,916		30,140		2,180
SAN FRANCISCO, CA		20,780		26,446		110,058		136,504		5,540
The Highlands		—		321		2,830		3,151		2,973
Emerald Bay		—		626		4,723		5,349		5,262
Dominion Peppertree		—		1,546		7,699		9,245		1,953
Dominion Harris Pond		—		887		6,728		7,615		1,533
Dominion Mallard Creek		—		699		6,488		7,187		928
Chateau Village		—		1,047		6,979		8,026		2,725
Dominion At Sharon		—		667		4,856		5,523		1,163

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount at Which

Carried at Close of Period

Land and Buildings Total

Land and Carrying Accumulated

Improvements Improvements Value(A) Depreciation(B) Date of Construction Date Acquired

Dominion Walnut Creek
3,746 25,535 29,281 9,139 1985/86 05/17/94

Dominion Ramsgate
1,049 8,033 9,082 2,311 1988 08/15/96

Copper Mill
1,841 16,927 18,768 4,236 1997 12/31/96

Trinity Park
4,635 19,014 23,649 4,698 1987 02/28/97

Meadows at Kildaire
6,916 18,681 25,597 3,616 2000 05/25/00

Oaks at Weston
10,147 23,606 33,753 2,365 2001 06/28/02

RALEIGH, NC
38,650 169,215 207,865 50,967

Bay Cove
3,528 10,474 14,002 5,304 1972 12/16/92

Summit West
2,528 7,338 9,866 3,929 1972 12/16/92

Pinebrook
2,026 5,586 7,612 3,470 1977 09/28/93

Lakewood Place
1,650 12,135 13,785 4,495 1986 03/10/94

Hunters Ridge
3,006 12,526 15,532 4,411 1992 06/30/95

Bay Meadow
3,438 11,664 15,102 3,821 1985 12/09/96

Cambridge
2,116 8,600 10,716 2,606 1985 06/06/97

Laurel Oaks
1,551 7,862 9,413 2,319 1986 07/01/97

Parker’s Landing
9,358 41,260 50,618 7,825 1991 12/07/98

Sugar Mill Creek
2,389 8,331 10,720 1,716 1988 12/07/98

Inlet Bay
7,724 23,526 31,250 756 1988/89 06/30/03

TAMPA, FL
39,314 149,302 188,616 40,652

Autumnwood
2,745 9,969 12,714 2,925 1984 12/31/96

Cobblestone
3,199 13,633 16,832 4,043 1984 12/31/96

Pavillion
4,787 20,861 25,648 5,596 1979 12/31/96

Oak Park
5,576 21,581 27,157 6,776 1982/98 12/31/96

Parc Plaza
2,182 6,595 8,777 2,203 1986 10/30/97

Summit Ridge
2,226 7,523 9,749 2,262 1983 03/27/98

Greenwood Creek
2,310 10,050 12,360 2,654 1984 03/27/98

Derby Park
3,795 13,119 16,914 3,606 1984 03/27/98

Aspen Court
1,100 5,725 6,825 1,571 1986 03/27/98

The Cliffs
3,776 19,922 23,698 2,497 1992 01/29/02

ARLINGTON, TX
31,696 128,978 160,674 34,133

Sycamore Ridge
4,259 16,558 20,817 3,483 1997 07/02/98

Heritage Green
3,134 20,836 23,970 4,479 1998 07/02/98

Alexander Court
6,218 16,891 23,109 4,887 1999 07/02/98

Governour’s Square
7,903 31,797 39,700 6,537 1967 12/07/98

Hickory Creek
3,544 14,797 18,341 2,999 1988 12/07/98

Britton Woods
4,083 20,664 24,747 4,793 1991 04/20/01

COLUMBUS, OH
29,141 121,543 150,684 27,178

2000 Post Street
9,958 45,424 55,382 6,351 1987 12/07/98

Birch Creek
4,621 17,881 22,502 3,208 1968 12/07/98

Highlands Of Marin
6,082 25,758 31,840 4,225 1991 12/07/98

Marina Playa
6,489 25,831 32,320 4,763 1971 12/07/98

SAN FRANCISCO, CA
27,150 114,894 142,044 18,547

The Highlands
715 5,409 6,124 3,978 1970 01/17/84

Emerald Bay
1,284 9,327 10,611 4,930 1972 02/06/90

Dominion Peppertree
1,815 9,383 11,198 4,004 1987 12/14/93

Dominion Harris Pond
1,250 7,898 9,148 2,945 1987 07/01/94

Dominion Mallard Creek
709 7,406 8,115 2,464 1989 08/16/94

Chateau Village
1,474 9,277 10,751 3,460 1974 08/15/96

Dominion At Sharon
917 5,769 6,686 1,878 1984 08/15/96

UNITED DOMINION REALTY TRUST

SCHEDULE III — REAL ESTATE OWNED

For the Year Ended December 31, 2003 — (Continued)


									Cost of
			Initial Costs						Improvements
									Capitalized
			Land and		Buildings		Total Initial		Subsequent to
			Land		And		Acquisition		Acquisition (Net
	Encumbrances		Improvements		Improvements		Costs		of Disposals)

Providence Court		—		—		22,048		22,048		10,007
Stoney Pointe		11,917		1,500		15,856		17,356		1,702
Dominion Crown Point		—		2,122		22,339		24,461		2,367
CHARLOTTE, NC		11,917		9,415		100,546		109,961		30,613
Boronda Manor		—		1,946		8,982		10,928		5,934
Garden Court		—		888		4,188		5,076		2,868
Harding Park Townhomes		—		549		2,051		2,600		1,621
Cambridge Court		—		3,039		12,883		15,922		9,346
Laurel Tree		—		1,304		5,115		6,419		3,788
The Pointe at Harden Ranch		—		6,389		23,854		30,243		16,423
The Pointe at Northridge		—		2,044		8,029		10,073		5,987
The Pointe at Westlake		—		1,329		5,334		6,663		3,771
MONTEREY PENINSULA, CA		—		17,488		70,436		87,924		49,738
Dominion Olde West		—		1,965		12,204		14,169		2,916
Dominion Creekwood		—		—		—		—		1,428
Dominion Laurel Springs		—		464		3,120		3,584		1,661
Dominion English Hills		20,044		1,979		11,524		13,503		6,177
Dominion Gayton Crossing		10,400		826		5,148		5,974		6,561
Dominion West End		16,493		2,059		15,049		17,108		3,285
Courthouse Green		8,085		732		4,702		5,434		2,573
Waterside at Ironbridge		11,635		1,844		13,239		15,083		1,048
Carriage Homes at Wyndham		—		474		30,996		31,470		48
RICHMOND, VA		66,657		10,343		95,982		106,325		25,697
Legacy Hill		—		1,148		5,868		7,016		3,236
Hickory Run		—		1,469		11,584		13,053		2,503
Carrington Hills		—		2,117		—		2,117		24,756
Brookridge		—		707		5,461		6,168		1,679
Club at Hickory Hollow		—		2,140		15,231		17,371		2,466
Breckenridge		—		766		7,714		8,480		1,001
Williamsburg		—		1,376		10,931		12,307		1,802
Colonnade		—		1,460		16,015		17,475		780
NASHVILLE, TN		—		11,183		72,804		83,987		38,223
Beechwood		—		1,409		6,087		7,496		1,541
Steeplechase		—		3,208		11,514		14,722		12,844
Northwinds		—		1,558		11,736		13,294		1,374
Deerwood Crossings		—		1,540		7,989		9,529		1,538
Dutch Village		—		1,197		4,826		6,023		980
Lake Brandt		—		1,547		13,490		15,037		986
Park Forest		—		680		5,770		6,450		755
Deep River Pointe		—		1,671		11,140		12,811		543
GREENSBORO, NC		—		12,810		72,552		85,362		20,561
Cape Harbor		—		1,892		18,113		20,005		1,718
Mill Creek		—		1,404		4,489		5,894		13,997
The Creek		—		418		2,506		2,924		1,998
Forest Hills		—		1,028		5,421		6,449		2,768
Clear Run		—		875		8,741		9,616		6,110
Crosswinds		—		1,096		18,230		19,326		1,426

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount at Which

Carried at Close of Period

Land and Buildings Total

Land and Carrying Accumulated

Improvements Improvements Value(A) Depreciation(B) Date of Construction Date Acquired

Providence Court
7,544 24,511 32,055 6,910 1997 09/30/97

Stoney Pointe
1,776 17,282 19,058 4,580 1991 02/28/97

Dominion Crown Point
3,933 22,895 26,828 7,972 1987/2000 07/01/94

CHARLOTTE, NC
21,417 119,157 140,574 43,121

Boronda Manor
3,044 13,818 16,862 1,756 1979 12/07/98

Garden Court
1,392 6,552 7,944 865 1973 12/07/98

Harding Park Townhomes
866 3,355 4,221 407 1984 12/07/98

Cambridge Court
4,783 20,485 25,268 2,745 1974 12/07/98

Laurel Tree
2,006 8,201 10,207 1,098 1977 12/07/98

The Pointe at Harden Ranch
9,455 37,211 46,666 4,680 1986 12/07/98

The Pointe at Northridge
3,160 12,900 16,060 1,641 1979 12/07/98

The Pointe at Westlake
2,032 8,402 10,434 1,089 1975 12/07/98

MONTEREY PENINSULA, CA
26,738 110,924 137,662 14,281

Dominion Olde West
2,395 14,690 17,085 7,692 1978/82/84/85/87 12/31/84&8/27/91

Dominion Creekwood
51 1,377 1,428 401 1984 08/27/91

Dominion Laurel Springs
645 4,600 5,245 2,262 1972 09/06/91

Dominion English Hills
2,865 16,815 19,680 8,570 1969/76 12/06/91

Dominion Gayton Crossing
1,286 11,249 12,535 6,604 1973 09/28/95

Dominion West End
2,741 17,652 20,393 5,910 1989 12/28/95

Courthouse Green
1,103 6,904 8,007 4,223 1974/78 12/31/84

Waterside at Ironbridge
2,036 14,095 16,131 3,294 1987 09/30/97

Carriage Homes at Wyndham
3,640 27,878 31,518 169 1998 11/25/03

RICHMOND, VA
16,762 115,260 132,022 39,125

Legacy Hill
1,457 8,795 10,252 3,596 1977 11/06/95

Hickory Run
1,757 13,799 15,556 4,325 1989 12/29/95

Carrington Hills
3,750 23,123 26,873 5,967 1999 12/06/95

Brookridge
943 6,904 7,847 2,363 1986 03/28/96

Club at Hickory Hollow
2,744 17,093 19,837 4,927 1987 02/21/97

Breckenridge
969 8,512 9,481 2,323 1986 03/27/97

Williamsburg
1,645 12,464 14,109 3,139 1986 05/20/98

Colonnade
1,639 16,616 18,255 3,276 1998 01/07/99

NASHVILLE, TN
14,904 107,306 122,210 29,916

Beechwood
1,679 7,358 9,037 2,925 1985 12/22/93

Steeplechase
3,985 23,581 27,566 6,225 1990/97 03/07/96

Northwinds
1,776 12,892 14,668 3,777 1989/97 08/15/96

Deerwood Crossings
1,716 9,351 11,067 3,057 1973 08/15/96

Dutch Village
1,312 5,691 7,003 1,971 1970 08/15/96

Lake Brandt
1,833 14,190 16,023 4,180 1995 08/15/96

Park Forest
877 6,328 7,205 1,797 1987 09/26/96

Deep River Pointe
1,821 11,533 13,354 2,807 1997 10/01/97

GREENSBORO, NC
14,999 90,924 105,923 26,739

Cape Harbor
2,289 19,434 21,723 5,478 1996 08/15/96

Mill Creek
1,951 17,940 19,891 5,639 1986/98 09/30/91

The Creek
508 4,414 4,922 2,449 1973 06/30/92

Forest Hills
1,209 8,008 9,217 3,707 1964/69 06/30/92

Clear Run
1,293 14,433 15,726 4,940 1987/89 07/22/94

Crosswinds
1,240 19,512 20,752 5,153 1990 02/28/97

UNITED DOMINION REALTY TRUST

SCHEDULE III — REAL ESTATE OWNED

For the Year Ended December 31, 2003 — (Continued)


									Cost of
			Initial Costs						Improvements
									Capitalized
			Land and		Buildings		Total Initial		Subsequent to
			Land		And		Acquisition		Acquisition (Net
	Encumbrances		Improvements		Improvements		Costs		of Disposals)

WILMINGTON , NC		—		6,713		57,500		64,213		28,018
Gatewater Landing		—		2,078		6,085		8,163		1,973
Dominion Kings Place		4,215		1,565		7,007		8,572		1,156
Dominion at Eden Brook		7,205		2,361		9,384		11,745		1,716
Dominion Great Oaks		11,446		2,920		9,100		12,020		4,148
Dominion Constant Friendship		—		903		4,669		5,572		996
Lakeside Mill		4,886		2,666		10,109		12,775		785
Tamar Meadow		—		4,145		17,149		21,294		536
BALTIMORE, MD		27,752		16,638		63,503		80,141		11,310
Stanford Village		—		885		2,808		3,693		1,546
Griffin Crossing		—		1,510		7,544		9,054		1,936
Gwinnett Square		8,851		1,924		7,376		9,300		2,238
Dunwoody Pointe		9,870		2,763		6,903		9,666		5,019
Riverwood		11,725		2,986		11,088		14,074		4,391
Waterford Place		—		1,579		10,303		11,882		638
ATLANTA, GA		30,446		11,647		46,022		57,669		15,768
Gable Hill		—		825		5,307		6,132		1,731
St. Andrews Commons		—		1,429		9,371		10,800		2,065
Forestbrook		5,000		396		2,902		3,298		1,982
Waterford		—		958		6,948		7,906		1,849
Hampton Greene		—		1,363		10,118		11,481		1,773
Rivergate		—		1,122		12,056		13,178		1,552
COLUMBIA, SC		5,000		6,093		46,702		52,795		10,952
Greentree		12,455		1,634		11,227		12,861		4,590
Westland		10,747		1,835		14,865		16,700		4,341
Antlers		—		4,034		11,193		15,227		6,274
JACKSONVILLE, FL		23,202		7,503		37,285		44,788		15,205
Forest Lake at Oyster Point		—		780		8,862		9,642		2,260
Woodscape		—		799		7,209		8,008		2,750
Eastwind		—		155		5,317		5,472		1,566
Dominion Waterside at Lynnhaven		—		1,824		4,107		5,931		1,508
Heather Lake		—		617		3,400		4,017		3,848
Dominion Yorkshire Downs		7,359		1,089		8,582		9,671		1,014
NORFOLK, VA		7,359		5,264		37,477		42,741		12,946
2900 Place		—		1,819		5,593		7,412		568
Brandywine Creek		14,140		4,666		17,514		22,180		(1,084	)
Lakewood		4,130		1,113		3,878		4,991		815
Nemoke Trail		13,300		3,431		12,223		15,654		1,242
LANSING, MI		31,570		11,029		39,208		50,237		1,541
Arbor Terrace		9,800		1,453		11,995		13,448		722
Crowne Pointe		8,330		2,486		6,437		8,923		1,334
Hilltop		7,700		2,174		7,408		9,582		618
SEATTLE, WA		25,830		6,113		25,840		31,953		2,674
Greensview		—		6,450		24,405		30,855		2,414
Mountain View		—		6,402		21,569		27,971		2,526
The Reflections		—		6,305		27,202		33,507		1,196
Foothills Tennis Village		15,820		3,618		14,542		18,160		1,129
Woodlake Village		30,900		6,772		26,967		33,739		2,247

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount at Which

Carried at Close of Period

Land and Buildings Total

Land and Carrying Accumulated

Improvements Improvements Value(A) Depreciation(B) Date of Construction Date Acquired

WILMINGTON , NC
8,490 83,741 92,231 27,366

Gatewater Landing
2,225 7,911 10,136 3,397 1970 12/16/92

Dominion Kings Place
1,653 8,075 9,728 3,184 1983 12/29/92

Dominion at Eden Brook
2,476 10,985 13,461 4,350 1984 12/29/92

Dominion Great Oaks
4,287 11,881 16,168 5,191 1974 07/01/94

Dominion Constant Friendship
1,067 5,501 6,568 1,900 1990 05/04/95

Lakeside Mill
2,702 10,858 13,560 3,247 1989 12/10/99

Tamar Meadow
4,172 17,658 21,830 1,158 1990 11/22/02

BALTIMORE, MD
18,582 72,869 91,451 22,427

Stanford Village
1,197 4,042 5,239 2,463 1985 09/26/89

Griffin Crossing
1,878 9,112 10,990 3,646 1987/89 06/08/94

Gwinnett Square
2,211 9,327 11,538 3,278 1985 03/29/95

Dunwoody Pointe
3,353 11,332 14,685 4,996 1980 10/24/95

Riverwood
3,507 14,958 18,465 5,746 1980 06/26/96

Waterford Place
1,672 10,848 12,520 2,335 1985 04/15/98

ATLANTA, GA
13,818 59,619 73,437 22,464

Gable Hill
1,197 6,666 7,863 3,426 1985 12/04/89

St. Andrews Commons
1,908 10,957 12,865 4,744 1986 05/20/93

Forestbrook
568 4,712 5,280 2,723 1974 07/01/93

Waterford
1,315 8,440 9,755 3,278 1985 07/01/94

Hampton Greene
1,920 11,334 13,254 4,167 1990 08/19/94

Rivergate
1,472 13,258 14,730 3,817 1989 08/15/96

COLUMBIA, SC
8,380 55,367 63,747 22,155

Greentree
2,377 15,074 17,451 6,071 1986 07/22/94

Westland
2,700 18,341 21,041 6,620 1990 05/09/96

Antlers
4,919 16,582 21,501 6,425 1985 05/28/96

JACKSONVILLE, FL
9,996 49,997 59,993 19,116

Forest Lake at Oyster Point
1,198 10,704 11,902 3,957 1986 08/15/95

Woodscape
1,810 8,948 10,758 5,357 1974/76 12/29/87

Eastwind
408 6,630 7,038 3,404 1970 04/04/88

Dominion Waterside at Lynnhaven
2,039 5,400 7,439 2,021 1966 08/15/96

Heather Lake
1,027 6,838 7,865 5,256 1972/74 03/01/80

Dominion Yorkshire Downs
1,303 9,382 10,685 2,259 1987 12/23/97

NORFOLK, VA
7,785 47,902 55,687 22,254

2900 Place
1,844 6,136 7,980 1,175 1966 12/07/98

Brandywine Creek
4,799 16,297 21,096 3,337 1974 12/07/98

Lakewood
1,236 4,570 5,806 976 1974 12/07/98

Nemoke Trail
3,520 13,376 16,896 2,646 1978 12/07/98

LANSING, MI
11,399 40,379 51,778 8,134

Arbor Terrace
1,507 12,663 14,170 2,967 1996 03/27/98

Crowne Pointe
2,532 7,725 10,257 1,706 1987 12/07/98

Hilltop
2,330 7,870 10,200 1,563 1985 12/07/98

SEATTLE, WA
6,369 28,258 34,627 6,236

Greensview
6,048 27,221 33,269 4,998 1987/2002 12/07/98

Mountain View
6,380 24,117 30,497 4,889 1973 12/07/98

The Reflections
6,424 28,279 34,703 2,949 1981/1996 04/30/02

Foothills Tennis Village
3,734 15,555 19,289 2,848 1988 12/07/98

Woodlake Village
7,020 28,966 35,986 5,715 1979 12/07/98

UNITED DOMINION REALTY TRUST

SCHEDULE III — REAL ESTATE OWNED

For the Year Ended December 31, 2003 — (Continued)


									Cost of
			Initial Costs						Improvements
									Capitalized
			Land and		Buildings		Total Initial		Subsequent to
			Land		And		Acquisition		Acquisition (Net
	Encumbrances		Improvements		Improvements		Costs		of Disposals)

OTHER WESTERN		46,720		29,547		114,685		144,232		9,512
Lancaster Commons		7,910		2,485		7,451		9,936		516
Tualatin Heights		10,090		3,273		9,134		12,407		851
University Park		—		3,007		8,191		11,198		547
Evergreen Park Apartments		5,074		3,878		9,973		13,851		1,105
Aspen Creek		6,654		1,178		9,116		10,294		382
Beaumont		10,640		2,339		12,559		14,898		607
Stonehaven		8,537		6,471		29,536		36,007		803
Campus Commons		—		1,144		12,873		14,017		(1,963	)
OTHER PACIFIC		48,905		23,775		98,833		122,608		2,848
Inn at Los Patios		—		3,005		11,545		14,550		(1,491	)
Pecan Grove		—		1,407		5,293		6,700		674
Anderson Mill		9,765		3,134		11,170		14,304		3,861
Red Stone Ranch		—		1,897		17,526		19,423		305
Barton Creek Landing		—		3,151		14,269		17,420		851
Turtle Creek		—		1,913		7,087		9,000		1,138
Shadow Lake		—		2,524		8,976		11,500		1,667
OTHER SOUTHWESTERN		9,765		17,031		75,866		92,897		7,005
Mallards of Wedgewood		—		959		6,865		7,824		2,140
Brantley Pines		—		1,893		8,248		10,141		5,202
Ashlar		—		3,952		11,718		15,670		16,966
The Groves		—		790		4,767		5,557		1,975
Lakeside		—		2,404		6,420		8,824		1,470
Mallards of Brandywine		—		766		5,408		6,174		1,533
LakePointe		—		1,435		4,940		6,375		2,600
OTHER FLORIDA		—		12,199		48,366		60,565		31,886
Colony Village		—		347		3,037		3,384		2,230
Brynn Marr		—		433		3,821		4,254		2,823
Liberty Crossing		—		840		3,873		4,713		3,285
Bramblewood		—		402		3,151		3,553		1,843
Cumberland Trace		—		632		7,896		8,528		1,242
Village At Cliffdale		11,550		941		15,498		16,439		1,586
Morganton Place		—		819		13,217		14,036		765
Woodberry		—		389		6,381		6,770		1,563
OTHER NORTH CAROLINA		11,550		4,803		56,874		61,677		15,337
Jamestown of St. Matthews		11,970		3,866		14,422		18,288		1,478
Patriot Place		—		213		1,601		1,814		5,888
River Place		6,142		1,097		7,492		8,589		2,681
The Trails at Mount Moriah		16,650		5,931		22,095		28,026		4,162
OTHER SOUTHEASTERN		34,762		11,107		45,610		56,717		14,209
Washington Park		—		2,011		7,565		9,576		1,187
Fountainhead		—		391		1,420		1,811		268
Jamestown of Toledo		5,110		1,800		7,054		8,854		1,425
Sunset Village		—		797		1,829		2,626		504
American Heritage		3,640		1,021		3,958		4,979		449
Ashton Pines		—		1,822		8,014		9,836		678
Kings Gate		4,620		1,181		4,829		6,010		555
Lancaster Lake		12,950		4,238		14,663		18,901		1,253

[Additional columns below]

[Continued from above table, first column(s) repeated]

Gross Amount at Which

Carried at Close of Period

Land and Buildings Total

Land and Carrying Accumulated

Improvements Improvements Value(A) Depreciation(B) Date of Construction Date Acquired

OTHER WESTERN
29,606 124,138 153,744 21,399

Lancaster Commons
2,509 7,943 10,452 1,740 1992 12/07/98

Tualatin Heights
3,377 9,881 13,258 2,162 1989 12/07/98

University Park
3,021 8,724 11,745 1,672 1987 03/27/98

Evergreen Park Apartments
3,923 11,033 14,956 2,452 1988 03/27/98

Aspen Creek
1,272 9,404 10,676 1,755 1996 12/07/98

Beaumont
2,393 13,112 15,505 3,601 1996 06/14/00

Stonehaven
6,481 30,329 36,810 3,015 1989/1990 05/28/02

Campus Commons
1,264 10,790 12,054 2,898 1972 03/27/98

OTHER PACIFIC
24,240 101,216 125,456 19,295

Inn at Los Patios
3,005 10,054 13,059 1,806 1990 08/15/98

Pecan Grove
1,481 5,893 7,374 1,507 1984 12/31/96

Anderson Mill
3,515 14,650 18,165 5,193 1984 03/27/97

Red Stone Ranch
5,390 14,338 19,728 3,257 2000 06/14/00

Barton Creek Landing
3,155 15,116 18,271 1,660 1986 03/28/02

Turtle Creek
2,216 7,922 10,138 2,374 1985 12/31/96

Shadow Lake
2,851 10,316 13,167 3,191 1984 12/31/96

OTHER SOUTHWESTERN
21,613 78,289 99,902 18,988

Mallards of Wedgewood
1,263 8,701 9,964 3,183 1985 07/27/95

Brantley Pines
858 14,485 15,343 6,891 1986 08/11/94

Ashlar
7,965 24,671 32,636 5,908 1999/2000 12/24/97

The Groves
1,461 6,071 7,532 2,512 1989 12/13/95

Lakeside
2,588 7,706 10,294 2,285 1985 07/01/97

Mallards of Brandywine
989 6,718 7,707 2,038 1985 07/01/97

LakePointe
1,792 7,183 8,975 3,491 1984 09/24/93

OTHER FLORIDA
16,916 75,535 92,451 26,308

Colony Village
580 5,034 5,614 3,477 1972/74 12/31/84

Brynn Marr
731 6,346 7,077 4,295 1973/77 12/31/84

Liberty Crossing
1,492 6,506 7,998 4,346 1972/74 11/30/90

Bramblewood
588 4,808 5,396 3,194 1980/82 12/31/84

Cumberland Trace
725 9,045 9,770 2,627 1973 08/15/96

Village At Cliffdale
1,197 16,828 18,025 4,625 1992 08/15/96

Morganton Place
894 13,907 14,801 3,586 1994 08/15/96

Woodberry
1,009 7,324 8,333 2,392 1987 08/15/96

OTHER NORTH CAROLINA
7,216 69,798 77,014 28,542

Jamestown of St. Matthews
3,975 15,791 19,766 3,167 1968 12/07/98

Patriot Place
1,516 6,186 7,702 4,289 1974 10/23/85

River Place
1,806 9,464 11,270 4,020 1988 04/08/94

The Trails at Mount Moriah
6,519 25,669 32,188 6,037 1990 01/09/98

OTHER SOUTHEASTERN
13,816 57,110 70,926 17,513

Washington Park
2,150 8,613 10,763 1,866 1998 12/07/98

Fountainhead
406 1,673 2,079 405 1966 12/07/98

Jamestown of Toledo
1,949 8,330 10,279 1,714 1965 12/07/98

Sunset Village
890 2,240 3,130 679 1940 12/07/98

American Heritage
1,047 4,381 5,428 878 1968 12/07/98

Ashton Pines
1,849 8,665 10,514 1,615 1987 12/07/98

Kings Gate
1,253 5,312 6,565 1,021 1973 12/07/98

Lancaster Lake
4,364 15,790 20,154 3,029 1988 12/07/98

UNITED DOMINION REALTY TRUST

SCHEDULE III — REAL ESTATE OWNED

For the Year Ended December 31, 2003 — (Continued)


									Cost of
			Initial Costs						Improvements
									Capitalized
			Land and		Buildings		Total Initial		Subsequent to
			Land		And		Acquisition		Acquisition (Net
	Encumbrances		Improvements		Improvements		Costs		of Disposals)

OTHER MIDWESTERN		26,320		13,261		49,332		62,593		6,319
Greens at Hollymead		—		965		5,250		6,215		909
Brittingham Square		—		650		4,962		5,612		907
Greens at Schumaker Pond		—		710		6,118		6,828		1,064
Greens at Cross Court		—		1,182		4,544		5,726		1,230
Greens at Hilton Run		12,542		2,755		10,483		13,238		1,954
OTHER MID- ATLANTIC		12,542		6,262		31,357		37,619		6,064
Dover Country		—		2,008		6,365		8,373		2,836
Greens at Cedar Chase		5,167		1,528		4,831		6,359		833
OTHER NORTHEASTERN		5,167		3,536		11,196		14,732		3,669

TOTAL APARTMENTS	$	1,014,144	$	660,980	$	2,928,858	$	3,589,838	$	705,009

REAL ESTATE HELD FOR DISPOSITION
Apartments
Pine Grove	$	—	$	1,383	$	5,784	$	7,167	$	4,736
Land		—		—		—
Fossil Creek		—		3,821		—		3,821		2

	$	—	$	5,204	$	5,784	$	10,988	$	4,738

REAL ESTATE UNDER DEVELOPMENT
Apartments
Rancho Cucamonga	$	—	$	13,557	$	2,661	$	16,218	$	—
2000 Post III		—		1,756		742		2,498		—
Mandalay on the Lake		—		3,876		—		3,876		—

Total Apartments		—		19,189		3,403		22,592		—
Land
Copper Mill II		—		835		—		835		—
Parkers Landing Phase II		—		1,141		—		1,141		—
Wimbledon Court II		—		660		—		660		—
Coit Road		—		2,879		—		2,879		—
Coit Road II		—		2,048		—		2,048		—
Mountain View Phase II		—		220		—		220		—

Total Land		—		7,783		—		7,783		—

	$	—	$	26,972	$	3,403	$	30,375	$	—

COMMERCIAL HELD FOR INVESTMENT
Hanover Village	$	—	$	1,624	$	—	$	1,624	$	—
The Calvert		—		34		1,597		1,631		—

Total Commercial		—		1,658		1,597		3,255		—
Richmond — Corporate		3,884		245		6,352		6,597		751

	$	3,884	$	1,903	$	7,949	$	9,852	$	751

TOTAL REAL ESTATE OWNED	$	1,018,028	$	695,059	$	2,945,994	$	3,641,053	$	710,498

[Additional columns below]

UNITED DOMINION REALTY TRUST

SCHEDULE III — REAL ESTATE OWNED

For the Year Ended December 31, 2003 — (Continued)


(A)		The aggregate cost for federal income tax purposes was approximately $3.6 billion at December 31, 2003.

(B)		The depreciable life for buildings is 35 years.

EXHIBIT INDEX

The exhibits listed below are filed as part of this Report. References under the caption “Location” to exhibits, forms, or other filings indicate that the form or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. The Commission file number for our Exchange Act filings referenced below is 1-10524.


Exhibit			Description	Location

	2	.01	Agreement and Plan of Merger dated as of December 19, 1997, between the Company, ASR Investment Corporation and ASR Acquisition Sub, Inc.	Exhibit 2(a) to the Company’s Form S-4 Registration Statement (Registration No. 333-45305) filed with the Commission on January 30, 1998.
	2	.02	Agreement of Plan of Merger dated as of September 10, 1998, between the Company and American Apartment Communities II, Inc. including as exhibits thereto the proposed terms of the Series D Preferred Stock and the proposed form of Investment Agreement between the Company, United Dominion Realty, L.P., American Apartment Communities II, Inc., American Apartment Communities Operating Partnership, L.P., Schnitzer Investment Corp., AAC Management LLC and LF Strategic Realty Investors, L.P.	Exhibit 2(c) to the Company’s Form S-3 Registration Statement (Registration No. 333-64281) filed with the Commission on September 25, 1998.
	2	.03	Partnership Interest Purchase and Exchange Agreement dated as of September 10, 1998, between the Company, United Dominion Realty, L.P., American Apartment Communities Operating Partnership, L.P., AAC Management LLC, Schnitzer Investment Corp., Fox Point Ltd. and James D. Klingbeil including as an exhibit thereto the proposed form of the Third Amended and Restated Limited Partnership Agreement of United Dominion Realty, L.P.	Exhibit 2(d) to the Company’s Form S-3 Registration Statement (Registration No. 333-64281) filed with the Commission on September 25, 1998.
	2	.04	Articles of Merger between the Company and United Dominion Realty Trust, Inc., a Virginia corporation, filed with the State Department of Assessments and Taxation of the State of Maryland.	Exhibit 2.01 to the Company’s Current Report on Form 8-K dated and filed June 11, 2003.
	2	.05	Articles of Merger between the Company and United Dominion Realty Trust, Inc., a Virginia corporation, filed with the State Corporation Commission of the Commonwealth of Virginia.	Exhibit 2.02 to the Company’s Current Report on Form 8-K dated and filed June 11, 2003.
	3	.01	Amended and Restated Articles of Incorporation.	Exhibit A to Exhibit 2.01 to the Company’s Current Report on Form 8-K dated and filed June 11, 2003.
	3	.02	Amended and Restated Bylaws (as amended through February 13, 2004).	Filed herewith.
	4	.01	Specimen Common Stock Certificate.	Exhibit 4(i) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1993.


Exhibit			Description	Location

	4	.02	Form of Certificate for Shares of 8.60% Series B Cumulative Redeemable Preferred Stock.	Exhibit I(e) to the Company’s Form 8-A Registration Statement dated June 11, 1997.
	4	.03	First Amended and Restated Rights Agreement dated as of September 14, 1999, between the Company and ChaseMellon Shareholders Services, L.L.C., as Rights Agent, including Form of Rights Certificate.	Exhibit 4(i)(d)(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
	4	.04	Note Purchase Agreement dated as of February 15, 1993, between the Company and CIGNA Property and Casualty Insurance Company, Connecticut General Life Insurance Company, on behalf of one or more separate accounts, Insurance Company of North America, Principal Mutual Life Insurance Company and Aid Association for Lutherans.	Exhibit 6(c)(5) to the Company’s Form 8-A Registration Statement dated April 19, 1990.
	4	.05	Senior Indenture dated as of November 1, 1995.	Exhibit 4(ii)(h)(1) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
	4	.06	Subordinated Indenture dated as of August 1, 1994.	Exhibit 4(i)(m)to the Company’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995.
	4	.07	Form of Senior Debt Security.	Exhibit 4(i)(n) to the Company’s Form S-3 Registration Statement (Registration No. 33-64725) filed with the Commission on November 15, 1995.
	4	.08	Form of Subordinated Debt Security.	Exhibit 4(i)(o) to the Company’s Form S-3 Registration Statement (Registration No. 33-55159) filed with the Commission on August 19, 1994.
	4	.09	6.50% Notes due 2009.	Exhibit 4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
	4	.10	Form of Fixed Rate Medium-Term Note.	Exhibit 4.01 to the Company’s Current Report on Form 8-K dated February 24, 2003 and filed on February 25, 2003.
	4	.11	Form of Floating Rate Medium-Term Note.	Exhibit 4.02 to the Company’s Current Report on Form 8-K dated February 24, 2003 and filed on February 25, 2003.
	4	.12	4.50% Medium-Term Note due March 2008.	Exhibit 4.13 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.
	4	.13	4.50% Medium-Term Note due March 2008.	Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	4	.14	5.13% Medium-Term Note due January 2014.	Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	4	.15	4.25% Medium-Term Note due January 2009.	Filed herewith.


Exhibit			Description	Location

	4	.16	Registration Rights Agreement dated June 12, 2003 between the Company and the holders of the Series E Cumulative Convertible Preferred Stock.	Exhibit 4.5 to the Company’s Form S-3 Registration Statement (Registration No. 333-106959) filed with the Commission on October 20, 2003.
	10	.01	1985 Stock Option Plan, as amended.	Exhibit 10(iv) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
	10	.02	1991 Stock Purchase and Loan Plan.	Exhibit 10(viii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
	10	.03	Third Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of December 7, 1998.	Exhibit 10(vi) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998.
	10	.04	Subordination Agreement dated April 16, 1998, between the Company and United Dominion Realty, L.P.	Exhibit 10(vi)(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
	10	.05	First Amendment to Third Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P.	Exhibit 10(vii)(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
	10	.06	Servicing and Purchase Agreement dated as of June 24, 1999, including as an exhibit thereto the Note and Participation Agreement forms.	Exhibit 10(vii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
	10	.07	Description of Restricted Stock Awards Program.	Exhibit 10(ix) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.
	10	.08	Description of United Dominion Realty Trust, Inc. Shareholder Value Plan.	Exhibit 10(x) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.
	10	.09	Description of United Dominion Realty Trust, Inc. Executive Deferral Plan.	Exhibit 10(xi) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.
	10	.10	Retirement Agreement and Covenant Not to Compete between the Company and John P. McCann dated March 20, 2001.	Exhibit 10(xv) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
	10	.11	Description of Out-Performance Program.	Exhibit 10(xviii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
	10	.12	Description of Long Term Incentive Compensation Plan.	Exhibit 10(xix) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
	10	.13	Second Amendment to Third Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P.	Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	10	.14	Third Amendment to Third Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P.	Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	10	.15	Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P.	Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	10	.16	First Amendment of Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P.	Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.


Exhibit			Description	Location

	10	.17	Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P.	Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
	10	.18	Credit Agreement dated as of November 14, 2000, between the Company and certain subsidiaries and a syndicate of banks represented by First Union National Bank.	Exhibit 4(ii)(g) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000.
	10	.19	Credit Agreement dated as of August 14, 2001, between the Company and certain subsidiaries and ARCS Commercial Mortgage Company, L.P., as Lender.	Exhibit 4(ii)(g) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
	10	.20	Credit Agreement dated as of December 12, 2001, between the Company and certain subsidiaries and ARCS Commercial Mortgage Company, L.P., as Lender.	Exhibit 4(ii)(h) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.
	10	.21	Credit Agreement dated March 14, 2003 between the Company, Wachovia Securities, Inc. and J.P. Morgan Securities, Inc., as Joint Lead Arrangers/ Joint Bookrunners, JPMorgan Chase Bank and Bank One, NA, as Syndication Agents, Wells Fargo Bank, National Association and KeyBank National Association, as Documentation Agents, SunTrust Bank, Citicorp North America, Inc. and SouthTrust Bank, as Co-Agents, and each of the financial institutions initially a signatory thereto together with their assignees.	Exhibit 99.1 to the Company’s Current Report on Form 8-K dated March 14, 2003 and filed on April 3, 2003.
	10	.22	Description of Series B Out-Performance Program.	Filed herewith.
	10	.23	Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of February 23, 2004.	Filed herewith.
	12		Computation of Ratio of Earnings to Fixed Charges.	Filed herewith.
	21		Subsidiaries.	Filed herewith.
	23		Consent of Independent Auditors.	Filed herewith.
	31	.1	Rule 13a-14(a) Certification of the Chief Executive Officer.	Filed herewith.
	31	.2	Rule 13a-14(a) Certification of the Chief Financial Officer.	Filed herewith.
	32	.1	Section 1350 Certification of the Chief Executive Officer.	Filed herewith.
	32	.2	Section 1350 Certification of the Chief Financial Officer.	Filed herewith.


	•	We provided a total stockholder return of 25%.

	•	We increased our dividend for the 27th consecutive year.

	•	We lowered the weighted average interest rate on our debt from 5.9% at December 31, 2002 to 5.2% at December 31, 2003.

	•	We increased the size of our unencumbered pool of assets to $2.8 billion, valued on a historical cost basis.

	•	We completed over $1 billion of capital transactions in 2003, all of which improved our balance sheet strength and flexibility.

	•	We were upgraded by Standard & Poor’s Rating Services to a BBB rating with a Stable outlook, and by Moody’s Investors Service to a Positive outlook on an existing Baa3 rating.

	•	We acquired 5,220 apartment homes in 21 communities for approximately $423.7 million.

	•	We completed the disposition of seven apartment communities with 1,927 apartment homes for an aggregate sales price of approximately $88.9 million, exiting markets that no longer met our investment criteria. In addition, we sold two commercial properties for an aggregate consideration of $7.3 million.


	•	own and operate middle-market apartments across a national platform, thus enhancing stability and predictability of returns to our stockholders,

	•	manage real estate cycles by taking an opportunistic approach to buying, selling and building apartment communities,

	•	empower site associates to manage our communities efficiently and effectively,

	•	measure and reward associates based on specific performance targets, and

	•	manage our capital structure to ensure predictability of earnings and dividends.


	•	population growth, cost of alternative housing, overall potential for economic growth and the tax and regulatory environment of the community in which the property is located,

	•	geographic location and type of community, including proximity to our existing communities which can deliver significant economies of scale,

	•	construction quality, condition and design of the community,

	•	current and projected cash flow of the property and the ability to increase cash flow,

	•	potential for capital appreciation of the property,

	•	ability to increase the value and profitability of the property through upgrades and repositioning,

	•	terms of resident leases, including the potential for rent increases,

	•	occupancy and demand by residents for properties of a similar type in the vicinity,

	•	prospects for liquidity through sale, financing, or refinancing of the property, and

	•	competition from existing multifamily communities and the potential for the construction of new multifamily properties in the area.


	•	current market price for an asset compared to projected economics for that asset,

	•	potential increases in new construction in the market area,

	•	areas where the economy is not expected to grow substantially, and

	•	markets where we do not intend to establish long-term concentration.


	•	Repaid $40.0 million of secured debt and $214.6 million of unsecured debt.

	•	Sold 2.0 million shares of common stock at a public offering price of $15.71 per share under our $1 billion shelf registration statement in January 2003. The net proceeds of $31.2 million were used to repay debt and for general corporate purposes.

	•	Sold $150 million aggregate principal amount of 4.50% medium-term notes due March 2008 in February 2003 under our medium-term note program. The net proceeds of $149.3 million were used to repay debt.

	•	Negotiated a new $500 million unsecured revolving credit facility to replace our $375 million unsecured revolver and $100 million unsecured term loan in March 2003. The credit facility’s interest rate is 25 and 30 basis points lower than the previous unsecured revolver and term loan, respectively.

	•	Sold 3.0 million shares of common stock at a public offering price of $16.97 per share under our $1 billion shelf registration statement in April 2003. The net proceeds of $49.2 million were ultimately used to acquire additional apartment communities. We sold an additional 100,000 shares of common stock at a public offering price of $16.97 per share in connection with the exercise of the underwriter’s over-allotment option in May 2003. The net proceeds of $1.6 million were used for general corporate purposes.

	•	Exercised our right to redeem 2.0 million shares of our Series D Cumulative Convertible Redeemable Preferred Stock in May 2003. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 3,076,923 shares of common stock at a price of $16.25 per share.

	•	Issued $56.9 million of our Series E Cumulative Convertible Preferred Stock (“Series E”) and 1,617,815 Preferred OP Units totaling $26.9 million in June 2003 as partial consideration for the purchase of four apartment communities in Southern California. Each share of Series E and each OP Unit was priced at $16.61 per share and dividends on the Series E and OP Units carry a fixed coupon of 8.0% until such time as the common share dividend is equal to or exceeds this amount for four consecutive quarters, at which time the Series E and OP Units will be entitled to receive dividends equivalent to the dividends paid to holders of our common stock.

	•	Sold $50 million aggregate principal amount of 4.50% medium-term notes due March 2008 in August 2003 under our medium-term note program. The net proceeds of approximately $49.9 million were used to repay amounts outstanding on our $500 million unsecured revolving credit facility.


	•	Sold 4.0 million shares of common stock at a public offering price of $18.40 per share under our $1 billion shelf registration statement in September 2003. The net proceeds of approximately $72.3 million were used for general corporate purposes, including funding acquisitions and development, with the balance used to reduce outstanding variable rate debt under our unsecured credit facilities. We sold an additional 600,000 shares of common stock at a public offering price of $18.40 per share in connection with the exercise of the underwriter’s over-allotment option in October 2003. The net proceeds of $10.8 million were used for general corporate purposes, including funding acquisitions and development, with the remaining balance used to reduce outstanding variable rate debt under our unsecured credit facilities.

	•	Sold $75 million aggregate principal amount of 5.13% senior unsecured notes due January 2014 in October 2003 under our medium-term note program. The net proceeds of $74.5 million were used to repay amounts outstanding on our $500 million unsecured revolving credit facility.

	•	Sold $50 million aggregate principal amount of 4.25% senior unsecured notes due January 2009 in November 2003 under our medium-term note program. The net proceeds of $49.8 million were used to fund acquisitions of apartment communities.

	•	Exercised our right to redeem 4.0 million shares of our Series D Cumulative Convertible Redeemable Preferred Stock in December 2003. Upon receipt of our redemption notice, the shares to be redeemed were converted by the holder into 6,154,000 shares of common stock at a price of $16.25 per share.


	•	a fully integrated organization with property management, development, acquisition, marketing and financing expertise,

	•	scalable operating and support systems,

	•	purchasing power,

	•	geographic diversification with a presence in 55 markets across the country, and

	•	significant presence in many of our major markets that allows us to be a local operating expert.


	•	a reduction in jobs and other local economic downturns,

	•	declines in mortgage interest rates, making alternative housing more affordable,

	•	government or builder incentives which enable first time homebuyers to put little or no money down, making alternative housing decisions easier to make,

	•	oversupply of, or reduced demand for, apartment homes,

	•	declines in household formation, and

	•	rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs.


	•	an acquired community may fail to perform as we expected in analyzing our investment, or a significant exposure related to the acquired property may go undetected during our due diligence procedures,

	•	when we acquire an apartment community, we often invest additional amounts in it with the intention of increasing profitability. These additional investments may not produce the anticipated improvements in profitability, and

	•	new developments may not achieve pro forma rents or occupancy levels, or problems with construction or local building codes may delay initial occupancy dates for all or a portion of a development community.


	•	the national and local economies,

	•	local real estate market conditions, such as an oversupply of apartment homes,

	•	tenants’ perceptions of the safety, convenience and attractiveness of our communities and the neighborhoods where they are located,

	•	our ability to provide adequate management, maintenance and insurance, and

	•	rental expenses, including real estate taxes and utilities.


	•	we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in increased development costs and could require us to abandon our activities entirely with respect to a project for which we are unable to obtain permits or authorizations,

	•	if we are unable to find joint venture partners to help fund the development of a community or otherwise obtain acceptable financing for the developments, our development capacity may be limited,

	•	we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring such opportunities,

	•	we may be unable to complete construction and lease-up of a community on schedule, or incur development or construction costs that exceed our original estimates, and we may be unable to charge rents that would compensate for any increase in such costs, and

	•	occupancy rates and rents at a newly-developed community may fluctuate, depending on a number of factors, including market and economic conditions, preventing us from meeting our profitability goals for that community.


	•	inability to accurately evaluate local apartment market conditions and local economies,

	•	inability to obtain land for development or to identify appropriate acquisition opportunities,

	•	inability to hire and retain key personnel, and

	•	lack of familiarity with local governmental and permitting procedures.


														Average
											Annualized			Home Size
		Cost		Physical			Average Monthly		Concessions		Resident			(Square
		Per Home		Occupancy			Rental Rates(a)		(b)		Turnover(c)			Feet)

Southern California		$	105,009		95.1	%	$	1,041		1.5%		45.2	%		819
Dallas, TX			52,331		95.1	%		660		2.3%		60.5	%		827
Houston, TX			43,014		90.2	%		635		2.3%		57.5	%		820
Metropolitan DC			83,722		95.9	%		986		1.2%		42.1	%		960
Phoenix, AZ			60,104		91.2	%		713		10.5%		73.2	%		924
Orlando, FL			51,251		93.4	%		708		1.6%		71.8	%		937
Raleigh, NC			56,747		93.1	%		696		4.4%		67.4	%		957
Tampa, FL			49,170		93.0	%		710		4.2%		59.2	%		953
Arlington, TX			46,371		94.3	%		655		2.8%		59.9	%		809
Columbus, OH			59,559		93.6	%		677		2.1%		65.4	%		904
Monterey Peninsula, CA			87,773		92.7	%		926		0.9%		54.6	%		727
San Francisco, CA			144,943		95.5	%		1,501		3.6%		54.5	%		776
Charlotte, NC			51,853		94.5	%		602		3.3%		69.9	%		982
Richmond, VA			50,084		94.4	%		712		2.4%		55.8	%		968
Nashville, TN			55,050		92.9	%		657		1.8%		67.5	%		943
Greensboro, NC			49,893		93.5	%		579		1.1%		57.6	%		981
Wilmington, NC			49,374		91.9	%		627		3.2%		74.9	%		952
Baltimore, MD			62,211		95.8	%		898		1.7%		55.1	%		905
Atlanta, GA			51,499		91.0	%		655		2.2%		62.4	%		908
Columbia, SC			40,244		92.9	%		600		2.3%		74.9	%		838
Jacksonville, FL			51,852		95.9	%		679		1.8%		61.7	%		896
Norfolk, VA			38,725		96.2	%		730		0.8%		68.1	%		1,016
Lansing, MI			42,233		93.5	%		653		2.1%		79.1	%		816
Seattle, WA			55,139		93.3	%		737		3.7%		72.3	%		823
Other Western			64,114		90.4	%		804		7.8%		61.9	%		893
Other Pacific			55,145		91.0	%		751		4.5%		66.8	%		915
Other Southwestern			55,656		88.8	%		670		4.6%		70.5	%		863
Other Florida			50,658		94.2	%		736		2.5%		74.4	%		867
Other North Carolina			40,684		94.7	%		577		0.6%		84.7	%		895
Other Southeastern			50,916		90.8	%		578		1.4%		61.6	%		893
Other Midwestern			50,783		93.3	%		667		2.2%		62.1	%		931
Other Mid-Atlantic			47,072		94.9	%		838		1.3%		81.8	%		931
Other Northeastern			49,464		95.4	%		711		0.1%		64.2	%		889
Real Estate Under Development			n/a		n/a			n/a		n/a		n/a			n/a
Land			n/a		n/a			n/a		n/a		n/a			n/a

	Total Apartments(d)	$	56,935		93.2	%	$	717		3.0%		63.5	%		895


(a)	Funds from operations (“FFO”) is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of depreciable property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s definition issued in April 2002. We consider FFO in evaluating property acquisitions and our operating performance and believe that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of our activities in accordance with 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.

(b)	Gains on the disposition of real estate investments developed for sale is defined as net sales proceeds less a tax provision (such development by REITs must be conducted in a taxable REIT subsidiary) and the gross investment basis of the asset before accumulated depreciation. We consider FFO with gains (or losses) on real estate development for sale to be a meaningful supplemental measure of performance because of the short-term use of funds to produce a profit which differs from the traditional long-term investment in real estate for REITs.

(c)	Reclassified to conform to current year presentation as described in Note 3 to the consolidated financial statements.


	•	a charge of $19.3 million in 2003 for a premium on preferred share repurchases,

	•	$16.8 million less in gains recognized from the sale of depreciable property in 2003,

	•	a $15.5 million decrease in property operating income in 2003,

	•	a $4.2 million increase in depreciation and amortization expense in 2003, and

	•	a $1.4 million impairment charge taken in 2003 for the write-off of our investment in Realeum, Inc., an unconsolidated development joint venture.


	•	an $11.4 million decrease in interest expense in 2002,

	•	$8.0 million more in gains recognized from the sale of depreciable property in 2002,

	•	a charge of $5.4 million in 2001 for restructuring,

	•	a $5.4 million charge in 2001 for impairment losses on real estate and investments, and

	•	a $4.7 million increase in property operating income in 2002.


*	Excludes depreciation, amortization, and property management expenses.


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

	•	the failure of acquisitions to achieve anticipated results,

	•	possible difficulty in selling apartment communities,

	•	the timing and closing of planned dispositions under agreement,

	•	competitive factors that may limit our ability to lease apartment homes or increase or maintain rents,

	•	insufficient cash flow that could affect our debt financing and create refinancing risk,

	•	failure to generate sufficient revenue, which could impair our debt service payments and distributions to stockholders,

	•	development and construction risks that may impact our profitability,

	•	delays in completing developments and lease-ups on schedule,

	•	our failure to succeed in new markets,

	•	changing interest rates, which could increase interest costs and affect the market price of our securities,

	•	potential liability for environmental contamination, which could result in substantial costs, and

	•	the imposition of federal taxes if we fail to qualify as a REIT in any taxable year.


	1. Financial Statements. See Index to Consolidated Financial Statements and Schedule on page 44 of this Report.

	2. Financial Statement Schedule. See Index to Consolidated Financial Statements and Schedule on page 44 of this Report. All other schedules are omitted because they are not required, are inapplicable, or the required information is included in the financial statements or notes thereto.

	3. Exhibits. The exhibits filed with this Report are set forth in the Exhibit Index.


	•	Current Report on Form 8-K dated October 27, 2003, furnished to the Securities and Exchange Commission on October 28, 2003, under Item 12. Results of Operations and Financial Condition.

	•	Current Report on Form 8-K dated November 7, 2003, filed with the Securities and Exchange Commission on November 12, 2003, under Item 5. Other Events and Item 7. Financial Statements and Exhibits.


(a)	In connection with one of our acquisitions in 2003, United Dominion received a note receivable for $5 million that is due October 2011. The note bears interest of 9.0% that is payable in annual installments.


(b)	In February 2003, United Dominion issued $150 million of 4.50% senior unsecured medium-term notes due in March 2008. The net proceeds of $149.3 million from the sale were used to repay amounts outstanding on United Dominion’s $375 million unsecured revolving credit facility. In August 2003, United Dominion issued an additional $50 million of 4.50% senior unsecured medium-term notes due in March 2008. The net proceeds were used to repay amounts outstanding on United Dominion’s $500 million unsecured credit facility.

(c)	In November 2003, United Dominion issued $50 million of 4.25% senior unsecured medium-term notes due in January 2009. The net proceeds of $49.8 million from the sale were used to fund acquisitions of apartment communities.

(d)	In October 2003, United Dominion issued $75 million of 5.13% senior unsecured medium-term notes due in January 2014. The net proceeds of $74.5 million from the sale were used to repay amounts outstanding on United Dominion’s $500 million unsecured revolving credit facility.

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


(f)	Includes $1.1 million and $1.5 million at December 31, 2003 and 2002, respectively, of deferred gains from the termination of interest rate risk management agreements.


	Stanley REIT Index, which is the peer group index, or the minimum return (such excess being the “excess return”);

	ii. multiplying 5% of the excess return by United Dominion’s market capitalization (defined as the average number of shares outstanding over the 24-month period, including common stock, OP Units, outstanding options and convertible securities) multiplied by the daily closing price of United Dominion’s common stock, up to a maximum of 2% of market capitalization; and

	iii. dividing the number obtained in (ii) by the market value of one share of United Dominion’s common stock on the valuation date, determined by the weighted average price per day of common stock for the 20 trading days immediately preceding the valuation date.



	Gross Amount at Which
	Carried at Close of Period

	Land and		Buildings		Total
	Land		and		Carrying		Accumulated
	Improvements		Improvements		Value(A)		Depreciation(B)		Date of Construction		Date Acquired

Pine Avenue	$	2,832	$	10,927	$	13,759	$	1,805		1987		12/07/98
The Grand Resort		11,784		50,492		62,276		8,054		1971		12/07/98
Grand Terrace		2,228		7,803		10,031		1,584		1986		06/30/99
Windemere at Sycamore Highland		5,812		23,657		29,469		1,591		2001		11/21/02
Harbor Greens		20,476		28,587		49,063		910		1965		06/12/03
Pine Brook Village		2,582		25,697		28,279		803		1979		06/12/03
Windjammer		7,345		22,645		29,990		712		1971		06/12/03
Huntington Vista		8,055		22,572		30,627		713		1970		06/12/03
Pacific Palms		12,291		6,333		18,624		170		1962		07/31/03
Missions at Back Bay		10,617		3,748		14,365		11		1969		12/16/03
Rancho Vallecitos		3,406		12,327		15,733		3,607		1988		10/13/99
SOUTHERN CALIFORNIA		87,428		214,788		302,216		19,960
Preston Oaks		1,962		7,155		9,117		2,055		1980		12/31/96
Rock Creek		4,670		20,438		25,108		6,371		1979		12/31/96
Windridge		4,095		17,132		21,227		5,241		1980		12/31/96
Catalina		1,693		6,636		8,329		1,875		1982		12/31/96
Wimbledon Court		2,861		12,475		15,336		3,383		1983		12/31/96
Lakeridge		1,856		6,833		8,689		2,127		1984		12/31/96
Summergate		1,421		4,600		6,021		1,469		1984		12/31/96
Oak Forest		6,418		33,583		40,001		10,123		1996/98		12/31/96
Oaks Of Lewisville		4,566		16,892		21,458		5,567		1983		03/27/97
Kelly Crossing		2,998		10,690		13,688		3,037		1984		06/18/97
Highlands Of Preston		2,494		9,750		12,244		2,630		1985		03/27/98
The Summit		2,346		10,558		12,904		2,646		1983		03/27/98
Springfield		3,284		8,020		11,304		2,152		1985		03/27/98
Meridian		6,397		29,763		36,160		4,073		2000/2002		1/27/98 & 12/28/01
Mandolin I		6,327		30,015		36,342		3,054		2001		12/28/01
DALLAS, TX		53,388		224,540		277,928		55,803
Woodtrail		1,756		7,964		9,720		3,009		1978		12/31/96
Park Trails		1,281		5,260		6,541		1,620		1983		12/31/96
Green Oaks		5,983		22,582		28,565		6,285		1985		06/25/97
Sky Hawk		2,733		8,868		11,601		3,003		1984		05/08/97
South Grand at Pecan Grove		4,914		19,352		24,266		5,614		1985		09/26/97
Breakers		1,923		7,429		9,352		2,406		1985		09/26/97
Braesridge		3,522		13,149		16,671		3,715		1982		09/26/97
Skylar Pointe		3,750		15,994		19,744		4,986		1979		11/20/97
Stone Canyon		1,327		9,041		10,368		1,934		1998		12/17/97
Briar Park		366		3,051		3,417		658		1987		03/27/98
Chelsea Park		2,446		7,615		10,061		2,172		1983		03/27/98
Clear Lake Falls		1,173		4,578		5,751		1,049		1980		03/27/98
Country Club Place		677		7,732		8,409		1,918		1985		03/27/98
Arbor Ridge		2,098		7,095		9,193		2,010		1983		03/27/98
London Park		2,510		8,407		10,917		2,461		1983		03/27/98
Marymont		1,181		5,068		6,249		1,150		1983		03/27/98
Nantucket Square		1,082		4,490		5,572		936		1983		03/27/98
Riverway		568		3,131		3,699		810		1985		03/27/98
Riviera Pines		1,486		7,652		9,138		1,538		1979		03/27/98
The Gallery		794		3,619		4,413		712		1968		03/27/98