10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2004
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 of organization)	(I.R.S. Employer Identification No.)

1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129

(Address of principal executive offices — zip code)

(720) 283-6120

(Registrant’s telephone number, including area code)

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 such filing requirements for the past 90 days.     Yes þ          No o

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

     The number of shares of the issuer’s common stock, $1 par value, outstanding as of August 3, 2004 was 127,904,170.

UNITED DOMINION REALTY TRUST, INC.

FORM 10-Q

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003		2
	Consolidated Statements of Operations for the three and six months ended June 30, 2004 and 2003		3
	Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003		4
	Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2004		5
	Notes to Consolidated Financial Statements		6-14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		15-27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		27
Item 4.	Controls and Procedures .		28
PART II — OTHER INFORMATION
Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		28
Item 4.	Submission of Matters to a Vote of Security Holders		29
Item 6.	Exhibits and Reports on Form 8-K		29
Signatures			30
4.30% Medium-Term Note due July 2007 dated June 25, 2004
Computation of Ratio of Earnings to Fixed Charges
Rule 13a-14(a) Certification of the Chief Executive Officer
Rule 13a-14(a) Certification of the Chief Financial Officer
Section 1350 Certification of the Chief Executive Officer
Section 1350 Certification of the Chief Financial Officer

1

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)

(Unaudited)

					June 30,			December 31,
					2004			2003
ASSETS
Real estate owned:
		Real estate held for investment			$	4,362,196		$	4,157,837
			Less: accumulated depreciation			(935,677	)		(852,461	)
						3,426,519			3,305,376
		Real estate under development				58,069			30,375
		Real estate held for disposition (net of accumulated depreciation of $14,068 and $44,169)				47,921			119,170
		Total real estate owned, net of accumulated depreciation				3,532,509			3,454,921
Cash and cash equivalents						753			4,824
Restricted cash						6,364			7,540
Deferred financing costs, net						21,131			21,425
Investment in unconsolidated development joint venture						809			1,673
Funds held in escrow from 1031 exchanges pending the acquisition of real estate						2,339			14,447
Notes receivable						44,586			13,000
Other assets						32,385			25,553
Other assets — real estate held for disposition						96			260
		Total assets			$	3,640,972		$	3,543,643
LIABILITIES AND STOCKHOLDERS’ EQUITY
Secured debt					$	999,658		$	1,018,028
Unsecured debt						1,267,650			1,114,009
Real estate taxes payable						24,274			30,334
Accrued interest payable						15,042			12,892
Security deposits and prepaid rent						21,715			23,156
Distributions payable						41,782			40,623
Deferred gain on sale of depreciable property						11,413			—
Accounts payable, accrued expenses, and other liabilities						39,990			45,080
Other liabilities — real estate held for disposition						666			1,879
				Total liabilities		2,422,190			2,286,001
	Minority interests					89,813			94,206
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 2003)		135,400			135,400
				2,000,000 shares 7.50% Series D Cumulative Convertible Redeemable issued and outstanding (2,000,000 in 2003)		47,396			44,271
				3,425,217 shares 8.00% Series E Cumulative Convertible issued and outstanding (3,425,217 in 2003)		56,893			56,893
		Common stock, $1 par value; 250,000,000 shares authorized 127,771,383 shares issued and outstanding (127,295,126 in 2003)				127,771			127,295
		Additional paid-in capital				1,465,452			1,458,983
		Distributions in excess of net income				(695,840	)		(651,497	)
		Deferred compensation — unearned restricted stock awards				(8,103	)		(5,588	)
		Notes receivable from officer-stockholders				—			(459	)
		Accumulated other comprehensive loss				—			(1,862	)
				Total stockholders’ equity		1,128,969			1,163,436
		Total liabilities and stockholders’ equity			$	3,640,972		$	3,543,643

See accompanying notes to consolidated financial statements.

2

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

			Three Months Ended						Six Months Ended
			June 30,						June 30,
			2004			2003			2004			2003
REVENUES
	Rental income		$	156,754		$	143,940		$	309,745		$	286,782
	Non-property income			1,062			194			1,406			396
		Total revenues		157,816			144,134			311,151			287,178
EXPENSES
	Rental expenses:
		Real estate taxes and insurance		19,021			16,576			37,788			33,184
		Personnel		16,132			14,069			32,210			28,503
		Utilities		9,051			8,346			19,123			17,021
		Repair and maintenance		10,397			8,941			19,498			17,857
		Administrative and marketing		5,622			5,383			11,075			10,568
		Property management		4,390			4,201			8,751			8,379
		Other operating expenses		291			316			561			610
	Real estate depreciation and amortization			43,125			37,364			84,474			74,368
	Interest			29,295			29,595			58,201			61,156
	General and administrative			4,627			5,157			9,381			10,606
	Other depreciation and amortization			849			753			1,783			1,496
		Total expenses		142,800			130,701			282,845			263,748
Income before minority interests and discontinued operations				15,016			13,433			28,306			23,430
Minority interests of outside partnerships				(50	)		(239	)		(115	)		(614	)
Minority interests of unitholders in operating partnerships				(522	)		14			(955	)		(187	)
Income before discontinued operations, net of minority interests				14,444			13,208			27,236			22,629
Income from discontinued operations, net of minority interests				14,067			2,276			16,587			6,295
Net income				28,511			15,484			43,823			28,924
Distributions to preferred stockholders — Series B				(2,911	)		(2,911	)		(5,822	)		(5,822	)
Distributions to preferred stockholders — Series D (Convertible)				(1,045	)		(3,393	)		(2,080	)		(7,428	)
Distributions to preferred stockholders — Series E (Convertible)				(1,138	)		(228	)		(2,276	)		(228	)
Premium on preferred share conversions				(1,562	)		(6,250	)		(3,125	)		(6,250	)
Net income available to common stockholders			$	21,855		$	2,702		$	30,520		$	9,196
Earnings per common share — basic and diluted:
	Income from continuing operations available to common stockholders, net of minority interests		$	0.06		$	0.00		$	0.11		$	0.02
	Income from discontinued operations, net of minority interests		$	0.11		$	0.02		$	0.13		$	0.06
	Net income available to common stockholders		$	0.17		$	0.02		$	0.24		$	0.08
Common distributions declared per share			$	0.2925		$	0.2850		$	0.5850		$	0.5700
Weighted average number of common shares outstanding — basic				127,150			112,467			127,057			110,169
Weighted average number of common shares outstanding — diluted				128,065			113,439			127,996			111,101

See accompanying notes to consolidated financial statements.

3

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except for share data)

(Unaudited)

				Six Months Ended
				June 30,
				2004			2003
Operating Activities
	Net income			$	43,823		$	28,924
		Adjustments to reconcile net income to net cash provided
			by operating activities:
			Depreciation and amortization		87,944			80,616
			Net gains on sales of land and depreciable property		(15,019	)		(933	)
			Minority interests		2,199			1,209
			Gain on early debt retirement		—			(171	)
			Amortization of deferred financing costs and other		3,199			2,942
			Changes in operating assets and liabilities:
			Increase in operating assets		(4,670	)		(2,133	)
			Decrease in operating liabilities		(10,715	)		(9,648	)
Net cash provided by operating activities					106,761			100,806
Investing Activities
		Proceeds from sales of real estate investments, net			56,943			11,350
		Acquisition of real estate assets, net of liabilities assumed and equity			(143,019	)		(135,025	)
		Development of real estate assets			(10,759	)		(9,661	)
		Capital expenditures and other major improvements — real estate assets, net of escrow reimbursement			(31,146	)		(23,535	)
		Capital expenditures — non-real estate assets			(862	)		(480	)
		Decrease in funds held in escrow from tax free exchanges pending the acquisition of real estate			12,108			—
Net cash used in investing activities					(116,735	)		(157,351	)
Financing Activities
		Proceeds from the issuance of secured debt			—			37,415
		Scheduled principal payments on secured debt			(38,220	)		(7,746	)
		Non-scheduled principal payments and prepayment penalties on secured debt			(21,474	)		—
		Proceeds from the issuance of unsecured debt			246,973			149,250
		Payments and prepayment premiums on unsecured debt			(46,585	)		(207,307	)
		Net (repayment)/proceeds of revolving bank debt			(45,600	)		78,200
		Payment of financing costs			(2,520	)		(7,413	)
		Proceeds from the issuance of common stock			2,704			91,312
		Proceeds from the repayment of officer loans			459			—
		Proceeds from the issuance of performance shares			80			—
		Distributions paid to minority interests			(6,031	)		(4,024	)
		Distributions paid to preferred stockholders			(10,160	)		(13,858	)
		Distributions paid to common stockholders			(73,723	)		(60,738	)
		Repurchase of common stock			—			(71	)
Net cash provided by financing activities					5,903			55,020
Net decrease in cash and cash equivalents					(4,071	)		(1,525	)
Cash and cash equivalents, beginning of period					4,824			3,152
Cash and cash equivalents, end of period				$	753		$	1,627
Supplemental Information:
		Interest paid during the period		$	54,736		$	59,986
		Non-cash transactions:
			Conversion of operating partnership minority interests to common stock (82,867 shares in 2004 and 38,423 shares in 2003)		641			476
			Issuance of restricted stock awards		3,600			5,286
			Issuance of preferred stock in connection with acquisitions		—			58,811
			Issuance of preferred operating partnership units in connection with acquisitions		—			26,872
			Cancellation of a note receivable with the acquisition of a property		8,000			—
			Secured debt assumed with the acquisition of a property		41,324			—
			Receipt of note receivable in connection with sales of real estate investments		75,586			—
			Deferred gain in connection with sales of real estate investments		11,413			—

See accompanying notes to consolidated financial statements.

4

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

																Deferred			Notes
																Compensation —			Receivable			Accumulated
			Preferred Stock				Common Stock						Distributions			Unearned			from			Other
											Paid-in		in Excess of			Restricted			Officer —			Comprehensive
			Shares		Amount		Shares		Amount		Capital		Net Income			Stock Awards			Stockholders			Loss			Total
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
Comprehensive Income
	Net income													43,823												43,823
	Other comprehensive income:
		Unrealized gain on derivative financial instruments																					1,862			1,862
	Comprehensive income													43,823									1,862			45,685
	Issuance of common shares to employees, officers, and director- stockholders							227,062		228		1,776														2,004
	Issuance of common shares through dividend reinvestment and stock purchase plan							37,487		37		663														700
	Issuance of restricted stock awards							128,841		128		3,472					(3,600	)								—
	Adjustment for conversion of minority interests of unitholders in operating partnerships							82,867		83		558														641
	Principal repayments on notes receivable from officer- stockholders																			459						459
	Accretion of premium on Series D redemptions					3,125								(3,125	)											—
	Common stock distributions declared ($0.5850 per share)													(74,863	)											(74,863	)
	Preferred stock distributions declared-Series B ($1.0750 per share)													(5,822	)											(5,822	)
	Preferred stock distributions declared-Series D ($1.0446 per share)													(2,080	)											(2,080	)
	Preferred stock distributions declared-Series E ($0.6644 per share)													(2,276	)											(2,276	)
	Amortization of deferred compensation																1,085									1,085
Balance, June 30, 2004				10,841,226	$	239,689		127,771,383	$	127,771	$	1,465,452	$	(695,840	)	$	(8,103	)	$	—		$	—		$	1,128,969

See accompanying notes to consolidated financial statements.

5

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2004

(UNAUDITED)

1. Consolidation and 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 June 30, 2004, there were 130,397,811 units in the Operating Partnership outstanding, of which 120,286,089 units or 92.2% were owned by United Dominion and 10,111,722 units or 7.8% were owned by limited partners. As of June 30, 2004, there were 5,542,200 units in the Heritage OP outstanding, of which 5,183,522 units or 93.5% were owned by United Dominion and 358,678 units or 6.5% 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.

      The accompanying interim unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. The accompanying consolidated financial statements should be read in conjunction with the audited financial statements and related notes appearing in United Dominion’s Annual Report on Form 10-K for the year ended December 31, 2003, filed with the Securities and Exchange Commission as amended by the Current Report on Form 8-K filed May 14, 2004.

      In the opinion of management, the consolidated financial statements reflect all adjustments which are necessary for the fair presentation of financial position at June 30, 2004 and results of operations for the interim periods ended June 30, 2004 and 2003. Such adjustments are normal and recurring in nature. The interim results presented are not necessarily indicative of results that can be expected for a full year.

      The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. Certain previously reported amounts have been reclassified to conform to the current financial statement presentation.

2.     Real Estate Held for Investment

      At June 30, 2004, there are 260 communities with 74,883 apartment homes classified as real estate held for investment. The following table summarizes the components of real estate held for investment, (dollars in thousands):

	June 30,			December 31,
	2004			2003
Land and land improvements	$	860,478		$	827,054
Buildings and improvements		3,276,345			3,116,436
Furniture, fixtures, and equipment		225,373			214,347
Real estate held for investment		4,362,196			4,157,837
Accumulated depreciation		(935,677	)		(852,461	)
Real estate held for investment, net	$	3,426,519		$	3,305,376

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

3.     Income from Discontinued Operations

      FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“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 June 30, 2004, 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 June 30, 2004, within the Consolidated Statements of Operations for the quarters ended June 30, 2004 and 2003, and the reclassification of the assets and liabilities within the Consolidated Balance Sheets for 2004 and 2003.

      For the six months ended June 30, 2004, United Dominion sold eight communities with 1,910 apartment homes. In conjunction with the sales, we received a note receivable for $75.6 million that bears interest at 7.0%. The note matures December 31, 2004. As of June 30, 2004, the balance on the note receivable was $39.6 million. We recognized gains for financial reporting purposes of $15.0 million on these sales and will recognize $11.4 million in additional gains as the note receivable matures. At June 30, 2004, United Dominion had two communities with a total of 1,190 apartment homes and a net book value of $44.0 million and one parcel of land with a net book value of $3.9 million included in real estate held for disposition. For the year ended December 31, 2003, United Dominion sold seven communities with a total of 1,927 apartment homes and two commercial properties. 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 three and six months ended June 30, (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2004			2003			2004			2003
Rental income	$	2,937		$	9,041		$	8,565		$	18,635
Rental expenses		1,614			4,062			4,180			8,104
Real estate depreciation		109			2,429			1,670			4,730
Other expenses		4			15			18			33
		1,727			6,506			5,868			12,867
Income before gain/(loss) on sale of depreciable property and minority interests		1,210			2,535			2,697			5,768
Net gain/(loss) on sale of depreciable property		13,814			(112	)		15,019			935
Income before minority interests		15,024			2,423			17,716			6,703
Minority interests on income from discontinued operations		(957	)		(147	)		(1,129	)		(408	)
Income from discontinued operations, net of minority interests	$	14,067		$	2,276		$	16,587		$	6,295

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

4.     Investment in Unconsolidated Development 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 $3.3 million to the joint venture.

      The following is a summary of the financial position of the joint venture as of June 30, 2004 (dollars in thousands):

Assets
	Real estate under development			$	22,894
		Less: accumulated depreciation			(222	)
	Real estate under development, net of accumulated depreciation				22,672
	Cash and cash equivalents				41
	Deferred financing costs				225
			Total assets	$	22,938
Liabilities and Members’ Equity
	Mortgage note payable			$	14,369
	Accrued real estate taxes payable				158
	Security deposits and prepaid rent				54
	Accrued interest payable				19
	Accounts payable and other accrued liabilities				127
		Total liabilities			14,727
	Members’ equity:
		Capital contributions UDR/ AEGON Development Venture I, LLC			8,501
		Net loss			(290	)
			Total members’ equity		8,211
	Total liabilities and members’ equity			$	22,938

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

5.     Secured Debt

      Secured debt on continuing and discontinued operations, which encumbers $1.5 billion or 34% of United Dominion’s real estate owned based upon book value ($3.0 billion or 66% of United Dominion’s real estate owned is unencumbered) consists of the following as of June 30, 2004 (dollars in thousands):

								Weighted
					Weighted			Average		Number of
	Principal Outstanding				Average			Years to		Communities
					Interest Rate			Maturity		Encumbered
	June 30,		December 31,
	2004		2003		2004			2004		2004
Fixed Rate Debt
Mortgage notes payable	$	159,576	$	174,520		6.92	%		5.8		11
Tax-exempt secured notes payable		39,345		42,540		6.13	%		17.2		4
Fannie Mae credit facilities		288,875		288,875		6.40	%		6.6		9
Fannie Mae credit facilities — swapped		—		17,000		—			—		—
Total fixed rate secured debt		487,796		522,935		6.55	%		7.2		24
Variable Rate Debt
Mortgage notes payable		45,954		46,185		2.31	%		7.4		4
Tax-exempt secured note payable		7,770		7,770		1.05	%		23.7		1
Fannie Mae credit facilities		387,469		370,469		1.75	%		12.9		51
Freddie Mac credit facility		70,669		70,669		1.49	%		6.6		8
Total variable rate secured debt		511,862		495,093		1.75	%		11.7		64
Total secured debt	$	999,658	$	1,018,028		4.09	%		9.5		88

      Weighted average years to maturity include certain extension options.

      Approximate principal payments due during each of the next five calendar years and thereafter, as of June 30, 2004, are as follows (dollars in thousands):

					Total
	Fixed Rate		Variable Rate		Secured
Year	Maturities		Maturities		Maturities
2004	$	2,270	$	173	$	2,443
2005		18,805		4,660		23,465
2006		59,943		3,706		63,649
2007		7,491		70,669		78,160
2008		10,641		—		10,641
Thereafter		388,646		432,654		821,300
	$	487,796	$	511,862	$	999,658

9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

6.     Unsecured Debt

      A summary of unsecured debt as of June 30, 2004 and December 31, 2003 is as follows (dollars in thousands):

			2004		2003
Commercial Banks
	Borrowings outstanding under an unsecured credit facility due March 2006(a)		$	92,300	$	137,900
Senior Unsecured Notes – Other
	7.67% Medium-Term Notes due January 2004			—		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
	Verano Construction Loan due February 2006			21,018		—
	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		92,255
	4.30% Medium-Term Notes due July 2007			50,000		—
	4.50% Medium-Term Notes due March 2008			200,000		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			50,000		50,000
	6.50% Notes due June 2009			200,000		200,000
	3.90% Medium-Term Notes due March 2010			50,000		—
	5.13% Medium-Term Notes due January 2014			200,000		75,000
	8.50% Debentures due September 2024(b)			54,118		54,118
	Other(c)			944		1,136
				1,175,350		976,109
		Total Unsecured Debt	$	1,267,650	$	1,114,009

(a)	United Dominion has a three-year $500 million unsecured revolving credit facility. 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. At June 30, 2004, United Dominion had one interest rate swap agreement associated with commercial bank borrowings under the revolver with a notional value of $5.0 million under which United Dominion pays a fixed rate of interest and receives a variable rate of interest on the notional amount. The interest rate swap, which matures July 1, 2004, effectively changes United Dominion’s interest rate exposure on the $5.0 million of borrowings from a variable rate to a weighted average fixed rate of approximately 7.8%. As of June 30, 2004, the weighted average interest rate of commercial borrowings, after giving effect to the swap agreement, was 1.9%.
(b)	Includes an investor put feature that grants a one-time option to redeem the debentures in September 2004.
(c)	Represents deferred gains from the termination of interest rate risk management agreements.

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

7.     Financial Instruments

      United Dominion accounts for its derivative instruments in accordance with Statements of Financial Accounting Standards No. 133 and No. 138, “Accounting for Certain Derivative Instruments and Hedging Activities.” At June 30, 2004, United Dominion’s derivative financial instrument is an interest rate swap agreement that is designated as a cash flow hedge of debt with variable interest rate features, and is a qualifying hedge for financial reporting purposes. For a derivative instrument that qualifies as a cash flow hedge, 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 fair value of United Dominion’s derivative instrument is reported on the balance sheet at its current fair value. The estimated fair value for our interest rate swap relies on prevailing market interest rates. The fair value amount should not be viewed in isolation, but rather in relation to the value of the underlying hedged transaction and investment and to the overall reduction in exposure to adverse fluctuations in interest rates. The 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 swap involves the periodic exchange of payments over the life of the related agreements. An amount received or paid on the interest rate swap is 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 amount payable to and receivable from counterparties is included in other liabilities and other assets, respectively.

      As of June 30, 2004, United Dominion had one interest rate swap agreement associated with commercial bank borrowings under our revolver with a notional value of $5.0 million under which United Dominion pays a fixed rate of interest and receives a variable rate of interest on the notional amount. The interest rate swap, which matured on July 1, 2004, has a fair value of $0 at June 30, 2004, and, therefore, we have no derivative financial instrument liabilities reported on our Consolidated Balance Sheet at June 30, 2004. For the quarter ended June 30, 2004, United Dominion recognized $0.9 million of unrealized gains in comprehensive income.

8.     Earnings Per Share

      Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the period. 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.

11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

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

			Three Months Ended						Six Months Ended
			June 30,						June 30,
			2004			2003			2004			2003
Numerator for basic and diluted earnings per share —
	Net income available to common stockholders		$	21,855		$	2,702		$	30,520		$	9,196
Denominator:
Denominator for basic earnings per share —
	Weighted average common shares outstanding			127,764			112,952			127,642			110,525
		Non-vested restricted stock awards		(614	)		(485	)		(585	)		(356	)
				127,150			112,467			127,057			110,169
Effect of dilutive securities:
Employee stock options and non-vested restricted stock awards				915			972			939			932
Denominator for diluted earnings per share				128,065			113,439			127,996			111,101
Basic and diluted earnings per share			$	0.17		$	0.02		$	0.24		$	0.08

      The effect of the conversion of the operating partnership units, Series A Out-Performance Partnership Shares, and convertible preferred stock is not dilutive and is therefore not included in the above calculations. If the operating partnership units were converted to common stock, the additional shares of common stock outstanding for the three and six months ended June 30, 2004 would be 8,680,217 and 8,683,229 weighted average common shares, and 7,286,193 and 7,124,753 weighted average common shares for the three and six months ended June 30, 2003. If the Series A Out-Performance Partnership Shares were converted to common stock, the additional shares of common stock outstanding for the three and six months ended June 30, 2004 would be 1,791,329 weighted average common shares, and 1,853,204 weighted average common shares for the three and six months ended June 30, 2003. If the convertible preferred stock were converted to common stock, the additional shares of common stock outstanding for the three and six months ended June 30, 2004 would be 6,502,140 weighted average common shares, and 11,632,713 and 11,968,318 weighted average common shares for the three and six months ended June 30, 2003, respectively.

9.     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.

12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

      The following table sets forth United Dominion’s earnings and earnings per share had United Dominion’s stock-based compensation expense been determined based upon the fair value method at the date of grant, consistent with the provisions of SFAS 123 (dollars in thousands, except per share data):

				Three Months Ended						Six Months Ended
				June 30,						June 30,
				2004			2003			2004			2003
Reported net income available to common stockholders				$	21,855		$	2,702		$	30,520		$	9,196
		Stock-based employee compensation cost
			included in net income		271			543			1,096			1,056
		Stock-based employee compensation cost that would have been included in net income under the fair value method			(287	)		(617	)		(1,163	)		(1,204	)
Adjusted net income available to common stockholders				$	21,839		$	2,628		$	30,453		$	9,048
Earnings per common share — basic and diluted
	As reported			$	0.17		$	0.02		$	0.24		$	0.08
	Pro forma			$	0.17		$	0.02		$	0.24		$	0.08

10.     Comprehensive Income

      Total comprehensive income for the three and six months ended June 30, 2004 and 2003 was $29.5 million and $45.7 million for 2004 and $17.8 million and $34.3 million for 2003, respectively. The difference between net income and total comprehensive income is primarily due to the fair value accounting for interest rate swaps.

11.     Commitments and Contingencies

Commitments

      United Dominion is committed to completing its real estate under development, which has an estimated cost to complete of $67.2 million at June 30, 2004.

Contingencies

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 total cumulative 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.

13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

      At the conclusion of the measurement period, if United Dominion’s total cumulative 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 (accounted for on a consistent basis with all other OP Units) 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 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 volume-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.     Related Party Transactions

      United Dominion’s notes receivable from certain officers matured 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’s 1991 Stock Purchase and Loan Plan. The loans were evidenced by promissory notes between the borrowers and United Dominion and secured by a pledge of the shares of common stock.

      In addition, United Dominion had entered into a Servicing and Purchase Agreement (the “Servicing Agreement”) with SunTrust Bank (the “Bank”) whereby United Dominion acted 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 were evidenced by promissory notes (“Notes”) between each Borrower and the Bank. The Servicing Agreement provided that the Bank could 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. All of the Notes matured in June 2004.

13.     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 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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

      This quarterly 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 2003. 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.

      At June 30, 2004, our portfolio included 262 communities with 76,073 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):

										Three Months Ended					Six Months Ended
	As of June 30, 2004									June 30, 2004					June 30, 2004
													Average					Average
	Number of		Number of		Percentage of			Carrying		Average			Monthly		Average			Monthly
	Apartment		Apartment		Carrying			Value		Physical			Rental		Physical			Rental
	Communities		Homes		Value			(in thousands)		Occupancy			Rates		Occupancy			Rates
Southern California		12		3,142		7.6	%	$	339,809		94.4	%	$	1,112		94.5	%	$	1,107
Houston, TX		21		6,034		6.0	%		267,413		91.2	%		635		91.0	%		637
Dallas, TX		12		4,076		5.2	%		232,679		95.8	%		677		95.9	%		667
Phoenix, AZ		11		3,635		4.9	%		219,293		89.8	%		709		89.1	%		710
Orlando, FL		14		4,140		4.8	%		214,287		93.8	%		703		93.4	%		702
Raleigh, NC		11		3,663		4.7	%		209,537		93.1	%		647		93.0	%		649
Metropolitan DC		7		2,245		4.6	%		208,437		96.2	%		1,065		96.0	%		1,060
Northern CA		6		1,894		4.5	%		199,764		94.6	%		1,151		94.2	%		1,150
Tampa, FL		11		3,836		4.3	%		192,263		94.8	%		720		94.4	%		718
Arlington, TX		10		3,465		3.6	%		161,817		92.8	%		635		93.4	%		636
Baltimore, MD		10		2,118		3.5	%		158,702		95.4	%		1,262		96.0	%		1,081
Columbus, OH		6		2,530		3.4	%		151,592		92.1	%		675		91.7	%		676
Nashville, TN		9		2,580		3.4	%		150,908		94.6	%		661		94.0	%		657

15

											Three Months Ended					Six Months Ended
		As of June 30, 2004									June 30, 2004					June 30, 2004
														Average					Average
		Number of		Number of		Percentage of			Carrying		Average			Monthly		Average			Monthly
		Apartment		Apartment		Carrying			Value		Physical			Rental		Physical			Rental
		Communities		Homes		Value			(in thousands)		Occupancy			Rates		Occupancy			Rates
Monterey Peninsula, CA			8		1,604		3.1	%		139,617		93.0	%		926		91.9	%		926
Richmond, VA			9		2,636		3.0	%		133,804		94.5	%		743		94.2	%		742
Charlotte, NC			7		2,034		2.5	%		113,671		91.0	%		598		91.3	%		601
Greensboro, NC			8		2,123		2.4	%		106,548		93.4	%		582		93.2	%		582
Denver, CO			3		1,484		2.2	%		98,869		92.9	%		774		92.9	%		773
Wilmington, NC			6		1,868		2.1	%		92,701		94.7	%		630		94.3	%		627
Atlanta, GA			6		1,426		1.7	%		74,242		92.2	%		616		91.3	%		620
Columbia, SC			6		1,584		1.4	%		64,257		93.8	%		597		92.7	%		598
Austin, TX			4		1,116		1.4	%		63,783		91.9	%		649		91.6	%		652
Jacksonville, FL			3		1,157		1.4	%		60,520		93.4	%		691		93.7	%		689
Norfolk, VA			6		1,438		1.3	%		56,985		96.7	%		767		96.6	%		760
Lansing, MI			4		1,226		1.2	%		52,145		92.2	%		643		92.0	%		644
Portland, OR			4		994		1.1	%		50,669		91.2	%		720		91.3	%		720
Seattle, WA			3		628		0.8	%		35,009		93.8	%		742		94.1	%		741
Other Southwestern			9		2,805		3.0	%		135,093		92.7	%		588		92.7	%		590
Other Mid-Atlantic			7		1,604		1.9	%		83,450		93.1	%		879		92.5	%		879
Other North Carolina			8		1,893		1.7	%		77,421		96.3	%		595		96.2	%		591
Other Pacific			4		1,281		1.7	%		75,623		94.0	%		761		94.3	%		760
Other Midwestern			7		1,188		1.5	%		66,219		93.2	%		700		92.9	%		701
Other Southeastern			3		1,153		1.4	%		60,675		93.8	%		552		93.8	%		556
Other Florida			5		1,101		1.0	%		44,951		93.8	%		659		93.7	%		658
Other Northeastern			2		372		0.4	%		18,474		95.7	%		710		94.9	%		710
Real Estate Under Development			—		—		0.7	%		33,156		—			—		—			—
Land			—		—		0.6	%		28,840		—			—		—			—
	Total		262		76,073		100.0	%	$	4,473,223		93.5	%	$	729		93.2	%	$	725

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

16

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 which provides for the issuance of up to an aggregate of $1.5 billion in common shares, preferred shares, and debt securities to facilitate future financing activities in the public capital markets. This shelf registration statement replaces our previous $1.0 billion shelf registration statement and includes $331.3 million of unissued securities carried forward from the previous $1.0 billion shelf registration statement. During the first six months of 2004, we completed various financing activities under our shelf registration statements. These activities are summarized in the section entitled “Financing Activities” that follows. As of June 30, 2004, approximately $1.45 billion of equity and debt securities remained available for issuance under our new $1.5 billion shelf registration statement. Access to capital markets is dependent on market conditions at the time of issuance.

      In July 2004, Moody’s Investors Service upgraded our rating outlook on our senior unsecured debt from Baa3 to Baa2 and our preferred stock from Ba1 to Baa3 with a stable outlook.

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.

      During the remainder of 2004, we have approximately $2.4 million of secured debt maturing that we anticipate repaying with proceeds from borrowings under our secured or unsecured credit facilities, or the issuance of new unsecured debt securities or equity. We also have $54.1 million of unsecured debt with a one-time investor put feature that can be triggered in September of this year. We believe that the likelihood of having this debt put back to us is highly remote given the current low rate environment.

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. Our critical accounting policies are described in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2003. There have been no significant changes in our critical accounting policies from those reported in our 2003 Annual Report on Form 10-K. With respect to these critical accounting policies, management believes that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented.

Statements of Cash Flow

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

Operating Activities

      For the six months ended June 30, 2004, our cash flow provided by operating activities was $106.8 million compared to $100.8 million for the same period in 2003. The increase in cash flow from operating activities resulted primarily from a $4.6 million increase in property operating activities, a $3.0 million decrease in interest expense, and a $1.2 million decrease in general and administrative expenses.

17

Investing Activities

      For the six months ended June 30, 2004, net cash used in investing activities was $116.7 million compared to $157.4 million for the same period in 2003. 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

      During the six months ended June 30, 2004, we acquired six apartment communities with 1,739 apartment homes and one parcel of land. Our long-term strategic plan is to achieve greater operating efficiencies by investing in fewer, more concentrated markets. As a result, we have been expanding our interests in the fast growing Southern California market over the last two years. 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.

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 the first six months of 2004, we spent $31.1 million or $414 per home on capital expenditures for all of our communities, excluding development. 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 $15.9 million or $211 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 $15.0 million or $200 per home and major renovations totaled $0.2 million or $3 per home for the six months ended June 30, 2004.

      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:

		Six Months Ended June 30,							Six Months Ended June 30,
		(dollars in thousands)							(per home)
		2004		2003		% Change			2004		2003		% Change
Turnover capital expenditures		$	8,173	$	6,906		18.3	%	$	108	$	94		14.9	%
Other recurring capital expenditures			7,726		10,585		-27.0	%		103		144		-28.5	%
	Total recurring capital expenditures		15,899		17,491		-9.1	%		211		238		-11.3	%
Revenue enhancing improvements			15,050		4,242		254.8	%		200		58		244.8	%
Major renovations			197		1,802		-89.1	%		3		25		-88.0	%
	Total capital improvements	$	31,146	$	23,535		32.3	%	$	414	$	321		29.0	%
Repair and maintenance			20,389		19,332		5.5	%		271		264		2.7	%
	Total expenditures	$	51,535	$	42,867		20.2	%	$	685	$	585		17.1	%

      Total capital improvements increased $7.6 million or $93 per home for the first six months of 2004 compared to the same period in 2003. 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 $490 per home.

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Real Estate Under Development

      Development activity is focused in core markets in which we have strong operations in place. For the six months ended June 30, 2004, we invested approximately $10.8 million on development projects, an increase of $1.1 million from $9.7 million for the same period in 2003.

      The following projects were under development as of June 30, 2004:

			Number of		Completed						Estimated		Expected
			Apartment		Apartment		Cost to Date		Budgeted Cost		Cost Per		Completion
	Location		Homes		Homes		(In thousands)		(In thousands)		Home		Date
2000 Post III		San Francisco, CA		24		—	$	2,600	$	7,000	$	291,700		3Q05
Verano at Town Square		Rancho Cucamonga, CA		414		—		23,000		65,100		157,200		4Q05
Mandalay on the Lake		Irving, TX		369		—		7,500		28,200		76,400		1Q06
				807		—	$	33,100	$	100,300	$	124,300

      In addition, we own eight parcels of land that we continue to hold for future development that had a carrying value at June 30, 2004 of $24.9 million. Six of the eight parcels represent additional phases to existing communities as we plan to add apartment homes adjacent to currently owned communities that are in improving markets.

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 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%. 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 estimate 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 $3.3 million to the joint venture.

      As of June 30, 2004, Villa Toscana, a 504 apartment home community located in Houston, Texas, was under development and total costs incurred as of June 30, 2004, were $22.9 million with 268 apartment homes complete. The estimated budgeted costs for the project are approximately $28.4 million or $56,300 per apartment home. We anticipate that the project will be completed in the third quarter of 2005.

Disposition of Investments

      For the six months ended June 30, 2004, we sold eight communities with 1,910 apartment homes for a gross consideration of $99.4 million. In conjunction with the sales, we received a note receivable for $75.6 million that bears interest at 7.0%. The note matures December 31, 2004. As of June 30, 2004, the balance on the note receivable was $39.6 million. We recognized gains for financial reporting purposes of $15.0 million on these sales and will recognize $11.4 million in additional gains as the note receivable matures. Proceeds from the sales were used primarily to reduce debt.

      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.

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Financing Activities

      Net cash provided by financing activities during the six months ended June 30, 2004, was $5.9 million compared to $55.0 million for the same period in 2003. 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 six months ended June 30, 2004:

•  Repaid $59.7 million of secured debt and $46.6 million of unsecured debt.

•  Sold $125 million aggregate principal amount of 5.13% senior unsecured notes due January 2014 ($75 million in January and $50 million in March) under our previous medium-term note program. These notes represent a re-opening of the 5.13% senior notes due January 2014 that we issued in October 2003, and these notes constitute a single series of notes, bringing the aggregate principal amount outstanding of the 5.13% senior notes to $200 million. The net proceeds from the issuances of $126.0 million were used to repay secured and unsecured debt obligations maturing in the first quarter of 2004 and to fund the acquisition of apartment homes.

•  Sold $50 million aggregate principal amount of 3.90% medium-term notes due March 2010 in March 2004 under our previous medium-term note program. The net proceeds from the issuance of approximately $49.4 million were used to fund the acquisition of apartment communities.

•  Increased our existing $1.0 billion shelf registration statement to $1.5 billion in debt securities and preferred and common stock in June 2004. The $1.5 billion shelf registration statement includes $331.1 million of unissued securities carried forward from our previous shelf registration statement.

•  Sold $50 million aggregate principal amount of 4.30% medium-term notes due July 2007 in June 2004 under our new $750 million medium-term note program. The net proceeds from the issuance of approximately $49.8 million will be used to fund acquisitions of apartment communities and repay amounts outstanding on our $500 million unsecured credit facility.

•  Moody’s Investors Service upgraded our rating outlook on our senior unsecured debt from Baa3 to Baa2 and our preferred stock from Ba1 to Baa3 with a stable outlook in July 2004.

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 June 30, 2004, $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 June 30, 2004, $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 June 30, 2004, aggregate borrowings under both the Fannie Mae and Freddie Mac credit facilities were $747 million. We have $288.9 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. 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 June 30, 2004, $92.3 million was outstanding under the credit facility leaving $407.7 million of unused capacity.

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

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      Information concerning short-term bank borrowings under our credit facility and unsecured term loan is summarized in the table that follows (dollars in thousands):

		Three Months Ended			Twelve Months Ended
		June 30, 2004			December 31, 2003
Total revolving credit facility		$	500,000		$	500,000
Borrowings outstanding at end of period			92,300			137,900
Weighted average daily borrowings during the period			113,665			171,179
Maximum daily borrowings during the period			167,100			272,800
Weighted average interest rate during the period			1.5	%		2.1	%
Weighted average interest rate at end of period			1.5	%		1.6	%
Weighted average interest rate at end of period —
	after giving effect to swap agreements		1.9	%		4.2	%

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 the first six months of 2004, the fair value of our derivative instruments improved from an unfavorable $1.6 million at December 31, 2003, to $0 at June 30, 2004. This decrease is primarily due to the normal progression of the fair market value of derivative instruments towards zero as they near expiration. As of June 30, 2004, United Dominion had only one interest rate swap agreement remaining associated with commercial bank borrowings under our revolver with a notional value of $5.0 million. The interest rate swap, which matured on July 1, 2004, had a fair value of $0 at June 30, 2004.

Funds from Operations

      Funds from operations, or 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. 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 as a measure of our operating performance. 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 of real estate assets, 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

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different companies. We believe that FFO is the best measure 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 and six months ended June 30, (dollars and shares in thousands):

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2004			2003			2004			2003
Net income		$	28,511		$	15,484		$	43,823		$	28,924
Adjustments:
	Distributions to preferred stockholders		(5,094	)		(6,532	)		(10,178	)		(13,478	)
	Real estate depreciation and amortization, net of outside partners’ interest in 2003		43,125			37,126			84,474			73,933
	Minority interests of unitholders in operating partnership		522			(14	)		955			187
	Real estate depreciation related to unconsolidated entities		80			52			137			84
Discontinued Operations:
	Real estate depreciation		109			2,429			1,670			4,730
	Minority interests of unitholders in operating partnership		957			147			1,129			408
	Net (gain)/loss on sale of depreciable property		(13,814	)		112			(15,019	)		(935	)
Funds from operations (“FFO”) — basic		$	54,396		$	48,804		$	106,991		$	93,853
	Distributions to preferred stockholders — Series D and E (Convertible)		2,183			3,621			4,356			7,656
Funds from operations — diluted		$	56,579		$	52,425		$	111,347		$	101,509
Weighted average number of common shares and OP Units outstanding — basic			135,830			119,754			135,740			117,294
Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted			145,039			134,211			144,973			132,048

      In the computation of diluted FFO, OP Units, out-performance partnership shares, and the shares of Series D and Series E convertible preferred stock are dilutive; therefore, they are included in the diluted share count. For the three and six months ended June 30, 2004, distributions to preferred stockholders exclude $1.6 million and $3.1 million, respectively, related to a premium on preferred share conversions. For both the three and six months ended June 30, 2003, distributions to preferred stockholders exclude $6.3 million related to a premium on preferred share conversions.

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

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2004			2003			2004			2003
Weighted average number of common shares and OP units outstanding — basic			135,830			119,754			135,740			117,294
Weighted average number of OP units outstanding			(8,680	)		(7,287	)		(8,683	)		(7,125	)
	Weighted average number of common shares and OP units outstanding — basic per the Consolidated Statements of Operations		127,150			112,467			127,057			110,169
Weighted average number of common shares and OP units outstanding — diluted			145,039			134,211			144,973			132,048
Weighted average number of OP units outstanding			(8,680	)		(7,287	)		(8,683	)		(7,125	)
Weighted average number of Series A OPPSs outstanding			(1,792	)		(1,852	)		(1,792	)		(1,852	)
Weighted average number of Series D preferred shares outstanding			(3,077	)		(10,955	)		(3,077	)		(11,628	)
Weighted average number of Series E preferred shares outstanding			(3,425	)		(678	)		(3,425	)		(342	)
	Weighted average number of common shares and OP units outstanding — diluted per the Consolidated Statements of Operations		128,065			113,439			127,996			111,101

      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.

      The following is a presentation of cash flow metrics based on generally accepted accounting principles for the three and six months ended June 30 (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2004			2003			2004			2003
Net cash provided by operating activities	$	68,506		$	63,742		$	106,761		$	100,806
Net cash used in investing activities		(41,898	)		(152,182	)		(116,735	)		(157,351	)
Net cash (used in)/provided by financing activities		(27,828	)		85,554			5,903			55,020

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

      Net income available to common stockholders was $21.9 million ($0.17 per diluted share) for the quarter ended June 30, 2004, compared to $2.7 million ($0.02 per diluted share) for the same period in the prior year.

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The increase for the quarter ended June 30, 2004 when compared to the same period in 2003 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this report:

•  $13.9 million more in gains recognized from the sale of depreciable property;

•  a $4.7 million decrease in premiums paid on preferred share conversions;

•  a $2.3 million increase in operating results;

•  a $0.9 million increase in non-property income;

•  a $0.3 million decrease in interest expense; and

•  a $0.5 million decrease in general and administrative expense.

      These increases in income were partially offset by a $3.4 million increase in depreciation expense during the second quarter of 2004 when compared to the same period in 2003.

      Net income available to common stockholders was $30.5 million ($0.24 per diluted share) for the six months ended June 30, 2004, compared to $9.2 million ($0.08 per diluted share) for the same period in the prior year. The increase for the six months ended June 30, 2004 when compared to the same period in 2003 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this report:

•  $14.1 million more in gains recognized from the sale of depreciable property;

•  a $4.6 million increase in operating results;

•  a $3.1 million decrease in premiums paid on preferred share conversions;

•  a $3.0 million decrease in interest expense;

•  a $1.2 million decrease in general and administrative expense; and

•  a $1.0 million increase in non-property income.

      These increases in income were partially offset by a $7.0 million increase in depreciation expense during the first six months of 2004 when compared to the same period in 2003.

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):

	Three Months Ended June 30,									Six Months Ended June 30,
	2004			2003			% Change			2004			2003			% Change
Property rental income	$	159,578		$	152,751			4.5	%	$	318,083		$	304,675			4.4	%
Property operating expense*		(61,830	)		(57,301	)		7.9	%		(123,861	)		(115,075	)		7.6	%
Property operating income	$	97,748		$	95,450			2.4	%	$	194,222		$	189,600			2.4	%
Weighted average number of homes		75,106			73,806			1.8	%		75,710			73,717			2.7	%
Physical occupancy**		93.5	%		93.6	%		-0.1	%		93.2	%		93.5	%		-0.3	%

*  Excludes depreciation, amortization, and property management expenses.

**  Based upon weighted average stabilized homes.

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      The following table is our reconciliation of property operating income to net income as reflected on the Consolidated Statements of Operations for the three and six months ended June 30, (dollars in thousands):

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2004			2003			2004			2003
Property operating income		$	97,748		$	95,450		$	194,222		$	189,600
Commercial operating income			106			154			214			580
Non-property income			1,062			194			1,406			396
Real estate depreciation and amortization			(44,083	)		(40,546	)		(87,927	)		(80,594	)
Interest			(29,295	)		(29,595	)		(58,201	)		(61,156	)
General and administrative and property management			(9,017	)		(9,358	)		(18,132	)		(18,985	)
Other operating expenses			(295	)		(331	)		(579	)		(643	)
Net gain/(loss) on sale of depreciable property			13,814			(112	)		15,019			935
Minority interests			(1,529	)		(372	)		(2,199	)		(1,209	)
	Net income per the Consolidated Statements of Operations	$	28,511		$	15,484		$	43,823		$	28,924

Same Communities

      Our same communities (those communities acquired, developed, and stabilized prior to June 30, 2003 and held on June 30, 2004, which consisted of 69,286 apartment homes) provided 89% of our property operating income for the six months ended June 30, 2004.

      For the second quarter of 2004, same community property operating income decreased 3.1% or $2.8 million compared to the same period in 2003. The overall decrease in property operating income was primarily attributable to a 0.2% or $0.3 million decrease in revenues from rental and other income and a 4.7% or $2.5 million increase in operating expenses. The decrease in revenues from rental and other income was primarily driven by a 0.8% or $1.2 million decrease in rental rates. This decrease in income was partially offset by an 11.6% or $0.5 million increase in utility reimbursement income, a 4.8% or $0.2 million decrease in concession expense, and a 1.5% or $0.1 million decrease in vacancy loss. Physical occupancy remained constant at 93.6%.

      The increase in property operating expenses was primarily driven by a 3.0% or $0.4 million increase in real estate taxes, a 13.1% or $0.4 million increase in insurance costs, a 6.6% or $0.9 million increase in personnel costs, and a 8.2% or $0.7 million increase in repair and maintenance costs.

      As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property operating income divided by property rental income) decreased 1.8% to 61.1%.

      For the six months ended June 30, 2004, same community property operating income decreased 3.1% or $5.6 million compared to the same period in 2003. The overall decrease in property operating income was primarily attributable to a 0.4% or $1.1 million decrease in revenues from rental and other income and a 4.2% or $4.5 million increase in operating expenses. The decrease in revenues from rental and other income was primarily driven by a 1.2% or $3.6 million decrease in rental rates. This decrease in income was partially offset by a 15.6% or $1.3 million increase in utility reimbursement income, and a 7.5% or $0.7 million decrease in concession expense. Physical occupancy decreased 0.2% to 93.3%.

      The increase in property operating expenses was primarily driven by a 5.3% or $1.5 million increase in personnel costs, a 6.1% or $1.1 million increase in repair and maintenance costs, a 16.9% or $1.0 million increase in insurance costs, and a 4.2% or $0.7 million increase in utilities expense.

      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 1.7% to 60.9%.

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Non-Mature Communities

      The remaining 11% of our property operating income during the first six months of 2004 was generated from communities that we classify as “non-mature communities” (primarily those communities acquired or developed during 2003 and 2004, sold properties, and those properties classified as real estate held for disposition). The 17 communities with 5,253 apartment homes that we acquired during 2003 and 2004 provided $15.8 million of property operating income. The eight communities with 1,910 apartment homes sold during 2004 provided $2.5 million of property operating income. In addition, our development communities, which included 178 apartment homes constructed since January 1, 2003, provided $0.4 million of property operating income during 2004, the two communities with 1,190 apartment homes classified as real estate held for disposition provided $1.9 million of property operating income, and other non-mature communities provided $0.8 million of property operating income for the six months ended June 30, 2004.

Real Estate Depreciation and Amortization

      For the three and six months ended June 30, 2004, real estate depreciation and amortization on both continuing and discontinued operations increased 8.6% or $3.4 million and 8.9% or $7.0 million, respectively, compared to the same period in 2003, primarily due to the overall increase in the weighted average number of apartment homes.

Interest Expense

      For the three months ended June 30, 2004, interest expense on both continuing and discontinued operations decreased 1.0% or $0.3 million from the same period in 2003 primarily due to debt refinancings and decreasing interest rates. For the quarter ended June 30, 2004, the weighted average amount of debt outstanding increased 15.0% or $300.3 million compared to the prior year. However, this was more than offset by the weighted average interest rate declining from 5.7% to 5.1% during 2004. The weighted average amount of debt outstanding during 2004 is higher than 2003 as acquisition costs in 2004 have been funded, in most part, by the issuance of debt. The decrease in the average interest rate during 2004 reflects our ability to take advantage of lower interest rates through refinancing and the utilization of variable rate debt.

      For the six months ended June 30, 2004, interest expense on both continuing and discontinued operations decreased 4.8% or $3.0 million from the same period in 2003 primarily due to debt refinancings and decreasing interest rates. For the six months ended June 30, 2004, the weighted average amount of debt outstanding increased 9.7% or $196.5 million compared to the prior year. However, this was more than offset by the weighted average interest rate declining from 5.5% to 5.1% during 2004. The weighted average amount of debt outstanding during 2004 is higher than 2003 as acquisition costs in 2004 have been funded, in most part, by the issuance of debt. The decrease in the average interest rate during 2004 reflects our ability to take advantage of lower interest rates through refinancing and the utilization of variable rate debt.

General and Administrative

      For the three months ended June 30, 2004, general and administrative expenses decreased $0.5 million or 10.3% compared to the same period in 2003 primarily as a result of a decrease in incentive compensation expense and legal costs. For the six months ended June 30, 2004, general and administrative expense decreased $1.2 million or 11.6% over the comparable period in 2003. The decrease for the six-month period was primarily due to a decrease in incentive compensation expense, legal costs, and professional service costs.

Gains on Sales of Land and Depreciable Property

      For the three and six months ended June 30, 2004, we recognized gains for financial reporting purposes of $13.8 million and $15.0 million, respectively, compared to a loss of $0.1 million and a gain of $0.9 million for the comparable period in 2003. 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.

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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.

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.

      For a discussion of these and other factors affecting our business and prospects, see “Item 1. — Business — Factors Affecting Our Business and Prospects” in our Annual Report on Form 10-K for the year ended December 31, 2003.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

      United Dominion is exposed to interest rate changes associated with our unsecured credit facility and other variable rate debt as well as refinancing risk on our fixed rate debt. United Dominion’s involvement with derivative financial instruments is limited and we do not expect to use them for trading or other speculative purposes. United Dominion uses derivative instruments solely to manage its exposure to interest rates.

      See our Annual Report on Form 10-K for the year ended December 31, 2003 “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for a more complete discussion of our interest rate sensitive assets and liabilities. As of June 30, 2004, our market risk has not changed materially from the amounts reported on our Annual Report on Form 10-K for the year ended December 31, 2003.

27

Item 4.     Controls and Procedures

      As of June 30, 2004, 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 quarter ended June 30, 2004, 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. However, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective under circumstances where our disclosure controls and procedures should reasonably be expected to operate effectively.

PART II

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

      On June 3, 1999, our Board of Directors authorized the repurchase in open market transactions, in block transactions, or otherwise, of up to 5.5 million shares of common stock. On December 5, 2000, our Board of Directors authorized the purchase of up to an additional 5.5 million shares of common stock in open market transactions, in block purchases or otherwise. As of June 30, 2004, we have repurchased a total of 8,749,763 shares of common stock under this program. As disclosed in the table below, we did not purchase any shares of our common stock during the quarter ended June 30, 2004.

						Total Number		Maximum
						of Shares		Number of
						Purchased as		Shares that
						Part of Publicly		May Yet Be
		Total Number		Average		Announced		Purchased
		of Shares		Price Per		Plans or		Under the Plans
Period		Purchased		Share		Programs		or Programs
January 1, 2004 through January 31, 2004			0		N/A		0		2,250,237
February 1, 2004 through February 29, 2004			0		N/A		0		2,250,237
March 1, 2004 through March 31, 2004			0		N/A		0		2,250,237
April 1, 2004 through April 30, 2004			0		N/A		0		2,250,237
May 1, 2004 through May 31, 2004			0		N/A		0		2,250,237
June 1, 2004 through June 30, 2004			0		N/A		0		2,250,237
	Total		0		N/A		0		2,250,237

28

Item 4. Submission of Matters to a Vote of Security Holders

      On May 4, 2004, United Dominion held its Annual Meeting of Stockholders. At the meeting, the stockholders voted on the election of directors and a proposal to ratify the selection of Ernst & Young LLP to serve as our independent auditors for the year ending December 31, 2004.

      The following persons were elected directors of United Dominion, to serve as such for the term indicated and under their respective successors are duly elected and qualified or until their earlier resignation or removal, by the indicated vote:

Name	Votes For		Votes Withheld
Eric J. Foss		113,682,723		498,916
Robert P. Freeman		112,564,523		1,617,116
Jon A. Grove		83,872,764		30,308,875
James D. Klingbeil		83,960,454		30,221,185
Robert C. Larson		113,480,127		701,512
Thomas R. Oliver		113,594,441		587,199
Lynne B. Sagalyn		112,570,526		1,611,113
Mark J. Sandler		113,687,210		494,429
Robert W. Scharar		112,709,880		1,471,760
Thomas W. Toomey		113,768,492		413,147

      The stockholders approved the proposal to ratify the selection of Ernst & Young LLP to serve as independent auditors for the year ending December 31, 2004, by the indicated vote:

Votes For		Votes Against		Votes Abstained
	110,895,725		3,038,211		247,703

      There were no broker non-votes.

Item 6. Exhibits and Reports on Form 8-K

      (a) Exhibits.

      The exhibits filed or furnished 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 June 30, 2004. 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 April 19, 2004, furnished to the Securities and Exchange Commission on April 20, 2004, under Item 12. Results of Operations and Financial Condition.

      Current Report on Form 8-K dated May 14, 2004, filed with the Securities and Exchange Commission on May 14, 2004, under Item 5. Other Events and under Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

      Current Report on Form 8-K dated June 17, 2004, filed with the Securities and Exchange Commission on June 18, 2004, under Item 5. Other Events and under Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

29

SIGNATURES

      Pursuant to the requirements 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.

(Registrant)

Date: August 5, 2004

/s/ CHRISTOPHER D. GENRY

Christopher D. Genry

Executive Vice President and Chief Financial Officer

Date: August 5, 2004

/s/ SCOTT A. SHANABERGER

Scott A. Shanaberger

Senior Vice President and Chief Accounting Officer

30

EXHIBIT INDEX

Exhibit		Description
	4.1	4.30% Medium-Term Note due July 2007 dated June 25, 2004.
	12	Computation of Ratio of Earnings to Fixed Charges.
	31.1	Rule 13a-14(a) Certification of the Chief Executive Officer.
	31.2	Rule 13a-14(a) Certification of the Chief Financial Officer.
	32.1	Section 1350 Certification of the Chief Executive Officer.
	32.2	Section 1350 Certification of the Chief Financial Officer.

31 EX-4.1 2 d17218exv4w1.htm 4.30% MEDIUM-TERM NOTE DUE JULY 2007 DATED JUNE 25, 2004

EXHIBIT 4.1

UNITED DOMINION REALTY TRUST, INC.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (THE “DEPOSITARY”) (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER HEREOF OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

REGISTERED	CUSIP No.:	PRINCIPAL AMOUNT:
No. FXR-1	91019PCM2	$50,000,000

UNITED DOMINION REALTY TRUST, INC.
MEDIUM-TERM NOTE
(Fixed Rate)

ORIGINAL ISSUE DATE:
June 25, 2004	INTEREST RATE: 4.30%	STATED MATURITY
		DATE: July 1, 2007
INTEREST PAYMENT DATE(S)	o CHECK IF DISCOUNT NOTE
x January 1 and July 1,	Issue Price:%
commencing January 1, 2005
o Other:
INITIAL REDEMPTION	INITIAL REDEMPTION	ANNUAL REDEMPTION
DATE: N/A	PERCENTAGE: N/A	PERCENTAGE
		REDUCTION: N/A
OPTIONAL REPAYMENT
DATE(S): N/A
SPECIFIED CURRENCY:	AUTHORIZED DENOMINATION:	EXCHANGE RATE
x United States dollars	x $1,000 and integral	AGENT: N/A
o Other:	multiples thereof
	o Other:
ADDENDUM ATTACHED	DEFAULT INTEREST RATE: N/A	OTHER/ADDITIONAL
		PROVISIONS: N/A
o Yes
xNo

     UNITED DOMINION REALTY TRUST, INC., a Maryland corporation (the “Company”, which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & Co., as nominee for The Depository Trust Company, or registered assigns, the Principal Amount of FIFTY MILLION DOLLARS ($50,000,000), on the Stated Maturity Date specified above (or any Redemption Date or Repayment Date, each as defined on the reverse hereof, or any earlier date of acceleration of maturity) (each such date being hereinafter referred to as the “Maturity Date” with respect to the principal repayable on such date) and to pay interest thereon (and on any overdue principal, premium and/or interest to the extent legally enforceable) at the Interest Rate per annum specified above, until the principal hereof is paid or duly made available for payment. The Company will pay interest in arrears on each Interest Payment Date, if any, specified above (each, an “Interest Payment Date”), commencing with the first Interest Payment Date next succeeding the Original Issue Date specified above, and on the Maturity Date; provided, however, that if the Original Issue Date occurs between a Record Date (as defined below) and the next succeeding Interest Payment Date, interest payment will commence on the Interest Payment Date immediately following the next succeeding Record Date to the registered holder (the “Holder”) of this Note on the next succeeding Record Date. Interest on this Note will be computed on the basis of a 360-day year of twelve 30-day months.

     Interest on this Note will accrue from, and including, the immediately preceding Interest Payment Date to which interest has been paid or duly provided for (or from, and including, the Original Issue Date if no interest has been paid or duly provided for) to, but excluding, the applicable Interest Payment Date or the Maturity Date, as the case may be (each, an “Interest Period”). The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, subject to certain exceptions described herein, be paid to the person in whose name this Note (or one or more predecessor Notes, as defined on the reverse hereof) is registered at the close of business on the fifteenth calendar day (whether or not a Business Day, as defined below) immediately preceding such Interest Payment Date (the “Record Date”); provided, however, that interest payable on the Maturity Date will be payable to the person to whom the principal hereof and premium, if any, hereon shall be payable. Any such interest not so punctually paid or duly provided for on any Interest Payment Date other than the Maturity Date (“Defaulted Interest”) shall forthwith cease to be payable to the Holder on the close of business on any Record Date and, instead, shall be paid to the person in whose name this Note is registered at the close of business on a special record date (the “Special Record Date”) for the payment of such Defaulted Interest to be fixed by the Trustee hereinafter referred to, notice whereof shall be given to the Holder of this Note by the Trustee not less than 10 calendar days prior to such Special Record Date or may be paid at any time in any other lawful manner, all as more fully provided for in the Indenture.

     Payment of principal, premium, if any, and interest in respect of this Note due on the Maturity Date will be made in immediately available funds upon presentation and surrender of this Note (and, with respect to any applicable repayment of this Note, upon delivery of instructions as contemplated on the reverse hereof) at the office or agency maintained by the Company for that purpose in the Borough of Manhattan, The City of New York, currently the corporate trust office of the Trustee located at 40 Broad Street, 5th Floor, New York, New York 10004, or at such other paying agency in the Borough of Manhattan, The City of New York, as the Company may determine; provided, however, that if the Specified Currency (as defined below) is other than United States dollars and such payment is to be made in the Specified Currency in accordance with the provisions set forth below, such payment will be made by wire transfer of immediately available funds to an account with a bank designated by the Holder hereof at least 15 calendar days prior to the Maturity Date, provided that such bank has appropriate facilities therefor and that this Note is presented and surrendered and, if applicable, instructions are delivered at the aforementioned office or agency maintained by the Company in time for the Trustee to make such payment in such funds in accordance with its normal procedures. Payment of interest due on any Interest Payment Date other than the Maturity Date will be made at the aforementioned office or agency maintained by the Company or, at the option of the Company, by check mailed to the address of the person entitled thereto as such address shall appear in the Security Register maintained by the Trustee; provided, however, that a Holder of U.S.$10,000,000 (or, if the Specified Currency is other than United States dollars, the equivalent thereof in the Specified Currency) or more in aggregate principal amount of Notes (whether having identical or different terms and provisions) will be entitled to receive interest payments on such Interest Payment Date by wire transfer of immediately available funds if such Holder has delivered appropriate

wire transfer instructions in writing to the Trustee not less than 15 calendar days prior to such Interest Payment Date. Any such wire transfer instructions received by the Trustee shall remain in effect until revoked by such Holder.

     If any Interest Payment Date or the Maturity Date falls on a day that is not a Business Day, the required payment of principal, premium, if any, and/or interest shall be made on the next succeeding Business Day with the same force and effect as if made on the date such payment was due, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date or the Maturity Date, as the case may be, to the date of such payment on the next succeeding Business Day.

     As used herein, “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in The City of New York; provided, however, that if the Specified Currency is other than United States dollars, such day must also not be a day on which commercial banks are authorized or required by law, regulation or executive order to close in the Principal Financial Center (as defined below) of the country issuing the Specified Currency (or, if the Specified Currency is Euro, such day must also be a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open). “Principal Financial Center” means the capital city of the country issuing the Specified Currency, except that with respect to United States dollars, Australian dollars, Canadian dollars, Euros, South African rands and Swiss francs, the “Principal Financial Center” shall be The City of New York, Sydney, Toronto, Johannesburg and Zurich, respectively.

     The Company is obligated to make payment of principal, premium, if any, and interest in respect of this Note in the currency in which this Note is denominated above (or, if such currency is not at the time of such payment legal tender for the payment of public and private debts in the country issuing such currency or, if such currency is Euro, in the member states of the European Union that have adopted the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on European Union, then the currency which is at the time of such payment legal tender in the related country or in the adopting member states of the European Union, as the case may be) (the “Specified Currency”). If the Specified Currency is other than United States dollars, except as otherwise provided below, any such amounts so payable by the Company will be converted by the Exchange Rate Agent specified above into United States dollars for payment to the Holder of this Note.

     Any United States dollar amount to be received by the Holder of this Note will be based on the highest bid quotation in The City of New York received by the Exchange Rate Agent at approximately 11:00 A.M., New York City time, on the second Business Day preceding the applicable payment date from three recognized foreign exchange dealers (one of whom may be the Exchange Rate Agent) selected by the Exchange Rate Agent and approved by the Company for the purchase by the quoting dealer of the Specified Currency for United States dollars for settlement on such payment date in the aggregate amount of the Specified Currency payable to all Holders of Notes scheduled to receive United States dollar payments and at which the applicable dealer commits to execute a contract. All currency exchange costs will be borne by the Holder of this Note by deductions from such payments. If three such bid quotations are not available, payments on this Note will be made in the Specified Currency.

     If the Specified Currency is other than United States dollars, the Holder of this Note may elect to receive all or a specified portion of any payment of principal, premium, if any, and/or interest, if any, in respect of this Note in the Specified Currency by submitting a written request for such payment to the Trustee at its corporate trust office in The City of New York on or prior to the applicable Record Date or at least 15 calendar days prior to the Maturity Date, as the case may be. Such written request may be mailed or hand delivered or sent by cable, telex or other form of facsimile transmission. The Holder of this Note may elect to receive all or a specified portion of all future payments in the Specified Currency in respect of such principal, premium, if any, and/or interest, if any, and need not file a separate election for each payment. Such election will remain in effect until revoked by written notice delivered to the Trustee, but written notice of any such revocation must be received by the Trustee on or prior to the applicable Record Date or at least 15 calendar days prior to the Maturity Date, as the case may be.

     If the Specified Currency is other than United States dollars and the Holder of this Note shall have duly made an election to receive all or a specified portion of any payment of principal, premium, if any, and/or interest, if any, in respect of this Note in the Specified Currency, but the Specified Currency is not available due to the imposition of exchange controls or other circumstances beyond the control of the Company, the Company will be entitled to satisfy its obligations to the Holder of this Note by making such payment in United States dollars on the basis of the Market Exchange Rate (as defined below) determined by the Exchange Rate Agent on the second Business Day prior to such payment date or, if such Market Exchange Rate is not then available, on the basis of the most recently available Market Exchange Rate. The “Market Exchange Rate” for the Specified Currency other than United States dollars means the noon dollar buying rate in The City of New York for cable transfers for the Specified Currency as certified for customs purposes (or, if not so certified, as otherwise determined) by the Federal Reserve Bank of New York. Any payment made in United States dollars under such circumstances shall not constitute an Event of Default (as defined in the Indenture).

     All determinations referred to above made by the Exchange Rate Agent shall be at its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and binding on the Holder of this Note.

     The Company agrees to indemnify the Holder of any Note against any loss incurred by such Holder as a result of any judgment or order being given or made against the Company for any amount due hereunder and such judgment or order requiring payment in a currency (the “Judgment Currency”) other than the Specified Currency, and as a result of any variation between (i) the rate of exchange at which the Specified Currency amount is converted into the Judgment Currency for the purpose of such judgment or order, and (ii) the rate of exchange at which such Holder, on the date of payment of such judgment or order, is able to purchase the Specified Currency with the amount of the Judgment Currency actually received by such Holder, as the case may be. The foregoing indemnity constitutes a separate and independent obligation of the Company and continues in full force and effect notwithstanding any such judgment or order as aforesaid. The term “rate of exchange” includes any premiums and costs of exchange payable in connection with the purchase of, or conversion into, the relevant currency.

     Reference is hereby made to the further provisions of this Note set forth on the reverse hereof and, if so specified on the face hereof, in an Addendum hereto, which further provisions shall have the same force and effect as if set forth on the face hereof.

     Notwithstanding the foregoing, if an Addendum is attached hereto or “Other/Additional Provisions” apply to this Note as specified above, this Note shall be subject to the terms set forth in such Addendum or such “Other/Additional Provisions”.

     Unless the Certificate of Authentication hereon has been executed by the Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, United Dominion Realty Trust, Inc. has caused this Note to be duly executed by one of its duly authorized officers.

UNITED DOMINION REALTY TRUST, INC.
By /s/ Scott A. Shanaberger
Name:	Scott A. Shanaberger
Title:	Senior Vice President, Chief Accounting      Officer and Assistant Secretary

ATTEST:

By/s/ Mary Ellen Norwood

     Name: Mary Ellen Norwood

     Title: Vice President and Secretary

Dated: June 25, 2004

TRUSTEE’S CERTIFICATE OF AUTHENTICATION:

This is one of the Debt Securities of
the series designated therein referred
to in the within-mentioned Indenture.

WACHOVIA BANK, NATIONAL ASSOCIATION,
as Trustee

By	/s/ Sarah A. McMahon	Authentication Date: June 25, 2004
	Authorized Signatory

[REVERSE OF NOTE]

UNITED DOMINION REALTY TRUST, INC.

MEDIUM-TERM NOTE
(Fixed Rate)

     This Note is one of a duly authorized series of Debt Securities (the “Debt Securities”) of the Company issued and to be issued under an Indenture, dated as of November 1, 1995, as amended, modified or supplemented from time to time (the “Indenture”), between the Company (successor by merger to United Dominion Realty Trust, Inc., a Virginia corporation) and Wachovia Bank, National Association, (formerly known as First Union National Bank of Virginia) as trustee (the “Trustee”, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Debt Securities, and of the terms upon which the Debt Securities are, and are to be, authenticated and delivered. This Note is one of the series of Debt Securities designated as “Medium-Term Notes Due Nine Months or More From Date of Issue” (the “Notes”). All terms used but not defined in this Note or in an Addendum hereto shall have the meanings assigned to such terms in the Indenture or on the face hereof, as the case may be.

     This Note is issuable only in registered form without coupons in minimum denominations of U.S. $1,000 and integral multiples thereof or other Authorized Denomination specified on the face hereof.

     This Note will not be subject to any sinking fund and, unless otherwise specified on the face hereof in accordance with the provisions of the following two paragraphs, will not be redeemable or repayable prior to the Stated Maturity Date.

     This Note will be subject to redemption at the option of the Company on any date on or after the Initial Redemption Date, if any, specified on the face hereof, in whole or from time to time in part in increments of U.S. $1,000 or other integral multiple of an Authorized Denomination (provided that any remaining principal amount hereof shall be at least U.S. $1,000 or such other minimum Authorized Denomination), at the Redemption Price (as defined below), together with unpaid interest accrued thereon to the date fixed for redemption (the “Redemption Date”), on written notice given to the Holder hereof (in accordance with the provisions of the Indenture) not more than 60 nor less than 30 calendar days prior to the Redemption Date. The “Redemption Price” shall be an amount equal to the Initial Redemption Percentage specified on the face hereof (as adjusted by the Annual Redemption Percentage Reduction, if any, specified on the face hereof) multiplied by the unpaid principal amount of this Note to be redeemed. The Initial Redemption Percentage, if any, shall decline at each anniversary of the Initial Redemption Date by the Annual Redemption Percentage Reduction, if any, until the Redemption Price is 100% of unpaid principal amount to be redeemed. In the event of redemption of this Note in part only, a new Note of like tenor for the unredeemed portion hereof and otherwise having the same terms and provisions as this Note shall be issued by the Company in the name of the Holder hereof upon the presentation and surrender hereof.

     This Note will be subject to repayment by the Company at the option of the Holder hereof on the Optional Repayment Date(s), if any, specified on the face hereof, in whole or in part in increments of U.S. $1,000 or other integral multiple of an Authorized Denomination (provided that any remaining principal amount hereof shall be at least U.S. $1,000 or such other minimum Authorized Denomination), at a repayment price equal to 100% of the unpaid principal amount to be repaid, together with unpaid interest accrued thereon to the date fixed for repayment (the “Repayment Date”). For this Note to be repaid, the Trustee must receive at its corporate trust office in the Borough of Manhattan, The City of New York, not more than 60 nor less than 30 calendar days prior to the Repayment Date, such Note and instructions to such effect forwarded by the Holder hereof. Exercise of such repayment option by the Holder hereof shall be irrevocable. In the event of repayment of this Note in part only, a new Note of like tenor for the unrepaid portion hereof and otherwise having the same terms and provisions as this Note shall be issued by

the Company in the name of the Holder hereof upon the presentation and surrender hereof.

     If this Note is specified on the face hereof to be a Discount Note, the amount payable to the Holder of this Note in the event of redemption, repayment or acceleration of maturity will be equal to the sum of (1) the Issue Price specified on the face hereof (increased by any accruals of the Discount, as defined below) and, in the event of any redemption of this Note (if applicable), multiplied by the Initial Redemption Percentage (as adjusted by the Annual Redemption Percentage Reduction, if applicable) and (2) any unpaid interest accrued thereon to the Redemption Date, Repayment Date or date of acceleration of maturity, as the case may be. The difference between the Issue Price and 100% of the principal amount of this Note is referred to herein as the “Discount”.

     For purposes of determining the amount of Discount that has accrued as of any Redemption Date, Repayment Date or date of acceleration of maturity of this Note, such Discount will be accrued so as to cause the yield on the Note to be constant. The constant yield will be calculated using a 30-day month, 360-day year convention, a compounding period that, except for the Initial Period (as defined below), corresponds to the shortest period between Interest Payment Dates (with ratable accruals within a compounding period) and an assumption that the maturity of this Note will not be accelerated. If the period from the Original Issue Date to the initial Interest Payment Date (the “Initial Period”) is shorter than the compounding period for this Note, a proportionate amount of the yield for an entire compounding period will be accrued. If the Initial Period is longer than the compounding period, then such period will be divided into a regular compounding period and a short period, with the short period being treated as provided in the preceding sentence.

     In addition to the covenants set forth in the Indenture, the Company is required to maintain Total Unencumbered Assets (as defined below) of not less than 150% of the aggregate outstanding principal amount of the Company’s Unsecured Debt (as defined below). For purposes of this requirement, the following capitalized terms shall be defined as follows:

     “Total Unencumbered Assets” means the sum of (i) those Undepreciated Real Estate Assets (as defined below) not subject to an encumbrance and (ii) all other assets of the Company and its Subsidiaries (as defined below) not subject to encumbrance determined in accordance with generally accepted accounting principles (but excluding accounts receivable and intangibles).

     “Subsidiaries” means a corporation, a limited liability company or a partnership a majority of the outstanding voting stock, limited liability company or partnership interests, as the case may be, of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries of the Company. For purposes of this definition, “voting stock” means stock having voting power for the election of directors, managing members or trustees, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.

     “Undepreciated Real Estate Assets” as of any date means the original cost plus capital improvements of real estate assets of the Company and its Subsidiaries determined in accordance with generally accepted accounting principles.

     “Unsecured Debt” means debt of the Company or any Subsidiary which is not secured by any mortgage, lien, charge, pledge or security interest of any kind upon any of their properties.

     If an Event of Default shall occur and be continuing, the principal of the Notes may, and in certain cases shall, be accelerated in the manner and with the effect provided in the Indenture.

     The Indenture contains provisions for defeasance of (i) the entire indebtedness of the Notes or (ii) certain covenants and Events of Default with respect to the Notes, in each case upon compliance with certain conditions set forth therein, which provisions apply to the Notes.

     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Debt

Securities at any time by the Company and the Trustee with the consent of the Holders of a majority of the aggregate principal amount of all Debt Securities at the time outstanding and affected thereby. The Indenture also contains provisions permitting the Holders of a majority of the aggregate principal amount of the outstanding Debt Securities of any series, on behalf of the Holders of all such Debt Securities, to waive compliance by the Company with certain provisions of the Indenture. Furthermore, provisions in the Indenture permit the Holders of a majority of the aggregate principal amount of the outstanding Debt Securities of any series, in certain instances, to waive, on behalf of all of the Holders of Debt Securities of such series, certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and other Notes issued upon the registration of transfer hereof or in exchange heretofore or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.

     No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay principal, premium, if any, and interest in respect of this Note at the times, places and rate or formula, and in the coin or currency, herein prescribed.

     As provided in the Indenture and subject to certain limitations therein and herein set forth, the transfer of this Note is registrable in the Security Register of the Company upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal hereof and any premium or interest hereon are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or by his attorney duly authorized in writing, and thereupon one or more new Notes having the same terms and provisions, of Authorized Denominations and for the same aggregate principal amount, will be issued by the Company to the designated transferee or transferees.

     As provided in the Indenture and subject to certain limitations therein and herein set forth, this Note is exchangeable for a like aggregate principal amount of Notes of different Authorized Denominations but otherwise having the same terms and provisions, as requested by the Holder hereof surrendering the same.

     No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary, except as required by law.

     THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF VIRGINIA.

ABBREVIATIONS

     The following abbreviations, when used in the inscription on the face of this Note, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM	- as tenants in common	UNIF GIFT MIN ACT	-                      Custodian
TEN ENT	- as tenants by the entireties		(Cust)                Minor)
JT TEN	- as joint tenants with right of		under Uniform Gifts to Minors
	survivorship and not as tenants		Act
	in common		(State)
	Additional abbreviations may also be used though not in the above list.

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR

OTHER

IDENTIFYING NUMBER OF ASSIGNEE

(Please print or typewrite name and address including postal zip code of assignee) this Note and all rights thereunder hereby irrevocably constituting and appointing Attorney to transfer this Note on the books of the Company, with full power of substitution in the premises.

Dated:
	Notice: The signature(s) on this Assignment must correspond with
	the name(s) as written upon the face of this Note in every
	particular, without alteration or enlargement or any change
	whatsoever.

EX-4.1

exv4w1

EX-12

EXHIBIT 12

Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
(Dollars in thousands)

	Three months ended June 30,						Six months ended June 30,
	2004			2003			2004			2003
Income before discontinued operations, net of minority interests	$	14,444		$	13,208		$	27,236		$	22,629
Add:
Portion of rents representative of the interest factor		157			167			312			328
Minority interests		572			225			1,070			801
Interest on indebtedness from continuing operations		29,295			29,595			58,201			61,156
Earnings	$	44,468		$	43,195		$	86,819		$	84,914
Fixed charges and preferred stock dividend:
Interest on indebtedness from continuing operations	$	29,295		$	29,595		$	58,201		$	61,156
Capitalized interest		208			173			480			322
Portion of rents representative of the interest factor		157			167			312			328
Fixed charges		29,660			29,935			58,993			61,806
Add:
Preferred stock dividend		5,094			6,532			10,178			13,478
Accretion of preferred stock		1,562			6,250			3,125			6,250
Preferred stock dividend		6,656			12,782			13,303			19,728
Combined fixed charges and preferred stock dividend	$	36,316		$	42,717		$	72,296		$	81,534
Ratio of earnings to fixed charges		1.50	x		1.44	x		1.47	x		1.37	x
Ratio of earnings to combined fixed charges
and preferred stock dividend		1.22	x		1.01	x		1.20	x		1.04	x

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Thomas W. Toomey, Chief Executive Officer and President of United Dominion Realty Trust, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of United Dominion Realty Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) (Reserved)

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2004	/s/ Thomas W. Toomey
	Thomas W. Toomey
	Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Christopher D. Genry, Executive Vice President and Chief Financial Officer of United Dominion Realty Trust, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of United Dominion Realty Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) (Reserved)

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2004	/s/ Christopher D. Genry
	Christopher D. Genry
	Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION

     In connection with the periodic report of United Dominion Realty Trust, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2004, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas W. Toomey, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

     (1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

     This Certification has not been, and shall be deemed, “filed” with the Securities and Exchange Commission.

Date: August 5, 2004	/s/ Thomas W. Toomey
	Thomas W. Toomey
	Chief Executive Officer and President

EX-32.2

EXHIBIT 32.2

CERTIFICATION

     In connection with the periodic report of United Dominion Realty Trust, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2004, as filed with the Securities and Exchange Commission (the “Report”), I, Christopher D. Genry, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

     (1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

     This Certification has not been, and shall be deemed, “filed” with the Securities and Exchange Commission.

Date: August 5, 2004	/s/ Christopher D. Genry
	Christopher D. Genry
	Executive Vice President and Chief Financial Officer