Ladies and gentlemen, thank you for standing by. Welcome to UDR's First Quarter 2013 Conference Call. [Operator Instructions] Today's conference is being recorded. At this time, I'd like to turn conference over to Chris Van Ens, VP of Investor Relations. Please go ahead.

Thank you for joining us for UDR's first quarter financial results conference call. Our first quarter press release and supplemental disclosure package were distributed earlier today and posted to our website, www.udr.com. In the supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. I would like to note that statements made during this call which are not historical, may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risk and risk factors are detailed in this morning's press release and included in our filings with the SEC. We do not undertake a duty to update any forward-looking statements. [Operator Instructions] Management will be available after the call for your questions that did not get answered on the call. I will now turn the call over to our President and CEO, Tom Toomey.

Thank you, Chris. And good morning, everyone, and welcome to UDR's first quarter conference call. On the call with me today are Tom Herzog, Chief Financial Officer; and Jerry Davis, Chief Operating Officer, who will discuss our results; as well as senior officers, Warren Troupe and Harry Alcock, who will be available to answer questions during the Q&A portion of the call. Multifamily fundamentals remain strong. Job growth continues at a slow and steady pace, while new supply remains manageable in the majority of our markets. Third-party research providers estimate that 5 new jobs are required to generate demand in 1 apartment home. Using this relationship, 18 of our 20 markets are expected to have more than sufficient demand to fully absorb the new multifamily supply that is forecast to come online over the next 3 years. Single-family housing is clearly recovering, but move-outs to home purchases remain contained at less than 12%, still well below the long-term average of 15%. From our investment perspective, the amount of capital looking to participate in the multifamily sector remains deep. This has kept cap rates stable, which in turn continues to propel above-average profit margins for development and redevelopment investments. Over the coming years, we expect the majority of these macro tailwinds to persist, especially for UDR, which owns a portfolio primarily concentrated in coastal gateway markets for multifamily renters who want to live and work where alternative housing options are relatively unaffordable and where long-term new supply pressures are below average. In February, we presented a 3-year strategic plan for the company. The plan focuses on driving high-quality cash flow per share growth over the coming years. We believe that cash flow growth is the primary driver of NAV per share growth, dividend growth and ultimately, total shareholder return. The team…

Thanks, Tom. There are several topics I will cover today: first, first quarter results; second, our balance sheet update; third, an update on insurance recoveries from Hurricane Sandy; fourth, a change to our income statement presentation; and lastly, our second quarter and full year 2013 guidance. Let me begin with our first quarter results. FFO per share was $0.35. After deducting a $0.01 benefit from Hurricane Sandy insurance recoveries, FFO as adjusted per share was $0.34. The $0.02 of upside versus the midpoint of our previous FFO as adjusted guidance was driven by a $0.01 from better-than-expected operations and another $0.01 from timing differences in G&A and other miscellaneous items. We expect these timing differences to reverse during the balance of the year. First quarter AFFO per share was $0.31 and benefited from $0.01 of lower CapEx spend than anticipated during the quarter, which again was due to timing. We continue to target $1,020 in maintenance CapEx per home in 2013. Turning now to the balance sheet. At quarter end, our financial leverage on a historic cost basis was 39%. On a market value basis, it was approximately 31%. Our net-debt-to-EBITDA was 7.3x, which remains on target with our plan. As a reminder, we anticipate that net-debt-to-EBITDA will peak at 7.5x toward the middle of the year and subsequently decline to 7.0x by year-end 2013 as non-income earning assets come online. We ended the quarter with $826 million of available liquidity through a combination of cash and undrawn capacity on our credit facilities. Next, an update on our insurance recoveries from Hurricane Sandy. Original damage estimate of $28 million to $32 million remains intact. To date, we have recovered $16 million or approximately 90% of the $17 million we have paid for hurricane damages incurred for rental income loss. Moving…

Thanks, Tom, and good afternoon, everyone. In my remarks, I will cover the following topics: first quarter operating results; an update on our non-mature communities, development lease-ups and redevelopment projects; and lastly, an update on our New York operations. We are pleased to announce another strong quarter of operating results. In the first quarter, same-store NOI grew 6.3%, driven by a 5.4% year-over-year increase in revenue against a 3.4% increase in expenses. Our same-store revenue per occupied home increased by 5.4% year-over-year, $1,448 per month, while same-store occupancy was flat at 95.5%. On a total portfolio basis, including our pro rata share of joint ventures, our revenue per occupied home was $1,569 per month. Sequentially, first quarter NOI declined by 10 basis points, representing typical seasonality for the first quarter. This was driven by a 0.8% increase in revenue and expense growth of 2.7%. Turning to new and renewal lease rates. In the first quarter, effective rental rate increases on new leases at our same-store communities increased by 2.2% on average and renewal rate growth remained strong at 5.8%. Annualized turnover in the first quarter decreased by 130 basis points year-over-year to 45.5%. Moving on to our stabilized non-mature communities, detailed on Page 8 of our supplement. These properties account for 40% of our total non-same-store NOI, excluding joint ventures, and they are performing slightly ahead of plan. Our in-progress developments and redevelopments are an important driver of our anticipated cash flow growth over the coming years. During the quarter, we spent $111 million on development and redevelopment projects, including $2 million on our recent work completed, Capitol View on 14th development in Washington, D.C. I'm pleased to report that our development lease-ups are on plan and our redevelopments are commanding the rental rate increases we underwrote. Lease-up specifics. Our…

[Operator Instructions] And our first question is from the line of Jana Galan with Bank of America.

Jerry, can you let us know what April is looking like for occupancy and new leases and the renewal rate growth and then what you're sending out for renewals?

Sure. Thanks, Jana. Currently, occupancy, as of yesterday, for the same-store portfolio was 96%, probably averaged a little above that 95.5% that we had in the first quarter. And in the month of April, new lease rate growth is currently coming in at 3.4% growth. And renewals are coming in at about 5.4%. We're sending out renewals right now, 60 days out, right up around that 5.7%, 5.8% range.

And then, your D.C. results were better than I was expecting. I was curious, do you think it's due to maybe having less government-related tenants in your portfolio. Or anything that you can kind of surmise why D.C. is holding up really well for you?

I think it's a couple of things. First, I would tell you, I think, we have the best operating team in the industry in Washington, D.C. that helps us, every year, perform well above average. Secondly, I think our properties are located in submarkets that today are not seeing a whole lot of new deliveries affect them. There's 1 or 2 that -- submarkets we will feel the effect of new supply later this year, but we've been fortunate to this point to not really encounter that. And I'd say on the government workers, we do have 1 or 2 properties that have felt the effect of some of the sequester, but it hasn't been rampant throughout the portfolio.

Our next question comes from the line of David Toti, Cantor Fitzgerald. David Toti - Cantor Fitzgerald & Co., Research Division: Just a quick question. Some of your occupancy and turnover trends kind of bucked what we had seen in some other reports. Your occupancy stayed flat and your turn actually went a bit lower. Two questions, are there any specific regions where there was strength impacting those metrics? And number two, do you believe you left some rent on the table by maybe not being aggressive enough with the rent part of the equation?

I don't think we left anything on the table. I think our intent this year was to run the turnover roughly flat with last year, and we are still pushing renewals up to what the current market rate is, so I don't think we're really leaving any money on the table. And I would tell you there's a couple of markets where turnover decreased significantly. One was up in our Monterey Peninsula, another was -- which was down about 16%; Portland was down about 14%; and Richmond, Virginia was down about 7%. And then, we did see spikes in San Diego. It was up almost 20%. And a large part of that is we had a tax-exempt bond that matured about 1 year, 1.5 year ago that had 20% of -- that required 20% of the units to be low-income housing. That requirement went away at the end of last year, and we're in the process right now of retenanting those units with the conventional lease rates. David Toti - Cantor Fitzgerald & Co., Research Division: Okay, that's helpful. And then my second question just has to do with technology. And you guys are sort of at the forefront of pushing a lot of the online service to your tenants as far down as the phones. Do you think you've kind of maxed out the technology impact at this point? Or are there other things that you're working on that you think you might get some additional financial benefits from?

We definitely don't think we've tapped it out. There's -- online leasing should be rolling out. We've been beta testing it for the last 4 to 6 months. We're ready to do a full rollout as we go into leasing season so that'll be beneficial. We probably don't see it having the same penetration rate that we've achieved on our online renewals, which are up around 80%, but we think that'll help people make a decision, that 24/7 ability to lease a unit and enjoy self-service. The bigger impact though of what we're working on this year and then probably carry forward for the next 2 to 3 years is introducing technology into the service aspect of our business. Where we use handheld devices to enable our guys to get service requests mobile-y, to punch in and punch out their time on a handheld device, which will save us quite a bit of time. And we're also using different reports now that are in our property management system to better measure the effectiveness of all of our service teams. One thing that we've also started putting in several of our rehabs, as well as our new developments, are electronic locks that we find our resident base appreciates that and our service teams also appreciate it because there's not a need to go back and forth to the office to get keys or the need to re-key the lock every time somebody moves in or moves out, which is a huge time savings. David Toti - Cantor Fitzgerald & Co., Research Division: Just one last question, if I can, Jerry. Have you guys experimented widely with trying to push through higher rental rates via the Internet-based applications versus sort of the traditional walk-ins and call-ins?

I'm not sure I understand the question. You're saying can I get higher rates because we have the electronic platforms for leasing? David Toti - Cantor Fitzgerald & Co., Research Division: Yes. Well, I guess, have you ever experimented with trying different rates through the different channels? Let's say, a walk-in really wants the apartment, do you offer higher rates there? Do you try to push the higher rates through the Internet, where the customers might be more accustomed increasingly to closing deals? I guess, have you experimented with the different tolerance levels in the customer base?

No, David. We've never done that. Whatever the rate is that we get from YieldStar for the given lease term, we would honor that regardless of how the person found us.

Our next question comes from the line of Nic Joseph with Citi.

How did first quarter same-store revenue growth compare with your original expectations? It's early in the year, but I'm trying to get a sense where you're tracking relative to guidance.

Sure, this is Jerry again. It came in a little bit better, not materially. I would tell you the biggest surprise to us was fee income was higher than expected predominantly due to lease breaks, and that was caused not so much by people moving out for home purchase. As Tom said, that move-outs to home purchase was still at 11.8%, below our historical averages. But we believe it was more related to people needing to move for job transfers. So that was a little better than what we had expected, a couple of hundred thousand dollars, and we're hopeful that continues throughout the year, but it's hard to tell if it will.

Okay, then. How does traffic trend, I guess, in the first quarter and what you've seen in April relative to historical averages?

Traffic actually is almost exactly flat. It's up 3 basis points, if you will. And through the month of April, it's continuing to track pretty even with what it was in 2012.

Great. And then finally, you mentioned earlier, Tom, that development remains very attractive. So can you give us some numbers around kind of where the development yields are trending, initial yields, versus where you're seeing transaction cap rates in those markets?

Sure. We -- on an untrended basis, we won't start a project unless we have sort of a meaningful variance to spot cap rates. That's going to be at least 100 to 150 basis points. As we've looked at our trended results of between 6% and 6.5% where the average spot cap rates in those markets are perhaps 4.5%, we've got 150- to 200-basis-point variance on our expected yield versus spot cap rates in those markets.

Our next question is from the line of Rob Stevenson with Macquarie.

Jerry, can you talk about where first quarter, on the expense side, came in relative to expectations for snow removal and the other sort of seasonality things like utilities, et cetera?

Sure. Expenses actually came in pretty close to budget. We were a little bit under, I think, utilities expense due to the first part of the season being a little warmer than normal and many of our markets was down. Snow removal really didn't affect me much on a same-store basis because most of the snow that hit us was up in the Boston area. And the impact of that I felt more in my MetLife JV assets. The one -- I've got 3 assets up there that are in my fort, that are in my same-store, one is actually an urban property with no snow removal costs. So snow removal was not a big player in my numbers.

Okay. And then, Tom, just back to the development question. I mean, you're sitting here, just on the development side with $1 billion pipeline. A lot of it's going to be delivered this year. When you look out and sort of see how the market is, sort of pricing development or underpricing development opportunities, is it a situation where you think about it and you steer the pipeline down or just let it burn down from projects coming off or you look at it as an opportunity and going to continue to maintain a sort of $1 billion development pipeline going out the next year until the economy starts weakening?

So Rob, first, we operate in 20 markets, and each market has its own cycle, with respect to the size and the annual spend on our development pipeline. First of all, is you're going to look at what our cost capital is versus what the opportunity is. And as we articulated in our 3-year strategic plan that we published in February, we'd like to keep the numbers somewhere between $300 million and $600 million on an annual spend basis. Projects typically take 3 years. So you can see that we're probably going to average right around $1 billion, $1.2 billion in total pipeline over the next 3-year period. We think we have enough in the shadow pipeline in the right markets that are stacking well up on the supply/demand equation for us, and we'll continue to execute at that level. We'll wait and see how the cost of capital changes that, how cost of building deals changes that and the individual markets before announcing more starts.

Okay. And then one for Harry. Have you been seeing any changes in the environment for dispositions, given the rumblings about changes at Fannie and Freddie?

Well, there continues to be tremendous demand for product in the marketplace. Cap rates, in general, for -- I mean, both for A and B product are flat or in some markets, are even down recently. I think more of the B market product is migrated down even more so than the A recently. The market fundamentals are still good, interest rates are still good, and there's a lot of demand for product in the market right now.

And our next question is from the line of Alexander Goldfarb with Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Just a first question is on the mid-Atlantic. If you look on Page 18, you have your new lease rates versus the renewals. And in the mid-Atlantic, Baltimore, Richmond, Norfolk, the new rates were negatives, while the renewals were positives. And conceptually, I understand that you can push rents more on renewals. But as you think about the -- going out the balance of this year, do you expect this trend to continue or do you think that new rates you'll be able to make positive? Or what's going on in those 3 markets that's causing it? Is that sequester? Is that just more competition?

Yes, Alex, this is Jerry. I guess, first, I'd start they're smaller markets for us but still irrelevant. The question, I don't think it is sequester. I think it was just timing of what was happening with the expiring leases and what was happening with some of the new leases. What happened in the case of Richmond, for example, we had 1 property that had quite a few corporate leases roll-off late in 4Q and early 1Q. And those are typically shorter-term leases with premium prices, and we reloaded with 12-month leases on conventional renters. I can tell you in the month of April, Richmond, for example, new lease rates are up 2.1%, so they're not down anymore. In Norfolk, that's a military town, and again, you'll have cycles with folks going out, folks coming in, things like that. I would expect new lease rates growth there to stay low. But again, in the month of April, it was flat, right at 0. And then in the case of Baltimore. Baltimore is a pretty weak market right now. There have been some government job cuts that have affected Baltimore, and there's also some new competition in a few of our submarkets, including Carlson, [ph] that have made it more difficult to push new rate on incoming people. And unfortunately there, I do have to report that in the month of April, I'm still negative at negative 1.6.% Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay, that's helpful. And then, for Mr. Herzog, I didn't want to say Tom and have confusion. Is -- on running the operating assets through the TRS through RE3, is there a time limit of how long you can run those through or this sort of accounting or tax say, "Hey, if you're operating, you have to move them back into the regular REIT?"

No, there's no time limit on that, Alex. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. So they can ...

From a -- go ahead. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: So indefinitely, you'll be booking these tax benefits or at a certain point, that somehow they reverse out or it burns off?

Well, it gets into a tax strategy conversation, that's probably a little deeper than we'll get into on this call. But when we think about the type of assets that might end up in there, it would be, solvent assets were one optionality. There could have been some assets that had certain improvements that might have had the 2-year rule attached to them historically or condo-type assets that we've decided since to keep down in the TRS. It is producing this benefit. You will note from the 3-year strategy document that we do show that benefit ticking down over the next couple of years in 2014 and 2015. So I do see us -- seeing that number reduce over time through some tax strategy that we'll be employing over the next couple of years. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. And just to finish up there, does it make these assets more advantageous to sell or when it comes time to figure out which assets you want to prune, it's no different picking these assets versus other assets?

It's really no different. There are strategies that we can employ that allow us to have a similar outcome.

Our next question is from the line of Karin Ford with KeyBanc.

Just on the 11.8% move out to home purchase stat. Jerry, can you just give us what the sequential quarterly comparison is on that versus last quarter?

Sure. Yes, last quarter, Karin, it was 13.4%.

Okay, helpful. And then just, Tom, just your thoughts on the single -- competition from the single-family market. It sounded like from your comments that you're continuing to think about it. Just wondering if you're feeling -- as we keep getting more and more positive data points on the recovery in the single-family market, that you're feeling increasing concern from competition there. It doesn't sound like it's manifesting itself in the stat yet, but is there something you're thinking about in the quarters ahead?

Yes, Karin. A couple of points on this. I guess, first, I'd say, we've all lived through a period of time where single family was almost a predator of the apartment industry through lax lending and programs that were probably just not, and turned out to be, not right. I don't see that horizon turning, and that was a big fueling engine towards a lot of our results over the last decade, is fighting back homes. If you look over even a longer period horizon, I think homes will start to get back to the 1 million, 1.2 million start number. That's going to be concentrated a lot in the prior homebuilding markets. This exposure of this portfolio today doesn't quite carry the same exposure it has historically at all to that type of marketplace competition. So it seems to weigh less on our mind as a direct competitor because we're just not in those markets that much anymore. And so going future, I don't believe the housing policy in America, that what derailed us for the financial crisis is going to come back into vogue. And I'd see a nice balance, with a healthy recovery in the single-family market, driving jobs. We'll benefit from some of that, and I like our position on a long-term basis.

Our next question is from the line of Paula Poskon, Robert W. Baird. Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division: Jerry, just a follow-up on some of the expense commentary on Page 15 in the supplement. Just wondering what is sort of causing the huge swing or discrepancies between some of the submarkets within even the same region. So for example, Monterey expenses were up 10.5%, but San Diego was down 9.5% or similarly, Dallas is only up 4% but Austin, over 13%. So kind of what's driving those kinds of discrepancies within regions?

Well, Paula, frequently, most of the outliers tend to come from real estate taxes. Now there are some situations where it's lower or it's something else. For example, in the Monterey Peninsula, the bulk of that increase came from an increase in personnel because we are running that portfolio in the first quarter of last year with quite a few staff openings from natural turnover, plus in the fourth quarter of 2011, as the positions turned, we elected to keep them open for a prolonged period of time. Because it's our slower time of the year, we waded deep into the first quarter to really feel the need to reload that position. But I can tell you as I look at the reasons for all of either large increases or decreases, 80% of the time, it's real estate taxes, either something that happened this year where the valuation increased or last year, we potentially had a refund. Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division: That's helpful, Jerry. And Tom, just a big-picture question for you. It's been a tremendous 5-year period of activity for UDR. Playing Monday morning quarterback, do you wish you had done anything differently? Or did everything pretty much play out according to plan?

Well, Paula, I'm not one to kind of look in the rearview mirror and try to drive the ship towards the future based on what I would have done differently or not. I think we had a good 5-year period. I think we executed. We communicated. Probably, could have done a better job of communicating our activities, the long-term vision. And that led us to generate the 3-year plan. And clearly, articulate here is where the portfolio is, here's where the portfolio is headed. And we're extremely focused on executing that plan. And so I don't "Monday quarterback" a lot other than maybe the Bronco's safety and letting the ball get over his head. But with running the business, we're very focused on that plan.

Our next question comes from the line of Michael Salinsky with RBC Capital Markets.

Tom, first question. Just we're basically approaching May right now. As we think about disposition timing relative to your guidance, are you guys marketing anything right now and how do you expect that to play out? As well as additional development starts for the year. I know your guidance previously did not include any additional starts.

Mike, this is Harry. We -- even though we have some dispositions in our guidance, we're working on getting those projects in the market now. Again, as I mentioned earlier, there is terrific investor demand for the type of product we're going to be selling, so we don't anticipate any issues achieving our guidance. Second part of the question with respect to development starts, I think it would be -- it's unlikely that we're going to have any this year. Just given where we are in the entitlement and design process, I wouldn't expect any new starts until early next year.

Okay. Just following up on that question then. As you think about -- I mean, consistent with your 3-year plan, kind of developed -- delivering kind of $300 million to $600 million annually. I mean, if you don't start projects in '13, it kind of leaves a hole there in terms of '15 deliveries. How should we think about kind of backfilling the pipeline, if that is? Or is it more -- can you guys take a kind of sit-back approach here looking at potential acquisition opportunities in kind of '15 and '16?

Mike, we've looked at that '15, a little bit of drop-off, and it will probably drop to the $300 million in that year would be kind of the run rate at this point. That doesn't mean that something might come out of the woodwork but I doubt it. With respect to acquisitions in that window of time, we always look at the acquisition markets, but we're going to weigh it against our cost of capital and weigh it against what we think we can do with the asset. And it's hard for me to forecast out what's going to be the environment in '15 given all the variables. But we continue to always examine it under that light.

Our next question is from the line of Rich Anderson with BMO Capital Markets.

So Tom, just kind of a first big-picture question. With Avalon and EQ Irvine, Archstone, do you see this sector kind of going the way the health care REIT sector has gone to a couple of very large companies and then a smaller rung. Or do you think that it's getting closer to a time where M&A, public-to-public M&A, could start to make sense in the space, to get bigger companies?

Rich, it's hard for me to speculate on public M&A in this space. You know what it takes to be successful in that frontier, which is a cost of capital advantage, a G&A cut savings. And I just don't know how those line up in other people's minds. We're focused on our 3-year plan. We'll continue to execute on that. With respect to the debt markets and taking companies private, you're seeing large pools of capital rates. That's probably one of the things that they are looking at is same REITs are cheap compared to private market valuations, leverages are out there and it's abundant and it's an attractive rate. That seems to be probably where I would tilt conversation more to -- than I would towards M&A activity.

Okay. So you don't feel any kind of anxiety about not being very large, relatively speaking, as a company?

No, I think, Rich, very good question. We weighed, as part of our 3-year strategic plan, about the size and scope of our enterprise. And what our research indicated to us is the top 25 REITs have a distinct and a very tight bandwidth of cost of capital, and it's not very advantageous once you get out the top 5. So our focus and plan over the 3 years was to remain in the top 25 REITs in terms of equity and enterprise value, and we think that plan will sustain us in that range. And don't see the ambition toward getting in the top 5 and trying to create a cost of capital advantage. So I think we thought through that process. We'll continue to monitor the market and how it shifts. But that seems to be the historical trend. And I think it's probably going to be one that will project to the future very well in our view.

Okay. Another big picture, if I may. Have you ever worried or do you worry about any kind of regulatory pressures entering the system? You guys, as an industry, did very well pushing rents when we're in the midst of a recession. I'm curious if taking the foot off the accelerator a little bit from a rent perspective and maybe making your money through lower turn, lower CapEx is a model you think that we could be someday approaching as a means to not have that regulatory conversation start to happen. Is that something you would consider?

No, we continue to monitor it. And I will say that Washington, no one ever sleeps while they're in session. On a state and local level where we do see, from time-to-time, fights on rent controls, it seems, in the end, cities are looking at it from a longer-term perspective and realizing rent control environments do not bring new innovative product to their space, and they resist that. And they want that new innovative because they want to attract the younger, more vibrant workforce. And in our markets, we think that will win out over time, so I'm not overly concerned about rent control in the current environment. Trading off, turnover and rent increases, Jerry weighs that every time he prices a unit. And so we're always looking at it and saying, "We want this much traffic. We need to get this price point." We're going to always try to maximize the value of our assets, and if we feel like a market has reached a point or an asset has reached a point, we'll look at the alternatives. I mean, our job is to allocate capital, get the most out of it. And when that is exhausted, move on and find another place for that capital.

Okay. And then last question, maybe for Tom -- I'm sorry, Mr. Herzog. The issue of holding assets in the TRS, could you just remind me if you can quantify what the kind of benefit is to FFO from doing that, if any? I just don't remember. Is there like a flow-through that you get because of that strategy?

Yes. We have, in our guidance, a number, $12 million for 2013. It was in at, I think, $9 million for 2012 so that is the benefit that does flow through.

That's just a tax benefit. Is that right?

It was a tax benefit, correct.

Okay. Do you take it out when you look at operating FFO or whatever you call it?

No, we don't. We did take out the removal of the valuation allowance last year. That was a carve-out that occurred in the first quarter, and that had been reduced from the FFO, the core FFO and for that matter, the FFO itself. But in the exact sense of itself, it does flow through.

It smelled a little bit like Archstone when they were booking gains because they did things in the TRS into FFO. I mean, is that kind of the path you want to go down from an FFO definition perspective? Any thought about just taking that out? It's a small number, why bother with it anyway?

It's been something that was in our numbers, from a comparability perspective. We'll keep it in there. It is part of our run rate. Again, I do see that declining over the next couple of years, so we'll continue to present it as we have.

Our next question comes from the line of Dave Bragg with Green Street Advisors.

I just wanted to follow-up on a couple of comments that you made and ask a question on it. Tom, you mentioned that the amount of capital in the multifamily space remains deep. Harry, I think you observed flat cap rates continuing, but we'd all agree that NOI growth outlooks are moderating. So to what extent do you observe that buyers are continuing to lower their return requirements? And are you noticing that from your JV partners specifically?

This is Tom. I'll take a first shot at it, and let anybody else clean up on it. What I think of this is, first, there's lots of long-term yield-oriented investors out there that are interested and have been underexposed to multifamily and are gaining an appreciation for the asset class and are growing their asset base. And I think second buyers, the levered buyer who's taking advantage of extremely low rates continues to be deep and hunting a lot of the B-type portfolio, where they could add extra leverage. The institutional-quality, coastal A buyer, low-levered buyer, it's a safe haven for money in their view, and probably will continue to be buyers in the future. So I don't think they're overly concerned about a degregrading [ph] NOI curve when they look at the long-term alternatives and believe that coastal, high-quality urban product has a long-term growth trajectory, which is probably going to be more prevalent as we see costs rise for replacements, as well as NOIs. So I think they're in for the long-term haul, and I would expect the asset class to do well, not just in the public space, but in the private space.

Okay. And speaking of rising construction costs. It seems as though yours were pretty well contained with the exception of Mission Bay. A bit of an uptick there. Is that project-specific? And while we're touching on that, can you just comment on the supply outlook for that submarket?

Dave, this is Harry Alcock. With respect to Mission Bay specifically, that was project-specific. There's couple of reasons for it. One is we intentionally slowed the rate of unit deliveries, given that first units are scheduled for delivery in October so that added something to our carry costs. Second as we went through and assessed the project, we found that we could get paid for improving the quality of the product in a manner that will allow us to standout from our competitor. So we did things like added AC, we upgraded the unit interior finishes and we upgraded our wireless system. We did this whole thing in a lower cost environment, meaning that we expect that our costs, even with these upgrades, will be lower than competing developments or these changes did force a change in our overall reported development cost.

And Dave, this is Jerry. I think you had asked about supply coming. And what we're seeing is somewhere in the 1,000 to 1,500 units coming through the end of 2014 down in that Mission Bay submarket.

Okay, that's helpful. And on this project specifically, where do you see your rents on a per square foot basis coming out?

Well, we're going to be well above $3 a foot, well above $3.50 a foot. When we begin our lease-up here in the next 3 to 4 months, we will again look at rent expectations. As you probably know, the San Francisco market has been very, very strong. These units have continued to reprice, and we'll look at it again, but we'll be above $3.50 a foot.

Our next question is from the line of Haendel St. Juste with Morgan Stanley.

So 2 questions. I want to go back to the comprehensive 3-year strategic plan that you laid out on last quarter's call. I'm curious how some of your near-term outlook on sources and uses could change if your stock continue' to trade below NAV. In conjunction with attractive unsecured bond market pricing and the relatively attractive pricing for well-located, good-quality assets. So just thinking how some of the numbers you laid out could change against a backdrop that I just laid out.

This is Tom Herzog. When we look at the assumptions in the 3-year strategy, we spoke to a certain amount of equity issuance, some bond offerings, some sales, and those all are ways to generate capital. And I'm going to add to that proceeds from joint venture transactions, where we might bring a partner in. And I think as we look outward, first of all, we've got conversations going on, on a number of fronts in some of these areas. And so what we end up doing is going to be dictated by the outcome of those conversations. As far as the bond markets, they definitely do look good. Rates look favorable. From a stock perspective right now, we're trading at a discount. As we indicated in the last call, we're very unlikely to want to issue stock at a discount to our NAV. So all those factors will come into play, and we'll see what transpires over the next several months. For now, we have not modified those assumptions in our 3-year strategy, but certainly, over the next quarter or so, I would imagine we'll have a better insight into what that will look like, that we'll be able to provide to you.

Okay. And one more here, specifically on asset sales. We've seen a number of your public peers sell some D.C. assets recently at pretty good pricing. Curious how you view your current D.C. exposure today in light of those recent asset sales, but also against the backdrop of moderating growth and the supply wave?

I'm sorry, Haendel, our D.C. asset sales?

Curious -- we've seen Equity, Avalon and Lehman Brothers sell assets in D.C. here over the last few weeks, few months. And so I'm curious how you think about your D.C. portfolio in light of the attractive pricing that's available against the backdrop of the slowing growth we're seeing in D.C. and the mounting supply wave that's coming into D.C.

I think we look at our portfolio sort of on a regular basis to decide which assets we're going to sell. We expect to find very strong pricing in many of our markets. And typically, if you're going to sell an asset, you'd prefer to sell an asset that has sort of robust, expected short-term revenue and NOI increase as opposed to assets that, just from an investor standpoint, have slightly lower. I mean, your pricing simply is going to be better. Does that answer your question?

To a certain degree. But just more curious as to we've seen others pare back their exposure there. Just curious as to your -- not just the portfolio and its prospects, but just do you feel that it might be a good time to pare back and capitalize on some of the full -- the rather full pricing that people appear to be getting for D.C. assets?

Hendel, this is Toomey. With respect to the portfolio, I articulated earlier a little bit of our strategy about the size of the enterprise. And how we expect it to be over the next 3-year period. And from that, what we drove down was a submarket ranking of our portfolio, and from there, really look at it and said, "How much do we want to have in D.C. to have a balanced portfolio?" Today, we're at that target. What we will always look at is the pricing of assets, the use of capital. We'll weigh it as time goes by. We're not really kind of trying to tie markets in our overall philosophy. What we're trying to do is buying the best submarkets with long-term cash flow appreciation and value. We think we have a great portfolio in D.C. that fits very well in many of those submarkets, as you can see in Jerry's recent market performance relative to peers. And it's taken us a decade to assemble this portfolio. We're a long-term holder. We're not going to flip it out when market conditions are just right for a day. We're a long-term holder. We're comfortable where we're at, and we think there is other places where we can maximize our capital utilization and recycling in D.C. in this current cycle right now.

Thank you. Ladies and gentlemen, that does conclude our question-and-answer session. For closing remarks, I would like to turn the conference back to Tom Toomey, President and CEO.

Well, thanks, all of you, for participating on today's call. Certainly, you can see we feel very good about our business after 1 quarter. We feel very good about our long-term business plan and the execution on that. And we will see many of you in NAREIT in a few weeks. So with that, take care.

Ladies and gentlemen, if you'd like to listen to a replay of today's conference, please dial 1 (800) 406-7325 or (303) 590-3030 using the access code of 4612133 followed by the #. This does conclude the UDR First Quarter 2013 Conference Call. Thank you for your participation. You may now disconnect.