Ladies and gentlemen, thank you for standing by, and welcome to UDR's Second Quarter 2013 Conference Call. [Operator Instructions] Today's conference is being recorded, July 30, 2013. I would now like to turn the conference over to Chris Van Ens. Please go ahead.

Thank you for joining us for UDR's Second Quarter Financial Results Conference Call. Our second 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 risks 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 afternoon, everyone. Welcome to UDR's second 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. I will cover 4 topics today: first, our quarterly performance and recent guidance grade; second, multifamily fundamentals; third, our expanding relationship with MetLife; and lastly, the continued execution of our 3-year strategic plan. The second quarter was strong across all aspects of our business. Both earnings per share and operations outperformed versus our expectations, as well as we completed a number of transactions and finances. As a result, we raised earnings per share and same-store guidance into late June. Herzog and Jerry will provide more details on their prepared remarks on the quarter and the recent guidance increase. All in, we were very pleased with the first half of 2013 and the way it played out and look forward to more of the same for the balance of 2013. Nationally, multifamily fundamentals remain healthy. Demand continues to be driven by improving employment and positive demographics. New multifamily supply have increased from the trough as expected, but permitting trends now appear to be leveling off. In the vast majority of UDR's markets, demand and supply dynamics appear favorable, with 21 of our 23 markets expected to create at least 5 jobs for every new apartment home over the next 3 years. The national single-family market has also improved from its recessionary lows, albeit with some support from institutional investors. UDR's markets remain more sheltered than most from this improvement given the relative unaffordability and higher-propensity rent. In our coastal markets,…

Thanks, Tom. There are a number of topics I will cover today. First, our second quarter results; second, a balance sheet update; third, an overview of our recently announced transactions with MetLife; fourth, an update on insurance recoveries from Hurricane Sandy; fifth, a reiteration of how we look at development yields; and lastly, our third quarter and full year 2013 guidance. I'll begin with our second quarter results. FFO per share was $0.37. After deducting a $0.01 benefit from Hurricane Sandy insurance recoveries and taking into account the effects of rounding, FFO as adjusted per share was $0.35. The $0.01 of upside versus the midpoint of our previous FFO as adjusted guidance was primarily driven from better-than-expected same-store and non-same-store operations. Second quarter AFFO per share was $0.31 and benefited from a lower amount of CapEx spend 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 historical cost basis was 39%. On a fair value basis, it was 29%. Our net debt-to-EBITDA was 6.9x following the recent closing of the Vitruvian Park transaction with MetLife. And we anticipate that it will remain near this level through year-end 2013 as non-income earning assets come online. As of the end of the second quarter, we had no remaining outstanding debt maturities in 2013. Our improving balance sheet has not gone unnoticed. Recently, Moody's affirmed the company's credit rating of Baa2 and changed its outlook from stable to positive. We ended the quarter with $769 million of available liquidity through a combination of cash and undrawn capacity on our credit facilities. Next, as Tom highlighted in his opening remarks, in late June, we announced 2 separate…

Thanks, Tom. Good afternoon, everyone. In my remarks, I'll cover the following topics: second quarter operating results; I will also provide an update on our development lease-ups and redevelopment projects. We are pleased to announce another strong quarter of operating results. In the second quarter, same-store net operating income grew 6.8%, driven by a 5.2% year-over-year increase in revenue against a 1.6% increase in expenses. Real estate tax increases of almost 9% were offset by a reduction in repairs and maintenance expense, as well as lower marketing costs. Same-store revenue per occupied home increased by 5% year-over-year to $1,472 per month, while same-store occupancy of 96.1% was 20 basis points higher year-over-year. On a total portfolio basis, including our pro rata share of joint ventures, our revenue per occupied home was $1,602 per month. Sequentially, second quarter net operating income increased by 2.7%, representing typical seasonality. This was driven by a 2% increase in revenue against expense growth of 40 basis points. Turning to new and renewal lease rates. In the second quarter, effective rental rate increases on new leases at our same-store communities increased by 4.3% on average, and renewal rate growth remains strong at 5.4%. Specifically in New York, our communities that were impacted by Hurricane Sandy are fully back on track. Annualized turnover in the second quarter decreased by 230 basis points year-over-year to 55.4%. I'll remind everyone that turnover is highly seasonal and peaks in the second and third quarters during the spring and summer leasing seasons. Rent as a percentage of our tenants' income held steady at roughly 17%, similar to where it has been over the past several -- past few years. Next, our development and redevelopment programs, along with our same-store will drive our anticipated cash flow growth over the coming years. During…

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

Jerry, I was wondering if you can follow-up on the expenses in the quarter and particularly we saw a pretty good decrease in R&M. I was curious if that was just kind of led to timing of items last year or if you're starting to see some of your technology initiatives take hold?

It's really a little of both. A little bit's timing from last year, but most of it is the technology and other initiatives we've been doing to make our service teams more efficient in the way they do their business. And by making them more efficient, they're then able to bring more of the third-party services that we've historically vended out in-house. Those include automation, we've given all of our service guys a handheld device now that they can receive service requests without having to come into the office. And secondly, they're able to do their timekeeping online instead of having to walk all the way back to the office to punch in and out for breaks and for lunch. Lastly, I would tell you we've really started managing our people to labor standards, comparing different people, telling them what the expectation is of how long each task should take and that's helped make them more efficient, too. So it's predominantly that.

And just turning over to San Diego, you had some very impressive rent growth in the quarter there. I was just wondering if you're finally starting to see those job gains help apartment demand or is something else is going on during the quarter?

I think San Diego is picking up a bit, but our numbers are really inflated. We only have 2 properties on our same-store pool there, it's only about 300 units. But one of the properties on Oceanside is -- it has a tax-exempt bond that expired about 1.5 year on it. You have to wait 1 year after that to increase the rent on the 20% of the residents that really benefited from below-market rate units. So after we waited that 1-year period really to bring those 20% up to market, that's probably driven the outsize growth a little bit more than improvement in the market. But the market has...

Our next question comes from the line of Nick Joseph with Citigroup.

What are you seeing in terms all-in rates for unsecured debt and how has that changed over the past few months with the increasing rates?

Nick, this is Warren. I think our all-in rates on our -- on the tenure, we're looking right about kind of a 4.2% to 4.4% range. Spreads have tightened a little bit. We're in the 160 to -- 150 to 160 range, and obviously the tenure has gone up and down over the last month or so.

Okay, great. And then, I guess a bigger-picture question. How do you balance the attractiveness of JV capital against the additional complexities associated with the partnerships?

Well, I mean, when we think about joint venture capital, there are a variety of different benefits. For one, at times it could be trading at a price that's different from your NAV. And that provides an opportunity for bringing in funds at a cost-effective rate. Another is, it gives you the opportunity to tackle bigger deals by bringing -- and I'm assuming you're talking specifically about us, the deals that we did with MetLife. And with them we've got a long-term investor that is interested in multifamily. They like development. We have a long history with them. They prefer lower leverage. From our perspective, it also provides a good source of fees. So as I think about the size of the program and at what point it becomes too big, certainly, at a $500-or-so million equity investment in JVs, and call that $1 billion or so of real estate, against the $13 billion asset base for the company, we think it's still relatively very much in line and not too large at all. We consider it a net plus.

Our next question comes from the line of David Toti with Cantor Fitzgerald. David Toti - Cantor Fitzgerald & Co., Research Division: I just have a couple of general questions. Tom, in particular when you talk about the focus on urban concentrations I kind of understand the -- why they're compelling from a rank-growth perspective and sort of a -- in a kind of defensive positioning. Do you grow concerned that at some point there can be a liability on the urban locations relative to move-out rates because of the particulars of demographics you're targeting?

It's a fair question. I guess, time will yield an answer that we can look back on. Our view would be is that the urban setting, if you look at most demographic studies, this is where that 20- to 35-year-old age cohort is moving to the secured jobs and be around that lifestyle that they want. And I suspect that they're going to be renters for a longer period of time in that urban setting. If you specifically look at our market mix, you can see we've diversified across both coasts on an urban platform, if you will; trying to insulate against economic's ups and downs, but focusing on submarkets with a higher propensity to rent and a higher income bracket. We think that combination of characteristics over the long term will enable us to grow cash flow, grow NAV and deliver better returns that are available in the marketplace or what would be available in a boom-bust-type portfolio in a suburban setting. David Toti - Cantor Fitzgerald & Co., Research Division: Given that focus, and I know you -- this has been a particular strategy for the company for some time, do you guys experiment at all with adding services to those particular sites where you have that target demographic and concentration? Outside of the sort of standard cable and whatnot, is there a way to sort of package a real sort of secondary fee stream for these tenants given the preferences of that demographic?

Yes, David, this is Jerry. We've looked a little bit into that. Most of these properties will have concierge-type services, a doorman, at several of the properties especially the ones we have in the MetLife joint venture. We have valet parking services. We have started to experiment a bit with offering other types of concierge-type services to better accommodate our resident base and really sell them time that we can do some of their personal errands for them. We're really in the beginning stages of that. But we are finding with that higher-end demographic, probably not some of those urban guys that are more working class, but at the higher end, I think they do value their time and have excess funds and they would appreciate that. So we are looking into it. David Toti - Cantor Fitzgerald & Co., Research Division: Okay. And then my last question, and I apologize if I missed this, but did you guys talk about the specifics to the Texas market today? Seems to be growing concerns about supply. Some of the numbers look a little softer on a year-over-year basis. What are your views on the Texas markets for the next 6 to 12 months?

Well, this is Jerry again. Texas right now is holding up. It decelerated slightly from 1Q to 2Q. We operate in Dallas, both in up to North Dallas, Plano, as well as Addison and in uptown. And right now, supply is becoming an issue especially in uptown, a little bit up north, but job growth to date has been able to offset it. As we look over the next couple of years, we do anticipate job growth of at least 5:1 to new developments. So it probably won't be able to sustain the 7% to 10% year-over-year [indiscernible] in the last year or 2, but I still think it's going to be strong. I don't see it getting overbuilt. I think Austin, you're also seeing very high job growth, especially in the tech sectors. Apple's doubling their workforce, Samsung has built a $4 billion plant expansion there. There is a lot of new supply, as everybody knows, coming into Austin. Most of our properties are in the direct line of it. When you really go tour that downtown area, a lot of it is -- a lot of the new supplies coming up down on the South Lamar Street corridor. But when you're downtown, where our joint venture with MetLife at Ashton Austin is. We probably have the nicest product in town and we're not seeing a lot of competition there. And our other product in Dallas is more the B, B+ grade, and we're not competing directly with the new product.

Yes, it's Tom Toomey. I might add that just -- I think it's your typical cycle in Texas, which is you've got a very good run up in rents. There was not much supply. And what's happened recently is move-out of homeownership is going to kick in a little bit and supply. But for us, in our view in the long-term basis, Dallas and Austin are both great cities for job machines. There is where the economy is going to continue to prosper across many different employment basis. And so I think it's still a very good long-term market. It's just going through one of those minor adjustment periods and we'll probably see a good '14 out of it, too.

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

While we're on Texas, can you remind us when does the window for the debt repayment on the Texas JV open up? And what's the current thinking about what you guys are going to do with that?

This is Warren. The window, it opens in December 2014. I think we would discuss that with our partner both [indiscernible].

Okay. And then, Tom. What's the thought on the development pipeline now in terms of new starts? I mean, you're sitting here the 6, 6.5 yield on the current pipeline. When you take a look at the next projects in the queue, where are the -- given rising construction costs and financing costs, et cetera, where's the return sort of penciling out if you guys wanted to start those today? And what do you think you're starting between now and the end of the year?

Rob, this is Harry. We don't expect any additional starts in 2013. And if you look on Attachment 11, you can see that we have several land sites in our portfolio, both wholly-owned and in MetLife, many of which will be used to backdoor existing pipeline. We're actively working for the design and approval processes and would expect to start number of new projects in 2014. But remember costs are rising, but rents are also rising. We won't start a project unless we achieve a meaningful spread over market cap rates, at least 100 basis points on an untrended basis. So it's really -- it's asset-specific. The -- and the spread between the expected yield versus the expected market cap rate is something we look at closely. Today's spreads are relatively high. We think we have a little bit of cushion, but we will underwrite each of these assets before we start construction.

Our next question comes from the line of Alex Goldfarb from Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Just a few quick questions here. First, and maybe I'm just not really good at math and maybe I'm just missing a few things, but if you -- if we look at the MetLife JV, its $290 million is gross. And it looks like if you stabilize the -- forgive my pronunciation, Fiori deal? It looks like there's about $8.6 million of NOI coming off of that on an annualized basis, which would imply sort of a 3 cap. But if we used the 5 cap that's cited, that says that the development portion of that JV was valued at about $120 million. So $172 million for the 3 assets and $120 million for the development. Can you just walk through like what I may be missing in these calculations, or is that, in fact, the right way to look at it?

This is Herzog. Alex, your math -- there are a lot of numbers flying around there. But I do get your point, is that you're looking at what the cap rate was in the MetLife I transaction when we completed it and what does it look like today based on some of the transactions that are taking place. I guess I would describe it this way. The transactions that have been taking place have been swapped transactions, so that we and our MetLife partner could both increase our ownership and assets that fit our individual portfolio needs. And it really -- the whole transaction was more than a collection of assets. It really involved more the relationship, the options that were in place, development potential, et cetera. So as we look at the overall transaction, there's a lot more going on than just that. But as to the specific detail of what you're looking at on the cap rate, I'd have to look at the detail to see what you're referencing.

This is Warren. I think when you look at that deal, that deal was structured as a portfolio trade rather than disposition of individual assets. And they have their own specific allocation requirements and we are pretty much ambivalent. So when we look at it, it was just a $290 million trade. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Right, but you guys cited a 5 cap. So I'm just curious, the 5 cap would imply the part of the Vitruvian, those 3 assets, were value at $172 million. I just want to make sure, is that math right or am I missing something?

Alex, this is Harry. I'd have to look at your math, but Fiori is still a lease up. So my guess is you're looking in a non-stabilized revenue stream with a -- and applying a cap rate to that. If you apply a stabilized NOI to Fiori you'll get a number that's meaningfully higher than that. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. We can go offline. I was using a stabilized, but we can go offline. The second thing is just looking at the back half of the guidance, you guys have done 6.4% year-to-date, but your full year NOI guidance is 5% to 6%. So where in the portfolio are you expecting more of the slowdown that's going to bring the NOI down for the back half the year?

Yes. I'll take that, Alex, this is Jerry. Really let's look at it in 2 pieces. First, revenue. Through the first half the year, we've had results of 5.2% growth. So to get to the midpoint -- or the high point of our guidance, which is 5%, that means the second half would need to come in at about 4.8%. I can tell you based on what we're seeing today, what we expect to see the rest of the year, we're comfortable with that guidance. Our expectation is revenue will be near the high end. When you look at the expense side, year-to-date through June, we're at 2.6%. And to get to the midpoint of 3%, we need to average 3.4% in the second half of the year. I'd say we have 2 factors that could get us there. One, real estate taxes continue to be somewhat of an unknown. We've gotten valuations in on about half of our portfolio, but we still don't have them in for California or Florida, which make up 40% to 50%. And the second is we had a pretty favorable -- difficult comps in the second half of last year to compare to. So when you really see what could drive it, the biggest unknown right now is still real estate taxes. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: But isn't -- California is Prop 13, so why would the real estate tax be unknown?

It is Prop 13 but there's still the potential that some of our Prop 8 adjustments that we had in prior years haven't totally been factored in. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. So if I heard you correctly, the downside to NOI in the back half is more expense related not revenue related?

Yes, I think so.

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

Just given that we're halfway through the year, can you give us an update on where you stand with the remaining dispositions in your guidance?

Yes, we've got about $100 million of dispositions remaining. So that's where we're at in the second half. We have the $145 million or so with the Tribune [ph] transaction and then there's another $100 million on top of that.

Are those actively being marketed or...

Yes, we're in progress on a number of fronts and feel good about that number.

So that would be like a fourth quarter closing and kind of expected?

Yes, that's probably either late third or probably early fourth quarter.

Okay. And then my second question for Jerry, did you give July leasing trends? And also in previous calls you've given a loss -- a gain or loss lease statistic. Can you give us where that is for the portfolio? And then curious where the D.C. market is on that?

Yes, I can give you parts of that. I'll probably get the D.C. part later, I don't have that with me but in a follow-up, I'll give you that offline. Loss to lease as of the end of the quarter was about 4% for the portfolio. And as far as leasing trends through today, for the month of July, new leases are up about 4.3% to 4.4%. Reno [ph] was up probably right at that 5%, 6% level. And as of today, our physical occupancy in the same-store portfolio is 96.3%.

Just a follow-up to that, if I may. Also on the guidance, if you look at the run rate for the first half of the year in G&A versus the back half, seems like there's a pretty substantial increase in G&A in the back half of the year. Could you talk about what's going to drive that?

Yes, there were a couple of different things, Mike. Part of it is just timing items such as personnel, health care, legal costs, costs associated with software development, et cetera. And the other part of it is due to timing on incentive comp-type programs, just based on the way that the accounting works. Because the program was set up in February, there's no expense in the first month, for instance. And then certain components of it will be more heavily loaded in the second half of the year. So from a G&A perspective, it's still relatively just timing.

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

So, Jerry, I guess just a quick follow-up question on expenses. Can you talk about the 9% year-over-year real estate tax growth? How did that compare expectations? And where do you see the most pressure across your portfolio for conversations that are underway today outside of -- was it California and Florida?

It's roughly at expectations. We were right up around that 9% level in our budgets this year, so no huge changes yet. But like I said, we still haven't heard about California and Florida. I think Florida probably is where most of the conversation will come. We've already talked to Texas, Virginia, places like that. But I think most of it's going to come in Florida.

All right. And another one for Warren or Tom. On the new MetLife Vitruvian JV, the one with the Savoye and Fiori assets, can you discuss generally the nature and scope of fees from the JV? And also the long-term return required to hit and to promote there?

Yes, Haendel, this is Warren. In terms of the fees, it's structured pretty much like our existing one on MetLife II. There's a property management fee, there's a financing fee or pretty much market. As we do development, there will be development asset management fees. In terms of promote, there's not a promote structure in that. It's a 50-50 JV.

Great. And one more related to that. Can you discuss timing early thoughts for the other -- in the press release, the other 2,500 homes and 50,000 square feet of retails you plan to build out?

I'll start and let Harry really address that. We're in active discussions right now with MetLife over the future development of Vitruvian. And I will tell you they're very excited about developing that and making our master plan come fruition.

Yes. Haendel, this is Harry. In addition to talking to MetLife, we are beginning the design and planning process for the next phase. When that comes to fruition, I don't know. It'll be our first development deal with Met, so we're sort of testing each other out a little bit as we work through the planning process.

[Operator Instructions] And our next question comes from the line of David Bragg with Green Street Advisors.

So just comparing your guidance for the year to the 3-year plan that you had laid out. It appears as though with the stock trading at a discounted NAV, you've been able to remove your equity needs for 2013, and in doing so, have increased dispositions, cut back a little bit on development spending and redev spending. If the discount persists into 2014 and '15, is this the playbook that we should look for you to follow in terms of a deviation from the 3-year plan?

As far as the adjustment to the guidance as a result of the Vitruvian transaction, we did bring enough cash to remove the equity issuance that we had previously included. If our price went back up above NAV, we still could raise some of that equity. As far as cutting the development or redevelopment though, that had nothing to do with the current conditions. That's just been the timing of the spend that we've had within the programs. So as I look forward into 2014 and 2015, there's really nothing that's changed in our plan relative to the Vitruvian or market conditions at this point.

Right. But, Tom, if you go through 2014 and '15 and the stock's at a discount over that time frame, looking at the, I think, would be $350 million to $450 million of equity issuance in your 3-year plan, what are the levers -- could you just talk through the levers that you'd pull to offset that?

Well, one of the big ones is we still have about $400 million of non-core assets that could be utilized to create some funding. We have some warehouse assets of a much larger size that could be utilized, that we're in no hurry to liquidate, but that stands as a possibility. So again, as we look forward, we've got a number of different sources of funding that could be brought in. Equity, it could be debt, it could be joint ventures, and of course, the sales of noncore-type assets. So -- and on top of that, we've got, not that we would intend to use it, but in a shorter term, we still do have a sizable amount of capacity on our revolver. So there's a lot of different funding that we could use as we go forward.

Thank you. I'm showing no further questions in the queue at this time. Please continue with any closing comments.

Well, thank you, all of you for taking the time this morning or this afternoon. And certainly, we feel good about the business, feel good about our 3-year strategic plan and the execution of it. And we're seeing good, strong fundamentals in the business. And we see that continuing for some long period of time and are enjoying the benefits of it, and you'll see us continue to focus on execution. And with that, we'll see you shortly.

Ladies and gentlemen, this concludes our conference for today. If you'd like to listen to o replay of today's conference, please dial 1 (800) 406-7325 or (303) 590-3030, and enter the access code of 4628403. Thank you for your participation. You may now disconnect.