e424b3
 

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-115696

Pricing Supplement No. 7
Dated April 28, 2005
(To Prospectus dated June 9, 2004 and Prospectus Supplement
dated June 17, 2004, as supplemented by a Supplement dated September 29, 2004)

UNITED DOMINION REALTY TRUST, INC.
Medium-Term Notes Due Nine Months or More From Date of Issue

Fixed Rate Notes

The Notes are not Discount Notes.

     
Principal Amount: $50,000,000
  Specified Currency: U.S. dollars
Settlement Date: May 3, 2005
  Stated Maturity Date: January 15, 2015
Original Issue Date: November 1, 2004
  Authorized Denomination: A/S
Interest Payment Dates: July 15 and January 15,
  Initial Redemption Percentage: See Below
  commencing July 15, 2005
  Optional Repayment Date(s): See Below
Initial Redemption Date: See Below
  Interest Rate: 5.25%
Annual Redemption Percentage Reduction: See Below
  Regular Record Date(s): A/S
Exchange Rate Agent: N/A
  Additional/Other Terms: See Below
Default Rate: N/A
  Net Proceeds to the Company: 98.234%
Day Count: 30/360
   
Agent: Wachovia Capital Markets, LLC
Agent’s Commission: Wachovia Capital Markets, LLC proposes to offer the notes from time to time for sale in negotiated transactions, or otherwise, at varying prices to be determined at the time of each sale, plus interest accrued from November 1, 2004.

     “N/A” as used herein means “Not Applicable.” “A/S” as used herein means “As stated in the Prospectus Supplement dated June 17, 2004, as supplemented by a Supplement dated September 29, 2004.”

     These notes represent a reopening of the 5.25% medium-term notes due 2015 issued by United Dominion Realty Trust, Inc., and these notes constitute a single series of notes with those notes, bringing the aggregate principal amount of the notes outstanding to $250 million.

     Pursuant to U.S. Treasury regulations section 1.1275-2(k)(3), the issuance of the notes will be treated as a “qualified reopening” of the fixed rate notes with an original issue date of November 1, 2004 (the “original notes”). Therefore, for purposes of the rules governing original issue discount, the notes will have the same issue date, issue price and adjusted issue price as the original notes. See “U.S. Federal Income Tax Consequences — U.S. Holders — Original Issue Discount” in the prospectus supplement dated June 17, 2004. Depending on your purchase price for your notes, your notes may have a market discount or amortizable bond premium. See “U.S. Federal Income Tax Consequences — U.S. Holders — Market Discount” and “— Acquisition Premium; Amortizable Bond Premium” in the prospectus supplement dated June 17, 2004. The purchase price for the notes will also reflect interest accrued from November 1, 2004 (“pre-issuance accrued interest”), which will be included in the accrued interest to be paid on the first interest payment date on July 15, 2005. In accordance with U.S. Treasury regulations section 1.1273-2(m), for purposes of the rules governing original issue discount, United Dominion Realty Trust, Inc. will exclude the pre-issuance accrued interest from the issue price of the notes. In accordance with this treatment, holders must treat a corresponding portion of the interest payable on the first interest payment date as a return of the excluded pre-issuance accrued interest, rather than as an amount payable on the notes.

     United Dominion Realty Trust, Inc., sometimes referred to herein as the “Company,” may redeem all or part of the notes at any time at its option at a redemption price equal to the greater of (1) the principal amount of the notes being redeemed plus accrued and unpaid interest to the redemption date or (2) the Make-Whole Amount for the notes being redeemed.

     “Make-Whole Amount” means, as determined by the Quotation Agent, the sum of the present values of the principal amount of the notes to be redeemed, together with the scheduled payments of interest (exclusive of interest to the redemption date) from the redemption date to the maturity date of the notes being redeemed, in each case discounted to the redemption date on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Adjusted Treasury Rate, plus accrued and unpaid interest on the principal amount of the notes being redeemed to the redemption date.

     “Adjusted Treasury Rate” means, with respect to any redemption date, the sum of (x) either (1) the yield for the maturity corresponding to the Comparable Treasury Issue, under the heading that represents the average for the immediately preceding week, appearing in the most recent published statistical release designated “H.15 (519)” or any successor publication that is published weekly by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities” (provided, if no maturity is within three months before or after the remaining term of the notes being redeemed, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounded to the nearest month) or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, in each case calculated on the third business day preceding the redemption date, and (y) .20%.

     “Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term from the redemption date to the maturity date of the notes being redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the notes being redeemed.

     “Comparable Treasury Price” means, with respect to any redemption date, (x) the average of three Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations so obtained or (y) if fewer than five Reference Treasury Dealer Quotations are so obtained, the average of all such Reference Treasury Dealer Quotations so obtained.

     “Quotation Agent” means the Reference Treasury Dealer selected by the indenture trustee after consultation with United Dominion Realty Trust, Inc.

     “Reference Treasury Dealer” means any of J.P. Morgan Securities Inc., Goldman, Sachs & Co., their respective successors and assigns and three other nationally recognized investment banking firms selected by United Dominion Realty Trust, Inc. that are primary U.S. Government securities dealers.

     “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the indenture trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the indenture trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date.

WACHOVIA SECURITIES


 

RECENT DEVELOPMENTS
     The Company’s financial results for the quarter ended March 31, 2005 are as follows:
Balance Sheet Information

UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

                 
    March 31,     December 31,  
In thousands, except share and per share amounts   2005     2004  
ASSETS
               
Real estate owned:
               
Real estate held for investment
  $ 5,167,321     $ 5,027,892  
Less: accumulated depreciation
    (1,021,170 )     (978,159 )
 
           
 
    4,146,151       4,049,733  
Real estate under development
    74,859       64,921  
Real estate held for disposition (net of accumulated depreciation of $10,328 and $29,728)
    58,655       120,755  
 
           
Total real estate owned, net of accumulated depreciation
    4,279,665       4,235,409  
Cash and cash equivalents
    1,661       7,904  
Restricted cash
    5,921       6,086  
Deferred financing costs, net
    23,463       25,151  
Investment in unconsolidated development joint venture
    436       458  
Funds held in escrow from 1031 exchanges pending the acquisition of real estate
          17,039  
Note receivable
    5,000       5,000  
Other assets
    36,590       34,347  
Other assets — real estate held for disposition
    1,280       607  
 
           
Total assets
  $ 4,354,016     $ 4,332,001  
 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Secured debt
  $ 1,088,451     $ 1,197,924  
Unsecured debt
    1,852,663       1,682,058  
Real estate taxes payable
    19,330       31,377  
Accrued interest payable
    24,736       18,773  
Security deposits and prepaid rent
    26,306       25,168  
Distributions payable
    45,800       44,624  
Accounts payable, accrued expenses, and other liabilities
    46,945       50,217  
Other liabilities — real estate held for disposition
    1,115       2,816  
 
           
Total liabilities
    3,105,346       3,052,957  
Minority interests
    79,942       83,593  
Stockholders’ equity
Preferred stock, no par value; $25 liquidation preference, 25,000,000 shares authorized;
    5,416,009 shares of 8.60% Series B Cumulative Redeemable issued and outstanding
        (5,416,009 shares in 2004)
    135,400       135,400  
2,803,812 shares of 8.00% Series E Cumulative Convertible issued and outstanding (2,803,812 shares in 2004)
    46,571       46,571  
Common stock, $1 par value; 250,000,000 shares authorized
136,940,069 shares issued and outstanding (136,429,592 shares in 2004)
    136,940       136,430  
Additional paid-in capital
    1,625,479       1,614,916  
Distributions in excess of net income
    (761,905 )     (731,808 )
Deferred compensation — unearned restricted stock awards
    (13,757 )     (6,058 )
 
           
Total stockholders’ equity
    1,168,728       1,195,451  
 
           
Total liabilities and stockholders’ equity
  $ 4,354,016     $ 4,332,001  
 
           

2


 

Statement of Operations Information

UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

                 
    Three Months Ended  
    March 31,  
In thousands, except per share amounts   2005     2004  
Rental income
  $ 171,331     $ 143,231  
Rental expenses:
               
Real estate taxes and insurance
    20,864       17,675  
Personnel
    17,536       14,950  
Utilities
    10,363       9,254  
Repair and maintenance
    10,687       8,486  
Administrative and marketing
    6,080       5,020  
Property management
    4,813       4,361  
Other operating expenses
    290       270  
 
           
 
    70,633       60,016  
Non-property income:
               
Sale of technology investment
    12,306        
Other income
    668       395  
 
           
 
    12,974       395  
Other expenses:
               
Real estate depreciation and amortization
    51,715       39,111  
Interest
    39,160       28,913  
General and administrative
    7,000       4,754  
Loss on early debt retirement
    8,464       5  
Other depreciation and amortization
    671       909  
 
           
 
    107,010       73,692  
Income before minority interests and discontinued operations
    6,662       9,918  
Minority interests of outside partnerships
    (58 )     (64 )
Minority interests of unitholders in operating partnerships
    (162 )     (209 )
 
           
Income before discontinued operations, net of minority interests
    6,442       9,645  
Income from discontinued operations, net of minority interests (including gain on sales)(A)
    8,499       5,667  
 
           
Net income
    14,941       15,312  
Distributions to preferred stockholders — Series B
    (2,911 )     (2,911 )
Distributions to preferred stockholders — Series D (Convertible)
          (1,036 )
Distributions to preferred stockholders — Series E (Convertible)
    (931 )     (1,138 )
Premium on preferred stock conversions
          (1,562 )
 
           
Net income available to common stockholders
  $ 11,099     $ 8,665  
 
           
Earnings per weighted average common share — basic and diluted:
               
Income from continuing operations available to common stockholders, net of minority interests
  $ 0.02     $ 0.02  
Income from discontinued operations, net of minority interests
  $ 0.06     $ 0.05  
Net income available to common stockholders
  $ 0.08     $ 0.07  
Common distributions declared per share
  $ 0.3000     $ 0.2925  
Weighted average number of common shares outstanding — basic
    136,067       126,984  
Weighted average number of common shares outstanding — diluted
    137,073       127,953  

(A)   Discontinued operations represents all properties sold since January 1, 2002 and properties that are currently classified as held for disposition at March 31, 2005.

3


 

Other Information

UNITED DOMINION REALTY TRUST, INC.
FUNDS FROM OPERATIONS
(Unaudited)

                 
    Three Months Ended  
    March 31,  
In thousands, except per share amounts   2005     2004  
Net income
  $ 14,941     $ 15,312  
Adjustments:
               
Distributions to preferred stockholders
    (3,842 )     (5,085 )
Real estate depreciation and amortization
    51,715       39,111  
Minority interests of unitholders in operating partnership
    162       209  
Real estate depreciation related to unconsolidated entities
    62       57  
Discontinued Operations:
               
Real estate depreciation
    4       3,800  
Minority interests of unitholders in operating partnership
    529       397  
Net gain on sale of depreciable property
    (7,023 )     (1,205 )
 
           
Funds from operations (“FFO”) — basic
  $ 56,548     $ 52,596  
 
           
Distribution to preferred stockholders — Series D and E (Convertible)
    931       2,174  
 
           
Funds from operations — diluted
  $ 57,479     $ 54,770  
 
           
Gains on the disposition of real estate developed for sale(A)
    459        
 
           
FFO with gains on the disposition of real estate developed for sale — diluted
  $ 57,938     $ 54,770  
 
           
Weighted average number of common shares and OP Units outstanding — basic
    144,586       135,901  
Weighted average number of common shares, OP Units, and common stock equivalents
outstanding — diluted
    150,187       145,163  

    FFO is defined as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. This definition conforms with the National Association of Real Estate Investment Trust’s definition issued in April 2002. United Dominion considers FFO in evaluating property acquisitions and its operating performance and believes that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of United Dominion’s activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs.
 
    For the three months ended March 31, 2004, distributions to preferred stockholders excludes $1.6 million related to premiums on preferred stock conversions.
 
(A)   See the following GAAP reconciliation for further discussion.

4


 

UNITED DOMINION REALTY TRUST, INC.
FUNDS FROM OPERATIONS (continued)
(Unaudited)

The following is a reconciliation of GAAP gains from the disposition of real estate developed for sale to gross gains from the disposition of real estate developed for sale.

                 
    Three Months Ended  
    March 31,  
In thousands   2005     2004  
GAAP gains from the disposition of real estate developed for sale
  $ 466     $  
Less: accumulated depreciation
    (7 )      
 
           
Gains from the disposition of real estate developed for sale
  $ 459     $  
 
           

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

The following is a reconciliation of FFO share information to weighted average common shares outstanding, basic and diluted, reflected in the statements of operations information for the three months ended March 31, 2005 and 2004.

                   
    Three Months Ended
March 31,
     
In thousands   2005   2004
         
Weighted average number of common shares and OP units outstanding — basic
    144,586       135,901  
Weighted average number of OP units outstanding
    (8,519 )     (8,917 )
             
 
Weighted average number of common shares outstanding — basic (per the Consolidated Statements of Operations)
    136,067       126,984  
             
Weighted average number of common shares, OP units, and common stock equivalents outstanding — diluted
    150,187       145,163  
Weighted average number of OP units outstanding
    (8,519 )     (8,917 )
Weighted average number of Series A OPPSs outstanding
    (1,791 )     (1,791 )
Weighted average number of Series D preferred shares outstanding
          (3,077 )
Weighted average number of Series E preferred shares outstanding
    (2,804 )     (3,425 )
             
 
Weighted average number of common shares outstanding — diluted (per the Consolidated Statements of Operations)
    137,073       127,953  
             

5


 

Portfolio Repositioning
As previously announced during the first quarter of 2005, the Company acquired one apartment community in Newport Beach, California with 715 apartment homes for a purchase price of $106 million. This property was one of the two remaining communities to be purchased in the Essex transaction. The Company also sold 10 older communities in Houston and Phoenix with 1,855 apartment homes for a total of $69.1 million. On average, these homes were 24 years old, approximately 900 square feet in size, and generated $629 per month in rent.

U.S. FEDERAL INCOME TAX CONSIDERATIONS

                        This section supplements the discussion under the caption “U.S. Federal Income Tax Considerations” in the prospectus and prospectus supplement to which this pricing supplement relates.

                        The American Jobs Creation Act of 2004, which was enacted on October 22, 2004, amended certain of the tax rules applicable to our qualification and taxation as a REIT. Among other changes, the new legislation:

  •   effective retroactively for taxable years after December 31, 2000, expanded the straight debt safe harbor under which certain types of securities are disregarded as securities when calculating the 10% value asset test discussed in the prospectus, so that the safe harbor would apply to, among other things, any loan to an individual or estate, certain rental agreements, any obligation to pay rents from real property, and any security issued by a REIT;
 
  •   created a new rule pursuant to which, solely for purposes of the 10% value asset test, a REIT’s interest in the assets of any partnership will be based upon the REIT’s proportionate interest in any securities issued by the partnership (including, for this purpose, the REIT’s interest as a partner in the partnership and any debt securities issued by the partnership, but excluding any securities qualifying for the “straight debt” or other exceptions described in the preceding bullet), valuing any debt instrument at its adjusted issue price;
 
  •   effective retroactively for taxable years after December 31, 2000, provided specific safe-harbor rules, applicable solely for purposes of the special rules regarding rents received from a taxable REIT subsidiary, regarding the dates for testing whether 90% of a property owned by a REIT is rented to unrelated persons and whether the rents paid by related persons are substantially comparable to unrelated party rents;
 
  •   eliminated the exclusion from potential “redetermined rent” treatment of amounts received by a REIT for services customarily furnished or rendered by a taxable REIT subsidiary in connection with the rental of real property;
 
  •   excluded, for purposes of the 95% income test, income or gain from identified hedging transactions entered into to reduce risk on indebtedness incurred to acquire or carry real estate assets;
 
  •   amended the computation of the tax imposed on a REIT that fails to satisfy the 95% income test, by applying a taxable fraction based on 95% (rather than the current 90%) of the REIT’s gross income;
 
  •   in lieu of REIT disqualification in the case of a de minimis violation of the 5% or 10% asset tests, created a rule permitting the REIT to dispose of the excess assets or otherwise come into compliance within six months of the end of the quarter in which the failure is identified without penalty;
 
  •   provided a similar exception in the case of non-de minimis asset test failures, if the IRS is notified, the REIT disposes of the excess assets or otherwise comes into compliance within six months of the end of the quarter in which the failure is identified, the failure was due to reasonable cause and a penalty tax is paid;

  •   created a rule imposing monetary penalties, in lieu of REIT disqualification, for the failure to meet REIT qualification requirements other than the asset and income tests, provided that the failure was due to reasonable cause and the REIT pays a per-failure penalty.

The foregoing is a non-exhaustive list of changes made by the 2004 legislation. Except as indicated above, the changes apply to taxable years beginning after October 22, 2004. Please refer to the prospectus and prospectus supplement for a discussion of other aspects of our qualification and taxation as a REIT and the tax consequences to you of an investment in the notes.

6