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HIGHLANDS RANCH, CO-Chris Pike, an analyst with UBS Investment Research, has initiated coverage of United Dominion Realty Trust, the nation’s fourth largest apartment real estate investment trust, with a Buy 2 rating. United Dominion’s executive offices are in Douglas County. The company’s president and CEO, Tom Toomey, is a former top executive at Denver-based Apartment and Investment Management Co., which owns more apartment units than any other REIT in the country. Toomey, who lives in the Denver area, served as chief operating officer for two years and chief financial officer for four years, at Aimco, prior to joining UDR. UDR’s official corporate headquarters remains in Richmond, VA.

Pike, in his 13-page report, is putting a $26 per share target on UDR, a $3-billion market cap REIT that focuses on middle market communities. Its largest single market is Orange County, CA, where it has 8.3% of its units. It owns interests in about 77,000 units.

Since Toomey took over in 2001, the company has “recycled” almost 70% of its portfolio to more growth-oriented markets, according to Pike’s report. Management also has “significantly improved the balance sheet by terming out expensive capital and pragmatically using non-recurring cash flow to increase financial flexibility,” according to the report.

Pike says, “management leaves no stone unturned” when it comes to finding “new ways to unlock shareholder value and drive revenue. We welcome management’s straightforward and entrepreneurial approach to apartment management.” He goes on to note that UDR pays a 5% yield to investors, which is 20 basis points above apartment peers and REITs overall. He says that UDR currently trades at 14.6 times his 2005 funds from operations per share, a 14% discount to apartments overall.

“However, we believe the current multiple discounts is unwarranted given the asset repositioning and balance sheet improvement executed by the current management team over the last few years,” states the report. The report says a more appropriate multiple discounts is in the 5% to 10% range. That would place the stock in the $26 to $27 per share range, in line with UBS’ target price.

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