10-K 1 c12701e10vk.htm FORM 10-K Form 10-K
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
(Mark One)
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 1-12110
CAMDEN PROPERTY TRUST
(Exact name of registrant as specified in its charter)
     
Texas
(State or other jurisdiction of
incorporation or organization)
  76-6088377
(I.R.S. Employer
Identification No.)
     
     
3 Greenway Plaza, Suite 1300
Houston, Texas

(Address of principal executive offices)
  77046
(Zip Code)
Registrant’s telephone number, including area code: (713) 354-2500
Securities registered pursuant to Section 12(b) of the Act:
     
Title of each class   Name of each exchange on which registered
     
Common Shares of Beneficial Interest, $.01 par value   New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company)    
Indicate by check mark whether the registrant is a shell company (as defined in the Rule 12b-2 of the Act). Yes o No þ
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was $2,690,865,073 based on a June 30, 2010 share price of $40.85.
On February 17, 2011, 69,780,732 common shares of the registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement in connection with its Annual Meeting of Shareholders to be held May 11, 2011 are incorporated by reference in Part III.
 
 

 


 

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 Exhibit 12.1
 Exhibit 21.1
 Exhibit 23.1
 Exhibit 24.1
 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32.1
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

 

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PART I
Item 1.  
Business
General Development of Business
Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust (“REIT”), is engaged in the ownership, management, development, acquisition, and construction of multifamily apartment communities. Unless the context requires otherwise, “we,” “our,” “us,” and the “Company” refer to Camden Property Trust and its consolidated subsidiaries. Our multifamily apartment communities are referred to as “communities,” “multifamily communities,” “properties,” or “multifamily properties” in the following discussion.
Our executive offices are located at 3 Greenway Plaza, Suite 1300, Houston, Texas 77046 and our telephone number is (713) 354-2500. Our website is located at www.camdenliving.com. On our website we make available free of charge our annual, quarterly, and current reports, and amendments to such reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). We also make available, free of charge on our website, our Guidelines on Governance, Code of Business Conduct and Ethics, Code of Ethical Conduct for Senior Financial Officers, and the charters of each of our Audit, Compensation, Nominating, and Corporate Governance Committees.
Our annual, quarterly, and current reports, proxy statements, and other information are electronically filed with the SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Please contact the SEC at 1-800-SEC-0330 for further information about the operation of the SEC’s Public Reference Room. The SEC also maintains a website at www.sec.gov which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Financial Information about Segments
We are primarily engaged in the ownership, management, development, acquisition, and construction of multifamily apartment communities. As each of our communities has similar economic characteristics, residents, amenities, and services, our operations have been aggregated into one reportable segment. See our consolidated financial statements and notes included thereto in Item 15 of this Annual Report on Form 10-K for certain information required by Item 1.
Narrative Description of Business
As of December 31, 2010, we owned interests in, operated, or were developing 188 multifamily properties comprising 63,923 apartment homes across the United States. Of these 188 properties, two properties were under development and when completed will consist of a total of 607 apartment homes. In addition, we own land parcels we may develop into multifamily apartment communities.
Operating Strategy
We believe producing consistent earnings growth through property operations, development and acquisitions, achieving market balance, and recycling capital are crucial factors to our success. We rely heavily on our sophisticated property management capabilities and innovative operating strategies to help us maximize the earnings potential of our communities.
Real Estate Investments and Market Balance. We believe we are well positioned in our current markets and have the expertise to take advantage of new opportunities as they arise. These capabilities, combined with what we believe is a conservative financial structure, should allow us to concentrate our growth efforts toward selective opportunities to enhance our strategy of having a geographically diverse portfolio of assets which meet the requirements of our residents.
We continue to operate in our core markets which we believe provides an advantage due to economies of scale. We believe, where possible, it is best to operate with a strong base of properties in order to benefit from the personnel allocation and the market strength associated with managing several properties in the same market. However, consistent with our goal of generating sustained earnings growth, we intend to selectively dispose of properties and redeploy capital for various strategic reasons, including if we determine a property cannot meet long-term earnings growth expectations.

 

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Subject to market conditions, we intend to continue to look for opportunities to develop and acquire existing communities through our discretionary investment funds (the “Funds”), expand our development pipeline, and complete selective dispositions.
We intend to continue to focus on strengthening our capital and liquidity positions by generating positive cash flows from operations, reducing outstanding debt and leverage ratios, and controlling overhead costs. We intend to meet our liquidity requirements through available cash balances, cash flows generated from operations, draws on our unsecured credit facility, proceeds from property dispositions and secured mortgage notes, and the use of debt and equity offerings under our automatic shelf registration statement.
Sophisticated Property Management. We believe the depth of our organization enables us to deliver quality services, promote resident satisfaction, and retain residents, thereby reducing operating expenses. We manage our properties utilizing a staff of professionals and support personnel, including certified property managers, experienced apartment managers and leasing agents, and trained apartment maintenance technicians. Our on-site personnel are trained to deliver high quality services to our residents. We strive to motivate our on-site employees through incentive compensation arrangements based upon property operational results, rental rate increases, and level of lease renewals achieved.
Operations. We believe an intense focus on operations is necessary to realize consistent, sustained earnings growth. Ensuring resident satisfaction, increasing rents as market conditions allow, maximizing rent collections, maintaining property occupancy at optimal levels, and controlling operating costs comprise our principal strategies to maximize property financial results. We believe our web-based property management and revenue management systems strengthen on-site operations and allow us to quickly adjust rental rates as local market conditions change. Lease terms are generally staggered based on vacancy exposure by apartment type so lease expirations are matched to each property’s seasonal rental patterns. We generally offer leases ranging from six to fifteen months with individual property marketing plans structured to respond to local market conditions. In addition, we conduct ongoing customer service surveys to ensure timely response to residents’ changing needs and a high level of satisfaction.
Investments in Joint Ventures. We have entered into, and may continue in the future to enter into, joint ventures through which we own an indirect economic interest of less than 100% of the community or communities owned directly by the joint venture. See Note 8, “Investments in Joint Ventures,” and Note 14, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements for further discussion of our investments in joint ventures.
Competition
There are numerous housing alternatives which compete with our communities in attracting residents. Our properties compete directly with other multifamily properties as well as with condominiums and single-family homes which are available for rent or purchase in the markets in which our communities are located. This competitive environment could have a material adverse effect on our ability to lease apartment homes at our present communities or any newly developed or acquired community, as well as on the rents charged.
Employees
At December 31, 2010, we had approximately 1,750 employees, including executive, administrative, and community personnel.
Qualification as a Real Estate Investment Trust
As of December 31, 2010, we met the qualification of a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”). As a result, we, with the exception of our taxable REIT subsidiaries, will not be subject to federal income tax to the extent we continue to meet certain requirements of the Code.

 

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Item 1A.  
Risk Factors
In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, or results of operations could be materially adversely affected by any of these risks. Additional risks not presently known to us, or which we currently consider immaterial, may also impair our business and operations.
Risks Associated with Real Estate, Real Estate Capital, and Credit Markets
Volatility in capital and credit markets, or other unfavorable changes in economic conditions could adversely impact us.
The capital and credit markets experienced volatility and disruption particularly in the latter half of 2008 through the first quarter of 2010. This caused the spreads on prospective debt financings to fluctuate and made it more difficult to borrow money. In the event of renewed market disruption and volatility, we may not be able to obtain new debt financing or refinance our existing debt on favorable terms or at all, which would adversely affect our liquidity, our ability to make distributions to shareholders, acquire and dispose of assets and continue our development pipeline. Other weakened economic conditions, including job losses and high unemployment rates have adversely affected rental rates and occupancy levels. Unfavorable changes in economic conditions may have a material adverse impact on our cash flows and operating results.
Additional key economic risks which may affect conditions in the markets in which we operate include the following:
   
local conditions, such as an oversupply of apartments or other housing available for rent, or a reduction in demand for apartments in the area;
   
declines in the financial condition of our tenants, which may make it more difficult for us to collect rents from some tenants;
   
changes in market rental rates;
   
declines in mortgage interest rates and home pricing, making alternative housing more affordable;
   
government or builder incentives which enable home buyers to put little or no money down, making alternative housing options more attractive;
   
regional economic downturns which simultaneously affect one or more of our geographical markets; and
   
increased operating costs, if these costs cannot be passed through to residents.
Short-term leases expose us to the effects of declining market rents.
Substantially all of our apartment leases are for a term of fifteen months or less. As these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms.
We face risks associated with land holdings and related activities.
We hold land for future development and may in the future acquire additional land holdings. The risks inherent in purchasing, owning, and developing land increase as demand for apartments, or rental rates, decrease. Real estate markets are highly uncertain and, as a result, the value of undeveloped land has fluctuated significantly and may continue to fluctuate. In addition, carrying costs can be significant and can result in losses or reduced profitability. As a result, we hold certain land, and may in the future acquire additional land, in our development pipeline at a cost we may not be able to fully recover or at a cost which precludes our developing a profitable multifamily community. Given the uncertainty and volatility of the current economic environment, there is less market information available to us to utilize in estimating the fair value of our holdings; if additional market information becomes available in future periods which impacts our estimates of fair value, we may be required to take future impairment charges.

 

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Difficulties of selling real estate could limit our flexibility.
We intend to continue to evaluate the potential disposition of assets which may no longer meet our objectives. When we decide to sell an asset, we may encounter difficulty in finding buyers in a timely manner as real estate investments generally cannot be disposed of quickly, especially when market conditions are poor. These factors may limit our ability to vary our portfolio promptly in response to changes in economic or other conditions and may also limit our ability to utilize sales proceeds as a source of liquidity, which would adversely affect our ability to make distributions to shareholders or repay debt. In addition, the provisions of the Code relating to REITs limit our ability to earn a gain on the sale of property (unless we own the property through a subsidiary which will incur a taxable gain upon sale) if we have held the property less than two years, and this limitation may affect our ability to sell properties without adversely affecting returns to shareholders.
We could be negatively impacted by the condition of Fannie Mae or Freddie Mac.
Fannie Mae and Freddie Mac are a major source of financing for secured multifamily real estate. We and other multifamily companies depend heavily on Fannie Mae and Freddie Mac to finance growth by purchasing or guaranteeing apartment loans. In February 2011, the Obama administration released a report proposing Fannie Mae and Freddie Mac be gradually eliminated. The report proposed three possible courses for long-term reform of housing finance. A final decision by the government to eliminate Fannie Mae or Freddie Mac or reduce their acquisitions or guarantees of apartment loans may adversely affect interest rates, capital availability, and the development of multifamily communities.
Compliance or failure to comply with laws requiring access to our properties by disabled persons could result in substantial cost.
The Americans with Disabilities Act (“ADA”), the Fair Housing Amendments Act of 1988 (“FHAA”), and other federal, state, and local laws, rules, and regulations generally require public accommodations and apartment homes be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the government or the award of damages to private litigants. These laws may require us to modify our existing properties. These laws may also restrict renovations by requiring improved access to such buildings by disabled persons or may require us to add other structural features which increase our construction costs. Legislation or regulations adopted in the future may impose further costs and obligations or restrictions on us with respect to improved access by disabled persons. We may incur unanticipated expenses which may be material to our financial condition or results of operations to comply with ADA, FHAA, and other federal, state, and local laws, or in connection with lawsuits brought by the government or private litigants.
Competition could limit our ability to lease apartments or increase or maintain rental income.
There are numerous housing alternatives which compete with our properties in attracting residents. Our properties compete directly with other multifamily properties as well as condominiums and single family homes which are available for rent or purchase in the markets in which our properties are located. This competitive environment could have a material adverse effect on our ability to lease apartment homes at our present properties or any newly developed or acquired property, as well as on the rents charged.
Risks Associated with Our Operations
Development and construction risks could impact our profitability.
We intend to continue to develop and construct multifamily apartment communities for our portfolio, and expect higher levels of development activity in 2011 as compared to recent years. Our development and construction activities may be exposed to a number of risks which may increase our construction costs and decrease our profitability including the following:
   
inability to obtain, or delays in obtaining, necessary zoning, land-use, building, occupancy, and other required permits and authorizations;

 

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increased materials, labor, problems with subcontractors, or other costs due to errors and omissions which occur in the design or construction process;
   
inability to obtain financing with favorable terms for the development of a community;
   
inability to complete construction and lease-up of a community on schedule;
   
the expected occupancy and rental rates may differ from the actual results;
   
incurring costs related to the abandonment of development opportunities which we have pursued and subsequently deemed unfeasible; and
   
inability to successfully implement our development and construction strategy could adversely affect our results of operations and our ability to satisfy our financial obligations and pay distributions to shareholders.
One of our wholly-owned subsidiaries is engaged in the business of providing general contracting services under construction contracts entered into between it and third-parties (including nonconsolidated subsidiaries). The terms of those construction contracts generally require this subsidiary to estimate the time and costs to complete a project, and to assume the risk the time and costs associated with its performance may be greater than anticipated. As a result, profitability on those contracts is dependent on the ability to accurately predict such factors. The time and costs necessary to complete a project may be affected by a variety of factors, including those listed above, many of which are beyond this subsidiary’s control. In addition, the terms of those contracts generally require this subsidiary to warrant its work for a period of time during which it may be required to repair, replace, or rebuild defective work. Further, additional trailing liabilities, based on various legal theories such as claims of negligent construction, may result from such projects, and these trailing liabilities may go on for a number of years depending on the length of the statutes of repose in various jurisdictions.
Our acquisition strategy may not produce the cash flows expected.
Subject to the requirements of the Funds, we may acquire additional operating properties on a select basis. Our acquisition activities are subject to a number of risks, including the following:
   
we may not be able to successfully integrate acquired properties into our existing operations;
   
our estimates of the costs, if any, of repositioning or redeveloping the acquired property may prove inaccurate;
   
the expected occupancy and rental rates may differ from the actual results; and
   
we may not be able to obtain adequate financing.
With respect to acquisitions of operating companies, we may not be able to identify suitable candidates on terms acceptable to us or may not achieve expected returns and other benefits as a result of integration challenges, such as personnel and technology.
Competition could adversely affect our ability to acquire properties.
We expect other real estate investors, including insurance companies, pension and investment funds, private investors, and other apartment REITs, will compete with us to acquire additional operating properties. This competition could increase prices for the type of properties we would likely pursue and adversely affect our ability to acquire these properties or the profitability of such properties upon acquisition.
Losses from catastrophes may exceed our insurance coverage.
We carry comprehensive property and liability insurance on our properties, which we believe is of the type and amount customarily obtained on similar real property assets by similar types of owners. We intend to obtain similar coverage for properties we acquire or develop in the future. However, some losses, generally of a catastrophic nature such as losses from floods, hurricanes, or earthquakes, may be subject to coverage limitations. We exercise our discretion in determining amounts, coverage limits, and deductible provisions of insurance to maintain appropriate insurance on our investments at a reasonable cost and on suitable terms. If we suffer a substantial loss, our insurance coverage may not be sufficient to pay the full current market value or current replacement value of our lost investment, as well as the anticipated future revenues from the property. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also may reduce the feasibility of using insurance proceeds to replace a property after it has been damaged or destroyed.

 

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Investments through joint ventures involve risks not present in investments in which we are the sole investor.
We have invested and may continue to invest as a joint venture partner in joint ventures. These investments involve risks, including the possibility the other joint venture partner may have business goals which are inconsistent with ours, be in a position to take action or withhold consent contrary to our requests, or become insolvent and require us to assume and fulfill the joint venture’s financial obligations. We and our joint venture partner may each have the right to initiate a buy-sell arrangement, which could cause us to sell our interest, or acquire our joint venture partner’s interest, at a time when we otherwise would not have entered into such a transaction. Each joint venture agreement is individually negotiated, and our ability to operate, finance, and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the terms of the joint venture agreement.
We face risks associated with investments in and management of discretionary funds.
We have formed the Funds which, through wholly-owned subsidiaries, we manage as the general partner and advisor. We have committed to invest 20% of the total equity interest in each of the Funds, up to $75 million in the aggregate; each of the Funds has total capital commitments of $187.5 million or $375 million in the aggregate. There are risks associated with the investment in and management of the Funds, including the following:
   
investors in the Funds may fail to make their capital contributions when due and, as a result, the Funds may be unable to execute their investment objectives;
   
the general partner of the Funds, our wholly-owned subsidiary, has unlimited liability for the third-party debts, obligations, and liabilities of the Funds pursuant to partnership law;
   
investors in the Funds (other than us), by majority vote, may remove our subsidiary as the general partner of the Funds with or without cause and the Funds’ advisory boards, by a majority vote of their members, may remove our subsidiary as the general partner of the Funds at any time for cause;
   
while we have broad discretion to manage the Funds and make investment decisions on behalf of the Funds, the investors or the advisory boards must approve certain matters, and as a result we may be unable to cause the Funds to make certain investments or implement certain decisions we consider beneficial;
   
we are permitted to acquire land and develop communities outside of the Funds, but are generally prohibited from acquiring fully developed multifamily properties outside of the Funds until the earlier of (i) April 8, 2012, or (ii) such time as 90% of the Funds’ committed capital is invested, subject to certain exceptions;
   
our ability to redeem all or a portion of our investments in the Funds is subject to significant restrictions; and
   
we may be liable if the Funds fail to comply with various tax or other regulatory matters.
We depend on our key personnel.
Our success depends in part on our ability to attract and retain the services of executive officers and other personnel. There is substantial competition for qualified personnel in the real estate industry, and the loss of several of our key personnel could have an adverse effect on us.

 

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Changes in litigation risks could affect our business.
As a large publicly-traded owner of multifamily properties, we may become involved in legal proceedings, including consumer, employment, tort, or commercial litigation, which if decided adversely to or settled by us, could result in liability which is material to our financial condition or results of operations.
Tax matters, including failure to qualify as a REIT, could have adverse consequences.
We may not continue to qualify as a REIT in the future. The Internal Revenue Service may challenge our qualification as a REIT for prior years and new legislation, regulations, administrative interpretations, or court decisions may change the tax laws or the application of the tax laws with respect to qualification as a REIT or the federal tax consequences of such qualification.
For any taxable year we fail to qualify as a REIT and do not qualify under statutory relief provisions:
   
we would be subject to federal income tax on our taxable income at regular corporate rates, including any applicable alternative minimum tax;
   
we would be disqualified from treatment as a REIT for the four taxable years following the year in which we failed to qualify, thereby reducing our net earnings available for operations, including any distributions to shareholders, as we would be required to pay significant income taxes for the year or years involved; and
   
our ability to expand our business and raise capital would be impaired, which may adversely affect the value of our common shares.
We may face other tax liabilities in the future which may impact our cash flow. These potential tax liabilities may be calculated on our income or property values at either the corporate or individual property levels. Any additional tax expense incurred would decrease the cash available for distribution to our shareholders.
Risks Associated with Our Indebtedness and Financing
Insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders.
Substantially all of our income is derived from rental and other income from our multifamily communities. As a result, our performance depends in large part on our ability to collect rent from residents, which could be negatively affected by a number of factors, including the following:
   
delay in resident lease commencements;
   
decline in occupancy;
   
failure of residents to make rental payments when due;
   
the attractiveness of our properties to residents and potential residents;
   
our ability to adequately manage and maintain our communities;
   
competition from other available apartments and housing alternatives; and
   
changes in market rents.
Cash flow could be insufficient to meet required payments of principal and interest with respect to debt financing. In order for us to continue to qualify as a REIT we must meet a number of organizational and operational requirements, including a requirement to distribute annual dividends to our shareholders equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains. This requirement limits the cash flow available to meet required principal payments on our debt.

 

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We have significant debt, which could have important adverse consequences.
As of December 31, 2010, we had outstanding debt of approximately $2.6 billion. This indebtedness could have important consequences, including:
   
if a property is mortgaged to secure payment of indebtedness, and if we are unable to meet our mortgage obligations, we could sustain a loss as a result of foreclosure on the mortgaged property;
   
our vulnerability to general adverse economic and industry conditions is increased; and
   
our flexibility in planning for, or reacting to, changes in business and industry is limited.
The mortgages on our properties subject to secured debt, our unsecured credit facility, and the indentures under which our unsecured debt was issued contain customary restrictions, requirements, and other limitations, as well as certain financial and operating covenants including maintenance of certain financial ratios. Maintaining compliance with these provisions could limit our financial flexibility. A default in these provisions, if uncured, could require us to repay the indebtedness before the scheduled maturity date, which could adversely affect our liquidity and increase our financing costs.
We may be unable to renew, repay, or refinance our outstanding debt.
We are subject to the risk that indebtedness on our properties or our unsecured indebtedness will not be renewed, repaid, or refinanced when due or the terms of any renewal or refinancing will not be as favorable as the existing terms of such indebtedness. If we are unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to dispose of one or more of the properties on disadvantageous terms, which might result in losses to us. Such losses could have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt. Furthermore, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose on the property, appoint a receiver and exercise rights under an assignment of rents and leases, or pursue other remedies, all with a consequent loss of our revenues and asset value. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Code.
Variable rate debt is subject to interest rate risk.
We have mortgage debt with varying interest rates dependent upon various market indexes. In addition, we have a revolving credit facility bearing interest at a variable rate on all amounts drawn on the facility. We may incur additional variable rate debt in the future. Increases in interest rates on variable rate debt would increase our interest expense, unless we make arrangements which hedge the risk of rising interest rates, which would adversely affect net income and cash available for payment of our debt obligations and distributions to shareholders.
We may incur losses on interest rate hedging arrangements.
Historically, we have entered into agreements to reduce the risks associated with changes in interest rates, and we may continue to do so in the future. Although these agreements may partially protect against rising interest rates, they may also reduce the benefits to us if interest rates decline. If a hedging arrangement is not indexed to the same rate as the indebtedness which is hedged, we may be exposed to losses to the extent which the rate governing the indebtedness and the rate governing the hedging arrangement change independently of each other. Additionally, nonperformance by the other party to the hedging arrangement may subject us to increased credit risks.
Issuances of additional debt may adversely impact our financial condition.
Our capital requirements depend on numerous factors, including the rental and occupancy rates of our apartment properties, dividend payment rates to our shareholders, development and capital expenditures, costs of operations, and potential acquisitions. If our capital requirements vary materially from our plans, we may require additional financing earlier than anticipated. If we issue more debt, we could become more leveraged, resulting in increased risk of default on our obligations and an increase in our debt service requirements, both of which could adversely affect our financial condition and ability to access debt and equity capital markets in the future.

 

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Failure to maintain our current credit ratings could adversely affect our cost of funds, related margins, liquidity, and access to capital markets.
Moody’s and Standard & Poor’s, the major debt rating agencies, routinely evaluate our debt and have given us ratings of Baa1 and BBB, respectively, with stable outlooks, on our senior unsecured debt. These ratings are based on a number of factors, which include their assessment of our financial strength, liquidity, capital structure, asset quality, and sustainability of cash flow and earnings. Due to changes in market conditions, we may not be able to maintain our current credit ratings, which could adversely affect our cost of funds and related margins, liquidity, and access to capital markets.
Risks Associated with Our Shares
Share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders.
For us to maintain our qualification as a REIT, we must have 100 or more shareholders during the year and not more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals. As defined for federal income tax purposes, the term “individuals” includes a number of specified entities. To minimize the possibility of us failing to qualify as a REIT under this test, our declaration of trust includes restrictions on transfers of our shares and ownership limits. The ownership limits, as well as our ability to issue other classes of equity securities, may delay, defer, or prevent a change in control. These provisions may also deter tender offers for our common shares which may be attractive to you or limit your opportunity to receive a premium for your shares which might otherwise exist if a third party were attempting to effect a change in control transaction.
Our share price will fluctuate.
The market price and trading volume of our common shares are subject to fluctuation due to general market conditions, the risks discussed in this report and other matters, including the following:
   
operating results which vary from the expectations of securities analysts and investors;
   
investor interest in our property portfolio;
   
the reputation and performance of REITs;
   
the attractiveness of REITs as compared to other investment vehicles;
   
the results of our financial condition and operations;
   
the perception of our growth and earnings potential;
   
dividend payment rates;
   
increases in market interest rates, which may lead purchasers of our common shares to demand a higher yield; and
   
changes in financial markets and national economic and general market conditions.
The form, timing and/or amount of dividend distributions in future periods may vary and be impacted by economic and other considerations.
The form, timing and/or amount of dividend distributions will be declared at the discretion of our Board of Trust Managers and will depend on actual cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and other factors as the Board of Trust Managers may consider relevant. The Board of Trust Managers may modify the form, timing and/or amount of dividends from time to time.

 

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Table of Contents

Item 1B.  
Unresolved Staff Comments
None.
Item 2.  
Properties
The Properties
Our properties typically consist of mid-rise buildings or two and three story buildings in a landscaped setting and provide residents with a variety of amenities. Most of the properties have one or more swimming pools and a clubhouse and many have whirlpool spas, weight room facilities, and controlled-access gates. Many of the apartment homes offer additional features such as fireplaces, vaulted ceilings, microwave ovens, covered parking, icemakers, washers and dryers, and ceiling fans.
Operating Properties (including properties held through unconsolidated joint ventures)
The 186 operating properties in which we owned interests and operated at December 31, 2010 averaged 922 square feet of living area per apartment home. For the year ended December 31, 2010, no single operating property accounted for greater than 1.6% of our total revenues. Our operating properties had a weighted average occupancy rate of approximately 93.3% for each of the years ended December 31, 2010 and 2009, and an average annual rental revenue per apartment home of $928 and $946 for the years ended December 31, 2010 and 2009, respectively. Resident lease terms generally range from six to fifteen months. One hundred and fifty-nine of our operating properties have over 200 apartment homes, with the largest having 904 apartment homes. Our operating properties have an average age of 11 years (calculated on the basis of investment dollars). Our operating properties were constructed and placed in service as follows:
         
Year Placed in Service   Number of Operating Properties  
2006-2010
    25  
2001-2005
    28  
1996-2000
    57  
1991-1995
    19  
1986-1990
    38  
Prior to 1985
    19  
Property Table
The following table sets forth information with respect to our 186 operating properties at December 31, 2010:
                                         
    OPERATING PROPERTIES  
                                    2010 Average  
    Year Placed     Average Apartment     Number of     2010 Average     Monthly Rental Rate  
Property and Location   In Service     Size (Sq. Ft.)     Apartments     Occupancy (1)     per Apartment  
ARIZONA
                                       
Phoenix
                                       
Camden Copper Square
    2000       786       332       92.5 %   $ 749  
Camden Fountain Palms (7)
    1986/1996       1,050       192       89.6       657  
Camden Legacy
    1996       1,067       428       94.1       834  
Camden Pecos Ranch (7)
    2001       924       272       94.5       737  
Camden San Paloma
    1993/1994       1,042       324       94.2       866  
Camden Sierra (7)
    1997       925       288       90.3       639  
Camden Towne Center (7)
    1998       871       240       91.8       657  
Camden Vista Valley
    1986       923       357       90.1       601  
CALIFORNIA
                                       
Los Angeles/Orange County
                                       
Camden Crown Valley
    2001       1,009       380       93.8       1,501  
Camden Harbor View
    2004       975       538       94.2       1,852  

 

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Table of Contents

                                         
    OPERATING PROPERTIES  
                                    2010 Average  
    Year Placed     Average Apartment     Number of     2010 Average     Monthly Rental Rate  
Property and Location   In Service     Size (Sq. Ft.)     Apartments     Occupancy (1)     per Apartment  
Camden Main & Jamboree (12)
    2008       1,011       290       94.0 %   $ 1,787  
Camden Martinique
    1986       794       714       92.3       1,242  
Camden Parkside (7)
    1972       836       421       93.5       1,168  
Camden Sea Palms
    1990       891       138       94.4       1,427  
San Diego/Inland Empire
                                       
Camden Old Creek
    2007       1,037       350       93.9       1,515  
Camden Sierra at Otay Ranch
    2003       962       422       93.2       1,472  
Camden Tuscany
    2003       896       160       93.7       1,801  
Camden Vineyards
    2002       1,053       264       91.5       1,191  
COLORADO
                                       
Denver
                                       
Camden Caley
    2000       925       218       96.2       852  
Camden Centennial
    1985       744       276       94.0       658  
Camden Denver West (8)
    1997       1,015       320       93.8       1,036  
Camden Highlands Ridge
    1996       1,149       342       94.7       1,081  
Camden Interlocken
    1999       1,022       340       95.7       1,075  
Camden Lakeway
    1997       932       451       92.9       877  
Camden Pinnacle
    1985       748       224       93.8       672  
WASHINGTON DC METRO
                                       
Camden Ashburn Farms
    2000       1,062       162       96.7       1,318  
Camden Clearbrook
    2007       1,048       297       95.5       1,210  
Camden College Park (12)
    2008       942       508       94.6       1,514  
Camden Dulles Station (3)
    2009       984       366       96.2       1,466  
Camden Fair Lakes
    1999       1,056       530       95.8       1,473  
Camden Fairfax Corner
    2006       934       488       95.9       1,521  
Camden Fallsgrove
    2004       996       268       96.7       1,515  
Camden Grand Parc
    2002       674       105       96.5       2,267  
Camden Lansdowne
    2002       1,006       690       96.2       1,246  
Camden Largo Town Center
    2000/2007       1,027       245       93.7       1,508  
Camden Monument Place
    2007       856       368       94.9       1,395  
Camden Potomac Yard
    2008       835       378       94.3       1,812  
Camden Roosevelt
    2003       856       198       97.9       2,248  
Camden Russett
    2000       992       426       93.9       1,331  
Camden Silo Creek
    2004       975       284       97.2       1,257  
Camden Summerfield
    2008       957       291       92.1       1,512  
FLORIDA
                                       
Southeast Florida
                                       
Camden Aventura
    1995       1,108       379       94.7       1,313  
Camden Brickell
    2003       937       405       97.2       1,342  
Camden Doral
    1999       1,120       260       95.4       1,426  
Camden Doral Villas
    2000       1,253       232       96.3       1,536  
Camden Las Olas
    2004       1,043       420       94.0       1,505  
Camden Plantation
    1997       1,201       502       94.7       1,235  
Camden Portofino
    1995       1,112       322       94.6       1,265  
Orlando
                                       
Camden Club
    1986       1,077       436       93.5       810  
Camden Hunter’s Creek
    2000       1,075       270       94.0       911  
Camden Lago Vista
    2005       955       366       93.8       844  
Camden Landings
    1983       748       220       93.1       638  
Camden Lee Vista
    2000       937       492       93.7       802  
Camden Orange Court
    2008       812       261       93.9       1,032  
Camden Renaissance
    1996/1998       899       578       92.5       747  
Camden Reserve
    1990/1991       824       526       92.8       684  
Camden World Gateway
    2000       979       408       94.3       879  
Tampa/St. Petersburg
                                       
Camden Bay
    1997/2001       943       760       94.5       788  
Camden Bay Pointe
    1984       771       368       92.7       642  
Camden Bayside
    1987/1989       748       832       93.7       687  
Camden Citrus Park
    1985       704       247       93.4       628  
Camden Lakes
    1982/1983       732       688       92.3       633  
Camden Lakeside
    1986       729       228       91.4       702  
Camden Live Oaks
    1990       1,093       770       93.3       758  

 

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Table of Contents

                                         
    OPERATING PROPERTIES  
                                    2010 Average  
    Year Placed     Average Apartment     Number of     2010 Average     Monthly Rental Rate  
Property and Location   In Service     Size (Sq. Ft.)     Apartments     Occupancy (1)     per Apartment  
Camden Preserve
    1996       942       276       94.4 %   $ 952  
Camden Providence Lakes
    1996       1,024       260       92.8       850  
Camden Royal Palms
    2006       1,017       352       93.2       899  
Camden Westshore
    1986       728       278       94.9       771  
Camden Woods
    1986       1,223       444       94.2       776  
GEORGIA
                                       
Atlanta
                                       
Camden Brookwood
    2002       912       359       94.5       906  
Camden Dunwoody
    1997       1,007       324       95.5       832  
Camden Deerfield
    2000       1,187       292       93.7       875  
Camden Ivy Hall (2) (6) (14)
    2010       1,181       110     Lease-Up       1,682  
Camden Midtown Atlanta
    2001       935       296       92.1       924  
Camden Peachtree City
    2001       1,027       399       93.6       829  
Camden River
    1997       1,103       352       94.1       820  
Camden Shiloh
    1999/2002       1,143       232       93.0       797  
Camden St. Clair
    1997       999       336       94.4       852  
Camden Stockbridge
    2003       1,009       304       91.7       726  
Camden Sweetwater
    2000       1,151       308       91.4       697  
KENTUCKY
                                       
Louisville
                                       
Camden Brookside (9)
    1987       732       224       94.7       663  
Camden Meadows (9)
    1987/1990       746       400       95.1       671  
Camden Oxmoor (9)
    2000       903       432       95.6       811  
Camden Prospect Park (9)
    1990       916       138       95.4       753  
MISSOURI
                                       
Kansas City
                                       
Camden Passage (9)
    1989/1997       834       596       92.9       643  
St. Louis
                                       
Camden Cedar Lakes (9)
    1986       852       420       92.5       612  
Camden Cove West (9)
    1990       828       276       94.9       818  
Camden Cross Creek (9)
    1973/1980       947       591       93.9       737  
Camden Westchase (9)
    1986       945       160       96.4       841  
NEVADA
                                       
Las Vegas
                                       
Camden Bel Air
    1988/1995       943       528       93.1       743  
Camden Breeze
    1989       846       320       92.9       733  
Camden Canyon
    1995       987       200       94.0       867  
Camden Commons
    1988       936       376       91.9       758  
Camden Cove
    1990       898       124       92.1       739  
Camden Del Mar
    1995       986       560       94.4       895  
Camden Fairways
    1989       896       320       94.5       879  
Camden Hills
    1991       439       184       89.3       529  
Camden Legends
    1994       792       113       91.0       823  
Camden Palisades
    1991       905       624       91.9       747  
Camden Pines (7)
    1997       982       315       93.8       797  
Camden Pointe
    1996       983       252       92.0       758  
Camden Summit (7)
    1995       1,187       234       94.0       1,094  
Camden Tiara (7)
    1996       1,043       400       92.7       856  
Camden Vintage
    1994       978       368       90.2       731  
Oasis Bay (10)
    1990       876       128       95.8       764  
Oasis Crossings (10)
    1996       983       72       92.0       782  
Oasis Emerald (10)
    1988       873       132       91.4       659  
Oasis Gateway (10)
    1997       1,146       360       92.7       803  
Oasis Island (10)
    1990       901       118       92.5       654  
Oasis Landing (10)
    1990       938       144       92.6       702  
Oasis Meadows (10)
    1996       1,031       383       89.3       739  
Oasis Palms (10)
    1989       880       208       90.7       689  
Oasis Pearl (10)
    1989       930       90       93.1       733  
Oasis Place (10)
    1992       440       240       91.1       527  
Oasis Ridge (10)
    1984       391       477       87.1       438  
Oasis Sierra (10)
    1998       923       208       92.7       801  
Oasis Springs (10)
    1988       838       304       89.1       614  

 

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Table of Contents

                                         
    OPERATING PROPERTIES  
                                    2010 Average  
    Year Placed     Average Apartment     Number of     2010 Average     Monthly Rental Rate  
Property and Location   In Service     Size (Sq. Ft.)     Apartments     Occupancy (1)     per Apartment  
Oasis Vinings (10)
    1994       1,152       234       89.0 %   $ 751  
NORTH CAROLINA
                                       
Charlotte
                                       
Camden Ballantyne
    1998       1,045       400       95.2       799  
Camden Cotton Mills
    2002       905       180       97.3       1,045  
Camden Dilworth
    2006       857       145       97.1       1,034  
Camden Fairview
    1983       1,036       135       95.7       752  
Camden Forest
    1989       703       208       90.5       548  
Camden Foxcroft
    1979       940       156       95.4       699  
Camden Grandview
    2000       1,057       266       97.2       1,150  
Camden Habersham
    1986       773       240       94.6       586  
Camden Park Commons
    1997       861       232       92.5       626  
Camden Pinehurst
    1967       1,147       407       94.2       708  
Camden Sedgebrook
    1999       972       368       94.6       734  
Camden Simsbury
    1985       874       100       95.3       680  
Camden South End Square
    2003       882       299       94.8       940  
Camden Stonecrest
    2001       1,098       306       94.1       843  
Camden Touchstone
    1986       899       132       95.0       700  
Raleigh
                                       
Camden Crest
    2001       1,013       438       94.2       731  
Camden Governor’s Village
    1999       1,046       242       95.0       806  
Camden Lake Pine
    1999       1,066       446       94.8       752  
Camden Manor Park
    2006       966       484       94.6       793  
Camden Overlook
    2001       1,060       320       95.1       839  
Camden Reunion Park
    2000/2004       972       420       93.6       655  
Camden Westwood
    1999       1,027       354       92.2       722  
PENNSYLVANIA
                                       
Camden Valleybrook
    2002       992       352       94.7       1,250  
TEXAS
                                       
Austin
                                       
Camden Amber Oaks (3) (6)
    2009       862       348       94.1       779  
Camden Cedar Hills
    2008       911       208       93.9       909  
Camden Gaines Ranch
    1997       955       390       93.3       922  
Camden Huntingdon
    1995       903       398       94.7       697  
Camden Laurel Ridge
    1986       702       183       92.8       562  
Camden Ridgecrest
    1995       855       284       93.2       652  
Camden South Congress (6)
    2001       975       253       93.0       1,284  
Camden Stoneleigh
    2001       908       390       94.9       841  
Corpus Christi
                                       
Camden Breakers
    1996       868       288       94.0       878  
Camden Copper Ridge
    1986       775       344       93.3       665  
Camden Miramar (5)
    1994-2010       485       816       80.9       901  
Camden South Bay (6) (14)
    2007       1,055       270       95.5       1,016  
Dallas/Fort Worth
                                       
Camden Addison (7)
    1996       942       456       94.4       766  
Camden Buckingham
    1997       919       464       95.2       757  
Camden Centreport
    1997       911       268       93.5       756  
Camden Cimarron
    1992       772       286       94.9       754  
Camden Farmers Market
    2001/2005       932       904       93.9       847  
Camden Gardens
    1983       652       256       94.4       521  
Camden Glen Lakes
    1979       877       424       93.5       720  
Camden Legacy Creek
    1995       831       240       95.7       799  
Camden Legacy Park
    1996       871       276       95.9       816  
Camden Springs
    1987       713       304       93.0       538  
Camden Valley Creek
    1984       855       380       92.5       630  
Camden Valley Park (4)
    1986       743       516       93.7       692  
Camden Valley Ridge
    1987       773       408       92.2       568  
Camden Westview
    1983       697       335       91.4       577  
Houston
                                       
Camden Baytown
    1999       844       272       88.1       802  
Belle Meade (3) (11)
    2010       1,414       119       93.3       2,645  
Braeswood Place (2) (11)
    2009       1,042       340     Lease-Up       1,388  

 

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Table of Contents

                                         
    OPERATING PROPERTIES  
                                    2010 Average  
    Year Placed     Average Apartment     Number of     2010 Average     Monthly Rental Rate  
Property and Location   In Service     Size (Sq. Ft.)     Apartments     Occupancy (1)     per Apartment  
Camden City Centre
    2007       932       379       93.2 %   $ 1,273  
Camden Creek
    1984       639       456       90.8       575  
Camden Greenway
    1999       861       756       94.4       1,011  
Camden Holly Springs (7)
    1999       934       548       92.9       863  
Camden Midtown
    1999       844       337       96.1       1,172  
Camden Oak Crest
    2003       870       364       92.6       811  
Camden Park (7)
    1995       866       288       93.0       766  
Camden Plaza (12)
    2007       915       271       92.6       1,217  
Camden Royal Oaks
    2006       923       236       91.0       1,103  
Camden Steeplechase
    1982       748       290       89.4       621  
Camden Stonebridge
    1993       845       204       95.1       788  
Camden Sugar Grove (7)
    1997       921       380       93.8       861  
Camden Travis Street (3) (13)
    2010       819       253       97.3       1,312  
Camden Vanderbilt
    1996/1997       863       894       95.0       1,103  
Camden Whispering Oaks
    2008       934       274       92.1       971  
Camden Yorktown (6) (14)
    2008       995       306       95.6       934  
     
(1)  
Represents average physical occupancy for the year except as noted below.
 
(2)  
Properties under lease-up at December 31, 2010.
 
(3)  
Development property stabilized during 2010 — average occupancy calculated from date at which occupancy exceeded 90% through year-end.
 
(4)  
Redevelopment completed during 2010 — average occupancy calculated from date at which occupancy exceeded 90% through year-end.
 
(5)  
Miramar is a student housing project for Texas A&M at Corpus Christi. Average occupancy includes summer which is normally subject to high vacancies.
 
(6)  
Properties owned through a joint venture in which we own a 20% interest. The remaining interest is owned by an unaffiliated private pension fund.
 
(7)  
Properties owned through a joint venture in which we own a 20% interest. The remaining interest is owned by an unaffiliated private investor.
 
(8)  
Property owned through a joint venture in which we own a 50% interest. The remaining interest is owned by an unaffiliated private investor.
 
(9)  
Properties owned through a joint venture in which we own a 15% interest. The remaining interest is owned by an unaffiliated private investor.
 
(10)  
Properties owned through a joint venture in which we own a 20% interest. The remaining interest is owned by an unaffiliated private pension fund.
 
(11)  
Property owned through a joint venture in which we own a 72% interest. The remaining interest is owned by an unaffiliated private investor.
 
(12)  
Property owned through a fully-consolidated joint venture in which we own a 99.99% interest. The remaining interest is owned by an unaffiliated private investor.
 
(13)  
Property owned through a fully-consolidated joint venture in which we own a 25% interest. The remaining interest is owned by an unaffiliated private investor.
 
(14)  
Property acquired during 2010 — average occupancy calculated from date at which property was acquired, unless otherwise noted.
Item 3.  
Legal Proceedings
For discussion regarding legal proceedings, see Note 14, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements.
Item 4.  
Reserved

 

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PART II
Item 5.  
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The high and low closing prices per share of our common shares, as reported on the New York Stock Exchange composite tape under the symbol “CPT,” and distributions per share declared for the quarters indicated are as follows:
                         
    High     Low     Distributions  
2010 Quarters:
                       
First
  $ 43.94     $ 36.77     $ 0.45  
Second
    51.50       40.85       0.45  
Third
    49.90       39.15       0.45  
Fourth
    54.13       48.18       0.45  
 
                       
2009 Quarters:
                       
First
  $ 30.63     $ 17.56     $ 0.70  
Second
    30.99       21.71       0.45  
Third
    42.73       25.10       0.45  
Fourth
    44.01       35.24       0.45  
(PERFORMANCE GRPAH)
This graph assumes the investment of $100 on December 31, 2005 and quarterly reinvestment of dividends. (Source: SNL Financial LC)

 

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    Years Ended December 31,  
Index   2006     2007     2008     2009     2010  
Camden Property Trust
    132.17       90.19       63.05       91.40       121.09  
FTSE NAREIT Equity
    135.06       113.87       70.91       90.76       116.13  
S&P 500
    115.79       122.16       76.96       97.33       111.99  
Russell 2000
    118.37       116.51       77.15       98.11       124.46  
MSCI US REIT (RMS) Index
    135.92       113.06       70.13       90.20       115.89  
As of February 17, 2011, there were 585 shareholders of record and approximately 19,335 beneficial owners of our common shares.
In January 2008, our Board of Trust Managers approved an increase of the April 2007 repurchase plan to allow for the repurchase of up to $500 million of our common equity securities through open market purchases, block purchases, and privately negotiated transactions. Under this program, we have repurchased 4.3 million shares for a total of approximately $230.2 million from April 2007 through December 31, 2010. The remaining dollar value of our common equity securities authorized to be repurchased under the program was approximately $269.8 million as of December 31, 2010. There were no repurchases of our equity securities during the year ended December 31, 2010.
In March 2010, we announced the creation of an at-the-market (“ATM”) share offering program through which we may, but have no obligation to, sell common shares having an aggregate offering price of up to $250 million, in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. Actual sales from time to time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations of the appropriate sources of funding for us. During the year ended December 31, 2010, we issued approximately 4.9 million common shares at an average price of $48.37 per share for total net consideration of approximately $231.7 million. In January 2011, we issued 0.1 million common shares at an average price of $54.06 per share for total net consideration of approximately $3.8 million. As of the date of this filing, we had common shares having an aggregate offering price of up to $10.7 million remaining available for sale under the ATM program.
See Part III, Item 12, for a description of securities authorized for issuance under equity compensation plans.

 

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Item 6.  
Selected Financial Data
The following table provides selected financial data relating to our historical financial condition and results of operations as of and for each of the years ended December 31, 2006 through 2010. This data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes. Prior year amounts have been reclassified for discontinued operations.
COMPARATIVE SUMMARY OF SELECTED FINANCIAL AND PROPERTY DATA
                                         
    Year Ended December 31,  
(in thousands, except per share amounts and property data)   2010     2009     2008     2007     2006  
 
                                       
Operating Data (a)
                                       
Total property revenues
  $ 610,404     $ 612,010     $ 612,408     $ 577,429     $ 553,237  
Total property expenses
    247,500       242,071       234,594       213,369       207,855  
Total non-property income (loss)
    28,337       25,443       (19,540 )     25,002       35,530  
Total other expenses
    370,010       373,137       327,952       336,219       342,468  
Income (loss) from continuing operations attributable to common shareholders
    10,121       (72,788 )     (17,666 )     38,141       118,367  
Net income (loss) attributable to common shareholders
    23,216       (50,800 )     70,973       148,457       232,846  
 
                                       
Income (loss) from continuing operations attributable to common shareholders per share:
                                       
Basic
  $ 0.14     $ (1.15 )   $ (0.32 )   $ 0.64     $ 2.06  
Diluted
    0.14       (1.15 )     (0.32 )     0.63       2.00  
Net income (loss) attributable to common shareholders per share
                                       
Basic
  $ 0.33     $ (0.80 )   $ 1.28     $ 2.54     $ 4.08  
Diluted
    0.33       (0.80 )     1.28       2.50       3.93  
 
                                       
Distributions declared per common share
  $ 1.80     $ 2.05     $ 2.80     $ 2.76     $ 2.64  
 
                                       
Balance Sheet Data (at end of year)
                                       
Total real estate assets, at cost
  $ 5,675,309     $ 5,505,168     $ 5,491,593     $ 5,527,403     $ 5,141,467  
Total assets
    4,699,737       4,607,999       4,730,342       4,890,760       4,586,050  
Notes payable
    2,563,754       2,625,199       2,832,396       2,828,095       2,330,976  
Perpetual preferred units
    97,925       97,925       97,925       97,925       97,925  
Equity
    1,757,373       1,609,013       1,501,356       1,653,340       1,859,942  
 
                                       
Other Data
                                       
Cash flows provided by (used in):
                                       
Operating activities
  $ 224,036     $ 217,688     $ 216,958     $ 223,106     $ 231,569  
Investing activities
    35,150       (69,516 )     (37,374 )     (346,798 )     (52,067 )
Financing activities
    (152,767 )     (91,423 )     (173,074 )     123,555       (180,044 )
Funds from operations — diluted (b)
    194,309       109,947       169,585       227,153       237,790  
 
                                       
Property Data
                                       
Number of operating properties (at the end of year) (c)
    186       183       181       182       186  
Number of operating apartment homes (at end of year) (c)
    63,316       63,286       62,903       63,085       63,843  
Number of operating apartment homes (weighted average) (c)(d)
    50,794       50,608       51,277       53,132       55,850  
Weighted average monthly total property revenue per apartment home
  $ 1,021     $ 1,036     $ 1,058     $ 1,023     $ 969  
Properties under development (at end of period)
    2       2       5       11       11  
     
(a)  
Excludes discontinued operations.
 
(b)  
Management considers Funds from Operations (“FFO”) to be an appropriate measure of the financial performance of an equity REIT. The National Association of Real Estate Investment Trusts (“NAREIT”) currently defines FFO as net income (computed in accordance with accounting principles generally accepted in the United States of America (“GAAP”)), excluding gains (or losses) associated with the sale of previously depreciated operating properties, real estate depreciation and amortization, and adjustments for unconsolidated joint ventures. Our calculation of diluted FFO also assumes conversion of all potentially dilutive securities, including certain noncontrolling interests, which are convertible into common shares. We consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions of operating properties and excluding depreciation, FFO can assist in the comparison of the operating performance of a company’s real estate between periods or as compared to different companies.
 
(c)  
Includes discontinued operations.
 
(d)  
Excludes apartment homes owned in joint ventures.

 

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Item 7.  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this report. Historical results and trends which might appear in the consolidated financial statements should not be interpreted as being indicative of future operations.
We consider portions of this report to be “forward-looking” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions, or other items relating to the future; forward-looking statements are not guarantees of future performances, results, or events. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein which are not statements of historical fact should be deemed forward-looking statements. Reliance should not be placed on these forward-looking statements as they are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.
Factors that may cause our actual results or performance to differ materially from those contemplated by forward-looking statements include, but are not limited to, the following:
   
volatility in capital and credit markets, or other unfavorable changes in economic conditions could adversely impact us;
   
short-term leases expose us to the effects of declining market rents;
   
we face risks associated with land holdings and related activities;
   
difficulties of selling real estate could limit our flexibility;
   
we could be negatively impacted by the condition of Fannie Mae or Freddie Mac;
   
compliance or failure to comply with laws requiring access to our properties by disabled persons could result in substantial cost;
   
competition could limit our ability to lease apartments or increase or maintain rental income;
   
development and construction risks could impact our profitability;
   
our acquisition strategy may not produce the cash flows expected;
   
competition could adversely affect our ability to acquire properties;
   
losses from catastrophes may exceed our insurance coverage;
   
investments through joint ventures involve risks not present in investments in which we are the sole investor;
   
we face risks associated with investments in and management of discretionary funds;
   
we depend on our key personnel;
   
changes in litigation risks could affect our business;
   
tax matters, including failure to qualify as a REIT, could have adverse consequences;
   
insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders;
   
we have significant debt, which could have important adverse consequences;
   
we may be unable to renew, repay, or refinance our outstanding debt;
   
variable rate debt is subject to interest rate risk;
   
we may incur losses on interest rate hedging arrangements;
   
issuances of additional debt may adversely impact our financial condition;
   
failure to maintain our current credit ratings could adversely affect our cost of funds, related margins, liquidity, and access to capital markets;
   
share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders;
   
our share price will fluctuate; and
   
the form, timing and/or amount of dividend distributions in future periods may vary and be impacted by economic or other considerations.
These forward-looking statements represent our estimates and assumptions as of the date of this report, and we assume no obligation to update or supplement forward-looking statements because of subsequent events.

 

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Executive Summary
We are primarily engaged in the ownership, management, development, acquisition and construction of multifamily apartment communities. As of December 31, 2010, we owned interests in, operated, or were developing 188 multifamily properties comprising 63,923 apartment homes across the United States as detailed in the following Property Portfolio table. In addition, we own other land parcels we may develop into multifamily apartment communities.
The U.S. economy has experienced a significant recession. Record levels of job losses and higher unemployment rates negatively impacted our business, particularly in the latter half of 2008 through the first quarter of 2010, when we experienced declines in both rental rates and occupancy levels. Despite unemployment rates remaining at high levels, our results for the most recent three quarters reflect sequential rental revenue growth as well as an increase in rental revenue growth for the three months ended December 31, 2010 as compared to the same period in 2009, primarily due to improvements in rental rates and slight improvements in average occupancy levels. We believe these improvements may be due in part to the continued decline in home ownership rates and the limited supply of new rental housing. We expect improvements in rental rates and occupancy to continue in 2011 and believe sustained revenue growth will depend on, among other things, the timing and extent of employment growth, supply levels of new multifamily housing, and the continuation of the decline in home ownership rates.
In 2010, we acquired three multifamily properties, totaling 686 units, for an aggregate of approximately $63.0 million on behalf of one of our discretionary investment funds in which we have a 20% ownership interest. Additionally, we restructured three of our joint ventures, which collectively own an aggregate of 1,069 units, resulting in our acquiring a controlling ownership interest in each joint venture.
During the second half of 2010, we began construction on two development projects, comprised of approximately 607 units; initial occupancy is expected in the last half of 2011. As of December 31, 2010, we intend to incur approximately $57.2 million of additional costs on these projects. We expect to fund these amounts through available cash balances and draws upon our unsecured line of credit. We expect to start several additional development projects currently held in our development pipeline in 2011 and are evaluating additional development projects to commence during fiscal year 2011 and beyond.
During the fourth quarter of 2010, we received net proceeds of approximately $101.9 million and recognized a gain of approximately $9.6 million from the sale of two operating properties, containing 1,066 apartment homes to unaffiliated third parties.
Subject to market conditions, we intend to continue to look for opportunities to develop and acquire existing communities through the Funds, expand our development pipeline, and complete selective dispositions. We also intend to continue to focus on strengthening our capital and liquidity positions by generating positive cash flows from operations, reducing outstanding debt and leverage ratios, and controlling overhead costs. We intend to meet our liquidity requirements through available cash balances, cash flows generated from operations, draws on our unsecured credit facility, proceeds from property dispositions and secured mortgage notes, and the use of debt and equity offerings under our automatic shelf registration statement.
As of December 31, 2010, we had approximately $170.6 million in cash and cash equivalents and no balances outstanding on our $500 million unsecured line of credit. We have approximately $154.4 million of debt maturities in 2011, excluding scheduled principal amortizations. We believe we are well-positioned with a strong balance sheet and sufficient liquidity to cover near-term debt maturities and new development funding requirements. We will, however, continue to assess and take further actions where prudent to meet our objectives and capital requirements.

 

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Property Portfolio
Our multifamily property portfolio, excluding land held for future development, is summarized as follows:
                                 
    December 31, 2010     December 31, 2009  
    Apartment             Apartment        
    Homes     Properties     Homes     Properties  
Operating Properties
                               
Las Vegas, Nevada
    8,016       29       8,016       29  
Houston, Texas (1)
    6,967       19       6,289       16  
Washington, D.C. Metro (2)
    5,604       16       6,068       17  
Dallas, Texas
    5,517       14       6,119       15  
Tampa, Florida
    5,503       12       5,503       12  
Charlotte, North Carolina
    3,574       15       3,574       15  
Orlando, Florida
    3,557       9       3,557       9  
Atlanta, Georgia
    3,312       11       3,202       10  
Raleigh, North Carolina
    2,704       7       2,704       7  
Southeast Florida
    2,520       7       2,520       7  
Los Angeles/Orange County, California (3)
    2,481       6       2,481       6  
Austin, Texas
    2,454       8       2,454       8  
Phoenix, Arizona
    2,433       8       2,433       8  
Denver, Colorado
    2,171       7       2,171       7  
San Diego/Inland Empire, California
    1,196       4       1,196       4  
Other
    5,307       14       4,999       13  
 
                       
Total Operating Properties
    63,316       186       63,286       183  
 
                       
Properties Under Development
                               
Orlando, Florida
    420       1              
Washington, D.C. Metro
    187       1              
Houston, Texas
                372       2  
 
                       
Total Properties Under Development
    607       2       372       2  
 
                       
Total Properties
    63,923       188       63,658       185  
 
                       
Less: Unconsolidated Joint Venture Properties (4)
                               
Las Vegas, Nevada
    4,047       17       4,047       17  
Houston, Texas
    1,981       6       1,946       6  
Phoenix, Arizona
    992       4       992       4  
Austin, Texas
    601       2       601       2  
Dallas, Texas
    456       1       456       1  
Los Angeles/Orange County, California
    421       1       711       2  
Denver, Colorado
    320       1       320       1  
Atlanta, Georgia
    110       1              
Washington, D. C. Metro
                508       1  
Other
    3,507       10       3,237       9  
 
                       
Total Joint Venture Properties
    12,435       43       12,818       43  
 
                       
Total Properties Fully-Consolidated
    51,488       145       50,840       142  
 
                       
     
(1)  
Includes two fully-consolidated joint ventures Camden Travis Street, a fully-consolidated joint venture, of which we retain a 25% ownership, and Camden Plaza of which we retain a 99.99% ownership.
 
(2)  
Includes Camden College Park, a fully-consolidated joint venture, of which we retain a 99.99% ownership.
 
(3)  
Includes Camden Main and Jamboree, a fully-consolidated joint venture, of which we retain a 99.99% ownership.
 
(4)  
Refer to Note 8, “Investments in Joint Ventures,” of the Notes to Consolidated Financial Statements for further discussion of our unconsolidated joint venture investments.

 

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Stabilized Communities
We generally consider a property stabilized once it reaches 90% occupancy at the beginning of a period. During the year ended December 31, 2010, stabilization was achieved at four recently completed development properties as follows:
                         
    Number of     Date of        
    Apartment     Construction     Date of  
Property and Location   Homes     Completion     Stabilization  
 
                       
Camden Dulles Station
Oak Hill, VA
    366       1Q09       2Q10  
 
                       
Camden Amber Oaks — joint venture
Austin, TX
    348       2Q09       2Q10  
 
                       
Camden Travis Street (1)
Houston, TX
    253       1Q10       3Q10  
 
                       
Belle Meade — joint venture
Houston, TX
    119       1Q10       4Q10  
     
(1)  
Camden Travis Street is a fully-consolidated joint venture, of which we retain a 25% ownership
Partial Sales and Dispositions to Joint Ventures Included in Continuing Operations
There were no partial sales or dispositions to joint ventures for the years ended December 31, 2010 or 2009.
In March 2008, we sold a development community in Austin, Texas, to one of the Funds for approximately $8.9 million. No gain or loss was recognized on the sale. In August 2008, we sold a stabilized community to the same Fund for approximately $44.2 million and recognized a gain of approximately $1.8 million on the sale.
Discontinued Operations
We intend to maintain a long-term strategy of managing our invested capital through the selective sale of properties and to utilize the proceeds to reduce our outstanding debt and leverage ratios and fund investments with higher anticipated growth prospects in our markets. Income from discontinued operations includes the operations of properties sold during the year ended December 31, 2010. The components of earnings classified as discontinued operations include separately identifiable property-specific revenues, expenses, depreciation, and interest expense, if any. Any gain or loss on the disposal of the properties held for sale is also classified as discontinued operations.
A summary of our 2010 dispositions is as follows:
                         
    Number of              
    Apartment     Date of     Year Placed in  
Property and Location   Homes     Disposition     Service  
 
                       
Camden Westwind
Ashburn, VA
    464       4Q10       2006  
 
                       
Camden Oasis
Euless, TX
    602       4Q10       1986  
During the fourth quarter of 2010, we received net proceeds of approximately $101.9 million and recognized a gain of approximately $9.6 million from the sale of the two operating properties above, containing 1,066 apartment homes, to unaffiliated third parties. During the year ended December 31, 2009, we received net proceeds of approximately $28.0 million and recognized a gain of approximately $16.9 million from the sale of one operating property containing 671 apartment homes to an unaffiliated third party. During the year ended December 31, 2008, we received net proceeds of approximately $121.7 million and recognized gains of approximately $80.2 million from the sales of eight operating properties, containing 2,392 apartment homes, to unaffiliated third parties.

 

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During the year ended December 31, 2010, we recognized a gain of approximately $0.2 million from the sale of land in Houston, Texas. During the year ended December 31, 2008, we recognized a gain of approximately $1.1 million from the sale of land adjacent to our regional office in Las Vegas, Nevada. The gains on these sales were not included in discontinued operations as the operations and cash flows of these assets were not clearly distinguished, operationally or for reporting purposes, from the adjacent assets.
Development and Lease-Up Properties
We did not have any consolidated properties in lease-up at December 31, 2010.
At December 31, 2010, we had two consolidated properties under construction as follows:
                                                 
                            Included in     Estimated        
    Number of                     Properties     Date of     Estimated  
($ in millions)   Apartment     Estimated     Cost     Under     Construction     Date of  
Property and Location   Homes     Cost     Incurred     Development     Completion     Stabilization  
 
                                               
Camden Lake Nona
Orlando, FL
    420     $ 61.0     $ 28.6     $ 28.6       2Q12       3Q14  
Camden Summerfield II
Landover, MD
    187       32.0       7.2       7.2       1Q12       4Q12  
 
                                     
Total
    607     $ 93.0     $ 35.8     $ 35.8                  
 
                                     
Our consolidated balance sheet at December 31, 2010 included approximately $206.9 million related to properties under development and land. Of this amount, approximately $35.8 million related to our projects currently under development. In addition, we had approximately $171.1 million primarily invested in land held for future development, which includes approximately $95.6 million related to projects we expect to begin constructing during the next two years, and approximately $75.5 million invested in land tracts for which we may begin developing in the future.
At December 31, 2010, we had investments in unconsolidated joint ventures which were developing the following multifamily communities:
                                 
            Number of     Total     % Leased  
($ in millions)           Apartment     Cost     At  
Property and Location   Ownership %     Homes     Incurred     1/30/11  
 
                               
Completed Communities (1)
                               
Braeswood Place
Houston, TX
    72 %     340     $ 50.4       91 %
 
                               
Camden Ivy Hall
Atlanta, GA
    20 %     110       16.9       68 %
 
                           
 
            450     $ 67.3          
 
                           
 
                               
Pre-Development (2)
          Total Acres                
 
                               
Lakes at 610
Houston, TX
    30 %     6.1     $ 7.4       N/A  
 
                           
Total Pre-Development
            6.1     $ 7.4          
 
                           
     
(1)  
Properties in lease-up as of December 31, 2010.
 
(2)  
Properties in pre-development by joint venture partner.

 

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Refer to Note 8, “Investments in Joint Ventures” of the Notes to Consolidated Financial Statements for further discussion of our unconsolidated joint venture investments.
Geographic Diversification
At December 31, 2010 and 2009, our investments in various geographic areas, excluding both depreciation and investments in joint ventures were as follows:
                                 
(in thousands)   2010     2009  
 
Washington, D.C. Metro
  $ 1,214,165       21.5 %   $ 1,193,269       21.9 %
Southeast Florida
    456,127       8.1       453,021       8.3  
Houston, Texas
    432,697       7.7       389,848       7.1  
Los Angeles/Orange County, California
    426,527       7.5       332,414       6.1  
Tampa, Florida
    404,718       7.2       393,377       7.2  
Orlando, Florida
    381,642       6.8       371,862       6.8  
Dallas, Texas
    329,222       5.8       345,814       6.3  
Atlanta, Georgia
    322,741       5.7       320,748       5.9  
Charlotte, North Carolina
    321,838       5.7       318,493       5.8  
Las Vegas, Nevada
    311,186       5.5       308,054       5.6  
Raleigh, North Carolina
    239,840       4.2       237,284       4.4  
San Diego/Inland Empire, California
    227,784       4.0       227,108       4.2  
Denver, Colorado
    189,644       3.4       187,544       3.4  
Austin, Texas
    155,714       2.8       154,473       2.8  
Phoenix, Arizona
    119,826       2.1       118,828       2.2  
Other
    114,006       2.0       109,489       2.0  
 
                       
Total
  $ 5,647,677       100.0 %   $ 5,461,626       100.0 %
 
                       
Results of Operations
Changes in revenues and expenses related to our operating properties from period to period are due primarily to the performance of stabilized properties in the portfolio, the lease-up of newly constructed properties, acquisitions, and dispositions. Where appropriate, comparisons of income and expense on communities included in continuing operations are made on a dollars-per-weighted average apartment home basis in order to adjust for such changes in the number of apartment homes owned during each period. Selected weighted averages for the years ended December 31 are as follows:
                         
    2010     2009     2008  
Average monthly property revenue per apartment home
  $ 1,021     $ 1,036     $ 1,058  
Annualized total property expenses per apartment home
  $ 4,970     $ 4,920     $ 4,862  
Weighted average number of consolidated operating apartment homes
    49,801       49,206       48,246  
Weighted average occupancy of consolidated operating apartment homes
    93.4 %     94.6 %     93.9 %

 

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Property-level operating results
The following tables present the property-level revenues and property-level expenses, excluding discontinued operations, for the year ended December 31, 2010 as compared to 2009 and for the year ended December 31, 2009 as compared to 2008:
                                         
    Apartment     Year Ended        
    Homes     December 31,     Change  
($ in thousands)   at 12/31/10     2010     2009     $     %  
Property revenues:
                                       
Same store communities
    46,293     $ 557,542     $ 568,926     $ (11,384 )     (2.0 )%
Non-same store communities
    4,588       48,596       38,265       10,331       27.0  
Development and lease-up communities
    607                          
Other
          4,266       4,819       (553 )     (11.5 )
 
                             
Total property revenues
    51,488     $ 610,404     $ 612,010     $ (1,606 )     (0.3 )%
 
                             
 
                                       
Property expenses:
                                       
Same store communities
    46,293     $ 223,528     $ 222,689     $ 839       0.4 %
Non-same store communities
    4,588       18,987       15,954       3,033       19.0  
Development and lease-up communities
    607                          
Other
          4,985       3,428       1,557       45.4  
 
                             
Total property expenses
    51,488     $ 247,500     $ 242,071     $ 5,429       2.2 %
 
                             
Same store communities are communities we owned and which were stabilized as of January 1, 2009. Non-same store communities are stabilized communities we have acquired, developed, or re-developed after January 1, 2009. Development and lease-up communities are non-stabilized communities we have acquired or developed after January 1, 2009. Other includes results from non-multifamily rental properties and expenses relating to land holdings no longer under active development.
                                         
    Apartment     Year Ended        
    Homes     December 31,     Change  
($in thousands)   at 12/31/09     2009     2008     $     %  
Property revenues:
                                       
Same store communities
    41,604     $ 505,907     $ 522,748     $ (16,841 )     (3.2 )%
Non-same store communities
    7,551       96,840       81,034       15,806       19.5  
Development and lease-up communities
    619       4,527       1,213       3,314       273.2  
Other
          4,736       7,413       (2,677 )     (36.1 )
 
                             
Total property revenues
    49,774     $ 612,010     $ 612,408     $ (398 )     (0.1 )%
 
                             
 
                                       
Property expenses:
                                       
Same store communities
    41,604     $ 198,685     $ 195,242     $ 3,443       1.8 %
Non-same store communities
    7,551       37,985       34,201       3,784       11.1  
Development and lease-up communities
    619       2,028       515       1,513       293.8  
Other
          3,373       4,636       (1,263 )     (27.2 )
 
                             
Total property expenses
    49,774     $ 242,071     $ 234,594     $ 7,477       3.2 %
 
                             
Same store communities are communities we owned and which were stabilized as of January 1, 2008. Non-same store communities are stabilized communities we have acquired, developed, or re-developed after January 1, 2008. Development and lease-up communities are non-stabilized communities we have developed or acquired after January 1, 2008. Other includes results from non-multifamily rental properties and expenses relating to land holdings no longer under active development.
Same store analysis:
Same store property revenues for the year ended December 31, 2010 decreased approximately $11.4 million, or 2.0%, from 2009. Same store rental revenues decreased approximately $11.8 million for the year ended December 31, 2010 as compared to 2009, primarily due to a 2.3% decline in average rental rates from 2009 for our same store portfolio during 2010, partially offset by a slight increase in average occupancy. The decline in average rental rates was due to the continuation of the recession through the first quarter of 2010, offset by improving rental rates and slight improvements in average occupancy levels for the most recent three quarters which we believe is due in part to the continued decline in home ownership rates and the limited supply of new rental housing. The decrease was also partially offset by a $0.4 million increase in other property revenue primarily due to increases from our utility rebilling programs.
Same store property revenues for the year ended December 31, 2009 decreased approximately $16.8 million, or 3.2%, from 2008. Same store rental revenues decreased approximately $23.9 million, or 5.2%, from 2008 due to a slight decline in average occupancy and a 5.0% decline in average rental rates for our same store portfolio due to, among other factors, the challenges within the multifamily industry resulting from a significant recession experienced within the U.S. This decrease was partially offset by an approximate $7.1 million increase in other property revenue primarily due to the continued rollout of our utility rebilling programs.

 

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Property expenses from our same store communities increased approximately $0.8 million, or 0.4%, for the year ended December 31, 2010, as compared to 2009. The increase was primarily due to expenses related to our utility rebilling programs discussed above, higher salaries, and increases in property insurance and repair and maintenance costs. These increases were partially offset by lower real estate taxes as a result of declining rates and valuations at a number our communities. Excluding the expenses associated with our utility rebilling programs, same store property expenses for 2010 decreased approximately $0.8 million, or 0.4%, from 2009.
Property expenses from our same store communities increased approximately $3.4 million, or 1.8%, for the year ended December 31, 2009, as compared to 2008. This increase was primarily due to expenses related to our utility rebilling programs discussed above and increases in property insurance costs. This increase was partially offset by lower property taxes resulting from declining rates and valuations at a number of our communities, and lower repair and maintenance, and marketing and leasing, expenses. Excluding the expenses associated with our utility rebilling programs, same store property expenses for 2009 declined approximately $0.2 million, or 0.1% from 2008.
Non-same store and development and lease-up analysis:
Property revenues from non-same store and development and lease-up communities increased approximately $10.3 million for the year ended December 31, 2010 as compared to 2009 and increased approximately $19.1 million for the year ended December 31, 2009 as compared to 2008. The increase in 2010 as compared to 2009 was primarily due to seven consolidated properties in our development and re-development pipelines reaching stabilization during 2009 and 2010, in addition to approximately $2.6 million of revenues recognized in the second half of 2010 related to three newly consolidated joint ventures as more fully described in Note 7, “Property Acquisitions, Discontinued Operations, and Impairments.” The increase in 2009 as compared to 2008 was primarily due to nine consolidated properties in our development and re-development pipelines reaching stabilization during 2008 and 2009.
Property expenses from non-same store and development and lease-up communities increased approximately $3.0 million for the year ended December 31, 2010 as compared to 2009 and increased approximately $5.3 million for 2009 as compared to 2008. The increases in both periods were due to a number of consolidated properties in our development and re-development pipelines reaching stabilization as discussed above. The increase in 2010 was also due to approximately $1.1 million of expenses recognized in the second half of 2010 related to three newly consolidated joint ventures as more fully described in Note 7, “Property Acquisitions, Discontinued Operations, and Impairments.”
Other property analysis:
Other property revenues decreased approximately $0.6 million and $2.7 million for the year ended December 31, 2010 as compared to 2009 and for the year ended December 31, 2009 as compared to 2008, respectively. The decrease for 2009 as compared to 2008 was primarily due to the sale of one of our communities to one of the Funds in 2008.
Other property expenses increased approximately $1.6 million for the year ended December 31, 2010 as compared to 2009 and decreased $1.3 million for the year ended December 31, 2009 as compared to 2008, respectively. The increases in 2010 as compared to 2009 primarily related to increases in property taxes expensed on land holdings for eight projects for which we decided in 2009 to postpone development. As a result, we ceased capitalization of expenses, including property taxes. The decrease in 2009 as compared to 2008 was primarily due to costs we incurred related to Hurricane Ike in September 2008.

 

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Non-property income
                                                                 
    Year Ended                     Year Ended        
    December 31,     Change     December 31,     Change  
($ in thousands)   2010     2009     $     %     2009     2008     $     %  
Fee and asset management
  $ 8,172     $ 8,008     $ 164       2.0 %   $ 8,008     $ 9,167     $ (1,159 )     (12.6 )%
Interest and other income
    8,584       2,826       5,758       203.8       2,826       4,736       (1,910 )     (40.3 )
Income (loss) on deferred compensation plans
    11,581       14,609       (3,028 )     (20.7 )     14,609       (33,443 )     48,052       *  
 
                                               
Total non-property income (loss)
  $ 28,337     $ 25,443     $ 2,894       (11.4 )%   $ 25,443     $ (19,540 )   $ 44,983       %*
 
                                               
     
*  
Not a meaningful percentage.
Fee and asset management income, which represents income related to asset management, third-party construction and development projects and property management, increased approximately $0.2 million for the year ended December 31, 2010 as compared to 2009 and decreased approximately $1.2 million for the year ended December 31, 2009 as compared to 2008. The increase for 2010 was primarily related to an increase in third-party construction activities, offset by decreases in development and construction fees earned on our development joint ventures as compared to 2009 due to the completion of construction activities during 2009 and 2010. The increase was further offset by decreases in fees earned on our stabilized joint ventures due to declines in property revenues. The decrease for 2009 was primarily related to overall declines in development and construction fees earned on our development joint ventures in 2009 as compared to 2008 due to the completion of the associated construction activities at several joint venture communities in 2008 and 2009. The decrease in 2009 was partially offset by an increase in third-party construction activities in 2009.
Interest and other income increased approximately $5.8 million for 2010 as compared to 2009 and decreased approximately $1.9 million for 2009 as compared to 2008. The increase for 2010 was primarily due to the recognition of approximately $2.7 million of other income resulting from indemnification provisions in an operating joint venture agreement which expired in January 2010, and recognition of approximately $4.2 million of other income as a result of the dissolution of a joint venture and purchase by our joint venture partner of the third-party debt made by this joint venture from the note holder, which relieved us from our guarantee of our proportionate interest of this debt; we had previously recorded a charge for this indemnification. These increases were partially offset by an approximate $0.9 million decrease in interest income due to declines in interest income on our mezzanine loan portfolio related primarily to the lower balances of outstanding mezzanine loans due in part to conversion of mezzanine loans into additional equity interests in certain of our joint ventures in 2009 and 2010.
The $1.9 million decrease in 2009 as compared to 2008 was primarily due to declines in interest income on our mezzanine loan portfolio related to contractual reductions in interest rates, reductions in interest earned on certain variable rate mezzanine notes due to declines in LIBOR, and lower balances of outstanding mezzanine loans due in part to the conversion of mezzanine loans into additional equity interests in certain of our joint ventures in 2009.
Our deferred compensation plans earned income of approximately $11.6 million and $14.6 million in 2010 and 2009, respectively, and incurred losses of $33.4 million in 2008. The changes were related to the performance of the investments held in the deferred compensation plans for plan participants and were directly offset by the expense (benefit) related to these plans, as set forth in the table below.

 

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Other expenses
                                                                 
    Year Ended                     Year Ended        
    December 31,     Change     December 31,     Change  
($ in thousands)   2010     2009     $     %     2009     2008     $     %  
Property management
  $ 19,982     $ 18,864     $ 1,118       5.9 %   $ 18,864     $ 19,910     $ (1,046 )     (5.3 )%
Fee and asset management
    4,841       4,878       (37 )     (0.8 )     4,878       6,054       (1,176 )     (19.4 )
General and administrative
    30,762       31,243       (481 )     (1.5 )     31,243       31,586       (343 )     (1.1 )
Interest
    125,893       128,296       (2,403 )     (1.9 )     128,296       132,399       (4,103 )     (3.1 )
Depreciation and amortization
    172,849       171,322       1,527       0.9     171,322       168,488       2,834       1.7  
Amortization of deferred financing costs
    4,102       3,925       177       4.5       3,925       2,958       967       32.7  
Expense (benefit) on deferred compensation plans
    11,581       14,609       (3,028 )     (20.7 )     14,609       (33,443 )     48,052       143.7  
 
                                               
Total other expenses
  $ 370,010     $ 373,137     $ (3,127 )     (0.8 %)   $ 373,137     $ 327,952     $ 45,185       13.8 %
 
                                               
Property management expense, which represents regional supervision and accounting costs related to property operations, increased approximately $1.1 million for the year ended December 31, 2010 as compared to 2009 and decreased approximately $1.0 million for 2009 as compared to 2008. Property management expenses were 3.3%, 3.1%, and 3.3% of total property revenues for the years ended December 31, 2010, 2009, and 2008, respectively. The $1.1 million increase in 2010 was primarily due to increases in salary and benefits, rental, marketing, and travel expenses as compared to 2009. The decrease in 2009 as compared to 2008 was due primarily to lower travel and legal expenses.
Fee and asset management expense, which represents expenses related to asset management, third-party construction and development projects and property management, was relatively flat in 2010 as compared to 2009 due in part to an increase in third-party construction activities, offset by decreases in development and construction on our development joint ventures as compared to 2009 due to the completion of construction activities during 2009 and 2010. The $1.2 million decrease for 2009 as compared to 2008 was primarily due to declines in development and construction activities related to our development joint ventures in 2009 as compared to 2008 due to the completion of the associated construction activities at several joint venture communities in 2008 and 2009.
General and administrative expenses decreased approximately $0.5 million during the year ended December 31, 2010 as compared to 2009 and decreased approximately $0.3 million during the year ended December 31, 2009 as compared to 2008. General and administrative expenses were 4.9% of total revenues, excluding income or loss on deferred compensation plans, for the year ended December 31, 2010, and 5.0% for each of the years ended December 31, 2009, and 2008. The decrease in 2010 as compared to 2009 was primarily due to a decrease in legal costs and other discretionary expenses, $1.6 million in severance payments made in connection with a reduction in force of certain construction and development staff in January 2009, and separation costs relating to the retirement of one executive officer during the fourth quarter of 2009. These decreases were partially offset by an increase in long-term incentive compensation of approximately $1.6 million during 2010 as compared to 2009. The decrease for 2009 as compared to 2008 was primarily due to various cost-saving initiatives implemented in 2009, and increased expenses in 2008 which did not recur in 2009 associated with the abandonment of potential acquisitions. The decrease was partially offset by $1.6 million in severance payments made in connection with the reduction in force of certain construction and development staff in 2009, and separation costs relating to the retirement of one executive officer during the fourth quarter of 2009.
Interest expense decreased approximately $2.4 million during the year ended December 31, 2010 as compared to 2009 and decreased approximately $4.1 million during the year ended December 31, 2009 as compared to 2008. The decrease in 2010 was primarily due to using the net proceeds of $272.1 million from the equity offering completed during the second quarter of 2009 and approximately $231.7 million in net proceeds from our ATM program during 2010 to retire outstanding debt, prior to its maturity, of approximately $325.0 million during the first six months of 2009 and repay maturing secured and unsecured notes during 2009 and 2010, as well as reduce the balances outstanding on our unsecured line of credit. This decrease was partially offset by the increased interest expense incurred on our $420 million credit facility entered into during the second quarter of 2009 and lower capitalized interest of approximately $4.6 million in 2010 as compared to 2009 primarily due to the completion of communities in our development pipeline and our decision in fiscal year 2009 to postpone the development of land holdings for eight future projects.

 

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The decrease for 2009 as compared to 2008 was primarily due to decreases in indebtedness as a result of early retirement of outstanding debt of approximately $325.0 million during the first six months of 2009. This decrease in interest expense was partially offset by a decrease in capitalized interest of approximately $7.4 million during the year ended December 31, 2009 as compared to 2008 as a result of the completion of units in our development pipeline and our decision in fiscal year 2008 not to continue with five future development projects. The decrease was further offset by higher interest rates on existing indebtedness resulting from paying down amounts outstanding under our unsecured line of credit with proceeds from our $420 million credit facility entered into in April 2009 and our $380 million credit facility entered into in September 2008.
Depreciation and amortization expense increased approximately $1.5 million during the year ended December 31, 2010 as compared to 2009 and increased approximately $2.8 million during the year ended December 31, 2009 as compared to 2008. The increase in 2010 as compared to 2009 was primarily due to new development and capital improvements placed in service during 2009 and 2010 and the consolidation of three joint ventures during the second half of 2010, which were previously accounted for under the equity method of accounting. These increases were partially offset by an increase in the number of assets being fully depreciated in 2010 as compared to 2009. The increase in 2009 as compared to 2008 was primarily due to completion of new development and capital improvements placed in service in 2009 as compared to the previous year.
Amortization of deferred financing costs increased approximately $0.2 million during the year ended December 31, 2010 as compared to 2009 and increased approximately $1.0 million during the year ended December 31, 2009 as compared to 2008. The increase for 2010 as compared to 2009 was primarily due to additional financing costs incurred on our $500 million unsecured credit facility, entered into in August 2010, and on our $420 million credit facility, entered into the second quarter of 2009. These increases were partially offset by lower amortization of deferred financing costs related to the repurchase and retirement of certain series of notes during 2010 and 2009. The increase for 2009 as compared to 2008 was primarily due to the amortization of our financing costs incurred upon the extension of our unsecured credit facility in October 2009, and financing costs related to our $380 million credit facility completed in September 2008 and our $420 million credit facility completed in April 2009. This increase was partially offset by the repurchase and retirement of certain series of notes during 2009.
Our deferred compensation plans incurred expenses of approximately $11.6 million and $14.6 million in 2010 and 2009, respectively, and earned a benefit of approximately $33.4 million in 2008. The changes were related to the performance of the investments held in the deferred compensation plans for plan participants and were directly offset by the income (loss) related to these plans, as discussed above.
Other
                                                                 
    Year Ended                     Year Ended        
    December 31,     Change     December 31,     Change  
($ in thousands)   2010     2009     $     %     2009     2008     $     %  
Gain on sale of properties, including land
  $ 236     $     $ 236       100.0 %   $     $ 2,929     $ (2,929 )     (100.0 )%
Gain (loss) on early retirement of debt
          (2,550 )     2,550       100.0       (2,550 )     13,566       (16,116 )     (118.8 )
Impairment associated with land development activities
          (85,614 )     85,614       100.0       (85,614 )     (51,323 )     (34,291 )     (66.8 )
Impairment provision for technology investment
    (1,000 )           (1,000 )     (100.0 )                        
Equity in income (loss) of joint ventures
    (839 )     695       (1,534 )     (220.7 )     695       (1,265 )     1,960       (154.9 )
Income tax expense — current
    (1,581 )     (967 )     (614 )     (63.5 )     (967 )     (843 )     (124 )     (14.7 )
Gain on sale of properties, including land, totaled approximately $0.2 million and $2.9 million for the years ended December 31, 2010 and December 31, 2008, respectively. The gain in 2008 was due to the partial sale of properties to one of the Funds and a gain on the sale of a land parcel in Las Vegas, Nevada to an unaffiliated third party. There was no gain on sale of properties, including land, for the year ended December 31, 2009.

 

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Loss on early retirement of debt was approximately $2.6 million for the year ended December 31, 2009 due to the repurchase and retirement of approximately $325.0 million of various unsecured and secured notes from unrelated third parties for approximately $327.5 million during the first two quarters of 2009. Gain on early retirement of debt was approximately $13.6 million for the year ended December 31, 2008 due to the repurchases and retirements of debt, including a tender offer for certain series of outstanding debt which resulted in the repurchase and retirement of approximately $108.3 million of debt from unrelated third parties for approximately $100.6 million, and the repurchases and retirements of approximately $82.7 million of various series of other outstanding debt from unrelated third parties for approximately $75.7 million. The gain (loss) on early retirement of debt for these transactions also includes reductions for the write-off of applicable loan costs. There was no gain (loss) on early retirement of debt for the year ended December 31, 2010.
The impairment associated with land development activities for the year ended December 31, 2009 of approximately $85.6 million includes approximately $72.2 million related to land holdings for eight projects, and approximately $13.4 million related to a land development joint venture we put on hold. The impairment associated with land development activities for the year ended December 31, 2008 of approximately $51.3 million reflects impairments in the value of land holdings for several potential development projects, including approximately $48.6 million related to land holdings for five projects, approximately $1.6 million in the value of a land parcel held for future development, and approximately $1.1 million for costs capitalized for a potential joint venture development we did not develop. These impairment charges for land are the difference between each parcel’s estimated fair value and the carrying value. There were no impairments associated with land development activities for the year ended December 31, 2010.
During the fourth quarter of 2010, we wrote-off a $1.0 million investment associated with a technology investment which we determined was no longer recoverable.
Equity in income (loss) of joint ventures decreased approximately $1.5 million for the year ended December 31, 2010 as compared to 2009, and increased approximately $2.0 million for the year ended December 31, 2009 as compared to 2008. The decrease for 2010 as compared to 2009 was primarily the result of decreases in earnings by our stabilized operating joint ventures due to declines in rental income, and the recognition of net operating losses by certain development joint ventures during the lease-up phase of operations. The decreases were further impacted by the consolidation of three operating joint ventures during the second half of 2010, which were previously accounted for in accordance with the equity method of accounting. These decreases were partially offset by increases in earnings in development joint ventures reaching or nearing stabilization during 2009 and 2010. The increase for 2009 as compared to 2008 was primarily the result of certain properties owned by development joint ventures reaching or nearing stabilization in 2009 partially offset by declining earnings at our stabilized operating joint ventures due to declines in rental income.
We had current income tax expense of approximately $1.6 million, $1.0 million, and $0.8 million for the tax years ended December 31, 2010, 2009, and 2008, respectively. The increase in taxes in 2010 as compared to 2009 primarily related to an increase in federal income taxes resulting from increased profitability in our construction activities conducted in a taxable REIT subsidiary. The increase in taxes in 2009 as compared to 2008 primarily related to an increase in state income taxes.
Noncontrolling interests
                                                                 
    Year Ended                     Year Ended        
    December 31,     Change     December 31,     Change  
($ in thousands)   2010     2009     $     %     2009     2008     $     %  
(Income) loss allocated to noncontrolling interests from continuing operations
  $ (926 )   $ 403     $ 1,329       329.8 %   $ 403     $ (4,052 )   $ (4,455 )     (110.0 )%
Income allocated to perpetual preferred units
    (7,000 )     (7,000 )                 (7,000 )     (7,000 )            
Income allocated to noncontrolling interests from continuing operations increased approximately $1.3 million in 2010 as compared to 2009, and decreased $4.5 million in 2009 as compared to 2008. During 2009, we recognized an approximately $72.2 million impairment associated with land holdings for eight projects we had put on hold, of which $3.6 million represented certain operating partnerships’ interests of the impairment. Excluding this impairment charge, income allocated to noncontrolling interests from continuing operations decreased approximately $2.3 million and $0.8 million in 2010 as compared to 2009, and 2009 as compared to 2008, respectively. The $2.3 million decrease in 2010 as compared to 2009 was primarily due to the completion during the three months ended March 31, 2010 and subsequent lease-up of a property by a fully consolidated joint venture of which we retain a 25% ownership, which resulted in our recording depreciation and interest expense on the property, upon completion of construction, in excess of income recognized during the lease-up period. The decrease was also due to lower earnings associated with properties held by operating partnerships during 2010 as compared to 2009. The $0.8 million decrease in 2009 was primarily due to lower earnings associated with properties held by operating partnerships during 2009 as compared to 2008.

 

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Funds from Operations (“FFO”)
Management considers FFO to be an appropriate measure of the financial performance of an equity REIT. The National Association of Real Estate Investment Trusts (“NAREIT”) currently defines FFO as net income (computed in accordance with accounting principles generally accepted in the United States of America (“GAAP”)), excluding gains (or losses) associated with the sale of previously depreciated operating properties, real estate depreciation and amortization, and adjustments for unconsolidated joint ventures. Our calculation of diluted FFO also assumes conversion of all potentially dilutive securities, including certain noncontrolling interests, which are convertible into common shares. We consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions of operating properties and depreciation, FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different companies.
To facilitate a clear understanding of our consolidated historical operating results, we believe FFO should be examined in conjunction with net income attributable to common shareholders as presented in the consolidated statements of income and comprehensive income and data included elsewhere in this report. FFO is not defined by GAAP and should not be considered as an alternative to net income attributable to common shareholders as an indication of our operating performance. Additionally, FFO as disclosed by other REITs may not be comparable to our calculation.
Reconciliations of net income attributable to common shareholders to diluted FFO for the years ended December 31 are as follows:
                         
(in thousands)   2010     2009     2008  
Funds from operations
                       
Net income (loss) attributable to common shareholders (1)
  $ 23,216     $ (50,800 )   $ 70,973  
Real estate depreciation and amortization, including discontinued operations
    170,660       170,480       171,009  
Adjustments for unconsolidated joint ventures
    8,943       7,800       7,103  
Gain on sale of properties and discontinued operations, net of taxes
    (9,614 )     (16,887 )     (83,117 )
Income (loss) allocated to noncontrolling interests
    1,104       (646 )     3,617  
 
                 
Funds from operations — diluted
  $ 194,309     $ 109,947     $ 169,585  
 
                 
 
                       
Weighted average shares — basic
    68,608       62,359       55,272  
Incremental shares issuable from assumed conversion of:
                       
Common share options and share awards granted
    348       55       114  
Common units
    2,596       2,852       3,142  
 
                 
Weighted average shares — diluted
    71,552       65,266       58,528  
 
                 
     
(1)  
Includes an $85.6 million and $51.3 million impairment associated with land development activities for the years ended December 31, 2009 and 2008, respectively.

 

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Liquidity and Capital Resources
Financial Condition and Sources of Liquidity
We intend to maintain a strong balance sheet and preserve our financial flexibility, which we believe should enhance our ability to identify and capitalize on investment opportunities as they become available. We intend to maintain what management believes is a conservative capital structure by:
   
extending and sequencing the maturity dates of our debt where practicable;
 
   
managing interest rate exposure using what management believes to be prudent levels of fixed and floating rate debt;
   
maintaining what management believes to be conservative coverage ratios; and
   
using what management believes to be a prudent combination of debt and common and preferred equity.
Our interest expense coverage ratio, net of capitalized interest, was approximately 2.6 times for each of the years ended December 31, 2010, 2009, and 2008. Our interest expense coverage ratio is calculated by dividing interest expense for the period into the sum of property revenues and expenses, non-property income, other expenses, income from discontinued operations, after adding back depreciation, amortization, and interest expense from both continuing and discontinued operations. This ratio is a method for calculating the amount of operating cash flows available to cover interest expense. At December 31, 2010, 2009, and 2008, approximately 71.1%, 72.8%, and 78.3%, respectively, of our properties (based on invested capital) were unencumbered. Our weighted average maturity of debt, including our line of credit, was 5.5 years at December 31, 2010.
For the longer term, we intend to continue to focus on strengthening our capital and liquidity position by generating positive cash flows from operations, reducing outstanding debt and leverage ratios, and controlling overhead costs.
Our primary source of liquidity is cash flow generated from operations. Other sources include available cash balances, the availability under our unsecured credit facility and other short-term borrowings, proceeds from dispositions of properties and other investments, secured mortgage debt, and the use of debt and equity offerings under our automatic shelf registration statement. We believe our liquidity and financial condition are sufficient to meet all of our reasonably anticipated cash needs during 2011 including:
   
normal recurring operating expenses;
   
current debt service requirements;
   
recurring capital expenditures;
   
initial funding of property developments, acquisitions, joint venture investments, and notes receivable; and
   
the minimum dividend payments required to maintain our REIT qualification under the Code.
Factors which could increase or decrease our future liquidity include but are not limited to volatility in capital and credit markets, sources of financing, our ability to complete asset sales, the effect our debt level and decreases in credit ratings could have on our costs of funds, and our ability to access capital markets.
Cash Flows
Certain sources and uses of cash, such as the level of discretionary capital expenditures, and repurchases of debt and common shares are within our control and are adjusted as necessary based upon, among other factors, market conditions. The following is a discussion of our cash flows for the years ended December 31, 2010 and 2009.
Net cash provided by operating activities was approximately $224.0 million during the year ended December 31, 2010 as compared to approximately $217.7 million during the year ended December 31, 2009. The increase was primarily due to lower interest expense and changes in operating accounts. The increase was partially offset by declines in property net operating income in 2010 as compared to 2009.
Net cash provided by investing activities during the year ended December 31, 2010 totaled approximately $35.2 million as compared to net cash used by investing activities of approximately $69.5 million during the year ended December 31, 2009. Cash outflows for property development, acquisition, and capital improvements were approximately $63.7 million during 2010 as compared to approximately $72.8 million during 2009. This decrease was due to the timing of completions of communities in our development pipeline and a reduction in construction and development activity in 2010 as compared to 2009. Cash inflows from sales of properties including land and discontinued operations were approximately $102.8 million for the year ended December 31, 2010 as compared to approximately $28.1 million for the year ended December 31, 2009. Additionally, cash outflows for investments in joint ventures were $6.5 million for the year ended December 31, 2010 as compared to $23.2 million in 2009. The decrease in cash outflows for investments in joint ventures in 2010 as compared to 2009 was primarily a result of our $22.2 million equity investment in one of our joint ventures during the third quarter 2009.

 

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Net cash used in financing activities totaled approximately $152.8 million during the year ended December 31, 2010 primarily as a result of the repayment of maturing outstanding unsecured notes payable of approximately $137.6 million, repayment of approximately $165.6 million of secured notes assumed in connection with obtaining controlling interests in three joint ventures and distributions paid to common shareholders, perpetual preferred unit holders, and noncontrolling interest holders of approximately $135.6 million. The cash outflows were partially offset by cash receipts of approximately $231.7 million relating to proceeds received from the sale of approximately 4.9 million common shares throughout fiscal year 2010 under our ATM share offering program. Cash outflows were further offset by decreases in accounts receivable from affiliates of approximately $4.2 million relating to proceeds received from participant withdrawals from our deferred compensation plans and approximately $53.0 million for proceeds received from secured notes payable relating to a secured credit agreement for a newly consolidated joint venture and $4.7 million for advances under a construction loan for one of our communities completing construction during 2010. Net cash provided by financing activities totaled approximately $91.4 million during the year ended December 31, 2009. During the year ended December 31, 2009, we used a total of approximately $648.7 million of cash to repay outstanding notes payable consisting of approximately $169.9 million of outstanding notes payable stemming from our April 2009 tender offer, the early retirement of outstanding debt consisting of approximately $139.1 million of secured notes, and approximately $18.2 million of senior unsecured notes. The remaining outstanding notes payable payments were primarily for maturing secured and unsecured notes payable of approximately $176.5 million, and payments of all remaining amounts outstanding on our unsecured line of credit. Also in 2009, $152.7 million was used for distributions paid to common shareholders, perpetual preferred unit holders, and noncontrolling interest holders. The cash outflows were offset by cash receipts of $420 million from a secured credit facility entered into during the second quarter, approximately $20.8 million of cash receipts from secured notes relating to a construction loan for a consolidated joint venture and net proceeds of approximately $272.1 million from the completion of our equity offering in May 2009.
Financial Flexibility
In August 2010, we entered into a $500 million unsecured credit facility, with the option to increase this credit facility to $600 million, which matures in August 2012 and may be extended at our option to August 2013. This facility replaces our $600 million unsecured credit facility which was scheduled to mature in January 2011. Interest rate spreads float on a margin based on LIBOR and are subject to change as our credit ratings change. Advances under the line of credit may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of 180 days or less and may not exceed the lesser of $250 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations, all of which we are in compliance.
Our line of credit provides us with the ability to issue up to $100 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, it does reduce the amount available. At December 31, 2010, we had outstanding letters of credit totaling approximately $10.2 million, leaving approximately $489.8 million available under our unsecured line of credit.
We currently have an automatic shelf registration statement on file with the SEC which allows us to offer, from time to time, an unlimited amount of common shares, preferred shares, debt securities, or warrants. Our declaration of trust provides we may issue up to 110 million shares of beneficial interest, consisting of 100 million common shares and 10 million preferred shares. As of December 31, 2010, we had approximately 69.6 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding.
In March 2010, we announced the creation of our ATM share offering program through which we may, but have no obligation to, sell common shares having an aggregate offering price of up to $250 million, in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. Actual sales from time to time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations of the appropriate sources of funding for us. As of the day of this filing, we had common shares having an aggregate offering price of up to $10.7 million remaining under the ATM program.
We believe our ability to access capital markets is enhanced by our senior unsecured debt ratings by Moody’s and Standard and Poor’s, which are currently Baa1 and BBB, respectively, with stable outlooks, as well as by our ability to borrow on a secured basis from various institutions including banks, Fannie Mae, Freddie Mac, or life insurance companies. However, we may not be able to maintain our current credit ratings and may not be able to borrow on a secured or unsecured basis in the future.

 

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Future Cash Requirements and Contractual Obligations
One of our principal long-term liquidity requirements includes the repayment of maturing debt, including any future borrowings under our unsecured line of credit. During 2011, approximately $154.4 million of unsecured debt, excluding scheduled principal amortizations, are scheduled to mature. See Note 9, “Notes Payable,” of the Notes to Consolidated Financial Statements for further discussion of scheduled maturities. Additionally, we intend to incur approximately $57.2 million of additional capital expenditures on our current development projects and we expect to fund these amounts through available cash balances and draws on our unsecured line of credit. We intend to meet our near-term liquidity requirements through available cash balances, cash flows generated from operations, draws on our unsecured credit facility, proceeds from property dispositions and secured mortgage notes, and the use of debt and equity offerings under our automatic shelf registration statement.
In order for us to continue to qualify as a REIT, we are required to distribute annual dividends to our shareholders equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains. In December 2010, we announced our Board of Trust Managers had declared a dividend distribution of $0.45 per share to our common shareholders of record as of December 20, 2010. The dividend was subsequently paid on January 18, 2011. We paid equivalent amounts per unit to holders of common operating partnership units. When aggregated with previous 2010 dividends, this distribution to common shareholders and holders of common operating partnership units equates to an annual dividend rate of $1.80 per share or unit for the year ended December 31, 2010.
The following table summarizes our known contractual cash obligations as of December 31, 2010:
                                                         
(in millions)   Total     2011     2012     2013     2014     2015     Thereafter  
Debt maturities (1)
  $ 2,563.8     $ 159.0     $ 763.0     $ 228.4     $ 11.4     $ 252.7     $ 1,149.3  
Interest payments (2)
    621.4       123.2       112.0       77.9       66.8       59.6       181.9  
Non-cancelable lease payments
    10.0       2.5       2.1       1.9       1.8       1.1       0.6  
Postretirement benefit obligations
    2.8       0.2       0.2       0.2       0.2       0.2       1.8  
 
                                         
 
  $ 3,198.0     $ 284.9     $ 877.3     $ 308.4     $ 80.2     $ 313.6     $ 1,333.6  
 
                                         
     
(1)  
Includes scheduled principal amortizations.
 
(2)  
Includes contractual interest payments for our senior unsecured notes, medium-term notes, and secured notes. Interest payments on hedged loans were calculated based on the interest rates effectively fixed by the interest rate swap agreements. The interest payments on certain secured notes with floating interest rates were calculated based on the interest rates in effect as of December 31, 2010 or the most recent practicable date.
Off-Balance Sheet Arrangements
The joint ventures in which we have an interest have been funded in part with secured, third-party debt. We have guaranteed no more than our proportionate interest, totaling approximately $11.0 million, of two loans utilized for construction and development activities for our joint ventures. We are also committed to additional funding under a mezzanine loan provided to one joint venture and our commitment to fund additional amounts under this mezzanine loan was an aggregate of approximately $6.0 million at December 31, 2010.
Inflation
Substantially all of our apartment leases are for a term generally ranging from six to fifteen months. In an inflationary environment, we may realize increased rents at the commencement of new leases or upon the renewal of existing leases. We believe the short-term nature of our leases generally minimizes our risk from the adverse effects of inflation.
Critical Accounting Policies
The preparation of our financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date, and the amounts of revenues and expenses recognized during the reporting period. These estimates are based on historical experience and other assumptions believed to be reasonable under the circumstances. The following is a discussion of our critical accounting estimates. For a discussion of all of our significant accounting policies, see Note 2 to the accompanying consolidated financial statements.

 

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Use of Estimates. In the application of GAAP, management is required to make estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements, results of operations during the reporting periods, and related disclosures. Our more significant estimates include estimates supporting our impairment analysis related to the carrying values of our real estate assets, estimates related to the valuation of our investments in joint ventures, and estimates and assumptions used to determine the entity with the power to direct activities that most significantly impacts economic performance of variable interest entities. These estimates are based on historical experience and other assumptions believed to be reasonable under the circumstances. Future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment.
Principles of Consolidation. We may enter into various joint venture agreements with unrelated third parties to hold or develop real estate assets. We must determine for each of these joint ventures whether to consolidate the entity or account for our investment under the equity or cost basis of accounting. Investments acquired or created are continuously evaluated based on the accounting guidance relating to variable interest entities (“VIEs”), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation (primarily using a voting interest model) under the remaining consolidation guidance relating to real estate entities. If we are the general partner in a limited partnership, or manager of a limited liability company, we also consider the consolidation guidance relating to the rights of limited partners (non-managing members) to assess whether any rights held by the limited partners overcome the presumption of control by us. We evaluate our accounting for investments on a quarterly basis or when a reconsideration event (as defined in GAAP) with respect to our investments occurs. The analysis required to identify VIEs and primary beneficiaries is complex and requires substantial management judgment. Accordingly, we believe the decisions made to choose an appropriate accounting framework are critical.
Asset Impairment. Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. We consider projected future discounted and undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. When impairment exists, the long-lived asset is adjusted to its fair value. While we believe our estimates of future cash flows are reasonable, different assumptions regarding a number of factors, including market rents, economic conditions, and occupancies could significantly affect these estimates. In estimating fair value, management uses appraisals, management estimates, and discounted cash flow calculations that maximize inputs from a marketplace participant’s perspective.
In addition, we evaluate our investments in joint ventures and if we believe there is an other than temporary decline in market value of our investment, we will record an impairment charge.
The value of our properties under development depends on market conditions, including estimates of the project start date as well as estimates of demand for multifamily communities. We have reviewed market trends and other marketplace information and have incorporated this information as well as our current outlook into the assumptions we use in our impairment analyses. Due to, among other factors, the judgment and assumptions applied in the impairment analyses and the fact limited market information regarding the value of comparable land exists at this time, it is possible actual results could differ substantially from those estimated.
We believe the carrying value of our operating real estate assets, properties under development, and land is currently recoverable. However, if market conditions deteriorate or if changes in our development strategy significantly affect any key assumptions used in our fair value calculations, we may need to take material charges in future periods for impairments related to existing assets. Any such material non-cash charges would have an adverse effect on our consolidated financial position and results of operations.
Cost Capitalization. Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes which are capitalized as part of properties under development. Capitalized interest is generally based on our weighted average interest rate of our unsecured debt. Transaction costs associated with the acquisition of real estate assets are expensed. Expenditures directly related to the development and improvement of real estate assets are capitalized at cost as land and buildings and improvements. Indirect development costs, including salaries and benefits and other related costs directly attributable to the development of properties are also capitalized. All construction and carrying costs are capitalized and reported in the balance sheet as properties under development until the apartment homes are substantially completed. Upon substantial completion of the apartment homes, the total cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively. Included in capitalized costs are management’s estimates of indirect costs associated with our development and redevelopment activities. The estimates used by management require judgment, and accordingly we believe cost capitalization to be a critical accounting estimate.

 

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Item 7A.  
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to certain market risks inherent in our operations. These risks generally arise from transactions entered into in the normal course of business. We believe our primary market risk exposure relates to interest rate risk. We do not enter into derivatives or other financial instruments for trading or speculative purposes.
The table below provides information about our assets and our liabilities sensitive to changes in interest rates as of December 31, 2010 and 2009:
                                                                 
    December 31, 2010     December 31, 2009  
            Weighted     Weighted                     Weighted     Weighted        
            Average     Average                     Average     Average        
    Amount     Maturity     Interest     % Of     Amount     Maturity     Interest     % Of  
    (in millions)     (in years)     Rate     Total     (in millions)     (in years)     Rate     Total  
 
                                                               
Fixed rate debt (1)
  $ 2,333.5       5.2       5.4 %     91.0 %   $ 2,396.8       5.2       5.5 %     91.3 %
Variable rate debt
    230.3       9.0       1.3       9.0       228.4       10.1       1.2       8.7  
     
(1)  
Includes a $500 million term loan entered into in 2007 and $16.6 million of a construction loan entered into in 2008 which are effectively fixed by the use of an interest rate swap (see discussion below).
We have historically used variable rate indebtedness available under our revolving credit facility to initially fund acquisitions and our development pipeline. To the extent we utilize our revolving credit facility thereby increasing our variable rate indebtedness, our exposure to increases in interest rates will also increase.
For fixed rate debt, interest rate changes affect the fair market value but do not impact net income attributable to common shareholders or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact net income attributable to common shareholders and cash flows, assuming other factors are held constant. Holding other variables constant, a one percentage point variance in interest rates would change the unrealized fair market value of the fixed rate debt by approximately $94.6 million. The net income attributable to common shareholders and cash flows impact on the next year resulting from a one percentage point variance in interest rates on floating rate debt, excluding debt effectively fixed by interest rate swap agreements described below, would be approximately $2.3 million, holding all other variables constant. We currently use interest rate hedges to reduce the impact of interest rate fluctuations on certain variable indebtedness, not for trading or speculative purposes. Under the hedge agreements:
   
we agree to pay a counterparty the interest that would have been incurred on a fixed principal amount at a fixed interest rate; and
   
the counterparty agrees to pay us the interest rate that would have been incurred on the same principal amount at an assumed floating interest rate tied to a particular market index.
As of December 31, 2010, the effect of our hedge agreements was to fix the interest rate on approximately $516.6 million of our variable rate debt. Had the hedge agreements not been in place during 2010, our annual interest costs would have been approximately $23.3 million lower, based on balances and reported interest rates through the year as the variable interest rates were less than the effective interest rates on the associated hedge agreements. Additionally, if the variable interest rates on this debt had been 100 basis points higher through 2010 and the hedge agreements not been in place, our annual interest cost would have been approximately $5.8 million higher. Derivative financial instruments expose us to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. We believe we minimize our credit risk on these transactions by dealing with major, creditworthy financial institutions. As part of our on-going control procedures, we monitor the credit ratings of counterparties and our exposure to any single entity, thus minimizing credit risk concentration. We believe the likelihood of realized losses from counterparty non-performance is remote.

 

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Item 8.  
Financial Statements and Supplementary Data
Our response to this item is included in a separate section at the end of this report beginning on page F-1.
Item 9.  
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.  
Controls and Procedures
Evaluation of disclosure controls and procedures. We carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Securities Exchange Act (“Exchange Act”) Rules 13a-15(e) and 15d-15(e). Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded the disclosure controls and procedures as of the end of the period covered by this report are effective to ensure information required to be disclosed by us in our Exchange Act filings is recorded, processed, summarized, and reported within the periods specified in the Securities and Exchange Commission’s rules and forms.
Changes in internal controls. There were no changes in our internal control over financial reporting (identified in connection with the evaluation required by paragraph (d) in Rules 13a-15 and 15d-15 under the Exchange Act) during our most recent fiscal quarter which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as follows:
A process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of trustees, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
   
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
   
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
   
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on our assessment, management concluded our internal control over financial reporting is effective as of December 31, 2010.
Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report regarding the effectiveness of our internal controls over financial reporting, which is included herein.

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trust Managers and Shareholders of
Camden Property Trust
Houston, Texas
We have audited the internal control over financial reporting of Camden Property Trust and subsidiaries (the “Company”) as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of trust managers, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and the board of trust managers of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule of the Company as of and for the year ended December 31, 2010 and our report dated February 24, 2011 expressed an unqualified opinion on those financial statements and financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
February 24, 2011

 

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Item 9B.  
Other Information
None.
PART III
Item 10.  
Directors, Executive Officers, and Corporate Governance
Information with respect to this Item 10 is incorporated by reference from our Proxy Statement, which we expect to file on or about March 22, 2011 in connection with the Annual Meeting of Shareholders to be held May 11, 2011.
Item 11.  
Executive Compensation
Information with respect to this Item 11 is incorporated by reference from our Proxy Statement, which we expect to file on or about March 22, 2011 in connection with the Annual Meeting of Shareholders to be held May 11, 2011.
Item 12.  
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information with respect to this Item 12 is incorporated by reference from our Proxy Statement, which we expect to file on or about March 22, 2011 in connection with the Annual Meeting of Shareholders to be held May 11, 2011.
Equity Compensation Plan Information
                         
                    Number of securities  
                    remaining available for  
    Number of securities to be     Weighted-average     future issuance under  
    issued upon exercise of     exercise price of     equity compensation plans  
    outstanding options,     outstanding options,     (excluding securities  
    warrants and rights     warrants and rights     reflected in column (a))  
Plan Category   (a)     (b)     (c)  
Equity compensation plans approved by security holders
    1,837,990     $ 42.39       1,273,833  
Equity compensation plans not approved by security holders
                 
 
                 
Total
    1,837,990     $ 42.39       1,273,833  
 
                 
Item 13.  
Certain Relationships and Related Transactions and Director Independence
Information with respect to this Item 13 is incorporated herein by reference from our Proxy Statement, which we expect to file on or about March 22, 2011 in connection with the Annual Meeting of Shareholders to be held May 11, 2011.
Item 14.  
Principal Accounting Fees and Services
Information with respect to this Item 14 is incorporated herein by reference from our Proxy Statement, which we expect to file on or about March 22, 2011 in connection with the Annual Meeting of Shareholders to be held May 11, 2011.

 

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PART IV
Item 15.  
Exhibits and Financial Statement Schedules
The following documents are filed as part of this report:
         
(1) Financial Statements:
       
 
       
    F-1  
 
       
    F-2  
 
       
    F-3  
 
       
    F-5  
 
       
    F-7  
 
       
    F-9  
 
       
(2) Financial Statement Schedules:
       
 
       
    S-1  
All other schedules have been omitted since the required information is presented in the financial statements and the related notes or is not applicable.
(3) Index to Exhibits:
The following exhibits are filed as part of or incorporated by reference into this report:
             
            Filed Herewith or Incorporated
Exhibit No.   Description   Herein by Reference (1)
       
 
   
  3.1    
Amended and Restated Declaration of Trust of Camden Property Trust
  Exhibit 3.1 to Form 10-K for the year ended December 31, 1993
       
 
   
  3.2    
Amendment to the Amended and Restated Declaration of Trust of Camden Property Trust
  Exhibit 3.1 to Form 10-Q for the quarter ended June 30, 1997
       
 
   
  3.3    
Second Amended and Restated Bylaws of Camden Property Trust
  Exhibit 3.3 to Form 10-K for the year ended December 31, 1997
       
 
   
  3.4    
Amendment to Second Amended and Restated Bylaws of Camden Property Trust
  Exhibit 99.2 to Form 8-K filed on May 4, 2006
       
 
   
  4.1    
Specimen certificate for Common Shares of Beneficial Interest
  Form S-11 filed on September 15, 1993 (Registration No. 33-68736)
       
 
   
  4.2    
Indenture dated as of February 15, 1996 between Camden Property Trust and the U.S. Trust Company of Texas, N.A., as Trustee
  Exhibit 4.1 to Form 8-K filed on February 15, 1996

 

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            Filed Herewith or Incorporated
Exhibit No.   Description   Herein by Reference (1)
       
 
   
  4.3    
First Supplemental Indenture dated as of February 15, 1996 between Camden Property Trust and U.S. Trust Company of Texas, N.A., as Trustee
  Exhibit 4.2 to Form 8-K filed on February 15, 1996
       
 
   
  4.4    
Form of Indenture for Senior Debt Securities dated as of February 11, 2003 between Camden Property Trust and SunTrust Bank, as Trustee
  Exhibit 4.1 to Form S-3 filed on February 12, 2003 (Registration No. 333-103119)
       
 
   
  4.5    
First Supplemental Indenture dates as of May 4, 2007 between the Company and U.S. Bank National Association, as successor to SunTrust Bank, as trustee
  Exhibit 4.2 to Form 8-K filed on May 7, 2007
       
 
   
  4.6    
Indenture dated as of February 11, 2003 between the Company and U.S. Bank National Association, as successor to SunTrust Bank, as trustee.
  Exhibit 4.1 to Form 8-K filed on May 7, 2007
       
 
   
  4.7    
Registration Rights Agreement, dated as of February 23, 1999, between Camden Property Trust and the unitholders named therein
  Exhibit 99.3 to Form 8-K filed on March 10, 1999
       
 
   
  4.8    
Form of Amendment to Registration Rights Agreement, dated as of December 1, 2003, between Camden Property Trust and the unitholders named therein
  Exhibit 4.8 to Form 10-K for the year ended December 31, 2003
       
 
   
  4.9    
Form of Registration Rights Agreement between Camden Property Trust and the holders named therein
  Form S-4 filed on November 24, 2004 (Registration No. 333-120733)
       
 
   
  4.10    
Form of Statement of Designation of Series B Cumulative Redeemable Preferred Shares of Beneficial Interest
  Exhibit 4.1 to Form 8-K filed on March 10, 1999
       
 
   
  4.11    
Form of Amendment to Statement of Designation of Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, effective as of December 31, 2003
  Exhibit 4.10 to Form 10-K for the year ended December 31, 2003
       
 
   
  4.12    
Form of Camden Property Trust 7.625% Note due 2011
  Exhibit 4.4 to Form 8-K filed on February 20, 2001
       
 
   
  4.13    
Form of Camden Property Trust 5.875% Note due 2012
  Exhibit 4.3 to Form 8-K filed on November 25, 2002
       
 
   
  4.14    
Form of Camden Property Trust 5.375% Note due 2013
  Exhibit 4.2 to Form 8-K filed on December 9, 2003
       
 
   
  4.15    
Form of Camden Property Trust 5.00% Note due 2015
  Exhibit 4.2 to Form 8-K filed on June 7, 2005
       
 
   
  4.16    
Form of Camden Property Trust 5.700% Notes due 2017
  Exhibit 4.3 to Form 8-K filed on May 7, 2007
       
 
   
  4.17    
Indenture dated as of August 7, 1997 between Camden Summit Partnership, L.P. (f/k/a Summit Properties Partnership, L.P.) and First Union National Bank
  Exhibit 4.1 to Camden Summit Partnership, L.P.’s Form 8-K filed on August 11, 1997 (File No. 000-22411)

 

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            Filed Herewith or Incorporated
Exhibit No.   Description   Herein by Reference (1)
       
 
   
  4.18    
Supplemental Indenture No. 1, dated as of August 12, 1997, between Camden Summit Partnership, L.P. (f/k/a Summit Properties Partnership, L.P.) and First Union National Bank
  Exhibit 4.1 to Camden Summit Partnership, L.P.’s Form 8-K/A-1 filed on August 18, 1997 (File No. 000-22411)
       
 
   
  4.19    
Supplemental Indenture No. 2, dated as of December 17, 1997, between Camden Summit Partnership, L.P. (f/k/a Summit Properties Partnership, L.P.) and First Union National Bank
  Exhibit 4.1 to Camden Summit Partnership, L.P.’s Form 8-K/A-1 filed on December 17, 1997 (File No. 000-22411)
       
 
   
  4.20    
Supplemental Indenture No. 3, dated as of May 29, 1998, between Camden Summit Partnership, L.P. (f/k/a Summit Properties Partnership, L.P.) and First Union National Bank
  Exhibit 4.2 to Camden Summit Partnership, L.P.’s Form 8-K filed on June 2, 1998 (File No. 000-22411)
       
 
   
  4.21    
Supplemental Indenture No. 4, dated as of April 20, 2000, between Camden Summit Partnership, L.P. (f/k/a Summit Properties Partnership, L.P.) and First Union National Bank
  Exhibit 4.2 to Camden Summit Partnership, L.P.’s Form 8-K filed on April 28, 2000 (File No. 000-22411)
       
 
   
  4.22    
Supplemental Indenture No. 5, dated as of June 21, 2005, among Camden Summit Partnership, L.P., Camden Property Trust and Wachovia Bank, N.A.
  Exhibit 99.1 to Form 8-K filed on June 23, 2005
       
 
   
  4.23    
Form of Camden Summit Partnership, L.P. (f/k/a Summit Properties Partnership, L.P.) 7.703% Medium-Term Note due 2011
  Exhibit 10.3 to Summit Property Inc.’s Form 10-Q for the quarter ended June 30, 2001 (File No. 001-12792)
       
 
   
  10.1    
Form of Indemnification Agreement between Camden Property Trust and certain of its trust managers and executive officers
  Form S-11 filed on July 9, 1993 (Registration No. 33-63588)
       
 
   
  10.2    
Second Amended and Restated Employment Agreement dated July 11, 2003 between Camden Property Trust and Richard J. Campo
  Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2003
       
 
   
  10.3    
Second Amended and Restated Employment Agreement dated July 11, 2003 between Camden Property Trust and D. Keith Oden
  Exhibit 10.2 to Form 10-Q for the quarter ended June 30, 2003
       
 
   
  10.4    
Form of First Amendment to Second Amended and Restated Employment Agreements, effective as of January 1, 2008, between Camden Property Trust and each of Richard J. Campo and D. Keith Oden.
  Exhibit 99.1 to Form 8-K filed on November 30, 2007
       
 
   
  10.5    
Second Amendment to Second Amended and Restated Employment Agreement, dated as of March 14, 2008 between Camden Property Trust and D. Keith Oden.
  Exhibit 99.1 to Form 8-K filed on March 18, 2008
       
 
   
  10.6    
Form of Employment Agreement by and between Camden Property Trust and certain senior executive officers
  Exhibit 10.13 to Form 10-K for the year ended December 31, 1996
       
 
   
  10.7    
Form of First Amendment to Employment Agreement, effective as of January 1, 2008, between the Company and each of H. Malcolm Stewart, Dennis M. Steen, and Steven K. Eddington.
  Exhibit 99.1 to Form 8-K filed on November 30, 2007
       
 
   
  10.8    
Second Amended and Restated Employment Agreement, dated November 3, 2008, between Camden Property Trust and H. Malcolm Stewart
  Exhibit 99.1 to Form 8-K filed on November 4, 2008

 

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            Filed Herewith or Incorporated
Exhibit No.   Description   Herein by Reference (1)
       
 
   
  10.9    
Second Amended and Restated Camden Property Trust Key Employee Share Option Plan (KEYSOPTM), effective as of January 1, 2008
  Exhibit 99.5 to Form 8-K filed on November 30, 2007
       
 
   
  10.10    
Amendment No. 1 to Second Amended and Restated Camden Property Trust Key Employee Share Option Plan, effective as of January 1, 2008
  Exhibit 99.1 to Form 8-K filed on December 8, 2008
       
 
   
  10.11    
Form of Amended and Restated Master Exchange Agreement between Camden Property Trust and certain key employees
  Exhibit 10.7 to Form 10-K for the year ended December 31, 2003
       
 
   
  10.12    
Form of Amended and Restated Master Exchange Agreement between Camden Property Trust and certain trust managers
  Exhibit 10.8 to Form 10-K for the year ended December 31, 2003
       
 
   
  10.13    
Form of Amended and Restated Master Exchange Agreement between Camden Property Trust and certain key employees
  Exhibit 10.9 to Form 10-K for the year ended December 31, 2003
       
 
   
  10.14    
Form of Master Exchange Agreement between Camden Property Trust and certain trust managers
  Exhibit 10.10 to Form 10-K for the year ended December 31, 2003
       
 
   
  10.15    
Form of Amendment No. 1 to Amended and Restated Master Exchange Agreement (Trust Managers) effective November 27, 2007
  Exhibit 10.1 to Form 10-Q filed on July 30, 2010
       
 
   
  10.16    
Form of Amendment No. 1 to Amended and Restated Master Exchange Agreement (Key Employees) effective November 27, 2007
  Exhibit 10.2 to Form 10-Q filed on July 30, 2010
       
 
   
  10.17    
Form of Third Amended and Restated Agreement of Limited Partnership of Camden Operating, L.P.
  Exhibit 10.1 to Form S-4 filed on February 26, 1997 (Registration No. 333-22411)
       
 
   
  10.18    
First Amendment to Third Amended and Restated Agreement of Limited Partnership of Camden Operating, L.P., dated as of February 23, 1999
  Exhibit 99.2 to Form 8-K filed on March 10, 1999
       
 
   
  10.19    
Form of Second Amendment to Third Amended and Restated Agreement of Limited Partnership of Camden Operating, L.P., dated as of August 13, 1999
  Exhibit 10.15 to Form 10-K for the year ended December 31, 1999
       
 
   
  10.20    
Form of Third Amendment to Third Amended and Restated Agreement of Limited Partnership of Camden Operating, L.P., dated as of September 7, 1999
  Exhibit 10.16 to Form 10-K for the year ended December 31, 1999
       
 
   
  10.21    
Form of Fourth Amendment to Third Amended and Restated Agreement of Limited Partnership of Camden Operating, L.P., dated as of January 7, 2000
  Exhibit 10.17 to Form 10-K for the year ended December 31, 1999
       
 
   
  10.22    
Form of Amendment to Third Amended and Restated Agreement of Limited Partnership of Camden Operating, L.P., dated as of December 1, 2003
  Exhibit 10.19 to Form 10-K for the year ended December 31, 2003
       
 
   
  10.23    
Amended and Restated Limited Liability Company Agreement of Sierra-Nevada Multifamily Investments, LLC, adopted as of June 29, 1998 by Camden Subsidiary, Inc. and TMT-Nevada, L.L.C.
  Exhibit 99.1 to Form 8-K filed on July 15, 1998

 

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            Filed Herewith or Incorporated
Exhibit No.   Description   Herein by Reference (1)
       
 
   
  10.24    
Amended and Restated Limited Liability Company Agreement of Oasis Martinique, LLC, adopted as of October 23, 1998 among Oasis Residential, Inc. and the persons named therein
  Exhibit 10.59 to Oasis Residential, Inc.’s Form 10-K for the year ended December 31, 1997 (File No. 001-12428)
       
 
   
  10.25    
Exchange Agreement, dated as of October 23, 1998, by and among Oasis Residential, Inc., Oasis Martinique, LLC and the holders listed therein
  Exhibit 10.60 to Oasis Residential, Inc.’s Form 10-K for the year ended December 31, 1997 (File No. 001-12428)
       
 
   
  10.26    
Contribution Agreement, dated as of February 23, 1999, by and among Belcrest Realty Corporation, Belair Real Estate Corporation, Camden Operating, L.P. and Camden Property Trust
  Exhibit 99.1 to Form 8-K filed on March 10, 1999
       
 
   
  10.27    
Amended and Restated 1993 Share Incentive Plan of Camden Property Trust
  Exhibit 10.18 to Form 10-K for the year ended December 31, 1999
       
 
   
  10.28    
Camden Property Trust 1999 Employee Share Purchase Plan
  Exhibit 10.19 to Form 10-K for the year ended December 31, 1999
       
 
   
  10.29    
Amended and Restated 2002 Share Incentive Plan of Camden Property Trust
  Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2002
       
 
   
  10.30    
Amendment to Amended and Restated 2002 Share Incentive Plan of Camden Property Trust
  Exhibit 99.1 to Form 8-K filed on May 4, 2006
       
 
   
  10.31    
Amendment to Amended and Restated 2002 Share Incentive Plan of Camden Property Trust, effective as of January 1, 2008
  Exhibit 99.1 to Form 8-K filed on July 29, 2008
       
 
   
  10.32    
Camden Property Trust Short Term Incentive Plan
  Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2002
       
 
   
  10.33    
Amended and Restated Camden Property Trust Non-Qualified Deferred Compensation Plan, effective as of January 1, 2008
  Exhibit 99.6 to Form 8-K filed on November 30, 2007
       
 
   
  10.34    
Amendment No. 1 to Amended and Restated Camden Property Trust Non-Qualified Deferred Compensation Plan, effective as of January 1, 2008
  Exhibit 99.2 to Form 8-K filed on July 29, 2008
       
 
   
  10.35    
Amendment No. 2 to Amended and Restated Camden Property Trust Non-Qualified Deferred Compensation Plan, effective as of January 1, 2008
  Exhibit 99.2 to Form 8-K filed on December 8, 2008
       
 
   
  10.36    
Form of Second Amended and Restated Agreement of Limited Partnership of Camden Summit Partnership, L.P. among Camden Summit, Inc., as general partner, and the persons whose names are set forth on Exhibit A thereto
  Exhibit 10.4 to Form S-4 filed on November 24, 2004 (Registration No. 333-120733)
       
 
   
  10.37    
Form of Tax, Asset and Income Support Agreement among Camden Property Trust, Camden Summit, Inc., Camden Summit Partnership, L.P. and each of the limited partners who has executed a signature page thereto
  Exhibit 10.5 to Form S-4 filed on November 24, 2004 (Registration No. 333-120733)
       
 
   
  10.38    
Form of Credit Agreement dated as of October 4, 2007 among Camden Property Trust, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank, N.A., as syndication agent, and the financial institutions and other entities designated as “Lenders” on Schedule I thereto.
  Exhibit 99.1 to Form 8-K filed on October 10, 2007

 

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            Filed Herewith or Incorporated
Exhibit No.   Description   Herein by Reference (1)
       
 
   
  10.39    
Employment Agreement dated February 15, 1999, by and among William B. McGuire, Jr., Summit Properties Inc. and Summit Management Company, as restated on August 24, 2001
  Exhibit 10.1 to Summit Properties Inc.’s Form 10-Q for the quarter ended September 30, 2001 (File No. 000-12792)
       
 
   
  10.40    
Amendment Agreement, dated as of June 19, 2004, among William B. McGuire, Jr., Summit Properties Inc. and Summit Management Company
  Exhibit 10.8.2 to Summit Properties Inc.’s Form 10-Q for the quarter ended June 30, 2004 (File No. 001-12792)
       
 
   
  10.41    
Amendment Agreement, dated as of June 19, 2004, among William F. Paulsen, Summit Properties Inc. and Summit Management Company
  Exhibit 10.8.2 to Summit Properties Inc.’s Form 10-Q for the quarter ended June 30, 2004 (File No. 001-12792)
       
 
   
  10.42    
Separation Agreement, dated as of February 28, 2005, between Camden Property Trust and William B. McGuire, Jr.
  Exhibit 99.1 to Form 8-K filed on April 28, 2005
       
 
   
  10.43    
Separation Agreement, dated as of February 28, 2005, between Camden Property Trust and William F. Paulsen
  Exhibit 99.2 to Form 8-K filed on April 28, 2005
       
 
   
  10.44    
Distribution Agreement, dated as of April 20, 2000, by and among Camden Summit Partnership, L.P. (f/k/a Summit Properties Partnership, L.P.), Summit Properties Inc. and the Agents listed therein
  Camden Summit Partnership, L.P.’s Form 8-K filed on April 28, 2000 (File No. 000-22411)
       
 
   
  10.45    
First Amendment to Distribution Agreement, dated as of May 8, 2001, among Camden Summit Partnership, L.P. (f/k/a Summit Properties Partnership, L.P.), Summit Properties Inc. and the Agents named therein
  Exhibit 10.2 to Summit Properties Inc.’s Form 10-Q for the quarter ended March 31, 2001 (File No. 000-22411)
       
 
   
  10.46    
Master Credit Agreement, dated as of September 24, 2008, among CSP Community Owner, LLC, CPT Community Owner, LLC, and Red Mortgage Capital, Inc. (2)
  Exhibit 10.4 to Form 10-Q filed on July 30, 2010
       
 
   
  10.47    
Form of Master Credit Facility Agreement, dated as of April 17, 2009, among Summit Russett, LLC, 2009 CPT Community Owner, LLC, 2009 CUSA Community Owner, LLC, 2009 CSP Community Owner LLC, and 2009 COLP Community Owner, LLC, as borrowers, Camden Property Trust, as guarantor, and Red Mortgage Capital, Inc., as lender. (2)
  Exhibit 10.5 to Form 10-Q filed on July 30, 2010
       
 
   
  10.48    
Form of Amended and Restated Distribution Agency Agreement dated May 10, 2010 between Camden Property Trust and Deutsche Bank Securities Inc.
  Exhibit 1.1 to Form 8-K filed on May 11, 2010
       
 
   
  10.49    
Form of Amended and Restated Distribution Agency Agreement dated May 10, 2010 between Camden Property Trust and Credit Suisse Securities (USA) LLC
  Exhibit 1.2 to Form 8-K filed on May 11, 2010
       
 
   
  10.50    
Form of Distribution Agency Agreement dated May 10, 2010 between Camden Property Trust and Morgan Stanley & Co. Incorporated
  Exhibit 1.3 to Form 8-K filed on May 11, 2010

 

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            Filed Herewith or Incorporated
Exhibit No.   Description   Herein by Reference (1)
       
 
   
  10.51    
Form of Amended and Restated Distribution Agency Agreement dated May 10, 2010 between Camden Property Trust and Wells Fargo Securities, LLC
  Exhibit 1.4 to Form 8-K filed on May 11, 2010
       
 
   
  10.52    
Form of Credit Agreement dated as of August 18, 2010 among Camden Property Trust, each lender from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, and JPMorgan Chase Bank, N.A., as syndication agent
  Exhibit 99.1 to Form 8-K filed on August 18, 2010
       
 
   
  12.1    
Statement Regarding Computation of Ratios
  Filed Herewith
       
 
   
  21.1    
List of Significant Subsidiaries
  Filed Herewith
       
 
   
  23.1    
Consent of Deloitte & Touche LLP
  Filed Herewith
       
 
   
  24.1    
Powers of Attorney for Richard J. Campo, D. Keith Oden, William R. Cooper, Scott S. Ingraham, Lewis A. Levey, William B. McGuire, Jr., F. Gardner Parker, William F. Paulsen, Steven A. Webster, and Kelvin R. Westbrook
  Filed Herewith
       
 
   
  31.1    
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act
  Filed Herewith
       
 
   
  31.2    
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act
  Filed Herewith
       
 
   
  32.1    
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  Filed Herewith
       
 
   
101.INS  
XBRL Instance Document
  Filed Herewith
       
 
   
101.SCH  
XBRL Taxonomy Extension Schema Document
  Filed Herewith
       
 
   
101.CAL  
XBRL Taxonomy Extension Calculation Linkbase Document
  Filed Herewith
       
 
   
101.DEF  
XBRL Taxonomy Extension Definition Linkbase Document
  Filed Herewith
       
 
   
101.LAB  
XBRL Taxonomy Extension Label Linkbase Document
  Filed Herewith
       
 
   
101.PRE  
XBRL Taxonomy Extension Presentation Linkbase Document
  Filed Herewith
     
(1)  
Unless otherwise indicated, all references to reports or registration statements are to reports or registration statements filed by Camden Property Trust (File No. 1-12110).
 
(2)  
Portions of the exhibit have been omitted pursuant to a request for confidential treatment.

 

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Camden Property Trust has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
         
February 24, 2011   CAMDEN PROPERTY TRUST
 
 
  By:   /s/ Michael P. Gallagher    
    Michael P. Gallagher   
    Vice President — Chief Accounting Officer   

 

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Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Camden Property Trust and in the capacities and on the dates indicated.
         
Name   Title   Date
 
       
/s/ Richard J. Campo
 
Richard J. Campo
  Chairman of the Board of Trust Managers and Chief Executive Officer (Principal Executive Officer)   February 24, 2011
 
       
/s/ D. Keith Oden
 
D. Keith Oden
  President and Trust Manager    February 24, 2011
 
       
/s/ Dennis M. Steen
 
Dennis M. Steen
  Senior Vice President-Finance and Chief Financial Officer (Principal Financial Officer)   February 24, 2011
 
       
/s/ Michael P. Gallagher
 
Michael P. Gallagher
  Vice President — Chief Accounting Officer (Principal Accounting Officer)   February 24, 2011
 
       
*
 
William R. Cooper
  Trust Manager    February 24, 2011
 
       
*
 
Scott S. Ingraham
  Trust Manager    February 24, 2011
 
       
*
 
Lewis A. Levey
  Trust Manager    February 24, 2011
 
       
*
 
William B. McGuire, Jr.
  Trust Manager    February 24, 2011
 
       
*
 
F. Gardner Parker
  Trust Manager    February 24, 2011
 
       
*
  Trust Manager   February 24, 2011
William F. Paulsen        
 
       
*
 
Steven A. Webster
  Trust Manager    February 24, 2011
 
       
*
 
Kelvin R. Westbrook
  Trust Manager    February 24, 2011
         
*By:
  /s/ Dennis M. Steen
 
Dennis M. Steen
   
 
  Attorney-in-fact    

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trust Managers and Shareholders of
Camden Property Trust
Houston, Texas
We have audited the accompanying consolidated balance sheets of Camden Property Trust and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of income and comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Camden Property Trust and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
February 24, 2011

 

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CAMDEN PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
                 
    December 31,  
(in thousands, except per share amounts)   2010     2009  
Assets
               
Real estate assets, at cost
               
Land
  $ 760,397     $ 747,921  
Buildings and improvements
    4,680,361       4,512,124  
 
           
 
    5,440,758       5,260,045  
Accumulated depreciation
    (1,292,924 )     (1,149,056 )
 
           
Net operating real estate assets
    4,147,834       4,110,989  
Properties under development, including land
    206,919       201,581  
Investments in joint ventures
    27,632       43,542  
 
           
Total real estate assets
    4,382,385       4,356,112  
 
               
Accounts receivable — affiliates
    31,895       36,112  
Notes receivable — affiliates
    3,194       45,847  
Other assets, net
    106,175       102,114  
Cash and cash equivalents
    170,575       64,156  
Restricted cash
    5,513       3,658  
 
           
Total assets
  $ 4,699,737     $ 4,607,999  
 
           
 
               
Liabilities and equity
               
Liabilities
               
Notes payable
               
Unsecured
  $ 1,507,757     $ 1,645,926  
Secured
    1,055,997       979,273  
Accounts payable and accrued expenses
    81,556       74,420  
Accrued real estate taxes
    22,338       23,241  
Distributions payable
    35,295       33,025  
Other liabilities
    141,496       145,176  
 
           
Total liabilities
    2,844,439       2,901,061  
 
               
Commitments and contingencies
               
 
               
Perpetual preferred units
    97,925       97,925  
 
               
Equity
               
Common shares of beneficial interest; $0.01 par value per share; 100,000 shares authorized; 85,130 and 79,543 issued; 82,386 and 76,996 outstanding at December 31, 2010 and 2009, respectively
    824       770  
Additional paid-in capital
    2,775,625       2,525,656  
Distributions in excess of net income attributable to common shareholders
    (595,317 )     (492,571 )
Notes receivable secured by common shares
          (101 )
Treasury shares, at cost (12,766 and 12,792 common shares, at December 31, 2010 and 2009, respectively)
    (461,255 )     (462,188 )
Accumulated other comprehensive loss
    (33,458 )     (41,155 )
 
           
Total common equity
    1,686,419       1,530,411  
Noncontrolling interests
    70,954       78,602  
 
           
Total equity
    1,757,373       1,609,013  
 
           
Total liabilities and equity
  $ 4,699,737     $ 4,607,999  
 
           
See Notes to Consolidated Financial Statements.

 

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CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                         
    Year Ended December 31,  
(in thousands, except per share amounts)   2010     2009     2008  
Property revenues
                       
Rental revenues
  $ 524,305     $ 527,429     $ 537,781  
Other property revenues
    86,099       84,581       74,627  
 
                 
Total property revenues
    610,404       612,010       612,408  
Property expenses
                       
Property operating and maintenance
    179,644       172,397       165,681  
Real estate taxes
    67,856       69,674       68,913  
 
                 
Total property expenses
    247,500       242,071       234,594  
Non-property income
                       
Fee and asset management
    8,172       8,008       9,167  
Interest and other income
    8,584       2,826       4,736  
Income (loss) on deferred compensation plans
    11,581       14,609       (33,443 )
 
                 
Total non-property income (loss)
    28,337       25,443       (19,540 )
Other expenses
                       
Property management
    19,982       18,864       19,910  
Fee and asset management
    4,841       4,878       6,054  
General and administrative
    30,762       31,243       31,586  
Interest
    125,893       128,296       132,399  
Depreciation and amortization
    172,849       171,322       168,488  
Amortization of deferred financing costs
    4,102       3,925       2,958  
Expense (benefit) on deferred compensation plans
    11,581       14,609       (33,443 )
 
                 
Total other expenses
    370,010       373,137       327,952  
Gain on sale of properties, including land
    236             2,929  
Gain (loss) on early retirement of debt
          (2,550 )     13,566  
Impairment associated with land development activities
          (85,614 )     (51,323 )
Impairment provision on a technology investment
    (1,000 )            
Equity in income (loss) of joint ventures
    (839 )     695       (1,265 )
 
                 
Income (loss) from continuing operations before income taxes
    19,628       (65,224 )     (5,771 )
Income tax expense — current
    (1,581 )     (967 )     (843 )
 
                 
Income (loss) from continuing operations
    18,047       (66,191 )     (6,614 )
Income from discontinued operations
    3,481       5,101       8,441  
Gain on sale of discontinued operations, net of tax
    9,614       16,887       80,198  
 
                 
Net income (loss)
    31,142       (44,203 )     82,025  
Less (income) loss allocated to noncontrolling interests from continuing operations
    (926 )     403       (4,052 )
Less income allocated to perpetual preferred units
    (7,000 )     (7,000 )     (7,000 )
 
                 
Net income (loss) attributable to common shareholders
  $ 23,216     $ (50,800 )   $ 70,973  
 
                 
See Notes to Consolidated Financial Statements.

 

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CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Continued)
                         
    Year Ended December 31,  
(In thousands, except per share amounts)   2010     2009     2008  
Earnings per share — basic
                       
Income (loss) from continuing operations attributable to common shareholders
  $ 0.14     $ (1.15 )   $ (0.32 )
Income from discontinued operations, including gain on sale, attributable to common shareholders
    0.19       0.35       1.60  
 
                 
Net income (loss) attributable to common shareholders
  $ 0.33     $ (0.80 )   $ 1.28  
 
                 
Earnings per share — diluted
                       
Income (loss) from continuing operations attributable to common shareholders
  $ 0.14     $ (1.15 )   $ (0.32 )
Income from discontinued operations, including gain on sale, attributable to common shareholders
    0.19       0.35       1.60  
 
                 
Net income (loss) attributable to common shareholders
  $ 0.33     $ (0.80 )   $ 1.28  
 
                 
 
                       
Weighted average number of common shares outstanding
    68,608       62,359       55,272  
Weighted average number of common shares and dilutive equivalent common shares outstanding
    68,957       62,359       55,272  
 
                       
Net income (loss) attributable to common shareholders
                       
Income (loss) from continuing operations
  $ 18,047     $ (66,191 )   $ (6,614 )
Less (income)loss allocated to noncontrolling interests from continuing operations
    (926 )     403       (4,052 )
Less income allocated to perpetual preferred units
    (7,000 )     (7,000 )     (7,000 )
 
                 
Income (loss) from continuing operations attributable to common shareholders
    10,121       (72,788 )     (17,666 )
Income from discontinued operations, including gain on sale, attributable to common shareholders
    13,095       21,988       88,639  
 
                 
Net income (loss) attributable to common shareholders
  $ 23,216     $ (50,800 )   $ 70,973  
 
                 
 
                       
Consolidated Statements of Comprehensive Income (Loss)
                       
Net income (loss)
  $ 31,142     $ (44,203 )   $ 82,025  
Other comprehensive income (loss)
                       
Unrealized loss on cash flow hedging activities
    (19,059 )     (12,291 )     (44,386 )
Reclassification of net loss on cash flow hedging activities
    23,385       22,192       9,317  
Unrealized gain on available-for-sale investments, net of tax
    3,306              
Unrealized gain on postretirement obligations
    65             136  
 
                 
Comprehensive income (loss)
    38,839       (34,302 )     47,092  
Less (income) loss allocated to noncontrolling interests from continuing operations
    (926 )     403       (4,052 )
Less income allocated to perpetual preferred units
    (7,000 )     (7,000 )     (7,000 )
 
                 
Comprehensive income (loss) attributable to common shareholders
  $ 30,913     $ (40,899 )   $ 36,040  
 
                 
See Notes to Consolidated Financial Statements.

 

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CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF EQUITY
                                                                         
    Common Shareholders                      
                            Notes                                    
    Common                     receivable             Accumulated                      
    shares of             Distributions     secured by             other                      
    beneficial     Additional     in excess of     common     Treasury     comprehensive     Noncontrolling             Perpetual  
(in thousands, except per share amounts)   interest     paid-in capital     net income     shares     shares, at cost     loss     interests     Total equity     preferred units  
Equity, December 31. 2007
  $ 654     $ 2,209,631     $ (227,025 )   $ (1,950 )   $ (433,874 )   $ (16,123 )   $ 122,027     $ 1,653,340     $ 97,925  
 
                                                     
Net income
                    70,973                               4,052       75,025       7,000  
Other comprehensive loss
                                            (34,933 )             (34,933 )        
Net share awards
    3       10,218                                               10,221          
Employee share purchase plan
            142                       740                       882          
Repayment of employee notes receivable, net
                            1,655                               1,655          
Common share options exercised (45 shares)
            2,155                                               2,155          
Conversions and redemptions of operating partnership units (464 shares)
    5       15,548                                       (18,610 )     (3,057 )        
Common shares repurchased (695 shares)
                                    (30,075 )                     (30,075 )        
Purchase of noncontrolling interests
                                                    (8,573 )     (8,573 )        
Distributions on perpetual preferred units
                                                                    (7,000 )
Cash distributions ($2.80 per share)
                    (156,257 )                             (9,034 )     (165,291 )        
Other
    (2 )     9                                               7          
 
                                                     
Equity, December 31, 2008
  $ 660     $ 2,237,703     $ (312,309 )   $ (295 )   $ (463,209 )   $ (51,056 )   $ 89,862     $ 1,501,356     $ 97,925  
 
                                                     
Net income (loss)
                    (50,800 )                             (403 )     (51,203 )     7,000  
Other comprehensive income
                                            9,901               9,901          
Common shares issued (10,350 shares)
    104       272,008                                               272,112          
Net share awards
    2       10,157                                               10,159          
Employee share purchase plan
            105                       1,027                       1,132          
Repayment of employee notes receivable, net
                            194                               194          
Common share options exercised (19 shares)
            1,275                                               1,275          
Conversions and redemptions of operating partnership units (139 shares)
    2       3,759                                       (3,777 )     (16 )        
Common shares repurchased
                                    (6 )                     (6 )        
Purchase of noncontrolling interests
            647                                       (748 )     (101 )        
Distributions on perpetual preferred units
                                                                    (7,000 )
Cash distributions ($2.05 per share)
                    (129,462 )                             (6,332 )     (135,794 )        
Other
    2       2                                               4          
 
                                                     
Equity, December 31, 2009
  $ 770     $ 2,525,656     $ (492,571 )   $ (101 )   $ (462,188 )   $ (41,155 )   $ 78,602     $ 1,609,013     $ 97,925  
 
                                                     
See Notes to Consolidated Financial Statements.

 

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CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
                                                                         
    Common Shareholders                      
                            Notes                                    
    Common                     receivable             Accumulated                      
    shares of             Distributions     secured by             other                      
    beneficial     Additional     in excess of     common     Treasury     comprehensive     Noncontrolling             Perpetual  
(in thousands, except per share amounts)   interest     paid-in capital     net income     shares     shares, at cost     loss     interests     Total equity     preferred units  
Equity, December 31, 2009
  $ 770     $ 2,525,656     $ (492,571 )   $ (101 )   $ (462,188 )   $ (41,155 )   $ 78,602     $ 1,609,013     $ 97,925  
 
                                                     
Net income
                    23,216                               926       24,142       7,000  
Other comprehensive income
                                            7,697               7,697          
Common shares issued (4,868 shares)
    49       231,602                                               231,651          
Net share awards
    4       11,609                                               11,613          
Employee share purchase plan
            232                       933                       1,165          
Repayment of employee notes receivable, net
                            101                               101          
Common share options exercised (41 shares)
            2,997                                               2,997          
Conversions and redemptions of operating partnership units (279 shares)
    3       3,525                                       (3,553 )     (25 )        
Distributions on perpetual preferred units
                                                                    (7,000 )
Cash distributions ($1.80 per share)
                    (125,962 )                             (5,046 )     (131,008 )        
Other
    (2 )     4                                       25       27          
 
                                                     
Equity, December 31, 2010
  $ 824     $ 2,775,625     $ (595,317 )   $     $ (461,255 )   $ (33,458 )   $ 70,954     $ 1,757,373     $ 97,925  
 
                                                     
See Notes to Consolidated Financial Statements.

 

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CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
                         
    Year Ended December 31,  
(in thousands)   2010     2009     2008  
Cash flows from operating activities
                       
Net income (loss)
  $ 31,142     $ (44,203 )   $ 82,025  
Adjustments to reconcile net income (loss) to net cash from operating activities
                       
Depreciation and amortization, including discontinued operations
    174,465       172,415       169,151  
Gain on sale of discontinued operations
    (9,614 )     (16,887 )     (80,198 )
Gain on sale of properties, including land
    (236 )           (2,929 )
Loss (gain) on early retirement of debt
          2,550       (13,566 )
Impairment associated with land development activities
          85,614       51,323  
Impairment provision on a technology investment
    1,000              
Equity in (income) loss of joint ventures
    839       (695 )     1,265  
Share-based compensation
    11,306       9,053       7,663  
Distributions of income from joint ventures
    6,524       5,664       5,392  
Amortization of deferred financing costs
    4,102       3,925       2,975  
Accretion of discount on unsecured notes payable
    514       628       571  
Interest on notes receivable — affiliates
    (239 )     (437 )     (3,688 )
Net change in operating accounts
    4,233       61       (3,026 )
 
                 
Net cash from operating activities
  $ 224,036     $ 217,688     $ 216,958  
 
                 
 
                       
Cash flows from investing activities
                       
Development and capital improvements
  $ (63,739 )   $ (72,779 )   $ (199,269 )
Proceeds from sales of properties, including land and discontinued operations
    102,819       28,078       123,513  
Proceeds from partial sales of assets to joint ventures
                52,509  
Investments in joint ventures
    (6,467 )     (23,159 )     (10,444 )
Payments received on notes receivable — other
          8,710       2,855  
Increase in notes receivable — affiliates
    (511 )     (7,332 )     (3,487 )
Other
    3,048       (3,034 )     (3,051 )
 
                 
Net cash from investing activities
  $ 35,150     $ (69,516 )   $ (37,374 )
 
                 
See Notes to Consolidated Financial Statements.

 

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CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                         
    Year Ended December 31,  
(in thousands)   2010     2009     2008  
Cash flows from financing activities
                       
Proceeds from issuance of common shares
  $ 231,651     $ 272,112     $  
Proceeds from notes payable
    57,748       440,840       385,927  
Repayment of notes payable
    (306,692 )     (503,705 )     (379,213 )
Borrowings on unsecured line of credit and short-term borrowings
    37,000             30,000  
Repayments on unsecured line of credit and short-term borrowings
    (37,000 )     (145,000 )      
Distributions to common shareholders, perpetual preferred units, and noncontrolling interests
    (135,626 )     (152,687 )     (172,332 )
Repurchase of common shares and units
    (26 )     (21 )     (33,133 )
Payment of deferred financing costs
    (6,564 )     (5,124 )     (4,321 )
Net decrease (increase) in accounts receivable — affiliates
    4,217       909       (929 )
Other
    2,525       1,253       927  
 
                 
Net cash from financing activities
  $ (152,767 )   $ (91,423 )   $ (173,074 )
 
                 
Net increase in cash and cash equivalents
    106,419       56,749       6,510  
Cash and cash equivalents, beginning of year
    64,156       7,407       897  
 
                 
Cash and cash equivalents, end of year
  $ 170,575     $ 64,156     $ 7,407  
 
                 
Supplemental information
                       
Cash paid for interest, net of interest capitalized
  $ 128,742     $ 134,266     $ 136,172  
Cash paid for income taxes
    1,169       1,654       1,651  
Supplemental schedule of non-cash investing and financing activities
                       
Distributions declared but not paid
  $ 35,295     $ 33,025     $ 42,937  
Value of shares issued under benefit plans, net of cancellations
    14,401       6,653       10,766  
Conversion of operating partnership units to common shares
    3,536       3,753       15,793  
Accrual associated with construction and capital expenditures
    6,590       5,189       24,167  
Conversion of mezzanine notes to joint venture equity
    43,279       18,496        
Change of fair value of available-for-sale investments, net of tax
    3,306              
Debt disposed of through disposition
                14,010  
Contribution of real estate assets to joint ventures
                10,523  
Consolidation of joint venture at fair value, net of cash
                       
Real estate assets
    238,885              
In-place leases
    4,962              
Other assets
    1,135              
Mortgage debt assumed
    188,119              
Other liabilities
    3,197              
See Notes to Consolidated Financial Statements.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust (“REIT”), is engaged in the ownership, management, development, acquisition, and construction of multifamily apartment communities. Our multifamily apartment communities are referred to as “communities,” “multifamily communities,” “properties,” or “multifamily properties” in the following discussion. As of December 31, 2010, we owned interests in, operated, or were developing 188 multifamily properties comprising 63,923 apartment homes across the United States. Of these 188 properties, two properties were under development and when completed will consist of a total of 607 apartment homes. In addition, we own land parcels we may develop into multifamily apartment communities.
2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Principles of Consolidation. Our consolidated financial statements include our accounts and the accounts of other subsidiaries and joint ventures (including partnerships and limited liability companies) over which we have control. All intercompany transactions, balances, and profits have been eliminated in consolidation. Investments acquired or created are continuously evaluated based on the accounting guidance relating to variable interest entities (“VIEs”), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation (primarily using a voting interest model) under the remaining consolidation guidance relating to real estate entities. If we are the general partner of a limited partnership, or manager of a limited liability company, we also consider the consolidation guidance relating to the rights of limited partners (non-managing members) to assess whether any rights held by the limited partners overcome the presumption of control by us.
Allocations of Purchase Price. Upon the acquisition of real estate, we allocate the purchase price between tangible and intangible assets, which includes land, buildings, furniture and fixtures, the value of in-place leases, including above and below market leases, and acquired liabilities. When allocating the purchase price to acquired properties, we allocate costs to the estimated intangible value of in-place leases and above or below market leases and to the estimated fair value of furniture and fixtures, land, and buildings on a value determined by assuming the property was vacant by applying methods similar to those used by independent appraisers of income-producing property. Depreciation is computed on a straight-line basis over the remaining useful lives of the related tangible assets. The value of in-place leases and above or below market leases is amortized over the estimated average remaining life of leases in place at the time of acquisition. The unamortized value of in-place leases at December 31, 2010, was approximately $3.9 million. Amortization expense will be recognized over the remaining life of these in-place leases in 2011. Estimates of fair value of acquired debt are based upon interest rates available for the issuance of debt with similar terms and remaining maturities.
Asset Impairment. Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. We consider projected future discounted and undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. When impairment exists, the long-lived asset is adjusted to its fair value. While we believe our estimates of future cash flows are reasonable, different assumptions regarding a number of factors, including market rents, economic conditions, and occupancies could significantly affect these estimates. In estimating fair value, management uses appraisals, management estimates, and discounted cash flow calculations which maximize inputs from a marketplace participant’s perspective.
In addition, we evaluate our investments in joint ventures and if we believe there is an other than temporary decline in market value of our investment, we will record an impairment charge.
The value of our properties under development depends on market conditions, including estimates of the project start date as well as estimates of demand for multifamily communities. We have reviewed market trends and other marketplace information and have incorporated this information as well as our current outlook into the assumptions we use in our impairment analyses. Due to, among other factors, the judgment and assumptions applied in the impairment analyses and the fact limited market information regarding the value of comparable land exists at this time, it is possible actual results could differ substantially from those estimated.

 

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We believe the carrying value of our operating real estate assets, properties under development, and land is currently recoverable. However, if market conditions deteriorate or if changes in our development strategy significantly affect any key assumptions used in our fair value calculations, we may need to take material charges in future periods for impairments related to existing assets. Any such material non-cash charges would have an adverse effect on our consolidated financial position and results of operations.
Cash and Cash Equivalents. All cash and investments in money market accounts and other highly liquid securities with a maturity of three months or less at the date of purchase are considered to be cash and cash equivalents. We maintain the majority of our cash and cash equivalents at major financial institutions in the United States and deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, we regularly monitor the financial stability of these financial institutions and believe we are not currently exposed to any significant default risk with respect to these deposits.
Cost Capitalization. Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes which are capitalized as part of properties under development. Capitalized interest is generally based on the weighted average interest rate of our unsecured debt. Transaction costs associated with the acquisition of real estate assets are expensed. Expenditures directly related to the development and improvement of real estate assets are capitalized at cost as land and buildings and improvements. Indirect development costs, including salaries and benefits and other related costs directly attributable to the development of properties are also capitalized. All construction and carrying costs are capitalized and reported in the balance sheet as properties under development until the apartment homes are substantially completed. Upon substantial completion of the apartment homes, the total cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively.
As discussed above, carrying charges are principally interest and real estate taxes capitalized as part of properties under development and buildings and improvements. Capitalized interest was approximately $5.7 million, $10.3 million, and $17.7 million for the years ended December 31, 2010, 2009, and 2008, respectively. Capitalized real estate taxes were approximately $0.8 million, $1.9 million, and $3.4 million for the years ended December 31, 2010, 2009, and 2008, respectively.
Where possible, we stage our construction to allow leasing and occupancy during the construction period, which we believe minimizes the duration of the lease-up period following completion of construction. Our accounting policy related to properties in the development and leasing phase is to expense all operating expenses associated with completed apartment homes. We capitalize renovation and improvement costs we believe extend the economic lives of depreciable property. Capital expenditures subsequent to initial construction are capitalized and depreciated over their estimated useful lives.
Depreciation and amortization is computed over the expected useful lives of depreciable property on a straight-line basis with lives generally as follows:
     
    Estimated
    Useful Life
Buildings and improvements
  5-35 years
Furniture, fixtures, equipment and other
  3-20 years
Intangible assets (in-place leases and above and below market leases)
  underlying lease term
Derivative Financial Instruments. Derivative financial instruments are recorded in the consolidated balance sheets at fair value and we do not apply master netting for financial reporting purposes. Accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows or other types of forecasted transactions are cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes attributable to the earnings effect of the hedged transactions. We may enter into derivative contracts which are intended to economically hedge certain of our risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.

 

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Discontinued Operations. A property is classified as a discontinued operation when (i) the operations and cash flows of the property can be clearly distinguished and have been or will be eliminated from our ongoing operations; (ii) the property has either been disposed of or is classified as held for sale; and (iii) we will not have any significant continuing involvement in the operations of the property after the disposal transactions. Significant judgments are involved in determining whether a property meets the criteria for discontinued operations reporting and the period in which these criteria are met. A property is classified as held for sale when (i) management commits to a plan to sell and it is actively marketed; (ii) it is available for immediate sale in its present condition and the sale is expected to be completed within one year; and (iii) it is unlikely significant changes to the plan will be made or the plan will be withdrawn. In isolated instances, assets held for sale may exceed one year due to events or circumstances beyond our control.
The results of operations for properties sold during the period or classified as held for sale at the end of the current period are classified as discontinued operations in the current and prior periods. The property-specific components of earnings classified as discontinued operations include separately identifiable property-specific revenues, expenses, depreciation, and interest expense, if any. The gain or loss resulting from the eventual disposal of the held for sale properties is also classified within discontinued operations. Real estate assets held for sale are measured at the lower of carrying amount or fair value less costs to sell and are presented separately in the accompanying consolidated balance sheets. Subsequent to classification of a property as held for sale, no further depreciation is recorded. Properties sold by our unconsolidated entities are not included in discontinued operations and related gains or losses are reported as a component of equity in income (loss) of joint ventures.
Gains on sale of real estate are recognized using the full accrual or partial sale methods, as applicable, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), provided various criteria relating to the terms of sale and any subsequent involvement with the real estate sold are met.
Income Recognition. Our rental and other property revenue is recorded when due from residents and is recognized monthly as it is earned. Other property revenue consists primarily of utility rebillings and administrative, application, and other transactional fees charged to our residents. Our apartment homes are rented to residents on lease terms generally ranging from six to fifteen months, with monthly payments due in advance. All other sources of income, including from interest and fee and asset management income, are recognized as earned. Eight of our properties are subject to rent control. Operations of multifamily properties acquired are recorded from the date of acquisition in accordance with the acquisition method of accounting. In management’s opinion, due to the number of residents, the types and diversity of submarkets in which our properties operate, and the collection terms, there is no significant concentration of credit risk.
Insurance. Our primary lines of insurance coverage are property, general liability, and health and workers’ compensation. We believe our insurance coverage adequately insures our properties against the risk of loss attributable to fire, earthquake, hurricane, tornado, flood, and other perils and adequately insures us against other risks. Losses are accrued based upon our estimates of the aggregate liability for claims incurred using certain actuarial assumptions followed in the insurance industry and based on our experience.
Other Assets, Net. Other assets in our consolidated financial statements include investments under deferred compensation plans, deferred financing costs, non-real estate leasehold improvements and equipment, prepaid expenses, the value of in-place leases net of related accumulated amortization, available-for-sale investments, and other miscellaneous receivables. Investments under deferred compensation plans are classified as trading securities and are adjusted to fair market value at period end. See further discussion of our investments under deferred compensation plans in Note 11, “Share-based Compensation and Benefit Plans.” Deferred financing costs are amortized no longer than the terms of the related debt on the straight-line method, which approximates the effective interest method. Corporate leasehold improvements and equipment are depreciated using the straight-line method over the shorter of the expected useful lives or the lease terms which range from three to ten years. Our available-for-sale investments are carried at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity.
Reportable Segments. Our multifamily communities are geographically diversified throughout the United States, and management evaluates operating performance on an individual property level. As each of our apartment communities has similar economic characteristics, residents, and products and services, our apartment communities have been aggregated into one reportable segment. Our multifamily communities generate rental revenue and other income through the leasing of apartment homes, which comprised approximately 97% of our total property revenues and total non-property income, excluding income (loss) on deferred compensation plans for the year ended December 31, 2010, and approximately 98% for each of the years ended December 31, 2009, and 2008.

 

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Restricted Cash. Restricted cash consists of escrow deposits held by lenders for property taxes, insurance and replacement reserves, cash required to be segregated for the repayment of residents’ security deposits, and escrowed amounts related to our development and acquisition activities. Substantially all restricted cash is invested in demand and short-term instruments.
Share-based Compensation. Compensation expense associated with share-based awards is recognized in our consolidated statements of income and comprehensive income using the grant-date fair values. Compensation cost for all share-based awards, including options, requires measurement at estimated fair value on the grant date and recognition of compensation expense over the requisite service period for awards expected to vest. The fair value of stock option grants is estimated using the Black-Scholes valuation model. Valuation models require the input of assumptions, including judgments to estimate the expected stock price volatility, expected life, and forfeiture rate. The compensation cost for share-based awards is based on the market value of the shares on the date of grant.
Use of Estimates. In the application of GAAP, management is required to make estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements, results of operations during the reporting periods, and related disclosures. Our more significant estimates include estimates supporting our impairment analysis related to the carrying values of our real estate assets, estimates related to the valuation of our investments in joint ventures, and estimates and assumptions used to determine the entity with the power to direct activities that most significantly impacts economic performance of potential variable interest entities. These estimates are based on historical experience and other assumptions believed to be reasonable under the circumstances. Future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment.
3. Share Data
Basic earnings per share are computed using net income (loss) attributable to common shareholders and the weighted average number of common shares outstanding. Diluted earnings per share reflect common shares issuable from the assumed conversion of common share options and share awards granted and units convertible into common shares. Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. Our unvested share-based awards are considered participating securities and are reflected in the calculation of basic and diluted earnings per share using the two-class method. The number of common share equivalent securities excluded from the diluted earnings per share calculation was approximately 4.8 million, 4.9 million, and 5.2 million for the years ended December 31, 2010, 2009, and 2008, respectively. These securities, which include common share options and share awards granted and units convertible into common shares, were excluded from the diluted earnings per share calculation as they are anti-dilutive.

 

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The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated:
                         
    Year Ended December 31,  
(in thousands, except per share amounts)   2010     2009     2008  
Basic earnings per share calculation
                       
Income (loss) from continuing operations attributable to common shareholders
  $ 10,121     $ (72,788 )   $ (17,666 )
Amount allocated to participating securities
    (265 )     637       (329 )
 
                 
Income (loss) from continuing operations attributable to common shareholders, net of amount allocated to participating securities
    9,856       (72,151 )     (17,995 )
Income from discontinued operations, including gain on sale, attributable to common shareholders
    13,095       21,988       88,639  
 
                 
Net income (loss) attributable to common shareholders, as adjusted — basic
  $ 22,951     $ (50,163 )   $ 70,644  
 
                 
 
                       
Income (loss) from continuing operations attributable to common shareholders, as adjusted — per share
  $ 0.14     $ (1.15 )   $ (0.32 )
Income from discontinued operations, including gain on sale, attributable to common shareholders — per share
    0.19       0.35       1.60  
 
                 
Net income (loss) attributable to common shareholders, as adjusted — per share
  $ 0.33     $ (0.80 )   $ 1.28  
 
                 
 
                       
Weighted average number of common shares outstanding
    68,608       62,359       55,272  
 
                       
Diluted earnings per share calculation
                       
Income (loss) from continuing operations attributable to common shareholders, net of amount allocated to participating securities
  $ 9,856     $ (72,151 )   $ (17,995 )
Income allocated to common units
                 
 
                 
Income (loss) from continuing operations attributable to common shareholders, as adjusted
    9,856       (72,151 )     (17,995 )
Income from discontinued operations, including gain on sale, attributable to common shareholders
    13,095       21,988       88,639  
 
                 
Net income (loss) attributable to common shareholders, as adjusted
  $ 22,951     $ (50,163 )   $ 70,644  
 
                 
 
                       
Income (loss) from continuing operations attributable to common shareholders, as adjusted — per share
  $ 0.14     $ (1.15 )   $ (0.32 )
Income from discontinued operations, including gain on sale, attributable to common shareholders — per share
    0.19       (0.35 )     1.60  
 
                 
Net income (loss) attributable to common shareholders, as adjusted — per share
  $ 0.33     $ (0.80 )   $ 1.28  
 
                 
 
                       
Weighted average number of common shares outstanding
    68,608       62,359       55,272  
Incremental shares issuable from assumed conversion of:
                       
Common share options and share awards granted
    349              
Common units
                 
 
                 
Weighted average number of common shares and dilutive equivalent common shares outstanding
    68,957       62,359       55,272  
 
                 
4. Common Shares
In January 2008, our Board of Trust Managers approved an increase of the April 2007 repurchase plan to allow for the repurchase of up to $500 million of our common equity securities through open market purchases, block purchases, and privately negotiated transactions. Under this program, we have repurchased 4.3 million shares for a total of approximately $230.2 million from April 2007 through December 31, 2010. The remaining dollar value of our common equity securities authorized to be repurchased under the program was approximately $269.8 million as of December 31, 2010. There were no repurchases of our equity securities during the year ended December 31, 2010.
In March 2010, we announced the creation of an at-the-market (“ATM”) share offering program through which we may, but have no obligation to, sell common shares having an aggregate offering price of up to $250 million, in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. Actual sales from time to time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations of the appropriate sources of funding for us. During the year ended December 31, 2010, we issued approximately 4.9 million common shares at an average price of $48.37 per share for total net consideration of approximately $231.7 million. In January 2011, we issued 0.1 million common shares at an average price of $54.06 per share for total net consideration of approximately $3.8 million. As of the date of this filing, we had common shares having an aggregate offering price of up to $10.7 million remaining available for sale under the ATM program.

 

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We currently have an automatic shelf registration statement on file with the Securities and Exchange Commission which allows us to offer, from time to time, an unlimited amount of common shares, preferred shares, debt securities, or warrants. Our declaration of trust provides we may issue up to 110 million shares of beneficial interest, consisting of 100 million common shares and 10 million preferred shares. As of December 31, 2010, we had approximately 69.6 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding.
5. Operating Partnerships
At December 31, 2010, approximately 12% of our multifamily apartment homes were held in Camden Operating, L.P (“Camden Operating” or the “operating partnership”). Camden Operating has issued both common and preferred limited partnership units. As of December 31, 2010, we held 89.8% of the common limited partnership units and the sole 1% general partnership interest of the operating partnership. The remaining common limited partnership units, comprising approximately 1.1 million units, are primarily held by former officers, directors, and investors of Paragon Group, Inc., which we acquired in 1997. Each common limited partnership unit is redeemable for one common share of Camden or cash at our election. Holders of common limited partnership units are not entitled to rights as shareholders prior to redemption of their common limited partnership units. No member of our management owns Camden Operating common limited partnership units, and two of our ten trust managers own Camden Operating common limited partnership units.
Camden Operating has $100 million of 7.0% Series B Cumulative Redeemable Perpetual Preferred Units outstanding. Distributions on the preferred units are payable quarterly in arrears. The Series B preferred units were redeemable beginning in December 2008 by the operating partnership for cash at par plus the amount of any accumulated and unpaid distributions. There were no redemptions as of December 31, 2010. The preferred units are convertible beginning in 2015 by the holder into a fixed number of corresponding Series B Cumulative Redeemable Perpetual Preferred Shares of Camden. The Series B preferred units are subordinate to present and future debt.
We are the controlling managing member interest in Oasis Martinique, LLC, which owns one property in Orange County, California and is included in our consolidated financial statements. The remaining interests, comprising approximately 0.4 million units, are exchangeable into approximately 0.3 million of our common shares.
At December 31, 2010, approximately 25% of our multifamily apartment homes were held in Camden Summit Partnership, L.P. (the “Camden Summit Partnership”). The Camden Summit Partnership has issued common limited partnership units. As of December 31, 2010, we held 94.0% of the common limited partnership units and the sole 1% general partnership interest of the Camden Summit Partnership. The remaining common limited partnership units, comprising approximately 1.1 million units, are primarily held by former officers, directors, and investors of Summit Properties Inc. (“Summit”), a company we acquired in 2005. Each common limited partnership unit is redeemable for one common share of Camden or cash at our election. Holders of common limited partnership units are not entitled to rights as shareholders prior to redemption of their common limited partnership units. No member of our management owns Camden Summit Partnership common limited partnership units, and two of our ten trust managers own Camden Summit Partnership common limited partnership units.
6. Income Taxes
We have maintained and intend to maintain our election as a REIT under the Internal Revenue Code of 1986, as amended. In order for us to continue to qualify as a REIT we must meet a number of organizational and operational requirements, including a requirement to distribute annual dividends to our shareholders equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains. As a REIT, we generally will not be subject to federal income tax on our taxable income at the corporate level to the extent such income is distributed to our shareholders annually. If our taxable income exceeds our dividends in a tax year, REIT tax rules allow us to designate dividends from the subsequent tax year in order to avoid current taxation on undistributed income. If we fail to qualify as a REIT in any taxable year, we will be subject to federal and state income taxes at regular corporate rates, including any applicable alternative minimum tax. In addition, we may not be able to requalify as a REIT for the four subsequent taxable years. Historically, we have incurred only state and local income, franchise and margin taxes. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal, state, and local income and margin taxes. Our operating partnerships are flow-through entities and are not subject to federal income taxes at the entity level. We have provided for federal, state, and local income, franchise, and margin taxes in the consolidated statements of income and comprehensive income for the years ended December 31, 2010, 2009 and 2008. These taxes are primarily for margin taxes and entity level state income and franchise taxes on certain ventures, and federal taxes on one of our taxable REIT subsidiaries. We have no significant temporary differences or tax credits associated with our taxable REIT subsidiaries.

 

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The following table reconciles net income to REIT taxable income for the years ended December 31:
                         
    Year Ended December 31,  
(in thousands)   2010     2009     2008  
Net income (loss)
  $ 31,142     $ (44,203 )   $ 82,025  
Less (income) loss attributable to noncontrolling interests
    (926 )     403       (4,052 )
Less income allocated to perpetual preferred units
    (7,000 )     (7,000 )     (7,000 )
 
                 
Net income (loss) attributable to common shareholders
    23,216       (50,800 )     70,973  
Loss of taxable REIT subsidiaries included above
    2,056       25,124       9,239  
 
                 
Net income (loss) from REIT operations
    25,272       (25,676 )     80,212  
Book depreciation and amortization, including discontinued operations
    179,662       178,607       175,162  
Tax depreciation and amortization
    (158,134 )     (164,639 )     (164,327 )
Book/tax difference on gains/losses from capital transactions
    37,798       (7,059 )     826  
Book/tax difference on impairment associated with land development activities
          62,397       51,323  
Other book/tax differences, net
    (10,565 )     (24,188 )     (15,410 )
 
                 
REIT taxable income
    74,033       19,442       127,786  
Dividends paid deduction
    (124,999 )     (128,507 )     (151,346 )
 
                 
Dividends paid in excess of taxable income
  $ (50,966 )   $ (109,065 )   $ (23,560 )
 
                 
A schedule of per share distributions we paid and reported to our shareholders is set forth in the following table:
                         
    Year Ended December 31,  
    2010     2009     2008  
Common Share Distributions
                       
Ordinary income
  $ 0.89     $ 1.74     $ 1.34  
Long-term capital gain
    0.20       0.25       0.91  
Unrecaptured Sec. 1250 gain
    0.48       0.06       0.55  
Return of capital
    0.23              
 
                 
Total
  $ 1.80     $ 2.05     $ 2.80  
 
                 
 
                       
Percentage of distributions representing tax preference items
    3.91 %     3.94 %     5.59 %
We have taxable REIT subsidiaries which are subject to federal and state income taxes. At December 31, 2010, our taxable REIT subsidiaries had net operating loss carryforwards (“NOL’s”) of approximately $25.1 million which expire in years 2019 to 2030. Because NOL’s are subject to certain change of ownership, continuity of business, and separate return year limitations, and because it is unlikely the available NOL’s will be utilized or because we consider any amounts possibly utilized to be immaterial, no benefits of these NOL’s have been recognized in our consolidated financial statements.
The carrying value of net assets reported in our consolidated financial statements at December 31, 2010 exceeded the tax basis by approximately $843.9 million.
Income Tax Expense — Current. For the tax years ended December 31, 2010, 2009, and 2008, we had current income tax expense of approximately $1.6 million, $1.0 million, and $0.8 million, respectively. The 2010 tax expense was comprised mainly of entity level state income taxes on certain ventures and federal income tax on one of our taxable REIT subsidiaries. The 2009 and 2008 amounts were comprised mainly of state income taxes.
Income Tax Expense — Deferred. For the years ended December 31, 2010, 2009, and 2008, our deferred tax expense was not significant.

 

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The company and its subsidiaries’ income tax returns are subject to examination by federal, state and local tax jurisdictions for years 2007 through 2009. Net income tax loss carryforwards and other tax attributes generated in years prior to 2007 are also subject to challenge in any examination of those tax years. The company and its subsidiaries are not under any notice of audit from any taxing authority at year end 2010. We believe we have no uncertain tax positions or unrecognized tax benefits requiring disclosure for the periods presented.
7. Property Acquisitions, Discontinued Operations, and Impairments
Acquisitions. During 2010, we acquired three multifamily properties for an aggregate of approximately $63.0 million on behalf of one of our discretionary investment funds (the “Fund”) in which we have a 20% ownership interest. The acquisitions were comprised of 306 units located in Houston, Texas, 110 units located in Atlanta, Georgia and 270 units located in Corpus Christi, Texas.
In August 2010, the ownership of one of our joint ventures, which owns a multifamily property located in Irvine, California, was restructured and resulted in our ownership interest increasing from 30% to 99.99%. We previously accounted for this joint venture in accordance with the equity method of accounting. Following this restructuring, we have consolidated this entity for financial reporting purposes. At the time of this restructuring, we recorded the assets and liabilities of the joint venture at fair value, which resulted in an increase of real estate assets of approximately $92.7 million and a reduction to investments in joint ventures and notes receivable-affiliates of approximately $21.2 million and $20.7 million, respectively. We did not record a gain or loss on this restructuring as the net consideration approximated the fair market value of the net assets received. Subsequent to this restructuring, we repaid the joint venture’s existing $52.1 million secured note, which accrued interest at LIBOR plus 2.25%, and the joint venture entered into a 35 year secured credit agreement with a third-party lender in the amount of $53.0 million with an effective annual interest rate of approximately 4.35%.
In December 2010, the ownership of two of our joint ventures, which own multifamily properties located in Houston, Texas and College Park, Maryland, were restructured and resulted in our ownership interests increasing from 30% to 99.99%. We previously accounted for these joint ventures in accordance with the equity method of accounting. Following this restructuring, we have consolidated these entities for financial reporting purposes. At the time of this restructuring, we recorded the assets and liabilities of the joint ventures at fair value, which resulted in an increase of real estate assets of approximately $146.2 million and a reduction to investments in joint ventures and notes receivable-affiliates of approximately $2.4 million and $14.3 million, respectively. We did not record a gain or loss on this restructuring as the net consideration approximated the fair market value of the net assets received. Subsequent to this restructuring, we repaid one joint venture’s existing $108.8 million secured note, which accrued interest at LIBOR plus 2.0%. Additionally, we assumed the debt of one of the joint venture’s secured notes with third-party lenders for approximately $27.2 million, and repaid one of the secured notes for approximately $4.6 million. The remaining $22.6 million secured note matures in May 2019 and has an effective annual interest rate of 5.33%.
The following is a summary of revenue and earnings, which represents property revenue less property expenses, for the three restructured joint ventures from their respective consolidation dates through December 31, 2010:
         
(in thousands)        
Property revenues
  $ 2,612  
 
       
Property operating income
  $ 1,548  
The following summarized pro forma consolidated income statement information assumes the acquisition of control of the three joint ventures discussed above occurred as of January 1, 2009:
                 
    Year Ended December 31,  
    2010     2009  
(in thousands)   (unaudited)  
Property revenues
  $ 627,565     $ 630,463  
 
               
Property operating income
  $ 372,630     $ 380,142  

 

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We did not acquire any operating properties in 2009 or 2008.
Discontinued Operations. Two operating properties, one operating property, and eight operating properties were sold in the years ended December 31, 2010, 2009, and 2008, respectively. Income from discontinued operations in each of the years includes the results of operations of the operating properties that were sold during such year through their sale dates.
The following is a summary of income from discontinued operations for the years presented below:
                         
    Year Ended December 31,  
(in thousands)   2010     2009     2008  
Property revenues
  $ 10,774     $ 14,324     $ 27,465  
Property expenses
    4,582       5,863       12,470  
 
                 
 
    6,192       8,461       14,995  
Interest
                466  
Depreciation and amortization
    2,711       3,360       6,088  
 
                 
Income from discontinued operations
  $ 3,481     $ 5,101     $ 8,441  
 
                 
 
                       
Gain on sale of discontinued operations
  $ 9,614     $ 16,887     $ 80,198  
 
                 
Impairment. The impairment associated with land development activities for the years ended December 31, 2009 and 2008 totaled approximately $72.2 million and $50.2 million, respectively, for the difference between the estimated fair value and the carrying value of various land holdings for development projects we either placed on hold or planned to not pursue.
Impairment for the year ended December 31, 2009 included $13.4 million of costs capitalized and exit costs associated with a land development joint venture we placed on hold. In the fourth quarter of 2010, this joint venture was dissolved. Refer to Note 8, “Investments in Joint Ventures,” for further discussion.
During the fourth quarter of 2010, we wrote-off a $1.0 million investment associated with a technology investment which we determined was no longer recoverable.

 

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8. Investments in Joint Ventures
As of December 31, 2010, our equity investments in unconsolidated joint ventures, which we account for utilizing the equity method of accounting, consisted of 20 joint ventures, with our ownership percentages ranging from 15% to 72%. We provide property management services to the majority of these joint ventures which own operating properties and may provide asset management services in addition to construction and development services to the joint ventures which own properties under development. The following table summarizes aggregate balance sheet and statement of income data for the unconsolidated joint ventures as of December 31 (in millions):
                 
    2010 (2)     2009  
Total assets
  $ 935.3     $ 1,202.0  
Total third-party debt
    810.1       980.9  
Total equity
    105.3       151.9  
                         
    2010     2009     2008  
Total revenues
  $ 137.6     $ 137.3     $ 127.1  
Net income (loss)
    (19.1 )     (18.0 )     (18.7 )
Equity in income (loss) (1)
    (0.8 )     0.7       (1.3 )
     
(1)  
Equity in income (loss) of unconsolidated joint ventures excludes our ownership interest of fee income from various property management services and interest income from mezzanine loans with our joint ventures.
 
(2)  
During 2010, we consolidated three joint ventures previously accounted for in accordance with the equity method. Refer to Note 7, “Property Acquisitions, Discontinued Operations and Impairments,” for further discussion of these restructurings.
The joint ventures in which we have an interest have been funded in part with secured third-party debt. We have guaranteed no more than our proportionate interest, totaling approximately $11.0 million, of two loans utilized for construction and development activities for our joint ventures.
Mezzanine loans we have made to affiliated joint ventures are recorded as “Notes receivable — affiliates” and as of December 31, 2010 and 2009, the balance was $3.2 million and $45.8 million, respectively. At December 31, 2010, we had one mezzanine loan outstanding and our commitment to fund additional amounts under this mezzanine loan was approximately $6.0 million.
We may earn fees for property and asset management, construction, development, and other services related primarily to joint ventures in which we own an interest. Fees earned for these services amounted to approximately $8.2 million, $8.0 million, and $9.2 million for the years ended December 31, 2010, 2009, and 2008, respectively. We eliminate fee income from property management services provided to these joint ventures to the extent of our ownership.
On April 15, 2010, a $24.5 million secured third-party construction note made by one of our joint ventures which owns a multifamily property located in Houston, Texas, originally scheduled to mature in April 2010, was contractually extended to April 2011. Concurrent with the construction note extension, our $8.2 million mezzanine loan to this joint venture was converted into an additional $7.2 million common equity interest in the joint venture (with a preference on distribution of cash flows) and $1.0 million common equity interest in the joint venture (without such preference).
In the fourth quarter of 2010, we dissolved a joint venture located in Austin, Texas. In connection with the dissolution, our joint venture partner purchased the third-party debt made by this joint venture from the note holder, which relieved us of our guarantee of our proportionate interest of this debt of approximately $4.2 million; we had previously recorded a charge for this indemnification. Accordingly, we recorded the $4.2 million as other income in our 2010 consolidated statements of income and comprehensive income.
In February 2011, the Fund acquired one multifamily property for approximately $44.5 million. The multifamily property is located in Houston, TX and is comprised of 352 apartment homes.

 

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9. Notes Payable
The following is a summary of our indebtedness:
                 
    December 31,  
(in millions)   2010     2009  
Commercial Banks
               
Unsecured line of credit and short-term borrowings
  $     $  
Term loan, due 2012
    500.0       500.0  
 
           
 
  $ 500.0     $ 500.0  
Senior unsecured notes
               
4.39% Notes, due 2010
          55.3  
6.75% Notes, due 2010
          57.8  
7.69% Notes, due 2011
    88.0       87.9  
5.93% Notes, due 2012
    189.5       189.4  
5.45% Notes, due 2013
    199.6       199.4  
5.08% Notes, due 2015
    249.2       249.0  
5.75% Notes, due 2017
    246.1       246.1  
 
           
 
    972.4       1,084.9  
Medium-term notes
               
4.90% Notes, due 2010
          10.2  
6.79% Notes, due 2010
          14.5  
4.99% Notes, due 2011
    35.4       36.3  
 
           
 
    35.4       61.0  
 
           
Total unsecured notes payable
    1,507.8       1,645.9  
 
               
Secured notes
               
1.12% - 6.00% Conventional Mortgage Notes, due 2011 — 2045
    1,015.7       937.8  
1.78% Tax-exempt Mortgage Note, due 2028
    40.3       41.5  
 
           
 
    1,056.0       979.3  
 
           
Total notes payable
  $ 2,563.8     $ 2,625.2  
 
           
 
               
Floating rate tax-exempt debt included in secured notes (1.78%)
  $ 40.3     $ 41.5  
Floating rate debt included in secured notes (1.12% - 1.70%)
    189.9       186.9  
Value of real estate assets, at cost, subject to secured notes
    1,629.6       1,487.1  
In August 2010, we entered into a $500 million unsecured credit facility, with the option to increase this credit facility to $600 million, which matures in August 2012 and may be extended at our option to August 2013. This facility replaced our $600 million unsecured credit facility which was scheduled to mature in January 2011. Interest rate spreads float on a margin based on LIBOR and are subject to change as our credit ratings change. Advances under the line of credit may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of 180 days or less and may not exceed the lesser of $250 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations, all of which we are in compliance.
Our line of credit provides us with the ability to issue up to $100 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, it does reduce the amount available. At December 31, 2010, we had outstanding letters of credit totaling approximately $10.2 million, leaving approximately $489.8 million available under our unsecured line of credit.
As part of the 2005 Summit merger, we assumed certain debt and recorded approximately $33.9 million as a fair value adjustment which is being amortized over the respective debt terms. As of December 31, 2010, approximately $0.4 million of the fair value adjustment remained unamortized and substantially all of the remaining adjustment will be recorded as an adjustment to interest expense in 2011. We recorded amortization of the fair value adjustment, which resulted in a decrease of interest expense of approximately $1.1 million, $2.3 million, and $5.4 million during the years ended December 31, 2010, 2009, and 2008, respectively.

 

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Subsequent to the restructuring of one of our unconsolidated joint ventures in August 2010, this now fully consolidated joint venture entered into a 35 year secured credit agreement with a third-party lender in the amount of $53.0 million with an effective annual interest rate of approximately 4.35%. Refer to Note 7, “Property Acquisitions, Discontinued Operations, and Impairments,” for further discussion of this transaction.
As part of the joint venture restructurings in December 2010, we assumed the debt of one of the joint venture’s secured notes with a third-party lender for approximately $22.6 million, which matures in May 2019 and has an effective annual interest rate of 5.33%. See Note 7, “Property Acquisitions, Discontinued Operations and Impairments,” for further discussion of these restructurings.
At December 31, 2010 and 2009, the weighted average interest rate on our floating rate debt, which includes our unsecured line of credit, was approximately 1.3% and 1.2%, respectively.
Our indebtedness, including our unsecured line of credit, had a weighted average maturity of approximately 5.5 years at December 31, 2010. Scheduled repayments on outstanding debt, including our line of credit and scheduled principal amortizations, and the weighted average interest rate on maturing debt at December 31, 2010 are as follows:
                 
            Weighted Average  
(in millions)   Amount     Interest Rate  
2011
  $ 159.0       6.2 %
2012
    763.0       5.4  
2013
    228.4       5.4  
2014
    11.4       6.0  
2015
    252.7       5.1  
2016 and thereafter
    1,149.3       4.6  
 
           
 
               
Total
  $ 2,563.8       5.1 %
 
           
The remaining principal amount outstanding on our 7.69% senior unsecured notes matured and was repaid in February 2011 for a total of approximately $88.0 million.
10. Derivative Instruments and Hedging Activities
Risk Management Objective of Using Derivatives. We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we may enter into derivative financial instruments to manage exposures arising from business activities resulting in differences in the amount, timing, and duration of our known or expected cash payments principally related to our borrowings.
Cash Flow Hedges of Interest Rate Risk. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps and caps as part of our interest rate risk management strategy. Interest rate swaps involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps involve the receipt of variable rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an upfront premium.
Designated Hedges. The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive income or loss and is subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings. Over the next twelve months, we estimate an additional $22.6 million will be reclassified to interest expense. The ineffective portion of the change in fair value of the derivatives, if any, is recognized directly in earnings. No portion was ineffective during the years ended December 31, 2010, 2009, and 2008.

 

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As of December 31, 2010, we had the following outstanding interest rate derivatives designated as cash flow hedges of interest rate risk:
                 
Interest Rate Derivative   Number of Instruments     Notional Amount  
 
               
Interest Rate Swaps
    2     $516.6 million
Non-designated Hedges. Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks. Non-designated hedges are either specifically non-designated by management or do not meet strict hedge accounting requirements. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings in other income or other expense.
As of December 31, 2010, we had the following outstanding interest rate derivative which was not designated as a hedge of interest rate risk:
                 
Interest Rate Derivative   Number of Instruments     Notional Amount  
 
               
Interest Rate Cap
    1     $175.0 million
The table below presents the fair value of our derivative financial instruments as well as their classification in the consolidated balance sheets at December 31 (in millions):
                                                                 
    Fair Values of Derivative Instruments        
    Asset Derivatives     Liability Derivatives  
    2010     2009     2010     2009  
    Balance             Balance             Balance             Balance        
    Sheet     Fair     Sheet     Fair     Sheet     Fair     Sheet     Fair  
    Location     Value     Location     Value     Location     Value     Location     Value  
Derivatives designated as hedging instruments
                                                               
Interest Rate Swaps
                                  Other Liabilities   $ 36.9     Other Liabilities   $ 41.1  
Derivatives not designated as hedging instruments
                                                               
Interest Rate Cap
  Other Assets   $     Other Assets   $ 0.1                                  

 

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The tables below present the effect of our derivative financial instruments on the consolidated statements of income and comprehensive income for the years ended December 31 (in millions).
                                                                 
Effect of Derivative Instruments  
                                                            Location of Gain or  
                                                            (Loss) Recognized  
                                                            in Income on  
                                                            Derivative  
    Amount of Loss Recognized in     Location of Loss                             (Ineffective Portion  
    Other Comprehensive Income     Reclassified from     Amount of Loss Reclassified     and Amount  
Derivatives in Cash   (“OCI”) on Derivative     Accumulated OCI     from Accumulated OCI into     Excluded from  
Flow   (Effective Portion)     into Income     Income (Effective Portion)     Effectiveness  
Hedging Relationships   2010     2009     2008     (Effective Portion)     2010     2009     2008     Testing)  
 
                                                               
Interest Rate Swaps
  $ 19.1     $ 12.3     $ 44.4     Interest Expense   $ 23.4     $ 22.2     $ 9.3     Not applicable
                                 
            Amount of Gain Recognized in Income  
Derivatives Not Designated as   Location of Gain Recognized     on Derivative  
Hedging Instruments   in Income on Derivative     2010     2009     2008  
 
                               
Interest Rate Cap
  Other income   $     $     $ 0.1  
Credit-risk-related Contingent Features. Derivative financial investments expose us to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. We believe we minimize our credit risk on these transactions by transacting with major creditworthy financial institutions. As part of our on-going control procedures, we monitor the credit ratings of counterparties and our exposure to any single entity, which we believe minimizes credit risk concentration. We believe the likelihood of realized losses from counterparty non-performance is remote.
Our agreements with each of our derivative counterparties contain provisions which provide the counterparty the right to declare a default on our derivative obligations if we are in default on any of our indebtedness, subject to certain thresholds. For all instances, these provisions include a default even if there is no acceleration of the indebtedness. Our agreements with each of our derivative counterparties also provide if we consolidate with, merge with or into, or transfer all or substantially all our assets to another entity and the creditworthiness of the resulting, surviving, or transferee entity is materially weaker than ours, the counterparty has the right to terminate the derivative obligations.
At December 31, 2010, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk (the “termination value”), related to these agreements was approximately $38.6 million. As of December 31, 2010, we had not posted any collateral related to these agreements. If we were in breach of any of these provisions at December 31, 2010, or terminated these agreements, we would have been required to settle our obligations at their aggregate termination value of approximately $38.6 million.
11. Share-based Compensation and Benefit Plans
Incentive Plan. During 2002, our Board of Trust Managers adopted, and our shareholders approved, the 2002 Share Incentive Plan of Camden Property Trust (the “2002 Share Plan”). Under the 2002 Share Plan, we may issue up to 10% of the total of (i) the number of our common shares outstanding as of the plan date, February 5, 2002, plus (ii) the number of our common shares reserved for issuance upon conversion of securities convertible into or exchangeable for our common shares, plus (iii) the number of our common shares held as treasury shares. Compensation awards eligible to be granted under the 2002 Share Plan include various forms of incentive awards, including incentive share options, non-qualified share options, and share awards. The class of eligible persons which can receive grants of incentive awards under the 2002 Share Plan consists of key employees, consultants, and non-employee trust managers as determined by the Compensation Committee of our Board of Trust Managers. The 2002 Share Plan does not have a termination date; however, no incentive share options will be granted under this plan after February 5, 2012.

 

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Options. Options are exercisable, subject to the terms and conditions of the plan, in increments ranging from 20% to 33.33% per year on each of the anniversaries of the date of grant. The plan provides that the exercise price of an option will be determined by the Compensation Committee of the Board of Trust Managers on the day of grant, and to date all options have been granted at an exercise price that equals the fair market value on the date of grant. Options exercised during 2010 were exercised at prices ranging from $25.88 to $48.02 per option. At December 31, 2010, outstanding options and exercisable options were at prices ranging from $30.06 to $73.32 per option and had a weighted average remaining contractual life of approximately 5.1 years and 3.6 years, respectively.
The total intrinsic value of options exercised was approximately $1.5 million, $0.1 million, and $0.5 million during the years ended December 31, 2010, 2009 and 2008, respectively. As of December 31, 2010, there was approximately $2.3 million of total unrecognized compensation cost related to unvested options, which is expected to be amortized over the next four years.
The following table summarizes share outstanding options and exercisable options at December 31, 2010:
                                 
    Outstanding Options(1)     Exercisable Options(1)  
Range of           Weighted             Weighted  
Exercise           Average             Average  
Prices   Number     Price     Number     Price  
$30.06-$41.91
    605,031     $ 33.01       213,424     $ 38.42  
$42.90-$44.00
    508,835       43.32       452,940       43.25  
$45.53-$73.32
    724,124       49.58       494,412       50.30  
 
                       
Total options
    1,837,990     $ 42.39       1,160,776     $ 45.36  
 
                       
     
(1)  
The aggregate intrinsic value of outstanding and exercisable options at December 31, 2010 was approximately $22.2 million and $10.9 million, respectively. The aggregate intrinsic values were calculated as the excess, if any, between our closing share price of $53.98 per share on December 31, 2010 and the strike price of the underlying award.
Valuation Assumptions. Options generally have a vesting period of three to five years. We estimate the fair values of each option award on the date of grant using the Black-Scholes option pricing model.
The following assumptions were used for options granted during each respective period:
                         
    Year Ended  
    December 31,  
    2010     2009     2008  
Weighted average fair value of options granted
  $ 11.69     $ 3.06     $ 5.06  
Expected volatility
  35.6% - 39.2%       33.0 %     20.5 %
Risk-free interest rate
  3.6% - 3.7%       2.6 %     3.6 %
Expected dividend yield
  4.1% - 4.4%       9.3 %     5.8 %
Expected life (in years)
  7 - 9       7       7  
Our computation of expected volatility for 2010 is based on the historical volatility of our common shares over a time period equal to the expected life of the option and ending on the grant date. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield on our common shares is estimated using the annual dividends paid in the prior year and the market price on the date of grant. Our computation of expected life for 2010 is estimated based on historical experience of similar awards, giving consideration to the contractual terms of the share-based awards.
Share Awards and Vesting. Share awards generally have a vesting period of five years. The compensation cost for share awards is based on the market value of the shares on the date of grant and is amortized over the vesting period. To estimate forfeitures, we use actual forfeiture history. At December 31, 2010, the unamortized value of previously issued unvested share awards was approximately $22.1 million which is expected to be amortized over the next four years. The total fair value of shares vested during the years ended December 31, 2010, 2009, and 2008 was approximately $10.6 million, $10.2 million, and $8.8 million, respectively, and there were a total of 2.4 million vested share awards outstanding at December 31, 2010 with a weighted average issuance price of $38.72. At December 31, 2010, there were approximately 1.3 million share awards and options available for issuance.

 

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Table of Contents

Total compensation cost for option and share awards charged against income was approximately $11.7 million, $8.7 million, and $7.3 million for 2010, 2009, and 2008, respectively. Total capitalized compensation cost for option and share awards was approximately $1.0 million, $1.7 million, and $2.6 million for 2010, 2009 and 2008, respectively.
The following table summarizes activity under our Share Incentive Plans for the three years ended December 31:
                                 
            Weighted             Weighted  
            Average     Share     Average  
    Options     Exercise /     Awards     Exercise /  
    Outstanding     Grant Price     Outstanding     Grant Price  
Balance at December 31, 2007
    1,150,167     $ 43.54       2,357,780     $ 40.62  
Vested share awards at December 31, 2007 (1)
                    (1,912,608 )     (34.79 )
 
                           
Options and nonvested share awards outstanding at December 31, 2007
    1,150,167     $ 43.54       445,172     $ 65.67  
 
                       
 
                               
Granted
    444,264       48.02       267,450       48.23  
Exercised/Vested
    (44,950 )     38.21       (155,892 )     58.33  
Forfeited
    (12,954 )     48.02       (36,445 )     58.10  
 
                           
Net activity
    386,360               75,113          
 
                               
Balance at December 31, 2008
    1,536,527     $ 44.96       520,285     $ 59.40  
 
                       
 
                               
Granted
    489,509       30.06       329,018       30.11  
Exercised/Vested
    (18,521 )     33.45       (188,892 )     53.76  
Forfeited
    (33,303 )     43.37       (65,258 )     51.06  
 
                           
Net activity
    437,685               74,868          
 
                               
Balance at December 31, 2009
    1,974,212     $ 41.40       595,153     $ 46.20  
 
                       
 
                               
Granted
    55,895       43.94       372,661       40.05  
Exercised/Vested
    (141,213 )     32.54       (214,923 )     49.17  
Forfeited
    (50,904 )     46.65       (11,386 )     39.64  
 
                           
Net activity
    (136,222 )             146,352 &nb