XNYS:CPT Camden Property Trust Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
(Mark One)
Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
OR
¨
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
 
76-6088377
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
3 Greenway Plaza, Suite 1300
Houston, Texas
 
77046
(Address of principal executive offices)
 
(Zip Code)
(713) 354-2500
(Registrant’s Telephone Number, Including Area Code)
 
 
N/A
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
 
Indicate by check mark whether the 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  Q    No  ¨
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  Q    No  ¨
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 definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated filer
 
Q
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨
Smaller Reporting Company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  Q
On July 27, 2012, 83,585,617 common shares of the registrant were outstanding, net of treasury shares and shares held in our deferred compensation arrangements.



CAMDEN PROPERTY TRUST
Table of Contents
 
 
 
 
Page
PART I
 
 
 
 
 
Item 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
 
 
Item 3
 
 
 
 
 
Item 4
 
 
 
 
 
Part II
 
 
 
 
 
Item 1
 
 
 
 
 
Item 1A
 
 
 
 
 
Item 2
 
 
 
 
 
Item 3
 
 
 
 
 
Item 4
 
 
 
 
 
Item 5
 
 
 
 
 
Item 6
 
 
 
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 101.INS
Exhibit 101.SCH
Exhibit 101.CAL
Exhibit 101.DEF
Exhibit 101.LAB
Exhibit 101.PRE







2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) 
(in thousands, except per share amounts)
June 30,
2012
 
December 31, 2011
Assets
 
 
 
Real estate assets, at cost
 
 
 
Land
$
893,910

 
$
768,016

Buildings and improvements
5,203,675

 
4,751,654

 
6,097,585

 
5,519,670

Accumulated depreciation
(1,505,862
)
 
(1,432,799
)
Net operating real estate assets
4,591,723

 
4,086,871

Properties under development, including land
297,712

 
299,870

Investments in joint ventures
47,776

 
44,844

Properties held for sale

 
11,131

Total real estate assets
4,937,211

 
4,442,716

Accounts receivable – affiliates
29,940

 
31,035

Other assets, net
88,002

 
88,089

Cash and cash equivalents
52,126

 
55,159

Restricted cash
5,295

 
5,076

Total assets
$
5,112,574

 
$
4,622,075

Liabilities and equity
 
 
 
Liabilities
 
 
 
Notes payable
 
 
 
Unsecured
$
1,381,152

 
$
1,380,755

Secured
1,015,260

 
1,051,357

Accounts payable and accrued expenses
87,041

 
93,747

Accrued real estate taxes
31,607

 
21,883

Distributions payable
49,135

 
39,364

Other liabilities
83,471

 
109,276

Total liabilities
2,647,666

 
2,696,382

Commitments and contingencies

 

Perpetual preferred units

 
97,925

Equity
 
 
 
Common shares of beneficial interest; $0.01 par value per share; 175,000 shares authorized; 97,497 and 87,377 issued; 94,534 and 84,517 outstanding at June 30, 2012 and December 31, 2011, respectively
945

 
845

Additional paid-in capital
3,501,354

 
2,901,024

Distributions in excess of net income attributable to common shareholders
(674,221
)
 
(690,466
)
Treasury shares, at cost (11,926 and 12,509 common shares at June 30, 2012 and December 31, 2011, respectively)
(430,958
)
 
(452,003
)
Accumulated other comprehensive loss
(667
)
 
(683
)
Total common equity
2,396,453

 
1,758,717

Noncontrolling interests
68,455

 
69,051

Total equity
2,464,908

 
1,827,768

Total liabilities and equity
$
5,112,574

 
$
4,622,075

See Notes to Condensed Consolidated Financial Statements.

3


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
AND COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(in thousands, except per share amounts)
2012
 
2011
 
2012
 
2011
Property revenues
 
 
 
 
 
 
 
Rental revenues
$
159,318

 
$
138,167

 
$
313,037

 
$
274,002

Other property revenues
26,727

 
23,235

 
51,659

 
45,002

Total property revenues
186,045

 
161,402

 
364,696

 
319,004

Property expenses
 
 
 
 
 
 
 
Property operating and maintenance
51,119

 
46,232

 
100,338

 
91,038

Real estate taxes
19,338

 
17,558

 
37,709

 
34,902

Total property expenses
70,457

 
63,790

 
138,047

 
125,940

Non-property income
 
 
 
 
 
 
 
Fee and asset management
3,608

 
2,471

 
6,531

 
4,309

Interest and other income (loss)
(65
)
 
86

 
(753
)
 
4,857

Income (loss) on deferred compensation plans
(2,185
)
 
1,375

 
5,601

 
7,329

Total non-property income
1,358

 
3,932

 
11,379

 
16,495

Other expenses
 
 
 
 
 
 
 
Property management
4,851

 
5,109

 
10,135

 
10,428

Fee and asset management
1,444

 
1,670

 
3,187

 
2,890

General and administrative
9,730

 
8,032

 
18,409

 
17,820

Interest
26,247

 
28,381

 
52,930

 
58,118

Depreciation and amortization
53,310

 
44,754

 
103,428

 
90,605

Amortization of deferred financing costs
900

 
1,890

 
1,812

 
3,417

Expense (benefit) on deferred compensation plans
(2,185
)
 
1,375

 
5,601

 
7,329

Total other expenses
94,297

 
91,211

 
195,502

 
190,607

Gain on acquisition of controlling interest in joint ventures

 

 
40,191

 

Gain on sale of properties, including land

 
4,748

 

 
4,748

Gain on sale of unconsolidated joint venture interests

 

 

 
1,136

Loss on discontinuation of hedging relationship

 
(29,791
)
 

 
(29,791
)
Equity in income of joint ventures
632

 
16

 
998

 
390

Income (loss) from continuing operations before income taxes
23,281

 
(14,694
)
 
83,715

 
(4,565
)
Income tax expense – current
(434
)
 
(256
)
 
(658
)
 
(1,576
)
Income (loss) from continuing operations
22,847

 
(14,950
)
 
83,057

 
(6,141
)
Income from discontinued operations

 
895

 
353

 
1,687

Gain on sale of discontinued operations, net of tax

 

 
32,541

 

Net income (loss)
22,847

 
(14,055
)
 
115,951

 
(4,454
)
Less income allocated to noncontrolling interests from continuing operations
(1,084
)
 
(781
)
 
(1,909
)
 
(1,337
)
Less income, including gain on sale, allocated to noncontrolling interests from discontinued operations

 
(11
)
 
(670
)
 
(20
)
Less income allocated to perpetual preferred units

 
(1,750
)
 
(776
)
 
(3,500
)
Less write off of original issuance costs of redeemed perpetual preferred units

 

 
(2,075
)
 

Net income (loss) attributable to common shareholders
$
21,763

 
$
(16,597
)
 
$
110,521

 
$
(9,311
)
See Notes to Condensed Consolidated Financial Statements.

4


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
AND COMPREHENSIVE INCOME (continued)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(in thousands, except per share amounts)
2012
 
2011
 
2012
 
2011
Earnings per share – basic
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to common shareholders
$
0.26

 
$
(0.24
)
 
$
0.95

 
$
(0.15
)
Income from discontinued operations, including gain on sale, attributable to common shareholders

 
0.01

 
0.39

 
0.02

Net income (loss) attributable to common shareholders
$
0.26

 
$
(0.23
)
 
$
1.34

 
$
(0.13
)
Earnings per share – diluted
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to common shareholders
$
0.26

 
$
(0.24
)
 
$
0.94

 
$
(0.15
)
Income from discontinued operations, including gain on sale, attributable to common shareholders

 
0.01

 
0.38

 
0.02

Net income (loss) attributable to common shareholders
$
0.26

 
$
(0.23
)
 
$
1.32

 
$
(0.13
)
Distributions declared per common share
$
0.56

 
$
0.49

 
$
1.12

 
$
0.98

Weighted average number of common shares outstanding – basic
83,223

 
72,343

 
81,554

 
72,126

Weighted average number of common shares outstanding – diluted
83,846

 
72,343

 
84,461

 
72,126

Net income (loss) attributable to common shareholders
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
22,847

 
$
(14,950
)
 
$
83,057

 
$
(6,141
)
Less income allocated to noncontrolling interests from continuing operations
(1,084
)
 
(781
)
 
(1,909
)
 
(1,337
)
Less income allocated to perpetual preferred units

 
(1,750
)
 
(776
)
 
(3,500
)
Less write off of original issuance costs of redeemed perpetual preferred units

 

 
(2,075
)
 

Income (loss) from continuing operations attributable to common shareholders
21,763

 
(17,481
)
 
78,297

 
(10,978
)
Income from discontinued operations, including gain on sale

 
895

 
32,894

 
1,687

Less income, including gain on sale, allocated to noncontrolling interests from discontinued operations

 
(11
)
 
(670
)
 
(20
)
Income from discontinued operations, including gain on sale, attributable to common shareholders

 
884

 
32,224

 
1,667

Net income (loss) attributable to common shareholders
$
21,763

 
$
(16,597
)
 
$
110,521

 
$
(9,311
)
Condensed Consolidated Statements of Comprehensive Income:
 
 
 
 
 
 
 
Net income (loss)
$
22,847

 
$
(14,055
)
 
$
115,951

 
$
(4,454
)
Other comprehensive income
 
 
 
 
 
 
 
Unrealized loss on cash flow hedging activities

 
(2,189
)
 

 
(2,692
)
Reclassification of net losses on cash flow hedging activities

 
33,786

 

 
39,552

Reclassification of gain on available-for-sale investment to earnings, net of tax

 

 

 
(3,309
)
Reclassification of prior service cost on post retirement obligations
8

 

 
16

 

Comprehensive income
22,855

 
17,542

 
115,967

 
29,097

Less income allocated to noncontrolling interests from continuing operations
(1,084
)
 
(781
)
 
(1,909
)
 
(1,337
)
Less income, including gain on sale, allocated to noncontrolling interests from discontinued operations

 
(11
)
 
(670
)
 
(20
)
Less income allocated to perpetual preferred units

 
(1,750
)
 
(776
)
 
(3,500
)
Less write off of original issuance costs of redeemed perpetual preferred units

 

 
(2,075
)
 

Comprehensive income attributable to common shareholders
$
21,771

 
$
15,000

 
$
110,537

 
$
24,240

See Notes to Condensed Consolidated Financial Statements.

5


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND PERPETUAL PREFERRED UNITS
(Unaudited)
 
 
Common Shareholders
 
 
 
 
 
 
(in thousands)
Common
shares of
beneficial
interest
 
Additional
paid-in
capital
 
Distributions
in excess of
net income
 
Treasury
shares, at
cost
 
Accumulated
other
comprehensive
loss
 
Noncontrolling
interests
 
Total equity
 
Perpetual
preferred
units
December 31, 2011
$
845

 
$
2,901,024

 
$
(690,466
)
 
$
(452,003
)
 
$
(683
)
 
$
69,051


$
1,827,768

 
$
97,925

Net income
 
 
 
 
110,521

 
 
 
 
 
2,579

 
113,100

 
2,851

Other comprehensive income
 
 
 
 
 
 
 
 
16

 
 
 
16

 
 
Common shares issued
99

 
604,360

 
 
 
 
 
 
 
 
 
604,459

 
 
Net share awards
 
 
(6,182
)
 
 
 
14,021

 
 
 
 
 
7,839

 
 
Employee stock purchase plan
 
 
294

 
 
 
170

 
 
 
 
 
464

 
 
Common share options exercised
 
 
2,307

 
 
 
6,854

 
 
 
 
 
9,161

 
 
Conversions of operating partnership units
2

 
(450
)
 
 
 
 
 
 
 
448

 

 
 
Cash distributions declared to perpetual preferred units
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(776
)
Cash distributions declared to equity holders
 
 
 
 
(94,276
)
 
 
 
 
 
(3,623
)
 
(97,899
)
 
 
Redemption of perpetual preferred units
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(100,000
)
Other
(1
)
 
1

 
 
 
 
 
 
 
 
 

 
 
June 30, 2012
$
945

 
$
3,501,354

 
$
(674,221
)
 
$
(430,958
)
 
$
(667
)
 
$
68,455

 
$
2,464,908

 
$


See Notes to Condensed Consolidated Financial Statements.

6


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND PERPETUAL PREFERRED UNITS (continued)
(Unaudited)
 
 
Common Shareholders
 
 
 
 
 
 
(in thousands)
Common
shares of
beneficial
interest
 
Additional
paid-in
capital
 
Distributions
in excess of
net income
 
Treasury
shares, at
cost
 
Accumulated
other
comprehensive
income (loss)
 
Noncontrolling
interests
 
Total equity
 
Perpetual
preferred
units
December 31, 2010
$
824

 
$
2,775,625

 
$
(595,317
)
 
$
(461,255
)
 
$
(33,458
)
 
$
70,954

 
$
1,757,373

 
$
97,925

Net income (loss)
 
 
 
 
(9,311
)
 
 
 
 
 
1,357

 
(7,954
)
 
3,500

Other comprehensive income
 
 
 
 
 
 
 
 
33,551

 
 
 
33,551

 
 
Common shares issued
6

 
37,120

 
 
 
 
 
 
 
 
 
37,126

 
 
Net share awards
4

 
6,346

 
 
 
525

 
 
 
 
 
6,875

 
 
Employee stock purchase plan
 
 
232

 
 
 
788

 
 
 
 
 
1,020

 
 
Common share options exercised
1

 
3,774

 
 
 
808

 
 
 
 
 
4,583

 
 
Conversions of operating partnership units
1

 
591

 
 
 
 
 
 
 
(592
)
 

 
 
Cash distributions declared to perpetual preferred units
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3,500
)
Cash distributions declared to equity holders
 
 
 
 
(71,739
)
 
 
 
 
 
(2,447
)
 
(74,186
)
 
 
Other
(2
)
 
2

 
 
 
 
 
 
 
 
 

 
 
June 30, 2011
$
834

 
$
2,823,690

 
$
(676,367
)
 
$
(459,134
)
 
$
93

 
$
69,272

 
$
1,758,388

 
$
97,925

See Notes to Condensed Consolidated Financial Statements.

7


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) 
 
Six Months Ended
 
June 30,
(in thousands)
2012
 
2011
Cash flows from operating activities
 
 
 
Net income (loss)
$
115,951

 
$
(4,454
)
Adjustments to reconcile net income (loss) to net cash from operating activities:
 
 
 
Depreciation and amortization, including discontinued operations
103,614

 
92,170

Gain on acquisition of controlling interest in joint ventures
(40,191
)
 

Gain on sale of discontinued operations, net of tax
(32,541
)
 

Gain on sale of properties, including land

 
(4,748
)
Gain on sale of unconsolidated joint venture interests

 
(1,136
)
Gain on sale of available-for-sale investment

 
(4,301
)
Loss on discontinuation of hedging relationship

 
29,791

Distributions of income from joint ventures
2,107

 
2,181

Equity in income of joint ventures
(998
)
 
(390
)
Share-based compensation
6,478

 
6,003

Amortization of deferred financing costs
1,812

 
3,417

Net change in operating accounts and other
(15,366
)
 
(3,779
)
Net cash from operating activities
140,866

 
114,754

Cash flows from investing activities
 
 
 
Development and capital improvements
(140,963
)
 
(67,586
)
Acquisition of operating properties, including joint venture interests, net of cash acquired
(171,283
)
 

Proceeds from sale of properties, including land and discontinued operations
54,125

 
19,095

Proceeds from sale of joint venture interests

 
19,310

Proceeds from sale of available-for-sale investment

 
4,510

Decrease in notes receivable – affiliates

 
3,279

Investments in joint ventures
(5,656
)
 
(35,111
)
Distributions of investments from joint ventures
4,030

 
1,208

Other
(1,250
)
 
(2,232
)
Net cash from investing activities
(260,997
)
 
(57,527
)
Cash flows from financing activities
 
 
 
Borrowings on unsecured line of credit
43,000

 

Repayments on unsecured line of credit
(43,000
)
 

Repayment of notes payable
(308,703
)
 
(625,272
)
Proceeds from notes payable

 
495,705

Proceeds from issuance of common shares
604,459

 
37,126

Redemption of perpetual preferred units
(100,000
)
 

Distributions to common shareholders, perpetual preferred units and noncontrolling interests
(88,858
)
 
(73,966
)
Payment of deferred financing costs
(440
)
 
(4,883
)
Common share options exercised
8,694

 
4,121

Net decrease in accounts receivable – affiliates
1,099

 
1,494

Other
847

 
1,021

Net cash from financing activities
117,098

 
(164,654
)
Net decrease in cash and cash equivalents
(3,033
)
 
(107,427
)
Cash and cash equivalents, beginning of period
55,159

 
170,575

Cash and cash equivalents, end of period
$
52,126

 
$
63,148

Supplemental information
 
 
 
Cash paid for interest, net of interest capitalized
$
53,304

 
$
59,709

Cash paid for income taxes
1,450

 
1,879

See Notes to Condensed Consolidated Financial Statements.

8


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
 
 
Six Months Ended
 
June 30,
(in thousands)
2012
 
2011
Supplemental schedule of noncash investing and financing activities
 
 
 
Distributions declared but not paid
$
49,135

 
$
38,966

Value of shares issued under benefit plans, net of cancellations
21,379

 
18,805

Conversion of operating partnership units to common shares
447

 
592

Accrual associated with construction and capital expenditures
14,030

 
11,409

Acquisition of operating properties, including joint venture interests, net of cash acquired, at fair value:
 
 
 
Assets acquired
399,306

 

Mortgage debt assumed
272,606

 

Other liabilities assumed
5,495

 

See Notes to Condensed Consolidated Financial Statements.


9


CAMDEN PROPERTY TRUST
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Description of Business
Business. Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust (“REIT”), is primarily 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 June 30, 2012, we owned interests in, operated, or were developing 206 multifamily properties comprising 69,902 apartment homes across the United States. Of the 206 properties, seven properties were under development, and when completed will consist of a total of 2,208 apartment homes. In addition, we own land parcels we may develop into multifamily apartment communities in the future.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Principles of Consolidation. Our condensed 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.

Interim Financial Reporting. We have prepared these financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, these statements do not include all information and footnote disclosures required for annual statements. While we believe the disclosures presented are adequate for interim reporting, these interim financial statements should be read in conjunction with the audited financial statements and notes included in our 2011 Annual Report on Form 10-K. In the opinion of management, all adjustments and eliminations, consisting of normal recurring adjustments, necessary for a fair representation of our financial statements for the interim period reported have been included. Operating results for the three and six months ended June 30, 2012 are not necessarily indicative of the results which may be expected for the full year.

Allocations of Purchase Price. Upon acquisition of real estate, we allocate the purchase price between tangible and intangible assets, which includes land, buildings (as-if-vacant), furniture and fixtures, the value of in-place leases, including above and below market leases, and acquired liabilities. In allocating these values we apply methods similar to those used by independent appraisers of income-producing property. Upon the acquisition of a controlling interest of an investment in an unconsolidated joint venture, such joint venture is consolidated and our initial equity investment is remeasured to fair value at the date the controlling interest is acquired; any differences between the carrying value and the fair value of the previously held equity investment is recognized in earnings at the time of obtaining control. Transaction costs associated with the acquisition of operating real estate assets are expensed. 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 June 30, 2012 was approximately $3.2 million and is included in other assets, net, in our condensed consolidated balance sheets. The unamortized value of above or below market leases at June 30, 2012 was $0.2 million and is included in other liabilities in our condensed consolidated balance sheets. 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 equity investments in joint ventures and if we believe there is an other than

10


temporary decline in market value of our investment below our carrying value, 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 the judgment and assumptions applied in the impairment analyses, 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 estimates, we may need to take material charges in future periods for impairments related to existing assets. Any such material non-cash charges could 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 the weighted average interest rate of our unsecured debt. Transaction costs associated with the acquisition of operating 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. We start capitalizing development, construction, and carrying costs when the development of the future real estate asset is probable and activities necessary to get the underlying real estate asset ready for its intended use have been initiated. 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 capitalized development 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. Capitalized interest was approximately $3.2 million and $6.3 million for the three and six months ended June 30, 2012, respectively, and approximately $1.8 million and $3.6 million for the three and six months ended June 30, 2011, respectively. Capitalized real estate taxes were approximately $0.7 million and $1.4 million for the three and six months ended June 30, 2012, respectively, and approximately $0.3 million and $0.7 million for the three and six months ended June 30, 2011, 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

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.
The results of operations for properties sold during the period or classified as held for sale at the end of the current period

11


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 of joint ventures.
Gains on sale of real estate are recognized using the full accrual or partial sale methods, as applicable, in accordance with GAAP, provided various criteria relating to the terms of sale and any subsequent involvement with the real estate sold are satisfied.
Fair Value. For financial assets and liabilities recorded at fair value on a recurring or nonrecurring basis, fair value is the price we would receive to sell an asset, or pay to transfer a liability, in an orderly transaction with a market participant at the measurement date. In the absence of such data, fair value is estimated using internal information consistent with what market participants would use in a hypothetical transaction.
In determining fair value, observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions; preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:
Level 1:    Quoted prices for identical instruments in active markets.
Level 2:    Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3: Significant inputs to the valuation model are unobservable.
Recurring Fair Value Disclosures. The following describes the valuation methodologies we use to measure different financial instruments at fair value on a recurring basis:
Deferred Compensation Plan Investments. The estimated fair values of investment securities classified as deferred compensation plan investments are based on quoted market prices utilizing public information for the same transactions. Our deferred compensation plan investments are recorded in other assets in our consolidated balance sheets.
Derivative Financial Instruments. The estimated fair values of derivative financial instruments are valued using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps and caps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk, including our own nonperformance risk and the respective counterparty's nonperformance risk. The fair value of interest rate caps is determined using the market standard methodology of discounting the future expected cash receipts which would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observed market interest rate curves and volatilities.
Although we have determined the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
Financial Instrument Fair Value Disclosures. In calculating the fair value of our notes payable, interest rates and spreads reflect current creditworthiness and market conditions available for the issuance of notes payable with similar terms and remaining

12


maturities. These financial instruments utilize Level 2 inputs.
Non-recurring Fair Value Disclosures. Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances. These assets primarily include long-lived assets which are recorded at fair value when they are impaired. The fair value methodologies used to measure long-lived assets are described above at “Asset Impairment.” The inputs associated with the valuation of long-lived assets are generally included in Level 3 of the fair value hierarchy.
Recent Accounting Pronouncements. In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-04 (“ASU 2011-04”), “Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” ASU 2011-04 requires entities to separately disclose the amounts and reasons for any transfers of assets and liabilities into and out of Level 1 and Level 2 of the fair value hierarchy. For fair value measurements using significant unobservable inputs (Level 3), entities are required to disclose quantitative information about the significant unobservable inputs used for all Level 3 measurements and a description of the valuation processes in determining fair value. In addition, ASU 2011-04 requires entities to provide a qualitative discussion about the sensitivity of recurring Level 3 measurements to changes in the unobservable inputs disclosed, including the interrelationship between inputs. Entities are also required to disclose information about when the current use of a non-financial asset measured at fair value differs from its highest and best use and the hierarchy classification for items whose fair value is not recorded in the balance sheet but is disclosed in the notes. We did not have any changes to our existing classification and measurement of fair value upon adoption on January 1, 2012. Refer to Note 14, "Fair Value Disclosures" and the fair value discussion above for additional disclosures resulting from the adoption of this standard.
In June 2011, the FASB issued Accounting Standards Update 2011-05 (“ASU 2011-05”), “Presentation of Comprehensive Income.” ASU 2011-05 requires all nonowner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Subsequent to the issuance of ASU 2011-05, the FASB issued Accounting Standards Update 2011-12 (“ASU 2011-12”), “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05” which indefinitely defers the ASU 2011-05 requirement for an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income. We adopted ASU 2011-05 and ASU 2011-12 on January 1, 2012, and these adoptions did not have a material effect on our financial statements.
3. Per 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 3.5 million and 4.8 million for the three months ended June 30, 2012 and 2011, respectively, and was approximately 1.4 million and 4.9 million for the six months ended June 30, 2012 and 2011, 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.

13


The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated:
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(in thousands, except per share amounts)
2012
 
2011
 
2012
 
2011
Earnings per share calculation – basic
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to common shareholders
$
21,763

 
$
(17,481
)
 
$
78,297

 
$
(10,978
)
Amount allocated to participating securities
(210
)
 
139

 
(1,099
)
 
36

Income (loss) from continuing operations attributable to common shareholders, net of amount allocated to participating securities
21,553

 
(17,342
)
 
77,198

 
(10,942
)
Income from discontinued operations, including gain on sale, attributable to common shareholders

 
884

 
32,224

 
1,667

Net income (loss) attributable to common shareholders, as adjusted
$
21,553

 
$
(16,458
)
 
$
109,422

 
$
(9,275
)
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to common shareholders, as adjusted – per share
$
0.26

 
$
(0.24
)
 
$
0.95

 
$
(0.15
)
Income from discontinued operations, including gain on sale, attributable to common shareholders – per share

 
0.01

 
0.39

 
0.02

Net income (loss) attributable to common shareholders, as adjusted – per share
$
0.26

 
$
(0.23
)
 
$
1.34

 
$
(0.13
)
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – basic
83,223

 
72,343

 
81,554

 
72,126

 
 
 
 
 
 
 
 
Earnings per share calculation – diluted
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to common shareholders, net of amount allocated to participating securities
$
21,553

 
$
(17,342
)
 
$
77,198

 
$
(10,942
)
Income allocated to common units from continuing operations

 

 
1,685

 

Income (loss) from continuing operations attributable to common shareholders, as adjusted
21,553

 
(17,342
)
 
78,883

 
(10,942
)
Income from discontinued operations, including gain on sale, attributable to common shareholders

 
884

 
32,224

 
1,667

Net income (loss) attributable to common shareholders, as adjusted
$
21,553

 
$
(16,458
)
 
$
111,107

 
$
(9,275
)
 
 
 
 
 
 
 


Income (loss) from continuing operations attributable to common shareholders, as adjusted – per share
$
0.26

 
$
(0.24
)
 
$
0.94

 
$
(0.15
)
Income from discontinued operations, including gain on sale, attributable to common shareholders – per share

 
0.01

 
0.38

 
0.02

Net income (loss) attributable to common shareholders, as adjusted – per share
$
0.26

 
$
(0.23
)
 
$
1.32

 
$
(0.13
)
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – basic
83,223

 
72,343

 
81,554

 
72,126

Incremental shares issuable from assumed conversion of:
 
 
 
 
 
 
 
Common share options and share awards granted
623

 

 
652

 

Common units

 

 
2,255

 

Weighted average number of common shares outstanding – diluted
83,846

 
72,343

 
84,461

 
72,126


14



4. Common Shares
In March 2010, we announced the creation of an at-the-market (“ATM”) share offering program through which we could, but had no obligation to, sell common shares having an aggregate offering price of up to $250 million (the “2010 ATM program”), in amounts and at times as we determined, into the existing trading market at current market prices as well as through negotiated transactions. The 2010 ATM program terminated in the second quarter of 2011, and no further common shares are available for sale under the 2010 ATM program.
In May 2011, we created an ATM share offering program through which we could, but had no obligation to, sell common shares having an aggregate offering price of up to $300 million (the “2011 ATM program”), in amounts and at times as we determined, into the existing trading market at current market prices as well as through negotiated transactions. The net proceeds resulting from the 2011 ATM program were used to redeem all of our outstanding redeemable perpetual preferred units as further discussed in Note 5, "Operating Partnerships," and for other general corporate purposes, which included funding for development activities, financing of acquisitions, the redemption or other repurchase of outstanding debt or equity securities, reducing future borrowings under our $500 million unsecured line of credit, and the repayment of other indebtedness. The 2011 ATM program terminated in the second quarter of 2012, and no further common shares are available for sale under the 2011 ATM program.

The following table presents activity under our 2010 and 2011 ATM programs for the periods presented (in thousands, except per share amounts):
 
 
Three Months Ended
 
Six Months Ended
 
June 30, 2012
 
June 30, 2011
 
June 30, 2012
 
June 30, 2011
Total net consideration
$
83,836.3

 
$
33,331.6

 
$
128,128.0

 
$
37,126.1

Common shares sold
1,267.1

 
550.4

 
1,971.4

 
621.7

Average price per share
$
67.19

 
$
61.88

 
$
66.01

 
$
60.98


In May 2012, we created an ATM share offering program through which we can, but have no obligation to, sell common shares having an aggregate offering price of up to $300 million (the "2012 ATM program"), in amounts and at times 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 by management of the appropriate sources of funding for us. We intend to use the net proceeds from the 2012 ATM program for general corporate purposes, which may include funding for development activities, financing of acquisitions, the redemption or other repurchase of outstanding debt or equity securities, reducing future borrowings under our $500 million unsecured line of credit, and the repayment of other indebtedness.

The following table presents activity under our 2012 ATM program for the periods presented (in thousands, except per share amounts):
 
Three and Six Months Ended
 
June 30, 2012
Total net consideration
$
84,711.8

Common shares sold
1,305.5

Average price per share
$
65.93


As of June 30, 2012, we had common shares having an aggregate offering price of up to $213.9 million remaining available for sale under the 2012 ATM program. In July 2012, we issued approximately 0.9 million common shares at an average price of $69.34 per share for total net consideration of approximately $64.1 million. As of the date of this filing, we had common shares having an aggregate offering price of up to $148.9 million remaining available for sale under the 2012 ATM program.

We currently have an automatic shelf registration statement which allows us to offer, from time to time, an unlimited amount of common shares, preferred shares, debt securities, or warrants. In January 2012, we issued 6,612,500 common shares in a public equity offering and received approximately $391.6 million in net proceeds. We utilized these proceeds to fund the acquisition of the remaining 80% interest we did not own in twelve real estate joint ventures that owned twelve apartment communities, containing 4,034 apartment homes in Dallas, Houston, Las Vegas, Phoenix, and Southern California, becoming sole owner of that portfolio. See Note 6, “Property Acquisitions, Discontinued Operations, and Assets Held for Sale” for further discussion of this transaction.

15


On May 11, 2012, the shareholders of the Company approved an amendment to our Amended and Restated Declaration of Trust to increase our total number of authorized shares from 110.0 million to 185.0 million shares of beneficial interest, consisting of 175.0 million common shares and 10.0 million preferred shares.
5. Operating Partnerships

As of December 31, 2011, Camden Operating, L.P. (“Camden Operating” or the “operating partnership”) had 4.0 million 7.0% Series B Cumulative Redeemable Perpetual Preferred Units outstanding. Distributions on the preferred units were payable quarterly in arrears. In February 2012, we redeemed all of these outstanding units at their redemption price of $25.00 per unit, or an aggregate of $100.0 million, plus accrued and unpaid distributions. In connection with this redemption, the unamortized issuance costs relating to these units of approximately $2.1 million were expensed in the first quarter of 2012.
As of December 31, 2011, we held 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. During the first quarter of 2012, the remaining non-managing member interests, comprising approximately 0.3 million units, were converted to approximately 0.2 million of our common shares, resulting in this entity being wholly-owned by us.
6. Property Acquisitions, Discontinued Operations, and Assets Held for Sale
Acquisitions. In May 2012, we acquired approximately 4.7 acres of land located in Dallas, Texas for approximately $13.4 million. We intend to utilize this land holding for development of a multifamily apartment community. On June 28, 2012, we acquired one operating property comprised of 477 units located in Dallas, Texas for approximately $76.0 million.
As of December 31, 2011, we held a 20% ownership interest in twelve unconsolidated joint ventures that owned twelve apartment communities, containing 4,034 apartment homes located in Dallas, Houston, Las Vegas, Phoenix, and Southern California. In January 2012, we acquired the remaining 80% ownership interests in these joint ventures, resulting in these entities being wholly-owned by us. Selected data regarding this acquisition is presented below (in millions):
Cash consideration
 
$
99.5

Fair value of our 20% ownership interest held before the acquisition
 
24.9

Debt assumed
 
272.6

Net other assets/liabilities acquired
 
1.1

Acquisition date fair value
 
$
398.1


The following table summarizes the fair values of the assets acquired and liabilities assumed for the acquisitions of the twelve joint ventures and one operating property described above as of the respective acquisition/consolidation dates (in millions):

Assets acquired:
 
 
Buildings and improvements
$
353.9

 
Land
108.7

 
Cash
3.4

 
Restricted cash
0.7

 
Intangible and other assets
12.1

Total assets acquired
$
478.8

 
 
 
Liabilities assumed:
 
 
Mortgage debt (1)
$
272.6

 
Other liabilities
5.5

Total liabilities assumed
$
278.1

 
Net assets acquired
$
200.7

(1) Mortgage debt assumed was subsequently repaid in January 2012 at face value.

The related assets, liabilities, and results of operations for these acquisitions are included in the consolidated financial statements from the respective dates of acquisition. There was no contingent consideration associated with these acquisitions. As a result of acquiring the remaining 80% interest in these twelve joint ventures, our previously held equity interest was remeasured at fair value, resulting in a gain of approximately $40.2 million. The fair value of the equity interest was determined utilizing the consideration paid for the acquired 80% ownership interest.

16


The twelve former joint ventures and the one operating property acquired as discussed above contributed revenues of approximately $20.5 million and property expenses of approximately $8.3 million, from their respective acquisition/consolidation dates through June 30, 2012.
The following unaudited pro forma summary presents consolidated information assuming the acquisitions/consolidation of the twelve former joint ventures and one operating property described above had occurred on January 1, 2011. The information for the three and six months ended June 30, 2012, includes pro forma results for the portion of the period prior to the respective acquisition/consolidation dates and actual results from the respective dates of acquisition/consolidation through the end of the period.
 
Pro Forma Three Months Ended June 30,
 
Pro Forma Six Months Ended June 30,
(in thousands)
2012
 
2011
 
2012
 
2011
 
(unaudited)
Property revenues
$
187,884

 
$
174,260

 
$
371,315

 
$
344,464

Property expenses
71,234

 
69,623

 
140,751

 
137,521

 
$
116,650

 
$
104,637

 
$
230,564

 
$
206,943

In July 2012, we acquired one operating property comprised of 223 units located in Atlanta, Georgia for approximately $25.3 million.

Discontinued Operations and Assets Held for Sale. For the three and six months ended June 30, 2012, income from discontinued operations included the results of operations of three operating properties, containing 1,033 apartment homes, sold in the first quarter of 2012. We had no assets classified as held for sale as of June 30, 2012.

For the three and six months ended June 30, 2011, income from discontinued operations also included the results of operations of two operating properties, containing 788 apartment homes, sold in December 2011.

The following is a summary of income from discontinued operations for the three and six months ended June 30, 2012 and 2011: 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in thousands)
2012
 
2011
 
2012
 
2011
Property revenues
$

 
$
3,704

 
$
1,209

 
$
7,249

Property expenses

 
1,832

 
670

 
3,614

 

 
1,872

 
539

 
3,635

Depreciation and amortization

 
977

 
186

 
1,948

Income from discontinued operations
$

 
$
895

 
$
353

 
$
1,687


7. Investments in Joint Ventures
As of June 30, 2012, our equity investments in unconsolidated joint ventures consisted of five joint ventures, with our ownership percentages ranging from 15% to 50%. We utilize the equity method of accounting to account for transactions related to these investments. We currently provide property management services to each of these joint ventures which own operating properties, and we may provide 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 and for the periods presented:
 
(in millions)
June 30, 2012
(1)
 
December 31, 2011
Total assets
$
1,096.1

 
 
$
1,394.9

Total third-party debt
864.9

 
 
1,093.9

Total equity
196.0

 
 
261.6


17


 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
Total revenues (2)
$
38.9

 
$
36.4

 
$
79.4

 
$
69.4

Net loss

 
(3.8
)
 
(1.7
)
 
(6.4
)
Equity in income (3)
0.6

 

 
1.0

 
0.4

 
(1)
In January 2012, as a result of our purchase of the remaining 80% ownership interest in previously unconsolidated joint ventures, we consolidated twelve joint ventures previously accounted for in accordance with the equity method. Refer to Note 6, "Property Acquisitions, Discontinued Operations, and Assets Held for Sale," for further discussion of the acquisition.
(2)
Approximately $3.0 million and $5.9 million of revenues for the three and six months ended June 30, 2011, respectively, relates to discontinued operations within one of our unconsolidated joint ventures resulting from the sale of four operating properties in the fourth quarter of 2011.
(3)
Equity in income excludes our ownership interest of fee income from various property management services provided by us to our joint ventures.

The joint ventures in which we have a partial interest have been funded in part with secured third-party debt. As of June 30, 2012, we had no outstanding guarantees related to loans of our unconsolidated joint ventures.

We may earn fees for property management, construction, development, and other services related to joint ventures in which we own an interest. Fees earned for these services amounted to approximately $3.3 million and $2.4 million for the three months ended June 30, 2012 and 2011, respectively, and approximately $6.1 million and $3.9 million for the six months ended June 30, 2012 and 2011, respectively. We eliminate fee income for services provided to these joint ventures to the extent of our ownership.

In January 2012, one of our discretionary investment funds acquired a multifamily property comprising of 350 units located in Raleigh, North Carolina. In March 2012, this fund acquired approximately 15.0 acres of land located in Orange County, Florida and intends to utilize this land for development of a multifamily apartment community.

8. Notes Payable
The following is a summary of our indebtedness:
 
Balance at
(in millions)
June 30,
2012
 
December 31,
2011
Commercial Banks
 
 
 
Unsecured line of credit and short-term borrowings
$

 
$

 


 


Senior unsecured notes
 
 
 
5.93% Notes, due 2012
189.6

 
189.6

5.45% Notes, due 2013
199.8

 
199.7

5.08% Notes, due 2015
249.4

 
249.3

5.75% Notes, due 2017
246.3

 
246.2

4.70% Notes, due 2021
248.6

 
248.6

5.00% Notes, due 2023
247.4

 
247.3

 
1,381.1

 
1,380.7

 
 
 
 
Secured notes
 
 
 
0.89% – 6.00% Conventional Mortgage Notes, due 2012 – 2045
976.9

 
1,012.3

1.36% Tax-exempt Mortgage Note due 2028
38.4

 
39.1

 
1,015.3

 
1,051.4

Total notes payable
$
2,396.4

 
$
2,432.1

 
 
 
 
Floating rate tax-exempt debt included in secured notes (1.36%)
$
38.4

 
$
39.1

Floating rate debt included in secured notes (0.89% – 1.69%)
206.5

 
206.4


We have a $500 million unsecured credit facility which matures in September 2015 with an option to extend at our election

18


to September 2016.  Additionally, we have the option to increase this credit facility to $750 million by either adding additional banks to the credit facility or obtaining the agreement of the existing banks in the credit facility to increase their commitments. The interest rate is based upon LIBOR plus a margin which is 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. We are in compliance with all such financial covenants and limitations.

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 June 30, 2012, we had outstanding letters of credit totaling approximately $10.5 million, leaving approximately $489.5 million available under our unsecured line of credit.

In June 2012, we repaid the remaining principal amount on a 4.92% secured third-party note payable which was due to mature on July 1, 2012 for approximately $33.7 million. In August 2012, we repaid the remaining principal amount on a 5.07% secured third-party note payable which matured on August 1, 2012 for approximately $19.3 million.

At June 30, 2012 and 2011, the weighted average interest rate on our floating rate debt, which include amounts outstanding on our unsecured line of credit, was approximately 1.1%.

Our indebtedness had a weighted average maturity of 6.4 years at June 30, 2012. Scheduled repayments on outstanding debt including all contractual extensions which have been exercised, including scheduled principal amortizations, and the weighted average interest rate on maturing debt at June 30, 2012 were as follows: 
(in millions)
Amount
 
Weighted
Average 
Interest
Rate
2012
$
258.5

 
5.3
%
2013
228.0

 
5.4

2014
11.0

 
6.0

2015
252.4

 
5.1

2016 (1)
2.6

 

2017 and thereafter
1,643.9

 
4.6

Total
$
2,396.4

 
4.8
%

(1) Includes only scheduled principal amortizations.

Subsequent to quarter end, we exercised the automatic one year extension option to extend the maturity of a $31.5 million secured third-party note payable made by one of our fully-consolidated joint ventures, in which we hold a 25% ownership, from August 2012 to August 2013.

9. Derivative Financial 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

19


the hedged forecasted transaction affects earnings. During the six months ended June 30, 2011, such derivatives were used to hedge the variable cash flows associated with existing variable rate debt. The ineffective portion of the change in fair value of the derivatives, if any, is recognized directly in earnings. No portion of designated hedges was ineffective during the three and six months ended June 30, 2011. We did not have any designated hedges during the six months ended June 30, 2012.

Non-designated Hedges. Derivatives are not entered into for speculative purposes and are used to manage our exposure to interest rate movements and other identified risks. Our 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 interest and other income.

As of June 30, 2012, we had the following outstanding interest rate derivatives which were not designated as hedges of interest rate risk:
Interest Rate Derivative
 
Number of Instruments
 
Notional Amount
Interest Rate Cap
 
1

 
$
175.0
 million
Interest Rate Swap
 
1

 
$
500.0
 million

The table below presents the fair value of our derivative financial instruments as well as their classification in the condensed consolidated balance sheets at June 30, 2012 and December 31, 2011 (in millions):

Fair Values of Derivative Instruments
 
 
Asset Derivatives
 
Liability Derivatives
 
June 30, 2012
 
December 31, 2011
 
June 30, 2012
 
December 31, 2011
 
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Swap
 
 
 
 
 
 
 
 
Other
Liabilities
 
$
5.9

 
Other
Liabilities
 
$
16.6

Interest Rate Cap
Other
Assets
 
$

 
Other
Assets
 
$
0.1

 
 
 
 
 
 
 
 

The tables below present the effect of our derivative financial instruments in the condensed consolidated statements of income (loss) and comprehensive income for the three and six months ended June 30, 2012 and 2011 (in millions):

Effect of Derivative Instruments
 
Three Months Ended
June 30,


Unrealized (Loss)
Recognized in Other
Comprehensive  Income
(“OCI”) on 
Derivative
(Effective Portion)

Location of Loss
Reclassified from
Accumulated OCI into Income(Effective Portion)

Amount of Loss
Reclassified from
Accumulated OCI
into Income
(Effective Portion)

Location of Loss
Recognized in 
Statements of Income (Loss)
(Discontinuation, Ineffective 
Portion and
Amount 
Excluded from Effectiveness
Testing)

Amount of Loss
Recognized in
Statements of Income (Loss) (Discontinuation, Ineffective
Portion and Amount Excluded
from Effectiveness
Testing)
Derivatives in Cash Flow Hedging Relationships

2012

2011



2012

2011

 

2012

2011
Interest Rate Swaps (1)

$


$
(2.2
)

Interest expense

$


$
4.0


Loss on discontinuation of hedging relationship

$


$
29.8

Derivatives not designated as hedging instruments

Location of Gain/(Loss)
Recognized in Statements of Income (Loss)

Amount of (Loss) Recognized
in Statements of Income (Loss)


2012

2011
Interest Rate Cap

Other income/(loss)

$


$

Interest Rate Swap

Other income/(loss)

$
(0.1
)

$


20



Six Months Ended
June 30,
 
 
Unrealized (Loss)
Recognized in Other
Comprehensive  Income
(“OCI”) on 
Derivative
(Effective Portion)
 
Location of Loss
Reclassified from
Accumulated OCI into Income(Effective Portion)
 
Amount of Loss
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Location of Loss
Recognized in 
Statements of Income (Loss)
(Ineffective 
Portion and
Amount 
Excluded from Effectiveness
Testing)
 
Amount of Loss
Recognized in
Statements of Income (Loss) (Ineffective
Portion and Amount Excluded
from Effectiveness
Testing)
Derivatives in Cash Flow Hedging Relationships
 
2012
 
2011
 
 
 
2012
 
2011
 
 
 
2012
 
2011
Interest Rate Swaps (1)
 
$

 
$
(2.7
)
 
Interest expense
 
$

 
$
9.8

 
Loss on discontinuation of hedging relationship
 
$

 
$
29.8

Derivatives not designated as hedging instruments
 
Location of Gain/(Loss)
Recognized in Statements of Income (Loss)
 
Amount of (Loss) Recognized
in Statements of Income (Loss)
 
 
2012
 
2011
Interest Rate Cap
 
Other income/(loss)
 
$
(0.1
)
 
$

Interest Rate Swap
 
Other income/(loss)
 
$
(0.7
)
 
$

(1)
The results include the interest rate swap gain (loss) prior to discontinuation in May 2011.

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.

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 June 30, 2012, 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 $7.5 million. As of June 30, 2012, we had not posted any collateral related to these agreements. If we were in breach of any of these provisions at June 30, 2012, or terminated these agreements, we would have been required to settle our obligations at their aggregate termination value of approximately $7.5 million.

10. Share-based Compensation
Incentive Compensation. During the second quarter of 2011, our Board of Trust Managers adopted, and on May 11, 2011 our shareholders approved, the 2011 Share Incentive Plan of Camden Property Trust (the “2011 Share Plan”). Under the 2011 Share Plan, we may issue up to a total of approximately 9.1 million fungible units (the “Fungible Pool Limit”), which is comprised of approximately 5.8 million new fungible units plus approximately 3.3 million fungible units previously available for issuance under our 2002 share incentive plan based on a 3.45 to 1.0 fungible unit-to full value award conversion ratio. Fungible units represent the baseline for the number of shares available for issuance under the 2011 Share Plan. Different types of awards are counted differently against the Fungible Pool Limit, as follows:
 
Each share issued or to be issued in connection with an award, other than an option, right or other award which does not deliver the full value at grant of the underlying shares, will be counted against the Fungible Pool Limit as 3.45 fungible pool units;
Options and other awards which do not deliver the full value at grant of the underlying shares and which expire more than five years from date of grant will be counted against the Fungible Pool Limit as one fungible pool unit; and

21


Options, rights and other awards which do not deliver the full value at date of grant and expire five years or less from the date of grant will be counted against the Fungible Pool Limit as 0.83 of a fungible pool unit.

At June 30, 2012 approximately 7.9 million fungible units were available under the 2011 Share Plan, which results in approximately 2.3 million common shares which could be granted pursuant to full value awards based on the 3.45 to 1.0 fungible unit-to-full value award conversion ratio.

Awards which may be granted under the 2011 Share Plan include incentive share options, non-qualified share options (which may be granted separately or in connection with an option), share awards, dividends and dividend equivalents and other equity based awards. Persons eligible to receive awards under the 2011 Share Plan are trust managers, directors of our affiliates, executive and other officers, key employees and consultants, as determined by the Compensation Committee of our Board of Trust Managers. The 2011 Share Plan will expire on May 11, 2021.

Options. Approximately 0.3 million options were exercised during each of the six months ended June 30, 2012 and 2011. The options were exercised at prices ranging from $30.06 to $51.37 per option during the six months ended June 30, 2012, and at prices ranging from $30.06 to $48.02 per option during the six months ended June 30, 2011. The total intrinsic value of options exercised was approximately $7.0 million and $5.0 million, during the six months ended June 30, 2012 and 2011, respectively. As of June 30, 2012, there was approximately $0.8 million of total unrecognized compensation cost related to unvested options, which is expected to be amortized over the next two years. At June 30, 2012, outstanding options and exercisable options had a weighted average remaining life of approximately 4.7 years and 3.9 years, respectively.

The following table summarizes outstanding share options and exercisable options at June 30, 2012:
 
 
Outstanding Options (1)
 
Exercisable Options (1)
Range of Exercise Prices
Number
 
Weighted
Average Price
 
Number
 
Weighted
Average Price
$30.06-$31.48
334,036

 
$
30.09

 
138,229

 
$
30.13

$41.16-$43.94
259,632

 
42.72

 
241,000

 
42.63

$45.53-$73.32
381,893

 
49.05

 
308,784

 
49.29

Total options
975,561

 
$
40.87

 
688,013

 
$
43.11

 
(1)
The aggregate intrinsic value of outstanding and exercisable options at June 30, 2012 were $26.3 million and $17.0 million, respectively. The aggregate intrinsic values were calculated as the excess, if any, between our closing share price of $67.67 per share on June 30, 2012 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. No options have been granted in 2012.

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 June 30, 2012, the unamortized value of previously issued unvested share awards was approximately $40.9 million which is expected to be amortized over the next five years. The total fair value of shares vested during the six months ended June 30, 2012 and 2011 was approximately $13.4 million and $11.0 million, respectively.

Total compensation cost for option and share awards charged against income was approximately $3.6 million and $3.2 million for the three months ended June 30, 2012 and 2011, respectively, and approximately $6.7 million and $6.2 million for the six months ended June 30, 2012 and 2011, respectively. Total capitalized compensation cost for option and share awards was approximately $0.4 million and $0.3 million for the three months ended June 30, 2012 and 2011, respectively, and approximately $0.7 million and $0.6 million for the six months ended June 30, 2012 and 2011, respectively.


22


The following table summarizes activity under our share incentive plans for the six months ended June 30, 2012:
 
 
Options
Outstanding
 
Weighted
Average
Exercise  /
Grant Price
 
Nonvested
Share
Awards
Outstanding
 
Weighted
Average
Exercise /
Grant Price
Total options and nonvested share awards outstanding at December 31, 2011
1,339,536

 
$
42.27

 
818,754

 
$
46.88

Granted

 

 
343,080

 
63.46

Exercised/vested
(332,032
)
 
44.61