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Section 1: 10-Q (CPT Q114 10-Q)

CPT 3.31.2014 10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014
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
 
76-6088377
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
11 Greenway Plaza, Suite 2400
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  ý    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  ý    No  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 definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated filer
 
ý
Accelerated filer
 
o
 
 
 
 
Non-accelerated filer
 
o
Smaller Reporting Company
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
On April 30, 2014, 85,566,108 common shares of the registrant were outstanding, net of treasury shares and shares held in our deferred compensation arrangements.


Table of Contents


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

Table of Contents


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) 
(in thousands, except per share amounts)
March 31,
2014
 
December 31, 2013
Assets
 
 
 
Real estate assets, at cost
 
 
 
Land
$
978,770

 
$
969,711

Buildings and improvements
5,691,619

 
5,629,904

 
$
6,670,389

 
$
6,599,615

Accumulated depreciation
(1,698,724
)
 
(1,643,713
)
Net operating real estate assets
$
4,971,665

 
$
4,955,902

Properties under development, including land
515,141

 
472,566

Investments in joint ventures
36,719

 
42,155

Total real estate assets
$
5,523,525

 
$
5,470,623

Accounts receivable – affiliates
26,145

 
27,724

Other assets, net
107,862

 
109,401

Cash and cash equivalents
16,768

 
17,794

Restricted cash
5,549

 
6,599

Total assets
$
5,679,849

 
$
5,632,141

Liabilities and equity
 
 
 
Liabilities
 
 
 
Notes payable
 
 
 
Unsecured
$
1,649,041

 
$
1,588,798

Secured
940,881

 
941,968

Accounts payable and accrued expenses
124,981

 
113,307

Accrued real estate taxes
21,922

 
35,648

Distributions payable
59,728

 
56,787

Other liabilities
88,693

 
88,272

Total liabilities
$
2,885,246

 
$
2,824,780

Commitments and contingencies

 

Non-qualified deferred compensation share awards
55,498

 
47,180

Equity
 
 
 
Common shares of beneficial interest; $0.01 par value per share; 175,000 shares authorized; 99,698 and 99,645 issued; 96,623 and 96,660 outstanding at March 31, 2014 and December 31, 2013, respectively
966

 
967

Additional paid-in capital
3,593,633

 
3,596,069

Distributions in excess of net income attributable to common shareholders
(523,321
)
 
(494,167
)
Treasury shares, at cost (11,055 and 11,352 common shares at March 31, 2014 and December 31, 2013, respectively)
(399,510
)
 
(410,227
)
Accumulated other comprehensive loss
(1,091
)
 
(1,106
)
Total common equity
$
2,670,677

 
$
2,691,536

Non-controlling interests
68,428

 
68,645

Total equity
$
2,739,105

 
$
2,760,181

Total liabilities and equity
$
5,679,849

 
$
5,632,141

See Notes to Condensed Consolidated Financial Statements.

3

Table of Contents


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended
 
March 31,
(in thousands, except per share amounts)
2014
 
2013
Property revenues
 
 
 
Rental revenues
$
178,964

 
$
164,393

Other property revenues
26,965

 
25,418

Total property revenues
$
205,929

 
$
189,811

Property expenses
 
 
 
Property operating and maintenance
$
50,747

 
$
48,263

Real estate taxes
23,577

 
21,183

Total property expenses
$
74,324

 
$
69,446

Non-property income
 
 
 
Fee and asset management
$
3,023

 
$
2,894

Interest and other income
288

 
52

Income on deferred compensation plans
681

 
2,999

Total non-property income
$
3,992

 
$
5,945

Other expenses
 
 
 
Property management
$
5,839

 
$
5,983

Fee and asset management
1,259

 
1,477

General and administrative
9,545

 
9,794

Interest
23,133

 
24,895

Depreciation and amortization
57,396

 
51,603

Amortization of deferred financing costs
841

 
916

Expense on deferred compensation plans
681

 
2,999

Total other expenses
$
98,694

 
$
97,667

Gain on sale of land
354

 
698

Equity in income of joint ventures
4,290

 
934

Income from continuing operations before income taxes
$
41,547

 
$
30,275

Income tax expense
(474
)
 
(399
)
Income from continuing operations
$
41,073

 
$
29,876

Income from discontinued operations

 
2,774

Gain on sale of discontinued operations, net of tax

 
31,783

Net income
$
41,073

 
$
64,433

Less income allocated to non-controlling interests from continuing operations
(1,037
)
 
(864
)
Less income, including gain on sale, allocated to non-controlling interests from discontinued operations

 
(93
)
Net income attributable to common shareholders
$
40,036

 
$
63,476

See Notes to Condensed Consolidated Financial Statements.

4

Table of Contents


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (continued)
(Unaudited)
 
Three Months Ended
 
March 31,
(in thousands, except per share amounts)
2014
 
2013
Earnings per share – basic
 
 
 
Income from continuing operations attributable to common shareholders
$
0.45

 
$
0.33

Income from discontinued operations, including gain on sale, attributable to common shareholders

 
0.39

Net income attributable to common shareholders
$
0.45

 
$
0.72

Earnings per share – diluted
 
 
 
Income from continuing operations attributable to common shareholders
$
0.45

 
$
0.33

Income from discontinued operations, including gain on sale, attributable to common shareholders

 
0.39

Net income attributable to common shareholders
$
0.45

 
$
0.72

Distributions declared per common share
$
0.66

 
$
0.63

Weighted average number of common shares outstanding – basic
87,651

 
86,703

Weighted average number of common shares outstanding – diluted
88,824

 
87,276

Net income attributable to common shareholders
 
 
 
Income from continuing operations
$
41,073

 
$
29,876

Less income allocated to non-controlling interests from continuing operations
(1,037
)
 
(864
)
Income from continuing operations attributable to common shareholders
$
40,036

 
$
29,012

Income from discontinued operations, including gain on sale
$

 
$
34,557

Less income, including gain on sale, allocated to non-controlling interests from discontinued operations

 
(93
)
Income from discontinued operations, including gain on sale, attributable to common shareholders
$

 
$
34,464

Net income attributable to common shareholders
$
40,036

 
$
63,476

Condensed Consolidated Statements of Comprehensive Income:
 
 
 
Net income
$
41,073

 
$
64,433

Other comprehensive income
 
 
 
Reclassification of prior service cost and net loss on post retirement obligations
15

 
14

Comprehensive income
$
41,088

 
$
64,447

Less income allocated to non-controlling interests from continuing operations
(1,037
)
 
(864
)
Less income, including gain on sale, allocated to non-controlling interests from discontinued operations

 
(93
)
Comprehensive income attributable to common shareholders
$
40,051

 
$
63,490

See Notes to Condensed Consolidated Financial Statements.

5

Table of Contents


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(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
 
Non-controlling interests
 
Total equity
Equity, December 31, 2013
$
967

 
$
3,596,069

 
$
(494,167
)
 
$
(410,227
)
 
$
(1,106
)
 
$
68,645


$
2,760,181

Net income
 
 
 
 
40,036

 
 
 
 
 
1,037

 
41,073

Other comprehensive income
 
 
 
 
 
 
 
 
15

 
 
 
15

Net share awards


 
(5,287
)
 
 
 
10,343

 
 
 
 
 
5,056

Employee share purchase plan
 
 
168

 
 
 
330

 
 
 
 
 
498

Common share options exercised
 
 
308

 
 
 
44

 
 
 
 
 
352

Change in classification of deferred compensation plan
 
 
606

 
 
 
 
 
 
 
 
 
606

Change in redemption value of non-qualified share awards
 
 
 
 
(11,352
)
 
 
 
 
 
 
 
(11,352
)
Diversification of share awards within deferred compensation plan
 
 
1,770

 
658

 
 
 
 
 
 
 
2,428

Cash distributions declared to equity holders
 
 
 
 
(58,496
)
 
 
 
 
 
(1,254
)
 
(59,750
)
       Other
(1
)
 
(1
)
 
 
 
 
 
 
 
 
 
(2
)
Equity, March 31, 2014
$
966

 
$
3,593,633

 
$
(523,321
)
 
$
(399,510
)
 
$
(1,091
)
 
$
68,428

 
$
2,739,105


See Notes to Condensed Consolidated Financial Statements.

6

Table of Contents


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (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
loss
 
Non-controlling
interests
 
Total equity
Equity, December 31, 2012
$
962

 
$
3,587,505

 
$
(598,951
)
 
$
(425,355
)
 
$
(1,062
)
 
$
63,609

 
$
2,626,708

Net income
 
 
 
 
63,476

 
 
 
 
 
957

 
64,433

Other comprehensive income
 
 
 
 
 
 
 
 
14

 
 
 
14

Common shares issued
1

 
9,365

 
 
 
 
 
 
 
 
 
9,366

Net share awards
 
 
(7,198
)
 
 
 
11,939

 
 
 
 
 
4,741

Employee share purchase plan
 
 
174

 
 
 
180

 
 
 
 
 
354

Common share options exercised
 
 
367

 
 
 
593

 
 
 
 
 
960

Conversions of operating partnership units
 
 
47

 
 
 
 
 
 
 
(47
)
 

Cash distributions declared to equity holders
 
 
 
 
(55,356
)
 
 
 
 
 
(1,197
)
 
(56,553
)
Other
(1
)
 
1

 
 
 
 
 
 
 
 
 

Equity, March 31, 2013
$
962

 
$
3,590,261

 
$
(590,831
)
 
$
(412,643
)
 
$
(1,048
)
 
$
63,322

 
$
2,650,023

See Notes to Condensed Consolidated Financial Statements.

7

Table of Contents


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) 
 
Three Months Ended
 
March 31,
(in thousands)
2014
 
2013
Cash flows from operating activities
 
 
 
Net income
$
41,073

 
$
64,433

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization
57,396

 
53,470

Gain on sale of discontinued operations, net of tax

 
(31,783
)
Gain on sale of land
(354
)
 
(698
)
Distributions of income from joint ventures
3,873

 
1,299

Equity in income of joint ventures
(4,290
)
 
(934
)
Share-based compensation
3,626

 
3,274

Amortization of deferred financing costs
841

 
916

Net change in operating accounts and other
(8,146
)
 
(5,107
)
Net cash from operating activities
$
94,019

 
$
84,870

Cash flows from investing activities
 
 
 
Development and capital improvements
$
(110,085
)
 
$
(58,390
)
Proceeds from sale of land and discontinued operations
5,749

 
68,237

Distributions from investments in joint ventures
5,853

 
276

Increase in non-real estate assets
(1,586
)
 
(1,085
)
Other
843

 
(959
)
Net cash from investing activities
$
(99,226
)
 
$
8,079

Cash flows from financing activities
 
 
 
Borrowings on unsecured line of credit and other short-term borrowings
$
310,000

 
$

Repayments on unsecured line of credit and other short-term borrowings
(250,000
)
 

Repayment of notes payable
(1,087
)
 
(27,122
)
Distributions to common shareholders and non-controlling interests
(56,787
)
 
(49,941
)
Proceeds from issuance of common shares

 
9,366

Payment of deferred financing costs
(205
)
 
(306
)
Net decrease in accounts receivable – affiliates
1,579

 
6,677

Other
681

 
1,350

Net cash from financing activities
$
4,181

 
$
(59,976
)
Net (decrease) increase in cash and cash equivalents
(1,026
)
 
32,973

Cash and cash equivalents, beginning of period
17,794

 
26,669

Cash and cash equivalents, end of period
$
16,768

 
$
59,642

Supplemental information
 
 
 
Cash paid for interest, net of interest capitalized
$
5,307

 
$
7,160

Supplemental schedule of noncash investing and financing activities
 
 
 
Distributions declared but not paid
$
59,728

 
$
56,559

Value of shares issued under benefit plans, net of cancellations
18,502

 
22,811

Net change in redemption of non-qualified share awards
10,694

 

Accrual associated with construction and capital expenditures
22,111

 
9,118

See Notes to Condensed Consolidated Financial Statements.


8

Table of Contents


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, redevelopment, 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 March 31, 2014, we owned interests in, operated, or were developing 183 multifamily properties comprised of 64,150 apartment homes across the United States. Of the 183 properties, 14 properties were under construction, and when completed will consist of a total of 4,434 apartment homes. Additionally, we are adding a subsequent phase to a stabilized community which when completed will consist of 75 apartment homes, and we own land holdings 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 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. We did not have any VIEs at March 31, 2014 or December 31, 2013.

Interim Financial Reporting. We have prepared these unaudited 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 unaudited financial statements should be read in conjunction with the audited financial statements and notes included in our 2013 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 months ended March 31, 2014 are not necessarily indicative of the results which may be expected for the full year.

Acquisitions of Real Estate. Upon acquisition of real estate, we determine the fair value of 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 estimating 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 difference between the carrying value of the previously held equity investment and the fair value is recognized in earnings at the time of obtaining control. Transaction costs associated with the acquisition of operating real estate assets are expensed. Estimates of fair value of acquired debt are based upon interest rates available for the issuance of debt with similar terms and remaining maturities. 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 net carrying value of below market leases is included in other liabilities in our condensed consolidated balance sheets, and the net carrying value of in-place leases is included in other assets, net, in our condensed consolidated balance sheets.

9

Table of Contents


The carrying values of below market leases and in-place leases at March 31, 2014 and December 31, 2013 are as follows:
 
March 31,
 
December 31,
(in millions)
2014
 
2013
Below market leases (Gross carrying value)
$
0.4

 
$
0.4

Accumulated amortization
(0.4
)
 
(0.2
)
Value of below market leases, net
$

 
$
0.2

 
 
 
 
In-place leases (Gross carrying value)
$
2.3

 
$
2.3

Accumulated amortization
(2.1
)
 
(1.1
)
Value of in-place leases, net
$
0.2

 
$
1.2

Revenues recognized related to below market leases and amortization expense related to in-place leases for the three months ended March 31, 2014 and 2013 are as follows:
 
 
Three Months Ended
 
 
March 31,
(in millions)
 
2014
 
2013
Revenues related to below market leases
 
$
0.2

 
$
0.4

Amortization of in-place leases
 
$
1.0

 
$
1.9

The weighted average amortization period of below market leases and in-place leases for the three months ended March 31, 2014 and 2013 was approximately seven and six months, respectively.
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 may exist 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. 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 utilize inputs from a marketplace participant’s perspective. When impairment exists, the long-lived asset is adjusted to its fair value. In addition, we evaluate our equity investments in joint ventures and if we believe there is an other than temporary decline in market value of our investment below our carrying value, we will record an impairment charge. There were no impairment charges recorded for the three months ended March 31, 2014 or 2013.

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. 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 begin 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 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.

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Table of Contents


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 $4.9 million and $3.2 million for the three months ended March 31, 2014 and 2013, respectively. Capitalized real estate taxes were approximately $1.6 million and $0.9 million for the three months ended March 31, 2014 and 2013, 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.

We also incur expenditures related to renovation and construction of office space we lease and capitalize these leasehold improvements as furniture, fixtures, equipment and other. We depreciate these costs using the straight-line method over the shorter of the lease term or the useful life of the improvement.

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/liabilities (in-place leases and below market leases)
underlying lease term

Fair Value. For financial assets and liabilities recorded at fair value on a recurring or non-recurring 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 valuation methodology we use to measure our deferred compensation plan investments is based on quoted market prices utilizing public information for the same transactions. Our deferred compensation plan investments are recorded at fair value on a recurring basis and included in other assets in our condensed consolidated balance sheets.
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 if they are impaired using the fair value methodologies used to measure long-lived assets 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 April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-08 ("ASU 2014-08"), "Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360) - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." ASU 2014-08 changes the threshold for disclosing discontinued operations and the related disclosure requirements, requiring only disposals representing a strategic shift, such as a major line of business, a major geographical area or a major equity investment, to be

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presented as a discontinued operation. If the disposal does qualify as a discontinued operation under ASU 2014-08, the entity will be required to provide expanded disclosures. The guidance will be applied prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014 with early adoption permitted but only for disposals or classifications as held for sale which have not been reported in financial statements previously issued or available for issuance. We adopted ASU 2014-08 as of January 1, 2014 and believe future sales of our individual operating properties will no longer qualify as discontinued operations.
3. Per Share Data
Basic earnings per share are computed using net income 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 2.1 million and 3.0 million for the three months ended March 31, 2014 and 2013, 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.
The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated:
 
Three Months Ended
 
March 31,
(in thousands, except per share amounts)
2014
 
2013
Earnings per share calculation – basic
 
 
 
Income from continuing operations attributable to common shareholders
$
40,036

 
$
29,012

Amount allocated to participating securities
(352
)
 
(638
)
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities
39,684

 
28,374

Income from discontinued operations, including gain on sale, attributable to common shareholders

 
34,464

Net income attributable to common shareholders, as adjusted
$
39,684

 
$
62,838

 
 
 
 
Income from continuing operations attributable to common shareholders, as adjusted – per share
$
0.45

 
$
0.33

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

 
0.39

Net income attributable to common shareholders, as adjusted – per share
$
0.45

 
$
0.72

 
 
 
 
Weighted average number of common shares outstanding – basic
87,651

 
86,703

 
 
 
 
Earnings per share calculation – diluted
 
 
 
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities
$
39,684

 
$
28,374

Income allocated to common units from continuing operations
310

 

Income from continuing operations attributable to common shareholders, as adjusted
39,994

 
28,374

Income from discontinued operations, including gain on sale, attributable to common shareholders

 
34,464

Net income attributable to common shareholders, as adjusted
$
39,994

 
$
62,838

 
 
 


Income from continuing operations attributable to common shareholders, as adjusted – per share
$
0.45

 
$
0.33

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

 
0.39

Net income attributable to common shareholders, as adjusted – per share
$
0.45

 
$
0.72

 
 
 
 
Weighted average number of common shares outstanding – basic
87,651

 
86,703

Incremental shares issuable from assumed conversion of:
 
 
 
Common share options and share awards granted
360

 
573

Common units
813

 

Weighted average number of common shares outstanding – diluted
88,824

 
87,276


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4. Common Shares

In May 2012, we created an at-the-market ("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 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 by management of the appropriate sources of funding for us.

The following table presents activity under our 2012 ATM program for the three months ended March 31, 2013. There were no shares sold during the three months ended March 31, 2014.
 
Three Months Ended March 31,
(in thousands, except per share amounts)
2013
Total net consideration
$
9,365.5

Common shares sold
135.7

Average price per share
$
70.63


As of the date of this filing, we had common shares having an aggregate offering price of up to $82.7 million remaining available for sale under the 2012 ATM program. No additional shares were sold subsequent to March 31, 2014 through the date of this filing.

We currently have an automatic shelf registration statement which allows us to offer, from time to time, common shares, preferred shares, debt securities, or warrants. Our Amended and Restated Declaration of Trust provides we may issue up to 185 million shares of beneficial interest, consisting of 175 million common shares and 10 million preferred shares. At March 31, 2014, we had approximately 85.6 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding.
5. Acquisitions and Discontinued Operations
Acquisitions of Land. In January 2014, we acquired approximately 2.9 acres of land located in Houston, Texas for approximately $15.6 million. In April 2014, we acquired approximately 7.6 acres of land in Montgomery County, Maryland for approximately $23.8 million.
Discontinued Operations. For the three months ended March 31, 2013, income from discontinued operations, included the results of operations of 12 operating properties, comprised of 3,931 apartment homes, sold during 2013. There were no operating properties sold during the three months ended March 31, 2014. Effective January 1, 2014, in accordance with ASU 2014-08, we believe future sales of our individual operating properties will no longer qualify as discontinued operations. See Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements" for additional discussion of ASU 2014-08.

The following is a summary of income from discontinued operations for the three months ended March 31, 2013: 
 
Three Months Ended March 31,
(in thousands)
2013
Property revenues
$
8,111

Property expenses
(3,470
)
 
$
4,641

Depreciation and amortization
(1,867
)
Income from discontinued operations
$
2,774

 
 
Gain on sale of discontinued operations, net of tax
$
31,783



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Land Holding Dispositions. In March 2014, we sold approximately 3.0 acres of land adjacent to a current development community located in Atlanta, Georgia for approximately $6.3 million and recognized a gain of approximately $0.4 million. In April 2014, we sold approximately 4.7 acres of land adjacent to an operating property located in Dallas, Texas for approximately $8.3 million. During the three months ended March 31, 2013, we sold two land parcels comprised of an aggregate of approximately 3.7 acres, adjacent to current development communities in Atlanta, Georgia and Houston, Texas, for approximately $6.6 million and recognized a gain of approximately $0.7 million.

6. Investments in Joint Ventures
Our equity investments in unconsolidated joint ventures, which we account for utilizing the equity method of accounting, consisted of two joint ventures at March 31, 2014 and December 31, 2013, and four joint ventures at March 31, 2013. The two joint ventures in which we held an equity investment at March 31, 2014 are two discretionary investment funds (the "funds"), in which we have a 20% ownership interest. We provide property management services to 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 the combined basis balance sheet and statement of income data for the unconsolidated joint ventures as of and for the periods presented:
 
(in millions)
March 31, 2014
 
December 31, 2013
Total assets
$
739.2

 
$
790.2

Total third-party debt
517.0

 
530.7

Total equity
203.7

 
229.6

 
Three Months Ended
 
March 31,
 (in millions)
2014
 
2013
Total revenues (1)
$
25.1

 
$
22.3

Gain on sale of operating properties, net of tax
18.5

 

Net income
20.0

 
2.0

Equity in income (2)
4.3

 
0.9

 
(1)
Excludes approximately $1.1 million and $1.8 million for the three months ended March 31, 2014, and 2013, respectively, related to the sale of two operating properties by the funds during the first quarter of 2014. Additionally, excludes approximately $8.4 million for the three months ended March 31, 2013, related to the sale of 16 operating properties within two of our unconsolidated joint ventures in May and December 2013.
(2)
Equity in income excludes our ownership interest of fee income from various property management services provided by us to the funds.

The funds in which we have a partial interest have been funded in part with secured third-party debt. As of March 31, 2014, we had no outstanding guarantees related to loans of the funds.

We may earn fees for property and asset management, construction, development, and other services related to joint ventures in which we own an equity interest and also may earn a promoted equity interest if certain thresholds are met. Fees earned for these services were approximately 2.7 million for each of the three months ended March 31, 2014 and 2013. We eliminate fee income for services provided to these joint ventures to the extent of our ownership.

In February 2014, each of the funds sold an operating property comprised of an aggregate of 558 apartment homes for approximately $65.6 million. One of the operating properties was located in San Antonio, Texas and the other operating property was located in Houston, Texas. Our proportionate share of the gains on these transactions was approximately $3.6 million and was reported as a component of equity in income of joint ventures in the condensed consolidated statements of income and comprehensive income.


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7. Notes Payable
The following is a summary of our indebtedness:
 
Balance at
(in millions)
March 31,
2014
 
December 31, 2013
Commercial Banks
 
 
 
Unsecured line of credit and short-term borrowings
$
60.0

 
$

 


 


Senior unsecured notes
 
 
 
5.08% Notes, due 2015
249.8

 
249.7

5.75% Notes, due 2017
246.4

 
246.4

4.70% Notes, due 2021
248.9

 
248.8

3.07% Notes, due 2022
346.7

 
346.7

5.00% Notes, due 2023
247.7

 
247.7

4.27% Notes, due 2024
249.5

 
249.5

 
1,589.0

 
1,588.8

 
 
 
 
Total unsecured notes payable
1,649.0

 
1,588.8

 
 
 
 
Secured notes
 
 
 
0.93% – 6.00% Conventional Mortgage Notes, due 2014 – 2045
905.0

 
905.7

Tax-exempt Mortgage Note, due 2028 (1.31% floating rate)
35.9

 
36.3

 
940.9

 
942.0

Total notes payable
$
2,589.9

 
$
2,530.8

 
 
 
 
Other floating rate debt included in secured notes (0.93%)
$
175.0

 
$
175.0


We have a $500 million unsecured credit facility which matures in September 2015 with an option to extend at our election 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 the London Interbank Offered Rate ("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 believe we are in compliance with all such financial covenants and limitations on the date of this filing.

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 March 31, 2014, we had $60.0 million outstanding on our $500 million unsecured line of credit and we had outstanding letters of credit totaling approximately $10.7 million, leaving approximately $429.3 million available under our unsecured line of credit. As an alternative to our unsecured line of credit, from time to time, we may borrow using an unsecured overnight borrowing facility. Our use of short-term borrowings does not decrease the amount available under our unsecured line of credit. At March 31, 2014, we had no short-term borrowings outstanding.

At March 31, 2014 and 2013, the weighted average interest rate on our floating rate debt of approximately $270.9 million and $212.4 million, respectively, which includes our unsecured line of credit and short-term borrowings, was approximately 1.0% and 1.1%, respectively.


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Our indebtedness, which includes our unsecured line of credit and short-term borrowings, had a weighted average maturity of 6.6 years at March 31, 2014. Scheduled repayments on outstanding debt, including our unsecured line of credit, short-term borrowings and scheduled principal amortizations, and the respective weighted average interest rate on maturing debt at March 31, 2014 were as follows: 
(in millions)
Amount
 
Weighted Average Interest Rate
2014
$
34.5

 
3.2
%
2015
312.0

 
4.2

2016 (1)
2.2

 

2017
249.2

 
5.7

2018
177.6

 
0.9

Thereafter
1,814.4

 
4.5

Total
$
2,589.9

 
4.3
%
(1) Includes only scheduled principal amortizations.

8. Share-based Compensation and Non-Qualified Deferred Compensation Plan
Incentive Compensation. Under the 2011 Share Incentive Plan of Camden Property Trust (as amended, 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
Options, rights and other awards which do not deliver the full value at 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 March 31, 2014, approximately 5.6 million fungible units were available under the 2011 Share Plan, which results in approximately 1.6 million common shares which may be granted pursuant to full value awards based on the 3.45 to 1.0 fungible unit to full value award conversion ratio.

Options. Approximately 0.2 million and 0.1 million options were exercised during the three months ended March 31, 2014 and 2013, respectively. The total intrinsic value of options exercised was approximately $3.6 million and $4.1 million during the three months ended March 31, 2014 and 2013, respectively. At March 31, 2014, there was no unrecognized compensation cost related to unvested options. Options generally have a vesting period of three to five years. At March 31, 2014, options outstanding and exercisable had a weighted average remaining life of approximately 3.5 years.

The following table summarizes outstanding share options and exercisable options at March 31, 2014:
 
 
Options Outstanding and Exercisable (1) (2)
Range of Exercise Prices
Number
 
Weighted
Average Price
$30.06-$41.16
207,036

 
$
33.46

$43.90-$45.53
151,837

 
44.94

$48.02-$64.75
158,086

 
56.96

Total options
516,959

 
$
44.02

 
(1)
As of March 31, 2014, all options outstanding are also exercisable.

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(2)
The aggregate intrinsic value of options outstanding and exercisable at March 31, 2014 was $12.1 million. The aggregate intrinsic values were calculated as the excess, if any, between our closing share price of $67.34 per share on March 31, 2014 and the strike price of the underlying award.
Options Granted and Valuation Assumptions. During the three months ended March 31, 2014, we granted approximately 0.1 million reload options. Reload options are granted for the number of shares tendered as payment for the exercise price upon the exercise of an option with a reload provision. The reload options granted have an exercise price equal to the fair market value of a common share on the date of grant and expire on the same date as the original options which were exercised. The reload options granted during the three months ended March 31, 2014 vested immediately and approximately $0.3 million was expensed on the reload date. We estimate the fair values of each option award including reloads on the date of grant using the Black-Scholes option pricing model. The following assumptions were used for the reload options granted during the three months ended March 31, 2014:
 
Three Months Ended March 31,
 
2014
Weighted average fair value of options granted
$3.55 - $8.17
Expected volatility
22.6% - 23.2%
Risk-free interest rate
0.1% - 1.1%
Expected dividend yield
3.5%
Expected life
6 months - 4 years

Our computation of expected volatility for 2014 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 based on the historical dividend yield over the expected term of the options granted. Our computation of expected life is based upon historical experience of similar awards, giving consideration to the contractual terms of the share-based awards.

Share Awards and Vesting. Share awards for employees generally have a vesting period of three to 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 March 31, 2014, the unamortized value of previously issued unvested share awards was approximately $49.2 million, which is expected to be amortized over the next five years. The total fair value of shares vested during the three months ended March 31, 2014 and 2013 was approximately $15.5 million and $14.1 million, respectively.

Total compensation cost for option and share awards charged against income was approximately $3.8 million and $3.4 million for the three months ended March 31, 2014 and 2013, respectively. Total capitalized compensation cost for option and share awards was approximately $0.6 million and $0.5 million for the three months ended March 31, 2014 and 2013, respectively.

The following table summarizes activity under our share incentive plans for the three months ended March 31, 2014:
 
 
Options
Outstanding
 
Weighted
Average
Exercise
Price
 
Nonvested
Share
Awards
Outstanding
 
Weighted
Average
Grant  Price
Total options and nonvested share awards outstanding at December 31, 2013
634,361

 
$
41.59

 
831,298

 
$
59.77

Granted
84,452

 
64.75

 
286,484

 
65.22

Exercised/vested
(180,168
)
 
42.98

 
(281,828
)
 
55.11

Forfeited
(21,686
)
 
62.32

 
(2,847
)
 
64.03

Total options and nonvested share awards outstanding at March 31, 2014
516,959

 
$
44.02

 
833,107

 
$
63.20


Non-Qualified Deferred Compensation Plan. In February 2014, we adopted the Second Amended and Restated Camden Property Trust Non-Qualified Deferred Compensation Plan (the "Plan") to clarify certain terms in the original plan relating to the deferral of performance based compensation. The Plan permits diversification of fully vested share awards into other equity securities subject to a six month holding period, which results in the fully vested awards and the proportionate share of nonvested awards eligible for diversification being reclassified from additional paid in capital to temporary equity in our condensed consolidated balance sheets. The share awards are adjusted to their redemption value at each reporting period, with the redemption

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value based on the market value of the shares at the end of the reporting period. Changes in value from period to period are charged to distributions in excess of net income attributable to common shareholders in our condensed consolidated statements of equity.

The following table summarizes the eligible share award activity as recorded in temporary equity for the three months ended March 31, 2014:
(in thousands)
 
 
Balance at December 31, 2013
 
$
47,180

Change in classification
 
(606
)
Change in redemption value
 
11,352

Diversification of share awards
 
(2,428
)
Balance at March 31, 2014
 
$
55,498


9. Net Change in Operating Accounts
The effect of changes in the operating accounts and other on cash flows from operating activities is as follows:
 
Three Months Ended
  
March 31,
(in thousands)
2014
 
2013
Change in assets:
 
 
 
Other assets, net
$
2,313

 
$
1,158

Change in liabilities:
 
 
 
Accounts payable and accrued expenses
5,965

 
2,035

Accrued real estate taxes
(13,714
)
 
(7,768
)
Other liabilities
(2,953
)
 
(791
)
Other
243

 
259

Change in operating accounts and other
$
(8,146
)
 
$
(5,107
)

10. Commitments and Contingencies
Construction Contracts. As of March 31, 2014, we estimate the additional costs to complete 14 consolidated projects currently under construction to be approximately $533.2 million. We expect to fund these amounts through a combination of cash flows generated from operations, draws on our unsecured credit facility or other short-term borrowings, proceeds from property dispositions, the use of debt and equity offerings under our automatic shelf registration statement, equity issued from our ATM program, other unsecured borrowings, and secured mortgages.

Litigation. One of our wholly-owned subsidiaries previously acted as a general contractor for the construction of an apartment project in Florida which was subsequently sold and converted to condominium units by an unrelated third-party. The condominium association instituted a lawsuit against our subsidiary and other unrelated third-parties in Florida alleging negligent construction and failure to comply with building codes and claimed damages for the costs of repair arising out of the alleged defective construction as well as the recovery of incidental and consequential damages resulting from such alleged negligence. This matter was resolved in March 2014 and, pursuant to the terms of the settlement, we made a one-time payment to the association in an amount which was not material.
We are also subject to various legal proceedings and claims which arise in the ordinary course of business. Matters which arise out of allegations of bodily injury, property damage, and employment practices are generally covered by insurance. While the resolution of these legal proceedings and claims cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on our condensed consolidated financial statements.
Other Contingencies. In the ordinary course of our business, we issue letters of intent indicating a willingness to negotiate for acquisitions, dispositions, or joint ventures and also enter into arrangements contemplating various transactions. Such letters of intent and other arrangements are non-binding as to either party unless and until a definitive contract is entered into by the parties. Even if definitive contracts relating to the purchase or sale of real property are entered into, these contracts generally provide the purchaser with time to evaluate the property and conduct due diligence, during which periods the purchaser will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money. There can be no assurance definitive contracts will be entered into with respect to any matter covered by letters of intent or we will consummate any transaction

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contemplated by any definitive contract. Furthermore, due diligence periods for real property are frequently extended as needed. An acquisition or sale of real property becomes probable at the time the due diligence period expires and the definitive contract has not been terminated. We are then at risk under a real property acquisition contract, but generally only to the extent of any earnest money deposits associated with the contract, and are obligated to sell under a real property sales contract. At March 31, 2014, we had earnest money deposits of approximately $2.6 million for potential acquisitions of land which are included in other assets, net in our condensed consolidated balance sheets. Approximately $2.3 million of these deposits was non-refundable, and included approximately $1.5 million related to the 7.6 acres of land purchased in April 2014.

Lease Commitments. At March 31, 2014, we had long-term leases covering certain land, office facilities, and equipment. Rental expense totaled approximately $0.7 million for each of the three months ended March 31, 2014 and 2013. Minimum annual rental commitments for the remainder of 2014 are $2.2 million, and for the years ending December 31, 2015 through 2018 are approximately $2.3 million, $2.6 million, $2.7 million, and $2.5 million, respectively, and approximately $15.4 million in the aggregate thereafter.

Investments in Joint Ventures. We have entered into, and may continue in the future to enter into, joint ventures or partnerships, including limited liability companies, through which we own an indirect economic interest in less than 100% of the community or land owned directly by the joint venture or partnership. Our decision whether to hold the entire interest in an apartment community or land ourselves, or to have an indirect interest in the community or land through a joint venture or partnership, is based on a variety of factors and considerations, including: (i) our projection, in some circumstances, that we will achieve higher returns on our invested capital or reduce our risk if a joint venture or partnership vehicle is used; (ii) our desire to diversify our portfolio of investments by market; (iii) our desire at times to preserve our capital resources to maintain liquidity or balance sheet strength; and (iv) the economic and tax terms required by a seller of land or of a community, who may prefer or who may require less payment if the land or community is contributed to a joint venture or partnership. Investments in joint ventures or partnerships are not limited to a specified percentage of our assets. Each joint venture or partnership agreement is individually negotiated, and our ability to operate and/or dispose of land or of a community in our sole discretion is limited to varying degrees in our existing joint venture agreements and may be limited to varying degrees depending on the terms of future joint venture agreements.

11. 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, margin, and excise 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 recorded income, franchise, and excise taxes in the condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2014 and 2013 as income tax expense. Income taxes for the three months ended March 31, 2014 primarily related to state income tax and federal taxes on certain of our taxable REIT subsidiaries. We have no significant temporary or permanent differences or tax credits associated with our taxable REIT subsidiaries.

We believe we have no uncertain tax positions or unrecognized tax benefits requiring disclosure as of and for the three months ended March 31, 2014.

12. Fair Value Measurements

Recurring Fair Value Measurements. The following table presents information about our financial instruments measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013 using the inputs and fair value hierarchy discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements."
 

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Financial Instruments Measured at Fair Value on a Recurring Basis
 
March 31, 2014
 
December 31, 2013
(in millions)
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation plan investments (1)
$
47.0

 
$

 
$

 
$
47.0

 
$
43.8

 
$

 
$

 
$
43.8

(1)
Approximately $1.1 million of participant cash was withdrawn from our deferred compensation plan investments during the three months ended March 31, 2014.

Financial Instrument Fair Value Disclosures. As of March 31, 2014 and December 31, 2013, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and distributions payable represent fair value because of the short-term nature of these instruments. The carrying value of restricted cash approximates its fair value based on the nature of our assessment of the ability to recover these amounts.
In calculating the fair value of our notes payable, interest rate and spread assumptions reflect current creditworthiness and market conditions available for the issuance of notes payable with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs. The following table presents the carrying and estimated fair values of our notes payable at March 31, 2014 and December 31, 2013:
 
March 31, 2014
 
December 31, 2013
(in millions)
Carrying
Value
 
Estimated
Fair  Value
 
Carrying
Value
 
Estimated
Fair  Value
Fixed rate notes payable
$
2,319.0

 
$
2,433.4

 
$
2,319.5

 
$
2,391.5

Floating rate notes payable (1)
270.9

 
263.5

 
211.3

 
201.4

(1)
Includes balances outstanding under our unsecured line of credit and short-term borrowings of $60.0 million and $0.0 million at March 31, 2014 and December 31, 2013, respectively.

Non-recurring Fair Value Measurements. There were no events during the three months ended March 31, 2014 or 2013 which required fair value adjustments of our non-financial assets and non-financial liabilities. The non-recurring fair value disclosure inputs under the fair value hierarchy are discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements."


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes appearing elsewhere in this report, as well as Part I, Item 1A, “Risk Factors” within our Annual Report on Form 10-K for the year ended December 31, 2013. Historical results and trends which might appear in the condensed 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, and include statements related to expectations, projections, intentions, or other items relating to the future; forward-looking statements are not guarantees of future performance, 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 these statements 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 which 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;
we could be negatively impacted by the elimination of Fannie Mae or Freddie Mac;
compliance or failure to comply with laws, including those 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, redevelopment 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 and discretionary funds involve risks not present in investments in which we are the sole investor;
tax matters, including failure to qualify as a REIT, could have adverse consequences;
a cybersecurity incident and other technology disruptions could negatively impact our business and our relationships with residents;
we depend on our key personnel;
litigation risks could affect our business;
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;
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, redevelopment, acquisition, and construction of multifamily apartment communities. As of March 31, 2014, we owned interests in, operated, or were developing 183 multifamily properties comprised of 64,150 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.
Property Operations
Our results for the three months ended March 31, 2014 reflect an increase in rental revenue as compared to the same period in 2013. We believe this increase was primarily due to the continuation of improving economic conditions, including with respect to job growth, favorable demographics, and a manageable supply of new multifamily housing, which have resulted in increases in realized rental rates and stable average occupancy levels. Same store revenues increased 4.7% for the first three months of 2014, as compared to the same period in 2013. We believe U.S. economic and employment growth is likely to continue during the remainder of 2014 and the supply of new multifamily homes, although increasing, will likely remain at manageable levels. However, we believe significant risks to the economy remain, and while there have been increases in employment levels in the majority of our markets, the unemployment rate remains at higher than historical levels. If economic conditions were to worsen, our operating results could be adversely affected.
Construction Activity
At March 31, 2014, we had a total of 14 projects under construction comprised of 4,434 apartment homes, including one development project to be comprised of 266 units owned by one of the discretionary funds, in which we have a 20% interest, with initial occupancy scheduled to occur within the next 24 months. Additionally, we are adding a subsequent phase to a stabilized community which when completed will consist of 75 apartment homes. Excluding the project owned by one of the discretionary funds, as of March 31, 2014, we estimate the additional costs to complete the construction of 14 consolidated projects to be approximately $533.2 million.
Land Holdings
In January 2014, we acquired approximately 2.9 acres of land in Houston, Texas for approximately $15.6 million. In April 2014, we acquired approximately 7.6 acres of land in Montgomery County, Maryland for approximately $23.8 million.
In March 2014, we sold approximately 3.0 acres of land adjacent to a current development community located in Atlanta, Georgia for approximately $6.3 million and recognized a gain of approximately $0.4 million. In April 2014, we sold approximately 4.7 acres of land adjacent to an operating property located in Dallas, Texas for approximately $8.3 million.

Dispositions
In February 2014, each of the funds sold an operating property comprised of an aggregate of 558 apartment homes. One of the operating properties was located in San Antonio, Texas and the other operating property was in Houston, Texas. Our proportionate share of the gains on these transactions was approximately $3.6 million.
Future Outlook
Subject to market conditions, we intend to continue to seek opportunities to develop and acquire existing communities. We evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise. We also intend to continue to strengthen our capital and liquidity positions by continuing to focus on our core fundamentals which we believe are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intend to meet our near-term liquidity requirements through a combination of cash flows generated from operations, draws on our unsecured credit facility or other short-term borrowings, proceeds from property dispositions, the use of debt and equity offerings under our automatic shelf registration statement, equity issued from our at-the-market ("ATM") program, other unsecured borrowings, and secured mortgages.
As of March 31, 2014, we had approximately $16.8 million in cash and cash equivalents and approximately $429.3 million available under our $500 million unsecured line of credit. As of the date of this filing, we had common shares having an aggregate offering price of up to $82.7 million remaining available for sale under our ATM program. We believe payments on debt maturing in 2014 are manageable at approximately $34.5 million, which represents approximately 1.3% of our total outstanding debt and includes scheduled principal amortizations of approximately $2.3 million. We believe we are well-positioned with a strong balance sheet and sufficient liquidity to cover near-term debt maturities and new development, redevelopment, and other capital funding requirements. We will, however, continue to assess and take further actions we believe are prudent to meet our objectives and capital requirements.

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Property Portfolio
Our multifamily property portfolio is summarized as follows:
 
March 31, 2014
 
December 31, 2013
 
Apartment Homes    
 
Properties    
 
Apartment
 Homes    
 
Properties    
Operating Properties
 
 
 
 
 
 
 
Houston, Texas
8,434

 
24

 
8,752

 
25

Washington, D.C. Metro
6,083

 
18

 
6,083

 
18

Dallas, Texas
5,667

 
14

 
5,667

 
14

Tampa, Florida
5,108

 
12

 
5,108

 
12

Las Vegas, Nevada
4,918

 
15

 
4,918

 
15

Orlando, Florida
3,976

 
10

 
3,676

 
9

Atlanta, Georgia
3,943

 
12

 
3,943

 
12

Raleigh, North Carolina
3,054

 
8

 
3,054

 
8

Austin, Texas
3,030

 
9

 
3,030

 
9

Charlotte, North Carolina
2,894

 
12

 
2,894

 
12

Southeast Florida
2,520

 
7

 
2,520

 
7

Los Angeles/Orange County, California
2,481

 
6

 
2,481

 
6

Phoenix, Arizona
2,095

 
7

 
2,095

 
7

Denver, Colorado
1,941

 
6

 
1,941

 
6

San Diego/Inland Empire, California
1,665

 
5

 
1,665

 
5

Other
1,832

 
4

 
2,072

 
5

Total Operating Properties
59,641

 
169

 
59,899

 
170

Properties Under Construction
 
 
 
 
 
 
 
Phoenix, Arizona
834

 
3

 
454

 
2

Austin, Texas
614

 
2

 
614

 
2

Los Angeles/Orange County, California
590

 
2

 
590

 
2

Charlotte, North Carolina
589

 
2

 
589

 
2

Denver, Colorado
424

 
1

 
424

 
1

Dallas, Texas
423

 
1

 
423

 
1

Atlanta, Georgia
379

 
1

 
379

 
1

Washington, D.C. Metro
320

 
1

 
320

 
1

Southeast Florida
261

 
1

 
261

 
1

Orlando, Florida

 

 
300

 
1

Other (1)
75

 

 
75

 

Total Properties Under Construction
4,509

 
14

 
4,429

 
14

Total Properties
64,150

 
183

 
64,328

 
184

Less: Unconsolidated Joint Venture Properties (2)
 
 
 
 
 
 
 
Houston, Texas
2,522

 
8

 
2,840

 
9

Austin, Texas
1,360

 
4

 
1,360

 
4

Dallas, Texas
1,250

 
3

 
1,250

 
3

Tampa, Florida
450

 
1

 
450

 
1

Raleigh, North Carolina
350

 
1

 
350

 
1

Orlando, Florida
300

 
1

 
300

 
1

Washington, D.C. Metro
276

 
1

 
276

 
1

Charlotte, North Carolina (3)
266

 
1

 
266

 
1

Atlanta, Georgia
234

 
1

 
234

 
1

Other
270

 
1

 
510

 
2

Total Unconsolidated Joint Venture Properties
7,278

 
22

 
7,836

 
24

Total Properties Fully Consolidated
56,872

 
161

 
56,492

 
160

 
(1)
Represents the units under construction for Phase IX-B of Camden Miramar, our one student housing community, located in Corpus Christi, Texas.
(2)
Refer to Note 6, “Investments in Joint Ventures,” in the notes to condensed consolidated financial statements for further discussion of our joint venture investments.
(3)
Represents a property under development owned by one of our unconsolidated joint ventures. See communities under construction below for details.


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Dispositions
During the three months ended March 31, 2014, each of the funds, in which we own a 20% interest in each, sold an operating property as follows:
Dispositions of Unconsolidated Operating Properties
 
Location
 
Number of Apartment Homes
 
Date of Disposition
Camden Braun Station
 
San Antonio, TX
 
240
 
2/12/2014
Camden Piney Point
 
Houston, TX
 
318
 
2/27/2014
Unconsolidated total
 
 
 
558
 
 
Stabilized Communities
We generally consider a property stabilized once it reaches 90% occupancy during the quarter. We had no operating properties reach stabilization during the three months ended March 31, 2014.
Completed Construction in Lease-Up
At March 31, 2014, each of the funds, in which we own a 20% interest, had a completed operating property in lease-up as follows:
($ in millions)
Property and Location
Number of
Apartment
Homes
 
Cost
Incurred
 
% Leased at 5/4/14
 
Date of
Construction
Completion
 
Estimated
Date of
Stabilization
South Capitol
 
 
 
 
 
 
 
 
 
Washington, DC
276

 
$
78.4

 
82
%
 
3Q13
 
3Q14
Waterford Lakes
 
 
 
 
 
 
 
 
 
Orlando, FL
300

 
36.9

 
71
%
 
1Q14
 
4Q14
 
576

 
$
115.3

 
 
 
 
 
 
Properties Under Development and Land
Our condensed consolidated balance sheet at March 31, 2014 included approximately $515.1 million related to properties under development and land. Of this amount, approximately $402.0 million related to our projects currently under construction. In addition, we had approximately $113.1 million primarily invested in land held for future development and land holdings, which included approximately $82.9 million related to projects we expect to begin constructing during the next two years and approximately $30.2 million invested in land holdings which we may develop in the future.

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Communities Under Construction. At March 31, 2014, we had 13 consolidated properties, one property held by one of the funds, in which we own a 20% interest, and 75 units at one of our consolidated properties, in various stages of construction as follows:
($ in millions)
Property and Location
Number of
Apartment
Homes
 
Estimated
Cost
 
Cost
Incurred
 
Included in
Properties
Under
Development
 
Estimated
Date of
Construction
Completion
 
Estimated
Date of
Stabilization
Camden NOMA (1)
 
 
 
 
 
 
 
 
 
 
 
Washington, DC
320

 
$
110.0

 
$
100.9

 
$
21.7

 
2Q14
 
2Q15
Camden Lamar Heights
 
 
 
 
 
 
 
 
 
 
 
Austin, TX
314
 
47.0

 
34.2

 
34.2

 
4Q14
 
4Q15
Camden Flatirons
 
 
 
 
 
 
 
 
 
 
 
Denver, CO
424

 
78.0

 
54.3

 
52.7

 
4Q14
 
4Q16
Camden Glendale
 
 
 
 
 
 
 
 
 
 
 
Glendale, CA
303
 
115.0

 
61.6

 
61.6

 
3Q15
 
1Q16
Camden Boca Raton
 
 
 
 
 
 
 
 
 
 
 
Boca Raton, FL
261
 
54.0

 
34.6

 
34.6

 
4Q14
 
4Q15
Camden Paces
 
 
 
 
 
 
 
 
 
 
 
Atlanta, GA
379
 
110.0

 
55.2

 
55.2

 
2Q15
 
1Q17
Camden La Frontera
 
 
 
 
 
 
 
 
 
 
 
Round Rock, TX
300

 
36.0

 
12.2

 
12.2

 
1Q15
 
4Q15
Camden Foothills
 
 
 
 
 
 
 
 
 
 
 
Scottsdale, AZ
220

 
50.0

 
24.3

 
24.3

 
2Q15
 
3Q15
Camden Hayden
 
 
 
 
 
 
 
 
 
 
 
Tempe, AZ
234

 
48.0

 
16.4

 
16.4

 
2Q15
 
3Q15
Camden Gallery
 
 
 
 
 
 
 
 
 
 
 
Charlotte, NC
323

 
58.0

 
17.7

 
17.7

 
4Q15
 
2Q16
The Camden
 
 
 
 
 
 
 
 
 
 
 
Los Angeles, CA
287

 
145.0

 
37.0

 
37.0

 
4Q16
 
2Q17
Camden Victory Park
 
 
 
 
 
 
 
 
 
 
 
Dallas, TX
423

 
82.0

 
19.0

 
19.0

 
1Q16
 
1Q18
Camden Chandler
 
 
 
 
 
 
 
 
 
 
 
Chandler, AZ
380

 
75.0

 
14.3

 
14.3

 
2Q16
 
2Q17
Camden Miramar Phase IX-B (2)
 
 
 
 
 
 
 
 
 
 
 
Corpus Christi, TX
75

 
8.0

 
1.1

 
1.1

 
3Q14
 
3Q14
Consolidated total
4,243

 
$
1,016.0

 
$
482.8

 
$
402.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Camden Southline (3)
 
 
 
 
 
 
 
 
 
 
 
Charlotte, NC
266

 
$
48.0

 
$
17.3

 
$
17.3

 
3Q15
 
4Q15
 
(1)
Property in lease-up and was 40% leased at May 4, 2014.
(2)
Represents the units under construction for Phase IX-B of Camden Miramar, our one student housing community.
(3)
Property owned through an unconsolidated joint venture in which we own a 20% interest.

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Development Pipeline Communities. At March 31, 2014, we had the following communities undergoing development activities:
($ in millions)
Property and Location
Projected Homes
 
Total Estimated Cost (1)
 
Cost to Date
Camden McGowen Station
 
 
 
 
 
Houston, TX
320
 
$
82.0

 
$
9.0

Camden Lincoln Station
 
 
 
 
 
Denver, CO
267

 
51.0

 
6.1

Camden Conte (2)
 
 
 
 
 
       Houston, TX
519

 
170.0

 
16.0

Camden Buckhead
 
 
 
 
 
Atlanta, GA
336