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Section 1: 10-Q (10-Q)

CPT 3.31.2015 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, 2015
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.)
 
 
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  ¨
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  
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
 
¨
 
 
 
 
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 ý
On April 24, 2015, 86,841,754 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
 
 
 
 
 
 
 
Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2015 and December 31, 2014
 
 
 
 
 
 
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) for the three months ended March 31, 2015 and 2014
 
 
 
 
 
 
Condensed Consolidated Statements of Equity (Unaudited) for the three months ended March 31, 2015 and 2014
 
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2015 and 2014
 
 
 
 
 
 
 
 
 
 
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

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) 
(in thousands, except per share amounts)
March 31,
2015
 
December 31, 2014
Assets
 
 
 
Real estate assets, at cost
 
 
 
Land
$
1,012,684

 
$
1,003,422

Buildings and improvements
5,979,985

 
5,890,498

 
$
6,992,669

 
$
6,893,920

Accumulated depreciation
(1,798,955
)
 
(1,738,862
)
Net operating real estate assets
$
5,193,714

 
$
5,155,058

Properties under development, including land
519,454

 
527,596

Investments in joint ventures
36,526

 
36,429

Properties held for sale

 
27,143

Total real estate assets
$
5,749,694

 
$
5,746,226

Accounts receivable – affiliates
25,652

 
25,977

Other assets, net
122,326

 
124,888

Cash and cash equivalents
174,353

 
153,918

Restricted cash
5,034

 
5,898

Total assets
$
6,077,059

 
$
6,056,907

Liabilities and equity
 
 
 
Liabilities
 
 
 
Notes payable
 
 
 
Unsecured
$
1,838,203

 
$
1,837,911

Secured
904,914

 
905,628

Accounts payable and accrued expenses
134,438

 
157,232

Accrued real estate taxes
23,269

 
39,149

Distributions payable
64,261

 
60,386

Other liabilities
102,163

 
100,058

Total liabilities
$
3,067,248

 
$
3,100,364

Commitments and contingencies (Note 10)

 

Non-qualified deferred compensation share awards
69,902

 
68,134

Equity
 
 
 
Common shares of beneficial interest; $0.01 par value per share; 175,000 shares authorized; 100,646 and 100,620 issued; 97,586 and 97,604 outstanding at March 31, 2015 and December 31, 2014, respectively
976

 
976

Additional paid-in capital
3,656,105

 
3,667,448

Distributions in excess of net income attributable to common shareholders
(403,518
)
 
(453,777
)
Treasury shares, at cost (10,741 and 10,975 common shares at March 31, 2015 and December 31, 2014, respectively)
(388,181
)
 
(396,626
)
Accumulated other comprehensive loss
(2,382
)
 
(2,419
)
Total common equity
$
2,863,000

 
$
2,815,602

Non-controlling interests
76,909

 
72,807

Total equity
$
2,939,909

 
$
2,888,409

Total liabilities and equity
$
6,077,059

 
$
6,056,907

See Notes to Condensed Consolidated Financial Statements.

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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)
2015
 
2014
Property revenues
 
 
 
Rental revenues
$
186,857

 
$
178,964

Other property revenues
28,577

 
26,965

Total property revenues
$
215,434

 
$
205,929

Property expenses
 
 
 
Property operating and maintenance
$
52,998

 
$
50,747

Real estate taxes
25,413

 
23,577

Total property expenses
$
78,411

 
$
74,324

Non-property income
 
 
 
Fee and asset management
$
1,563

 
$
3,023

Interest and other income
60

 
288

Income on deferred compensation plans
1,864

 
681

Total non-property income
$
3,487

 
$
3,992

Other expenses
 
 
 
Property management
$
5,962

 
$
5,839

Fee and asset management
1,076

 
1,259

General and administrative
9,748

 
9,545

Interest
24,612

 
23,133

Depreciation and amortization
61,530

 
57,396

Amortization of deferred financing costs
798

 
841

Expense on deferred compensation plans
1,864

 
681

Total other expenses
$
105,590

 
$
98,694

Gain on sale of operating properties, including land
85,192

 
354

Equity in income of joint ventures
1,382

 
4,290

Income from continuing operations before income taxes
$
121,494

 
$
41,547

Income tax expense
(429
)
 
(474
)
Income from continuing operations
$
121,065

 
$
41,073

Net income
$
121,065

 
$
41,073

Less income allocated to non-controlling interests from continuing operations
(5,466
)
 
(1,037
)
Net income attributable to common shareholders
$
115,599

 
$
40,036

See Notes to Condensed Consolidated Financial Statements.

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CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (Continued)
(Unaudited)
 
Three Months Ended
 
March 31,
(in thousands, except per share amounts)
2015
 
2014
Earnings per share – basic
$
1.29

 
$
0.45

Earnings per share – diluted
$
1.27

 
$
0.45

Distributions declared per common share
$
0.70

 
$
0.66

Weighted average number of common shares outstanding – basic
88,987

 
87,651

Weighted average number of common shares outstanding – diluted
90,464

 
88,824

Condensed Consolidated Statements of Comprehensive Income:
 
 
 
Net income
$
121,065

 
$
41,073

Other comprehensive income
 
 
 
Reclassification of net loss on cash flow hedging activities, prior service cost and net loss on post retirement obligation
37

 
15

Comprehensive income
$
121,102

 
$
41,088

Less income allocated to non-controlling interests from continuing operations
(5,466
)
 
(1,037
)
Comprehensive income attributable to common shareholders
$
115,636

 
$
40,051

See Notes to Condensed Consolidated Financial Statements.

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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, 2014
$
976

 
$
3,667,448

 
$
(453,777
)
 
$
(396,626
)
 
$
(2,419
)
 
$
72,807


$
2,888,409

Net income
 
 
 
 
115,599

 
 
 
 
 
5,466

 
121,065

Other comprehensive income
 
 
 
 
 
 
 
 
37

 
 
 
37

Net share awards
 
 
(2,726
)
 
 
 
8,444

 
 
 
 
 
5,718

Employee share purchase plan
 
 
65

 
 
 
1

 
 
 
 
 
66

Common share options exercised
 
 
176

 
 
 
 
 
 
 
 
 
176

Change in classification of deferred compensation plan
 
 
(1,024
)
 
 
 
 
 
 
 
 
 
(1,024
)
Change in redemption value of non-qualified share awards
 
 
 
 
(3,764
)
 
 
 
 
 
 
 
(3,764
)
Diversification of share awards within deferred compensation plan
 
 
1,668

 
1,352

 
 
 
 
 
 
 
3,020

Conversions of operating partnership units
 
 
16

 
 
 
 
 
 
 
(16
)
 

Cash distributions declared to equity holders
 
 
 
 
(62,928
)
 
 
 
 
 
(1,328
)
 
(64,256
)
Purchase of non-controlling interests
 
 
(9,480
)
 
 
 
 
 
 
 
(20
)
 
(9,500
)
       Other
 
 
(38
)
 
 
 
 
 
 
 
 
 
(38
)
Equity, March 31, 2015
$
976

 
$
3,656,105

 
$
(403,518
)
 
$
(388,181
)
 
$
(2,382
)
 
$
76,909

 
$
2,939,909


See Notes to Condensed Consolidated Financial Statements.

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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, 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.

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CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended
 
March 31,
(in thousands)
2015
 
2014
Cash flows from operating activities
 
 
 
Net income
$
121,065

 
$
41,073

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization
61,530

 
57,396

Gain on sale of operating properties, including land
(85,192
)
 
(354
)
Distributions of income from joint ventures
1,203

 
3,873

Equity in income of joint ventures
(1,382
)
 
(4,290
)
Share-based compensation
3,919

 
3,626

Amortization of deferred financing costs
798

 
841

Net change in operating accounts and other
(25,405
)
 
(8,146
)
Net cash from operating activities
$
76,536

 
$
94,019

Cash flows from investing activities
 
 
 
Proceeds from sales of operating properties, including land
112,180

 
5,749

Development and capital improvements
(97,754
)
 
(110,085
)
Distributions from investments in joint ventures
82

 
5,853

Other
(366
)
 
(743
)
Net cash from investing activities
$
14,142

 
$
(99,226
)
Cash flows from financing activities
 
 
 
Distributions to common shareholders and non-controlling interests
$
(60,386
)
 
$
(56,787
)
Purchase of non-controlling interests
(9,500
)
 

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
(714
)
 
(1,087
)
Net decrease in accounts receivable – affiliates
325

 
1,579

Other
32

 
476

Net cash from financing activities
$
(70,243
)
 
$
4,181

Net increase (decrease) in cash and cash equivalents
20,435

 
(1,026
)
Cash and cash equivalents, beginning of period
153,918

 
17,794

Cash and cash equivalents, end of period
$
174,353

 
$
16,768

Supplemental information
 
 
 
Cash paid for interest, net of interest capitalized
$
14,420

 
$
5,307

Supplemental schedule of noncash investing and financing activities
 
 
 
Distributions declared but not paid
$
64,261

 
$
59,728

Value of shares issued under benefit plans, net of cancellations
17,297

 
18,502

Net change in redemption of non-qualified share awards
2,412

 
10,694

Accrual associated with construction and capital expenditures
25,637

 
22,111

See Notes to Condensed Consolidated Financial Statements.


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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, 2015, we owned interests in, operated, or were developing 180 multifamily properties comprised of 62,452 apartment homes across the United States. Of the 180 properties, 12 properties were under construction, and when completed will consist of a total of 4,006 apartment homes. We also own land holdings which 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 indicate we do not have a controlling financial interest. We did not have any interests in VIEs at March 31, 2015 or December 31, 2014.

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 2014 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, 2015 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.

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The carrying values of below market leases and in-place leases at March 31, 2015 and December 31, 2014 are as follows:
 
March 31,
 
December 31,
(in millions)
2015
 
2014
Below market leases (Gross carrying value)
$
0.5

 
$
0.5

Accumulated amortization
(0.5
)
 
(0.4
)
Value of below market leases, net
$

 
$
0.1

 
 
 
 
In-place leases (Gross carrying value)
$
3.0

 
$
3.0

Accumulated amortization
(2.8
)
 
(2.5
)
Value of in-place leases, net
$
0.2

 
$
0.5

Revenues recognized related to below market leases and amortization expense related to in-place leases for the three months ended March 31, 2015 and 2014 are as follows:
 
 
Three Months Ended
 
 
March 31,
(in millions)
 
2015
 
2014
Revenues related to below market leases
 
$
0.1

 
$
0.2

Amortization of in-place leases
 
$
0.3

 
$
1.0

The weighted average amortization period of below market leases and in-place leases was approximately eight months and seven months for the three months ended March 31, 2015 and 2014, 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, 2015 or 2014.

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 prepare the underlying real estate 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

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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 $5.3 million and $4.9 million for the three months ended March 31, 2015 and 2014, respectively. Capitalized real estate taxes were approximately $0.9 million and $1.6 million for the three months ended March 31, 2015 and 2014, respectively.

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.” Non-recurring fair value disclosures are not provided for impairments on assets disposed during the period because they are no longer owned by us. The inputs associated with the valuation of long-lived assets are generally included in Level 3 of the fair value hierarchy, unless a quoted price for a similar long-lived asset in an active market exists, at which time they are included in Level 2 of the fair value hierarchy.
Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-09 ("ASU 2014-09"), "Revenue from Contracts with Customers." ASU 2014-09 provides a single comprehensive revenue recognition model for contracts with customers (excluding certain contracts, such as lease contracts) to improve comparability within industries. ASU 2014-09 requires an entity to recognize revenue to reflect the transfer of goods or services to customers at an amount the entity expects to be paid in exchange for those goods and services and provide enhanced disclosures, all to provide more comprehensive guidance for transactions such as service revenue and contract modifications. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2016 and may be applied using either a full retrospective or a modified approach upon adoption. We expect to adopt ASU 2014-09 as of January 1, 2017 and are currently evaluating the impact this standard may have on our financial statements.

In February 2015, the FASB issued Accounting Standards Update 2015-02 ("ASU 2015-02"), "Amendments to the Consolidation Analysis." ASU 2015-02 changes the analysis a reporting entity must perform to determine whether it should

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consolidate certain types of legal entities. ASU 2015-02 modifies whether limited partnerships and similar entities are VIEs or voting interest entities and eliminates the presumption a general partner should consolidate a limited partnership. ASU 2015-02 is effective for interim and annual periods beginning after December 15, 2015, with early adoption permitted. We expect to adopt ASU 2015-02 as of January 1, 2016 and do not expect it to have a material effect on our financial statements.

In April 2015, the FASB issued Accounting Standards Update 2015-03 ("ASU 2015-03"), "Simplifying the Presentation of Debt Issuance Costs." ASU 2015-03 requires all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt rather than being recorded as a deferred charge and presented as an asset. ASU 2015-03 is effective for interim and annual periods beginning after December 15, 2015, with early adoption permitted, and retrospective application required. We expect to adopt ASU 2015-03 as of January 1, 2016 and do not expect it to have a material impact on our financial statements.

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 1.5 million and 2.1 million for the three months ended March 31, 2015 and 2014, 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)
 
2015
 
2014
Earnings per common share calculation – basic
 
 
 
 
Net income attributable to common shareholders
 
$
115,599

 
$
40,036

Amount allocated to participating securities
 
(1,052
)
 
(352
)
Net income attributable to common shareholders – basic
 
$
114,547

 
$
39,684

 
 
 
 
 
Earnings per common share – basic
 
$
1.29

 
$
0.45

 
 
 
 
 
Weighted average number of common shares outstanding – basic
 
88,987

 
87,651

 
 
 
 
 
Earnings per common share calculation – diluted
 
 
 
 
Net income attributable to common shareholders, net of
amount allocated to participating securities
 
$
114,547

 
$
39,684

Income allocated to common units from continuing operations
 
766

 
310

Net income attributable to common shareholders – diluted
 
$
115,313

 
$
39,994

 
 
 
 


Earnings per common share – diluted
 
$
1.27

 
$
0.45

 
 
 
 
 
Weighted average number of common shares outstanding – basic
 
88,987

 
87,651

Incremental shares issuable from assumed conversion of:
 
 
 
 
Common share options and share awards granted
 
391

 
360

Common units
 
1,086

 
813

Weighted average number of common shares outstanding – diluted
 
90,464

 
88,824


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4. Common Shares
In November 2014, 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 $331.3 million (the "2014 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. We intend to use the net proceeds from any future sales under the 2014 ATM program for general corporate purposes, which may include reducing future borrowings under our $500 million unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development, redevelopment and investment projects and financing for acquisitions.
 
There were no shares sold during the three months ended March 31, 2015 or 2014. As of the date of this filing, we had common shares having an aggregate offering price of up to $315.3 million remaining available for sale under the 2014 ATM program. No shares were sold subsequent to March 31, 2015 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, 2015, we had approximately 86.8 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding.
5. Acquisitions and Dispositions
Acquisition of Land. We did not acquire any land in the first quarter of 2015. In January 2014, we acquired approximately 2.9 acres of land located in Houston, Texas for approximately $15.6 million.
In April 2015, we signed an agreement to acquire approximately 50.0 acres of land located in Phoenix, Arizona for approximately $36.3 million.

Acquisition of Non-Controlling Ownership Interest. In March 2015, we purchased the remaining 0.01% non-controlling interest in two fully consolidated joint ventures, which own an aggregate 798 units located in College Park, Maryland and Irvine, California, for approximately $9.5 million. The acquisitions of the remaining ownership interest were recorded as equity transactions and, as a result, the carrying balances of the non-controlling interest were eliminated and the remaining difference between the purchase price and carrying balance was recorded as a reduction in additional paid-in capital. See Note 13, "Non-controlling Interests," for the effect of changes in ownership interests of these joint ventures on the equity attributable to common shareholders.

Land Holding Dispositions. In March 2015, we sold a land holding adjacent to an operating property in Dallas, Texas for approximately $0.4 million and recognized a gain of approximately $0.1 million. In March 2014, we sold approximately 3.0 acres of land adjacent to a development community in Atlanta, Georgia for approximately $6.3 million and recognized a gain of approximately $0.4 million.

Sale of Operating Properties. In January 2015, we sold two operating properties, which were included in properties held for sale at December 31, 2014, comprised of 1,116 apartment homes located in Tampa, Florida and Austin, Texas for approximately $114.4 million and we recognized a gain of approximately $85.1 million relating to these property sales.

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, 2015, December 31, 2014 and March 31, 2014. The two joint ventures are two discretionary investment funds (the "funds"), in which we had a 31.3% ownership interest at March 31, 2015 and December 31, 2014, and a 20% ownership interest at March 31, 2014. We provide property and asset management and other services to the joint ventures which own operating properties and we may also provide construction and development services to the joint ventures which own properties under development. The following table summarizes the combined balance sheet and statement of income data for the unconsolidated joint ventures as of and for the periods presented:

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(in millions)
March 31, 2015
 
December 31, 2014
Total assets
$
751.6

 
$
757.8

Total third-party debt
527.3

 
523.6

Total equity
203.9

 
203.3

 
Three Months Ended
 
March 31,
 (in millions)
2015
 
2014
Total revenues (1)
$
27.5

 
$
25.1

Gain on sale of operating properties, net of tax

 
18.5

Net income
2.7

 
20.0

Equity in income (2)
1.4

 
4.3

 
(1)
Excludes approximately $1.1 million for the three months ended March 31, 2014, related to the sale of two operating properties by the funds during the first quarter of 2014.
(2)
Equity in income excludes our ownership interest of fee income from various services provided by us to the funds.

The funds have been funded in part with secured third-party debt. As of March 31, 2015, 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. Fees earned for these services were approximately $1.4 million and $2.7 million for the three months ended March 31, 2015 and 2014, respectively. We eliminate fee income for services provided to these joint ventures to the extent of our ownership.

In March 2015, we completed the formation of a third discretionary investment fund ("Fund III") with an unaffiliated third party for additional multifamily investments of up to $450.0 million (including leverage of approximately 70% of the estimated value of the underlying real estate). Our ownership in this unconsolidated joint venture is 20%. As of March 31, 2015, Fund III owned no properties.

In February 2014, two of the funds each sold an operating property, comprised of an aggregate of 558 apartment homes, for an aggregate of 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:
(in millions)
 
March 31,
2015
 
December 31, 2014
Senior unsecured notes
 
 
 
 
5.08% Notes, due 2015
 
$
249.9

 
$
249.9

5.75% Notes, due 2017
 
246.5

 
246.5

4.70% Notes, due 2021
 
249.0

 
249.0

3.07% Notes, due 2022
 
347.1

 
347.0

5.00% Notes, due 2023
 
247.9

 
247.8

4.27% Notes, due 2024
 
249.6

 
249.6

3.59% Notes, due 2024
 
248.2

 
248.1

 
 
$
1,838.2

 
$
1,837.9

 
 
 
 
 
Secured notes
 
 
 
 
0.95% – 5.63% Conventional Mortgage Notes, due 2018 – 2045
 
870.6

 
870.9

Tax-exempt Mortgage Note, due 2028 (1.26% floating rate)
 
34.3

 
34.7

 
 
904.9

 
905.6

Total notes payable
 
$
2,743.1

 
$
2,743.5

 
 
 
 
 
Other floating rate debt included in secured notes (0.95%)
 
$
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, 2015, we had no balance outstanding on our $500 million unsecured line of credit and we had outstanding letters of credit totaling approximately $6.4 million, leaving approximately $493.6 million available under our unsecured line of credit.

At March 31, 2015 and 2014, we had outstanding floating rate debt of approximately $209.4 million and $270.9 million, respectively, which includes our unsecured line of credit and short-term borrowings, and the weighted average interest rate on such debt was approximately 1.0% for each of the three months ended March 31, 2015 and 2014.


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Our indebtedness had a weighted average maturity of 6.1 years at March 31, 2015. Set forth below is a summary of the maturity dates of our outstanding debt and principal amortizations, and the weighted average interest rates on such debt, at March 31, 2015, were as follows: 
(in millions)
 
Amount
 
Weighted Average 
Interest Rate
2015
 
$
251.4

 
5.1
%
2016 (1)
 
2.0

 

2017
 
249.0

 
5.8

2018
 
177.4

 
1.0

2019
 
646.5

 
5.3

Thereafter
 
1,416.8

 
4.0

Total
 
$
2,743.1

 
4.4
%

(1)
Includes only scheduled principal amortizations.

8. Share-based Compensation and Non-Qualified Deferred Compensation Plan
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 (as amended, 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
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, 2015, approximately 4.7 million fungible units were available under the 2011 Share Plan, which results in approximately 1.4 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.

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. New options are exercisable, subject to the terms and conditions of the plan, in increments ranging from 20% to 33.33% per year on each of the anniversaries of the date of grant. The plan provides that the exercise price of an option will be determined by the Compensation Committee of the Board of Trust Managers on the day of grant, and to date all options have been granted at an exercise price that equals the fair market value on the date of grant. Approximately 0.1 million and 0.2 million options were exercised during the three months ended March 31, 2015 and 2014, respectively. The total intrinsic value of options exercised was approximately $2.0 million and $3.6 million during the three months ended March 31, 2015 and 2014, respectively. At March 31, 2015, there was no unrecognized compensation cost related to unvested options. At March 31, 2015, all options outstanding were exercisable and had a weighted average remaining life of approximately 3.9 years.


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The following table summarizes outstanding share options, all of which were exercisable, at March 31, 2015:
 
 
Options Outstanding and Exercisable (1)
Range of Exercise Prices
 
Number
 
Weighted
Average Price
$30.06
 
105,015

 
$
30.06

$41.16 - $43.94
 
119,242

 
42.46

$48.02 - $75.17
 
70,948

 
60.92

Total options
 
295,205

 
$
42.49

 

(1)
The aggregate intrinsic value of options outstanding and exercisable at March 31, 2015 was $10.5 million. The aggregate intrinsic value was calculated as the excess, if any, between our closing share price of $78.13 per share on March 31, 2015 and the strike price of the underlying award.

Options Granted and Valuation Assumptions. During the three months ended March 31, 2015, we granted approximately 26.8 thousand 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, 2015 vested immediately and approximately $0.2 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, 2015:
 
Three Months Ended
 
March 31, 2015
Weighted average fair value of options granted
$5.52 - $7.38
Expected volatility
16.5% - 18.8%
Risk-free interest rate
1.0% - 1.3%
Expected dividend yield
3.5% - 3.7%
Expected life
3 years - 4 years

Our computation of expected volatility for 2015 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 generally based on the market value of the shares on the date of grant and is amortized over the vesting period. In the event the holder of the share awards will reach both the retirement eligibility age of 65 years and the service requirements as defined in the 2011 Share Plan before the term in which the awards are scheduled to vest, the value of the share awards is amortized from the date of grant to the individual's retirement eligibility date. To estimate forfeitures, we use actual forfeiture history. At March 31, 2015, the unamortized value of previously issued unvested share awards was approximately $47.3 million, which is expected to be amortized over the next four years. The total fair value of shares vested during the three months ended March 31, 2015 and 2014 was approximately $17.6 million and $15.5 million, respectively.

Total compensation cost for option and share awards charged against income was approximately $4.1 million and $3.8 million for the three months ended March 31, 2015 and 2014, respectively. Total capitalized compensation cost for option and share awards was approximately $0.8 million and $0.6 million for the three months ended March 31, 2015 and 2014, respectively.


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The following table summarizes activity under our share incentive plans for the three months ended March 31, 2015:
 
 
Options
Outstanding
 
Weighted
Average
Exercise /
Grant Price
 
Nonvested
Share
Awards
Outstanding
 
Weighted
Average
Exercise /  Grant Price
Options and nonvested share awards outstanding at December 31, 2014
321,811

 
$
38.97

 
818,943

 
$
63.39

Granted
26,752

 
75.17

 
233,902

 
74.40

Exercised/Vested
(53,358
)
 
37.69

 
(292,195
)
 
60.24

Forfeited

 

 
(1,570
)
 
65.93

Total options and nonvested share awards outstanding at March 31, 2015
295,205

 
$
42.49

 
759,080

 
$
67.99


Non-Qualified Deferred Compensation Plan. In February 2014, we adopted the Second Amended and Restated Camden Property Trust Non-Qualified Deferred Compensation Plan to clarify certain terms in the existing plan relating to the deferral of performance based compensation. As a result of such action, the fully vested awards and the proportionate
share of nonvested awards eligible for diversification were 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 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, 2015:
 
 
Three Months Ended
(in thousands)
 
March 31, 2015
Temporary equity:
 
 
Balance at December 31, 2014
 
$
68,134

Change in classification
 
1,024

Change in redemption value
 
3,764

Diversification of share awards
 
(3,020
)
Balance at March 31, 2015
 
$
69,902


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9. Net Change in Operating Accounts
The effect of changes in the operating and other accounts on cash flows from operating activities is as follows:
 
Three Months Ended
  
March 31,
(in thousands)
2015
 
2014
Change in assets:
 
 
 
Other assets, net
$
5,498

 
$
2,313

Change in liabilities:
 
 
 
Accounts payable and accrued expenses
(14,289
)
 
5,965

Accrued real estate taxes
(15,857
)
 
(13,714
)
Other liabilities
(1,049
)
 
(2,953
)
Other
292

 
243

Change in operating accounts and other
$
(25,405
)
 
$
(8,146
)

10. Commitments and Contingencies
Construction Contracts. As of March 31, 2015, we estimate the additional cost to complete 11 consolidated projects currently under construction to be approximately $394.0 million. We expect to fund this amount through a combination of cash flows generated from operations, draws on our unsecured credit facility, 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. We are 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 Commitments and 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 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, 2015, we had earnest money deposits of approximately $1.3 million for potential acquisitions of land which are included in other assets, net in our condensed consolidated balance sheets. Approximately $1.0 million of these deposits was non-refundable. In April 2015, concurrent with executing an agreement to acquire approximately 50.0 acres of land located in Phoenix, Arizona, we made a one-time non-refundable payment of approximately $11.9 million.

Lease Commitments. At March 31, 2015, we had long-term leases covering certain land, office facilities, and equipment. Rental expense totaled approximately $0.8 million and $0.7 million for the three months ended March 31, 2015 and 2014, respectively. Minimum annual rental commitments for the remainder of 2015 are $1.6 million, and for the years ending December 31, 2016 through 2019 are approximately $2.7 million, $2.7 million, $2.5 million, and $2.3 million, respectively, and approximately $13.1 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

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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 may be 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, and excise taxes. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal, state, and local income 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, 2015 and 2014 as income tax expense. Income taxes for the three months ended March 31, 2015 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, 2015.

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, 2015 and December 31, 2014 using the inputs and fair value hierarchy discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements."
 
Financial Instruments Measured at Fair Value on a Recurring Basis
 
March 31, 2015
 
December 31, 2014
(in millions)
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
 
Total
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation plan investments (1)
$
60.2

 
$

 
$

 
$
60.2

 
$
56.1

 
$

 
$

 
$
56.1

(1)
Approximately $2.2 million of participant cash was withdrawn from our deferred compensation plan investments during the three months ended March 31, 2015.

Financial Instrument Fair Value Disclosures. As of March 31, 2015 and December 31, 2014, 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,

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interest rate and spread assumptions reflect current credit worthiness 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, 2015 and December 31, 2014:
 
March 31, 2015
 
December 31, 2014
(in millions)
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Fixed rate notes payable
$
2,533.7

 
$
2,687.1

 
$
2,533.8

 
$
2,666.1

Floating rate notes payable
209.4

 
202.5

 
209.7

 
203.7


Non-recurring Fair Value Measurements. There were no events during the three months ended March 31, 2015 or 2014 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."

13. Non-controlling Interests

The following table summarizes the effect of changes in our ownership interest in subsidiaries on the equity attributable to common shareholders for the periods indicated:
 
 
Three Months Ended
 
 
March 31,
(in thousands)
 
2015
 
2014
Net income attributable to common shareholders
 
$
115,599

 
40,036

Transfers from non-controlling interests:
 
 
 
 
Increase in equity for conversion of operating partnership units
 
16

 

Decrease in additional paid-in capital for purchase of remaining non-controlling ownership interests in two consolidated joint ventures (1)
 
(9,480
)
 

Change in common equity and net transfers from non-controlling interests
 
$
106,135

 
$
40,036

(1)
Refer to Note 5, "Acquisitions and Dispositions," for further discussion of acquisitions.

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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, 2014. 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, but instead 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, either nationally or regionally in one or more of the markets in which we operate, could adversely impact us;
short-term leases expose us to the effects of declining market rents;
competition could limit our ability to lease apartments or increase or maintain rental income;
we face risks associated with land holdings and related activities;
we could be negatively impacted by the elimination of Fannie Mae or Freddie Mac;
development, redevelopment and construction risks could impact our profitability;
investments through joint ventures and discretionary funds involve risks not present in investments in which we are the sole investor;
competition could adversely affect our ability to acquire properties;
our acquisition strategy may not produce the cash flows expected;
tax matters, including failure to qualify as a REIT, could have adverse consequences;
losses from catastrophes may exceed our insurance coverage;
a cybersecurity incident and other technology disruptions could negatively impact our business;
we have significant debt, which could have important adverse consequences;
insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders;
issuances of additional debt may adversely impact our financial condition;
we may be unable to renew, repay, or refinance our outstanding debt;
variable rate debt is subject to interest rate risk;
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 and 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, 2015, we owned interests in, operated, or were developing 180 multifamily properties comprised of 62,452 apartment homes across the United States as detailed in the following Property Portfolio table. In addition, we own other land holdings which we may develop into multifamily apartment communities in the future.
Property Operations
Our results for the three months ended March 31, 2015 reflect an increase in same store revenues of 4.6% as compared to the same period in 2014. We believe this increase was due to the continuation of improving economic conditions, including job growth, favorable demographics, a manageable supply of new multifamily housing and more individuals choosing to rent versus buy as evidenced by the moderating level of homeownership rates, all of which have resulted in higher rental rates and average occupancy levels. We believe U.S. economic and employment growth is likely to continue during the remainder of 2015 and the supply of new multifamily homes, although increasing, will likely remain at manageable levels. If economic conditions were to worsen, our operating results could be adversely affected.
Construction Activity
At March 31, 2015, we had a total of 12 projects under construction to be comprised of 4,006 apartment homes, with initial occupancy scheduled to occur within the next 25 months. The 12 projects included 11 projects which were consolidated and one project, to be comprised of 266 apartment homes, which was owned by one of the discretionary funds ("the funds"), in which we have a 31.3% interest. As of March 31, 2015, we estimate the additional cost to complete the construction of 11 consolidated projects to be approximately $394.0 million.
Acquisitions
In April 2015, we signed an agreement to acquire approximately 50.0 acres of land located in Phoenix, Arizona for approximately $36.3 million.
Dispositions
In January 2015, we sold two operating properties, which were included in properties held for sale at December 31, 2014, comprised of 1,116 apartment homes located in Tampa, Florida and Austin, Texas for approximately $114.4 million and recognized a gain of approximately $85.1 million relating to these property sales.
Future Outlook
Subject to market conditions, we intend to continue to seek opportunities to develop and acquire existing communities. We also intend to 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, 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") share offering program, other unsecured borrowings, and secured mortgages.
As of March 31, 2015, we had approximately $174.4 million in cash and cash equivalents and no balances outstanding on our $500 million unsecured line of credit and, as of the date of this filing, we had common shares having an aggregate offering price of up to $315.3 million remaining available for sale under our 2014 ATM program. We believe debt maturing in 2015 is manageable at $251.4 million, which represents approximately 9% of our total outstanding debt and includes scheduled principal amortizations of approximately $1.4 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, 2015
 
December 31, 2014
 
Apartment Homes    
 
Properties    
 
Apartment
 Homes    
 
Properties    
Operating Properties
 
 
 
 
 
 
 
Houston, Texas
8,434
 
24
 
8,434
 
24
Washington, D.C. Metro
6,405
 
19
 
6,405
 
19
Dallas, Texas
5,243
 
13
 
5,243
 
13
Las Vegas, Nevada
4,918
 
15
 
4,918
 
15
Tampa, Florida
4,048
 
10
 
4,880
 
11
Atlanta, Georgia
3,867
 
12
 
3,867
 
12
Orlando, Florida
3,540
 
9
 
3,540
 
9
Austin, Texas
3,360
 
10
 
3,030
 
9
Raleigh, North Carolina
3,054
 
8
 
3,054
 
8
Southeast Florida
2,781
 
8
 
2,781
 
8
Charlotte, North Carolina
2,487
 
11
 
2,487
 
11
Los Angeles/Orange County, California
2,481
 
6
 
2,481
 
6
Phoenix, Arizona
2,315
 
8
 
2,315
 
8
Denver, Colorado
1,941
 
6
 
1,941
 
6
Corpus Christi, Texas
1,907
 
4
 
1,907
 
4
San Diego/Inland Empire, California
1,665
 
5
 
1,665
 
5
Total Operating Properties
58,446
 
168
 
58,948
 
168
Properties Under Construction
 
 
 
 
 
 
 
Denver, Colorado
691
 
2
 
691
 
2
Phoenix, Arizona
614
 
2
 
614
 
2
Los Angeles/Orange County, California
590
 
2
 
590
 
2
Charlotte, North Carolina
589
 
2
 
589
 
2
Dallas, Texas
423
 
1
 
423
 
1
Washington, D.C. Metro
405
 
1
 
 
Atlanta, Georgia
379
 
1
 
379
 
1
Houston, Texas
315
 
1
 
315
 
1
Austin, Texas
 
 
614
 
2
Total Properties Under Construction
4,006
 
12
 
4,215
 
13
Total Properties
62,452
 
180
 
63,163
 
181
Less: Unconsolidated Joint Venture Properties (1)
 
 
 
 
 
 
 
Houston, Texas
2,522
 
8
 
2,522
 
8
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
Corpus Christi, Texas
270
 
1
 
270
 
1
Charlotte, North Carolina (2)
266
 
1
 
266
 
1
Atlanta, Georgia
234
 
1
 
234
 
1
Total Unconsolidated Joint Venture Properties
7,278
 
22
 
7,278
 
22
Total Properties Fully Consolidated
55,174
 
158
 
55,885
 
159
 

(1)
Refer to Note 6, “Investments in Joint Ventures,” in the notes to Condensed Consolidated Financial Statements for further discussion of our joint venture investments.
(2)
Represents a property under development owned by one of the funds. See communities under construction below for details.


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Dispositions
During the three months ended March 31, 2015, we sold two consolidated operating properties as follows:
Dispositions of Consolidated Operating Properties
 
Location
 
Number of Apartment Homes
 
Date of Disposition
Camden Ridgecrest
 
Austin, TX
 
284
 
1/15/2015
Camden Bayside
 
Tampa, FL
 
832
 
1/30/2015
Consolidated total
 
 
 
1,116
 
 
Stabilized Communities
We generally consider a property stabilized once it reaches 90% occupancy. We had no properties reach stabilization during the three months ended March 31, 2015.
Completed Construction in Lease-Up
At March 31, 2015, we had four consolidated completed operating properties in lease-up as follows:
($ in millions)
Property and Location
Number of
Apartment
Homes
 
Cost
Incurred
 
% Leased at 4/26/2015
 
Date of
Construction
Completion
 
Estimated
Date of
Stabilization
Consolidated Operating Property
 
 
 
 
 
 
 
 
 
Camden Boca Raton
 
 
 
 
 
 
 
 
 
Boca Raton, FL
261
 
$51.5
 
      95% (1)
 
4Q14
 
2Q15
Camden Foothills
 
 
 
 
 
 
 
 
 
Scottsdale, AZ
220
 
44.4
 
71%
 
4Q14
 
3Q15
Camden La Frontera
 
 
 
 
 
 
 
 
 
Round Rock, TX
300
 
35.6
 
96% (1)
 
1Q15
 
2Q15
Camden Lamar Heights
 
 
 
 
 
 
 
 
 
Austin, TX
314
 
46.5
 
87%
 
1Q15
 
3Q15
Consolidated total
1,095
 
$178.0
 
 
 
 
 
 
(1)
Property reached stabilization subsequent to March 31, 2015.
Properties Under Development and Land
Our condensed consolidated balance sheet at March 31, 2015 included approximately $519.5 million related to properties under development and land. Of this amount, approximately $422.9 million related to our projects currently under construction. In addition, we had approximately $96.6 million primarily invested in land held for future development and land holdings, which included approximately $85.6 million related to projects we expect to begin constructing during the next three years, and approximately $11.0 million invested in land holdings which we may develop in the future.

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Table of Contents

Communities Under Construction. At March 31, 2015, we had 11 consolidated properties and one property held by one of the funds, in which we own a 31.3% interest, 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
Consolidated Communities Under Construction
 
 
 
 
 
 
 
 
 
 
 
Camden Flatirons (1)
 
 
 
 
 
 
 
 
 
 
 
Denver, CO
424
 
$78.0
 
$77.7
 
$24.1
 
2Q15
 
3Q16
Camden Paces (2)
 
 
 
 
 
 
 
 
 
 
 
Atlanta, GA
379
 
110.0
 
104.2
 
50.0
 
3Q15
 
4Q16
Camden Hayden (3)
 
 
 
 
 
 
 
 
 
 
 
Tempe, AZ
234
 
48.0
 
43.4
 
16.4
 
2Q15
 
4Q15
Camden Chandler (4)
 
 
 
 
 
 
 
 
 
 
 
Chandler, AZ
380
 
75.0
 
48.6
 
35.0
 
1Q16
 
1Q17
Camden Glendale (5)
 
 
 
 
 
 
 
 
 
 
 
Glendale, CA
303
 
115.0
 
107.3
 
100.6
 
3Q15
 
1Q16
Camden Gallery
 
 
 
 
 
 
 
 
 
 
 
Charlotte, NC
323
 
58.0
 
34.6
 
34.6
 
1Q16
 
3Q16
Camden Victory Park
 
 
 
 
 
 
 
 
 
 
 
Dallas, TX
423
 
82.0
 
40.9
 
40.9
 
1Q16
 
1Q18
The Camden
 
 
 
 
 
 
 
 
 
 
 
Los Angeles, CA
287
 
145.0
 
72.9
 
72.9
 
4Q16
 
2Q17
Camden Lincoln Station
 
 
 
 
 
 
 
 
 
 
 
Denver, CO
267
 
56.0
 
9.8
 
9.8
 
2Q17
 
1Q18
Camden McGowen Station
 
 
 
 
 
 
 
 
 
 
 
Houston, TX
315
 
90.0
 
11.8
 
11.8
 
4Q17
 
1Q19
Camden NoMa II
 
 
 
 
 
 
 
 
 
 
 
Washington, DC
405
 
115.0
 
26.8
 
26.8
 
4Q17
 
4Q19
Consolidated total
3,740
 
$972.0
 
$578.0
 
$422.9
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Community Under Construction
 
 
 
 
 
 
 
 
 
 
 
Camden Southline (6)
 
 
 
 
 
 
 
 
 
 
 
Charlotte, NC
266
 
$48.0
 
$41.7
 
$32.5
 
3Q15
 
1Q16
 

(1)
Property in lease-up and was 55% leased at April 26, 2015.
(2)
Property in lease-up and was 43% leased at April 26, 2015.
(3)
Property in lease-up and was 33% leased at April 26, 2015.
(4)
Property in lease-up and was 15% leased at April 26, 2015.
(5)
Property in lease-up and was 5% leased at April 26, 2015.
(6)
Property owned through an unconsolidated joint venture in which we own a 31.3% interest. Property in lease-up and was 22% leased at April 26, 2015.







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Table of Contents

Development Pipeline Communities. At March 31, 2015, we had the following consolidated communities undergoing development activities:
($ in millions)
Property and Location
Projected Homes
 
Total Estimated Cost (1)
 
Cost to Date
Camden Shady Grove
 
 
 
 
 
Rockville, MD
457
 
$116.0
 
$32.3
Camden Buckhead
 
 
 
 
 
Atlanta, GA
336
 
80.0
 
21.3
Camden Conte (2)
 
 
 
 
 
Houston, TX
519
 
170.0
 
19.1
Camden Atlantic
 
 
 
 
 
Plantation, FL
286
 
62.0
 
12.9
Total
1,598
 
$428.0
 
$85.6
(1)
Represents our estimate of total costs we expect to incur on these projects. However, forward-looking statements are not guarantees of future performance, results, or events. Although we believe these expectations are based upon reasonable assumptions, future events rarely develop exactly as forecasted, and estimates routinely require adjustment.
(2)
The property will be developed in two phases. The estimated units, estimated cost, and cost to date represent both phases.

Land Holdings. At March 31, 2015, we had the following land holdings:
($ in millions)
Location
Acres
 
Cost to Date
Las Vegas, NV
19.6
 
$4.2
Tampa, FL
4.8
 
1.5
Other (1)
 
5.3
Total
24.4

$11.0
(1)
Includes development opportunities in the early phase of the development process for which we either have an option to acquire land or enter into a leasehold interest, or for which we are the buyer under a contract to purchase land.

Results of Operations
Changes in revenues and expenses related to our operating properties from period to period are due primarily to the performance of stabilized properties in the portfolio, the lease-up of newly constructed properties, acquisitions, and dispositions. Where appropriate, comparisons of income and expense for communities included in continuing operations are made on a dollars-per-weighted average apartment home basis in order to adjust for such changes in the number of apartment homes owned during each period. Selected weighted averages for the three months ended March 31, 2015 and 2014 are as follows:
 
($ in thousands)
Three Months Ended
March 31,
2015
 
2014
Average monthly property revenue per apartment home
$
1,393

 
$
1,304

Annualized total property expenses per apartment home
$
6,083

 
$
5,646

Weighted average number of operating apartment homes owned 100%
51,558

 
52,659

Weighted average occupancy of operating apartment homes owned 100% *
95.6%

 
95.6
%
*
Our one student housing community is excluded from this calculation.


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Table of Contents

Property-Level Operating Results (1)
The following tables present the property-level revenues and property-level expenses for the three months ended March 31, 2015 as compared to the same period in 2014:
($ in thousands)
Apartment
Homes at
 
Three Months Ended March 31,
 
Change
3/31/2015
 
2015
 
2014
 
$
 
%
Property revenues:
 
 
 
 
 
 
 
 
 
Same store communities
47,878

 
$
198,132

 
$
189,405

 
$
8,727

 
4.6
 %
Non-same store communities
2,461

 
10,262

 
6,440

 
3,822

 
59.3

Development and lease-up communities
4,835

 
4,908

 
3

 
4,905

 
*
Dispositions/other

 
2,132

 
10,081

 
(7,949
)
 
(78.9
)
Total property revenues
55,174

 
$
215,434

 
$
205,929

 
$
9,505

 
4.6
 %
Property expenses:
 
 
 
 
 
 
 
 
 
Same store communities
47,878

 
$
71,825

 
$
67,657

 
$
4,168

 
6.2
 %
Non-same store communities
2,461

 
3,125

 
2,502

 
623

 
24.9

Development and lease-up communities
4,835

 
2,595

 
17

 
2,578

 
*
Dispositions/other

 
866

 
4,148

 
(3,282
)
 
(79.1
)
Total property expenses
55,174

 
$
78,411

 
$
74,324

 
$
4,087

 
5.5
 %
*
Not a meaningful percentage
(1)
Same store communities are communities we owned and were stabilized as of January 1, 2014. Non-same store communities are stabilized communities not owned or stabilized as of January 1, 2014. Development and lease-up communities are non-stabilized communities we have acquired or developed since January 1, 2014. Dispositions/other includes operating properties sold subsequent to January 1, 2014 and also includes results from non-multifamily rental properties, below market lease amortization related to acquired communities, and expenses related to land holdings not under active development.
Same Store Analysis
Same store rental revenues increased approximately $7.0 million during the three months ended March 31, 2015, as compared to the same period in 2014. The increase was primarily due to a 4.1% increase in average rental rates for our same store portfolio during the three months ended March 31, 2015, as compared to the same period in 2014. We believe the increase to rental revenue was due in part to more individuals choosing to rent verses buy as evidenced by the moderating level of homeownership levels and the continuation of improving economic conditions, including job growth, favorable demographics, and a manageable supply of new multifamily housing. Additionally, there was a $1.7 million increase in other property revenue during the three months ended March 31, 2015, as compared to the same period in 2014, primarily due to an increase in miscellaneous income and income from our bulk internet rebilling program.

Property expenses from our same store communities increased approximately $4.2 million, or 6.2%, for the three months ended March 31, 2015, as compared to the same period in 2014. The increase was primarily due to higher real estate taxes as a result of increased property valuations and property tax rates at a number of our communities during the three months ended March 31, 2015. The increase was also due to higher salaries, higher bulk internet rebilling program expenses and higher repair and maintenance costs.


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Table of Contents

Non-same Store and Development and Lease-up Analysis
Property revenues from non-same store and development and lease-up communities increased approximately $8.7 million for the three months ended