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Section 1: 10-Q (10-Q)

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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
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)
 
 
TX
 
76-6088377
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
11 Greenway Plaza, Suite 2400
Houston,
TX
 
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)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Shares of Beneficial Interest, $.01 par value
CPT
NYSE
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 every Interactive Data File required to be submitted 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).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer", "accelerated filer", and "small reporting company" in Rule 12b-2 of the Exchange Act. (Check one): 
Large Accelerated Filer
 
ý
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨
Smaller Reporting Company
 
¨
 
 
 
 
 
 
 
 
 
Emerging Growth Company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected to not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant of Section 13(a) of the Exchange Act. ¨
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 October 25, 2019, 96,831,663 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
 
 
 


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)
September 30,
2019
 
December 31, 2018
Assets
 
 
 
Real estate assets, at cost
 
 
 
Land
$
1,158,342

 
$
1,098,526

Buildings and improvements
7,242,256

 
6,935,971

 
$
8,400,598

 
$
8,034,497

Accumulated depreciation
(2,638,693
)
 
(2,403,149
)
Net operating real estate assets
$
5,761,905

 
$
5,631,348

Properties under development, including land
440,917

 
293,978

Investments in joint ventures
21,715

 
22,283

Total real estate assets
$
6,224,537

 
$
5,947,609

Accounts receivable – affiliates
23,170

 
22,920

Other assets, net
238,014

 
205,454

Cash and cash equivalents
157,239

 
34,378

Restricted cash
5,686

 
9,225

Total assets
$
6,648,646

 
$
6,219,586

Liabilities and equity
 
 
 
Liabilities
 
 
 
Notes payable
 
 
 
Unsecured
$
2,432,137

 
$
1,836,427

Secured
45,250

 
485,176

Accounts payable and accrued expenses
170,689

 
146,866

Accrued real estate taxes
74,658

 
54,358

Distributions payable
80,764

 
74,982

Other liabilities
187,367

 
183,999

Total liabilities
$
2,990,865

 
$
2,781,808

Commitments and contingencies (Note 13)

 

Non-qualified deferred compensation share awards

 
52,674

Equity
 
 
 
Common shares of beneficial interest; $0.01 par value per share; 175,000 shares authorized; 108,882 and 105,503 issued; 106,472 and 103,080 outstanding at September 30, 2019 and December 31, 2018, respectively
1,065

 
1,031

Additional paid-in capital
4,538,422

 
4,154,763

Distributions in excess of net income attributable to common shareholders
(599,615
)
 
(495,496
)
Treasury shares, at cost (9,640 and 9,841 common shares at September 30, 2019 and December 31, 2018, respectively)
(348,556
)
 
(355,804
)
Accumulated other comprehensive (loss) income
(6,438
)
 
6,929

Total common equity
$
3,584,878

 
$
3,311,423

Non-controlling interests
72,903

 
73,681

Total equity
$
3,657,781

 
$
3,385,104

Total liabilities and equity
$
6,648,646

 
$
6,219,586

See Notes to Condensed Consolidated Financial Statements (Unaudited).

1

Table of Contents

CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(in thousands, except per share amounts)
2019
 
2018
 
2019
 
2018
Property revenues
$
260,672

 
$
241,770

 
$
765,000

 
$
709,586

Property expenses
 
 
 
 
 
 
 
Property operating and maintenance
$
62,277

 
$
56,973

 
$
177,372

 
$
165,624

Real estate taxes
31,596

 
30,860

 
98,566

 
91,235

Total property expenses
$
93,873

 
$
87,833

 
$
275,938

 
$
256,859

Non-property income
 
 
 
 
 
 
 
Fee and asset management
$
2,139

 
$
1,827

 
$
5,849

 
$
5,651

Interest and other income
1,485

 
385

 
2,114

 
1,669

Income on deferred compensation plans
780

 
3,539

 
14,992

 
3,769

Total non-property income
$
4,404

 
$
5,751

 
$
22,955

 
$
11,089

Other expenses
 
 
 
 
 
 
 
Property management
$
6,154

 
$
6,303

 
$
18,904

 
$
19,415

Fee and asset management
1,316

 
1,140

 
4,022

 
3,193

General and administrative
13,458

 
12,618

 
40,027

 
37,113

Interest
20,719

 
21,235

 
60,538

 
62,216

Depreciation and amortization
85,814

 
76,476

 
250,734

 
222,269

Expense on deferred compensation plans
780

 
3,539

 
14,992

 
3,769

Total other expenses
$
128,241

 
$
121,311

 
$
389,217

 
$
347,975

Equity in income of joint ventures
2,133

 
1,943

 
5,954

 
5,644

Income from continuing operations before income taxes
$
45,095

 
$
40,320

 
$
128,754

 
$
121,485

Income tax expense
(313
)
 
(330
)
 
(709
)
 
(1,098
)
Net income
$
44,782

 
$
39,990

 
$
128,045

 
$
120,387

Less income allocated to non-controlling interests from
continuing operations
(1,185
)
 
(1,124
)
 
(3,436
)
 
(3,455
)
Net income attributable to common shareholders
$
43,597

 
$
38,866

 
$
124,609

 
$
116,932

Earnings per share – basic
$
0.44

 
$
0.41

 
$
1.27

 
$
1.22

Earnings per share – diluted
$
0.44

 
$
0.40

 
$
1.26

 
$
1.22

Weighted average number of common shares outstanding – basic
98,959

 
95,257

 
98,259

 
95,190

Weighted average number of common shares outstanding – diluted
99,066

 
95,417

 
98,375

 
95,333

Condensed Consolidated Statements of Comprehensive Income
 
 
 
 
 
 
 
Net income
$
44,782

 
$
39,990

 
$
128,045

 
$
120,387

Other comprehensive income
 
 
 
 
 
 
 
Unrealized (loss) gain on cash flow hedging activities

 
5,202

 
(12,998
)
 
13,984

Reclassification of net loss (gain) on cash flow hedging activities, prior service cost and net loss on post-retirement obligation
357

 
35

 
(369
)
 
104

Comprehensive income
$
45,139

 
$
45,227

 
$
114,678

 
$
134,475

Less income allocated to non-controlling interests from continuing operations
(1,185
)
 
(1,124
)
 
(3,436
)
 
(3,455
)
Comprehensive income attributable to common shareholders
$
43,954

 
$
44,103

 
$
111,242

 
$
131,020

See Notes to Condensed Consolidated Financial Statements (Unaudited).

2

Table of Contents

CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
For the nine months ended September 30, 2019
 
 
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)/income
 
Non-controlling interests
 
Total equity
Equity, December 31, 2018
$
1,031

 
$
4,154,763

 
$
(495,496
)
 
$
(355,804
)
 
$
6,929

 
$
73,681


$
3,385,104

Net income
 
 
 
 
124,609

 
 
 
 
 
3,436

 
128,045

Other comprehensive loss
 
 
 
 
 
 
 
 
(13,367
)
 
 
 
(13,367
)
Common shares issued
34

 
328,340

 
 
 
 
 
 
 
 
 
328,374

Net share awards
 
 
10,565

 
 
 
6,654

 
 
 
 
 
17,219

Employee share purchase plan
 
 
1,213

 
 
 
594

 
 
 
 
 
1,807

Change in classification of deferred compensation plan
       (See Note 11)
 
 
43,311

 
9,363

 
 
 
 
 
 
 
52,674

Conversion of operating partnership units
 
 
186

 
 
 
 
 
 
 
(186
)
 

Cash distributions declared to equity holders ($2.40 per common share)
 
 
 
 
(238,091
)
 
 
 
 
 
(4,208
)
 
(242,299
)
       Other

 
44

 
 
 
 
 
 
 
180

 
224

Equity, September 30, 2019
$
1,065

 
$
4,538,422

 
$
(599,615
)
 
$
(348,556
)
 
$
(6,438
)
 
$
72,903

 
$
3,657,781


See Notes to Condensed Consolidated Financial Statements (Unaudited).

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CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Unaudited)
For the three months ended September 30, 2019

 
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)/income
 
Non-controlling interests
 
Total equity
Equity, June 30, 2019
$
1,065

 
$
4,533,667

 
$
(563,834
)
 
$
(348,480
)
 
$
(6,795
)
 
$
73,145

 
$
3,688,768

Net income
 
 
 
 
43,597

 
 
 
 
 
1,185

 
44,782

Other comprehensive loss
 
 
 
 
 
 
 
 
357

 
 
 
357

Net share awards
 
 
4,625

 
 
 
(76
)
 
 
 
 
 
4,549

Employee share purchase plan
 
 
57

 
 
 
 
 
 
 
 
 
57

Conversion of operating partnership units
 
 
71

 
 
 
 
 
 
 
(71
)
 

Cash distributions declared to equity holders ($0.80 per common share)
 
 
 
 
(79,378
)
 
 
 
 
 
(1,400
)
 
(80,778
)
       Other
 
 
2

 
 
 
 
 
 
 
44

 
46

Equity, September 30, 2019
$
1,065

 
$
4,538,422

 
$
(599,615
)
 
$
(348,556
)
 
$
(6,438
)
 
$
72,903

 
$
3,657,781


See Notes to Condensed Consolidated Financial Statements (Unaudited).


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CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Unaudited)
For the nine months ended September 30, 2018
 
 
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, 2017
$
1,028

 
$
4,137,161

 
$
(368,703
)
 
$
(364,066
)
 
$
(57
)
 
$
79,351

 
$
3,484,714

Net income
 
 
 
 
116,932

 
 
 
 
 
3,455

 
120,387

Other comprehensive income
 
 
 
 
 
 
 
 
14,088

 
 
 
14,088

Net share awards
 
 
9,341

 
 
 
8,229

 
 
 
 
 
17,570

Employee share purchase plan
 
 
455

 
 
 
265

 
 
 
 
 
720

Common share options exercised
 
 
41

 
 
 
 
 
 
 
 
 
41

Change in classification of deferred compensation plan
 
 
(13,547
)
 
 
 
 
 
 
 
 
 
(13,547
)
Change in redemption value of non-qualified share awards
 
 
 
 
(2,048
)
 
 
 
 
 
 
 
(2,048
)
Diversification of share awards within deferred compensation plan
 
 
23,780

 
8,171

 
 
 
 
 
 
 
31,951

Conversion/redemption of operating partnership units
 
 
(9,781
)
 
 
 
 
 
 
 
(4,634
)
 
(14,415
)
Common shares repurchased
 
 
 
 
 
 
(253
)
 
 
 
 
 
(253
)
Cash distributions declared to equity holders ($2.31 per common share)
 
 
 
 
(220,864
)
 
 
 
 
 
(4,251
)
 
(225,115
)
Other
2

 
(172
)
 
 
 
 
 
 
 
 
 
(170
)
Equity, September 30, 2018
$
1,030

 
$
4,147,278

 
$
(466,512
)
 
$
(355,825
)
 
$
14,031

 
$
73,921

 
$
3,413,923

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Unaudited)
For the three months ended September 30, 2018
 
 
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, June 30, 2018
$
1,027

 
$
4,132,404

 
$
(436,575
)
 
$
(355,752
)
 
$
8,794

 
$
78,706

 
$
3,428,604

Net income
 
 
 
 
38,866

 
 
 
 
 
1,124

 
39,990

Other comprehensive income
 
 
 
 
 
 
 
 
5,237

 
 
 
5,237

Net share awards
 
 
4,442

 
 
 
(73
)
 
 
 
 
 
4,369

Employee share purchase plan
 
 
63

 
 
 
 
 
 
 
 
 
63

Change in classification of deferred compensation plan
 
 
(2,912
)
 
 
 
 
 
 
 
 
 
(2,912
)
Change in redemption value of non-qualified share awards
 
 
 
 
(3,024
)
 
 
 
 
 
 
 
(3,024
)
Diversification of share awards within deferred compensation plan
 
 
23,143

 
7,857

 
 
 
 
 
 
 
31,000

Conversion/redemption of operating partnership units
 
 
(9,859
)
 
 
 
 
 
 
 
(4,556
)
 
(14,415
)
Cash distributions declared to equity holders ($0.77 per common share)
 
 
 
 
(73,636
)
 
 
 
 
 
(1,353
)
 
(74,989
)
Other
3

 
(3
)
 
 
 
 
 
 
 
 
 

Equity, September 30, 2018
$
1,030

 
$
4,147,278

 
$
(466,512
)
 
$
(355,825
)
 
$
14,031

 
$
73,921

 
$
3,413,923

See Notes to Condensed Consolidated Financial Statements (Unaudited).


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CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended
September 30,
(in thousands)
2019
 
2018
Cash flows from operating activities
 
 
 
Net income
$
128,045

 
$
120,387

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization
250,734

 
222,269

Distributions of income from joint ventures
5,954

 
5,573

Equity in income of joint ventures
(5,954
)
 
(5,644
)
Share-based compensation
12,183

 
12,337

Settlement of forward interest rate swaps
(20,430
)
 

Net change in operating accounts and other
37,903

 
21,028

Net cash from operating activities
$
408,435

 
$
375,950

Cash flows from investing activities
 
 
 
Development and capital improvements, including land
$
(300,661
)
 
$
(272,340
)
Acquisition of operating properties
(214,233
)
 
(290,005
)
Proceeds from sale of land

 
11,296

Increase in non-real estate assets
(13,793
)
 
(12,436
)
Decrease (increase) in note receivable
(27
)
 
9,475

Other
(770
)
 
2,219

Net cash from investing activities
$
(529,484
)
 
$
(551,791
)
Cash flows from financing activities
 
 
 
Borrowings on unsecured credit facility and other short-term borrowings
$
1,167,000

 
$
62,000

Repayments on unsecured credit facility and other short-term borrowings
(1,167,000
)
 
(8,000
)
Repayment of notes payable
(440,103
)
 
(1,072
)
Proceeds from notes payable
593,409

 

Distributions to common shareholders and non-controlling interests
(236,489
)
 
(223,029
)
Proceeds from issuance of common shares
328,374

 

Payment of deferred financing costs
(6,009
)
 
(752
)
Repurchase of common shares and redemption of units

 
(14,668
)
Other
1,189

 
2,147

Net cash from financing activities
$
240,371

 
$
(183,374
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
119,322

 
(359,215
)
Cash, cash equivalents, and restricted cash, beginning of year
43,603

 
377,805

Cash, cash equivalents, and restricted cash, end of period
$
162,925

 
$
18,590

Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets
 
 
 
Cash and cash equivalents
$
157,239

 
$
8,529

Restricted cash
5,686

 
10,061

Total cash, cash equivalents, and restricted cash, end of period
$
162,925

 
$
18,590

Supplemental information
 
 
 
Cash paid for interest, net of interest capitalized
$
49,793

 
$
58,597

Cash paid for income taxes
1,209

 
1,954

Supplemental schedule of noncash investing and financing activities
 
 
 
Distributions declared but not paid
$
80,764

 
$
74,976

Value of shares issued under benefit plans, net of cancellations
18,388

 
17,841

Accrual associated with construction and capital expenditures
18,474

 
26,207

Right-of-use assets obtained in exchange for the use of new operating lease liabilities
15,666

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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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"), and all consolidated subsidiaries are 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 September 30, 2019, we owned interests in, operated, or were developing 172 multifamily properties comprised of 58,209 apartment homes across the United States. Of the 172 properties, seven properties were under construction as of September 30, 2019, and will consist of a total of 1,938 apartment homes when completed. We also own land holdings which we may develop into multifamily 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. In determining if we have a controlling financial interest, we consider factors such as ownership interests, authority to make decisions, kick-out rights and participating rights. As of September 30, 2019, two of our consolidated operating partnerships are VIEs. We are considered the primary beneficiary of both consolidated operating partnerships and therefore consolidate these operating partnerships.  As of September 30, 2019, we held approximately 92% and 95% of the outstanding common limited partnership units and the sole 1% general partnership interest in each of these consolidated operating partnerships.
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 2018 Annual Report on Form 10-K. Certain amounts have been presented separately within financing activities in the unaudited condensed consolidated statements of cash flows for the nine months ended September 30, 2018 to conform to the current year presentation. These changes in presentation had no impact in our condensed consolidated cash flows from financing activities. Additionally, we adopted Accounting Standards Update ("ASU") 2016-02, "Leases" on January 1, 2019. ASU 2016-02 requires us, based on our election of a practical expedient, to combine lessor lease and non-lease components as a single component under certain conditions. For the three and nine months ended September 30, 2018, we combined other property revenues with rental revenues to conform to the current year presentation.
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. We generally believe acquisitions of operating properties are asset acquisitions, which include the capitalization of transaction costs. 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 in-place leases are included in other assets, net and the net carrying value of above or below market leases are included in other liabilities, net in our condensed consolidated balance sheets.
We recognized amortization expense related to in-place leases of approximately $3.4 million and $2.4 million for the three months ended September 30, 2019 and 2018, respectively, and approximately $8.8 million and $8.0 million for the nine months ended September 30, 2019 and 2018, respectively. We recognized amortization expense related to net below market leases approximately $0.1 million and $0.2 million for the nine months ended September 30, 2019 and 2018, respectively. During the three and nine months ended September 30, 2019, the weighted average amortization periods for in-place and net below market leases were approximately six months and five months, respectively. During the three and nine months ended September 30, 2018,

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the weighted average amortization periods for in-place and net below market leases were approximately seven months and five 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 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, but not limited to, 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. We did not record any impairment charges for the three or nine months ended September 30, 2019 or 2018.
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 in 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 and was approximately $4.0 million and $3.3 million for the three months ended September 30, 2019 and 2018, respectively, and was approximately $9.9 million and $10.8 million for the nine months ended September 30, 2019 and 2018, respectively. Capitalized real estate taxes were approximately $0.4 million for both the three months ended September 30, 2019 and 2018 and were approximately $2.3 million and $1.9 million for the nine months ended September 30, 2019 and 2018, respectively.
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 certain 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 are substantially completed. As apartment homes within development properties are substantially completed the total capitalized development cost of each apartment home is transferred from properties under development including land to buildings and improvements.
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 above and below market leases)
underlying lease term

Derivative Financial Instruments. Derivative financial instruments are recorded in the condensed consolidated balance sheets at fair value and presented on a gross basis for financial reporting purposes even when those instruments are subject to master netting arrangements and may otherwise qualify for net presentation. Accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows or other types of forecasted transactions are cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss

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recognition on the hedging instrument with the recognition of the changes attributable to the earnings effect of the hedged transactions. We may enter into derivative contracts which are intended to economically hedge certain of our risks, for which hedge accounting does not apply or we elect not to apply hedge accounting.
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 expect to receive to sell an asset, or pay to transfer a liability, in an orderly transaction with a market participant at the measurement date under current market conditions. 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 Measurements. The following describes the valuation methodologies we use to measure different financial instruments at fair value on a recurring basis:
Deferred Compensation Plan Investments. The estimated fair values of investment securities classified as deferred compensation plan investments are based on quoted market prices utilizing public information for the same transactions. Our deferred compensation plan investments are recorded in other assets in our condensed consolidated balance sheets. The inputs associated with the valuation of our recurring deferred compensation plan investments are included in Level 1 of the fair value hierarchy.
Derivative Financial Instruments. The estimated fair values of derivative financial instruments are valued using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps and caps are estimated using the market-standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk, including our own nonperformance risk and the respective counterparty’s nonperformance risk. The fair value of interest rate caps is determined using the market-standard methodology of discounting the future expected cash receipts which would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observed market interest rate curves and volatilities.
Although we have determined the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
Non-Recurring Fair Value Measurements. 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.
Financial Instrument Fair Value Disclosures. As of September 30, 2019 and December 31, 2018, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and distributions payable represented 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. The carrying values of our notes receivable also approximate their fair values, which are based on certain factors, such as market interest rates, terms of the note and credit worthiness of the

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borrower. These financial instruments utilize Level 3 inputs. In calculating the fair value of our notes payable, 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.
Note Receivable. We have one note receivable included in other assets, net, in our condensed consolidated balance sheets, relating to a real estate secured loan made to an unaffiliated third party. This note receivable matures on October 1, 2025. At both September 30, 2019 and December 31, 2018, the outstanding note receivable principal balance was approximately $9.3 million. The weighted average interest rate was approximately 7.0% and 4.0% for the nine months ended September 30, 2019 and 2018, respectively. Interest is recognized over the life of the note and included in interest and other income in our condensed consolidated statements of income and comprehensive income. We consider a note receivable to be impaired and will record an allowance when it is probable we will not be able to collect all contractual amounts due.
Recent Accounting Pronouncements. In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-15, "Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." ASU 2018-15 aligns the accounting for costs incurred to implement a cloud computing arrangement which is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. ASU 2018-15 is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted. This standard may be applied using the prospective transition method which is applicable to costs for activities on service contracts entered, renewed, materially modified or performed after the effective date or the retrospective transition method which allows us to recognize a cumulative effect adjustment to the opening balance of retained earnings, if any, as of the adoption date. We will adopt ASU 2018-15 as of January 1, 2020, using the prospective transition method and will present future qualified capitalizable costs relating to new completed cloud computing arrangements which are service arrangements as prepaid assets on our consolidated balance sheets, as cash flows from operating activities on our consolidated statement of cash flows, and the associated amortization as general and administrative expenses on our consolidated statements of income and comprehensive income. We do not expect our adoption of ASU 2018-15 to have a material impact on our consolidated financial statements.
In August 2018, FASB issued ASU 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." ASU 2018-13 removes, modifies, and adds certain fair value disclosure requirements including (i) the removal of disclosures regarding amounts, reasons, and timing for transfers between Levels 1 and 2 as well as descriptions of valuation processes used for Level 3 measurements of the fair value hierarchy; (ii) modified disclosures for the timing of liquidation of investee assets; (iii) clarifies the narrative description of the measurement uncertainty of Level 3 fair value measurements at the reporting date does not need to include sensitivity of future changes; (iv) add disclosures related to changes in unrealized gains and losses in other comprehensive income for recurring Level 3 fair value measurements to also be included in the statement of comprehensive income; and (v) add disclosures for the range and weighted average of significant unobservable inputs. ASU 2018-13 is effective January 1, 2020 for the additional disclosures and early adoption of the removal and amended disclosures is allowed. We will adopt ASU 2018-13 as of January 1, 2020 and do not expect the adoption to have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, "Leases." ASU 2016-02 and its related amendments codify Accounting Standard Codification ("ASC") 842 and provides new guidance for accounting for leases. We adopted ASC 842 as of January 1, 2019 using the transition practical expedient which allows us to recognize a cumulative-effect adjustment to the opening balance of retained earnings as of the adoption date and to initially apply the new lease standard to leases which existed as of January 1, 2019. Upon our adoption of ASC 842, as a lessee we recorded a right-of-use asset and a corresponding liability in our condensed consolidated balance sheet, as a lessor we now present combined lease and non-lease components as a single component in our condensed consolidated statement of income and comprehensive income, and this ASU did not have an impact on the opening balance of retained earnings as of the adoption date. In addition to the transition practical expedient, we elected other practical expedients during our adoption of the new lease standard. For both lessor and lessee contracts, we elected the practical expedient package to not reassess: (i) whether any expired or existing contract is a lease or contains a lease, (ii) the lease classification of any expired or existing leases, and (iii) the accounting for initial direct costs for any existing leases.
As a lessor, we also elected practical expedients to:
not separate the lease and non-lease components by class of underlying assets and account for the combined components as a single component under certain conditions, and
exclude from lease revenues the sales taxes collected from lessees and certain lessor costs paid directly by the lessee (as of the date of adoption, we did not have material sales tax collected from customers or lessor costs paid by customers).
As a lessee, we also elected the practical expedients to:

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use hindsight to determine lease terms and impairment of the right-of-use assets for existing lease contracts,
not separate lease and non-lease components by class of underlying asset when certain conditions are met which is consistent with our current accounting, and
not recognize short-term lease contracts with a duration of 12 months or less (short-term leases) in our condensed consolidated balance sheet.
We earn income from the leasing of our owned real estate properties which is considered our only lessor underlying asset class. Substantially all of our real estate lessor commitments will continue to be accounted for as operating leases and the new leasing standard did not have a material impact on our property revenues. As a lessee, we enter into lease contracts to facilitate the operations and needs of our business and our operating leases primarily consist of our office facility leases which are considered our only lessee underlying asset class. Our lessee operating lease commitments are subject to this standard and recognized as operating lease liabilities and right-of-use assets upon adoption. See Note 3, "Revenues," as it relates to our lessor leases and Note 4, "Leases" as it relates to our lessee leases for additional disclosures required by ASC 842.
3. Revenues
The majority of our revenues are derived from real estate lease contracts which are accounted for pursuant to ASC 842 and presented as property revenues, which include rental revenue and revenue from amounts received under contractual terms for other services provided to our customers. Our other revenue stream includes fee and asset management income in accordance with other revenue guidance, ASC 606, Revenues from Contracts with Customers. A detail of these revenue streams are discussed below:
Property Revenue. We earn rental revenue from operating lease contracts for the use of dedicated spaces within owned assets which is recognized on a straight-line basis over the applicable lease term, net of amounts related to lease contracts identified as uncollectible. We also earn revenues from amounts received under contractual terms for other services considered non-lease components within a lease contract, primarily consisting of utility rebillings and other transactional fees, and are charged to our residents and recognized monthly as earned. We elected the practical expedient to not separate lease and non-lease components and have presented our property revenues combined based upon the lease being determined to be the predominant component. Any uncollectible amounts related to individual lease contracts are presented as an adjustment to property revenue. Any renewal options of real estate lease contracts are considered a new, separate contract and will be recognized at the time the option is exercised on a straight-line basis over the renewal period.
As of September 30, 2019, our average residential lease term was between twelve months to fifteen months with all other commercial leases averaging longer lease terms. We anticipate property revenue from existing leases as follows:
(in millions)
 
Year ended December 31,
Operating Leases

Remainder of 2019
$
258.4

2020
478.5

2021
9.7

2022
5.1

2023
4.4

Thereafter
31.7

Total
$
787.8


Fee and Asset Management Income. We receive property management, asset management, and development and construction fees from our joint ventures for managing the ventures and managing the activities, development, and construction of their operating communities. While the individual activities related to these fees may vary the services provided are substantially similar, have the same pattern of transfer, and are considered to be individual performance obligations composed of a series of distinct services recognized monthly as earned.
We also earn construction fees for construction management and general contracting services we provide to third-party owners of multifamily and commercial properties. These fees are recognized as we satisfy our single performance obligation over time based on a percentage-of-completion of cost basis which we believe is an accurate depiction of the transfer of control to our customers. For these contracts, significant judgment is used to estimate the cost plus margin for the project fee and our profitability on those contracts is dependent on the ability to accurately predict such factors.

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Contract Balances. We record third-party construction receivables for amounts where we have unconditional rights to payments earned but not received and liabilities for amounts received but not earned. For the three and nine months ended September 30, 2019 and 2018, these contract receivables and liability balances were immaterial.
4. Leases
Substantially all of our operating leases recorded in our condensed consolidated balance sheet at January 1, 2019 upon adoption of ASC 842 are related to office facility leases. The lease and non-lease components are accounted for as a combined single component based upon the standalone price at the time the applicable lease is commenced and is recognized as a lease expense on a straight-line basis over the lease term. Most of our office facility leases include options to renew and generally are not included in the operating lease liabilities or right-of-use ("ROU") assets as they are not reasonably certain of being exercised. If an option to renew is exercised, it would be considered a separate contract and recognized based upon the standalone price at the time the option to renew is exercised. Variable lease payments which values are not known at lease commencement, such as executory costs of real estate taxes, property insurance, and common area maintenance, are expensed as incurred.
As of September 30, 2019, we had no significant leases executed but not yet commenced and did not record any impairment charges related to our ROU assets. See Note 13, "Commitments and Contingencies," for maturities of lease liabilities. The following is a summary of our operating lease related information:
($ in millions)
 
As of
Balance sheet
Classification
September 30, 2019
   Right-of-use assets, net
Other assets, net
$
11.1

   Operating lease liabilities
Other liabilities
$
15.7

($ in millions)
 
 
 
Statement of income and comprehensive income
Classification
Three Months Ended September 30, 2019
Nine Months Ended September 30, 2019
Rent expense related to operating lease liabilities
General and administrative expenses and property management expenses
$
0.7

$
2.2

   Variable lease expense
General and administrative expenses and property management expenses
$
0.3

$
1.0

Statement of cash flows
 
 
   Cash flows from operating leases
Net cash from operating activities
$
0.7

$
2.3

Supplemental lease information
 
 
 
   Weighted average remaining lease term (years)
 
5.6

   Weighted average discount rate - operating leases (1)
 
4.9
%
(1)
We use a secured incremental borrowing rate, as defined by ASC 842 based on an estimated secured rate with applicable adjustments, as most of our lease contracts do not provide a readily determinable implicit rate.
5. Per Share Data
Basic earnings per share is computed using net income attributable to common shareholders and the weighted average number of common shares outstanding. Diluted earnings per share reflects 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 were approximately 1.9 million for both the three and nine months ended September 30, 2019 and approximately 2.1 million and 2.2 million for the three and nine months ended September 30, 2018, 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 calculations as they are anti-dilutive.

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The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated:
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(in thousands, except per share amounts)
 
2019
 
2018
 
2019
 
2018
Earnings per common share calculation – basic
 
 
 
 
 
 
 
 
Income from continuing operations attributable to common shareholders
 
$
43,597

 
$
38,866

 
$
124,609

 
$
116,932

Amount allocated to participating securities
 
(89
)
 
(284
)
 
(284
)
 
(831
)
Net income attributable to common shareholders – basic
 
$
43,508

 
$
38,582

 
$
124,325

 
$
116,101

 
 
 
 
 
 
 
 
 
Total earnings per common share – basic
 
$
0.44

 
$
0.41

 
$
1.27

 
$
1.22

 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – basic
 
98,959

 
95,257

 
98,259

 
95,190

 
 
 
 
 
 
 
 
 
Earnings per common share calculation – diluted
 
 
 
 
 
 
 
 
Net income attributable to common shareholders – diluted
 
$
43,508

 
$
38,582

 
$
124,325

 
$
116,101

 
 
 
 
 
 
 
 
 
Total earnings per common share – diluted
 
$
0.44

 
$
0.40

 
$
1.26

 
$
1.22

 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – basic
 
98,959

 
95,257

 
98,259

 
95,190

Incremental shares issuable from assumed conversion of:
 
 
 
 
 
 
 
 
Common share options and share awards granted
 
107

 
160

 
116

 
143

Weighted average number of common shares outstanding – diluted
 
99,066

 
95,417

 
98,375

 
95,333


6. Common Shares
In May 2017, 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 $315.3 million (the "2017 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 proceeds from the sale of our common shares under the 2017 ATM program are intended to be used for general corporate purposes, which may include reducing future borrowings under our $900 million unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development activities, and financing for acquisitions.
For the three and nine months ended September 30, 2019, and through the date of this filing, we did not sell any shares under the 2017 ATM program. As of the date of this filing, we had common shares having an aggregate offering price of up to $312.8 million remaining available for sale under the 2017 ATM program.
We have a repurchase plan approved by our Board of Trust Managers which allows for the repurchase of up to $500 million of our common equity securities through open-market purchases, block purchases, and privately negotiated transactions. There were no repurchases during the three and nine months ended September 30, 2019. As of the date of this filing, the remaining dollar value of our common equity securities authorized to be repurchased under this program was approximately $269.5 million.
We currently have an automatic shelf registration statement which allows us to offer common shares, preferred shares, debt securities, or warrants, and 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 September 30, 2019, we had approximately 96.8 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding. In February 2019, we issued approximately 3.4 million common shares in an underwritten equity offering and received approximately $328.4 million in net proceeds, which we used to acquire one operating property in Scottsdale, Arizona, and repay amounts on our unsecured line of credit and certain secured conventional mortgage debt.

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7. Acquisitions and Dispositions
Asset Acquisition of Operating Properties. In May 2019, we acquired one operating property comprised of 326 apartment homes located in Austin, Texas for approximately $120.4 million. In February 2019, we acquired one operating property comprised of 316 apartment homes located in Scottsdale, Arizona for approximately $97.1 million. In September 2018, we acquired one operating property comprised of 299 apartment homes located in Orlando, Florida, for approximately $89.8 million. In February 2018, we acquired one operating property comprised of 333 apartment homes located in Orlando, Florida for approximately $81.4 million. In January 2018, we acquired one operating property comprised of 358 apartment homes located in St. Petersburg, Florida for approximately $126.9 million.
Acquisition of Land. In May 2019, we acquired approximately 11.6 acres of land in Tempe, Arizona for approximately $18.0 million for the development of approximately 400 apartment homes. In April 2019, we acquired approximately 4.3 acres of land in Charlotte, North Carolina for approximately $10.9 million for the development of approximately 400 apartment homes. In April 2018, we acquired approximately 1.8 acres of land in Orlando, Florida for approximately $11.4 million for the development of approximately 360 wholly-owned apartment homes which commenced construction during the quarter ended June 30, 2018.
Disposition of Land. In September 2018, we sold approximately 14.1 acres of land adjacent to two of our development properties in Phoenix, Arizona for approximately $11.5 million.
8. Investments in Joint Ventures
Our equity investments in unconsolidated joint ventures, which we account for utilizing the equity method of accounting, consists of three funds (collectively, the "Funds"). As of September 30, 2019, we had an ownership interest of 31.3% in two discretionary investment funds. In March 2015, we completed the formation of the third fund with an unaffiliated third party for additional multifamily investments of up to $450 million. In June 2019, we amended the third fund's agreement, among other things, to reduce the investments from $450 million to approximately $360 million and increase our ownership interest from 20% to 40%. This third fund did not own any properties as of September 30, 2019 or 2018. We provide property and asset management and other services to the Funds which own operating properties and we may also provide construction and development services to the Funds which own properties under development. The following table summarizes the combined balance sheets and statements of income data for the Funds as of and for the periods presented:
 
(in millions)
September 30, 2019
 
December 31, 2018
Total assets
$
698.9

 
$
695.2

Total third-party debt
514.1

 
510.7

Total equity
156.5

 
158.4

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(in millions)
2019
 
2018
 
2019
 
2018
Total revenues
$
33.3

 
$
32.5

 
$
98.5

 
$
95.3

Net income
4.4

 
4.0

 
12.3

 
11.6

Equity in income (1)
2.1

 
1.9

 
6.0

 
5.6

 
(1)
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 and, as of September 30, 2019, we had no outstanding guarantees related to debt of the Funds.
We may earn fees for property and asset management, construction, development, and other services related to the Funds and may earn a promoted equity interest if certain thresholds are met. We eliminate fee income for services provided to the Funds to the extent of our ownership. Fees earned for these services, net of eliminations, were approximately $1.7 million and $1.5 million for the three months ended September 30, 2019 and 2018, respectively, and approximately $4.6 million and $4.3 million for the nine months ended September 30, 2019 and 2018, respectively.

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9. Notes Payable
The following is a summary of our indebtedness:
(in millions)
 
September 30,
2019
 
December 31, 2018
Commercial banks
 
 
 
 
3.11% Term Loan, due 2022
 
$
99.7

 
$
99.6

 
 
 
 
 
Senior unsecured notes
 
 
 
 
4.78% Notes, due 2021
 
$