UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-12110

CAMDEN PROPERTY TRUST

(Exact Name of Registrant as Specified in Its Charter)

Texas (State or other jurisdiction of incorporation or organization)		76-6088377 (I.R.S. Employer Identification No.)
3 Greenway Plaza, Suite 1300
Houston, Texas		77046
(Address of principle 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark 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 þ		Accelerated filer o		Non-accelerated filer o		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes o No þ

On November 1, 2010, 68,677,146 common shares of the registrant were outstanding.

 

 

CAMDEN PROPERTY TRUST
Table of Contents

		Page
PART I FINANCIAL INFORMATION			3
Item 1 Financial Statements			3
Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2010 and December 31, 2009			3
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2010 and 2009			4
Condensed Consolidated Statements of Equity (Unaudited) for the nine months ended September 30, 2010 and 2009			6
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2010 and 2009			8
Notes to Condensed Consolidated Financial Statements (Unaudited)			10
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3 Quantitative and Qualitative Disclosures About Market Risk			40
Item 4 Controls and Procedures			41
Part II OTHER INFORMATION			41
Item 1 Legal Proceedings			41
Item 1A Risk Factors			41
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			41
Item 3 Defaults Upon Senior Securities			41
Item 4 Reserved			41
Item 5 Other Information			41
Item 6 Exhibits			41
SIGNATURES			42
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CAMDEN PROPERTY TRUST

		September 30,				December 31,
(in thousands, except per share amounts)		2010				2009
Assets
Real estate assets, at cost
Land		$	763,559			$	747,921
Buildings and improvements			4,613,036				4,512,124
			5,376,595				5,260,045
Accumulated depreciation			(1,263,173	)			(1,149,056	)
Net operating real estate assets			4,113,422				4,110,989
Properties under development, including land			198,377				201,581
Investments in joint ventures			33,226				43,542
Properties held for sale			9,737				—
Total real estate assets			4,354,762				4,356,112
Accounts receivable — affiliates			32,269				36,112
Notes receivable — affiliates			17,509				45,847
Other assets, net			105,950				102,114
Cash and cash equivalents			91,071				64,156
Restricted cash			5,174				3,658
Total assets		$	4,606,735			$	4,607,999
Liabilities and equity
Liabilities
Notes payable
Unsecured		$	1,507,858			$	1,645,926
Secured			1,034,354				979,273
Accounts payable and accrued expenses			82,598				74,420
Accrued real estate taxes			40,340				23,241
Distributions payable			34,548				33,025
Other liabilities			144,146				145,176
Total liabilities			2,843,844				2,901,061
Commitments and contingencies
Perpetual preferred units			97,925				97,925
Equity
Common shares of beneficial interest; $0.01 par value per share; 100,000 shares authorized; 83,129 and 79,543 issued; 80,381 and 76,996 outstanding, respectively			804				770
Additional paid-in capital			2,673,606				2,525,656
Distributions in excess of net income attributable to common shareholders			(580,046	)			(492,571	)
Notes receivable secured by common shares			—				(101	)
Treasury shares, at cost (12,766 and 12,897 shares, respectively)			(461,255	)			(462,188	)
Accumulated other comprehensive loss			(41,302	)			(41,155	)
Total common equity			1,591,807				1,530,411
Noncontrolling interests			73,159				78,602
Total equity			1,664,966				1,609,013
Total liabilities and equity		$	4,606,735			$	4,607,999

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

		Three Months								Nine Months
		Ended September 30,								Ended September 30,
(in thousands, except per share amounts)		2010				2009				2010				2009
Property revenues
Rental revenues		$	133,601			$	132,758			$	395,258			$	403,248
Other property revenues			22,675				22,467				65,519				64,271
Total property revenues			156,276				155,225				460,777				467,519
Property expenses
Property operating and maintenance			47,430				46,266				135,844				132,285
Real estate taxes			16,817				17,803				53,359				54,692
Total property expenses			64,247				64,069				189,203				186,977
Non-property income
Fee and asset management			2,145				1,818				6,028				6,093
Interest and other income			451				582				3,988				2,414
Income on deferred compensation plans			6,918				8,194				6,818				11,702
Total non-property income			9,514				10,594				16,834				20,209
Other expenses
Property management			4,789				4,377				14,994				13,848
Fee and asset management			1,155				1,074				3,611				3,512
General and administrative			7,568				7,532				22,339				23,010
Interest			31,781				31,117				95,078				97,364
Depreciation and amortization			43,685				42,697				129,963				130,197
Amortization of deferred financing costs			1,185				682				2,624				2,356
Expense on deferred compensation plans			6,918				8,194				6,818				11,702
Total other expenses			97,081				95,673				275,427				281,989
Gain on sale of properties, including land			—				—				236				—
Loss on early retirement of debt			—				—				—				(2,550	)
Equity in income (loss) of joint ventures			(244	)			(38	)			(785	)			592
Income from continuing operations before income taxes			4,218				6,039				12,432				16,804
Income tax expense — current			(712	)			(126	)			(1,286	)			(772	)
Income from continuing operations			3,506				5,913				11,146				16,032
Income from discontinued operations			326				279				715				2,265
Gain on sale of discontinued operations			—				—				—				16,887
Net income			3,832				6,192				11,861				35,184
Less income allocated to noncontrolling interests from continuing operations			(432	)			(505	)			(542	)			(1,448	)
Less income allocated to perpetual preferred units			(1,750	)			(1,750	)			(5,250	)			(5,250	)
Net income attributable to common shareholders		$	1,650			$	3,937			$	6,069			$	28,486

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

		Three Months								Nine Months
		Ended September 30,								Ended September 30,
(in thousands, except per share amounts)		2010				2009				2010				2009
Earnings per share — basic
Income from continuing operations attributable to common shareholders		$	0.02			$	0.06			$	0.08			$	0.15
Income from discontinued operations, including gain on sale, attributable to common shareholders			—				—				0.01				0.31
Net income attributable to common shareholders		$	0.02			$	0.06			$	0.09			$	0.46
Earnings per share — diluted
Income from continuing operations attributable to common shareholders		$	0.02			$	0.06			$	0.08			$	0.15
Income from discontinued operations, including gain on sale, attributable to common shareholders			—				—				0.01				0.31
Net income attributable to common shareholders		$	0.02			$	0.06			$	0.09			$	0.46
Distributions declared per common share		$	0.45			$	0.45			$	1.35			$	1.60
Weighted average number of common shares outstanding			69,100				66,094				67,898				61,087
Weighted average number of common shares and dilutive equivalent common shares outstanding			69,441				66,602				68,169				61,579
Net income attributable to common shareholders
Income from continuing operations		$	3,506			$	5,913			$	11,146			$	16,032
Less income allocated to noncontrolling interests from continuing operations			(432	)			(505	)			(542	)			(1,448	)
Less income allocated to perpetual preferred units			(1,750	)			(1,750	)			(5,250	)			(5,250	)
Income from continuing operations attributable to common shareholders			1,324				3,658				5,354				9,334
Income from discontinued operations, including gain on sale, attributable to common shareholders			326				279				715				19,152
Net income attributable to common shareholders		$	1,650			$	3,937			$	6,069			$	28,486
Condensed Consolidated Statements of Comprehensive Income:
Net income		$	3,832			$	6,192			$	11,861			$	35,184
Other comprehensive income (loss)
Unrealized loss on cash flow hedging activities			(5,323	)			(8,732	)			(19,549	)			(10,307	)
Reclassification of net losses on cash flow hedging activities			5,825				5,697				17,488				16,442
Unrealized gain on available-for-sale securities, net of tax			1,914				—				1,914				—
Comprehensive income			6,248				3,157				11,714				41,319
Less income allocated to noncontrolling interests from continuing operations			(432	)			(505	)			(542	)			(1,448	)
Less income allocated to perpetual preferred units			(1,750	)			(1,750	)			(5,250	)			(5,250	)
Comprehensive income attributable to common shareholders		$	4,066			$	902			$	5,922			$	34,621

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

		Common Shareholders
														Notes
		Common												receivable								Accumulated
		shares of				Additional				Distributions				secured by				Treasury				other
		beneficial				paid-in				in excess of				common				shares, at				comprehensive				Noncontrolling								Perpetual
(in thousands, except per share amounts)		interest				capital				net income				shares				cost				loss				interests				Total equity				preferred units
December 31, 2009		$	770			$	2,525,656			$	(492,571	)		$	(101	)		$	(462,188	)		$	(41,155	)		$	78,602			$	1,609,013			$	97,925
Net income											6,069																542				6,611				5,250
Other comprehensive loss																							(147	)							(147	)
Common shares issued			29				134,588																								134,617
Net share awards			4				8,919																								8,923
Employee stock purchase plan							(150	)											933												783
Common share options exercised			1				2,459																								2,460
Conversions of operating partnership units			2				2,130																				(2,132	)			—
Distributions to perpetual preferred units																																			(5,250	)
Distributions to common shareholders and noncontrolling interests											(93,544	)															(3,863	)			(97,407	)
Other			(2	)			4								101												10				113
September 30, 2010		$	804			$	2,673,606			$	(580,046	)		$	—			$	(461,255	)		$	(41,302	)		$	73,159			$	1,664,966			$	97,925

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)

		Common Shareholders
														Notes
		Common												receivable								Accumulated
		shares of				Additional				Distributions				secured by				Treasury				other												Perpetual
		beneficial				paid-in				in excess of				common				shares, at				comprehensive				Noncontrolling								preferred
(in thousands, except per share amounts)		interest				capital				net income				shares				cost				loss				interests				Total equity				units
December 31, 2008		$	660			$	2,237,703			$	(312,309	)		$	(295	)		$	(463,209	)		$	(51,056	)		$	89,862			$	1,501,356			$	97,925
Net income											28,486																1,448				29,934				5,250
Other comprehensive income																							6,135								6,135
Common shares issued			104				272,008																								272,112
Net share awards							8,110																								8,110
Employee stock purchase plan							(215	)											1,027												812
Common share options exercised							513																								513
Conversions and redemptions of operating partnership units			1				3,760																				(3,777	)			(16	)
Purchase of noncontrolling interests							648																				(748	)			(100	)
Distributions to perpetual preferred units																																			(5,250	)
Distributions to common shareholders and noncontrolling interests											(99,442	)															(4,934	)			(104,376	)
Other			5				(2	)							194				(6	)											191
September 30, 2009		$	770			$	2,522,525			$	(383,265	)		$	(101	)		$	(462,188	)		$	(44,921	)		$	81,851			$	1,714,671			$	97,925

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

		Nine Months
		Ended September 30,
(in thousands)		2010				2009
Cash flows from operating activities
Net income		$	11,861			$	35,184
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization, including discontinued operations			129,419				128,797
Gain on sale of discontinued operations			—				(16,887	)
Gain on sale of properties, including land			(236	)			—
Distributions of income from joint ventures			3,870				4,431
Equity in (income) loss of joint ventures			785				(592	)
Interest from notes receivable — affiliates			(231	)			(321	)
Share-based compensation			8,502				7,035
Loss on early retirement of debt			—				2,550
Amortization of deferred financing costs			2,624				2,356
Accretion of discount on unsecured notes payable			384				502
Net change in operating accounts			21,483				22,340
Net cash from operating activities		$	178,461			$	185,395
Cash flows from investing activities
Development and capital improvements		$	(43,927	)		$	(55,068	)
Proceeds from sales of properties, including land and discontinued operations, net			937				28,078
Payments received on notes receivable — other			—				8,710
Increase in notes receivable — affiliates			(511	)			(6,219	)
Investments in joint ventures			(5,094	)			(22,796	)
Other			(1,464	)			(3,135	)
Net cash from investing activities		$	(50,059	)		$	(50,430	)

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Nine Months
		Ended September 30,
(in thousands)		2010				2009
Cash flows from financing activities
Borrowings on unsecured line of credit		$	37,000			$	—
Repayments on unsecured line of credit			(37,000	)			(145,000	)
Repayment of notes payable			(192,247	)			(502,880	)
Proceeds from notes payable			57,601				436,797
Proceeds from issuance of common shares, net			134,617				272,112
Distributions to common shareholders, perpetual preferred units, and noncontrolling interests			(101,052	)			(119,538	)
Payment of deferred financing costs			(6,528	)			(3,960	)
Net decrease in accounts receivable — affiliates			3,843				1,051
Other			2,279				729
Net cash from financing activities		$	(101,487	)		$	(60,689	)
Net increase in cash and cash equivalents			26,915				74,276
Cash and cash equivalents, beginning of period			64,156				7,407
Cash and cash equivalents, end of period		$	91,071			$	81,683
Supplemental information
Cash paid for interest, net of interest capitalized		$	87,116			$	94,443
Cash paid for income taxes			1,280				1,800
Supplemental schedule of noncash investing and financing activities
Distributions declared but not paid		$	34,548			$	33,028
Value of shares issued under benefit plans, net of cancellations			14,465				8,454
Conversion of operating partnership units to common shares			2,132				3,753
Accrual associated with construction and capital expenditures			4,140				5,401
Conversion of mezzanine notes to joint venture equity			28,944				9,213
Change in fair value of available-for-sale investments, net of tax			1,914				—
Consolidation of joint venture at fair value, net of cash:
Real estate assets, net			92,726				—
In-place leases			1,193				—
Other assets			289				—
Mortgage debt assumed			52,144				—
Other liabilities			561				—

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

1. Description of Business

Business. Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust (“REIT”), is engaged in the ownership, development, construction, and management 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, 2010, we owned interests in or operated 189 multifamily properties comprising 64,681 apartment homes across the United States. In addition, we own other land parcels we may develop into multifamily apartment communities; one multifamily property comprised of 602 apartment homes was designated as held for sale.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Principles of Consolidation. Our condensed consolidated financial statements include our accounts and the accounts of other subsidiaries and joint ventures (including partnerships and limited liability companies) over which we have control. All intercompany transactions, balances, and profits have been eliminated in consolidation. Investments acquired or created are continuously evaluated based on the accounting guidance relating to variable interest entities (“VIEs”), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation (primarily using a voting interest model) under the remaining consolidation guidance relating to real estate. If we are the general partner of a limited partnership, or manager of a limited liability company, we also consider the consolidation guidance relating to the rights of limited partners (non-managing members) to assess whether any rights held by the limited partners overcome the presumption of control by us.

Interim Financial Reporting. We have prepared these financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, these statements do not include all information and footnote disclosures required for annual financial statements. While we believe the disclosures presented are adequate for interim reporting, these interim financial statements should be read in conjunction with the audited financial statements and notes included in our 2009 Form 10-K. In the opinion of management, all adjustments and eliminations, consisting of normal recurring adjustments, necessary for a fair representation of our financial statements for the interim period reported have been included. Operating results for the three and nine months ended September 30, 2010 are not necessarily indicative of the results which may be expected for the full year.

Asset Impairment. Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. We consider projected future discounted and undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. When impairment exists, the long-lived asset is adjusted to its fair value. While we believe our estimates of future cash flows are reasonable, different assumptions regarding a number of factors, including market rents, economic conditions, and occupancies, could significantly affect these estimates. In estimating fair value, management uses appraisals, management estimates, and discounted cash flow calculations which maximize inputs from a marketplace participant’s perspective.

In addition, we evaluate our investments in joint ventures and mezzanine construction financing and if, with respect to investments, we believe there is an other than temporary decline in market value, or if, with respect to mezzanine loans, it is probable we will not collect all amounts due in accordance with the terms, we will record an impairment charge based on these evaluations. In general, we provide mezzanine loans to affiliated joint ventures constructing or operating multifamily assets. While we believe it is currently probable we will collect all amounts due with respect to these mezzanine loans, changes in market conditions related to credit markets and real estate market fundamentals inject a significant amount of uncertainty into the environment. Any adverse economic or market development may cause us to re-evaluate our conclusions and could result in material impairment charges with respect to our mezzanine loans.

The value of our properties under development depends on market conditions, including estimates of the project start date as well as estimates of demand for multifamily communities. We have reviewed market trends and other marketplace information and have incorporated this information as well as our current outlook into the assumptions we use in our impairment analyses. Due to, among other factors, the judgment and assumptions applied in the impairment analyses and the fact limited market information regarding the value of comparable land exists at this time, it is possible actual results could differ substantially from those estimated.

We believe the carrying value of our operating real estate assets, properties under development, and land is currently recoverable. However, if market conditions deteriorate or if changes in our development strategy significantly affect any key assumptions used in our fair value calculations, we may need to take material charges in future periods for impairments related to existing assets. Any such material non-cash charges would have an adverse effect on our consolidated financial position and results of operations.

Cash and Cash Equivalents. All cash and investments in money market accounts and other highly liquid securities with a maturity of three months or less at the date of purchase are considered to be cash and cash equivalents. We maintain the majority of our cash and cash equivalents at major financial institutions in the United States and deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, we regularly monitor the financial stability of these financial institutions and believe we are not currently exposed to any significant default risk with respect to these deposits.

Cost Capitalization. Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes which are capitalized as part of properties under development. Capitalized interest is generally based on the weighted average interest rate of our unsecured debt. Transaction and restructuring costs associated with the acquisition of real estate assets are expensed. Expenditures directly related to the development and improvement of real estate assets are capitalized at cost as land and buildings and improvements. Indirect development costs, including salaries and benefits and other related costs directly attributable to the development of properties, are also capitalized. All construction and carrying costs are capitalized and reported in the balance sheet as properties under development until the apartment homes are substantially completed. Upon substantial completion of the apartment homes, the total cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively.

As discussed above, carrying charges are principally interest and real estate taxes capitalized as part of properties under development and buildings and improvements. Capitalized interest was approximately $1.3 million and $4.0 million for the three and nine months ended September 30, 2010, respectively, and approximately $2.7 million and $7.6 million for the three and nine months ended September 30, 2009, respectively. Capitalized real estate taxes were approximately $0.1 million and $0.6 million for the three and nine months ended September 30, 2010, respectively, and approximately $0.4 million and $1.4 million for the three and nine months ended September 30, 2009, respectively.

Where possible, we stage our construction to allow leasing and occupancy during the construction period, which we believe minimizes the duration of the lease-up period following completion of construction. Our accounting policy related to properties in the development and leasing phase is to expense all operating expenses associated with completed apartment homes. We capitalize renovation and improvement costs we believe extend the economic lives of depreciable property. Capital expenditures subsequent to initial construction are capitalized and depreciated over their estimated useful lives.

Depreciation and amortization is computed over the expected useful lives of depreciable property on a straight-line basis with lives generally as follows:

		Estimated
		Useful Life
Buildings and improvements		5-35 years
Furniture, fixtures, equipment, and other		3-20 years
Intangible assets (in-place leases and above and below market leases)		underlying lease term

Derivative Financial Instruments. Derivative financial instruments are recorded in the condensed consolidated balance sheet at fair value and we do not apply master netting for financial reporting purposes. Accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows or other types of forecasted transactions are cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes attributable to the earnings effect of the hedged transactions. We may enter into derivative contracts which are intended to economically hedge certain of our risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.

Income Recognition. Our rental and other property revenue is recorded when due from residents and is recognized monthly as it is earned. Other property revenue consists primarily of utility rebillings and administrative, application, and other transactional fees charged to our residents. Our apartment homes are rented to residents on lease terms generally ranging from six to fifteen months, with monthly payments due in advance. All sources of income, including from interest and fee and asset management income, are recognized as earned. Nine of our properties are subject to rent control. Operations of multifamily properties acquired are recorded from the date of acquisition in accordance with the acquisition method of accounting. In management’s opinion, due to the number of residents, the types and diversity of submarkets in which the properties operate, and the collection terms, there is no significant concentration of credit risk.

Other Assets, Net. Other assets in our consolidated financial statements include investments under deferred compensation plans, deferred financing costs, non-real estate leasehold improvements and equipment, prepaid expenses, the value of in-place leases net of related accumulated amortization, available-for-sale investments, and other miscellaneous receivables. Available-for-sale investments are carried at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity.

Reportable Segments. Our multifamily communities are geographically diversified throughout the United States, and management evaluates operating performance on an individual property level. As each of our apartment communities has similar economic characteristics, residents, and products and services, our apartment communities have been aggregated into one reportable segment. Our multifamily communities generate rental revenue and other income through the leasing of apartment homes, which comprises approximately 98% of our total property revenues and total non-property income, excluding income on deferred compensation plans, for all periods presented.

Use of Estimates. In the application of GAAP, management is required to make estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements, results of operations during the reporting periods, and related disclosures. Our more significant estimates include estimates supporting our impairment analysis related to the carrying values of our real estate assets, estimates related to the valuation of our investments in joint ventures and mezzanine financing, and estimates of expected losses of potential variable interest entities. These estimates are based on historical experience and other assumptions believed to be reasonable under the circumstances. Future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment.

Recent Accounting Pronouncements. In December 2009, the FASB issued ASU 2009-17, “Consolidations (Topic 810) — Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities,” which codified the previously issued Statement of Financial Accounting Standards 167, “Amendments to FASB Interpretation No. 46R.” ASU 2009-17 changes the consolidation analysis for VIEs and requires a qualitative analysis to determine the primary beneficiary of the VIE. The determination of the primary beneficiary of a VIE is based on whether the entity has the power to direct matters which most significantly impact the activities of the VIE and has the obligation to absorb losses, or the right to receive benefits, of the VIE which could potentially be significant to the VIE. The ASU requires an ongoing reconsideration of the primary beneficiary and also amends the events triggering a reassessment of whether an entity is a VIE. ASU 2009-17 requires additional disclosures for VIEs, including disclosures about a reporting entity’s involvement with VIEs, how a reporting entity’s involvement with a VIE affects the reporting entity’s financial statements, and significant judgments and assumptions made by the reporting entity to determine whether it must consolidate the VIE. ASU 2009-17 was effective for us beginning January 1, 2010. Our adoption of ASU 2009-17 did not have a material effect on our financial statements, but could potentially have a material impact on future reconsideration events and subsequent reassessment of VIE status.

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 4.7 million and 5.0 million for the three and nine months ended September 30, 2010, respectively, and was approximately 4.9 million for both the three and nine months ended September 30, 2009. 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 were determined to be anti-dilutive.

The following table presents information necessary to calculate basic and diluted earnings per share for the three and nine months ended September 30, 2010 and 2009:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share amounts)		2010				2009				2010				2009
Basic earnings per share calculation
Income from continuing operations attributable to common shareholders		$	1,324			$	3,658			$	5,354			$	9,334
Amount allocated to participating securities			(24	)			(3	)			(94	)			(226	)
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities			1,300				3,655				5,260				9,108
Income from discontinued operations, including gain on sale, attributable to common shareholders			326				279				715				19,152
Net income attributable to common shareholders, as adjusted — basic		$	1,626			$	3,934			$	5,975			$	28,260
Income from continuing operations attributable to common shareholders, as adjusted — per share		$	0.02			$	0.06			$	0.08			$	0.15
Income from discontinued operations, including gain on sale, attributable to common shareholders — per share			—				—				0.01				0.31
Net income attributable to common shareholders, as adjusted — per share		$	0.02			$	0.06			$	0.09			$	0.46
Weighted average number of common shares outstanding			69,100				66,094				67,898				61,087

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share amounts)		2010				2009				2010				2009
Diluted earnings per share calculation
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities		$	1,300			$	3,655			$	5,260			$	9,108
Income allocated to common units			—				9				—				29
Income from continuing operations attributable to common shareholders, as adjusted			1,300				3,664				5,260				9,137
Income from discontinued operations, including gain on sale, attributable to common shareholders			326				279				715				19,152
Net income attributable to common shareholders, as adjusted		$	1,626			$	3,943			$	5,975			$	28,289
Income from continuing operations attributable to common shareholders, as adjusted — per share		$	0.02			$	0.06			$	0.08			$	0.15
Income from discontinued operations, including gain on sale, attributable to common shareholders — per share			—				—				0.01				0.31
Net income attributable to common shareholders, as adjusted — per share		$	0.02			$	0.06			$	0.09			$	0.46
Weighted average number of common shares outstanding			69,100				66,094				67,898				61,087
Incremental shares issuable from assumed conversion of:
Common share options and share awards granted			341				36				271				13
Common units			—				472				—				479
Weighted average number of common shares and dilutive equivalent common shares outstanding			69,441				66,602				68,169				61,579

4. Common Shares

We currently have an automatic shelf registration statement on file with the SEC which allows us to offer, from time to time, an unlimited amount of common shares, preferred shares, debt securities, or warrants. Our declaration of trust provides we may issue up to 110 million shares of beneficial interest, consisting of 100 million common shares and 10 million preferred shares. As of September 30, 2010, we had approximately 67.6 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding.

In March 2010, we announced the creation of an at-the-market (“ATM”) share offering program through which we may, but have no obligation to, sell common shares having an aggregate offering price of up to $250 million, in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. Actual sales will depend on a variety of factors we determine from time to time including, among others, market conditions, the trading price of our common shares, and determinations of the appropriate sources of funding for us.

The following table presents activity under our ATM share offering program for the periods presented (in millions, except per share amounts):

		Three Months Ended				Nine Months Ended
		September 30, 2010				September 30, 2010
Common shares sold			0.6				2.9
Total net consideration		$	28.2			$	134.6
Average price per share		$	48.05			$	46.91

During the fourth quarter of 2010, we issued approximately 1.0 million common shares at an average price of $49.25 per share for total net consideration of approximately $50.4 million. As of the date of this filing, we had common shares having an aggregate offering price of up to $61.9 million remaining available for sale under the ATM program.

5. Investments in Joint Ventures

As of September 30, 2010, our equity investments in unconsolidated joint ventures, which we account for utilizing the equity method of accounting, consisted of 23 joint ventures, with our ownership percentages ranging from 15% to 72%. We provide property management services to the majority of these joint ventures which own operating properties and may provide construction and development services to the joint ventures which own properties under development. The following table summarizes aggregate balance sheet and statement of income data for the unconsolidated joint ventures as of and for the periods presented:

		September 30,				December 31,
(in millions)		2010				2009
Total assets		$	1,121.4			$	1,202.0
Total third-party debt			949.9				980.9
Total equity			134.6				151.9

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Total revenues		$	35.3			$	35.2			$	103.6			$	103.2
Net loss			(5.0	)			(5.8	)			(15.2	)			(12.9	)
Equity in income (loss) (1)			(0.2	)			—				(0.8	)			0.6

The joint ventures in which we have an interest have been funded in part with secured, third-party debt. We have guaranteed no more than our proportionate interest, totaling approximately $47.8 million, of four loans utilized for construction and development activities for our joint ventures.

Mezzanine loans we have made to affiliate joint ventures are recorded as “Notes receivable — affiliates” as discussed in Note 6, “Notes Receivable.”

We may earn fees for property and asset management, construction, development, and other services related primarily to joint ventures in which we own an interest. Fees earned for these services amounted to approximately $2.1 million and $1.8 million for the three months ended September 30, 2010 and 2009, respectively, and approximately $6.0 million and $6.1 million for the nine months ended September 30, 2010 and September 30, 2009, respectively. We eliminate fee income from property management services provided to these joint ventures to the extent of our ownership.

On April 15, 2010, a $24.5 million secured third-party construction note made by one of our joint ventures which owns a multifamily property located in Houston, Texas, originally scheduled to mature in April 2010, was contractually extended to April 2011. Concurrent with the construction note extension, our $8.2 million mezzanine loan to this joint venture was converted into an additional common equity interest in the amount of $7.2 million (with a preference on distribution of cash flows) and the remaining $1.0 million was converted into an additional equity interest in the joint venture.

In July 2010, we acquired two multifamily properties for approximately $41 million on behalf of one of our discretionary investment funds (the “Funds”) in which we have a 20% ownership interest. One property is comprised of 306 units located in Houston, Texas and the second property is a 110 unit substantially complete development community located in Atlanta, Georgia.

In August 2010, the ownership of one of our joint ventures, which owns a multifamily property located in Irvine, California, was restructured and resulted in our ownership interest increasing from 30% to 99.99%. We previously accounted for this joint venture in accordance with the equity method of accounting. Following this restructuring, we have consolidated this entity for financial reporting purposes. At the time of this restructuring, we recorded the assets and liabilities of the joint venture at fair value, which has resulted in an increase of net real estate assets of approximately $92.7 million and a reduction to investments in joint ventures and notes receivable-affiliates of approximately $21.2 million and $20.7 million, respectively. We did not record a gain or loss on this restructuring as the net consideration approximated the fair market value of the net assets received. Subsequent to this restructuring, we repaid the joint venture’s existing $52.1 million secured note, which accrued interest at LIBOR plus 2.25%, and the joint venture entered into a 35 year secured credit agreement with a third-party lender in the amount of $53.0 million with an effective annual interest rate of 4.35%.

6. Notes Receivable

Notes Receivable — affiliates. We provide mezzanine financing with rates ranging from the London Interbank Offered Rate (“LIBOR”) plus 3% to a fixed maximum rate of 12% per year, to certain of our joint ventures. As of September 30, 2010 and December 31, 2009, the balance of “Notes receivable — affiliates” totaled approximately $17.5 million and $45.8 million, respectively, on notes maturing through 2019. We eliminate the interest income to the extent of our percentage ownership in the joint ventures. We have reviewed the terms and conditions underlying these notes receivable and believe these notes are collectible and no impairment existed at September 30, 2010.

At September 30, 2010, our commitment to fund additional amounts under the mezzanine loans was an aggregate of approximately $6.0 million.

7. Notes Payable

The following is a summary of our indebtedness:

		Balance at
		September 30,				December 31,
(in millions)		2010				2009
Commercial Banks
Unsecured line of credit and short-term borrowings		$	—			$	—
$500 million term loan, due 2012			500.0				500.0
		$	500.0			$	500.0
Senior unsecured notes
$250.0 million 4.39% Notes, due 2010			—				55.3
$100.0 million 6.75% Notes, due 2010			—				57.8
$150.0 million 7.69% Notes, due 2011			87.9				87.9
$200.0 million 5.93% Notes, due 2012			189.4				189.4
$200.0 million 5.45% Notes, due 2013			199.6				199.4
$250.0 million 5.08% Notes, due 2015			249.2				249.0
$300.0 million 5.75% Notes, due 2017			246.1				246.1
		$	972.2			$	1,084.9
Medium-term notes
$10.0 million 4.90% Notes, due 2010			—				10.2
$14.5 million 6.79% Notes, due 2010			—				14.5
$35.0 million 4.99% Notes, due 2011			35.6				36.3
		$	35.6			$	61.0
Total unsecured notes payable		$	1,507.8			$	1,645.9

		Balance at
		September 30,				December 31,
(in millions)		2010				2009
Secured notes
1.18% – 6.00% Conventional Mortgage Notes, due 2011 – 2045		$	993.8			$	937.8
1.72% Tax-exempt Mortgage Note due 2028			40.6				41.5
		$	1,034.4			$	979.3
Total notes payable		$	2,542.2			$	2,625.2
Floating rate debt included in secured notes (1.18% – 1.71%)		$	189.8			$	186.9
Floating rate tax-exempt debt included in secured notes (1.72%)			40.6				41.5

In August 2010, we entered into a $500 million unsecured credit facility, with the ability to further increase to $600 million, which matures in August 2012 and may be extended at our option to August 2013. This facility replaced our $600 million unsecured credit facility which was scheduled to mature in January 2011. Interest rate spreads float on a margin based on LIBOR and are subject to change as our credit ratings change. Advances under the line of credit may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of 180 days or less and may not exceed the lesser of $250 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations, all of which we are in compliance.

Our line of credit provides us with the ability to issue up to $100 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, it does reduce the amount available. At September 30, 2010, we had outstanding letters of credit totaling approximately $10.2 million, leaving approximately $489.8 million available under our unsecured line of credit.

Subsequent to the restructuring of one of our unconsolidated joint ventures in August 2010, this now fully consolidated joint venture entered into a 35 year secured credit agreement with a third-party lender in the amount of $53.0 million with an effective annual interest rate of 4.35%. Refer to Note 5, “Investments in Joint Ventures,” for further discussion of this transaction.

At September 30, 2010 and 2009, the weighted average interest rate on our floating rate debt, which includes our unsecured line of credit, was approximately 1.3% and 1.2%, respectively.

During the three months ended March 31, 2010, we repaid the remaining principal amount of our $250 million, 4.39% senior unsecured notes which matured on January 15, 2010 for a total of approximately $55.3 million. During the three months ended September 30, 2010, we repaid the remaining amounts outstanding on our $10.0 million, 4.90% and $14.5 million, 6.79% medium-term notes and our $100.0 million, 6.75% fixed-rate notes maturing in 2010 for a total of approximately $82.3 million. We have no scheduled debt maturities for the remainder of 2010.

Our indebtedness, including our unsecured line of credit, had a weighted average maturity of approximately 5.7 years at September 30, 2010. Scheduled repayments on outstanding debt assuming all contractual extensions, including our line of credit and scheduled principal amortizations, and the weighted average interest rate on maturing debt at September 30, 2010 are as follows:

						Weighted
						Average
(in millions)		Amount				Interest Rate
2010		$	1.1	*			—	%
2011			158.5				6.2
2012			762.7				5.4
2013			228.0				5.4
2014			11.0				6.0
2015 and thereafter			1,380.9				4.7
Total		$	2,542.2				5.0	%

8. Derivative Instruments and Hedging Activities

Risk Management Objective of Using Derivatives. We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we may enter into derivative financial instruments to manage exposures arising from business activities resulting in differences in the amount, timing, and duration of our known or expected cash payments principally related to our borrowings.

Cash Flow Hedges of Interest Rate Risk. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps and caps as part of our interest rate risk management strategy. Interest rate swaps involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps involve the receipt of variable rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up front premium.

Designated Hedges. The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive income or loss and is subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings. Over the next twelve months, we estimate an additional $23.0 million will be reclassified to interest expense. During the three and nine months ended September 30, 2010 and 2009, such derivatives were used to hedge the variable cash flows associated with existing variable rate debt. The ineffective portion of the change in fair value of the derivatives, if any, is recognized directly in earnings. No portion was ineffective during the three or nine months ended September 30, 2010 and 2009.

As of September 30, 2010, we had the following outstanding interest rate derivatives designated as cash flow hedges of interest rate risk:

Interest Rate Derivative		Number of Instruments		Notional Amount
Interest Rate Swaps		2		$	516.6 million

Non-designated Hedges. Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks. Non-designated hedges are either specifically non-designated by management or do not meet strict hedge accounting requirements. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings in other income or other expense.

As of September 30, 2010, we had the following outstanding interest rate derivative which was not designated as a hedge of interest rate risk:

Interest Rate Derivative		Number of Instruments		Notional Amount
Interest Rate Cap		1		$	175.0 million

The table below presents the fair value of our derivative financial instruments as well as their classification in the condensed consolidated balance sheets at September 30, 2010 and December 31, 2009 (in millions):

Fair Values of Derivative Instruments

Asset Derivatives

Liability Derivatives

September 30, 2010

December 31, 2009

September 30, 2010

December 31, 2009

Balance Sheet

Fair

Balance Sheet

Fair

Balance Sheet

Fair

Balance Sheet

Fair

Location

Value

Location

Value

Location

Value

Location

Value

Derivatives designated as hedging instruments

Interest Rate Swaps

Other Liabilities

$

43.3

Other Liabilities

$

41.1

Derivatives not designated as hedging instruments

Interest Rate Cap

Other Assets

$

—

Other Assets

$

0.1

The tables below present the effect of our derivative financial instruments on the condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2010 and 2009 (in millions):

Effect of Derivative Instruments

Three Months Ended September 30,

Location of Gain

(Loss) Recognized

in Income on

Amount of Loss

Location of Loss

Amount of Loss

Derivative

Recognized in Other

Reclassified from

Reclassified from

(Ineffective Portion

Amount of Gain (Loss) Recognized in

Comprehensive Income

Accumulated OCI

Accumulated OCI

and Amount

Income on Derivative (Ineffective

Derivatives in Cash

(“OCI”) on Derivative

into Income

into Income (Effective

Excluded from

Portion and Amount Excluded from

Flow Hedging

(Effective Portion)

(Effective

Portion)

Effectiveness

Effectiveness Testing)

Relationships

2010

2009

Portion)

2010

2009

Testing)

2010

2009

Interest Rate Swaps

$

(5.3

)

$

(8.7

)

Interest expense

$

5.8

$

5.7

Not applicable

Not applicable