Edgar Filing: CAMDEN PROPERTY TRUST

CPT 9.30.2013 10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended September 30, 2013



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

For the transition period from to

Commission file number: 1-12110

CAMDEN PROPERTY TRUST

(Exact Name of Registrant as Specified in Its Charter)



Texas		76-6088377
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

11 Greenway Plaza, Suite 2400 Houston, Texas		77046
(Address of principal executive offices)		(Zip Code)

(713) 354-2500

(Registrant’s Telephone Number, Including Area Code)

3 Greenway Plaza, Suite 1300, Houston, TX 77046

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Q No 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 Q 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	Q	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 Q

On October 25, 2013, 85,308,064 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	FINANCIAL INFORMATION	3

Item 1	Financial Statements	3

	Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2013 and December 31, 2012	3

	Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2013 and 2012	4

	Condensed Consolidated Statements of Equity and Perpetual Preferred Units (Unaudited) for the nine months ended September 30, 2013 and 2012	6

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2013 and 2012	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	10

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4	Controls and Procedures	39

Part II	OTHER INFORMATION	39

Item 1	Legal Proceedings	39

Item 1A	Risk Factors	39

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3	Defaults Upon Senior Securities	39

Item 4	Mine Safety Disclosures	40

Item 5	Other Information	40

Item 6	Exhibits	40

SIGNATURES
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 101.INS
Exhibit 101.SCH
Exhibit 101.CAL
Exhibit 101.DEF
Exhibit 101.LAB
Exhibit 101.PRE

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



(in thousands, except per share amounts)	September 30, 2013			December 31, 2012
Assets
Real estate assets, at cost
Land	$	967,121		$	949,777
Buildings and improvements	5,596,754			5,389,674
	$	6,563,875		$	6,339,451
Accumulated depreciation	(1,619,325		)	(1,518,896		)
Net operating real estate assets	$	4,944,550		$	4,820,555
Properties under development, including land	438,968			334,463
Investments in joint ventures	43,338			45,092
Properties held for sale	58,765			30,517
Total real estate assets	$	5,485,621		$	5,230,627
Accounts receivable – affiliates	27,474			33,625
Other assets, net	112,520			88,260
Cash and cash equivalents	4,707			26,669
Restricted cash	60,889			5,991
Total assets	$	5,691,211		$	5,385,172
Liabilities and equity
Liabilities
Notes payable
Unsecured	$	1,721,998		$	1,538,212
Secured	943,039			972,256
Accounts payable and accrued expenses	124,336			101,896
Accrued real estate taxes	50,247			28,452
Distributions payable	56,793			49,969
Other liabilities	69,716			67,679
Total liabilities	$	2,966,129		$	2,758,464
Commitments and contingencies
Non-Qualified deferred compensation share awards	47,092			—
Equity
Common shares of beneficial interest; $0.01 par value per share; 175,000 shares authorized; 99,652 and 99,106 issued; 96,662 and 96,201 outstanding at September 30, 2013 and December 31, 2012, respectively	967			962
Additional paid-in capital	3,595,536			3,587,505
Distributions in excess of net income attributable to common shareholders	(571,935		)	(598,951		)
Treasury shares, at cost (11,354 and 11,771 common shares at September 30, 2013 and December 31, 2012, respectively)	(410,309		)	(425,355		)
Accumulated other comprehensive loss	(1,021		)	(1,062		)
Total common equity	$	2,613,238		$	2,563,099
Non-controlling interests	64,752			63,609
Total equity	$	2,677,990		$	2,626,708
Total liabilities and equity	$	5,691,211		$	5,385,172

See Notes to Condensed Consolidated Financial Statements.

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CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands, except per share amounts)	2013			2012			2013			2012
Property revenues
Rental revenues	$	174,303		$	155,984		$	510,772		$	447,728
Other property revenues	27,653			25,779			80,264			72,957
Total property revenues	$	201,956		$	181,763		$	591,036		$	520,685
Property expenses
Property operating and maintenance	$	52,109		$	49,531		$	151,711		$	140,662
Real estate taxes	21,618			17,932			64,919			53,085
Total property expenses	$	73,727		$	67,463		$	216,630		$	193,747
Non-property income
Fee and asset management	$	3,096		$	3,041		$	8,817		$	9,572
Interest and other income (loss)	86			3			1,176			(750		)
Income (loss) on deferred compensation plans	2,315			(1,781		)	5,212			3,820
Total non-property income	$	5,497		$	1,263		$	15,205		$	12,642
Other expenses
Property management	$	5,353		$	5,509		$	16,578		$	15,644
Fee and asset management	1,505			1,864			4,468			5,051
General and administrative	9,993			9,303			31,377			27,712
Interest	24,275			25,865			73,967			78,759
Depreciation and amortization	54,880			49,409			160,272			145,709
Amortization of deferred financing costs	875			909			2,689			2,721
Expense (benefit) on deferred compensation plans	2,315			(1,781		)	5,212			3,820
Total other expenses	$	99,196		$	91,078		$	294,563		$	279,416
Gain on sale of land	—			—			698			—
Gain on acquisition of controlling interest in joint ventures	—			—			—			40,191
Equity in income of joint ventures	1,926			3,688			20,658			4,686
Income from continuing operations before income taxes	$	36,456		$	28,173		$	116,404		$	105,041
Income tax expense	(720		)	(334		)	(1,587		)	(992		)
Income from continuing operations	$	35,736		$	27,839		$	114,817		$	104,049
Income from discontinued operations	1,656			3,964			5,296			11,164
Gain on sale of discontinued operations, net of tax	34,410			—			91,059			32,541
Net income	$	71,802		$	31,803		$	211,172		$	147,754
Less income allocated to non-controlling interests from continuing operations	(1,074		)	(1,025		)	(3,026		)	(2,807		)
Less income, including gain on sale, allocated to non-controlling interests from discontinued operations	(8		)	(75		)	(1,778		)	(872		)
Less income allocated to perpetual preferred units	—			—			—			(776		)
Less write off of original issuance costs of redeemed perpetual preferred units	—			—			—			(2,075		)
Net income attributable to common shareholders	$	70,720		$	30,703		$	206,368		$	141,224

See Notes to Condensed Consolidated Financial Statements.

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CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME (continued)

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands, except per share amounts)	2013			2012			2013			2012
Earnings per share – basic
Income from continuing operations attributable to common shareholders	$	0.39		$	0.31		$	1.26		$	1.17
Income from discontinued operations, including gain on sale, attributable to common shareholders	0.41			0.05			1.09			0.52
Net income attributable to common shareholders	$	0.80		$	0.36		$	2.35		$	1.69
Earnings per share – diluted
Income from continuing operations attributable to common shareholders	$	0.39		$	0.31		$	1.25		$	1.16
Income from discontinued operations, including gain on sale, attributable to common shareholders	0.41			0.04			1.09			0.51
Net income attributable to common shareholders	$	0.80		$	0.35		$	2.34		$	1.67
Distributions declared per common share	$	0.63		$	0.56		$	1.89		$	1.68
Weighted average number of common shares outstanding – basic	87,449			85,631			87,117			82,923
Weighted average number of common shares outstanding – diluted	87,902			86,293			88,429			84,694
Net income attributable to common shareholders
Income from continuing operations	$	35,736		$	27,839		$	114,817		$	104,049
Less income allocated to non-controlling interests from continuing operations	(1,074		)	(1,025		)	(3,026		)	(2,807		)
Less income allocated to perpetual preferred units	—			—			—			(776		)
Less write off of original issuance costs of redeemed perpetual preferred units	—			—			—			(2,075		)
Income from continuing operations attributable to common shareholders	$	34,662		$	26,814		$	111,791		$	98,391
Income from discontinued operations, including gain on sale	$	36,066		$	3,964		$	96,355		$	43,705
Less income, including gain on sale, allocated to non-controlling interests from discontinued operations	(8		)	(75		)	(1,778		)	(872		)
Income from discontinued operations, including gain on sale, attributable to common shareholders	$	36,058		$	3,889		$	94,577		$	42,833
Net income attributable to common shareholders	$	70,720		$	30,703		$	206,368		$	141,224
Condensed Consolidated Statements of Comprehensive Income:
Net income	$	71,802		$	31,803		$	211,172		$	147,754
Other comprehensive income
Reclassification of prior service cost and net loss on post retirement obligations	14			7			41			23
Comprehensive income	$	71,816		$	31,810		$	211,213		$	147,777
Less income allocated to non-controlling interests from continuing operations	(1,074		)	(1,025		)	(3,026		)	(2,807		)
Less income, including gain on sale, allocated to non-controlling interests from discontinued operations	(8		)	(75		)	(1,778		)	(872		)
Less income allocated to perpetual preferred units	—			—			—			(776		)
Less write off of original issuance costs of redeemed perpetual preferred units	—			—			—			(2,075		)
Comprehensive income attributable to common shareholders	$	70,734		$	30,710		$	206,409		$	141,247

See Notes to Condensed Consolidated Financial Statements.

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CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND PERPETUAL PREFERRED UNITS

(Unaudited)



	Common Shareholders
(in thousands)	Common shares of beneficial interest			Additional paid-in capital			Distributions in excess of net income			Treasury shares, at cost			Accumulated other comprehensive loss			Non-controlling interests			Total equity
Equity, December 31, 2012	$	962		$	3,587,505		$	(598,951	)	$	(425,355	)	$	(1,062	)	$	63,609		$	2,626,708
Net income							206,368									4,804			211,172
Other comprehensive income													41						41
Common shares issued	6			40,092															40,098
Net share awards	(1		)	987						12,620									13,606
Employee share purchase plan				437						469									906
Common share options exercised				740						1,957									2,697
Change in classification of deferred compensation plan				(34,517		)													(34,517		)
Change in redemption value of non-qualified share awards							(12,928		)										(12,928		)
Diversification of share awards within deferred compensation plan				221			132												353
Conversions of operating partnership units				71												(71		)	—
Cash distributions declared to equity holders							(166,556		)							(3,590		)	(170,146		)
Equity, September 30, 2013	$	967		$	3,595,536		$	(571,935	)	$	(410,309	)	$	(1,021	)	$	64,752		$	2,677,990

See Notes to Condensed Consolidated Financial Statements.

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CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND PERPETUAL PREFERRED UNITS (continued)

(Unaudited)



	Common Shareholders
(in thousands)	Common shares of beneficial interest		Additional paid-in capital			Distributions in excess of net income			Treasury shares, at cost			Accumulated other comprehensive loss			Non-controlling interests			Total equity			Perpetual preferred units
Equity, December 31, 2011	$	845	$	2,901,024		$	(690,466	)	$	(452,003	)	$	(683	)	$	69,051		$	1,827,768		$	97,925
Net income						141,224									3,679			144,903			2,851
Other comprehensive income												23						23
Common shares issued	112		693,263															693,375
Net share awards			(2,477		)				14,096									11,619
Employee share purchase plan			613						718									1,331
Common share options exercised			1,840						11,433									13,273
Conversions of operating partnership units	2		(450		)										448			—
Cash distributions declared to perpetual preferred units																					(776		)
Cash distributions declared to equity holders						(142,993		)							(5,950		)	(148,943		)
Redemption of perpetual preferred units																					(100,000		)
Purchase of non-controlling interests			(13,285		)										3,044			(10,241		)
Equity, September 30, 2012	$	959	$	3,580,528		$	(692,235	)	$	(425,756	)	$	(660	)	$	70,272		$	2,533,108		$	—

See Notes to Condensed Consolidated Financial Statements.

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CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine Months Ended
	September 30,
(in thousands)	2013			2012
Cash flows from operating activities
Net income	$	211,172		$	147,754
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	163,573			156,423
Gain on acquisition of controlling interest in joint ventures	—			(40,191		)
Gain on sale of discontinued operations, net of tax	(91,059		)	(32,541		)
Gain on sale of land	(698		)	—
Distributions of income from joint ventures	7,935			3,064
Equity in income of joint ventures	(20,658		)	(4,686		)
Share-based compensation	10,682			9,950
Amortization of deferred financing costs	2,689			2,721
Net change in operating accounts and other	25,968			7,501
Net cash from operating activities	$	309,604		$	249,995
Cash flows from investing activities
Development and capital improvements	$	(245,336	)	$	(202,730	)
Acquisition of operating properties, including joint venture interests, net of cash acquired	(224,109		)	(305,258		)
Proceeds from sale of land and discontinued operations	162,019			54,125
Investments in joint ventures	(1,126		)	(6,706		)
Distributions from investments in joint ventures	6,094			9,230
Increase in non-real estate assets	(15,103		)	(2,918		)
Change in restricted cash	(53,704		)	(791		)
Other	—			(3,395		)
Net cash from investing activities	$	(371,265	)	$	(458,443	)
Cash flows from financing activities
Borrowings on unsecured line of credit and other short-term borrowings	$	450,900		$	79,000
Repayments on unsecured line of credit and other short-term borrowings	(267,900		)	(45,000		)
Repayment of notes payable	(29,217		)	(345,592		)
Proceeds from issuance of common shares	40,098			693,375
Distributions to common shareholders, perpetual preferred units and non-controlling interests	(163,290		)	(138,641		)
Redemption of perpetual preferred units	—			(100,000		)
Payment of deferred financing costs	(827		)	(757		)
Common share options exercised	2,466			12,575
Net decrease in accounts receivable – affiliates	6,151			2,165
Other	1,318			1,754
Net cash from financing activities	$	39,699		$	158,879
Net decrease in cash and cash equivalents	(21,962		)	(49,569		)
Cash and cash equivalents, beginning of period	26,669			55,159
Cash and cash equivalents, end of period	$	4,707		$	5,590
Supplemental information
Cash paid for interest, net of interest capitalized	$	56,500		$	61,120
Cash paid for income taxes	2,116			1,548

See Notes to Condensed Consolidated Financial Statements.

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CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)



	Nine Months Ended
	September 30,
(in thousands)	2013		2012
Supplemental schedule of noncash investing and financing activities
Distributions declared but not paid	$	56,793	$	49,940
Value of shares issued under benefit plans, net of cancellations	20,555		21,226
Net change in redemption of non-qualified share awards	12,796		—
Conversion of operating partnership units to common shares	71		447
Accrual associated with construction and capital expenditures	21,502		14,428
Amount payable for purchase of non-controlling interest	—		10,241
Acquisition of operating properties, including joint venture interests:
Mortgage debt assumed	—		272,606
Other liabilities assumed	—		6,640

See Notes to Condensed Consolidated Financial Statements.

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CAMDEN PROPERTY TRUST

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business

Business. Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust (“REIT”), is primarily engaged in the ownership, management, development, 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, 2013, we owned interests in, operated, or were developing 192 multifamily properties comprised of 66,278 apartment homes across the United States. Of the 192 properties, 12 properties were under construction, and when completed will consist of a total of 3,644 apartment homes. In addition, we own land holdings we may develop into multifamily apartment communities in the future.

2. Summary of Significant Accounting Policies

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

Interim Financial Reporting. We have prepared these 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 2012 Annual Report on Form 10-K. In the opinion of management, all adjustments and eliminations, consisting of normal recurring adjustments, necessary for a fair representation of our financial statements for the interim period reported have been included. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results which may be expected for the full year.

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

The unamortized values of below market leases and in-place leases at September 30, 2013 and 2012 are as follows:



	September 30,
(in millions)	2013		2012
Unamortized value of below market leases	$	0.4	$	0.2
Unamortized value of in-place leases	$	2.3	$	3.3

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Revenues recognized related to below market leases and amortization expense related to in-place leases for the three and nine months ended September 30, 2013 and 2012 are as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2013		2012		2013		2012
Revenues related to below market leases	$	0.2	$	0.2	$	0.9	$	1.2
Amortization of in-place leases	$	1.4	$	2.4	$	4.5	$	10.8

Asset Impairment. Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment may exist if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. We consider projected future discounted and undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. While we believe our estimates of future cash flows are reasonable, different assumptions regarding a number of factors, including market rents, economic conditions, and occupancies, could significantly affect these estimates. In estimating fair value, management uses appraisals, management estimates, and discounted cash flow calculations which utilize inputs from a marketplace participant’s perspective. When impairment exists, the long-lived asset is adjusted to its fair value. In addition, we evaluate our equity investments in joint ventures and if we believe there is an other than temporary decline in market value of our investment below our carrying value, we will record an impairment charge. There were no impairment charges recorded for the three and nine months ended September 30, 2013 and 2012, respectively.

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

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

Cost Capitalization. Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes which are capitalized as part of properties under development. Capitalized interest is generally based on the weighted average interest rate of our unsecured debt. Expenditures directly related to the development and improvement of real estate assets are capitalized at cost as land and buildings and improvements. Indirect development costs, including salaries and benefits and other related costs directly attributable to the development of properties, are also capitalized. We begin capitalizing development, construction, and carrying costs when the development of the future real estate asset is probable and activities necessary to get the underlying real estate ready for its intended use have been initiated. All construction and carrying costs are capitalized and reported in the balance sheet as properties under development until the apartment homes are substantially completed. Upon substantial completion of the apartment homes, the total capitalized development cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively.

As discussed above, carrying charges are principally interest and real estate taxes capitalized as part of properties under development. Capitalized interest was approximately $4.2 million and $3.1 million for the three months ended September 30, 2013 and 2012, respectively, and $10.8 million and $9.4 million for the nine months ended September 30, 2013 and 2012, respectively. Capitalized real estate taxes were approximately $0.7 million for each of the three months ended September 30, 2013 and 2012, and $2.3 million and $2.1 million for the nine months ended September 30, 2013 and 2012, respectively.

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

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

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of the lease term or the useful life of the improvement. During the third quarter of 2013, we relocated our corporate headquarters. In conjunction with this relocation, we capitalized approximately $11.3 million related to leasehold improvements which will be depreciated over the life of our new lease.

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



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

Discontinued Operations. A property is classified as a discontinued operation when (i) the operations and cash flows of the property can be clearly distinguished and have been or will be eliminated from our ongoing operations; (ii) the property has either been disposed of or is classified as held for sale; and (iii) we will not have any significant continuing involvement in the operations of the property after the disposal transaction. Significant judgments are involved in determining whether a property meets the criteria for discontinued operations reporting and the period in which these criteria are met. A property is classified as held for sale when (i) management commits to a plan to sell and it is actively marketed; (ii) it is available for immediate sale in its present condition and the sale is expected to be completed within one year; and (iii) it is unlikely significant changes to the plan will be made or the plan will be withdrawn.

The results of operations for properties sold during the period or classified as held for sale at the end of the current period are classified as discontinued operations in the current and prior periods. The property-specific components of earnings classified as discontinued operations include separately identifiable property-specific revenues, expenses, depreciation, and interest expense, if any. The gain or loss resulting from the eventual disposal of the held for sale properties is also classified within discontinued operations. Real estate assets held for sale are measured at the lower of carrying amount or fair value less costs to sell and are presented separately in the accompanying condensed consolidated balance sheets. Subsequent to classification of a property as held for sale, no further depreciation is recorded. Properties sold by our unconsolidated entities are not included in discontinued operations and related gains or losses are reported as a component of equity in income of joint ventures.

Gains on sale of real estate are recognized using the full accrual or partial sale methods, as applicable, in accordance with GAAP, provided various criteria relating to the terms of sale and any subsequent involvement with the real estate sold are satisfied.

Fair Value. For financial assets and liabilities recorded at fair value on a recurring or nonrecurring basis, fair value is the price we would receive to sell an asset, or pay to transfer a liability, in an orderly transaction with a market participant at the measurement date. In the absence of such data, fair value is estimated using internal information consistent with what market participants would use in a hypothetical transaction.

In determining fair value, observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions; preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:


•	Level 1: Quoted prices for identical instruments in active markets.


•	Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.


•	Level 3: Significant inputs to the valuation model are unobservable.

Recurring Fair Value Disclosures. The valuation methodology we use to measure our deferred compensation plan investments at fair value on a recurring basis is 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.

Non-recurring Fair Value Disclosures. Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances. These assets primarily include long-lived assets which are recorded at fair value when they are impaired. The fair value methodologies used

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to measure long-lived assets are described above at “Asset Impairment.” The inputs associated with the valuation of long-lived assets are generally included in Level 3 of the fair value hierarchy.

3. Per Share Data

Basic earnings per share are computed using net income attributable to common shareholders and the weighted average number of common shares outstanding. Diluted earnings per share reflect common shares issuable from the assumed conversion of common share options and share awards granted and units convertible into common shares. Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. Our unvested share-based awards are considered participating securities and are reflected in the calculation of basic and diluted earnings per share using the two-class method. The number of common share equivalent securities excluded from the diluted earnings per share calculation was approximately 2.9 million and 3.3 million for the three months ended September 30, 2013 and 2012, respectively, and was approximately 2.1 million and 2.4 million for the nine months ended September 30, 2013 and 2012, respectively. These securities, which include common share options and share awards granted and units convertible into common shares, were excluded from the diluted earnings per share calculation as they are anti-dilutive.

The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated:



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands, except per share amounts)	2013			2012			2013			2012
Earnings per share calculation – basic
Income from continuing operations attributable to common shareholders	$	34,662		$	26,814		$	111,791		$	98,391
Amount allocated to participating securities	(623		)	(288		)	(1,958		)	(1,387		)
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities	$	34,039		$	26,526		$	109,833		$	97,004
Income from discontinued operations, including gain on sale, attributable to common shareholders	36,058			3,889			94,577			42,833
Net income attributable to common shareholders, as adjusted	$	70,097		$	30,415		$	204,410		$	139,837

Income from continuing operations attributable to common shareholders, as adjusted – per share	$	0.39		$	0.31		$	1.26		$	1.17
Income from discontinued operations, including gain on sale, attributable to common shareholders – per share	0.41			0.05			1.09			0.52
Net income attributable to common shareholders, as adjusted – per share	$	0.80		$	0.36		$	2.35		$	1.69

Weighted average number of common shares outstanding – basic	87,449			85,631			87,117			82,923

Earnings per share calculation – diluted
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities	$	34,039		$	26,526		$	109,833		$	97,004
Income allocated to common units from continuing operations	—			—			947			985
Income from continuing operations attributable to common shareholders, as adjusted	$	34,039		$	26,526		$	110,780		$	97,989
Income from discontinued operations, including gain on sale, attributable to common shareholders	36,058			3,889			94,577			42,833
Income from discontinued operations allocated to common units	—			—			1,778			852
Net income attributable to common shareholders, as adjusted	$	70,097		$	30,415		$	207,135		$	141,674

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	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2013		2012		2013		2012
Earnings per share calculation – diluted (continued)
Income from continuing operations attributable to common shareholders, as adjusted – per share	$	0.39	$	0.31	$	1.25	$	1.16
Income from discontinued operations, including gain on sale, attributable to common shareholders – per share	0.41		0.04		1.09		0.51
Net income attributable to common shareholders, as adjusted – per share	$	0.80	$	0.35	$	2.34	$	1.67

Weighted average number of common shares outstanding – basic	87,449		85,631		87,117		82,923
Incremental shares issuable from assumed conversion of:
Common share options and share awards granted	453		662		497		655
Common units	—		—		815		1,116
Weighted average number of common shares outstanding – diluted	87,902		86,293		88,429		84,694

4. Common Shares

In May 2012, we created an at-the-market ("ATM") share offering program through which we can, but have no obligation to, sell common shares having an aggregate offering price of up to $300 million (the "2012 ATM program"), in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. Actual sales from time to time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations by management of the appropriate sources of funding for us. The net proceeds for the nine months ended September 30, 2013 were used for general corporate purposes, which included funding for development and capital improvement projects.

The following table presents activity under our 2012 ATM program for the three and nine months ended September 30, 2013 and 2012 (in thousands, except per share amounts):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Total net consideration	$	—	$	88,915.9	$	40,097.6	$	173,627.6
Common shares sold	—		1,302.5		555.1		2,607.9
Average price per share	$	—	$	69.34	$	73.73	$	67.63

At September 30, 2013, we had common shares having an aggregate offering price of up to $82.7 million remaining available for sale under the 2012 ATM program. No additional shares were sold subsequent to quarter end through the date of this filing.

In May 2011, we created an ATM share offering program through which we could, but had no obligation to, sell common shares having an aggregate offering price of up to $300 million (the “2011 ATM program”), in amounts and at times as we determined, into the existing trading market at current market prices as well as through negotiated transactions. The net proceeds resulting from the 2011 ATM program were used to redeem all of our outstanding redeemable perpetual preferred units and for other general corporate purposes, which included funding for development activities, financing of acquisitions, repayment of notes payable and borrowings under our $500 million unsecured line of credit. The 2011 ATM program terminated in the second quarter of 2012, and no further common shares are available for sale under the 2011 ATM program.

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The following table presents activity under our 2011 ATM program for the three and nine months ended September 30, 2012 (in thousands, except per share amounts):



	Three Months Ended		Nine Months Ended
	September 30, 2012		September 30, 2012
Total net consideration	$	—	$	128,128.0
Common shares sold	—		1,971.4
Average price per share	$	—	$	66.01

We currently have an automatic shelf registration statement which allows us to offer, from time to time, common shares, preferred shares, debt securities, or warrants. Our Amended and Restated Declaration of Trust provides we may issue up to 185 million shares of beneficial interest, consisting of 175 million common shares and 10 million preferred shares.

5. Property Acquisitions, Discontinued Operations, and Assets Held for Sale

Acquisitions. During April 2013, we acquired one operating property, Camden Post Oak, comprised of 356 apartment homes, located in Houston, Texas for approximately $108.5 million. During September 2013, we acquired two operating properties: Camden Sotelo, comprised of 170 apartment homes, located in Tempe, Arizona for approximately $34.0 million and Camden Vantage, comprised of 592 apartment homes, located in Atlanta, Georgia for approximately $82.5 million. During June 2013, we acquired approximately 38.8 acres in three land parcels located in Scottsdale, Chandler, and Tempe, Arizona for approximately $25.8 million.

The following table summarizes the fair values of the assets acquired and liabilities assumed for the acquisition of the operating properties described above as of the acquisition date (in millions):



Assets acquired:
	Buildings and improvements	$	192.0
	Land	29.5
	Intangible and other assets	4.5
Total assets acquired		$	226.0

Liabilities assumed:
	Other liabilities	$	1.9
Total liabilities assumed		$	1.9
	Net assets acquired	$	224.1

The three operating properties acquired as discussed above contributed revenues of approximately $5.4 million and property expenses of approximately $2.2 million from the respective acquisition dates through September 30, 2013.

Discontinued Operations. For the three and nine months ended September 30, 2013, income from discontinued operations, included the results of operations of two operating properties, Camden Centennial and Camden Pinnacle, comprised of 500 apartment homes, sold on September 30, 2013. Our restricted cash balance at September 30, 2013 included approximately $54.1 million in proceeds from the disposition of these two properties which was held with a qualified intermediary for use in a like-kind exchange. Discontinued operations for the nine months ended September 30, 2013 also included the results of operations of two operating properties, Camden Reserve and Camden Live Oaks, comprised of 1,296 apartment homes sold in January and April 2013, respectively.

For the three and nine months ended September 30, 2012, income from discontinued operations included the results of operations of the four operating properties sold in 2013, as discussed above, and also included the results of operations of 11 operating properties, Camden Vista Valley, Camden Landings, Camden Creek, Camden Laurel Ridge, Camden Steeplechase, Camden Sweetwater, Camden Valleybrook, Camden Park Commons, Camden Forest, Camden Baytown, and Camden Westview, comprised of 3,213 apartment homes, sold during 2012.

Discontinued operations for the three and nine months ended September 30, 2013 and 2012 also included the results of operations of five operating properties, Camden Gardens, Camden Springs, Camden Fountain Palms, Camden Sierra, and Camden Towne Center, comprised of 1,280 apartment homes, classified as held for sale at September 30, 2013. Two of these properties, Camden Gardens and Camden Springs, were sold in October 2013 for approximately $34.6 million.

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The following is a summary of income from discontinued operations for the three and nine months ended September 30, 2013 and 2012:



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2013			2012			2013			2012
Property revenues	$	4,455		$	13,545		$	14,988		$	40,528
Property expenses	(1,891		)	(6,181		)	(6,391		)	(18,614		)
	$	2,564		$	7,364		$	8,597		$	21,914
Interest	—			—			—			(36		)
Depreciation and amortization	(908		)	(3,400		)	(3,301		)	(10,714		)
Income from discontinued operations	$	1,656		$	3,964		$	5,296		$	11,164

Gain on sale of discontinued operations, net of tax	$	34,410		$	—		$	91,059		$	32,541

During the nine months ended September 30, 2013, we sold two land holdings comprised of an aggregate of approximately 3.7 acres located adjacent to current development communities in Atlanta, Georgia and Houston, Texas, for approximately $6.6 million. We recognized a gain of approximately $0.7 million relating to these land sales.

6. Investments in Joint Ventures

As of September 30, 2013, our equity investments in unconsolidated joint ventures, which we account for utilizing the equity method of accounting, consisted of three joint ventures. We have a 20% ownership interest in each of these joint ventures. We currently provide property and asset management services to each of these joint ventures which own operating properties, and we may provide construction and development services to the joint ventures which own properties under development. The following table summarizes the combined basis balance sheet and statement of income data for the unconsolidated joint ventures as of and for the periods presented:



(in millions)	September 30, 2013		December 31, 2012
Total assets	$	826.6	$	917.8
Total third-party debt	563.2		712.7
Total equity	234.9		165.2



	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(in millions)	2013		2012			2013		2012
Total revenues (1)	$	27.7	$	26.6	(2)	$	80.5	$	79.2	(2)
Net income	2.2		15.3			102.2		13.5
Equity in income (3)	1.9		3.7			20.7		4.7

(1)

Excludes approximately $10.3 million for the nine months ended September 30, 2013, and approximately $6.5 million and $19.5 million for the three and nine months ended September 30, 2012, respectively, relating to the discontinued operations from the sale of 14 operating properties within one of our unconsolidated joint ventures during the second quarter of 2013. Additionally, excludes approximately $6.6 million and $20.4 million for the three and nine months ended September 30, 2012, respectively, related to the discontinued operations from the sale of seven operating properties within two of our unconsolidated joint ventures during the third and fourth quarters of 2012.


(2)	Includes approximately $1.3 million of revenues for the three months ended September 30, 2012 related to one previously unconsolidated joint venture acquired by us in December 2012 and approximately $6.6 million of revenues for the nine months ended September 30, 2012 related to this joint venture and 12 previously unconsolidated joint ventures acquired by us in January 2012.


(3)	Equity in income excludes our ownership interest of fee income from various property and asset management services provided by us to our joint ventures.

The joint ventures in which we have a partial interest have been funded in part with secured third-party debt. As of September 30, 2013, we had no outstanding guarantees related to loans of our unconsolidated joint ventures.

We may earn fees for property and asset management, construction, development, and other services related to joint ventures in which we own an equity interest and also may earn a promoted equity interest if certain thresholds are met. Fees earned for these services were approximately $2.4 million and $2.8 million for the three months ended September 30, 2013 and 2012,

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respectively, and approximately $7.5 million and $8.8 million for the nine months ended September 30, 2013 and 2012, respectively. We eliminate fee income for services provided to these joint ventures to the extent of our ownership.

In May 2013, one of our unconsolidated joint ventures sold its 14 operating properties, Oasis Bay, Oasis Crossings, Oasis Emerald, Oasis Gateway, Oasis Island, Oasis Landing, Oasis Meadows, Oasis Palms, Oasis Pearl, Oasis Place, Oasis Ridge, Oasis Sierra, Oasis Springs, and Oasis Vinings, comprised of 3,098 apartment homes, located in Las Vegas, Nevada, for approximately $200.2 million. Our proportionate share of the gain was approximately $13.0 million. Additionally, as a result of achieving certain performance measures as set forth in the joint venture agreement, we recognized a promoted equity interest of approximately $3.8 million during the second quarter of 2013, and $1.2 million during the third quarter of 2013. Our proportionate share of the gain and the promoted equity interest were reported as components of equity in income of joint ventures in the condensed consolidated statements of income and comprehensive income.

7. Notes Payable

The following is a summary of our indebtedness:



	Balance at
(in millions)	September 30, 2013		December 31, 2012
Commercial Banks
Unsecured line of credit and short-term borrowings	$	183.0	$	—

Senior unsecured notes
5.45% Notes, due 2013	200.0		199.9
5.08% Notes, due 2015	249.7		249.5
5.75% Notes, due 2017	246.4		246.3
4.70% Notes, due 2021	248.8		248.7
3.07% Notes, due 2022	346.5		346.3
5.00% Notes, due 2023	247.6		247.5
	1,539.0		1,538.2

Total unsecured notes payable	1,722.0		1,538.2

Secured notes
1.00% – 6.00% Conventional Mortgage Notes, due 2014 – 2045	906.4		934.6
Tax-exempt Mortgage Note due 2028 (1.26% floating rate)	36.6		37.7
	943.0		972.3
Total notes payable	$	2,665.0	$	2,510.5

Other floating rate debt included in secured notes (1.00%)	$	175.0	$	175.0

We have a $500 million unsecured credit facility which matures in September 2015 with an option to extend at our election to September 2016. Additionally, we have the option to increase this credit facility to $750 million by either adding additional banks to the credit facility or obtaining the agreement of the existing banks in the credit facility to increase their commitments. The interest rate is based upon LIBOR plus a margin which is subject to change as our credit ratings change. Advances under the line of credit may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of 180 days or less and may not exceed the lesser of $250 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations. We believe we are in compliance with all such financial covenants and limitations.

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, 2013, we had $170.0 million outstanding on our $500 million unsecured line of credit and we had outstanding letters of credit totaling approximately $11.0 million, leaving approximately $319.0 million available under our unsecured line of credit. As an alternative to our unsecured line of credit, from time to time, we may borrow using an unsecured overnight borrowing facility. Our use of short-term borrowings does not decrease the amount available under our unsecured line of credit. At September 30, 2013, we had $13.0 million short-term borrowings outstanding.

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In January 2013, we repaid a 4.95% secured conventional mortgage note which was scheduled to mature on April 1, 2013 for approximately $26.1 million.

At September 30, 2013 and 2012, the weighted average interest rate on our floating rate debt, which includes our unsecured line of credit and short-term borrowings, was approximately 1.0% and 1.1%, respectively.

Our indebtedness, which includes our unsecured line of credit and short-term borrowings, had a weighted average maturity of 6.1 years at September 30, 2013. Scheduled repayments on outstanding debt, including our unsecured line of credit, short-term borrowings and scheduled principal amortizations, and the respective weighted average interest rate on maturing debt at September 30, 2013, were as follows:



(in millions)	Amount		Weighted Average Interest Rate
2013	$	200.8	5.5	%
2014	35.4		3.2
2015	435.0		3.3
2016 (1)	2.2		—
2017	249.2		5.8
Thereafter	1,742.4		4.2
Total	$	2,665.0	4.3	%

(1) Includes only scheduled principal amortizations.

8. Share-based Compensation and Non-Qualified Deferred Compensation Plan

Incentive Compensation. During the second quarter of 2011, our Board of Trust Managers adopted, and on May 11, 2011 our shareholders approved, the 2011 Share Incentive Plan of Camden Property Trust (as amended, the “2011 Share Plan”). Under the 2011 Share Plan, we may issue up to a total of approximately 9.1 million fungible units (the “Fungible Pool Limit”), which is comprised of approximately 5.8 million new fungible units plus approximately 3.3 million fungible units previously available for issuance under our 2002 share incentive plan based on a 3.45 to 1.0 fungible unit to full value award conversion ratio. Fungible units represent the baseline for the number of shares available for issuance under the 2011 Share Plan. Different types of awards are counted differently against the Fungible Pool Limit, as follows:


•	Each share issued or to be issued in connection with an award, other than an option, right or other award which does not deliver the full value at grant of the underlying shares, will be counted against the Fungible Pool Limit as 3.45 fungible pool units;


•	Options and other awards which do not deliver the full value at grant of the underlying shares and which expire more than five years from date of grant will be counted against the Fungible Pool Limit as one fungible pool unit; and


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

At September 30, 2013, approximately 6.7 million fungible units were available under the 2011 Share Plan, which results in approximately 1.9 million common shares which may be granted pursuant to full value awards based on the 3.45 to 1.0 fungible unit-to-full value award conversion ratio.

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

Options. Approximately 0.2 million and 0.5 million options were exercised during the nine months ended September 30, 2013 and 2012, respectively. The options were exercised at prices ranging from $30.06 to $62.32 per option during the nine months ended September 30, 2013, and at prices ranging from $30.06 to $51.37 per option during the nine months ended September 30, 2012. The total intrinsic value of options exercised was approximately $5.2 million and $12.0 million during the nine months ended September 30, 2013 and 2012, respectively. At September 30, 2013, there was approximately $0.1 million of

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total unrecognized compensation cost related to unvested options, which is expected to be amortized over the next year. At September 30, 2013, outstanding options and exercisable options had a weighted average remaining life of approximately 3.5 years and 3.1 years, respectively.

The following table summarizes outstanding share options and exercisable options at September 30, 2013:



	Outstanding Options (1)			Exercisable Options (1)
Range of Exercise Prices	Number	Weighted Average Price		Number	Weighted Average Price
$30.06-$41.16	228,012	$	33.14	130,107	$	35.46
$42.90-$43.94	108,947	43.43		108,947	43.43
$45.53-$62.32	298,609	47.39		298,609	47.39
Total options	635,568	$	41.60	537,663	$	43.70


(1)	The aggregate intrinsic value of outstanding and exercisable options at September 30, 2013 was $12.6 million and $9.6 million, respectively. The aggregate intrinsic values were calculated as the excess, if any, between our closing share price of $61.44 per share on September 30, 2013 and the strike price of the underlying award.

Valuation Assumptions. Options generally have a vesting period of three to five years. We estimate the fair values of each option award on the date of grant using the Black-Scholes option pricing model. No new options have been granted in 2013.

Share Awards and Vesting. Share awards generally have a vesting period of three to five years. The compensation cost for share awards is based on the market value of the shares on the date of grant and is amortized over the vesting period. To estimate forfeitures, we use actual forfeiture history. At September 30, 2013, the unamortized value of previously issued unvested share awards was approximately $40.1 million, which is expected to be amortized over the next four years. The total fair value of shares vested during the nine months ended September 30, 2013 and 2012 was approximately $14.9 million and $13.4 million, respectively.

Total compensation cost for option and share awards charged against income was approximately $3.9 million and $3.6 million for the three months ended September 30, 2013 and 2012, respectively, and approximately $11.3 million and $10.4 million for the nine months ended September 30, 2013 and 2012, respectively. Total capitalized compensation cost for option and share awards was approximately $0.5 million and $0.4 million for the three months ended September 30, 2013 and 2012, respectively, and approximately $1.6 million and $1.1 million for the nine months ended September 30, 2013 and 2012, respectively.

The following table summarizes activity under our share incentive plans for the nine months ended September 30, 2013:



	Options Outstanding		Weighted Average Exercise Price		Nonvested Share Awards Outstanding		Weighted Average Grant Price
Total options and nonvested share awards outstanding at December 31, 2012	838,754		$	42.36	862,253		$	52.64
Granted	—		—		349,565		69.59
Exercised/vested	(182,664	)	41.52		(296,373	)	50.43
Forfeited	(20,522	)	73.32		(65,076	)	57.90
Total options and nonvested share awards outstanding at September 30, 2013	635,568		$	41.60	850,369		$	59.98

Non-Qualified Deferred Compensation Plan. In July 2013, we entered into an Amended and Restated Camden Property Trust Non-Qualified Deferred Compensation Plan (the "Plan") to permit diversification of fully vested share awards into other equity securities subject to a six month holding period. As a result of these modifications, the fully vested awards and the proportionate share of nonvested awards eligible for diversification were reclassified from additional paid in capital to temporary equity in our Condensed Consolidated Balance Sheets. The share awards are adjusted to their redemption value at each reporting period. Changes in value from period to period are charged to distributions in excess of net income attributable to common shareholders in our Condensed Consolidated Statements of Equity and Perpetual Preferred Units.

The following table summarizes the share award activity since the effective date of the amended and restated Plan through September 30, 2013:

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(in thousands)
Balance at December 31, 2012	$	—
Change in classification	34,517
Change in redemption value	12,928
Diversification of share awards	(353		)
Balance at September 30, 2013	$	47,092

9. Net Change in Operating Accounts

The effect of changes in the operating accounts and other on cash flows from operating activities is as follows:



	Nine Months Ended
	September 30,
(in thousands)	2013			2012
Change in assets:
Other assets, net	$	(8,964	)	$	(8,765	)
Change in liabilities:
Accounts payable and accrued expenses	6,737			11,759
Accrued real estate taxes	21,470			20,230
Other liabilities	5,939			(16,322		)
Other	786			599
Change in operating accounts and other	$	25,968		$	7,501

10. Commitments and Contingencies

Construction Contracts. As of September 30, 2013, we estimate the additional costs to complete 10 consolidated projects currently under construction to be approximately $412.2 million. We expect to fund these amounts through a combination of cash flows generated from operations, draws on our unsecured credit facility or other short-term borrowings, proceeds from property dispositions, equity issued from our ATM program, the use of debt and equity offerings under our automatic shelf registration statement, and secured mortgages.

Litigation. One of our wholly-owned subsidiaries previously acted as a general contractor for the construction of two apartment projects in Florida which were subsequently sold and converted to condominium units by unrelated third-parties. One condominium association instituted a lawsuit against our subsidiary alleging a failure to comply with building codes. In June 2013, we entered into a settlement agreement with this association, which resolved this matter in full. Pursuant to this settlement agreement, we made a one-time payment to the association in an amount which was not material.

The other association instituted a lawsuit against our subsidiary and other unrelated third-parties alleging negligent construction and failure to comply with building codes. This association is claiming damages for the costs of repair arising out of the alleged defective construction as well as the recovery of incidental and consequential damages resulting from such alleged negligence. We have denied liability to the association. Based upon the amount of discovery completed to date, it is not possible to determine the potential outcome or to estimate a range of loss, if any, which would be associated with any potential adverse decision.

We are also subject to various legal proceedings and claims which arise in the ordinary course of business. Matters which arise out of allegations of bodily injury, property damage, and employment practices are generally covered by insurance. While the resolution of these legal proceedings and claims cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on our condensed consolidated financial statements.

Other Contingencies. In the ordinary course of our business, we issue letters of intent indicating a willingness to negotiate for acquisitions, dispositions, or joint ventures and also enter into arrangements contemplating various transactions. Such letters of intent and other arrangements are non-binding as to either party unless and until a definitive contract is entered into by the parties. Even if definitive contracts relating to the purchase or sale of real property are entered into, these contracts generally provide the purchaser with time to evaluate the property and conduct due diligence, during which periods the purchaser will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money. There can be no assurance definitive contracts will be entered into with respect to any matter covered by letters of intent or we will consummate any transaction

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contemplated by any definitive contract. Furthermore, due diligence periods for real property are frequently extended as needed. An acquisition or sale of real property becomes probable at the time the due diligence period expires and the definitive contract has not been terminated. We are then at risk under a real property acquisition contract, but generally only to the extent of any earnest money deposits associated with the contract, and are obligated to sell under a real property sales contract. At September 30, 2013, we had made earnest money deposits of approximately $2.3 million for potential acquisitions of operating properties and land, of which approximately $1.3 million is non-refundable.

Lease Commitments. At September 30, 2013, we had long-term leases covering certain land, office facilities, and equipment. Rental expense totaled approximately $0.7 million for each of the three months ended September 30, 2013 and 2012, respectively, and approximately $2.1 million and $1.9 million for the nine months ended September 30, 2013 and 2012, respectively. Minimum annual rental commitments for the remainder of 2013 are $0.7 million, and for the years ending December 31, 2014 through 2017 are approximately $3.1 million, $1.9 million, $2.2 million, and $2.2 million, respectively, and approximately $16.4 million in the aggregate thereafter.

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

11. Income Taxes

We have maintained and intend to maintain our election as a REIT under the Internal Revenue Code of 1986, as amended. In order for us to continue to qualify as a REIT we must meet a number of organizational and operational requirements, including a requirement to distribute annual dividends to our shareholders equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains. As a REIT, we generally will not be subject to federal income tax on our taxable income at the corporate level to the extent such income is distributed to our shareholders annually. If our taxable income exceeds our dividends in a tax year, REIT tax rules allow us to designate dividends from the subsequent tax year in order to avoid current taxation on undistributed income. If we fail to qualify as a REIT in any taxable year, we will be subject to federal and state income taxes at regular corporate rates, including any applicable alternative minimum tax. In addition, we may not be able to requalify as a REIT for the four subsequent taxable years. Historically, we have incurred only state and local income, franchise, margin, and excise taxes. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal, state, and local income and margin taxes. Our operating partnerships are flow-through entities and are not subject to federal income taxes at the entity level.

We have provided for income, franchise and excise taxes in the condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2013 and 2012 as income tax expense. For the three and nine months ended September 30, 2013, income tax expense is primarily related to state income tax and federal taxes on certain of our taxable REIT subsidiaries. We have no significant temporary differences or tax credits associated with our taxable REIT subsidiaries.

We believe we have no uncertain tax positions or unrecognized tax benefits requiring disclosure as of and for the nine months ended September 30, 2013.

12. Fair Value Disclosures

Recurring Fair Value Disclosures. The following table presents information about our financial instruments measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012 under the fair value hierarchy discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements."

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Financial Instruments Measured at Fair Value on a Recurring Basis



	September 30, 2013								December 31, 2012
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Deferred compensation plan investments (1)	$	40.8	$	—	$	—	$	40.8	$	35.0	$	—	$	—	$	35.0


(1)	Approximately $1.2 million of participant cash was withdrawn from our deferred compensation plan investments during the nine months ended September 30, 2013.

Financial Instrument Fair Value Disclosures. As of September 30, 2013 and December 31, 2012, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and distributions payable represent fair value because of the short-term nature of these instruments. The carrying value of restricted cash approximates its fair value based on the nature of our assessment of the ability to recover these amounts.

In calculating the fair value of our notes payable, interest rate and spread assumptions reflect current creditworthiness and market conditions available for the issuance of notes payable with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs. The following table presents the carrying and estimated fair values of our notes payable at September 30, 2013 and December 31, 2012:



	September 30, 2013				December 31, 2012
(in millions)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Fixed rate notes payable	$	2,270.4	$	2,366.3	$	2,297.8	$	2,518.1
Floating rate notes payable (1)	394.6		384.7		212.7		203.4


(1)	Includes balances outstanding under our unsecured line of credit and short-term borrowings.

Non-recurring Fair Value Disclosures. There were no events during the nine months ended September 30, 2013 or 2012 which required fair value adjustments of our non-financial assets and non-financial liabilities.

13. Non-controlling Interests

The following table summarizes the effect of changes in our ownership interest in subsidiaries on the equity attributable to common shareholders for the nine months ended September 30:



(in thousands)	2013		2012
Net income attributable to common shareholders	$	206,368	$	141,224
Transfers from the non-controlling interests:
Increase (decrease) in equity for conversion of operating partnership units	71		(448		)
Decrease in additional paid-in-capital for purchase of remaining non-controlling ownership interest in a consolidated joint venture	—		(13,285		)
Change in common equity and net transfers from non-controlling interests	$	206,439	$	127,491

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes appearing elsewhere in this report, as well as Part I, Item 1A, “Risk Factors” within our Annual Report on Form 10-K for the year ended December 31, 2012. Historical results and trends which might appear in the condensed consolidated financial statements should not be interpreted as being indicative of future operations.

We consider portions of this report to be “forward-looking” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, and include statements related to expectations, projections, intentions, or other items relating to the future; forward-looking statements are not guarantees of future performance, results, or events. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein which are not statements of historical fact should be deemed forward-looking statements. Reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.

Factors which may cause our actual results or performance to differ materially from those contemplated by forward-looking statements include, but are not limited to, the following:


•	volatility in capital and credit markets, or other unfavorable changes in economic conditions, could adversely impact us;


•	short-term leases expose us to the effects of declining market rents;


•	we face risks associated with land holdings and related activities;


•	difficulties of selling real estate could limit our flexibility;


•	we could be negatively impacted by the condition of Fannie Mae or Freddie Mac;


•	compliance or failure to comply with laws, including those requiring access to our properties by disabled persons, could result in substantial cost;


•	competition could limit our ability to lease apartments or increase or maintain rental income;


•	development and construction risks could impact our profitability;


•	our acquisition strategy may not produce the cash flows expected;


•	competition could adversely affect our ability to acquire properties;


•	losses from catastrophes may exceed our insurance coverage;


•	investments through joint ventures and discretionary funds involve risks not present in investments in which we are the sole investor;


•	tax matters, including failure to qualify as a REIT, could have adverse consequences;


•	we rely on information technology in our operations, and any breach, interruption or security failure of that technology could have a negative impact to our business and/or financial condition;


•	we depend on our key personnel;


•	litigation risks could affect our business;


•	insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders;


•	we have significant debt, which could have important adverse consequences;


•	we may be unable to renew, repay, or refinance our outstanding debt;


•	variable rate debt is subject to interest rate risk;


•	we may incur losses on interest rate hedging arrangements;


•	issuances of additional debt may adversely impact our financial condition;


•	failure to maintain our current credit ratings could adversely affect our cost of funds, related margins, liquidity, and access to capital markets;


•	share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders;


•	our share price will fluctuate; and


•	the form, timing and/or amount of dividend distributions in future periods may vary and be impacted by economic or other considerations.

These forward-looking statements represent our estimates and assumptions as of the date of this report, and we assume no obligation to update or supplement forward-looking statements because of subsequent events.

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Executive Summary

We are primarily engaged in the ownership, management, development, acquisition, and construction of multifamily apartment communities. As of September 30, 2013, we owned interests in, operated, or were developing 192 multifamily properties comprised of 66,278 apartment homes across the United States as detailed in the following Property Portfolio table. In addition, we own other land holdings we may develop into multifamily apartment communities.

Property Operations

Our results for the nine months ended September 30, 2013 reflect an increase in rental revenue as compared to the same period in 2012, which we believe was primarily due to a gradually improving economy, favorable demographics, and a manageable supply of new multifamily housing, which have resulted in increases in realized rental rates and stable average occupancy levels. Same store revenues increased 5.2% for the first nine months of 2013, as compared to the same period in 2012. We believe U.S. economic and employment growth is likely to continue during 2013 and the supply of new multifamily homes, although increasing, will likely remain at manageable levels. However, we believe significant risks to the economy remain prevalent, and while there have been increases in employment levels in the majority of our markets, the unemployment rate remains at higher than historical levels. If economic conditions were to worsen, our operating results could be adversely affected.

Construction Activity

At September 30, 2013, we had a total of 12 projects under construction comprised of 3,644 apartment homes, including two projects comprised of 566 units in our discretionary funds, with initial occupancy scheduled to occur within the next 24 months. Excluding the projects owned by our discretionary funds, as of September 30, 2013, we estimate the additional costs to complete the construction of 10 consolidated projects to be approximately $412.2 million.

Acquisitions

During the nine months ended September 30, 2013, we acquired three operating properties comprised of 1,118 apartment homes, located in Houston, Texas, Tempe, Arizona and Atlanta, Georgia, for approximately $225.0 million. In June 2013, we acquired approximately 38.8 acres in three land parcels located in Scottsdale, Chandler, and Tempe, Arizona, for approximately $25.8 million.

Dispositions

During the nine months ended September 30, 2013, we sold four operating properties comprised of 1,796 apartment homes located in Tampa and Orlando, Florida, and Littleton and Westminster, Colorado. In October 2013, we sold two operating properties comprised of 560