CPT 9.30.2014 10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ______________ to _______________                                       
Commission file number: 1-12110 
 
CAMDEN PROPERTY TRUST
(Exact Name of Registrant as Specified in Its Charter)
 
 
Texas
 
76-6088377
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
11 Greenway Plaza, Suite 2400
Houston, Texas
 
77046
(Address of principal executive offices)
 
(Zip Code)
(713) 354-2500
(Registrant’s Telephone Number, Including Area Code)
 
 
N/A
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated filer
 
ý
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨
Smaller Reporting Company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
On October 27, 2014, 86,398,451 common shares of the registrant were outstanding, net of treasury shares and shares held in our deferred compensation arrangements.

Table of Contents


CAMDEN PROPERTY TRUST
Table of Contents
 
 
 
 
Page
PART I
 
 
 
 
 
Item 1
 
 
 
 
 
 
 
Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2014 and December 31, 2013
 
 
 
 
 
 
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2014 and 2013
 
 
 
 
 
 
Condensed Consolidated Statements of Equity (Unaudited) for the nine months ended September 30, 2014 and 2013
 
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2014 and 2013
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
 
 
Item 3
 
 
 
 
 
Item 4
 
 
 
 
 
Part II
 
 
 
 
 
Item 1
 
 
 
 
 
Item 1A
 
 
 
 
 
Item 2
 
 
 
 
 
Item 3
 
 
 
 
 
Item 4
 
 
 
 
 
Item 5
 
 
 
 
 
Item 6
 
 
 
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 101.INS
Exhibit 101.SCH
Exhibit 101.CAL
Exhibit 101.DEF
Exhibit 101.LAB
Exhibit 101.PRE

2
Table of Contents


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) 
(in thousands, except per share amounts)
September 30,
2014
 
December 31, 2013
Assets
 
 
 
Real estate assets, at cost
 
 
 
Land
$
997,349

 
$
969,711

Buildings and improvements
5,894,453

 
5,629,904

 
$
6,891,802

 
$
6,599,615

Accumulated depreciation
(1,813,124
)
 
(1,643,713
)
Net operating real estate assets
$
5,078,678

 
$
4,955,902

Properties under development, including land
576,269

 
472,566

Investments in joint ventures
35,180

 
42,155

Total real estate assets
$
5,690,127

 
$
5,470,623

Accounts receivable – affiliates
25,954

 
27,724

Other assets, net
123,999

 
109,401

Cash and cash equivalents
66,127

 
17,794

Restricted cash
5,769

 
6,599

Total assets
$
5,911,976

 
$
5,632,141

Liabilities and equity
 
 
 
Liabilities
 
 
 
Notes payable
 
 
 
Unsecured
$
1,837,621

 
$
1,588,798

Secured
906,328

 
941,968

Accounts payable and accrued expenses
147,255

 
113,307

Accrued real estate taxes
54,369

 
35,648

Distributions payable
60,265

 
56,787

Other liabilities
94,230

 
88,272

Total liabilities
$
3,100,068

 
$
2,824,780

Commitments and contingencies

 

Non-qualified deferred compensation share awards
60,363

 
47,180

Equity
 
 
 
Common shares of beneficial interest; $0.01 par value per share; 175,000 shares authorized; 100,413 and 99,645 issued; 97,386 and 96,660 outstanding at September 30, 2014 and December 31, 2013, respectively
974

 
967

Additional paid-in capital
3,649,750

 
3,596,069

Distributions in excess of net income attributable to common shareholders
(568,142
)
 
(494,167
)
Treasury shares, at cost (11,000 and 11,352 common shares at September 30, 2014 and December 31, 2013, respectively)
(397,497
)
 
(410,227
)
Accumulated other comprehensive loss
(1,474
)
 
(1,106
)
Total common equity
$
2,683,611

 
$
2,691,536

Non-controlling interests
67,934

 
68,645

Total equity
$
2,751,545

 
$
2,760,181

Total liabilities and equity
$
5,911,976

 
$
5,632,141

See Notes to Condensed Consolidated Financial Statements.

3
Table of Contents


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
(in thousands, except per share amounts)
2014
 
2013
 
2014
 
2013
Property revenues
 
 
 
 
 
 
 
Rental revenues
$
184,247

 
$
172,540

 
$
543,649

 
$
505,567

Other property revenues
28,851

 
27,200

 
83,870

 
78,967

Total property revenues
$
213,098

 
$
199,740

 
$
627,519

 
$
584,534

Property expenses
 
 
 
 
 
 
 
Property operating and maintenance
$
55,228

 
$
51,303

 
$
158,239

 
$
149,353

Real estate taxes
23,447

 
21,466

 
70,640

 
64,459

Total property expenses
$
78,675

 
$
72,769

 
$
228,879

 
$
213,812

Non-property income
 
 
 
 
 
 
 
Fee and asset management
$
2,131

 
$
3,096

 
$
7,301

 
$
8,817

Interest and other income
430

 
86

 
762

 
1,176

Income (loss) on deferred compensation plans
(765
)
 
2,315

 
1,934

 
5,212

Total non-property income
$
1,796

 
$
5,497

 
$
9,997

 
$
15,205

Other expenses
 
 
 
 
 
 
 
Property management
$
5,416

 
$
5,353

 
$
17,108

 
$
16,578

Fee and asset management
1,240

 
1,505

 
3,746

 
4,468

General and administrative
10,331

 
9,993

 
30,410

 
31,377

Interest
22,967

 
24,275

 
68,846

 
73,967

Depreciation and amortization
59,179

 
54,285

 
174,528

 
158,517

Amortization of deferred financing costs
836

 
875

 
2,493

 
2,689

Expense (benefit) on deferred compensation plans
(765
)
 
2,315

 
1,934

 
5,212

Total other expenses
$
99,204

 
$
98,601

 
$
299,065

 
$
292,808

Gain on sale of land
1,808

 
—

 
3,609

 
698

Impairment associated with land holdings
—

 
—

 
(1,152
)
 
—

Equity in income of joint ventures
863

 
1,926

 
5,889

 
20,658

Income from continuing operations before income taxes
$
39,686

 
$
35,793

 
$
117,918

 
$
114,475

Income tax expense
(353
)
 
(720
)
 
(1,228
)
 
(1,587
)
Income from continuing operations
$
39,333

 
$
35,073

 
$
116,690

 
$
112,888

Income from discontinued operations
—

 
2,319

 
—

 
7,225

Gain on sale of discontinued operations, net of tax
—

 
34,410

 
—

 
91,059

Net income
$
39,333

 
$
71,802

 
$
116,690

 
$
211,172

Less income allocated to non-controlling interests from continuing operations
(1,050
)
 
(1,029
)
 
(3,099
)
 
(2,894
)
Less income, including gain on sale, allocated to non-controlling interests from discontinued operations
—

 
(53
)
 
—

 
(1,910
)
Net income attributable to common shareholders
$
38,283

 
$
70,720

 
$
113,591

 
$
206,368

See Notes to Condensed Consolidated Financial Statements.

4
Table of Contents


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (continued)
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
(in thousands, except per share amounts)
2014
 
2013
 
2014
 
2013
Earnings per share – basic
 
 
 
 
 
 
 
Earnings per common share from continuing operations
$
0.43

 
$
0.38

 
$
1.28

 
$
1.24

Earnings per common share from discontinued operations
—

 
0.42

 
—

 
1.11

Total earnings per common share -- basic
$
0.43

 
$
0.80

 
$
1.28

 
$
2.35

Earnings per share – diluted
 
 
 
 
 
 
 
Earnings per common share from continuing operations
$
0.43

 
$
0.38

 
$
1.28

 
$
1.23

Earnings per common share from discontinued operations
—

 
0.41

 
—

 
1.11

Total earnings per common share -- diluted
$
0.43

 
$
0.79

 
$
1.28

 
$
2.34

Distributions declared per common share
$
0.66

 
$
0.63

 
$
1.98

 
$
1.89

Weighted average number of common shares outstanding – basic
88,146

 
87,449

 
87,882

 
87,117

Weighted average number of common shares outstanding – diluted
89,353

 
88,716

 
89,052

 
88,429

Condensed Consolidated Statements of Comprehensive Income:
 
 
 
 
 
 
 
Net income
$
39,333

 
$
71,802

 
$
116,690

 
$
211,172

Other comprehensive income
 
 
 
 
 
 
 
Unrealized loss on cash flow hedging activities
(417
)
 
—

 
(417
)
 
—

Reclassification of net loss on cash flow hedging activities, prior service cost and net loss on post retirement obligations
20

 
14

 
49

 
41

Comprehensive income
$
38,936

 
$
71,816

 
$
116,322

 
$
211,213

Less income allocated to non-controlling interests from continuing operations
(1,050
)
 
(1,029
)
 
(3,099
)
 
(2,894
)
Less income, including gain on sale, allocated to non-controlling interests from discontinued operations
—

 
(53
)
 
—

 
(1,910
)
Comprehensive income attributable to common shareholders
$
37,886

 
$
70,734

 
$
113,223

 
$
206,409

See Notes to Condensed Consolidated Financial Statements.

5
Table of Contents


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
 
 
Common Shareholders
 
 
 
 
(in thousands)
Common
shares of
beneficial
interest
 
Additional
paid-in
capital
 
Distributions
in excess of
net income
 
Treasury
shares, at
cost
 
Accumulated
other
comprehensive
loss
 
Non-controlling interests
 
Total equity
Equity, December 31, 2013
$
967

 
$
3,596,069

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


$
2,760,181

Net income
 
 
 
 
113,591

 
 
 
 
 
3,099

 
116,690

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
(368
)
 
 
 
(368
)
Common shares issued
7

 
50,528

 
 
 
 
 
 
 
 
 
50,535

Net share awards
 
 
3,538

 
 
 
11,235

 
 
 
 
 
14,773

Employee share purchase plan
 
 
870

 
 
 
1,062

 
 
 
 
 
1,932

Common share options exercised
1

 
335

 
 
 
433

 
 
 
 
 
769

Change in classification of deferred compensation plan
 
 
(4,916
)
 
 
 
 
 
 
 
 
 
(4,916
)
Change in redemption value of non-qualified share awards
 
 
 
 
(12,936
)
 
 
 
 
 
 
 
(12,936
)
Diversification of share awards within deferred compensation plan
 
 
3,273

 
1,396

 
 
 
 
 
 
 
4,669

Conversions of operating partnership units
 
 
52

 
 
 
 
 
 
 
(52
)
 
—

Cash distributions declared to equity holders
 
 
 
 
(176,026
)
 
 
 
 
 
(3,758
)
 
(179,784
)
       Other
(1
)
 
1

 
 
 
 
 
 
 
 
 
—

Equity, September 30, 2014
$
974

 
$
3,649,750

 
$
(568,142
)
 
$
(397,497
)
 
$
(1,474
)
 
$
67,934

 
$
2,751,545


See Notes to Condensed Consolidated Financial Statements.

6
Table of Contents


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (continued)
(Unaudited)
 
 
Common Shareholders
 
 
 
 
(in thousands)
Common
shares of
beneficial
interest
 
Additional
paid-in
capital
 
Distributions
in excess of
net income
 
Treasury
shares, at
cost
 
Accumulated
other
comprehensive
loss
 
Non-controlling
interests
 
Total equity
Equity, December 31, 2012
$
962

 
$
3,587,505

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

 
$
2,626,708

Net income
 
 
 
 
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.

7
Table of Contents


CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended
 
September 30,
(in thousands)
2014
 
2013
Cash flows from operating activities
 
 
 
Net income
$
116,690

 
$
211,172

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization
174,528

 
163,573

Gain on sale of discontinued operations, net of tax
—

 
(91,059
)
Gain on sale of land
(3,609
)
 
(698
)
Impairment associated with land holdings
1,152

 
—

Distributions of income from joint ventures
6,293

 
7,935

Equity in income of joint ventures
(5,889
)
 
(20,658
)
Share-based compensation
11,902

 
10,682

Amortization of deferred financing costs
2,493

 
2,689

Net change in operating accounts and other
23,446

 
25,968

Net cash from operating activities
$
327,006

 
$
309,604

Cash flows from investing activities
 
 
 
Development and capital improvements
$
(390,756
)
 
$
(245,336
)
Acquisition of operating properties
—

 
(224,109
)
Proceeds from sale of land and discontinued operations
22,606

 
162,019

Distributions from investments in joint ventures
6,571

 
6,094

Increase in non-real estate assets
(3,486
)
 
(15,103
)
Change in restricted cash
714

 
(53,704
)
Other
$
(1,750
)
 
$
(1,126
)
Net cash from investing activities
$
(366,101
)
 
$
(371,265
)
Cash flows from financing activities
 
 
 
Borrowings on unsecured line of credit and other short-term borrowings
$
2,172,000

 
$
450,900

Repayments on unsecured line of credit and other short-term borrowings
(2,172,000
)
 
(267,900
)
Repayment of notes payable
(35,640
)
 
(29,217
)
Proceeds from notes payable
248,078

 
—

Distributions to common shareholders and non-controlling interests
(176,284
)
 
(163,290
)
Proceeds from issuance of common shares
50,535

 
40,098

Payment of deferred financing costs
(3,147
)
 
(827
)
Common share options exercised
417

 
2,466

Net decrease in accounts receivable – affiliates
1,770

 
6,151

Other
1,699

 
1,318

Net cash from financing activities
$
87,428

 
$
39,699

Net increase (decrease) in cash and cash equivalents
48,333

 
(21,962
)
Cash and cash equivalents, beginning of period
17,794

 
26,669

Cash and cash equivalents, end of period
$
66,127

 
$
4,707

Supplemental information
 
 
 
Cash paid for interest, net of interest capitalized
$
52,073

 
$
56,500

Cash paid for income taxes
1,623

 
2,116

Supplemental schedule of noncash investing and financing activities
 
 
 
Distributions declared but not paid
$
60,265

 
$
56,793

Value of shares issued under benefit plans, net of cancellations
19,215

 
20,555

Net change in redemption of non-qualified share awards
11,541

 
12,796

Accrual associated with construction and capital expenditures
22,269

 
21,502

See Notes to Condensed Consolidated Financial Statements.


8
Table of Contents


CAMDEN PROPERTY TRUST
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Description of Business
Business. Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust (“REIT”), is primarily engaged in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities. Our multifamily apartment communities are referred to as “communities,” “multifamily communities,” “properties,” or “multifamily properties” in the following discussion. As of September 30, 2014, we owned interests in, operated, or were developing 183 multifamily properties comprised of 64,152 apartment homes across the United States. Of the 183 properties, 13 properties were under construction, and when completed will consist of a total of 4,114 apartment homes. We also own land holdings we may develop into multifamily apartment communities in the future.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Principles of Consolidation. Our condensed consolidated financial statements include our accounts and the accounts of other subsidiaries and joint ventures (including partnerships and limited liability companies) over which we have control. All intercompany transactions, balances, and profits have been eliminated in consolidation. Investments acquired or created are evaluated based on the accounting guidance relating to variable interest entities (“VIEs”), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation (primarily using a voting interest model) under the remaining consolidation guidance relating to real estate entities. If we are the general partner of a limited partnership, or manager of a limited liability company, we also consider the consolidation guidance relating to the rights of limited partners (non-managing members) to assess whether any rights held by the limited partners overcome the presumption of control by us. We did not have any VIEs at September 30, 2014 or December 31, 2013.

Interim Financial Reporting. We have prepared these unaudited financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, these statements do not include all information and footnote disclosures required for annual statements. While we believe the disclosures presented are adequate for interim reporting, these interim unaudited financial statements should be read in conjunction with the audited financial statements and notes included in our 2013 Annual Report on Form 10-K. In the opinion of management, all adjustments and eliminations, consisting of normal recurring adjustments, necessary for a fair representation of our financial statements for the interim period reported have been included. Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results which may be expected for the full year.

Acquisitions of Real Estate. Upon acquisition of real estate, we determine the fair value of tangible and intangible assets, which includes land, buildings (as-if-vacant), furniture and fixtures, the value of in-place leases, including above and below market leases, and acquired liabilities. In estimating these values, we apply methods similar to those used by independent appraisers of income-producing property. Upon the acquisition of a controlling interest of an investment in an unconsolidated joint venture, such joint venture is consolidated and our initial equity investment is remeasured to fair value at the date the controlling interest is acquired; any difference between the carrying value of the previously held equity investment and the fair value is recognized in earnings at the time of obtaining control. Transaction costs associated with the acquisition of operating real estate assets are expensed. Estimates of fair value of acquired debt are based upon interest rates available for the issuance of debt with similar terms and remaining maturities. Depreciation is computed on a straight-line basis over the remaining useful lives of the related tangible assets. The value of in-place leases and above or below market leases is amortized over the estimated average remaining life of leases in place at the time of acquisition. The net carrying value of below market leases is included in other liabilities in our condensed consolidated balance sheets, and the net carrying value of in-place leases is included in other assets, net in our condensed consolidated balance sheets.

9
Table of Contents


The carrying values of below market leases and in-place leases at September 30, 2014 and December 31, 2013 are as follows:
 
September 30,
 
December 31,
(in millions)
2014
 
2013
Below market leases (Gross carrying value)
$
0.4

 
$
0.4

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

 
$
0.2

 
 
 
 
In-place leases (Gross carrying value)
$
2.3

 
$
2.3

Accumulated amortization
(2.3
)
 
(1.1
)
Value of in-place leases, net
$
—

 
$
1.2

Revenues recognized related to below market leases and amortization expense related to in-place leases for the three and nine months ended September 30, 2014 and 2013 are as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
(in millions)
 
2014
 
2013
 
2014
 
2013
Revenues related to below market leases
 
$
—

 
$
0.2

 
$
0.2

 
$
0.9

Amortization of in-place leases
 
$
—

 
$
1.4

 
$
1.2

 
$
4.5

The weighted average amortization period of below market leases and in-place leases was approximately seven months for the three months ended September 30, 2013, and was approximately seven months and six months for the nine months ended September 30, 2014 and 2013, respectively.
Asset Impairment. Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment may exist if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. We consider projected future discounted and undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. While we believe our estimates of future cash flows are reasonable, different assumptions regarding a number of factors, including market rents, economic conditions, and occupancies, could significantly affect these estimates. In estimating fair value, management uses appraisals, management estimates, and discounted cash flow calculations which utilize inputs from a marketplace participant’s perspective. When impairment exists, the long-lived asset is adjusted to its fair value. In addition, we evaluate our equity investments in joint ventures and if we believe there is an other than temporary decline in market value of our investment below our carrying value, we will record an impairment charge.

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

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

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

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Upon substantial completion of the apartment homes, the total capitalized development cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively.

As discussed above, carrying charges are principally interest and real estate taxes capitalized as part of properties under development. Capitalized interest was approximately $5.8 million and $4.2 million for the three months ended September 30, 2014 and 2013, respectively, and was approximately $16.1 million and $10.8 million for the nine months ended September 30, 2014 and 2013, respectively. Capitalized real estate taxes were approximately $0.8 million and $0.7 million for the three months ended September 30, 2014 and 2013, respectively, and were approximately $3.8 million and $2.3 million for the nine months ended September 30, 2014 and 2013, respectively.

Depreciation and amortization is computed over the expected useful lives of depreciable property on a straight-line basis with lives generally as follows:
 
Estimated
Useful Life
Buildings and improvements
5-35 years
Furniture, fixtures, equipment, and other
3-20 years
Intangible assets/liabilities (in-place leases and below market leases)
underlying lease term

Fair Value. For financial assets and liabilities recorded at fair value on a recurring or non-recurring basis, fair value is the price we would receive to sell an asset, or pay to transfer a liability, in an orderly transaction with a market participant at the measurement date. In the absence of such data, fair value is estimated using internal information consistent with what market participants would use in a hypothetical transaction.
In determining fair value, observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions; preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:
•
Level 1:    Quoted prices for identical instruments in active markets.
•
Level 2:    Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
•
Level 3: Significant inputs to the valuation model are unobservable.
Recurring Fair Value Disclosures. The valuation methodology we use to measure our deferred compensation plan investments is based on quoted market prices utilizing public information for the same transactions. Our deferred compensation plan investments are recorded at fair value on a recurring basis and included in other assets in our condensed consolidated balance sheets.
Non-recurring Fair Value Disclosures. Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances. These assets primarily include long-lived assets which are recorded at fair value if they are impaired using the fair value methodologies used to measure long-lived assets described above at “Asset Impairment.” Non-recurring fair value disclosures exclude impairments on disposed assets because they are no longer owned by us. The inputs associated with the valuation of long-lived assets are generally included in Level 3 of the fair value hierarchy, unless a quoted price for a similar long-lived asset in an active market exists, at which time they are included in Level 2 of the fair value hierarchy.
Recent Accounting Pronouncements. In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-08 ("ASU 2014-08"), "Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360) - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." ASU 2014-08 changes the threshold for disclosing discontinued operations and the related disclosure requirements, requiring only disposals representing a strategic shift, such as a major line of business, a major geographical area or a major equity investment, to be presented as a discontinued operation. If the disposal does qualify as a discontinued operation under ASU 2014-08, the entity will be required to provide expanded disclosures. The guidance will be applied prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014 with early adoption permitted but only for disposals or classifications as held for sale which have not been reported in financial statements previously issued or available for issuance. We adopted ASU 2014-08 as of January 1, 2014 and believe future sales of our individual operating properties will no longer qualify as discontinued operations.

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In May 2014, the FASB issued Accounting Standards Update 2014-09 ("ASU 2014-09"), "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09 provides a single comprehensive revenue recognition model for contracts with customers (excluding certain contracts, such as lease contracts) to improve comparability within industries. ASU 2014-09 requires an entity to recognize revenue to reflect the transfer of goods or services to customers at an amount the entity expects to be paid in exchange for those goods and services and provide enhanced disclosures, all to provide more comprehensive guidance for transactions such as service revenue and contract modifications. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2016 and may be applied using either a full retrospective or a modified approach upon adoption. We expect to adopt ASU 2014-09 as of January 1, 2017 and are currently evaluating the impact this standard may have on our financial statements.
3. Per Share Data
Basic earnings per share are computed using net income attributable to common shareholders and the weighted average number of common shares outstanding. Diluted earnings per share reflect common shares issuable from the assumed conversion of common share options and share awards granted and units convertible into common shares. Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. Our unvested share-based awards are considered participating securities and are reflected in the calculation of basic and diluted earnings per share using the two-class method. The number of common share equivalent securities excluded from the diluted earnings per share calculation was approximately 1.9 million and 2.1 million for the three months ended September 30, 2014 and 2013, respectively, and approximately 2.0 million and 2.1 million for the nine months ended September 30, 2014 and 2013, respectively. These securities, which include common share options and share awards granted and units convertible into common shares, were excluded from the diluted earnings per share calculation as they are anti-dilutive.
The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
(in thousands, except per share amounts)
2014
 
2013
 
2014
 
2013
Earnings per common share calculation – basic
 
 
 
 
 
 
 
Income from continuing operations attributable to common shareholders
$
38,283

 
$
34,044

 
$
113,591

 
$
109,994

Amount allocated to participating securities
(317
)
 
(623
)
 
(970
)
 
(1,958
)
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities
37,966

 
33,421

 
112,621

 
108,036

Discontinued operations, including gain on sale, attributable to common shareholders
—

 
36,676

 
—

 
96,374

Net income attributable to common shareholders – basic
$
37,966

 
$
70,097

 
$
112,621

 
$
204,410

 
 
 
 
 
 
 
 
Earnings per common share continuing operations
$
0.43

 
$
0.38

 
$
1.28

 
$
1.24

Earnings per common share from discontinued operations
—

 
0.42

 
—

 
1.11

Total earnings per common share – basic
$
0.43

 
$
0.80

 
$
1.28

 
$
2.35

 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – basic
88,146

 
87,449

 
87,882

 
87,117

 
 
 
 
 
 
 
 


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Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
(in thousands, except per share amounts)
2014
 
2013
 
2014
 
2013
Earnings per common share calculation – diluted
 
 
 
 
 
 
 
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities
$
37,966

 
$
33,421

 
$
112,621

 
$
108,036

Income allocated to common units from continuing operations
313

 
274

 
937

 
814

Income from continuing operations attributable to common shareholders, as adjusted
38,279

 
33,695

 
113,558

 
108,850

Discontinued operations, including gain on sale, attributable to common shareholders
—

 
36,676

 
—

 
96,374

Discontinued operations, including gain on sale, allocated to common units
—

 
53

 
—

 
1,910

Net income attributable to common shareholders – diluted
$
38,279

 
$
70,424

 
$
113,558

 
$
207,134

 
 
 
 
 
 
 


Earnings per common share from continuing operations
$
0.43

 
$
0.38

 
$
1.28

 
$
1.23

Earnings per common share from discontinued operations
—

 
0.41

 
—

 
1.11

Total earnings per common share – diluted
$
0.43

 
$
0.79

 
$
1.28

 
$
2.34

 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – basic
88,146

 
87,449

 
87,882

 
87,117

Incremental shares issuable from assumed conversion of:
 
 
 
 
 
 
 
Common share options and share awards granted
396

 
453

 
358

 
497

Common units
811

 
814

 
812

 
815

Weighted average number of common shares outstanding – diluted
89,353

 
88,716

 
89,052

 
88,429


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 three and nine months ended September 30, 2014 were used for general corporate purposes, which included repayment of outstanding balances on our unsecured line of credit and short-term borrowings, and funding for development, redevelopment, and capital improvement activities.
 
The following table presents activity under our 2012 ATM program for the three and nine months ended September 30, 2014 and 2013.
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
(in thousands, except per share amounts)
2014
 
2013
 
2014
 
2013
Total net consideration
$
50,535.3

 
$
—

 
$
50,535.3

 
$
40,097.6

Common shares sold
688.3

 
—

 
688.3

 
555.1

Average price per share
$
74.60

 
$
—

 
$
74.60

 
$
73.73



As of the date of this filing, we had common shares having an aggregate offering price of up to $31.3 million remaining available for sale under the 2012 ATM program. No additional shares were sold subsequent to September 30, 2014 through the date of this filing.

We currently have an automatic shelf registration statement which allows us to offer, from time to time, common shares, preferred shares, debt securities, or warrants. Our Amended and Restated Declaration of Trust provides we may issue up to 185 million shares of beneficial interest, consisting of 175 million common shares and 10 million preferred shares. At September 30,

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2014, we had approximately 86.4 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding.
5. Acquisitions, Dispositions, Impairment and Discontinued Operations

Acquisitions. In January 2014, we acquired approximately 2.9 acres of land located in Houston, Texas for approximately $15.6 million. In April 2014, we acquired approximately 7.6 acres of land in Rockville, Maryland for approximately $23.8 million. In October 2014, we acquired one operating property, Camden Fourth Ward, which had recently completed construction in September 2014 and is comprised of 276 apartment homes, located in Atlanta, Georgia for approximately $62.6 million. As of the date of this filing, the initial accounting for the purchase price allocation has not been finalized as our analysis of the net assets acquired is not complete. Our purchase price allocation is expected to be complete by the end of the fourth quarter 2014.

Land Holding Dispositions and Impairment. In July 2014, we sold approximately 2.4 acres of land adjacent to an operating property in Dallas, Texas for approximately $0.8 million. We recognized a $1.2 million impairment charge related to this land parcel in June 2014, which represented the difference between the land holding’s carrying value and the fair value based upon the sales contract. In August 2014, we sold approximately 19.2 acres of land adjacent to an operating property in Houston, Texas for approximately $8.3 million and recognized a gain of approximately $1.8 million.

During the nine months ended September 30, 2014, we also sold approximately 3.0 acres of land adjacent to a current development community located in Atlanta, Georgia, and sold approximately 4.7 acres of land adjacent to an operating property located in Dallas, Texas for an aggregate of $14.6 million and recognized a gain of approximately $1.8 million related to these land sales. During the nine months ended September 30, 2013, we sold two land parcels comprised of an aggregate of approximately 3.7 acres, adjacent to current development communities in Atlanta, Georgia and Houston, Texas, for approximately $6.6 million and recognized a gain of approximately $0.7 million.
Discontinued Operations. For the three and nine months ended September 30, 2013, income from discontinued operations included the results of operations of 12 operating properties, comprised of 3,931 apartment homes, sold during 2013. There were no discontinued operations during the nine months ended September 30, 2014.

The following is a summary of income from discontinued operations for the three and nine months ended September 30, 2013: 
 
Three Months Ended
 
Nine Months Ended
(in thousands)
September 30, 2013
Property revenues
$
6,671

 
$
21,490

Property expenses
(2,849
)
 
(9,209
)
 
$
3,822

 
$
12,281

Depreciation and amortization
(1,503
)
 
(5,056
)
Income from discontinued operations
$
2,319

 
$
7,225

 
 
 
 
Gain on sale of discontinued operations, net of tax
$
34,410

 
$
91,059


6. Investments in Joint Ventures
Our equity investments in unconsolidated joint ventures, which we account for utilizing the equity method of accounting, consisted of two joint ventures at September 30, 2014 and December 31, 2013, and three joint ventures at September 30, 2013. The two joint ventures in which we held an equity investment at September 30, 2014 are discretionary investment funds (the "funds"), in which we have a 20% ownership interest. We provide property and asset management and other services to the joint ventures which own operating properties, and we may also provide construction and development services to the joint ventures which own properties under development. The following table summarizes the combined balance sheet and statement of income data for the unconsolidated joint ventures as of and for the periods presented:

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(in millions)
September 30, 2014
 
December 31, 2013
Total assets
$
747.9

 
$
790.2

Total third-party debt
524.5

 
530.7

Total equity
196.8

 
229.6

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 (in millions)
2014
 
2013
 
2014
 
2013
Total revenues (1)
$
27.3

 
$
23.8

 
$
78.3

 
$
69.1

Gain on sale of operating properties, net of tax
—

 
—

 
18.5

 
95.4

Net income
2.2

 
2.2

 
23.8

 
102.2

Equity in income (2)
0.9

 
1.9

 
5.9

 
20.7

 
(1)
Excludes approximately $1.9 million for the three months ended September 30, 2013, and approximately $1.1 million and $5.5 million for the nine months ended September 30, 2014 and 2013, respectively, related to the sale of two operating properties by the funds during the first quarter of 2014. Additionally, excludes approximately $2.0 million and $5.9 million for the three and nine months ended September 30, 2013, related to the sale of two operating properties within one of our unconsolidated joint ventures in December 2013 and approximately $10.3 million for the nine months ended September 30, 2013 relating to the discontinued operations from the sale of 14 operating properties within one of our unconsolidated joint ventures in May 2013.
(2)
Equity in income excludes our ownership interest of fee income from various services provided by us to the funds.

The funds in which we have a partial interest have been funded in part with secured third-party debt. As of September 30, 2014, we had no outstanding guarantees related to debt of the funds.

We may earn fees for property and asset management, construction, development, and other services related to 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 $2.0 million and $2.4 million for the three months ended September 30, 2014 and 2013, respectively, and approximately $6.6 million and $7.5 million for the nine months ended September 30, 2014 and 2013, respectively. We eliminate fee income for services provided to these joint ventures to the extent of our ownership.

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



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7. Notes Payable
The following is a summary of our indebtedness:
 
Balance at
(in millions)
September 30,
2014
 
December 31, 2013
Senior unsecured notes
 
 
 
5.08% Notes, due 2015
$
249.9

 
$
249.7

5.75% Notes, due 2017
246.5

 
246.4

4.70% Notes, due 2021
248.9

 
248.8

3.07% Notes, due 2022
346.9

 
346.7

5.00% Notes, due 2023
247.8

 
247.7

4.27% Notes, due 2024
249.5

 
249.5

3.59% Notes, due 2024
248.1

 
—

 
1,837.6

 
1,588.8

 
 
 
 
Secured notes
 
 
 
0.95% – 5.63% Conventional Mortgage Notes, due 2018 – 2045
871.2

 
905.7

Tax-exempt Mortgage Note, due 2028 (1.25% floating rate)
35.1

 
36.3

 
906.3

 
942.0

Total notes payable
$
2,743.9

 
$
2,530.8

 
 
 
 
Other floating rate debt included in secured notes (0.95%)
$
175.0

 
$
175.0


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

Our line of credit provides us with the ability to issue up to $100 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, it does reduce the amount available. At September 30, 2014, we had no balances outstanding on our $500 million unsecured line of credit and we had outstanding letters of credit totaling approximately $6.4 million, leaving approximately $493.6 million available under our unsecured line of credit. 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.

In September 2014, we issued $250 million aggregate principal amount of 3.50% senior unsecured notes due September 15, 2024 (the "2024 Notes") under our existing shelf registration statement. The 2024 Notes were offered to the public at 99.231% of their face amount with a stated rate of 3.50% and a yield to maturity of 3.59%. We received net proceeds of approximately $245.7 million, net of underwriting discounts and other offering expenses. Interest on the 2024 Notes is payable semi-annually on March 15 and September 15, beginning March 15, 2015. We may redeem the 2024 Notes, in whole or in part, at any time at a redemption price equal to the principal amount and accrued interest of the notes being redeemed, plus a make-whole provision. If, however, we redeem the 2024 Notes 90 days or fewer prior to the maturity date, the redemption price will equal 100% of the principal amount of the 2024 Notes to be redeemed plus accrued and unpaid interest on the amount being redeemed to the redemption date. The 2024 Notes are direct, senior unsecured obligations and rank equally with all of our other unsecured and unsubordinated indebtedness. We used the proceeds from this offering to repay outstanding balances on our unsecured line of credit and other short-term borrowings, and for general corporate purposes, which may include property acquisition and development in the ordinary course of business, capital expenditures and working capital.


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In April 2014, we repaid a 6.0% secured conventional mortgage note at par, which was scheduled to mature on August 1, 2014, for approximately $8.9 million. In September, 2014, we repaid a 2.2% secured conventional mortgage note at par, which was due to mature on October 1, 2014, for approximately $23.5 million.

At September 30, 2014 and 2013, the weighted average interest rate on our floating rate debt of approximately $210.1 million and $394.6 million, respectively, which includes our unsecured line of credit and short-term borrowings, was each approximately 1.0%.

Our indebtedness had a weighted average maturity of 6.6 years at September 30, 2014. Scheduled repayments on outstanding debt, including scheduled principal amortizations, and the respective weighted average interest rates on maturing debt at September 30, 2014, were as follows: 
(in millions)
Amount
 
Weighted Average Interest Rate
2014 (1)
$
0.4

 
—
%
2015
251.8

 
5.1

2016 (1)
2.0

 
—

2017
249.0

 
5.7

2018
177.4

 
0.9

Thereafter
2,063.3

 
4.4

Total
$
2,743.9

 
4.4
%
(1) Includes only scheduled principal amortizations.

8. Share-based Compensation and Non-Qualified Deferred Compensation Plan
Incentive Compensation. Under the 2011 Share Incentive Plan of Camden Property Trust (as amended, the “2011 Share Plan”), we may issue up to a total of approximately 9.1 million fungible units (the “Fungible Pool Limit”), which is comprised of approximately 5.8 million new fungible units plus approximately 3.3 million fungible units previously available for issuance under our 2002 share incentive plan based on a 3.45 to 1.0 fungible unit to full value award conversion ratio. Fungible units represent the baseline for the number of shares available for issuance under the 2011 Share Plan. Different types of awards are counted differently against the Fungible Pool Limit, as follows:
 
•
Each share issued or to be issued in connection with an award, other than an option, right or other award which does not deliver the full value at grant of the underlying shares, will be counted against the Fungible Pool Limit as 3.45 fungible pool units;
•
Options and other awards which do not deliver the full value at grant of the underlying shares and which expire more than five years from date of grant will be counted against the Fungible Pool Limit as one fungible pool unit; and
•
Options, rights and other awards which do not deliver the full value at grant and expire five years or less from the date of grant will be counted against the Fungible Pool Limit as 0.83 of a fungible pool unit.

At September 30, 2014, approximately 5.5 million fungible units were available under the 2011 Share Plan, which results in approximately 1.6 million common shares which may be granted pursuant to full value awards based on the 3.45 to 1.0 fungible unit to full value award conversion ratio.

Options. Approximately 0.4 million and 0.2 million options were exercised during the nine months ended September 30, 2014 and 2013, respectively. The total intrinsic value of options exercised was approximately $6.9 million and $5.2 million during the nine months ended September 30, 2014 and 2013, respectively. Options generally have a vesting period of three to five years. At September 30, 2014, options outstanding and exercisable had a weighted average remaining life of approximately 4.3 years.


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The following table summarizes outstanding share options and exercisable options at September 30, 2014:
 
 
Options Outstanding and Exercisable (1) (2)
Range of Exercise Prices
Number
 
Weighted
Average Price
$30.06
135,709

 
$
30.06

$41.16-$43.94
119,242

 
42.46

$48.02-$64.75
82,118

 
50.32

Total options
337,069

 
$
39.38

 
(1)
As of September 30, 2014, all options outstanding are also exercisable.
(2)
The aggregate intrinsic value of options outstanding and exercisable at September 30, 2014 was $9.8 million. The aggregate intrinsic values were calculated as the excess, if any, between our closing share price of $68.53 per share on September 30, 2014 and the strike price of the underlying award.
Options Granted and Valuation Assumptions. During the nine months ended September 30, 2014, we granted approximately 0.1 million reload options. Reload options are granted for the number of shares tendered as payment for the exercise price upon the exercise of an option with a reload provision. The reload options granted have an exercise price equal to the fair market value of a common share on the date of grant and expire on the same date as the original options which were exercised. The reload options granted during the nine months ended September 30, 2014 vested immediately and approximately $0.3 million was expensed on the reload date. We estimate the fair values of each option award including reloads on the date of grant using the Black-Scholes option pricing model. The following assumptions were used for the reload options granted during the nine months ended September 30, 2014:
 
Nine Months Ended
 
September 30, 2014
Weighted average fair value of options granted
$3.55 - $8.17
Expected volatility
22.6% - 23.2%
Risk-free interest rate
0.1% - 1.1%
Expected dividend yield
3.5%
Expected life
6 months - 4 years

Our computation of expected volatility for 2014 is based on the historical volatility of our common shares over a time period equal to the expected life of the option and ending on the grant date. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield on our common shares is based on the historical dividend yield over the expected term of the options granted. Our computation of expected life is based upon historical experience of similar awards, giving consideration to the contractual terms of the share-based awards.

Share Awards and Vesting. Share awards for employees generally have a vesting period of three to five years. The compensation cost for share awards is based on the market value of the shares on the date of grant and is amortized over the vesting period. To estimate forfeitures, we use actual forfeiture history. At September 30, 2014, the unamortized value of previously issued unvested share awards was approximately $40.2 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, 2014 and 2013 was approximately $16.0 million and $14.9 million, respectively.

Total compensation cost for option and share awards charged against income was approximately $4.2 million and $3.9 million for the three months ended September 30, 2014 and 2013, respectively, and approximately $12.1 million and $11.3 million for the nine months ended September 30, 2014 and 2013, respectively. Total capitalized compensation cost for option and share awards was approximately $0.7 million and $0.5 million for the three months ended September 30, 2014 and 2013, respectively, and approximately $2.0 million and $1.6 million for the nine months ended September 30, 2014 and 2013, respectively.


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The following table summarizes activity under our share incentive plans for the nine months ended September 30, 2014:
 
 
Options
Outstanding
 
Weighted
Average
Exercise
Price
 
Nonvested
Share
Awards
Outstanding
 
Weighted
Average
Grant  Price
Total options and nonvested share awards outstanding at December 31, 2013
634,361

 
$
41.59

 
831,298

 
$
59.77

Granted
84,452

 
64.75

 
311,214

 
65.69

Exercised/vested
(360,058
)
 
47.84

 
(290,381
)
 
55.19

Forfeited
(21,686
)
 
62.32

 
(19,212
)
 
63.93

Total options and nonvested share awards outstanding at September 30, 2014
337,069

 
$
39.38

 
832,919

 
$
63.49


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

The following table summarizes the eligible share award activity as recorded in temporary equity for the nine months ended September 30, 2014:
(in thousands)
 
 
Balance at December 31, 2013
 
$
47,180

Change in classification
 
4,916

Change in redemption value
 
12,936

Diversification of share awards
 
(4,669
)
Balance at September 30, 2014
 
$
60,363


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)
2014
 
2013
Change in assets:
 
 
 
Other assets, net
$
(9,826
)
 
$
(8,964
)
Change in liabilities:
 
 
 
Accounts payable and accrued expenses
18,009

 
6,737

Accrued real estate taxes
18,886

 
21,470

Other liabilities
(4,273
)
 
5,939

Other
650

 
786

Change in operating accounts and other
$
23,446

 
$
25,968


10. Commitments and Contingencies
Construction Contracts. As of September 30, 2014, we estimate the additional cost to complete the construction of 12 consolidated projects to be approximately $334.4 million. We expect to fund this amount through a combination of cash flows generated from operations, draws on our unsecured credit facility or other short-term borrowings, proceeds from property dispositions, the use of debt and equity offerings under our automatic shelf registration statement, equity issued from our ATM program, other unsecured borrowings, and secured mortgages.

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Litigation. One of our wholly-owned subsidiaries previously acted as a general contractor for the construction of an apartment project in Florida which was subsequently sold and converted to condominium units by an unrelated third-party. The condominium association instituted a lawsuit against our subsidiary and other unrelated third-parties in Florida alleging negligent construction and failure to comply with building codes and claimed damages for the costs of repair arising out of the alleged defective construction as well as the recovery of incidental and consequential damages resulting from such alleged negligence. This matter was resolved in March 2014 and, pursuant to the terms of the settlement, we made a one-time payment to the association in an amount which was not material.
We are also subject to various legal proceedings and claims which arise in the ordinary course of business. Matters which arise out of allegations of bodily injury, property damage, and employment practices are generally covered by insurance. While the resolution of these legal proceedings and claims cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on our condensed consolidated financial statements.
Other Contingencies. In the ordinary course of our business, we issue letters of intent indicating a willingness to negotiate for acquisitions, dispositions, or joint ventures and also enter into arrangements contemplating various transactions. Such letters of intent and other arrangements are non-binding as to either party unless and until a definitive contract is entered into by the parties. Even if definitive contracts relating to the purchase or sale of real property are entered into, these contracts generally provide the purchaser with time to evaluate the property and conduct due diligence, during which periods the purchaser will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money. There can be no assurance definitive contracts will be entered into with respect to any matter covered by letters of intent or we will consummate any transaction 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, 2014, we had earnest money deposits of approximately $2.8 million for potential acquisitions of land and an operating property which are included in other assets, net in our condensed consolidated balance sheets. Approximately $2.5 million of these deposits was non-refundable at September 30, 2014.

Lease Commitments. At September 30, 2014, we had long-term leases covering certain land, office facilities, and equipment. Rental expense totaled approximately $0.8 million and $0.7 million for the three months ended September 30, 2014 and 2013, respectively, and approximately $2.2 million and $2.1 million for the nine months ended September 30, 2014 and 2013, respectively. Minimum annual rental commitments for the remainder of 2014 are $0.8 million, and for the years ending December 31, 2015 through 2018 are approximately $2.4 million, $2.7 million, $2.7 million, and $2.5 million, respectively, and approximately $15.4 million in the aggregate thereafter.

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


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

We have recorded income, franchise, and excise taxes in the condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2014 and 2013 as income tax expense. Income taxes for the three and nine months ended September 30, 2014 primarily related to state income tax and federal taxes on certain of our taxable REIT subsidiaries. We have no significant temporary or permanent differences or tax credits associated with our taxable REIT subsidiaries.

We believe we have no uncertain tax positions or unrecognized tax benefits requiring disclosure as of and for the nine months ended September 30, 2014.

12. Fair Value Measurements

Recurring Fair Value Measurements. The following table presents information about our financial instruments measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013 using the inputs and fair value hierarchy discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements."
 
Financial Instruments Measured at Fair Value on a Recurring Basis
 
September 30, 2014
 
December 31, 2013
(in millions)
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation plan investments (1)
$
53.8

 
$
—

 
$
—

 
$
53.8

 
$
43.8

 
$
—

 
$
—

 
$
43.8

(1)
Approximately $1.4 million of participant cash was withdrawn from our deferred compensation plan investments during the nine months ended September 30, 2014.

Financial Instrument Fair Value Disclosures. As of September 30, 2014 and December 31, 2013, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and distributions payable represent fair value because of the short-term nature of these instruments. The carrying value of restricted cash approximates its fair value based on the nature of our assessment of the ability to recover these amounts.
In calculating the fair value of our notes payable, interest rate and spread assumptions reflect current creditworthiness and market conditions available for the issuance of notes payable with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs. The following table presents the carrying and estimated fair values of our notes payable at September 30, 2014 and December 31, 2013:
 
September 30, 2014
 
December 31, 2013
(in millions)
Carrying
Value
 
Estimated
Fair  Value
 
Carrying
Value
 
Estimated
Fair  Value
Fixed rate notes payable
$
2,533.8

 
$
2,661.4

 
$
2,319.5

 
$
2,391.5

Floating rate notes payable
210.1

 
203.5

 
211.3

 
201.4




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Non-recurring Fair Value Measurements. The non-recurring fair value disclosure inputs under the fair value hierarchy are discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements." There were no non-recurring fair value adjustments at September 30, 2014 or December 31, 2013.




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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes appearing elsewhere in this report, as well as Part I, Item 1A, “Risk Factors” within our Annual Report on Form 10-K for the year ended December 31, 2013. Historical results and trends which might appear in the condensed consolidated financial statements should not be interpreted as being indicative of future operations.

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

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

•
volatility in capital and credit markets, or other unfavorable changes in economic conditions, could adversely impact us;
•
short-term leases expose us to the effects of declining market rents;
•
we face risks associated with land holdings and related activities;
•
we could be negatively impacted by the elimination of Fannie Mae or Freddie Mac;
•
compliance or failure to comply with laws, including those requiring access to our properties by disabled persons, could result in substantial cost;
•
competition could limit our ability to lease apartments or increase or maintain rental income;
•
development, redevelopment and construction risks could impact our profitability;
•
our acquisition strategy may not produce the cash flows expected;
•
competition could adversely affect our ability to acquire properties;
•
losses from catastrophes may exceed our insurance coverage;
•
investments through joint ventures and discretionary funds involve risks not present in investments in which we are the sole investor;
•
tax matters, including failure to qualify as a REIT, could have adverse consequences;
•
a cybersecurity incident and other technology disruptions could negatively impact our business and our relationships with residents;
•
we depend on our key personnel;
•
litigation risks could affect our business;
•
insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders;
•
we have significant debt, which could have important adverse consequences;
•
we may be unable to renew, repay, or refinance our outstanding debt;
•
variable rate debt is subject to interest rate risk;
•
issuances of additional debt may adversely impact our financial condition;
•
failure to maintain our current credit ratings could adversely affect our cost of funds, related margins, liquidity, and access to capital markets;
•
share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders;
•
our share price will fluctuate; and
•
the form, timing and/or amount of dividend distributions in future periods may vary and be impacted by economic or other considerations.

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

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Executive Summary
We are primarily engaged in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities. As of September 30, 2014, we owned interests in, operated, or were developing 183 multifamily properties comprised of 64,152 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 three and nine months ended September 30, 2014 reflect an increase in same store revenues of 4.6% as compared to the same periods in 2013. We believe these increases were due in part to more individuals choosing to rent versus buy as evidenced by the moderating level of homeownership rates. We believe these increases were also due to the continuation of improving economic conditions, including job growth, favorable demographics, and a manageable supply of new multifamily housing, all of which have resulted in increases in higher rental rates and average occupancy levels. We believe U.S. economic and employment growth is likely to continue during the remainder of 2014 and the supply of new multifamily homes, although increasing, will likely remain at manageable levels. However, we believe significant risks to the economy remain, and while there have been increases in employment levels in the majority of our markets, the unemployment rate remains at higher than historical levels. If economic conditions were to worsen, our operating results could be adversely affected.
Construction Activity
At September 30, 2014, we had a total of 13 projects under construction to be comprised of 4,114 apartment homes, including one development project to be comprised of 266 units owned by one of the discretionary funds ("the funds"), in which we have a 20% interest, with initial occupancy scheduled to occur within the next 24 months. Excluding the project owned by one of the funds, as of September 30, 2014, we estimate the additional cost to complete the construction of 12 consolidated projects to be approximately $334.4 million.
Acquisitions
In January 2014, we acquired approximately 2.9 acres of land in Houston, Texas for approximately $15.6 million. In April 2014, we acquired approximately 7.6 acres of land in Rockville, Maryland for approximately $23.8 million. Subsequent to quarter end, in October 2014, we acquired Camden Fourth Ward, comprised of 276 apartment homes, located in Atlanta, Georgia for approximately $62.6 million.
Dispositions
In July 2014, we sold approximately 2.4 acres of land adjacent to an operating property in Dallas, Texas for approximately $0.8 million. We recognized a $1.2 million impairment charge related to this land parcel in June 2014, which represented the difference between the land holding’s carrying value and the fair value based upon the sales contract. In August 2014, we sold approximately 19.2 acres of land adjacent to an operating property in Houston, Texas for approximately $8.3 million and recognized a gain of approximately $1.8 million.

During the nine months ended September 30, 2014, we also sold approximately 3.0 acres of land adjacent to a current development community located in Atlanta, Georgia, and sold approximately 4.7 acres of land adjacent to an operating property located in Dallas, Texas for an aggregate of $14.6 million and recognized a gain of approximately $1.8 million related to these land sales.

In February 2014, each of the funds sold an operating property comprised of an aggregate of 558 apartment homes. One of the operating properties was located in San Antonio, Texas and the other operating property was in Houston, Texas. Our proportionate share of the gains on these transactions was approximately $3.6 million.

Future Outlook
Subject to market conditions, we intend to continue to seek opportunities to develop and acquire existing communities. We evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise. We also intend to continue to strengthen our capital and liquidity positions by continuing to focus on our core fundamentals which we believe are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intend to meet our near-term liquidity requirements through a combination of cash flows generated from operations, draws on our unsecured credit facility or other short-term borrowings, proceeds from property dispositions, the use of debt and equity offerings under our automatic shelf registration statement, equity issued from our at-the-market ("ATM") program, other unsecured borrowings, and secured mortgages.
As of September 30, 2014, we had approximately $66.1 million in cash and cash equivalents and approximately $493.6 million available under our $500 million unsecured line of credit. As of the date of this filing, we had common shares having an

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aggregate offering price of up to $31.3 million remaining available for sale under our ATM program. We believe debt maturing during the remainder of 2014 is manageable at approximately $0.4 million, which relates only to scheduled principal amortizations. We believe we are well-positioned with a strong balance sheet and sufficient liquidity to cover near-term debt maturities and new development, redevelopment, and other capital funding requirements. We will, however, continue to assess and take further actions we believe are prudent to meet our objectives and capital requirements.

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Property Portfolio
Our multifamily property portfolio is summarized as follows:
 
September 30, 2014
 
December 31, 2013
 
Apartment Homes    
 
Properties    
 
Apartment
 Homes    
 
Properties    
Operating Properties
 
 
 
 
 
 
 
Houston, Texas
8,434

 
24

 
8,752

 
25

Washington, D.C. Metro
6,405

 
19

 
6,083

 
18

Dallas, Texas
5,667

 
14

 
5,667

 
14

Tampa, Florida
5,108

 
12

 
5,108

 
12

Las Vegas, Nevada
4,918

 
15

 
4,918

 
15

Orlando, Florida
3,976

 
10

 
3,676

 
9

Atlanta, Georgia
3,943

 
12

 
3,943

 
12

Raleigh, North Carolina
3,054

 
8

 
3,054

 
8

Austin, Texas
3,030

 
9

 
3,030

 
9

Charlotte, North Carolina
2,894

 
12

 
2,894

 
12

Southeast Florida
2,520

 
7

 
2,520

 
7

Los Angeles/Orange County, California
2,481

 
6

 
2,481

 
6

Phoenix, Arizona
2,095

 
7

 
2,095

 
7

Denver, Colorado
1,941

 
6

 
1,941

 
6

San Diego/Inland Empire, California
1,665

 
5

 
1,665

 
5

Other
1,907

 
4

 
2,072

 
5

Total Operating Properties
60,038

 
170

 
59,899

 
170

Properties Under Construction
 
 
 
 
 
 
 
Phoenix, Arizona
834

 
3

 
454

 
2

Austin, Texas
614

 
2

 
614

 
2

Los Angeles/Orange County, California
590

 
2

 
590

 
2

Charlotte, North Carolina
589

 
2

 
589

 
2

Denver, Colorado
424

 
1

 
424

 
1

Dallas, Texas
423

 
1

 
423

 
1

Atlanta, Georgia
379

 
1

 
379

 
1

Southeast Florida
261

 
1

 
261

 
1

Washington, D.C. Metro
—

 
—

 
320

 
1

Orlando, Florida
—

 
—

 
300

 
1

Other (1)
—

 
—

 
75

 
—

Total Properties Under Construction
4,114

 
13

 
4,429

 
14

Total Properties
64,152

 
183

 
64,328

 
184

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

 
8

 
2,840

 
9

Austin, Texas
1,360

 
4

 
1,360

 
4

Dallas, Texas
1,250

 
3

 
1,250

 
3

Tampa, Florida
450

 
1

 
450

 
1

Raleigh, North Carolina
350

 
1

 
350

 
1

Orlando, Florida
300

 
1

 
300

 
1

Washington, D.C. Metro
276

 
1

 
276

 
1

Charlotte, North Carolina (3)
266

 
1