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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 June 30, 2018
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 website, 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, a smaller reporting company, or an emerging growth 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
 
¨ (Do not check if a Smaller Reporting Company)
Smaller Reporting Company
 
¨
 
 
 
 
 
 
 
 
 
Emerging Growth Company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected to not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant of Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
On July 27, 2018, 92,804,091 common shares of the registrant were outstanding, net of treasury shares and shares held in our deferred compensation arrangements.

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CAMDEN PROPERTY TRUST
Table of Contents
 
 
 
 
Page
PART I
 
 
 
 
 
Item 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
 
 
Item 3
 
 
 
 
 
Item 4
 
 
 
 
 
PART II
 
 
 
 
 
Item 1
 
 
 
 
 
Item 1A
 
 
 
 
 
Item 2
 
 
 
 
 
Item 3
 
 
 
 
 
Item 4
 
 
 
 
 
Item 5
 
 
 
 
 
Item 6
 
 
 
 
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)
June 30,
2018
 
December 31, 2017
Assets
 
 
 
Real estate assets, at cost
 
 
 
Land
$
1,066,077

 
$
1,021,031

Buildings and improvements
6,620,169

 
6,269,481

 
$
7,686,246

 
$
7,290,512

Accumulated depreciation
(2,255,737
)
 
(2,118,839
)
Net operating real estate assets
$
5,430,509

 
$
5,171,673

Properties under development, including land
373,350

 
377,231

Investments in joint ventures
26,205

 
27,237

Total real estate assets
$
5,830,064

 
$
5,576,141

Accounts receivable – affiliates
23,473

 
24,038

Other assets, net
204,717

 
195,764

Cash and cash equivalents
64,071

 
368,492

Restricted cash
9,581

 
9,313

Total assets
$
6,131,906

 
$
6,173,748

Liabilities and equity
 
 
 
Liabilities
 
 
 
Notes payable
 
 
 
Unsecured
$
1,339,659

 
$
1,338,628

Secured
865,629

 
865,970

Accounts payable and accrued expenses
127,777

 
128,313

Accrued real estate taxes
52,461

 
51,383

Distributions payable
75,071

 
72,943

Other liabilities
156,767

 
154,567

Total liabilities
$
2,617,364

 
$
2,611,804

Commitments and contingencies (Note 12)

 

Non-qualified deferred compensation share awards
85,938

 
77,230

Equity
 
 
 
Common shares of beneficial interest; $0.01 par value per share; 175,000 shares authorized; 105,494 and 105,489 issued; 102,644 and 102,769 outstanding at June 30, 2018 and December 31, 2017, respectively
1,027

 
1,028

Additional paid-in capital
4,132,404

 
4,137,161

Distributions in excess of net income attributable to common shareholders
(436,575
)
 
(368,703
)
Treasury shares, at cost (9,839 and 10,073 common shares at June 30, 2018 and December 31, 2017, respectively)
(355,752
)
 
(364,066
)
Accumulated other comprehensive income (loss)
8,794

 
(57
)
Total common equity
$
3,349,898

 
$
3,405,363

Non-controlling interests
78,706

 
79,351

Total equity
$
3,428,604

 
$
3,484,714

Total liabilities and equity
$
6,131,906

 
$
6,173,748

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in thousands, except per share amounts)
2018
 
2017
 
2018
 
2017
Property revenues
 
 
 
 
 
 
 
Rental revenues
$
208,634

 
$
190,470

 
$
412,139

 
$
378,572

Other property revenues
28,499

 
32,900

 
55,677

 
64,319

Total property revenues
$
237,133

 
$
223,370

 
$
467,816

 
$
442,891

Property expenses
 
 
 
 
 
 
 
Property operating and maintenance
$
54,735

 
$
52,550

 
$
108,651

 
$
104,098

Real estate taxes
30,326

 
27,803

 
60,375

 
55,723

Total property expenses
$
85,061

 
$
80,353

 
$
169,026

 
$
159,821

Non-property income
 
 
 
 
 
 
 
Fee and asset management
$
1,826

 
$
1,942

 
$
3,824

 
$
3,690

Interest and other income
491

 
560

 
1,284

 
1,194

Income on deferred compensation plans
435

 
3,441

 
230

 
8,058

Total non-property income
$
2,752

 
$
5,943

 
$
5,338

 
$
12,942

Other expenses
 
 
 
 
 
 
 
Property management
$
6,473

 
$
6,554

 
$
13,112

 
$
13,581

Fee and asset management
1,088

 
961

 
2,053

 
1,845

General and administrative
12,272

 
12,451

 
24,495

 
25,319

Interest
20,607

 
21,966

 
40,981

 
44,922

Depreciation and amortization
75,569

 
65,033

 
145,793

 
128,767

Expense on deferred compensation plans
435

 
3,441

 
230

 
8,058

Total other expenses
$
116,444

 
$
110,406

 
$
226,664

 
$
222,492

Loss on early retirement of debt
—

 
—

 
—

 
(323
)
Equity in income of joint ventures
1,872

 
1,785

 
3,701

 
3,602

Income from continuing operations before income taxes
$
40,252

 
$
40,339

 
$
81,165

 
$
76,799

Income tax expense
(380
)
 
(25
)
 
(768
)
 
(496
)
Net income
$
39,872

 
$
40,314

 
$
80,397

 
$
76,303

Less income allocated to non-controlling interests from
continuing operations
(1,201
)
 
(1,126
)
 
(2,331
)
 
(2,254
)
Net income attributable to common shareholders
$
38,671

 
$
39,188

 
$
78,066

 
$
74,049

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (Continued)
(Unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in thousands, except per share amounts)
2018
 
2017
 
2018
 
2017
Earnings per share – basic
$
0.40

 
$
0.43

 
$
0.81

 
$
0.82

Earnings per share – diluted
$
0.40

 
$
0.43

 
$
0.81

 
$
0.82

Distributions declared per common share
$
0.77

 
$
0.75

 
$
1.54

 
$
1.50

Weighted average number of common shares outstanding – basic
95,243

 
90,105

 
95,155

 
90,015

Weighted average number of common shares outstanding – diluted
95,337

 
91,041

 
95,289

 
90,995

Condensed Consolidated Statements of Comprehensive Income
 
 
 
 
 
 
 
Net income
$
39,872

 
$
40,314

 
$
80,397

 
$
76,303

Other comprehensive income
 
 
 
 
 
 
 
Unrealized gain on cash flow hedging activities
5,181

 
—

 
8,782

 
—

Reclassification of net loss on cash flow hedging activities, prior service cost and net loss on post-retirement obligation
34

 
34

 
69

 
68

Comprehensive income
$
45,087

 
$
40,348

 
$
89,248

 
$
76,371

Less income allocated to non-controlling interests from continuing operations
(1,201
)
 
(1,126
)
 
(2,331
)
 
(2,254
)
Comprehensive income attributable to common shareholders
$
43,886

 
$
39,222

 
$
86,917

 
$
74,117

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
 
 
Common Shareholders
 
 
 
 
(in thousands)
Common
shares of
beneficial
interest
 
Additional
paid-in
capital
 
Distributions
in excess of
net income
 
Treasury
shares, at
cost
 
Accumulated
other
comprehensive
(loss)/income
 
Non-controlling interests
 
Total equity
Equity, December 31, 2017
$
1,028

 
$
4,137,161

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


$
3,484,714

Net income
 
 
 
 
78,066

 
 
 
 
 
2,331

 
80,397

Other comprehensive income
 
 
 
 
 
 
 
 
8,851

 
 
 
8,851

Net share awards
 
 
4,899

 
 
 
8,302

 
 
 
 
 
13,201

Employee share purchase plan
 
 
392

 
 
 
265

 
 
 
 
 
657

Common share options exercised
 
 
41

 
 
 
 
 
 
 
 
 
41

Change in classification of deferred compensation plan
 
 
(10,635
)
 
 
 
 
 
 
 
 
 
(10,635
)
Change in redemption value of non-qualified share awards
 
 
 
 
976

 
 
 
 
 
 
 
976

Diversification of share awards within deferred compensation plan
 
 
637

 
314

 
 
 
 
 
 
 
951

Common shares repurchased
 
 
 
 
 
 
(253
)
 
 
 
 
 
(253
)
Conversion of operating partnership units
 
 
78

 
 
 
 
 
 
 
(78
)
 
—

Cash distributions declared to equity holders
 
 
 
 
(147,228
)
 
 
 
 
 
(2,898
)
 
(150,126
)
       Other
(1
)
 
(169
)
 
 
 
 
 
 
 
 
 
(170
)
Equity, June 30, 2018
$
1,027

 
$
4,132,404

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

 
$
78,706

 
$
3,428,604


See Notes to Condensed Consolidated Financial Statements (Unaudited).

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CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Unaudited)
 
 
Common Shareholders
 
 
 
 
(in thousands)
Common
shares of
beneficial
interest
 
Additional
paid-in
capital
 
Distributions
in excess of
net income
 
Treasury
shares, at
cost
 
Accumulated
other
comprehensive
loss
 
Non-controlling
interests
 
Total equity
Equity, December 31, 2016
$
978

 
$
3,678,277

 
$
(289,180
)
 
$
(373,339
)
 
$
(1,863
)
 
$
80,680

 
$
3,095,553

Net income
 
 
 
 
74,049

 
 
 
 
 
2,254

 
76,303

Other comprehensive income
 
 
 
 
 
 
 
 
68

 
 
 
68

Net share awards
1

 
5,873

 
 
 
8,092

 
 
 
 
 
13,966

Employee share purchase plan
 
 
665

 
 
 
462

 
 
 
 
 
1,127

Common share options exercised
 
 
77

 
 
 
 
 
 
 
 
 
77

Change in classification of deferred compensation plan
 
 
(7,724
)
 
 
 
 
 
 
 
 
 
(7,724
)
Change in redemption value of non-qualified share awards
 
 
 
 
(1,916
)
 
 
 
 
 
 
 
(1,916
)
Diversification of share awards within deferred compensation plan
 
 
1,602

 
1,025

 
 
 
 
 
 
 
2,627

Conversion of operating partnership units
 
 
117

 
 
 
 
 
 
 
(117
)
 
—

Cash distributions declared to equity holders
 
 
 
 
(135,888
)
 
 
 
 
 
(2,826
)
 
(138,714
)
Other
(1
)
 
(227
)
 
 
 
 
 
 
 
 
 
(228
)
Equity, June 30, 2017
$
978

 
$
3,678,660

 
$
(351,910
)
 
$
(364,785
)
 
$
(1,795
)
 
$
79,991

 
$
3,041,139

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended
June 30,
(in thousands)
2018
 
2017
Cash flows from operating activities
 
 
 
Net income
$
80,397

 
$
76,303

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization
145,793

 
128,767

Loss on early retirement of debt
—

 
323

Distributions of income from joint ventures
3,659

 
3,558

Equity in income of joint ventures
(3,701
)
 
(3,602
)
Share-based compensation
8,206

 
8,895

Net change in operating accounts and other
(3,071
)
 
(10,797
)
Net cash from operating activities
$
231,283

 
$
203,447

Cash flows from investing activities
 
 
 
Development and capital improvements
$
(177,546
)
 
$
(148,028
)
Acquisition of operating properties
(201,899
)
 
(58,267
)
Maturities of short-term investments
—

 
100,000

Increase in non-real estate assets
(8,591
)
 
(2,449
)
Other
798

 
(304
)
Net cash from investing activities
$
(387,238
)
 
$
(109,048
)
Cash flows from financing activities
 
 
 
Borrowings on unsecured credit facility and other short-term borrowings
$
—

 
$
187,000

Repayments on unsecured credit facility and other short-term borrowings
—

 
(87,000
)
Repayment of notes payable
(713
)
 
(278,305
)
Distributions to common shareholders and non-controlling interests
(147,959
)
 
(138,487
)
Other
474

 
1,197

Net cash from financing activities
$
(148,198
)
 
$
(315,595
)
Net decrease in cash, cash equivalents, and restricted cash
(304,153
)
 
(221,196
)
Cash, cash equivalents, and restricted cash, beginning of year
377,805

 
245,826

Cash, cash equivalents, and restricted cash, end of period
$
73,652

 
$
24,630

Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheet
 
 
 
Cash and cash equivalents
$
64,071

 
$
16,318

Restricted cash
9,581

 
8,312

Total cash, cash equivalents, and restricted cash, end of period
$
73,652

 
$
24,630

Supplemental information
 
 
 
Cash paid for interest, net of interest capitalized
$
41,009

 
$
46,875

Cash paid for income taxes
1,875

 
1,455

Supplemental schedule of noncash investing and financing activities
 
 
 
Distributions declared but not paid
$
75,071

 
$
69,347

Value of shares issued under benefit plans, net of cancellations
17,988

 
18,146

Accrual associated with construction and capital expenditures
25,726

 
17,805

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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

1. Description of Business
Business. Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust ("REIT"), 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 June 30, 2018, we owned interests in, operated, or were developing 165 multifamily properties comprised of 56,194 apartment homes across the United States. Of the 165 properties, seven properties were under construction as of June 30, 2018, and will consist of a total of 2,013 apartment homes when completed. We also own land holdings which we may develop into multifamily communities in the future.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Principles of Consolidation. Our condensed consolidated financial statements include our accounts and the accounts of other subsidiaries and joint ventures (including partnerships and limited liability companies) over which we have control. All intercompany transactions, balances, and profits have been eliminated in consolidation. Investments acquired or created are evaluated based on the accounting guidance relating to variable interest entities ("VIEs"), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation primarily using a voting interest model. In determining if we have a controlling financial interest, we consider factors such as ownership interests, authority to make decisions, kick-out rights and participating rights. At June 30, 2018, two of our consolidated operating partnerships are VIEs, of which we held between 92% and 94% of the outstanding common limited partnership units and the sole 1% general partnership interest of each consolidated operating partnership. As we are considered the primary beneficiary, we consolidate these operating partnerships.
Interim Financial Reporting. We have prepared these unaudited financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial statements and the applicable rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, these statements do not include all information and footnote disclosures required for annual statements. While we believe the disclosures presented are adequate for interim reporting, these interim unaudited financial statements should be read in conjunction with the audited financial statements and notes included in our 2017 Annual Report on Form 10-K. Certain insignificant amounts in the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2017 have been reclassified to conform to the current year presentation. These reclassifications had no impact on our condensed consolidated cash flows from investing activities.
Acquisitions of Real Estate. Upon acquisition of real estate, we determine the fair value of tangible and intangible assets, which includes land, buildings (as-if-vacant), furniture and fixtures, the value of in-place leases, including above and below market leases, and acquired liabilities. In estimating these values, we apply methods similar to those used by independent appraisers of income-producing property. We generally believe acquisitions of operating properties are asset acquisitions, which include the capitalization of transaction costs. Estimates of fair value of acquired debt are based upon interest rates available for the issuance of debt with similar terms and remaining maturities. Depreciation is computed on a straight-line basis over the remaining useful lives of the related tangible assets. The value of in-place leases and above or below market leases is amortized over the estimated average remaining life of leases in place at the time of acquisition; the net carrying value of in-place leases are included in other assets, net and the net carrying value of above or below market leases are included in other liabilities, net in our condensed consolidated balance sheets.
During the three and six months ended June 30, 2018, we recognized amortization expense of approximately $3.6 million and $5.5 million, respectively, related to in-place leases and approximately $0.1 million and $0.2 million for the three and six months ended June 30, 2018, respectively, related to net below market leases. We did not recognize any amortization expense related to in-place leases or below market leases for the three and six months ended June 30, 2017. During the three and six months ended June 30, 2018, the weighted average amortization periods for in-place and net below market leases were approximately seven months and five months, respectively.
Asset Impairment. Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment may exist if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. We consider projected future undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. While we believe our estimates of future cash flows are reasonable, different assumptions regarding a number of factors, including, but not limited to, market rents, economic conditions, and occupancies, could significantly

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affect these estimates. In estimating fair value, management uses appraisals, management estimates, and discounted cash flow calculations which utilize inputs from a marketplace participant's perspective. When impairment exists, the long-lived asset is adjusted to its fair value. In addition, we evaluate our equity investments in joint ventures and if we believe there is an other than temporary decline in market value of our investment below our carrying value, we will record an impairment charge. We did not record any impairment charges for the three and six months ended June 30, 2018 or 2017.
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 certain activities necessary to prepare the underlying real estate for its intended use have been initiated. All construction and carrying costs are capitalized and reported in the balance sheet as properties under development until the apartment homes are substantially completed. As apartment homes within development properties are completed, the total capitalized development cost of each apartment home is transferred from properties under development including land to buildings and improvements.
As discussed above, carrying charges are principally interest and real estate taxes capitalized as part of properties under development. Capitalized interest was approximately $3.7 million and $3.8 million for the three months ended June 30, 2018 and 2017, respectively, and was approximately $7.4 million and $8.3 million for the six months ended June 30, 2018 and 2017, respectively. Capitalized real estate taxes were approximately $0.7 million for each of the three months ended June 30, 2018 and 2017, and were approximately $1.5 million and $1.2 million for the six months ended June 30, 2018 and 2017, 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 above and below market leases)
underlying lease term
Derivative Financial Instruments. Derivative financial instruments are recorded in the consolidated balance sheets at fair value and presented on a gross basis for financial reporting purposes even when those instruments are subject to master netting arrangements and may otherwise qualify for net presentation. Accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows or other types of forecasted transactions are cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes attributable to the earnings effect of the hedged transactions. We may enter into derivative contracts which are intended to economically hedge certain of our risks, for which hedge accounting does not apply or we elect not to apply hedge accounting.
Fair Value. For financial assets and liabilities recorded at fair value on a recurring or non-recurring basis, fair value is the price we would expect to receive to sell an asset, or pay to transfer a liability, in an orderly transaction with a market participant at the measurement date under current market conditions. In the absence of such data, fair value is estimated using internal information consistent with what market participants would use in a hypothetical transaction.

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In determining fair value, observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions; preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:
•
Level 1:    Quoted prices for identical instruments in active markets.
•
Level 2:    Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
•
Level 3:    Significant inputs to the valuation model are unobservable.
Recurring Fair Value Measurements. The following describes the valuation methodologies we use to measure different financial instruments at fair value on a recurring basis:
Deferred Compensation Plan Investments. The estimated fair values of investment securities classified as deferred compensation plan investments are based on quoted market prices utilizing public information for the same transactions. Our deferred compensation plan investments are recorded in other assets in our consolidated balance sheets. The inputs associated with the valuation of our recurring deferred compensation plan investments are included in Level 1 of the fair value hierarchy.
Derivative Financial Instruments. The estimated fair values of derivative financial instruments are valued using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps and caps are estimated using the market-standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk, including our own nonperformance risk and the respective counterparty’s nonperformance risk. The fair value of interest rate caps is determined using the market-standard methodology of discounting the future expected cash receipts which would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observed market interest rate curves and volatilities.
Although we have determined the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
Non-Recurring Fair Value Measurements. Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. These assets primarily include long-lived assets which are recorded at fair value if they are impaired using the fair value methodologies used to measure long-lived assets described above at "Asset Impairment." Non-recurring fair value disclosures are not provided for impairments on assets disposed during the period because they are no longer owned by us. The inputs associated with the valuation of long-lived assets are generally included in Level 3 of the fair value hierarchy, unless a quoted price for a similar long-lived asset in an active market exists, at which time they are included in Level 2 of the fair value hierarchy.
Financial Instrument Fair Value Disclosures. As of June 30, 2018 and December 31, 2017, 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. The carrying values of our notes receivable also approximate their fair values, which are based on certain factors, such as market interest rates, terms of the note and credit worthiness of the borrower. These financial instruments utilize Level 3 inputs. In calculating the fair value of our notes payable, interest rate and spread assumptions reflect current credit worthiness and market conditions available for the issuance of notes payable with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs.
Note Receivable. We have one note receivable included in other assets, net, in our condensed consolidated balance sheets, relating to a real estate secured loan to an unaffiliated third party. This note receivable matures on October 1, 2030. At both June 30, 2018 and December 31, 2017, the outstanding note receivable balance was approximately $18.8 million, and the interest rate was approximately 4.0% for each of the six months ended June 30, 2018 and 2017. Interest is recognized over the life of the note and included in interest and other income in our condensed consolidated statements of income and comprehensive income. We consider a note receivable to be impaired if it is probable we will not collect all contractually due principal and interest and do not accrue

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interest when a note is considered impaired and an allowance is recorded for any principal and previously accrued interest which is not believed to be collectible.
Recent Accounting Pronouncements. In February 2017, the Financial Accounting Standards Board ("FASB") issued ASU 2017-05, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets." ASU 2017-05 clarifies the definition of an in-substance nonfinancial asset and changes the accounting for partial sales of nonfinancial assets to be more consistent with the accounting for a sale of a business pursuant to ASU 2017-01. We adopted ASU 2017-05 effective January 1, 2018, along with our adoption of ASU 2014-09 (described below), and it did not have any impact on our consolidated financial statements as there were no partial sales in the current or comparative period. We believe most of our future contributions of nonfinancial assets to our joint ventures, if any, will result in the recognition of a full gain or loss as if we sold 100% of the nonfinancial asset and we will also measure our retained interest at fair value.
In May 2014, the FASB issued ASU 2014-09 "Revenue from Contracts with Customers." ASU 2014-09 prescribes a single, common revenue standard to replace most existing revenue recognition guidance in GAAP, including most industry-specific requirements. The standard outlines a five-step model whereby revenue is recognized as performance obligations within a contract are satisfied. Several ASUs intended to promote a more consistent interpretation and application of the principles outlined in the standard have been issued since the issuance of ASU 2014-09 which modify certain sections of the new revenue recognition standard. We adopted ASU 2014-09 and all related amendments effective January 1, 2018 using the modified retrospective with cumulative effect transition method; this method requires us to recognize the cumulative effect of initially applying the new revenue standard as an adjustment, if any, to the opening balance of retained earnings, which did not have any impact upon adoption. See Note 3, "Revenues," for additional disclosures required by the ASU.
In February 2016, the FASB issued ASU 2016-02, "Leases." ASU 2016-02 supersedes the current accounting for leases. The new lease standard retains three distinct types of leases which are similar to existing guidance for lessors: operating, sales-type, and financing, and aligns many of the underlying lessor model principles with those in the new revenue standard. For lessees, the new lease standard retains two distinct types of leases, finance and operating; and (i) requires lessees to record a right of use asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting and (ii) eliminates most real estate specific lease provisions. We anticipate adopting ASU 2016-02 and all its related amendments as of January 1, 2019 and will adopt the transition practical expedient which allows us to recognize a cumulative-effect adjustment to the opening balance of retained earnings as of the adoption date. We have identified our lease commitments and are finalizing our evaluation on our consolidated financial statements and on our internal accounting processes. Based on our initial assessments, substantially all of our real estate lessor commitments will continue to be accounted for as operating leases and we do not believe the new leasing standard will have a material impact on rental revenues. Our lessee operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption. We do not believe our adoption of the new leasing standard will have a material increase in the right-of-use assets and lease liabilities on our consolidated balance sheets and do not believe there will be a material impact to our consolidated statements of income and comprehensive income. The ultimate impact, however, will depend on our lease portfolio as of the adoption date.
In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)." ASU 2016-15 clarifies how eight specific cash receipts and cash payments are to be presented and classified on the statement of cash flows, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration made after a business combination, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of predominance principle. We adopted ASU 2016-15 as of January 1, 2018 and it did not have any impact on our consolidated statements of cash flows upon adoption.
3. Revenues
On January 1, 2018, we adopted ASU 2014-09 and all related amendments in accordance with ASU 2014-09 and elected to apply the new revenue standard to those contracts which were not completed as of January 1, 2018. We also elected to omit disclosing the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the invoiced amount directly corresponds to the value transferred to the customer as provided for in the practical expedients. Our adoption of ASU 2014-09 and its related amendments did not have a material impact upon our consolidated financial statements as the majority of our revenues are derived from real estate lease contracts which are scoped out of ASU 2014-09. 
Our presentation of revenue within our condensed consolidated statements of income and comprehensive income is separated into its component parts by the nature and timing of the revenue streams. Our revenue within the scope of this new revenue standard

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is recognized when the services are transferred to our customers for an amount which reflects the consideration we expect to receive in exchange for those services rendered and include the following: 
Other Property Revenues. The items within other property revenues relate to non-lease components within a lease contract and primarily consist of utility rebillings which are usually recognized over time and other transactional fees primarily recognized at a point-in-time. These fees are charged to our residents and recognized monthly as the performance obligation is satisfied.
Upon our adoption of ASU 2014-09, we are now presenting certain revenue items, historically included as a component of other property revenues, as rental revenues due to the nature and timing of revenue recognition for these items being more closely aligned to a lease. This new presentation has been applied prospectively as this reclassification will not have an impact upon total property revenues or the opening balance of retained earnings. Approximately $5.8 million and $11.4 million of rental revenue is related to this presentation for the three and six months ended June 30, 2018, respectively. Had ASU 2014-09 been effective as of January 1, 2017, we would have reclassified approximately $5.7 million and $11.0 million from other property revenues to rental revenue for the three and six months ended June 30, 2017, respectively.
Fee and Asset Management Income. Management fee income primarily consists of fees charged to our unconsolidated joint ventures for managing the joint venture, and the development, redevelopment and capital expenditures of their operating communities. While the individual activities related to these fees may vary, the services provided are substantially similar, have the same pattern of transfer, and are considered to be individual performance obligations composed of a series of distinct services, recognized monthly as earned.
We also generate construction fees for construction management and general contracting services provided to third-party owners of multifamily, commercial, and retail properties. These fees are recognized as we satisfy our single performance obligation over time based on a percentage-of-completion of cost basis which we believe is an accurate depiction of the transfer of control to our customers. For these contracts, significant judgment is used to estimate the cost plus margin for the project fee and our profitability on those contracts is dependent on the ability to accurately predict such factors.
Contract Balances. We record third-party construction receivables for amounts where we have unconditional rights to payment but have not received and liabilities for amounts incurred but not paid. For the three and six months ended June 30, 2018, these contract receivable and liability balances were immaterial.
4. Per Share Data
Basic earnings per share is computed using net income attributable to common shareholders and the weighted average number of common shares outstanding. Diluted earnings per share reflects common shares issuable from the assumed conversion of common share options and share awards granted and units convertible into common shares. Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. Our unvested share-based awards are considered participating securities and are reflected in the calculation of basic and diluted earnings per share using the two-class method. The number of common share equivalent securities excluded from the diluted earnings per share calculation were approximately 2.2 million for each of the three and six months ended June 30, 2018 and approximately 1.5 million for each of the three and six months ended June 30, 2017. These securities, which include common share options and share awards granted and units convertible into common shares, were excluded from the diluted earnings per share calculations as they are anti-dilutive.
The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in thousands, except per share amounts)
 
2018
 
2017
 
2018
 
2017
Earnings per common share calculation – basic
 
 
 
 
 
 
 
 
Income from continuing operations attributable to common shareholders
 
$
38,671

 
$
39,188

 
$
78,066

 
$
74,049

Amount allocated to participating securities
 
(282
)
 
(74
)
 
(547
)
 
(112
)
Net income attributable to common shareholders – basic
 
$
38,389

 
$
39,114

 
$
77,519

 
$
73,937

 
 
 
 
 
 
 
 
 
Total earnings per common share – basic
 
$
0.40

 
$
0.43

 
$
0.81

 
$
0.82

 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – basic
 
95,243

 
90,105

 
95,155

 
90,015

 
 
 
 
 
 
 
 
 

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Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in thousands, except per share amounts)
 
2018
 
2017
 
2018
 
2017
Earnings per common share calculation – diluted
 
 
 
 
 
 
 
 
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities
 
$
38,389

 
$
39,114

 
$
77,519

 
$
73,937

Income allocated to common units from continuing operations
 
—

 
302

 
—

 
575

Net income attributable to common shareholders – diluted
 
$
38,389

 
$
39,416

 
$
77,519

 
$
74,512

 
 
 
 
 
 
 
 


Total earnings per common share – diluted
 
$
0.40

 
$
0.43

 
$
0.81

 
$
0.82

 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – basic
 
95,243

 
90,105

 
95,155

 
90,015

Incremental shares issuable from assumed conversion of:
 
 
 
 
 
 
 
 
Common share options and share awards granted
 
94

 
131

 
134

 
175

Common units
 
—

 
805

 
—

 
805

Weighted average number of common shares outstanding – diluted
 
95,337

 
91,041

 
95,289

 
90,995

5. Common Shares
In May 2017, we created an at-the market ("ATM") share offering program through which we can, but have no obligation to, sell common shares having an aggregate offering price of up to $315.3 million (the "2017 ATM program"), in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. Actual sales from time to time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations by management of the appropriate sources of funding for us. The proceeds from the sale of our common shares under the 2017 ATM program are intended to be used for general corporate purposes, which may include reducing future borrowings under our $600 million unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development activities, and financing for acquisitions.
For the three and six months ended June 30, 2018, and through the date of this filing, we did not sell any shares under the 2017 ATM program. As of the date of this filing, we had common shares having an aggregate offering price of up to $312.8 million remaining available for sale under the 2017 ATM program.
In November 2014, 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 $331.3 million (the "2014 ATM program"). Concurrently with the creation of the 2017 ATM program, we terminated the 2014 ATM program and rolled the $315.3 million remaining available for sale into the 2017 ATM program. Upon termination, no further common shares were available for sale under the 2014 ATM program.
We have a repurchase plan approved by our Board of Trust Managers which allows for the repurchase of up to $500 million of our common equity securities through open-market purchases, block purchases, and privately negotiated transactions. In March 2018, we repurchased 3,222 common shares for approximately $0.3 million. There were no repurchases during the three months ended June 30, 2018. As of the date of this filing, the remaining dollar value of our common equity securities authorized to be repurchased under this program was approximately $269.5 million. There were no repurchases during the six months ended June 30, 2017.
We currently have an automatic shelf registration statement which allows us to offer common shares, preferred shares, debt securities, or warrants, and our Amended and Restated Declaration of Trust provides we may issue up to 185 million shares of beneficial interest, consisting of 175 million common shares and 10 million preferred shares. At June 30, 2018, we had approximately 92.8 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding.

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6. Acquisitions
Asset Acquisition of Operating Properties. In February 2018, we acquired one operating property comprised of 333 apartment homes located in Orlando, Florida, for approximately $81.4 million. In January 2018, we acquired one operating property comprised of 358 apartment homes located in St. Petersburg, Florida, for approximately $126.9 million. In June 2017, we acquired one operating property comprised of 250 apartment homes, located in Atlanta, Georgia, for approximately $58.3 million.
Acquisition of Land. In April 2018, we acquired approximately 1.8 acres of land in Orlando, Florida for approximately $11.4 million for the development of a community with 360 wholly-owned apartment homes which commenced construction during the quarter ended June 30, 2018. In April 2017, we acquired approximately 8.2 acres of land in San Diego, California for $20.0 million.
7. Investments in Joint Ventures
As of June 30, 2018, our equity investments in unconsolidated joint ventures, which are accounted for utilizing the equity method of accounting, consisted of three investment funds (collectively the "Funds") with our ownership percentages ranging from 20.0% to 31.3%. We provide property and asset management and other services to the Funds which own operating properties and we may also provide construction and development services to the Funds which own properties under development. One of the Funds, in which we have a 20.0% ownership interest, did not own any properties for any periods presented. We have a 31.3% ownership interest in each of the two other Funds. The following table summarizes the combined balance sheets and statements of income data for the Funds as of and for the periods presented:
 
(in millions)
June 30, 2018
 
December 31, 2017
Total assets
$
705.0

 
$
715.9

Total third-party debt
512.6

 
514.5

Total equity
171.1

 
174.5

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in millions)
2018
 
2017
 
2018
 
2017
Total revenues
$
31.7

 
$
30.4

 
$
62.8

 
$
60.4

Net income
$
3.9

 
$
3.7

 
$
7.6

 
$
7.5

Equity in income (1)
$
1.9

 
$
1.8

 
$
3.7

 
$
3.6

 
(1)
Equity in income excludes our ownership interest of fee income from various services provided by us to the Funds.
The Funds have been funded in part with secured third-party debt and, as of June 30, 2018, we had no outstanding guarantees related to debt of the Funds.

We may earn fees for property and asset management, construction, development, and other services related to the Funds and may earn a promoted equity interest if certain thresholds are met. We eliminate fee income for services provided to the Funds to the extent of our ownership. Fees earned for these services, net of eliminations, were approximately $1.4 million for each of the three months ended June 30, 2018 and 2017 and approximately $2.8 million and $2.7 million for the six months ended June 30, 2018 and 2017, respectively.


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8. Notes Payable
The following is a summary of our indebtedness:
(in millions)
 
June 30,
2018
 
December 31, 2017
Senior unsecured notes (1)
 
 
 
 
4.78% Notes, due 2021
 
$
248.9

 
$
248.7

3.15% Notes, due 2022
 
347.0

 
346.6

5.07% Notes, due 2023
 
247.8

 
247.6

4.36% Notes, due 2024
 
248.6

 
248.5

3.68% Notes, due 2024
 
247.4

 
247.2

 
 
$
1,339.7

 
$
1,338.6

 
 
 
 
 
Secured notes (1)
 
 
 
 
2.62% – 5.77% Conventional Mortgage Notes, due 2018 – 2045
 
$
865.6

 
$
866.0

 
 
 
 
 
Total notes payable
 
$
2,205.3

 
$
2,204.6

 
 
 
 
 
Other floating rate debt included in secured notes (2.62%)
 
$
175.0

 
$
175.0

(1)
Unamortized debt discounts and debt issuance costs of $10.9 million and $12.3 million are included in senior unsecured and secured notes payable as of June 30, 2018 and December 31, 2017, respectively.
We have a $600 million unsecured credit facility which matures in August 2019, with two six-month options to extend the maturity date at our election to August 2020. Additionally, we have the option to further increase our credit facility to $900 million by either adding additional banks to the facility or obtaining the agreement of the existing banks to increase their commitments. The interest rate on our credit facility is based upon the London Interbank Offered Rate ("LIBOR") plus a margin which is subject to change as our credit ratings change. Advances under our credit facility 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 $300 million or the remaining amount available under our credit facility. Our credit facility 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 credit facility provides us with the ability to issue up to $50 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our credit facility, it does reduce the amount available. At June 30, 2018, we had no balances outstanding on our $600 million credit facility and we had outstanding letters of credit totaling approximately $12.6 million, leaving approximately $587.4 million available under our credit facility.
In May 2018, we extended the term on our $45.0 million unsecured short-term borrowing facility from May 2018 to May 2019. The interest rate is based on LIBOR plus 0.95%. At June 30, 2018, we had no balances outstanding on this unsecured short-term borrowing facility, leaving $45.0 million available under this facility.
We had outstanding floating rate debt of approximately $175.0 million and $275.0 million at June 30, 2018 and 2017, respectively, which included amounts borrowed under our unsecured credit facility and unsecured short-term borrowings. The weighted average interest rate on such debt was approximately 2.6% and 1.8% for the six months ended June 30, 2018 and 2017, respectively.

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Our indebtedness had a weighted average maturity of approximately 3.8 years at June 30, 2018. The table below is a summary of the maturity dates of our outstanding debt and principal amortizations, and the weighted average interest rates on such debt, at June 30, 2018: 
(in millions) (1)
 
Amount
 
Weighted Average 
Interest Rate
2018
 
$
174.4

 
2.6
%
2019
 
643.0

 
5.4

2020 (2)
 
(1.2
)
 
—

2021
 
249.1

 
4.8

2022
 
349.3

 
3.2

Thereafter
 
790.7

 
4.4

Total
 
$
2,205.3

 
4.4
%
(1)
Includes all available extension options.
(2)
Includes amortization of debt discounts and debt issuance costs, net of scheduled principal payments.

9. Derivative Financial Instruments and Hedging Activities

Risk Management Objective of Using Derivatives. We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we may enter into derivative financial instruments to manage exposures arising from business activities resulting in differences in the amount, timing, and duration of our known or expected cash payments principally related to our borrowings. See Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements" for a further discussion of derivative financial instruments.
Cash Flow Hedges of Interest Rate Risk. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps and caps as part of our interest rate risk management strategy. Interest rate swaps involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps involve the receipt of variable rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an upfront premium.
Designated Hedges.  The gain or loss on derivatives designated and qualifying as cash flow hedges is reported as a component of other comprehensive income or loss, and subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings and is presented in the same line item as the earnings effect of the hedged item. In February 2018, we entered into two forward interest rate swap agreements with an aggregate notional amount of $200.0 million that become effective October 31, 2018 to hedge a portion of an anticipated future fixed rate debt issuance. At June 30, 2018, we had a total of five forward interest rate swaps with a total notional value of $400.0 million to hedge a portion of future fixed rate debt issuances. As of June 30, 2018, the amount we expect to be reclassified into earnings in the next 12 months as a decrease to interest expense is approximately $0.7 million. At June 30, 2017, we did not have any designated hedges outstanding. See Note 14, "Fair Value Measurements" for a further discussion of the fair value of our derivative financial instrument.
Non-Designated Hedges. Derivatives are not entered into for speculative purposes and are used to manage our exposure to interest rate movements and other identified risks. Our non-designated hedges are either specifically non-designated by management or do not meet strict hedge accounting requirements. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings in interest and other income. At June 30, 2018, we did not have any non-designated hedges outstanding. At June 30, 2017, we had one outstanding interest rate cap with a notional amount of $175.0 million which was not designated as a hedge of interest rate risk. The fair value changes for this derivative was not material.

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The table below presents the fair value of our derivative financial instruments as well as their classification in the consolidated balance sheets at June 30, 2018 and December 31, 2017:
 
Asset Derivatives
 
Liability Derivatives
 
June 30, 2018 (1)
 
December 31, 2017
 
June 30, 2018 (1)
 
December 31, 2017
 (in millions)
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Swaps
Other Assets
 
$
10.5

 
Other Assets
 
$
2.2

 
Other Liabilities
 
$
—

 
Other Liabilities
 
$
0.5

(1)
The derivatives subject to master netting arrangements are presented on a gross basis on our condensed consolidated balance sheet as of June 30, 2018. We did not have any derivative contracts in a liability position as of June 30, 2018 and there were no derivative contracts in a master netting arrangement as of December 31, 2017.
The table below presents the effect of our derivative financial instruments in the consolidated statements of income and comprehensive income for the three months ended June 30, 2018:
Derivatives in Cash Flow Hedging Relationships
 
Unrealized Gain
Recognized in Other
Comprehensive  Income
(“OCI”) on 
Derivatives
 
Location of Gain
Reclassified from
Accumulated OCI into Income
 
Amount of Gain
Reclassified from
Accumulated OCI
into Income
 
2018
 
 
 
2018
Interest Rate Swaps
 
$
5.2

 
Interest expense
 
N/A
The table below presents the effect of our derivative financial instruments in the consolidated statements of income and comprehensive income for the six months ended June 30, 2018:
Derivatives in Cash Flow Hedging Relationships
 
Unrealized Gain
Recognized in Other
Comprehensive  Income
(“OCI”) on 
Derivatives
 
Location of Gain
Reclassified from
Accumulated OCI into Income
 
Amount of Gain
Reclassified from
Accumulated OCI
into Income
 
2018
 
 
 
2018
Interest Rate Swaps
 
$
8.8

 
Interest expense
 
N/A
Credit-Risk-Related Contingent Features. Derivative financial investments expose us to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company has an agreement with a derivative counterparty that contains a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness. We did not have any derivative contracts in a liability position as of June 30, 2018.
10. Share-Based Compensation and Non-Qualified Deferred Compensation Plan
Incentive Compensation. Our Board of Trust Managers adopted in February 2018, and our shareholders approved on May 17, 2018, the Camden Property Trust 2018 Share Incentive Plan (the "2018 Share Plan") which supersedes our 2011 Share Incentive Plan (the "2011 Share Plan"). Under the 2018 Share Plan, we may issue up to a total of approximately 9.7 million common shares (the "Share Limit"). The Share Limit is comprised of 7.6 million new common shares, approximately 0.6 million common shares available for issuance under our 2011 Share Plan, as well as approximately 0.4 million common shares subject to restricted share and restricted share unit awards outstanding under the 2011 plan (subject to a 3.45 multiplier) and 0.1 million common shares subject to options granted under the 2011 Share Plan. The shares reserved for issuance under the 2011 Plan for these restricted share and option awards will become available for grant under the 2018 Share Plan if they are forfeited, terminated, cancelled or otherwise reacquired without being exercised or vested. Different types of awards are counted differently against the Share Limit, as follows:
 
•
Each share issued or to be issued in connection with a full value award, other than an option or share appreciation right which does not deliver the full value at grant of the underlying shares, will be counted against the Share Limit as 3.45 common shares; and

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•
Options and share appreciation rights which do not deliver the full value at grant of the underlying shares will be counted against the Share Limit as one common share.
Excluding the 0.5 million common shares subject to 2011 Share Plan awards which may in the future become available under the 2018 Share Plan as discussed above, there were approximately 8.2 million common shares available under the 2018 Share Plan at June 30, 2018. This results in approximately 2.4 million shares which may be granted pursuant to full value awards based on the 3.45 to 1.0 common share to full value award conversion ratio.
The other types of awards which may be granted under the 2018 Share Plan include, without limitation, share bonuses, restricted shares, performance shares, share units, restricted share units, deferred shares, phantom stock (which are contractual rights to receive common shares, or cash based on the fair market value of a common share), dividend equivalents (which represent the right to receive a payment based on the dividends paid on a common share over a stated period of time), similar rights to purchase or acquire shares, and cash awards. Persons eligible to receive awards under the 2018 Share Plan include officers and employees of the Company or any of its subsidiaries, Trust Managers of the Company, and certain consultants and advisors to the Company or any of its subsidiaries. The 2018 Share Plan will expire on February 15, 2028.
Options. Effective May 17, 2018, new options are exercisable subject to the terms and conditions of the 2018 Share Plan. Outstanding options granted prior to May 17, 2018 were awarded subject to the terms and conditions of the 2011 Share Plan. Stock options granted generally provide they become exercisable in increments ranging from 20% to 33.3% per year on each of the anniversaries of the date of grant, other than reload options which are vested at grant. Approximately 26 thousand and 39 thousand options were exercised during the six months ended June 30, 2018 and 2017, respectively. The total intrinsic value of options exercised was approximately $1.3 million and $2.0 million during the six months ended June 30, 2018 and 2017, respectively. At June 30, 2018, there was no unrecognized compensation cost related to unvested options, and all options outstanding were exercisable with a weighted average remaining life of approximately seven months.

The following table summarizes outstanding share options, all of which were exercisable, at June 30, 2018:
 
 
Options Outstanding and Exercisable (1)
Range of Exercise Prices
 
Number
 
Weighted
Average Price
$75.17
 
15,388

 
$
75.17

$78.55
 
9,994

 
78.55

$80.89 - $85.05
 
27,476

 
82.84

Total options
 
52,858

 
$
79.79

 

(1)
The aggregate intrinsic value of options outstanding and exercisable at June 30, 2018 was $0.6 million. The aggregate intrinsic value was calculated as the excess, if any, between our closing share price of $91.13 per share on June 30, 2018 and the strike price of the underlying award.

Options Granted and Valuation Assumptions. In March 2018, we granted approximately 10 thousand reload options. Reload options are granted for the number of shares tendered as payment for the exercise price upon the exercise of an option with a reload provision. The reload options granted have an exercise price equal to the fair market value of a common share on the date of grant and expire on the same date as the original options which were exercised. The reload options granted during the six months ended June 30, 2018 vested immediately and approximately $37 thousand was expensed on the reload date. As of June 30, 2018, no stock options remain outstanding with reload rights. 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 six months ended June 30, 2018:
 
Six Months Ended
June 30, 2018
Weighted average fair value of options granted
4.11
Expected volatility
15.1%
Risk-free interest rate
2.0%
Expected dividend yield
3.3%
Expected life
1 year

Our computation of expected volatility for 2018 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, and 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

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shares is based on the historical dividend yield over the expected term of the options granted. Our computation of expected life is based upon historical experience of similar awards, giving consideration to the contractual terms of the share-based awards.

Share Awards and Vesting. Share awards for employees generally have a vesting period of three to five years. The compensation cost for share awards is generally based on the market value of the shares on the date of grant and is amortized over the vesting period. In the event the holder of the share awards will reach both the retirement eligibility age of 65 years and the service requirements as defined in the 2018 Share Plan before the term in which the awards are scheduled to vest, the value of the share awards is amortized from the date of grant to the individual's retirement eligibility date. We utilize actual forfeitures rather than estimating forfeitures at the time share-based awards were granted. At June 30, 2018, the unamortized value of previously issued unvested share awards was approximately $24.6 million, which is expected to be amortized over the next three years. The total fair value of shares vested during the six months ended June 30, 2018 and 2017 was approximately $23.9 million and $23.0 million, respectively.

Total compensation costs for option and share awards charged against income was approximately $4.3 million and $4.7 million for the three months ended June 30, 2018 and 2017, respectively, and approximately $8.8 million and $9.5 million for the six months ended June 30, 2018 and 2017, respectively. Total capitalized compensation costs for option and share awards was approximately $0.8 million and $0.9 million for the three months ended June 30, 2018 and 2017, respectively, and approximately $1.6 million and $1.9 million for the six months ended June 30, 2018 and 2017, respectively.

The following table summarizes activity under our share incentive plans for the six months ended June 30, 2018:
 
 
Options
Outstanding
 
Weighted
Average
Exercise /
Grant Price
 
Nonvested
Share
Awards
Outstanding
 
Weighted
Average
Exercise /  Grant Price
Options and nonvested share awards outstanding at December 31, 2017
68,978

 
$
61.15

 
499,898

 
$
75.80

Granted
9,994

 
78.55

 
230,353

 
82.73

Exercised/Vested
(26,114
)
 
30.06

 
(315,789
)
 
75.65

Forfeited
—

 
—

 
(13,478
)
 
79.26

Total options and nonvested share awards outstanding at June 30, 2018
52,858

 
$
79.79

 
400,984

 
$
79.77


Employee Share Purchase Plan (“ESPP”). Our Board of Trust Managers adopted in February 2018, and our shareholders approved on May 17, 2018, the Camden Property Trust 2018 Employee Share Purchase Plan (the "2018 ESPP") which amends and restates our 1999 Employee Share Purchase Plan (the "1999 ESPP") effective with the offering period commencing in June 2018. Under the 2018 ESPP, we may issue up to a total of approximately 500,000 common shares. We have established the 2018 ESPP for all active employees and officers who have completed three months of continuous service. Participants may elect to purchase our common shares through payroll deductions and/or through semi-annual lump-sum contributions. At the end of each six-month offering period, each participant’s account balance is applied to acquire common shares at 85% of the market value, as defined, on the first or last day of the offering period, whichever price is lower. We currently use treasury shares to satisfy ESPP share requirements. Each participant must hold the shares purchased for nine months in order to receive the discount, and a participant may not purchase more than $25,000 in value of shares during any calendar year. 

Non-Qualified Deferred Compensation Share Awards. Balances within temporary equity in our condensed consolidated balance sheets relate to fully vested awards and the proportionate share of nonvested awards of participants within our Non-Qualified Deferred Compensation Plan who are permitted to diversify their shares into other equity securities subject to a six month holding period. The following table summarizes the eligible share award activity for the six months ended June 30, 2018:

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(in thousands)
 
Six Months Ended
June 30, 2018
Temporary equity:
 
 
Balance at December 31, 2017
 
$
77,230

Change in classification
 
10,635

Change in redemption value
 
(976
)
Diversification of share awards
 
(951
)
Balance at June 30, 2018
 
$
85,938

11. Net Change in Operating Accounts
The effect of changes in the operating and other accounts on cash flows from operating activities is as follows:
  
Six Months Ended
June 30,
(in thousands)
2018
 
2017
Change in assets:
 
 
 
Other assets, net
$
2,280

 
$
(1,819
)
Change in liabilities:
 
 
 
Accounts payable and accrued expenses
(10,409
)
 
(15,453
)
Accrued real estate taxes
922

 
(482
)
Other liabilities
2,733

 
5,518

Other
1,403

 
1,439

Change in operating accounts and other
$
(3,071
)
 
$
(10,797
)

12. Commitments and Contingencies
Construction Contracts. As of June 30, 2018, we estimate the total additional cost to complete the seven consolidated projects currently under construction to be approximately $283.4 million. We expect to fund this amount through a combination of one or more of the following: cash and cash equivalents, cash flows generated from operations, draws on our unsecured credit facility or other short-term borrowing, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from our 2017 ATM program, other unsecured borrowings or secured mortgages.

Other Commitments and Contingencies. In the ordinary course of our business, we issue letters of intent indicating a willingness to negotiate for acquisitions, dispositions, or joint ventures and also enter into arrangements contemplating various transactions. Such letters of intent and other arrangements are non-binding as to either party unless and until a definitive contract is entered into by the parties. Even if definitive contracts relating to the purchase or sale of real property are entered into, these contracts generally provide the purchaser with time to evaluate the property and conduct due diligence, during which periods the purchaser will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money. There can be no assurance definitive contracts will be entered into with respect to any matter covered by letters of intent or we will consummate any transaction contemplated by any definitive contract. Furthermore, due diligence periods for real property are frequently extended as needed. An acquisition or sale of real property becomes probable at the time the due diligence period expires and the definitive contract has not been terminated. We are then at risk under a real property acquisition contract, but generally only to the extent of any earnest money deposits associated with the contract, and are obligated to sell under a real property sales contract. At June 30, 2018, we had approximately $0.5 million in earnest money deposits of which $0.3 million is non-refundable for potential acquisitions of land in our condensed consolidated balance sheets.
Lease Commitments. At June 30, 2018, we had long-term leases covering certain land, office facilities, and equipment. Rental expense totaled approximately $1.0 million for each of the three months ended June 30, 2018 and 2017, and was approximately $2.0 million for each of the six months ended June 30, 2018 and 2017, respectively. Minimum annual rental commitments for the remainder of 2018 are $1.5 million, and for the years ending December 31, 2019 through 2022 are approximately $2.8 million, $2.9 million, $2.9 million, and $2.7 million, respectively, and approximately $7.0 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

21
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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 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.
13. 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 adjusted taxable income. 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. In addition, we may not be able to requalify as a REIT for the four subsequent taxable years. Historically, we have incurred only state and local income, franchise, and excise taxes. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal, state, and local income taxes. Our consolidated 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 six months ended June 30, 2018 and 2017 as income tax expense. Income taxes for the three and six months ended June 30, 2018 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 six months ended June 30, 2018.
14. 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 June 30, 2018 and December 31, 2017 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
 
June 30, 2018
 
December 31, 2017
(in millions)
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
 
Total
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
 
Total
Other Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation plan investments (1)
$
120.6

 
$
—

 
$
—

 
$
120.6

 
$
120.3

 
$
—

 
$
—

 
$
120.3

Derivative financial instruments - forward interest rate swap
—

 
10.5

 
—

 
10.5

 
—

 
2.2

 
—

 
2.2

Other Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative financial instruments - forward interest rate swaps
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
0.5

 
$
—

 
$
0.5

(1)
Approximately $3.3 million and $4.2 million of participant cash was withdrawn from our deferred compensation plan investments during the six months ended June 30, 2018 and the year ended December 31, 2017, respectively. Approximately $1.0 million and $23.2 million of participant restricted share units in the compensation plan were diversified into deferred compensation plan investments during the six months ended June 30, 2018 and the year ended December 31, 2017, respectively.

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Non-Recurring Fair Value Disclosures. The nonrecurring fair value disclosure inputs under the fair value hierarchy are discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements." We completed two asset acquisitions of operating properties during the six months ended June 30, 2018 and one asset acquisition of an operating property during the six months ended June 30, 2017. We recorded the real estate assets and identifiable net below market and in-place leases at their relative fair values based upon methods similar to those used by independent appraisers of income producing properties. The fair value measurements associated with the valuation of these acquired assets represent Level 3 measurements within the fair value hierarchy. See Note 6, "Acquisitions," for a further discussion about these acquisitions.

Financial Instrument Fair Value Disclosures. The following table presents the carrying and estimated fair values of our notes payable at June 30, 2018 and December 31, 2017, in accordance with the policies discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements."
 
June 30, 2018
 
December 31, 2017
(in millions)
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Fixed rate notes payable
$
2,030.3

 
$
2,051.5

 
$
2,029.6

 
$
2,106.5

Floating rate notes payable
175.0

 
174.6

 
175.0

 
173.7




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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, 2017. Historical results and trends which might appear in the condensed consolidated financial statements should not be interpreted as being indicative of future operations.

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

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

•
Volatility in capital and credit markets, or other unfavorable changes in economic conditions, either nationally or regionally in one or more of the markets in which we operate, could adversely impact us;
•
Short-term leases expose us to the effects of declining market rents;
•
Competition could limit our ability to lease apartments or increase or maintain rental income;
•
We face risks associated with land holdings and related activities;
•
Potential reforms to Fannie Mae and Freddie Mac could adversely affect us;
•
Development, redevelopment and construction risks could impact our profitability;
•
Investments through joint ventures and discretionary funds involve risks not present in investments in which we are the sole investor;
•
Competition could adversely affect our ability to acquire properties;
•
Our acquisition strategy may not produce the cash flows expected;
•
Failure to qualify as a REIT could have adverse consequences;
•
Tax laws have recently changed and may continue to change at any time, and any such legislative or other actions could have a negative effect on us;
•
Litigation risks could affect our business;
•
Damage from catastrophic weather and other natural events could result in losses;
•
A cybersecurity incident and other technology disruptions could negatively impact our business;
•
We have significant debt, which could have adverse consequences;
•
Insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders;
•
Issuances of additional debt may adversely impact our financial condition;
•
We may be unable to renew, repay, or refinance our outstanding debt;
•
We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined;
•
Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distribution to our shareholders, and decrease our share price, if investors seek higher yields through other investments;
•
Failure to hedge effectively against interest rates may adversely affect results of operations;
•
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 amount of dividend distributions in future periods may vary and be impacted by economic and other considerations.

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

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Executive Summary
We are primarily engaged in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities. We focus on investing in markets characterized by high-growth economic conditions, strong employment, and attractive quality of life which we believe leads to higher demand and retention of our apartments. As of June 30, 2018, we owned interests in, operated, or were developing 165 multifamily properties comprised of 56,194 apartment homes across the United States. In addition, we own other land holdings which we may develop into multifamily apartment communities in the future.
Property Operations
Our results for the three and six months ended June 30, 2018 reflect increases in same store revenues of 3.2% and 3.3% as compared to the same periods in 2017, respectively. These increases were primarily due to higher average rental rates and increased average occupancy, which we believe were primarily attributable to improving job growth, favorable demographics, a manageable supply of new multifamily housing, and in part to more individuals choosing to rent versus buy as evidenced by the continued low level of homeownership rates, all of which have resulted in higher rental rates. We believe the continued low levels of homeownership rates are mainly attributable to difficulties in obtaining mortgage loans as well as changing demographic trends, both of which promote apartment rentals. We also believe U.S. economic and employment growth is likely to continue during 2018 and the supply of new multifamily homes will remain at manageable levels. If economic conditions were to worsen, our operating results could be adversely affected.
Construction Activity
At June 30, 2018, we had seven projects under construction to be comprised of 2,013 apartment homes, with initial occupancy scheduled to occur within the next 24 months. As of June 30, 2018, we estimate the total additional cost to complete the construction of these seven projects is approximately $283.4 million.
Acquisitions
Operating properties. In February 2018, we acquired one operating property comprised of 333 apartment homes located in Orlando, Florida for approximately $81.4 million. In January 2018, we acquired one operating property comprised of 358 apartment homes located in St. Petersburg, Florida for approximately $126.9 million.
Land. In April 2018, we acquired approximately 1.8 acres of land in Orlando, Florida for approximately $11.4 million for the future development of a community with 360 wholly-owned apartment homes which commenced construction during the quarter ended June 30, 2018.
Future Outlook
Subject to market conditions, we intend to continue to seek opportunities to develop new communities, and to redevelop, reposition, and acquire existing communities. We also intend to evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise. We expect to maintain a strong balance sheet and preserve our financial flexibility 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 one or more of the following: cash and cash equivalents, cash flows generated from operations, draws on our unsecured credit facility or other short-term borrowing, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from our 2017 at-the-market ("ATM") share offering program, other unsecured borrowings or secured mortgages.
As of June 30, 2018, we had approximately $64.1 million in cash and cash equivalents and $632.4 million available under our $645.0 million unsecured credit facilities. As of the date of this filing, we had common shares having an aggregate offering price of up to $312.8 million remaining available for sale under our 2017 ATM program. We believe scheduled payments of debt in 2018 are manageable at approximately $174.4 million which represents approximately 7.9% of our total outstanding debt, and includes amortization of debt discounts and debt issuance costs, net of scheduled principal payments of approximately $0.6 million. We believe we are well-positioned with a strong balance sheet and sufficient liquidity to cover 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:
 
June 30, 2018
 
December 31, 2017
 
Apartment Homes    
 
Properties    
 
Apartment
 Homes    
 
Properties    
Operating Properties
 
 
 
 
 
 
 
Houston, Texas
8,434

 
24

 
8,434

 
24

Washington, D.C. Metro
6,497

 
18

 
6,040

 
17

Dallas, Texas
5,666

 
14

 
5,666

 
14

Atlanta, Georgia
4,496

 
14

 
4,496

 
14

Austin, Texas
3,360

 
10

 
3,360

 
10

Orlando, Florida
3,295

 
9

 
2,962

 
8

Charlotte, North Carolina
3,076

 
13

 
3,076

 
13

Raleigh, North Carolina
3,054

 
8

 
3,054

 
8

Phoenix, Arizona
2,929

 
10

 
2,929

 
10

Southeast Florida
2,781

 
8

 
2,781

 
8

Tampa, Florida
2,736

 
7

 
2,378

 
6

Los Angeles/Orange County, California
2,658

 
7

 
2,658

 
7

Denver, Colorado
2,632

 
8

 
2,632

 
8

San Diego/Inland Empire, California
1,665

 
5

 
1,665

 
5

Corpus Christi, Texas
902

 
3

 
902

 
3

Total Operating Properties
54,181

 
158

 
53,033

 
155

Properties Under Construction
 
 
 
 
 
 
 
Houston, Texas
586

 
2

 
586

 
2

Phoenix, Arizona
441

 
1

 
441

 
1

Washington, D.C. Metro
365

 
1

 
822

 
2

Orlando, Florida
360

 
1

 
—

 
—

Denver, Colorado
233

 
1

 
233

 
1

Charlotte, North Carolina
28

 
1

 
28

 
1

Total Properties Under Construction
2,013

 
7

 
2,110

 
7

Total Properties
56,194

 
165

 
55,143

 
162

Less: Unconsolidated Joint Venture Properties (1)
 
 
 
 
 
 
 
Houston, Texas
2,522

 
8

 
2,522

 
8

Austin, Texas
1,360

 
4

 
1,360

 
4

Dallas, Texas
1,250

 
3

 
1,250

 
3

Tampa, Florida
450

 
1

 
450

 
1

Raleigh, North Carolina
350

 
1

 
350

 
1

Orlando, Florida
300

 
1

 
300

 
1

Washington, D.C. Metro
281

 
1

 
281

 
1

Corpus Christi, Texas
270

 
1

 
270

 
1

Charlotte, North Carolina
266

 
1

 
266

 
1

Atlanta, Georgia
234

 
1

 
234

 
1

Total Unconsolidated Joint Venture Properties
7,283

 
22

 
7,283

 
22

Total Properties Fully Consolidated
48,911

 
143

 
47,860

 
140

 

(1)
Refer to Note 7, "Investments in Joint Ventures," in the notes to Condensed Consolidated Financial Statements for further discussion of our joint venture investments.

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Stabilized Communities
We generally consider a property stabilized once it reaches 90% occupancy. We had no properties reach stabilization during the three months ended June 30, 2018.
Completed Construction in Lease-Up
At June 30, 2018, we had two consolidated completed operating properties in lease-up as follows:
($ in millions)
Property and Location
Number of
Apartment
Homes
 
Cost
Incurred (1)
 
% Leased at 7/31/2018
 
Date of
Construction
Completion
 
Estimated
Date of
Stabilization
Camden NoMa II
 
 
 
 
 
 
 
 
 
Washington, DC
405
 
$
107.9

 
86
%
 
2Q17
 
2Q19
Camden Shady Grove
 
 
 
 
 
 
 
 
 
Rockville, MD
457
 
113.7

 
80
%
 
1Q18
 
3Q19
Total
862
 
$
221.6

 
 
 
 
 
 
(1) Excludes leasing costs, which are expensed as incurred.
Properties Under Development and Land
Our condensed consolidated balance sheet at June 30, 2018 included approximately $373.4 million related to properties under development and land. Of this amount, approximately $242.9 million related to our projects currently under construction. In addition, we had approximately $119.4 million invested primarily in land held for future development related to projects we expect to begin constructing during the next two years and approximately $11.1 million invested in land which we may develop in the future.
Communities Under Construction. At June 30, 2018, we had seven consolidated properties in various stages of construction as follows:
($ in millions)
Property and Location
Number of
Apartment
Homes
 
Estimated
Cost
 
Cost
Incurred
 
Included in
Properties
Under
Development
 
Estimated
Date of
Construction
Completion
 
Estimated
Date of
Stabilization
Camden McGowen Station (1)
 
 
 
 
 
 
 
 
 
 
 
Houston, TX
315

 
$
90.0

 
$
86.0

 
$
46.6

 
3Q18
 
4Q19
Camden North End I (2)
 
 
 
 
 
 
 
 
 
 
 
Phoenix, AZ
441

 
105.0

 
80.7

 
47.3

 
2Q19
 
2Q20
Camden Washingtonian (3)
 
 
 
 
 
 
 
 
 
 
 
Gaithersburg, MD
365

 
90.0

 
81.8

 
47.9

 
1Q19
 
4Q19
Camden Grandview II
 
 
 
 
 
 
 
 
 
 
 
Charlotte, NC
28

 
21.0

 
16.3

 
16.3

 
4Q18
 
2Q19
Camden RiNo
 
 
 
 
 
 
 
 
 
 
 
Denver, CO
233

 
75.0

 
32.2

 
32.2

 
2Q20
 
4Q20
Camden Downtown I
 
 
 
 
 
 
 
 
 
 
 
Houston, TX
271

 
132.0

 
32.6

 
32.6

 
3Q20
 
1Q21
Camden Lake Eola
 
 
 
 
 
 
 
 
 
 
 
Orlando, FL
360

 
120.0

 
20.0

 
20.0

 
3Q20
 
3Q21
Total
2,013

 
$
633.0

 
$
349.6

 
$
242.9

 
 
 
 
(1)
Property in lease-up was 30% leased at July 31, 2018.
(2)
Property in lease-up was 27% leased at July 31, 2018.
(3)
Property in lease-up was 32% leased at July 31, 2018.


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Table of Contents

Development Pipeline Communities. At June 30, 2018, we had the following consolidated multifamily communities undergoing development activities:
($ in millions)
Property and Location
Projected Homes
 
Total Estimated Cost (1)
 
Cost to Date
Camden Buckhead
 
 
 
 
 
Atlanta, GA
365

 
$
160.0

 
$
19.0

Camden Atlantic
 
 
 
 
 
Plantation, FL
269

 
90.0

 
16.2

Camden Arts District
 
 
 
 
 
Los Angeles, CA
354

 
150.0

 
20.3

Camden Hillcrest
 
 
 
 
 
San Diego, CA
125

 
75.0

 
26.0

Camden North End II
 
 
 
 
 
Phoenix, AZ
326

 
73.0

 
13.2

Camden Paces III
 
 
 
 
 
Atlanta, GA
350

 
100.0

 
14.3

Camden Downtown II
 
 
 
 
 
Houston, TX
271

 
145.0

 
10.4

Total
2,060

 
$
793.0

 
$
119.4

(1)
Represents our estimate of total costs we expect to incur on these projects. However, forward-looking statements are not guarantees of future performance, results, or events. Although we believe these expectations are based upon reasonable assumptions, future events rarely develop exactly as forecast, and estimates routinely require adjustment.

Land Holdings. At June 30, 2018, we had the following investment in land:
($ in millions)
Location
Acres
 
Cost to Date
Phoenix, AZ
14.0

 
$
11.1

Results of Operations
Changes in revenues and expenses related to our operating properties from period to period are due primarily to the performance of stabilized properties in the portfolio, the lease-up of newly constructed properties, acquisitions, and dispositions. Selected weighted averages for the three and six months ended June 30, 2018 and 2017 are as follows:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
2018
 
2017
 
2018
 
2017
Average monthly property revenue per apartment home
$
1,693

 
$
1,617

 
$
1,676

 
$
1,609

Annualized total property expenses per apartment home
$
7,289

 
$
6,979

 
$
7,267

 
$
6,967

Weighted average number of operating apartment homes owned 100%
46,682

 
46,053

 
46,518

 
45,882

Weighted average occupancy of operating apartment homes owned 100%
95.7
%
 
95.3
%
 
95.5
%
 
95.0
%
Management considers property net operating income ("NOI") to be an appropriate supplemental measure of operating performance to net income because it reflects the operating performance of our communities without allocation of corporate level property management overhead or general and administrative costs. We define NOI as total property income less property operating and maintenance expenses less real estate taxes. NOI is further detailed in the Property-Level NOI table as seen below. NOI is not defined by accounting principles generally accepted in the United States of America ("GAAP") and should not be considered an alternative to net income as an indication of our operating performance. Additionally, NOI as disclosed by other REITs may not be comparable to our calculation.


28
Table of Contents

Reconciliations of net income to NOI for the three and six months ended June 30, 2018 and 2017 are as follows:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
Net income
 
$
39,872

 
$
40,314

 
$
80,397

 
$
76,303

Less: Fee and asset management income
 
(1,826
)
 
(1,942
)
 
(3,824
)
 
(3,690
)
Less: Interest and other income
 
(491
)
 
(560
)
 
(1,284
)
 
(1,194
)
Less: Income on deferred compensation plans
 
(435
)
 
(3,441
)
 
(230
)
 
(8,058
)
Plus: Property management expense
 
6,473

 
6,554

 
13,112

 
13,581

Plus: Fee and asset management expense
 
1,088

 
961

 
2,053

 
1,845

Plus: General and administrative expense
 
12,272

 
12,451

 
24,495

 
25,319

Plus: Interest expense
 
20,607

 
21,966

 
40,981

 
44,922

Plus: Depreciation and amortization expense
 
75,569

 
65,033

 
145,793

 
128,767

Plus: Expense on deferred compensation plans
 
435

 
3,441

 
230

 
8,058

Plus: Loss on early retirement of debt
 
—

 
—

 
—

 
323

Less: Equity in income of joint ventures
 
(1,872
)
 
(1,785
)
 
(3,701
)
 
(3,602
)
Plus: Income tax expense
 
380

 
25

 
768

 
496

Net operating income
 
$
152,072

 
$
143,017

 
$
298,790

 
$
283,070


Property-Level NOI (1)
Property NOI, as reconciled above, is detailed further into the following categories for the three and six months ended June 30, 2018 as compared to the same periods in 2017:
($ in thousands)
Apartment
Homes at
 
Three Months Ended
June 30,
 
Change
 
Six Months Ended
June 30,
 
Change
6/30/2018
 
2018
 
2017
 
$
 
%
 
2018
 
2017
 
$
 
%
Property revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same store communities
41,968

 
$
205,086

 
$
198,690

 
$
6,396

 
3.2
 %
 
$
406,561

 
$
393,734

 
$
12,827

 
3.3
 %
Non-same store communities
4,068

 
25,453

 
19,340

 
6,113

 
31.6

 
49,006

 
37,371

 
11,635

 
31.1

Development and lease-up
communities
2,875

 
4,479

 
806

 
3,673

 
*
 
7,967

 
906

 
7,061

 
*
Dispositions/other
—

 
2,115

 
4,534

 
(2,419
)
 
(53.4
)
 
4,282

 
10,880

 
(6,598
)
 
(60.6
)
Total property revenues
48,911

 
$
237,133

 
$
223,370

 
$
13,763

 
6.2
 %
 
$
467,816

 
$
442,891

 
$
24,925

 
5.6
 %
Property expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same store communities
41,968

 
$
73,357

 
$
70,987

 
$
2,370

 
3.3
 %
 
$
146,228

 
$
142,350

 
$
3,878

 
2.7
 %
Non-same store communities
4,068

 
9,309

 
6,953

 
2,356

 
33.9

 
18,197

 
13,560

 
4,637

 
34.2

Development and lease-up
communities
2,875

 
1,621

 
417

 
1,204

 
*
 
3,061

 
475

 
2,586

 
*
Dispositions/other
—

 
774

 
1,996

 
(1,222
)
 
(61.2
)
 
1,540

 
3,436

 
(1,896
)
 
(55.2
)
Total property expenses
48,911

 
$
85,061

 
$
80,353

 
$
4,708

 
5.9
 %
 
$
169,026

 
$
159,821

 
$
9,205

 
5.8
 %
Property NOI:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same store communities
41,968

 
$
131,729

 
$
127,703

 
$
4,026

 
3.2
 %
 
$
260,333

 
$
251,384

 
$
8,949

 
3.6
 %
Non-same store communities
4,068

 
16,144

 
12,387

 
3,757

 
30.3

 
30,809

 
23,811

 
6,998

 
29.4

Development and lease-up communities
2,875

 
2,858

 
389

 
2,469

 
*
 
4,906

 
431

 
4,475

 
*
Dispositions/other
—

 
1,341

 
2,538

 
(1,197
)
 
(47.2
)
 
2,742

 
7,444

 
(4,702
)
 
(63.2
)
Total property NOI
48,911

 
$
152,072

 
$
143,017

 
$
9,055

 
6.3
 %
 
$
298,790

 
$
283,070

 
$
15,720

 
5.6
 %
*    Not a meaningful percentage.

29
Table of Contents

(1)
Same store communities are communities we owned and were stabilized since January 1, 2017, excluding communities under redevelopment and properties held for sale. Non-same store communities are stabilized communities not owned or stabilized since January 1, 2017, including communities under redevelopment and excluding properties held for sale. We define communities under redevelopment as communities with capital expenditures that improve a community's cash flow and competitive position through extensive unit, exterior building, common area, and amenity upgrades. Management believes same store information is useful as it allows both management and investors to determine financial results over a particular period for the same set of communities. Development and lease-up communities are non-stabilized communities we have developed since January 1, 2017, excluding properties held for sale. Dispositions/other includes those communities disposed of or held for sale which are not classified as discontinued operations, and non-multifamily rental properties and expenses related to land holdings not under active development.
Same Store Analysis
Same store property NOI increased approximately $4.0 million and $8.9 million for the three and six months ended June 30, 2018, as compared to the same periods in 2017. These increases were due to increases of approximately $6.4 million and $12.8 million in same store property revenues for the three and six months ended June 30, 2018, respectively, partially offset by increases of approximately $2.4 million and $3.9 million in same store property expenses for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017. These increases in same store property revenues were primarily due to a $4.4 million and an $8.5 million increase in average rental rates for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017, and a $0.6 million and a $1.7 million increase in average occupancy from our same store portfolio for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017. The increases in same store property revenues were also due to increases in income from our bulk Internet rebilling program during the three and six months ended June 30, 2018, as compared to the same periods in 2017.
The $2.4 million increase in same store property expenses during the three months ended June 30, 2018, as compared to the same period in 2017, was primarily due to an increase of approximately $1.2 million in real estate taxes as a result of increased property valuations at a number of our communities, higher salary expenses of approximately $0.7 million, and increased costs of approximately $0.2 million associated with higher utility expenses incurred. The $3.9 million increase in same store property expenses during the six months ended June 30, 2018, as compared to the same period in 2017, was primarily due to an increase of approximately $1.9 million in real estate taxes as a result of increased property valuations at a number of our communities, higher salary expenses of approximately $1.6 million, and increased costs of approximately $0.7 million associated with higher utility expenses incurred. The increase for the six months ended June 30, 2018 was partially offset by an approximate $0.8 million decrease related to lower repair and maintenance costs as compared to the same period in 2017.
Non-same Store and Development and Lease-up Analysis
Property NOI from non-same store and development and lease-up communities increased approximately $6.2 million and $11.5 million for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017. These increases were due to increases of approximately $9.8 million and $18.7 million in revenues, partially offset by increases of approximately $3.6 million and $7.2 million in expenses for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017. The increases in property revenues and expenses from our non-same store communities were primarily due to the acquisition of one operating property during 2017 and two operating properties during the six months ended June 30, 2018, and four operating properties reaching stabilization during 2017 and the six months ended June 30, 2018. The increases in property revenues and expenses from our development and lease-up communities were primarily due to the completion and partial lease-up of two properties during 2017 and the six months ended June 30, 2018, and the partial lease-up of three properties which were under construction at June 30, 2018.

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Table of Contents

The following table details the changes, described above, relating to non-same store and development and lease up NOI:
 
 
For the three months ended June 30, 2018 as compared to 2017
 
For the six months ended June 30, 2018 as compared to 2017
(in millions)
 
 
Property Revenues:
 
 
 
 
Revenues from acquisitions
 
$
5.0

 
$
9.0

Revenues from non-same store stabilized properties
 
1.3

 
3.1

Revenues from development and lease-up properties
 
3.7

 
7.1

Other
 
(0.2
)
 
(0.5
)
 
 
$
9.8

 
$
18.7

Property Expenses:
 
 
 
 
Expenses from acquisitions
 
$
2.1

 
$
3.7

Expenses from non-same store stabilized properties
 
0.3

 
0.8

Expenses from development and lease-up properties
 
1.2

 
2.6

Other
 
—

 
0.1

 
 
$
3.6

 
$
7.2

Property NOI:
 
 
 
 
NOI from acquisitions
 
$
2.9

 
$
5.3

NOI from non-same store stabilized properties
 
1.0

 
2.3

NOI from development and lease-up properties
 
2.5

 
4.5

Other
 
(0.2
)
 
(0.6
)
 
 
$
6.2

 
$
11.5

Dispositions/Other Property Analysis
Dispositions/other property NOI decreased approximately $1.2 million and $4.7 million for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017. These decreases were primarily due to the disposition of one operating property during the fourth quarter of 2017.

Non-Property Income
($ in thousands)
Three Months Ended
June 30,
 
Change
 
Six Months Ended
June 30,
 
Change
2018
 
2017
 
$
 
%
 
2018
 
2017
 
$
 
%
Fee and asset management
$
1,826

 
$
1,942

 
$
(116
)
 
(6.0
)%
 
$
3,824

 
$
3,690

 
$
134

 
3.6
 %
Interest and other income
491

 
560

 
(69
)
 
(12.3
)
 
1,284

 
1,194

 
90

 
7.5

Income on deferred compensation plans
435

 
3,441

 
(3,006
)
 
(87.4
)
 
230

 
8,058

 
(7,828
)
 
(97.1
)
Total non-property income
$
2,752

 
$
5,943

 
$
(3,191
)
 
(53.7
)%
 
$
5,338

 
$
12,942

 
$
(7,604
)
 
(58.8
)%
Fee and asset management income, which represents income related to property management of our joint ventures and fees from third party construction projects, decreased approximately $0.1 million for the three months ended June 30, 2018, and increased approximately $0.1 million for the six months ended June 30, 2018, as compared to the same periods in 2017. The decrease for the three months ended June 30, 2018 was primarily due to a decrease in third-party construction activity partially offset by an increase in property revenues by the operating properties of the Funds, which resulted in higher property management fees. The increase for the six months ended June 30, 2018 was due to an increase in property revenues by the operating properties of the Funds, as compared to the same period in 2017.
Our deferred compensation plans recognized income of approximately $0.4 million and $3.4 million during the three months ended June 30, 2018 and 2017, respectively and income of approximately $0.2 million and $8.1 million during the six months ended June 30, 2018 and 2017, respectively. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the expense related to these plans, as discussed below.

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Table of Contents

Other Expenses
($ in thousands)
Three Months Ended
June 30,
 
Change
 
Six Months Ended
June 30,
 
Change
2018
 
2017
 
$
 
%
 
2018
 
2017
 
$
 
%
Property management
$
6,473

 
$
6,554

 
$
(81
)
 
(1.2
)%
 
$
13,112

 
$
13,581

 
$
(469
)
 
(3.5
)%
Fee and asset management
1,088

 
961

 
127

 
13.2

 
2,053

 
1,845

 
208

 
11.3

General and administrative
12,272

 
12,451

 
(179
)
 
(1.4
)
 
24,495

 
25,319

 
(824
)
 
(3.3
)
Interest
20,607

 
21,966

 
(1,359
)
 
(6.2
)
 
40,981

 
44,922

 
(3,941
)
 
(8.8
)
Depreciation and amortization
75,569

 
65,033

 
10,536

 
16.2

 
145,793

 
128,767

 
17,026

 
13.2

Expense on deferred compensation plans
435

 
3,441

 
(3,006
)
 
(87.4
)
 
230

 
8,058

 
(7,828
)
 
(97.1
)
Total other expenses
$
116,444

 
$
110,406

 
$
6,038

 
5.5
 %
 
$
226,664

 
$
222,492

 
$
4,172

 
1.9
 %
Property management expense, which represents regional supervision and accounting costs related to property operations, decreased approximately $0.1 million and $0.5 million for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017. These decreases were primarily related to lower consulting and other discretionary costs. Property management expenses were 2.7% and 2.9% of total property revenues for the three months ended June 30, 2018 and 2017, respectively, and were 2.8% and 3.1% of total property revenues for the six months ended June 30, 2018 and 2017, respectively.
Fee and asset management expense, which represents expenses related to property management of our joint venture and fees from third-party construction projects, increased approximately $0.1 million and $0.2 million for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017. These increases were primarily due to higher salaries and expenses incurred in managing our joint ventures.
General and administrative expense decreased approximately $0.2 million and $0.8 million for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017. These decreases were primarily due to lower professional fees and other discretionary costs. The decrease for the six months ended June 30, 2018 was partially offset by higher salary and benefit costs. General and administrative expenses were 5.1% and 5.5% of total revenues, excluding income on deferred compensation plans, for the three months ended June 30, 2018 and 2017, respectively, and were 5.2% and 5.7% of total revenues, excluding income on deferred compensation plans, for the six months ended June 30, 2018 and 2017, respectively.
Interest expense for the three and six months ended June 30, 2018 decreased approximately $1.4 million and $3.9 million, respectively, as compared to the same periods in 2017. These decreases were primarily due to the repayment of $246.8 million, 5.83% senior unsecured notes payable in May 2017. These decreases were partially offset by lower capitalized interest during the three and six months ended June 30, 2018 resulting from lower average balances in our development pipeline and an increase in interest expense recognized on our variable rate debt due to higher weighted average interest rates during the three and six months ended June 30, 2018 as compared to the same periods in 2017.
Depreciation and amortization expense increased approximately $10.5 million and $17.0 million for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017. These increases were primarily due to the acquisition of one operating property in 2017, two operating properties during the six months ended June 30, 2018, the completion of units in our development pipeline, and the completion of repositions and redevelopments during 2018 and 2017. These increases were partially offset by the disposition of one operating property during the fourth quarter of 2017.
Our deferred compensation plans incurred expenses of approximately $0.4 million and $3.4 million during the three months ended June 30, 2018 and 2017, respectively, and expenses of approximately $0.2 million and $8.1 million during the six months ended June 30, 2018 and 2017, respectively. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the income related to these plans, as discussed in the non-property income section above.

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Table of Contents

Other
 
Three Months Ended
June 30,
 
Change
 
Six Months Ended
June 30,
 
Change
($ in thousands)
2018
 
2017
 
$
 
%
 
2018
 
2017
 
$
 
%
Loss on early retirement
 of debt
$
—

 
$
—

 
$
—

 
—
%
 
$
—

 
$
(323
)
 
$
323

 
100.0
 %
Equity in income of joint
 ventures
$
1,872

 
$
1,785

 
$
87

 
4.9
%
 
$
3,701

 
$
3,602

 
$
99

 
2.7
 %
Income tax expense
$
(380
)
 
$
(25
)
 
$
(355
)
 
*
 
$
(768
)
 
$
(496
)
 
$
(272
)
 
(54.8
)%
*    Not a meaningful percentage.
The $0.3 million loss on early retirement of debt during the six months ended June 30, 2017 related to the early retirement of our $30.7 million tax-exempt secured note payable which was scheduled to mature in 2028. The loss on early retirement of debt primarily includes the applicable unamortized loan costs related to this notes payable.
Equity in income of joint ventures increased approximately $0.1 million for each of the three and six months ended June 30, 2018, as compared to the same periods in 2017. These slight increases in equity in income were primarily due to increases in earnings resulting from the operating properties owned by the Funds.
Income tax expense increased approximately $0.4 million and $0.3 million for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017. These increases were primarily due to an approximate $0.5 million state income tax refund received during the three months ended June 30, 2017. Excluding the income tax refund received in 2017, income tax expense decreased approximately $0.1 million and $0.2 million for the three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017. These decreases were primarily due to lower income taxes related to our third-party construction activities in a taxable REIT subsidiary as a result of a reduction in the effective tax rate following the enactment of the 2017 Tax Act passed in December 2017.
Funds from Operations ("FFO") and Adjusted FFO ("AFFO")
Management considers FFO and AFFO to be appropriate measures of the financial performance of an equity REIT. The National Association of Real Estate Investment Trusts ("NAREIT") currently defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) associated with the sale of previously depreciated operating properties, real estate depreciation and amortization, impairments of depreciable assets, and adjustments for unconsolidated joint ventures to reflect FFO on the same basis. Our calculation of diluted FFO also assumes conversion of all potentially dilutive securities, including certain non-controlling interests, which are convertible into common shares. We consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions of operating properties, and depreciation, FFO can assist in the comparison of the operating performance of a company's real estate investments between periods or to different companies.

AFFO is calculated utilizing FFO less recurring capitalized expenditures which are necessary to help preserve the value of and maintain the functionality at our communities. We also consider AFFO to be a useful supplemental measure because it is frequently used by analysts and investors to evaluate a REIT's operating performance between periods or to different companies. Our definition of recurring capital expenditures may differ from other REITs, and there can be no assurance our basis for computing this measure is comparable to other REITs.

To facilitate a clear understanding of our consolidated historical operating results, we believe FFO and AFFO should be examined in conjunction with net income attributable to common shareholders as presented in the condensed consolidated statements of income and comprehensive income and data included elsewhere in this report. FFO and AFFO are not defined by GAAP and should not be considered alternatives to net income attributable to common shareholders as an indication of our operating performance. Additionally, FFO and AFFO as disclosed by other REITs may not be comparable to our calculation.

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Table of Contents

Reconciliations of net income attributable to common shareholders to FFO and AFFO for the three and six months ended June 30, 2018 and 2017 are as follows:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
($ in thousands)
2018
 
2017
 
2018
 
2017
Funds from operations
 
 
 
 
 
 
 
Net income attributable to common shareholders
$
38,671

 
$
39,188

 
$
78,066

 
$
74,049

Real estate depreciation and amortization
73,980

 
63,450

 
142,575

 
125,603

Adjustments for unconsolidated joint ventures
2,257

 
2,214

 
4,504

 
4,427

Income allocated to non-controlling interests
1,201

 
1,126

 
2,331

 
2,254

Funds from operations
$
116,109

 
$
105,978

 
$
227,476

 
$
206,333

 
 
 
 
 
 
 
 
Less: recurring capitalized expenditures
(19,190
)
 
(16,775
)
 
(29,189
)
 
(26,469
)
Adjusted funds from operations
$
96,919

 
$
89,203

 
$
198,287

 
$
179,864

 
 
 
 
 
 
 
 
Weighted average shares – basic
95,243

 
90,105

 
95,155

 
90,015

Incremental shares issuable from assumed conversion of:
 
 
 
 
 
 
 
Common share options and awards granted
94

 
131

 
134

 
175

Common units
1,883

 
1,883

 
1,883

 
1,884

Weighted average shares – diluted
97,220

 
92,119

 
97,172

 
92,074

 
Liquidity and Capital Resources
Financial Condition and Sources of Liquidity
We intend to maintain a strong balance sheet and preserve our financial flexibility, which we believe should enhance our ability to identify and capitalize on investment opportunities as they become available. We intend to maintain what management believes is a conservative capital structure by:
•
extending and sequencing the maturity dates of our debt where practicable;
•
managing interest rate exposure using what management believes to be prudent levels of fixed and floating rate debt;
•
maintaining what management believes to be conservative coverage ratios; and
•
using what management believes to be a prudent combination of debt and equity.

Our interest expense coverage ratio, net of capitalized interest, was approximately 6.5 and 5.7 times for the three months ended June 30, 2018 and 2017, respectively, and 6.4 and 5.5 times for the six months ended June 30, 2018 and 2017, respectively. This ratio is a method for calculating the amount of operating cash flows available to cover interest expense and is calculated by dividing interest expense for the period into the sum of property revenues and expenses, non-property income, other expenses and income from discontinued operations, after adding back depreciation, amortization, and interest expense from both continuing and discontinued operations. Approximately 80.8% and 80.1% of our properties were unencumbered at June 30, 2018 and 2017, respectively. Our weighted average maturity of debt was approximately 3.8 years at June 30, 2018.
Our primary sources of liquidity are cash and cash equivalents and cash flows generated from operations. Other sources may include one or more of the following: availability under our unsecured credit facility and other short-term borrowing, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from our ATM program, other unsecured borrowings or secured mortgages. We believe our liquidity and financial condition are sufficient to meet all of our reasonably anticipated cash needs during 2018 including:
•
normal recurring operating expenses;
•
current debt service requirements;
•
recurring and non-recurring capital expenditures;
•
reposition expenditures;
•
funding of property developments, redevelopments, acquisitions, and joint venture investments; and

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•
the minimum dividend payments required to maintain our REIT qualification under the Code.

Factors which could increase or decrease our future liquidity include but are not limited to volatility in capital and credit markets, sources of financing, the minimum REIT dividend requirements, our ability to complete asset purchases, sales, or developments, the effect our debt level and changes in credit ratings could have on our costs of funds, and our ability to access capital markets.

Cash Flows
The following is a discussion of our cash flows for the six months ended June 30, 2018 and 2017:

Net cash from operating activities was approximately $231.3 million during the six months ended June 30, 2018 as compared to approximately $203.4 million for the same period in 2017. The increase was primarily due to growth attributable to our same store, non-same store, and development and lease-up communities, partially offset by a decrease relating to the disposition of one operating property during the fourth quarter of 2017. See further discussions of our 2018 operations as compared to 2017 in "Results of Operations."

Net cash used in investing activities during the six months ended June 30, 2018 totaled approximately $387.2 million as compared to $109.0 million during the same period in 2017. Cash outflows during the six months ended June 30, 2018, primarily related to the acquisition of two operating properties located in St. Petersburg and Orlando, Florida for approximately $201.9 million and the cash outflows for property development and capital improvements of approximately $177.5 million. Cash outflows during the six months ended June 30, 2017 primarily related to cash outflows for property development and capital improvements of approximately $148.0 million and the acquisition of one operating property located in Atlanta, Georgia for approximately $58.3 million. These outflows during 2017 were partially offset by cash inflows of $100.0 million from the maturity of a short-term investment. The increase in property development and capital improvements for the six months ended June 30, 2018, as compared to the same period in 2017, was primarily due to the timing and completion of four consolidated operating properties during 2017 and the six months ended June 30, 2018, and the completion of repositions and redevelopments at several of our operating properties. The property development and capital improvements during the six months ended June 30, 2018 and 2017, included the following:

 
 
Six Months Ended
June 30,
(in millions)
 
2018
 
2017
Expenditures for new development, including land
 
$
101.2

 
$
92.3

Capitalized interest, real estate taxes, and other capitalized indirect costs
 
13.4

 
13.0

Redevelopment expenditures
 
8.1

 
0.1

Reposition expenditures
 
19.0

 
13.1

Capital expenditures
 
35.8

 
29.5

     Total
 
$
177.5

 
$
148.0

Net cash used in financing activities totaled approximately $148.2 million for the six months ended June 30, 2018 as compared to approximately $315.6 million during the same period in 2017. Cash outflows during the six months ended June 30, 2018, primarily related to approximately $148.0 million used for the distributions to common shareholders and non-controlling interest holders, as compared to approximately $138.5 million during the same period in 2017. Cash outflows for the three months ended June 30, 2017 are also related to the repayment of our 5.83% senior unsecured note payable of approximately $246.8 million, as well as our tax-exempt secured notes payable of approximately $30.7 million. These cash outflows during 2017 were partially offset by net proceeds from our unsecured line of credit and other short-term borrowings of $100.0 million.

Financial Flexibility

We have a $600 million unsecured credit facility which matures in August 2019, with two six-month options to extend the maturity date at our election to August 2020. Additionally, we have the option to further increase our credit facility to $900 million by either adding additional banks to the facility or obtaining the agreement of the existing banks to increase their commitments. The interest rate on our credit facility is based upon the London Interbank Offered Rate ("LIBOR") plus a margin which is subject to change as our credit ratings change. Advances under our credit facility 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 $300 million or the remaining amount available under our credit facility. Our credit facility is

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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 credit facility provides us with the ability to issue up to $50 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our credit facility, it does reduce the amount available. At June 30, 2018, we had no balances outstanding on our credit facility and we had outstanding letters of credit totaling approximately $12.6 million, leaving approximately $587.4 million available under our credit facility.
We also have a $45.0 million unsecured short-term borrowing facility which matures in May 2019. The interest rate is based on LIBOR plus 0.95%. At June 30, 2018, we had no balances outstanding on this unsecured short-term borrowing facility, leaving $45.0 million available under this facility.
We currently have an automatic shelf registration statement which allows us to offer common shares, preferred shares, debt securities, or warrants, and our Amended and Restated Declaration of Trust provides we may issue up to 185 million shares of beneficial interest, consisting of 175 million common shares and 10 million preferred shares. At June 30, 2018, we had approximately 92.8 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding.
In May 2017, we created an at-the market ("ATM") share offering program through which we can, but have no obligation to, sell common shares having an aggregate offering price of up to $315.3 million (the "2017 ATM program"), in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. Actual sales from time to time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations by management of the appropriate sources of funding for us. The proceeds from the sale of our common shares under the 2017 ATM program are intended to be used for general corporate purposes, which may include reducing future borrowings under our $600 million unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development activities, and financing for acquisitions. For the three and six months ended June 30, 2018, and through the date of this filing, we did not sell any shares under the 2017 ATM program. As of the date of this filing, we had common shares having an aggregate offering price of up to $312.8 million remaining available for sale under the 2017 ATM program.
We believe our ability to access capital markets is enhanced by our senior unsecured debt ratings by Moody's, Fitch, and Standard and Poor's, which are currently A3 with stable outlook, A- with stable outlook, and BBB+ with positive outlook, respectively. We believe our ability to access capital markets is also enhanced by our ability to borrow on a secured basis from various institutions including banks, Fannie Mae, Freddie Mac, or life insurance companies. However, we may not be able to maintain our current credit ratings and may not be able to borrow on a secured or unsecured basis in the future.
Future Cash Requirements and Contractual Obligations
One of our principal long-term liquidity requirements includes the repayment of maturing debt, including any future borrowings under our unsecured credit facility. We believe payments of debt in 2018 are manageable at approximately $174.4 million, which represents approximately 7.9% of our total outstanding debt, and includes amortization of debt discounts and debt issuance costs, net of scheduled principal payments of approximately $0.6 million. See Note 8, "Notes Payable," in the notes to Condensed Consolidated Financial Statements for a further discussion of scheduled maturities.
We estimate the additional cost to complete the construction of seven consolidated projects to be approximately $283.4 million. Of this amount, we expect to incur costs between approximately $80 million and $100 million during the remainder of 2018 and to incur the remaining costs during 2019 and 2020. Additionally, during the remainder of 2018, we expect to incur costs between approximately $20 million and $30 million related to the start of new development activities, approximately $27 million and $31 million of repositions and revenue enhancing expenditures, approximately $18 million to $22 million of additional redevelopment expenditures and approximately $36 million to $40 million of additional recurring capital expenditures.
We intend to meet our near-term liquidity requirements through a combination of one or more of the following: cash and cash equivalents, cash flows generated from operations, draws on our unsecured credit facility or other short-term borrowing, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from our 2017 ATM program, other unsecured borrowings or secured mortgages. We intend to evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise.
As a REIT, we are subject to a number of organizational and operational requirements, including a requirement to distribute current dividends to our shareholders equal to a minimum of 90% of our annual taxable income. In order to minimize paying income taxes, our general policy is to distribute at least 100% of our taxable income. In June 2018, our Board of Trust Managers declared a quarterly dividend of $0.77 per common share to our common shareholders of record as of June 29, 2018. The quarterly

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dividend was subsequently paid on July 17, 2018, and we paid equivalent amounts per unit to holders of the common operating partnership units. Assuming similar quarterly dividend distributions for the remainder of 2018, our annualized dividend rate would be $3.08 per share or unit.

Off-Balance Sheet Arrangements
The joint ventures in which we have an interest have been funded in part with secured, third-party debt. At June 30, 2018, our unconsolidated joint ventures had outstanding debt of approximately $512.6 million, of which our proportionate share was approximately $160.4 million. As of June 30, 2018, we had no outstanding guarantees related to the debt of our unconsolidated joint ventures.

Inflation
Substantially all of our apartment leases are for a term generally ranging from six to eighteen months. In an inflationary environment, we may realize increased rents at the commencement of new leases or upon the renewal of existing leases. We believe the short-term nature of our leases generally minimizes our risk from the adverse effects of inflation.
Critical Accounting Policies
Our critical accounting policies have not changed from the information reported in our Annual Report on Form 10-K for the year ended December 31, 2017.
Recent Accounting Pronouncements. See Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements," in the notes to Condensed Consolidated Financial Statements for further discussion of recent accounting pronouncements issued or adopted during the six months ended June 30, 2018.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
No material changes to our exposures to market risk have occurred since our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. We carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Securities Exchange Act ("Exchange Act") Rules 13a-15(e) and 15d-15(e). Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded the disclosure controls and procedures as of the end of the period covered by this report are effective to ensure information required to be disclosed by us in our Exchange Act filings is accurately recorded, processed, summarized, and reported within the periods specified in the Securities and Exchange Commission's rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls. There were no changes in our internal control over financial reporting (identified in connection with the evaluation required by paragraph (d) in Rules 13a-15 and 15d-15 under the Exchange Act) during our most recent fiscal quarter which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
None

Item 1A.
Risk Factors
There have been no material changes to the Risk Factors previously disclosed in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
There were no repurchases of our equity securities for the three months ended June 30, 2018:


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Item 3.
Defaults Upon Senior Securities
None

Item 4.
Mine Safety Disclosures
None

Item 5.
Other Information
None

Item 6.
Exhibits 
(a) Exhibits
 
 
 
 
 
 
Camden Property Trust 2018 Share Incentive Plan (Incorporated herein by reference to Exhibit 99.1 to Form 8-K filed by Camden Property Trust on May 17, 2018 (File No. 1-12110).)
 
 
 
 
Camden Property Trust 2018 Employee Share Purchase Plan (Incorporated herein by reference to Exhibit 99.2 to Form 8-K filed by Camden Property Trust on May 17, 2018 (File No. 1-12110).)
 
 
 
 
Certification pursuant to Rule 13a-14(a) of Chief Executive Officer dated August 3, 2018
 
 
 
Certification pursuant to Rule 13a-14(a) of Chief Financial Officer dated August 3, 2018
 
 
 
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002
 
 
*101.INS
 
XBRL Instance Document
 
 
*101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
*101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
*101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
*101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
*101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
*
Filed herewith.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
 
CAMDEN PROPERTY TRUST
 
 
/s/ Michael P. Gallagher
 
August 3, 2018
Michael P. Gallagher
 
Date
Senior Vice President – Chief Accounting Officer
 
 


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Exhibit Index 
Exhibit
 
Description of Exhibits
 
 
 
Camden Property Trust 2018 Share Incentive Plan (Incorporated herein by reference to Exhibit 99.1 to Form 8-K filed by Camden Property Trust on May 17, 2018 (File No. 1-12110).)
 
 
 
 
Camden Property Trust 2018 Employee Share Purchase Plan (Incorporated herein by reference to Exhibit 99.2 to Form 8-K filed by Camden Property Trust on May 17, 2018 (File No. 1-12110).)
 
 
 
 
Certification pursuant to Rule 13a-14(a) of Chief Executive Officer dated August 3, 2018
 
 
 
Certification pursuant to Rule 13a-14(a) of Chief Financial Officer dated August 3, 2018
 
 
 
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002
 
 
*101.INS
 
XBRL Instance Document
 
 
*101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
*101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
*101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
*101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
*101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 *
Filed herewith.



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