<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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 (I.R.S. Employer Identification
Incorporation or Organization) Number)
3200 Southwest Freeway, Suite 1500, Houston, Texas 77027
(Address of Principal Executive Offices) (Zip Code)
(713) 964-3555
(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 [X] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of November 10, 1997, there were 31,742,968 shares of Common Shares of
Beneficial Interest, $0.01 par value outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAMDEN PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Real estate assets, at cost:
Land $ 181,675 $ 86,673
Buildings and improvements 1,115,684 523,325
Projects under development, including land 28,481 36,547
Investment in joint ventures 16,165
------------ ------------
1,342,005 646,545
Less: accumulated depreciation (87,014) (56,369)
------------ ------------
1,254,991 590,176
Accounts receivable - affiliates 848 148
Notes receivable - affiliates 3,325 3,550
Deferred financing and other assets, net 6,947 4,847
Cash and cash equivalents 3,885 2,366
Restricted cash - escrow deposits 3,712 2,423
------------ ------------
Total assets $ 1,273,708 $ 603,510
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable:
Unsecured $ 284,405 $ 185,800
Secured 155,792 58,382
Accounts payable 8,219 7,512
Accrued real estate taxes 18,047 13,246
Accrued expenses and other liabilities 14,753 7,675
Distributions payable 16,752 7,765
------------ ------------
Total liabilities 497,968 280,380
Minority Interest in Operating Partnership 64,028
7.33% Convertible Subordinated Debentures 6,710 27,702
Shareholders' Equity:
Preferred shares of beneficial interest
Common shares of beneficial interest 318 165
Additional paid-in capital 777,755 348,339
Distributions in excess of net income (67,630) (49,515)
Unearned restricted share awards (5,441) (3,561)
------------ ------------
Total shareholders' equity 705,002 295,428
------------ ------------
Total liabilities and shareholders' equity $ 1,273,708 $ 603,510
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
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CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------- -----------------------
1997 1996 1997 1996
-------- -------- --------- --------
<S> <C> <C> <C> <C>
REVENUES
Rental income $ 53,378 $ 27,066 $ 132,416 $ 78,167
Other property income 2,893 1,239 6,491 3,401
-------- -------- --------- --------
Total property income 56,271 28,305 138,907 81,568
Equity in income of joint ventures 368 804
Fee and asset management 219 313 482 640
Other income 81 150 290 381
-------- -------- --------- --------
Total revenues 56,939 28,768 140,483 82,589
-------- -------- --------- --------
EXPENSES
Property operating and maintenance 20,889 10,716 49,544 30,356
Real estate taxes 5,769 3,357 15,436 9,905
General and administrative 1,048 618 3,088 1,938
Interest 7,466 4,747 20,742 12,984
Depreciation and amortization 12,895 6,279 31,425 17,447
-------- -------- --------- --------
Total expenses 48,067 25,717 120,235 72,630
-------- -------- --------- --------
INCOME BEFORE LOSS ON SALES OF PROPERTIES, LOSSES RELATED
TO EARLY RETIREMENT OF DEBT AND MINORITY INTEREST 8,872 3,051 20,248 9,959
LOSS ON SALES OF PROPERTIES (250) (55)
LOSSES RELATED TO EARLY RETIREMENT OF DEBT (286) (5,351)
-------- -------- --------- --------
INCOME BEFORE MINORITY INTEREST 8,872 2,801 19,962 4,553
MINORITY INTEREST IN OPERATING PARTNERSHIP (612) (1,209)
-------- -------- --------- --------
NET INCOME 8,260 2,801 18,753 4,553
PREFERRED SHARE DIVIDENDS (4)
-------- -------- --------- --------
NET INCOME TO COMMON SHAREHOLDERS $ 8,260 $ 2,801 $ 18,753 $ 4,549
======== ======== ========= ========
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ 0.27 $ 0.19 $ 0.76 $ 0.31
DISTRIBUTIONS DECLARED PER COMMON SHARE $ 0.490 $ 0.475 $ 1.470 $ 1.425
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON 30,718 14,695 24,733 14,573
EQUIVALENT SHARES OUTSTANDING
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE> 4
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 18,753 $ 4,553
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 31,425 17,447
Equity in income of joint ventures, net of cash received (147)
Loss on sales of properties 55
Losses related to early retirement of debt 286 5,351
Minority interest in Operating Partnership 1,209
Accretion of discount on unsecured notes payable 105 46
Net change in operating accounts (14,051) (3,872)
--------- ---------
Net cash provided by operating activities 37,580 23,580
CASH FLOW FROM INVESTING ACTIVITIES
Cash of Paragon at acquisition 12,400
Increase in real estate assets (62,583) (56,738)
Proceeds from sales of properties 23,013
Decrease (increase) in affiliate notes receivable 6,220 (209)
Decrease in investment in joint ventures 4,624
Other (480) 4
--------- ---------
Net cash used in investing activities (39,819) (33,930)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common shares 142,643
Net decrease in credit facility and short-term notes (1,500) (41,783)
Proceeds from notes payable 100,000 106,883
Losses related to early retirement of debt (286) (5,351)
Repayment of notes payable (37,479) (26,947)
Repayment of Paragon debt, including line of credit (160,617)
Distributions to common shareholders and minority interests (38,762) (20,471)
Payment of loan costs (920) (1,549)
Other 679 1,262
--------- ---------
Net cash provided by financing activities 3,758 12,044
--------- ---------
Net increase in cash and cash equivalents 1,519 1,694
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,366 236
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,885 $ 1,930
========= =========
SUPPLEMENTAL INFORMATION
Cash paid for interest, net of interest capitalized $ 21,362 $ 13,558
Interest capitalized $ 2,605 $ 3,389
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Acquisition of Paragon, net of cash acquired:
Fair value of assets acquired $ 648,203
Liabilities assumed 332,961
Common shares issued 262,370
Fair value of minority interest 65,272
Conversion of 7.33% subordinated debentures to common shares, net $ 20,385 $ 3,173
Value of shares issued under benefit plans $ 3,388 $ 1,960
Conversion of preferred shares and dividends $ 1,954
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE> 5
CAMDEN PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited financial information has been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management, all
adjustments and eliminations, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of Camden Property Trust as
of September 30, 1997 and the results of operations for the three and nine
months ended September 30, 1997 and 1996, and cash flows for the nine months
ended September 30, 1997 and 1996 have been included. The results of operations
for such interim periods are not necessarily indicative of the results for the
full year.
Business
Camden Property Trust and its subsidiaries ("Camden" or the "Company")
report as a single business segment with activities related to the ownership,
development, acquisition, management, marketing and disposition of multifamily
apartment communities in the Southwest, Southeast and Midwest regions of the
United States. At September 30, 1997, the Company owned interests in, operated
or was developing 103 multifamily properties containing 35,460 apartment units
located in Texas, Arizona, Florida, Kentucky, Missouri, and North Carolina. Two
of the Company's multifamily properties containing 732 apartment units were
under development at September 30, 1997 in Dallas. Three of the Company's newly
developed multifamily properties containing 1,002 apartment units were in
various stages of lease-up at September 30, 1997 in Houston, Phoenix and
Greensboro. The Company has several additional sites which it intends to develop
into multifamily apartment communities. Additionally, the Company manages 4,673
apartment units in 16 properties for third-parties and non-consolidated
affiliates.
Acquisition of Paragon Group, Inc.
On April 15, 1997, the Company acquired through a tax-free merger
Paragon Group, Inc. ("Paragon"), a publicly-traded Dallas-based multifamily real
estate investment trust. The acquisition increased the size of the Company's
portfolio from 53 to 103 multifamily properties (after combining the operations
of seven of the acquired properties with adjacent properties), and from 19,389
to 35,364 apartment units at the date of acquisition (the "Paragon
Acquisition"). As provided in the Plan of Merger dated December 16, 1996, each
share of Paragon common stock outstanding on April 15, 1997 was exchanged for
0.64 shares of the Company's common shares (based on a share price of $17.75 per
share of Paragon common stock and $27.75 per share of Camden common shares). The
Company issued 9,466,346 shares in exchange for all of the outstanding shares of
Paragon common stock. Subsequent to the acquisition, 2,352,161 limited
partnership units ("OP Units") in Camden Operating, L.P. (the "Operating
Partnership") were outstanding. Approximately $296 million of Paragon debt, at
fair value, was assumed in the acquisition.
The Paragon Acquisition has been recorded under the purchase method of
accounting. In accordance with generally accepted accounting principles, the
purchase price was preliminarily allocated to the net assets acquired based on
their estimated fair values. Such estimates may be revised at a later date. No
goodwill is expected to be recorded in this transaction. The accompanying
consolidated statements of operations include the operating results
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<PAGE> 6
of Paragon since April 1, 1997, the effective date of the Paragon Acquisition
for accounting purposes. Pro forma unaudited consolidated operating results of
the Company for the nine months ended September 30, 1997 and 1996, assuming that
the Paragon Acquisition had been made as of January 1, 1996, are summarized
below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Total revenues $ 162,704 $ 157,317
Net income to common shareholders $ 19,727 $ 3,782
Net income per common and common equivalent share $ 0.71 $ 0.16
</TABLE>
The non-residential operations of Paragon Group Property Services, Inc.,
a Paragon affiliate which was sold on June 30, 1996, and the related gain from
the sale have been adjusted out of the nine months ended September 30, 1996 pro
forma amounts. These pro forma results have been prepared for informational
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the Paragon Acquisition been completed on
the date indicated, nor are they necessarily indicative of future operations.
Operating Partnership
Camden owns the assets acquired from Paragon, comprising approximately
44.8% of Camden's multifamily apartment units for the third quarter of 1997, in
the Operating Partnership in which Camden holds 79.1% of the OP Units, and the
sole 1% general partner interest. The remaining 19.9% of the Operating
Partnership interests are held by former officers, directors and investors in
Paragon, who collectively owned 2,346,640 OP Units at September 30, 1997. Each
OP Unit is convertible into one common share of Camden or cash at the election
of the Company. Holders of OP Units are not entitled to rights as shareholders
of the Company prior to redemption of their OP Units. No member of the Company's
management team owns OP Units and only two of the seven Trust Managers of the
Company own OP Units.
Camden, through its general partner interest in the Operating
Partnership, holds exclusive power over the business and affairs of the
Operating Partnership without the consent of the holders of OP Units, subject to
certain limitations. As the general partner, subject to the limitations
discussed below, Camden may engage in transactions (including transactions with
affiliates of Camden) to purchase, sell, or finance the real estate assets of
the Operating Partnership, and may borrow or lend funds, as long as such
transactions are fair and reasonable to the Operating Partnership.
As the holder of more than two-thirds of the OP Units, Camden has the
power to dissolve at any time and liquidate the Operating Partnership, and in
connection therewith sell or otherwise dispose of any part or all of the
Operating Partnership's assets. Either the sale of all or substantially all of
the assets of the Operating Partnership without liquidation of the partnership,
or a merger in which the holders of OP Units do not receive the same
consideration as Camden shareholders, requires the majority consent of holders
of OP Units (excluding OP Units held by the Company). Otherwise, Camden
generally has complete discretion to manage the Operating Partnership and its
assets without consent of the other OP Unit holders.
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<PAGE> 7
Accounting for Subsidiaries and Joint Ventures
The Company consolidates the operations and accounts of all subsidiaries
and partnerships in which its aggregate ownership is greater than 50%. Those
owned less than 50% are accounted for using the equity method. As a result of
the Paragon Acquisition, the Company now owns a substantial number of its assets
in the Operating Partnership. At September 30, 1997, the Company owned, through
its wholly-owned subsidiaries, an 80.1% interest in the Operating Partnership.
The remaining 19.9% interest, comprising 2,346,640 OP Units, is accounted for as
minority interest. In connection with the Paragon Acquisition, the Company also
obtained an ownership interest in three properties containing 1,264 apartment
units controlled through a private real estate investment trust, and interests
in three office building limited partnerships, all of which are included as
investment in joint ventures.
Dividend Declaration
On October 17, 1997, the Company paid a distribution of $0.49 per share
for the third quarter of 1997 to all holders of record of Camden's common shares
as of September 30, 1997, and paid an equivalent amount per unit to holders of
OP Units. This distribution to common shareholders and holders of OP Units
equates to an annualized dividend rate of $1.96 per share or unit. The Company
determines the amount of cash distributable from the Operating Partnership in
accordance with the partnership agreement and has distributed and intends to
continue to make distributions to the holders of OP Units in amounts equivalent
to the per share dividends paid to holders of common shares.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings
Per Share. SFAS No. 128, which is effective for periods ending after December
15, 1997, specifies the computation, presentation and disclosure requirements of
earnings per share ("EPS") and supercedes Accounting Principles Board Opinion
No. 15 ("APB No. 15"). SFAS No. 128 requires a dual presentation of basic and
diluted EPS. Basic EPS, which excludes the impact of common share equivalents,
replaces primary EPS. Diluted EPS, which utilizes the average market price per
share as opposed to the greater of the average market price per share or ending
market price per share when applying the treasury stock method in determining
common share equivalents, replaces fully diluted EPS. Pro forma basic and
diluted EPS for all historical periods presented, assuming SFAS No. 128 was
effective at the beginning of each such historical period, would not be
materially different than the presentations using APB No. 15.
In February 1997, the FASB also issued SFAS No. 129, Disclosure of
Information about Capital Structure, which establishes standards for disclosing
information about an entity's capital structure. SFAS No. 129 is effective for
periods ending after December 15, 1997. The Company believes that its
disclosures already comply with the requirements of SFAS No. 129. In June 1997,
the FASB issued SFAS No. 130, Reporting Comprehensive Income, and SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information. SFAS No.
130 establishes standards for reporting and displaying comprehensive income and
its components. SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments and related
information in interim and annual financial statements. SFAS No. 131 will not
impact the Company's financial statements as it reports as a single segment.
SFAS Nos. 130 and 131 are effective for periods beginning after December 15,
1997. Management is evaluating what, if any, additional disclosures may be
required upon the implementation of SFAS No. 130.
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<PAGE> 8
Reclassifications
Certain reclassifications have been made to amounts in prior year
financial statements to conform with current year presentations. Specifically,
direct on-site general and administrative expenses previously classified as
general and administrative expenses are now reflected as a part of property
operating and maintenance expenses, and certain components of revenues have been
reported separately.
2. NOTES PAYABLE
The following is a summary of the Company's indebtedness:
(In millions)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
--------------- --------------
<S> <C> <C>
Senior Unsecured Notes:
6-5/8% Notes, due 2001 $ 99.7 $ 99.6
Reset Notes, due 2002 75.0
7% Notes, due 2006 74.2 74.2
7.172% Medium Term Notes, due 2004 25.0
Credit facility 10.5 12.0
------- --------
284.4 185.8
Secured Notes - Mortgage loans 155.8 58.4
------- --------
Total notes payable $ 440.2 $ 244.2
======= ========
Floating rate debt included in notes payable, net of
hedging agreement $ 60.5 $
</TABLE>
The Company has a revolving $150 million unsecured line of credit (the
"Unsecured Credit Facility") which matures July 28, 2000. One year prior to
maturity, this note becomes a term loan, unless it is extended, renegotiated or
repaid. The scheduled interest rate on the loan is currently based on LIBOR plus
105 basis points or Prime plus 25 basis points. This scheduled rate is subject
to change as the Company's credit ratings change. Advances under the Unsecured
Credit Facility may be priced at the scheduled rate, or the Company may enter
into bid rate loans ("Bid Rate Loans") with participating banks at rates below
the scheduled rate. These Bid Rate Loans have terms of six months or less and
may not exceed the lesser of $75 million or the remaining amount available under
the Unsecured Credit Facility. The Unsecured Credit Facility is subject to
customary financial covenants and limitations.
As an alternative to its Unsecured Credit Facility, the Company from
time to time borrows using competitively bid unsecured short-term notes with
lenders who may or may not be a part of the Unsecured Credit Facility bank
group. Such borrowings vary in term and pricing but have the same covenants as
the Unsecured Credit Facility and are typically priced at interest rates below
those available under the Unsecured Credit Facility.
On May 9, 1997, the Company issued from its recently filed shelf
registration statement an aggregate principal amount of $75 million of its
unsecured reset notes maturing May 2002 (the "Reset Notes"). During the one-year
period ending May 11, 1998, the interest rate on the Reset Notes, which will be
reset quarterly, will equal 90-day LIBOR plus 32 basis points and interest will
be payable on a quarterly basis. After the one-year period, the
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<PAGE> 9
mode and duration of the interest rate on the Reset Notes will be reset by the
Company and a remarketing underwriter as either fixed or floating and for
durations of six months to four years. The Reset Notes are direct, senior
unsecured obligations of the Company and rank equally with all other unsecured
and unsubordinated indebtedness of the Company. The Reset Notes are redeemable
after May 11, 1998 at the option of the Company at par value. The net proceeds
to the Company from the sale of the Reset Notes were $74.8 million. The Company
used the net proceeds to reduce indebtedness incurred under the Unsecured Credit
Facility which had been used to liquidate portions of the debt assumed in the
Paragon Acquisition.
On June 20, 1997, the Company issued $25 million aggregate principal
amount of senior unsecured notes from its $196 million medium-term note shelf
registration. These fixed rate notes, due in June 2004, bear interest at the
annual rate of 7.172%, payable semiannually on March 15 and September 15. The
net proceeds were used to reduce indebtedness outstanding under short-term
unsecured notes.
On July 21, 1997, the Company completed the public sale and issuance of
4,830,000 common shares, including 630,000 shares issued to the underwriters to
satisfy over-allotments (the "July 1997 Equity Offering"), at a price of $31 per
share. Net proceeds from the July 1997 Equity Offering were used to retire
certain secured indebtedness assumed in the Paragon Acquisition and to reduce
amounts outstanding under the Unsecured Credit Facility which had been advanced
to fund recent property developments, a 96-unit apartment acquisition and other
working capital requirements. Had the July 1997 Equity Offering been completed
on the effective date of the Paragon Acquisition, the interest expense on a pro
forma basis would have been $13.5 million for the six months ended September 30,
1997. Net income to common shareholders on a pro forma basis would have been
$17.7 million or $0.57 per share for the six months ended September 30, 1997.
On July 21, 1997, Camden retired $66.7 million in mortgage loans using a
portion of the proceeds of the July 1997 Equity Offering. Including the debt
retirements made in conjunction with the July 1997 Equity Offering, the Company
has retired $160.6 million of the $296 million of debt assumed in the Paragon
Acquisition.
At September 30, 1997, the Company was party to a $25 million interest
rate hedging agreement which is scheduled to mature in July 2000. The issuing
bank has an option to extend this agreement to July 2002. The LIBOR rate is
fixed at 6.1%, resulting in a fixed rate equal to 6.1% plus the actual LIBOR
spread on the related indebtedness. This swap continues to be used as a hedge to
manage the risk of interest rate fluctuations on the Unsecured Credit Facility
and other floating rate indebtedness.
At September 30, 1997, the weighted average interest rate on total notes
payable was 7.0%.
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<PAGE> 10
3. NET CHANGE IN OPERATING ACCOUNTS
The effect of changes in the operating accounts on cash flows from
operating activities is as follows: (In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Decrease (increase) in assets:
Accounts receivable - affiliates $ 2,148 $ 16
Deferred financing and other assets, net (1,105) 410
Restricted cash - escrow deposits 1,189 760
Increase (decrease) in liabilities:
Accounts payable (5,057) (3,075)
Accrued real estate taxes 2,644 (1,385)
Accrued expenses and other liabilities (13,870) (598)
-------- --------
Net change in operating accounts $(14,051) $ (3,872)
======== ========
</TABLE>
4. PROPERTY OPERATING AND MAINTENANCE EXPENSES
Property operating and maintenance expenses included normal repairs and
maintenance totaling $4.5 million and $10.0 million for the three and nine
months ended September 30, 1997, respectively, and $2.2 million and $6.2 million
for the three and nine months ended September 30, 1996, respectively. In
addition, property operating and maintenance expenses included amounts incurred
subsequent to the initial renovation and rehabilitation periods for recurring
expenditures such as carpets, appliances and other furnishings and equipment,
which might otherwise be capitalized, totaling $1.7 million and $3.9 million for
the three and nine months ended September 30, 1997, respectively, and $0.9
million and $2.7 million for the same periods in 1996.
5. RESTRICTED SHARE AND OPTION AWARDS
During the first nine months of 1997, 128,159 restricted shares were
granted in lieu of cash compensation to certain key employees and non-employee
trust managers. The restricted shares were issued based on market value at the
date of grant and have vesting periods of up to five years. An additional
310,000 options were granted at the market value exercise price and are
exercisable in equal increments on or following each of the first three
anniversaries of the date of grant. During the second quarter of 1997, the
Company's shareholders and Trust Managers voted to amend the Company's 1993
Share Incentive Plan (the "Plan"), which resulted in an increase in the maximum
number of common shares available for issuance under the Plan to 10% of the
common shares outstanding at any time. During the nine month period ended
September 30, 1997, previously granted options for 69,064 shares became
exercisable and 58,673 restricted shares became vested. Subsequent to September
30, 1997, an additional 55,500 of restricted share awards were granted, none of
which are exercisable until October 31, 1998.
6. EMPLOYEE STOCK PURCHASE PLAN
In July 1997, the Company established and commenced an Employee Stock
Purchase Plan for all active employees, officers, and Trust Managers who have
completed one month of continuous service. Participants may elect to purchase
Camden common shares through payroll or director fee deductions and/or through
quarterly contributions. At the end of each six-month offering period, each
participant's account balance is applied to acquire common shares of the Company
at 85% of the market value, as defined, on the first or last day of the offering
period, whichever price is lower. A participant may not purchase more than
$25,000 in value of shares during any Plan Year, as defined.
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<PAGE> 11
7. CONVERTIBLE SUBORDINATED DEBENTURES
During the first nine months of 1997, debentures in the principal amount
of $21 million were converted into approximately 874,650 common shares. These
debentures were converted on or before the record date for the quarterly
dividend and the related debenture interest was forfeited by the debenture
holders in accordance with the indenture. In addition, $608,000 of unamortized
debenture issue costs were reclassified to additional paid-in capital. Had all
converted debentures converted as of the beginning of the period, net income per
common and common equivalent share would have remained at $0.27 and $0.76 per
share for the three and nine months ended September 30,1997, respectively.
8. SUBSEQUENT EVENTS
In the ordinary course of its business, the Company issues letters of
intent indicating a willingness to negotiate for the purchase or sale of
multifamily properties or development land. In accordance with the local real
estate market practice, such letters of intent are non-binding, and neither
party to the letter of intent is obligated to pursue negotiations unless and
until a definitive contract is entered into by the parties. Even if definitive
contracts are entered into, the letters of intent and resulting contracts
contemplate that such contracts will provide the purchaser with periods varying
from 25 to 180 days during which it will evaluate the properties and conduct its
due diligence and 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 that definitive contracts will be entered into
with respect to any properties covered by letters of intent or that the Company
will acquire or sell any property as to which the Company may have entered into
a definitive contract. Further, due diligence periods are frequently extended as
needed. An acquisition or sale becomes probable at the time that the due
diligence period expires and the definitive contract has not been terminated.
The Company is then at risk under an acquisition contract, but only to the
extent of any earnest money deposits associated with the contract, and is
obligated to sell under a sales contract.
The Company is currently in the due diligence period on contracts for
the purchase of land for development and the acquisition of properties. No
assurance can be made that the Company will be able to complete the negotiations
or become satisfied with the outcome of the due diligence.
Subsequent to September 30, 1997, the Company purchased, for a total of
$41 million, two properties. Chase Crossing, purchased on October 29, 1997, is
a 444-unit property located in Tampa, Florida and Longmore Estates, purchased
November 5, 1997, is a 357-unit property located in Mesa, Arizona. Furthermore,
on November 4, 1997, the Company purchased 17.7 acres in Houston on which it
intends to develop 756 units.
The Company seeks to selectively dispose of assets that are either not
in core markets, have a lower projected net operating income growth rate than
the overall portfolio, or no longer conform to the Company's operating and
investment strategies. The proceeds from these sales may be reinvested in
acquisitions or developments or used to retire debt.
-11-
<PAGE> 12
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Overview
The following discussion should be read in conjunction with all of the
financial statements and notes thereto appearing elsewhere in this report as
well as the audited financial statements appearing in the Company's 1996 Annual
Report to Shareholders. Where appropriate, comparisons are made on a dollars
per-weighted-average-unit basis in order to adjust for changes in the number of
units owned during each period. The statements contained in this report that are
not historical facts are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results may differ
materially from those included in the forward-looking statements. These
forward-looking statements involve risks and uncertainties including, but not
limited to, the following: changes in general economic conditions in the markets
that could impact demand for the Company's product and changes in financial
markets and interest rates impacting the Company's ability to meet its financing
needs and obligations.
Camden Property Trust and its subsidiaries ("Camden" or the "Company")
report as a single business segment with activities related to the ownership,
development, acquisition, management, marketing and disposition of multifamily
apartment communities in the Southwest, Southeast and Midwest regions of the
United States. At September 30, 1997, the Company owned interests in, operated
or was developing 103 multifamily properties containing 35,460 apartment units
located in Texas, Arizona, Florida, Kentucky, Missouri, and North Carolina. Two
of the Company's multifamily properties containing 732 apartment units were
under development at September 30, 1997 in Dallas (the "Development
Properties"). Three of the Company's newly developed multifamily properties
containing 1,002 apartment units were in various stages of lease-up at September
30, 1997 in Houston, Phoenix and Greensboro (the "Lease-Up Properties"). The
Company has several additional sites which it intends to develop into
multifamily apartment communities. Additionally, the Company manages 4,673
apartment units in 16 properties for third-parties and non-consolidated
affiliates.
Acquisition of Paragon Group, Inc.
On April 15, 1997, the Company acquired through a tax-free merger
Paragon Group, Inc. ("Paragon"), a publicly-traded Dallas-based multifamily real
estate investment trust. The acquisition increased the size of the Company's
portfolio from 53 to 103 multifamily properties (after combining the operations
of seven of the acquired properties with adjacent properties), and from 19,389
to 35,364 apartment units at the date of acquisition (the "Paragon
Acquisition"). As provided in the Plan of Merger dated December 16, 1996, each
share of Paragon common stock outstanding on April 15, 1997 was exchanged for
0.64 shares of the Company's common shares (based on a share price of $17.75 per
share of Paragon common stock and $27.75 per share of Camden common shares). The
Company issued 9,466,346 shares in exchange for all of the outstanding shares of
Paragon common stock. Subsequent to the acquisition, 2,352,161 limited
partnership units ("OP Units") in Camden Operating, L.P. (the "Operating
Partnership") were outstanding. Approximately $296 million of Paragon debt, at
fair value, was assumed in the acquisition.
-12-
<PAGE> 13
Property Portfolio
The Company's multifamily property portfolio, excluding land held for
development, at September 30, 1997 and December 31, 1996 is summarized as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997** DECEMBER 31, 1996
----------------------------------- -----------------------------------
Number Number of Number of Number of
of Units Properties %* Units Properties %*
----------- ------------ ------ ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Texas
Houston 7,745 20 22% 7,745 20 40%
Dallas 9,381 26 27 6,777 18 35
Austin 1,745 6 5 1,745 6 9
Other 1,585 5 4 1,585 5 8
------- ---- ---- ------ --- ----
Total Texas Properties 20,456 57 58 17,852 49 92
------- ---- ---- ------ --- ----
Arizona 1,537 4 4 1,537 4 8
Florida 6,103 17 17
Kentucky 1,142 5 3
Missouri 3,487 10 10
North Carolina 2,735 10 8
------- ---- ---- ------ --- ----
Total Properties 35,460 103 100% 19,389 53 100%
======= ==== ==== ====== === ====
</TABLE>
* Based on number of units.
** Includes three multifamily properties containing 1,264 units owned in joint
ventures.
Property Update
During the third quarter of 1997, The Park at Sugar Grove, which was
completed in the first quarter of 1997, and Park Commons and Camden Passage,
Phase II, which were acquired in the Paragon Acquisition and were completed in
the second quarter of 1997, reached stabilization. Furthermore, leasing
continued during the third quarter on three properties.
The following table sets forth information regarding these Lease-Up
Properties:
<TABLE>
<CAPTION>
Estimated
Number Cost % Leased Date of
Property and Location of Units ($ millions) at 11/05/97 Completion Estimated Stabilization
- ------------------------------------ --------- ------------- ------------ ------------------ ---------------------------
<S> <C> <C> <C> <C> <C>
The Park at Arrowhead Springs
Phoenix, AZ 288 $ 16.3 90% 1Q97 4Q97
Brassfield Park*
Greensboro, NC 336 17.1 89 2Q97 4Q97
The Park at Vanderbilt, Phase II
Houston, TX 378 24.0 76 3Q97 4Q97
------ ------
Total 1,002 $ 57.4
====== ======
</TABLE>
* Brassfield Park is owned through a joint venture acquired in the Paragon
Acquisition.
-13-
<PAGE> 14
Construction continued on The Park at Buckingham and The Park at
Centreport. The Park at Buckingham began leasing during the second quarter of
1997 and The Park at Centreport began leasing during the third quarter of 1997.
The following table sets forth information regarding the Development
Properties:
<TABLE>
<CAPTION>
Estimated
Number Cost % Leased Estimated Date
Property and Location of Units ($ millions) at 11/05/97 of Completion Estimated Stabilization
- ------------------------------------ --------- ------------- ------------ ------------------ ---------------------------
<S> <C> <C> <C> <C> <C>
The Park at Buckingham
Dallas, TX 464 $ 25.5 41% 1Q98 3Q98
The Park at Centreport
Dallas, TX 268 14.0 28 1Q98 3Q98
------ ------
Total 732 $ 39.5
====== ======
</TABLE>
Historically, the Company has staged its construction to allow leasing
and occupancy during the construction period thereby minimizing the lease-up
period following completion of construction. The Company's accounting policy
related to properties in the development and leasing phase is that all operating
expenses, excluding depreciation, associated with occupied units are expensed
against revenues generated by those units as they become occupied. All
construction and carrying costs are capitalized and reported on the balance
sheet in "Projects under development, including land" until such units are
completed. Upon completion of each building of the project, the total cost of
that building and the associated land is transferred to "Land" and "Buildings
and improvements" and the assets are depreciated over their estimated useful
lives using the straight-line method of depreciation. Upon achieving 90%
occupancy, or one year from opening the leasing office, whichever occurs first,
all units are considered operating and the Company begins expensing all items
that were previously considered as carrying costs.
Comparison of the Quarter Ended September 30, 1997 and September 30, 1996
The changes in operating results from period to period are primarily
due to the Paragon Acquisition, development of four properties aggregating 1,474
units, and an increase in net operating income generated by the stabilized
portfolio. The weighted average number of units for the third quarter of 1997
increased by 15,498 units, or 88.5%, from 17,518 to 33,016. Total operating
properties were 98 and 49 at September 30, 1997 and 1996, respectively. The
33,016 weighted average units and the 98 operating properties exclude the impact
of the Company's ownership interest in 1,264 units on three properties owned in
joint ventures.
The average rental income per unit per month increased $24 or 4.7%,
from $515 to $539 for the third quarter of 1996 and 1997, respectively. The
increase was primarily due to increased revenue growth from the stabilized real
estate portfolio and higher average rental rates on properties added to the
portfolio through the Paragon Acquisition and completion of new development
properties. Overall average occupancy was unchanged at 94.5% for the quarters
ended September 30, 1996 and 1997.
Other property income increased $1.7 million from $1.2 million to $2.9
million for the quarters ended September 30, 1996 and 1997, respectively. The
increase in other property income was due to a larger number of units owned and
in operation and from new revenue sources in cable, phone and water rebillings.
-14-
<PAGE> 15
Property operating and maintenance expenses and real estate taxes
increased $12.6 million from $14.1 million to $26.7 million, which represents an
annual increase of $16 per unit. The Company's operating expense ratios
decreased over the prior year primarily as a result of operating efficiencies
resulting from a larger portfolio together with savings in utilities and other
costs. Real estate taxes increased as a result of the Paragon Acquisition,
increases in the valuations of renovated and developed properties, and increases
in property tax rates. However, on a per unit basis, annualized taxes declined
from $767 to $699.
General and administrative expenses increased $430,000 from $618,000 to
$1.0 million, and decreased slightly as a percent of revenues from 2.1% to 1.8%.
Interest expense increased from $4.7 million to $7.5 million due to
increased indebtedness related to the Paragon Acquisition, completed
developments and renovations. The increase was partially offset by reductions in
average interest rates on the Company's debt and the equity offering that
occurred in July, 1997 (the "July 1997 Equity Offering") discussed in the
Liquidity and Capital Resources section. Interest capitalized was $891,000 and
$856,000 for the quarters ended September 30, 1997 and 1996, respectively.
Depreciation and amortization increased from $6.3 million to $12.9
million. This increase was due primarily to the Paragon Acquisition,
developments, and renovations.
Comparison of the Nine Months Ended September 30, 1997 and September 30, 1996
The changes in operating results from period to period are primarily
due to the Paragon Acquisition, development of eight properties aggregating
3,134 units, and an increase in net operating income generated by the stabilized
portfolio. The weighted average number of units for the first nine months of
1997 increased by 10,525 units, or 61.1%, from 17,219 to 27,744. Total operating
properties were 98 and 49 at September 30, 1997 and 1996, respectively. The
27,744 weighted average units and the 98 operating properties exclude the impact
of the Company's ownership interest in 1,264 units on three properties owned in
joint ventures.
The average rental income per unit per month increased $26, or 5.2%,
from $504 to $530 for the nine months ended September 30, 1996 and 1997,
respectively. The increase was primarily due to increased revenue growth from
the stabilized real estate portfolio and higher average rental rates on
properties added to the portfolio through the Paragon Acquisition and completion
of new development properties.
Other property income increased $3.1 million from $3.4 million to $6.5
million for the nine months ended September 30, 1996 and 1997, respectively. The
increase in other property income was due to a larger number of units owned and
in operation and from new revenue sources in cable, phone and water rebillings.
Property operating and maintenance expenses and real estate taxes
increased $24.7 million from $40.3 million to $65.0 million, which represents an
annual decrease of $5 per unit. The Company's operating expense ratios decreased
over the prior year primarily as a result of operating efficiencies resulting
from a larger portfolio together with savings in utilities and other costs. Real
estate taxes increased as a result of the Paragon Acquisition, increases in the
valuations of renovated and developed properties, and increases in property tax
rates.
General and administrative expenses increased $1.2 million from $1.9
million to $3.1 million, a rate consistent with the overall increase in
revenues.
-15-
<PAGE> 16
Interest expense increased from $13.0 million to $20.7 million due to
increased indebtedness related to the Paragon Acquisition, completed
developments and renovations. This increase was partially offset by reductions
in average interest rates on the Company's debt and the July 1997 Equity
Offering discussed in the Liquidity and Capital Resources section below.
Interest capitalized was $2.6 million and $3.4 million for the nine months ended
September 30, 1997 and 1996, respectively.
Depreciation and amortization increased from $17.4 million to $31.4
million. This increase was due primarily to the Paragon Acquisition,
developments, and renovations.
LIQUIDITY AND CAPITAL RESOURCES
Financial Structure
The Company intends to continue maintaining what management believes to
be a conservative capital structure by: (i) targeting a ratio of total debt to
total market capitalization of less than 50%; (ii) extending and sequencing the
maturity dates of its debt where possible; (iii) managing floating interest rate
exposure using fixed rate debt and hedging, where appropriate; (iv) borrowing on
an unsecured basis; (v) maintaining a substantial number of unencumbered assets;
and (vi) maintaining a conservative debt service coverage ratio.
On July 21, 1997, the Company completed the July 1997 Equity Offering,
which involved the $31 per share issuance of 4,830,000 common shares, including
630,000 shares issued to the underwriters to satisfy over-allotments. Net
proceeds from the July 1997 Equity Offering were used to retire certain secured
indebtedness assumed in the Paragon Acquisition and to reduce amounts
outstanding under the $150 million unsecured line of credit (the "Unsecured
Credit Facility") which had been advanced to fund recent property developments,
a 96-unit apartment acquisition and other working capital requirements.
Camden has maintained on a quarterly basis a financial structure with
no more than 40% total debt to total market capitalization since its initial
public offering in July 1993. At September 30, 1997, the Company's ratio of
total debt to total market capitalization was approximately 29.3% (based on the
closing price of $30.625 per common share of the Company on the New York Stock
Exchange composite tape on September 30, 1997). This ratio represents total
consolidated debt of the Company as a percentage of the market value of the
Company's common shares (including common shares issuable upon the conversion of
convertible securities and OP Units but excluding common shares issuable upon
exercise of outstanding options) plus total consolidated debt. The interest
coverage ratio was 3.9 and 3.0 times earnings before interest, taxes,
depreciation, and amortization ("EBITDA") for the three months ended September
30, 1997 and 1996, respectively, and 3.5 and 3.1 times EBITDA for the nine
months ended September 30, 1997 and 1996, respectively.
Liquidity
The Company intends to meet its short-term liquidity requirements
through cash flows provided by operations, the Unsecured Credit Facility, and
other short-term borrowings. The Company uses equity capital and senior
unsecured debt to refinance maturing secured debt and borrowings under its
Unsecured Credit Facility and other short-term borrowings. As of September 30,
1997, the Company had availability of $139.5 million under the Unsecured Credit
Facility. The Company has on file a universal shelf registration providing for
the issuance of up to $500 million in equity, debt, preferred or convertible
securities, of which, over $275 million remains unused. Additionally, the
Company has a $196 million medium-term note program used to provide intermediate
and long-term, unsecured publicly-traded debt financing, of which $171 million
remains unused. Finally, the Company has significant unencumbered real estate
assets which could be sold or used as collateral for financing purposes should
other sources of capital not be available. The Company considers its ability to
generate cash to be sufficient, and expects to be able to meet future operating
cash requirements and to pay distributions to shareholders and holders of OP
Units.
-16-
<PAGE> 17
On October 17, 1997, the Company paid a distribution of $0.49 per share
for the third quarter of 1997 to all holders of record of Camden's common shares
as of September 30, 1997, and paid an equivalent amount per unit to holders of
OP Units. This distribution to common shareholders and holders of OP Units
equates to an annualized dividend rate of $1.96 per share or unit. The Company
determines the amount of cash distributable from the Operating Partnership in
accordance with the partnership agreement and has distributed and intends to
continue to make distributions to the holders of OP Units in amounts equivalent
to the per share dividends paid to holders of common shares.
Financial Flexibility
The Company concentrates its growth efforts toward selective
development and acquisition opportunities in its core markets, and through the
acquisition of existing operating portfolios and development properties in
selected new markets. During the nine months ended September 30, 1997, the
Company incurred $46.6 million in development costs and $5.6 million in
acquisition costs for a property and land purchased for cash. In addition,
Camden issued 9.5 million common shares and assumed $296 million of
indebtedness, at fair value, to purchase Paragon. The Company has announced
plans to develop several additional properties at an aggregate cost of
approximately $142 million. The Company funds its developments and acquisitions
through a combination of equity capital, OP Units, debt securities, the
Unsecured Credit Facility and other short-term borrowing arrangements, and
previously has used construction and other mortgage loans. The Company also
seeks to selectively dispose of assets that are either not in core markets, have
a lower projected net operating income growth rate than the overall portfolio,
or no longer conform to the Company's operating and investment strategies. Such
sales also generate capital for reinvestment in other acquisitions and new
developments.
The Company's Unsecured Credit Facility matures July 28, 2000. One year
prior to maturity, this note becomes a term loan, unless it is extended,
renegotiated or repaid. The scheduled interest rate on the loan is currently
based on LIBOR plus 105 basis points or Prime plus 25 basis points. This
scheduled rate is subject to change as the Company's credit ratings change.
Advances under the Unsecured Credit Facility may be priced at the scheduled
rate, or the Company may enter into bid rate loans ("Bid Rate Loans") with
participating banks at rates below the scheduled rate. These Bid Rate Loans have
terms of six months or less and may not exceed the lesser of $75 million or the
remaining amount available under the Unsecured Credit Facility. The Unsecured
Credit Facility is subject to customary financial covenants and limitations.
As an alternative to its Unsecured Credit Facility, the Company from
time to time borrows using competitively bid unsecured short-term notes with
lenders who may or may not be a part of the Unsecured Credit Facility bank
group. Such borrowings vary in term and pricing but have the same covenants as
the Unsecured Credit Facility and are typically priced at interest rates below
those available under the Unsecured Credit Facility.
On May 9, 1997, the Company issued from its recently filed shelf
registration statement an aggregate principal amount of $75 million of its
unsecured reset notes maturing May 2002 (the "Reset Notes"). During the one-year
period ending May 11, 1998, the interest rate on the Reset Notes, which will be
reset quarterly, will equal 90-day LIBOR plus 32 basis points and interest will
be payable on a quarterly basis. After the one-year period, the mode and
duration of the interest rate on the Reset Notes will be reset by the Company
and a remarketing underwriter as either fixed or floating and for durations of
six months to four years. The Reset Notes are direct, senior unsecured
obligations of the Company and rank equally with all other unsecured and
unsubordinated indebtedness of the Company. The Reset Notes are redeemable after
May 11, 1998 at the option of the Company at par value. The net proceeds to the
Company from the sale of the Reset Notes were $74.8 million. The Company used
the net proceeds to reduce indebtedness incurred under the Unsecured Credit
Facility which had been used to liquidate portions of the debt assumed in the
Paragon Acquisition.
On June 20, 1997, the Company issued $25 million aggregate principal
amount of senior unsecured notes from its $196 million medium-term note shelf
registration. These fixed rate notes, due in June 2004, bear interest
-17-
<PAGE> 18
at the annual rate of 7.172%, payable semiannually on March 15 and September 15.
The net proceeds were used to reduce indebtedness outstanding under short-term
unsecured notes.
On July 21, 1997, Camden retired $66.7 million in mortgage loans using
a portion of the proceeds of the July 1997 Equity Offering. Including the debt
retirements made in conjunction with the July 1997 Equity Offering, the Company
has retired $160.6 million of the $296 million of debt assumed in the Paragon
Acquisition.
At September 30, 1997, the Company was party to a $25 million interest
rate hedging agreement which is scheduled to mature in July 2000. The issuing
bank has an option to extend this agreement to July 2002. The LIBOR rate is
fixed at 6.1%, resulting in a fixed rate equal to 6.1% plus the actual LIBOR
spread on the related indebtedness. This swap continues to be used as a hedge to
manage the risk of interest rate fluctuations on the Unsecured Credit Facility
and other floating rate indebtedness.
At September 30, 1997, the weighted average interest rate on total
notes payable was 7.0%.
FUNDS FROM OPERATIONS
Fully diluted funds from operations for the three and nine months ended
September 30, 1997 increased $12.1 million and $22.9 million, respectively, over
the same periods in 1996. Management considers funds from operations ("FFO") an
appropriate measure of performance of an equity REIT. The National Association
of Real Estate Investment Trusts ("NAREIT") currently defines FFO as net income
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property, plus
real estate depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. In addition, extraordinary or
unusual items, along with significant non-recurring events that materially
distort the comparative measure of FFO are typically disregarded in its
calculation. Fully diluted FFO assumes conversion at the beginning of the period
of all convertible securities including minority interests which are convertible
into common equity. The Company believes that in order to facilitate a clear
understanding of the consolidated historical operating results of the Company,
fully diluted FFO should be examined in conjunction with net income as presented
in the consolidated financial statements and data included elsewhere in this
report. Fully diluted FFO should not be considered as an alternative to net
income as an indication of the Company's operating performance or to net cash
provided by operating activities as a measure of the Company's liquidity.
Further, fully diluted FFO and FFO as disclosed by other REITs may not be
comparable to the Company's calculation. Camden's calculation of fully diluted
FFO for the three and nine month periods ended September 30, 1997 and September
30, 1996 follows:
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- -----------------------
1997 1996 1997 1996
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net income to common shareholders $ 8,260 $ 2,801 $ 18,753 $ 4,549
Real estate depreciation 12,648 5,978 30,644 16,765
Minority interest in Operating Partnership 612 1,209
Real estate depreciation from unconsolidated ventures 313 596
Interest on convertible subordinated debentures 130 738 559 2,301
Amortization of deferred costs on convertible debentures 13 77 77 236
Loss on sales of properties 250 55
Losses related to early retirement of debt 286 5,351
Preferred share dividends 4
-------- ------- -------- --------
Funds from operations - fully diluted $ 21,976 $ 9,844 $ 52,124 $ 29,261
======== ======= ======== ========
Weighted average number of common and common equivalent 33,428 16,471 26,978 16,409
shares outstanding - fully diluted
</TABLE>
-18-
<PAGE> 19
The Company expenses recurring capital expenditures for items such as
carpets, appliances and HVAC units as these items are replaced in their normal
course. During a renovation, many of these items may be capitalized,
particularly to the extent that an inordinate number of such items are replaced.
Non-recurring capital expenditures for such items as roof replacements are
capitalized. The Company capitalized $11.0 million and $6.9 million in the nine
months ended September 30, 1997 and 1996, respectively, of non-recurring
renovations and improvements to extend the economic lives and enhance its
multifamily properties.
INFLATION
The Company leases apartments under lease terms generally ranging from
six to thirteen months. Management believes that such short-term lease contracts
lessen the impact of inflation due to the ability to adjust rental rates to
market levels as leases expire.
-19-
<PAGE> 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Statement regarding Computation of Earnings Per Common
Share
27.1 Financial Data Schedule (filed only electronically with
the Commission)
(b) Reports on Form 8-K
Current Report on Form 8-K dated June 30, 1997 and filed with
the Commission on July 8, 1997, contained information under
Item 5 (Other Events) and Item 7 (Financial Statements, Pro
Forma Financial Information and Exhibits), and was amended by
Form 8-K/A filed with the Commission on July 18, 1997, which
contained information under Item 5 (Other Events) and Item 7
(Financial Statements, Pro Forma Financial Information and
Exhibits).
Current Report on Form 8-K dated and filed with the Commission
on July 21, 1997, contained information under Item 5 (Other
Events) and Item 7 (Financial Statements, Pro Forma Financial
Information and Exhibits).
-20-
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAMDEN PROPERTY TRUST
/s/ G. Steven Dawson November 11, 1997
- ------------------------------------ ---------------------------
G. Steven Dawson Date
Sr. Vice President of Finance,
Chief Financial Officer and Treasurer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)
-21-
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11.1 Statement regarding Computation of Earnings Per Common Share
27.1 Financial Data Schedule (filed only electronically with
the Commission)
</TABLE>
<PAGE> 1
EXHIBIT 11.1
CAMDEN PROPERTY TRUST
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS ENDED
ENDED SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SIMPLE EARNINGS PER SHARE
Weighted Average Common Shares Outstanding 30,410 14,604 24,487 14,508
======== ======== ======== ========
Simple Earnings Per Share $ 0.27 $ 0.19 $ 0.77 $ 0.31
======== ======== ======== ========
PRIMARY EARNINGS PER SHARE
Weighted Average Common Shares Outstanding 30,410 14,604 24,487 14,508
Shares Issuable from Assumed Conversion of:
Common Share Options and Awards Granted and Outstanding 308 91 246 65
-------- -------- -------- --------
Weighted Average Common Shares Outstanding, as Adjusted 30,718 14,695 24,733 14,573
======== ======== ======== ========
Primary Earnings Per Share $ 0.27 $ 0.19 $ 0.76 $ 0.31
======== ======== ======== ========
FULLY DILUTED EARNINGS PER SHARE(*)
Weighted Average Common Shares Outstanding 30,410 14,604 24,487 14,508
Shares Issuable from Assumed Conversion of:
Common Share Options and Awards Granted and Outstanding 378 150 337 107
Operating Partnership Units 2,346 1,574
Convertible Subordinated Debentures 294 1,717 580 1,794
-------- -------- -------- --------
Weighted Average Common Shares Outstanding, as Adjusted 33,428 16,471 26,978 16,409
======== ======== ======== ========
Fully Diluted Earnings Per Share $ 0.27 $ 0.22 $ 0.76 $ 0.43
======== ======== ======== ========
EARNINGS FOR SIMPLE, PRIMARY AND FULLY
DILUTED COMPUTATION:
Earnings to Common Shareholders (Simple Earnings
Per Share Computation) $ 8,260 $ 2,801 $ 18,753 $ 4,549
Dividends on Convertible Preferred Shares 4
-------- -------- -------- --------
Earnings (Primary Earnings Per Share Computation) 8,260 2,801 18,753 4,553
Minority Interest in Operating Partnership 612 1,209
Interest on Convertible Subordinated Debentures 130 738 559 2,301
Convertible Subordinated Debenture Cost Amortization 13 77 77 236
-------- -------- -------- --------
Earnings (Fully Diluted Earnings Per Share Computation) $ 9,015 $ 3,616 $ 20,598 $ 7,090
======== ======== ======== ========
</TABLE>
* Fully diluted earnings per share of beneficial interest is not dilutive and
is not presented in the Consolidated Statements of Operations.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,597
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,325,840
<DEPRECIATION> 87,014
<TOTAL-ASSETS> 1,273,708
<CURRENT-LIABILITIES> 0
<BONDS> 440,197
0
0
<COMMON> 318
<OTHER-SE> 704,684
<TOTAL-LIABILITY-AND-EQUITY> 1,273,708
<SALES> 0
<TOTAL-REVENUES> 140,483
<CGS> 0
<TOTAL-COSTS> 64,980
<OTHER-EXPENSES> 31,425
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,742
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
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