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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
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
Incorporation or Organization) Identification No.)
3 GREENWAY PLAZA, SUITE 1300
HOUSTON, TEXAS 77046
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 354-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Shares of Beneficial
Interest, $.01 par value New York Stock Exchange
7.33% Convertible Subordinated
Debentures due 2001 New York Stock Exchange
$2.25 Series A Cumulative Convertible
Preferred Shares, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether 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 registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of voting shares of beneficial interest held by
non-affiliates of the registrant was $1,029,157,584 at March 1, 1999.
The number of common shares of beneficial interest outstanding at March 1, 1999
was 42,725,791.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the year ended
December 31, 1998 are incorporated by reference in Parts I, II and IV.
Portions of the registrant's Proxy Statement in connection with its Annual
Meeting of Shareholders to be held May 13, 1999 are incorporated by reference in
Part III.
<PAGE> 2
PART I
ITEM 1. BUSINESS
INTRODUCTION
Camden Property Trust is a Houston-based real estate investment trust
("REIT") that owns, develops, acquires, manages, markets and disposes of
multifamily apartment communities in the Southwest, Southeast, Midwest and
Western regions of the United States. As of December 31, 1998, we owned
interests in and operated 149 multifamily properties containing 51,310 apartment
homes located throughout 14 core markets in nine states. These properties had a
weighted average occupancy rate of 93% for the year ended December 31, 1998.
Fourteen of our multifamily properties containing 5,658 apartment homes were
under development at December 31, 1998. We have several additional sites which
we intend to develop into multifamily apartment communities.
On April 8, 1998, Oasis Residential, Inc. ("Oasis") was merged with and into
one of our wholly-owned subsidiaries. Oasis was a REIT headquartered in Las
Vegas, Nevada whose business was the operation and development of multifamily
residential communities in Las Vegas, Denver and Southern California. The merger
increased the size of our portfolio from 100 to 152 completed multifamily
properties, and from 34,669 to 50,183 apartment homes. In this merger, each then
outstanding share of Oasis common stock was exchanged for 0.759 of a Camden
common share. Each then outstanding share of Oasis Series A Cumulative
Convertible Preferred Stock was reissued as a Camden Series A Cumulative
Convertible Preferred Share. The Camden preferred shares have comparable terms
and conditions as the Oasis preferred stock. We issued 12.4 million common
shares and 4.2 million preferred shares in the merger. We assumed approximately
$484 million of Oasis debt, at fair value, in the merger. In the merger, we
obtained a managing member interest in Oasis Martinique. The remaining interests
are exchangeable into 672,490 Camden common shares.
In connection with the merger with Oasis, on June 30, 1998, we completed a
transaction in which we formed Sierra-Nevada Multifamily Investments, LLC. The
other member of Sierra-Nevada is a private limited liability company. We
retained a 20% interest in Sierra-Nevada. In this transaction, we transferred 19
apartment communities previously owned by Oasis containing 5,119 apartment homes
located in Las Vegas for an aggregate of $248 million. This transaction was
funded with capital invested by the members of Sierra-Nevada, the assumption of
$9.9 million of existing nonrecourse indebtedness, the issuance of 17
nonrecourse cross collateralized and cross defaulted loans totaling $180 million
and the issuance of two nonrecourse second lien mortgages totaling $7 million.
We used the net proceeds from this transaction to reduce our outstanding debt by
$124 million, including the $9.9 million of existing indebtedness noted above,
and set aside $112 million into an escrow account which was used to complete
tax-free exchange property acquisitions, retire debt and repurchase common
shares. We did not record a book gain or loss as a result of this transaction.
We continue to provide property management services for these assets.
On April 15, 1997, we acquired through a tax-free merger, Paragon Group,
Inc. ("Paragon"), a Dallas-based multifamily REIT. The acquisition increased the
size of our portfolio from 53 to 103 multifamily properties, and from 19,389 to
35,364 apartment homes. Each share of Paragon common stock outstanding on April
15, 1997 was exchanged for 0.64 of a Camden common share. In this transaction,
we issued 9.5 million common shares, 2.4 million limited partnership units in
Camden Operating, L.P. and assumed approximately $296 million of Paragon debt at
fair value.
At December 31, 1998, we had 1,773 employees. Our headquarters are located
at 3 Greenway Plaza, Suite 1300, Houston, Texas 77046 and our telephone number
is (713) 354-2500.
OPERATING STRATEGY
We believe that producing consistent earnings growth and developing a
strategy for selective investment in favorable markets are crucial factors to
our success. We rely heavily on our sophisticated property management
capabilities and innovative operating strategies in our efforts to produce
consistent earnings growth.
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Sophisticated Property Management. We believe the depth of our organization
enables us to deliver quality services, thereby promoting resident satisfaction
and improving resident retention, which reduces operating expenses. We manage
our properties utilizing a staff of professionals and support personnel,
including certified property managers, experienced apartment managers and
leasing agents, and trained apartment maintenance technicians. Our on-site
personnel are trained to deliver high quality services to their residents. We
attempt to motivate our on-site employees through incentive compensation
arrangements based upon the net operating income produced at their property, as
well as rental rate increases and the level of lease renewals achieved.
Innovative Operating Strategies. We believe an intense focus on operations
is necessary to realize consistent, sustained earnings growth. Ensuring resident
satisfaction, increasing rents as market conditions allow, maximizing rent
collections, maintaining property occupancy at optimal levels and controlling
operating costs comprise our principal strategies to maximize property net
operating income. Lease terms are generally staggered based on vacancy exposure
by apartment type so that lease expirations are better matched to each
property's seasonal rental patterns. We offer leases ranging from six to
thirteen months, with individual property marketing plans structured to respond
to local market conditions. In addition, we conduct ongoing customer service
surveys to ensure we respond timely to residents changing needs and to ensure
that residents retain a high level of satisfaction.
New Development and Acquisitions. We believe we are well positioned in our
markets and have the expertise to take advantage of both development and
acquisition opportunities. This dual capability, combined with what we believe
is a conservative financial structure, allows us to concentrate our growth
efforts towards selective development alternatives and acquisition
opportunities.
Selective development of new apartment properties in our core markets will
continue to be important to the growth of our portfolio for the next several
years. We use experienced on-site construction superintendents, operating under
the supervision of project managers and senior management, to control the
construction process. All development decisions are made from our corporate
office. Risks inherent to developing real estate include zoning changes and
environmental matters. There is also the risk that certain assumptions
concerning economic conditions may change during the development process. We
believe that we understand and effectively manage the risks associated with
development and that the risks of new development are justified by higher
potential yields.
We plan to continue diversification of our investments, both geographically
and in the number of apartment homes and selection of amenities offered. Our
operating properties have an average age of nine years (calculated on a basis of
investment dollars). We believe that the physical improvements we have made at
our acquired properties, such as new or enhanced landscaping design, new or
upgraded amenities and redesigned building structures, coupled with a strong
focus on property management and marketing, has resulted in attractive yields on
acquired properties.
Dispositions. To generate consistent earnings growth, we seek to
selectively dispose of properties and redeploy capital if we determine a
property cannot meet long-term earnings growth expectations. The $275.5 million
in net proceeds received from asset disposals during 1998, including the joint
venture investment in Sierra-Nevada, were reinvested in acquisitions and
developments and used to retire debt and repurchase common shares.
Environmental Matters. Under various federal, state and local laws,
ordinances and regulations, we are liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in our properties.
These laws often impose liability without regard to whether we knew of, or were
responsible for, the presence of the hazardous or toxic substances. All of our
properties have been subjected to Phase I site assessments or similar
environmental audits to determine if there is a likelihood of contamination from
either on- or off-site sources. These audits have been carried out in accordance
with accepted industry practices. We have also conducted limited subsurface
investigations and tested for radon and lead-based paint where such procedures
have been recommended by our consultants. We cannot assure you that existing
environmental studies reveal all environmental liabilities or that any prior
owner did not create any material environmental condition not know to us. The
costs of investigation, remediation or removal of hazardous substances may be
substantial. If hazardous or toxic substances are present on a property, or if
we fail to properly remediate such substances, our ability to sell or rent such
property or to borrow using such property as collateral may be adversely
affected.
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Insurance. We carry comprehensive liability, fire, flood, extended coverage
and rental loss insurance on our properties, which we believe is of the type and
amount customarily obtained on real property assets. We intend to obtain similar
coverage for properties we acquire in the future. However, there are certain
types of losses, generally of a catastrophic nature, such as losses from floods
or earthquakes, that may be subject to limitations in certain areas. Our board
exercises its discretion in determining amounts, coverage limits and
deductibility provisions of insurance, with a view to maintaining appropriate
insurance on our investments at a reasonable cost and on suitable terms. If we
suffer a substantial loss, our insurance coverage may not be sufficient to pay
the full current market value or current replacement cost of our lost
investment. Inflation, changes in building codes and ordinances, environmental
considerations and other factors also might make it infeasible to use insurance
proceeds to replace a property after it has been damaged or destroyed.
MARKETS AND COMPETITION
Our portfolio consists of middle to upper market apartment properties. We
target acquisitions and developments in selected high-growth markets. Since our
initial public offering, we have diversified into other markets in the Southwest
region and into the Southeast, Midwest and Western regions of the United States.
By combining acquisition, renovation and development capabilities, we believe we
are able to better respond to changing conditions in each market, thereby
reducing market risk and allowing us to take advantage of opportunities as they
arise.
There are numerous housing alternatives that compete with our properties in
attracting residents. Our properties compete directly with other multifamily
properties and single family homes that are available for rent in the markets in
which our properties are located. Our properties also compete for residents with
the new and existing owned-home market. The demand for rental housing is driven
by economic and demographic trends. Recent trends in the economics of renting
versus home ownership indicate an increasing demand for rental housing in
certain markets, despite relatively low residential mortgage interest rates.
Rental demand should be strong in areas anticipated to experience in-migration,
due to the younger ages that characterize movers as well as the relatively high
cost of home ownership in higher growth areas.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
We have made statements in this report that are "forward-looking" in that
they do not discuss historical fact, but instead note future expectations,
projections, intentions or other items relating to the future. These
forward-looking statements include those made in the documents incorporated by
reference in this report.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other facts that may cause our actual results or performance
to differ materially from those contemplated by the forward-looking statements.
Many of those factors are noted in conjunction with the forward-looking
statements in the text. Other important factors that could cause actual results
to differ include:
1. The results of our efforts to implement our property development
strategy.
2. The effect of economic conditions.
3. Failure to qualify as a real estate investment trust.
4. The costs of our capital.
5. Actions of our competitors and our ability to respond to those
actions.
6. Changes in government regulations, tax rates and similar matters.
7. Environmental uncertainties and natural disasters.
8. Unexpected Year 2000 problems.
9. Other risks detailed in our other SEC reports or filings.
Given these uncertainties, you should not place undue reliance on these
forward-looking statements. These forward-looking statements represent our
estimates and assumptions only as of the date of this report.
<PAGE> 5
ITEM 2. PROPERTIES
THE PROPERTIES
The Company's properties typically consist of two- and three-story
buildings in a landscaped setting and provide residents with a variety of
amenities. Most of the properties have, or are expected to have, one or more
swimming pools and a clubhouse and many have whirlpool spas, tennis courts and
controlled-access gates. Many of the apartment homes offer additional features
such as fireplaces, vaulted ceilings, microwave ovens, covered parking,
icemakers, washers and dryers and ceiling fans. The 149 properties, which we
owned interests in and operated at December 31, 1998, average 838 square feet of
living area.
OPERATING PROPERTIES
For the year ended December 31, 1998, no single operating property
accounted for greater than 3.2% of our total revenues. The operating properties
had a weighted average occupancy rate of 93.0% and 94.0% in 1998 and 1997,
respectively. Resident lease terms generally range from six to thirteen months
and usually require security deposits. One hundred twenty-six of our operating
properties have over 200 apartment homes, with the largest having 894 apartment
homes. Our operating properties were constructed and placed in service as
follows:
Year Placed in Service Number of Properties
------------------------------ ------------------------------
1993 - 1998 40
1988 - 1992 26
1983 - 1987 53
1978 - 1982 19
1973 - 1977 7
1967 - 1972 4
Property Table
The following table sets forth information with respect to our operating
properties at December 31, 1998.
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OPERATING PROPERTIES
<TABLE>
<CAPTION>
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December 1998 Avg.
Mo. Rental Rates
------------------------
Number of Year Placed Average Apartment 1998 Average Per
PROPERTY AND LOCATION Apartments in Service Size (Sq. Ft.) Occupancy (1) Apartment Per Sq. Ft.
- ---------------------------------------- --------------- -------------- -------------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ARIZONA
PHOENIX
Arrowhead Springs, The Park at 288 1997 925 88 % $ 704 $ 0.76
Fountain Palms, The Park at (2) 192 1986/1996 1,050 87 703 0.67
Scottsdale Legacy 428 1996 1,067 90 893 0.84
Towne Center, The Park at (3) 240 1998 871 85 707 0.81
Vista Valley, The Park at 357 1986 923 90 703 0.76
TUCSON
Eastridge 456 1984 559 91 446 0.80
Oracle Villa 365 1974 1,026 90 687 0.67
CALIFORNIA
ORANGE COUNTY
Martinique 713 1986 795 94 1,009 1.27
Parkside (4) 421 1972 835 61 924 1.11
Sea Palms 138 1990 891 97 1,115 1.25
COLORADO
DENVER
Centennial, The Park at 276 1985 744 96 715 0.96
Deerwood, The Park at 342 1996 1,141 95 1,093 0.96
Denver West, The Park at (5) 321 1997 1,012 96 1,033 1.02
Lakeway, The Park at 451 1997 919 95 953 1.04
Park Place 224 1985 748 95 706 0.94
Wexford, The Park at 358 1986 810 95 750 0.93
FLORIDA
ORLANDO
Grove, The 232 1973 677 97 537 0.79
Landtree Crossing 220 1983 748 95 594 0.79
Renaissance Pointe 272 1996 940 95 793 0.84
Riverwalk I & II 552 1984/1986 747 92 552 0.74
Sabal Club (2) 436 1986 1,077 91 845 0.78
Vineyard, The (6) 526 1990/1991 824 97 669 0.81
TAMPA/ST. PETERSBURG
Chase Crossing 444 1986 1,223 88 784 0.64
Chasewood 247 1985 704 95 548 0.78
Dolphin/Lookout Pointe 832 1987/1989 748 94 646 0.86
Heron Pointe 276 1996 942 95 824 0.88
Island Club I & II 484 1983/1985 722 95 533 0.74
Live Oaks (2) 770 1990 1,093 89 743 0.68
Mallard Pointe I & II 688 1982/1983 728 93 573 0.79
Marina Pointe Village (9) 408 1997 927 89 795 0.86
Parsons Run 228 1986 728 97 572 0.78
Schooner Bay 278 1986 728 95 636 0.87
Summerset Bend 368 1984 771 94 597 0.77
KENTUCKY
LOUISVILLE
Copper Creek 224 1987 732 92 623 0.85
Deerfield 400 1987/1990 746 89 625 0.84
Glenridge 138 1990 916 89 735 0.80
Post Oak 126 1981 847 92 586 0.69
Sundance 254 1975 682 92 533 0.78
MISSOURI
KANSAS CITY
Camden Passage I & II 596 1989/1997 832 95 695 0.83
ST. LOUIS 92
Cedar Ridge (2) 420 1986 852 96 550 0.65
Cove at Westgate, The 276 1990 828 93 846 1.02
Knollwood I & II 608 1981/1985 722 91 534 0.74
Spanish Trace 372 1972 1,158 88 714 0.62
Tempo 304 1975 676 94 502 0.74
Westchase 160 1986 945 89 849 0.90
Westgate I & II (4) 591 1973/1980 947 92 741 0.78
NEVADA
LAS VEGAS
Oasis Bay (5) 128 1990 862 96 717 0.82
Oasis Bel Air I & II 528 1988/1995 943 94 670 0.71
Oasis Breeze 320 1989 846 95 673 0.80
</TABLE>
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OPERATING PROPERTIES (CONTINUED)
<TABLE>
<CAPTION>
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December 1998 Avg.
Mo. Rental Rates
------------------------
Number of Year Placed Average Apartment 1998 Average Per
PROPERTY AND LOCATION Apartments in Service Size (Sq. Ft.) Occupancy (1) Apartment Per Sq. Ft.
- ----------------------------------------- ------------ --------------- ------------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Oasis Canyon 200 1995 987 92 % $ 776 $ 0.79
Oasis Cliffs 376 1988 936 92 733 0.78
Oasis Club 320 1989 896 95 711 0.79
Oasis Cove 124 1990 898 97 680 0.76
Oasis Crossings (5) 72 1996 983 90 752 0.77
Oasis Del Mar 560 1995 986 94 801 0.81
Oasis Emerald (5) 132 1988 873 94 642 0.74
Oasis Gateway (5) 360 1997 1,146 92 850 0.74
Oasis Glen 113 1994 792 98 686 0.88
Oasis Greens 432 1990 892 93 702 0.79
Oasis Harbor 336 1996 1,008 94 785 0.78
Oasis Heights 240 1989 849 93 659 0.78
Oasis Heritage (5) 720 1986 950 88 604 0.64
Oasis Hills 184 1991 579 95 507 0.88
Oasis Island (5) 118 1990 901 93 651 0.72
Oasis Landing (5) 144 1990 938 94 694 0.74
Oasis Meadows (5) 383 1996 1,031 89 782 0.76
Oasis Palms (5) 208 1989 880 96 664 0.75
Oasis Paradise 624 1991 905 93 743 0.82
Oasis Pearl (5) 90 1989 930 95 671 0.72
Oasis Pines 315 1997 1,005 91 795 0.79
Oasis Place (5) 240 1992 440 94 440 1.00
Oasis Plaza (5) 300 1976 820 95 603 0.74
Oasis Pointe 252 1996 985 95 749 0.76
Oasis Ridge (5) 477 1984 391 91 432 1.10
Oasis Rose (5) 212 1994 1,025 92 719 0.70
Oasis Sands 48 1994 1,125 94 735 0.65
Oasis Springs (5) 304 1988 838 94 635 0.76
Oasis Suites (5) 409 1988 404 93 444 1.10
Oasis Summit 234 1995 1,187 94 1,063 0.90
Oasis Tiara 400 1996 1,043 95 829 0.79
Oasis Topaz 270 1978 827 90 603 0.73
Oasis View (5) 180 1983 940 93 665 0.71
Oasis Vinings (5) 234 1994 1,152 94 739 0.64
Oasis Vintage 368 1994 978 92 731 0.75
Oasis Vista (5) 408 1985 896 86 527 0.59
Oasis Winds 350 1978 807 89 598 0.74
RENO
Oasis Bluffs 450 1997 1,111 93 991 0.89
NORTH CAROLINA
CHARLOTTE
Copper Creek 208 1989 703 92 610 0.87
Eastchase 220 1986 698 91 569 0.82
Habersham Pointe 240 1986 773 91 646 0.84
Overlook, The (5) 220 1985 754 93 665 0.88
Park Commons 232 1997 859 92 726 0.84
Pinehurst 407 1967 1,147 90 758 0.66
Timber Creek 352 1984 706 90 606 0.86
GREENSBORO
Brassfield Park (5) 336 1997 889 94 713 0.80
Glen, The 304 1980 662 88 555 0.84
River Oaks 216 1985 795 90 626 0.79
TEXAS
AUSTIN
Autumn Woods 283 1984 644 94 566 0.88
Calibre Crossing 183 1986 705 98 607 0.86
Huntingdon, The 398 1995 903 96 785 0.87
Quail Ridge 167 1984 859 97 672 0.78
Ridgecrest 284 1995 851 95 753 0.88
South Oaks 430 1980 705 94 589 0.83
CORPUS CHRISTI
Breakers, The 288 1996 861 92 757 0.88
</TABLE>
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OPERATING PROPERTIES (CONTINUED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
December 1998 Avg.
Mo. Rental Rates
------------------------
Number of Year Placed Average Apartment 1998 Average Per
PROPERTY AND LOCATION Apartments in Service Size (Sq. Ft.) Occupancy (1) Apartment Per Sq. Ft.
- ----------------------------------------- ------------ ---------------- ------------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Miramar I, II & III (7) 300 1994/1995/1998 708 89% $ 789 $ 1.11
Potters Mill 344 1986 775 91 597 0.77
Waterford, The 580 1976/1980 767 91 521 0.68
DALLAS/FORT WORTH
Addison, The Park at 456 1996 942 92 873 0.93
Buckingham, The Park at (8) 464 1997 919 93 803 0.87
Centreport, The Park at (8) 268 1997 910 96 808 0.89
Chesapeake 128 1982 912 96 724 0.79
Cottonwood Ridge 208 1985 829 95 575 0.69
Emerald Valley 516 1986 743 95 657 0.88
Emerald Village 304 1987 713 94 616 0.86
Glen Arbor 320 1980 666 98 505 0.76
Glen Lakes 424 1979 877 95 746 0.85
Highland Trace 160 1985 816 94 657 0.80
Highpoint (5) 708 1985 835 95 640 0.77
Ivory Canyon 602 1986 548 96 538 0.98
Los Rios 286 1992 772 94 778 1.01
Nob Hill 486 1986 642 95 516 0.80
North Dallas Crossing I & II 446 1985 730 93 623 0.85
Oakland Hills 476 1985 853 97 601 0.70
Pineapple Place 256 1983 652 93 586 0.90
Randol Mill Terrace 340 1984 848 96 581 0.69
Shadow Lake 264 1984 733 92 573 0.78
Stone Creek 240 1995 831 92 787 0.95
Stone Gate 276 1996 871 93 814 0.94
Towne Centre Village 188 1983 735 97 565 0.77
Towne Crossing, The Place at 442 1984 772 97 570 0.74
Valley Creek Village 380 1984 855 97 639 0.75
Valley Ridge 408 1987 773 96 612 0.79
Westview 335 1983 697 95 593 0.85
EL PASO
La Plaza 129 1969 997 95 582 0.58
HOUSTON
Brighton Place 282 1978 749 97 558 0.74
Cambridge Place 336 1979 771 97 574 0.75
Crossing, The 366 1982 762 96 563 0.74
Driscoll Place 488 1983 708 95 467 0.66
Eagle Creek 456 1984 639 97 564 0.88
Jones Crossing 290 1982 748 97 563 0.75
Roseland 671 1982 726 96 554 0.75
Southpoint 244 1981 730 93 568 0.78
Stonebridge 204 1993 845 97 777 0.92
Sugar Grove, The Park at 380 1997 917 94 810 0.88
Vanderbilt I & II, The Park at 894 1996/1997 863 96 993 1.15
Wallingford 462 1980 787 95 589 0.75
Wilshire Place 536 1982 761 95 562 0.74
Woodland Park 288 1995 866 96 789 0.91
Wyndham Park 448 1978/1981 797 98 506 0.63
========= =============== ============ ========= ===========
Total 51,310 838 93% $ 681 $ 0.81
========= =============== ============ ========= ===========
</TABLE>
(1) Represents average physical occupancy for the year, except as noted below.
(2) Acquisition property - average occupancy calculated from acquisition date
through year-end.
(3) Property under lease-up at December 31, 1998. Occupancy percentage listed
is as of March 1, 1999, and is excluded from the December 31, 1998 average
physical occupancy calculation.
(4) Property under renovation during 1998, which affected occupancy levels
during this period. Occupancy percentage listed is as of March 1, 1999, and
is excluded from the December 31, 1998 average physical occupancy
calculation.
(5) Properties owned through joint venture investments.
(6) Property combined with an adjacent property, The Reserve, in 1998.
(7) Miramar is a student housing project for Texas A&M at Corpus Christi.
Average occupancy includes summer which is normally subject to high
vacancies.
(8) Development property - average occupancy calculated from date at which
occupancy exceeded 90% through year-end.
(9) Property acquired during 1998 while still under lease-up. Occupancy
percentage listed is as of March 1, 1999, and is excluded from the December
31, 1998 average physical occupancy calculation.
<PAGE> 9
OPERATING PROPERTY UNDER LEASE-UP
The operating property under lease-up table is incorporated herein by
reference from page 22 of the Company's Annual Report to Shareholders for the
year ended December 31, 1998, which page is filed as Exhibit 13.1 hereto.
DEVELOPMENT PROPERTIES
The total budgeted cost of the development properties is approximately
$400.1 million, with a remaining cost to complete, as of December 31, 1998, of
approximately $217.8 million. There can be no assurance that our budget, leasing
or occupancy estimates will be attained for the development properties or that
their performance will be comparable to that of our existing portfolio.
Development Property Table
The development property table is incorporated herein by reference from
page 22 of our Annual Report to Shareholders for the year ended December 31,
1998, which is filed as Exhibit 13.1.
Management believes that we possess the development capabilities and
experience to provide a continuing source of portfolio growth. In making
development decisions, management considers a number of factors, including the
size of the property, the season in which leasing activity will occur and the
extent to which delivery of the completed apartment homes will coincide with
leasing and occupancy of such apartment homes (which is dependent upon local
market conditions). In order to pursue a development opportunity, we currently
require a minimum initial stabilized target return of 9.5%-10.5%. This minimum
target return is based on projected market rents and projected stabilized
expenses, considering the market and the nature of the prospective development.
ITEM 3. LEGAL PROCEEDINGS
Prior to our merger with Oasis, Oasis had been contacted by certain
regulatory agencies with regard to alleged failures to comply with the Fair
Housing Amendments Act as it pertained to nine properties (seven of which we
currently own) constructed for first occupancy after March 31, 1991. On February
1, 1999, the Justice Department filed a lawsuit against us in the United States
District Court for the District of Nevada alleging (1) that the design and
construction of these properties violates the Fair Housing Act and (2) that the
Company, through the merger with Oasis, has discriminated in the rental of
dwellings to persons because of handicap. The complaint requests an order that
(i) declares that the defendants' policies and practices violate the Fair
Housing Act; (ii) enjoins the Company from (a) failing or refusing, to the
extent possible, to bring the dwelling units and public use and common use areas
at these properties and other covered units that it has designed and/or
constructed into compliance with the Fair Housing Act, (b) failing or refusing
to take such affirmative steps as may be necessary to restore, as nearly as
possible, the alleged victims of the defendants alleged unlawful practices to
positions they would have been in but for the discriminatory conduct and (c)
designing or constructing any covered multi-family dwellings in the future that
do not contain the accessibility and adaptability features set forth in the Fair
Housing Act; and requires us to pay damages, including punitive damages, and a
civil penalty.
We are currently inspecting these properties to determine the extent of the
alleged noncompliance and the changes that may be necessitated. At this time, we
are not able to provide an estimate of costs and expenses associated with this
matter. There can be no assurance that we will be successful in the defense of
the Justice Department action. If this lawsuit is successful, we could suffer a
material adverse impact.
Camden is subject to various legal proceedings and claims that arise in the
ordinary course of business. These matters are generally covered by insurance.
While the resolution of these matters cannot be predicted with certainty,
management believes that the final outcome of such matters will not have a
material adverse effect on the consolidated financial statements of Camden.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
<PAGE> 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information with respect to this Item 5 is incorporated herein by reference
from page 49 of our Annual Report to Shareholders for the year ended December
31, 1998, which is filed as Exhibit 13.1. The number of holders of record of our
common shares, $0.01 par value, as of March 1, 1999, was 1,137.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to this Item 6 is incorporated herein by reference
from pages 50 and 51 of our Annual Report to Shareholders for the year ended
December 31, 1998, which is filed as Exhibit 13.1.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information with respect to this Item 7 is incorporated herein by reference
from pages 19 through 29 of our Annual Report to Shareholders for the year ended
December 31, 1998, which is filed as Exhibit 13.1.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information with respect to this Item 7A is incorporated herein by
reference from page 25 of our Annual Report to Shareholders for the year ended
December 31, 1998, which is filed as Exhibit 13.1.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements and supplementary financial information
for the years ended December 31, 1998, 1997 and 1996 are listed in the
accompanying Index to Consolidated Financial Statements and Supplementary Data
at F-1 and are incorporated herein by reference from pages 30 through 49 of our
Annual Report to Shareholders for the year ended December 31, 1998, which is
filed as Exhibit 13.1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE> 11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to this Item 10 is incorporated by reference from
the Company's Proxy Statement to be filed on or before March 31, 1999 in
connection with the Annual Meeting of Shareholders to be held May 13, 1999.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this Item 11 is incorporated by reference from
the Company's Proxy Statement to be filed on or before March 31, 1999 in
connection with the Annual Meeting of Shareholders to be held May 13, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this Item 12 is incorporated by reference from
the Company's Proxy Statement to be filed on or before March 31, 1999 in
connection with the Annual Meeting of Shareholders to be held May 13, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this Item 13 is incorporated by reference from
the Company's Proxy Statement to be filed on or before March 31, 1999 in
connection with the Annual Meeting of Shareholders to be held May 13, 1999.
<PAGE> 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements:
The Company's financial statements and supplementary financial
information for the years ended December 31, 1998, 1997 and 1996 are listed
in the accompanying Index to Consolidated Financial Statements and
Supplementary Data at F-1 and are incorporated herein by reference from
pages 30 through 49 of the Company's Annual Report to the Shareholders for
the year ended December 31, 1998, which pages are filed as Exhibit 13.1
hereto.
(2) Financial Statement Schedule:
The financial statement schedule listed in the accompanying Index to
Consolidated Financial Statements and Supplementary Data at page F-1 is
filed as part of this Report.
(3) Index to Exhibits:
NUMBER TITLE
2.1 Agreement and Plan of Merger, dated as of December 16, 1996,
among the Registrant, Camden Subsidiary, Inc. and Paragon Group,
Inc. Incorporated by reference from Exhibit 99.2 to the
Registrant's Form 8-K filed December 18, 1996 (File No. 1-12110).
2.2 Agreement and Plan of Merger, dated December 16, 1997, among the
Registrant, Camden Subsidiary II, Inc. and Oasis Residential,
Inc. Incorporated by reference from Exhibit 2.1 to the
Registrant's Form 8-K filed December 17, 1997 (File No. 1-12110).
2.3 Amendment No. 1, dated February 4, 1998, to the Agreement and
Plan of Merger, dated December 16, 1997, among the Registrant,
Camden Subsidiary II, Inc. and Oasis Residential, Inc.
Incorporated by reference from Exhibit 2.1 to the Registrant's
Form 8-K filed February 5, 1998 (File No. 1-12110).
2.4 Contribution Agreement, dated June 26, 1998, by and between
Camden Subsidiary, Inc. and Sierra-Nevada Multifamily
Investments, LLC. Incorporated by reference from Exhibit 2.1 to
the Registrant's Form 8-K filed July 15, 1998 (File No. 1-12110).
2.5 Agreement of Purchase and Sale, dated June 26, 1998, by and
between Camden Subsidiary, Inc. and Sierra-Nevada Multifamily
Investments, LLC. Incorporated by reference from Exhibit 2.2 to
the Registrant's Form 8-K filed July 15, 1998 (File No. 1-12110).
2.6 Agreement of Purchase and Sale, dated June 26, 1998, by and
between NQRS, Inc. and Sierra-Nevada Multifamily Investments,
LLC. Incorporated by reference from Exhibit 2.3 to the
Registrant's Form 8-K filed July 15, 1998 (Filed No. 1-12110).
3.1 Amended and Restated Declaration of Trust of the Registrant.
Incorporated by reference from Exhibit 3.1 to the Registrant's
Form 10-K for the year ended December 31, 1993 (File No.
1-12110).
3.2 Amendment to the Amended and Restated Declaration of Trust of the
Registrant. Incorporated by reference from Exhibit 3.1 to the
Registrant's Form 10-Q filed August 14, 1997 (File No. 1-12110).
3.3 Second Amended and Restated Bylaws of the Registrant.
Incorporated by reference from Exhibit 3.3 to the Registrant's
Form 10-K for the year ended December 31, 1997 (File No.
1-12110).
4.1 Specimen certificate for Common Shares of beneficial interest.
Incorporated by reference from Exhibit 4.1 to the Registrant's
Registration Statement on Form S-11 filed September 15, 1993
(File No. 33-68736).
<PAGE> 13
4.2 Indenture dated as of April 1, 1994 by and between the Registrant
and The First National Bank of Boston, as Trustee. Incorporated
by reference from Exhibit 4.3 to the Registrant's Statement on
Form S-11 filed April 12, 1994 (File No. 33-76244).
4.3 Form of Convertible Subordinated Debenture Due 2001. Incorporated
by reference from Exhibit 4.3 to the Registrant's Statement on
Form S-11 filed April 12, 1994 (File No. 33-76244).
4.4 Indenture dated as of February 15, 1996 between the Company and
the U.S. Trust Company of Texas, N.A., as Trustee. Incorporated
by reference from Exhibit 4.1 to the Registrant's Form 8-K filed
February 15, 1996 (File No. 1-12110).
4.5 First Supplemental Indenture dated as of February 15, 1996
between the Company and U.S. Trust Company of Texas N.A., as
trustee. Incorporated by reference from Exhibit 4.2 to the
Registrant's Form 8-K filed February 15, 1996 (File No. 1-12110).
4.6 Form of Camden Property Trust 6 5/8% Note due 2001. Incorporated
by reference from Exhibit 4.3 to the Registrant's Form 8-K filed
February 15, 1996 (File No. 1-12110).
4.7 Form of Camden Property Trust 7% Note due 2006. Incorporated by
reference from Exhibit 4.3 to the Registrant's Form 8-K filed
December 2, 1996 (File No. 1-12110).
4.8 Specimen certificate for Camden Series A Cumulative Convertible
Shares of Beneficial Interest. Incorporated from Exhibit 4.3 to
the Registrant's Registration Statement on Form S-4 filed
February 6, 1998 (File No. 333-45817).
4.9 Statement of Designation, Preferences and Rights of Series A
Cumulative Convertible Preferred Shares of Beneficial Interest.
Incorporated by reference from Exhibit 4.1 to the Registrant's
Registration Statement on Form S-4 filed February 6, 1998 (File
No. 333-45817).
4.10 Form of Statement of Designation of Series B Cumulative
Redeemable Preferred Shares of Beneficial Interest. Incorporated
by reference from Exhibit 4.1 to the Registrant's Form 8-K filed
on March 10, 1999 (File No. 1-2110).
10.1 Form of Indemnification Agreement by and between the Registrant
and certain of its trust managers and executive officers.
Incorporated by reference from Exhibit 10.18 to Amendment No. 1
of the Registrant's Registration Statement on Form S-11 filed
July 9, 1993 (File No. 33-63588).
10.2 Letter Agreement dated July 18, 1993 among Richard J. Campo, G.
Steven Dawson, the Registrant and Apartment Connection, Inc.
Incorporated by reference from Exhibit 10.25 to the Registrant's
Registration Statement on Form S-11 filed September 15, 1993
(File No. 33-68736).
10.3 Amendment and Restatement of the 1993 Share Option Plan of Camden
Property Trust. Incorporated by reference from Exhibit 10.7 to
the Registrant's Form 10-K filed March 28, 1996 (File No.
1-12110).
10.4* Amended and Restated Employment Agreement dated August 7, 1998 by
and between the Registrant and Richard J. Campo.
10.5* Amended and Restated Employment Agreement dated August 7, 1998 by
and between the Registrant and D. Keith Oden.
10.6 Form of Employment Agreement by and between the Registrant and
certain senior executive officers. Incorporated by reference from
Exhibit 10.13 to the Registrant's Form 10-K filed March 28, 1997
(File No. 1-12110).
10.7 Camden Property Trust Key Employee Share Option Plan.
Incorporated by reference from Exhibit 10.14 to the Registrant's
Form 10-K filed March 28, 1997 (File No. 1-12110).
<PAGE> 14
10.8 Distribution Agreement dated March 20, 1997 among the Registrant
and the Agents listed therein relating to the issuance of Medium
Term Notes. Incorporated by reference from Exhibit 1.1 to the
Registrant's Form 8-K filed March 21, 1997 (File No. 1-12110).
10.9 Registration Rights Agreement dated April 15, 1997 among the
Company, the Operating Partnership and certain investors set
forth therein. Incorporated by reference from Exhibit 99.1 to the
Registrant's Registration Statement on Form S-3 filed with the
Commission on April 22, 1997 (File No. 333-25637).
10.10 Camden Development, Inc. 1997 Non-Qualified Employee Stock
Purchase Plan. Incorporated by reference from Exhibit 10.3 to the
Registrant's Form 10-Q filed August 14, 1997 (File No. 1-12110).
10.11 Form of Master Exchange Agreement by and between the Registrant
and certain key employees. Incorporated by reference from Exhibit
10.16 to the Registrant's Form 10-K filed February 6, 1998 (File
No. 1-12110).
10.12 Restatement and Amendment of Loan Agreement dated November 25,
1997 between Registrant and NationsBank of Texas, N.A.
Incorporated by reference from Exhibit 10.17 to the Registrant's
Form 10-K filed February 6, 1998 (File No. 1-12110).
10.13 Form of Affiliate Letter. Incorporated by reference from Exhibit
10.1 to the Registrant's Registration Statement on Form S-4/A
filed February 26, 1998 (File No. 333-45817).
10.14 Amended and Restated Limited Liability Company Agreement of
Sierra-Nevada Multifamily Investments, LLC, adopted as of June
29, 1998 by Camden Subsidiary, Inc. and TMT-Nevada, L.L.C.
Incorporated by reference from Exhibit 99.1 to the Registrant's
Form 8-K filed July 15, 1998 (File No. 1-12110).
10.15 Form of Registration Rights Agreement, dated as of April 6, 1998,
by and among Oasis Residential, Inc., ISCO and IFT Properties,
Ltd. Incorporated by reference from Exhibit 99.1 to the
Registrant's Registration Statement on Form S-3 filed January 8,
1999 (File No. 333-70295).
10.16 Form of Registration Rights Agreement, dated as of April 2, 1998,
by and between Oasis Residential, Inc. and Merrill Lynch
International Private Finance Limited. Incorporated by reference
from Exhibit 99.2 to the Registrant's Registration Statement on
Form S-3 filed January 8, 1999 (File No. 333-70295).
10.17 Amended and Restated Limited Liability Company Agreement of Oasis
Martinique, LLC, dated as of October 23, 1998, by and among Oasis
Residential, Inc. and the persons named therein. Incorporated by
reference from Exhibit 10.59 to Oasis Residential, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1997 (File
No. 1-12428).
10.18 Exchange Agreement, dated as of October 23, 1998, by and among
Oasis Residential, Inc., Oasis Martinique, LLC and the holders
listed thereon. Incorporated by reference from Exhibit 10.60 to
Oasis Residential, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1997 (File No. 1-12428).
10.19 Contribution Agreement, dated as of February 23, 1999, by and
among Belcrest Realty Corporation, Belair Real Estate
Corporation, Camden Operating, L.P. and Camden Property Trust.
Incorporated by reference from Exhibit 99.1 to the Registrant's
Form 8-K filed on March 10, 1999 (File No. 1-12110).
10.20 First Amendment to Third Amended and Restated Agreement of
Limited Partnership of Camden Operating, L.P., dated as of
February 23, 1999. Incorporated by reference from Exhibit 99.2 to
the Registrant's Form 8-K filed on March 10, 1999 (File No.
1-12110).
10.21 Registration Rights Agreement, dated as of February 23, 1999, by
and between Camden Property Trust and the unitholders named
therein. Incorporated by reference from Exhibit 99.3 to the
Registrant's Form 8-K filed on March 10, 1999 (File No. 1-12110).
<PAGE> 15
11.1* Statement re Computation of Per Share Earnings.
13.1* Selected pages of the Camden Property Trust Annual Report to
Shareholders for the year ended December 31, 1998.
21.1* Subsidiaries of the Registrant.
23.1* Consent of Deloitte & Touche LLP.
24.1* Powers of Attorney for Richard J. Campo, D. Keith Oden, G. Steven
Dawson, William R. Cooper, George A. Hrdlicka, Scott S. Ingraham,
Lewis A. Levey, F. Gardner Parker and Steven A. Webster.
27.1* Financial Data Schedule (filed only electronically with the SEC).
27.2* Restated Financial Data Schedules (filed only electronically with
the SEC).
27.3* Restated Financial Data Schedules (filed only electronically with
the SEC).
- ---------------------
*Filed herewith.
14(b) Reports on Form 8-K
The Registrant did not file any Current Reports on Form 8-K during the fourth
quarter of 1998.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
March 29, 1999 CAMDEN PROPERTY TRUST
By: /s/ G. Steven Dawson
--------------------------------------
G. Steven Dawson
Senior Vice President - Finance,
Chief Financial Officer, Treasurer
and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
* Chairman of the Board of Trust March 29, 1999
- ------------------------ Managers and Chief Executive
Richard J. Campo Officer (Principal Executive
Officer)
* President, Chief Operating March 29, 1999
- ------------------------ Officer and Trust Manager
D. Keith Oden
/s/G. Steven Dawson Senior Vice President-Finance, March 29, 1999
- ------------------------ Chief Financial Officer,
G. Steven Dawson Treasurer and Secretary
(Principal Financial and
Accounting Officer)
* Trust Manager March 29, 1999
- ------------------------
William R. Cooper
* Trust Manager March 29, 1999
- ------------------------
George A. Hrdlicka
* Trust Manager March 29, 1999
- ------------------------
Scott S. Ingraham
* Trust Manager March 29, 1999
- ------------------------
Lewis A. Levey
* Trust Manager March 29, 1999
- ------------------------
F. Gardner Parker
* Trust Manager March 29, 1999
- ------------------------
Steven A. Webster
*By: /s/G. Steven Dawson
- ------------------------
G. Steven Dawson
Attorney-in-Fact
<PAGE> 17
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Registrant and its subsidiaries
required to be included in Item 14(a)(1) are listed below:
CAMDEN PROPERTY TRUST PAGE
Independent Auditors' Report (included herein) . . . . . . . . . . . . . F-2
Financial Statements (incorporated by reference under Item 8 of Part II from
Pages 30 through 49 of the Company's Annual Report to Shareholders for the
year ended December 31, 1998):
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Operations for the Years Ended
December 31,1998, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
The following financial statement supplementary data of the Registrant and
its subsidiaries required to be included in Item 14(a)(2) is listed below:
Schedule III -- Real Estate and Accumulated Depreciation . . . . . . . S-1
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Camden Property Trust
We have audited the consolidated financial statements of Camden Property Trust
("Camden") as of December 31, 1997 and 1998, and for each of the three years in
the period ended December 31, 1998, and have issued our report thereon dated
January 26, 1999 (except for Notes 3, 6, 11 and 12 as to which the date is
February 23, 1999); such consolidated financial statements and report are
included in your 1998 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the financial statement schedule of
Camden Property Trust, listed in Item 14. This financial statement schedule is
the responsibility of Camden's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Houston, Texas
January 26, 1999 (except for Notes 3, 6, 11 and 12 as to which the date is
February 23, 1999)
<PAGE> 19
SCHEDULE III
CAMDEN PROPERTY TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Cost
Capitalized
Subsequent
to
Acquisition
Initial Cost to or
Description Encumbrances Camden Property Trust Development
- ---------------------------------- ------------ ------------------------- -------------
Building and
PROPERTY NAME Location Land Improvements
- ------------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Apartments TX $ 33,737 $105,295 $ 564,941 $ 43,658
Apartments AZ 8,176 14,471 106,200 3,405
Apartments CA 71,083 41,535 82,041 5,286
Apartments CO 33,612 15,618 120,088 685
Apartments FL 33,445 43,754 303,603 10,813
Apartments KY 18,565 5,382 44,853 860
Apartments MO 54,252 21,612 141,446 6,683
Apartments NV 96,330 62,243 400,899 3,188
Apartments NC 20,445 11,842 75,102 3,275
Projects under Development AZ 6,390 2,581
Projects under Development NV 7,438 13,911
Projects under Development CO 6,053 16,393
Projects under Development CA 9,380 1,360
Projects under Development FL 8,501 9,564
Projects under Development KY 5,845
Projects under Development TX 76,508 52,756
------------ ---------- -------------- -------------
Total $ 369,645 $436,022 $ 1,941,583 $ 77,853
============ ========== ============== =============
</TABLE>
(In thousands)
<TABLE>
<CAPTION>
Date
Gross Amount at Which Accumulated Constructed Depreciable
Description Carried at December 31, 1998(a) Depreciation or Acquired Life (Years)
- ----------------------------------- ------------------------------- ------------ ----------- ------------
PROPERTY NAME Location Land Building Total
- ------------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Apartments TX $105,295 $ 608,599 $ 713,894 $ 97,158 1993-1998 3-35
Apartments AZ 14,471 109,605 124,076 11,923 1994-1998 3-35
Apartments CA 41,535 87,327 128,862 1,673 1998 3-35
Apartments CO 15,618 120,773 136,391 2,323 1998 3-35
Apartments FL 43,754 314,416 358,170 16,748 1997-1998 3-35
Apartments KY 5,382 45,713 51,095 3,697 1997-1998 3-35
Apartments MO 21,612 148,129 169,741 12,810 1997 3-35
Apartments NV 62,243 404,087 466,330 11,417 1998 3-35
Apartments NC 11,842 78,377 90,219 9,811 1997 3-35
Projects under Development AZ 6,390 2,581 8,971 1997-1998
Projects under Development NV 7,438 13,911 21,349 1998
Projects under Development CO 6,053 16,393 22,446 1994-1998
Projects under Development CA 9,380 1,360 10,740 1998
Projects under Development FL 8,501 9,564 18,065 1996-1998
Projects under Development KY 5,845 5,845 1997-1998
Projects under Development TX 76,508 52,756 129,264 1995-1998
--------- ---------- ----------- ---------
Total $436,022 $2,019,436 $ 2,455,458 $ 167,560
======== ========== =========== =========
(a) The aggregate cost for federal income tax purposes at December 31,1998 was
$2.0 billion.
</TABLE>
<PAGE> 20
THE CHANGES IN TOTAL REAL ESTATE ASSETS FOR THE YEARS ENDED DECEMBER 31, 1998,
1997 AND 1996 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
Balance, beginning of period $1,382,049 $ 646,545 $ 607,598
Additions during period:
Acquisition - Oasis 997,049
Acquisition - Paragon 618,292
Acquisition - Other 139,199 45,830 6,294
Development 193,212 91,203 56,132
Improvements 26,108 13,308 9,578
Deductions during period:
Cost of real estate sold - Third Party Transaction (237,423)
Cost of real estate sold - Other (44,736) (33,139) (33,057)
----------- ------------ ------------
Balance, end of period $2,455,458 $ 1,382,049 $ 646,545
=========== ============ ============
</TABLE>
THE CHANGES IN ACCUMULATED DEPRECIATION FOR THE YEARS ENDED DECEMBER 31, 1998,
1997 AND 1996 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------- ------------
<S> <C> <C> <C>
Balance, beginning of period $ 94,665 $ 56,369 $ 36,800
Depreciation 76,740 43,769 22,946
Real Estate Sold (3,845) (5,473) (3,377)
----------- ------------ ------------
Balance, end of period $ 167,560 $ 94,665 $ 56,369
=========== ============ ============
</TABLE>
S-1
<PAGE> 21
Exhibit 10.4
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
The Amended and Restated Employment Agreement (the "Agreement") made this 7th
day of August 1998, by and between Camden Property Trust, a Texas real estate
investment trust, (the "Company") and MR. RICHARD J. CAMPO (the "Executive").
WITNESSETH:
WHEREAS the Company is engaged in the business of multifamily management and
development and
WHEREAS the Executive is experienced and knowledgeable in the field; and
WHEREAS Mr. Campo shall work as Chairman & Chief Executive Officer; and
WHEREAS this Agreement shall supersede and replace all prior employment
agreements between the Company and the Executive, including, but not limited to
the Employment Agreement dated July, 22, 1996 (the "Prior Agreement").
NOW THEREFORE, in consideration of the mutual covenants and conditions contained
herein, the parties agree as follows:
1. EMPLOYMENT
The Company employs Mr. Campo as Chairman and Chief Executive Officer (the
"Officer") to perform the duties normally associated with that office under
the control and at the direction of the Board of Trust Managers (the
"Board") and other such duties as may, from time to time, be assigned and
are consistent with the position.
2. EMPLOYMENT TERM
(a) EMPLOYMENT TERM
The term of employment shall begin the 7th day of August,1998, (the
"Commencement Date"). This agreement will expire on July 22nd , 1999
or after the expiration of any Renewal Period (the "Expiration Date").
The term of employment shall annually be extended by one (1) year (the
"Renewal Period") unless written notification is given by either party
to the other at least six (6) months prior to the Expiration Date. The
Commencement Date through and including the Expiration Date is
hereinafter referred to as the "Employment Term."
(b) TERMINATION
The Company agrees to employ the Executive for the period beginning on
the Commencement Date and continuing through the earliest of:
(i) death of the Executive; or
(ii) termination of the Executive by vote of a committee of the
Board for "Disability," as defined below; or
(iii)the discharge of the Executive by vote of the Board "For
Cause", as defined below, or any other termination For
Cause; or
<PAGE> 22
(iv) the discharge of the Executive by vote of the Board for
any reason other than For Cause;
(v) retirement of the Executive under the terms of the
Company's retirement plan as instituted and amended from
time to time by the Board;
(vi) termination of the Agreement due to a "Change of Control,"
as defined below; or
(vii)the end of the Employment Term.
(c) DISABILITY
The term Disability refers to the physical or mental incapacity of the
Executive that has prevented the execution of the duties of the
office, as outlined below, for three (3) consecutive months or for a
period of more than 180 business days in the aggregate in any 18 month
period and that, in the determination of the Board after consultation
with a medical doctor licensed to practice in the State of Texas
appointed by the Board and the Executive, may be expected to prevent
the Executive for any period of time thereafter from devoting
substantial time and energies to the Duties of the office, as outlined
below. The Executive agrees to submit to reasonable requests for
medical examinations to determine whether a Disability exists.
During the period of incapacitation, as provided above, the salary
otherwise payable to the Executive may, at the absolute discretion of
the Board, be reduced by the amount of any disability benefits or
payment received by the Executive, excluding health insurance benefits
or other reimbursement of medical expenses for the Executive.
(d) FOR CAUSE
The term "For Cause" shall mean any one or more of the following:
(i) material or repeated violation by the Executive of the
the terms of this Agreement or the material or
repeated failure to perform the duties of the office
to include material substandard performance of the
Executive in the achievement of written goals and
objectives set by the Board for two (2) consecutive
years, other than any such failure resulting from the
Executive's Disability;
(ii) excessive absenteeism not related to illness; or
(iii)the Executive's conviction of or plea of nolo contendere
to a felony or conviction of any other crime which
incarcerates the Executive for a period of one (1) year or
longer; or
(iv) the Executive's commission of fraud, embezzlement, theft,
or other felony crimes, in any case, whether or not
involving the Company, that, in the reasonable opinion of
the Board, render the Executive's continued employment
harmful to the Company.
(v) the voluntary resignation of the Executive without the
prior consent of the Board.
<PAGE> 23
(e) CHANGE OF CONTROL
A "change of control" shall be determined to have occurred when any
one or more of the following events occur:
(i) at any time during any twelve (12) month period, the Trust
Managers in office at the beginning of such period cease
to constitute a majority of the Company's Board of Trust
Managers, disregarding any vacancies occurring during such
period by reasons of death or disability but deeming any
individual whose election, or nomination for election, to
fill such vacancy to have been in office at the beginning
of such one (1) year prior;
(ii) there is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report or item
therein), each as promulgated pursuant to the Securities
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), disclosing that any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the
Exchange Act) of securities representing over 25% of the
combined voting power of the securities of the Company
entitled to vote generally in the election of Trust
Managers (the "Voting Shares") of the Company or could
become the owner of over 25% of the Company's Common
Shares of Beneficial Interest through the conversion of
the Company's debt or equity securities;
(iii)the Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K or
Schedule 14A (or any successor schedule, form or report or
item therein) that a change in control of the Company has
occurred or will occur in the future pursuant to any
then-existing contract or transaction; or
(iv) a merger or consolidation occurs to which the Company is
party and the Company is not the surviving entity; or
(v) the sale of at least fifty (50%) percent of the Company's
assets to any person or entity or in a series of related
transactions.
The determination as to which party to a merger, consolidation or
reorganization is the "surviving entity" within the meaning of Section 2(e)
shall be made on the basis of the relative equity interest of the
shareholders in the entity existing after the merger, consolidation or
reorganization, as follows: if following any merger, consolidation or
reorganization the holders of outstanding Voting Shares of the Company
immediately prior to the merger, consolidation or reorganization own equity
securities possessing more than 50% of the voting power of the entity
existing following the merger, consolidation or reorganization, the Company
shall be the surviving entity. In all other cases, the Company shall not be
the surviving entity. In making the determination of ownership of equity
securities by the shareholders of an entity immediately after the merger,
consolidation or reorganization pursuant to this paragraph, equity
securities which the shareholders owned immediately before the merger,
consolidation or reorganization as shareholders of another party to the
transaction shall be disregarded. Further, for purposes of this paragraph
only, outstanding voting securities of an entity shall be calculated by
assuming the conversion of all equity securities convertible (immediately
or at some future time) into shares entitled to vote.
<PAGE> 24
Notwithstanding the foregoing provisions of Section 2(e), unless otherwise
determined in a specific case by majority vote of the Board of Trust
Managers of the Company, a "Change of Control" will not be deemed to have
occurred for purposes of Section 2(e) solely because (A) an entity in which
the Company, directly or indirectly, beneficially owns 50% or more of the
voting securities (a "Subsidiary"), or (B) any employee share ownership
plan or any other employee benefit plan of the Company or any Subsidiary
either files or becomes obligated to file a report or a proxy statement
under or in response to Schedule 13D, Schedule 14D-1, Form 8-K, or Schedule
14A (or any successor schedule, form, or report or item therein) under the
Exchange Act disclosing beneficial ownership by it of shares of Voting
Shares, whether in excess of 25% or otherwise, or because the Company
reports that a change in control of the Company has occurred or will occur
in the future by reason of such beneficial ownership.
3. DUTIES
The Executive will devote substantially all of his time, skill, energy,
knowledge, and best efforts during the Employment Term to such duties, and
will, faithfully and diligently endeavor to the best of his ability,
further the best interests of the Company. The Executive may:
(i) continue to serve as general partner in, or as an officer,
director, or shareholder of a corporation that is a
general partner in, the limited partnerships listed in
Schedule A to the Prior Agreement; and
(ii) continue to serve as a director or shareholder, directly
or indirectly, in the corporations listed in Schedule A to
the Prior Agreement; and
(iii)serve in the future as an officer, director, shareholder,
or limited partner in any business venture which is not
prohibited by Section 9(c).
At no time shall the Executive be requested to perform duties that are not
commensurate with the duties of a senior executive of the Company.
4. LOCATION OF EMPLOYMENT
The Executive shall be located in or about Houston, Texas. The Executive
shall travel to such geographical locations as may be appropriate from time
to time to carry out the duties of the office as outlined in Section 3,
Duties.
5. COMPENSATION
For all services rendered by the Executive to the Company, the Company
shall pay:
(a) BASE SALARY
For services rendered, the Company shall pay the Executive an annual
salary of $258,000, "the base salary" payable in arrears monthly or
semi-monthly as the Board may elect from time to time during the
Employment Term. The Board shall conduct an annual review of the
Executive's Base Salary. The Executive shall be entitled to receive
increases in the Base Salary, if any, that may be determined by the
Board at its sole discretion. Any increases to the Executive's Base
Salary shall be effective January 1 for each year of the Employment
Term.
In no event shall the Executive's base salary be reduced, except as
provided for under Section 2(c), Disability.
<PAGE> 25
(b) ANNUAL INCENTIVE COMPENSATION
In further consideration of the Executive's service, the Executive
shall be eligible to receive an annual incentive compensation as
determined by the Board.
(c) LONG-TERM INCENTIVE COMPENSATION
In further consideration of the Executive's service, the Executive
shall be eligible to receive a long-term incentive compensation as
determined by the Board.
(d) TAXES
All compensation paid to the Executive shall be subject to applicable
employment and withholding taxes.
The Executive shall be responsible for any taxes resulting from a
determination that any portion of any benefits supplied to the
Executive may be reimbursing personal as well as business expenses.
6. EMPLOYEE BENEFITS
(a) BENEFITS
The Executive shall receive group health/dental insurance, life
insurance, disability insurance, and other similar benefits available
to the Company's employees. Benefits may be changed, modified, or
revoked at the sole discretion of the Company.
The Executive shall not be deemed to have a vested interest in any of
the Company plans or programs.
The Executive shall receive benefits not generally provided to Company
employees from time to time at the sole discretion of the Board.
(b) VACATION
The Executive is entitled to receive twenty- (20) business days paid
vacation annually for each year of the Employment Term. Such vacation
shall be taken at such times that are consistent with the reasonable
business needs of the Company. All vacation shall be subject to the
policies and procedures of the Company.
(c) FRINGE BENEFITS
The Executive shall receive fringe benefits as such benefits may exist
from time to time at the sole discretion of the Board.
7. BUSINESS EXPENSES
The Executive is authorized to incur reasonable, ordinary and necessary
business expenses in the performance of the duties outlined above during
the Employment Term in accordance with policies established by the Board.
The Executive shall account to the Company for all such expenses. The
Company shall reimburse the Executive or pay the expenses in accordance
with the policies established by the Board.
8. TERMINATION
In the event of termination, the Executive's rights and the Company's
obligations shall terminate except as herein provided.
In all events, the Company shall be obligated to pay all salary and
<PAGE> 26
benefits accrued to the Executive through and including the date of
termination. Additionally, the Executive shall be entitled to receive the
minimum bonus for the contract year during which the termination occurs,
prorated through and including the date of termination.
(a) TERMINATION FOR REASON OTHER THAN FOR CAUSE
Upon the occurrence of a change of control or if the Employment Term
is terminated for reasons other than For Cause, the Executive shall be
entitled to receive a severance payment (the "Severance Benefit")
equal to 2.99 times (I) Executive's annualized compensation that would
be included in Executive's gross income in the year in which the first
event constituting a change of control occurs or the taxable year in
which the termination occurs, as applicable, or, if higher, (ii) the
average annual compensation that was included in the gross income of
the Executive for the three (3) most recent taxable years that ended
before the date of termination or the date of the change of control,
as applicable, plus 2.99 times Executive's targeted annual incentive
compensation for the fiscal year in which the event first constituting
a change of control occurs.
Gross income includes, but is not limited to:
(i) base salary;
(ii) annual bonus amounts;
(iii)deferred compensation amounts; and
(iv) the value, in good faith, of share options, restricted
share grants and dividend equivalent rights granted to
the Executive and any other benefits received by the
Executive from the Company, (assuming for purposes of
such calculation that all grants have vested).
For purposes of making the calculation in Section 8(a)(iv) above, the Board
shall make such calculation and shall use the Black-Scholes pricing model
for its calculation; provided, however, that if the Black-Scholes pricing
model cannot be used to value the types of benefit being valued, the Board
shall use any other reasonable method of calculation based upon the
recommendation of the Company's independent compensation consultant (or if
there is none, an independent compensation consultant retained by the Board
for such purpose.)
However, gross income shall not include untaxed fringe benefits.
Following the occurrence of a Change of Control or termination of
employment for a reason other than For Cause, the Company will pay to the
Executive the Severance Benefit in immediately available funds, in United
States Dollars, within five business days after the first occurrence of a
Change of Control or termination, as applicable. In addition, during the
Severance Period, the Company will arrange to provide the Executive
Employee Benefits that are welfare benefits (but not share options, share
purchase, share appreciation, dividend equivalent rights or similar
compensatory benefits) substantially similar to those which the Executive
was receiving or entitled to receive immediately prior to the Change of
Control. Such one year period will be considered service with the Company
for the purpose of determining service credits and benefits due and payable
to the Executive under the Company's retirement income, supplemental
executive retirement, and other benefit plans of the Company applicable to
the Executive, the Executive's dependents, or the Executive's beneficiaries
immediately prior to the Change of Control. If and to the extent that any
benefit described in the immediately preceding sentence is not or cannot be
paid or provided under any policy, plan, program or arrangement of the
Company, then the Company will itself pay or provide for the payment of
such Employee Benefits to the Executive, and, if applicable, the
Executive's dependents and beneficiaries. Employee Benefits otherwise
<PAGE> 27
receivable by the Executive pursuant to this Section 8 will be reduced to
the extent comparable welfare benefits are actually received by the
Executive from another employer during the Severance Period.
There will be no right of set-off or counterclaim in respect of any claim,
debt of obligation against any payment to or benefit for the Executive
provided for in this Agreement, except as expressly provided herein.
Notwithstanding any other provision hereof, the parties' respective rights
and obligations under this Section 8 and under Sections 11 and 16 will
survive any termination or expiration of this Agreement following a Change
of Control or termination of employment, other than for cause.
Executive will not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment.
"Employee Benefits" means the perquisites, benefits and service credit for
benefits as provided under any and all employee retirement income and
welfare benefit policies, plans, programs or arrangements in which the
Executive is entitled to participate, including, without limitation, any
share option, share purchase, share appreciation, dividend equivalent
rights, savings, pension, supplemental executive retirement or other
retirement income or welfare benefit, deferred compensation, incentive
compensation, group or other life, health, medical/hospital, or other
insurance (whether funded by actual insurance or self-insured by the
Company), disability, salary continuation, expense reimbursement, and other
employee benefit policies, plans, programs or arrangements that may now
exist or any equivalent successor policies, plans, programs or arrangements
that may be adopted hereafter by the Company, providing perquisites,
benefits and service credit for benefits at least as great in the aggregate
as are payable thereunder prior to a Change of Control.
"Severance Period" means the period of time commencing on the date of an
occurrence of each change of control and continuing until the earliest of
(i) the expiration of one year after each occurrence of an event
constituting a change of control, (ii) the Executive's death, or (iii) the
Executive's attainment of age 65.
(b) TERMINATION BY REASON OF DEATH
If the Employment Term is terminated by reason of Death, the Executive
shall be entitled to receive a severance payment equal to the
Severance Benefit. Vesting of benefits shall be treated as described
in Section 24 of this Agreement.
(c) TERMINATION BY REASON OF DISABILITY
If the Employment Term is terminated by reason of Disability, the
Executive shall be entitled to receive a severance payment equal to
the Severance Benefit. Vesting of benefits shall be treated as
described in Section 24 of this Agreement.
The Executive shall receive, so long as the Disability continues, to
remain eligible for all benefits provided under any long-term
<PAGE> 28
disability program(s) of the Company in effect at the time of such
termination, subject to the terms and conditions of any such
program(s), as may be amended, changed, modified, or terminated for
all employees of the Company.
(d) ADDITIONAL PAYMENTS
(i) Notwithstanding anything in this Agreement to the contrary, in
the event it is determined (as hereafter provided) that any payment or
distribution by the Company to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise pursuant to or by reason of
any other agreement, policy, plan, program or arrangement, including
without limitation any share option, share appreciation right,
dividend equivalent right, restricted shares of similar right, the
lapse or termination of any restriction on or the vesting or exercise
ability of any of the foregoing (any such payment or distribution, a
"Payment"), would be subject to the excise tax imposed by Section 4999
of the Internal Revenue code of 1986, as amended (the "Code") (or any
successor provision thereto),by reason of being considered "contingent
on a change in ownership or control" of the Company, within the
meaning of Section 280G of the Code (or any successor provision
thereto) or to any similar tax imposed by state or local law, or any
interest or penalties with respect to such tax (such tax or taxes,
together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then the Executive will
be entitled to receive an additional payment or payments(collectively,
a "Gross-Up Payment"); PROVIDED, HOWEVER, that no Gross-up Payment
will be made with respect to the Excise Tax, if any, attributable to
(A) any incentive share option ("ISO") granted prior to the execution
of this Agreement or (B) any share appreciation or similar right,
whether or not limited, granted in tandem with any ISO described in
clause (A) of this sentence. The Gross-Up Payment will be in an amount
such that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including
any Excise Tax imposed upon the Gross-Up Payment, the Executive will
have received an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.
(ii) Subject to the provisions of Section 8(d)(vi), all determinations
required to be made under this Section 8(e), including whether an
Excise Tax is payable by the Executive and the amount of such Excise
Tax and whether a Gross-Up Payment is required to be paid by the
Company to the Executive and the amount of such Gross-Up Payment, if
any, will be made by a nationally recognized accounting firm (the
"Accounting Firm") selected by the Executive in the Executive's sole
discretion. The Executive will direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the
Company and the Executive within 30 calendar days after the
Executive's termination date, and any such other time or times as may
be requested by the Company of the Executive. If the Accounting Firm
determines that any Excise Tax is payable by the Executive, the
Company will pay the required Gross-Up Payment to the Executive within
five business days after receipt of such determination and
calculations with respect to any Payment to the Executive. If the
Accounting firm determines that no Excise Tax is payable by the
Executive, it will, at the same time as it makes such determination,
furnish the Company and the Executive an opinion that the Executive
has substantial authority not to report any Excise Tax on the
Executive's federal, state or local income or other tax return. As a
result of the uncertainty in the application of Section 4999 of the
Code (or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax law at the
time of any determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the
Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts or fails to pursue its remedies pursuant to Section
8(d)(vi) and the Executive
<PAGE> 29
thereafter is required to make a payment of any Excise Tax, the
Executive will direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and the Executive
as promptly as possible. Any such Underpayment will be promptly paid
by the Company to, or for the benefit of, the Executive within five
business days after receipt of such determination and calculations.
(iii)The Company and the Executive will each provide the Accounting
Firm access to and copies of any books, records and documents in the
possession of the Company or the Executive, as the case may be,
reasonably requested by the Accounting Firm, and otherwise cooperate
with the Accounting Firm in connection with the preparation of and
issuance of the determinations and calculations contemplated by
Section 8(d)(ii). Any determination by the Accounting Firm as to the
amount of the Gross-Up Payment will be binding upon the Company and
the Executive.
(iv) The federal, state, and local income or other tax returns filed
by the Executive will by prepared and filed on a consistent basis with
the determination of the Accounting Firm with respect to the Excise
Tax payable by the Executive. The Executive will make proper payment
of the amount of any Excise Payment and,at the request of the Company,
provide to the Company true and correct copies (with any amendments)
of the Executive's federal tax return as filed with the Internal
Revenue Service and corresponding state and local tax returns, if
relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such
payment. If prior to the filing of the Executive's federal income tax
return, or corresponding state or local tax return, if relevant, the
Accounting Firm determines that the amount of the Gross-Up Payment
should be reduced, the Executive will within five business days pay to
the Company the amount of such reduction.
(v) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated
herein will be borne by the Company. If such fees and expenses are
initially paid by the Executive, the Company will reimburse the
Executive the full amount of such fees and expenses within five
business days after receipt from the Executive of a statement therefor
and reasonable evidence of the Executive's payment thereof.
(vi) The Executive will notify the Company in writing of any claim by
the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up
Payment. Such notification will be given as promptly as practicable
but no later than 10 business days after the Executive actually
receives notice of such claim and the Executive will further apprise
the Company of the nature of such claim and the date on which such
claim is requested to be paid (in each case, to the extent known by
the Executive). The Executive will not pay such claim prior to the
earlier of (i) the expiration if the 30-calendar day period following
the date on which the Executive gives such notice to the Company and
(ii) the date that any payment of amount with respect to such claim
is due. If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the
Executive will:
a) provide the Company with any written records or documents in the
Executive's possession relating to such claim reasonably
requested by the Company;
<PAGE> 30
b) take such action in connection with contesting such claim as the
Company may reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by attorney competent in respect of the
subject matter and reasonably selected by the Company;
c) cooperate with the Company in good faith in order effectively to
contest such claim; and
d) permit the Company to participate in any proceedings relating to
such claims;
provided, however, that the Company will bear and pay directly all costs
and expenses (including interest and penalties) incurred in connection with
such contest and will indemnify and hold harmless the Executive, on an
after-tax basis, for and against any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing provisions of this Section 8(d), the Company will control all
proceedings taken in connection with the contest of any claim contemplated
by this Section 8(d)(vi) and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim (provided, however, that the
Executive may participate therein at the Executive's own cost and expense)
and may, at its option, either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner, and
the Executive will prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction, and in one or
more appellate courts, as the Company may determine; provided, however,
that is the Company directs the Executive to pay the tax claimed and sue
for a refund, the Company will advance the amount of such payment to the
Executive on an interest-free basis and will indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income or
other tax, including interest or penalties with respect thereto, imposed
with respect to such advance; and provided further, however, that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which the contested
amount if claimed to be due is limited solely to such contested amount. The
Company's control of any such contested claim will be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive will be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(vii)If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 8(d)(vi), the Executive receives any refund
with respect to such claim, the Executive will (subject to the Company's
complying with the requirements of Section 8(e)(vi) pay to the Company the
amount of such refund (together with any interest paid or credited thereon
after (vii) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to any taxes applicable thereto) within 30 calendar
days after such receipt and the Company's satisfaction of all accrued
obligations under this Agreement. If, after the receipt by the Executive of
any amount advanced by the Company pursuant to Section 8(d)(vi), a
determination is made that the Executive will not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such determination prior to the expiration
of 30 calendar days after such determination, then such advance will be
forgiven and will not be required to be repaid and the amount of any such
advance will offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid by the Company to the Executive pursuant to this
Section 8.
<PAGE> 31
9. CONFIDENTIALITY AND NON-COMPETITION
All information (the "Confidential Information")includes all confidential
information of the Company and/or its subsidiaries, including information
entrusted to the Company and/or any of its subsidiaries by third parties,
not otherwise publicly disclosed or available, other than as a result of
wrongful disclosure by the Executive, which, during the Employment Term:
(i) is disclosed by any of them to the Executive; or
(ii) the Executive had access or otherwise had reason to
know; or
(iii) was developed or discovered by the Executive.
Confidential Information includes, but is not limited to, whether or not
legended or otherwise identified as "confidential":
(i) property lists, prospective properties lists, and
details of agreement with sellers; and
(ii) acquisition, expansion, marketing, financial, and other
business information and plans; and
(iii) research and development and data related thereto; and
(iv) other compilations of data; and
(v) computer programs and/or records; and
(vi) sources of supply; and
(vii) confidential information developed by consultants and
contractors; and
(viii)purchasing, operating, and other costs data; and
(ix) employee information; and
(x) manuals, memoranda, projections, minutes, plans,
drawings, designs, formula books and specifications.
(a) RESTRICTION ON USE AND DISCLOSURE
The Executive acknowledges that the Confidential Information is
valuable and proprietary to the Company or to third parties which have
entrusted the Company and/or its subsidiaries, and, except as required
by the Executive's Duties, the Executive shall not use, publish,
disseminate, or otherwise disclose any Confidential information
without prior written consent of the Company.
(b) RETURN OF DOCUMENTS
Upon termination of the Executive's employment, the Executive shall
forthwith deliver to the Company all plans, designs, drawings,
specifications, listings, manuals, records, notebooks, and similar
repositories of or containing Confidential Information, including all
copies, then in the Executive's possession or control, whether
<PAGE> 32
prepared by the Executive or others. Upon such termination the
Executive shall retain no copies of any such documents.
(c) RESTRICTION ON COMPETITIVE EMPLOYMENT
The term Business shall mean:
(i) the business of the Company and its subsidiaries as
described in the Company's most recent Form 10-K; and
(ii) any other business in which the Company or any of its
subsidiaries is engaged during the Executive's Employment
Term.
The term Territories shall refer to those metropolitan areas in which the
Company owns properties or otherwise is engaged in the Business, including
any areas where the Company has specific plans to acquire or develop
properties within the following six (6) months following the date of
termination or change of control, as applicable, and all outlying areas
located within a thirty (30) mile radius of each such metropolitan area.
Except as noted in Section 3, Duties, during the Employment Term and the
twelve months (12) months following the termination of this Agreement (the
"Non-Competition Period"), absent the Company's prior written approval, the
Executive shall not, as owner, part-owner, shareholder, partner, director,
principal, agent, employee, consultant, or otherwise, within the
Territories, directly or indirectly engage or participate in activities
relating to, or render services to or invest in any firm or business
engaged or about to become engaged in, the Business, provided that the
Executive may:
(i) engage in the activities as noted in Section 3, Duties;
(ii) make passive investments in an enterprise engaged in the
the Business the shares of ownership of which are
publicly traded if the Executive's investment constitutes
constitutes less than 2% of the total equity of such
enterprise.
(d) INDUCEMENT / ENTICEMENT
During the Employment Term and the Non-Competition Period, the
Executive shall not, directly or indirectly:
(i) induce, or attempt to induce, any employees or agents or
consultants of or to the Company or any subsidiary of the
Company to do anything from which the Executive is
restricted by reason of Section 9(a) through 9(c),
inclusive; or
(ii) offer or aid others to offer employment to anyone who is
an employee, agent or consultant of or to the Company or
an subsidiary of the Company at the time of termination
of the Executive.
(e) REDUCTION OF NON-COMPETITION PERIOD
If this Agreement shall be terminated by the Company pursuant to
Section 2(b)(iv), Termination for reason other than For Cause, the
provisions of Sections 9(c) and 9(d) shall terminate on the first
business day following the termination of the Executive.
Unless otherwise provided, the provisions of Sections 9(a) through
9(d), inclusive, shall survive the termination of this Agreement for
the duration of the Non-Competition Period.
<PAGE> 33
10. REMEDIES FOR THE COMPANY
The Executive acknowledges that remedy at law for any breach or attempted
breach of the Executive's obligations under Section 9, Confidentiality and
Non-Competition, may be inadequate, agrees that the Company may be entitled
to specific performance and injunctive and other equitable remedies in case
of any such breach or attempted breach, and further agrees to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or other equitable relief.
The termination of the Employment Term pursuant to Section 2(a)(iii),
Discharge For Cause, shall not be deemed to be a waiver by the Company of
any breach by the Executive of this Agreement or any other obligation owed
the Company, and, notwithstanding such a termination, the Executive shall
be liable for all damages attributable to such a breach.
11. REMEDIES FOR THE EXECUTIVE
In the event the Executive is terminated For Cause and it is ultimately
determined the Company lacked "cause", the:
(i) Executive's termination shall be treated as a Termination
for reason other than For Cause, as it pertains to
Section 8(a); and
(ii) Executive shall reserve the right to seek remedy for
breach of the Agreement by the Company including, but not
limited to, any other such damages as may be suffered
and/or incurred by the Executive, the Executive's costs
incurred during the dispute, and reasonable attorney's
fees in connection with such dispute; and
(iii)Executive shall receive all Severance Benefits under
Section 8(a), Termination for reason other than For
Cause, with interest of 8% annually on all payments
considered past due from the date at which such payment
payment would have been made.
12. NO WAIVER
No Waiver or non-action by either party with respect to any breach by the
other party of any provision of this Agreement,nor the waiver or non-action
with respect to the provisions of similar agreement with other employees or
the breach thereof, shall be deemed or construed to be a waiver of any
succeeding breach of such provision,or as a waiver of the provision itself.
13. INVALID PROVISIONS
Should any portion of this Agreement be adjusted or held invalid,
unenforceable or void, such holding shall not have the effect of
invalidating or voiding the remainder of this Agreement and the parties
hereby agree that the portion so held invalid, unenforceable,or void shall,
if possible, be deemed amended or reduced in scope,or otherwise be stricken
from this Agreement to the extent required for the purposes of validity and
enforcement thereof.
14. SUCCESSOR AND ASSIGNS
Neither the Executive nor the Company may assign its rights, duties, or
obligations hereunder without consent of the other.
15. SURVIVAL OF THE EXECUTIVE'S OBLIGATIONS
Except with respect to any termination under Section 2(b)(iv), the
Executive's obligations under Sections 9 and 10 shall survive regardless of
whether or not the Executive's employment is terminated, voluntarily or
involuntarily, by the employer or the Executive, with or without cause.
<PAGE> 34
16. SURVIVAL OF THE COMPANY'S OBLIGATIONS
The Company's obligations under Sections 8 and 11 shall survive regardless
of whether or not the Executive's employment is terminated, voluntarily or
involuntarily, by the employer or the Executive, with or without cause.
17. PRIOR AGREEMENTS
This Agreement incorporates the entire agreement between both parties with
respect to the subject matter hereof and supersedes all prior agreements,
documents, or other instruments with respect to the matters covered herein.
18. GOVERNING LAW
This Agreement shall be governed by, and interpreted in accordance with the
provisions of, the law of the State of Texas, without reference to
provisions that refer a matter to the law of any other jurisdiction. Each
party hereto hereby irrevocably submits itself to the non-exclusive
personal jurisdiction of the Federal and State courts sitting in Texas.
19. NO ORAL MODIFICATIONS
This Agreement may not be changed or terminated orally, and no change,
termination, or waiver of this Agreement or of any of the provisions herein
contained shall be binding unless made in writing and signed by both
parties, and, in the case of the Company, by a person designated by the
Board.
Without limiting the foregoing, any change or changes, from time to time,
in the Executive's salary or duties or both shall not be, nor be deemed to
be, a change, termination, or waiver of this Agreement or of any of the
provisions herein contained.
20. NOTICES
All notices and other communications required or permitted hereunder shall
be made in writing, and shall be deemed properly given if delivered
personally, mailed by certified mail, postage prepaid and return receipt
requested, sent by facsimile, or sent by Express Mail or Federal Express or
other nationally recognized express delivery service, as follows:
If to the Company or the Board:
Camden Property Trust
Three Greenway Plaza, Suite 1300
Houston, TX 77046
Attention: Board of Trust Managers
If to the Executive:
Richard J. Campo
Three Greenway Plaza, Suite 1300
Houston, TX 77046
Notice given by hand, Express Mail, Federal Express, or other such express
delivery service shall be effective upon actual receipt. Notice given by
facsimile transmission shall be effective upon actual receipt of received
during the recipient's normal business hours, or at the beginning of the
recipient's next business day after receipt if not received during the
<PAGE> 35
recipient's normal business hours. All notices sent by facsimile
transmission shall be confirmed promptly after transmission in writing by
certified mail or personal delivery.
Any party may change any address to which notice shall be given to it by
giving notice as provided above of such change in address.
21. EXECUTIVE'S REPRESENTATION AND WARRANTIES
The Executive represents and warrants that he is legally free to make and
perform this Agreement, that he has no obligation to any other person or
entity that would affect or conflict with any of his obligations hereunder,
and that the complete performance of his obligations hereunder will not
violate any law, regulation, order, or decree of any governmental or
jurisdictional body or contract by which he is bound.
22. EXPENSES; SECURITY
It is the intent of the Company that the Executive not be required to incur
legal fees and the related expenses associated with the interpretation,
enforcement or defense of the Executive's rights to compensation upon a
Change of Control by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, if it should appear to
the Executive that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or any
other person takes or threatens to take any action to declare the agreement
to pay Executive compensation upon a change of control void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, r to recover from, the Executive the benefits provided or
intended to be provided to the Executive hereunder, the Company irrevocably
authorizes the Executive from time to time to retain counsel of the
Executive's choice, at the expense of the Company as hereinafter provided,
to advise and represent the Executive in connection with any such
interpretation, enforcement or defense, including without limitation the
initiation or defense of any litigation or other legal action, whether by
or against the Company or any Trust Manager, officer, shareholder, or other
person affiliated with the Company, in any jurisdiction. Notwithstanding
any existing or prior attorney-client relationship between the Company and
such counsel, the Company irrevocably consents to the Executive's entering
into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential
relationship will exist between the Executive and such counsel. Without
regard to whether the Executive prevails, in whole or in part, in
connection with any of the foregoing, the Company will pay and be solely
financially responsible for any and all attorneys' and related fees and
expenses incurred by the Executive in connection with any of the foregoing.
23. ENTIRE AGREEMENT
The parties expressly agree that this Agreement is contractual in nature
and not a mere recital, and that it contains all the terms and conditions
of the agreement between the parties with respect to the matters set forth
herein. All prior negotiations, agreements, arrangements, understandings
and statements between the parties relating to the matters set forth herein
that have occurred at any time or contemporaneously with the execution of
this Agreement (including, but not limited to, the Prior Agreement) are
superseded and merger into this completely integrated Agreement. The
Recitals set forth above shall be deemed to be part of this Agreement.
24. VESTING OF BENEFITS
Notwithstanding anything in this Agreement, the Company's employee benefit
<PAGE> 36
plans, any agreement entered into under such plans,or under any retirement,
pension, profit sharing or other similar plan, upon the occurrence of a
change of control, as defined in Section 2(e), or termination for reason of
death or disability or If Executive is terminated other than For Cause all
deferred or unvested portions of any award made to Executive under any of
the foregoing plans and agreements shall automatically becomefully vested
in Executive and shall be in effect and redeemable by or payable to
Executive, or Executive's designated beneficiary or estate, on the same
conditions (other than vesting) as would have applied had the change of
control, or termination for reason of death or disability or the
termination other than For Cause, as applicable, not occurred, including,
but not limited to, the right to exercise any share options for a period of
10 years from the date of grant. All unvested awards under the plans shall
immediately vest upon the change of control, or termination for reason of
death or disability or if Executive is terminated other than For Cause and
the Executive or Executive's designated beneficiary or estate shall have
the right to exercise any vested awards during the balance of the awards'
term.
EXECUTED as of the date first written above.
CAMDEN PROPERTY TRUST
By: /s/D. Keith Oden
------------------------------------
Name: D. Keith Oden
------------------------------------
Title: President
------------------------------------
EXECUTIVE
/s/Richard J. Campo
------------------------------------
Richard J. Campo
<PAGE> 37
Exhibit 10.5
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
The Amended and Restated Employment Agreement (the "Agreement") made this 7th
day of August 1998, by and between Camden Property Trust, a Texas real estate
investment trust, (the "Company") and MR. D. KEITH ODEN (the "Executive").
WITNESSETH:
WHEREAS the Company is engaged in the business of multifamily management and
development and
WHEREAS the Executive is experienced and knowledgeable in the field; and
WHEREAS Mr. Oden shall work as President & Chief Operating Officer; and
WHEREAS this Agreement shall supersede and replace all prior employment
agreements between the Company and the Executive, including, but not limited to
the Employment Agreement dated July, 22, 1996 (the "Prior Agreement").
NOW THEREFORE, in consideration of the mutual covenants and conditions contained
herein, the parties agree as follows:
1. EMPLOYMENT
The Company employs Mr. Oden as President & Chief Operating Officer (the
"Officer") to perform the duties normally associated with that office under
the control and at the direction of the Board of Trust Managers (the
"Board") and other such duties as may, from time to time, be assigned and
are consistent with the position.
2. EMPLOYMENT TERM
(a) EMPLOYMENT TERM
The term of employment shall begin the 7th day of August,1998, (the
"Commencement Date"). This agreement will expire on July 22nd , 1999
or after the expiration of any Renewal Period (the "Expiration Date").
The term of employment shall annually be extended by one (1) year (the
"Renewal Period") unless written notification is given by either party
to the other at least six (6) months prior to the Expiration Date. The
Commencement Date through and including the Expiration Date is
hereinafter referred to as the "Employment Term."
(b) TERMINATION
The Company agrees to employ the Executive for the period beginning on
the Commencement Date and continuing through the earliest of:
(i) death of the Executive; or
(ii) termination of the Executive by vote of a committee
of the Board for "Disability," as defined below; or
(iii)the discharge of the Executive by vote of the Board
"For Cause," as defined below, or any other
termination For Cause; or
<PAGE> 38
(iv) the discharge of the Executive by vote of the Board
for any reason other than For Cause;
(v) retirement of the Executive under the terms of the
Company's retirement plan as instituted and amended
from time to time by the Board;
(vi) termination of the Agreement due to a "Change of
Control," as defined below; or
(vii) the end of the Employment Term.
(c) DISABILITY
The term Disability refers to the physical or mental incapacity of the
Executive that has prevented the execution of the duties of the
office, as outlined below, for three (3) consecutive months or for a
period of more than 180 business days in the aggregate in any 18 month
period and that, in the determination of the Board after consultation
with a medical doctor licensed to practice in the State of Texas
appointed by the Board and the Executive, may be expected to prevent
the Executive for any period of time thereafter from devoting
substantial time and energies to the Duties of the office, as outlined
below. The Executive agrees to submit to reasonable requests for
medical examinations to determine whether a Disability exists.
During the period of incapacitation, as provided above, the salary
otherwise payable to the Executive may, at the absolute discretion of
the Board, be reduced by the amount of any disability benefits or
payment received by the Executive, excluding health insurance benefits
or other reimbursement of medical expenses for the Executive.
(d) FOR CAUSE
The term "For Cause" shall mean any one or more of the following:
(i) material or repeated violation by the Executive of
the terms of this Agreement or the material or
repeated failure to perform the duties of the office
to include material substandard performance of the
Executive in the achievement of written goals and
objectives set by the Board for two (2) consecutive
years, other than any such failure resulting from the
Executive's Disability;
(ii) excessive absenteeism not related to illness; or
(iii)the Executive's conviction of or plea of nolo
contendere to a felony or conviction of any other
crime which incarcerates the Executive for a period
of one (1) year or longer; or
(iv) the Executive's commission of fraud, embezzlement,
theft, or other felony crimes, in any case, whether
or not involving the Company, that, in the reasonable
opinion of the Board, render the Executive's
continued employment harmful to the Company.
(v) the voluntary resignation of the Executive without
the prior consent of the Board.
<PAGE> 39
(e) CHANGE OF CONTROL
A "change of control" shall be determined to have occurred when any
one or more of the following events occur:
(i) at any time during any twelve (12) month period, the
Trust Managers in office at the beginning of such
period cease to constitute a majority of the
Company's Board of Trust Managers, disregarding any
vacancies occurring during such period by reasons of
death or disability but deeming any individual whose
election, or nomination for election, to fill such
vacancy to have been in office at the beginning of
such one (1) year prior;
(ii) there is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report or
item therein), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), disclosing that any person (as the
term "person" is used in Section 13(d)(3) or Section
14 (d) (2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of
securities representing over 25% of the combined
voting power of the securities of the Company
entitled to vote generally in the election of Trust
Managers (the "Voting Shares") of the Company or
could become the owner of over 25% of the Company's
Common Shares of Beneficial Interest through the
conversion of the Company's debt or equity
securities;
(iii)the Company files a report or proxy statement with
the Securities and Exchange Commission pursuant to
the Exchange Act disclosing in response to Form 8-K
or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of
the Company has occurred or will occur in the future
pursuant to any then-existing contract or
transaction; or
(iv) a merger or consolidation occurs to which the Company
is party and the Company is not the surviving entity;
or
(v) the sale of at least fifty (50%) percent of the
Company's assets to any person or entity or in a
series of related transactions.
The determination as to which party to a merger, consolidation or
reorganization is the "surviving entity" within the meaning of Section
2(e) shall be made on the basis of the relative equity interest of the
shareholders in the entity existing after the merger, consolidation or
reorganization, as follows: if following any merger, consolidation or
reorganization the holders of outstanding Voting Shares of the Company
immediately prior to the merger, consolidation or reorganization own
equity securities possessing more than 50% of the voting power of the
entity existing following the merger, consolidation or reorganization,
the Company shall be the surviving entity. In all other cases, the
Company shall not be the surviving entity. In making the determination
of ownership of equity securities by the shareholders of an entity
immediately after the merger, consolidation or reorganization pursuant
to this paragraph, equity securities which the shareholders owned
immediately before the merger, consolidation or reorganization as
shareholders of another party to the transaction shall be disregarded.
Further, for purposes of this paragraph only, outstanding voting
securities of an entity shall be calculated by assuming the conversion
of all equity securities convertible (immediately or at some future
time) into shares entitled to vote.
<PAGE> 40
Notwithstanding the foregoing provisions of Section 2(e), unless
otherwise determined in a specific case by majority vote of the Board
of Trust Managers of the Company, a "Change of Control" will not be
deemed to have occurred for purposes of Section 2(e) solely because
(A) an entity in which the Company, directly or indirectly,
beneficially owns 50% or more of the voting securities (a
"Subsidiary"), or (B) any employee share ownership plan or any other
employee benefit plan of the Company or any Subsidiary either files or
becomes obligated to file a report or a proxy statement under or in
response to Schedule 13D, Schedule 14D-1, Form 8-K, or Schedule 14A
(or any successor schedule, form, or report or item therein) under the
Exchange Act disclosing beneficial ownership by it of shares of Voting
Shares, whether in excess of 25% or otherwise, or because the Company
reports that a change in control of the Company has occurred or will
occur in the future by reason of such beneficial ownership.
3. DUTIES
The Executive will devote substantially all of his time, skill,
energy, knowledge, and best efforts during the Employment Term to such
duties, and will, faithfully and diligently endeavor to the best of
his ability, further the best interests of the Company The Executive
may:
(i) continue to serve as general partner in, or as an
officer, director, or shareholder of a corporation
that is a general partner in, the limited
partnerships listed in Schedule A to the Prior
Agreement; and
(ii) continue to serve as a director or shareholder,
directly or indirectly, in the corporations listed in
Schedule A to the Prior Agreement; and
(iii) serve in the future as an officer, director,
shareholder, or limited partner in any business
venture which is not prohibited by Section 9(c).
At no time shall the Executive be requested to perform duties that are
not commensurate with the duties of a senior executive of the Company.
4. LOCATION OF EMPLOYMENT
The Executive shall be located in or about Houston, Texas. The
Executive shall travel to such geographical locations as may be
appropriate from time to time to carry out the duties of the office as
outlined in Section 3, Duties.
5. COMPENSATION
For all services rendered by the Executive to the Company, the Company
shall pay:
(a) BASE SALARY
For services rendered, the Company shall pay the Executive an
annual salary of $258,000, "the base salary" payable in arrears
monthly or semi-monthly as the Board may elect from time to time
during the Employment Term. The Board shall conduct an annual
review of the Executive's Base Salary. The Executive shall be
entitled to receive increases in the Base Salary, if any, that may
be determined by the Board at its sole discretion. Any increases
to the Executive's Base Salary shall be effective January 1 for
each year of the Employment Terms
In no event shall the Executive's base salary be reduced, except
as provided for under Section 2(c), Disability.
<PAGE> 41
(b) ANNUAL INCENTIVE COMPENSATION
In further consideration of the Executive's service, the Executive
shall be eligible to receive an annual incentive compensation as
determined by the Board.
(c) LONG-TERM INCENTIVE COMPENSATION
In further consideration of the Executive's service, the Executive
shall be eligible to receive a long-term incentive compensation as
determined by the Board.
(d) TAXES
All compensation paid to the Executive shall be subject to
applicable employment and withholding taxes.
The Executive shall be responsible for any taxes resulting from a
determination that any portion of any benefits supplied to the
Executive may be reimbursing personal as well as business
expenses.
6. EMPLOYEE BENEFITS
(a) BENEFITS
The Executive shall receive group health/dental insurance, life
insurance, disability insurance, and other similar benefits
available to the Company's employees. Benefits may be changed,
modified, or revoked at the sole discretion of the Company.
The Executive shall not be deemed to have a vested interest in any
of the Company plans or programs.
The Executive shall receive benefits not generally provided to
Company employees from time to time at the sole discretion of the
Board.
(b) VACATION
The Executive is entitled to receive twenty- (20) business days
paid vacation annually for each year of the Employment Term. Such
vacation shall be taken at such times that are consistent with the
reasonable business needs of the Company. All vacation shall be
subject to the policies and procedures of the Company.
(c) FRINGE BENEFITS
The Executive shall receive fringe benefits as such benefits may
exist from time to time at the sole discretion of the Board.
7. BUSINESS EXPENSES
The Executive is authorized to incur reasonable, ordinary and
necessary business expenses in the performance of the duties outlined
above during the Employment Term in accordance with policies
established by the Board. The Executive shall account to the Company
for all such expenses. The Company shall reimburse the Executive or
pay the expenses in accordance with the policies established by the
Board.
8. TERMINATION
In the event of termination, the Executive's rights and the Company's
obligations shall terminate except as herein provided.
<PAGE> 42
In all events, the Company shall be obligated to pay all salary and
benefits accrued to the Executive through and including the date of
termination. Additionally, the Executive shall be entitled to receive
the minimum bonus for the contract year during which the termination
occurs, prorated through and including the date of termination.
(a) TERMINATION FOR REASON OTHER THAN FOR CAUSE
Upon the occurrence of a change of control or if the Employment
Term is terminated for reasons other than For Cause, the Executive
shall be entitled to receive a severance payment (the "Severance
Benefit") equal to 2.99 times (I) Executive's annualized
compensation that would be included in Executive's gross income in
the year in which the first event constituting a change of control
occurs or the taxable year in which the termination occurs, as
applicable, or, if higher, (ii) the average annual compensation
that was included in the gross income of the Executive for the
three (3) most recent taxable years that ended before the date of
termination or the date of the change of control, as applicable,
plus 2.99 times Executive's targeted annual incentive compensation
for the fiscal year in which the event first constituting a change
of control occurs.
Gross income includes, but is not limited to:
(i) base salary;
(ii) annual bonus amounts;
(iii)deferred compensation amounts; and
(iv) the value, in good faith, of share options, restricted
share grants and dividend equivalent rights granted to
the Executive and any other benefits received by the
Executive from the Company, (assuming for purposes of
such calculation that all grants have vested).
For purposes of making the calculation in Section 8(a)(iv) above,
the Board shall make such calculation and shall use the
Black-Scholes pricing model for its calculation; provided,
however, that if the Black-Scholes pricing model cannot be used to
value the types of benefit being valued, the Board shall use any
other reasonable method of calculation based upon the
recommendation of the Company's independent compensation
consultant (or if there is none, an independent compensation
consultant retained by the Board for such purpose.)
However, gross income shall not include untaxed fringe benefits.
Following the occurrence of a Change of Control or termination of
of employment for a reason other than For Cause, the Company will
pay to the Executive the Severance Benefit in immediately
available funds, in United States Dollars, within five business
days after the first occurrence of a Change of Control or
termination, as applicable. In addition, during the Severance
Period, the Company will arrange to provide the Executive Employee
Benefits that are welfare benefits (but not share options, share
purchase, share appreciation, dividend equivalent rights or
similar compensatory benefits) substantially similar to those
which the Executive was receiving or entitled to receive
immediately prior to the Change of Control. Such one year period
will be considered service with the Company for the purpose of
determining service credits and benefits due and payable to the
Executive under the Company's retirement income, supplemental
executive retirement, and other benefit plans of the Company
applicable to the Executive, the Executive's dependents, or the
<PAGE> 43
Executive's beneficiaries immediately prior to the Change of
Control. If and to the extent that any benefit described in the
immediately preceding sentence is not or cannot be paid or
provided under any policy, plan, program or arrangement of the
Company, then the Company will itself pay or provide for the
payment of such Employee Benefits to the Executive, and, if
applicable, the Executive's dependents and beneficiaries. Employee
Benefits otherwise receivable by the Executive pursuant to this
Section 8 will be reduced to the extent comparable welfare
benefits are actually received by the Executive from another
employer during the Severance Period.
There will be no right of set-off or counterclaim in respect of
any claim, debt of obligation against any payment to or benefit
for the Executive provided for in this Agreement, except as
expressly provided herein.
Notwithstanding any other provision hereof, the parties'
respective rights and obligations under this Section 8 and under
Sections 11 and 16 will survive any termination or expiration of
this Agreement following a Change of Control or termination of
employment, other than for cause.
Executive will not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other
employment.
"Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which the Executive is entitled to participate,
including, without limitation, any share option, share purchase,
share appreciation, dividend equivalent rights, savings, pension,
supplemental executive retirement or other retirement income or
welfare benefit, deferred compensation, incentive compensation,
group or other life, health, medical/hospital, or other insurance
(whether funded by actual insurance or self-insured by the
Company), disability, salary continuation, expense reimbursement,
and other employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor
policies, plans, programs or arrangements that may be adopted
hereafter by the Company, providing perquisites, benefits and
service credit for benefits at least as great in the aggregate as
as are payable thereunder prior to a Change of Control.
"Severance Period" means the period of time commencing on the date
of an occurrence of each change of control and continuing until
the earliest of (i) the expiration of one year after each
occurrence of an event constituting a change of control, (ii) the
Executive's death, or (iii) the Executive's attainment of age 65.
(b) TERMINATION BY REASON OF DEATH
If the Employment Term is terminated by reason of Death, the
Executive shall be entitled to receive a severance payment equal
to the Severance Benefit. Vesting of benefits shall be treated as
described in Section 24 of this Agreement.
(c) TERMINATION BY REASON OF DISABILITY
If the Employment Term is terminated by reason of Disability, the
Executive shall be entitled to receive a severance payment equal
to the Severance Benefit. Vesting of benefits shall be treated as
treated as described in Section 24 of this Agreement.
<PAGE> 44
The Executive shall receive, so long as the Disability continues,
to remain eligible for all benefits provided under any long-term
disability program(s) of the Company in effect at the time of such
termination, subject to the terms and conditions of any such
program(s), as may be amended, changed, modified, or terminated
for all employees of the Company.
(d) ADDITIONAL PAYMENTS
(i) Notwithstanding anything in this Agreement to the contrary, in
the event it is determined (as hereafter provided) that any
payment or distribution by the Company to or for the benefit of
the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise
pursuant to or by reason of any other agreement, policy, plan,
program or arrangement, including without limitation any share
option, share appreciation right, dividend equivalent right,
restricted shares of similar right, the lapse or termination of
any restriction on or the vesting or exercise ability of any of
the foregoing (any such payment or distribution, a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue code of 1986, as amended (the "Code") (or any
successor provision thereto), by reason of being considered
"contingent on a change in ownership or control" of the Company,
within the meaning of Section 280G of the Code (or any successor
provision thereto) or to any similar tax imposed by state or local
law, or any interest or penalties with respect to such tax (such
tax or taxes, together with any such interest and penalties, being
hereafter collectively referred to as the "Excise Tax"), then the
Executive will be entitled to receive an additional payment or
payments (collectively, a "Gross-Up Payment"); provided, HOWEVER,
that no Gross-up Payment will be made with respect to the Excise
Tax, if any, attributable to (A) any incentive share option
("ISO") granted prior to the execution of this Agreement or (B)
any share appreciation or similar right, whether or not limited,
granted in tandem with any ISO described in clause (A) of this
sentence. The Gross-Up Payment will be in an amount such that,
after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, the
Executive will have received an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
(ii) Subject to the provisions of Section 8 (d) (vi), all
determinations required to be made under this Section 8(e),
including whether an Excise Tax is payable by the Executive and
the amount of such Excise Tax and whether a Gross-Up Payment is
required to be paid by the Company to the Executive and the amount
of such Gross-Up Payment, if any, will be made by a nationally
recognized accounting firm (the "Accounting Firm") selected by the
Executive in the Executive's sole discretion. The Executive will
direct the Accounting Firm to submit its determination and
detailed supporting calculations to both the Company and the
Executive within 30 calendar days after the Executive's
termination date, and any such other time or times as may be
requested by the Company of the Executive. If the Accounting Firm
determines that any Excise Tax is payable by the Executive, the
Company will pay the required Gross-Up Payment to the Executive
within five business days after receipt of such determination and
calculations with respect to any Payment to the Executive. If the
Accounting firm determines that no Excise Tax is payable by the
Executive, it will, at the same time as it makes such
determination, furnish the Company and the Executive an opinion
that the Executive has substantial authority not to report any
Excise Tax on the Executive's federal, state or local income or
other tax return. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor
provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the
<PAGE> 45
Company should have been made (an "Underpayment"), consistent with
the calculations required to be made hereunder. In the event that
the Company exhausts or fails to pursue its remedies pursuant to
Section 8(d)(vi) and the Executive thereafter is required to make
a payment of any Excise Tax, the Executive will direct the
Accounting Firm to determine the amount of the Underpayment that
has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Executive as
promptly as possible. Any such Underpayment will be promptly paid
by the Company to, or for the benefit of, the Executive within
five business days after receipt of such determination and
calculations.
(iii) The Company and the Executive will each provide the
Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or the Executive, as
the case may be, reasonably requested by the Accounting Firm, and
otherwise cooperate with the Accounting Firm in connection with
the preparation of and issuance of the determinations and
calculations contemplated by Section 8(d)(ii). Any determination
by the Accounting Firm as to the amount of the Gross-Up Payment
will be binding upon the Company and the Executive.
(iv) The federal, state, and local income or other tax returns
filed by the Executive will by prepared and filed on a consistent
basis with the determination of the Accounting Firm with respect
to the Excise Tax payable by the Executive. The Executive will
make proper payment of the amount of any Excise Payment and, at
the request of the Company, provide to the Company true and
correct copies (with any amendments) of the Executive's federal
tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as filed
with the applicable taxing authority, and such other documents
reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Executive's federal income tax return,
or corresponding state or local tax return, if relevant, the
Accounting Firm determines that the amount of the Gross-Up Payment
should be reduced, the Executive will within five business days
pay to the Company the amount of such reduction.
(v) The fees and expenses of the Accounting Firm for its services
in connection with the determinations and calculations
contemplated herein will be borne by the Company. If such fees and
expenses are initially paid by the Executive, the Company will
reimburse the Executive the full amount of such fees and expenses
within five business days after receipt from the Executive of a
statement therefor and reasonable evidence of the Executive's
payment thereof.
(vi) The Executive will notify the Company in writing of any claim
by the Internal Revenue Service or any other taxing authority
that, if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification will be given as promptly as
practicable but no later than 10 business days after the Executive
actually receives notice of such claim and the Executive will
further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to
the extent known by the Executive). The Executive will not pay
such claim prior to the earlier of (i) the expiration if the
30-calendar day period following the date on which the Executive
gives such notice to the Company and (ii) the date that any
payment of amount with respect to such claim is due. If the
Company notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the
Executive will:
<PAGE> 46
a) provide the Company with any written records or documents
in the Executive's possession relating to such claim
reasonably requested by the Company;
b) take such action in connection with contesting such claim
as the Company may reasonably request in writing from
time to time, including without limitation accepting
legal representation with respect to such claim by
attorney competent in respect of the subject matter and
reasonably selected by the Company;
c) cooperate with the Company in good faith in order
effectively to contest such claim; and
d) permit the Company to participate in any proceedings
relating to such claims;
provided, however, that the Company will bear and pay directly all
costs and expenses (including interest and penalties) incurred in
connection with such contest and will indemnify and hold harmless the
Executive, on an after-tax basis, for and against any Excise Tax or
income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of this Section
8(d), the Company will control all proceedings taken in connection
with the contest of any claim contemplated by this Section 8(d)(vi)
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim (provided, however, that the
Executive may participate therein at the Executive's own cost and
expense) and may, at its option, either direct the Executive to pay
the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive will prosecute such contest to a
determination before any administrative tribunal, in a court of
initial jurisdiction, and in one or more appellate courts, as the
Company may determine; provided, however, that is the Company directs
the Executive to pay the tax claimed and sue for a refund, the Company
will advance the amount of such payment to the Executive on an
interest-free basis and will indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income or
other tax, including interest or penalties with respect thereto,
imposed with respect to such advance; and provided further, however,
that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which
the contested amount if claimed to be due is limited solely to such
contested amount. The Company's control of any such contested claim
will be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive will be entitled to
settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(vii) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(d) (vi), the Executive receives any
refund with respect to such claim, the Executive will (subject to the
Company's complying with the requirements of Section 8(e)(vi) pay to
the Company the amount of such refund (together with any interest paid
or credited thereon after (vii) If, after the receipt by the Executive
of an amount advanced by the Company pursuant to any taxes applicable
thereto) within 30 calendar days after such receipt and the Company's
satisfaction of all accrued obligations under this Agreement. If,
after the receipt by the Executive of any amount advanced by the
Company pursuant to Section 8(d) (vi), a determination is made that
the Executive will not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its
intent to contest such determination prior to the expiration of 30
calendar days after such determination, then such advance will be
forgiven and will not be
<PAGE> 47
required to be repaid and the amount of any such advance will offset,
to the extent thereof, the amount of Gross-Up Payment required to be
paid by the Company to the Executive pursuant to this Section 8.
9. CONFIDENTIALITY AND NON-COMPETITION
All information (the "Confidential Information") includes all confidential
information of the Company and/or its subsidiaries, including information
entrusted to the Company and/or any of its subsidiaries by third parties,
not otherwise publicly disclosed or available, other than as a result of
wrongful bisclosure by the Executive, which, during the Employment Term:
(i) is disclosed by any of them to the Executive; or
(ii) the Executive had access or otherwise had reason to
know; or
(iii) was developed or discovered by the Executive.
Confidential Information includes, but is not limited to, whether or not
legended or otherwise identified as "confidential":
(i) property lists, prospective properties lists, and
details of agreement with sellers; and
(ii) acquisition, expansion, marketing, financial, and
other business information and plans; and
(iii) research and development and data related thereto; and
(iv) other compilations of data; and
(v) computer programs and/or records; and
(vi) sources of supply; and
(vii) confidential information developed by consultants and
contractors; and
(viii)purchasing, operating, and other costs data; and
(ix) employee information; and
(x) manuals, memoranda, projections, minutes, plans,
drawings, designs, formula books and specifications.
(a) RESTRICTION ON USE AND DISCLOSURE
The Executive acknowledges that the Confidential Information is
valuable and proprietary to the Company or to third parties which have
entrusted the Company and/or its subsidiaries, and, except as required
by the Executive's Duties, the Executive shall not use, publish,
disseminate, or otherwise disclose any Confidential information
without prior written consent of the Company.
(b) RETURN OF DOCUMENTS
Upon termination of the Executive's employment, the Executive shall
forthwith deliver to the Company all plans, designs, drawings,
<PAGE> 48
specifications, listings, manuals, records, notebooks, and similar
repositories of or containing Confidential Information, including all
copies, then in the Executive's possession or control, whether
prepared by the Executive or others. Upon such termination the
Executive shall retain no copies of any such documents.
(c) RESTRICTION ON COMPETITIVE EMPLOYMENT The term Business shall mean:
(i) the business of the Company and its subsidiaries as
described in the Company's most recent Form 10-K; and
(ii) any other business in which the Company or any of its
subsidiaries is engaged during the Executive's
Employment Term.
The term Territories shall refer to those metropolitan areas in which
the Company owns properties or otherwise is engaged in the Business,
including any areas where the Company has specific plans to acquire or
develop properties within the following six (6) months following the
date of termination or change of control, as applicable, and all
outlying areas located within a thirty (30) mile radius of each such
metropolitan area.
Except as noted in Section 3, Duties, during the Employment Term and
the twelve months (12) months following the termination of this
Agreement (the "Non-Competition Period"), absent the Company's prior
written approval, the Executive shall not, as owner, part-owner,
shareholder, partner, director, principal, agent, employee,
consultant, or otherwise, within the Territories, directly or
indirectly engage or participate in activities relating to, or render
services to or invest in any firm or business engaged or about to
become engaged in, the Business, provided that the Executive may:
(i) engage in the activities as noted in Section 3,
Duties;
(ii) make passive investments in an enterprise engaged in
the Business the shares of ownership of which are
publicly traded if the Executive's investment
constitutes less than 2% of the total equity of such
enterprise.
(d) INDUCEMENT / ENTICEMENT
During the Employment Term and the Non-Competition Period, the
Executive shall not, directly or indirectly:
(i) induce, or attempt to induce, any employees or agents
or consultants of or to the Company or any subsidiary
of the Company to do anything from which the Executive
is restricted by reason of Section 9(a) through 9(c),
inclusive; or
(ii) offer or aid others to offer employment to anyone who
is an employee, agent or consultant of or to the
Company or an subsidiary of the Company at the time of
termination of the Executive.
(e) REDUCTION OF NON-COMPETITION PERIOD
If this Agreement shall be terminated by the Company pursuant to
Section 2(b)(iv), Termination for reason other than For Cause, the
provisions of Sections 9(c) and 9(d) shall terminate on the first
business day following the termination of the Executive.
<PAGE> 49
Unless otherwise provided, the provisions of Sections 9(a) through
9(d), inclusive, shall survive the termination of this Agreement for
the duration of the Non-Competition Period.
10. REMEDIES FOR THE COMPANY
The Executive acknowledges that remedy at law for any breach or attempted
breach of the Executive's obligations under Section 9, Confidentiality and
Non-Competition, may be inadequate, agrees that the Company may be entitled
to specific performance and injunctive and other equitable remedies in case
of any such breach or attempted breach, and further agrees to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or other equitable relief.
The termination of the Employment Term pursuant to Section 2(a)(iii),
Discharge For Cause, shall not be deemed to be a waiver by the Company of
any breach by the Executive of this Agreement or any other obligation owed
the Company, and, notwithstanding such a termination, the Executive shall
be liable for all damages attributable to such a breach.
11. REMEDIES FOR THE EXECUTIVE
In the event the Executive is terminated For Cause and it is ultimately
determined the Company lacked "cause", the:
(i) Executive's termination shall be treated as a
Termination for reason other than For Cause, as it
pertains to Section 8(a); and
(ii) Executive shall reserve the right to seek remedy for
breach of the Agreement by the Company including, but
not limited to, any other such damages as may be
suffered and/or incurred by the Executive, the
Executive's costs incurred during the dispute, and
reasonable attorney's fees in connection with such
dispute; and
(iii)Executive shall receive all Severance Benefits under
Section 8(a), Termination for reason other than For
Cause, with interest of 8% annually on all payments
considered past due from the date at which such
payment would have been made.
12. NO WAIVER
No Waiver or non-action by either party with respect to any breach by the
other party of any provision of this Agreement, nor the waiver or
non-action with respect to the provisions of similar agreement with other
employees or the breach thereof, shall be deemed or construed to be a
waiver of any succeeding breach of such provision, or as a waiver of the
provision itself.
13. INVALID PROVISIONS
Should any portion of this Agreement be adjusted or held invalid,
unenforceable or void, such holding shall not have the effect of
invalidating or voiding the remainder of this Agreement and the parties
hereby agree that the portion so held invalid, unenforceable, or void
shall, if possible, be deemed amended or reduced in scope, or otherwise be
stricken from this Agreement to the extent required for the purposes of
validity and enforcement thereof.
<PAGE> 50
14. SUCCESSOR AND ASSIGNS
Neither the Executive nor the Company may assign its rights, duties, or
obligations hereunder without consent of the other.
15. SURVIVAL OF THE EXECUTIVE'S OBLIGATIONS
Except with respect to any termination under Section 2(b)(iv), the
Executive's obligations under Sections 9 and 10 shall survive regardless of
whether or not the Executive's employment is terminated, voluntarily or
involuntarily, by the employer or the Executive, with or without cause.
16. SURVIVAL OF THE COMPANY'S OBLIGATIONS
The Company's obligations under Sections 8 and 11 shall survive regardless
of whether or not the Executive's employment is terminated, voluntarily or
involuntarily, by the employer or the Executive, with or without cause.
17. PRIOR AGREEMENTS
This Agreement incorporates the entire agreement between both parties with
respect to the subject matter hereof and supersedes all prior agreements,
documents, or other instruments with respect to the matters covered herein.
18. GOVERNING LAW
This Agreement shall be governed by, and interpreted in accordance with the
provisions of, the law of the State of Texas, without reference to
provisions that refer a matter to the law of any other jurisdiction. Each
party hereto hereby irrevocably submits itself to the non-exclusive
personal jurisdiction of the Federal and State courts sitting in Texas.
19. NO ORAL MODIFICATIONS
This Agreement may not be changed or terminated orally, and no change,
termination, or waiver of this Agreement or of any of the provisions herein
contained shall be binding unless made in writing and signed by both
parties, and, in the case of the Company, by a person designated by the
Board.
Without limiting the foregoing, any change or changes, from time to time,
in the Executive's salary or duties or both shall not be, nor be deemed to
be, a change, termination, or waiver of this Agreement or of any of the
provisions herein contained.
20. NOTICES
All notices and other communications required or permitted hereunder shall
be made in writing, and shall be deemed properly given if delivered
personally, mailed by certified mail, postage prepaid and return receipt
requested, sent by facsimile, or sent by Express Mail or Federal Express or
other nationally recognized express delivery service, as follows:
If to the Company or the Board:
Camden Property Trust
Three Greenway Plaza, Suite 1300
Houston, TX 77046
Attention: Board of Trust Managers
If to the Executive:
D. Keith Oden
Three Greenway Plaza, Suite 1300
Houston, TX 77046
<PAGE> 51
Notice given by hand, Express Mail, Federal Express, or other such express
delivery service shall be effective upon actual receipt. Notice given by
facsimile transmission shall be effective upon actual receipt of received
during the recipient's normal business hours, or at the beginning of the
recipient's next business day after receipt if not received during the
recipient's normal business hours. All notices sent by facsimile
transmission shall be confirmed promptly after transmission in writing by
certified mail or personal delivery.
Any party may change any address to which notice shall be given to it by
giving notice as provided above of such change in address.
21. EXECUTIVE'S REPRESENTATION AND WARRANTIES
The Executive represents and warrants that he is legally free to make and
perform this Agreement, that he has no obligation to any other person or
entity that would affect or conflict with any of his obligations hereunder,
and that the complete performance of his obligations hereunder will not
violate any law, regulation, order, or decree of any governmental or
jurisdictional body or contract by which he is bound.
22. EXPENSES; SECURITY
It is the intent of the Company that the Executive not be required to incur
legal fees and the related expenses associated with the interpretation,
enforcement or defense of the Executive's rights to compensation upon a
Change of Control by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, if it should appear to
the Executive that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or any
other person takes or threatens to take any action to declare the agreement
to pay Executive compensation upon a change of control void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the benefits provided
or intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to time to retain counsel of
the Executive's choice, at the expense of the Company as hereinafter
provided, to advise and represent the Executive in connection with any such
interpretation, enforcement or defense, including without limitation the
initiation or defense of any litigation or other legal action, whether by
or against the Company or any Trust Manager, officer, shareholder, or other
person affiliated with the Company, in any jurisdiction. Notwithstanding
any existing or prior attorney-client relationship between the Company and
such counsel, the Company irrevocably consents to the Executive's entering
into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential
relationship will exist between the Executive and such counsel. Without
regard to whether the Executive prevails, in whole or in part, in
connection with any of the foregoing, the Company will pay and be solely
financially responsible for any and all attorneys' and related fees and
expenses incurred by the Executive in connection with any of the foregoing.
<PAGE> 52
23. ENTIRE AGREEMENT
The parties expressly agree that this Agreement is contractual in nature
and not a mere recital, and that it contains all the terms and conditions
of the agreement between the parties with respect to the matters set forth
herein. All prior negotiations, agreements, arrangements, understandings
and statements between the parties relating to the matters set forth herein
that have occurred at any time or contemporaneously with the execution of
this Agreement (including, but not limited to, the Prior Agreement) are
superseded and merger into t his completely integrated Agreement. The
Recitals set forth above shall be deemed to be part of this Agreement.
24. VESTING OF BENEFITS
Notwithstanding anything in this Agreement, the Company's employee benefit
plans, any agreement entered into under such plans, or under any
retirement, pension, profit sharing or other similar plan, upon the
occurrence of a change of control, as defined in Section 2(e), or
termination for reason of death or disability or if Executive is terminated
other than For Cause all deferred or unvested portions of any award made to
Executive under any of the foregoing plans and agreements shall
automatically become fully vested in Executive and shall be in effect and
redeemable by or payable to Executive, or Executive's designated
beneficiary or estate, on the same conditions (other than vesting) as would
have applied had the change of control, or termination for reason of death
or disability or the termination other than For Cause, as applicable, not
occurred, including, but not limited to, the right to exercise any share
options for a period of 10 years from the date of grant. All unvested
awards under the plans shall immediately vest upon the change of control,
or termination for reason of death or disability or if Executive is
terminated other than For Cause and the Executive or Executive's designated
beneficiary or estate shall have the right to exercise any vested awards
during the balance of the awards' term.
EXECUTED as of the date first written above.
CAMDEN PROPERTY TRUST
By: /s/Richard J. Campo
---------------------------------
Name: Richard J. Campo
---------------------------------
Title: Chief Executive Officer
---------------------------------
EXECUTIVE
/s/D. Keith Oden
-----------------------------------
D. Keith Oden
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT 11.1
CAMDEN PROPERTY TRUST
COMPUTATION OF EARNINGS PER COMMON SHARE
Year Ended December 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Weighted Average Common Shares Outstanding 41,174 26,257 14,849
========== ========== ==========
Basic Earnings Per Share $ 1.16 $ 1.46 $ 0.59
========== ========== ==========
DILUTED EARNINGS PER SHARE
Weighted Average Common Shares Outstanding 41,174 26,257 14,849
Shares Issuable from Assumed Conversion of:
Common Share Options and Awards Granted 399 330 130
Minority Interest Units 2,610 1,769
---------- ---------- ----------
Weighted Average Common Shares Outstanding, as Adjusted 44,183 28,356 14,979
========== ========== ==========
Diluted Earnings Per Share $ 1.12 $ 1.41 $ 0.58
========== ========== ==========
EARNINGS FOR BASIC AND DILUTED COMPUTATION
Net Income $ 57,333 $ 38,438 $ 8,713
Less: Dividends on Preferred Shares 9,371 4
---------- ---------- ----------
Net Income to Common Shareholders (Basic Earnings Per Share
Computation) 47,962 38,438 8,709
Dividends on Preferred Shares 4
Minority Interests 1,322 1,655
---------- ---------- ----------
Net Income to Common Shareholders, as Adjusted (Diluted
Earnings Per Share Computation) $ 49,284 $ 40,093 $ 8,713
========== ========== ==========
</TABLE>
<PAGE> 54
EXHIBIT 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
"Comparative Summary of Selected Financial and Property Data" and the
consolidated financial statements and notes thereto appearing elsewhere in this
report. Historical results and trends which might appear should not be taken as
indicative of future operations. 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 rental of the Company's properties, and changes
in financial markets and interest rates impacting the Company's ability to meet
its financing needs and obligations.
BUSINESS
Camden Property Trust, a Houston-based real estate investment trust
("REIT"), and its subsidiaries (collectively, "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, Midwest and Western regions
of the United States. As of December 31, 1998, the Company owned interests in
and operated or was developing 163 multifamily properties containing 56,968
apartment homes located in nine states. These properties had a weighted average
occupancy rate of 93% for the year ended December 31, 1998. Fourteen of the
Company's multifamily properties containing 5,658 apartment homes were under
development at December 31, 1998. The Company has several additional sites which
it intends to develop into multifamily apartment communities.
On April 8, 1998, the Company acquired through a tax-free merger (the
"Oasis Merger"), Oasis Residential, Inc. ("Oasis"), a publicly traded Las
Vegas-based multifamily REIT. The acquisition increased the size of the
Company's portfolio from 100 to 152 completed multifamily properties and from
34,669 to 50,183 apartment homes at the date of acquisition. Upon completion of
ten properties under development at the date of acquisition, the Company's
portfolio would have increased to 54,314 apartment homes in 162 properties. As
provided in the Plan of Merger dated December 16, 1997, as amended, each of the
shares of Oasis common stock outstanding on April 8, 1998 was exchanged for
0.759 share of the Company's common shares. Each share of Oasis Series A
cumulative convertible preferred stock (the "Oasis Preferred Stock") outstanding
on April 8, 1998 was reissued as one Camden Series A Cumulative Convertible
Preferred Share (the "Preferred Shares") with terms and conditions comparable to
the Oasis Preferred Stock. The Company issued 12.4 million common shares and 4.2
million Preferred Shares in exchange for the outstanding Oasis common stock and
outstanding Oasis Preferred Stock, respectively. Approximately $484 million of
Oasis debt, at fair value, was assumed in the merger. In connection with the
Oasis Merger, the Company also acquired the managing member interest in Oasis
Martinique, LLC. The remaining interests (the "Martinique Units") are
exchangeable into 672,490 common shares and are accounted for as a minority
interest. In connection with the Oasis Merger, Camden disclosed its intentions
of entering into a joint venture investment (the "Joint Venture") in order to
transfer into the Joint Venture 19 apartment communities containing 5,119
apartment homes located in Las Vegas (the "Third Party Transaction").
<PAGE> 55
On June 30, 1998, the Company completed the Third Party Transaction for an
aggregate of $248 million with a private limited liability company (the "LLC").
The Company retained a 20% interest in the LLC, which is included in investment
in joint ventures. The Third Party Transaction was funded with capital invested
by the LLC members, the assumption of $9.9 million of existing nonrecourse
indebtedness, the issuance of 17 nonrecourse cross collateralized and cross
defaulted loans totaling $180 million and the issuance of two nonrecourse second
lien mortgages totaling $7 million. The LLC assumed the $190 million of treasury
locks which Camden had entered into during the first quarter of 1998 as a hedge
against interest rate exposure for the LLC. The treasury locks were unwound by
the LLC simultaneously with the completion of the funding for the Third Party
Transaction. Camden used the net proceeds from the Third Party Transaction to
reduce outstanding debt by $124 million, including the $9.9 million of existing
indebtedness noted above, and set aside $112 million into an escrow account
which was used to complete tax-free exchange property acquisitions, retire debt
and repurchase the Company's common shares pursuant to the Company's share
repurchase program. No book gain or loss was recorded by Camden as a result of
the Third Party Transaction. Camden continues to provide property management
services for these assets.
On April 15, 1997, the Company acquired through a tax-free merger, Paragon
Group, Inc. ("Paragon"), a Dallas-based multifamily REIT. The acquisition
increased the size of the Company's portfolio from 53 to 103 multifamily
properties, and from 19,389 to 35,364 apartment homes (the "Paragon
Acquisition"). Each share of Paragon common stock outstanding on April 15, 1997
was exchanged for 0.64 shares of the Company's common shares. The Company issued
9.5 million shares in exchange for all of the outstanding shares of Paragon
common stock and 2.4 million limited partnership units ("OP Units") in Camden
Operating, L.P. (the "Operating Partnership") and assumed approximately $296
million of Paragon debt, at fair value, in connection with the Paragon
Acquisition. The accompanying consolidated financial statements include the
operations of Paragon since April 1, 1997, the effective date of the Paragon
Acquisition for accounting purposes.
<PAGE> 56
The Company's multifamily property portfolio, excluding land held for
future development and joint venture properties not managed by the Company, at
December 31, 1998, 1997 and 1996 is summarized as follows:
<TABLE>
<CAPTION>
1998 (a) 1997 1996
---------------------------- ----------------------------- ------------------------------
Apartment Apartment Apartment
Homes Properties % (b) Homes Properties % (b) Homes Properties % (b)
--------- ------------ ----- ------------ ---------- ----- ---------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Properties
Texas
Houston 6,345 15 13% 6,345 16 18% 6,987 18 36%
Dallas (c) (d) 9,381 26 17 9,381 26 24 6,045 16 31
Austin 1,745 6 4 1,745 6 5 1,745 6 9
Other 1,641 5 3 1,585 5 4 1,585 5 8
----------- ------- ------ ----------- ------ ----- ----------- ------ -------
Total Texas Operating Properties 19,112 52 37 19,056 53 51 16,362 45 84
Arizona 2,326 7 5 1,894 5 5 1,249 3 7
California 1,272 3 3
Colorado (c) 1,972 6 3
Florida 7,261 17 14 6,355 17 18
Kentucky 1,142 5 2 1,142 5 3
Missouri 3,327 8 7 3,487 10 10
Nevada (c) 12,163 41 14
North Carolina (c) (d) 2,735 10 4 2,735 10 6
----------- ------- ------ ----------- ------ ----- ----------- ------ -------
Total Operating Properties 51,310 149 89 34,669 100 93 17,611 48 91
----------- ------- ------ ----------- ------ ----- ----------- ------ -------
Properties Under Development
Texas
Houston 2,213 5 4 1,365 3 4 758 2 4
Dallas 600 1 1 732 2 4
----------- ------- ------ ----------- ------ ----- ----------- ------ -------
Total Texas Development Properties 2,813 6 5 1,365 3 4 1,490 4 8
Arizona 325 1 1 240 1 1 288 1 1
California 380 1 1
Colorado 558 2 1
Florida 1,150 3 2 306 1 1
Kentucky 432 1 1 432 1 1
----------- ------- ------ ----------- ------ ----- ----------- ------ -------
Total Properties Under Development 5,658 14 11 2,343 6 7 1,778 5 9
----------- ------- ------ ----------- ------ ----- ----------- ------ -------
Total Properties 56,968 163 100% 37,012 106 100% 19,389 53 100%
======= ====== ====== ===== ====== =======
Less: Joint Venture
Apartment Homes (c) (d) 6,704 1,264
----------- ----------- -----------
Total Apartment Homes
- Owned 100% 50,264 35,748 19,389
=========== =========== ===========
</TABLE>
(a) Includes the combination of operations at December 31, 1998 of two
adjacent properties in Nevada, which were acquired in the Oasis Merger,
two adjacent properties in Houston and two adjacent properties in Florida.
(b) Based on number of apartment homes owned 100%.
(c) The 1998 figures include properties held in joint ventures as follows: one
property with 708 apartment homes in Dallas and two properties with 556
apartment homes in North Carolina in which the company owns a 44%
interest, one property with 321 apartment homes in Colorado in which the
company owns a 50% interest, and 19 properties with 5,119 apartment homes
in Nevada in which the company owns a 20% interest.
(d) The 1997 figures include properties held in a joint venture as follows:
one property with 708 apartment homes in Dallas and two properties with
556 apartment homes in North Carolina in which the company owns a 44%
interest.
<PAGE> 57
At December 31, 1998, the Company had one property under lease-up as
follows:
<TABLE>
<CAPTION>
Estimated
Product Number of % Leased Date of Date of
Property and Location Type Apartment Homes at 1/27/99 Completion Stabilization
- ----------------------------------------- ---------- ----------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
The Park at Towne Center
Glendale, AZ Garden 240 78% 4Q98 2Q99
</TABLE>
At December 31, 1998, the Company had 14 development properties in
various stages of construction as follows:
<TABLE>
<CAPTION>
Product Number of Estimated Estimated Estimated
Type Apartment Cost Date of Date of
Property and Location Homes ($ millions) * Completion Stabilization
- ------------------------------------------- ------------ ------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Renaissance Pointe II
Orlando, FL Garden 306 $ 17.3 1Q99 3Q99
The Park at Goose Creek
Baytown, TX Affordable 272 11.8 2Q99 4Q99
The Park at Midtown
Houston, TX Urban 337 21.5 2Q99 4Q99
The Park at Interlocken
Denver, CO Garden 340 34.9 3Q99 1Q00
The Park at Holly Springs
Houston, TX Garden 548 37.1 3Q99 3Q00
The Park at Caley
Denver, CO Urban 218 18.3 4Q99 1Q00
The Park at Oxmoor
Louisville, KY Garden 432 22.1 4Q99 3Q00
The Park at Greenway
Houston, TX Urban 756 55.7 4Q99 4Q00
The Park at Arizona Center
Phoenix, AZ Urban 325 22.0 1Q00 3Q00
The Park at Lee Vista
Orlando, FL Garden 492 32.8 1Q00 4Q00
The Park at Mission Viejo
Mission Viejo, CA Garden 380 42.0 2Q00 4Q00
The Park at Farmers Market, Phase I
Dallas, TX Urban 600 45.9 4Q00 3Q01
---------- ----------
5,006 361.4
Marina Pointe II To Be To Be
Tampa, FL Garden 352 25.2 Determined Determined
The Park at Steeplechase To Be To Be
Houston, TX Affordable 300 13.5 Determined Determined
---------- -----------
Total for 14 development properties 5,658 $ 400.1
========== ===========
</TABLE>
* At December 31, 1998, the Company had incurred $182.3 million of the
estimated $400.1 million.
<PAGE> 58
Camden has diversified into other markets in the Southwest region and into
the Southeast, Midwest and Western regions of the United States. At December 31,
1998 and 1997, the Company's investment in the various geographic areas,
excluding investment in joint ventures, was as follows: <TABLE> <CAPTION>
(Dollars in thousands)
1998 1997
------------------- ------------------
<S> <C> <C> <C> <C>
Texas
Houston $ 347,069 14% $ 265,404 19%
Dallas 370,538 15 321,101 23
Austin 67,832 3 66,365 5
Other 57,705 2 53,462 4
------------- ----- ------------ -----
Total Texas Properties 843,144 34 706,332 51
------------- ----- ------------ -----
Arizona 133,047 5 102,520 8
California 139,602 6
Colorado 158,837 7 3,083
Florida 376,235 15 240,008 17
Kentucky 56,954 2 55,210 4
Missouri 169,741 7 173,939 13
Nevada 487,679 20
North Carolina 90,219 4 100,957 7
------------- ----- ------------ -----
Total Properties $ 2,455,458 100% $ 1,382,049 100%
============= ===== ============ =====
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Financial Structure. The Company intends to continue maintaining what
management believes to be a conservative capital structure by: (i) using a
prudent combination of debt, common and preferred equity; (ii) extending and
sequencing the maturity dates of its debt where possible; (iii) managing
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 conservative coverage ratios. The
interest coverage ratio was 3.8 times and 3.6 times for the years ended December
31, 1998 and 1997, respectively. At December 31, 1998 and 1997, 73.2% and 78.9%,
respectively, of the Company's properties (based on invested capital) were
unencumbered.
Liquidity. The Company intends to meet its short-term liquidity
requirements through cash flows provided by operations, its unsecured lines of
credit (the "Unsecured Lines of Credit") described in the Financial Flexibility
section and other short-term borrowings. The Company uses common and preferred
equity capital and senior unsecured debt to refinance maturing secured debt and
borrowings under its Unsecured Lines of Credit. As of December 31, 1998, the
Company had $18 million available under the Unsecured Lines of Credit.
Subsequent to December 31, 1998, the Company added an additional $75 million in
capacity to its Unsecured Lines of Credit, increasing its total capacity to $275
million, raised an additional $39.5 million from the sale of senior unsecured
notes, and completed the private placement of $100 million of its perpetual
preferred units. The Company filed a universal shelf registration statement in
April 1997 providing for the issuance of up to $500 million in equity, debt,
preferred or convertible securities, of which $275 million remains unused.
Additionally, in March 1997 the Company implemented a $196 million medium-term
note program used to provide intermediate and long-term, unsecured
publicly-traded debt financing. 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 partners.
<PAGE> 59
On January 15, 1999, the Company paid a distribution of $0.505 per share
for the fourth quarter of 1998 to all holders of record of Camden's common
shares as of December 22, 1998, and paid an equivalent amount per unit to
holders of OP Units. Total distributions to common shareholders and holders of
OP Units for the year ended December 31, 1998 were $2.02 per share for holders
who held common shares and OP Units for the full year. For the period from
January 1, 1998 through the date of the Oasis Merger, Oasis paid distributions
of $0.4525 per share to common shareholders. The Company determines the amount
of cash available for distribution in accordance with the partnership agreements
and has distributed and intends to continue to make distributions to the holders
of OP Units in amounts equivalent to the per share distributions paid to holders
of common shares. The Company intends to continue shareholder distributions in
accordance with REIT qualification requirements under the federal tax code while
maintaining what management believes to be a conservative payout ratio, and
expects to continue reducing the payout ratio by raising the distributions at a
rate which is less than the funds from operations ("FFO") growth rate.
On February 15, 1999, the Company paid a quarterly dividend on its
Preferred Shares, which were reissued for Oasis Preferred Stock in conjunction
with the merger of Oasis. The dividend in the amount of $0.5625 per share was
paid to all preferred shareholders of record as of December 22, 1998. Total
dividends to holders of Preferred Shares from the date of the Oasis Merger
through December 31, 1998 were $1.6875 per share. For the period from January 1,
1998 through the date of the Oasis Merger, Oasis paid dividends of $0.5625 per
share to preferred shareholders.
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 1998, the Company incurred $193.2
million in development costs and $139.2 million in acquisition costs. In
addition, Camden issued 12.4 million common shares, 4.2 million Preferred Shares
and assumed $484 million of indebtedness, at fair value, to purchase Oasis. The
Company has announced plans to develop 14 additional properties at an aggregate
cost of approximately $400.1 million, of which $182.3 million had been incurred
through December 31, 1998. The Company funds its developments and acquisitions
through a combination of equity capital, partnership units, medium-term notes,
construction loans, other debt securities and the Unsecured Lines of Credit. The
Company also seeks to selectively dispose of assets that are 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 $275.5 million in net proceeds received from these
asset disposals, including the Third Party Transaction, during 1998 were
reinvested in acquisitions and developments, used to retire debt and used to
repurchase the Company's common shares.
The Company's Unsecured Lines of Credit mature July 1999 through July 2000.
Prior to maturity, the Company intends to have these notes extended,
renegotiated or repaid. The scheduled interest rates on the loans currently
range from LIBOR plus 95 basis points to prime. These scheduled rates are
subject to change as the Company's credit ratings change. Advances under the
Unsecured Lines of Credit may be priced at the scheduled rates, or the Company
may enter into bid rate loans ("Bid Rate Loans") with participating banks at
rates below the scheduled rates. 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 Lines of Credit. The Unsecured Lines of Credit are
subject to customary financial covenants and limitations. As an alternative to
its Unsecured Lines of Credit, 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 Lines of Credit bank groups. Such borrowings vary in
term and pricing and are typically priced at interest rates below those
available under the Unsecured Lines of Credit.
As a result of the Oasis Merger, the Company assumed $228 million in
conventional mortgage loans with interest rates currently ranging from 5 3/4% to
8 5/8%. As of December 31, 1998, $201 million of the conventional mortgage loans
assumed remained outstanding.
In conjunction with the Oasis Merger, Camden assumed $150 million in senior
unsecured notes payable issued by Oasis in November 1996. These notes are due in
equal increments in November 2001, 2003, 2006 and bear interest at annual rates
ranging from 6 3/4% to 7 1/4%, payable quarterly.
<PAGE> 60
Proceeds from the Third Party Transaction were used to reduce outstanding
debt by $124 million, including $9.9 million of existing indebtedness and
approximately $114 million on the Unsecured Lines of Credit, and $112 million
was set aside into an escrow account which was used to complete tax-free
exchange property acquisitions, retire debt and repurchase the Company's common
shares.
In October 1998, the Company issued $102 million principal amounts of
senior unsecured notes from its $196 million medium-term note shelf
registration. These fixed rate notes, due in October 2000, bear interest at a
weighted average rate of 7.19 %, payable semiannually on March 15 and September
15. The net proceeds were used to liquidate the $75 million Reset Notes, pay off
certain mortgage notes payable, and reduce indebtedness incurred under the
Unsecured Lines of Credit. At December 31, 1998, $69 million of the medium-term
note program remained unused.
Subsequent to December 31, 1998, the Company issued $39.5 million principal
amounts of senior unsecured notes from its $196 million medium-term note shelf
registration. These fixed rate notes, due in January 2002 through January 2009,
respectively, bear interest at a weighted average rate of 7.07%, payable
semiannually on January 15 and July 15. The net proceeds were used to reduce
indebtedness outstanding under the Unsecured Lines of Credit.
On February 23, 1999, the Operating Partnership issued $100 million of 8.5%
Series B Cumulative Redeemable Perpetual Preferred Units ("Preferred Units").
The Preferred Units are redeemable for cash by the Operating Partnership on or
after the fifth anniversary of issuance at par plus the amount of any
accumulated and unpaid distributions. The Preferred Units are convertible after
10 years by the holder into registered preferred shares of the Company. The
Preferred Units are subordinate to present and future debt of the Operating
Partnership and the Company.
MARKET RISK
The Company uses fixed and floating rate debt to finance acquisitions,
developments and maturing debt. These transactions expose the Company to market
risk related to changes in interest rates. Derivative financial instruments,
specifically interest rate swap agreements, are occasionally used to manage this
risk. The Company currently has a $25 million interest rate swap agreement
designated as a partial hedge of floating rate debt. The swap is scheduled to
mature in July 2000, but 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. The Company's
policy as to the occasional use of derivative financial instruments in managing
market risk exposures is consistent with the prior year and is not expected to
change in future years. The Company does not use derivative financial
instruments for trading purposes.
For fixed rate debt, interest rate changes affect the fair market value but
do not impact net income to common shareholders or cash flows. Conversely, for
floating rate debt, interest rate changes generally do not affect the fair
market value but do impact net income to common shareholders and cash flows,
assuming other factors are held constant.
At December 31, 1998, after adjusting for the effect of the interest rate
swap agreement, Camden had fixed rate debt of $781.3 million and floating rate
debt of $221.3 million. Holding other variables constant (such as debt levels),
a one percentage point variance in interest rates would change the unrealized
fair market value of the fixed rate debt by approximately $30 million. The net
income to common shareholders and cash flows impact on the next year resulting
from a one percentage point variance in interest rates on floating rate debt
would be approximately $2.2 million, holding all other variables constant.
<PAGE> 61
FUNDS FROM OPERATIONS
Management considers FFO to be an appropriate measure of performance of an
equity REIT. The National Association of Real Estate Investment Trusts 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. The Company's definition of FFO also 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, FFO should be
examined in conjunction with net income as presented in the consolidated
financial statements and data included elsewhere in this report. FFO is not
defined by generally accepted accounting principles. 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, FFO as disclosed by other REITs may
not be comparable to the Company's calculation. Camden's FFO for the year ended
December 31, 1998 increased $62.2 million over 1997 primarily due to the Oasis
Merger, the Paragon Acquisition, property acquisitions, developments and
improvements in the performance of the stabilized properties in the portfolio.
The calculation of FFO for the two years ended December 31, 1998 follows:
<TABLE>
<CAPTION>
1998 1997
--------- ----------
(In thousands)
<S> <C> <C>
Net income to common shareholders $ 47,962 $ 38,438
Real estate depreciation 76,740 43,769
Minority interests 1,322 1,655
Real estate depreciation from unconsolidated ventures 2,253 906
Interest on convertible subordinated debentures 317 670
Amortization of deferred costs on convertible debentures 31 88
Preferred share dividends 9,371
Gain on sales of properties (10,170)
Losses related to early retirement of debt 397
--------- ----------
Funds from operations $137,996 $ 75,753
========= ==========
Weighted average number of common and common dilutive and
antidilutive equivalent shares outstanding 46,779 28,882
</TABLE>
RESULTS OF OPERATIONS
Changes in revenues and expenses related to the operating properties from
period to period are primarily due to the Oasis Merger, the Paragon Acquisition,
property acquisitions, developments, dispositions and improvements in the
performance of the stabilized properties in the portfolio. Where appropriate,
comparisons are made on a dollars-per-weighted-average-apartment homes basis in
order to adjust for such changes in the number of apartment homes owned during
each period. Selected weighted average revenues and expenses per operating
apartment home for the three years ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- ------------
<S> <C> <C> <C>
Rental income per apartment home per month $ 591 $ 535 $ 508
Property operating and maintenance per apartment home per year $ 2,290 $ 2,414 $ 2,339
Real estate taxes per apartment home per year $ 742 $ 718 $ 760
Weighted average number of operating apartment homes 42,411 29,280 17,362
</TABLE>
<PAGE> 62
1998 COMPARED TO 1997
The changes in operating results from 1997 to 1998 are primarily due to the
Oasis Merger, the Paragon Acquisition, development of five properties
aggregating 2,074 apartment homes, the acquisition of seven properties
containing 3,123 apartment homes, the disposition of 11 properties containing
2,986 apartment homes and an increase in net operating income generated by the
stabilized portfolio. The weighted average number of apartment homes increased
by 13,131 apartment homes, or 44.8%, from 29,280 to 42,411 for the years ended
December 31, 1997 and 1998, respectively. Total operating properties were 97 and
126 at December 31, 1997 and 1998, respectively. The weighted average number of
apartment homes and the operating properties exclude the impact of the Company's
ownership interest in operating properties and apartment homes owned in joint
ventures.
Rental income per apartment home per month increased $56, or 10.5%, from
$535 to $591 for the years ended December 31, 1997 and 1998, respectively. The
increase was primarily due to increased revenue growth from the stabilized real
estate portfolio, higher average rental rates on properties added to the
portfolio through the Oasis Merger, the seven acquired properties and completion
of new development properties.
Other property income increased $8.6 million from $9.4 million to $18.1
million for the years ended December 31, 1997 and 1998, respectively. This
increase in other property income was due to a larger number of apartment homes
owned and in operation and a $2.9 million increase from new revenue sources such
as telephone, cable and water.
Property operating and maintenance expenses increased $26.5 million, from
$70.7 million to $97.1 million, but decreased as a percent of total property
income from 35.8% to 30.5% for the years ended December 31, 1997 and 1998,
respectively. The Company's operating expense ratios decreased from the prior
year primarily as a result of operating efficiencies resulting from operating a
larger portfolio and the impact of the Company's April 1, 1998 adoption of a new
accounting policy, whereby expenditures for carpet, appliances and HVAC unit
replacements are expensed in the first five years of a property's life and
capitalized thereafter. Prior to the adoption of this policy, the Company had
been expensing these costs. Had this policy change not been adopted, the 1998
operating expense ratio would have been 32.0%.
Real estate taxes increased $10.4 million from $21.0 million to $31.5
million for the years ended December 31, 1997 and 1998, respectively, which
represents an annual increase of $24 per apartment home. Real estate taxes per
apartment home have increased due to increases in the valuations of renovated,
acquired and developed properties, and increases in property tax rates. This
increase per apartment home was partially offset by lower property taxes in the
portfolio added through the Oasis Merger.
General and administrative expenses increased from $4.4 million in 1997 to
$8.0 million in 1998, and increased as a percent of revenues from 2.2% to 2.5%.
The general and administrative expense ratio increase is mainly attributable to
the impact of the Company's March 20, 1998 adoption of Issue No. 97-11,
Accounting for Internal Costs Relating to Real Estate Property Acquisitions,
discussed in Note 2 in the Company's consolidated financial statements, which
was partially offset by efficiencies resulting from operating a larger
portfolio.
Interest expense increased from $28.5 million in 1997 to $50.5 million in
1998 due to increased indebtedness related to the Oasis Merger, the Paragon
Acquisition, completed developments, renovations and property acquisitions. This
increase was partially offset by reductions in average interest rates on the
Company's debt, the equity offering that occurred in July 1997 and property
dispositions. Interest capitalized was $9.9 million and $3.3 million for the
years ended December 31, 1998 and 1997, respectively.
Depreciation and amortization increased from $44.8 million to $78.1
million. This increase was due primarily to the Oasis Merger, the Paragon
Acquisition, developments, renovations and property acquisitions.
Gain on sales of properties decreased $10.2 million due to the December
1997 disposition of four properties containing 1,400 apartment homes.
Dispositions in 1998 resulted in no book gain or loss.
<PAGE> 63
1997 COMPARED TO 1996
The changes in operating results from 1996 to 1997 are primarily due to the
Paragon Acquisition, development of ten properties aggregating 3,823 apartment
homes, and an increase in net operating income generated by the stabilized
portfolio. The weighted average number of apartment homes increased by 11,918
apartment homes, or 68.6%, from 17,362 to 29,280 for the years ended December
31, 1996 and 1997, respectively. Total operating properties were 48 and 97 at
December 31, 1996 and 1997, respectively. The 29,280 weighted average apartment
homes and the 97 operating properties exclude the impact of the Company's
ownership interest in 1,264 apartment homes on three properties owned in joint
ventures.
Rental income per apartment home per month increased $27, or 5.3%, from
$508 to $535 for the years ended December 31, 1996 and 1997, respectively. The
increase was primarily due to increased revenue growth from the stabilized real
estate portfolio, higher average rental rates on properties added to the
portfolio through the Paragon Acquisition and completion of new development
properties.
Other property income increased $5.0 million from $4.5 million to $9.4
million for the years ended December 31, 1996 and 1997, respectively. This
increase in other property income was due to a larger number of apartment homes
owned and in operation and a $2.2 million increase from new revenue sources such
as telephone, cable and water.
Property operating and maintenance expenses increased $30.1 million, from
$40.6 million to $70.7 million, but decreased as a percent of total property
income from 36.8% to 35.8% for the years ended December 31, 1996 and 1997,
respectively. The Company's operating expense ratios decreased from the prior
year primarily as a result of operating efficiencies resulting from operating a
larger portfolio together with savings in utilities and other costs.
Real estate taxes increased $7.8 million from $13.2 million to $21.0
million for the years ended December 31, 1996 and 1997, respectively, which
represents an annual decrease of $42 per apartment home. Real estate taxes per
apartment home have decreased due to lower property taxes for the Company's
properties outside of Texas. This decrease per apartment home was offset by
increases in the valuations of renovated, acquired and developed properties, and
increases in property tax rates.
General and administrative expenses increased from $2.6 million in 1996 to
$4.4 million in 1997, and decreased slightly as a percent of revenues from 2.4%
to 2.2%.
Interest expense increased from $17.3 million in 1996 to $28.5 million in
1997 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 an equity offering that
occurred in July 1997. Interest capitalized was $3.3 million and $4.1 million
for the years ended December 31, 1997 and 1996, respectively.
Depreciation and amortization increased from $23.9 million to $44.8 million
primarily due to the Paragon Acquisition, developments and renovations.
Gain on sales of properties increased $10.2 million due to the gain on
disposition of four properties containing 1,400 apartment homes in December
1997.
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.
<PAGE> 64
YEAR 2000 CONVERSION
Camden has recognized the need to ensure that its computer equipment and
software ("computer systems"), other equipment and operations will not be
adversely impacted by the change to the calendar Year 2000. As such, the Company
has taken steps to identify and resolve potential areas of risk by implementing
a comprehensive Year 2000 action plan. The plan is divided into four phases:
identification, assessment, notification/certification, and testing/contingency
plan development; and includes three major elements: computer systems, other
equipment and third parties. The Company is on the fourth phase for its computer
systems, and the third phase for its other equipment and third party services.
The Company believes that the Year 2000 issue will not pose significant
operating problems for the Company's computer systems, since the significant
computer equipment and software products the Company utilizes are already
compliant and are being converted or modified by March 31, 1999 as part of
system upgrades unrelated to the Year 2000 issue. The Company is in the process
of developing a contingency plan which will permit its primary computer systems
operations to continue if the testing of such conversions and modifications are
not completed by March 31, 1999.
The total cost to the Company of addressing the Year 2000 issues with
respect to its own computer systems, other equipment and operations is expected
to be minimal because the Company is not performing its computer systems
upgrades and conversions to address the Year 2000 issues. Additionally, the
majority of Year 2000 issues are being addressed by use of internal resources
and the Company does not separately track such internal costs which are
principally payroll and related costs. The Company's minimal cost estimate does
not include time and costs that may be incurred by the Company as a result of
the failure of any third parties to become Year 2000 ready or costs to implement
any contingency plans.
The Company is communicating with its key third party service providers and
vendors, including those who have previously sold equipment to the Company, to
obtain information and compliance certificates, if possible, regarding their
state of readiness with respect to the Year 2000 issue. Failure of certain third
parties to remediate Year 2000 issues affecting their respective businesses on a
timely basis, or to implement contingency plans sufficient to permit
uninterrupted continuation of their businesses in the event of a failure of
their systems, could have a material adverse impact on the Company's business
and results of operations. However, failure of third parties to remediate Year
2000 issues affecting the Company's previously purchased equipment is not
expected to have a material adverse impact on the Company's business or results
of operations. Final determination of third party Year 2000 readiness is
expected to be substantially complete in early 1999, however, none of the
responses received from third party service providers as of January 26, 1999
have indicated any problem with bringing their services into Year 2000
compliance. The Company intends to continue to monitor the progress made by
third parties, test critical system interfaces and formulate appropriate
contingency and business continuation plans to address third party issues
identified through its evaluations and assessments.
The Company presently believes that the most reasonably likely worst case
scenario with respect to the Year 2000 issues is the failure of third party
service providers, including utility suppliers and banks, to become Year 2000
compliant. This could result in interruptions in services to the Company's
apartment communities for a period of time and could adversely affect the
Company's access to credit and money markets which, in turn, could result in
loss of normal operating capacity by the Company. If the Company's computer
systems completely fail, the Company would be able to continue affected
functions either manually or through non-Year 2000 compliant systems. The
Company does not believe that the increased costs associated with such
interruptions could exceed $1 million.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, which requires recognition of all
derivatives as either assets or liabilities in the financial statements and
measurement of those instruments at fair value. SFAS No. 133 is effective for
all periods beginning after June 15, 1999. Management is evaluating what, if
any, effect on the Company's consolidated financial statements will occur upon
the implementation of SFAS No. 133.
<PAGE> 65
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Camden Property Trust
We have audited the accompanying consolidated balance sheets of Camden Property
Trust as of December 31, 1998 and 1997, and the related consolidated statements
of operations, shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1998. These financial statements are the
responsibility of the management of Camden Property Trust. Our responsibility is
to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Camden Property Trust at December
31, 1998 and 1997, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
January 26, 1999 (except for Notes 3, 6, 11 and 12 as to which the date is
February 23, 1999)
<PAGE> 66
CAMDEN PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
------------------------------
1998 1997
-------------- ---------------
<S> <C> <C>
Assets
Real estate assets, at cost
Land $ 321,752 $ 182,909
Buildings and improvements 1,917,026 1,155,335
-------------- --------------
2,238,778 1,338,244
Less: accumulated depreciation (167,560) (94,665)
-------------- --------------
Net operating real estate assets 2,071,218 1,243,579
Properties under development, including land 216,680 43,805
Investment in joint ventures 32,484 15,089
-------------- --------------
2,320,382 1,302,473
Accounts receivable - affiliates 831 950
Notes receivable - affiliates 1,800 1,796
Other assets, net 15,036 7,885
Cash and cash equivalents 5,647 6,468
Restricted cash-- escrow deposits 4,286 4,048
-------------- --------------
Total assets $ 2,347,982 $ 1,323,620
============== ==============
Liabilities and Shareholders' Equity
Liabilities
Notes payable:
Unsecured $ 632,923 $ 316,941
Secured 369,645 163,813
Accounts payable 24,180 13,698
Accrued real estate taxes 21,474 16,568
Accrued expenses and other liabilities 28,278 15,881
Distributions payable 25,735 16,805
-------------- --------------
Total liabilities 1,102,235 543,706
Minority Interests 71,783 63,325
7.33% Convertible Subordinated Debentures 3,576 6,025
Shareholders' Equity
Preferred shares of beneficial interest; $2.25 Series A Cumulative Convertible,
$0.01 par value per share, liquidation preference of $25 per share, 10,000
shares authorized, 4,165 issued and outstanding at December 31, 1998 42
Common shares of beneficial interest; $0.01 par value per share; 100,000
shares authorized; 45,123 and 31,954 issued at
December 31, 1998 and 1997, respectively 447 317
Additional paid-in capital 1,299,539 780,738
Distributions in excess of net income (98,897) (63,526)
Unearned restricted share awards (10,039) (6,965)
Less: treasury shares, at cost ` (20,704)
-------------- --------------
Total shareholders' equity 1,170,388 710,564
-------------- --------------
Total liabilities and shareholders' equity $ 2,347,982 $ 1,323,620
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 67
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Rental income $ 300,632 $ 187,928 $ 105,785
Other property income 18,093 9,446 4,453
----------- ----------- -----------
Total property income 318,725 197,374 110,238
Equity in income of joint ventures 1,312 1,141
Fee and asset management 1,552 743 949
Other income 2,250 531 419
----------- ----------- -----------
Total revenues 323,839 199,789 111,606
----------- ----------- -----------
EXPENSES
Property operating and maintenance 97,137 70,679 40,604
Real estate taxes 31,469 21,028 13,192
General and administrative 7,998 4,389 2,631
Interest 50,467 28,537 17,336
Depreciation and amortization 78,113 44,836 23,894
----------- ----------- -----------
Total expenses 265,184 169,469 97,657
----------- ----------- -----------
INCOME BEFORE GAIN ON SALES OF PROPERTIES, LOSSES RELATED TO EARLY
RETIREMENT OF DEBT AND MINORITY INTERESTS 58,655 30,320 13,949
GAIN ON SALES OF PROPERTIES 10,170 115
LOSSES RELATED TO EARLY RETIREMENT OF DEBT (397) (5,351)
----------- ----------- -----------
INCOME BEFORE MINORITY INTERESTS 58,655 40,093 8,713
MINORITY INTERESTS (1,322) (1,655)
----------- ----------- -----------
NET INCOME 57,333 38,438 8,713
PREFERRED SHARE DIVIDENDS (9,371) (4)
----------- ----------- -----------
NET INCOME TO COMMON SHAREHOLDERS $ 47,962 $ 38,438 $ 8,709
=========== =========== ===========
BASIC EARNINGS PER SHARE $ 1.16 $ 1.46 $ 0.59
DILUTED EARNINGS PER SHARE $ 1.12 $ 1.41 $ 0.58
DISTRIBUTIONS DECLARED PER COMMON SHARE $ 2.02 $ 1.96 $ 1.90
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 41,174 26,257 14,849
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON DILUTIVE
EQUIVALENT SHARES OUTSTANDING 44,183 28,356 14,979
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 68
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Preferred Common Unearned
Shares of Shares of Additional Distributions Restricted
Beneficial Beneficial Paid-In in Excess of Share Treasury
Interest Interest Capital Net Income Awards Shares
---------- ---------- ---------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY, JANUARY 1, 1996 $ $ 145 $ 299,808 $ (29,625) $ (2,499) $
Net income to common shareholders 8,709
Public offering of 1,090 common shares 11 27,580
Common shares issued under dividend reinvestment plan 31
Conversion of debentures 6 15,814
Restricted shares issued under benefit plan (82 shares) 1 2,074 (1,062)
Common share options exercised (71 shares) 1 1,272
Conversion of preferred shares 1 1,952
Other (192)
Cash distributions ($1.90 per share) (28,599)
---------- ---------- ---------- ------------- ----------- ---------
SHAREHOLDERS' EQUITY, DECEMBER 31, 1996 165 348,339 (49,515) (3,561)
---------- ---------- ---------- ------------- ----------- ---------
Net income to common shareholders 38,438
Common shares issued in Paragon Acquisition (9,466 shares) 95 262,275
Public offering of 4,830 common shares 48 142,579
Common shares issued under dividend reinvestment plan 38
Conversion of debentures 9 21,061
Restricted shares issued under benefit plan (194 shares) 2 5,519 (3,407)
Restricted shares placed into Rabbi Trust (261 shares) (3) 3
Common share options exercised (33 shares) 1 773
Conversion of Operating Partnership units 154
Cash distributions ($1.96 per share) (52,449)
---------- ---------- ---------- ------------- ----------- ---------
SHAREHOLDERS' EQUITY, DECEMBER 31, 1997 317 780,738 (63,526) (6,965)
---------- ---------- ---------- ------------- ----------- ---------
Net income to common shareholders 47,962
Common shares issued in Oasis Merger (12,393 shares) 124 395,404
Preferred shares issued in Oasis Merger (4,165 shares) 42 104,083
Common shares issued under dividend reinvestment plan 35
Conversion of debentures 1 2,408
Restricted shares issued (232 shares) 2 6,675 (3,076)
Employee Stock Purchase Plan (136)
Restricted shares placed into Rabbi Trust (236 shares) (2) 2
Common share options exercised (82 shares) 1 428
Conversion of Operating Partnership units 4 9,904
Repurchase of common shares (801 shares) (20,704)
Cash distributions ($2.02 per share) (83,333)
--------- ----------- ----------- ------------ ----------- ----------
SHAREHOLDERS' EQUITY, DECEMBER 31, 1998 $ 42 $ 447 $1,299,539 $ (98,897) $ (10,039) $(20,704)
========= =========== =========== ========== =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 69
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
Cash Flow from Operating Activities
Net income $ 57,333 $ 38,438 $ 8,713
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 78,113 44,836 23,894
Equity in income of joint ventures, net of cash received 1,278 929
Gain on sales of properties (10,170) (115)
Losses related to early retirement of debt 397 5,351
Minority interests 1,322 1,655
Accretion of discount on unsecured notes payable 169 142 72
Net change in operating accounts 204 (10,253) 3,352
----------- ----------- ------------
Net cash provided by operating activities 138,419 65,974 41,267
Cash Flow from Investing Activities
Cash of Oasis and Paragon at acquisition 7,253 9,847
Net proceeds from Third Party Transaction 226,128
Increase in real estate assets (335,567) (133,206) (71,288)
Net proceeds from sales of properties 42,513 37,826 29,794
Net proceeds from sale of joint venture 6,841
Increase in investment in joint ventures (4,922)
Decrease in investment in joint ventures 1,478 4,624
Net decrease (increase) in affiliate notes receivable 5,389 7,749 (73)
Other (4,126) (549) (130)
----------- ----------- ------------
Net cash used in investing activities (55,013) (73,709) (41,697)
Cash Flow from Financing Activities
Net increase (decrease) in unsecured lines of credit and short-term borrowings 146,792 31,000 (110,783)
Debt repayments from Third Party Transaction (114,248)
Proceeds from notes payable 152,600 100,000 181,048
Repayment of notes payable (160,225) (206,097) (61,614)
Proceeds from issuance of common shares 142,627 27,591
Distributions to shareholders and minority interests (89,115) (55,514) (27,457)
Repurchase of common shares (20,704)
Payment of loan costs (1,430) (988) (2,253)
Losses related to early retirement of debt (397) (5,351)
Other 2,103 1,206 1,379
----------- ----------- -----------
Net cash (used in) provided by financing activities (84,227) 11,837 2,560
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (821) 4,102 2,130
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,468 2,366 236
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,647 $ 6,468 $2,366
=========== =========== ===========
</TABLE>
<PAGE> 70
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
Supplemental Information
Cash paid for interest, net of interest capitalized $ 51,574 $ 27,155 $ 15,585
Interest capitalized $ 9,929 $ 3,338 $ 4,129
Supplemental Schedule of Noncash Investing and Financing Activities
Acquisition of Oasis (including the Third Party Transaction) and Paragon, net
of cash acquired:
Fair value of assets acquired $ 793,513 $ 650,634
Liabilities assumed 505,721 332,839
Common shares issued 395,528 262,370
Preferred shares issued 104,125
Fair value of minority interest 21,520 65,272
Notes payable assumed upon purchase of properties $ 22,424 $ 16,022
Conversion of 7.33% subordinated debentures to common shares, net $ 2,409 $ 21,070 $ 15,820
Value of shares issued under benefit plans, net $ 6,821 $ 5,372 $ 2,449
Conversion of preferred shares and dividends $ 1,953
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
Camden Property Trust ("Camden" or the "Company") is a Houston-based
self-administered and self-managed real estate investment trust ("REIT")
organized on May 25, 1993. Camden and its subsidiaries 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, Midwest and Western regions of the
United States. As of December 31, 1998, the Company owned interests in, operated
or was developing 163 multifamily properties containing 56,968 apartment homes
located in nine states. Fourteen of the Company's multifamily properties
containing 5,658 apartment homes were under development at December 31, 1998.
The Company has several additional sites which it intends to develop into
multifamily apartment communities.
Acquisition of Oasis Residential, Inc. On April 8, 1998, the Company
acquired through a tax-free merger (the "Oasis Merger"), Oasis Residential, Inc.
("Oasis"), a publicly traded Las Vegas-based multifamily REIT. The acquisition
increased the size of the Company's portfolio from 100 to 152 completed
multifamily properties, and from 34,669 to 50,183 apartment homes at the date of
acquisition. Upon completion of ten properties under development at the date of
acquisition, the Company's portfolio would have increased to 54,314 apartment
homes in 162 properties. As provided in the Plan of Merger dated December 16,
1997, as amended, each of the shares of Oasis common stock outstanding on April
8, 1998 was exchanged for 0.759 share of the Company's common shares. Each share
of Oasis Series A cumulative convertible preferred stock (the "Oasis Preferred
Stock") outstanding on April 8, 1998 was reissued as one Camden Series A
Cumulative Convertible Preferred Share (the "Preferred Shares") with terms and
conditions comparable to the Oasis Preferred Stock. The Company issued 12.4
million common shares and 4.2 million Preferred Shares in exchange for the
outstanding Oasis common stock and outstanding Oasis Preferred Stock,
respectively. Approximately $484 million of Oasis debt, at fair value, was
assumed in the merger. In connection with the Oasis Merger, the Company also
acquired the managing member interest in Oasis Martinique, LLC. The remaining
interests (the "Martinique Units") are exchangeable into 672,490 common shares
and are accounted for as a minority interest. In connection with the Oasis
Merger, Camden disclosed its intentions of entering into a joint venture
investment (the "Joint Venture") in order to transfer into the Joint Venture 19
apartment communities containing 5,119 apartment homes located in Las Vegas (the
"Third Party Transaction").
On June 30, 1998, the Company completed the Third Party Transaction for an
aggregate of $248 million with a private limited liability company (the "LLC").
The Company retained a 20% interest in the LLC, which is included in investment
in joint ventures. The Third Party Transaction was funded with capital invested
by the LLC members, the assumption of $9.9 million of existing nonrecourse
indebtedness, the issuance of 17 nonrecourse cross collateralized and cross
defaulted loans totaling $180 million and the issuance of two nonrecourse second
lien mortgages totaling $7 million. The LLC assumed the $190 million of treasury
locks which Camden had entered into during the first quarter of 1998 as a hedge
against interest rate exposure for the LLC. The treasury locks were unwound by
the LLC simultaneously with the completion of the funding for the Third Party
Transaction. Camden used the net proceeds from the Third Party Transaction to
reduce outstanding debt by $124 million, including the $9.9 million of existing
indebtedness noted above, and set aside $112 million into an escrow account
which was used to complete tax-free exchange property acquisitions, retire debt
and repurchase the Company's common shares pursuant to the Company's share
repurchase program. No book gain or loss was recorded by Camden as a result of
the Third Party Transaction. Camden continues to provide property management
services for these assets.
<PAGE> 72
The Oasis Merger has been recorded under the purchase method of accounting.
In accordance with generally accepted accounting principles, the purchase price
was allocated to the net assets acquired based on their estimated fair values.
No goodwill was recorded in this transaction. The accompanying consolidated
financial statements include the operations of Oasis since April 1, 1998, the
effective date of the Oasis Merger for accounting purposes. Pro forma unaudited
consolidated operating results of the Company for the years ended December 31,
1998 and 1997, assuming that the Oasis Merger and the Third Party Transaction
had occurred as of January 1, 1997, are summarized below (in thousands, except
per share amounts):
Year Ended
December 31,
-----------------------------
1998 1997
------------- --------------
Total revenues $ 337,868 $ 282,274
Net income to common shareholders $ 51,440 $ 59,181
Basic earnings per share $ 1.16 $ 1.53
Diluted earnings per share $ 1.10 $ 1.49
These pro forma results do not purport to be indicative of the results of
operations which actually would have resulted had the Oasis Merger and the Third
Party Transaction been completed on the date indicated, nor are they necessarily
indicative of future operations.
Acquisition of Paragon Group, Inc. On April 15, 1997, the Company acquired
through a tax-free merger, Paragon Group, Inc. ("Paragon"), a Dallas-based
multifamily REIT. The acquisition increased the size of the Company's portfolio
from 53 to 103 multifamily properties, and from 19,389 to 35,364 apartment homes
(the "Paragon Acquisition"). Each share of Paragon common stock outstanding on
April 15, 1997 was exchanged for 0.64 shares of the Company's common shares. The
Company issued 9.5 million shares in exchange for all of the outstanding shares
of Paragon common stock and 2.4 million limited partnership units ("OP Units")
in Camden Operating, L.P. (the "Operating Partnership") and assumed
approximately $296 million of Paragon debt, at fair value, in connection with
the Paragon Acquisition. The accompanying consolidated financial statements
include the operations of Paragon since April 1, 1997, the effective date of the
Paragon Acquisition for accounting purposes.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements of
Camden include the assets, liabilities, and operations of the parent company and
its wholly-owned subsidiaries and partnerships in which its aggregate ownership
is greater than 50%. Those entities owned less than 50% are accounted for using
the equity method. All significant intercompany accounts and transactions have
been eliminated in consolidation. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, results of operations
during the reporting periods and related disclosures. Actual results could
differ from those estimates.
Operating Partnership. Approximately 29.0% of Camden's multifamily
apartment units at December 31, 1998, are held in the Operating Partnership of
which Camden holds 81.56% interest and the sole 1% general partner interest. The
remaining 17.44% of the Operating Partnership interests are held by former
officers, directors and investors in Paragon, who collectively owned 2,000,109
OP Units at December 31, 1998. Minority interests in the accompanying
consolidated financial statements relate to holders of these OP Units and the
Martinique Units described in Note 1. Each OP Unit is redeemable for 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 eight Trust Managers of the Company own OP Units.
<PAGE> 73
Cash and Cash Equivalents. All cash and investments in money market
accounts and other securities with a maturity of three months or less, are
considered to be cash and cash equivalents.
Restricted Cash. Restricted cash mainly consists of escrow deposits held by
lenders for property taxes, insurance and replacement reserves. Substantially
all restricted cash is invested in short-term securities.
Real Estate Assets, at Cost. Real estate assets are carried at cost plus
capitalized carrying charges. Expenditures directly related to the development,
acquisition, and improvement of real estate assets, excluding those costs
prohibited by EITF 97-11 described in the New Accounting Pronouncements section,
are capitalized at cost as land, buildings and improvements. All construction
and carrying costs are capitalized and reported on the balance sheet in
"Projects under development, including land" until such apartment homes 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 apartment homes are considered operating and the Company begins expensing
all items that were previously considered as carrying costs.
If there is an event or change in circumstance that indicates a potential
impairment in the value of a property has occurred, the Company's policy is to
assess any potential impairment by making a comparison of the current and
projected operating cash flows for such property over its remaining useful life,
on an undiscounted basis, to the carrying amount of the property. If such
carrying amounts are in excess of the estimated projected operating cash flows
of the property, the Company would recognize an impairment loss equivalent to an
amount required to adjust the carrying amount to its estimated fair market
value.
The Company capitalized $26.1 million and $13.3 million in 1998 and 1997,
respectively, of renovation and improvement costs which extended the economic
lives and enhanced the earnings of its multifamily properties. If the accounting
policy described below had been adopted as of January 1, 1997, the amounts
capitalized for 1998 and 1997 would have increased to $27.2 million and $17.4
million, respectively.
Effective April 1, 1998, the Company implemented prospectively a new
accounting policy whereby expenditures for carpet, appliances and HVAC unit
replacements are capitalized and depreciated over their estimated useful lives.
Previously, all such replacements had been expensed. The Company believes that
the newly adopted accounting policy is preferable as it is consistent with
standards and practices utilized by the majority of the Company's peers and
provides a better matching of expenses with the related benefit of the
expenditure. The change in accounting principle is inseparable from the effect
of the change in accounting estimate and is therefore treated as a change in
accounting estimate. See New Accounting Pronouncements section for the effect of
this change and the Company's adoption of a new accounting pronouncement on
Camden's financial results for the nine months ended December 31, 1998.
Carrying charges, principally interest and ad valorem taxes, of land under
development and buildings under construction are capitalized as part of projects
under development and buildings and improvements to the extent that such charges
do not cause the carrying value of the asset to exceed its net realizable value.
Capitalized interest was $9.9 million in 1998, $3.3 million in 1997 and $4.1
million in 1996. Capitalized ad valorem taxes were $1.4 million in 1998,
$557,000 in 1997 and $617,000 in 1996.
All buildings and improvements are depreciated over their remaining
estimated useful lives of 10 to 35 years using the straight line method. Capital
improvements subsequent to the initial renovation period are depreciated over
their expected useful lives of 3 to 15 years using the straight line method.
<PAGE> 74
Other Assets, Net. Other assets are amortized over the lives of the asset
or the terms of the related debt on the straight line method. Leasehold
improvements and equipment are depreciated on the straight line method over the
shorter of the expected useful lives or the lease terms which range from 3 to 10
years. Accumulated depreciation and amortization was $4.1 million in 1998 and
$2.9 million in 1997 for other assets, deferred financing, leasehold
improvements and equipment.
Interest Rate Swap Agreements. The differential to be paid or received on
interest rate swap agreements is accrued as interest rates change and is
recognized over the life of the agreements as an increase or decrease in
interest expense. The Company does not use these instruments for trading
purposes, rather it uses them to hedge the impact of interest rate fluctuations
on floating rate debt.
Income Recognition. Rental, other property income, interest and all other
sources of income are recognized as earned.
Rental Operations. Camden owns and operates multifamily apartment homes
that are rented to residents on lease terms ranging from six to thirteen months,
with monthly payments due in advance. None of the properties are subject to rent
control or rent stabilization. Operations of apartment properties acquired are
recorded from the date of acquisition in accordance with the purchase method of
accounting. All operating expenses, excluding depreciation, associated with
occupied apartment homes for properties in the development and leasing phase are
expensed against revenues generated by those apartment homes as they become
occupied. In management's opinion, due to the number of residents, the type and
diversity of submarkets in which the properties operate, and the collection
terms, there is no concentration of credit risk.
Income Taxes and Distributions. Camden has maintained and intends to
maintain its election as a REIT under the Internal Revenue Code of 1986, as
amended. As a result, the Company generally will not be subject to federal
taxation to the extent it distributes 95% of its REIT taxable income to its
shareholders and satisfies certain other requirements. Accordingly, no provision
for federal income taxes has been included in the accompanying consolidated
financial statements.
Taxable income differs from net income for financial reporting purposes due
principally to the timing of the recognition of depreciation expense. This
difference is primarily due to the difference in the book/tax basis of the real
estate assets and the differing methods of depreciation and useful lives of the
assets. During 1998, book depreciation expense exceeded the amount reported for
tax purposes by $19.3 million. As a result of these cumulative book/tax
differences, the net book basis of the Company's real estate assets exceeds its
net tax basis by $344 million at December 31, 1998. At December 31, 1997, the
net book basis exceeded the net tax basis by $85 million.
<PAGE> 75
A schedule of per share distributions paid by the Company to be reported by
the shareholders is set forth in the following table:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Ordinary income $ 1.68 $ 1.30 $ 1.03
20% Long-term capital gain 0.10 0.12
25% Sec. 1250 capital gain 0.24 0.08
Return of capital 0.46 0.87
---------- ---------- ----------
Total $ 2.02 $ 1.96 $ 1.90
========== ========== ==========
Percentage of distributions representing tax preference items. 9.052% 17.013% 24.769%
</TABLE>
Dividends paid to preferred shareholders totaled $1.69 per share for 1998,
with $1.40 representing ordinary income, $0.09 representing 20% long-term
capital gain, and $0.20 representing 25% Sec. 1250 capital gain.
A schedule of 1998 per share distributions paid by Oasis to Oasis
shareholders prior to the Oasis Merger is set forth in the following table:
<TABLE>
<CAPTION>
1998
----------------------------
Common Preferred
------------ ------------
<S> <C> <C>
Ordinary income $ 0.28 $ 0.56
Return of capital 0.17
------------ ------------
Total $ 0.45 $ 0.56
============ ============
</TABLE>
Property Operating and Maintenance Expenses. Property operating and
maintenance expenses included normal repairs and maintenance totaling $21.5
million in 1998, $14.6 million in 1997 and $8.3 million in 1996.
Earnings Per Share. Basic earnings per share has been computed by dividing
net income to common shareholders by the weighted average number of common
shares outstanding. Diluted earnings per share has been computed by dividing net
income to common shareholders (as adjusted) by the weighted average number of
common and common dilutive equivalent shares outstanding.
<PAGE> 76
The following table presents information necessary to calculate basic and
diluted earnings per share for the periods indicated (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Weighted Average Common Shares Outstanding 41,174 26,257 14,849
========== ========== ==========
Basic Earnings Per Share $ 1.16 $ 1.46 $ 0.59
========== ========== ==========
DILUTED EARNINGS PER SHARE
Weighted Average Common Shares Outstanding 41,174 26,257 14,849
Shares Issuable from Assumed Conversion of:
Common Share Options and Awards Granted 399 330 130
Minority Interest Units 2,610 1,769
---------- ---------- ----------
Weighted Average Common Shares Outstanding, as Adjusted 44,183 28,356 14,979
========== ========== ==========
Diluted Earnings Per Share $ 1.12 $ 1.41 $ 0.58
========== ========== ==========
EARNINGS FOR BASIC AND DILUTED COMPUTATION
Net Income $ 57,333 $ 38,438 $ 8,713
Less: Preferred Share Dividends 9,371 4
---------- ---------- ----------
Net Income to Common Shareholders (Basic Earnings Per Share
Computation) 47,962 38,438 8,709
Preferred Share Dividends 4
Minority Interests 1,322 1,655
---------- ---------- ----------
Net Income to Common Shareholders, as Adjusted (Diluted
Earnings Per Share Computation) $ 49,284 $ 40,093 $ 8,713
========== ========== ==========
</TABLE>
Reclassifications. Certain reclassifications have been made to amounts in
prior year financial statements to conform with current year presentations.
New Accounting Pronouncements. In March 1998, the Accounting Standards
Executive Committee ("AcSEC") of the American Institute of Certified Public
Accountants ("AICPA") reached a consensus on Statement of Position ("SOP") No.
98-1, Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use. SOP No. 98-1 is effective for financial statements for fiscal
years beginning after December 15, 1998. The Company believes the adoption of
this SOP will not have a material effect on the Company's consolidated financial
statements.
In March 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") reached a consensus decision on Issue No.
97-11, Accounting for Internal Costs Relating to Real Estate Property
Acquisitions, which requires that internal costs of identifying and acquiring
operating properties be expensed as incurred for transactions entered into on or
after March 20, 1998. Prior to Camden's adoption of this policy, the Company had
been capitalizing such costs. The effect of the Company's adoption of Issue No.
97-11 and the new accounting policy for carpet, appliances and HVAC unit
replacements on the nine months ended December 31, 1998 was to increase the net
income to common shareholders by $3.2 million ($0.08 per basic earnings per
share and $0.07 per diluted earnings per share).
In April 1998, the AcSEC of the AICPA reached a consensus on SOP No. 98-5,
Reporting on the Costs of Start-Up Activities, which provides that costs of
start-up activities and organization costs be expensed as incurred. SOP No. 98-5
is effective for financial statements for fiscal years beginning after December
15, 1998. The Company believes the adoption of this SOP will not have a material
effect on the Company's consolidated financial statements.
<PAGE> 77
In June 1998, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities,
which requires recognition of all derivatives as either assets or liabilities in
the financial statements and measurement of those instruments at fair value.
SFAS No. 133 is effective for all periods beginning after June 15, 1999.
Management is evaluating what, if any, effect on the Company's consolidated
financial statements will occur upon the implementation of SFAS No. 133.
3. NOTES PAYABLE
The following is a summary of the Company's indebtedness:
(In millions)
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
---------- -----------
<S> <C> <C>
Senior Unsecured Notes:
6 5/8% - 7 1/4% Notes, due 2001 - 2006 $ 323.9 $ 174.0
6.92% - 7.23% Medium-Term Notes, due 2000 - 2004 127.0 25.0
Unsecured Lines of Credit and Short-Term Borrowings 182.0 43.0
Reset Notes 75.0
----------- ---------
632.9 317.0
Secured Notes - Mortgage Loans (5 7/10% - 8 5/8%), due 1999-2025 369.7 163.8
----------- ---------
Total notes payable $ 1,002.6 $ 480.8
=========== =========
Floating rate debt included in unsecured notes payable, net of $25 million
hedging agreement (6 1/4% - 7 3/4%) $ 157.0 $ 93.0
Floating rate tax-exempt debt included in mortgage loans (5 7/10% - 5 3/4%) $ 64.3
</TABLE>
As of December 31, 1998, the Company had $18 million available under its
revolving unsecured lines of credit ("Unsecured Lines of Credit"). The weighted
average balance outstanding on the Unsecured Lines of Credit during the year
ended December 31, 1998 was $129 million, with a maximum outstanding balance of
$189 million. In February 1999, the Company added an additional $75 million in
capacity to its Unsecured Lines of Credit, increasing its total capacity to $275
million.
The Unsecured Lines of Credit mature July 1999 through July 2000. Prior to
maturity, the Company intends to have these notes extended, renegotiated or
repaid. The scheduled interest rates on the loans currently range from LIBOR
plus 95 basis points to prime. These scheduled rates are subject to change as
the Company's credit ratings change. Advances under the Unsecured Lines of
Credit may be priced at the scheduled rates, or the Company may enter into bid
rate loans ("Bid Rate Loans") with participating banks at rates below the
scheduled rates. 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 Lines of Credit. The Unsecured Lines of Credit are subject to
customary financial covenants and limitations. As an alternative to its
Unsecured Lines of Credit, 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 Lines of Credit bank groups. Such borrowings vary in
term and pricing and are typically priced at interest rates below those
available under the Unsecured Lines of Credit.
As a result of the Oasis Merger, the Company assumed $228 million in
conventional mortgage loans with interest rates currently ranging from 5 3/4% to
8 5/8%. As of December 31, 1998, $201 million of the conventional mortgage loans
assumed remained outstanding.
In conjunction with the Oasis Merger, Camden assumed $150 million in senior
unsecured notes payable issued by Oasis in November 1996. These notes are due in
equal increments in November 2001, 2003, 2006 and bear interest at annual rates
ranging from 6 3/4% to 7 1/4%, payable quarterly.
<PAGE> 78
Proceeds from the Third Party Transaction were used to reduce outstanding
debt by $124 million, including $9.9 million of existing indebtedness and
approximately $114 million on the Unsecured Lines of Credit, and $112 million
was set aside into an escrow account which was used to complete tax-free
exchange property acquisitions, retire debt and repurchase the Company's common
shares.
In October 1998, the Company issued $102 million principal amounts of
senior unsecured notes from its $196 million medium-term note shelf
registration. These fixed rate notes, due in October 2000, bear interest at a
weighted average rate of 7.19%, payable semiannually on March 15 and September
15. The net proceeds were used to liquidate the $75 million Reset Notes, pay off
certain mortgage notes payable, and reduce indebtedness incurred under the
Unsecured Lines of Credit.
At December 31, 1998, the Company maintained 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 Lines of Credit and
other floating rate indebtedness.
At December 31, 1998, the weighted average interest rate on floating rate
debt was 6.6%.
Subsequent to December 31, 1998, the Company issued $39.5 million principal
amounts of senior unsecured notes from its $196 million medium-term note shelf
registration. These fixed rate notes, due in January 2002 through January 2009,
respectively, bear interest at a weighted average rate of 7.07%, payable
semiannually on January 15 and July 15. The net proceeds were used to reduce
indebtedness outstanding under the Unsecured Lines of Credit.
Scheduled principal repayments on all loans outstanding at December 31,
1998 over the next five years are $18.6 million in 1999, $295.6 million in 2000,
$167.7 million in 2001, $6.2 million in 2002, $125.7 million in 2003 and $388.8
million thereafter.
4. CONVERTIBLE SUBORDINATED DEBENTURES
In April 1994, the Company issued $86.3 million aggregate principal amount
of 7.33% Convertible Subordinated Debentures due 2001 (the "Debentures"). The
Debentures are convertible at any time prior to maturity into common shares of
beneficial interest, $0.01 par value, of the Company at a conversion price of
$24 per share, subject to adjustment under certain circumstances. The Debentures
will not be redeemable by the Company prior to maturity, except in certain
circumstances intended to maintain the Company's status as a REIT. Interest on
the Debentures is payable on April 1 and October 1 of each year. The Debentures
are unsecured and subordinated to present and future senior debt and will be
effectively subordinated to all debt and other liabilities of the Company. As of
December 31, 1998, $82.7 million in principal amount of the Debentures had been
converted to 3.4 million common shares. For the converted Debentures, the earned
but unpaid interest was forfeited by the Debenture holders in accordance with
the Indenture and the unpaid interest payable was credited to additional
paid-in-capital. In addition, $3.2 million of unamortized Debenture issue costs
have been reclassified to additional paid-in-capital. Had all these converted
Debentures converted as of the beginning of the period, basic earnings per share
would have been $1.17, $1.46 and $0.62 per share for the years ended December
31, 1998, 1997 and 1996, respectively. Diluted earnings per share would have
been $1.12, $1.41 and $0.62 per share for the years ended December 31, 1998,
1997 and 1996, respectively. Deferred Debenture issue costs of $58,000 and
$142,000 remained outstanding at December 31, 1998 and 1997, respectively, and
are being amortized over the life of the Debentures.
<PAGE> 79
5. INCENTIVE AND BENEFIT PLANS
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB No. 25") and related
interpretations in accounting for its share-based compensation. Under APB No.
25, since the exercise price of employee share options equals the market price
of the Company's shares at the date of grant, no compensation expense is
recorded. Restricted shares are recorded to compensation expense over the
vesting periods based on the market value on the date of grant, and no
compensation expense is recorded for the Company's Employee Stock Purchase Plan
("ESPP"), since the ESPP is considered non-compensatory. The Company has adopted
the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based
Compensation.
Incentive Plan. The Company has a non-compensatory option plan (the "Plan")
which was amended in the second quarter of 1997 by the Company's shareholders
and trust managers. This amendment 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. Compensation awards that can be granted under
the Plan include various forms of incentive awards including incentive share
options, non-qualified share options and restricted share awards (collectively,
the "Incentive Awards"). The class of eligible persons that can receive grants
of Incentive Awards under the Plan consists of non-employee trust managers, key
employees, consultants, and directors of subsidiaries as determined by a
committee of the Board of Trust Managers (the "Committee") of the Company. No
Incentive Awards may be granted after May 27, 2003.
Following is a summary of the activity of the Plan for the three years
ended December 31, 1998:
<TABLE>
<CAPTION>
Shares
Available for
Issuance Options and Restricted Shares
------------- ---------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
1998 1997 1996
1998 1998 Price 1997 Price 1996 Price
------------- ----------- ----------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1 1,748,983 1,303,849 $ 24.94 843,360 $ 23.34 870,835 $ 23.12
Current Year Share Adjustment
Due to Plan Amendment 1,165,618
Options
Granted (1,657,008) 1,657,008 29.32 310,050 26.99
Exercised (82,327) 22.96 (33,042) 23.39 (71,450) 22.35
Forfeited 271,538 (271,538) 23.57 (4,333) 24.00 (54,650) 23.71
------------- ----------- ----------- ----------- ----------- ------------ ---------
Net Options (1,385,470) 1,303,143 30.92 272,675 27.47 (126,100) 22.94
------------- ----------- ----------- ----------- ----------- ------------ ---------
Restricted Shares
Granted (248,769) 248,769 29.06 193,724 28.42 124,341 24.73
Forfeited (17,262) 27.67 (5,910) 26.39 (25,716) 24.37
------------- ----------- ----------- ----------- ----------- ------------ ---------
Net Restricted Shares (248,769) 231,507 29.16 187,814 28.48 98,625 24.83
------------- ----------- ----------- ----------- ----------- ------------ ---------
Balance at December 31 1,280,362 2,838,499 $ 28.03 1,303,849 $ 24.94 843,360 $ 23.34
============= =========== =========== =========== =========== ============ =========
Exercisable options at December 31 586,607 $ 26.15 565,600 $ 22.95 533,617 $ 22.86
Vested restricted shares at December 31 213,782 $ 25.20 123,341 $ 24.46 56,781 $ 23.96
</TABLE>
Options are exercisable, subject to the terms and conditions of the Plan,
in increments of 33.33% per year on each of the first three anniversaries of the
date of grant. The Plan provides that the exercise price of an option (other
than non-employee trust manager options) will be determined by the Committee on
the day of grant and
<PAGE> 80
to date all options have been granted at an exercise price which equals the fair
market value on the date of grant. Options exercised during 1998 were exercised
at prices ranging from $22 to $24 per share. At December 31, 1998, options
outstanding were at prices ranging from $22 to $29.44 per share. Such options
have a weighted average remaining contractual life of nine years.
The Company converted all unexercised Oasis stock options issued under the
former Oasis stock incentive plans that are held by former employees of Oasis
into 894,111 options to purchase Camden common shares based on the 0.759
exchange ratio described in Note 1. The options are exercisable at prices
ranging from $28.66 to $33.76. All of the Oasis options became fully vested upon
conversion, are exercisable, and have a weighted average remaining contractual
life of six years. These options are exercisable at a weighted average price of
$30.29.
The fair value of each option grant, excluding the Oasis stock options, was
estimated on the date of grant utilizing the Black-Scholes option pricing model
with the following weighted average assumptions used for grants in 1998 and
1997, respectively: risk-free interest rates ranging from 5.5% to 5.6% and 6.3%
to 6.9%, expected life of ten years, dividend yield of 7.8% and 6.3%, and
expected share price volatility of 13.9% and 14.4%. The weighted average fair
value of options granted in 1998 and 1997, respectively, was $1.27 per share and
$2.63 per share.
Restricted shares have vesting periods of up to five years. The
compensation cost for restricted shares has been appropriately recognized at
fair market value of the Company's shares.
Employee Stock Purchase Plan. In July 1997, the Company established and
commenced an ESPP 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 on the
open market 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. No
compensation expense was recognized for the difference in price paid by
employees and the fair market value of the Company's shares at the date of
purchase. There were 32,678 and 0 shares purchased under the ESPP during 1998
and 1997, respectively. The weighted average fair value of ESPP shares purchased
in 1998 was $30.41 per share. On January 4, 1999, 31,761 shares were purchased
under the ESPP related to the 1998 Plan Year.
If the Company applied the recognition provisions of SFAS No. 123 to its
option grants and ESPP, the Company's net income to common shareholders and
related basic and diluted earnings per share would be as follows (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------------
1998 1997
----------- ----------
<S> <C> <C>
Net income to common shareholders $ 47,360 $ 38,381
Basic earnings per share $ 1.15 $ 1.46
Diluted earnings per share $ 1.10 $ 1.41
</TABLE>
The Company did not grant any option awards in 1996. The effects of
applying SFAS No. 123 in this pro forma disclosure are not indicative of future
amounts.
Rabbi Trust. In February 1997, the Company established a rabbi trust (the
"Rabbi Trust"), in which salary and bonus amounts awarded to certain officers
under the Key Employee Share Option Plan and restricted shares awarded to
certain officers may be deposited. The Company accounts for the Rabbi Trust
similar to a compensatory stock option plan. At December 31, 1998, approximately
497,000 restricted shares were held in the Rabbi Trust.
<PAGE> 81
401(k) Savings Plan. The Company has a 401(k) savings plan (the "Savings
Plan") which is a voluntary defined contribution plan. Under the Savings Plan,
every employee is eligible to participate beginning on the earlier of January 1
or July 1 following the date the employee has completed six months of continuous
service with the Company. Each participant may make contributions to the Savings
Plan by means of a pre-tax salary deferral which may not be less than 1% nor
more than 15% of the participant's compensation. The federal tax code limits the
annual amount of salary deferrals that may be made by any participant. The
Company may make matching contributions on the participant's behalf. A
participant's salary deferral contribution will always be 100% vested and
nonforfeitable. A participant will become vested in the Company's matching
contributions 33.33% after one year of service, 66.67% after two years of
service and 100% after three or more years of service. Expenses under the
Savings Plan were not material.
6. COMMON SHARE REPURCHASE PROGRAM
In September 1998, the Board of Trust Managers authorized the Company to
repurchase up to $50 million of Camden's common shares through open market
purchases and private transactions. At December 31, 1998 the Company had
repurchased 801,400 common shares for a total cost of $20.7 million. As of
February 23, 1999, an additional 1,142,310 shares were purchased with the
remaining $29.3 million.
7. CONVERTIBLE PREFERRED SHARES
The 4,165,000 Preferred Shares reissued in conjunction with the Oasis
Merger pay a cumulative dividend quarterly in arrears in an amount equal to
$2.25 per share per annum. The Preferred Shares generally have no voting rights
and have a liquidation preference of $25 per share plus accrued and unpaid
distributions. The Preferred Shares are convertible at the option of the holder
at any time into common shares at a conversion price of $32.4638 per common
share (equivalent to a conversion rate of 0.7701 per common share for each
Preferred Share), subject to adjustment in certain circumstances. The Preferred
Shares are not redeemable by the Company prior to April 30, 2001.
8. RELATED PARTY TRANSACTIONS
Camden Connection, Inc. ("CCI") (formerly Apartment Connection, Inc.) is a
nonqualified-REIT subsidiary. CCI was established to act as a leasing agent
providing tenants for apartment owners in Houston, including properties owned by
the Company. Locator fees paid by the Company to CCI were $79,000, and $136,000
for the years ended 1997, and 1996, respectively. The Company made an unsecured
working capital revolving line of credit available to CCI, which was renewable
annually. The loan had a maximum commitment of $1.2 million and earned interest
at a fixed rate of 7.5% per annum. During 1997, the operations of CCI were sold
and the loan was paid off.
Two of the Company's executive officers (the "Executives") have loans
totaling $1.8 million with one of the Company's nonqualified-REIT subsidiaries.
The Executives utilized amounts received from these loans to purchase common
shares of the Company. The loans mature in April of 1999 and bear interest at
the fixed rate of 7.0%. These loans are non-recourse, but are secured by a
pledge of such common shares, and do not require any prepayments of principal
until maturity. The Company is currently in the process of renegotiating the
maturity date and interest rate terms of these loans with the Executives.
In connection with the Paragon Acquisition, Oasis Merger and the Third
Party Transaction, the Company began performing residential services for owners
of affiliated properties. Management fees earned on the properties amounted to
$583,000 and $279,000 for the years ended December 31, 1998 and 1997,
respectively.
Prior to 1997, the Company had management agreements in which the
Executives had 1% economic interests with respect to four properties. Fees
earned amounted to $428,000 for the year ended 1996. Although the management
agreements were not the result of arm's length negotiations, the Company
believes that they were no more favorable to the owners than the fees that would
have been paid to unaffiliated third parties under similar circumstances.
<PAGE> 82
In connection with the Oasis Merger, the Company entered into consulting
agreements with two former Oasis executives, one of whom currently serves as a
trust manager of the Company, to locate potential investment opportunities in
California through Camden Capital, Inc., a subsidiary of the Company. During
1998, the Company paid consulting fees totaling $340,000 to these executives. At
December 31, 1998, Camden Capital had invested approximately $4.9 million in
three operating properties and one development property held in two joint
ventures which the Company does not manage.
9. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
SFAS No. 107 requires disclosure about fair value for all financial
instruments, whether or not recognized, for financial statement purposes.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 1998 and December 31,
1997. Considerable judgment is necessary to interpret market data and develop
estimated fair values. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could obtain on disposition of
the financial instruments. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
As of December 31, 1998 and 1997, management estimates that the fair value
of (i) cash and cash equivalents, receivables, accounts payable, accrued
expenses and other liabilities and distributions payable are carried at amounts
which reasonably approximate their fair value; and (ii) based upon the Company's
effective borrowing rate for issuance of debt with similar terms and remaining
maturities, the carrying amounts of fixed rate debt approximate fair value.
The Company is exposed to credit risk in the event of nonperformance by
counterparties to its interest rate swap agreements, but has no off-balance
sheet risk of loss. The Company anticipates that its counter parties will fully
perform their obligations under the agreements.
10. 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>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Decrease (increase) in assets:
Accounts receivable - affiliates $ 1,496 $ 853 $ 210
Other assets, net 1,518 2,046 221
Restricted cash - escrow deposits 1,272 (1,733) 929
Increase (decrease) in liabilities:
Accounts payable 11,570 434 (788)
Accrued real estate taxes 3,879 842 1,381
Accrued expenses and other liabilities (19,531) (12,695) 1,399
------------ ------------ ------------
Net change in operating accounts $ 204 $ (10,253) $ 3,352
============ ============ ============
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
Construction Contracts. As of December 31, 1998, the Company was obligated
for approximately $124.2 million of additional expenditures (a substantial
amount of which is to be provided by debt).
<PAGE> 83
Lease Commitments. At December 31, 1998, Camden had long-term leases
covering certain land, office facilities and equipment. Rental expense totaled
$1.0 million in 1998, $783,000 in 1997 and $475,000 in 1996. Minimum annual
rental commitments for the years ending December 31, 1999 through 2003 are $1.0
million, $982,000, $916,000, $899,000 and $935,000, respectively, and $9.6
million in the aggregate thereafter.
Employment Agreements. The Company has employment agreements with six of
its senior officers, the terms of which expire at various times through August
20, 1999. Such agreements provide for minimum salary levels as well as various
incentive compensation arrangements, which are payable based on the attainment
of specific goals. The agreements also provide for severance payments in the
event certain situations occur such as termination without cause or a change of
control. The severance payments vary based on the officer's position and amount
to one times the current salary base for four of the officers and 2.99 times the
average annual compensation over the previous three fiscal years for the two
remaining officers. Six months prior to expiration, unless notification of
termination is given by the senior officers, these agreements extend for one
year from the date of expiration.
Contingencies. Prior to our merger with Oasis, Oasis had been contacted by
certain regulatory agencies with regards to alleged failures to comply with the
Fair Housing Amendments Act (the "Fair Housing Act") as it pertained to nine
properties (seven of which the Company currently owns) constructed for first
occupancy after March 31, 1991. On February 1, 1999, the Justice Department
filed a lawsuit against us in the United States District Court for the District
of Nevada alleging (1) that the design and construction of these properties
violates the Fair Housing Act and (2) that the Company, through the merger with
Oasis, has discriminated in the rental of dwellings to persons because of
handicap. The complaint requests an order that (i) declares that the defendant's
policies and practices violate the Fair Housing Act; (ii) enjoins the Company
from (a) failing or refusing, to the extent possible, to bring the dwelling
units and public use and common use areas at these properties and other covered
units that it has designed and/or constructed into compliance with the Fair
Housing Act, (b) failing or refusing to take such affirmative steps as may be
necessary to restore, as nearly as possible, the alleged victims of the
defendants alleged unlawful practices to positions they would have been in but
for the discriminatory conduct and (c) designing or constructing any covered
multi-family dwellings in the future that do not contain the accessibility and
adaptability features set forth in the Fair Housing Act; and requires the
Company to pay damages, including punitive damages, and a civil penalty.
The Company is currently inspecting these properties to determine the
extent of the alleged noncompliance and the changes that may be necessitated. At
this time, the Company is not able to provide an estimate of costs and expenses
associated with this matter. There can be no assurance that the Company will be
successful in the defense of the Justice Department action. If this lawsuit is
successful, the Company could suffer a material adverse impact.
Camden is subject to various legal proceedings and claims that arise in the
ordinary course of business. These matters are generally covered by insurance.
While the resolution of these matters cannot be predicted with certainty,
management believes that the final outcome of such matters will not have a
material adverse effect on the consolidated financial statements of Camden.
12. SUBSEQUENT EVENTS
On February 23, 1999, the Operating Partnership issued $100 million of 8.5%
Series B Cumulative Redeemable Perpetual Preferred Units ("Preferred Units").
The Preferred Units are redeemable for cash by the Operating Partnership on or
after the fifth anniversary of issuance at par plus the amount of any
accumulated and unpaid distributions. The Preferred Units are convertible after
10 years by the holder into registered preferred shares of the Company. The
Preferred Units are subordinated to present and future debt of the Operating
Partnership and the Company.
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 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 time to evaluate the properties
and conduct its due diligence and during which time the purchaser will have the
ability to terminate the contracts without penalty or forfeiture of any deposit
<PAGE> 84
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 for the purchase of
land for development. 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.
The Company seeks to selectively dispose of assets that are 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.
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the years ended December 31, 1998
and 1997 are as follows:
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth Total
---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1998**:
Revenues $ 58,592 $ 91,587 $ 86,549 $ 87,111 $ 323,839
Net income to common shareholders 8,961 9,568 14,650 14,783 47,962
Basic earnings per share 0.28 0.22 0.33 0.33 1.16
Diluted earnings per share 0.27 0.21 0.31 0.32 1.12
1997**:
Revenues $ 29,472 $ 54,072 $ 56,939 $ 59,306 $ 199,789
Net income to common shareholders 4,064 6,429 8,260 19,685* 38,438
Basic earnings per share 0.25 0.24 0.27 0.62* 1.46
Diluted earnings per share 0.24 0.24 0.27 0.59* 1.41
</TABLE>
* Includes a $10,170 or $0.32 basic earnings and $0.29 diluted earnings per
share impact related to gain on sales of properties.
** Includes results of the Paragon Acquisition and the Oasis Merger beginning
April 1, 1997 and 1998, respectively.
14. PRICE RANGE OF COMMON SHARES (UNAUDITED)
The high and low sales prices per share of the Company's common shares, as
reported on the New York Stock Exchange composite tape, and distributions per
share declared for the quarters indicated were as follows:
<TABLE>
<CAPTION>
High Low Distributions
------------- ------------- ------------------
<S> <C> <C> <C>
1998:
First $ 30 9/16 $ 28 5/8 $ 0.505
Second 31 1/16 27 15/16 0.505
Third 30 7/16 25 0.505
Fourth 27 7/8 24 1/2 0.505
1997:
First $ 28 3/4 $ 26 3/4 $ 0.490
Second 31 5/8 26 1/2 0.490
Third 31 5/8 28 5/8 0.490
Fourth 33 3/16 29 1/4 0.490
</TABLE>
<PAGE> 85
CAMDEN PROPERTY TRUST
COMPARATIVE SUMMARY OF SELECTED FINANCIAL AND PROPERTY DATA
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------
1998* 1997** 1996 1995 1994
------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING DATA
Revenues:
Rental income $ 300,632 $ 187,928 $ 105,785 $ 92,275 $ 71,468
Other property income 18,093 9,446 4,453 3,617 2,811
------------- ------------- ----------- ----------- -----------
Total property income 318,725 197,374 110,238 95,892 74,279
Equity in income of joint ventures 1,312 1,141
Fee and asset management 1,552 743 949 1,029 721
Other income 2,250 531 419 353 456
------------- ------------- ----------- ----------- -----------
Total revenues 323,839 199,789 111,606 97,274 75,456
------------- ------------- ----------- ----------- -----------
Expenses
Property operating and maintenance 97,137 70,679 40,604 37,093 29,352
Real estate taxes 31,469 21,028 13,192 11,481 8,962
General and administrative 7,998 4,389 2,631 2,263 2,574
Interest 50,467 28,537 17,336 13,843 8,807
Depreciation and amortization 78,113 44,836 23,894 20,264 16,239
------------- ------------- ----------- ----------- -----------
Total expenses 265,184 169,469 97,657 84,944 65,934
------------- ------------- ----------- ----------- -----------
Income before gain on sales of properties, losses related
to early retirement of debt and minority interests 58,655 30,320 13,949 12,330 9,522
Gain on sales of properties 10,170 115
Losses related to early retirement of debt (397) (5,351)
------------- ------------- ----------- ---------- -----------
Income before minority interests 58,655 40,093 8,713 12,330 9,522
Minority interests (1,322) (1,655)
------------- ------------- ----------- ---------- -----------
Net income 57,333 38,438 8,713 12,330 9,522
Preferred share dividends (9,371) (4) (39) (20)
------------- ------------- ----------- ---------- -----------
Net income to common shareholders $ 47,962 $ 38,438 $ 8,709 $ 12,291 $ 9,502
============= ============= =========== =========== ===========
Basic earnings per share $ 1.16 $ 1.46 $ 0.59 $ 0.86 $ 0.78
Diluted earnings per share $ 1.12 $ 1.41 $ 0.58 $ 0.86 $ 0.77
Distributions per common share $ 2.02 $ 1.96 $ 1.90 $ 1.84 $ 1.76
Weighted average number of common shares outstanding 41,174 26,257 14,849 14,325 12,188
Weighted average number of common and common
dilutive equivalent shares outstanding 44,183 28,356 14,979 14,414 12,310
BALANCE SHEET DATA (AT END OF PERIOD)
Real estate assets $ 2,487,942 $ 1,397,138 $ 646,545 $ 607,598 $ 510,324
Accumulated depreciation (167,560) (94,665) (56,369) (36,800) (17,731)
Total assets 2,347,982 1,323,620 603,510 582,352 504,284
Notes payable 1,002,568 480,754 244,182 235,459 149,547
Minority interests 71,783 63,325
Convertible subordinated debentures 3,576 6,025 27,702 44,050 47,800
Series A Preferred Shares issued in 1993 1,950 1,950
Shareholders' Equity 1,170,388 710,564 295,428 267,829 277,604
Common shares outstanding 43,825 31,694 16,521 14,514 14,273
</TABLE>
<PAGE> 86
CAMDEN PROPERTY TRUST
COMPARATIVE SUMMARY OF SELECTED FINANCIAL AND PROPERTY DATA (CONTINUED)
(In thousands, except property data amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------
1998* 1997** 1996 1995 1994
------------ ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
OTHER DATA
Cash flows provided by (used in):
Operating activities $ 138,419 $ 65,974 $ 41,267 $ 37,594 $ 33,560
Investing activities (55,013) (73,709) (41,697) (97,003) (198,0877)
Financing activities (84,227) 11,837 2,560 59,404 159,388
Funds from operations*** 137,996 75,753 39,999 35,260 28,604
PROPERTY DATA
Number of operating properties (at end of period) 149 100 48 50 48
Number of operating apartment homes (at end of period) 51,310 34,669 17,611 16,742 15,783
Number of operating apartment homes (weighted average) 42,411 29,280 17,362 16,412 13,694
Weighted average monthly total property
income per apartment home $ 626 $ 562 $ 529 $ 487 $ 452
Properties under development (at end of period) 14 6 5 9 8
</TABLE>
*Effective April 1, 1998 the Company acquired Oasis.
**Effective April 1, 1997 the Company acquired Paragon.
***Management considers FFO to be an appropriate measure of the 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. Prior to March 1995 the NAREIT definition
of FFO required the add back of non-real estate depreciation and
amortization, such as loan cost amortization. Camden adopted the new FFO
definition prescribed by NAREIT during 1995. The Company's definition of
FFO also 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, FFO should be examined in conjunction with net
income as presented in the consolidated financial statements and data
included elsewhere in this report. FFO is not defined by generally
accepted accounting principles. 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, FFO as disclosed by other REIT's may
not be comparable to the Company's calculation.
<PAGE> 87
EXHIBIT 21.1
<TABLE>
<CAPTION>
State of
Incorporation/ Name Under Which
Names of Subsidiaries Organization Business is Done
- -------------------------------------------------------- ----------------------- -----------------------------------
<S> <C> <C>
1. Camden Operating, L.P. Delaware Camden Operating, L.P.
2. Camden USA, Inc. Delaware Camden USA, Inc.
</TABLE>
<PAGE> 88
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-80230 filed on June 15, 1994, No. 333-32569 filed on July 31, 1997 and No.
333-57565 filed on June 24, 1998, each on Form S-8, Amendment No. 2 to No.
33-84658 filed on March 30, 1995, Amendment No. 1 to No. 33-84536 filed on March
30, 1995, Amendment No. 1 to No. 333-24637 filed on April 14, 1997, No.
333-25637 filed on April 22, 1997 and Amendment No. 1 to No. 333-70295 filed on
January 8, 1999, each on Form S-3, of Camden Property Trust of our report dated
January 26, 1999 (except for Notes 3, 6, 11 and 12 as to which the date is
February 23, 1999), appearing in this Annual Report on Form 10-K of Camden
Property Trust for the year ended December 31, 1998.
DELOITTE & TOUCHE LLP
Houston, Texas
March 26, 1999
<PAGE> 89
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint D. Keith Oden and G. Steven Dawson, and each of them,
each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY
TRUST on Form 10-K for the year ended December 31, 1998 and to sign any and all
amendments to the Annual Report and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or any of them may lawfully do or cause to be
done by virtue hereof.
/s/Richard J. Campo
-------------------------------------------------------
Signature
Richard J. Campo
-------------------------------------------------------
Print Name
Dated: March 29, 1999
<PAGE> 90
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint Richard J. Campo and G. Steven Dawson, and each of them,
each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY
TRUST on Form 10-K for the year ended December 31, 1998 and to sign any and all
amendments to the Annual Report and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or any of them may lawfully do or cause to be
done by virtue hereof.
/s/D. Keith Oden
-------------------------------------------------------
Signature
D. Keith Oden
-------------------------------------------------------
Print Name
Dated: March 29, 1999
<PAGE> 91
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint D. Keith Oden and Richard J. Campo, and each of them,
each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY
TRUST on Form 10-K for the year ended December 31, 1998 and to sign any and all
amendments to the Annual Report and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or any of them may lawfully do or cause to be
done by virtue hereof.
/s/G. Steven Dawson
-------------------------------------------------------
Signature
G. Steven Dawson
-------------------------------------------------------
Print Name
Dated: March 29, 1999
<PAGE> 92
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and
each of them, each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY
TRUST on Form 10-K for the year ended December 31, 1998 and to sign any and all
amendments to the Annual Report and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or any of them may lawfully do or cause to be
done by virtue hereof.
/s/William R. Cooper
-------------------------------------------------------
Signature
William R. Cooper
-------------------------------------------------------
Print Name
Dated: March 25, 1999
<PAGE> 93
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and
each of them, each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY
TRUST on Form 10-K for the year ended December 31, 1998 and to sign any and all
amendments to the Annual Report and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or any of them may lawfully do or cause to be
done by virtue hereof.
/s/George A. Hrdlicka
-------------------------------------------------------
Signature
George A. Hrdlicka
-------------------------------------------------------
Print Name
Dated: March 29, 1999
<PAGE> 94
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and
each of them, each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY
TRUST on Form 10-K for the year ended December 31, 1998 and to sign any and all
amendments to the Annual Report and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or any of them may lawfully do or cause to be
done by virtue hereof.
/s/Scott S. Ingraham
-------------------------------------------------------
Signature
Scott S. Ingraham
-------------------------------------------------------
Print Name
Dated: March 26, 1999
<PAGE> 95
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and
each of them, each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY
TRUST on Form 10-K for the year ended December 31, 1998 and to sign any and all
amendments to the Annual Report and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or any of them may lawfully do or cause to be
done by virtue hereof.
/s/Lewis A. Levey
-------------------------------------------------------
Signature
Lewis A. Levey
-------------------------------------------------------
Print Name
Dated: March 25, 1999
<PAGE> 96
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and
each of them, each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY
TRUST on Form 10-K for the year ended December 31, 1998 and to sign any and all
amendments to the Annual Report and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or any of them may lawfully do or cause to be
done by virtue hereof.
/s/F. Gardner Parker
-------------------------------------------------------
Signature
F. Gardner Parker
-------------------------------------------------------
Print Name
Dated: March 29, 1999
<PAGE> 97
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and
each of them, each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY
TRUST on Form 10-K for the year ended December 31, 1998 and to sign any and all
amendments to the Annual Report and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or any of them may lawfully do or cause to be
done by virtue hereof.
/s/Steven A. Webster
-------------------------------------------------------
Signature
Steven A. Webster
-------------------------------------------------------
Print Name
Dated: March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 9,933
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,487,942
<DEPRECIATION> 167,560
<TOTAL-ASSETS> 2,347,982
<CURRENT-LIABILITIES> 0
<BONDS> 1,002,568
0
42
<COMMON> 447
<OTHER-SE> 1,169,899
<TOTAL-LIABILITY-AND-EQUITY> 2,347,982
<SALES> 0
<TOTAL-REVENUES> 323,839
<CGS> 0
<TOTAL-COSTS> 128,606
<OTHER-EXPENSES> 78,113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,467
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,333
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.12
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998 SEP-30-1998
<CASH> 6,765 127,893 39,959
<SECURITIES> 0 0 0
<RECEIVABLES> 0 0 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 0 0
<PP&E> 1,448,987 2,262,551 2,413,204
<DEPRECIATION> 108,865 127,198 147,285
<TOTAL-ASSETS> 1,356,682 2,284,052 2,322,270
<CURRENT-LIABILITIES> 0 0 0
<BONDS> 535,856 926,118 962,728
0 0 0
0 42 42
<COMMON> 319 446 446
<OTHER-SE> 709,639 1,203,832 1,194,979
<TOTAL-LIABILITY-AND-EQUITY> 1,356,682 2,284,052 2,322,270
<SALES> 0 0 0
<TOTAL-REVENUES> 58,592 150,179 236,728
<CGS> 0 0 0
<TOTAL-COSTS> 25,607 62,218 95,877
<OTHER-EXPENSES> 14,488 36,977 57,388
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 7,754 23,266 36,680
<INCOME-PRETAX> 0 0 0
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 8,961 23,215 40,208
<EPS-PRIMARY> 0.28 0.49 0.83
<EPS-DILUTED> 0.27 0.47 0.79
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000906345
<NAME> CAMDEN PROPERTY TRUST
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> DEC-31-1997 SEP-30-1997
<CASH> 10,516 7,597
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 1,397,138 1,325,840
<DEPRECIATION> 94,665 87,014
<TOTAL-ASSETS> 1,323,620 1,273,708
<CURRENT-LIABILITIES> 0 0
<BONDS> 480,754 440,197
0 0
0 0
<COMMON> 317 318
<OTHER-SE> 710,247 704,684
<TOTAL-LIABILITY-AND-EQUITY> 1,323,620 1,273,708
<SALES> 0 0
<TOTAL-REVENUES> 199,789 140,483
<CGS> 0 0
<TOTAL-COSTS> 91,707 65,015
<OTHER-EXPENSES> 44,836 31,425
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 28,537 20,742
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 38,438 18,753
<EPS-PRIMARY> 1.46 .77
<EPS-DILUTED> 1.41 .76
</TABLE>