<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission file number: 1-12110
CAMDEN PROPERTY TRUST
(Exact Name of Registrant as Specified in Its Charter)
TEXAS 76-6088377
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
3 Greenway Plaza, Suite 1300, Houston, Texas 77046
(Address of Principal Executive Offices) (Zip Code)
(713) 354-2500
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of August 10, 1999, there were 41,398,047 shares of Common Shares of
Beneficial Interest, $0.01 par value outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAMDEN PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS
JUNE 30, DECEMBER 31,
1999 1998
------------- ----------------
(Unaudited)
<S> <C> <C>
Real estate assets, at cost:
Land $ 338,993 $ 321,752
Buildings and improvements 2,012,933 1,917,026
------------ --------------
2,351,926 2,238,778
Less: accumulated depreciation (209,341) (167,560)
------------ --------------
Net operating real estate assets 2,142,585 2,071,218
Projects under development, including land 203,414 216,680
Investment in joint ventures 26,706 32,484
------------ --------------
2,372,705 2,320,382
Accounts receivable - affiliates 1,382 831
Notes receivable - affiliates 1,800 1,800
Other assets, net 31,471 15,036
Cash and cash equivalents 9,736 5,647
Restricted cash - escrow deposits 5,350 4,286
------------ --------------
Total assets $ 2,422,444 $ 2,347,982
============ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable:
Unsecured $ 704,431 $ 632,923
Secured 356,820 369,645
Accounts payable 18,759 24,180
Accrued real estate taxes 18,842 21,474
Accrued expenses and other liabilities 31,977 28,278
Distributions payable 27,283 25,735
------------ --------------
Total liabilities 1,158,112 1,102,235
Minority Interests:
Preferred units 97,926
Common units 68,987 71,783
------------ ------------
Total minority interests 166,913 71,783
7.33% Convertible Subordinated Debentures 3,536 3,576
Shareholders' Equity:
Preferred shares of beneficial interest 42 42
Common shares of beneficial interest 447 447
Additional paid-in capital 1,303,312 1,299,539
Distributions in excess of net income (115,956) (98,897)
Unearned restricted share awards (9,988) (10,039)
Less: treasury shares, at cost (83,974) (20,704)
------------ --------------
Total shareholders' equity 1,093,883 1,170,388
------------ --------------
Total liabilities and shareholders' equity $ 2,422,444 $ 2,347,982
============ ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- -------------------------
1999 1998 1999 1998
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES
Rental income $ 83,695 $ 84,964 $ 165,829 $ 139,799
Other property income 5,420 5,350 10,579 8,566
--------- --------- ---------- -----------
Total property income 89,115 90,314 176,408 148,365
Equity in income of joint ventures 428 430 944 722
Fee and asset management 1,273 237 2,223 349
Other income 596 606 672 743
--------- --------- ---------- -----------
Total revenues 91,412 91,587 180,247 150,179
--------- --------- ---------- -----------
EXPENSES
Property operating and maintenance 26,563 27,931 52,139 47,249
Real estate taxes 9,303 8,680 18,504 14,969
General and administrative 2,376 2,068 4,799 3,519
Interest 14,044 15,512 27,518 23,266
Depreciation and amortization 21,486 22,489 42,838 36,977
--------- --------- ---------- -----------
Total expenses 73,772 76,680 145,798 125,980
--------- --------- ---------- -----------
Income before gain on sale of a property 17,640 14,907 34,449 24,199
and minority interests
Gain on sale of a property 720
--------- --------- ---------- -----------
Income before minority interests 17,640 14,907 35,169 24,199
Minority interests
Preferred unit distributions (2,119) (2,981)
Minority interest (340) (653) (958) (984)
--------- --------- ---------- -----------
Total minority interests (2,459) (653) (3,939) (984)
--------- --------- ---------- -----------
Net income 15,181 14,254 31,230 23,215
Preferred share dividends (2,343) (4,686) (4,686) (4,686)
--------- --------- ---------- -----------
Net income to common shareholders $ 12,838 $ 9,568 $ 26,544 $ 18,529
========= ========= ========== ===========
Basic earnings per share $ 0.31 $ 0.22 $ 0.63 $ 0.49
Diluted earnings per share $ 0.30 $ 0.21 $ 0.61 $ 0.47
Distributions declared per common share $ 0.520 $ 0.505 $ 1.040 $ 1.010
Weighted average number of common shares 41,243 44,262 42,038 37,952
outstanding
Weighted average number of common and 44,320 46,826 45,093 40,581
common dilutive equivalent shares outstanding
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 31,230 $ 23,215
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 42,838 36,977
Equity in income of joint ventures, net of cash received 711 380
Gain on sale of a property (720)
Minority interest 958 984
Accretion of discount on unsecured notes payable 128 80
Net change in operating accounts (13,062) (14,913)
------------ ------------
Net cash provided by operating activities 62,083 46,723
CASH FLOW FROM INVESTING ACTIVITIES
Cash of Oasis at acquisition 7,253
Net proceeds from Third Party Transaction 226,128
Increase in real estate assets (101,681) (135,454)
Net proceeds from sales of properties 4,825 42,513
Net decrease in affiliate notes receivable 3,911
Increase in investment in joint ventures (1,336)
Other (1,110) (428)
------------ ------------
Net cash (used in) provided by investing activities (99,302) 143,923
CASH FLOW FROM FINANCING ACTIVITIES
Net (decrease) increase in unsecured lines of credit and short-term borrowings (182,000) 87,792
Debt repayments from Third Party Transaction (114,248)
Proceeds from notes payable 253,380
Proceeds from issuance of preferred units, net 97,926
Repayment of notes payable (12,825) (10,742)
Distributions to shareholders and minority interests (52,311) (36,780)
Payment of loan costs (1,600) (168)
Repurchase of common shares (63,270)
Other 2,008 1,092
------------ ------------
Net cash provided by (used in) financing activities 41,308 (73,054)
------------ ------------
Net increase in cash and cash equivalents 4,089 117,592
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,647 6,468
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,736 $ 124,060
============ ============
SUPPLEMENTAL INFORMATION
Cash paid for interest, net of interest capitalized $ 23,414 $ 20,941
Interest capitalized $ 8,182 $ 3,461
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Acquisition of Oasis, net of cash acquired and fair value adjustment from the
acquisitions of Oasis and Paragon:
Fair value of assets acquired $ 835 $ 781,515
Liabilities assumed $ 835 $ 493,461
Common shares issued $ 395,528
Preferred shares issued $ 104,125
Fair value of minority interest $ 21,782
Conversion of 7.33% subordinated debentures to common shares, net $ 40 $ 2,242
Value of shares issued under benefit plans, net $ 3,478 $ 5,767
Conversion of operating partnership units to common shares $ 292 $ 9,693
Note payable assumed upon purchase of a property $ 8,199
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CAMDEN PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited financial information has been
prepared according to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted according to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management, all
adjustments and eliminations, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of Camden Property Trust as
of June 30, 1999 and the results of operations for the three and six months
ended June 30, 1999 and 1998 and cash flows for the six months ended June 30,
1999 and 1998 have been included. The results of operations for such interim
periods are not necessarily indicative of the results for the full year.
BUSINESS
We are a Houston-based real estate investment trust ("REIT") and report
as a single business segment with activities related to the ownership,
development, acquisition, management and disposition of multifamily apartment
communities in the Southwest, Southeast, Midwest and Western regions of the
United States. At June 30, 1999, we owned interests in, operated or were
developing 160 multifamily properties containing 56,210 apartment homes located
in nine states. Eleven of our multifamily properties containing 4,720 apartment
homes were under development at June 30, 1999. One of our newly developed
multifamily properties containing 306 apartment homes was in lease-up at June
30, 1999. We have several additional sites which we intend to develop into
multifamily apartment communities.
ACQUISITION OF OASIS RESIDENTIAL, INC.
On April 8, 1998, we acquired, through a tax-free merger, Oasis
Residential, Inc., a publicly traded Las Vegas-based multifamily REIT. The
acquisition increased the size of our portfolio from 100 to 152 completed
multifamily properties, and from 34,669 to 50,183 apartment homes at the date of
acquisition. Each share of Oasis common stock outstanding on April 8, 1998 was
exchanged for 0.759 of a Camden common share. Each share of Oasis Series A
cumulative convertible preferred stock outstanding on April 8, 1998 was reissued
as one Camden Series A cumulative convertible preferred share with terms and
conditions comparable to the Oasis preferred stock. We issued 12.4 million
common shares and 4.2 million preferred shares in exchange for the outstanding
Oasis common and preferred stock, respectively. Approximately $484 million of
Oasis debt, at fair value, was assumed in the merger.
In connection with the merger with Oasis, on June 30, 1998 we completed a
transaction in which we formed Sierra-Nevada Multifamily Investments, LLC. In
this transaction, we transferred an 80% interest in 19 apartment communities for
an aggregate of $248 million to a private limited liability company that was not
affiliated with either us or Oasis. We retained the remaining 20% interest.
Prior to this transaction we owned 100% of each of these 19 properties through
one of our wholly-owned subsidiaries. Prior to the merger with Oasis, Oasis
owned 100% of each of these properties. These properties contain 5,119 apartment
homes and are located in Las Vegas.
REAL ESTATE ASSETS AT COST
We capitalized $14.7 million and $10.7 million in the six months ended
June 30, 1999 and 1998, respectively, of renovation and improvement costs which
<PAGE>
we believe extended the economic lives and enhanced the earnings of our
multifamily properties. If we had adopted the accounting policy described below
as of January 1, 1998, the amounts capitalized for the six months ended June 30,
1998 would have been $11.8 million.
Effective April 1, 1998, we implemented prospectively a new accounting
policy where expenditures for floor coverings, appliances and HVAC unit
replacements are capitalized and depreciated over their estimated useful lives.
Previously, all such replacements had been expensed. We believe that the newly
adopted accounting policy is preferable as it is consistent with standards and
practices utilized by the majority of our 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 Recent
Accounting Pronouncements below for the effect of this change and our adoption
of a recent accounting pronouncement on our financial results for the six months
ended June 30, 1998.
PROPERTY OPERATING AND MAINTENANCE EXPENSES
Property operating and maintenance expenses included normal repairs and
maintenance totaling $6.1 million and $11.7 million for the three and six months
ended June 30, 1999, and $6.2 million and $9.8 million for the three and six
months ended June 30, 1998, respectively.
COMMON SHARE DIVIDEND DECLARATION
In June 1999, we announced that our Board of Trust Managers had declared
a dividend in the amount of $0.52 per share for the second quarter of 1999 which
was paid on July 16, 1999 to all common shareholders of record as of June 30,
1999. We paid an equivalent amount per unit to holders of common operating
partnership units. This distribution to common shareholders and holders of
common operating partnership units equates to an annualized dividend rate of
$2.08 per share or unit.
PREFERRED SHARE DIVIDEND DECLARATION
In June 1999, we announced that our Board of Trust Managers had declared
a quarterly dividend on our preferred shares in the amount of $0.5625 per share
payable August 16, 1999 to all preferred shareholders of record as of June 30,
1999.
RECENT ACCOUNTING PRONOUNCEMENTS
On March 19, 1998, the Emerging Issues Task Force of the Financial
Accounting Standards Board 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 our adoption of this policy, we had been capitalizing
such costs. Had we adopted Issue No. 97-11 and the new accounting policy for
floor coverings, appliances and HVAC unit replacements as of January 1, 1998,
net income to common shareholders would have increased $650,000 or $0.02 per
basic and diluted earnings per share for the six months ended June 30, 1998.
<PAGE>
EARNINGS PER SHARE
The following table presents information necessary to calculate basic
and diluted earnings per share for the three and six months ended June 30, 1999
and 1998:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------- ----------------------
1999 1998 1999 1998
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Weighted Average Common Shares Outstanding 41,243 44,262 42,038 37,952
========== ========= ========== =========
Basic Earnings Per Share $ 0.31 $ 0.22 $ 0.63 $ 0.49
========== ========= ========== =========
DILUTED EARNINGS PER SHARE:
Weighted Average Common Shares Outstanding 41,243 44,262 42,038 37,952
Shares Issuable from Assumed Conversion of:
Common Share Options and Awards Granted 419 459 394 428
Minority Interest Units 2,658 2,105 2,661 2,201
---------- --------- ---------- ---------
Weighted Average Common Shares Outstanding, as Adjusted 44,320 46,826 45,093 40,581
========== ========= ========== =========
Diluted Earnings Per Share $ 0.30 $ 0.21 $ 0.61 $ 0.47
========== ========= ========== =========
EARNINGS FOR BASIC AND DILUTED COMPUTATION:
Net Income $ 15,181 $ 14,254 $ 31,230 $ 23,215
Less: Preferred Share Dividends 2,343 4,686 4,686 4,686
---------- -------- ---------- --------
Net Income to Common Shareholders
(Basic Earnings Per Share Computation) 12,838 9,568 26,544 18,529
Minority Interest 340 238 958 569
---------- --------- ---------- ---------
Net Income to Common Shareholders, as Adjusted
(Diluted Earnings Per Share Computation) $ 13,178 $ 9,806 $ 27,502 $ 19,098
========== ========= ========== =========
</TABLE>
RECLASSIFICATIONS
Certain reclassifications have been made to amounts in prior year financial
statements to conform with current year presentations.
<PAGE>
2. NOTES PAYABLE
The following is a summary of our indebtedness:
(In millions)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- ----------------
<S> <C> <C>
Senior Unsecured Notes:
6.63% - 7.25% Notes, due 2001-2006 $ 522.9 $ 323.9
6.68% - 7.63% Medium Term Notes, due 2000 - 2009 181.5 127.0
Unsecured Lines of Credit and Short-Term Borrowings 182.0
------------ -------------
704.4 632.9
Secured Notes - Mortgage loans (5.22% - 8.63%), due 1999 - 2028 356.9 369.7
------------ -------------
Total notes payable $ 1,061.3 $ 1,002.6
============ =============
</TABLE>
During the first quarter of 1999, we issued $39.5 million aggregate
principal amounts of senior unsecured notes from our $196 million medium-term
note shelf registration. These fixed rate notes, due in January 2002 through
January 2009, 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.
In April 1999, we issued $15 million aggregate principal amounts of senior
unsecured notes from our $196 million medium-term note shelf registration. These
fixed rate notes, due in March 2002, bear interest at a rate of 6.74%, payable
semiannually on March 15 and September 15. The net proceeds were used to reduce
indebtedness outstanding under the unsecured lines of credit.
In April 1999, we issued from our $500 million shelf registration an
aggregate principal amount of $200 million of five-year senior unsecured notes.
Interest on the notes accrues at an annual rate of 7.0% and is payable
semi-annually on April 15 and October 15, commencing on October 15, 1999. The
notes are direct, senior unsecured obligations and rank equally with all other
unsecured and unsubordinated indebtedness. The notes may be redeemed at any time
at our option subject to a make-whole provision. We used the net proceeds of
$197.7 million to reduce $171 million of indebtedness under the unsecured lines
of credit and for general working capital purposes.
At June 30, 1999, we 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 interest rate is fixed at
6.1%, resulting in an interest rate exposure equal to the difference between
6.1% and the actual LIBOR rate. 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 June 30, 1999, the weighted average interest rate on floating rate debt
was 5.44%.
We are currently in the process of executing a new line of credit for
approximately $375 million which will be completed during the third quarter of
1999. The new line will include 14 banks, 10 of which are new to our unsecured
facility. The new line of credit will replace our three current credit
facilities, totaling $275 million, which had no balances outstanding at quarter
end.
<PAGE>
3. NET CHANGE IN OPERATING ACCOUNTS
The effect of changes in the operating accounts on cash flows from
operating activities is as follows:
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
1999 1998
---------- -----------
<S> <C> <C>
Decrease (increase) in assets:
Accounts receivable - affiliates $ (372) $ 679
Other assets, net (8,576) 15
Restricted cash - escrow deposits (1,064) 1,498
Increase (decrease) in liabilities:
Accounts payable (6,191) (3,362)
Accrued real estate taxes (2,632) (3,229)
Accrued expenses and other liabilities 5,773 (10,514)
---------- -----------
Net change in operating accounts $ (13,062) $ (14,913)
========== ===========
</TABLE>
4. PREFERRED UNITS
In February 1999, our operating partnership issued $100 million of 8.5%
Series B Cumulative Redeemable Perpetual Preferred Units. Distributions on the
preferred units are payable quarterly in arrears. 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 our 8.5% Series B Cumulative Redeemable Perpetual Preferred Shares. The
preferred units are subordinate to present and future debt.
5. RESTRICTED SHARE AND OPTION AWARDS
During the first six months of 1999, we granted 115,850 restricted shares
in lieu of cash compensation to certain key employees and non-employee trust
managers. The restricted shares were issued based on market value at the date of
grant and have vesting periods of up to five years. We also granted 603,071
options with an exercise price equal to the market value on the date of grant.
The options become exercisable in equal increments over three years, beginning
on the first anniversary of the grant. During the six month period ended June
30, 1999, previously granted options to purchase 649,119 shares became
exercisable and 100,917 restricted shares vested.
6. COMMON SHARE REPURCHASE PROGRAM
In March 1999, the Board of Trust Managers authorized us to repurchase up
to $50 million of our common shares through open market purchases and private
transactions. This amount is in addition to the initial $50 million the Board of
Trust Managers authorized for repurchase in September 1998. As of June 30, 1999,
we had repurchased 3,323,260 common shares for a total cost of $84.0 million. We
expect to complete the repurchase of the remaining $16 million during the third
quarter of 1999.
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
<PAGE>
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 prior to April 30, 2001.
8. CONTINGENCIES
Prior to our merger, 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 we currently own) constructed for first occupancy after March
31, 1991. On February 1, 1999, the Justice Department filed a lawsuit against us
and several other defendants 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 we, through the merger
with Oasis, had 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 us 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
Oasis had 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.
With any acquisition, we plan for and undertake renovations needed to
correct deferred maintenance, life/safety and Fair Housing matters. We are
currently in the process of determining the extent of the alleged noncompliance
on the properties discussed above and the remaining changes that may be
necessitated. At this time, we are not able to provide an estimate of costs and
expenses associated with the resolution of this matter however, management does
not expect the amount to be material. There can be no assurance that we will be
successful in the defense of the Justice Department action.
9. SUBSEQUENT EVENTS
In the ordinary course of our business, we issue letters of intent
indicating a willingness to negotiate for the purchase or sale of multifamily
properties or development land. In accordance with the local real estate market
practice, such letters of intent are non-binding, and neither party to the
letter of intent is obligated to pursue negotiations unless and until a
definitive contract is entered into by the parties. Even if definitive contracts
are entered into, the letters of intent and resulting contracts contemplate that
such contracts will provide the purchaser with time to evaluate the properties
and conduct due diligence and during which periods the purchaser will have the
ability to terminate the contracts without penalty or forfeiture of any deposit
or earnest money. There can be no assurance that definitive contracts will be
entered into with respect to any properties covered by letters of intent or that
we will acquire or sell any property as to which we 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. We
are then at risk under an acquisition contract, but only to the extent of any
earnest money deposits associated with the contract, and are obligated to sell
under a sales contract.
We are currently in the due diligence period on contracts for the purchase
of land for development. No assurance can be made that we will be able to
complete the negotiations or become satisfied with the outcome of the due
diligence.
We seek to selectively dispose of assets that are either not in our current
markets, have a lower projected net operating income growth rate than the
overall portfolio, or no longer conform to our operating and investment
strategies. The proceeds from these sales may be reinvested in acquisitions or
developments or used to retire debt.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with all of the
financial statements and notes appearing elsewhere in this report as well as the
audited financial statements appearing in our 1998 Annual Report to
Shareholders. Where appropriate, comparisons are made on a dollars
per-weighted-average-unit basis in order to adjust for changes in the number of
apartment homes owned during each period. The statements contained in this
report that are not historical facts are forward-looking statements, and 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, changes in financial markets and interest rates, our failure to
qualify as a real estate investment trust ("REIT") and unexpected Year 2000
problems.
BUSINESS
We are a Houston-based REIT and report as a single business segment with
activities related to the ownership, development, acquisition, management and
disposition of multifamily apartment communities in the Southwest, Southeast,
Midwest and Western regions of the United States. At June 30, 1999, we owned
interests in, operated or were developing 160 multifamily properties containing
56,210 apartment homes located in nine states. Eleven of our multifamily
properties containing 4,720 apartment homes were under development at June 30,
1999. One of our newly developed multifamily properties containing 306 apartment
homes was in lease-up at June 30, 1999. We have several additional sites which
we intend to develop into multifamily apartment communities.
ACQUISITION OF OASIS RESIDENTIAL, INC.
On April 8, 1998, we acquired, through a tax-free merger, Oasis
Residential, Inc., a publicly traded Las Vegas-based multifamily REIT. The
acquisition increased the size of our portfolio from 100 to 152 completed
multifamily properties, and from 34,669 to 50,183 apartment homes at the date of
acquisition. Each share of Oasis common stock outstanding on April 8, 1998 was
exchanged for 0.759 of a Camden common share. Each share of Oasis Series A
cumulative convertible preferred stock outstanding on April 8, 1998 was reissued
as one Camden Series A cumulative convertible preferred share with terms and
conditions comparable to the Oasis preferred stock. We issued 12.4 million
common shares and 4.2 million preferred shares in exchange for the outstanding
Oasis common and preferred stock, respectively. Approximately $484 million of
Oasis debt, at fair value, was assumed in the merger.
In connection with the merger with Oasis, on June 30, 1998 we completed a
transaction in which we formed Sierra-Nevada Multifamily Investments, LLC. In
this transaction, we transferred an 80% interest in 19 apartment communities for
an aggregate of $248 million to a private limited liability company that was not
affiliated with either us or Oasis. We retained the remaining 20% interest.
Prior to this transaction we owned 100% of each of these 19 properties through
one of our wholly-owned subsidiaries. Prior to the merger with Oasis, Oasis
owned 100% of each of these properties. These properties contain 5,119 apartment
homes and are located in Las Vegas.
<PAGE>
PROPERTY PORTFOLIO
Our multifamily property portfolio, excluding land held for future
development and joint venture properties that we do not manage, is summarized as
follows:
<TABLE>
<CAPTION>
June 30,1999 December 31, 1998
-----------------------------------------------------------
Apartment Apartment
Homes Properties % (a) Homes Properties % (a)
---------- ----------- ------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Operating Properties
Texas
Houston 6,345 15 13% 6,345 15 13%
Dallas (b) 9,381 26 17 9,381 26 17
Austin 1,745 6 4 1,745 6 4
Other 1,641 5 3 1,641 5 3
----------- ------- ------ ----------- ------- -----
Total Texas Operating Properties 19,112 52 37 19,112 52 37
Arizona 2,326 7 5 2,326 7 5
California 1,272 3 3 1,272 3 3
Colorado (b) 1,972 6 3 1,972 6 3
Florida 7,567 18 15 7,261 17 14
Kentucky 1,016 4 2 1,142 5 2
Missouri 3,327 8 7 3,327 8 7
Nevada (b) 12,163 41 14 12,163 41 14
North Carolina (b) 2,735 10 4 2,735 10 4
----------- ------- ------ ----------- ------- -----
Total Operating Properties 51,490 149 90 51,310 149 89
----------- ------- ------ ----------- ------- -----
Properties Under Development
Texas
Houston (c) 1,913 4 4 2,213 5 4
Dallas 620 1 1 600 1 1
----------- ------- ------ ----------- ------- -----
Total Texas Development Properties 2,533 5 5 2,813 6 5
Arizona 325 1 1 325 1 1
California 380 1 1 380 1 1
Colorado 558 2 1 558 2 1
Florida (c) 492 1 1 1,150 3 2
Kentucky 432 1 1 432 1 1
----------- ------- ------ ----------- ------- -----
Total Properties Under Development 4,720 11 10 5,658 14 11
----------- ------- ------ ----------- ------- -----
Total Properties 56,210 160 100% 56,968 163 100%
=========== ======= ====== =========== ======= =====
Less: Joint Venture
Apartment Homes (b) 6,704 6,704
----------- -----------
Total Apartment Homes
- Owned 100% 49,506 50,264
=========== ===========
</TABLE>
(a) Based on number of apartment homes owned 100%.
(b) The 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 we own a 44% interest, one
property with 321 apartment homes in Colorado in which we own a 50%
interest, and 19 properties with 5,119 apartment homes in Nevada in which
we own a 20% interest.
(c) The June 30, 1999 amounts exclude one property with 300 apartment homes in
Houston and one property with 352 apartment homes in Florida which were
previously included as properties under development. These properties are
now classified as land held for future development.
<PAGE>
At June 30, 1999, we had one completed property under lease-up as follows:
<TABLE>
<CAPTION>
Product Number of % Leased Estimated
Type Apartment Homes at 8/4/99 Date of Date of
Property and Location Completion Stabilization
- ----------------------------------------- ---------- ----------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Renaissance Pointe II
Orlando, FL Garden 306 87% 1Q99 3Q99
</TABLE>
At June 30, 1999, we had 11 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>
In Lease-up
The Park at Midtown Urban 337 $ 22.0 3Q99 3Q99
Houston, TX
The Park at Interlocken Garden 340 34.9 3Q99 1Q00
Denver, CO
The Park at Goose Creek Affordable 272 12.5 3Q99 4Q99
Baytown, TX
The Park at Holly Springs Garden 548 37.1 3Q99 3Q00
Houston, TX
The Park at Greenway Urban 756 55.7 4Q99 4Q00
Houston, TX
---------- ----------
Subtotal 2,253 162.2
---------- ----------
Under Construction
The Park at Caley Garden 218 18.3 4Q99 2Q00
Denver, CO
The Park at Lee Vista Garden 492 32.8 1Q00 2Q01
Orlando, FL
The Park at Oxmoor Garden 432 22.1 1Q00 4Q00
Louisville, KY
The Park at Arizona Center Urban 325 22.0 1Q00 4Q00
Phoenix, AZ
The Park at Crown Valley Garden 380 42.0 4Q00 2Q01
Mission Viejo, CA
The Park at Farmers Market, Phase I Urban 620 49.8 4Q00 3Q01
Dallas, TX
---------- -----------
Subtotal 2,467 187.0
---------- -----------
Total for 11 development properties 4,720 $ 349.2
========== ===========
</TABLE>
We stage our construction to allow leasing and occupancy during the
construction period which we believe minimizes the lease-up period following
completion of construction. Our accounting policy related to properties in the
development and leasing phase is that all operating expenses, excluding
depreciation, associated with occupied apartment homes are expensed against
revenues generated by those apartment homes as they become occupied. All
construction and carrying costs are capitalized and reported on the balance
sheet in "Projects under development, including land" until such 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
<PAGE>
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 we begin expensing all items
that were previously considered as carrying costs.
COMPARISON OF THE QUARTER ENDED JUNE 30, 1999 AND JUNE 30, 1998
The changes in operating results from period to period are primarily due to
the transfer of 19 properties totaling 5,119 apartment homes into the Sierra
Nevada joint venture, the development of two properties totaling 602 apartment
homes, the acquisition of five properties containing 2,226 apartment homes, the
disposition of seven properties containing 1,520 apartment homes and an increase
in net operating income generated by the stabilized portfolio. The weighted
average number of apartment homes for the second quarter of 1999 decreased by
2,941 apartment homes, or 6.1%, from 48,119 to 45,178. Total operating
properties were 126 and 125 at June 30, 1999 and 1998, respectively. The 45,178
weighted average apartment homes and the 126 operating properties exclude the
impact of our ownership interest in properties owned in joint ventures.
Rental income per apartment home per month increased $29 or 4.9%, from $589
to $618 for the second quarters of 1998 and 1999, respectively. The increase was
primarily due to increased revenue growth from the stabilized real estate
portfolio and higher average rental rates on four of the five acquired
properties and the completed development properties. Additionally, six of the
seven disposed properties had average rental rates significantly lower than the
portfolio average. Overall average occupancy increased slightly from 93.0% for
the quarter ended June 30, 1998 to 93.4% for the quarter ended June 30, 1999.
Other property income for the quarter ended June 30, 1999 increased $70,000
over the quarter ended June 30, 1998. The increase in other property income was
due to $453,000 increase from new revenue sources such as telephone, cable and
water. This increase was offset by the fewer number of apartment homes owned and
in operation.
Property operating and maintenance expenses decreased $1.4 million from
$27.9 million to $26.6 million and decreased as a percent of total property
income from 30.9% to 29.8% for the quarters ended June 30, 1998 and 1999,
respectively. The decrease in operating expense was due to the fewer number of
apartment homes owned and in operation. Our operating expense ratios decreased
primarily as a result of operating efficiencies gained from the new development
properties.
Real estate taxes increased $623,000 from $8.7 million to $9.3 million for
the second quarters of 1998 and 1999, respectively, which represents an annual
increase of $102 per apartment home. The increase was primarily due to increases
in the valuations of renovated, acquired and developed properties and increases
in property tax rates.
General and administrative expenses increased $308,000 from $2.1 million to
$2.4 million, and increased as a percent of revenues from 2.3% to 2.6% for the
quarters ended June 30, 1998 and 1999, respectively. The increase is primarily
due to increases in incentive-based compensation.
Interest expense decreased from $15.5 million to $14.0 million primarily
due to the $100 million preferred unit issuance in February 1999 and the
reduction of debt due to the Sierra-Nevada transaction in June 1998. These
decreases were offset by interest incurred from the repurchase of our shares
under the common share repurchase program. Interest capitalized was $4.3 million
and $2.4 million for the quarters ended June 30, 1999 and 1998, respectively.
Depreciation and amortization decreased from $22.5 million to $21.5
million. This decrease was due primarily to the fewer number of apartment homes
owned and in operation.
<PAGE>
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
The changes in operations results from period to period are primarily due
to the Oasis merger, transfer of 19 properties totaling 5,119 apartment homes
into the Sierra-Nevada joint venture, development of two properties aggregating
602 apartment homes, the acquisition of five properties containing 2,226
apartment homes, the disposition of seven properties containing 1,520 apartment
homes and an increase in new operating income generated by the stabilized
portfolio. The weighted average number of apartment homes for the first six
months of 1999 increased by 4,396 apartment homes, or 10.8%, from 40,564 to
44,960. Total operating properties were 126 and 125 at June 30, 1999 and 1998,
respectively, and exclude those owned through joint venture investments. The
weighted average number of apartment homes of 44,960 and 40,564 exclude the
impact of our ownership interest in apartment homes owned in joint ventures
throughout the six month periods.
The average rental income per apartment home per month increased $41 or
7.1%, from $574 to $615 for the six months ended June 30, 1998 and 1999,
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, four of the five acquired
properties and completion of new development properties. Additionally, six of
the seven disposed properties had average rental rates significantly lower than
the portfolio average.
Other property income increased $2.0 million from $8.6 million to $10.6
million for the six months ended June 30, 1998 and 1999, respectively. The
increase in other property income was due to a larger number of apartment homes
owned and in operation and a $1.1 million increase from new revenue sources such
as telephone, cable and water.
Property operating and maintenance expenses increased $4.9 million, from
$47.2 million to $52.1 million, but decreased as a percent of total property
income from 31.8% to 29.6% for the six months ended June 30, 1998 and 1999,
respectively. Our operating expense ratio decreased from the prior year
primarily as a result of the impact of our April 1, 1998 adoption of a new
accounting policy, whereby expenditures for floor coverings, 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, we had been
expensing these costs. Had this policy been adopted as of January 1, 1998, the
six months ended June 30, 1998 operating expense ratio would have been 31.1%.
Real estate taxes increased $3.5 million from $15 million to $18.5 million
for the six months ended June 30, 1998 and 1999, respectively, which represents
an annual increase of $85 per apartment home. The increase was primarily 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 $1.3 million from $3.5
million to $4.8 million, and increased as a percent of revenues from 2.3% to
2.7%. The general and administrative expense ratio increase is mainly
attributable to the impact of our March 20, 1998 adoption of Issue No. 97-11,
Accounting for Internal Costs Relating to Real Estate Property Acquisitions,
discussed in Note 1, which is partially offset by efficiencies resulting from
operating a larger portfolio.
Interest expense increased from $23.3 million to $27.5 million due to
increased indebtedness related to the Oasis merger, completed developments,
renovations and property acquisitions. Interest capitalized was $8.2 million and
$3.5 million for the six months ended June 30, 1999 and 1998, respectively.
Depreciation and amortization increased from $37.0 million to $42.8
million. This increase was due primarily to the Oasis merger, developments,
renovations and property acquisitions.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL STRUCTURE
We intend to continue maintaining what management believes to be a
conservative capital structure by:
(i) using a prudent combination of debt and common and preferred
equity;
(ii) extending and sequencing the maturity dates of our debt where
possible;
(iii) managing interest rate exposure using fixed rate debt and
hedging, where appropriate;
(iv) borrowing on an unsecured basis in order to maintain a
substantial number of unencumbered assets; and
(v) maintaining conservative coverage ratios.
The interest expense coverage ratio after capitalized interest was 3.8 and
3.6 times for the six months ended June 30, 1999 and 1998, respectively, and 3.8
times and 3.4 times for the quarters ended June 30, 1999 and 1998, respectively.
At June 30, 1999 and 1998, 74.6% and 69.2%, respectively, of our properties
(based on invested capital) were unencumbered.
LIQUIDITY
We intend to meet our liquidity requirements through cash flows provided by
operations, our unsecured lines of credit described in the Financial Flexibility
section below and other long-term and short-term borrowings. We primarily use
common and preferred equity capital and senior unsecured debt to refinance
maturing secured debt and borrowings under our unsecured lines of credit. As of
June 30, 1999, we had $275 million available under the unsecured lines of
credit, $75 million available under our universal shelf registration, and $14.5
million available under our medium-term note program. Finally, we have
significant unencumbered real estate assets which could be sold or used as
collateral for financing purposes should other sources of capital not be
available. We consider our ability to generate cash to be sufficient, and expect
to be able to meet future operating and financing cash requirements and to pay
distributions to shareholders and unitholders.
We are currently in the process of executing a new line of credit for
approximately $375 million which will be completed during the third quarter of
1999. The new line will include 14 banks, 10 of which are new to our unsecured
facility. The new line of credit will replace our three current credit
facilities, totaling $275 million, which had no balances outstanding at quarter
end.
In June 1999, we announced that our Board of Trust Managers had declared a
dividend in the amount of $0.52 per share for the second quarter of 1999 which
was paid on July 16, 1999 to all common shareholders of record as of June 30,
1999. We paid an equivalent amount per unit to holders of the common operating
partnership units. This distribution to common shareholders and holders of
common operating partnership units equates to an annualized dividend rate of
$2.08 per share or unit.
In June 1999, we declared a quarterly dividend on our Series A Cumulative
Preferred Shares, which were issued in conjunction with the merger of Oasis. The
dividend in the amount of $0.5625 per share is payable August 16, 1999 to all
preferred shareholders of record as of June 30, 1999.
FINANCIAL FLEXIBILITY
We concentrate our growth efforts toward selective development and
acquisition opportunities in our current markets, and through the acquisition of
existing operating portfolios and development properties in selected new
markets. During the six months ended June 30, 1999, we incurred $87.4 million in
development costs and no acquisition costs. We are developing eleven additional
properties at an aggregate cost of approximately $349.2 million. We fund our
<PAGE>
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. We also seek to selectively dispose of assets
that are either not in our current markets, have a lower projected net operating
income growth rate than the overall portfolio, or no longer conform to our
operating and investment strategies. Such sales generate capital for
acquisitions and new developments or for debt reduction.
Our unsecured lines of credit mature January through July 2000. As of June
30,1999, we had no balances outstanding under our current unsecured lines of
credit. Advances under the unsecured lines of credit may be priced at the
scheduled rates, or we may enter into bid rate loans with participating banks at
rates below the scheduled rates. These bid rate loans have terms of 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 our unsecured lines of credit, we from time to time
borrow 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.
On February 23, 1999, our operating partnership issued $100 million of 8.5%
Series B Cumulative Redeemable Perpetual Preferred Units. Distributions on the
preferred units are payable quarterly in arrears. 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 our 8.5% Series B Cumulative Redeemable Perpetual Preferred Shares. The
preferred units are subordinate to present and future debt.
On April 9, 1999, we issued $15 million principal amounts of senior
unsecured notes from our $196 million medium-term note shelf registration. These
fixed rate notes, due in March 2002, bear interest at a rate of 6.74%, payable
semiannually on March 15 and September 15. The net proceeds were used to reduce
indebtedness outstanding under the unsecured lines of credit.
On April 15, 1999, we issued from our $500 million shelf registration an
aggregate principal amount of $200 million of five-year senior unsecured notes.
Interest on the notes accrues at an annual rate of 7.0% and is payable
semi-annually on April 15 and October 15, commencing on October 15, 1999. The
notes are direct, senior unsecured obligations and rank equally with all other
unsecured and unsubordinated indebtedness. The notes may be redeemed at any time
at our option subject to a make-whole provision. The proceeds from the sale of
the notes were $197.7 million, net of issuance costs. We used the net proceeds
to reduce $171 million of indebtedness under the unsecured lines of credit and
for general working capital purposes.
At June 30, 1999, we 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 interest rate is fixed at
6.1%, resulting in an interest rate exposure equal to the difference between
6.1% and the actual LIBOR rate. 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 June 30, 1999, the weighted average interest rate on floating rate debt
was 5.44%.
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
<PAGE>
sales of property, plus real estate depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. Our definition
of diluted FFO assumes conversion at the beginning of the period of all dilutive
convertible securities, including minority interest, which are convertible into
common equity.
We believe that in order to facilitate a clear understanding of our
consolidated historical operating results, 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 our operating performance or to net cash provided by
operating activities as a measure of our liquidity. Further, FFO as disclosed by
other REITs may not be comparable to our calculation. Our diluted FFO for the
three months ended June 30, 1999 increased slightly over the three months ended
June 30, 1998. The increase in diluted FFO during the three months ended June
30, 1999 from property acquisitions, developments and improvements in the
performance of the stabilized properties was offset by the transfer of 5,119
apartment homes into a joint venture at June 30, 1998, and the repurchase of our
shares under our common share repurchase program. Our diluted FFO for the six
months ended June 30, 1999 increased $13.9 million over the six months ended
June 30, 1998. This increase in diluted FFO was due to the Oasis merger,
property acquisitions, developments and improvements in the performance of the
stabilized properties in our portfolio.
The calculation of basic and diluted FFO for the three and six months ended
June 30, 1999 and 1998 follows:
(In thousands)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
FUNDS FROM OPERATIONS:
Net income to common shareholders $ 12,838 $ 9,568 $ 26,544 $ 18,529
Real estate depreciation 21,109 22,094 42,073 36,294
Real estate depreciation from unconsolidated ventures 801 408 1,626 744
Preferred share dividends 2,343 2,343
Gain on sale of a property (720)
---------- ---------- ---------- ---------
FUNDS FROM OPERATIONS - BASIC 34,748 34,413 69,523 57,910
Preferred share dividends 2,343 2,343 4,686 2,343
Minority interest 340 653 958 984
Interest on convertible subordinated debentures 66 71 132 180
Amortization of deferred costs on convertible debentures 6 7 12 18
---------- ---------- ---------- ---------
FUNDS FROM OPERATIONS - DILUTED $ 37,503 $ 37,487 $ 75,311 $ 61,435
========== ========== ========== =========
WEIGHTED AVERAGE SHARES - BASIC 41,243 44,262 42,038 37,952
Common share options and awards granted 419 459 394 428
Preferred shares 3,207 3,207 3,207 1,613
Minority interest units 2,658 2,778 2,661 2,539
Convertible subordinated debentures 149 161 149 204
---------- ---------- ---------- ---------
WEIGHTED AVERAGE SHARES - DILUTED 47,676 50,867 48,449 42,736
========== ========== ========== =========
</TABLE>
INFLATION
We lease 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 our ability to adjust rental rates to market
levels as leases expire.
<PAGE>
YEAR 2000 CONVERSION
We have recognized the need to ensure that our 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, we have
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. We are on the fourth phase for our computer
systems, and the third phase for our other equipment and third party services.
We believe that the Year 2000 issue will not pose significant operating
problems for our computer systems, since the significant computer equipment and
software products we utilize are already compliant or were converted or modified
as part of system upgrades unrelated to the Year 2000 issue. We are in the
process of developing a contingency plan which will permit our primary computer
systems operations to continue if the on-going testing of such conversions and
modifications reveals any Year 2000 issues presently unknown to us.
Our estimated total cost of addressing the Year 2000 issues with respect to
our own computer systems, other equipment and operations is expected to be
minimal since any computer systems upgrades and conversions to specifically
address the Year 2000 issues have been and are expected to be minimal.
Additionally, the majority of Year 2000 issues are being addressed by use of
internal resources and such future internal costs are expected to be minimal as
well. We do not separately track internal cost, which primarily consist of
payroll and related costs, incurred on Year 2000 issues. We have not estimated
any time or other internal costs that may be incurred by us as a result of the
failure of any third parties to become Year 2000 ready or costs to implement any
contingency plans.
We are communicating with our key third party service providers and
vendors, including those who have previously sold equipment to us, to obtain
information and compliance certificates, if possible, regarding their state
ofreadiness with respect to the Year 2000 issue. As of August 11, 1999, 99% of
key third party services providers have responded with compliance certificates.
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 our
business and results of operations. Final determination of third party Year 2000
readiness is substantially complete. None of the responses received from third
party service providers as of August 5, 1999 have indicated any problem with
bringing their services into Year 2000 compliance. We intend 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 our evaluations and assessments.
We presently believe that the 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 our apartment communities for a period of time and
could adversely affect our access to credit and money markets which, in turn,
could result in loss of normal operating capacity. If our computer systems
completely fail, we would be able to continue affected functions either manually
or through non-Year 2000 compliant systems. We do not believe that the increased
costs associated with such interruptions from both third party service failure
and computer system failure could exceed $1 million.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes have occurred since our Annual Report on Form
10-K for the year ended December 31, 1998.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Our Annual Meeting of Shareholders was held on April 8, 1998.
(1) The Shareholders elected eight of the eight Trust Managers
nominated by the Board of Trust Managers.
<TABLE>
<CAPTION>
Broker
AFFIRMATIVE NEGATIVE ABSTENTIONS NON-VOTERS
<S> <C> <C> <C> <C>
Richard J. Campo 32,996,939 173,885 0 0
William R. Cooper 32,995,299 175,525 0 0
George A. Hrdlicka 32,996,489 174,335 0 0
Lewis A. Levey 32,996,882 173,942 0 0
D. Keith Oden 32,996,939 173,885 0 0
F. Gardner Parker 32,997,114 173,710 0 0
Steven A. Webster 32,997,114 173,710 0 0
Scott S. Ingraham 32,997,114 173,710 0 0
</TABLE>
(2) The Shareholders ratified the appointment of Deloitte and Touche LLP as
our independent auditors for the year ending December 31,1999.
<TABLE>
<CAPTION>
Broker
AFFIRMATIVE NEGATIVE ABSTENTIONS NON-VOTERS
<S> <C> <C> <C>
32,756,935 63,921 349,968 0
</TABLE>
Item 5. Other Information
None
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Statement regarding Computation of Earnings Per Common Share
27.1 Financial Data Schedule (filed only electronically with the
Commission)
(b) Reports on Form 8-K
Current Report on Form 8-K dated April 15, 1999 and filed
with the Commission on April 16,1999, contained information under
Item 5 (Other Events) and Item 7 (Financial Statements, Pro Forma
Financial Information and Exhibits).
Current Report on Form 8-K dated and filed with the commission
on April 20, 1999, contained information under Item 5 (other
Events) and Item 7 (Financial Statement, Pro Forma Financial
Information and Exhibits).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on our behalf by the
undersigned thereunto duly authorized.
CAMDEN PROPERTY TRUST
/s/ G. Steven Dawson August 11, 1999
- --------------------------------------- --------------------------------
G. Steven Dawson Date
Sr. Vice President of Finance,
Chief Financial Officer and Treasurer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)
<PAGE>
EXHIBIT 11.1
CAMDEN PROPERTY TRUST
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Weighted Average Common Shares Outstanding 41,243 44,262 42,038 37,952
========== ========== ========== ==========
Basic Earnings Per Share $ 0.31 $ 0.22 $ 0.63 $ 0.49
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE:
Weighted Average Common Shares Outstanding 41,243 44,262 42,038 37,952
Shares Issuable from Assumed Conversion of:
Common Share Options and Awards Granted 419 459 394 428
Minority Interest Units 2,658 2,105 2,661 2,201
---------- ---------- ---------- ----------
Weighted Average Common Shares Outstanding, as Adjusted 44,320 46,826 45,093 40,581
========== ========== ========== ==========
Diluted Earnings Per Share $ 0.30 $ 0.21 $ 0.61 $ 0.47
========== ========== ========== ==========
EARNINGS FOR BASIC AND DILUTED COMPUTATION:
Net Income $ 15,181 $ 14,254 $ 31,230 $ 23,215
Less: Preferred Share Dividends 2,343 4,686 4,686 4,686
---------- ---------- ---------- ----------
Net Income to Common Shareholders 12,838 9,568 26,544 18,529
(Basic Earnings Per Share Computation)
Minority Interest 340 238 958 569
---------- ---------- ---------- ----------
Net Income to Common Shareholders, as Adjusted
(Diluted Earnings Per Share Calculation) $ 13,178 $ 9,806 $ 27,502 $ 19,098
========== ========== ========== ==========
</TABLE>
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<PERIOD-END> JUN-30-1999
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0
42
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