SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 October 31, 2000, there were 38,254,937 shares of Common Shares of
Beneficial Interest, $0.01 par value outstanding.
<PAGE> 1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAMDEN PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------- --------------
(Unaudited)
<S> <C> <C>
Real estate assets, at cost:
Land $ 348,143 $ 354,833
Buildings and improvements 2,109,015 2,122,793
--------------- --------------
2,457,158 2,477,626
Less: accumulated depreciation (303,904) (253,545)
--------------- --------------
Net operating real estate assets 2,153,254 2,224,081
Properties under development, including land 147,076 178,539
Investment in joint ventures 22,119 21,869
--------------- --------------
Total real estate assets 2,322,449 2,424,489
Accounts receivable - affiliates 2,579 2,228
Notes receivable:
Affiliates 1,800 1,800
Other 63,126 34,442
Other assets, net 25,720 14,744
Cash and cash equivalents 13,396 5,517
Restricted cash 5,347 4,712
--------------- --------------
Total assets $ 2,434,417 $ 2,487,932
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable:
Unsecured $ 789,923 $ 820,623
Secured 340,677 344,467
Accounts payable 14,089 20,323
Accrued real estate taxes 28,898 24,485
Accrued expenses and other liabilities 36,252 33,987
Distributions payable 28,984 27,114
--------------- --------------
Total liabilities 1,238,823 1,270,999
Minority Interests:
Units convertible into perpetual preferred shares 149,815 132,679
Units convertible into common shares 61,806 64,173
--------------- -------------
Total minority interests 211,621 196,852
7.33% Convertible Subordinated Debentures 2,246 3,406
Shareholders' Equity:
Convertible preferred shares of beneficial interest 42 42
Common shares of beneficial interest 450 448
Additional paid-in capital 1,311,448 1,303,645
Distributions in excess of net income (145,958) (132,198)
Unearned restricted share awards (11,172) (8,485)
Less: treasury shares, at cost (173,083) (146,777)
--------------- --------------
Total shareholders' equity 981,727 1,016,675
--------------- --------------
Total liabilities and shareholders' equity $ 2,434,417 $ 2,487,932
=============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 2
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------------- -------------------------
2000 1999 2000 1999
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Rental income $ 92,251 $ 86,753 $ 273,429 $ 252,582
Other property income 7,250 6,006 20,226 16,585
------------ ---------- ----------- -----------
Total property income 99,501 92,759 293,655 269,167
Equity in income of joint venture 190 (472) 670 472
Fee and asset management 1,545 1,404 4,471 3,627
Other income 1,159 486 3,640 1,158
------------ ---------- ----------- -----------
Total revenues 102,395 94,177 302,436 274,424
------------ ---------- ----------- -----------
Expenses
Property operating and maintenance 29,312 28,205 85,292 80,344
Real estate taxes 10,057 9,165 30,091 27,669
General and administrative 2,926 2,473 9,691 7,272
Interest 17,640 14,709 51,829 42,227
Depreciation and amortization 23,700 22,703 73,543 65,541
------------ ---------- ----------- -----------
Total expenses 83,635 77,255 250,446 223,053
------------ ---------- ----------- -----------
Income before gain on sales of properties and joint
venture interests and minority interests 18,760 16,922 51,990 51,371
Gain on sales of properties and joint venture interests 16,440 2,259 18,373 2,979
------------ ---------- ----------- -----------
Income before minority interests 35,200 19,181 70,363 54,350
Minority interests
Distributions on units convertible into perpetual
preferred shares (3,219) (2,411) (9,627) (5,392)
Income allocated to units convertible into common shares (1,435) (892) (2,234) (1,850)
------------ ---------- ----------- -----------
Total minority interests (4,654) (3,303) (11,861) (7,242)
------------ ---------- ----------- -----------
Net income 30,546 15,878 58,502 47,108
Preferred share dividends (2,343) (2,343) (7,029) (7,029)
------------ ---------- ----------- -----------
Net income to common shareholders $ 28,203 $ 13,535 $ 51,473 $ 40,079
============ ========== =========== ===========
Basic earnings per share $ 0.74 $ 0.33 $ 1.35 $ 0.96
Diluted earnings per share $ 0.72 $ 0.32 $ 1.30 $ 0.94
Distributions declared per common share $ 0.5625 $ 0.520 $ 1.6875 $ 1.560
Weighted average number of common shares outstanding 38,050 40,939 38,156 41,668
Weighted average number of common
and common dilutive equivalent shares outstanding 44,746 42,025 41,388 44,728
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 3
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 58,502 $ 47,108
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 73,543 65,541
Equity in income of joint ventures, net of cash received 1,247 1,963
Gain on sale of properties and joint venture interests (18,373) (2,979)
Income allocated to units convertible into common shares 2,234 1,850
Accretion of discount on unsecured notes payable 300 223
Net change in operating accounts 2,647 7,464
------------ ------------
Net cash provided by operating activities 120,100 121,170
CASH FLOW FROM INVESTING ACTIVITIES
Increase in real estate assets (103,487) (166,990)
Net proceeds from sale of properties 150,141 13,226
Net proceeds from sale of joint venture interests 5,465
Increase in investment in joint ventures (1,497) (2,012)
Decrease in investment in joint ventures 6,400
Increase in notes receivable (28,684) (27,331)
Other (1,110) (1,488)
------------ ------------
Net cash provided by (used in) investing activities 15,363 (172,730)
CASH FLOW FROM FINANCING ACTIVITIES
Net decrease in unsecured lines of credit and
short-term borrowings (31,000) (147,000)
Proceeds from notes payable 253,380
Proceeds from issuance of preferred units, net 17,136 132,712
Repayment of notes payable (3,790) (23,685)
Distributions to shareholders and minority interests (84,219) (79,722)
Repurchase of common shares and units convertible
into common shares (26,306) (79,247)
Other 595 3,265
------------ ------------
Net cash (used in) provided by financing activities (127,584) 59,703
------------ ------------
Net increase in cash and cash equivalents 7,879 8,143
Cash and cash equivalents, beginning of period 5,517 5,647
------------ ------------
Cash and cash equivalents, end of period $ 13,396 $ 13,790
============ ============
SUPPLEMENTAL INFORMATION
Cash paid for interest, net of interest capitalized $ 50,514 $ 35,526
Interest capitalized 11,871 12,306
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Fair value adjustment from the acquisition of Oasis:
Fair value of assets acquired $ 835
Liabilities assumed 835
Conversion of 7.33% subordinated debentures to common shares, net $ 1,160 125
Value of shares issued under benefit plans, net 6,099 2,004
Conversion of operating partnership units to common shares 136 387
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
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 September 30, 2000, the results of operations for the three and nine months
ended September 30, 2000 and 1999 and cash flows for the nine months ended
September 30, 2000 and 1999 have been included. The results of operations for
such interim periods are not necessarily indicative of the results for the full
year.
Business
Camden Property Trust is a real estate investment trust which reports as
a single business segment with activities related to the ownership, development,
construction and management of multifamily apartment communities in the
Southwest, Southeast, Midwest and Western regions of the United States. At
September 30, 2000, we owned interests in, operated or were developing 147
multifamily properties containing 52,336 apartment homes located in nine states.
Two of our multifamily properties containing 1,000 apartment homes were under
development at September 30, 2000. Three of our newly developed multifamily
properties containing 1,256 apartment homes were in lease-up at September 30,
2000. Additionally, we have several sites which we intend to develop into
multifamily apartment communities.
Property Update
During the first nine months of 2000, we completed construction on four
development properties totaling 1,474 apartment homes: The Park at Caley in
Denver, The Park at Lee Vista in Orlando, The Park at Oxmoor in Louisville, and
The Park at Arizona Center in Phoenix. We also completed the construction of an
additional 151 apartment homes at Miramar, an existing operating property
located in Corpus Christi. Stabilization occured during the second quarter of
2000 at The Park at Caley, and in the third quarter at The Park at Holly Springs
and The Park at Greenway, both located in Houston and for the new units at
Miramar. Stabilization is expected to occur at the remaining properties during
the next year. Additionally, construction continued at two properties totaling
1,000 apartment homes: The Park at Farmers Market in Dallas and The Park at
Crown Valley in Mission Viejo, California, both of which have begun leasing.
During the first quarter of 2000 we sold a mini-storage facility located
in Las Vegas and several parcels of undeveloped land. The land sales consisted
of 2.9 acres located in downtown Dallas and 38.5 acres located in Houston which
were sold for commercial and retail development. These parcels of land are
adjacent to our land development projects located in those cities. Additionally,
we sold a 19.5 acre tract of land located in Las Vegas which we acquired in our
merger with Oasis Residential, Inc. Net proceeds from these sales were
approximately $20.1 million. We used the proceeds to reduce indebtedness
outstanding under our unsecured line of credit.
During the third quarter of 2000, we sold eleven properties containing
3,599 apartment homes. Three properties were located in each of Houston, Dallas
and Las Vegas, and one property was located in each of St. Louis and El Paso. As
<PAGE> 5
a result of these sales, we have exited the El Paso market, reduced the number
of assets in our three largest markets and believe that we have improved the
overall quality and geographic mix of our portfolio. Net proceeds from these
sales totaled $130.1 million and were used to reduce indebtedness outstanding
under our unsecured line of credit.
Real Estate Assets at Cost
We capitalized $22.0 million and $19.2 million in the nine months ended
September 30, 2000 and 1999, respectively, of renovation and improvement costs
which we believe should extend the economic lives and enhance the earnings of
our multifamily properties.
Property Operating and Maintenance Expenses
Property operating and maintenance expenses included normal repairs and
maintenance totaling $7.2 million and $21.4 million for the three and nine
months ended September 30, 2000, respectively, compared to $7.3 million and
$20.7 million for the three and nine months ended September 30, 1999,
respectively. On an annualized basis, repair and maintenance expenses were $612
and $636 per unit for the quarters ended September 30, 2000 and 1999,
respectively, and $607 and $609 per unit for the nine months ended September 30,
2000 and 1999, respectively.
Common Share Dividend Declaration
In September 2000, we announced that our Board of Trust Managers had
declared a dividend on our common shares of $0.5625 per share for the third
quarter of 2000 which was paid on October 17, 2000 to all common shareholders of
record as of September 29, 2000. 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 $2.25 per share or unit.
Preferred Share Dividend Declaration
In September 2000, we announced that our Board of Trust Managers had
declared a quarterly dividend on our preferred shares of $0.5625 per share
payable November 15, 2000 to all preferred shareholders of record as of
September 29, 2000.
Recent 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. The initial effective date of
SFAS No. 133 was delayed, and is now effective for all quarters of all fiscal
years beginning after June 15, 2000. Management believes that the adoption of
SFAS No. 133 will not have a material impact on our consolidated financial
statements.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No.
101, "Revenue Recognition in Financial Statements." SAB No. 101 provides
guidance on revenue recognition as well as the presentation and disclosure of
revenue in financial statements for all public companies. Our rental and other
property income is recorded when due from residents and is recognized monthly as
it is earned. Our apartment homes are rented to residents on lease terms ranging
from six to thirteen months, with monthly payments due in advance. We are
currently following the criteria set forth in SAB No. 101 to determine when
revenue can be recognized, and therefore believe that SAB No. 101 does not have
a material impact on our financial statements.
<PAGE> 6
Earnings Per Share
Basic earnings per share is computed based on net income to common
shareholders and the weighted average number of common shares outstanding.
Diluted earnings per share reflects common shares issuable from the assumed
conversion of common share options and awards granted, preferred shares,
minority interest units and convertible subordinated debentures. Only those
items that have a dilutive impact on our basic earnings per share are included
in diluted earnings per share. The following table presents information
necessary to calculate basic and diluted earnings per share for the three and
nine months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------ -------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Basic earnings per share:
Weighted average common shares outstanding 38,050 40,939 38,156 41,668
=========== =========== =========== ===========
Basic earnings per share $ 0.74 $ 0.33 $ 1.35 $ 0.96
=========== =========== =========== ===========
Diluted earnings per share:
Weighted average common shares outstanding 38,050 40,939 38,156 41,668
Shares issuable from assumed conversion of:
Common share options and awards granted 847 452 684 414
Preferred shares 3,207
Common minority interest units 2,545 634 2,548 2,646
Convertible subordinated debentures 97
----------- ----------- ----------- -----------
Weighted average common shares outstanding, as adjusted 44,746 42,025 41,388 44,728
=========== =========== =========== ===========
Diluted earnings per share $ 0.72 $ 0.32 $ 1.30 $ 0.94
=========== =========== =========== ===========
Earnings for basic and diluted computation:
Net income $ 30,546 $ 15,878 $ 58,502 $ 47,108
Less: Preferred share dividends (2,343) (2,343) (7,029) (7,029)
----------- ---------- ---------- -----------
Net income to common shareholders 28,203 13,535 51,473 40,079
(Basic earnings per share computation)
Preferred share dividends 2,343
Income allocated to units convertible into common shares 1,435 2,234 1,850
Interest on convertible subordinated debentures 5
Amortization of deferred costs on convertible debentures 42
----------- ----------- ----------- -----------
Net income to common shareholders, as adjusted
(Diluted earnings per share computation) $ 32,028 $ 13,535 $ 53,707 $ 41,929
=========== =========== =========== ===========
</TABLE>
Reclassifications
Certain reclassifications have been made to amounts in prior period
financial statements to conform with current year presentations.
2. Notes Receivable
We have entered into agreements with unaffiliated third parties to
develop, construct, and manage seven multifamily projects containing a total of
2,203 apartment homes. We are providing financing for a portion of each project
in the form of notes receivable which mature through 2005. These notes earn
interest at 10% annually and are secured by second liens on the assets and
partial guarantees by the third party owners. We expect these notes to be repaid
from operating cash flow or proceeds from the sale of the individual properties.
At September 30, 2000, these notes had principal balances totaling $59.9 million
and we anticipate funding up to an aggregate of $84 million in connection with
these projects. We earn fees for managing the development, construction and
<PAGE> 7
eventual operations of these properties. We have begun construction on four of
these projects, and initial occupancy has begun on two of the projects. We have
the option to purchase these properties in the future at a price to be
determined based upon the property's performance and an agreed valuation model.
The following is a detail of our third party construction subject to notes
receivable.
<TABLE>
<CAPTION>
Number of Estimated Estimated Estimated
Apartment Cost Date of Date of
Property and Location Homes ($ millions) Completion Stabilization
------------------------------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
In lease-up
Pecos Ranch
Phoenix, AZ 272 $ 21 4Q00 1Q01
Marina Pointe II
Tampa, FL 352 30 1Q01 3Q01
Under Construction
Creekside
Denver, CO 279 32 1Q01 4Q01
Ybor City
Tampa, FL 454 40 4Q01 3Q02
Pre-Development
Little Italy
San Diego, CA 160 32 TBD TBD
Otay Ranch
San Diego, CA 422 57 TBD TBD
California Oaks
Murietta, CA 264 35 TBD TBD
------------- -------------
Total Third Party Development 2,203 $ 247
============= =============
</TABLE>
Additionally, we have a $3.2 million note receivable which bears
interest at 15% and matures in June 2001.
3. Notes Payable
The following is a summary of our indebtedness:
(In millions)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---------------- ----------------
<S> <C> <C>
Senior Unsecured Notes:
6.73% - 7.28% Notes, due 2001-2006 $ 523.4 $ 523.1
6.68% - 7.70% Medium Term Notes, due 2000 - 2009 181.5 181.5
Unsecured Lines of Credit and Short-Term Borrowings 85.0 116.0
--------------- ----------------
789.9 820.6
Secured Notes - Mortgage loans (5.75% - 8.63%), due 2001 - 2028 340.7 344.5
--------------- ----------------
Total notes payable $ 1,130.6 $ 1,165.1
=============== ================
</TABLE>
During the third quarter of 2000, our line of credit, which was entered
into in August 1999 with 14 banks for a total commitment of $375 million, was
increased to $400 million and the maturity was extended to August 2003. The
scheduled interest rate on the line of credit is based on a spread over LIBOR or
Prime. The scheduled interest rates are subject to change as our credit ratings
change. Advances under the line of credit may be priced at the scheduled rates,
or we may enter into bid rate loans with participating banks at rates below the
<PAGE> 8
scheduled rates. These bid rate loans have terms of six months or less and may
not exceed the lesser of $200 million or the remaining amount available under
the line of credit. The line of credit is subject to customary financial
covenants and limitations.
During September 1999, we executed three interest rate swap agreements
totaling $70 million which matured in October 2000. These swaps were being used
as a hedge of interest rate exposure on our $90 million medium term notes issued
in October 1998 which matured in October 2000. The interest rate on the medium
term notes was fixed at 7.23%. The interest rates on the swaps were reset
monthly based on the one-month LIBOR rate plus a spread which resulted in a
weighted average effective interest rate on the swaps of 7.67% at September 30,
2000.
At September 30, 2000, the weighted average interest rate on floating
rate debt was 7.27%.
4. Net Change in Operating Accounts
The effect of changes in the operating accounts on cash flows from
operating activities is as follows:
(In thousands)
Nine Months Ended
September 30,
--------------------------
2000 1999
----------- -----------
Decrease (increase) in assets:
Accounts receivable - affiliates $ 218 $ (175)
Other assets, net (9,081) (1,787)
Restricted cash (635) (883)
Increase (decrease) in liabilities:
Accounts payable (3,862) (6,551)
Accrued real estate taxes 4,413 5,257
Accrued expenses and other liabilities 11,594 11,603
----------- -----------
Net change in operating accounts $ 2,647 $ 7,464
=========== ===========
5. Preferred Units
In January 2000, our operating partnership issued $17.5 million of 8.25%
Series C 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 8.25% Series C Cumulative Redeemable Perpetual Preferred Shares. The
preferred units are subordinate to present and future debt.
6. Restricted Share and Option Awards
During the first nine months of 2000, we granted 257,764 restricted
shares in lieu of cash compensation to certain key employees and non-employee
trust managers. The restricted shares were issued based on the market value of
our common shares at the date of grant and have vesting periods of up to five
years. We also granted 14,000 options with an exercise price equal to the market
value of our common shares 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 nine month period ended September 30, 2000, previously granted
options to purchase 706,661 shares became exercisable and 118,174 restricted
shares vested.
7. Common Share Repurchase Program
In 1998 and 1999, the Board of Trust Managers authorized us to
repurchase or redeem up to $200 million of our common equity securities through
open market purchases and private transactions. As of September 30, 2000, we had
repurchased 6,687,626 common shares and redeemed 105,814 units that were
convertible into common shares for a total cost of $173.1 million and $2.9
million, respectively.
<PAGE> 9
8. Convertible Preferred Shares
The 4,165,000 preferred shares 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 rate of 0.7701 of a common share for each preferred share, subject to
adjustment in certain circumstances. The preferred shares are not redeemable
prior to April 30, 2001.
9. Executive Loan Guaranty Agreements
In 1999 and 2000, our Board of Trust Managers approved a plan which
permitted six of our senior executive officers to complete the purchase of $23.0
million of our common shares in open market transactions. The purchases were
funded with unsecured full recourse personal loans made to each of the
executives by a third party lender. The loans mature in five years, bear
interest at market rates and require interest to be paid quarterly. In order to
facilitate the employee share purchase transactions, we entered into a guaranty
agreement with the lender for payment of all indebtedness, fees and liabilities
of the officers to the lender. Simultaneously, we entered into a reimbursement
agreement with each of the executive officers whereby each executive officer has
indemnified us and absolutely and unconditionally agreed to reimburse us should
any amounts ever be paid by us pursuant to the terms of the guaranty agreement.
The reimbursement agreements require the executives to pay interest from the
date any amounts are paid by us until repayment by the officer. We have not had
to perform under the guaranty agreement.
10. E-commerce initiatives
Our Board of Trust Managers has authorized us to invest in non-real estate
initiatives, including investments in e-commerce initiatives with other
multi-family real estate owners. These investments may be made in companies that
will provide our residents with a broad range of real estate technology services
including high-speed data, video and entertainment services, as well as resident
portals. These portals will provide our residents with a variety of online
services, including online rental payments and maintenance requests, which we
believe will improve their overall living experience. As of September 30, 2000,
we had invested approximately $750,000 into BroadBand Residential Inc., a
multi-unit owner-sponsored broadband company providing high-speed data services
to multi-family residents, and have signed a commitment with another entity to
invest $3.5 million. Subsequent to September 30, 2000 we invested approximately
$2 million into Viva.com, an internet based company that provides online
owner-renter matching service for the multi-family housing industry. One of our
trust managers is a director, executive officer and significant shareholder of
Viva.com.
11. Contingencies
In April 1998, we acquired Oasis Residential, Inc. Prior to this time,
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 June 30, 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.
<PAGE> 10
With any acquisition, we plan for and undertake renovations needed to
correct deferred maintenance, life/safety and Fair Housing matters. We are
currently engaged in settlement negotiations with the Justice Department to
resolve this lawsuit. While the final estimate of costs and expenses associated
with the resolution of this matter has not yet been determined, management does
not expect the amount to be material.
12. 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 the transaction unless and until a
definitive contract is entered into by the parties. The letters of intent and
any resulting definitive contracts 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 complete
the purchases or will be satisfied with the outcome of the due diligence.
<PAGE> 11
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 1999 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 environmental
uncertainties and natural disasters.
Business
Camden Property Trust is a real estate investment trust which reports as
a single business segment with activities related to the ownership, development,
construction and management of multifamily apartment communities in the
Southwest, Southeast, Midwest and Western regions of the United States. At
September 30, 2000, we owned interests in, operated or were developing 147
multifamily properties containing 52,336 apartment homes located in nine states.
Two of our multifamily properties containing 1,000 apartment homes were under
development at September 30, 2000. Three of our newly developed multifamily
properties containing 1,256 apartment homes were in lease-up at September 30,
2000. Additionally, we have several sites which we intend to develop into
multifamily apartment communities.
Property Portfolio
Our multifamily property portfolio, excluding land held for future
development is summarized as follows:
<PAGE> 12
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
----------------------------- ------------------------------
Apartment Apartment
Homes Properties % (a) Homes Properties % (a)
---------- ---------- ------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating Properties
Texas
Houston 7,190 16 16% 8,258 19 16%
Dallas (b) 8,447 23 17 9,381 26 18
Austin 1,745 6 4 1,745 6 4
Other 1,663 4 3 1,641 5 3
----------- ------- ------ ---------- ------- --------
Total Texas Operating Properties 19,045 49 40 21,025 56 41
Arizona 2,658 8 6 2,326 7 5
California 1,272 3 3 1,272 3 3
Colorado (b) 2,529 8 5 2,312 7 4
Florida (c) 7,827 17 17 7,335 17 15
Kentucky 1,448 5 3 1,016 4 2
Missouri 2,719 7 6 3,327 8 7
Nevada (b) 11,103 38 13 11,963 41 14
North Carolina (b) 2,735 10 5 2,735 10 4
----------- ------- ------ ---------- ------- --------
Total Operating Properties 51,336 145 98 53,311 153 95
----------- ------- ------ ---------- ------- --------
Properties Under Development
Texas
Dallas 620 1 1 620 1 1
Arizona 332 1 1
California 380 1 1 380 1 1
Colorado 218 1
Florida 492 1 1
Kentucky 432 1 1
----------- ------- ------ ---------- ------- --------
Total Properties Under Development 1,000 2 2 2,474 6 5
----------- ------- ------ ---------- ------- --------
Total Properties 52,336 147 100% 55,785 159 100%
=========== ======= ====== ========== ======= ========
Less: Joint Venture
Apartment Homes (b) 6,503 6,504
----------- -----------
Total Apartment Homes
- Owned 100% 45,833 49,281
=========== ===========
</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, the
remaining interest is owned by unaffiliated private investors; one
property with 320 apartment homes (321 apartment homes at December 31,
1999) in Colorado in which we own a 50% interest, the remaining interest
is owned by an unaffiliated private investor; and 19 properties with 4,919
apartment homes in Nevada owned through Sierra-Nevada Multifamily
Investment, LLC which we own a 20% interest, the remaining interest is
owned by an unaffiliated private pension fund.
(c) Includes the combination of operations at January 1, 2000 of two adjacent
properties.
<PAGE> 13
At September 30, 2000, we had three completed properties under lease-up
as follows:
<TABLE>
<CAPTION>
Product Number of % Leased Estimated
Type Apartment at Date of Date of
Property and Location Homes 10/31/00 Completion Stabilization
----------------------------------- ------------ -------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
The Park at Oxmoor Garden 432 84% 1Q00 1Q01
Louisville, KY
The Park at Lee Vista Garden 492 78% 1Q00 1Q01
Orlando, FL
The Park at Arizona Center Urban 332 49% 1Q00 3Q01
Phoenix, AZ
</TABLE>
At September 30, 2000, we had two 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>
The Park at Farmers Market, Phase I Urban 620 $ 53.0 1Q01 4Q01
Dallas, TX
The Park at Crown Valley Garden 380 54.1 2Q01 4Q01
Mission Viejo, CA
</TABLE>
We stage our construction to allow leasing and occupancy during the
construction period which we believe minimizes the duration of 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 "Properties under development, including land" until individual
buildings are completed. Upon completion of each building, 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 generally one year from opening the leasing office (with some
allowances for larger than average properties), whichever occurs first, all
apartment homes are considered operating and we begin expensing all items that
were previously considered as carrying costs.
Properties under development in our consolidated financial statements
includes additional land held for development totaling $95.6 million at
September 30, 2000. Included in this amount is $68.9 million related to the
development of three land projects located in Dallas, Houston and Long Beach,
California.
<PAGE> 14
Comparison of the Quarter Ended September 30, 2000 and September 30, 1999
Earnings before interest, depreciation and amortization increased $5.8
million, or 10.6%, from $54.3 million to $60.1 million for the three months
ended September 30, 1999 and 2000, respectively. The weighted average number of
apartment homes for the third quarter of 2000 increased by 948 apartment homes,
or 2.1%, from 45,992 to 46,940. Total operating properties were 122 and 128 at
September 30, 2000 and 1999, respectively. The 46,940 weighted average apartment
homes and the 122 operating properties exclude the impact of our ownership
interest in properties owned in joint ventures.
Our apartment communities generate rental revenue and other income
through the leasing of apartment homes. Revenues from our rental operations
comprised 97% and 98% of our total revenues for the quarters ended September 30,
2000 and 1999, respectively. Our primary financial focus for our apartment
communities is net operating income. Net operating income represents total
property revenues less property operating and maintenance expenses, including
real estate taxes. Net operating income increased $4.7 million, or 8.6%, from
$55.4 million to $60.1 million for the quarters ended September 30, 1999 and
2000, respectively.
Rental income for the quarter ended September 30, 2000 increased $5.5
million, or 6.3%, over the quarter ended September 30, 1999. Rental income per
apartment home per month increased $26 or 4.1%, from $629 to $655 for the third
quarters of 1999 and 2000, respectively. The increase was primarily due to
increased revenue growth from the stabilized real estate portfolio and higher
average rental rates on the completed development properties. Overall average
occupancy increased from 94.0% for the quarter ended September 30, 1999 to 94.6%
for the quarter ended September 30, 2000.
Other property income increased $1.2 million from $6.0 million to $7.3
million for the three months ended September 30, 1999 and 2000, respectively,
which represents a monthly increase of $8 per apartment home. The increase in
other property income was due primarily to increases from revenue sources such
as telephone, cable and water.
Other income increased $673,000 for the quarter ended September 30, 2000
compared to the same period in 1999. This increase was due to interest earned on
our notes receivable.
Property operating and maintenance expenses increased $1.1 million or
3.9%, from $28.2 million to $29.3 million, but decreased as a percent of total
property income from 30.4% to 29.5% for the quarters ended September 30, 1999
and 2000, respectively. The increase in operating expense was due to a larger
number of apartment homes in operation and an increase in salary and benefit
expenses. Our operating expense ratios decreased primarily as a result of
operating efficiencies generated by our newly developed properties and a
reduction on a per unit basis in repairs and maintenance expenses.
Real estate taxes increased $892,000 from $9.2 million to $10.1 million
for the third quarters of 1999 and 2000, respectively, which represents an
annual increase of $60 per apartment home. The increase was primarily due to
increases in the valuations of renovated and developed properties and increases
in property tax rates.
General and administrative expenses increased $453,000 from $2.5 million
to $2.9 million, and increased as a percent of revenues from 2.6% to 2.9% for
the quarters ended September 30, 1999 and 2000 respectively. The increase was
primarily due to increases in incentive-based compensation expense, and expenses
related to our information technology function.
<PAGE> 15
Interest expense increased from $14.7 million to $17.6 million primarily
due to interest on new development and debt incurred to repurchase our shares
under the common share repurchase program. Interest capitalized was $3.8 million
and $4.1 million for the quarters ended September 30, 2000 and 1999,
respectively.
Depreciation and amortization increased from $22.7 million to $23.7
million. This increase was due primarily to developments and renovations
activity.
Gains on sales of properties for the quarter ended September 30, 2000
totaled $16.4 million due to the sale of eleven properties containing a total of
3,599 apartment homes. Gains on sales of properties for the quarter ended
September 30, 1999 totaled $2.3 million due to gains from the disposition of one
multifamily property containing 232 units and our investment in two commercial
office buildings. The gains recorded on these 1999 dispositions were partially
offset by a loss on the sale of a retail/commercial center. The gains in 1999 do
not include a loss on the sale of a 408 unit property held in a joint venture of
$738,000 which is included in "Equity in Income of Joint Ventures."
Distributions on units convertible into perpetual preferred shares
increased $808,000, from $2.4 million for the quarter ended September 30, 1999
to $3.2 million for the quarter ended September 30, 2000. This increase is
attributable to the issuance of additional perpetual preferred units which
totaled $35.5 million in August and September of 1999 and $17.5 million in
January 2000.
Comparison of the Nine Months Ended September 30, 2000 and September 30, 1999
Earnings before interest, depreciation and amortization increased $18.2
million, or 11.5%, from $159.1 million to $177.4 million for the nine months
ended September 30, 1999 and 2000, respectively. The weighted average number of
apartment homes for the first nine months of 2000 increased by 1,772 apartment
homes, or 3.9%, from 45,304 to 47,076. Total operating properties were 122 and
128 at September 30, 2000 and 1999, respectively. The weighted average apartment
homes and the number of operating properties exclude the impact of our ownership
interest in properties owned in joint ventures.
Revenues from our rental operations comprised 97% and 98% of our total
revenues for the nine months ended September 30, 2000 and 1999, respectively.
Net operating income increased $17.1 million, or 10.6%, from $161.2 million to
$178.3 million for the nine months ended September 30, 1999 and 2000,
respectively.
Rental income for the nine months ended September 30, 2000 increased
$20.8 million, or 8.3%, over the nine months ended September 30, 1999. Rental
income per apartment home per month increased $26 or 4.2%, from $619 to $645 for
the first nine months of 1999 and 2000, respectively. The increase was primarily
due to increased revenue growth from the stabilized real estate portfolio and
higher average rental rates on the completed development properties.
Other property income increased $3.6 million from $16.6 million to $20.2
million for the nine months ended September 30, 1999 and 2000, respectively,
which represents a monthly increase of $7 per apartment home. The increase in
other property income was due primarily to increases from revenue sources such
as telephone, cable and water.
Other Income for the nine months ended September 30, 2000 increased $2.5
million over the same period in 1999. This increase was due to interest earned
on our notes receivable.
Property operating and maintenance expenses increased $4.9 million or
6.2%, from $80.3 million to $85.3 million, but decreased as a percent of total
property income from 29.8% to 29.0% for the nine months ended September 30, 1999
and 2000, respectively. The increase in operating expense was due to a larger
<PAGE> 16
number of apartment homes in operation and an increase in salary and benefit
expenses. Our operating expense ratios decreased primarily as a result of
operating efficiencies generated by our newly developed properties.
Real estate taxes increased $2.4 million from $27.7 million to $30.1
million for the first nine months of 1999 and 2000, respectively, which
represents an annual increase of $38 per apartment home. The increase was
primarily due to increases in the valuations of renovated and developed
properties and increases in property tax rates.
General and administrative expenses increased $2.4 million from $7.3
million to $9.7 million, and increased as a percent of revenues from 2.6% to
3.2% for the nine months ended September 30, 1999 and 2000, respectively. The
increase was primarily due to increases in incentive-based compensation expense,
including the vesting of outstanding performance-based compensation related to
the gain on land development sales, and expenses related to our information
technology function.
Interest expense increased from $42.2 million to $51.8 million primarily
due to interest on new development and debt incurred to repurchase our shares
under the common share repurchase program. Interest capitalized was $11.9
million and $12.3 million for the nine months ended September 30, 2000 and 1999,
respectively.
Depreciation and amortization increased from $65.5 million to $73.5
million. This increase was due primarily to increased development and renovation
activity.
Gains on sale of properties for the nine months ended September 30, 2000
totaled $18.4 million due primarily to the sale of eleven properties containing
a total of 3,599 apartment homes. Also included is the sale of a mini-storage
facility in Las Vegas and the sale of approximately 61 acres of undeveloped land
located in Las Vegas, Dallas and Houston. Gains on sales of properties for the
nine months ended September 30, 1999 totaled $3.0 million due to the sale of two
multifamily properties containing 358 units and our investment in two commercial
office buildings. The gains recorded on these 1999 dispositions were partially
offset by a loss on the sale of a retail/commercial center. The gains in 1999 do
not include a loss on the sale of a 408 unit property held in a joint venture of
$738,000 which is included in "Equity in Income of Joint Ventures."
Distributions on units convertible into perpetual preferred shares
increased $4.2 million, from $5.4 million for the nine months ended September
30, 1999 to $9.6 million for the nine months ended September 30, 2000. This
increase is attributable to our issuances of perpetual preferred units, which
totaled $100 million in February 1999, $35.5 million in August and September of
1999 and $17.5 million in January 2000.
Liquidity and Capital Resources
Financial Structure
We intend to continue maintaining what management believes to be a
conservative capital structure by:
(i) using what management believes is 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 management believes it is appropriate;
<PAGE> 17
(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, net of capitalized interest, was
3.4 times and 3.8 times for the nine months ended September 30, 2000 and 1999,
respectively, and 3.4 times and 3.7 times for the quarters ended September 30,
2000 and 1999, respectively. At September 30, 2000 and 1999, 75.5% and 75.7%,
respectively, of our properties (based on invested capital) were unencumbered.
Liquidity
We intend to meet our short-term liquidity requirements through cash
flows provided by operations, our unsecured line of credit discussed in the
financial flexibility section and other short-term borrowings. We expect that
our ability to generate cash will be sufficient to meet our short-term liquidity
needs, which include:
(i) normal operating expenses;
(ii) current debt service requirements;
(iii) recurring capital expenditures;
(iv) property developments;
(v) common share repurchases; and
(vi) distributions on our common and preferred equity.
We consider our long-term liquidity requirements to be the repayment of
maturing secured debt and borrowings under our unsecured line of credit and
funding of acquisitions. We intend to meet our long-term liquidity requirements
through the use of common and preferred equity capital, senior unsecured debt
and property dispositions.
We intend to concentrate our growth efforts toward selective development
and acquisition opportunities in our current markets, and through the
acquisition of existing operating portfolios and the development of properties
in selected new markets. We are developing two properties at an aggregate
expected cost of approximately $107.1 million, $91.5 million of which was
incurred at September 30, 2000. We fund our developments and acquisitions
through a combination of equity capital, partnership units, medium-term notes,
construction loans, other debt securities and the unsecured line of credit. We
also seek to selectively dispose of assets that management believes have a lower
projected net operating income growth rate than the overall portfolio, or no
longer conform to our operating and investment strategies. We expect that any
such sales should generate capital for acquisitions and new developments or for
debt reduction.
Net cash provided by operating activities totaled $120.1 million for the
nine months ended September 30, 2000, a decrease of $1.1 million, or 0.9%, over
the same period in 1999. This decrease was attributable to a $17.1 million
increase in net operating income from the real estate portfolio for the nine
months ended September 30, 2000 as compared to the same period in 1999, offset
by a $9.6 million increase in interest expense and a $4.2 million increase in
distributions on units convertible into perpetual preferred shares. Also, other
assets increased $11.0 million, primarily from receivables due on third party
construction projects.
Net cash provided by investing activities totaled $15.4 million for the
nine months ended September 30, 2000 compared to net cash used by investing
activities of $172.7 million for the same period in 1999. Total real estate
assets, before accumulated depreciation, decreased $51.7 million for the nine
months ended September 30, 2000, and increased $145.4 million for the nine
months ended September 30, 1999. For the nine months ended September 30, 2000,
net cash flows provided by investing activities related to $150.1 million in net
proceeds received from property dispositions during 2000. This increase in cash
was offset by expenditures for property development and capital improvements
totaling $80.9 million and $22.0 million, respectively for the nine months ended
September 30, 2000. For the nine months ended September 30, 1999, net cash spent
on property development and capital improvements were $155.3 million and $19.2
million, respectively. Additionally, we received $13.2 million in net proceeds
for property dispositions during the nine months ended September 30, 1999.
<PAGE> 18
Net cash used in financing activities totaled $127.6 million for the
nine months ended September 30, 2000 compared to net cash provided by financing
activities of $59.7 million for the nine months ended September 30, 1999. During
the nine months ended September 30, 2000, we paid distributions totaling $84.2
million and we repurchased $26.3 million common shares and units convertible
into common shares. These payments were funded by the issuance of $17.5 million
of preferred units, which are discussed in the "Financial Flexibility" section,
and a decrease in borrowings under our line of credit of $31.0 million. During
the nine months ended September 30, 1999, we paid $79.7 million for
distributions and repurchased $79.2 million common shares and units convertible
into common shares. Additionally, during the nine months ended September 30,
1999, we issued $135.5 million of preferred units and $254.5 million in senior
unsecured notes. The proceeds from these issuances were used to pay down
borrowings under our line of credit, which decreased $147.0 million for the nine
months ended September 30, 1999.
In 1998 and 1999, the Board of Trust Managers authorized us to
repurchase or redeem up to $200 million of our common equity securities through
open market purchases and private transactions. As of September 30, 2000, we had
repurchased 6,687,626 common shares and redeemed 105,814 units that were
convertible into common shares for a total cost of $173.1 million and $2.9
million, respectively.
During the first quarter of 2000 we sold a mini-storage facility located
in Las Vegas and several parcels of undeveloped land. The land sales consisted
of 2.9 acres located in downtown Dallas and 38.5 acres located in Houston which
were sold for commercial and retail development. These parcels of land are
adjacent to our urban land development projects located in those cities.
Additionally, we sold a 19.5 acre tract of land located in Las Vegas which we
acquired in our merger with Oasis Residential, Inc. Net proceeds from these
sales were approximately $20.1 million. We used the proceeds to reduce
indebtedness outstanding under our unsecured line of credit.
During the third quarter of 2000, we sold eleven properties containing
3,599 apartment homes. Three properties were located in each of Houston, Dallas
and Las Vegas, and one property was located in each of St. Louis and El Paso. As
a result of these sales, we have exited the El Paso market, reduced the number
of assets in our three largest markets and believe that we have improved the
overall quality and geographic mix of our portfolio. Net proceeds from these
sales totaled $130.1 million and were used to reduce indebtedness outstanding
under our unsecured line of credit.
In September 2000, we announced that our Board of Trust Managers had
declared a dividend on our common shares of $0.5625 per share for the third
quarter of 2000 which was paid on October 17, 2000 to all common shareholders of
record as of September 29, 2000. 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 $2.25 per share or unit.
In September 2000, we declared a quarterly dividend on our preferred
shares of $0.5625 per share payable November 15, 2000 to all preferred
shareholders of record as of September 29, 2000.
<PAGE> 19
As of September 30, 2000, we had senior unsecured debt totaling $789.9
million and secured mortgage loans totaling $340.7 million. Our indebtedness has
a weighted average maturity of 5.3 years as of September 30, 2000. Scheduled
principal repayments on all notes payable outstanding at September 30, 2000 is
as follows:
(In thousands)
Year Amount
--------- ---------------
2000 $ 103,479
2001 167,465
2002 40,435
2003 210,482
2004 235,297
2005 and thereafter 373,442
---------------
Total $ 1,130,600
===============
The scheduled principal repayments in 2000 include $102.0 million senior
unsecured medium term notes, which were issued in October 1998 and which we
expect to repay from the unsecured line of credit.
Financial Flexibility
During the third quarter of 2000, our line of credit, which was entered
into in August 1999 with 14 banks for a total commitment of $375 million, was
increased to $400 million and the maturity was extended to August 2003. The
scheduled interest rate on the line of credit is currently based on a spread
over LIBOR or Prime. The scheduled interest rates are subject to change as our
credit ratings change. Advances under the line of credit may be priced at the
scheduled rates, or we may enter into bid rate loans with participating banks at
rates below the scheduled rates. These bid rate loans have terms of nine months
or less and may not exceed the lesser of $200 million or the remaining amount
available under the line of credit. The line of credit is subject to customary
financial covenants and limitations.
As an alternative to our unsecured line 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 line of credit bank group. Such borrowings
vary in term and pricing and are typically priced at interest rates below those
available under the unsecured line of credit.
As of September 30, 2000, we had $315 million available under the
unsecured line of credit and $750 million available under our universal shelf
registration. We have significant unencumbered real estate assets which we
believe could be sold or used as collateral for financing purposes should other
sources of capital not be available.
In January 2000, our operating partnership issued $17.5 million of 8.25%
Series C 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 8.25% Series C Cumulative Redeemable Perpetual Preferred Shares. The
preferred units are subordinate to present and future debt.
During September 1999, we executed three interest rate swap agreements
totaling $70 million which matured in October 2000. These swaps were being used
as a hedge of interest rate exposure on our $90 million medium term notes issued
in October 1998 which matured in October 2000. The interest rate on the medium
term notes was fixed at 7.23%. The interest rates on the swaps were reset
<PAGE> 20
monthly based on the one-month LIBOR rate plus a spread which resulted in a
weighted average effective interest rate on the swaps of 7.67% for the nine
months ended September 30, 2000.
At September 30, 2000, the weighted average interest rate on floating
rate debt was 7.27%.
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. Our definition of diluted FFO assumes conversion at the beginning of
the period of all dilutive convertible securities, including minority interests,
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 and nine months ended September 30, 2000 increased $1.1 million and $2.7
million over the three and nine months ended September 30, 1999, respectively.
On a per share basis, diluted FFO for the three and nine months ended September
30, 2000 increased approximately 8.9% and 10.1%, respectively, over the same
periods in 1999. The increase in diluted FFO was due to a $4.7 million and $17.1
million increase in net operating income from our real estate portfolio for the
three and nine months ended September 30, 2000 compared to the same periods in
1999. These increases were offset by increases in interest on debt which was
used to fund developments, repurchase shares under our common share repurchase
program, and fund distributions on units convertible into perpetual preferred
shares.
The calculation of basic and diluted FFO for the three and nine months ended
September 30, 2000 and 1999 follows:
(In thousands)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
----------------------- ------------------------
2000 1999 2000 1999
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Funds from operations:
Net income to common shareholders $ 28,203 $ 13,535 $ 51,473 $ 40,079
Real estate depreciation 23,141 22,315 71,443 64,388
Real estate depreciation from unconsolidated ventures 814 797 2,432 2,423
Loss on sale of property held in unconsolidated ventures 738 738
Gain on sales of properties and joint venture interests (16,440) (2,259) (18,373) (2,979)
---------- --------- ---------- -----------
Funds from operations - basic 35,718 35,126 106,975 104,649
Preferred share dividends 2,343 2,343 7,029 7,029
Income allocated to units convertible into common shares 1,435 892 2,234 1,850
Interest on convertible subordinated debentures 42 63 139 195
Amortization of deferred costs on convertible debentures 5 7 16 19
---------- --------- ---------- -----------
Funds from operations - diluted $ 39,543 $ 38,431 $ 116,393 $ 113,742
========== ========= ========== ===========
Weighted average shares - basic 38,050 40,939 38,156 41,668
Common share options and awards granted 847 452 684 414
Preferred shares 3,207 3,207 3,207 3,207
Minority interest units 2,545 2,621 2,548 2,646
Convertible subordinated debentures 97 145 111 148
---------- --------- ---------- -----------
Weighted average shares - diluted 44,746 47,364 44,706 48,083
========== ========= ========== ===========
</TABLE>
<PAGE> 21
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.
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. The initial effective date of
SFAS No. 133 was delayed, and is now effective for all quarters of all fiscal
years beginning after June 15, 2000. Management believes that the adoption of
SFAS No. 133 will not have a material impact on our consolidated financial
statements.
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No.
101, "Revenue Recognition in Financial Statements." SAB No. 101 provides
guidance on revenue recognition as well as the presentation and disclosure of
revenue in financial statements for all public companies. Our rental and other
property income is recorded when due from residents and is recognized monthly as
it is earned. Our apartment homes are rented to residents on lease terms ranging
from six to thirteen months, with monthly payments due in advance. We are
currently following the criteria set forth in SAB No. 101 to determine when
revenue can be recognized, and therefore believe that SAB No. 101 does not have
a material impact on our financial statements.
<PAGE> 22
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, 1999.
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. Other Information
None
Item 5. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule (filed only electronically with
the Commission)
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the registrant during
the quarter for which this report is filed.
<PAGE> 23
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 November 13, 2000
--------------------------------------------- -------------------------------
G. Steven Dawson Date
Chief Financial Officer,
Sr. Vice President of Finance and Secretary
/s/ Dennis M. Steen November 13, 2000
--------------------------------------------- -------------------------------
Dennis M. Steen Date
Chief Accounting Officer,
Vice President - Controller and Treasurer
