EXHIBIT 13.1 Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with all of the financial statements and notes appearing elsewhere in this report. Historical results and trends which might appear should not be taken as being indicative of future operations. We have made statements in this report that are “forward-looking” in that they do not discuss historical fact, but instead note future expectations, projections, intentions or other items relating to the future. You should not rely on these forward-looking statements as they are subject to known and unknown risks, uncertainties and other factors that may cause our actual results or performance to differ materially from those included in the forward-looking statements. Many of those factors are noted in conjunction with the forward-looking statements in the text. Other important factors that could cause actual results to differ include: |
o | the results of our efforts to implement our property development, construction and acquisition strategies; |
o | the effects of economic conditions, including rising interest rates; |
o | our ability to generate sufficient cash flows; |
o | the failure to qualify as a real estate investment trust; |
o | the costs of our capital and debt; |
o | changes in our capital requirements; |
o | the actions of our competitors and our ability to respond to those actions; |
o | the performance of our mezzanine financing program; |
o | changes in governmental regulations, tax rates and similar matters; and |
o | environmental uncertainties and disasters. |
Do not rely on these forward-looking statements, which only represent our estimates and assumptions as of the date of this report. We assume no obligation to update or revise any forward-looking statement. Business Camden Property Trust is a real estate investment trust (“REIT”) and, with our subsidiaries, reports as a single business segment with activities related to the ownership, development, construction and management of multifamily apartment communities. As of December 31, 2003, we owned interests in, operated or were developing 146 multifamily properties containing 52,346 apartment homes located in ten states. Two of our newly developed multifamily apartment properties containing 786 apartment homes were in lease-up at year end. Two of our multifamily properties containing 1,002 apartment homes were under development at December 31, 2003, including 464 apartment homes owned through a joint venture. Additionally, we have several sites that we intend to develop into multifamily apartment communities. Our 2003 results reflect the difficult operating fundamentals in our industry, including an oversupply of multifamily housing; low interest rates on mortgage debt, which continue to make home purchases attractive; and a slow economic recovery. During 2003, apartment turnover due to home purchases was at the highest level in our history. Despite these challenges, overall occupancy in our portfolio increased during 2003. The increase in occupancy was achieved in part by offering higher concessions in many of our markets. As a result, we experienced a 1.3% decline in revenues from our same-store communities during the year. Total revenues for 2003 increased slightly as income from newly developed communities offset the decline in revenues from our same-store communities and 2002 dispositions.
We continued to focus on expense control in 2003. Expenses at our same-store communities increased 4.7% during 2003, after increasing only 1.1% in 2002. The increase in 2003 expenses was driven by increases in property insurance expense, real estate taxes, repair and maintenance costs and normal increases in employee related expenses. We were able to take advantage of the lower interest rate environment in 2003, and these savings should continue, as we replace maturing debt with new lower cost debt. Although we expect 2004 to remain a challenging economic environment, we believe we are well positioned for growth. Our average borrowing costs should continue to decline as a result of the replacement of higher priced maturing debt. Additionally, our operating results should be positively impacted by the increase in the occupancy levels of our portfolio and, increases in contributions from our California and Houston development properties. Property Update During 2003, stabilization was achieved at three communities totaling 878 apartment homes as follows: Camden Ybor City in Tampa, Florida, a 454 apartment home community that was acquired in the second quarter of 2002; Camden Vineyards in Murrieta, California, which completed construction of 264 apartment homes in the fourth quarter of 2002; and Camden Tuscany in San Diego, California, which completed construction of 160 apartment homes in the third quarter of 2003. We consider a property stabilized once it reaches 90% occupancy, or generally one year from opening the leasing office, with some allowances for larger than average properties. During 2003, we also completed construction of Camden Sierra at Otay Ranch, a 422 apartment home community located in Chula Vista, California, which we expect will stabilize operations during the first quarter of 2004, and Camden Oak Crest, a 364 apartment home community in Houston, Texas, which we expect will stabilize operations during the second quarter of 2004. Additionally, we continued construction at Camden Harbor View, a 538 apartment home community in Long Beach, California, which we expect to complete and stabilize in 2004. We also began construction on one property, Camden Westwind, a 464 apartment home community in Ashburn, Virginia. This property is owned by a joint venture in which we own a 20% interest. As of December 31, 2003, we had operating properties in 16 markets. No single market contributed more than 15% of our net operating income for the year then ended. For the year ended December 31, 2003, Houston, Dallas and Las Vegas contributed 14.4%, 13.9% and 13.8%, respectively, of our net operating income. We continually evaluate our portfolio to ensure appropriate geographic diversification in order to manage our risk of market concentration. We seek to selectively dispose of assets that management believes are highly capital intensive, have a lower projected net operating income growth rate than the overall portfolio, or no longer conform to our operating and investment strategies. In connection with this strategy, three communities with 482 apartment homes, which were held through joint ventures, were sold during 2003. 2 A summary of our 2003 dispositions is as follows: |
Property and Location | Number of Apartment Homes | Date of Disposition | Year Built | ||||
---|---|---|---|---|---|---|---|
Park Catalina (a) | |||||||
Los Angeles, California | 90 | 3/28/03 | 2002 | ||||
Oasis Rose (a) | |||||||
Las Vegas, Nevada | 212 | 5/22/03 | 1994 | ||||
Oasis View (a) | |||||||
Las Vegas, Nevada | 180 | 5/22/03 | 1983 | ||||
Total apartment homes sold | 482 | ||||||
(a) | As these properties were held through joint ventures, our portion of the results of operations and the gains from these dispositions are included in "Equity in income of joint ventures" in our consolidated statements of operations |
3 Our multifamily property portfolio, excluding land we hold for future development and joint venture properties we do not manage, at December 31, 2003, 2002 and 2001 is summarized as follows: |
2003 | 2002 | 2001 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apartment Homes | Properties | Apartment Homes | Properties | Apartment Homes | Properties | ||||||||
Operating Properties | |||||||||||||
West Region | |||||||||||||
Las Vegas, Nevada (a) | 9,625 | 33 | 10,017 | 35 | 10,653 | 37 | |||||||
Denver, Colorado (a) | 2,529 | 8 | 2,529 | 8 | 2,529 | 8 | |||||||
Phoenix, Arizona | 2,433 | 8 | 2,433 | 8 | 2,109 | 7 | |||||||
Southern California | 2,499 | 7 | 1,917 | 5 | 1,653 | 4 | |||||||
Tucson, Arizona | 821 | 2 | 821 | 2 | 821 | 2 | |||||||
Reno, Nevada | -- | -- | -- | -- | 450 | 1 | |||||||
Central Region | |||||||||||||
Dallas, Texas | 8,359 | 23 | 8,359 | 23 | 8,359 | 23 | |||||||
Houston, Texas (b) | 6,810 | 15 | 6,446 | 14 | 7,190 | 16 | |||||||
St. Louis, Missouri | 2,123 | 6 | 2,123 | 6 | 2,123 | 6 | |||||||
Austin, Texas | 1,745 | 6 | 1,745 | 6 | 1,745 | 6 | |||||||
Corpus Christi, Texas (b) | 1,284 | 3 | 1,284 | 3 | 1,663 | 4 | |||||||
Kansas City, Missouri | 596 | 1 | 596 | 1 | 596 | 1 | |||||||
East Region | |||||||||||||
Tampa, Florida | 6,089 | 13 | 6,089 | 13 | 5,023 | 11 | |||||||
Orlando, Florida | 2,804 | 6 | 2,804 | 6 | 2,804 | 6 | |||||||
Charlotte, North Carolina | 1,659 | 6 | 1,659 | 6 | 1,659 | 6 | |||||||
Louisville, Kentucky | 1,448 | 5 | 1,448 | 5 | 1,448 | 5 | |||||||
Greensboro, North Carolina | 520 | 2 | 520 | 2 | 520 | 2 | |||||||
Total Operating Properties | 51,344 | 144 | 50,790 | 143 | 51,345 | 145 | |||||||
Properties Under Development | |||||||||||||
West Region | |||||||||||||
Southern California | 538 | 1 | 1,120 | 3 | 802 | 2 | |||||||
Central Region | |||||||||||||
Houston, Texas | -- | -- | 364 | 1 | -- | -- | |||||||
East Region | |||||||||||||
Northern Virginia (c) | 464 | 1 | -- | -- | -- | -- | |||||||
Total Properties Under Development | 1,002 | 2 | 1,484 | 4 | 802 | 2 | |||||||
Total Properties | 52,346 | 146 | 52,274 | 147 | 52,147 | 147 | |||||||
Less: Joint Venture Properties (a) (c) | 5,011 | 18 | 4,939 | 19 | 5,239 | 20 | |||||||
Total Properties Owned 100% | 47,335 | 128 | 47,335 | 128 | 46,908 | 127 | |||||||
(a) | Includes properties held in joint ventures as follows: one property with 320 apartment homes in Colorado in which we own a 50% interest, the remaining interest is owned by an unaffiliated private investor; and 16 properties with 4,227 apartment homes (18 properties with 4,619 apartment homes at December 31, 2002, and 19 properties with 4,919 apartment homes at December 31, 2001) in Las Vegas in which we own a 20% interest, the remaining interest is owned by an unaffiliated private investor. |
(b) | December 31, 2001 balances include two properties with 744 apartment homes in Houston and one property with 580 apartment homes in Corpus Christi, which are included in discontinued operations in our consolidated financial statements. |
(c) | Includes one property with 464 apartment homes currently under development in Virginia held in a joint venture we entered into in 2003 in which we own a 20% interest, the remaining interest is owned by an unaffiliated private investor. |
4 At December 31, 2003, we had two completed properties in lease-up as follows: ($ in millions) |
Property and Location | Number of Apartment Homes | Cost to Date | % Leased at 2/16/04 | Date of Completion | Estimated Date of Stablization | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Camden Oak Crest | |||||||||||||||||
Houston, TX | 364 | $ | 22.9 | 82% | 2Q03 | 2Q04 | |||||||||||
Camden Sierra at Otay Ranch | |||||||||||||||||
Chula Vista, CA | 422 | 59.9 | 90% | 3Q03 | 1Q04 | ||||||||||||
Total | 786 | $ | 82.8 | ||||||||||||||
At December 31, 2003, we had two properties under development as follows: ($ in millions) |
Property and Location | Number of Apartment Homes | Estimated Cost | Cost Incurred at 12/31/03 | Estimated Date of Completion | Estimated Date of Stablization | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In Lease-up | |||||||||||||||||
Camden Harbor View | |||||||||||||||||
Long Beach, CA | 538 | $ | 144.5 | $ | 138.5 | 2Q04 | 4Q04 | ||||||||||
Under Construction - JV's | |||||||||||||||||
Camden Westwind | |||||||||||||||||
Ashburn, VA | 464 | $ | 69.1 | $ | 25.3 | 1Q06 | 4Q06 |
Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes that are capitalized as part of properties under development. Expenditures directly related to the development, acquisition and improvement of real estate assets, excluding internal costs relating to acquisitions, are capitalized at cost as land, buildings and improvements. Indirect development costs, including salaries and benefits and other related costs that are clearly attributable to the development of properties, are also capitalized. All construction and carrying costs are capitalized and reported on the balance sheet in properties under development until the apartment homes are substantially completed. Upon substantial completion of the apartment homes, the total cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively, and the assets are depreciated over their estimated useful lives using the straight-line method of depreciation. Where possible, 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 associated with completed apartment homes are expensed against revenues generated by those apartment homes. If an event or change in circumstance indicates that a potential impairment in the value of a property has occurred, our policy is to assess any potential impairment by making a comparison of the current and projected cash flows for such property over its remaining holding period, on an undiscounted basis, to the carrying amount of the property. If such carrying amounts were in excess of the estimated projected cash flows of the property, we would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its estimated fair market value. 5 Our consolidated financial statements at December 31, 2003 included $189.1 million related to wholly owned properties under development. Of this amount, $64.9 million relates to our one project currently under development, Camden Harbor View. Additionally, we have $124.2 million invested in land held for future development. Included in this amount is $54.0 million related to projects we expect to begin constructing in early 2004. We also have $37.6 million invested in land tracts adjacent to current development projects, which are being utilized in conjunction with those projects. Upon completion of these development projects, we expect to utilize this land to further develop apartment homes in these areas. We may also sell certain parcels of these undeveloped land tracts to third parties for commercial and retail development. We have completed construction of 17 for-sale townhomes in the downtown Dallas area at a total cost of approximately $5.5 million. During 2001 and 2002, we sold five and eight units, respectively, at a total sales price of approximately $1.6 million and $2.5 million, respectively. During 2003, we sold the four remaining units at a total sales price of approximately $1.3 million. The proceeds received from these townhome sales are included in other revenues in our consolidated statements of operations. Other expenses in our consolidated statements of operations represent the construction costs and marketing expenses associated with the townhomes. At December 31, 2003 and 2002, our investments in various geographic areas, excluding investments in joint ventures, were as follows: (In thousands) |
2003 | 2002 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
West Region | |||||||||||||||
Southern California | $ | 516,077 | 17 | % | $ | 454,878 | 15 | % | |||||||
Las Vegas, Nevada | 382,238 | 12 | 379,606 | 12 | |||||||||||
Denver, Colorado | 193,833 | 6 | 192,738 | 6 | |||||||||||
Phoenix, Arizona | 175,693 | 6 | 174,672 | 6 | |||||||||||
Tucson, Arizona | 35,266 | 1 | 34,825 | 1 | |||||||||||
Central Region | |||||||||||||||
Dallas, Texas | 412,553 | 13 | 407,313 | 13 | |||||||||||
Houston, Texas | 402,724 | 13 | 396,462 | 13 | |||||||||||
St. Louis, Missouri | 118,779 | 4 | 117,391 | 4 | |||||||||||
Austin, Texas | 72,883 | 2 | 72,110 | 2 | |||||||||||
Corpus Christi, Texas | 49,494 | 2 | 49,076 | 2 | |||||||||||
Kansas City, Missouri | 36,730 | 1 | 36,458 | 1 | |||||||||||
East Region | |||||||||||||||
Tampa, Florida | 342,421 | 11 | 338,999 | 11 | |||||||||||
Orlando, Florida | 171,594 | 5 | 169,544 | 6 | |||||||||||
Charlotte, North Carolina | 82,250 | 3 | 81,246 | 3 | |||||||||||
Louisville, Kentucky | 78,075 | 3 | 77,308 | 3 | |||||||||||
Greensboro, North Carolina | 18,213 | 1 | 17,941 | 1 | |||||||||||
Northern Virginia | -- | -- | 20,017 | 1 | |||||||||||
Total Properties | $ | 3,088,823 | 100 | % | $ | 3,020,584 | 100 | % | |||||||
Third-Party Construction Services Our construction division performs services for our internally developed construction pipeline, as well as provides construction management and general contracting services for third-party owners of multifamily, commercial and retail properties. We are currently under contract on projects ranging from $0.7 million to $17.1 million. We earn fees on these projects ranging from 4% to 7% of the total contracted construction cost which we recognize when they are earned. Fees earned from third-party construction projects totaled 6 $2.6 million, $2.7 million and $2.6 million for the years ended December 31, 2003, 2002 and 2001, respectively, and are included in revenues in our consolidated statements of operations under “Fee and asset management.” For projects where our fee is based on a fixed price, any cost overruns, as compared to the original budget, incurred during construction will reduce the fee generated on those projects. For any project where cost overruns are expected to be in excess of the fee generated on the project, we will recognize the total expected loss in the period in which the loss is first estimated. During the year ended December 31, 2003, we recorded cost overruns of $2.0 million on fixed fee projects, which represented the estimate of our remaining costs to complete the projects. These cost overruns are included in fee and asset management expenses in our consolidated statements of operations. Liquidity and Capital Resources Financial Structure We intend to maintain 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 what management believes are prudent levels of fixed and floating rate debt; |
(iv) | borrowing on an unsecured basis in order to maintain a substantial number of unencumbered assets; and |
(v) | maintaining conservative coverage ratios. |
Our interest expense coverage ratio, net of capitalized interest, was 2.9, 3.3 and 3.4 times for the years ended December 31, 2003, 2002 and 2001, respectively. At December 31, 2003, 2002 and 2001, 85.1%, 83.8% and 80.4%, respectively, of our properties (based on invested capital) were unencumbered. Our weighted average maturity of debt, excluding our line of credit, was 6.5 years, 6.7 years and 6.9 years at December 31, 2003, 2002 and 2001, respectively. Interest expense coverage ratio is derived by dividing interest expense for the period into the sum of income from continuing operations before gain on sale of properties, equity in income of joint ventures and minority interests, depreciation, amortization, interest expense and income from discontinued operations. 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) | operating expenses; |
(ii) | current debt service requirements; |
(iii) | recurring capital expenditures; |
(iv) | initial funding of property developments, acquisitions and mezzanine financings; |
(v) | common share repurchases; and |
(vi) | distributions on our common and preferred equity. |
Total | 2004 | 2005 | 2006 | 2007 | 2008 | Thereafter | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Debt maturities (a) | $ | 1,509.7 | $ | 234.2 | $ | 60.9 | $ | 257.3 | $ | 165.4 | $ | 17.9 | $ | 774.0 | |||||||||
Non-cancelable | |||||||||||||||||||||||
operating lease | |||||||||||||||||||||||
payments | 12.2 | 2.1 | 1.9 | 1.6 | 1.5 | 1.0 | 4.1 | ||||||||||||||||
Construction contracts | 3.0 | 3.0 | -- | -- | -- | -- | -- | ||||||||||||||||
$ | 1,524.9 | $ | 239.3 | $ | 62.8 | $ | 258.9 | $ | 166.9 | $ | 18.9 | $ | 778.1 | ||||||||||
(a) | Debt maturities in 2004 are at a weighted average interest rate of 7.1% and will be repaid using proceeds available under our unsecured line of credit |
The joint ventures in which we have an interest have been funded with secured, third-party debt. We are not committed to any additional funding on third-party debt in relation to our joint ventures. Financial Flexibility We have a $500 million unsecured line of credit that matures in August 2006. The scheduled interest rate is currently based on spreads over LIBOR or Prime. The scheduled interest rate spreads 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 six months or less and may not exceed the lesser of $250 million or the remaining amount available under the line of credit. The line of credit provides us with additional liquidity to pursue development and acquisition opportunities, as well as lower our overall cost of funds. The line of credit is subject to customary financial covenants and limitations, all of which we were in compliance with at December 31, 2003. Our line of credit provides us with the ability to issue up to $100 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our line, it does reduce the amount available to us. At December 31, 2003, we had outstanding letters of credit totaling $12.4 million. 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 December 31, 2003, we had $440.6 million available under our unsecured line of credit. In February 2003, we filed a universal shelf registration statement providing for the issuance of up to $1.0 billion in debt securities, preferred shares, common shares or warrants. This registration statement was combined with the $85.5 million remaining from our previous $750 million universal shelf. At December 31, 2003, $885.5 million was available for future issuances. We have significant unencumbered real estate assets that could be sold or used as collateral for financing purposes, should other sources of capital not be available. The following table summarizes our unsecured notes payable issued during 2003 from our $1.1 billion universal shelf: 10 |
Type and Amount | Month of Issuance | Terms | Coupon Rate | Maturity Date | Interest Paid | Proceeds, Net of Costs | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 15 and | |||||||||||||
$200.0 million senior unsecured notes | 12/03 | Interest only | 5.375% | 12/15/13 | December 15 | $198.9 million |
We may redeem the notes at any time at a redemption price equal to the principal amount and accrued interest, plus a make-whole provision. The notes are direct, senior unsecured obligations and rank equally with all other unsecured and unsubordinated indebtedness. We used the net proceeds to reduce indebtedness outstanding under our unsecured line of credit. During 2003, we paid $50.0 million of maturing unsecured notes payable. These notes had an interest rate of 7.0% and were repaid using proceeds from our unsecured line of credit. Additionally, we repaid two conventional mortgage notes totaling $13.2 million. These notes had interest rates of 7.5% and 7.7% and were repaid using proceeds available under our unsecured line of credit. At December 31, 2003 and 2002, the weighted average interest rate on our floating rate debt was 2.2% and 2.6%, respectively. Market Risk We use fixed and floating rate debt to finance acquisitions, developments and maturing debt. These transactions expose us to market risk related to changes in interest rates. Management’s policy is to review our borrowings and attempt to mitigate interest rate exposure through the use of long-term debt maturities and derivative instruments, where appropriate. As of December 31, 2003, we had no derivative instruments outstanding. For fixed rate debt, interest rate changes affect the fair market value but do not impact net income to common shareholders or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact net income to common shareholders and cash flows, assuming other factors are held constant. At December 31, 2003, we had fixed rate debt of $1,385.1 million and floating rate debt of $124.6 million. Holding other variables constant (such as debt levels), a one percentage point variance in interest rates would change the unrealized fair market value of the fixed rate debt by approximately $62.8 million. The net income available to common shareholders and cash flows impact on the next year resulting from a one percentage point variance in interest rates on floating rate debt would be approximately $1.2 million, holding all other variables constant. Results of Operations Changes in revenues and expenses related to our operating properties from period to period are due primarily to property developments, acquisitions, dispositions, and changes in the performance of the stabilized properties in our portfolio. Where appropriate, comparisons are made on a dollars-per-weighted-average-apartment home basis in order to adjust for changes in the number of apartment homes owned during each period. 11 Selected operating results for the three years ended December 31, 2003 are as follows: |
2003 | 2002 | 2001 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Total property revenue per apartment home per month | $ | 725 | $ | 727 | $ | 745 | |||||
Annualized total property expenses per apartment home | $ | 3,509 | $ | 3,297 | $ | 3,236 | |||||
Weighted average number of operating apartment homes owned 100% | 46,382 | 45,465 | 44,164 | ||||||||
Weighted average occupancy, by region: | |||||||||||
West | 94.3% | 93.3% | 94.8% | ||||||||
Central | 92.0% | 92.3% | 94.7% | ||||||||
East | 93.0% | 90.2% | 92.2% | ||||||||
Total operating properties owned 100% | 92.9% | 92.0% | 94.2% |
2003 Compared to 2002 Income from continuing operations decreased $12.8 million, or 30.4%, from $42.3 million to $29.4 million for the years ended December 31, 2002 and 2003, respectively. The decrease in income from continuing operations was due to many factors, which included, but were not limited to, decreases in property net operating income combined with increases in interest costs and depreciation. Our primary financial focus for our apartment communities is net operating income. Net operating income represents total property revenues less total property expenses. Net operating income decreased $5.8 million, or 2.3%, from $246.6 million to $240.8 million for the years ended December 31, 2002 and 2003, respectively. The following table presents the components of net operating income for the years ended December 31, 2003 and 2002: ($ in thousands) |
Apartment Homes | Year Ended December 31, | Change | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
at 12/31/03 | 2003 | 2002 | $ | % | |||||||||||||
Property revenues | |||||||||||||||||
Same-store communities | 42,137 | $ | 356,596 | $ | 361,360 | $ | (4,764 | ) | (1.3 | )% | |||||||
Non-same store communities | 3,874 | 38,784 | 26,321 | 12,463 | 47.4 | ||||||||||||
Development and lease-up communities | 1,324 | 7,569 | -- | 7,569 | -- | ||||||||||||
Dispositions/other | -- | 630 | 8,824 | (8,194 | ) | (92.9 | ) | ||||||||||
Total property revenues | 47,335 | 403,579 | 396,505 | 7,074 | 1.8 | ||||||||||||
Property expenses | |||||||||||||||||
Same-store communities | 42,137 | 143,178 | 136,737 | 6,441 | 4.7 | ||||||||||||
Non-same store communities | 3,874 | 15,748 | 10,322 | 5,426 | 52.6 | ||||||||||||
Development and lease-up communities | 1,324 | 3,396 | -- | 3,396 | -- | ||||||||||||
Dispositions/other | -- | 422 | 2,861 | (2,439 | ) | (85.2 | ) | ||||||||||
Total property expenses | 47,335 | 162,744 | 149,920 | 12,824 | 8.6 | ||||||||||||
Property net operating income | |||||||||||||||||
Same-store communities | 42,137 | 213,418 | 224,623 | (11,205 | ) | (5.0 | ) | ||||||||||
Non-same store communities | 3,874 | 23,036 | 15,999 | 7,037 | 44.0 | ||||||||||||
Development and lease-up communities | 1,324 | 4,173 | -- | 4,173 | -- | ||||||||||||
Dispositions/other | -- | 208 | 5,963 | (5,755 | ) | (96.5 | ) | ||||||||||
Total property net operating income | 47,335 | $ | 240,835 | $ | 246,585 | $ | (5,750 | ) | (2.3 | )% | |||||||
Same-store communities are stabilized communities we have owned since January 1, 2002. Non-same store communities are stabilized communities we have acquired or developed since January 1, 2002. Development and lease-up communities are non-stabilized communities we have developed or acquired after January 1, 2002. Dispositions represent communities we have sold since January 1, 2002, which are not included in discontinued operations. 12 Total property revenues for the year ended December 31, 2003 increased 1.8% as compared to 2002, but decreased from $727 to $725 on a per apartment home per month basis. Total property revenues from our same-store properties decreased 1.3%, from $361.4 million for 2002 to $356.6 million for 2003, which represents a decrease of $9 on a per apartment home per month basis. For same-store properties, rental rates on a per apartment home per month basis increased $14 from 2002 to 2003, and vacancy loss decreased $6 per apartment home over the same period. These increases in revenues were offset by increases in concessions granted which increased $30 per apartment home per month from 2002 to 2003. One of our primary objectives in 2003 was to increase occupancy rates at our same-store properties, which began the year at approximately 90.9% occupied and rose to approximately 94.5% occupied at December 31, 2003. Related to this increase, concessions granted during 2003 at our same-store properties increased approximately $15.3 million from 2002. Property revenues from our non-same store, development and lease-up properties increased from $26.3 million for 2002 to $46.4 million for 2003 due to the completion and stabilization of properties in our development pipeline. The decrease in property revenues from 2002 to 2003 attributable to property dispositions was $8.2 million. Fee and asset management revenues during the year ended December 31, 2003 increased $1.0 million over 2002. This increase was due primarily to fees earned on third-party construction and development projects. Other revenues for the year ended December 31, 2003 decreased $2.5 million from 2002. Other revenues for the year ended December 31, 2002 included $5.3 million of interest income from our third-party development program. This program was completed in 2002. Other revenues for 2003 included approximately $3.9 million of interest income related to our mezzanine financing program, which we began in the third quarter of 2002. Interest income from this program totaled $0.4 million during the year ended December 31, 2002. Total property expenses for the year ended December 31, 2003 increased $12.8 million, or 8.6%, as compared to 2002, and increased from $3,297 to $3,509 on an annualized per apartment home basis. Total property expenses from our same-store properties increased 4.7%, from $136.7 million for 2002 to $143.2 million for 2003, which represents an increase of $153 on an annualized per apartment home basis. The increase in same-store property expenses per apartment home was due primarily to increases in property insurance premiums, salary expenses, repair and maintenance expenses and slight increases in all other expense categories. Property expenses from our non-same store, development and lease-up properties increased from $10.3 million for 2002 to $19.1 million for 2003. The increase in operating expenses during 2003 from our non-same store, development and lease-up properties was consistent with the growth in revenues during the same period. The decrease in property expenses from 2002 to 2003 attributable to property dispositions was $2.4 million. Property management expense, which represents regional supervision and accounting costs related to property operations, increased from $10.0 million for the year ended December 31, 2002 to $10.2 million for the year ended December 31, 2003. This increase was due primarily to increases in salary and benefit expenses. Fee and asset management expense, which represents expenses related to third-party construction projects and property management for third parties, increased from $2.5 million for the year ended December 31, 2002 to $3.9 million for the year ended December 31, 2003. This increase was due primarily to increased costs associated with our third-party construction division, including cost overruns on fixed fee projects that totaled $2.0 million for 2003. See further discussion of our third-party construction in our “Business” section. 13 General and administrative expenses increased $1.8 million from $14.4 million in 2002 to $16.2 million in 2003, and increased as a percent of revenues from 3.5% to 3.9%. The increase was due primarily to increases in salary and benefit expenses, costs associated with pursuing potential transactions that were not consummated and increases in public company related costs. Gross interest cost before interest capitalized to development properties increased $8.1 million, or 9.8%, from $82.4 million for the year ended December 31, 2002 to $90.5 million for the year ended December 31, 2003. The overall increase in interest expense was due to higher average debt balances during 2003 that were incurred to fund our increase in real estate assets. This increase was partially offset by declines in the average interest rate on our outstanding debt, due to declines in variable interest rates and savings from maturing debt. Interest capitalized increased from $10.9 million to $15.1 million for the year ended December 31, 2002 and 2003, respectively, due to higher average balances in our development pipeline. Depreciation and amortization increased from $103.3 million for 2002 to $108.1 million for 2003. Total real estate assets have increased approximately $276.3 million since January 1, 2002 due to construction efforts at our new development properties, property acquisitions and capital improvements, partially offset by property dispositions. The increase in amortization was due primarily to costs related to new debt financings that were issued in late 2002 and 2003. Gain on sale of properties for the year ended December 31, 2003 was from the sale of 61.1 acres of undeveloped land located in Houston. Gain on sale of properties for the year ended December 31, 2002 totaled $0.4 million due primarily to the sale of 6.7 acres of undeveloped land located in Houston. During 2002, we also sold two properties with 786 apartment homes in Las Vegas and Reno and 58.6 acres of undeveloped land adjacent to those properties. Equity in income of joint ventures increased $2.8 million from 2002, primarily from gains recognized on sale of properties held in joint ventures. Our portion of the gain recognized on these property sales totaled $1.4 million during 2003. 2002 Compared to 2001 Income from continuing operations decreased $16.0 million, or 27.5%, from $58.3 million to $42.3 million for the years ended December 31, 2001 and 2002, respectively. The weighted average number of apartment homes increased by 1,301 apartment homes, or 2.9%, from 44,164 to 45,465 for the years ended December 31, 2001 and 2002, respectively. The increase in the weighted average number of apartment homes was due primarily to the acquisition of 1,662 apartment homes and an increase in occupancy at our newly constructed properties. We had 122 and 124 wholly owned operating properties at December 31, 2001 and 2002, respectively. The weighted average number of apartment homes and the number of operating properties exclude the impact of our ownership interest in properties owned in joint ventures, and the impact from properties classified as discontinued operations. Our apartment communities generate rental revenue and other income through the leasing of apartment homes. Revenues from our rental operations comprised 96% of our total revenues for the years ended December 31, 2001 and 2002. Our primary financial focus for our apartment communities is net operating income. Net operating income represents total property revenues less total property expenses. Net operating income decreased $5.2 million, or 2.1%, from $251.8 million to $246.6 million for the years ended December 31, 2001 and 2002, respectively. Net operating income from our stabilized communities, which represents properties owned and stabilized as of January 1, 2001, decreased $10.6 million, or 4.7% from 14 $224.2 million to $213.6 million for the years ended December 31, 2001 and 2002, respectively. This decrease was offset by increases in net operating income from our newly developed and acquired properties. Rental revenues for the year ended December 31, 2002 decreased slightly from the year ended December 31, 2001. Rental revenues per apartment home per month decreased $20, or 2.9%, from $691 to $671 for the years ended December 31, 2001 and 2002, respectively. The decrease was primarily due to higher concessions granted and higher vacancy rates in the majority of our markets during 2002. Overall average occupancy decreased from 94.2% for the year ended December 31, 2001 to 92.2% for the year ended December 31, 2002. Other property revenues increased $1.9 million from $28.7 million to $30.6 million for the years ended December 31, 2001 and 2002, respectively, which represents a monthly increase of $2 per apartment home. This increase in other property revenues was due primarily to increases in miscellaneous property fees, as well as increases in cable and water revenues. Fee and asset management revenues for 2002 decreased $1.5 million from 2001. This decrease was due primarily to a reduction in fees earned from our investments in third-party development projects in 2002. Other revenues for the year ended December 31, 2002 decreased $0.9 million from the year ended December 31, 2001. This decrease was due primarily to decreases in interest income related to our investments in third-party development projects partially offset by increases in revenues from townhome sales. Property operating and maintenance expenses increased $5.8 million or 5.6%, from $103.2 million to $108.9 million, and increased as a percent of total property income from 26.1% to 27.5% for the years ended December 31, 2001 and 2002, respectively. The increase in property operating and maintenance expenses as a percent of property income was due primarily to a decline in rental income from our stabilized communities combined with an increase in operating expenses. On an annualized basis, property operating and maintenance expenses increased $60 per unit, or 2.6%. This increase was due primarily to increases in salary and benefit expenses and a 33.7% increase in property insurance expenses. Real estate taxes increased $1.2 million from $39.8 million to $41.0 million for the years ended December 31, 2001 and 2002, respectively, which represents an annual increase of $2 per apartment home. The increase was due primarily to increases in the valuations of properties and increases in property tax rates. Property management expense, which represents regional supervision and accounting costs related to property operations, increased from $9.5 million for the year ended December 31, 2001 to $10.0 million for the year ended December 31, 2002. This increase was due primarily to increases in salary and benefit expenses. Fee and asset management expense, which represents expenses related to third-party construction projects and property management for third parties, increased from $2.0 million for the year ended December 31, 2001 to $2.5 million for the year ended December 31, 2002. This increase was due primarily to increased costs associated with our third-party construction division. See further discussion of our third-party construction in our “Business” section. General and administrative expenses increased $1.9 million, from $12.5 million in 2001 to $14.4 million in 2002, and increased as a percent of revenues from 3.0% to 3.5%. The increase was due primarily to increases in salary and benefit expenses, including long-term incentive compensation costs, increases in costs associated with pursuing potential transactions that were not consummated and information technology expenses. 15 Other expenses, which represent the construction costs associated with the townhomes sold during the year, increased $1.3 million, from $1.5 million for the year ended December 31, 2001 to $2.8 million for the year ended December 31, 2002. During 2002, we sold eight townhomes, compared with five townhome sales in 2001. Gross interest cost before interest capitalized to development properties increased $1.7 million, or 2.0%, from $80.8 million for the year ended December 31, 2001 to $82.4 million for the year ended December 31, 2002. The overall increase in interest expense was due to higher average debt balances in 2002, offset by lower average interest rates on our floating rate debt. Interest capitalized remained constant at $10.9 million for the years ended December 31, 2002 and 2001. Depreciation and amortization increased from $99.6 million to $103.3 million. This increase was due to increases in real estate assets resulting from new development, property acquisitions and capital improvements during the past two years. Gain on sale of properties for the year ended December 31, 2002 totaled $0.4 million due primarily to the sale of 6.7 acres of undeveloped land located in Houston. During 2002, we also sold two properties with 786 apartment homes and 58.6 acres of undeveloped land adjacent to those properties. We will continue to manage these two properties for a third party and therefore have included the gain resulting from this sale, which totaled approximately $18,000, in “Gain on sale of properties.” Gain on sale of properties for the year ended December 31, 2001 totaled $2.4 million due primarily to the sale of 22.7 acres of undeveloped land located in Houston. Equity in income of joint ventures decreased $8.2 million from the year ended 2001, primarily from gains recognized in one of our joint ventures from the sale of three properties totaling 1,264 apartment homes in 2001. The gains from these properties, which are located in North Carolina and Dallas, totaled $6.6 million for year ended December 31, 2001. During the year ended December 31, 2002, one property with 300 apartment homes was sold, resulting in a gain of $37,000. Funds from Operations (FFO) 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 property sales, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our definition of diluted FFO also assumes conversion at the beginning of the period of all dilutive convertible securities, including minority interests, which are convertible into common equity. We consider FFO to be a useful performance measure of our operating performance because FFO, together with net income and cash flows, provides investors with an additional basis to evaluate our ability to incur and service debt and to fund capital expenditures and distributions to shareholders and unitholders. 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 statements of operations 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. Furthermore, FFO as disclosed by other REITs may not be comparable to our calculation. 16 The reconciliation of net income available to common shareholders to FFO and the calculation of diluted FFO for the years ended December 31, 2003, 2002 and 2001 are as follows: (In thousands) |
2003 | 2002 | 2001 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Funds from operations | |||||||||||
Net income available to common shareholders | $ | 29,430 | $ | 74,612 | $ | 58,747 | |||||
Real estate depreciation from continuing operations | 103,354 | 99,206 | 96,303 | ||||||||
Real estate depreciation from discontinued operations | -- | 1,785 | 2,097 | ||||||||
Adjustments for unconsolidated joint ventures | 678 | 2,252 | (3,032 | ) | |||||||
Gain on sale of properties | (2,590 | ) | (359 | ) | (2,372 | ) | |||||
Gain on sale of discontinued operations | -- | (29,199 | ) | -- | |||||||
Preferred share dividends | -- | -- | 2,545 | ||||||||
Income allocated to units convertible into common shares | 2,237 | 1,807 | 3,127 | ||||||||
Adjustments for convertible subordinated debentures | -- | -- | 37 | ||||||||
Funds from operations - diluted | $ | 133,109 | $ | 150,104 | $ | 157,452 | |||||
Weighted average common shares outstanding | 39,355 | 40,441 | 39,796 | ||||||||
Common share options and awards granted | 1,433 | 1,313 | 1,234 | ||||||||
Units convertible into common shares | 2,446 | 2,462 | 2,509 | ||||||||
Preferred shares | -- | -- | 1,052 | ||||||||
Convertible subordinated debentures | -- | -- | 19 | ||||||||
Weighted average common and common equivalent shares outstanding - diluted | 43,234 | 44,216 | 44,610 | ||||||||
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2003 | 2002 | |||||||
Assets | ||||||||
Real estate assets, at cost | ||||||||
Land | $ | 400,490 | $ | 386,246 | ||||
Buildings and improvements | 2,499,214 | 2,348,702 | ||||||
2,899,704 | 2,734,948 | |||||||
Accumulated depreciation | (601,688 | ) | (498,776 | ) | ||||
Net operating real estate assets | 2,298,016 | 2,236,172 | ||||||
Properties under development, including land | 189,119 | 285,636 | ||||||
Investments in joint ventures | 11,033 | 15,386 | ||||||
Total real estate assets | 2,498,168 | 2,537,194 | ||||||
Accounts receivable - affiliates | 25,997 | 5,843 | ||||||
Notes receivable | ||||||||
Affiliates | 9,017 | 1,800 | ||||||
Other | 41,416 | 17,614 | ||||||
Other assets, net | 40,951 | 41,827 | ||||||
Cash and cash equivalents | 3,357 | 405 | ||||||
Restricted cash | 6,655 | 4,216 | ||||||
Total assets | $ | 2,625,561 | $ | 2,608,899 | ||||
Liabilities and shareholders' equity | ||||||||
Liabilities | ||||||||
Notes payable | ||||||||
Unsecured | $ | 1,277,879 | $ | 1,177,347 | ||||
Secured | 231,798 | 249,669 | ||||||
Accounts payable | 26,150 | 36,189 | ||||||
Accrued real estate taxes | 27,407 | 26,827 | ||||||
Accrued expenses and other liabilities | 50,111 | 48,144 | ||||||
Distributions payable | 30,946 | 30,541 | ||||||
Total liabilities | 1,644,291 | 1,568,717 | ||||||
Commitments and contingencies | ||||||||
Minority interests | ||||||||
Units convertible into perpetual preferred shares | 149,815 | 149,815 | ||||||
Units convertible into common shares | 46,570 | 50,914 | ||||||
Total minority interests | 196,385 | 200,729 | ||||||
Shareholders' equity | ||||||||
Common shares of beneficial interest; $0.01 par value per share; | ||||||||
100,000 shares authorized; 50,060 and 49,223 issued at | ||||||||
December 31, 2003 and 2002, respectively | 483 | 479 | ||||||
Additional paid-in capital | 1,330,512 | 1,314,592 | ||||||
Distributions in excess of net income | (297,808 | ) | (224,756 | ) | ||||
Unearned restricted share awards | (11,875 | ) | (13,714 | ) | ||||
Treasury shares, at cost | (236,427 | ) | (237,148 | ) | ||||
Total shareholders' equity | 784,885 | 839,453 | ||||||
Total liabilities and shareholders' equity | $ | 2,625,561 | $ | 2,608,899 | ||||
See Notes to Consolidated Financial Statements. 21 CAMDEN PROPERTY TRUST (In thousands, except per share amounts) |
Year Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2001 | |||||||||
Revenues | |||||||||||
Rental revenues | $ | 371,019 | $ | 365,883 | $ | 365,973 | |||||
Other property revenues | 32,560 | 30,622 | 28,692 | ||||||||
Total property revenues | 403,579 | 396,505 | 394,665 | ||||||||
Fee and asset management | 7,276 | 6,264 | 7,745 | ||||||||
Other revenues | 5,685 | 8,214 | 9,117 | ||||||||
Total revenues | 416,540 | 410,983 | 411,527 | ||||||||
Expenses | |||||||||||
Property operating and maintenance | 118,616 | 108,915 | 103,154 | ||||||||
Real estate taxes | 44,128 | 41,005 | 39,760 | ||||||||
Total property expenses | 162,744 | 149,920 | 142,914 | ||||||||
Property management | 10,154 | 10,027 | 9,510 | ||||||||
Fee and asset management | 3,908 | 2,499 | 2,016 | ||||||||
General and administrative | 16,231 | 14,439 | 12,521 | ||||||||
Impairment provision for technology investments | -- | -- | 9,864 | ||||||||
Other expenses | 1,389 | 2,790 | 1,511 | ||||||||
Losses related to early retirement of debt | -- | 234 | 388 | ||||||||
Interest | 75,414 | 71,499 | 69,841 | ||||||||
Amortization of deferred financing costs | 2,634 | 2,165 | 1,591 | ||||||||
Depreciation | 105,442 | 101,177 | 97,972 | ||||||||
Total expenses | 377,916 | 354,750 | 348,128 | ||||||||
Income from continuing operations before gain on sale of properties, equity in income of joint ventures and minority interests | 38,624 | 56,233 | 63,399 | ||||||||
Gain on sale of properties | 2,590 | 359 | 2,372 | ||||||||
Equity in income of joint ventures | 3,200 | 366 | 8,527 | ||||||||
Income allocated to minority interests | |||||||||||
Distributions on units convertible into perpetual preferred shares .. | (12,747 | ) | (12,872 | ) | (12,872 | ) | |||||
Income allocated to units convertible into common shares | (2,237 | ) | (1,807 | ) | (3,127 | ) | |||||
Income from continuing operations | 29,430 | 42,279 | 58,299 | ||||||||
Income from discontinued operations | -- | 3,134 | 2,993 | ||||||||
Gain on sale of discontinued operations | -- | 29,199 | -- | ||||||||
Net income | 29,430 | 74,612 | 61,292 | ||||||||
Preferred share dividends | -- | -- | (2,545 | ) | |||||||
Net income available to common shareholders | $ | 29,430 | $ | 74,612 | $ | 58,747 | |||||
Earnings per share - basic | |||||||||||
Income from continuing operations | $ | 0.75 | $ | 1.04 | $ | 1.40 | |||||
Income from discontinued operations, including gain on sale | -- | 0.80 | 0.08 | ||||||||
Net income available to common shareholders | $ | 0.75 | $ | 1.84 | $ | 1.48 | |||||
Earnings per share - diluted | |||||||||||
Income from continuing operations | $ | 0.71 | $ | 1.00 | $ | 1.34 | |||||
Income from discontinued operations, including gain on sale | -- | 0.73 | 0.07 | ||||||||
Net income available to common shareholders | $ | 0.71 | $ | 1.73 | $ | 1.41 | |||||
Distributions declared per common share | $ | 2.54 | $ | 2.54 | $ | 2.44 | |||||
Weighted average number of common shares outstanding | 39,355 | 40,441 | 39,796 | ||||||||
Weighted average number of common and common dilutive equivalent shares outstanding | 41,354 | 44,216 | 41,603 |
See Notes to Consolidated Financial Statements. 22 CAMDEN PROPERTY TRUST (In thousands, except per share amounts) |
Preferred Shares of Beneficial Interest | Common Shares of Beneficial Interest | Additional Paid-In Capital | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Shareholders' equity, January 1, 2001 | $ | 42 | $ | 450 | $ | 1,312,323 | |||||
Net income available to common shareholders | |||||||||||
Conversion of preferred shares (3,088 shares) | (31 | ) | 24 | 7 | |||||||
Redemption of preferred shares (1,077 shares) | (11 | ) | (26,911 | ) | |||||||
Common shares issued under dividend reinvestment plan | 15 | ||||||||||
Conversion of debentures (81 shares) | 1 | 2,006 | |||||||||
Restricted shares issued under benefit plan (266 shares) | 2 | 6,048 | |||||||||
Restricted shares canceled under benefit plan (19 shares) | (555 | ) | |||||||||
Amortization of previously granted restricted shares | |||||||||||
Employee share purchase plan | (36 | ) | |||||||||
Restricted shares placed into rabbi trust (269 shares) | (3 | ) | 3 | ||||||||
Common share options exercised (110 shares) | 1 | 3,160 | |||||||||
Conversion of operating partnership units (51 shares) | 1 | 1,179 | |||||||||
Cash distributions ($2.44 per share) | |||||||||||
Shareholders' equity, December 31, 2001 | -- | 476 | 1,297,239 | ||||||||
Net income available to common shareholders | |||||||||||
Common shares issued under dividend reinvestment plan | 26 | ||||||||||
Restricted shares issued under benefit plan (385 shares) | 4 | 10,764 | |||||||||
Restricted shares canceled under benefit plan (18 shares) | (565 | ) | |||||||||
Amortization of previously granted restricted shares | |||||||||||
Employee share purchase plan | 125 | ||||||||||
Restricted shares placed into rabbi trust (310 shares) | (3 | ) | 3 | ||||||||
Common share options exercised (204 shares) | 2 | 6,190 | |||||||||
Conversion of operating partnership units (35 shares) | 810 | ||||||||||
Repurchase of common shares (1,945 shares) | |||||||||||
Cash distributions ($2.54 per share) | |||||||||||
Shareholders' equity, December 31, 2002 | -- | 479 | 1,314,592 | ||||||||
Net income available to common shareholders | |||||||||||
Common shares issued under dividend reinvestment plan | 41 | ||||||||||
Restricted shares issued under benefit plan (195 shares) | 2 | 5,000 | |||||||||
Restricted shares canceled under benefit plan (74 shares) | (1 | ) | (2,379 | ) | |||||||
Amortization of previously granted restricted shares | |||||||||||
Employee share purchase plan | 88 | ||||||||||
Restricted shares placed into rabbi trust (410 shares) | (4 | ) | 4 | ||||||||
Common share options exercised (689 shares) | 7 | 12,849 | |||||||||
Conversion of operating partnership units (16 shares) | 317 | ||||||||||
Cash distributions ($2.54 per share) | |||||||||||
Shareholders' equity, December 31, 2003 | $ | -- | $ | 483 | $ | 1,330,512 | |||||
CAMDEN PROPERTY TRUST (In thousands, except per share amounts) |
Distributions In Excess of Net Income | Unearned Restricted Share Awards | Treasury Shares, at cost | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Shareholders' equity, January 1, 2001 | $ | (153,972 | ) | $ | (6,680 | ) | $ | (177,980 | ) | ||
Net income available to common shareholders | 58,747 | ||||||||||
Conversion of preferred shares (3,088 shares) | |||||||||||
Redemption of preferred shares (1,077 shares) | |||||||||||
Common shares issued under dividend reinvestment plan | |||||||||||
Conversion of debentures (81 shares) | |||||||||||
Restricted shares issued under benefit plan (266 shares) | (5,777 | ) | |||||||||
Restricted shares canceled under benefit plan (19 shares) | 555 | ||||||||||
Amortization of previously granted restricted shares | 3,281 | ||||||||||
Employee share purchase plan | 666 | ||||||||||
Restricted shares placed into rabbi trust (269 shares) | |||||||||||
Common share options exercised (110 shares) | 1,189 | ||||||||||
Conversion of operating partnership units (51 shares) | |||||||||||
Cash distributions ($2.44 per share) | (99,493 | ) | |||||||||
Shareholders' equity, December 31, 2001 | (194,718 | ) | (8,621 | ) | (176,125 | ) | |||||
Net income available to common shareholders | 74,612 | ||||||||||
Common shares issued under dividend reinvestment plan | |||||||||||
Restricted shares issued under benefit plan (385 shares) | (10,459 | ) | |||||||||
Restricted shares canceled under benefit plan (18 shares) | 566 | ||||||||||
Amortization of previously granted restricted shares | 4,800 | ||||||||||
Employee share purchase plan | 639 | ||||||||||
Restricted shares placed into rabbi trust (310 shares) | |||||||||||
Common share options exercised (204 shares) | 1,013 | ||||||||||
Conversion of operating partnership units (35 shares) | |||||||||||
Repurchase of common shares (1,945 shares) | (62,675 | ) | |||||||||
Cash distributions ($2.54 per share) | (104,650 | ) | |||||||||
Shareholders' equity, December 31, 2002 | (224,756 | ) | (13,714 | ) | (237,148 | ) | |||||
Net income available to common shareholders | 29,430 | ||||||||||
Common shares issued under dividend reinvestment plan | |||||||||||
Restricted shares issued under benefit plan (195 shares) | (4,834 | ) | |||||||||
Restricted shares canceled under benefit plan (74 shares) | 2,380 | ||||||||||
Amortization of previously granted restricted shares | 4,293 | ||||||||||
Employee share purchase plan | 721 | ||||||||||
Restricted shares placed into rabbi trust (410 shares) | |||||||||||
Common share options exercised (689 shares) | |||||||||||
Conversion of operating partnership units (16 shares) | |||||||||||
Cash distributions ($2.54 per share) | (102,482 | ) | |||||||||
Shareholders' equity, December 31, 2003 | $ | (297,808 | ) | $ | (11,875 | ) | $ | (236,427 | ) | ||
See Notes to Consolidated Financial Statements. 23 CAMDEN PROPERTY TRUST (In thousands) |
Year Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2001 | |||||||||
Cash flow from operating activities | |||||||||||
Net income | $ | 29,430 | $ | 74,612 | $ | 61,292 | |||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
Income from discontinued operations | -- | (3,134 | ) | (2,993 | ) | ||||||
Depreciation and amortization | 108,076 | 103,342 | 99,563 | ||||||||
Equity in income of joint ventures | (3,200 | ) | (366 | ) | (8,527 | ) | |||||
Gain on sale of discontinued operations | -- | (29,199 | ) | -- | |||||||
Gain on sale of properties | (2,590 | ) | (359 | ) | (2,372 | ) | |||||
Impairment provision for technology investments | -- | -- | 9,864 | ||||||||
Income allocated to units convertible into common shares | 2,237 | 1,807 | 3,127 | ||||||||
Accretion of discount on unsecured notes payable | 684 | 529 | 421 | ||||||||
Net change in operating accounts | 3,325 | 30,030 | 14,985 | ||||||||
Net cash provided by operating activities of continuing operations | 137,962 | 177,262 | 175,360 | ||||||||
Net cash provided by operating activities of discontinued operations | -- | 4,945 | 4,920 | ||||||||
Net cash provided by operating activities | 137,962 | 182,207 | 180,280 | ||||||||
Cash flow from investing activities | |||||||||||
Increase in real estate assets | (100,914 | ) | (401,403 | ) | (122,088 | ) | |||||
Net proceeds from sales of properties and townhomes | 26,264 | 76,007 | 10,377 | ||||||||
Net proceeds from sale of discontinued operations | -- | 51,810 | -- | ||||||||
Increase in investments in joint ventures | -- | -- | (1,881 | ) | |||||||
Distributions from joint ventures | 8,917 | 2,053 | 15,938 | ||||||||
Increase in notes receivable - other | (23,802 | ) | (17,614 | ) | -- | ||||||
Increase in investments in third-party development properties | -- | (10,386 | ) | (26,349 | ) | ||||||
Decrease in investments in third-party development properties | -- | 80,369 | 29,259 | ||||||||
Increase in technology investments | (39 | ) | (240 | ) | (7,249 | ) | |||||
Other | (2,373 | ) | (1,362 | ) | (1,696 | ) | |||||
Net cash used in investing activities | (91,947 | ) | (220,766 | ) | (103,689 | ) | |||||
Cash flow from financing activities | |||||||||||
Net decrease in unsecured line of credit and short-term borrowings | (49,000 | ) | (61,000 | ) | (39,000 | ) | |||||
Proceeds from issuance of notes payable | 198,848 | 365,528 | 326,868 | ||||||||
Repayments of notes payable | (67,871 | ) | (85,088 | ) | (219,359 | ) | |||||
Distributions to shareholders and minority interests | (121,075 | ) | (123,412 | ) | (119,226 | ) | |||||
Repurchase of preferred shares | -- | -- | (26,922 | ) | |||||||
Repurchase of common shares and units | -- | (62,675 | ) | -- | |||||||
Net increase in accounts receivable - affiliates | (18,086 | ) | (570 | ) | (839 | ) | |||||
Repayment of notes receivable - affiliates | 1,800 | -- | -- | ||||||||
Common share options exercised | 11,333 | 7,206 | 4,352 | ||||||||
Other | 988 | (4,204 | ) | (4,222 | ) | ||||||
Net cash (used in) provided by financing activities | (43,063 | ) | 35,785 | (78,348 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | 2,952 | (2,774 | ) | (1,757 | ) | ||||||
Cash and cash equivalents, beginning of year | 405 | 3,179 | 4,936 | ||||||||
Cash and cash equivalents, end of year | $ | 3,357 | $ | 405 | $ | 3,179 | |||||
Supplemental information | |||||||||||
Cash paid for interest, net of interest capitalized | $ | 75,419 | $ | 70,912 | $ | 65,276 | |||||
Interest capitalized | 15,068 | 10,923 | 10,920 | ||||||||
Supplemental schedule of noncash investing and financing activities | |||||||||||
Value of shares issued under benefit plans, net | $ | 2,454 | $ | 9,893 | $ | 5,222 | |||||
Conversion of operating partnership units to common shares | 317 | 810 | 1,179 | ||||||||
Note receivable issued upon sale of real estate asset | 9,017 | -- | -- | ||||||||
Contribution of real estate asset to joint venture | 1,364 | -- | -- | ||||||||
Conversion of 7.33% subordinated debentures to common shares, net | -- | -- | 1,950 | ||||||||
Conversion of preferred shares to common shares | -- | -- | 31 |
See Notes to Consolidated Financial Statements. 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Business Camden Property Trust is a self-administered and self-managed real estate investment trust (“REIT”) organized on May 25, 1993. We, with our subsidiaries, report as a single business segment, with activities related to the ownership, development, construction and management of multifamily apartment communities. As of December 31, 2003, we owned interests in, operated or were developing 146 multifamily properties containing 52,346 apartment homes located ten states. At December 31, 2003, we had two recently completed multifamily properties containing 786 apartment homes in lease-up. Two of our multifamily properties containing 1,002 apartment homes were under development at December 31, 2003, including 464 apartment homes owned through a joint venture. Additionally, we have several sites that we intend to develop into multifamily apartment communities. As of December 31, 2003, we had operating properties in 16 markets. No one market contributed more than 15% of our net operating income for the year then ended. For the year ended December 31, 2003, Houston, Dallas and Las Vegas contributed 14.4%, 13.9% and 13.8%, respectively, of our net operating income. 2. Summary of Significant Accounting Policies Principles of Consolidation.The consolidated financial statements include our assets, liabilities and operations and those of our wholly owned subsidiaries and partnerships in which our aggregate ownership is greater than 50% and we exercise elements of control. Those entities owned 50% or less where significant influence is in effect are accounted for using the equity method. Those entities owned less than 50% where significant influence is not exercised are accounted for using the cost method. All significant intercompany accounts and transactions have been eliminated in consolidation. In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, Consolidated Financial Statements” (“FIN 46”), which was revised in December 2003. This interpretation requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. This interpretation is effective for periods ending after March 15, 2004. Our application of FIN 46 will not require the consolidation of any additional entities. Use of Estimates.The preparation of our financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, results of operations during the reporting periods and related disclosures. Our estimates relate to determining the allocation of the purchase price of our acquisitions, developments and the carrying value of our assets, reserves related to co-insurance requirements under our property, general liability and employee benefit insurance programs and estimates of expected losses of variable interest entities. Actual results could differ from those estimates. Reportable Segments.FASB Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have determined that we have one reportable segment, with activities related to the ownership, development and management of multifamily communities. Our apartment communities generate rental revenue and other income through the leasing of apartment homes, which comprised 97%, 96% and 96% of our total consolidated revenues for the 25 years ended December 31, 2003, 2002 and 2001, respectively. Although our multifamily communities are geographically diversified throughout the United States, management evaluates operating performance on an individual property level. Where appropriate, we provide information about our real estate portfolio on a geographic basis in order to illustrate the concentration of market risk associated with our portfolio. Operating Partnership and Minority Interests.Approximately 25% of our multifamily apartment units at December 31, 2003 were held in Camden Operating, L.P. This operating partnership has issued both common and preferred limited partnership units. As of December 31, 2003, we held 83.1% of the common limited partnership units and the sole 1% general partnership interest of the operating partnership. The remaining 15.9% of the common limited partnership units are held primarily by former officers, directors and investors of Paragon Group, Inc., which we acquired in 1997. Each common limited partnership unit is redeemable for one common share of Camden or cash at our election. Holders of common limited partnership units are not entitled to rights as shareholders prior to redemption of their common limited partnership units. No member of our management owns common limited partnership units, and only two of our eight trust managers own common limited partnership units. Our operating partnership has issued $100 million of 7.0% Series B Cumulative Redeemable Perpetual Preferred Units and $53 million of 8.25% Series C Cumulative Redeemable Perpetual Preferred Units. Distributions on the preferred units are payable quarterly in arrears. The Series B preferred units are redeemable beginning in 2008 and the Series C preferred units are redeemable beginning in 2004, in each case by the operating partnership for cash at par plus the amount of any accumulated and unpaid distributions. The preferred units are convertible beginning in 2009 by the holder into a fixed number of corresponding Series B or C Cumulative Redeemable Perpetual Preferred Shares. The preferred units are subordinate to present and future debt. Effective December 1, 2003, we amended the terms of the Series B preferred units, which are described above. We did not record any charges to earnings in connection with this amendment. Distributions on the preferred units totaled $12.7 million for the year ended December 31, 2003. In conjunction with our acquisition of Oasis Residential, Inc. in 1998, we acquired the controlling managing member interest in Oasis Martinique, LLC, which owns one property in Orange County, California and is included in our consolidated financial statements. The remaining interests, comprising 740,348 units, are exchangeable into 561,924 of our common shares. Minority interests in the accompanying consolidated financial statements relate to holders of common and preferred limited partnership units of Camden Operating, L.P. and units in Oasis Martinique, LLC. Cash and Cash Equivalents.All cash and investments in money market accounts and other securities with a maturity of three months or less at the date of purchase are considered to be cash and cash equivalents. Restricted Cash.Restricted cash consists of escrow deposits held by lenders for property taxes, insurance and replacement reserves, cash required to be segregated for the repayment of residents’ security deposits and deposits related to our development activities. Substantially all restricted cash is invested in demand and short-term instruments. Real Estate Assets, at Cost.Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes which are capitalized as part of properties under development. Expenditures directly related to the development, acquisition and improvement of real estate assets, excluding internal costs relating to acquisitions, are capitalized at cost as land, buildings and improvements. Indirect development costs, including salaries and benefits, travel and other related costs that are clearly attributable to the development of properties, are also capitalized. All construction and carrying costs are capitalized and reported on the balance sheet in properties under development until the apartment 26 homes are substantially completed. Upon substantial completion of the apartment homes, the total cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively, and the assets are depreciated over their estimated useful lives using the straight-line method of depreciation. Upon the acquisition of real estate, we assess the fair value of acquired assets, including land, buildings, the value of in-place leases, including above and below market leases, and acquired liabilities. We then allocate the purchase price of the acquired property based on these assessments. We assess fair value based on estimated cash flow projections and available market information. As of December 31, 2003, we have not acquired any operating properties that would fall within the scope of SFAS No. 141, “Business Combinations.” If an event or change in circumstance indicates that a potential impairment in the value of a property has occurred, our policy is to assess any potential impairment by making a comparison of the current and projected cash flows for such property over its remaining holding period, on an undiscounted basis, to the carrying amount of the property. If such carrying amounts were in excess of the estimated projected cash flows of the property, we would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its estimated fair market value. On January 1, 2002, we adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which requires that the assets and results of operations of any communities that have been sold, or otherwise qualify as held for sale, be presented as discontinued operations in our consolidated financial statements in both current and prior periods presented. Real estate to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. Depreciation expense is not recorded during the period in which such assets are considered held for sale. We capitalized $22.3 million and $33.7 million in 2003 and 2002, respectively, of renovation and improvement costs which we believe extended the economic lives and enhanced the earnings of the related assets. Capital expenditures are capitalized and depreciated over their useful lives, which range from 3 to 20 years. Capital expenditures for 2002 included $6.3 million of non-recurring expenditures associated with signage implemented as part of our branding initiatives. Expenditures for signage represent fixed assets that are being depreciated over 10 years, as we believe that the new signage should provide long term benefits to us. Carrying charges, principally interest and real estate taxes, of land under development and buildings under construction are capitalized as part of properties under development and buildings and improvements to the extent that such charges do not cause the carrying value of the asset to exceed its net realizable value. Capitalized interest was $15.1 million in 2003, $10.9 million in 2002 and $10.9 million in 2001. Capitalized real estate taxes were $2.3 million in 2003, $2.0 million in 2002 and $2.3 million in 2001. All operating expenses, excluding depreciation, associated with completed apartment homes for properties in the development and leasing phase are expensed against revenues generated by those apartment homes. Upon substantial completion of the project, all apartment homes are considered operating and we stop capitalizing carrying costs. All initial buildings and improvements costs are depreciated over their remaining estimated useful lives of 5 to 35 years using the straight line method. Capital improvements, including carpet, appliances and HVAC unit replacements, subsequent to initial construction are depreciated over their expected useful lives of 3 to 20 years using the straight line method. Property operating and maintenance expenses included repair and maintenance expenses, which totaled $29.4 million in 2003, $26.9 million in 2002 and $26.5 million in 2001. Costs recorded as repair and 27 maintenance include all costs that do not alter the primary use, extend the expected useful life or improve the safety or efficiency of the related asset. Our largest repair and maintenance expenditures related to landscaping, interior painting and floor coverings. Other Assets, Net.Other assets in our consolidated financial statements include deferred financing costs, non-real estate leasehold improvements and equipment, prepaid expenses and other miscellaneous receivables. Deferred financing costs are amortized over the terms of the related debt on the straight line method, which approximates the effective interest method. Leasehold improvements and equipment are depreciated on the straight line method over the shorter of the expected useful lives or the lease terms which range from 3 to 10 years. Accumulated depreciation and amortization for such assets totaled $19.3 million in 2003 and $16.9 million in 2002. Income Recognition.Our rental and other property income is recorded when due from residents and is recognized monthly as it is earned. Other property income consists primarily of utility rebillings, and administrative, application and other transactional fees charged to our residents. Our apartment homes are rented to residents on lease terms generally ranging from 6 to 13 months, with monthly payments due in advance. Interest, fee and asset management and all other sources of income are recognized as earned. Two of our properties are subject to rent control or rent stabilization. Operations of apartment properties acquired are recorded from the date of acquisition in accordance with the purchase method of accounting. In management’s opinion, due to the number of residents, the type and diversity of submarkets in which the properties operate, and the collection terms, there is no significant concentration of credit risk. Third-Party Construction Services.Our construction division performs services for our internally developed communities, as well as provides construction management and general contracting services for third-party owners of multifamily, commercial and retail properties. Income from these third-party projects is recognized on a percentage-of-completion basis. For projects where our fee is based on a fixed price, any cost overruns, as compared to the original budget, incurred during construction will reduce the fee generated on those projects. For any project where cost overruns are expected to be in excess of the fee generated on the project, we will recognize the total projected loss in the period in which the loss is first estimated. See Note 7 for further discussion of our third-party construction services. Fair Value Stock-Based Compensation.We have historically elected to follow Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for our share-based compensation. Under APB No. 25, when the exercise price of share options equals the market price of our shares at the date of grant, no compensation expense is recorded. Restricted shares are recorded to compensation expense over the vesting periods based on the market value of the shares on the date of grant, and no compensation expense is recorded for our Employee Stock Purchase Plan (“ESPP”), as the ESPP is considered non-compensatory. As discussed in the “Recent Accounting Pronouncements” Section, in December 2002, FASB issued SFAS No. 148, which amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. We had adopted the disclosure-only provisions of SFAS No. 123, but beginning January 1, 2003, we adopted the prospective method set forth in SFAS No. 148 in applying the provisions of SFAS No. 123. The fair value of each option granted is estimated on the date of grant utilizing the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2003 and 2002, respectively: risk-free interest rates of 4.0% and 5.0% to 5.2%, expected life of ten years, dividend yield of 8.1% and 6.9% to 7.0%, and expected share volatility of 18.3% and 18.1%. The weighted average fair value of options granted in 2003 and 2002, respectively, was $1.38 and $2.85 per share. There were no options granted in 2001. 28 If we applied the retroactive restatement method set forth in SFAS No. 148 in applying the provisions of SFAS No. 123 to our option grants and ESPP, our net income to common shareholders and related basic and diluted earnings per share would be as follows: (in thousands, except per share amounts) |
Year Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2001 | |||||||||
Net income available to common shareholders, as reported | $ | 29,430 | $ | 74,612 | $ | 58,747 | |||||
Per share - basic | 0.75 | 1.84 | 1.48 | ||||||||
Per share - diluted | 0.71 | 1.73 | 1.41 | ||||||||
Net income available to common shareholders, pro forma | $ | 28,564 | $ | 74,009 | $ | 58,310 | |||||
Per share - basic | 0.73 | 1.83 | 1.47 | ||||||||
Per share - diluted | 0.69 | 1.71 | 1.40 | ||||||||
Share-based compensation cost | �� | ||||||||||
Included in net income available to common shareholders, as reported | $ | 3,247 | $ | 2,918 | $ | 1,951 | |||||
Included in net income available to common shareholders, pro forma | 4,113 | 3,521 | 2,388 |
The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. Reclassifications. Certain reclassifications have been made to amounts in prior year financial statements to conform with current year presentations. Recent Accounting Pronouncements.In April 2002, FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” which is effective for fiscal years beginning after May 15, 2002. Among other corrections, SFAS No. 145 requires gains and losses from the extinguishment of debt to be classified as extraordinary only if they meet the criteria set forth in Accounting Principles Board Opinion No. 30. Our adoption of SFAS No. 145 on January 1, 2003 did not have a material impact on our financial position, results of operations or cash flows. In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 elaborates on the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The recognition and initial measurement provisions of FIN 45, are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for periods ending after December 15, 2002. Our application of FIN 45 did not have a material impact on our financial position, results of operations or cash flows. In December 2002, FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” which is effective for fiscal years ending after December 15, 2002. SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. Our adoption of the prospective method set forth in SFAS No. 148 did not have a material impact on our financial position, results of operations or cash flows. In May 2003, FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for classification and 29 measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150, as amended, is effective for the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on our financial position, results of operations or cash flows. 3. Income Taxes We have maintained and intend to maintain our election as a REIT under the Internal Revenue Code of 1986, as amended. As a result, we generally will not be subject to federal taxation to the extent we distribute 90% of our REIT taxable income to our shareholders and satisfy certain other requirements. Accordingly, no provision for federal income taxes from REIT operations has been included in the accompanying consolidated financial statements. If we fail to qualify as a REIT in any taxable year, then we will be subject to federal income taxes at regular corporate rates, including any applicable alternative minimum tax. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal, state and local income taxes. The following table reconciles net income available to common shareholders to REIT taxable income for the years ended December 31, 2003, 2002 and 2001: (In thousands) |
Year Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2001 | |||||||||
Net income available to common shareholders | $ | 29,430 | $ | 74,612 | $ | 58,747 | |||||
Net (income) loss of taxable REIT subsidiaries included above | (496 | ) | 4,034 | 3,525 | |||||||
Net income from REIT operations | 28,934 | 78,646 | 62,272 | ||||||||
Book depreciation and amortization, including discontinued operations | 108,027 | 105,043 | 101,639 | ||||||||
Tax depreciation and amortization | (94,660 | ) | (89,734 | ) | (81,687 | ) | |||||
Book/tax difference on gains/losses from capital transactions | 999 | (1,642 | ) | 5,374 | |||||||
Other book/tax differences, net | (3,454 | ) | (3,919 | ) | (2,099 | ) | |||||
REIT taxable income | 39,846 | 88,394 | 85,499 | ||||||||
Dividends paid deduction | (100,104 | ) | (103,441 | ) | (102,757 | ) | |||||
Dividends paid (in excess) of taxable income | $ | (60,258 | ) | $ | (15,047 | ) | $ | (17,258 | ) | ||
30 A schedule of per share distributions we paid and reported to our shareholders is set forth in the following tables: |
Year Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2001 | |||||||||
Common Share Distributions | |||||||||||
Ordinary income | $ | 2.15 | $ | 1.85 | $ | 2.31 | |||||
Return of capital | 0.34 | -- | -- | ||||||||
20% Long-term capital gain | -- | 0.46 | 0.11 | ||||||||
Pre May 6, 2003 long-term capital gain | 0.01 | -- | -- | ||||||||
Post May 5, 2003 long-term capital gain | 0.03 | -- | -- | ||||||||
25% Sec. 1250 capital gain | 0.01 | 0.23 | 0.02 | ||||||||
Total | $ | 2.54 | $ | 2.54 | $ | 2.44 | |||||
Percentage of distributions representing tax preference items | 8.304 | % | 9.491 | % | 10.773 | % | |||||
Preferred Share Dividends | |||||||||||
Ordinary income | $ | 1.24 | |||||||||
20% Long-term capital gain | 0.06 | ||||||||||
25% Sec. 1250 capital gain | 0.01 | ||||||||||
Total | $ | 1.31 | |||||||||
4. Earnings Per Share Basic earnings per share is computed using income from continuing operations 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, units convertible into common shares 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. For the years ended December 31, 2003 and 2001, 1.9 million units convertible into common shares were not included in the diluted earnings per share calculated as they were anti-dilutive. 31 The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated: (In thousands, except per share amounts). |
Year Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2001 | |||||||||
Basic earnings per share calculation | |||||||||||
Income from continuing operations before preferred share dividends | $ | 29,430 | $ | 42,279 | $ | 58,299 | |||||
Preferred share dividends | -- | -- | (2,545 | ) | |||||||
Income from continuing operations | 29,430 | 42,279 | 55,754 | ||||||||
Income from discontinued operations, including gain on sale | -- | 32,333 | 2,993 | ||||||||
Net income | $ | 29,430 | $ | 74,612 | $ | 58,747 | |||||
Income from continuing operations - per share | $ | 0.75 | $ | 1.04 | $ | 1.40 | |||||
Income from discontinued operations - per share | -- | 0.80 | 0.08 | ||||||||
Net income - per share | $ | 0.75 | $ | 1.84 | $ | 1.48 | |||||
Weighted average common shares outstanding | 39,355 | 40,441 | 39,796 | ||||||||
Diluted earnings per share calculation | |||||||||||
Income from continuing operations before preferred share dividends | $ | 29,430 | $ | 42,279 | $ | 58,299 | |||||
Preferred share dividends | -- | -- | (2,545 | ) | |||||||
Income from continuing operations | 29,430 | 42,279 | 55,754 | ||||||||
Income allocated to units convertible into common shares | 35 | 1,807 | -- | ||||||||
Income from continuing operations, as adjusted | 29,465 | 44,086 | 55,754 | ||||||||
Income from discontinued operations, including gain on sale | -- | 32,333 | 2,993 | ||||||||
Net income, as adjusted | $ | 29,465 | $ | 76,419 | $ | 58,747 | |||||
Income from continuing operations, as adjusted - per share | $ | 0.71 | $ | 1.00 | $ | 1.34 | |||||
Income from discontinued operations - per share | -- | 0.73 | 0.07 | ||||||||
Net income, as adjusted - per share | $ | 0.71 | $ | 1.73 | $ | 1.41 | |||||
Weighted average common shares outstanding | 39,355 | 40,441 | 39,796 | ||||||||
Incremental shares issuable from assumed conversion of: | |||||||||||
Common share options and awards granted | 1,433 | 1,313 | 1,234 | ||||||||
Units convertible into common shares | 566 | 2,462 | 573 | ||||||||
Weighted average common and common dilutive equivalent | |||||||||||
shares outstanding | 41,354 | 44,216 | 41,603 | ||||||||
32 5. Discontinued Operations The components of net income that are presented as discontinued operations include net operating income, depreciation and property specific interest expense, if any. In addition, the net gain or loss on the disposal of communities is presented in discontinued operations when recognized. The operating results of discontinued operations related to properties held through our investment in joint ventures that are subsequently sold will continue to be reported in “Equity in income of joint ventures.” There were no property sales that were characterized as discontinued operations for 2003. The operating results of the three properties sold in 2002 that are included in discontinued operations for the years ended December 31, 2002 and 2001, are as follows: (In thousands) |
Year Ended December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2002 | 2001 | |||||||
Total property revenues | $ | 8,944 | $ | 8,955 | ||||
Total property expenses | (4,025 | ) | (3,865 | ) | ||||
Net operating income | 4,919 | 5,090 | ||||||
Depreciation | (1,785 | ) | (2,097 | ) | ||||
Income from discontinued operations | $ | 3,134 | $ | 2,993 | ||||
6. Investments in Joint Ventures In December 2003, Camden USA, Inc., one of our wholly owned subsidiaries, contributed undeveloped land located in Ashburn, Virginia into a joint venture in return for a 20% interest, totaling $1.5 million and approximately $12.7 million in cash. The remaining 80% interest is owned by Westwind Equity, LLC, an unrelated third party, which contributed $5.8 million to the joint venture. We entered into this transaction to reduce the risk associated with entering into a new market. The joint venture is developing Camden Westwind, a 464 apartment home community at a total estimated cost of $69.1 million. Concurrently with this transaction, we provided a $9.0 million mezzanine loan to the joint venture. We are providing development services to the joint venture, and fees earned for these services totaled $0.4 million for the year ended 2003. At December 31, 2003, the joint venture had total assets of $25.3 million and had third-party secured debt totaling $9.0 million. In June 1998, we completed a transaction in which Camden USA, Inc. and TMT-Nevada, LLC, a wholly owned subsidiary of a private pension fund, formed Sierra-Nevada Multifamily Investments, LLC (“Sierra-Nevada”). We entered into this transaction to reduce our market risk in the Las Vegas area. In this transaction, we transferred to Sierra-Nevada 19 apartment communities containing 5,119 apartment homes for an aggregate of $248 million. TMT-Nevada holds an 80% interest in Sierra-Nevada and Camden USA, Inc. holds the remaining 20% interest. At December 31, 2003, Sierra-Nevada owned 16 apartment communities with 4,227 apartment homes, had total assets of $183.5 million and secured debt totaling $157.5 million. In April 1998, we acquired, through one of our wholly owned subsidiaries, a 50% interest in Denver West Apartments, LLC, which owns Camden Denver West, a 320 apartment home community located in Denver, Colorado. The remaining 50% interest is owned by a private investor. In April 1997, we acquired, through our operating partnership, a 44% interest in Paradim, Inc. The remaining interest was held by unaffiliated private investors. During 2001, our investment in Paradim, Inc. was liquidated after all the assets, consisting of three apartment communities with 1,264 apartment homes were sold. Our portion of the gains recognized from these sales totaled $6.6 million and is included in “Equity in income of joint ventures” for the year then ended. 33 The joint ventures discussed above are all accounted for under the equity method. The joint ventures in which we have an interest have been funded with secured, third-party debt. We are not committed to any additional funding on third-party debt in relation to our joint ventures. See discussion of principles of consolidation in Note 2. 7. Third-Party Construction Services Our construction division performs services for our internally developed communities, as well as provides construction management and general contracting services for third-party owners of multifamily, commercial and retail properties. We are currently under contract on projects ranging from $0.7 million to $17.1 million. We earn fees on these projects ranging from 4% to 7% of the total contracted construction cost, which we recognize when they are earned. Fees earned from third-party construction projects totaled $2.6 million, $2.7 million, and $2.6 million for the years ended December 31, 2003, 2002 and 2001, respectively, and are included in revenues in our consolidated statements of operations under “Fee and asset management.” During the year ended December 31, 2003, we recorded cost overruns of $2.0 million on fixed fee projects, which represented the estimate of our remaining costs to complete the projects. These cost overruns are included in fee and asset management expenses in our consolidated statements of operations. 8. Notes Receivable During the third quarter of 2002, we implemented a mezzanine financing program under which we provide financing to owners of real estate properties. We had $41.4 million and $17.6 million in secured notes receivable outstanding as of December 31, 2003 and 2002, respectively. These notes, which mature through 2008, accrue interest at rates ranging from 5% to 18% which is recognized as earned. The following is a summary of our notes receivable under this program: ($ in millions) |
Location | Property Type (s) | Status | Apartment Homes | December 31, 2003 2002 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dallas/Fort Worth, Texas | Multifamily | Stabilized | 738 | $ | 11.4 | $ | -- | |||||||||
Las Vegas, Nevada | Multifamily | Stabilized/Development | 560 | 7.4 | 5.9 | |||||||||||
Reno, Nevada | Multifamily | Stabilized | 450 | 5.4 | 5.3 | |||||||||||
Houston, Texas | Multifamily/Commercial | Predevelopment/Development | -- | 4.7 | -- | |||||||||||
San Jose, California | Multifamily | Stabilized | 117 | 3.6 | -- | |||||||||||
Denver, Colorado | Multifamily | Stabilized | 279 | 3.5 | 3.4 | |||||||||||
Atlanta, Georgia | Multifamily | Stabilized | 360 | 3.0 | 3.0 | |||||||||||
Austin, Texas | Multifamily | Stabilized | 296 | 2.4 | -- | |||||||||||
Total | 2,800 | $ | 41.4 | $ | 17.6 | |||||||||||
We have reviewed the terms and conditions underlying each note and management believes that none of these notes qualify for consolidation as a variable interest entity. Management believes that these notes appear to be collectable, and no impairment existed at December 31, 2003. In December 2003, in connection with a joint venture transaction, we provided to the joint venture a $9.0 million mezzanine loan. We own a 20% interest in this joint venture. Interest on the note accrues at 14% and will mature in 2006. See further discussion of our joint ventures in Note 6. 34 9. Notes Payable The following is a summary of our indebtedness: (In millions) |
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2002 | 2001 | |||||||
Unsecured line of credit and short-term borrowings | $ | 47.0 | $ | 96.0 | ||||
Senior unsecured notes | ||||||||
7.03% Notes, due 2003 | -- | 50.0 | ||||||
7.14% Notes, due 2004 | 199.9 | 199.7 | ||||||
7.11% - 7.28% Notes, due 2006 | 174.5 | 174.4 | ||||||
5.98% Notes, due 2007 | 149.5 | 149.3 | ||||||
6.77% Notes, due 2010 | 99.9 | 99.9 | ||||||
7.69% Notes, due 2011 | 149.5 | 149.4 | ||||||
5.93% Notes, due 2012 | 199.2 | 199.1 | ||||||
5.45% Notes, due 2013 | 198.9 | -- | ||||||
1,171.4 | 1,021.8 | |||||||
Medium-term notes | ||||||||
6.88% - 7.17% Notes, due 2004 | 30.0 | 30.0 | ||||||
7.63% Notes, due 2009 | 15.0 | 15.0 | ||||||
6.79% Notes, due 2010 | 14.5 | 14.5 | ||||||
59.5 | 59.5 | |||||||
Total unsecured notes | 1,277.9 | 1,177.3 | ||||||
Secured notes | ||||||||
7.10% - 8.50% Conventional Mortgage Notes, due 2005- 2009 | 133.2 | 150.0 | ||||||
1.96% - 7.29% Tax-exempt Mortgage Notes, due 2025 - 2032 | 98.6 | 99.7 | ||||||
231.8 | 249.7 | |||||||
Total notes payable | $ | 1,509.7 | $ | 1,427.0 | ||||
Floating rate debt included in unsecured line of credit (1.70% - 1.92%) | $ | 47.0 | $ | 96.0 | ||||
Floating rate tax-exempt debt included in secured notes (1.96% - 2.54%) | 77.6 | 78.4 | ||||||
Net book value of real estate assets subject to secured notes | 347.3 | 399.6 |
We have a $500 million unsecured line of credit that matures in August 2006. The scheduled interest rate is currently based on spreads over LIBOR or Prime. The scheduled interest rate spreads 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 six months or less and may not exceed the lesser of $250 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations, all of which we were in compliance with at December 31, 2003. The weighted average balance outstanding on the unsecured line of credit during the year ended December 31, 2003 was $144.0 million, with a maximum outstanding balance of $242.0 million. Our line of credit provides us with the ability to issue up to $100 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our line, it does reduce the amount available to us. At December 31, 2003, we had outstanding letters of credit totaling $12.4 million. As of December 31, 2003, we had $440.6 million available under our unsecured line of credit. In February 2003, we filed a universal shelf registration statement providing for the issuance of up to $1.0 billion in debt securities, preferred shares, common shares or warrants. This registration statement was combined with the $85.5 million remaining from our previous $750 million universal shelf. At December 31, 2003, $885.5 million was available for issuance. 35 At December 31, 2003 and 2002, the weighted average interest rate on our floating rate debt was 2.2% and 2.6%, respectively. Our indebtedness, excluding our unsecured line of credit, had a weighted average maturity of 6.5 years. Scheduled repayments on outstanding debt, including our line of credit, at December 31, 2003 are as follows: (In millions) |
Year | Amount | Weighted Average Interest Rate | ||||||
---|---|---|---|---|---|---|---|---|
2004 | $ | 234.2 | 7.1% | |||||
2005 | 60.9 | 7.3% | ||||||
2006 | 257.3 | 6.3% | ||||||
2007 | 165.4 | 6.1% | ||||||
2008 | 17.9 | 7.5% | ||||||
2009 and thereafter | 774.0 | 6.0% | ||||||
Total | $ | 1,509.7 | 6.3% | |||||
10. Incentive and Benefit Plans Incentive Plan. During 2002, our Board of Trust Managers adopted, and our shareholders approved, the 2002 Share Incentive Plan of Camden Property Trust (the “2002 Share Plan”). Under the 2002 Share Plan, we may issue up to 10% of the total of (i) the number of our common shares outstanding at any time, plus (ii) the number of our common shares reserved for issuance upon conversion of securities convertible into or exchangeable for our common shares, plus (iii) the number of our common shares held as treasury shares. Compensation awards that can be granted under the 2002 Share Plan include various forms of incentive awards, including incentive share options, non-qualified share options and restricted shares. The class of eligible persons that can receive grants of incentive awards under the 2002 Share Plan consists of key employees, consultants and non-employee trust managers as determined by the compensation committee of our Board of Trust Managers. The 2002 Share Plan does not have a termination date; however, no incentive share options will be granted under this plan after February 5, 2012. We also have a non-compensatory option plan (the “1993 Share Plan”) that was amended in 2000 by our shareholders and Board of Trust Managers. The terms and conditions of the 1993 Share Plan are very similar to the 2002 Share Plan, except that no incentive awards may be granted under the 1993 Share Plan after May 27, 2003. As the terms and conditions of the 1993 Share Plan and the 2002 Share Plan are similar, when the term “plan” is used in the following discussion, we are referring to the plan from which the incentive award was granted. 36 Following are summaries of the activity of the 1993 Share Plan and the 2002 Share Plan for the three years ended December 31, 2003: |
2003 Share Plan | Shares Available for Issuance | Options and Restricted Shares | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2003 | Weighted Average 2003 Price | 2002 | Weighted Average 2002 Price | 2001 | Weighted Average 2001 Price | |||||||||||||||||
Balance at January 1 | 515,394 | 3,939,200 | $ | 30.96 | 3,292,816 | $ | 29.21 | 3,351,704 | $ | 28.30 | |||||||||||||
Current year share adjustment (a) | (108,487 | ) | |||||||||||||||||||||
Options | |||||||||||||||||||||||
Granted | (517,000 | ) | 517,000 | 31.48 | 510,000 | 34.59 | -- | -- | |||||||||||||||
Exercised | -- | (1,232,711 | ) | 30.45 | (142,813 | ) | 28.15 | (204,846 | ) | 29.65 | |||||||||||||
Forfeited | 111,164 | (111,164 | ) | 33.16 | (333 | ) | 24.88 | (14,487 | ) | 26.11 | |||||||||||||
Net options | (405,836 | ) | (826,875 | ) | 366,854 | (219,333 | ) | ||||||||||||||||
Restricted shares | |||||||||||||||||||||||
Granted | (1,071 | ) | 1,071 | 35.54 | 294,555 | 35.07 | 179,560 | 32.06 | |||||||||||||||
Forfeited | -- | (57,929 | ) | 32.47 | (15,025 | ) | 31.15 | (19,115 | ) | 28.48 | |||||||||||||
Net restricted shares | (1,071 | ) | (56,858 | ) | 279,530 | 160,445 | |||||||||||||||||
Balance at December 31 | -- | 3,055,467 | $ | 30.46 | 3,939,200 | $ | 30.96 | 3,292,816 | $ | 29.21 | |||||||||||||
Exercisable options at December 31 | 876,031 | $ | 33.65 | 2,017,495 | $ | 31.32 | 1,991,231 | $ | 30.50 | ||||||||||||||
Vested restricted shares at December 31 | 1,021,349 | $ | 27.66 | 880,440 | $ | 27.12 | 756,661 | $ | 26.79 |
(a) | Current year share adjustment represents cancellation of previously granted options that were forfeited partially offset by new common shares issued during the year. |
2002 Share Plan | Shares Available for Issuance | Options and Restricted Shares | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2003 | Weighted Average 2003 Price | 2002 | Weighted Average 2002 Price | |||||||||||||
Balance at January 1 (a) | 4,564,542 | 593,455 | $ | 36.87 | -- | $ | -- | ||||||||||
Options | |||||||||||||||||
Granted | -- | -- | -- | 612,486 | 36.87 | ||||||||||||
Exercised | -- | (33,876 | ) | 36.87 | -- | -- | |||||||||||
Forfeited | 72,966 | (72,966 | ) | 36.87 | (19,031 | ) | 36.87 | ||||||||||
Net options | 72,966 | (106,842 | ) | 593,455 | |||||||||||||
Restricted shares | |||||||||||||||||
Granted | (147,258 | ) | 147,258 | 32.44 | -- | -- | |||||||||||
Forfeited | -- | (17,071 | ) | 31.55 | -- | -- | |||||||||||
Net restricted shares | (147,258 | ) | 130,187 | -- | |||||||||||||
Balance at December 31 | 4,490,250 | 616,800 | $ | 35.98 | 593,455 | $ | 36.87 | ||||||||||
Exercisable options at December 31 | 147,095 | $ | 36.87 | -- | $ | -- | |||||||||||
Vested restricted shares at December 31 | 8,754 | $ | 31.53 | -- | $ | -- |
(a) | Balance at January 1 reflects adjustment to shares available for issuance due to changes in plan calculation in 2003 |
37 Options. Options are exercisable, subject to the terms and conditions of the plan, in increments of 33.33% per year on each of the first three anniversaries of the date of grant. The plan provides that the exercise price of an option will be determined by the compensation committee of the Board of Trust Managers on the day of grant, and to date all options have been granted at an exercise price that equals the fair market value on the date of grant. Options exercised during 2003 were exercised at prices ranging from $22.00 to $38.85 per share. At December 31, 2003, options outstanding were at exercise prices ranging from $21.38 to $41.91 per share and had a weighted average remaining contractual life of 7.0 years. The following is a detail of outstanding options at December 31, 2003: |
Total Options | Vested Options | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Option Price | Outstanding | Weighted Average Price | Outstanding | Weighted Average Price | Remaining Contractual Life | ||||||||||||
$21.38-$31.48 | 602,451 | $ | 30.68 | 126,951 | $ | 27.68 | 8.1 years | ||||||||||
$33.25-$34.59 | 783,460 | 33.87 | 510,138 | 33.49 | 6.1 years | ||||||||||||
$36.87-$41.91 | 805,323 | 37.40 | 386,037 | 37.05 | 7.0 years | ||||||||||||
Total options | 2,191,234 | $ | 34.29 | 1,023,126 | $ | 34.11 | 7.0 years | ||||||||||
Year Ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2001 | |||||||||
Decrease (increase) in assets: | |||||||||||
Other assets, net | $ | 1,492 | $ | (6,720 | ) | $ | (5,333 | ) | |||
Restricted cash | (2,439 | ) | 1,387 | (1,128 | ) | ||||||
Increase (decrease) in liabilities: | |||||||||||
Accounts payable | (10,039 | ) | 22,624 | (255 | ) | ||||||
Accrued real estate taxes | 906 | (1,695 | ) | 2,012 | |||||||
Accrued expenses and other liabilities | 13,405 | 14,434 | 19,689 | ||||||||
Change in operating accounts | $ | 3,325 | $ | 30,030 | $ | 14,985 | |||||
First | Second | Third | Fourth | Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003: | |||||||||||||||||
Revenues | $ | 100,800 | $ | 102,841 | $ | 104,824 | $ | 108,075 | $ | 416,540 | |||||||
Net income available to common shareholders | 8,334 | 5,908 | 5,938 | 9,250 | 29,430 | ||||||||||||
Net income available to common shareholders | |||||||||||||||||
per share - basic | 0.21 | 0.15 | 0.15 | 0.23 | 0.75 | ||||||||||||
Net income available to common shareholders | |||||||||||||||||
per share - diluted | 0.20 | 0.14 | 0.14 | 0.22 | 0.71 | ||||||||||||
2002: | |||||||||||||||||
Revenues | $ | 101,697 | $ | 101,753 | $ | 104,229 | $ | 103,304 | $ | 410,983 | |||||||
Net income available to common shareholders | 13,982 | 12,117 | 10,235 | 38,278 | 74,612 | ||||||||||||
Net income available to common shareholders | |||||||||||||||||
per share - basic | 0.34 | 0.30 | 0.25 | 0.98 | (a) | 1.84 | |||||||||||
Net income available to common shareholders | |||||||||||||||||
per share - diluted | 0.32 | 0.28 | 0.24 | 0.93 | (a) | 1.73 |
(a) | Includes a $29,199, or $0.74 basic and $0.71 diluted, impact related to the gain on sale of discontinued operations |
20. Price Range of Common Shares (unaudited) The high and low sales prices per share of our common shares, as reported on the New York Stock Exchange composite tape, and distributions per share declared for the quarters indicated are as follows: |
High | Low | Distributions | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2003 Quarters: | |||||||||||
First | $ | 33.99 | $ | 30.70 | $ | 0.635 | |||||
Second | 36.14 | 32.93 | 0.635 | ||||||||
Third | 38.99 | 34.88 | 0.635 | ||||||||
Fourth | 44.30 | 38.73 | 0.635 | ||||||||
2002 Quarters: | |||||||||||
First | $ | 39.20 | 34.59 | $ | 0.635 | ||||||
Second | 41.54 | 36.81 | 0.653 | ||||||||
Third | 37.25 | 30.80 | 0.635 | ||||||||
Fourth | 34.35 | 29.74 | 0.635 |
43 CAMDEN PROPERTY TRUST (In thousands, except per share amounts) |
Year Ended December 31, | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||||
Revenues | |||||||||||||||||
Rental revenues | $ | 371,019 | $ | 365,883 | $ | 365,973 | $ | 356,396 | $ | 333,482 | |||||||
Other property revenues | 32,560 | 30,622 | 28,692 | 26,351 | 21,476 | ||||||||||||
Total property revenues | 403,579 | 396,505 | 394,665 | 382,747 | 354,958 | ||||||||||||
Fee and asset management | 7,276 | 6,264 | 7,745 | 6,537 | 6,492 | ||||||||||||
Other revenues | 5,685 | 8,214 | 9,117 | 5,823 | 1,924 | ||||||||||||
Total revenues | 416,540 | 410,983 | 411,527 | 395,107 | 363,374 | ||||||||||||
Expenses | |||||||||||||||||
Property operating and maintenance | 118,616 | 108,915 | 103,154 | 100,511 | 95,794 | ||||||||||||
Real estate taxes | 44,128 | 41,005 | 39,760 | 38,125 | 35,451 | ||||||||||||
Total property expenses | 162,744 | 149,920 | 142,914 | 138,636 | 131,245 | ||||||||||||
Property management | 10,154 | 10,027 | 9,510 | 9,358 | 9,372 | ||||||||||||
Fee and asset management | 3,908 | 2,499 | 2,016 | 1,370 | 1,254 | ||||||||||||
General and administrative | 16,231 | 14,439 | 12,521 | 13,706 | 10,471 | ||||||||||||
Impairment provision for technology investments | -- | -- | 9,864 | -- | -- | ||||||||||||
Other expenses | 1,389 | 2,790 | 1,511 | -- | -- | ||||||||||||
Losses related to early retirement of debt | -- | 234 | 388 | -- | -- | ||||||||||||
Interest | 75,414 | 71,499 | 69,841 | 69,036 | 57,856 | ||||||||||||
Amortization of deferred financing costs | 2,634 | 2,165 | 1,591 | 1,340 | 1,064 | ||||||||||||
Depreciation | 105,442 | 101,177 | 97,972 | 93,610 | 86,523 | ||||||||||||
Total expenses | 377,916 | 354,750 | 348,128 | 327,056 | 297,785 | ||||||||||||
Income from continuing operations before gain on sale of properties, equity in income of joint ventures and minority interests | 38,624 | 56,233 | 63,399 | 68,051 | 65,589 | ||||||||||||
Gain on sale of properties | 2,590 | 359 | 2,372 | 18,323 | 2,979 | ||||||||||||
Equity in income of joint ventures | 3,200 | 366 | 8,527 | 765 | 683 | ||||||||||||
Income allocated to minority interests | |||||||||||||||||
Distributions on units convertible into perpetual | |||||||||||||||||
preferred shares | (12,747 | ) | (12,872 | ) | (12,872 | ) | (12,845 | ) | (8,278 | ) | |||||||
Income allocated to units convertible into common shares | (2,237 | ) | (1,807 | ) | (3,127 | ) | (2,461 | ) | (2,014 | ) | |||||||
Income from continuing operations | 29,430 | 42,279 | 58,299 | 71,833 | 58,959 | ||||||||||||
Income from discontinued operations | -- | 3,134 | 2,993 | 2,591 | 2,664 | ||||||||||||
Gain on sale of discontinued operations | -- | 29,199 | -- | -- | -- | ||||||||||||
Net income | 29,430 | 74,612 | 61,292 | 74,424 | 61,623 | ||||||||||||
Preferred share dividends | -- | -- | (2,545 | ) | (9,371 | ) | (9,371 | ) | |||||||||
Net income available to common shareholders | $ | 29,430 | $ | 74,612 | $ | 58,747 | $ | 65,053 | $ | 52,252 | |||||||
Earnings per share - basic | |||||||||||||||||
Income from continuing operations | $ | 0.75 | $ | 1.04 | $ | 1.40 | $ | 1.64 | $ | 1.20 | |||||||
Income from discontinued operations, including gain on sale | -- | 0.80 | 0.08 | 0.07 | 0.07 | ||||||||||||
Net income available to common shareholders | $ | 0.75 | $ | 1.84 | $ | 1.48 | $ | 1.71 | $ | 1.27 | |||||||
Earnings per share - diluted | |||||||||||||||||
Income from continuing operations | $ | 0.71 | $ | 1.00 | $ | 1.34 | $ | 1.57 | $ | 1.17 | |||||||
Income from discontinued operations, including gain on sale | -- | 0.73 | 0.07 | 0.06 | 0.06 | ||||||||||||
Net income available to common shareholders | $ | 0.71 | $ | 1.73 | $ | 1.41 | $ | 1.63 | $ | 1.23 | |||||||
Distributions declared per common share | $ | 2.54 | $ | 2.54 | $ | 2.44 | $ | 2.25 | $ | 2.08 | |||||||
Weighted average number of common shares outstanding | 39,355 | 40,441 | 39,796 | 38,112 | 41,236 | ||||||||||||
Weighted average number of common and common dilutive equivalent shares outstanding | 41,354 | 44,216 | 41,603 | 41,388 | 44,291 |
44 CAMDEN PROPERTY TRUST (In thousands, except property data) |
Year Ended December 31, | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||||
Balance Sheet Data (at end of year) | |||||||||||||||||
Real estate assets | $ | 3,099,856 | $ | 3,035,970 | $ | 2,823,530 | $ | 2,719,234 | $ | 2,706,163 | |||||||
Accumulated depreciation | (601,688 | ) | (498,776 | ) | (422,154 | ) | (326,723 | ) | (253,545 | ) | |||||||
Total assets | 2,625,561 | 2,608,899 | 2,449,665 | 2,430,881 | 2,487,932 | ||||||||||||
Notes payable | 1,509,677 | 1,427,016 | 1,207,047 | 1,138,117 | 1,165,090 | ||||||||||||
Minority interests | 196,385 | 200,729 | 206,079 | 210,377 | 196,852 | ||||||||||||
Convertible subordinated debentures | -- | -- | -- | 1,950 | 3,406 | ||||||||||||
Shareholders' equity | $ | 784,885 | $ | 839,453 | $ | 918,251 | $ | 974,183 | $ | 1,016,675 | |||||||
Common shares outstanding | 39,658 | 39,214 | 40,799 | 38,129 | 39,093 | ||||||||||||
Other Data | |||||||||||||||||
Cash flows provided by (used in): | |||||||||||||||||
Operating activities | $ | 137,962 | $ | 182,207 | $ | 180,280 | $ | 166,436 | $ | 164,021 | |||||||
Investing activities | (91,947 | ) | (220,766 | ) | (103,689 | ) | (15,751 | ) | (220,571 | ) | |||||||
Financing activities | (43,063 | ) | 35,785 | (78,348 | ) | (151,266 | ) | (56,420 | ) | ||||||||
Funds from operations - diluted (a) | 133,109 | 150,104 | 157,452 | 156,274 | 152,369 | ||||||||||||
Property Data | |||||||||||||||||
Number of operating properties (at end of year) | |||||||||||||||||
Included in continuing operations | 144 | 143 | 142 | 142 | 150 | ||||||||||||
Included in discontinued operations | -- | -- | 3 | 3 | 3 | ||||||||||||
Number of operating apartment homes (at end of year) | |||||||||||||||||
Included in continuing operations | 51,344 | 50,790 | 50,021 | 50,012 | 51,987 | ||||||||||||
Included in discontinued operations | -- | -- | 1,324 | 1,324 | 1,324 | ||||||||||||
Number of operating apartment homes (weighted average) (b) | |||||||||||||||||
Included in continuing operations | 46,382 | 45,465 | 44,164 | 45,177 | 44,282 | ||||||||||||
Included in discontinued operations | -- | 1,285 | 1,324 | 1,324 | 1,324 | ||||||||||||
Weighted average monthly total property revenue | |||||||||||||||||
per apartment home | $ | 725 | $ | 727 | $ | 745 | $ | 706 | $ | 668 | |||||||
Properties under development (at end of period) | 2 | 4 | 2 | 3 | 6 |
(a) | Management considers FFO to be an appropriate measure of the performance of an equity REIT. The National Association of Real Estate Investment Trusts ("NAREIT") currently defines FFO as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In addition, extraordinary or unusual items, along with significant non-recurring events that materially distort the comparative measure of FFO are typically disregarded in its calculation. Our definition of diluted FFO also assumes conversion at the beginning of the period of all 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. Furthermore, FFO as disclosed by other REITs may not be comparable to our calculation. See our reconciliation of net income available to common shareholders to FFO in Management's Discussion and Analysis. | ||
(b) | Excludes apartment homes owned in joint ventures. |
45 |