Camden Property Trust (CPT) 10-Q 2005 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to               

Commission file number:  1-12110

CAMDEN PROPERTY TRUST

(Exact Name of Registrant as Specified in Its Charter)

TEXAS	76-6088377
(State or Other Jurisdiction of	(I.R.S. Employer Identification
Incorporation or Organization)	Number)

3 Greenway Plaza, Suite 1300, Houston, Texas 77046

(Address of Principal Executive Offices) (Zip Code)

(713) 354-2500

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ý               NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  YES ý     NO o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o     NO ý

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of November 1, 2005, there were 52,133,927 shares of Common Shares of Beneficial Interest, $0.01 par value outstanding.

CAMDEN PROPERTY TRUST

Table of Contents

PART I	FINANCIAL INFORMATION
Item 1	Financial Statements
	Consolidated Balance Sheets (Unaudited) as of September 30, 2005 and December 31, 2004
	Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2005 and 2004
	Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2005 and 2004
	Notes to Consolidated Financial Statements (Unaudited)
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3	Quantitative and Qualitative Disclosures About Market Risk
Item 4	Controls and Procedures
PART II	OTHER INFORMATION
Item 1	Legal Proceedings
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3	Defaults Upon Senior Securities
Item 4	Submission of Matters to a Vote of Security Holders
Item 5	Other Information
Item 6	Exhibits
SIGNATURES

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PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

CAMDEN PROPERTY TRUST

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			December 31,
(In thousands)	2005			2004
ASSETS
Real estate assets, at cost
Land	$	660,748		$	399,054
Buildings and improvements	3,881,682			2,511,195
	4,542,430			2,910,249
Accumulated depreciation	(713,991		)	(688,333		)
Net operating real estate assets	3,828,439			2,221,916
Properties under development, including land	377,787			176,769
Investments in joint ventures	31,389			9,641
Properties held for sale	51,741			62,418
Total real estate assets	4,289,356			2,470,744
Accounts receivable – affiliates	35,313			31,380
Notes receivable
Affiliates	11,505			10,367
Other	24,865			44,547
Other assets, net	100,080			66,164
Cash and cash equivalents	1,076			2,253
Restricted cash	5,829			3,909
Total assets	$	4,468,024		$	2,629,364
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Notes payable
Unsecured	$	1,903,094		$	1,407,208
Secured	661,723			169,197
Accounts payable	59,248			31,904
Accrued real estate taxes	39,740			27,324
Accrued expenses and other liabilities	152,270			65,237
Distributions payable	38,933			30,412
Total liabilities	2,855,008			1,731,282
Commitments and contingencies
Minority interests
Perpetual preferred units	97,925			115,060
Common units	115,190			44,507
Other minority interests	10,425			—
Total minority interests	223,540			159,567
Shareholders’ equity
Common shares of beneficial interest	607			486
Additional paid-in capital	1,913,930			1,348,848
Distributions in excess of net income	(273,609		)	(361,973		)
Unearned share awards	(14,217		)	(13,023		)
Employee notes receivable	(2,087		)	—
Treasury shares, at cost	(235,148		)	(235,823		)
Total shareholders’ equity	1,389,476			738,515
Total liabilities and shareholders’ equity	$	4,468,024		$	2,629,364

See Notes to Consolidated Financial Statements.

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CAMDEN PROPERTY TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands, except per share amounts)	2005			2004			2005			2004
Property revenues
Rental revenues	$	129,309		$	92,347		$	360,761		$	275,547
Other property revenues	11,899			8,562			32,769			24,880
Total property revenues	141,208			100,909			393,530			300,427
Property expenses
Property operating and maintenance	40,590			31,680			111,612			90,324
Real estate taxes	15,231			10,958			43,534			33,051
Total property expenses	55,821			42,638			155,146			123,375
Non-property income
Fee and asset management	1,789			1,962			10,929			6,639
Sale of technology investments	—			—			24,199			863
Interest and other income	1,913			1,917			6,401			7,136
Total non-property income	3,702			3,879			41,529			14,638
Other expenses
Property management	4,208			2,901			11,350			8,512
Fee and asset management	2,008			850			4,999			2,845
General and administrative	6,183			4,074			18,017			12,400
Transaction compensation and merger expenses	—			—			14,085			—
Interest	29,331			19,305			81,416			59,701
Depreciation and amortization	45,574			25,748			123,084			76,109
Amortization of deferred financing costs	855			767			2,872			2,250
Total other expenses	88,159			53,645			255,823			161,817
Income from continuing operations before gain on sale of properties, equity in income (losses) of joint ventures and minority interests	930			8,505			24,090			29,873
Gain on sale of properties, including land	—			—			132,128			1,255
Equity in income (losses) of joint ventures	(1,827		)	93			(1,472		)	259
Income allocated to minority interests
Distributions on perpetual preferred units	(1,750		)	(2,664		)	(5,278		)	(8,350		)
Original issuance costs on redeemed perpetual preferred units	—			(745		)	(365		)	(745		)
Income allocated to common units and other minority interests	(373		)	(515		)	(2,099		)	(1,956		)
Income (loss) from continuing operations	(3,020		)	4,674			147,004			20,336
Income from discontinued operations	703			1,171			3,091			3,778
Income from discontinued operations allocated to common units	—			(38		)	—			(122		)
Impairment loss on land held for sale	—			—			—			(1,143		)
Gain on sale of discontinued operations	—			—			36,104			—
Net income (loss)	$	(2,317	)	$	5,807		$	186,199		$	22,849
Earnings per share – basic
Income (loss) from continuing operations	$	(0.05	)	$	0.11		$	2.87		$	0.51
Income from discontinued operations, including gain on sale	0.01			0.03			0.76			0.06
Net income (loss)	$	(0.04	)	$	0.14		$	3.63		$	0.57
Earnings per share – diluted
Income (loss) from continuing operations	$	(0.06	)	$	0.11		$	2.68		$	0.48
Income from discontinued operations, including gain on sale	0.01			0.03			0.71			0.06
Net income (loss)	$	(0.05	)	$	0.14		$	3.39		$	0.54
Distributions declared per common share	$	0.635		$	0.635		$	1.905		$	1.905
Weighted average number of common shares outstanding	54,018			40,377			51,294			40,234
Weighted average number of common and common dilutive equivalent shares outstanding	55,671			42,574			55,494			42,381

See Notes to Consolidated Financial Statements.

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CAMDEN PROPERTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
(In thousands)	2005			2004
Cash flows from operating activities
Net income	$	186,199		$	22,849
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	124,504			80,299
Amortization of deferred financing costs	2,872			2,250
Equity in (income) losses of joint ventures	1,472			(259		)
Gain on sale of properties, including land	(132,128		)	(1,255		)
Gain on sale of discontinued operations	(36,104		)	—
Gain on sale of technology investments	(24,199		)	(863		)
Impairment loss on land held for sale	—			1,143
Original issuance costs of redeemed perpetual preferred units	365			745
Income allocated to common units and other minority interests, including discontinued operations	2,099			2,078
Accretion of discount on unsecured notes payable	498			466
Amortization of share-based compensation	8,518			2,535
Net change in operating accounts	27,765			8,769
Net cash provided by operating activities	161,861			118,757
Cash flows from investing activities
Cash of Summit at merger date	16,696			—
Cash consideration paid for Summit	(458,050		)	—
Payment of merger related liabilities	(50,765		)	—
Net proceeds from contribution of assets to joint ventures	395,521			—
Increase in investment in joint ventures	(26,191		)	—
Increase in real estate assets	(201,518		)	(80,483		)
Net proceeds from sale of discontinued operations	127,016			—
Net proceeds from sales of properties, including land	11			3,451
Issuance of notes receivable – other	—			(12,183		)
Payments received on notes receivable – other	19,694			—
Distributions from joint ventures	16,449			1,216
Proceeds from the sale of technology investments	24,606			863
Increase in non-real estate assets and other	(2,306		)	(2,318		)
Net cash used in investing activities	(138,837		)	(89,454		)

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CAMDEN PROPERTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
(In thousands)	2005			2004
Cash flows from financing activities
Net increase in unsecured line of credit and short-term borrowings	$	65,000		$	287,000
Repayment of Summit secured credit facility	(188,500		)	—
Proceeds from issuance of notes payable	248,423			99,841
Repayment of notes payable	(17,838		)	(291,658		)
Distributions to shareholders and minority interests	(109,385		)	(92,957		)
Redemption of perpetual preferred units	(17,500		)	(35,500		)
Repayment of employee notes receivable	1,825			—
Repurchase of common units	(5,580		)	(181		)
Net increase in accounts receivable – affiliates	(2,197		)	(1,200		)
Increase in notes receivable - affiliates	(1,138		)	(993		)
Common share options exercised	8,253			6,537
Payment of deferred financing costs	(6,968		)	(1,858		)
Other	1,404			774
Net cash used in financing activities	(24,201		)	(30,195		)
Net decrease in cash and cash equivalents	(1,177		)	(892		)
Cash and cash equivalents, beginning of period	2,253			3,357
Cash and cash equivalents, end of period	$	1,076		$	2,465
Supplemental information
Cash paid for interest, net of interest capitalized	$	72,107		$	58,582
Interest capitalized	12,657			6,965
Supplemental schedule of noncash investing and financing activities
Acquisition of Summit, net of cash acquired, at fair value:
Assets acquired	$	1,589,680		$	—
Liabilities assumed	980,747			—
Common shares issued	544,065			—
Minority interests issued	81,564			—
Value of shares issued under benefit plans, net	$	11,271		$	5,710

See Notes to Consolidated Financial Statements.

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CAMDEN PROPERTY TRUST

Notes to Consolidated Financial Statements

(Unaudited)

1.Organization and Significant Accounting Policies

The accompanying interim unaudited financial information has been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted according to such rules and regulations. Management believes that the disclosures included are adequate to make the information presented not misleading. In the opinion of management, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Camden Property Trust as of September 30, 2005, the results of operations for the three and nine months ended September 30, 2005 and 2004, and the cash flows for the nine months ended September 30, 2005 and 2004 have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year.

Organization

Camden Property Trust (“Camden”) is a self-administered and self-managed Texas 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.  Our use of the term “communities,” “multifamily communities,” “properties,” or “multifamily properties” in the following discussion refers to our multifamily apartment communities.  As of September 30, 2005, we owned interests in, operated or were developing 202 multifamily properties containing 69,830 apartment homes located in thirteen states.  We had 3,211 apartment homes under development at nine of our multifamily properties, including 464 apartment homes at one multifamily property owned through a joint venture.  We had two properties containing 1,034 apartment homes which were designated as held for sale as of September 30, 2005.  Additionally, we have several sites that we intend to develop into multifamily apartment communities.

As of September 30, 2005, we had operating properties in 22 markets.  No one market contributed more than 11% of our net operating income for the quarter then ended.  For the three months ended September 30, 2005, Washington, D.C. Metro, Tampa and Dallas contributed 10.4%, 8.5% and 8.2%, respectively, to our net operating income.

Approximately 18% of our multifamily apartment units at September 30, 2005 were held in Camden Operating, L.P. This operating partnership has issued both common and preferred limited partnership units. As of September 30, 2005, we held 83.2% of the common limited partnership units and the sole 1% general partnership interest of the operating partnership. The remaining 15.8% of the common limited partnership units are primarily held by former officers, directors and investors of Paragon Group, Inc., which we acquired in 1997.

Merger with Summit Properties Inc.

On February 28, 2005, Summit Properties Inc. (“Summit”) was merged with and into Camden Summit Inc., one of our wholly-owned subsidiaries (“Camden Summit”), pursuant to an Agreement and Plan of Merger dated as of October 4, 2004 (the “Merger Agreement”), as amended.  We determined the merger would allow us to lower our concentrations in Las Vegas, Houston and Dallas and increase our presence on the East coast, and accomplish this diversification strategy in a matter of months rather than what would have otherwise taken years to accomplish.  We acquired a significant portfolio of high-quality apartment properties, most of which were located in new, East coast markets such as Southeast Florida, Washington, D.C. Metro and Atlanta.  These properties complemented our existing footprint in Florida and North Carolina while further diversifying our portfolio with the addition of new markets. Prior to the effective time of the merger, Summit was the sole general partner of Summit Properties Partnership, L.P. (the “Camden Summit Partnership”), and at the effective time, Camden Summit became the sole general partner of the Camden Summit Partnership and the name of such

7

partnership was changed to Camden Summit Partnership, L.P.  As of February 28, 2005, Summit owned or held an ownership interest in 48 operating communities comprised of 15,002 apartment homes with an additional 1,834 apartment homes under construction in five new communities.

The aggregate consideration paid for the merger was as follows:

(in thousands)
Fair value of Camden common shares issued	$	544,065
Fair value of Camden Summit Partnership units issued	81,564
Cash consideration paid for Summit common shares and partnership units exchanged	458,050
Total consideration	1,083,679
Fair value of liabilities assumed, including debt	980,747
Total purchase price	$	2,064,426

Under the terms of the Merger Agreement, Summit stockholders had the opportunity to elect to receive cash or Camden shares for their Summit stock.  Each stockholder’s election was subject to proration, depending on the elections of all Summit stockholders, so that the aggregate amount of cash issued in the merger to Summit’s stockholders equaled approximately $436.3 million.  As a result of this proration, Summit stockholders electing Camden shares received approximately .6383 of a Camden share and $1.4177 in cash for each of their shares of Summit common stock.  The final conversion ratio of the common shares was determined based on the average market price of our common shares over a five day trading period preceding the effective time of the merger.  Fractional shares were paid in cash.  Summit stockholders electing cash or who made no effective election, received $31.20 in cash for each of their Summit shares.  In the merger, we issued approximately 11.8 million common shares to Summit stockholders.

In conjunction with the merger, the limited partners in the Camden Summit Partnership were offered, on a unit-by-unit basis, the opportunity to redeem their partnership units for $31.20 in cash, without interest, or to remain in the Camden Summit Partnership following the merger at a unit valuation equal to .6687 of a Camden common share.  The limited partner elections resulted in our redeeming 0.7 million partnership units for cash, for an aggregate of $21.7 million, and issuing 1.8 million partnership units.  The value of the common shares and partnership units issued was determined based on the average market price of our common shares for the five day period commencing two days prior to the announcement of the merger on October 4, 2004.  Subsequent to the merger, 0.1 million partnership units have been redeemed for $5.5 million.

We allocated the purchase price between tangible and intangible assets.  When allocating the purchase price to acquired properties, we allocated costs to the estimated intangible value of in-place leases and above or below market leases and to the estimated fair value of furniture and fixtures, land and buildings on a value determined by assuming the property was vacant by applying methods similar to those used by independent appraisers of income-producing property.  Depreciation and amortization is computed on a straight-line basis over the remaining useful lives of the related assets.  Buildings and furniture and fixtures have an estimated useful life of 35 years and 5 years, respectively.  The value of in-place leases and above or below market leases is being amortized over the estimated average remaining life of leases in-place at the time of the merger.  In-place lease terms generally range from 6 to 13 months.  We use an estimated remaining average lease life of 10 months to amortize the value of in-place leases recorded in conjunction with the merger.

8

The allocations of the purchase price are based upon preliminary estimates and assumptions. Accordingly, these allocations are subject to revision when we receive final information, including appraisals and other analyses. Revisions to the fair value estimates, which may be significant, will be recorded as further adjustments to the purchase price allocations.  Revisions to the purchase price allocations during the third quarter of 2005 included reductions of $230,000 to notes payable for a fair value of debt adjustment, increases of $308,000 to accounts payable, accrued expenses and other liabilities, and increases of $414,000 to other minority interests.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the time of merger, net of cash acquired:

(in thousands)
Land	$	297,169
Buildings and improvements	1,527,221
Properties under development, including land	152,042
Investments in joint ventures	2,652
Properties held for sale	29,687
Other assets, including the value of in-place leases of $31.7 million	37,417
Cash and cash equivalents	16,696
Restricted cash	1,542
Total assets acquired	2,064,426
Notes payable	880,829
Accounts payable, accrued expenses and other liabilities	93,506
Employee notes receivable	(3,882		)
Other minority interests	10,294
Fair value of liabilities assumed, including debt	980,747
Total consideration	$	1,083,679

In connection with the merger, we incurred $69.8 million of termination, severance and settlement of share-based compensation costs.  Of this amount, Summit had paid $26.3 million prior to the effective time of the merger.  As of September 30, 2005, we had paid $38.0 million of these costs leaving $5.5 million remaining to be paid.

The following unaudited pro forma financial information for the three and nine months ended September 30, 2005 and 2004, gives effect to the merger as if it had occurred at the beginning of the periods presented. The pro forma financial information for the nine months ended September 30, 2005 includes pro forma results for the first two months of 2005 and actual results for the remaining seven months. The pro forma results are based on historical data (in thousands, except per share amounts) and are not intended to be indicative of the results of future operations.

	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	2005			2004		2005		2004
Total property revenues	$	141,208		$	141,446	$	421,134	$	415,380
Net income (loss) to common shareholders	(2,317		)	120,160		171,431		142,926
Net income (loss) per common and common equivalent share	$	(0.05	)	$	2.21	$	2.90	$	2.64

At September 30, 2005, approximately 24% of our multifamily apartment units were held in the Camden Summit Partnership.  This operating partnership has issued common limited partnership units.  As of September 30, 2005, we held 91.8% of the common limited partnership units and the sole 1% general partnership interest of

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the Camden Summit Partnership.  The remaining 7.2% of the common limited partnership units were primarily held by former officers, directors and investors of Summit.

Significant Accounting Policies

Reportable Segments.  Financial Accounting Standards Board (“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.  Although our multifamily communities are geographically diversified throughout the United States, management evaluates operating performance on an individual property level.  However, as each of our apartment communities has similar economic characteristics, residents, and products and services, our apartment communities have been aggregated into one reportable segment.  In addition to Generally Accepted Accounting Principles (“GAAP”) measures included in our consolidated statements of operations, our chief operating decision makers evaluate the financial performance of each community using a financial measure entitled net operating income.  Each community’s performance is assessed based on growth of or decline in net operating income, which is defined as total property revenues less total property expenses as presented in our consolidated statements of operations and excludes certain revenue and expense items such as fee and asset management income and expenses and other indirect operating expenses, interest, depreciation and amortization expenses.

Below is a reconciliation of net operating income from our wholly-owned communities included in continuing operations to its most directly comparable GAAP measure, income from continuing operations before gain on sale of properties, equity in income (losses) of joint ventures and minority interests:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2005		2004		2005		2004
Total property revenues	$	141,208	$	100,909	$	393,530	$	300,427
Total property expenses	55,821		42,638		155,146		123,375
Net operating income	85,387		58,271		238,384		177,052
Less other expenses:
Depreciation and amortization	45,574		25,748		123,084		76,109
Interest	29,331		19,305		81,416		59,701
Transaction compensation and merger expenses	—		—		14,085		—
General and administrative	6,183		4,074		18,017		12,400
Property management	4,208		2,901		11,350		8,512
Fee and asset management	2,008		850		4,999		2,845
Amortization of deferred financing costs	855		767		2,872		2,250
Total other expenses	88,159		53,645		255,823		161,817
Add non-property income:
Fee and asset management	1,789		1,962		10,929		6,639
Sale of technology investment	—		—		24,199		863
Interest and other income	1,913		1,917		6,401		7,136
Total non-property income	3,702		3,879		41,529		14,638
Income from continuing operations before gain on sale of properties, equity in income (losses) of joint ventures and minority interests	$	930	$	8,505	$	24,090	$	29,873

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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 of operating properties, 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.

Upon the acquisition of real estate, we assess the fair value of acquired assets, including land, buildings, the value of in-place leases, above and below market leases, and acquired liabilities, including fair value adjustments for debt.  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.

Carrying costs, 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 $5.0 million and $12.7 million for the three and nine months ended September 30, 2005, respectively, and $2.3 million and $7.0 million for the three and nine months ended September 30, 2004, respectively.  Capitalized real estate taxes were $0.6 million and $2.4 million for the three and nine months ended September 30, 2005, respectively, and $0.6 million and $1.9 million for the three and nine months ended September 30, 2004, respectively.  All operating expenses associated with completed apartment homes for properties in the development and leasing phase are expensed.  Upon substantial completion of the project, all apartment homes are considered operating and we begin expensing all items that were previously considered carrying costs.

We capitalized $28.7 million and $17.2 million during the nine months ended September 30, 2005 and 2004, respectively, of renovation and improvement costs that we believe extended the economic lives and enhanced the earnings of our multifamily properties.  Capital expenditures are capitalized and depreciated over their useful lives, which range from 3 to 20 years.

Property operating and maintenance expenses, excluding discontinued operations, included repairs and maintenance expenses totaling $9.7 million and $25.7 million for the three and nine months ended September 30, 2005, respectively, compared with $7.7 million and $21.8 million for the three and nine months ended September 30, 2004, respectively.  Costs recorded as repairs and maintenance include all costs which 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.

If an event or change in circumstances 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, less costs to sell.

Stock-based Employee Compensation.  During the first nine months of 2005, we granted 254,722 shares to certain key employees and non-employee trust managers. The shares were issued based on the market value of our common shares at the date of grant and have vesting periods of up to five years. During the nine month period ended September 30, 2005, 288,409 shares became fully vested, including 124,328 shares for which vesting was accelerated in connection with the sale of a technology investment.

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During the first nine months of 2005, we also granted options to purchase 200,000 common shares with an exercise price of $45.53 per share, which was equal to the market value on the date of grant.  The options become exercisable in equal increments over three years, beginning on the first anniversary of the date of grant.  During the nine month period ended September 30, 2005, previously granted options to purchase 544,829 shares became exercisable, and 276,471 options were exercised at a weighted average price of $37.08 per share.

Prior to 2003, we accounted for option grants under the intrinsic method set forth in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations.  Beginning 2003, we adopted SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of SFAS No. 123, Accounting for Stock-Based Compensation.”  As a result of our adoption of the prospective method set forth in SFAS No. 148, we recognize stock-based employee compensation when new options are awarded.  During the three and nine months ended September 30, 2005, we expensed $0.2 million and $1.0 million, respectively, compared with $0.2 million and $0.5 million during the three and nine months ended September 30, 2004, respectively, associated with awards accounted for under the fair value method.  Additionally, we recognize compensation expense on shares purchased under our Employee Share Purchase Plan (“ESPP”) for the difference in the price paid by our employees and the fair market value of our shares at the date of purchase.  We expensed $50,000 and $142,000 related to ESPP purchases during the three and nine months ended September 30, 2005, respectively.

The fair value of each option granted in 2005 and 2004 was estimated on the date of grant utilizing the Black-Scholes option pricing model with the following assumptions: risk-free interest rates of 4.2%, expected life of ten years, dividend yield of 5.6% and 5.9%, respectively, and expected share volatility of 18.0%.  The weighted average fair value of options granted in 2005 and 2004 was $4.47 and $3.83 per share, respectively.

If we had adopted the provisions of SFAS No. 123 to our option grants and ESPP prior to 2003, our net income to common shareholders and related basic and diluted earnings per share would be as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share amounts)	2005			2004			2005			2004
Net income (loss), as reported	$	(2,317	)	$	5,807		$	186,199		$	22,849
Add: stock-based employee compensation expense included in reported net income	1,034			877			8,530			2,768
Deduct: total stock-based employee compensation expense determined under fair value method for all awards	(1,132		)	(1,059		)	(8,736		)	(3,373		)
Pro forma net income (loss)	$	(2,415	)	$	5,625		$	185,993		$	22,244
Net income (loss) per share:
Basic – as reported	$	(0.04	)	$	0.14		$	3.63		$	0.57
Basic – pro forma	(0.04		)	0.14			3.63			0.55
Diluted – as reported	(0.05		)	0.14			3.39			0.54
Diluted – pro forma	(0.05		)	0.13			3.39			0.53

The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts.

Recent Accounting Pronouncements.  In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized over their vesting periods in the income statement based on their estimated fair values. In April 2005, the Securities and Exchange Commission (“SEC”) issued a press release announcing it would provide for a phased-in implementation process for SFAS 123R. SFAS 123R is effective for all public entities in the first annual reporting period beginning after June 15, 2005, which for us is the calendar

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year of 2006. As a result of the SEC’s announcement, we are in the process of assessing the impact of SFAS 123R and have not determined what impact, if any, our adoption of SFAS 123R will have on our financial position, results of operations or cash flows.

In December 2004, FASB issued SFAS No. 153, “Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29,” which addresses the measurement of exchanges of nonmonetary assets.  SFAS No. 153 eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchange of nonmonetary assets that do not have commercial substance.  It also specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.  SFAS No. 153 is effective beginning July 1, 2005.  The adoption of SFAS No. 153 did not have a material impact on our financial position, results of operations or cash flows.

In March 2005, the FASB issued FASB Staff Position (“FSP”) FASB Interpretation (“FIN”) 46R-5, “Implicit Variable Interest under FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities.”  This FSP requires a reporting entity to consider whether it holds an implicit variable interest in a variable interest entity (“VIE”) or potential VIE.  FSP FIN 46R-5 was effective with reporting periods beginning after March 3, 2005.  The adoption of FSP FIN 46R-5 did not have a material impact on our financial position, results of operations or cash flows.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3.”  SFAS No. 154 changes the requirements for and reporting of a change in accounting principle.  SFAS No. 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. This Statement also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) corrections of errors in previously issued financial statements should be termed a “restatement.” The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005.  We do not expect that the adoption of SFAS No. 154 will have a material impact on our financial position, results of operations or cash flows.

In June 2005, the FASB issued Emerging Issues Task Force (“EITF”) Issue No. 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights.”  EITF Issue No. 04-05 provides a framework for determining whether a general partner controls, and should consolidate, a limited partnership or a similar entity.  EITF Issue No. 04-05 is effective after June 29, 2005, for all newly formed limited partnerships and for any pre-existing limited partnerships that modify their partnership agreements after that date.  General partners of all other limited partnerships are required to apply the consensus no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005.  We do not expect that the adoption of EITF Issue No. 04-05 will have a material impact on our financial position, results of operations or cash flows.

In June 2005, the FASB issued FSP 78-9-1, “Interaction of AICPA Statement of Position 78-9 and EITF Issue No. 04-05.”  The EITF acknowledged that the consensus in EITF Issue No. 04-05 conflicts with certain aspects of Statement of Position (“SOP”) 78-9, “Accounting for Investments in Real Estate Ventures.”  The EITF agreed that the assessment of whether a general partner, or the general partners as a group, controls a limited partnership should be consistent for all limited partnerships, irrespective of the industry within which the limited partnership operates.  Accordingly, the guidance in SOP 78-9 was amended in FSP 78-9-1 to be consistent with the guidance in EITF Issue No. 04-05.  The effective dates for this FSP are the same as those mentioned above in EITF Issue No. 04-05.  We do not expect that the adoption of FSP 78-9-1 will have a material impact on our financial position, results of operations or cash flows.

Reclassifications.  Certain reclassifications have been made to amounts in prior period financial statements to conform with current period presentations.  In our Consolidated Statements of Cash Flows for the nine months ended September 30, 2005, we changed the classification of changes in restricted cash and changes in tenant security deposits liabilities to present such changes as an investing activity and a financing activity, respectively.  We previously presented such changes as operating activities.  In the accompanying Consolidated Statements of

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Cash Flows for the nine months ended September 30, 2004, we reclassified these changes in balances to be consistent with our 2005 presentation which resulted in a $2.4 million and $0.7 million increase to investing cash flows and financing cash flows, respectively, with a corresponding $3.1 million decrease to operating cash flows, from the amounts previously reported.

2.Per Share Data

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 and units convertible into common shares.  Only those items that have a dilutive impact on our basic earnings per share are included in diluted earnings per share.  For the three months ended September 30, 2005, 0.5 million common shares issuable from the assumed conversion of common share options and awards granted and 2.4 million units convertible into common shares were excluded from the diluted earnings per share calculation as they were not dilutive.  For the three and nine months ended September 30, 2004, 1.9 million units convertible into common shares were excluded from the diluted earnings per share calculation as they were not dilutive.

The following table presents information necessary to calculate basic and diluted earnings per share for the three and nine months ended September 30, 2005 and 2004:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2005			2004		2005		2004
Basic earnings per share calculation
Income (loss) from continuing operations	$	(3,020	)	$	4,674	$	147,004	$	20,336
Income from discontinued operations, including gain on sale	703			1,133		39,195		2,513
Net income (loss)	$	(2,317	)	$	5,807	$	186,199	$	22,849
Income (loss) from continuing operations – per share	$	(0.05	)	$	0.11	$	2.87	$	0.51
Income from discontinued operations, including gain on sale–per share	0.01			0.03		0.76		0.06
Net income (loss) – per share	$	(0.04	)	$	0.14	$	3.63	$	0.57
Weighted average number of common shares outstanding	54,018			40,377		51,294		40,234
Diluted earnings per share calculation
Income (loss) from continuing operations	$	(3,020	)	$	4,674	$	147,004	$	20,336
Income (loss) allocated to common units	(359		)	8		1,968		32
Income (loss) from continuing operations, as adjusted	(3,379		)	4,682		148,972		20,368
Income from discontinued operations, including gain on sale	703			1,133		39,195		2,513
Net income (loss), as adjusted	$	(2,676	)	$	5,815	$	188,167	$	22,881
Income (loss) from continuing operations, as adjusted – per share	$	(0.06	)	$	0.11	$	2.68	$	0.48
Income from discontinued operations, including gain on sale–per share	0.01			0.03		0.71		0.06
Net income (loss), as adjusted – per share	$	(0.05	)	$	0.14	$	3.39	$	0.54
Weighted average common shares outstanding	54,018			40,377		51,294		40,234
Incremental shares issuable from assumed conversion of:
Common share options and awards granted	—			1,635		455		1,585
Common units	1,653			562		3,745		562
Weighted average common shares outstanding, as adjusted	55,671			42,574		55,494		42,381

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3.Property Acquisitions and Dispositions

Acquisitions.  In September 2005, we acquired Camden World Gateway, a 408 apartment home community, located in Orlando, Florida, for $58.5 million.  We used proceeds from our unsecured line of credit facility to fund the purchase.  The purchase price of this property was preliminarily allocated to the tangible and intangible assets acquired based on their estimated fair values at the date of acquisition.  The intangible assets acquired at acquisition include in-place leases of $1.1 million and above or below market leases of $0.1 million.  Tangible assets, which include land, buildings and improvements are being depreciated over their estimated useful lives, which range from 5 to 35 years.  Intangible assets, which include the value of in place leases and above or below market leases, are being amortized over 10 months, which is the estimated average remaining life of in-place leases at time of acquisition.

Subsequent to September 30, 2005, we acquired Camden Gaines Ranch, a 390 apartment home community, located in Austin, Texas, for $43.0 million.

Dispositions.  The components of net income that are presented as income from 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 including impairment loss, if any, is presented in discontinued operations when recognized.  Communities sold or held for sale which were owned through one of our operating partnerships have been allocated their portion of income related to common unitholders.

During the first nine months of 2005, we sold three operating properties, the first property, located in Las Vegas, Nevada, with 432 apartment homes, the second property, located in Tampa, Florida, with 454 apartment homes, and the third property, located in Atlanta, Georgia, with 431 apartment homes.  As of September 30, 2005, we have two properties, one of which is located in Tampa, Florida, and the other of which is located in Dallas, Texas, totaling 1,034 apartment homes, designated as held for sale.

At September 30, 2005, we had 4.5 acres of undeveloped land held in Dallas classified as land held for sale.  Costs associated with these acres were reclassified to discontinued operations.  In connection with our decision to dispose of a 2.4 acre tract, during the first quarter of 2004, we incurred an impairment charge of $1.1 million to write-down the carrying value of the land to its fair value, less costs to sell.

The operating results of the properties designated as held for sale as of September 30, 2005, the three properties sold in 2005, as well as one property sold in 2004, which are included in discontinued operations for the three and nine months ended September 30, 2005 and 2004, are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2005		2004		2005		2004
Property revenues	$	2,410	$	5,073	$	9,871	$	15,052
Property expenses	1,474		2,502		5,360		7,084
Net operating income	936		2,571		4,511		7,968
Depreciation and amortization	233		1,400		1,420		4,190
Income from discontinued operations	$	703	$	1,171	$	3,091	$	3,778

In March 2005, we sold 12 apartment communities containing 4,034 apartment homes to 12 individual joint ventures for approximately $398 million.  We obtained a 20% ownership interest in the ventures, with an approximate value of $26.2 million.  In accordance with SFAS No. 144, “Disposal of Long Lived Assets,” the operations of these communities have not been reclassified to discontinued operations due to our continuing involvement in the operations of these communities.  In connection with this transaction, we recorded a gain of $165.1 million of which $132.1 million was recognized as a gain during the first quarter of 2005.  The remaining

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$33.0 million was recorded as a deferred gain of which $0.3 million and $0.7 million was recognized in equity earnings during the three and nine months ended September 30, 2005, respectively.

4.Investments in Joint Ventures

In December 2003, we contributed undeveloped land located in Ashburn, Virginia to a joint venture in return for a 20% interest in the joint venture, totaling $1.5 million and approximately $12.7 million in cash.  The remaining 80% interest is owned by an unrelated third party, which contributed $5.8 million to the joint venture.  The joint venture is developing 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, which had a balance of $11.5 million at September 30, 2005, and is reported as “Notes receivable – affiliates.”   We are providing development services to the joint venture, and fees earned for these services totaled $0.2 million and $1.0 million for the three and nine months ended September 30, 2004, respectively.  We are providing property management services to the joint ventures, and fees earned for these services totaled $6,000 and $10,000 for the three and nine months ended September 30, 2005, respectively.  At September 30, 2005, the joint venture had total assets of $61.0 million and had third-party secured debt totaling $42.5 million.

In March 2005, we sold 12 apartment communities containing 4,034 apartment homes to 12 individual joint ventures in return for a 20% minority interest in the joint ventures, totaling $26.2 million and approximately $369.3 million in cash.  The remaining 80% interest of each joint venture is owned by a single unrelated third party who contributed $104.7 million to the joint ventures.  We are providing property management services to the joint ventures, and fees earned for these services totaled $0.3 million and $0.5 million for the three and nine months ended September 30, 2005, respectively.  At September 30, 2005, the joint ventures had total assets of $399.4 million and had third-party secured debt totaling $272.6 million.

As a result of the Summit merger, we assumed a 25% interest in a joint venture that owns four multifamily properties containing 1,203 apartment homes.  The remaining 75% interest is owned by an unrelated third party.  We are providing property management services to the joint venture, and fees earned for these services totaled $0.1 million for the three and nine months ended September 30, 2005.  At September 30, 2005, the joint venture had total assets of $67.0 million and had third-party secured debt totaling $56.2 million.

The joint ventures discussed above are all accounted for under the equity method.  Excluding the mezzanine loan associated with the joint venture in Ashburn, Virginia, the joint ventures in which we have an interest have been funded with third-party secured debt.  We are not committed to any additional funding on third-party debt in relation to our joint ventures.  Management believes that none of the investments in joint ventures qualify for consolidation as a variable interest entity.  These joint ventures are accounted for under the equity method as we exercise significant influence.

In 2002, Summit entered into two separate joint ventures with a major financial services institution (the “investor member”) to redevelop Summit Roosevelt and Summit Grand Parc, both located in the Washington, D.C. Metro area, in a manner to permit the use of federal rehabilitation income tax credits.  The investor member contributed approximately $6.5 million for Summit Roosevelt and approximately $2.6 million for Summit Grand Parc in equity to fund a portion of the total estimated costs for the respective communities and will receive a preferred return on these capital investments and an annual asset management fee with respect to each community.  The investor member’s interests in the joint ventures are subject to put/call rights during the sixth and seventh years after the respective communities are placed in service.  As a result of the merger, we have assumed these joint ventures and they are consolidated into our financial statements.

During the third quarter of 2005, one of our joint ventures refinanced their outstanding mortgage notes.  At the time of the refinancing, our investment in the joint venture was approximately $3.7 million.  In connection with the refinancing, we received distributions of $14.5 million.  Based upon the provisions of SOP 78-9, “Accounting for Investments in Real Estate Ventures,” we have recorded the distributions in excess of our investment as a liability due to our continued commitment to this joint venture.  These distributions are reflected in “Accrued expenses and other liabilities” in our consolidated balance sheets.

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5.Third Party Construction Services

At September 30, 2005, we were under contract on third-party construction projects ranging from $0.2 million to $18.7 million.  We typically earn fees on these projects ranging from 1.5% to 8.6% of the total contracted construction cost, which we recognize as earned.  During the three and nine months ended September 30, 2005, fees earned from third-party construction projects totaled $0.8 million and $1.9 million, respectively, compared with $1.0 million and $3.1 million during the three and nine months ended September 30, 2004, respectively, and are included in fee and asset management income in our consolidated statements of operations.

We recorded warranty and repair related costs on third party construction projects of $0.9 million and $2.4 million during the three and nine months ended September 30, 2005, respectively.  During the nine months ended September 30, 2004, we recorded $0.7 million of warranty and repair related costs on third party construction projects. These costs are first applied against revenues earned on the project and any excess is included in fee and asset management expenses in our consolidated statements of operations.

The Camden Summit Partnership is the developer of one apartment community which is owned by a third party.  Under the development and other related agreements, the Camden Summit Partnership has guaranteed certain aspects relating to the construction, lease-up and management of that apartment community.  The Camden Summit Partnership has also committed to fund certain development cost overruns, if any, and lease-up losses.  The Camden Summit Partnership has evaluated its commitments and obligations under these agreements and determined that no accrual or charge is necessary as the overall development economics are profitable.  The Camden Summit Partnership began marketing and leasing activities in the first quarter of 2005 and completed construction during the third quarter of 2005.

6.Notes Receivable

We have a mezzanine financing program under which we provided secured financing to owners of real estate properties.  We had $24.9 million in secured notes receivable outstanding as of September 30, 2005 to unrelated third parties.  These notes, which mature through 2008, accrue interest at rates ranging from 7.75% to 16% per annum, which is recognized as earned.

The following is a summary of our notes receivable under this program excluding notes receivable from affiliates:

($ in millions)

				Apartment
				Homes	September 30,		December 31,
Location	Current Property Type		Current Status	At 9/30/05	2005		2004
Dallas/Fort Worth, Texas	Multifamily		Stabilized	930	$	10.5	$	17.9
Las Vegas, Nevada	—		—	—	—		7.9
Tampa, Florida	Multifamily		Stabilized	370	5.0		5.0
Houston, Texas	Multifamily		Predevelopment	—	3.9		4.7
Denver, Colorado	—		—	—	—		3.5
Atlanta, Georgia	Multifamily		Stabilized	360	3.0		3.0
Austin, Texas	Multifamily		Stabilized	296	2.5		2.5
		Total		1,956	$	24.9	$	44.5

We have reviewed the terms and conditions underlying each note, and management believes that none of these entities qualify for consolidation.  Management believes that these notes are collectable, and that no impairment existed at September 30, 2005.

In December 2003, in connection with a joint venture transaction discussed in Note 4, we provided mezzanine financing to the joint venture, in which we own a 20% interest.  As of September 30, 2005, the balance of the note receivable totaled $11.5 million.  This note accrues interest at 14% per year and will mature in 2006.

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In January 2005, four loans totaling $12.3 million were repaid.  These loans accrued interest annually at a rate of 16%.  In August, an additional loan totaling $7.5 million was repaid, which accrued interest annually at a rate of 14%.  Included in these repayments were $1.7 million of prepayment penalties, which are included in “Fee and asset management” in our consolidated statements of operations.

7.Notes Payable

The following is a summary of our indebtedness:

(in millions)	September 30, 2005		December 31, 2004
Unsecured line of credit and short-term borrowings	$	121.0	$	56.0
Senior unsecured notes
$50.0 million 7.11% Notes, due 2006	50.0		49.9
$75.0 million 7.16% Notes, due 2006	74.9		74.8
$50.0 million 7.28% Notes, due 2006	50.0		50.0
$50.0 million 4.30% Notes, due 2007	52.7		—
$150.0 million 5.98% Notes, due 2007	149.7		149.6
$100.0 million 4.74% Notes, due 2009	99.9		99.9
$250.0 million 4.39% Notes, due 2010	249.9		249.9
$100.0 million 6.77% Notes, due 2010	99.9		99.9
$150.0 million 7.69% Notes, due 2011	149.6		149.5
$200.0 million 5.93% Notes, due 2012	199.3		199.3
$200.0 million 5.45% Notes, due 2013	199.0		198.9
$250.0 million 5.08% Notes, due 2015	248.4		—
	1,623.3		1,321.7
Medium-term unsecured notes
$25.0 million 3.59% Notes, due 2005	25.2		—
$25.0 million 3.91% Notes, due 2006	25.5		—
$15.0 million 7.63% Notes, due 2009	15.0		15.0
$25.0 million 4.64% Notes, due 2009	27.4		—
$10.0 million 4.90% Notes, due 2010	11.5		—
$14.5 million 6.79% Notes, due 2010	14.5		14.5
$35.0 million 4.99% Notes, due 2011	39.7		—
	158.8		29.5
Total unsecured notes	1,903.1		1,407.2
Secured notes
3.61% - 8.50% Conventional Mortgage Notes, due 2005 - 2013	564.8		71.7
3.25% - 7.29% Tax-exempt Mortgage Notes, due 2025 - 2032	96.9		97.5
	661.7		169.2
Total notes payable	$	2,564.8	$	1,576.4

As a result of the Summit merger, we assumed $488.4 million in conventional mortgage loans with effective interest rates ranging from 3.61% to 5.07% per year.  We also assumed $50 million in senior unsecured notes payable issued by Summit in 1997, which are due in August 2007, with an effective interest rate of 4.30%, payable quarterly, and $120 million in medium term notes, with effective interest rates ranging from 3.59% to 4.99%.

In connection with the merger, we recorded a $33.9 million fair value adjustment to account for the difference between the fixed rates and market rates for the mortgage loans, notes payable, and medium term notes.  The fixed interest rates on the various borrowings that we assumed upon completion of the merger with Summit were primarily above prevailing market rates.  Estimates of fair value are based upon interest rates available for the issuance of debt with similar terms and remaining maturities.

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The following is a summary of the debt assumed at the time of merger:

(in millions)	Book Value		Fair Value Adjustment		Fair Value
Unsecured notes
3.59% - 4.99% Notes, due 2005 - 2011	$	170.0	$	14.8	$	184.8
Secured notes
Secured Credit Facility (1)	188.5		—		188.5
3.61% - 5.07% Mortgage Notes, due 2005 - 2013	488.4		19.1		507.5
	676.9		19.1		696.0
Total notes payable	$	846.9	$	33.9	$	880.8

(1)   In connection with the merger, on February 28, 2005, we repaid amounts outstanding under the Summit secured credit facility using our $600 million credit facility.

In January 2005, we entered into a new credit agreement which increased our credit facility to $600 million, with the ability to further increase it up to $750 million.  This $600 million unsecured line of credit matures in January 2008. The scheduled interest rate is 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 $300 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 lowers 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 September 30, 2005.

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.  At September 30, 2005, we had outstanding letters of credit totaling $30.5 million, and had $448.5 million available under our unsecured line of credit.

As part of the merger agreement, we assumed Summit’s unsecured letter of credit facility, which matures in July 2008 and has a total commitment of $20.0 million.  The letters of credit issued under this facility serve as collateral for performance on contracts and as credit guarantees to banks and insurers.  As of September 30, 2005, there were $8.9 million of letters of credit outstanding under this facility.

During the first quarter of 2005, we borrowed $512.0 million to fund the cash portion of the merger consideration and payment of estimated fees and other expenses related to the merger.  These borrowings were financed under a $500 million senior unsecured bridge facility and our $600 million unsecured line of credit.  The bridge facility had a term of 364 days from funding and an interest rate of LIBOR plus 80 basis points, which was subject to certain conditions. Certain of our subsidiaries had guaranteed any outstanding obligation under the bridge facility.  We repaid all outstanding borrowings on the $500 million senior unsecured bridge facility and terminated the facility during the first quarter.

In connection with the merger, we assumed Summit’s interest rate swap agreement with a notional amount of $50.0 million, relating to $50.0 million of 7.20% fixed rate notes issued.  Under the interest rate swap agreement, through the maturity date of August 15, 2007, (a) Summit agreed to pay to the counterparty the interest on a $50.0 million notional amount at a floating interest rate of three-month LIBOR plus 241.75 basis points, and (b) the counterparty had agreed to pay Summit the interest on the same notional amount at the fixed rate of the underlying debt obligation.  The swap was designated as a fair value hedge of the underlying fixed rate debt obligation and was recorded in “Other assets” in the allocation of the purchase price discussed in Note 1.

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In March 2005, we terminated the interest rate swap and received $0.6 million from the counterparty.  In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” we are recording the $0.6 million as a reduction of interest expense over the period beginning from the termination date through the maturity date of the underlying debt obligation of August 15, 2007.

In June 2005, we issued from our $1.1 billion shelf registration an aggregate principal amount of $250 million 5% ten-year senior unsecured notes maturing on June 15, 2015.  Interest on the notes is payable on June 15 and December 15 commencing December 15, 2015.  We may redeem these notes at any time at a redemption price equal to the principal amount and accrued interest, plus a make-whole provision.  The notes are a direct, senior unsecured obligation and rank equally with all other unsecured and unsubordinated indebtedness.  The proceeds received from the sale of the notes were $246.8 million, net of issuance costs, and were used to reduce amounts outstanding under our unsecured line of credit.

At September 30, 2005, $285.5 million was available for issuance in debt securities, preferred shares, common shares or warrants from our $1.1 billion shelf registration.  We have significant unencumbered real estate assets which could be sold or used as collateral for financing purposes should other sources of capital not be available.

At September 30, 2005, the weighted average interest rate on our floating rate debt, which includes our unsecured line of credit, was 4.0%.

Our indebtedness, excluding our unsecured line of credit, had a weighted average maturity of 6.1 years.  Scheduled repayments on outstanding debt, including our line of credit, and the weighted average interest rate on maturing debt at September 30, 2005, are as follows:

(in millions)

Year	Amount		Weighted Average Interest Rate
2005	$	28.8	3.6	%
2006	246.5		7.0
2007	232.9		5.7
2008	321.7		4.5
2009	198.2		5.0
2010 and thereafter	1,536.7		5.4
Total	$	2,564.8	5.4	%

8.Net Change in Operating Accounts

The effect of changes in the operating accounts on cash flows from operating activities is as follows:

	Nine Months Ended September 30,
(in thousands)	2005			2004
Increase in assets:
Accounts receivable - affiliates	$	(583	)	$	(94	)
Other assets, net	(4,517		)	(5,512		)
Increase in liabilities:
Accounts payable	8,280			2,656
Accrued real estate taxes	10,095			4,975
Accrued expenses and other liabilities	14,490			6,744
Net change in operating accounts	$	27,765		$	8,769

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9.Preferred Units

Camden Operating, L.P., one of our operating partnerships, had $100 million of 7.0% Series B Cumulative Redeemable Perpetual Preferred Units outstanding as of September 30, 2005.  Distributions on the preferred units are payable quarterly in arrears.  The Series B preferred units are redeemable beginning in 2008 by the operating partnership for cash at par plus the amount of any accumulated and unpaid distributions.  The preferred units are convertible beginning in 2013 by the holder into a fixed number of corresponding Series B Cumulative Redeemable Perpetual Preferred Shares. The Series B preferred units are subordinate to present and future debt.  Distributions on the Series B preferred units totaled $1.8 million for the three months and $5.3 million for the nine months ended September 30, 2005 and 2004, respectively.

Additionally, Camden Operating, L.P. had issued $53 million of 8.25% Series C Cumulative Redeemable Perpetual Preferred Units. During the third quarter of 2004, we redeemed 1.4 million Series C preferred units at their redemption price of $25.00 per unit, or an aggregate of $35.5 million, plus accrued and unpaid distributions at which time we expensed the issuance cost associated with these units.  In January 2005, we redeemed the remaining 0.7 million Series C preferred units at their redemption price of $25.00 per unit, or an aggregate of $17.5 million, plus accrued and unpaid distributions.  In connection with the issuance of these Series C preferred units, we incurred $0.4 million in issuance costs which had been recorded as a reduction to minority interests.  These issuance costs were expensed in January 2005 in connection with the redemption of the Series C preferred units.  There were no distributions on Series C preferred units during the three months ended September 30, 2005.  There were $0.9 million distributions for the three months ended September 30, 2004, and $28,000 and $3.1 million for the nine months ended September 30, 2005 and 2004, respectively.

10.Related Party Transactions

We perform property management services for properties owned by joint ventures in which we own an interest.  Management fees earned on these properties amounted to $0.4 million and $1.4 million for the three and nine months ended September 30, 2005, respectively, as compared to $0.3 million and $0.8 million for the three and nine months ended September 30, 2004, respectively.

In 1999 and 2000, our Board of Trust Managers approved a plan that permitted six of our then current senior executive officers to complete the purchase of $23.0 million of our common shares in open market transactions.  The purchases were funded with unsecured full recourse personal loans made to each of the executives by a third-party lender.  To facilitate the employee share purchase transactions, we entered into a guaranty agreement with the lender for payment of all indebtedness, fees and liabilities of the officers to the lender.  Simultaneously, we entered into a reimbursement agreement with the executives, should any amounts ever be paid by us pursuant to the terms of the guaranty agreement.  The reimbursement agreements required the executives to pay interest from the date any amounts are paid by us until repayment by the officer.  As of September 30, 2005, none of these unsecured full recourse loans was outstanding, and the obligations under the related guaranty and reimbursement agreements have terminated.  We did not have to perform under the guaranty agreements.

In conjunction with our merger with Summit, we acquired employee notes receivable from nine current and former employees of Summit totaling $3.9 million.  Subsequent to the merger, five employees repaid their loans totaling $1.8 million.  At September 30, 2005, the notes receivable had an outstanding balance of $2.1 million.  As of November 1, 2005, the employee notes receivable were 100% secured by Camden common shares.

11.Commitments and Contingencies

Construction Contracts.  As of September 30, 2005, we were obligated for approximately $202.1 million of additional expenditures on our eight wholly-owned projects currently under development (a substantial amount of which we expect to be funded with our unsecured line of credit).

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Contingencies.  Prior to our merger with Oasis Residential, Inc., Oasis had been contacted by certain regulatory agencies with regard to alleged failures to comply with the Fair Housing Amendments Act (the “Fair Housing Act”) as it pertained to nine properties (seven of which we currently own) constructed for first occupancy after March 31, 1991.  On February 1, 1999, the Justice Department filed a lawsuit against us and several other defendants in the United States District Court for the District of Nevada alleging (1) that the design and construction of these properties violates the Fair Housing Act and (2) that we, through the merger with Oasis, had discriminated in the rental of dwellings to persons because of handicap.  The complaint requests an order that (i) declares that the defendants’ policies and practices violate the Fair Housing Act; (ii) enjoins us from (a) failing or refusing, to the extent possible, to bring the dwelling units and public use and common use areas at these properties and other covered units that Oasis has designed and/or constructed into compliance with the Fair Housing Act, (b) failing or refusing to take such affirmative steps as may be necessary to restore, as nearly as possible, the alleged victims of the defendants’  alleged unlawful practices to positions they would have been in but for the discriminatory conduct, and (c) designing or constructing any covered multifamily dwellings in the future that do not contain the accessibility and adaptability features set forth in the Fair Housing Act; and requires us to pay damages, including punitive damages, and a civil penalty.

With any acquisition, we plan for and undertake renovations needed to correct deferred maintenance, life/safety and Fair Housing matters. On January 30, 2001, a consent decree was ordered and executed in the above Justice Department action.  Under the terms of the decree, we were ordered to make certain retrofits and implement certain educational programs and Fair Housing advertising.  These changes are to take place by July 31, 2006.  The costs associated with complying with the decree have been accrued for and are not material to our consolidated financial statements.

On October 6, 2004, a purported class action complaint was filed in the General Court of Justice, Superior Court Division, of the State of North Carolina, County of Mecklenburg, by an alleged Summit stockholder.  This complaint named as defendants Camden, Summit and each member of the board of directors of Summit and principally alleges that the merger of Camden and Summit and the acts of the Summit directors constitute a breach of the Summit defendants’ fiduciary duties to Summit stockholders. The plaintiff in the lawsuit sought, among other things (1) a declaration that each defendant has committed or aided and abetted a breach of fiduciary duty to the Summit stockholders, (2) to preliminarily and permanently enjoin the merger, (3) to rescind the merger in the event that it is consummated, (4) an order to permit a stockholders’ committee to ensure an unspecified “fair procedure, adequate procedural safe-guards and independent input by plaintiff” in connection with any transaction for Summit shares, (5) unspecified compensatory damages and (6) attorneys’ fees.  On November 3, 2004, Camden removed the lawsuit to the United States District Court for the Western District of North Carolina, Charlotte Division, and filed an Answer and Counterclaim for declaratory judgment denying the plaintiff’s allegations of wrongdoing.

On September 23, 2005, the parties to the action executed a stipulation of settlement.  Under the terms of the stipulation, the defendants admit to no wrongdoing or fault.  The stipulation contemplates a dismissal of all claims with prejudice and a release in favor of all defendants of any and all claims related to the merger that have been or could have been asserted by the plaintiffs or any members of the putative class.  In connection with negotiations relating to the stipulation, the parties agreed to include, and have included, in the joint proxy statement/prospectus relating to the merger additional disclosures regarding the merger.

The stipulation of settlement is subject to the customary conditions, including final court approval of the settlement.  If the conditions are satisfied, subject to final court approval of the settlement and dismissal of the action by the court with prejudice, the plaintiff’s counsel will seek and Camden, as successor to Summit, will pay an amount not to exceed in the aggregate $383,000 in settlement of this action for attorneys’ fees and expenses.  Subject to any order of the court, any attorneys’ fees and expenses awarded by the court to plaintiff’s counsel will be paid by Camden, as successor to Summit, on behalf of all defendants within five business days after final court approval of the settlement.  All costs and expenses expected to be incurred associated with this matter have been accrued for and are not material to our consolidated financial statements.

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The defendants vigorously deny all liability with respect to the facts and claims alleged in this action, and specifically deny that any further supplemental disclosure was required under any applicable rule, statute, regulation, or law.  However, the defendants considered it desirable that these actions be settled to avoid the substantial burden, expense, risk, inconvenience and distraction of continued litigation and to fully and finally resolve the settled claims.

On May 25, 2001, through a joint venture of the Camden Summit Partnership and SZF, LLC, a Delaware limited liability company in which the Camden Summit Partnership owned 29.78% until July 3, 2003, on which date the Camden Summit Partnership purchased its joint venture partner’s 70.22% interest, the Camden Summit Partnership entered into an agreement with Brickell View, L.L.C. (“Brickell View”), a Florida limited liability company, and certain of its affiliates relating to the formation of Coral Way, LLC, a Delaware limited liability company, to develop a new community in Miami, Florida.  Brickell View agreed to be the developer of that community and certain of its affiliates signed guarantees obligating them to pay certain costs relating to the development.  On August 12, 2003, the Camden Summit Partnership received notice of two suits filed by Brickell View and certain of its affiliates against SZF, LLC and certain entities affiliated with the Camden Summit Partnership.  The suits were originally filed in the Miami-Dade Circuit Court and were subsequently removed to the U.S. District Court for the Southern District of Florida.  One of the suits was remanded to the Miami-Dade Circuit Court, while the other remains pending in the U.S. District Court.  These suits relate to the business agreement among the parties in connection with the development and construction of the community by Coral Way.  Brickell View and its affiliates allege breach of contract, breach of implied covenant of good faith and fair dealing, breach of fiduciary duties and constructive fraud on the part of SZF, LLC and constructive fraud on the part of the Camden Summit Partnership and its affiliates, and seek both a declaratory judgment that the guarantee agreements have been constructively terminated and unspecified monetary damages.  We intend to enforce our rights under the joint venture agreements.  We do not believe that there is any basis for allowing Brickell View or its affiliates to be released from their obligations under the development agreement or the guarantees.  We believe that the allegations made by Brickell View and its affiliates are not supported by the facts and we intend to vigorously defend against these suits.  On December 19, 2003, the Camden Summit Partnership received notice of a demand for arbitration asserted by Bermello, Ajamil & Partners, Inc. against Coral Way, LLC for unpaid architectural fees.  In this demand, Bermello, Ajamil & Partners, Inc. allege that they are entitled to an increased architectural fee as a result of an increase in the cost of the project.  We believe that the allegations made by Bermello, Ajamil & Partners, Inc. are not supported by the facts, and we will vigorously defend against this claim.  Additionally, the Camden Summit Partnership has asserted a cross-claim against Bermello, Ajamil & Partners, Inc. for damages related to the cost to correct certain structural and other design defects.  All costs and expenses expected to be incurred associated with this matter have been accrued for and are not material to our consolidated financial statements.

On May 6, 2003, the Camden Summit Partnership purchased certain assets of Brickell Grand, Inc. (“Brickell Grand”), including the community known as Summit Brickell.  At the time of purchase, Summit Brickell was subject to a $4.1 million claim of construction lien filed by the general contractor, Bovis Lend Lease, Inc. (“Bovis”), due to Brickell Grand’s alleged failure to pay the full amount of the construction costs.  Bovis sought to enforce this claim of lien against Brickell Grand in a suit filed on October 18, 2002 in Miami-Dade Circuit Court, Florida.  In mid-2003, litigation with Bovis was temporarily stayed pending mediation.  In September 2003, Bovis filed an amended complaint seeking to enforce an increased claim of lien of $4.6 million.  Mediation with Bovis ended unsuccessfully in November 2003.  The litigation is proceeding in the Miami-Dade Circuit Court.  As the current owner of Summit Brickell, which property is subject to the claim of lien, the Camden Summit Partnership is vigorously defending against these claims of lien and related litigation.  As a result of several items claimed by Bovis in its amended claim of lien, the Camden Summit Partnership is asserting a counterclaim for a fraudulent mechanic’s lien, as well as counterclaims for breach of contract and breach of warranties.  In January 2005, Brickell Grand, Inc. filed suit in Miami-Dade Circuit Court, Florida, asserting claims for breach of contract and fraud in the inducement, alleging that Summit has an obligation to indemnify Brickell Grand, Inc. in the Bovis lawsuit and that Summit had failed to properly market the apartments, increasing Brickell Grand Inc.’s cost overrun obligations.  Brickell Grand, Inc. also claims that Summit misappropriated its identity by filing eviction actions in its name.  We assumed Summit’s obligations as part of the merger.  On May 31, 2005, we paid Bovis $1.3 million, which was credited against amounts owed by the Camden Summit Partnership to Bovis.  By paying the $1.3 million, we in no way release our claims against Bovis for construction–related

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defects or any of Bovis’ warranty obligations related to the Summit Brickell property.  We continue to believe that these allegations made by Brickell Grand, Inc. are not supported by the facts, and intend to vigorously defend against these claims.  All costs and expenses expected to be incurred associated with this matter have been accrued for and are not material to our consolidated financial statements.

In the ordinary course of our business, we issue letters of intent indicating a willingness to negotiate for acquisitions, dispositions or joint ventures.  Such letters of intent are non-binding, and neither party to the letter of intent is obligated to pursue negotiations unless and until a definitive contract is entered into by the parties. Even if definitive contracts are entered into, the letters of intent relating to the purchase and sale of real property and resulting contracts generally contemplate that such contracts will provide the purchaser with time to evaluate the property and conduct due diligence, during which periods the purchaser will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money. There can be no assurance that definitive contracts will be entered into with respect to any matter covered by letters of intent or that we will consummate any transaction contemplated by any definitive contract. Furthermore, due diligence periods for real property are frequently extended as needed. An acquisition or sale of real property becomes probable at the time that the due diligence period expires and the definitive contract has not been terminated. We are then at risk under a real property acquisition contract, but only to the extent of any earnest money deposits associated with the contract, and are obligated to sell under a real property sales contract.

We are currently in the due diligence period for certain acquisitions and dispositions.  No assurance can be made that we will be able to complete the negotiations or become satisfied with the outcome of the due diligence.

We are subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of such matters will not have a material adverse effect on our consolidated financial statements.

Lease commitments.  At September 30, 2005, we had long-term operating leases covering certain land, office facilities and equipment.  Rental expense totaled $0.7 million and $2.0 million for the three and nine months ended September 30, 2005 compared to $0.5 million and $1.3 million for the three and nine months ended September 30, 2004.  Minimum annual rental commitments for the remaining three months of 2005 are $0.5 million, and for the years ending December 31, 2006 through 2009 are $2.0 million, $1.9 million, $1.3 million, and $0.4 million, respectively, and $4.1 million in the aggregate thereafter.

Employment agreements.  At September 30, 2005, we had employment agreements with six of our senior officers, the terms of which expire at various times through August 20, 2006.  Such agreements provide for minimum salary levels, as well as various incentive compensation arrangements, which are payable based on the attainment of specific goals.  The agreements also provide for severance payments plus a gross-up payment if certain situations occur, such as termination without cause or a change of control.  In the case of four of the agreements, the severance payment equals one times the respective current salary base in the case of termination without cause and 2.99 times the respective average annual compensation over the previous three fiscal years in the case of change of control.  In the case of the other two agreements, the severance payment generally equals 2.99 times the respective average annual compensation over the previous three fiscal years in connection with, among other things, a termination without cause or a change of control, and the officer would be entitled to receive continuation and vesting of certain benefits in the case of such termination.

12.Post Retirement Benefits

We have entered into a separation agreement with William B. McGuire and William F. Paulsen.  Each separation agreement was effective as of the effective time of the merger of Summit and a wholly owned subsidiary of Camden, which occurred on February 28, 2005.  Pursuant to the respective separation agreement, as of the effective time of the merger, Messrs. McGuire and Paulsen resigned as an officer and director of Summit and all entities related to Summit, and the respective employment agreement between Summit and each such executive was terminated.  Also pursuant to the respective separation agreement, each such executive received

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payments totaling $1.0 million and other benefits approximately equivalent to those he was entitled to receive upon termination of employment pursuant to his employment agreement with Summit.

The other benefits received by Messrs. McGuire and Paulsen are considered post retirement benefits.  As of September 30, 2005, we had accrued $3.2 million associated with these post retirement liabilities.  Net periodic benefit cost, relating entirely to interest cost, was $0.1 million for the nine months ended September 30, 2005.  We have not made any contributions as of September 30, 2005, nor do we expect to make any contributions for the remainder of 2005.

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Item 2.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 as well as the audited financial statements appearing in our 2004 Annual Report to Shareholders. Where appropriate, comparisons are made on a dollars per-weighted-average-unit basis in order to adjust for changes in the number of apartment homes owned during each period. The statements contained in this report that are not historical facts are forward-looking statements, and actual results may differ materially from those included in the forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to, the following:

•the results of our efforts to implement our property development, construction and acquisition strategies;

•our ability to effectively integrate the operations of Summit Properties Inc. (“Summit”);

•the effects of economic conditions, including rising interest rates;

•our ability to generate sufficient cash flows;

•the failure to qualify as a real estate investment trust;

•the costs of our capital and debt;

•changes in our capital requirements;

•the actions of our competitors and our ability to respond to those actions;

•the performance of our mezzanine financing program;

•changes in governmental regulations, tax rates and similar matters; and

•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 self-administered and self-managed Texas 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.  Our use of the term “communities,” “multifamily communities,” “properties,” or “multifamily properties” in the following discussion refers to our multifamily apartment communities.  As of September 30, 2005, we owned interests in, operated or were developing 202 multifamily properties containing 69,830 apartment homes located in thirteen states.  We had 3,211 apartment homes under development at nine of our multifamily properties, including 464 apartment homes at one multifamily property owned through a joint venture.  We had two properties containing 1,034 apartment homes which were designated as held for sale as of September 30, 2005.  Additionally, we have several sites that we intend to develop into multifamily apartment communities.

As of September 30, 2005, we had operating properties in 22 markets.  No one market contributed more than 11% of our net operating income for the quarter then ended.  For the three months ended September 30, 2005, Washington, D.C. Metro, Tampa and Dallas contributed 10.4%, 8.5% and 8.2%, respectively, to our net operating income.

Approximately 18% of our multifamily apartment units at September 30, 2005 were held in Camden Operating, L.P. This operating partnership has issued both common and preferred limited partnership units. As of March 31, 2005, we held 83.2% of the common limited partnership units and the sole 1% general partnership interest of the operating partnership. The remaining 15.8% of the common limited partnership units are primarily held by former officers, directors and investors of Paragon Group, Inc., which we acquired in 1997.

On February 28, 2005, Summit Properties Inc. (“Summit”) was merged with and into Camden Summit Inc., one of our wholly-owned subsidiaries (“Camden Summit”), pursuant to an Agreement and Plan of Merger dated as of October 4, 2004 (the “Merger Agreement”), as amended.  We determined the merger would allow us to lower our concentration in Las Vegas, Houston and Dallas and increase our presence on the East coast, and

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accomplish this diversification strategy in a matter of months rather than what would have otherwise taken years to accomplish.  We acquired a significant portfolio of high-quality apartment properties, most of which were located in new, East coast markets such as Southeast Florida, Washington, D.C. Metro and Atlanta.  These properties complemented our existing footprint in Florida and North Carolina while further diversifying our portfolio with the addition of new markets. Prior to the effective time of the merger, Summit was the sole general partner of Summit Properties Partnership, L.P. (the “Camden Summit Partnership”), and at the effective time, Camden Summit became the sole general partner of the Camden Summit Partnership and the name of such partnership was changed to Camden Summit Partnership, L.P.  As of February 28, 2005, Summit owned or held an ownership interest in 48 operating communities comprised of 15,002 apartment homes with an additional 1,834 apartment homes under construction in five new communities.

Under the terms of the Merger Agreement, Summit stockholders had the opportunity to elect to receive cash or Camden shares for their Summit stock.  Each stockholder’s election was subject to proration, depending on the elections of all Summit stockholders, so that the aggregate amount of cash issued in the merger to Summit’s stockholders equaled approximately $436.3 million.  As a result of this proration, Summit stockholders electing Camden shares received approximately .6383 of a Camden share and $1.4177 in cash for each of their shares of Summit common stock. The final conversion ratio of the common shares was determined based on the average market price of our common shares over a five day trading period preceding the effective time of the merger.  Fractional shares were paid in cash.  Summit stockholders electing cash or who made no effective election, received $31.20 in cash for each of their Summit shares.  In the merger, we issued approximately 11.8 million common shares to Summit stockholders.

In conjunction with the merger, the limited partners in the Camden Summit Partnership were offered, on a unit-by-unit basis, the opportunity to redeem their partnership units for $31.20 in cash, without interest, or to remain in the Camden Summit Partnership following the merger at a unit valuation equal to .6687 of a Camden common share.  The limited partner elections resulted in our redeeming 0.7 million partnership units for cash, for an aggregate of $21.7 million, and issuing 1.8 million partnership units.  The value of the common shares and partnership units issued was determined based on the average market price of our common shares for the five day period commencing two days prior to the announcement of the merger on October 4, 2004.  Subsequent to the merger, 0.1 million partnership units have been redeemed for $5.5 million.

Approximately 24% of our multifamily apartment units at September 30, 2005 were held in the Camden Summit Partnership.  This operating partnership has issued common limited partnership units.  As of September 30, 2005, we held 91.8% of the common limited partnership units and the sole 1% general partnership interest of the Camden Summit Partnership.  The remaining 7.2% of the common limited partnership units are primarily held by former officers, directors and investors of Summit.

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Property Portfolio

Our multifamily property portfolio, excluding land held for future development and joint venture properties which we do not manage, is summarized as follows:

	September 30, 2005		December 31, 2004
	Apartment		Apartment
	Homes	Properties	Homes	Properties
Operating Properties
Las Vegas, Nevada (a) (c)	9,193	32	9,625	33
Dallas, Texas (c)	8,359	23	8,359	23
Houston, Texas (c)	6,810	15	6,810	15
Tampa, Florida	5,635	12	6,089	13
Charlotte, North Carolina (b)	4,793	19	1,659	6
Atlanta, Georgia	3,202	10	—	—
Orlando, Florida	2,930	7	2,252	5
D.C. Metro	2,882	9	—	—
Raleigh, North Carolina (b)	2,631	7	—	—
Denver, Colorado (a)	2,529	8	2,529	8
Southeast Florida	2,520	7	—	—
Phoenix, Arizona (c)	2,433	8	2,433	8
Los Angeles/Orange County, California (c)	2,191	5	2,191	5
St. Louis, Missouri	2,123	6	2,123	6
Austin, Texas	1,745	6	1,745	6
Louisville, Kentucky	1,448	5	1,448	5
Corpus Christi, Texas	1,410	3	1,410	3
San Diego/Inland Empire, California	846	3	846	3
Other	2,289	6	1,937	5
Total Operating Properties	65,969	191	51,456	144
Properties Under Development
D.C. Metro	1,996	5	464	1
Raleigh, North Carolina	484	1	—	—
Orlando, Florida	366	1	366	1
San Diego/Inland Empire, California	350	1	—	—
Dallas, Texas	284	1	284	1
Houston, Texas	236	1	—	—
Charlotte, North Carolina	145	1	—	—
Total Properties Under Development	3,861	11	1,114	3
Total Properties	69,830	202	52,570	147
Less: Joint Venture Properties (a) (b) (c)	10,248	34	5,011	18
Total Properties Owned 100%	59,582	168	47,559	129

(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, 16 properties with 4,227 apartment homes in Nevada in which we own a 20% interest, the remaining interest is owned by an unaffiliated private investor, and one property with 464 units currently under development and in lease-up in Virginia in which we own a 20% interest, the remaining interest is owned by an unaffiliated private investor.

(b)Includes properties held in joint ventures acquired through the merger with Summit as follows:  three properties with 792 apartment homes in Charlotte, and one property with 411 apartment homes in Raleigh in which we own a 25% interest, the remaining interest is owned by an unaffiliated private investor.

(c)Includes properties held in joint ventures entered into in 2005  as follows: one property with 456  apartment homes in Dallas, three properties with 1,216 apartment homes in Houston, four properties with 992 apartment homes in Phoenix, one property with 421 apartment homes in Orange County, California, and three properties with 949 apartment homes in Las Vegas.  Each property is held individually in a joint venture in which we hold a 20% interest.  The remaining interest is owned by an unaffiliated private investor.

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Development and Lease-Up Properties

At September 30, 2005, we had two properties in lease-up as follows:

($ in millions)

Property and Location	Number of Apartment Homes	Estimated Cost		% Leased at 10/9/05		Estimated Date of Completion	Estimated Date of Stabilization
In Lease-Up
Camden Lago Vista
Orlando, FL	366	$	34.8	94	%	3Q05	4Q05
Camden Farmers Market II
Dallas, TX	284	31.7		46	%	3Q05	1Q06

At September 30, 2005, we had nine properties in various stages of construction as follows:

($ in millions)

Property and Location	Number of Apartment Homes	Estimated Cost		Cost Incurred at 9/30/05		Estimated Date of Completion	Estimated Date of Stabilization
In Lease-Up
Camden Fairfax Corner
Fairfax, VA	488	$	82.0	$	64.9	3Q06	1Q07
Under Construction
Camden Dilworth
Charlotte, NC	145	18.0		10.6		2Q06	3Q06
Camden Clearbrook
Frederick, MD	297	45.0		20.5		3Q06	1Q07
Camden Royal Oaks
Houston, TX	236	22.0		4.7		3Q06	2Q07
Camden Manor Park
Raleigh, NC	484	52.0		37.6		4Q06	3Q07
Camden Old Creek
San Marcos, CA	350	98.0		48.5		1Q07	3Q07
Camden Monument Place
Fairfax, VA	368	64.0		23.6		2Q07	1Q08
Camden Potomac Yards
Arlington County, VA	379	110.0		25.5		3Q07	2Q08
Total	2,747	$	491.0	$	235.9
In Lease-Up – Joint Venture
Camden Westwind
Ashburn, VA	464	$	69.1	$	61.1	1Q06	4Q06

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.  All operating expenses associated with completed apartment homes are expensed.

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

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would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its estimated fair value, less costs to sell.

At September 30, 2005, 4.5 acres of undeveloped land held in Dallas was classified as land held for sale.  In connection with our decision to dispose of a 2.4 acre tract, during the first quarter of 2004, we incurred an impairment charge of $1.1 million to write-down the carrying value of the land to its fair value, less costs to sell.

Our consolidated balance sheet at September 30, 2005 included $377.8 million related to wholly-owned properties under development. Of this amount, $229.8 million relates to our eight projects currently under development. Additionally, at September 30, 2005, we had $147.2 million invested in land held for future development.  Included in this amount is $78.6 million related to projects we expect to begin constructing in late 2005 and early 2006.  We also had $32.6 million invested in land tracts adjacent to 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.

Results of Operations

Changes in revenues and expenses related to our operating properties from period to period are due primarily to the acquisition of Summit in the first quarter of 2005, as well as property developments, dispositions, and the performance of the stabilized properties in the portfolio.  Where appropriate, comparisons are made on a dollars-per-weighted-average-apartment home basis in order to adjust for such changes in the number of apartments homes owned during each period.  For the nine months ended September 30, 2005, actual results for Summit properties acquired are included in the results of operations only for the period subsequent to the effective date of the merger.  Selected weighted averages for the three and nine months ended September 30, 2005 and 2004 are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Average monthly property revenue per apartment home	$	855		$	752		$	826		$	749
Annualized total property expenses per apartment home	$	4,056		$	3,814		$	3,910		$	3,691
Weighted average number of operating apartment homes owned 100%	55,056			44,720			52,907			44,567
Weighted average occupancy, total operating properties owned 100%	95.0		%	93.8		%	93.8		%	94.0		%

Comparison of the Quarters Ended September 30, 2005 and September 30, 2004

Income (loss) from continuing operations decreased $7.7 million, from $4.7 million to $(3.0) million for the quarters ended September 30, 2004 and 2005, respectively. The decrease in income (loss) from continuing operations was primarily due to higher depreciation and amortization of intangible assets and increased interest expense as a result of our merger with Summit.  These increases in expense were partially offset by increases in net operating income primarily due to properties acquired in the Summit merger.  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 increased $27.1 million, or 46.5%, from $58.3 million to $85.4 million for the quarters ended September 30, 2004 and 2005, respectively.  See further discussion of net operating income in our discussion of “Segment Reporting” in the footnotes to our consolidated financial statements.

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The following table presents the components of net operating income for the three months ended September 30, 2005 and 2004:

($ in thousands)

	Apartment Homes	Three Months Ended September 30,				Change
	at 9/30/05	2005		2004		$			%
Property revenues
Camden same store communities	38,853	$	88,123	$	84,724	$	3,399		4.0	%
Summit same store communities	11,083	34,469		—		34,469			100.0
Camden non-same store communities	2,510	6,772		5,798		974			16.8
Summit non-same store communities	2,705	9,184		—		9,184			100.0
Development and lease-up communities	3,397	878		—		878			100.0
Dispositions/other	—	1,782		10,387		(8,605		)	(82.8	)
Total property revenues	58,548	141,208		100,909		40,299			39.9
Property expenses
Camden same store communities	38,853	37,367		36,001		1,366			3.8
Summit same store communities	11,083	11,920		—		11,920			100.0
Camden non-same store communities	2,510	2,689		2,639		50			1.9
Summit non-same store communities	2,705	3,130		—		3,130			100.0
Development and lease-up communities	3,397	440		—		440			100.0
Dispositions/other	—	275		3,998		(3,723		)	(93.1	)
Total property expenses	58,548	55,821		42,638		13,183			30.9
Property net operating income
Camden same store communities	38,853	50,756		48,723		2,033			4.2
Summit same store communities	11,083	22,549		—		22,549			100.0
Camden non-same store communities	2,510	4,083		3,159		924			29.2
Summit non-same store communities	2,705	6,054		—		6,054			100.0
Development and lease-up communities	3,397	438		—		438			100.0
Dispositions/other	—	1,507		6,389		(4,882		)	(76.4	)
Total property net operating income	58,548	$	85,387	$	58,271	$	27,116		46.5	%

Same store communities are communities we (or Summit) owned and were stabilized as of January 1, 2004.  Non-same store communities are stabilized communities we (or Summit) have acquired or developed after January 1, 2004.  Development and lease-up communities are non-stabilized communities we (or Summit) have developed or acquired after January 1, 2004.  Dispositions represent communities we have sold which are not included in discontinued operations. Other property revenues primarily relates to amortization of above and below market leases acquired in our merger with Summit. 

Total property revenues for the quarter ended September 30, 2005 increased $40.3 million over 2004, and increased from $752 to $855 on a per apartment home per month basis.  Total property revenues from our same store properties increased 4.0%, from $84.7 million for the third quarter of 2004 to $88.1 million for the third quarter of 2005, which represents an increase of $29 on a per apartment home per month basis.  For same store properties, rental rates on a per apartment home per month basis increased $18 from the third quarter of 2004 to the third quarter of 2005, vacancy loss decreased $12 on a per apartment home per month basis. These increases in revenues were partially offset by decreases in other rental income, which decreased $1 per apartment home per month.  Total property revenues from Summit same store properties were $34.5 million for the third quarter of 2005, or $1,037 on a per apartment home per month basis.

Property revenues from our non-same store, development and lease-up properties, including Summit non-same store properties, increased from $5.8 million for the third quarter of 2004 to $16.8 million for the third quarter of 2005 due to the acquisition of 2,285 apartment homes in the Summit merger and the completion and lease-up of properties in our development pipeline.  Total property revenues on a per apartment home per month basis were $1,096 and $1,054 for the quarters ended September 30, 2005 and 2004, respectively.  Property revenues from disposition properties decreased $8.6 million from the third quarter of 2004.  Disposition property revenues primarily relates to 12 properties sold to 12 individual joint ventures during March 2005.  As we have continuing involvement in theses communities, the operations from these communities continue to be included in continuing operations.

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Total property expenses for the quarter ended September 30, 2005 increased $13.2 million, or 30.9%, as compared to the same period in 2004, and increased from $3,814 to $4,056 on an annualized per apartment home basis.  Total property expenses from our same store properties increased 3.8%, from $36.0 million for the third quarter of 2004 to $37.4 million for the third quarter of 2005, which represents an increase of $141 on an annualized per apartment home basis.  The increase in same store property expenses per apartment home was primarily due to increases in real estate taxes, salary and benefit expense and repair and maintenance expense of $58, $48 and $30 on an annualized per apartment home basis, respectively.  These increases represent a 6.2%, 4.6% and 4.4% increase, respectively, over third quarter 2004.  Property expenses from Summit’s same store properties were $11.9 million for the third quarter of 2005, or $4,302 on an annualized per apartment home basis.

Property expenses from our non-same store, development and lease-up properties, including Summit non-same store properties, increased from $2.6 million for the third quarter of 2004 to $6.3 million for the third quarter of 2005, primarily due to the acquisition of 2,285 apartment homes in the Summit merger.  Total property expenses on an annualized per apartment home basis were $4,890 and $5,759 for the quarters ended September 30, 2005 and 2004, respectively.  Property expenses from disposition properties decreased $3.7 million, from the third quarter of 2004.

Fee and asset management income for the quarter ended September 30, 2005 decreased $0.2 million from the same quarter ended 2004.  This decrease was primarily due to decreases in construction and development fees earned on third party projects which decreased $0.4 million, partially offset by increases in management fees earned from joint ventures.

Interest and other income remained consistent at $1.9 million for the quarters ended September 30, 2005 and 2004.  Interest income on mezzanine loans decreased due to payoffs of mezzanine loans offset by interest income recognized due to the prepayment of one mezzanine loan during the quarter ended September 30, 2005.

Property management expense, which represents regional supervision and accounting costs related to property operations, increased from $2.9 million for the quarter ended September 30, 2004 to $4.2 million for the quarter ended September 30, 2005.  This increase was primarily due to salary and benefit expenses related to the addition of regional supervision personnel, as well as expenses associated with regional offices acquired in the Summit merger.

Fee and asset management expenses for the quarter ended September 30, 2005 increased $1.2 from the quarter ended September 30, 2004.  This increase was primarily due to warranty and repair costs associated with third party projects.  Warranty and repair costs totaled $0.9 million for the third quarter of 2005.

General and administrative expenses increased 51.8% from $4.1 million to $6.2 million, and increased as a percent of revenues from 3.9% to 4.3% for the quarters ended September 30, 2004 and 2005, respectively.  The increase was primarily due to costs associated with pursuing potential transactions that were not consummated, increases in salary and benefit expenses, including the addition of internal audit and information technology personnel, and professional fees associated with compliance with Sarbanes-Oxley and information technology projects.

Gross interest cost before interest capitalized to development properties increased $12.7 million, or 59.0%, from $21.6 million for the quarter ended September 30, 2004 to $34.3 million for the quarter ended September 30, 2005.  The overall increase in interest expense was due to higher average debt balances due to $880.8 million in notes and mortgages payable acquired in the merger with Summit and debt incurred to fund our development pipeline.  Interest capitalized increased to $5.0 million from $2.3 million for the quarters ended September 30, 2005 and 2004, respectively, due to higher average balances in our development pipeline primarily as a result of development properties acquired in our merger with Summit.

Depreciation and amortization increased from $25.7 million for the third quarter of 2004 to $45.6 million for the third quarter of 2005. This increase was due primarily to additional amortization of $9.5 million recorded during the three months ended September 30, 2005 related to in-place leases acquired in connection with the

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merger with Summit, as well as additional depreciation on assets acquired, new development and capital improvements placed in service during the past year.

Equity in income (losses) of joint ventures decreased $1.9 million from the three months ended September 30, 2004, primarily from losses recognized in one joint venture due to debt retirement costs associated with the refinancing of debt during the third quarter of 2005.  Our portion of the debt retirement costs was approximately $2.0 million for the quarter ended September 30, 2005.

Distributions on units convertible into perpetual preferred shares decreased from $2.7 million for the third quarter of 2004 to $1.8 million for the third quarter of 2005, as a result of the redemption of $53 million Series C preferred units in September 2004 and January 2005.

Comparison of the Nine Months Ended September 30, 2005 and September 30, 2004

Income from continuing operations increased $126.7 million, from $20.3 million to $147.0 million, for the nine months ended September 30, 2004 and 2005, respectively. The increase in income from continuing operations was due to many factors, which included, but were not limited to, gains on sale of properties, including land, the contribution from operating properties acquired in the merger with Summit, a gain on the sale of a technology investment and increased occupancy at our development communities. These increases were partially offset by increases in depreciation and amortization expense, interest expense, transaction compensation and merger expenses, and property expenses.  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 increased $61.3 million, or 34.6%, from $177.1 million to $238.4 million for the nine months ended September 30, 2004 and 2005, respectively.  See further discussion of net operating income in our discussion of “Segment Reporting” in the footnotes to our consolidated financial statements.

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The following table presents the components of net operating income for the nine months ended September 30, 2005 and 2004:

($ in thousands)

	Apartment Homes	Nine Months Ended September 30,				Change
	at 9/30/05	2005		2004		$			%
Property revenues
Camden same store communities	38,853	$	259,628	$	253,474	$	6,154		2.4	%
Summit same store communities	11,083	78,896		—		78,896			100.0
Camden non-same store communities	2,510	20,188		15,870		4,318			27.2
Summit non-same store communities	2,705	20,506		—		20,506			100.0
Development and lease-up communities	3,397	1,280		—		1,280			100.0
Dispositions/other	—	13,032		31,083		(18,051		)	(58.1	)
Total property revenues	58,548	393,530		300,427		93,103			31.0
Property expenses
Camden same store communities	38,853	107,479		104,822		2,657			2.5
Summit same store communities	11,083	27,040		—		27,040			100.0
Camden non-same store communities	2,510	7,774		6,841		933			13.6
Summit non-same store communities	2,705	7,806		—		7,806			100.0
Development and lease-up communities	3,397	609		—		609			100.0
Dispositions/other	—	4,438		11,712		(7,274		)	(62.1	)
Total property expenses	58,548	155,146		123,375		31,771			25.8
Property net operating income
Camden same store communities	38,853	152,149		148,652		3,497			2.4
Summit same store communities	11,083	51,856		—		51,856			100.0
Camden non-same store communities	2,510	12,414		9,029		3,385			37.5
Summit non-same store communities	2,705	12,700		—		12,700			100.0
Development and lease-up communities	3,397	671		—		671			100.0
Dispositions/other	—	8,594		19,371		(10,777		)	(55.6	)
Total property net operating income	58,548	$	238,384	$	177,052	$	61,332		34.6	%

Same store communities are communities we (or Summit) owned and were stabilized as of January 1, 2004. Non-same store communities are stabilized communities we (or Summit) have acquired or developed after January 1, 2004. Development and lease-up communities are non-stabilized communities we (or Summit) have developed or acquired after January 1, 2004. Dispositions represent communities we have sold which are not included in discontinued operations. Other property revenues primarily relates to amortization of above and below market leases acquired in our merger with Summit.

Total property revenues for the nine months ended September 30, 2005 increased $93.1 million over the nine months ended September 30, 2004, and increased from $749 to $826 on a per apartment home per month basis.  Total property revenues from our same store properties increased 2.4%, from $253.5 million for the nine months ended September 30, 2004 to $259.6 million for the nine months ended September 30, 2005, which represents an increase of $22 on a per apartment home per month basis.  For same store properties, rental rates on a per apartment home per month basis increased $16 from the nine months ended September 30, 2004 to the nine months ended September 30, 2005 and vacancy loss decreased $8 per apartment home over the same period.  These increases in revenues were partially offset by decreases in other rental income, which decreased $2 per apartment home per month.  Total property revenues from Summit same store properties were $78.9 million for the nine months ended September 30, 2005, or $1,017 on a per apartment home per month basis.

Property revenues from our non-same store, development and lease-up properties, including Summit non-same store properties, increased from $15.9 million for the nine months ended September 30, 2004 to $42.0 million for the nine months ended September 30, 2005 due to the acquisition of 2,285 apartment homes in the Summit merger and the completion and lease-up of properties in our development pipeline.  Total property revenues on a per apartment home per month basis were $1,087 and $1,050 for the nine months ended September 30, 2005 and 2004, respectively.  Property revenues from disposition properties during the nine months ended September 30, 2005 decreased $18.1 million as compared to the nine months ended September 30, 2004.  Disposition property revenues primarily relates to 12 properties sold to 12 individual joint ventures during March

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2005.  As we have continuing involvement in theses communities, the operations from these communities continues to be included in continuing operations.

Total property expenses for the nine months ended September 30, 2005 increased $31.8 million, or 25.8%, as compared to the same period in 2004, and increased from $3,691 to $3,910 on an annualized per apartment home basis.  Total property expenses from our same store properties increased 2.5%, from $104.8 million for the nine months ended September 30, 2004 to $107.5 million for the nine months ended September 30, 2005, which represents an increase of $91 on an annualized per apartment home basis.  The increase in same store property expenses per apartment home was primarily due to increases in salary and benefit expense and utility expense of $65 and $31 on an annualized per apartment home basis, respectively.  These two expense categories represent approximately 43% of total operating costs for the period, and increased 6.5% as compared to the nine months ended September 30, 2004.  Property expenses from Summit’s same store properties were $27.0 million for seven months ended September 30, 2005, or $4,182 on an annualized per apartment home basis.

Property expenses from our non-same store, development and lease-up properties, including Summit non-same store properties, increased from $6.8 million for the nine months ended September 30, 2004 to $16.2 million for the nine months ended September 30, 2005, due to the acquisition of 2,285 apartment homes in the Summit merger and the completion and lease-up of properties in our development pipeline.  Total property expenses on an annualized per apartment home basis were $5,029 and $5,429 for the nine months ended September 30, 2005 and 2004, respectively.  Property expenses from disposition properties decreased $7.3 million, as compared to the nine months ended September 30, 2004.

Fee and asset management income for the nine months ended September 30, 2005 increased $4.3 from the nine months ended September 30, 2004.  This increase was primarily due to fees earned on services provided to our joint ventures, as well as fees earned from our mezzanine financing program offset by declines in construction and development fees earned on third party construction projects.

Income from the sale of technology investments totaled $24.2 million for the nine months ended September 30, 2005, compared to $0.9 million for the same period in 2004.  Income from the sale of technology investments for 2005 relates to a gain recognized on the sale of our investment in Rent.com, which was acquired by Ebay during the first quarter of 2005.

Interest and other income for the nine months ended September 30, 2005 decreased $0.7 million from the same period in 2004.  This decrease was primarily attributable to proceeds received in 2004 from an insurance settlement for lost rents of $1.8 million, partially offset by increases in interest income from our mezzanine financing program.

Property management expense, which represents regional supervision and accounting costs related to property operations, increased from $8.5 million for the nine months ended September 30, 2004 to $11.4 million for the nine months ended September 30, 2005.  This increase was primarily due to salary and benefit expenses related to the addition of regional supervision personnel, as well as the expense associated with regional offices acquired in with the Summit merger.

Fee and asset management expense, which represents expenses related to third party construction projects and property management for third parties, increased from $2.8 million for the nine months ended September 30, 2004 to $5.0 million for the nine months ended September 30, 2005.  This increase was primarily due to warranty expense and repair expense on third party projects which totaled $2.4 million and $0.7 million for the nine months ended September 30, 2005 and 2004, respectively.

General and administrative expenses increased 45.3% from $12.4 million to $18.0 million, and increased as a percent of revenues from 3.9% to 4.1% for the nine months ended September 30, 2004 and 2005, respectively.  The increase was primarily due to costs associated with pursuing potential transactions that were not consummated, increases in salary and benefit expenses, including the addition of internal audit and information technology personnel, and professional fees associated with compliance with Sarbanes-Oxley and information technology projects.

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During the nine months ended September 30, 2005, we incurred transaction compensation and merger expenses of $14.1 million.  Merger expenses primarily related to training and transitional employee costs.

Gross interest cost before interest capitalized to development properties increased $27.4 million, or 41.1%, from $66.7 million for the quarter ended September 30, 2004 to $94.1 million for the quarter ended September 30, 2005.  The overall increase in interest expense was due to higher average debt balances due to $880.8 million in notes and mortgages payable acquired in the merger with Summit.  Interest capitalized increased to $12.7 million from $7.0 million for the nine months ended September 30, 2005 and 2004, respectively, due to higher average balances in our development pipeline primarily as a result of development properties acquired in our merger with Summit.

Depreciation and amortization increased from $76.1 million for the nine months ended September 30, 2004 to $123.1 million for the nine months ended September 30, 2005. This increase was due primarily to additional amortization of $22.2 million during the nine months ended September 30, 2005 related to in-place leases acquired in connection with the merger with Summit, as well as additional depreciation on assets acquired, new development and capital improvements placed in service during the past year.

Gain on sale of properties for the nine months ended September 30, 2005 included a gain of $132.1 million from the sale of assets to 12 joint ventures. Gain on sale of properties for the nine months ended September 30, 2004 included a gain of $1.3 million from the sale of 9.9 acres of undeveloped land located in Houston.

The $1.1 million impairment loss on land held for sale in 2004 related to 2.4 acres of undeveloped land located in Dallas, which was classified as held for sale.

Equity in income (losses) of joint ventures decreased $1.7 million from the nine months ended September 30, 2004, primarily from losses recognized in one joint venture due to debt retirement costs associated with the refinancing of debt during the third quarter of 2005.  Our portion of the debt retirement costs was approximately $2.0 million for the nine months ended September 30, 2005.

Distributions on units convertible into perpetual preferred shares decreased from $8.4 million for the nine months ended September 30, 2004 to $5.3 million for the nine months ended September 30, 2005, as a result of the redemption of $53 million Series C preferred units in September 2004 and January 2005.  Original issuance costs of $0.4 million were expensed in connection with the redemption of $17.5 million of the Series C preferred units in 2005 and original issuance costs of $0.7 million were expenses in 2004.

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 2.6 and 2.9 times for the three months ended September 30, 2005 and 2004, respectively and 2.9 times for the nine months ended September 30, 2005 and 2004.  At September 30, 2005 and 2004, 77.0% and 89.0%, respectively, of our properties (based on invested

36

capital) were unencumbered.  Our weighted average maturity of debt, excluding our line of credit, was 6.1 years and 7.0 years at September 30, 2005 and 2004, 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 land, impairment loss on land held for sale, 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 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; and

 (v)distributions on our common and preferred equity.

We consider our long-term liquidity requirements to be the repayment of maturing debt, including borrowings under our unsecured line of credit that were used to fund development and acquisition activities. We intend to meet our long-term liquidity requirements through the use of common and preferred equity capital, senior unsecured debt and property dispositions.  We expect to use the proceeds from any property sales for reinvestment in acquisitions or new developments or reduction of debt.

In March 2005, we formed 12 individual joint ventures and sold to the ventures 12 multifamily properties containing 4,034 apartment homes for approximately $398 million.  We obtained a 20% minority interest in the ventures and continue to provide property management services for the properties sold to the ventures for a fee.  We used the proceeds from this transaction to pay down all outstanding balances under the bridge loan facility.  See further discussion of our merger with Summit, including the issuance of common equity in connection with the merger, in the “Business” section.

We intend to concentrate our growth efforts toward selective development and acquisition opportunities in our current markets, and through the acquisition of existing operating properties and the development of properties in selected new markets.  During the nine months ended September 30, 2005, we incurred $119.4 million in development costs and $57.6 million in property acquisition costs.  At September 30, 2005, we had eight wholly-owned properties under construction at a projected aggregate cost of approximately $491.0 million, $235.9 million of which had been incurred through September 30, 2005.  At September 30, 2005, we were obligated for approximately $202.1 million under construction contracts related to these projects (a substantial amount of which we expect to fund with our unsecured line of credit).  We intend to fund our developments and acquisitions through a combination of equity capital, partnership units, medium-term notes, construction loans, other debt securities and our unsecured line of credit.

Net cash provided by operating activities totaled $161.9 million for the nine months ended September 30, 2005, an increase of $43.1 million, or 36.3%, from the same period in 2004.  The increase in operating cash flow was primarily due to a $61.3 million increase in net operating income partially offset by a $21.7 million increase in interest expense.  Additionally, the $19.0 million increase in operating accounts is primarily due to increases in accrued real estate taxes and accrued expenses and other of $10.1 million and $14.5 million, respectively, during the nine months ended September 30, 2005 as compared to increases of $5.0 million and $6.7 million, respectively, for the nine months ended September 30, 2004.  These increases were primarily due to timing of property tax payments and interest associated with properties acquired in conjunction with the Summit merger.  See Note 8 to our consolidated financial statements which details the net change in our operating accounts.

Net cash used in investing activities totaled $138.8 million for the nine months ended September 30, 2005 compared to $89.5 million for the same period in 2004. For the nine months ended September 30, 2005, net cash used in investing activities included cash consideration paid in connection with the merger with Summit of $458.1

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million, repayment of merger related liabilities of $50.8 million, investment in a joint venture of $26.2 million and expenditures for property development, acquisitions, and capital improvements of $119.4 million, $57.6 million, and $28.7 million, respectively.  These expenditures were offset by $395.5 million in net proceeds received from the sale of assets to 12 joint ventures, $127.0 million in net proceeds from the sale of discontinued operations during 2005, $24.6 million in proceeds from the sale of a technology investment, $19.7 million from repayments of notes receivable and $16.7 million of cash held by Summit at effective date of the merger.  For the nine months ended September 30, 2004, net cash used in investing activities included expenditures for property development and capital improvements totaling $63.8 million and $17.2 million, respectively.  Additionally, fundings of notes receivable were $12.2 million for the nine months ended September 30, 2004.

Net cash used in financing activities totaled $24.2 million for the nine months ended September 30, 2005 compared to $30.2 million for the nine months ended September 30, 2004.  During the nine months ended September 30, 2005, we paid distributions totaling $109.4 million to holders of common and preferred equity.  Our line of credit and notes payable increased $65.0 million and $248.4 million, respectively, for the nine months ended September 30, 2005.  These increases in notes payable were used to repay $188.5 million in Summit notes payable and $17.8 million in other notes payable, redeem $17.5 million of preferred units, and fund development activities and capital improvements.  Also, we paid $7.0 million of deferred financing costs in 2005.  Cash received from option exercises totaled $8.3 million during the nine months ended September 30, 2005.  During the nine months ended September 30, 2004, we paid distributions totaling $93.0 million to holders of common and preferred equity. Our line of credit and notes payable increased $287.0 million and $99.8 million, respectively, for the nine months ended September 30, 2004, primarily from the repayment of $291.7 million in notes payable, and the funding of development activities and capital improvements.  Cash received from option exercises totaled $6.5 million during the first nine months of 2004.

In September 2005, we announced that our Board of Trust Managers had declared a dividend distribution of $0.635 per share to holders of record as of September 30, 2005 of our common shares.  The dividend was subsequently paid on October 17, 2005.  We paid equivalent amounts per unit to holders of the common operating partnership units.  This distribution to common shareholders and holders of common operating partnership units equates to an annualized dividend rate of $2.54 per share or unit.

Contractual Obligations

The following table summarizes our known contractual obligations as of September 30, 2005:

(in millions)	Total		2005		2006		2007		2008		2009		Thereafter
Debt maturities	$	2,564.8	$	28.8	$	246.5	$	232.9	$	321.7	$	198.2	$	1,536.7
Non-cancelable operating lease payments	10.2		0.5		2.0		1.9		1.3		0.4		4.1
Construction contracts	202.1		50.8		148.8		2.5		—		—		—
	$	2,777.1	$	80.1	$	397.3	$	237.3	$	323.0	$	198.6	$	1,540.8

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

In January 2005, we entered into a new credit agreement which increased our credit facility to $600 million, with the ability to further increase it up to $750 million.  This $600 million unsecured line of credit matures in January 2008. The scheduled interest rate is 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 $300 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 lowers our overall cost of funds.  The

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line of credit is subject to customary financial covenants and limitations, all of which we were in compliance with at September 30, 2005.

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 September 30, 2005 we had outstanding letters of credit totaling $30.5 million, and had $448.5 million available under our unsecured line of credit.

As part of the merger agreement, we assumed Summit’s unsecured letter of credit facility, which matures in July 2008 and has a total commitment of $20.0 million.  The letters of credit issued under this facility will serve as collateral for performance on contracts and as credit guarantees to banks and insurers.  As of September 30, 2005, there were $8.9 million of letters of credit outstanding under this facility.

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.

In June 2005, we issued from our $1.1 billion shelf registration an aggregate principal amount of $250 million 5% ten-year senior unsecured notes maturing on June 15, 2015.  Interest on the notes is payable on June 15 and December 15 commencing December 15, 2015.  We may redeem these notes at any time at a redemption price equal to the principal amount and accrued interest, plus a make-whole provision.  The notes are a direct, senior unsecured obligation and rank equally with all other unsecured and unsubordinated indebtedness.  The proceeds received from the sale of the notes were $246.8 million, net of issuance costs, and were used to reduce amounts outstanding under our unsecured line of credit.

At September 30, 2005, $285.5 million was available for issuance in debt securities, preferred shares, common shares or warrants from our $1.1 billion shelf registration.  We have significant unencumbered real estate assets which could be sold or used as collateral for financing purposes should other sources of capital not be available.

At September 30, 2005, our floating rate debt totaled $218.1 million and had a weighted average interest rate of 4.0%.

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 depreciable operating 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 of all dilutive convertible securities, including minority interests, which are convertible into common shares.  We consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions of operating properties and excluding depreciation, FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different companies.

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.  Furthermore, FFO as disclosed by other REIT’s may not be comparable to our calculation.

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A reconciliation of net income to diluted FFO for the three and nine months ended September 30, 2005 and 2004 follows:

(In thousands)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2005			2004		2005			2004
Funds from operations:
Net income (loss)	$	(2,317	)	$	5,807	$	186,199		$	22,849
Real estate depreciation, including discontinued operations	45,163			26,741		122,626			78,987
Adjustments for unconsolidated joint ventures	1,284			523		3,249			1,570
Gain on sale of properties, including discontinued operations	—			—		(168,221		)	—
Income allocated to common units, including discontinued operations	241			553		1,969			2,078
Funds from operations – diluted	$	44,371		$	33,624	$	145,822		$	105,484
Weighted average shares - basic	54,018			40,377		51,294			40,234
Incremental shares issuable from assumed conversion of :
Common share options and awards granted	496			1,635		456			1,585
Common units	4,086			2,437		3,744			2,438
Weighted average shares – diluted	58,600			44,449		55,494			44,257

Inflation

We lease apartments under lease terms generally ranging from 6 to 13 months. Management believes that such short-term lease contracts lessen the impact of inflation due to the ability to adjust rental rates to market levels as leases expire.

Critical Accounting Policies

The Securities and Exchange Commission (“SEC”) has issued guidance for the disclosure of “critical accounting policies.”  The SEC defines “critical accounting policies” as those that are most important to the presentation of a company’s financial condition and results, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  We follow financial accounting and reporting policies that are in accordance with generally accepted accounting principles.  The more significant of these policies relate to the acquisition of assets, cost capitalization and asset impairment, which are discussed in the “Business” section under “Property Update,” and income recognition, capital expenditures and notes receivable, which are discussed below.

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.  Interest, fee and asset management and all other sources of income are recognized as earned.

Acquisition of assets. Upon the acquisition of real estate, we assess the fair value of acquired assets, including land, buildings, the value of in-place leases, 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.

Capital expenditures.  We capitalize renovation and improvement costs that we believe extend the economic lives and enhance the earnings of the related assets.  Capital expenditures, including carpet, appliances and HVAC unit replacements, subsequent to initial construction are capitalized and depreciated over their estimated useful lives, which range from 3 to 20 years.

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Notes receivable.  We evaluate the collectibility of both interest and principal of each of our notes receivable.  If we identify that the borrower is unable to perform their duties under the notes receivable or that the operations of the property do not support the continued recognition of interest income or the carrying value of the loan, we would then cease income recognition and record an impairment charge against the loan.

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 more significant estimates relate to determining the allocation of the purchase price of our acquisitions, estimates supporting our impairment analysis related to the carrying value of our real estate assets, estimates of the useful lives 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.

Impact of New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized over their vesting periods in the income statement based on their estimated fair values. In April 2005, the Securities and Exchange Commission (“SEC”) issued a press release announcing it would provide for a phased-in implementation process for SFAS 123R. SFAS 123R is effective for all public entities in the first annual reporting period beginning after June 15, 2005 which, for us would be the calendar year of 2006. As a result of the SEC’s announcement, we are in the process of assessing the impact of SFAS 123R and have not determined what impact, if any, our adoption of SFAS 123R will have on our financial position, results of operations or cash flows.

In December 2004, FASB issued SFAS No. 153, “Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29,” which addresses the measurement of exchanges of nonmonetary assets.  SFAS No. 153 eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchange of nonmonetary assets that do not have commercial substance.  It also specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.  SFAS No. 153 is effective beginning July 1, 2005.  The adoption of SFAS No. 153 did not have a material impact on our financial position, results of operations or cash flows.

In March 2005, the FASB issued FASB Staff Position (“FSP”) FIN 46R-5, “Implicit Variable Interest under FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities.”  This FSP requires a reporting entity to consider whether it holds an implicit variable interest in a variable interest entity (“VIE”) or potential VIE.  FSP FIN 46R-5 was effective with reporting periods beginning after March 3, 2005.  The adoption of FSP FIN 46R-5 did not have a material impact on our financial position, results of operations or cash flows.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3.”  SFAS No. 154 changes the requirements for and reporting of a change in accounting principle.  SFAS No. 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. This Statement also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) corrections of errors in previously issued financial statements should be termed a “restatement.” The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005.  We do not expect that the adoption of SFAS No. 154 will have a material impact on our financial position, results of operations or cash flows.

In June 2005, the FASB issued Emerging Issues Task Force (“EITF”) Issue No. 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity

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When the Limited Partners Have Certain Rights.”  EITF Issue No. 04-05 provides a framework for determining whether a general partner controls, and should consolidate, a limited partnership or a similar entity.  EITF Issue No. 04-05 is effective after June 29, 2005, for all newly formed limited partnerships and for any pre-existing limited partnerships that modify their partnership agreements after that date.  General partners of all other limited partnerships are required to apply the consensus no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005.  We do not expect that the adoption of EITF Issue No. 04-05 will have a material impact on our financial position, results of operations or cash flows.

In June 2005, the FASB issued FSP 78-9-1, “Interaction of AICPA Statement of Position 78-9 and EITF Issue No. 04-05.”  The EITF acknowledged that the consensus in EITF Issue No. 04-05 conflicts with certain aspects of Statement of Position (“SOP”) 78-9, “Accounting for Investments in Real Estate Ventures.”  The EITF agreed that the assessment of whether a general partner, or the general partners as a group, controls a limited partnership should be consistent for all limited partnerships, irrespective of the industry within which the limited partnership operates.  Accordingly, the guidance in SOP 78-9 was amended in FSP 78-9-1 to be consistent with the guidance in EITF Issue No. 04-05.  The effective dates for this FSP are the same as those mentioned above in EITF Issue No. 04-05.  We do not expect that the adoption of FSP 78-9-1 will have a material impact on our financial position, results of operations or cash flows.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

No material changes have occurred since our Annual Report on Form 10-K for the year ended December 31, 2004.

Item 4.Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of September 30, 2005. Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2005.

There has been no change to our internal control over financial reporting during the period ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

For further discussion regarding legal proceedings, see Note 11 to the Consolidated Financial Statements.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.Defaults Upon Senior Securities

None

Item 4.Submission of Matters to a Vote of Security Holders

None

Item 5.Other Information

None

Item 6.Exhibits

(a)Exhibits

31.1Certification pursuant to Rule 13a-14(a) of Chief Executive Officer dated November 4, 2005.

31.2Certification pursuant to Rule 13a-14(a) of Chief Financial Officer dated November 4, 2005.

32.1Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.

CAMDEN PROPERTY TRUST

/s/ Dennis M. Steen	November 4, 2005
Dennis M. Steen  Senior Vice President – Finance  Chief Financial Officer and Secretary	Date

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