UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission file number: 1-12110
CAMDEN PROPERTY TRUST
(Exact Name of Registrant as Specified in Its Charter)
TEXAS 76-6088377
(State or Other Jurisdiction of I.R.S. Employer Identification
Incorporation or Organization) Number)
3 Greenway Plaza, Suite 1300, Houston, Texas 77046
(Address of Principal Executive Offices) (Zip Code)
(713) 354-2500
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of August 3, 2001, there were 40,735,751 shares of Common Shares of
Beneficial Interest, $0.01 par value outstanding.
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAMDEN PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
June 30, December 31,
2001 2000
---------------- ---------------
(Unaudited)
Real estate assets, at cost:
Land $ 359,150 $ 350,248
Buildings and improvements 2,190,177 2,124,740
--------------- --------------
2,549,327 2,474,988
Less: accumulated depreciation (374,696) (326,723)
--------------- --------------
Net operating real estate assets 2,174,631 2,148,265
Properties under development, including land 128,610 148,741
Investment in joint ventures 20,380 22,612
--------------- --------------
Total real estate assets 2,323,621 2,319,618
Accounts receivable - affiliates 3,733 3,236
Notes receivable:
Affiliates 1,800 1,800
Other 79,323 72,893
Other assets, net 30,990 23,923
Cash and cash equivalents 2,576 4,936
Restricted cash 4,538 4,475
--------------- --------------
Total assets $ 2,446,581 $ 2,430,881
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable:
Unsecured $ 871,079 $ 799,026
Secured 324,386 339,091
Accounts payable 14,309 13,592
Accrued real estate taxes 20,967 26,781
Accrued expenses and other liabilities 39,553 36,981
Distributions payable 30,262 28,900
--------------- --------------
Total liabilities 1,300,556 1,244,371
Minority Interests:
Units convertible into perpetual preferred shares 149,815 149,815
Units convertible into common shares 57,849 60,562
--------------- -------------
Total minority interests 207,664 210,377
7.33% Convertible Subordinated Debentures 1,950
Shareholders' Equity:
Convertible preferred shares of beneficial interest 42
Common shares of beneficial interest 475 450
Additional paid-in capital 1,294,534 1,312,323
Distributions in excess of net income (169,787) (153,972)
Unearned restricted share awards (10,434) (6,680)
Less: treasury shares, at cost (176,427) (177,980)
--------------- --------------
Total shareholders' equity 938,361 974,183
--------------- --------------
Total liabilities and shareholders' equity $ 2,446,581 $ 2,430,881
=============== ==============
2
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------- -------------------------
2001 2000 2001 2000
----------- ------------ ------------ -----------
Revenues
Rental income $ 93,116 $ 91,660 $ 185,326 $ 181,178
Other property income 7,372 6,613 14,323 12,976
----------- ----------- ----------- -----------
Total property income 100,488 98,273 199,649 194,154
Equity in income of joint ventures 228 223 2,924 480
Fee and asset management 1,720 1,217 3,263 2,926
Other income 2,124 1,614 4,078 2,481
----------- ----------- ----------- -----------
Total revenues 104,560 101,327 209,914 200,041
----------- ----------- ----------- -----------
Expenses
Property operating and maintenance 28,205 28,274 56,364 55,980
Real estate taxes 10,448 10,044 20,514 20,034
General and administrative 3,109 3,626 6,392 6,765
Impairment provision for technology investments 1,090
Interest 17,774 17,605 34,917 34,189
Depreciation and amortization 24,848 25,244 49,344 49,843
----------- ----------- ----------- -----------
Total expenses 84,384 84,793 168,621 166,811
----------- ----------- ----------- -----------
Income before gain on sales of properties and minority interests 20,176 16,534 41,293 33,230
Gain on sales of properties 656 2,372 1,933
----------- ----------- ----------- -----------
Income before minority interests 20,832 16,534 43,665 35,163
Income allocated to minority interests
Distributions on units convertible into perpetual
preferred shares (3,218) (3,190) (6,436) (6,408)
Income allocated to units convertible into common shares (478) (407) (1,549) (799)
----------- ----------- ----------- -----------
Total income allocated to minority interests (3,696) (3,597) (7,985) (7,207)
----------- ----------- ----------- -----------
Net income 17,136 12,937 35,680 27,956
Preferred share dividends (202) (2,343) (2,545) (4,686)
----------- ----------- ----------- -----------
Net income to common shareholders $ 16,934 $ 10,594 $ 33,135 $ 23,270
=========== =========== =========== ===========
Basic earnings per share $ 0.43 $ 0.28 $ 0.85 $ 0.61
Diluted earnings per share $ 0.40 $ 0.27 $ 0.82 $ 0.58
Distributions declared per common share $ 0.61 $ 0.5625 $ 1.22 $ 1.125
Weighted average number of common shares
outstanding 39,797 37,927 38,891 38,210
Weighted average number of common and
common dilutive equivalent shares outstanding 44,525 41,146 42,512 41,361
See Notes to Consolidated Financial Statements.
3
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months
Ended June 30,
--------------------------
2001 2000
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 35,680 $ 27,956
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 49,344 49,843
Equity in income of joint ventures, net of cash received 3,359 779
Gain on sale of properties (2,372) (1,933)
Income allocated to units convertible into common shares 1,549 799
Accretion of discount on unsecured notes payable 251 198
Net change in operating accounts 419 (5,088)
----------- -----------
Net cash provided by operating activities 88,230 72,554
CASH FLOW FROM INVESTING ACTIVITIES
Increase in real estate assets (59,629) (73,536)
Net proceeds from sale of properties 8,914 20,056
Increase in investment in joint ventures (1,136)
Increase in notes receivable (13,665) (6,300)
Decrease in notes receivable 7,235
Other (3,470) (783)
----------- -----------
Net cash used in investing activities (61,751) (60,563)
CASH FLOW FROM FINANCING ACTIVITIES
Net (decrease) increase in unsecured lines of credit and short-term borrowings (26,000) 52,000
Proceeds from notes payable 211,227
Proceeds from issuance of preferred units, net 17,136
Repayment of notes payable (128,130) (2,507)
Distributions to shareholders and minority interests (59,444) (55,605)
Repurchase of preferred shares (26,922)
Repurchase of common shares and units convertible into common shares (26,306)
Other 430 786
----------- -----------
Net cash used in financing activities (28,839) (14,496)
----------- -----------
Net decrease in cash and cash equivalents (2,360) (2,505)
Cash and cash equivalents, beginning of period 4,936 5,517
----------- -----------
Cash and cash equivalents, end of period $ 2,576 $ 3,012
=========== ===========
SUPPLEMENTAL INFORMATION
Cash paid for interest, net of interest capitalized $ 31,888 $ 34,070
Interest capitalized 5,809 8,067
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Conversion of 7.33% subordinated debentures to common shares, net $ 1,950 $ 859
Value of shares issued under benefit plans, net 5,475 6,125
Conversion of operating partnership units to common shares 1,126
See Notes to Consolidated Financial Statements.
4
CAMDEN PROPERTY TRUST
Notes to Consolidated Financial Statements
(Unaudited)
1. Interim Unaudited Financial Information
The accompanying interim unaudited financial information has been prepared
according to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted according to such rules and
regulations. 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 June 30, 2001 and the results of operations and cash flows for the three and
six months ended June 30, 2001 and 2000 have been included. The results of
operations for such interim periods are not necessarily indicative of the
results for the full year.
Business
Camden Property Trust is a real estate company engaged in the ownership,
development, construction and management of multifamily apartment communities.
At June 30, 2001, we owned interests in, operated or were developing 147
multifamily properties containing 52,590 apartment homes located in the Sunbelt
and Midwestern markets from Florida to California. Two of our multifamily
properties containing 918 apartment homes were under development at June 30,
2001. Two of our newly developed multifamily properties containing 952 apartment
homes were in lease-up at June 30, 2001. Additionally, we have several sites
which we intend to develop into multifamily apartment communities.
Property Update
During the first six months of 2001, stabilization occurred at the
following two properties totaling 924 apartment homes: The Park at Oxmoor in
Louisville and The Park at Lee Vista in Orlando. We consider a property
stabilized once it reaches 90% occupancy, or generally one year from opening the
leasing office, with some allowances for larger than average properties. We
completed construction of 620 apartment homes at The Park at Farmers Market,
Phase I in Dallas. Construction continued at two properties totaling 918
apartment homes: The Park at Crown Valley in Mission Viejo and Camden Harbour
View in Long Beach. We have begun leasing at the Mission Viejo property, and are
expected to begin leasing during the third quarter of 2002 at the property in
Long Beach.
During the second quarter of 2001, we acquired Camden Pecos Ranch, a 272
apartment home property located in Phoenix, Arizona for $20.6 million. Camden
Pecos Ranch was developed under our third party development pipeline and was
completed during the fourth quarter 2000. It stabilized during the first quarter
2001.
Dispositions during the first six months of 2001 included two parcels of
land totaling 22.7 acres located in Houston and two operating properties with a
total of 556 apartment homes located in North Carolina. The proceeds from the
land sales totaled $8.6 million and were used to reduce indebtedness outstanding
under our unsecured line of credit. The operating properties were held through a
joint venture and the gains from these dispositions, totaling $2.6 million, are
included in "Equity in income of joint ventures".
5
Real Estate Assets at Cost
We capitalized $12.7 million and $13.7 million in the six months ended June
30, 2001 and 2000, respectively, of renovation and improvement costs which we
believe extended the economic lives and enhanced the earnings of our multifamily
properties.
Property Operating and Maintenance Expenses
Property operating and maintenance expenses included normal repairs and
maintenance totaling $6.7 million and $13.7 million for the three and six months
ended June 30, 2001, compared to $7.2 million and $14.3 million for the three
and six months ended June 30, 2000.
Common Share Dividend Declaration
In June 2001, we announced that our Board of Trust Managers had declared a
dividend of $0.61 per share for the second quarter of 2001 which was paid on
July 17, 2001 to all common shareholders of record as of June 29, 2001. We paid
an equivalent amount per unit to holders of common operating partnership units.
This distribution to common shareholders and holders of common operating
partnership units equates to an annualized dividend rate of $2.44 per share or
unit.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which is effective for all
fiscal years beginning after June 15, 2000. SFAS No. 133, as amended,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. Under SFAS No. 133, certain contracts that were not formerly
considered derivatives may now meet the definition of a derivative. We have
adopted SFAS No. 133 effective January 1, 2001. The adoption of SFAS No. 133 did
not have a material impact on our financial position, results of operations, or
cash flows.
In July 2001, FASB issued SFAS No. 141, "Business Combinations", which is
effective for business combinations initiated after June 30, 2001. SFAS No. 141
requires all business combinations to be accounted for under the purchase method
and that the pooling-of-interest method is no longer allowed. The adoption of
SFAS No. 141 will not have a material impact on our financial position, results
of operations, or cash flows.
In July 2001, FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", which is effective for fiscal years beginning after December 15, 2001.
SFAS No. 142 requires that goodwill no longer be amortized to earnings, but
instead be reviewed for impairment. The adoption of SFAS No. 142 will not have a
material impact on our financial position, results of operations, or cash flows.
6
Earnings Per Share
The following table presents information necessary to calculate basic and
diluted earnings per share for the three and six months ended June 30, 2001 and
2000:
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
2001 2000 2001 2000
---------- ----------- ----------- ----------
Basic earnings per share:
Weighted average common shares outstanding 39,797 37,927 38,891 38,210
========== =========== =========== ==========
Basic earnings per share $ 0.43 $ 0.28 $ 0.85 $ 0.61
========== =========== =========== ==========
Diluted earnings per share:
Weighted average common shares outstanding 39,797 37,927 38,891 38,210
Shares issuable from assumed conversion of:
Common share options and awards granted 1,169 670 1,096 602
Convertible preferred shares (a) 1,047
Units convertible into common shares 2,512 2,549 2,525 2,549
---------- ----------- ----------- ----------
Weighted average common shares outstanding, as adjusted 44,525 41,146 42,512 41,361
========== =========== =========== ==========
Diluted earnings per share $ 0.40 $ 0.27 $ 0.82 $ 0.58
========== =========== =========== ==========
Earnings for basic and diluted computation:
Net income $ 17,136 $ 12,937 $ 35,680 $ 27,956
Less: Preferred share dividends (202) (2,343) (2,545) (4,686)
---------- ----------- ----------- ----------
Net income to common shareholders
(Basic diluted earnings per share computation) 16,934 10,594 33,135 23,270
Preferred share dividends (a) 202
Income allocated to operating partnership units 478 407 1,549 799
---------- ----------- ----------- ----------
Net income to common shareholders, as adjusted
(Diluted earnings per share computation) $ 17,614 $ 11,001 $ 34,684 $ 24,069
========== =========== =========== ==========
(a) The convertible preferred shares were anti-dilutive for the three and six
months ended June 30, 2000 and for the six months ended June 30, 2001
2. Notes Receivable
We have entered into agreements with unaffiliated third parties to develop,
construct, and manage eight multifamily projects containing a total of 2,840
apartment homes. We are providing financing for a portion of each project in the
form of notes receivable which mature through 2005. These notes earn interest at
10% annually and are secured by second liens on the assets and partial
guarantees by the third party owners. We expect these notes to be repaid from
operating cash flow or proceeds from the sale of the individual properties. At
June 30, 2001 and 2000, these notes had principal balances totaling $76.2
million and $38.3 million, respectively, and we anticipate funding up to an
aggregate of $103 million in connection with these projects.
We earn fees for managing the development, construction and eventual
operations of these properties. The related fees we earned for these projects
totaled $462,000 and $1.3 million for the six months ended June 30, 2001 and
2000, respectively. We have begun construction on four of these projects, and
initial occupancy has begun on three of the projects. We have the option to
purchase these properties in the future at a price to be determined based upon
the property's performance and an agreed valuation model.
7
During the second quarter of 2001, we acquired Camden Pecos Ranch which was
developed under our third party development pipeline for $20.6 million. Camden
Pecos Ranch contains 272 apartment homes and is located in Phoenix, Arizona. The
note receivable relating to Camden Pecos Ranch at time of acquisition was $7.2
million.
The following is a detail of our third party construction subject to notes
receivable.
Number of Estimated Estimated/ Estimated/
Apartment Cost Actual Date of Actual Date of
Property and Location Homes ($ millions) Completion Stabilization
- ------------------------------------- ------------- ------------- ---------------- ----------------
In lease-up
Marina Pointe II
Tampa, FL 352 $ 30 1Q01 3Q01
Creekside
Denver, CO 279 32 3Q01 4Q01
Ybor City
Tampa, FL 454 40 4Q01 3Q02
Under Construction
Little Italy
San Diego, CA 160 36 4Q02 3Q03
Pre-Development
Otay Ranch
San Diego, CA 422 57
California Oaks
Murietta, CA 264 35
Lee Vista II
Orlando, FL 366 31
Midtown West
Houston, TX 543 54
------------- -------------
Total Third Party Development 2,840 $ 315
============= =============
3. Technology Investments
During 2000, our Board of Trust Managers authorized us to invest in
non-real estate initiatives, including investments in e-commerce initiatives
with other multi-family real estate owners. These investments may be made in
companies that we believe will provide our residents with a broad range of real
estate technology services including high-speed data, video and entertainment
services, as well as resident portals. These portals should provide our
residents with a variety of online services, including online rental payments
and maintenance requests, which we believe will improve their overall living
experience. Additionally, we have invested in companies that we believe will
improve the efficiency of our internal operations through revenue management,
credit scoring and purchasing.
As of June 30, 2001, we had $5.0 million invested into various e-commerce
companies. These investments are being accounted for under the cost method and
are included in other assets in our consolidated financial statements. In
addition to our investments, we have $3.1 million in notes receivable relating
to our e-commerce investments. We have commitments outstanding to fund an
additional $3.3 million on current e-commerce investments.
During the first six months of 2001, we expensed $1.1 million of e-commerce
investments relating to BroadBand Residential Inc. The $1.1 million included a
note receivable of approximately $600,000, and represented our total investment,
including notes receivable, in BroadBand Residential at the time of the
write-off.
8
4. Notes Payable
The following is a summary of our indebtedness:
(In millions)
June 30, December 31,
2001 2000
----------------- ----------------
Unsecured Line of Credit and Short Term Borrowings $ 170.0 $ 196.0
Senior Unsecured Notes
6.73% - 6.76% Notes, due 2001 50.0 150.0
7.03% Notes, due 2003 50.0 50.0
7.14% Notes, due 2004 199.3 199.2
7.16% - 7.28% Notes, due 2006 173.9 124.3
7.78% Notes, due 2011 148.4
--------------- -------------
621.6 523.5
Medium Term Notes
6.68% - 6.74% Notes, due 2002 34.5 34.5
6.88% - 7.17% Notes, due 2004 30.0 30.0
7.63% Notes, due 2009 15.0 15.0
--------------- -------------
79.5 79.5
Secured Notes
7.00% - 8.50% Conventional Mortgage Notes, due 2003 - 2009 223.3 237.6
4.37% - 7.29 Tax-exempt Mortgage Notes, due 2023 - 2031 101.1 101.5
--------------- -------------
324.4 339.1
--------------- -------------
Total Notes Payable $ 1,195.5 $ 1,138.1
=============== =============
We have a $400 million line of credit with a group of 14 banks which
matures August 2003. The scheduled interest rate is currently based on a spread
over LIBOR or Prime. The scheduled interest rates are subject to change as our
credit ratings change. Advances under the line of credit may be priced at the
scheduled rates, or we may enter into bid rate loans with participating banks at
rates below the scheduled rates. These bid rate loans have terms of six months
or less and may not exceed the lesser of $200 million or the remaining amount
available under the line of credit. The line of credit is subject to customary
financial covenants and limitations. At quarter end, we were in compliance with
all covenants and limitations.
On February 7, 2001, we issued from our $750 million shelf registration an
aggregate principal amount of $50 million of 7% five-year senior unsecured notes
maturing on February 15, 2006 and $150 million of 7.625% ten-year senior
unsecured notes maturing on February 15, 2011. Interest on the notes is payable
semiannually on February 15 and August 15, commencing on August 15, 2001. We may
redeem the notes at any time at a redemption price equal to the principal amount
and accrued interest, plus a make-whole provision. The notes are direct, senior
unsecured obligations and rank equally with all other unsecured and
unsubordinated indebtedness. The proceeds from the sale of the notes were $197.8
million, net of issuance costs. We used the net proceeds to reduce indebtedness
outstanding under the unsecured line of credit.
At June 30, 2001, the weighted average interest rate on floating rate debt
was 4.91%.
9
5. Net Change in Operating Accounts
The effect of changes in the operating accounts on cash flows from
operating activities is as follows:
(In thousands)
Six Months Ended
June 30,
--------------------------
2001 2000
----------- -----------
Decrease (increase) in assets:
Accounts receivable - affiliates $ (100) $ 183
Other assets, net (3,004) (7,987)
Restricted cash (63) (471)
Increase (decrease) in liabilities:
Accounts payable 711 152
Accrued real estate taxes (5,606) (3,747)
Accrued expenses and other liabilities 8,481 6,782
----------- -----------
Net change in operating accounts $ 419 $ (5,088)
=========== ===========
6. Convertible Subordinated Debentures
In April 1994, we issued $86.3 million aggregate principal amount of 7.33%
Convertible Subordinated Debentures which matured on April 1, 2001. The
debentures were convertible at any time prior to maturity into our common
shares. Prior to maturity, $86.2 million in principal amount of the debentures
were converted into 3.6 million common shares. In addition, $3.2 million of
unamortized debenture issue costs were reclassified to additional
paid-in-capital.
7. Preferred Units
In 1999, our operating partnership issued $100 million of 8.5% Series B
Cumulative Redeemable Perpetual Preferred Units. Also during 1999 and 2000, our
operating partnership issued $53 million of 8.25% Series C Cumulative Redeemable
Perpetual Preferred Units. Distributions on the preferred units are payable
quarterly in arrears. The preferred units are redeemable for cash by the
operating partnership on or after the fifth anniversary of issuance at par plus
the amount of any accumulated and unpaid distributions. The preferred units are
convertible after 10 years by the holder into corresponding Cumulative
Redeemable Perpetual Preferred Shares. The preferred units are subordinate to
present and future debt.
8. Restricted Share and Option Awards
During the first six months of 2001, we granted 263,068 restricted shares
in lieu of cash compensation to certain key employees and non-employee trust
managers. The restricted shares were issued based on the market value of our
common shares at the date of grant and have vesting periods of up to five years.
We granted no options during the six months ended June 30, 2001. During the six
month period ended June 30, 2001, previously granted options to purchase 582,131
shares became exercisable and 89,478 restricted shares vested.
9. Securities Repurchase Program
In 1998 and 1999, the Board of Trust Managers authorized us to repurchase
or redeem up to $200 million of our securities through open market purchases and
private transactions. As of June 30, 2001, we had repurchased 6,857,726 common
shares and redeemed 105,814 units convertible in to common shares for a total
cost of $178.0 million and $2.9 million, respectively.
10
10. Convertible Preferred Shares
The 4,165,000 preferred shares paid a cumulative dividend quarterly in
arrears in an amount equal to $2.25 per share per annum. The preferred shares
generally had no voting rights and had a liquidation preference of $25 per share
plus accrued and unpaid distributions. The preferred shares were convertible at
the option of the holder at any time into common shares at a conversion price of
$32.4638 per common share (equivalent to a conversion rate of 0.7701 per common
share for each preferred share), subject to adjustment in certain circumstances.
The preferred shares were not redeemable prior to April 30, 2001.
In April 2001, we announced that our issued and outstanding preferred
shares would be redeemed effective April 30, 2001 at a redemption price of
$25.00 per share plus an amount equal to all accumulated, accrued and unpaid
dividends as of April 30, 2001. Prior to redemption, 3.1 million preferred
shares were converted into 2.4 million common shares. The remaining preferred
shares were redeemed for an aggregate of $27.1 million, including unpaid
dividends, using funds available under our unsecured line of credit.
11. Contingencies
Prior to our merger with Oasis Residential, Inc. in April 1998, Oasis had
been contacted by certain regulatory agencies with regards to alleged failures
to comply with the Fair Housing Amendments Act (the "Fair Housing Act") as it
pertained to nine properties (seven of which we currently own) constructed for
first occupancy after March 31, 1991. On February 1, 1999, the Justice
Department filed a lawsuit against us and several other defendants in the United
States District Court for the District of Nevada alleging (1) that the design
and construction of these properties violates the Fair Housing Act and (2) that
we, through the merger with Oasis, had discriminated in the rental of dwellings
to persons because of handicap. The complaint requests an order that (i)
declares that the defendant's 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 multi-family dwellings in the future that do not
contain the accessibility and adaptability features set forth in the Fair
Housing Act; and requires us to pay damages, including punitive damages, and a
civil penalty.
With any acquisition, we plan for and undertake renovations needed to
correct deferred maintenance, life/safety and Fair Housing matters. 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 over the next five years. In
management's opinion, the costs associated with complying with the decree are
not expected to have a material impact on our financial statements.
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.
11
12. Subsequent Events
In the ordinary course of our business, we issue letters of intent
indicating a willingness to negotiate for the purchase or sale of multifamily
properties or development land. In accordance with the local real estate market
practice, such letters of intent are non-binding, and neither party to the
letter of intent is obligated to pursue the transaction unless and until a
definitive contract is entered into by the parties. The letters of intent and
any resulting definitive contracts provide the purchaser with time to evaluate
the properties and conduct due diligence and during which periods the purchaser
will have the ability to terminate the contracts without penalty or forfeiture
of any deposit or earnest money. There can be no assurance that definitive
contracts will be entered into with respect to any properties covered by letters
of intent or that we will acquire or sell any property as to which we may have
entered into a definitive contract. Further, due diligence periods are
frequently extended as needed. An acquisition or sale becomes probable at the
time that the due diligence period expires and the definitive contract has not
been terminated. We are then at risk under an acquisition contract, but only to
the extent of any earnest money deposits associated with the contract, and are
obligated to sell under a sales contract.
We are currently in the due diligence period on contracts for the purchase
of land for development. No assurance can be made that we will complete the
purchases or will be satisfied with the outcome of the due diligence.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Overview
The following discussion should be read in conjunction with all of the
financial statements and notes appearing elsewhere in this report as well as the
audited financial statements appearing in our 2000 Annual Report to
Shareholders. Where appropriate, comparisons are made on a dollars
per-weighted-average-unit basis in order to adjust for changes in the number of
apartment homes owned during each period. The statements contained in this
report that are not historical facts are forward-looking statements, and actual
results may differ materially from those included in the forward-looking
statements. These forward-looking statements involve risks and uncertainties
including, but not limited to, the following: changes in general economic
conditions, changes in financial markets and interest rates, our failure to
qualify as a real estate investment trust ("REIT") and environmental
uncertainties and natural disasters.
Business
Camden Property Trust is a real estate investment trust which reports as a
single business segment. At June 30, 2001, we owned interests in, operated or
were developing 147 multifamily properties containing 52,590 apartment homes
located in the Sunbelt and Midwestern markets from Florida to California. Two of
our multifamily properties containing 918 apartment homes were under development
at June 30, 2001. Two of our newly developed multifamily properties containing
952 apartment homes were in lease-up at June 30, 2001. Additionally, we have
several sites which we intend to develop into multifamily apartment communities.
Property Update
During the first six months of 2001, stabilization occurred at the
following two properties totaling 924 apartment homes: The Park at Oxmoor in
Louisville and The Park at Lee Vista in Orlando. We consider a property
stabilized once it reaches 90% occupancy, or generally one year from opening the
leasing office, with some allowances for larger than average properties. We
completed construction of 620 apartment homes at The Park at Farmers Market,
Phase I in Dallas. Construction continued at two properties totaling 918
apartment homes: The Park at Crown Valley in Mission Viejo and Camden Harbour
View in Long Beach. We have begun leasing at the Mission Viejo property, and are
expected to begin leasing during the third quarter of 2002 at the property in
Long Beach.
During the second quarter of 2001, we acquired Camden Pecos Ranch, a 272
apartment home property located in Phoenix, Arizona for $20.6 million. Camden
Pecos Ranch was developed under our third party development pipeline and was
completed during the fourth quarter 2000. It stabilized during the first quarter
2001.
Dispositions during the first six months of 2001 included two parcels of
land totaling 22.7 acres located in Houston and two operating properties with a
total of 556 apartment homes located in North Carolina. The proceeds from the
land sale totaled $8.6 million and were used to reduce indebtedness outstanding
under our unsecured line of credit. The operating properties were held through a
joint venture and the gains from these dispositions, totaling $2.6 million, are
included in "Equity in income of joint ventures".
13
Property Portfolio
Our multifamily property portfolio, excluding land held for future
development is summarized as follows:
June 30, 2001 December 31, 2000
-------------------------------------------------
Apartment Apartment
Homes Properties Homes Properties
------------ ----------- ----------- ------------
Operating Properties
West
Las Vegas, Nevada (a) 10,653 37 10,653 37
Denver, Colorado (a) 2,529 8 2,529 8
Phoenix, Arizona 2,109 7 1,837 6
Southern California 1,272 3 1,272 3
Tucson, Arizona 821 2 821 2
Reno, Nevada 450 1 450 1
Central
Dallas, Texas (a) 9,067 24 8,447 23
Houston, Texas 7,190 16 7,190 16
St. Louis, Missouri 2,123 6 2,123 6
Austin, Texas 1,745 6 1,745 6
Corpus Christi, Texas 1,663 4 1,663 4
Kansas City, Missouri 596 1 596 1
East
Tampa, Florida 5,023 11 5,023 11
Orlando, Florida 2,804 6 2,804 6
Charlotte, North Carolina (a) 1,659 6 1,879 7
Louisville, Kentucky 1,448 5 1,448 5
Greensboro, North Carolina (a) 520 2 856 3
------------ ----------- ----------- ------------
Total Operating Properties 51,672 145 51,336 145
------------ ----------- ----------- ------------
Properties Under Development
West
Southern California 918 2 918 2
Central
Dallas, Texas 620 1
------------ ----------- ----------- ------------
Total Properties Under Development 918 2 1,538 3
------------ ----------- ----------- ------------
Total Properties 52,590 147 52,874 148
------------ ----------- ----------- ------------
Less: Joint Venture Properties (a) 5,947 21 6,503 23
------------ ----------- ----------- ------------
Total Properties Owned 100% 46,643 126 46,371 125
============ =========== =========== ============
(a) The figures include properties held in joint ventures as follows: one
property with 708 apartment homes in Dallas (and two properties with 556
apartment homes in North Carolina at December 31, 2000) in which we own a
44% interest, the remaining interest is owned by unaffiliated private
investors; one property with 320 apartment homes in Colorado in which we
own a 50% interest, the remaining interest is owned by an unaffiliated
private investor; and 19 properties with 4,919 apartment homes in Nevada in
which we own a 20% interest, the remaining interest is owned by an
unaffiliated private pension fund.
14
At June 30, 2001, we had two completed properties under lease-up as
follows:
Number of Estimated
Product Apartment % Leased Date of Date of
Property and Location Type Homes at 7/25/01 Completion Stabilization
- ---------------------------------------- ------------ ------------- ------------ -------------- -----------------
The Park at Arizona Center
Phoenix, AZ Urban 332 91% 1Q00 3Q01
The Park at Farmers Market, Phase I
Dallas, TX Urban 620 79% 2Q01 4Q01
At June 30, 2001, we had two development properties in various stages of
construction as follows:
Number of Estimated Estimated Estimated
Product Apartment Cost Date of Date of
Property and Location Type Homes ($ millions) Completion Stabilization
- ---------------------------------------- ------------ ------------- -------------- ------------- ---------------
In Lease-Up
The Park at Crown Valley
Mission Viejo, CA Garden 380 $ 58.5 3Q01 4Q01
Under Construction
Camden Harbour View
Long Beach, CA Urban 538 120.0 2Q03 2Q04
-------------- -----------
Total for two development properties 918 $ 178.5
============== ===========
We stage our construction to allow leasing and occupancy during the
construction period which we believe minimizes the duration of the lease-up
period following completion of construction. Our accounting policy related to
properties in the development and leasing phase is that all operating expenses,
excluding depreciation, associated with occupied apartment homes are expensed
against revenues generated by those apartment homes as they become occupied. All
construction and carrying costsare capitalized and reported on the balance sheet
in "Properties under development, including land" until individual buildings are
completed. Upon completion of each building, the total cost of that building and
the associated land is transferred to "Land" and "Buildings and improvements"
and the assets are depreciated over their estimated useful lives using the
straight-line method of depreciation. Upon achieving 90% occupancy, or generally
one year from opening the leasing office (with some allowances for larger than
average properties), whichever occurs first, all apartment homes are considered
operating and we begin expensing all items that were previously considered as
carrying costs.
Our consolidated financial statements includes $137.1 million related to
the development of three urban land projects located in Dallas, Houston and Long
Beach, California. Of this amount, $83.5 million relates to two of our current
development projects - The Park at Farmers Market in Dallas and Camden Harbour
View in Long Beach. We have an additional $25.4 million invested in Dallas,
which we may use for the future development of Farmers Market, Phase II, and we
are also in the construction phase of for-sale townhomes in this area. We have
$28.2 million invested in additional land under development in Houston and Long
Beach. We are currently in the planning phase with respect to these properties
to determine whether to further develop apartment homes in these areas. We may
also sell certain parcels of all three properties to third parties for
commercial and retail development.
15
Comparison of the Quarter Ended June 30, 2001 and June 30, 2000
Earnings before interest, depreciation and amortization increased $3.4
million, or 5.8%, from $59.4 million to $62.8 million for the three months ended
June 30, 2000 and 2001, respectively. The weighted average number of apartment
homes for the second quarter of 2001 decreased by 2,005 apartment homes, or
4.2%, from 47,372 to 45,367. The decrease in the weighted average number of
apartment homes is due to the disposition of 3,599 apartment homes in the third
quarter of 2000, offset by property development and acquisition. Total operating
properties were 124 and 133 at June 30, 2001 and 2000, respectively. The 45,367
weighted average apartment homes and the 124 operating properties exclude the
impact of our ownership interest in properties owned in joint ventures.
Our apartment communities generate rental revenue and other income through
the leasing of apartment homes. Revenues from our rental operations comprised
96% and 97% of our total revenues for the quarters ended June 30, 2001 and 2000,
respectively. The decrease in rental revenue as a percent of total revenue is
due to the increase in fee and asset management income and interest income from
our third party development pipeline and related notes receivable. Our primary
financial focus for our apartment communities is net operating income. Net
operating income represents total property revenues less property operating and
maintenance expenses, including real estate taxes. Net operating income
increased $1.9 million, or 3.1%, from $60.0 million to $61.8 million for the
quarters ended June 30, 2000 and 2001, respectively.
Rental income for the quarter ended June 30, 2001 increased $1.5 million,
or 1.6%, over the quarter ended June 30, 2000. Rental income per apartment home
per month increased $39 or 6.1%, from $645 to $684 for the second quarters of
2000 and 2001, respectively. The increase was primarily due to increased revenue
growth from the stabilized real estate portfolio and higher average rental rates
on the completed development properties. Additionally, properties sold in 2000
had average rental rates which were significantly lower than the portfolio
average. Overall average occupancy increased from 93.7% for the quarter ended
June 30, 2000 to 94.4% for the quarter ended June 30, 2001.
Other property income increased $759,000 from $6.6 million to $7.4 million
for the three months ended June 30, 2000 and 2001, respectively, which
represents a monthly increase of $8 per apartment home. The increase in other
property income was due primarily to increases from revenue sources such as
telephone, cable, water and other miscellaneous property fees.
Property operating and maintenance expenses decreased $69,000, from $28.3
million for the quarter ended June 30, 2000 to $28.2 million for the quarter
ended June 30, 2001. On an annualized basis, property operating and maintenance
expenses increased $99 per unit, or 4.2%. This increase is primarily due to
significant increases in property insurance costs, as well as increases in
salary and benefit expenses per unit. Property operating and maintenance
expenses as a percent of total property income decreased from 28.8% to 28.1% for
the quarters ended June 30, 2000 and 2001, respectively. Our operating expense
ratios decreased primarily as a result of operating efficiencies generated by
our newly developed properties. Also, the operating expense ratios for the
properties sold in 2000 were higher than the portfolio average.
Real estate taxes increased $404,000 from $10.0 million to $10.4 million for the
second quarters of 2000 and 2001, respectively, which represents an annual
increase of $73 per apartment home. The increase was primarily due to increases
in the valuations of renovated and developed properties and increases in
property tax rates.
General and administrative expenses decreased $517,000 from $3.6 million to
$3.1 million, and decreased as a percent of revenues from 3.6% to 3.0% for the
quarters ended June 30, 2000 and 2001 respectively. The decrease was primarily
due to the vesting of outstanding performance-based compensation during the
second quarter of 2000.
16
Interest expense, before capitalized interest, decreased from $21.5 million
for the quarter ended June 30, 2000 to $20.5 million for the quarter ended June
30, 2001. This decrease is primarily due to lower debt balances in 2001 arising
from proceeds received from the dispositions in the third quarter of 2000 and
lower interest rates on variable debt. Interest capitalized was $2.7 million and
$3.9 million for the quarters ended June 30, 2001 and 2000, respectively.
Depreciation and amortization decreased from $25.2 million to $24.8
million. This decrease was due primarily to the sale of eleven properties in the
third quarter of 2000, offset by new development and capital improvements.
Comparison of the Six Months Ended June 30, 2000 and June 30, 1999
Earnings before interest, depreciation and amortization increased $8.3
million, or 7.1%, from $117.3 million to $125.6 million for the six months ended
June 30, 2000 and 2001, respectively. The weighted average number of apartment
homes for the first six months of 2001 decreased by 1,941 apartment homes, or
4.1%, from 47,144 to 45,203. The decrease in the weighted average number of
apartment homes is due to the disposition of 3,599 apartment homes in the third
quarter of 2000, offset by property development and acquisition. Total operating
properties were 124 and 133 at June 30, 2001 and 2000, respectively. The
weighted average apartment homes and the number of operating properties exclude
the impact of our ownership interest in properties owned in joint ventures.
Revenues from our rental operations comprised 95% and 97% of our total
revenues for the six months ended June 30, 2001 and 2000, respectively. The
decrease in rental revenue as a percent of total revenue is due to the increase
in fee and asset management income and interest income from our third party
development and related notes receivable. Net operating income increased $4.6
million, or 3.9%, from $118.1 million to $122.8 million for the six months ended
June 30, 2000 and 2001, respectively.
Rental income for the six months ended June 30, 2001 increased $4.1
million, or 2.3%, over the six months ended June 30, 2000. Rental income per
apartment home per month increased $43 or 6.7%, from $641 to $683 for the first
six months of 2000 and 2001, respectively. The increase was primarily due to
increased revenue growth from the stabilized real estate portfolio and higher
average rental rates on the completed development properties.
Other property income increased $1.3 million from $13.0 million to $14.3
million for the six months ended June 30, 2000 and 2001, respectively, which
represents a monthly increase of $7 per apartment home. The increase in other
property income was due primarily to increases from revenue sources such as
telephone, cable, water and other miscellaneous property fees.
Equity in income of joint ventures increased $2.4 million over the first
six months of 2000, primarily from gains recognized in one of our joint ventures
from the sale of two properties totaling 556 apartment homes. Other income for
the six months ended June 30, 2001 increased $1.6 million over the same period
in 2000. This increase was due to interest earned on our third party
construction notes receivable.
Property operating and maintenance expenses increased $384,000, from $56.0
million to $56.4 million, but decreased as a percent of total property income
from 28.8% to 28.2% for the six months ended June 30, 2000 and 2001,
respectively. On an annualized basis, property operating and maintenance
expenses increased $119 per unit, or 5.0%. This increase is primarily due to
significant increases in property insurance costs as well as increases in salary
and benefit expenses per unit. Our operating expense ratios decreased primarily
as a result of operating efficiencies generated by our newly developed
properties. Additionally, the operating expense ratios for the properties sold
in 2000 were higher than the portfolio average.
17
Real estate taxes increased $480,000 from $20.0 million to $20.5 million
for the first six months of 2000 and 2001, respectively, which represents an
annual increase of $58 per apartment home. The increase was primarily due to
increases in the valuations of renovated and developed properties and increases
in property tax rates.
General and administrative expenses decreased $373,000 from $6.8 million to
$6.4 million, and decreased as a percent of revenues from 3.4% to 3.0% for the
six months ended June 30, 2000 and 2001, respectively. The decrease was
primarily due to the vesting of outstanding performance-based compensation
during the first six months of 2000.
Interest expense, before capitalized interest, decreased from $42.3 million
for the six months ended June 30, 2000 to $40.7 million for the six months ended
June 30, 2001. This decrease is primarily due to lower debt balances in 2001
arising from proceeds received from the dispositions in the third quarter of
2000 and lower interest rates on variable debt. Interest capitalized was $5.8
million and $8.1 million for the six months ended June 30, 2001 and 2000,
respectively.
Depreciation and amortization decreased from $49.8 million to $49.3
million. This decrease was due primarily to the sale of eleven properties in the
third quarter of 2000, offset by new development and capital improvements.
Gains on sale of properties for the six months ended June 30, 2001 totaled
$2.4 million due to the sale of 22.7 acres of undeveloped land located in
Houston. Gains on sales of properties for the six months ended June 30, 2000
totaled $1.9 million due to the sale of a mini-storage facility in Las Vegas and
the sale of approximately 61 acres of undeveloped land located in Las Vegas,
Dallas and Houston.
Liquidity and Capital Resources
Financial Structure
We intend to continue maintaining what management believes to be a
conservative capital structure by:
(i) using what management believes is a prudent combination of debt and
common and preferred equity;
(ii) extending and sequencing the maturity dates of our debt where
possible;
(iii) managing interest rate exposure using fixed rate debt and hedging
where management believes it is appropriate;
(iv) borrowing on an unsecured basis in order to maintain a substantial
number of unencumbered assets; and
(v) maintaining conservative coverage ratios.
The interest expense coverage ratio, net of capitalized interest, was 3.6
and 3.4 times for the six months ended June 30, 2001 and 2000, respectively. At
June 30, 2001 and 2000, 77.0% and 76.3%, respectively, of our properties (based
on invested capital) were unencumbered.
Liquidity
We intend to meet our short-term liquidity requirements through cash flows
provided by operations, our unsecured line of credit discussed in the financial
flexibility section and other short-term borrowings. We expect that our ability
18
to generate cash will be sufficient to meet our short-term liquidity needs,
which include:
(i) normal operating expenses;
(ii) current debt service requirements;
(iii) recurring capital expenditures;
(iv) property developments;
(v) common share repurchases; and
(vi) distributions on our common and preferred equity.
We consider our long-term liquidity requirements to be the repayment of
maturing secured debt and borrowings under our unsecured line of credit and
funding of acquisitions. We intend to meet our long-term liquidity requirements
through the use of common and preferred equity capital, senior unsecured debt
and property dispositions, if the dispositions fit our strategy of portfolio
balancing discussed below.
We intend to concentrate our growth efforts toward selective development
and acquisition opportunities in our current markets, and through the
acquisition of existing operating portfolios and the development of properties
in selected new markets. During the six months ended June 30, 2000, we incurred
$27.5 million in development costs and $20.6 million in acquisition costs. We
are developing two properties at an aggregate cost of approximately $178.5
million, $81.5 million of which was incurred through June 30, 2001. 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 the unsecured line of credit. We also seek to selectively dispose of assets
that management believes have a lower projected net operating income growth rate
than the overall portfolio, or no longer conform to our operating and investment
strategies. Additionally, over the next three years, we will continue
rebalancing our portfolio with the goal of limiting any one market to no more
than 12% of total real estate assets. We expect that any such sales should
generate capital for acquisitions and new developments or for debt reduction.
During the first six months of 2001 we sold 22.7 acres of undeveloped land
located in Houston. Net proceeds from these sales were approximately $8.6
million. We used the proceeds to reduce indebtedness outstanding under our
unsecured line of credit.
Net cash provided by operating activities totaled $88.2 million for the six
months ended June 30, 2001, an increase of $15.7 million, or 21.6%, over the
same period in 2000. This increase was attributable to a $4.6 million increase
in net operating income from the real estate portfolio for the six months ended
June 30, 2001 as compared to the same period in 2000. Additionally, equity in
income of joint ventures increased $2.4 million due to the sales of two joint
venture properties and fee and asset management and other income increased a
total of $1.9 million from third party construction and interest on notes
receivable. Also, other assets increased $7.1 million during 2001, primarily
from increases in third party construction receivables and technology
investments.
Net cash used in investing activities totaled $61.8 million for the six
months ended June 30, 2001 compared to $60.6 million for the same period in
2000. Total real estate assets, before joint ventures and accumulated
depreciation, increased $54.2 million for the six months ended June 30, 2001,
compared to $53.5 million for the six months ended June 30, 2000. For the six
months ended June 30, 2001, net cash flows provided by investing activities
included $8.9 million in net proceeds received from property dispositions. This
increase in cash was offset by expenditures for acquisitions, property
development and capital improvements totaling $20.6 million, $27.5 million and
$12.7 million, respectively for the six months ended June 30, 2001. For the six
months ended June 30, 2000, expenditures for property development and capital
improvements were $58.3 million and $13.7 million, respectively. Additionally,
we received $20.1 million in net proceeds for property dispositions during the
six months ended June 30, 2000.
19
Net cash used in financing activities totaled $28.8 million for the six
months ended June 30, 2001 compared to $14.5 million for the six months ended
June 30, 2000. During the six months ended June 30, 2001, we paid distributions
totaling $59.4 million. We also paid $26.9 million during the first six months
of 2001 to repurchase our unconverted preferred shares. We received proceeds
totaling $211.2 million from the issuance of senior unsecured notes and mortgage
notes. The proceeds from these issuances were used to pay down borrowings under
our line of credit and repay notes payable, which decreased $26.0 million and
$128.1 million, respectively, for the six months ended June 30, 2001. During the
six months ended June 30, 2000, we paid $55.6 million for distributions and
repurchased $26.3 million common shares and units convertible into common
shares. These payments were funded by the issuance of $17.5 million in preferred
units, and an increase in borrowings under our line of credit of $52.0 million.
In 1998, we began repurchasing our securities under a program approved by
our Board of Trust Managers. The plan allows us to repurchase or redeem up to
$200 million of our securities through open market purchases and private
transactions. Management consummates these repurchases and redemptions at the
time when they believe that we can reinvest available cash flow into our own
securities at yields which exceed those currently available on direct real
estate investments. These repurchases were made and we expect that future
repurchases, if any, will be made without incurring additional debt and, in
management's opinion, without reducing our financial flexibility. At June 30,
2001, we had repurchased approximately 6.9 million common shares and redeemed
approximately 106,000 units at a total cost of $180.9 million.
In June 2001, we announced that our Board of Trust Managers had declared a
dividend in the amount of $0.61 per share for the second quarter of 2001 which
was paid on July 17, 2001 to all common shareholders of record as of June 29,
2001. We paid an equivalent amount per unit to holders of the common operating
partnership units. This distribution to common shareholders and holders of
common operating partnership units equates to an annualized dividend rate of
$2.44 per share or unit.
In April 2001, we announced that our issued and outstanding preferred
shares would be redeemed effective April 30, 2001 at a redemption price of
$25.00 per share plus an amount equal to all accumulated, accrued and unpaid
dividends as of April 30, 2001. Prior to redemption, 3.1 million preferred
shares were converted into 2.4 million common shares. The remaining preferred
shares were redeemed for an aggregate of $27.1 million, including unpaid
dividends, using funds available under our unsecured line of credit.
As of June 30, 2001, we had senior unsecured debt totaling $871.1 million
and secured mortgage loans totaling $324.4 million. Our indebtedness, excluding
our unsecured line of credit, has a weighted average maturity of 6.6 years as of
June 30, 2001. Scheduled principal repayments on all notes payable outstanding
at June 30, 2001 is as follows:
(In thousands)
Year Amount
--------- ---------------
2001 $ 52,526
2002 39,866
2003 294,872
2004 234,619
2005 61,227
2006 and thereafter 512,355
---------------
Total $ 1,195,465
===============
20
The scheduled principal repayments in 2001 include $50.0 million senior
unsecured notes due November 2001, which were issued in November 1996 and which
we expect to repay from the unsecured line of credit.
Financial Flexibility
We have a $400 million line of credit with a group of 14 banks which
matures August 2003. The scheduled interest rate on the line of credit is
currently based on a spread over LIBOR or Prime. The scheduled interest rates
are subject to change as our credit ratings change. Advances under the line of
credit may be priced at the scheduled rates, or we may enter into bid rate loans
with participating banks at rates below the scheduled rates. These bid rate
loans have terms of six months or less and may not exceed the lesser of $200
million or the remaining amount available under the line of credit. The line of
credit is subject to customary financial covenants and limitations.
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 comparable
to or below those available under the unsecured line of credit.
As of June 30, 2001, we had $230 million available under the unsecured line
of credit and $550 million available under our universal 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.
On February 7, 2001, we issued from our $750 million shelf registration an
aggregate principal amount of $50 million of 7% five-year senior unsecured notes
maturing on February 15, 2006 and $150 million of 7.625% ten-year senior
unsecured notes maturing on February 15, 2011. Interest on the notes is payable
semiannually on February 15 and August 15, commencing on August 15, 2001. We may
redeem the notes at any time at a redemption price equal to the principal amount
and accrued interest, plus a make-whole provision. The notes are direct, senior
unsecured obligations and rank equally with all other unsecured and
unsubordinated indebtedness. The proceeds from the sale of the notes were $197.8
million, net of issuance costs. We used the net proceeds to reduce indebtedness
outstanding under the unsecured line of credit.
At June 30, 2001, the weighted average interest rate on floating rate debt
was 4.91%.
Funds from Operations
Management considers FFO to be an appropriate measure of performance of an
equity REIT. The National Association of Real Estate Investment Trusts currently
defines FFO as net income (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from debt restructuring and
sales of property, plus real estate depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. Our definition
of diluted FFO assumes conversion at the beginning of the period of all dilutive
convertible securities, including minority interests, which are convertible into
common equity.
We believe that in order to facilitate a clear understanding of our
consolidated historical operating results, FFO should be examined in conjunction
with net income as presented in the consolidated financial statements and data
included elsewhere in this report. FFO is not defined by generally accepted
accounting principles. FFO should not be considered as an alternative to net
income as an indication of our operating performance or to net cash provided by
21
operating activities as a measure of our liquidity. Further, FFO as disclosed by
other REITs may not be comparable to our calculation. Our diluted FFO for the
three and six months ended June 30, 2001 increased $3.2 million and $5.3 million
over the three and six months ended June 30, 2000, respectively. On a per share
basis, diluted FFO for the three and six months ended June 30, 2001 increased
approximately 8.0% and 7.0%, respectively over the same periods in 2000. The
increase in diluted FFO was primarily due to a $1.9 million and $4.6 million
increase in net operating income from our real estate portfolio for the three
and six months ended June 30, 2001 compared to the same period in 2000.
The calculation of basic and diluted FFO for the three and six months ended June
30, 2001 and 2000 follows:
(In thousands)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------- ------------------------
2001 2000 2001 2000
---------- ---------- ----------- ----------
Funds from operations:
Net income to common shareholders $ 16,934 $ 10,594 $ 33,135 $ 23,270
Real estate depreciation 24,198 24,500 48,005 48,302
Adjustments for unconsolidated joint ventures 801 809 (794) 1,618
Gain on sales of properties (656) (2,372) (1,933)
---------- ---------- ----------- ----------
Funds from operations - basic 41,277 35,903 77,974 71,257
Preferred share dividends 202 2,343 2,545 4,686
Income allocated to operating partnership units 478 407 1,549 799
Interest on convertible subordinated debentures 3 53 36 97
Amortization of deferred costs on convertible debentures 5 1 11
---------- ---------- ----------- ----------
Funds from operations - diluted $ 41,960 $ 38,711 $ 82,105 $ 76,850
========== ========== =========== ==========
Weighted average shares - basic 39,797 37,927 38,891 38,210
Common share options and awards granted 1,169 670 1,096 602
Preferred shares 1,047 3,207 2,121 3,207
Minority interest units 2,512 2,549 2,525 2,549
Convertible subordinated debentures 110 39 118
---------- ---------- ----------- ----------
Weighted average shares - diluted 44,525 44,463 44,672 44,686
========== ========== =========== ==========
Inflation
We lease apartments under lease terms generally ranging from six to
thirteen months. Management believes that such short-term lease contracts lessen
the impact of inflation due to our ability to adjust rental rates to market
levels as leases expire.
Impact of New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which is effective for all
fiscal years beginning after June 15, 2000. SFAS No. 133, as amended,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. Under SFAS No. 133, certain contracts that were not formerly
considered derivatives may now meet the definition of a derivative. We have
adopted SFAS No. 133 effective January 1, 2001. The adoption of SFAS No. 133 did
not have a material impact on our financial position, results of operations, or
cash flows.
In July 2001, FASB issued SFAS No. 141, "Business Combinations", which is
effective for business combinations initiated after June 30, 2001. SFAS No. 141
requires all business combinations to be accounted for under the purchase method
and that the pooling-of-interest method is no longer allowed. The adoption of
22
SFAS No. 141 will not have a material impact on our financial position, results
of operations, or cash flows.
In July 2001, FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", which is effective for fiscal years beginning after December 15, 2001.
SFAS No. 142 requires that goodwill no longer be amortized to earnings, but
instead be reviewed for impairment. The adoption of SFAS No. 142 will not have a
material impact on our financial position, results of operations, or cash flows.
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, 2000.
23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Our Annual Meeting of Shareholders was held on May 15, 2001.
(1) The shareholders elected all eight of the nominees for Trust
Manager by the following vote:
Broker
Affirmative Negative Abstentions Non-Voters
Richard J. Campo 28,503,167 6,769,013 - -
William R. Cooper 33,457,684 1,814,496 - -
George A. Hrdlicka 33,500,310 1,778,910 - -
Lewis A. Levey 33,498,949 1,773,231 - -
D. Keith Oden 28,502,667 6,769,513 - -
F. Gardner Parker 33,500,290 1,771,890 - -
Steven A. Webster 33,500,310 1,771,870 - -
Scott S. Ingraham 33,042,320 2,229,860 - -
(2) The shareholders ratified the appointment of Deloitte and Touche
LLP as our independent auditors for the year ending December 31,
by the following vote:
Broker
Affirmative Negative Abstentions Non-Voters
----------- -------- ----------- ----------
35,078,731 77,718 115,731 -
Item 5. Other Information
None
24
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
Current report on Form 8-K dated April 3, 2001 and filed with
the Commission on April 4, 2001, contained information under
Item 5 (Other Events) and Item 7 (Financial Statements, Pro
Forma Financial Information and Exhibits).
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on our behalf by the
undersigned thereunto duly authorized.
CAMDEN PROPERTY TRUST
/s/ G. Steven Dawson August 7, 2001
- ------------------------------------------- --------------------------
G. Steven Dawson Date
Sr. Vice President of Finance,
Chief Financial Officer and Treasurer
/s/ Dennis M. Steen August 7, 2001
- ------------------------------------------- --------------------------
Dennis M. Steen Date
Vice President - Controller and Chief
Accounting Officer