1
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, 1997
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
Incorporation or Organization) Identification Number)
3200 Southwest Freeway, Suite 1500, Houston, Texas 77027
(Address of Principal Executive Offices)
(713) 964-3555
(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 11, 1997, there were 31,637,963 shares of Common Shares of
Beneficial Interest, $0.01 par value outstanding.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAMDEN PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
(Unaudited)
Real estate assets, at cost:
Land $ 178,745 $ 86,673
Buildings and improvements 1,091,064 523,325
Projects under development, including land 34,187 36,547
Investment in joint ventures 16,179
------------ ------------
1,320,175 646,545
Less: accumulated depreciation (74,363) (56,369)
------------ ------------
1,245,812 590,176
Accounts receivable - affiliates 2,010 148
Notes receivable - affiliates 3,406 3,550
Deferred financing and other assets, net 6,028 4,847
Cash and cash equivalents 5,104 2,366
Restricted cash - escrow deposits 3,358 2,423
------------ ------------
Total assets $ 1,265,718 $ 603,510
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable:
Unsecured $ 344,869 $ 185,800
Secured 222,857 58,382
Accounts payable 15,636 7,512
Accrued real estate taxes 12,465 13,246
Accrued expenses and other liabilities 15,153 7,675
Distributions payable 14,371 7,765
------------ ------------
Total liabilities 625,351 280,380
Minority Interest in Operating Partnership 64,565
7.33% Convertible Subordinated Debentures 7,270 27,702
Shareholders' Equity:
Preferred shares of beneficial interest
Common shares of beneficial interest 270 165
Additional paid-in capital 634,388 348,339
Distributions in excess of net income (60,337) (49,515)
Unearned restricted share awards (5,789) (3,561)
------------ ------------
Total shareholders' equity 568,532 295,428
------------ ------------
Total liabilities and shareholders' equity $ 1,265,718 $ 603,510
============ ============
See Notes to Consolidated Financial Statements.
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CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
REVENUES
Rental income $ 51,084 $ 25,956 $ 79,038 $ 51,101
Other property income 2,304 1,134 3,598 2,162
-------- -------- -------- --------
Total property income 53,388 27,090 82,636 53,263
Equity in income of joint ventures 436 436
Fee and asset management 119 48 263 327
Other income 129 93 209 231
-------- -------- -------- --------
Total revenues 54,072 27,231 83,544 53,821
EXPENSES
Property operating and maintenance 18,663 9,892 28,655 19,640
Real estate taxes 5,975 3,323 9,667 6,548
General and administrative 1,216 696 2,040 1,320
Interest 9,090 4,177 13,276 8,237
Depreciation and amortization 12,102 5,645 18,530 11,168
-------- -------- -------- --------
Total expenses 47,046 23,733 72,168 46,913
-------- -------- -------- --------
INCOME BEFORE GAIN ON SALES OF PROPERTIES, LOSSES RELATED
TO EARLY RETIREMENT OF DEBT AND MINORITY INTEREST 7,026 3,498 11,376 6,908
GAIN ON SALES OF PROPERTIES 195
LOSSES RELATED TO EARLY RETIREMENT OF DEBT (286) (5,351)
-------- -------- -------- --------
INCOME BEFORE MINORITY INTEREST 7,026 3,498 11,090 1,752
MINORITY INTEREST IN OPERATING PARTNERSHIP (597) (597)
-------- -------- -------- --------
NET INCOME 6,429 3,498 10,493 1,752
PREFERRED SHARE DIVIDENDS (4)
-------- -------- -------- --------
NET INCOME TO COMMON SHAREHOLDERS $ 6,429 $ 3,498 $ 10,493 $ 1,748
======== ======== ======== ========
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ 0.24 $ 0.24 $ 0.48 $ 0.12
DISTRIBUTIONS DECLARED PER COMMON SHARE $ 0.490 $ 0.475 $ 0.980 $ 0.950
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 26,663 14,511 21,687 14,512
See Notes to Consolidated Financial Statements.
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CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1997 1996
--------- ---------
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 10,493 $ 1,752
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 18,530 11,168
Equity in income of joint ventures, net of cash received (161)
Gain on sales of properties (195)
Losses related to early retirement of debt 286 5,351
Minority interest in Operating Partnership 597
Accretion of discount on unsecured notes payable 69 27
Net change in operating accounts (11,420) (3,196)
--------- ---------
Net cash provided by operating activities 18,394 14,907
CASH FLOW FROM INVESTING ACTIVITIES
Cash of Paragon at acquisition 12,400
Increase in real estate assets (41,384) (39,393)
Net proceeds from sales of properties 19,436
Decrease (increase) in notes receivable for net advances to affiliates 6,139 (92)
Decrease in investment in joint ventures 4,624
Other (308) 7
--------- ---------
Net cash used in investing activities (18,529) (20,042)
CASH FLOW FROM FINANCING ACTIVITIES
Net increase (decrease) in lines of credit and short-term notes 59,000 (80,783)
Proceeds from notes payable 100,000 106,883
Losses related to early retirement of debt (286) (5,351)
Repayment of notes payable (37,392) (581)
Repayment of Paragon debt, including line of credit (93,639)
Distributions to common shareholders and minority interests (24,391) (13,520)
Payment of loan costs (798) (1,349)
Other 379 170
--------- ---------
Net cash provided by financing activities 2,873 5,469
--------- ---------
Net increase in cash and cash equivalents 2,738 334
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,366 236
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,104 $ 570
========= =========
SUPPLEMENTAL INFORMATION
Cash paid for interest, net of interest capitalized $ 13,179 $ 6,831
Interest capitalized $ 1,714 $ 2,533
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Acquisition of Paragon, net of cash acquired:
Fair value of assets acquired $ 647,795
Liabilities assumed 332,553
Common shares issued 262,370
Fair value of minority interest 65,272
Conversion of 7.33% subordinated debentures to common shares, net $ 19,839 $ 2,690
Shares issued under benefit plans $ 3,335 $ 1,678
Conversion of preferred shares and dividends $ 1,954
See Notes to Consolidated Financial Statements.
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CAMDEN PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited financial information has been prepared
pursuant 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 pursuant to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management,
all adjustments and eliminations, consisting only of normal recurring
adjustments, necessary to present fairly the financial position of Camden
Property Trust as of June 30, 1997 and the results of operations for the three
and six months ended June 30, 1997 and 1996, and cash flows for the six months
ended June 30, 1997 and 1996 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 and its subsidiaries ("Camden" or the "Company")
report as a single business segment related to the ownership, development,
acquisition, management, marketing and disposition of multifamily apartment
communities in the Southwest, Southeast and Midwest regions of the United
States. At June 30, 1997, the Company owned interests in, operated or was
developing 103 multifamily properties containing 35,460 apartment units located
in Texas, Arizona, Florida, Kentucky, Missouri, and North Carolina. Three of
the Company's multifamily properties were under development at June 30, 1997 in
Houston and Dallas containing 1,110 apartment units. Five of the Company's
newly developed multifamily properties containing 1,524 apartment units were in
various stages of lease-up at June 30, 1997 in Houston, Phoenix, Charlotte,
Greensboro and Kansas City. The Company has several additional sites including
land in Denver which it intends to develop into multifamily apartment
communities. Additionally, the Company manages 4,673 apartment units in 16
properties for third-parties and affiliates.
Acquisition of Paragon Group, Inc.
On April 15, 1997, the Company acquired through a tax-free merger Paragon
Group, Inc. ("Paragon"), a publicly-traded Dallas-based multifamily real estate
investment trust. The acquisition increased the size of the Company's portfolio
from 53 to 103 multifamily properties (after combining the operations of seven
of the acquired properties with adjacent properties), and from 19,389 to 35,364
apartment units at the date of acquisition, (the "Paragon Acquisition"). As
provided in the Plan of Merger dated December 16, 1996 (the "Merger Agreement")
each share of Paragon common stock outstanding on April 15, 1997 was exchanged
for 0.64 shares of the Company's common shares (based on a share price of
$17.75 per share of Paragon common stock and $27.75 per share of Camden common
shares). The Company issued 9,466,346 shares in exchange for all of the
outstanding shares of Paragon common stock. Subsequent to the acquisition,
2,352,161 Operating Partnership units were outstanding. Approximately $296
million of Paragon debt, at fair value, was assumed in the acquisition.
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The Paragon Acquisition has been recorded under the purchase method of
accounting. In accordance with generally accepted accounting principles, the
purchase price was preliminarily allocated to the net assets acquired based on
their estimated fair values. Such estimates may be revised at a later date. No
goodwill is expected to be recorded in this transaction. The accompanying
consolidated statements of operations include the operating results of Paragon
since April 1, 1997, the effective date of the Paragon Acquisition for
accounting purposes. Pro forma unaudited consolidated operating results of the
Company for the six months ended June 30, 1997 and 1996, assuming that the
Paragon Acquisition had been made as of January 1, 1996, are summarized below
(in thousands, except per share amounts):
SIX MONTHS ENDED
JUNE 30
-----------------------
1997 1996
---------- ----------
Total revenues $ 105,764 $ 103,242
Net income to common shareholders $ 11,773 $ 1,331
Net income per common and common equivalent share $ 0.45 $ 0.06
The non-residential operations of Paragon Group Property Services, Inc., a
Paragon affiliate which was sold on June 30, 1996, and the related gain from
the sale have been adjusted out of the six months ended June 30, 1996 pro forma
amounts. These pro forma results have been prepared for informational purposes
only and do not purport to be indicative of the results of operations which
actually would have resulted had the Paragon Acquisition been completed on the
date indicated, nor are they necessarily indicative of future operations.
Operating Partnership
Camden owns the assets acquired from Paragon, comprising approximately
45.2% of Camden's multifamily apartment units, in an operating partnership (the
"Operating Partnership") in which Camden holds 79.1% of the Operating
Partnership units (the "OP Units"), and the sole 1% general partner interest.
The remaining 19.9% of the Operating Partnership interests are held by former
officers, directors and investors in Paragon, who collectively owned 2,346,640
OP Units at June 30, 1997. Each OP Unit is convertible into one common share of
Camden or cash at the election of the Company. Holders of OP Units are not
entitled to rights as shareholders of the Company prior to redemption of their
OP Units. No members of the Company's management team own OP Units and only two
of the seven Trust Managers of the Company own OP Units.
Camden, through its general partner interest in the Operating Partnership,
holds exclusive power over the business and affairs of the Operating
Partnership without the consent of the holders of OP Units, subject to certain
limitations. As the general partner, subject to the limitations discussed
below, Camden may engage in transactions (including transactions with
affiliates of Camden) to purchase, sell, or finance the real estate assets of
the Operating Partnership, and may borrow or lend funds, as long as such
transactions are fair and reasonable to the Operating Partnership.
As the holder of more than two-thirds of the OP Units, Camden has the
power to dissolve at any time and liquidate the Operating Partnership, and in
connection therewith sell or otherwise dispose of any part or all of the
Operating Partnership's assets. Either the sale of all or substantially all of
the assets of the Operating Partnership without liquidation of the partnership
or, a merger in which the holders of OP Units do not receive the same
consideration as Camden shareholders requires the majority consent of holders
of OP Units, excluding OP Units held by the Company. Otherwise, Camden
generally has
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complete discretion to manage the Operating Partnership and its assets without
consent of the other OP Units holders.
Accounting for Subsidiaries and Joint Ventures
The Company consolidates the operations and accounts of all subsidiaries
and partnerships in which its aggregate ownership is greater than 50%. Those
owned less than 50%, are accounted for using the equity method. As a result of
the Paragon Acquisition, the Company now owns a substantial number of its
assets in an Operating Partnership. At June 30, 1997, the Company owns, through
its wholly-owned subsidiaries, an 80.1% interest in the Operating Partnership.
The remaining 19.9% interest, comprising 2,346,640 OP Units, is accounted for
as minority interest. In connection with the Paragon Acquisition, the Company
also obtained an ownership interest in three properties containing 1,264
apartment units controlled through a private real estate investment trust, and
interests in three office building limited partnerships, all of which are
included as investment in joint ventures.
July 1997 Equity Offering
In July 1997 the Company completed the public sale and issuance of
4,830,000 common shares (the "July 1997 Equity Offering") at a price of $31 per
share. The net proceeds of $142.6 million were used to retire certain secured
indebtedness assumed in the Paragon Acquisition and to reduce amounts
outstanding under the Company's credit facility. See Note 8 for further
discussion.
Dividend Declaration
On July 17, 1997, the Company paid a distribution of $0.49 per share for
the second quarter of 1997 to all holders of record of Camden's common shares
as of June 30, 1997, and paid an equivalent amount per unit to holders of OP
Units. This distribution to common shareholders and holders of OP Units equates
to an annualized dividend rate of $1.96 per share or unit. The Company
determines the amount of cash distributable from the Operating Partnership in
accordance with the partnership agreement and intends to make distributions to
the holders of OP Units in amounts equivalent to the per share dividends paid
to holders of common shares.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS
128"). SFAS No. 128, which is effective for periods ending after December 15,
1997, specifies the computation, presentation and disclosure requirements of
earnings per share ("EPS") and supercedes Accounting Principles Board Opinion
No. 15 ("APB No. 15"). SFAS 128 requires a dual presentation of basic and
diluted EPS. Basic EPS, which excludes the impact of common share equivalents,
replaces primary EPS. Diluted EPS, which utilizes the average market price per
share as opposed to the greater of the average market price per share or ending
market price per share when applying the treasury stock method in determining
common share equivalents, replaces fully diluted EPS. Pro forma basic and
diluted EPS for all historical periods presented, assuming SFAS No. 128 was
effective at the beginning of each such historical period, would not be
materially different than the presentations using APB No. 15.
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Also in February 1997, the FASB issued SFAS No. 129, Disclosure of
Information about Capital Structure, which establishes standards for disclosing
information about an entity's capital structure. Such SFAS is effective for
periods ending after December 15, 1997. The Company believes that its
disclosures already comply with the requirements of SFAS No. 129. In June 1997,
the FASB issued SFAS No. 130, Reporting Comprehensive Income, and SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information. SFAS No.
130 establishes standards for reporting and displaying of comprehensive income
and its components. SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments and related
information in interim and annual financial statements. SFAS No. 131 will not
impact the Company's financial statements as it reports as a single segment.
SFAS Nos. 130 and 131 are effective for periods beginning after December 15,
1997. Management is evaluating what, if any, additional disclosures may be
required upon the implementation of SFAS No. 130.
Reclassifications
Certain reclassifications have been made to amounts in prior year
financial statements to conform with current year presentations. Specifically,
direct on-site general and administrative expenses previously classified as
general and administrative expenses are now reflected as a part of property
operating and maintenance expenses, and certain components of revenues have
been reported separately.
2. NOTES PAYABLE
The following is a summary of the Company's indebtedness:
(In millions)
PRO FORMA AFTER
EQUITY OFFERING DECEMBER 31,
(SEE NOTE 8) JUNE 30, 1997 1996
--------------- ------------- ------------
Senior Unsecured Notes:
6 5/8% Notes, due 2001 $ 99.7 $ 99.7 $ 99.6
7.172% Medium Term Notes, due 2004 25.0 25.0
7% Notes, due 2006 74.2 74.2 74.2
Reset Notes, due 2002 75.0 75.0
Credit facility and other short-term notes 71.0 12.0
------ ------- --------
273.9 344.9 185.8
Secured Notes:
Mortgage loans 156.0 222.8 58.4
------ ------- --------
Total notes payable $ 429.9 $ 567.7 $ 244.2
======= ======= ========
Floating rate debt included in notes payable, net of
hedging agreements $ 50.0 $ 121.0
The Company has a revolving $150 million unsecured line of credit (the
"Unsecured Credit Facility") which matures July 28, 2000. One year prior to
maturity, this debt becomes a term loan, unless it is extended, renegotiated or
repaid. The scheduled interest rate on the loan is currently based on LIBOR
plus 105 basis points or Prime plus 25 basis points. This scheduled rate is
subject to change as the
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Company's credit ratings change. Advances under the Unsecured Credit Facility
may be priced at the scheduled rate, or, the Company may enter into bid rate
loans ("Bid Rate Loans") with participating banks at rates below the scheduled
rate. These Bid Rate Loans have terms of six months or less and may not exceed
the lesser of $75 million or the remaining amount available under the Unsecured
Credit Facility. The Unsecured Credit Facility is subject to customary
financial covenants and limitations.
As an alternative to its Unsecured Credit Facility, the Company from time
to time borrows using competitively bid unsecured short-term notes with lenders
who may or may not be a part of the Unsecured Credit Facility bank group. Such
borrowings vary in term and pricing but have the same covenants as the
Unsecured Credit Facility and are typically priced at interest rates below
those available under the Unsecured Credit Facility.
Subsequent to June 30, 1997, Camden retired an additional $66.7 million
mortgage loan using a portion of the proceeds of the July 1997 Equity Offering.
Including the debt retirements made in conjunction with the July 1997 Equity
Offering, the Company has retired $160.3 million of the $296 million of debt
assumed in the Paragon Acquisition.
On May 9, 1997, the Company issued from its recently filed shelf
registration statement an aggregate principal amount of $75 million of its
unsecured reset notes maturing May 2002 (the "Reset Notes"). During the
one-year period ending May 11, 1998, the interest rate on the Reset Notes,
which will be reset quarterly, will equal 90-day LIBOR plus 32 basis points and
interest will be payable on a quarterly basis. After the one-year period, the
mode and duration of the interest rate on the Reset Notes will be reset by the
Company and a remarketing underwriter as either fixed or floating and for
durations of from six months to four years. The Reset Notes are direct, senior
unsecured obligations of the Company and rank equally with all other unsecured
and unsubordinated indebtedness of the Company. The Reset Notes are redeemable
after May 11, 1998 at the option of the Company at par value. The net proceeds
to the Company from the sale of the Notes were $74.8 million. The Company used
the net proceeds to reduce indebtedness incurred under the Unsecured Credit
Facility which had been used to liquidate portions of the debt assumed in the
Paragon Acquisition.
On June 20, 1997, the Company issued $25 million aggregate principal
amount of senior unsecured notes from its $196 million Medium Term Notes shelf
registration. These fixed rate notes, due in June 2004, bear interest at the
annual rate of 7.172% payable semiannually on March 15 and September 15. The
net proceeds were used to reduce indebtedness outstanding under short-term
unsecured notes.
At June 30, 1997, the Company was party to a $25 million interest rate
hedging agreement which is scheduled to mature in July 2000. The issuing bank
has an option to extend this agreement to July 2002. The LIBOR rate is fixed at
6.1%, resulting in a fixed rate equal to 6.1% plus the actual LIBOR spread on
the related indebtedness. This swap continues to be used as a hedge to manage
the risk of interest rate fluctuations on the Unsecured Credit Facility and
other floating rate indebtedness.
At June 30, 1997, the weighted average interest rate on total notes
payable was 7.1%. Following the retirement of debt using the proceeds of the
July 1997 Equity Offering, the weighted average interest rate was reduced to
7.0%.
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3. NET CHANGE IN OPERATING ACCOUNTS
The effect of changes in the operating accounts on cash flows from
operating activities is as follows:
(In thousands)
SIX MONTHS ENDED
JUNE 30,
------------------------
1997 1996
--------- ---------
Decrease (increase) in assets:
Accounts receivable - affiliates $ 986 $ (365)
Deferred financing and other assets, net (255) 770
Restricted cash - escrow deposits 1,543 827
Increase (decrease) in liabilities:
Accounts payable 2,646 (1,262)
Accrued real estate taxes (2,938) (4,528)
Accrued expenses and other liabilities (13,402) 1,362
--------- --------
Net change in operating accounts $ (11,420) $ (3,196)
========= ========
4. PROPERTY OPERATING AND MAINTENANCE EXPENSES
Property operating and maintenance expenses included normal repairs and
maintenance totaling $3.8 million and $5.5 million for the three and six months
ended June 30, 1997, respectively and $2.1 million and $4.0 million for the
three and six months ended June 30, 1996, respectively. In addition, property
operating and maintenance expense included amounts incurred subsequent to the
initial renovation and rehabilitation periods for recurring expenditures such
as carpets, appliances and other furnishings and equipment, which might
otherwise be capitalized, totaling $1.5 million and $2.2 million for the three
and six months of 1997 and $0.9 million and $1.8 million for the same periods
in 1996.
5. RESTRICTED SHARE AND OPTION AWARDS
During the first six months of 1997, 124,159 restricted shares were
granted in lieu of cash compensation to certain key employees and non-employee
trust managers. The restricted shares were issued based on market value at the
date of grant and have vesting periods of up to five years. An additional
310,000 options were granted at the market value exercise price and are
exercisable in equal increments on or following each of the first three
anniversaries of the date of grant. During the second quarter of 1997, the
Company's shareholders and Trust Managers voted to amend the Plan, which
resulted in an increase in the maximum number of common shares available for
issuance under the Plan to 10% of the common shares outstanding at any time.
During the six month period ended June 30, 1997, previously granted options for
65,064 shares became exercisable and 47,804 restricted shares became vested.
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6. EMPLOYEE STOCK PURCHASE PLAN
In July 1997, the Company established and commenced an Employee Stock
Purchase Plan ("ESPP") for all active employees, officers, and Trust Managers
who have completed one month of continuous service. Participants may elect to
purchase Camden common shares through payroll or director fee deductions and/or
through quarterly contributions. At the end of each six-month offering period,
each participant's account balance is applied to acquire common shares of the
Company at 85% of the market value, as defined, on the first or last day of the
offering period, whichever price is lower. A participant may not purchase more
than $25,000 in value of shares during any Plan Year, as defined.
7. CONVERTIBLE SUBORDINATED DEBENTURES
During the first six months of 1997, debentures in the principal amount of
$20.4 million were converted into approximately 851,000 common shares. These
debentures were converted on or before the record date for the quarterly
dividend and the related debenture interest was forfeited by the debenture
holders in accordance with the indenture. In addition, $593,000 of unamortized
debenture issue costs were reclassified to additional paid-in capital. Had all
converted debentures converted as of the beginning of the period, net income
per common and common equivalent share would have remained at $0.24 for the
three months ended June 30,1997, and would have been $0.50 per share for the
six months ended June 30, 1997.
8. SUBSEQUENT EVENTS
On July 21, 1997, the Company completed the public sale and issuance of
4,830,000 common shares, including 630,000 shares issued to the underwriters to
satisfy over-allotments, at a price of $31 per share. The net proceeds of
$142.6 million were used to retire certain secured indebtedness assumed in the
Paragon Acquisition and to reduce amounts outstanding under the Unsecured
Credit Facility which had been advanced to fund recent property developments, a
96-unit apartment acquisition and other working capital requirements. Had the
July 1997 Equity Offering been completed on the effective date of the Paragon
Acquisition, interest expense on a pro forma basis would have been $6.6 million
for the three months ended June 30, 1997. Net income to common shareholders on
a pro forma basis would have been $8.9 million or $0.28 per share for the three
months ended June 30, 1997.
In the ordinary course of its business, the Company issues letters of
intent indicating a willingness to negotiate for the purchase or sale of
multifamily properties or development land. In accordance with the local real
estate market practice, such letters of intent are non-binding, and neither
party to the letter of intent is obligated to pursue negotiations unless and
until a definitive contract is entered into by the parties. Even if definitive
contracts are entered into, the letters of intent and resulting contracts
contemplate that such contract will provide the purchaser with periods varying
from 25 to 180 days during which it will evaluate the properties and conduct
its 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 the Company will acquire or sell any property as to which the Company 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. The Company is then at risk under an
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acquisition contract, but only to the extent of any earnest money deposits
associated with the contract, and is obligated to sell under a sales contract.
The Company is currently in the due diligence period on contracts for the
purchase of land for development or acquisition of properties. No assurance can
be made that the Company will be able to complete the negotiations or become
satisfied with the outcome of the due diligence.
The Company seeks to selectively dispose of assets that are either not in
core markets, have a lower projected net operating income growth rate than the
overall portfolio, or no longer conform to the Company's operating and
investment strategies. The proceeds from these sales may be reinvested in
acquisitions, developments or used to retire debt.
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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 thereto appearing elsewhere in this report as
well as the audited financial statements appearing in the Company's 1996 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 units owned during each period. The statements contained in this
report that are not historical facts are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. 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 in the
markets that could impact demand for the Company's product and changes in
financial markets and interest rates impacting the Company's ability to meet
its financing needs and obligations.
Camden Property Trust and its subsidiaries ("Camden" or the "Company")
report as a single business segment related to the ownership, development,
acquisition, management, marketing and disposition of multifamily apartment
communities in the Southwest, Southeast and Midwest regions of the United
States. At June 30, 1997, the Company owned interests in, operated or was
developing 103 multifamily properties containing 35,460 apartment units located
in Texas, Arizona, Florida, Kentucky, Missouri, and North Carolina. Three of
the Company's multifamily properties were under development at June 30, 1997 in
Houston and Dallas containing 1,110 apartment units ("Development Properties").
Five of the Company's newly developed multifamily properties containing 1,524
apartment units were in various stages of lease-up at June 30, 1997 in Houston,
Phoenix, Charlotte, Greensboro and Kansas City ("Lease-up Properties"). The
Company has several additional sites including land in Denver which it intends
to develop into multifamily apartment communities. Additionally, the Company
manages 4,673 apartment units in 16 properties for third-parties and
affiliates.
Acquisition of Paragon Group, Inc.
On April 15, 1997, the Company acquired through a tax-free merger Paragon
Group, Inc., ("Paragon"), a publicly-traded Dallas-based multifamily real
estate investment trust. The acquisition increased the size of the Company's
portfolio from 53 to 103 multifamily properties (after combining the operations
of seven of the acquired properties with adjacent properties), and from 19,389
to 35,364 apartment units at the date of acquisition, (the "Paragon
Acquisition"). As provided in the Plan of Merger dated December 16, 1996 (the
"Merger Agreement") each share of Paragon common stock outstanding on April 15,
1997 was exchanged for 0.64 shares of the Company's common shares (based on a
share price of $17.75 per share of Paragon common stock and $27.75 per share of
Camden common shares). The Company issued 9,466,346 shares in exchange for all
of the outstanding shares of Paragon common stock. Subsequent to the
acquisition, 2,352,161 Operating Partnership units were outstanding.
Approximately $296 million of Paragon debt, at fair value, was assumed in the
acquisition.
-13-
14
Property Portfolio
The Company's multifamily property portfolio, excluding land held for
development, at June 30, 1997 and December 31, 1996 is summarized as follows:
JUNE 30, 1997** DECEMBER 31, 1996
----------------------------------- -----------------------------------
Number Number of Number of Number of
of Units Properties %* Units Properties %*
----------- ------------ ------ ----------- ----------- -----
Texas
Houston 7,745 20 22% 7,745 20 40%
Dallas 9,381 26 27 6,777 18 35
Austin 1,745 6 5 1,745 6 9
Other 1,585 5 4 1,585 5 8
------- ---- ---- ------ --- ----
Total Texas Properties 20,456 57 58 17,852 49 92
------- ---- ---- ------ --- ----
Arizona 1,537 4 4 1,537 4 8
Florida 6,103 17 17
Kentucky 1,142 5 3
Missouri 3,487 10 10
North Carolina 2,735 10 8
------- ---- ---- ------ --- ----
Total Properties 35,460 103 100% 19,389 53 100%
======= ==== ==== ====== === ====
* Based on number of units.
** Includes three properties containing 1,264 units owned in joint ventures.
Property Update
Leasing continued during the second quarter on the two development
properties completed during the first quarter of 1997 and on the three
development properties acquired in the Paragon Acquisition.
The following table sets forth information regarding the Lease-Up
Properties:
Estimated
Number Cost % Leased Date of Estimated
Property and Location of Units ($ millions) at 8/6/97 Completion Stabilization
- ------------------------------------ ---------- ------------- ------------ ----------------- -----------------
The Park at Sugar Grove
Houston, TX 380 $ 19.3 96% 1Q97 3Q97
The Park at Arrowhead Springs
Phoenix, AZ 288 16.1 80 1Q97 3Q97
Park Commons*
Charlotte, NC 232 11.5 83 2Q97 3Q97
Brassfield Park*
Greensboro, NC 336 17.1 82 2Q97 3Q97
Camden Passage Phase II*
Kansas City, MO 288 15.6 74 2Q97 3Q97
----- ------
Total 1,524 $ 79.6
===== ======
* Acquired in Paragon Acquisition. Brassfield is owned through a joint venture.
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15
Construction continued on The Park at Centreport, The Park at Buckingham,
and Phase II of The Park at Vanderbilt. The Park at Centreport is expected to
be ready for first occupancy during the third quarter of 1997 with
stabilization to occur during the third quarter of 1998. The Park at Buckingham
and Phase II of The Park at Vanderbilt began leasing during the second quarter
of 1997.
The following table sets forth information regarding the Development
Properties:
Estimated
Number Cost % Leased Estimated Date Estimated
Property and Location of Units ($ millions) at 8/6/97 of Completion Stabilization
- ------------------------------------ ---------- ------------- ------------ ----------------- -----------------
The Park at Buckingham
Dallas, TX 464 $ 25.5 22% 1Q98 3Q98
The Park at Centreport
Dallas, TX 268 14.0 0 1Q98 3Q98
The Park at Vanderbilt, Phase II
Houston, TX 378 24.6 60 3Q97 4Q97
----- ------
Total 1,110 $ 64.1
===== ======
Historically, the Company has staged its construction to allow leasing and
occupancy during the construction period thereby minimizing the lease-up period
following completion of construction. The Company's accounting policy related
to properties in the development and leasing phase is that all operating
expenses, excluding depreciation, associated with occupied units are expensed
against revenues generated by those units as they become occupied. All
construction and carrying costs are capitalized and reported on the balance
sheet in "Projects under development, including land" until such units are
completed. Upon completion of each building of the project, the total cost of
that building and the associated land is transferred to "Land" and "Buildings
and improvements" and the assets are depreciated over their estimated useful
lives using the straight-line method of depreciation. Upon achieving 90%
occupancy, or one year from opening the leasing office, whichever occurs first,
all units are considered operating and the Company begins expensing all items
that were previously considered as carrying costs.
Comparison of the Quarter Ended June 30, 1997 and June 30, 1996
The changes in operating results from period to period are primarily due to
the Paragon Acquisition, development of four properties aggregating 1,552
units, and an increase in net operating income generated by the stabilized
portfolio. The weighted average number of units for the second quarter of 1997
increased by 15,218 units, or 88.6%, from 17,174 to 32,392. Total operating
properties were 97 and 50 at June 30, 1997 and 1996, respectively. The 32,392
weighted average units and the 97 operating properties exclude the impact of
the Company's ownership interest in 1,264 units on three properties owned in
joint ventures.
The average rental income per unit per month increased $22 or 4.4%, from
$504 to $526 for the second quarter of 1996 and 1997, respectively. The
increase was primarily due to increased revenue growth from the stabilized real
estate portfolio and higher average rental rates on properties added to the
portfolio through the Paragon Acquisition and completion of new development
properties. Overall average occupancy decreased slightly from 94.2% to 93.8%
for the quarters ended June 30, 1996 and 1997, respectively.
-15-
16
Other property income increased $1.2 million from $1.1 million to $2.3
million for the quarters ended June 30, 1996 and 1997, respectively. The
increase in other property income was due to a larger number of units owned and
in operation.
Property operating and maintenance expenses and real estate taxes increased
$11.4 million, from $13.2 million to $24.6 million, which represents an annual
decrease of $36 per unit. The Company's operating expense ratios decreased over
the prior year primarily as a result of operating efficiencies resulting from a
larger portfolio together with savings in utilities and other costs. Real
estate taxes increased as a result of the Paragon Acquisition, increases in the
valuations of renovated and developed properties, and increases in property tax
rates. However, on a per unit basis, annualized taxes declined from $774 to
$738.
General and administrative expenses increased $520,000 from $696,000 to
$1.2 million, a rate consistent with the overall increase in revenues.
Interest expense increased from $4.2 million to $9.1 million due to
increased indebtedness related to the Paragon Acquisition, completed
developments and renovations. The increase was partially offset by reductions
in average interest rates on the Company's debt. Interest capitalized remained
constant at $1.1 million for the quarters ended June 30, 1997 and 1996,
respectively.
Depreciation and amortization increased from $5.6 million to $12.1 million.
This increase was due primarily to the Paragon Acquisition, developments, and
renovations.
Comparison of the Six Months Ended June 30, 1997 and June 30, 1996
The changes in operating results from period to period are primarily due to
the Paragon Acquisition, development of six properties aggregating 2,356 units,
and an increase in net operating income generated by the stabilized portfolio.
The weighted average number of units for the first six months of 1997 increased
by 8,040 units, or 47.1%, from 17,068 to 25,108. Total operating properties
were 97 and 50 at June 30, 1997 and 1996, respectively. The 25,108 weighted
average units and the 97 operating properties exclude the impact of the
Company's ownership interest in 1,264 units on three properties owned in joint
ventures.
The average rental income per unit per month increased $26 or 5.2%, from
$499 to $525 for the six months ended June 30, 1996 and 1997, respectively. The
increase was primarily due to increased revenue growth from the stabilized real
estate portfolio and higher average rental rates on properties added to the
portfolio through the Paragon Acquisition and completion of new development
properties.
Other property income increased $1.4 million from $2.2 million to $3.6
million for the six months ended June 30, 1996 and 1997, respectively. The
increase in other property income was due to a larger number of units owned and
in operation.
Property operating and maintenance expenses and real estate taxes increased
$12.1 million, from $26.2 million to $38.3 million, which represents an annual
decrease of $16 per unit. The Company's operating expense ratios decreased over
the prior year primarily as a result of operating efficiencies resulting from a
larger portfolio together with savings in utilities and other costs. Real
estate taxes increased as a result of the Paragon Acquisition, increases in the
valuations of renovated and developed properties, and increases in property tax
rates.
General and administrative expenses increased $720,000 from $1.3 million to
$2.0 million, a rate consistent with the overall increase in revenues.
-16-
17
Interest expense increased from $8.2 million to $13.3 million due to
increased indebtedness related to the Paragon Acquisition, completed
developments and renovations. This increase was partially offset by reductions
in average interest rates on the Company's debt. Interest capitalized was $1.7
million and $2.5 million for the six months ended June 30, 1997 and 1996,
respectively.
Depreciation and amortization increased from $11.2 million to $18.5
million. This increase was due primarily to the Paragon Acquisition,
developments, and renovations.
LIQUIDITY AND CAPITAL RESOURCES
Financial Structure
The Company intends to continue maintaining what management believes to be
a conservative capital structure by: (i) targeting a ratio of total debt to
total market capitalization of less than 50%; (ii) extending and sequencing the
maturity dates of its debt where possible; (iii) managing floating interest
rate exposure using fixed rate debt and hedging, where appropriate; (iv)
borrowing on an unsecured basis; (v) maintaining a substantial number of
unencumbered assets; and (vi) maintaining a conservative debt service coverage
ratio.
On July 21, 1997, the Company completed the public sale and issuance of
4,830,000 common shares, including 630,000 shares issued to the underwriters to
satisfy over-allotments, (the "July 1997 Equity Offering") at a price of $31
per share. Net proceeds from the July 1997 Equity Offering were used to retire
certain secured indebtedness assumed in the Paragon Acquisition and to reduce
amounts outstanding under the $150 million unsecured line of credit (the
"Unsecured Credit Facility") which had been advanced to fund recent property
developments, a 96-unit apartment acquisition and other working capital
requirements. Following the July 1997 Equity Offering, the Company had
outstanding 31,002,349 common shares, (excluding: 897,733 shares reserved for
issuance upon the exercise of outstanding options granted pursuant to the
Company's 1993 Share Incentive Plan (the "Plan"); (ii) 2,346,640 common shares
issuable upon conversion of Operating Partnership Units; (iii) 299,583 common
shares issuable upon conversion of the Company's outstanding convertible
debentures; and, (iv) 183,434 common shares awarded under the Plan to certain
executive officers of the Company and held in trust by the Company.)
Camden has maintained on a quarterly basis a financial structure with no
more than 40% total debt to total market capitalization since its initial
public offering in July 1993. At June 30, 1997, the Company's ratio of total
debt to total market capitalization was approximately 37.7% (based on the
closing price of $31.63 per common share of the Company on the New York Stock
Exchange composite tape on June 30, 1997). This ratio represents total
consolidated debt of the Company as a percentage of the market value of the
Company's common shares (including common shares issuable upon the conversion
of convertible securities and operating partnership units, but excluding common
shares issuable upon exercise of outstanding options) plus total consolidated
debt. The interest coverage ratio was 3.1 and 3.2 times earnings before
interest, taxes, depreciation, and amortization ("EBITDA") for the three months
ended June 30, 1997 and 1996, respectively, and 3.3 and 3.2 times EBITBA, for
the six months ended June 30, 1997 and 1996, respectively. Following the July
1997 Equity Offering and the application of proceeds to reduce outstanding
secured and unsecured debt, the ratio of debt to total market capitalization
was reduced to 28.3%. Had the offering and subsequent debt retirement been
completed at the beginning of the quarter, the interest coverage ratio for the
second quarter of 1997 would have been 4.3 times EBITDA.
-17-
18
Liquidity
The Company intends to meet its short-term liquidity requirements through
cash flows provided by operations, the Unsecured Credit Facility, and other
short-term borrowings. The Company uses equity capital and senior unsecured
debt to refinance maturing secured debt and borrowings under its Unsecured
Credit Facility and other short-term borrowings. Following the Offering in July
1997, the Company had availability of $142 million under the Unsecured Credit
Facility. The Company has on file a universal shelf registration providing for
the issuance of up to $500 million in equity, debt, preferred or convertible
securities, of which, over $275 million remains unused. Additionally, the
Company has a $196 million medium-term note program used to provide
intermediate and long-term, unsecured publicly-traded debt financing, of which
$171 million remains unused. Finally, the Company has significant unencumbered
real estate assets which could be sold or used as collateral for financing
purposes should other sources of capital not be available. The Company
considers its ability to generate cash to be sufficient, and expects to be able
to meet future operating cash requirements and to pay distributions to
shareholders and holders of operating partnership units.
On July 17, 1997, the Company paid a distribution of $0.49 per share for
the second quarter of 1997 to all holders of record of Camden's common shares
as of June 30, 1997, and paid an equivalent amount per unit to holders of
Operating Partnership Units ("OP Units"). This distribution to common
shareholders and holders of OP Units equates to an annualized dividend rate of
$1.96 per share or unit. The Company determines the amount of cash
distributable from the Operating Partnership in accordance with the partnership
agreement and intends to make distributions to the holders of OP Units in
amounts equivalent to the per share dividends paid to holders of common shares.
Financial Flexibility
The Company concentrates its growth efforts toward selective development
and acquisition opportunities in its core markets, and through the acquisition
of existing operating portfolios and development properties in selected new
markets. During the six months ended June 30, 1997, the Company incurred $33.5
million in development costs and $3.9 million in acquisition costs for a
property purchased for cash. In addition, Camden issued 9.5 million common
shares and assumed $296 million of indebtedness, at fair value, to purchase
Paragon. The Company funds its developments and acquisitions through a
combination of equity capital, OP Units, debt securities, the Unsecured Credit
Facility, other short-term borrowing arrangements, and previously has used
construction and other mortgage loans. The Company also seeks to selectively
dispose of assets that are either not in core markets, have a lower projected
net operating income growth rate than the overall portfolio, or no longer
conform to the Company's operating and investment strategies. Such sales also
generate capital for reinvestment into other acquisitions and new developments.
The Company's Unsecured Credit Facility matures July 28, 2000. One year
prior to maturity, this note becomes a term loan, unless it is extended,
renegotiated or repaid. The scheduled interest rate on the loan is currently
based on LIBOR plus 105 basis points or Prime plus 25 basis points. This
scheduled rate is subject to change as the Company's credit ratings change.
Advances under the Unsecured Credit Facility may be priced at the scheduled
rate, or, the Company may enter into bid rate loans ("Bid Rate Loans") with
participating banks at rates below the scheduled rate. These Bid Rate Loans
have terms of six months or less and may not exceed the lesser of $75 million
or the remaining amount available under the Unsecured Credit Facility. The
Unsecured Credit Facility is subject to customary financial covenants and
limitations.
As an alternative to its Unsecured Credit Facility, the Company from time
to time borrows using competitively bid unsecured short-term notes with lenders
who may or may not be a part of the Unsecured Credit Facility bank group. Such
borrowings vary in term and pricing but have the same
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19
covenants as the Unsecured Credit Facility and are typically priced at interest
rates below those available under the Unsecured Credit Facility.
Subsequent to June 30, 1997, Camden retired an additional $66.7 million
mortgage loan using a portion of the proceeds of the July 1997 Equity Offering.
Including the debt retirements made in conjunction with the July 1997 Equity
Offering, the Company has retired $160.3 million of the $296 million of debt
assumed in the Paragon Acquisition.
On May 9, 1997, the Company issued from its recently filed shelf
registration statement an aggregate principal amount of $75 million of its
unsecured reset notes maturing May 2002 (the "Reset Notes"). During the
one-year period ending May 11, 1998, the interest rate on the Reset Notes,
which will be reset quarterly, will equal 90-day LIBOR plus 32 basis points and
interest will be payable on a quarterly basis. After the one-year period, the
mode and duration of the interest rate on the Reset Notes will be reset by the
Company and a remarketing underwriter as either fixed or floating and for
durations of from six months to four years. The Reset Notes are direct, senior
unsecured obligations of the Company and rank equally with all other unsecured
and unsubordinated indebtedness of the Company. The Reset Notes are redeemable
after May 11, 1998 at the option of the Company at par value. The net proceeds
to the Company from the sale of the Notes were $74.8 million. The Company used
the net proceeds to reduce indebtedness incurred under the Unsecured Credit
Facility which had been used to liquidate portions of the debt assumed in the
Paragon Acquisition.
On June 20, 1997, the Company issued $25 million aggregate principal amount
of senior unsecured notes from its $196 million Medium Term Notes shelf
registration. These fixed rate notes, due in June 2004, bear interest at the
annual rate of 7.172% payable semiannually on March 15 and September 15. The
net proceeds were used to reduce indebtedness outstanding under short-term
unsecured notes.
At June 30, 1997, the Company was party to a $25 million interest rate
hedging agreement which is scheduled to mature in July 2000. The issuing bank
has an option to extend this agreement to July 2002. The LIBOR rate is fixed at
6.1%, resulting in a fixed rate equal to 6.1% plus the actual LIBOR spread on
the related indebtedness. This swap continues to be used as a hedge to manage
the risk of interest rate fluctuations on the Unsecured Credit Facility and
other floating rate indebtedness.
At June 30, 1997, the weighted average interest rate on total notes payable
was 7.1%. Following the retirement of debt using the proceeds of the July 1997
Equity Offering, the weighted average interest rate was reduced to 7.0%.
FUNDS FROM OPERATIONS
Funds from operations ("FFO") for the three and six months ended June 30,
1997 increased $9.5 million and $10.7 million, respectively over the same
periods of 1996. Management considers FFO an appropriate measure of performance
of an equity REIT. The National Association of Real Estate Investment Trusts
("NAREIT") currently defines FFO as net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from
debt restructuring and sales of property, plus real estate depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. In addition, extraordinary or unusual items, along with significant
non-recurring events that materially distort the comparative measure of FFO are
typically disregarded in its calculation. The Company believes that in order to
facilitate a clear understanding of the consolidated historical operating
results of the Company, FFO should be examined in conjunction with net income
as presented in the consolidated financial statements and data included
elsewhere in this report. FFO should not be considered as an alternative to net
income as an indication of the Company's operating performance or to net cash
provided by operating activities as a measure of the Company's liquidity.
-19-
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Further, FFO as disclosed by other REITs may not be comparable to the Company's
calculation of FFO. Camden's calculation of FFO for the three and six month
periods ended June 30, 1997 and June 30, 1996 follows:
(In thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- -----------------------
1997 1996 1997 1996
--------- -------- --------- ---------
Net income to common shareholders $ 6,429 $ 3,498 $ 10,493 $ 1,748
Real estate depreciation 11,807 5,451 17,996 10,787
Minority interest in Operating Partnership 597 597
Real estate depreciation from unconsolidated ventures 283 283
Interest on convertible subordinated debentures 133 756 429 1,563
Amortization of deferred costs on convertible debentures 22 80 64 159
Gain on sales of properties (195)
Losses related to early retirement of debt 286 5,351
Preferred share dividends 4
-------- ------- -------- --------
Funds from operations - fully diluted $ 19,271 $ 9,785 $ 30,148 $ 19,417
======== ======= ======== ========
Weighted average number of common and common
equivalent shares outstanding - fully diluted 29,633 16,381 23,689 16,378
The Company expenses recurring capital expenditures for items such as
carpets, appliances and HVAC units as these items are replaced in their normal
course. During a renovation, many of these items may be capitalized,
particularly to the extent that an inordinate number of such items are
replaced. Nonrecurring capital expenditures for such items as roof replacements
are capitalized. The Company capitalized $4.4 million and $3.8 million in the
six months ended June 30, 1997 and 1996, respectively of non-recurring
renovations and improvements to extend the economic lives and enhance its
multifamily properties.
INFLATION
The Company leases 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 the ability to adjust rental rates to
market levels as leases expire.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held a Special Shareholders Meeting April 15, 1997.
The Shareholders voted to approve the Agreement and Plan of
Merger by and among Camden Property Trust, Camden Subsidiary,
Inc., and Paragon Group, Inc.
Affirmative Negative Abstentions
----------- -------- -----------
11,105,390 57,678 88,955
(b) The Company's Annual Meeting of Shareholders was held June 5,
1997.
(1) The Shareholders elected five of the seven Trust Managers
nominated by the Board of Trust Managers. William R. Cooper
and Lewis A. Levey, who were nominated by the Board of
Trust Managers, did not receive the requisite two-thirds
majority vote by the shareholders of all outstanding
shares. The Board of Trust Managers re-appointed Messrs.
Cooper and Levey, however, as Trust Managers.
Broker
Affirmative Negative Abstentions Non-Votes
----------- -------- ----------- ---------
Richard J. Campo 15,652,818 62,204 0 0
D. Keith Oden 15,658,430 56,593 0 0
George A. Hrdlicka 15,658,430 56,593 0 0
F. Gardner Parker 15,658,430 56,593 0 0
Steven A. Webster 15,658,430 56,593 0 0
William R. Cooper 15,658,430 56,593 0 0
Lewis A. Levey 15,658,430 56,593 0 0
(2) The Shareholders approved an amendment to the 1993 Share
Incentive Plan to increase the number of shares authorized
for issuance under the Plan.
Broker
Affirmative Negative Abstentions Non-Votes
----------- -------- ----------- ---------
11,853,947 3,500,980 242,561 124,055
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22
(3) The Shareholders ratified the appointment of Deloitte &
Touche LLP as independent auditors of the Company for the
year ending December 31, 1997.
Broker
Affirmative Negative Abstentions Non-Votes
----------- -------- ----------- ---------
15,670,370 18,512 26,189 124,055
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated Declaration of the Trust of the
Company, as last amended on April 15, 1997
3.2 Amended and Restated Bylaws of the Trust (filed as
Exhibit 3.1 to the Company's Current Report on Form 8-K
dated October 10, 1996, filed with the Commission on
November 18, 1996 (File No. 1-12110), and incorporated
by reference herein)
4.1 Indenture dated as of February 15, 1996 between the
Company and U.S. Trust Company of Texas, N.A., as
trustee (filed as Exhibit 4.1 to the Company's Current
Report on Form 8-K dated February 15, 1996 (File No.
1-12110), and incorporated by reference herein)
4.2 First Supplemental Indenture dated as of February 15,
1996 between the Company and U.S. Trust Company of
Texas N.A., as trustee (filed as Exhibit 4.2 to the
Company's Current Report on Form 8-K dated February 15,
1996 (File No. 1-12110), and incorporated by reference
herein)
4.3 Form of Camden Property Trust Remarketed Reset Note due
May 9, 2002 (filed as Exhibit 4.3 to the Company's
Current Report on Form 8-K dated May 9, 1997, filed
with the Commission on May 21, 1997 (File No. 1-12110),
and incorporated by reference by herein)
10.1 Underwriting Agreement dated May 6, 1997 between the
Company and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (filed as Exhibit 1.1 to the Company's
Current Report on Form 8-K dated May 9, 1997, filed
with the Commission on May 21, 1997 (File No. 1-12110),
and incorporated by reference herein)
10.2 Remarketing Agreement dated May 6, 1997 between the
Company and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (filed as Exhibit 1.2 to the Company's
Current Report on Form 8-K dated May 9, 1997, filed
with the Commission on May 21, 1997 (File No. 1-12110),
and incorporated by reference herein)
10.3 Camden Development, Inc. 1997 Non-Qualified Employee
Stock Purchase Plan
11.1 Statement regarding Computation of Per Share Earnings
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23.1 Consent of Ernst & Young LLP (filed as Exhibit 23.1 to
the Company's Current Report on Form 8-K dated June 30,
1997, filed with the Commission on July 8, 1997, as
amended by Form 8-K/A filed with the Commission on July
18, 1997 (Filed No. 1-12110), and incorporated by
reference herein)
27.1 Financial Data Schedule (filed only electronically with
the Commission)
99.1 Registration Rights Agreement dated April 15, 1997
among the Company, the Operating Partnership and
certain investors set forth therein (filed as Exhibit
99.1 to the Company's Registration Statement on Form
S-3 filed with the Commission on April 22, 1997 (File
No. 333-25637) and incorporated by reference herein)
(b) Reports on Form 8-K
Current Report on Form 8-K dated April 15, 1997 was filed with
the Commission on April 30, 1997, contained information under
Item 2 (Acquisition or Disposition of Assets) and Item 7
(Financial Statements, Pro Forma Financial Information and
Exhibits), and was amended by Form 8-K/A filed with the
Commission on June 16, 1997, which contained information under
Item 7 (Financial Statements, Pro Forma Financial Information
and Exhibits).
Current Report on Form 8-K dated May 9, 1997 and filed with
the Commission on May 21, 1997, contained information under
Item 5 (Other Events) and Item 7 (Financial Statements, Pro
Forma Financial Information and Exhibits).
Current Report on Form 8-K dated June 30, 1997 and filed with
the Commission on July 8, 1997, contained information under
Item 5 (Other Events) and Item 7 (Financial Statement, Pro
Forma Financial Information and Exhibits), and was amended by
Form 8-K/A filed with the Commission on July 18, 1997, which
contained information under Item 5 (Other Events) and Item 7
(Financial Statements, Pro Forma Financial Information and
Exhibits).
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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 its behalf by the
undersigned thereunto duly authorized.
CAMDEN PROPERTY TRUST
/s/ G. STEVEN DAWSON August 13, 1997
- ------------------------------------------ -------------------
G. Steven Dawson Date
Sr. Vice President of Finance,
Chief Financial Officer and Treasurer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)
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INDEX TO EXHIBITS
EXHIBITS DESCRIPTION
-------- -----------
3.1 Amended and Restated Declaration of the Trust of the
Company, as last amended on April 15, 1997
3.2 Amended and Restated Bylaws of the Trust (filed as
Exhibit 3.1 to the Company's Current Report on Form 8-K
dated October 10, 1996, filed with the Commission on
November 18, 1996 (File No. 1-12110), and incorporated
by reference herein)
4.1 Indenture dated as of February 15, 1996 between the
Company and U.S. Trust Company of Texas, N.A., as
trustee (filed as Exhibit 4.1 to the Company's Current
Report on Form 8-K dated February 15, 1996 (File No.
1-12110), and incorporated by reference herein)
4.2 First Supplemental Indenture dated as of February 15,
1996 between the Company and U.S. Trust Company of
Texas N.A., as trustee (filed as Exhibit 4.2 to the
Company's Current Report on Form 8-K dated February 15,
1996 (File No. 1-12110), and incorporated by reference
herein)
4.3 Form of Camden Property Trust Remarketed Reset Note due
May 9, 2002 (filed as Exhibit 4.3 to the Company's
Current Report on Form 8-K dated May 9, 1997, filed
with the Commission on May 21, 1997 (File No. 1-12110),
and incorporated by reference by herein)
10.1 Underwriting Agreement dated May 6, 1997 between the
Company and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (filed as Exhibit 1.1 to the Company's
Current Report on Form 8-K dated May 9, 1997, filed
with the Commission on May 21, 1997 (File No. 1-12110),
and incorporated by reference herein)
10.2 Remarketing Agreement dated May 6, 1997 between the
Company and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (filed as Exhibit 1.2 to the Company's
Current Report on Form 8-K dated May 9, 1997, filed
with the Commission on May 21, 1997 (File No. 1-12110),
and incorporated by reference herein)
10.3 Camden Development, Inc. 1997 Non-Qualified Employee
Stock Purchase Plan
11.1 Statement regarding Computation of Per Share Earnings
23.1 Consent of Ernst & Young LLP (filed as Exhibit 23.1 to
the Company's Current Report on Form 8-K dated June 30,
1997, filed with the Commission on July 8, 1997, as
amended by Form 8-K/A filed with the Commission on July
18, 1997 (Filed No. 1-12110), and incorporated by
reference herein)
27.1 Financial Data Schedule (filed only electronically with
the Commission)
99.1 Registration Rights Agreement dated April 15, 1997
among the Company, the Operating Partnership and
certain investors set forth therein (filed as Exhibit
99.1 to the Company's Registration Statement on Form
S-3 filed with the Commission on April 22, 1997 (File
No. 333-25637) and incorporated by reference herein)