CAMDEN PROPERTY TRUST - Quarter Report: 2009 March (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

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

CAMDEN PROPERTY TRUST

(Exact Name of Registrant as Specified in Its Charter)

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

(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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes o No þ

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 April 28, 2009, there were 53,754,541 shares of Common Shares of Beneficial Interest, $0.01 par value, outstanding.

 

 

CAMDEN PROPERTY TRUST
Table of Contents

		Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements			3
Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2009 and December 31, 2008			3
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) for the three months ended March 31, 2009 and 2008			4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2009 and 2008			6
Notes to Condensed Consolidated Financial Statements (Unaudited)			8
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			31
Item 3 Quantitative and Qualitative Disclosures About Market Risk			48
Item 4 Controls and Procedures			48
Part II OTHER INFORMATION
Item 1 Legal Proceedings			49
Item 1A Risk Factors			49
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			49
Item 3 Defaults Upon Senior Securities			49
Item 4 Submission of Matters to a Vote of Security Holders			49
Item 5 Other Information			49
Item 6 Exhibits			50
SIGNATURES			51
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

PART I. FINANCIAL INFORMATION

CAMDEN PROPERTY TRUST

		March 31,				December 31,
(in thousands)		2009				2008
ASSETS
Real estate assets, at cost
Land		$	746,935			$	744,059
Buildings and improvements			4,466,296				4,447,587
			5,213,231				5,191,646
Accumulated depreciation			(1,023,466	)			(981,049	)
Net operating real estate assets			4,189,765				4,210,597
Properties under development, including land			258,239				264,188
Investments in joint ventures			15,158				15,106
Properties held for sale, including land			20,696				20,653
Total real estate assets			4,483,858				4,510,544
Accounts receivable — affiliates			36,105				37,000
Notes receivable
Affiliates			58,481				58,109
Other			—				8,710
Other assets, net			84,905				103,013
Cash and cash equivalents			7,256				7,407
Restricted cash			4,437				5,559
Total assets		$	4,675,042			$	4,730,342
Liabilities
Notes payable
Unsecured		$	2,151,492			$	2,103,187
Secured			680,631				729,209
Accounts payable and accrued expenses			73,250				82,575
Accrued real estate taxes			19,113				23,600
Distributions payable			43,136				42,936
Other liabilities			137,397				149,554
Total liabilities			3,105,019				3,131,061
Commitments and contingencies
Minority interests
Perpetual preferred units			97,925				97,925
Shareholders’ equity
Common shares of beneficial interest			666				660
Additional paid in capital			2,242,940				2,237,703
Distributions in excess of net income attributable to common shareholders			(345,481	)			(312,309	)
Notes receivable secured by common shares			(291	)			(295	)
Treasury shares, at cost			(462,751	)			(463,209	)
Accumulated other comprehensive loss			(48,716	)			(51,056	)
Total common shareholders’ equity			1,386,367				1,411,494
Noncontrolling interest			85,731				89,862
Total shareholders’ equity			1,472,098				1,501,356
Total liabilities and shareholders’ equity		$	4,675,042			$	4,730,342

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

		Three Months
		Ended March 31,
(in thousands, except per share amounts)		2009				2008
Property revenues
Rental revenues		$	136,500			$	134,263
Other property revenues			20,532				17,201
Total property revenues			157,032				151,464
Property expenses
Property operating and maintenance			42,283				39,179
Real estate taxes			18,532				17,281
Total property expenses			60,815				56,460
Non-property income
Fee and asset management			2,031				2,412
Interest and other income			735				1,333
Loss on deferred compensation plans			(4,152	)			(8,541	)
Total non-property loss			(1,386	)			(4,796	)
Other expenses
Property management			4,929				4,900
Fee and asset management			1,135				1,725
General and administrative			8,232				7,960
Interest			32,245				32,573
Depreciation and amortization			43,980				41,516
Amortization of deferred financing costs			817				734
Benefit on deferred compensation plans			(4,152	)			(8,541	)
Total other expenses			87,186				80,867
Income from continuing operations before gain on sale of properties, including land, gain on early retirement of debt, equity in income (loss) of joint ventures, and distributions on perpetual preferred units			7,645				9,341
Gain on sale of properties, including land			—				1,106
Gain on early retirement of debt			166				—
Equity in income (loss) of joint ventures			408				(47	)
Distributions on perpetual preferred units			(1,750	)			(1,750	)
Income from continuing operations before income taxes			6,469				8,650
Income tax expense — current			(299	)			(273	)
Income from continuing operations			6,170				8,377
Income from discontinued operations			585				1,680
Gain on sale of discontinued operations			—				6,127
Net income			6,755				16,184
Less net income allocated to noncontrolling interest			(521	)			(1,269	)
Net income attributable to common shareholders		$	6,234			$	14,915

CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

		Three Months
		Ended March 31,
(in thousands, except per share amounts)		2009				2008
Earnings per share — basic
Income from continuing operations attributable to common shareholders		$	0.10			$	0.13
Income from discontinued operations attributable to common shareholders, including gain on sale			0.01				0.14
Net income attributable to common shareholders		$	0.11			$	0.27
Earnings per share — diluted
Income from continuing operations attributable to common shareholders		$	0.10			$	0.13
Income from discontinued operations attributable to common shareholders, including gain on sale			0.01				0.14
Net income attributable to common shareholders		$	0.11			$	0.27
Distributions declared per common share		$	0.70			$	0.70
Weighted average number of common shares outstanding			55,552				54,965
Weighted average number of common and common dilutive equivalent shares outstanding			56,047				55,625
Net income attributable to common shareholders
Income from continuing operations		$	6,170			$	8,377
Less net income allocated to noncontrolling interest			(521	)			(1,269	)
Income from continuing operations attributable to common shareholders			5,649				7,108
Income from discontinued operations attributable to common shareholders, including gain on sale			585				7,807
Net income attributable to common shareholders		$	6,234			$	14,915
Condensed Consolidated Statements of Comprehensive Income:
Net income		$	6,755			$	16,184
Other comprehensive income (loss)
Unrealized loss on cash flow hedging activities			(2,936	)			(19,425	)
Reclassification of net losses on cash flow hedging activities			5,276				1,330
Comprehensive income (loss)			9,095				(1,911	)
Less net income allocated to noncontrolling interest			(521	)			(1,269	)
Comprehensive income (loss) attributable to common shareholders		$	8,574			$	(3,180	)

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

		Three Months
		Ended March 31,
(in thousands)		2009				2008
Cash flows from operating activities
Net income		$	6,755			$	16,184
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization, including discontinued operations			43,060				41,227
Gain on sale of discontinued operations			—				(6,127	)
Gain on sale of properties, including land			—				(1,106	)
Distributions on perpetual preferred units			1,750				1,750
Distributions of income from joint ventures			1,427				1,350
Equity in (income) loss of joint ventures			(408	)			47
Interest from notes receivable — affiliates			(36	)			(1,086	)
Share-based compensation			2,160				1,982
Gain on early retirement of debt			(166	)			—
Amortization of deferred financing costs			817				742
Accretion of discount on unsecured notes payable			142				142
Net change in operating accounts			(4,330	)			(18,159	)
Net cash from operating activities			51,171				36,946
Cash flows from investing activities
Development and capital improvements			(18,620	)			(67,472	)
Payments received on notes receivable — other			8,710				2,855
Increase in notes receivable — affiliates			—				(437	)
Investments in joint ventures			(310	)			(6,550	)
Distributions of investments from joint ventures			24				205
Proceeds from sales of properties, including land and discontinued operations			—				11,716
Proceeds from partial sales of assets to joint ventures			—				8,923
Change in restricted cash			1,686				350
Other			(549	)			(731	)
Net cash from investing activities			(9,059	)			(51,141	)

CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Three Months
		Ended March 31,
(in thousands)		2009				2008
Cash flows from financing activities
Net increase in unsecured line of credit and short-term borrowings		$	96,000			$	86,000
Repayment of notes payable			(100,009	)			(1,704	)
Proceeds from notes payable			4,116				—
Distributions to shareholders, minority interests, and noncontrolling interest			(43,155	)			(42,883	)
Payment of deferred financing costs			(465	)			(364	)
Net decrease (increase) in accounts receivable — affiliates			917				(190	)
Repayment of notes receivable secured by common shares			8				1,654
Repurchase of common shares and units			(23	)			(29,973	)
Common share options exercised			—				1,378
Other			348				327
Net cash from financing activities			(42,263	)			14,245
Net (decrease) increase in cash and cash equivalents			(151	)			50
Cash and cash equivalents, beginning of period			7,407				897
Cash and cash equivalents, end of period		$	7,256			$	947
Supplemental information
Cash paid for interest, net of interest capitalized		$	27,955			$	28,988
Cash paid for income taxes			24				319
Supplemental schedule of noncash investing and financing activities
Distributions declared but not paid		$	43,136			$	42,942
Value of shares issued under benefit plans, net of cancellations			7,779				11,413
Conversion of operating partnership units to common shares			1,756				13,198
Accrual associated with construction and capital expenditures			2,863				4,793

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

1. Description of Business

Business. Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust (“REIT”), is engaged in the ownership, development, construction, and management of multifamily apartment communities. Our multifamily apartment communities are referred to as “communities,” “multifamily communities,” “properties,” or “multifamily properties” in the following discussion. As of March 31, 2009, we owned interests in, operated, or were developing 186 multifamily properties comprising 64,329 apartment homes across the United States. We had 1,060 apartment homes under development at four of our multifamily properties, including 807 apartment homes at three multifamily properties owned through nonconsolidated joint ventures, and 253 apartment homes at one multifamily property owned through a fully consolidated joint venture, in which we own an interest. In addition, we own other sites we may develop into multifamily apartment communities. One property comprised of 671 apartment homes was designated as held for sale.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Principles of Consolidation. Our condensed consolidated financial statements include our accounts, the accounts of variable interest entities (“VIEs”) in which we are the primary beneficiary, and the accounts of other subsidiaries and joint ventures over which we have control. All intercompany transactions, balances, and profits have been eliminated in consolidation. Investments acquired or created are evaluated based on Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) 46R, “Consolidation of Variable Interest Entities” (as revised), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be within the scope of FIN 46R, then the investments are evaluated for consolidation using American Institute of Certified Public Accountants’ Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures,” and Accounting Research Bulletin 51, “Consolidated Financial Statements,” as amended by Statement of Financial Accounting Standards 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51” (“SFAS160”). If we are the general partner in a limited partnership, we also consider the guidance of Emerging Issues Task Force Issue 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,” to assess whether any rights held by the limited partners overcome the presumption of control by us.

Interim Financial Reporting. We have prepared these financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the applicable rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all information and footnote disclosures normally included for complete financial statements. While we believe the disclosures presented are adequate for interim reporting, these interim financial statements should be read in conjunction with the audited financial statements and notes included in our 2008 Form 10-K. In the opinion of management, all adjustments and eliminations, consisting of normal recurring adjustments, necessary for a fair representation of our financial statements have been included. Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results which may be expected for the full year.

Asset Impairment. Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. When impairment exists the long-lived asset is adjusted to its respective fair value. We consider projected future undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. While we believe our estimates of future cash flows are reasonable, different assumptions regarding such factors as market rents, economies, and occupancies could significantly affect these estimates. In estimating fair value, management uses appraisals, management estimates, or discounted cash flow calculations. In addition, we continually evaluate our investments in joint ventures and mezzanine construction financing and if we believe there is an other than temporary decline in market value, or if it is probable we will not collect all interest and principal in accordance with the terms of the mezzanine loan, we will record an impairment charge based on these evaluations. In general, we provide mezzanine loans to affiliated joint ventures constructing or operating multifamily assets. While we believe it is currently probable we will collect all scheduled principal and interest with respect to these mezzanine loans, current market conditions with respect to credit markets and real estate market fundamentals inject a significant amount of uncertainty into the environment. Given this, any future adverse economic or market development may cause us to re-evaluate our conclusions, and could result in impairment charges with respect to our mezzanine loans.

The value of our properties held for development depends on market conditions, including estimates of the project start date as well as estimates of demand for multifamily communities. We have reviewed trends and other information and have incorporated these reviews as well as our current outlook into the assumptions we use in our impairment analyses. Due to, among other factors, the judgment and assumptions applied in the impairment analyses, and the fact limited market information regarding the value of comparable land exists at this time, it is possible actual results could differ substantially from those estimated.

We believe the carrying value of our operating real estate assets, properties under development, and land is currently recoverable. However, if market conditions deteriorate beyond our current expectations, or if changes in our development strategy significantly affect any key assumptions used in our fair value calculations, we may need to take additional charges in future periods for impairments related to existing assets. Any such non-cash charges would have an adverse effect on our consolidated financial position and results of operations.

Cash and Cash Equivalents. All cash and investments in money market accounts and other highly liquid securities with a maturity of three months or less at the date of purchase are considered to be cash and cash equivalents.

Cost Capitalization. Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes which are capitalized as part of properties under development. Capitalized interest is based on our weighted average interest rate as it relates to amounts borrowed for construction purposes. Most transaction and restructuring costs associated with the acquisition of real estate assets are expensed. Expenditures directly related to the development and improvement of real estate assets are capitalized at cost as land and buildings and improvements. Indirect development costs, including salaries and benefits and other related costs directly attributable to the development of properties are also capitalized. All construction and carrying costs are capitalized and reported in the balance sheet as properties under development until the apartment homes are substantially completed. Upon substantial completion of the apartment homes, the total cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively.

As discussed above, carrying charges are principally interest and real estate taxes capitalized as part of properties under development and buildings and improvements. Capitalized interest was approximately $2.4 million for the three months ended March 31, 2009, and approximately $5.4 million for the three months ended March 31, 2008. Capitalized real estate taxes were approximately $0.6 million for the three months ended March 31, 2009, and approximately $1.1 million for the three months ended March 31, 2008.

Where possible, we stage our construction to allow leasing and occupancy during the construction period, which we believe minimizes the duration of the lease-up period following completion of construction. Our accounting policy related to properties in the development and leasing phase is all operating expenses associated with completed apartment homes are expensed. We capitalize renovation and improvement costs we believe extend the economic lives of depreciable property. Capital expenditures subsequent to initial construction are capitalized and depreciated over their estimated useful lives, which range from three to twenty years.

Depreciation and amortization is computed over the expected useful lives of depreciable property on a straight-line basis with lives generally as follows:

		Estimated
		Useful Life
Buildings and improvements		5-35 years
Furniture, fixtures, equipment, and other		3-20 years
Intangible assets (in-place leases and above and below market leases)		underlying lease term

Derivative Instruments. SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement 133,” amends and expands the disclosure requirements of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.

As required by SFAS 133, we record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows or other types of forecasted transactions are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes attributable to the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts which are intended to economically hedge certain of our risks, even though hedge accounting does not apply or we elect not to apply hedge accounting under SFAS 133.

Income Recognition. Our rental and other property revenue is recorded when due from residents and is recognized monthly as it is earned. Other property revenue consists primarily of utility rebillings and administrative, application, and other transactional fees charged to our residents. Our apartment homes are rented to residents on lease terms generally ranging from six to fifteen months, with monthly payments due in advance. Interest, fee and asset management, and all other sources of income are recognized as earned. One of our properties is subject to rent control or rent stabilization. Operations of apartment properties acquired are recorded from the date of acquisition in accordance with the acquisition method of accounting. In management’s opinion, due to the number of residents, the types and diversity of submarkets in which the properties operate, and the collection terms, there is no significant concentration of credit risk.

Reportable Segments. Our multifamily communities are geographically diversified throughout the United States, and management evaluates operating performance on an individual property level. As each of our apartment communities has similar economic characteristics, residents, and products and services, our apartment communities have been aggregated into one reportable segment. Our multifamily communities generate rental revenue and other income through the leasing of apartment homes, which comprised 98.3% of our total property revenues and total non-property income, excluding loss on deferred compensation plans, for the three months ended March 31, 2009 and 97.6% for the three months ended March 31, 2008.

Use of Estimates. In the application of GAAP, management is required to make estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements, results of operations during the reporting periods, and related disclosures. Our more significant estimates relate to estimates supporting our impairment analysis related to the carrying values of our real estate assets, estimates of the useful lives of our assets, reserves related to our general liability and employee benefit programs, estimates related to our investments in joint ventures and mezzanine construction financing, and estimates of expected losses of variable interest entities. These estimates are based on historical experience and other assumptions believed to be reasonable under the circumstances. Future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment.

Recent Accounting Pronouncements. In April 2009, the FASB issued FSP FAS 141R-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise From Contingencies.” FSP 141R-1 amends the guidance of SFAS 141R, “Business Combinations,” related to accounting for pre-acquisition contingencies to more closely resemble the guidance originally issued under SFAS 141, “Business Combinations.” Under FSP 141R-1, an acquirer is required to recognize assets or liabilities arising from contingencies at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with SFAS 5, “Accounting for Contingencies.” FSP 141R-1 applies prospectively to business combinations completed on or after January 1, 2009. We expect FSP 141R-1 will have an impact on our financial statements, but the nature and magnitude of the specific effects will depend upon the nature, terms, and size of acquisitions we complete subsequent to our adoption of the new standard.

In December 2007, the FASB issued SFAS 160 which defines a noncontrolling interest as an ownership interest in a consolidated entity which should be reported as equity in the parent’s consolidated financial statements. SFAS 160 requires a reconciliation of the beginning and ending balances of equity attributable to noncontrolling interest and disclosure, on the face of the consolidated income statements, of those amounts of consolidated net income attributable to the noncontrolling interest. SFAS 160 requires a parent to recognize a gain or loss in net income when a subsidiary is deconsolidated and requires the parent to attribute to a noncontrolling interest its share of losses, even if such treatment results in a deficit balance within the parent’s equity accounts related to the noncontrolling interest. We adopted SFAS 160 effective January 1, 2009, and most presentation and disclosure provisions were applied retrospectively for all periods presented. Since we have significant noncontrolling interest, this standard had a material effect on prior-year presentation.

Upon our adoption of SFAS 160, we reclassified balances related to minority interest relating to the common units in (i) Camden Operating, L.P., (ii) Oasis Martinique, LLC, (iii) Camden Summit Partnership, L.P., and (iv) other minority interest in consolidated real estate joint ventures into our consolidated equity accounts and these are now classified as noncontrolling interest. The noncontrolling interest reclassification amount at December 31, 2008 was approximately $89.9 million. The minority interest relating to cumulative redeemable perpetual preferred units in Camden Operating, L.P. of $97.9 million will remain classified between liability and equity pursuant to EITF D-98, “Classification and Measurement of Redeemable Securities.” See Note 14, “Noncontrolling Interest,” for further disclosure requirements of noncontrolling interest.

In April 2009, the FASB issued FSP 157-4, “Determining Fair Value when the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions that are not Orderly.” FSP 157-4 provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased or when circumstances indicate a transaction is not orderly. FSP 157-4 will be effective for us for the quarter ending June 30, 2009. We are currently evaluating the effects FSP 157-4 may have on our financial statements.

In April 2009, the FASB issued FSPs 115-2 and 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” to amend the current other-than-temporary impairment guidance for debt securities. The intent of these FSPs is to improve the presentation and disclosure of other-than-temporary impairment of debt and equity securities in the financial statements. These FSPs do not amend existing recognition and measurement guidance on other-than-temporary impairment of equity securities. The FSPs will be effective for us for the quarter ending June 30, 2009. We do not believe the adoption of these FSPs will have a material impact on our financial statements.

3. Per Share Data

Earnings per share has been computed pursuant to the provisions of SFAS 128, “Earning Per Share.” Basic earnings per share are computed using net income attributable to common shareholders and the weighted average number of common shares outstanding. Diluted earnings per share reflect common shares issuable from the assumed conversion of common share options and awards granted and units convertible into common shares. Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. On January 1, 2009 we adopted FSP 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities,” and, as a result, our unvested share-based payment awards are considered participating securities and are included in our earnings per share calculation. For the three months ended March 31, 2009 and 2008, 4.8 million and 4.6 million common share options and awards granted and units convertible into common shares, respectively, were excluded from the diluted earnings per share calculation as they were determined to not be dilutive.

The following table presents information necessary to calculate basic and diluted earnings per share for the three months ended March 31, 2009 and 2008:

		Three Months
		Ended March 31,
(in thousands, except per share amounts)		2009				2008
Basic earnings per share calculation
Income from continuing operations		$	6,170			$	8,377
Less net income allocated to noncontrolling interest			(521	)			(1,269	)
Income from continuing operations attributable to common shareholders		$	5,649			$	7,108
Income from discontinued operations attributable to common shareholders, including gain on sale			585				7,807
Net income attributable to common shareholders			6,234				14,915
Amount allocated to participating securities			(76	)			(105	)
Net income attributable to common shareholders, as adjusted — basic		$	6,158			$	14,810
Income from continuing operations attributable to common shareholders, as adjusted — per share		$	0.10			$	0.13
Income from discontinued operations attributable to common shareholders, including gain on sale — per share			0.01				0.14
Net income attributable to common shareholders, as adjusted — per share		$	0.11			$	0.27
Weighted average common shares outstanding			55,552				54,965
Diluted earnings per share calculation
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities		$	5,573			$	7,003
Income allocated to common units			5				5
Income from continuing operations attributable to common shareholders, as adjusted			5,578				7,008
Income from discontinued operations attributable to common shareholders, including gain on sale			585				7,807
Net income attributable to common shareholders, as adjusted		$	6,163			$	14,815
Income from continuing operations attributable to common shareholders, as adjusted — per share		$	0.10			$	0.13
Income from discontinued operations attributable to common shareholders, including gain on sale — per share			0.01				0.14
Net income attributable to common shareholders, as adjusted — per share		$	0.11			$	0.27
Weighted average common shares outstanding			55,552				54,965
Incremental shares issuable from assumed conversion of:
Common share options and awards granted			—				152
Common units			495				508
Weighted average common shares outstanding, as adjusted			56,047				55,625

In April 2007, our Board of Trust Managers approved a program to repurchase up to $250 million of our common equity securities through open market purchases, block purchases, and privately negotiated transactions. In January 2008, our Board of Trust Managers voted to increase the April 2007 repurchase plan to allow for the repurchase of up to $500 million of our common equity securities through open market purchases, block purchases, and privately negotiated transactions. Under this program, we repurchased 4.3 million shares for a total of approximately $230.2 million from April 2007 through March 31, 2009. The remaining dollar value of our common equity securities authorized to be repurchased under the program was approximately $269.8 million as of March 31, 2009.

4. Investments in Joint Ventures

The joint ventures described below are accounted for using the equity method. The joint ventures in which we have an interest have been funded in part with secured, third-party debt. We have guaranteed no more than our proportionate interest on six loans totaling approximately $74.2 million utilized for construction and development activities for our joint ventures. Additionally, we eliminate fee income from property management services provided to these joint ventures to the extent of our ownership.

Our contributions of real estate assets to joint ventures at formation in which we receive cash are treated as partial sales provided certain criteria are met. As a result, the amounts recorded as gain on sale of assets to joint ventures represent the change in ownership of the underlying assets. Our initial recorded investment is comprised of our historical carrying value of the assets on the date of the respective transaction multiplied by our ownership percentage in the joint venture. We have provided mezzanine loans to certain joint ventures, which are recorded as “Notes receivable — affiliates” as discussed in Note 5, “Notes Receivable.”

We earn fees for property management, construction, development, and other services related to joint ventures in which we own an interest. Fees earned for these services amounted to approximately $2.0 million and $2.4 million for each of the three months ended March 31, 2009 and 2008, respectively.

As of March 31, 2009, our equity investments in unconsolidated joint ventures accounted for utilizing the equity method of accounting consisted of 25 joint ventures, with our ownership percentages ranging from 15% to 72%. We provide property management services to the joint ventures which own operating properties and may provide construction and development services to the joint ventures which own properties under development. The following table summarizes balance sheet and income statement data for the unconsolidated joint ventures as of the periods presented (in millions):

		March 31,				December 31,
		2009				2008
Total assets		$	1,212.5			$	1,210.7
Total third-party debt			996.4				984.2
Total equity			136.8				145.0

		March 31,				March 31,
		2009				2008
Total revenues		$	33.7			$	29.6
Net loss			(3.2	)			(3.6	)
Equity in income (1)			0.4				—

Variable Interest Entities. As discussed in Note 2, “Summary of Significant Accounting Policies and Recent Accounting Pronouncements,” investments acquired or created are evaluated based on FIN 46R to determine whether or not the investment qualifies as a VIE. If the investment is determined to fall under the scope of FIN 46R, we then determine whether we are the primary beneficiary by performing a combination of qualitative and quantitative measures, including analyzing expected investment portfolios for the investments using various assumptions including product mix, return rates, and revenue and expense growth.

We are an investor in each of Camden Multifamily Value Add Fund, L.P., and a co-investment limited partnership (collectively, the “Fund”). The Fund has been determined to be a VIE. However, based on the application of our methodology, as described above, we are not considered to be the primary beneficiary. We therefore do not consolidate the Fund. The Fund is a joint venture and was created to make investments in multifamily and mixed-use projects and own, develop, redevelop, manage, supervise, and dispose of such investments. The Fund currently contains one development project and one 253-unit operating property, and intends to continue to evaluate potential acquisitions. The assets owned by the Fund are financed with third-party secured debt.

The following table compares the carrying amount of our investment in the Fund to the maximum loss exposure as of March 31, 2009 (in thousands):

Investment(1)		Maximum Loss Exposure(2)
$3,282		$	37,500

5. Notes Receivable

Notes receivable — affiliates. We provided mezzanine construction financing with rates ranging from the London Interbank Offered Rate (“LIBOR”) plus 3% to 14% per year, in connection with certain of our joint venture transactions. As of March 31, 2009 and December 31, 2008, the balance of “Notes receivable — affiliates” totaled approximately $58.5 million and $58.1 million, respectively, on notes maturing through 2011. We eliminate the interest and other income to the extent of our percentage ownership in the joint ventures. We have reviewed the terms and conditions underlying these notes receivable and believe these notes are collectible, and no impairment existed at March 31, 2009.

At March 31, 2009, we were committed to funding additional amounts under the mezzanine loans in the amount of approximately $31.7 million.

Notes receivable — other. We have a mezzanine financing program under which we provide secured financing to owners of real estate properties. At December 31, 2008, we had amounts outstanding of approximately $8.7 million; this amount, with accrued interest, was paid in full during the three months ended March 31, 2009.

Notes receivable secured by common shares. At March 31, 2009, one note receivable was outstanding and had a balance of $0.3 million, which was secured by common shares and reported as a component of shareholders’ equity in our condensed consolidated balance sheet.

6.

Notes Payable

The following is a summary of our indebtedness:

		March 31,				December 31,
(in millions)		2009				2008
Commercial Banks
Unsecured line of credit and short-term borrowings		$	241.0			$	145.0
$500 million term loan, due 2012			500.0				500.0
			741.0				645.0
Senior unsecured notes
$100.0 million 4.74% Notes, due 2009			81.9				81.9
$250.0 million 4.39% Notes, due 2010			143.0				150.4
$100.0 million 6.75% Notes, due 2010			79.9				79.9
$150.0 million 7.69% Notes, due 2011			149.8				149.8
$200.0 million 5.93% Notes, due 2012			199.6				199.6
$200.0 million 5.45% Notes, due 2013			199.4				199.3
$250.0 million 5.08% Notes, due 2015			248.9				248.9
$300.0 million 5.75% Notes, due 2017			246.0				246.0
			1,348.5				1,355.8
Medium-term notes
$15.0 million 7.63% Notes, due 2009			—				15.0
$25.0 million 4.64% Notes, due 2009			—				25.2
$10.0 million 4.90% Notes, due 2010			10.5				10.5
$14.5 million 6.79% Notes, due 2010			14.5				14.5
$35.0 million 4.99% Notes, due 2011			37.0				37.2
			62.0				102.4
Total unsecured notes payable			2,151.5				2,103.2
Secured notes
2.11% — 6.00% Conventional Mortgage Notes, due 2010 — 2018			638.3				686.6
1.78% Tax-exempt Mortgage Note due 2028			42.3				42.6
			680.6				729.2
Total notes payable		$	2,832.1			$	2,832.4
Floating rate debt included in commercial bank indebtedness (1.44%)		$	241.0			$	145.0
Floating rate tax-exempt debt included in secured notes (1.78%)			42.3				42.6
Floating rate debt included in secured notes (2.11% — 2.43%)			178.7				180.9

We have a $600 million unsecured credit facility which matures in January 2010 and can be extended at our option to January 2011. The scheduled interest rate is based on spreads over LIBOR or the Prime Rate. The scheduled interest rate spreads are subject to change as our credit ratings change. Advances under the line of credit may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of six months or less and may not exceed the lesser of $300 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations, all of which we are in compliance.

Our line of credit provides us with the ability to issue up to $100 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, it does reduce the amount available. At March 31, 2009, we had outstanding letters of credit totaling approximately $13.9 million, and had approximately $345.1 million available under our unsecured line of credit.

As an alternative to our unsecured line of credit, from time to time we borrow using competitively bid unsecured short-term notes with lenders who may or may not be a part of the unsecured line of credit bank group. Such borrowings vary in term and pricing and are typically priced at interest rates below those available under the unsecured line of credit.

At March 31, 2009 and 2008, the weighted average interest rate on our floating rate debt, which includes our unsecured line of credit, was 1.7% and 3.5%, respectively.

During the three months ended March 31, 2009, we repurchased and retired $7.4 million of the principal amount of our $250 million, 4.375% senior unsecured notes due 2010 from unrelated third parties for approximately $7.2 million.

Our indebtedness, including our unsecured line of credit, had a weighted average maturity of 4.6 years at March 31, 2009. Scheduled repayments on outstanding debt assuming all contractual extensions, including our line of credit and scheduled principal amortizations, and the weighted average interest rate on maturing debt at March 31, 2009, are as follows:

						Weighted
						Average
(in millions)		Amount				Interest Rate
2009		$	86.8				4.7	%
2010			302.8				5.2
2011			521.8				4.0
2012			772.2				5.4
2013			227.2				5.4
2014 and thereafter			921.3				4.7
Total		$	2,832.1				4.9	%

7. Derivative Instruments and Hedging Activities

Risk Management Objective of Using Derivatives. We are exposed to certain risk arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures arising from business activities resulting in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our borrowings.

Cash Flow Hedges of Interest Rate Risk. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps and caps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up front premium.

The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings. During the three months ending March 31, 2009, such derivatives were used to hedge the variable cash flows associated with existing variable rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. We had no ineffectiveness for the three months ended March 31, 2009 and 2008.

Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on our variable rate debt. Over the next twelve months, we estimate an additional $19.5 million will be reclassified to interest expense.

As of March 31, 2009, we had the following outstanding interest rate derivatives designated as cash flow hedges of interest rate risk:

Interest Rate Derivative		Number of Instruments				Notional Amount
Interest Rate Swaps			2			$505.7 million

Non-designated Hedges. Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks. Non-designated hedges are either specifically nondesignated by management or do not meet the strict hedge accounting requirements of SFAS 133. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and were immaterial for the three months ended March 31, 2009 and 2008, respectively.

As of March 31, 2009, we had the following outstanding interest rate derivative which was not designated as a hedge of interest rate risk:

Interest Rate Derivative		Number of Instruments				Notional Amount
Interest Rate Caps			1			$175.0 million

The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets at March 31, 2009 and December 31, 2008 (in millions):

Fair Values of Derivative Instruments

Asset Derivatives

Liability Derivatives

March 31, 2009

December 31, 2008

March 31, 2009

December 31, 2008

Balance Sheet

Fair

Balance Sheet

Fair

Balance Sheet

Fair

Balance Sheet

Fair

Location

Value

Location

Value

Location

Value

Location

Value

Derivatives designated as hedging instruments under SFAS 133

Interest Rate Swaps

Other Liabilities

$

48.7

Other Liabilities

$

51.1

Derivatives not designated as hedging instruments under SFAS 133

Interest Rate Cap

Other Assets

$

0.1

Other Assets

$

0.1

The tables below present the effect of our derivative financial instruments on the condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2009 and 2008 (in millions):

Effect of Derivative Instruments on the Three Months Ended March 31, 2009 and 2008

Location of Gain or

(Loss) Recognized

in Income on

Amount of Gain or

Location of Loss

Amount of Loss

Derivative

(Loss) Recognized in

Amount of Loss

Reclassified from

Reclassified from

(Ineffective Portion

Income on Derivative

Derivatives in SFAS

Recognized in OCI on

Accumulated OCI

Accumulated OCI

and Amount

(Ineffective Portion and

133 Cash Flow

Derivative(Effective

into Income

into Income (Effective

Excluded from

Amount Excluded from

Hedging

Portion)

(Effectiveness

Portion)

Effectiveness

Effectiveness Testing)

Relationships

2009

2008

Portion)

2009

2008

Testing)

2009

2008

Interest Rate Swaps

$

2.9

$

19.4

Interest expense

$

5.3

$

1.3

Not applicable

—

—

Derivatives Not Designated as		Location of Gain or (Loss)		Amount of Gain or (Loss) Recognized in
Hedging Instruments Under		Recognized in Income on		Income on Derivative
SFAS 133		Derivative		2009				2008
Interest Rate Cap		Other income / (expense)		$	—			$	—

Credit-risk-related Contingent Features. Derivative financial investments expose us to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. We believe we minimize our credit risk on these transactions by dealing with major creditworthy financial institutions. As part of our on-going control procedures, we monitor the credit ratings of counterparties and our exposure to any single entity, which we believe minimizes credit risk concentration. We believe the likelihood of realized losses from counterparty non-performance is remote.

Our agreements with each of our derivative counterparties contain a provision pursuant to which a default under any of our indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, the counterparty has the right to declare a default on our derivative obligations.

Our agreements with each of our derivative counterparties also provide if we consolidate with, merge with or into, or transfer all or substantially all our assets to another entity and the creditworthiness of the resulting, surviving, or transferee entity is materially weaker than ours, the counterparty has the right to terminate the derivative obligations.

At March 31, 2009, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk (the “termination value”), related to these agreements was $57.2 million. As of March 31, 2009, we had not posted any collateral related to these agreements. If we were in breach of any of these provisions at March 31, 2009, we would have been required to settle our obligations under the agreements at their termination value of $57.2 million.

8. Share-based Compensation

Share Awards and Vesting. Share awards generally have a vesting period of five years. The compensation cost for share awards is based on the market value of the shares on the date of grant and is amortized over the vesting period. To determine our estimated forfeitures, we use actual forfeiture history. At March 31, 2009, the unamortized value of previously issued unvested share awards was approximately $27.8 million. The total fair value of shares vested during the three months ended March 31, 2009 was approximately $9.1 million.

Valuation Assumptions. Options generally have a vesting period of three to five years. The weighted average fair value of options granted in 2009 was $3.06 per option. We estimated the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The following assumptions were used for options granted during the three months ended March 31, 2009:

Expected volatility			33.0	%
Risk-free interest rate			2.6	%
Expected dividend yield			9.3	%
Expected life (in years)			7.0

Our computation of expected volatility for 2009 is based on the historical volatility of our common shares over a time period equal to the expected life of the option and ending on the grant date. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield on our common shares is estimated using the annual dividends paid in the prior year and the market price on the date of grant. Our computation of expected life for 2009 is estimated based on historical experience of similar awards, giving consideration to the contractual terms of the share-based awards.

Options. No options were exercised during the three months ended March 31, 2009. As of March 31, 2009, there was approximately $3.0 million of total unrecognized compensation cost related to unvested options, which is expected to be amortized over the next five years. Total compensation cost for option and share awards charged against income was $2.3 million for the three months ended March 31, 2009.

The weighted average remaining contractual term of outstanding options under the share incentive plans is 6.6 years.

The following table summarizes share options outstanding and exercisable at March 31, 2009:

		Outstanding Options								Exercisable Options
																		Remaining
						Weighted								Weighted				Contractual
Range of Exercise						Average								Average				Life
Prices		Number				Price				Number				Price				(Years)
$25.88-$41.91			763,085			$	31.93				273,576			$	35.28				7.5
$42.90-$44.00			472,200				43.23				472,200				43.23				4.4
$45.53-$73.32			759,995				49.55				430,116				50.72				7.1
Total options			1,995,280			$	41.32				1,175,892			$	44.12				6.6

The following table summarizes activity under our 1993 and 2002 Share Incentive Plans for the three months ended March 31, 2009:

						Weighted
		Options /				Average
		Share Awards				Exercise /
		Outstanding				Grant Price
Balance at January 1, 2009			4,125,312			$	41.37
Options
Granted			489,509				30.06
Exercised			—				—
Forfeited			(30,756	)			43.91
Net Options			458,753
Share Awards
Granted			298,067				30.00
Forfeited			(20,591	)			56.90
Net Share Awards			277,476
Balance at March 31, 2009			4,861,541			$	36.30
Vested share awards at March 31, 2009			2,152,688			$	37.67

9. Net Change in Operating Accounts

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

		Three Months
		Ended March 31,
(in thousands)		2009				2008
Decrease in assets:
Other assets, net		$	4,020			$	2,542
Increase (decrease) in liabilities:
Accounts payable and accrued expenses			(6,171	)			(12,084	)
Accrued real estate taxes			(4,487	)			(7,103	)
Other liabilities			2,308				(1,514	)
Change in operating accounts		$	(4,330	)		$	(18,159	)

10. Commitments and Contingencies

Construction Contracts. As of March 31, 2009, we were obligated for approximately $25.9 million of additional construction and development expenditures for one development project owned by a consolidated joint venture. Contractual amounts due with respect to this project are expected to be funded from an existing construction loan.

Litigation. In September 2007, the Equal Rights Center filed a lawsuit against us and one of our wholly-owned subsidiaries in the United States District Court for the District of Maryland. This suit alleges various violations of the Fair Housing Act and the Americans with Disabilities Act by us in the design, construction, control, management, and/or ownership of various multifamily properties. The plaintiff seeks compensatory and punitive damages in unspecified amounts, an award of attorneys’ fees and costs of suit, as well as preliminary and permanent injunctive relief which includes modification of existing assets and prohibiting construction or sale of noncompliant units or complexes. At this stage in the proceeding, it is not possible to predict or determine the outcome of the lawsuit, nor is it possible to estimate the amount of loss, if any, which would be associated with an adverse decision.

We are subject to various other legal proceedings and claims which arise in the ordinary course of business. Matters which arise out of allegations of bodily injury, property damage, and employment practices are generally covered by insurance. While the resolution of these other legal proceedings and claims cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on our condensed consolidated financial statements.

Other Contingencies. In the ordinary course of our business, we issue letters of intent indicating a willingness to negotiate for acquisitions, dispositions, or joint ventures and also enter into arrangements contemplating various transactions. Such letters of intent and other arrangements are non-binding as to either party unless and until a definitive contract is entered into by the parties. Even if definitive contracts relating to the purchase or sale of real property are entered into, these contracts generally provide the purchaser with time to evaluate the property and conduct due diligence, during which periods the purchaser will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money. There can be no assurance definitive contracts will be entered into with respect to any matter covered by letters of intent or we will consummate any transaction contemplated by any definitive contract. Furthermore, due diligence periods for real property are frequently extended as needed. An acquisition or sale of real property becomes probable at the time the due diligence period expires and the definitive contract has not been terminated. We are then at risk under a real property acquisition contract, but generally only to the extent of any earnest money deposits associated with the contract, and are obligated to sell under a real property sales contract.

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

Lease Commitments. At March 31, 2009, we had long-term leases covering certain land, office facilities, and equipment. Rental expense totaled approximately $0.8 million and $0.7 million for the three months ended March 31, 2009 and 2008, respectively. Minimum annual rental commitments for the remainder of 2009 are $2.2 million, and for the years ending December 31, 2010 through 2013 are approximately $2.5 million, $2.3 million, $2.0 million and $1.9 million, respectively, and $3.6 million in the aggregate thereafter.

Investments in Joint Ventures. We have entered into, and may continue in the future to enter into, joint ventures or partnerships (including limited liability companies) through which we own an indirect economic interest in less than 100% of the community or communities owned directly by the joint venture or partnership. Our decision whether to hold the entire interest in an apartment community ourselves, or to have an indirect interest in the community through a joint venture or partnership, is based on a variety of factors and considerations, including: (i) our projection, in some circumstances, we will achieve higher returns on our invested capital or reduce our risk if a joint venture or partnership vehicle is used; (ii) our desire to diversify our portfolio of communities by market; (iii) our desire at times to preserve our capital resources to maintain liquidity or balance sheet strength; and (iv) the economic and tax terms required by a seller of land or of a community, who may prefer or who may require less payment if the land or community is contributed to a joint venture or partnership. Investments in joint ventures or partnerships are not limited to a specified percentage of our assets. Each joint venture or partnership agreement is individually negotiated, and our ability to operate and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the terms of the joint venture or partnership agreement.

11. Income Taxes

We have maintained and intend to maintain our election as a REIT under the Internal Revenue Code of 1986, as amended. In order for us to continue to qualify as a REIT we must meet a number of organizational and operational requirements, including a requirement to distribute annual dividends to our shareholders equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains. As a REIT, we generally will not be subject to federal income tax on our taxable income at the corporate level to the extent such income is distributed to our shareholders annually. If our taxable income exceeds our dividends in a tax year, REIT tax rules allow us to designate dividends from the subsequent tax year in order to avoid current taxation on undistributed income. If we fail to qualify as a REIT in any taxable year, we will be subject to federal and state income taxes at regular corporate rates, including any applicable alternative minimum tax. In addition, we may not be able to requalify as a REIT for the four subsequent taxable years. Historically, we have incurred only state and local income, franchise, excise, and margin taxes. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal, state, and local income taxes. Our operating partnerships are flow-through entities and are not subject to federal income taxes at the entity level. We have provided for income, franchise, and margin taxes in the condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2009. These taxes are primarily for entity level taxes on certain ventures, state margin taxes, and federal taxes on certain of our taxable REIT subsidiaries. We have no significant temporary differences or tax credits associated with our taxable REIT subsidiaries.

We believe we have no uncertain tax positions or unrecognized tax benefits requiring disclosure as of and for the three months ended March 31, 2009.

12. Dispositions and Assets Held for Sale

Discontinued Operations and Assets Held for Sale. For the three months ended March 31, 2009 and 2008, income from discontinued operations included the results of operations of one operating property, containing 671 apartment homes, classified as held for sale at March 31, 2009. For the three months ended March 31, 2008, income from discontinued operations also included the results of operations of eight operating properties sold during 2008. As of March 31, 2009, the one operating property held for sale had a net book value of approximately $11.2 million.

The following is a summary of income from discontinued operations for the three months ended March 31, 2009 and 2008:

		Three Months
		Ended March 31,
(in thousands)		2009				2008
Property revenues		$	1,197			$	6,100
Property expenses			612				2,924
			585				3,176
Interest			—				204
Depreciation and amortization			—				1,292
Income from discontinued operations		$	585			$	1,680

There were no sales of operating properties during the three months ended March 31, 2009. During the three months ended March 31, 2008, we recognized a gain of approximately $6.1 million from the sale of one operating property, containing 167 apartment homes, to an unaffiliated third party. The sale generated total proceeds of approximately $10.3 million.

Upon our decision to abandon efforts to develop certain land parcels and to market these parcels for sale, we reclassify the operating expenses associated with these assets to discontinued operations. At March 31, 2009, we had 4.6 acres of undeveloped land parcels classified as held for sale with a net book value of approximately $9.2 million.

Partial Sales. In March 2008, we completed a partial sale of Camden Amber Oaks, a development community in Austin, Texas, to the Fund for approximately $8.9 million. No gain or loss was recognized on the sale. Concurrent with the transaction, we invested approximately $1.9 million in the Fund. There were no partial sales during the three months ended March 31, 2009.

13. Fair Value Disclosures

SFAS 157, “Fair Value Measurements,” defines fair value, establishes a framework for measuring fair value, and also expands disclosures about fair value measurements. The following table presents information about our assets and liabilities measured at fair value on a recurring basis as of March 31, 2009, and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value.

In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets we have the ability to access for identical assets and liabilities. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 which are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices observable for the asset or liability, such as interest rates and yield curves observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In instances in which the inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. Disclosures concerning assets and liabilities measured at fair value are as follows:

Assets and Liabilities Measured at Fair Value on a Recurring Basis at March 31, 2009
(in millions)

		Quoted Prices in Active Markets
		for Identical				Significant Other				Significant
		Assets				Observable Inputs				Unobservable Inputs				Balance at
		(Level 1)				(Level 2)				(Level 3)				March 31, 2009
Assets
Deferred compensation plan investments		$	30.6			$	—			$	—			$	30.6
Derivative financial instruments			—				0.1				—				0.1
Liabilities
Derivative financial instruments			—				48.7				—				48.7

To estimate fair values, observable market prices are used if available. In some instances, observable market prices are not readily available for certain financial instruments and fair value is estimated using present value or other techniques appropriate for a particular financial instrument. These techniques involve some degree of judgment and as a result are not necessarily indicative of the amounts we would realize in a current market exchange. The use of different assumptions or estimation techniques may have a material effect on the estimated fair value amounts.

Deferred compensation plan investments. The estimated fair values of investment securities classified as deferred compensation plan investments are based on quoted market prices utilizing public information for the same transactions or information provided through third-party advisors. Our deferred compensation plan investments are recorded in other assets.

Derivative financial instruments. We enter into derivative financial instruments, specifically interest rate swaps and caps, for non-trading purposes. We use interest rate swaps and caps to manage interest rate risk arising from interest payments associated with floating rate debt. Through March 31, 2009, we had derivative financial instruments designated and qualifying as cash flow hedges. Derivative contracts with positive net fair values are recorded in accrued expenses and other assets. Derivative contracts with negative net fair values are recorded in accrued expenses and other liabilities. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps and caps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, to comply with the provisions of SFAS 157, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk, both our own nonperformance risk and the respective counterparty’s nonperformance risk. The fair value of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts which would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observed market interest rate curves and volatilities.

Although we have determined the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of March 31, 2009, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

We had no nonfinancial assets or nonfinancial liabilities requiring fair value disclosure under FAS 157 as of March 31, 2009.

14. Noncontrolling Interest

We adopted SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51,” effective January 1, 2009, and, as a result, we are required to separately report noncontrolling interest as equity in our condensed consolidated statements. SFAS 160 requires a reconciliation of equity attributable to noncontrolling interest and disclosure of those amounts of consolidated net income attributable to the noncontrolling interest.

The following table presents a reconciliation of the carrying amount of equity for the period indicated:

		Common Shareholders
										Distributions
										in excess of				Notes
		Common								Net Income				Receivable								Accumulated
		Shares of				Additional				attributable to				Secured by								Other
		Beneficial				Paid-in				Common				Common				Treasury				Comprehensive				Noncontrolling
(in thousands except per share amounts)		Interest				Capital				Shareholders				Shares				Shares				Loss				Interest				Total
Shareholders’ Equity, January 1, 2009		$	660			$	2,237,703			$	(312,309	)		$	(295	)		$	(463,209	)		$	(51,056	)		$	89,862			$	1,501,356
Net income											6,234																521				6,755
Unrealized loss on cash flow hedging activities																							(2,936	)							(2,936	)
Reclassification of net losses on cash flow hedging activities																							5,276								5,276
Common shares issued under dividend reinvestment plan							1																								1
Share awards issued under benefit plan			3				(3	)																							—
Amortization of previously granted share awards							2,754																								2,754
Employee stock purchase plan							(79	)											464												385
Repayment of notes receivable secured by common shares, net															4																4
Share awards placed into deferred plans			2				(2	)																							—
Common share options exercised							155																								155
Conversions and redemptions of operating partnership units			1				1,763																				(1,780	)			(16	)
Common shares repurchased																			(6	)											(6	)
Purchase of noncontrolling interest							648																				(748	)			(100	)
Cash distributions											(39,406	)															(2,124	)			(41,530	)
Shareholders’ Equity, March 31, 2009		$	666			$	2,242,940			$	(345,481	)		$	(291	)		$	(462,751	)		$	(48,716	)		$	85,731			$	1,472,098

The following table summarizes the effect of changes in our ownership interest in subsidiaries on the equity attributable to us for the periods ended March 31:

		2009				2008
Net income attributable to common shareholders		$	6,234			$	14,915
Transfers from the noncontrolling interest:
Increase in equity for conversion of operating partnership units			1,763				13,194
Increase in equity from purchase of noncontrolling interest			648				—
Change in common shareholders’ equity and net transfers from noncontrolling interest		$	8,645			$	28,109

15. Subsequent Events

On April 17, 2009, we, as guarantor, and five separate subsidiaries, each a Delaware limited liability company, as borrowers (collectively, the “Borrowers”), entered into a $420 million secured credit facility agreement with Red Mortgage Capital, Inc., a Fannie Mae lender. The ten-year facility has a fixed annual interest rate of 5.12% with payments of interest only, and matures on May 1, 2019. We have entered into standard nonrecourse carveout guarantees. The obligations of the Borrowers under the credit agreement are secured by cross-collateralized first priority mortgages on eleven multifamily properties.

On April 21, 2009, we commenced a cash tender offer for certain series of notes maturing in 2010 and 2011. This tender offer was completed on April 28, 2009, and we repurchased and retired approximately $169.5 million of our outstanding debt at par. Total cash consideration was approximately $171.7 million, including accrued and unpaid interest.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes appearing elsewhere in this report, as well as Part I, Item 1A, “Risk Factors” within our Annual Report on Form 10-K for the year ended December 31, 2008. Historical results and trends which might appear in the condensed consolidated financial statements should not be interpreted as being indicative of future operations.

We consider portions of this report to be “forward-looking” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions, or other items relating to the future; forward-looking statements are not guarantees of future performance, results, or events. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein which are not statements of historical fact should be considered forward-looking statements. Reliance should not be placed on these forward-looking statements as they are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.

Factors which may cause our actual results or performance to differ materially from those contemplated by forward-looking statements include, but are not limited to, the following:

	•		Volatility in capital and credit markets could adversely impact us;
	•		We could be negatively impacted by the condition of Fannie Mae or Freddie Mac;
	•		Unfavorable changes in economic conditions could adversely impact occupancy or rental rates;
	•		We face risks associated with land holdings;
	•		Difficulties of selling real estate could limit our flexibility;
	•		Compliance or failure to comply with laws requiring access to our properties by disabled persons could result in substantial cost;
	•		Competition could limit our ability to lease apartments or increase or maintain rental income;
	•		Development and construction risks could impact our profitability;
	•		Our acquisition strategy may not produce the cash flows expected;
	•		Competition could adversely affect our ability to acquire properties;
	•		Losses from catastrophes may exceed our insurance coverage;
	•		Investments through joint ventures and partnerships involve risks not present in investments in which we are the sole investor;
	•		We face risks associated with investments in and management of discretionary funds;
	•		We depend on our key personnel;
	•		Changes in laws and litigation risks could affect our business;
	•		Tax matters, including failure to qualify as a REIT, could have adverse consequences;
	•		Insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders;
	•		We have significant debt, which could have important adverse consequences;
	•		We may be unable to renew, repay, or refinance our outstanding debt;
	•		Variable rate debt is subject to interest rate risk;
	•		We may incur losses on interest rate hedging arrangements;
	•		Issuances of additional debt or equity may adversely impact our financial condition;
	•		Failure to maintain current credit ratings could adversely affect our cost of funds, related margins, liquidity, and access to capital markets;
	•		Share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders;
	•		Our share price will fluctuate; and
	•		We may reduce dividends on our equity securities or elect to pay a portion of the dividend in common shares.

These forward-looking statements represent our estimates and assumptions as of the date of this report, and we assume no obligation to update or supplement forward-looking statements because of subsequent events.

Unless the context requires otherwise, “Camden,” “we,” “our,” “us,” and the “Company” refer to Camden Property Trust and Camden’s consolidated subsidiaries and partnerships, collectively.

Executive Summary

Our results reflect the challenges the multifamily industry is currently facing. During fiscal year 2008 and continuing in 2009, the factors adversely affecting demand for and rents received in our multifamily communities became more intense and pervasive across the United States. As a result, the already difficult conditions within the industry have become progressively more challenging. High inventory levels of single-family homes and condominiums in the markets in which we operate, overall weak consumer confidence, job losses, and fears of a prolonged recession, among other factors, have persisted and, in some cases, accelerated thus far in 2009. We believe the effects of these factors have been further magnified by high levels of home foreclosures and liquidity disruptions in the financial markets.

Based on our results, the market conditions discussed above, and our belief these conditions may not improve quickly, we expect a decline in property revenues during fiscal year 2009. However, positive impacts on our performance may result from reductions in the U.S. home ownership rate, more stringent lending criteria for prospective home-buyers, and long-term growth prospects for population, employment, and household formations in our markets, although there can be no assurance any of these factors will continue or will positively impact our operating results.

Due to the instability experienced during the current economic downturn, and our belief these conditions may not improve quickly, our near term primary focus is to strengthen our capital and liquidity position by selectively disposing of properties, controlling and reducing construction and overhead costs, generating positive cash flows from operations, and reducing outstanding debt and leverage ratios.

We intend to continue to look for opportunities to acquire existing communities through our investment in and management of discretionary investment funds. Until the earlier of (i) December 31, 2011 or (ii) such time as 90% of its committed capital is invested, subject to two one-year extensions, the Fund will be our exclusive investment vehicle for acquiring fully developed multifamily properties, subject to certain exceptions. Our portfolio of apartment communities is geographically diverse, which we believe mitigates risks such as changes in demographics or job growth which may occur within individual markets, although may not mitigate such risks with respect to more wide spread economic declines. In the long term, we also intend to continue focusing on our development pipeline which currently contains eleven properties in various stages of construction and lease-up. The commencement of future developments has and may continue to be impacted by economic conditions, increasing construction costs, and other factors. We expect decreasing levels of development activity in 2009 as compared to prior years.

We review our assets for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Our impairment evaluations reflect our expectation of continued and increased challenges in the development of future multifamily communities, our belief these challenges will persist for some time, and our decision in fiscal year 2008 to not continue with five future development projects. Based on our evaluations, we recorded significant impairment charges to our land valuations in the fourth quarter of fiscal year 2008, which materially affected our operating results during fiscal year 2008. Land valuations may continue to have significant fluctuations due to, among other things, the current economic environment and, as a result, there can be no assurance we will not have further impairments in the future.

The continuation of the current economic environment and capital market disruptions have and could continue to have a negative impact on us and adversely affect our future results of operations.

During the remainder of 2009, approximately $86.8 million of debt maturities, including scheduled principal amortizations, are scheduled to mature. We intend to meet our long-term liquidity requirements through draws on our unsecured credit facility, property dispositions, secured mortgage notes, and the use of debt and equity offerings under our automatic shelf registration statement. Approximately $25.9 million remains to be funded for one development project owned by a consolidated joint venture, which we expect to fund from an existing construction loan.

Property Portfolio

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

		March 31, 2009								December 31, 2008
		Apartment								Apartment
		Homes				Properties				Homes				Properties
Operating Properties
Las Vegas, Nevada			8,016				29				8,016				29
Dallas, Texas			6,119				15				6,119				15
Houston, Texas			6,620				16				6,620				16
Tampa, Florida			5,503				12				5,503				12
Washington, D.C. Metro			6,068				17				5,702				16
Charlotte, North Carolina			3,574				15				3,574				15
Orlando, Florida			3,557				9				3,557				9
Atlanta, Georgia			3,202				10				3,202				10
Austin, Texas			2,106				7				2,106				7
Raleigh, North Carolina			2,704				7				2,704				7
Denver, Colorado			2,171				7				2,171				7
Southeast Florida			2,520				7				2,520				7
Phoenix, Arizona			2,433				8				2,433				8
Los Angeles/Orange County, California			2,481				6				2,481				6
San Diego/Inland Empire, California			1,196				4				1,196				4
Other			4,999				13				4,999				13
Total Operating Properties			63,269				182				62,903				181
Properties Under Development
Washington, D.C. Metro			—				—				366				1
Houston, Texas			712				3				712				3
Austin, Texas			348				1				348				1
Total Properties Under Development			1,060				4				1,426				5
Total Properties			64,329				186				64,329				186
Less: Joint Venture Properties (1)
Las Vegas, Nevada			4,047				17				4,047				17
Houston, Texas (2)			2,199				7				2,199				7
Phoenix, Arizona			992				4				992				4
Los Angeles/Orange County, California			711				2				711				2
Washington, D.C. Metro			508				1				508				1
Dallas, Texas			456				1				456				1
Austin, Texas			601				2				601				2
Denver, Colorado			320				1				320				1
Other			3,237				9				3,237				9
Total Joint Venture Properties			13,071				44				13,071				44
Total Properties Owned 100%			51,258				142				51,258				142