CAMDEN PROPERTY TRUST 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 endedDecember 31, 2019 . 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 deemed forward-looking statements. Reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance. For a discussion of risks and actions taken in response to the coronavirus pandemic, see "The ongoing COVID-19 pandemic and measures intended to prevent its spread and the impact has and continues to have a material adverse effect on our business, results of operations, cash flows, and financial condition" under Item 1A, "Risk Factors." Factors which may cause our actual results or performance to differ materially or be further amplified by the coronavirus pandemic (COVID-19) from those contemplated by forward-looking statements include, but are not limited to, the following: •The ongoing COVID-19 pandemic and measures intended to prevent its spread and the impact has and continues to have a material adverse effect on our business, results of operations, cash flows, and financial condition; •Volatility in capital and credit markets, or other unfavorable changes in economic conditions, either nationally or regionally in one or more of the markets in which we operate, could adversely impact us; •Short-term leases expose us to the effects of declining market rents; •Competition could limit our ability to lease apartments or increase or maintain rental income; •We face risks associated with land holdings and related activities; •Development, redevelopment and construction risks could impact our profitability; •Investments through joint ventures and investment funds involve risks not present in investments in which we are the sole investor; •Competition could adversely affect our ability to acquire properties; •Our acquisition strategy may not produce the cash flows expected; •Changes in rent control or rent stabilization laws and regulations could adversely affect our operations and property value; •Failure to qualify as a REIT could have adverse consequences; •Tax laws have recently changed and may continue to change at any time, and any such legislative or other actions could have a negative effect on us; •Litigation risks could affect our business; •Damage from catastrophic weather and other natural events could result in losses; •The implementation of future enhancements to our new enterprise resource planning system could interfere with our business and operations; •A cybersecurity incident and other technology disruptions could negatively impact our business; •We have significant debt, which could have adverse consequences; •Insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders; •Issuances of additional debt may adversely impact our financial condition; •We may be unable to renew, repay, or refinance our outstanding debt; •We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined; •Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distribution to our shareholders, and decrease our share price, if investors seek higher yields through other investments; •Failure to maintain our 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; 20 -------------------------------------------------------------------------------- Table of Contents •Our share price will fluctuate; and •The form, timing and amount of dividend distributions in future periods may vary and be impacted by economic and other considerations. 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. Executive SummaryCamden Property Trust and all consolidated subsidiaries are primarily engaged in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities. We focus on investing in markets characterized by high-growth economic conditions, strong employment, and attractive quality of life which we believe leads to higher demand for our apartments and retention of our residents. As ofSeptember 30, 2020 , we owned interests in, operated, or were developing 174 multifamily properties comprised of 59,104 apartment homes acrossthe United States . In addition, we own other land holdings which we may develop into multifamily apartment communities in the future. Impact of the Coronavirus Pandemic (COVID-19) on our Business COVID-19 has currently resulted in a widespread health crisis, which has adversely affected international, national, and local economies and financial markets generally, and has had an unprecedented effect on many industries including the multifamily industry. The discussions below, including without limitation statements with respect to outlooks of future operating performance and liquidity, are subject to the future effects of COVID-19 and the responses to curb its spread, which continue to evolve daily. Accordingly, the full magnitude of the pandemic and its ultimate effect on our results of operations, cash flows, financial condition, and liquidity for the year endingDecember 31, 2020 , as well as for future years, is uncertain at this time. Additionally, our property revenues and expenses have been and will likely continue to be impacted by COVID-19. For the three months endedSeptember 30, 2020 , we collected approximately 99.4% of our scheduled rents, none of our scheduled rents entered into a current deferred rent arrangement, and approximately 0.6% of our scheduled rents were delinquent. As ofOctober 27, 2020 , our October collections are approximately 98.1% of scheduled rents, none of our scheduled rents entered into a current deferred rent arrangement, and approximately 1.9% are delinquent. Consolidated Results Net income attributable to common shareholders decreased approximately$8.6 million and$29.9 million for the three and nine months endedSeptember 30, 2020 , respectively, as compared to the same periods in 2019. During the three months endedSeptember 30, 2020 , we incurred approximately$0.4 million of directly-related COVID-19 expenses at our operating properties. During the nine months endedSeptember 30, 2020 , we incurred a COVID-19 related impact of approximately$14.8 million . The amounts during the nine months endedSeptember 30, 2020 , were comprised of$9.5 million related to the Resident Relief Funds which were established inApril 2020 . Of this amount, approximately$9.1 million was paid to residents at our wholly-owned communities and approximately$1.3 million of Resident Relief Funds paid to residents of the operating communities owned by our unconsolidated joint ventures, of which we recognized our ownership interest of$0.4 million in equity in income of joint ventures. Additionally, we incurred approximately$4.5 million of COVID-19 expenses at our operating properties, which included$2.8 million of bonuses paid to on-site employees who have provided essential services during the pandemic and$1.7 million in other directly-related COVID-19 expenses. During the nine months endedSeptember 30, 2020 , we also incurred approximately$0.8 million related to theEmployee Relief Fund we established to help our employees impacted by COVID-19, which was recorded within general and administrative expenses. In addition to the COVID-19 related expenses discussed above, the decrease during the three months endedSeptember 30, 2020 was also due to higher depreciation expense of$4.8 million , higher interest expense of approximately$3.5 million , and a decrease of approximately$1.7 million in property operations, as compared to the same period in 2019. These decreases for the three months endedSeptember 30, 2020 were partially offset by a$0.7 million increase in net fee and asset management income, an approximate$0.5 million increase in interest and other income, and a decrease of approximately$0.7 million of general and administrative expenses, as compared to the same period in 2019. In addition to the COVID-19 related expenses discussed above, the decrease during the nine months endedSeptember 30, 2020 was also due to higher depreciation expense of approximately$24.5 million and higher interest expense of approximately$6.9 million , as compared to the same period in 2019. These decreases for the nine months endedSeptember 30, 2020 were partially offset by approximately$12.0 million of increases in property operations, an approximate$2.9 million increase in net 21 -------------------------------------------------------------------------------- Table of Contents fee and asset management income, a$0.5 million increase in interest and other income, a$0.4 million decrease in general and administrative expenses, and approximately$0.4 million gain on sale of land as compared to the same period in 2019. Property Operations Our results for the three and nine months endedSeptember 30, 2020 reflect an increase in same store revenues of 0.8% and 1.5%, respectively, as compared to the same periods in 2019. The increase for the three and nine months endedSeptember 30, 2020 was primarily due to higher average rental rates, which we believe was primarily attributable to our focus on high-growth markets, favorable demographics, a manageable supply of new multifamily housing, and in part to more individuals choosing to rent versus buy as evidenced by the continued low level homeownership rate. The increase during the three and nine months endedSeptember 30, 2020 was partially offset by the impact of COVID-19. Challenges within the multifamily industry have surfaced due to COVID-19. Factors adversely affecting demand for and rents received from our multifamily communities have since become more intense and pervasive acrossthe United States . Overall weak consumer confidence, high unemployment, fears of a prolonged recession, and government-imposed moratoriums on our ability to collect rents or evict non-paying tenants, among other factors, have also persisted through the date of this filing. Based on our belief these conditions may become more pervasive and may not improve quickly, we could have a decline in property revenues during the remainder of fiscal year 2020. Construction Activity AtSeptember 30, 2020 , we had a total of nine projects under construction to be comprised of 2,721 apartment homes, including one development project to be comprised of 234 apartment homes owned by one of our discretionary investment funds (the "Funds") in which we have a 31.3% ownership interest. Initial occupancies of these nine projects are currently scheduled to occur within the next 27 months. Excluding the project owned by one of the Funds, we estimate the total additional cost to complete the construction of the eight consolidated projects is approximately$383.7 million . The locations of these projects may currently or in the future be subject to "shelter in place," "stay at home," or other similar orders adopted by state and local authorities in response to COVID-19. Some of these orders may adversely affect the timely completion and final project costs of some or all of our projects under development if, for example, we are required to temporarily cease construction, experience delays in obtaining governmental permits and authorizations, or experience disruption in the supply of materials or labor. Other InApril 2020 , we issued$750.0 million of 2.80%, senior unsecured notes dueMay 2030 at an effective annual interest rate of 2.91% under our then-existing shelf registration statement. InMay 2020 , Camden's Chairman and CEO, and Executive Vice Chairman, each agreed to voluntarily reduce the amount of their respective annual bonus (cash or shares) which may be awarded in the future by$500,000 . The aggregate$1.0 million compensation reduction served as a contribution to the Resident Relief Funds and to theEmployee Relief Fund . InJune 2020 , we created an at-the market ("ATM") share offering program through which we can, but have no obligation to, sell common shares and we may also enter into separate forward sale agreements with forward purchasers for an aggregate offering price of up to$362.7 million (the "2020 ATM program"). InOctober 2020 , we entered into a$40.0 million two-year unsecured floating rate term loan with an unrelated third party and used the net proceeds, together with cash on hand, to repay our$100.0 million unsecured term loan which was scheduled to mature in 2022. Future Outlook Subject to market conditions as described above, we intend to continue to seek opportunities to develop new communities and to redevelop, reposition, and acquire existing communities. We also intend to evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise. We expect to maintain a strong balance sheet and preserve our financial flexibility by continuing to focus on our core fundamentals which we believe are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intend to meet our near-term liquidity requirements through a combination of one or more of the following: cash and cash equivalents, cash flows generated from operations, draws on our unsecured credit facility, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from our ATM program, and other unsecured borrowings or secured mortgages. 22 -------------------------------------------------------------------------------- Table of Contents As ofSeptember 30, 2020 , we had approximately$589.6 million in cash and cash equivalents and$889.8 million available under our$900 million unsecured credit facilities. As ofSeptember 30, 2020 and through the date of this filing, we also had common shares having an aggregate offering price of up to$362.7 million remaining available for sale under our 2020 ATM program. As discussed above, subsequent to quarter-end, we repaid$100.0 million term loan and do not have any debt maturing through the year ending 2021. Additionally, as ofSeptember 30, 2020 and through the date of this filing, 100% of our consolidated properties were unencumbered. We believe we are well-positioned with a strong balance sheet and sufficient liquidity to fund new development, redevelopment, and other capital requirements. We will, however, continue to assess and take further actions we believe are prudent to meet our objectives and capital requirements. Property Portfolio Our multifamily property portfolio is summarized as follows: September 30, 2020 December 31, 2019 Apartment Apartment Homes Properties Homes PropertiesOperating Properties Houston, Texas 9,572 27 9,301 26 Washington, D.C. Metro 6,862 19 6,862 19 Dallas, Texas 5,666 14 5,666 14 Atlanta, Georgia 4,496 14 4,496 14 Phoenix, Arizona 3,686 12 3,686 12 Austin, Texas 3,686 11 3,686 11 Orlando, Florida 3,594 10 3,594 10 Raleigh, North Carolina 3,240 9 3,240 9 Charlotte, North Carolina 3,104 14 3,104 14 Southeast Florida 2,781 8 2,781 8 Tampa, Florida 2,736 7 2,736 7 Los Angeles/Orange County, California 2,663 7 2,658 7 Denver, Colorado 2,632 8 2,632 8 San Diego/Inland Empire, California 1,665 5 1,665 5Total Operating Properties 56,383 165 56,107 164Properties Under Construction Phoenix, Arizona 740 2 343 1 Charlotte, North Carolina 387 1 - - Atlanta, Georgia 366 1 366 1 Orlando, Florida 360 1 360 1 Houston, Texas 234 1 505 2 Southeast Florida 269 1 269 1 Denver, Colorado 233 1 233 1 San Diego/Inland Empire, California 132 1 132 1Total Properties Under Construction 2,721 9 2,208 8Total Properties 59,104 174 58,315 172 23
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September 30, 2020 December 31, 2019
Apartment
Apartment Homes Properties Homes Properties
Less: Unconsolidated Joint Venture Properties (1)
Houston, Texas (2) 2,756 9 2,756 9
Austin, Texas 1,360 4 1,360 4
Dallas, Texas 1,250 3 1,250 3
Tampa, Florida 450 1 450 1
Raleigh, North Carolina 350 1 350 1
Orlando, Florida 300 1 300 1
Washington, D.C. Metro 281 1 281 1
Charlotte, North Carolina 266 1 266 1
Atlanta, Georgia 234 1 234 1
Total Unconsolidated Joint Venture Properties 7,247 22 7,247 22
Total Properties Fully Consolidated 51,857 152 51,068 150
(1)Refer to Note 6, "Investments in Joint Ventures," in the notes to Condensed
Consolidated Financial Statements for further discussion of our joint venture
investments.
(2)Includes a property under development owned by one of the Funds. See
communities under construction below for details.
Stabilized Communities
We generally consider a property stabilized once it reaches 90% occupancy.
During the three months ended September 30, 2020 , stabilization was achieved at
one consolidated operating property as follows:
Number of Date of
($ in millions) Apartment Construction Date of
Property and Location Homes Completion Stabilization
Camden North End I
Phoenix, AZ 441 1Q19 3Q20
Completed Construction in Lease-Up
At September 30, 2020 , we had one consolidated completed operating property in
lease-up as follows:
Number of Date of Estimated
($ in millions) Apartment Cost % Leased at Construction Date of
Property and Location Homes Incurred (1) 10/27/2020 Completion Stabilization
Camden Downtown I
Houston, TX 271 $ 131.2 39 % 3Q20 4Q21
(1)Excludes leasing costs, which are expensed as incurred.
Properties Under Development
Our condensed consolidated balance sheet at September 30, 2020 included
approximately $522.7 million related to properties under development and land.
Of this amount, approximately $433.5 million related to our projects currently
under construction. In addition, we had approximately $89.2 million invested
primarily in land held for future development related to projects we currently
expect to begin construction.
Communities Under Construction . At September 30, 2020 , we had eight consolidated
properties and one unconsolidated property held by one of the Funds, in various
stages of construction as follows:
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Included in Estimated
Number of Properties Date of Estimated
($ in millions) Apartment Estimated Cost Under Construction Date of
Property and Location (1) Homes Cost Incurred Development Completion Stabilization
Consolidated Communities Under ConstructionCamden RiNo (2) Denver, CO 233$ 79.0 $ 78.3 $ 26.5 4Q20 2Q21 Camden North End II (3) Phoenix, AZ 343 90.0 63.9 63.9 1Q22 3Q22 Camden Lake Eola Orlando, FL 360 125.0 112.2 112.2 2Q21 2Q22 Camden Buckhead Atlanta, GA 366 160.0 99.4 99.4 1Q22 3Q22 Camden Hillcrest San Diego, CA 132 95.0 55.8 55.8 4Q21 3Q22 Camden Atlantic Plantation, FL 269 100.0 30.6 30.6 4Q22 4Q23 Camden Tempe II Tempe, AZ 397 115.0 26.2 26.2 3Q23 1Q25 Camden NoDa Charlotte, NC 387 105.0 18.9 18.9 3Q23 1Q25 Total 2,487$ 869.0 $ 485.3 $ 433.5 (1)The locations of these projects may currently or in the future be subject to "shelter in place," "stay at home," or similar orders adopted by state and local authorities in response to COVID-19. Some of these orders may adversely affect the timely completion and final project costs of some or all of our projects under development if, for example, we are required to temporarily cease construction, experience delays in obtaining governmental permits and authorizations, or experience disruption in the supply of materials or labor. (2)Property in lease-up and was 40% leased atOctober 27, 2020 . (3)Property in lease-up and was 1% leased atOctober 27, 2020 .
Camden Cypress Creek II (1) Cypress, TX 234$ 38.0 $ 31.8 $ 14.6 4Q20 4Q21 (1)Property owned through an unconsolidated joint venture in which we own a 31.3% interest. This property is in lease-up and was 33% leased as ofOctober 27, 2020 . Development Pipeline Communities. AtSeptember 30, 2020 , we had the following consolidated multifamily communities undergoing development activities: ($ in millions) Property and Location Projected Homes Total Estimated Cost (1) Cost to DateCamden Arts District Los Angeles, CA 354 $ 150.0$ 32.0 Camden Paces III Atlanta, GA 350 100.0 16.6 Camden Downtown II Houston, TX 271 145.0 11.9Camden Cameron Village Raleigh, NC 355 115.0 20.3 Camden Highland Village II Houston, TX 300 100.0 8.4 Total 1,630 $ 610.0$ 89.2 (1)Represents our estimate of total costs we expect to incur on these projects. However, forward-looking estimates are not guarantees of future performance, results, or events. Although we believe these expectations are based upon reasonable assumptions, future events rarely develop exactly as forecast, and estimates routinely require adjustment. In addition, the locations of these projects may currently or in the future be subject to "shelter in place," "stay at home," or similar orders adopted by state and local authorities in response to COVID-19. Some of these orders may adversely affect the timely completion and final project costs of some or all of our projects under development if, for example, we are required to temporarily cease construction, experience delays in obtaining governmental permits and authorizations, or experience disruption in the supply of materials or labor. 25
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Results of Operations Changes in revenues and expenses related to our operating properties from period to period are due primarily to the performance of stabilized properties in the portfolio, the lease-up of newly constructed properties, acquisitions, and dispositions. Selected weighted averages for the three and nine months endedSeptember 30, 2020 and 2019 are as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019
Average monthly property revenue per apartment home (1)
$ 1,802 $
1,781
$ 8,223 $
7,694
49,158 48,801 49,081 48,441
Weighted average occupancy of operating apartment
homes owned 100% 95.3 % 96.2 % 95.3 % 96.0 %
(1)Average monthly property revenue per apartment home for the nine months ended
September 30, 2020 , includes approximately $9.1 million of Resident Relief Funds
paid to residents at our wholly-owned communities who have experienced financial
losses caused by COVID-19 and was recorded as a reduction to property revenues.
(2)Annualized total property expenses per apartment home includes approximately
$0.4 million and $4.5 million of directly-related COVID-19 expenses incurred at
our operating properties for the three and nine months ended September 30, 2020 ,
respectively.
Management considers property net operating income ("NOI") to be an appropriate
supplemental measure of operating performance to net income because it reflects
the operating performance of our communities without an allocation of corporate
level property management overhead or general and administrative costs. We
define NOI as property revenue less property operating and maintenance expenses
less real estate taxes. NOI is further detailed in the Property-Level NOI table
as seen below. NOI is not defined by accounting principles generally accepted in
the United States of America ("GAAP") and should not be considered an
alternative to net income as an indication of our operating performance.
Additionally, NOI as disclosed by other REITs may not be comparable to our
calculation.
Reconciliations of net income to NOI for the three and nine months ended
September 30, 2020 and 2019 are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 2020 2019 2020 2019
Net income $ 36,220 $ 44,782 $ 98,198 $ 128,045
Less: Fee and asset management income (2,542) (2,139) (7,449) (5,849)
Less: Interest and other income (1,948) (1,485) (2,602) (2,114)
Less: Income on deferred compensation plans (5,071) (780) (1,646) (14,992)
Plus: Property management expense 5,894 6,154 18,360 18,904
Plus: Fee and asset management expense 1,018 1,316 2,681 4,022
Plus: General and administrative expense 12,726 13,458 40,350 40,027
Plus: Interest expense 24,265 20,719 67,454 60,538
Plus: Depreciation and amortization expense 90,575 85,814 275,237 250,734
Plus: Expense on deferred compensation plans 5,071 780 1,646 14,992
Less: Gain on sale of land - - (382) -
Less: Equity in income of joint ventures (2,154) (2,133) (5,909) (5,954)
Plus: Income tax expense 615 313 1,476 709
Net operating income $ 164,669 Property-Level NOI (1) Property NOI, as reconciled above, is detailed further into the following categories for the three and nine months endedSeptember 30, 2020 as compared to the same periods in 2019: 26
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Apartment Three Months Ended Nine Months Ended
Homes at September 30, Change September 30, Change
($ in thousands) 9/30/2020 2020 2019 $ % 2020 2019 $ %
Property revenues:
Same store communities 43,710 $ 230,257 $ 228,389 $ 1,868 0.8 % $ 685,548 $ 675,407 $ 10,141 1.5 %
Non-same store communities 5,389 33,224 27,704 5,520 19.9 99,400 75,948 23,452 30.9
Development and lease-up
communities 2,758 615 - 615 * 996 - 996 *
Resident Relief Funds - - - - - (9,074) - (9,074) *
Dispositions/other - 1,625 4,579 (2,954) (64.5) 5,413 13,645 (8,232) (60.3)
Total property revenues 51,857 $ 265,721 $ 260,672 $ 5,049 1.9 % $ 782,283 $ 765,000 $ 17,283 2.3 %
Property expenses:
Same store communities 43,710 $ 85,520 $ 81,703 $ 3,817 4.7 % $ 247,870 $ 242,170 $ 5,700 2.4 %
Non-same store communities 5,389 13,152 10,291 2,861 27.8 38,121 28,360 9,761 34.4
Development and lease-up
communities 2,758 969 11 958 * 1,735 13 1,722 *
COVID-19 expenses - 444 - 444 * 4,540 - 4,540 *
Dispositions/other - 967 1,868 (901) (48.2) 2,603 5,395 (2,792) (51.8)
Total property expenses 51,857 $ 101,052 $ 93,873 $ 7,179 7.6 % $ 294,869 $ 275,938 $ 18,931 6.9 %
Property NOI:
Same store communities 43,710 $ 144,737 $ 146,686 $ (1,949) (1.3) % $ 437,678 $ 433,237 $ 4,441 1.0 %
Non-same store communities 5,389 20,072 17,413 2,659 15.3 61,279 47,588 13,691 28.8
Development and lease-up
communities 2,758 (354) (11) (343) * (739) (13) (726) *
COVID-19 Related Impact - (444) - (444) * (13,614) - (13,614) *
Dispositions/other - 658 2,711 (2,053) (75.7) 2,810 8,250 (5,440) (65.9)
Total property NOI 51,857 $ 164,669 $ 166,799 $ (2,130) (1.3) % $ 487,414 $ 489,062 $ (1,648) (0.3) %
* Not a meaningful percentage.
(1) Same store communities are communities we owned and were stabilized since
January 1, 2019 , excluding communities under redevelopment and properties held
for sale. Non-same store communities are stabilized communities not owned or
stabilized since January 1, 2019 , including communities under redevelopment and
excluding properties held for sale. We define communities under redevelopment as
communities with capital expenditures that improve a community's cash flow and
competitive position through extensive unit, exterior building, common area, and
amenity upgrades. Management believes same store information is useful as it
allows both management and investors to determine financial results over a
particular period for the same set of communities. Development and lease-up
communities are non-stabilized communities we have developed since January 1,
2019 , excluding properties held for sale. COVID-19 Related Impact relates to the
Resident Relief Funds which were established for our residents experiencing
financial losses caused by COVID-19 and includes the amount we paid to residents
at our wholly-owned communities as an adjustment to property revenues. The
COVID-19 Related Impact also includes direct related expenses incurred at our
operating properties as a result of the pandemic. Dispositions/other includes
those communities disposed of or held for sale which are not classified as
discontinued operations, and non-multifamily rental properties, expenses related
to land holdings not under active development, and other miscellaneous expenses.
Same Store Analysis
Same store property NOI decreased approximately $1.9 million for the three
months ended September 30, 2020 and increased approximately $4.4 million for the
nine months ended September 30, 2020 , as compared to the same periods in 2019.
The $1.9 million decrease in same store property NOI for the three months ended
September 30, 2020 was primarily due to an increase in property expenses of
approximately $3.8 million which was partially offset by an increase of
approximately $1.9 million in same store property revenues, as compared to the
same period in 2019.
The $3.8 million increase in same store property expenses during the three
months ended September 30, 2020 , as compared to the same period in 2019, was
primarily due to higher real estate taxes of approximately $2.6 million as a
result of increased property valuations at a number of our communities and lower
property tax refunds, higher property insurance expenses of approximately $0.9
million , higher salary expenses of approximately $0.7 million , and higher
utility expenses of
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approximately $0.2 million . The increase for the three months ended
September 30, 2020 was partially offset by approximately $0.6 million lower
repairs and maintenance and general administrative expenses, as compared to the
same period in 2019.
The $1.9 million increase in same store property revenues during the three
months ended September 30, 2020 , as compared to the same period in 2019, was
primarily due to an approximate $1.8 million or 1.0% increase in average rental
rates, approximately $1.0 million higher net reletting and other rental income,
an approximate $0.9 million increase in income from our bulk internet and other
utility rebilling programs, and an increase of approximately $0.4 million
related to fee and other income. These increases for the three months ended
September 30, 2020 were partially offset by lower occupancy of approximately
$1.1 million and higher bad debt expense of approximately $1.1 million due in
part to COVID-19.
The $4.4 million increase in same store property NOI for the nine months ended
September 30, 2020 was primarily due to an increase of approximately $10.1
million in same store property revenues which was partially offset by an
increase of approximately $5.7 million same store property expenses, as compared
to the same period in 2019.
The $10.1 million increase in same store property revenues during the nine
months ended September 30, 2020 , as compared to the same period in 2019, was
primarily due to an approximate $12.9 million or 2.2% increase in average rental
rates, of which approximately $6.2 million was recognized during the first
quarter of 2020 primarily due to a 3.3% first quarter increase in average rental
rates. The increase during the nine months ended September 30, 2020 was also due
to an approximately $2.5 million increase in income from our bulk internet and
other utility rebilling programs, and an approximate $2.4 million higher net
reletting and other rental income. These increases for the nine months ended
September 30, 2020 were partially offset by lower occupancy of approximately
$2.6 million , higher bad debt expense of approximately $4.1 million due in part
to COVID-19, and a decrease of approximately $1.0 million related to fee and
other income due to waived late and other fees during COVID-19.
The $5.7 million increase in same store property expenses during the nine months
ended September 30, 2020 , as compared to the same period in 2019, was primarily
due to higher salary expenses of approximately $2.2 million , higher real estate
taxes of approximately $1.9 million as a result of increased property valuations
at a number of our communities, higher property insurance of approximately $1.3
million , and higher utilities of approximately $1.1 million . The increase for
the nine months ended September 30, 2020 was partially offset by approximately
$0.8 million lower repairs and maintenance and general administrative expenses,
as compared to the same period in 2019.
Non-same Store and Development and Lease-up Analysis
Property NOI from non-same store and development and lease-up communities
increased approximately $2.3 million and $12.9 million for the three and nine
months ended September 30, 2020 , respectively, as compared to the same periods
in 2019. These increases were comprised of increases from non-same store
communities of approximately $2.7 million and $13.6 million and partially offset
by decreases from development and lease-up communities of approximately $0.3
million and $0.7 million for the three and nine months ended September 30, 2020 ,
respectively, as compared to the same periods in 2019. The increases in property
revenues and expenses from our non-same store communities were primarily due to
the acquisition of four operating properties during 2019, four operating
properties reaching stabilization during 2019 and two operating properties
reaching stabilization during the nine months ended September 30, 2020 . The
slight decreases in property NOI from our development and lease-up communities
were primarily due to the timing of completion and partial lease-up of one
development property during the three and nine months ended September 30, 2020 .
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The following table details the changes, described above, relating to non-same
store and development and lease up NOI:
For the three For the nine
months ended months ended
September 30, September 30,
2020 as compared 2020 as compared
to 2019 to 2019
(in millions)
Property Revenues:
Revenues from acquisitions $ 4.8 $ 18.4
Revenues from non-same store stabilized properties 0.7 4.7
Revenues from development and lease-up properties 0.6 1.0
Other - 0.3
$ 6.1 $ 24.4
Property Expenses:
Expenses from acquisitions $ 2.2 $ 8.1
Expenses from non-same store stabilized properties 0.3 0.9
Expenses from development and lease-up properties 0.9 1.7
Other 0.4 0.8
$ 3.8 $ 11.5
Property NOI:
NOI from acquisitions $ 2.6 $ 10.3
NOI from non-same store stabilized properties 0.4 3.8
NOI from development and lease-up properties (0.3) (0.7)
Other (0.4) (0.5)
$ 2.3 $ 12.9
COVID-19 Related Impact Analysis
The COVID-19 Related Impact was approximately $0.4 million and $13.6 million for
the three and nine months ended September 30, 2020 , respectively. The impact for
the three months ended September 30, 2020 related to approximately $0.4 million
of directly-related COVID-19 expenses incurred at our operating properties.
The COVID-19 Related Impact for the nine months ended September 30, 2020 was due
to the Resident Relief Funds and COVID-19 directly-related expenses. In April
2020 , we announced two Resident Relief Funds for our residents experiencing
financial losses caused by COVID-19. During the three months ended June 30,
2020 , we paid approximately $9.1 million to approximately 7,100 residents of our
wholly-owned communities which was recorded as a reduction of property revenues.
During the nine months ended September 30, 2020 , we also incurred approximately
$4.5 million of directly-related COVID-19 expenses at our operating properties,
which included $2.8 million of bonuses paid to on-site employees who provided
essential services during the pandemic and approximately $1.7 million of other
directly-related COVID-19 expenses.
Dispositions/Other Property Analysis
Dispositions/other property NOI decreased approximately $2.1 million and $5.4
million for the three and nine months ended September 30, 2020 as compared to
the same periods in 2019. These decreases were primarily due to the disposition
of two consolidated operating properties in the fourth quarter of 2019. We had
no operating property dispositions during the nine months ended September 30,
2020 . These decreases were also due to higher amounts identified as
uncollectible related to our retail tenants during the three and nine months
ended September 30, 2020 , which was due in part to COVID-19.
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Non-Property Income
Three Months Ended Nine Months Ended
September 30, Change September 30, Change
($ in thousands) 2020 2019 $ % 2020 2019 $ %
Fee and asset management $ 2,542 $ 2,139 $ 403 18.8 % $ 7,449 $ 5,849 $ 1,600 27.4 %
Interest and other income 1,948 1,485 463 31.2 2,602 2,114 488 23.1
Income on deferred compensation
plans 5,071 780 4,291 * 1,646 14,992 (13,346) *
Total non-property income $ 9,561 $ 4,404 $ 5,157 117.1 % $ 11,697 $ 22,955 $ (11,258) (49.0) %
* Not a meaningful percentage.
Fee and asset management income, which represents income related to property
management of our joint ventures and fees from third-party construction
projects, increased approximately $0.4 million and $1.6 million for the three
and nine months ended September 30, 2020 , respectively, as compared to the same
periods in 2019. These increases were primarily due to higher fees earned
related to increased construction and development activity for one property held
by one of the Funds which was under construction, and an increase in third-party
construction activity during the three and nine months ended September 30, 2020
as compared to the same periods in 2019.
Our deferred compensation plans recognized income of approximately $5.1 million
and $0.8 million during the three months ended September 30, 2020 and 2019,
respectively, and income of approximately $1.6 million and $15.0 million during
the nine months ended September 30, 2020 and 2019, respectively. The changes
were related to the performance of the investments held in deferred compensation
plans for participants and were directly offset by the expense related to these
plans, as discussed below.
Other Expenses
Three Months Ended Nine Months Ended
September 30, Change September 30, Change
($ in thousands) 2020 2019 $ % 2020 2019 $ %
Property management $ 5,894 $ 6,154 $ (260) (4.2) % $ 18,360 $ 18,904 $ (544) (2.9) %
Fee and asset management 1,018 1,316 (298) (22.6) 2,681 4,022 (1,341) (33.3)
General and administrative 12,726 13,458 (732) (5.4) 40,350 40,027 323 0.8
Interest 24,265 20,719 3,546 17.1 67,454 60,538 6,916 11.4
Depreciation and amortization 90,575 85,814 4,761 5.5 275,237 250,734 24,503 9.8
Expense on deferred
compensation plans 5,071 780 4,291 * 1,646 14,992 (13,346) *
Total other expenses $ 139,549 $ 128,241 $ 11,308 8.8 % $ 405,728 $ 389,217 $ 16,511 4.2 %
* Not a meaningful percentage.
Property management expense, which represents regional supervision and accounting costs related to property operations, decreased approximately$0.3 million and$0.5 million for the three and nine months endedSeptember 30, 2020 , respectively, as compared to the same periods in 2019. These decreases were primarily related to lower travel expenses during the three and nine months endedSeptember 30, 2020 as compared to the same periods in 2019. Property management expenses were 2.2% and 2.4% of total property revenues for the three months endedSeptember 30, 2020 and 2019, respectively, and were 2.3% and 2.5% of total property revenues for the nine months endedSeptember 30, 2020 and 2019, respectively. Fee and asset management expense from property management, asset management, construction, and development activities of our joint ventures and our third-party projects decreased approximately$0.3 million and$1.3 million for the three and nine months endedSeptember 30, 2020 as compared to the same periods in 2019. These decreases were primarily due to lower discretionary spending incurred in managing our joint ventures and construction activities during the three and nine months endedSeptember 30, 2020 as compared to the same periods in 2019. General and administrative expense decreased by approximately$0.7 million for the three months endedSeptember 30, 2020 and increased by approximately$0.3 million for the nine months endedSeptember 30, 2020 , as compared to the same periods in 2019. The decrease during the three months endedSeptember 30, 2020 was primarily due to a decrease in professional fee expenses, as well as lower travel and other discretionary expenses. The increase during the nine months endedSeptember 30, 2020 was primarily due to approximately$0.8 million of COVID-19 related expenses, higher salary and benefit costs, and higher information technology costs as compared to the same periods in 2019. These increases during the nine months endedSeptember 30, 2020 were partially offset by lower incentive compensation expense in 2020 due to decreased 30 -------------------------------------------------------------------------------- Table of Contents amortization relating to accelerated vesting for employees reaching retirement eligibility during the nine months endedSeptember 30, 2020 . Excluding income on deferred compensation plans, general and administrative expenses were 4.7% and 5.1% of total revenues for the three months endedSeptember 30, 2020 and 2019, respectively, and were 5.1% and 5.2% of total revenues for the nine months endedSeptember 30, 2020 and 2019, respectively. Interest expense increased approximately$3.5 million and$6.9 million for the three and nine months endedSeptember 30, 2020 , respectively, as compared to the same periods in 2019. These increases were primarily due to the issuance of$300 million , 3.41% senior unsecured notes inOctober 2019 , and the issuance of$750 million , 2.91% senior unsecured notes inApril 2020 . The increase during the nine months endedSeptember 30, 2020 was also due to the issuance of$600 million , 3.67% senior unsecured notes inJune 2019 . These increases were partially offset by the redemption of our$250 million , 4.78% senior unsecured notes due 2021, and the prepayment of an approximate$45.3 million , 4.38% secured conventional mortgage note inOctober 2019 . These increases were also partially offset by higher capitalized interest during the three and nine months endedSeptember 30, 2020 resulting from higher average balances in our development pipeline and decreases in interest expense recognized on our term loan due to lower rates during the three and nine months endedSeptember 30, 2020 as compared to the same periods in 2019. The increase during the nine months endedSeptember 30, 2020 was further offset by the repayment of approximately$439.3 million of secured conventional mortgage debt with a weighted average interest rate of 5.2% in the first quarter of 2019 and a decrease in interest expense recognized on our unsecured credit facility due to lower balances outstanding during the nine months endedSeptember 30, 2020 as compared to the same period in 2019. Depreciation and amortization expense increased approximately$4.8 million and$24.5 million for the three and nine months endedSeptember 30, 2020 , respectively, as compared to the same periods in 2019. These increases were primarily due to the acquisition of four operating properties in 2019, the completion of units in our development pipeline, the completion of repositions, and the partial completion of redevelopments during 2020 and 2019. These increases were partially offset by a decrease in depreciation expense related to the disposition of two operating properties inDecember 2019 . Our deferred compensation plans recognized expenses of approximately$5.1 million and$0.8 million during the three months endedSeptember 30, 2020 and 2019, respectively, and expenses of approximately$1.6 million and$15.0 million during the nine months endedSeptember 30, 2020 and 2019, respectively. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the income related to these plans, as discussed in the non-property income section above. Other Three Months Ended Nine Months Ended September 30, Change September 30, Change ($ in thousands) 2020 2019 $ % 2020 2019 $ % Gain on sale of land $ - $ - $ - 100.0 %$ 382 $ -$ 382 100.0 % Equity in income of joint ventures$ 2,154 $ 2,133 $ 21 1.0 %$ 5,909 $ 5,954 $ (45) (0.8) % Income tax expense$ (615) $ (313) $ (302) 96.5 %$ (1,476) $ (709) $ (767)
108.2 %
During the nine months endedSeptember 30, 2020 , we sold approximately 4.7 acres of land adjacent to one of our operating properties inRaleigh, North Carolina for approximately$0.8 million and recognized a gain of approximately$0.4 million . Equity in income of joint ventures was relatively flat for the three and nine months endedSeptember 30, 2020 , as compared to the same periods in 2019. The slight increase during the three months endedSeptember 30, 2020 was primarily due to an increase in earnings from the operating properties owned by the Funds as a result of lower interest expense due to lower weighted average interest rates on variable rate debt. The increase was partially offset by a decrease in earnings due to the sale of one operating property by one of the Funds inDecember 2019 . The slight decrease during the nine months endedSeptember 30, 2020 was primarily due to approximately$1.3 million of Resident Relief Funds paid to residents of the operating communities owned by our unconsolidated joint ventures, of which we recognized our ownership interest of$0.4 million in equity in income of joint ventures. The decrease in earnings during the nine months endedSeptember 30, 2020 was also due to the sale of one operating property by one of the Funds inDecember 2019 , and was partially offset by lower interest expense recognized by operating properties owned by the Funds due to lower weighted average interest rates on variable rate debt during the nine months endedSeptember 30, 2020 as compared to the same period in 2019. Income tax expense increased approximately$0.3 million and$0.8 million for the three and nine months endedSeptember 30, 2020 , respectively, as compared to the same periods in 2019. These increases were primarily due to an increase in state and local taxes and an increase in taxable income related to higher third-party construction activities conducted in a taxable REIT subsidiary. 31 -------------------------------------------------------------------------------- Table of Contents Funds from Operations ("FFO") and Adjusted FFO ("AFFO") Management considers FFO and AFFO to be appropriate supplementary measures of the financial performance of an equity REIT.The National Association of Real Estate Investment Trusts ("NAREIT") currently defines FFO in accordance with the 2018 NAREIT FFO White Paper which defines FFO as net income (computed in accordance with GAAP), excluding depreciation and amortization related to real estate, gains (or losses) from the sale of certain real estate assets (depreciable real estate), impairments of certain real estate assets (depreciable real estate), gains (or losses) from change in control, and adjustments for unconsolidated joint ventures to reflect FFO on the same basis. Our calculation of diluted FFO also assumes conversion of all potentially dilutive securities, including certain non-controlling interests, which are convertible into common shares. We consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions of depreciable real estate and depreciation, FFO can assist in the comparison of the operating performance of a company's real estate investments between periods or to different companies. AFFO is calculated utilizing FFO less recurring capitalized expenditures which are necessary to help preserve the value of and maintain the functionality at our communities. We also consider AFFO to be a useful supplemental measure because it is frequently used by analysts and investors to evaluate a REIT's operating performance between periods or to different companies. Our definition of recurring capital expenditures may differ from other REITs, and there can be no assurance our basis for computing this measure is comparable to other REITs. To facilitate a clear understanding of our consolidated historical operating results, we believe FFO and AFFO should be examined in conjunction with net income attributable to common shareholders as presented in the condensed consolidated statements of income and comprehensive income and data included elsewhere in this report. FFO and AFFO are not defined by GAAP and should not be considered alternatives to net income attributable to common shareholders as an indication of our operating performance. Additionally, FFO and AFFO as disclosed by other REITs may not be comparable to our calculation. Reconciliations of net income attributable to common shareholders to FFO and AFFO for the three and nine months endedSeptember 30, 2020 and 2019 are as follows: Three Months Ended Nine Months Ended September 30, September 30, ($ in thousands) 2020 2019 2020 2019 Funds from operations Net income attributable to common shareholders (1)$ 34,957 $ 43,597 $ 94,718 $ 124,609 Real estate depreciation and amortization 87,974 83,437 267,985 244,908 Adjustments for unconsolidated joint ventures 2,404 2,245 6,933 6,736 Income allocated to non-controlling interests 1,276 1,225 3,661 3,549 Funds from operations$ 126,611
Less: recurring capitalized expenditures (22,299) (20,242) (55,906) (51,063) Adjusted funds from operations$ 104,312
Weighted average shares - basic 99,419 98,959 99,372 98,259
Incremental shares issuable from assumed conversion of: Common share options and awards granted
36 107 42 116
Common units 1,748 1,753 1,748 1,754
Weighted average shares - diluted 101,203 100,819 101,162 100,129
(1)Net income attributable to common shareholders includes an approximate $0.4
million and $14.8 million COVID-19 Related Impact for the three and nine months
ended September 30, 2020 , respectively. For the three months ended September 30,
2020 , we incurred approximately $0.4 million of COVID-19 directly-related
expenses at our operating communities. The total COVID-19 Related Impact for the
nine months ended September 30, 2020 , was comprised of $9.5 million related to
the Resident Relief Funds which were established in April 2020 . Of this amount,
approximately $9.1 million was paid to residents at our wholly-owned communities
and approximately $1.3 million of Resident Relief Funds paid to residents of the
operating communities owned by our unconsolidated joint ventures, of which we
recognized our ownership interest of $0.4 million in equity in income of joint
ventures. Additionally, we incurred approximately $4.5 million of COVID-19
expenses at our operating communities, which included $2.8 million of bonuses
paid to on-site employees who provided essential services during the pandemic
and $1.7 million in other directly-related COVID-19 expenses. We also incurred
approximately $0.8 million related to the Employee Relief Fund we established to
help our employees impacted by COVID-19.
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Liquidity and Capital Resources
Financial Condition and Sources of Liquidity
We intend to maintain a strong balance sheet and preserve our financial
flexibility, which we believe should enhance our ability to identify and
capitalize on investment opportunities as they become available. We intend to
maintain what management believes is a conservative capital structure by:
•extending and sequencing the maturity dates of our debt where practicable;
•managing interest rate exposure using what management believes to be prudent
levels of fixed and floating rate debt;
•maintaining what management believes to be conservative coverage ratios; and
•using what management believes to be a prudent combination of debt and equity.
Our interest expense coverage ratio, net of capitalized interest, was
approximately 6.2 and 6.7 for the three and nine months ended September 30,
2020 , respectively, and was approximately 7.2 times for each of the three and
nine months ended September 30, 2019 . This ratio is a method for calculating the
amount of operating cash flows available to cover interest expense and is
calculated by dividing interest expense for the period into the sum of property
revenues and expenses, non-property income, and other expenses, after adding
back depreciation, amortization, and interest expense. All of our consolidated
properties were unencumbered at September 30, 2020 and approximately 98.9% of
our consolidated properties were unencumbered at September 30, 2019 . Our
weighted average maturity of debt was approximately 8.5 years at September 30,
2020 .
Our primary sources of liquidity are cash and cash equivalents and cash flows
generated from operations. Other sources may include one or more of the
following: availability under our unsecured credit facility, the use of debt and
equity offerings under our automatic shelf registration statement, proceeds from
property dispositions, equity issued from our ATM program, and other unsecured
borrowings or secured mortgages. We believe our liquidity and financial
condition are sufficient to meet all of our reasonably anticipated cash needs
during the next twelve months from our filing date including:
•normal recurring operating expenses;
•current debt service requirements;
•recurring and non-recurring capital expenditures;
•reposition expenditures;
•funding of property developments, redevelopments, acquisitions, and joint
venture investments; and
•the minimum dividend payments required to maintain our REIT qualification under
the Code.
Factors which could increase or decrease our future liquidity include but are
not limited to volatility in capital and credit markets, changes in rent control
or rent stabilization laws, sources of financing, the minimum REIT dividend
requirements, our ability to complete asset purchases, sales, or developments,
the effect our debt level and changes in credit ratings could have on our cost
of funds, and our ability to access capital markets. A variety of these factors,
among others, could also be affected by COVID-19.
Cash Flows
The following is a discussion of our cash flows for the nine months ended
September 30, 2020 and 2019:
Net cash from operating activities was approximately $413.3 million during the
nine months ended September 30, 2020 as compared to approximately $408.4
million for the same period in 2019. The increase was primarily due to a $20.4
million settlement of forward interest rate swaps we paid in June 2019 and was
partially offset by a decrease in the amount of cash received in operating
accounts primarily due to the timing of payments to vendors during the nine
months ended September 30, 2020 as compared to the same period in 2019.
Net cash used in investing activities during the nine months ended September 30,
2020 totaled approximately $298.1 million as compared to $529.5 million during
the same period in 2019. Cash outflows during the nine months ended
September 30, 2020 primarily related to amounts paid for property development
and capital improvements of approximately $294.4 million , and increases in
non-real estate assets of $6.1 million . Cash outflows during the nine months
ended September 30, 2019 primarily related to amounts paid for property
development and capital improvements of approximately $300.7 million , the
acquisition of two operating properties located in Scottsdale, Arizona and
Austin, Texas for approximately $214.2 million , and increases in non-real estate
assets of $13.8 million . The slight decrease in property
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development and capital improvements for the nine months ended September 30,
2020 , as compared to the same period in 2019, was primarily due to the
acquisition of two development properties in 2019 as compared to one development
property in 2020, the timing and completion of three consolidated operating
properties during 2019 and the nine months ended September 30, 2020 , and the
completion of repositions at several of our operating properties. The property
development and capital improvements during the nine months ended September 30,
2020 and 2019, included the following:
Nine Months Ended
September 30,
(in millions) 2020 2019
Expenditures for new development, including land $ 159.0 $ 162.3
Capital expenditures 61.2 58.1
Reposition expenditures 35.6 47.1
Capitalized interest, real estate taxes, and other
capitalized indirect costs 25.2 18.6
Redevelopment expenditures 13.4 14.6
Total $ 294.4 $ 300.7
Net cash from financing activities totaled approximately $450.8 million for the
nine months ended September 30, 2020 as compared to $240.4 million during the
same period in 2019. Cash inflows during the nine months ended September 30,
2020 primarily related to net proceeds of approximately $743.1 million from the
issuance of $750.0 million senior unsecured notes in April 2020 . These cash
inflows during 2020 were partially offset by $249.2 million used for the
distributions to common shareholders and non-controlling interest holders, and
net payments of $44.0 million of borrowings from our unsecured line of credit.
Cash inflows during the nine months ended September 30, 2019 primarily related
to net proceeds of approximately $593.4 million from the issuance of $600.0
million senior unsecured notes in June 2019 , as well as net proceeds of
approximately $328.4 million from the issuance of approximately 3.4 million
common shares through an underwritten equity offering completed in February
2019 . These cash inflows during 2019 were partially offset by the repayment of
approximately $439.3 million of secured conventional mortgage debt, as well as
$236.5 million used for the distributions to common shareholders and
non-controlling interest holders.
Financial Flexibility
We have a$900 million unsecured credit facility which matures inMarch 2023 , with two options to further extend the facility at our election for two additional six-month periods and may be expanded three times by up to an additional$500 million upon the satisfaction of certain conditions. The interest rate on our unsecured credit facility is based upon theLondon Interbank Offered Rate ("LIBOR") plus a margin which is subject to change as our credit ratings change. Advances under our credit facility 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 180 days or less and may not exceed the lesser of$450 million or the remaining amount available under our credit facility. Our credit facility is subject to customary financial covenants and limitations. We believe we are in compliance with all such financial covenants and limitations as ofSeptember 30, 2020 and through the date of this filing. Our credit facility provides us with the ability to issue up to$50 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our credit facility, it does reduce the amount available. AtSeptember 30, 2020 , we had no borrowings outstanding on our credit facility and we had outstanding letters of credit totaling approximately$10.2 million , leaving approximately$889.8 million available under our credit facility. InJune 2020 , we created an at-the market ("ATM") share offering program through which we can, but have no obligation to, sell common shares and we may also enter into separate forward sale agreements with forward purchasers for an aggregate offering price of up to$362.7 million (the "2020 ATM program"), in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. Actual sales from time to time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations by management of the appropriate sources of funding for us. The proceeds from the sale of our common shares under the 2020 ATM program are intended to be used for general corporate purposes, which may include reducing future borrowings under our$900 million unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development activities, and financing for acquisitions. There were no shares sold under the 2020 ATM program in the quarter endedSeptember 30, 2020 and no shares have been sold through the date of this filing. As of the date of this filing, we had common shares having an aggregate offering price of up to$362.7 million remaining available for sale under the 2020 ATM program. 34 -------------------------------------------------------------------------------- Table of Contents We believe our ability to access capital markets is enhanced by our senior unsecured debt ratings by Moody's, Fitch, and Standard and Poor's, which are currently A3 with stable outlook, A- with stable outlook, and A- with stable outlook, respectively. We believe our ability to access capital markets is also enhanced by our ability to borrow on a secured basis from various institutions including banks, Fannie Mae, Freddie Mac, or life insurance companies. However, we may not be able to maintain our current credit ratings and may not be able to borrow on a secured or unsecured basis in the future. Future Cash Requirements and Contractual Obligations One of our principal long-term liquidity requirements includes the repayment of maturing debt, including any future borrowings under our unsecured credit facility. InApril 2020 , we issued$750 million of senior unsecured notes dueMay 15, 2030 under our then-existing shelf registration statement. InOctober 2020 , we entered into a$40.0 million two-year unsecured floating rate term loan with an unrelated third party. Also inOctober 2020 , we used the net proceeds from the$40.0 million term loan together with cash on hand to repay the$100.0 million unsecured term loan which was scheduled to mature in 2022. As of the date of this filing, we do not have any debt maturing through the year ending 2021. See Note 7, "Notes Payable," in the notes to Condensed Consolidated Financial Statements for a further discussion of our scheduled maturities. We currently estimate the additional cost to complete the construction of eight consolidated projects to be approximately$383.7 million . Of this amount, we expect to incur costs between approximately$50 million and$70 million during the remainder of 2020 and to incur the remaining costs during 2021 through 2023. Additionally, during the remainder of 2020, we expect to incur costs between approximately$10 million and$13 million related to repositions and revenue enhancing expenditures, between approximately$1 million to$4 million related to additional redevelopment expenditures and between approximately$20 million to$23 million related to additional recurring capital expenditures. The locations of many of these projects may currently or in the future be subject to "shelter in place," "stay at home," or similar orders adopted by state and local authorities in response to COVID-19. Some of these orders may adversely affect the timely completion and final project costs of some or all of our projects under development if, for example, we are required to temporarily cease construction, experience delays in obtaining governmental permits and authorizations, or experience disruption in the supply of materials or labor. We intend to meet our near-term liquidity requirements through a combination of one or more of the following: cash and cash equivalents, cash flows generated from operations, draws on our unsecured credit facility, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from our ATM program, and other unsecured borrowings or secured mortgages. We intend to evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise. As a REIT, we are subject to a number of organizational and operational requirements, including a requirement to distribute current dividends to our shareholders equal to a minimum of 90% of our annual taxable income. In order to minimize paying income taxes, our general policy is to distribute at least 100% of our taxable income. InSeptember 2020 , ourBoard of Trust Managers declared a quarterly dividend of$0.83 per common share to our common shareholders of record as ofSeptember 30, 2020 . The quarterly dividend was subsequently paid onOctober 16, 2020 , and we paid equivalent amounts per unit to holders of the common operating partnership units. Assuming similar quarterly dividend distributions for the remainder of 2020, our annualized dividend rate would be$3.32 per share or unit. Off-Balance Sheet Arrangements The joint ventures in which we have an interest have been funded in part with secured, third-party debt. AtSeptember 30, 2020 , our unconsolidated joint ventures had outstanding debt of approximately$507.2 million . As ofSeptember 30, 2020 , we had no outstanding guarantees related to the debt of our unconsolidated joint ventures. Inflation Our apartment leases are for an average term of approximately fourteen months. In an inflationary environment, we may realize increased rents at the commencement of new leases or upon the renewal of existing leases. We believe the short-term nature of our leases generally minimizes our risk from the adverse effects of inflation. 35
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Table of Contents Critical Accounting Policies Our critical accounting policies have not changed from the information reported in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Recent Accounting Pronouncements. See Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements," in the notes to Condensed Consolidated Financial Statements for further discussion of recent accounting pronouncements issued or adopted during the nine months endedSeptember 30, 2020 .
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