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, 2020 . 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. 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, 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 could expose us to the effects of declining market rents; •Competition could limit our ability to lease apartments or increase or maintain rental income; •We could be negatively impacted by the risks associated with land holdings and related activities; •The ongoing pandemic and measures intended to prevent its spread and impact have and could continue to have a material adverse effect on our business, results of operations, cash flows, and financial condition; •Development, redevelopment and construction risks could impact our profitability; •We could be impacted by our investments through joint ventures and investment funds which involve risks not present in investments in which we are the sole investor; •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 may continue to change at any time and any such legislative or other actions could have a negative effect on us; •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; •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; •We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined; •Share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders; •The form, timing and amount of dividend distributions in future periods may vary and be impacted by economic and other considerations; •Competition could adversely affect our ability to acquire properties; •Litigation risks could affect our business; •Damage from catastrophic weather and other natural events could result in losses; and •We could be adversely impacted due to our share price fluctuations. 19 -------------------------------------------------------------------------------- Table of Conten t s 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 ofJune 30, 2021 , we owned interests in, operated, or were developing 177 multifamily properties comprised of 60,219 apartment homes acrossthe United States . In addition, we own other land holdings which we may develop into multifamily apartment communities in the future. Business Environment and Current Outlook Since the pandemic began inMarch 2020 , we believe the multifamily industry market conditions in which we operate have been challenging, but are showing recent signs of improvement. During the three months endedJune 30, 2021 , our results reflect an increase in same store revenues of approximately 4.1% as compared to the same period in 2020. The increase was primarily due to an increase in occupancy, higher realized rental rates, and higher reletting income, net of lower uncollectible revenue, which we believe was primarily attributable to improving job growth, favorable demographics, higher demand for multifamily housing in our markets, and a manageable supply of new multifamily housing. We currently believeU.S. economic and employment growth are likely to continue during 2021 and the supply of multifamily homes will remain at manageable levels. If economic conditions were to worsen, our operating results could be adversely affected. Consolidated Results Net income attributable to common shareholders increased approximately$13.7 million and$1.8 million for the three and six months endedJune 30, 2021 , respectively, as compared to the same periods in 2020. The$13.7 million increase during the three months endedJune 30, 2021 was primarily due to a$25.8 million increase in property revenues as we continue to see improvement in operations from the pandemic, resulting in increased occupancy, higher realized rental rates, and higher reletting income, net of uncollectible revenue, as compared to the same period in 2020. This increase was partially offset by higher property operating expenses of$3.3 million , higher depreciation expense of approximately$6.8 million , higher general and administrative expenses of approximately$0.9 million , higher interest expense of approximately$0.6 million , and higher other property management expense of$0.5 million , as compared to the same period in 2020. The$1.8 million increase during the six months endedJune 30, 2021 was primarily due to a$27.5 million increase in property revenues as we continue to see improvement in operations from the pandemic, resulting in increased occupancy and higher realized rental rates in our same store and non-same store communities, as compared to the same period in 2020. This increase was partially offset by higher property operating expenses of$10.1 million , higher depreciation expense of approximately$8.1 million , higher interest expense of approximately$4.5 million , higher general and administrative expenses of approximately$1.8 million , and lower net fee and asset management income of approximately$0.9 million . The increase was further offset due to a decrease of$0.4 million related to a gain on sale of land during the six months endedJune 30, 2020 . Construction Activity AtJune 30, 2021 , we had a total of eight properties under construction comprising 2,608 apartment homes. Initial occupancies of these eight properties are currently scheduled to occur within the next 24 months. As ofJune 30, 2021 , we estimate the total additional cost to complete the construction of the eight properties is approximately$301.6 million . Acquisitions Operating properties: InJune 2021 , we acquired one operating property comprised of 328 apartment homes located inFranklin, Tennessee for approximately$105.3 million and one operating property comprised of 430 apartment homes located inNashville, Tennessee for approximately$186.3 million . Land: InJune 2021 , we acquired approximately 14.6 acres of land inThe Woodlands, Texas for approximately$9.3 million and approximately 0.2 acres of land inSt. Petersburg, Florida for approximately$2.1 million for future development purposes. 20 -------------------------------------------------------------------------------- Table of Conten t s Other We issued approximately 2.9 million shares under our 2020 at-the-market ("ATM") program during the three months endedJune 30, 2021 and received approximately$358.8 million in net proceeds. 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 future ATM programs, and other unsecured borrowings or secured mortgages. As ofJune 30, 2021 , we had approximately$374.6 million in cash and cash equivalents and$887.8 million available under our$900 million unsecured credit facilities. As ofJune 30, 2021 and through the date of this filing, we do not have any debt maturing untilSeptember 2022 and 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: June 30, 2021 December 31, 2020 Apartment Apartment Homes Properties Homes PropertiesOperating Properties Houston, Texas 9,806 28 9,806 28 Washington, D.C. Metro 6,863 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 3,242 9 3,240 9 Charlotte, North Carolina 3,104 14 3,104 14 Denver, Colorado 2,865 9 2,865 9 Southeast Florida 2,781 8 2,781 8 Tampa, Florida 2,736 7 2,736 7 Los Angeles/Orange County, California 2,663 7 2,663 7 San Diego/Inland Empire, California 1,665 5 1,665 5 Nashville, Tennessee 758 2 - -Total Operating Properties 57,611 169 56,850 167 21
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Table of Conten t s June 30, 2021 December 31, 2020 Apartment Apartment Homes Properties Homes PropertiesProperties Under Construction Phoenix, Arizona 740 2 740 2 Charlotte, North Carolina 387 1 387 1 Atlanta, Georgia 366 1 366 1 Orlando, Florida 360 1 360 1 Raleigh, North Carolina 354 1 - - Southeast Florida 269 1 269 1 San Diego/Inland Empire, California 132 1 132 1Total Properties Under Construction 2,608 8 2,254 7Total Properties 60,219 177 59,104 174 Less:Unconsolidated Joint Venture Properties (1) Houston, Texas 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 1Total Unconsolidated Joint Venture Properties 7,247 22 7,247 22 Total Properties Fully Consolidated 52,972 155 51,857 152 (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. Stabilized Communities We generally consider a property stabilized when it has reached 90% occupancy. During the three months endedJune 30, 2021 , stabilization was achieved at one consolidated operating property and one unconsolidated joint venture operating property as follows: Number of Date of ($ in millions) Apartment Construction Date of Property and Location Homes Completion Stabilization Consolidated Operating Property Camden RiNo Denver, CO 233 4Q20
2Q21
Unconsolidated Operating Property Camden Cypress Creek II Cypress, TX 234 4Q20 2Q21 22
-------------------------------------------------------------------------------- Table of Conten t s Completed Construction in Lease-Up AtJune 30, 2021 , there was one completed consolidated 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) 7/25/2021 Completion Stabilization Camden Downtown I Houston, TX 271$ 131.6 92 % 3Q20 4Q21 (1)Excludes leasing costs, which are expensed as incurred.Properties Under Development Our condensed consolidated balance sheet atJune 30, 2021 included approximately$443.1 million related to properties under development and land. Of this amount, approximately$334.3 million related to our properties currently under construction. In addition, we had approximately$108.8 million invested primarily in land held for future development related to projects we currently expect to begin construction.Properties Under Construction . AtJune 30, 2021 , we had eight properties in various stages of construction as follows: Included in Estimated Number of Properties Date of Estimated ($ in millions) Apartment Estimated Cost Under Construction Date of Property and Location Homes Cost Incurred Development Completion
Stabilization
Properties Under Construction Camden North End II (1) Phoenix, AZ 343$ 87.0 $ 77.9 $ 7.2 4Q21 2Q22Camden Lake Eola (2) Orlando, FL 360 125.0 124.0 27.9 3Q21 2Q22 Camden Buckhead (3) Atlanta, GA 366 160.0 140.0 69.3 1Q22 3Q22Camden Hillcrest (4) San Diego, CA 132 95.0 80.2 46.6 4Q21 3Q22 Camden Atlantic Plantation, FL 269 100.0 61.9 61.9 4Q22 4Q23 Camden Tempe II Tempe, AZ 397 115.0 41.8 41.8 3Q23 1Q25 Camden NoDa Charlotte, NC 387 105.0 41.2 41.2 3Q23 1Q25 Camden Durham Durham, NC 354 120.0 38.4 38.4 4Q23 1Q25 Total 2,608$ 907.0 $ 605.4 $ 334.3
(1)Property in lease-up and was 76% leased at
23
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Table of Conten t s Development Pipeline Communities. AtJune 30, 2021 , we had the following multifamily communities undergoing development activities: ($ in millions) Total Estimated Property and Location Projected Homes Cost (1) Cost to DateCamden Village District (2) Raleigh, NC 355$ 115.0 $ 22.3 Camden Woodmill Creek The Woodlands, TX 188 60.0 9.6Camden Arts District Los Angeles, CA 354 150.0 35.9 Camden Pier District II St. Petersburg, FL 95 50.0 2.4 Camden Paces III Atlanta, GA 350 100.0 17.4 Camden Downtown II Houston, TX 271 145.0 12.4 Camden Highland Village II Houston, TX 300 100.0 8.8 Total 1,913$ 720.0 $ 108.8 (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. (2)Formerly known asCamden Cameron Village . 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 six months endedJune 30, 2021 and 2020 are as follows: Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Average monthly property revenue per apartment home (1)$ 1,848 $ 1,703 $ 1,826 $ 1,755 Annualized total property expenses per apartment home (2)$ 8,256 $ 8,126 $ 8,211 $ 7,904 Weighted average number of operating apartment homes owned 100% 49,887 49,069 49,663 49,043 Weighted average occupancy of operating apartment homes owned 100% 97.3 %
94.9 % 96.8 % 95.4 %
(1)Includes approximately$9.1 million of Resident Relief Funds paid to residents at our wholly-owned communities who have experienced financial losses caused by the pandemic and was recorded as a reduction to property revenues during the three and six months endedJune 30, 2020 . (2)Includes approximately$4.1 million of pandemic 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$1.3 million in other directly-related pandemic expenses during the three and six months endedJune 30, 2020 . Management considers property net operating income ("NOI") to be an appropriate supplemental measure of operating performance to net income because it reflects the operating performance of our communities without an allocation of corporate level property management overhead or general and administrative costs. We define NOI as property revenue less property operating and maintenance expenses less real estate taxes. NOI is further detailed in the Property-Level NOI table as seen below. NOI is not defined by accounting principles generally accepted inthe United States of America ("GAAP") and should not be considered an alternative to net income as an indication of our operating performance. Additionally, NOI as disclosed by other REITs may not be comparable to our calculation. 24 -------------------------------------------------------------------------------- Table of Conten t s Reconciliations of net income to NOI for the three and six months endedJune 30, 2021 and 2020 are as follows: Three Months Ended Six Months Ended June 30, June 30, (in thousands) 2021 2020 2021 2020 Net income$ 31,439
(2,263) (2,380) (4,469) (4,907) Less: Interest and other income (257) (325) (589) (654) Less: (Income)/loss on deferred compensation plans (6,400) (11,435) (10,026) 3,425 Plus: Property management expense 6,436 5,939 12,560 12,466 Plus: Fee and asset management expense 1,019 820 2,151 1,663 Plus: General and administrative expense 15,246 14,391 29,468 27,624 Plus: Interest expense 24,084 23,482 47,728 43,189 Plus: Depreciation and amortization expense 99,586 92,803 192,727 184,662 Plus: Expense/(benefit) on deferred compensation plans 6,400 11,435 10,026 (3,425) Less: Gain on sale of land - - - (382) Less: Equity in income of joint ventures (2,198) (1,633) (4,112) (3,755) Plus: Income tax expense 460 394 812 861 Net operating income$ 173,552 $ 151,002 $ 340,188 $ 322,745 Property-Level NOI (1) Property NOI, as reconciled above, is detailed further into the following categories for the three and six months endedJune 30, 2021 as compared to the same periods in 2020: Apartment Three Months Ended Six Months Ended Homes at June 30, Change June 30, Change ($ in thousands) 6/30/2021 2021 2020 $ % 2021 2020 $ % Property revenues: Same store communities 45,492$ 245,330 $ 235,606 $ 9,724 4.1 %$ 485,042 $ 476,211 $ 8,831 1.9 % Non-same store communities 4,601 25,531 22,274 3,257 14.6 49,368 45,257 4,111 9.1 Development and lease-up communities 2,879 3,567 304 3,263 * 6,001 379 5,622 * Resident Relief Funds - - (9,074) 9,074 - - (9,074) 9,074 * Other - 2,095 1,573 522 33.2 3,680 3,789 (109) (2.9) Total property revenues 52,972$ 276,523 $ 250,683 $ 25,840 10.3 %$ 544,091 $ 516,562 $ 27,529 5.3 % Property expenses: Same store communities 45,492$ 90,770 $ 85,504 $ 5,266 6.2 %$ 179,999 $ 170,155 $ 9,844 5.8 % Non-same store communities 4,601 9,536 8,587 949 11.1 18,883 17,143 1,740 10.1 Development and lease-up communities 2,879 1,679 643 1,036 * 3,008 793 2,215 * Pandemic expenses - - 4,096 (4,096) * - 4,096 (4,096) * Other - 986 851 135 15.9 2,013 1,630 383 23.5 Total property expenses 52,972$ 102,971 $ 99,681 $ 3,290 3.3 %$ 203,903 $ 193,817 $ 10,086 5.2 % Property NOI: Same store communities 45,492$ 154,560 $ 150,102 $ 4,458 3.0 %$ 305,043 $ 306,056 $ (1,013) (0.3) % Non-same store communities 4,601 15,995 13,687 2,308 16.9 30,485 28,114 2,371 8.4 Development and lease-up communities 2,879 1,888 (339) 2,227 * 2,993 (414) 3,407 * Pandemic Related Impact - - (13,170) 13,170 * - (13,170) 13,170 * Other - 1,109 722 387 53.6 1,667 2,159 (492) (22.8) Total property NOI 52,972$ 173,552 $ 151,002 $ 22,550 14.9 %$ 340,188 $ 322,745 $ 17,443 5.4 % 25
-------------------------------------------------------------------------------- Table of Conten t s * Not a meaningful percentage. (1) Same store communities are communities we owned and were stabilized sinceJanuary 1, 2020 , excluding communities under redevelopment and properties held for sale. Non-same store communities are stabilized communities not owned or stabilized sinceJanuary 1, 2020 , including communities under redevelopment and excluding properties held for sale. We define communities under redevelopment as communities with capital expenditures which 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 sinceJanuary 1, 2020 , excluding properties held for sale. Pandemic Related Impact relates to the Resident Relief Funds which were established for our residents experiencing financial losses caused by the pandemic and includes the amount we paid to residents at our wholly-owned communities as an adjustment to property revenues. The Pandemic Related Impact also includes direct related expenses incurred at our operating properties as a result of the pandemic. Other includes results from non-multifamily rental properties, expenses related to land holdings not under active development, and other miscellaneous revenues and expenses. Same Store Analysis Same store property NOI increased approximately$4.5 million for the three months endedJune 30, 2021 and decreased approximately$1.0 million for the six months endedJune 30, 2021 , as compared to the same periods in 2020. The$4.5 million increase in same store property NOI for the three months endedJune 30, 2021 was primarily due to an increase of approximately$9.7 million in same store property revenues which was partially offset by an increase in property expenses of approximately$5.2 million , as compared to the same period in 2020. The$9.7 million increase in same store property revenues during the three months endedJune 30, 2021 , as compared to the same period in 2020, was primarily due to a$6.4 million increase in rental revenues comprised of higher occupancy, reletting fees, net of uncollectible revenue, and higher other rental income. The increase was also due to an increase of approximately$2.3 million related to fees and other income, and an increase of approximately$1.0 million in income from our bulk internet and other utility rebilling programs. The$5.2 million increase in same store property expenses during the three months endedJune 30, 2021 , as compared to the same period in 2020, was primarily due to higher real estate taxes of approximately$1.9 million as a result of increased property valuations at a number of our communities and lower property tax refunds, higher property insurance expense of approximately$1.4 million , higher repairs and maintenance expense of approximately$1.1 million , and higher salary, general and administrative, and other property expenses of approximately$0.8 million . The$1.0 million decrease in same store property NOI for the six months endedJune 30, 2021 was primarily due to an increase of approximately$9.8 million in same store property expenses which was partially offset by an increase of approximately$8.8 million in same store property revenues, as compared to the same period in 2020. The$9.8 million increase in same store property expenses during the six months endedJune 30, 2021 , as compared to the same period in 2020, was primarily due to higher real estate taxes of approximately$4.5 million as a result of increased property valuations at a number of our communities and lower property tax refunds, higher property insurance expense of approximately$1.7 million , higher repairs and maintenance expense of approximately$1.5 million , higher salary, general and administrative, and other property expenses of approximately$1.1 million , and higher utilities of approximately$1.0 million . The$8.8 million increase in same store property revenues during the six months endedJune 30, 2021 , as compared to the same period in 2020, was primarily due to a$3.5 million increase in rental revenues comprised of higher occupancy and other rental income, partially offset by lower reletting income, net of uncollectible revenue and a slight decrease in average rental rates. The increase was also due to an increase of approximately$3.1 million in fees and other income, and an approximately$2.2 million increase from our bulk internet rebilling and other utility rebilling programs.Non-same Store and Development and Lease-up Analysis Property NOI from non-same store and development and lease-up communities increased approximately$4.5 million and$5.8 million for the three and six months endedJune 30, 2021 as compared to the same periods in 2020. These increases were comprised of increases from development and lease-up communities of approximately$2.2 million and$3.4 million and increases from non-same store communities of approximately$2.3 million and$2.4 million for the three and six months endedJune 30, 2021 as compared to the same periods in 2020, respectively. The increases 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 in 2020, and the timing of development and partial lease-up of four development properties during the three and six months endedJune 30, 2021 . 26 -------------------------------------------------------------------------------- Table of Conten t s The increases in property NOI from our non-same store communities were primarily due to the acquisition of two operating properties in June of 2021, two operating properties reaching stabilization during 2020 and one operating property reaching stabilization during 2021, and the stabilization of four properties which were under redevelopment in 2020. Pandemic Related Impact Analysis During the three and six months endedJune 30, 2020 , our wholly-owned multifamily communities incurred an approximately$13.2 million impact related to the pandemic due to the Resident Relief Funds and the directly-related pandemic expenses. InApril 2020 , we announced two Resident Relief Funds for our residents experiencing financial losses caused by the pandemic. During the three and six months endedJune 30, 2020 , the Company 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 three and six months endedJune 30, 2020 , we also incurred approximately$4.1 million of pandemic related 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$1.3 million of other directly-related pandemic expenses. Other Property Analysis Other property NOI increased approximately$0.4 million for the three months endedJune 30, 2021 and decreased$0.5 million for the six months endedJune 30, 2021 , as compared to the same periods in 2020. The increase during the three months endedJune 30, 2021 was due to higher NOI from our retail communities primarily due to higher collections of previously uncollectible revenues as a result of the pandemic. The decrease during the six months endedJune 30, 2021 was due to lower NOI from our retail communities primarily due to higher salaries and real estate taxes. Non-Property Income Three Months Ended Six Months Ended June 30, Change June 30, Change ($ in thousands) 2021 2020 $ % 2021 2020 $ % Fee and asset management$ 2,263 $ 2,380 $ (117) (4.9) %$ 4,469 $ 4,907 $ (438) (8.9) % Interest and other income 257 325 (68) (20.9) 589 654 (65) (9.9) Income/(loss) on deferred compensation plans 6,400 11,435 (5,035) (44.0) 10,026 (3,425) 13,451 * Total non-property income$ 8,920 $ 14,140 $ (5,220) (36.9) %$ 15,084 $ 2,136 $ 12,948 606.2 % * Not a meaningful percentage. Fee and asset management income from property management, asset management, construction, and development activities at our joint ventures and our third-party construction projects, decreased approximately$0.1 million and$0.4 million for the three and six months endedJune 30, 2021 , respectively, as compared to the same periods in 2020. These decreases were primarily due to lower fees earned during the three and six months endedJune 30, 2021 due to decreased construction and development activity for one property held by one of the Funds which was under construction throughout 2020 and completed inDecember 2020 . These decreases were partially offset by higher fees earned related to an increase in third-party construction activity during the three and six months endedJune 30, 2021 as compared to the same periods in 2020. Our deferred compensation plans recognized income of approximately$6.4 million and$11.4 million during the three months endedJune 30, 2021 and 2020, respectively, and recognized income of approximately$10.0 million during the six months endedJune 30, 2021 , as compared to a loss of approximately$3.4 million during the same period in 2020. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the expense (benefit) related to these plans, as discussed below. 27 --------------------------------------------------------------------------------
Table of Conten t s Other Expenses Three Months Ended Six Months Ended June 30, Change June 30, Change ($ in thousands) 2021 2020 $ % 2021 2020 $ % Property management$ 6,436 $ 5,939 $ 497 8.4 %$ 12,560 $ 12,466 $ 94 0.8 % Fee and asset management 1,019 820 199 24.3 2,151 1,663 488 29.3 General and administrative 15,246 14,391 855 5.9 29,468 27,624 1,844 6.7 Interest 24,084 23,482 602 2.6 47,728 43,189 4,539 10.5 Depreciation and amortization 99,586 92,803 6,783 7.3 192,727 184,662 8,065 4.4 Expense/(benefit) on deferred compensation plans 6,400 11,435 (5,035) (44.0) 10,026 (3,425) 13,451 * Total other expenses$ 152,771 $ 148,870 $ 3,901 2.6 %$ 294,660 $ 266,179 $ 28,481 10.7 %
* Not a meaningful percentage.
Property management expense, which represents regional supervision and accounting costs related to property operations, increased approximately$0.5 million and$0.1 million for the three and six months endedJune 30, 2021 as compared to the same periods in 2020. These increases were primarily related to higher salaries, benefits, and incentive compensation costs during the three and six months endedJune 30, 2021 as compared to the same periods in 2020. These increases were partially offset by lower pandemic-related expenses. The increase during the six months endedJune 30, 2021 was also partially offset by lower travel and conference related expenses. Property management expenses were 2.3% of total property revenues for each of the three and six months endedJune 30, 2021 , and were 2.4% of total property revenues for each of the three and six months endedJune 30, 2020 . Fee and asset management expense from property management, asset management, construction, and development activities at our joint ventures and our third-party projects increased approximately$0.2 million and$0.5 million for the three and six months endedJune 30, 2021 as compared to the same periods in 2020. These increases were primarily due to higher expenses incurred due to an increase in third-party construction activities, partially offset by lower expenses incurred during the three and six months endedJune 30, 2021 as a result of a development property held by one of the Funds completing construction inDecember 2020 . General and administrative expense increased by approximately$0.9 million and$1.8 million for the three and six months endedJune 30, 2021 as compared to the same periods in 2020. These increases were primarily due to higher salaries, benefits, and incentive compensation costs during the three and six months endedJune 30, 2021 as compared to the same periods in 2020. These increases were partially offset by lower pandemic related-expenses and lower information technology costs. Excluding income (loss) on deferred compensation plans, general and administrative expenses were 5.5% and 5.7% of total revenues for the three months endedJune 30, 2021 and 2020, respectively, and were 5.4% and 5.3% of total revenues for the six months endedJune 30, 2021 and 2020, respectively. Interest expense increased approximately$0.6 million and$4.5 million for the three and six months endedJune 30, 2021 , respectively, as compared to the same periods in 2020. These increases were primarily due to the issuance of$750 million , 2.91% senior unsecured notes duringApril 2020 and the$40.0 million unsecured floating rate term loan entered into inOctober 2020 . These increases were partially offset by lower interest expense due to the repayment of our$100.0 million unsecured floating rate term loan inOctober 2020 and higher capitalized interest expense resulting from higher average balances in our development pipeline. These increases were also partially offset by a decrease in interest expense recognized on our unsecured credit facility due to having lower balances outstanding during the three and six months endedJune 30, 2021 as compared to the same periods in 2020. Depreciation and amortization expense increased approximately$6.8 million and$8.1 million for the three and six months endedJune 30, 2021 as compared to the same periods in 2020. These increases were primarily due to the completion of units in our development pipeline and completion of repositions during 2020 and 2021, the completion of redevelopments during 2020, and the acquisition of two operating properties in June of 2021. These increases were partially offset by a decrease of amortization of in-place leases relating to the acquisition of two operating properties inDecember 2019 , which was amortized through the third quarter of 2020. Our deferred compensation plans incurred expenses of approximately$6.4 million and$11.4 million during the three months endedJune 30, 2021 and 2020, respectively, and recognized an expense of approximately$10.0 million during the six months endedJune 30, 2021 , as compared to recognizing a benefit of approximately$3.4 million during the same period in 2020. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the income (loss) related to these plans, as discussed in the non-property income section above. 28 --------------------------------------------------------------------------------
Table of Conten t s Other Three Months Ended Six Months Ended June 30, Change June 30, Change ($ in thousands) 2021 2020 $ % 2021 2020 $ % Gain on sale of land $ - $ - $ - - % $ -$ 382 $ (382) 100.0 % Equity in income of joint ventures$ 2,198 $ 1,633 $ 565 34.6 %$ 4,112 $ 3,755 $ 357 9.5 % Income tax expense$ (460) $ (394) $ (66) 16.8 %$ (812) $ (861) $ 49 (5.7) % The$0.4 million gain on sale of land for the six months endedJune 30, 2020 was due to the sale of approximately 4.7 acres of land adjacent to one of our operating properties inRaleigh, North Carolina for approximately$0.8 million . Equity in income of joint ventures increased approximately$0.6 million for the three months endedJune 30, 2021 and$0.4 million for the six months endedJune 30, 2021 , as compared to the same periods in 2020. These increases were primarily due to an increase in earnings recognized during the three and six months endedJune 30, 2021 relating to higher revenues from the stabilized operating properties owned by the Funds. A portion of these increases in revenues was due to a$0.4 million reduction in revenues recognized during the three and six months endedJune 30, 2020 , which was our ownership interest of the Resident Relief Funds paid to residents of operating communities owned by our unconsolidated joint ventures who were impacted by the pandemic. These increases were partially offset by a decrease in earnings related to one property held by one of the Funds, which completed construction inDecember 2020 and was under lease up during the majority of the six months endedJune 30, 2021 . We recognized our proportionate share of the loss while this property was in the lease-up phase of operations. 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 months endedJune 30, 2021 and 2020 are as follows: Three Months Ended Six Months Ended June 30, June 30, ($ in thousands) 2021 2020 2021 2020 Funds from operations Net income attributable to common shareholders (1)$ 30,179 $ 16,477 $ 61,526 $ 59,761 Real estate depreciation and amortization 97,122 90,500 187,829 180,011 Adjustments for unconsolidated joint ventures 2,630 2,287 5,229 4,529 Income allocated to non-controlling interests 1,260 1,103 2,386 2,385 Funds from operations$ 131,191 $ 110,367 $ 256,970 $ 246,686 29
-------------------------------------------------------------------------------- Table of Conten t s Less: recurring capitalized expenditures (18,808) (18,782) (31,488) (33,607) Adjusted funds from operations$ 112,383 $
91,585
Weighted average shares - basic 100,701 99,399 100,127 99,348
Incremental shares issuable from assumed conversion of: Common share options and awards granted
66 9 70 46 Common units 1,677 1,748 1,699 1,748 Weighted average shares - diluted (2) 102,444 101,156 101,896 101,142 (1)Net income attributable to common shareholders includes an approximate$14.4 million Pandemic Related Impact for the three and six months endedJune 30, 2020 . The total Pandemic Related Impact was 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 was recorded as a reduction to property revenues, 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$4.1 million of pandemic 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$1.3 million in other directly-related pandemic expenses. We also incurred approximately$0.8 million related to theEmployee Relief Fund we established to help our employees impacted by the pandemic. (2)FFO diluted shares includes approximately 1.0 million and 0.5 million weighted average share impact related to the 2020 ATM Program activity during the three and six months endedJune 30, 2021 , respectively. 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 6.4 and 6.2 for the three months endedJune 30, 2021 and 2020, respectively, and 6.3 and 7.0 for the six months endedJune 30, 2021 and 2020. 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 atJune 30, 2021 and 2020. Our weighted average maturity of debt was approximately 7.9 years atJune 30, 2021 . 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 future ATM programs, 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 30 -------------------------------------------------------------------------------- Table of Conten t s our cost of funds, and our ability to access capital markets. A variety of these factors, among others, could also be affected by the pandemic. Cash Flows The following is a discussion of our cash flows for the six months endedJune 30, 2021 and 2020: Net cash from operating activities was approximately$243.7 million during the six months endedJune 30, 2021 as compared to approximately$250.2 million for the same period in 2020. The decrease was primarily due to higher and timing of real estate tax payments in 2021 as compared to 2020, as well as the timing of payments to vendors in 2021 as compared to 2020. The decrease was partially offset by the increase in property operations due to the$13.2 million Pandemic Related impact incurred in 2020, and the growth attributable to our non-same store and development and lease-up communities. See further discussion of our 2021 operations as compared to 2020 in "Results of Operations." Net cash used in investing activities during the six months endedJune 30, 2021 totaled approximately$482.9 million as compared to$205.6 million during the same period in 2020. Cash outflows during the six months endedJune 30, 2021 primarily related to the acquisition of two operating properties for approximately$289.4 million , amounts paid for property development and capital improvements of approximately$188.2 million and cash outflows during the six months endedJune 30, 2020 primarily related to cash outflows for property development and capital improvements of approximately$199.6 million . The decrease in property development and capital improvements for the six months endedJune 30, 2021 , as compared to the same period in 2020, was primarily due to the completion of repositions and redevelopments at several of our operating properties. The property development and capital improvements during the six months endedJune 30, 2021 and 2020, included the following: Six Months Ended June 30, (in millions) 2021 2020 Expenditures for new development, including land$ 114.6 $ 111.7 Capital expenditures 40.3 35.6 Reposition expenditures 16.8 24.5 Capitalized interest, real estate taxes, and other capitalized indirect costs 16.5 17.8 Redevelopment expenditures - 10.0 Total$ 188.2 $ 199.6 Net cash from financing activities totaled approximately$194.0 million for the six months endedJune 30, 2021 as compared to$533.6 million during the same period in 2020. Cash inflows during the six months endedJune 30, 2021 primarily related to net proceeds of$358.8 million from the issuance of approximately 2.9 million common shares from our 2020 ATM program. These cash inflows during 2021 were partially offset by$168.4 million used for distributions to common shareholders and non-controlling interest holders. Cash inflows during the six months endedJune 30, 2020 primarily related to net proceeds of approximately$743.1 million from the issuance of$750.0 million senior unsecured notes inApril 2020 . These cash inflows during 2020 were partially offset by$165.1 million used for distributions to common shareholders and non-controlling interest holders, and net payments of$44.0 million of borrowings from our unsecured line of credit.
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 the 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 ofJune 30, 2021 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. AtJune 30, 2021 , we had no borrowings outstanding on our credit facility and we had outstanding letters of credit totaling approximately$12.2 million , leaving approximately$887.8 million available under our credit facility. 31
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Table of Conten t s 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. As of the date of this filing, we do not have any debt maturing untilSeptember 2022 . See Note 7, "Notes Payable," in the notes to Condensed Consolidated Financial Statements for a further discussion of our scheduled maturities. We estimate the additional cost to complete the construction of eight properties to be approximately$301.6 million . Of this amount, we expect to incur costs between approximately$125 million and$140 million during the remainder of 2021 and to incur the remaining costs during 2022 through 2023. Additionally, during the remainder of 2021, we expect to incur costs between approximately$44 million and$48 million related to repositions and revenue enhancing expenditures, between approximately$22 million and$26 million related to the start of new development activities, and between approximately$38 million to$42 million related to additional recurring capital expenditures. We anticipate meeting 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 future ATM programs, and other unsecured borrowings or secured mortgages. We continue 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. InJune 2021 , ourBoard of Trust Managers declared a quarterly dividend of$0.83 per common share to our common shareholders of record as ofJune 30, 2021 . The quarterly dividend was subsequently paid onJuly 16, 2021 , and we paid equivalent amounts per unit to holders of the common operating partnership units. Assuming similar quarterly dividend distributions for the remainder of 2021, 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. AtJune 30, 2021 , our unconsolidated joint ventures had outstanding debt of approximately$514.5 million . As ofJune 30, 2021 , 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. 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, 2020 . Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to our exposures to market risk have occurred since our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
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