Quick10K

Camden Property Trust

Price	110.37		EPS	2
Shares	99		P/E	65
MCap	10,934		P/FCF	27
Net Debt	2,314		EBIT	228
TEV	13,248		TEV/EBIT	58
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-04-30 Print
10-K	2020-12-31	Filed 2021-02-18 Print
10-Q	2020-09-30	Filed 2020-10-30 Print
10-Q	2020-06-30	Filed 2020-07-31 Print
10-Q	2020-03-31	Filed 2020-05-08 Print
10-K	2019-12-31	Filed 2020-02-20 Print
10-Q	2019-09-30	Filed 2019-11-01 Print
10-Q	2019-06-30	Filed 2019-07-26 Print
10-Q	2019-03-31	Filed 2019-05-03 Print
10-K	2018-12-31	Filed 2019-02-15 Print
10-Q	2018-09-30	Filed 2018-10-26 Print
10-Q	2018-06-30	Filed 2018-08-03 Print
10-Q	2018-03-31	Filed 2018-05-04 Print
10-K	2017-12-31	Filed 2018-02-16 Print
10-Q	2017-09-30	Filed 2017-10-27 Print
10-Q	2017-06-30	Filed 2017-07-28 Print
10-Q	2017-03-31	Filed 2017-05-05 Print
10-K	2016-12-31	Filed 2017-02-13 Print
10-Q	2016-09-30	Filed 2016-10-28 Print
10-Q	2016-06-30	Filed 2016-07-29 Print
10-Q	2016-03-31	Filed 2016-04-29 Print
10-K	2015-12-31	Filed 2016-02-19 Print
10-Q	2015-09-30	Filed 2015-10-30 Print
10-Q	2015-06-30	Filed 2015-07-31 Print
10-Q	2015-03-31	Filed 2015-05-01 Print
10-K	2014-12-31	Filed 2015-02-20 Print
10-Q	2014-09-30	Filed 2014-10-31 Print
10-Q	2014-06-30	Filed 2014-08-01 Print
10-Q	2014-03-31	Filed 2014-05-07 Print
10-K	2013-12-31	Filed 2014-02-21 Print
10-Q	2013-09-30	Filed 2013-11-01 Print
10-Q	2013-06-30	Filed 2013-07-26 Print
10-K	2012-12-31	Filed 2013-02-15 Print
10-Q	2012-09-30	Filed 2012-11-02 Print
10-Q	2012-06-30	Filed 2012-08-03 Print
10-Q	2012-03-31	Filed 2012-04-27 Print
10-K	2011-12-31	Filed 2012-02-17 Print
10-Q	2011-09-30	Filed 2011-11-04 Print
10-Q	2011-06-30	Filed 2011-07-29 Print
10-Q	2011-03-31	Filed 2011-04-29 Print
10-K	2010-12-31	Filed 2011-02-24 Print
10-Q	2010-09-30	Filed 2010-11-05 Print
10-Q	2010-06-30	Filed 2010-07-30 Print
10-Q	2010-03-31	Filed 2010-05-07 Print
10-K	2009-12-31	Filed 2010-02-25 Print

8-K	2021-02-04	Earnings, Exhibits
8-K	2021-02-02	Amend Bylaw, Exhibits
8-K	2020-10-29
8-K	2020-07-30
8-K	2020-06-04
8-K	2020-05-15
8-K	2020-05-13
8-K	2020-05-07
8-K	2020-05-01
8-K	2020-04-16
8-K	2020-04-15
8-K	2020-04-09
8-K	2020-02-20
8-K	2020-01-30
8-K	2019-10-31
8-K	2019-10-07
8-K	2019-09-23
8-K	2019-07-25
8-K	2019-07-24
8-K	2019-06-17
8-K	2019-06-06
8-K	2019-05-09
8-K	2019-05-02
8-K	2019-03-08
8-K	2019-02-22
8-K	2019-01-31
8-K	2018-10-25
8-K	2018-10-04
8-K	2018-09-14
8-K	2018-08-02
8-K	2018-05-17
8-K	2018-05-03
8-K	2018-02-01

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Balance Sheet	Income Statement	Cash Flow
CopyHistoryView Assets, Equity	CopyHistoryView Rev, G Profit, Net Income	CopyHistoryView Ops, Inv, Fin

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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1. Description of Business

Business. Formed on May 25, 1993, Camden Property Trust ("CPT"), a Texas real estate investment trust ("REIT"), and all consolidated subsidiaries are primarily engaged in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities. Our multifamily apartment communities are referred to as "communities," "multifamily communities," "properties," or "multifamily properties" in the following discussion. As of March 31, 2021, we owned interests in, operated, or were developing 175 multifamily properties comprised of 59,459 apartment homes across the United States. Of the 175 properties, eight properties were under construction as of March 31, 2021, and will consist of a total of 2,608 apartment homes when completed. We also own land holdings which we may develop into multifamily communities in the future.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Principles of Consolidation. Our condensed consolidated financial statements include our accounts and the accounts of other subsidiaries and joint ventures (including partnerships and limited liability companies) over which we have control. All intercompany transactions, balances, and profits have been eliminated in consolidation. Investments acquired or created are evaluated based on the accounting guidance relating to variable interest entities ("VIEs"), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation primarily using a voting interest model. In determining if we have a controlling financial interest, we consider factors such as ownership interests, authority to make decisions, kick-out rights and participating rights. As of March 31, 2021, two of our consolidated operating partnerships were VIEs. We are considered the primary beneficiary of both consolidated operating partnerships and therefore consolidate these operating partnerships.  During the three months ended March 31, 2021, certain unit holders of one of these consolidated operating partnerships redeemed their common limited partnership units in exchange for CPT common shares of approximately $3.3 million, and as of March 31, 2021, we held approximately 93% of the outstanding common limited partnership units and the sole 1% general partnership interest in this consolidated operating partnership. As of March 31, 2021, we held approximately 95% of the outstanding common limited partnership units and the sole 1% general partnership interest of the other consolidated operating partnership.

Interim Financial Reporting. We have prepared these unaudited financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial statements and the applicable rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, these statements do not include all information and footnote disclosures required for annual statements. While we believe the disclosures presented are adequate for interim reporting, these interim unaudited financial statements should be read in conjunction with the audited financial statements and notes included in our 2020 Annual Report on Form 10-K.

Acquisitions of Real Estate. Upon an acquisition of real estate, we determine the fair value of tangible and intangible assets, which includes land, buildings (as-if-vacant), furniture and fixtures, the value of in-place leases, including above and below market leases, and acquired liabilities. In estimating these values, we apply methods similar to those used by independent appraisers of income-producing property. Estimates of fair value of acquired debt are based upon interest rates available for the issuance of debt with similar terms and remaining maturities. Depreciation is computed on a straight-line basis over the remaining useful lives of the related tangible assets. The value of in-place leases and above or below market leases is amortized over the estimated average remaining life of leases in place at the time of acquisition; the net carrying value of in-place leases are included in other assets, net and the net carrying value of above or below market leases are included in other liabilities, net in our condensed consolidated balance sheets.

Asset Impairment. Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment may exist if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. We consider projected future undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. While we believe our estimates of future cash flows are reasonable, different assumptions regarding a number of factors, including market rents, economic conditions, and occupancies, could significantly affect these estimates. When impairment exists, the long-lived asset is adjusted to its fair value. In estimating fair value, management uses appraisals, management estimates, and discounted cash flow calculations which utilize inputs from a marketplace participant's perspective. In addition, we evaluate our equity investments in joint ventures and if we believe there is an other than temporary decline in market value of our investment below our carrying value, we will record an impairment charge. We did not record any impairment charges for the three months ended March 31, 2021 or 2020.

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The value of our properties under development depends on market conditions, including estimates of the project start date, projected construction costs, as well as estimates of demand for multifamily communities. We have reviewed market trends and other marketplace information and have incorporated this information as well as our current outlook into the assumptions we use in our impairment analyses. Due to the judgment and assumptions applied in the impairment analyses, it is possible actual results could differ substantially from those estimated.

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

Cost Capitalization. Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes which are capitalized as part of properties under development. Capitalized interest is generally based on the weighted average interest rate of our unsecured debt and was approximately $4.8 million and $4.5 million for the three months ended March 31, 2021 and 2020, respectively. Capitalized real estate taxes were approximately $1.4 million and $1.6 million for the three months ended March 31, 2021 and 2020, respectively.

Expenditures directly related to the development and improvement of real estate assets are capitalized at cost as land and buildings and improvements. Indirect development costs, including salaries and benefits and other related costs directly attributable to the development of properties, are also capitalized. We begin capitalizing development, construction, and carrying costs when the development of the future real estate asset is probable and certain activities necessary to prepare the underlying real estate for its intended use have been initiated. All construction and carrying costs are capitalized and reported in the balance sheet as properties under development until the apartment homes are substantially completed. As apartment homes within development properties are substantially completed the total capitalized development cost of each apartment home is transferred from properties under development including land to buildings and improvements.

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

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

Fair Value. For financial assets and liabilities recorded at fair value on a recurring or non-recurring basis, fair value is the price we would expect to receive to sell an asset, or pay to transfer a liability, in an orderly transaction with a market participant at the measurement date under current market conditions. In the absence of such data, fair value is estimated using internal information consistent with what market participants would use in a hypothetical transaction.

In determining fair value, observable inputs reflect market data obtained from independent sources while unobservable inputs reflect our market assumptions; preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:

•Level 1:    Quoted prices for identical instruments in active markets.

•Level 2:    Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level 3:    Significant inputs to the valuation model are unobservable.

Recurring Fair Value Measurements. The following describes the valuation methodologies we use to measure different financial instruments at fair value on a recurring basis:

Deferred Compensation Plan Investments. The estimated fair values of investment securities classified as deferred compensation plan investments are based on quoted market prices utilizing public information for the same transactions. Our deferred compensation plan investments are recorded in other assets in our condensed consolidated balance sheets. The inputs associated with the valuation of our recurring deferred compensation plan investments are included in Level 1 of the fair value hierarchy.

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Non-Recurring Fair Value Measurements. Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. These assets primarily include long-lived assets which are recorded at fair value if they are impaired using the fair value methodologies used to measure long-lived assets described above at "Asset Impairment." Non-recurring fair value disclosures are not provided for impairments on assets disposed during the period because they are no longer owned by us. The inputs associated with the valuation of long-lived assets are generally included in Level 3 of the fair value hierarchy, unless a quoted price for a similar long-lived asset in an active market exists, at which time they are included in Level 2 of the fair value hierarchy.

Financial Instrument Fair Value Disclosures. As of March 31, 2021 and December 31, 2020, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and distributions payable represented fair value because of the short-term nature of these instruments. The carrying value of restricted cash approximates its fair value based on the nature of our assessment of the ability to recover these amounts. The carrying values of our notes receivable also approximate their fair values, which are based on certain factors, such as market interest rates, terms of the note and credit worthiness of the borrower. These financial instruments utilize Level 3 inputs. In calculating the fair value of our notes payable, interest rate and spread assumptions reflect current credit worthiness and market conditions available for the issuance of notes payable with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs.

Income Recognition. The majority of our revenues are derived from real estate lease contracts and presented as property revenues, which include rental revenue and revenue from amounts received under contractual terms for other services provided to our customers. As a lessor, we also elected practical expedients to: i) not separate the lease and non-lease components by class of underlying assets and account for the combined components as a single component under certain conditions, and ii) exclude from lease revenues the sales taxes collected from lessees and certain lessor costs paid directly by the lessee. Our other revenue streams include fee and asset management income in accordance with other revenue guidance, ASC 606, Revenues from Contracts with Customers. Details of our material revenue streams are discussed below:

Property Revenues: We earn rental revenue from operating lease contracts for the use of dedicated spaces within owned assets, which is our only underlying asset class. We recognize rental revenues from these lease contracts on a straight-line basis over the applicable lease term, net of amounts related to lease contracts identified as uncollectible. We also earn revenues from amounts received under contractual terms for other services considered non-lease components within a lease contract, primarily consisting of utility rebillings and other transactional fees. These amounts received under contractual terms for other services are charged to our residents and recognized monthly as earned. Any identified uncollectible amounts related to individual lease contracts are presented as an adjustment to property revenue. Any renewal options of real estate lease contracts are considered a new, separate contract and will be recognized at the time the option is exercised on a straight-line basis over the renewal period.

In accordance with the Financial Accounting Standards Board ("FASB") question and answer document issued in April 2020, we elected to account for the pandemic-related concessions provided to our residents/tenants, which were primarily related to a change of timing of rent payments with no significant changes to total payments or term, as a deferred payment in which we continue to recognize property revenue on the existing straight-line basis over the remaining applicable lease term. We recognize any changes in payment through lease receivables, which is recorded in other assets, net, in our condensed consolidated balance sheets, and any identified uncollectible amounts related to deferred amounts are presented as an adjustment to property revenue.

As of March 31, 2021, our average residential lease term was approximately fourteen months with all other commercial leases averaging longer lease terms. We currently anticipate property revenue from existing leases as follows:

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(in millions)
Year ended December 31,			Operating Leases
Remainder of 2021			$	497.2
2022			89.3
2023			4.2
2024			3.4
2025			2.7
Thereafter			6.9
Total			$	603.7

Credit Risk. In management’s opinion, due to the number of residents, the types and diversity of submarkets in which our properties operate, and the collection terms, there is no significant concentration of credit risk.

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3. Per Share Data

Basic earnings per share is computed using net income attributable to common shareholders and the weighted average number of common shares outstanding. Diluted earnings per share reflects common shares issuable from the assumed conversion of common share options and unvested share awards, units convertible into common shares, and shares which could be settled under equity forward sales agreements. Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. Our unvested share-based awards are considered participating securities and are reflected in the calculation of basic and diluted earnings per share using the two-class method. Common shares under a forward sales agreement will be considered in our calculation for diluted earnings-per-share until settlement, using the treasury stock method. The number of common share equivalent securities excluded from the diluted earnings per share calculation were approximately 1.9 million for each of the three months ended March 31, 2021 and 2020. These securities, which include common share options and share awards granted and units convertible into common shares, were excluded from the diluted earnings per share calculations as they are anti-dilutive. The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated:

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						Three Months Ended March 31,
(in thousands, except per share amounts)						2021						2020
Earnings per common share calculation – basic
Income from continuing operations attributable to common shareholders						$	31,347					$	43,284
Amount allocated to participating securities						(43)						(99)
Net income attributable to common shareholders – basic						$	31,304					$	43,185
Total earnings per common share – basic						$	0.31					$	0.43
Weighted average number of common shares outstanding – basic						99,547						99,298
Earnings per common share calculation – diluted
Net income attributable to common shareholders – diluted						$	31,304					$	43,185
Total earnings per common share – diluted						$	0.31					$	0.43
Weighted average number of common shares outstanding – basic						99,547						99,298
Incremental shares issuable from assumed conversion of:
Common share options and share awards granted						74						82
Weighted average number of common shares outstanding – diluted						99,621						99,380

4. Common Shares

In June 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

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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. 

The 2020 ATM program permits the use of forward sales agreements which allows us to lock in a share price on the sale of common shares at the time the agreement is executed, but defer receiving the proceeds from the sale of shares until a later date. If we enter into a forward sale agreement, we expect the relevant forward purchasers will borrow from third parties and, through the relevant sales agent, acting in its role as forward seller, sell a number of common shares equal to the number of shares underlying the agreement. Under this scenario, we would not initially receive any proceeds from any sale of borrowed shares by the forward seller. We expect to physically settle each forward sale agreement with the relevant forward purchaser on or prior to the maturity date of a particular forward sale agreement by issuing our common shares in return for the receipt of aggregate net cash proceeds at settlement equal to the number of common shares underlying the particular forward sale agreement multiplied by the relevant forward sale price. However, at our sole discretion, we may also elect to cash settle or net share settle a particular forward sale agreement, in which case we may not receive any proceeds from the issuance of common shares, and we will instead receive or pay cash (in the case of cash settlement) or receive or deliver common shares (in the case of net share settlement). During the three months ended March 31, 2021 and through the date of this filing, we did not enter into any forward sale agreements nor were there any shares sold under the 2020 ATM program. 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.

We have a repurchase plan approved by our Board of Trust Managers which allows for the repurchase of up to $500 million of our common equity securities through open-market purchases, block purchases, and privately negotiated transactions. There were no repurchases during the three months ended March 31, 2021. As of the date of this filing, the remaining dollar value of our common equity securities authorized to be repurchased under this program was approximately $269.5 million.

5. Acquisitions and Dispositions

Acquisition of Land. We did not acquire any land during the three months ended March 31, 2021. During the three months ended March 31, 2020, we acquired approximately 4.9 acres of land in Raleigh, North Carolina for approximately $18.2 million for the future development of approximately 355 apartment homes.

6. Investments in Joint Ventures

Our equity investments in unconsolidated joint ventures, which we account for utilizing the equity method of accounting, consists of three funds (collectively, the "Funds"). As of March 31, 2021, we had two discretionary investment funds in which we had an ownership interest of 31.3% in each of these funds. We hold a 40% ownership interest in a third fund with an unaffiliated third party which may hold multifamily investments of approximately $360 million; this third fund did not own any properties as of March 31, 2021 or 2020. We provide property and asset management and other services to the Funds which own operating properties and we may also provide construction and development services to the Funds which own properties under development. The following table summarizes the combined balance sheets and statements of income data for the Funds as of and for the periods presented:

 

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(in millions)			March 31, 2021						December 31, 2020
Total assets			$	682.4					$	691.5
Total third-party debt			512.5						509.1
Total equity			148.4						149.1

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Copy History

			Three Months Ended March 31,
(in millions)			2021						2020
Total revenues			$	33.0					$	32.3
Net income			3.8						4.5
Equity in income (1)			1.9						2.1

(1)Equity in income excludes our ownership interest of fee income from various services provided by us to the Funds.

The Funds have been funded in part with secured third-party debt and, as of March 31, 2021, we had no outstanding guarantees related to debt of the Funds.

We may earn fees for property and asset management, construction, development, and other services related to the Funds and may earn a promoted equity interest if certain thresholds are met. We eliminate fee income for services provided to the Funds to the extent of our ownership. Fees earned for these services, net of eliminations, were approximately $1.5 million and $1.8 million for the three months ended March 31, 2021 and 2020, respectively.

7. Notes Payable

The following is a summary of our indebtedness:

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(in millions)						March 31, 2021						December 31, 2020
Commercial banks
1.85% Term Loan, due 2022						$	39.8					$	39.7
Senior unsecured notes
3.15% Notes, due 2022						$	348.8					$	348.6
5.07% Notes, due 2023						249.0						248.9
4.36% Notes, due 2024						249.3						249.2
3.68% Notes, due 2024						248.5						248.4
3.74% Notes, due 2028						397.4						397.3
3.67% Notes, due 2029 (1)						594.4						594.3
2.91% Notes, due 2030						743.7						743.5
3.41% Notes, due 2049						296.7						296.7
						$	3,127.8					$	3,126.9
Total unsecured notes payable (2)						$	3,167.6					$	3,166.6

(1)    The 2029 Notes have an effective annual interest rate of approximately 3.84% through June 2026, which includes the effect of a settled forward interest rate swap, and approximately 3.28% thereafter, for an all-in average effective rate of approximately 3.67%.

(2) Unamortized debt discounts and debt issuance costs of $22.4 million and $23.4 million are included in senior unsecured notes payable as of March 31, 2021 and December 31, 2020, respectively.

We have a $900 million unsecured credit facility which matures in March 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 satisfaction of certain conditions. The interest rate on our unsecured credit facility is based upon the London 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 of March 31, 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. At March 31, 2021, we had no borrowings outstanding on our $900 million credit facility and we had outstanding letters of credit totaling approximately $12.2 million, leaving approximately $887.8 million available under our credit facility.

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At March 31, 2021, we had $39.8 million outstanding floating rate debt with a weighted average interest rate of approximately 1.9%. At March 31, 2020, we had $225.8 million outstanding floating rate debt which included amounts borrowed under our unsecured credit facility with a weighted average interest rate of approximately 2.1%.

Our indebtedness had a weighted average maturity of approximately 8.2 years at March 31, 2021. The table below is a summary of the maturity dates of our outstanding debt and principal amortizations, and the weighted average interest rates on such debt, at March 31, 2021: 

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(in millions) (1)						Amount (2)						Weighted Average  Interest Rate (3)
Remainder of 2021						$	(2.8)					—		%
2022						386.3						3.0
2023						247.3						5.1
2024						497.9						4.0
2025						(1.7)						—
Thereafter						2,040.6						3.4
Total						$	3,167.6					3.6		%

(1)Includes all available extension options.

(2)Includes amortization of debt discounts and debt issuance costs.

(3)Includes the effects of the applicable settled forward interest rate swaps.

8. Derivative Financial Instruments and Hedging Activities

Risk Management Objective of Using Derivatives. We are exposed to certain risks arising from both our business operations and economic conditions. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we may enter into derivative financial instruments to manage exposures arising from business activities resulting in differences in the amount, timing, and duration of our known or expected cash payments principally related to our borrowings.

Cash Flow Hedges of Interest Rate Risk. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

Designated Hedges.  The gain or loss on derivatives designated and qualifying as cash flow hedges is reported as a component of other comprehensive income or loss, and subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings and is presented in the same line item as the earnings effect of the hedged item. At March 31, 2021 and 2020, we had no designated hedges outstanding. The table below presents the effect of our derivative financial instruments which were settled in 2018 and 2019 in the condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2021 and 2020:

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(in millions)						Unrealized Gain (Loss) Recognized in Other Comprehensive Income (Loss) (“OCI”) on Derivatives												Location of Loss Reclassified from Accumulated OCI into Income						Amount of Loss Reclassified from Accumulated OCI into Income
Derivatives in Cash Flow Hedging Relationships						2021						2020												2021						2020
Interest Rate Swaps						$	—					$	—					Interest expense						$	(0.3)					$	(0.3)

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9. Share-Based Compensation and Non-Qualified Deferred Compensation Plan

Incentive Compensation. We currently maintain the 2018 Share Incentive Plan (the “2018 Share Plan”) and the 2011 Share Incentive Plan (the “2011 Share Plan”), although no new awards may be granted under the 2011 Plan. Each of these plans were approved by our shareholders. The shares available for awards under the 2018 Share Plan are, subject to certain other limits under the plan, generally available for any type of award authorized under the 2018 Share Plan including stock options, stock appreciation rights, restricted stock awards, stock bonuses and other stock-based awards. Persons eligible to receive awards under the 2018 Share Plan include our and our subsidiaries' officers and employees, Trust Managers, and certain of our and our subsidiaries' consultants and advisors. A total of 9.7 million shares (“Share Limit”) was authorized under the 2018 Share Plan. Shares issued or to be issued are counted against the Share Limit as (1) 3.45 to 1.0 for every share award, excluding stock options and share appreciation rights, granted, and (2) 1.0 to 1.0 for every share of stock option or share appreciation right granted. As of March 31, 2021, there were approximately 6.4 million common shares available under the 2018 Share Plan, which would result in approximately 1.9 million shares which could be granted pursuant to full value awards conversion ratios as defined under the plan.

Total compensation cost for share awards charged against income was approximately $4.0 million and $3.7 million for the three months ended March 31, 2021 and 2020, respectively. Total capitalized compensation costs for share awards were approximately $0.9 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively.

A summary of activity under our share incentive plans for the three months ended March 31, 2021 is shown below:

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															Nonvested Share Awards Outstanding						Weighted Average Exercise /  Grant Price
Nonvested share awards outstanding at December 31, 2020															239,728						$	103.48
Granted															170,321						103.77
Vested															(176,346)						100.16
Forfeited															(6,924)						106.70
Total nonvested share awards outstanding at March 31, 2021															226,779						$	106.18

Share Awards and Vesting. Share awards for employees generally vest over three years and are valued at the market value of the shares on the grant date. In the event the holder of the share awards attains at least age 65, and with respect to employees, also attain at least ten or more years of service ("Retirement Eligibility") before the term in which the awards are scheduled to vest, the value of the share awards is amortized from the date of grant to the individual's Retirement Eligibility date. All new share awards granted after reaching retirement eligibility vest on the date of grant.

10. Net Change in Operating Accounts

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

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			Three Months Ended March 31,
(in thousands)			2021						2020
Change in assets:
Other assets, net			$	(1,838)					$	(1,825)
Change in liabilities:
Accounts payable and accrued expenses			(7,127)						(5,107)
Accrued real estate taxes			(33,001)						(22,046)
Other liabilities			232						(480)
Other			932						777
Change in operating accounts and other			$	(40,802)					$	(28,681)

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11. Commitments and Contingencies

Construction Contracts. As of March 31, 2021, we estimate the total additional cost to complete the eight properties currently under construction to be approximately $357.9 million. We expect to fund this amount 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.

Other Commitments and Contingencies. In the ordinary course of our business we issue letters of intent indicating a willingness to negotiate for acquisitions, dispositions, or joint ventures and also enter into arrangements contemplating various transactions. Such letters of intent and other arrangements are non-binding as to either party unless and until a definitive contract is entered into by the parties. Even if definitive contracts relating to the purchase or sale of real property are entered into, these contracts generally provide the purchaser with time to evaluate the property and conduct due diligence, during which periods the purchaser will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money. There can be no assurance definitive contracts will be entered into with respect to any matter covered by letters of intent or we will consummate any transaction contemplated by any definitive contract. Furthermore, due diligence periods for real property are frequently extended as needed. An acquisition or sale of real property becomes probable at the time the due diligence period expires and the definitive contract has not been terminated. We are then at risk under a real property acquisition contract, but generally only to the extent of any earnest money deposits associated with the contract, and are obligated to sell under a real property sales contract. At March 31, 2021, we had approximately $1.3 million earnest money deposits, of which $0.8 million was non-refundable, for potential acquisitions of land which are included in other assets, net in our condensed consolidated balance sheet.

Lease Commitments. Substantially all of our lessee operating leases, which are recorded within other liabilities in our condensed consolidated balance sheets, are related to office facility leases. We had no significant changes to our lessee lease commitments for the three months ended March 31, 2021.The lease and non-lease components, excluding short-term lease contracts with a duration of 12 months or less, are accounted for as a combined single component based upon the standalone price at the time the applicable lease is commenced and is recognized as a lease expense on a straight-line basis over the lease term. Most of our office facility leases include options to renew and generally are not included in the operating lease liabilities or right-of-use assets as they are not reasonably certain of being exercised. If an option to renew is exercised, it would be considered a separate contract and recognized based upon the standalone price at the time the option to renew is exercised. Variable lease payments which values are not known at lease commencement, such as executory costs of real estate taxes, property insurance, and common area maintenance, are expensed as incurred. Rental expense totaled approximately $1.2 million and $1.1 million for the three months ended March 31, 2021 and 2020, respectively. The following is a summary of our maturities of our lease liabilities as of March 31, 2021:

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(in millions)
Year ended December 31,			Operating Leases
Remainder of 2021			$	2.6
2022			3.1
2023			3.0
2024			2.8
2025			2.0
Thereafter			0.1
Less: discount for time value			(1.4)
Lease liability as of March 31, 2021			$	12.2

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

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12. Income Taxes

We have maintained and intend to maintain our election as a REIT under the Internal Revenue Code of 1986, as amended. In order for us to continue to qualify as a REIT we must meet a number of organizational and operational requirements, including a requirement to distribute annual dividends to our shareholders equal to a minimum of 90% of our adjusted taxable income. As a REIT, we generally will not be subject to federal income tax on our taxable income at the corporate level to the extent such income is distributed to our shareholders annually. If our taxable income exceeds our dividends in a tax year, REIT tax rules allow us to designate dividends from the subsequent tax year in order to avoid current taxation on undistributed income. If we fail to qualify as a REIT in any taxable year, we may be subject to federal and state income taxes for such year. In addition, we may not be able to requalify as a REIT for the four subsequent taxable years and may be subject to federal and state income taxes in those years as well. Historically, we have incurred only state and local income, franchise, and excise taxes. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal, state, and local income taxes. Our consolidated operating partnerships are flow-through entities and are not subject to federal income taxes at the entity level.

We have recorded income, franchise, sales, and excise taxes in the condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2021 and 2020 as income tax expense. Income taxes for the three months ended March 31, 2021 primarily related to state income tax and federal taxes on the taxable income of certain of our taxable REIT subsidiaries. We have no significant temporary or permanent differences or tax credits associated with our taxable REIT subsidiaries.

13. Fair Value Measurements

Recurring Fair Value Measurements. The following table presents information about our financial instruments measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 using the inputs and fair value hierarchy discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements."

 

Financial Instruments Measured at Fair Value on a Recurring Basis

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			March 31, 2021																								December 31, 2020
(in millions)			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
Other Assets
Deferred compensation plan investments (1)			$	125.8					$	—					$	—					$	125.8					$	129.8					$	—					$	—					$	129.8

(1)Approximately $9.4 million and $37.8 million of participant cash was withdrawn from our deferred compensation plan investments during the three months ended March 31, 2021 and the year ended December 31, 2020, respectively.

Non-Recurring Fair Value Disclosures. The nonrecurring fair value disclosure inputs under the fair value hierarchy are discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements." We did not have any asset acquisitions of operating properties or impairments during the three months ended March 31, 2021.

Financial Instrument Fair Value Disclosures. The following table presents the carrying and estimated fair values of our notes payable at March 31, 2021 and December 31, 2020, in accordance with the policies discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements."

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

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