Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this report. Historical results and trends which might appear in the 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 performances, 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, could adversely impact us;


•	short-term leases expose us to the effects of declining market rents;


•	we face risks associated with land holdings and related activities;


•	we could be negatively impacted by the elimination of Fannie Mae or Freddie Mac;


•	compliance or failure to comply with laws, including those requiring access to our properties by disabled persons, could result in substantial cost;


•	competition could limit our ability to lease apartments or increase or maintain rental income;


•	development, redevelopment and construction risks could impact our profitability;


•	our acquisition strategy may not produce the cash flows expected;


•	competition could adversely affect our ability to acquire properties;


•	losses from catastrophes may exceed our insurance coverage;


•	investments through joint ventures and discretionary funds involve risks not present in investments in which we are the sole investor;


•	tax matters, including failure to qualify as a REIT, could have adverse consequences;


•	a cybersecurity incident and other technology disruptions could negatively impact our business and our relationships with residents;


•	we depend on our key personnel;


•	litigation risks could affect our business;


•	insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders;


•	we have significant debt, which could have adverse consequences;


•	we may be unable to renew, repay, or refinance our outstanding debt;


•	variable rate debt is subject to interest rate risk;


•	issuances of additional debt may adversely impact our financial condition;


•	failure to maintain our current credit ratings could adversely affect our cost of funds, related margins, liquidity, and access to capital markets;


•	share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders;


•	our share price will fluctuate; and


•	the form, timing and/or amount of dividend distributions in future periods may vary and be impacted by economic or other considerations.

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

Executive Summary

We are primarily engaged in the ownership, management, development, redevelopment, acquisition and construction of multifamily apartment communities. As of December 31, 2013, we owned interests in, operated, or were developing 184 multifamily properties comprising 64,328 apartment homes across the United States as detailed in the following Property Portfolio table. In addition, we own other land parcels we may develop into multifamily apartment communities.

Property Operations

Our results for the year ended December 31, 2013 reflect an increase in rental revenue as compared to 2012. We believe this increase was primarily due to the continuation of improving economic conditions, including with respect to job growth, favorable demographics, and a manageable supply of new multifamily housing, which have resulted in increases in realized rental rates and stable average occupancy levels. Same store revenues increased 5.1% in 2013 and 6.5% in 2012. We believe U.S. economic and employment growth is likely to continue during 2014 and the supply of new multifamily homes, although increasing, will likely remain at manageable levels. However, we believe significant risks to the economy remain and while there have been increases in employment levels in the majority of our markets, the unemployment rate remains at higher than historical levels. If economic conditions were to worsen, our operating results could be adversely affected.

Construction Activity

During the year ended December 31, 2013, we completed construction of three development projects, including one community containing 276 units owned by one of our discretionary funds in which we have a 20% ownership interest, and 75 units at one of our consolidated operating properties. As of December 31, 2013, two of these projects reached stabilization. At December 31, 2013, we had a total of 14 projects under construction comprised of 4,354 units, including two development projects comprised of 566 units owned by one of our discretionary funds in which we have a 20% interest, with initial occupancy scheduled to occur within the next 24 months. Additionally, we are adding a subsequent phase to a stabilized community which will consist of 75 apartment homes. Excluding the projects owned by our discretionary funds, as of December 31, 2013, we estimate the additional costs to complete the construction of 13 consolidated projects to be approximately $541.2 million.

Acquisitions

During the year ended December 31, 2013, we acquired three operating properties comprised of 1,118 apartment homes located in Houston, Texas, Tempe, Arizona, and Atlanta, Georgia for approximately $225.0 million. We also acquired three land parcels comprised of approximately 38.8 acres of land located in Scottsdale, Chandler, and Tempe, Arizona for approximately $25.8 million. In January 2014, we acquired approximately 2.9 acres of land located in Houston, Texas for approximately $15.6 million.

Dispositions

During the year ended December 31, 2013, we sold 12 operating properties comprised of 3,931 apartment homes located in Tampa and Orlando, Florida, Littleton and Westminster, Colorado, Dallas, Texas, Peoria and Glendale, Arizona and Charlotte, North Carolina for approximately $329.3 million and we recognized a gain of approximately $182.2 million relating to these property sales. We also sold two land holdings comprised of an aggregate of approximately 3.7 acres located adjacent to current construction communities in Atlanta, Georgia and Houston, Texas for approximately $6.6 million. We recognized a gain of approximately $0.7 million relating to these land sales.

In May 2013, one of our unconsolidated joint ventures sold its 14 operating properties comprised of 3,098 apartment homes located in Las Vegas, Nevada. Our proportionate share of the gain was approximately $13.1 million. Additionally, as a result of achieving certain performance measures as set forth in the joint venture agreement, we recognized a promoted equity interest of approximately $5.1 million in 2013. In December 2013, one of our funds sold two operating properties comprised of a total of 600 apartment homes for approximately $68.7 million. Our proportionate share of the gains on these transactions was approximately $3.2 million. At December 31, 2013, one of our funds had an operating property held for sale comprised of 240 apartment homes located in San Antonio, Texas. This property sold in February 2014.

Future Outlook

Subject to market conditions, we intend to continue to seek opportunities to develop and acquire existing communities. We continually evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities develop. We also intend to continue to strengthen our capital and liquidity positions 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 cash flows generated from operations, draws on our unsecured credit facility or other short-term borrowings, proceeds from property dispositions, the use of debt and equity offerings under our automatic shelf registration statement, equity issued from our ATM program, other unsecured borrowings and secured mortgages.

As of December 31, 2013, we had approximately $17.8 million in cash and cash equivalents and no balances outstanding on our $500 million unsecured line of credit. As of the date of this filing, we had common shares having an aggregate offering price of up to $82.7 million remaining available for sale under our ATM program. We believe payments on debt maturing in 2014 are manageable at $35.4 million, which represents approximately 1% of our total outstanding debt and includes scheduled principal amortizations of approximately $3.1 million. We believe we are well-positioned with a strong balance sheet and sufficient liquidity to cover near-term debt maturities and new development, redevelopment, and other capital funding 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:



	December 31, 2013		December 31, 2012
	Apartment Homes	Properties	Apartment Homes	Properties
Operating Properties
Houston, Texas	8,752	25	8,440	24
Washington, D.C. Metro	6,083	18	5,791	17
Dallas, Texas	5,667	14	6,227	16
Tampa, Florida	5,108	12	6,493	15
Las Vegas, Nevada	4,918	15	8,016	29
Atlanta, Georgia	3,943	12	3,351	11
Orlando, Florida	3,676	9	4,202	10
Raleigh, North Carolina	3,054	8	3,054	8
Austin, Texas	3,030	9	3,030	9
Charlotte, North Carolina	2,894	12	3,134	13
Southeast Florida	2,520	7	2,520	7
Los Angeles/Orange County, California	2,481	6	2,481	6
Phoenix, Arizona	2,095	7	2,645	9
Denver, Colorado	1,941	6	2,441	8
San Diego/Inland Empire, California	1,665	5	1,665	5
Other	2,072	5	2,285	6
Total Operating Properties	59,899	170	65,775	193



	December 31, 2013		December 31, 2012
	Apartment Homes	Properties	Apartment Homes	Properties
Properties Under Development
Austin, Texas	614	2	314	1
Los Angeles/Orange County, California	590	2	303	1
Charlotte, North Carolina	589	2	—	—
Phoenix, Arizona	454	2	—	—
Denver, Colorado	424	1	424	1
Dallas, Texas	423	1	—	—
Atlanta, Georgia	379	1	379	1
Washington, D.C. Metro	320	1	596	2
Orlando, Florida	300	1	300	1
Southeast Florida	261	1	261	1
Houston, Texas	—	—	268	1
Other (1)	75	—	—	—
Total Properties Under Development	4,429	14	2,845	9
Total Properties	64,328	184	68,620	202
Less: Unconsolidated Joint Venture Properties (2)
Houston, Texas	2,840	9	3,152	10
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 (3)	300	1	300	1
Washington, D.C. Metro	276	1	276	1
Charlotte, North Carolina (3)	266	1	—	—
Atlanta, Georgia	234	1	234	1
Las Vegas, Nevada	—	—	3,098	14
Other	510	2	798	3
Total Unconsolidated Joint Venture Properties	7,836	24	11,268	39
Total Properties Fully Consolidated	56,492	160	57,352	163


(1)	Represents the units under construction for Phase IX-B of Camden Miramar, our one student housing community, located in Corpus Christi, Texas.


(2)	Refer to Note 8, “Investments in Joint Ventures,” in the Notes to Consolidated Financial Statements for further discussion of our unconsolidated joint venture investments.


(3)	Represents a property under development owned by one of our unconsolidated joint ventures. See Communities Under Construction below for details.

Acquisitions

During the year ended December 31, 2013, we completed the acquisition of three operating properties and acquired three land parcels as follows:



Acquisitions of Operating Properties	Location	Number of Apartment Homes	Date of Acquisition
Camden Post Oak	Houston, TX	356	4/10/2013
Camden Sotelo	Tempe, AZ	170	9/11/2013
Camden Vantage	Atlanta, GA	592	9/18/2013
Consolidated total		1,118



Location of Land Tract Acquisitions	Acreage	Date of Acquisition
Chandler, AZ	21.7	6/12/2013
Scottsdale, AZ	9.3	6/12/2013
Tempe, AZ	7.8	6/12/2013
Consolidated total	38.8

In January 2014, we acquired approximately 2.9 acres of land located in Houston, Texas for approximately $15.6 million.

Dispositions

During the year ended December 31, 2013, we sold 12 operating properties and two of our unconsolidated joint ventures sold 16 operating properties as follows:



Dispositions of Consolidated Operating Properties	Location	Number of Apartment Homes	Date of Disposition
Camden Live Oaks	Tampa, FL	770	1/17/2013
Camden Reserve	Orlando, FL	526	4/10/2013
Camden Centennial	Littleton, CO	276	9/30/2013
Camden Pinnacle	Westminster, CO	224	9/30/2013
Camden Gardens	Dallas, TX	256	10/23/2013
Camden Springs	Dallas, TX	304	10/30/2013
Camden Fountain Palms	Peoria, AZ	192	11/21/2013
Camden Sierra	Peoria, AZ	288	11/21/2013
Camden Towne Center	Glendale, AZ	240	11/21/2013
Camden Bay Pointe	Tampa, FL	368	11/26/2013
Camden Citrus Park	Tampa, FL	247	11/26/2013
Camden Habersham	Charlotte, NC	240	11/26/2013
Consolidated total		3,931



Dispositions of Unconsolidated Operating Properties	Location	Number of Apartment Homes	Date of Disposition
Oasis Bay	Las Vegas, NV	128	5/23/2013
Oasis Crossings	Las Vegas, NV	72	5/23/2013
Oasis Emerald	Las Vegas, NV	132	5/23/2013
Oasis Gateway	Las Vegas, NV	360	5/23/2013
Oasis Island	Las Vegas, NV	118	5/23/2013
Oasis Landing	Las Vegas, NV	144	5/23/2013
Oasis Meadows	Las Vegas, NV	383	5/23/2013
Oasis Palms	Las Vegas, NV	208	5/23/2013
Oasis Pearl	Las Vegas, NV	90	5/23/2013
Oasis Place	Las Vegas, NV	240	5/23/2013
Oasis Ridge	Las Vegas, NV	477	5/23/2013
Oasis Sierra	Las Vegas, NV	208	5/23/2013
Oasis Springs	Las Vegas, NV	304	5/23/2013
Oasis Vinings	Las Vegas, NV	234	5/23/2013
Camden Westover Hills	San Antonio, TX	288	12/18/2013
Camden Lakemont	Richmond, TX	312	12/20/2013
Unconsolidated total		3,698

At December 31, 2013, one of our funds had an operating property held for sale comprised of 240 apartment homes located in San Antonio, Texas. This property sold in February 2014.

During the year ended December 31, 2013, we sold two land holdings as follows:



Location of Disposed Land	Acres	Date of Disposition
Atlanta, GA	2.0	1/15/2013
Houston, TX	1.7	2/15/2013
Consolidated total	3.7

Stabilized Communities

We generally consider a property stabilized once it reaches 90% occupancy. During the year ended December 31, 2013, stabilization was achieved at four recently completed consolidated development properties as follows:



Stabilized Property and Location	Number of Apartment Homes	Date of Construction Completion	Date of Stabilization
Camden Royal Oaks II
Houston, TX	104	1Q12	2Q13
Camden Town Square
Orlando, FL	438	4Q12	2Q13
Camden City Centre II
Houston, TX	268	2Q13	3Q13
Camden Miramar Phase IX-A (1)
Corpus Christi, TX	75	3Q13	3Q13
Consolidated total	885

(1) Represents the completed units for Phase IX-A of Camden Miramar, our one student housing community.

Completed Construction in Lease-Up

At December 31, 2013, one of our unconsolidated joint ventures had one completed operating property in lease-up as follows:



($ in millions) Property and Location	Number of Apartment Homes	Cost Incurred		Date of Construction Completion	Estimated Date of Stabilization	% Leased at 1/26/14
South Capitol (1)
Washington, DC	276	$	77.4	3Q13	3Q14	64	%

(1) Property owned through an unconsolidated joint venture in which we own a 20% interest.

Our consolidated balance sheet at December 31, 2013 included approximately $472.6 million related to properties under development and land. Of this amount, approximately $368.1 million related to our projects currently under development. In addition, we had approximately $104.5 million primarily invested in land held for future development, which included approximately $70.1 million related to projects we expect to begin constructing during the next two years, and approximately $34.4 million invested in land tracts which we may develop in the future.

Communities Under Construction. At December 31, 2013, we had 12 consolidated properties, two properties held by one of our unconsolidated joint ventures, and 75 units at one of our consolidated properties in various stages of construction as follows:



($ in millions) Property and Location	Number of Apartment Homes	Estimated Cost		Cost Incurred		Included in Properties Under Development		Estimated Date of Construction Completion	Estimated Date of Stabilization
Camden NOMA (1) Washington, DC	320	$	110.0	$	98.6	$	66.9	2Q14	2Q15
Camden Lamar Heights Austin, TX	314	47.0		27.5		27.5		2Q14	3Q15
Camden Flatirons Denver, CO	424	78.0		46.2		46.2		4Q14	4Q16
Camden Glendale Glendale, CA	303	115.0		52.3		52.3		3Q15	1Q16
Camden Boca Raton Boca Raton, FL	261	54.0		26.0		26.0		4Q14	1Q16
Camden Paces Atlanta, GA	379	110.0		46.7		46.7		2Q15	2Q17
Camden La Frontera Round Rock, TX	300	36.0		9.3		9.3		1Q15	4Q15
Camden Foothills Scottsdale, AZ	220	50.0		17.5		17.5		2Q15	3Q15
Camden Hayden Tempe, AZ	234	48.0		13.2		13.2		2Q15	3Q15
Camden Gallery Charlotte, NC	323	58.0		14.0		14.0		4Q15	2Q16
The Camden (2) Los Angeles, CA	287	145.0		30.7		30.7		4Q16	2Q17
Camden Victory Park Dallas, TX	423	82.0		17.7		17.7		1Q16	1Q18
Camden Miramar Phase IX-B (3) Corpus Christi, TX	75	8.0		0.1		0.1		3Q14	3Q14
Consolidated total	3,863	$	941.0	$	399.8	$	368.1



($ in millions) Property and Location	Number of Apartment Homes	Estimated Cost		Cost Incurred		Included in Properties Under Development		Estimated Date of Construction Completion	Estimated Date of Stabilization
Camden Waterford Lakes (4) (5) Orlando, FL	300	$	40.0	$	34.7	$	11.1	3Q14	4Q15
Camden Southline (4) Charlotte, NC	266	48.0		12.9		12.9		3Q15	4Q15
Unconsolidated total	566	$	88.0	$	47.6	$	24.0


(1)	Property in lease-up and was 10% leased at January 26, 2014.


(2)	Formerly known as Camden Hollywood.


(3)	Represents the units under construction for Phase IX-B of Camden Miramar, our one student housing community.


(4)	Property owned through an unconsolidated joint venture in which we own a 20% interest.


(5)	Property in lease-up and was 41% leased at January 26, 2014.

Development Pipeline Communities. At December 31, 2013, we had the following communities undergoing development activities:



($ in millions) Property and Location	Projected Homes	Total Estimated Cost (1)		Cost to Date
Camden Chandler
Chandler, AZ	380	$	75.0	$	6.5
Camden Atlantic
Plantation, FL	286	62.0		11.1
Camden Lincoln Station
Denver, CO	275	48.0		5.8
Camden McGowen Station
Houston, TX	251	40.0		8.0
Camden Buckhead
Atlanta, GA	390	70.0		18.9
Camden NOMA II
Washington, DC	410	124.0		19.8
Total	1,992	$	419.0	$	70.1

(1) Represents our estimate of total costs we expect to incur on these projects. However, forward-looking statements 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 forecasted, and estimates routinely require adjustment.

Land Holdings. At December 31, 2013, we had the following land tracts:



($ in millions) Location	Acreage	Cost to Date
Dallas, TX	7.2	$	8.6
Houston, TX	11.5	6.5
Atlanta, GA	3.0	5.3
Las Vegas, NV	19.6	4.2
Other	4.8	9.8
Total	46.1	$	34.4

Geographic Diversification

At December 31, 2013 and 2012, our real estate assets by various markets, excluding depreciation, investments in joint ventures and properties held for sale, were as follows:



(in thousands)	2013				2012
Washington, D.C. Metro	$	1,319,513	18.7	%	$	1,276,153	19.1	%
Houston, Texas	680,985		9.6		546,761		8.2
Los Angeles/Orange County, California	571,976		8.1		532,729		8.0
Southeast Florida	514,445		7.3		482,213		7.2
Atlanta, Georgia	498,255		7.0		384,658		5.8
Dallas, Texas	442,537		6.3		447,539		6.7
Orlando, Florida	419,117		5.9		445,112		6.7
Las Vegas, Nevada	417,041		5.9		411,270		6.2
Tampa, Florida	390,392		5.5		412,010		6.2
Charlotte, North Carolina	332,656		4.7		330,849		5.0
San Diego/Inland Empire, California	323,349		4.6		319,266		4.7
Denver, Colorado	320,631		4.5		322,534		4.8
Phoenix, Arizona	310,109		4.4		278,671		4.2
Raleigh, North Carolina	253,704		3.6		248,458		3.7
Austin, Texas	192,250		2.7		161,841		2.4
Other	85,221		1.2		73,850		1.1
Total	$	7,072,181	100.0	%	$	6,673,914	100.0	%

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. Where appropriate, comparisons of income and expense for communities included in continuing operations are made on a dollars-per-weighted average apartment home basis in order to adjust for such changes in the number of apartment homes owned during each period. Selected weighted averages for the years ended December 31 are as follows:



($ in thousands)	2013			2012			2011
Average monthly property revenue per apartment home	$	1,270		$	1,207		$	1,142
Annualized total property expenses per apartment home	$	5,520		$	5,321		$	5,265
Weighted average number of operating apartment homes owned 100%	51,759			48,194			43,726
Weighted average occupancy of operating apartment homes owned 100% *	95.3		%	95.3		%	94.7		%

* The student housing community is excluded from this calculation.

Property-level operating results (1)

The following tables present the property-level revenues and property-level expenses, excluding discontinued operations, for the year ended December 31, 2013 as compared to 2012 and for the year ended December 31, 2012 as compared to 2011:



	Apartment Homes	Year Ended December 31,				Change
($ in thousands)	at 12/31/13	2013		2012		$			%
Property revenues:
Same store communities	41,150	$	624,429	$	594,255	$	30,174		5.1	%
Non-same store communities	11,479	158,359		97,950		60,409			61.7
Development and lease-up communities	3,863	—		—		—			—
Other	—	6,063		6,113		(50		)	(0.8	)
Total property revenues	56,492	$	788,851	$	698,318	$	90,533		13.0	%
Property expenses:
Same store communities	41,150	$	224,189	$	217,391	$	6,798		3.1	%
Non-same store communities	11,479	58,376		35,861		22,515			62.8
Development and lease-up communities	3,863	15		17		(2		)	(11.8	)
Other	—	3,111		3,161		(50		)	(1.6	)
Total property expenses	56,492	$	285,691	$	256,430	$	29,261		11.4	%

(1) Same store communities are communities we owned and were stabilized since January 1, 2012. Non-same store communities are stabilized communities not owned or stabilized since January 1, 2012. Development and lease-up communities are non-stabilized communities we have acquired or developed since January 1, 2012. Other includes results from non-multifamily rental properties, above/below market lease amortization related to acquired communities, and expenses related to land holdings not under active development. Properties held for sale are excluded from the above results.



	Apartment Homes	Year Ended December 31,				Change
($ in thousands)	at 12/31/12	2012		2011		$			%
Property revenues:
Same store communities	42,333	$	613,691	$	576,330	$	37,361		6.5	%
Non-same store communities	8,277	76,356		18,028		58,328			323.5
Development and lease-up communities	2,811	2,161		1		2,160			*
Other	—	6,110		5,042		1,068			21.2
Total property revenues	53,421	$	698,318	$	599,401	$	98,917		16.5	%
Property expenses:
Same store communities	42,333	$	224,270	$	219,518	$	4,752		2.2	%
Non-same store communities	8,277	28,090		6,537		21,553			329.7
Development and lease-up communities	2,811	1,035		—		1,035			*
Other	—	3,035		4,157		(1,122		)	(27.0	)
Total property expenses	53,421	$	256,430	$	230,212	$	26,218		11.4	%

Not a meaningful percentage.

(1) Same store communities are communities we owned and were stabilized since January 1, 2011. Non-same store communities are stabilized communities not owned or stabilized since January 1, 2011. Development and lease-up communities are non-stabilized communities we have acquired or developed since January 1, 2011. Other includes results from non-multifamily rental properties, above/below market lease amortization related to acquired communities, and expenses related to land holdings not under active development. Properties held for sale are excluded from the above results.

Same store analysis:

Same store property revenues for the year ended December 31, 2013 increased approximately $30.2 million, or 5.1%, from 2012. Same store rental revenues for the year ended December 31, 2013 increased approximately $27.3 million, or 5.3%, from 2012, primarily due to a 5.1% increase in average rental rates and a slight increase in average occupancy for our same store portfolio from 95.3% in 2012 to 95.4% in 2013. We believe the increase to rental revenue was due in part to the continuation of the improving economic conditions, favorable demographics, and a manageable supply of new multifamily housing. Additionally, there was a $2.9 million increase in other property revenue during the year ended December 31, 2013 as compared to 2012 primarily due to increases in various items of miscellaneous income combined with ancillary income from our utility rebilling programs.

Same store property revenues for the year ended December 31, 2012 increased approximately $37.4 million, or 6.5%, from 2011. Same store rental revenues for the year ended December 31, 2012 increased approximately $32.2 million, or 6.5%, from 2011, primarily due to a 5.7% increase in average rental rates and a 0.6% increase in average occupancy for our same store portfolio. We believe the increase to rental revenue was due in part to a gradually improving economy, favorable demographics, a modest supply of new multifamily housing and a decline in home ownership rates. Additionally, there was a $5.2 million increase in other property revenue during the year ended December 31, 2012 as compared to 2011 primarily due to increases in revenues from ancillary income from our utility rebilling programs and miscellaneous fees and charges.

Property expenses from our same store communities increased approximately $6.8 million, or 3.1%, for the year ended December 31, 2013 as compared to 2012. The increase was due to a $6.5 million, or 10.9%, increase in real estate taxes as a result of higher property valuations and property tax rates at a number of our communities. The increase was also due to a $2.5 million increase in property insurance expenses due to higher insurance premiums and claims for the year ended December 31, 2013 as compared to 2012. These increases were partially offset by lower repairs and maintenance costs and decreased medical benefit costs.

Property expenses from our same store communities increased approximately $4.8 million, or 2.2%, for the year ended December 31, 2012 as compared to 2011. The increase was primarily due to an increase in real estate taxes as a result of increasing property valuations and property tax rates at a number of our communities, offset partially by refunds received on successful protests of prior year tax assessments. The increase was also due to an increase in salaries and benefit expenses due to increases in salaries and incentive compensation and higher medical benefit costs.

Non-same store and development and lease-up analysis:

Property revenues and property expenses from non-same store and development and lease-up communities increased approximately $60.4 million and $22.5 million for the year ended December 31, 2013 as compared to 2012, respectively. The increases in 2013 as compared to 2012 were primarily due to revenues and expenses recognized in 2013 related to the acquisition of seven operating properties in 2012, the acquisition of three operating properties in 2013 and the acquisition of one previously unconsolidated joint venture community in December 2012. These increases were also due to revenues and expenses recognized in 2013 related to four operating properties reaching stabilization in 2012 and three operating properties and 75 units at one of our consolidated operating properties reaching stabilization in 2013. The remaining increases related to increases in revenues and expenses at our other non-same store communities.

Property revenue and property expenses increased approximately $60.5 million and $22.6 million for the year ended December 31, 2012 as compared to 2011, respectively. The increases in 2012 as compared to 2011 were primarily due to increases in revenues and expenses recognized in 2012 related to the acquisition of nine previously unconsolidated joint venture communities in January 2012 and one previously unconsolidated joint venture community in December 2012. The increases in revenues and expenses were also due to revenues and expenses related to the acquisition of seven properties in 2012, four properties in our development pipeline reaching stabilization and the completion and partial lease-up of two properties in our development pipeline in 2012.

The following table details the impact in our revenues and expenses as discussed above:



	For the year ended December 31,
(in millions)	2013		2012
Revenues from acquisitions	$	39.3	$	46.4
Revenues from stabilized properties	15.7		13.3
Other	5.4		0.8
	$	60.4	$	60.5

Expenses from acquisitions	$	15.1	$	17.9
Expenses from stabilized properties	6.0		4.9
Other	1.4		(0.2		)
	$	22.5	$	22.6

Other property analysis:

Other property revenues were relatively flat in 2013 as compared to 2012 and increased approximately $1.1 million for the year ended December 31, 2012 as compared to 2011. The increase in 2012 was primarily due to revenues of approximately $1.4 million for the year ended December 31, 2012 from above and below market lease amortization related to our 2012 acquisitions.

Other property expenses were relatively flat in 2013 as compared to 2012 and decreased approximately $1.1 million for the year ended December 31, 2012 as compared to 2011. The decrease in 2012 was primarily related to decreases in property taxes expensed on four land holdings for projects which were approved during 2012 and the second half of 2011 for development activities. As a result, we started capitalizing expenses, including property taxes, on these development projects.

Non-property income



	Year Ended December 31,					Change					Year Ended December 31,					Change
($ in thousands)	2013		2012			$			%		2012			2011		$			%
Fee and asset management	$	11,690	$	12,345		$	(655	)	(5.3	)%	$	12,345		$	9,973	$	2,372		23.8	%
Interest and other income (loss)	1,217		(710		)	1,927			*		(710		)	4,649		(5,359		)	(115.3	)
Income on deferred compensation plans	8,290		4,772			3,518			73.7		4,772			6,773		(2,001		)	(29.5	)
Total non-property income	$	21,197	$	16,407		$	4,790		29.2	%	$	16,407		$	21,395	$	(4,988	)	(23.3	)%

Not a meaningful percentage.

Fee and asset management income decreased approximately $0.7 million for the year ended December 31, 2013 as compared to 2012 and increased approximately $2.4 million for the year ended December 31, 2012 as compared to 2011. The decrease for 2013 as compared to 2012 was primarily due to the sale of 23 operating properties by three unconsolidated joint ventures during 2012 and 2013 and our acquisition of a previously unconsolidated joint venture community in December 2012. The decrease was partially offset by higher construction fees due to an increase in third-party construction activity. The increase for 2012 as compared to 2011 was primarily related to an increase in property management, development and construction fees due to acquisitions completed and development communities started by our funds during 2011 and 2012. The increase was partially offset by a decrease in property management fees due to our acquisition of 12 previously unconsolidated joint venture communities in January 2012, and the sale of seven operating properties by two of our unconsolidated joint ventures in 2012.

Interest and other income (loss) increased approximately $1.9 million for the year ended December 31, 2013 as compared to 2012 and decreased approximately $5.4 million for the year ended December 31, 2012 as compared to 2011. The increase during 2013 as compared to 2012 was primarily due to approximately $1.0 million recognized in the second quarter of 2013 from the release of a deed restriction on a parcel of land sold to an unaffiliated third-party in 2006. The increase was also due to losses of approximately $0.8 million recognized in 2012 relating to non-designated derivatives. The decrease during 2012 as compared to 2011 was primarily due to a $4.3 million gain recognized in 2011 relating to the sale of an available-for-sale investment, and an increase in losses recognized on non-designated hedges of approximately $0.6 million during the year ended December 31, 2012.

Our deferred compensation plans recognized income of approximately $8.3 million, $4.8 million and $6.8 million in 2013, 2012 and 2011, respectively. The changes were related to the performance of the investments held in the deferred compensation plans for participants and were directly offset by the expense related to these plans, as discussed below.

Other expenses



	Year Ended December 31,				Change					Year Ended December 31,				Change
($ in thousands)	2013		2012		$			%		2012		2011		$			%
Property management	$	21,774	$	21,796	$	(22	)	(0.1	)%	$	21,796	$	20,686	$	1,110		5.4	%
Fee and asset management	5,756		6,631		(875		)	(13.2	)	6,631		5,935		696			11.7
General and administrative	40,586		37,528		3,058			8.1		37,528		35,456		2,072			5.8
Interest	98,129		104,246		(6,117		)	(5.9	)	104,246		112,414		(8,168		)	(7.3	)
Depreciation and amortization	214,395		194,673		19,722			10.1		194,673		165,486		29,187			17.6
Amortization of deferred financing costs	3,548		3,608		(60		)	(1.7	)	3,608		5,877		(2,269		)	(38.6	)
Expense on deferred compensation plans	8,290		4,772		3,518			73.7		4,772		6,773		(2,001		)	(29.5	)
Total other expenses	$	392,478	$	373,254	$	19,224		5.2	%	$	373,254	$	352,627	$	20,627		5.8	%

Property management expense, which represents regional supervision and accounting costs related to property operations, was relatively flat in 2013 as compared to 2012 and increased approximately $1.1 million for the year ended December 31, 2012 as compared to 2011. The increase for 2012 as compared to 2011 was primarily due to higher salaries, benefits and incentive compensation for our property management personnel, and was partially offset by a decrease in administrative costs. Property management expenses were 2.8%, 3.1%, and 3.5% of total property revenues for the years ended December 31, 2013, 2012, and 2011, respectively.

Fee and asset management expense, which represents expenses related to third-party construction projects and property management of our joint ventures, decreased approximately $0.9 million for the year ended December 31, 2013 as compared to 2012 and increased approximately $0.7 million for the year ended December 31, 2012 as compared to 2011. The decrease for 2013 as compared to 2012 was primarily due to a decrease in expenses relating to the sale of 23 operating properties by three of our unconsolidated joint ventures in 2013 and 2012, and our acquisition of a previously unconsolidated joint venture community in December 2012. The decrease was also due to lower expenses related to management of development communities due to the timing of communities started and completed by our funds during 2012 and 2013, and lower internal acquisition costs in 2013, due to the closing of the investment period for future operating properties in one of our discretionary funds during the second quarter of 2012. These decreases were partially offset by higher expenses related to an increase in third-party construction activity during 2013 as compared to 2012.

The increase in fee and asset management expense for 2012 as compared to 2011 primarily related to an increase in expenses related to the management of acquisitions completed and development communities started by our funds during 2011 and 2012. The increase was partially offset by a decrease in expenses resulting from our acquisition of 12 previously unconsolidated joint venture communities in January 2012, and the sale of seven operating properties by two of our unconsolidated joint ventures in 2012.

General and administrative expenses increased approximately $3.1 million during the year ended December 31, 2013 as compared to 2012 and increased approximately $2.1 million during the year ended December 31, 2012 as compared to 2011. General and administrative expenses were 5.1%, 5.3% and 5.8% of total revenues, excluding income on deferred compensation plans, for the years ended December 31, 2013, 2012 and 2011, respectively. The increase in 2013 as compared to 2012 was primarily due to increases in salaries, benefits and incentive compensation expenses due to salary increases and higher deferred compensation amortization costs resulting from an increase in the value of awards granted in 2012 and 2013 as compared to the value of awards which were fully vested during the year ended December 31, 2012. The increase was also due to increases in professional and consulting fees of approximately $1.5 million and the net costs of approximately $0.2 million relating to the retirement of an executive officer in July 2013. The increase in 2012 as compared to 2011 was primarily due to increases in salaries, benefits and incentive compensation expenses, an increase in professional fees, and an increase in expensed costs related to our acquisitions completed in 2012. These increases were partially offset by approximately $2.1 million in one-time bonuses awarded to all non-executive employees in the first quarter of 2011.

Interest expense decreased approximately $6.1 million for the year ended December 31, 2013 as compared to 2012 and decreased approximately $8.2 million for the year ended December 31, 2012 as compared to 2011. The decrease in interest expense in 2013 as compared to 2012 was primarily due to the repayment of one secured and one senior unsecured notes payable in 2013 and four secured and one senior unsecured notes payable in 2012. The decrease was also due to higher capitalized interest of

approximately $3.0 million during 2013 due to higher average balances in our development pipeline. These decreases were partially offset by interest expense related to a secured note payable assumed in connection with the acquisition of a previously unconsolidated joint venture in December 2012, the issuance of $350 million senior unsecured notes payable in December 2012 and the issuance of $250 million senior unsecured notes payable in December 2013.

The decrease in interest expense in 2012 as compared to 2011 was primarily due to the repayment of our $500 million term loan, and two unsecured notes payable during the first half of 2011, the repayment of four secured and one senior unsecured notes payable in 2012, and higher capitalized interest of approximately $3.7 million as compared to 2011 due to higher average balances in our development pipeline. These decreases were partially offset by an increase in interest expense related to our issuance of $500 million senior unsecured notes payable in June 2011 and our issuance of $350 million senior unsecured notes payable in December 2012.

Depreciation and amortization expense increased approximately $19.7 million during the year ended December 31, 2013 as compared to 2012 and increased approximately $29.2 million during the year ended December 31, 2012 as compared to 2011. The increase in 2013 as compared to 2012 was primarily due to the acquisition of three operating properties in 2013, the acquisition of seven operating properties in 2012, and the acquisition of a previously unconsolidated joint venture community in December 2012. The increase was also due to the completion of units in our development pipeline, the completion of repositions during 2013 and an increase in capital improvements placed in service in 2012 and 2013. These increases were partially offset by lower amortization of in-place leases relating to the acquisition of nine previously unconsolidated joint venture communities in January 2012 which were amortized through July 2012. The increase in 2012 as compared to 2011 was primarily due to the acquisition of seven operating properties in 2012 and the acquisition of nine previously unconsolidated joint venture communities in January 2012. The increases were also due to the completion of units in our development pipeline and an increase in capital improvements placed in service throughout 2011 and 2012.

Amortization of deferred financing costs decreased approximately $2.3 million during the year ended December 31, 2012 as compared to 2011. The decrease for 2012 was due to lower amortization of financing costs as a result of an amendment to our $500 million credit facility in September 2011 which extended the maturity date three years. The decrease was also due to lower amortization and the write-off of approximately $0.5 million of unamortized loan costs associated with the repayment of the $500 million term loan in June 2011. This decrease was partially offset by higher amortization of financing costs associated with the issuance of $500 million senior unsecured notes payable in June 2011.

Our deferred compensation plans incurred expenses of approximately $8.3 million, $4.8 million and $6.8 million in 2013, 2012 and 2011, respectively. The changes were related to the performance of the investments held in the deferred compensation plans for participants and were directly offset by the income related to these plans, as discussed in non-property income, above.

Other



	Year Ended December 31,						Change			Year Ended December 31,						Change
($ in thousands)	2013			2012			$			2012			2011			$
Gain on acquisition of controlling interest in joint ventures	$	—		$	57,418		$	(57,418	)	$	57,418		$	—		$	57,418
Gain on sale of properties, including land	698			—			698			—			4,748			(4,748		)
Gain on sale of unconsolidated joint venture interests	—			—			—			—			1,136			(1,136		)
Loss on discontinuation of hedging relationship	—			—			—			—			(29,791		)	29,791
Equity in income of joint ventures	24,865			20,175			4,690			20,175			5,679			14,496
Income tax expense – current	(1,826		)	(1,208		)	(618		)	(1,208		)	(2,220		)	1,012

In January 2012, we acquired the remaining 80% ownership interests in 12 previously unconsolidated joint ventures not previously owned by us, resulting in these entities being wholly-owned. In December 2012, we acquired the remaining 50% ownership interest in another previously unconsolidated joint venture. Our acquisitions resulted in a gain of approximately $57.4 million, which represented the difference between the fair market value of our previously owned equity interests and the cost basis.

Gain on sale of properties, including land, totaled approximately $0.7 million and $4.7 million for the years ended December 31, 2013 and 2011, respectively. The gain in 2013 was due to the sale of two land holdings comprised of an aggregate of approximately 3.7 acres located adjacent to current development communities in Atlanta, Georgia and Houston, Texas for approximately $6.6 million. The gain in 2011 was due to the sale of two of our land development properties located in Washington, DC and Austin, Texas to one of the funds.

Gain on sale of unconsolidated joint venture interests totaled approximately $1.1 million for the year ended December 31, 2011 due to the sale of our ownership interests in three unconsolidated joint ventures in March 2011.

The loss on discontinuation of hedging relationship during the year ended December 31, 2011 was due to the discontinuation of a cash flow hedge associated with the repayment of our $500 million term loan in June 2011.

Equity in income of joint ventures increased approximately $4.7 million for the year ended December 31, 2013 as compared to 2012, and increased approximately $14.5 million for the year ended December 31, 2012 as compared to 2011. The increase in 2013 as compared to 2012 was primarily due to recognizing a $16.3 million proportionate share of the gain relating to the sale of 16 operating properties by two of our unconsolidated joint ventures in 2013. Additionally, as a result of achieving certain performance measures as set forth in the joint venture agreement, we recognized a promoted equity interest of approximately $5.1 million related to one of these unconsolidated joint ventures. The increase was also due to an increase in earnings recognized during 2013 relating to higher rental income from the stabilized operating joint venture properties. These increases were partially offset by recognizing a $17.4 million proportionate share of the gain relating to the sale of seven operating properties by two of our unconsolidated joint ventures in 2012. These increases were also partially offset by our acquisition of a previously unconsolidated joint venture in December 2012.

The increase in 2012 as compared to 2011 was primarily due to recognizing a $17.4 million gain relating to our proportionate share of the gain on the sale of seven operating properties by two of our unconsolidated joint ventures in 2012. The increase was also due to an increase in earnings recognized in 2012 relating to 18 acquisitions of operating properties completed by the funds during 2011. These increases were partially offset by our acquisition of 12 previously unconsolidated joint venture communities in January 2012. These increases were further offset by recognizing a $6.4 million gain relating to our proportionate share of the gain on the sale of four operating properties by one of our unconsolidated joint ventures in 2011.

We had current income tax expense of approximately $1.8 million, $1.2 million, and $2.2 million for the tax years ended December 31, 2013, 2012, and 2011, respectively. The $0.6 million increase in 2013 as compared to 2012 was due to increases in taxable income related to higher construction activities conducted in a taxable REIT subsidiary and increases in state income taxes relating to certain acquisitions completed in 2012 and 2013. The $1.0 million decrease in income tax expense during 2012 as compared to 2011 was due to income taxes from the gain recognized on the sale of our available-for-sale investment during the first quarter of 2011 by a taxable REIT subsidiary.

Funds from Operations (“FFO”)

Management considers FFO to be an appropriate measure of the financial performance of an equity REIT. The National Association of Real Estate Investment Trusts (“NAREIT”) currently defines FFO as net income (computed in accordance with accounting principles generally accepted in the United States of America (“GAAP”)), excluding gains (or losses) associated with previously depreciated operating properties, real estate depreciation and amortization, impairments of depreciable assets, and adjustments for unconsolidated joint ventures. 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 operating properties, 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.

To facilitate a clear understanding of our consolidated historical operating results, we believe FFO should be examined in conjunction with net income attributable to common shareholders as presented in the consolidated statements of income and comprehensive income and data included elsewhere in this report. FFO is not defined by GAAP and should not be considered as an alternative to net income attributable to common shareholders as an indication of our operating performance. Additionally, FFO as disclosed by other REITs may not be comparable to our calculation.

Reconciliations of net income attributable to common shareholders to diluted FFO for the years ended December 31 are as follows:



(in thousands)	2013			2012			2011
Funds from operations
Net income attributable to common shareholders (1)	$	336,364		$	283,390		$	49,379
Real estate depreciation and amortization, including discontinued operations	214,729			205,437			177,187
Adjustments for unconsolidated joint ventures	5,738			7,939			10,534
Gain on acquisition of controlling interests in joint ventures	—			(57,418		)	—
Gain on sale of unconsolidated joint venture properties (2)	(16,277		)	(17,418		)	(6,394		)
Gain on sale of unconsolidated joint venture interests	—			—			(1,136		)
Gain on sale of properties and discontinued operations, net of tax	(182,160		)	(115,068		)	(24,621		)
Income allocated to non-controlling interests	9,927			6,475			2,586
Funds from operations – diluted	$	368,321		$	313,337		$	207,535
Weighted average shares – basic	87,204			83,772			72,756
Incremental shares issuable from assumed conversion of:
Common share options and share awards granted	476			647			706
Common units	1,900			2,200			2,466
Weighted average shares – diluted	89,580			86,619			75,928

(1)

Includes a promoted equity interest of approximately $5.1 million for the year ended December 31, 2013, as a result of achieving certain performance measures as set forth in the joint venture agreement for one of our unconsolidated joint ventures which sold its 14 operating properties during May 2013. Includes a $29.8 million charge related to a loss on discontinuation of a hedging relationship for the year ended December 31, 2011.

(2)

The gain in 2013 represents our proportionate share of the gain on sale of 16 operating properties sold during 2013 by two of our unconsolidated joint ventures. The gain in 2012 represents our proportionate share of the gain on sale of seven operating properties sold during 2012 by two of our unconsolidated joint ventures. The gain in 2011 represents our proportionate share of the gain on sale of four operating properties sold by an unconsolidated joint venture during 2011.

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 4.7, 4.0, and 3.2 times for the years ended December 31, 2013, 2012, and 2011, respectively. 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, other expenses, income from discontinued operations after adding back depreciation, amortization, and interest expense from both continuing and discontinued operations. Approximately 77.6%, 76.5%, and 71.7% of our properties (based on invested capital) were unencumbered at December 31, 2013, 2012, and 2011, respectively. Our weighted average maturity of debt was approximately 6.9 years at December 31, 2013.

We also intend to continue to strengthen our capital and liquidity positions 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.

Our primary source of liquidity is cash flow generated from operations. Other sources include availability under our unsecured credit facility and other short-term borrowings, proceeds from property dispositions, the use of debt and equity offerings under

our automatic shelf registration statement, equity issued from our ATM program, other unsecured borrowings and secured mortgages. We believe our liquidity and financial condition are sufficient to meet all of our reasonably anticipated cash needs during 2014 including:


•	normal recurring operating expenses;


•	current debt service requirements, including debt maturities;


•	recurring capital expenditures;


•	reposition expenditures;


•	funding of property developments, acquisitions, 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, sources of financing, our ability to complete asset purchases, sales, or developments, the effect our debt level and changes in credit ratings could have on our costs of funds, and our ability to access capital markets.

Cash Flows

The following is a discussion of our cash flows for the years ended December 31, 2013 and 2012.

Net cash provided by operating activities was approximately $404.3 million during the year ended December 31, 2013 as compared to approximately $324.3 million during the year ended December 31, 2012. The increase was primarily due to growth in property revenues directly attributable to increased rental rates from our same store communities and the growth in non-same store revenues primarily relating to the acquisition of seven operating properties in 2012, the acquisition of three operating properties in 2013, and the acquisition of one previously unconsolidated joint venture community in the fourth quarter of 2012. The increase in non-same store revenues also related to the stabilization of four operating properties in 2012 and three operating properties in 2013. The increases in revenues were partially offset by the increase in property expenses from our same store and non-same store communities which included the property expenses of the 10 operating properties acquired in 2012 and 2013, the previously unconsolidated joint venture acquired in 2012 and the stabilization of seven operating properties in 2012 and 2013. See further discussions of our 2013 operations as compared to 2012 in our “Results of Operations.” The increase in net cash from operating activities was also due to changes in working capital account balances, partially offset by a decrease in property revenues and expenses due to the disposition of 12 operating properties in 2013 and 11 operating properties in 2012.

Net cash used in investing activities during the year ended December 31, 2013 totaled approximately $259.0 million as compared to approximately $527.7 million used during the year ended December 31, 2012. Cash outflows for property development and capital improvements were approximately $356.8 million during 2013 as compared to approximately $290.7 million during 2012 due primarily to an increase in redevelopment expenditures relating to our reposition program in 2013 as compared to 2012. The property development and capital improvements during the years ended December 31, 2013 and 2012, respectively, included the following:



	December 31,
(in millions)	2013		2012
Expenditures for new development, including land	$	174.7	$	169.6
Capitalized interest, real estate taxes, and other capitalized indirect costs	25.1		20.3
Reposition expenditures	91.4		37.7
Capital expenditures	65.6		63.1
Total	$	356.8	$	290.7

Cash outflows during the year ended December 31, 2013 also related to the acquisition of three operating properties for approximately $224.1 million, increases in non-real estate assets of approximately $17.5 million and investments in joint ventures of approximately $1.9 million. Additional cash out flows for the year ended December 31, 2012 related to the acquisition of seven operating properties and the controlling interests in 13 previously unconsolidated joint ventures, net of cash acquired, of approximately $465.4 million. During 2012, we also used approximately $7.0 million for investments in joint ventures relating to acquisition of one operating property and two land development properties by one of our funds, in which we own a 20% interest, and an approximately $4.8 million increase in non-real estate assets. Cash outflows during the year ended December 31, 2013 were partially offset by cash inflows of approximately $329.4 million from the sale of 12 operating properties and two land holdings in 2013 and $11.3 million relating to distributions from our joint ventures, which included $8.8 million received from two unconsolidated joint ventures relating to the sale of 16 operating properties in 2013. During the year ended December 31, 2012,

cash outflows were partially offset by inflows of $226.9 million from the sale of 11 operating properties, and $17.4 million relating to distributions from our joint ventures, which included $14.2 million in distributions of investments from two unconsolidated joint ventures relating to the sale of seven operating properties in 2012.

Net cash used in financing activities totaled approximately $154.2 million during the year ended December 31, 2013 as compared to net cash provided by financing activities of $174.9 million during the year ended December 31, 2012. During 2013, we used approximately $226.1 million to repay maturing secured and unsecured notes payable and approximately $4.2 million to pay principal amortization. We also used approximately $220.1 million to pay distributions to common shareholders and non-controlling interest holders. The cash flows for the year ended December 31, 2013 were partially offset by proceeds of approximately $249.5 million relating to the issuance of $250 million unsecured notes payable completed in December 2013, net proceeds of approximately $40.0 million from the issuance of 0.6 million shares from our ATM program and proceeds of approximately $2.5 million from common share options exercised during the period. During 2012, we received net proceeds of approximately $693.4 million from the issuances of 11.2 million common shares in an equity offering and our ATM programs. Cash inflows in 2012 also included proceeds of approximately $346.3 million from the issuance of $350 million unsecured notes payable completed in December 2012 and proceeds of approximately $13.0 million from common share options exercised during the period. The cash inflows during 2012 were partially offset by approximately $272.6 million used to repay the mortgage debt of 12 previously unconsolidated joint ventures we acquired in January 2012, and approximately $295.0 million used to repay maturing secured and unsecured notes payable. Cash inflows during 2012 were further offset by $100.0 million used to redeem our perpetual preferred units, approximately $189.0 million used to pay distributions to common shareholders, perpetual preferred unit holders, and non-controlling interest holders, and approximately $16.5 million used to acquire the remaining non-controlling interests in three consolidated joint ventures.

Financial Flexibility

We have a $500 million unsecured credit facility which matures in September 2015 with an option to extend at our election to September 2016. Additionally, we have the option to increase this credit facility to $750 million by either adding additional banks to the credit facility or obtaining the agreement of the existing banks in the credit facility to increase their commitments. The interest rate is based upon LIBOR plus a margin which is subject to change as our credit ratings change. Advances under the line of credit may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of 180 days or less and may not exceed the lesser of $250 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations. We believe we are in compliance with all such financial covenants and limitations on the date of this filing.

Our line of credit provides us with the ability to issue up to $100 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, it does reduce the amount available. At December 31, 2013, we had no balances outstanding on our $500 million unsecured line of credit and we had outstanding letters of credit totaling approximately $11.3 million, leaving approximately $488.7 million available under our unsecured line of credit. As an alternative to our unsecured line of credit, from time to time, we may borrow using an unsecured overnight borrowing facility. Our use of short-term borrowings does not decrease the amount available under our unsecured line of credit. At December 31, 2013, we had no short-term borrowings outstanding.

We currently have an automatic shelf registration statement which allows us to offer, from time to time, common shares, preferred shares, debt securities, or warrants. Our Amended and Restated Declaration of Trust provides we may issue up to 185 million shares of beneficial interest, consisting of 175 million common shares and 10 million preferred shares.

In May 2012, we created an ATM program through which we can, but have no obligation to, sell common shares having an aggregate offering price of up to $300 million (the “2012 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. We intend to use the net proceeds from the 2012 ATM program for general corporate purposes, which may include funding for development and acquisition activities, the redemption or other repurchase of outstanding debt or equity securities, reducing future borrowings under our $500 million unsecured line of credit or other short-term borrowings, and the repayment of other indebtedness. The net proceeds for the year ended December 31, 2013 were used for general corporate purposes, which included funding for development, redevelopment and capital improvement projects. As of the date of this filing, we had common shares having an aggregate offering price of up to $82.7 million remaining available for sale under the 2012 ATM program.

We believe our ability to access capital markets is enhanced by our senior unsecured debt ratings by Moody’s, Standard and Poor's, and Fitch, which are currently Baa1, BBB+ and BBB+, respectively, each with stable outlooks, as well as 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 line of credit or other short-term borrowings. During 2014, approximately $35.4 million of debt, including scheduled principal amortizations of approximately $3.1 million, is scheduled to mature. See Note 9, “Notes Payable,” in the Notes to Consolidated Financial Statements for further discussion of scheduled maturities.

We estimate the additional costs to complete the construction of 13 consolidated projects to be approximately $541.2 million. Of this amount, we expect between approximately $360 million and $370 million will be incurred during 2014 and the remainder of the costs to be incurred during 2015. Additionally, we also expect to incur between approximately $55 million and $75 million of additional redevelopment expenditures and between approximately $56 million and $60 million of additional other capital expenditures during 2014.

We intend to meet our near-term liquidity requirements through a combination of cash flows generated from operations, draws on our unsecured credit facility or other short-term borrowings, proceeds from property dispositions, the use of debt and equity offerings under our automatic shelf registration statement, equity issued from our ATM program, other unsecured borrowings and secured mortgages. We evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities develop.

In order for us to continue to qualify as a REIT, we are required to distribute annual dividends to our shareholders equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains. In December 2013, we announced our Board of Trust Managers had declared a quarterly dividend of $0.63 per common share, to our common shareholders of record as of December 17, 2013. The dividend was subsequently paid on January 17, 2014 and we paid equivalent amounts per unit to holders of common operating partnership units. When aggregated with previous 2013 dividends, this distribution to common shareholders and holders of common operating partnership units equates to an annual dividend rate of $2.52 per share or unit for the year ended December 31, 2013.

In the first quarter of 2014, the Company's Board of Trust Managers increased the quarterly dividend rate from $0.63 to $0.66 per common share. Future dividend payments are paid at the discretion of the Board of Trust Managers and depend on cash flows generated from operations, the Company's financial condition and capital requirements, distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and other factors which may be deemed relevant by our Board of Trust Managers. Assuming dividend distributions for the remainder of 2014 are similar to those declared for the first quarter 2014, the annualized dividend rate for 2014 would be $2.64.

The following table summarizes our known contractual cash obligations as of December 31, 2013:



(in millions)	Total		2014		2015		2016		2017		2018		Thereafter
Debt maturities (1)	$	2,530.8	$	35.4	$	252.0	$	2.2	$	249.2	$	177.6	$	1,814.4
Interest payments (2)	698.1		110.9		103.3		97.6		88.7		79.7		217.9
Non-cancelable lease payments	28.3		2.8		2.3		2.6		2.7		2.5		15.4
	$	3,257.2	$	149.1	$	357.6	$	102.4	$	340.6	$	259.8	$	2,047.7


(1)	Includes scheduled principal amortizations.


(2)	Includes contractual interest payments for our senior unsecured notes and secured notes. The interest payments on certain secured notes with floating interest rates were calculated based on the interest rates in effect as of December 31, 2013 or the most recent practicable date.

Off-Balance Sheet Arrangements

The joint ventures in which we have an interest have been funded in part with secured, third-party debt. At December 31, 2013, our unconsolidated joint ventures had outstanding debt of approximately $530.7 million, of which our proportionate share was approximately $106.1 million. As of December 31, 2013, we had no outstanding guarantees related to the loans of our unconsolidated joint ventures.

Inflation

Substantially all of our apartment leases are for a term generally ranging from six to fifteen 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

The preparation of our financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date, and the amounts of revenues and expenses recognized during the reporting period. These estimates are based on historical experience and other assumptions believed to be reasonable under the circumstances. The following is a discussion of our critical accounting policies. For a discussion of all of our significant accounting policies, see Note 2 to the accompanying consolidated financial statements.

Principles of Consolidation. We may enter into various joint venture agreements with unrelated third-parties to hold or develop real estate assets. We must determine for each of these joint ventures whether to consolidate the entity or account for our investment under the equity or cost basis of accounting. 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) under the remaining consolidation guidance relating to real estate entities. If we are the general partner in a limited partnership, or manager of a limited liability company, we also consider the consolidation guidance relating to the rights of limited partners (non-managing members) to assess whether any rights held by the limited partners overcome the presumption of control by us. We evaluate our accounting for investments on a quarterly basis or when a reconsideration event (as defined by GAAP) with respect to our investments occurs. The analysis required to identify VIEs and primary beneficiaries is complex and requires substantial management judgment. Accordingly, we believe the decisions made to choose an appropriate accounting framework are critical.

Acquisitions of Real Estate. Upon 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. Upon the acquisition of a controlling interest of an investment in an unconsolidated joint venture, such joint venture is consolidated and our initial equity investment is remeasured to fair value at the date the controlling interest is acquired. Estimates of fair value of acquired debt are based upon interest rates available for the issuance of debt with similar terms and remaining maturities. As the determination of the fair value of assets acquired and liabilities assumed is subject to significant management judgment and a change in purchase price allocations could result in a material difference in amounts recorded in our consolidated financial statements, we believe the valuation of assets acquired and liabilities assumed are critical.

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 discounted and 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. In estimating fair value, management uses appraisals, management estimates, and discounted cash flow calculations which utilize inputs from a marketplace participant’s perspective. When impairment exists, the long-lived asset is adjusted to its fair value. 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.

The value of our properties under development depends on market conditions, including estimates of the project start date 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 on 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 our weighted average interest rate of our unsecured debt. 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 activities

necessary to get the underlying real estate ready 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. Upon substantial completion of the apartment homes, the total capitalized development cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively. Included in capitalized costs are indirect costs associated with our development and redevelopment activities. The estimates used by management require judgment, and accordingly we believe cost capitalization to be a critical accounting estimate.

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