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 performance, results, or events. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein which are not statements of historical fact should be deemed forward-looking statements. Reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.

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

•	Volatility in capital and credit markets, or other unfavorable changes in economic conditions, either nationally or regionally in one or more of the markets in which we operate, could adversely impact us;

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

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

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

•	Potential reforms to Fannie Mae and Freddie Mac could adversely affect us;

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

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

•	Competition could adversely affect our ability to acquire properties;

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

•	Failure to qualify as a REIT could have adverse consequences;

•	Tax laws and related interpretations may change at any time, and any such legislative or other actions could have a negative effect on us;

•	Litigation risks could affect our business;

•	Damage from catastrophic weather and other natural events could result in losses;

•	A cybersecurity incident and other technology disruptions could negatively impact our business;

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

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

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

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

•	Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distribution to our shareholders, and decrease our share price, if investors seek higher yields through other investments;

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

•	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 amount of dividend distributions in future periods may vary and be impacted by economic and other considerations.

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

Executive Summary

We are primarily engaged in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities. Overall, we focus on investing in markets characterized by high-growth economic conditions, strong employment, and attractive quality of life which we believe leads to higher demand and retention of our apartments. As of December 31, 2016, we owned interests in, operated, or were developing 159 multifamily properties comprised of 55,366 apartment homes across the United States as detailed in the following Property Portfolio table. In addition, we own other land holdings which we may develop into multifamily apartment communities in the future.

Property Operations

Our results for the year ended December 31, 2016 reflect an increase in same store revenues of 3.9% as compared to 2015. This increase was due to higher average rental rates and increased other property income, which we believe were due to, among other matters, the continuation of improving economic conditions, including job growth, favorable demographics, a manageable supply of new multifamily housing, and in part to more individuals choosing to rent versus buy as evidenced by the moderating level of homeownership rates, all of which have resulted in higher rental rates. We believe U.S. economic and employment growth is likely to continue during 2017 and the supply of new multifamily homes, although increasing, will likely remain at manageable levels. If economic conditions were to worsen, our operating results could be adversely affected.

Construction Activity

At December 31, 2016, we had seven projects under construction to be comprised of 2,573 apartment homes, with stabilization expected to be completed within the next 42 months. As of December 31, 2016, we estimate the additional cost to complete the construction of the seven projects to be approximately $240.6 million.

Acquisitions

During the year ended December 31, 2016, we acquired an aggregate of approximately of 4.6 acres of land located in Denver, Colorado and Charlotte, North Carolina for approximately $19.9 million. All of the land parcels acquired in 2016 are currently in development as of December 31, 2016.

Dispositions

Operating properties: During the year ended December 31, 2016, we sold one dual-phased property and six other operating properties comprised of an aggregate of 3,184 apartment homes with an average age of 24 years, located in Landover and Frederick, Maryland; Fullerton, California; and Tampa, Altamonte Springs, and St. Petersburg, Florida for an aggregate of approximately $523.4 million, and recognized a gain of approximately $294.9 million.

Land: During 2016, we also sold approximately 6.3 acres of land adjacent to an operating property in Tampa, Florida for approximately $2.2 million and recognized a gain of approximately $0.4 million.

Discontinued operations: In April 2016, we sold 15 operating properties, comprised of an aggregate of 4,918 apartment homes with an average age of 23 years, a retail center and approximately 19.6 acres of land, all located in Las Vegas, Nevada, to an unaffiliated third party for an aggregate of approximately $630.0 million and recognized a gain of approximately $375.2 million.

Future Outlook

Subject to market conditions, we intend to continue to seek opportunities to develop, redevelop and acquire existing communities. We also intend to evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise. We further intend to strengthen our capital and liquidity positions by continuing to focus on our core fundamentals which currently are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We anticipate meeting our near-term liquidity requirements through a combination of one or more of the following: cash and cash equivalents, short-term investments, cash flows generated from operations, draws on our unsecured credit facility, 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, 2016, we had approximately $237.4 million in cash and cash equivalents, $100.0 million in short-term investments, and no balance outstanding on our $600 million unsecured credit facility. As of the date of this filing, we had common shares having an aggregate offering price of up to $315.3 million remaining available for sale under our ATM program. We believe payments of debt in 2017 are manageable at approximately $276.0 million which represents approximately 11.1% of our total outstanding debt, and includes scheduled principal amortization of approximately $1.2 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, 2016						December 31, 2015
	Apartment Homes			Properties			Apartment Homes			Properties
Operating Properties
Houston, Texas	8,434			24			8,434			24
Dallas, Texas	5,666			14			5,243			13
Washington, D.C. Metro (1)	5,635			16			6,405			19
Atlanta, Georgia	4,246			13			4,246			13
Austin, Texas	3,360			10			3,360			10
Raleigh, North Carolina	3,054			8			3,054			8
Orlando, Florida	2,962			8			3,540			9
Phoenix, Arizona	2,929			10			2,549			9
Southeast Florida	2,781			8			2,781			8
Charlotte, North Carolina	2,753			12			2,753			12
Los Angeles/Orange County, California	2,658			7			2,784			7
Tampa, Florida	2,378			6			3,788			9
Denver, Colorado	2,365			7			2,365			7
Corpus Christi, Texas	1,907			4			1,907			4
San Diego/Inland Empire, California	1,665			5			1,665			5
Las Vegas, Nevada (2)	—			—			4,918			15
Total Operating Properties	52,793			152			59,792			172

Properties Under Construction
Washington, D.C. Metro	1,227			3			862			2
Phoenix, Arizona	441			1			380			1
Charlotte, North Carolina	323			1			323			1
Houston, Texas	315			1			315			1
Denver, Colorado	267			1			267			1
Dallas, Texas	—			—			423			1
Los Angeles/Orange County, California	—			—			287			1
Total Properties Under Construction	2,573			7			2,857			8
Total Properties	55,366			159			62,649			180

	December 31, 2016						December 31, 2015
	Apartment Homes			Properties			Apartment Homes			Properties
Less: Unconsolidated Joint Venture Properties (3)
Houston, Texas	2,522			8			2,522			8
Austin, Texas	1,360			4			1,360			4
Dallas, Texas	1,250			3			1,250			3
Tampa, Florida	450			1			450			1
Raleigh, North Carolina	350			1			350			1
Orlando, Florida	300			1			300			1
Washington, D.C. Metro (1)	281			1			276			1
Corpus Christi, Texas	270			1			270			1
Charlotte, North Carolina	266			1			266			1
Atlanta, Georgia	234			1			234			1
Total Unconsolidated Joint Venture Properties	7,283			22			7,278			22
Total Properties Fully Consolidated	48,083			137			55,371			158

(1)	In August 2016, one of the Funds completed the conversion of retail space to five apartment homes at one of its operating properties.

(2)	These 15 operating properties were sold to an unaffiliated third party on April 26, 2016.

(3)	Refer to Note 8, "Investments in Joint Ventures," in the notes to Consolidated Financial Statements for further discussion of our joint venture investments.

Dispositions

Disposition of Consolidated Operating Properties

During the year ended December 31, 2016, we sold one dual-phased property and six operating properties, with an average age of 24 years, as follows:

Dispositions of Consolidated Operating Properties		Location		Number of Apartment Homes			Date of Disposition
Camden Westshore		Tampa, FL		278			6/28/2016
Camden Clearbrook		Frederick, MD		297			7/11/2016
Camden Summerfield		Landover, MD		291			7/11/2016
Camden Summerfield II		Landover, MD		187			7/11/2016
Camden Woods		Tampa, FL		444			8/9/2016
Camden Renaissance		Altamonte Springs, FL		578			8/22/2016
Camden Parkside		Fullerton, CA		421			8/31/2016
Camden Lakes		St. Petersburg, FL		688			9/27/2016
Consolidated total				3,184

Discontinued Operations

On April 26, 2016, we sold 15 operating properties, comprised of an aggregate of 4,918 apartment homes, with an average age of 23 years, a retail center and approximately 19.6 acres of land, all located in Las Vegas, Nevada.

Stabilized Communities

We generally consider a property stabilized once it reaches 90% occupancy. During the year ended December 31, 2016, stabilization was achieved at four consolidated operating properties and one unconsolidated operating property as follows:

Stabilized Property and Location	Number of Apartment Homes			Date of Construction Completion		Date of Stabilization
Consolidated Operating Properties
Camden Flatirons
Denver, CO	424			3Q15		1Q16
Camden Paces
Atlanta, GA	379			4Q15		2Q16
Camden Glendale
Glendale, CA	303			3Q15		3Q16
Camden Chandler
Chandler, AZ	380			1Q16		4Q16
Consolidated total	1,486

Unconsolidated Operating Property
Camden Southline
Charlotte, NC	266			4Q15		1Q16

Completed Construction in Lease-Up

At December 31, 2016, we had two consolidated completed operating properties in lease-up as follows:

($ in millions) Property and Location	Number of Apartment Homes			Cost Incurred (1)				% Leased at 2/4/2017			Date of Construction Completion		Estimated Date of Stabilization
Consolidated Operating Properties
The Camden
Hollywood, CA	287			$	133.7			88	%		4Q16		2Q17
Camden Victory Park
Dallas, TX	423			84.6				80	%		3Q16		4Q17
Consolidated total	710			$	218.3

(1) Excludes leasing costs, which are expensed as incurred.

Properties Under Development and Land

Our consolidated balance sheet at December 31, 2016 included approximately $442.3 million related to properties under development and land. Of this amount, approximately $316.3 million related to our projects currently under construction. In addition, we had approximately $126.0 million primarily invested in land held for future development and land holdings, which included approximately $114.9 million related to projects we expect to begin constructing during the next two years, and approximately $11.1 million invested in land which we may develop in the future.

Communities Under Construction. At December 31, 2016, we had seven 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
Consolidated Communities Under Construction
Camden Gallery Charlotte, NC (1)	323			$	60.0			$	58.4			$	1.3			1Q17		2Q17
Camden Lincoln Station Denver, CO (2)	267			56.0				50.5				32.5				2Q17		1Q18
Camden NoMa II Washington, DC	405			115.0				99.3				99.3				4Q17		4Q19
Camden Shady Grove Rockville, MD	457			116.0				90.3				90.3				1Q18		4Q19
Camden McGowen Station Houston, TX	315			90.0				35.6				35.6				2Q18		3Q19
Camden Washingtonian Gaithersburg, MD	365			90.0				31.8				31.8				4Q18		4Q19
Camden North End I Phoenix, AZ	441			105.0				25.5				25.5				2Q19		2Q20
Consolidated total	2,573			$	632.0			$	391.4			$	316.3

(1) Property in lease-up and was 85% leased at February 4, 2017.

(2) Property in lease-up and was 33% leased at February 4, 2017.

Development Pipeline Communities. At December 31, 2016, we had the following consolidated communities undergoing development activities:

($ in millions) Property and Location		Projected Homes			Total Estimated Cost (1)				Cost to Date
Camden Grandview II		28			$	21.0			$	6.1
Charlotte, NC
Camden Buckhead		375			104.0				14.8
Atlanta, GA
Camden RiNo		230			70.0				17.0
Denver, CO
Camden Gallery II		5			3.0				1.0
Charlotte, NC
Camden Arts District		354			150.0				16.8
Los Angeles, CA
Camden Conte (2)		519			170.0				22.4
Houston, TX
Camden North End II		326			73.0				11.5
Phoenix, AZ
Camden Atlantic		286			62.0				14.2
Plantation, FL
Camden Paces III		350			100.0				11.1
Atlanta, GA
Total		2,473			$	753.0			$	114.9

(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.

(2)	Anticipated to be developed in two phases. The estimated units, estimated cost, and cost to date represent both phases.

Land Holdings. At December 31, 2016, we had the following investment in land:

($ in millions) Location	Acres			Cost to Date
Phoenix, AZ (c)	14.0			$	11.1

Geographic Diversification

At December 31, 2016 and 2015, our real estate assets by various markets, excluding depreciation, investments in joint ventures and properties held for sale, were as follows:

($ in thousands)	2016							2015
Washington, D.C. Metro	$	1,417,255			19.2	%		$	1,433,339			19.4	%
Houston, Texas	766,801				10.4			730,576				9.9
Los Angeles/Orange County, California	709,210				9.6			740,976				10.0
Atlanta, Georgia	626,483				8.5			615,972				8.3
Southeast Florida	565,369				7.7			558,521				7.5
Dallas, Texas	493,477				6.7			470,629				6.4
Phoenix, Arizona	492,251				6.7			478,373				6.5
Denver, Colorado	440,296				6.0			383,280				5.2
Charlotte, North Carolina	371,009				5.0			351,661				4.8
Orlando, Florida	341,727				4.6			387,547				5.2
San Diego/Inland Empire, California	330,961				4.5			328,381				4.4
Raleigh, North Carolina	268,230				3.6			263,185				3.6
Austin, Texas	230,351				3.1			229,306				3.1
Tampa, Florida	221,428				3.0			315,643				4.3
Corpus Christi, Texas	101,842				1.4			100,208				1.4
Total	$	7,376,690			100.0	%		$	7,387,597			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:

	2016				2015				2014
Average monthly property revenue per apartment home	$	1,556			$	1,479			$	1,374
Annualized total property expenses per apartment home	$	6,634			$	6,392			$	5,963
Weighted average number of operating apartment homes owned 100%	46,934				47,088				47,915
Weighted average occupancy of operating apartment homes owned 100% *	95.3		%		95.7		%		95.8		%
* Our one student housing community is excluded from this calculation.

Management considers property net operating income ("NOI") to be an appropriate supplemental measure of operating performance to net income because it reflects the operating performance of our communities without an allocation of corporate level property management overhead or general and administrative costs. We define NOI as total property income less property operating and maintenance expenses less real estate taxes. NOI is further detailed in the Property-Level NOI table as seen below. NOI is not defined by accounting principles generally accepted in the United States of America ("GAAP") and should not be considered an alternative to net income as an indication of our operating performance, should not be considered an alternative to net cash from operating activities as a measure of liquidity, or an indication of cash available to fund cash needs. Additionally, NOI as disclosed by other REITs may not be comparable to our calculation.

Reconciliations of net income to NOI for the year ended December 31, 2016, 2015, and 2014 are as follows:

(in thousands)		2016				2015				2014
Net income		$838,226				$258,262				$	301,314
Less: Fee and asset management income		(6,864		)		(6,999		)		(9,832		)
Less: Interest and other income		(2,202		)		(597		)		(842		)
Less: Income/(loss) on deferred compensation plans		(5,511		)		264				(3,937		)
Plus: Property management expense		25,125				23,055				22,070
Plus: Fee and asset management expense		3,848				4,742				5,341
Plus: General and administrative expense		47,415				46,233				51,005
Plus: Interest expense		93,145				97,312				94,906
Plus: Depreciation and amortization expense		250,146				240,944				222,055
Plus: Expense/(benefit) on deferred compensation plans		5,511				(264		)		3,937
Less: Gain on sale of operating properties, including land		(295,397		)		(104,288		)		(159,289		)
Plus: Impairment associated with land holdings		—				—				1,152
Less: Equity in income of joint ventures		(7,125		)		(6,168		)		(7,023		)
Plus: Income tax expense		1,617				1,872				1,903
Less: Income from discontinued operations		(7,605		)		(19,750		)		(18,197		)
Less: Gain on sale of discontinued operations, net of tax		(375,237		)		—				—
Net operating income		$	565,092			$	534,618			$	504,563

Property-Level NOI (1)

Property NOI, as reconciled above, is detailed further into the following categories for the year ended December 31, 2016 as compared to 2015 and for the year ended December 31, 2015 as compared to 2014:

	Apartment Homes at			Year Ended December 31,								Change
($ in thousands)	12/31/2016			2016				2015				$				%
Property revenues:
Same store communities	40,221			$	746,101			$	718,234			$	27,867			3.9	%
Non-same store communities	4,579			84,510				60,596				23,914				39.5
Development and lease-up communities	3,283			9,399				1				9,398				*
Dispositions/other	—			36,437				56,787				(20,350		)		(35.8	)
Total property revenues	48,083			$	876,447			$	835,618			$	40,829			4.9	%
Property expenses:
Same store communities	40,221			$	263,768			$	257,988			$	5,780			2.2	%
Non-same store communities	4,579			30,907				23,169				7,738				33.4
Development and lease-up communities	3,283			4,363				8				4,355				*
Dispositions/other	—			12,317				19,835				(7,518		)		(37.9	)
Total property expenses	48,083			$	311,355			$	301,000			$	10,355			3.4	%
Property NOI:
Same store communities	40,221			$	482,333			$	460,246			$	22,087			4.8	%
Non-same store communities	4,579			53,603				37,427				16,176				43.2
Development and lease-up communities	3,283			5,036				(7		)		5,043				*
Dispositions/other	—			24,120				36,952				(12,832		)		(34.7	)
Total property NOI	48,083			$	565,092			$	534,618			$	30,474			5.7	%

• Not a meaningful percentage.

(1)

Same store communities are communities we owned and were stabilized as of January 1, 2015, excluding assets held for sale. Non-same store communities are stabilized communities not owned or stabilized as of January 1, 2015, excluding assets held for sale. Management believes same store information is useful as it allows both management and investors to determine financial results over a particular period for the same set of communities. Development and lease-up communities are non-stabilized communities we have acquired or developed since January 1, 2015, excluding assets held for sale. Dispositions/other includes those communities disposed of or held for sale which are not classified as discontinued operations. Other includes non-multifamily rental properties, below market lease amortization related to acquired communities, and expenses related to land holdings not under active development.

	Apartment Homes at			Year Ended December 31,								Change
($ in thousands)	12/31/2015			2015				2014				$				%
Property revenues:
Same store communities	42,700			$	752,983			$	716,613			$	36,370			5.1	%
Non-same store communities	3,790			59,413				30,397				29,016				95.5
Development and lease-up communities	3,963			14,548				1,295				13,253				*
Dispositions/other	—			8,674				41,958				(33,284		)		(79.3	)
Total property revenues	50,453			$	835,618			$	790,263			$	45,355			5.7	%
Property expenses:
Same store communities	42,700			$	269,445			$	256,395			$	13,050			5.1	%
Non-same store communities	3,790			22,038				11,117				10,921				98.2
Development and lease-up communities	3,963			6,069				301				5,768				*
Dispositions/other	—			3,448				17,887				(14,439		)		(80.7	)
Total property expenses	50,453			$	301,000			$	285,700			$	15,300			5.4	%
Property NOI:
Same store communities	42,700			$	483,538			$	460,218			$	23,320			5.1	%
Non-same store communities	3,790			$	37,375			$	19,280			$	18,095			93.9	%
Development and lease-up communities	3,963			$	8,479			$	994			$	7,485			*
Dispositions/other	—			$	5,226			$	24,071			$	(18,845	)		(78.3	)%
Total property NOI	50,453			$	534,618			$	504,563			$	30,055			6.0	%

• Not a meaningful percentage.

(1)

Same store communities are communities we owned and were stabilized as of January 1, 2014, excluding assets held for sale. Non-same store communities are stabilized communities not owned or stabilized as of January 1, 2014, excluding assets held for sale. Management believes same store information is useful as it allows both management and investors to determine financial results over a particular period for the same set of communities. Development and lease-up communities are non-stabilized communities we have acquired or developed since January 1, 2014, excluding assets held for sale. Dispositions/other includes those communities disposed of or held for sale which are not classified as discontinued operations. Other includes non-multifamily rental properties, below market lease amortization related to acquired communities, and expenses related to land holdings not under active development.

Same Store Analysis

Same store property NOI increased approximately $22.1 million for the year ended December 31, 2016 as compared to the same period in 2015. This increase was due to an increase of approximately $27.9 million in same store property revenues for the year ended December 31, 2016, partially offset by an increase of approximately $5.8 million in same store property expenses for the year ended December 31, 2016, as compared to the same period in 2015.

The $27.9 million increase in same store property revenue for the year ended December 31, 2016 as compared to the same period in 2015, was due in part to an increase in same store rental revenues of approximately $17.4 million for the year ended December 31, 2016, which was primarily due to a 3.2% increase in average rental rates for our same store portfolio for the year ended December 31, 2016, as compared to the same period in 2015. The increase in same store property revenue was also due to an increase of approximately $10.5 million in other property revenue for the year ended December 31, 2016 as compared to the same period in 2015, primarily due to increases in income from our bulk internet rebilling program and miscellaneous fee income.

The $5.8 million increase in same store property expense for the year ended December 31, 2016 as compared to the same period in 2015, was primarily due to increased costs associated with our bulk internet rebilling program and a $2.5 million, or 2.8%, increase in real estate taxes as a result of higher property valuations at a number of our communities. These increases were partially offset by decreased property insurance expenses during the year ended December 31, 2016 as compared to the same period in 2015.

Same store property NOI increased approximately $23.3 million for the year ended December 31, 2015 as compared to the same period in 2014. This increase was due to an increase of approximately $36.4 million in same store property revenues for the year ended December 31, 2015, partially offset by an increase of approximately $13.1 million in same store property expenses for the year ended December 31, 2015, as compared to the same period in 2014.

The $36.4 million increase in same store property revenue during the year ended December 31, 2015 as compared to the same period in 2014, was due in part to an increase in same store rental revenues of approximately $26.5 million during the year ended December 31, 2015, which was primarily due to a 4.1% increase in average rental rates for our same store portfolio during the year ended December 31, 2015 as compared to the same period in 2014. The increase in same store property revenue was also due to an increase of approximately $9.9 million in other property revenue during the year ended December 31, 2015 as compared to the same period in 2014, primarily due to increases in income from our bulk internet rebilling program and miscellaneous fee income.

The $13.1 million increase in same store property expense during the year ended December 31, 2015 as compared to the same period in 2014, was primarily due to a $5.8 million, or 6.6%, increase in real estate taxes as a result of higher property valuations at a number of our communities as well as increased costs associated with our bulk internet rebilling program.

Non-same Store and Development and Lease-up Analysis

Property NOI from non-same store and development and lease-up communities increased approximately $21.2 million for the year ended December 31, 2016 as compared to the same period in 2015. The increase was due to an increase of approximately $33.3 million in revenues for the year ended December 31, 2016, partially offset by an increase of approximately $12.1 million in expenses for the year ended December 31, 2016, as compared to the same period in 2015. The increases in property revenues and expenses from our non-same store communities were primarily due to the stabilization of five operating properties in 2015 and four operating properties in 2016. The increases in property revenues and expenses from our development and lease-up communities were primarily due to the completion and partial lease up of three properties during 2015 and two properties during 2016, and the partial lease-up of two properties which were under construction at December 31, 2016.

Property NOI from non-same store and development and lease-up communities increased approximately $25.6 million for the year ended December 31, 2015 as compared to the same period in 2014. The increase was due to an increase of approximately $42.3 million in revenues for the year ended December 31, 2015, partially offset by an increase of approximately $16.7 million in expenses for the year ended December 31, 2015, as compared to the same period in 2014. The increases in property revenues and expenses from our non-same store communities were primarily due to the stabilization of one operating property in 2014 and five operating properties in 2015, and the acquisition of one operating property in 2014. The increases in property revenues and expenses from our development and lease-up communities were primarily due to the completion and partial lease up of three properties in 2015 and the partial lease-up of one property which was under construction at December 31, 2015.

Dispositions/Other Property Analysis

Dispositions/other property NOI decreased approximately $12.8 million for the year ended December 31, 2016 as compared to the same period in 2015. The decrease was primarily due to the disposition of three operating properties in 2015, and the disposition of one dual-phase operating property and six other operating properties in 2016.

Dispositions/other property NOI decreased approximately $18.8 million for the year ended December 31, 2015 as compared to the same period in 2014. The decrease was primarily due to the disposition of five operating properties in 2014 and three operating properties in 2015.

Non-Property Income

	Year Ended December 31,								Change							Year Ended December 31,								Change
($ in thousands)	2016				2015				$				%			2015				2014				$				%
Fee and asset management	$	6,864			$	6,999			$	(135	)		(1.9	)%		$	6,999			$	9,832			$	(2,833	)		(28.8	)%
Interest and other income	2,202				597				1,605				268.8			597				842				(245		)		(29.1	)
Income (loss) on deferred compensation plans	5,511				(264		)		5,775				*			(264		)		3,937				(4,201		)		(106.7	)
Total non-property income	$	14,577			$	7,332			$	7,245			98.8	%		$	7,332			$	14,611			$	(7,279	)		(49.8	)%

Fee and asset management income, which represents income related to property management of our joint ventures and fees from third-party construction projects, decreased approximately $0.1 million for the year ended December 31, 2016 as compared to 2015 and decreased approximately $2.8 million for the year ended December 31, 2015 as compared to 2014. The slight decrease for 2016 as compared to 2015 was primarily due to a decrease in development and construction fees earned due to the timing of the commencement and completion of the development of one community by one of our Funds in 2015, partially offset by higher third-party construction activity. The decrease for 2015 as compared to 2014 was primarily due to lower development and construction fees earned due to the timing of development communities started and completed by our Funds during 2014 and 2015, and our increase in ownership interest in two of the Funds from 20% to 31.3% effective December 23, 2014. We eliminate fee income provided by our Funds to the extent of our ownership.

Interest and other income increased approximately $1.6 million for the year ended December 31, 2016, as compared to 2015, and was relatively flat for the year ended December 31, 2015 as compared to 2014. The increase for 2016 was due to higher interest income earned on investments in cash and short-term investments due to an increase in average cash balances and an increase in interest income earned due to higher average note receivable balances outstanding on our real estate secured loans to unaffiliated third parties in 2016, as compared to the same period in 2015.

Our deferred compensation plans recognized income of approximately $5.5 million in 2016, a loss of approximately $0.3 million in 2015 and income of approximately $3.9 million in 2014. These changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the expense (benefit) related to these plans, as discussed below.

Other Expenses

	Year Ended December 31,								Change							Year Ended December 31,								Change
($ in thousands)	2016				2015				$				%			2015				2014				$				%
Property management	$	25,125			$	23,055			$	2,070			9.0	%		$	23,055			$	22,070			$	985			4.5	%
Fee and asset management	3,848				4,742				(894		)		(18.9	)		4,742				5,341				(599		)		(11.2	)
General and administrative	47,415				46,233				1,182				2.6			46,233				51,005				(4,772		)		(9.4	)
Interest	93,145				97,312				(4,167		)		(4.3	)		97,312				94,906				2,406				2.5
Depreciation and amortization	250,146				240,944				9,202				3.8			240,944				222,055				18,889				8.5
Expense (benefit) on deferred compensation plans	5,511				(264		)		5,775				*			(264		)		3,937				(4,201		)		(106.7	)
Total other expenses	$	425,190			$	412,022			$	13,168			3.2	%		$	412,022			$	399,314			$	12,708			3.2	%

Property management expense, which primarily represents regional supervision and accounting costs related to property operations, increased approximately $2.1 million for the year ended December 31, 2016 as compared to 2015 and increased approximately $1.0 million for the year ended December 31, 2015 as compared to 2014. These increases were primarily due to increases in salaries, benefits, and incentive compensation expenses. Property management expenses were 2.9% of total property revenues for the year ended December 31, 2016 and were 2.8% of total property revenues for each of the years ended December 31, 2015 and 2014.

Fee and asset management expense, which represents expenses related to property management of our joint ventures and fees from third-party construction projects, decreased approximately $0.9 million for the year ended December 31, 2016 as compared to 2015 and decreased approximately $0.6 million for the year ended December 31, 2015 as compared to 2014. The decrease for 2016 as compared to 2015 was primarily due to lower professional fees incurred in managing our joint ventures

and lower expenses incurred as a result of decreases in development and construction activity relating to the timing of one development community started and completed by one of the Funds in 2015. The decrease was partially offset by higher expenses relating to an increase in third-party construction activity in 2016 as compared to 2015. The decrease for 2015 as compared to 2014 was primarily due to lower expenses directly related to lower net revenues resulting from our change in ownership interest in two of the Funds effective December 23, 2014.

General and administrative expenses increased approximately $1.2 million during the year ended December 31, 2016 as compared to 2015 and decreased approximately $4.8 million during the year ended December 31, 2015 as compared to 2014. General and administrative expenses were 5.4%, 5.5% and 6.4% of total revenues, excluding income (loss) on deferred compensation plans, for the years ended December 31, 2016, 2015 and 2014, respectively. The increase for the year ended December 31, 2016 as compared to 2015 was primarily due to increases in salaries, benefits, and incentive compensation expenses due to higher deferred compensation amortization costs resulting from the accelerated vesting relating to certain trust managers and executive officers meeting the retirement eligibility and service requirements as defined in the 2011 Share Incentive Plan of Camden Property Trust, and an increase in the value of awards granted in 2016 as compared to the value of awards which vested during the same period in 2015.

The decrease in general and administrative expenses for the year ended December 31, 2015 as compared to 2014 was primarily due to approximately $10.0 million in one-time bonuses paid to employees in 2014 relating to the restructuring of the Funds in December 2014. Excluding the $10.0 million one-time bonus paid in 2014, general and administrative expenses increased by approximately $5.2 million in 2015 as compared to 2014, which was primarily related to an increase in salaries, benefits and incentive compensation expenses, partially offset by a slight decrease in professional fees.

Interest expense decreased approximately $4.2 million for the year ended December 31, 2016 as compared to 2015 and increased approximately $2.4 million for the year ended December 31, 2015 as compared to 2014. The decrease in interest expense in 2016 as compared to 2015 was primarily due to the repayment of a $250.0 million, 5.08% senior unsecured note payable in June 2015. The decrease was partially offset by lower capitalized interest during the year ended December 31, 2016, resulting from lower average balances in our development pipeline, and higher interest expense recognized on our variable rate debt due to higher weighted average interest rates in 2016 as compared to the same period in 2015.

The increase in interest expense in 2015 as compared to 2014 was primarily due to increased interest expense from the issuance of a $250.0 million, 3.68% senior unsecured note payable in September 2014, and lower capitalized interest of approximately $2.9 million during the year ended December 31, 2015, resulting from lower average balances in our development pipeline. The increase in 2015 was also due to an increase in interest expense relating to borrowings on our unsecured credit facility and unsecured short-term borrowing facility as compared to the same period in 2014. The increase in 2015 was partially offset by the repayment of a $250.0 million, 5.08% senior unsecured note payable in June 2015 and the repayment of two secured notes payable in April and September of 2014.

Depreciation and amortization expense increased approximately $9.2 million for the year ended December 31, 2016 as compared to 2015 and increased approximately $18.9 million for the year ended December 31, 2015 as compared to 2014. The increase in 2016 as compared to 2015 was primarily due to the completion of units in our development pipeline, the completion of repositions, and increases in capital improvements placed in service during 2016 and 2015. The increase was partially offset by a decrease in depreciation expense related to the disposition of one operating property during the fourth quarter of 2015, and the dispositions of one dual-phased operating property and six other operating properties in 2016.

The increase in depreciation and amortization expense in 2015 as compared to 2014 was primarily due to the completion of units in our development pipeline, the completion of repositions, increases in capital improvements placed in service during 2014 and 2015, and the acquisition of one operating property in October 2014. The increase was partially offset by a decrease in depreciation expense related to the dispositions of five operating properties in 2014 and three operating properties in 2015.

Our deferred compensation plans incurred an expense of approximately $5.5 million in 2016, a benefit of approximately $0.3 million in 2015 and an expense of $3.9 million in 2014. These changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the income (loss) related to these plans, as discussed in the non-property income section above.

Other

	Year Ended December 31,								Change				Year Ended December 31,								Change
(in thousands)	2016				2015				$				2015				2014				$
Gain on sale of operating properties, including land	$	295,397			$	104,288			$	191,109			$	104,288			$	159,289			$	(55,001	)
Impairment associated with land holdings	—				—				—				—				(1,152		)		1,152
Equity in income of joint ventures	7,125				6,168				957				6,168				7,023				(855		)
Income tax expense	(1,617		)		(1,872		)		255				(1,872		)		(1,903		)		31

During the year ended December 31, 2016 we recognized an approximate $294.9 million gain related to the sale of one dual-phased property and six other operating properties. During the year ended December 31, 2015, we recognized an approximate $104.0 million gain related to the sale of three operating properties. For the year ended 2016, we also sold 6.3 acres of land adjacent to an operating property in Tampa, Florida for a gain of approximately $0.4 million and for the year ended 2015, we sold two land holdings adjacent to operating properties in Dallas and Houston, Texas for a gain of approximately $0.3 million.

During the year ended December 31, 2014, we recognized an approximate $155.7 million gain related to the sales of five operating properties and the sale of approximately 29.3 acres located adjacent to current operating and development communities for a gain on the sale of land of approximately $3.6 million. The $1.2 million impairment associated with land holdings in 2014 reflects the difference between the land holding's carrying value and the sales price.

Equity in income of joint ventures increased approximately $1.0 million for the year ended December 31, 2016 as compared to 2015, and decreased approximately $0.9 million for the year ended December 31, 2015 as compared to 2014. The increase in 2016 was primarily due to an increase in earnings resulting from higher rental and other property revenues from the operating properties owned by the Funds and the stabilization of one operating property owned by one of the Funds during the first quarter of 2016. The increase was partially offset by higher real estate taxes as a result of increased property valuations at a number of the communities owned by the Funds. The increase was further offset by an increase in interest expense incurred during the year ended December 31, 2016 resulting from interest capitalized during the year ended December 31, 2015 while a property was under construction.

The decrease in equity in income of joint ventures in 2015 as compared to 2014 was primarily due to the recognition of a $3.6 million proportionate share of the gain relating to the sale of two operating properties by the Funds in 2014. The decrease was partially offset by an increase in earnings resulting from our increase in ownership interest in two of the Funds from 20% to 31.3% effective December 23, 2014. The decrease was further offset by an increase in earnings resulting from higher rental income from the stabilized operating properties owned by the Funds and two operating properties owned by the Funds reaching stabilization during the third quarter of 2014.

Funds from Operations (“FFO”) and Adjusted FFO ("AFFO")

Management considers FFO and AFFO to be appropriate measures 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 GAAP), excluding gains (or losses) associated with the sale of previously depreciated operating properties, real estate depreciation and amortization, impairments of depreciable assets, and adjustments for unconsolidated joint ventures to reflect FFO on the same basis. Our calculation of diluted FFO also assumes conversion of all potentially dilutive securities, including certain non-controlling interests, which are convertible into common shares. We consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions of 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.

AFFO is calculated utilizing FFO less recurring capitalized expenditures which are necessary to help preserve the value of and maintain the functionality at our communities. We also consider AFFO to be a useful supplemental measure because it is frequently used by analysts and investors to evaluate a REIT's operating performance between periods or different companies. Our definition of recurring capital expenditures may differ from other REITs, and there can be no assurance our basis for computing this measure is comparable to other REITs.

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

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

($ in thousands)	2016				2015				2014
Funds from operations
Net income attributable to common shareholders	$	819,823			$	249,315			$	292,089
Real estate depreciation and amortization, including discontinued operations	248,235				251,104				230,638
Adjustments for unconsolidated joint ventures	9,194				9,146				5,337
Gain on sale of unconsolidated joint venture properties (1)	—				—				(3,566		)
Gain on sale of operating properties, net of tax	(294,954		)		(104,015		)		(155,680		)
Gain on sale of discontinued operations, net of tax	(375,237		)		—				—
Income allocated to non-controlling interests	18,403				8,947				9,225
Funds from operations	$	425,464			$	414,497			$	378,043
Less: recurring capitalized expenditures	(59,084		)		(64,169		)		(59,854		)
Adjusted funds from operations	$	366,380			$	350,328			$	318,189
Weighted average shares – basic	89,580				89,120				88,084
Incremental shares issuable from assumed conversion of:
Common share options and awards granted	323				370				384
Common units	1,891				1,896				1,898
Weighted average shares – diluted	91,794				91,386				90,366

(1) The gain in 2014 represents our proportionate share of the gain on sale of two operating properties sold by the Funds in 2014.

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 5.5, 5.2, and 5.0 times for the years ended December 31, 2016, 2015, and 2014, 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 and income from discontinued operations after adding back depreciation, amortization, and interest expense from both continuing and discontinued operations. Approximately 78.3%, 79.9%, and 79.5% of our properties were unencumbered at December 31, 2016, 2015, and 2014, respectively. Our weighted average maturity of debt was approximately 4.9 years at December 31, 2016.

We also intend to strengthen our capital and liquidity positions by continuing to focus on our core fundamentals, which currently are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs.

Our primary sources of liquidity are cash and cash equivalents on hand, short-term investments, and cash flow generated from operations. Other sources may include one or more of the following: availability under our unsecured credit facility,

proceeds from property dispositions, the use of debt and equity offerings under our automatic shelf registration statement, equity issued from our ATM program, and 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 2017 including:

•	normal recurring operating expenses;

•	current debt service requirements, including debt maturities;

•	recurring capital expenditures;

•	reposition expenditures;

•	funding of property developments, redevelopments, acquisitions, and joint venture investments; and,

•	the minimum dividend payments required to maintain our REIT qualification under the Code.

Factors which could increase or decrease our future liquidity include but are not limited to volatility in capital and credit markets, and interest rates, changes in sources of financing, the satisfaction of REIT dividend requirements, our ability to complete asset purchases, sales, or developments, the effect our debt level and changes in credit ratings could have on our cost of funds, and our ability to access capital markets.

Cash Flows

The following is a discussion of our cash flows for the years ended December 31, 2016 and 2015.

Net cash from operating activities was approximately $443.1 million during the year ended December 31, 2016 as compared to approximately $423.2 million during the year ended December 31, 2015. The increase was primarily due to higher net property-level NOI, primarily due to the growth in revenues attributable to increased rental rates from our same store communities and growth in the number of non-same store properties resulting from the stabilization of nine operating properties in 2015 and 2016, the completion and partial lease-up of two operating properties in 2016, and the partial lease-up of two properties under construction at December 31, 2016. The increase was also due to an approximate $10.0 million bonus paid to employees in 2015 relating to the restructuring of the Funds in December 2014. The increase was partially offset by a decrease related to the disposition of 15 operating properties, a retail center, and approximately 19.6 acres of land classified as discontinued operations in 2016, as well as the disposition of three other operating properties, in 2015 and the disposition of one dual-phased operating property and six other operating properties in 2016. See further discussions of our 2016 operations as compared to 2015 in "Results of Operations."

Net cash from investing activities during the year ended December 31, 2016 totaled approximately $690.4 million as compared to net cash used in investing activities of approximately $293.2 million during the year ended December 31, 2015. During 2016, we received approximately $623.0 million, net of expenses, from the sale of 15 operating properties, a retail center, and approximately 19.6 acres of land classified as discontinued operations, as well as approximately $515.8 million, net of expenses, from the sale of one dual-phased operating property and six other properties and one land holding. These cash inflows were partially offset by cash outflows for property development and capital improvements of approximately $343.0 million during 2016 as compared to approximately $411.8 million in 2015, primarily due to the completion of nine operating properties in 2015 and 2016, and the completion of repositions at several of our operating properties. The expenditures related to property development and capital improvements during the years ended December 31, 2016 and 2015 included the following:

		December 31,
(in millions)		2016				2015
Expenditures for new development, including land		$	220.4			$	285.8
Capitalized interest, real estate taxes, and other capitalized indirect costs		29.8				30.9
Reposition expenditures		23.1				31.2
Capital expenditures		69.7				63.9
Total		$	343.0			$	411.8

During the year ended December 31, 2016, cash outflows also included the purchase of a short-term investment for $100 million. During the year ended December 31, 2015, cash outflows also included $13.8 million relating to capital improvements and reposition expenditures from our discontinued operations. These cash outflows were offset by proceeds of approximately $145.0 million from the sale of three operating properties and two land holdings.

Net cash used in financing activities totaled approximately $904.2 million during the year ended December 31, 2016 as compared to approximately $273.2 million during the year ended December 31, 2015. During 2016, we had net payments of

$244.0 million on our unsecured credit facility and other short-term borrowings. We also used approximately $663.4 million to pay distributions to common shareholders and non-controlling interest holders which included the $4.25 per common share special dividend payment made on September 30, 2016. During 2015, we used $250.0 million to repay maturing unsecured notes payable and approximately $3.0 million to pay principal amortization payments. We also used approximately $253.1 million to pay distributions to common shareholders and non-controlling interest holders, and approximately $9.5 million to acquire the remaining non-controlling interests in two consolidated joint ventures. The cash flows for 2015 were partially offset by net proceeds from our unsecured line of credit and other short-term borrowings of $244.0 million.

The following is a discussion of our cash flows for the years ended December 31, 2015 and 2014.

Net cash from operating activities was approximately $423.2 million during the year ended December 31, 2015 as compared to approximately $418.5 million during the year ended December 31, 2014. The increase was primarily due to higher net property-level net operating income, primarily due to the growth in revenues directly attributable to increased rental rates from our same store communities and growth in non-same store properties primarily relating to the acquisition of one operating property in 2014, the stabilization of one operating property in 2014 and five operating properties in 2015, the completion and partial lease-up of three operating properties during the third and fourth quarters of 2015, and the partial lease-up of one property under construction at December 31, 2015. These increases in net cash from operating activities were partially offset by the disposition of five operating properties in 2014 and three operating properties in 2015. These decreases were also due to an approximate $10.0 million bonus paid to employees in 2015 relating to the restructuring of the Funds in December 2014, as well as the timing of the first interest payment relating to the $250 million, 3.68% unsecured notes issued in September 2014, which was made in the first quarter of 2015. See further discussions of our 2015 operations as compared to 2014 in "Results of Operations."

Net cash used in investing activities during the year ended December 31, 2015 totaled approximately $293.2 million as compared to approximately $326.6 million during the year ended December 31, 2014. Cash outflows for property development and capital improvements from continuing operations were approximately $411.8 million during 2015 as compared to approximately $497.1 million during 2014, primarily due to the completion of nine operating properties in 2014 and 2015, and the completion of repositions at several of our operating properties. The expenditures related to property development and capital improvements during the years ended December 31, 2015 and 2014 included the following:

		December 31,
(in millions)		2015				2014
Expenditures for new development, including land		$	285.8			$	342.1
Capitalized interest, real estate taxes, and other capitalized indirect costs		30.9				34.1
Reposition expenditures		31.2				64.4
Capital expenditures		63.9				56.5
Total		$	411.8			$	497.1

During the year ended December 31, 2015, cash outflows also included approximately $13.8 million relating to capital improvements and reposition expenditures from our discontinued operations. These cash outflows were offset by proceeds, net of expenses, of approximately $145.0 million from the sale of three operating properties and two land holdings. Additional cash outflows for the year ended December 31, 2014 related to the acquisition of one operating property for approximately $62.3 million and capital improvements from our discontinued operations of approximately $6.2 million. Net cash used in investing activities during the year ended December 31, 2014 was partially offset by cash inflows of approximately $237.6 million, net of expenses, from the sale of five operating properties and four land holdings in 2014, and the distributions received from our joint ventures of approximately $6.4 million relating to the sale of two operating properties in February 2014.

Net cash used in financing activities totaled approximately $273.2 million during the year ended December 31, 2015 as compared to net cash provided by financing activities of $43.5 million during the year ended December 31, 2014. During 2015, we used $250.0 million to repay maturing unsecured notes payable and approximately $3.0 million to pay principal amortization payments. We also used approximately $253.1 million to pay distributions to common shareholders and non-controlling interest holders, and approximately $9.5 million to acquire the remaining non-controlling interests in two fully consolidated joint ventures. The cash flows for the year ended December 31, 2015 were partially offset by net proceeds from our unsecured line of credit and other short-term borrowings of approximately $244.0 million. During 2014, we received net proceeds of approximately $248.1 million from the issuance in September 2014 of $250.0 million unsecured notes payable and net proceeds of approximately $66.2 million from the issuance of approximately 0.9 million common shares from our ATM program. The cash inflows during 2014 were partially offset by approximately $236.5 million used for distributions paid to common shareholders and non-controlling interest holders, approximately $32.3 million used to repay maturing secured mortgage notes payable, and approximately $4.0 million used for principal amortization payments.

Financial Flexibility

We have a $600.0 million unsecured credit facility which matures in August 2019, with two six-month options to extend the maturity date at our election to August 2020. Additionally, we have the option to further increase our credit facility to $900.0 million by either adding additional banks to the facility or obtaining the agreement of the existing banks to increase their commitments. The interest rate on this 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 this 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 $300.0 million or the remaining amount available under the 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 on the date of this filing.

Our credit facility provides us with the ability to issue up to $50.0 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 December 31, 2016, we had no balances outstanding on our $600.0 million credit facility and we had outstanding letters of credit totaling approximately $12.7 million, leaving approximately $587.3 million available under our credit facility.

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. At December 31, 2016 we had approximately 87.5 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding.

In November 2014, we created an at-the-market share offering program (the "ATM program") through which we can, but have no obligation to, sell common shares having an aggregate offering price of up to $331.3 million 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 any future sales under the ATM program for general corporate purposes, which may include reducing future borrowings under our unsecured credit facility, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development, redevelopment and investment projects and financing for acquisitions. As of the date of this filing, we had common shares having an aggregate offering price of up to $315.3 million remaining available for sale under the ATM program.

We believe our ability to access capital markets is enhanced by our senior unsecured debt ratings by Moody’s, Fitch, and Standard and Poor's, which are currently A3 with stable outlook, A- with stable outlook, and BBB+ with stable outlook, respectively. We believe our ability to access capital markets is also enhanced by our ability to borrow on a secured basis from various institutions including banks, Fannie Mae, Freddie Mac, or life insurance companies. However, we may not be able to maintain our current credit ratings and may not be able to borrow on a secured or unsecured basis in the future.

Future Cash Requirements and Contractual Obligations

One of our principal long-term liquidity requirements includes the repayment of maturing debt, including any future borrowings under our unsecured credit facility. We believe payments of debt in 2017 are manageable at approximately $276.0 million which represents approximately 11.1% of our total outstanding debt, and includes scheduled principal amortization of approximately $1.2 million. See Note 9, “Notes Payable,” in the notes to Consolidated Financial Statements for further discussion of scheduled maturities.

We estimate the additional cost to complete the construction of the seven consolidated projects to be approximately $240.6 million. Of this amount, we expect to incur costs between approximately $150 million and $170 million during 2017 and to incur the remaining costs during 2018 and 2019. Additionally, we expect to incur costs between approximately $20 million and $30 million related to the start of new development activities, between approximately $24 million and $28 million of additional redevelopment expenditures and between approximately $60 million and $64 million of additional recurring capital expenditures during 2017.

We anticipate meeting our near-term liquidity requirements through a combination of one or more of the following: cash and cash equivalents, short-term investments, cash flows generated from operations, draws on our unsecured credit facility, 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 continue to evaluate our operating properties and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise.

As a REIT, we are subject to a number of organizational and operational requirements, including a requirement to distribute current dividends to our shareholders equal to a minimum of 90% of our annual taxable income. In order to minimize paying income taxes, our general policy is to distribute at least 100% of our taxable income. In September 2016, our Board of Trust Managers also declared a special dividend of $4.25 per common share to our common shareholders of record as of September 23, 2016, which was paid on September 30, 2016. The special dividend consisted of gains on dispositions of assets completed in 2016 and enabled us to distribute 100% of our taxable income; we also paid equivalent amounts per unit to holders of the common operating partnership units. In December 2016, we announced our Board of Trust Managers had declared a quarterly dividend of $0.75 per common share to our common shareholders of record as of December 16, 2016. This dividend was subsequently paid on January 17, 2017 and we paid equivalent amounts per unit to holders of common operating partnership units. Excluding the special dividend and aggregated with previous 2016 dividends, this distribution to common shareholders and holders of the common operating partnership units equates to an annual dividend rate of $3.00 per share or unit for the year ended December 31, 2016.

In the first quarter of 2017, the Company's Board of Trust Managers maintained the $0.75 quarterly dividend rate 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 similar dividend distributions for the remainder of 2017, our annualized dividend rate for 2017 would be $3.00.

The following table summarizes our known contractual cash obligations as of December 31, 2016:

(in millions)	Total				2017				2018				2019				2020				2021				Thereafter
Debt maturities (1)(2)	$	2,480.6			$	276.0			$	173.8			$	643.2			$	(1.1	)		$	249.1			$	1,139.6
Interest payments (2)(3)	454.1				98.3				89.1				63.2				55.4				49.1				99.0
Non-cancelable lease payments	21.7				2.9				2.7				2.5				2.5				2.5				8.6
Unfunded commitments under notes receivable	0.8				0.8				—				—				—				—				—
	$	2,957.2			$	378.0			$	265.6			$	708.9			$	56.8			$	300.7			$	1,247.2

(1)	Includes scheduled principal payments and amortization of debt discounts and debt issuance costs.

(2)	Subsequent to December 31, 2016, we gave notice of advance repayment on our tax-exempt secured note payable of approximately $30.7 million in February 2017, which was initially due to mature in 2028. This table reflects this repayment in 2017.

(3)	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, 2016.

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, 2016, our unconsolidated joint ventures had outstanding debt of approximately $518.7 million, of which our proportionate share was approximately $162.4 million. As of December 31, 2016, 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 eighteen 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. 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. 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.

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. 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 the 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 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. 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.

Recent Accounting Pronouncements

See Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements" in the notes to Consolidated Financial Statements for further discussion of recent accounting pronouncements issued during the year ended December 31, 2016.