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

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes appearing elsewhere in this report, as well as Part I, Item 1A, "Risk Factors" within our Annual Report on Form 10-K for the year ended December 31, 2020. Historical results and trends which might appear in the condensed consolidated financial statements should not be interpreted as being indicative of future operations.

We consider portions of this report to be "forward-looking" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions, or other items relating to the future; forward-looking statements are not guarantees of future performance, results, or events. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein which are not statements of historical fact should be deemed forward-looking statements. Reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.

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

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

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

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

• We could be negatively impacted by the risks associated with land holdings and related activities;

• The ongoing pandemic and measures intended to prevent its spread and impact have and could continue to have a material adverse effect on our business, results of operations, cash flows, and financial condition;

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

• We could be impacted by our investments through joint ventures and investment funds which involve risks not present in investments in which we are the sole investor;

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

• Changes in rent control or rent stabilization laws and regulations could adversely affect our operations and property value;

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

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

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

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

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

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

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

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

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

• We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined;

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

• The form, timing and amount of dividend distributions in future periods may vary and be impacted by economic and other considerations;

• Competition could adversely affect our ability to acquire properties;

• Litigation risks could affect our business;

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

• We could be adversely impacted due to our share price fluctuations.

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

Camden Property Trust and all consolidated subsidiaries are primarily engaged in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities. We focus on investing in markets characterized by high-growth economic conditions, strong employment, and attractive quality of life which we believe leads to higher demand for our apartments and retention of our residents. As of September 30, 2021, we owned interests in, operated, or were developing 178 multifamily properties comprised of 60,587 apartment homes across the United States. In addition, we own other land holdings which we may develop into multifamily apartment communities in the future.

Business Environment and Current Outlook

As a result of the pandemic, we believe the multifamily industry market conditions in which we operate have been challenging but continue to show signs of improvement. During the three months ended September 30, 2021, our results reflect an increase in same store revenues of approximately 5.1% as compared to the same period in 2020. The increase was primarily due to higher average rental rates and increased occupancy which we believe was primarily attributable to improving job growth, favorable demographics with a higher propensity to rent versus buy, higher demand for multifamily housing in our markets, and a manageable supply of new multifamily housing.

We currently believe U.S. economic and employment growth are likely to continue during 2021 and the supply of multifamily homes will remain at manageable levels. If economic conditions were to worsen, our operating results could be adversely affected.

Consolidated Results

Net income attributable to common shareholders was $29.5 million and $35.0 million for the three months ended September 30, 2021 and 2020, respectively, and $91.0 and $94.7 million for the nine months ended September 30, 2021 and 2020, respectively.

The $5.5 million and $3.7 million decreases during the three and nine months ended September 30, 2021 as compared to the prior periods in 2020 were primarily due to higher depreciation expense related to the acquisition of three operating properties in June 2021 and August 2021. The decreases were also due to higher general and administration expenses and increases in property management, interest and fee and asset management expenses. These decreases were partially offset by increases in property operations due to the growth attributable to our same store, non-same store which includes three acquisitions discussed below, and development and lease-up communities, and increases in asset management income and equity in earnings. The decrease for the nine months ended September 30, 2021, was also partially offset by the $13.6 million Pandemic Related impact incurred in 2020. See further discussion of our 2021 operations as compared to 2020 in "Results of Operations," below.

Construction Activity

At September 30, 2021, we had a total of six properties under construction comprising 1,905 apartment homes. Initial occupancies of these six properties are currently scheduled to occur within the next 21 months. As of September 30, 2021, we estimate the total additional cost to complete the construction of the six properties is approximately $242.4 million.

Acquisitions

Operating properties: In August 2021, we acquired one operating property comprised of 368 apartment homes located in St. Petersburg, Florida for approximately $176.3 million. In June 2021, we acquired one operating property comprised of 328 apartment homes located in Franklin, Tennessee for approximately $105.3 million and one operating property comprised of 430 apartment homes located in Nashville, Tennessee for approximately $186.3 million. In October 2021, we acquired one operating property comprised of 558 apartment homes located in Dallas, Texas for approximately $165.5 million.

Land: In June 2021, we acquired approximately 14.6 acres of land in The Woodlands, Texas for approximately $9.3 million and approximately 0.2 acres of land in St. Petersburg, Florida for approximately $2.1 million for future development purposes. In October 2021, we acquired approximately 5.2 acres of land in Denver, Colorado for approximately $24.0 million for future development purposes.

Other

In 2021, we issued approximately 4.4 million common shares under our at-the-market ("ATM") programs and received approximately $579.5 million in net proceeds.

Future Outlook

Subject to market conditions, we intend to continue to seek opportunities to develop new communities and to redevelop, reposition, and acquire existing communities. We also intend to evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise. We expect to maintain a strong balance sheet and preserve our financial flexibility by continuing to focus on our core fundamentals which we believe are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intend to meet our near-term liquidity requirements through a combination of one or more of the following: cash and cash equivalents, cash flows generated from operations, draws on our unsecured credit facility, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from the 2021 ATM program, and other unsecured borrowings or secured mortgages.

As of September 30, 2021, we had approximately $428.2 million in cash and cash equivalents and $885.2 million available under our $900 million unsecured credit facilities. As of September 30, 2021 and through the date of this filing, we also had common shares having an aggregate offering price of up to $278.2 million remaining available for sale under our 2021 ATM program. We have no scheduled debt due for the remainder of 2021 and believe scheduled repayments of debt in 2022 are manageable at approximately $386.3 million which represents approximately 12.2% of our total outstanding debt, and includes amortization of debt discounts and debt issuance costs. Additionally, as of September 30, 2021 and through the date of this filing, 100% of our consolidated properties were unencumbered. We believe we are well-positioned with a strong balance sheet and sufficient liquidity to fund new development, repositions, redevelopment, and other capital requirements. We will, however, continue to assess and take further actions we believe are prudent to meet our objectives and capital requirements.

Property Portfolio

Our multifamily property portfolio is summarized as follows:

			September 30, 2021												December 31, 2020
			Apartment Homes						Properties						Apartment Homes						Properties
Operating Properties
Houston, Texas			9,806						28						9,806						28
Washington, D.C. Metro			6,863						19						6,862						19
Dallas, Texas			5,666						14						5,666						14
Atlanta, Georgia			4,496						14						4,496						14
Phoenix, Arizona			4,029						13						3,686						12
Austin, Texas			3,686						11						3,686						11
Orlando, Florida			3,954						11						3,594						10
Raleigh, North Carolina			3,242						9						3,240						9
Charlotte, North Carolina			3,104						14						3,104						14
Tampa, Florida			3,104						8						2,736						7
Denver, Colorado			2,865						9						2,865						9
Southeast Florida			2,781						8						2,781						8
Los Angeles/Orange County, California			2,663						7						2,663						7
San Diego/Inland Empire, California			1,665						5						1,665						5
Nashville, Tennessee			758						2						—						—
Total Operating Properties			58,682						172						56,850						167

			September 30, 2021												December 31, 2020
			Apartment Homes						Properties						Apartment Homes						Properties
Properties Under Construction
Phoenix, Arizona			397						1						740						2
Charlotte, North Carolina			387						1						387						1
Atlanta, Georgia			366						1						366						1
Raleigh, North Carolina			354						1						—						—
Southeast Florida			269						1						269						1
San Diego/Inland Empire, California			132						1						132						1
Orlando, Florida			—						—						360						1
Total Properties Under Construction			1,905						6						2,254						7
Total Properties			60,587						178						59,104						174
Less: Unconsolidated Joint Venture Properties (1)
Houston, Texas			2,756						9						2,756						9
Austin, Texas			1,360						4						1,360						4
Dallas, Texas			1,250						3						1,250						3
Tampa, Florida			450						1						450						1
Raleigh, North Carolina			350						1						350						1
Orlando, Florida			300						1						300						1
Washington, D.C. Metro			281						1						281						1
Charlotte, North Carolina			266						1						266						1
Atlanta, Georgia			234						1						234						1
Total Unconsolidated Joint Venture Properties			7,247						22						7,247						22
Total Properties Fully Consolidated			53,340						156						51,857						152

*(1)*Refer to Note 6, "Investments in Joint Ventures," in the notes to Condensed Consolidated Financial Statements for further discussion of our joint venture investments.

Stabilized Communities

We generally consider a property stabilized when it has reached 90% occupancy. During the three months ended September 30, 2021, stabilization was achieved at one consolidated operating property as follows:

($ in millions) Property and Location			Number of Apartment Homes						Date of Construction Completion						Date of Stabilization
Consolidated Operating Property
Camden Downtown I
Houston, TX			271						3Q20						3Q21

Completed Construction in Lease-Up

At September 30, 2021, there were two completed operating properties in lease-up as follows:

($ in millions) Property and Location			Number of Apartment Homes						Cost Incurred (1)						% Leased at 10/24/2021						Date of Construction Completion						Estimated Date of Stabilization
Camden North End II (2)
Phoenix, AZ			343						$	79.0					96		%				3Q21						4Q21
Camden Lake Eola
Orlando, FL			360						124.7						82		%				3Q21						2Q22
Total			703						$	203.7

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

*(2)*Stabilization has been achieved at this property subsequent to quarter-end.

Properties Under Development

Our condensed consolidated balance sheet at September 30, 2021 includes approximately $428.6 million related to properties under development and land. Of this amount, approximately $316.6 million related to our properties currently under construction. In addition, we had approximately $112.0 million invested primarily in land held for future development related to projects we currently expect to begin construction.

Properties Under Construction. At September 30, 2021, we had six 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
Properties Under Construction
Camden Buckhead (1)
Atlanta, GA			366						$	160.0					$	150.2					$	68.0					1Q22						3Q22
Camden Hillcrest (2)
San Diego, CA			132						95.0						86.4						32.6						4Q21						3Q22
Camden Atlantic
Plantation, FL			269						100.0						72.4						72.4						4Q22						4Q23
Camden Tempe II
Tempe, AZ			397						115.0						49.0						49.0						3Q23						1Q25
Camden NoDa
Charlotte, NC			387						105.0						52.2						52.2						3Q23						1Q25
Camden Durham
Durham, NC			354						120.0						42.4						42.4						4Q23						1Q25
Total			1,905						$	695.0					$	452.6					$	316.6

*(1)*Property in lease-up and was 52% leased at October 24, 2021.

*(2)*Property in lease-up and was 32% leased at October 24, 2021.

Development Pipeline Communities. At September 30, 2021, we had the following multifamily communities undergoing development activities:

($ in millions) Property and Location			Projected Homes						Total Estimated Cost (1)						Cost to Date
Camden Village District
Raleigh, NC			355						$	115.0					$	23.4
Camden Woodmill Creek
The Woodlands, TX			188						60.0						9.9
Camden Arts District
Los Angeles, CA			354						150.0						36.5
Camden Pier District II
St. Petersburg, FL			95						50.0						3.0
Camden Paces III
Atlanta, GA			350						100.0						17.7
Camden Downtown II
Houston, TX			271						145.0						12.6
Camden Highland Village II
Houston, TX			300						100.0						8.9
Total			1,913						$	720.0					$	112.0

*(1)*Represents our estimate of total costs we expect to incur on these projects. However, forward-looking estimates are not guarantees of future performance, results, or events. Although we believe these expectations are based upon reasonable assumptions, future events rarely develop exactly as forecast, and estimates routinely require adjustment.

Results of Operations

Changes in revenues and expenses related to our operating properties from period to period are due primarily to the performance of stabilized properties in the portfolio, the lease-up of newly constructed properties, acquisitions, and dispositions. Selected weighted averages for the three and nine months ended September 30, 2021 and 2020 are as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
2021						2020						2021						2020
Average monthly property revenue per apartment home (1)			$	1,922					$	1,802					$	1,855					$	1,771
Annualized total property expenses per apartment home (2)			$	8,631					$	8,223					$	8,339					$	8,010
Weighted average number of operating apartment homes owned 100%			51,011						49,158						50,202						49,081
Weighted average occupancy of operating apartment homes owned 100%			97.7		%				95.3		%				97.1		%				95.3		%

*(1)*Includes approximately $9.1 million of Resident Relief Funds paid to residents at our wholly-owned communities who experienced financial losses caused by the pandemic and was recorded as a reduction to property revenues during the nine months ended September 30, 2020.

*(2)*Includes approximately $0.4 million and $4.5 million of directly-related pandemic expenses at our operating communities during the three and nine months ended September 30, 2020, respectively.

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

Reconciliations of net income to NOI for the three and nine months ended September 30, 2021 and 2020 are as follows:

						Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)						2021						2020						2021						2020
Net income						$	30,605					$	36,220					$	94,517					$	98,198
Less: Fee and asset management income						(3,248)						(2,542)						(7,717)						(7,449)
Less: Interest and other income						(443)						(1,948)						(1,032)						(2,602)
Less: (Income)/loss on deferred compensation plans						843						(5,071)						(9,183)						(1,646)
Plus: Property management expense						6,640						5,894						19,200						18,360
Plus: Fee and asset management expense						1,159						1,018						3,310						2,681
Plus: General and administrative expense						14,960						12,726						44,428						40,350
Plus: Interest expense						24,987						24,265						72,715						67,454
Plus: Depreciation and amortization expense						111,462						90,575						304,189						275,237
Plus: Expense/(benefit) on deferred compensation plans						(843)						5,071						9,183						1,646
Less: Gain on sale of land						—						—						—						(382)
Less: Equity in income of joint ventures						(2,540)						(2,154)						(6,652)						(5,909)
Plus: Income tax expense						480						615						1,292						1,476
Net operating income						$	184,062					$	164,669					$	524,250					$	487,414

Property-Level NOI (1)

Property NOI, as reconciled above, is detailed further into the following categories for the three and nine months ended September 30, 2021 as compared to the same periods in 2020:

($ in thousands)			Apartment Homes at						Three Months Ended September 30,												Change												Nine Months Ended September 30,												Change
9/30/2021						2021						2020						$						%						2021						2020						$						%
Property revenues:
Same store communities			45,200						$	251,781					$	239,464					$	12,317					5.1		%				$	733,785					$	712,885					$	20,900					2.9		%
Non-same store communities			5,532						35,670						24,632						11,038						44.8						91,649						73,058						18,591						25.4
Development and lease-up communities			2,608						4,506						—						4,506						*						6,934						—						6,934						*
Resident Relief Funds			—						—						—						—						—						—						(9,074)						9,074						*
Other			—						2,173						1,625						548						33.7						5,853						5,414						439						8.1
Total property revenues			53,340						$	294,130					$	265,721					$	28,409					10.7		%				$	838,221					$	782,283					$	55,938					7.2		%
Property expenses:
Same store communities			45,200						$	93,472					$	89,238					$	4,234					4.7		%				$	272,435					$	258,470					$	13,965					5.4		%
Non-same store communities			5,532						13,949						10,400						3,549						34.1						36,099						29,256						6,843						23.4
Development and lease-up communities			2,608						1,712						2						1,710						*						2,489						5						2,484						*
Pandemic expenses			—						—						444						(444)						*						—						4,540						(4,540)						*
Other			—						935						968						(33)						(3.4)						2,948						2,598						350						13.5
Total property expenses			53,340						$	110,068					$	101,052					$	9,016					8.9		%				$	313,971					$	294,869					$	19,102					6.5		%
Property NOI:
Same store communities			45,200						$	158,309					$	150,226					$	8,083					5.4		%				$	461,350					$	454,415					$	6,935					1.5		%
Non-same store communities			5,532						21,721						14,232						7,489						52.6						55,550						43,802						11,748						26.8
Development and lease-up communities			2,608						2,794						(2)						2,796						*						4,445						(5)						4,450						*
Pandemic Related Impact			—						—						(444)						444						*						—						(13,614)						13,614						*
Other			—						1,238						657						581						88.4						2,905						2,816						89						3.2
Total property NOI			53,340						$	184,062					$	164,669					$	19,393					11.8		%				$	524,250					$	487,414					$	36,836					7.6		%

** Not a meaningful percentage.*

(1) Same store communities are communities we owned and were stabilized since January 1, 2020, excluding communities under redevelopment and properties held for sale. Non-same store communities are stabilized communities not owned or stabilized since January 1, 2020, including communities under redevelopment and excluding properties held for sale. We define communities under redevelopment as communities with capital expenditures which improve a community's cash flow and competitive position through extensive unit, exterior building, common area, and amenity upgrades. Management believes same store information is useful as it allows both management and investors to determine financial results over a particular period for the same set of communities. Development and lease-up communities are non-stabilized communities we have developed since January 1, 2020, excluding properties held for sale. Pandemic Related Impact relates to the Resident Relief Funds which were established for our residents experiencing financial losses caused by the pandemic and includes the amount we paid to residents at our wholly-owned communities as an adjustment to property revenues. The Pandemic Related Impact also includes direct related expenses incurred at our operating properties as a result of the pandemic. Other includes results from non-multifamily rental properties, expenses related to land holdings not under active development, and other miscellaneous revenues and expenses.

Same Store Analysis

Same store property NOI increased approximately $8.1 million for the three months ended September 30, 2021 and increased approximately $6.9 million for the nine months ended September 30, 2021, as compared to the same periods in 2020.

The $8.1 million increase in same store property NOI for the three months ended September 30, 2021 was primarily due to an increase of approximately $12.3 million in same store property revenues which was partially offset by an increase in property expenses of approximately $4.2 million, as compared to the same period in 2020.

The $12.3 million increase in same store property revenues during the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to a $10.2 million increase in rental revenues comprised of a 3.3% increase in average rental rates, higher occupancy, and higher other rental income, partially offset by lower reletting fees, net of uncollectible revenue. The increase was also due to an increase of approximately $1.3 million in income from our bulk internet and other utility rebilling programs and an increase of approximately $0.8 million related to fees and other income.

The $4.2 million increase in same store property expenses during the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to higher property insurance expense of approximately $2.1 million due to higher claims incurred at our communities, higher real estate taxes of approximately $0.9 million as a result of increased property valuations at a number of our communities and lower property tax refunds, higher repair and maintenance and utility expenses of approximately $0.9 million, and higher general and administrative and other property expenses of approximately $0.4 million. These increases were partially offset by lower salaries of approximately $0.1 million for the three months ended September 30, 2021, as compared to the same period in 2020.

The $6.9 million increase in same store property NOI for the nine months ended September 30, 2021 was primarily due to an increase of approximately $20.9 million in same store property revenues which was partially offset by an increase of approximately $14.0 million in same store property expenses, as compared to the same period in 2020.

The $20.9 million increase in same store property revenues during the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to a $13.5 million increase in rental revenues comprised of a 0.9% increase in average rental rates, an increase in occupancy, and higher other rental income, partially offset by lower reletting income, net of uncollectible revenue. The increase was also due to an increase of approximately $3.7 million in fees and other income, as well as an approximately $3.7 million increase from our bulk internet rebilling and other utility rebilling programs.

The $14.0 million increase in same store property expenses during the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to higher real estate taxes of approximately $5.4 million as a result of increased property valuations at a number of our communities and lower property tax refunds, higher property insurance expense of approximately $3.8 million due to higher claims incurred at our communities, higher repairs and maintenance and utility expense of approximately $3.4 million, and higher salary, general and administrative, and other property expenses of approximately $1.4 million.

Non-same Store and Development and Lease-up Analysis

Property NOI from non-same store and development and lease-up communities increased approximately $10.3 million and $16.2 million for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. These increases in Property NOI were comprised of increases from non-same store communities of approximately $7.5 million and $11.8 million for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020 and increases from development and lease-up communities of approximately $2.8 million and $4.4 million from the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. These increases in property NOI from our non-same store communities were primarily due to the acquisition of two operating properties in June 2021 and one operating property in August 2021. These increases were also due to four operating properties which reached stabilization in 2020 and 2021, and the stabilization of four redevelopment properties in December 2020. These increases in property NOI from our development and lease-up communities were primarily due to two development communities under lease-up which completed construction during the three months ended September 30, 2021, and the timing of two other development communities which were also under lease-up during the three and nine months ended September 30, 2021.

The following table details the changes, described above, relating to non-same store and development and lease up NOI:

(in millions)						For the three months ended September 30, 2021 as compared to 2020						For the nine months ended September 30, 2021 as compared to 2020
Property Revenues:
Revenues from acquisitions						$	6.1					$	6.9
Revenues from non-same store stabilized properties						3.7						9.7
Revenues from development and lease-up properties						4.5						6.9
Other						1.2						2.0
						$	15.5					$	25.5
Property Expenses:
Expenses from acquisitions						$	2.3					$	2.5
Expenses from non-same store stabilized properties						0.9						3.5
Expenses from development and lease-up properties						1.7						2.5
Other						0.3						0.8
						$	5.2					$	9.3
Property NOI:
NOI from acquisitions						$	3.8					$	4.4
NOI from non-same store stabilized properties						2.8						6.2
NOI from development and lease-up properties						2.8						4.4
Other						0.9						1.2
						$	10.3					$	16.2

Pandemic Related Impact Analysis

The pandemic related impact was approximately $0.4 million and $13.6 million for the three and nine months ended September 30, 2020, respectively. The impact for the three months ended September 30, 2020 related to approximately $0.4 million of directly-related pandemic expenses incurred at our operating properties. The pandemic-related impact for the nine months ended September 30, 2020 was due to the Resident Relief Funds announced in April 2020 for our residents experiencing pandemic related financial losses and the directly-related pandemic expenses. During the three months ended June 30, 2020, we paid approximately $9.1 million in Resident Relief Funds to approximately 7,100 residents of our wholly-owned communities which was recorded as a reduction of property revenues.

During the nine months ended September 30, 2020, we also incurred approximately $4.5 million of directly-related pandemic expenses at our operating properties, which included $2.8 million of bonuses paid to on-site employees providing essential services during the pandemic and approximately $1.7 million of other directly-related pandemic expenses.

Other Property Analysis

Other property NOI increased approximately $0.6 million for the three months ended September 30, 2021 and was relatively flat during the nine months ended September 30, 2021, as compared to the same periods in 2020. The increase during the three months ended September 30, 2021 was due to higher NOI from our retail communities as compared to the same period in 2020.

Non-Property Income

($ in thousands)			Three Months Ended September 30,												Change												Nine Months Ended September 30,												Change
2021						2020						$						%						2021						2020						$						%
Fee and asset management			$	3,248					$	2,542					$	706					27.8		%				$	7,717					$	7,449					$	268					3.6		%
Interest and other income			443						1,948						(1,505)						(77.3)						1,032						2,602						(1,570)						(60.3)
Income/(loss) on deferred compensation plans			(843)						5,071						(5,914)						*						9,183						1,646						7,537						*
Total non-property income			$	2,848					$	9,561					$	(6,713)					(70.2)		%				$	17,932					$	11,697					$	6,235					53.3		%

** Not a meaningful percentage.*

Fee and asset management income from property management, asset management, construction, and development activities at our joint ventures and our third-party construction projects, increased approximately $0.7 million and $0.3 million

for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. These increases were primarily due to higher fees earned related to an increase in third-party construction activity, and increases in property management fees recognized from the joint ventures in which we manage as a result of increased operating results during the three and nine months ended September 30, 2021 as compared to the same periods in 2020. These increases were partially offset by lower fees earned during the three and nine months ended September 30, 2021 due to decreased construction and development activity for one property held by one of the Funds which was under construction throughout 2020 and completed in December 2020.

Interest and other income decreased approximately $1.5 million and $1.6 million for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. These decreases were primarily due to our sale of a technology joint venture in September 2020 and recognizing our proportionate share of the gain of approximately $1.5 million.

Our deferred compensation plans incurred a loss of approximately $0.8 million during the three months ended September 30, 2021, as compared to recognizing income of approximately $5.1 million during the same period in 2020, and recognizing income of approximately $9.2 million and $1.6 million during the nine months ended September 30, 2021 and 2020, respectively. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the expense/(benefit) related to these plans, as discussed below.

Other Expenses

($ in thousands)			Three Months Ended September 30,												Change												Nine Months Ended September 30,												Change
2021						2020						$						%						2021						2020						$						%
Property management			$	6,640					$	5,894					$	746					12.7		%				$	19,200					$	18,360					$	840					4.6		%
Fee and asset management			1,159						1,018						141						13.9						3,310						2,681						629						23.5
General and administrative			14,960						12,726						2,234						17.6						44,428						40,350						4,078						10.1
Interest			24,987						24,265						722						3.0						72,715						67,454						5,261						7.8
Depreciation and amortization			111,462						90,575						20,887						23.1						304,189						275,237						28,952						10.5
Expense/(benefit) on deferred compensation plans			(843)						5,071						(5,914)						*						9,183						1,646						7,537						*
Total other expenses			$	158,365					$	139,549					$	18,816					13.5		%				$	453,025					$	405,728					$	47,297					11.7		%

** Not a meaningful percentage.*

Property management expense, which represents regional supervision and accounting costs related to property operations, increased approximately $0.7 million and $0.8 million for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. These increases were primarily related to higher salaries, benefits, and incentive compensation costs, and partially offset by lower pandemic-related expenses during the three and nine months ended September 30, 2021 as compared to the same periods in 2020. The increase during the nine months ended September 30, 2021 was also partially offset by lower professional and conference related expenses. Property management expenses were 2.3% and 2.2% of total property revenues for the three months ended September 30, 2021 and 2020, respectively, and were 2.3% of total property revenues for each of the nine months ended September 30, 2021 and 2020.

Fee and asset management expense from property management, asset management, construction, and development activities at our joint ventures and our third-party projects increased approximately $0.1 million and $0.6 million for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. These increases were primarily due to higher expenses incurred due to an increase in third-party construction activities and higher expenses incurred from the joint ventures in which we manage, partially offset by lower expenses incurred during the three and nine months ended September 30, 2021 as a result of a development property held by one of the Funds completing construction in December 2020.

General and administrative expense increased by approximately $2.2 million and $4.1 million for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. These increases were primarily due to higher salaries, benefits, and incentive compensation costs and higher acquisition and professional costs during the three and nine months ended September 30, 2021 as compared to the same periods in 2020. The increase for the nine months ended September 30, 2021 was partially offset by lower pandemic related-expenses. Excluding income/(loss) on deferred compensation plans, general and administrative expenses were 5.0% and 4.7% of total revenues for the three months ended September 30, 2021 and 2020, respectively, and were 5.2% and 5.1% of total revenues for the nine months ended September 30, 2021 and 2020, respectively.

Interest expense increased approximately $0.7 million and $5.3 million for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. The increase during the three months ended

September 30, 2021 as compared to the same period in 2020 was primarily due to a decrease in capitalized interest resulting from lower average balances in our development pipeline, and an increase in interest expense related to the issuance of the $40.0 million unsecured floating rate term loan entered into in October 2020. These increases were partially offset by the repayment of our $100.0 million unsecured floating rate term loan in October 2020.

The increase in interest expense during the nine months ended September 30, 2021 as compared to the same period in 2020 was primarily due to the issuance of $750 million, 2.91% senior unsecured notes during April 2020, the issuance of a $40.0 million unsecured floating rate term loan during October 2020, and slightly lower capitalized interest resulting from lower average balances in our development pipeline. These increases were partially offset by lower interest expense due to the repayment of our $100.0 million unsecured floating rate term loan in October 2020 and a decrease in interest expense recognized on our unsecured credit facility due to having lower balances outstanding during the nine months ended September 30, 2021 as compared to the same period in 2020.

Depreciation and amortization expense increased approximately $20.9 million and $29.0 million for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. These increases were primarily due to the completion of units in our development pipeline and completion of repositions during 2020 and 2021, and the completion of redevelopments during 2020. These increases were also due to higher depreciation and amortization of in-place leases related to the acquisition of two operating properties in June 2021, and one operating property in August 2021, partially offset by lower amortization of in-place leases related to the acquisition of two operating properties in December 2019, which was fully amortized during the third quarter of 2020.

Our deferred compensation plans recognized a benefit of approximately $0.8 million for the three months ended September 30, 2021, as compared to incurring expenses of approximately $5.1 million during the same period in 2020, and incurring expenses of approximately $9.2 million and $1.6 million during the nine months ended September 30, 2021 and 2020, respectively. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the income/(loss) related to these plans, as discussed in the non-property income section above.

Other

			Three Months Ended September 30,												Change												Nine Months Ended September 30,												Change
($ in thousands)			2021						2020						$						%						2021						2020						$						%
Gain on sale of land			$	—					$	—					$	—					—		%				$	—					$	382					$	(382)					100.0		%
Equity in income of joint ventures			$	2,540					$	2,154					$	386					17.9		%				$	6,652					$	5,909					$	743					12.6		%
Income tax expense			$	(480)					$	(615)					$	135					(22.0)		%				$	(1,292)					$	(1,476)					$	184					(12.5)		%

The $0.4 million gain on sale of land for the nine months ended September 30, 2020 was due to the sale of approximately 4.7 acres of land adjacent to one of our operating properties in Raleigh, North Carolina for approximately $0.8 million.

Equity in income of joint ventures increased approximately $0.4 million and $0.7 million for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. These increases were due to an increase in earnings recognized during the three and nine months ended September 30, 2021 primarily relating to higher revenues from the stabilized operating properties owned by the Funds. The increase in revenues during the nine months ended September 30, 2021 was also due to a $0.4 million reduction in revenues recognized during the nine months ended September 30, 2020, which was our ownership interest of the Resident Relief Funds paid to residents of operating communities owned by our unconsolidated joint ventures who were impacted by the pandemic. The increase during the nine months ended September 30, 2021 was partially offset by a decrease in earnings related to one property held by one of the Funds, which completed construction in December 2020 and was under lease up through June 30, 2021, at which time it reached stabilization. We recognized our proportionate share of the loss while this property was in the lease-up phase of operations.

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

Management considers FFO and AFFO to be appropriate supplementary measures of the financial performance of an equity REIT. The National Association of Real Estate Investment Trusts ("NAREIT") currently defines FFO in accordance with the 2018 NAREIT FFO White Paper which defines FFO as net income (computed in accordance with GAAP), excluding depreciation and amortization related to real estate, gains (or losses) from the sale of certain real estate assets (depreciable real estate), impairments of certain real estate assets (depreciable real estate), gains (or losses) from change in control, and adjustments for unconsolidated joint ventures to reflect FFO on the same basis. Our calculation of diluted FFO also assumes conversion of all potentially dilutive securities, including certain non-controlling interests, which are convertible into common shares. We consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or

losses on dispositions of depreciable real estate and depreciation, FFO can assist in the comparison of the operating performance of a company's real estate investments between periods or to different companies.

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

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

Reconciliations of net income attributable to common shareholders to FFO and AFFO for the three months ended September 30, 2021 and 2020 are as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
($ in thousands)			2021						2020						2021						2020
Funds from operations
Net income attributable to common shareholders (1)			$	29,483					$	34,957					$	91,009					$	94,718
Real estate depreciation and amortization			108,931						87,974						296,760						267,985
Adjustments for unconsolidated joint ventures			2,674						2,404						7,903						6,933
Income allocated to non-controlling interests			1,122						1,276						3,508						3,661
Funds from operations			$	142,210					$	126,611					$	399,180					$	373,297
Less: recurring capitalized expenditures			(19,717)						(22,299)						(51,205)						(55,906)
Adjusted funds from operations			$	122,493					$	104,312					$	347,975					$	317,391
Weighted average shares – basic			103,071						99,419						101,119						99,372
Incremental shares issuable from assumed conversion of:
Common share options and awards granted			100						36						80						42
Common units			1,641						1,748						1,680						1,748
Weighted average shares – diluted (2)			104,812						101,203						102,879						101,162

*(1)*Net income attributable to common shareholders includes an approximate $0.4 million and $14.8 million Pandemic Related Impact for the three and nine months ended September 30, 2020, respectively. For the three months ended September 30, 2020, we incurred approximately $0.4 million of pandemic expenses at our operating communities. The total Pandemic Related Impact for the nine months ended September 30, 2020 was comprised of $9.5 million related to the Resident Relief Funds which were established in April 2020. Of this amount, approximately $9.1 million was paid to residents at our wholly-owned communities and was recorded as a reduction to property revenues, and approximately $1.3 million of Resident Relief Funds paid to residents of the operating communities owned by our unconsolidated joint ventures, of which we recognized our ownership interest of $0.4 million in equity in income of joint ventures. Additionally, we incurred approximately $4.5 million of pandemic expenses at our operating communities, which included $2.8 million of bonuses paid to on-site employees who provided essential services during the pandemic and $1.7 million in other directly-related pandemic expenses. We also incurred approximately $0.8 million related to the Employee Relief Fund we established to help our employees impacted by the pandemic.

*(2)*FFO diluted shares includes approximately 3.3 million and 1.5 million weighted average share impact related to activity from the 2020 and 2021 ATM Programs during the three and nine months ended September 30, 2021, respectively.

Liquidity and Capital Resources

Financial Condition and Sources of Liquidity

We intend to maintain a strong balance sheet and preserve our financial flexibility, which we believe should enhance our ability to identify and capitalize on investment opportunities as they become available. We intend to maintain what management believes is a conservative capital structure by:

• extending and sequencing the maturity dates of our debt where practicable;

• managing interest rate exposure using what management believes to be prudent levels of fixed and floating rate debt;

• maintaining what management believes to be conservative coverage ratios; and

• using what management believes to be a prudent combination of debt and equity.

Our interest expense coverage ratio, net of capitalized interest, was approximately 6.6 and 6.2 for the three months ended September 30, 2021 and 2020, respectively, and 6.4 and 6.7 for the nine months ended September 30, 2021 and 2020. This ratio is a method for calculating the amount of operating cash flows available to cover interest expense and is calculated by dividing interest expense for the period into the sum of property revenues and expenses, non-property income, and other expenses, after adding back depreciation, amortization, and interest expense. All of our consolidated properties were unencumbered at September 30, 2021 and 2020. Our weighted average maturity of debt was approximately 7.7 years at September 30, 2021.

Our primary sources of liquidity are cash and cash equivalents and cash flows generated from operations. Other sources may include one or more of the following: availability under our unsecured credit facility, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from our 2021 ATM program, and other unsecured borrowings or secured mortgages. We believe our liquidity and financial condition are sufficient to meet all of our reasonably anticipated cash needs during the next twelve months from our filing date including:

• normal recurring operating expenses;

• current debt service requirements;

• recurring and non-recurring capital expenditures;

• reposition expenditures;

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

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

Factors which could increase or decrease our future liquidity include but are not limited to volatility in capital and credit markets, changes in rent control or rent stabilization laws, sources of financing, the minimum REIT dividend requirements, our ability to complete asset purchases, sales, or developments, the effect our debt level and changes in credit ratings could have on our cost of funds, and our ability to access capital markets. A variety of these factors, among others, could also be affected by the pandemic.

Cash Flows

The following is a discussion of our cash flows for the nine months ended September 30, 2021 and 2020:

Net cash from operating activities was approximately $436.0 million during the nine months ended September 30, 2021 as compared to approximately $413.3 million for the same period in 2020. The increase was primarily due to the increase in property operations due to the growth attributable to our same store, non-same store and development and lease-up communities and the $13.6 million Pandemic Related Impact incurred in 2020. The increase was partially offset by higher and timing of real estate tax payments in 2021 as compared to 2020. See further discussion of our 2021 operations as compared to 2020 in "Results of Operations."

Net cash used in investing activities during the nine months ended September 30, 2021 totaled approximately $755.8 million as compared to $298.1 million during the same period in 2020. Cash outflows during the nine months ended September 30, 2021 primarily related to the acquisition of three operating properties for approximately $464.0 million, and amounts paid for property development and capital improvements of approximately $279.7 million. Cash outflows during the nine months ended September 30, 2020 primarily related to cash outflows for property development and capital improvements of approximately $294.4 million. The slight decrease in property development and capital improvements for the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to the completion of repositions and redevelopments at several of our operating properties. The property development and capital improvements during the nine months ended September 30, 2021 and 2020, included the following:

						Nine Months Ended September 30,
(in millions)						2021						2020
Expenditures for new development, including land						$	163.6					$	159.0
Capital expenditures						63.4						61.2
Reposition expenditures						30.4						35.6
Capitalized interest, real estate taxes, and other capitalized indirect costs						22.3						25.2
Redevelopment expenditures						—						13.4
Total						$	279.7					$	294.4

Net cash from financing activities totaled approximately $328.7 million for the nine months ended September 30, 2021 as compared to $450.8 million during the same period in 2020. Cash inflows during the nine months ended September 30, 2021 primarily related to net proceeds of $579.5 million from the issuance of approximately 4.4 million common shares from our ATM programs. These cash inflows during 2021 were partially offset by $255.1 million used for distributions to common shareholders and non-controlling interest holders. Cash inflows during the nine months ended September 30, 2020 primarily related to net proceeds of approximately $743.1 million from the issuance of $750.0 million senior unsecured notes in April 2020. These cash inflows during 2020 were partially offset by $249.2 million used for distributions to common shareholders and non-controlling interest holders, and net payments of $44.0 million of borrowings from our unsecured line of credit.

Financial Flexibility

We have a $900 million unsecured credit facility which matures in March 2023, with two options to further extend the facility at our election for two additional six-month periods and may be expanded three times by up to an additional $500 million upon the satisfaction of certain conditions. The interest rate on our unsecured credit facility is based upon LIBOR plus a margin which is subject to change as our credit ratings change. Advances under our credit facility may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of 180 days or less and may not exceed the lesser of $450 million or the remaining amount available under our credit facility. Our credit facility is subject to customary financial covenants and limitations. We believe we are in compliance with all such financial covenants and limitations as of September 30, 2021 and through the date of this filing.

Our credit facility provides us with the ability to issue up to $50 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our credit facility, it does reduce the amount available. At September 30, 2021, we had no borrowings outstanding on our credit facility and we had outstanding letters of credit totaling approximately $14.8 million, leaving approximately $885.2 million available under our credit facility.

In August 2021, we created an ATM share offering program through which we can, but have no obligation to, sell common shares and we may also enter into separate forward sale agreements with forward purchasers for an aggregate offering price of up to $500.0 million (the "2021 ATM program"), in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. Actual sales from time to time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations by management of the appropriate sources of funding for us. The proceeds from the sale of our common shares under the 2021 ATM program are intended to be used for general corporate purposes, which may include reducing future borrowings under our $900 million unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development activities, and financing for acquisitions. We issued approximately 1.5 million shares under our 2021 ATM program during the three months ended September 30, 2021 and received approximately $220.7 million in net proceeds. As of September 30, 2021 and through the date of this filing, we had common shares having an aggregate offering price of up to $278.2 million remaining available for sale under the 2021 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 A- with stable outlook, respectively. We believe our ability to access capital markets is also enhanced by our ability to borrow on a secured basis from various institutions including banks, Fannie Mae, Freddie Mac, or life insurance companies. However, we may not be able to maintain our current credit ratings and may not be able to borrow on a secured or unsecured basis in the future.

Future Cash Requirements and Contractual Obligations

One of our principal long-term liquidity requirements includes the repayment of maturing debt, including any future borrowings under our unsecured credit facility. We have no scheduled debt due for the remainder of 2021 and believe scheduled repayments of debt in 2022 are manageable at approximately $386.3 million which represents approximately 12.2% of our total outstanding debt, and includes amortization of debt discounts and debt issuance costs. See Note 7, "Notes Payable," in the notes to Condensed Consolidated Financial Statements for a further discussion of our scheduled maturities.

We estimate the additional cost to complete the construction of six properties to be approximately $242.4 million. Of this amount, we expect to incur costs between approximately $56 million and $66 million during the remainder of 2021 and to incur the remaining costs during 2022 through 2023. Additionally, during the remainder of 2021, we expect to incur costs between approximately $22 million and $24 million related to repositions and revenue enhancing expenditures, between approximately $22 million and $26 million related to the start of new development activities, and between approximately $20 million and $24 million related to additional recurring capital expenditures.

We anticipate meeting our near-term liquidity requirements through a combination of one or more of the following: cash and cash equivalents, cash flows generated from operations, draws on our unsecured credit facility, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from our 2021 ATM program, and other unsecured borrowings or secured mortgages. We continue to evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise.

As a REIT, we are subject to a number of organizational and operational requirements, including a requirement to distribute current dividends to our shareholders equal to a minimum of 90% of our annual taxable income. In order to minimize paying income taxes, our general policy is to distribute at least 100% of our taxable income. In September 2021, our Board of Trust Managers declared a quarterly dividend of $0.83 per common share to our common shareholders of record as of September 30, 2021. The quarterly dividend was subsequently paid on October 18, 2021, and we paid equivalent amounts per unit to holders of the common operating partnership units. Assuming similar quarterly dividend distributions for the remainder of 2021, our annualized dividend rate would be $3.32 per share or unit.

Off-Balance Sheet Arrangements

The joint ventures in which we have an interest have been funded in part with secured, third-party debt. At September 30, 2021, our unconsolidated joint ventures had outstanding debt of approximately $514.6 million. As of September 30, 2021, we had no outstanding guarantees related to the debt of our unconsolidated joint ventures.

Inflation

Our apartment leases are for an average term of approximately fourteen months. In an inflationary environment, we may realize increased rents at the commencement of new leases or upon the renewal of existing leases. We believe the short-term nature of our leases generally minimizes our risk from the adverse effects of inflation.

Critical Accounting Policies

Our critical accounting policies have not changed from the information reported in our Annual Report on Form 10-K for the year ended December 31, 2020.