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, 2021. 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;

• A pandemic and measures intended to prevent its spread could 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;

• 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 the phase out of LIBOR;

• 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 March 31, 2022, we owned interests in, operated, or were developing 175 multifamily properties comprised of 59,894 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

During the three months ended March 31, 2022, our results reflect an increase in same store revenues of approximately 11.1% as compared to the same period in 2021. The increase was primarily due to higher average rental rates and increased occupancy which we believe were 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 2022 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 $80.7 million and $31.3 million for the three months ended March 31, 2022 and 2021, respectively.

The $49.4 million increase during the three months ended March 31, 2022 as compared to the prior period in 2021 was primarily due to a 20.7% increase in property operations due to growth attributable to our same store, non-same store, and development and lease-up communities. See further discussion of our 2022 operations as compared to 2021 in "Results of Operations," below. The increase was also due to the gain on sale of an operating property in Largo, Maryland during the first quarter of 2022, offset by higher depreciation expense related to the acquisition of four operating properties during 2021.

Construction Activity

At March 31, 2022, we had a total of five properties under construction comprising 1,839 apartment homes. Initial occupancies of these five properties are currently scheduled to occur within the next 15 months. As of March 31, 2022, we estimate the total additional cost to complete the construction of these five properties is approximately $182.3 million.

Acquisitions

Land: During the three months ended March 31, 2022, we acquired approximately 15.9 acres of land in Richmond, Texas for approximately $7.8 million for future development purposes.

Dispositions

Operating property: During the three months ended March 31, 2022, we sold one operating property comprised of 245 apartment homes located in Largo, Maryland for approximately $71.9 million and recognized a gain of approximately $36.4 million.

Other

During the first three months of 2022, we issued approximately 0.2 million common shares under our at-the-market ("ATM") program and received approximately $26.2 million in net proceeds.

Subsequent Events

*•*On April 1, 2022, we purchased the remaining 68.7% ownership interests in the Funds for cash consideration of approximately $1.1 billion, after adjusting for our assumption of approximately $514 million of existing secured mortgage debt of the Funds which remained outstanding. We funded this transaction with cash on-hand. These Funds own 22 multifamily communities comprised of 7,247 units located in Houston, Austin, Dallas, Tampa, Raleigh, Orlando, Washington D.C., Charlotte, and Atlanta. As a result of this acquisition, we will no longer recognize fee and asset management income from property management, construction, and development activities for these joint ventures nor will we recognize related expenses

for managing these joint ventures or equity in income as these joint ventures were subsequently consolidated effective April 1, 2022.

• In April 2022, we issued 2.9 million common shares in a public equity offering and received approximately $490.3 million in net proceeds; we used these net proceeds to reduce borrowings under our $900 million unsecured line of credit.

• In April 2022, we also acquired two parcels of land of approximately 42.6 acres in Charlotte, North Carolina for an aggregate of $32.7 million for future development purposes.

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 ATM programs, and other unsecured borrowings or secured mortgages.

As of March 31, 2022, we had approximately $1.1 billion in cash and cash equivalents and $385.4 million available under our $900 million unsecured credit facilities. On April 1, 2022, we funded the acquisition of the remaining 68.7% ownership interests of the Funds through cash on-hand as discussed in Note 6, “Investments in Joint Ventures.”

As of March 31, 2022 and through the date of this filing, we also had common shares having an aggregate offering price of up to $71.3 million remaining available for sale under our 2021 ATM program. In April 2022, we also issued 2.9 million common shares in a public equity offering and received approximately $490.3 million in net proceeds; we used these net proceeds to reduce borrowings under our $900 million unsecured line of credit. We believe scheduled repayments of debt due during the next 12 months are manageable at approximately $387.2 million which represents approximately 10.5% of our total outstanding debt, and includes amortization of debt discounts, debt issuance costs, and amounts outstanding on our unsecured credit facility. Additionally, as of March 31, 2022, 100% of our consolidated properties were unencumbered. Effective April 1, 2022, as a result of the consolidation of 22 Fund properties described above in connection with the acquisition of the remaining 68.7% ownership interests in two of the Funds, approximately 84% 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 including scheduled debt maturities. 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:

			March 31, 2022												December 31, 2021
			Apartment Homes						Properties						Apartment Homes						Properties
Operating Properties
Houston, Texas			9,154						26						9,154						26
Dallas, Texas			6,224						15						6,224						15
Washington, D.C. Metro			6,192						17						6,437						18
Atlanta, Georgia			4,496						14						4,496						14
Phoenix, Arizona			4,029						13						4,029						13
Orlando, Florida			3,954						11						3,954						11
Austin, Texas			3,686						11						3,686						11
Raleigh, North Carolina			3,248						9						3,248						9
Charlotte, North Carolina			3,104						14						3,104						14
Tampa, Florida			3,104						8						3,104						8
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			1,797						6						1,797						6

			March 31, 2022												December 31, 2021
			Apartment Homes						Properties						Apartment Homes						Properties
Nashville, Tennessee			758						2						758						2
Total Operating Properties			58,055						170						58,300						171
Properties Under Construction
Raleigh, North Carolina			420						1						354						1
Phoenix, Arizona			397						1						397						1
Charlotte, North Carolina			387						1						387						1
Atlanta, Georgia			366						1						366						1
Southeast Florida			269						1						269						1
Total Properties Under Construction			1,839						5						1,773						5
Total Properties			59,894						175						60,073						176
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 (2)			7,247						22						7,247						22
Total Properties Fully Consolidated			52,647						153						52,826						154

*(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.

*(2)*In April 2022, we acquired the remaining 68.7% ownership interests of the Funds which owned these properties. Refer to Note 6, “Investments in Joint Ventures” in the Notes to Consolidated Financial Statements for further discussion of this transaction.

Stabilized Communities

We generally consider a property stabilized when it has reached 90% occupancy. During the three months ended March 31, 2022, 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 Lake Eola
Orlando, FL			360						3Q21						1Q22

Completed Construction in Lease-Up

At March 31, 2022, there was one completed operating property in lease-up as follows:

($ in millions) Property and Location			Number of Apartment Homes						Cost Incurred (1)						% Leased at 4/24/2022						Date of Construction Completion						Estimated Date of Stabilization
Camden Hillcrest
San Diego, CA			132						$	90.8					55		%				4Q21						4Q22

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

Properties Under Development

Our condensed consolidated balance sheet at March 31, 2022 includes approximately $488.1 million related to properties under development and land. Of this amount, approximately $295.9 million related to our properties currently under construction. In addition, we had approximately $192.2 million invested primarily in land held for future development related to projects we currently expect to begin construction.

Properties Under Construction. At March 31, 2022, we had five 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						$	163.5					$	159.2					$	8.9					2Q22						4Q22
Camden Atlantic
Plantation, FL			269						100.0						88.0						88.0						3Q22						4Q23
Camden Tempe II
Tempe, AZ			397						115.0						79.5						79.5						3Q23						1Q25
Camden NoDa
Charlotte, NC			387						105.0						67.3						67.3						3Q23						1Q25
Camden Durham (2)
Durham, NC			420						145.0						52.2						52.2						2Q24						4Q25
Total			1,839						$	628.5					$	446.2					$	295.9

*(1)*Property in lease-up and was 81% leased at April 24, 2022.

*(2)*Revised project scope now includes an additional 66 apartment homes being developed on land.

Development Pipeline Communities. At March 31, 2022, 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			369						$	138.0					$	24.8
Camden Woodmill Creek
The Woodlands, TX			188						60.0						10.7
Camden Pier District II
St. Petersburg, FL			95						50.0						4.2
Camden Arts District
Los Angeles, CA			354						150.0						38.4
Camden Long Meadow Farms
Richmond, TX			188						68.0						8.4
Camden Gulch
Nashville, TN			480						260.0						38.8
Camden Paces III
Atlanta, GA			350						100.0						18.4
Camden Baker
Denver, CO			435						165.0						26.4
Camden Highland Village II
Houston, TX			300						100.0						9.2
Camden Downtown II
Houston, TX			271						145.0						12.9
Total			3,030						$	1,236.0					$	192.2

*(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 months ended March 31, 2022 and 2021 are as follows:

			Three Months Ended March 31,
2022						2021
Average monthly property revenue per apartment home			$	2,038					$	1,804
Annualized total property expenses per apartment home			$	8,663					$	8,166
Weighted average number of operating apartment homes owned 100%			50,935						49,439
Weighted average occupancy of operating apartment homes owned 100%			96.9		%				95.9		%

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 months ended March 31, 2022 and 2021 are as follows:

												Three Months Ended March 31,
(in thousands)																		2022						2021
Net income																		$	83,601					$	32,473
Less: Fee and asset management income																		(2,450)						(2,206)
Less: Interest and other income																		(2,131)						(332)
Less: (Income)/loss on deferred compensation plans																		7,497						(3,626)
Plus: Property management expense																		7,214						6,124
Plus: Fee and asset management expense																		1,175						1,132
Plus: General and administrative expense																		14,790						14,222
Plus: Interest expense																		24,542						23,644
Plus: Depreciation and amortization expense																		113,138						93,141
Plus: Expense/(benefit) on deferred compensation plans																		(7,497)						3,626
Less: Gain on sale of operating property																		(36,372)						—
Less: Equity in income of joint ventures																		(3,048)						(1,914)
Plus: Income tax expense																		590						352
Net operating income																		$	201,049					$	166,636

Property-Level NOI (1)

Property NOI, as reconciled above, is detailed further into the following categories for the three months ended March 31, 2022 as compared to the same periods in 2021:

($ in thousands)			Apartment Homes at						Three Months Ended March 31,												Change
3/31/2022						2022						2021						$						%
Property revenues:
Same store communities			46,544						$	277,838					$	250,064					$	27,774					11.1		%
Non-same store communities			4,132						27,580						9,655						17,925						185.7
Development and lease-up communities			1,971						2,258						31						2,227						*
Dispositions/Other			—						3,683						7,818						(4,135)						(52.9)
Total property revenues			52,647						$	311,359					$	267,568					$	43,791					16.4		%
Property expenses:
Same store communities			46,544						$	96,560					$	93,068					$	3,492					3.8		%
Non-same store communities			4,132						10,903						4,369						6,534						149.6
Development and lease-up communities			1,971						1,343						10						1,333						*
Dispositions/Other			—						1,504						3,485						(1,981)						(56.8)
Total property expenses			52,647						$	110,310					$	100,932					$	9,378					9.3		%
Property NOI:
Same store communities			46,544						$	181,278					$	156,996					$	24,282					15.5		%
Non-same store communities			4,132						16,677						5,286						11,391						215.5
Development and lease-up communities			1,971						915						21						894						*
Dispositions/Other			—						2,179						4,333						(2,154)						(49.7)
Total property NOI			52,647						$	201,049					$	166,636					$	34,413					20.7		%

** Not a meaningful percentage.*

(1) Same store communities are communities we wholly-owned and were stabilized since January 1, 2021, excluding communities under redevelopment and properties held for sale. Non-same store communities are stabilized communities not owned or stabilized since January 1, 2021, 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, 2021, excluding properties held for sale. Dispositions/Other includes those communities disposed of or held for sale which are not classified as discontinued operations, 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 $24.3 million for the three months ended March 31, 2022 as compared to the same period in 2021.

The $24.3 million increase in same store property NOI for the three months ended March 31, 2022 was primarily due to an increase of approximately $27.8 million in same store property revenues which was partially offset by an increase in property expenses of approximately $3.5 million, as compared to the same period in 2021.

The $27.8 million increase in same store property revenues during the three months ended March 31, 2022, as compared to the same period in 2021, was primarily due to a $25.9 million increase in rental revenues comprised of a 10.7% increase in average rental rates, higher occupancy, higher other rental income, and higher reletting fees, net of uncollectible revenue. The increase was also due to an increase of approximately $1.4 million in income from our bulk internet and other utility rebilling programs and an increase of approximately $0.5 million related to fees and other income.

The $3.5 million increase in same store property expenses during the three months ended March 31, 2022, as compared to the same period in 2021, was primarily due to higher property insurance expense of approximately $1.5 million due to higher claims incurred at our communities, higher repair and maintenance and utility expenses of approximately $1.4 million, higher salaries of approximately $0.8 million, and higher general and administrative and other property expenses of approximately $0.5 million. These increases were partially offset by lower real estate taxes of approximately $0.7 million as a result of higher property tax refunds partially offset by increased property valuations at a number of our communities for the three months ended March 31, 2022, as compared to the same period in 2021.

Non-same Store and Development and Lease-up Analysis

Property NOI from non-same store and development and lease-up communities increased approximately $12.3 million for the three months ended March 31, 2022 as compared to the same period in 2021. This increase in Property NOI was comprised of increases from non-same store communities of approximately $11.4 million for the three months ended March 31,

2022 as compared to the same period in 2021 and increases from development and lease-up communities of approximately $0.9 million for the three months ended March 31, 2022, as compared to the same period in 2021. The increase in property NOI from our non-same store communities was primarily due to the acquisition of four operating properties in 2021. The increase was also due to four operating properties which reached stabilization in 2021 and 2022. The increase in property NOI from our development and lease-up communities was primarily due to one development community under lease-up which completed construction during the three months ended March 31, 2022, and the timing of one other development community which was also under lease-up during the three months ended March 31, 2022.

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 March 31, 2022 as compared to 2021
Property Revenues:
Revenues from acquisitions						$	12.1
Revenues from non-same store stabilized properties						5.1
Revenues from development and lease-up properties						2.2
Other						0.8
						$	20.2
Property Expenses:
Expenses from acquisitions						$	5.0
Expenses from non-same store stabilized properties						1.5
Expenses from development and lease-up properties						1.3
Other						0.1
						$	7.9
Property NOI:
NOI from acquisitions						$	7.1
NOI from non-same store stabilized properties						3.6
NOI from development and lease-up properties						0.9
Other						0.7
						$	12.3

Dispositions/Other Property Analysis

Dispositions/Other property NOI decreased approximately $2.2 million for the three months ended March 31, 2022 as compared to the same period in 2021. The decrease during the three months ended March 31, 2022 was primarily due to the disposition of three operating properties during the fourth quarter of 2021 and one operating property in Largo, Maryland in March 2022, partially offset by higher NOI from our retail communities as compared to the same period in 2021.

Non-Property Income

($ in thousands)			Three Months Ended March 31,												Change
2022						2021						$						%
Fee and asset management			$	2,450					$	2,206					$	244					11.1		%
Interest and other income			2,131						332						1,799						*
Income/(loss) on deferred compensation plans			(7,497)						3,626						(11,123)						*
Total non-property income/(loss)			$	(2,916)					$	6,164					$	(9,080)					(147.3)		%

** 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 $0.2 million for the three months ended March 31, 2022 as compared to the same period in 2021. This increase was primarily due to higher fees earned related to an increase in third-party construction activity, combined with increases in property management fees earned from the Funds in which we managed as a result of increased operating results during the three months ended March 31, 2022 as compared to the same period in 2021.

Interest and other income increased approximately $1.8 million for the three months ended March 31, 2022 as compared to the same period in 2021. This increase was primarily due to an earn-out received related to a technology joint venture sold in September 2020. We paid out approximately $0.4 million of bonuses related to this earn-out during the three months ended March 31, 2022, which was recorded in general and administrative expense discussed below.

Our deferred compensation plans incurred a loss of approximately $7.5 million during the three months ended March 31, 2022, as compared to recognizing income of approximately $3.6 million during the same period in 2021. 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 March 31,												Change
2022						2021						$						%
Property management			$	7,214					$	6,124					$	1,090					17.8		%
Fee and asset management			1,175						1,132						43						3.8
General and administrative			14,790						14,222						568						4.0
Interest			24,542						23,644						898						3.8
Depreciation and amortization			113,138						93,141						19,997						21.5
Expense/(benefit) on deferred compensation plans			(7,497)						3,626						(11,123)						*
Total other expenses			$	153,362					$	141,889					$	11,473					8.1		%

** Not a meaningful percentage.*

Property management expense, which represents regional supervision and accounting costs related to property operations, increased approximately $1.1 million for the three months ended March 31, 2022 as compared to the same period in 2021. This increase was primarily related to higher salaries, benefits, and incentive compensation costs, and higher conference costs during the three months ended March 31, 2022 as compared to the same period in 2021. Property management expenses were 2.3% of total property revenues for each of the three months ended March 31, 2022 and 2021.

General and administrative expense increased by approximately $0.6 million for the three months ended March 31, 2022 as compared to the same period in 2021. This increase was primarily due to approximately $0.3 million of higher salaries, benefits, and incentive compensation costs which was comprised of approximately $0.9 million of higher compensation and bonuses, including an approximate $0.4 million of bonuses paid for an earn-out received during the three months ended March 31, 2022 related to a technology joint venture sold in September 2020, partially offset by an approximate $0.6 million decrease related to a senior executive officer who retired in December 2021. The increase was also due to higher professional fees. Excluding income/(loss) on deferred compensation plans, general and administrative expenses were 4.7% and 5.3% of total revenues for the three months ended March 31, 2022 and 2021, respectively.

Interest expense increased approximately $0.9 million for the three months ended March 31, 2022 as compared to the same period in 2021. The increase during the three months ended March 31, 2022 as compared to the same period in 2021 was primarily due to a decrease in capitalized interest resulting from lower average balances in our development pipeline during the three months ended March 31, 2022 as compared to the same period in 2021.

Depreciation and amortization expense increased approximately $20.0 million for the three months ended March 31, 2022 as compared to the same period in 2021. This increase was primarily due to the completion of units in our development pipeline and the completion of repositions during 2021 and 2022. The increase was also due to higher depreciation and amortization of in-place leases related to the acquisition of two operating properties in June 2021, one operating property in August 2021, and one operating property in October 2021. These increases were partially offset by lower depreciation expense related to the disposition of three operating properties during the fourth quarter of 2021 and one operating property during the first quarter of 2022.

Our deferred compensation plans recognized a benefit of approximately $7.5 million for the three months ended March 31, 2022, as compared to incurring expenses of approximately $3.6 million during the same period in 2021. 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 March 31,												Change
($ in thousands)			2022						2021						$						%
Gain on sale of operating property			$	36,372					$	—					$	36,372					—		%
Equity in income of joint ventures			$	3,048					$	1,914					$	1,134					59.2		%
Income tax expense			$	(590)					$	(352)					$	(238)					67.6		%

The $36.4 million gain on sale was due to the disposition of one operating property located in Largo, Maryland during the three months ended March 31, 2022.

Equity in income of joint ventures increased approximately $1.1 million for the three months ended March 31, 2022 as compared to the same period in 2021. This increase was due to an increase in earnings recognized during the three months ended March 31, 2022 primarily relating to higher revenues from the stabilized operating properties owned by the Funds.

Income tax expense increased approximately $0.2 million for the three months ended March 31, 2022 as compared to the same period in 2021. This increase was primarily due to higher state taxes and higher taxable income due to higher third-party construction activities in a taxable REIT subsidiary.

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 March 31, 2022 and 2021 are as follows:

			Three Months Ended March 31,
($ in thousands)			2022						2021
Funds from operations
Net income attributable to common shareholders			$	80,745					$	31,347
Real estate depreciation and amortization			110,537						90,707
Adjustments for unconsolidated joint ventures			2,709						2,599
Gain on sale of operating property			(36,372)						—
Income allocated to non-controlling interests			2,856						1,126
Funds from operations			$	160,475					$	125,779

			Three Months Ended March 31,
($ in thousands)			2022						2021
Less: recurring capitalized expenditures			(14,251)						(12,680)
Adjusted funds from operations			$	146,224					$	113,099
Weighted average shares – basic			105,336						99,547
Incremental shares issuable from assumed conversion of:
Common share options and awards granted			83						74
Common units			1,606						1,720
Weighted average shares – diluted			107,025						101,341

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 7.4 and 6.2 for the three months ended March 31, 2022 and 2021, 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, and other expenses, after adding back depreciation, amortization, and interest expense. All of our consolidated properties were unencumbered at March 31, 2022 and 2021. Effective April 1, 2022, as a result of the consolidation of 22 Fund properties discussed in Note 6, "Investments in Joint Ventures" in connection with the acquisition of the remaining 68.7% ownership interests in two of the Funds, approximately 84% of our consolidated properties were unencumbered. Our weighted average maturity of debt was approximately 6.5 years at March 31, 2022.

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 ATM programs, and other unsecured borrowings or secured mortgages. We believe our liquidity and financial condition are sufficient to meet all of our reasonably anticipated cash needs during the next twelve months from our filing date including:

• normal recurring operating expenses;

• current debt service requirements including scheduled debt maturities;

• 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 three months ended March 31, 2022 and 2021:

Net cash from operating activities was approximately $122.3 million during the three months ended March 31, 2022 as compared to approximately $88.5 million for the same period in 2021. The increase was primarily due to the increase in cash from property operations due to the growth attributable to our same store, non-same store and development and lease-up communities. See further discussion of our 2022 operations as compared to 2021 in "Results of Operations."

Net cash used in investing activities during the three months ended March 31, 2022 totaled approximately $48.9 million as compared to $92.1 million during the same period in 2021. Cash outflows during the three months ended March 31, 2022 primarily related to amounts paid for property development and capital improvements of approximately $90.5 million, and an increase in earnest money of approximately $23.2 million primarily related to an acquisition of a 42.6 acre land parcel completed in April 2022. These outflows were partially offset by net proceeds from the sale of one operating property of approximately $70.5 million. Cash outflows during the three months ended March 31, 2021 primarily related to cash outflows for property development and capital improvements of approximately $90.3 million. The increase in property development and capital improvements for the three months ended March 31, 2022, as compared to the same period in 2021, was primarily due to the acquisition of one development property, as well as higher reposition and capital expenditures, partially offset by the timing and completion of three consolidated operating properties in 2021 and 2022. The property development and capital improvements during the three months ended March 31, 2022 and 2021, included the following:

						Three Months Ended March 31,
(in millions)						2022						2021
Expenditures for new development, including land						$	48.5					$	55.4
Capital expenditures						20.3						17.8
Reposition expenditures						14.3						8.7
Direct real estate taxes and capitalized interest and other indirect costs						7.4						8.4
Total						$	90.5					$	90.3

Net cash from financing activities totaled approximately $443.1 million for the three months ended March 31, 2022 as compared to net cash used of $83.4 million during the same period in 2021. Cash inflows during the three months ended March 31, 2022 primarily related to net proceeds of $500.0 million of borrowings from our unsecured line of credit, and net proceeds of $26.2 million from the issuance of approximately 0.2 million common shares from our ATM programs. These cash inflows during 2022 were partially offset by $88.8 million used for distributions to common shareholders and non-controlling interest holders. Cash outflows during the three months ended March 31, 2021 primarily related to $84.1 million used for distributions to common shareholders and non-controlling interest holders.

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 March 31, 2022 and through the date of this filing.

Our credit facility provides us with the ability to issue up to $50 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our credit facility, it does reduce the amount available. At March 31, 2022, we had $500 million of borrowings outstanding on our credit facility and we had outstanding letters of credit totaling approximately $14.6 million, leaving approximately $385.4 million available under our credit facility. In April 2022, we issued approximately 2.9 million common shares in a public equity offering and received approximately $490.3 million in net proceeds; we used these net proceeds to reduce borrowings under our $900 million unsecured line of credit.

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 0.2 million shares under our 2021 ATM program during the three months ended March 31, 2022 and received approximately $26.2 million in net proceeds. As of March 31, 2022 and through the date of this filing, we had common shares having an aggregate offering price of up to $71.3 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 believe scheduled repayments of debt due during the next 12 months are manageable at approximately $387.2 million which represents approximately 10.5% of our total outstanding debt, and includes amortization of debt discounts, debt issuance costs, and amounts outstanding on our unsecured credit facility. 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 five properties to be approximately $182.3 million. Of this amount, we expect to incur costs between approximately $105 million and $125 million during the remainder of 2022 and to incur the remaining costs during 2023. Additionally, we expect to incur costs between approximately $120 million and $130 million related to the start of new development activities, between approximately $61 million and $65 million of repositions, redevelopment, repurposes, and revenue enhancing expenditures and between approximately $74 million and $78 million of 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 ATM programs, and other unsecured borrowings or secured mortgages. We continue to evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise.

As a REIT, we are subject to a number of organizational and operational requirements, including a requirement to distribute current dividends to our shareholders equal to a minimum of 90% of our annual taxable income. In order to minimize paying income taxes, our general policy is to distribute at least 100% of our taxable income. In February 2022, our Board of Trust Managers declared a quarterly dividend of $0.94 per common share to our common shareholders of record as of March 31, 2022. The quarterly dividend was subsequently paid on April 18, 2022, and we paid equivalent amounts per unit to holders of the common operating partnership units. Assuming similar quarterly dividend distributions for the remainder of 2022, our annualized dividend rate would be $3.76 per share or unit.

Off-Balance Sheet Arrangements

The Funds in which we have an interest have been funded in part with secured, third-party debt. At March 31, 2022, our Funds had outstanding debt of approximately $513.9 million. Effective Apri1 1, 2022, this debt was consolidated as a result of our acquisition of the remaining 68.7% ownership interests in the Funds. As of March 31, 2022, we had no outstanding guarantees related to the debt of the Funds.

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, 2021.