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, repositions, 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 September 30, 2022, we owned interests in, operated, or were developing 178 multifamily properties comprised of 60,652 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 and nine months ended September 30, 2022, our results reflect an increase in same store revenues of approximately 11.7% and 11.6%, respectively, as compared to the same periods in 2021. These increases were primarily due to higher average rental rates, 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 $29.8 million and $29.5 million for the three months ended September 30, 2022 and 2021, respectively, and $607.9 million and $91.0 million for the nine months ended September 30, 2022 and 2021, respectively. The increase during the nine months ended September 30, 2022 as compared to the same period in 2021 was primarily due to a $474.1 million gain recognized as a result of the remeasurement of our previously held 31.3% ownership interest in two unconsolidated Funds upon our acquiring the remaining ownership interests on April 1, 2022, and a $36.4 million gain on sale of an operating property in Largo, Maryland during the first quarter of 2022 and an increase in property operations. See further discussion of our 2022 operations as compared to 2021 in "Results of Operations," below. The increase was partially offset by higher depreciation expense and amortization of in-place leases related to the consolidation of 22 properties upon acquiring the Funds and the acquisition of four operating properties during 2021.

Construction Activity

At September 30, 2022, we had a total of seven properties under construction comprising 2,219 apartment homes. As of September 30, 2022, we estimated the total additional cost to complete the construction of these seven properties is approximately $348.4 million.

Acquisitions

Operating properties: 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 $515 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. After obtaining 100% of the ownership interests, we consolidated the Funds as of April 1, 2022, and no longer recognize fee and asset management income from property management, construction, and development activities, related expenses or equity in income for these Funds.

Land: During the nine months ended September 30, 2022, we acquired for future development purposes two parcels of land totaling approximately 42.6 acres in Charlotte, North Carolina for an aggregate consideration of approximately $32.7 million, approximately 3.8 acres of land in Nashville, Tennessee for approximately $30.5 million, and approximately 15.9 acres of land in Richmond, Texas for approximately $7.8 million.

Dispositions

Operating property: During the nine months ended September 30, 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

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 unsecured line of credit.

During the nine months of 2022, we issued approximately 0.2 million common shares under our at-the-market ("ATM") programs and received approximately $26.2 million in net proceeds. As of the date of this filing, we had common shares having an aggregate offering amount of up to $500.0 million remaining available for sale under our 2022 ATM program.

In August 2022 we amended and restated our existing credit facility to (i) add a $300 million unsecured term loan facility with a delayed draw feature with a maturity date of August 2024 (which may be extended at the Company's option to August 2025), (ii) increase our existing facility from $900 million to $1.2 billion, which may be expanded by up to three times and up to an additional $500 million upon satisfaction of certain conditions, (iii) amend the maturity date of the revolving credit facility from March 2023 to August 2026, which may be extended at the Company's option for two additional consecutive six-month periods, and (iv) change the interest rate from London Interbank Offered Rate ("LIBOR") to Secured Overnight Financing Rate ("SOFR"), subject to customary benchmark replacement provisions.

In September 2022, we extended the maturity date of our $40 million unsecured floating rate term loan with an unrelated third party from September 2022 to September 2024. Additionally, the interest rate on the term loan was changed from LIBOR plus a margin to SOFR plus a margin.

In October 2022, our Board of Trust Managers approved to increase the authorization for our common equity securities of approximately $269.5 million remaining under our share repurchase plan to $500.0 million. There were no repurchases subsequent to September 30, 2022 through the date of this filing, and the remaining dollar value of our common equity securities authorized to be repurchased under this program is $500.0 million.

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 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 and unsecured term loan 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 September 30, 2022, we had approximately $1.2 billion available under our unsecured credit facility and also a $300 million unsecured term loan facility, with a delayed draw feature. As of September 30, 2022 and through the date of this filing, we had common shares having an aggregate offering amount of up to $500.0 million remaining available for sale under our 2022 ATM program, and the ability to issue debt and equity under our automatic shelf registration statement. We believe scheduled repayments of debt due during the next 12 months are manageable at approximately $595.7 million which represents approximately 16.2% of our total outstanding debt, and includes amortization of debt discounts, and debt issuance costs. 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:

			September 30, 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			4,862						15						4,496						14
Phoenix, Arizona			4,029						13						4,029						13

			September 30, 2022												December 31, 2021
			Apartment Homes						Properties						Apartment Homes						Properties
Orlando, Florida			3,954						11						3,954						11
Austin, Texas			3,686						11						3,686						11
Raleigh, North Carolina			3,252						9						3,248						9
Charlotte, North Carolina			3,104						14						3,104						14
Tampa, Florida			3,104						8						3,104						8
Denver, Colorado			2,873						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
Nashville, Tennessee			758						2						758						2
Total Operating Properties			58,433						171						58,300						171
Properties Under Construction
Raleigh, North Carolina			789						2						354						1
Phoenix, Arizona			397						1						397						1
Charlotte, North Carolina			387						1						387						1
Houston, Texas			377						2						—						—
Southeast Florida			269						1						269						1
Atlanta, Georgia			—						—						366						1
Total Properties Under Construction			2,219						7						1,773						5
Total Properties			60,652						178						60,073						176
Less: Unconsolidated Joint Venture Properties (1)
Houston, Texas			—						—						2,756						9
Austin, Texas			—						—						1,360						4
Dallas, Texas			—						—						1,250						3
Tampa, Florida			—						—						450						1
Raleigh, North Carolina			—						—						350						1
Orlando, Florida			—						—						300						1
Washington, D.C. Metro			—						—						281						1
Charlotte, North Carolina			—						—						266						1
Atlanta, Georgia			—						—						234						1
Total Unconsolidated Joint Venture Properties			—						—						7,247						22
Total Properties Fully Consolidated			60,652						178						52,826						154

*(1)*In April 2022, we acquired the remaining 68.7% ownership interests of the Funds which owned these properties. After obtaining 100% of the ownership interests, we consolidated the Funds as of April 1, 2022. Refer to Note 5, “Acquisitions and Dispositions” in the Notes to Condensed Consolidated Financial Statements for further discussion of this transaction.

Stabilized Communities

We generally consider a property stabilized once it reaches 90% occupancy. During the quarter ended September 30, 2022, stabilization was achieved at two consolidated operating properties as follows:

($ in millions) Stabilized Property and Location			Number of Apartment Homes						Date of Construction Completion						Date of Stabilization
Camden Buckhead
Atlanta, GA			366						2Q22						3Q22
Camden Hillcrest
San Diego, CA			132						4Q21						3Q22
Total			498

Properties Under Development

Our condensed consolidated balance sheet at September 30, 2022 includes approximately $529.1 million related to properties under development and land. Of this amount, approximately $295.6 million related to our properties currently under construction. In addition, we had approximately $229.1 million invested primarily in land held for future development related to projects we currently expect to begin construction, and approximately $4.4 million invested in land which we may develop in the future.

Properties Under Construction. At September 30, 2022, we had seven properties in various stages of construction as follows:

($ in millions) Property and Location			Number of Homes						Estimated Cost						Cost Incurred						Included in Properties Under Development						Estimated Date of Construction Completion						Estimated Date of Stabilization
Properties Under Construction
Camden Atlantic (1)
Plantation, FL			269						$	100.0					$	98.3					$	33.6					4Q22						4Q23
Camden Tempe II (2)
Tempe, AZ			397						115.0						97.6						48.3						3Q23						1Q25
Camden NoDa
Charlotte, NC			387						105.0						85.0						85.0						3Q23						1Q25
Camden Durham
Durham, NC			420						145.0						73.5						73.5						2Q24						4Q25
Camden Village District
Raleigh, NC			369						138.0						30.7						30.7						2Q25						4Q26
Camden Woodmill Creek
The Woodlands, TX			189						75.0						14.0						14.0						3Q24						4Q24
Camden Long Meadow Farms
Richmond, TX			188						80.0						10.5						10.5						3Q24						4Q24
Total			2,219						$	758.0					$	409.6					$	295.6

(1) Property in lease-up and was 40% leased at October 24, 2022.

(2) Property in lease-up and was 33% leased at October 24, 2022.

Development Pipeline Communities. At September 30, 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 Nations
Nashville, TN			393						$	175.0					$	32.0
Camden Paces III
Atlanta, GA			350						100.0						19.6
Camden Blakeney
Charlotte, NC			349						120.0						20.2
Camden South Charlotte
Charlotte, NC			420						135.0						23.4
Camden Baker
Denver, CO			435						165.0						28.4
Camden Highland Village II
Houston, TX			300						100.0						9.6
Camden Gulch
Nashville, TN			480						260.0						42.2
Camden Arts District
Los Angeles, CA			354						150.0						40.4
Camden Downtown II
Houston, TX			271						145.0						13.3
Total			3,352						$	1,350.0					$	229.1

*(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.

Land Holdings. At September 30, 2022, we had the following land holdings:

($ in millions) Location						Acres						Cost to Date
St. Petersburg, FL						0.2						$4.4

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, and the impact of acquisitions and dispositions. Selected weighted averages for the three and nine months ended September 30, 2022 and 2021 are as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
2022						2021						2022						2021
Average monthly property revenue per apartment home			$	2,132					$	1,922					$	2,082					$	1,855
Annualized total property expenses per apartment home (1)			$	9,094					$	8,631					$	8,851					$	8,339
Weighted average number of operating apartment homes owned 100%			58,427						51,011						55,881						50,202
Weighted average occupancy of operating apartment homes owned 100%			96.5		%				97.7		%				96.7		%				97.1		%

(1) Includes approximately $1.0 million of storm related expenses relating to Hurricane Ian. If these expenses had been excluded, the annualized property expenses would have been $9,025 and $8,827 for the three and nine months ended September 30, 2022, 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, 2022 and 2021 are as follows:

						Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)						2022						2021						2022						2021
Net income						$	31,550					$	30,605					$	614,037					$	94,517
Less: Fee and asset management income						(617)						(3,248)						(4,257)						(7,717)
Less: Interest and other income						(88)						(443)						(2,881)						(1,032)
Less: (Income)/loss on deferred compensation plans						6,275						843						28,450						(9,183)
Plus: Property management expense						6,732						6,640						21,228						19,200
Plus: Fee and asset management expense						556						1,159						2,090						3,310
Plus: General and administrative expense						14,002						14,960						44,526						44,428
Plus: Interest expense						29,192						24,987						82,756						72,715
Plus: Depreciation and amortization expense						158,877						111,462						429,749						304,189
Plus: Expense/(benefit) on deferred compensation plans						(6,275)						(843)						(28,450)						9,183
Less: Gain on sale of operating property						—						—						(36,372)						—
Less: Gain on acquisition of unconsolidated joint venture interests						—						—						(474,146)						—
Less: Equity in income of joint ventures						—						(2,540)						(3,048)						(6,652)
Plus: Income tax expense						737						480						2,213						1,292
Net operating income						$	240,941					$	184,062					$	675,895					$	524,250

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, 2022 as compared to the same periods in 2021:

($ in thousands)			Apartment Homes at						Three Months Ended September 30,												Change												Nine Months Ended September 30,												Change
9/30/2022						2022						2021						$						%						2022						2021						$						%
Property revenues:
Same store communities			46,151						$	292,151					$	261,519					$	30,632					11.7		%				$	850,167					$	761,731					$	88,436					11.6		%
Non-same store communities			12,282						78,725						23,877						54,848						*						187,598						51,472						136,126						*
Development and lease-up communities			2,219						407						—						407						100.0						427						—						427						100.0
Dispositions/Other			—						2,489						8,734						(6,245)						(71.5)						8,655						25,018						(16,363)						(65.4)
Total property revenues			60,652						$	373,772					$	294,130					$	79,642					27.1		%				$	1,046,847					$	838,221					$	208,626					24.9		%
Property expenses:
Same store communities			46,151						$	100,873					$	97,033					$	3,840					4.0		%				$	294,538					$	282,909					$	11,629					4.1		%
Non-same store communities			12,282						29,746						9,499						20,247						*						71,690						20,669						51,021						*
Development and lease-up communities			2,219						177						—						177						100.0						197						(8)						205						*
Hurricane expenses			—						1,000						—						1,000						100.0						1,000						—						1,000						100.0
Dispositions/Other			—						1,035						3,536						(2,501)						(70.7)						3,527						10,401						(6,874)						(66.1)
Total property expenses			60,652						$	132,831					$	110,068					$	22,763					20.7		%				$	370,952					$	313,971					$	56,981					18.1		%
Property NOI:
Same store communities			46,151						$	191,278					$	164,486					$	26,792					16.3		%				$	555,629					$	478,822					$	76,807					16.0		%
Non-same store communities			12,282						48,979						14,378						34,601						*						115,908						30,803						85,105						*
Development and lease-up communities			2,219						230						—						230						100.0						230						8						222						*
Hurricane expenses			—						(1,000)						—						(1,000)						(100.0)						(1,000)						—						(1,000)						(100.0)
Dispositions/Other			—						1,454						5,198						(3,744)						(72.0)						5,128						14,617						(9,489)						(64.9)
Total property NOI			60,652						$	240,941					$	184,062					$	56,879					30.9		%				$	675,895					$	524,250					$	151,645					28.9		%

** 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. Hurricane expenses include storm-related damages related to Hurricane Ian in September 2022. 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 $26.8 million for the three months ended September 30, 2022 and increased approximately $76.8 million for the nine months ended September 30, 2022, as compared to the same periods in 2021.

The $26.8 million increase in same store property NOI for the three months ended September 30, 2022 as compared to the same period in 2021, was primarily due to an increase of approximately $30.6 million in same store property revenues which was partially offset by an increase in property expenses of approximately $3.8 million.

The $30.6 million increase in same store property revenues during the three months ended September 30, 2022, as compared to the same period in 2021, was primarily due to a $28.8 million increase in rental revenues comprised of a 13.8% increase in average rental rates and higher other rental income, partially offset by lower occupancy and reletting fees, net of uncollectible revenue. The increase was also due to an increase of approximately $1.3 million in income from our utility and other rebilling programs and an increase of $0.5 million related to fees and other income.

The $3.8 million increase in same store property expenses during the three months ended September 30, 2022, as compared to the same period in 2021, was primarily due to higher real estate taxes of approximately $1.8 million as a result of higher valuations at a number of our communities. The increase was also due to higher repairs and maintenance of $1.1 million,

higher utilities and other property expenses of $1.0 million, and higher property insurance expense of approximately $0.5 million. These increases were partially offset by lower salaries of $1.8 million offset by an increase in property general and administrative expenses of approximately $1.2 million primarily related to centralizing our workforce to manage certain responsibilities for all of our communities.

The $76.8 million increase in same store property NOI for the nine months ended September 30, 2022 as compared to the same period in 2021 was primarily due to an increase of approximately $88.4 million in same store property revenues which was partially offset by an increase of approximately $11.6 million in same store property expenses.

The $88.4 million increase in same store property revenues during the nine months ended September 30, 2022, as compared to the same period in 2021, was primarily due to a $82.7 million increase in rental revenues comprised of a 12.3% increase in average rental rates, higher other rental income, and higher reletting income, net of uncollectible revenue. The increase was also due to an increase of approximately $4.0 million from our utility and other rebilling programs, and approximately $1.7 million increase in fees and other income.

The $11.6 million increase in same store property expenses during the nine months ended September 30, 2022, as compared to the same period in 2021, was primarily due to higher repairs and maintenance of $3.4 million, higher real estate taxes of approximately $2.9 million as a result of increased property valuations at a number of our communities, higher property insurance of approximately $2.5 million, and higher utilities and other property expenses of approximately $1.4 million. The increase was also due to an increase of property general and administrative expense of $3.2 million primarily due to centralizing our workforce to manage certain responsibilities for all of our communities, partially offset by a decrease in salaries of $1.8 million.

Non-same Store and Development and Lease-up Analysis

Property NOI from non-same store and development and lease-up communities increased approximately $34.8 million and $85.3 million for the three and nine months ended September 30, 2022 as compared to the same periods in 2021. These increases in Property NOI were comprised of increases from non-same store communities of approximately $34.6 million and $85.1 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021 and increases from development and lease-up communities of approximately $0.2 million for both the three and nine months ended September 30, 2022, as compared to the same periods in 2021. The increases in property NOI from our non-same store communities were primarily due to our acquiring and consolidating the Funds on April 1, 2022, and the acquisition of four operating properties in 2021. The increases were also due to six operating properties which reached stabilization in 2021 and 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 September 30, 2022 as compared to 2021						For the nine months ended September 30, 2022 as compared to 2021
Property Revenues:
Revenues from acquisitions						$	49.2					$	114.0
Revenues from non-same store stabilized properties						4.4						18.4
Revenues from development and lease-up properties						0.4						0.4
Other						1.2						3.7
						$	55.2					$	136.5
Property Expenses:
Expenses from acquisitions						$	18.2					$	43.5
Expenses from non-same store stabilized properties						1.9						7.1
Expenses from development and lease-up properties						0.2						0.2
Other						0.1						0.4
						$	20.4					$	51.2
Property NOI:
NOI from acquisitions						$	31.0					$	70.5
NOI from non-same store stabilized properties						2.5						11.3
NOI from development and lease-up properties						0.2						0.2
Other						1.1						3.3
						$	34.8					$	85.3

Hurricane Expenses

Our communities impacted by Hurricane Ian in September 2022 incurred approximately $1.0 million of storm related expenses, with no insurance recoveries anticipated during the three and nine months ended September 30, 2022.

Dispositions/Other Property Analysis

Dispositions/Other property NOI decreased approximately $3.7 million and $9.5 million for the three and nine months ended September 30, 2022 as compared to the same periods in 2021. These decreases were primarily due to the disposition of three operating properties during the fourth quarter of 2021 and one operating property in March 2022.

Non-Property Income

($ in thousands)			Three Months Ended September 30,												Change												Nine Months Ended September 30,												Change
2022						2021						$						%						2022						2021						$						%
Fee and asset management			$	617					$	3,248					$	(2,631)					(81.0)		%				$	4,257					$	7,717					$	(3,460)					(44.8)		%
Interest and other income			88						443						(355)						(80.1)		%				2,881						1,032						1,849						*
Income/(loss) on deferred compensation plans			(6,275)						(843)						(5,432)						*						(28,450)						9,183						(37,633)						*
Total non-property income/(loss)			$	(5,570)					$	2,848					$	(8,418)					(295.6)		%				$	(21,312)					$	17,932					$	(39,244)					(218.8)		%

** 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, decreased approximately $2.6 million and $3.5 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021. These decreases were primarily due to the consolidation of the Funds on April 1, 2022, and no longer having any related fee and asset management income. These decreases were also due to lower fees earned related to decreases in third-party construction activity during the three and nine months ended September 30, 2022 as compared to the same periods in 2021.

Interest and other income decreased approximately $0.4 million and increased $1.8 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021. The increase during the nine months ended September 30, 2022 was primarily due to an earn-out received related to a technology joint venture sold in September 2020.

Our deferred compensation plans incurred a loss of approximately $6.3 million and $28.5 million during the three and nine months ended September 30, 2022, respectively, as compared to incurring a loss of approximately $0.8 million and recognizing income of approximately $9.2 million during the three and nine months ended September 30, 2021, 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
2022						2021						$						%						2022						2021						$						%
Property management			$	6,732					$	6,640					$	92					1.4		%				$	21,228					$	19,200					$	2,028					10.6		%
Fee and asset management			556						1,159						(603)						(52.0)						2,090						3,310						(1,220)						(36.9)
General and administrative			14,002						14,960						(958)						(6.4)						44,526						44,428						98						0.2
Interest			29,192						24,987						4,205						16.8						82,756						72,715						10,041						13.8
Depreciation and amortization			158,877						111,462						47,415						42.5						429,749						304,189						125,560						41.3
Expense/(benefit) on deferred compensation plans			(6,275)						(843)						(5,432)						*						(28,450)						9,183						(37,633)						*
Total other expenses			$	203,084					$	158,365					$	44,719					28.2		%				$	551,899					$	453,025					$	98,874					21.8		%

** Not a meaningful percentage.*

Property management expense, which represents regional supervision and accounting costs related to property operations, increased approximately $0.1 million and $2.0 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021. The increase for the nine months ended September 30, 2022 was primarily related to higher salaries, benefits, and incentive compensation costs primarily due to higher regional salary related costs which were previously allocated to fee and asset management expense and now recognized in property management expense upon our consolidating the Funds on April 1, 2022. Property management expenses were 1.8% and 2.0% of total property revenues for the three and nine months ended September 30, 2022, respectively, and were 2.3% of total property revenues for each of the three and nine months ended September 30, 2021.

Fee and asset management expense from property management, asset management, construction, and development activities at our joint ventures and our third-party projects decreased approximately $0.6 million and $1.2 million during the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021. These decreases were primarily due to our consolidating the Funds on April 1, 2022, and no longer having any related fee and asset management expenses.

General and administrative expense decreased approximately $1.0 million during the three months ended September 30, 2022 and was relatively flat for the nine months ended September 30, 2022 as compared to the same periods in 2021. Excluding income/(loss) on deferred compensation plans, general and administrative expenses were 3.7% and 4.2% of total revenues for the three and nine months ended September 30, 2022, respectively, and were 5.0% and 5.2% of total revenues for the three and nine months ended September 30, 2022, respectively.

Interest expense increased approximately $4.2 million and $10.0 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021. These increases were primarily due to an increase in interest expense related to our assuming approximately $515 million of secured mortgage debt upon completion of the acquisition of the Funds on April 1, 2022. These increases were also due to higher interest expense recognized on our unsecured credit facility resulting from an increase in average balances outstanding. These increases were partially offset by higher capitalized interest during the three and nine months ended September 30, 2022 resulting from higher average balances in our development pipeline.

Depreciation and amortization expense increased approximately $47.4 million and $125.6 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021. These increases were primarily due to higher depreciation and amortization related to our acquisition of the Funds on April 1, 2022, and higher depreciation 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 also due to the completion of units in our development pipeline and the completion of repositions during 2021 and 2022, and 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 $6.3 million and $28.5 million for the three and nine months ended September 30, 2022, respectively, as compared to recognizing a benefit of approximately $0.8 million and incurring expenses of approximately $9.2 million during the three and nine months ended September 30, 2021, 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)			2022						2021						$						%						2022						2021						$						%
Gain on sale of operating property			$	—					$	—					$	—					—		%				$	36,372					$	—					$	36,372					100.0		%
Gain on acquisition of unconsolidated joint venture interests			$	—					$	—					$	—					—		%				$	474,146					$	—					$	474,146					100.0		%
Equity in income of joint ventures			$	—					$	2,540					$	(2,540)					(100.0)		%				$	3,048					$	6,652					$	(3,604)					(54.2)		%
Income tax expense			$	(737)					$	(480)					$	(257)					53.5		%				$	(2,213)					$	(1,292)					$	(921)					71.3		%

The $36.4 million gain on sale during the nine months ended September 30, 2022 was due to the disposition of one operating property located in Largo, Maryland.

On April 1, 2022, we acquired the remaining 68.7% ownership interest in the Funds. We had previously owned a 31.3% interest in each of these Funds and accounted for the joint ventures under the equity method. As a result of acquiring the remaining ownership interests, we consolidated the Funds and recorded a gain of approximately $474.1 million which represented the difference between the fair market value and the cost basis of our previously owned equity interests.

Equity in income of joint ventures decreased approximately $2.5 million and $3.6 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021. These decreases were primarily due to our consolidating the Funds on April 1, 2022.

Income tax expense increased approximately $0.3 million and $0.9 million for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021. These increases were primarily due to higher state income taxes due to our acquiring the Funds on April 1, 2022, partially offset by a decrease in taxable income due to lower 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 and nine months ended September 30, 2022 and 2021 are as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
($ in thousands)			2022						2021						2022						2021
Funds from operations
Net income attributable to common shareholders (1)			$	29,844					$	29,483					$	607,904					$	91,009
Real estate depreciation and amortization			156,065						108,931						421,808						296,760
Adjustments for unconsolidated joint ventures			—						2,674						2,709						7,903
Gain on sale of operating property			—						—						(36,372)						—
Gain on acquisition of unconsolidated joint venture interests			—						—						(474,146)						—
Income allocated to non-controlling interests			1,706						1,122						6,133						3,508
Funds from operations			$	187,615					$	142,210					$	528,036					$	399,180
Less: recurring capitalized expenditures			(26,001)						(19,717)						(61,682)						(51,205)
Adjusted funds from operations			$	161,614					$	122,493					$	466,354					$	347,975
Weighted average shares – basic			108,466						103,071						107,314						101,119
Incremental shares issuable from assumed conversion of:
Common share options and awards granted			40						100						52						80
Common units			1,606						1,641						1,606						1,680
Weighted average shares – diluted			110,112						104,812						108,972						102,879

(1) Net income attributable to common shareholders for the three and nine months ended September 30, 2022 included approximately $1.0 million of storm- related expenses related to Hurricane Ian.

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 7.6 and 6.6 for the three months ended September 30, 2022 and 2021, respectively, and 7.4 and 6.4 for the nine months ended September 30, 2022 and 2021. 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. Approximately 83.8% and 100% of our properties were unencumbered as of September 30, 2022 and 2021, respectively. Our weighted average maturity of debt was approximately 6.4 years at September 30, 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 and unsecured term loan 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.

Cash Flows

The following is a discussion of our cash flows for the nine months ended September 30, 2022 and 2021:

Net cash from operating activities was approximately $576.5 million during the nine months ended September 30, 2022 as compared to approximately $436.0 million for the same period in 2021. The increase was primarily due to the increase in cash from property operations due to our acquiring the Funds, and 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 nine months ended September 30, 2022 totaled approximately $1.3 billion as compared to $755.8 million during the same period in 2021. Cash outflows during the nine months ended September 30, 2022 primarily related to the acquisition of the Funds for cash consideration of approximately $1.1 billion, and amounts paid for property development and capital improvements of approximately $342.5 million. These outflows were partially offset by net proceeds from the sale of one operating property of approximately $70.5 million. 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. The increase in property development and capital improvements for the nine months ended September 30, 2022, as compared to the same period in 2021, was primarily due to the acquisition of four development properties, as well as higher reposition and capital expenditures, partially offset by the timing and completion of four consolidated operating properties in 2022 and 2021. The property development and capital improvements during the nine months ended September 30, 2022 and 2021, included the following:

						Nine Months Ended September 30,
(in millions)						2022						2021
Expenditures for new development, including land						$	203.2					$	163.6
Capital expenditures						75.3						63.4
Reposition expenditures						37.2						30.4
Direct real estate taxes and capitalized interest and other indirect costs						26.8						22.3
Total						$	342.5					$	279.7

Net cash from financing activities totaled approximately $221.0 million for the nine months ended September 30, 2022 as compared to $328.7 million during the same period in 2021. Cash inflows during the nine months ended September 30, 2022 primarily related to net proceeds of $516.8 million from the issuance of approximately 2.9 million common shares from our equity offering and approximately 0.2 million common shares from our ATM programs, partially offset by $293.2 million used for distributions to common shareholders and non-controlling interest holders. 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.

Financial Flexibility

In August 2022 we amended and restated our existing credit facility (the "Credit Agreement"), to among other things, add a $300 million unsecured term loan facility with a delayed draw feature that matures in August 2024 (which may be extended at the Company's option to August 2025), and increase the capacity of our existing unsecured revolving credit facility from $900 million to $1.2 billion which may be expanded, upon the satisfaction of certain conditions, by up to three times and $500 million in the aggregate by requesting increases to the revolving credit facility and term loan facility or requesting additional term loans. The Credit Agreement also amended the maturity date of the revolving credit facility from March 2023 to August

2026, with two options to further extend the facility at our election for two additional consecutive six-month periods. The interest rate on our unsecured credit facility is based upon SOFR plus a spread 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 $600 million or the remaining amount available under our revolving credit facility. Our revolving credit facility and delayed term loan are subject to customary financial covenants and limitations. We believe we are in compliance with all such financial covenants and limitations as of September 30, 2022 and through the date of this filing.

Our unsecured revolving 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 revolving credit facility, it does reduce the amount available. At September 30, 2022, we had no borrowings outstanding on our credit facility or our delayed term loan, and we had outstanding letters of credit totaling approximately $14.2 million.

In May 2022, 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 amount of up to $500.0 million (the "2022 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 2022 ATM program are intended to be used for general corporate purposes, which may include reducing future borrowings under our 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. As of the date of this filing, we have not entered into any forward sales agreement and have common shares having an aggregate offering amount of up to $500.0 million remaining available for sale under this 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 $595.7 million which represents approximately 16.2% 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.

As of September 30, 2022, we estimated the additional cost to complete the construction of seven properties to be approximately $348.4 million. Of this amount, we expect to incur costs between approximately $50 million and $60 million during the remainder of 2022 and to incur the remaining costs during 2023 through 2025. Additionally, we expect to incur costs between approximately $26 million and $28 million related to the start of new development activities, between approximately $23 million and $25 million of repositions, redevelopment, repurposes, and revenue enhancing expenditures and between approximately $28 million and $32 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 and unsecured term loan 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 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 2022, our Board of Trust Managers declared a quarterly dividend of $0.94 per common share to our common shareholders of record as of September 30, 2022. The quarterly dividend was subsequently paid on October 17, 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

As of September 30, 2022, we had no outstanding guarantees or other off-balance sheet arrangements.

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.