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, 2022. 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.

For a discussion of risks in response to recent bank failures, see "Because of recent deterioration of the credit and capital markets, we may be unable to obtain debt financing from sources other than our unsecured revolving credit facility on acceptable terms or at all" under Item 1A, "Risk Factors." 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:

• Because of recent deterioration of the credit and capital markets, we may be unable to obtain debt financing from sources other than our unsecured revolving credit facility on acceptable terms or at all;

• 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;

• 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 values;

• 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;

• 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;

• Environmental, Social, and Governance factors may impose additional costs and/or expose us to new risks;

• Litigation risks could affect our business;

• A pandemic and measures intended to prevent its spread could negatively impact our business;

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

• Competition could adversely affect our ability to acquire properties; 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, 2023, 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 months ended March 31, 2023, our results reflect an increase in same store revenues of approximately 8.0% as compared to the same period in 2022. The increase was primarily due to higher average rental rates, which we believe was primarily attributable to 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 the supply of multifamily homes will remain at manageable levels during 2023 in the submarkets and asset classes in which we operate. However, if economic conditions were to worsen, our operating results could be adversely affected.

Consolidated Results

Net income attributable to common shareholders was $41.9 million and $80.7 million for the three months ended March 31, 2023 and 2022, respectively. The decrease was primarily due to a gain on sale of an operating property in Largo, Maryland during the first quarter of 2022. The decrease was also due to higher depreciation and interest expense and lower equity in income of joint ventures during the three months ended March 31, 2023, primarily due to our purchase of the remaining 68.7% ownership interests in two unconsolidated investment funds (collectively, "the Funds" or "the acquisition of the Funds") on April 1, 2022. The decrease was partially offset by a 21.1% increase in property operations primarily related to non-same store, same store, and development and lease up communities during the three months ended March 31, 2023 as compared to the same period in 2022. See further discussion of our 2023 operations as compared to 2022 in "Results of Operations," below.

Construction Activity

At March 31, 2023, we had a total of six properties under construction comprising 1,950 apartment homes. As of March 31, 2023, we estimated the total additional cost to complete the construction of these six properties is approximately $267.7 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, 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 flows generated from operations, draws on our unsecured revolving 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, 2023, we had approximately $1.1 billion available under our $1.2 billion unsecured revolving credit facility. As of March 31, 2023 and through the date of this filing, we also 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 $500.0 million which represents approximately 13.3% of our total outstanding debt, and excludes 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:

			March 31, 2023												December 31, 2022
			Number of Homes						Properties						Number of 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						6,192						17
Atlanta, Georgia			4,862						15						4,862						15
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			3,252						9						3,252						9
Charlotte, North Carolina			3,104						14						3,104						14
Tampa, Florida			3,104						8						3,104						8
Southeast Florida			3,050						9						3,050						9
Denver, Colorado			2,873						9						2,873						9
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			58,702						172						58,702						172
Properties Under Construction
Raleigh, North Carolina			789						2						789						2
Phoenix, Arizona			397						1						397						1
Charlotte, North Carolina			387						1						387						1
Houston, Texas			377						2						377						2
Total Properties Under Construction			1,950						6						1,950						6
Total Properties			60,652						178						60,652						178

Stabilized Communities

We generally consider a property stabilized once it reaches 90% occupancy. During the three months ended March 31, 2023, stabilization was achieved at one operating property as follows:

Stabilized Property and Location			Number of Homes						Date of Construction Completion						Date of Stabilization
Operating Properties
Camden Atlantic			269						4Q22						1Q23
Plantation, FL

Properties Under Development

Our condensed consolidated balance sheet at March 31, 2023 includes approximately $515.1 million related to properties under development and land. Of this amount, approximately $270.1 million related to our properties currently under construction. In addition, we had approximately $245.0 million primarily invested in land held for future development.

Properties Under Construction. At March 31, 2023, we had six properties in various stages of construction as follows:

($ in millions) Properties and Locations			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 Tempe II (1)
Tempe, AZ			397						$	115.0					$	104.4					$	16.7					3Q23						2Q24
Camden NoDa (2)
Charlotte, NC			387						108.0						101.6						66.1						4Q23						1Q25
Camden Durham
Durham, NC			420						145.0						95.7						95.7						2Q24						4Q25
Camden Village District
Raleigh, NC			369						138.0						45.4						45.4						2Q25						4Q26
Camden Woodmill Creek
The Woodlands, TX			189						75.0						28.9						28.9						3Q24						4Q24
Camden Long Meadow Farms
Richmond, TX			188						80.0						17.3						17.3						3Q24						4Q24
Total			1,950						$	661.0					$	393.3					$	270.1

(1) Property in lease-up and was 73% leased at April 26, 2023.

(2) Property in lease-up and was 37% leased at April 26, 2023.

Development Pipeline Communities. At March 31, 2023, we had the following multifamily communities undergoing development activities:

($ in millions) Properties and Locations			Projected Homes						Total Estimated Cost (1)						Cost to Date
Camden Blakeney
Charlotte, NC			349						$	120.0					$	22.7
Camden South Charlotte
Charlotte, NC			420						135.0						25.7
Camden Nations
Nashville, TN			393						175.0						35.1
Camden Baker
Denver, CO			435						165.0						30.3
Camden Paces III
Atlanta, GA			350						100.0						21.0
Camden Highland Village II
Houston, TX			300						100.0						9.9
Camden Arts District
Los Angeles, CA			354						150.0						41.7
Camden Gulch
Nashville, TN			480						260.0						44.9
Camden Downtown II
Houston, TX			271						145.0						13.7
Total			3,352						$	1,350.0					$	245.0

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

Results of Operations

Changes in revenues and expenses related to our operating properties from period to period are due primarily to the performance of stabilized properties in the portfolio, the lease-up of newly constructed properties, and the impact of acquisitions and dispositions.

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, 2023 and 2022 are as follows:

						Three Months Ended March 31,
(in thousands)						2023						2022
Net income						$	43,619					$	83,601
Less: Fee and asset management income						(578)						(2,450)
Less: Interest and other income						(62)						(2,131)
Less: (Income)/loss on deferred compensation plans						(5,912)						7,497
Plus: Property management expense						8,297						7,214
Plus: Fee and asset management expense						413						1,175
Plus: General and administrative expense						15,356						14,790
Plus: Interest expense						32,843						24,542
Plus: Depreciation and amortization expense						142,444						113,138
Plus: Expense/(benefit) on deferred compensation plans						5,912						(7,497)
Less: Gain on sale of operating property						—						(36,372)
Less: Equity in income of joint ventures						—						(3,048)
Plus: Income tax expense						1,150						590
Net operating income						$	243,482					$	201,049

Property-Level NOI (1)

Property NOI, as reconciled above, is detailed further into the following categories for the three months ended March 31, 2023 as compared to the same period in 2022:

($ in thousands)			Homes at						Three Months Ended March 31,												Change
3/31/2023						2023						2022						$						%
Property revenues:
Same store communities			48,137						$	310,126					$	287,206					$	22,920					8.0		%
Non-same store communities			10,565						64,109						19,584						44,525						*
Development and lease-up communities			1,950						1,344						—						1,344						100.0
Dispositions/Other			—						2,584						4,569						(1,985)						(43.4)
Total property revenues			60,652						$	378,163					$	311,359					$	66,804					21.5		%
Property expenses:
Same store communities			48,137						$	108,721					$	100,808					$	7,913					7.8		%
Non-same store communities			10,565						24,398						7,127						17,271						*
Development and lease-up communities			1,950						492						—						492						100.0
Dispositions/Other			—						1,070						2,375						(1,305)						(54.9)
Total property expenses			60,652						$	134,681					$	110,310					$	24,371					22.1		%
Property NOI:
Same store communities			48,137						$	201,405					$	186,398					$	15,007					8.1		%
Non-same store communities			10,565						39,711						12,457						27,254						*
Development and lease-up communities			1,950						852						—						852						100.0
Dispositions/Other			—						1,514						2,194						(680)						(31.0)
Total property NOI			60,652						$	243,482					$	201,049					$	42,433					21.1		%

** Not a meaningful percentage.*

(1) Same store communities are communities we wholly-owned and were stabilized since January 1, 2022, excluding communities under redevelopment and properties held for sale. Non-same store communities are stabilized communities not owned or stabilized since January 1, 2022, 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, 2022, 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, including net below market leases, casualty-related expenses net of recoveries and severance related costs.

Same Store Analysis

Same store property NOI increased approximately $15.0 million for the three months ended March 31, 2023 as compared to the same period in 2022. The increase was primarily due to an increase of approximately $22.9 million in same store property revenues which was partially offset by an increase in property expenses of approximately $7.9 million.

The $22.9 million increase in same store property revenues during the three months ended March 31, 2023, as compared to the same period in 2022, was primarily due to a $21.5 million increase in rental revenues comprised of a 10.7% 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 $1.2 million in income from our utility and other rebilling programs and an increase of $0.2 million related to fees and other income.

The $7.9 million increase in same store property expenses during the three months ended March 31, 2023, as compared to the same period in 2022, was primarily due to higher property insurance expense of approximately $2.8 million, higher real estate taxes of approximately $2.7 million as a result of higher valuations at a number of our communities, higher repairs and maintenance expenses of $1.6 million, and higher utilities expense and other property expenses of $1.3 million. These increases were partially offset by a net decrease in salaries and general and administrative expenses of approximately $0.5 million, which

was primarily due to our reducing and centralizing our workforce to manage certain responsibilities for all our communities in April 2022. The centralization of workforce is now being recorded in general and administrative expenses.

Non-same Store and Development and Lease-up Analysis

Property NOI from non-same store and development and lease-up communities increased approximately $28.1 million for the three months ended March 31, 2023 as compared to the same period in 2022. The increase in Property NOI was comprised of increases from non-same store communities of approximately $27.3 million and increases from development and lease-up communities of approximately $0.8 million for the three months ended March 31, 2023, as compared to the same period in 2022. The increase in property NOI from our non-same store communities was primarily due to our acquisition of the Funds on April 1, 2022 and the stabilization of three operating properties in 2022 and one operating property during the three months ended March 31, 2023.

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, 2023 as compared to 2022
Property Revenues:
Revenues from acquisitions						$	39.7
Revenues from non-same store stabilized properties						3.8
Revenues from development and lease-up properties						1.3
Other						1.1
						$	45.9
Property Expenses:
Expenses from acquisitions						$	16.0
Expenses from non-same store stabilized properties						0.8
Expenses from development and lease-up properties						0.5
Other						0.5
						$	17.8
Property NOI:
NOI from acquisitions						$	23.7
NOI from non-same store stabilized properties						3.0
NOI from development and lease-up properties						0.8
Other						0.6
						$	28.1

Dispositions/Other Property Analysis

Dispositions/Other property NOI decreased approximately $0.7 million for the three months ended March 31, 2023 as compared to the same period in 2022. The decrease was primarily due to the disposition of one operating property in March 2022.

Non-Property Income

($ in thousands)			Three Months Ended March 31,												Change
2023						2022						$						%
Fee and asset management			$	578					$	2,450					$	(1,872)					(76.4)		%
Interest and other income			62						2,131						(2,069)						(97.1)		%
Income/(loss) on deferred compensation plans			5,912						(7,497)						13,409						*
Total non-property income/(loss)			$	6,552					$	(2,916)					$	9,468					(324.7)		%

** 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 $1.9 million for the three months ended March 31, 2023 as compared to the same period in 2022. The decrease was primarily due to the consolidation of

the Funds on April 1, 2022, and no longer having any related fee and asset management income. The decrease was also due to lower fees earned related to decreases in third-party construction activity during the three months ended March 31, 2023 as compared to the same period in 2022.

Interest and other income decreased approximately $2.1 million for the three months ended March 31, 2023 as compared to the same period in 2022. The decrease during the three months ended March 31, 2023 was primarily due to an earn-out received and recognized during the three months ended March 31, 2022 related to a technology joint venture sold in September 2020.

Our deferred compensation plans recognized income of approximately $5.9 million during the three months ended March 31, 2023 as compared to incurring a loss of approximately $7.5 million during the three months ended March 31, 2022. 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
2023						2022						$						%
Property management			$	8,297					$	7,214					$	1,083					15.0		%
Fee and asset management			413						1,175						(762)						(64.9)
General and administrative			15,356						14,790						566						3.8
Interest			32,843						24,542						8,301						33.8
Depreciation and amortization			142,444						113,138						29,306						25.9
Expense/(benefit) on deferred compensation plans			5,912						(7,497)						13,409						*
Total other expenses			$	205,265					$	153,362					$	51,903					33.8		%

** 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, 2023 as compared to the same period in 2022. The increase for the three months ended March 31, 2023 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 2.2% of total property revenues for the three months ended March 31, 2023 and were 2.3% of total property revenues for the three months ended March 31, 2022.

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 $0.8 million during the three months ended March 31, 2023 as compared to the same period in 2022. The decrease was 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 increased approximately $0.6 million during the three months ended March 31, 2023 as compared to the same period in 2022. Excluding income/(loss) on deferred compensation plans, general and administrative expenses were 4.1% and 4.7% of total revenues for the three months ended March 31, 2023 and 2022, respectively.

Interest expense increased approximately $8.3 million for the three months ended March 31, 2023 as compared to the same period in 2022. The increase was 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. The increase was also due to interest expense related to a $300 million term loan entered into in December 2022 and higher interest expense recognized on our unsecured revolving credit facility resulting from higher interest rates and an increase in average balances outstanding. The increase was partially offset by lower interest expense related to the repayment of a $350 million, 3.15% senior unsecured note payable in December 2022 and higher capitalized interest during the three months ended March 31, 2023 resulting from higher interest rates on our unsecured revolving credit facility.

Depreciation and amortization expense increased approximately $29.3 million for the three months ended March 31, 2023 as compared to the same period in 2022. The increase was primarily due to higher depreciation related to our acquisition of the Funds on April 1, 2022, and the completion of apartment homes in our development pipeline and the completion of repositions during 2022 and 2023. The increase was partially offset by higher amortization of in-place leases during the three months ended March 31, 2022 related to the acquisition of one operating property in August 2021 and one operating property in October 2021.

Our deferred compensation plans incurred an expense of approximately $5.9 million for the three months ended March 31, 2023 as compared to recognizing a benefit of approximately $7.5 million during the three months ended March 31, 2022. 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)			2023						2022						$						%
Gain on sale of operating property			$	—					$	36,372					$	(36,372)					—		%
Equity in income of joint ventures			$	—					$	3,048					$	(3,048)					(100.0)		%
Income tax expense			$	(1,150)					$	(590)					$	(560)					94.9		%

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

Equity in income of joint ventures decreased approximately $3.0 million for the three months ended March 31, 2023, as compared to the same period in 2022. The decrease was due to our consolidating the Funds on April 1, 2022.

Income tax expense increased approximately $0.6 million for the three months ended March 31, 2023, respectively, as compared to the same period in 2022. The increase was 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"), Core FFO, and Core Adjusted FFO ("Core AFFO")

Management considers FFO, Core FFO, and Core 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.

Core FFO represents FFO as further adjusted for items not considered part of our core business operations. We consider Core FFO to be a helpful supplemental measure of operating performance as it excludes not only depreciation expense of real estate assets, but it also excludes certain items which by their nature are not comparable period over period and therefore tends to obscure actual operating performance. Our definition of Core FFO may differ from other REITs, and there can be no assurance our basis for computing this measure is comparable to other REITs.

Core AFFO is calculated utilizing Core FFO less recurring capitalized expenditures which are necessary to help preserve the value of and maintain the functionality at our communities. We also consider Core 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, Core FFO, and Core 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, Core FFO, and Core 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, Core FFO, and Core AFFO as disclosed by other REITs may not be comparable to our calculation.

Reconciliations of net income attributable to common shareholders to FFO, Core FFO, and Core AFFO for the three months ended March 31, 2023 and 2022 are as follows:

			Three Months Ended March 31,
($ in thousands)			2023						2022
Funds from operations
Net income attributable to common shareholders			$	41,917					$	80,745
Real estate depreciation and amortization			139,387						110,537
Adjustments for unconsolidated joint ventures			—						2,709
Gain on sale of operating property			—						(36,372)
Income allocated to non-controlling interests			1,702						2,856
Funds from operations			$	183,006					$	160,475
Net below market leases			—						(861)
Casualty-related expenses, net of (recoveries)			(42)						—
Severance			—						896
Legal costs and settlements			84						—
Miscellaneous (income)/expense (1)			—						(1,877)
Core funds from operations			$	183,048					$	158,633
Less: recurring capitalized expenditures			(17,579)						(14,251)
Core adjusted funds from operations			$	165,469					$	144,382
Weighted average shares – basic			108,568						105,336
Incremental shares issuable from assumed conversion of:
Share awards granted			36						83
Common units			1,597						1,606
Weighted average shares – diluted			110,201						107,025

(1) Three months ended March 31, 2022 activity relates to proceeds from earn-out from previously sold technology investment.

Liquidity and Capital Resources

Financial Condition and Sources of Liquidity

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

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

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

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

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

Our interest expense coverage ratio, net of capitalized interest, was approximately 6.7 and 7.4 for the three months ended March 31, 2023 and 2022, 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. Approximately 84.0% and 100% of our properties were unencumbered as of March 31, 2023 and 2022, respectively. Our weighted average maturity of debt was approximately 6.1 years at March 31, 2023.

Our primary sources of liquidity is cash flows generated from operations. Other sources may include one or more of the following: availability under our unsecured revolving 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;

• funding of property developments, repositions, redevelopments, and acquisitions; 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

At March 31, 2023, we had cash, cash equivalents and restricted cash of approximately $27.3 million as compared to $1.1 billion at March 31, 2022. On April 1, 2022, we purchased the remaining 68.7% ownership interests in the Funds for cash consideration of $1.1 billion, after adjusting for assumption of $515 million of existing secured mortgage debt of the Funds which remained outstanding. We funded this transaction with cash on hand. The following is further discussion of our cash flows for the three months ended March 31, 2023 as compared to the same period in 2022.

Net cash from operating activities was approximately $139.7 million during the three months ended March 31, 2023 as compared to approximately $122.3 million for the same period in 2022. The increase was primarily due to the increase in cash from property operations due to the acquisition of the Funds on April 1, 2022, and the growth attributable to our same store, non-same store and development and lease-up communities. The increase was partially offset by higher real estate tax payments related to the acquisition of the Funds. See further discussion of our 2023 operations as compared to 2022 in "Results of Operations."

Net cash used in investing activities during the three months ended March 31, 2023 totaled approximately $93.5 million as compared to $48.9 million during the same period in 2022. Cash outflows during the three months ended March 31, 2023 primarily related to amounts paid for property development and capital improvements of approximately $91.9 million. Cash outflows during the three months ended March 31, 2022 primarily related to amounts paid for property developments 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. The increase in property development and capital improvements for the three months ended March 31, 2023, as compared to the same period in 2022, was primarily due to higher reposition expenditures, partially offset by the acquisition of approximately 15.9 acres of land in 2022, and the timing and completion of two operating properties in 2023 and 2022. The property development and capital improvements during the three months ended March 31, 2023 and 2022, included the following:

						Three Months Ended March 31,
(in millions)						2023						2022
Expenditures for new development, including land						$	40.5					$	48.5
Capital expenditures						20.6						20.3
Reposition expenditures						21.0						14.3
Direct real estate taxes and capitalized interest and other indirect costs						9.8						7.4
Total						$	91.9					$	90.5

Net cash used in financing activities totaled approximately $36.3 million for the three months ended March 31, 2023 as compared to net cash from financing activities of $443.1 million during the same period in 2022. Cash outflows during the three months ended March 31, 2023 primarily related to $103.6 million used for distributions to common shareholders and non-controlling interest holders, partially offset by net proceeds of $66.0 million of borrowings from our unsecured revolving credit facility. Cash inflows during the three months ended March 31, 2022 primarily related to net proceeds of $500.0 million of borrowings from our unsecured revolving credit facility, 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.

Financial Flexibility

We have a $1.2 billion unsecured revolving credit facility which matures in August 2026, with two options to extend the facility at our election for two consecutive six-month periods and to expand the facility up to three times by up to an additional $500 million upon satisfaction of certain conditions. The interest rate on our unsecured revolving credit facility is based upon SOFR plus a spread which is subject to change as our credit ratings change. Advances under our revolving 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 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, 2023 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 March 31, 2023, we had outstanding letters of credit totaling approximately $14.2 million, and approximately $1.1 billion available under our unsecured revolving credit facility.

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 revolving credit facility, 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 sold any shares or 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 or 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 revolving credit facility. We believe scheduled repayments of debt due during the next 12 months are manageable at approximately $500.0 million which represents approximately 13.3% of our total outstanding debt, and excludes 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 March 31, 2023, we estimated the additional cost to complete the construction of six properties to be approximately $267.7 million. Of this amount, we expect to incur costs between approximately $175 million and $185 million during the remainder of 2023 and to incur the remaining costs during 2024 through 2025. Additionally, we expect to incur costs between approximately $60 million and $80 million related to the start of new development activities, between approximately $80 million and $84 million of repositions, redevelopment, repurposes, and revenue enhancing expenditures and between approximately $80 million and $84 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 flows generated from operations, draws on our unsecured revolving 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 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 2023, our Board of Trust Managers declared a quarterly dividend of $1.00 per common share to our common shareholders of record as of March 31, 2023. The quarterly dividend was subsequently paid on April 17, 2023, and we paid equivalent amounts per unit to holders of the common operating partnership units. Assuming similar quarterly dividend distributions for the remainder of 2023, our annualized dividend rate would be $4.00 per share or unit.

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, 2022.