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

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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, 2023. 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;
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 could 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 could be unable to renew, repay, or refinance our outstanding debt;
Rising interest rates could increase our borrowing costs, lower the value of our real estate, and decrease our share price, leading investors to 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;
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, reposition, 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, 2024, we owned interests in, operated, or were developing 177 multifamily properties comprised of 59,996 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, 2024, our results reflect an increase in same store revenues of approximately 0.6% and 1.5%, respectively, as compared to the same periods in 2023. The increases were in part due to higher average rental rates, which we believe were primarily attributable to job growth, favorable demographics with a higher propensity to rent versus buy, and continued demand for multifamily housing in our markets.

We believe the levels of new multifamily supply in the submarkets and asset classes in which we operate continue to be elevated for the remainder of 2024 and into 2025, but should be met with continued demand to absorb these new deliveries. However, if this were to change or other economic conditions were to worsen, our operating results could be adversely affected.

Consolidated Results

Net income (loss) attributable to common shareholders was $(4.2) million and $48.0 million for the three months ended September 30, 2024 and 2023, respectively, and was $122.6 million and $181.0 million for the nine months ended September 30, 2024 and 2023, respectively. The $52.2 million and $58.4 million decreases during the three and nine months ended September 30, 2024 as compared to the same periods in 2023, were primarily due to recognizing a $41.0 million impairment associated with land development activities. The decrease during the nine months ended September 30, 2024, was also due to recognizing a higher gain on sale of one operating property in 2023 of $48.9 million as compared to recognizing a gain on sale of one operating property in 2024 of $43.8 million. See further discussion of our 2024 operations as compared to 2023 in "Results of Operations," below.

Construction and Development Activity

At September 30, 2024, we had a total of five properties under construction comprising 1,746 apartment homes. As of September 30, 2024, we estimated the total additional cost to complete the construction of these five properties is approximately $267.0 million.

We stopped development activities for the foreseeable future on four of our developments in the third quarter of 2024 and recorded approximately $41.0 million of impairment charges on three of these land parcels. We review our long-lived assets on an annual basis or whenever events or circumstances indicated the carrying amount of an asset may not be recoverable and our impairment evaluations take into consideration the current and anticipated economic climate. We currently have three other land parcels held for future development we plan to develop. However, the commencement of future developments may be impacted by macroeconomic issues, multifamily market conditions, and other factors. We will continue to evaluate future development starts based on market, economic, and capital market conditions. However, there can be no assurance we will not have impairments charges in the future.

Disposition

In February 2024, we sold one operating property comprised of 592 apartment homes located in Atlanta, Georgia for approximately $115.0 million and recognized a gain of approximately $43.8 million.

Other

In January 2024, we issued $400.0 million of 4.90% senior unsecured notes due January 15, 2034. We utilized a portion of the net proceeds from these notes to repay the outstanding balance on our $300.0 million, 6.21% unsecured term loan due in August 2024. As a result of the early repayment, we expensed approximately $0.9 million of unamortized loan costs, which are reflected in the loss on early retirement of debt in our condensed consolidated statements of income and comprehensive income.

In January 2024, we utilized cash on hand to repay the principal amount of our 4.36% senior unsecured notes payable, which had a maturity date of January 15, 2024, for a total of $250.0 million, plus accrued interest.

On July 8, 2024, Hurricane Beryl impacted several of our multifamily communities in the Houston, Texas area. During the three and nine months ended September 30, 2024, we expensed approximately $2.1 million of costs, net of anticipated insurance recoveries related to this hurricane.

In September 2024, we extended the maturity date of our $40.0 million unsecured floating rate term loan with an unrelated third party from September 2024 to September 2026.

In September 2024, we utilized cash on hand and our unsecured revolving credit facility to repay the principal amount of our 3.68% senior unsecured notes payable, which had a maturity date of September 15, 2024, for a total of $250.0 million, plus accrued interest.

During the nine months ended September 30, 2024, we repurchased 515,974 common shares for approximately $50.0 million at an average price of $96.88 per share. As of the date of this filing, the remaining dollar value of our common equity securities authorized to be repurchased under this plan was approximately $450.0 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 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 2023 ATM program, and other unsecured borrowings or secured mortgages.

As of September 30, 2024, we had approximately $1.0 billion available under our $1.2 billion unsecured revolving credit facility and do not have any debt maturing until April 2026. As of September 30, 2024, 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 2023 ATM program. 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, 2024		December 31, 2023
	Number of Homes	Properties	Number of Homes	Properties
Operating Properties
Houston, Texas	9,343	27	9,154	26
Dallas/Fort Worth, Texas	6,224	15	6,224	15
Washington, D.C. Metro	6,192	17	6,192	17
Phoenix, Arizona	4,426	14	4,426	14
Atlanta, Georgia	4,270	14	4,862	15
Orlando, Florida	3,954	11	3,954	11
Austin, Texas	3,686	11	3,686	11
Charlotte, North Carolina	3,510	15	3,491	15
Raleigh, North Carolina	3,252	9	3,252	9
Tampa/St. Petersburg, 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	1,811	5	1,811	5
San Diego/Inland Empire, California	1,797	6	1,797	6
Nashville, Tennessee	758	2	758	2
Total Operating Properties	58,250	172	58,634	172


	September 30, 2024		December 31, 2023
	Number of Homes	Properties	Number of Homes	Properties
Properties Under Construction
Raleigh, North Carolina	789	2	789	2
Charlotte, North Carolina	769	2	—	—
Houston, Texas	188	1	377	2




Total Properties Under Construction	1,746	5	1,166	4













Total Properties	59,996	177	59,800	176

Completed Construction in Lease- Up

At September 30, 2024, there was one completed operating property in lease up as follows:


($ in millions) Property and Location	Number of Homes	Cost Incurred (1)	% Leased at 10/30/2024	Date of Construction Completion	Estimated Date of Stabilization
Operating Property
Camden Woodmill Creek
Spring, TX	189	$71.6	79%	2Q24	2Q25

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

Properties Under Development and Land

Our condensed consolidated balance sheet at September 30, 2024 includes approximately $418.2 million related to properties under development and land. Of this amount, approximately $230.9 million related to our properties currently under construction. In addition, we had approximately $187.3 million primarily invested in land held for future development and land holdings, which included approximately $129.5 million related to land held for future development and $57.8 million invested in land which we may develop in the future.

Properties Under Construction. At September 30, 2024, we had five 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 Durham (1)
Durham, NC	420	$	145.0	$	144.0	$	23.5	4Q24	4Q25
Camden Long Meadow Farms (2)
Richmond, TX	188	75.0		72.6		16.0		4Q24	3Q25
Camden Village District
Raleigh, NC	369	138.0		111.5		111.5		4Q25	2Q27
Camden South Charlotte
Charlotte, NC	420	163.0		47.1		47.1		2Q27	4Q28
Camden Blakeney
Charlotte, NC	349	154.0		32.8		32.8		3Q27	3Q28
Total	1,746	$	675.0	$	408.0	$	230.9

(1) Property in lease-up and was 74% leased at October 30, 2024.

(2) Property in lease-up and was 46% leased at October 30, 2024.

Development Pipeline Communities. At September 30, 2024, we had the following multifamily communities undergoing development activities:


($ in millions) Properties and Locations	Projected Homes	Total Estimated Cost (1)		Cost to Date
Camden Baker
Denver, CO	434	$	195.0	$	35.6
Camden Nations
Nashville, TN	393	178.0		42.0
Camden Gulch
Nashville, TN	498	300.0		51.9
Total	1,325	$	673.0	$	129.5

*(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, 2024, we also had four undeveloped land tracts with a valuation of approximately $57.8 million.

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 and nine months ended September 30, 2024 and 2023 are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2024		2023		2024		2023
Net income (loss)	$	(2,338)	$	49,819	$	128,231	$	186,378
Less: Fee and asset management income	(1,707)		(1,077)		(5,597)		(2,373)
Less: Interest and other income	(1,076)		(64)		(4,442)		(557)
Less: Income/(loss) on deferred compensation plans	(8,248)		3,339		(15,140)		(5,417)
Plus: Property management expense	9,817		7,891		29,057		24,939
Plus: Fee and asset management expense	623		444		1,541		1,277
Plus: General and administrative expense	18,845		15,543		53,692		46,762
Plus: Interest expense	32,486		33,006		97,250		99,427
Plus: Depreciation and amortization expense	145,844		144,359		436,540		429,857
Plus: Expense/(benefit) on deferred compensation plans	8,248		(3,339)		15,140		5,417
Plus: Impairment associated with land development activities	40,988		—		40,988		—
Plus: Loss on early retirement of debt	—		—		921		2,513
Less: Gain on sale of operating property	—		—		(43,806)		(48,919)
Plus: Income tax expense	390		752		2,354		2,753


Property net operating income	$	243,872	$	250,673	$	736,729	$	742,057

Property NOI (1)

Property NOI, as reconciled above, is detailed further into the following categories for the three and nine months ended September 30, 2024 as compared to the same periods in 2023:


($ in thousands)	Homes at		Three Months Ended September 30,						Change						Nine Months Ended September 30,						Change
9/30/2024		2024			2023			$			%			2024			2023			$			%
Property revenues:
Same store communities	55,866		$	367,488		$	365,148		$	2,340		0.6	%		$	1,098,390		$	1,081,992		$	16,398		1.5	%
Non-same store communities	2,195		14,324			13,204			1,120			8.5			42,506			35,662			6,844			19.2
Development and lease-up communities	1,935		2,787			6			2,781			*			4,747			6			4,741			*

Dispositions/Other	—		2,633			12,420			(9,787)			(78.8)			11,880			36,780			(24,900)			(67.7)
Total property revenues	59,996		$	387,232		$	390,778		$	(3,546)		(0.9)	%		$	1,157,523		$	1,154,440		$	3,083		0.3	%

Property expenses:
Same store communities	55,866		$	132,898		$	130,500		$	2,398		1.8	%		$	393,685		$	384,516		$	9,169		2.4	%
Non-same store communities	2,195		5,271			5,047			224			4.4			15,375			14,211			1,164			8.2
Development and lease-up communities	1,935		1,313			18			1,295			*			2,822			25			2,797			*

Dispositions/Other	—		3,878			4,540			(662)			(14.6)			8,912			13,631			(4,719)			(34.6)
Total property expenses	59,996		$	143,360		$	140,105		$	3,255		2.3	%		$	420,794		$	412,383		$	8,411		2.0	%

Property NOI:
Same store communities	55,866		$	234,590		$	234,648		$	(58)		—	%		$	704,705		$	697,476		$	7,229		1.0	%
Non-same store communities	2,195		9,053			8,157			896			11.0			27,131			21,451			5,680			26.5
Development and lease-up communities	1,935		1,474			(12)			1,486			*			1,925			(19)			1,944			*

Dispositions/Other	—		(1,245)			7,880			(9,125)			(115.8)			2,968			23,149			(20,181)			(87.2)
Total property NOI	59,996		$	243,872		$	250,673		$	(6,801)		(2.7)	%		$	736,729		$	742,057		$	(5,328)		(0.7)	%

** Not a meaningful percentage.*

(1) For 2024, same store communities are communities we wholly-owned and were stabilized since January 1, 2023, excluding communities under redevelopment and properties held for sale. Non-same store communities are stabilized communities not owned or stabilized since January 1, 2023, 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, 2023, 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 decreased approximately $0.1 million and increased approximately $7.2 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023.

The $0.1 million decrease in same store property NOI for the three months ended September 30, 2024 was primarily due to an increase in same store property expenses of approximately $2.4 million which was offset by an increase of approximately $2.3 million in same store property revenues as compared to the same period in 2023.

The $2.3 million increase in same store property revenues during the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an approximate $0.8 million increase in average rental rates and lower uncollectible revenues of approximately $1.6 million, partially offset by $0.6 million of lower miscellaneous fee income. The increase was also due to approximately $0.5 million of higher income from our utility rebilling and ancillary income programs.

The $2.4 million increase in same store property expenses during the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to higher utilities expense of approximately $1.9 million, higher salaries and benefits of approximately $1.8 million, higher repairs and maintenance expense of approximately $1.3 million, and higher marketing, leasing, and other expenses of approximately $0.6 million. These increases were partially offset by lower insurance expense of approximately $1.9 million and lower real estate taxes of approximately $1.3 million primarily due to higher refunds received.

The $7.2 million increase in same store property NOI for the nine months ended September 30, 2024 as compared to the same period in 2023 was primarily due to an increase of approximately $16.4 million in same store property revenues which was partially offset by an increase in same store property expenses of approximately $9.2 million as compared to the same period in 2023.

The $16.4 million increase in same store property revenues during the nine months ended September 30, 2024 as compared to the same period in 2023, was primarily due to an approximate $7.5 million increase in rental revenues due in part to higher average rental rates, and approximately $7.3 million of lower uncollectible revenue. The increase was also due to $1.6 million of higher income from our utility rebilling and ancillary income programs.

The $9.2 million increase in same store property expenses during the nine months ended September 30, 2024 as compared to the same period in 2023, was primarily due to higher salaries and benefits of approximately $5.0 million, higher utilities expense of approximately $3.9 million, higher repairs and maintenance expense of approximately $2.4 million, higher marketing, leasing, and other expenses of approximately $2.0 million, and higher property general and administrative expenses of approximately $0.6 million. These increases were partially offset by lower insurance expenses of approximately $3.5 million and lower real estate taxes of approximately $1.2 million.

Non-same Store and Development and Lease-up Analysis

Property NOI from non-same store and development and lease-up communities increased approximately $2.4 million and $7.6 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases were due to increases from non-same store communities of approximately $0.9 million and $5.7 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023, and increases from development and lease-up communities of $1.5 million and $1.9 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases in property NOI from our non-same store communities were primarily due to the stabilization of two operating properties in 2023 and one operating property in 2024. The increases in property NOI from our development and lease-up communities were primarily due to the timing of lease-up of two operating properties under development and one development community under lease-up, which completed construction during the second quarter of 2024.

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, 2024 as compared to 2023		For the nine months ended September 30, 2024 as compared to 2023

Property Revenues:

Revenues from non-same store stabilized properties	$	1.1	$	6.8
Revenues from development and lease-up properties	2.8		4.7
Other non same-store	—		0.1
	$	3.9	$	11.6
Property Expenses:

Expenses from non-same store stabilized properties	$	0.1	$	1.1
Expenses from development and lease-up properties	1.3		2.8
Other non same-store	0.1		0.1
	$	1.5	$	4.0
Property NOI:

NOI from non-same store stabilized properties	$	1.0	$	5.7
NOI from development and lease-up properties	1.5		1.9
Other non same-store	(0.1)		—
	$	2.4	$	7.6

Dispositions/Other Property Analysis

Dispositions/Other property NOI decreased approximately $9.1 million and $20.2 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The decreases were comprised of lower NOI related to dispositions of approximately $6.0 million and $18.4 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The decreases in NOI related to dispositions were due to the dispositions of one operating property in each of June 2023, December 2023, and February 2024. The decreases were also due to lower other property NOI of approximately $3.1 million and $1.8 million for the three and nine months ended September 30,

2024, respectively, as compared to the same periods in 2023. The $3.1 million lower other property NOI was primarily due to recognizing higher storm-related expenses of approximately $2.1 million during the three months ended September 30, 2024 as compared to the same period in 2023, and recognizing approximately $1.0 million of higher revenues related to business interruption proceeds during the three months ended September 30, 2023. The $1.8 million lower other property NOI for the nine months ended September 30, 2024 was primarily due to higher storm-related expenses of approximately $3.3 million, partially offset by approximately $1.1 million of higher revenues related to business interruption insurance proceeds for the nine months ended September 30, 2024 as compared to the same period in 2023.

Non-Property Income


($ in thousands)	Three Months Ended September 30,						Change						Nine Months Ended September 30,						Change
2024			2023			$			%			2024			2023			$			%
Fee and asset management	$	1,707		$	1,077		$	630		58.5%			$	5,597		$	2,373		$	3,224		*
Interest and other income	1,076			64			1,012			*			4,442			557			3,885			*
Income/(loss) on deferred compensation plans	8,248			(3,339)			11,587			*			15,140			5,417			9,723			*
Total non-property income/(loss)	$	11,031		$	(2,198)		$	13,229		(601.9)	%		$	25,179		$	8,347		$	16,832		201.7	%

** Not a meaningful percentage.*

Fee and asset management income from construction and development activities at our third-party construction projects, increased approximately $0.6 million and $3.2 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases were related to higher fees earned on third-party construction projects due to higher activity during the three and nine months ended September 30, 2024 as compared to the same periods in 2023.

Interest and other income increased approximately $1.0 million and $3.9 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases were primarily due to higher investment interest income earned due to having higher average cash balances during the three and nine months ended September 30, 2024 as compared to the same periods in 2023.

Our deferred compensation plans recognized income of approximately $8.2 million and $15.1 million during the three and nine months ended September 30, 2024, respectively, as compared to incurring a loss of approximately $3.3 million during the three months ended September 30, 2023 and recognizing income of approximately $5.4 million during the nine months ended September 30, 2023. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the expense related to these plans, as discussed below.

Other Expenses


($ in thousands)	Three Months Ended September 30,						Change						Nine Months Ended September 30,						Change
2024			2023			$			%			2024			2023			$			%
Property management	$	9,817		$	7,891		$	1,926		24.4	%		$	29,057		$	24,939		$	4,118		16.5	%
Fee and asset management	623			444			179			40.3			1,541			1,277			264			20.7
General and administrative	18,845			15,543			3,302			21.2			53,692			46,762			6,930			14.8
Interest	32,486			33,006			(520)			(1.6)			97,250			99,427			(2,177)			(2.2)
Depreciation and amortization	145,844			144,359			1,485			1.0			436,540			429,857			6,683			1.6
Expense/(benefit) on deferred compensation plans	8,248			(3,339)			11,587			*			15,140			5,417			9,723			*
Total other expenses	$	215,863		$	197,904		$	17,959		9.1	%		$	633,220		$	607,679		$	25,541		4.2	%

** Not a meaningful percentage.*

Property management expense, which represents regional supervision and accounting costs related to property operations, increased approximately $1.9 million and $4.1 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases were primarily related to higher salaries, benefits, and incentive compensation costs, and higher advocacy contributions. Property management expenses were approximately 2.5% and 2.0% of total property revenues for the three months ended September 30, 2024 and 2023, respectively, and were 2.5% and 2.2% for the nine months ended September 30, 2024 and 2023, respectively.

General and administrative expense increased approximately $3.3 million and $6.9 million during the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases were primarily related to higher salaries, benefits, and incentive compensation costs, higher legal expenses, and higher abandoned acquisition and development pursuit costs. Excluding income on deferred compensation plans, general and administrative expenses were

approximately 4.8% and 4.0% of total revenues for the three months ended September 30, 2024 and 2023, respectively, and were 4.6% and 4.0% of total revenues for the nine months ended September 30, 2024 and 2023, respectively.

Interest expense decreased approximately $0.5 million and $2.2 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The decreases were primarily due to the repayments of a $300 million, 6.21% unsecured term loan and a $250.0 million, 4.36% senior unsecured notes payable in January 2024, the repayment of a $250 million, 3.68% senior unsecured notes payable in in September 2024, and lower interest expense recognized on our unsecured revolving credit facility resulting from lower average balances outstanding during the three and nine months ended September 30, 2024 as compared to the same periods in 2023. The decreases were partially offset by increases in interest expense due to the issuance of $500 million senior unsecured notes in November 2023, the issuance of $400 million senior unsecured notes in January 2024 and slight decreases in capitalized interest expense primarily due to having lower average balances in assets under construction during the three and nine months ended September 30, 2024 as compared to the same periods in 2023. The decrease in interest expense during the nine months ended September 30, 2024, was also due to the early retirement of $185.3 million of secured variable rate notes in May 2023 and the repayment of a $250 million, 5.07% senior unsecured notes payable in June 2023.

Depreciation and amortization expense increased approximately $1.5 million and $6.7 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases were primarily due to higher depreciation related to the completion of apartment homes in our development pipeline and the completion of capitalized improvements during 2023 and 2024. The increases were partially offset by the disposition of one operating property in each of December 2023 and February 2024.

Our deferred compensation plans incurred an expense of approximately $8.2 million and $15.1 million for the three and nine months ended September 30, 2024, respectively, as compared to recognizing a benefit of approximately $3.3 million during the three months ended September 30, 2023 and incurring an expense of approximately $5.4 million during the nine months ended September 30, 2023. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the income related to these plans, as discussed in the non-property income/(loss) section above.

Other


	Three Months Ended September 30,				Change				Nine Months Ended September 30,				Change
($ in thousands)	2024		2023		$		%		2024		2023		$		%

Impairment associated with land development activities	$	(40,988)	$	—	$	(40,988)	*		$	(40,988)	$	—	$	(40,988)	*
Loss on early retirement of debt	$	—	$	—	$	—	—%		$	(921)	$	(2,513)	$	1,592	(63.4)	%


Gain on sale of operating property	$	—	$	—	$	—	—%		$	43,806	$	48,919	$	(5,113)	(10.5)	%

Income tax expense	$	(390)	$	(752)	$	362	(48.1)	%	$	(2,354)	$	(2,753)	$	399	(14.5)	%

** Not a meaningful percentage.*

The impairment expense associated with land development activities for the three and nine months ended September 30, 2024, of approximately $41.0 million related to three projects we have put on hold for the foreseeable future. These impairment charges represent the difference between each parcel's estimated fair value and the carrying value, which included the original purchase price and other capitalized development costs.

The $0.9 million loss on early retirement of debt for the nine months ended September 30, 2024 was due to the write-off of unamortized loan costs related to the early retirement of our $300 million unsecured term loan which was scheduled to mature in August 2024. The $2.5 million loss on early retirement of debt during the nine months ended September 30, 2023 was due to the early repayment of our $185.2 million secured variable rate notes due in 2024 and 2026, and consisted of approximately $1.7 million of prepayment penalties and fees and approximately $0.8 million of unamortized fair value adjustments.

The $43.8 million gain on sale during the nine months ended September 30, 2024 was due to the disposition of one operating property located in Atlanta, Georgia in February 2024. The $48.9 million gain on the sale during the nine months ended September 30, 2023, was due to the disposition of one operating property located in Costa Mesa, California in June 2023.

Income tax expense decreased approximately $0.4 million for each of the three and nine months ended September 30, 2024 as compared to the same periods in 2023. The decreases were primarily due to lower state and franchise income taxes relating to recent tax legislation changes in certain state jurisdictions, offset by an increase in taxable income due to higher third-party construction activities within 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 as net income (computed in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, 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 and losses on dispositions of real estate, impairment write-downs of certain real estate assets, 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 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 and nine months ended September 30, 2024 and 2023 are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023
Funds from operations

Net income (loss) attributable to common shareholders	$	(4,204)	$	47,963	$	122,602	$	180,979
Real estate depreciation and amortization	142,853		141,362		427,595		420,762


Impairment associated with land development activities	40,988		—		40,988		—
Gain on sale of operating property	—		—		(43,806)		(48,919)

Income allocated to non-controlling interests	1,866		1,856		5,629		5,399
Funds from operations	$	181,503	$	191,181	$	553,008	$	558,221

Casualty-related expenses, net of (recoveries)	2,833		(436)		2,769		503
Severance	—		—		506		—


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023
Legal costs and settlements, net of recoveries	1,301		—		3,267		84
Loss on early retirement of debt	—		—		921		2,513
Expensed development and other pursuit costs	833		—		1,493		471
Advocacy contributions	1,653		—		1,653		—

Miscellaneous (income)/expense (1)	—		—		—		(364)
Core funds from operations	$	188,123	$	190,745	$	563,617	$	561,428

Less: recurring capitalized expenditures	(25,676)		(26,554)		(77,296)		(65,167)
Core adjusted funds from operations	$	162,447	$	164,191	$	486,321	$	496,261

Weighted average shares – basic	108,426		108,683		108,513		108,638
Incremental shares issuable from assumed conversion of:
Share based awards	62		23		34		21
Common units	1,594		1,595		1,594		1,596
Weighted average shares – diluted	110,082		110,301		110,141		110,255

(1) Activity during the nine months ended September 30, 2023 relates to proceeds from an earn-out from a 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 6.9 for each of the three months ended September 30, 2024 and 2023, and 6.9 and 6.8 for the nine months ended September 30, 2024 and 2023, 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 89.9% of our properties were unencumbered at both September 30, 2024 and 2023. Our weighted average maturity of debt was approximately 6.5 years at September 30, 2024.

Our primary source 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 2023 ATM program, and other unsecured borrowings or secured mortgages. We believe our liquidity and financial condition are sufficient to meet all of our reasonably anticipated cash needs during the next twelve months from our filing date including:

normal recurring operating expenses;
current debt service requirements including scheduled debt maturities;
recurring and non-recurring capital expenditures;
funding of property developments, repositions, redevelopments, and acquisitions;
the minimum dividend payments required to maintain our REIT qualification under the Code; and
funding share repurchases.

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, 2024 as compared to the same period in 2023.

Net cash from operating activities was approximately $622.5 million during the nine months ended September 30, 2024 as compared to approximately $603.0 million for the same period in 2023. The increase was primarily due to a higher prepayment of rental income received from our residents, the growth attributable to our same store and non-same store communities, and lower interest payments on our secured and unsecured debt, partially offset by a decrease in cash from property operations due to the sale of two operating properties in 2023 and one operating property in 2024. See further discussion of our 2024 operations as compared to 2023 in "Results of Operations."

Net cash used in investing activities during the nine months ended September 30, 2024 totaled approximately $196.0 million as compared to $240.7 million during the same period in 2023. Cash outflows during the nine months ended September 30, 2024 primarily related to amounts paid for property development and capital improvements of approximately $306.6 million, partially offset by net proceeds from the sale of one operating property of approximately $114.5 million. Cash outflows during the nine months ended September 30, 2023 primarily related to amounts paid for property development and capital improvements of approximately $294.3 million, partially offset by net proceeds from the sale of one operating property of approximately $60.4 million. The increase in property development and capital improvements for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to higher capital improvements and repositions

expenditures in 2024 as compared to 2023. The property development and capital improvements during the nine months ended September 30, 2024 and 2023, included the following:


	Nine Months Ended September 30,
(in millions)	2024		2023
Expenditures for new development, including land	$	129.7	$	127.4
Capital expenditures	82.0		75.2
Reposition expenditures	70.1		64.1
Direct real estate taxes and capitalized interest and other indirect costs	24.8		27.6

Total	$	306.6	$	294.3

Net cash used in financing activities totaled approximately $652.2 million for the nine months ended September 30, 2024 as compared to approximately $356.8 million during the same period in 2023. Cash outflows during the nine months ended September 30, 2024 primarily related to the repayment of our $250 million senior unsecured notes in September 2024 and the repayment of our $300 million unsecured term loan and the $250 million senior unsecured notes in January 2024. Cash outflows also related to $337.5 million used for distributions to common shareholders and non-controlling interest holders, and $50.0 million used for common share repurchases. These outflows were partially offset by net proceeds of approximately $396.0 million from the issuance of $400.0 million senior unsecured notes in January 2024, and net proceeds of $138.0 million of borrowings from our unsecured revolving credit facility. Cash outflows during the nine months ended September 30, 2023 primarily related to the repayment of $250 million senior unsecured notes and $187.7 million secured variable rate notes, which includes prepayment penalties and fees, and $324.4 million used for distributions to common shareholders and non-controlling interest holders. These outflows were partially offset by net proceeds of $405.0 million of borrowings from our unsecured revolving credit facility.

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 rates on our unsecured revolving credit facility is based upon, at our option, (a) the daily or the one-, three-, or six-month Secured Overnight Financing Rate ("SOFR") plus, in each case, a spread based on our credit rating, or (b) a base rate equal to the higher of: (i) the Federal Funds Rate plus 0.50%, (ii) Bank of America, N.A.'s prime rate, (iii) Term SOFR plus 1.0%, and (iv) 1.0%. Advances under our unsecured 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 unsecured revolving credit facility. Our unsecured 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 September 30, 2024 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 unsecured revolving credit facility, it does reduce the amount available. At September 30, 2024, we had outstanding letters of credit totaling approximately $27.7 million and approximately $1.0 billion available under our unsecured revolving credit facility.

In May 2023, we created the 2023 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, in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. Actual sales from time to time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations by management of the appropriate sources of funding for us. We intend to use proceeds from the sale of our common shares under the 2023 ATM program 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 the 2023 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. As of the date of this filing, we did not have any debt maturing during the remainder of 2024 through April 2026. See Note 6, "Notes Payable," in the notes to Condensed Consolidated Financial Statements for a further discussion of our scheduled maturities.

As of September 30, 2024, we estimated the additional cost to complete the construction of five properties to be approximately $267.0 million. Of this amount, we expect to incur costs between approximately $23 million and $33 million during the remainder of 2024 and to incur the remaining costs during 2025 through 2027. Additionally, we expect to incur costs between approximately $20 million and $24 million of reposition, redevelopment, repurpose, and revenue enhancing expenditures and between approximately $28 million and $36 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 program, 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 2024, our Board of Trust Managers declared a quarterly dividend of $1.03 per common share to our common shareholders of record as of September 30, 2024. The quarterly dividend was subsequently paid on October 17, 2024, and we paid equivalent amounts per unit to holders of the common operating partnership units. Assuming similar quarterly dividend distributions for the remainder of 2024, our annualized dividend rate would be $4.12 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, 2023.

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