SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 1-12110 CAMDEN PROPERTY TRUST (Exact name of Registrant as specified in its Charter) TEXAS 76-6088377 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3200 Southwest Freeway, Suite 1500, Houston, Texas 77027 (Address of principal executive offices) (713) 964-3555 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of May 3, 1996, there were 14,667,617 shares of Common Shares of Beneficial Interest, $0.01 par value outstanding.
PART I. FINANCIAL INFORMATION Item 1. Financial Statements <TABLE> CAMDEN PROPERTY TRUST CONSOLIDATED BALANCE SHEETS (In thousands) <CAPTION> ASSETS March 31, December 31, 1996 1995 -------- -------- (Unaudited) <S> <C> <C> Real estate assets, at cost: Land $ 80,857 $ 81,544 Buildings and improvements 476,149 471,584 Projects under development, including land 45,169 54,470 ________ ________ 602,175 607,598 Less: accumulated depreciation (40,421) (36,800) ________ ________ 561,754 570,798 Accounts receivable - affiliates 468 369 Notes receivable - affiliates 3,569 3,477 Deferred financing and other assets, net 4,883 4,839 Cash and cash equivalents 442 236 Restricted cash - escrow deposits 1,357 2,633 ________ ________ Total assets $572,473 $582,352 ======== ======== <CAPTION> LIABILITIES AND SHAREHOLDERS' EQUITY <S> <C> <C> Liabilities: Notes payable: Unsecured $125,071 $122,783 Secured 117,241 112,676 Accounts payable 6,572 8,300 Accrued real estate taxes 3,654 11,865 Accrued expenses and other liabilities 7,508 6,276 Dividends payable 6,897 6,623 ________ ________ Total liabilities 266,943 268,523 7.33% Convertible Subordinated Debentures 44,050 44,050 Preferred Shares of Beneficial Interest - 1,950 Shareholders' Equity: Common shares of beneficial interest 147 145 Additional paid-in capital 303,227 299,808 Distributions in excess of net income (38,272) (29,625) Unearned restricted share awards (3,622) (2,499) ________ ________ Total shareholders' equity 261,480 267,829 ________ ________ Total liabilities and shareholders' equity $572,473 $582,352 ======== ======== See Notes to Consolidated Financial Statements. </TABLE>
<TABLE> CAMDEN PROPERTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts) <CAPTION> Three Months Ended March 31, ---------------------------- 1996 1995 ------- ------- <S> <C> <C> Revenues Rental income $25,145 $21,510 Other income 1,445 1,038 _______ _______ Total revenues 26,590 22,548 Expenses Property operating and maintenance 9,263 7,853 Real estate taxes 3,225 2,881 General and administrative 1,109 998 Interest 4,060 2,981 Depreciation and amortization 5,523 4,720 _______ _______ Total expenses 23,180 19,433 _______ _______ Income before gain on sales of properties and extinguishment of hedges upon debt refinancing 3,410 3,115 Gain on sales of properties 195 Extinguishment of hedges upon debt refinancing (5,351) _______ _______ Net income(loss) (1,746) 3,115 Preferred share dividends (4) (10) _______ _______ Net income(loss) to common shareholders $(1,750) $ 3,105 ======= ======= Net income(loss) per common share and common equivalent share $ (0.12) $ 0.22 Distributions declared per common share $ 0.475 $ 0.46 Weighted average number of common and common equivalent shares outstanding 14,512 14,312 See Notes to Consolidated Financial Statements. </TABLE>
<TABLE> CAMDEN PROPERTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) <CAPTION> For the Quarter Ended March 31, ------------------------------- 1996 1995 -------- -------- <S> <C> <C> CASH FLOW FROM OPERATING ACTIVITIES Net income (loss) $ (1,746) $ 3,115 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,523 4,720 Gain on sales of properties (195) Extinguishment of hedges upon debt refinancing 5,351 Net change in operating accounts (6,628) (4,937) ________ _______ Net cash provided by operating activities 2,305 2,898 CASH FLOW FROM INVESTING ACTIVITIES Proceeds from issuance of common shares, net 10 Investment in real estate assets (15,301) (17,459) Net proceeds from sales of properties 19,436 Increase in notes receivable for net advances to affiliates (92) (116) Decrease in earnest money deposits 75 100 Other (24) (32) ________ _______ Net cash provided by (used in) investing activities 4,104 (17,507) CASH FLOW FROM FINANCING ACTIVITIES Net (decrease) increase in lines of credit (97,283) 14,559 Proceeds from notes payable 104,359 10,415 Extinguishment of hedges upon debt refinancing (5,351) Principal reduction on notes payable (223) (4,098) Distributions to common shareholders (6,623) (6,280) Cash dividends paid to preferred shareholders (10) Payment of loan costs (1,184) (60) Other 102 47 ________ _______ Net cash provided by (used in) financing activities (6,203) 14,573 ________ _______ Net increase (decrease) in cash and cash equivalents 206 (36) Cash and cash equivalents, beginning of period 236 241 ________ _______ Cash and cash equivalents, end of period $ 442 $ 205 ======== ======= SUPPLEMENTAL INFORMATION Cash paid for interest, net of interest capitalized $ 3,196 $ 1,958 Interest capitalized $ 1,424 $ 1,067 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Shares issued under benefit plans $ 1,690 $ 1,984 Conversion of preferred shares $ 1,950 See Notes to Consolidated Financial Statements. </TABLE>
CAMDEN PROPERTY TRUST Notes to Consolidated Financial Statements (Unaudited) 1. Interim Unaudited Financial Information The accompanying interim unaudited financial information has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Camden Property Trust as of March 31, 1996 and the results of operations and cash flows for the three months ended March 31, 1996 and 1995 have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. Summary Camden Property Trust and its subsidiaries ("Camden" or the "Company") are engaged in the ownership, development, acquisition, management, marketing and disposition of multifamily apartment communities in the Southwest and Mountain regions of the United States. As of March 31, 1996, the Company owned and operated 49 multifamily properties located in Houston, Dallas/Fort Worth, Austin, Corpus Christi, El Paso and Tucson. These 49 properties contained 16,737 apartment units and had a weighted average occupancy rate of 94.1% for the quarter ended March 31, 1996. The Company is developing four multifamily properties in Houston, Dallas and Phoenix which will, when completed, add 1,552 units to its portfolio, and has three properties on which it intends to develop an estimated 1,010 units. Property Update During the first quarter of 1996, the Company completed construction of the 516-unit Vanderbilt Square apartments in Houston and the 288-unit Breakers apartments in Corpus Christi. As of March 31, 1996, the properties were near stabilization as occupancies reached 75% and 68%. These properties were 81% and 73% leased, respectively. Construction was begun during the quarter on The Park at Sugar Grove apartments, a 380-unit property in the Houston area, and Arrowhead Springs apartments, a 288-unit property in the Phoenix area. These properties are expected to be ready for first occupancy during the second half of 1996 with stabilization to occur during 1997. The Company seeks to selectively dispose of assets that are either not in core markets or that have a lower projected net operating income growth rate than the overall portfolio. The proceeds from these sales may be reinvested in acquisitions or developments or used to retire debt. During the first quarter of 1996, the Company disposed of three properties for slightly in excess of their net book value of $19.2 million. These properties contained 117 units in Houston, 476 units in Dallas and 216 units in San Antonio. See note 7, "Subsequent Events", regarding a property acquisition on May 1, 1996. Other In March 1996, the Company announced that its Board of Trust Managers declared a dividend in the amount of $0.475 per common share for the first quarter of 1996. This quarterly dividend represents an increase of $.015 per share from the fourth quarter 1995 and an annualized dividend rate of $1.90 per share, and a 3.3% increase over the $1.84 annualized rate for 1995. The Company intends to continue increasing its dividend annually at a rate which is less than its rate of growth in funds from operation. Management believes that retaining funds from operations in the maximum allowable amounts is in the best interest of the Company's shareholders. 2. Property Operating and Maintenance Expenses Property operating and maintenance expenses included normal repairs and maintenance totaling $1.9 million for the first three months of 1996 and $1.5 million for the same period in 1995. In addition, amounts incurred subsequent to the initial renovation and rehabilitation periods for recurring expenditures such as carpets, appliances and other furnishings and equipment, which might otherwise be capitalized, totaled $870,000 for the first quarter of 1996 and $445,000 for the same period in 1995 and were included in expense. 3. Notes Payable <TABLE> <CAPTION> A summary of the Company's notes payable follows: (In thousands) March 31, December 31, 1996 1995 ------------ ------------ <S> <C> <C> Unsecured notes: Senior unsecured notes $ 99.5 $ Unsecured credit facility 25.5 122.8 ______ ______ 125.0 122.8 Secured notes: Construction loans 58.3 53.5 Conventional mortgage loans 59.0 59.2 ______ ______ 117.3 112.7 ______ ______ Total notes payable $242.3 $235.5 ====== ====== Floating rate debt included in notes payable $ 33.8 $ 26.3 </TABLE> During the first quarter of 1996, the Company issued from its previously filed shelf registration statement an aggregate principal amount of $100 million of five-year senior unsecured notes ("Notes"). Interest on the Notes accrues at a rate of 6 5/8% per annum and is payable semi-annually on February 15 and August 15, commencing on August 15, 1996. The Notes are direct, senior unsecured obligations of the Company and rank equally with all other unsecured and unsubordinated indebtedness of the Company from time to time outstanding. The Notes may be redeemed at any time at the option of the Company subject to a make whole provision. The proceeds to the Company from the sale of the Notes were $98.4 million, net of issuance costs. The Company used the net proceeds to reduce $93.4 million of indebtedness under the unsecured credit facility, to pay $4.9 million arising from the early settlement of hedging agreements related to the indebtedness repaid and to pay $0.5 million to extinguish a bank's option related to a settled hedging agreement. At March 31, 1996, a total of $50 million in interest rate hedging agreements remain in effect. One $25 million contract matures in June 1996 with a bank's option to extend to June 1997. A second $25 million contract matures in July 2000 with a bank's option to extend to July 2002. The actual rate on such $50 million of indebtedness consists of the 5.9% average fixed rate plus the spread over LIBOR, which ranges from 1.5% to 1.8%. Each of these two swaps continue to operate as a hedge to manage the risk of interest rate fluctuations. At the end of March 1996, the Company reduced its interest rate on its $150 million unsecured credit facility and on $12.2 million of its construction loans to LIBOR plus 150 basis points or Prime. Subsequent to March 31, 1996, the rate on an additional $9.4 million of construction debt was reduced to 150 basis points over LIBOR or Prime. 4. Restricted Share Awards During the first quarter of 1996, 75,841 restricted share awards were granted in lieu of cash compensation to certain key employees. At March 31, 1996, 227,847 of such shares have been granted since the inception of the 1993 Share Incentive Plan of which 16,196 awards were canceled and 51,664 have vested. The value of the restricted share awards at the date of grant are amortized over vesting periods ranging from three to five years from the date of grant. 5. Changes in Operating Accounts The effect of changes in the operating accounts on cash flows from operating activities is as follows (in thousands): <TABLE> <CAPTION> Quarter Ended March 31, ----------------------- 1996 1995 ------- ------- <S> <C> <C> Decrease(increase) in assets: Escrow deposits $ 1,276 $ 1,226 Accounts receivable-affiliates (99) 68 Other assets 902 320 Increase(decrease) in liabilities: Accounts payable (1,728) (224) Accrued real estate taxes (8,211) (7,010) Accrued expenses and other liabilities 1,232 683 _______ _______ Net change in operating accounts $(6,628) $(4,937) ======= ======= </TABLE> 6. Convertible Preferred Shares During the first quarter, all preferred shareholders elected to convert all of their preferred shares into 85,369 common shares. In 1993, the Company issued 84,783 shares of Series A cumulative convertible preferred shares of beneficial interests in exchange for the remaining multifamily operations of the Company's predecessor entities. These operations consisted primarily of asset management and construction activities. 7. Subsequent Events On May 1, 1996, the Company purchased a 400-unit multifamily property in Houston. The property is adjacent to an existing property, Sierra Pines, and the two will be operated as one property. The new addition was 94.5% occupied at closing. In the ordinary course of its business, the Company issues letters of intent indicating a willingness to negotiate for the purchase or sale of multifamily properties or development land. In accordance with the local real estate market practice, such letters of intent are non-binding, and neither party to the letter of intent is obligated to pursue negotiations unless and until a definitive contract is entered into by the parties. Even if definitive contracts are entered into, the letters of intent and resulting contracts contemplate that such contract will provide the purchaser with periods varying from 25 to 90 days during which it will evaluate the properties and conduct its due diligence and during which periods the purchaser will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money. There can be no assurance that definitive contracts will be entered into with respect to any properties covered by letters of intent or that the Company will acquire or sell any property as to which the Company may have entered into a definitive contract. Further, due diligence periods are frequently extended as needed. An acquisition or sale becomes probable at the time that the due diligence period expires and the definitive contract has not been terminated. The Company is then at risk under an acquisition contract, but only to the extent of any earnest money deposits associated with the contract, and is obligated to sell under a sales contract. The Company is currently in the due diligence period on contracts for the purchase of land for development or acquisition of properties. No assurance can be made that the Company will be able to complete the negotiations or become satisfied with the outcome of the due diligence. The Company seeks to selectively dispose of assets that are either not in core markets or that have a lower projected net operating income growth rate than the overall portfolio. The proceeds from these sales may be reinvested in acquisitions or developments or used to retire debt. The Company currently has letters of intent or contracts for the sale of certain properties from potential unaffiliated buyers. No assurances can be made that these transactions will be consummated.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Overview The following discussion should be read in conjunction with all of the financial statements and notes thereto appearing elsewhere in this report as well as the audited financial statements appearing in the Company's 1995 Annual Report to Shareholders. Where appropriate, comparisons are made on a dollars-per-weighted-average-unit basis in order to adjust for changes in the number of units owned during each period. Camden Property Trust and its subsidiaries ("Camden" or the "Company") are engaged in the ownership, development, acquisition, management, marketing and disposition of multifamily apartment communities in the Southwest and Mountain regions of the United States. As of March 31, 1996, the Company owned and operated 49 multifamily properties located in Houston, Dallas/Fort Worth, Austin, Corpus Christi, El Paso and Tucson. These 49 properties contained 16,737 apartment units and had a weighted average occupancy rate of 94.1% for the quarter ended March 31, 1996. The Company had four multifamily properties in Houston, Dallas and Phoenix which will, when completed, add 1,552 units to its portfolio, and has three properties on which it intends to develop an estimated 1,010 units. Camden's real estate portfolio at December 31, 1995 and March 31, 1996 is summarized as follows: <TABLE> <CAPTION> December 31, 1995 March 31, 1996 ------------------- ------------------- Units Projects %* Units Projects %* ----- -------- -- ----- -------- -- <S> <C> <C> <C> <C> <C> <C> Operating Properties Texas Houston 6,598 20 33% 6,997 19 36% Dallas 6,065 17 30 5,589 16 29 Austin 1,745 6 9 1,745 6 9 Other 1,513 5 8 1,585 6 8 ______ __ ____ ______ __ ____ Total Texas Properties 15,921 48 79 15,916 47 82 ______ __ ____ ______ __ ____ Arizona 821 2 4 821 2 4 ______ __ ____ ______ __ ____ Total Operating Properties 16,742 50 83 16,737 49 87 Projects Under Development** Texas Houston 1,226 3 6 710 2 4 Dallas 920 2 5 920 2 5 Other 288 1 1 ______ __ ____ ______ __ ____ Total Texas Properties 2,434 6 12 1,630 4 8 ______ __ ____ ______ __ ____ Arizona 716 2 4 716 2 4 Colorado 216 1 1 216 1 1 ______ __ ____ ______ __ ____ Total Projects Under Development 3,366 9 17 2,562 7 13 ______ __ ____ ______ __ ____ Total Properties 20,108 59 100% 19,299 56 100% ====== == ==== ====== == ==== <FN> *Based on units. **The totals for projects under development include three projects comprising 1,010 units on which construction has not commenced. </FN> </TABLE> At March 31, 1996, the Company had four development properties in various stages of development and three properties which it intends to develop as follows: <TABLE> <CAPTION> Development Properties Estimated Number Budgeted Cost to Estimated Estimated Property of Cost Complete Completion Stabilization and Location Units ($ millions)($ millions) Date Date - - ------------- ------ ------------ ------------ ----------- ------------- <S> <C> <C> <C> <C> <C> Arrowhead Springs 288 $15.3 $13.6 1st Qtr., 4th Qtr., Phoenix, AZ 1997 1997 The Park at Addison 456 25.3 2.6 2nd Qtr., 4th Qtr., Dallas, TX 1996 1996 The Park at Sugar Grove 380 19.1 16.0 1st Qtr., 3rd Qtr., Houston, TX 1997 1997 Scottsdale Legacy 428 29.0 4.8 3rd Qtr., 4th Qtr., Phoenix, AZ 1996 1996 _____ _____ _____ 1,552 $88.7 $37.0 ===== ===== ===== <CAPTION> Future Development Properties Estimated Property and Number Total Project Cost Construction Location of Units ($ millions) Start Date - - ------------ -------- ----------------- -------------- <S> <C> <C> <C> The Village at 464 $24.2 To be determined Buckingham Dallas, TX Remington 216 12.6 To be determined Denver, CO Vanderbilt Square II 330 22.6 To be determined Houston, TX _____ _____ 1,010 $59.4 ===== ===== </TABLE> Comparison of the Quarter Ended March 31, 1996 to the Quarter Ended March 31, 1995 The changes in operating results from period to period are primarily the result of the development of 1,586 units and the disposition of three properties containing 809 units since March 31, 1995. During the first quarter of 1996, the completion of the Vanderbilt apartments in Houston and The Breakers apartments in Corpus Christi added 804 units to the portfolio. During this same period, the Company disposed of the above mentioned 809 units consisting of: the 117-unit The Madison apartments in Houston, the 216-unit Wolfe Run apartments in San Antonio and the 476-unit Collins Pointe apartments in Dallas. The weighted average number of units increased by 1,016 units, or 6.4%, from 15,945 to 16,961. Total units owned were 16,737 and 15,960 at March 31, 1996 and 1995, respectively. The portfolio had an average occupancy of 94.1% and 92.7% for the quarter ended March 31, 1996 and 1995, respectively. The average rental income per unit per month increased $44 or 9.8%, from $450 to $494 from March 31, 1995 to 1996, respectively. The increase is primarily due to 5.7% higher average rental rates from the stabilized real estate portfolio that existed throughout both periods and higher than average rental rates achieved on properties added to the portfolio. Other income increased by 39.2% or $407,000, from $1.0 million to $1.4 million for the quarter ended March 31, 1995, and 1996, respectively. The increase is due to a larger number of units owned and in operation combined with an increase in third party construction and management fee income of $132,000. Construction and management fee income totaled $279,000 and $147,000 for the quarter ended March 31, 1996 and 1995, respectively. Property operating and maintenance expenses and real estate taxes increased $1.8 million, from $10.7 million to $12.5 million, which represents an annual increase of $253 per unit. However, the Company's operating expense ratios decreased slightly over the prior year. This decrease was primarily a result of the change in the property mix due to development. Real estate taxes increased as a result of increases in valuations of renovated properties and increases in property tax rates. Operating expenses from the stabilized real estate portfolio in operation throughout both periods increased 2.8% resulting in an 8.3% increase in net operating income from these properties. General and administrative expense increased $111,000 from $1.0 million to $1.1 million. However, the Company's ratio of general and administrative expenses to revenues has decreased 6%. Interest expense increased 36.2%, from $3.0 million to $4.1 million due to increased indebtedness related to completed development and renovation costs, partially offset by reductions in interest rates. Interest capitalized was $1.4 million and $1.1 million for the quarter ended March 31, 1996 and 1995, respectively. Depreciation and amortization increased 17.0% to $5.5 million versus $4.7 million in the prior year. This increase was due primarily to developments and renovations. Liquidity and Capital Resources The Company funds its development and acquisitions through a combination of equity capital, conventional mortgage loans, construction loans and an unsecured revolving credit facility of $150 million with six banks (the "Unsecured Credit Facility"). During the first quarter of 1996, the Company issued from its previously filed shelf registration statement an aggregate principal amount of $100 million of five-year senior unsecured notes (the "Notes"). Interest on the Notes accrues at a rate of 6 5/8% per annum and is payable semi-annually on February 15 and August 15, commencing on August 15, 1996. The Notes are direct, senior unsecured obligations of the Company and rank equally with all other unsecured and unsubordinated indebtedness of the Company from time to time outstanding. The Notes may be redeemed at any time at the option of the Company subject to a make whole provision. The net proceeds to the Company from the sale of the Notes were $98.4 million, net of issuance costs. The Company used the net proceeds to reduce $93.4 million of indebtedness under the unsecured credit facility, to pay $4.9 million arising from the early settlement of hedging agreements related to the indebtedness repaid and to pay $0.5 million to extinguish a bank's option related to a settled hedging agreement. At March 31, 1996, a total of $50 million in interest rate hedging agreements remain in effect. One $25 million contract matures in June 1996 with a bank's option to extend to June 1997. A second $25 million contract matures in July 2000 with a bank's option to extend to July 2002. The actual rate on such $50 million of indebtedness consists of the 5.9% average fixed rate plus the spread over LIBOR, which ranges from 1.5% to 1.8%. Each of these two hedging agreements continue to operate as a hedge to manage the risk of interest rate fluctuations. At the end of March 1996, the Company reduced its interest rate on its $150 million Unsecured Credit Facility and on one of its construction loans to LIBOR plus 150 basis points or Prime. Subsequent to March 31, 1996, the rate on an additional $9.4 million of construction debt was reduced to 150 basis points over LIBOR or Prime. On March 15, 1996, the Company declared a first quarter dividend in the amount of $0.475 per common share. The distributions were payable on April 17, 1996 to shareholders of record as of March 29, 1996. The Company intends to continue shareholder distributions in accordance with REIT requirements while maintaining a conservative payout ratio, and expects to continue reducing the payout ratio to the maximum allowable levels by raising the dividends at a rate which is less than the FFO growth rate. The Company intends to meet its short-term liquidity requirements through cash flow provided by operations, the Unsecured Credit Facility and construction loans. The Company intends to use senior unsecured debt (such as the Notes) to refinance the construction loans and other secured debt and borrowings under the Unsecured Credit Facility. The Company considers its ability to generate cash to be sufficient, and expects it to continue to be sufficient to meet future operating requirements and shareholder distributions. Funds from Operations Funds from operations for the quarter ended March 31, 1996 increased $1.1 million over the same quarter of 1995, primarily due to properties added to the portfolio and rental growth in the Company's Dallas and Houston markets. Industry analysts generally consider funds from operations ("FFO") an appropriate measure of performance of an equity REIT. FFO is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus real estate depreciation and other non-cash items. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO should be examined in conjunction with net income as presented in the consolidated financial statements and data included elsewhere in this report. FFO should not be considered as an alternative to net income as an indication of the Company's operating performance or to net cash provided by operating activities as a measure of the Company's liquidity. A calculation of FFO follows (in thousands): <TABLE> <CAPTION> Quarter Ended March 31, ----------------------- 1996 1995 ------ ------ <S> <C> <C> Net income(loss) to common shareholders $(1,750) $3,105 Real estate asset depreciation 5,336 4,478 Gain on sales of properties (195) Extinguishment of hedges upon debt refinancing 5,351 _______ ______ Funds from operations available to common shareholders 8,742 7,583 Preferred share dividends 4 10 _______ ______ Total funds from operations 8,746 7,593 Interest on convertible subordinated debentures 807 876 Amortization of deferred costs on convertible debentures 79 86 _______ ______ Funds from operations - Fully diluted $ 9,632 $8,555 ======= ====== </TABLE> The Company seeks to continue to maintain a conservative capital structure by: (i) targeting a ratio of total debt to total market capitalization of less than 50%; (ii) extending and sequencing the maturity dates of its debt where possible; (iii) borrowing at fixed rates; (iv) borrowing on an unsecured basis; (v) maintaining a substantial number of unencumbered assets; and (vi) maintaining a conservative debt service coverage ratio. At March 31, 1996, the Company's ratio of total debt to total market capitalization was approximately 39% (based on the closing price of $23.125 per common share of beneficial interest, $0.01 par value, of the Company on the New York Stock Exchange composite tape on March 29, 1996). This ratio represents total consolidated debt of the Company (excluding the Company's Convertible Debentures due 2001) as a percentage of the market value of the Company's common shares (including common shares issuable upon conversion of the Convertible Debentures, but excluding common shares issuable upon exercise of outstanding options) plus total consolidated debt (excluding the Convertible Debentures). The interest coverage ratio was 3.2 times for the first quarter of 1996. At March 31, 1996, 72.4% of the Company's portfolio (based on the number of units) were unencumbered. Inflation The Company leases apartments under lease terms generally ranging from six to thirteen months. Management believes that such short-term lease contracts lessen the impact of inflation due to the ability to adjust rental rates to market levels as leases expire.
PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11.1 Statement re Computation of Per Share Earnings (b) Reports of Form 8-K No reports on Form 8-K have been filed by the registrant during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAMDEN PROPERTY TRUST G. Steven Dawson May 14, 1996 (Signature) Date Sr. Vice President of Finance, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial and Accounting Officer)