-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WSe7zuJPrs8ANXFZm7i55XhHyAd/V9ATJW05RxoaBwzSXscTrblZB3OSqoh+UvEF TMgUvsJqvYmQQpyIa0T7wA== 0000906345-97-000050.txt : 19970329 0000906345-97-000050.hdr.sgml : 19970329 ACCESSION NUMBER: 0000906345-97-000050 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMDEN PROPERTY TRUST CENTRAL INDEX KEY: 0000906345 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 766088377 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12110 FILM NUMBER: 97566047 BUSINESS ADDRESS: STREET 1: 3200 SOUTHWEST FRWY STREET 2: STE 1500 CITY: HOUSTON STATE: TX ZIP: 77027 BUSINESS PHONE: 7139643555 MAIL ADDRESS: STREET 1: 3200 SOUTHWEST FREEWAY STREET 2: SUITE 1500 CITY: HOUSTON STATE: TX ZIP: 77027 10-K 1 FORM 10-K TEXT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) _ |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended December 31, 1996 OR _ |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _______ to _________ 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 No.) 3200 Southwest Freeway, Suite 1500 Houston, Texas 77027 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 964-3555 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - ------------------------------ ------------------------ Common Shares of Beneficial Interest, $.01 par value New York Stock Exchange 7.33% Convertible Subordinated Debentures due 2001 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether 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 Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No ______ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X| The aggregate market value of voting shares of beneficial interest held by non-affiliates of the registrant was $451,605,448 at March 18, 1997. The number of common shares of beneficial interest outstanding at March 18, 1997 was 16,705,224. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Report to Shareholders for the year ended December 31, 1996 are incorporated by reference in Parts II and IV. Portions of the registrant's Proxy Statement in connection with its Annual Meeting of Shareholders to be held June 5, 1997 are incorporated by reference in Part III. PAGE PART I Item 1. Business Introduction 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 region of the United States. As of December 31, 1996, the Company owned and operated 48 multifamily properties ("Operating Properties") containing 17,611 units located in Houston, Dallas/Fort Worth, Austin, Corpus Christi, El Paso, Phoenix and Tucson. These properties had a weighted average occupancy rate of 94.0% for the year ended December 31, 1996. The Company is developing five multifamily properties (the "Development Properties") in Houston, Dallas and Phoenix which will, when completed, add 1,778 units to its portfolio, and has one site in Denver which it intends to develop (collectively with the Operating Properties and the Development Properties, the "Camden Properties"). On December 16, 1996, the Company announced the execution of a definitive merger agreement pursuant to which Paragon Group, Inc. would be merged with and into a wholly-owned subsidiary of Camden. Upon consummation of the merger, the Company will have 35,364 units and approximately $1.25 billion in total assets. Each share of Paragon will be exchanged for 0.64 shares of Camden. The exchange ratio is based on Camden's closing price on December 4, 1996 of $27.75 per share and $17.75 per share for Paragon. If Camden's share price falls below $25.67 per share during a specified time frame as set forth in the merger agreement, Paragon has the right to terminate the agreement, subject to Camden's right to negate such termination right by increasing the exchange ratio so that Paragon's shareholders receive the same aggregate dollar value of Camden shares had Camden's share price remained at the $25.67 per share threshold. Paragon is a fully integrated real estate investment trust ("REIT") headquartered in Dallas, Texas whose business is the operation, development and acquisition of multifamily apartment communities in the Southwest, Midwest, North Carolina and Florida. Paragon is a self-administered and self-managed REIT that, as of December 31, 1996, owned interests in 57 completed multifamily properties located in six states, with three additional multifamily properties under construction. Subsequent to December 31, 1996, three of Paragon's properties were sold and one of Paragon's construction properties was completed. The merger with Paragon has been structured as a tax-free transaction and will be treated as a purchase for accounting purposes. The merger is subject to the approval of both companies' shareholders. The meetings to consider the transaction have been scheduled for April 15, 1997. It is anticipated that the merger will be completed by the end of April 1997. At December 31, 1996, the Company employed 613 persons approximately 73 of whom were located at the Company's headquarters and 540 of whom were "on-site" or in regional operating offices. The Company's headquarters are located at 3200 Southwest Freeway, Suite 1500, Houston, Texas 77027 and its telephone number is (713) 964-3555. Operating Strategy Management believes that producing consistent earnings growth and developing a strategy for selective investment in favorable markets are crucial factors to Camden's success. Camden relies heavily on its sophisticated property management capabilities and innovative operating strategies in its efforts to produce consistent earnings growth. Sophisticated Property Management. Management believes the depth of its organization enables Camden to deliver quality services, thereby promoting resident satisfaction and improving resident retention, which reduces operating expenses. Camden manages the Camden Properties utilizing its staff of professionals and support personnel, including certified property managers, certified public accountants, experienced apartment managers and leasing agents, and trained apartment maintenance technicians. All on-site personnel are trained to deliver high quality services to their residents. Camden attempts to motivate on-site employees through incentive compensation arrangements based upon the net operating income produced at their property, as well as rental rate increases and the level of lease renewals achieved. Innovative Operating Strategies. Management believes an intense focus on operations is necessary to realize consistent, sustained earnings growth. Ensuring resident satisfaction, increasing rents as market conditions allow, maximizing rent collections, maintaining property occupancy at optimal levels and controlling operating costs comprise Camden's principal strategies to maximize property net operating income. Lease terms are generally staggered based on vacancy exposure by apartment type so that lease expirations are better matched to each Camden Property's seasonal rental patterns. Camden offers leases of six-month to thirteen-month terms, with individual property marketing plans structured to respond to local market conditions. In addition, Camden conducts ongoing customer service surveys to ensure timely responsiveness to changing resident needs and the highest level of resident satisfaction. Acquisitions and Dispositions. Camden believes it is well positioned in its markets with the expertise to take advantage of both acquisition and development opportunities. This dual capability, combined with what management believes is a conservative financial structure, affords Camden the ability to concentrate its growth efforts towards selective acquisition opportunities and development alternatives. Several of Camden's core markets are targeted by Camden for continued acquisitions during 1997. Camden plans to continue diversification of its investments within its core markets, both geographically and in terms of the number of units and selection of amenities offered. The broadest segment of Camden's core markets is comprised of properties which are ten to fifteen years old. Camden's Operating Properties have an average age of ten years (calculated on a basis of investment dollars). Camden believes its demonstrated ability to make physical improvements to acquired properties, such as new or enhanced landscaping design, new or upgraded amenities and redesigned building structures, coupled with a strong focus on property management and marketing, has resulted in attractive yields on the acquired Camden Properties. To generate consistent earnings growth, Camden seeks to selectively dispose of properties and redeploy capital if management determines a property cannot meet long-term earnings growth expectations. Camden disposed of five properties containing 1,219 units in 1996. The net proceeds of $29.8 million from the property dispositions were either reinvested in acquisitions or developments or were used to retire debt. New Development. Selective development of new apartment properties in Camden's core markets will continue to be important to the growth of Camden's portfolio for the next several years. Camden uses experienced on-site construction superintendents, operating under the supervision of project managers and senior management, to control the construction process. All development decisions are made from the corporate office. Risks inherent to developing real estate include zoning changes and environmental matters. There is also the risk that certain assumptions concerning economic conditions may change during the development process. Management believes that it understands and effectively manages the risks associated with development and that the risks of new development are justified by higher potential yields. Environmental Matters. Under various federal, state, and local environmental laws, regulations and ordinances, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances, petroleum product releases or ACMs at such property and may be held liable to a governmental entity or to third parties for property damage and for investigation and cleanup costs incurred by such parties in connection with the contamination. The costs of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to properly remediate the contamination on such property, may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances at a disposal or treatment facility also may be liable for the costs of remediation or removal of a release of hazardous or toxic substances at or from such facility whether or not such facility is owned or operated by such person. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs it incurs in connection with the contamination. Finally, the owner of a site may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site. In connection with its acquisitions of properties, the Company's practice is to obtain Phase I and, if necessary, Phase II environmental assessments. These Phase I assessments have been carried out in accordance with accepted industry practices. The Company has also conducted limited subsurface investigations and tested for radon and lead-based paint where such procedures have been recommended by the consultants. Insurance. The Company carries comprehensive liability, fire, extended coverage and rental loss insurance with respect to all of its properties, with policy specifications, insured limits and deductibles customarily carried for similar properties, and carries similar insurance with respect to any undeveloped parcels (with such exceptions as are appropriate given the undeveloped nature of such properties). Financial Strategy Financial Structure. The Company intends to continue maintaining what management believes to be 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. Camden has maintained on a quarterly basis a financial structure with no more than 40% total debt to total market capitalization since its initial public offering ("Camden IPO") in July 1993. At December 31, 1996, the Company's ratio of total debt to total market capitalization was approximately 32.6% (based on the closing price of $28.63 per common share of the Company on the New York Stock Exchange composite tape on December 31, 1996). This ratio represents total consolidated debt of the Company (excluding the Company's 7.33% Convertible Debentures due 2001 ["Convertible Debentures"]) 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 and 3.4 times for 1996 and 1995, respectively. At December 31, 1996 and 1995, 84.3% and 68.6%, respectively, of the Company's properties (based on invested capital) were unencumbered. After adjusting for the early 1997 retirement of two conventional mortgage loans, this unencumbered property percentage increased to 90.1%. Liquidity. The Company intends to meet its short-term liquidity requirements through cash flows provided by operations, the $150 million unsecured credit facility (the "Unsecured Credit Facility" or "facility"), construction loans, and other short-term borrowing arrangements. The Company intends to use equity capital or senior unsecured debt to refinance maturing secured debt, borrowings under its facility and other short-term borrowing arrangements. The Company has commenced under its previously filed shelf registration statement a $196 million medium-term note program to be used to provide intermediate or long-term, unsecured publicly-traded debt, none of which has yet been issued. The Company considers its ability to generate cash to be sufficient, and expects to be able to meet future operating requirements and shareholder distributions. On December 13, 1996, the Company declared its fourth quarter dividend in the amount of $0.475 per common share, bringing the total dividends for the year to $1.90 per common share. The fourth quarter distributions were paid on January 17, 1997 to shareholders of record as of December 30, 1996. During the first quarter of 1997, the Company announced an increase in the quarterly dividend rate to $0.49 per common share effective for 1997. The Company intends to continue shareholder distributions in accordance with REIT qualification requirements under the federal tax code while maintaining what management believes to be a conservative payout ratio, and expects to continue reducing the payout ratio by raising the dividends per share at a rate which is less than the funds from operations per share growth rate. Financial Flexibility. The Company concentrates its growth efforts toward selective development and acquisition opportunities in its core markets. During the year ended December 31, 1996, the Company incurred $56.1 million in development costs and $6.3 million in acquisition costs for new properties. The Company also seeks to selectively dispose of assets that are either not in core markets, have a lower projected net operating income growth rate than the overall portfolio, or no longer conform to the Company's operating and investment strategies. The $29.8 million in net proceeds received from these asset disposals during 1996 were either reinvested in acquisitions or developments or were used to retire debt. The Company funds its developments and acquisitions through a combination of equity capital, debt securities, conventional mortgage loans, the Unsecured Credit Facility and other short-term borrowing arrangements. In the past, the Company had also utilized construction loans to fund its developments. The Unsecured Credit Facility is subject to certain restrictions and financial covenants. The facility may be used for acquisitions, developments and working capital purposes. During 1996, the Company utilized the facility to retire three secured construction loans aggregating $26.1 million and later refinanced that amount with ten-year unsecured notes described below. The facility is currently structured as a revolving facility until July 1997. The interest rate on the facility, which is subject to changes in the Company's credit ratings, was reduced to LIBOR plus 150 basis points or Prime during 1996. Management is currently negotiating the terms of the facility with its bank group and expects to be able to extend the maturity date and lower the interest rate on this facility. Furthermore, management believes it will continue to be able to extend the maturity date of this facility as needed in the future. The facility is subject to certain restrictive covenants including, among others, liquidity, net worth, leverage, capitalization and cash flow ratios and limitations on capital investments. Such restrictions also include a limitation on distributions to common shareholders that are not to exceed 95% of funds from operations except as required to maintain REIT status. As of December 31, 1996, the Company had $138.0 million available under its facility. Subsequent to December 31, 1996, the Company began utilizing competitively bid short-term borrowings as an alternative to borrowing under its Unsecured Credit Facility. Such borrowings vary in term and pricing but have the same covenants as the facility and may be funded through lenders outside of the facility bank group at rates substantially below those of the facility. Since there are no commitments in place for such arrangements, these borrowings cannot exceed the unused portion of the facility. On October 16, 1996, the Company completed a common share offering from its previously filed shelf registration statement selling 1,090,000 shares at a gross price of $25.875 per share. The net proceeds of $27.6 million were used primarily to retire a $25.1 million secured construction loan. During 1996, the Company issued from its previously filed shelf registration statement two issues of senior unsecured notes. The first issue for an aggregate principal amount of $100 million accrues interest at a rate of 6.6% per annum, has an average effective annual rate of 6.7%, and matures within five years. The second issue for an aggregate principal amount of $75 million accrues interest at a rate of 7.0% per annum, has an average effective annual rate of 7.2%, and matures within ten years. These two issues of senior unsecured notes received investment-grade ratings from Moody's Investors Service, Standard & Poor's and Duff & Phelps. Both issues pay interest semi-annually and are direct, senior unsecured obligations of the Company ranking equally with all other unsecured and unsubordinated indebtedness of the Company. Both issues may be redeemed at any time at the option of the Company subject to make-whole provisions. The net proceeds from the first issue of $98.4 million were used 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 $500,000 to extinguish a bank's option related to a settled hedging agreement. The net proceeds from the second issue of $73.6 million were used to reduce $64.0 million of indebtedness under the facility and to repay the Company's only remaining secured construction loan of $9.4 million. Subsequent to December 31, 1996, the Company prepaid two of its 8.8% conventional mortgage loans with outstanding balances at December 31, 1996 of $20.3 million and prepayment penalties of $203,000. The loans were prepaid by utilizing funds from the lower interest bearing Unsecured Credit Facility. At December 31, 1996, a $25 million interest rate hedging agreement remained in effect and is scheduled to mature in July 2000 with a bank's option to extend to July 2002. The LIBOR rate on this $25 million hedging agreement is fixed at 6.1%. The resulting fixed rate is equal to the 6.1% plus the actual LIBOR spread on the related indebtedness. This swap continues to be used as a hedge to manage the risk of interest rate fluctuations. The differential to be paid or received on the interest rate hedging agreement is accrued as interest rates change and is recognized over the life of the agreement as an increase or decrease in interest expense. Markets and Competition Camden's portfolio consists of middle to upper market apartment properties. Camden has expanded its portfolio since the Camden IPO through targeted acquisitions and developments in selected high-growth markets. By combining acquisition, renovation and development capabilities, management believes it is able to better respond to changing conditions in each market, thereby reducing market risk and allowing Camden to take advantage of opportunities as they arise. At December 31, 1996, 88% of Camden's real estate assets were located in Texas. Since the Camden IPO, Camden has diversified into other markets in the Southwest region of the United States, including Phoenix and Tucson, with additional development properties in Phoenix, Corpus Christi, Austin and Dallas. At the time of the Camden IPO, approximately 77% of the Camden Properties (based on the number of units) were located in Houston. At December 31, 1996, after giving effect to the anticipated completion of the Development Properties, 40% of the Camden Properties were located in Houston. The Company intends to further diversify geographically into the Midwest, North Carolina and Florida through its planned merger with Paragon. Camden believes it has benefitted from the strong employment growth and economic diversification within the State of Texas. Camden also believes the diversified employment base of the Texas metropolitan areas where the Camden Properties are located provides significant stability to Camden's cash flow. For example, the major industries in Houston include petrochemicals, health care, technology and education. In Dallas, the major industries include trade, transportation and energy. In Austin, the major industries include government, education and technology. Camden believes that there is a limited supply of vacant apartments in the markets where the Camden Properties are located due to only moderate new construction of multifamily apartment properties during the last decade. Camden expects the rate of new apartment construction in these markets to continue to be restrained in the near future, due to higher investment yield requirements, continued conservative lending parameters, restrictions on building relating to political factors, impact fees and infrastructure assessments and the lack of tax and governmental incentives. There are numerous housing alternatives that compete with Camden's Properties in attracting residents. Camden's Properties compete directly with other multifamily properties and single family homes that are available for rent in the markets in which Camden's properties are located. Camden's Properties also compete for residents with the new and existing owned-home market. The demand for rental housing is driven by economic and demographic trends. Recent trends in the economics of renting versus home ownership indicate an increasing demand for rental housing in certain markets, despite relatively low residential mortgage interest rates. Rental demand should be strong in areas anticipated to experience in-migration, due to the younger ages that characterize movers as well as the relatively high cost of home ownership in higher growth areas. In addition, management believes that the accelerating growth in the formation of non-traditional households, which tend to rent, should increase the demand for apartments. Disclosure Regarding Forward Looking Statements The statements contained in Item 1 of this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may differ materially from those included in the forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to, the following: the proposed merger with Paragon Group, Inc., changes in general economic conditions in the markets that could impact demand for the Company's product, and changes in financial markets and interest rates impacting the Company's ability to meet its financing needs and obligations. PAGE Item 2. Properties The Properties The Camden Properties typically consist of two- and three-story buildings in a landscaped setting and provide residents with a variety of amenities. Most of the Camden Properties have, or are expected to have, one or more swimming pools and a clubhouse and many have whirlpool spas, tennis courts and controlled-access gates. Many of the units offer additional features such as fireplaces, vaulted ceilings, microwave ovens, covered parking, icemakers, washers and dryers and ceiling fans. The Operating Properties' units average 781 square feet of living area. Operating Properties For the year ended December 31, 1996, no single Operating Property accounted for greater than 4.8% of the Company's total revenues. The Operating Properties had an average occupancy rate of 94.0% and 93.3% in 1996 and 1995, respectively. Resident leases are generally for six-month to thirteen-month terms and usually require security deposits. Forty-two of the Operating Properties have in excess of 200 units, with the largest having 804 units. Nine of the Operating Properties were constructed by the Company or its predecessors and placed in service since 1992. Twenty-six were placed in service between 1982 and 1987, eleven were placed in service between 1974 and 1981 and one was placed in service in each of 1968 and 1969. Property Table The following table sets forth information with respect to the Company's Operating Properties as of December 31, 1996: PAGE OPERATING PROPERTIES
December 1996 December 1995 Average Monthly Average Monthly Average 1996 Rental Rates 1995 Rental Rates Number Year Year Unit Average -------------- Average -------------- Property of Placed in Renovation Size Occupancy Per Per Occupancy Per Per and Location Units Service Commenced (Sq. Ft.) Unit Sq Ft Unit Sq Ft - ------------------------ ------- ---------- ---------- --------- - ---------- ---- ----- --------- ---- ----- ARIZONA Phoenix Scottsdale Legacy 428 1996 1,067 95% $867 $0.81 Tucson Eastridge 456 1984 1994 559 94 443 0.79 89% $441 $0.79 Oracle Villa 365 1974 1994 1,026 92 713 0.70 87 711 0.69 TEXAS Austin Autumn Woods 283 1984 1993 644 95 553 0.86 95 548 0.85 Calibre Crossing 183 1986 1994 705 93 588 0.84 95 595 0.84 Huntingdon 398 1995 903 90 814 0.90 94 824 0.91 Quail Ridge 167 1984 1994 859 95 670 0.78 95 659 0.77 Ridgecrest 284 1995 851 92 774 0.91 94 774 0.91 South Oaks 430 1980 1993 705 92 571 0.80 95 549 0.77 Corpus Christi Breakers 288 1996 861 96 747 0.86 Miramar 244 1994/95 722 85 653 0.90 84 629 0.89 Potters Mill 344 1986 1994 775 94 575 0.74 95 552 0.71 Waterford 580 1976/80 1993 767 91 509 0.66 92 484 0.63 Dallas/Fort Worth Cottonwood Ridge 208 1985 1994 829 96 529 0.64 97 508 0.61 Emerald Valley 516 1986 1994 743 95 617 0.83 93 593 0.80 Emerald Village 304 1987 1994 713 96 581 0.82 95 564 0.79 Glen Lakes 424 1979 1992 877 95 696 0.79 92 672 0.77 Ivory Canyon 602 1986 1994 548 95 502 0.92 94 491 0.90 North Dallas Crossing 446 1985 1993/94 730 94 582 0.80 92 567 0.78 Oakland Hills 476 1985 1994 853 95 563 0.66 93 539 0.63 Park at Addison 456 1996 942 90 842 0.89 Pineapple Place 256 1983 1994 652 94 543 0.83 95 526 0.81 Randol Mill Terrace 340 1984 1994 848 93 538 0.64 94 527 0.62 Shadowlake 264 1984 1994 733 92 533 0.73 92 510 0.70 Towne Centre Village 188 1983 1994 735 96 535 0.73 95 514 0.70 Towne Crossing 442 1984 1994 772 94 535 0.69 95 521 0.68 Valley Creek Village 380 1984 1994 855 96 588 0.69 93 567 0.66 Valley Ridge 408 1987 1994 773 94 573 0.74 95 555 0.72 Westview 335 1983 1993 697 94 561 0.81 96 537 0.77 El Paso La Plaza 129 1969 1994 997 98 586 0.59 98 568 0.57 Houston Bay Crest Village 96 1980 1990 855 91 580 0.68 92 569 0.67 Bay Place 193 1968 1990 856 91 529 0.62 88 509 0.59 Brighton Place 282 1978 1992 749 95 510 0.68 96 488 0.65 Cambridge Place 336 1979 1992 771 95 521 0.68 92 506 0.66 Crossing, The 366 1982 1993 762 96 524 0.69 93 498 0.65 Driscoll Place 488 1983 1991 708 94 437 0.62 91 421 0.60 Eagle Creek 456 1984 1992 639 96 503 0.79 95 498 0.78 Hayes Place 307 1980 1991 746 93 485 0.65 91 472 0.63 Jones Crossing 290 1982 1994 748 96 522 0.70 95 505 0.68 Roseland Place 671 1982 1992 726 97 503 0.69 96 484 0.67 Sierra Pines I & II 804 1982 1993 766 91 455 0.59 91 437 0.58 Southpoint 244 1981 1993 730 95 542 0.74 96 530 0.73 Stonebridge 204 1993 845 96 724 0.86 95 709 0.84 Vanderbilt Square I 516 1996 963 98 989 1.03 Wallingford 462 1980 1993 787 94 533 0.68 93 523 0.66 Wilshire Place 536 1982 1992 761 94 504 0.66 92 497 0.65 Woodland Park 288 1995 866 95 745 0.86 96 737 0.85 Wyndham Park 448 1978/81 1991 797 92 474 0.59 92 459 0.58 ------ --- - -- ---- ----- -- ---- ----- TOTAL 17,611 781 94% $588 $0.75 93% $542 $0.71 ====== === == ==== ===== == ==== ===== Represents average physical occupancy for the year ended. 1996 average occupancy calculated from date at which occupancy exceeded 90% through December 31, 1996. These properties were recently constructed by the Company or its predecessors; accordingly, they have not been renovated. Miramar is a student housing project for Texas A&M at Corpus Christi. Average occupancy includes summer which is normally subject to high vacancies. Phase II of Sierra Pines was acquired in May 1996, increasing the total number of units at this property from 404 to 804. /TABLE Development Properties The total budgeted cost of the Development Properties is approximately $99.4 million, with a remaining cost to complete, as of December 31, 1996, of approximately $52.7 million. There can be no assurance that the Company's budget, leasing or occupancy estimates will be attained for the Development Properties or that their performance will be comparable to that of the Company's existing portfolio. Development Property Table The development property table is incorporated herein by reference from page 19 of the Company's Annual Report to Shareholders for the year ended December 31, 1996, which page is filed as Exhibit 13.1 hereto. Management believes that the Company possesses the development capabilities and experience to provide a continuing source of portfolio growth. In making development decisions, management considers a number of factors, including the size of the property, the season in which leasing activity will occur and the extent to which delivery of the completed units will coincide with leasing and occupancy of such units (which is dependent upon local market conditions). In order to pursue a development opportunity, the Company currently requires a minimum initial stabilized target return of 10%-10.5%. This minimum target return is based on current market rents and projected stabilized expenses, considering the market and the nature of the prospective development. Item 3. Legal Proceedings Neither the Company nor the Camden Properties are presently subject to any material litigation nor, to the Company's knowledge, is any material litigation threatened against the Company or the Camden Properties, other than routine litigation arising in the ordinary course of business and which is expected to be covered by liability insurance. Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted during the fourth quarter of the fiscal year covered by this Report to a vote of security holders, through the solicitation of proxies or otherwise. PAGE PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Information with respect to this Item 5 is incorporated herein by reference from page 40 of the Company's Annual Report to Shareholders for the year ended December 31, 1996, which page is filed as Exhibit 13.1 hereto. The number of holders of record of the Company's common shares, $0.01 par value, as of March 18, 1997, was 436. Item 6. Selected Financial Data Information with respect to this Item 6 is incorporated herein by reference from pages 41 and 42 of the Company's Annual Report to Shareholders for the year ended December 31, 1996, which pages are filed as Exhibit 13.1 hereto. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Information with respect to this Item 7 is incorporated herein by reference from pages 18 through 24 of the Company's Annual Report to Shareholders for the year ended December 31, 1996, which pages are filed as Exhibit 13.1 hereto. Item 8. Financial Statements and Supplementary Data The Company's financial statements and supplementary financial information for the years ended December 31, 1996, 1995 and 1994 are listed in the accompanying Index to Consolidated Financial Statements and Supplementary Data at F-1 and are incorporated herein by reference from pages 25 through 40 of the Company's Annual Report to Shareholders for the year ended December 31, 1996, which pages are filed as Exhibit 13.1 hereto. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PAGE PART III Item 10. Directors and Executive Officers of the Registrant Information with respect to this item is incorporated by reference from the Company's Proxy Statement to be filed on or before April 30, 1997 in connection with the Annual Meeting of Shareholders to be held June 5, 1997. Item 11. Executive Compensation Information with respect to this item is incorporated by reference from the Company's Proxy Statement to be filed on or before April 30, 1997 in connection with the Annual Meeting of Shareholders to be held June 5, 1997. Item 12. Security Ownership of Certain Beneficial Owners and Management Information with respect to this item is incorporated by reference from the Company's Proxy Statement to be filed on or before April 30, 1997 in connection with the Annual Meeting of Shareholders to be held June 5, 1997. Item 13. Certain Relationships and Related Transactions Information with respect to this item is incorporated by reference from the Company's Proxy Statement to be filed on or before April 30, 1997 in connection with the Annual Meeting of Shareholders to be held June 5, 1997. PAGE PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) (1) Financial Statements: The Company's financial statements and supplementary financial information for the years ended December 31, 1996, 1995 and 1994 are listed in the accompanying Index to Consolidated Financial Statements and Supplementary Data at F-1 and are incorporated herein by reference from pages 25 through 40 of the Company's Annual Report to the Shareholders for the year ended December 31, 1996, which pages are filed as Exhibit 13.1 hereto. (2) Financial Statement Schedule: The financial statement schedule listed in the accompanying Index to Consolidated Financial Statements and Supplementary Data at page F-1 is filed as part of this Report. (3) Index to Exhibits: Number Title 2.1 Agreement and Plan of Merger, dated as of December 16, 1996, among the Registrant, Camden Subsidiary, Inc. and Paragon Group, Inc. Incorporated by reference from Exhibit 99.2 to the Registrant's Form 8-K filed December 18, 1996 (File No. 1-12110). 3.1 Amended and Restated Declaration of Trust of the Registrant. Incorporated by reference from Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-12110). 3.2 Amended and Restated Bylaws of the Registrant. Incorporated by reference from Exhibit 3.1 to the Registrant's Form 8-K filed November 18, 1996 (File No. 1-12110). 4.1 Specimen certificate for Common Shares of beneficial interest. Incorporated by reference from Exhibit 4.1 to the Registrant's Registration Statement on Form S-11 filed September 15, 1993 (File No. 33-68736). 4.2 Indenture dated as of April 1, 1994 by and between the Registrant and The First National Bank of Boston, as Trustee. Incorporated by reference from Exhibit 4.3 to the Registrant's Statement on Form S-11 filed April 12, 1994 (File No. 33-76244). 4.3 Form of Convertible Subordinated Debenture Due 2001. Incorporated by reference from Exhibit 4.3 to the Registrant's Statement on Form S-11 filed April 12, 1994 (File No. 33-76244). 4.4 Indenture dated as of February 15, 1996 between the Company and the U.S. Trust Company of Texas, N.A., as Trustee. Incorporated by reference from Exhibit 4.1 to the Registrant's Form 8-K filed February 15, 1996 (File No. 1-12110). 4.5 First Supplemental Indenture dated as of February 15, 1996. Incorporated by reference from Exhibit 4.2 to the Registrant's Form 8-K filed February 15, 1996 (File No. 1-12110). 4.6 Form of Camden Property Trust 6 5/8% Note due 2001. Incorporated by reference from Exhibit 4.3 to the Registrant's Form 8-K filed February 15, 1996 (File No. 1-12110). 4.7 Form of Camden Property Trust 7% Note due 2006. Incorporated by reference from Exhibit 4.3 to the Registrant's Form 8-K filed December 2, 1996 (File No. 1-12110). 10.1 Registration Rights Agreement dated July 29, 1993 by and between the Registrant and Richard J. Campo, D. Keith Oden, Redstone Richmond, Inc., Gay A. Roane, Walter M. Mischer, Sr. and the corporations listed on Exhibits A and B thereto. Incorporated by reference from Exhibit 10.2 to the Registrant's Registration Statement Form S-11 filed September 15, 1993 (File No. 33-68736). 10.2 Non-competition Agreement dated July 21, 1993 by and between Centeq Investments Inc. and the Registrant. Incorporated by reference from Exhibit 10.6 to the Registrant's Registration Statement on Form S-11 filed September 15, 1993 (File No. 33-68736). 10.3 Form of Indemnification Agreement by and between the Registrant and certain of its trust managers and executive officers. Incorporated by reference from Exhibit 10.18 to Amendment No. 1 of the Registrant's Registration Statement on Form S-11 filed July 9, 1993 (File No. 33-63588). 10.4 Letter Agreement dated July 18, 1993 among Richard J. Campo, G. Steven Dawson, the Registrant and Apartment Connection, Inc. Incorporated by reference from Exhibit 10.25 to the Registrant's Registration Statement on Form S-11 filed September 15, 1993 (File No. 33-68736). 10.5 Camden Property Trust Key Executive Bonus Plan. Incorporated by reference from Exhibit 10.38 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-12110). 10.6 Loan Agreement dated July 28, 1995 between Registrant and NationsBank of Texas, N.A. Incorporated by reference from Exhibit 10.1 to the Registrant's Form 10-Q for the quarter ended June 30, 1995 (File No. 1-12110). 10.7 Amendment and Restatement of the 1993 Share Option Plan of Camden Property Trust. Incorporated by reference from Exhibit 10.7 to the Registrant's Form 10-K filed March 28, 1996 (File No. 1-12110). 10.8 Employment Agreement dated July 22, 1996 by and between the Registrant and Richard J. Campo. Incorporated by reference from Exhibit 10.1 to the Registrant's Form 8-K filed October 11, 1996 (File No. 1-12110). 10.9 Employment Agreement dated July 22, 1996 by and between the Registrant and D. Keith Oden. Incorporated by reference from Exhibit 10.2 to the Registrant's Form 8-K filed October 11, 1996 (File No. 1-12110). 10.10 Voting Agreement, dated December 16, 1996, between Camden, Paragon and certain major securityholders of Camden. Incorporated by reference from Exhibit 10.7 to the Registrant's Registration Statement on Form S-4 filed February 26, 1997 (File No. 333-22411). 10.11 Voting Agreement, dated December 16, 1996, between Camden, Paragon and certain major securityholders of Paragon. Incorporated by reference from Exhibit 10.8 to the Registrant's Registration Statement on Form S-4 filed February 26, 1997 (File No. 333-22411). 10.12 Stock Purchase Agreement, dated December 16, 1996, between Apartment Connection, Inc. and Texas Paragon Management Partners L.P. Incorporated by reference from Exhibit 10.9 to the Registrant's Registration Statement on Form S-4 filed February 26, 1997 (File No. 333-22411). 10.13* Form of Employment Agreement by and between the Registrant and certain senior executive officers. 10.14* Camden Property Trust Key Employee Share Option Plan. 10.15* Form of Master Exchange Agreement by and between the Registrant and certain key employees. 11.1* Statement re Computation of Per Share Earnings. 13.1* Selected pages of the Camden Property Trust Annual Report to Shareholders for the year ended December 31, 1996. 21.1* Subsidiaries of the Registrant. 23.1* Consent of Deloitte & Touche LLP. 24.1* Powers of Attorney for Richard J. Campo, D. Keith Oden, G. Steven Dawson, George A. Hrdlicka, F. Gardner Parker and Steven A. Webster. 27.1* Financial Data Schedule (filed only electronically with the SEC). - ------------------ *Filed herewith. (b) Reports on Form 8-K Current Report on Form 8-K dated October 10, 1996 was filed which contained information under Item 5 (Other Events) and Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits). Current Report on Form 8-K dated October 21, 1996 was filed which contained information under Item 5 (Other Events) and Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits). Current Report on Form 8-K dated October 31, 1996 was filed which contained information under Item 5 (Other Events) and Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits). Current Report on Form 8-K dated November 19, 1996 was filed which contained information under Item 5 (Other Events) and Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits). Current Report on Form 8-K dated December 16, 1996 was filed which contained information under Item 5 (Other Events) and Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits). PAGE SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. March 26, 1997 CAMDEN PROPERTY TRUST /s/ By: _______________________ G. Steven Dawson Senior Vice President - Finance, Chief Financial Officer and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Name Title Date * - ---------------- Richard J. Campo Chairman of the Board of Trust March 26, 1997 Managers and Chief Executive Officer (Principal Executive Officer) * - ---------------- D. Keith Oden President, Chief Operating March 26, 1997 Officer and Trust Manager /s/ - ---------------- G. Steven Dawson Senior Vice President Finance, March 26, 1997 Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) * - ---------------- George A. Hrdlicka Trust Manager March 26, 1997 * - ---------------- F. Gardner Parker Trust Manager March 26, 1997 * - ---------------- Steven A. Webster Trust Manager March 26, 1997 *By: /s/ - ---------------- G. Steven Dawson Attorney-in-Fact PAGE INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements of the Registrant and its subsidiaries required to be included in Item 14(a)(1) are listed below: Page CAMDEN PROPERTY TRUST Independent Auditors' Report (included herein)..........................F-2 Financial Statements (incorporated by reference under Item 8 of Part II from pages 25 through 40 of the Company's Annual Report to Shareholders for the year ended December 31, 1996): Independent Auditors' Report Consolidated Balance Sheets as of December 31, 1996 and 1995 Consolidated Statements of Operations for the Years Ended December 31,1996, 1995 and 1994 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements The following financial statement supplementary data of the Registrant and its subsidiaries required to be included in Item 14(a)(2) is listed below: Schedule III -- Real Estate and Accumulated Depreciation...............S-1 PAGE INDEPENDENT AUDITORS' REPORT To the Shareholders of Camden Property Trust We have audited the consolidated financial statements of Camden Property Trust as of December 31, 1996 and 1995, and for each of the three years in the period ended December 31, 1996; and have issued our report thereon dated February 21, 1997; such consolidated financial statements and report are included in your 1996 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedule of Camden Property Trust, listed in Item 14. This financial statement schedule is the responsibility of Camden's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Houston, Texas February 21, 1997 PAGE SCHEDULE III CAMDEN PROPERTY TRUST REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1996 (In thousands)
Cost Gross Amount Capitalized at Which Carried Date of Dep. Encum- Initial Cost to Subsequent to at December 31, 1996 Accum. Construction Life Description brances Camden Property Trust Acq. or Dev. Dep. or Acquired (Years) - --------------------- ------- ---------------------- ------------ - -------------------------- ------- ------------ ------- Building and Property Name Location Land Improvements Land Building Total - ------------- -------- -------- ------------ - -------- -------- ------- Apartments Texas Vanderbilt Square $ $ 9,324 $ 28,247 $ 13 $ 9,324 $ 28,260 $ 37,584 $ 1,712 1994-1995 3-35 Other 58,382 69,692 410,525 27,309 69,692 437,834 507,526 50,014 1993-1996 3-35 Apartments Arizona 7,657 55,582 1,649 7,657 57,231 64,888 4,643 1994-1996 3-35 Projects under development Texas 11,678 12,670 11,678 12,670 24,348 1994-1996 Projects under development Arizona 1,324 8,143 1,324 8,143 9,467 1995-1996 Projects under development Colorado 1,951 781 1,951 781 2,732 1994 ------- -------- -------- ------- - -------- -------- -------- ------- Total $58,382 $101,626 $515,948 $28,971 $101,626 $544,919 $646,545 $56,369 ======= ======== ======== ======= ======== ======== ======== ======= The aggregate cost for federal income tax purposes at December 31, 1996 was $653.9 million.
PAGE The changes in total real estate assets for the years ended December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994 -------- -------- -------- Balance, beginning of the period $607,598 $510,324 $296,545 Additions during period: Acquisitions 6,294 137,777 Development 56,132 91,237 66,245 Improvements 9,578 8,409 9,757 Deductions during period: Cost of real estate sold (33,057) (2,372) -------- -------- -------- Balance, end of period $646,545 $607,598 $510,324 ======== ======== ========
The changes in accumulated depreciation for the years ended December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994 ------- ------- ------- Balance, beginning of the period $36,800 $17,731 $ 3,388 Depreciation 22,946 19,299 14,343 Real estate sold (3,377) (230) ------- ------- ------- Balance, end of period $56,369 $36,800 $17,731 ======= ======= =======
EX-10.13 2 FORM OF EMPLOYMENT AGREEMENT EXHIBIT 10.13 Employment Agreement The Employment Agreement (the "Agreement") made this ________ day of ____________, 199__, by and between Camden Property Trust, a Texas real estate investment trust, (the "Company") and _________ _____________________, (the "Executive"). WITNESSETH: WHEREAS the Company is engaged in the business of multifamily management and development; and WHEREAS the Executive is experienced and knowledgeable in the field; and WHEREAS the Executive shall work as_________________________; and WHEREAS this agreement shall supersede and replace all prior employment agreements between the Company and the Executive; NOW THEREFORE, in consideration of the mutual covenants and conditions contained herein, the parties agree as follows: 1. Employment The Company employs the Executive as________________________ (the "Officer") to perform the duties normally associated with that office under the control and at the direction of the Chairman of the Board, Chief Executive Officer and the President ("Management") and other such duties as may, from time to time, be assigned and are consistent with the position. 2. Employment Term (a) Employment Term The term of employment shall begin the ____ day of _______, 199_, (the "Commencement Date"). This agreement will expire three (3) years after the Commencement Date or after the expiration of any Renewal Period (the "Expiration Date"). The term of employment shall annually be extended by one (1) year (the "Renewal Period") unless written notification is given by either party to the other at least six (6) months prior to the Expiration Date. The Commencement Date through and including the Expiration Date is hereinafter referred to as the "Employment Term". (b) Termination The Company agrees to employ the Executive for period beginning on the Commencement Date and continuing through the earliest of: (i) death of the Executive; or (ii) termination of the Executive by Management for "Disability", as defined below; or (iii) the discharge of the Executive by Management "For Cause", as defined below, or any other termination For Cause; or (iv) the discharge of the Executive by Management any reason other than For Cause; (v) retirement of the Executive under the terms of the Company's retirement plan as instituted and amended from time to time by the Board; (vi) resignation of the Executive "For Good Reason", as defined below; (vii) termination of the Agreement due to "Change of Control", as defined below; or (viii) the end of the Employment Term. (c) Disability The term Disability refers to the physical or mental incapacity of the Executive that has prevented the execution of the Duties of the office, as outlined below, for three (3) consecutive months or for a period of more than 180 business days in the aggregate in any 18 month period and that, in the determination of the Management after consultation with a medical doctor licensed to practice in the State of Texas appointed by Management and the Executive, may be expected to prevent the Executive for any period of time thereafter from devoting substantial time and energies to the Duties of the office, as outlined below. The Executive agrees to submit to reasonable requests for medical examinations to determine whether a Disability exists. During the period of incapacitation, as provided above, the salary otherwise payable to the Executive may, at the absolute discretion of Management, be reduced by the amount of any disability benefits or payment received by the Executive pursuant to Company plans, excluding health insurance benefits or other reimbursement of medical expenses for the Executive. (d) For Cause The term For Cause shall mean any one or more of the following: (i) material or repeated violation by the Executive of the terms of this Agreement or the material or repeated failure to perform the Duties of the Office to include material substandard performance of the Executive in the achievement of written goals and objectives set by Management for two (2) consecutive years, other than any such failure resulting from the Executive's Disability; (ii) excessive absenteeism not related to illness; or (iii) the Executive's conviction of or plea of nolo contendere to a felony or conviction of any other crime which incarcerates the Executive for a period of one (1) year or longer; or (iv) the Executive's commission of fraud, embezzlement, theft, or other crimes, in any case, whether or not involving the Company, that, in the reasonable opinion of Management, render the Executive's continued employment harmful to the Company; or (v) the voluntary resignation of the Executive without the prior consent of Management. (e) Resignation For Good Reason The Executive may resign from the Company, if at any time during the Employment Term, there is the continued and material failure of the Company to comply with the covenants and obligations under this Agreement, but only when: (i) the Executive notifies the Company detailing the manner in which the Executive believes the Company has failed to meet its obligations under this Agreement; and (ii) such material failure continues for at least thirty-two (32) days following the receipt of the notification by the Company. The Executive's resignation For Good Reason shall be effective the last day of the month following the waiting period, defined above. (f) Change of Control A change of control shall be determined to have occurred when two (2) events occur. The first of which is the occurrence of one of the following events: (i) at any time during any twelve (12) month period, the Company directors in office at the beginning of such period cease to constitute a majority of the Company's Board of Directors, disregarding any vacancies occurring during such period by reasons of death or disability but deeming any individual whose election, or nomination for election, to fill such vacancy to have been in office at the beginning of such one (1) year prior; and, a tender offer or exchange is made and consummated for ownership of securities of the Company representing twenty-five (25%) percent or more of the combined voting power of the then outstanding voting securities; (ii) a merger or consolidation occurs to which the Company is party, whether or not the Company is the surviving entity; or (iii) the sale of at least fifty (50%) percent of the Company's assets. In addition to the occurrence of one (1) of the preceding events, one (1) of the following events must occur to trigger a change of control: (iv) the Executive is required, without the Executive's consent, to relocate to a different metropolitan area; or (v) the Executive is assigned to a lower organizational level than the level stated in this Agreement, or substantially diminishes the Executive's assignment, duties, responsibilities, or operating authority from those specified in Section 3, Duties; or (vi) the Executive is terminated. 3. Duties The Executive will devote substantially all of his time, skill, energy, knowledge, and best efforts during the Employment Term to such duties, and will, faithfully and diligently endeavor to the best of his ability, further the best interests of the Company. At no time shall the Executive be requested to perform duties that are not commensurate with the duties of a senior executive of the Company. 4. Location of Employment The Executive shall be located in or about Houston, Texas. The Executive shall travel to such geographical locations as may be appropriate from time to time to carry out the duties of the office as outlined in Section 3, Duties. 5. Compensation For all services rendered by the Executive to the Company, the Company shall pay: (a) Base Salary For services rendered, the Company shall pay the Executive an annual salary of $___________, payable in arrears monthly or semi-monthly as the Board may elect from time to time during the Employment Term. Management shall conduct an annual review of the Executive's base salary. The Executive shall be entitled to receive increases in the Base Salary, if any, that may be determined by Management at its sole discretion. Any increases to the Executive's Base Salary shall be effective January 1 for each year of the Employment Term. In no event shall the Executive's base salary be reduced, except as provided for under Section 2(c), Disability. (b) Sign-on Bonus The Board shall grant the Executive, on the Commencement Date of this Agreement, _____ shares of restricted stock of the Company. Such shares granted shall vest over the initial term of this agreement on a pro rata each basis on the anniversary date of this Agreement. (c) Omitted (d) Annual Incentive Compensation In further consideration of the Executive's service, the Executive shall be eligible to receive an annual incentive compensation as determined by the Board. (e) Long-term Incentive Compensation In further consideration of the Executive's service, the Executive shall be eligible to receive a long-term incentive compensation as determined by the Board. (f) Taxes All compensation paid to the Executive shall be subject to applicable employment and withholding taxes. The Executive shall be responsible for any taxes resulting from a determination that any portion of any benefits supplied to the Executive may be reimbursing personal as well as business expenses. 6. Employee Benefits (a) Benefits The Executive shall receive group health/dental insurance, life insurance, disability insurance, and other similar benefits available to the Company's employees. Benefits may be changed, modified, or revoked at the sole discretion of the company. The Executive shall not be deemed to have a vested interest in any of the Company plans or programs. The Executive shall receive benefits not generally provided to Company employees from time to time at the sole discretion of the Board. (b) Vacation The Executive is entitled to receive paid vacation annually for each year of the Employment Term. Such vacation shall be taken at such times that are consistent with the reasonable business needs of the Company. All vacation shall be subject to the policies and procedures of the Company. (c) Fringe Benefits The Executive shall receive fringe benefits as such benefits may exist from time to time at the sole discretion of the Board. 7. Business Expenses The Executive is authorized to incur reasonable, ordinary and necessary business expenses in the performance of the duties outlined above during the Employment Term in accordance with policies established by Management. The Executive shall account to the Company for all such expenses. The Company shall reimburse the Executive or pay the expenses in accordance with the policies established by Management. 8. Termination In the event of termination, the Executive's rights and the Company's obligations shall terminate except as herein provided. In all events, the Company shall be obligated to pay all salary and benefits accrued to the Executive through and including the date of termination. Additionally, the Executive shall be entitled to receive the minimum bonus for the contract year during which the termination occurs, prorated through and including the date of termination. (a) Termination for reason other than For Cause If the Employment Term is terminated for reasons other than For Cause, the Executive shall be entitled to receive a severance payment equal to the annual base salary currently in effect. In addition, the Executive shall continue to receive health and welfare benefits, as received before the Executive's termination, until the earlier of (a) the Executive obtaining employment with another company or (b) the end of the Employment Term, as if the Executive had not so terminated. The Executive shall forfeit any and all unvested portion of any award made to the Executive in respect to any retirement, pension, profit sharing, long-term incentive, or other similar such plan(s). (b) Termination for reason of Death If the Employment Term is terminated by reason of Death, the Executive shall be entitled to receive a severance payment equal to the annual compensation, including targeted bonus, at the date on which death occurs. (c) Termination for reason of Disability If the Employment Term is terminated by reason of Disability, the Executive shall be entitled to receive a severance payment equal to the annual compensation, including targeted bonus, at the date on which termination due to Disability occurs. The Executive shall receive, so long as the Disability continues, to remain eligible for all benefits provided under any long-term disability program(s) of the Company in effect at the time of such termination, subject to the terms and conditions of any such program(s), as may be amended, changed, modified, or terminated for all employees of the Company. (d) Resignation for Good Reason If the Executive resigns for Good Reason as defined in Section 2(e), the treatment for the severance payment to the Executive shall be the same as if the Executive was terminated for reasons other than For Cause as provided for in Section 8(a). (e) Termination due to Change of Control If the Executive terminates due to Change of Control as defined in Section 2(f), the Executive shall be entitled to receive a severance payment equal to ______ times the average annual base salary of the Executive for the three (3) most recent taxable years that ended before the date of termination. The Executive shall not forfeit any and all deferred portion of any award made to the Executive in respect to any retirement, pension, profit sharing, long-term incentive, or other similar such plan(s). Notwithstanding the preceding, if and to the extent the severance payment, either alone or in conjunction with other payments the Executive has the right to receive either directly or indirectly from the Company, would constitute an excess parachute payment (the "Excess Payment") under Section 280G of the Internal Revenue Code of 1986, as amended, the Executive agrees that such cash severance payment shall be reduced by the amount necessary to prevent any such payments to the Executive from constituting an Excess Payment as determined in good faith by the Company. 9. Confidentiality and Non-Competition All information (the "Confidential Information") includes all confidential information of the Company and/or its subsidiaries, including information entrusted to the Company and/or any of its subsidiaries by third parties, not otherwise publicly disclosed or available, other than as a result of wrongful disclosure by the Executive, which, during the Employment Term: (i) is disclosed by any of them to the Executive; or (ii) the Executive had access to otherwise had reason to know; or (iii) was developed or discovered by the Executive. Confidential Information includes, but is not limited to, whether or not legended or otherwise identified as "confidential": (i) property lists, prospective properties lists, and details of agreement with sellers; and (ii) acquisition, expansion, marketing, financial, and other business information and plans; and (iii) research and development and data related thereto; and (iv) other compilations of data; and (v) computer programs and/or records; and (vi) sources of supply; and (vii) confidential information developed by consultants and contractors; and (viii) purchasing, operating, and other costs data; and (ix) employee information; and (x) manuals, memoranda, projections, minutes, plans, drawings, designs, formula books and specifications. (a) Restriction on Use and Disclosure The Executive acknowledges that the Confidential Information is valuable and proprietary to the Company or to third parties which have entrusted the Company and/or its subsidiaries, and, except as required by the Executive's Duties, the Executive shall not use, publish, disseminate, or otherwise disclose any Confidential information without prior written consent of the Company. (b) Return of Documents Upon termination of the Executive's employment, the Executive shall forthwith deliver to the Company all plans, designs, drawings, specifications, listings, manuals, records, notebooks, and similar repositories of or containing Confidential Information, including all copies, then in the Executive's possession or control, whether prepared by the Executive or others. Upon such termination the Executive shall retain no copies of any such documents. (c) Restriction on Competitive Employment The term Business shall mean: (i) the business of the Company and its subsidiaries as described in the Company's Registration Statement on Form S-11, as amended; and (ii) any other business in which the Company or any of its subsidiaries is engaged during the Executive's Employment Term. The term Territories shall refer to those metropolitan areas in which the Company owns properties or otherwise is engaged in the Business, including any areas where the Company has specific plans to acquire or develop properties within the following six (6) months following the date of termination, and all outlying areas located within a thirty (30) mile radius each such metropolitan area. Except as noted in Section 3, Duties, during the Employment Term and the twelve months (12) months following the termination of this Agreement (the "Non-Competition Period"), absent the Company's prior written approval, the Executive shall not, as owner, part-owner, shareholder, partner, director, principal, agent, employee, consultant, or otherwise, within the Territories, directly or indirectly engage or participate in activities relating to, or render services to or invest in any firm or business engaged or about to become engaged in, the business, provided that the Executive may: (i) engage in the activities as noted in Section 3, Duties; (ii) make passive investments in an enterprise engaged in the Business the shares of ownership of which are publicly traded if the Executive's investment constitutes less than 2% of the total equity of such enterprise. (d) Inducement / Enticement During the Employment Term and the Non-Competition Period, the Executive shall not, directly or indirectly: (i) induce, or attempt to induce, any employees or agents or consultants of or to the Company or any subsidiary of the Company to do anything from which the Executive is restricted by reason of Section 9(a) through 9(c), inclusive; or (ii) offer or aid others to offer employment to anyone who is an employee, agent or consultant of or to the Company or an subsidiary of the Company at the time of termination of the Executive. (e) Reduction of Non-Competition Period If this Agreement shall be terminated by the Company pursuant to Section 2(b)(iv), Termination for reason other than For Cause, the provisions of Sections 9(c) and 9(d) shall terminate on the first business day following the termination of the Executive. Unless other wise provided, the provisions of Sections 9(a) through 9(d), inclusive, shall survive the termination of this Agreement for the duration of the Non-Competition Period. 10. Remedies for the Company The Executive acknowledges that remedy at law for any breach or attempted breach of the Executive's obligations under Section 9, Confidentiality and Non-Competition, may be inadequate, agrees that the Company may be entitled to specific performance and injunctive and other equitable remedies in case of any such breach or attempted breach, and further agrees to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief. The Company shall have the right to offset against amounts to be paid to the Executive pursuant to the terms hereof any amounts from time to time owing by the Executive to the Company. The termination of the Employment Term pursuant to Section 2(a)(iii), Discharge For Cause, shall not be deemed to be a waiver by the Company of any breach by the Executive of this Agreement or any other obligation owed the Company, and, notwithstanding such a termination, the Executive shall be liable for all damages attributable to such a breach. 11. Remedies for the Executive In the event the Executive is terminated For Cause and it is ultimately determined the Company lacked "cause", the: (i) Executive's termination shall be treated as a Termination for reason other than For Cause, as it pertains to Section 8(a); and (ii) Executive shall reserve the right to seek remedy for breach of the Agreement by the Company including, but not limited to, any other such damages as may be suffered and/or incurred by the Executive, the Executive's costs incurred during the dispute, and reasonable attorney's fees in connection with such dispute; and (iii) Executive shall receive all payments as defined under Section 8(a), Termination for reason other than For Cause, with interest of 8% annually on all payments considered past due from the date at which such payment would have been made. 12. No Waiver No Waiver or non-action by either party with respect to any breach by the other party of any provision of this Agreement, nor the waiver or non-action with respect to the provisions of similar agreement with other employees or the breach thereof, shall be deemed or construed to be a waiver of any succeeding breach of such provision, or as a waiver of the provision itself. 13. Invalid Provisions Should any portion of this Agreement be adjusted or held invalid, unenforceable or void, such holding shall not have the effect to invalidating or voiding the remainder of this Agreement and the parties hereby agree that the portion so held invalid, unenforceable, or void shall, if possible, be deemed amended or reduced in scope, or otherwise be stricken from this Agreement to the extent required for the purposes of validity and enforcement thereof. 14. Successor and Assigns Neither the Executive nor the Company may assign its rights, duties, or obligations hereunder without consent of the other. 15. Survival of the Executive's Obligations The Executive's obligations under Sections 9 and 10 shall survive regardless of whether or not the Executive's employment is terminated, voluntarily or involuntarily, by the employer or the Executive, with or without cause. 16. Survival of the Companies Obligations The Company's obligations under Sections 8 and 11 shall survive regardless of whether or not the Executive's employment is terminated, voluntarily or involuntarily, by the employer or the Executive, with or without cause. 17. Prior Agreements This Agreement incorporates the entire agreement between both parties with respect to the subject matter hereof and supersedes all prior agreements, documents, or other instruments with respect to the matters covered herein. 18. Governing Law This Agreement shall be governed by, and interpreted in accordance with the provisions of, the law of the State of Texas, without reference to provisions that refer a matter to the law of any other jurisdiction. Each party hereto hereby irrevocably submits itself to the non-exclusive personal jurisdiction of the Federal and State courts sitting in Texas. 19. No Oral Modifications This Agreement may not be changed or terminated orally, and no change, termination, or waiver of this Agreement or of any of the provisions herein contained shall be binding unless made in writing and signed by both parties, and, in the case of the Company, by a person designated by the Board. Without limiting the foregoing, any change or changes, from time to time, in the Executive's salary or duties or both shall not be, nor be deemed to be, a change, termination, or waiver of this Agreement or of any of the provisions herein contained. 20. Notices All notices and other communications required or permitted hereunder shall be made in writing, and shall be deemed properly given if delivered personally, mailed by certified mail, postage prepaid and return receipt requested, sent by facsimile, or sent by Express Mail or Federal Express or other nationally recognized express delivery service, as follows: If to the Company or the Board: Camden Property Trust 3200 Southwest Freeway, Suite 1500 Houston, TX 77027 Attention: Board of Directors If to the Executive: _____________________________ _____________________________ _____________________________ Notice given by hand, Express Mail, Federal Express, or other such express delivery service shall be effective upon actual receipt. Notice given by facsimile transmission shall be effective upon actual receipt of received during the recipient's normal business hours, or at the beginning of the recipient's next business day after receipt if not received during the recipient's normal business hours. All notices sent by facsimile transmission shall be confirmed promptly after transmission in writing by certified mail or personal delivery. Any party may change any address to which notice shall be given to it by giving notice as provided above of such change in address. 21. Executive's Representation and Warranties The Executive represents and warrants that he/she is legally free to make and perform this Agreement, that he/she has no obligation to any other person or entity that would affect or conflict with any of his obligations hereunder, and that the complete performance of his obligations hereunder will not violate any law, regulation, order, or decree of any governmental or jurisdictional body or contract by which he/she is bound. EXECUTED as of the date first written above. Camden Property Trust by: ____________________________________ name: ____________________________________ title: ____________________________________ Executive ________________________________________ Name EX-10.14 3 KEYSOP PLAN EXHIBIT 10.15 MASTER EXCHANGE AGREEMENT This Agreement is entered into this ____ day of ___________, 199__ by and between _____________________________ ("Recipient") and Camden Property Trust (the "Company"). WHEREAS, pursuant to the 1993 Share Incentive Plan of Camden Property Trust (the "Plan"), the Recipient has and will receive awards of Restricted Shares as shown in Exchange Supplement A attached hereto which shall vest over time in accordance with the terms of the Plan and outlined on Exchange Supplement B; WHEREAS, Recipient desires to exchange his right to receive the unvested Restricted Shares upon vesting and all other rights appurtenant thereto for the Rights to Repurchase (as defined below); WHEREAS, the Company desires to exchange the Rights to Repurchase for the return of the Recipient's unvested Restricted Shares; NOW, THEREFORE, in consideration of the mutual promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Recipient hereby agrees to exchange Recipient's unvested Restricted Shares (including the right to receive dividends thereon and the right to vote such shares) for the Rights to Repurchase as described below. 2. Upon the execution of this Agreement, the Company shall deposit Recipient's Restricted Shares into a rabbi trust (the "Trust") established by and for the benefit of the Company. The Trust shall be administered by an independent trustee who shall be selected by the Company. Dividends on the Restricted Shares will accumulate in the Trust and the trustee shall invest such dividends in marketable securities other than the Company's securities. The trustee shall have the right to substitute, from time to time, other marketable securities of equal value for the marketable securities originally purchased by the trustee. 3. Upon vesting, Recipient shall have the right to purchase all or part of the Restricted Shares that Recipient exchanged with the Trust together with any securities that were purchased with the accumulated dividends on such Restricted Shares (the "Rights to Repurchase"). The Rights to Repurchase may be exercised with regard to vested shares in an amount at least equal to the lesser of 2,000 shares or the number of shares for any portion of an Award separately identified in Exchange Supplement B. Nothing in this Agreement shall be construed as allowing a Recipient to exercise his Rights to Repurchase to purchase either the shares or the dividends but not both; that is, the shares and the related dividends shares must be purchased together, except as provided in paragraph 6 hereof. 4. The Rights to Repurchase shall vest as shown on Exchange Supplement B. The Rights to Repurchase shall be exercisable for a period of 20 years from the applicable vesting date. 5. The exercise price of the Rights to Repurchase shall equal the sum of (i) 10% of the Fair Market Value of the Restricted Shares to be purchased by Recipient, as determined on the date of this Agreement, and (ii) 5% of the amount of dividends declared and paid with respect to such Restricted Shares. 6. If Recipient's employment or relationship with the Company or its Affiliates is terminated for any reason before the vesting of the Repurchase Rights, the Repurchase Rights not theretofore vested shall terminate on the date of death, disability, retirement, or the date notice of termination or resignation is given. Recipient's vested Rights to Repurchase shall be exercisable for a period of one year from such date. Thereafter, the unexercised Rights to Repurchase shall terminate and be of no further force and effect. However, to the extent that there have been any dividends declared and recorded and not yet repurchased from the Plan, recipient shall vest in such dividends and be entitled to repurchase such dividends separately from the shares, even though such shares have not vested and the vesting rights in such shares is then expiring. 7. All initial capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan. 8. This Agreement shall be construed in accordance with the laws of the State of Texas. 9. To the extent any provision of this Agreement is held to be unenforceable, illegal or invalid under any current or future law, such provision shall be fully separable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part thereof, the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance therefrom. In lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement, a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible, and the parties hereto request the court or any arbitrator to whom disputes relating to this Agreement are submitted to reform the otherwise illegal, invalid or unenforceable provision in accordance with this Section 9. 10. To the extent any provisions of this Agreement conflict with the provisions of any employment agreement entered into between the Company and Recipient, the terms of the employment agreement shall control. To the extent that any such employment agreement provides for the automatic or accelerated vesting of securities or derivative securities held by the Recipient upon the occurrence of a change of control, business combination or other enumerated event, the Restricted Shares and Rights to Repurchase shall likewise be deemed to be governed by such provisions and shall likewise vest on the terms and conditions set forth in such employment agreement. 11. The Rights to Repurchase granted hereunder, to the extent permitted by law, shall be transferable to Recipient's spouse, children or grandchildren or to a trust created for their benefit. The Rights to Repurchase shall not otherwise be transferable. 12. The Restricted Shares and Rights to Repurchase covered by this Agreement shall be subject to the adjustment provisions contained in the Plan (currently Section 7 of the Plan). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. RECIPIENT ___________________________ CAMDEN PROPERTY TRUST By: ____________________ Name: ____________________ Title: ____________________ EX-10.15 4 FORM OF MASTER EXCHANGE AGREEMENT EXHIBIT 10.14 CAMDEN PROPERTY TRUST KEY EMPLOYEE SHARE OPTION PLAN (KEYSOP)TM Preamble Camden Property Trust (the "Employer") hereby establishes the Camden Property Trust Key Employee Share Option Plan (the "Plan"), effective as of the date specified herein. The purpose of the Plan is to provide a vehicle for the payment of compensation (either salary or bonuses) otherwise payable to the participating key executives of the Employer, commensurate with their contributions to the success of the Employer's activities, in a form that will provide incentives and rewards for meritorious performance and encourage the recipients' continuance as employees of the Employer. ARTICLE I Definitions As used in this Plan, the following capitalized words and phrases have the meanings indicated, unless the context requires a different meaning: 1.1 "Beneficiary" means the person or persons designated by a Participant, or otherwise entitled, to exercise Options after a Participant's death. 1.2 "Board of Trust Managers" or "Board" means the board of trust managers of the Employer. 1.3 "Code" means the Internal Revenue Code of 1986, any amendments thereto, and any regulations on rulings issued thereunder. 1.4 "Committee" means the committee appointed in accordance with Section 5.1 to determine awards of Options and administer the Plan. 1.5 "Designated Property" means shares of regulated investment companies or any other property (not including cash, cash equivalents, or securities of the Employer) designated by the Committee as subject to purchase through the exercise of an Option. 1.6 "Effective Date" means February 1, 1997 1.7 "Employee" means any individual who is employed by the Employer. 1.8 "Employer" means Camden Property Trust, and any successor thereto. 1.9 "ERISA" means the Employee Retirement Income Security Act of 1974, any amendments thereto, and any regulations or rulings issued thereunder. 1.10 "Exercise Price" means the price that a Participant must pay in order to exercise an Option. 1.11 "Grant Date" means, with respect to any Option, the date on which an Option is awarded to the Participant. 1.12 "Option" means the right of a Participant, granted by the Employer in accordance with the terms of this Plan, to purchase Designated Property from the Employer at the Exercise Price established under Section 2.3. 1.13 "Option Agreement" means an agreement executed by the Employer and by a Participant to whom Options have been awarded, acknowledging the issuance of the Options and setting forth any terms that are not specified in this Plan. 1.14 "Participant" means any individual who has received an award of Options in accordance with Section 2.2 and whose Options have not been completely exercised. After a Participant's death, his Beneficiary is considered to be a Participant to the extent necessary to facilitate the exercise of any Options that continue to be exercisable under the terms of the Plan. In the event of a Participant's disability or other legal incapacity, the Participant's legal representative is considered to be a Participant to the extent necessary to facilitate the exercise of any Options that are or become exercisable under the terms of the Plan. 1.15 "Plan" means the Camden Property Trust Key Employee Share Option PlanTM, as set forth herein and as from time to time amended. 1.16 "Plan Year" means the operating year of the Plan, which ends on January 31st. 1.17 "Termination of Employment" means a Participant's separation from the service of the Employer (including all subsidiaries or other affiliates of the Employer that participate in the Plan) by reason of his resignation, retirement, discharge or death. 1.18 "Trust" means the trust that may be established pursuant to Article VI to hold the Designated Property that is subject to purchase through the exercise of an Option. 1.19 "Trust Agreement" means an agreement setting forth the terms of the Trust established pursuant to Article VI. 1.20 "Trust Fund" means the Designated Property that is subject to an option that is held in the Trust. 1.21 "Trustee" means the persons or institution acting as trustee of the Trust. 1.22 Rules of construction 1.22.1 Governing law. The construction and operation of this Plan are governed by the laws of the State of Texas. 1.22.2 Headings. The headings of Articles, Sections and Subsections are for reference only and are not to be utilized in construing the Plan. 1.22.3 Gender. Unless clearly inappropriate, all pronouns of whatever gender refer indifferently to persons or objects of any gender. 1.22.4 Singular and plural. Unless clearly inappropriate, singular terms refer also to the plural number and vice versa. 1.22.5 Severability. To the extent any provision of this Plan is held to be unenforceable, illegal or invalid under any current or future law, such provision shall be fully separable and this Plan shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part thereof, the remaining provisions of this Plan shall remain in force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance therefrom. In lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Plan, a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible, and the parties hereto request the court or any arbitrator to whom disputes relating to the Plan are submitted to reform the otherwise illegal, invalid or unenforceable provision in accordance with this Section 1.22.5. ARTICLE II Award of Options 2.1 Eligibility for awards. Awards of Options may be made to any Employee selected by the Committee from the executive officers and other key employees who occupy senior managerial or professional positions and who have the capacity of making a substantial contribution to the success of the Employer. In making this selection and in determining the form and amount of options the Committee shall consider any factors it deems relevant, including the individual's functions, responsibilities, value of services to the Employer and past and potential contributions to the Employer's profitability and growth. 2.2 Procedure for awarding Options. The recipients of Options are determined from time to time by the Committee. No Committee member may take part in any way in determining the amount of any award of Options to himself. Awards become effective upon the Grant Date. Awards may be made at any time on or after the Effective Date and prior to the termination of the Plan. 2.3 Selection of Designated Property and Establishment of Exercise Price. When an Option is awarded, the Committee will specify the Designated Property that may be purchased by exercise of the Option and will fix the Exercise Price. If the Employer acquires Designated Property specified by an Option Agreement in accordance with Section 2.5 hereunder, such Designated Property must: (a) not be subject to any security interest, whether or not perfected, or to any option or contract under which any other person may acquire any interest in it; and (b) be readily tradable on an established market or consist wholly of interests in property that is readily tradable on an established market. Unless otherwise specified in a particular Option Agreement, the Exercise Price will equal twenty-five percent (25%) of the lesser of the fair market value of the Designated Property on the Grant Date or the fair market value on the date that the Option is exercised. 2.4 Effect of dividends and distributions with respect to Designated Property. The Employer agrees, whenever any dividend is declared on those shares, to reinvest all dividends and distributions with respect to Designated Property in additional property of the same kind (or as nearly the same kind as feasible, if property of the same kind is not available). Any property acquired through investment or reinvestment will immediately be subject to an Option in favor of the Participant on terms identical to those set forth in the pertinent Option Agreement. 2.5 Held in Trust. Upon the grant of an Option, the Employer may acquire the Designated Property and contribute it to the Trust as soon as practicable after the Grant Date. At the time contributed to the Trust, the Designated Property shall not be subject to any security interest, whether or not perfected, or to any option or contract under which any other person may acquire any interest in it, except as otherwise provided in Section 6.2 2.6 Substitution of other property for Designated Property. At any time after the grant of an Option, the Committee may, in its discretion, after consultation with the Participant substitute other property of equal value for Designated Property subject to that option. ARTICLE III Exercise of Options 3.1 Period for exercise of Options. Options may be exercised by a Participant at any time during the period beginning six months after the Grant Date and ending on the earliest of: (a) one year after the Participant's termination of employment, or (b) twenty years after Grant Date. If a Participant dies before all of his Options have been exercised, any Options that remain outstanding may be exercised by his Beneficiary. The right of a Participant or his Beneficiary to exercise any Option ceases at the time specified in the Option Agreement or one (1) year after his date of death, whichever is earlier. 3.2 Procedure for exercising Option. A Participant may exercise all or a portion of an Option by giving written notice to the Committee and either tendering payment of the applicable Exercise Price or requesting that the Committee approve a net exercise in accordance with Section 3.3. 3.3 Net exercise of Option. At a Participant's request, the Committee may, in its sole discretion, consent to the payment to the Participant, in lieu of the exercise of an Option, of cash equal to the difference between (a) the fair market value of the Designated Property subject to the Option or portion of an Option that he proposes to exercise and (b) the applicable Exercise Price. 3.4 Inalienability of Options. Except as otherwise provided in Section 3.5, no Option granted under this Plan may be transferred, assigned or alienated, except as provided herein, and no Option shall be subject to execution, attachment or similar process. An Option may be exercised only by the Participant to whom it was granted, by his Beneficiary after his death, or the Participant's assignee pursuant to Section 3.5. 3.5 Permitted Transfers. A Participant may at any time prior to death, assign all or any portion of an Option to: (a) the Participant's spouse or lineal descendants, (b) the trustee of a trust for the primary benefit of the Participant's spouse lineal descendants, (c) partnership of which the Participant's spouse and lineal descendants are the only partners, or (d) a tax exempt organization as described in Section 501(c)(3)of the Code. Any such assignment will be permitted only if an assignment is expressly permitted in the Option Agreement, or approved in writing by the Committee, and the Participant receives no consideration for the assignment. Any such assignment will be evidenced by an appropriate written document executed by the Participant, and delivered to the Committee on or before the effective date of the assignment. In the event of such assignment, the spouse, lineal descendant, trustee, partnership or tax exempt organization will be entitled to all of the rights of the Participant with respect to the assigned portion of the Option, and such portion of the Option, will continue to be subject to all of the terms, conditions and restrictions applicable to the Option, as set forth in the Plan and the Option Agreement. 3.6 Delivery of Designated Property. On the date of exercise, or as soon as practicable thereafter (but in no event later than five business days after the date of exercise), the Employer will deliver or cause to be delivered the Designated Property then being purchased to the Participant (the Participant's Beneficiary pursuant to Section 3.8, or the Participant's assignee pursuant to Section 3.5). In the event that the listing, registration or qualification of the Option or the Designated Property on any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the exercise of the Option, then the Option will not be exercised in whole or in part until such listing, registration, qualification, consent or approval has been effected or obtained. 3.7 Tax Withholding. Whenever Designated Property is to be delivered upon exercise of an Option under the Plan, the Employer will require as a condition of such delivery (a) the cash payment by the Participant of an amount sufficient to satisfy all federal, state and local tax withholding requirements related thereto, (b) the withholding of such amount from any Designated Property to be delivered to the Participant, (c) the withholding of such amount from compensation otherwise due to the Participant, or (d) any combination of the foregoing, at the election of the Participant with the consent of the Employer. Such election will be made before the date on which the amount of tax to be withheld is determined by the Employer, and such election will be irrevocable. With the consent of the Employer, the Participant may elect a greater amount of withholding, not to exceed the estimated amount of the Participant's total tax liability with respect to the delivery of Designated Property under the Plan. Such election will be made at the same time and in the same manner as provided above. 3.8 Election of Beneficiary. 3.8.1 Designation or Change of Beneficiary by Participant. When Options are first awarded to a Participant, the Committee will send him a Beneficiary designation form, on which he may designate one or more Beneficiaries and successor Beneficiaries. A Participant may change his Beneficiary designation at any time by filing the prescribed form with the Committee. The consent of the Participant's current Beneficiary is not required for a change of Beneficiary, and no Beneficiary has any rights under this Plan except as are provided by its terms. The rights of a Beneficiary who predeceases the Participant who designated him immediately terminate, unless the Participant has specified otherwise. 3.8.2 Beneficiary if no election is made. Unless a different Beneficiary has been elected in accordance with Section 3.8.1, the Beneficiary of any Participant who is lawfully married on the date of his death is his surviving spouse. The Beneficiary of any other Participant who dies without having designated a Beneficiary is his estate. ARTICLE IV Amendment or Termination of the Plan 4.1 Employer's right to amend or terminate Plan. The Board may, at any time and from time to time, amend, in whole or in part, any of the provisions of this Plan or may terminate it as a whole or with respect to any Participant or group of Participants. Any such amendment is binding upon all Participants and Beneficiaries, the Committee and all other parties in interest. 4.2 When amendments take effect. A resolution amending or terminating the Plan becomes effective as of the date specified therein. 4.3 Amendment of Options. An Option Agreement may be amended by the Committee at any time if the Committee determines that an amendment is necessary or advisable as a result of: (a) any addition to or change in the Code or ERISA, a federal or state securities law or any other law or regulation, which occurs after the Grant Date and by its terms applies to the Option, (b) any substitutions of Designated Property held in trust pursuant to Section 2.5, (c) any Plan amendment or termination pursuant to Section 4.1, provided that the amendment does not materially affect the terms, conditions and restrictions applicable to the Option, or (d) any circumstances not specified in Paragraphs (a), (b), (c), with the consent of the Participant. ARTICLE V Administration 5.1 The Committee. The Plan will be administered by a Committee consisting of one or more persons appointed by the Board of Trust Managers. The Committee will act by a majority of its members at the time in office and may take action either by vote at a meeting or by consent in writing without a meeting. (a) The Board may remove any member of the Committee at any time, with or without cause, and may fill any vacancy. If a vacancy occurs, the remaining member or members of the Committee will have full authority to act. (b) Any member of the Committee may resign by written resignation delivered to the Board. Any such resignation will become effective upon its receipt by the Board or on such other date as agreed to by the Board and the resigning member. 5.2 Powers of the Committee. In carrying out its duties with respect to the general administration of the Plan, the Committee will have, in addition to any other powers conferred by the Plan or by law, the following powers: (a) to determine eligibility to participate in the Plan and eligibility to receive Options; (b) to grant Options, and to determine the form, amount and timing of such Options; (c) to determine the terms and provisions of the Option Agreements, and to modify such Option Agreements as provided in Section 4.3; (d) to substitute Designated Property held in Trust as provided in Section 2.6; (e) to maintain all records necessary for the administration of the Plan; (f) to prescribe, amend, and rescind rules for the administration of the Plan to the extent not inconsistent with the terms thereof; (g) to appoint such individuals and subcommittees as it deems desirable for the conduct of its affairs and the administration of the Plan; (h) to employ counsel, accountants and other consultants to aid in exercising its powers and carrying out its duties under the Plan; and (i) to perform any other acts necessary and proper for the conduct of its affairs and the administration of the Plan, except those reserved by the Board. 5.3 Determinations by the Committee. The Committee will interpret and construe the Plan and the Option Agreements, and its interpretations and determinations will be conclusive and binding on all Participants, Beneficiaries and any other persons claiming an interest under the Plan or any Option Agreement. 5.4 Indemnification of the Committee. The Employer will indemnify and hold harmless each member of the Committee against any and all expenses and liabilities arising out of such member's action or failure to act in such capacity, excepting only expenses and liabilities arising out of such member's own willful misconduct or gross negligence. (a) Expenses and liabilities against which a member of the Committee is indemnified hereunder will include, without limitation, the amount of any settlement or judgment, costs, counsel fees and related charges reasonably incurred in connection with a claim asserted or a proceeding brought against him or the settlement thereof. (b) This right of indemnification will be in addition to any other rights to which any member of the Committee may be entitled. (c) The Employer may, at its own expense, settle any claim asserted or proceeding brought against any member of the Committee when such settlement appears to be in the best interests of the Employer, with such member's consent which will not be unreasonably withheld. 5.5 Expenses of the Committee. The members of the Committee will serve without compensation for services as such. All expenses of the Committee will be paid by the Employer. ARTICLE VI Trust Provisions 6.1 Establishment of the Trust. A trust may be established to hold all Designated Property contributed by the Employer pursuant to Section 2.5. Except as otherwise provided in Section 6.2, and Section 12 of the Trust Agreement, the Trust will be irrevocable and no portion of the Trust Fund will be used for any purpose other than the delivery of Designated Property pursuant to the exercise of an Option, and the payment of expenses of the Plan and Trust. 6.2 Trust Status. The Trust is intended to be a grantor trust, within the meaning of section 671 of the Code, of which the Employer is the grantor, and this Plan is to be construed in accordance with that intention. Notwithstanding any other provision of this Plan, the Trust Fund will remain the property of the Employer and will be subject to the claims of its creditors in the event of its bankruptcy or insolvency. No Participant will have any priority claim on the Trust Fund or any security interest or other right superior to the rights of a general creditor of the Employer. ARTICLE VII Miscellaneous Provisions 7.1 No Rights of Shareholder. Neither the Participant, a Beneficiary nor any assignee will be, or will have any of the rights and privileges of, a stockholder with respect to any Designated Property purchasable or issuable upon the exercise of an Option, prior to the date of exercise of such Option. 7.2 No Right to Continued Employment. Nothing contained in the Plan will be deemed to give any person the right to be retained in the employ of the Employer, or to interfere with the right of the Employer to discharge any person at any time without regard to the effect that such discharge will have upon such person's rights or potential rights, if any, under the Plan. The provisions of the Plan are in addition to, and not a limitation on, any rights that a Participant may have against the Employer by reason of any employment or other agreement with the Employer. 7.3 Notices. Unless otherwise specified in an Option Agreement, any notice to be provided under the Plan to the Committee will be mailed (by certified mail, postage prepaid) or delivered to the Committee in care of the Employer at its executive offices, and any notice to the Participant will be mailed (by certified mail, postage prepaid) or delivered to the Participant at the current address shown on the payroll records of the Employer. No notice will be binding on the Committee until received by the Committee, and no notice will be binding on the Participant until received by the Participant. 7.4 Coordination with Employment Agreement: To the extent any provisions of this Plan conflict with the provisions of any employment agreement entered into between the Employer and the Participant, the terms of the employment agreement shall control. To the extent that any such employment agreement provides for the automatic or accelerated vesting of securities or derivative securities held by the Participant upon the occurrence of a change of control, business combination or other enumerated event, any Option Agreements shall likewise be deemed to be governed by such provisions and shall likewise vest on the terms on the terms and conditions set forth in such employment agreement. IN WITNESS WHEREOF, Camden Property Trust has caused these presents to be executed by its duly authorized officer by authority of its Board of Trust Managers this 1st day of February, 1997. CAMDEN PROPERTY TRUST /s/ ------------------------- By: G. Steven Dawson Senior Vice President and Chief Financial Officer EX-11.1 5 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11.1 CAMDEN PROPERTY TRUST COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share amounts) For the Year Ended December 31, -------------------------- 1996 1995 1994 ------ ------ ------ SIMPLE EARNINGS PER SHARE Weighted Average Common Shares Outstanding 14,849 14,325 12,188 ====== ====== ====== Simple Earnings Per Share $0.59 $0.86 $0.78 ====== ====== ====== PRIMARY EARNINGS PER SHARE Weighted Average Common Shares Outstanding 14,849 14,325 12,188 Shares Issuable from Assumed Conversion of: Common Share Options and Awards Granted and Outstanding 91 14 38 Convertible Preferred Shares - 85 85 ------ ------ ------ Weighted Average Common Shares Outstanding, as Adjusted 14,940 14,424 12,311 ====== ====== ====== Primary Earnings Per Share $0.58 $0.85 $0.77 ====== ====== ====== FULLY DILUTED EARNINGS PER SHARE Weighted Average Common Shares Outstanding 14,849 14,325 12,188 Shares Issuable from Assumed Conversion of: Common Share Options and Awards Granted and Outstanding 140 36 38 Convertible Preferred Shares - 85 85 Convertible Subordinated Debentures 1,693 1,881 1,896 ------ ------ ------ Weighted Average Common Shares Outstanding, as Adjusted 16,682 16,327 14,207 ====== ====== ====== Fully Diluted Earnings Per Share $0.71 $0.98 $0.89 ====== ====== ====== EARNINGS FOR SIMPLE, PRIMARY AND FULLY DILUTED COMPUTATION: Earnings to Common Shareholders (Simple Earnings Per Share Computation) $8,709 $12,291 $ 9,502 Dividends on Convertible Preferred Shares 4 39 20 ------- ------- ------- Earnings (Primary Earnings Per Share Computation) 8,713 12,330 9,522 Interest on Convertible Subordinated Debentures 2,809 3,297 2,843 Convertible Subordinated Debenture Cost Amortization 295 334 333 ------- ------- ------- Earnings (Fully Diluted Earnings Per Share Computation) $11,817 $15,961 $12,698 ======= ======= ======= Fully diluted earnings per share of beneficial interest is not dilutive and is not presented in the Consolidated Statements of Operations.
EX-13.1 6 SELECTED PAGES OF ANNUAL REPORT TO SHAREHOLDERS EXHIBIT 13.1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the "Comparative Summary of Selected Financial and Property Data" and the consolidated financial statements and notes thereto appearing elsewhere in this annual report. Historical results and trends which might appear should not be taken as indicative of future operations. The statements contained in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may differ materially from those included in the forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to, the following: the proposed merger with Paragon Group, Inc., changes in general economic conditions in the markets that could impact demand for the Company's product, and changes in financial markets and interest rates impacting the Company's ability to meet its financing needs and obligations. BUSINESS 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 region of the United States. As of December 31, 1996, the Company owned and operated 48 multifamily properties containing 17,611 units located in Houston, Dallas/Fort Worth, Austin, Corpus Christi, El Paso, Phoenix and Tucson. These properties had a weighted average occupancy rate of 94.0% for the year ended December 31, 1996. The Company is developing five multifamily properties in Houston, Dallas and Phoenix which will, when completed, add 1,778 units to its portfolio, and has one site in Denver which it intends to develop. On December 16, 1996, the Company announced the execution of a definitive merger agreement pursuant to which Paragon Group, Inc. would be merged with and into a wholly-owned subsidiary of Camden. The merger will create the fourth largest multifamily real estate investment trust ("REIT") with 35,364 units and approximately $1.25 billion in total assets. Each share of Paragon will be exchanged for 0.64 shares of Camden. The exchange ratio is based on Camden's closing price on December 4, 1996 of $27.75 per share and $17.75 per share for Paragon. If Camden's share price falls below $25.67 per share during a specified time frame as set forth in the merger agreement, Paragon has the right to terminate the agreement, subject to Camden's right to negate such termination right by increasing the exchange ratio so that Paragon's shareholders receive the same aggregate dollar value of Camden shares had Camden's share price remained at the $25.67 per share threshold. Paragon is a fully integrated REIT headquartered in Dallas, Texas whose business is the operation, development and acquisition of multifamily apartment communities in the Southwest, Midwest, North Carolina and Florida. Paragon is a self-administered and self-managed REIT that, as of December 31, 1996, owned interests in 57 completed multifamily properties located in six states, with three additional multifamily properties under construction. Subsequent to December 31, 1996, three of Paragon's properties were sold and one of Paragon's construction properties was completed. The merger with Paragon has been structured as a tax-free transaction and will be treated as a purchase for accounting purposes. The merger is subject to the approval of both companies' shareholders. The meetings to consider the transaction have been scheduled for April 15, 1997. It is anticipated that the merger will be completed by the end of April 1997. PAGE Camden's real estate portfolio at December 31, 1996, 1995 and 1994 is summarized as follows: 1996 1995 1994 ---------------------- ---------------------- ---------------------- Units Projects % Units Projects % Units Projects % ----- -------- ----- ----- -------- ----- ----- -------- ----- OPERATING PROPERTIES Texas Houston 6,987 18 36% 6,598 20 33% 6,310 19 34% Dallas 6,045 16 31 6,065 17 30 6,065 17 33 Austin 1,745 6 9 1,745 6 9 1,063 4 6 Other 1,585 5 8 1,513 5 8 1,524 6 8 ------ -- --- ------ -- --- ------ -- --- Total Texas Operating Properties 16,362 45 84 15,921 48 80 14,962 46 81 Arizona 1,249 3 7 821 2 4 821 2 5 ------ -- --- ------ -- --- ------ -- --- Total Operating Properties 17,611 48 91 16,742 50 84 15,783 48 86 ------ -- --- ------ -- --- ------ -- --- PROJECTS UNDER DEVELOPMENT Texas Houston 758 2 4 1,226 3 6 804 2 4 Dallas 732 2 4 920 2 5 456 1 2 Austin 682 2 4 Other 288 1 1 288 1 2 ------ -- --- ------ -- --- ------ -- --- Total Texas Development Projects 1,490 4 8 2,434 6 12 2,230 6 12 Arizona 288 1 1 716 2 4 428 1 2 ------ -- --- ------ -- --- ------ -- --- Total Projects Under Development 1,778 5 9 3,150 8 16 2,658 7 14 ------ -- --- ------ -- --- ------ -- --- Total Properties 19,389 53 100% 19,892 58 100% 18,441 55 100% ====== == === ====== == === ====== == === Based on units. Excludes one project in Denver on which construction had not commenced.
At December 31, 1996, the Company had five development properties in various stages of construction as follows: Estimated Number Total Project Estimated Estimated Estimated of Cost Percent Completion Stabilization Property and Location Units ($ millions) Complete Date Date - ----------------------------- ------ ------------- --------- -------------- -------------- The Park at Arrowhead Springs Phoenix, AZ 288 $16.0 76% 1st Qtr., 1997 4th Qtr., 1997 The Park at Sugar Grove Houston, TX 380 19.3 88 1st Qtr., 1997 3rd Qtr., 1997 The Park at Centreport Dallas, TX 268 14.0 15 1st Qtr., 1998 3rd Qtr., 1998 The Park at Buckingham Dallas, TX 464 25.5 22 1st Qtr., 1998 3rd Qtr., 1998 Vanderbilt Square II Houston, TX 378 24.6 40 1st Qtr., 1998 3rd Qtr., 1998 ----- ----- Total 1,778 $99.4 ===== ===== Includes land and preconstruction costs.
PAGE In 1993, at the time of the initial public offering, 77% of Camden's properties (based on the number of units) were located in Houston. At December 31, 1996, after giving effect to the anticipated completion of the projects under development, 40% of the Company's properties (based on the number of units) were located in Houston. At December 31, 1996 and 1995, the Company's investment in the various geographic areas was as follows: (Dollars in thousands) 1996 1995 --------------- --------------- Texas Houston $243,575 38% $230,664 38% Dallas 207,628 32 201,578 33 Austin 65,677 10 64,559 11 Other 52,578 8 57,101 9 -------- --- -------- --- Total Texas Properties 569,458 88 553,902 91 -------- --- -------- --- Arizona 74,355 12 51,207 9 Other 2,732 2,489 -------- --- -------- --- Total Properties $646,545 100% $607,598 100% ======== === ======== === The Company intends to further diversify geographically into the Midwest, North Carolina and Florida through its planned merger with Paragon. LIQUIDITY AND CAPITAL RESOURCES FINANCIAL STRUCTURE. The Company intends to continue maintaining what management believes to be 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. Camden has maintained on a quarterly basis a financial structure with no more than 40% total debt to total market capitalization since its initial public offering in July 1993. At December 31, 1996, the Company's ratio of total debt to total market capitalization was approximately 32.6% (based on the closing price of $28.63 per common share of the Company on the New York Stock Exchange composite tape on December 31, 1996). This ratio represents total consolidated debt of the Company (excluding the Company's 7.33% Convertible Debentures due 2001 ["Convertible Debentures"]) 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 and 3.4 times for 1996 and 1995, respectively. At December 31, 1996 and 1995, 84.3% and 68.6%, respectively, of the Company's properties (based on invested capital) were unencumbered. After adjusting for the early 1997 retirement of two conventional mortgage loans, this unencumbered property percentage increased to 90.1%. LIQUIDITY. The Company intends to meet its short-term liquidity requirements through cash flows provided by operations, the $150 million unsecured credit facility (the "Unsecured Credit Facility" or "facility"), construction loans, and other short-term borrowing arrangements. The Company intends to use equity capital or senior unsecured debt to refinance maturing secured debt, borrowings under its facility and other short-term borrowing arrangements. The Company is establishing a medium-term note program to be used to provide intermediate or long-term, unsecured publicly-traded debt. The Company considers its ability to generate cash to be sufficient, and expects to be able to meet future operating requirements and shareholder distributions. On December 13, 1996, the Company declared its fourth quarter dividend in the amount of $0.475 per common share, bringing the total dividends for the year to $1.90 per common share. The fourth quarter distributions were paid on January 17, 1997 to shareholders of record as of December 30, 1996. During the first quarter of 1997, the Company announced an increase in the quarterly dividend rate to $0.49 per common share effective for 1997. The Company intends to continue shareholder distributions in accordance with REIT qualification requirements under the federal tax code while maintaining what management believes to be a conservative payout ratio, and expects to continue reducing the payout ratio by raising the dividends at a rate which is less than the funds from operations growth rate. FINANCIAL FLEXIBILITY. The Company concentrates its growth efforts toward selective development and acquisition opportunities in its core markets. During the year ended December 31, 1996, the Company incurred $56.1 million in development costs and $6.3 million in acquisition costs for new properties. The Company also seeks to selectively dispose of assets that are either not in core markets, have a lower projected net operating income growth rate than the overall portfolio, or no longer conform to the Company's operating and investment strategies. The $29.8 million in net proceeds received from these asset disposals during 1996 were either reinvested in acquisitions or developments or were used to retire debt. The Company funds its developments and acquisitions through a combination of equity capital, debt securities, conventional mortgage loans, the Unsecured Credit Facility and other short-term borrowing arrangements. In the past, the Company had also utilized construction loans to fund its developments. The Unsecured Credit Facility is subject to certain restrictions and financial covenants. The facility may be used for acquisitions, developments and working capital purposes. During 1996, the Company utilized the facility to retire three secured construction loans aggregating $26.1 million and later refinanced that amount with ten-year unsecured notes described below. The facility is currently structured as a revolving facility until July 1997. The interest rate on the facility, which is subject to changes in the Company's credit ratings, was reduced to LIBOR plus 150 basis points or Prime during 1996. Management is currently negotiating the terms of the facility with its bank group and expects to be able to extend the maturity date and lower the interest rate on this facility. Furthermore, management believes it will continue to be able to extend the maturity date of this facility as needed in the future. The facility is subject to certain restrictive covenants including, among others, liquidity, net worth, leverage, capitalization and cash flow ratios and limitations on capital investments. Such restrictions also include a limitation on distributions to common shareholders that are not to exceed 95% of funds from operations except as required to maintain REIT status. As of December 31, 1996, the Company had $138.0 million available under its facility. Subsequent to December 31, 1996, the Company began utilizing competitively bid short-term borrowings as an alternative to borrowing under its Unsecured Credit Facility. Such borrowings vary in term and pricing but have the same covenants as the facility and may be funded through lenders outside of the facility bank group at rates substantially below those of the facility. Since there are no commitments in place for such arrangements, these borrowings cannot exceed the unused portion of the facility. On October 16, 1996, the Company completed a common share offering from its previously filed shelf registration statement selling 1,090,000 shares at a gross price of $25.875 per share. The net proceeds of $27.6 million were used primarily to retire a $25.1 million secured construction loan. During 1996, the Company issued from its previously filed shelf registration statement two issues of senior unsecured notes. The first issue for an aggregate principal amount of $100 million accrues interest at a rate of 6.6% per annum, has an average effective annual rate of 6.7%, and matures within five years. The second issue for an aggregate principal amount of $75 million accrues interest at a rate of 7.0% per annum, has an average effective annual rate of 7.2%, and matures within ten years. These two issues of senior unsecured notes received investment-grade ratings from Moody's Investors Service, Standard & Poor's, and Duff & Phelps. Both issues pay interest semi-annually and are direct, senior unsecured obligations of the Company ranking equally with all other unsecured and unsubordinated indebtedness of the Company. Both issues may be redeemed at any time at the option of the Company subject to make-whole provisions. The net proceeds from the first issue of $98.4 million were used 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 $500,000 to extinguish a bank's option related to a settled hedging agreement. The net proceeds from the second issue of $73.6 million were used to reduce $64.0 million of indebtedness under the facility and to repay the Company's only remaining secured construction loan of $9.4 million. Subsequent to December 31, 1996, the Company prepaid two of its 8.8% conventional mortgage loans with outstanding balances at December 31, 1996 of $20.3 million and prepayment penalties of $203,000. The loans were prepaid by utilizing funds from the Unsecured Credit Facility. At December 31, 1996, a $25 million interest rate hedging agreement remained in effect and is scheduled to mature in July 2000 with a bank's option to extend to July 2002. The LIBOR rate on this $25 million hedging agreement is fixed at 6.1%. The resulting fixed rate is equal to the 6.1% plus the actual LIBOR spread on the related indebtedness. This swap continues to be used as a hedge to manage the risk of interest rate fluctuations. The differential to be paid or received on the interest rate hedging agreement is accrued as interest rates change and is recognized over the life of the agreement as an increase or decrease in interest expense. FUNDS FROM OPERATIONS Funds from operations ("FFO") for the year ended December 31, 1996 increased $4.7 million over 1995, primarily due to properties added to the portfolio and rental growth in the Company's Dallas and Houston markets. Management considers FFO to be an appropriate measure of performance of an equity REIT. The National Association of Real Estate Investment Trusts ("NAREIT") currently defines FFO as net income (computed in accordance with generally accepted accounting principals), excluding gains (or losses) from debt restructuring and sales of property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. 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 annual 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 for the two years ended December 31, 1996 and 1995 follows: (In thousands) 1996 1995 ------- ------- Net income to common shareholders $ 8,709 $12,291 Real estate asset depreciation 22,946 19,299 Gain on sales of properties (115) Extinguishment of hedges upon debt refinancing 5,351 ------- ------- Funds from operations available to common shareholders 36,891 31,590 Preferred share dividends 4 39 ------- ------- Total funds from operations 36,895 31,629 Interest on convertible subordinated debentures 2,809 3,297 Amortization of deferred costs on convertible debentures 295 334 ------- ------- Funds from operations - fully diluted* $39,999 $35,260 ======= ======= * Prior to March 1995, the NAREIT definition of FFO required the add-back of non-real estate depreciation and amortization, such as loan cost amortization. The amount for fully diluted funds from operations for 1994 under the pre-March 1995 definition was $28,604. RESULTS OF OPERATIONS Changes in revenues and expenses related to the operating properties from period to period are the result of property acquisitions, developments, dispositions and improvements in the performance of core properties in the portfolio. Where appropriate, comparisons are made on a dollars-per-weighted-average-units basis in order to adjust for such changes in the number of units owned during each period. Selected weighted average revenues and expenses per operating unit for the three years ended December 31, 1996 are as follows: 1996 1995 1994 ------ ------ ------ Rental income per unit per month $ 508 $ 469 $ 435 Property operating and maintenance per unit per year $2,339 $2,260 $2,143 Real estate taxes per unit per year $ 760 $ 700 $ 654 Weighted average number of operating units 17,362 16,412 13,694 1996 COMPARED TO 1995 The changes in operating results from 1995 to 1996 are due to completion of the development of four properties aggregating 1,688 units, the acquisition of an adjoining property containing 400 units, the disposition of five properties containing 1,219 units and an increase in revenues generated by the stabilized portfolio. The weighted average number of units increased by 950 units, or 5.8%, from 16,412 to 17,362 for the years ended December 31, 1995 and 1996, respectively. Total units owned and operating were 16,742 and 17,611 at December 31, 1995 and 1996, respectively. The average rental income increased $39 per unit per month, or 8.3%, from $469 to $508 for the years ended December 31, 1995 and 1996, respectively. The increase was primarily due to a 4.7% increase in revenue growth from the stabilized real estate portfolio that existed throughout both periods, higher than average rental rates achieved on properties added to the portfolio, and overall increases in average occupancy from 93.3% in 1995 to 94.0% in 1996. Other income, which consisted of miscellaneous income earned from the properties, third-party construction and management fees, and interest income, increased $822,000 from 1995 to 1996. This 16.4% increase was due to a larger number of units owned and in operation. Third-party construction and management fee income totaled $1.0 million and $949,000 for the years ended December 31, 1995, and 1996, respectively. Property operating and maintenance expenses and real estate taxes increased $5.2 million, from $48.6 million to $53.8 million for the years ended December 31, 1995 and 1996, respectively, which represented an annual increase of $139 per unit. The Company's operating expense ratios decreased from the prior year primarily as a result of the change in the property mix due to development and property dispositions. Real estate taxes increased as a result of increases in valuations of renovated and developed properties and increases in property tax rates. Operating expenses from the stabilized real estate portfolio in operation throughout both periods increased 2.3% which, combined with the revenue increase, resulted in a 6.8% increase in net operating income from these properties. General and administrative expenses increased from $2.3 million in 1995 to $2.6 million in 1996, a rate consistent with the overall increase in revenues. Interest expense increased 25.4%, from $13.8 million in 1995 to $17.3 million in 1996, due to increased indebtedness related to the property acquisition, completed developments and renovations, partially offset by reductions in interest rates, reductions in debt as a result of the equity offering in October 1996, the conversion of Convertible Debentures and proceeds from dispositions. Interest capitalized was $5.3 million and $4.1 million for the years ended December 31, 1995 and 1996, respectively. Depreciation and amortization increased 17.7% from $20.3 million in 1995 to $23.9 million in 1996 primarily due to developments and renovations partially offset by property dispositions. 1995 COMPARED TO 1994 The weighted average number of units increased by 2,718 units, or 19.8%, from 13,694 units in 1994 to 16,412 units in 1995 as a result of development. The completion of Woodland Park in the first quarter, The Huntingdon in the second quarter, and Ridgecrest and the additional phase of Miramar in the third quarter of 1995 added 1,070 units to the portfolio. Total units owned and operating were 15,783 and 16,742 at December 31, 1994 and 1995, respectively. Average rental income increased $34 per unit per month, or 7.8%, from $435 to $469 from 1994 to 1995. The increase was primarily due to 4.6% 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 $1.0 million, from $4.0 million in 1994 to $5.0 million in 1995. The increase was due to a larger number of units owned and in operation combined with an increase in third-party construction and management fee income of $308,000 and related party interest of $120,000. This increase was offset by $240,000 in interest income earned from invested excess funds available after the offerings in April 1994. Third-party construction and property management fee income totaled $722,000 and $1.0 million for 1994 and 1995, respectively. Property operating and maintenance expenses and real estate taxes increased by $10.3 million, from $38.3 million in 1994 to $48.6 million in 1995, representing a $163 per unit annual increase of 5.8%. The Company's operating expense ratios improved slightly over the prior year primarily as a result of the Company's increased average rental rates, the installation of water-saving devices in the Company's Texas properties, energy-efficient lighting throughout properties in the portfolio and the addition of higher-margin new properties to the portfolio. Such savings were partially offset by increases in real estate taxes resulting from increases in valuations of renovated properties, increases in property tax rates and the change in the property mix through acquisitions and development. Operating expenses from the stabilized real estate portfolio in operation throughout both periods remained fairly level, which together with higher revenues, resulted in a 7.1% increase in net operating income from these properties. General and administrative expenses decreased by $311,000, from $2.6 million in 1994 to $2.3 million in 1995. On a per unit basis, the Company experienced a decrease over the prior year due to the efficiencies of operating a larger portfolio. Interest expense increased by $5.0 million, from $8.8 million in 1994 to $13.8 million in 1995, due to increased indebtedness related to properties acquired in 1994 and completed developments and renovations, partially offset by reductions in debt as a result of the equity offering in April 1994 and the conversion of Convertible Debentures. Interest capitalized was $2.2 million and $5.3 million for the years ended December 31, 1994 and 1995, respectively. Depreciation and amortization in 1995 increased to $20.3 million from $16.2 million in 1994 due to acquisitions, completed developments and renovations. 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. PAGE INDEPENDENT AUDITORS' REPORT To The Shareholders of Camden Property Trust We have audited the accompanying consolidated balance sheets of Camden Property Trust as of December 31, 1996 and 1995, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the management of Camden Property Trust. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Camden Property Trust at December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. /S/ - --------------------- DELOITTE & TOUCHE LLP Houston, Texas February 21, 1997 PAGE CAMDEN PROPERTY TRUST CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) December 31, -------------------- 1996 1995 -------- -------- ASSETS Real estate assets, at cost Land $ 86,673 $ 81,544 Buildings and improvements 523,325 471,584 Projects under development, including land 36,547 54,470 -------- -------- 646,545 607,598 Less: accumulated depreciation (56,369) (36,800) -------- -------- 590,176 570,798 Accounts receivable -- affiliates 148 369 Notes receivable -- affiliates 3,550 3,477 Deferred financing and other assets, net 4,847 4,839 Cash and cash equivalents 2,366 236 Restricted cash -- escrow deposits 2,423 2,633 -------- -------- Total assets $603,510 $582,352 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Notes payable Unsecured $185,800 $122,783 Secured 58,382 112,676 Accounts payable 7,512 8,300 Accrued real estate taxes 13,246 11,865 Accrued expenses and other liabilities 7,675 6,276 Distributions payable 7,765 6,623 -------- -------- Total liabilities 280,380 268,523 7.33% Convertible Subordinated Debentures 27,702 44,050 Preferred Shares of Beneficial Interest; $0.01 par value per share; 85 authorized, issued and outstanding of Series A cumulative convertible preferred shares (redeemable at $23.00 per share) at December 31, 1995 1,950 Shareholders' Equity Preferred shares of beneficial interest; $0.01 par value per share; 10,000 shares authorized; 85 Series A Preferred shares outstanding at December 31, 1995 Common shares of beneficial interest; $0.01 par value per share, 100,000 shares authorized; 16,521 and 14,514 issued and outstanding at December 31, 1996 and 1995, respectively 165 145 Additional paid-in capital 348,339 299,808 Distributions in excess of net income (49,515) (29,625) Unearned restricted share awards (3,561) (2,499) -------- -------- Total shareholders' equity 295,428 267,829 -------- -------- Total liabilities and shareholders' equity $603,510 $582,352 ======== ======== See Notes to Consolidated Financial Statements. PAGE CAMDEN PROPERTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, -------------------------------- 1996 1995 1994 -------- ------- ------- Revenues Rental income $105,785 $92,275 $71,468 Other income 5,821 4,999 3,988 -------- ------- ------- Total revenues 111,606 97,274 75,456 Expenses Property operating and maintenance 40,604 37,093 29,352 Real estate taxes 13,192 11,481 8,962 General and administrative 2,631 2,263 2,574 Interest 17,336 13,843 8,807 Depreciation and amortization 23,894 20,264 16,239 -------- ------- ------- Total expenses 97,657 84,944 65,934 -------- ------- ------- Income before gain on sales of properties and extinguishment of hedges upon debt refinancing 13,949 12,330 9,522 Gain on sales of properties 115 Extinguishment of hedges upon debt refinancing (5,351) -------- ------- ------- Net income 8,713 12,330 9,522 Preferred share dividends (4) (39) (20) -------- ------- ------- Net income to common shareholders $ 8,709 $12,291 $ 9,502 ======== ======= ======= Net income per common and common equivalent share $0.58 $0.85 $0.77 Distributions declared per common share $1.90 $1.84 $1.76 Weighted average number of common and common equivalent shares outstanding 14,940 14,424 12,311 See Notes to Consolidated Financial Statements. PAGE CAMDEN PROPERTY TRUST CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands, except per share amounts) Common Unearned Shares of Additional Distributions Restricted Beneficial Paid-in in Excess of Share Interest Capital Net Income Awards ---------- ---------- ------------- --------- SHAREHOLDERS' EQUITY, JANUARY 1, 1994 $ 92 $178,575 $ (2,683) $ Net income to common shareholders 9,502 Public offering of 3,450 common shares 34 77,424 Conversion of debentures 16 36,580 Restricted shares issued under benefit plan (59 shares) 1 1,518 (1,134) Cash distributions ($1.76 per share) (22,321) ---- -------- -------- -------- SHAREHOLDERS' EQUITY, DECEMBER 31, 1994 143 294,097 (15,502) (1,134) ---- -------- -------- -------- Net income to common shareholders 12,291 Common shares issued under dividend reinvestment plan 28 Conversion of debentures 1 3,588 Restricted shares issued under benefit plan (83 shares) 1 2,095 (1,365) Cash distributions ($1.84 per share) (26,414) ---- -------- -------- -------- SHAREHOLDERS' EQUITY, DECEMBER 31, 1995 145 299,808 (29,625) (2,499) ---- -------- -------- -------- Net income to common shareholders 8,709 Public offering of 1,090 common shares 11 27,580 Common shares issued under dividend reinvestment plan 31 Conversion of debentures 6 15,814 Restricted shares issued under benefit plan (82 shares) 1 2,074 (1,062) Common share options exercised (71 shares) 1 1,272 Conversion of preferred shares 1 1,952 Other (192) Cash distributions ($1.90 per share) (28,599) ---- -------- -------- ------- SHAREHOLDERS' EQUITY, DECEMBER 31, 1996 $165 $348,339 $(49,515) $(3,561) ==== ======== ======== =======
See Notes to Consolidated Financial Statements. PAGE CAMDEN PROPERTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, ---------------------------- 1996 1995 1994 ------- ------- -------- CASH FLOW FROM OPERATING ACTIVITIES Net income $ 8,713 $12,330 $ 9,522 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23,894 20,264 16,239 Gain on sales of properties (115) Extinguishment of hedges upon debt refinancing 5,351 Accretion of discount on unsecured notes payable 72 Net change in operating accounts 3,352 5,000 7,799 ------- ------- -------- Net cash provided by operating activities 41,267 37,594 33,560 CASH FLOW FROM INVESTING ACTIVITIES Increase in real estate assets, net of notes payable assumed (71,288) (96,183) (195,856) Net proceeds from sales of properties 29,794 Increase in notes receivable for net advances to affiliates (73) (833) (2,007) Other (130) 13 (224) ------- ------- -------- Net cash used in investing activities (41,697) (97,003) (198,087) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issuance of common shares, net 27,591 77,506 Proceeds from issuance of convertible debentures, net 81,884 Net (decrease) increase in lines of credit (110,783) 50,759 14,849 Proceeds from notes payable 181,048 39,860 17,595 Extinguishment of hedges upon debt refinancing (5,351) Principal reduction on notes payable (61,614) (4,707) (12,042) Distributions to common shareholders (27,457) (26,071) (19,730) Payment of loan costs (2,253) (634) (790) Other 1,379 197 116 ------- ------- -------- Net cash provided by financing activities 2,560 59,404 159,388 ------- ------- -------- Net increase (decrease) in cash and cash equivalents 2,130 (5) (5,139) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 236 241 5,380 ------- ------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,366 $ 236 $ 241 ======= ======= ======== SUPPLEMENTAL INFORMATION Cash paid for interest, net of interest capitalized $15,585 $13,189 $ 7,532 Interest capitalized $ 4,129 $ 5,321 $ 2,167 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Conversion of 7.33% subordinated debentures to common shares, net $15,820 $ 3,589 $ 36,596 Shares issued under benefit plans, net $ 2,449 $ 2,096 $ 1,519 Conversion of preferred shares and dividends $ 1,953 Notes payable assumed upon purchase of assets $ 17,632 See Notes to Consolidated Financial Statements. PAGE CAMDEN PROPERTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS Camden Property Trust is a self-administered and self-managed real estate investment trust ("REIT") organized on May 25, 1993. 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 region of the United States. As of December 31, 1996, the Company owned and operated 54 multifamily properties located in Houston, Dallas/Fort Worth, Austin, Corpus Christi, El Paso, Phoenix and Tucson, including five properties under development and one future development property in Denver. On December 16, 1996, the Company announced the execution of a definitive merger agreement pursuant to which Paragon Group, Inc. would be merged with and into a wholly-owned subsidiary of Camden expanding the Company's geographic focus in 1997 to include the Midwest, North Carolina and Florida. Each share of Paragon will be exchanged for 0.64 shares of Camden. The exchange ratio is based on Camden's closing price on December 4, 1996 of $27.75 per share and $17.75 per share for Paragon. If Camden's share price falls below $25.67 per share during a specified time frame as set forth in the merger agreement, Paragon has the right to terminate the agreement, subject to Camden's right to negate such termination right by increasing the exchange ratio so that Paragon's shareholders receive the same aggregate dollar value of Camden shares had Camden's share price remained at the $25.67 per share threshold. The merger has been structured as a tax-free transaction and will be treated as a purchase for accounting purposes. The merger is subject to the approval of both companies' shareholders. The meetings to consider the transaction have been scheduled for April 15, 1997. It is anticipated that the merger will be completed by the end of April 1997. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation. The consolidated financial statements of Camden include the assets, liabilities, and operations of the parent company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, results of operations during the reporting periods and related disclosures. Actual results could differ from those estimates. Income Recognition. Rental, interest and other income are recognized as earned. Rental Operations. Camden owns and operates garden-style multifamily apartment units that are rented to residents on lease terms ranging from six to thirteen months, with monthly payments due in advance. None of the properties are subject to rent control or rent stabilization. Operations of apartment properties acquired are recorded from the date of acquisition in accordance with the purchase method of accounting. All operating expenses, excluding depreciation, associated with occupied units for properties in the development and leasing phase are expensed against revenues generated by those units as they become occupied. In management's opinion, due to the number of tenants, the type and diversity of submarkets in which the properties operate, and the collection terms, there is no concentration of credit risk. Cash and Cash Equivalents. All cash and investments in money market accounts and other securities with a maturity of three months or less, at the time of purchase, are considered to be cash and cash equivalents. Restricted Cash. Restricted cash mainly consists of escrow deposits held by lenders for property taxes, insurance and replacement reserves. Substantially all restricted cash is invested in short-term securities. Real Estate Assets, at Cost. Real estate assets are carried at cost plus capitalized carrying charges. Expenditures directly related to the development, acquisition, and improvement of real estate assets are capitalized at cost as land, buildings and improvements. All construction and carrying costs are capitalized and reported on the balance sheet in "Projects under development, including land" until such units are completed. Upon completion of each building of the project, the total cost of that building and the associated land is transferred to "Land" and "Buildings and improvements" and the assets are depreciated over their estimated useful lives using the straight-line method of depreciation. Upon achieving 90% occupancy, or one year from opening the leasing office, whichever occurs first, all units are considered operating and the Company begins expensing all items that were previously considered as carrying costs. The Company expenses recurring capital expenditures for items such as carpets, appliances and HVAC units as these items are replaced in their normal course. During a renovation, many of these items may be capitalized, particularly to the extent that an inordinate number of such items are replaced. Non-recurring capital expenditures for such items as roof replacements are capitalized. The Company capitalized $9.6 million in 1996 and $8.3 million in 1995 of non-recurring renovations and improvements to extend the economic lives and enhance its multifamily properties. Carrying charges, principally interest and ad valorem taxes, of land under development and buildings under construction are capitalized as part of projects under development and buildings and improvements to the extent that such charges do not cause the carrying value of the asset to exceed its net realizable value. Capitalized interest was $4.1 million in 1996, $5.3 million in 1995 and $2.2 million in 1994. Capitalized ad valorem taxes were $617,000 in 1996, $551,000 in 1995 and $221,000 in 1994. All buildings and improvements are depreciated over their remaining estimated useful lives of 10 to 35 years using the straight line method. Subsequent expenditures for furnishings, equipment and other normal recurring items are expensed as incurred. Capital improvements subsequent to the initial renovation period are depreciated over their expected useful lives of 3 to 15 years using the straight line method. Impact of New Accounting Pronouncements. In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of ("SFAS No. 121"). SFAS No 121 requires that certain long-lived assets and intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The adoption of SFAS No. 121 by the Company in 1996 did not have a material effect on the Company's financial position or results of operations. In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"). SFAS No. 123 prescribes a fair value-based method of determining compensation expense related to stock-based awards granted to employees or associates. The recognition provisions of SFAS No. 123 are optional; however, entities electing not to adopt SFAS No. 123 are required to disclose in annual financial statements issued for fiscal years beginning after December 15, 1995 pro forma net income and earnings per share as if SFAS No. 123 had been applied. The Company elected not to adopt the recognition provisions of SFAS No. 123. See Note 6 for further information on the Company's 1996 disclosures. Property Operating and Maintenance Expenses. Property operating and maintenance expenses included normal repairs and maintenance totaling $8.3 million in 1996, $7.3 million in 1995 and $5.6 million in 1994. In addition, amounts incurred subsequent to the initial renovation and rehabilitation periods for recurring expenditures such as carpets, appliances, and furnishings and equipment which might otherwise be capitalized, totaled $3.5 million in 1996, $2.8 million in 1995 and $1.9 million in 1994 and were included in expense. Deferred Financing and Other Assets, Net. Deferred financing and other assets are amortized ($838,000 in 1996, $871,000 in 1995 and $1.8 million in 1994) over the terms of the related debt or lives of the asset on the straight line method. Leasehold improvements and equipment are depreciated on the straight line method over the shorter of the expected useful lives or the lease term which range from three to ten years. Accumulated depreciation and amortization was $1.8 million in 1996 and $1.2 million in 1995 for deferred financing, other assets, leasehold improvements and equipment. Interest Rate Swap Agreements. The differential to be paid or received on interest rate swap agreements is accrued as interest rates change and is recognized over the life of the agreements as an increase or decrease in interest expense. Income Taxes and Distributions. Camden intends to maintain its election as a REIT under the Internal Revenue Code of 1986, as amended. As a result, the Company generally will not be subject to federal taxation to the extent it distributes 95% of its REIT taxable income to its shareholders and satisfies certain other requirements. Accordingly, no provision for federal income taxes has been included in the accompanying consolidated financial statements. Taxable income differs from net income for financial reporting purposes principally due to the timing of the recognition of depreciation. Such differences are primarily due to differences in the book/tax basis of the real estate assets of $7.4 million and differences in methods of depreciation and lives of the real estate assets. As a result of these differences, the tax basis of the Company's net real estate assets exceeds its book basis by $37.1 million and $13.6 million at December 31, 1996 and 1995, respectively. Shareholders are taxed on distributions declared and must report such distributions as either ordinary income, short-term gains, long-term gains, or as return of capital. A schedule of per share distributions paid by the Company is set forth in the following table: Year Ended December 31, ------------------------- 1996 1995 1994 ----- ----- ----- Ordinary income $1.03 $1.37 $1.27 Return of capital 0.87 0.47 0.49 ----- ----- ----- Total $1.90 $1.84 $1.76 ===== ===== ===== Percentage of distributions representing tax preference items 24.769% 20.119% 17.611% Net Income Per Share. Net income per common and common equivalent share of beneficial interest has been computed by dividing net income by the weighted average number of common and common equivalent shares outstanding. Common equivalent shares include the weighted average number of assumed equivalent shares outstanding from convertible preferred shares of beneficial interest and common share options. Fully diluted net income per common and common equivalent share of beneficial interest is not materially dilutive and is not presented. Reclassifications. Certain reclassifications have been made to amounts in prior year financial statements to conform with current year presentations. 3. NOTES PAYABLE A summary of the Company's notes payable follows: (In millions) December 31, ----------------- 1996 1995 ------ ------ Unsecured notes: 6 5/8% Senior Notes, due 2001 $ 99.6 $ 7% Senior Notes, due 2006 74.2 Credit facility 12.0 122.8 ------ ------ 185.8 122.8 Secured notes: Conventional mortgage loans 58.4 59.2 Construction loans 53.5 ------ ------ 58.4 112.7 ------ ------ Total notes payable $244.2 $235.5 ====== ====== Floating rate debt included in notes payable $ $ 26.3 ====== ====== The Company funds its developments and acquisitions through a combination of equity capital, debt securities, conventional mortgage loans, a $150 million unsecured credit facility (the "Unsecured Credit Facility" or "facility") and other short-term borrowing arrangements. In the past, the Company had also utilized construction loans to fund its developments. Subject to certain restrictions and financial covenants, the facility may be used for acquisitions, developments and working capital purposes. During 1996, the Company utilized the facility to retire three secured construction loans aggregating $26.1 million and later refinanced that amount with ten-year unsecured notes described below. The facility is currently structured as a revolving facility until July 1997. The interest rate on the facility, which is subject to changes in the Company's credit ratings, was reduced to LIBOR plus 150 basis points or Prime during 1996. Management is currently negotiating the terms of the facility with its bank group and expects to be able to extend the maturity date and lower the interest rate on this facility. Furthermore, management believes it will continue to be able to extend the maturity date of this facility as needed in the future. The facility is subject to certain restrictive covenants including, among others, liquidity, net worth, leverage, capitalization and cash flow ratios and limitations on capital investments. Such restrictions also include a limitation on distributions to common shareholders that are not to exceed 95% of funds from operations except as required to maintain REIT status. As of December 31, 1996, the Company had $138.0 million available under its facility. Subsequent to December 31, 1996, the Company began utilizing competitively bid short-term borrowings as an alternative to borrowing under its Unsecured Credit Facility. Such borrowings vary in term and pricing but have the same covenants as the facility and may be funded through lenders outside of the facility bank group at rates substantially below those of the facility. Since there are no commitments in place for such arrangements, these borrowings cannot exceed the unused portion of the facility. On October 16, 1996, the Company completed a common share offering from its previously filed shelf registration statement selling 1,090,000 shares at a gross price of $25.875 per share. The net proceeds of $27.6 million were used primarily to retire a $25.1 million secured construction loan. During 1996, the Company issued from its previously filed shelf registration statement two issues of senior unsecured notes. The first issue for an aggregate principal amount of $100 million accrues interest at a rate of 6.6% per annum, has an average effective annual rate of 6.7%, and matures within five years. The second issue for an aggregate principal amount of $75 million accrues interest at a rate of 7.0% per annum, has an average effective annual rate of 7.2%, and matures within ten years. These two issues of senior unsecured notes received investment-grade ratings from Moody's Investors Service, Standard & Poor's, and Duff & Phelps. Both issues pay interest semi-annually and are direct, senior unsecured obligations of the Company ranking equally with all other unsecured and unsubordinated indebtedness of the Company. Both issues may be redeemed at any time at the option of the Company subject to make-whole provisions. The net proceeds from the first issue of $98.4 million were used 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 $500,000 to extinguish a bank's option related to a settled hedging agreement. The net proceeds from the second issue of $73.6 million were used to reduce $64.0 million of indebtedness under the facility and to repay the Company's only remaining secured construction loan of $9.4 million. The fixed rate conventional mortgage loans were secured by eight multifamily properties containing 3,216 units with a net book value of $90.3 million at December 31, 1996. The weighted average interest rate on these loans was 7.5% through July 1996. At that time, the weighted average interest rate increased to 8.4%. These fixed rate loans amortize principal over periods ranging from 25 to 30 years, are payable in balloon payments at final maturities, and require escrow balances for the payment of insurance, taxes, improvements and repairs. Subsequent to December 31, 1996, the Company prepaid two of its 8.8% conventional mortgage loans with outstanding balances at December 31, 1996 of $20.3 million and prepayment penalties of $203,000. The loans were prepaid by utilizing funds from the Unsecured Credit Facility. At December 31, 1996, a $25 million interest rate hedging agreement remained in effect and is scheduled to mature in July 2000 with a bank's option to extend to July 2002. The LIBOR rate on this $25 million hedging agreement is fixed at 6.1%. The resulting fixed rate is equal to the 6.1% plus the actual LIBOR spread on the related indebtedness. This swap continues to be used as a hedge to manage the risk of interest rate fluctuations. At December 31, 1996, all debt was fixed rate debt earning a weighted average interest rate of 7.3%. Scheduled principal repayments on all loans outstanding at December 31, 1996 over the next five years, excluding the loans retired subsequent to year end, are $17.2 million in 1997, $12.2 million in 1998, $200,000 in 1999, $7.7 million in 2000, $100.3 million in 2001 and $86.3 million thereafter. 4. CONVERTIBLE SUBORDINATED DEBENTURES In April 1994, the Company issued $86.3 million aggregate principal amount of 7.33% Convertible Subordinated Debentures due 2001 (the "Debentures"). The Debentures are convertible at any time prior to maturity into common shares of beneficial interest, $0.01 par value, of the Company at a conversion price of $24.00 per share, subject to adjustment under certain circumstances. The Debentures will not be redeemable by the Company prior to maturity, except in certain circumstances intended to maintain the Company's status as a REIT. Interest on the Debentures is payable on April 1 and October 1 of each year. The Debentures are unsecured and subordinated to present and future senior debt and will be effectively subordinated to all debt and other liabilities of the Company. As of December 31, 1996, $58.5 million in principal amount of the Debentures had been converted to 2.4 million common shares. For the converted Debentures, the earned but unpaid interest was forfeited by the Debenture holders in accordance with the Indenture. In addition, $2.5 million of unamortized Debenture issue costs have been reclassified to additional paid-in-capital. Had all these converted Debentures converted as of the beginning of the period or issuance date, net income per common and common equivalent share would have been $0.62, $0.85 and $0.78 per share for the years ended December 31, 1996, 1995 and 1994, respectively. Deferred Debenture issue costs of $900,000 and $1.7 million remained outstanding at December 31, 1996 and 1995, respectively, and are being amortized over the life of the Debentures. During January 1997, an additional $5.8 million in principal amount of Debentures had been converted to 240,000 common shares and the related $175,000 of unamortized Debenture costs had been reclassified to additional paid-in-capital. Had all converted Debentures converted as of the beginning of the period, including these Debentures converted in January 1997, net income per common and common equivalent share would have been $0.62 per share for the year ended December 31, 1996. 5. CONVERTIBLE PREFERRED 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. During the first quarter of 1996, the preferred shareholders elected to convert all of their preferred shares into 85,369 common shares. 6. INCENTIVE AND BENEFIT PLANS Incentive Plan. The Company has a non-compensatory option plan (the "Plan") which provides for the issuance of a maximum of 1,450,000 common shares. Compensation awards that can be granted under the Plan include various forms of incentive awards including incentive share options, non-qualified share options and restricted share awards ("Incentive Awards"). The class of eligible persons that can receive grants of Incentive Awards under the Plan consists of non-employee trust managers, key employees, consultants, and directors of subsidiaries as determined by a committee of the Board of Trust Managers (the "Committee") of the Company. No Incentive Award may be granted after May 27, 2003. Following is a summary of the activity of the Plan for the three years ended December 31, 1996: Shares Available for Issuance Options and Restricted Shares -------- ---------------------------------- Weighted Average 1996 1996 1996 Price 1995 1994 ------- ------- ------ ------- ------- Balance at January 1 579,165 870,835 $23.12 834,900 489,000 Options Granted 305,975 Exercised (71,450) 22.35 Forfeited 54,650 (54,650) 23.71 (47,175) (18,775) ------- ------- ------ ------- ------- Net Options 54,650 (126,100) 22.94 (47,175) 287,200 ------- ------- ------ ------- ------- Restricted Shares Granted (124,341) 124,341 24.73 90,956 61,050 Forfeited 25,716 (25,716) 24.37 (7,846) (2,350) ------- ------- ------ ------- ------- Net Restricted Shares (98,625) 98,625 24.83 83,110 58,700 ------- ------- ------ ------- ------- Balance at December 31 535,190 843,360 $23.34 870,835 834,900 ======= ======= ====== ======= ======= Exercisable options at December 31 533,617 $22.86 406,008 163,000 Vested restricted shares at December 31 56,781 $23.96 22,806 5,000 Options are exercisable, subject to the terms and conditions of the Plan, in increments of 33.33% per year on each of the first three anniversaries of the date of grant. The Plan provides that the exercise price of an option (other than non-employee trust manager options) will be determined by the Committee on the day of grant and to date all options have been granted at an exercise price which equals the fair market value on the date of grant. Options exercised during 1996 were exercised at prices ranging from $22.00 to $24.25 per share. At December 31, 1996, options outstanding were at prices ranging from $21.38 to $26.25 per share. Such options have a weighted average remaining contractual life of 6.5 years. Subsequent to December 31, 1996, an additional 300,000 of options having an exercise price of $27.00 per share were granted. Restricted shares have vesting periods ranging from three to five years. Subsequent to December 31, 1996, an additional 109,359 of restricted share awards having a purchase price of $0.01 per share were granted. The Company accounts for its Plan under the provisions of APB Opinion No. 25. The pro forma net income and earnings per share disclosure requirements of SFAS No. 123 did not impact the Company in 1995 or 1996 due to the fact that the Company did not grant any option awards from January 1, 1995 through December 31, 1996 and the compensation expense calculated on the Company's restricted shares under SFAS No. 123 did not materially differ from the results obtained under APB Opinion No. 25. 401(k) Savings Plan. The Company has a 401(k) savings plan (the "Savings Plan") which is a voluntary defined contribution plan. Under the Savings Plan, every employee is eligible to participate beginning on the earlier of January 1 or July 1 following the date the employee has completed six months of continuous service with the Company. Each participant may make contributions to the Savings Plan by means of a pre-tax salary deferral which may not be less than 1% nor more than 15% of the participant's compensation. The federal tax code limits the annual amount of salary deferrals that may be made by any participant. The Company may make matching contributions on the participant's behalf. A participant's salary deferral contribution will always be 100% vested and nonforfeitable. A participant will become vested in the Company's matching contributions 33.33% after one year of service, 66.67% after two years of service and 100% after three or more years of service. Expenses under the Savings Plan were not material. 7. RELATED PARTY TRANSACTIONS Apartment Connection, Inc. ("ACI") is a nonqualified-REIT subsidiary that acts as a leasing agent providing tenants for apartment owners in Houston, including properties owned by the Company. The Company has made an unsecured working capital revolving line of credit available to ACI which has been renewed annually. The loan has a maximum commitment of $1.2 million, earns interest at a fixed rate of 7.5% per annum and is payable in full during July 1997. The loan's outstanding balance was $1.2 million and $949,000 at December 31, 1996 and 1995, respectively. The loan is used to fund working capital requirements of ACI in the ordinary course of its business. In conjunction with the equity offering in April 1994, the Chief Executive Officer and Chief Operating Officer of the Company (the "Executives") each purchased $1 million of common shares at the market price of such shares. The Compensation Committee determined that it was in the best interest of the Company that the Executives have greater ownership interests in the Company. Accordingly, the Compensation Committee determined that the Company should loan to each Executive 90% of the purchase price of such common shares or $900,000. These loans have five-year terms and bear interest at the fixed rate of 7.0%. The loans are non-recourse, but are secured by a pledge of such common shares, and do not require any prepayments of principal until maturity. During July 1995, the Executive's loans were transferred to ACI. ACI obtained a $1.8 million unsecured loan from the Company with the same interest rate and maturity as the underlying Executive loans. During 1995, the Company formed Teleserve, Inc. (formerly Camden Communications One, Inc.), doing business as CamTel ("CamTel"). CamTel is a nonqualified-REIT subsidiary that was established to provide fiber optic, central office switched telecommunications service to residents in the Company's properties and third parties. The Company has made an unsecured revolving line of credit available to CamTel with a maximum commitment of $5.9 million which had an outstanding balance of $585,000 and $44,000 at December 31, 1996 and 1995, respectively. The loan earns interest at 7.0%, is payable in full in June 1999 and is used to fund asset additions or other operating costs. As of December 31, 1996, the Company had invested $3.8 million in telecommunications equipment for 22 of its properties. The Company entered into an alliance in 1995 with one of Houston's cable television operators to provide cable service to the residents of the Company's properties. The Company, through ACI, made a revolving line of credit available to an unrelated third party, Cable Leasing, Inc. ("CLI"), with a maximum commitment of $950,000 to purchase existing and future distribution systems on a large portion of the Company's Houston properties. The loan earned interest at 15.5% per annum and required monthly payments of interest. The loan was secured by the distribution systems and service agreements on the Company's properties. The outstanding balance at December 31, 1995 was $728,000. Camden acquired the assets of CLI on July 31, 1996 for $700,000. CLI used the net proceeds from the sale to pay off the outstanding balance on the line of credit it had with the Company through ACI. The Company had management agreements with investment partnerships in which the Executives had a combined 1% economic interest, with respect to two multifamily properties and two high-rise condominium properties owned by such partnerships. The management agreements provided for the exclusive right to lease, operate and manage these four properties. The Company also insured certain aspects of the business operations of the investment partnerships under the Company's insurance policies. The management agreements required the Company to be reimbursed for the actual costs incurred by the Company in making such insurance available. Management fees earned on the two multifamily properties amounted to $184,000, $306,000 and $295,000 for the years ended 1996, 1995 and 1994, respectively. The Company received a $244,000 fee in November 1996 upon the sale of the two multifamily properties. The management agreements related to the two high-rise condominium properties provided for a fee of $33,813 per quarter in the aggregate until the payments of such management fees was terminated on December 31, 1995. Although the management agreements were not the result of arm's length negotiations, the Company believes that they were no more favorable to the owners than the fees that would have been paid to unaffiliated third parties under similar circumstances. 8. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS The following disclosure is made for informational purposes only and does not purport to represent fair values of Camden's financial instruments. This information is based on estimates determined by using available market information and appropriate valuation methodologies. However, considerable judgement is necessary to interpret market data and develop the related estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Cash and cash equivalents, receivables, accounts payable, accrued expenses and other liabilities and distributions payable are carried at amounts which reasonably approximate their fair value. (In millions) December 31, ------------------------------------- 1996 1995 ----------------- ----------------- Fair Carrying Fair Carrying Value Amount Value Amount ------ -------- ------ -------- Senior notes $174.6 $173.8 $ $ Credit facility 12.0 12.0 122.8 122.8 Conventional mortgage loans* 61.0 58.4 61.7 59.2 Construction loans 53.5 53.5 * Subsequent to December 31, 1996, two conventional mortgage loans with carrying amounts of $20.3 million and fair value amounts of $20.6 million were retired utilizing funds from the Unsecured Credit Facility. The fair value of the senior notes and the conventional mortgage loans were estimated using discounted cash flows at approximate borrowing rates available as of the date presented. The fair values of the credit facility and the construction loans approximate their carrying value. The conventional mortgage loans were subject to prepayment penalties of $792,000 at December 31, 1996. At December 31, 1996, the Company had an outstanding interest rate swap agreement of $25 million. The Company does not use this instrument for trading purposes, rather, it has entered into the interest rate swap agreement to hedge the impact of interest rate fluctuations on $25 million of floating rate debt. This interest rate swap agreement is valued at an amount for which it could be settled at December 31, 1996. Settlement amounts were based upon estimates obtained from dealers. If the Company had settled the $25 million interest rate swap agreement with a counterparty at December 31, 1996, the Company would have incurred an unwind charge of $269,000. At December 31, 1995, the Company had $150 million outstanding in interest rate swap agreements with potential unwind charges of $6.3 million. See Note 3 for discussion of the early settlement of certain interest rate swap agreements that occurred during 1996. The fair value estimates presented herein are based on information available to management as of December 31, 1996 and 1995. Such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and current estimates of fair value may differ significantly from the amounts presented herein. 9. NET CHANGE IN OPERATING ACCOUNTS The effect of changes in the operating accounts on cash flows from operating activities is as follows: (In thousands) Year Ended December 31, ---------------------------- 1996 1995 1994 ------ ------ ------ Decrease (increase) in assets: Restricted cash - escrow deposits $ 210 $ (68) $ (624) Accounts receivable - affiliates 221 65 (1) Other assets 929 (335) (1,446) Increase (decrease) in liabilities: Accounts payable (788) 3,143 2,990 Accrued real estate taxes 1,381 1,552 3,508 Accrued expenses and other liabilities 1,399 643 3,372 ------ ------ ------ Net change in operating accounts $3,352 $5,000 $7,799 ====== ====== ====== 10. COMMITMENTS AND CONTINGENCIES Construction Contracts. As of December 31, 1996, the Company was obligated for approximately $39.9 million of additional expenditures (a substantial amount of which is to be provided by debt). Lease Commitments. At December 31, 1996, Camden had long-term operating leases covering certain land, office facilities and equipment. Rental expense totaled $475,000 in 1996, $476,000 in 1995 and $419,000 in 1994. Minimum annual rental commitments for the years ending December 31, 1997 through 2001 are $500,000, $294,000, $56,000, $26,000 and $21,000 respectively, and $534,000 in the aggregate thereafter. Employment Agreements. The Company has employment agreements with six of its senior officers, the terms of which expire at various times through August 20, 1999. Such agreements provide for minimum salary levels as well as various incentive compensation arrangements, which are payable based on the attainment of specific goals. The agreements also provide for severance payments in the event certain situations occur such as termination without cause or a change of control. The severance payments vary based on the officer's position and amount to one times the current salary base for four of the officers and 2.99 times the average annual compensation over the previous three fiscal years for the two remaining officers. Contingencies. Camden is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of such matters will not have a material adverse effect on the financial position or results of operations of Camden. 11. SUBSEQUENT EVENTS 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 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 contracts will provide the purchaser with periods varying from 25 to 180 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 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, have a lower projected net operating income growth rate than the overall portfolio, or no longer conform to the Company's operating and investment strategies. The proceeds from these sales may be reinvested in acquisitions or developments or used to retire debt. 12. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for the years ended December 31, 1996 and 1995 are as follows: (In thousands, except per share amounts) First Second Third Fourth Total ------- ------- ------- ------- -------- 1996: Revenues $26,590 $27,231 $28,768 $29,017 $111,606 Net income (loss) to common shareholders (1,750) 3,498 2,801 4,160 8,709 Net income (loss) per common and common equivalent share (0.12)* 0.24 0.19 0.26 0.58 1995: Revenues $22,548 $23,498 $25,085 $26,143 $ 97,274 Net income to common share- holders 3,105 3,099 2,908 3,179 12,291 Net income per common and common equivalent share 0.22 0.22 0.20 0.22 0.85 * Includes a $(5,351) or $(0.37) per share impact from the extinguishment of hedges upon debt refinancing. 13. PRICE RANGE OF COMMON SHARES (UNAUDITED) The high and low sales prices per share of the Company's common shares, as reported on the New York Stock Exchange composite tape, and distributions per share declared for the quarters indicated were as follows: High Low Distributions ------- ------- ------------- 1996: First $24 3/4 $22 3/4 $0.475 Second 25 21 3/4 0.475 Third 26 1/2 22 3/4 0.475 Fourth 29 1/4 25 5/8 0.475 1995: First $25 $20 3/4 $0.46 Second 23 5/8 20 1/4 0.46 Third 23 1/4 20 7/8 0.46 Fourth 24 20 1/8 0.46 PAGE CAMDEN PROPERTY TRUST COMPARATIVE SUMMARY OF SELECTED FINANCIAL AND PROPERTY DATA (In thousands, except per share and property data amounts) Camden Property Trust Camden Predecessors ---------------------------------------- --------------------- Years Ended December 31, July 29 to January 1 Year Ended ----------------------------- December to July December 1996 1995 1994 31, 1993 28, 1993 31, 1992 --------- -------- -------- --------- -------- -------- OPERATING DATA Revenues: Rental income $105,785 $ 92,275 $ 71,468 $ 16,785 $16,721 $ 20,645 Other income 5,821 4,999 3,988 782 900 988 -------- -------- -------- -------- ------- -------- Total revenues 111,606 97,274 75,456 17,567 17,621 21,633 Expenses: Property operating and maintenance 40,604 37,093 29,352 6,907 7,380 9,426 Real estate taxes 13,192 11,481 8,962 1,910 1,989 2,560 General and administrative 2,631 2,263 2,574 291 343 503 Interest 17,336 13,843 8,807 1,340 4,364 5,840 Depreciation and amortization 23,894 20,264 16,239 3,572 3,045 4,037 -------- -------- -------- -------- ------- -------- Total expenses 97,657 84,944 65,934 14,020 17,121 22,366 -------- -------- -------- -------- ------- -------- Income before gain on sales and extinguishment of hedges 13,949 12,330 9,522 3,547 500 (733) Gain on sales of property 115 Extinguishment of hedges upon debt refinancing (5,351) -------- -------- -------- -------- ------- -------- Net income (loss) $ 8,713 $12,330 $ 9,522 $ 3,547 $ 500 $ (733) ======= ======== Preferred share dividends (4) (39) (20) -------- -------- -------- -------- Net income to common shareholders $ 8,709 $ 12,291 $ 9,502 $ 3,547 ======== ======== ======== ======== Net income per common and common equivalent share $ 0.58 $ 0.85 $ 0.77 $ 0.39 Distributions per common share $ 1.90 $ 1.84 $ 1.76 $ 0.68 Weighted average number of common and common equivalent shares outstanding 14,940 14,424 12,311 9,114 BALANCE SHEET DATA (AT END OF PERIOD) Real estate assets $646,545 $607,598 $510,324 $296,545 $141,391 Accumulated depreciation (56,369) (36,800) (17,731) (3,388) (6,735) Total assets 603,510 582,352 504,284 304,345 149,500 Notes payable 244,182 235,459 149,547 111,513 102,201 Series A Preferred Shares 1,950 1,950 1,950 Shareholders'/Partners' Equity 295,428 267,829 277,604 175,984 41,209 Common shares outstanding 16,521 14,514 14,273 9,162 OTHER DATA Cash flows provided by (used in) Operating activities $ 41,267 $ 37,594 $ 33,560 $ 16,554 $ 1,942 $ 4,289 Investing activities (41,697) (97,003) (198,087) (237,346) (4,297) (79,064) Financing activities 2,560 59,404 159,388 226,171 1,073 75,630 Funds from operations 36,895 31,629 25,741 7,119 3,545 3,304 Funds from operations assuming conversions of convertible securities 39,999 35,260 28,604 7,119 3,545 3,304 PROPERTY DATA Number of operating properties (at end of period) 48 50 48 32 17 16 Number of operating units (at end of period) 17,611 16,742 15,783 11,064 6,040 5,836 Number of operating units (weighted average) 17,362 16,412 13,694 7,935 5,996 4,479 Weighted average monthly revenue per unit $ 536 $ 494 $ 459 $ 434 $ 426 $ 402 Properties under development (at end of period) 6 9 8 3 1 Management considers FFO to be an appropriate measure of the performance of an equity REIT. The National Association of Real Estate Investment Trusts ("NAREIT") currently defines FFO 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 amortization, and after adjustments for unconsolidated partnerships and joint ventures. In addition, extraordinary or unusual items, along with significant non-recurring events that materially distort the comparative measure of FFO, should be disregarded in its calculation. Prior to March 1995, the NAREIT definition of FFO required the add back of non-real estate depreciation and amortization, such as loan cost amortization. Camden has reported FFO according to the definitions prescribed by NAREIT for each of the periods presented above. FFO does not represent cash flows from operating activities as defined by GAAP and should not be considered as an alternative to net income as an indicator of Camden's operating performance. FFO is not a measure of liquidity, nor is it indicative of cash available to fund other cash flow needs, including principal amortization, capital improvements and distributions to shareholders. Further, FFO as disclosed by other REITs may not be comparable to Camden's calculation of FFO.
EX-21.1 7 SUBSIDIARIES EXHIBIT 21.1 Names of State of Names Under Which Subsidiaries Incorporation Business is Done - ---------------------------- ------------- -------------------------- 1. Apartment Connection, Inc. Delaware Apartment Connection, Inc. 2. Camden Acquisition, Inc. Delaware Camden Acquisition, Inc. 3. Camden Bay Crest, Inc. Delaware Camden Bay Crest, Inc. 4. Camden Building, Inc. Delaware Camden Building, Inc. 5. Camden Colorado, Inc. Delaware Camden Colorado, Inc. 6. Camden Development, Inc. Delaware Camden Development, Inc. 7. Camden Glen Lakes, Inc. Delaware Camden Glen Lakes, Inc. 8. Camden Hayes Place, Inc. Delaware Camden Hayes Place, Inc. 9. Camden Roseland Place, Inc. Delaware Camden Roseland Place, Inc. 10. Camden Subsidiary, Inc. Delaware Camden Subsidiary, Inc. 11. Camden Wilshire Place, Inc. Delaware Camden Wilshire Place, Inc. 12. CPT Arizona, Inc. Delaware CPT Arizona, Inc. 13. CPT Texas, Inc. Delaware CPT Texas, Inc. 14. TeleServe, Inc. (formerly Delaware CamTel Camden Communications One, Inc.) EX-23.1 8 AUDITOR'S CONSENT EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 33-80230 on Form S-8 filed on June 15, 1994, No. 33-83362 filed on September 14, 1994, No. 33-84020 filed on September 15, 1994, No. 33-84658 filed on October 3, 1994 and No. 33-84536 filed on October 3, 1994, each on Form S-3, No. 333-22411 filed on February 26, 1997 on Form S-4 of Camden Property Trust of our reports dated February 21, 1997, included and incorporated by reference in the Annual Report on Form 10-K of Camden Property Trust for the year ended December 31, 1996, and to the reference to us under the heading "Experts" in the Prospectus, which is part of such Registration Statements on Forms S-3 and Form S-4. /S/ - ------------------ DELOITTE & TOUCHE LLP Houston, Texas March 26, 1997 EX-24.1 9 POWER OF ATTORNEYS EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY TRUST on Form 10-K for the year ended December 31, 1996 and to sign any and all amendments to the Annual Report, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. Signature /S/ ------------------- Richard J. Campo Dated: March 26, 1997 PAGE POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Richard J. Campo and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY TRUST on Form 10-K for the year ended December 31, 1996 and to sign any and all amendments to the Annual Report, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. Signature /S/ ------------------- D. Keith Oden Dated: March 26, 1997 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden and Richard J. Campo, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY TRUST on Form 10-K for the year ended December 31, 1996 and to sign any and all amendments to the Annual Report, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. Signature /S/ ------------------- G. Steven Dawson Dated: March 26, 1997 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY TRUST on Form 10-K for the year ended December 31, 1996 and to sign any and all amendments to the Annual Report, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys- infact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. Signature /S/ ------------------- George A. Hrdlicka Dated: March 25, 1997 PAGE POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY TRUST on Form 10-K for the year ended December 31, 1996 and to sign any and all amendments to the Annual Report, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys- infact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. Signature /S/ ------------------- F. Gardner Parker Dated: March 26, 1997 PAGE POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign an Annual Report (the "Annual Report") of CAMDEN PROPERTY TRUST on Form 10-K for the year ended December 31, 1996 and to sign any and all amendments to the Annual Report, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys- infact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. Signature /S/ ------------------- Steven A. Webster Dated: March 26, 1997 EX-27.1 10 FINANCIAL DATA SCHEDULE
5 0000906345 CAMDEN PROPERTY TRUST 1,000 YEAR DEC-31-1996 DEC-31-1996 4,789 0 0 0 0 0 646,545 56,369 603,510 0 244,182 0 0 165 295,263 603,510 0 111,606 0 53,796 23,894 0 17,336 0 0 0 0 0 0 8,709 0.58 0
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