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1. Description of Business

Business. Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust ("REIT"), and all consolidated subsidiaries are primarily engaged in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities. Our multifamily apartment communities are referred to as "communities," "multifamily communities," "properties," or "multifamily properties" in the following discussion. As of March 31, 2020, we owned interests in, operated, or were developing 171 multifamily properties comprised of 58,051 apartment homes across the United States. Of the 171 properties, seven properties were under construction as of March 31, 2020, and will consist of a total of 1,939 apartment homes when completed. We also own land holdings which we may develop into multifamily communities in the future.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Principles of Consolidation. Our condensed consolidated financial statements include our accounts and the accounts of other subsidiaries and joint ventures (including partnerships and limited liability companies) over which we have control. All intercompany transactions, balances, and profits have been eliminated in consolidation. Investments acquired or created are evaluated based on the accounting guidance relating to variable interest entities ("VIEs"), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation primarily using a voting interest model. In determining if we have a controlling financial interest, we consider factors such as ownership interests, authority to make decisions, kick-out rights and participating rights. As of March 31, 2020, two of our consolidated operating partnerships are VIEs. We are considered the primary beneficiary of both consolidated operating partnerships and therefore consolidate these operating partnerships.  As of March 31, 2020, we held approximately 92% and 95% of the outstanding common limited partnership units and the sole 1% general partnership interest in each of these consolidated operating partnerships.

Interim Financial Reporting. We have prepared these unaudited financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial statements and the applicable rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, these statements do not include all information and footnote disclosures required for annual statements. While we believe the disclosures presented are adequate for interim reporting, these interim unaudited financial statements should be read in conjunction with the audited financial statements and notes included in our 2019 Annual Report on Form 10-K.

Acquisitions of Real Estate. Upon acquisition of real estate, we determine the fair value of tangible and intangible assets, which includes land, buildings (as-if-vacant), furniture and fixtures, the value of in-place leases, including above and below market leases, and acquired liabilities. In estimating these values, we apply methods similar to those used by independent appraisers of income-producing property. We generally believe acquisitions of operating properties are asset acquisitions, which include the capitalization of transaction costs. Estimates of fair value of acquired debt are based upon interest rates available for the issuance of debt with similar terms and remaining maturities. Depreciation is computed on a straight-line basis over the remaining useful lives of the related tangible assets. The value of in-place leases and above or below market leases is amortized over the estimated average remaining life of leases in place at the time of acquisition; the net carrying value of in-place leases are included in other assets, net and the net carrying value of above or below market leases are included in other liabilities, net in our condensed consolidated balance sheets.

We recognized amortization expense related to in-place leases of approximately $4.6 million and $1.9 million for the three months ended March 31, 2020 and 2019, respectively. During the three months ended March 31, 2020 and 2019, the weighted average amortization periods for in-place leases were approximately six months and seven months, respectively.

Asset Impairment. Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment may exist if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. We consider projected future undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. While we believe our estimates of future cash flows are reasonable, different assumptions regarding a number of factors including, but not limited to, market rents, economic conditions, and occupancies could significantly affect these estimates. When impairment exists the long-lived asset is adjusted to its fair value. In estimating fair value management uses appraisals, management estimates, and discounted cash flow calculations which utilize inputs from a marketplace participant's perspective. In addition, we evaluate our equity investments in joint ventures and if we believe there is an other than temporary

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decline in market value of our investment below our carrying value, we will record an impairment charge. We did not record any impairment charges for the three months ended March 31, 2020 or 2019.

The value of our properties under development depends on market conditions, including estimates of the project start date as well as estimates of demand for multifamily communities. We have reviewed market trends and other marketplace information and have incorporated this information as well as our current outlook into the assumptions we use in our impairment analyses. Due to the judgment and assumptions applied in the impairment analyses it is possible actual results could differ substantially from those estimated.

We believe the carrying value of our operating real estate assets, properties under development, and land is currently recoverable. However, if market conditions deteriorate, including as a result of evolving facts and circumstances relating to the COVID-19 pandemic, or if changes in our development strategy significantly affect any key assumptions used in our fair value estimates we may need to take material charges in future periods for impairments related to existing assets. Any such material non-cash charges could have an adverse effect in our consolidated financial position and results of operations.

Cost Capitalization. Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes which are capitalized as part of properties under development. Capitalized interest is generally based on the weighted average interest rate of our unsecured debt and was approximately $4.5 million and $2.7 million for the three months ended March 31, 2020 and 2019, respectively. Capitalized real estate taxes were approximately $1.6 million and $1.3 million for the three months ended March 31, 2020 and 2019, respectively.

Expenditures directly related to the development and improvement of real estate assets are capitalized at cost as land and buildings and improvements. Indirect development costs, including salaries and benefits and other related costs directly attributable to the development of properties, are also capitalized. We begin capitalizing development, construction, and carrying costs when the development of the future real estate asset is probable and certain activities necessary to prepare the underlying real estate for its intended use have been initiated. All construction and carrying costs are capitalized and reported in the balance sheet as properties under development until the apartment homes are substantially completed. As apartment homes within development properties are substantially completed the total capitalized development cost of each apartment home is transferred from properties under development including land to buildings and improvements.

Depreciation and amortization is computed over the expected useful lives of depreciable property on a straight-line basis with lives generally as follows:

	Estimated Useful Life
Buildings and improvements	5-35 years
Furniture, fixtures, equipment, and other	3-20 years
Intangible assets/liabilities (in-place leases and above and below market leases)	underlying lease term

Fair Value. For financial assets and liabilities recorded at fair value on a recurring or non-recurring basis, fair value is the price we would expect to receive to sell an asset, or pay to transfer a liability, in an orderly transaction with a market participant at the measurement date under current market conditions. In the absence of such data, fair value is estimated using internal information consistent with what market participants would use in a hypothetical transaction.

In determining fair value, observable inputs reflect market data obtained from independent sources while unobservable inputs reflect our market assumptions; preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:

•	Level 1:    Quoted prices for identical instruments in active markets.

•	Level 2:    Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•	Level 3:    Significant inputs to the valuation model are unobservable.

Recurring Fair Value Measurements. The following describes the valuation methodologies we use to measure different financial instruments at fair value on a recurring basis:

Deferred Compensation Plan Investments. The estimated fair values of investment securities classified as deferred compensation plan investments are based on quoted market prices utilizing public information for the same transactions. Our deferred compensation plan investments are recorded in other assets in our condensed consolidated balance sheets. The inputs

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associated with the valuation of our recurring deferred compensation plan investments are included in Level 1 of the fair value hierarchy.

Non-Recurring Fair Value Measurements. Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. These assets primarily include long-lived assets which are recorded at fair value if they are impaired using the fair value methodologies used to measure long-lived assets described above at "Asset Impairment." Non-recurring fair value disclosures are not provided for impairments on assets disposed during the period because they are no longer owned by us. The inputs associated with the valuation of long-lived assets are generally included in Level 3 of the fair value hierarchy, unless a quoted price for a similar long-lived asset in an active market exists, at which time they are included in Level 2 of the fair value hierarchy.

Financial Instrument Fair Value Disclosures. As of March 31, 2020 and December 31, 2019, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and distributions payable represented fair value because of the short-term nature of these instruments. The carrying value of restricted cash approximates its fair value based on the nature of our assessment of the ability to recover these amounts. The carrying values of our notes receivable also approximate their fair values, which are based on certain factors, such as market interest rates, terms of the note and credit worthiness of the borrower. These financial instruments utilize Level 3 inputs. In calculating the fair value of our notes payable, interest rate and spread assumptions reflect current credit worthiness and market conditions available for the issuance of notes payable with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs.

Income Recognition. The majority of our revenues are derived from real estate lease contracts which are accounted for pursuant to the lease standard and presented as property revenues, which include rental revenue and revenue from amounts received under contractual terms for other services provided to our customers. Our other revenue streams include fee and asset management income and is accounted for in accordance with the revenue standard. A detail of these revenue streams are discussed below:

Property Revenue: We earn rental revenue from operating lease contracts for the use of dedicated spaces within owned assets which is our only underlying asset class and are recognized on a straight-line basis over the applicable lease term, net of amounts related to lease contracts identified as uncollectible. We also earn revenues from amounts received under contractual terms for other services considered non-lease components within a lease contract, primarily consisting of utility rebillings and other transactional fees, and are charged to our residents and recognized monthly as earned. Any uncollectible amounts related to individual lease contracts are presented as an adjustment to property revenue. Any renewal options of real estate lease contracts are considered a new, separate contract and will be recognized at the time the option is exercised on a straight-line basis over the renewal period.

As of March 31, 2020, our average residential lease term was between twelve months to fifteen months with all other commercial leases averaging longer lease terms. We currently anticipate property revenue from existing leases as follows:

(in millions)
Year ended December 31,	Operating Leases
Remainder of 2020	$	554.4
2021	98.0
2022	5.4
2023	4.8
2024	4.0
Thereafter	28.8
Total	$	695.4

As discussed below, the COVID-19 pandemic has had an unprecedented effect on the economy, and the ultimate impact of the pandemic on the property revenue, if any, is unknown at this time.

Fee and Asset Management Income: We receive property management, asset management, and development and construction fees from our joint ventures for managing the ventures and managing the activities, development, and construction of their operating communities. While the individual activities related to these fees may vary, the services provided are substantially similar, have the same pattern of transfer, and are considered to be individual performance obligations composed of a series of distinct services recognized monthly as earned.

We also earn construction fees for construction management and general contracting services we provide to third-party owners of multifamily and commercial properties. These fees are recognized as we satisfy our single performance obligation over time based on a percentage-of-completion of cost basis which we believe is an accurate depiction of the transfer of control to our customers. For these contracts, significant judgment is used to estimate the cost plus margin for the project fee and our profitability on those contracts is dependent on the ability to accurately predict such factors. We record third-party construction receivables

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for amounts where we have unconditional rights to payment but have not received and liabilities for amounts incurred but not paid. For both the three months ended March 31, 2020 and 2019, these contract receivable and liability balances were immaterial.

Credit Risk. In management’s opinion, due to the number of residents, the types and diversity of submarkets in which our properties operate, and the collection terms, there is no significant concentration of credit risk.

Note Receivable. We have one note receivable included in other assets, net, in our condensed consolidated balance sheets, relating to a real estate secured loan made to an unaffiliated third party. This note receivable matures on October 1, 2025. At both March 31, 2020 and December 31, 2019, the outstanding note receivable principal balance was approximately $7.9 million, net of any allowance. The weighted average interest rate was approximately 7.0% for both the three months ended March 31, 2020 and 2019. Interest is recognized over the life of the note and included in interest and other income in our condensed consolidated statements of income and comprehensive income. We will provide for an allowance on our note receivable for expected losses if it becomes apparent conditions exist which may lead to our inability to collect all contractual amounts due. Conditions may include challenging economic factors, delinquent or late payments on the receivable, deterioration in the on-going relationship with the borrower, and other relevant factors. No allowance has been recognized on this note receivable as of March 31, 2020.

3. Per Share Data

Basic earnings per share is computed using net income attributable to common shareholders and the weighted average number of common shares outstanding. Diluted earnings per share reflects common shares issuable from the assumed conversion of common share options and share awards granted and units convertible into common shares. Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. Our unvested share-based awards are considered participating securities and are reflected in the calculation of basic and diluted earnings per share using the two-class method. The number of common share equivalent securities excluded from the diluted earnings per share calculation were approximately 1.9 million for each of the three months ended March 31, 2020 and 2019. These securities, which include common share options and share awards granted and units convertible into common shares, were excluded from the diluted earnings per share calculations as they are anti-dilutive. The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated:

		Three Months Ended March 31,
(in thousands, except per share amounts)		2020				2019
Earnings per common share calculation – basic
Income from continuing operations attributable to common shareholders		$	43,284			$	38,613
Amount allocated to participating securities		(99		)		(84		)
Net income attributable to common shareholders – basic		$	43,185			$	38,529
Total earnings per common share – basic		$	0.43			$	0.40
Weighted average number of common shares outstanding – basic		99,298				96,892

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		Three Months Ended March 31,
(in thousands, except per share amounts)		2020				2019
Earnings per common share calculation – diluted
Net income attributable to common shareholders – diluted		$	43,185			$	38,529
Total earnings per common share – diluted		$	0.43			$	0.40
Weighted average number of common shares outstanding – basic		99,298				96,892
Incremental shares issuable from assumed conversion of:
Common share options and share awards granted		82				149
Weighted average number of common shares outstanding – diluted		99,380				97,041

4. Common Shares

In May 2017, we created an at-the market ("ATM") share offering program through which we can, but have no obligation to, sell common shares having an aggregate offering price of up to $315.3 million (the "2017 ATM program") in amounts and at times as we determine into the existing trading market at current market prices as well as through negotiated transactions. Actual sales from time-to-time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations by management of the appropriate sources of funding for us. The proceeds from the sale of our common shares under the 2017 ATM program are intended to be used for general corporate purposes, which may include reducing future borrowings under our $900 million unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development activities, and financing for acquisitions.

For the three months ended March 31, 2020, and through the date of this filing, we did not sell any shares under the 2017 ATM program. As of the date of this filing, we had common shares having an aggregate offering price of up to $287.7 million remaining available for sale under the 2017 ATM program.

We have a repurchase plan approved by our Board of Trust Managers which allows for the repurchase of up to $500 million of our common equity securities through open-market purchases, block purchases, and privately negotiated transactions. There were no repurchases during the three months ended March 31, 2020. As of the date of this filing, the remaining dollar value of our common equity securities authorized to be repurchased under this program was approximately $269.5 million.

5. Acquisitions and Dispositions

Asset Acquisition of Operating Properties. We did not acquire any operating properties in the three months ended March 31, 2020. In February 2019, we acquired one operating property comprised of 316 apartment homes located in Scottsdale, Arizona for approximately $97.1 million.

Acquisition of Land. In January 2020, we acquired 4.9 acres of land in Raleigh, North Carolina for approximately $18.2 million for the future development of approximately 355 apartment homes. We did not acquire any land during the three months ended March 31, 2019.

Disposition of Land. In March 2020, we sold approximately 4.7 acres of land adjacent to one of our operating properties in Raleigh, North Carolina for approximately $0.8 million and recognized a gain of $0.4 million. We did not sell any land during the three months ended March 31, 2019.

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6. Investments in Joint Ventures

Our equity investments in unconsolidated joint ventures, which we account for utilizing the equity method of accounting, consists of three funds (collectively, the "Funds"). As of March 31, 2020, we had two discretionary investment funds in which we had an ownership interest of 31.3% in each of these funds. In March 2015, we completed the formation of the third fund with an unaffiliated third party for additional multifamily investments of up to $450 million. In June 2019, we amended the third fund's agreement, among other things, to reduce the investments from $450 million to approximately $360 million and increase our ownership interest from 20% to 40%. This third fund did not own any properties as of March 31, 2020 or 2019. We provide property and asset management and other services to the Funds which own operating properties and we may also provide construction and development services to the Funds which own properties under development. The following table summarizes the combined balance sheets and statements of income data for the Funds as of and for the periods presented:

 

(in millions)	March 31, 2020				December 31, 2019
Total assets	$	679.9			$	685.0
Total third-party debt	496.9				496.9
Total equity	159.1				153.4

	Three Months Ended March 31,
(in millions)	2020				2019
Total revenues	$	32.3			$	32.4
Net income	4.5				4.0
Equity in income (1)	2.1				1.9

 

(1)	Equity in income excludes our ownership interest of fee income from various services provided by us to the Funds.

The Funds have been funded in part with secured third-party debt and, as of March 31, 2020, we had no outstanding guarantees related to debt of the Funds.

We may earn fees for property and asset management, construction, development, and other services related to the Funds and may earn a promoted equity interest if certain thresholds are met. We eliminate fee income for services provided to the Funds to the extent of our ownership. Fees earned for these services, net of eliminations, were approximately $1.8 million and $1.5 million for the three months ended March 31, 2020 and 2019, respectively.

7. Notes Payable

The following is a summary of our indebtedness:

(in millions)		March 31, 2020				December 31, 2019
Commercial banks
2.60% Term Loan, due 2022		$	99.8			$	99.7
Unsecured credit facility		126.0				44.0
		$	225.8			$	143.7
Senior unsecured notes
3.15% Notes, due 2022		$	348.1			$	348.0
5.07% Notes, due 2023		248.6				248.4
4.36% Notes, due 2024		249.0				249.0
3.68% Notes, due 2024		248.1				248.0
3.74% Notes, due 2028		396.9				396.7
3.67% Notes, due 2029		593.8				593.7
3.41% Notes, due 2049		296.6				296.6
		$	2,381.1			$	2,380.4
Total notes payable (1)		$	2,606.9			$	2,524.1

(1)	Unamortized debt discounts and debt issuance costs of $19.1 million and $19.9 million are included in senior unsecured and secured notes payable as of March 31, 2020 and December 31, 2019, respectively.

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We have a $900 million unsecured credit facility which matures in March 2023, with two options to further extend the facility at our election for two additional six month periods and may be expanded three times by up to an additional $500 million upon satisfaction of certain conditions. The interest rate on our unsecured credit facility is based upon the London Interbank Offered Rate ("LIBOR") plus a margin which is subject to change as our credit ratings change. Advances under our credit facility may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of 180 days or less and may not exceed the lesser of $450 million or the remaining amount available under our credit facility. Our credit facility is subject to customary financial covenants and limitations. We believe we are in compliance with all such financial covenants and limitations as of March 31, 2020 and through the date of this filing.

Our credit facility provides us with the ability to issue up to $50 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our credit facility, it does reduce the amount available. At March 31, 2020, we had approximately $126.0 million of borrowings outstanding on our $900 million credit facility and we had outstanding letters of credit totaling approximately $8.9 million, leaving approximately $765.1 million available under our credit facility.

We had outstanding floating rate debt of approximately $225.8 million and $341.6 million at March 31, 2020 and 2019, respectively, which included amounts borrowed under our unsecured credit facility. The weighted average interest rate on such debt was approximately 2.1% and 3.3% for the three months ended March 31, 2020 and 2019, respectively.

Our indebtedness had a weighted average maturity of approximately 8.5 years at March 31, 2020. The table below is a summary of the maturity dates of our outstanding debt and principal amortizations, and the weighted average interest rates on such debt, at March 31, 2020: 

(in millions) (1)		Amount (2)				Weighted Average  Interest Rate (3)
Remainder of 2020		$	(2.3	)		—	%
2021		(3.1		)		—
2022		447.0				3.0
2023		247.9				5.1
2024 (4)		624.6				3.6
Thereafter		1,292.8				3.7
Total		$	2,606.9			3.7	%

(1)	Includes all available extension options.

(2)	Includes amortization of debt discounts and debt issuance costs.

(3)	Includes the effects of the applicable settled forward interest rate swaps.

(4)	Includes $126.0 million of borrowings outstanding under our unsecured credit facility.

8. Derivative Financial Instruments and Hedging Activities

Risk Management Objective of Using Derivatives. We are exposed to certain risks arising from both our business operations and economic conditions. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we may enter into derivative financial instruments to manage exposures arising from business activities resulting in differences in the amount, timing, and duration of our known or expected cash payments principally related to our borrowings.

Cash Flow Hedges of Interest Rate Risk. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps as

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part of our interest rate risk management strategy. Interest rate swaps involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

Designated Hedges.  The gain or loss on derivatives designated and qualifying as cash flow hedges is reported as a component of other comprehensive income or loss, and subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings and is presented in the same line item as the earnings effect of the hedged item.

In connection with the issuance of our 3.74% Notes due 2028 in October 2018, we settled an aggregate of $400.0 million forward interest rate swap designated hedges resulting in a cash receipt of approximately $15.9 million which was recorded in accumulated other comprehensive income on our condensed consolidated balance sheets and will be recognized over the 10-year life of the issued debt as an adjustment to interest expense. In connection with the issuance of our 3.67% Notes due 2029 in June 2019, we settled all of our remaining outstanding forward interest rate swaps with a total notional value of $300.0 million resulting in a net cash payment of approximately $20.4 million. Amounts in other comprehensive income associated with the settled forward interest rate swaps will be reclassified to interest expense over the first seven years of the 3.67% Notes due 2029. At March 31, 2020, we had no designated hedges outstanding. At March 31, 2019, we had a total of two designated hedges outstanding with a notional value of $300.0 million which was used to hedge fixed rate debt issuances in 2019.

As of March 31, 2020, the amount we expect to be reclassified into earnings in the next 12 months as an increase to interest expense is approximately $1.3 million.

The table below presents the effect of our derivative financial instruments in the consolidated statements of income and comprehensive income for the three months ended March 31, 2020 and 2019:

(in millions)		Unrealized Gain (Loss) Recognized in Other Comprehensive Income (Loss) (“OCI”) on Derivatives								Location of Gain Reclassified from Accumulated OCI into Income		Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
Derivatives in Cash Flow Hedging Relationships		2020				2019						2020				2019
Interest Rate Swaps		$	—			$	(5.9	)		Interest expense		$	(0.3	)		$	0.4

9. Share-Based Compensation and Non-Qualified Deferred Compensation Plan

Incentive Compensation. We currently maintain the 2018 Share Incentive Plan (the “2018 Share Plan”) and the 2011 Share Incentive Plan (the “2011 Share Plan”), although no new awards may be granted under the 2011 Plan. Each of these plans were approved by our shareholders. The shares available for awards under the 2018 Share Plan are, subject to certain other limits under the plan, generally available for any type of award authorized under the 2018 Share Plan including stock options, stock appreciation rights, restricted stock awards, stock bonuses and other stock-based awards. Persons eligible to receive awards under the 2018 Share Plan include our and our subsidiaries' officers and employees, Trust Managers, and certain of our and our subsidiaries' consultants and advisors. A total of 9.7 million shares (“Share Limit”) was authorized under the 2018 Share Plan. Shares issued or to be issued are counted against the Share Limit as (1) 3.45 to 1.0 for every share award, excluding stock options and share appreciation rights, granted, and (2) 1.0 to 1.0 for every share of stock option or share appreciation right granted. As of March 31, 2020, there were approximately 7.0 million common shares available under the 2018 Share Plan, which would result in approximately 2.0 million shares which could be granted pursuant to full value awards conversion ratios as defined under the plan.

Total compensation cost for share awards charged against income was approximately $3.7 million and $4.5 million for the three months ended March 31, 2020 and 2019, respectively. Total capitalized compensation costs for share awards were approximately $0.7 million for both of the three months ended March 31, 2020 and 2019.

A summary of activity under our share incentive plans for the three months ended March 31, 2020 is shown below:

	Nonvested Share Awards Outstanding			Weighted Average Exercise /  Grant Price
Nonvested share awards outstanding at December 31, 2019	264,654			$	90.44
Granted	157,948			117.70
Vested	(174,846	)		96.34
Forfeited	(1,752	)		102.24
Total nonvested share awards outstanding at March 31, 2020	246,004			$	103.67

Share Awards and Vesting. Share awards for employees generally vest over three years and are valued at the market value of the shares on the grant date. In the event the holder of the share awards attains at least age 65, and with respect to employees,

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also attain at least ten or more years of service ("Retirement Eligibility") before the term in which the awards are scheduled to vest, the value of the share awards is amortized from the date of grant to the individual's Retirement Eligibility date.

10. Net Change in Operating Accounts

The effect of changes in the operating and other accounts on cash flows from operating activities is as follows:

	Three Months Ended March 31,
(in thousands)	2020				2019
Change in assets:
Other assets, net	$	(1,825	)		$	(2,280	)
Change in liabilities:
Accounts payable and accrued expenses	(5,107		)		(6,730		)
Accrued real estate taxes	(22,046		)		(23,528		)
Other liabilities	(480		)		343
Other	777				819
Change in operating accounts and other	$	(28,681	)		$	(31,376	)

11. Commitments and Contingencies

Construction Contracts. As of March 31, 2020, we estimate the total additional cost to complete the six consolidated projects currently under construction to be approximately $235.4 million. We expect to fund this amount through a combination of one or more of the following: cash and cash equivalents, cash flows generated from operations, draws on our unsecured credit facility, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, other unsecured borrowings or secured mortgages.

Other Commitments and Contingencies. In the ordinary course of our business we issue letters of intent indicating a willingness to negotiate for acquisitions, dispositions, or joint ventures and also enter into arrangements contemplating various transactions. Such letters of intent and other arrangements are non-binding as to either party unless and until a definitive contract is entered into by the parties. Even if definitive contracts relating to the purchase or sale of real property are entered into, these contracts generally provide the purchaser with time to evaluate the property and conduct due diligence, 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 definitive contracts will be entered into with respect to any matter covered by letters of intent or we will consummate any transaction contemplated by any definitive contract. Furthermore, due diligence periods for real property are frequently extended as needed. An acquisition or sale of real property becomes probable at the time the due diligence period expires and the definitive contract has not been terminated. We are then at risk under a real property acquisition contract, but generally only to the extent of any earnest money deposits associated with the contract, and are obligated to sell under a real property sales contract. At March 31, 2020, we had approximately $0.7 million in refundable earnest money for potential acquisitions of real property in our condensed consolidated balance sheets.

Lease Commitments. Substantially all of our lessee operating leases recorded in our condensed consolidated balance sheets are related to office facility leases. Rental expense totaled approximately $1.1 million for each of the three months ended March 31, 2020 and 2019. We had no significant changes to our lessee lease commitments for the three months ended March 31, 2020. The following is a summary of our maturities of our lease liabilities as of March 31, 2020:

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(in millions)
Year ended December 31,	Operating Leases
Remainder of 2020	$	2.5
2021	3.2
2022	2.9
2023	2.7
2024	2.8
Thereafter	2.2
Less: discount for time value	(1.9		)
Lease liability as of March 31, 2020	$	14.4

Investments in Joint Ventures. We have entered into, and may continue in the future to enter into, joint ventures or partnerships, including limited liability companies, through which we own an indirect economic interest in less than 100% of the community or land owned directly by the joint venture or partnership. Our decision whether to hold the entire interest in an apartment community or land ourselves, or to have an indirect interest in the community or land through a joint venture or partnership, is based on a variety of factors and considerations, including: (i) our projection, in some circumstances, that we will achieve higher returns on our invested capital or reduce our risk if a joint venture or partnership vehicle is used; (ii) our desire to diversify our portfolio of investments by market; (iii) our desire at times to preserve our capital resources to maintain liquidity or balance sheet strength; and (iv) the economic and tax terms required by a seller of land or of a community, who may prefer or who may require less payment if the land or community is contributed to a joint venture or partnership. Investments in joint ventures or partnerships are not limited to a specified percentage of our assets. Each joint venture or partnership agreement is individually negotiated, and our ability to operate or dispose of land or of a community in our sole discretion may be limited to varying degrees in our existing joint venture agreements and may be limited to varying degrees depending on the terms of future joint venture agreements.

12. Income Taxes

We have maintained and intend to maintain our election as a REIT under the Internal Revenue Code of 1986, as amended. In order for us to continue to qualify as a REIT we must meet a number of organizational and operational requirements, including a requirement to distribute annual dividends to our shareholders equal to a minimum of 90% of our adjusted taxable income. As a REIT, we generally will not be subject to federal income tax on our taxable income at the corporate level to the extent such income is distributed to our shareholders annually. If our taxable income exceeds our dividends in a tax year, REIT tax rules allow us to designate dividends from the subsequent tax year in order to avoid current taxation on undistributed income. If we fail to qualify as a REIT in any taxable year, we may be subject to federal and state income taxes for such year. In addition, we may not be able to requalify as a REIT for the four subsequent taxable years and may be subject to federal and state income taxes in those years as well. Historically, we have incurred only state and local income, franchise, and excise taxes. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal, state, and local income taxes. Our consolidated operating partnerships are flow-through entities and are not subject to federal income taxes at the entity level.

We have recorded income, franchise, and excise taxes in the condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2020 and 2019 as income tax expense. Income taxes for the three months ended March 31, 2020 primarily related to state income tax and federal taxes on the taxable income of certain of our taxable REIT subsidiaries. We have no significant temporary or permanent differences or tax credits associated with our taxable REIT subsidiaries.

We believe we have no uncertain tax positions or unrecognized tax benefits requiring disclosure as of and for the three months ended March 31, 2020.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was enacted. The legislation was intended to support the economy during COVID-19 with technical corrections, or temporary modifications, to certain of the provisions of the Tax Cut and Jobs Act. The changes are not expected to have a material impact on our financial statements. It is also possible additional legislation could be enacted in the future as a result of the COVID-19 pandemic which may affect our Company.

13. Fair Value Measurements

Recurring Fair Value Measurements. The following table presents information about our financial instruments measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 using the inputs and fair value hierarchy discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements."

 

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Financial Instruments Measured at Fair Value on a Recurring Basis

	March 31, 2020																December 31, 2019
(in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Other Assets
Deferred compensation plan investments (1)	$	101.9			$	—			$	—			$	101.9			$	151.8			$	—			$	—			$	151.8

(1)	Approximately $37.1 million and $18.0 million of participant cash was withdrawn from our deferred compensation plan investments during the three months ended March 31, 2020 and the year ended December 31, 2019, respectively.

Non-Recurring Fair Value Disclosures. The nonrecurring fair value disclosure inputs under the fair value hierarchy are discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements." We did not have any asset acquisitions of operating properties during the three months ended March 31, 2020.

Financial Instrument Fair Value Disclosures. The following table presents the carrying and estimated fair values of our notes payable at March 31, 2020 and December 31, 2019, in accordance with the policies discussed in Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements."

	March 31, 2020								December 31, 2019
(in millions)	Carrying Value				Estimated Fair Value				Carrying Value				Estimated Fair Value
Fixed rate notes payable	$	2,381.1			$	2,376.5			$	2,380.4			$	2,533.5
Floating rate notes payable (1)	225.8				220.9				143.7				143.8

(1)	Includes balances outstanding under our unsecured credit facility at March 31, 2020 and December 31, 2019.

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•	The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations, cash flows and financial condition;

•	Volatility in capital and credit markets, or other unfavorable changes in economic conditions, either nationally or regionally in one or more of the markets in which we operate, could adversely impact us;

•	Short-term leases expose us to the effects of declining market rents;

•	Competition could limit our ability to lease apartments or increase or maintain rental income;

•	We face risks associated with land holdings and related activities;

•	Development, redevelopment and construction risks could impact our profitability;

•	Investments through joint ventures and investment funds involve risks not present in investments in which we are the sole investor;

•	Competition could adversely affect our ability to acquire properties;

•	Our acquisition strategy may not produce the cash flows expected;

•	Changes in rent control or rent stabilization laws and regulations could adversely affect our operations and property value;

•	Failure to qualify as a REIT could have adverse consequences;

•	Tax laws have recently changed and may continue to change at any time, and any such legislative or other actions could have a negative effect on us;

•	Litigation risks could affect our business;

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

•	The implementation of future enhancements to our new enterprise resource planning system could interfere with our business and operations;

•	A cybersecurity incident and other technology disruptions could negatively impact our business;

•	We have significant debt, which could have adverse consequences;

•	Insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders;

•	Issuances of additional debt may adversely impact our financial condition;

•	We may be unable to renew, repay, or refinance our outstanding debt;

•	We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined;

•	Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distribution to our shareholders, and decrease our share price, if investors seek higher yields through other investments;

•	Failure to maintain our current credit ratings could adversely affect our cost of funds, related margins, liquidity, and access to capital markets;

•	Share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders;

•	Our share price will fluctuate; and

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•	The form, timing and amount of dividend distributions in future periods may vary and be impacted by economic and other considerations.

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(1)	Refer to Note 6, "Investments in Joint Ventures," in the notes to Condensed Consolidated Financial Statements for further discussion of our joint venture investments.

(2)	Includes a property under development owned by one of the Funds. See communities under construction below for details.

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

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(1)

The locations of these projects are currently subject to “shelter in place” or “stay at home” orders adopted by state and local authorities in response to the COVID-19 pandemic. Some of these orders may adversely affect the timely completion and final project costs of some or all of our projects under development if, for example, we are required to temporarily cease construction entirely, experience delays in obtaining governmental permits and authorizations, or experience disruption in the supply of materials or labor.

(2)	Property in lease-up and was 16% leased at May 6, 2020.

(1)	Property owned through an unconsolidated joint venture in which we own a 31.3% interest.

(1)

Represents our estimate of total costs we expect to incur on these projects. However, forward-looking estimates are not guarantees of future performance, results, or events. Although we believe these expectations are based upon reasonable assumptions, future events rarely develop exactly as forecast, and estimates routinely require adjustment. In addition, the locations of these projects are currently subject to “shelter

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(2)

While the Company is still actively engaged in the development of this asset through continued coordination with the general contractor and the completion of required permits and project design, we have temporarily suspended the on-site construction until further notice. Accordingly, this asset was moved from our communities under construction to our development pipeline communities effective March 31, 2020.

(3)	Formerly known as Camden Hayden II.

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(1)

Same store communities are communities we owned and were stabilized since January 1, 2019, excluding communities under redevelopment and properties held for sale. Non-same store communities are stabilized communities not owned or stabilized since January 1, 2019, including communities under redevelopment and excluding properties held for sale. We define communities under redevelopment as communities with capital expenditures that improve a community's cash flow and competitive position through extensive unit, exterior building, common area, and amenity upgrades. Management believes same store information is useful as it allows both management and investors to determine financial results over a particular period for the same set of communities. Development and lease-up communities are non-stabilized communities we have developed since January 1, 2019, excluding properties held for sale. Dispositions/other includes those communities disposed of or held for sale which are not classified as discontinued operations, and non-multifamily rental properties, expenses related to land holdings not under active development, and other miscellaneous expenses.

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*	Not a meaningful percentage.

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

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

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

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

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•	normal recurring operating expenses;

•	current debt service requirements;

•	recurring and non-recurring capital expenditures;

•	reposition expenditures;

•	funding of property developments, redevelopments, acquisitions, and joint venture investments; and

•	the minimum dividend payments required to maintain our REIT qualification under the Code.

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Item 1.	Legal Proceedings

Item 1A.	Risk Factors

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Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.	Defaults Upon Senior Securities

Item 4.	Mine Safety Disclosures

Item 5.	Other Information

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Item 6.	Exhibits

*	Filed herewith.

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