UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Commission file number: 1-12110

CAMDEN PROPERTY TRUST

Texas		76-6088377
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
3 Greenway Plaza, Suite 1300
Houston, Texas		77046
(Address of principle executive offices)		(Zip Code)

(713) 354-2500
(Registrant’s Telephone Number, Including Area Code)

N/A
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes o No þ

As of July 27, 2009, there were 64,122,340 shares of Common Shares of Beneficial Interest, $0.01 par value, outstanding.

 

 

CAMDEN PROPERTY TRUST
Table of Contents

		Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2009 and December 31, 2008			3
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) for the three and six months ended June 30, 2009 and 2008			4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2009 and 2008			6
Notes to Condensed Consolidated Financial Statements (Unaudited)			8
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3 Quantitative and Qualitative Disclosures About Market Risk			42
Item 4 Controls and Procedures			42
PART II OTHER INFORMATION			43
Item 1 Legal Proceedings			43
Item 1A Risk Factors			43
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			43
Item 3 Defaults Upon Senior Securities			43
Item 4 Submission of Matters to a Vote of Security Holders			43
Item 5 Other Information			43
Item 6 Exhibits			43
SIGNATURES			44
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

		June 30,				December 31,
(in thousands)		2009				2008
Assets
Real estate assets, at cost
Land		$	746,936			$	744,059
Buildings and improvements			4,473,906				4,447,587
			5,220,842				5,191,646
Accumulated depreciation			(1,065,861	)			(981,049	)
Net operating real estate assets			4,154,981				4,210,597
Properties under development, including land			268,655				264,188
Investments in joint ventures			22,334				15,106
Properties held for sale, including land			6,732				20,653
Total real estate assets			4,452,702				4,510,544
Accounts receivable — affiliates			35,909				37,000
Notes receivable
Affiliates			54,033				58,109
Other			—				8,710
Other assets, net			92,421				103,013
Cash and cash equivalents			157,665				7,407
Restricted cash			5,190				5,559
Total assets		$	4,797,920			$	4,730,342
Liabilities and shareholders’ equity
Liabilities
Notes payable
Unsecured		$	1,728,150			$	2,103,187
Secured			969,668				729,209
Accounts payable and accrued expenses			65,012				82,575
Accrued real estate taxes			30,154				23,600
Distributions payable			33,050				42,936
Other liabilities			132,763				149,554
Total liabilities			2,958,797				3,131,061
Commitments and contingencies
Perpetual preferred units			97,925				97,925
Shareholders’ equity
Common shares of beneficial interest; $0.01 par value per share; 100,000 shares authorized; 79,509 and 68,770 issued; 76,915 and 66,028 outstanding, respectively			769				660
Additional paid in capital			2,517,788				2,237,703
Distributions in excess of net income attributable to common shareholders			(357,168	)			(312,309	)
Notes receivable secured by common shares			(287	)			(295	)
Treasury shares, at cost (12,807 and 12,820 common shares, respectively)			(462,751	)			(463,209	)
Accumulated other comprehensive loss			(41,886	)			(51,056	)
Total common shareholders’ equity			1,656,465				1,411,494
Noncontrolling interests			84,733				89,862
Total shareholders’ equity			1,741,198				1,501,356
Total liabilities and shareholders’ equity		$	4,797,920			$	4,730,342

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

		Three Months								Six Months
		Ended June 30,								Ended June 30,
(in thousands, except per share amounts)		2009				2008				2009				2008
Property revenues
Rental revenues		$	135,800			$	136,555			$	272,300			$	270,818
Other property revenues			21,657				18,972				42,189				36,173
Total property revenues			157,457				155,527				314,489				306,991
Property expenses
Property operating and maintenance			44,562				40,218				86,845				79,397
Real estate taxes			18,532				17,831				37,064				35,112
Total property expenses			63,094				58,049				123,909				114,509
Non-property income
Fee and asset management			2,244				2,131				4,275				4,543
Interest and other income			1,097				1,092				1,832				2,425
Income (loss) on deferred compensation plans			7,660				(639	)			3,508				(9,180	)
Total non-property income (loss)			11,001				2,584				9,615				(2,212	)
Other expenses
Property management			4,542				5,281				9,471				10,181
Fee and asset management			1,303				1,696				2,438				3,421
General and administrative			7,246				8,414				15,478				16,374
Interest			34,002				33,286				66,247				65,859
Depreciation and amortization			43,888				43,190				87,868				84,706
Amortization of deferred financing costs			857				589				1,674				1,323
Expense (benefit) on deferred compensation plans			7,660				(639	)			3,508				(9,180	)
Total other expenses			99,498				91,817				186,684				172,684
Income from continuing operations before gain on sale of properties, including land, gain (loss) on early retirement of debt, and equity in income (loss) of joint ventures			5,866				8,245				13,511				17,586
Gain on sale of properties, including land			—				—				—				1,106
Gain (loss) on early retirement of debt			(2,716	)			2,298				(2,550	)			2,298
Equity in income (loss) of joint ventures			222				(474	)			630				(521	)
Income from continuing operations before income taxes			3,372				10,069				11,591				20,469
Income tax expense — current			(347	)			(160	)			(646	)			(433	)
Income from continuing operations			3,025				9,909				10,945				20,036
Income from discontinued operations			575				1,712				1,160				3,392
Gain on sale of discontinued operations			16,887				8,549				16,887				14,676
Net income			20,487				20,170				28,992				38,104
Less net income allocated to noncontrolling interests			(422	)			(1,126	)			(943	)			(2,395	)
Less income allocated to perpetual preferred units			(1,750	)			(1,750	)			(3,500	)			(3,500	)
Net income attributable to common shareholders		$	18,315			$	17,294			$	24,549			$	32,209

CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

		Three Months								Six Months
		Ended June 30,								Ended June 30,
(in thousands, except per share amounts)		2009				2008				2009				2008
Earnings per share — basic
Income from continuing operations attributable to common shareholders		$	0.01			$	0.12			$	0.11			$	0.25
Income from discontinued operations attributable to common shareholders, including gain on sale			0.29				0.19				0.31				0.33
Net income attributable to common shareholders		$	0.30			$	0.31			$	0.42			$	0.58
Earnings per share — diluted
Income from continuing operations attributable to common shareholders		$	0.01			$	0.12			$	0.11			$	0.25
Income from discontinued operations attributable to common shareholders, including gain on sale			0.29				0.19				0.30				0.32
Net income attributable to common shareholders		$	0.30			$	0.31			$	0.41			$	0.57
Distributions declared per common share		$	0.45			$	0.70			$	1.15			$	1.40
Weighted average number of common shares outstanding			61,499				55,351				58,542				55,158
Weighted average number of common and common dilutive equivalent shares outstanding			61,449				56,033				59,025				55,829
Net income attributable to common shareholders
Income from continuing operations		$	3,025			$	9,909			$	10,945			$	20,036
Less net income allocated to noncontrolling interests from continuing operations			(422	)			(1,126	)			(943	)			(2,395	)
Less income allocated to perpetual preferred units			(1,750	)			(1,750	)			(3,500	)			(3,500	)
Income from continuing operations attributable to common shareholders			853				7,033				6,502				14,141
Income from discontinued operations attributable to common shareholders, including gain on sale			17,462				10,261				18,047				18,068
Net income attributable to common shareholders		$	18,315			$	17,294			$	24,549			$	32,209
Condensed Consolidated Statements of Comprehensive Income
Net income		$	20,487			$	20,170			$	28,992			$	38,104
Other comprehensive income
Unrealized gain (loss) on cash flow hedging activities			1,361				15,623				(1,574	)			(3,802	)
Reclassification of net losses on cash flow hedging activities			5,469				2,640				10,744				3,970
Comprehensive Income			27,317				38,433				38,162				38,272
Less net income allocated to noncontrolling interests			(422	)			(1,126	)			(943	)			(2,395	)
Less income allocated to perpetual preferred units			(1,750	)			(1,750	)			(3,500	)			(3,500	)
Comprehensive income attributable to common shareholders		$	25,145			$	35,557			$	33,719			$	32,377

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Six Months
		Ended June 30,
(in thousands)		2009				2008
Cash flows from operating activities
Net income		$	28,992			$	38,104
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization, including discontinued operations			86,201				83,928
Gain on sale of discontinued operations			(16,887	)			(14,676	)
Gain on sale of properties, including land			—				(1,106	)
Distributions of income from joint ventures			3,106				2,866
Equity in (income) loss of joint ventures			(630	)			521
Interest from notes receivable — affiliates			(212	)			(2,152	)
Share-based compensation			4,555				4,136
Loss (gain) on early retirement of debt			2,550				(2,298	)
Amortization of deferred financing costs			1,674				1,329
Accretion of discount on unsecured notes payable			376				286
Net change in operating accounts			(4,022	)			(11,717	)
Net cash from operating activities		$	105,703			$	99,221
Cash flows from investing activities
Development and capital improvements		$	(33,122	)		$	(127,511	)
Proceeds from sales of properties, including land and discontinued operations, net			27,967				25,527
Payments received on notes receivable — other			8,710				2,855
Increase in notes receivable — affiliates			(5,381	)			(437	)
Investments in joint ventures			(466	)			(10,374	)
Distributions of investments from joint ventures			36				293
Proceeds from partial sales of assets to joint ventures			—				8,923
Change in restricted cash			369				988
Other			(1,445	)			(2,347	)
Net cash from investing activities		$	(3,332	)		$	(102,083	)

CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Six Months
		Ended June 30,
(in thousands)		2009				2008
Cash flows from financing activities
Net (decrease) increase in unsecured line of credit and short-term borrowings		$	(145,000	)		$	163,000
Repayment of notes payable			(420,212	)			(46,320	)
Proceeds from notes payable			429,618				—
Proceeds from issuance of common shares			272,112				—
Distributions to shareholders, perpetual preferred units, and noncontrolling interests			(86,409	)			(85,904	)
Payment of deferred financing costs			(3,692	)			(603	)
Net decrease (increase) in accounts receivable — affiliates			1,113				(560	)
Repayment of notes receivable secured by common shares			17				1,662
Repurchase of common shares and units			(23	)			(29,973	)
Common share options exercised			—				1,623
Other			363				282
Net cash from financing activities			47,887				3,207
Net increase in cash and cash equivalents			150,258				345
Cash and cash equivalents, beginning of period			7,407				897
Cash and cash equivalents, end of period		$	157,665			$	1,242
Supplemental information
Cash paid for interest, net of interest capitalized		$	70,626			$	66,904
Cash paid for income taxes			1,740				1,450
Supplemental schedule of noncash investing and financing activities
Distributions declared but not paid		$	33,050			$	42,965
Value of shares issued under benefit plans, net of cancellations			8,462				11,513
Conversion of operating partnership units to common shares			1,756				13,198
Accrual associated with construction and capital expenditures			4,793				13,180
Conversion of mezzanine note to joint venture equity			9,213				—

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

1. Description of Business

Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust (“REIT”), is engaged in the ownership, development, construction, and management 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 June 30, 2009, we owned interests in, operated, or were developing 185 multifamily properties comprising 63,658 apartment homes across the United States. We had 712 apartment homes under development at three of our multifamily properties, including 459 apartment homes at two multifamily properties owned through nonconsolidated joint ventures and 253 apartment homes at one multifamily property owned through a fully consolidated joint venture, in which we own an interest. In addition, we own other sites we may develop into multifamily apartment communities.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Principles of Consolidation. Our condensed consolidated financial statements include our accounts, the accounts of variable interest entities (“VIEs”) in which we are the primary beneficiary, and the accounts of other subsidiaries and joint ventures over which we have control. All intercompany transactions, balances, and profits have been eliminated in consolidation. Investments acquired or created are evaluated based on Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) 46R, “Consolidation of Variable Interest Entities” (as revised), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be within the scope of FIN 46R, then the investment is evaluated for consolidation using American Institute of Certified Public Accountants’ Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures,” and Accounting Research Bulletin 51, “Consolidated Financial Statements,” as amended by Statement of Financial Accounting Standards 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51” (“SFAS 160”). If we are the general partner in a limited partnership, we also consider the guidance of Emerging Issues Task Force Issue 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,” to assess whether any rights held by the limited partners overcome the presumption of control by us.

Interim Financial Reporting. We have prepared these 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. Accordingly, they do not include all information and footnote disclosures normally included for complete financial statements. While we believe the disclosures presented are adequate for interim reporting, these interim financial statements should be read in conjunction with the audited financial statements and notes included in our 2008 Form 10-K. In the opinion of management, all adjustments and eliminations, consisting of normal recurring adjustments, necessary for a fair representation of our financial statements have been included. Operating results for the three and six months ended June 30, 2009 are not necessarily indicative of the results which may be expected for the full year.

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 exists 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 discounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. When impairment exists the long-lived asset is adjusted to its fair value. While we believe our estimates of future cash flows are reasonable, different assumptions regarding such factors as market rents, economic conditions, and occupancies could significantly affect these estimates. In estimating fair value, management uses appraisals, management estimates, or discounted cash flow calculations. In addition, we evaluate our investments in joint ventures and mezzanine construction financing and if we believe there is an other than temporary decline in market value, or if it is probable we will not collect all amounts due in accordance with the terms of the mezzanine loan, we will record an impairment charge based on these evaluations. In general, we provide mezzanine loans to affiliated joint ventures constructing or operating multifamily assets. While we believe it is currently probable we will collect all scheduled amounts due with respect to these mezzanine loans, current market conditions with respect to credit markets and real estate market fundamentals inject a significant amount of uncertainty into the environment and any further adverse economic or market development may cause us to re-evaluate our conclusions, and could result in impairment charges with respect to our mezzanine loans.

The value of our properties held for development depends on market conditions, including estimates of the project start date as well as estimates of demand for multifamily communities. We have reviewed trends and other information and have incorporated this information as well as our current outlook into the assumptions we use in our impairment analyses. Due to, among other factors, the judgment and assumptions applied in the impairment analyses and the fact limited market information regarding the value of comparable land exists at this time, 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 beyond our current expectations or if changes in our development strategy significantly affect any key assumptions used in our fair value calculations, we may need to take material charges in future periods for impairments related to existing assets. Any such material non-cash charges would have an adverse effect on our consolidated financial position and results of operations.

Cash and Cash Equivalents. All cash and investments in money market accounts and other highly liquid securities with a maturity of three months or less at the date of purchase are considered to be cash and cash equivalents.

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 based on our weighted average interest rate as it relates to amounts borrowed for construction purposes. Most transaction and restructuring costs associated with the acquisition of real estate assets are expensed. 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. All construction and carrying costs are capitalized and reported in the balance sheet as properties under development until the apartment homes are substantially completed. Upon substantial completion of the apartment homes, the total cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively.

As discussed above, carrying charges are principally interest and real estate taxes capitalized as part of properties under development and buildings and improvements. Capitalized interest was approximately $2.5 million and $4.9 million for the three and six months ended June 30, 2009, respectively, and approximately $4.3 million and $9.6 million for the three and six months ended June 30, 2008, respectively. Capitalized real estate taxes were approximately $0.4 million and $1.0 million for the three and six months ended June 30, 2009, respectively, and approximately $1.2 million and $2.3 million for the three and six months ended June 30, 2008, respectively.

Where possible, we stage our construction to allow leasing and occupancy during the construction period, which we believe minimizes the duration of the lease-up period following completion of construction. Our accounting policy related to properties in the development and leasing phase is to expense all operating expenses associated with completed apartment homes. We capitalize renovation and improvement costs we believe extend the economic lives of depreciable property. Capital expenditures subsequent to initial construction are capitalized and depreciated over their estimated useful lives, which range from three to twenty years.

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 (in-place leases and above and below market leases)		underlying lease term

Derivative Instruments. SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement 133,” amends and expands the disclosure requirements of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.

As required by SFAS 133, we record all derivatives in the balance sheet at fair value. Accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows or other types of forecasted transactions are cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes attributable to the earnings effect of the hedged transactions. We may enter into derivative contracts which are intended to economically hedge certain of our risks, even though hedge accounting does not apply or we elect not to apply hedge accounting under SFAS 133.

Income Recognition. Our rental and other property revenue is recorded when due from residents and is recognized monthly as it is earned. Other property revenue consists primarily of utility rebillings and administrative, application, and other transactional fees charged to our residents. Our apartment homes are rented to residents on lease terms generally ranging from six to fifteen months, with monthly payments due in advance. All sources of income, including from interest and fee and asset management, are recognized as earned. One of our properties is subject to rent control or rent stabilization. Operations of multifamily properties acquired are recorded from the date of acquisition in accordance with the acquisition method of accounting. In management’s opinion, due to the number of residents, the types and diversity of submarkets in which the properties operate, and the collection terms, there is no significant concentration of credit risk.

Reportable Segments. Our multifamily communities are geographically diversified throughout the United States, and management evaluates operating performance on an individual property level. As each of our apartment communities has similar economic characteristics, residents, and products and services, our apartment communities have been aggregated into one reportable segment. Our multifamily communities generate rental revenue and other income through the leasing of apartment homes, which comprised approximately 98% of our total property revenues and total non-property income, excluding income (loss) on deferred compensation plans, for all periods presented.

Use of Estimates. In the application of GAAP, management is required to make estimates and assumptions which 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. Our more significant estimates include estimates supporting our impairment analysis related to the carrying values of our real estate assets, estimates of the useful lives of our assets, reserves related to the self-insured components of our insurance and employee benefit programs, estimates related to our investments in joint ventures and mezzanine construction financing, and estimates of expected losses of variable interest entities. These estimates are based on historical experience and other assumptions believed to be reasonable under the circumstances. Future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment.

Recent Accounting Pronouncements. In April 2009, the FASB issued FSP SFAS 141R-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise From Contingencies” (“FSP 141R-1”). FSP 141R-1 amends the guidance of SFAS 141R, “Business Combinations,” related to accounting for pre-acquisition contingencies. Under FSP 141R-1, an acquirer is required to recognize assets or liabilities arising from contingencies at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with SFAS 5, “Accounting for Contingencies.” FSP 141R-1 applies prospectively to us for business combinations completed on or after January 1, 2009. We expect FSP 141R-1 will have an impact on our financial statements, but the nature and magnitude of the specific effects will depend upon the nature, terms, and size of acquisitions we complete subsequent to our adoption of the new standard.

Upon our adoption of SFAS 160, we reclassified minority interest balances relating to (i) the common units in Camden Operating, L.P., Oasis Martinique, LLC, and Camden Summit Partnership, L.P. and (ii) other minority interest in consolidated real estate joint ventures into our consolidated equity accounts and these are now classified as noncontrolling interests. The noncontrolling interests amount at June 30, 2009 and December 31, 2008 was approximately $84.7 million and $89.9 million, respectively. The balance relating to cumulative redeemable perpetual preferred units in Camden Operating, L.P. of approximately $97.9 million remains classified between liability and equity pursuant to EITF D-98, “Classification and Measurement of Redeemable Securities.” See Note 14, “Noncontrolling Interests,” for further disclosure requirements of noncontrolling interests.

In April 2009, the FASB issued FSP SFAS 157-4, “Determining Fair Value when the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions that are not Orderly,” (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased or when circumstances indicate a transaction is not orderly. Additionally, FSP 157-4 requires interim and annual disclosure of the techniques used to measure fair value and a discussion of changes, if any, in these techniques during the period. We adopted FSP 157-4 during the quarter ended June 30, 2009 and the adoption did not have a material impact on our financial statements.

In April 2009, the FASB issued FSP SFAS 115-2 and SFAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” (“FSPs”) to amend the current other-than-temporary impairment guidance for debt securities. The intent of these FSPs is to improve the presentation and disclosure of other-than-temporary impairment of debt and equity securities in the financial statements. These FSPs do not amend existing recognition and measurement guidance on other-than-temporary impairment of equity securities. We adopted the FSPs during the quarter ended June 30, 2009 and the adoption did not have a material impact on our financial statements.

In April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, “Interim Disclosure about Fair Value of Financial Instruments” (the “Fair Value FSP”). The Fair Value FSP requires disclosure of the fair value of financial instruments, presented together with the carrying amount of the financial instruments, on an interim basis. The methods and assumptions used to estimate the fair value of the financial instruments are also required to be disclosed, including any changes in those methods or assumptions from prior periods. We adopted the Fair Value FSP during the quarter ended June 30, 2009 and the adoption did not have a material impact on our financial statements but did increase our disclosures.

In May 2009, the FASB issued SFAS 165, “Subsequent Events,” (“SFAS 165”). SFAS 165 establishes principles and requirements for subsequent events, including the time period following the balance sheet date for which management should evaluate events and transactions for potential recognition or disclosure in the financial statements, the circumstances under which recognition in the financial statements would be appropriate, and the level of potential disclosures. SFAS 165 is not expected to result in significant changes in either the recognition or disclosure of subsequent events. We adopted SFAS 165 during the quarter ended June 30, 2009 and it did not have a material impact on our financial statements. Subsequent events for the quarter ended June 30, 2009 have been evaluated through July 31, 2009.

In June 2009, the FASB issued SFAS 166, “Accounting for Transfers of Financial Assets, an Amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 modifies the financial components approach used in SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities — a Replacement of FASB Statement 125,” removes the concept of a qualifying special purpose entity, and clarifies and amends the derecognition criteria for determining whether a transfer of a financial asset or portion of a financial asset qualifies for sale accounting. SFAS 166 also requires expanded disclosures regarding transferred assets and how they affect the reporting entity. SFAS 166 is effective for us beginning January 1, 2010. We are currently evaluating the effects, if any, this statement may have on our financial statements.

In June 2009, the FASB issued SFAS 167, “Amendments to FASB Interpretation No. 46R (“SFAS 167”). SFAS 167 changes the consolidation analysis for VIEs and requires a qualitative analysis to determine the primary beneficiary of the VIE. The determination of the primary beneficiary of a VIE is based on whether the entity has the power to direct matters which most significantly impact the activities of the VIE and has the obligation to absorb losses, or the right to receive benefits, of the VIE which could potentially be significant to the VIE. SFAS 167 further amends FIN 46R to require an ongoing reconsideration of the primary beneficiary and also amends the events triggering a reassessment. SFAS 167 requires additional disclosures for VIEs, including providing additional disclosures about a reporting entity’s involvement with VIEs, how a reporting entity’s involvement with a VIE affects the reporting entity’s financial statements, and significant judgments and assumptions made by the reporting entity to determine whether it must consolidate the VIE. SFAS 167 is effective for us beginning January 1, 2010. We are currently evaluating the effects, if any, this statement may have on our financial statements.

In June 2009, the FASB issued SFAS 168, “The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS 168” or the “Codification”). Effective July 1, 2009, the Codification is the single source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP. We do not expect the adoption of this statement to materially impact our financial statements, however our references to accounting literature within our notes to the condensed consolidated financial statements will be revised to conform to the Codification beginning with the quarter ending September 30, 2009.

3. Per Share Data

Earnings per share has been computed pursuant to the provisions of SFAS 128, “Earnings Per Share.” Basic earnings per share are computed using net income attributable to common shareholders and the weighted average number of common shares outstanding. Diluted earnings per share reflect common shares issuable from the assumed conversion of common share options and 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. On January 1, 2009 we adopted FSP 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities,” and, as a result, our unvested share-based payment awards are considered participating securities and are included in our earnings per share calculations. For the three months ended June 30, 2009 and 2008, approximately 5.5 million and 4.5 million common share options and awards granted and units convertible into common shares, respectively, were excluded from the diluted earnings per share calculation as they were determined to be anti-dilutive. For the six months ended June 30, 2009 and 2008, approximately 4.9 million and 4.6 million common share options and awards granted and units convertible into common shares, respectively, were excluded from the diluted earnings per share calculation as they were determined to be anti-dilutive.

The following table presents information necessary to calculate basic and diluted earnings per share for the three and six months ended June 30, 2009 and 2008:

		Three Months								Six Months
		Ended June 30,								Ended June 30,
(in thousands, except per share amounts)		2009				2008				2009				2008
Basic earnings per share calculation
Income from continuing operations attributable to common shareholders		$	853			$	7,033			$	6,502			$	14,141
Amount allocated to participating securities			(147	)			(122	)			(223	)			(227	)
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities			706				6,911				6,279				13,914
Income from discontinued operations attributable to common shareholders, including gain on sale			17,462				10,261				18,047				18,068
Net income attributable to common shareholders, as adjusted — basic		$	18,168			$	17,172			$	24,326			$	31,982
Income from continuing operations attributable to common shareholders, as adjusted — per share		$	0.01			$	0.12			$	0.11			$	0.25
Income from discontinued operations attributable to common shareholders, including gain on sale — per share			0.29				0.19				0.31				0.33
Net income attributable to common shareholders, as adjusted — per share		$	0.30			$	0.31			$	0.42			$	0.58
Weighted average common shares outstanding			61,499				55,351				58,542				55,158
Diluted earnings per share calculation
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities		$	706			$	6,911			$	6,279			$	13,914
Income allocated to common units			—				12				21				17
Income from continuing operations attributable to common shareholders, as adjusted			706				6,923				6,300				13,931
Income from discontinued operations attributable to common shareholders, including gain on sale			17,462				10,261				18,047				18,068
Net income attributable to common shareholders, as adjusted		$	18,168			$	17,184			$	24,347			$	31,999
Income from continuing operations attributable to common shareholders, as adjusted — per share		$	0.01			$	0.12			$	0.11			$	0.25
Income from discontinued operations attributable to common shareholders, including gain on sale — per share			0.29				0.19				0.30				0.32
Net income attributable to common shareholders, as adjusted — per share		$	0.30			$	0.31			$	0.41			$	0.57
Weighted average common shares outstanding			61,499				55,351				58,542				55,158
Incremental shares issuable from assumed conversion of:
Common share options and awards granted			—				174				—				163
Common units			—				508				483				508
Weighted average common shares outstanding, as adjusted			61,499				56,033				59,025				55,829

Our Board of Trust Managers has approved a program to repurchase up to $500 million of our common equity securities through open market purchases, block purchases, and privately negotiated transactions. Under this program, we repurchased approximately 4.3 million shares for a total of approximately $230.2 million through June 30, 2009. The remaining dollar value of our common equity securities authorized to be repurchased under the program was approximately $269.8 million as of June 30, 2009.

In May 2009, we issued 10,350,000 common shares at $27.50 per share in a public equity offering. We have used a portion of the net proceeds of approximately $272.1 million to reduce indebtedness on our unsecured line of credit and repurchase near-term debt maturities, and we expect to further use such proceeds to fund other debt maturities and for other general corporate purposes.

We filed a shelf registration statement with the Securities and Exchange Commission during the three months ended June 30, 2009, which became automatically effective upon filing. We may use the shelf registration statement to offer, from time to time, an unlimited amount of common shares, preferred shares, debt securities, or warrants. Our declaration of trust provides we may issue up to 110,000,000 shares of beneficial interest, consisting of 100,000,000 common shares and 10,000,000 preferred shares.

4. Investments in Joint Ventures

The joint ventures described below are accounted for using the equity method. The joint ventures in which we have an interest have been funded in part with secured third-party debt. We have guaranteed no more than our proportionate interest, totaling approximately $65.2 million, of five loans utilized for construction and development activities for our joint ventures. Additionally, we eliminate fee income from property management services provided to these joint ventures to the extent of our ownership.

In May 2009, one of our joint ventures located in Houston, Texas refinanced its $31.7 million construction loan to a secured ten-year note in the principal amount of approximately $23.0 million. The note has a fixed annual interest rate of 5.325% with monthly payments of principal and interest due beginning on July 1, 2009. Concurrent with this transaction, each of the two joint venture partners made a mezzanine loan to the joint venture in the amount of $4.6 million, or $9.2 million in the aggregate, each of which has a 10% annual interest rate and matures on June 3, 2019. We had previously made a mezzanine loan to this joint venture of $9.2 million, which was converted into an additional equity interest in the joint venture concurrently with the refinancing.

The mezzanine loan discussed above, and the mezzanine loans we have made to certain other affiliated joint ventures, are recorded as “Notes receivable — affiliates” as discussed in Note 5, “Notes Receivable.”

We earn fees for property management, construction, development, and other services provided primarily to joint ventures in which we own an interest. Fees earned for these services amounted to approximately $2.2 million and $4.3 million during the three and six months ended June 30, 2009, respectively, and approximately $2.1 million and $4.5 million during the three and six months ended June 30, 2008, respectively.

As of June 30, 2009, our equity investments in unconsolidated joint ventures, which we account for utilizing the equity method of accounting, consisted of 25 joint ventures, with our ownership percentages ranging from 15% to 72%. We provide property management services to the joint ventures which own operating properties and may provide construction and development services to the joint ventures which own properties under development. The following table summarizes balance sheet and statement of income data for the unconsolidated joint ventures as of the periods presented (in millions):

		June 30,				December 31,
		2009				2008
Total assets		$	1,212.7			$	1,210.7
Total third-party debt			1,001.5				984.2
Total equity			137.2				145.0

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2009				2008				2009				2008
Total revenues		$	34.3			$	31.0			$	68.0			$	60.6
Net loss			(3.8	)			(4.0	)			(7.0	)			(7.6	)
Equity in income (1)			0.2				(0.5	)			0.6				(0.5	)

5. Notes Receivable

Notes receivable — affiliates. We provided mezzanine construction financing, with rates ranging from the London Interbank Offered Rate (“LIBOR”) plus 3% to 12% per year, in connection with certain of our joint venture transactions. During the quarter ended June 30, 2009, one mezzanine note was converted into an additional equity interest in the related joint venture and a new mezzanine note was provided. See further discussion of this transaction in Note 4, “Investment in Joint Ventures.” As of June 30, 2009 and December 31, 2008, the balance of “Notes receivable — affiliates” totaled approximately $54.0 million and $58.1 million, respectively, on notes maturing through 2019. We eliminate the interest and other income to the extent of our percentage ownership in the joint ventures. We have reviewed the terms and conditions underlying these notes receivable and believe these notes are collectible, and no impairment existed at June 30, 2009.

At June 30, 2009, our commitment to fund additional amounts under the mezzanine loans was an aggregate of approximately $30.0 million.

Notes receivable — other. We have a mezzanine financing program under which we provide secured financing to third party owners of real estate properties. At December 31, 2008, an aggregate of approximately $8.7 million was outstanding on these loans. This amount, together with accrued interest, was paid in full during the three months ended March 31, 2009.

Notes receivable secured by common shares. At June 30, 2009, one note receivable was outstanding with a balance of approximately $0.3 million, which was secured by our common shares and reported as a component of shareholders’ equity in our condensed consolidated balance sheet.

6. Notes Payable

The following is a summary of our indebtedness:

		June 30,				December 31,
(in millions)		2009				2008
Commercial Banks
Unsecured line of credit and short-term borrowings		$	—			$	145.0
$500 million term loan, due 2012			500.0				500.0
			500.0				645.0
Senior unsecured notes
$100.0 million 4.74% Notes, due 2009			81.9				81.9
$250.0 million 4.39% Notes, due 2010			55.2				150.4
$100.0 million 6.75% Notes, due 2010			57.8				79.9
$150.0 million 7.69% Notes, due 2011			87.9				149.8
$200.0 million 5.93% Notes, due 2012			189.3				199.6
$200.0 million 5.45% Notes, due 2013			199.4				199.3
$250.0 million 5.08% Notes, due 2015			249.0				248.9
$300.0 million 5.75% Notes, due 2017			246.0				246.0
			1,166.5				1,355.8
Medium-term notes
$15.0 million 7.63% Notes, due 2009			—				15.0
$25.0 million 4.64% Notes, due 2009			—				25.2
$10.0 million 4.90% Notes, due 2010			10.4				10.5
$14.5 million 6.79% Notes, due 2010			14.5				14.5
$35.0 million 4.99% Notes, due 2011			36.7				37.2
			61.6				102.4
Total unsecured notes payable			1,728.1				2,103.2
Secured notes
2.11% — 6.00% Conventional Mortgage Notes, due 2011 — 2019			927.6				686.6
1.58% Tax-exempt Mortgage Note due 2028			42.1				42.6
			969.7				729.2
Total notes payable		$	2,697.8			$	2,832.4
Floating rate debt included in commercial bank indebtedness (0.00%)		$	—			$	145.0
Floating rate debt included in secured notes (2.11% — 2.45%)			180.9				180.9
Floating rate tax-exempt debt included in secured notes (1.58%)			42.1				42.6

We have a $600 million unsecured credit facility which matures in January 2010 and can be extended at our option to January 2011. The scheduled interest rate is based on spreads over LIBOR or the Prime Rate. The scheduled interest rate spreads are subject to change as our credit ratings change. Advances under the line of credit 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 six months or less and may not exceed the lesser of $300 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations, all of which we are in compliance.

Our line of credit provides us with the ability to issue up to $100 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, it does reduce the amount available. At June 30, 2009, we had outstanding letters of credit totaling approximately $10.0 million, and we had approximately $590.0 million available under our unsecured line of credit.

As an alternative to our unsecured line of credit, from time to time we borrow using competitively bid unsecured short-term notes with lenders who may or may not be a part of the unsecured line of credit bank group. Such borrowings vary in term and pricing and are typically priced at interest rates below those available under the unsecured line of credit.

At June 30, 2009 and 2008, the weighted average interest rate on our floating rate debt, which includes our unsecured line of credit, was approximately 2.0% and 3.0%, respectively.

On April 17, 2009, we, as guarantor, and five separate subsidiaries as borrowers (collectively, the “Borrowers”) entered into a $420 million secured credit facility agreement. The ten-year facility has a fixed annual interest rate of 5.12% with monthly payments of interest only and matures on May 1, 2019. We have entered into standard nonrecourse carveout guarantees. The obligations of the Borrowers under the credit agreement are secured by cross-collateralized first priority mortgages on eleven multifamily properties. The proceeds from this credit facility were used to repurchase outstanding debt, repay maturing debt, and pay down amounts outstanding under our revolving line of credit, with the remainder being used for general corporate purposes.

During the second quarter of 2009, we repurchased and retired approximately $12.8 million of certain senior unsecured notes due in 2011 and 2012 from unrelated third parties for approximately $11.1 million. These transactions resulted in a net gain on early retirement of debt of approximately $1.7 million which includes a reduction for applicable loan costs.

On April 21, 2009, we commenced a cash tender offer for certain series of notes maturing in 2010 and 2011. This tender offer was completed on April 28, 2009, and we repurchased and retired approximately $169.5 million of our outstanding debt at par for approximately $170.1 million, including fees incurred in connection with the tender offer. This transaction resulted in a loss on early retirement of debt of approximately $0.6 million which includes a reduction for applicable loan costs.

In June 2009, we repurchased and retired approximately $135.3 million of certain secured notes maturing in 2010 and 2011 from unrelated third parties for approximately $139.1 million. The transaction resulted in a loss on early retirement of debt of approximately $3.8 million which includes a reduction for applicable loan costs.

Our indebtedness, including our unsecured line of credit, had a weighted average maturity of approximately 5.9 years at June 30, 2009. Scheduled repayments on outstanding debt assuming all contractual extensions, including our line of credit and scheduled principal amortizations, and the weighted average interest rate on maturing debt at June 30, 2009, are as follows:

						Weighted
						Average
(in millions)		Amount				Interest Rate
2009		$	83.8				4.7	%
2010			141.6				5.7
2011			142.0				6.4
2012			761.9				5.4
2013			227.2				5.4
2014 and thereafter			1,341.3				4.8
Total		$	2,697.8				5.1	%

On July 15, 2009, we repaid the remaining amount of our $100 million, 4.74% senior unsecured notes maturing in 2009 for a total of approximately $83.8 million, of which approximately $1.9 million represented accrued and unpaid interest.

7. Derivative 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 principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. 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 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 this objective, we primarily use interest rate swaps and caps as 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. Interest rate caps involve the receipt of variable rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up front premium.

The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings. During the three and six months ending June 30, 2009, such derivatives were used to hedge the variable cash flows associated with existing variable rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. No portion was ineffective during the three or six months ended June 30, 2009 and 2008.

Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on our variable rate debt. Over the next twelve months, we estimate an additional $20.6 million will be reclassified to interest expense.

As of June 30, 2009, we had the following outstanding interest rate derivatives designated as cash flow hedges of interest rate risk:

Interest Rate Derivative		Number of Instruments				Notional Amount
Interest Rate Swaps			2			$509.7 million

Non-designated Hedges. Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks. Non-designated hedges are either specifically non-designated by management or do not meet strict hedge accounting requirements of SFAS 133. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and were approximately $0.1 million for both the three and six months ended June 30, 2009. We did not have any non-designated hedges for the three or six months ended June 30, 2008.

As of June 30, 2009, we had the following outstanding interest rate derivative which was not designated as a hedge of interest rate risk:

Interest Rate Derivative		Number of Instruments				Notional Amount
Interest Rate Cap			1			$175.0 million

The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets at June 30, 2009 and December 31, 2008 (in millions):

Fair Values of Derivative Instruments

Asset Derivatives

Liability Derivatives

June 30, 2009

December 31, 2008

June 30, 2009

December 31, 2008

Balance

Balance

Balance

Balance

Sheet

Fair

Sheet

Fair

Sheet

Fair

Sheet

Fair

Location

Value

Location

Value

Location

Value

Location

Value

Derivatives designated as hedging instruments under SFAS 133

Interest Rate Swaps

Other Liabilities

$

41.8

Other Liabilities

$

51.1

Derivatives not designated as hedging instruments under SFAS 133

Interest Rate Cap

Other Assets

$

0.1

Other Assets

$

0.1

The tables below present the effect of our derivative financial instruments on the condensed consolidated statements of income and comprehensive income for the three and six months ended June 30, 2009 and 2008 (in millions).

Effect of Derivative Instruments on the Three Months Ended June 30,

Location of Gain or

Location of Loss

(Loss) Recognized in

Amount of Gain (Loss)

Reclassified from

Amount of Loss

Income on Derivative

Recognized in Other

Accumulated

Reclassified from

(Ineffective Portion

Derivatives in SFAS 133

Comprehensive Income

OCI into Income

Accumulated OCI into

and Amount Excluded

Cash Flow

(“OCI”) on Derivative

(Effective

Income (Effective

from Effectiveness

Hedging Relationships

(Effective Portion)

Portion)

Portion)

Testing)

2009

2008

2009

2008

Interest Rate Swaps

$

1.4

$

15.6

Interest Expense

$

5.5

$

2.6

Not applicable

		Location of Gain
		Recognized in Income				Amount of Gain Recognized
Derivatives Not Designated as Hedging Instruments Under SFAS 133		on Derivative				in Income on Derivative
						2009				2008
Interest Rate Cap		Other income				$	0.1			$	—

Effect of Derivative Instruments on the Six Months Ended June 30,

Location of Gain or

(Loss) Recognized in

Location of Loss

Income on Derivative

Derivatives in SFAS

Amount of Gain (Loss)

Reclassified from

Amount of Loss

(Ineffective Portion

133 Cash Flow

Recognized in OCI on

Accumulated OCI

Reclassified from

and Amount Excluded

Hedging

Derivative (Effective

into Income

Accumulated OCI into

from Effectiveness

Relationships

Portion)

(Effective Portion)

Income (Effective Portion)

Testing)

2009

2008

2009

2008

Interest Rate Swaps

$

(1.6

)

$

(3.8

)

Interest Expense

$

10.7

$

4.0

Not applicable

		Location of Gain
		Recognized in Income				Amount of Gain Recognized
Derivatives Not Designated as Hedging Instruments Under SFAS 133		on Derivative				in Income on Derivative
						2009				2008
Interest Rate Cap		Other income				$	0.1			$	—

Credit-risk-related Contingent Features. Derivative financial investments expose us to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. We believe we minimize our credit risk on these transactions by transacting with major creditworthy financial institutions. As part of our on-going control procedures, we monitor the credit ratings of counterparties and our exposure to any single entity, which we believe minimizes credit risk concentration. We believe the likelihood of realized losses from counterparty non-performance is remote.

Our agreements with each of our derivative counterparties contain a provision pursuant to which a default under any of our indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, the counterparty has the right to declare a default on our derivative obligations. Our agreements with each of our derivative counterparties also provide if we consolidate with, merge with or into, or transfer all or substantially all our assets to another entity and the creditworthiness of the resulting, surviving, or transferee entity is materially weaker than ours, the counterparty has the right to terminate the derivative obligations.

At June 30, 2009, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk (the “termination value”), related to these agreements was approximately $45.0 million. As of June 30, 2009, we had not posted any collateral related to these agreements. If we were in breach of any of these provisions at June 30, 2009, or terminated these agreements, we would have been required to settle our obligations at their termination value of approximately $45.0 million.

8. Share-based Compensation

Share Awards and Vesting. Share awards generally have a vesting period of five years. The compensation cost for share awards is based on the market value of the shares on the date of grant and is amortized over the vesting period. To estimate forfeitures, we use actual forfeiture history. At June 30, 2009, the unamortized value of previously issued unvested share awards was approximately $25.9 million. The total fair value of shares vested during the six months ended June 30, 2009 and 2008 was approximately $9.4 million and $8.8 million, respectively.

Valuation Assumptions. Options generally have a vesting period of three to five years. The weighted average fair value of options granted in 2009 was $3.06 per option. We estimated the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The following assumptions were used for options granted during the three months ended March 31, 2009 (no options were granted during the quarter ended June 30, 2009):

Expected volatility			33.0	%
Risk-free interest rate			2.6	%
Expected dividend yield			9.3	%
Expected life (in years)			7.0

Our computation of expected volatility for 2009 is based on the historical volatility of our common shares over a time period equal to the expected life of the option and ending on the grant date. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield on our common shares is estimated using the annual dividends paid in the prior year and the market price on the date of grant. Our computation of expected life for 2009 is estimated based on historical experience of similar awards, giving consideration to the contractual terms of the share-based awards.

Options. No options were exercised during the six months ended June 30, 2009. As of June 30, 2009, there was approximately $2.9 million of total unrecognized compensation cost related to unvested options, which is expected to be amortized over the next five years. Total compensation cost for option and share awards charged against income was approximately $2.3 million and $4.3 million for the three and six months ended June 30, 2009, respectively, and approximately $2.0 million and $3.9 million for the three and six months ended June 30, 2008, respectively. Total capitalized compensation cost for option and share awards was approximately $0.2 million and $0.5 million for the three and six months ended June 30, 2009, respectively, and approximately $0.3 million and $0.7 million for the three and six months ended June 30, 2008, respectively.

The weighted average remaining contractual term of outstanding options under the share incentive plans is approximately 6.3 years.

The following table summarizes share options outstanding and exercisable at June 30, 2009:

		Outstanding Options								Exercisable Options								Remaining
						Weighted								Weighted				Contractual
						Average								Average				Life
Range of Exercise Prices		Number				Price				Number				Price				(Years)
$25.88-$41.91			760,538			$	31.92				271,029			$	35.27				7.2
$42.90-$44.00			472,200				43.23				472,200				43.23				4.1
$45.53-$73.32			759,995				49.55				430,116				50.72				6.8
Total options			1,992,733			$	41.32				1,173,345			$	44.14				6.3

The following table summarizes activity under our 1993 and 2002 Share Incentive Plans for the six months ended June 30, 2009:

						Weighted
		Options /				Average
		Share Awards				Exercise /
		Outstanding				Grant Price
Balance at January 1, 2009			4,125,312			$	41.37
Options
Granted			489,509				30.06
Exercised			—				—
Forfeited			(33,303	)			43.37
Net Options			456,206
Share Awards
Granted			325,943				30.06
Forfeited			(24,271	)			55.04
Net Share Awards			301,672
Balance at June 30, 2009			4,883,190			$	36.26
Vested share awards at June 30, 2009			2,159,701			$	37.73

9. Net Change in Operating Accounts

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

		Six Months
		Ended June 30,
(in thousands)		2009				2008
Decrease in assets:
Other assets, net		$	6,848			$	1,931
Increase (decrease) in liabilities:
Accounts payable and accrued expenses			(16,129	)			(16,965	)
Accrued real estate taxes			6,849				5,849
Other liabilities			(1,590	)			(2,532	)
Change in operating accounts		$	(4,022	)		$	(11,717	)

10. Commitments and Contingencies

Construction Contracts. As of June 30, 2009, we were obligated for approximately $19.2 million of additional construction and development expenditures for one development project owned by a consolidated joint venture. These amounts are expected to be funded from an existing construction loan.

Litigation. In September 2007, the Equal Rights Center filed a lawsuit against us and one of our wholly-owned subsidiaries in the United States District Court for the District of Maryland. This suit alleges various violations of the Fair Housing Act and the Americans with Disabilities Act by us in the design, construction, control, management, and/or ownership of various multifamily properties. The plaintiff seeks compensatory and punitive damages in unspecified amounts, an award of attorneys’ fees and costs of suit, as well as preliminary and permanent injunctive relief which includes modification of existing assets and prohibiting construction or sale of noncompliant units or complexes. At this stage in the proceeding, it is not possible to predict or determine the outcome of the lawsuit, nor is it possible to estimate the amount of loss, if any, which would be associated with an adverse decision.

We are subject to various other legal proceedings and claims which arise in the ordinary course of business. Matters which arise out of allegations of bodily injury, property damage, and employment practices are generally covered by insurance. While the resolution of these other legal proceedings and claims cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on our condensed consolidated financial statements.

Other 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.

Lease Commitments. At June 30, 2009, we had long-term leases covering certain land, office facilities, and equipment. Rental expense totaled approximately $0.8 million for both the three months ended June 30, 2009 and 2008 and approximately $1.5 million for both the six months ended June 30, 2009 and 2008. Minimum annual rental commitments for the remainder of 2009 are approximately $1.3 million, and for the years ending December 31, 2010 through 2013 are approximately $2.5 million, $2.3 million, $2.0 million, and $1.9 million, respectively, and approximately $3.6 million in the aggregate thereafter.

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 communities owned directly by the joint venture or partnership. Our decision whether to hold the entire interest in an apartment community ourselves, or to have an indirect interest in the community through a joint venture or partnership, is based on a variety of factors and considerations, including: (i) our projection, in some circumstances, 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 communities 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 and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the terms of the joint venture or partnership agreement.

11. 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 REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains. 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 will be subject to federal and state income taxes at regular corporate rates, including any applicable alternative minimum tax. In addition, we may not be able to requalify as a REIT for the four subsequent taxable years. Historically, we have incurred only state and local income, franchise, excise, and margin taxes. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal, state, and local income taxes. Our operating partnerships are flow-through entities and are not subject to federal income taxes at the entity level. We have provided for income, franchise, and margin taxes in the condensed consolidated statements of income and comprehensive income for the three and six months ended June 30, 2009. These taxes are primarily for entity level taxes on certain ventures, state margin taxes, and federal taxes on certain of our taxable REIT subsidiaries. We have no significant temporary 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 six months ended June 30, 2009.

12. Dispositions and Assets Held for Sale

During the six months ended June 30, 2009, we recognized a gain of approximately $16.9 million from the sale of one operating property, containing 671 apartment homes with a net book value of approximately $11.3 million, to an unaffiliated third party. This sale generated total net proceeds of approximately $28.0 million. During the six months ended June 30, 2008, we recognized gains totaling approximately $14.7 million from the sale of three operating properties, containing a combined 403 apartment homes, to unaffiliated third parties. These sales generated total net proceeds of approximately $23.8 million.

For the three and six months ended June 30, 2009 and 2008, income from discontinued operations included the results of operations of one operating property sold in 2009 through its sale date. For the three and six months ended June 30, 2008, income from discontinued operations also included the results of operations of eight operating properties sold during 2008. We had no operating properties designated as held for sale as of June 30, 2009.

The following is a summary of income from discontinued operations for the three and six months ended June 30, 2009 and 2008:

		Three Months								Six Months
		Ended June 30,								Ended June 30,
(in thousands)		2009				2008				2009				2008
Property revenues		$	1,211			$	5,869			$	2,408			$	11,969
Property expenses			636				2,859				1,248				5,783
			575				3,010				1,160				6,186
Interest			—				177				—				380
Depreciation and amortization			—				1,121				—				2,414
Income from discontinued operations		$	575			$	1,712			$	1,160			$	3,392

13. Fair Value Disclosures

The following table presents information regarding our assets and liabilities measured at fair value on a recurring basis as of June 30, 2009, and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets we have the ability to access for identical assets and liabilities. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 which are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices observable for the asset or liability, such as interest rates and yield curves observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

In instances in which the inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Disclosures concerning assets and liabilities measured at fair value are as follows:

Assets and Liabilities Measured at Fair Value on a Recurring Basis at June 30, 2009
(in millions)

		Quoted Prices in
		Active Markets				Significant Other				Significant
		for Identical				Observable				Unobservable				Balance at
		Assets (Level 1)				Inputs (Level 2)				Inputs (Level 3)				June 30, 2009
Assets
Deferred compensation plan investments		$	38.6			$	—			$	—			$	38.6
Derivative financial instruments			—				0.1				—				0.1
Liabilities
Derivative financial instruments			—				41.8				—				41.8

To estimate fair values, observable market prices are used if available. In some instances, observable market prices are not readily available for certain financial instruments and fair value is estimated using present value or other techniques appropriate for a particular financial instrument. These techniques involve some degree of judgment and as a result are not necessarily indicative of the amounts we would realize in a current market exchange. The use of different assumptions or estimation techniques may have a material effect on the estimated fair value amounts.

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 or information provided through third-party advisors. Our deferred compensation plan investments are recorded in other assets.

Derivative financial instruments. We enter into derivative financial instruments, specifically interest rate swaps and caps, for non-trading purposes. We use interest rate swaps and caps to manage interest rate risk arising from interest payments associated with floating rate debt. Through June 30, 2009, we had derivative financial instruments designated and qualifying as cash flow hedges. Derivative contracts with positive net fair values are recorded in accrued expenses and other assets. Derivative contracts with negative net fair values are recorded in accrued expenses and other liabilities. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps and caps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, to comply with the provisions of SFAS 157, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk, both our own nonperformance risk and the respective counterparty’s nonperformance risk. The fair value of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts which would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observed market interest rate curves and volatilities.

Although we have determined the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. As of June 30, 2009, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Effective January 1, 2009, we adopted the provisions of SFAS 157 relating to our nonfinancial assets and nonfinancial liabilities measured on a nonrecurring basis, which primarily relates to impairment of long-lived assets or investments. During the six months ended June 30, 2009, there were no events which required fair value adjustments of our nonfinancial assets and nonfinancial liabilities.

Other Fair Value Disclosures. As of June 30, 2009 and December 31, 2008, management estimated the carrying value of cash and cash equivalents, restricted cash, accounts receivable, notes receivable, investments and liabilities under deferred compensation plans, accounts payable, accrued expenses and other liabilities, and distributions payable were at amounts which reasonably approximated their fair value.

In calculating the fair value of our notes payable, interest rates and spreads reflect our current creditworthiness and market conditions available for the issuance of notes payable with similar terms and remaining maturities. In instances where markets are not active, we follow the guidance of FSP 157-3, “Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active,” to estimate fair value in a non-active market.

		June 30, 2009								December 31, 2008
		Carrying				Estimated				Carrying				Estimated
(in thousands)		Value				Fair Value				Value				Fair Value
Fixed rate notes payable (1)		$	2,474.9			$	2,403.8			$	2,467.3			$	2,163.8
Floating rate notes payable (2)			222.9				215.3				365.1				359.0

14. Noncontrolling interests

A reconciliation of equity attributable to noncontrolling interests and disclosure of those amounts of consolidated net income attributable to the noncontrolling interests for the periods indicated is presented below:

		Common Shareholders
										Distributions
										in excess of				Notes
		Common								net income				receivable								Accumulated
		shares of				Additional				attributable				secured by								other								Total
(in thousands except		beneficial				paid-in				to common				common				Treasury				comprehensive				Noncontrolling				shareholders’
per share amounts)		interest				capital				shareholders				shares				shares				loss				interests				equity
Shareholders’ Equity, January 1, 2009		$	660			$	2,237,703			$	(312,309	)		$	(295	)		$	(463,209	)		$	(51,056	)		$	89,862			$	1,501,356
Net income											24,549																943				25,492
Common shares issued			104				272,008																								272,112
Unrealized loss on cash flow hedging activities																							(1,574	)							(1,574	)
Reclassification of net losses on cash flow hedging activities																							10,744								10,744
Amortization of previously granted share awards							5,393																								5,393
Employee stock purchase plan							(54	)											464												410
Common share options exercised, including amortization							329																								329
Conversions and redemptions of operating partnership units			1				1,763																				(1,780	)			(16	)
Cash distributions											(69,408	)															(3,544	)			(72,952	)
Other			4				646								8				(6	)							(748	)			(96	)
Shareholders’ Equity, June 30, 2009		$	769			$	2,517,788			$	(357,168	)		$	(287	)		$	(462,751	)		$	(41,886	)		$	84,733			$	1,741,198