the right move. strategically.

Transcription

1 the right move. strategically.

2 A move. A direction. A business decision.

3 People make decisions that affect other people. Everyday we all have to choose to make the right move.

4 In the ups and downs of the economy, given a choice, it s better to make things happen than to wait, watch or wonder what happened.

5 our strategic moves:

6 attract and retain residents reduce concessions the right move. strategically. 04.

7 lower borrowing costs stabilize new developments

8 building relationships and trust Fundamentally, our business is about serving customers - all of our customers, from our residents and employees to our shareholders. Ingrained in our culture is the desire to be the best. We seek out highly skilled professionals who are willing to provide higher levels of customer service to deliver on our bold promise of Living Excellence to our residents. the right move. strategically. 06.

9 higher levels of customer service Their commitment, which is guided by our values and aligned with our strategies, helps us to build long-lasting relationships with our customers; this enables us to achieve our financial objectives year after year. Our consistent performance helps us to build credibility, which keeps us earning our customers trust each and every day.

10 making connections Pursuing new opportunities for growth the right move. strategically. 08.

11 investing in the power of technology that leads the industry

12 The Camden blueprint: six key strategies to making the right move

13 For the past 10 years as a public company, these principles have served as a foundation for all the strategic moves we have made to strengthen Camden s brand in the marketplace. They are the strategies that got us started, got us where we are today, and that will continue to pave our way into the future as we make the next move to provide Living Excellence to our residents, Working Excellence to our employees and Investing Excellence to our shareholders.

14 conservative financial policies Being flexible: maintain conservative financial policies to ensure flexibility. the right move. strategically. 12.

15 Our financial infrastructure is a powerful combination of people, process and tools, capable of transforming data into strategic information for all our planning decisions. It gives us solid reporting capabilities, so that we can measure profitability for each community within our portfolio. We have invested in it as a foundation from which we manage our growing business, so that decisions rely on facts, not opinion. Our systems and disciplines are applicable and flexible to support a broader business base. Finally, the integrity and accuracy of our well established financial infrastructure ensure dependable SEC reporting and support a continued ability to tap into the capital markets as we expand.

16 financial flexibility Through prudent financial management, we have maintained a strong balance sheet despite the ups and downs of the multifamily markets and general economy over the last few years. We have focused on maintaining moderate leverage, a reasonable amount of floating rate debt, and manageable future debt maturities. We have been selective in allocating our capital only to those projects which allow for the highest return and overall value creation for our company and our shareholders. As a result of our conservative financial policies, our financial flexibility allows us to capitalize on future growth opportunities. the right move. strategically. 14.

17 our performance has been consistent, our dividends safe, and our returns stable. We continue to seek ways to enhance our portfolio by developing, acquiring, and disposing of assets. Camden s Investment Committee, comprised of the company s top executives, routinely evaluates investment options and determines the most effective capital allocation each year. In 2003, we focused our efforts on new development communities in high growth markets and mezzanine loan investments, which we believe will provide the highest returns. Going forward, we will continue to focus on those areas while also seeking acquisition opportunities in our targeted markets and anticipating the disposition of nonstrategic assets.

18 achieving excellence More value: Increase productivity and resident service through best practices emphasizing training, continuous process improvement and technology. the right move. strategically. 16.

19 we create values that enhance our residents lifestyle

20 more home for less the right move. strategically. 18.

21 carefree living

22 the right move. strategically. 20. comfort and The recent economic downturn has made our customers much more cost conscious, creating a highly competitive market. Our success hinges on how quickly and effectively we respond to these market challenges and turn them into opportunities. To differentiate ourselves from our competitors, we continue to seek innovative service offerings that will enhance our residents living experience while carefully controlling our costs. We re defining new ways of doing business in the multifamily industry that will keep Camden in the lead.

23 convenience

24 market balance No shortage of options: build, buy and sell communities to maintain a high quality portfolio balanced by geography and product type. the right move. strategically. 22.

25 Camden Harbor View Long Beach, CA Camden Tuscany San Diego, CA Camden Oak Crest Houston, TX build new communities

26 and sell assets to balance the portfolio During the last 10 years, we have completed more than $2.1 billion in acquisitions and over $0.8 billion in dispositions. the right move. strategically. 24.

27 AZ Phoenix Camden Copper Square Camden Fountain Palms Camden Legacy Camden Pecos Ranch Camden San Paloma Camden Sierra Camden Towne Center Camden Vista Valley Tucson Camden Pass Camden View CA Los Angeles / Orange County Camden Crown Valley Camden Harbor View Camden Martinique Camden Parkside Camden Sea Palms San Diego / Inland Empire Camden Sierra at Otay Ranch Camden Tuscany Camden Vineyards CO Denver Camden Arbors Camden Caley Camden Centennial Camden Denver West Camden Highlands Ridge Camden Interlocken Camden Lakeway Camden Pinnacle maintain diversity FL Orlando Camden Club Camden Fountains Camden Landings Camden Lee Vista Camden Renaissance Camden Reserve Tampa Camden Bay Camden Bayside Camden Bay Pointe Camden Citrus Park Camden Isles Camden Lakes Camden Lakeside Camden Live Oaks Camden Preserve Camden Providence Lakes Camden Westshore Camden Woods Camden Ybor City KY Louisville Camden Brookside Camden Downs Camden Meadows Camden Oxmoor Camden Prospect Park MO Kansas City Camden Passage St. Louis Camden Cedar Lakes Camden Cove West Camden Cross Creek Camden Taravue Camden Trace Camden Westchase NV Las Vegas Camden Bel Air Camden Breeze Camden Canyon Camden Commons Camden Cove Camden Del Mar Camden Fairways Camden Greens Camden Hills Camden Legends Camden Palisades Camden Pines Camden Pointe Camden Summit Camden Tiara Camden Vintage Oasis Bay Oasis Crossings Oasis Emerald Oasis Gateway Oasis Heritage Oasis Island Oasis Landing Oasis Meadows Oasis Palms Oasis Pearl Oasis Place Oasis Ridge Oasis Sands Oasis Sierra Oasis Springs Oasis Suites Oasis Vinings NC Charlotte Camden Eastchase Camden Forest Camden Habersham Camden Park Commons Camden Pinehurst Camden Timber Creek Greensboro Camden Glen Camden Wendover TX Austin Camden Briar Oaks Camden Huntingdon Camden Laurel Ridge Camden Ridgecrest Camden Ridgeview Camden Woodview Corpus Christi Camden Breakers Camden Copper Ridge Camden Miramar Dallas / Fort Worth Camden Addison Camden Buckingham Camden Centreport Camden Cimarron Camden Farmers Market Camden Gardens Camden Glen Lakes Camden Highlands Camden Lakeview Camden Legacy Creek Camden Legacy Park Camden Oaks Camden Oasis Camden Place Camden Ridge Camden Springs Camden Terrace Camden Towne Village Camden Trails Camden Valley Creek Camden Valley Park Camden Valley Ridge Camden Westview Houston Camden Baytown Camden Creek Camden Crossing Camden Greenway Camden Holly Springs Camden Midtown Camden Oak Crest Camden Park Camden Steeplechase Camden Stonebridge Camden Sugar Grove Camden Vanderbilt Camden West Oaks Camden Wilshire Camden Wyndham

28 dividend growth Safe and sound: provide shareholders with a safe, growing dividend. the right move. strategically. 26.

29 Our distributions have grown from $1.76 per share in 1994 to $2.54 per share in $2.54 $2.44 $2.25 $2.08 $2.02 $1.96 $1.90 $1.84 $ distributions per share

30 performance you can count on the right move. strategically. 28.

31 5 year performance comparison CAMDEN NAREIT EQUITY INDEX RUSSELL 2000 S&P 500 This graph assumes the investment of $100 on December 31, 1998 and quarterly reinvestment of dividends. source: NAREIT

32 employee excellence The right people: create a work environment which attracts, retains and rewards the best and the brightest people. the right move. strategically. 30.

33

34 We have invested heavily in one of our most precious assets, our people. We ve hired extremely talented, motivated, ethical, results-oriented professionals and retained the quality employees who have been integral to our growth. the right move. strategically. 32.

35

36 Net Operating Income Growth Stability in diversity: produce a stable, growing cash flow. We are committed to the responsible management of our business and the long-term prosperity of all shareholders. the right move. strategically. 34.

37 Percent of Total NOI 4Q03 austin 3% charlotte 3% corpus christi 3% dallas 14% denver 6% houston 14% las vegas 13% louisville 3% orlando 6% phoenix 6% southern CA 10% st louis 5% tampa 11% other 3%

38 March 15, 2004 To Our Shareholders: In 2003, we celebrated our 10th anniversary as a publicly traded company. We marked this occasion by ringing the closing bell for the New York Stock Exchange on August 14th. It was an opportunity to reflect on our humble beginnings and measure our progress. During the past 10 years, Camden s share price has more than doubled; we have built over $1.0 billion of Camden flagship communities; and the size of our company, based on total asset dollars, has increased tenfold. Our performance has been consistent, our dividends safe, and our returns stable. Simply put, we have done what we said we were going to do year after year. We believe that the reasons for our success can be attributed to our commitment from the very beginning to hire and retain the best people people who share our values and our desire to be the best and by focusing on six key strategies; strategies that have stood the test of time. These strategies guided our decisions at our initial public offering in July 1993 and keep us grounded as we maneuver through the challenging operating environment of today. Most importantly, they will continue to direct our future decisions, helping us make the right moves each day moves that enhance our shareholders value score card Our 2003 score card reflects the difficult operating fundamentals of our industry: an oversupply of apartment product; low mortgage rates, which continue to make home purchases attractive; and a slow, jobless economic recovery. As a result, 2003 funds from operations (FFO) declined $0.31 per share to $3.08 per share, compared to $3.39 per share in This is mostly due to a 5.0% decline in same-property net operating income (NOI). Revenues increased slightly to $416.5 million compared to $411.0 million in 2002, as income from newly developed communities and property acquisitions offset the decline in revenues from our stabilized communities and 2002 dispositions. the right move. strategically. 36.

39 About two years ago, we began exploring alternative ways to grow our cash flow and safely enter new markets, which meet our investment criteria. An example is our Mezzanine Debt Program. This program, in which Camden acts as a secondary lender for both existing and new development multifamily communities, funded more than $26.4 million in mezzanine loans in During a year when our same-property NOI declined, this program helped to offset that decline by contributing additional revenues. It also demonstrated our flexibility in pursuing one of our fundamental strategies: NOI Growth. safe and sound Our commitment to our shareholders remains strong. We maintained the $2.54 annual distribution through 2003 as promised notwithstanding economic conditions. Our 2003 total return of 41.9% was in the top five of the multifamily sector, well above the sector average of 28.4%. Furthermore, over the last five years Camden s total return has outperformed most indexes including the S&P 500, NASDAQ and Morgan Stanley REIT Index. To provide our shareholders with a safe and growing dividend over time, we must carefully manage our finances. In 2003, we issued $200.0 million of new 10-year senior unsecured debt and refinanced $100.0 million of perpetual preferred units at lower rates, taking advantage of the market s favorable interest rate environment. As a result, we lowered our cost of capital and thus lowered our projected expenses for 2004, which allows for greater dividend coverage going forward and an opportunity to grow the dividend once again when our earnings improve. Adhering to our strategy of Conservative Financial Policies enables us to execute on another of our key strategies: Dividend Growth. stability in diversity Balancing our portfolio to maintain high quality communities in geographically diverse markets is a primary focus for our team. In 2003, three new development communities

40 were added to our stabilized portfolio: Camden Ybor City in Tampa, Florida, which is in the heart of Tampa s historical district; Camden Vineyards in California s Inland Empire, one of the top ten high-growth markets in the country; and Camden Tuscany, located in downtown San Diego s Little Italy district. Additionally, three joint venture communities consisting of 482 apartment homes and 82 acres of undeveloped land were disposed of for a total sales price of $38.7 million and $35.4 million, respectively. We are committed to our long-term plan of having no more than 10% of our NOI contribution from any one market, and these transactions bring us closer to realizing that objective. We completed construction at Camden Oak Crest in Houston, Texas, Camden Tuscany in San Diego, California, and Camden Sierra at Otay Ranch in Chula Vista, California in These communities consist of 946 apartment homes for a total cost of $122.7 million. They also represent diversity in product type: Camden Tuscany is an urban mid-rise community with retail space attached; and Camden Sierra at Otay Ranch and Camden Oak Crest are garden style communities built within suburban masterplanned communities. Having a portfolio consisting of a mix of high-quality, urban and suburban product enables us to offer a variety of price points to our customers. This aligns with our mission to provide the best value in apartment home living in America. no shortage of options We continue to focus on growing our portfolio through new development in markets that are poised to experience high job growth. Historically, these markets have been the first to benefit from an economic recovery, and have led the nation in overall job creation. We recently formed a development joint venture to build a new community in Northern Virginia, enabling us to enter a new market with manageable financial and lease-up risk. We will look for additional development opportunities as the year progresses. With these new developments, we should be well positioned to capitalize on increased demand for apartment homes when the economy improves. the right move. strategically. 38.

41 Richard J. Campo D. Keith Oden In addition to our new development efforts, we continue to look for opportunities to acquire new assets that meet our investment criteria and are located in high-growth markets. We are also charged with pruning our portfolio of older, non-strategic assets; those that are capital intensive or have lower than average projected growth rates. Through new development, acquisitions and dispositions, we are well on our way to achieving a portfolio balanced by both geography and product type. the right people In order for Camden to provide the best in apartment home living, we must have the right people on our team. Our underpinning has always been our ability to attract and retain highly talented professionals - people who share our values, understand our mission and focus their abilities on achieving results. That is why two of our key strategies focus on the human element. First and foremost, we strive to provide a work environment that both enriches and empowers our employees. Our compensation package is highly competitive and our benefits package comprehensive, including opportunities for stock ownership through an attractive Employee Share Purchase Program. Camden University, our blended learning solution consisting of classroom instruction, proprietary elearning courses, and one-on-one learning through our Mentor Program, provides employees with educational and career development opportunities. Most importantly, we take time to celebrate our successes, share our challenges and communicate our culture through annual Leadership and Management Conferences.

42 Secondly, our best practice approach to our core competencies ensures that we are working to consistently produce results. Through customer comment cards, employee opinion surveys and internal best practice groups, we constructively analyze situations, both those in which the results meet expectations as well as those that do not. This method ensures that we are continually searching for ways to improve our productivity and enhance our residents living experience. creating value In 2003, we streamlined our residents online experience by enhancing our community web pages on camdenliving.com. Our residents now have the ability to customize their own ebrochure, arrange their furniture through our online, interactive function, Create your Space, and get instant approval of their rental application with our credit scoring process. We also simplified our follow-up process with ecard, a customizable, online postcard that our Leasing Consultants use to follow-up with future and current residents, and our residents use to send photos of their new home and notes to their friends. Today each of our markets offers Camden Connect, an online resident utility connection service that helps our residents save time and money through an easy and secure portal. Our property management team initiated a grass roots marketing program that consisted of developing ongoing business relationships with local, regional and national businesses, area merchants and professional associations. The result of our Outreach Program was an increase in traffic, which helped to move our portfolio occupancy from 91.4% in the first quarter of 2003 to 94.5% for the fourth quarter of All of these results exemplify the focus and dedication of our high-performance work teams; and that our most important asset is the right people moving in the right direction with persistence and diligence. making the right moves We are working to make the right moves. We have set our sights on four specific objectives: refinancing $400.0 million of debt and preferred equity; increasing our NOI contributions from our new development communities; increasing our occupancy; and reducing concessions. This four point plan is known as Making the Right Move and is designed to drive earnings and increase shareholder value. the right move. strategically. 40.

43 The plan is well underway. To date, we have refinanced $200.0 million of debt and $100.0 million of preferred equity at very attractive rates. Our new development communities have been leasing up as expected and their NOI will continue to grow and add to our bottom line in 2004 and beyond. Our physical occupancy reached 94.5% at the end of 2003, and we expect that our 2004 marketing plans will help us to retain this occupancy going forward. Lastly, the right financial move for Camden is to lower our concessions. With higher occupancy, we are positioning ourselves to incrementally reduce concessions over the course of To begin this process, we are conducting just-in-time training sessions that introduce a proven, systematic approach to lowering concessions. This type of training ensures that our teams have the right tools and techniques to reach our objectives. Making the Right Move sets the stage for a successful Our four cornerstones our values, our promise of Living Excellence, our mission to be the best and our key strategies have been fundamental to our success over the last 10 years. With focused discipline, our cornerstones will continue to guide our decisions for the next 10 years, helping to ensure that we exceed our residents expectations, empower our employees to excel, increase our shareholders value, and make the right move today and tomorrow. Respectfully, Richard J. Campo Chairman and Chief Executive Officer D. Keith Oden President and Chief Operating Officer

44 what moves us the most: the right move. strategically. 42.

45 our business is building

46 inside the right move. strategically. 44.

47

48 Camden Farmers Market - Dallas, TX Camden Bay - Tampa, FL the right move. strategically. 46. and

49 Camden Interlocken - Denver, CO out Camden Harbor View - Long Beach, CA Camden Towne Center - Phoenix, AZ

50 our product is living the right move. strategically. 48.

51 relax and unwind

52 a safer place to live the right move. strategically. 50.

53 play

54 realize your dreams the right move. strategically. 52.

55 a slice of heaven to call your home.

56 there s only one place to move

57 CAMDEN 2003 ANNUAL REPORT the right move. financially.

58 corporate profile Camden, one of the largest multifamily companies in the nation, specializes in several disciplines within the residential real estate industry. We provide expertise in the ownership, development and management of apartment home communities; in the acquisition, disposition and redevelopment of communities; and in consulting, building and construction services for third-party clients. Camden has built a solid reputation by delivering excellent product in the marketplace - and in delivering value to both our residents and shareholders. Our current geographic and product diversification, as well as upcoming initiatives, gives us the leverage to capitalize on dynamic new opportunities. At the beginning of 2004, we owned and managed 144 communities, consisting of 51,344 apartment homes, geographically dispersed in the Sunbelt and Midwestern markets from Florida to California. Through the ownership of land parcels and development rights in promising markets, Camden is uniquely prepared for future growth. Our development pipeline is substantial, with up to 4,100 apartment homes in the planning stages for future opportunities. Our corporate offices are strategically headquartered in Houston, Texas to better serve our national and regional markets.

59 Camden Property Trust management s discussion and analysis of financial condition and results of operations independent auditors report consolidated balance sheets consolidated statements of operations consolidated statements of shareholders equity consolidated statements of cash flows notes to consolidated financial statements comparative summary of selected financial and property data the right move. financially. 01. camden

60 management s discussion and analysis of financial condition and results of operations The following discussion should be read in conjunction with all of the financial statements and notes appearing elsewhere in this report. Historical results and trends which might appear should not be taken as being indicative of future operations. We have made statements in this report that are forward-looking in that they do not discuss historical fact, but instead note future expectations, projections, intentions or other items relating to the future. You should not rely on these forward-looking statements as they are subject to known and unknown risks, uncertainties and other factors that may cause our actual results or performance to differ materially from those included in the forward-looking statements. Many of those factors are noted in conjunction with the forward-looking statements in the text. Other important factors that could cause actual results to differ include: the results of our efforts to implement our property development, construction and acquisition strategies; the effects of economic conditions, including rising interest rates; our ability to generate sufficient cash flows; the failure to qualify as a real estate investment trust; the costs of our capital and debt; changes in our capital requirements; the actions of our competitors and our ability to respond to those actions; the performance of our mezzanine financing program; changes in governmental regulations, tax rates and similar matters; and environmental uncertainties and disasters. Do not rely on these forward-looking statements, which only represent our estimates and assumptions as of the date of this report. We assume no obligation to update or revise any forward-looking statement. BUSINESS Camden Property Trust is a real estate investment trust ( REIT ) and, with our subsidiaries, reports as a single business segment with activities related to the ownership, development, construction and management of multifamily apartment communities. As of December 31, 2003, we owned interests in, operated or were developing 146 multifamily properties containing 52,346 apartment homes located in ten states. Two of our newly developed multifamily apartment properties containing 786 apartment homes were in lease-up at year end. Two of our multifamily properties containing 1,002 apartment homes were under development at December 31, 2003, including 464 apartment homes owned through a joint venture. Additionally, we have several sites that we intend to develop into multifamily apartment communities. Our 2003 results reflect the difficult operating fundamentals in our industry, including an oversupply of multifamily housing; low interest rates on mortgage debt, which continue to make home purchases attractive; and a slow economic recovery. During 2003, apartment turnover due to home purchases was at the highest level in our history. Despite these challenges, overall occupancy in our portfolio increased during The increase in occupancy was achieved in part by offering higher concessions in many of our markets. As a result, we experienced a 1.3% decline in revenues from our same-store communities during the year. Total revenues for 2003 increased slightly as income from newly developed communities offset the decline in revenues from our same-store communities and 2002 dispositions. We continued to focus on expense control in Expenses at our same-store communities increased 4.7% during 2003, after increasing only 1.1% in The increase in 2003 expenses was driven by increases in property insurance expense, real estate taxes, repair and maintenance costs and normal increases in employee related expenses. We were able to take advantage of the lower interest rate environment in 2003, and these savings should continue, as we replace maturing debt with new lower cost debt. the right move. financially. 02. camden

61 management s discussion and analysis of financial condition and results of operations Although we expect 2004 to remain a challenging economic environment, we believe we are well positioned for growth. Our average borrowing costs should continue to decline as a result of the replacement of higher priced maturing debt. Additionally, our operating results should be positively impacted by the increase in the occupancy levels of our portfolio, and increases in contributions from our California and Houston development properties. property update During 2003, stabilization was achieved at three communities totaling 878 apartment homes as follows: Camden Ybor City in Tampa, Florida, a 454 apartment home community that was acquired in the second quarter of 2002; Camden Vineyards in Murrieta, California, which completed construction of 264 apartment homes in the fourth quarter of 2002; and Camden Tuscany in San Diego, California, which completed construction of 160 apartment homes in the third quarter of We consider a property stabilized once it reaches 90% occupancy, or generally one year from opening the leasing office, with some allowances for larger than average properties. During 2003, we also completed construction of Camden Sierra at Otay Ranch, a 422 apartment home community located in Chula Vista, California, which we expect will stabilize operations during the first quarter of 2004, and Camden Oak Crest, a 364 apartment home community in Houston, Texas, which we expect will stabilize operations during the second quarter of Additionally, we continued construction at Camden Harbor View, a 538 apartment home community in Long Beach, California, which we expect to complete and stabilize in We also began construction on one property, Camden Westwind, a 464 apartment home community in Ashburn, Virginia. This property is owned by a joint venture in which we own a 20% interest. As of December 31, 2003, we had operating properties in 16 markets. No single market contributed more than 15% of our net operating income for the year then ended. For the year ended December 31, 2003, Houston, Dallas and Las Vegas contributed 14.4%, 13.9% and 13.8%, respectively, of our net operating income. We continually evaluate our portfolio to ensure appropriate geographic diversification in order to manage our risk of market concentration. We seek to selectively dispose of assets that management believes are highly capital intensive, have a lower projected net operating income growth rate than the overall portfolio, or no longer conform to our operating and investment strategies. In connection with this strategy, three communities with 482 apartment homes, which were held through joint ventures, were sold during A summary of our 2003 dispositions is as follows: PROPERTY AND LOCATION NUMBER OF APARTMENT HOMES DATE OF DISPOSITION Park Catalina (a) Los Angeles, California 90 3/28/ Oasis Rose (a) Las Vegas, Nevada 212 5/22/ Oasis View (a) Las Vegas, Nevada 180 5/22/ Total apartment homes sold 482 (a) As these properties were held through joint ventures, our portion of the results of operations and the gains from these dispositions are included in Equity in income of joint ventures in our consolidated statements of operations. YEAR BUILT the right move. financially. 03. camden

62 management s discussion and analysis of financial condition and results of operations Our multifamily property portfolio, excluding land we hold for future development and joint venture properties we do not manage, at December 31, 2003, 2002 and 2001 is summarized as follows: APARTMENT HOMES PROPERTIES APARTMENT HOMES PROPERTIES APARTMENT HOMES OPERATING PROPERTIES West Region Las Vegas, Nevada (a) 9, , , Denver, Colorado (a) 2, , ,529 8 Phoenix, Arizona 2, , ,109 7 Southern California 2, , ,653 4 Tucson, Arizona Reno, Nevada Central Region Dallas, Texas 8, , , Houston, Texas (b) 6, , , St. Louis, Missouri 2, , ,123 6 Austin, Texas 1, , ,745 6 Corpus Christi, Texas (b) 1, , ,663 4 Kansas City, Missouri East Region Tampa, Florida 6, , , Orlando, Florida 2, , ,804 6 Charlotte, North Carolina 1, , ,659 6 Louisville, Kentucky 1, , ,448 5 Greensboro, North Carolina Total Operating Properties 51, , , PROPERTIES UNDER DEVELOPMENT West Region Southern California , Central Region Houston, Texas East Region Northern Virginia (c) Total Properties Under Development 1, , Total Properties 52, , , Less: Joint Venture Properties (a) (c) 5, , , Total Properties Owned 100% 47, , , (a) (b) (c) Includes properties held in joint ventures as follows: one property with 320 apartment homes in Colorado in which we own a 50% interest, the remaining interest is owned by an unaffiliated private investor; and 16 properties with 4,227 apartment homes (18 properties with 4,619 apartment homes at December 31, 2002, and 19 properties with 4,919 apartment homes at December 31, 2001) in Las Vegas in which we own a 20% interest, the remaining interest is owned by an unaffiliated private investor. December 31, 2001 balances include two properties with 744 apartment homes in Houston and one property with 580 apartment homes in Corpus Christi, which are included in discontinued operations in our consolidated financial statements. Includes one property with 464 apartment homes currently under development in Virginia held in a joint venture we entered into in 2003 in which we own a 20% interest, the remaining interest is owned by an unaffiliated private investor. PROPERTIES the right move. financially. 04. camden

63 management s discussion and analysis of financial condition and results of operations At December 31, 2003, we had two completed properties in lease-up as follows: $ in millions PROPERTY AND LOCATION NUMBER OF APARTMENT HOMES COST TO DATE % LEASED AT 2/16/04 DATE OF COMPLETION ESTIMATED DATE OF STABILIZATION Camden Oak Crest Houston, TX 364 $ % 2Q03 2Q04 Camden Sierra at Otay Ranch Chula Vista, CA % 3Q03 1Q04 Total 786 $ 82.8 At December 31, 2003, we had two properties under development as follows: $ in millions PROPERTY AND LOCATION NUMBER OF APARTMENT HOMES ESTIMATED COST COST INCURRED AT 12/31/03 ESTIMATED DATE OF COMPLETION ESTIMATED DATE OF STABILIZATION IN LEASE-UP Camden Harbor View Long Beach, CA 538 $ $ Q04 4Q04 UNDER CONSTRUCTION JV S Camden Westwind Ashburn, VA 464 $ 69.1 $ Q06 4Q06 Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes that are capitalized as part of properties under development. Expenditures directly related to the development, acquisition and improvement of real estate assets, excluding internal costs relating to acquisitions, are capitalized at cost as land, buildings and improvements. Indirect development costs, including salaries and benefits and other related costs that are clearly attributable to the development of properties, are also capitalized. All construction and carrying costs are capitalized and reported on the balance sheet in 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, and the assets are depreciated over their estimated useful lives using the straight line method of depreciation. 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 that all operating expenses associated with completed apartment homes are expensed against revenues generated by those apartment homes. If an event or change in circumstance indicates that a potential impairment in the value of a property has occurred, our policy is to assess any potential impairment by making a comparison of the current and projected cash flows for such property over its remaining holding period, on an undiscounted basis, to the carrying amount of the property. If such carrying amounts were in excess of the estimated projected cash flows of the property, we would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its estimated fair market value. Our consolidated financial statements at December 31, 2003 included $189.1 million related to wholly owned properties under development. Of this amount, $64.9 million relates to our one project currently under development, Camden Harbor View. the right move. financially. 05. camden

64 management s discussion and analysis of financial condition and results of operations Additionally, we have $124.2 million invested in land held for future development. Included in this amount is $54.0 million related to projects we expect to begin constructing in early We also have $37.6 million invested in land tracts adjacent to current development projects, which are being utilized in conjunction with those projects. Upon completion of these development projects, we expect to utilize this land to further develop apartment homes in these areas. We may also sell certain parcels of these undeveloped land tracts to third parties for commercial and retail development. We have completed construction of 17 for-sale townhomes in the downtown Dallas area at a total cost of approximately $5.5 million. During 2001 and 2002, we sold five and eight units, respectively, at a total sales price of approximately $1.6 million and $2.5 million, respectively. During 2003, we sold the four remaining units at a total sales price of approximately $1.3 million. The proceeds received from these townhome sales are included in other revenues in our consolidated statements of operations. Other expenses in our consolidated statements of operations represent the construction costs and marketing expenses associated with the townhomes. At December 31, 2003 and 2002, our investments in various geographic areas, excluding investments in joint ventures, were as follows: in thousands West Region Southern California $ 516,077 17% $ 454,878 15% Las Vegas, Nevada 382, , Denver, Colorado 193, ,738 6 Phoenix, Arizona 175, ,672 6 Tucson, Arizona 35, ,825 1 Central Region Dallas, Texas 412, , Houston, Texas 402, , St. Louis, Missouri 118, ,391 4 Austin, Texas 72, ,110 2 Corpus Christi, Texas 49, ,076 2 Kansas City, Missouri 36, ,458 1 East Region Tampa, Florida 342, , Orlando, Florida 171, ,544 6 Charlotte, North Carolina 82, ,246 3 Louisville, Kentucky 78, ,308 3 Greensboro, North Carolina 18, ,941 1 Northern Virginia ,017 1 Total Properties $ 3,088, % $ 3,020, % the right move. financially. 06. camden

65 management s discussion and analysis of financial condition and results of operations third-party construction services Our construction division performs services for our internally developed construction pipeline, as well as provides construction management and general contracting services for third-party owners of multifamily, commercial and retail properties. We are currently under contract on projects ranging from $0.7 million to $17.1 million. We earn fees on these projects ranging from 4% to 7% of the total contracted construction cost which we recognize when they are earned. Fees earned from third-party construction projects totaled $2.6 million, $2.7 million and $2.6 million for the years ended December 31, 2003, 2002 and 2001, respectively, and are included in revenues in our consolidated statements of operations under Fee and asset management. For projects where our fee is based on a fixed price, any cost overruns, as compared to the original budget, incurred during construction will reduce the fee generated on those projects. For any project where cost overruns are expected to be in excess of the fee generated on the project, we will recognize the total expected loss in the period in which the loss is first estimated. During the year ended December 31, 2003, we recorded cost overruns of $2.0 million on fixed fee projects, which represented the estimate of our remaining costs to complete the projects. These cost overruns are included in fee and asset management expenses in our consolidated statements of operations. LIQUIDITY AND CAPITAL RESOURCES financial structure We intend to maintain what management believes to be a conservative capital structure by: (i) (ii) (iii) (iv) (v) using what management believes is a prudent combination of debt and common and preferred equity; extending and sequencing the maturity dates of our debt where possible; managing interest rate exposure using what management believes are prudent levels of fixed and floating rate debt; borrowing on an unsecured basis in order to maintain a substantial number of unencumbered assets; and maintaining conservative coverage ratios. Our interest expense coverage ratio, net of capitalized interest, was 2.9, 3.3 and 3.4 times for the years ended December 31, 2003, 2002 and 2001, respectively. At December 31, 2003, 2002 and 2001, 85.1%, 83.8% and 80.4%, respectively, of our properties (based on invested capital) were unencumbered. Our weighted average maturity of debt, excluding our line of credit, was 6.5 years, 6.7 years and 6.9 years at December 31, 2003, 2002 and 2001, respectively. Interest expense coverage ratio is derived by dividing interest expense for the period into the sum of income from continuing operations before gain on sale of properties, equity in income of joint ventures and minority interests, depreciation, amortization, interest expense and income from discontinued operations. liquidity We intend to meet our short-term liquidity requirements through cash flows provided by operations, our unsecured line of credit discussed in the Financial Flexibility section and other short-term borrowings. We expect that our ability to generate cash will be sufficient to meet our short-term liquidity needs, which include: (i) (ii) (iii) (iv) (v) (vi) operating expenses; current debt service requirements; recurring capital expenditures; initial funding of property developments, acquisitions and mezzanine financings; common share repurchases; and distributions on our common and preferred equity. the right move. financially. 07. camden

66 management s discussion and analysis of financial condition and results of operations We consider our long-term liquidity requirements to be the repayment of maturing debt, including borrowings under our unsecured line of credit that were used to fund development and acquisition activities. We intend to meet our long-term liquidity requirements through the use of common and preferred equity capital, senior unsecured debt and property dispositions. We expect to use the proceeds from any property sales for reinvestment in acquisitions or new developments or reduction of debt. We intend to concentrate our growth efforts toward selective development and acquisition opportunities in our current markets, and through the acquisition of existing operating properties and the development of properties in selected new markets. During the year ended December 31, 2003, we incurred $80.0 million in development costs and no acquisition costs. We currently have one wholly owned property under construction at a projected aggregate cost of approximately $144.5 million, $138.5 million of which had been incurred through We expect to complete construction on this property in At year end, we were obligated for approximately $3.0 million under construction contracts related to this project (a substantial amount of which we expect to fund with our unsecured line of credit). We intend to fund our developments and acquisitions through a combination of equity capital, partnership units, medium-term notes, construction loans, other debt securities and our unsecured line of credit. Net cash provided by operating activities totaled $138.0 million for 2003, a decrease of $44.2 million, or 24.3%, from Income from continuing operations before gain on sale of properties, equity in income of joint ventures, minority interests, depreciation and amortization for 2003 decreased $12.9 million from This decrease was due primarily to an increase in total expenses of $23.2 million for 2003 as compared to 2002 with an increase in revenues of only $5.6 million during the same period. Additionally, as a result of timing on our construction and development projects, cash flows from changes in accounts payable decreased $10.0 million during the year ended December 31, 2003, compared to an increase of $22.6 million during Net cash used in investing activities totaled $91.9 million for the year ended 2003 compared to $220.8 million in For 2003, expenditures for property development and capital improvements totaled $80.0 million and $22.3 million, respectively. Also, notes receivable increased $23.8 million due to increases in amounts funded under our mezzanine financing program. These expenditures were offset by $26.3 million in net proceeds received from townhome sales, the sale of 61.1 acres of undeveloped land, and the contribution of a property to a joint venture during Additionally, distributions from joint ventures totaled $8.9 million during 2003 due to the sale of three properties totaling 482 apartment homes. For the year ended 2002, expenditures for acquisitions, property development and capital improvements were $248.8 million, $124.2 million and $33.7 million, respectively. These expenditures were offset by $127.8 million in net proceeds received from the sales of properties, including properties included in discontinued operations and townhome sales, and a net decrease in investments in third-party development properties of $70.0 million. Additionally, notes receivable increased $17.6 million due primarily to mezzanine financings related to property sales. Net cash used in financing activities totaled $43.1 million for the year ended 2003 compared to net cash provided of $35.8 million for During 2003, we paid distributions totaling $121.1 million to holders of common and preferred equity. We received net proceeds of $198.8 million from the issuance of senior unsecured notes in The proceeds from this issuance were used to pay down borrowings under our line of credit, which decreased $49.0 million during the year, repay $67.9 million in notes payable, and fund our development activities. Additionally, accounts receivable - affiliates increased $18.1 million during 2003 due to an increase in receivables from rabbi trust plan participants under our employee benefit plans. For the year ended 2002, we paid distributions totaling $123.4 million to holders of common and preferred equity. We received net proceeds totaling $365.5 million from the issuance of senior unsecured and secured notes in The proceeds from these issuances were used to pay down borrowings under our line of credit, which decreased $61.0 million during the year, repay $85.1 million in notes payable, repurchase $62.7 million in common shares and units, and fund our acquisition and development activities. the right move. financially. 08. camden

67 management s discussion and analysis of financial condition and results of operations In 1998, we began repurchasing our common equity securities under a program approved by our Board of Trust Managers. To date, the Board has authorized us to repurchase or redeem up to $250 million of our securities through open market purchases and private transactions. Management consummates these repurchases and redemptions at the time when they believe that we can reinvest available cash flow into our own securities at yields that exceed those currently available on direct real estate investments. These repurchases were made and we expect that future repurchases, if any, will be made without incurring additional debt and, in management s opinion, without reducing our financial flexibility. At December 31, 2003, we had repurchased approximately 8.8 million common shares and redeemed approximately 106,000 units convertible into common shares at a total cost of $243.6 million. No common shares or units convertible into common shares were repurchased during On January 16, 2004, we paid a distribution of $0.635 per share for the fourth quarter of 2003 to all holders of record of our common shares as of December 19, 2003, and paid an equivalent amount per unit to holders of common units in Camden Operating, L.P. and Oasis Martinique, LLC. Total distributions to common shareholders and holders of common units for the year ended December 31, 2003 were $2.54 per share or unit. We determine the amount of cash available for distribution to unitholders in accordance with the operating agreements and have made and intend to continue to make distributions to the holders of common units in amounts equivalent to the per share distributions paid to holders of common shares. We intend to continue to make shareholder distributions in accordance with REIT qualification requirements under the federal tax code. The dividend payout ratio, which is calculated by dividing distributions per share by funds from operations per share, was 83%, 75% and 69% for the years ended December 31, 2003, 2002 and 2001, respectively. Management intends to maintain a dividend rate for our common shares that, when combined with expenditures for capital improvements, is less than our funds from operations. Our operating partnership has issued $100 million of 7.0% Series B Cumulative Redeemable Perpetual Preferred Units and $53 million of 8.25% Series C Cumulative Redeemable Perpetual Preferred Units. Distributions on the preferred units are payable quarterly in arrears. The Series B preferred units are redeemable beginning in 2008 and the Series C preferred units are redeemable beginning in 2004, in each case by the operating partnership for cash at par plus the amount of any accumulated and unpaid distributions. The preferred units are convertible beginning in 2009 by the holder into a fixed number of corresponding Series B or C Cumulative Redeemable Perpetual Preferred Shares. The preferred units are subordinate to present and future debt. Effective December 1, 2003, we amended the terms of the Series B preferred units, which are described above. We did not record any charges to earnings in connection with this amendment. Distributions on the preferred units totaled $12.7 million for the year ended December 31, contractual obligations The following table summarizes our known contractual obligations as of December 31, 2003: in millions Total Thereafter Debt maturities (a) $ 1,509.7 $ $ 60.9 $ $ $ 17.9 $ Non-cancelable operating lease payments Construction contracts $ 1,524.9 $ $ 62.8 $ $ $ 18.9 $ (a) Debt maturities in 2004 are at a weighted average interest rate of 7.1% and will be repaid using proceeds available under our unsecured line of credit. The joint ventures in which we have an interest have been funded with secured, third-party debt. We are not committed to any additional funding on third-party debt in relation to our joint ventures. the right move. financially. 09. camden