CAMDEN PROPERTY TRUST (CPT) FY 2021 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this report. Historical results and trends which might appear in the consolidated financial statements should not be interpreted as being indicative of future operations.

Discussion of our year-to-date comparisons between 2021 and 2020 is presented below. Year-to-date comparisons between 2020 and 2019 can be found in "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

We consider portions of this report to be "forward-looking" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions, or other items relating to the future; forward-looking statements are not guarantees of future performance, results, or events. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein which are not statements of historical fact should be deemed forward-looking statements. Reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.

Factors which may cause our actual results or performance to differ materially from those contemplated by forward-looking statements include, but are not limited to, the following:

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

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

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

•We could be negatively impacted by the risks associated with land holdings and related activities;

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

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

•We could be impacted by our investments through joint ventures and investment funds which involve risks not present in investments in which we are the sole investor;

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

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

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

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

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

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

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

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

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

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

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

•We may be adversely affected by the phase out of LIBOR;

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

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

•Competition could adversely affect our ability to acquire properties;

•Litigation risks could affect our business;

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

•We could be adversely impacted due to our share price fluctuations.

These forward-looking statements represent our estimates and assumptions as of the date of this report, and we assume no obligation to update or supplement forward-looking statements because of subsequent events.

Executive Summary

We are primarily engaged in the ownership, management, development, reposition, redevelopment, acquisition, and construction of multifamily apartment communities. Overall, we focus on investing in markets characterized by high-growth economic conditions, strong employment, and attractive quality of life which we believe leads to higher demand and retention of our apartments. As of December 31, 2021, we owned interests in, operated, or were developing 176 multifamily properties comprised of 60,073 apartment homes across the United States as detailed in the Property Portfolio table below. In addition, we own other land holdings which we may develop into multifamily apartment communities in the future.

Business Environment and Current Outlook

As a result of the COVID-19 pandemic, we believe the conditions in the multifamily industry market in which we operate have been challenging but continue to show signs of improvement. During the year ended December 31, 2021, our results reflect an increase in same store revenues of approximately 4.3% as compared to the same period in 2020. The increase was primarily due to higher average rental rates and increased occupancy which we believe was primarily attributable to improving job growth, favorable demographics with a higher propensity to rent versus buy, higher demand for multifamily housing in our markets, and a manageable supply of new multifamily housing.

We currently believe U.S. economic and employment growth are likely to continue during 2022 and the supply of multifamily homes will remain at manageable levels. If economic conditions were to worsen, our operating results could be adversely affected.

Consolidated Results

Net income attributable to common shareholders increased approximately $180.0 million for the year ended December 31, 2021, as compared to the same period in 2020. This increase was primarily due to the gains from the sale of three operating properties during the fourth quarter of 2021 and an 11.9% increase in property operations due to the growth attributable to our same store, non-same store, and development and lease-up communities. The increase was partially offset by higher depreciation expense related to the acquisition of four operating properties during 2021. See further discussion of our 2021 operations as compared to 2020 in "Results of Operations," below.

Construction Activity

At December 31, 2021, we had a total of five projects under construction to be comprised of 1,773 apartment homes. Initial occupancies of these five projects are currently scheduled to occur within the next 18 months. We estimate the additional cost to complete the construction of the five projects to be approximately $199.4 million.

Acquisitions

Operating Properties: During the year ended December 31, 2021, we acquired one operating property comprised of 558 apartment homes located in Dallas, Texas for approximately $165.5 million in October and one operating property comprised of 368 apartment homes located in St. Petersburg, Florida for approximately $176.3 million in August. In June 2021, we also acquired one operating property comprised of 328 apartment homes located in Franklin, Tennessee for approximately $105.3 million and one operating property comprised of 430 apartment homes located in Nashville, Tennessee for approximately $186.3 million.

Land: During the year ended December 31, 2021, we acquired approximately 2.0 acres of land in Nashville, Tennessee for approximately $36.6 million, approximately 5.2 acres of land in Denver, Colorado for approximately $24.0 million,

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approximately 14.6 acres of land in The Woodlands, Texas for approximately $9.3 million, and approximately 0.2 acres of land in St. Petersburg, Florida for approximately $2.1 million for future development purposes.

Dispositions

Operating Properties: During the fourth quarter of 2021, we sold two operating properties comprised of a total of 652 apartment homes, located in Houston, Texas for approximately $115.0 million and recognized a gain of approximately $81.1 million and one property comprised of 426 apartment homes located in Laurel, Maryland for approximately $145.0 million and recognized a gain of approximately $93.3 million.

Other

In August 2021, we created an at-the market ("ATM") share offering program through which we can, but have no obligation to, sell common shares and we may also enter into separate forward sale agreements with forward purchasers for an aggregate offering price of up to $500.0 million (the "2021 ATM program").

In 2021, we issued approximately 5.5 million common shares under our 2020 and 2021 ATM programs and received approximately $759.2 million in net proceeds.

Future Outlook

Subject to market conditions, we intend to continue to seek opportunities to develop new communities, and to redevelop, reposition and acquire existing communities. We also intend to evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise. We expect to maintain a strong balance sheet and preserve our financial flexibility by continuing to focus on our core fundamentals which currently are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intend to meet our short-term and long-term liquidity requirements through a combination of one or more of the following: cash and cash equivalents, cash flows generated from operations, draws on our unsecured credit facility, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from our ATM programs, other unsecured borrowings, or secured mortgages.

As of December 31, 2021, we had approximately $613.4 million in cash and cash equivalents, and $885.2 million available under our $900.0 million unsecured credit facility. As of December 31, 2021 and through the date of this filing, we had common shares having an aggregate offering price of up to $97.6 million remaining available for sale under our 2021 ATM program. We believe scheduled repayments of debt during the next 12 months are manageable at approximately $386.3 million which represents approximately 12.2% of our total outstanding debt, and includes amortization of debt discounts and debt issuance costs of approximately $3.7 million. Additionally, as of December 31, 2021 and through the date of this filing, 100% of our consolidated properties were unencumbered. We believe we are well-positioned with a strong balance sheet and sufficient liquidity to fund new development, redevelopment, and other capital funding requirements. We will, however, continue to assess and take further actions we believe are prudent to meet our objectives and capital requirements.

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Property Portfolio

Our multifamily property portfolio is summarized as follows:

(1)Refer to Note 8, "Investments in Joint Ventures," in the notes to Consolidated Financial Statements for further discussion of our joint venture investments.

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Stabilized Communities

We generally consider a property stabilized once it reaches 90% occupancy. During the year ended December 31, 2021, stabilization was achieved at three consolidated operating properties and one unconsolidated joint venture operating property as follows:

Completed Construction in Lease-Up

At December 31, 2021, we had two consolidated completed operating properties in lease-up as follows:

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

(2)Stabilization has been achieved at this property subsequent to year-end.

Properties Under Development

Our consolidated balance sheet at December 31, 2021 included approximately $474.7 million related to properties under development and land. Of this amount, approximately $296.3 million related to our projects currently under construction. In addition, we had approximately $178.4 million primarily invested in land held for future development related to projects we currently expect to begin construction.

Communities Under Construction. At December 31, 2021, we had five consolidated properties in various stages of construction as follows:

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(1)Property in lease-up and was 65% leased at January 30, 2022.

Development Pipeline Communities. At December 31, 2021, we had the following consolidated communities undergoing development activities:

(1)Represents our estimate of total costs we expect to incur on these projects. However, forward-looking statements are not guarantees of future performance, results, or events. Although we believe these expectations are based upon reasonable assumptions, future events rarely develop exactly as forecasted and estimates routinely require adjustment.

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Geographic Diversification

At December 31, 2021 and 2020, our real estate assets by various markets, excluding depreciation and investments in joint ventures, were as follows:

Results of Operations

Changes in revenues and expenses related to our operating properties from period to period are due primarily to the performance of stabilized properties in the portfolio, the lease-up of newly constructed properties, acquisitions, and dispositions. Where appropriate, comparisons of income and expense for communities included in continuing operations are made on a dollars-per-weighted average apartment home basis in order to adjust for such changes in the number of apartment homes owned during each period. Selected weighted averages for the years ended December 31 are as follows:

(1)Average monthly property revenue per apartment home for the year ended December 31, 2020 includes approximately $9.1 million of Resident Relief Funds paid to residents at our wholly-owned communities who experienced financial losses caused by the pandemic and was recorded as a reduction to property revenues.

(2)Annualized total property expenses per apartment home for the year ended December 31, 2020 includes approximately $4.5 million of directly-related pandemic expenses incurred at our operating properties.

Management considers property net operating income ("NOI") to be an appropriate supplemental measure of operating performance to net income because it reflects the operating performance of our communities without an allocation of corporate level property management overhead or general and administrative costs. We define NOI as total property income less property operating and maintenance expenses less real estate taxes. NOI is further detailed in the Property-Level NOI table as seen below. NOI is not defined by accounting principles generally accepted in the United States of America ("GAAP") and should not be considered an alternative to net income as an indication of our operating performance, should not be considered an alternative to net cash from operating activities as a measure of liquidity, and should not be considered an indication of cash available to fund cash needs. Additionally, NOI as disclosed by other REITs may not be comparable to our calculation.

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Reconciliations of net income to NOI for the year ended December 31, 2021 and 2020 are as follows:

Property-Level NOI (1)(2)

Property NOI, as reconciled above, is detailed further into the categories below for the year ended December 31, 2021 as compared to 2020:

* Not a meaningful percentage.

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(1)    Same store communities are communities we owned and were stabilized since January 1, 2020, excluding communities under redevelopment and properties held for sale. Non-same store communities are stabilized communities not owned or stabilized since January 1, 2020, including communities under redevelopment and excluding properties held for sale. We define communities under redevelopment as communities with capital expenditures that improve a community's cash flow and competitive position through extensive unit, exterior building, common area, and amenity upgrades. Management believes same store information is useful as it allows both management and investors to determine financial results over a particular period for the same set of communities. Development and lease-up communities are non-stabilized communities we have developed since January 1, 2020, excluding properties held for sale. Pandemic Related Impact relates to the Resident Relief Funds which were established for our residents experiencing financial losses caused by the pandemic and includes the amount we paid to residents at our wholly-owned communities as an adjustment to property revenues. The Pandemic Related Impact also includes direct related expenses incurred at our operating properties as a result of the pandemic. Dispositions/other includes those communities disposed of or held for sale which are not classified as discontinued operations, non-multifamily rental properties, expenses related to land holdings not under active development, and other miscellaneous revenues and expenses.

Same Store Analysis

Same store property NOI increased approximately $28.2 million for the year ended December 31, 2021 as compared to the same period in 2020. The increase was due to an increase of approximately $40.0 million in same store property revenues for the year ended December 31, 2021, partially offset by an increase of approximately $11.8 million in same store property expenses for the year ended December 31, 2021, as compared to the same period in 2020.

The $40.0 million increase in same store property revenues for the year ended December 31, 2021, as compared to the same period in 2020, was primarily due to an increase of approximately $30.9 million in rental revenues comprised of a 2.8% increase in average rental rates, higher occupancy, and higher other rental income, partially offset by lower reletting fees, net of uncollectible revenue. The increase was also due to an increase of approximately $5.7 million in income from our bulk internet and other utility rebilling programs as well as an increase of approximately $3.4 million related to fees and other income.

The $11.8 million increase in same store property expenses for the year ended December 31, 2021, as compared to the same period in 2020, was primarily due to higher property insurance expense of approximately $4.0 million due to higher premiums and claims incurred at our communities, higher repairs and maintenance and utility expenses of approximately $2.7 million, higher real estate taxes of approximately $2.2 million as a result of increased property valuations and rates at a number of our communities and lower property tax refunds, higher general and administrative and other property expenses of approximately $1.5 million, and higher salaries expense of approximately $1.4 million.

Non-same Store and Development and Lease-up Analysis

Property NOI from non-same store and development and lease-up communities increased approximately $32.2 million for the year ended December 31, 2021, as compared to the same period in 2020. The increases were comprised of increases from non-same store communities of approximately $27.3 million and increases from development and lease-up communities of approximately $4.9 million for the year ended December 31, 2021, as compared to the same period in 2020. The increase in property NOI from our non-same store communities was primarily due to the acquisition of four operating properties during 2021, five operating properties reaching stabilization during 2020 and 2021, and the stabilization of four redevelopment properties in December 2020. The increase in property NOI from our development and lease-up communities was primarily due to two development communities under lease-up which completed construction during 2021, and the timing of one other development community which was also under lease-up during the year ended December 31, 2021.

The following table details the changes, described above, relating to non-same store and development and lease-up NOI:

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Pandemic Related Impact Analysis

The Pandemic Related Impact was approximately $13.6 million for the year ended December 31, 2020 due to the Resident Relief Funds announced in April 2020 for our residents experiencing financial losses and directly-related pandemic expenses. During the year ended December 31, 2020, the Company paid approximately $9.1 million in Resident Relief Funds to approximately 7,100 residents of our wholly-owned communities which was recorded as a reduction to property revenues. Also during the year ended December 31, 2020, we incurred approximately $4.5 million of directly-related pandemic expenses at our operating properties, which included $2.8 million of bonuses paid to on-site employees providing essential services during the pandemic and approximately $1.7 million of other directly-related pandemic expenses.

Dispositions/Other Property Analysis

Dispositions/other property NOI increased approximately $3.6 million for the year ended December 31, 2021 as compared to the same period in 2020. The increase was due to higher NOI from our retail properties primarily due to an approximate $3.5 million non-cash retail straight-line rent receivable adjustments incurred in 2020. The increase was partially offset by the disposition of three consolidated operating properties during the fourth quarter of 2021.

Non-Property Income

Fee and asset management income from property management, asset management, construction, and development activities at our joint ventures and our third-party construction projects decreased approximately $0.3 million for the year ended December 31, 2021 as compared to 2020. The decrease for 2021 as compared to 2020 was primarily due to lower fees earned during 2021 due to decreased construction and development activity for one property held by one of the Funds which completed construction in December 2020. The decrease was partially offset by higher fees earned related to an increase in third-party construction activity, and increases in property management fees from the joint ventures in which we manage as a result of increased operating results during 2021 as compared to 2020.

Interest and other income decreased approximately $1.7 million for the year ended December 31, 2021, as compared to 2020. The decrease was primarily due to our sale of a consolidated technology joint venture in September 2020 and recognizing our proportionate share of the gain of approximately $1.5 million. The decrease was also due to lower interest income in 2021 primarily due to reduced interest rates on our investments.

Our deferred compensation plans recognized income of approximately $14.4 million and $12.0 million in 2021 and 2020, respectively. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the expense related to these plans, as discussed below.

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Other Expenses

Property management expenses, which primarily represent regional supervision and accounting costs related to property operations, increased approximately $2.1 million for the year ended December 31, 2021 as compared to 2020. The increase was primarily related to higher salary, benefits, and incentive compensation costs and higher travel related expenses, partially offset by lower marketing and advertising expenses and pandemic related expenses in 2021 as compared to 2020. Property management expenses were 2.3% of total property revenues for each of the years ended December 31, 2021 and 2020.

Fee and asset management expense from property management, asset management, construction, and development activities at our joint ventures and our third-party construction projects increased approximately $0.6 million for the year ended December 31, 2021 as compared to 2020. The increase was primarily due to higher expenses incurred due to an increase in third-party construction activities, partially offset by lower expenses incurred in 2021 as a result of a development property held by one of the Funds completing construction in December 2020.

General and administrative expenses increased approximately $5.7 million for the year ended December 31, 2021 as compared to 2020. The increase was primarily due to higher salary, benefits, and incentive compensation costs and higher acquisition related expenses, partially offset by lower professional fee expenses in 2021 as compared to 2020. Excluding deferred compensation plans, general and administrative expenses were 5.1% of total revenues for each of the years ended December 31, 2021 and 2020.

Interest expense increased approximately $5.8 million for the year ended December 31, 2021 as compared to 2020. The increase in interest expense was primarily due to the issuance of $750 million, 2.91% senior unsecured notes during April 2020, the issuance of a $40.0 million unsecured floating rate term loan during October 2020, and lower capitalized interest resulting from lower average balances in our development pipeline. The increase was partially offset by lower interest expense due to the repayment of our $100.0 million unsecured floating rate term loan in October 2020 and a decrease in interest expense recognized on our unsecured credit facility due to having lower balances outstanding during the year ended December 31, 2021 as compared to 2020.

Depreciation and amortization expense increased approximately $53.5 million for the year ended December 31, 2021 as compared to 2020. The increase was primarily due to higher depreciation and amortization of in-place leases related to four acquisitions completed in 2021, the completion of units in our development pipeline, the completion of repositions during 2020 and 2021, and the completion of redevelopments during 2020. The increase was partially offset by lower amortization of in-place leases related to the acquisition of two operating properties in December 2019, which was fully amortized during 2020.

Our deferred compensation plans incurred an expense of approximately $14.4 million and $12.0 million in 2021 and 2020, respectively. These changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the income related to these plans, as discussed in the non-property income section above.

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Other

The loss on early retirement of debt for the year ended December 31, 2020 related to the early retirement of our $100 million unsecured term loan which was scheduled to mature in 2022; this loss is primarily related to the applicable unamortized loan costs.

The $174.4 million gain on sale for the year ended December 31, 2021 was due to the sale of two operating properties located in Houston, Texas and the sale of one operating property located in Laurel, Maryland during the fourth quarter. The $0.4 million gain on sale in 2020 related to the sale of approximately 4.7 acres of land adjacent to one of our operating properties in Raleigh, North Carolina for approximately $0.8 million.

Equity in income of joint ventures increased approximately $1.7 million for the year ended December 31, 2021 as compared to 2020. The increase was primarily due to an increase in earnings recognized during 2021 primarily relating to higher revenues from the stabilized operating properties owned by the Funds. The increase in 2021 was partially offset by a decrease in earnings related to one property held by one of the Funds which completed construction in December 2020 and was under lease up through June 30, 2021, at which time it reached stabilization. We recognized our proportionate share of the loss while this property was in the lease-up phase of operations.

Funds from Operations (“FFO”) and Adjusted FFO ("AFFO")

Management considers FFO and AFFO to be appropriate supplementary measures of the financial performance of an equity REIT. The National Association of Real Estate Investment Trusts (“NAREIT”) currently defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) associated with the sale of previously depreciated operating properties, real estate depreciation and amortization, impairments of depreciable assets, and adjustments for unconsolidated joint ventures to reflect FFO on the same basis. Our calculation of diluted FFO also assumes conversion of all potentially dilutive securities, including certain non-controlling interests, which are convertible into common shares. We consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions of operating properties and depreciation, FFO can assist in the comparison of the operating performance of a company’s real estate investments between periods or to different companies.

AFFO is calculated utilizing FFO less recurring capitalized expenditures which are necessary to help preserve the value of and maintain the functionality at our communities. We also consider AFFO to be a useful supplemental measure because it is frequently used by analysts and investors to evaluate a REIT's operating performance between periods or different companies. Our definition of recurring capital expenditures may differ from other REITs, and there can be no assurance our basis for computing this measure is comparable to other REITs.

To facilitate a clear understanding of our consolidated historical operating results, we believe FFO and AFFO should be examined in conjunction with net income attributable to common shareholders as presented in the consolidated statements of income and comprehensive income and data included elsewhere in this report. FFO and AFFO are not defined by GAAP and should not be considered alternatives to net income attributable to common shareholders as an indication of our operating performance. Additionally, FFO and AFFO as disclosed by other REITs may not be comparable to our calculation.

Reconciliations of net income attributable to common shareholders to FFO and AFFO for the years ended December 31 are as follows:

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(1) Net income attributable to common shareholders for the year ended December 31, 2020 includes an approximate $3.5 million non-cash adjustment to retail straight-line rent receivable and an approximate $14.8 million Pandemic Related Impact. The total Pandemic Related Impact for the year ended December 31, 2020 was comprised of $9.5 million related to the Resident Relief Funds which were established in April 2020. Of this amount, approximately $9.1 million was paid to residents at our wholly-owned communities and was recorded as a reduction to property revenues, and approximately $1.3 million of Resident Relief Funds paid to residents of the operating communities owned by our unconsolidated joint ventures, of which we recognized our ownership interest of $0.4 million in equity in income of joint ventures. Additionally, we incurred approximately $4.5 million of pandemic expenses at our operating communities, which included $2.8 million of bonuses paid to on-site employees who provided essential services during the pandemic and $1.7 million in other directly-related pandemic expenses. We also incurred approximately $0.8 million related to the Employee Relief Fund we established to help our employees impacted by the pandemic.

(2) FFO diluted shares includes approximately 2.3 million weighted average share impact related to activity from our ATM Programs during the year ended December 31, 2021. There was no ATM activity during the year-ended December 31, 2020.

Liquidity and Capital Resources

Financial Condition and Sources of Liquidity

We intend to maintain a strong balance sheet and preserve our financial flexibility, which we believe should enhance our ability to identify and capitalize on investment opportunities as they become available. We intend to maintain what management believes is a conservative capital structure by:

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

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

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

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

Our interest expense coverage ratio, net of capitalized interest, was approximately 6.7 and 6.5 times for the years ended December 31, 2021 and 2020, respectively. This ratio is a method for calculating the amount of operating cash flows available to cover interest expense and is calculated by dividing interest expense for the period into the sum of property revenues and expenses, non-property income, and other expenses after adding back depreciation, amortization, and interest expense. All of our properties were unencumbered at both December 31, 2021 and 2020. Our weighted average maturity of debt was approximately 7.4 years at December 31, 2021.

We also intend to strengthen our capital and liquidity positions by continuing to focus on our core fundamentals, which currently are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs.

Our primary sources of liquidity are cash and cash equivalents on hand and cash flow generated from operations. Other sources may include one or more of the following: availability under our unsecured credit facility, the use of debt and equity

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offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from our ATM programs, and other unsecured borrowings or secured mortgages. We believe our liquidity and financial condition are sufficient to meet all of our reasonably anticipated cash needs over the next 12 months including:

•normal recurring operating expenses;

•current debt service requirements, including debt maturities;

•recurring capital expenditures;

•reposition expenditures;

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

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

Factors which could increase or decrease our future liquidity include but are not limited to volatility in capital and credit markets, changes in rent control or rent stabilization laws, sources of financing, the minimum REIT dividend requirements, our ability to complete asset purchases, sales, or developments, the effect our debt level and changes in credit ratings could have on our cost of funds, and our ability to access capital markets. A variety of these factors, among others, could also be affected by the continuation of the pandemic.

Cash Flows

The following is a discussion of our cash flows for the years ended December 31, 2021 and 2020.

Net cash from operating activities was approximately $577.5 million during the year ended December 31, 2021 as compared to approximately $519.3 million during the year ended December 31, 2020. The increase was primarily due to the increase in property operations due to the growth attributable to our same store, non-same store, and development and lease-up communities. See further discussions of our 2021 operations as compared to 2020 in "Results of Operations." The increase was partially offset by lower cash inflows from operating accounts due to lower prepayment of rental income received from our residents, higher interest payments on our unsecured debt, and higher real estate tax payments in 2021 as compared to 2020.

Net cash used in investing activities during the year ended December 31, 2021 totaled approximately $804.4 million as compared to $429.6 million during the year ended December 31, 2020. Cash outflows during 2021 primarily related to the acquisition of four operating properties for approximately $630.0 million, and property development and capital improvements of approximately $428.7 million. These outflows were partially offset by net proceeds from the sale of three operating properties of approximately $254.7 million. Cash outflows during 2020 primarily related to property development and capital improvements of approximately $427.2 million, and increases in non-real estate assets of $7.5 million. The increase in property development and capital improvements for 2021, as compared to the same period in 2020, was primarily due to the acquisition of four land parcels in 2021, partially offset by a decrease in redevelopment activity and lower capital expenditures, capitalized interest, real estate taxes and other capitalized indirect costs. The property development and capital improvements during 2021 and 2020, included the following:

Net cash from financing activities totaled approximately $421.4 million during the year ended December 31, 2021 as compared to approximately $307.3 million during the year ended December 31, 2020. Cash inflows during 2021 primarily related to net proceeds of $759.2 million from the issuance of approximately 5.4 million common shares from our ATM programs. These cash inflows were partially offset by approximately $343.0 million to pay distributions to common shareholders and non-controlling interest holders Cash inflows during 2020 primarily related to net proceeds of approximately $782.8 million from the issuance of $750.0 million senior unsecured notes in April 2020 and a $40.0 million unsecured floating-rate term loan in October 2020. These cash inflows were partially offset by approximately $333.4 million to pay distributions to common shareholders and non-controlling interest holders, the repayment of an unsecured floating-rate term

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loan of approximately $100.0 million in the fourth quarter of 2020, and net payment of $44.0 million of borrowings from our unsecured line of credit.

Financial Flexibility

We have a $900 million unsecured credit facility which matures in March 2023 with two separate options to extend the facility for a period of six-months and may be expanded three times by up to an additional $500 million in the aggregate upon the satisfaction of certain conditions. The interest rate on our unsecured credit facility is currently based upon LIBOR plus a margin which is subject to change as our credit ratings change. Advances under our credit facility may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of 180 days or less and may not exceed the lesser of $450 million or the remaining amount available under our credit facility. Our credit facility is subject to customary financial covenants and limitations. We believe we are in compliance with all such financial covenants and limitations as of December 31, 2021 and through the date of this filing.

Our credit facility provides us with the ability to issue up to $50.0 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our credit facility, it does reduce the amount available. At December 31, 2021, we had no borrowings outstanding on our $900.0 million credit facility and we had outstanding letters of credit totaling approximately $14.8 million, leaving approximately $885.2 million available under our credit facility.

In August 2021, we created an ATM share offering program through which we can, but have no obligation to, sell common shares and we may also enter into separate forward sale agreements with forward purchasers for an aggregate offering price of up to $500.0 million (the "2021 ATM program"), in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. Actual sales from time to time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations by management of the appropriate sources of funding for us. The proceeds from the sale of our common shares under the 2021 ATM program are intended to be used for general corporate purposes, which may include reducing future borrowings under our $900 million unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development activities, and financing for acquisitions. We issued approximately 2.6 million shares under our 2021 ATM program during the year ended December 31, 2021 and received approximately $400.4 million in net proceeds. As of December 31, 2021 and through the date of this filing, we had common shares having an aggregate offering price of up to $97.6 million remaining available for sale under the 2021 ATM program.

We currently have an automatic shelf registration statement which allows us to offer common shares, preferred shares, debt securities, or warrants, and our Amended and Restated Declaration of Trust provides we may issue up to 185 million shares of beneficial interest, consisting of 175 million common shares and 10 million preferred shares. At December 31, 2021, we had approximately 103.3 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding.

We believe our ability to access capital markets is enhanced by our senior unsecured debt ratings by Fitch, Moody's, and Standard and Poor's, which were A- with stable outlook, A3 with stable outlook, and A- with stable outlook, respectively, as of December 31, 2021. We believe our ability to access capital markets is also enhanced by our ability to borrow on a secured basis from various institutions including banks, Fannie Mae, Freddie Mac, or life insurance companies. However, we may not be able to maintain our current credit ratings and may not be able to borrow on a secured or unsecured basis in the future.

Future Cash Requirements and Contractual Obligations

One of our principal long-term liquidity requirements includes the repayment of maturing debt, including any future borrowings under our unsecured credit facility. We believe scheduled repayments of debt during the next 12 months are manageable at approximately $386.3 million which represents approximately 12.2% of our total outstanding debt, and includes amortization of debt discounts and debt issuance costs of approximately $3.7 million. See Note 9, “Notes Payable,” in the notes to Consolidated Financial Statements for further discussion of scheduled maturities beyond 2022. Interest payments related to the debt discussed above and as further discussed in Note 9 will be approximately $108.2 million for the year ended December 31, 2022 and for the years ending 2023 through 2026 will be approximately $91.3 million, $73.0 million, $66.4 million and $66.4 million, respectively, and approximately $376.9 million in the aggregate thereafter.

We estimate the additional cost to complete the construction of the five consolidated projects to be approximately $199.4 million. Of this amount, we expect to incur costs between approximately $150 million and $170 million during 2022 and to incur the remaining costs during 2023. Additionally, we expect to incur costs between approximately $150 million and $160 million related to the start of new development activities, between approximately $62 million and $66 million of repositions, redevelopment, repurposes, and revenue enhancing expenditures and between approximately $80 million and $84 million of additional recurring capital expenditures.

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We anticipate meeting our short-term and long-term liquidity requirements through a combination of one or more of the following: cash and cash equivalents, cash flows generated from operations, draws on our unsecured credit facility, the use of debt and equity offerings under our automatic shelf registration statement, proceeds from property dispositions, equity issued from our ATM programs, other unsecured borrowings, or secured mortgages. We continue to evaluate our operating properties and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise.

As a REIT, we are subject to a number of organizational and operational requirements, including a requirement to distribute current dividends to our shareholders equal to a minimum of 90% of our annual taxable income. In order to reduce the amount of income taxes, our general policy is to distribute at least 100% of our taxable income. In December 2021, we announced our Board of Trust Managers had declared a quarterly dividend of $0.83 per common share to our common shareholders of record as of December 16, 2021. This dividend was subsequently paid on January 18, 2022, and we paid equivalent amounts per unit to holders of common operating partnership units. When aggregated with previous 2021 dividends, this distribution to common shareholders and holders of the common operating partnership units equates to an annual dividend rate of $3.32 per share or unit for the year ended December 31, 2021.

In the first quarter of 2022, the Company's Board of Trust Managers declared a first quarter dividend of $0.94 per common share to our common shareholders of record as of March 31, 2022. Future dividend payments are paid at the discretion of the Board of Trust Managers and depend on cash flows generated from operations, the Company's financial condition and capital requirements, distribution requirements under the REIT provisions of the Code and other factors which may be deemed relevant by our Board of Trust Managers. Assuming similar dividend distributions for the remainder of 2022, our annualized dividend rate for 2022 would be $3.76.

The joint ventures in which we have an interest have been funded in part with secured, third-party debt. At December 31, 2021, our unconsolidated joint ventures had outstanding debt of approximately $513.8 million. As of December 31, 2021, we had no outstanding guarantees related to the loans of our unconsolidated joint ventures.

Critical Accounting Estimates

The preparation of our financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date, and the amounts of revenues and expenses recognized during the reporting period. These estimates are based on historical experience and other assumptions believed to be reasonable under the circumstances. The following is a discussion of our critical accounting policies. For a discussion of all of our significant accounting policies, see Note 2, "Summary of Significant Accounting Policies and Recent Accounting Pronouncements," to the accompanying consolidated financial statements.

Valuation of Assets. Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment may exist if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. We consider projected future undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment indicators exist. While we believe our estimates of future cash flows are reasonable, different assumptions regarding a number of factors, including market rents, economic conditions, and occupancies, could significantly affect these estimates. When impairment exists, the long-lived asset is adjusted to its fair value. In estimating fair value, management uses appraisals, management estimates, and discounted cash flow calculations which utilize inputs from a marketplace participant’s perspective. In addition, we evaluate our equity investments in joint ventures and if we believe there is an other than temporary decline in market value of our investment below our carrying value, we will record an impairment charge. We did not record any impairment charges for the years ended December 31, 2021, 2020, or 2019.

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

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

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