# CAMDEN PROPERTY TRUST (CPT) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CAMDEN PROPERTY TRUST's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/906345/000090634524000007/cpt-20231231.htm
Accession: 0000906345-24-000007
Filing date: 2024-02-22
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/CPT/
All MD&A years: /company/CPT/mda/
Previous year: /company/CPT/mda/fy2022/ (FY 2022)
Next year: /company/CPT/mda/fy2024/ (FY 2024)

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 2023 and 2022 is presented below. Year-to-date comparisons between 2022 and 2021 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, 2022.

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;

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

•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 increase our borrowing costs, lower the value of our real estate, and decrease our share price, leading investors to seek higher yields through other investments;

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

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

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

•Environmental, social, and governance factors may impose additional costs and/or expose us to new risks;

•Litigation risks could affect our business;

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

•Competition could adversely affect our ability to acquire properties; 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, 2023, we owned interests in, operated, or were developing 176 multifamily properties comprised of 59,800 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

Our results for the year ended December 31, 2023, reflect an increase in same store revenues of approximately 5.1% as compared to the same period in 2022. The increase was primarily due to higher average rental rates which we believe was primarily attributable to job growth, favorable demographics with a higher propensity to rent versus buy, continued demand for multifamily housing in our markets, and a manageable supply of new multifamily housing.

We believe the levels of new multifamily supply in the submarkets and asset classes in which we operate will likely rise in 2024, but should be met with continued demand to absorb these new deliveries. However, if this were to change or other economic conditions were to worsen, our operating results could be adversely affected.

Consolidated Results

Net income attributable to common shareholders was $403.3 million and $653.6 million for the years ended December 31, 2023 and December 31, 2022, respectively. The decrease during the year ended December 31, 2023 as compared to the same period in 2022 was primarily due to a $474.1 million gain recognized in 2022 as a result of the remeasurement of our previously held 31.3% ownership interest in two unconsolidated Funds (collectively, "the Funds" or "the acquisition of the Funds") upon our acquiring the remaining ownership interests on April 1, 2022. The decrease was also due to higher interest expense incurred during the year ended December 31, 2023 as compared to the same period in 2022. The decrease was partially offset by recognizing a higher gain on sale of two operating properties during the year ended December 31, 2023 of approximately $225.3 million as compared to a gain on sale of one operating property during the year ended December 31, 2022 of approximately $36.4 million. The decrease was further offset by an increase in property operations during the year ended December 31, 2023 as compared to the same period in 2022. See further discussion of our 2023 operations as compared to 2022 in "Results of Operations," below.

Construction Activity

At December 31, 2023, we had a total of four projects under construction to be comprised of 1,166 apartment homes. Initial occupancies of these four projects are currently scheduled to occur within the next nine months. We estimate the additional cost to complete the construction of the four projects to be approximately $137.6 million.

Dispositions

Operating Properties: During the year ended December 31, 2023, we sold two operating properties comprised of an aggregate of 852 apartment homes located in Costa Mesa, California for an aggregate of approximately $293.1 million and recognized a gain of approximately $225.3 million.

Other

In May 2023, 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 "2023 ATM program"). As of the date of this filing, we have $500.0 million available for sale under this program.

In May 2023, we utilized draws our unsecured revolving credit facility to retire our $185.2 million secured variable rate notes due in 2024 and 2026. As a result of the early repayments, we recorded a $2.5 million loss on early retirement of debt in

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our consolidated statements of income and comprehensive income, which was comprised of approximately $1.7 million of prepayment penalties and fees and approximately $0.8 million for the write-off of unamortized fair value adjustments.

In June 2023, we utilized draws on our unsecured revolving credit facility to repay the principal amount of our 5.07% senior unsecured notes payable, which matured on June 15, 2023, for a total of $250.0 million, plus accrued interest.

In November 2023, we issued $500.0 million of 5.85% senior unsecured notes due November 3, 2026. We utilized an interest rate swap with a notional amount of $500.0 million which exposes us to interest rate fluctuations on these notes. This interest rate swap was designated and qualified as a fair value hedging instrument.

Subsequent Events

In January 2024, we issued $400.0 million of 4.90% senior unsecured notes due January 15, 2034. We utilized a portion of the net proceeds from these notes to repay the outstanding balance on our $300 million, 6.21% unsecured term loan due in August 2024.                                 

In January 2024, we utilized cash on hand to repay the principal amount of our 4.36% senior unsecured notes payable, which matured on January 15, 2024, for a total of $250.0 million, plus accrued interest.

In February 2024, we sold one operating property comprised of 592 apartment homes located in Atlanta, Georgia for approximately $115.0 million.

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 flows generated from operations, draws on our unsecured revolving 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, 2023, we had approximately $1.2 billion available under our unsecured revolving credit facility. As of December 31, 2023 and through the date of this filing, we also had common shares having an aggregate offering price of up to $500.0 million remaining available for sale under our 2023 ATM program. We believe the remaining scheduled payments of debt over the next 12 months are manageable at approximately $290.0 million, which excludes the amortization of debt discounts and debt issuance costs as well as the $550 million of debt we repaid in January 2024, as discussed above. We also 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:

[[GREPCENT_TABLE]]
[["","December 31, 2023","","December 31, 2022"],["","Number of Homes","","Properties","","Number of Homes","","Properties"],["Operating Properties"],["Houston, Texas","9,154","","","26","","","9,154","","","26"],["Dallas/Fort Worth, Texas","6,224","","","15","","","6,224","","","15"],["Washington, D.C. Metro","6,192","","","17","","","6,192","","","17"],["Atlanta, Georgia","4,862","","","15","","","4,862","","","15"],["Phoenix, Arizona","4,426","","","14","","","4,029","","","13"],["Orlando, Florida","3,954","","","11","","","3,954","","","11"],["Austin, Texas","3,686","","","11","","","3,686","","","11"],["Charlotte, North Carolina","3,491","","","15","","","3,104","","","14"],["Raleigh, North Carolina","3,252","","","9","","","3,252","","","9"],["Tampa/St. Petersburg, Florida","3,104","","","8","","","3,104","","","8"],["Southeast Florida","3,050","","","9","","","3,050","","","9"],["Denver, Colorado","2,873","","","9","","","2,873","","","9"],["Los Angeles/Orange County, California","1,811","","","5","","","2,663","","","7"],["San Diego/Inland Empire, California","1,797","","","6","","","1,797","","","6"],["Nashville, Tennessee","758","","","2","","","758","","","2"],["Total Operating Properties","58,634","","","172","","","58,702","","","172"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Properties Under Construction"],["Raleigh, North Carolina","789","","","2","","","789","","","2"],["Houston, Texas","377","","","2","","","377","","","2"],["Charlotte, North Carolina","\u2014","","","\u2014","","","387","","","1"],["Phoenix, Arizona","\u2014","","","\u2014","","","397","","","1"],["Total Properties Under Construction","1,166","","","4","","","1,950","","","6"],["Total Properties","59,800","","","176","","","60,652","","","178"]]
[[/GREPCENT_TABLE]]

Stabilized Communities

We generally consider a property stabilized once it reaches 90% occupancy. During the year ended December 31, 2023, stabilization was achieved at two operating properties as follows:

[[GREPCENT_TABLE]]
[["Stabilized Properties and Locations","Number of Homes","","Date of Construction Completion","","Date of Stabilization"],["Operating Properties"],["Camden Atlantic"],["Plantation, FL","269","","4Q22","","1Q23"],["Camden Tempe II"],["Tempe, AZ","397","","2Q23","","3Q23"],["Total","666"]]
[[/GREPCENT_TABLE]]

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Completed Construction in Lease-Up

At December 31, 2023, we had one completed operating property in lease-up as follows:

[[GREPCENT_TABLE]]
[["($ in millions) Property and Location","Number of Homes","","CostIncurred (1)","","","% Leased at 1/31/2024","","Date of Construction Completion","","Estimated Date of Stabilization"],["Operating Property"],["Camden NoDa","387","","","$","107.6","","","","89","%","","4Q23","","2Q24"],["Charlotte, NC"]]
[[/GREPCENT_TABLE]]

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

Properties Under Development

Our consolidated balance sheet at December 31, 2023 included approximately $486.9 million related to properties under development and land. Of this amount, approximately $214.0 million related to our projects currently under construction. In addition, we had approximately $272.9 million primarily invested in land held for future development related to projects we currently expect to begin construction.

Communities Under Construction. At December 31, 2023, we had four properties in various stages of construction as follows:

[[GREPCENT_TABLE]]
[["($ in millions) Properties and Locations","Number of Homes","","Estimated Cost","","Cost Incurred","","Included in Properties Under Development","","Estimated Date of Construction Completion","","Estimated Date of Stabilization"],["Communities Under Construction"],["Camden Durham (1)","420","","","$","145.0","","","$","126.8","","","$","79.3","","","2Q24","","4Q25"],["Durham, NC"],["Camden Woodmill Creek (2)","189","","","75.0","","","64.5","","","25.6","","","3Q24","","2Q25"],["The Woodlands, TX"],["Camden Village District","369","","","138.0","","","68.4","","","68.4","","","2Q25","","4Q26"],["Raleigh, NC"],["Camden Long Meadow Farms","188","","","80.0","","","40.7","","","40.7","","","3Q24","","2Q25"],["Richmond, TX"],["Total","1,166","","","$","438.0","","","$","300.4","","","$","214.0"]]
[[/GREPCENT_TABLE]]

(1)Property in lease-up and was 17% leased at January 31, 2024.

(2)Property in lease-up and was 15% leased at January 31, 2024.

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    Development Pipeline Communities. At December 31, 2023, we had the following communities undergoing development activities:

[[GREPCENT_TABLE]]
[["($ in millions)Properties and Locations","","Projected Homes","","Total Estimated Cost (1)","","Cost to Date"],["Camden South Charlotte","","420","","","$","153.0","","","$","32.9"],["Charlotte, NC"],["Camden Blakeney","","349","","","145.0","","","26.0"],["Charlotte, NC"],["Camden Baker","","435","","","165.0","","","33.1"],["Denver, CO"],["Camden Nations","","393","","","175.0","","","39.0"],["Nashville, TN"],["Camden Gulch","","480","","","260.0","","","49.1"],["Nashville, TN"],["Camden Paces III","","350","","","100.0","","","22.5"],["Atlanta, GA"],["Camden Highland Village II","","300","","","100.0","","","10.4"],["Houston, TX"],["Camden Arts District","","354","","","150.0","","","45.5"],["Los Angeles, CA"],["Camden Downtown II","","271","","","145.0","","","14.4"],["Houston, TX"],["","","3,352","","","$","1,393.0","","","$","272.9"]]
[[/GREPCENT_TABLE]]

(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, 2023 and 2022, our real estate assets by various markets, excluding depreciation, were as follows:

[[GREPCENT_TABLE]]
[["($ in thousands)","2023","","2022"],["Houston, Texas","$","1,960,825","","","14.9","%","","$","1,878,221","","","14.5","%"],["Washington, D.C. Metro","1,633,201","","","12.4","","","1,619,826","","","12.5"],["Dallas/Fort Worth, Texas","1,117,909","","","8.5","","","1,076,941","","","8.3"],["Atlanta, Georgia","1,036,351","","","7.9","","","1,012,209","","","7.8"],["Phoenix, Arizona","899,802","","","6.8","","","872,695","","","6.8"],["Orlando, Florida","775,393","","","5.9","","","761,013","","","5.9"],["Southeast Florida","757,434","","","5.7","","","740,263","","","5.7"],["Charlotte, North Carolina","731,254","","","5.5","","","690,767","","","5.4"],["Tampa/St.Petersburg, Florida","723,695","","","5.5","","","711,552","","","5.5"],["Austin, Texas","705,347","","","5.3","","","691,830","","","5.4"],["Raleigh, North Carolina","699,142","","","5.3","","","618,157","","","4.8"],["Los Angeles/Orange County, California","687,949","","","5.2","","","810,109","","","6.3"],["Denver, Colorado","620,916","","","4.7","","","611,147","","","4.7"],["San Diego/Inland Empire, California","472,464","","","3.6","","","463,825","","","3.6"],["Nashville, Tennessee","370,445","","","2.8","","","357,318","","","2.8"],["Total","$","13,192,127","","","100.0","%","","$","12,915,873","","","100.0","%"]]
[[/GREPCENT_TABLE]]

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.

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, 2023 and 2022 are as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2023","","2022"],["Net income","","$410,553","","$661,508"],["Less: Fee and asset management income","","(3,451)","","","(5,188)"],["Less: Interest and other income","","(879)","","","(3,019)"],["Less: (Income)/loss on deferred compensation plans","","(15,398)","","","19,637"],["Plus: Property management expense","","33,706","","","28,601"],["Plus: Fee and asset management expense","","1,717","","","2,516"],["Plus: General and administrative expense","","62,506","","","60,413"],["Plus: Interest expense","","133,395","","","113,424"],["Plus: Depreciation and amortization expense","","574,813","","","577,020"],["Plus: Expense/(benefit) on deferred compensation plans","","15,398","","","(19,637)"],["Plus: Loss on early retirement of debt","","2,513","","","\u2014"],["Less: Gain on sale of operating properties, including land","","(225,416)","","","(36,372)"],["Less: Gain on acquisition of unconsolidated joint venture interests","","\u2014","","","(474,146)"],["Less: Equity in income of joint ventures","","\u2014","","","(3,048)"],["Plus: Income tax expense","","3,650","","","2,966"],["Net operating income","","$","993,107","","","$","924,675"]]
[[/GREPCENT_TABLE]]

Property-Level NOI (1)

Property NOI, as reconciled above, is detailed further into the categories below for the year ended December 31, 2023 as compared to 2022:

[[GREPCENT_TABLE]]
[["","Number of Homes at","","Year Ended December 31,","","Change"],["($ in thousands)","12/31/2023","","2023","","2022","","$","","%"],["Property revenues:"],["Same store communities","47,423","","","$","1,238,564","","","$","1,178,247","","","$","60,317","","","5.1","%"],["Non-same store communities","10,824","","","264,396","","","200,479","","","63,917","","","31.9"],["Development and lease-up communities","1,553","","","3,851","","","\u2014","","","3,851","","","*"],["Dispositions/other","\u2014","","","35,216","","","44,030","","","(8,814)","","","(20.0)"],["Total property revenues","59,800","","","$","1,542,027","","","$","1,422,756","","","$","119,271","","","8.4","%"],["Property expenses:"],["Same store communities","47,423","","","$","434,389","","","$","407,260","","","$","27,129","","","6.7","%"],["Non-same store communities","10,824","","","100,413","","","76,537","","","23,876","","","31.2"],["Development and lease-up communities","1,553","","","1,236","","","(28)","","","1,264","","","*"],["Dispositions/other","\u2014","","","12,882","","","14,312","","","(1,430)","","","(10.0)"],["Total property expenses","59,800","","","$","548,920","","","$","498,081","","","$","50,839","","","10.2","%"],["Property NOI:"],["Same store communities","47,423","","","$","804,175","","","$","770,987","","","$","33,188","","","4.3","%"],["Non-same store communities","10,824","","","163,983","","","123,942","","","40,041","","","32.3"],["Development and lease-up communities","1,553","","","2,615","","","28","","","2,587","","","*"],["Dispositions/other","\u2014","","","22,334","","","29,718","","","(7,384)","","","(24.8)"],["Total property NOI","59,800","","","$","993,107","","","$","924,675","","","$","68,432","","","7.4","%"]]
[[/GREPCENT_TABLE]]

* Not a meaningful percentage.

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(1)    For 2023, same store communities are communities we owned and were stabilized since January 1, 2022, excluding communities under redevelopment and properties held for sale. Non-same store communities are stabilized communities not owned or stabilized since January 1, 2022, 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, 2022, excluding properties held for sale. 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, including net below market leases, casualty-related expenses net of recoveries, and severance related costs.

Same Store Analysis

Same store property NOI increased approximately $33.2 million for the year ended December 31, 2023 as compared to the same period in 2022. The increase was due to an increase of approximately $60.3 million in same store property revenues, partially offset by an increase of approximately $27.1 million in same store property expenses, for the year ended December 31, 2023, as compared to the same period in 2022.

The $60.3 million increase in same store property revenues for the year ended December 31, 2023, as compared to the same period in 2022, was primarily due to an increase of approximately $56.5 million in rental revenues comprised of a 6.6% increase in average rental rates and higher other rental income. The increase was also due to an increase of approximately $3.3 million related to income from our utility rebilling and ancillary income programs, and an increase of approximately $0.5 million in fees and other income.

The $27.1 million increase in same store property expenses for the year ended December 31, 2023, as compared to the same period in 2022, was primarily due to higher insurance expense of approximately $9.7 million primarily due to increased premiums and claims; repairs and maintenance expense of $4.8 million; real estate taxes of $4.6 million due to increased tax rates and property valuations; utilities expense of $3.4 million; and, marketing and leasing expenses of $1.7 million. The increase was also due to higher property general and administrative expenses of $3.4 million, a portion of which was due to centralizing our workforce to manage certain responsibilities for all of our communities during 2022, and was partially offset by a decrease in salaries expense of $0.5 million.

Non-same Store and Development and Lease-up Analysis

Property NOI from non-same store (which includes acquisitions, non-same store stabilized properties, and other) and development and lease-up communities increased $42.6 million for the year ended December 31, 2023, as compared to the same period in 2022. The increase was comprised of an increase from non-same store communities of approximately $40.0 million and an increase from development and lease-up communities of approximately $2.6 million for the year ended December 31, 2023, as compared to the same period in 2022. The increase in property NOI from our non-same store communities was primarily due to our acquisition of the Funds on April 1, 2022, and the stabilization of three operating properties in 2022 and two operating properties in 2023. The increase in property NOI from our development and lease-up communities in fiscal year 2023 was primarily due to the timing of one property under development, which began lease-up during the year ended December 31, 2023.

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

[[GREPCENT_TABLE]]
[["","","For the year ended December 31,"],["(in millions)","","2023 compared to 2022"],["Property Revenues"],["Revenues from acquisitions","","$","43.8"],["Revenues from non-same store stabilized properties","","17.4"],["Revenues from development and lease-up properties","","3.9"],["Other","","2.7"],["","","$","67.8"],["Property Expenses"],["Expenses from acquisitions","","$","16.7"],["Expenses from non-same store stabilized properties","","5.1"],["Expenses from development and lease-up properties","","1.3"],["Other","","2.1"],["","","$","25.2"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","For the year ended December 31,"],["(in millions)","","2023 compared to 2022"],["Property NOI"],["NOI from acquisitions","","$","27.1"],["NOI from non-same store stabilized properties","","12.3"],["NOI from development and lease-up properties","","2.6"],["Other","","0.6"],["","","$","42.6"]]
[[/GREPCENT_TABLE]]

Dispositions/Other Property Analysis

Dispositions/other property NOI decreased approximately $7.4 million for the year ended December 31, 2023 as compared to the same period in 2022. The decrease was comprised of lower NOI related to dispositions of approximately $1.4 million and lower other property NOI of approximately $6.0 million for the year ended December 31, 2023 as compared to the same period in 2022. The decrease in NOI related to dispositions was due to the disposition of two operating properties in 2023, and the disposition of one operating property in March 2022. The lower other property NOI was primarily due to a decrease in revenues in 2023 related to approximately $7.6 million of net below market leases recognized during the year ended December 31, 2022 as a result of the acquisition of the Funds in April 2022. The decrease in other property NOI was partially offset by higher revenues of approximately $1.1 million related to business interruptions received during the year ended December 31, 2023.

Non-Property Income

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Change"],["($ in thousands)","2023","","2022","","$","","%"],["Fee and asset management","$","3,451","","","$","5,188","","","$","(1,737)","","","(33.5)","%"],["Interest and other income","879","","","3,019","","","(2,140)","","","(70.9)"],["Income/(loss) on deferred compensation plans","15,398","","","(19,637)","","","35,035","","","*"],["Total non-property income","$","19,728","","","$","(11,430)","","","$","31,158","","","(272.6)","%"]]
[[/GREPCENT_TABLE]]

*Not a meaningful percentage.

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 $1.7 million for the year ended December 31, 2023 as compared to 2022. The decrease was primarily due to the consolidation of the Funds on April 1, 2022, and no longer earning the related fee and asset management income. The decrease was also due to slightly lower fees earned related to a decrease in third-party construction activity during 2023 as compared to 2022.

Interest and other income decreased approximately $2.1 million for the year ended December 31, 2023, as compared to 2022. The decrease was primarily due to a higher earn-out received in 2022 as compared to 2023 related to a technology joint venture sold in September 2020.

Our deferred compensation plans recognized income of approximately $15.4 million in 2023 and incurred a loss of approximately $19.6 million in 2022. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the expense/(benefit) related to these plans, as discussed below.

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Other Expenses

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Change"],["($ in thousands)","2023","","2022","","$","","%"],["Property management","$","33,706","","","$","28,601","","","$","5,105","","","17.8","%"],["Fee and asset management","1,717","","","2,516","","","(799)","","","(31.8)"],["General and administrative","62,506","","","60,413","","","2,093","","","3.5"],["Interest","133,395","","","113,424","","","19,971","","","17.6"],["Depreciation and amortization","574,813","","","577,020","","","(2,207)","","","(0.4)"],["Expense/(benefit) on deferred compensation plans","15,398","","","(19,637)","","","35,035","","","*"],["Total other expenses","$","821,535","","","$","762,337","","","$","59,198","","","7.8","%"]]
[[/GREPCENT_TABLE]]

*Not a meaningful percentage.

Property management expenses, which primarily represent regional supervision and accounting costs related to property operations, increased approximately $5.1 million for the year ended December 31, 2023 as compared to 2022. The increase was primarily related to higher salary, benefits, and incentive compensation costs and higher travel related costs. Property management expenses were 2.2% and 2.0% of total property revenues for the years ended December 31, 2023 and 2022, respectively.

Fee and asset management expense from property management, asset management, construction, and development activities at our joint ventures and our third-party projects decreased approximately $0.8 million for the year ended December 31, 2023 as compared to 2022. The decrease was primarily due to our consolidating the Funds on April 1, 2022, and no longer having any related fee and asset management expenses.

General and administrative expenses increased approximately $2.1 million for the year ended December 31, 2023 as compared to 2022. Excluding deferred compensation plans, general and administrative expenses were 4.0% and 4.2% of total revenues for the years ended December 31, 2023 and 2022, respectively.

Interest expense increased approximately $20.0 million for the year ended December 31, 2023 as compared to 2022. The increase was primarily due to a $300 million term loan we entered into in December 2022, the issuance of $500 million unsecured notes in November 2023, higher interest expense recognized on our unsecured revolving credit facility resulting from higher interest rates and an increase in average balances outstanding, and higher interest expense recognized on our other variable rate debt outstanding in 2023 due to higher interest rates as compared to the same period in 2022. The increase in 2023 was also due to an increase in interest expense related to our assuming approximately $515 million of secured mortgage debt upon completion of the acquisition of the Funds on April 1, 2022.

The increase in interest expense in 2023 was partially offset by lower interest expense related to the repayment of a $350 million, 3.15% senior unsecured notes payable in December 2022, the repayment of a $250 million, 5.07% senior unsecured notes payable in June 2023, and higher capitalized interest in 2023 resulting from higher interest rates on our unsecured revolving credit facility. The increase in 2023 was also partially offset by lower interest expense in 2023, as compared to the same period in 2022, related to the early retirement of $185.2 million of secured variable rate notes in May 2023.

Depreciation and amortization expense decreased approximately $2.2 million for the year ended December 31, 2023 as compared to 2022. The decrease was primarily due to the amortization of in-place leases incurred related to the acquisition of the Funds in April 2022 being fully amortized by December 31, 2022, and the amortization of in-place leases related to the acquisition of two operating properties in 2021 being fully amortized by March 31, 2022. The decrease was also due to a higher amount of three to five year assets being fully depreciated in 2023 as compared to 2022 and the dispositions of an operating property in March of 2022, June of 2023, and December of 2023. The decrease was partially offset by higher depreciation expense in 2023 related to the acquisition of the Funds on April 1, 2022 and the completion of apartment homes in our development pipeline and completion of repositions during 2022 and 2023.

Our deferred compensation plans incurred an expense of approximately $15.4 million in 2023 and recognized a benefit of approximately $19.6 million in 2022. The changes were related to the performance of the investments held in deferred compensation plans for participants and were directly offset by the income/(loss) related to these plans, as discussed in the Non-Property Income section above.

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Other

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Change"],["(in thousands)","2023","","2022","","$"],["Loss on early retirement of debt","$","(2,513)","","","$","\u2014","","","$","(2,513)"],["Gain on sale of operating properties, including land","225,416","","","36,372","","","189,044"],["Gain on acquisition of unconsolidated joint venture interests","\u2014","","","474,146","","","(474,146)"],["Equity in income of joint ventures","\u2014","","","3,048","","","(3,048)"],["Income tax expense","(3,650)","","","(2,966)","","","(684)"]]
[[/GREPCENT_TABLE]]

The $2.5 million loss on early retirement of debt during the year ended December 31, 2023 was due to the early repayment of our $185.2 million secured variable rate notes due in 2024 and 2026, and consisted of approximately $1.7 million of prepayment penalties and fees and approximately $0.8 million of unamortized fair value adjustments.

The $225.4 million gain on sale for the year ended December 31, 2023 was primarily due to the disposition of two operating properties located in Costa Mesa, California. The $36.4 million gain on sale for the year ended December 31, 2022 was due to the disposition of one operating property located in Largo, Maryland during the first quarter of 2022.

On April 1, 2022, we acquired the remaining 68.7% ownership interest in the Funds. Prior to the acquisition, we held a 31.3% ownership interest in the Funds, and accounted for these investments under the equity method. As a result of acquiring the remaining ownership interests, we consolidated the Funds and recorded a gain of approximately $474.1 million which represented the difference between the fair market value and the cost basis of our previously owned equity interests.

Equity in income of joint ventures decreased approximately $3.0 million for the year ended December 31, 2023 as compared to 2022. The decrease was primarily due to our consolidating the Funds on April 1, 2022.

Income tax expense increased approximately $0.7 million for the year ended December 31, 2023 as compared to the same period in 2022. The increase was primarily due to higher state income and franchise taxes.

Funds from Operations ("FFO"), Core FFO, and Core Adjusted FFO ("Core AFFO")

Management considers FFO, Core FFO, and Core 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 depreciation and amortization related to real estate, gains (or losses) from the sale of certain real estate assets (depreciable real estate), impairments of certain real estate assets (depreciable real estate), gains (or losses) from change in control, 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 depreciable real estate 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.

Core FFO represents FFO as further adjusted for items not considered part of our core business operations. We consider Core FFO to be a helpful supplemental measure of operating performance as it excludes not only depreciation expense of real estate assets, but it also excludes certain items which, by nature, are not comparable period over period and therefore tends to obscure actual operating performance. Our definition of Core FFO may differ from other REITs, and there can be no assurance our basis for computing this measure is comparable to other REITs.

Core AFFO is calculated utilizing Core FFO less recurring capitalized expenditures which are necessary to help preserve the value of and maintain the functionality at our communities. We also consider Core 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 to 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, Core FFO, and Core 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, Core FFO, and Core 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, Core FFO, and Core AFFO as disclosed by other REITs may not be comparable to our calculation.

Reconciliations of net income attributable to common shareholders to FFO, Core FFO, and Core AFFO for the years ended December 31, 2023 and 2022 are as follows:

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[[GREPCENT_TABLE]]
[["($ in thousands)","2023","","2022"],["Funds from operations"],["Net income attributable to common shareholders","$","403,309","","","$","653,613"],["Real estate depreciation and amortization","562,654","","","565,913"],["Adjustments for unconsolidated joint ventures","\u2014","","","2,709"],["Gain on sale of operating properties","(225,331)","","","(36,372)"],["Gain on acquisition of unconsolidated joint venture interests","\u2014","","","(474,146)"],["Income allocated to non-controlling interests","7,244","","","7,895"],["Funds from operations","$","747,876","","","$","719,612"],["Casualty-related expenses, net of recoveries","1,186","","","2,282"],["Severance","\u2014","","","896"],["Legal costs and settlements, net of recoveries","280","","","555"],["Loss on early retirement of debt","2,513","","","\u2014"],["Expensed development and other pursuit costs","471","","","\u2014"],["Net below market lease amortization","\u2014","","","(8,467)"],["Miscellaneous (income)/expense (1)","(364)","","","(2,071)"],["Core funds from operations","$","751,962","","","$","712,807"],["Less: recurring capitalized expenditures","(97,094)","","","(90,715)"],["Core adjusted funds from operations","$","654,868","","","$","622,092"],["Weighted average shares \u2013 basic","108,653","","","107,605"],["Incremental shares issuable from assumed conversion of:"],["Share awards granted","21","","","50"],["Common units","1,595","","","1,606"],["Weighted average shares \u2013 diluted","110,269","","","109,261"]]
[[/GREPCENT_TABLE]]

(1) For the year ended December 31, 2023 and 2022 activity relates to proceeds from a previously sold technology investment.

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 6.8 and 7.4 times for the years ended December 31, 2023 and 2022, 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. Approximately 89.8% and 83.9% of our properties were unencumbered at December 31, 2023 and 2022, respectively. Our weighted average maturity of debt was approximately 5.6 years at December 31, 2023.

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 flows generated from operations. Other sources may include one or more of the following: availability under our unsecured revolving credit facility, the use of debt and equity offerings under our automatic

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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, and acquisitions; 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.

Cash Flows

The following is a discussion of our cash flows for the years ended December 31, 2023 and 2022.

Net cash from operating activities was approximately $795.0 million during the year ended December 31, 2023 as compared to approximately $744.7 million during the year ended December 31, 2022. The increase was primarily due to the increase in cash from non-same store property operations due to the acquisition of the Funds on April 1, 2022, and the growth attributable to our same store, other non-same store and development and lease-up communities. The increase was partially offset by higher real estate tax payments related to the acquisition of the Funds and higher interest payments on our secured and unsecured debt. See further discussions of our 2023 operations as compared to 2022 in "Results of Operations."

Net cash used in investing activities during the year ended December 31, 2023 totaled approximately $127.1 million as compared to $1.5 billion during the year ended December 31, 2022. Cash outflows during 2023 primarily related to amounts paid for property development and capital improvements of approximately $410.9 million. These outflows were partially offset by net proceeds from the sale of two operating properties of approximately $290.7 million. Cash outflows during 2022 primarily related to the acquisition of the Funds for cash consideration of approximately $1.1 billion, and amounts paid for property development and capital improvements of approximately $449.4 million. These outflows were partially offset by net proceeds from the sale of one operating property for approximately $70.5 million in 2022. The decrease in property development and capital improvements for 2023, as compared to the same period in 2022, was primarily due to the acquisition of four parcels of land for development in 2022, partially offset by higher reposition expenditures in 2023 as compared to 2022. The property development and capital improvements during 2023 and 2022, included the following:

[[GREPCENT_TABLE]]
[["","","December 31,"],["(in millions)","","2023","","2022"],["Expenditures for new development, including land","","$","179.3","","","$","253.0"],["Capital expenditures","","107.1","","","108.8"],["Reposition expenditures","","88.2","","","53.0"],["Capitalized interest, real estate taxes, and other capitalized indirect costs","","36.3","","","34.6"],["Total","","$","410.9","","","$","449.4"]]
[[/GREPCENT_TABLE]]

Net cash used in financing activities totaled approximately $417.2 million during the year ended December 31, 2023 as compared to net cash from financing activities of approximately $109.9 million during the year ended December 31, 2022. Cash outflows during 2023 primarily related to $434.9 million used for distributions to common shareholders and non-controlling interest holders, the repayment of $250 million senior unsecured notes and $187.7 million secured variable rate notes, which includes prepayment penalties and fees, and the net repayment of $42.0 million of borrowings from our unsecured revolving credit facility. These outflows were partially offset by net proceeds of approximately $498.2 million from the issuance of $500.0 million senior unsecured notes in November 2023. Cash inflows during 2022 primarily related to net proceeds of approximately $516.8 million from the issuance of approximately 2.9 million common shares from our equity offering and approximately 0.2 million common shares from our ATM programs, as well as net proceeds of approximately $300.0 million of borrowings under our unsecured term loan, and net proceeds of $42.0 million of borrowings from our unsecured revolving credit facility. These cash inflows were partially offset by approximately $396.8 million to pay

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distributions to common shareholders, and non-controlling interest holders and the repayment of $350.0 million senior unsecured notes in the fourth quarter of 2022.

Financial Flexibility

We have a $1.2 billion unsecured revolving credit facility which matures in August 2026, with two options to extend the facility at our election for two consecutive six-month periods and to expand the facility up to three times by up to an additional $500 million upon satisfaction of certain conditions. The interest rates on our unsecured revolving credit facility and term loan are based upon, at our option, (a) the daily or the one-, three-, or six- months Secured Overnight Financing Rate ("SOFR") plus, in each case, a spread based on our credit rating, or (b) a base rate equal to the higher of: (i) the Federal Funds Rate plus 0.50%, (ii) Bank of America, N.A.'s price rate, (iii) Term SOFR plus 1.0%, and (iv) 1.0%. Advances under our unsecured revolving 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 $600 million or the remaining amount available under our unsecured revolving credit facility. Our unsecured revolving credit facility and term loan are subject to customary financial covenants and limitations. We believe we are in compliance with all such financial covenants and limitations as of December 31, 2023 and through the date of this filing.

Our unsecured revolving credit facility provides us with the ability to issue up to $50 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our revolving credit facility, it does reduce the amount available. At December 31, 2023, we had outstanding letters of credit totaling $27.7 million, and approximately $1.2 billion available under our unsecured revolving credit facility.

In May 2023, we created an at-the-market ("ATM") share offering program through which we can, but have no obligation to, sell common shares for an aggregate offering amount of up to $500.0 million (the "2023 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. We intend to use the proceeds from any sale of our common shares under the 2023 ATM program for general corporate purposes, which may include reducing future borrowings under our unsecured revolving credit facility, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development activities, and financing for acquisitions. As of the date of this filing, we have not entered into any forward sales agreements and have not sold any shares under the 2023 ATM program.

We currently have an automatic shelf registration statement which allows us to offer, from time to time, common shares, preferred shares, debt securities, or warrants. 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, 2023, we had approximately 106.8 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 the 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, 2023. We believe our ability to access the 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 revolving credit facility. At December 31, 2023, we had outstanding debt of approximately $3.7 billion. In January 2024, we issued $400.0 million of 4.90% senior unsecured notes due January 15, 2034. We utilized a portion of the net proceeds from these notes to repay the outstanding balance on our $300 million, 6.21% unsecured term loan due in August 2024 with a one year extension option to August 2025. In January 2024, we also repaid the $250.0 million principal balance related to the 4.36% senior unsecured notes payable, which matured on January 15, 2024. We believe the remaining scheduled payments of debt over the next 12 months are manageable at approximately $290.0 million, which excludes the amortization of debt discounts and debt issuance costs as well as the $550 million of debt we repaid in January 2024, as discussed above. See Note 9, "Notes Payable," in the notes to Consolidated Financial Statements for further discussion of scheduled maturities beyond 2024. Interest payments related to the debt discussed above and as further discussed in Note 9 will be approximately $123.1 million for the year ended December 31, 2024 and for the years ending 2025 through 2028 will be approximately $115.2 million, $110.6 million, $86.0 million, and $82.5 million, respectively, and approximately $346.5 million in the aggregate thereafter.

We estimate the additional cost to complete the construction of the four projects to be approximately $137.6 million. Of this amount, we expect to incur costs between approximately $120 million and $130 million during 2024 and to incur the

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remaining costs during 2025. Additionally, we expect to incur costs between approximately $40 million and $60 million related to the start of new development activities, between approximately $90 million and $94 million of repositions, redevelopment, repurposes, and revenue enhancing expenditures and between approximately $101 million and $105 million of additional recurring capital expenditures during 2024.

We anticipate meeting our short-term and long-term liquidity requirements through a combination of one or more of the following: cash flows generated from operations, draws on our unsecured revolving 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 2023, we announced our Board of Trust Managers had declared a quarterly dividend of $1.00 per common share to our common shareholders of record as of December 15, 2023. This dividend was subsequently paid on January 17, 2024, and we paid equivalent amounts per unit to holders of common operating partnership units. When aggregated with previous 2023 dividends, this distribution to common shareholders and holders of the common operating partnership units equates to an annual dividend rate of $4.00 per share or unit for the year ended December 31, 2023.

In the first quarter of 2024, the Company's Board of Trust Managers declared a first quarter dividend of $1.03 per common share to our common shareholders of record as of March 29, 2024. 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, including the Company's past performance, and future prospects, which may be deemed relevant by our Board of Trust Managers. Assuming similar dividend distributions for the remainder of 2024, our annualized dividend rate for 2024 would be $4.12.

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, if any, 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, 2023, 2022, or 2021.

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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