**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

 

**FORM 10-Q**

 

**ý****QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(D) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended June 30, 2005**

 

**OR**

 

**o****TRANSITION REPORT PURSUANT TO SECTION 13OR 15(D) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the transition periodfrom      to     **

 

**Commission file number 0-22411**

 

**CAMDEN SUMMIT PARTNERSHIP, L.P.**

(Exact name of registrant as specified in its charter)

 
| **Delaware**                             | ** ** | **56-1857809**      |
|------------------------------------------|------------|---------------------|
| (State or other jurisdiction of          |       | (I.R.S. Employer    |
| incorporation or organization)           |       | Identification No.) |
|                                     |       |                |
| **3 Greenway Plaza**                     | ** ** | ** **          |
| **Suite 1300**                      | ** ** | ** **          |
| **Houston, Texas**                       | ** ** | **77046**           |
| (Address of principal executive offices) |       | (Zip code)          |

 

**(713) 354-2500**

(Registrant’s telephone number, including area code)

 

**N/A**

(Former name, former address and former fiscal year, if changed sincelast report)

 

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

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act). o Yes ý No

 

 

----

 

**TABLE OFCONTENTS**

 
| **PART I**  | **Financial Information**                                                                                                                                                                                                           | ** ** |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|             |                                                                                                                                                                                                                                |       |
| Item 1           | Financial Statements                                                                                                                                                                                                                |       |
|             | Consolidated  Balance Sheets (Unaudited) as of June 30, 2005 (Successor) and December 31,  2004 (Predecessor)                                                                                                             |       |
|             | Consolidated  Statements of Operations (Unaudited) for the three months ended June 30,  2005 (Successor) and June 30, 2004 (Predecessor)                                                                                  |       |
|             | Consolidated Statements  of Operations (Unaudited) for the four months ended June 30, 2005  (Successor), the two months ended February 28, 2005 (Predecessor), and  the six months ended June 30, 2004 (Predecessor) |       |
|             | Consolidated  Statements of Cash Flows (Unaudited) for the four months ended June 30,  2005 (Successor), the two months ended February 28, 2005 (Predecessor),  and the six months ended June 30, 2004 (Predecessor) |       |
|             | Notes to Consolidated Financial  Statements (Unaudited)                                                                                                                                                                             |       |
| Item 2           | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                                                                                                                                         |       |
| Item 3           | Quantitative and Qualitative Disclosures About Market  Risk                                                                                                                                                                         |       |
| Item 4           | Controls and Procedures                                                                                                                                                                                                             |       |
|             |                                                                                                                                                                                                                                |       |
| **PART II** | **Other Information**                                                                                                                                                                                                               | ** ** |
|             |                                                                                                                                                                                                                                |       |
| Item 1           | Legal Proceedings                                                                                                                                                                                                                   |       |
| Item 2           | Unregistered Sales of Equity  Securities and Use of Proceeds                                                                                                                                                                        |       |
| Item 3           | Defaults Upon Senior Securities                                                                                                                                                                                                     |       |
| Item 4           | Submission of Matters to a  Vote of Security Holders                                                                                                                                                                                |       |
| Item 5           | Other Information                                                                                                                                                                                                                   |       |
| Item 6           | Exhibits                                                                                                                                                                                                                            |       |
|             | Signatures                                                                                                                                                                                                                          |       |

 

1

----

 

**PART I. FINANCIAL INFORMATION**

**Item 1.Financial Statements**

 

**CAMDEN SUMMIT PARTNERSHIP, L.P.**

**CONSOLIDATED BALANCE SHEETS**

**(Dollars inthousands)**

**(Unaudited)**

 
| ** **                                      | ** ** | **June 30,  2005** | ** ** | ** ** | **December 31,  2004** | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|------------|-----------------------------|------------|
| ** **                                      | ** ** | **(Successor)**         | ** ** | ** ** | **(Predecessor)**           | ** ** |
| Assets:                                         |       |                    |       |       |                        |       |
| Real estate assets, at  cost                    |       |                    |       |       |                        |       |
| Land                                            |       | $                       | 297,169    |       |                        | $          | 248,018 |   |
| Buildings and  improvements                     |       | 1,528,359               |       |       | 1,117,508                   |       |
|                                            |       | 1,825,528               |       |       | 1,365,526                   |       |
| Accumulated  depreciation                       |       | (16,090                 | )          |       | (156,913                    | )          |
| Net operating real  estate assets               |       | 1,809,438               |       |       | 1,208,613                   |       |
| Properties under  development, including land   |       | 185,888                 |       |       | 219,137                     |       |
| Investment in joint  venture                    |       | 2,515                   |       |       | 2,716                       |       |
| Property held for sale                          |       | 29,763                  |       |       | 31,348                      |       |
| Total real estate  assets                       |       | 2,027,604               |       |       | 1,461,814                   |       |
|                                            |       |                    |       |       |                        |       |
| Other assets, net                               |       | 22,995                  |       |       | 23,231                      |       |
| Cash                                            |       | 619                     |       |       | 6,511                       |       |
| Restricted cash                                 |       | 681                     |       |       | 1,525                       |       |
| Total assets                                    |       | $                       | 2,051,899  |       |                        | $          | 1,493,081 |   |
|                                            |       |                    |       |       |                        |       |
| Liabilities and  Partners’ Equity:         |       |                    |       |       |                        |       |
| Notes payable                                   |       |                    |       |       |                        |       |
| Unsecured                                       |       | $                       | 183,164    |       |                        | $          | 172,511 |   |
| Secured mortgage notes                          |       | 505,041                 |       |       | 490,337                     |       |
| Secured credit facility                         |       | —                  |       |       | 95,900                      |       |
| Secured line of credit  - related party         |       | 245,108                 |       |       | —                      |       |
| Accounts payable                                |       | 7,517                   |       |       | 15,134                      |       |
| Accrued real estate  taxes                      |       | 10,060                  |       |       | 3,816                       |       |
| Accrued expenses and  other liabilities         |       | 31,352                  |       |       | 31,582                      |       |
| Series C preferred  units redeemed in 2005 |       | —                  |       |       | 55,000                      |       |
| Distributions payable                           |       | 14,464                  |       |       | 11,777                      |       |
| Total liabilities                               |       | 996,706                 |       |       | 876,057                     |       |
|                                            |       |                    |       |       |                        |       |
| Partners’ equity                           |       | 1,055,193               |       |       | 617,024                     |       |
| Total liabilities and  partners’ equity    |       | $                       | 2,051,899  |       |                        | $          | 1,493,081 |   |

 

See Notes to Consolidated Financial Statements.

 

2

----

 

**CAMDEN SUMMIT PARTNERSHIP, L.P.**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(Dollars inthousands, except per unit amounts)**

**(Unaudited)**

 
| ** **                                                                                       | ** ** | **For the three  months ended  June 30,  2005** | ** ** | ** ** | **For the three  months ended  June 30,  2004** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|------------|------------------------------------------------------|------------|
| ** **                                                                                       | ** ** | **(Successor)**                                      | ** ** | ** ** | **(Predecessor)**                                    | ** ** |
|                                                                                             |       |                                                 |       |       |                                                 |       |
| **REVENUES**                                                                                     |       |                                                 |       |       |                                                 |       |
| Rental revenues                                                                                  |       | $                                                    | 40,717     |       |                                                 | $          | 31,401 |   |
| Other property revenues                                                                          |       | 2,929                                                |       |       | 2,710                                                |       |
| Total property revenues                                                                          |       | 43,646                                               |       |       | 34,111                                               |       |
| Other income                                                                                     |       | 4                                                    |       |       | 557                                                  |       |
| Total revenues                                                                                   |       | 43,650                                               |       |       | 34,668                                               |       |
|                                                                                             |       |                                                 |       |       |                                                 |       |
| **EXPENSES**                                                                                     |       |                                                 |       |       |                                                 |       |
| Property operating and  maintenance                                                              |       | 9,738                                                |       |       | 7,270                                                |       |
| Real estate taxes                                                                                |       | 5,340                                                |       |       | 3,962                                                |       |
| Total property expenses                                                                          |       | 15,078                                               |       |       | 11,232                                               |       |
| General and  administrative                                                                      |       | 2,183                                                |       |       | 2,112                                                |       |
| Property management                                                                              |       | 1,255                                                |       |       | 1,499                                                |       |
| Interest                                                                                         |       | 9,000                                                |       |       | 7,578                                                |       |
| Depreciation and  amortization                                                                   |       | 21,579                                               |       |       | 10,295                                               |       |
| Amortization of  deferred financing costs                                                        |       | —                                               |       |       | 338                                                  |       |
| Total expenses                                                                                   |       | 49,095                                               |       |       | 33,054                                               |       |
| **Income  (loss) from continuing operations before equity in earnings (loss) of joint  venture** |       | (5,445                                               | )          |       | 1,614                                                |       |
| Equity in earnings  (loss) of joint venture                                                      |       | (87                                                  | )          |       | (80                                                  | )          |
| **Income  (loss) from continuing operations**                                                    |       | (5,532                                               | )          |       | 1,534                                                |       |
| Income from  discontinued operations                                                             |       | 365                                                  |       |       | 3,143                                                |       |
| Gain on sale of  discontinued operations                                                         |       | —                                               |       |       | 9,993                                                |       |
| **Net  income (loss)**                                                                           |       | (5,167                                               | )          |       | 14,670                                               |       |
| Distributions to  preferred unitholders                                                          |       | —                                               |       |       | (1,203                                               | )          |
| **Net  income (loss) available to common unitholders**                                           |       | $                                                    | (5,167     | )          |                                                 | $          | 13,467 |   |
|                                                                                             |       |                                                 |       |       |                                                 |       |
| **Net  income (loss) per unit – basic:**                                                    |       |                                                 |       |       |                                                 |       |
| Income (loss) from  continuing operations                                                        |       | $                                                    | (0.24      | )          |                                                 | $          | 0.04 |   |
| Income from  discontinued operations                                                             |       | 0.01                                                 |       |       | 0.38                                                 |       |
| Net income (loss)                                                                                |       | $                                                    | (0.23      | )          |                                                 | $          | 0.42 |   |
| Distributions to  preferred unitholders                                                          |       | —                                               |       |       | (0.03                                                | )          |
| Net income (loss)  available to common unitholders                                               |       | $                                                    | (0.23      | )          |                                                 | $          | 0.39 |   |
|                                                                                             |       |                                                 |       |       |                                                 |       |
| **Net  income (loss) per unit – diluted:**                                                  |       |                                                 |       |       |                                                 |       |
| Income (loss) from  continuing operations                                                        |       | $                                                    | (0.24      | )          |                                                 | $          | 0.04 |   |
| Income from  discontinued operations                                                             |       | 0.01                                                 |       |       | 0.38                                                 |       |
| Net income (loss)                                                                                |       | $                                                    | (0.23      | )          |                                                 | $          | 0.42 |   |
| Distributions to  preferred unitholders                                                          |       | —                                               |       |       | (0.03                                                | )          |
| Net income (loss)  available to common unitholders                                               |       | $                                                    | (0.23      | )          |                                                 | $          | 0.38 |   |
|                                                                                             |       |                                                 |       |       |                                                 |       |
| Distributions per  common unit                                                                   |       | $                                                    | 0.64       |       |                                                 | $          | 0.34 |   |
| Weighted average number  of common units outstanding                                             |       | 22,810                                               |       |       | 34,809                                               |       |
| Weighted average number  of common and common dilutive equivalent units outstanding              |       | 22,810                                               |       |       | 35,032                                               |       |

 

See Notes to Consolidated Financial Statements.

 

3

----

 

**CAMDENSUMMIT PARTNERSHIP, L.P.**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(Dollars in thousands, except per unitamounts)**

**(Unaudited)**

 
| ** **                                                                                       | ** ** | **For the four  months ended  June 30,  2005** | ** ** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the six  months ended  June 30,  2004** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|------------|--------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                                       | ** ** | **(Successor)**                                     | ** ** | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                  | ** ** |
|                                                                                             |       |                                                |       |       |                                                   |       |                                               |       |
| **REVENUES**                                                                                     |       |                                                |       |       |                                                   |       |                                               |       |
| Rental revenues                                                                                  |       | $                                                   | 53,461     |       |                                                   | $          | 25,119                                             |       | $ | 61,868 |   |
| Other property revenues                                                                          |       | 4,287                                               |       |       | 2,078                                                  |       | 5,098                                              |       |
| Total property revenues                                                                          |       | 57,748                                              |       |       | 27,197                                                 |       | 66,966                                             |       |
| Other income                                                                                     |       | 4                                                   |       |       | 251                                                    |       | 1,074                                              |       |
| Total revenues                                                                                   |       | 57,752                                              |       |       | 27,448                                                 |       | 68,040                                             |       |
|                                                                                             |       |                                                |       |       |                                                   |       |                                               |       |
| **EXPENSES**                                                                                     |       |                                                |       |       |                                                   |       |                                               |       |
| Property operating and  maintenance                                                              |       | 12,902                                              |       |       | 5,978                                                  |       | 14,574                                             |       |
| Real estate taxes                                                                                |       | 7,196                                               |       |       | 3,546                                                  |       | 8,018                                              |       |
| Total property expenses                                                                          |       | 20,098                                              |       |       | 9,524                                                  |       | 22,592                                             |       |
| General and  administrative                                                                      |       | 2,699                                               |       |       | 2,146                                                  |       | 4,003                                              |       |
| Property management                                                                              |       | 1,679                                               |       |       | 1,651                                                  |       | 3,174                                              |       |
| Merger expenses                                                                                  |       | —                                              |       |       | 9,947                                                  |       | —                                             |       |
| Interest                                                                                         |       | 11,799                                              |       |       | 5,882                                                  |       | 14,403                                             |       |
| Depreciation and  amortization                                                                   |       | 28,754                                              |       |       | 8,398                                                  |       | 20,056                                             |       |
| Amortization of  deferred financing costs                                                        |       | —                                              |       |       | 288                                                    |       | 662                                                |       |
| Total expenses                                                                                   |       | 65,029                                              |       |       | 37,836                                                 |       | 64,890                                             |       |
| **Income  (loss) from continuing operations before equity in earnings (loss) of joint  venture** |       | (7,277                                              | )          |       | (10,388                                                | )          | 3,150                                              |       |
| Equity in earnings  (loss) of joint venture                                                      |       | (114                                                | )          |       | (64                                                    | )          | (174                                               | )          |
| **Income  (loss) from continuing operations**                                                    |       | (7,391                                              | )          |       | (10,452                                                | )          | 2,976                                              |       |
| Income from  discontinued operations                                                             |       | 463                                                 |       |       | 245                                                    |       | 5,405                                              |       |
| Gain on sale of  discontinued operations                                                         |       | —                                              |       |       | —                                                 |       | 10,040                                             |       |
| **Net  income (loss)**                                                                           |       | (6,928                                              | )          |       | (10,207                                                | )          | 18,421                                             |       |
| Distributions to  preferred unitholders                                                          |       | —                                              |       |       | (267                                                   | )          | (2,406                                             | )          |
| **Net  income (loss) available to common unitholders**                                           |       | $                                                   | (6,928     | )          |                                                   | $          | (10,474                                            | )          | $ | 16,015 |   |
|                                                                                             |       |                                                |       |       |                                                   |       |                                               |       |
| **Net  income (loss) per unit – basic:**                                                    |       |                                                |       |       |                                                   |       |                                               |       |
| Income (loss) from  continuing operations                                                        |       | $                                                   | (0.32      | )          |                                                   | $          | (0.30                                              | )          | $ | 0.09 |   |
| Income from  discontinued operations                                                             |       | 0.02                                                |       |       | 0.01                                                   |       | 0.44                                               |       |
| Net income (loss)                                                                                |       | $                                                   | (0.30      | )          |                                                   | $          | (0.29                                              | )          | $ | 0.53 |   |
| Distributions to  preferred unitholders                                                          |       | —                                              |       |       | (0.01                                                  | )          | (0.07                                              | )          |
| Net income (loss)  available to common unitholders                                               |       | $                                                   | (0.30      | )          |                                                   | $          | (0.30                                              | )          | $ | 0.46 |   |
|                                                                                             |       |                                                |       |       |                                                   |       |                                               |       |
| **Net  income (loss) per unit – diluted:**                                                  |       |                                                |       |       |                                                   |       |                                               |       |
| Income (loss) from  continuing operations                                                        |       | $                                                   | (0.32      | )          |                                                   | $          | (0.30                                              | )          | $ | 0.08 |   |
| Income from  discontinued operations                                                             |       | 0.02                                                |       |       | 0.01                                                   |       | 0.44                                               |       |
| Net income (loss)                                                                                |       | $                                                   | (0.30      | )          |                                                   | $          | (0.29                                              | )          | $ | 0.53 |   |
| Distributions to  preferred unitholders                                                          |       | —                                              |       |       | (0.01                                                  | )          | (0.07                                              | )          |
| Net income (loss)  available to common unitholders                                               |       | $                                                   | (0.30      | )          |                                                   | $          | (0.30                                              | )          | $ | 0.46 |   |
|                                                                                             |       |                                                |       |       |                                                   |       |                                               |       |
| Distributions per  common unit                                                                   |       | $                                                   | 0.85       |       |                                                   | $          | 0.22                                               |       | $ | 0.68 |   |
|                                                                                             |       |                                                |       |       |                                                   |       |                                               |       |
| Weighted average number  of common units outstanding                                             |       | 22,810                                              |       |       | 34,910                                                 |       | 34,801                                             |       |
| Weighted average number  of common and common dilutive equivalent units outstanding              |       | 22,810                                              |       |       | 34,910                                                 |       | 35,025                                             |       |

 

See Notes to Consolidated Financial Statements.

 

4

----

 

**CAMDENSUMMIT****PARTNERSHIP**,**L.P.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Dollars inthousands)**

**(Unaudited)**

 
| ** **                                                                               | ** ** | **For the four  months ended  June 30,  2005** | ** ** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the six  months ended  June 30,  2004** | ** ** |
|------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|------------|--------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                               | ** ** | **(Successor)**                                     | ** ** | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                  | ** ** |
|                                                                                     |       |                                                |       |       |                                                   |       |                                               |       |
| **Cash  flow from operating activities:**                                                |       |                                                |       |       |                                                   |       |                                               |       |
| Net income (loss)                                                                        |       | $                                                   | (6,928     | )          |                                                   | $          | (10,207                                            | )          | $ | 18,421 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by operating activities |       |                                                |       |       |                                                   |       |                                               |       |
| Depreciation and  amortization                                                           |       | 28,754                                              |       |       | 8,774                                                  |       | 23,537                                             |       |
| Gain on sale of discontinued  operations                                                 |       | —                                              |       |       | —                                                 |       | (10,040                                            | )          |
| Issuance of  unrestricted stock grants                                                   |       | —                                              |       |       | —                                                 |       | 1,150                                              |       |
| Postretirement benefits  for former executive officers                                   |       | —                                              |       |       | (14                                                    | )          | —                                             |       |
| Equity in earnings  (loss) of joint venture                                              |       | 114                                                 |       |       | 64                                                     |       | 174                                                |       |
| Net change in operating  accounts                                                        |       | 7,322                                               |       |       | (4,071                                                 | )          | 7,243                                              |       |
| Net cash provided by  (used in) operating activities                                     |       | 29,262                                              |       |       | (5,454                                                 | )          | 40,485                                             |       |
|                                                                                     |       |                                                |       |       |                                                   |       |                                               |       |
| **Cash  flows from investing activities:**                                               |       |                                                |       |       |                                                   |       |                                               |       |
| Investment in real  estate assets                                                        |       | (38,561                                             | )          |       | (12,662                                                | )          | (64,007                                            | )          |
| Net proceeds from sales  of properties, including land                                   |       | —                                              |       |       | —                                                 |       | 22,190                                             |       |
| Acquisition of  communities                                                              |       | —                                              |       |       | —                                                 |       | (43,253                                            | )          |
| Payment of merger  related liabilities                                                   |       | (49,943                                             | )          |       | —                                                 |       | —                                             |       |
| Other investing  activities                                                              |       | 885                                                 |       |       | (125                                                   | )          | (872                                               | )          |
| Net cash used in  investing activities                                                   |       | (87,619                                             | )          |       | (12,787                                                | )          | (85,942                                            | )          |
|                                                                                     |       |                                                |       |       |                                                   |       |                                               |       |
| **Cash  flows from financing activities:**                                               |       |                                                |       |       |                                                   |       |                                               |       |
| Net (repayments)  borrowings on secured credit facility                                  |       | (188,500                                            | )          |       | 92,600                                                 |       | 62,000                                             |       |
| Net borrowings on  secured line of credit-related party                                  |       | 240,468                                             |       |       | —                                                 |       | —                                             |       |
| Proceeds from issuance  of mortgage notes                                                |       | —                                              |       |       | —                                                 |       | 44,140                                             |       |
| Repayment of  construction loan                                                          |       | —                                              |       |       | —                                                 |       | (33,344                                            | )          |
| Distributions to common  unitholders                                                     |       | (7,354                                              | )          |       | (12,524                                                | )          | (23,547                                            | )          |
| Distributions to Series C  preferred unitholders                                    |       | —                                              |       |       | —                                                 |       | (2,406                                             | )          |
| Redemption of Series C  preferred units                                             |       | —                                              |       |       | (55,000                                                | )          | —                                             |       |
| Other financing  activities                                                              |       | (2,334                                              | )          |       | 3,350                                                  |       | (1,693                                             | )          |
| Net cash provided by  financing activities                                               |       | 42,280                                              |       |       | 28,426                                                 |       | 45,150                                             |       |
|                                                                                     |       |                                                |       |       |                                                   |       |                                               |       |
| **Net  (decrease) increase in cash and cash equivalents**                                |       | (16,077                                             | )          |       | 10,185                                                 |       | (307                                               | )          |
| **Cash  and cash equivalents, beginning of period**                                      |       | 16,696                                              |       |       | 6,511                                                  |       | 2,687                                              |       |
| **Cash  and cash equivalents, end of period**                                            |       | $                                                   | 619        |       |                                                   | $          | 16,696                                             |       | $ | 2,380 |   |
|                                                                                     |       |                                                |       |       |                                                   |       |                                               |       |
| **Supplemental  information:**                                                           |       |                                                |       |       |                                                   |       |                                               |       |
| Cash paid for interest,  net of interest capitalized                                     |       | $                                                   | 9,375      |       |                                                   | $          | 5,067                                              |       | $ | 14,266 |   |
| Interest capitalized                                                                     |       | 2,892                                               |       |       | 1,378                                                  |       | 5,045                                              |       |
|                                                                                     |       |                                                |       |       |                                                   |       |                                               |       |
| **Supplemental  schedule of noncash investing and financing activities:**           |       |                                                |       |       |                                                   |       |                                               |       |
| Merger with Camden, net  of cash:                                                        |       |                                                |       |       |                                                   |       |                                               |       |
| Fair value adjustment  of assets                                                         |       | $                                                   | 558,627    |       |                                                   | $          | —                                             |       | $ | — |   |
| Fair value adjustment  of debt                                                           |       | 34,166                                              |       |       | —                                                 |       | —                                             |       |

 

See Notes to Consolidated Financial Statements.

 

5

----

 

**CAMDENSUMMIT PARTNERSHIP, L.P.**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

*The accompanying interimunaudited financial information has been prepared according to the rules andregulations of the Securities and Exchange Commission.  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance with generallyaccepted accounting principles have been condensed or omitted according to suchrules and regulations. Management believes that the disclosures includedare adequate to make the information presented not misleading. In the opinionof management, all adjustments and eliminations, consisting only of normalrecurring adjustments, necessary to present fairly the financial position ofCamden Summit Partnership, L.P. (formerly known as Summit PropertiesPartnership, L.P.) as of June 30, 2005, the results of operations for**the three and four monthsended June 30, 2005 (Successor), the two months ended February 28,2005 (Predecessor), and the three and six months ended June 30, 2004(Predecessor), and the cash flows for the four months ended June 30, 2005(Successor), the two months ended February 28, 2005 (Predecessor), and thesix months ended June 30, 2004 (Predecessor) have been included. Theresults of operations for such interim periods are not necessarily indicativeof the results for the full year.*

 

**1.Basis of Presentation**

 

On February 28, 2005, Summit PropertiesInc. (“Summit”) was merged with and into Camden Summit, Inc. (“CamdenSummit”), a wholly-owned subsidiary of Camden Property Trust (“Camden”), pursuantto an Agreement and Plan of Merger dated as of October 4, 2004 (the “MergerAgreement”), as amended.  Prior to theeffective time of the merger, Summit was the sole general partner of SummitProperties Partnership, L.P. (the “Camden Summit Partnership” or “us” or “we”),and at the effective time, Camden Summit became the sole general partner of theCamden Summit Partnership and the name of this partnership was changed toCamden Summit Partnership, L.P.

 

The consummation of the merger effected a changein control of the Camden Summit Partnership. Prior to the effective time of the merger, Summit was the generalpartner of the Camden Summit Partnership and held 348,086 general partnerunits, representing a 1% general partnership interest, and 31,117,541 limitedpartner units, representing an 89.4% limited partnership interest.  The remaining 3,343,004 limited partner unitswere held by the outside limited partners. As of the effective time of the merger, Camden Summit became the generalpartner of the Camden Summit Partnership and held 232,765.108 general partnerunits, representing a 1% general partnership interest, and 20,808,299.667limited partner units, representing a 91.2% limited partnership interest.  The remaining 1,769,281 units, representing a7.8% limited partner interest, were heldby former outside limited partners.  Eachcommon limited partnership unit is redeemable for one common share of Camden.

 

In conjunction with the merger, the limitedpartners in the Camden Summit Partnership were offered, on a unit-by-unitbasis, the opportunity to redeem their partnership units for $31.20 in cash,without interest, or to remain in the Camden Summit Partnership following themerger at a unit valuation equal to .6687 of a Camden common share.  The limited partner elections resulted inCamden redeeming 0.7 million partnership units for cash, for an aggregate of$21.7 million, and issuing 1.8 million partnership units.  The value of the partnership units issued wasdetermined based on the average market price of Camden’s common shares for thefive day period commencing two days prior to the announcement of the merger on October 4,2004.  Subsequent to the merger, 0.1million partnership units have been redeemed for $5.3 million.

 

Camden Summit Partnership, L.P. is a Delaware limitedpartnership and a subsidiary of Camden Summit, which is a wholly-ownedsubsidiary of Camden, a Texas real estate investment trust.  Camden conducts a portion of its businessthrough the Camden Summit Partnership and its subsidiaries.  As ofJune 30, 2005, Camden held 91.7% of our common limited partnership unitsas well as the sole 1% general partnership interest.  The remaining 7.3% of the common limited partnershipunits were held by former outside limited partners.

 

As Camden acquiredapproximately 92% of its ownership interest in the Camden Summit Partnership atthe effective time of the merger, Camden has recorded the Camden SummitPartnership as a wholly-owned subsidiary in accordance with the provisions of EmergingIssues Task Force Abstract D-97, “Push-Down Accounting.”  Camden’sownership interest in the Camden Summit Partnership meets the criteria of “substantiallywholly owned,” and as such our assets and liabilities were revalued as of theeffective time of the merger.

 

Camden allocated the purchase price between nettangible and intangible assets.  Costs wereallocated to the estimated intangible value of in place leases and above orbelow market leases and to the estimated fair value of furniture and fixtures,land and buildings on a value determined by assuming the property is vacant byapplying methods similar to those used by independent appraisers ofincome-producing property.  Depreciationand amortization is computed on a straight-line basis over the remaining usefullives of the related assets.  Buildingsand furniture and fixtures have an estimated useful life of 35 years and 5years,

 

6

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respectively.  The value of in-placeleases and above or below market leases is being amortized over the estimatedaverage remaining life of leases in place at the time of the merger.  In-place lease terms generally range from 6to 13 months.  We use an estimatedremaining average lease life of 10 months to amortize the value of in-placeleases recorded in conjunction with the merger.

 

The following table summarizes the estimated fairvalues of our assets and liabilities on February 28, 2005, the closingdate of the merger:

 
| **(in thousands)**                                                     | ** ** | ** ** | ** ** |
|------------------------------------------------------------------------|------------|------------|------------|
|                                                                   |       |       |       |
| Land                                                                   |       | $          | 297,169    |   |
| Buildings and  improvements                                            |       | 1,526,603  |       |
| Properties under  development, including land                          |       | 152,042    |       |
| Investments in joint  ventures                                         |       | 2,652      |       |
| Properties held for  sale                                              |       | 29,710     |       |
| Other assets, including  the value of in-place leases of $31.7 million |       | 37,520     |       |
| Cash and cash  equivalents                                             |       | 16,696     |       |
| Restricted cash                                                        |       | 1,542      |       |
| Total assets                                                           |       | 2,063,934  |       |
| Notes payable                                                          |       | 881,059    |       |
| Accounts payable,  accrued expenses and other liabilities              |       | 99,196     |       |
| Fair value of  liabilities, including notes payable                    |       | 980,255    |       |
| Total partnership  equity                                              |       | $          | 1,083,679  |   |

 

In connection with themerger, $69.8 million of termination, severance and settlement of share-basedcompensation costs were incurred.  Ofthis amount, Summit paid $26.3 million prior to the effective time of themerger.  As of June 30, 2005, wepaid $38.0 million of these costs and have accrued $5.5 million.

 

The following unauditedpro forma financial information for the three and six months ended June 30,2005 and 2004, gives effect to the merger as if it had occurred at the beginningof the periods presented. The pro forma financial information for 2005 includespro forma results for the first two months of 2005 and actual results for theremaining four months. The pro forma results are based on historical data andare not intended to be indicative of the results of future operations.

 
| ** **                  | ** ** | **Three Months  Ended June 30,** | ** ** | **Six Months  Ended June 30,** | ** ** |
|-----------------------------|------------|---------------------------------------|------------|-------------------------------------|------------|
| **(in thousands)**          | ** ** | **2005**                              | ** ** | **2004**                            | ** ** | **2005** | ** ** | **2004** | ** ** |
|                        |       |                                  |       |                                |       |   |   |   |   |
| Total property revenues     |       | $                                     | 43,646     |                                | $          | 38,189 |   | $ | 85,352 |   | $ | 75,114 |   |
| Net income (loss)           |       | (5,167                                | )          | 3,736                               |       | (23,124 | ) | (3,944 | ) |
| Net income (loss) per  unit |       | $                                     | (0.23      | )                                   | $          | 0.16 |   | $ | (1.01 | ) | $ | (0.17 | ) |

 

We focus on the operation, development and acquisitionof luxury apartment communities in select neighborhoods throughout theSoutheast and Mid-Atlantic United States. We focus our efforts in five markets: Washington, D.C., SoutheastFlorida, Atlanta, Raleigh and Charlotte. As of June 30, 2005, our portfolio consisted of 49 completedcommunities comprising 15,422 apartment homes with an additional 1,414apartment homes under construction at four communities.

 

Our Consolidated Balance Sheets and our relatedConsolidated Statements of Operations and Cash Flows for the periods presentedprior to the merger are referenced herein as the Predecessor consolidatedfinancial statements (the “Predecessor”). Our Consolidated Balance Sheet as of June 30, 2005 and our relatedConsolidated Statements of Operations for the three and four months ended June 30,2005 and our Consolidated Statements of Cash Flows for the four months ended June 30,2005 are referenced herein as the Successor consolidated financial statements(the “Successor”).

 

SignificantAccounting Policies

 

The following significant accounting policiesrepresent those in effect as of June 30, 2005.  There have been no significant changes fromthe accounting policies in place prior to the effective time of the merger.

 

***Reportable Segments.***  The Financial Accounting Standards Board’s (“FASB”)Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosuresabout Segments of an Enterprise and Related Information,” establishes standardsfor reporting financial and descriptive information about an enterprise’sreportable segments.  We have determinedthat we have one reportable segment, with activities related to the ownership,development and management of multifamily communities.  Our apartment communities generate rentalrevenue and other income through the leasing of apartment homes.  Although our multifamily communities aregeographically diversified throughout the Southeast and Mid-Atlantic states,management evaluates operating performance on an individual propertylevel.  However, as each of our apartmentcommunities has similar economic characteristics, residents, and products andservices, our apartment communities have been aggregated into one reportablesegment.  In addition to GenerallyAccepted Accounting Principles (“GAAP”) measures included in our consolidatedstatements of operations, our chief operating decision makers evaluate thefinancial performance of each community using a financial measure entitled netoperating

 

7

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income.  Each community’s performance is assessedbased on growth of or decline in net operating income, which is defined astotal property revenues less total property expenses as presented in ourconsolidated statements of operations and excludes certain revenue and expenseitems such as fee and asset management income and expenses and other indirectoperating expenses, interest, depreciation and amortization expenses.

 

Below is a reconciliation of net operatingincome from our wholly-owned communities included in continuing operations toits most directly comparable GAAP measure, income from continuing operationsbefore equity in earnings of joint venture:

 
| **(in thousands)**                                                                          | ** ** | **For the three  months ended  June 30,  2005** | ** ** | ** ** | **For the three  months ended  June 30,  2004** | ** ** | **For the four  months ended  June 30,  2005** | ** ** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the six  months ended  June 30,  2004** | ** ** |
|---------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|------------|--------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                                  | ** ** | **(Successor)**                                      | ** ** | ** ** | **(Predecessor)**                                    | ** ** | **(Successor)**                                     | ** ** | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                  | ** ** |
|                                                                                        |       |                                                 |       |       |                                                 |       |                                                |       |       |                                                   |       |                                               |       |
| Total property revenues                                                                     |       | $                                                    | 43,646     |       |                                                 | $          | 34,111                                              |       | $          | 57,748                                                 |       |                                               | $          | 27,197 |   | $ | 66,966 |   |
| Total property expenses                                                                     |       | 15,078                                               |       |       | 11,232                                               |       | 20,098                                              |       |       | 9,524                                                  |       | 22,592                                             |       |
| Net operating income                                                                        |       | 28,568                                               |       |       | 22,879                                               |       | 37,650                                              |       |       | 17,673                                                 |       | 44,374                                             |       |
| Less other expenses:                                                                        |       |                                                 |       |       |                                                 |       |                                                |       |       |                                                   |       |                                               |       |
| Depreciation and  amortization                                                              |       | 21,579                                               |       |       | 10,295                                               |       | 28,754                                              |       |       | 8,398                                                  |       | 20,056                                             |       |
| Interest                                                                                    |       | 9,000                                                |       |       | 7,578                                                |       | 11,799                                              |       |       | 5,882                                                  |       | 14,403                                             |       |
| Merger expenses                                                                             |       | —                                               |       |       | —                                               |       | —                                              |       |       | 9,947                                                  |       | —                                             |       |
| General and  administrative                                                                 |       | 2,183                                                |       |       | 2,112                                                |       | 2,699                                               |       |       | 2,146                                                  |       | 4,003                                              |       |
| Property management                                                                         |       | 1,255                                                |       |       | 1,499                                                |       | 1,679                                               |       |       | 1,651                                                  |       | 3,174                                              |       |
| Amortization of  deferred financing costs                                                   |       | —                                               |       |       | 338                                                  |       | —                                              |       |       | 288                                                    |       | 662                                                |       |
| Total other expenses                                                                        |       | 34,017                                               |       |       | 21,822                                               |       | 44,931                                              |       |       | 28,312                                                 |       | 42,298                                             |       |
| Add non-property  income:                                                                   |       |                                                 |       |       |                                                 |       |                                                |       |       |                                                   |       |                                               |       |
| Other income                                                                                |       | 4                                                    |       |       | 557                                                  |       | 4                                                   |       |       | 251                                                    |       | 1,074                                              |       |
| Income (loss) from  continuing operations before equity in earnings (loss) of joint venture |       | $                                                    | (5,445     | )          |                                                 | $          | 1,614                                               |       | $          | (7,277                                                 | )          |                                               | $          | (10,388 | ) | $ | 3,150 |   |

 

***Real Estate Assets, at Cost.***  Real estate assets are carried at cost pluscapitalized carrying charges. Carrying charges are primarily interest and realestate taxes which are capitalized as part of properties underdevelopment.  For the three and four monthsended June 30, 2005, we capitalized $2.2 million and $3.1 million,respectively, in interest and real estate taxes.  Expenditures directly related to thedevelopment, acquisition and improvement of real estate assets, excludinginternal costs relating to acquisitions of operating properties, arecapitalized at cost as land, buildings and improvements. Indirect developmentcosts, including salaries and benefits and other related costs that are clearlyattributable to the development of properties, are also capitalized.  All construction and carrying costs arecapitalized and reported on the balance sheet in properties under developmentuntil the apartment homes are substantially completed. Upon substantial completionof the apartment homes, the total cost for the apartment homes and theassociated land is transferred to buildings and improvements and land,respectively, and the assets are depreciated over their estimated useful livesusing the straight-line method of depreciation. All operating expenses associated with completed apartment homes forproperties in the development and leasing phase are expensed.  Upon substantial completion of the project, allapartment homes are considered operating and we begin expensing all items thatwere previously considered carrying costs.

 

We capitalized $1.8 million during the four monthsended June 30, 2005, $1.8 million for the two months ended February 28,2005 and $4.2 during the six months ended June 30, 2004 of renovation andimprovement costs that we believe extended the economic lives and enhanced theearnings of our multifamily properties. Capital expenditures are capitalized and depreciated over their usefullives, which range from 3 to 20 years.

 

Uponthe acquisition of real estate assets, we assess the fair value of acquiredassets, including land, buildings, the value of in-place leases, above andbelow market leases, and acquired liabilities, including fair value adjustmentsfor debt.  We then allocate the purchaseprice of the acquired property based on these assessments.  We assess fair value based on estimated cashflow projections and available market information.

 

Depreciation and amortization is computed on astraight-line basis over the remaining useful lives of the related assets.  Buildings and furniture and fixtures have anestimated useful life of 35 years and 5 years, respectively.  The value of in place leases and above orbelow market leases is being amortized over the estimated average remaining lifeof leases in place at the time of the merger. In-place lease terms generally range from 6 to 13 months.

 

If an event or change in circumstances indicates thata potential impairment in the value of a property has occurred, our policy isto assess any potential impairment by making a comparison of the current andprojected cash flows for such property over its remaining holding period, on anundiscounted basis, to the carrying amount of the property.  If such carrying amounts were in excess ofthe estimated projected cash flows of the property, we would recognize animpairment loss equivalent to an amount required to adjust the carrying amountto its estimated fair market value, less costs to sell.  As of June 30, 2005, we had one propertyin Atlanta, GA designated as held for sale with a value of $29.8 million whichapproximates our estimated fair value, less costs to sell.

 

8

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***Incentive and benefits plans. ***In connection with themerger, all employees of Summit who continued employment with Camden becameemployees of Camden Development, Inc., a wholly-owned subsidiary ofCamden.  All Summit benefit plans,including its Stock Option and Incentive Plans were terminated or convertedinto benefit plans of Camden. Immediately prior to the effective time of the merger, Summit had454,742 options outstanding, including 91,902 incentive stock options, and35,229 unvested restricted stock awards. At the effective time of the merger, all outstanding options were cancelled,and the option holders had the right to receive a cash option payment, asdefined in the merger agreement, or to elect to receive Camden common shares inlieu of the cash option payment.  AllSummit restricted stock awards became fully vested immediately prior to the effectivetime of the merger and were considered outstanding shares for all purposesunder the merger agreement.

 

If we had adopted the provisions of SFAS No. 123to our option grants and ESPP prior to 2003, our net income to common shareholdersand related basic and diluted earnings per share would be as follows:

 
| **(in thousands, except per unit  amounts)**                                                                | ** ** | **For the three  months ended  June 30,  2004** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the six  months ended  June 30,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|--------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                                                  | ** ** | **(Predecessor)**                                    | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                  | ** ** |
|                                                                                                        |       |                                                 |       |                                                   |       |                                               |       |
| Net income (loss), as  reported                                                                             |       | $                                                    | 14,670     |                                                   | $          | (10,207                                            | )          | $ | 18,421 |   |
| Add: stock-based  employee compensation expense included in reported net income                             |       | 240                                                  |       | 37                                                     |       | 516                                                |       |
| Deduct: total  stock-based employee compensation expense determined under fair value method  for all awards |       | (328                                                 | )          | (37                                                    | )          | (656                                               | )          |
|                                                                                                        |       |                                                 |       |                                                   |       |                                               |       |
| Pro forma net income  (loss)                                                                                |       | $                                                    | 14,582     |                                                   | $          | (10,207                                            | )          | $ | 18,281 |   |
|                                                                                                        |       |                                                 |       |                                                   |       |                                               |       |
| Net income (loss) per  unit – basic                                                                    |       |                                                 |       |                                                   |       |                                               |       |
| As reported                                                                                                 |       | $                                                    | 0.42       |                                                   | $          | (0.29                                              | )          | $ | 0.53 |   |
| Pro forma                                                                                                   |       | 0.42                                                 |       | (0.29                                                  | )          | 0.53                                               |       |
|                                                                                                        |       |                                                 |       |                                                   |       |                                               |       |
| Net income (loss) per  unit – diluted                                                                  |       |                                                 |       |                                                   |       |                                               |       |
| As reported                                                                                                 |       | $                                                    | 0.42       |                                                   | $          | (0.29                                              | )          | $ | 0.53 |   |
| Pro forma                                                                                                   |       | 0.42                                                 |       | (0.29                                                  | )          | 0.52                                               |       |

 

***Estimates***.  The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesof America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the consolidated financial statements andthe reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates.

 

***Recent Accounting Pronouncements.***  In December 2004, the FASB issuedStatement of Financial Accounting Standards (“SFAS”) No. 123 (revised2004), “Share-Based Payments (SFAS 123R).” SFAS 123R requires all share-basedpayments to employees, including grants of employee stock options, to berecognized over their vesting periods in the income statement based on theirestimated fair values. In April 2005, the Securities and ExchangeCommission (“SEC”) issued a press release announcing it would provide fora phased-in implementation process for SFAS 123R. SFAS 123R is effective forall public entities in the first annual reporting period beginning after June 15,2005 which, for us would be the calendar year of 2006. As a result of the SEC’sannouncement, we are in the process of assessing the impact of SFAS 123R andhave not determined what impact, if any, our adoption of SFAS 123R will have onour financial position, results of operations or cash flows.

 

In December 2004, FASB issued SFAS No. 153, “Exchangeof Nonmonetary Assets, an amendment of APB Opinion No. 29,” whichaddresses the measurement of exchanges of nonmonetary assets.  SFAS No. 153 eliminates the exceptionfor nonmonetary exchanges of similar productive assets and replaces it with ageneral exception for exchange of nonmonetary assets that do not havecommercial substance.  It also specifiesthat a nonmonetary exchange has commercial substance if the future cash flowsof the entity are expected to change significantly as a result of theexchange.  SFAS No. 153 is effectivebeginning July 1, 2005.  Theadoption of SFAS No. 153 will not have a material impact on our financialposition, results of operations or cash flows.

 

In March 2005, the FASB issued FASB StaffPosition (“FSP”) FASB Interpretation (“FIN”) 46R-5, “Implicit Variable Interestunder FASB Interpretation No. 46 (revised December 2003), *Consolidation of Variable Interest Entities*.”  This FSP requires a reporting entity toconsider whether it holds an implicit variable interest in a variable interestentity (“VIE”) or potential VIE.  FSP FIN46R-5 was effective with reporting periods beginning after March 3,2005.  The adoption of FSP FIN 46R-5 did nothave a material impact on our financial position, results of operations or cashflows.

 

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In May 2005, the FASB issued SFAS No. 154, “AccountingChanges and Error Corrections, a replacement of APB Opinion No. 20 andFASB Statement No. 3.”  SFAS No. 154changes the requirements for and reporting of a change in accountingprinciple.  SFAS No. 154 requiresthat a voluntary change in accounting principle be applied retrospectively withall prior period financial statements presented on the new accountingprinciple, unless it is impracticable to do so. This Statement also providesthat (1) a change in method of depreciating or amortizing a long-livednonfinancial asset be accounted for as a change in estimate (prospectively)that was effected by a change in accounting principle, and (2) correctionsof errors in previously issued financial statements should be termed a “restatement.”The new standard is effective for accounting changes and correction of errorsmade in fiscal years beginning after December 15, 2005.  We do not expect that the adoption of SFAS No. 154will have a material impact on our financial position, results of operations orcash flows.

 

In June 2005, the FASB issued Emerging IssuesTask Force (“EITF”) Issue No. 04-05, “Determining Whether a GeneralPartner, or the General Partners as a Group, Controls a Limited Partnership orSimilar Entity When the Limited Partners Have Certain Rights.”  EITF Issue No. 04-05 provides aframework for determining whether a general partner controls, and shouldconsolidate, a limited partnership or a similar entity.  EITF Issue No. 04-05 is effective after June 29,2005, for all newly formed limited partnerships and for any pre-existinglimited partnerships that modify their partnership agreements after thatdate.  General partners of all otherlimited partnerships are required to apply the consensus no later than thebeginning of the first reporting period in fiscal years beginning after December 15,2005.  We do not expect that the adoptionof EITF Issue No. 04-05 will have a material impact on our financialposition, results of operations or cash flows.

 

In June 2005, the FASB issued FSP 78-9-1, “Interactionof AICPA Statement of Position 78-9 and EITF Issue No. 04-05.”  The EITF acknowledged that the consensus inEITF Issue No. 04-05 conflicts with certain aspects of Statement ofPosition (“SOP”) 78-9, “Accounting for Investments in Real Estate Ventures.”  The EITF agreed that the assessment ofwhether a general partner, or the general partners as a group, controls alimited partnership should be consistent for all limited partnerships,irrespective of the industry within which the limited partnership operates.  Accordingly, the guidance in SOP 78-9 wasamended in FSP 78-9-1 to be consistent with the guidance in EITF Issue No. 04-05.  The effective dates for this FSP are the sameas those mentioned above in EITF Issue No. 04-05.  We do not expect that the adoption of FSP 78-9-1will have a material impact on our financial position, results of operations orcash flows.

 

***Reclassifications***.  Certain reclassifications have been made toamounts in prior period consolidated financial statements to conform with currentperiod presentations.  In ourConsolidated Statements of Cash Flows for the four months ended June 30, 2005,we changed the classification of changes in restricted cash to present suchchanges as an investing activity.  Wepreviously presented such changes as operating activities.  In the accompanying Consolidated Statementsof Cash Flows for the two months ended February 28, 2005 and for the sixmonths ended June 30, 2004, we reclassified these changes in balances to beconsistent with our 2005 presentation which resulted in an $18,000 and $0.2million decrease in investing cash flows, respectively, and a corresponding $18,000and $0.2 million increase to operating cash flows, respectively, from theamounts previously reported.

 

**2.Per Unit Data**

 

Basicearnings per unit are computed based upon the weighted average number of unitsoutstanding during the respective period. The difference between “basic” and “diluted”weighted average units is the dilutive effect of Summit’s stock-basedcompensation outstanding, which was either cancelled and paid out or fullyvested in connection with the merger with Camden.  No potentially dilutive units wereoutstanding as of June 30, 2005. The number of units added to weighted average units outstanding for thediluted calculation was 223,000 for the three months ended June 30, 2004and 224,000 for the six months ended June 30, 2004.

 

**3.Communities Acquired**

 

Weacquired no communities during the six months ended June 30, 2005.  We acquired two communities in Charlotte,North Carolina with 605 apartment homes during the six months ended June 30,2004.  During the year ended December 31,2004, we acquired six communities with a total of 1,581 apartment homes asfollows:

 

| **Property Name**       | ** ** | **Location**  | ** ** | **Apartment  Homes** | ** ** |
|-------------------------|------------|---------------|------------|----------------------|------------|
| Summit Stonecrest       |       | Charlotte, NC |       | 306                  |       |
| Summit South End Square |       | Charlotte, NC |       | 299                  |       |
| Summit Doral Villas     |       | Miami, FL     |       | 232                  |       |
| Summit Midtown          |       | Atlanta, GA   |       | 296                  |       |
| Summit Fallsgrove       |       | Rockville, MD |       | 268                  |       |
| Summit Cotton Mills     |       | Charlotte, NC |       | 180                  |       |
|                    |       |          |       |                 |       |
|                    |       |          |       | 1,581                |       |

 

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Thefollowing unaudited pro forma financial information for the three and sixmonths ended June 30, 2004 gives effect to the above acquisitions as ifthey had occurred at the beginning of the period presented.  The pro forma financial information is basedon historical data and is not intended to be indicative of the results offuture operations.

 
| **(in thousands)**                | ** ** | **Three Months  Ended  June 30, 2004** | ** ** | **Completed  Acquisitions** | ** ** | **As  Adjusted** | ** ** | **Six Months  Ended  June 30, 2004** | ** ** | **Completed  Acquisitions** | ** ** | **As  Adjusted** | ** ** |
|-----------------------------------|------------|---------------------------------------------|------------|-----------------------------|------------|------------------|------------|-------------------------------------------|------------|-----------------------------|------------|------------------|------------|
|                              |       |                                        |       |                        |       |             |       |                                      |       |                        |       |             |       |
| Total revenues                    |       | $                                           | 34,668     |                        | $          | 3,446            |       | $                                         | 38,114     |                        | $          | 67,916           |       | $ | 6,876 |   | $ | 74,792 |   |
| Net income to common  unitholders |       | 13,467                                      |       | (1,504                      | )          | 11,963           |       | 16,015                                    |       | (3,538                      | )          | 12,477           |       |
|                                   |            |                                             |            |                             |            |                  |            |                                           |            |                             |            |                  |            |  |  |  |  |  |  |

 

**4.Discontinued Operations**

 

The components of net income that are presented asincome from discontinued operations include net operating income, depreciationand property specific interest expense, if any. In addition, the net gain or loss on the disposal of a community ispresented in discontinued operations when recognized, including impairmentloss, if any.   During the second quarterof 2005, we had one property located in Atlanta, Georgia, totaling 431apartment homes, designated as held for sale.  Subsequent to June 30, 2005, we soldthis property to an unrelated third party. We recognized a $10.0 million gain on one parcel of land sold during thequarter ended June 30, 2004.

 

The operating results of the one property designatedas held for sale as of June 30, 2005 and the operating results of the tenproperties sold during 2004 which areincluded in discontinued operations for the three and six months ended June 30,2005 and 2004, are as follows:

 
| **(in thousands)**                          | ** ** | **For the three  months ended  June 30,  2005** | ** ** | ** ** | **For the three  months ended  June 30,  2004** | ** ** | **For the four  months ended  June 30,  2005** | ** ** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the six  months ended  June 30,  2004** | ** ** |
|---------------------------------------------|------------|------------------------------------------------------|------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|------------|--------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                  | ** ** | **(Successor)**                                      | ** ** | ** ** | **(Predecessor)**                                    | ** ** | **(Successor)**                                     | ** ** | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                  | ** ** |
| Property revenues                           |       | $                                                    | 1,061      |       |                                                 | $          | 6,632                                               |       | $          | 1,398                                                  |       |                                               | $          | 727 |   | $ | 13,466 |   |
| Property operating  expenses                |       | 696                                                  |       |       | 2,624                                                |       | 935                                                 |       |       | 482                                                    |       | 5,400                                              |       |
| Net operating income                        |       | 365                                                  |       |       | 4,008                                                |       | 463                                                 |       |       | 245                                                    |       | 8,066                                              |       |
| Depreciation and  amortization and interest |       | —                                               |       |       | 865                                                  |       | —                                              |       |       | —                                                 |       | 2,661                                              |       |
| Income from  discontinued operations        |       | $                                                    | 365        |       |                                                 | $          | 3,143                                               |       | $          | 463                                                    |       |                                               | $          | 245 |   | $ | 5,405 |   |

 

**5.Investments in Joint Ventures**

 

We owna 25% equity interest in a joint venture named Station Hill, LLC (“Station Hill”),in which we and Hollow Creek, LLC, a subsidiary of a major financial servicescompany, are members.  We are entitled to25% of the joint venture’s cash flow based on our equity interest.  If certain benchmarks are achieved in thefuture, we would be entitled to a preferred return in excess of 25% of the cashflow.  The operating agreement of thejoint venture provides that we will be entitled to 25% of the net proceeds uponliquidation of Station Hill, although our interest in the residual value of thejoint venture could increase above or decrease below 25%.  Our interest in the residual value of thejoint venture could decrease below 25% only if we receive more than 25% of cashflow at any time prior to liquidation. Any such decrease would be limited to the extent of cash flow in excessof 25%.  Station Hill currently owns fourcommunities and is accounted for on the equity method of accounting and,therefore, our 25% equity interest is presented in “Equity in income of jointventures” in our consolidated statements of operations.

 

The joint venture discussed above is accountedfor under the equity method.  The jointventure in which we have an interest has been funded with secured, third-partydebt.  We are not committed to any additionalfunding on third-party debt in relation to our joint venture.  Management believes that the investment inthe joint venture does not qualify for consolidation as a variable interestentity.  This joint venture is accountedfor under the equity method as we exercise significant influence.

 

In2002, we entered into two separate joint ventures with a major financialservices institution (the “investor member”) to redevelop Summit Roosevelt andSummit Grand Parc, both located in Washington, D.C., in a manner to permit theuse of federal rehabilitation income tax credits.  The investor member contributed approximately$6.5 million for Summit Roosevelt and approximately $2.6 million for SummitGrand Parc in equity to fund a portion of the total estimated costs for therespective

 

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communities andwill receive a preferred return on these capital investments and an annualasset management fee with respect to each community.  The investor member’s interests in the jointventures are subject to put/call rights during the sixth and seventh yearsafter the respective communities are placed in service.  These joint ventures are consolidated intoour financial statements and the amounts contributed are included in accruedexpenses and other liabilities in our consolidated balance sheet.

 

**6.Notes Payable**

 

The following is a summary of our indebtedness:

 

| **(in  millions)**                                               |       |                    |       |                        |       |
|------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                       | ** ** | **June 30,  2005** | ** ** | **December 31,  2004** | ** ** |
| **Senior  unsecured notes**                                      |       |                    |       |                        |       |
| $50.0 million 4.30%  Notes, due 2007                             |       | $                       | 53.0       |                        | $          | 52.5 |   |
|                                                             |       |                    |       |                        |       |
| **Medium-term  unsecured notes**                                 |       |                    |       |                        |       |
| $25.0 million 3.59%  Notes, due 2005                             |       | 25.5                    |       | 25.0                        |       |
| $25.0 million 3.91%  Notes, due 2006                             |       | 25.7                    |       | 25.0                        |       |
| $25.0 million 4.64%  Notes, due 2009                             |       | 27.5                    |       | 25.0                        |       |
| $10.0 million 4.90%  Notes, due 2010                             |       | 11.6                    |       | 10.0                        |       |
| $35.0 million 4.99%  Notes, due 2011                             |       | 39.9                    |       | 35.0                        |       |
|                                                             |       | 130.2                   |       | 120.0                       |       |
| **Total  unsecured notes**                                       |       | 183.2                   |       | 172.5                       |       |
|                                                             |       |                    |       |                        |       |
| **Secured  notes**                                               |       |                    |       |                        |       |
| Secured credit facility                                          |       | —                  |       | 95.9                        |       |
| Secured line of credit  – related party                     |       | 245.1                   |       | —                      |       |
| 3.61% - 5.07%  Conventional Mortgage Notes, due 2005 – 2013 |       | 505.0                   |       | 490.3                       |       |
| **Total  secured notes**                                         |       | 750.1                   |       | 586.2                       |       |
|                                                             |       |                    |       |                        |       |
| **Total  notes payable**                                         |       | $                       | 933.3      |                        | $          | 758.7 |   |

 

In connection with the merger, we recorded a $34.2million fair value adjustment to account for the difference between the fixedrates and market rates for the mortgage loans, notes payable, and medium termnotes.  The fixed interest rates on thevarious borrowings were primarily above prevailing market rates.  Estimates of fair value are based uponinterest rates available for the issuance of debt with similar terms andremaining maturities.

 

The following is a summary of the debt at the time ofmerger:

 

| **(in millions)**                                   | ** ** | ** **      | ** ** | ** **                 | ** ** | ** **      | ** ** |
|-----------------------------------------------------|------------|-----------------|------------|----------------------------|------------|-----------------|------------|
| ** **                                          | ** ** | **Book  Value** | ** ** | **Fair Value  Adjustment** | ** ** | **Fair  Value** | ** ** |
| **Unsecured  notes**                                |       |            |       |                       |       |            |       |
| 3.59% - 4.99% Notes,  due 2005 – 2011          |       | $               | 170.0      |                       | $          | 14.8            |       | $ | 184.8 |   |
|                                                |       |            |       |                       |       |            |       |
| **Secured  notes**                                  |       |            |       |                       |       |            |       |
| Secured credit facility                             |       | 188.5           |       | —                     |       | 188.5           |       |
| 3.61% - 5.07% Mortgage  Notes, due 2005 – 2013 |       | 488.4           |       | 19.4                       |       | 507.8           |       |
|                                                |       | 676.9           |       | 19.4                       |       | 696.3           |       |
| **Total  notes payable**                            |       | $               | 846.9      |                       | $          | 34.2            |       | $ | 881.1 |   |

 

In connection with the merger, we repaid our $290 million secured credit facility, which had an outstanding balance of $188.5 million at the date of repayment, using proceeds received from a $500 million intercompany line of credit from Camden.  This line of credit bears interest at 6%, has a ten-year term and is secured by the same eleven communities that secured the credit facility.

 

During 2003, we obtained an unsecured letter of creditfacility, which matures in July 2008 and has a total commitment of $20.0million.  The letters of credit issuedunder this facility will serve as collateral for performance on contracts andas credit guarantees to banks and insurers. As of June 30, 2005, there were $9.0 million of letters of creditoutstanding under this facility.

 

During 2002, we entered into an interest rate swapwith a notional amount of $50.0 million, relating to $50.0 million of 7.20%fixed rate notes issued under our Medium-term notes program.  Under the interest rate swap agreement,through the maturity date of August 15, 2007, (a) we agreed to pay tothe counterparty the interest on a $50.0 million notional amount at a floatinginterest

 

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rate of three-month LIBOR plus 241.75 basis points, and (b) thecounterparty agreed to pay to us the interest on the same notional amount atthe fixed rate of the underlying debt obligation.  The swap was designated as a fair value hedgeof the underlying fixed rate debt obligation and had been recorded in “Otherassets” in our consolidated balance sheets.

 

On March 18, 2005, we terminated the interestrate swap and received $0.6 million from the counterparty.  In accordance with SFAS No. 133, “Accountingfor Derivative Instruments and Hedging Activities,” we are recording the $0.6million as a reduction of interest expense over the period beginning from thetermination date through the maturity date of the underlying debt obligation ofAugust 15, 2007.

 

On June 21, 2005, we, along with Camden andWachovia Bank (the “Trustee”) entered into Supplemental Indenture No. 5(the “Supplemental Indenture”) to the Indenture, dated as of August 7,1997, between the Trustee and ourselves, as amended (the “Indenture”), underwhich our senior debt securities (the “Notes”) were previously issued. Pursuantto the Supplemental Indenture, holders of the Notes and the Trustee willreceive periodic and other reports required under the Securities Exchange Actof 1934, as amended, of Camden rather than our reports and Camden agreed toguarantee all of our obligations under the Notes and the Indenture.

 

**7.  Net Change in Operating Accounts**

 

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

 
| **(in thousands)**                      | ** ** | **For the four  Months ended  June 30,  2005** | ** ** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the six  months ended  June 30,  2004** | ** ** |
|-----------------------------------------|------------|-----------------------------------------------------|------------|------------|--------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                              | ** ** | **(Successor)**                                     | ** ** | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                  | ** ** |
| (Increase) decrease in  assets:         |       |                                                |       |       |                                                   |       |                                               |       |
| Other assets, net                       |       | $                                                   | 3,413      |       |                                                   | $          | 1,427                                              |       | $ | (745 | ) |
|                                    |       |                                                |       |       |                                                   |       |                                               |       |
| Increase (decrease) in  liabilities:    |       |                                                |       |       |                                                   |       |                                               |       |
| Accounts payable                        |       | (5,671                                              | )          |       | (2,287                                                 | )          | 2,189                                              |       |
| Accrued real estate  taxes              |       | 6,480                                               |       |       | (236                                                   | )          | 4,620                                              |       |
| Accrued expenses and  other liabilities |       | 3,100                                               |       |       | (2,975                                                 | )          | 1,179                                              |       |
| Net change in operating  accounts       |       | $                                                   | 7,322      |       |                                                   | $          | (4,071                                             | )          | $ | 7,243 |   |

 

**8.Preferred Units**

 

On January 21,2005, we redeemed all 2.2 million preferred units of limited partnershipinterest designated as 8.75% Series C Cumulative Redeemable PerpetualPreferred Units for cash in the amount of $25.00 per unit plus all unpaiddistributions through the redemption date. These preferred units wereredeemable for cash at a redemption price equal to the holder’s capitalaccount. The holder of the Series C preferred units had the right toexchange these preferred units for shares of Summit’s Series C preferredstock on a one-for-one basis, subject to adjustment: (a) on or after September 3,2009, (b) if full quarterly distributions are not made for six quarters, (c) uponthe occurrence of specified events related to our treatment or the treatment ofthe preferred units for federal income tax purposes, or (d) if theholdings in the Operating Partnership of the Series C unitholder exceeded18% of the total profits of or capital interest in the Operating Partnershipfor a taxable year. Distributions on the Series C preferred units werecumulative from the date of original issuance and were payable quarterly at therate of 8.75% per year of the $25.00 original capital contribution. We madedistributions to the holders of the Series C preferred units in theaggregate amount of $0.3 million during the six months ended June 30, 2005,respectively, and $1.2 million and $2.4 million during the three and six monthsended June 30, 2004, respectively. As a result of the redemption, the excess of the redemption amount overthe carrying amount of the units, which totals $1.5 million, reduced incomeavailable to common unitholders for the year ended December 31, 2004.

 

**9.Related Parties**

 

Subsequent to the completion of the merger,Camden now provides certain corporate support services to us including generaland administrative and property management services.  Costs incurred by Camden which are clearlyapplicable to us are included in our consolidated statements ofoperations.  Certain costs were allocatedto us by Camden based upon our total revenues using Camden’s consolidatedcorporate level expenses as a percentage of their consolidated totalrevenues.  Costs allocated totaled $4.4 millionfor the four months ended June 30, 2005. The amounts allocated to us by Camden are not necessarily indicative ofcosts which may have been incurred had we operated as an entity unaffiliatedwith Camden due to operational synergies and cost savings

 

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Camdenhas achieved as a result of the merger. However, we believe the allocation is reasonable and in accordance withthe SEC’s Staff Accounting Bulletin No. 55.

 

At the effective time of the merger, we had notesreceivable outstanding totaling $3.9 million from nine current and formeremployees.  Subsequent to the merger, fiveborrowers paid off their loans totaling $1.8 million.  At June 30, 2005, the notes receivablehad an outstanding balance of $2.1 million. As of July 21, 2005, the employee notes receivable were 100%secured by Camden common shares.

 

**10.Commitments and Contingencies**

 

*Construction Contracts. *As of June 30, 2005,we were obligated for approximately $64.4 million of additional expenditures onour four wholly-owned projects currently under development (a substantialamount of which we expect to be funded with our secured intercompany line ofcredit).

 

*Contingencie*s. On October 6, 2004, a purported class action complaint was filed inthe General Court of Justice, Superior Court Division, of the State of NorthCarolina, County of Mecklenburg, by an alleged Summit stockholder.  This complaint named as defendants Camden,Summit and each member of the board of directors of Summit and principallyalleges that the merger of Camden and Summit and the acts of the Summit directorsconstitute a breach of the Summit defendants’ fiduciary duties to Summitstockholders. The plaintiff in the lawsuit sought, among other things (1) adeclaration that each defendant has committed or aided and abetted a breach offiduciary duty to the Summit stockholders, (2) to preliminarily andpermanently enjoin the merger, (3) to rescind the merger in the event thatit is consummated, (4) an order to permit a stockholders’ committee toensure an unspecified “fair procedure, adequate procedural safe-guards andindependent input by plaintiff” in connection with any transaction for Summitshares, (5) unspecified compensatory damages and (6) attorneys’fees.  On November 3, 2004, Camdenremoved the lawsuit to the United States District Court for the WesternDistrict of North Carolina, Charlotte Division, and filed an Answer andCounterclaim for declaratory judgment denying the plaintiff’s allegations ofwrongdoing.

 

On March 10, 2005,the parties to the action agreed on and executed a binding memorandum ofunderstanding setting forth the terms of a settlement of the litigation.  The parties also agreed, subject to theconditions described below, to enter into a stipulation of settlement and usebest efforts to gain approval of the settlement by the court.  Under the terms of the settlement, thedefendants admit to no wrongdoing or fault. The memorandum of understanding for the proposed settlement of thelitigation contemplates a dismissal of all claims with prejudice and a releasein favor of all defendants of any and all claims related to the merger thathave been or could have been asserted by the plaintiffs or any members of theputative class.  In connection withnegotiations relating to the memorandum of understanding, the parties agreed toinclude, and have included, in the joint proxy statement/prospectus relating tothe merger additional disclosures regarding the merger.

 

The memorandum ofunderstanding contemplates that the parties will enter into a settlementagreement.  The memorandum and the settlementwill be subject to the customary conditions, including final court approval ofthe settlement.  If the conditions aresatisfied, subject to final court approval of the settlement and dismissal ofthe action by the court with prejudice, the plaintiff’s counsel will seek andCamden, as successor to Summit, will pay an amount not to exceed in theaggregate $383,000 in settlement of this action for attorneys’ fees andexpenses.  Subject to any order of thecourt, any attorneys’ fees and expenses awarded by the court to plaintiff’scounsel will be paid by Camden, as successor to Summit, on behalf of alldefendants within five business days after final court approval of thesettlement.  All costs and expensesexpected to be incurred associated with this matter have been accrued for andare not material to our consolidated financial statements.

 

The defendants vigorouslydeny all liability with respect to the facts and claims alleged in this action,and specifically deny that any further supplemental disclosure was requiredunder any applicable rule, statute, regulation, or law.  However, the defendants considered itdesirable that these actions be settled to avoid the substantial burden,expense, risk, inconvenience and distraction of continued litigation and tofully and finally resolve the settled claims.

 

On May 25, 2001, through a joint venture withSZF, LLC, a Delaware limited liability company in which we owned 29.78% of thejoint venture until July 3, 2003, on which date we purchased its jointventure partner’s 70.22% interest.  Wethen entered into an agreement with Brickell View, L.L.C. (“Brickell View”), aFlorida limited liability company, and certain of its affiliates relating tothe formation of Coral Way, LLC, a Delaware limited liability company, todevelop a new community in Miami, Florida. Brickell View agreed to be the developer of that community and certainof its affiliates signed guarantees obligating them to pay certain costsrelating to the development.  On August 12,2003, we received notice of two suits filed by Brickell View and certain of itsaffiliates against SZF, LLC and certain entities affiliated with us.  The suits were originally filed in theMiami-Dade Circuit Court and were subsequently removed to the U.S. DistrictCourt for the Southern District of Florida. One of the suits was remanded to the Miami-Dade Circuit Court, while theother remains pending in the U.S. District Court.  These suits relate to the business agreementamong the parties in connection with the development and construction of thecommunity by Coral Way.  Brickell Viewand its affiliates

 

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allege breach of contract, breach of implied covenant of good faith andfair dealing, breach of fiduciary duties and constructive fraud on the part ofSZF, LLC and constructive fraud on our part, including our affiliates, and seekboth a declaratory judgment that the guarantee agreements have beenconstructively terminated and unspecified monetary damages.  We intend to enforce our rights under thejoint venture agreements.  Although wemay determine to terminate the development agreement based on Brickell View’sfailure to perform its obligations in accordance with the developmentagreement, we do not believe that there is any basis for allowing Brickell Viewor its affiliates to be released from their obligations under the developmentagreement or the guarantees.  We believethat the allegations made by Brickell View and its affiliates are not supportedby the facts and we intend to vigorously defend against these suits.  On December 19, 2003, we received noticeof a demand for arbitration asserted by Bermello, Ajamil & Partners, Inc.against Coral Way, LLC for unpaid architectural fees.  In this demand, Bermello, Ajamil &Partners, Inc. allege that they are entitled to an increased architecturalfee as a result of an increase in the cost of the project.  We believe that the allegations made byBermello, Ajamil & Partners, Inc. are not supported by the facts,and we will vigorously defend against this claim.  Additionally, we have asserted a cross-claimagainst Bermello, Ajamil & Partners, Inc. for damages related tothe cost to correct certain structural and other design defects.  All costs and expenses expected to be incurredassociated with this matter have been accrued for and are not material to ourconsolidated financial statements.

 

On May 6, 2003, we purchased certain assets ofBrickell Grand, Inc. (“Brickell Grand”), including the community known asSummit Brickell.  At the time ofpurchase, Summit Brickell was subject to a $4.1 million claim of constructionlien filed by the general contractor, Bovis Lend Lease, Inc. (“Bovis”),due to Brickell Grand’s alleged failure to pay the full amount of theconstruction costs.  Bovis sought toenforce this claim of lien against Brickell Grand in a suit filed on October 18,2002 in Miami-Dade Circuit Court, Florida. In mid-2003, litigation with Bovis was temporarily stayed pendingmediation.  In September 2003, Bovisfiled an amended complaint seeking to enforce an increased claim of lien of$4.6 million.  Mediation with Bovis endedunsuccessfully in November 2003. The litigation is proceeding in the Miami-Dade Circuit Court.  As the current owner of Summit Brickell,which property is subject to the claim of lien, we are vigorously defendingagainst these claims of lien and related litigation.  As a result of several items claimed by Bovisin its amended claim of lien, we are asserting a counterclaim for a fraudulentmechanic’s lien, as well as counterclaims for breach of contract and breach ofwarranties.  In early 2004, threesubcontractors of Bovis, Gulf Plumbing, Inc., Big Bear Plastering, Inc.and Kone, Inc., filed separate suits in Miami-Dade Circuit Court againstBrickell Grand, Bovis, the Camden Summit Partnership and other named parties toenforce claims of construction lien and/or claims against the contractor’s bondin an aggregate amount of approximately $600,000 filed due to the defendants’alleged failure to pay the full amount of the construction cost.  All of these claims have been voluntarilydismissed.  In January 2005,Brickell Grand, Inc. filed suit in Miami-Dade Circuit Court, Florida,asserting claims for breach of contract and fraud in the inducement, allegingthat we had an obligation toindemnify Brickell Grand, Inc. in the Bovis lawsuit and that we had failed to properly market theapartments, increasing Brickell Grand Inc.’s cost overrun obligations.  Brickell Grand, Inc. also claims that we misappropriated its identity byfiling eviction actions in its name.  Webelieve that these allegations made by Brickell Grand, Inc. are notsupported by the facts, and intend to vigorously defend against theseclaims.  On May 31, 2005, we paid Bovis $1.3million to be credited against amounts owed to Bovis.  By paying the $1.3 million, we in no wayrelease our claims against Bovis for construction–related defects or any ofBovis’ warranty obligations related to the Summit Brickell property.  We continue to believe that these allegationsmade by Brickell Grand, Inc. are not supported by the facts, and intend tovigorously defend against these claims. All costs and expenses expected to be incurred associated with thismatter have been accrued for and are not material to our consolidated financialstatements.

 

We are the developer for oneapartment community which is owned by a third party.  Under the development and other relatedagreements, we have guaranteed certain aspects relating to the construction,lease-up and management of that apartment community.  We have also committed to fund certaindevelopment cost overruns, if any, and lease-up losses.  We have evaluated our commitments andobligations under these agreements and determined that no accrual or charge isnecessary as the overall development economics are profitable.  We began marketing and leasing activities inthe first quarter of 2005 and believe that the construction will be completedduring the second quarter of 2005.

 

We are currently in the due diligence period forcertain dispositions.  No assurance canbe made that we will be able to complete the negotiations or become satisfiedwith the outcome of the due diligence.

 

We are subject to various legal proceedings and claimsthat arise in the ordinary course of business. These matters are generallycovered by insurance. While the resolution of these matters cannot be predictedwith certainty, management believes that the final outcome of such matters willnot have a material adverse effect on our consolidated financial statements.

 

*Lease commitments*.  At June 30, 2005, we had long-termoperating leases covering certain land, office facilities and equipment.  Rental expense totaled $52,000 and $98,000for the three and six months ended June 30, 2005 compared to $9,000 and $78,000for the three and six months ended June 30, 2004.  Minimum annual rental commitments for theremaining six months of 2005 are $0.1 million, and for the years ending December 31,2006 through 2009 are $0.2 million, $0.2 million, $0.2 million, and $0.1million, respectively, and $0.1 million in the aggregate thereafter.

 

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**11.  Post Retirement Benefits**

 

Summit had employment agreements with William B.McGuire and William F. Paulsen that terminated on December 31, 2011.  Each employment agreement entitled each ofthese employees to a base salary aggregating up to $2.1 million over the periodfrom July 1, 2001 to December 31, 2011 (beginning with calendar year2002, up to $200,000 on an annual basis). Each employment agreement provided each former officer with the right toparticipate in Summit’s life insurance plan as well as a requirement to provideoffice space, information systems support and administrative support for theremainder of each employee’s life, and participation in Summit’s health anddental insurance plans until the last to die of the employee or such employee’sspouse.  Either party could terminate theemployment agreements effective 20 business days after written notice was given.  The full base salary amount due would bepayable through 2011 whether or not the agreements were terminated earlier inaccordance with their terms.  Summitamended the employment agreements, effective July 1, 2004.  The amendments provide for additionalpayments to the employees and eliminated the provision to provide office space,information systems support and administrative support.  The additional annual payments were $100,000for one of the employees and $70,000 to the other employee and each was subjectto a yearly increase based on the Consumer Price Index.

 

Camden Summit has entered into a separation agreementwith each of Messrs. McGuire and Paulsen. Each separation agreement was effective as of the effective time of themerger of Summit and of Camden Summit, which occurred on February 28,2005.  Pursuant to the respectiveseparation agreement, as of the effective time of the merger, Messrs. McGuireand Paulsen resigned as an officer and director of Summit and all entitiesrelated to Summit, and the respective employment agreement between Summit andeach such executive was terminated.  Alsopursuant to the respective separation agreement, each such executive receivedpayments totaling $1.0 million and other benefits approximately equivalent tothose he was entitled to receive upon termination of employment pursuant to hisemployment agreement with Summit.

 

The other benefitsreceived by Messrs. McGuire and Paulsen are considered post retirementbenefits.  As of June 30, 2005, wehad accrued $3.2 million associated with these post retirementliabilities.  Net periodic benefit cost,relating entirely to interest cost, was $0.1 million for the six months ended June 30,2005.  We have not made any contributionsas of June 30, 2005, nor do we expect to make any contributions for theremainder of 2005.

 

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**Item2.  *Management’sDiscussion and Analysis of Financial Condition and Results of Operations***

 

The following discussion should be read in conjunctionwith all of the consolidated financial statements and notes appearing elsewherein this report as well as the audited consolidated financial statementsappearing in Camden Summit Partnership, L.P.’s (“Camden Summit Partnership”) Form 10-Kfor the year ended December 31, 2004.  The statements contained in this report thatare not historical facts are forward-looking statements, and actual results maydiffer materially from those included in the forward-looking statements. Theseforward-looking statements involve risks and uncertainties including, but notlimited to, the following:

 

•                  the resultsof our efforts to implement our property development and constructionstrategies;

•                  the effectsof economic conditions, including rising interest rates;

•                  our abilityto generate sufficient cash flows;

•                  the costs ofour capital and debt;

•                  competition,which could limit our ability to secure attractive investment opportunities,lease apartment homes, or increase or maintain rents;

•                  changes inour capital requirements;

•                  changes ingovernmental regulations, tax rates and similar matters;

•                  environmentaluncertainties and disasters; and

•                  supply anddemand for apartment communities in our current market areas.

 

Do not rely on these forward-looking statements,which only represent our estimates and assumptions as of the date of thisreport.  We assume no obligation toupdate or revise any forward-looking statement.

 

**Business**

 

On February 28, 2005, Summit PropertiesInc. (“Summit”) was merged with and into Camden Summit, Inc. (“CamdenSummit”), a wholly-owned subsidiary of Camden Property Trust (“Camden”), pursuantto an Agreement and Plan of Merger dated as of October 4, 2004 (the “MergerAgreement”), as amended.  Prior to theeffective time of the merger, Summit was the sole general partner of SummitProperties Partnership, L.P. (the “Camden Summit Partnership” or “us” or “we”),and at the effective time, Camden Summit became the sole general partner of theCamden Summit Partnership and the name of this partnership was changed toCamden Summit Partnership, L.P.

 

The consummation of the merger effected a changein control of the Camden Summit Partnership. Prior to the effective time of the merger, Summit was the generalpartner of the Camden Summit Partnership and held 348,086 general partnerunits, representing a 1% general partnership interest, and 31,117,541 limitedpartner units, representing an 89.4% limited partnership interest.  The remaining 3,343,004 limited partner unitswere held by the outside limited partners. As of the effective time of the merger, Camden Summit became the generalpartner of the Camden Summit Partnership and held 232,765.108 general partnerunits, representing a 1% general partnership interest, and 20,808,299.667limited partner units, representing a 91.2% limited partnership interest.  The remaining 1,769,281 units, representing a7.8% limited partner interest, were heldby outside limited partners.  Each commonlimited partnership unit is redeemable for one common share of Camden.

 

In conjunction with the merger, the limitedpartners in the Camden Summit Partnership were offered, on a unit-by-unitbasis, the opportunity to redeem their partnership units for $31.20 in cash,without interest, or to remain in the Camden Summit Partnership following themerger at a unit valuation equal to .6687 of a Camden common share.  The limited partner elections resulted inCamden redeeming 0.7 million partnership units for cash, for an aggregate of$21.7 million, and issuing 1.8 million partnership units.  The value of the common shares andpartnership units issued was determined based on the average market price ofCamden’s common shares for the five day period commencing two days prior to theannouncement of the merger on October 4, 2004.  Subsequent to the merger, 0.1 millionpartnership units have been redeemed for $5.3 million.

 

Camden Summit Partnership, L.P. is a Delaware limitedpartnership and a subsidiary of Camden Summit, which is a wholly-ownedsubsidiary of Camden, a Texas real estate investment trust.  Camden conducted a portion of its businessthrough the Camden Summit Partnership and its subsidiaries.  As ofJune 30, 2005, Camden held 91.7% of our common limited partnership unitsas well as the sole 1% general partnership interest.  The remaining 7.3% of the common limited partnershipunits were held by outside limited partners.

 

We focus on the operation, development and acquisitionof luxury apartment communities in select neighborhoods throughout theSoutheast and Mid-Atlantic United States. We focus our efforts in five markets: Washington, D.C., SoutheastFlorida, Atlanta, Raleigh and Charlotte. As of June 30, 2005, our portfolio consisted of 49 completedcommunities comprising 15,422 apartment homes with an additional 1,414apartment homes under construction at four communities.

 

17

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Property Portfolio

 

Our multifamily propertyportfolio, excluding land held for future development is summarized as follows:

 
| ** **                              | ** ** | **June 30, 2005** | ** ** | **December 31, 2004** | ** ** |
|-----------------------------------------|------------|------------------------|------------|----------------------------|------------|
| ** **                              | ** ** | **Apartment  Homes**   | ** ** | **Properties**             | ** ** | **Apartment  Homes** | ** ** | **Properties** | ** ** |
| **Operating  Properties**               |       |                   |       |                       |       |   |   |   |   |
| Charlotte, North  Carolina (a)          |       | 3,134                  |       | 13                         |       | 3,134 |   | 13 |   |
| Atlanta, Georgia                        |       | 3,633                  | ** ** | 11                         |       | 3,633 | ** ** | 11 | ** ** |
| D.C. Metro                              |       | 2,882                  | ** ** | 9                          |       | 2,882 | ** ** | 9 | ** ** |
| Raleigh, North Carolina  (a)            |       | 2,631                  |       | 7                          |       | 2,631 |   | 7 |   |
| Southeast Florida                       |       | 2,520                  |       | 7                          |       | 2,100 |   | 6 |   |
| Other                                   |       | 622                    |       | 2                          |       | 622 |   | 2 |   |
| **Total  Operating Properties**         |       | 15,422                 |       | 49                         |       | 15,002 |   | 48 |   |
| **Properties  Under Development**       |       |                   |       |                       |       |   |   |   |   |
| D.C. Metro                              |       | 785                    |       | 2                          |       | 785 |   | 2 |   |
| Raleigh, North Carolina                 |       | 484                    |       | 1                          |       | 484 |   | 1 |   |
| Charlotte, North  Carolina              |       | 145                    |       | 1                          |       | 145 |   | 1 |   |
| Southeast Florida                       |       | —                 |       | —                     |       | 420 |   | 1 |   |
| **Total  Properties Under Development** |       | 1,414                  |       | 4                          |       | 1,834 |   | 5 |   |
| **Total  Properties**                   |       | 16,836                 |       | 53                         |       | 16,836 |   | 53 |   |
|                                    |       |                   |       |                       |       |   |   |   |   |
| Less: Joint Venture  Properties (a)     |       | 1,203                  |       | 4                          |       | 1,203 |   | 4 |   |
|                                    |       |                   |       |                       |       |   |   |   |   |
| **Total  Properties Owned 100%**        |       | 15,633                 |       | 49                         |       | 15,633 |   | 49 |   |

 

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*(a)**      **Includes properties held ina joint venture as follows:  threeproperties with 792 apartment homes in Charlotte, and one property with 411apartment homes in Raleigh in which we own a 25% interest, the remaininginterest is owned by an unaffiliated private investor.*

 

**DevelopmentProperties**

 

At June 30, 2005, we had four properties invarious stages of construction as follows:

 
| **($ in millions)****Property and Location** | ** ** | **Number of  Apartment  Homes** | ** ** | **Estimated  Cost** | ** ** | **Cost  Incurred  at 6/30/05** | ** ** | **Estimated  Date of  Completion** | ** ** | **Estimated  Date of  Stabilization** | ** ** |
|---------------------------------------------------|------------|---------------------------------|------------|---------------------|------------|--------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
|                                              |       |                            |       |                |       |                           |       |                               |       |                                  |       |
| *Camden  Dilworth*                                |       |                            |       |                |       |                           |       |                               |       |                                  |       |   |   |
| *Charlotte,  NC*                                  |       | 145                             |       | $                   | 18.0       |                           | $          | 7.5                                |       | 2Q06                                  |       | 3Q06 |   |
| *Camden  Fairfax*                                 |       |                            |       |                |       |                           |       |                               |       |                                  |       |
| *Corner Fairfax, VA*                              |       | 488                             |       | 82.0                |       | 59.7                           |       | 3Q06                               |       | 1Q07                                  |       |
| *Camden  Clearbrook*                              |       |                            |       |                |       |                           |       |                               |       |                                  |       |
| *Frederick,  MD*                                  |       | 297                             |       | 45.0                |       | 17.4                           |       | 3Q06                               |       | 1Q07                                  |       |
| *Camden  Manor*                                   |       |                            |       |                |       |                           |       |                               |       |                                  |       |
| *Park Raleigh, NC*                                |       | 484                             |       | 52.0                |       | 32.1                           |       | 4Q06                               |       | 3Q07                                  |       |
| * *                                          |       |                            |       |                |       |                           |       |                               |       |                                  |       |
| Total                                             |       | 1,414                           |       | $                   | 197.0      |                           | $          | 116.7                              |       |                                  |       |   |   |

 

Where possible, we stage our construction to allowleasing and occupancy during the construction period, which we believeminimizes the duration of the lease-up period following completion ofconstruction.  Our accounting policyrelated to properties in the development and leasing phase is that alloperating expenses associated with completed apartment homes are expensed.

 

If an event or change in circumstance indicatesthat a potential impairment in the value of a property has occurred, our policyis to assess any potential impairment by making a comparison of the current andprojected cash flows for such property over its remaining holding period, on anundiscounted basis, to the carrying amount of the property.  If such carrying amounts were in excess ofthe estimated projected cash flows of the property, we would recognize animpairment loss equivalent to an amount required to adjust the carrying amountto its estimated fair value, less costs to sell.  As of June 30, 2005, we had one propertyin Atlanta, GA designated as held for sale with a value of $29.8 million whichapproximates our estimated fair value less costs to sell.

 

18

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Our consolidated balance sheet at June 30,2005 included $185.9 million related to wholly-owned properties under development.Of this amount, $116.7 million related to our four projects currently underdevelopment. Additionally, at June 30, 2005, we had $69.2 million investedin land held for future development.  Includedin this amount is $44.6 million related to projects we expect to beginconstructing in 2005.

 

**Results of Operations**

 

*Comparisonof the Three Months ended June 30, 2005 and June 30, 2004*

 

Income(loss) from continuing operations decreased $7.1 million, from $1.5 million to$(5.5) million for the three months ended June 30, 2004 and 2005,respectively.  The decrease in incomefrom continuing operations was due to many factors which included, but were notlimited to, increases in depreciation, amortization and interest related to ourmerger with Camden, partially offset by increases in net operating income.  Our primary financial focus for our apartmentcommunities is net operating income.  Netoperating income represents total property revenues less total propertyexpenses.  Net operating income increased$5.7 million, or 24.9%, from $22.9 million to $28.6 million for the threemonths ended June 30, 2004 and 2005, respectively.  See further discussion of net operating incomein our discussion of “Segment Reporting” in the notes to our consolidatedfinancial statements.  Comparisonsdiscussed below are made using the combined operations of the Predecessor andSuccessor for 2005 as compared to the Predecessor’s operations for the sameperiod in 2004.

 

Thefollowing table presents the components of net operating income for the threemonths ended June 30, 2005 and 2004:

 
| ** **                            | ** ** | ** **    | ** ** | **For the three** | ** ** | **For the three** | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------|------------|---------------|------------|-------------------|------------|-------------------|------------|------------|------------|------------|------------|
| ** **                            | ** ** | ** **    | ** ** | **months ended**  | ** ** | **months ended**  | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                            | ** ** | **Apartment** | ** ** | **June 30,** | ** ** | **June 30,** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                            | ** ** | **Homes at**  | ** ** | **2005**          | ** ** | **2004**          | ** ** | **Change** | ** ** |
| **(in thousands)**                    | ** ** | **6/30/05**   | ** ** | **(Successor)**   | ** ** | **(Predecessor)** | ** ** | **$**      | ** ** | **%**      | ** ** |
| **Property  revenues**                |       |          |       |              |       |              |       |       |       |       |       |
| Same store communities                |       | 11,083        |       | $                 | 34,009     |              | $          | 32,478     |       | $          | 1,531      |   | 4.7 | % |
| Non-same store  communities           |       | 2,705         |       | 8,763             |       | 1,633             |       | 7,130      |       | 436.6      |       |
| Development and  lease-up communities |       | 1,414         |       | —            |       | —            |       | —     |       | —     |       |
| Other                                 |       | —        |       | 874               |       | —            |       | 874        |       | 100.0      |       |
| Total property revenues               |       | 15,202        |       | 43,646            |       | 34,111            |       | 9,535      |       | 28.0       |       |
|                                  |       |          |       |              |       |              |       |       |       |       |       |
| **Property  expenses**                |       |          |       |              |       |              |       |       |       |       |       |
| Same store communities                |       | 11,083        |       | 11,557            |       | 10,457            |       | 1,100      |       | 10.5       |       |
| Non-same store  communities           |       | 2,705         |       | 3,521             |       | 775               |       | 2,746      |       | 354.3      |       |
| Development and  lease-up communities |       | 1,414         |       | —            |       | —            |       | —     |       | —     |       |
| Other                                 |       | —        |       | —            |       | —            |       | —     |       | —     |       |
| Total property expenses               |       | 15,202        |       | 15,078            |       | 11,232            |       | 3,846      |       | 34.2       |       |
|                                  |       |          |       |              |       |              |       |       |       |       |       |
| **Net  operating income**             |       |          |       |              |       |              |       |       |       |       |       |
| Same store communities                |       | 11,083        |       | 22,452            |       | 22,021            |       | 431        |       | 2.0        |       |
| Non-same store  communities           |       | 2,705         |       | 5,242             |       | 858               |       | 4,384      |       | 511.0      |       |
| Development and  lease-up communities |       | 1,414         |       | —            |       | —            |       | —     |       | —     |       |
| Other                                 |       | —        |       | 874               |       | —            |       | 874        |       | 100.0      |       |
| Total net operating  income           |       | 15,202        |       | $                 | 28,568     |              | $          | 22,879     |       | $          | 5,689      |   | 24.9 | % |

 

*Same storecommunities are communities we owned and were stabilized as of January 1,2004.  Non-same store communities are stabilizedcommunities we have acquired or developed after January 1, 2004.  Development and lease-up communities arenon-stabilized communities we have developed or acquired after January 1,2004.*

 

Totalproperty revenues for the three months ended June 30, 2005 increased $9.5million over 2004.  Property revenuesfrom our same store properties increased 4.7%, from $32.5 million for the threemonths ended June 30, 2004 to $34.0 million for the three months ended June 30,2005.  For same store properties, the primaryincrease was related to reductions in rent concessions and reductions invacancy loss.  Property revenues from ournon-same store and development and lease-up properties increased from $1.6million for the second quarter of 2004 to $8.8 million for the second quarterof 2005.  This increase was primarily dueto the revenues earned from the six apartment communities, or 1,581 apartmenthomes, acquired during the year ended December 31, 2004 and the revenuesrelated to development communities completed and stabilized over the past year.  Other property revenues during the threemonths ended June 30, 2005 relate to the amortization of below marketleases in place at the time of the merger.

 

Totalproperty expenses increased 34.2%, or $3.9 million, as compared to the sameperiod in 2004.  Property expenses forour same store communities increased 10.5% or $1.1 million for the secondquarter of 2005 as compared to the second quarter of 2004.  The increase was primarily due to payrollrelated expenses, increased repair and maintenance costs and higher propertytaxes

 

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offset bydecreases in marketing and leasing expenses. Non-same store and development and lease-up communities expensesincreased $2.7 million from $0.8 million for the second quarter 2004 as comparedto $3.5 million for the second quarter 2005.

 

Generaland administrative and property management expenses were $3.6 million and $3.4million for the three months ended June 30, 2004 and 2005, respectively.  General and administrative and propertymanagement expenses as a percent of total revenues decreased from 10.4% to 7.9%for the three months ended June 30, 2004 and 2005.  This decrease was primarily due to the costs allocatedto us by Camden based upon our total revenues using Camden’s consolidatedcorporate level expenses as a percentage of their consolidated total revenues.   Costs allocated totaled $3.4 million for the threemonths ended June 30, 2005.  Seefurther discussion of this allocation in our discussion of “Related Parties” inNote 9 to our Consolidated Financial Statements.

 

Interestexpense increased $1.4 million, from $7.6 million to $9.0 million, for the threemonths ended June 30, 2004 and 2005, respectively.  The increase was primarily a result ofadditional borrowings incurred during the past year related to our acquisitionand development properties.  Theseincreases were partially offset by reductions in interest from the amortizationof the fair value adjustments recorded on our notes payable in connection withour merger with Camden.  See furtherdiscussion of our notes payable in the “Liquidity and Capital Resources”section.

 

Depreciationand amortization expense for continuing operations increased $11.3 million,from $10.3 million to $21.6 million, for the three months ended June 30, 2004and 2005, respectively.  This increase wasprimarily due to additional depreciation and amortization of intangiblesrelated to in place leases as a result of our merger with Camden and newdevelopment and capital improvements placed in service during the past year.

 

Distributionsto preferred unitholders were $1.2 million for the three months ended June 30,2004.  We redeemed all outstandingpreferred units in January 2005. See further discussion of our preferred units in Note 8 to ourconsolidated financial statements.

 

During the three monthsended June 30, 2004, we sold one community, formerly known as Summit Square(362 apartment homes), located in Raleigh, North Carolina, for $22.5 million.  We recognized a gain on sale of $10.0 millionrelated to the sale of Summit Square.  Wealso sold one parcel of land for $88,000 during the three months ended June 30,2004.  This land was located at SummitSquare and was sold to the municipality in which it is located as an easementfor highway construction.  We recognizeda gain on sale of $47,000 related to this land.

 

*Comparisonof the Six Months ended June 30, 2005 and June 30, 2004*

 

Income(loss) from continuing operations decreased $20.8 million, from $3.0 million to$(17.8) million for the six months ended June 30, 2004 and 2005,respectively.  The decrease in incomefrom continuing operations was due to many factors which included, but were notlimited to, increases in depreciation and amortization, interest expense andmerger related expenses offset by increases in net operating income.  Our primary financial focus for our apartmentcommunities is net operating income.  Netoperating income represents total property revenues less total propertyexpenses.  Net operating income increased$10.9 million, or 24.7%, from $44.4 million to $55.3 million for the six monthsended June 30, 2004 and 2005, respectively.  See further discussion of net operatingincome in our discussion of “Basis of Presentation - Segment Reporting” in Note1 to our Consolidated Financial Statements. Comparisons discussed below are made using the combined operations ofthe Predecessor and Successor for 2005 as compared to the Predecessor’soperations for the same period in 2004.

 

20

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Thefollowing table presents the components of net operating income for the sixmonths ended June 30, 2005 and 2004:

 
| ** **                            | ** ** | ** **    | ** ** | **For the four**  | ** ** | **For the two**       | ** ** | **For the six**   | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------|------------|---------------|------------|-------------------|------------|-----------------------|------------|-------------------|------------|------------|------------|------------|------------|
| ** **                            | ** ** | ** **    | ** ** | **months ended**  | ** ** | **months ended**      | ** ** | **months ended**  | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                            | ** ** | **Apartment** | ** ** | **June 30,** | ** ** | **February 28,** | ** ** | **June 30,** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                            | ** ** | **Homes at**  | ** ** | **2005**          | ** ** | **2005**              | ** ** | **2004**          | ** ** | **Change** | ** ** |
| **(in thousands)**                    | ** ** | **6/30/05**   | ** ** | **(Successor)**   | ** ** | **(Predecessor)**     | ** ** | **(Predecessor)** | ** ** | **$**      | ** ** | **%**      | ** ** |
| **Property  revenues**                |       |          |       |              |       |                  |       |              |       |       |       |       |       |
| Same store communities                |       | 11,083        |       | $                 | 45,091     |                  | $          | 21,766            |       | $          | 64,464     |       | $          | 2,393 |   | 3.7 | % |
| Non-same store  communities           |       | 2,705         |       | 11,523            |       | 5,431                 |       | 2,502             |       | 14,452     |       | 577.6      |       |
| Development and  lease-up communities |       | 1,414         |       | —            |       | —                |       | —            |       | —     |       | —     |       |
| Other                                 |       | —        |       | 1,134             |       | —                |       | —            |       | 1,134      |       | 100.0      |       |
| Total property revenues               |       | 15,202        |       | 57,748            |       | 27,197                |       | 66,966            |       | 17,979     |       | 26.8       |       |
|                                  |       |          |       |              |       |                  |       |              |       |       |       |       |       |
| **Property  expenses**                |       |          |       |              |       |                  |       |              |       |       |       |       |       |
| Same store communities                |       | 11,083        |       | 15,367            |       | 7,268                 |       | 21,462            |       | 1,173      |       | 5.5        |       |
| Non-same store  communities           |       | 2,705         |       | 4,731             |       | 2,256                 |       | 1,130             |       | 5,857      |       | 518.3      |       |
| Development and  lease-up communities |       | 1,414         |       | —            |       | —                |       | —            |       | —     |       | —     |       |
| Other                                 |       | —        |       | —            |       | —                |       | —            |       | —     |       | —     |       |
| Total property expenses               |       | 15,202        |       | 20,098            |       | 9,524                 |       | 22,592            |       | 7,030      |       | 31.1       |       |
|                                  |       |          |       |              |       |                  |       |              |       |       |       |       |       |
| **Net  operating income**             |       |          |       |              |       |                  |       |              |       |       |       |       |       |
| Same store communities                |       | 11,083        |       | 29,724            |       | 14,498                |       | 43,002            |       | 1,220      |       | 2.8        |       |
| Non-same store  communities           |       | 2,705         |       | 6,792             |       | 3,175                 |       | 1,372             |       | 8,595      |       | 626.5      |       |
| Development and  lease-up communities |       | 1,414         |       | —            |       | —                |       | —            |       | —     |       | —     |       |
| Other                                 |       | —        |       | 1,134             |       | —                |       | —            |       | 1,134      |       | 100.0      |       |
| Total net operating  income           |       | 15,202        |       | $                 | 37,650     |                  | $          | 17,673            |       | $          | 44,374     |       | $          | 10,949 |   | 24.7 | % |

 

*Same storecommunities are communities we owned and were stabilized as of January 1,2004.  Non-same store communities arestabilized communities we have acquired or developed after January 1,2004.  Development and lease-upcommunities are non-stabilized communities we have developed or acquired after January 1,2004.*

 

Totalproperty revenues for the six months ended June 30, 2005 increased $18.0million over the same period in 2004. Property revenues from our same store properties increased 3.7%, from $64.5million for the first six months of 2004 to $66.9 million for the first sixmonths of 2005.  For same storeproperties, the primary increase was related to reductions in rent concessionspartially offset by increases in vacancy loss. Property revenues from our non-same store and development and lease-upproperties increased from $2.5 million for the six months ended June 30,2004 to $17.0 million for the same period in 2005.  This increase was primarily due to the revenuesrelated to the six apartment communities, or 1,581 apartment homes, acquiredduring the year ended December 31, 2004 and the revenues related todevelopment communities completed and stabilized over the past year.  Other property revenues during the six monthsended June 30, 2005 related to the amortization of below market leases inplace at the time of the merger.

 

Totalproperty expenses increased 31.1%, or $7.0 million, during the six months endedJune 30, 2005 as compared to the same period in 2004.  Property expenses for our same storecommunities increased 5.5%, or $1.2 million for the first six months of 2005 ascompared to the first six months of 2004. The increase was primarily due to increases in payroll related expensesand repair and maintenance costs offset by decreases in marketing and leasingexpenses.  Non-same store and developmentand lease-up communities expenses increased $5.9 million from $1.1 million forthe first six months of 2004 as compared to $7.0 million for the first sixmonths of 2005.

 

Generaland administrative and property management expenses increased a total of $1.0million, from $7.2 million to $8.2 million for the six months ended June 30,2004 and 2005, respectively.  This increasewas primarily due to legal, accounting and other professional costs incurredduring the first two months of 2005, prior to our merger with Camden.  General and administrative and propertymanagement expenses as a percent of total revenues was 7.6% for the four monthsended June 30, 2005 compared to 13.9% for the two months ended February 28,2005 and 10.6% for the six months ended June 30, 2004.  Subsequent to the completion of the merger,costs were allocated to us by Camden based upon our total revenues using Camden’sconsolidated corporate level expenses as a percentage of their consolidatedtotal revenues.   Costs allocated totaled$4.4 million for the four months ended June 30, 2005.  See further discussion of this allocation inour discussion of “Related Parties” in Note 9 to our Consolidated FinancialStatements.

 

Duringthe first six months of 2005, we incurred merger related expenses of $9.9million due to advisory and severance related costs associated with our mergerwith Camden.

 

Interestexpense increased $3.3 million, from $14.4 million to $17.7 million, for the sixmonths ended June 30, 2004 and 2005, respectively.  The increase was interest is a result ofadditional borrowings incurred during the past year related to our acquisitionand development properties.  Theseincreases were partially offset by reductions in interest from the amortizationof the

 

21

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fair valueadjustments recorded on our notes payable in connection with our merger withCamden.  See further discussion of ournotes payable in the “Liquidity and Capital Resources” section.

 

Depreciationand amortization expense for continuing operations increased $17.1 million,from $20.1 million to $37.2 million, for the six months ended June 30, 2004and 2005, respectively.  This increase wasprimarily due to additional depreciation and amortization of intangiblesrelated to in place leases as a result of our merger with Camden and newdevelopment and capital improvements placed in service during the past year.

 

Distributionsto preferred unitholders were $2.4 million for the six months ended June 30,2004, compared to $0.3 million for the same period in 2005.  The decrease was due to our redemption of alloutstanding preferred units in January 2005.  See further discussion of our preferred unitsin Note 8 to our consolidated financial statements.

 

Duringthe six months ended June 30, 2004, we sold one community, formerly known asSummit Square (362 apartment homes), located in Raleigh, North Carolina, for$22.5 million.  We recognized a gain onsale of $10.0 million related to the sale of Summit Square.  We also sold one parcel of land for $88,000during the six months ended June 30, 2004. This land was located at Summit Square and was sold to the municipalityin which it is located as an easement for highway construction.  We recognized a gain on sale of $47,000related to this land.

 

**Liquidityand Capital Resources**

 

*Liquidity*

 

We intend to meet our short-term and long-termliquidity requirements through cash flows provided by operations and oursecured intercompany line of credit with Camden discussed below.   We expect our ability to generate cash willbe sufficient to meet our liquidity needs which include:

 

(i)                                     operatingexpenses;

(ii)                                  debtservice requirements, including the repayment of maturing debt;

(iii)                               recurring capitalexpenditures;

(iv)                              fundingof property developments; and

(v)                                 distributionson our common units.

 

*Capital resources*

 

Ouroutstanding indebtedness on notes payable as of June 30, 2005 totaled $933.3million. This amount includes $505.0 million in conventional mortgages, $183.2million of unsecured notes, and $245.1 million under our $500 million securedintercompany line of credit.  For furtherdiscussion of our notes payable outstanding, including the fair valueadjustments recorded in connection with the merger, see Note 6 to ourConsolidated Financial Statements.

 

Inconnection with the merger, we repaid our $290 million secured credit facility,which had an outstanding balance of $188.5 million at the date of repayment,using proceeds received from a $500 million intercompany line of credit fromCamden.  This line of credit bearsinterest at 6%, has a ten-year term and is secured by the same elevencommunities which secured the credit facility.

 

As of January 1, 2005, we had $6.5 million ofcash and cash equivalents and $194.1 million available under our $290 millionsecured credit facility.  Afterconsidering the items discussed below and our cash provided by operatingactivities during the year of $2.8 million, as of June 30, 2005, we had $0.6million of cash and cash equivalents and $254.9 million available under our$500 million intercompany line of credit. During the six months ended June 30, 2005, we generated cashproceeds primarily from borrowings under our $290 million secured creditfacility and our $500 million intercompany line of credit.

 

Theproceeds were used primarily for:

 

•                  Repayment of all amounts outstandingunder our $290 million secured credit facility;

•                  Construction activities on propertiesunder development;

•                  Funding of capital expenditures andother improvements;

•                  Redemption of Series B preferredunits;

•                  Funding distributions to commonunitholders; and

•                  Payment of merger relatedliabilities.

 

Duringthe six months ended June 30, 2004, we generated cash proceeds fromvarious transactions, including:

 

•                  Proceeds received from sales ofproperties;

•                  Issuance of fixed-rate mortgagessecured by two communities; and

•                  Borrowings under our $290 millionsecured credit facility.

 

22

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Theproceeds in the first six months of 2004 were used primarily to fund:

 

•                  Construction activities on propertiesunder development;

•                  Acquisition of properties;

•                  Repayment of construction loans; and

•                  Funding of capital expenditures andother improvements.

 

### ***Contractual Obligations***

### * *

The following tablesummarizes our known contractual obligations as of June 30, 2005:

 
| **(in millions)**                        | ** ** | **Total** | ** ** | **2005** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **Thereafter** | ** ** |
|------------------------------------------|------------|-----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|
| Debt maturities                          |       | $         | 933.3      |     | $          | 39.1     |       | $        | 36.8       |     | $          | 68.2     |       | $              | 183.4      |   | $ | 78.5 |   | $ | 527.3 |   |
| Non-cancelable operating  lease payments |       | 0.9       |       | 0.1      |       | 0.2      |       | 0.2      |       | 0.2      |       | 0.1      |       | 0.1            |       |
| Construction contracts                   |       | 64.4      |       | 42.2     |       | 22.2     |       | —   |       | —   |       | —   |       | —         |       |
|                                     |       | $         | 998.6      |     | $          | 81.4     |       | $        | 59.2       |     | $          | 68.4     |       | $              | 183.6      |   | $ | 78.6 |   | $ | 527.4 |   |

 

***Inflation***

 

Welease apartments under lease terms generally ranging from 6 to 13 months.  Management believes that such short-termlease contracts lessen the impact of inflation due to the ability to adjustrental rates to market levels as leases expire.

 

***Critical Accounting Policies***

 

TheSecurities and Exchange Commission (“SEC”) has issued guidance for thedisclosure of “critical accounting policies.” The SEC defines “critical accounting policies” as those that are mostimportant to the presentation of a company’s financial condition and results,and require management’s most difficult, subjective or complex judgments, oftenas a result of the need to make estimates about the effect of matters that areinherently uncertain.  We followfinancial accounting and reporting policies that are in accordance withgenerally accepted accounting principles. The more significant of these policies relate to cost capitalization andasset impairment, which are discussed in Note 1 of our Consolidated FinancialStatements, income recognition, acquisition of assets and capital expenditures,which are discussed below.

 

*Income recognition.* Our rental and other property income is recorded when due from residentsand is recognized monthly as it is earned. Other property income consists of administrative, application and othertransactional fees charged to our residents. Interest, fee and asset management, and all other sources of income arerecognized as earned.

 

*Acquisition of assets. *Upon the acquisition of real estate, we assess thefair value of acquired assets, including land, buildings, the value of in-placeleases, above and below market leases, and acquired liabilities.  We then allocate the purchase price of theacquired property based on these assessments. We assess fair value based on estimated cash flow projections andavailable market information.

 

*Capital expenditures. *We capitalize renovation and improvement costs that webelieve extend the economic lives and enhance the earnings of the relatedassets.   Capital expenditures, includingcarpet, appliances and HVAC unit replacements, subsequent to initialconstruction are capitalized and depreciated over their estimated useful lives,which range from 3 to 20 years.

 

Thepreparation of our financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities at the date of theconsolidated financial statements, results of operations during the reportingperiods and related disclosures.  Ourmore significant estimates relate to estimates supporting our impairmentanalysis related to the carrying value of our real estate assets and estimatesof the useful lives of our assets. Actual results could differ from those estimates.

 

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***Impact of New Accounting Pronouncements***

 

In December 2004,the Financial Accounting Standards Board (“FASB”) issued Statement ofFinancial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-BasedPayments (SFAS 123R).” SFAS 123R requires all share-based payments toemployees, including grants of employee stock options, to be recognized over theirvesting periods in the income statement based on their estimated fair values.In April 2005, the Securities and Exchange Commission (“SEC”) issueda press release announcing it would provide for a phased-in implementationprocess for SFAS 123R. SFAS 123R is effective for all public entities in thefirst annual reporting period beginning after June 15, 2005 which, for uswould be the calendar year of 2006. As a result of the SEC’s announcement, weare in the process of assessing the impact of SFAS 123R and have not determinedwhat impact, if any, our adoption of SFAS 123R will have on our financialposition, results of operations or cash flows.

 

In December 2004, FASB issued SFAS No. 153, “Exchangeof Nonmonetary Assets, an amendment of APB Opinion No. 29,” whichaddresses the measurement of exchanges of nonmonetary assets.  SFAS No. 153 eliminates the exceptionfor nonmonetary exchanges of similar productive assets and replaces it with ageneral exception for exchange of nonmonetary assets that do not havecommercial substance.  It also specifiesthat a nonmonetary exchange has commercial substance if the future cash flowsof the entity are expected to change significantly as a result of the exchange.  SFAS No. 153 is effective beginning July 1,2005.  The adoption of SFAS No. 153will not have a material impact on our financial position, results ofoperations or cash flows.

 

In March 2005, the FASB issued FASB StaffPosition (“FSP”) FASB Interpretation (“FIN”) 46R-5, “Implicit Variable Interestunder FASB Interpretation No. 46 (revised December 2003), *Consolidation of Variable Interest Entities*.”  This FSP requires a reporting entity toconsider whether it holds an implicit variable interest in a variable interestentity (“VIE”) or potential VIE.  FSP FIN46R-5 is effective with reporting periods beginning after March 3,2005.  The adoption of FSP FIN 46R-5 did nothave a material impact on our financial position, results of operations or cashflows.

 

In May 2005, the FASB issued SFAS No. 154, “AccountingChanges and Error Corrections, a replacement of APB Opinion No. 20 andFASB Statement No. 3.”  SFAS No. 154changes the requirements for and reporting of a change in accountingprinciple.  SFAS No. 154 requiresthat a voluntary change in accounting principle be applied retrospectively withall prior period financial statements presented on the new accountingprinciple, unless it is impracticable to do so. This Statement also providesthat (1) a change in method of depreciating or amortizing a long-livednonfinancial asset be accounted for as a change in estimate (prospectively)that was effected by a change in accounting principle, and (2) correctionsof errors in previously issued financial statements should be termed a “restatement.”The new standard is effective for accounting changes and correction of errorsmade in fiscal years beginning after December 15, 2005.  We do not expect that the adoption of SFAS No. 154will have a material impact on our financial position, results of operations orcash flows.

 

In June 2005, the FASB issued Emerging IssuesTask Force (“EITF”) Issue No. 04-05, “Determining Whether a GeneralPartner, or the General Partners as a Group, Controls a Limited Partnership orSimilar Entity When the Limited Partners Have Certain Rights.”  EITF Issue No. 04-05 provides aframework for determining whether a general partner controls, and shouldconsolidate, a limited partnership or a similar entity.  EITF Issue No. 04-05 is effective after June 29,2005, for all newly formed limited partnerships and for any pre-existinglimited partnerships that modify their partnership agreements after thatdate.  General partners of all otherlimited partnerships are required to apply the consensus no later than the beginningof the first reporting period in fiscal years beginning after December 15,2005.  We do not expect that the adoptionof EITF Issue No. 04-05 will have a material impact on our financialposition, results of operations or cash flows.

 

In June 2005, the FASB issued FSP 78-9-1, “Interactionof AICPA Statement of Position 78-9 and EITF Issue No. 04-05.”  The EITF acknowledged that the consensus inEITF Issue No. 04-05 conflicts with certain aspects of Statement ofPosition (“SOP”) 78-9, “Accounting for Investments in Real Estate Ventures.”  The EITF agreed that the assessment ofwhether a general partner, or the general partners as a group, controls alimited partnership should be consistent for all limited partnerships,irrespective of the industry within which the limited partnership operates.  Accordingly, the guidance in SOP 78-9 wasamended in FSP 78-9-1 to be consistent with the guidance in EITF Issue No. 04-05.  The effective dates for this FSP are the sameas those mentioned above in EITF Issue No. 04-05.  We do not expect that the adoption of FSP 78-9-1will have a material impact on our financial position, results of operations orcash flows.

 

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***Item 3.  Quantitative and Qualitative Disclosuresabout Market Risk***

 

No material changes have occurred since our AnnualReport on Form 10-K for the year ended December 31, 2004.

 

***Item 4.  Controls and Procedures***

 

Under the supervision andwith the participation of Camden Summit’s Chief Executive Officer (“CEO”) andChief Financial Officer (“CFO”), management has evaluated the effectiveness ofthe design and operation of our disclosure controls and procedures (as definedin Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Actof 1934) as of June 30, 2005.  Basedon that evaluation, the CEO and CFO concluded that our disclosure controls andprocedures were effective as of June 30, 2005.

 

In connection with our merger with Camden, ourinternal controls, including our internal control over financial reporting (asdefined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act)were converted to the internal control processes in place at Camden.  Camden’s management assessed their internalcontrol over financial reporting as of December 31, 2004 and has concludedthat it was effective.  Additionally, therewere no changes in Camden’s internal control over financial reporting duringthe quarter ended June 30, 2005 that has materially affected, or isreasonably likely to materially affect, their internal control over financialreporting.

 

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**PART II**

 

**Item 1.  *LegalProceedings***

 

For furtherdiscussion regarding legal proceedings, see Note 10 to the ConsolidatedFinancial Statements.

 

***Item 2.  Unregistered Sales ofEquity Securities and Use of Proceeds***

 

None

 

***Item 3.  Defaults Upon Senior Securities***

 

None

 

***Item 4.  Submissionof Matters to a Vote of Security Holders***

 

None

 

***Item 5.  Other Information***

 

None

 

**Item 6.  *Exhibits***

 

(a)                             Exhibits

 
| 31.1   | Certification by  Chief Executive Officer pursuant to Rule 13a-14(a) of Chief  Executive Officer dated August 11, 2005. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                   |
| 31.2   | Certification by  Chief Financial Officer pursuant to Rule 13a-14(a) of Chief  Financial Officer dated August 11, 2005. |
|   |                                                                                                                                   |
| 32.1   | Certification  Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906  of the Sarbanes-Oxley Act of 2002.    |

 

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**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 

 
|                  | CAMDEN SUMMIT  PARTNERSHIP, L.P.                   |
|-----------------------|----------------------------------------------------|
|                  |                                               |
|                  | By: Camden  Summit, Inc., its general partner |
|                  |                                               |
| August 11,  2005 | By:                                                |  /s/ Dennis  M. Steen |   |
|                  |                                               |  Dennis M.  Steen |
|                  |                                               |  Chief  Financial Officer,   Senior Vice President - Finance and Secretary |

 

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