**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 thequarterly period ended March 31, 2005**

 

**OR**

 

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

 

**For the transition period from                     to                     **

 

**Commissionfile number 0-22411**

 

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

(Exact name ofregistrant as specified in its charter)

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

 

**(713) 354-2500**

(Registrant’s telephonenumber, including area code)

 

**N/A**

(Former name, formeraddress and former fiscal year, if changed since last report)

 

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

 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the ExchangeAct).  o   Yes          ý   No

 

 

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**TABLE OF CONTENTS**

 
| **PART I**  | **Financial  Information**                                                                                                                                                                                                            | ** ** |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|             |                                                                                                                                                                                                                                  |       |
| Item 1           | Financial Statements                                                                                                                                                                                                                  |       |
|             | Consolidated Balance Sheets  (Unaudited) as of March 31, 2005 (Successor) and December 31, 2004  (Predecessor)                                                                                                              | 2          |
|             | Consolidated  Statements of Operations (Unaudited) for the one month ended March 31,  2005 (Successor), the two months ended February 28, 2005 (Predecessor),  and the three months ended March 31, 2004 (Predecessor) | 3          |
|             | Consolidated  Statements of Cash Flows (Unaudited) for the one month ended March 31,  2005 (Successor), the two months ended February 28, 2005 (Predecessor),  and the three months ended March 31, 2004 (Predecessor) | 4          |
|             | Notes to  Consolidated Financial Statements (Unaudited)                                                                                                                                                                               | 5          |
| Item  2          | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                           | 15         |
| Item  3          | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                                                                           | 20         |
| Item 4           | Controls and Procedures                                                                                                                                                                                                               | 20         |
|             |                                                                                                                                                                                                                                  |       |
| **PART II** | **Other Information**                                                                                                                                                                                                                 | ** ** |
|             |                                                                                                                                                                                                                                  |       |
| Item 1           | Legal Proceedings                                                                                                                                                                                                                     | 21         |
| Item  2          | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                                                                                                                          | 21         |
| Item 3           | Defaults Upon  Senior Securities                                                                                                                                                                                                      | 21         |
| Item  4          | Submission  of Matters to a Vote of Security Holders                                                                                                                                                                                  | 21         |
| Item 5           | Other Information                                                                                                                                                                                                                     | 21         |
| Item 6           | Exhibits                                                                                                                                                                                                                              | 21         |
|             | Signatures                                                                                                                                                                                                                            | 22         |

 

1

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**PART I. FINANCIAL INFORMATION**

**Item 1.Financial Statements**

 

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

**CONSOLIDATED BALANCE SHEETS**

**(Dollars in thousands)**

**(Unaudited)**

 
| ** **                                   | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|----------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                   | ** ** | **(Successor)**          | ** ** | **(Predecessor)**           | ** ** |
| Assets:                                      |       |                     |       |                        |       |
| Real estate assets, at cost                  |       |                     |       |                        |       |
| Land                                         |       | $                        | 297,169    |                        | $          | 248,018 |   |
| Buildings and improvements                   |       | 1,521,955                |       | 1,117,508                   |       |
|                                         |       | 1,819,124                |       | 1,365,526                   |       |
| Accumulated depreciation                     |       | (4,009                   | )          | (156,913                    | )          |
| Net operating real estate assets             |       | 1,815,115                |       | 1,208,613                   |       |
| Properties under development, including land |       | 163,488                  |       | 219,137                     |       |
| Investment in joint ventures                 |       | 2,620                    |       | 2,716                       |       |
| Property held for sale                       |       | 31,424                   |       | 31,348                      |       |
| Total real estate assets                     |       | 2,012,647                |       | 1,461,814                   |       |
|                                         |       |                     |       |                        |       |
| Other assets, net                            |       | 35,448                   |       | 23,231                      |       |
| Cash                                         |       | 4,492                    |       | 6,511                       |       |
| Restricted cash                              |       | 591                      |       | 1,525                       |       |
| Total assets                                 |       | $                        | 2,053,178  |                        | $          | 1,493,081 |   |
|                                         |       |                     |       |                        |       |
| Liabilities and Partners’ Equity:       |       |                     |       |                        |       |
| Notes payable                                |       |                     |       |                        |       |
| Unsecured                                    |       | $                        | 184,351    |                        | $          | 172,511 |   |
| Secured mortgage notes                       |       | 507,111                  |       | 490,337                     |       |
| Secured credit facility                      |       | —                   |       | 95,900                      |       |
| Secured line of credit – related party  |       | 228,347                  |       | —                      |       |
| Accounts payable                             |       | 11,880                   |       | 15,134                      |       |
| Accrued real estate taxes                    |       | 5,234                    |       | 3,816                       |       |
| Accrued expenses and other liabilities       |       | 37,434                   |       | 31,582                      |       |
| Series C preferred units redeemed in 2005    |       | —                   |       | 55,000                      |       |
| Distributions payable                        |       | 4,989                    |       | 11,777                      |       |
| Total liabilities                            |       | 979,346                  |       | 876,057                     |       |
|                                         |       |                     |       |                        |       |
| Partners’ equity                        |       | 1,073,832                |       | 617,024                     |       |
| Total liabilities and partners’ equity  |       | $                        | 2,053,178  |                        | $          | 1,493,081 |   |

 

SeeNotes to Consolidated Financial Statements.

 

2

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

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(Dollars in thousands, except per unit amounts)**

**(Unaudited)**

 
| ** **                                                                               | ** ** | **For the  month ended  March 31,  2005** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the three  months ended  March 31,  2004** | ** ** |
|------------------------------------------------------------------------------------------|------------|------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                               | ** ** | **(Successor)**                                | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                     | ** ** |
| **REVENUES**                                                                             |       |                                           |       |                                                   |       |                                                  |       |
| Rental revenues                                                                          |       | $                                              | 12,744     |                                                   | $          | 25,119                                                |       | $ | 30,467 |   |
| Other property revenues                                                                  |       | 1,358                                          |       | 2,020                                                  |       | 2,330                                                 |       |
| Total property revenues                                                                  |       | 14,102                                         |       | 27,139                                                 |       | 32,797                                                |       |
| Other income                                                                             |       | —                                         |       | 251                                                    |       | 517                                                   |       |
| Total revenues                                                                           |       | 14,102                                         |       | 27,390                                                 |       | 33,314                                                |       |
|                                                                                     |       |                                           |       |                                                   |       |                                                  |       |
| **EXPENSES**                                                                             |       |                                           |       |                                                   |       |                                                  |       |
| Property operating and maintenance                                                       |       | 3,164                                          |       | 5,920                                                  |       | 7,246                                                 |       |
| Real estate taxes                                                                        |       | 1,856                                          |       | 3,546                                                  |       | 4,056                                                 |       |
| Total property expenses                                                                  |       | 5,020                                          |       | 9,466                                                  |       | 11,302                                                |       |
| General and administrative                                                               |       | 516                                            |       | 2,146                                                  |       | 1,891                                                 |       |
| Property management                                                                      |       | 424                                            |       | 1,651                                                  |       | 1,675                                                 |       |
| Merger expenses                                                                          |       | —                                         |       | 9,947                                                  |       | —                                                |       |
| Interest                                                                                 |       | 2,799                                          |       | 5,882                                                  |       | 6,825                                                 |       |
| Depreciation and amortization                                                            |       | 7,175                                          |       | 8,398                                                  |       | 9,761                                                 |       |
| Amortization of deferred financing costs                                                 |       | —                                         |       | 288                                                    |       | 324                                                   |       |
| Total expenses                                                                           |       | 15,934                                         |       | 37,778                                                 |       | 31,778                                                |       |
| **Income (loss) from continuing operations before  equity in earnings of joint venture** |       | (1,832                                         | )          | (10,388                                                | )          | 1,536                                                 |       |
| Equity in earnings of joint venture                                                      |       | (27                                            | )          | (64                                                    | )          | (94                                                   | )          |
| **Income (loss) from continuing operations**                                             |       | (1,859                                         | )          | (10,452                                                | )          | 1,442                                                 |       |
| Income from discontinued operations                                                      |       | 98                                             |       | 245                                                    |       | 2,262                                                 |       |
| Gain on sale of discontinued operations                                                  |       | —                                         |       | —                                                 |       | 47                                                    |       |
| **Net income (loss)**                                                                    |       | (1,761                                         | )          | (10,207                                                | )          | 3,751                                                 |       |
| Distributions to preferred unitholders                                                   |       | —                                         |       | (267                                                   | )          | (1,203                                                | )          |
| **Net income (loss) available to common  unitholders**                                   |       | $                                              | (1,761     | )                                                      | $          | (10,474                                               | )          | $ | 2,548 |   |
|                                                                                     |       |                                           |       |                                                   |       |                                                  |       |
| **Net income (loss) per unit – basic and diluted:**                                 |       |                                           |       |                                                   |       |                                                  |       |
| Income (loss) from continuing operations                                                 |       | $                                              | (0.08      | )                                                      | $          | (0.30                                                 | )          | $ | 0.04 |   |
| Income from discontinued operations                                                      |       | 0.00                                           |       | 0.01                                                   |       | 0.07                                                  |       |
| Net income (loss)                                                                        |       |                                           | (0.08      | )                                                      |       | (0.29                                                 | )          |   | 0.11 |   |
| Distributions to preferred unitholders                                                   |       | 0.00                                           |       | (0.01                                                  | )          | (0.03                                                 | )          |
| Net income (loss) available to common unitholders                                        |       | $                                              | (0.08      | )                                                      | $          | (0.30                                                 | )          | $ | 0.07 |   |
|                                                                                     |       |                                           |       |                                                   |       |                                                  |       |
| Distributions per common unit                                                            |       | $                                              | 0.22       |                                                   | $          | 0.22                                                  |       | $ | 0.34 |   |
| Weighted average number of common units outstanding                                      |       | 22,810                                         |       | 34,910                                                 |       | 34,792                                                |       |
| Weighted average number of common and common dilutive  equivalent units outstanding      |       | 22,810                                         |       | 34,910                                                 |       | 35,009                                                |       |

 

SeeNotes to Consolidated Financial Statements.

 

3

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

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Dollars in thousands)**

**(Unaudited)**

 
| ** **                                                                               | ** ** | **For the  month ended  March 31,  2005** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the three  months ended  March 31,  2004** | ** ** |
|------------------------------------------------------------------------------------------|------------|------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                               | ** ** | **(Successor)**                                | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                     | ** ** |
| **Cash flow from operating activities:**                                                 |       |                                           |       |                                                   |       |                                                  |       |
| Net income (loss)                                                                        |       | $                                              | (1,761     | )                                                      | $          | (10,207                                               | )          | $ | 3,751 |   |
| Adjustments to reconcile net income (loss) to net  cash provided by operating activities |       |                                           |       |                                                   |       |                                                  |       |
| Income from discontinued operations                                                      |       | (98                                            | )          | (245                                                   | )          | (2,262                                                | )          |
| Depreciation and amortization                                                            |       | 7,175                                          |       | 8,774                                                  |       | 10,305                                                |       |
| Gain on sale of discontinued operations                                                  |       | —                                         |       | —                                                 |       | (47                                                   | )          |
| Issuance of unrestricted stock grants                                                    |       | —                                         |       | —                                                 |       | 1,183                                                 |       |
| Postretirement benefits for former executive  officers                                   |       | —                                         |       | (14                                                    | )          | —                                                |       |
| Equity in earnings of joint venture                                                      |       | 27                                             |       | 64                                                     |       | 94                                                    |       |
| Net (increase) decrease in restricted cash                                               |       | 952                                            |       | (18                                                    | )          | 44                                                    |       |
| Increase (decrease) in operating accounts                                                |       | 1,701                                          |       | (3,999                                                 | )          | 3,024                                                 |       |
| Net cash provided by (used in) operating activities  of continuing operations            |       | 7,996                                          |       | (5,645                                                 | )          | 16,092                                                |       |
| Net cash provided by operating activities of  discontinued operations                    |       | 239                                            |       | 173                                                    |       | 3,153                                                 |       |
| Net cash provided by (used in) operating activities                                      |       | 8,235                                          |       | (5,472                                                 | )          | 19,245                                                |       |
|                                                                                     |       |                                           |       |                                                   |       |                                                  |       |
| **Cash flows from investing activities:**                                                |       |                                           |       |                                                   |       |                                                  |       |
| Investment in real estate assets                                                         |       | (11,558                                        | )          | (12,662                                                | )          | (23,586                                               | )          |
| Payment of merger related liabilities                                                    |       | (41,508                                        | )          | —                                                 |       | —                                                |       |
| Other investing activities                                                               |       | 5                                              |       | (107                                                   | )          | (217                                                  | )          |
| Net cash used in investing activities                                                    |       | (53,061                                        | )          | (12,769                                                | )          | (23,803                                               | )          |
|                                                                                     |       |                                           |       |                                                   |       |                                                  |       |
| **Cash flows from financing activities:**                                                |       |                                           |       |                                                   |       |                                                  |       |
| Net (repayments) borrowings on secured credit  facility                                  |       | (188,500                                       | )          | 92,600                                                 |       | 7,900                                                 |       |
| Net borrowings on secured line of credit-related  party                                  |       | 228,347                                        |       | —                                                 |       | —                                                |       |
| Proceeds from issuance of mortgage notes                                                 |       | —                                         |       | —                                                 |       | 44,140                                                |       |
| Repayment of construction loan                                                           |       | —                                         |       | —                                                 |       | (35,300                                               | )          |
| Distributions to common unitholders                                                      |       | (6,984                                         | )          | (12,524                                                | )          | (11,735                                               | )          |
| Redemption of preferred units                                                            |       | —                                         |       | (55,000                                                | )          | —                                                |       |
| Other financing activities                                                               |       | (241                                           | )          | 3,350                                                  |       | 239                                                   |       |
| Net cash provided by financing activities                                                |       | 32,622                                         |       | 28,426                                                 |       | 5,244                                                 |       |
|                                                                                     |       |                                           |       |                                                   |       |                                                  |       |
| Net (decrease) increase in cash and cash equivalents                                     |       | (12,204                                        | )          | 10,185                                                 |       | 686                                                   |       |
| **Cash and cash equivalents, beginning of period**                                       |       | 16,696                                         |       | 6,511                                                  |       | 2,687                                                 |       |
| **Cash and cash equivalents, end of period**                                             |       | $                                              | 4,492      |                                                   | $          | 16,696                                                |       | $ | 3,373 |   |
|                                                                                     |       |                                           |       |                                                   |       |                                                  |       |
| **Supplemental information:**                                                            |       |                                           |       |                                                   |       |                                                  |       |
| Cash paid for interest, net of interest capitalized                                      |       | $                                              | 3,155      |                                                   | $          | 5,067                                                 |       | $ | 6,774 |   |
| Interest capitalized                                                                     |       | 668                                            |       | 1,378                                                  |       | 2,572                                                 |       |
|                                                                                     |       |                                           |       |                                                   |       |                                                  |       |
| **Supplemental schedule of noncash investing  and financing activities:**           |       |                                           |       |                                                   |       |                                                  |       |
| Merger with Camden, net of cash:                                                         |       |                                           |       |                                                   |       |                                                  |       |
| Fair value adjustment of assets                                                          |       | $                                              | 557,211    |                                                   | $          | —                                                |       | $ | — |   |
| Fair value adjustment of debt                                                            |       | 34,166                                         |       | —                                                 |       | —                                                |       |

 

SeeNotes to Consolidated Financial Statements.

 

4

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**CAMDENSUMMIT PARTNERSHIP, L.P.**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

*Theaccompanying interim unaudited financial information has been preparedaccording to the rules and regulations of the Securities and ExchangeCommission.  Certain information andfootnote disclosures normally included in financial statements prepared inaccordance with generally accepted accounting principles have been condensed oromitted according to such rules and regulations. Management believes thatthe disclosures included are adequate to make the information presented notmisleading. In the opinion of management, all adjustments and eliminations,consisting only of normal recurring adjustments, necessary to present fairlythe financial position of Camden Summit Partnership, L.P. (formerly known asSummit Properties Partnership, L.P.) as of March 31, 2005, the results ofoperations for**the one month ended March 31, 2005(Successor), the two months ended February 28, 2005 (Predecessor), and thethree months ended March 31, 2004 (Predecessor), and the cash flows forthe one month ended March 31, 2005 (Successor), the two months ended February 28,2005 (Predecessor), and the three months ended March 31, 2004(Predecessor) have been included. The results of operations for such interimperiods are not necessarily indicative of the results for the full year.*

 

**1. Basisof Presentation**

 

OnFebruary 28, 2005, Summit Properties Inc. (“Summit”) was merged with andinto Camden Summit, Inc. (“Camden Summit”), a wholly-owned subsidiary ofCamden Property Trust (“Camden”), pursuant to an Agreement and Plan of Mergerdated as of October 4, 2004 (the “Merger Agreement”), as amended.  Prior to the effective time of the merger,Summit was the sole general partner of Summit Properties Partnership, L.P. (the“Camden Summit Partnership” or “us” or “we”), and at the effective time, CamdenSummit became the sole general partner of the Camden Summit Partnership and thename of this partnership was changed to Camden Summit Partnership, L.P.

 

Theconsummation of the merger effected a change in control of the Camden SummitPartnership.  Prior to the effective timeof the merger, Summit was the general partner of the Camden Summit Partnershipand held 348,086 general partner units, representing a 1% general partnershipinterest, and 31,117,541 limited partner units, representing an 89.4% limitedpartnership interest.  The remaining3,343,004 limited partner units were held by the outside limited partners.  As of the effective time of the merger,Camden Summit became the general partner of the Camden Summit Partnership andheld 232,765.108 general partner units, representing a 1% general partnershipinterest, and 20,808,299.667 limited partner units, representing a 91.2%limited partnership interest.  The remaining1,769,281 units, representing a 7.8% limited partner interest, are held by former outside limited partners.  Each common limited partnership unit isredeemable for one common share of Camden.

 

Inconjunction with the merger, the limited partners in the Camden SummitPartnership were offered, on a unit-by-unit basis, the opportunity to redeemtheir partnership units for $31.20 in cash, without interest, or to remain inthe Camden Summit Partnership following the merger at a unit valuation equal to..6687 of a Camden common share.  Thelimited partner elections resulted in Camden redeeming 0.7 million partnershipunits for cash, for an aggregate of $21.7 million, and issuing 1.8 millionpartnership units.  The value of thepartnership units issued was determined based on the average market price of Camden’scommon shares for the five day period commencing two days prior to theannouncement of the merger on October 4, 2004.

 

CamdenSummit Partnership, L.P. is a Delaware limited partnership and a subsidiary of CamdenSummit, which is a wholly-owned subsidiary of Camden, a Texas real estateinvestment trust.  Camden conducts aportion of its business through the Camden Summit Partnership and itssubsidiaries.  As of March 31, 2005, Camden held 91.6% of our common limitedpartnership units as well as the sole 1% general partnership interest.  The remaining 7.4% of the common limitedpartnership units are held by former outside limited partners.

 

As Camden acquired approximately 92% of theownership interest in the Camden Summit Partnership at the effective time ofthe merger, Camden has recorded the Camden Summit Partnership as a wholly-ownedsubsidiary in accordance with the provisions of Emerging Issues Task ForceAbstract D-97, “Push-Down Accounting.”  Camden’s ownership interest in theCamden Summit Partnership meets the criteria of “substantially wholly owned,”and as such our assets and liabilities were revalued as of the effective timeof the merger.

 

Camden allocated the purchase price between net tangibleand 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, respectively.  The value of inplace leases and above or below market leases is being amortized over theestimated average 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.

 

5

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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                                             |       | 1,521,850  |       |
| Properties under development, including land                           |       | 152,042    |       |
| Investments in joint ventures                                          |       | 2,652      |       |
| Properties held for sale                                               |       | 31,417     |       |
| Other assets, including the value of in place leases  of $32.4 million |       | 39,150     |       |
| Cash and cash equivalents                                              |       | 16,696     |       |
| Restricted cash                                                        |       | 1,542      |       |
| Total assets                                                           |       | 2,062,518  |       |
| Notes payable                                                          |       | 881,059    |       |
| Accounts payable, accrued expenses and other  liabilities              |       | 97,780     |       |
| Fair value of liabilities, including notes payable                     |       | 978,839    |       |
| Total partnership equity                                               |       | $          | 1,083,679  |   |

 

In connection with the merger, $69.8 million oftermination, severance and settlement of share-based compensation costs wereincurred.  Of this amount, Summit paid$26.3 million prior to the effective time of the merger.  In March 2005, we paid $35.0 million ofthese costs and have accrued $8.5 million as of March 31, 2005.

 

The following unaudited pro forma financialinformation for the quarters ended March 31, 2005 and March 31, 2004,give effect to the merger as if it had occurred at the beginning of the periodspresented. The pro forma information for 2005 includes pro forma results forthe first two months of the quarter and actual results for March. The pro formaresults are based on historical data and are not intended to be indicative ofthe results of future operations.

 
| ** **              | ** ** | **Three Months  Ended March 31,** | ** ** |
|-------------------------|------------|----------------------------------------|------------|
| **(in thousands)**      | ** ** | **2005**                               | ** ** | **2004** | ** ** |
|                    |       |                                   |       |   |   |
| Total property revenues |       | $                                      | 41,706     |   | $ | 36,825 |   |
| Net loss                |       | (17,957                                | )          | (7,680 | ) |
| Net loss per unit       |       | $                                      | (0.78      | ) | $ | (0.34 | ) |

 

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 March 31, 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 March 31, 2005 and our relatedConsolidated Statements of Operations and Cash Flows for the one month ended March 31,2005 are referenced herein as the Successor consolidated financial statements(the “Successor”).

 

SignificantAccounting Policies

 

The following significant accounting policies represent those in effectas of March 31, 2005.  There have beenno significant changes from the accounting policies in place prior to theeffective time of the merger.

 

***Reportable Segments.***  TheFinancial Accounting Standards Board’s Statement of Financial AccountingStandards (“SFAS”) No. 131, “Disclosures about Segments of an Enterpriseand Related Information”, establishes standards for reporting financial anddescriptive information about an enterprise’s reportable segments.  We have determined that we have onereportable segment, with activities related to the ownership, development andmanagement of multifamily communities. Our apartment communities generate rental revenue and other incomethrough the leasing of apartment homes. Although our multifamily communities are geographically diversifiedthroughout the Southeast and Mid-Atlantic states, management evaluatesoperating performance on an individual property level.  However, as each of our apartment communitieshas similar economic characteristics, residents, and products and services, ourapartment communities have been aggregated into one reportable segment.  In addition to GAAP measures included in ourconsolidated statements of operations, our chief operating decision makersevaluate the financial performance of each community using a financial measureentitled net operating income.  Eachcommunity’s performance is assessed based on growth of or decline in netoperating income, which is defined as total property revenues less totalproperty expenses as presented in our consolidated

 

6

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statements of operations and excludes certain revenue and expense itemssuch as fee and asset management income and expenses and other indirectoperating expenses, interest, depreciation and amortization expenses.

 

Belowis a reconciliation of net operating income from our wholly-owned communitiesincluded in continuing operations to its most directly comparable GAAP measure,income from continuing operations before equity in earnings of joint venture:

 
| ** **                                                                            | ** ** | **For the  month ended  March 31,  2005** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the three  months ended  March 31,  2004** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                            | ** ** | **(Successor)**                                | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                     | ** ** |
|                                                                                  |       |                                           |       |                                                   |       |                                                  |       |
| Total property revenues                                                               |       | $                                              | 14,102     |                                                   | $          | 27,139                                                |       | $ | 32,797 |   |
| Total property expenses                                                               |       | 5,020                                          |       | 9,466                                                  |       | 11,302                                                |       |
| Net operating income                                                                  |       | 9,082                                          |       | 17,673                                                 |       | 21,495                                                |       |
| Less other expenses:                                                                  |       |                                           |       |                                                   |       |                                                  |       |
| Depreciation and amortization                                                         |       | 7,175                                          |       | 8,398                                                  |       | 9,761                                                 |       |
| Interest                                                                              |       | 2,799                                          |       | 5,882                                                  |       | 6,825                                                 |       |
| Merger expenses                                                                       |       | —                                         |       | 9,947                                                  |       | —                                                |       |
| General and administrative                                                            |       | 516                                            |       | 2,146                                                  |       | 1,891                                                 |       |
| Property management                                                                   |       | 424                                            |       | 1,651                                                  |       | 1,675                                                 |       |
| Amortization of deferred financing costs                                              |       | —                                         |       | 288                                                    |       | 324                                                   |       |
| Total other expenses                                                                  |       | 10,914                                         |       | 28,312                                                 |       | 20,476                                                |       |
| Add non-property income:                                                              |       |                                           |       |                                                   |       |                                                  |       |
| Other income                                                                          |       | —                                         |       | 251                                                    |       | 517                                                   |       |
| Income (loss) from continuing operations before  equity in earnings of joint ventures |       | $                                              | (1,832     | )                                                      | $          | (10,388                                               | )          | $ | 1,536 |   |

 

***Real Estate Assets,at Cost.***  Realestate assets are carried at cost plus capitalized carrying charges. Carryingcharges are primarily interest and real estate taxes which are capitalized aspart of properties under development.  Forthe one month period subsequent to merger, we capitalized $0.7 million ininterest and $0.2 million in real estate taxes. Expenditures directly related to the development, acquisition andimprovement of real estate assets, excluding internal costs relating toacquisitions of operating properties, are capitalized at cost as land,buildings and improvements. Indirect development costs, including salaries andbenefits and other related costs that are clearly attributable to thedevelopment of properties, are also capitalized.  All construction and carrying costs arecapitalized and reported on the balance sheet in properties under development untilthe apartment homes are substantially completed. Upon substantial completion ofthe apartment homes, the total cost for the apartment homes and the associatedland is transferred to buildings and improvements and land, respectively, andthe assets are depreciated over their estimated useful lives using thestraight-line method of depreciation. All operating expenses associated with completed apartment homes forproperties in the development and leasing phase are expensed. Upon substantialcompletion of the project, all apartment homes are considered operating and webegin expensing all items that were previously considered carrying costs.

 

We capitalized $0.1 million in the one month ended March 31,2005 and $1.8 million for the two months ended February 28, 2005 andquarter ended March 31, 2004 of renovation and improvement costs which webelieve extended the economic lives and enhanced the earnings of ourmultifamily properties.  Capitalexpenditures are capitalized and depreciated over their useful lives, whichrange from 3 to 20 years.

 

Upon theacquisition of real estate assets, we assess the fair value of acquired assets,including land, buildings, the value of in-place leases, above and below marketleases, and acquired liabilities.  Wethen allocate the purchase price of the acquired property based on theseassessments.  We assess fair value basedon estimated cash flow 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 remaininglife of leases in place at the time of the merger.  In place lease terms generally range from 6to 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 March 31, 2005, we had oneproperty in Atlanta, GA designated as held for sale with a value of $31.4million which approximates our estimated fair value less costs to sell.

 

7

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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.  At theeffective time of the merger, Summit had 454,742 options outstanding, including91,902 incentive stock options, and 35,229 unvested restricted stockawards.  At the effective time of themerger, all outstanding options were cancelled, and the option holders had theright to receive a cash option payment, as defined in the mergeragreement.  Holders of outstandingincentive stock options had the right to elect to receive Camden common sharesin lieu of the cash option payment.  AllSummit restricted stock awards became fully vested immediately prior to theclosing 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 commonshareholders and related basic and diluted earnings per share would be asfollows:

 
| ** **                                                                                                 | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the three  months ended  March 31,  2004** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                                 | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                     | ** ** |
|                                                                                                       |       |                                                   |       |                                                  |       |
| Net income (loss), as reported                                                                             |       | $                                                      | (10,207    | )                                                     | $          | 3,751 |   |
| Add: stock-based employee compensation expense  included in reported net income                            |       | 37                                                     |       | 276                                                   |       |
| Deduct: total stock-based employee compensation  expense determined under fair value method for all awards |       | (37                                                    | )          | (328                                                  | )          |
|                                                                                                       |       |                                                   |       |                                                  |       |   |   |
| Pro forma net income (loss)                                                                                |       | $                                                      | (10,207    | )                                                     | $          | 3,699 |   |
|                                                                                                       |       |                                                   |       |                                                  |       |
| Net income (loss) per unit – basic and diluted:                                                       |       |                                                   |       |                                                  |       |
| As reported                                                                                                |       | $                                                      | (0.29      | )                                                     | $          | 0.11 |   |
| Pro forma                                                                                                  |       | (0.29                                                  | )          | 0.11                                                  |       |

 

***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 FinancialAccounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards No. 123 (revised 2004), “Share-Based Payments (SFAS123R).” SFAS 123R requires all share-based payments to employees, includinggrants of employee stock options, to be recognized over their vesting periodsin the income statement based on their estimated fair values. In April 2005,the Securities and Exchange Commission (“SEC”) issued a press releaseannouncing it would provide for a phased-in implementation process for SFAS123R. SFAS 123R is effective for all public entities in the first annualreporting period beginning after June 15, 2005 which, for us would be thecalendar year of 2006. As a result of the SEC’s announcement, we are in theprocess of assessing the impact of SFAS 123R and have not determined what impact,if any, our adoption of SFAS 123R will have on our financial position, resultsof 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”) FIN 46R-5, “Implicit Variable Interest under FASBInterpretation No. 46 (revised December 2003), *Consolidationof Variable Interest Entities*.” This FSP requires a reporting entity to consider whether it holds animplicit variable interest in a variable interest entity (“VIE”) or potentialVIE.  FSP FIN 46R-5 is effectivewith reporting periods beginning after March 3, 2005.  We do not expect the adoption of FSP FIN 46R-5will have a material impact on our financial position, results of operations orcash flows.

 

***Reclassifications***.  Certain reclassifications have been made toamounts in prior year consolidated financial statements to conform with currentyear presentations.

 

8

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**2. Per Unit Data**

 

Basic earnings perunit are computed based upon the weighted average number of units outstandingduring 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 March 31, 2005. The number of units added to weighted average units outstanding for thediluted calculation was 217,000 in the first quarter of 2004. These equivalentunits had no effect on net income per unit in 2004.

 

**3. CommunitiesAcquired**

 

There were nocommunities acquired during the three months ended March 31, 2004 or2005.  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                |       |

 

The followingunaudited pro forma financial information for the three months ended March 31,2004 gives effect to the above acquisitions as if they had occurred at thebeginning of the period presented.  Thepro forma is based on historical data and is not intended to be indicative ofthe results of future operations.

 
| ** **                       | ** ** | **As reported** | ** ** | **Completed  Acquisitions** | ** ** | **As adjusted** | ** ** |
|----------------------------------|------------|-----------------|------------|-----------------------------|------------|-----------------|------------|
| Total revenues                   |       | $               | 33,314     |                        | $          | 3,430           |       | $ | 36,744 |   |
| Net income to common unitholders |       | 2,548           |       | (2,034                      | )          | 514             |       |
|                                  |            |                 |            |                             |            |                 |            |  |  |  |

 

**4. DiscontinuedOperations**

 

The components of net income that are presented as income fromdiscontinued operations include net operating income, depreciation and propertyspecific interest expense, if any.  Inaddition, the net gain or loss on the disposal of a community is presented indiscontinued operations when recognized.  During the first quarter of 2005, we had one property located inAtlanta, Georgia, totaling 431 apartment homes, designated as held for sale.  We recognized a $47,000 gain on one parcel ofland sold during the quarter ended March 31, 2004.

 

The operating results of theone property designated as held for sale as of March 31, 2005 and theoperating results of the ten properties sold during 2004 which are included in discontinued operations forthe quarters ended March 31, 2005 and 2004, are as follows:

 
| **(In thousands)**                         | ** ** | **For the  month ended  March 31,  2005** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the three  months ended  March 31,  2004** | ** ** |
|--------------------------------------------|------------|------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                 | ** ** | **(Successor)**                                | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                     | ** ** |
| Property revenues                          |       | $                                              | 337        |                                                   | $          | 727                                                   |       | $ | 6,834 |   |
| Property operating expenses                |       | 239                                            |       | 482                                                    |       | 2,777                                                 |       |
| Net operating income                       |       | 98                                             |       | 245                                                    |       | 4,057                                                 |       |
| Depreciation and amortization and interest |       | —                                         |       | —                                                 |       | 1,795                                                 |       |
| Income from discontinued operations        |       | $                                              | 98         |                                                   | $          | 245                                                   |       | $ | 2,262 |   |

 

9

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**5. Investmentsin Joint Ventures**

 

We own a 25%equity interest in a joint venture named Station Hill, LLC (“Station Hill”), inwhich 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.

 

Thejoint venture discussed above is accounted for under the equity method.  The joint venture in which we have aninterest has been funded with secured, third-party debt.  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.

 

In 2002, weentered into two separate joint ventures with a major financial servicesinstitution (the “investor member”) to redevelop Summit Roosevelt and SummitGrand Parc, both located in Washington, D.C., in a manner to permit the use offederal rehabilitation income tax credits. The investor member contributed approximately $6.5 million for SummitRoosevelt and approximately $2.6 million for Summit Grand Parc in equity tofund a portion of the total estimated costs for the respective 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. NotesPayable**

 

The following is a summary of our indebtedness:

 
| **(In millions)**                                                | ** ** | **March 31,********2005** | ** ** | **December 31,********2004** | ** ** |
|------------------------------------------------------------------|------------|--------------------------------|------------|-----------------------------------|------------|
| ** **                                                       | ** ** | ** **                     | ** ** | ** **                        | ** ** |
| **Senior unsecured notes**                                       |       |                           |       |                              |       |
| $50.0 million 4.30% Notes, due 2007                              |       | $                              | 53.3       |                              | $          | 52.5 |   |
|                                                             |       |                           |       |                              |       |
| **Medium-term notes**                                            |       |                           |       |                              |       |
| $25.0 million 3.59% Notes, due 2005                              |       | 25.7                           |       | 25.0                              |       |
| $25.0 million 3.91% Notes, due 2006                              |       | 25.9                           |       | 25.0                              |       |
| $25.0 million 4.64% Notes, due 2009                              |       | 27.7                           |       | 25.0                              |       |
| $10.0 million 4.90% Notes, due 2010                              |       | 11.8                           |       | 10.0                              |       |
| $35.0 million 4.99% Notes, due 2011                              |       | 40.0                           |       | 35.0                              |       |
|                                                             |       | 131.1                          |       | 120.0                             |       |
| **Total unsecured notes**                                        |       | 184.4                          |       | 172.5                             |       |
|                                                             |       |                           |       |                              |       |
| **Secured notes**                                                |       |                           |       |                              |       |
| Secured credit facility                                          |       | —                         |       | 95.9                              |       |
| Secured line of credit – related party                      |       | 228.3                          |       | —                            |       |
| 3.61% - 5.07% Conventional Mortgage Notes, due 2005 –  2013 |       | 507.1                          |       | 490.3                             |       |
| **Total secured notes**                                          |       | 735.4                          |       | 586.2                             |       |
|                                                             |       |                           |       |                              |       |
| **Total notes payable**                                          |       | $                              | 919.8      |                              | $          | 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 the variousborrowings 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.

 

10

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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 March 31, 2005, there were $9.1 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 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 will record the $0.6million as a credit to interest expense over the period beginning from thetermination date through the maturity date of the underlying debt obligation ofAugust 15, 2007.

 

**7.  NetChange in Operating Accounts**

 

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

 
| ** **                             | ** ** | **For the  month ended  March 31,  2005** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the three  months ended  March 31,  2004** | ** ** |
|----------------------------------------|------------|------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                             | ** ** | **(Successor)**                                | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                     | ** ** |
| Decrease (increase) in assets:         |       |                                           |       |                                                   |       |                                                  |       |
| Other assets, net                      |       | $                                              | 529        |                                                   | $          | 1,422                                                 |       | $ | (518 | ) |
|                                   |       |                                           |       |                                                   |       |                                                  |       |
| Increase (decrease) in liabilities:    |       |                                           |       |                                                   |       |                                                  |       |
| Accounts payable                       |       | (1,450                                         | )          | (2,287                                                 | )          | 2,365                                                 |       |
| Accrued real estate taxes              |       | 1,707                                          |       | (236                                                   | )          | 844                                                   |       |
| Accrued expenses and other liabilities |       | 915                                            |       | (2,898                                                 | )          | 333                                                   |       |
| Net change in operating accounts       |       | $                                              | 1,701      |                                                   | $          | (3,999                                                | )          | $ | 3,024 |   |

 

11

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**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 holder of the Series C preferred units in theaggregate amount of $267,000 during the three months ended March 31, 2005and $1.2 million during the three months ended March 31, 2004.  As a result of the redemption, the excess ofthe redemption amount over the carrying amount of the units, which totals $1.5million, reduced income available to common unitholders for the year ended December 31,2004.

 

**9. RelatedParties**

 

Subsequentto the completion of the merger, Camden now provides certain corporate supportservices to us including general and administrative and property managementservices.  Costs incurred by Camden whichare clearly applicable 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 $0.9million for the one month ended March 31, 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.  However, we believe theallocation is reasonable and in accordance with the Securities and ExchangeCommission’s Staff Accounting Bulletin No. 55.

 

Atthe effective time of the merger, we had notes receivable outstanding totaling$3.9 million from nine current and former employees.  Subsequent to the merger, one borrower paidoff his loan in the amount of $0.9 million. At March 31, 2005, the notes receivable had an outstanding balanceof $3.1 million.  Subsequent to March 31,2005, one borrower paid off his loan in the amount of $0.7 million.  As of May 2, 2005, the employee notesreceivable were 87.1% secured by Camden common shares.

 

**10. Commitmentsand Contingencies**

 

*Construction Contracts. *As of March 31, 2005,we were obligated for approximately $76.8 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 Summitdirectors constitute a breach of the Summit defendants’ fiduciary duties toSummit stockholders. 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 Western Districtof North Carolina, Charlotte Division, and filed an Answer and Counterclaim fordeclaratory judgment denying the plaintiff’s allegations of wrongdoing.

 

On March 10, 2005, the parties to the actionagreed on and executed a binding memorandum of understanding setting forth theterms of a settlement of the litigation. The parties also agreed, subject to the conditions described below, toenter into a stipulation of settlement and use best efforts to gain approval ofthe settlement by the court.  Under theterms of the settlement, the defendants admit to no wrongdoing or fault.  The memorandum of understanding for theproposed settlement of the litigation contemplates a dismissal of all claimswith prejudice and a release in favor of all defendants of any and all claimsrelated to the merger that have been or could have been asserted by theplaintiffs or any members of the putative class.  In connection with negotiations relating tothe memorandum of understanding, the parties agreed to include, and have included,in the joint proxy statement/prospectus relating to the merger additionaldisclosures regarding the merger.

 

12

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Subject to the completion of certain confirmatorydiscovery by counsel to the plaintiffs, the memorandum of understandingcontemplates that the parties will enter into a settlement agreement.  The memorandum and the settlement will besubject to the customary conditions including, final court approval of thesettlement.  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 the court, any attorneys’ fees and expensesawarded by the court to plaintiff’s counsel will be paid by Camden, assuccessor to Summit, on behalf of all defendants within five business daysafter final court approval of the settlement. All costs and expenses expected to be incurred associated with thismatter have been accrued for and are not material to our consolidated financialstatements.

 

The defendants vigorously deny all liability withrespect to the facts and claims alleged in this action, and specifically denythat any further supplemental disclosure was required under any applicablerule, statute, regulation, or law. However, the defendants considered it desirable that these actions besettled to avoid the substantial burden, expense, risk, inconvenience anddistraction of continued litigation and to fully and finally resolve thesettled claims.

 

 On May 25,2001, through a joint venture with SZF, LLC, a Delaware limited liabilitycompany in which we owned 29.78% of the joint venture until July 3, 2003,on which date we purchased its joint venture partner’s 70.22% interest.  We then entered into an agreement withBrickell View, L.L.C. (“Brickell View”), a Florida limited liability company,and certain of its affiliates relating to the formation of Coral Way, LLC, aDelaware limited liability company, to develop a new community in Miami,Florida.  Brickell View agreed to be thedeveloper of that community and certain of its affiliates signed guaranteesobligating them to pay certain costs relating to the development.  On August 12, 2003, we received noticeof two suits filed by Brickell View and certain of its affiliates against SZF,LLC and certain entities affiliated with us. The suits were originally filed in the Miami-Dade Circuit Court and weresubsequently removed to the U.S. District Court for the Southern District ofFlorida.  One of the suits was remandedto the Miami-Dade Circuit Court, while the other remains pending in the U.S.District Court.  These suits relate tothe business agreement among the parties in connection with the development andconstruction of the community by Coral Way. Brickell View and its affiliates allege breach of contract, breach ofimplied covenant of good faith and fair dealing, breach of fiduciary duties andconstructive fraud on the part of SZF, LLC and constructive fraud on our part,including our affiliates, and seek both a declaratory judgment that theguarantee agreements have been constructively terminated and unspecifiedmonetary damages.  We intend to enforceour rights under the joint venture agreements. Although we may determine to terminate the development agreement basedon Brickell View’s failure to perform its obligations in accordance with thedevelopment agreement, we do not believe that there is any basis for allowingBrickell View or its affiliates to be released from their obligations under thedevelopment agreement or the guarantees. We believe that the allegations made by Brickell View and its affiliatesare not supported by the facts and we intend to vigorously defend against thesesuits.  On December 19, 2003, wereceived notice of 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 by Bermello,Ajamil & Partners, Inc. are not supported by the facts, and wewill vigorously defend against this claim. Additionally, we have asserted a cross-claim against Bermello, Ajamil &Partners, Inc. for damages related to the cost to correct certain structuraland other design defects.  All costs andexpenses expected to be incurred associated with this matter have been accruedfor and are not material to our consolidated 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, assertingclaims for breach of contract and fraud in the inducement, alleging that we had an obligation to indemnifyBrickell Grand, Inc. in the Bovis lawsuit and that we had failed to properly market the apartments, increasingBrickell Grand Inc.’s cost overrun obligations. Brickell Grand, Inc. also claims that we misappropriated its identity by filing eviction actions in itsname.  We believe that these allegationsmade by Brickell Grand, Inc. are not supported by the facts, and intend tovigorously defend against

 

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these claims.  All costs andexpenses expected to be incurred associated with this matter have been accruedfor and are not material to our consolidated financial statements.

 

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 its 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.

 

Weare currently in the due diligence period for certain dispositions.  No assurance can be made that we will be ableto complete the negotiations or become satisfied with the outcome of the duediligence.

 

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 March 31, 2005, we had long-termoperating leases covering certain land, office facilities and equipment.  Rental expense totaled $41,000 for thequarter ended March 31, 2005 compared to $0.1 million for the quarterended March 31, 2004.  Minimumannual rental commitments for the remaining nine months of 2005 are $0.1million, and for the years ending December 31, 2006 through 2009 are $0.2million, $0.2 million, $0.2 million, and $0.1 million, respectively, and $0.1million in the aggregate thereafter.

 

**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 wasgiven.  The full base salary amount duewould be payable through 2011 whether or not the agreements were terminatedearlier in accordance with their terms. Summit amended the employment agreements, effective July 1,2004.  The amendments provide foradditional payments to the employees and eliminated the provision to provideoffice 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 and other benefits approximately equivalent to those he was entitledto receive upon termination of employment pursuant to his employment agreementwith Summit.

 

The other benefits received by Messrs. McGuireand Paulsen are considered post retirement benefits.  As of March 31, 2005, we had accrued$5.3 million associated with these post retirement liabilities.  Net periodic benefit cost, relating entirelyto interest cost, was immaterial to our consolidated financial statements as awhole as of March 31, 2005.  We havenot made any contributions as of March 31, 2005, nor do we expect to makeany contributions for the remainder 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.

 

Donot rely on these forward-looking statements, which only represent ourestimates and assumptions as of the date of this report.  We assume no obligation to update or reviseany forward-looking statement.

 

**Business**

 

OnFebruary 28, 2005, Summit Properties Inc. (“Summit”) was merged with andinto Camden Summit, Inc. (“Camden Summit”), a wholly-owned subsidiary ofCamden Property Trust (“Camden”), pursuant to an Agreement and Plan of Mergerdated as of October 4, 2004 (the “Merger Agreement”), as amended.  Prior to the effective time of the merger,Summit was the sole general partner of Summit Properties Partnership, L.P. (the“Camden Summit Partnership” or “us” or “we”), and at the effective time, CamdenSummit became the sole general partner of the Camden Summit Partnership and thename of this partnership was changed to Camden Summit Partnership, L.P.

 

Theconsummation of the merger effected a change in control of the Camden SummitPartnership.  Prior to the effective timeof the merger, Summit was the general partner of the Camden Summit Partnershipand held 348,086 general partner units, representing a 1% general partnershipinterest, and 31,117,541 limited partner units, representing an 89.4% limitedpartnership interest.  The remaining3,343,004 limited partner units were held by the outside limited partners.  As of the effective time of the merger,Camden Summit became the general partner of the Camden Summit Partnership andheld 232,765.108 general partner units, representing a 1% general partnershipinterest, and 20,808,299.667 limited partner units, representing a 91.2%limited partnership interest.  Theremaining 1,769,281 units, representing a 7.8% limited partner interest, are held by outside limited partners.  Each common limited partnership unit isredeemable for one common share of Camden.

 

Inconjunction with the merger, the limited partners in the Camden SummitPartnership were offered, on a unit-by-unit basis, the opportunity to redeemtheir partnership units for $31.20 in cash, without interest, or to remain inthe Camden Summit Partnership following the merger at a unit valuation equal to..6687 of a Camden common share.  Thelimited partner elections resulted in Camden redeeming 0.7 million partnershipunits for cash, for an aggregate of $21.7 million, and issuing 1.8 millionpartnership units.  The value of thecommon shares and partnership units issued was determined based on the average marketprice of Camden’s common shares for the five day period commencing two daysprior to the announcement of the merger on October 4, 2004.

 

CamdenSummit Partnership, L.P. is a Delaware limited partnership and a subsidiary ofCamden Summit, which is a wholly-owned subsidiary of Camden, a Texas realestate investment trust.  Camdenconducted a portion of its business through the Camden Summit Partnership andits subsidiaries.  As of March 31, 2005, Camden held 91.6%of our common limited partnership units as well as the sole 1% general partnershipinterest.  The remaining 7.4% of thecommon limited partnership units are 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 March 31, 2005, our portfolio consisted of 49 completedcommunities comprising 15,422 apartment homes with an additional 1,414apartment homes under construction at four communities.

 

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Property Portfolio

 

Our multifamily property portfolio, excluding landheld for future development is summarized as follows:

 
| ** **                              | ** ** | **March 31, 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)  Includesproperties held in a joint venture as follows: three properties with 792 apartment homes in Charlotte, and one propertywith 411 apartment homes in Raleigh in which we own a 25% interest, theremaining interest is owned by an unaffiliated private investor.*

 

**Developmentand Lease-Up Properties**

 

At March 31, 2005, we had two completed propertiesin lease-up as follows:

 

*($ in millions)*

 
| **Property  and Location**          | ** ** | **Number of  Apartment  Homes** | ** ** | **Cost to  Date** | ** ** | **% Leased  at  5/2/05** | ** ** | **Date of  Completion** | ** ** | **Estimated  Date of  Stabilization** | ** ** |
|-------------------------------------|------------|---------------------------------|------------|-------------------|------------|--------------------------|------------|-------------------------|------------|---------------------------------------|------------|
|                                |       |                            |       |              |       |                     |       |                    |       |                                  |       |
| Summit Fallsgrove*Rockville, MD*    |       | 268                             |       | $                 | 52.7       |                     | 86         | %                       | 3Q04       |                                  | 2Q05       |   |
| * *                            |       |                            |       |              |       |                     |       |                    |       |                                  |       |
| Summit Las Olas*Ft. Lauderdale, FL* |       | 420                             |       | 91.2              |       | 91                       | %          | 1Q05                    |       | 2Q05                                  |       |
|                                     |            |                                 |            |                   |            |                          |            |                         |            |                                       |            |  |

 

At March 31, 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 3/31/05** | ** ** | **Estimated  Date of  Completion** | ** ** | **Estimated  Date of  Stabilization** | ** ** |
|------------------------------------|------------|---------------------------------|------------|---------------------|------------|--------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
|                               |       |                            |       |                |       |                           |       |                               |       |                                  |       |
| Camden Dilworth*Charlotte, NC*     |       | 145                             |       | $                   | 18.0       |                           | $          | 4.5                                |       | 2Q06                                  |       | 3Q06 |   |
| Camden Fairfax Corner*Fairfax, VA* |       | 488                             |       | 82.0                |       | 52.9                           |       | 3Q06                               |       | 1Q07                                  |       |
| Camden Clearbrook*Frederick, MD*   |       | 297                             |       | 45.0                |       | 14.8                           |       | 3Q06                               |       | 1Q07                                  |       |
| Camden Manor Park*Raleigh, NC*     |       | 484                             |       | 52.0                |       | 25.2                           |       | 4Q06                               |       | 3Q07                                  |       |
| Total                              |       | 1,414                           |       | $                   | 197.0      |                           | $          | 97.4                               |       |                                  |       |   |   |

 

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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.

 

Ifan event or change in circumstance indicates that a potential impairment in thevalue of a property has occurred, our policy is to assess any potential impairmentby making a comparison of the current and projected cash flows for suchproperty over its remaining holding period, on an undiscounted basis, to thecarrying amount of the property.  If suchcarrying amounts were in excess of the estimated projected cash flows of theproperty, we would recognize an impairment loss equivalent to an amountrequired to adjust the carrying amount to its estimated fair value, less coststo sell.  As of March 31, 2005, wehad one property in Atlanta, GA designated as held for sale with a value of$31.4 million which approximates our estimated fair value less costs to sell.

 

Ourconsolidated balance sheet at March 31, 2005 included $163.5 millionrelated to wholly-owned properties under development. Of this amount, $97.4 millionrelates to our four projects currently under development. Additionally, at March 31,2005, we had $66.1 million invested in land held for future development.  Included in this amount is $43.0 millionrelated to projects we expect to begin constructing in 2005.

 

**Resultsof Operations**

 

Income (loss) fromcontinuing operations decreased $13.8 million, from $1.4 million to $(12.3)million for the quarters ended March 31, 2004 and 2005, respectively.  The decrease in income from continuingoperations was due to many factors which included, but were not limited to,increases in depreciation and amortization, interest and merger relatedexpenses 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$5.3 million, or 24.7%, from $21.5 million to $26.8 million for the quartersended March 31, 2004 and 2005, respectively.  See further discussion of net operatingincome in our discussion of “Segment Reporting” in the notes to ourconsolidated 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.

 

The followingtable presents the components of net operating income for the quarters ended March 31,2005 and 2004:

 
| **(in  thousands)**                  | ** ** | **Apartment  Homes at  3/31/05** | ** ** | **For the one  month ended  March 31,  2005** | ** ** | **For the two  months ended  February 28,  2005** | ** ** | **For the three  months ended  March 31,  2004** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------|------------|----------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                           | ** ** | ** **                       |
| ** **                           | ** ** | ** **                       |
| **Change**                           |
| **$**                                | ** ** | **%**                            |
| ** **                           | ** ** | ** **                       | ** ** | **(Successor)**                                    | ** ** | **(Predecessor)**                                      | ** ** | **(Predecessor)**                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Property Revenues**                | ** ** | ** **                       | ** ** | ** **                                         | ** ** | ** **                                             | ** ** | ** **                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Same store communities               |       | 11,083                           |       | $                                                  | 11,082     |                                                   | $          | 21,708                                                |       | $          | 31,928     |       | $          | 862 |   | 2.7 | % |
| Non-same store communities           |       | 2,017                            |       | 1,916                                              |       | 3,934                                                  |       | 865                                                   |       | 4,985      |       | 576.3      | %          |
| Development and lease-up communities |       | 688                              |       | 844                                                |       | 1,497                                                  |       | 4                                                     |       | 2,337      |       | —     |       |
| Other                                |       | —                           |       | 260                                                |       | —                                                 |       | —                                                |       | 260        |       | 100.0      | %          |
| Total property revenues              |       | 13,788                           |       | 14,102                                             |       | 27,139                                                 |       | 32,797                                                |       | 8,444      |       | 25.7       | %          |
|                                 |       |                             |       |                                               |       |                                                   |       |                                                  |       |       |       |       |       |
| **Property expenses**                |       |                             |       |                                               |       |                                                   |       |                                                  |       |       |       |       |       |
| Same store communities               |       | 11,083                           |       | 3,810                                              |       | 7,210                                                  |       | 10,925                                                |       | 95         |       | 0.9        | %          |
| Non-same store communities           |       | 2,017                            |       | 826                                                |       | 1,503                                                  |       | 338                                                   |       | 1,991      |       | 589.1      | %          |
| Development and lease-up communities |       | 688                              |       | 384                                                |       | 753                                                    |       | 39                                                    |       | 1,098      |       | —     |       |
| Other                                |       | —                           |       | —                                             |       | —                                                 |       | —                                                |       | —     |       | —     |       |
| Total property expenses              |       | 13,788                           |       | 5,020                                              |       | 9,466                                                  |       | 11,302                                                |       | 3,184      |       | 28.2       | %          |
|                                 |       |                             |       |                                               |       |                                                   |       |                                                  |       |       |       |       |       |
| **Net operating income**             |       |                             |       |                                               |       |                                                   |       |                                                  |       |       |       |       |       |
| Same store communities               |       | 11,083                           |       | 7,272                                              |       | 14,498                                                 |       | 21,003                                                |       | 767        |       | 3.7        | %          |
| Non-same store communities           |       | 2,017                            |       | 1,090                                              |       | 2,431                                                  |       | 527                                                   |       | 2,994      |       | 568.1      | %          |
| Development and lease-up communities |       | 688                              |       | 460                                                |       | 744                                                    |       | (35                                                   | )          | 1,239      |       | —     |       |
| Other                                |       | —                           |       | 260                                                |       | —                                                 |       | —                                                |       | 260        |       | 100.0      | %          |
| Total net operating income           |       | 13,788                           |       | $                                                  | 9,082      |                                                   | $          | 17,673                                                |       | $          | 21,495     |       | $          | 5,260 |   | 24.5 | % |

 

Same store communities arecommunities 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.

 

Total propertyrevenues for the quarter ended March 31, 2005 increased $8.4 million over2004.  Property revenues from our samestore properties increased 2.7%, from $31.9 million for the first quarter of2004 to $32.8 million for the first quarter of 2005.  For same store properties, the primaryincrease was related to reductions in rent concessions partially offset byincreases in vacancy loss.  Propertyrevenues from our non-same store and development and lease-up propertiesincreased from $0.9 million for the first

 

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quarter of 2004 to $8.2million for the first quarter of 2005. This increase is primarily due to the revenues earned from the sixapartment communities, or 1,581 apartment homes, acquired during the year endedDecember 31, 2004 and the revenues related to development communitiescompleted over the past year.

 

Total propertyexpenses increased 28.2%, or $3.2 million, as compared to the same period in2004.  Property expenses for our samestore communities increased 0.9% or $0.1 million for the first quarter of 2005as compared to the first quarter of 2004. The increase is primarily due to payroll related expenses offset bydecreases in property insurance expenses. Non-same store and development and lease-up properties increased $3.1million from $0.4 million for the first quarter 2004 as compared to $3.5million for the first quarter 2005.

 

General andadministrative and property management expenses increased a total of $1.1million, from $3.6 million to $4.7 million for the three months ended March 31,2004 and 2005, respectively.  Thisincrease was primarily due to legal, accounting and other professional costsincurred during the two month period in 2005, prior to our merger with Camden.  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$0.9 million for the one month ended March 31, 2005.  See further discussion of this allocation inour discussion of “Related Parties” in Note 9 to our Consolidated FinancialStatements.

 

During the firstquarter of 2005, we incurred merger related expenses of $9.9 million due toadvisory and severance related costs associated with our merger with Camden.

 

Interest expenseincreased $1.9 million, from $6.8 million to $8.7 million, for the quartersended March 31, 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 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.

 

Depreciation andamortization expense for continuing operations increased $5.8 million, from$9.8 million to $15.6 million for the quarters ended 2004 and 2005, respectively.  This increase is primarily due to additionaldepreciation and amortization of intangibles related to in place leases as aresult of our merger with Camden and new development and capital improvementsplaced in service during the past year.

 

Distributions topreferred unitholders decreased from $1.2 million to $0.3 million for thequarters ended March 31, 2004 and 2005, respectively.  This decrease is due to our redemption of alloutstanding preferred units in January 2005. See further discussion of our preferred units in Note 8 to ourconsolidated financial statements.

 

**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)          recurringcapital expenditures;

(iv)          fundingof property developments; and

(v)           distributionson our common units.

 

*Capitalresources*

 

Our outstandingindebtedness on notes payable as of March 31, 2005 totaled $919.8 million.This amount includes $507.1 million in conventional mortgages, $184.4 millionof unsecured notes, and $228.3 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.

 

In connection withthe merger, we repaid our $290 million secured credit facility, which had anoutstanding balance of $188.5 million at the date of repayment, using proceedsreceived from a $500 million intercompany line of credit from Camden.  This line of credit bears interest at 6%, hasa ten-year term and is secured by the same eleven communities which secured thecredit 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 March 31, 2005, we had$4.5 million of cash and cash equivalents and $271.7 million available underour $500

 

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millionintercompany line of credit.  During thethree months ended March 31, 2005, we generated cash proceeds primarilyfrom borrowings under our $290 million secured credit facility and our $500million intercompany line of credit.

 

The proceeds wereused primarily for:

 

•      Repaymentof all amounts outstanding under our $290 million secured credit facility;

•      Constructionactivities on properties under development;

•      Fundingof capital expenditures and other improvements;

•      Redemptionof Series B preferred units;

•      Fundingdistributions to common unitholders; and

•      Paymentof merger related liabilities.

 

During the threemonths ended March 31, 2004, we generated cash proceeds from varioustransactions, including:

 

•      Issuanceof fixed-rate mortgages secured by two communities; and

•      Borrowingsunder our $290 million secured credit facility.

 

The proceeds inthe first quarter of 2004 were used primarily to fund:

 

•      Constructionactivities on properties under development;

•      Repaymentof construction loans; and

•      Fundingof capital expenditures and other improvements.

 

### ***Contractual Obligations***

### * *

The following tablesummarizes our known contractual obligations as of March 31, 2005:

 
| **(in  millions)**                      | ** ** | **Total** | ** ** | **2005** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **Thereafter** | ** ** |
|-----------------------------------------|------------|-----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|
| Debt maturities                         |       | $         | 919.8      |     | $          | 42.3     |       | $        | 36.7       |     | $          | 68.3     |       | $              | 183.4      |   | $ | 78.5 |   | $ | 510.6 |   |
| Non-cancelable operating lease payments |       | 0.9       |       | 0.1      |       | 0.2      |       | 0.2      |       | 0.2      |       | 0.1      |       | 0.1            |       |
| Construction contracts                  |       | 76.8      |       | 58.1     |       | 18.7     |       | —   |       | —   |       | —   |       | —         |       |
|                                    |       | $         | 997.5      |     | $          | 100.5    |       | $        | 55.6       |     | $          | 68.5     |       | $              | 183.6      |   | $ | 78.6 |   | $ | 510.7 |   |

 

***Inflation***

 

We leaseapartments 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 the “Notes to theConsolidated Financial Statements,” income recognition, acquisition of assetsand capital expenditures, which are discussed below.

 

*Incomerecognition.*  Our rental and other property income isrecorded when due from residents and is recognized monthly as it isearned.  Other property income consistsof administrative, application and other transactional fees charged to ourresidents.  Interest, fee and assetmanagement, and all other sources of income are recognized as earned.

 

*Acquisitionof assets. *Upon the acquisition of real estate,we assess the fair value of acquired assets, including land, buildings, the valueof in-place leases, above and below market leases, and acquiredliabilities.  We then allocate thepurchase price of the acquired property based on these assessments.  We assess fair value based on estimated cashflow projections and available market information.

 

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*Capitalexpenditures. *We capitalize renovation andimprovement costs that we believe extend the economic lives and enhance theearnings of the related assets.   Capitalexpenditures, including carpet, appliances and HVAC unit replacements,subsequent to initial construction are capitalized and depreciated over theirestimated 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.

 

***Impact of New Accounting Pronouncements***

 

In December 2004,the Financial Accounting Standards Board (“FASB”) issued Statement ofFinancial Accounting Standards 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 overtheir vesting periods in the income statement based on their estimated fairvalues. 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 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”) FIN 46R-5, “Implicit Variable Interest under FASBInterpretation No. 46 (revised December 2003), *Consolidationof Variable Interest Entities*.” This FSP requires a reporting entity to consider whether it holds animplicit variable interest in a variable interest entity (“VIE”) or potentialVIE.  FSP FIN 46R-5 is effectivewith reporting periods beginning after March 3, 2005.  We do not expect the adoption of FSP FIN 46R-5will have a material impact on our financial position, results of operations orcash flows.

 

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

 

No material changes have occurred since our Annual Report on Form 10-Kfor 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 March 31, 2005. Based on that evaluation, the CEO and CFO concluded that our disclosurecontrols and procedures were effective as of March 31, 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,there were no changes in Camden’s internal control over financial reportingduring the quarter ended March 31, 2005 that has materially affected, oris reasonably likely to materially affect, their internal control overfinancial reporting.

 

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**PART II**

 

**Item 1.  *LegalProceedings***

 

For further discussionregarding legal proceedings, see Note 10 to the Consolidated FinancialStatements.

 

***Item2.  Unregistered Sales of EquitySecurities and Use of Proceeds***

 

None

 

***Item3.  Defaults Upon Senior Securities***

 

None

 

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

 

Thefollowing are the results of a consent solicitation, which expired on February 25,2005:

 
| ** **                                                                                                       | ** ** | **For**   | ** ** | **Against** | ** ** | **Abstain** | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|-----------|------------|-------------|------------|-------------|------------|
| 1. Approval of the merger of Summit and Camden  Summit                                                           |       | 3,081,315 |       | —      |       | 261,189     |       |
|                                                                                                             |       |      |       |        |       |        |       |
| 2. Approval of the Amended and Restated Agreement of  the Limited Partnership of Camden Summit Partnership, L.P. |       | 3,081,315 |       | —      |       | 261,189     |       |

 

***Item 5.  OtherInformation***

 

None

 

**Item 6.  *Exhibits***

 

(a)           Exhibits

 
| 31.1   |   | Certification by Chief Executive Officer pursuant to  Rule 13a-14(a) of Chief Executive Officer dated May 16,  2005.                                                                                                                                              |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                             |
| 31.2   |   | Certification by Chief Financial Officer pursuant to  Rule 13a-14(a) of Chief Financial Officer dated May 16,  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.                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                             |
| 99.1   |   | Separation agreement, dated as of February 28,  2005, between Camden Property Trust and William B. McGuire, Jr.  Incorporated by reference from Exhibit 99.1 to Camden Property Trust’s  Form 8-K filed on April 27, 2005 (File No. 1-12110)  |
|   |   |                                                                                                                                                                                                                                                                             |
| 99.2   |   | Separation agreement,  dated as of February 28, 2005, between Camden Property Trust and William  B. McGuire, Jr. Incorporated by reference from Exhibit 99.2 to  Camden Property Trust’s Form 8-K filed on April 27, 2005  (File No. 1-12110) |

 

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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 |
|              |                                              |
| May 16, 2005 | By:                                               | /S/ DENNIS M. STEEN |   |
|              |                                              | Dennis M. Steen |
|              |                                              | Chief Financial Officer, Sr. Vice President - |
|              |                                              | Finance and Secretary |

 

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