MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  LIQUIDITY AND CAPITAL RESOURCES Financial Structure Liquidity 56 camden transforming We intend to concentrate our growth efforts toward selective development and acquisition opportunities in our current markets, and through the acquisition of existing operating properties and the development of properties in selected  new markets. During the year ended December 31, 2004, we incurred $83.0 million in development costs and no acquisition costs. At December 31, 2004, we had two wholly-owned properties under construction at a projected aggregate cost of approximately $66.5 million, $39.3 million of which had been incurred through 2004. At year end, we were obligated for approximately $21.3 million under construction contracts related to these projects (a substantial  amount of which we expect to fund with our unsecured line of credit). We intend to fund our developments and We financed the cash portion of the merger with Summit using a combination of available borrowing capacity under  our line of credit and a new bridge loan facility entered into on January 19, 2005. We currently expect to form a joint  venture and transfer to the venture multifamily properties with an estimated fair value of $425 million to $525 million.  We anticipate that we will retain a minority interest in the venture and continue to provide property management  services for the properties transferred to the venture. We intend to use a portion of the proceeds from this  transaction to refinance the bridge loan. See further discussion of our merger with Summit, including the issuance of  common equity in connection with the merger, in the “Business” section. We consider our long-term liquidity requirements to be the repayment of maturing debt, including borrowings under  our unsecured line of credit that were used to fund development and acquisition activities. We intend to meet our  long-term liquidity requirements through the use of common and preferred equity capital, senior unsecured debt and  property dispositions. We expect to use the proceeds from any property sales for reinvestment in acquisitions or new  developments or reduction of debt.  We intend to meet our short-term liquidity requirements through cash flows provided by operations, our unsecured  line of credit discussed in the “Financial Flexibility” section and other short-term borrowings. We expect our ability to  generate cash will be sufficient to meet our short-term liquidity needs which include: Our interest expense coverage ratio, net of capitalized interest, was 3.0, 2.9 and 3.3 times for the years ended December  31, 2004, 2003 and 2002, respectively. At December 31, 2004, 2003 and 2002, 88.6%, 85.1% and 83.8%, respectively,  of our properties (based on invested capital) were unencumbered. Our weighted average maturity of debt, excluding  our line of credit, was 6.5 years, 6.5 years and 6.7 years at December 31, 2004, 2003 and 2002, respectively. Interest  expense coverage ratio is derived by dividing interest expense for the period into the sum of income from continuing  operations before gain on sale of land, impairment loss on land held for sale, equity in income of joint ventures and  minority interests, depreciation, amortization, interest expense and income from discontinued operations. We intend to maintain what management believes to be a conservative capital structure by: (i)  using what management believes is a prudent combination of debt and common and preferred equity; (ii)  extending and sequencing the maturity dates of our debt where possible;  (iii) managing interest rate exposure using what management believes are prudent levels of fixed and fl oating rate debt; (iv) borrowing on an unsecured basis in order to maintain a substantial number of unencumbered assets; and (v)  maintaining conservative coverage ratios. (i) operating expenses; (ii)  current debt service requirements; (iii) recurring capital expenditures; (iv) initial funding of property developments, acquisitions and mezzanine fi nancings; (vi) distributions on our common and preferred equity. (v)  common share repurchases; and