Camden Property Trust — Q1 2024 Form 10-Q
Business context and period. This unaudited quarterly report covers the three months ended March 31, 2024. Camden is a multifamily REIT that owned, operated, or was developing 175 properties with 59,227 apartment homes across the United States at quarter-end; four properties with 1,166 homes were under construction.
Financial performance and position
- Revenue and property performance: Property revenue was $383.1 million, up 1.3% from $378.2 million. Same-store revenue increased 2.5%; same-store NOI increased 2.3% to $234.6 million. Total property NOI was $244.6 million, up 0.5%.
- Profit: Net income attributable to common shareholders was $83.9 million, or $0.77 per diluted share, compared with $41.9 million, or $0.39, a year earlier. The increase primarily reflected a $43.8 million gain on a property sale; the quarter also included a $0.9 million loss on early debt retirement.
- REIT operating measures: FFO was $183.8 million versus $183.0 million; Core FFO was $187.6 million versus $183.0 million; Core AFFO was $165.6 million versus $165.5 million. These are non-GAAP measures as defined by the company.
- Expenses and interest: Property expenses rose 2.9% to $138.5 million. Interest expense was $32.5 million, down slightly from $32.8 million. Depreciation and amortization was $144.8 million.
- Cash flow and investment: Operating cash flow was $135.9 million, compared with $139.7 million. Development and capital-improvement spending was $106.1 million. Investing cash flow was positive $6.9 million, including $114.5 million of net proceeds from the property sale.
- Debt and liquidity: Notes payable totaled $3.55 billion at March 31, down from $3.72 billion at year-end. Cash and cash equivalents were $92.7 million, with another $8.2 million restricted. The company reported approximately $1.2 billion available on its $1.2 billion revolving credit facility and stated it was in compliance with its covenants. Weighted-average debt maturity was 6.6 years; the weighted-average interest rate on total debt was 4.2%.
Material changes versus Q1 2023
- Same-store revenue growth was driven mainly by higher average rental rates, lower uncollectible revenue, and higher fee income. Same-store expenses increased 2.9%, including higher payroll, utilities, and real estate taxes, partly offset by lower insurance expense.
- Total property NOI increased only 0.5%, as same-store and non-same-store growth was largely offset by lower NOI from dispositions and other items.
- Reported net income and EPS nearly doubled, but the comparison was significantly affected by the 2024 property-sale gain. Core AFFO was essentially unchanged.
- Operating cash flow declined, while investing cash flow improved from a $93.5 million outflow to a $6.9 million inflow, largely because of the property sale.
- Camden issued $400 million of 4.90% senior notes due 2034, repaid a $300 million term loan carrying a 6.21% rate, and repaid $250 million of 4.36% notes at maturity. It also repurchased 471,282 shares for approximately $45.7 million.
Outlook, risks, and unusual items
- Management said new multifamily supply in its submarkets and asset classes is elevated in 2024, but expects continued demand to absorb deliveries; weaker demand or worsening economic conditions could harm results. No specific earnings or revenue guidance was provided.
- Management expects to continue development, redevelopment, repositioning, acquisitions, and selective property dispositions. It estimates $97.4 million of remaining costs to complete the four properties under construction, including $70 million to $90 million expected during the rest of 2024. Additional anticipated 2024 spending includes $39 million to $49 million for new development starts, $73 million to $77 million for repositioning and related projects, and $79 million to $83 million of recurring capital expenditures.
- The company considers approximately $290 million of debt repayments due over the next 12 months manageable. It expects to fund needs through operating cash flow and, as appropriate, its revolver, debt or equity offerings, property sales, or other borrowings. The 2023 ATM program has up to $500 million available; no shares had been sold under it as of the filing.
- Camden disclosed lawsuits alleging rent-fixing through revenue-management software, including consolidated private litigation and separate actions brought by the attorneys general of the District of Columbia and Arizona. It also received civil investigative demands from the U.S. Department of Justice and Texas. The company says it believes the lawsuits are without merit and intends to defend them; outcomes and potential losses cannot presently be estimated.
- No impairment charges were recorded in the quarter. Management cautioned that deterioration in market conditions or changes to development assumptions could require future impairment charges. Other principal risks include interest rates, capital-market access, development costs and leasing, rent regulation, severe weather, cybersecurity, and maintaining REIT status.
- The quarterly dividend declared was $1.03 per common share. Management noted that repeating this rate for the rest of 2024 would imply an annualized $4.12 per share; this is not a formal dividend commitment.
Important facts for investors to verify
- How much of the reported earnings increase is attributable to the $43.8 million sale gain, and how operating trends develop excluding disposition effects.
- Whether rent growth and occupancy can absorb elevated 2024 apartment supply, particularly in Camden’s markets.
- Progress, leasing, costs, and completion timing for the four construction projects and the broader development pipeline.
- Debt refinancing and interest-rate exposure, including the approximately $290 million of expected repayments over the next 12 months and floating-rate debt of $541.1 million.
- Developments in the rent-fixing litigation and government investigations, for which the company says potential losses cannot currently be estimated.