Business context and reporting period
Camden Property Trust is a U.S. multifamily REIT. This unaudited Form 10-Q covers the three months ended March 31, 2012, compared with the three months ended March 31, 2011. At quarter-end, Camden owned interests in, operated, or was developing 204 properties with 69,111 apartment homes, including seven properties under development.
Key financial metrics
| Metric | Q1 2012 | Q1 2011 |
|---|---|---|
| Property revenue | $178.7 million | $157.6 million |
| Net income attributable to common shareholders | $88.8 million | $7.3 million |
| Diluted EPS | $1.07 | $0.10 |
| Diluted FFO | $68.6 million | $54.1 million |
| Cash from operating activities | $75.8 million | $54.4 million |
| Development and capital improvement outflows | $60.3 million | $23.1 million |
| Cash and cash equivalents, March 31 | $49.7 million | $98.8 million |
| Total notes payable, March 31 | $2.431 billion | $2.432 billion at December 31, 2011 |
Property expenses were $67.6 million versus $62.2 million. Property revenue less property expenses was $111.1 million, or 62.2% of property revenue, compared with $95.5 million, or 60.6%, in Q1 2011. Same-store revenue increased 6.8%; average same-store rental rates rose 5.4% and average occupancy increased 0.9%. Portfolio weighted average occupancy was 94.8%, versus 94.0%.
Camden reported diluted continuing-operations EPS of $0.68 versus $0.09. The reported net income and EPS comparisons were substantially affected by transaction gains in 2012. Distributions declared were $0.56 per common share versus $0.49.
Material changes versus the prior comparable period
- Revenue increased 13.4%, reflecting same-store growth, recently consolidated communities, and new development/lease-up activity. Same-store property expenses rose 2.4%, slower than same-store revenue growth.
- In January, Camden acquired the remaining 80% interest in 12 joint ventures, consolidating 4,034 homes. It recorded a $40.2 million gain from remeasuring its previously held interests. The acquired portfolio contributed $8.7 million in revenue and $3.6 million in property expenses after consolidation.
- Camden sold three properties with 1,033 homes for total proceeds of approximately $55.6 million and recorded a $32.5 million net gain. No assets were held for sale at quarter-end.
- Cash from operations increased, while investing cash outflows rose to $105.5 million, primarily due to the joint-venture acquisition and greater development spending. Net cash decreased $5.5 million.
- Camden issued 6.6 million common shares in a public offering, receiving approximately $391.6 million net, and sold additional shares through its ATM program. It used offering proceeds to fund the acquisition and repay assumed mortgage debt. It also redeemed $100 million of preferred units and expensed $2.1 million of related unamortized issuance costs.
Liquidity, outlook, risks, and unusual items
At March 31, total debt was $2.431 billion, including $1.381 billion unsecured and $1.050 billion secured. The weighted-average debt maturity was 6.5 years. Camden had no line-of-credit borrowings, approximately $489.6 million available under its $500 million facility after letters of credit, and reported compliance with its covenants. Approximately 73.4% of properties by invested capital were unencumbered. Management said 2012 debt maturities of $293.2 million were manageable; approximately $101 million of those maturities had automatic one-year extension options.
Management expected economic and employment conditions to improve and new multifamily supply to remain modest, while noting that economic risks and elevated unemployment remained. It intended to pursue development, acquisitions, and selective dispositions, and to fund liquidity needs through operating cash flow, cash, credit facilities, asset sales, and debt or equity offerings. No quantified earnings or FFO guidance was provided. Management cited an annualized 2012 dividend rate of $2.24 per share if quarterly distributions remained at $0.56.
Camden expected $128.8 million of additional costs to complete current construction projects. Risks include economic and capital-market volatility, rent and occupancy pressure, development and acquisition execution, refinancing and interest-rate exposure, property-sale constraints, REIT qualification, and joint-venture and fund risks. Two Florida condominium associations have brought early-stage construction-defect lawsuits against a subsidiary; Camden denied liability, and the potential outcome or loss could not be estimated. Management stated that the carrying values of real estate and development assets were recoverable, but warned that deteriorating conditions or changed assumptions could lead to future impairment charges.
Most important facts for investors to verify
- Assess recurring operating performance separately from the $40.2 million joint-venture remeasurement gain and $32.5 million property-sale gain; review FFO alongside GAAP earnings.
- Verify the sustainability of same-store rent growth, occupancy, and expense trends, and the lease-up progress of completed developments.
- Review share issuance and dilution, ATM-program availability and renewal, and the effect of equity funding on per-share performance.
- Track 2012 debt maturities, extension decisions, development commitments, and access to financing; confirm liquidity remains adequate.
- Monitor the preliminary purchase-price allocation for the acquired joint ventures and developments for changes, as well as the Florida litigation and any future impairment indicators.