Camden Property Trust — FY 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. The filing also provides unaudited fourth-quarter results; this is an annual report, not a stand-alone quarterly filing.
Business context and portfolio
Camden is a U.S. multifamily REIT focused on apartment ownership, management, development, acquisition, and construction. At year-end, it owned interests in, operated, or was developing 206 properties with 69,794 apartment homes, including 10 properties under development. The company reports one operating segment.
Financial and operating results
| Metric | FY 2011 | FY 2010 |
|---|---|---|
| Total property revenue | $655.9 million | $601.5 million |
| Property expenses | $256.7 million | $242.9 million |
| Common-shareholder net income | $49.4 million; $0.66 diluted EPS | $23.2 million; $0.33 diluted EPS |
| Continuing-operations income attributable to common shareholders | $22.5 million; $0.30 diluted EPS | $8.2 million; $0.11 diluted EPS |
| Diluted FFO | $207.5 million | $194.3 million |
| Cash from operating activities | $244.8 million | $224.0 million |
| Cash and cash equivalents at year-end | $55.2 million | $170.6 million |
| Notes payable at year-end | $2.432 billion | $2.564 billion |
Property revenue increased 9.0%. Same-store revenue rose 5.5%, supported by a 4.6% increase in average rental rates and a 0.7% increase in average occupancy; same-store expenses rose 3.0%. Portfolio average occupancy was 94.5%, up from 93.3%, and average monthly rent per apartment home was $970, up from $928. Property revenue less property expenses was $399.2 million, or approximately 60.9% of property revenue, calculated from reported figures; this is not a GAAP profit margin.
Fourth-quarter revenue was $167.7 million and common-shareholder net income was $46.9 million, or $0.63 per diluted share. The quarter included a $24.6 million gain on sale of discontinued operations.
Investing activities used $187.4 million, principally reflecting increased development, capital improvements, land purchases, and joint-venture investment. Financing activities used $172.9 million. The company declared $1.96 per common share in 2011 distributions, versus $1.80 in 2010. Interest coverage was 3.2 times, compared with 2.6 times in 2010.
Material changes and unusual items
- Operating-property count rose to 196 from 186; year-end operating homes increased to 66,997 from 63,316. Growth reflected acquisitions and development activity, along with properties previously held in joint ventures.
- 2011 common-shareholder income included a $24.6 million gain on two property sales, a $4.7 million gain on land sales, and a $1.1 million gain on sales of joint-venture interests. A joint venture’s property sale contributed a further $6.4 million to equity in joint-venture income.
- A $29.8 million non-cash charge resulted from discontinuing hedge accounting after repayment of a $500 million term loan. It materially affected second-quarter results; the quarter reported a common-shareholder loss of $16.6 million.
- Cash declined by $115.4 million year over year, while debt fell by approximately $131.6 million. The company issued $500 million of senior unsecured notes in 2011 and repaid its $500 million term loan and other maturities.
- In January 2012, Camden raised $391.6 million net from a public share offering, acquired the remaining 80% interests in 12 joint ventures for about $99.5 million, and repaid about $272.6 million of associated mortgage debt. It redeemed $100 million of 7.0% preferred units in February 2012; approximately $2.1 million of issuance-cost expense was expected in first-quarter 2012.
Outlook, liquidity, and risks
Management expected modest economic and employment improvement in 2012, while noting that unemployment remained elevated and economic risks persisted. It intended to continue selective acquisitions and dispositions and expand development activity. At year-end, eight consolidated projects had approximately $180 million of anticipated remaining construction expenditures; the company said it expected sufficient liquidity for 2012 needs, including debt service, development, and required REIT distributions.
The $500 million unsecured credit facility was extended to September 2015, with an option to extend to September 2016 and potential capacity increase to $750 million. No borrowings were outstanding at year-end; after $10.4 million of letters of credit, approximately $489.6 million was available. Scheduled 2012 debt maturities were $294.2 million, including four instruments totaling $102.1 million with optional one-year extensions. Approximately 71.7% of properties, measured by invested capital, were unencumbered; weighted-average debt maturity was 6.8 years.
Key risks include short lease terms and exposure to declining rents or occupancy; local oversupply and economic weakness; development costs, delays, and lease-up risk; debt refinancing, interest-rate and credit-rating risk; land and real-estate impairment; joint-venture and fund obligations; and catastrophe, regulatory, litigation, and REIT-qualification risks. Two construction-defect lawsuits in Florida remained at an early stage, with potential losses not estimable; one related association claim had been settled for an amount described as not material. Management reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- How much of reported earnings growth and fourth-quarter income came from property-sale gains and other nonrecurring items, versus recurring operations and FFO.
- Whether same-store rent growth and occupancy gains continued, and how property operating costs and real-estate taxes evolved.
- Execution, lease-up, and funding of the development pipeline, including the approximately $180 million of remaining consolidated construction expenditures.
- Refinancing or repayment plans for 2012 maturities and the effect of post-year-end joint-venture consolidation, debt repayment, share issuance, and preferred-unit redemption on leverage and per-share measures.
- Developments in the Florida construction litigation, property impairment assumptions, and joint-venture and fund commitments.