Business Context and Reporting Period
Company: Camden Property Trust (REIT)
Reporting Period: Fiscal year ended December 31, 1998
Business Overview: Houston-based REIT owning, developing, and managing multifamily apartment communities across 14 core markets in nine states. As of December 31, 1998, the portfolio consisted of 149 operating properties with 51,310 apartment homes and a weighted average occupancy rate of 93%. Additionally, 14 properties containing 5,658 homes were under development.
Key Financial Metrics
Real Estate Assets: Total real estate assets carried at $2,455,458,000 as of December 31, 1998. This includes $1,941,583,000 in initial cost and $436,022,000 in capitalized costs subsequent to acquisition or development.
Depreciation: Accumulated depreciation totaled $167,560,000 for the year ended December 31, 1998, with depreciation expense for the year amounting to $76,740,000.
Debt and Liquidity:
- Debt Assumption: Assumed approximately $484 million of debt in the merger with Oasis Residential, Inc.
- Debt Reduction: Utilized net proceeds from asset disposals to reduce outstanding debt by $124 million.
- Development Funding: Total budgeted cost for development properties is approximately $400.1 million, with a remaining cost to complete of $217.8 million.
Revenue and Profit: The filing text incorporates financial statements by reference and does not provide specific consolidated revenue, net income, or cash flow figures for the period. No single operating property accounted for greater than 3.2% of total revenues.
Material Changes Versus Prior Period
Portfolio Expansion via Merger: On April 8, 1998, Camden merged with Oasis Residential, Inc., increasing the portfolio from 100 to 152 completed properties and from 34,669 to 50,183 apartment homes. Camden issued 12.4 million common shares and 4.2 million preferred shares in the transaction.
Asset Dispositions and Joint Ventures:
- Completed a transaction on June 30, 1998, forming Sierra-Nevada Multifamily Investments, LLC, transferring 19 apartment communities (5,119 homes) for an aggregate of $248 million.
- Received $275.5 million in net proceeds from asset disposals during 1998, which were reinvested in acquisitions, developments, debt retirement, and share repurchases.
Occupancy Trends: Weighted average occupancy was 93.0% in 1998, down from 94.0% in 1997.
Guidance, Outlook, Risks, and Contingencies
Outlook and Strategy: Management focuses on selective investment in favorable markets, sophisticated property management, and new development. The company targets a minimum initial stabilized return of 9.5%-10.5% for new developments.
Legal Contingencies:
- Fair Housing Act Lawsuit: On February 1, 1999, the U.S. Department of Justice filed a lawsuit alleging violations of the Fair Housing Act regarding the design and construction of nine properties (seven currently owned) acquired from Oasis. The complaint seeks injunctive relief, damages, and civil penalties. Camden is inspecting properties but cannot currently estimate costs or the outcome.
Risks:
- Failure to qualify as a REIT.
- Environmental liabilities (hazardous substances) and natural disasters.
- Year 2000 computer problems.
- Changes in government regulations and tax rates.
- Insurance coverage limitations for catastrophic losses.
Investor Verification Checklist
- Financial Statements: Verify specific revenue, net income, and cash flow figures in the Annual Report to Shareholders (pages 30-49), as these are incorporated by reference and not detailed in the 10-K text provided.
- Legal Exposure: Monitor the status and potential financial impact of the Department of Justice lawsuit regarding Fair Housing Act compliance.
- Development Pipeline: Review the $217.8 million remaining cost to complete for development projects and associated budget risks.
- Debt Structure: Confirm the total outstanding debt balance and interest rates following the $484 million assumption from Oasis and subsequent $124 million reduction.
- Occupancy Stability: Analyze the year-over-year decline in occupancy from 94.0% to 93.0% and its impact on future net operating income.