Camden Property Trust — 2010 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2010; filing dated February 24, 2011. Camden is a multifamily REIT focused on owning, operating, developing, acquiring, and constructing apartment communities. At year-end it owned interests in, operated, or was developing 188 properties with 63,923 homes across the United States; 186 properties were operating.
Key financial and operating metrics
| Metric | 2010 | 2009 |
|---|---|---|
| Property revenue | $610.4 million | $612.0 million |
| Property expenses | $247.5 million | $242.1 million |
| Property-level income (revenue less property expenses) | $362.9 million; 59.4% margin | $369.9 million; 60.4% margin |
| Income (loss) from continuing operations attributable to common shareholders | $10.1 million; $0.14 per diluted share | $(72.8) million; $(1.15) per diluted share |
| Net income (loss) attributable to common shareholders | $23.2 million; $0.33 per diluted share | $(50.8) million; $(0.80) per diluted share |
| Funds from operations (FFO), diluted | $194.3 million | $109.9 million |
| Cash provided by operating activities | $224.0 million | $217.7 million |
| Cash and cash equivalents at year-end | $170.6 million | $64.2 million |
| Notes payable at year-end | $2.564 billion | $2.625 billion |
Consolidated operating-property occupancy averaged 93.4% in 2010 versus 94.6% in 2009. Average monthly property revenue per apartment home was $1,021 versus $1,036. Interest expense coverage, as defined by management, was 2.6 times in both years. About 91% of debt was fixed-rate at year-end; weighted-average debt maturity was 5.5 years.
Material changes versus the prior year
- Total property revenue decreased 0.3%; property expenses increased 2.2%, compressing the property-level margin by about one percentage point.
- Same-store revenue fell 2.0%, mainly because same-store average rental rates declined 2.3%; management reported sequential rental improvement in the final three quarters and slight occupancy improvement.
- Common-shareholder results improved substantially from 2009, which included an $85.6 million land-development impairment. The 2010 result also benefited from property-sale gains and other income items; it should not be read as equivalent to recurring operating improvement.
- Cash from operations increased about $6.3 million. Investing cash flow moved from a $69.5 million use in 2009 to $35.2 million provided in 2010, principally reflecting higher property-sale proceeds. Financing used $152.8 million, including debt repayments and distributions, partly offset by $231.7 million of net ATM share proceeds.
- Camden sold two operating properties with 1,066 homes in Q4 for net proceeds of approximately $101.9 million and recorded a $9.6 million gain. It also acquired three properties for a discretionary fund and consolidated three joint ventures after restructuring ownership interests.
Liquidity, debt, and capital allocation
- At December 31, Camden had $170.6 million in cash and no borrowings outstanding on its $500 million unsecured credit facility; approximately $489.8 million remained available after letters of credit.
- The company reported approximately $154.4 million of 2011 debt maturities excluding scheduled amortization; its contractual-obligations table shows $159.0 million including scheduled amortization. The 2012 maturity amount is $763.0 million.
- Camden entered into a replacement $500 million unsecured facility in August 2010, maturing in August 2012 with an option to extend to August 2013. It reported compliance with facility covenants.
- Common distributions were $1.80 per share for 2010, down from $2.05 in 2009. The filing states REIT status generally requires distributions of at least 90% of REIT taxable income, subject to tax rules.
- During 2010, Camden issued about 4.9 million shares through its ATM program for approximately $231.7 million net. It reported $10.7 million of ATM capacity remaining as of the filing date.
Outlook, commentary, risks, and unusual items
- Management expected rental rates and occupancy to improve in 2011, while noting results depend on employment growth, new apartment supply, and home-ownership trends. It planned to increase development activity, pursue selective acquisitions through its funds, and dispose of selected properties.
- Two consolidated projects under construction totaled 607 homes, with $57.2 million of additional expected costs. The filing gives inconsistent timing: the executive summary says initial occupancy was expected in the second half of 2011, while the detailed project table estimates completion in 2012 and 2014.
- Camden reported no land-development impairment in 2010, but cautioned that weaker market conditions or changes to development plans could lead to future material non-cash impairment charges. It wrote off a $1.0 million technology investment in Q4.
- Other 2010 items included $9.6 million of gains on sales of discontinued operations, $4.2 million of income following a joint-venture dissolution that released a debt guarantee, and $2.7 million of income related to an expired joint-venture indemnification provision.
- Key risks include economic and rental-market weakness, short lease terms and competition, refinancing and interest-rate exposure, development costs and lease-up, land valuation, joint-venture and fund restrictions, and maintaining REIT qualification. Moody’s and S&P ratings were Baa1 and BBB, respectively, with stable outlooks.
- Management said it believed liquidity was sufficient for anticipated 2011 needs. Legal proceedings arising in the ordinary course were not expected by management to have a material adverse effect. Deloitte issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Whether rental-rate and occupancy recovery continued after year-end, particularly against the 2010 same-store revenue decline.
- The timing and remaining funding needs for the two development projects, given the conflicting completion disclosures.
- How the $763.0 million of 2012 maturities will be refinanced or repaid, and the availability and cost of capital.
- How much of 2010 FFO and earnings improvement reflects recurring property operations versus dispositions, joint-venture changes, and other unusual items.
- Whether land and development carrying values remain supportable under changed rent, occupancy, and project-start assumptions.
- The effect of ATM share issuance and the reduced annual distribution on per-share returns and future capital needs.