Camden Property Trust — Q2 2022 Form 10-Q
Business and period: Camden Property Trust is a multifamily REIT. This unaudited filing covers the quarter and six months ended June 30, 2022, compared with the same 2021 periods. At quarter-end, the company owned, operated, or was developing 176 communities with 60,267 apartment homes.
Financial results and key metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Property revenue | $361.7 million | $276.5 million | $673.1 million | $544.1 million |
| Net income attributable to common shareholders | $497.3 million | $30.2 million | $578.1 million | $61.5 million |
| Diluted EPS | $4.54 | $0.30 | $5.37 | $0.61 |
| Net operating income (NOI) | $233.9 million | $173.6 million | $435.0 million | $340.2 million |
| Funds from operations (FFO) | $179.9 million | $131.2 million | $340.4 million | $257.0 million |
| Adjusted FFO (AFFO) | $158.5 million | $112.4 million | $304.7 million | $225.5 million |
Amounts are rounded. FFO, AFFO, and NOI are non-GAAP supplemental measures as defined by the company.
- Same-store performance: Same-store revenue rose 12.1% in Q2 and 11.6% for the first half; same-store NOI increased 16.5% and 16.0%, respectively. Q2 average rental rates increased 12.5% year over year. Average occupancy was 96.8%, versus 97.3% a year earlier.
- Cash flow: First-half operating cash flow was $330.6 million, compared with $243.7 million. Investing activities used $1.255 billion, including the acquisition and $251.0 million of development and capital improvements. Financing activities provided $383.5 million. Cash, cash equivalents, and restricted cash ended at $78.7 million, down from $619.0 million at year-end 2021.
- Debt and liquidity: Total notes payable were $3.737 billion, including $514.7 million of secured debt assumed in the acquisition. The weighted-average debt rate was 3.6% and weighted-average maturity was 6.6 years. The company had $835.7 million available under its $900 million credit facility and reported compliance with its covenants. Management estimated $634.6 million of debt repayments due over the next 12 months; the facility matures in March 2023, with two six-month extension options.
- Distributions and equity: The company declared a $0.94-per-share quarterly dividend. In April it issued 2.9 million shares for approximately $490.3 million net proceeds, used to reduce credit-line borrowings. A new $500 million ATM program was established; no forward sales had been entered into as of the filing.
Material changes and unusual items
- On April 1, Camden acquired the remaining 68.7% interest in two investment funds, bringing 22 communities and 7,247 homes fully onto its balance sheet. The transaction involved approximately $1.1 billion in cash consideration and assumption of approximately $515 million of secured mortgage debt.
- The acquisition triggered a $474.1 million gain from remeasurement of Camden’s previously held 31.3% ownership interest. This gain was the principal reason reported net income and EPS surged; it is not representative of recurring property operations. First-half results also included a $36.4 million gain on sale of a Maryland property.
- Q2 NOI growth also reflected the acquired communities and other non-same-store properties. Same-store results provide a clearer view of comparable-property operating trends.
- Interest expense rose 20.5% in Q2 to $29.0 million, mainly due to assumed mortgage debt and higher credit-facility borrowings. Depreciation and amortization increased 58.4% to $157.7 million, largely due to acquisitions and completed development projects.
- Deferred-compensation investments recorded a $14.7 million Q2 loss, with an equal and offsetting expense benefit in the company’s statements; the first-half net income and expense effects likewise offset.
Outlook, risks, and contingencies
- Management expected economic and employment growth to continue in 2022 and multifamily supply in its markets to remain manageable, while warning that weaker economic conditions could adversely affect results. The filing provides no specific earnings or FFO guidance.
- Camden planned to pursue development, redevelopment, repositioning, and acquisitions, with selective dispositions as conditions allow. It estimated $247.7 million of remaining costs to complete five properties under construction; expected additional 2022 spending included $55–65 million for new development starts, $42–46 million for repositioning and related projects, and $52–56 million of recurring capital expenditures.
- Management considered liquidity sufficient for anticipated needs over the next 12 months, including debt service, construction, capital spending, acquisitions, and REIT distributions. Funding sources could include operating cash flow, cash, credit facilities, debt or equity issuance, ATM sales, and property dispositions.
- Key disclosed risks include rising interest rates and borrowing costs, refinancing and capital-market access, debt levels, rent regulation, economic weakness, competition, development and acquisition execution, cybersecurity, catastrophic weather, and maintaining REIT qualification. Most apartment leases average approximately 14 months, which management said may allow rents to adjust but also exposes the company to declining market rents.
- Five properties were under construction, with 1,842 planned homes; management estimated completion costs of approximately $247.7 million. No impairment charges were recorded in the periods presented. The filing reported no material change in risk factors, no legal proceedings, and no outstanding off-balance-sheet guarantees or arrangements.
Investor verification priorities
- Separate recurring performance from the $474.1 million acquisition remeasurement gain and the $36.4 million property-sale gain; review FFO, AFFO, and same-store NOI alongside GAAP results.
- Assess acquisition economics and integration: the 22 communities added substantial debt and depreciation, while Camden ceased recognizing fees and equity-method income from the funds.
- Verify liquidity and refinancing plans for the $634.6 million of estimated next-12-month repayments and the March 2023 credit-facility maturity, including extension options and interest-rate exposure.
- Monitor same-store rent growth, occupancy, property expenses and taxes, as well as construction budgets, lease-up, and funding for the development pipeline.
- Track future share issuance under the $500 million ATM program and whether dividend distributions remain supported by recurring cash generation.