Camden Property Trust — Q3 2013 Form 10-Q
Reporting period: Three and nine months ended September 30, 2013. Camden is a multifamily REIT. At quarter-end it owned interests in, operated, or was developing 192 properties with 66,278 apartment homes; 12 properties with 3,644 homes were under construction.
Financial performance
| Metric | Q3 2013 | Q3 2012 | First 9 months 2013 | First 9 months 2012 |
|---|---|---|---|---|
| Property revenue | $202.0 million | $181.8 million | $591.0 million | $520.7 million |
| Income from continuing operations | $35.7 million | $27.8 million | $114.8 million | $104.0 million |
| Net income attributable to common shareholders | $70.7 million | $30.7 million | $206.4 million | $141.2 million |
| Diluted EPS | $0.80 | $0.35 | $2.34 | $1.67 |
| Diluted FFO | $93.3 million | $82.1 million | $271.4 million | $227.4 million |
| Cash from operating activities | — | $309.6 million | $250.0 million |
Q3 property revenue rose 11.1%; first-nine-month revenue rose 13.5%. Same-store revenue increased 4.3% in Q3 and 5.2% for the nine months, while same-store property expenses rose 2.1% and 3.5%, respectively. Average occupancy was 95.3% in Q3 versus 95.5% a year earlier. Management attributed revenue gains chiefly to higher rental rates, favorable demographics, and a gradually improving economy.
Reported earnings include significant disposition-related gains: the company recorded a $34.4 million after-tax gain on discontinued operations in Q3 and $91.1 million for the nine-month period. Accordingly, net income and EPS growth substantially exceeded growth in continuing-operations income. Diluted FFO, a non-GAAP measure, increased about 14% for Q3 and 19% for the nine months.
Balance sheet, debt and liquidity
- Total assets were $5.69 billion at September 30, 2013, versus $5.39 billion at December 31, 2012. Total debt was $2.665 billion, up from $2.511 billion; comprising $1.722 billion unsecured and $943 million secured debt.
- Cash and cash equivalents were $4.7 million. Restricted cash was $60.9 million, including approximately $54.1 million of property-sale proceeds held for a like-kind exchange.
- Camden had $319 million available under its $500 million unsecured credit facility after $170 million of borrowings and approximately $11 million in letters of credit. It also reported $13 million in short-term borrowings. Management stated it was in compliance with facility covenants.
- Weighted-average debt maturity was 6.1 years; weighted-average interest rate on floating-rate debt was approximately 1.0%. Interest coverage was 4.8 times in Q3 and 4.6 times for the first nine months, compared with 4.2 and 3.9 times, respectively, a year earlier.
- Operating cash flow was $309.6 million; investing activities used $371.3 million and financing activities provided $39.7 million over the first nine months. Development and capital-improvement spending was $245.3 million.
Material changes and notable items
- Same-store rent growth and acquisitions contributed to higher revenue and operating cash flow. Same-store operating costs also increased, particularly real estate taxes and insurance.
- Camden acquired three operating properties totaling 1,118 homes for approximately $225 million and acquired Arizona land for approximately $25.8 million. It sold four operating properties totaling 1,796 homes during the nine months; two additional properties were sold in October for approximately $34.6 million.
- Unconsolidated joint ventures sold 14 Las Vegas properties. Camden recognized its approximately $13 million share of the gain and a $5 million promoted-equity interest during the first nine months.
- Construction and repositioning commitments are substantial: estimated costs to complete 10 consolidated projects were $412.2 million, with $70–$75 million expected in the remainder of 2013. Camden also expected $15–$20 million of additional repositioning and $14–$18 million of other capital expenditures in that period.
- Quarterly distributions declared were $0.63 per common share, up from $0.56 a year earlier. The filing gives no formal earnings or FFO guidance.
Outlook, risks and contingencies
Management intended to pursue development and acquisition opportunities while selectively disposing of assets and preserving liquidity. It expected to meet near-term requirements through operating cash flow, credit-facility borrowings, property sales, ATM share issuance, debt or equity offerings, and secured mortgages. Management described approximately $200.8 million of debt maturities for the remainder of 2013 as manageable and stated it believed liquidity was sufficient for anticipated needs.
Management cautioned that economic weakness, competition, new apartment supply, development and construction execution, property-sale conditions, financing and refinancing access, interest-rate exposure, credit ratings, and REIT qualification could adversely affect results. It noted that weaker markets or changed development plans could lead to future impairment charges, although none were recorded in the periods presented.
One construction-related lawsuit remained unresolved; the company denied liability and said the potential outcome or loss range could not be estimated. A separate lawsuit was settled in June 2013 for an immaterial payment. The company reported no guarantees on unconsolidated joint-venture debt and no material changes to previously disclosed risk factors or market-risk exposure.
Important facts for investors to verify
- How much reported earnings growth reflects property operations versus property-sale gains and joint-venture gains; review continuing-operations results and FFO reconciliations.
- Whether same-store rent growth, occupancy, and expense trends persist, especially as apartment supply increases.
- Funding and completion progress for the $412.2 million remaining construction program, alongside planned repositioning and capital spending.
- Debt repayment or refinancing plans, particularly the stated $200.8 million of maturities for the remainder of 2013, and the availability of liquidity after restricted sale proceeds are excluded.
- Resolution and potential financial exposure from the remaining construction lawsuit, which the filing says cannot yet be estimated.