Camden Property Trust — Q2 2023 Form 10-Q
Business context and period. Camden Property Trust is a multifamily apartment REIT. This unaudited report covers the three and six months ended June 30, 2023. At quarter-end, the company owned interests in, operated, or was developing 177 communities with 60,514 apartment homes; five communities with 1,553 homes were under construction.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Property revenue | $385.5 million | $361.7 million | $763.7 million | $673.1 million |
| Net income attributable to common shareholders | $91.1 million | $497.3 million | $133.0 million | $578.1 million |
| Diluted earnings per share | $0.84 | $4.54 | $1.22 | $5.37 |
| Property NOI | $247.9 million | $233.9 million | $491.4 million | $435.0 million |
- Same-store revenue grew 6.1% in Q2 and 7.0% for the first half; same-store NOI rose 6.2% and 7.1%, respectively. Q2 same-store average rental rates increased 8.4%; first-half rates increased 9.5%.
- Property NOI margin, calculated as NOI divided by property revenue, was approximately 64.3% in both Q2 and the first half of 2023, versus approximately 64.7% and 64.6% in the comparable 2022 periods.
- Operating cash flow was $366.6 million for the first half, versus $330.6 million. Investing cash outflow was $139.7 million, compared with $1.25 billion, largely because 2022 included the $1.1 billion acquisition of joint venture interests. Financing cash outflow was $215.5 million, versus $383.5 million of inflow in 2022.
- Cash and cash equivalents were $20.3 million and restricted cash was $8.5 million at June 30. Total assets were $9.26 billion and total equity was $4.99 billion.
Debt, liquidity, and distributions
- Total notes payable were $3.68 billion at June 30, 2023, broadly unchanged from $3.68 billion at year-end 2022. Unsecured debt was $3.35 billion and secured debt was $330.0 million.
- The company had $477.0 million drawn on its $1.2 billion unsecured revolving credit facility and approximately $705.2 million available after outstanding letters of credit. Weighted-average debt maturity was 6.3 years; weighted-average interest rate on total debt was 4.1%.
- Floating-rate debt was $816.9 million, with a 5.9% weighted-average rate for the first half, compared with $274.9 million and 2.9% in the comparable 2022 period. Interest expense rose 15.7% in Q2 and 24.0% for the first half, chiefly from higher rates and revolving credit balances.
- In May, Camden repaid $185.2 million of secured variable-rate notes using its revolver, recording a $2.5 million early-retirement loss. In June, it repaid a $250.0 million note at maturity using the revolver. Management estimated approximately $250 million of debt repayments due over the next 12 months.
- Q2 distributions declared were $1.00 per common share; first-half distributions were $2.00 per share. Assuming similar quarterly distributions for the rest of 2023, the annualized rate would be $4.00 per share.
Changes, outlook, and risks
- Net income fell sharply year over year because Q2 and first-half 2022 included a $474.1 million gain when Camden acquired the remaining interests in two joint venture funds. Q2 2023 also included a $48.9 million gain on sale of a 138-home California property; the comparable first-half 2022 property-sale gain was $36.4 million.
- Revenue growth reflected higher rents and contributions from acquired, stabilized, and lease-up properties. Same-store expense growth partly offset revenue gains: insurance, property taxes, repairs, maintenance, and utilities were among the increases.
- Management expects multifamily supply in its submarkets and asset classes to remain manageable during 2023, but warns that worsening economic conditions or higher supply could harm results. No specific earnings or same-store growth guidance is provided in the filing.
- Five projects under construction had an estimated $212.3 million of remaining costs. Management expected to spend $110–$120 million on these projects during the remainder of 2023. It also estimated $35–$45 million for new development starts, $48–$52 million for repositioning and similar work, and $58–$62 million for recurring capital expenditures.
- Management said liquidity should cover reasonably anticipated needs over the next 12 months, using operating cash flow, the revolver, debt or equity issuance, dispositions, or the ATM program. The $500 million 2023 ATM program had not been used as of the filing date; no shares had been repurchased under the company’s separate $500 million authorization.
- Risks include tighter or more expensive credit markets, rising interest rates, refinancing and capital access, rent-control changes, construction and development costs, market rents and occupancy, weather, cybersecurity, and litigation. Camden is a defendant in consolidated antitrust lawsuits alleging rent coordination through revenue-management software; it disputes the claims, and the potential loss cannot currently be estimated. Management reported no material market-risk changes and said it was in compliance with debt covenants.
- The company reported no impairment charges for the period, but cautioned that weaker market conditions or changes to development assumptions could require future impairment charges. It also reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether rent growth and same-store NOI growth remain resilient as rental demand, new supply, and resident collections evolve.
- How higher interest rates and the increased revolver balance affect interest expense, refinancing costs, and liquidity.
- Whether development costs and schedules remain consistent with management’s estimates, including the $212.3 million remaining construction commitment.
- Developments in the antitrust litigation, for which the filing says loss exposure cannot yet be estimated.
- That the large year-over-year earnings decline is primarily attributable to the nonrecurring 2022 joint-venture remeasurement gain, rather than a comparable decline in reported property revenue or NOI.