Camden Property Trust — Q1 2023 Form 10-Q
Business and period. This unaudited quarterly report covers the three months ended March 31, 2023. Camden is a multifamily REIT that owns, operates, develops, redevelops and acquires apartment communities. At quarter-end, it had interests in 178 properties with 60,652 homes, including six properties under construction.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change / context |
|---|---|---|---|
| Property revenue | $378.2 million | $311.4 million | Up 21.5% |
| Property expenses | $134.7 million | $110.3 million | Up 22.1% |
| Property NOI | $243.5 million | $201.0 million | Up 21.1%; NOI margin was approximately 64.4% versus 64.6% |
| Net income | $43.6 million | $83.6 million | Declined; 2022 included a $36.4 million property-sale gain |
| Net income attributable to common shareholders | $41.9 million | $80.7 million | EPS was $0.39 basic and diluted, versus $0.77 basic and $0.76 diluted |
| FFO / Core FFO / Core AFFO | $183.0 million / $183.0 million / $165.5 million | $160.5 million / $158.6 million / $144.4 million | Supplemental, non-GAAP measures |
Same-store revenue increased 8.0% and same-store NOI increased 8.1%. Average rental rates rose 10.7%; lower occupancy and reletting fees partly offset rental-rate growth. Same-store expenses rose 7.8%, including higher insurance, real estate taxes and repairs and maintenance.
Operating cash flow was $139.7 million, compared with $122.3 million. Investing cash use was $93.5 million, primarily for development and capital improvements; financing cash use was $36.3 million. Cash, cash equivalents and restricted cash totaled $27.3 million at quarter-end.
Total notes payable were $3.748 billion, including $3.233 billion unsecured and $515.1 million secured. Weighted-average debt maturity was 6.1 years and the reported weighted-average interest rate was 4.1%. Floating-rate debt was $633.1 million, with a weighted-average rate of 6.0% for the quarter. Interest expense rose 33.8% to $32.8 million. The interest expense coverage ratio was 6.7, versus 7.4.
Camden reported approximately $1.1 billion available on its $1.2 billion revolving credit facility, after outstanding borrowings and letters of credit. It stated that it was in compliance with debt covenants. The quarterly dividend declared was $1.00 per common share.
Material changes and unusual items
- Revenue and NOI growth reflected higher same-store rents and the contribution of acquired investment funds, consolidated from April 1, 2022, as well as stabilized and lease-up properties.
- Interest and depreciation expense increased, partly reflecting the acquired funds, additional debt and completed development and repositioning projects. Interest expense also reflected higher rates and average revolver borrowings.
- Compared with Q1 2022, Camden had no property-sale gain or equity income from joint ventures; the 2022 quarter included a $36.4 million sale gain and $3.0 million of joint-venture income.
- Deferred compensation plan investment income of $5.9 million was offset by an equal expense; the comparable 2022 period had a $7.5 million loss and offsetting benefit.
- Camden paid $1.1 billion in cash for the remaining interests in the funds on April 1, 2022, while assuming approximately $515 million of secured debt. The transaction significantly reduced cash on hand compared with March 2022.
Outlook, risks and contingencies
Management cited job growth, favorable renter demographics, apartment demand and manageable expected supply in its markets as supportive of operations, while warning that weaker economic conditions could hurt results. Camden intends to pursue development, redevelopment, repositioning, acquisitions and selective dispositions as market conditions allow. It did not provide specific earnings or revenue guidance in the filing.
Six properties under construction represented an estimated $267.7 million of remaining costs to complete; management expected $175–$185 million of that spending in the remainder of 2023. Other estimated spending included $60–$80 million for new development starts, $80–$84 million for repositioning, redevelopment and revenue-enhancing work, and $80–$84 million for recurring capital expenditures. Management estimated approximately $500 million of debt repayments due within 12 months and described them as manageable.
Risks include tighter or more expensive credit availability following deterioration in credit markets and bank failures, higher interest rates, refinancing needs, rent competition, rent regulation, development costs, and potential impairment if property or market assumptions weaken. Camden reported antitrust lawsuits alleging rent fixing involving revenue-management software; cases were consolidated on April 10, 2023. The company disputes the claims, but said the outcome and any potential loss could not be estimated. Management reported no impairment charges in the quarter and believes asset carrying values are recoverable, while noting future impairments remain possible if conditions deteriorate.
Facts investors should verify
- Whether rent growth and occupancy trends sustain same-store NOI growth, particularly as rental rates, occupancy and leasing fees evolve.
- Actual development, construction and capital spending versus estimates, and lease-up progress at the properties under construction.
- Debt maturities, refinancing terms and borrowing costs, including exposure to floating rates and continued availability of the revolving facility.
- Cash and liquidity available after distributions, debt repayment and development commitments.
- Any developments in the antitrust litigation, including whether a potential loss becomes estimable or material.
- Changes in property values, development assumptions or market conditions that could require impairment charges.