Camden Property Trust — FY 2018 Form 10-K
Reporting period: Year ended December 31, 2018. The filing also reports fourth-quarter results; it is an annual report, not a standalone quarterly filing. Camden is a U.S. multifamily REIT focused on owning, operating, developing, redeveloping and acquiring apartment communities.
Business context and operating portfolio
- At year-end, Camden owned interests in, operated or was developing 167 properties with 56,858 apartment homes. This included 161 operating properties and six properties under construction.
- Weighted average occupancy was 95.6% for the year, versus 95.4% in 2017. Stabilized properties averaged approximately 96% occupancy, compared with 95% in 2017.
- Average monthly rent per apartment home at stabilized properties was $1,502, up from $1,447 in 2017.
Financial results and liquidity
| Metric | FY 2018 | FY 2017 | Change |
|---|---|---|---|
| Total property revenue | $954.5 million | $900.9 million | +6.0% |
| Total property expenses | $343.6 million | $328.7 million | +4.5% |
| Property NOI | $610.9 million | $572.2 million | +6.8% |
| Same-store revenue | $820.7 million | $795.6 million | +3.2% |
| Same-store NOI | $526.2 million | $509.1 million | +3.4% |
| Net income attributable to common shareholders | $156.1 million | $196.4 million | -20.5% |
| Diluted EPS | $1.63 | $2.13 | Down $0.50 |
| Diluted FFO | $464.0 million | $424.1 million | +9.4% |
| Diluted AFFO | $391.7 million | $359.3 million | +9.0% |
| Cash from operating activities | $503.7 million | $434.7 million | +$69.1 million |
Property NOI margin was approximately 64.0%, versus 63.5% in 2017. Same-store rent growth was the principal revenue driver: average same-store rental rates increased 2.8%. Higher real estate taxes, salaries and utility-related expenses partly offset revenue gains.
- Net income and EPS fell despite higher operating results, in part because 2017 included a $43.2 million gain on sale of an operating property. The 2018 result also reflected a $6.5 million deferred-compensation-plan loss, offset by a corresponding expense benefit; these market-related amounts largely offset each other.
- Cash used in investing activities was $640.9 million, mainly reflecting $359.2 million of development and capital improvements and $290.0 million for three Florida operating-property acquisitions. Cash used in financing activities was $197.0 million.
- Year-end debt was $2.32 billion, up from $2.20 billion. Approximately 95.7% was fixed-rate; weighted average interest rate was 4.2% and weighted average maturity was 4.9 years. Interest coverage was 6.4 times, up from 5.8 times.
- Cash and cash equivalents were $34.4 million. Unused capacity was approximately $589.9 million under the $600 million revolving credit facility and $45 million under a short-term facility—$634.9 million combined. The revolving facility was scheduled to mature in August 2019, with extension options.
- 2019 scheduled debt payments were estimated at $437.3 million. Subsequent to year-end, Camden repaid $200 million of secured notes using its unsecured credit facility.
Material changes, outlook and risks
- Camden acquired three operating properties in Florida for approximately $290 million and acquired land for a planned 360-home Orlando development. It sold land in Phoenix for approximately $11.5 million and sold no operating properties in 2018.
- Six consolidated developments comprising 1,698 homes were under construction. Estimated remaining completion cost was $335.2 million; management expected to spend $205–$225 million on these projects in 2019. Additional 2019 planned spending included $95–$105 million to start new developments, $46–$50 million on repositions, $25–$33 million on extensive redevelopment and $68–$72 million on recurring capital expenditures.
- Management expected economic and employment growth to continue and apartment supply to remain manageable in 2019, while noting that weaker economic conditions could harm rent growth, occupancy and results. It described liquidity and the balance sheet as sufficient for anticipated 2019 needs.
- The Board declared a first-quarter 2019 dividend of $0.80 per share, versus $0.77 per quarter in 2018. If maintained for the balance of 2019, the annualized rate would be $3.20; future dividends remain discretionary.
- Key risks include local oversupply and rent declines, competition from other housing and short-term rentals, development cost and lease-up risks, interest-rate and refinancing exposure, and catastrophic weather. Camden also identified LIBOR transition uncertainty, cybersecurity exposure and its multi-year ERP implementation as risks.
- Unconsolidated joint ventures had $510.7 million of third-party debt; Camden’s proportionate share was approximately $159.8 million. The company reported no guarantees of that debt. It reported no material legal proceedings under Item 3; ordinary-course claims were not expected by management to materially affect the financial statements.
- No impairment charges were recorded in 2016–2018. Management cautioned that deterioration in market conditions or changed development assumptions could lead to future impairment charges.
Important facts for investors to verify
- Whether same-store rent and NOI growth can persist as local market supply, operating costs and employment conditions change.
- How the $437.3 million of scheduled 2019 debt payments and the revolving-credit-facility maturity were addressed, including the effect of the subsequent $200 million repayment.
- Actual development, redevelopment and recurring-capital spending against management’s 2019 estimates, and lease-up progress at newly completed communities.
- Whether the proposed $3.20 annualized 2019 dividend is supported by operating cash flow and taxable income.
- Comparability of FFO and AFFO, which are non-GAAP measures and depend in part on Camden’s definition of recurring capital expenditures.