Camden Property Trust — Q2 2015 Form 10-Q
Business and period: U.S. multifamily REIT owning, operating, or developing 181 properties with 62,909 apartment homes at June 30, 2015. This unaudited filing covers the quarter and six months ended June 30, 2015; comparisons are with 2014.
Financial performance
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Property revenue | $220.7m | $208.5m | $436.1m | $414.4m |
| Property revenue less property expenses | $141.9m | $132.6m | $278.9m | $264.2m |
| Net income attributable to common shareholders | $36.1m | $35.3m | $151.7m | $75.3m |
| Diluted EPS | $0.40 | $0.40 | $1.68 | $0.85 |
| Diluted FFO attributable to common shareholders | $102.0m | $94.2m | $200.6m | $189.0m |
| AFFO attributable to common shareholders | $82.8m | $77.2m | $170.1m | $163.6m |
Q2 property revenue rose 5.8%; same-store revenue grew 5.2%, while same-store expenses increased 3.9%. Average occupancy was 95.9%, versus 95.7%. Six-month same-store revenue growth was 4.9%, and same-store expense growth was 5.0%. The filing reports interest expense of $24.4m for Q2 and $49.0m for six months; depreciation and amortization were $63.7m and $125.3m, respectively.
Six-month GAAP earnings include an $85.1m gain on two operating-property sales. Excluding this unusual gain through the filing’s FFO reconciliation, six-month FFO was $200.6m, up from $189.0m; AFFO was $170.1m, up from $163.6m. Distributions declared were $0.70 per share for Q2 and $1.40 for the six-month period, compared with $0.66 and $1.32, respectively, in 2014.
Cash flow, debt, and liquidity
- Six-month operating cash flow was $194.6m, compared with $194.0m in 2014. Investing used $129.2m, including $237.9m for development and capital improvements, partly offset by $112.2m of property-sale proceeds. Financing used $202.8m, including repayment of $250.0m of notes and $124.6m of distributions.
- Cash and cash equivalents were $16.5m at June 30, down from $153.9m at December 31, 2014. Total assets were $6.00bn and total equity was $2.92bn.
- Total notes payable were $2.675bn, down from $2.744bn at year-end. The reported weighted-average debt rate was 4.1%, with a 6.1-year weighted-average maturity; floating-rate debt was $390.9m.
- The $500m unsecured credit facility had $175.0m drawn and $314.9m available after letters of credit. A separate $40m short-term facility had $7.0m drawn. The credit facility matures in September 2015, with an extension option to September 2016; the company was negotiating a restatement to extend maturity by four years, but gave no assurance it would be completed before maturity.
- Management said remaining-2015 debt maturities were approximately $176.0m, including the $175.0m revolver balance. It described liquidity as sufficient for anticipated 2015 needs. Up to $315.3m remained available under the ATM share program as of the filing date; no ATM shares were sold in the quarter or first half.
Developments, outlook, and risks
The company had 12 projects under construction totaling 4,229 homes, including 11 consolidated projects. Estimated cost to complete the consolidated projects was $418.7m; management expected $140m–$160m of that amount to be incurred during the rest of 2015. It also expected approximately $13m for new development starts, $5m–$7m of redevelopment spending, and $31m–$35m of other capital expenditures in the second half of 2015.
Management expected economic and employment growth to continue and new multifamily supply to remain manageable, while noting that weaker economic conditions could harm results. It intended to pursue development and acquisitions, selective dispositions, and capital and liquidity management; no specific earnings or rent guidance was provided. Ratings were Moody’s Baa1 stable, Fitch BBB+ positive, and S&P BBB+ stable.
Key disclosed risks include capital-market and refinancing access, debt and variable-rate exposure, rent and occupancy competition, development and construction execution, joint-venture risks, asset values and impairments, natural catastrophes and insurance coverage, cybersecurity, and maintaining REIT qualification. The company reported no 2015 impairment charges, no guarantees of joint-venture debt, no material change in market-risk disclosures, and no material change in previously disclosed risk factors. It estimated joint ventures had $528.6m of debt, of which Camden’s proportionate share was $165.5m. No legal proceedings were reported.
Important facts for investors to verify
- Whether the credit-facility extension or replacement was completed before its September 2015 maturity, and how the $175m drawn balance was refinanced.
- Actual construction costs, completion and lease-up progress, and stabilization of the development pipeline against the stated estimates.
- Whether same-store rent growth and occupancy remained strong as expenses, including property taxes and maintenance, increased.
- How much future funding comes from operating cash flow, dispositions, debt, or equity issuance, and the impact on leverage and shareholder distributions.
- The sustainability of operating performance after separating property-sale gains from recurring earnings; FFO and AFFO are non-GAAP measures.