Camden Property Trust — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; filed May 8, 2020. Camden is a multifamily REIT. At quarter-end, it owned interests in, operated, or was developing 171 communities with 58,051 apartment homes across the United States.
Financial performance and position
- Revenue: Property revenue was $265.9 million, up 7.0% from $248.6 million in Q1 2019. Same-store revenue increased 3.7%, primarily from higher rents.
- Profit: Net income attributable to common shareholders was $43.3 million, up 12.1% from $38.6 million. Diluted EPS was $0.43 versus $0.40.
- Operating measures: Same-store NOI rose 5.7% to $149.1 million; total NOI rose 8.9% to $171.7 million. Average occupancy was 95.9%, compared with 95.7%. NOI and FFO measures are non-GAAP and may not be comparable with other REITs.
- FFO and AFFO: FFO was $136.3 million versus $120.7 million; AFFO was $121.5 million versus $111.0 million.
- Cash flow: Operating cash flow was $110.6 million versus $92.7 million. Investing cash outflow was $113.7 million, mainly for development and capital improvements; financing cash inflow was $2.2 million. Cash, cash equivalents, and restricted cash ended the quarter at $26.6 million.
- Debt and liquidity: Notes payable totaled $2.607 billion, up from $2.524 billion at year-end 2019. The weighted-average debt maturity was 8.5 years and weighted-average interest rate was 3.7%. At March 31, $765.1 million was available under the $900 million unsecured credit facility; all consolidated properties were unencumbered. Camden reported compliance with credit-facility covenants.
- Distributions: The company declared a quarterly distribution of $0.83 per common share, payable April 17, 2020.
Material changes versus Q1 2019
- Revenue growth reflected same-store rent increases and contributions from acquisitions, newly stabilized properties, and developments. Same-store NOI increased 5.7%, with same-store expenses nearly flat.
- Depreciation and amortization increased $11.6 million to $91.9 million, mainly due to acquisitions and completed development and repositioning work. Interest expense decreased $0.8 million to $19.7 million.
- Deferred compensation investments recorded a $14.9 million loss, compared with $10.4 million of income in Q1 2019. The related expense or benefit was offset by the investment result, so the reported swings largely offset in earnings.
- Development and capital-improvement spending increased to $109.6 million from $79.5 million. Q1 2019 included a $94.9 million operating-property acquisition; none was acquired in Q1 2020.
- Net income and EPS increased, while weighted-average basic shares rose to 99.3 million from 96.9 million.
Outlook, risks, and unusual items
- COVID-19: Management said the pandemic’s effects were uncertain and could be material. It expected property revenue to decline during the remainder or a portion of 2020 and beyond, citing weaker consumer confidence, unemployment, and recession concerns. Potential impacts include rent collection, occupancy, pricing, leasing activity, construction schedules, and project costs. No quantified forecast was provided.
- Liquidity actions after quarter-end: In April, Camden issued $750 million of 2.800% senior unsecured notes due 2030, receiving approximately $743.1 million net proceeds. It used part of the proceeds to repay $126 million drawn on its credit facility. Cash and cash equivalents were approximately $562.4 million at April 30, 2020. The company said it had no debt maturing through 2021.
- Construction commitments: Estimated additional cost to complete six consolidated projects was $235.4 million. Management warned COVID-related restrictions, permitting delays, and labor or supply disruptions could affect timing and costs. One project was temporarily suspended and moved to the development pipeline.
- Resident and employee support: After quarter-end, resident relief funds had paid approximately $10.4 million to about 8,200 residents. Camden also made up to $1.0 million available for employee assistance and announced executive bonus reductions contributing to resident relief and a $3.0 million employee bonus.
- Other items: Camden acquired Raleigh land for $18.2 million and sold adjacent land for $0.8 million, recording a $0.4 million gain. No impairment charges were recorded, though management cautioned that deteriorating markets could lead to future impairments.
- Management stated it believed liquidity was sufficient for reasonably anticipated 2020 needs, while emphasizing that recovery timing and pandemic impacts remained uncertain. No specific earnings or revenue guidance was provided.
Most important facts for investors to verify
- Subsequent-quarter rent collections, concessions, delinquencies, occupancy, and renewal or new-lease pricing as COVID-19 effects unfold.
- Whether the $750 million note proceeds, credit-facility repayment, and reported April cash position translate into sustained liquidity and covenant headroom.
- Progress, cost changes, and completion dates for developments, especially the temporarily suspended project and the $235.4 million remaining construction commitment.
- Actual cash generation after capital spending and distributions, and whether distributions remain supportable under weaker operating conditions.
- Any future impairment charges, changes in credit ratings, or revisions to management’s stated outlook and capital plans.