CPT

Business Context and Reporting Period

Company: Camden Property Trust (REIT)
Reporting Period: Quarter and six months ended June 30, 2004
Business Overview: Self-administered REIT focused on the ownership, development, construction, and management of multifamily apartment communities. As of June 30, 2004, the portfolio included 148 properties with 53,122 apartment homes across ten states. The company operates in 17 markets with no single market contributing more than 15% of net operating income.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 5.7% for the six months ended June 30, 2004, compared to the same period in 2003. Property revenues rose 5.7% to $209.5 million, driven by a 1.8% increase in same-property revenues and significant growth from non-same and development properties.
• Net Income: Net income increased 19.7% to $17.0 million for the six-month period, up from $14.2 million in 2003. This was primarily due to higher property net operating income and non-property revenues.
• Net Operating Income (NOI): Property NOI increased 5.5% to $124.2 million for the six months ended June 30, 2004. Same-property NOI increased 1.2%.
• Expense Trends: Total property expenses increased 6.1% to $85.3 million. General and administrative expenses increased 3.5% but decreased as a percentage of revenue. Interest expense decreased slightly due to lower variable rates and refinancing, partially offset by higher average debt balances.
• Unusual Items: The company recorded a $1.1 million impairment loss on land held for sale in Dallas during the first quarter. Conversely, it recognized a $1.3 million gain on the sale of land in Houston.

Guidance, Outlook, and Risks

• Development Pipeline: The company has three wholly-owned properties under construction with an estimated aggregate cost of $71.6 million. Additionally, a joint venture project in Ashburn, Virginia, is under development with an estimated cost of $69.1 million.
• Liquidity and Capital Resources: Camden maintains a $500 million unsecured line of credit, with $152.8 million available as of June 30, 2004. The company has $885.5 million available under its shelf registration for future issuances. Management intends to fund growth through a combination of equity, debt, and property dispositions.
• Subsequent Event: In July 2004, the company issued $100 million of 4.70% senior unsecured notes due in 2009. Proceeds were used to reduce indebtedness under the unsecured line of credit.
• Risks: Key risks include the impact of rising interest rates, the ability to generate sufficient cash flows, failure to qualify as a REIT, and the performance of the mezzanine financing program. The company also faces risks related to construction cost overruns and market concentration, though no single market exceeds 15% of NOI.

Investor Verification Checklist

• Debt Maturities: Verify the schedule of debt maturities, noting $541.3 million due in 2006 and $773.9 million thereafter.
• Occupancy Trends: Monitor the weighted average occupancy rate (94.1% for six months) and rental rate increases ($27 per unit per month for same-store properties) to assess revenue sustainability.
• Development Costs: Review the $41.1 million in remaining construction contract obligations and the funding sources for these projects.
• Impairment and Gains: Assess the impact of the $1.1 million impairment loss on Dallas land and the $1.3 million gain on Houston land sales on future earnings.
• Dividend Coverage: Confirm that Funds from Operations ($71.9 million for six months) continue to cover distributions declared ($61.9 million for six months).