Business Context and Reporting Period
Company: Camden Property Trust (Houston-based REIT)
Reporting Period: Quarterly period ended September 30, 1999 (Unaudited)
Business Overview: The company owns, develops, acquires, manages, and disposes of multifamily apartment communities across the Southwest, Southeast, Midwest, and Western United States. As of September 30, 1999, the portfolio included 159 properties with 55,785 apartment homes. Eight properties (3,570 homes) were under development, and two newly developed properties (820 homes) were in lease-up.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 1999 | Nine Months Ended Sep 30, 1999 |
|---|---|---|
| Total Revenues | $94.2 million | $274.4 million |
| Net Income | $15.9 million | $47.1 million |
| Net Income to Common Shareholders | $13.5 million | $40.1 million |
| Diluted EPS | $0.32 | $0.94 |
| Funds From Operations (Diluted) | $38.4 million | $113.7 million |
| Operating Cash Flow | N/A | $121.2 million |
| Total Assets | $2.47 billion (as of Sep 30, 1999) | |
| Total Liabilities | $1.19 billion (as of Sep 30, 1999) | |
| Total Debt (Notes Payable) | $1.09 billion (as of Sep 30, 1999) | |
| Cash and Equivalents | $13.8 million (as of Sep 30, 1999) | |
| Dividends Declared (Common) | $0.520 per share | $1.560 per share (YTD) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 8.7% for the quarter and 15.0% for the nine-month period compared to 1998. Rental income per apartment home per month rose 4.1% (quarterly) and 5.8% (nine-month) due to stabilized portfolio growth, acquisitions, and new developments.
- Net Income: Net income to common shareholders decreased slightly for the quarter ($13.5M vs $14.7M in 1998) but increased significantly for the nine-month period ($40.1M vs $33.2M in 1998).
- Expense Trends: Property operating expenses increased 10.6% quarterly but improved as a percentage of total property income for the nine-month period (29.8% vs 31.2%) due to a change in accounting policy regarding capitalization of floor coverings and appliances.
- Debt Structure: Total notes payable increased to $1.09 billion from $1.00 billion at year-end 1998. The company issued $200 million in senior unsecured notes in April 1999 and entered into a new $375 million unsecured line of credit in August 1999.
- Share Repurchases: The company repurchased 3.9 million common shares and units for $100.0 million through September 30, 1999, under an authorized program.
Guidance, Outlook, and Risks
- Development Pipeline: The company is developing eight additional properties at an aggregate cost of approximately $281.9 million. Two properties are currently in lease-up with estimated stabilization dates in late 1999 and 2000.
- Liquidity: Management maintains a conservative capital structure with 75.7% of properties unencumbered. Available liquidity includes $340 million under the unsecured line of credit and $75 million under a universal shelf registration.
- Legal Contingency: The U.S. Justice Department filed a lawsuit in February 1999 alleging violations of the Fair Housing Act regarding nine properties acquired from Oasis Residential. Management does not expect the costs to be material but cannot assure success in defense.
- Year 2000 Readiness: The company is in the final phase of its Year 2000 action plan. 99% of key third-party providers have responded with compliance certificates. Management estimates worst-case costs for system failures would not exceed $1 million.
- Forward-Looking Risks: Risks include changes in economic conditions, interest rates, failure to qualify as a REIT, and potential Year 2000 issues with third-party vendors.
Investor Verification Checklist
- Debt Covenants: Verify compliance with financial covenants on the new $375 million line of credit and existing senior unsecured notes.
- Legal Exposure: Monitor the status of the Fair Housing Act lawsuit and any potential remediation costs for the nine affected properties.
- Development Costs: Track the $281.9 million in estimated costs for the eight properties under development to ensure no significant overruns.
- Occupancy Rates: Confirm that the two properties in lease-up (The Park at Goose Creek and The Park at Holly Springs) meet projected stabilization timelines and occupancy targets.
- Share Repurchase Impact: Assess the impact of the $100 million share repurchase program on future liquidity and dividend coverage ratios.