Business context and reporting period
Camden Property Trust is a U.S. multifamily REIT. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2023. At quarter-end, Camden owned interests in, operated, or was developing 177 communities with 60,514 apartment homes; five communities with 1,553 homes were under construction.
Financial results and key metrics
Amounts below are in millions except per-share data and where noted.
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Property revenue | $390.8 | $373.8 | $1,154.4 | $1,046.8 |
| Property NOI | $250.7 | $240.9 | $742.1 | $675.9 |
| Net income attributable to common shareholders | $48.0 | $29.8 | $181.0 | $607.9 |
| Diluted EPS | $0.44 | $0.27 | $1.66 | $5.62 |
| Interest expense | $33.0 | $29.2 | $99.4 | $82.8 |
| Net cash from operating activities | — | $603.0 | $576.5 |
- Q3 property revenue rose 4.5% year over year; total property NOI increased 4.0%. Same-store revenue grew 4.1% and same-store NOI grew 3.5%.
- For the first nine months, same-store revenue increased 6.0% and same-store NOI increased 5.9%. Average rental rates rose 5.1% in Q3 and 8.0% for the nine-month period, according to management.
- Core FFO was $190.7 million for Q3 and $561.4 million for the nine months. Core AFFO was $164.2 million and $496.3 million, respectively. These are non-GAAP supplemental measures.
- Cash and cash equivalents were $14.6 million at September 30; restricted cash was $8.4 million. Total assets were $9.21 billion and total liabilities were $4.28 billion.
- Total notes payable were $3.65 billion, including $3.32 billion unsecured and $330.1 million secured. Floating-rate debt was $786.9 million; total debt had a weighted-average maturity of 6.0 years and a weighted-average rate of 4.1% at quarter-end.
- Available capacity under the $1.2 billion revolving facility was approximately $725.2 million, after outstanding borrowings and letters of credit. Camden reported compliance with its debt covenants.
- For the nine months, investing cash outflow was $240.7 million, primarily development and capital improvements of $294.3 million, partly offset by $60.4 million of property-sale proceeds. Financing cash outflow was $356.8 million, including distributions and debt repayments.
Material changes versus the prior comparable period
- Q3 common-shareholder income rose to $48.0 million from $29.8 million, supported by higher property operations and lower amortization of acquired in-place leases.
- Nine-month common-shareholder income fell to $181.0 million from $607.9 million. The 2022 period included a $474.1 million gain from remeasuring Camden’s previously held interest when it acquired the remaining interests in two investment funds. Higher 2023 interest expense also weighed on results; a larger 2023 gain on a property sale partly offset these factors.
- Nine-month interest expense increased $16.7 million, primarily due to higher rates and revolving-credit borrowings, the December 2022 term loan, and debt assumed in the 2022 fund acquisition.
- Operating cash flow increased by $26.4 million year over year. Investing outflow was substantially lower than in 2022, when Camden paid approximately $1.1 billion to acquire the remaining fund interests.
- Camden sold one 138-home property in Costa Mesa, California, in June 2023 for approximately $61.1 million and recognized a $48.9 million gain. It repaid $185.2 million of secured variable-rate notes early and repaid $250 million of 5.07% notes at maturity, using its revolving facility; early repayment of the secured notes generated a $2.5 million loss.
Outlook, risks and contingencies
- Management said it expected multifamily supply in its submarkets and asset classes to remain manageable during 2023, while warning that worsening supply or economic conditions could adversely affect results. It plans to pursue development, redevelopment, acquisitions, and selective dispositions as market conditions allow.
- Camden estimated $180.6 million of remaining costs to complete the five properties under construction, including $55 million to $75 million expected during the rest of 2023. It also estimated $1.39 billion of total costs for nine communities in its development pipeline, with $262.4 million incurred to date.
- Management described liquidity as sufficient for reasonably anticipated needs over the next 12 months and estimated approximately $540 million of debt repayments due in that period. Planned liquidity sources include operating cash flow, revolving-credit borrowings, debt or equity issuance, property dispositions, and the ATM program. The $500 million 2023 ATM program had not been used as of the filing date.
- The board declared a quarterly dividend of $1.00 per common share in September 2023, paid October 17. If maintained for the remainder of 2023, the annualized rate would be $4.00 per share or unit.
- Camden disclosed multiple consolidated antitrust lawsuits alleging rent fixing involving revenue-management software and multifamily owners/operators. The company said it considers the claims without merit and intends to defend them. On October 24, 2023, the U.S. Department of Justice informed Camden it was investigating the matter. The filing says the outcome and any potential loss cannot currently be estimated.
- Other stated risks include capital-market access and refinancing, rising interest rates, debt levels, rent controls, competition, development and construction costs, insurance and property expenses, cybersecurity, severe weather, and REIT qualification. Management reported no impairment charges for the periods presented and no material change in market-risk exposures since the 2022 Form 10-K.
Important facts for investors to verify
- Track the antitrust litigation and DOJ investigation, including whether Camden later estimates or records any loss.
- Monitor financing costs and execution around approximately $540 million of debt repayments due within 12 months, including the company’s use of its revolving facility or capital markets.
- Assess whether rent growth continues to offset increases in operating costs: same-store expenses rose 5.3% in Q3 versus same-store revenue growth of 4.1%, with insurance, maintenance, and taxes among the cited cost pressures.
- Check construction budgets, lease-up progress, and delivery timing for the five projects under construction and the broader development pipeline.
- Distinguish recurring operating performance from prior-year acquisition gains, property-sale gains, deferred-compensation investment results, and other items when evaluating earnings and non-GAAP measures.