Camden Property Trust — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. Camden is a multifamily REIT that owned, operated, or was developing 172 properties with 58,209 apartment homes across the United States.
Financial performance and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Property revenue | $260.7 million | $241.8 million | $765.0 million | $709.6 million |
| Net income | $44.8 million | $40.0 million | $128.0 million | $120.4 million |
| Net income attributable to common shareholders | $43.6 million | $38.9 million | $124.6 million | $116.9 million |
| Diluted EPS | $0.44 | $0.40 | $1.26 | $1.22 |
| Property NOI | $166.8 million | $153.9 million | $489.1 million | $452.7 million |
| FFO / diluted share | $130.5 million / $1.29 | $117.1 million / $1.20 | $379.8 million / $3.79 | $344.5 million / $3.54 |
| AFFO | $110.3 million | $97.2 million | $328.7 million | $295.5 million |
For the nine months, operating cash flow was $408.4 million, investing cash outflow was $529.5 million, and financing cash inflow was $240.4 million. Cash, cash equivalents, and restricted cash totaled $162.9 million at September 30. Development and capital-improvement spending was $300.7 million.
At September 30, notes payable totaled $2.477 billion: $2.432 billion unsecured and $45.3 million secured. Weighted average debt maturity was 5.6 years and weighted average interest rate was 4.0%. The $900 million unsecured revolver had no borrowings and approximately $891.1 million available, after letters of credit. Interest coverage was 7.2x. Approximately 98.9% of properties were unencumbered.
Material changes versus prior periods
- Q3 property revenue rose 7.8% and property NOI rose 8.4% year over year; nine-month increases were 7.8% and 8.0%, respectively.
- Same-store revenue increased 3.6% in both comparison periods, driven principally by higher rents. Same-store NOI rose 4.7% in Q3 and 4.2% over nine months. Average occupancy was 96.2% in Q3 versus 95.8% in 2018.
- Net income attributable to common shareholders increased 12.2% in Q3 and 6.6% for the nine months. Diluted EPS increased to $0.44 in Q3 and $1.26 for the nine months.
- Depreciation and amortization increased 12.2% in Q3 and 12.8% for the nine months, largely reflecting acquisitions and completed development units. Interest expense declined 2.4% and 2.7%, respectively.
- In February, Camden issued about 3.4 million shares for net proceeds of $328.4 million. In June, it issued $600 million of 3.15% senior notes due 2029. It repaid about $439.3 million of secured mortgage debt during the first quarter.
Outlook, commentary, and risks
- Management expected U.S. employment and economic growth to continue in 2019 and multifamily supply to remain manageable, while cautioning that weaker conditions or adverse market changes could hurt results. It gave no specific earnings or revenue guidance in this filing.
- Management intends to pursue development, redevelopment, repositioning, and selective acquisitions and dispositions, while maintaining financial flexibility. Six consolidated projects under construction had an estimated $337.1 million of remaining costs; management expected to fund this through operating cash, existing liquidity, and potential debt or equity financing, among other sources.
- Subsequent to quarter-end, Camden issued $300 million of 3.35% notes due 2049, then redeemed $250 million of 2021 notes and prepaid a $45.3 million mortgage. It expects an approximately $12 million charge in Q4 2019. Management said no debt was due from the remainder of 2019 through 2021 after these actions.
- The quarterly dividend declared was $0.80 per common share. Management’s indicated annualized rate, assuming similar remaining 2019 payments, was $3.20 per share or unit.
- Key stated risks include rent and occupancy competition, economic and capital-market volatility, development and construction execution, significant debt and refinancing or interest-rate exposure, joint-venture risks, catastrophic weather, cybersecurity, and implementation of a new enterprise system. The first phase of the cloud-based system was completed in Q3 and materially affected internal control over financial reporting; management reported controls were effective and that it updated relevant processes and controls.
- No material changes to previously disclosed risk factors were reported. No legal proceedings were reported. Camden stated it was in compliance with credit-facility covenants.
Important facts for investors to verify
- Whether same-store rent growth, occupancy, and NOI trends persist, and how operating expenses—particularly taxes, payroll, insurance, and maintenance—evolve.
- Development budgets, completion and stabilization schedules, leasing progress, and the ability to fund remaining project costs without weakening liquidity or leverage.
- The effect and accounting treatment of the Q4 debt redemptions, including the expected $12 million charge and resulting interest costs.
- Debt maturity, credit ratings, covenant compliance, and exposure to floating rates and capital-market conditions.
- Whether the enterprise-system rollout and related control updates remain effective as implementation continues.