Camden Property Trust: Q3 2018 Form 10-Q Summary
Business context and reporting period
Quarter ended September 30, 2018. Camden is a multifamily REIT that owned, operated, or was developing 167 properties with 56,858 apartment homes. Results are unaudited and compare the three and nine months ended September 30, 2018 with the corresponding 2017 periods.
Financial and operating performance
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Property revenues | $241.8 million | $228.2 million | $709.6 million | $671.1 million |
| Net income | $40.0 million | $35.5 million | $120.4 million | $111.8 million |
| Net income attributable to common shareholders | $38.9 million | $34.4 million | $116.9 million | $108.4 million |
| Diluted EPS | $0.40 | $0.38 | $1.22 | $1.20 |
| Property NOI | $153.9 million | $139.9 million | $452.7 million | $423.0 million |
| FFO | $117.1 million | $103.2 million | $344.5 million | $309.5 million |
| AFFO | $97.2 million | $85.7 million | $295.5 million | $265.5 million |
Cash from operations for the first nine months was $376.0 million, versus $333.9 million in 2017. Investing activities used $551.8 million, primarily for acquisitions and development, while financing activities used $183.4 million, including $223.0 million of distributions. Cash and cash equivalents were $8.5 million at quarter-end; cash, cash equivalents, and restricted cash totaled $18.6 million.
Total notes payable were $2.26 billion at September 30, 2018, comprising $1.39 billion unsecured and $865.4 million secured. Weighted average debt maturity was 3.4 years and weighted average interest rate was 4.4%. The company reported $559.9 million available under its $600 million credit facility, plus $21.0 million under its short-term borrowing facility. Interest coverage was 6.4 times for both the quarter and nine-month period. Approximately 81% of properties were unencumbered at quarter-end.
Changes versus prior comparable periods
- Q3 property revenues increased 6.0%; nine-month property revenues increased 5.7%. Same-store revenues rose 3.1% and 3.2%, respectively, chiefly from higher rental rates; same-store NOI grew 3.8% and 3.6%.
- Total NOI grew 10.0% in Q3 and 7.0% for the nine months. Growth also reflected acquisitions and communities moving through development and lease-up.
- Net income attributable to common shareholders rose approximately 13% in Q3 and 8% for the nine months. Depreciation and amortization increased, mainly due to acquisitions and completed development/redevelopment; nine-month interest expense declined, principally following repayment of debt in 2017.
- Occupancy was 95.8% in Q3 versus 95.9% a year earlier; nine-month occupancy was 95.6% versus 95.3%.
- Cash from operations increased, while investing outflows rose substantially from 2017 because of three operating-property acquisitions and higher development and capital-improvement spending. The 2017 comparison included $100 million from maturity of a short-term investment.
Outlook, commentary, risks, and unusual items
- Management said it expects U.S. economic and employment growth to continue during 2018 and multifamily supply to remain manageable, while cautioning that weaker economic conditions could adversely affect results. It gave no specific earnings or revenue guidance.
- Management plans to pursue development, redevelopment, acquisitions, and selective dispositions, while emphasizing cash generation, debt levels, leverage, and cost control. It estimated $379.7 million of additional costs to complete eight projects under construction; approximately $45–$55 million was expected in the remainder of 2018.
- After quarter-end, Camden funded a $100 million floating-rate term loan, issued $400 million of 4.100% senior notes due 2028, and repaid $380 million of secured mortgages, as well as outstanding short-term borrowings and credit-line balances. Management said there were no scheduled debt payments for the remainder of 2018 and estimated 2019 maturities at approximately $438 million, excluding short-term borrowings repaid in October.
- The company declared a quarterly dividend of $0.77 per share. Management stated that, assuming similar quarterly distributions for the rest of 2018, the annualized rate would be $3.08 per share.
- Key risks include interest-rate and refinancing exposure, capital-market access and credit ratings, development and construction cost or timing, rental competition and market rents, natural disasters, cybersecurity, joint-venture risks, and maintaining REIT qualification. Management reported compliance with debt covenants and no material change in previously disclosed risk factors. No legal proceedings were reported.
- 2017 hurricane-related costs affected comparisons: approximately $3.9 million in property expenses and additional corporate and joint-venture expenses. Deferred-compensation plan income and expense offset each other. No impairment charges were recorded in either period.
Most important facts for investors to verify
- Whether same-store rent and NOI trends persist, and how property taxes, utilities, and other operating costs affect margins.
- Lease-up and stabilization progress for completed communities and the eight projects under construction, including remaining costs and delivery timing.
- Execution and funding effects of the October debt transactions, subsequent debt maturities, floating-rate exposure, and available liquidity.
- Whether operating cash flow can support development spending and distributions; assess the $0.77 quarterly dividend against FFO/AFFO and REIT distribution requirements.
- Market-level supply, employment, rental demand, and potential impacts from interest-rate changes or adverse economic conditions.