Camden Property Trust — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013; comparative period is Q1 2012. Amounts below are in millions unless otherwise noted. Camden is a multifamily REIT; at quarter-end it owned interests in, operated, or was developing 201 properties with 67,850 apartment homes.
Financial performance and position
| Metric | Q1 2013 | Q1 2012 / comparison |
|---|---|---|
| Total property revenue | $196.2 | $169.7; up 15.6% |
| Property expenses | $72.1 | $63.5; up 13.6% |
| Property-level margin | 63.2% | 62.6% (calculated as property revenue less property expenses, divided by property revenue) |
| Income from continuing operations | $31.9 | $57.6 |
| Net income attributable to common shareholders | $63.5; $0.72 diluted EPS | $88.8; $1.07 diluted EPS |
| Diluted FFO | $86.6 | $68.6 |
| Operating cash flow | $84.9 | $75.8 |
| Cash and cash equivalents | $59.6 | $26.7 at December 31, 2012 |
| Notes payable | $2,483.6 | $2,510.5 at December 31, 2012 |
| Interest coverage ratio | 4.4x | 3.7x |
Same-store revenue grew 5.9%; same-store rental revenue increased 6.0%, driven mainly by a 5.6% increase in average rental rates and a 0.3% increase in occupancy. Average occupancy was 94.9%, unchanged year over year. The declared quarterly common distribution rose to $0.63 per share from $0.56.
Investing cash flow was positive $8.1 million, versus an outflow of $105.5 million in Q1 2012, when Camden acquired controlling interests in joint ventures. Financing cash flow was negative $60.0 million, including distributions and debt repayment. Cash increased by $33.0 million during the quarter.
Camden had no borrowings under its $500 million unsecured credit facility; after $11.6 million of letters of credit, approximately $488.4 million remained available. Debt had a 6.8-year weighted-average maturity and a 4.5% weighted-average interest rate. Scheduled 2013 debt payments were approximately $202.4 million. The company reported compliance with its credit-facility covenants.
Material changes and unusual items
- Revenue growth reflected same-store rent increases and additional communities acquired or stabilized after Q1 2012. Same-store property expenses rose 4.5%, particularly due to real estate taxes and property insurance.
- Continuing-operations income was lower than the prior year, which included a $40.2 million gain from acquiring controlling interests in joint ventures. Q1 2013 included a $0.7 million gain on land sales.
- Net income included a $31.8 million after-tax gain on sale of discontinued operations, compared with $32.5 million in Q1 2012. Camden sold a 770-home property in January 2013; a 526-home property classified as held for sale at quarter-end was sold in April for approximately $40.5 million.
- In April 2013, Camden acquired a 356-home Houston property for approximately $108.5 million. The initial purchase-price allocation was not complete when the filing was submitted.
- Depreciation and amortization increased to $53.3 million from $47.9 million, while interest expense declined to $24.9 million from $26.7 million.
Outlook, risks and contingencies
Management expected U.S. employment and economic growth to continue in 2013, with new multifamily supply remaining manageable, but cautioned that significant economic risks remained and unemployment was still above historical levels. Camden intended to pursue selective acquisitions, development and dispositions, and said it believed liquidity was sufficient for anticipated 2013 needs, including debt maturities and development funding. This is management’s outlook, not a guarantee.
Seven consolidated projects under construction had estimated remaining costs of $325.3 million; management expected $170–$180 million of that amount to be incurred during the remainder of 2013. It also forecast $37–$47 million of additional redevelopment spending and $50–$54 million of other capital expenditures during the remainder of 2013. Funding sources could include operating cash flow, cash balances, facility borrowings, property-sale proceeds, equity issuance and debt.
Key disclosed risks include development and construction costs, market rents and occupancy, competition, access to debt and equity markets, interest-rate exposure, refinancing maturities, property-sale execution, catastrophic losses beyond insurance coverage, litigation, and maintaining REIT qualification. A subsidiary faced Florida construction-defect and building-code lawsuits seeking unspecified damages; management said the potential outcome and any loss range could not be estimated. Camden reported no guarantees of unconsolidated joint-venture loans. Management stated that disclosure controls were effective and there were no material changes in internal control over financial reporting.
Important facts for investors to verify
- Separate recurring operating performance from the $31.8 million discontinued-operations gain and compare continuing income with the prior-year joint-venture acquisition gain.
- Confirm the pace of same-store rent growth, occupancy, and expense increases, especially property taxes and insurance.
- Track completion costs, leasing and stabilization of development projects, and the company’s ability to fund the $325.3 million remaining consolidated construction commitment.
- Review debt maturities, refinancing plans, credit-facility availability, and actual funding needs for 2013 investment and distributions.
- Monitor the April property acquisition and disposition, the joint venture’s planned Las Vegas portfolio sale, and the unresolved Florida litigation.