Camden Property Trust — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; unaudited. Camden is a multifamily REIT. At quarter-end, it owned interests in, operated, or was developing 178 properties with 60,587 apartment homes across the United States, including six properties under construction.
Financial performance and condition
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Property revenue | $294.1 million | $265.7 million | $838.2 million | $782.3 million |
| Net income attributable to common shareholders | $29.5 million | $35.0 million | $91.0 million | $94.7 million |
| Diluted EPS | $0.29 | $0.35 | $0.90 | $0.95 |
| Property NOI | $184.1 million | $164.7 million | $524.3 million | $487.4 million |
| FFO (non-GAAP) | $142.2 million | $126.6 million | $399.2 million | $373.3 million |
| AFFO (non-GAAP) | $122.5 million | $104.3 million | $348.0 million | $317.4 million |
Property NOI increased 11.8% in Q3 and 7.6% year to date. NOI as a share of property revenue was approximately 62.6% in Q3 2021 versus 62.0% in Q3 2020; this is calculated from the reported amounts. Same-store revenue grew 5.1% in Q3 and 2.9% year to date; same-store NOI grew 5.4% and 1.5%, respectively. Average occupancy for operating homes owned 100% was 97.7% in Q3, versus 95.3% a year earlier.
Lower GAAP net income primarily reflected higher depreciation and amortization, including from acquired and newly completed properties, as well as higher general and administrative, property management, and interest expenses. FFO and AFFO increased despite the GAAP earnings decline, partly because these supplemental measures exclude real-estate depreciation and amortization. Deferred-compensation investment gains and losses affected reported non-property income and expense but were directly offset between those lines.
Cash flow, nine months: Operating cash flow was $436.0 million, compared with $413.3 million. Investing cash outflow was $755.8 million, including $464.0 million for operating-property acquisitions and $279.7 million for development and capital improvements. Financing cash inflow was $328.7 million, primarily reflecting $579.5 million of net proceeds from common-share issuance, partly offset by $255.1 million of distributions. Cash, cash equivalents, and restricted cash totaled $433.5 million at September 30.
Balance sheet and liquidity: Total assets were $7.69 billion, total liabilities $3.73 billion, and total equity $3.95 billion. Unsecured notes payable were $3.17 billion; weighted-average debt maturity was 7.7 years. The $900 million unsecured credit facility had no borrowings and approximately $885.2 million available after letters of credit. All consolidated properties were unencumbered. The filing reports interest coverage, net of capitalized interest, of 6.6 for Q3 2021 and 6.4 for the first nine months.
Material changes and capital activity
- Same-store Q3 revenue growth reflected a 3.3% increase in average rental rates, higher occupancy, and higher other rental income. Higher insurance claims, property taxes, repairs, maintenance, and utilities partly offset revenue gains.
- Camden acquired three operating properties in 2021 through September for approximately $468.0 million in aggregate. In October, after quarter-end, it acquired a 558-home Dallas property for approximately $165.5 million and Denver development land for approximately $24.0 million.
- The company issued approximately 4.4 million common shares through ATM programs during the first nine months for $579.5 million in net proceeds. The new 2021 ATM program authorized up to $500 million; $278.2 million of offering capacity remained as of the filing date.
- Quarterly distributions declared were $0.83 per common share. The filing states an annualized rate of $3.32 if similar quarterly distributions continue; this is not presented as formal earnings guidance.
Outlook, risks, and contingencies
Management said multifamily conditions continued to improve, citing stronger rental rates and occupancy, job growth, rental demand, and manageable new supply. It expected U.S. economic and employment growth to continue during 2021, while cautioning that worsening conditions could hurt results. Camden gave no numerical full-year earnings or revenue guidance.
Six properties under construction comprised 1,905 homes, with initial occupancies scheduled within 21 months. Estimated remaining construction cost was $242.4 million. Management expected to fund development and other requirements through operating cash flow, cash, available credit, debt or equity issuance, property dispositions, and other financing. It described 2022 scheduled debt repayments of approximately $386.3 million as manageable and said it believed liquidity was sufficient for reasonably anticipated needs over the next 12 months.
Risks highlighted include economic and capital-market volatility, the ongoing pandemic, short-term lease exposure to rent declines, competition, rent-control regulation, development and acquisition execution, interest-rate increases, debt refinancing and access to capital, cybersecurity, severe weather, and maintaining REIT qualification. The company reported no material changes to previously disclosed risk factors, no material market-risk changes, and no legal proceedings. It estimated $242.4 million of remaining construction costs and reported $7.9 million of earnest-money deposits for potential acquisitions, including $0.9 million nonrefundable. It reported no guarantees of unconsolidated joint-venture debt, which totaled $514.6 million at quarter-end.
Management reported compliance with credit-facility covenants and effective disclosure controls. No impairment charges were recorded in the periods presented; management cautioned that deteriorating market conditions or changed development plans could require future impairment charges.
Important facts for investors to verify
- Whether same-store rent and occupancy gains persist and continue to outpace property-tax, insurance, and operating-cost increases.
- Whether acquired and development properties lease up on schedule and deliver expected returns, and whether the $242.4 million remaining construction budget changes.
- How Camden funds acquisitions, construction, debt maturities, and distributions, including any further ATM share issuance and resulting dilution.
- Whether the stated liquidity and debt outlook remains adequate if capital-market conditions, interest rates, employment, or rental demand weaken.
- How non-GAAP FFO and AFFO compare with GAAP earnings and cash generation; these measures are not substitutes for GAAP results and may not be comparable across REITs.