CPT

Business Context and Reporting Period

Company: Camden Property Trust
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2002
Business Overview: A real estate investment trust (REIT) engaged in the ownership, development, construction, and management of multifamily communities. As of March 31, 2002, the company owned interests in 147 properties containing 52,412 apartment homes across nine states. The portfolio included 144 operating properties, 3 properties under development, and 2 properties in lease-up.

Key Financial Metrics

Material Changes Versus Prior Period

• Revenue: Total revenues increased slightly by 1.1% ($1.1 million) to $103.8 million. Rental income remained flat, while other property income increased by $474,000 due to higher fees for utilities and services. Other income rose $896,000 primarily due to the sale of four townhomes.
• Profitability: Net income decreased 24.6% to $13.98 million. This decline was driven by a $2.5 million decrease in equity income from joint ventures (due to fewer property sales in 2002 compared to 2001) and the absence of a $1.7 million gain on the sale of undeveloped land recorded in Q1 2001.
• Expenses: Property operating and maintenance expenses decreased by $294,000 (2.8% per unit). Real estate taxes increased by $517,000 due to higher property valuations. Depreciation and amortization increased by $1.56 million due to new developments and capital improvements.
• Occupancy: Weighted average occupancy declined from 94.7% in Q1 2001 to 91.7% in Q1 2002, attributed to higher concessions and vacancy rates.
• Debt: Total notes payable increased by $33.4 million. The company repaid $34.5 million in maturing medium-term notes but increased borrowings under its unsecured line of credit by $69.0 million to fund development and debt repayments.

Guidance, Outlook, and Risks

• Development Pipeline: The company is developing four properties with an aggregate cost of approximately $191.0 million. As of March 31, 2002, $70.1 million had been incurred. Two properties are in lease-up, and two are under construction.
• Acquisitions: Subsequent to the quarter end, the company purchased two properties in Tampa, Florida, for $70.2 million as part of its diversification strategy.
• Liquidity: The company maintains a $420 million unsecured line of credit with $194.0 million available as of March 31, 2002. Management intends to fund growth through a combination of equity, debt, and property dispositions.
• Dividends: A quarterly dividend of $0.635 per share was declared, representing an annualized rate of $2.54 per share.
• Risks: Forward-looking statements are subject to risks including changes in economic conditions, interest rates, failure to qualify as a REIT, and environmental uncertainties. The company is currently in the due diligence period for land purchases and property acquisitions, with no assurance of completion.

Investor Verification Checklist

• Occupancy Trends: Verify the sustainability of the 91.7% occupancy rate and the impact of increased concessions on future rental income.
• Joint Venture Income: Confirm the volatility of equity income from joint ventures, which dropped significantly due to the lack of property sales in Q1 2002 compared to Q1 2001.
• Debt Maturity Profile: Review the scheduled debt repayments, noting $460.8 million due in 2004, and assess refinancing risks.
• Development Costs: Monitor the $86.5 million in remaining construction commitments and the ability to fund these without diluting equity or increasing leverage beyond conservative targets.
• FFO vs. Net Income: Analyze Funds from Operations (FFO) of $40.1 million (diluted) as a more stable performance metric compared to Net Income, which was impacted by non-recurring gains/losses.