Camden Property Trust — Q1 2018 Form 10-Q
Business context and reporting period. This unaudited filing covers the three months ended March 31, 2018, compared with Q1 2017. Camden is a multifamily REIT; it owned interests in, operated, or was developing 164 communities with 55,834 apartment homes at quarter-end, including six communities under construction.
Financial performance
| Metric | Q1 2018 | Q1 2017 | Change |
|---|---|---|---|
| Total property revenue | $230.7 million | $219.5 million | +5.1% |
| Net income attributable to common shareholders | $39.4 million | $34.9 million | +13.0% |
| Diluted EPS | $0.41 | $0.39 | +5.1% |
| Property NOI | $146.7 million | $140.1 million | +4.8% |
| FFO | $111.4 million | $100.4 million | +11.0% |
| Adjusted FFO | $101.4 million | $90.7 million | +11.8% |
| Net cash from operating activities | $87.2 million | $73.0 million | +19.4% |
Same-store revenue increased 3.3% and same-store NOI rose 4.0%; average occupancy was 95.2%, versus 94.7%. Management attributed same-store revenue growth primarily to higher rental rates and occupancy. Same-store operating expenses increased 2.1%, including higher payroll, real estate taxes, and utility costs. Total property NOI was about 63.6% of property revenue, compared with 63.8% a year earlier; same-store NOI margin was about 63.8%, compared with 63.4%.
Interest expense declined 11.2% to $20.4 million, primarily following repayment of higher-rate notes in 2017; depreciation and amortization rose 10.2% to $70.2 million, mainly reflecting acquisitions and completed development. FFO and AFFO are non-GAAP measures and are not substitutes for GAAP earnings or cash flow.
Balance sheet, cash flow, and capital
At March 31, 2018, total assets were $6.13 billion and total notes payable were $2.20 billion, comprising $1.34 billion unsecured and $865.8 million secured. Debt carried a 4.3% weighted-average interest rate and a 4.0-year weighted-average maturity. Cash and cash equivalents were $101.4 million, with another $15.0 million of restricted cash. Camden reported approximately $586.9 million available on its $600 million credit facility and $45.0 million available on a separate short-term facility; letters of credit reduced availability on the main facility. Management reported compliance with debt covenants and an interest coverage ratio of 6.4 times.
Operating cash flow was $87.2 million. Investing used $275.6 million, including $201.9 million for two Florida acquisitions and $71.8 million for development and capital improvements. Financing used $73.0 million, principally distributions. Cash, cash equivalents, and restricted cash ended the quarter at $116.4 million, down from $377.8 million at year-end, largely reflecting acquisition and development spending.
Camden acquired 358-home and 333-home properties in St. Petersburg and Orlando for approximately $126.9 million and $81.4 million, respectively. It declared a quarterly distribution of $0.77 per common share; management’s assumed full-year run rate was $3.08 per share. No shares were sold under the ATM program during the quarter. Debt maturities scheduled for 2018 were approximately $174.1 million; approximately $643.0 million was scheduled for 2019, including available extension options in the maturity presentation.
Outlook, risks, and unusual items
Management expressed a positive but conditional outlook, citing expected continued U.S. employment and economic growth and manageable multifamily supply. It intends to pursue development, redevelopment, acquisitions, and selective dispositions, and stated that liquidity should cover reasonably anticipated 2018 needs. These are forward-looking statements, not formal earnings guidance. Management estimated $228.7 million of remaining costs to complete the six projects under construction, with $120–$140 million expected during the remainder of 2018, and outlined additional anticipated development, repositioning, redevelopment, and recurring capital spending.
Key risks identified include economic or capital-market deterioration, rent competition and market-rent declines, development and construction costs or delays, acquisition and joint-venture risks, refinancing and interest-rate exposure, access to capital, catastrophic weather, cybersecurity, and maintaining REIT qualification. The filing reported no material changes to previously disclosed risk factors and no legal proceedings. Disclosure controls were deemed effective, with no material change in internal control over financial reporting.
Deferred-compensation plan investment results produced a $0.2 million loss in Q1 2018 versus $4.6 million income in Q1 2017, with corresponding expense or benefit substantially offsetting those results. Camden adopted the new revenue-recognition standard in 2018 with no material impact; certain revenue items were reclassified between rental and other property revenue without changing total property revenue. It reported no impairment charges in either comparison period.
Important facts for investors to verify
- Whether same-store rent and occupancy growth is sustainable, and how operating-cost inflation affects NOI.
- Lease-up progress and delivery timing for projects, and whether remaining construction budgets and planned capital spending are met.
- Funding and refinancing plans for the 2018–2019 debt maturities, including the 2019 credit-facility maturity and exposure to variable rates.
- Returns and operating contribution from the Florida acquisitions, and the impact of further acquisition or development activity on cash and leverage.
- Cash available for distributions after recurring capital needs; reconcile GAAP results with management’s non-GAAP FFO and AFFO measures.
- Availability and terms of borrowing and equity-market funding if operating conditions or capital markets weaken.