Business Context and Reporting Period
Company: Camden Property Trust (REIT)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended March 31, 2008
Business Overview: Camden owns, develops, and manages multifamily apartment communities. As of March 31, 2008, the portfolio included 192 properties with 66,301 apartment homes across 13 states. The company operates 181 stabilized properties and has 11 properties under development.
Key Financial Metrics
| Metric (in thousands, except per share) | Q1 2008 | Q1 2007 |
|---|---|---|
| Total Property Revenues | $156,723 | $147,676 |
| Net Income | $14,915 | $13,037 |
| Funds from Operations (FFO) - Diluted | $52,330 | $55,919 |
| Net Cash from Operating Activities | $36,946 | $38,667 |
| Total Debt (Notes Payable) | $2,911,000 | $2,828,100 |
| Cash and Cash Equivalents | $947 | $1,470 |
| Weighted Avg. Occupancy (100% owned) | 93.5% | 94.3% |
| Distributions Declared per Share | $0.70 | $0.69 |
Material Changes vs. Prior Period
- Revenue Growth: Total property revenues increased 6.1% ($9.0 million) year-over-year, driven by a 1.5% increase in same-store communities and significant growth in non-same-store and development communities.
- Profitability: Net income increased 14.4% to $14.9 million, largely due to a $6.1 million gain on the sale of a discontinued property. However, income from continuing operations before gains decreased to $8.6 million from $11.1 million.
- Expense Increases: Interest expense rose 17.5% ($4.9 million) due to higher debt levels funding acquisitions and development. Depreciation and amortization increased 9.6% ($3.7 million).
- Deferred Compensation Volatility: The company recorded an $8.5 million loss on deferred compensation plans in Q1 2008, compared to a $2.3 million gain in Q1 2007, significantly impacting non-property income.
- FFO Decline: Diluted FFO decreased 6.4% to $52.3 million, primarily due to the loss on deferred compensation plans and higher interest expenses.
Guidance, Outlook, and Risks
- Outlook: Management expects moderating growth for the remainder of 2008 due to declining job growth and economic conditions. They anticipate potential positive impacts on multifamily demand from the struggling single-family housing market.
- Development Pipeline: The company maintains a development pipeline of approximately $2.0 billion to $2.5 billion. Total estimated costs for current projects under construction are $62.9 million.
- Liquidity: The company has a $600 million unsecured credit facility with $384.4 million available as of March 31, 2008. Management believes liquidity is sufficient to meet obligations, including debt service, distributions, and development funding.
- Share Repurchases: The Board increased the share repurchase authorization to $500 million. Through March 31, 2008, the company repurchased 4.3 million shares for $230.1 million, with approximately $269.9 million remaining under the program.
- Risks: Key risks include refinancing risk, volatility in debt markets, interest rate exposure on variable-rate debt (partially hedged with a $500 million swap), and potential liability from ongoing litigation regarding Fair Housing Act violations.
Investor Verification Checklist
- Deferred Compensation Impact: Verify the sustainability of earnings given the $10.8 million swing in deferred compensation plan results compared to the prior year.
- Debt Maturity Profile: Review the scheduled repayments of $197.4 million due in 2008 and the weighted average maturity of 4.6 years for remaining debt.
- Development Costs: Monitor the $62.9 million remaining funding requirement for current construction projects and potential cost overruns.
- Occupancy Trends: Track the decline in weighted average occupancy from 94.3% to 93.5% and its impact on future rental revenue.
- Legal Proceedings: Assess the potential financial impact of the Fair Housing Act lawsuit filed in September 2007, for which damages are currently unspecified.