Camden Property Trust — Q2 2021 Form 10-Q
Business context and reporting period. Camden Property Trust is a multifamily REIT that owns, manages, develops, redevelops, and acquires apartment communities. This unaudited filing covers the quarter and six months ended June 30, 2021. At quarter-end, Camden owned interests in, operated, or was developing 177 properties with 60,219 apartment homes, including eight properties under construction.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Property revenue | $276.5 million | $250.7 million | $544.1 million | $516.6 million |
| Net income attributable to common shareholders | $30.2 million | $16.5 million | $61.5 million | $59.8 million |
| Diluted EPS | $0.30 | $0.17 | $0.61 | $0.60 |
| Net operating income (NOI) | $173.6 million | $151.0 million | $340.2 million | $322.7 million |
| Funds from operations (FFO) | $131.2 million | $110.4 million | $257.0 million | $246.7 million |
| Adjusted FFO (AFFO) | $112.4 million | $91.6 million | $225.5 million | $213.1 million |
Q2 property expenses were $103.0 million, up 3.3%; total other expenses were $152.8 million, up 2.6%. Same-store revenue rose 4.1% and same-store NOI rose 3.0% in Q2. For the first half, same-store revenue increased 1.9%, while same-store NOI declined 0.3%. Q2 weighted average occupancy was 97.3%, versus 94.9% a year earlier.
For the six months, operating cash flow was $243.7 million, down from $250.2 million. Investing cash outflow was $482.9 million, including $289.4 million for operating-property acquisitions and $188.2 million for development and capital improvements. Financing cash inflow was $194.0 million, including $358.8 million net proceeds from common-share issuance; distributions to shareholders and non-controlling interests totaled $168.4 million.
At June 30, cash and cash equivalents were $374.6 million and restricted cash was $4.8 million. Total assets were $7.46 billion, total liabilities $3.67 billion, and total equity $3.79 billion. Unsecured notes payable were $3.17 billion, including $39.8 million of floating-rate debt. Camden had no credit-facility borrowings and approximately $887.8 million available after letters of credit. Debt had a 7.9-year weighted average maturity; all consolidated properties were unencumbered. The reported interest coverage ratio was 6.4 for Q2 and 6.3 for the first half.
Material changes versus comparable periods
- Q2 common-shareholder net income rose $13.7 million year over year, primarily reflecting a $25.8 million increase in property revenue as occupancy, realized rents, and reletting income improved. Higher property costs, depreciation, G&A, and interest partially offset the revenue gain.
- First-half common-shareholder net income increased $1.8 million. Higher property revenue was partly offset by higher property expenses, depreciation, interest, and G&A, as well as lower fee and asset-management income and the absence of the prior-year land-sale gain.
- First-half cash from operations decreased $6.5 million, with management citing timing and higher real estate tax payments and vendor payments.
- Deferred-compensation investment income and the corresponding plan expense moved together; the filing says these changes directly offset.
Outlook, risks, and unusual items
- Management reported improving multifamily conditions and expects U.S. economic and employment growth to continue during 2021, with new apartment supply remaining manageable. It cautioned that worsening economic conditions could adversely affect results. No formal earnings or same-store growth guidance is provided.
- Camden plans to pursue development, redevelopment, repositioning, acquisitions, and selective dispositions, while maintaining financial flexibility. It estimated $301.6 million of remaining costs to complete its eight projects under construction, including $125 million to $140 million expected in the remainder of 2021. It also expected remainder-of-year spending of $44 million to $48 million on repositions and revenue-enhancing work, $22 million to $26 million to start new development, and $38 million to $42 million on recurring capital expenditures.
- In June, Camden acquired two Nashville-area operating properties totaling 758 homes for approximately $291.6 million, and land in Texas and Florida for approximately $11.4 million. It issued approximately 2.9 million shares through its ATM program at an average $126.64 per share, receiving $358.8 million net.
- The quarterly dividend declared was $0.83 per common share. If similar quarterly payments continue for the rest of 2021, management’s stated annualized rate would be $3.32 per share.
- Key risks include pandemic effects, economic and capital-market volatility, rent competition and rent regulation, development costs and execution, debt refinancing and interest rates, access to capital, cybersecurity, natural disasters, and maintaining REIT qualification. The filing reported no material change to previously disclosed risk factors, no legal proceedings, and no impairment charges in the periods presented.
- Eight construction projects were expected to reach initial occupancy within 24 months. Camden stated that it believed liquidity was sufficient for reasonably anticipated cash needs over the next 12 months and that it was in compliance with credit-facility covenants.
Important facts for investors to verify
- Whether occupancy, leasing rates, and same-store revenue and NOI trends continue beyond Q2; first-half same-store NOI remained slightly below the prior year.
- Actual completion costs, leasing pace, and stabilization dates for the development pipeline, compared with management’s estimates.
- Funding needs and capital allocation after the substantial ATM issuance, including future share issuance, distributions, acquisitions, and development spending.
- Debt maturities beginning in 2022, credit-facility availability, interest-rate exposure, and continued covenant compliance.
- Whether management’s 2021 economic and supply assumptions hold, and whether pandemic, rent-control, construction-cost, or capital-market risks materially affect results.