Camden Property Trust — 2013 Form 10-K Summary
Business context and reporting period
Reports the fiscal year ended December 31, 2013; this is an annual filing, not a standalone fourth-quarter report. Camden is a U.S. multifamily REIT focused on owning, operating, developing, redeveloping, and acquiring apartment communities. At year-end it owned interests in, operated, or was developing 184 properties with 64,328 apartment homes. The company reports one operating segment.
Financial and operating highlights
| Metric | 2013 | 2012 |
|---|---|---|
| Property revenue | $788.9 million | $698.3 million |
| Property expenses | $285.7 million | $256.4 million |
| Net income attributable to common shareholders | $336.4 million | $283.4 million |
| Continuing-operations income attributable to common shareholders | $151.6 million | $154.1 million |
| Diluted FFO | $368.3 million | $313.3 million |
| Cash provided by operating activities | $404.3 million | $324.3 million |
| Cash used in investing activities | $259.0 million | $527.7 million |
| Cash from (used in) financing activities | $(154.2) million | $174.9 million |
| Notes payable at year-end | $2.53 billion | $2.51 billion |
- Property revenue grew 13.0%; same-store revenue rose 5.1%. Same-store rental revenue increased 5.3%, driven mainly by 5.1% higher average rents; occupancy edged up from 95.3% to 95.4%.
- Property expenses rose 11.4%. Same-store expenses increased 3.1%, including higher real estate taxes and insurance. Property-level revenue less property expenses was approximately 63.8% of revenue, versus 63.3% in 2012.
- Net income rose, but included a $182.2 million gain on sales of discontinued operations. Continuing-operations income attributable to common shareholders declined; diluted continuing-operations EPS was $1.69 versus $1.79. Diluted net EPS was $3.78 versus $3.30.
- Diluted FFO, a non-GAAP REIT measure, increased approximately 17.5%. Disposition and joint-venture gains are material to reported net income; FFO excludes specified property-sale gains and other adjustments.
- Year-end cash and cash equivalents were $17.8 million. The $500 million unsecured credit facility had no borrowings and approximately $488.7 million available after letters of credit. Interest coverage was 4.7 times, and weighted-average debt maturity was 6.9 years.
- Debt was predominantly fixed-rate: $2.32 billion fixed-rate at a 4.7% weighted-average rate and $211.3 million variable-rate at 1.0%. The company reported $530.7 million of unconsolidated-joint-venture debt, of which its proportionate share was $106.1 million; it had no guarantees of that debt.
- Cash distributions declared were $2.52 per common share in 2013, up from $2.24 in 2012. In the first quarter of 2014, the quarterly dividend was raised from $0.63 to $0.66 per share.
Material changes versus prior year
- Operating cash flow increased by $80.0 million, primarily on rental growth and contributions from acquired and stabilized properties.
- Investing cash outflow declined as acquisition spending fell from 2012’s unusually high level; 2013 included $356.8 million in development and capital-improvement outlays and $224.1 million in operating-property acquisitions, partly offset by $329.4 million of property-sale proceeds.
- Camden acquired three operating properties with 1,118 homes for approximately $225 million and land parcels for $25.8 million. It sold 12 operating properties with 3,931 homes for approximately $329.3 million, recognizing a gain of approximately $182.2 million on property sales classified as discontinued operations.
- The operating portfolio declined to 170 properties and 59,899 homes from 193 properties and 65,775 homes, reflecting dispositions and portfolio changes. The broader total portfolio, including development and joint ventures, was 184 properties and 64,328 homes.
- Interest expense fell 5.9% to $98.1 million, mainly due to debt repayments and increased capitalized interest; the company issued $250 million of senior unsecured notes due 2024 at a 4.25% coupon.
Outlook, risks, and unusual items
- Management expected improving employment and economic conditions and a manageable, though increasing, supply of new apartments to support operations in 2014, while cautioning that economic risks and elevated unemployment remained.
- At year-end, 14 projects totaling 4,354 homes were under construction, including joint-venture projects. Estimated remaining costs for 13 consolidated projects were $541.2 million, of which management expected $360–$370 million in 2014. Planned 2014 redevelopment spending was $55–$75 million and other capital expenditures $56–$60 million. Management also cited expected 2014 development starts of $150–$300 million.
- Management said 2014 debt maturities of $35.4 million were manageable and liquidity was sufficient for anticipated needs. The contractual schedule shows $252.0 million of maturities in 2015.
- Key risks include rent and occupancy sensitivity to local economic conditions and apartment supply, short lease terms, development cost and lease-up risks, land impairment, refinancing and interest-rate exposure, catastrophic losses beyond insurance coverage, cybersecurity, and continued REIT qualification. The company identified impairment estimates as judgment-sensitive; no impairment charges were recorded in 2013, 2012, or 2011.
- A construction-defect lawsuit was settled subject to final documentation for a one-time payment described as not material. Management reported no other litigation expected to have a material adverse effect. The independent auditor gave unqualified opinions on the financial statements and internal controls; management concluded controls were effective.
Important facts for investors to verify
- Separate recurring operating performance from gains on property and joint-venture dispositions when assessing earnings and FFO.
- Track same-store rent growth, occupancy, property tax and insurance costs, and supply conditions across Camden’s markets.
- Monitor development and redevelopment spending, remaining commitments, project delivery timing, and lease-up performance.
- Review the 2015 debt maturity, variable-rate exposure, refinancing access, credit ratings, and the availability and terms of the unsecured credit facility.
- Confirm dividend coverage against operating cash flows and required REIT distributions, and account for potential future equity issuance under the ATM program; $82.7 million remained available at filing.
- Assess joint-venture debt and potential impairment exposure, and confirm subsequent events, including the February 2014 sale of a fund property held for sale at year-end.