Business Context and Reporting Period
Company: Camden Property Trust (REIT)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and nine months ended September 30, 2008
Business Overview: Camden owns, develops, and manages multifamily apartment communities. As of September 30, 2008, the portfolio included 186 properties with 64,329 apartment homes across 13 states and D.C., including 1,908 homes under development.
Key Financial Metrics
| Metric (Nine Months Ended Sep 30, 2008) | Amount ($ in thousands) |
|---|---|
| Total Property Revenues | $469,998 |
| Net Income | $105,882 |
| Funds from Operations (FFO) - Diluted | $159,481 |
| Net Cash from Operating Activities | $179,313 |
| Total Assets | $4,832,880 |
| Total Liabilities | $3,118,735 |
| Total Notes Payable | $2,823,500 |
| Cash and Cash Equivalents | $29,517 |
| Available Credit Facility | $588,900 |
Per Share Data (Nine Months 2008): Net Income (Diluted) of $1.89; Distributions Declared of $2.10.
Material Changes vs. Prior Period
- Revenue Growth: Total property revenues increased 6.2% to $470.0 million compared to the prior year period, driven by the lease-up of new developments and non-same store communities.
- Net Income Surge: Net income rose significantly to $105.9 million from $67.5 million in the prior year. This increase is primarily attributable to a one-time gain of $80.3 million from the sale of eight operating properties (discontinued operations).
- Operating Expenses: Property expenses increased 9.5% to $181.5 million, largely due to higher utility costs (from rebilling programs) and real estate taxes.
- Interest Expense: Interest expense increased 16.9% to $98.7 million due to higher debt balances used for acquisitions and share repurchases, partially offset by reduced capitalized interest.
- Deferred Compensation: A loss of $19.7 million on deferred compensation plans negatively impacted non-property income, offset by a corresponding benefit in expenses.
Guidance, Outlook, and Risks
Management Outlook: Based on slowing economic conditions, job losses, and capital market disruptions, management expects minimal growth for the remainder of 2008. They anticipate potential negative impacts on rental rates and occupancy but note positive long-term prospects from reduced home ownership rates.
Liquidity and Capital: The company maintains a strong liquidity position with $588.9 million available under its unsecured credit facility. They recently secured a $380 million master credit facility to refinance maturing debt. Management believes liquidity is sufficient to meet needs through fiscal year 2009.
Key Risks and Contingencies:
- Hurricane Ike: Incurred approximately $6.7 million in damage to Houston-area communities; $1.4 million was uninsured and charged to operating expenses.
- Development Pipeline: Approximately $51.6 million remains to be funded for recently completed and under-development projects.
- Market Risk: Exposure to variable interest rates (hedged via swaps and caps) and potential refinancing risks in a volatile debt market.
- Legal: Ongoing litigation regarding Fair Housing Act and ADA violations; outcome and potential loss are currently indeterminable.
Investor Verification Checklist
- Discontinued Operations Impact: Verify the sustainability of earnings by excluding the $80.3 million gain from property sales when assessing core operating performance.
- Deferred Compensation Volatility: Monitor the performance of investments in deferred compensation plans, which caused a $19.7 million loss in the period.
- Development Costs: Confirm the funding sources for the remaining $51.6 million required for the development pipeline.
- Debt Maturity Profile: Review the weighted average maturity of 5.0 years and the specific terms of the new $380 million credit facility.
- Share Repurchases: Note that $230.1 million was spent on share repurchases YTD, with $269.9 million remaining under the authorized program.