Camden Property Trust — Q2 2016 Form 10-Q
Reporting period: Three and six months ended June 30, 2016. Camden is a U.S. multifamily REIT; at quarter-end it owned, operated, or was developing 164 properties with 57,461 apartment homes, including joint-venture properties.
Key financial results
Amounts are in millions except per-share data. Comparisons are with the same 2015 period.
| Metric | Q2 2016 | Q2 2015 | First half 2016 | First half 2015 |
|---|---|---|---|---|
| Property revenue | $221.5 | $206.4 | $439.1 | $408.0 |
| Property NOI | $141.3 | $132.7 | $281.8 | $260.8 |
| Income from continuing operations | $72.0 | $32.1 | $109.9 | $148.3 |
| Net income attributable to common shareholders | $446.3 | $36.1 | $488.0 | $151.7 |
| Diluted EPS | $4.92 | $0.40 | $5.38 | $1.68 |
| FFO | $105.6 | $102.0 | $215.7 | $200.6 |
| AFFO | $90.5 | $84.1 | $191.3 | $172.0 |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $222.1 | $194.6 |
- Q2 property revenue rose 7.3%; first-half revenue rose 7.6%. Same-store revenue increased 4.3% in Q2 and 4.6% in the first half; same-store NOI rose 3.7% and 5.1%, respectively. Same-store average rental rates increased 3.8% in both periods.
- Q2 property NOI was approximately 63.8% of property revenue, compared with 64.3% in Q2 2015. Weighted average occupancy was 95.4% in Q2 versus 95.9% a year earlier.
- Reported net income and EPS were substantially lifted by a $375.2 million after-tax gain on the April sale of 15 Las Vegas properties, a retail center, and land. Continuing-operations diluted EPS was $0.72 in Q2 and $1.12 for the first half. FFO and AFFO, which exclude property-sale gains under Camden’s definitions, increased year over year.
- Quarterly distributions declared were $0.75 per common share, up from $0.70; first-half distributions were $1.50 versus $1.40.
Balance sheet, debt and liquidity
- At June 30, 2016, cash and cash equivalents were $341.7 million; restricted cash was $21.6 million. Total assets were $6.20 billion.
- Total notes payable were $2.48 billion, down from $2.72 billion at December 31, 2015. Debt carried a 4.4% weighted-average interest rate and a 5.4-year weighted-average maturity. Floating-rate debt was $206.7 million.
- The $600 million unsecured credit facility had no borrowings outstanding; approximately $586.5 million remained available after letters of credit. Camden reported compliance with its covenants. Interest coverage was approximately 5.5 times.
- First-half investing cash flow was positive $482.1 million, primarily reflecting $623.0 million of proceeds from the Las Vegas disposition. Financing cash flow was negative $373.1 million, including net repayment of $244.0 million in credit-facility and other short-term borrowings and $133.3 million of distributions.
Changes, outlook and risks
- First-half continuing income fell to $109.9 million from $148.3 million, mainly because operating-property sale gains were $32.7 million versus $85.2 million in the prior-year period. The prior period included gains from two property sales. Lower interest expense partly offset the decline.
- Camden sold a Tampa operating property in June for approximately $39 million, recognizing a $32.2 million gain. Two Maryland properties totaling 775 homes, held for sale at quarter-end, were sold in July for approximately $171 million. The Las Vegas portfolio sale generated approximately $630 million in proceeds.
- Management cited improving economic conditions, job growth, favorable demographics, and manageable multifamily supply as supportive of rental demand, while noting that worsening economic conditions could hurt operating results. The company intends to pursue selective development, redevelopment, acquisitions, and dispositions.
- Seven projects comprising 2,477 homes were under construction; estimated remaining completion costs were $194.3 million. Management expected to spend $75–$80 million on these projects in the rest of 2016 and estimated additional 2016 recurring capital expenditures of $33–$37 million.
- Management said near-term liquidity was sufficient and scheduled debt principal amortization for the remainder of 2016 was approximately $0.1 million. A special dividend of $4.00–$4.50 per share was anticipated in Q3 2016, contingent on planned dispositions being completed as forecast; the amount and timing remained subject to the board.
- Key disclosed risks include capital-market and economic volatility, competition and rent changes, development and construction execution, leverage and refinancing, variable interest rates, REIT qualification, and catastrophe or cybersecurity losses. Camden reported no material changes to previously disclosed risk factors, no material change in market-risk exposures, and no legal proceedings.
Investor verification points
- Separate recurring operating performance from the $375.2 million Las Vegas disposal gain and other property-sale gains; review FFO/AFFO definitions and reconciliations.
- Confirm completion of the July Maryland sales and the assumptions and board approval underlying the anticipated special dividend.
- Monitor same-store rent growth, expense growth, occupancy, and lease-up progress against management’s outlook.
- Track remaining development costs, funding sources, debt maturities, floating-rate exposure, and covenant compliance.