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Camden Property Trust Announces Third Quarter 2018 Operating Results

10/25/2018

HOUSTON--(BUSINESS WIRE)-- Camden Property Trust (NYSE:CPT) announced today operating results for the three and nine months ended September 30, 2018. Net Income Attributable to Common Shareholders (“EPS”), Funds from Operations (“FFO”), and Adjusted Funds from Operations (“AFFO”) for the three and nine months ended September 30, 2018 are detailed below. A reconciliation of EPS to FFO is included in the financial tables accompanying this press release.

                   
      Three Months Ended         Nine Months Ended
September 30September 30
Per Diluted Share       2018         2017         2018         2017
EPS $0.40         $0.38$1.22         $1.20
FFO $1.20$1.11$3.54$3.35
AFFO       $1.00         $0.92         $3.04         $2.87
                             
      Quarterly Growth         Sequential Growth         Year-to-Date Growth
Same Property Results       3Q18 vs. 3Q17         3Q18 vs. 2Q18         2018 vs. 2017
Revenues 3.1% 1.1% 3.2%
Expenses 1.9% 2.7% 2.4%
Net Operating Income ("NOI")       3.8%         0.2%         3.6%
                             
Same Property Results       3Q18         3Q17         2Q18
Occupancy       95.9%         95.9%         95.8%
                     

“We are pleased to report another strong quarter of performance, with property NOI growth and FFO per share both slightly better than anticipated,” said Richard J. Campo, Camden’s Chairman and CEO. “As a result, we have increased the midpoint of our 2018 FFO guidance from $4.74 to $4.76 per share, and raised the midpoint of expected same property NOI growth from 3.0% to 3.2%.”

The Company defines same property communities as communities owned and stabilized since January 1, 2017, excluding communities under redevelopment and properties held for sale. A reconciliation of net income to NOI and same property NOI is included in the financial tables accompanying this press release.

Development Activity

During the quarter, construction commenced at Camden Buckhead in Atlanta, GA. Subsequent to quarter-end, lease-up was completed at Camden NoMa II in Washington, DC.

Development Communities - Construction Completed and Projects in Lease-Up ($ in millions)

                                       
              Total         Total         % Leased
Community Name       Location         Units         Cost         as of 10/23/2018
Camden NoMa II Washington, DC 405 $108.4 94%
Camden Shady Grove       Rockville, MD         457         113.9         85%
Total                 862         $222.3          
 

Development Communities - Construction Ongoing ($ in millions)

                                       
              Total         Total         % Leased
Community Name       Location         Units         Budget         as of 10/23/2018
Camden Washingtonian Gaithersburg, MD 365 $90.0 58%
Camden McGowen StationHouston, TX 315 90.0 50%
Camden North End I Phoenix, AZ 441 105.0 44%
Camden Grandview II Charlotte, NC 28 21.0
Camden RiNoDenver, CO 233 75.0
Camden Downtown I Houston, TX 271 132.0
Camden Lake EolaOrlando, FL 360 120.0
Camden Buckhead       Atlanta, GA         365         160.0          
Total                 2,378         $793.0          
 

Acquisition/Disposition Activity

During the quarter, the Company acquired Camden Thornton Park, a 299-home apartment community in Orlando, FL, for approximately $89.8 million. Camden also sold approximately 14.1 acres of land adjacent to two development communities in Phoenix, AZ for approximately $11.5 million. The Company does not expect to complete any additional acquisitions or dispositions during the fourth quarter of 2018.

Capital Markets Transactions

In October 2018, Camden retired $175.0 million of 2.86% variable rate secured conventional mortgage notes and $205.0 million of 5.77% secured conventional mortgage notes.

In October 2018, the Company issued $400 million senior unsecured notes under its existing shelf registration statement. These ten-year notes were offered to the public at 99.893% of par value with a coupon of 4.100%. After giving effect to the settlement of in-place swap agreements and deducting the underwriting discounts and other estimated expenses of the offering, the effective annual interest rate on the notes is approximately 3.74%. The Company received net proceeds of approximately $396.1 million, net of underwriting discounts and other estimated offering expenses.

In September 2018, Camden entered into a $100.0 million three-year unsecured floating-rate term loan which was funded in October 2018. The interest rate on the term loan is based on LIBOR plus a margin which is subject to change as our credit ratings change. The current margin is 0.85%.

Earnings Guidance

Camden updated its earnings guidance for 2018 based on its current and expected views of the apartment market and general economic conditions, and provided guidance for fourth quarter 2018 as detailed below.

                                       
      4Q18         2018         2018 Midpoint          
Per Diluted Share       Range         Range         Current         Prior         Change
EPS $0.40 - $0.44         $1.62 - $1.66         $1.64         $1.61         $0.03
FFO       $1.20 - $1.24         $4.74 - $4.78         $4.76         $4.74         $0.02
                             
        2018         2018 Midpoint          
Same Property Growth       Range         Current         Prior         Change
Revenues       3.05% - 3.25%         3.15%         3.15%         0.00%
Expenses 2.95% - 3.15% 3.05% 3.50% (0.45)%
NOI       3.00% - 3.40%         3.20%         3.00%         0.20%
 

Camden intends to update its earnings guidance to the market on a quarterly basis. Additional information on the Company’s 2018 financial outlook and a reconciliation of expected EPS to expected FFO are included in the financial tables accompanying this press release.

Conference Call

Friday, October 26, 2018 at 10:00 AM CT
Domestic Dial-In Number: (888) 317-6003; International Dial-In Number: (412) 317-6061
Passcode: 8427208
Webcast: http://services.choruscall.com/links/cpt181026.html

Supplemental financial information is available in the Investors section of the Company’s website under Earnings Releases or by calling Camden’s Investor Relations Department at (713) 354-2787.

Forward-Looking Statements

In addition to historical information, this press release contains forward-looking statements under the federal securities law. These statements are based on current expectations, estimates, and projections about the industry and markets in which Camden (the “Company”) operates, management's beliefs, and assumptions made by management. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties which are difficult to predict. Factors which may cause the Company’s actual results or performance to differ materially from those contemplated by forward-looking statements are described under the heading “Risk Factors” in Camden’s Annual Report on Form 10-K and in other filings with the Securities and Exchange Commission (SEC). Forward-looking statements made in today’s press release represent management’s current opinions at the time of this publication, and the Company assumes no obligation to update or supplement these statements because of subsequent events.

About Camden

Camden Property Trust, an S&P 400 Company, is a real estate company engaged in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities. Camden owns interests in and operates 159 properties containing 54,480 apartment homes across the United States. Upon completion of 8 properties currently under development, the Company’s portfolio will increase to 56,858 apartment homes in 167 properties. Camden was recently named by FORTUNE® Magazine for the eleventh consecutive year as one of the “100 Best Companies to Work For” in America, ranking #24.

For additional information, please contact Camden’s Investor Relations Department at (713) 354-2787 or access our website at camdenliving.com.

   
CAMDENOPERATING RESULTS
(In thousands, except per share amounts)
 

(Unaudited)

    
 

 

Three Months Ended September 30,Nine Months Ended September 30,
2018   20172018   2017

OPERATING DATA

    
Property revenues
Rental revenues (a)$212,984$194,690$625,123$573,262
Other property revenues (a) 28,786     33,488   84,463     97,807  
Total property revenues 241,770     228,178   709,586     671,069  
 
Property expenses
Property operating and maintenance (b) 56,973 60,090 165,624 164,188
Real estate taxes 30,860     28,193   91,235     83,916  
Total property expenses 87,833     88,283   256,859     248,104  
 
Non-property income
Fee and asset management 1,827 2,116 5,651 5,806
Interest and other income 385 385 1,669 1,579
Income on deferred compensation plans 3,539     3,648   3,769     11,706  
Total non-property income 5,751     6,149   11,089     19,091  
 
Other expenses
Property management 6,303 6,201 19,415 19,782
Fee and asset management 1,140 973 3,193 2,818
General and administrative (c) 12,618 12,266 37,113 37,585
Interest 21,235 21,210 62,216 66,132
Depreciation and amortization 76,476 67,014 222,269 195,781
Expense on deferred compensation plans 3,539     3,648   3,769     11,706  
Total other expenses 121,311     111,312   347,975     333,804  
 
Loss on early retirement of debt — — — (323 )
Equity in income of joint ventures (d) 1,943     1,255   5,644     4,857  
Income from continuing operations before income taxes40,32035,987121,485112,786
Income tax expense (330 )   (512 ) (1,098 )   (1,008 )
Net income39,99035,475120,387111,778
Less income allocated to non-controlling interests from
continuing operations 		(1,124 )   (1,091 ) (3,455 )   (3,345 )
Net income attributable to common shareholders$38,866     $34,384   $116,932     $108,433  
 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Net income$39,990$35,475$120,387$111,778
Other comprehensive income
Unrealized gain on cash flow hedging activities 5,202 1,754 13,984 1,754
Reclassification of net loss on cash flow hedging activities, prior service cost and net loss on post retirement obligation 35     34   104     102  
Comprehensive income45,22737,263134,475113,634
Less income allocated to noncontrolling interests from continuing operations (1,124 )   (1,091 ) (3,455 )   (3,345 )
Comprehensive income attributable to common shareholders$44,103     $36,172   $131,020     $110,289  
 

PER SHARE DATA

 
Total earnings per common share - basic $0.41$0.38$1.22$1.20
Total earnings per common share - diluted 0.40 0.38 1.22 1.20
 
Weighted average number of common shares outstanding:
Basic 95,257 91,011 95,190 90,351
Diluted 95,417 92,033 95,333 91,345
 
(a) Upon our adoption of ASU 2014-09 on January 1, 2018, we are now presenting certain revenue items, historically included as a component of other property revenues, as rental revenues due to the nature and timing of revenue recognition for these items being more closely aligned to a lease. This new presentation has been applied prospectively as this reclassification will not have an impact upon total property revenues or the opening balance of retained earnings. Approximately $5.5 million and $16.9 million of rental revenue is related to this presentation for the three and nine months ended September 30, 2018, respectively. Had ASU 2014-09 been effective as of January 1, 2017, we would have reclassified approximately $5.7 million and $16.7 million from other property revenues to rental revenue for the three and nine months ended September 30, 2017, respectively.
(b) Includes approximately $3.9 million in storm-related expenses related to Hurricanes Harvey and Irma for both the three and nine months ended September 30, 2017.
(c) Includes approximately $0.7 million in storm-related expenses related to Hurricanes Harvey and Irma for both the three and nine months ended September 30, 2017.
(d) Includes approximately $0.4 million in storm-related expenses related to Hurricanes Harvey and Irma for both the three and nine months ended September 30, 2017.
 
 
Note: Please refer to the following pages for definitions and reconciliations of all non-GAAP financial measures presented in this document.
   
CAMDENFUNDS FROM OPERATIONS
(In thousands, except per share and property data amounts)
       

(Unaudited)

   

 

Three Months Ended September 30,Nine Months Ended September 30,
2018   20172018   2017

FUNDS FROM OPERATIONS

    
 
Net income attributable to common shareholders (a)$38,866$34,384$116,932$108,433
Real estate depreciation and amortization 74,841 65,489 217,416 191,092
Adjustments for unconsolidated joint ventures 2,239 2,223 6,743 6,650
Income allocated to non-controlling interests 1,124     1,091   3,455     3,345  
Funds from operations$117,070     $103,187   $344,546     $309,520  
 
Less: recurring capitalized expenditures (b) (19,849 ) (17,506 ) (49,038 ) (43,975 )
           
Adjusted funds from operations - diluted$97,221     $85,681   $295,508     $265,545  
 

PER SHARE DATA

Funds from operations - diluted $1.20$1.11$3.54$3.35
Adjusted funds from operations - diluted 1.00 0.92 3.04 2.87
Distributions declared per common share 0.77 0.75 2.31 2.25
 
Weighted average number of common shares outstanding:
FFO/AFFO - diluted 97,238 93,111 97,194 92,424
 

PROPERTY DATA

Total operating properties (end of period) (c) 159 156 159 156
Total operating apartment homes in operating properties (end of period) (c) 54,480 54,038 54,480 54,038
Total operating apartment homes (weighted average) 47,010 46,546 46,682 46,103
 
(a) Net income attributable to common shareholders for the three and nine months ended September 30, 2017 included approximately $5.0 million of storm-related expenses related to Hurricanes Harvey and Irma.
 
(b) Capital expenditures necessary to help preserve the value of and maintain the functionality at our communities.
 
(c) Includes joint ventures and properties held for sale, if any.
 
 

Note:  Please refer to the following pages for definitions and reconciliations of all non-GAAP financial measures presented in this document.

   
CAMDENBALANCE SHEETS
(In thousands)
       

(Unaudited)

 

 

Sep 30,
2018

   Jun 30,
2018		   Mar 31,
2018		   Dec 31,
2017		   Sep 30,
2017
ASSETS        
Real estate assets, at cost
Land $1,088,293$1,066,077$1,053,578$1,021,031$1,016,097
Buildings and improvements 6,828,068     6,620,169     6,494,229     6,269,481     6,269,561  
7,916,361 7,686,246 7,547,807 7,290,512 7,285,658
Accumulated depreciation (2,328,092 )   (2,255,737 )   (2,185,452 )   (2,118,839 )   (2,080,989 )
Net operating real estate assets 5,588,269 5,430,509 5,362,355 5,171,673 5,204,669
Properties under development, including land 315,904 373,350 399,903 377,231 363,481
Investments in joint ventures 24,664     26,205     26,863     27,237     28,420  
Total real estate assets 5,928,837 5,830,064 5,789,121 5,576,141 5,596,570
Accounts receivable – affiliates 22,605 23,473 23,397 24,038 23,620
Other assets, net (a)(b) 228,468 204,717 199,420 195,764 189,253
Cash and cash equivalents 8,529 64,071 101,401 368,492 350,274
Restricted cash 10,061     9,581     15,036     9,313     9,178  
Total assets $6,198,500     $6,131,906     $6,128,375     $6,173,748     $6,168,895  
 
 
 
LIABILITIES AND EQUITY
Liabilities
Notes payable
Unsecured $1,394,178$1,339,659$1,339,142$1,338,628$1,338,117
Secured 865,431 865,629 865,798 865,970 866,134
Accounts payable and accrued expenses 140,046 127,777 123,706 128,313 127,557
Accrued real estate taxes 70,174 52,461 29,061 51,383 70,027
Distributions payable 74,976 75,071 75,083 72,943 72,962
Other liabilities (b)(c) 178,898     156,767     157,002     154,567     154,506  
Total liabilities 2,723,703 2,617,364 2,589,792 2,611,804 2,629,303
 
Commitments and contingencies
Non-qualified deferred compensation share awards 60,874 85,938 76,174 77,230 73,015
 
Equity
Common shares of beneficial interest 1,030 1,027 1,026 1,028 1,028
Additional paid-in capital 4,147,278 4,132,404 4,132,056 4,137,161 4,134,206
Distributions in excess of net income attributable to common shareholders (466,512 ) (436,575 ) (396,596 ) (368,703 ) (383,584 )
Treasury shares, at cost (355,825 ) (355,752 ) (356,687 ) (364,066 ) (364,736 )
Accumulated other comprehensive income (loss) (d) 14,031     8,794     3,579     (57 )   (7 )
Total common equity 3,340,002 3,349,898 3,383,378 3,405,363 3,386,907
Non-controlling interests 73,921     78,706     79,031     79,351     79,670  
Total equity 3,413,923     3,428,604     3,462,409     3,484,714     3,466,577  
Total liabilities and equity $6,198,500     $6,131,906     $6,128,375     $6,173,748     $6,168,895  
 
 
 
 
 
(a) Includes net deferred charges of:$538$724$929$1,125$1,312
 
(b) Includes net asset fair value of derivative instruments:$15,674$10,472$5,291$1,690$1,754
 
(c) Includes deferred revenues of:$603$659$536$426$1,463
 
(d) Represents the unrealized net loss and unamortized prior service costs on post retirement obligations, and unrealized net gain on cash flow hedging activities.
   
CAMDENNON-GAAP FINANCIAL MEASURES
DEFINITIONS & RECONCILIATIONS
(In thousands, except per share amounts)
           

(Unaudited)

 

This document contains certain non-GAAP financial measures management believes are useful in evaluating an equity REIT's performance.  Camden's definitions and calculations of non-GAAP financial measures may differ from those used by other REITs, and thus may not be comparable.  The non-GAAP financial measures should not be considered as an alternative to net income as an indication of our operating performance, or to net cash provided by operating activities as a measure of our liquidity.

   

FFO

 

The National Association of Real Estate Investment Trusts (“NAREIT”) currently defines FFO as net income (computed in accordance with accounting principles generally accepted in the United States of America ("GAAP")), excluding gains (or losses) associated with the sale of previously depreciated operating properties, real estate depreciation and amortization, impairments of depreciable assets, and adjustments for unconsolidated joint ventures. Our calculation of diluted FFO also assumes conversion of all potentially dilutive securities, including certain non-controlling interests, which are convertible into common shares. We consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions of operating properties, and depreciation, FFO can assist in the comparison of the operating performance of a company’s real estate investments between periods or to different companies. A reconciliation of net income attributable to common shareholders to FFO is provided below:

 

Adjusted FFO

 

In addition to FFO, we compute Adjusted FFO ("AFFO") as a supplemental measure of operating performance.  AFFO is calculated utilizing FFO less recurring capital expenditures which are necessary to help preserve the value of and maintain the functionality at our communities.  Our definition of recurring capital expenditures may differ from other REITs, and there can be no assurance our basis for computing this measure is comparable to other REITs.  A reconciliation of FFO to AFFO is provided below:

 

 

Three Months Ended
September 30,

  

Nine Months Ended
September 30,

2018   2017   2018   2017
Net income attributable to common shareholders $38,866   $34,384$116,932   $108,433
Real estate depreciation and amortization 74,841 65,489 217,416 191,092
Adjustments for unconsolidated joint ventures 2,239 2,223 6,743 6,650
Income allocated to non-controlling interests 1,124     1,091   3,455     3,345  
Funds from operations$117,070     $103,187   $344,546     $309,520  
 
Less: recurring capitalized expenditures (19,849 ) (17,506 ) (49,038 ) (43,975 )
               
Adjusted funds from operations$97,221     $85,681   $295,508     $265,545  
 
Weighted average number of common shares outstanding:
EPS diluted 95,417 92,033 95,333 91,345
FFO/AFFO diluted 97,238 93,111 97,194 92,424
 
 

Three Months Ended
September 30,

  

Nine Months Ended
September 30,

2018   2017   2018   2017
Total Earnings Per Common Share - Diluted $0.40$0.38$1.22$1.20
Real estate depreciation and amortization 0.77 0.70 2.23 2.07
Adjustments for unconsolidated joint ventures 0.02 0.02 0.07 0.07
Income allocated to non-controlling interests 0.01     0.01   0.02     0.01  
FFO per common share - Diluted$1.20     $1.11   $3.54     $3.35  
 
Less: recurring capitalized expenditures (0.20 ) (0.19 ) (0.50 ) (0.48 )
               
AFFO per common share - Diluted$1.00     $0.92   $3.04     $2.87  
 

Expected FFO

Expected FFO is calculated in a method consistent with historical FFO, and is considered an appropriate supplemental measure of expected operating performance when compared to expected earnings per common share (EPS).  Guidance excludes gains, if any, on properties not currently held for sale due to the uncertain timing and extent of property dispositions and the resulting gains/losses on sales.  A reconciliation of the ranges provided for diluted EPS to expected FFO per diluted share is provided below:

 
4Q18Range   2018Range
Low   High   Low   High
Expected earnings per common share - diluted $0.40$0.44$1.62$1.66
Expected real estate depreciation and amortization 0.77 0.77 3.00 3.00
Expected adjustments for unconsolidated joint ventures 0.02 0.02 0.09 0.09
Expected income allocated to non-controlling interests 0.01     0.01   0.03     0.03  
Expected FFO per share - diluted $1.20$1.24$4.74$4.78
 
 

Note:  This table contains forward-looking statements.  Please see the paragraph regarding forward-looking statements earlier in this document.

   
CAMDENNON-GAAP FINANCIAL MEASURES
DEFINITIONS & RECONCILIATIONS
(In thousands, except per share amounts)
       

(Unaudited)

 

Net Operating Income (NOI)

 

NOI is defined by the Company as total property income less property operating and maintenance expenses less real estate taxes. NOI is further detailed in the Components of Property NOI schedules on page 11. The Company considers NOI to be an appropriate supplemental measure of operating performance to net income attributable to common shareholders because it reflects the operating performance of our communities without allocation of corporate level property management overhead or general and administrative costs. A reconciliation of net income attributable to common shareholders to net operating income is provided below:

 

 

Three months ended
September 30,

    

Nine months ended
September 30,

2018   20172018   2017
Net income $39,990   $35,475$120,387   $111,778
Less: Fee and asset management income (1,827 ) (2,116 ) (5,651 ) (5,806 )
Less: Interest and other income (385 ) (385 ) (1,669 ) (1,579 )
Less: Income on deferred compensation plans (3,539 ) (3,648 ) (3,769 ) (11,706 )
Plus: Property management expense 6,303 6,201 19,415 19,782
Plus: Fee and asset management expense 1,140 973 3,193 2,818
Plus: General and administrative expense 12,618 12,266 37,113 37,585
Plus: Interest expense 21,235 21,210 62,216 66,132
Plus: Depreciation and amortization expense 76,476 67,014 222,269 195,781
Plus: Expense on deferred compensation plans 3,539 3,648 3,769 11,706
Plus: Loss on early retirement of debt — — — 323
Less: Equity in income of joint ventures (1,943 ) (1,255 ) (5,644 ) (4,857 )
Plus: Income tax expense 330     512   1,098     1,008  
NOI $153,937$139,895$452,727$422,965
 
"Same Property" Communities $131,943$127,153$392,276$378,537
Non-"Same Property" Communities 16,400 13,136 47,209 36,947
Development and Lease-Up Communities 4,072 1,406 8,978 1,837
Hurricane Expenses — (3,944 ) — (3,944 )
Dispositions/Other 1,522     2,144   4,264     9,588  
NOI $153,937$139,895$452,727$422,965
 
 

Adjusted EBITDA

 

Adjusted EBITDA is defined by the Company as earnings before interest, taxes, depreciation and amortization, including net operating income from discontinued operations, excluding equity in (income) loss of joint ventures, (gain) loss on sale of unconsolidated joint venture interests, gain on acquisition of controlling interest in joint ventures, gain on sale of operating properties including land, net of tax, loss on early retirement of debt and income (loss) allocated to non-controlling interests. The Company considers Adjusted EBITDA to be an appropriate supplemental measure of operating performance to net income attributable to common shareholders because it represents income before non-cash depreciation and the cost of debt, and excludes gains or losses from property dispositions. A reconciliation of net income attributable to common shareholders to Adjusted EBITDA is provided below:

 
 

Three months ended
September 30,

Nine months ended
September 30,

2018   20172018   2017
Net income attributable to common shareholders $38,866$34,384$116,932$108,433
Plus: Interest expense 21,235 21,210 62,216 66,132
Plus: Depreciation and amortization expense 76,476 67,014 222,269 195,781
Plus: Income allocated to non-controlling interests from continuing operations 1,124 1,091 3,455 3,345
Plus: Income tax expense 330 512 1,098 1,008
Plus: Loss on early retirement of debt — — — 323
Less: Equity in income of joint ventures (1,943 )   (1,255 ) (5,644 )   (4,857 )
Adjusted EBITDA $136,088$122,956$400,326$370,165

 

Camden Property Trust
Kim Callahan, 713-354-2549

Source: Camden Property Trust

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