Camden Property Trust Announces Second Quarter 2018 Operating Results

Aug 02, 2018 04:15 pm
HOUSTON -- 

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

 
        Three Months Ended     Six Months Ended
June 30 June 30
Per Diluted Share         2018     2017     2018     2017
EPS $0.40     $0.43 $0.81     $0.82
FFO $1.19 $1.15 $2.34 $2.24
AFFO         $1.00     $0.97     $2.04     $1.95
 
 
        Quarterly Growth     Sequential Growth     Year-to-Date Growth
Same Property Results         2Q18 vs. 2Q17     2Q18 vs. 1Q18     2018 vs. 2017
Revenues 3.2% 1.8% 3.3%
Expenses 3.3% 0.7% 2.7%
Net Operating Income ("NOI")         3.2%     2.4%     3.6%
 
 
Same Property Results         2Q18     2Q17     1Q18
Occupancy         95.8%     95.3%     95.4%
 

“We are pleased to report another solid quarter of results for our company,” said Richard J. Campo, Camden’s Chairman and CEO. “Same property performance and FFO per share were better than anticipated, and we have raised our full-year 2018 guidance for same property revenue growth, same property NOI growth and FFO per share as a result. We are also proud to announce that Camden recently celebrated its 25th anniversary as a publicly traded company, and we thank all of our team members, customers and shareholders for helping us reach this amazing milestone.”

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, leasing began at Camden McGowen Station in Houston, TX, Camden North End I in Phoenix, AZ and Camden Washingtonian in Gaithersburg, MD, and construction commenced at Camden Lake Eola in Orlando, FL.

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

 
            Total     Total     % Leased
Community Name         Location     Units     Cost     as of 7/31/2018
Camden NoMa II Washington, DC 405 $107.9 86%
Camden Shady Grove         Rockville, MD     457     113.7     80%
Total               862     $221.6      
 

Development Communities - Construction Ongoing ($ in millions)

 
        Total     Total     % Leased
Community Name     Location     Units     Budget     as of 7/31/2018
Camden McGowen Station Houston, TX 315 $90.0 30%
Camden North End I Phoenix, AZ 441 105.0 27%
Camden Washingtonian Gaithersburg, MD 365 90.0 32%
Camden Grandview II Charlotte, NC 28 21.0
Camden RiNo Denver, CO 233 75.0
Camden Downtown I Houston, TX 271 132.0
Camden Lake Eola     Orlando, FL     360     120.0      
Total           2,013     $633.0      
 

Acquisition/Disposition Activity

In April 2018, the Company acquired a 1.78-acre land parcel in Orlando, FL, for $11.4 million for the future development of 360 wholly-owned apartment homes which commenced construction during the quarter ended June 30, 2018.

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 third quarter 2018 as detailed below.

 
        3Q18     2018     2018 Midpoint      
Per Diluted Share         Range     Range     Current     Prior     Change
EPS $0.39 - $0.43     $1.55 - $1.67     $1.61     $1.78     ($0.17) (a)
FFO         $1.17 - $1.21     $4.68 - $4.80     $4.74     $4.72     $0.02

(a) Guidance adjusted for depreciation and amortization of real estate and in-place leases for 2018 completed and anticipated acquisitions.

 
          2018     2018 Midpoint      
Same Property Growth         Range     Current     Prior     Change
Revenues         2.90% - 3.40%     3.15%     3.00%     0.15%
Expenses 3.25% - 3.75% 3.50% 3.50% 0.00%
NOI         2.50% - 3.50%     3.00%     2.70%     0.30%
 

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, August 3, 2018 at 10:00 AM CT
Domestic Dial-In Number: (888) 317-6003; International Dial-In Number: (412) 317-6061
Passcode: 1269818
Webcast: http://services.choruscall.com/links/cpt180803.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 158 properties containing 54,181 apartment homes across the United States. Upon completion of 7 properties currently under development, the Company’s portfolio will increase to 56,194 apartment homes in 165 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.

 

CAMDEN

       

OPERATING RESULTS

(In thousands, except per share amounts)

           

(Unaudited)

 
Three Months Ended June 30,       Six Months Ended June 30,
2018     2017 2018     2017

OPERATING DATA

       
Property revenues
Rental revenues (a) $208,634 $190,470 $412,139 $378,572
Other property revenues (a) 28,499       32,900   55,677       64,319  
Total property revenues 237,133       223,370   467,816       442,891  
 
Property expenses
Property operating and maintenance 54,735 52,550 108,651 104,098
Real estate taxes 30,326       27,803   60,375       55,723  
Total property expenses 85,061       80,353   169,026       159,821  
 
Non-property income
Fee and asset management 1,826 1,942 3,824 3,690
Interest and other income 491 560 1,284 1,194
Income on deferred compensation plans 435       3,441   230       8,058  
Total non-property income 2,752       5,943   5,338       12,942  
 
Other expenses
Property management 6,473 6,554 13,112 13,581
Fee and asset management 1,088 961 2,053 1,845
General and administrative 12,272 12,451 24,495 25,319
Interest 20,607 21,966 40,981 44,922
Depreciation and amortization 75,569 65,033 145,793 128,767
Expense on deferred compensation plans 435       3,441   230       8,058  
Total other expenses 116,444       110,406   226,664       222,492  
 
Loss on early retirement of debt — — — (323 )
Equity in income of joint ventures 1,872       1,785   3,701       3,602  
Income from continuing operations before income taxes 40,252 40,339 81,165 76,799
Income tax expense (380 )     (25 ) (768 )     (496 )
Net income 39,872 40,314 80,397 76,303
Less income allocated to non-controlling interests from
continuing operations 		(1,201 )     (1,126 ) (2,331 )     (2,254 )
Net income attributable to common shareholders $38,671       $39,188   $78,066       $74,049  
 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Net income $39,872 $40,314 $80,397 $76,303
Other comprehensive income
Unrealized gain on cash flow hedging activities 5,181 — 8,782 —

Reclassification of net loss on cash flow hedging activities, prior service cost and net loss

on post retirement obligation

34       34   69       68  
Comprehensive income 45,087 40,348 89,248 76,371
Less income allocated to noncontrolling interests from continuing operations (1,201 )     (1,126 ) (2,331 )     (2,254 )
Comprehensive income attributable to common shareholders $43,886       $39,222   $86,917       $74,117  
 

PER SHARE DATA

 
Total earnings per common share - basic $0.40 $0.43 $0.81 $0.82
Total earnings per common share - diluted 0.40 0.43 0.81 0.82
 
Weighted average number of common shares outstanding:
Basic 95,243 90,105 95,155 90,015
Diluted 95,337 91,041 95,289 90,995
 

(a) Upon our adoption of ASU 2014-09, 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 $5.8 million and $11.4 million of rental revenue is related to this presentation for the three and six months ended June 30, 2018, respectively. Had ASU 2014-09 been effective as of January 1, 2017, we would have reclassified approximately $5.7 million and $11.0 million from other property revenues to rental revenue for the three and six months ended June 30, 2017, respectively.

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

       

CAMDEN

FUNDS FROM OPERATIONS

(In thousands, except per share and property data amounts)

           

(Unaudited)

 
Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017

FUNDS FROM OPERATIONS

       
 
Net income attributable to common shareholders $38,671 $39,188 $78,066 $74,049
Real estate depreciation and amortization 73,980 63,450 142,575 125,603
Adjustments for unconsolidated joint ventures 2,257 2,214 4,504 4,427
Income allocated to non-controlling interests 1,201       1,126   2,331       2,254  
Funds from operations $116,109       $105,978   $227,476       $206,333  
 
Less: recurring capitalized expenditures (a) (19,190 ) (16,775 ) (29,189 ) (26,469 )
               
Adjusted funds from operations - diluted $96,919       $89,203   $198,287       $179,864  
 

PER SHARE DATA

Funds from operations - diluted $1.19 $1.15 $2.34 $2.24
Adjusted funds from operations - diluted 1.00 0.97 2.04 1.95
Distributions declared per common share 0.77 0.75 1.54 1.50
 
Weighted average number of common shares outstanding:
FFO/AFFO - diluted 97,220 92,119 97,172 92,074
 

PROPERTY DATA

Total operating properties (end of period) (b) 158 155 158 155
Total operating apartment homes in operating properties (end of period) (b) 54,181 53,771 54,181 53,771
Total operating apartment homes (weighted average) 46,682 46,053 46,518 45,882
 

(a) Capital expenditures necessary to help preserve the value of and maintain the functionality at our communities.

(b) 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.

 

CAMDEN

       

BALANCE SHEETS

(In thousands)

           

(Unaudited)

 
Jun 30,
2018 		    Mar 31,
2018 		    Dec 31,
2017 		    Sep 30,
2017 		    Jun 30,
2017
ASSETS                
Real estate assets, at cost
Land $1,066,077 $1,053,578 $1,021,031 $1,016,097 $1,008,459
Buildings and improvements 6,620,169       6,494,229       6,269,481       6,269,561       6,199,435  
7,686,246 7,547,807 7,290,512 7,285,658 7,207,894
Accumulated depreciation (2,255,737 )     (2,185,452 )     (2,118,839 )     (2,080,989 )     (2,016,259 )
Net operating real estate assets 5,430,509 5,362,355 5,171,673 5,204,669 5,191,635
Properties under development, including land 373,350 399,903 377,231 363,481 373,294
Investments in joint ventures 26,205       26,863       27,237       28,420       29,665  
Total real estate assets 5,830,064 5,789,121 5,576,141 5,596,570 5,594,594
Accounts receivable – affiliates 23,473 23,397 24,038 23,620 23,592
Other assets, net (a)(b) 204,717 199,420 195,764 189,253 155,784
Cash and cash equivalents 64,071 101,401 368,492 350,274 16,318
Restricted cash 9,581       15,036       9,313       9,178       8,312  
Total assets $6,131,906       $6,128,375       $6,173,748       $6,168,895       $5,798,600  
 
 
 
LIABILITIES AND EQUITY
Liabilities
Notes payable
Unsecured $1,339,659 $1,339,142 $1,338,628 $1,338,117 $1,437,608
Secured 865,629 865,798 865,970 866,134 866,292
Accounts payable and accrued expenses 127,777 123,706 128,313 127,557 116,754
Accrued real estate taxes 52,461 29,061 51,383 70,027 48,559
Distributions payable 75,071 75,083 72,943 72,962 69,347
Other liabilities (b)(c) 156,767       157,002       154,567       154,506       134,851  
Total liabilities 2,617,364 2,589,792 2,611,804 2,629,303 2,673,411
 
Commitments and contingencies
Non-qualified deferred compensation share awards 85,938 76,174 77,230 73,015 84,050
 
Equity
Common shares of beneficial interest 1,027 1,026 1,028 1,028 978
Additional paid-in capital 4,132,404 4,132,056 4,137,161 4,134,206 3,678,660
Distributions in excess of net income attributable to common shareholders (436,575 ) (396,596 ) (368,703 ) (383,584 ) (351,910 )
Treasury shares, at cost (355,752 ) (356,687 ) (364,066 ) (364,736 ) (364,785 )
Accumulated other comprehensive loss (d) 8,794       3,579       (57 )     (7 )     (1,795 )
Total common equity 3,349,898 3,383,378 3,405,363 3,386,907 2,961,148
Non-controlling interests 78,706       79,031       79,351       79,670       79,991  
Total equity 3,428,604       3,462,409       3,484,714       3,466,577       3,041,139  
Total liabilities and equity $6,131,906       $6,128,375       $6,173,748       $6,168,895       $5,798,600  
 
 
 
 
 
(a) Includes net deferred charges of: $724 $929 $1,125 $1,312 $1,487
 
(b) Includes net asset fair value of derivative instruments: $10,472 $5,291 $1,690 $1,754 $—
 
(c) Includes deferred revenues of: $659 $536 $426 $1,463 $513
 
(d) Represents the unrealized net loss and unamortized prior service costs on post retirement obligations, and unrealized net gain on cash flow hedging activities.
 
 

CAMDEN

NON-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 June 30,     Six Months Ended June 30,
2018     2017 2018     2017
Net income attributable to common shareholders $38,671     $39,188 $78,066     $74,049
Real estate depreciation and amortization 73,980 63,450 142,575 125,603
Adjustments for unconsolidated joint ventures 2,257 2,214 4,504 4,427
Income allocated to non-controlling interests 1,201       1,126   2,331       2,254  
Funds from operations $116,109       $105,978   $227,476       $206,333  
 
Less: recurring capitalized expenditures (19,190 ) (16,775 ) (29,189 ) (26,469 )
               
Adjusted funds from operations $96,919       $89,203   $198,287       $179,864  
 
Weighted average number of common shares outstanding:
EPS diluted 95,337 91,041 95,289 90,995
FFO/AFFO diluted 97,220 92,119 97,172 92,074
 
Total earnings per common share - diluted $0.40 $0.43 $0.81 $0.82
FFO per common share - diluted $1.19 $1.15 $2.34

$2.24

AFFO per common share - diluted $1.00 $0.97 $2.04 $1.95
 

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:

 
       

3Q18 Range

   

2018 Range

Low     High Low     High
Expected earnings per common share - diluted $0.39     $0.43 $1.55     $1.67
Expected real estate depreciation and amortization 0.75 0.75 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   0.04       0.04
Expected FFO per share - diluted $1.17 $1.21 $4.68 $4.80
 

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

 

CAMDEN

NON-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 June 30,     Six months ended June 30,
2018     2017 2018     2017
Net income $39,872     $40,314 $80,397     $76,303
Less: Fee and asset management income (1,826 ) (1,942 ) (3,824 ) (3,690 )
Less: Interest and other income (491 ) (560 ) (1,284 ) (1,194 )
Less: Income on deferred compensation plans (435 ) (3,441 ) (230 ) (8,058 )
Plus: Property management expense 6,473 6,554 13,112 13,581
Plus: Fee and asset management expense 1,088 961 2,053 1,845
Plus: General and administrative expense 12,272 12,451 24,495 25,319
Plus: Interest expense 20,607 21,966 40,981 44,922
Plus: Depreciation and amortization expense 75,569 65,033 145,793 128,767
Plus: Expense on deferred compensation plans 435 3,441 230 8,058
Plus: Loss on early retirement of debt — — — 323
Less: Equity in income of joint ventures (1,872 ) (1,785 ) (3,701 ) (3,602 )
Plus: Income tax expense 380       25   768       496  
NOI $152,072 $143,017 $298,790 $283,070
 
"Same Property" Communities $131,729 $127,703 $260,333 $251,384
Non-"Same Property" Communities 16,144 12,387 30,809 23,811
Development and Lease-Up Communities 2,858 389 4,906 431
Dispositions/Other 1,341       2,538   2,742       7,444  
NOI $152,072 $143,017 $298,790 $283,070
 

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 June 30,     Six months ended June 30,
2018     2017 2018     2017
Net income attributable to common shareholders $38,671     $39,188 $78,066     $74,049
Plus: Interest expense 20,607 21,966 40,981 44,922
Plus: Depreciation and amortization expense 75,569 65,033 145,793 128,767
Plus: Income allocated to non-controlling interests from continuing operations 1,201 1,126 2,331 2,254
Plus: Income tax expense 380 25 768 496
Plus: Loss on early retirement of debt — — — 323
Less: Equity in income of joint ventures (1,872 )     (1,785 ) (3,701 )     (3,602 )
Adjusted EBITDA $134,556 $125,553 $264,238 $247,209
 

Camden Property Trust
Kim Callahan, 713-354-2549