UNITED STATES FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE For the quarterly period ended March 31, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) For the transition period from __________ to _________ Commission file number: 1-12110 CAMDEN PROPERTY TRUST |
TEXAS (State or Other Jurisdiction of Incorporation or Organization) | 76-6088377 (I.R.S. Employer Identification Number) |
3 Greenway Plaza, Suite 1300, Houston, Texas 77046 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of May 1, 2004, there were 39,807,615 shares of Common Shares of Beneficial Interest, $0.01 par value, outstanding. CAMDEN PROPERTY TRUST |
PART I | FINANCIAL INFORMATION | Page |
---|---|---|
Item 1 | Financial Statements | |
Consolidated Balance Sheets (Unaudited) as of March 31, 2004 and | ||
December 31, 2003 | 3 | |
Consolidated Statements of Operations (Unaudited) for the three months | ||
ended March 31, 2004 and 2003 | 4 | |
Consolidated Statements of Cash Flows (Unaudited) for the three months | ||
ended March 31, 2004 and 2003 | 5 | |
Notes to Consolidated Financial Statements (Unaudited) | 6 | |
Item 2 | Management's Discussion and Analysis of Financial Condition and | |
Results of Operations | 15 | |
Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 26 |
Item 4 | Controls and Procedures | 26 |
PART II | OTHER INFORMATION | |
Item 1 | Legal Proceedings | 27 |
Item 2 | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 27 |
Item 3 | Defaults Upon Senior Securities | 27 |
Item 4 | Submission of Matters to a Vote of Security Holders | 27 |
Item 5 | Other Information | 27 |
Item 6 | Exhibits and Reports on Form 8-K | 27 |
SIGNATURES | 28 | |
2 PART I. FINANCIAL INFORMATION |
(In thousands)
March 31, 2004 | December 31, 2003 | |||||||
---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||
Real estate assets, at cost | ||||||||
Land | $ | 404,113 | $ | 400,490 | ||||
Buildings and improvements | 2,538,193 | 2,499,214 | ||||||
2,942,306 | 2,899,704 | |||||||
Accumulated depreciation | (627,808 | ) | (601,688 | ) | ||||
Net operating real estate assets | 2,314,498 | 2,298,016 | ||||||
Properties under development, including land | 156,466 | 189,119 | ||||||
Investment in joint ventures | 10,754 | 11,033 | ||||||
Land held for sale | 1,800 | -- | ||||||
Total real estate assets | 2,483,518 | 2,498,168 | ||||||
Accounts receivable - affiliates | 28,984 | 25,997 | ||||||
Notes receivable | ||||||||
Affiliates | 9,335 | 9,017 | ||||||
Other | 41,685 | 41,416 | ||||||
Other assets, net | 42,922 | 40,951 | ||||||
Cash and cash equivalents | 3,836 | 3,357 | ||||||
Restricted cash | 6,794 | 6,655 | ||||||
Total assets | $ | 2,617,074 | $ | 2,625,561 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Liabilities | ||||||||
Notes payable | ||||||||
Unsecured | $ | 1,291,074 | $ | 1,277,879 | ||||
Secured | 230,622 | 231,798 | ||||||
Accounts payable | 26,112 | 26,150 | ||||||
Accrued real estate taxes | 14,165 | 27,407 | ||||||
Accrued expenses and other liabilities | 54,397 | 50,111 | ||||||
Distributions payable | 30,974 | 30,946 | ||||||
Total liabilities | 1,647,344 | 1,644,291 | ||||||
Commitments and contingencies | ||||||||
Minority interests | ||||||||
Units convertible into perpetual preferred shares | 149,815 | 149,815 | ||||||
Units convertible into common shares | 45,711 | 46,570 | ||||||
Total minority interests | 195,526 | 196,385 | ||||||
Shareholders' equity | ||||||||
Common shares of beneficial interest | 484 | 483 | ||||||
Additional paid-in capital | 1,340,564 | 1,330,512 | ||||||
Distributions in excess of net income | (314,720 | ) | (297,808 | ) | ||||
Unearned restricted share awards | (15,937 | ) | (11,875 | ) | ||||
Treasury shares, at cost | (236,187 | ) | (236,427 | ) | ||||
Total shareholders' equity | 774,204 | 784,885 | ||||||
Total liabilities and shareholders' equity | $ | 2,617,074 | $ | 2,625,561 | ||||
See Notes to Consolidated Financial Statements. 3 |
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts) | ||||||||
Three Months Ended March 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2004 | 2003 | |||||||
Revenues | ||||||||
Rental revenues | $ | 96,305 | $ | 90,101 | ||||
Other property revenues | 8,465 | 7,591 | ||||||
Total property revenues | 104,770 | 97,692 | ||||||
Fee and asset management | 2,181 | 1,770 | ||||||
Other revenues | 4,281 | 1,612 | ||||||
Total revenues | 111,232 | 101,074 | ||||||
Expenses | ||||||||
Property operating and maintenance | 30,394 | 28,356 | ||||||
Real estate taxes | 11,510 | 11,164 | ||||||
Total property expenses | 41,904 | 39,520 | ||||||
Property management | 2,869 | 2,537 | ||||||
Fee and asset management | 989 | 1,563 | ||||||
General and administrative | 4,186 | 3,611 | ||||||
Other expenses | -- | 1,077 | ||||||
Interest | 21,135 | 18,356 | ||||||
Depreciation | 26,609 | 25,929 | ||||||
Amortization of deferred financing costs | 764 | 626 | ||||||
Total expenses | 98,456 | 93,219 | ||||||
Income before gain on sale of land, impairment loss on land held for sale, equity in income of joint ventures and minority interests | 12,776 | 7,855 | ||||||
Gain on sale of land | 1,255 | 1,423 | ||||||
Impairment loss on land held for sale | (1,143 | ) | -- | |||||
Equity in income of joint ventures | 99 | 2,643 | ||||||
Income allocated to minority interests | ||||||||
Distributions on units convertible into perpetual preferred shares | (2,843 | ) | (3,218 | ) | ||||
Income allocated to units convertible into common shares | (756 | ) | (369 | ) | ||||
Net income | $ | 9,388 | $ | 8,334 | ||||
Earnings per share - basic | $ | 0.23 | $ | 0.21 | ||||
Earnings per share - diluted | $ | 0.22 | $ | 0.20 | ||||
Distributions declared per common share | $ | 0.635 | $ | 0.635 | ||||
Weighted average number of common shares outstanding | 40,031 | 39,164 | ||||||
Weighted average number of common and common dilutive equivalent | ||||||||
shares outstanding | 42,146 | 42,752 |
See Notes to Consolidated Financial Statements. 4 |
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) | ||||||||
Three Months Ended March 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2004 | 2003 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 9,388 | $ | 8,334 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation | 26,609 | 25,929 | ||||||
Amortization of deferred financing costs | 764 | 626 | ||||||
Equity in income of joint ventures | (99 | ) | (2,643 | ) | ||||
Gain on sale of land | (1,255 | ) | (1,423 | ) | ||||
Impairment loss on land held for sale | 1,143 | -- | ||||||
Income allocated to units convertible into common shares | 756 | 369 | ||||||
Accretion of discount on unsecured notes payable | 195 | 166 | ||||||
Net change in operating accounts | (8,115 | ) | (8,630 | ) | ||||
Net cash provided by operating activities | 29,386 | 22,728 | ||||||
CASH FLOW FROM INVESTING ACTIVITIES | ||||||||
Increase in real estate assets | (14,341 | ) | (32,452 | ) | ||||
Net proceeds from sale of land and townhomes | 3,451 | 4,929 | ||||||
Distributions from joint ventures | 378 | 7,110 | ||||||
Increase in notes receivable - other | (269 | ) | -- | |||||
Other | (806 | ) | (384 | ) | ||||
Net cash used in investing activities | (11,587 | ) | (20,797 | ) | ||||
CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
Net increase in unsecured line of credit and short term borrowings | 18,000 | 31,000 | ||||||
Repayment of notes payable | (6,176 | ) | (1,188 | ) | ||||
Distributions to shareholders and minority interests | (30,945 | ) | (30,173 | ) | ||||
Net increase in accounts receivable - affiliates | (97 | ) | (448 | ) | ||||
Increase in notes receivable - affiliates | (318 | ) | -- | |||||
Common share options exercised | 1,944 | 6 | ||||||
Other | 272 | 412 | ||||||
Net cash used in financing activities | (17,320 | ) | (391 | ) | ||||
Net increase in cash and cash equivalents | 479 | 1,540 | ||||||
Cash and cash equivalents, beginning of period | 3,357 | 405 | ||||||
Cash and cash equivalents, end of period | $ | 3,836 | $ | 1,945 | ||||
SUPPLEMENTAL INFORMATION | ||||||||
Cash paid for interest, net of interest capitalized | $ | 14,128 | $ | 13,079 | ||||
Interest capitalized | 2,602 | 4,268 | ||||||
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||||
Value of shares issued under benefit plans, net | $ | 5,394 | $ | 3,837 | ||||
Conversion of operating partnership units to common shares | -- | 90 |
See Notes to Consolidated Financial Statements. 5 |
6 |
CAMDEN PROPERTY TRUST |
7 |
CAMDEN PROPERTY TRUST |
(in thousands, except per share data) | ||||||||
Three Months Ended March 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2004 | 2003 | |||||||
Net income, as reported | $ | 9,388 | $ | 8,334 | ||||
Add: stock-based employee compensation expense included | ||||||||
in reported net income | 950 | 814 | ||||||
Deduct: total stock-based employee compensation expense | ||||||||
determined under fair value based method for all awards | (1,260 | ) | (1,019 | ) | ||||
Pro forma net income | $ | 9,078 | $ | 8,129 | ||||
Earnings per share: | ||||||||
Basic - as reported | $ | 0.23 | $ | 0.21 | ||||
Basic - pro forma | 0.23 | 0.21 | ||||||
Diluted - as reported | 0.22 | 0.20 | ||||||
Diluted - pro forma | 0.22 | 0.20 |
The fair value of each option granted in 2004 and 2003, respectively, was estimated on the date of grant utilizing the Black-Scholes option pricing model with the following assumptions: risk-free interest rates of 4.2% and 4.0%, expected life of ten years, dividend yield of 5.9% and 8.1%, and expected share volatility of 18.0% and 18.3%. The weighted average fair value of options granted in 2004 and 2003, respectively, was $3.83 and $1.38 per share, and will be amortized over the vesting period in accordance with SFAS No. 148. Recent Accounting Pronouncements. In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, Consolidated Financial Statements” (“FIN 46”), which was revised in December 2003. This interpretation requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. This interpretation is effective for periods ending after March 15, 2004. Our application of FIN 46 did not require the consolidation of any additional entities. In May 2003, FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150, as amended, was effective for the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on our financial position, results of operations or cash flows. Reclassifications. Certain reclassifications have been made to amounts in prior year financial statements to conform with current year presentation. |
8 |
(in thousands, except per share amounts) | ||||||||
Three Months Ended March 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2004 | 2003 | |||||||
Basic earnings per share calculation | ||||||||
Net income | $ | 9,388 | $ | 8,334 | ||||
Net income - per share | $ | 0.23 | $ | 0.21 | ||||
Weighted average number of common shares outstanding | 40,031 | 39,164 | ||||||
Diluted earnings per share calculation | ||||||||
Net income | $ | 9,388 | $ | 8,334 | ||||
Income allocated to units convertible into common shares | 13 | 369 | ||||||
Net income, as adjusted | $ | 9,401 | $ | 8,703 | ||||
Net income, as adjusted - per share | $ | 0.22 | $ | 0.20 | ||||
Weighted average common shares outstanding | 40,031 | 39,164 | ||||||
Incremental shares issuable from assumed conversion of: | ||||||||
Common share options and awards granted | 1,553 | 1,132 | ||||||
Units convertible into common shares | 562 | 2,456 | ||||||
Weighted average common shares outstanding, as adjusted | 42,146 | 42,752 | ||||||
9 |
($ in millions) | |||||||||||||||||
Location | Property Type (s) | Status | Apartment Homes | Mar 31, 2004 | Dec 31, 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dallas/Fort Worth, Texas | Multifamily | Stabilized | 738 | $ | 11.4 | $ | 11.4 | ||||||||||
Las Vegas, Nevada | Multifamily | Stabilized/Development | 560 | 7.6 | 7.4 | ||||||||||||
Reno, Nevada | Multifamily | Stabilized | 450 | 5.4 | 5.4 | ||||||||||||
Houston, Texas | Multifamily/Commercial | Predevelopment/Development | -- | 4.7 | 4.7 | ||||||||||||
San Jose, California | Multifamily | Stabilized | 117 | 3.6 | 3.6 | ||||||||||||
Denver, Colorado | Multifamily | Stabilized | 279 | 3.5 | 3.5 | ||||||||||||
Atlanta, Georgia | Multifamily | Stabilized | 360 | 3.0 | 3.0 | ||||||||||||
Austin, Texas | Multifamily | Stabilized | 296 | 2.5 | 2.4 | ||||||||||||
Total | 2,800 | $ | 41.7 | $ | 41.4 | ||||||||||||
We have reviewed the terms and conditions underlying each note and management believes that none of these notes qualify for consolidation as a variable interest entity. Management believes that these notes appear to be collectable, and no impairment existed at March 31, 2004. In December 2003, in connection with a joint venture transaction discussed in Note 3, we provided mezzanine financing to the joint venture, in which we own a 20% interest. As of March 31, 2004, the balance of the note receivable totaled $9.3 million. Interest on the note accrues at 14% and the note will mature in 2006. |
10 |
CAMDEN PROPERTY TRUST |
(In millions) | ||||||||
March 31, 2004 | December 31, 2003 | |||||||
---|---|---|---|---|---|---|---|---|
Unsecured line of credit and short term borrowings | $ | 65.0 | $ | 47.0 | ||||
Senior unsecured notes | ||||||||
7.14% Notes, due 2004 | 200.0 | 199.9 | ||||||
7.11% - 7.28% Notes, due 2006 | 174.6 | 174.5 | ||||||
5.98% Notes, due 2007 | 149.5 | 149.5 | ||||||
6.77% Notes, due 2010 | 99.9 | 99.9 | ||||||
7.69% Notes, due 2011 | 149.5 | 149.5 | ||||||
5.93% Notes, due 2012 | 199.2 | 199.2 | ||||||
5.45% Notes, due 2013 | 198.9 | 198.9 | ||||||
1,171.6 | 1,171.4 | |||||||
Medium term notes | ||||||||
6.88% - 7.17% Notes, due 2004 | 25.0 | 30.0 | ||||||
7.63% Notes, due 2009 | 15.0 | 15.0 | ||||||
6.79% Notes, due 2010 | 14.5 | 14.5 | ||||||
54.5 | 59.5 | |||||||
Total unsecured notes | 1,291.1 | 1,277.9 | ||||||
Secured notes | ||||||||
7.10% - 8.50% Conventional Mortgage Notes, due 2005 - 2009 | 132.2 | 133.2 | ||||||
1.63% - 7.29% Tax-exempt Mortgage Notes, due 2025 - 2032 | 98.4 | 98.6 | ||||||
230.6 | 231.8 | |||||||
Total notes payable | $ | 1,521.7 | $ | 1,509.7 | ||||
We have a $500 million unsecured line of credit which matures in August 2006. The scheduled interest rate is currently based on spreads over LIBOR. The scheduled interest rate spreads are subject to change as our credit ratings change. Advances under the line of credit may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of six months or less and may not exceed the lesser of $250 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations all of which we were in compliance with at quarter end. Our line of credit provides us with the ability to issue up to $100 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our line, it does reduce the amount available to us. At March 31, 2004 we had outstanding letters of credit totaling $13.5 million, and had $421.5 million available under our unsecured line of credit. At March 31, 2004, $885.5 million was available for issuance in debt securities, preferred shares, common shares or warrants from our $1.1 billion universal shelf. We have significant unencumbered real estate assets which could be sold or used as collateral for financing purposes should other sources of capital not be available. |
11 |
(in thousands) | ||||||||
Three Months Ended March 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2004 | 2003 | |||||||
Decrease (increase) in assets: | ||||||||
Other assets, net | $ | (1,912 | ) | $ | (1,532 | ) | ||
Restricted cash | (139 | ) | (149 | ) | ||||
Increase (decrease) in liabilities: | ||||||||
Accounts payable | (38 | ) | 789 | |||||
Accrued real estate taxes | (13,230 | ) | (13,829 | ) | ||||
Accrued expenses and other liabilities | 7,204 | 6,091 | ||||||
Net change in operating accounts | $ | (8,115 | ) | $ | (8,630 | ) | ||
12 |
13 |
CAMDEN PROPERTY TRUST |
14 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with all of the financial statements and notes appearing elsewhere in this report as well as the audited financial statements appearing in our 2003 Annual Report to Shareholders. Where appropriate, comparisons are made on a dollars per-weighted-average-unit basis in order to adjust for changes in the number of apartment homes owned during each period. The statements contained in this report that are not historical facts are forward-looking statements, and actual results may differ materially from those included in the forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to, the following: |
o | the results of our efforts to implement our property development, construction and acquisition strategies; | |
o | the effects of economic conditions, including rising interest rates; | |
o | our ability to generate sufficient cash flows; | |
o | the failure to qualify as a real estate investment trust; | |
o | the costs of our capital and debt; | |
o | changes in our capital requirements; | |
o | the actions of our competitors and our ability to respond to those actions; | |
o | the performance of our mezzanine financing program; | |
o | changes in governmental regulations, tax rates and similar matters; and | |
o | environmental uncertainties and disasters. |
March 31, 2004 | December 31, 2003 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apartment Homes | Properties | Apartment Homes | Properties | |||||||||||
Operating Properties | ||||||||||||||
West Region | ||||||||||||||
Las Vegas, Nevada (a) | 9,625 | 33 | 9,625 | 33 | ||||||||||
Denver, Colorado (a) | 2,529 | 8 | 2,529 | 8 | ||||||||||
Phoenix, Arizona | 2,433 | 8 | 2,433 | 8 | ||||||||||
Los Angeles/Orange County, California | 1,653 | 4 | 1,653 | 4 | ||||||||||
San Diego/Inland Empire, California | 846 | 3 | 846 | 3 | ||||||||||
Tucson, Arizona | 821 | 2 | 821 | 2 | ||||||||||
Central Region | ||||||||||||||
Dallas, Texas | 8,359 | 23 | 8,359 | 23 | ||||||||||
Houston, Texas | 6,810 | 15 | 6,810 | 15 | ||||||||||
St. Louis, Missouri | 2,123 | 6 | 2,123 | 6 | ||||||||||
Austin, Texas | 1,745 | 6 | 1,745 | 6 | ||||||||||
Corpus Christi, Texas | 1,284 | 3 | 1,284 | 3 | ||||||||||
Kansas City, Missouri | 596 | 1 | 596 | 1 | ||||||||||
East Region | ||||||||||||||
Tampa, Florida | 6,089 | 13 | 6,089 | 13 | ||||||||||
Orlando, Florida | 2,804 | 6 | 2,804 | 6 | ||||||||||
Charlotte, North Carolina | 1,659 | 6 | 1,659 | 6 | ||||||||||
Louisville, Kentucky | 1,448 | 5 | 1,448 | 5 | ||||||||||
Greensboro, North Carolina | 520 | 2 | 520 | 2 | ||||||||||
Total Operating Properties | 51,344 | 144 | 51,344 | 144 | ||||||||||
Properties Under Development | ||||||||||||||
West Region | ||||||||||||||
Los Angeles/Orange County, California | 538 | 1 | 538 | 1 | ||||||||||
Central Region | ||||||||||||||
Dallas, Texas | 284 | 1 | -- | -- | ||||||||||
East Region | ||||||||||||||
Orlando, Florida | 366 | 1 | -- | -- | ||||||||||
Northern Virginia (a) | 464 | 1 | 464 | 1 | ||||||||||
Total Properties Under Development | 1,652 | 4 | 1,002 | 2 | ||||||||||
Total Properties | 52,996 | 148 | 52,346 | 146 | ||||||||||
Less: Joint Venture Properties (a) | 5,011 | 18 | 5,011 | 18 | ||||||||||
Total Properties Owned 100% | 47,985 | 130 | 47,335 | 128 | ||||||||||
(a) | Includes properties held in joint ventures as follows: one property with 320 apartment homes in Colorado in whichwe own a 50% interest, the remaining interest is owned by an unaffiliated private investor; and 16 properties with4,227 apartment homes in Nevada in which we own a 20% interest, the remaining interest is owned by an unaffiliatedprivate investor, and one property with 464 units currently under development in Virginia in which we own a 20%interest, the remaining interest is owned by an unaffiliated private investor. |
($ in millions) | |||||||||||||||||
Property and Location | Number of Apartment Homes | Cost to Date | % Leased at 04/26/04 | Date of Completion | Estimated Date of Stabilization | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Camden Oak Crest | |||||||||||||||||
Houston, TX | 364 | $ | 22.9 | 93 | % | 2Q03 | 2Q04 | ||||||||||
Camden Sierra at Otay Ranch | |||||||||||||||||
Chula Vista, CA | 422 | 59.9 | 90 | 3Q03 | 2Q04 | ||||||||||||
Total | 786 | $ | 82.8 | ||||||||||||||
At March 31, 2004, we had four properties in various stages of construction as follows:
($ in millions) | |||||||||||||||||
Property and Location | Number of Apartment Homes | Estimated Cost | Cost Incurred at 03/31/04 | Estimated Date of Completion | Estimated Date of Stabilization | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In Lease-up | |||||||||||||||||
Camden Harbor View | |||||||||||||||||
Long Beach, CA | 538 | $ | 144.5 | $ | 141.0 | 2Q04 | 4Q04 | ||||||||||
Under Construction | |||||||||||||||||
Camden Farmers Market II | |||||||||||||||||
Dallas, TX | 284 | 31.7 | 8.9 | 3Q05 | 1Q06 | ||||||||||||
Camden Lee Vista II | |||||||||||||||||
Orlando, FL | 366 | 34.8 | 8.1 | 3Q05 | 1Q06 | ||||||||||||
Total | 1,188 | $ | 211.0 | $ | 158.0 | ||||||||||||
Under Construction - JV's | |||||||||||||||||
Camden Westwind | |||||||||||||||||
Ashburn, VA | 464 | $ | 69.1 | $ | 28.3 | 1Q06 | 4Q06 |
Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes that are capitalized as part of properties under development. Expenditures directly related to the development, acquisition and improvement of real estate assets, excluding internal costs relating to acquisitions, are capitalized at cost as land, buildings and improvements. Indirect development costs, including salaries and benefits and other related costs that are clearly attributable to the development of properties, are also capitalized. All construction and carrying costs are capitalized and reported on the balance sheet in properties under development until the apartment homes are substantially completed. Upon substantial completion of the apartment homes, the total cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively, and the assets are depreciated over their estimated useful lives using the straight-line method of depreciation. Where possible, we stage our construction to allow leasing and occupancy during the construction period, which we believe minimizes the duration of the lease-up period following completion of construction. Our accounting policy related to properties in the development and leasing phase is that all operating expenses associated with completed apartment homes are expensed. |
Three Months Ended March 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2004 | 2003 | |||||||
Total property revenue per apartment home per month | $ | 744 | $ | 709 | ||||
Annualized total property expenses per apartment home | $ | 3,573 | $ | 3,444 | ||||
Weighted average number of operating apartment homes owned 100% | 46,912 | 45,911 | ||||||
Weighted average occupancy, by region | ||||||||
West | 95.1 | % | 93.3 | % | ||||
Central | 94.2 | % | 90.4 | % | ||||
East | 93.6 | % | 91.1 | % | ||||
Total operating properties owned 100% | 94.3 | % | 91.4 | % |
18 Management’s Discussion and Analysis of Financial Condition and Results of Operationsdecreases in gains from land sales and income from joint ventures. Our primary financial focus for our apartment communities is net operating income. Net operating income represents total property revenues less total property expenses. Net operating income increased $4.7 million, or 8.1%, from $58.2 million to $62.9 million for the quarters ended March 31, 2003 and 2004, respectively. The following table presents the components of net operating income for the three months ended March 31, 2004 and 2003. |
($ in thousands) | |||||||||||||||||
Apartment Homes | Three Months Ended March 31, 2004 2003 | Change $ % | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Property revenues | |||||||||||||||||
Same property communities | 44,481 | $ | 96,704 | $ | 93,884 | $ | 2,820 | 3.0 | % | ||||||||
Non-same property communities | 1,530 | 4,356 | 2,879 | 1,477 | 51.3 | ||||||||||||
Development and lease-up communities | 1,974 | 3,575 | 783 | 2,792 | 356.6 | ||||||||||||
Dispositions/other | -- | 135 | 146 | (11 | ) | (7.5 | ) | ||||||||||
Total property revenues | 47,985 | 104,770 | 97,692 | 7,078 | 7.2 | ||||||||||||
Property expenses | |||||||||||||||||
Same property communities | 44,481 | 38,602 | 37,640 | 962 | 2.6 | ||||||||||||
Non-same property communities | 1,530 | 1,557 | 1,139 | 418 | 36.7 | ||||||||||||
Development and lease-up communities | 1,974 | 1,637 | 602 | 1,035 | 171.9 | ||||||||||||
Dispositions/other | -- | 108 | 139 | (31 | ) | (22.3 | ) | ||||||||||
Total property expenses | 47,985 | 41,904 | 39,520 | 2,384 | 6.0 | ||||||||||||
Property net operating income | |||||||||||||||||
Same property communities | 44,481 | 58,102 | 56,244 | 1,858 | 3.3 | ||||||||||||
Non-same property communities | 1,530 | 2,799 | 1,740 | 1,059 | 60.9 | ||||||||||||
Development and lease-up communities | 1,974 | 1,938 | 181 | 1,757 | 970.7 | ||||||||||||
Dispositions/other | -- | 27 | 7 | 20 | 285.7 | ||||||||||||
Total property net operating income | 47,985 | $ | 62,866 | $ | 58,172 | $ | 4,694 | 8.1 | % | ||||||||
Same property communities are stabilized communities we have owned since January 1, 2003. Non-same property communities are stabilized communities we have acquired or developed since January 1, 2003. Development and lease-up communities are non-stabilized communities we have developed or acquired since January 1, 2003. Dispositions represent communities we have sold since January 1, 2003 but are not included in discontinued operations. Total property revenues for the quarter ended March 31, 2004 increased $7.1 million over 2003, and increased from $709 to $744 on a per apartment home per month basis. Total property revenues from our same store properties increased 3.0%, from $93.9 million for the first quarter of 2003 to $96.7 million for the first quarter of 2004, which represents an increase of $21 on a per apartment home per month basis. For same-store properties, rental rates on a per apartment home per month basis increased $26 from the first quarter of 2003 to the first quarter of 2004, and vacancy loss decreased $23 per apartment home over the same period. These increases in revenues were partially offset by increases in concessions granted which increased $34 per apartment home per month. Property revenues from our non-same store, development and lease-up properties increased from $3.7 million for 2003 to $7.9 million for 2004 due to the completion and lease-up of properties in our development pipeline. Fee and asset management revenues in the first quarter of 2004 increased $0.4 million over the same period in 2003. This increase was primarily due to development fees earned on third party projects. |
19 Management’s Discussion and Analysis of Financial Condition and Results of OperationsOther revenues for the quarter ended March 31, 2004 increased $2.7 million from the same quarter ended 2003. Other revenues for the three months ended March 31, 2004 included interest income of $1.7 million from our mezzanine financing program, $1.8 million related to an insurance settlement for lost rents related to a fire at one of our communities in 2000 and $0.8 million associated with the sale of an e-commerce investment that had previously been written off. Other revenues for the three months ended March 31, 2003 included interest income of $0.7 million from our mezzanine financing program and $0.9 million in revenues from townhome sales. Total property expenses for the quarter ended March 31, 2004 increased $2.4 million, or 6.0%, as compared to the same quarter in 2003, and increased from $3,444 to $3,573 on an annualized per apartment home basis. Total property expenses from our same store properties increased 2.6%, from $37.6 million for the first quarter of 2003 to $38.6 million for the first quarter of 2004, which represents an increase of $87 on an annualized per apartment home basis. The increase in same store property expenses per apartment home is primarily due to an increase in property insurance expenses of $61 on annualized per apartment home basis combined with increases in repairs and maintenance and utility expenses of $36 per apartment home. These increases were partially offset by a decrease in real estate taxes of $25 per apartment home. Property expenses from our non-same store, development and lease-up properties increased from $1.7 million for the first quarter of 2003 to $3.2 million for the first quarter of 2004, which is consistent with the growth in revenues during the same period. Property management expense, which represents regional supervision and accounting costs related to property operations, increased from $2.5 million for the quarter ended March 31, 2003 to $2.9 million for the quarter ended March 31, 2004. This increase was primarily due to increases in salary and benefit expenses. Fee and asset management expense, which represents expenses related to third party construction projects and property management for third parties, decreased from $1.6 million for the quarter ended March 31, 2003 to $1.0 million for the quarter ended March 31, 2004. This decrease was primarily due to a decrease in costs associated with our third party construction division, including decreases in cost overruns on fixed fee projects of $0.7 million. General and administrative expenses increased from $3.6 million to $4.2 million, and increased as a percent of revenues from 3.6% to 3.8%, for the quarters ended March 31, 2003 and 2004, respectively. The increase was primarily due to increases in salary and benefit expenses, costs associated with pursuing potential transactions and increases in public company related costs, including legal and audit related fees. Gross interest cost before interest capitalized to development properties increased $1.1 million, or 4.9%, from $22.6 million for the quarter ended March 31, 2003 to $23.7 million for the quarter ended March 31, 2004. The overall increase in interest expense was due to higher average debt balances that were incurred to fund our increase in real estate assets. This increase was partially offset by declines in the average interest rate on our outstanding debt, due to declines in variable interest rates and savings from maturing debt. Interest capitalized decreased to $2.6 million from $4.3 million for the quarters ended March 31, 2004 and 2003, respectively, due to lower average balances in our development pipeline. Depreciation and amortization increased from $26.6 million for the first quarter of 2003 to $27.4 million for the first quarter of 2004. This increase was due to new development and capital improvements placed in service during the past year. Gain on sale of properties for the quarter ended March 31, 2004 included a gain of $1.3 million from the sale of 9.9 acres of undeveloped land located in Houston. Gain on sale of properties for the quarter ended March 31, 2003 was from the sale of 23.9 acres of undeveloped land located in Houston. |
(i) | using what management believes is a prudent combination of debt and common and preferred equity; | |
(ii) | extending and sequencing the maturity dates of our debt where possible; | |
(iii) | managing interest rate exposure using what management believes are prudent levels of fixed and floating rate debt; | |
(iv) | borrowing on an unsecured basis in order to maintain a substantial number of unencumbered assets; and | |
(v) | maintaining conservative coverage ratios. |
(i) | operating expenses; | |
(ii) | current debt service requirements; | |
(iii) | recurring capital expenditures; | |
(iv) | initial funding of property developments, acquisitions and mezzanine financings; | |
(vi) | common share repurchases; and | |
(vii) | distributions on our common and preferred equity. |
21 Management’s Discussion and Analysis of Financial Condition and Results of OperationsWe consider our long-term liquidity requirements to be the repayment of maturing debt, including borrowings under our unsecured line of credit that were used to fund development and acquisition activities. We intend to meet our long-term liquidity requirements through the use of common and preferred equity capital, senior unsecured debt and property dispositions. We expect to use the proceeds from any property sales for reinvestment in acquisitions or new developments or reduction of debt. We intend to concentrate our growth efforts toward selective development and acquisition opportunities in our current markets, and through the acquisition of existing operating properties and the development of properties in selected new markets. During the quarter ended March 31, 2004, we incurred $10.0 million in development costs and no acquisition costs. We currently have three wholly owned properties under construction at a projected aggregate cost of approximately $211.0 million, $158.0 million of which had been incurred through March 31, 2004. At quarter end, we were obligated for approximately $41.8 million under construction contracts related to these projects (a substantial amount of which we expect to fund with our unsecured line of credit). We intend to fund our developments and acquisitions through a combination of equity capital, partnership units, medium-term notes, construction loans, other debt securities and our unsecured line of credit. Net cash provided by operating activities totaled $29.4 million for the quarter ended March 31, 2004, an increase of $6.7 million, or 29.3%, over the same period in 2003. The increase in operating cash flow was primarily due to a $4.7 million increase in property net operating income. Net cash used in investing activities totaled $11.6 million for the quarter ended March 31, 2004 compared to $20.8 million for the same period in 2003. For the quarter ended March 31, 2004, net cash used in investing activities included expenditures for property development and capital improvements totaling $10.0 million and $4.8 million, respectively. These expenditures were offset by $3.5 million in net proceeds received land sales during the first quarter of 2004. For the quarter ended March 31, 2003, net cash used in investing activities included expenditures for property development and capital improvements totaling $28.1 million and $4.7 million, respectively. These expenditures were offset by $4.9 million in net proceeds received from townhome and land sales during 2003. Additionally, distributions from joint ventures totaled $7.1 million during the first quarter of 2003, primarily due to proceeds received from the sale of properties held in joint ventures. Net cash used in financing activities totaled $17.3 million for the quarter ended March 31, 2004 compared to $0.4 million for the quarter ended March 31, 2003. During the quarter ended March 31, 2004, we paid dividends and distributions totaling $30.9 million. Our line of credit increased $18.0 million for the quarter ended March 31, 2004, primarily from funding of development activities and capital improvements. Also, we received $1.9 million from option exercises during the first three months of 2004. During the quarter ended March 31, 2003, we paid dividends and distributions totaling $30.2 million. Our line of credit increased $31.0 million for the quarter ended March 31, 2003, primarily from the funding of development activities and capital improvements. In 1998, we began repurchasing our common equity securities under a program approved by our Board of Trust Managers. To date, the Board has authorized us to repurchase or redeem up to $250 million of our securities through open market purchases and private transactions. Management consummates these repurchases and redemptions at the time when they believe that we can reinvest available cash flow into our own securities at yields that exceed those currently available on direct real estate investments. These repurchases were made and we expect that future repurchases, if any, will be made without incurring additional debt and, in management’s opinion, without reducing our financial flexibility. At March 31, 2004, we had repurchased approximately 8.8 million common shares and redeemed approximately 106,000 units convertible into common shares at a total cost of $243.6 million. No common shares or units convertible into common shares were repurchased during the first quarter of 2004. |
(in millions) | |||||||||||||||||||||||
Total | 2004 | 2005 | 2006 | 2007 | 2008 | Thereafter | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Debt maturities (a) | $ | 1,521.8 | $ | 228.3 | $ | 60.9 | $ | 275.3 | $ | 165.4 | $ | 17.9 | $ | 774.0 | |||||||||
Non-cancelable operating lease payments | 11.7 | 1.6 | 1.9 | 1.6 | 1.5 | 1.0 | 4.1 | ||||||||||||||||
Construction contracts | 41.8 | 25.3 | 16.5 | -- | -- | -- | -- | ||||||||||||||||
$ | 1,575.3 | $ | 255.2 | $ | 79.3 | $ | 276.9 | $ | 166.9 | $ | 18.9 | $ | 778.1 | ||||||||||
(a) | Debt maturities in 2004 are at a weighted average interest rate of 7.1% and will be repaid using proceeds available under our unsecured line of credit. |
(In thousands) | ||||||||
Three Months Ended March 31, | ||||||||
---|---|---|---|---|---|---|---|---|
2004 | 2003 | |||||||
Funds from operations: | ||||||||
Net income | $ | 9,388 | $ | 8,334 | ||||
Real estate depreciation | 26,120 | 25,389 | ||||||
Adjustments for unconsolidated joint ventures | 522 | (450 | ) | |||||
Income allocated to units convertible into common shares | 756 | 369 | ||||||
Funds from operations - diluted | $ | 36,786 | $ | 33,642 | ||||
Weighted average shares - basic | 40,031 | 39,164 | ||||||
Incremental shares issuable from assumed conversion of : | ||||||||
Common share options and awards granted | 1,553 | 1,132 | ||||||
Units convertible into common shares | 2,441 | 2,456 | ||||||
Weighted average shares - diluted | 44,025 | 42,752 | ||||||
26 PART II. OTHER INFORMATION |
Item 1 | Legal Proceedings None | ||||
Item 2 | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities None | ||||
Item 3 | Defaults Upon Senior Securities None | ||||
Item 4 | Submission of Matters to a Vote of Security Holders None | ||||
Item 5 | Other Information None | ||||
Item 6 | Exhibits and Reports on Form 8-K None |
(a) | Exhibits | |||||||
10.1 | Form of Second Amendment and Restatement of Credit Agreement dated February 20, 2004 between Camden Property Trust and Bank of America, N.A. | |||||||
31.1 | Certification pursuant to Rule 13a-14(a) of Chief Executive Officer dated May 7, 2004. | |||||||
31.2 | Certification pursuant to Rule 13a-14(a) of Chief Financial Officer dated May 7, 2004. | |||||||
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. | |||||||
(b) | Reports on Form 8-K | |||||||
Current Report on Form 8-K, dated February 5, 2004 was filed with the Commission on February 6, 2004, contained information under Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits) and Item 12 (Results of Operations and Financial Condition). |
27 |
/s/ Dennis M. Steen | May 7, 2004 | ||
Dennis M. Steen | Date | ||
Chief Financial Officer, Sr. Vice President - Finance and Secretary |
28 |