UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2014
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 1-12110
CAMDEN PROPERTY TRUST
(Exact name of registrant as specified in its charter)
Texas | 76-6088377 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
11 Greenway Plaza, Suite 2400 Houston, Texas | 77046 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (713) 354-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
Common Shares of Beneficial Interest, $.01 par value | New York Stock Exchange | |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý
Indicate by check mark whether 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 ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer | ý | Accelerated filer | ¨ | ||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | ||
Indicate by check mark whether the registrant is a shell company (as defined in the Rule 12b-2 of the Act). Yes ¨ No ý
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was $6,016,759,052 based on a June 30, 2014 share price of $71.15.
On February 13, 2015, 86,718,520 common shares of the registrant were outstanding, net of treasury shares and shares held in our deferred compensation arrangements.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement in connection with its Annual Meeting of Shareholders to be held May 8, 2015 are incorporated by reference in Part III.
TABLE OF CONTENTS
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Item 1A. | ||
Item 1B. | ||
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Item 3. | ||
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Item 5. | ||
Item 6. | ||
Item 7. | ||
Item 7A. | ||
Item 8. | ||
Item 9. | ||
Item 9A. | ||
Item 9B. | ||
Item 10. | ||
Item 11. | ||
Item 12. | ||
Item 13. | ||
Item 14. | ||
Item 15. | ||
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PART I
Item 1. Business
General
Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust (“REIT”), is primarily engaged in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities. Unless the context requires otherwise, “we,” “our,” “us,” and the “Company” refer to Camden Property Trust and its consolidated subsidiaries. Our multifamily apartment communities are referred to as “communities,” “multifamily communities,” “properties,” or “multifamily properties” in the following discussion.
Our corporate offices are located at 11 Greenway Plaza, Suite 2400, Houston, Texas 77046 and our telephone number is (713) 354-2500. Our website is located at www.camdenliving.com. On our website we make available free of charge our annual, quarterly, and current reports, and amendments to such reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). We also make available, free of charge on our website, our Guidelines on Governance, Code of Business Conduct and Ethics, Code of Ethical Conduct for Senior Financial Officers, and the charters of each of our Audit, Compensation, and Nominating and Corporate Governance Committees. Copies are also available, without charge, from Investor Relations, 11 Greenway Plaza, Suite 2400, Houston, Texas 77046. References to our website in this report are provided as a convenience and do not constitute, and should not be viewed as, an incorporation by reference of the information contained on, or available through our website, therefore such information should not be considered part of this report.
Our annual, quarterly, and current reports, proxy statements, and other information are electronically filed with the SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Please contact the SEC at 1-800-SEC-0330 for further information about the operation of the SEC’s Public Reference Room. The SEC also maintains a website at www.sec.gov which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Narrative Description of Business
As of December 31, 2014, we owned interests in, operated, or were developing 181 multifamily properties comprised of 63,163 apartment homes across the United States. Of the 181 properties, 13 properties were under construction and when completed will consist of a total of 4,215 apartment homes. We also own land holdings which we may develop into multifamily apartment communities in the future.
Operating and Business Strategy
We believe producing consistent earnings growth through property operations, development and acquisitions, achieving market balance, and recycling capital are crucial factors to our success. We rely heavily on our sophisticated property management capabilities and innovative operating strategies to help us maximize the earnings potential of our communities.
Real Estate Investments and Market Balance. We believe we are well positioned in our current markets and have the expertise to take advantage of new opportunities as they arise. These capabilities, combined with what we believe is a conservative financial structure, should allow us to concentrate our growth efforts toward selective opportunities to enhance our strategy of having a geographically diverse portfolio of assets which meet the requirements of our residents.
We continue to operate in our core markets which we believe provides an advantage due to economies of scale. We believe, where possible, it is best to operate with a strong base of properties in order to benefit from the personnel allocation and the market strength associated with managing multiple properties in the same market. However, consistent with our goal of generating sustained earnings growth, we intend to selectively dispose of properties and redeploy capital for various strategic reasons, including if we determine a property cannot meet long-term earnings growth expectations.
We try to maximize capital appreciation of our properties by investing in markets characterized by conditions favorable to multifamily property appreciation. These markets generally feature the following:
• | Strong economic growth leading to household formation and job growth, which in turn should support higher demand for our apartments; and |
• | An attractive quality of life, which may lead to higher demand and retention for our apartments and allow us to more readily increase rents. |
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Subject to market conditions, we intend to continue to look for opportunities to develop and acquire existing communities. We continually evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities develop.
We intend to continue to focus on strengthening our capital and liquidity positions by generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intend to meet our liquidity requirements through cash flow generated from operations, availability under our unsecured credit facility, proceeds from property dispositions, the use of debt and equity offerings under our automatic shelf registration statement, equity issued from our at-the-market share offering program, other unsecured borrowings and secured mortgages.
Sophisticated Property Management. We believe the depth of our organization enables us to deliver quality services, promote resident satisfaction, and retain residents, thereby increasing our operating revenues and reducing our operating expenses. We manage our properties utilizing a staff of professionals and support personnel, including certified property managers, experienced apartment managers and leasing agents, and trained apartment maintenance technicians. Our on-site personnel are trained to deliver high quality services to our residents, and we strive to motivate our on-site employees through incentive compensation arrangements based upon property operational results, rental rate increases, occupancy levels, and level of new leases and lease renewals achieved.
Operations. We believe an intense focus on operations is necessary to realize consistent, sustained earnings growth. Ensuring resident satisfaction, increasing rents as market conditions allow, maximizing rent collections, maintaining property occupancy at optimal levels, and controlling operating costs comprise our principal strategies to maximize property financial results. We believe our web-based property management and revenue management systems strengthen on-site operations and allow us to quickly adjust rental rates as local market conditions change. Lease terms are generally staggered based on vacancy exposure by apartment type so lease expirations are matched to each property's seasonal rental patterns. We generally offer leases ranging from six to fifteen months with individual property marketing plans structured to respond to local market conditions. In addition, we conduct ongoing customer service surveys to help ensure timely response to residents' changing needs and a high level of satisfaction.
Investments in Joint Ventures. We have entered into, and may continue in the future to enter into, joint ventures through which we own an indirect economic interest of less than 100% of the community or land owned directly by the joint venture. We currently have two discretionary investment funds (the “funds”), both of which are closed to future investments. Additionally, the investors in the funds have agreed to the terms of a new fund, in which our investment will be 20%, for additional multifamily investments of up to $450 million (including leverage of approximately 70% of the estimated value of the underlying real estate), although there can be no assurance we will consummate this transaction. See Note 8, “Investments in Joint Ventures,” and Note 13, “Commitments and Contingencies,” in the notes to Consolidated Financial Statements for further discussion of our investments in joint ventures.
Competition
There are numerous housing alternatives which compete with our communities in attracting residents. Our properties compete directly with other multifamily properties as well as condominiums and single-family homes which are available for rent or purchase in the markets in which our communities are located. This competitive environment could have a material adverse effect on our ability to lease apartment homes at our present communities or any newly developed or acquired community, as well as in the rents charged.
Employees
At December 31, 2014, we had approximately 1,780 employees, including executive, administrative, and community personnel. Our employee headcount has historically not varied significantly throughout the year.
Qualification as a Real Estate Investment Trust
As of December 31, 2014, we met the qualification of a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”). As a result, we, with the exception of our taxable REIT subsidiaries, will not be subject to federal income tax to the extent we continue to meet certain requirements of the Code.
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Item 1A. Risk Factors
In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, or results of operations could be materially adversely affected by any of these risks.
Risks Associated with Capital Markets, Credit Markets, and Real Estate
Volatility in capital and credit markets, or other unfavorable changes in economic conditions, either nationally or regionally in one or more of the markets in which we operate, could adversely impact us.
The capital and credit markets are subject to volatility and disruption. We therefore may not be able to obtain new debt financing or refinance our existing debt on favorable terms or at all, which would adversely affect our liquidity, our ability to make distributions to shareholders, acquire and dispose of assets and continue our development activities. Other weakened economic conditions, including job losses, high unemployment levels, stock market volatility, and uncertainty about the future, could adversely affect rental rates and occupancy levels. Unfavorable changes in economic conditions may have a material adverse impact on our cash flows and operating results.
Additional key economic risks which may adversely affect conditions in the markets in which we operate include the following:
• | local conditions, such as an oversupply of apartments or other housing available for rent, or a reduction in demand for apartments in the area; |
• | declines in the financial condition of our tenants, which may make it more difficult for us to collect rents from some tenants; |
• | declines in market rental rates; |
• | low mortgage interest rates and home pricing, making alternative housing more affordable; |
• | government or builder incentives which enable home buyers to put little or no money down, making alternative housing options more attractive; |
• | regional economic downturns which affect one or more of our geographical markets; and |
• | increased operating costs, if these costs cannot be passed through to residents. |
Short-term leases expose us to the effects of declining market rents.
Our apartment leases are generally for a term of fifteen months or less. As these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms.
Competition could limit our ability to lease apartments or increase or maintain rental income.
There are numerous housing alternatives which compete with our properties in attracting residents. Our properties compete directly with other multifamily properties as well as condominiums and single family homes which are available for rent or purchase in the markets in which our properties are located. This competitive environment could have a material adverse effect on our ability to lease apartment homes at our present properties or any newly developed or acquired property, as well as on the rents realized.
We face risks associated with land holdings and related activities.
We hold land for future development and may in the future acquire additional land holdings. The risks inherent in purchasing, owning, and developing land increase as demand for apartments, or rental rates, decrease. Real estate markets are highly uncertain and, as a result, the value of undeveloped land may fluctuate significantly. In addition, carrying costs can be significant and can result in losses or reduced profitability. As a result, we hold certain land, and may in the future acquire additional land, in our development pipeline at a cost we may not be able to fully recover or at a cost which may preclude our developing a profitable multifamily community. If there are subsequent changes in the fair value of our land holdings which we determine is less than the carrying basis of our land holdings reflected in our financial statements plus estimated costs to sell, we may be required to take future impairment charges which would reduce our net income.
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We could be negatively impacted by the elimination of Fannie Mae or Freddie Mac.
Fannie Mae and Freddie Mac are a major source of financing for secured multifamily real estate. We and other multifamily companies have utilized Fannie Mae and Freddie Mac to finance growth by purchasing or guaranteeing apartment loans. In May 2014, the U.S. Senate Banking Committee approved legislation to wind down Fannie Mae and Freddie Mac and redesign the U.S. mortgage finance system, which legislation has to date not been acted on in the broader Senate. A final decision by the government to eliminate Fannie Mae or Freddie Mac or reduce their role in the mortgage market, or otherwise restructure the U.S. mortgage finance system, may adversely affect interest rates, capital availability, and the development and potential sales of multifamily communities.
Risks Associated with Our Operations
Development, redevelopment and construction risks could impact our profitability.
We intend to continue to develop, redevelop and construct multifamily apartment communities for our portfolio. In 2015, we expect between approximately $250 million and $270 million will be incurred on the construction of 12 consolidated projects. Additionally, we expect to incur between approximately $80 million and $100 million of costs related to the start of new development activities and between approximately $21 million and $25 million of additional redevelopment expenditures during 2015. Our development, redevelopment and construction activities may be exposed to a number of risks which may increase our construction costs and decrease our profitability, including the following:
• | inability to obtain, or delays in obtaining, necessary zoning, land-use, building, occupancy, and other required permits and authorizations; |
• | increased materials and/or labor costs, problems with contractors or subcontractors, or other costs including those costs due to errors and omissions which occur in the design or construction process; |
• | inability to obtain financing with favorable terms; |
• | inability to complete construction and lease-up of a community on schedule; |
• | forecasted occupancy and rental rates may differ from the actual results; and |
• | the incurrence of costs related to the abandonment of development opportunities which we have pursued and subsequently deemed unfeasible. |
Our inability to successfully implement our development, redevelopment and construction strategy could adversely affect our results of operations and our ability to satisfy our financial obligations and pay distributions to shareholders.
One of our wholly-owned subsidiaries is engaged in the business of providing general contracting services under construction contracts entered into between it and third parties (which may include our nonconsolidated affiliates). The terms of those construction contracts generally require this subsidiary to estimate the time and costs to complete a project, and to assume the risk these estimates may be greater than anticipated. As a result, profitability on those contracts is dependent on the ability to accurately predict such factors. The time and costs necessary to complete a project may be affected by a variety of factors, including those listed above, many of which are beyond this subsidiary’s control. In addition, the terms of those contracts generally require this subsidiary to warrant its work for a period of time during which it may be required to repair, replace, or rebuild non-conforming work. Further, trailing liabilities, based on various legal theories such as claims of negligent construction, may result from such projects, and these trailing liabilities may go on for a number of years depending on the length of the statute of repose in the applicable jurisdictions.
Investments through joint ventures and discretionary funds involve risks not present in investments in which we are the sole investor.
We have invested and may continue to invest as a joint venture partner in joint ventures. These investments involve risks, including the possibility the other joint venture partner may have business goals which are inconsistent with ours, possess the ability to take or force action or withhold consent contrary to our requests, or become insolvent and require us to assume and fulfill the joint venture’s financial obligations. We and our joint venture partner may each have the right to initiate a buy-sell arrangement, which could cause us to sell our interest, or acquire our joint venture partner’s interest, at a time when we otherwise would not have entered into such a transaction. Each joint venture agreement is individually negotiated, and our ability to operate, finance, and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the terms of the joint venture agreement.
The risks associated with our discretionary funds, which we manage as the general partner and advisor, include the following:
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• | one of our wholly-owned subsidiaries is the general partner of the funds and has unlimited liability for the third-party debts, obligations, and liabilities of the funds pursuant to partnership law; |
• | investors in the funds (other than us), by majority vote, may remove our subsidiary as the general partner of the funds with or without cause and the funds’ advisory boards, by a majority vote of their members, may remove our subsidiary as the general partner of the funds at any time for cause; |
• | while we have broad discretion to manage the funds and make investment decisions on behalf of the funds, the investors or the advisory boards must approve certain matters, and as a result we may be unable to cause the funds to make certain investments or implement certain decisions we consider beneficial; |
• | our ability to dispose of all or a portion of our investments in the funds is subject to significant restrictions; and |
• | we may be liable if the funds fail to comply with various tax or other regulatory matters. |
Competition could adversely affect our ability to acquire properties.
We expect other real estate investors, including insurance companies, pension and investment funds, private investors, and other multifamily REITs, will compete with us to acquire additional operating properties. This competition could increase prices for the type of properties we would likely pursue and adversely affect our ability to acquire these properties or the profitability of such properties upon acquisition.
Our acquisition strategy may not produce the cash flows expected.
We may acquire additional operating properties on a selective basis. Our acquisition activities are subject to a number of risks, including the following:
• | we may not be able to successfully integrate acquired properties into our existing operations; |
• | our estimates of the costs, if any, of repositioning or redeveloping the acquired property may prove inaccurate; |
• | the expected occupancy, rental rates and operating expenses may differ from the actual results; |
• | we may not be able to obtain adequate financing; and |
• | we may not be able to identify suitable candidates on terms acceptable to us and may not achieve expected returns or other benefits as a result of integration challenges, such as personnel and technology. |
Tax matters, including failure to qualify as a REIT, could have adverse consequences.
We may not continue to qualify as a REIT in the future. The Internal Revenue Service may challenge our qualification as a REIT for prior years and new legislation, regulations, administrative interpretations, or court decisions may change the tax laws or the application of the tax laws with respect to qualification as a REIT or the federal tax consequences of such qualification.
For any taxable year we fail to qualify as a REIT and do not qualify under statutory relief provisions:
• | we would be subject to federal income tax on our taxable income at regular corporate rates, including any applicable alternative minimum tax; |
• | we would be disqualified from treatment as a REIT for the four taxable years following the year in which we failed to qualify, thereby reducing our net income, including any distributions to shareholders, as we would be required to pay significant income taxes for the year or years involved; and |
• | our ability to expand our business and raise capital would be impaired, which may adversely affect the value of our common shares. |
We may face other tax liabilities in the future which may impact our cash flow. These potential tax liabilities may be calculated on our income or property values at either the corporate or individual property levels. Any additional tax expense incurred would decrease the cash available for cash distributions to our common shareholders and non-controlling interest holders.
Losses from catastrophes may exceed our insurance coverage.
We carry comprehensive property and liability insurance on our properties, which we believe is of the type and amount customarily obtained on similar real property assets by similar types of owners. We intend to obtain similar coverage for properties we acquire or develop in the future. However, some losses, generally of a catastrophic nature, such as losses from
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floods, hurricanes, or earthquakes, may be subject to coverage limitations. We exercise our discretion in determining amounts, coverage limits, and deductible provisions of insurance to maintain appropriate insurance on our investments at a reasonable cost and on suitable terms. If we suffer a catastrophic loss, our insurance coverage may not be sufficient to pay the full current market value or current replacement value of our lost investment, as well as the anticipated future revenues from the property. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also may reduce the feasibility of using insurance proceeds to replace a property after it has been damaged or destroyed.
A cybersecurity incident and other technology disruptions could negatively impact our business.
We use technology in substantially all aspects of our business operations. We also use mobile devices, social networking, outside vendors and other online activities to connect with our employees, suppliers and residents. Such uses give rise to potential cybersecurity risks, including security breach, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and confidential information and intellectual property, including residents' and suppliers' personal information, private information about employees, and financial and strategic information about us. Further, as we pursue our strategy to grow through acquisitions and developments and to pursue new initiatives to improve our operations, we are also expanding our information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. If we fail to assess and identify cybersecurity risks associated with our operations, we may become increasingly vulnerable to such risks. Additionally, the measures we have implemented to prevent security breaches and cyber incidents may not be effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of residents, potential liability and competitive disadvantage, any of which could result in a material effect on our financial condition or results of operations.
Risks Associated with Our Indebtedness and Financing
We have significant debt, which could have important adverse consequences.
As of December 31, 2014, we had outstanding debt of approximately $2.7 billion. This indebtedness could have adverse consequences, including:
• | if a property is mortgaged to secure payment of indebtedness, and if we are unable to meet our mortgage obligations, we could sustain a loss as a result of foreclosure on the mortgaged property; |
• | our vulnerability to general adverse economic and industry conditions is increased; and |
• | our flexibility in planning for, or reacting to, changes in business and industry conditions is limited. |
The mortgages on our properties subject to secured debt, our unsecured credit facility, and the indenture under which our unsecured debt was issued, contain customary restrictions, requirements, and other limitations, as well as certain financial and operating covenants including maintenance of certain financial ratios. Maintaining compliance with these provisions could limit our financial flexibility. A default in these provisions, if uncured, could require us to repay the indebtedness before the scheduled maturity date, which could adversely affect our liquidity and increase our financing costs.
Insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders.
Substantially all of our income is derived from rental and other income from our multifamily communities. As a result, our performance depends in large part on our ability to collect rent from residents, which could be negatively affected by a number of factors, including the following:
• | delay in resident lease commencements; |
• | decline in occupancy; |
• | failure of residents to make rental payments when due; |
• | the attractiveness of our properties to residents and potential residents; |
• | our ability to adequately manage and maintain our communities; |
• | competition from other available apartments and housing alternatives; |
• | changes in market rents; and |
• | increases in operating expenses. |
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Cash flow could be insufficient to meet required payments of principal and interest with respect to debt financing. In order for us to continue to qualify as a REIT we must meet a number of organizational and operational requirements, including a requirement to distribute annual dividends to our shareholders equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains. This requirement limits the cash available to meet required principal payments on our debt.
Issuances of additional debt may adversely impact our financial condition.
Our capital requirements depend on numerous factors, including the rental and occupancy rates of our multifamily properties, dividend payment rates to our equity holders, development, redevelopment and other capital expenditures, costs of operations, and potential acquisitions. If our capital requirements vary materially from our plans, we may require additional financing earlier than anticipated. If we issue more debt, we could become more leveraged, resulting in increased risk of default on our obligations and an increase in our debt service requirements, both of which could adversely affect our financial condition and ability to access debt and equity capital markets in the future.
We may be unable to renew, repay, or refinance our outstanding debt.
We are subject to the risk that indebtedness on our properties or our unsecured indebtedness will not be renewed, repaid, or refinanced when due or the terms of any renewal or refinancing will not be as favorable as the existing terms of such indebtedness. If we are unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to dispose of one or more of the properties on disadvantageous terms, which might result in losses to us. Such losses could have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt. Furthermore, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose on the property, appoint a receiver and exercise rights under an assignment of rents and leases, or pursue other remedies, all with a consequent loss of our revenues and asset value. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Code.
Variable rate debt is subject to interest rate risk.
We have mortgage debt with varying interest rates dependent upon various market indexes. In addition, we have a revolving credit facility bearing interest at a variable rate on all amounts drawn on the facility. We may incur additional variable rate debt in the future. Increases in interest rates on variable rate debt would increase our interest expense, unless we make arrangements which hedge the risk of rising interest rates, which would adversely affect net income and cash available for payment of our debt obligations and distributions to shareholders.
Failure to maintain our current credit ratings could adversely affect our cost of funds, related margins, liquidity, and access to capital markets.
Moody’s, Fitch, and Standard & Poor's, the major debt rating agencies, routinely evaluate our debt and have given us ratings of Baa1 with stable outlook, BBB+ with positive outlook, and BBB+ with stable outlook, respectively, on our senior unsecured debt. These ratings are based on a number of factors, which include their assessment of our financial strength, liquidity, capital structure, asset quality, and sustainability of cash flow and earnings. Due to changes in market conditions, we may not be able to maintain our current credit ratings, which could adversely affect our cost of funds and related margins, liquidity, and access to capital markets.
Risks Associated with Our Shares
Share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders.
For us to maintain our qualification as a REIT, we must have 100 or more shareholders during the year and not more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals. As defined for federal income tax purposes, the term “individuals” includes a number of specified entities. To minimize the possibility of us failing to qualify as a REIT under this test, our declaration of trust includes restrictions on transfers of our shares and ownership limits. The ownership limits, as well as our ability to issue other classes of equity securities, may delay, defer, or prevent a change in control. These provisions may also deter tender offers for our common shares which may be attractive to you or limit your opportunity to receive a premium for your shares which might otherwise exist if a third party were attempting to effect a change in control transaction.
Our share price will fluctuate.
The market price and trading volume of our common shares are subject to fluctuation due to general market conditions, the risks discussed in this report and other matters, including the following:
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• | operating results which vary from the expectations of securities analysts and investors; |
• | investor interest in our property portfolio; |
• | the reputation and performance of REITs; |
• | the attractiveness of REITs as compared to other investment vehicles; |
• | the results of our financial condition and operations; |
• | the perception of our growth and earnings potential; |
• | dividend payment rates; |
• | increases in market interest rates, which may lead purchasers of our common shares to demand a higher yield; and |
• | changes in financial markets and national and regional economic and general market conditions. |
The form, timing and/or amount of dividend distributions in future periods may vary and be impacted by economic and other considerations.
The form, timing and/or amount of dividend distributions will be declared at the discretion of our Board of Trust Managers and will depend on actual cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and other factors as the Board of Trust Managers may consider relevant. The Board of Trust Managers may modify the form, timing and/or amount of dividends from time to time.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Properties
Our properties typically consist of mid-rise buildings or two and three story buildings in a landscaped setting and provide residents with a variety of amenities common to multifamily rental properties.
Operating Properties (including properties held through unconsolidated joint ventures)
The 168 operating properties in which we owned interests and operated at December 31, 2014 averaged 945 square feet of living area per apartment home. For the year ended December 31, 2014, no single operating property accounted for greater than 1.7% of our total revenues. Our operating properties had a weighted average occupancy rate of approximately 96% and 95% for the years ended December 31, 2014 and 2013, respectively, and an average annual rental revenue per apartment home of $1,230 and $1,157 for the years ended December 31, 2014 and 2013, respectively. Resident lease terms generally range from six to fifteen months. At December 31, 2014, 148 of our operating properties had over 200 apartment homes, with the largest having 1,005 apartment homes. Our operating properties have an average age of 12 years (calculated on the basis of investment dollars). Our operating properties were constructed and placed in service as follows:
Year Placed in Service | Number of Operating Properties |
2010-2014 | 18 |
2005-2009 | 36 |
2000-2004 | 42 |
1995-1999 | 46 |
1990-1994 | 10 |
1985-1989 | 12 |
Prior to 1985 | 4 |
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Property Table
The following table sets forth information with respect to our 168 operating properties at December 31, 2014:
OPERATING PROPERTIES | ||||||||||||||
Property and Location | Year Placed in Service | Average Apartment Size (Sq. Ft.) | Number of Apartments | 2014 Average Occupancy (1) | 2014 Average Monthly Rental Rate per Apartment (2) | |||||||||
ARIZONA | ||||||||||||||
Phoenix/Scottsdale | ||||||||||||||
Camden Copper Square | 2000 | 786 | 332 | 96.1 | % | $ | 958 | |||||||
Camden Foothills (3) | 2014 | 1,032 | 220 | Lease-up | 1,582 | |||||||||
Camden Legacy | 1996 | 1,067 | 428 | 95.1 | 1,044 | |||||||||
Camden Montierra | 1999 | 1,071 | 249 | 95.0 | 1,182 | |||||||||
Camden Pecos Ranch | 2001 | 924 | 272 | 94.6 | 910 | |||||||||
Camden San Marcos | 1995 | 984 | 320 | 94.1 | 1,057 | |||||||||
Camden San Paloma | 1993/1994 | 1,042 | 324 | 95.7 | 1,048 | |||||||||
Camden Sotelo | 2008/2012 | 1,303 | 170 | 92.0 | 1,461 | |||||||||
CALIFORNIA | ||||||||||||||
Los Angeles/Orange County | ||||||||||||||
Camden Crown Valley | 2001 | 1,009 | 380 | 96.0 | 1,763 | |||||||||
Camden Harbor View | 2004 | 975 | 538 | 96.1 | 2,120 | |||||||||
Camden Main & Jamboree (4) | 2008 | 1,011 | 290 | 96.4 | 1,913 | |||||||||
Camden Martinique | 1986 | 794 | 714 | 95.5 | 1,491 | |||||||||
Camden Parkside | 1972 | 836 | 421 | 87.4 | 1,431 | |||||||||
Camden Sea Palms | 1990 | 891 | 138 | 97.1 | 1,645 | |||||||||
San Diego/Inland Empire | ||||||||||||||
Camden Landmark | 2006 | 982 | 469 | 95.0 | 1,375 | |||||||||
Camden Old Creek | 2007 | 1,037 | 350 | 96.6 | 1,712 | |||||||||
Camden Sierra at Otay Ranch | 2003 | 962 | 422 | 94.5 | 1,599 | |||||||||
Camden Tuscany | 2003 | 896 | 160 | 95.8 | 2,216 | |||||||||
Camden Vineyards | 2002 | 1,053 | 264 | 95.5 | 1,286 | |||||||||
COLORADO | ||||||||||||||
Denver | ||||||||||||||
Camden Belleview Station | 2009 | 888 | 270 | 95.2 | 1,242 | |||||||||
Camden Caley | 2000 | 925 | 218 | 95.2 | 1,171 | |||||||||
Camden Denver West | 1997 | 1,015 | 320 | 96.3 | 1,360 | |||||||||
Camden Highlands Ridge | 1996 | 1,149 | 342 | 94.7 | 1,405 | |||||||||
Camden Interlocken | 1999 | 1,010 | 340 | 96.2 | 1,325 | |||||||||
Camden Lakeway | 1997 | 932 | 451 | 95.7 | 1,179 | |||||||||
WASHINGTON DC METRO | ||||||||||||||
Camden Ashburn Farm | 2000 | 1,062 | 162 | 95.5 | 1,511 | |||||||||
Camden Clearbrook | 2007 | 1,048 | 297 | 96.0 | 1,378 | |||||||||
Camden College Park (4) | 2008 | 942 | 508 | 94.7 | 1,576 | |||||||||
Camden Dulles Station | 2009 | 978 | 382 | 95.7 | 1,620 | |||||||||
Camden Fair Lakes | 1999 | 1,056 | 530 | 96.2 | 1,689 | |||||||||
Camden Fairfax Corner | 2006 | 934 | 489 | 95.4 | 1,739 | |||||||||
Camden Fallsgrove | 2004 | 996 | 268 | 95.3 | 1,719 | |||||||||
9
OPERATING PROPERTIES | ||||||||||||||
Property and Location | Year Placed in Service | Average Apartment Size (Sq. Ft.) | Number of Apartments | 2014 Average Occupancy (1) | 2014 Average Monthly Rental Rate per Apartment (2) | |||||||||
Camden Grand Parc | 2002 | 674 | 105 | 96.3 | % | $ | 2,422 | |||||||
Camden Lansdowne | 2002 | 1,006 | 690 | 96.0 | 1,455 | |||||||||
Camden Largo Town Center | 2000/2007 | 1,027 | 245 | 95.5 | 1,602 | |||||||||
Camden Monument Place | 2007 | 856 | 368 | 95.3 | 1,525 | |||||||||
Camden NoMa (5) | 2014 | 770 | 321 | 95.3 | 2,230 | |||||||||
Camden Potomac Yard | 2008 | 835 | 378 | 96.2 | 2,024 | |||||||||
Camden Roosevelt | 2003 | 856 | 198 | 96.3 | 2,543 | |||||||||
Camden Russett | 2000 | 992 | 426 | 95.2 | 1,424 | |||||||||
Camden Silo Creek | 2004 | 975 | 284 | 97.3 | 1,475 | |||||||||
Camden South Capitol (5) (6) | 2013 | 821 | 276 | 94.1 | 2,174 | |||||||||
Camden Summerfield | 2008 | 957 | 291 | 94.7 | 1,593 | |||||||||
Camden Summerfield II | 2012 | 936 | 187 | 94.2 | 1,598 | |||||||||
FLORIDA | ||||||||||||||
Southeast Florida | ||||||||||||||
Camden Aventura | 1995 | 1,108 | 379 | 95.5 | 1,764 | |||||||||
Camden Boca Raton (3) | 2014 | 843 | 261 | Lease-up | 1,801 | |||||||||
Camden Brickell | 2003 | 937 | 405 | 97.4 | 1,876 | |||||||||
Camden Doral | 1999 | 1,120 | 260 | 96.5 | 1,667 | |||||||||
Camden Doral Villas | 2000 | 1,253 | 232 | 96.3 | 1,789 | |||||||||
Camden Las Olas | 2004 | 1,043 | 420 | 95.7 | 1,928 | |||||||||
Camden Plantation | 1997 | 1,201 | 502 | 96.8 | 1,426 | |||||||||
Camden Portofino | 1995 | 1,112 | 322 | 96.8 | 1,457 | |||||||||
Orlando | ||||||||||||||
Camden Hunter’s Creek | 2000 | 1,075 | 270 | 96.5 | 1,113 | |||||||||
Camden Lago Vista | 2005 | 955 | 366 | 96.6 | 975 | |||||||||
Camden LaVina | 2012 | 970 | 420 | 95.5 | 1,095 | |||||||||
Camden Lee Vista | 2000 | 937 | 492 | 96.9 | 941 | |||||||||
Camden Orange Court | 2008 | 817 | 268 | 95.9 | 1,180 | |||||||||
Camden Renaissance | 1996/1998 | 899 | 578 | 94.6 | 876 | |||||||||
Camden Town Square | 2012 | 986 | 438 | 95.0 | 1,153 | |||||||||
Camden Waterford Lakes (5) (6) | 2013 | 971 | 300 | 98.0 | 1,180 | |||||||||
Camden World Gateway | 2000 | 979 | 408 | 95.5 | 1,050 | |||||||||
Tampa/St. Petersburg | ||||||||||||||
Camden Bay | 1997/2001 | 943 | 760 | 95.5 | 944 | |||||||||
Camden Bayside (7) | 1987/1989 | 748 | 832 | 95.3 | 841 | |||||||||
Camden Lakes | 1982/1983 | 732 | 688 | 95.1 | 790 | |||||||||
Camden Montague | 2012 | 975 | 192 | 96.5 | 1,149 | |||||||||
Camden Preserve | 1996 | 942 | 276 | 94.4 | 1,163 | |||||||||
Camden Providence Lakes | 1996 | 1,024 | 260 | 96.2 | 937 | |||||||||
Camden Royal Palms | 2006 | 1,017 | 352 | 95.6 | 991 | |||||||||
Camden Visconti (6) | 2007 | 1,125 | 450 | 95.6 | 1,163 | |||||||||
Camden Westchase Park | 2012 | 993 | 348 | 96.7 | 1,243 | |||||||||
Camden Westshore | 1986 | 728 | 278 | 96.6 | 919 | |||||||||
10
OPERATING PROPERTIES | ||||||||||||||
Property and Location | Year Placed in Service | Average Apartment Size (Sq. Ft.) | Number of Apartments | 2014 Average Occupancy (1) | 2014 Average Monthly Rental Rate per Apartment (2) | |||||||||
Camden Woods | 1986 | 1,223 | 444 | 96.4 | % | $ | 923 | |||||||
GEORGIA | ||||||||||||||
Atlanta | ||||||||||||||
Camden Brookwood | 2002 | 912 | 359 | 96.1 | 1,167 | |||||||||
Camden Creekstone | 2002 | 990 | 223 | 95.9 | 1,065 | |||||||||
Camden Deerfield | 2000 | 1,187 | 292 | 95.3 | 1,154 | |||||||||
Camden Dunwoody | 1997 | 1,007 | 324 | 95.1 | 1,091 | |||||||||
Camden Fourth Ward (8) | 2014 | 847 | 276 | 90.4 | 1,535 | |||||||||
Camden Midtown Atlanta | 2001 | 935 | 296 | 96.2 | 1,207 | |||||||||
Camden Peachtree City | 2001 | 1,027 | 399 | 96.5 | 1,078 | |||||||||
Camden Phipps (6) | 1996 | 1,018 | 234 | 96.7 | 1,410 | |||||||||
Camden Shiloh | 1999/2002 | 1,143 | 232 | 96.1 | 1,013 | |||||||||
Camden St. Clair | 1997 | 999 | 336 | 95.2 | 1,123 | |||||||||
Camden Stockbridge | 2003 | 1,009 | 304 | 95.4 | 811 | |||||||||
Camden Vantage | 2010 | 901 | 592 | 95.1 | 1,165 | |||||||||
NEVADA | ||||||||||||||
Las Vegas | ||||||||||||||
Camden Bel Air | 1988/1995 | 943 | 528 | 94.5 | 734 | |||||||||
Camden Breeze | 1989 | 846 | 320 | 94.8 | 743 | |||||||||
Camden Canyon | 1995 | 987 | 200 | 96.2 | 884 | |||||||||
Camden Commons | 1988 | 936 | 376 | 95.1 | 774 | |||||||||
Camden Cove | 1990 | 898 | 124 | 96.1 | 746 | |||||||||
Camden Del Mar | 1995 | 986 | 560 | 95.8 | 946 | |||||||||
Camden Fairways | 1989 | 896 | 320 | 96.9 | 896 | |||||||||
Camden Hills | 1991 | 439 | 184 | 95.4 | 508 | |||||||||
Camden Legends | 1994 | 792 | 113 | 95.9 | 837 | |||||||||
Camden Palisades | 1991 | 905 | 624 | 95.5 | 739 | |||||||||
Camden Pines | 1997 | 982 | 315 | 96.0 | 815 | |||||||||
Camden Pointe | 1996 | 983 | 252 | 96.3 | 755 | |||||||||
Camden Summit | 1995 | 1,187 | 234 | 96.0 | 1,104 | |||||||||
Camden Tiara | 1996 | 1,043 | 400 | 95.9 | 873 | |||||||||
Camden Vintage | 1994 | 978 | 368 | 95.2 | 710 | |||||||||
NORTH CAROLINA | ||||||||||||||
Charlotte | ||||||||||||||
Camden Ballantyne | 1998 | 1,045 | 400 | 96.5 | 1,155 | |||||||||
Camden Cotton Mills | 2002 | 905 | 180 | 97.7 | 1,404 | |||||||||
Camden Dilworth | 2006 | 857 | 145 | 97.7 | 1,356 | |||||||||
Camden Fairview | 1983 | 1,036 | 135 | 97.5 | 1,056 | |||||||||
Camden Foxcroft | 1979 | 940 | 156 | 98.2 | 911 | |||||||||
Camden Grandview | 2000 | 1,057 | 266 | 97.7 | 1,527 | |||||||||
Camden Sedgebrook | 1999 | 972 | 368 | 96.8 | 1,000 | |||||||||
Camden Simsbury | 1985 | 874 | 100 | 97.4 | 1,042 | |||||||||
Camden South End Square | 2003 | 882 | 299 | 97.5 | 1,279 | |||||||||
11
OPERATING PROPERTIES | ||||||||||||||
Property and Location | Year Placed in Service | Average Apartment Size (Sq. Ft.) | Number of Apartments | 2014 Average Occupancy (1) | 2014 Average Monthly Rental Rate per Apartment (2) | |||||||||
Camden Stonecrest | 2001 | 1,098 | 306 | 96.7 | % | $ | 1,174 | |||||||
Camden Touchstone | 1986 | 899 | 132 | 97.6 | 879 | |||||||||
Raleigh | ||||||||||||||
Camden Asbury Village (6) | 2009 | 1,009 | 350 | 96.0 | 1,050 | |||||||||
Camden Crest | 2001 | 1,013 | 438 | 90.4 | 887 | |||||||||
Camden Governor’s Village | 1999 | 1,046 | 242 | 95.2 | 940 | |||||||||
Camden Lake Pine | 1999 | 1,066 | 446 | 96.3 | 943 | |||||||||
Camden Manor Park | 2006 | 966 | 484 | 96.5 | 959 | |||||||||
Camden Overlook | 2001 | 1,060 | 320 | 95.6 | 1,083 | |||||||||
Camden Reunion Park | 2000/2004 | 972 | 420 | 94.9 | 821 | |||||||||
Camden Westwood | 1999 | 1,027 | 354 | 94.8 | 891 | |||||||||
TEXAS | ||||||||||||||
Austin | ||||||||||||||
Camden Amber Oaks (6) | 2009 | 862 | 348 | 96.1 | 951 | |||||||||
Camden Amber Oaks II (6) | 2012 | 910 | 244 | 95.5 | 1,044 | |||||||||
Camden Brushy Creek (6) | 2008 | 882 | 272 | 96.1 | 978 | |||||||||
Camden Cedar Hills | 2008 | 911 | 208 | 96.4 | 1,111 | |||||||||
Camden Gaines Ranch | 1997 | 955 | 390 | 95.4 | 1,268 | |||||||||
Camden Huntingdon | 1995 | 903 | 398 | 95.2 | 942 | |||||||||
Camden Ridgecrest (7) | 1995 | 855 | 284 | 95.3 | 847 | |||||||||
Camden Shadow Brook (6) | 2009 | 909 | 496 | 96.3 | 1,002 | |||||||||
Camden Stoneleigh | 2001 | 908 | 390 | 94.9 | 1,117 | |||||||||
Corpus Christi | ||||||||||||||
Camden Breakers | 1996 | 868 | 288 | 95.4 | 1,164 | |||||||||
Camden Copper Ridge | 1986 | 775 | 344 | 95.2 | 863 | |||||||||
Camden Miramar (9) | 1994-2014 | 494 | 1,005 | 75.1 | 988 | |||||||||
Camden South Bay (6) | 2007 | 1,055 | 270 | 94.7 | 1,248 | |||||||||
Dallas/Fort Worth | ||||||||||||||
Camden Addison | 1996 | 942 | 456 | 95.5 | 979 | |||||||||
Camden Belmont | 2010/2012 | 945 | 477 | 94.5 | 1,336 | |||||||||
Camden Buckingham | 1997 | 919 | 464 | 95.8 | 1,021 | |||||||||
Camden Centreport | 1997 | 911 | 268 | 95.8 | 960 | |||||||||
Camden Cimarron | 1992 | 772 | 286 | 95.2 | 979 | |||||||||
Camden Design District (6) | 2009 | 939 | 355 | 95.1 | 1,270 | |||||||||
Camden Farmers Market | 2001/2005 | 932 | 904 | 94.9 | 1,128 | |||||||||
Camden Henderson | 2012 | 967 | 106 | 96.3 | 1,464 | |||||||||
Camden Legacy Creek | 1995 | 831 | 240 | 95.8 | 1,025 | |||||||||
Camden Legacy Park | 1996 | 871 | 276 | 95.7 | 1,053 | |||||||||
Camden Panther Creek (6) | 2009 | 946 | 295 | 95.9 | 1,074 | |||||||||
Camden Riverwalk (6) | 2008 | 982 | 600 | 94.6 | 1,268 | |||||||||
Camden Valley Park | 1986 | 743 | 516 | 96.5 | 897 | |||||||||
Houston | ||||||||||||||
Camden City Centre | 2007 | 932 | 379 | 96.7 | 1,615 | |||||||||
12
OPERATING PROPERTIES | ||||||||||||||
Property and Location | Year Placed in Service | Average Apartment Size (Sq. Ft.) | Number of Apartments | 2014 Average Occupancy (1) | 2014 Average Monthly Rental Rate per Apartment (2) | |||||||||
Camden City Centre II | 2013 | 868 | 268 | 95.7 | % | $ | 1,683 | |||||||
Camden Cypress Creek (6) | 2009 | 993 | 310 | 95.2 | 1,222 | |||||||||
Camden Downs at Cinco Ranch (6) | 2004 | 1,075 | 318 | 95.4 | 1,233 | |||||||||
Camden Grand Harbor (6) | 2008 | 959 | 300 | 96.0 | 1,148 | |||||||||
Camden Greenway | 1999 | 861 | 756 | 95.7 | 1,380 | |||||||||
Camden Heights (6) | 2004 | 927 | 352 | 96.5 | 1,523 | |||||||||
Camden Holly Springs | 1999 | 934 | 548 | 94.7 | 1,201 | |||||||||
Camden Midtown | 1999 | 844 | 337 | 95.8 | 1,701 | |||||||||
Camden Northpointe (6) | 2008 | 940 | 384 | 96.3 | 1,043 | |||||||||
Camden Oak Crest | 2003 | 870 | 364 | 96.4 | 1,056 | |||||||||
Camden Park | 1995 | 866 | 288 | 95.8 | 1,016 | |||||||||
Camden Plaza | 2007 | 915 | 271 | 96.0 | 1,552 | |||||||||
Camden Post Oak | 2003 | 1,200 | 356 | 93.7 | 2,629 | |||||||||
Camden Royal Oaks | 2006 | 923 | 236 | 98.7 | 1,224 | |||||||||
Camden Royal Oaks II | 2012 | 1,054 | 104 | 98.6 | 1,420 | |||||||||
Camden Spring Creek (6) | 2004 | 1,080 | 304 | 96.4 | 1,156 | |||||||||
Camden Stonebridge | 1993 | 845 | 204 | 95.9 | 1,044 | |||||||||
Camden Sugar Grove | 1997 | 921 | 380 | 96.2 | 1,061 | |||||||||
Camden Travis Street | 2010 | 819 | 253 | 96.8 | 1,620 | |||||||||
Camden Vanderbilt | 1996/1997 | 863 | 894 | 95.6 | 1,411 | |||||||||
Camden Whispering Oaks | 2008 | 934 | 274 | 97.1 | 1,217 | |||||||||
Camden Woodson Park (6) | 2008 | 916 | 248 | 96.2 | 1,075 | |||||||||
Camden Yorktown (6) | 2008 | 995 | 306 | 96.2 | 1,139 | |||||||||
(1) | Represents average physical occupancy for the year except as noted. |
(2) | The average monthly rental rate per apartment incorporates tenant concessions calculated on a straight-line basis over the life of the lease. |
(3) | Property under lease-up at December 31, 2014. |
(4) | Property owned through a fully consolidated joint venture in which we own a 99.99% interest. The remaining interest is owned by an unaffiliated third party. |
(5) | Development property stabilized during 2014—average occupancy calculated from date at which occupancy exceeded 90% through December 31, 2014. |
(6) | Property owned through an unconsolidated joint venture in which we currently own a 31.3% interest. The remaining interest is owned by an unaffiliated third party. |
(7) | Property was included in properties held for sale at December 31, 2014. We sold this property in January 2015. |
(8) | Property acquired during 2014. Property had recently completed construction and was stabilized during 2014. Average occupancy was calculated from date at which occupancy exceeded 90% through December 31, 2014. |
(9) | Miramar is a student housing project for Texas A&M at Corpus Christi. Average occupancy includes summer months which are normally subject to high vacancies. Phase IXB was completed during 2014 and is comprised of 75 apartments. |
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
None.
13
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
The high and low closing prices per share of our common shares, as reported on the New York Stock Exchange composite tape under the symbol “CPT,” and distributions per share declared for the quarters indicated are as follows:
High | Low | Distributions | |||||||||
2014 Quarters: | |||||||||||
First | $ | 67.59 | $ | 57.64 | $ | 0.66 | |||||
Second | 72.08 | 66.69 | 0.66 | ||||||||
Third | 75.51 | 67.83 | 0.66 | ||||||||
Fourth | 77.87 | 68.47 | 0.66 | ||||||||
2013 Quarters: | |||||||||||
First | $ | 71.47 | $ | 68.14 | $ | 0.63 | |||||
Second | 75.46 | 62.98 | 0.63 | ||||||||
Third | 73.74 | 60.65 | 0.63 | ||||||||
Fourth | 66.51 | 56.79 | 0.63 | ||||||||
In the first quarter of 2015, the Company's Board of Trust Managers increased the quarterly dividend rate from $0.66 to $0.70 per common share. Future dividend payments are paid at the discretion of the Board of Trust Managers and depend on cash flows generated from operations, the Company's financial condition and capital requirements, distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and other factors which may be deemed relevant by our Board of Trust Managers. Assuming similar dividend distributions for the remainder of 2015, our annualized dividend rate for 2015 would be $2.80.
14
This graph assumes the investment of $100 on December 31, 2009 and quarterly reinvestment of dividends. (Source: SNL Financial LC)
Years Ended December 31, | |||||||||||||||||||
Index | 2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||
Camden Property Trust | $ | 132.48 | $ | 157.99 | $ | 179.18 | $ | 155.39 | $ | 209.52 | |||||||||
FTSE NAREIT Equity | 127.96 | 138.57 | 163.60 | 167.63 | 218.16 | ||||||||||||||
S&P 500 | 115.06 | 117.49 | 136.30 | 180.44 | 205.14 | ||||||||||||||
Russell 2000 | 126.86 | 121.56 | 141.43 | 196.34 | 205.95 | ||||||||||||||
MSCI US REIT (RMS) Index | 128.48 | 139.65 | 164.46 | 168.52 | 219.72 | ||||||||||||||
As of February 12, 2015, there were approximately 447 shareholders of record and approximately 25,215 beneficial owners of our common shares.
In May 2011, we created an at-the-market ("ATM") share offering program through which we could, but had no obligation to, sell common shares having an aggregate offering price of up to $300 million (the “2011 ATM program”), in amounts and at times as we determined, into the existing trading market at current market prices as well as through negotiated transactions. During the year ended December 31, 2012, we issued approximately 2.0 million common shares at an average price of $66.01 per share for total net consideration of approximately $128.1 million under the 2011 ATM program. These amounts were used to redeem all of our outstanding redeemable perpetual preferred units and for other general corporate purposes, which included funding for development activities, financing of acquisitions, repayment of notes payable and borrowings under our $500 million unsecured line of credit. The 2011 ATM program was terminated in the second quarter of 2012, and no further common shares are available for sale under this program.
In May 2012, we created an ATM share offering program through which we could, but had no obligation to, sell common shares having an aggregate offering price of up to $300 million (the "2012 ATM program"), in amounts and at times as we
15
determined, into the existing trading market at current market prices as well as through negotiated transactions. During the year ended December 31, 2012, we issued approximately 2.6 million common shares at an average price of $67.63 per share for total net consideration of approximately $173.6 million. During the year ended December 31, 2013, we issued approximately 0.6 million common shares at an average price of $73.73 per share for total net consideration of approximately $40.0 million. During the year ended December 31, 2014, we issued approximately 0.7 million common shares at an average price of $74.60 per share for total net consideration of approximately $50.5 million under the 2012 ATM program. These amounts were used for general corporate purposes, which included repayment of outstanding balances on our unsecured line of credit and short-term borrowings, and funding for development, redevelopment, and capital improvement activities. The 2012 ATM program was terminated in the fourth quarter of 2014, and no further common shares are available for sale under this program.
In November 2014, we created an ATM share offering program through which we can, but have no obligation to, sell common shares having an aggregate offering price of up to $331.3 million (the "2014 ATM program"), in amounts and at times as we determine, into the existing trading market at current market prices as well as through negotiated transactions. During the year ended December 31, 2014, we issued approximately 0.2 million common shares at an average price of $76.28 per share for total net consideration of approximately $15.7 million under the 2014 ATM program which was used for general corporate purposes, which included funding for development and capital improvement projects. We intend to use the remaining net proceeds from the 2014 ATM program for general corporate purposes, which may include funding for development, redevelopment and capital improvement projects, financing for acquisitions, the redemption or other repurchase of outstanding debt or equity securities, reducing future borrowings under our $500 million unsecured line of credit, and the repayment of other indebtedness. As of the date of this filing, we had common shares having an aggregate offering price of up to $315.3 million remaining available for sale under the 2014 ATM program. Actual sales from time to time may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations by management of the appropriate sources of funding for us.
See Part III, Item 12, for a description of securities authorized for issuance under equity compensation plans.
In January 2008, our Board of Trust Managers approved an increase of the April 2007 repurchase plan to allow for the repurchase of up to $500 million of our common equity securities through open market purchases, block purchases, and privately negotiated transactions. Under this program, we have repurchased 4.3 million shares for a total of approximately $230.2 million from April 2007 through December 31, 2014. The remaining dollar value of our common equity securities authorized to be repurchased under the program was approximately $269.8 million as of December 31, 2014. There were no repurchases of our equity securities during the years ended December 31, 2014, 2013 and 2012.
16
Item 6. Selected Financial Data
The following table provides selected financial data relating to our historical financial condition and results of operations as of and for each of the years ended December 31, 2010 through 2014. This data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes.
COMPARATIVE SUMMARY OF SELECTED FINANCIAL AND PROPERTY DATA
Year Ended December 31, | |||||||||||||||||||
(in thousands, except per share amounts and property data) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||
Operating Data (a) | |||||||||||||||||||
Total property revenues | $ | 843,978 | $ | 788,851 | $ | 698,318 | $ | 599,401 | $ | 547,756 | |||||||||
Total property expenses | 305,308 | 285,691 | 256,430 | 230,212 | 217,309 | ||||||||||||||
Total non-property income | 14,611 | 21,197 | 16,407 | 21,395 | 28,337 | ||||||||||||||
Total other expenses | 415,224 | 392,478 | 373,254 | 352,627 | 353,427 | ||||||||||||||
Income (loss) from continuing operations attributable to common shareholders | 292,089 | 151,594 | 154,116 | 7,383 | (5,357 | ) | |||||||||||||
Net income attributable to common shareholders | 292,089 | 336,364 | 283,390 | 49,379 | 23,216 | ||||||||||||||
Earnings (loss) per common share from continuing operations: | |||||||||||||||||||
Basic | $ | 3.29 | $ | 1.70 | $ | 1.81 | $ | 0.09 | $ | (0.08 | ) | ||||||||
Diluted | 3.27 | 1.69 | 1.79 | 0.09 | (0.08 | ) | |||||||||||||
Total earnings per common share: | |||||||||||||||||||
Basic | $ | 3.29 | $ | 3.82 | $ | 3.35 | $ | 0.67 | $ | 0.33 | |||||||||
Diluted | 3.27 | 3.78 | 3.30 | 0.66 | 0.33 | ||||||||||||||
Distributions declared per common share | $ | 2.64 | $ | 2.52 | $ | 2.24 | $ | 1.96 | $ | 1.80 | |||||||||
Balance Sheet Data (at end of year) | |||||||||||||||||||
Total real estate assets, at cost (b) | $ | 7,485,088 | $ | 7,114,336 | $ | 6,749,523 | $ | 5,875,515 | $ | 5,675,309 | |||||||||
Total assets | 6,056,907 | 5,632,141 | 5,385,172 | 4,622,075 | 4,699,737 | ||||||||||||||
Notes payable | 2,743,539 | 2,530,766 | 2,510,468 | 2,432,112 | 2,563,754 | ||||||||||||||
Non-Qualified deferred compensation share awards | 68,134 | 47,180 | — | — | — | ||||||||||||||
Perpetual preferred units | — | — | — | 97,925 | 97,925 | ||||||||||||||
Equity | 2,888,409 | 2,760,181 | 2,626,708 | 1,827,768 | 1,757,373 | ||||||||||||||
Other Data | |||||||||||||||||||
Cash flows provided by (used in): | |||||||||||||||||||
Operating activities | $ | 418,528 | $ | 404,291 | $ | 324,267 | $ | 244,834 | $ | 224,036 | |||||||||
Investing activities | (325,886 | ) | (258,985 | ) | (527,685 | ) | (187,364 | ) | 35,150 | ||||||||||
Financing activities | 43,482 | (154,181 | ) | 174,928 | (172,886 | ) | (152,767 | ) | |||||||||||
Funds from operations – diluted (c) | 378,043 | 368,321 | 313,337 | 207,535 | 194,309 | ||||||||||||||
Property Data | |||||||||||||||||||
Number of operating properties (at the end of year) (d) | 168 | 170 | 193 | 196 | 186 | ||||||||||||||
Number of operating apartment homes (at end of year) (d) | 58,948 | 59,899 | 65,775 | 66,997 | 63,316 | ||||||||||||||
Number of operating apartment homes (weighted average) (e) | 52,833 | 54,181 | 54,194 | 50,905 | 50,794 | ||||||||||||||
Weighted average monthly total property revenue per apartment home | $ | 1,331 | $ | 1,270 | $ | 1,207 | $ | 1,142 | $ | 1,072 | |||||||||
Properties under development (at end of period) | 13 | 14 | 9 | 10 | 2 | ||||||||||||||
(a) | Excludes discontinued operations. |
(b) | Includes properties held for sale at net book value at December 31, 2014, 2012 and 2011. |
(c) | Management considers Funds from Operations (“FFO”) to be an appropriate measure of the financial performance of an equity REIT. 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 |
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(“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 excluding depreciation, FFO can assist in the comparison of the operating performance of a company’s real estate between periods or as compared to different companies. See "Funds from Operations" in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a reconciliation of net income attributable to common shareholders to FFO.
(d) | Includes properties held for sale at December 31, 2014, 2012 and 2011. |
(e) | Excludes apartment homes owned in joint ventures. |
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this report. Historical results and trends which might appear in the consolidated financial statements should not be interpreted as being indicative of future operations.
We consider portions of this report to be “forward-looking” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions, or other items relating to the future; forward-looking statements are not guarantees of future performance, results, or events. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein which are not statements of historical fact should be deemed forward-looking statements. Reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.
Factors which may cause our actual results or performance to differ materially from those contemplated by forward-looking statements include, but are not limited to, the following:
• | Volatility in capital and credit markets, or other unfavorable changes in economic conditions, either nationally or regionally in one or more of the markets in which we operate, could adversely impact us; |
• | Short-term leases expose us to the effects of declining market rents; |
• | Competition could limit our ability to lease apartments or increase or maintain rental income; |
• | We face risks associated with land holdings and related activities; |
• | We could be negatively impacted by the elimination of Fannie Mae or Freddie Mac; |
• | Development, redevelopment and construction risks could impact our profitability; |
• | Investments through joint ventures and discretionary funds involve risks not present in investments in which we are the sole investor; |
• | Competition could adversely affect our ability to acquire properties; |
• | Our acquisition strategy may not produce the cash flows expected; |
• | Tax matters, including failure to qualify as a REIT, could have adverse consequences; |
• | Losses from catastrophes may exceed our insurance coverage; |
• | A cybersecurity incident and other technology disruptions could negatively impact our business; |
• | We have significant debt, which could have important adverse consequences; |
• | Insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders; |
• | Issuances of additional debt may adversely impact our financial condition; |
• | We may be unable to renew, repay, or refinance our outstanding debt; |
• | Variable rate debt is subject to interest rate risk; |
• | Failure to maintain our current credit ratings could adversely affect our cost of funds, related margins, liquidity, and access to capital markets; |
• | Share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders; |
• | Our share price will fluctuate; and |
• | The form, timing and/or amount of dividend distributions in future periods may vary and be impacted by economic and other considerations. |
These forward-looking statements represent our estimates and assumptions as of the date of this report, and we assume no obligation to update or supplement forward-looking statements because of subsequent events.
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Executive Summary
We are primarily engaged in the ownership, management, development, redevelopment, acquisition and construction of multifamily apartment communities. As of December 31, 2014, we owned interests in, operated, or were developing 181 multifamily properties comprised of 63,163 apartment homes across the United States as detailed in the following Property Portfolio table. In addition, we own other land holdings which we may develop into multifamily apartment communities in the future.
Property Operations
Our results for the year ended December 31, 2014 reflect an increase in same store revenues of 4.5% as compared to 2013. We believe this increase was due to the continuation of improving economic conditions, including job growth, favorable demographics, a manageable supply of new multifamily housing and more individuals choosing to rent versus buy as evidenced by the moderating level of homeownership rates, all of which have resulted in higher rental rates and average occupancy levels. We believe U.S. economic and employment growth is likely to continue during the remainder of 2015 and the supply of new multifamily homes, although increasing, will likely remain at manageable levels. If economic conditions were to worsen, our operating results could be adversely affected.
Construction Activity
At December 31, 2014, we had a total of 13 projects under construction to be comprised of 4,215 apartment homes, including one development project to be comprised of 266 apartment homes owned by one of the discretionary funds ("the funds") in which we currently have a 31.3% interest, with initial occupancy scheduled to occur within the next 28 months. Excluding the projects owned by one of the funds, as of December 31, 2014, we estimate the additional cost to complete the construction of 12 consolidated projects to be approximately $371.2 million.
Acquisitions
During the year ended December 31, 2014, we acquired one operating property, comprised of 276 apartment homes, located in Atlanta, Georgia for approximately $62.6 million. We also acquired two land parcels comprised of 10.5 acres of land located in Houston, Texas and Rockville, Maryland for approximately $39.4 million.
Fund Restructuring
In December 2014, the partnership agreements for each of the funds were amended, resulting in the extension of the term of each fund to December 31, 2026. In addition, our ownership interests in the funds were increased from 20% to 31.3% effective December 23, 2014.
Dispositions
During the year ended December 31, 2014, we sold five operating properties comprised of 1,847 apartment homes located in Atlanta, Georgia, Dallas, Texas, Orlando and Tampa, Florida and Charlotte, North Carolina for approximately $218.3 million and we recognized a gain of approximately $155.7 million relating to these property sales. We also sold four land holdings comprised of an aggregate of approximately 29.3 acres located adjacent to current operating and development communities in Dallas and Houston, Texas and Atlanta, Georgia for approximately $23.7 million and we recognized a gain of approximately $3.6 million relating to these land sales; we also recognized a $1.2 million impairment charge related to one of the land parcels sold in Dallas, Texas in June 2014, which represented the difference between the land holding's carrying value and the fair value based upon the sales contract. In February 2014, each of the funds sold an operating property comprised of an aggregate of 558 apartment homes; one of the operating properties was located in San Antonio, Texas and the other operating property was in Houston, Texas. Our proportionate share of the gains on these two transactions was approximately $3.6 million.
In January 2015, we sold two operating properties comprised of 1,116 apartment homes located in Tampa, Florida and Austin, Texas for approximately $114.4 million.
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Future Outlook
Subject to market conditions, we intend to continue to seek opportunities to develop and acquire existing communities. We also intend to evaluate our operating property and land development portfolio and plan to continue our practice of selective dispositions as market conditions warrant and opportunities arise. We also intend to continue to strengthen our capital and liquidity positions by continuing to focus on our core fundamentals which we believe are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intend to meet our near-term liquidity requirements through a combination of cash flows generated from operations, draws on our unsecured credit facility, proceeds from property dispositions, the use of debt and equity offerings under our automatic shelf registration statement, equity issued from our ATM program, other unsecured borrowings and secured mortgages.
As of December 31, 2014, we had approximately $153.9 million in cash and cash equivalents, no balances outstanding on our $500 million unsecured line of credit and, as of the date of this filing, we had common shares having an aggregate offering price of up to $315.3 million remaining available for sale under our 2014 ATM program. We believe debt maturing in 2015 is manageable at $251.8 million, which represents approximately 9% of our total outstanding debt and includes scheduled principal amortizations of approximately $1.8 million. We believe we are well-positioned with a strong balance sheet and sufficient liquidity to cover near-term debt maturities and new development, redevelopment, and other capital funding requirements. We will, however, continue to assess and take further actions we believe are prudent to meet our objectives and capital requirements.
Property Portfolio
Our multifamily property portfolio is summarized as follows:
December 31, 2014 | December 31, 2013 | ||||||
Apartment Homes | Properties | Apartment Homes | Properties | ||||
Operating Properties | |||||||
Houston, Texas | 8,434 | 24 | 8,752 | 25 | |||
Washington, D.C. Metro | 6,405 | 19 | 6,083 | 18 | |||
Dallas, Texas | 5,243 | 13 | 5,667 | 14 | |||
Las Vegas, Nevada | 4,918 | 15 | 4,918 | 15 | |||
Tampa, Florida (1) | 4,880 | 11 | 5,108 | 12 | |||
Atlanta, Georgia | 3,867 | 12 | 3,943 | 12 | |||
Orlando, Florida | 3,540 | 9 | 3,676 | 9 | |||
Raleigh, North Carolina | 3,054 | 8 | 3,054 | 8 | |||
Austin, Texas (2) | 3,030 | 9 | 3,030 | 9 | |||
Southeast Florida | 2,781 | 8 | 2,520 | 7 | |||
Charlotte, North Carolina | 2,487 | 11 | 2,894 | 12 | |||
Los Angeles/Orange County, California | 2,481 | 6 | 2,481 | 6 | |||
Phoenix, Arizona | 2,315 | 8 | 2,095 | 7 | |||
Denver, Colorado | 1,941 | 6 | 1,941 | 6 | |||
San Diego/Inland Empire, California | 1,665 | 5 | 1,665 | 5 | |||
Other | 1,907 | 4 | 2,072 | 5 | |||
Total Operating Properties | 58,948 | 168 | 59,899 | 170 | |||
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December 31, 2014 | December 31, 2013 | ||||||
Apartment Homes | Properties | Apartment Homes | Properties | ||||
Properties Under Construction | |||||||
Denver, Colorado | 691 | 2 | 424 | 1 | |||
Austin, Texas | 614 | 2 | 614 | 2 | |||
Phoenix, Arizona | 614 | 2 | 454 | 2 | |||
Los Angeles/Orange County, California | 590 | 2 | 590 | 2 | |||
Charlotte, North Carolina | 589 | 2 | 589 | 2 | |||
Dallas, Texas | 423 | 1 | 423 | 1 | |||
Atlanta, Georgia | 379 | 1 | 379 | 1 | |||
Houston, Texas | 315 | 1 | — | — | |||
Southeast Florida | — | — | 261 | 1 | |||
Washington, D.C. Metro | — | — | 320 | 1 | |||
Orlando, Florida | — | — | 300 | 1 | |||
Other (3) | — | — | 75 | — | |||
Total Properties Under Construction | 4,215 | 13 | 4,429 | 14 | |||
Total Properties | 63,163 | 181 | 64,328 | 184 | |||
Less: Unconsolidated Joint Venture Properties (4) | |||||||
Houston, Texas | 2,522 | 8 | 2,840 | 9 | |||
Austin, Texas | 1,360 | 4 | 1,360 | 4 | |||
Dallas, Texas | 1,250 | 3 | 1,250 | 3 | |||
Tampa, Florida | 450 | 1 | 450 | 1 | |||
Raleigh, North Carolina | 350 | 1 | 350 | ||||