SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 (I.R.S. Employer Identification
Incorporation or Organization) Number)
3 Greenway Plaza, Suite 1300, Houston, Texas 77046
(Address of Principal Executive Offices) (Zip Code)
(713) 354-2500
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
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
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, 2000, there were 38,194,316 shares of Common Shares of Beneficial
Interest, $0.01 par value outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAMDEN PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
2000 1999
---------------- ---------------
(Unaudited)
<S> <C> <C>
Real estate assets, at cost:
Land $ 358,947 $ 354,833
Buildings and improvements 2,168,383 2,122,793
--------------- --------------
2,527,330 2,477,626
Less: accumulated depreciation (276,897) (253,545)
--------------- --------------
Net operating real estate assets 2,250,433 2,224,081
Properties under development, including land 147,362 178,539
Investment in joint ventures 21,368 21,869
--------------- --------------
Total real estate assets 2,419,163 2,424,489
Accounts receivable - affiliates 2,143 2,228
Notes receivable:
Affiliates 1,800 1,800
Other 43,500 34,442
Other assets, net 20,775 14,744
Cash and cash equivalents 5,684 5,517
Restricted cash 4,394 4,712
--------------- --------------
Total assets $ 2,497,459 $ 2,487,932
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable:
Unsecured $ 857,721 $ 820,623
Secured 343,225 344,467
Accounts payable 22,617 20,323
Accrued real estate taxes 12,301 24,485
Accrued expenses and other liabilities 34,311 33,987
Distributions payable 28,887 27,114
--------------- --------------
Total liabilities 1,299,062 1,270,999
Minority Interests:
Units convertible into perpetual preferred shares 149,815 132,679
Units convertible into common shares 63,031 64,173
--------------- -------------
Total minority interests 212,846 196,852
7.33% Convertible Subordinated Debentures 2,777 3,406
Shareholders' Equity:
Convertible preferred shares of beneficial interest 42 42
Common shares of beneficial interest 449 448
Additional paid-in capital 1,308,964 1,303,645
Distributions in excess of net income (141,431) (132,198)
Unearned restricted share awards (12,167) (8,485)
Less: treasury shares, at cost (173,083) (146,777)
--------------- --------------
Total shareholders' equity 982,774 1,016,675
--------------- --------------
Total liabilities and shareholders' equity $ 2,497,459 $ 2,487,932
=============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES
Rental income $ 89,518 $ 82,134
Other property income 6,363 5,159
------------ ------------
Total property income 95,881 87,293
Equity in income of joint ventures 257 516
Fee and asset management 1,709 950
Other income 867 76
------------ ------------
Total revenues 98,714 88,835
------------ ------------
EXPENSES
Property operating and maintenance 27,706 25,576
Real estate taxes 9,990 9,201
General and administrative 3,139 2,423
Interest 16,584 13,474
Depreciation and amortization 24,599 21,352
------------ ------------
Total expenses 82,018 72,026
------------ ------------
Income before gain on sales of properties and minority interests 16,696 16,809
Gain on sales of properties 1,933 720
------------ ------------
Income before minority interests 18,629 17,529
Minority interests
Distributions on units convertible into perpetual preferred shares (3,218) (862)
Income allocated to units convertible into common shares (392) (618)
------------ ------------
Total minority interests (3,610) (1,480)
------------ ------------
Net income 15,019 16,049
Preferred share dividends (2,343) (2,343)
------------ ------------
Net income to common shareholders $ 12,676 $ 13,706
============ ============
Basic earnings per share $ 0.33 $ 0.32
Diluted earnings per share $ 0.31 $ 0.31
Distributions declared per common share $ 0.5625 $ 0.520
Weighted average number of common shares outstanding 38,492 42,842
Weighted average number of common and common dilutive
equivalent shares outstanding 41,575 45,874
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CAMDEN PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 15,019 $ 16,049
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 24,599 21,352
Equity in income of joint ventures, net of cash received 501 274
Gain on sale of properties (1,933) (720)
Income allocated to units convertible into common shares 392 618
Accretion of discount on unsecured notes payable 98 45
Net change in operating accounts (10,186) (16,008)
------------ ------------
Net cash provided by operating activities 28,490 21,610
CASH FLOW FROM INVESTING ACTIVITIES
Increase in real estate assets (38,484) (51,161)
Net proceeds from sale of properties 20,056 4,825
Increase in investment in joint ventures (1,336)
Increase in notes receivable (9,058)
Other (377) (568)
------------ ------------
Net cash used in investing activities (27,863) (48,240)
CASH FLOW FROM FINANCING ACTIVITIES
Net increase (decrease) in unsecured lines of credit and short-term 37,000 (17,000)
borrowings
Proceeds from notes payable 39,500
Proceeds from issuance of preferred units, net 17,136 97,936
Repayment of notes payable (1,242) (11,777)
Distributions to shareholders and minority interests (27,101) (26,110)
Repurchase of common shares and units (26,306) (57,485)
Other 53 738
------------ ------------
Net cash (used in) provided by financing activities (460) 25,802
------------ ------------
Net increase (decrease) in cash and cash equivalents 167 (828)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,517 5,647
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,684 $ 4,819
============ ============
SUPPLEMENTAL INFORMATION
Cash paid for interest, net of interest capitalized $ 15,078 $ 12,221
Interest capitalized 4,162 3,879
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Fair value adjustment from the acquisition of Oasis:
Fair value of assets acquired $ 835
Liabilities assumed 835
Conversion of 7.33% subordinated debentures to common shares, net $ 629
Value of shares issued under benefit plans, net 4,759 2,663
Conversion of operating partnership units to common shares 423
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CAMDEN PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited financial information has been prepared
according to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted according to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management, all
adjustments and eliminations, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of Camden Property Trust as
of March 31, 2000 and the results of operations and cash flows for the three
months ended March 31, 2000 and 1999 have been included. The results of
operations for such interim periods are not necessarily indicative of the
results for the full year.
BUSINESS
Camden Property Trust is a real estate investment trust which reports as a
single business segment with activities related to the ownership, development,
construction and management of multifamily apartment communities in the
Southwest, Southeast, Midwest and Western regions of the United States. At March
31, 2000, we owned interests in, operated or were developing 158 multifamily
properties containing 55,784 apartment homes located in nine states. Two of our
multifamily properties containing 1,000 apartment homes were under development
at March 31, 2000. Six of our newly developed multifamily properties containing
2,778 apartment homes were in lease-up at March 31, 2000. Additionally, we have
several sites which we intend to develop into multifamily apartment communities.
PROPERTY UPDATE
During the first quarter of 2000, we completed construction on four
properties totaling 1,474 apartment homes: The Park at Caley in Denver, The Park
at Lee Vista in Orlando, The Park at Oxmoor in Louisville, and The Park at
Arizona Center in Phoenix. Stabilization is expected to occur at these
properties over the next four quarters. Additionally, construction continued at
two properties totaling 1,000 apartment homes: The Park at Farmers Market in
Dallas and The Park at Crown Valley in Mission Viejo, California. Initial
occupancy for these two properties is expected to occur in the second and third
quarter of 2000, respectively.
During the first quarter of 2000 we sold a mini-storage facility located in
Las Vegas and several parcels of undeveloped land. The land sales consisted of
2.9 acres located in downtown Dallas and 38.5 acres located in Houston which
were sold for commercial and retail development. These parcels of land were
adjacent to our urban land development projects located in those cities.
Additionally, we sold a 19.5 acre tract of land located in Las Vegas which we
acquired in our merger with Oasis Residential, Inc. Net proceeds from these
sales were approximately $20.1 million. We used the proceeds to reduce
indebtedness outstanding under our unsecured line of credit.
We are currently seeking to selectively dispose of up to $150 million of
real estate assets that management believes have a lower projected net operating
income growth rate than the overall portfolio, or no longer conform to our
operating and investment strategies. We currently anticipate using the potential
proceeds from these sales to retire debt. However, we cannot assure you that we
will complete these sales or that the final outcomes of these sales, if
completed, will be on terms favorable to us.
<PAGE>
REAL ESTATE ASSETS AT COST
We capitalized $6.7 million and $6.5 million in the three months ended
March 31, 2000 and 1999, respectively, of renovation and improvement costs which
we believe extended the economic lives and enhanced the earnings of our
multifamily properties.
PROPERTY OPERATING AND MAINTENANCE EXPENSES
Property operating and maintenance expenses included normal repairs and
maintenance totaling $7.0 million for the three months ended March 31, 2000,
compared to $6.5 million for the three months ended March 31, 1999.
COMMON SHARE DIVIDEND DECLARATION
In March 2000, we announced that our Board of Trust Managers had declared a
dividend of $0.5625 per share for the first quarter of 2000 which was paid on
April 17, 2000 to all common shareholders of record as of March 31, 2000. We
paid an equivalent amount per unit to holders of common operating partnership
units. This distribution to common shareholders and holders of common operating
partnership units equates to an annualized dividend rate of $2.25 per share or
unit.
PREFERRED SHARE DIVIDEND DECLARATION
In March 2000, we announced that our Board of Trust Managers had declared a
quarterly dividend on our preferred shares of $0.5625 per share payable May 15,
2000 to all preferred shareholders of record as of March 31, 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, which requires recognition of all
derivatives as either assets or liabilities in the financial statements and
measurement of those instruments at fair value. The initial effective date of
SFAS No. 133 was delayed, and is now effective for all periods beginning after
June 15, 2000. Management believes that the adoption of SFAS No. 133 will not
have a material impact on our consolidated financial statements.
<PAGE>
EARNINGS PER SHARE
The following table presents information necessary to calculate basic
and diluted earnings per share for the three months ended March 31, 2000 and
1999:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
BASIC EARNINGS PER SHARE:
Weighted average common shares outstanding $ 38,492 $ 42,842
=========== ===========
Basic earnings per share $ 0.33 $ 0.32
=========== ===========
DILUTED EARNINGS PER SHARE:
Weighted average common shares outstanding 38,492 42,842
Shares issuable from assumed conversion of:
Common share options and awards granted 533 369
Common minority interest units 2,550 2,663
----------- -----------
Weighted average common shares outstanding, as adjusted 41,575 45,874
=========== ===========
Diluted earnings per share $ 0.31 $ 0.31
=========== ===========
EARNINGS FOR BASIC AND DILUTED COMPUTATION:
Net income $ 15,019 $ 16,049
Less: Preferred share dividends (2,343) (2,343)
----------- -----------
Net income to common shareholders 12,676 13,706
(Basic earnings per share computation)
Income allocated to operating partnership units 392 618
----------- -----------
Net income to common shareholders, as adjusted
(Diluted earnings per share computation) $ 13,068 $ 14,324
=========== ===========
</TABLE>
RECLASSIFICATIONS
Certain reclassifications have been made to amounts in prior period
financial statements to conform with current year presentations.
2. NOTES RECEIVABLE
We have entered into agreements with unaffiliated third parties to develop,
construct, and manage four multifamily projects containing 1,357 apartment
homes. We are providing financing for a portion of each project in the form of
notes receivable which mature in 2004. These notes earn interest at 10% annually
and are secured by second liens on the assets and partial guarantees by the
third party owners. We expect these notes to be repaid from operating cash flow
of the individual properties. At March 31, 2000, these notes had principal
balances totaling $37.2 million. We anticipate funding up to an aggregate of $41
million in connection with these projects. We earn fees for managing the
development, construction and eventual operations of these properties. We have
begun construction on these projects, with initial occupancy expected to begin
during the second quarter 2000. We have the option to purchase these properties
in the future at a price to be determined based upon the property's performance
and an agreed valuation model.
Additionally, we have a $6.3 million note receivable which bears interest
at 12% and matures in June 2000.
<PAGE>
3. NOTES PAYABLE
The following is a summary of our indebtedness:
(In millions)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------- ----------------
<S> <C> <C>
Senior Unsecured Notes:
6.73% - 7.28% Notes, due 2001-2006 $ 523.2 $ 523.1
6.68% - 7.63% Medium Term Notes, due 2000 - 2009 181.5 181.5
Unsecured Lines of Credit and Short-Term Borrowings 153.0 116.0
--------------- -------------
857.7 820.6
Secured Notes - Mortgage loans (5.30% - 8.63%), due 2001 - 2028 343.2 344.5
--------------- -------------
Total notes payable $ 1,200.9 $ 1,165.1
=============== =============
</TABLE>
In August 1999, we entered into a line of credit with 14 banks for a total
commitment of $375 million, which is scheduled to mature in August 2002. The
scheduled interest rate on the line of credit is based on a spread over LIBOR or
Prime. The scheduled interest rates 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 $187.5 million or the remaining amount available under
the line of credit. The line of credit is subject to customary financial
covenants and limitations.
During September 1999, we executed three interest rate swap agreements
totaling $70 million which are scheduled to mature in October 2000. These swaps
are being used as a hedge of interest rate exposure on our $90 million medium
term notes issued in October 1998 which mature in October 2000. Currently, the
interest rate on the medium term notes is fixed at 7.23%. The interest rates on
the swaps are reset monthly based on the one-month LIBOR rate plus a spread
which resulted in an effective interest rate on the swaps of 7.34% at March 31,
2000.
At March 31, 2000, the weighted average interest rate on floating rate debt
was 6.74%.
4. NET CHANGE IN OPERATING ACCOUNTS
The effect of changes in the operating accounts on cash flows from
operating activities is as follows:
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Decrease (increase) in assets:
Accounts receivable - affiliates $ 167 $ (816)
Other assets, net (4,379) (1,318)
Restricted cash 318 281
Increase (decrease) in liabilities:
Accounts payable 2,294 (3,850)
Accrued real estate taxes (12,184) (10,732)
Accrued expenses and other liabilities 3,598 427
----------- -----------
Net change in operating accounts $ (10,186) $ (16,008)
=========== ===========
</TABLE>
<PAGE>
5. PREFERRED UNITS
In January 2000, our operating partnership issued $17.5 million of 8.25%
Series C Cumulative Redeemable Perpetual Preferred Units. Distributions on the
preferred units are payable quarterly in arrears. The preferred units are
redeemable for cash by the operating partnership on or after the fifth
anniversary of issuance at par plus the amount of any accumulated and unpaid
distributions. The preferred units are convertible after 10 years by the holder
into our 8.25% Series C Cumulative Redeemable Perpetual Preferred Shares. The
preferred units are subordinate to present and future debt.
6. RESTRICTED SHARE AND OPTION AWARDS
During the first three months of 2000, we granted 185,564 restricted shares
in lieu of cash compensation to certain key employees and non-employee trust
managers. The restricted shares were issued based on the market value of our
common shares at the date of grant and have vesting periods of up to five years.
We also granted 14,000 options with an exercise price equal to the market value
of our common shares on the date of grant. The options become exercisable in
equal increments over three years, beginning on the first anniversary of the
grant. During the three month period ended March 31, 2000, previously granted
options to purchase 716,500 shares became exercisable and 107,823 restricted
shares vested.
7. COMMON SHARE REPURCHASE PROGRAM
In 1998 and 1999, the Board of Trust Managers authorized us to repurchase
or redeem up to $200 million of our common equity securities through open market
purchases and private transactions. As of March 31, 2000, we had repurchased
6,687,626 common shares and redeemed 105,814 units convertible into common
shares for a total cost of $173.1 million and $2.9 million, respectively.
8. CONVERTIBLE PREFERRED SHARES
The 4,165,000 preferred shares pay a cumulative dividend quarterly in
arrears in an amount equal to $2.25 per share per annum. The preferred shares
generally have no voting rights and have a liquidation preference of $25 per
share plus accrued and unpaid distributions. The preferred shares are
convertible at the option of the holder at any time into common shares at a
conversion price of $32.4638 per common share (equivalent to a conversion rate
of 0.7701 per common share for each preferred share), subject to adjustment in
certain circumstances. The preferred shares are not redeemable prior to April
30, 2001.
9. EXECUTIVE LOAN GUARANTY AGREEMENTS
In 1999 and 2000, our Board of Trust Managers approved a plan which
permitted six of our senior executive officers to complete the purchase of $23.0
million of our common shares of beneficial interest in open market transactions.
The purchases were funded with unsecured full recourse personal loans made to
each of the executives by a third party lender. The loans mature in five years,
bear interest at market rates and require interest to be paid quarterly. In
order to facilitate the employee share purchase transactions, we entered into a
guaranty agreement with the lender for payment of all indebtedness, fees and
liabilities of the officers to the lender. Simultaneously, we entered into a
reimbursement agreement with each of the executive officers whereby each
executive officer has indemnified us and absolutely and unconditionally agreed
to reimburse us should any amounts ever be paid by us pursuant to the terms of
the guaranty agreement. The reimbursement agreements require the executives to
pay interest from the date any amounts are paid by us until repayment by the
officer. We have not had to perform under the guaranty agreement.
<PAGE>
10. CONTINGENCIES
In April 1998, we acquired Oasis Residential, Inc. Prior to this time,
Oasis had been contacted by certain regulatory agencies with regards to alleged
failures to comply with the Fair Housing Amendments Act (the "Fair Housing Act")
as it pertained to nine properties (seven of which we currently own) constructed
for first occupancy after March 31,1991. On February 1, 1999, the Justice
Department filed a lawsuit against us and several other defendants in the United
States District Court for the District of Nevada alleging (1) that the design
and construction of these properties violates the Fair Housing Act and (2) that
we, through the merger with Oasis, had discriminated in the rental of dwellings
to persons because of handicap. The complaint requests an order that (i)
declares that the defendants' policies and practices violate the Fair Housing
Act; (ii) enjoins us from (a) failing or refusing, to the extent possible, to
bring the dwelling units and public use and common use areas at these properties
and other covered units that Oasis had designed and/or constructed into
compliance with the Fair Housing Act, (b) failing or refusing to take such
affirmative steps as may be necessary to restore, as nearly as possible, the
alleged victims of the defendants' alleged unlawful practices to positions they
would have been in but for the discriminatory conduct and (c) designing or
constructing any covered multi-family dwellings in the future that do not
contain the accessibility and adaptability features set forth in the Fair
Housing Act; and requires us to pay damages, including punitive damages, and a
civil penalty.
With any acquisition, we plan for and undertake renovations needed to
correct deferred maintenance, life/safety and Fair Housing matters. We are
currently engaged in settlement negotiations with the Justice Department to
resolve this lawsuit. While the final estimate of costs and expenses associated
with the resolution of this matter has not yet been determined, management does
not expect the amount to be material.
11. SUBSEQUENT EVENTS
In the ordinary course of our business, we issue letters of intent
indicating a willingness to negotiate for the purchase or sale of multifamily
properties or development land. In accordance with the local real estate market
practice, such letters of intent are non-binding, and neither party to the
letter of intent is obligated to pursue the transaction unless and until a
definitive contract is entered into by the parties. The letters of intent and
any resulting definitive contracts provide the purchaser with time to evaluate
the properties and conduct due diligence and during which periods the purchaser
will have the ability to terminate the contracts without penalty or forfeiture
of any deposit or earnest money. There can be no assurance that definitive
contracts will be entered into with respect to any properties covered by letters
of intent or that we will acquire or sell any property as to which we may have
entered into a definitive contract. Further, due diligence periods are
frequently extended as needed. An acquisition or sale becomes probable at the
time that the due diligence period expires and the definitive contract has not
been terminated. We are then at risk under an acquisition contract, but only to
the extent of any earnest money deposits associated with the contract, and are
obligated to sell under a sales contract.
We are currently in the due diligence period on contracts for the purchase
of land for development and acquisition of a property. No assurance can be made
that we will complete the purchases or will be satisfied with the outcome of the
due diligence.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
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 1999 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: changes in general economic
conditions, changes in financial markets and interest rates, our failure to
qualify as a real estate investment trust ("REIT") and environmental
uncertainties and natural disasters.
BUSINESS
Camden Property Trust is a real estate investment trust which reports as a
single business segment with activities related to the ownership, development,
construction and management of multifamily apartment communities in the
Southwest, Southeast, Midwest and Western regions of the United States. At March
31, 2000, we owned interests in, operated or were developing 158 multifamily
properties containing 55,784 apartment homes located in nine states. Two of our
multifamily properties containing 1,000 apartment homes were under development
at March 31, 2000. Six of our newly developed multifamily properties containing
2,778 apartment homes were in lease-up at March 31, 2000. Additionally, we have
several sites which we intend to develop into multifamily apartment communities.
<PAGE>
PROPERTY PORTFOLIO
Our multifamily property portfolio, excluding land held for future
development is summarized as follows:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------------------------------------------------------
Apartment Apartment
Homes Properties % (a) Homes Properties % (a)
----------- ------------ ----- ----------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Operating Properties
Texas
Houston 8,258 19 17% 8,258 19 16%
Dallas (b) 9,381 26 18 9,381 26 18
Austin 1,745 6 4 1,745 6 4
Other 1,641 5 3 1,641 5 3
----------- ------------ ----- ----------- ------------ -----
Total Texas Operating Properties 21,025 56 42 21,025 56 41
Arizona 2,658 8 5 2,326 7 5
California 1,272 3 3 1,272 3 3
Colorado (b) 2,529 8 4 2,312 7 4
Florida (c) 7,827 17 16 7,335 17 15
Kentucky 1,448 5 3 1,016 4 2
Missouri 3,327 8 7 3,327 8 7
Nevada (b) 11,963 41 14 11,963 41 14
North Carolina (b) 2,735 10 4 2,735 10 4
----------- ------------ ----- ----------- ------------ -----
Total Operating Properties 54,784 156 98 53,311 153 95
----------- ------------ ----- ----------- ------------ -----
Properties Under Development
Texas
Dallas 620 1 1 620 1 1
Arizona 332 1 1
California 380 1 1 380 1 1
Colorado 218 1
Florida 492 1 1
Kentucky 432 1 1
----------- ------------ ----- ----------- ------------ -----
Total Properties Under Development 1,000 2 2 2,474 6 5
----------- ------------ ----- ----------- ------------ -----
Total Properties 55,784 158 100% 55,785 159 100%
=========== ============ ===== =========== ============ =====
Less: Joint Venture
Apartment Homes (b) 6,503 6,504
----------- -----------
Total Apartment Homes
- Owned 100% 49,281 49,281
=========== ===========
</TABLE>
(a) Based on number of apartment homes owned 100%
(b) The figures include properties held in joint ventures as follows: one
property with 708 apartment homes in Dallas and two properties with 556
apartment homes in North Carolina in which we own a 44% interest, the
remaining interest is owned by unaffiliated private investors; one
property with 320 apartment homes (321 apartment homes at December 31,
1999) in Colorado in which we own a 50% interest, the remaining interest
is owned by an unaffiliated private investor; and 19 properties with 4,919
apartment homes in Nevada owned through Sierra-Nevada Multifamily
Investment, LLC in which we own a 20% interest, the remaining interest is
owned by an unaffiliated private pension fund.
(c) Includes the combination of operations at January 1, 2000 of two adjacent
properties.
<PAGE>
At March 31, 2000, we had six completed properties under lease-up as
follows:
<TABLE>
<CAPTION>
Product Number of % Leased Estimated
Type Apartment at 5/8/00 Date of Date of
Property and Location Homes Completion Stabilization
- ----------------------------------------- ------------ -------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
The Park at Holly Springs Garden 548 80% 3Q99 4Q00
Houston, TX
The Park at Greenway Urban 756 83% 4Q99 3Q00
Houston, TX
The Park at Caley Garden 218 82% 1Q00 2Q00
Denver, CO
The Park at Lee Vista Garden 492 65% 1Q00 1Q01
Orlando, FL
The Park at Oxmoor Garden 432 62% 1Q00 1Q01
Louisville, KY
The Park at Arizona Center Urban 332 30% 1Q00 1Q01
Phoenix, AZ
</TABLE>
At March 31, 2000, we had two development properties in various stages of
construction as follows:
<TABLE>
<CAPTION>
Product Number of Estimated Estimated Estimated
Type Apartment Cost Date of Date of
Property and Location Homes ($ millions) Completion Stabilization
- -------------------------------------------- ---------------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
The Park at Farmers Market, Phase I Urban 620 51.1 4Q00 4Q01
Dallas, TX
The Park at Crown Valley Garden 380 44.1 1Q01 4Q01
Mission Viejo, CA
---------- ----------
Total for two development properties 1,000 $ 95.2
========== ===========
</TABLE>
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,
excluding depreciation, associated with occupied apartment homes are expensed
against revenues generated by those apartment homes as they become occupied. All
construction and carrying costs are capitalized and reported on the balance
sheet in "Properties under development, including land" until individual
buildings are completed. Upon completion of each building, the total cost of
that building and the associated land is transferred to "Land" and "Buildings
and improvements" and the assets are depreciated over their estimated useful
lives using the straight-line method of depreciation. Upon achieving 90%
occupancy, or generally one year from opening the leasing office (with some
allowances for larger than average properties), whichever occurs first, all
apartment homes are considered operating and we begin expensing all items that
were previously considered as carrying costs.
Properties under development in our consolidated financial statements
includes land held for development totaling $75.2 million at December 31, 1999.
Included in this amount is $69.7 million related to the development of three
urban land projects located in Dallas, Houston and Long Beach, California.
<PAGE>
COMPARISON OF THE QUARTER ENDED MARCH 31, 2000 AND MARCH 31, 1999
Earnings before interest, depreciation and amortization increased $6.2
million, or 12.1%, from $51.6 million to $57.9 million for the three months
ended March 31, 1999 and 2000, respectively. The weighted average number of
apartment homes for the first quarter of 2000 increased by 2,174 apartment
homes, or 4.9%, from 44,741 to 46,915. Total operating properties were 133 and
126 at March 31, 2000 and 1999, respectively. The 46,915 weighted average
apartment homes and the 133 operating properties exclude the impact of our
ownership interest in properties owned in joint ventures.
Rental income for the quarter ended March 31, 2000 increased $7.4 million,
or 9.0%, over the quarter ended March 31, 1999. Rental income per apartment home
per month increased $24 or 3.9%, from $612 to $636 for the first quarters of
1999 and 2000, respectively. The increase was primarily due to increased revenue
growth from the stabilized real estate portfolio and higher average rental rates
on the completed development properties. Overall average occupancy decreased
slightly from 93.2% for the quarter ended March 31, 1999 to 93.0% for the
quarter ended March 31, 2000.
Other property income increased $1.2 million from $5.2 million to $6.4
million for the three months ended March 31, 1999 and 2000, respectively, which
represents a monthly increase of $7 per apartment home. The increase in other
property income was due primarily to increases from revenue sources such as
telephone, cable and water.
Property operating and maintenance expenses increased $2.1 million or 8.3%,
from $25.6 million to $27.7 million, but decreased as a percent of total
property income from 29.3% to 28.9% for the quarters ended March 31, 1999 and
2000, respectively. The increase in operating expense was due to a larger number
of apartment homes in operation. Our operating expense ratios decreased
primarily as a result of operating efficiencies generated by our newly developed
properties.
Real estate taxes increased $800,000 from $9.2 million to $10.0 million for
the first quarters of 1999 and 2000, respectively, which represents an annual
increase of $29 per apartment home. The increase was primarily due to increases
in the valuations of renovated and developed properties and increases in
property tax rates.
General and administrative expenses increased $700,000 from $2.4 million to
$3.1 million, and increased as a percent of revenues from 2.7% to 3.2% for the
quarters ended March 31, 1999 and 2000 respectively. The increase was primarily
due to increases in incentive-based compensation and marketing and information
technology functions.
Interest expense increased from $13.5 million to $16.6 million primarily
due to interest on new development and debt incurred to repurchase our shares
under the common share repurchase program. Interest capitalized was $4.2 million
and $3.9 million for the quarters ended March 31, 2000 and 1999, respectively.
Depreciation and amortization increased from $21.4 million to $24.6
million. This increase was due primarily to developments and renovations.
Gains on sale of properties for the quarter ended March 31, 2000 totaled
$1.9 million due to the sale of a mini-storage facility in Las Vegas and the
sale of approximately 61 acres of undeveloped land located in Las Vegas, Dallas
and Houston. Gains on sales of properties for the quarter ended March 31, 1999
related to the sale of a 126 unit complex located in Louisville, KY.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL STRUCTURE
We intend to continue maintaining what management believes to be a
conservative capital structure by:
(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 fixed rate debt and
hedging where management believes it is appropriate;
(iv) borrowing on an unsecured basis in order to maintain a
substantial number of unencumbered assets; and
(v) maintaining conservative coverage ratios.
The interest expense coverage ratio, net of capitalized interest, was 3.5
and 3.8 times for the three months ended March 31, 2000 and 1999, respectively.
At March 31, 2000 and 1999, 76.1% and 74.3%, respectively, of our properties
(based on invested capital) were unencumbered.
LIQUIDITY
We intend to meet our short-term liquidity requirements through cash flows
provided by operations, our unsecured line of credit discussed in the financial
flexibility section and other short-term borrowings. We expect that our ability
to generate cash will be sufficient to meet our short-term liquidity needs,
which include:
(i) normal operating expenses;
(ii) current debt service requirements;
(iii) recurring capital expenditures;
(iv) property developments;
(v) common share repurchases; and
(vi) distributions on our common and preferred equity.
We consider our long-term liquidity requirements to be the repayment of
maturing secured debt and borrowings under our unsecured line of credit and
funding of acquisitions. We intend to meet our long-term liquidity requirements
through the use of common and preferred equity capital, senior unsecured debt
and property dispositions.
In 1998 and 1999, the Board of Trust Managers authorized us to repurchase
or redeem up to $200 million of our common equity securities through open market
purchases and private transactions. As of March 31, 2000, we had repurchased
6,687,626 common shares and redeemed 105,814 units convertible into common
shares for a total cost of $173.1 million and $2.9 million, respectively.
We are currently seeking to selectively dispose of up to $150 million of
real estate assets that management believes have a lower projected net operating
income growth rate than the overall portfolio, or no longer conform to our
operating and investment strategies. We anticipate using the potential proceeds
from these sales to retire debt. However, it cannot be assured that we will
complete these sales or that the final outcomes of these sales, if completed,
will be on terms favorable to us.
In March 2000, we announced that our Board of Trust Managers had declared a
dividend of $0.5625 per share for the first quarter of 2000 which was paid on
April 17, 2000 to all common shareholders of record as of March 31, 2000. We
<PAGE>
paid an equivalent amount per unit to holders of the common operating
partnership units. This distribution to common shareholders and holders of
common operating partnership units equates to an annualized dividend rate of
$2.25 per share or unit.
In March 2000, we declared a quarterly dividend on our preferred shares of
$0.5625 per share payable May 15, 2000 to all preferred shareholders of record
as of March 31, 2000.
FINANCIAL FLEXIBILITY
We intend to concentrate our growth efforts toward selective development
and acquisition opportunities in our current markets, and through the
acquisition of existing operating portfolios and the development of properties
in selected new markets. During the three months ended March 31, 2000, we
incurred $30.0 million in development costs and no acquisition costs. We are
developing two properties at an aggregate cost of approximately $95.2 million of
which we incurred $13.1 million in the first quarter 2000. We fund our
developments and acquisitions through a combination of equity capital,
partnership units, medium-term notes, construction loans, other debt securities
and the unsecured line of credit. We also seek to selectively dispose of assets
that management believes have a lower projected net operating income growth rate
than the overall portfolio, or no longer conform to our operating and investment
strategies. Such sales generate capital for acquisitions and new developments or
for debt reduction.
In August 1999, we entered into a line of credit with 14 banks for a total
commitment of $375 million which is scheduled to mature in August 2002. The
scheduled interest rate on the line of credit is currently based on a spread
over LIBOR or Prime. The scheduled interest rates 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 $187.5 million or the remaining amount
available under the line of credit. The line of credit is subject to customary
financial covenants and limitations.
As an alternative to our unsecured line of credit, we from time to time
borrow using competitively bid unsecured short-term notes with lenders who may
or may not be a part of the unsecured line of credit bank group. Such borrowings
vary in term and pricing and are typically priced at interest rates comparable
to or below those available under the unsecured line of credit.
As of March 31, 2000, we had $222 million available under the unsecured
line of credit and $750 million available under our universal shelf
registration. 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.
In January 2000, our operating partnership issued $17.5 million of 8.25%
Series C Cumulative Redeemable Perpetual Preferred Units. Distributions on the
preferred units are payable quarterly in arrears. The preferred units are
redeemable for cash by the operating partnership on or after the fifth
anniversary of issuance at par plus the amount of any accumulated and unpaid
distributions. The preferred units are convertible after 10 years by the holder
into our 8.25% Series C Cumulative Redeemable Perpetual Preferred Shares. The
preferred units are subordinate to present and future debt.
During September 1999, we executed three interest rate reverse swap
agreements totaling $70 million which are scheduled to mature in October 2000.
These swaps are being used as a hedge of interest rate exposure on our $90
million medium term notes issued in October 1998. Currently, the interest rate
on the medium term notes is fixed at 7.23%. The interest rates on the swaps are
based on the one-month LIBOR rate plus a spread resulting in an effective
interest rate on the swaps of 7.34% at March 31, 2000.
<PAGE>
At March 31, 2000, the weighted average interest rate on floating rate debt
was 6.74%.
FUNDS FROM OPERATIONS
Management considers FFO to be an appropriate measure of performance of an
equity REIT. The National Association of Real Estate Investment Trusts currently
defines FFO as net income (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from debt restructuring and
sales of property, plus real estate depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. Our definition
of diluted FFO assumes conversion at the beginning of the period of all dilutive
convertible securities, including minority interests, which are convertible into
common equity.
We believe that in order to facilitate a clear understanding of our
consolidated historical operating results, FFO should be examined in conjunction
with net income as presented in the consolidated financial statements and data
included elsewhere in this report. FFO is not defined by generally accepted
accounting principles. FFO should not be considered as an alternative to net
income as an indication of our operating performance or to net cash provided by
operating activities as a measure of our liquidity. Further, FFO as disclosed by
other REITs may not be comparable to our calculation. Our diluted FFO for the
three months ended March 31, 2000 increased slightly over the three months ended
March 31, 1999. On a per share basis, diluted FFO for the three months ended
March 31, 2000 increased 10.4% over the three months ended March 31, 1999. The
increase in diluted FFO from property acquisitions, developments and
improvements in the performance of the stabilized properties during the three
months ended March 31, 2000 was offset by interest incurred on debt used to
repurchase our shares under our common share repurchase program.
The calculation of basic and diluted FFO for the three months ended March
31, 2000 and 1999 follows:
(In thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
------------------------
2000 1999
----------- ----------
<S> <C> <C>
FUNDS FROM OPERATIONS:
Net income to common shareholders $ 12,676 $ 13,706
Real estate depreciation 23,802 20,964
Real estate depreciation from unconsolidated ventures 809 825
Gain on sales of properties (1,933) (720)
----------- ----------
FUNDS FROM OPERATIONS - BASIC 35,354 34,775
Preferred share dividends 2,343 2,343
Income allocated to units convertible into common shares 392 618
Interest on convertible subordinated debentures 44 66
Amortization of deferred costs on convertible debentures 6 6
----------- ----------
FUNDS FROM OPERATIONS - DILUTED $ 38,139 $ 37,808
=========== ==========
WEIGHTED AVERAGE SHARES - BASIC 38,492 42,842
Common share options and awards granted 533 369
Preferred shares 3,207 3,207
Minority interest units 2,550 2,663
Convertible subordinated debentures 127 149
----------- ----------
WEIGHTED AVERAGE SHARES - DILUTED 44,909 49,230
=========== ==========
</TABLE>
INFLATION
We lease apartments under lease terms generally ranging from six to
thirteen months. Management believes that such short-term lease contracts lessen
the impact of inflation due to our ability to adjust rental rates to market
levels as leases expire.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes have occurred since our Annual Report on Form 10-K for
the year ended December 31, 1999.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
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
(a) Exhibits
27.1 Financial Data Schedule (filed only electronically with the
Commission)
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the registrant during
the quarter for which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on our behalf by the
undersigned thereunto duly authorized.
CAMDEN PROPERTY TRUST
/s/ G. Steven Dawson May 12, 2000
- ------------------------------------------- ------------------------------
G. Steven Dawson Date
Chief Financial Officer,
Sr. Vice President of Finance and Secretary
/s/ Dennis M. Steen May 12, 2000
- -------------------------------------------- ------------------------------
Dennis M. Steen Date
Chief Accounting Officer,
Vice President - Controller and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,078
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,696,060
<DEPRECIATION> 276,897
<TOTAL-ASSETS> 2,497,459
<CURRENT-LIABILITIES> 0
<BONDS> 1,200,946
0
42
<COMMON> 449
<OTHER-SE> 982,774
<TOTAL-LIABILITY-AND-EQUITY> 2,497,459
<SALES> 0
<TOTAL-REVENUES> 98,714
<CGS> 0
<TOTAL-COSTS> 37,696
<OTHER-EXPENSES> 24,599
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,584
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,019
<EPS-BASIC> 0.33
<EPS-DILUTED> 0.31
</TABLE>
