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Camden(CPT) - 2019 Q4 - Earnings Call Transcript
CPTCamden(CPT)2020-02-01 02:04
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Financial Data and Key Metrics Changes - The company reported funds from operations (FFO) for Q4 2019 of 125.6million,or125.6 million, or 1.24 per share, exceeding the midpoint of prior guidance by 0.01duetohighersame−storenetoperatingincomeandlowerturnovercosts[36][37]−Forthefullyear2019,same−storerevenuegrowthwas3.70.01 due to higher same-store net operating income and lower turnover costs [36][37] - For the full year 2019, same-store revenue growth was 3.7%, expense growth was 2%, and net operating income (NOI) growth was 4.7%, surpassing original guidance of 3.3% for revenue, expenses, and NOI [37][38] - The company expects 2020 FFO per diluted share to be in the range of 5.30 to 5.50,withamidpointof5.50, with a midpoint of 5.40, representing a 0.36pershareincreasefrom2019results[38][39]BusinessLineDataandKeyMetricsChanges−Same−propertyrevenuegrowthforQ42019was4.10.36 per share increase from 2019 results [38][39] Business Line Data and Key Metrics Changes - Same-property revenue growth for Q4 2019 was 4.1%, with top performers being Phoenix at 6.3%, Raleigh at 6%, and San Diego/Inland Empire at 5.3% [24] - The company anticipates same-property revenue growth in 2020 to be between 2% and 4%, with Phoenix expected to outperform at 5% to 6% [11][23] Market Data and Key Metrics Changes - The company assigned grades to its markets, with Phoenix receiving an A rating and stable outlook, while Houston received a C+ rating with a stable outlook [12][22] - Job growth in Phoenix is projected at nearly 50,000 new jobs, with only 6,000 new apartments coming online, indicating strong supply-demand metrics [12][22] - The Southeast Florida market is rated C+ with an improving outlook, expecting over 30,000 new jobs and 9,000 new units in 2020 [21] Company Strategy and Development Direction - The company has focused on improving its portfolio quality through significant property sales and acquisitions, with 3 billion in sales and 2.3billioninacquisitionsoverthepastdecade[8]−Thecompanyplanstocontinueitsdevelopmentstrategywith2.3 billion in acquisitions over the past decade [8] - The company plans to continue its development strategy with 100 million to 300millioninon−balancesheetdevelopmentstartsthroughout2020[43]−Thecompanyaimstomaintainabalancedportfolioofurbancoreandsuburbanassetstomitigaterisksassociatedwithmarketfluctuations[50]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementexpressedconfidenceinthedemandforrentalpropertiesdespitechallengesinspecificmarketslikeHouston,citingdemographictrendsfavoringrentingoverhomeownership[54]−Thecompanynotedthatwhilejobgrowthisexpectedtoslow,thedemandforrentalunitsremainsstrongduetochanginglifestylepreferencesamongvariousdemographicgroups[54]−Managementacknowledgedthepotentialforrevenuegrowthtomoderatein2020duetoincreasedsupplyandfewerjobs,butremainsoptimisticaboutoverallperformance[75]OtherImportantInformation−Thecompanycompleteda300 million in on-balance sheet development starts throughout 2020 [43] - The company aims to maintain a balanced portfolio of urban core and suburban assets to mitigate risks associated with market fluctuations [50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for rental properties despite challenges in specific markets like Houston, citing demographic trends favoring renting over homeownership [54] - The company noted that while job growth is expected to slow, the demand for rental units remains strong due to changing lifestyle preferences among various demographic groups [54] - Management acknowledged the potential for revenue growth to moderate in 2020 due to increased supply and fewer jobs, but remains optimistic about overall performance [75] Other Important Information - The company completed a 300 million bond offering at a low interest rate, locking in long-term debt and ensuring all assets are unencumbered [32][34] - The company reported a decrease in annual net turnover to 43% in 2019, indicating improved tenant retention [26] Q&A Session Summary Question: What is the outlook for Houston's market given the supply and job growth? - Management indicated that while supply estimates vary, they expect to achieve around 2% revenue growth in Houston, supported by a balanced portfolio of urban and suburban assets [48][49] Question: How does political risk in DC affect the market? - Management noted that election years can lead to increased economic activity, particularly if there is a change in administration, which could benefit the DC market [55] Question: What are the expectations for other income growth in 2020? - Management expects non-apartment rental income to align with apartment rental income growth, driven by parking revenue and utility income recapture initiatives [79] Question: What is the company's leverage outlook for the year? - The company is currently at a net debt-to-EBITDA ratio of 3.9 times and expects to be in the mid-4 times range by year-end, indicating capacity for additional leverage [80]