(The following statement was released by the rating agency)
NEW YORK, June 25 (Fitch) Fitch Ratings has affirmed the credit
Camden Property Trust (NYSE: CPT or Camden) as follows:
--Issuer Default Rating (IDR) at 'BBB+';
--$500 million unsecured revolving credit facility at 'BBB+';
--$1.6 billion senior unsecured notes at 'BBB+'.
The Rating Outlook has been revised to Positive from Stable.
KEY RATING DRIVERS
The Positive Outlook reflects leverage that is approaching
for the 'A-' level, along with excellent unencumbered asset
unsecured debt. Other credit strengths are Camden's management
to maintaining strong credit metrics and the company's proven
access to capital.
In addition, job growth in many of Camden's markets should
support increases in
rental rates and EBITDA (though growth is slowing relative to
period), and fixed-charge coverage is expected to sustain at
with an 'A-' rating.
Camden targets Sunbelt and mid-Atlantic markets with features
such as economic
growth that lead to household formation and job growth, an
attractive quality of
life, and/or high single family home prices making the company's
economical housing choice. Camden's same-store NOI growth
through the cycle has
been in line with other apartment REITs, a testament to strong
despite lower barriers to new supply compared with more
multifamily REITs. Credit concerns center on the development
(cost-to-complete is the highest of the multifamily REITs),
which improves asset
quality but adversely impacts corporate liquidity.
Camden's leverage was 5.5x for the trailing 12 months ended
March 31, 2014,
which is the lowest of Fitch rated multifamily REITs. Fitch
Camden's leverage will be in the low 5x range over the next
12-to-24 months due
to same-store NOI growth and incremental EBITDA from new
developments. This is
expected to be strong for the 'BBB+' rating for a multifamily
REIT in Sunbelt
markets. In a stress case not anticipated by Fitch in which the
experiences same-store NOI declines that occurred during
would approach the mid-6x range, which would be appropriate for
a 'BBB+' rating.
The company has consistently sold assets and/or issued equity to
maintain leverage since 2009 and targets 5x debt to EBITDA. In
has the lowest leverage as a percentage of asset value among
even when adjusting for a slightly above-average capitalization
rate used to
value its portfolio.
Excellent Unencumbered Asset Coverage
The company has primarily utilized the unsecured bond market for
except during periods of capital market dislocation.
Unencumbered assets (1Q2014
unencumbered property NOI divided by a stressed 7.5%
covered unsecured debt by 3.2x at March 31, 2014, which is
strong for the 'BBB+'
rating and indicates strong financial flexibility. This metric
has been above
3.0x since 2012. In addition, CPT's unencumbered debt yield was
23.8% as of
March 31, 2014, well above its 14.3% secured debt yield,
indicating that the
company has lower corporate leverage than total enterprise
leverage and thus
strong financial flexibility from its unencumbered pool.
Strong Management Team Focused on Credit
Richard Campo (Camden's Chairman of the Board of Trust Managers
Executive Officer) and Keith Oden (Camden's President and Trust
co-founded Camden's predecessor companies in 1982 and have
steered the company
through multifamily and capital markets cycles. The Board
metrics in management compensation, looking at the enterprise
performance metrics relate to equity returns (adjusted funds
from operations per
share and growth as well as total shareholder return), asset
growth), leverage (notably debt to EBITDA in the top third of
group), asset quality (development, acquisitions and
dispositions) and culture.
Proven Access to Capital
The company has issued $1.4 billion of unsecured bonds since
2006, most recently
a $250 million 4.25% 10-year offering in December 2013 priced to
yield 4.272% to
maturity or 150 basis points (bps) over the benchmark rate.
Camden has issued
$1.5 billion of common stock since 2006, including follow-on
offerings in May
2009 and January 2012 as well as via at-the-market offering
programs, at a
weighted average discount to net asset value of 1.1%, indicating
to defend the balance sheet in periods of high leverage.
Job Growth Supports Cash Flow and Fixed-Charge Coverage
Job growth in the energy sector particularly is supporting cash
Houston (12.6% of pro rata NOI) employment growth has been
strong, as the metro
added roughly three jobs for every one lost in the recession.
relocating employees from Ohio and Virginia to the Houston metro
in 2015. Tampa
(6.8% of pro rata NOI) has employment growth driven by back
and call center operations, while Dallas (6.7% of pro rata NOI)
the largest nominal number of job gains in any U.S. metro over
the past year due
to population growth twice the U.S. average, according to
CoStar. The Washington
D.C. metro (15.9% of Camden's pro rata NOI) has an economy that
is driven by the
government sector, but the largest industry in D.C. is actually
scientific, and technical services, according to CoStar.
Camden's portfolio rent rollover rate was 2.1% on new leases and
renewals on average for the trailing 12 months ended March 31,
2014, the primary
component of 6.2% average same-store NOI growth, as occupancy
between 95% and 96% (95.6% as of March 31, 2014).
Fixed charge coverage was 3.6x for the trailing 12 months ended
March 31, 2014,
up from 3.5x in 2013 and 3.0x in 2012. Fitch projects that fixed
will remain between 3.5x and 4.0x over the next 12-to-24 months
due to organic
and development driven EBITDA growth, which is strong for the
'BBB+' level for a
multifamily REIT. Fitch defines fixed-charge coverage as
EBITDA less recurring capital expenditures divided by total
In a stress case not anticipated by Fitch in which the company
same-store NOI declines that occurred during 2009-2010,
would remain above 3.0x which would be adequate for a 'BBB+'
Fitch expects Camden's same-store NOI growth to average
through 2016. The company's same-store NOI growth averaged 3.1%
through 1Q2014, in line with multifamily peers (3.3%), with
volatility (standard deviation of 5.1% compared with the peer
average of 4%).
Fitch attributes this to strong performance subsequent to the
in 2005 as well as weaker performance than peers in 2009. Above
development activity in the previous upcycle led to a decline in
and multifamily housing fundamentals during the recession.
Stronger job growth
over the next 12-to-24 months in Camden's markets should lead to
more cushion on
credit metrics through the cycle.
Large Development Pipeline
As of March 31, 2014, the company's cost-to-complete development
elevated at 7.2% of gross assets, representing a commitment of
across 14 projects. Development is a core tenet of Camden's
generally enhances portfolio asset quality but can pressure its
Fitch estimates the company's liquidity coverage ratio at 0.8x
for the period
April 1, 2014 to Dec. 31, 2015. Fitch defines liquidity coverage
sources divided by liquidity uses. Liquidity sources include
cash, availability under the company's $500 million unsecured
facility and projected retained cash flow from operating
uses include pro rata debt maturities, projected recurring
and projected development expenditures. Fitch expects that the
access the unsecured bond market and also use proceeds from
asset sales and
retained cash to fund development and acquisitions.
The company's AFFO payout ratio was 65.7% in 1Q2014, down from
73% in 2013 and
75.5% in 2012. Based on the current payout ratio, Fitch projects
will retain nearly $120 million annually in organic cash flow,
The Positive Outlook centers on Fitch's expectation that
Camden's leverage is
approaching the low 5x range, which is a level appropriate for
the 'A-' rating.
The Positive Outlook also incorporates Fitch's projections of
coverage in excess of 3x, and fixed-charge coverage in the high
However, development continues to negatively impact liquidity
The following factors may result in an upgrade to 'A-':
--Fitch's expectation of leverage sustaining below 5.25x, which
cushion through the cycle at the 'A-' level (leverage was 5.5x
as of March 31,
--Fitch's expectation of fixed-charge coverage sustaining above
(fixed-charge coverage was 3.6x for TTM ended March 31, 2014).
The following factors may result in negative momentum on the
--Fitch's expectation of cost-to-complete development sustaining
above 10% of
gross asset value (this metric was 7.2% as of March 31, 2014);
--The funding of development primarily via debt incurrence,
which is not Fitch's
--Fitch's expectation of leverage sustaining above 6.0x;
--Fitch's expectation of fixed-charge coverage ratio sustaining
--Fitch's expectation of liquidity coverage sustaining below
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
Stephen Boyd, CFA
Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278,
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (May 28, 2014);
--'Rating U.S. Equity REITs and REOCs (Sector Credit Factors)
(Feb. 26, 2014);
--'Recovery Ratings and Notching Criteria for Equity REITs'
(Nov. 19, 2013).
Applicable Criteria and Related Research:
Rating U.S. Equity REITs and REOCs (Sector Credit Factors)
Recovery Ratings and Notching Criteria for Equity REITs
Corporate Rating Methodology - Including Short-Term Ratings and
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