Cheaper by the dozen

Preparing to cash in on steadily rising rents and an onslaught of new renters entering the market, Camden Property Trust will increase its wholly-owned portfolio by 4,034 apartments by the end of January.


In mid-January, the apartment REIT announced the exercise of an option to purchase the 80 percent interest not currently owned by Camden in 12 related joint ventures for $99.5 million.

Camden originally owned 100 percent of all 12 assets, but sold the 80 percent interest to UBS and The Tuckerman Group in March 2005 to raise cash for a $1.9 billion merger with Summit Properties that was completed shortly thereafter. The properties are located in Texas, Nevada, Arizona and California, where the REIT has a significant footprint.

“The South is definitely rocking, again,” Camden CEO Ric Campo said in November, adding that limited new supply pressure, negative consumer attitudes about home ownership and continued employment growth are fueling the steadily improving fundamentals in the REIT’s nationwide apartment portfolio.

The company’s best performing markets in Q3 2011 were Austin, Houston, Dallas, Phoenix and Charlotte, all of which saw year-over-year revenue growth of 5.5 percent or more in the quarter. Although Las Vegas didn’t make such a sterling showing, down 0.9 percent in same store revenues from Q3 2010, Campo still expressed optimism about the desert market where the REIT owned 3,969 apartments at the end of September.

Three of the properties Camden bought out of the JV-the 315-unit Camden Pines, the 234-unit Camden Summit and the 400- unit Camden Tiara-are located in Las Vegas, which, Campo said, has historically been a great market, “minus the bust.” The gambling mecca has “all the dynamics of being able to make a bottom and come back reasonably strong,” he said, citing statistics indicating that if just half of the jobs lost in the city in the recent economic debacle were filled again it would mean 70,000 to 80,000 employment opportunities. “So, the dynamic can really turn pretty strong there. We’ve always liked Las Vegas and we continue to think it’s a good market.”

Over the past 15 years, there have been points in time when Las Vegas was Camden’s primary driver of growth for runs of two or three years in a row. “So, the way we think about it is Las Vegas is a highgrowth, high-beta market,” said Campo.

But, he said, almost nothing was trading in Las Vegas. In 2010 there were 14 transactions in Glitter City, the largest of which sold for $200,000 per door, but, by the end of Q3 2011, only one institutional quality trade had taken place there all year, when Colonial Property Trust purchased a property adjacent to one the apartment REIT already owned.

“Beyond that, there has been zero even solid B assets in Las Vegas traded. And it’s sort of the psychology of why would you sell now in Las Vegas, after you’ve had the bottom fall out of the market and cash flows dropped dramatically?,” he asked, rhetorically. “It would be fairly silly to sell now. Most of the owners in Las Vegas are not interested in selling, so, if you wanted to buy a big portfolio there, they don’t exist.”

In the Phoenix area, where the REIT owned and managed 1,441 same store units as of the end of Q3 and four of Camden’s recent acquisitions are located-the 192- unit Camden Fountain Palms and the 288- unit Camden Sierra in the metro’s suburb of Peoria, the 272-unit Camden Pecos Ranch in Chandler and the 240-unit Camden Town Centre in Glendale-Camden saw revenues grow 8.3 percent year-over-year. And in Houston area, where three of the portfolio properties-the 380-unit Camden Sugar Grove, the 548-unit Camden Holly Springs and the 288-unit Camden Park- are located, the REIT achieved 7.5 percent revenue growth from Q3 2010 to Q3 2011.

The portfolio also includes the 456-unit Camden Addison in the Dallas/Ft. Worth market, where the REIT owned and managed 17 properties with a total of 6,767 apartment units as of the end of Q3 2011.

The 12th asset of the bunch is the 421- unit Camden Parkside in Fullerton, CA. in northern Orange County, about 25 miles southeast of downtown Los Angeles. Including Parkside, as of the end of Q3, Camden owned a total of 2,481 units in six properties in the Los Angeles/Orange County market.

“We’ve been pretty active on the transaction side of our business in 2011,” Camden President Keith Oden said during a late September conference call, predicting that by the end of the year the REIT would complete $600 million of acquisitions. “All of the acquisitions we’ve done this year, all $600 million, will be done with our acquisition fund with Texas Teachers (pension fund),” he said.

“Even though asset values have increased in the last year, the cash-on-cash returns that we can generate have gone up substantially, primarily because of the collapse in debt rates,” he explained.