Camden Reports 44% Earnings Drop, Looks To Sell Older Houston, D.C. Assets

Multifamily owner and operator Camden Property Trust’s net income fell 43.6% year-over-year, down from $220M in 2019 to $124M in 2020, according to the firm's Q4 2020 earnings report.

During the fourth quarter, Camden reported net income of $29.2M, down by 69% from $95M in Q4 2019.

The coronavirus pandemic played a central role in damaging the firm's bottom line over the past year. Aside from a slowdown in new leases, the pandemic led to additional costs related to resident and employee relief funds, direct pandemic-related expenses and bonuses paid to on-site employees.

Looking ahead to 2021, Camden plans to sell its older multifamily properties in Houston and Washington, D.C., in favor of purchasing properties in other markets that have a stronger growth outlook, executives said during the Q4 2020 earnings call.

The firm’s strategy in 2021 will be similar to the last real estate cycle, where Camden disposed of roughly $3B in properties that were more than 20 years old, Camden CEO Ric Campo said. At the same time, the company bought $2B in properties that averaged five or six years old.

“We will be buying in markets we're underweighting. So if you look at some of the markets that we have an underweight in, it would be Tampa, Raleigh, potentially Dallas, as well as Denver,” Campo said.

Camden owns interests in and operates 167 multifamily properties in 14 markets. Houston was the firm’s worst-performing market in 2020, after net operating income there dropped 8.3% from the prior year. The fall was a reflection of the 20,000 new apartments that came online in 2020. Another 20,000 units are expected to deliver in 2021, intensifying competition for tenants and placing downward pressure on rent growth.

Washington, D.C., fared better in 2020, recording 1.5% net operating income growth from 2019. However, Camden expects 12,000 new units to deliver in 2021 and even more in the coming years, increasing competition for new renters.

The slow rollout of coronavirus vaccines is expected to keep economic recovery muted during the first half of 2021. For that reason, Camden is aiming to purchase new properties through midyear, and then focus on disposing of older Houston and Washington assets in the second half of 2021.

“We believe that both D.C. and Houston will be better in the second half of the year, and that's why we're going to be selling in the second half and not in the first half,” Campo said.

During economic downturns, it is common for investors to eagerly snap up value-add deals. In Houston, that has been particularly evident in the office market over the past year. That opportunistic appeal of value-add is why Campo said he expects plenty of interest in the firm’s older properties when they are placed on the market.

“As long as we're taking advantage of that huge bid on our older properties, then we're fine being a top bidder on the newer properties as well,” Campo said.

Camden’s rent collections actually improved year-over-year during Q4 2020, recording an overall collection rate of 98.6%, up from 97.9% during the same quarter in 2019. However, local and state government moratoriums meant that the company had difficulty in collecting rent in California, where the state had an average rent delinquency rate of 6.4%.

“California is just the classic example of people can pay, they just won't. And it's not a function of the California markets are more negatively impacted. It's just a function of the government,” Campo said. “Ultimately they will have to pay, or their credit will be destroyed. And it'll be interesting to see how that all plays out, and how the government responds to that going forward.”

CORRECTION, FEB. 8, 10:46 A.M. CT: The lede has been clarified to show Camden’s net income has decreased but the company did not report a loss.