Camden Property Trust (CPT), a leading operator in the multifamily apartment community, said the trust’s strong reported same-property growth in the last quarter was due to its continued investment in acquiring new apartment communities. However, as the Federal Reserve plans to raise US interest rates more aggressively, real estate company returns could be negatively impacted. So, is it worth betting on the stock now? Find out.
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Camden Property Trust, a multifamily real estate company (CPT) Houston, Tex., Participates in the development, acquisition, ownership and construction of apartments in the United States. Its 8.75% same-property revenue growth, driven by its product-diversified portfolio in the Sunbelt market in the fourth quarter of 2021, along with strong rent increases, helped its share price rise 13.5% in the last three months. Due to continuing as a strong market, the real estate firm expects to see strong revenue growth in 2022.
However, shares of CPT have declined 5.9% year-on-year. Because the Federal Reserve plans to raise interest rates by half-percentage-points at its forthcoming meeting, if inflationary pressures continue to mount, the CPT could be weakened in the short term for a negative impact on REIT returns.
While the strategic acquisition of apartment communities to boost the company’s FFO yields may help it capitalize on stable new supply, an uncertain interest rate environment and plans to sell shares to reduce CPT borrowing can make investors nervous about the stock.
Here’s what could affect CPT performance in the coming months:
Selling shares
This month, the CPT price a Public offer 2.9 million of its common stock, including a 30-day option to buy an additional 435,000 ordinary shares. The company expects total revenue of about $ 493 million from the offer, which is expected to close on April 12, 2022. CPT plans to use the proceeds from the offer to reduce borrowing under its $ 900 million unsecured credit line to fund its recent acquisitions. .
Strategic acquisition
This month, the company completed the acquisition of a partnership interest in its two discretionary investment funds from the tax teacher retirement system. Prior to CPT, the fund had 31.3% ownership of interest. The total transaction was roughly 1.1 billion, partly financed by cash and loans under its $ 900 million unsecured credit line. In addition, the property includes 22 multi-family communities, including 7,247 apartment houses, located primarily in the Sunbelt market.
The real estate company acquired Camden Greenville in Dallas, Texas for about 165.5 million. In addition, it has acquired land in Denver and Nashville for about $ 60.6 million for future development purposes.
Mixed financial
In the fourth quarter ended December 31, 2021, CPT’s asset revenue grew 16.7% year on year to $ 305.36 million. Its net income for the quarter was $ 217.86 million, compared to $ 30.38 million in the year-ago period. However, CPT non-property net income recorded $ 8.19 million, representing a 41.9% decline year on year. Denver’s average occupancy rate stood at 96.4% in the fourth quarter, compared to 97% in the third quarter of 2021. In addition, as of December 31, 2021, its total debt stood at $ 3.17 billion.
Mixed profitability
The company’s 61.6% trailing-12-month gross profit margin is 67.6%, 9% lower than the industry average. But its 26.1%, 7.9%, and 2.1% trailing-12-month net income margins, ROE, and ROTC are higher than their respective industry averages, respectively. And its 3.8% ROA is 62.7% higher than the 2.3% industry average.
POWR ratings reflect uncertainty
CPT has an overall C rating, which translates into neutral among us POWR rating Method. POWR ratings are calculated taking into account 118 individual factors, each factor weighing to an optimal degree.
Our proprietary rating system evaluates each stock based on eight distinct categories. CPT has a C grade for stability. The stock’s five-year monthly beta justifies the 0.79 grade.
CPT has a C in terms of quality grade. The gross profit margin of the company’s low-industry is consistent with this grade.
Beyond the grades I have highlighted, one can see additional CPT ratings for sentiment, momentum, growth and value. Here. The stock ranks # 18 out of 25 D-rated stocks REITS – Residential Art
The last row
As CPT’s substantial investment in new markets to leap to new jobs and renewal lease rates rise, its shares are rising, and growing concerns surrounding the Federal Reserve’s 50-basis-point increase in interest rates could cause REIT stocks to suffer a pullback in the near term. In addition, the company may add to the concerns of mixed financial investors. So, we think investors should wait for some improvement in the potential of CPT before investing in the stock.
How does the Camden Property Trust (CPT) stack up against its peers?
Although CPT has an overall C rating, one might consider looking at its industrial counterpart, Daiwa House Industry Co., Ltd.DWAHY), Having an overall B (By) rating.
CPT shares remained unchanged in pre-market trading on Monday. Year-to-date, the benchmark S&P 500 index rose -5.47% over the same period, while CPT fell -5.34%.
Author Profile: Emon Ghosh
Eamonn is an investment analyst and journalist, passionate about financial research and writing. He began his career at Kanta IMRB, a leading market research and consumer consulting firm.
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