Camden Property Trust to Buy Out Two Discretionary Investment Funds
The price of the remaining partnership interest in the $2.1 billion valued funds goes to the Teacher Retirement System of Texas.
Camden Property Trust announced that it plans to acquire the remaining ownership interests in two discretionary funds, with a gross valuation of $2.1 billion, that it has held with the Teacher Retirement System of Texas. Camden has a 31.3% interest while the pension fund has the 68.7% that Camden will acquire. The deal is expected to close early in the second quarter of 2022.
After an adjustment for $520 million in existing secured mortgage debt that will remain outstanding after closing, Camden will pay approximately $1.1 billion. The payment will come from a combination of cash on hand and borrowing against a $900 million unsecured credit line. As of December 31, 2021, Camden had $613.4 million in cash and cash equivalents, according to its 10-K.
The fund assets that are part of the transaction include 22 multifamily communities with 7,247 apartment homes with an average age of 12 years, primarily located in Sunbelt markets across Camden’s portfolio. The company expects an initial funds from operations (FFO) yield of 4.25%, or $0.08 per share assuming an April 1, 2022 close.
Funds from operations in 2021 were $559.4 million. On a per diluted share basis, that was $5.39, up from $4.90 in 2020. The company’s market cap is approximately $17 billion, with share prices currently in the mid-$160s, according to data from S&P Global Market Intelligence. In early February, Camden announced a 13.3% increase in dividend.
“We are pleased to announce this transaction, which allows us to fully acquire a very attractive portfolio of assets with no execution or integration risks,” Camden chairman and CEO Richard Campo said in prepared remarks. “We have operated these Camden communities for many years and are excited for the opportunity to add them to our wholly-owned portfolio.”
Camden owns interests in and operates 171 properties containing 58,300 apartment homes across the United States, according to the company. After completion of five properties currently under development, the portfolio will include 60,073 apartment homes across 176 properties.
“As a result of this transaction, the expected net operating income contribution from markets including Houston, Austin, Dallas, and Tampa would increase slightly, while the remainder of Camden’s markets would reflect slightly lower concentrations,” the company said.