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Camden Property Trust Upgraded To 'A-' On Sustained Low Leverage And Solid Operating Performance, Outlook Stable

  • Camden Property Trust reported solid operating results for the fourth quarter of 2018 and we project that the company will continue to generate steady cash flow growth over the next two years.
  • We believe the company remains committed to following a conservative financial policy and maintaining low debt leverage, with its credit protection measures among the strongest in our rated REIT universe.
  • We are raising our issuer credit rating on Camden to 'A-' from 'BBB+'.
  • The stable outlook reflects our expectation that Camden's occupancy rates will remain in line with current levels as the company continues to generate low- to mid-single-digit annual net operating income (NOI) growth over the next two years. In addition, we project that its S&P Global Ratings adjusted debt to EBITDA will rise only slightly to the mid-4x area while it sustains a debt-to-undepreciated capital ratio of around 30%.
NEW YORK (S&P Global Ratings) Feb. 4, 2019—S&P Global Ratings today took the 
rating actions listed above. The upgrade acknowledges Camden's solid operating 
results relative to those of its rated peers, the favorable demand drivers for 
multifamily REITs, and the company's commitment to maintaining a strong 
balance sheet with leverage consistently lower than at its multifamily peers.

The stable outlook on Camden reflects our expectation for relatively stable 
occupancy levels and low- to mid-single-digit annual NOI growth over the next 
two years. In our view, development completions will supplement the company's 
EBITDA growth as it mitigates the risk of its new development starts with a 
healthy amount of prefunding. We project that Camden will remain committed to 
maintaining a relatively strong balance sheet with debt to EBITDA rising only 
slightly to the mid-4x area and debt to undepreciated capital remaining around 
30%.

We could lower our rating on Camden if it pursues debt-funded acquisitions or 
development projects such that its debt to EBITDA rises above 5x or its debt 
to undepreciated capital increases above 35% on a sustained basis. We could 
also lower our rating if the company's operating metrics significantly worsen 
compared with our expectations or if there is any change in management's 
funding strategy or financial policy.

We consider an upgrade as highly unlikely over the next two years given 
Camden's small size relative to its similarly-rated peers. That said, we would 
consider an upgrade if the company significantly increases its scale and 
improves the quality of its assets such that its operating metrics 
consistently outpace those of its peers. In order to merit strong 
consideration for an upgrade, Camden would also need to reduce its S&P Global 
Ratings adjusted debt to EBITDA below 3.5x while sustaining debt to 
undepreciated capital of less than 25%.
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