Dive Brief:

• As interest rates have increased, apartment owners are focused on borrowing costs. Recently, two public companies took steps to shore up their balance sheet.
• Last week, Houston-based REIT Camden Property Trust announced that it used its unsecured revolving credit facility to retire approximately $185.2 million of secured variable rate debt with a current weighted average interest rate of approximately 7.1%. While the unsecured line also has a variable rate, the interest is 100 basis points lower, a company spokesperson told Multifamily Dive. The company will look to fix rates long-term through an unsecured bond offering later this year.
• In May, Las Vegas–based single-family rental operator American Homes 4 Rent used forward equity to pay down floating rate maturities of 5.8%. In the process, it brought its leverage to below 5.4 times and has zero floating rate debt. 

Dive Insight:

With the retirement of $185.2 million of secured variable rate debt, 91.3% of Camden’s debt is now unsecured. The company, which is the No. 14 owner in the country, according to the National Multifamily Housing Council, will recognize charges of approximately $2.5 million with this early retirement of debt. 

Camden said the changes of $2.5 million should reduce its 2023 earnings per share and funds from operations by $0.02 per share. The charges will be added to the calculation of its core funds from operations.

In Camden’s first quarter earnings call in April, CFO Alex Jessett noted that the REIT was expecting a $0.01 decrease in earnings per share from the higher floating rate interest expense. 

“Our balance sheet remains strong with net debt to EBITDA for the first quarter at 4.3 times,” Jessett said. “And at quarter end, we had $268 million left to spend over the next three years under our existing development pipeline.”

In the company’s first-quarter earnings call in May, American Homes 4 Rent CEO David Singelyn said the firm’s investment grade balance sheet, staggered maturity profile and focus on long-term fixed-rate debt will minimize near-term interest rate volatility. 

“Additionally, our leverage profile, which ended the quarter at 5.4 times, positions us for further resiliency as well as flexibility for growth,” he said.

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