Camden Positions for $250M Stock Buyback

HOUSTON-Camden Property Trust's plan to buy back up to $250 million of its common shares didn't surprise analysts. REIT experts believe the buyback will be used to increase stock value and trim the local company's portfolio.

According to a press release, the multifamily REIT will acquire shares through open market purchases, block purchases and privately negotiated transactions at no specific time or amount. The company says it plans to fund share repurchases with proceeds from asset sales and borrowings under its unsecured line of credit.

"Several years ago, Camden repurchased nearly $250 million of its common stock when we believed our shares were trading below net asset value," Richard Campo, Camden's chairman and CEO, says in the release.

Although Camden couldn't be reached for comment, analysts believe value creation is precisely why the company initiated a buyback. "This is the classic move to make if you believe your stock is trading below what your net asset value would be," says Richard Anderson, senior REIT analyst with BMO Capital Markets in New York City. "You're capturing, in theory, what you believe your company is worth and what it's valued at."

Anderson tells GlobeSt.com that buybacks haven't been common because REITs, by and large, have done well on the market. But aftereffects from the sub-prime lending business are having a psychological impact on stocks, which is indirectly lowering investor confidence on anything connected with housing.

"An opportunity surfaced for the company to sell assets and buy back stock in recognition they believe their shares are no longer too expensive to warrant acquiring them," Anderson adds.

David Rodgers, director with RBC Capital Markets in New York City, is somewhat surprised by Camden's move, but understands it needs to create value through stock. "Their stocks have been harder hit this year compared to last year," he adds. "Overall, the apartment market has been neutral, to date, and they may have been frustrated with that since the last time they issued equity."

Rodgers expects Camden's asset sales most likely will be one-offs in the Midwest as well as downsizing exposure in markets like Dallas and Las Vegas. "They're likely trying to manage their exposure to certain types of markets in which they're overexposed while allowing other markets like Washington, DC and Southern California to become more important over time," he says.

Neither analyst is worried that Camden is in any trouble. Rodgers and Anderson respect the REIT's management for its sound decision-making process. "It's a well thought-out organization that does things appropriately and has demonstrated a very good track record since going public 15 years ago," Anderson adds.