Camden's president discusses his challenges, rewards and business forecasts

Camden Property Trust and its visionary leaders have been quite busy lately. With two mergers (Oasis Residential Inc. and Paragon) in two years, Camden currently owns interest in and operates 148 apartment communities containing 49,389 apartment homes in the Sunbelt and Midwestern markets from Florida to California. Upon completion of 14 properties under development, the company's portfolio will increase to 55,069 apartment homes in 162 communities.

Based in Houston, Camden Property Trust is a self-administered, self-managed real estate investment trust (REIT) engaged in the ownership, development, acquisition, marketing and disposition of multifamily apartment communities.

D. Keith Oden has been president and COO of Camden Property Trust since May of 1993. Oden was co-founder of Camden's predecessor companies in 1982 and was continuously involved as a principal executive and director from 1982 to July 1993. He is a member of the American Institute of Certified Public Accountants (AICPA) and is a licensed real estate broker.

Oden began his career as a management consultant with the public accounting firm of Deloitte, Haskins and Sells. He joined Century Development Corp. in 1981 and later became director of financial planning, where he participated in the feasibility analysis and financial structuring of real estate property values in excess of $2 billion.

MM: With such record growth, what particular challenges has Camden been confronted with in the past year? What particular challenges have you been confronted with, personally?

Oden: The primary challenge of tripling our size (employees, assets and number of markets) was to integrate two companies, Paragon and Oasis, into Camden using a best practices approach. Both Paragon and Oasis had very talented property operations personnel that emphasized customer service. Reaching agreement on a common operating philosophy that incorporates the best of three companies with excellent practices was quite a challenge. As a "hands-on" real estate operator, maintaining my involvement with each of 160 properties in a portfolio that now stretches from Orlando to Orange County, Calif. has been my greatest challenge.

MM: What rewards has the firm, as a growing company, encountered in the past year?

Oden: Our company now has 15 core markets in nine states vs. six markets in two states a year ago. This diversity provides our investors with a greater level of stability and growth prospects that would have never been possible a year ago. Camden is now the only fully integrated (asset management, development and acquisitions) multifamily REIT operating coast to coast.

MM: How has the acquisition of Oasis affected Camden? How are you integrating this acquisition into the parent company, and are you looking to do more of these kinds of deals?

Oden: The acquisition of Oasis gave Camden an entry into three of the fastest growing markets in the country (Las Vegas, Denver and Southern California) and completed our coast-to-coast Sunbelt expansion. The integration has gone extremely smoothly, due in part to our previous experience with the Paragon merger. The high quality of the assets Oasis built and acquired gives us a tremendous ability to outperform in these markets. The Oasis merger was a compelling strategic fit for Camden but it also met our other criteria for a merger, it was accretive immediately, it maintained the strength of our balance sheet and it provided entries into other targeted core markets. We would always consider additional merger opportunities that meet these objectives.

MM: What kind of growth opportunities are you looking forward to? What are your strategies for growing the company?

Oden: Camden is currently involved in the development of a roughly $400 million pipeline of properties. Our strategies for growth include internal growth - Camden's same property performance has been one of the best in the sector for the last three years - and external growth through development and acquisitions.

MM: Do you plan to form alliances with the various vendors you are involved with? Oden: We have formed a number of alliances with national and regional vendors including phone, cable and Internet providers.

MM: What do you say when people ask you if REITs are artificially driving up property values?

Oden: While property values have increased, it has been primarily attributable to improving property fundamentals. Rental growth and occupancy increases have increased cash flows, which increase property values. The most aggressive purchasers of properties in our markets are those who are taking advantage of low interest rates and very high leverage, 90%-95% of purchase price, to achieve an acceptable equity return. Since REITs use only moderate leverage, 30%-40% on average, they are almost never the high bidder in competitive bid situations and are therefore not driving up property values, artificially or otherwise.

MM: Do you think Wall Street really understands the REITs? Do you think Wall Street has treated your company fairly? Oden: I think the level of understanding Wall Street has of REITs has increased dramatically since we became public in 1993. Our challenge as an industry is to assist in transferring that knowledge to investors outside the real estate sector.

MM: What is your prediction for the multifamily industry through the end of the decade?

Oden: The industry will continue to consolidate and the consolidation will lead to more sophisticated property management techniques which will address the residents' demands for increased convenience, service and value. Smaller companies (owners as well as operators) will find it difficult to compete in this environment.

MM: List the top three trends that will impact your firm in the next year.

Oden: (1) Larger, better capitalized companies will dominate this development cycle. As competition for new development sites increases and lenders become more cautious of potential supply excesses, the large, low leverage firms, primarily REITs, will have significant competitive advantages. (2) Low interest rates will allow high leverage competitors to continue "overpaying" for acquisitions. They will also keep home ownership as an attractive alternative for household formations. (3) REIT shares will outperform the broader market as investors realize that, both on a relative and absolute basis, REIT shares represent a compelling value.

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