Camden Property Trust (CPT)

Total return at 5 years: 7.2%/year = 3.1% appreciation + 4.1% dividend. The target price ($123) is ex-dividend; the $23 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $153 · Multiples $119) exceeds the market price ($106).

Today — fairly valued: at $106 trades ~11.1% below its value discounted to today (~$119); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($123) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$77.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($106) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-5.4%/year) than we project (2.5%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.5 bn of owner earnings in year 5 (vs ~$0.7 bn of our base case). It recalculates if the DCF assumptions are edited.

A REIT is valued on price/Core-FFO (not P/E: the accounting depreciation of the property is not an economic cost). ⚠️ The real cash is AFFO (owner earnings), substantially lower than Core FFO —it subtracts recurring capex and non-cash straight-line rent—, and the dividend consumes almost all of the AFFO. It returns capital via dividend; it may issue equity to fund development. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

Year 0 = TTM as of Jun 30, 2026, built by levels (FY2025 + H1-2026 − H1-2025) from the 10-K and the 2Q26 earnings 8-K release (Jul 30, 2026): Core FFO TTM $736.0M ($6.85/share) and Core AFFO TTM $627.6M ($5.84/share). The XBRL growth-capex tag (PaymentsToAcquireOtherPropertyPlantAndEquipment) went stale as of Dec 31, 2025 (181 days behind the rest of the core), so maintenance capex ($92.4M TTM) and growth capex (approx. $440M, FY2025 level cited from the 10-K) were taken directly from the filing rather than from a naive TTM window, per the triage directive. Year 1 is anchored to the company's current guidance (Jul 30, 2026 8-K): 2026 Core FFO $6.68-6.82 (midpoint $6.75/share), implying a slight -1.5% contraction versus TTM — consistent with the sale of the California portfolio (11 communities, 3,620 units, $1,625M closed Jul 29, 2026, excluded from the same-property calculation) and same-property NOI growth guided at -1.65%/+0.45% (midpoint -0.60%) due to oversupply of units in core markets (Houston, Atlanta, Denver, Nashville). Path shape: dip and recovery (R3 rebound exception) — deceleration/contraction in year 1 from the disposition and oversupply, then gradual acceleration toward a durable rate of ~4.5% (3-6% band for a mature residential REIT) as new supply is absorbed and the development pipeline (1,162 units, $492M) and recent acquisitions ($645.4M closed in 2026) mature. Shares: single path across the three scenarios, net reduction of -1.5%/year from 102.363M diluted — anchored in organic buyback capacity (TTM AFFO minus TTM dividend ÷ market value ≈ 1.6%/year), not in the recent pace of $422.9M in H1-2026 (funded largely by the $1,625M from the California sale, a non-recurring event that is not extrapolated, §6). The 16× base multiple is within the REIT archetype's [15,20] band, in the lower half due to the recent deterioration in interest coverage (5.6x → falling from 6.6x) and net leverage/EBITDAre rising from 4.2x to 5.0x.

Today's multiple compresses on its own going forward as the metric per share grows. The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $123 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $106, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $123 in 5 years plus $23 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $119. Against the current market price ($106), the margin of safety is 11.1% (trades below the maximum → there is margin) and the total return at that price would be 7.2% annually.

• Entry multiple. The current multiple on Core FFO/AFFO reasonably reflects the cyclical dip, with no evident overpenalization or unjustified premium.
• Margin of safety. It trades close to intrinsic value, far from the required margin of safety.
• Sensitivity to the exit multiple. The 5-year value ranges from $96 (bear, 14×) to $149 (bull, 18×), a reasonable range given that the business depends on how the supply cycle resolves.

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (152%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. Predictable: the dividend is paid on AFFO with a payout of ~72.6%, leaving a reasonable coverage margin despite the current cyclical dip.
• Return on capital. ROIC ~11.3% (NOI/invested-capital proxy), just above the 10% bar — good but not excellent for the risk level of a leveraged, cyclical business.
• Reinvestment runway. In-house development pipeline of 1,162 units and an active acquisition program, though competing for land and capital with many other developers in the same markets.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The central driver of a residential REIT is volume (occupancy) × price (rent per unit): Camden keeps occupancy stable near 95-96% while blended net effective rent (new leases and renewals) turned negative in the second quarter of 2026 (-0.2%), a sign that oversupply is compressing price before volume. Quarterly same-property NOI is the metric that aggregates both effects and shows the deceleration more directly than either alone.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• FFO growth. Contracts -1.5% in year 1 due to the California sale and oversupply, before recovering to a durable rate ~4.5% by year 5.
• Portfolio growth. $645.4 million in acquisitions and a $492 million development pipeline underway during 2026, funded partly by the California recycling.
• Occupancy. Stable near 95-96% despite supply pressure, with no signs of structural volume deterioration.

• Recurrence of demand. Housing is a basic and recurring need, with structural demand sustained by population growth in the Sunbelt markets where Camden operates.
• Product differentiation. The product (apartment units) is largely substitutable among comparable operators; differentiation is one of location and management quality, not brand.
• Pricing power. Limited in the current cycle: blended net effective rent was negative (-0.2%) in 2Q26 due to oversupply of new units in core markets.
• Operating leverage. Moderate: operating expenses grew 2.4% year over year in 2Q26 while revenue fell 0.1%, compressing the NOI margin rather than widening it.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Portfolio quality (occupancy + same-store NOI)Occupancy 95.7% · same-store NOI +-1.1%
• ✓Dividend coverage (payout over AFFO)73% of AFFO

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Net debt/EBITDAre 5.0x, rising from 4.2x a year ago — the weakest point of the current financial health profile.
• Interest coverage. 5.6x, falling from 6.6x a year ago, still comfortable in absolute terms but on a negative trend.
• Credit rating. Investment grade (A-/A3/A-) with a stable outlook across all three agencies as of year-end 2025, which supports access to capital despite rising leverage.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Capital allocation. Active recycling of the California portfolio into higher-growth markets, with part of the proceeds earmarked to reduce short-term debt — a reasonable decision given rising leverage.
• Alignment. Insiders (including the co-founders) hold ~2% of shares, a moderate level of skin in the game for a company of this size.
• Market communication. Guidance is updated quarterly with detailed breakdowns by market and growth component, and the company explicitly acknowledges the impact of oversupply in its own downward-revised guidance.

• Transitory oversupply in core markets (Houston, Atlanta, Denver, Nashville) compressing same-property NOI (-1.1% year over year) — a classic supply cycle, not a broken business: the company's own guidance anticipates a gradual recovery.
• Transitory FFO dilution from the recent sale of the California portfolio, a deliberate capital-recycling event (missing buyers: the market penalizes the year-1 FFO decline without yet crediting the redeployment into higher-growth markets).
• Deteriorating leverage and interest coverage (net debt/EBITDAre from 4.2x to 5.0x), which likely weighs on the multiple until the effect of debt reduction with the California sale proceeds becomes visible.

This is not a deep-discount stock: it trades It trades close to intrinsic value, far from the required margin of safety., with the market reasonably reflecting the current cyclical dip rather than ignoring it.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +3%/year (+14% total): the margin of safety protects the downside. The bull (+11%/year, +68% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Supply cycle. Oversupply in core markets is the dominant risk to the thesis: if it persists beyond what was guided, the FFO recovery is delayed.
• Interest rates. Variable-rate debt and the need for continuous refinancing expose Camden to a higher-than-expected rate cycle.
• Regulatory. Rent controls in some markets where it operates could limit the ability to pass costs on to rent.
• Development execution. The in-house pipeline (1,162 units) is exposed to delays and cost overruns, as already shown by the land impairments recognized in 2025.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A narrow moat and ROIC 11% above the 10% bar, but the margin is limited (+11%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A slow grower growing 3% at a multiple/growth of 7.2 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts -5% vs our 3%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -2%/yr, bull-scenario ceiling +7%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: efficient scale, cost advantage, intangibles → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -5%, within what we project (3%) — the story squares with the numbers.