Camden Property (NYSE:CPT) Trust reported its fourth-quarter 2024 earnings, revealing a slight miss on earnings per share (EPS) compared to market expectations. The EPS came in at $0.37, falling short of the anticipated $0.41, while revenue slightly exceeded forecasts at $386.32 million against an expected $384.24 million. Despite the EPS miss, Camden Property’s stock rose 1.35% in after-hours trading, signaling a positive market reaction to other aspects of the company’s performance and outlook.
Key Takeaways
- Camden Property Trust’s Q4 2024 EPS missed expectations by $0.04.
- Revenue surpassed forecasts, reaching $386.32 million.
- Stock price increased by 1.35% in after-hours trading.
- The company completed significant construction projects and acquisitions.
- Guidance for 2025 indicates a focus on strategic market repositioning.
Company Performance
Camden Property Trust demonstrated resilience in the fourth quarter of 2024, despite missing EPS forecasts. The company reported core funds from operations (FFO) of $190.4 million, or $1.73 per share, reflecting its strong operational capabilities. The full year 2024 saw a modest same-store revenue growth of 1.3% and a net operating income (NOI) growth of 1.1%. These figures underscore Camden’s ability to maintain stability in a challenging market environment. InvestingPro data reveals two notable strengths: the company has maintained dividend payments for 32 consecutive years and offers a current dividend yield of 3.5%. For deeper insights into Camden’s financial health and more exclusive ProTips, subscribers can access the comprehensive Pro Research Report.
Financial Highlights
- Revenue: $386.32 million, slightly above forecasts.
- Earnings per share: $0.37, below the forecast of $0.41.
- Full-year same-store revenue growth: 1.3%.
- Full-year expense growth: 1.8%.
- Full-year NOI growth: 1.1%.
Earnings vs. Forecast
Camden Property’s Q4 2024 EPS of $0.37 was 9.8% below the forecasted $0.41, marking a notable miss. However, the revenue exceeded expectations by approximately $2.08 million, suggesting robust sales performance despite the earnings shortfall.
Market Reaction
Following the earnings release, Camden Property’s stock saw a 1.35% increase in after-hours trading. Trading at $119.29, the stock’s movement is notable as it approaches its 52-week high of $127.69, reflecting investor confidence in the company’s strategic initiatives and future growth potential. Analyst price targets range from $115 to $142, suggesting mixed views on the stock’s upside potential. InvestingPro subscribers can access detailed valuation metrics and additional analysis tools to better evaluate the stock’s potential.
Outlook & Guidance
Looking ahead, Camden Property Trust has set a 2025 core FFO guidance range of $6.60 to $6.90 per share, with a midpoint of $6.75. The company plans to target $750 million in acquisitions and dispositions, aiming to optimize its market presence. Camden is also focusing on development starts, with guidance between $175 million and $675 million, and anticipates development yields around 6%.
Executive Commentary
CEO Rick Campo emphasized the company’s strategic direction, stating, "It’s time to move on. It’s time to get going." This sentiment was echoed in his commitment to enhancing stakeholder experiences. CFO Alex Jessett highlighted the financial strategy, noting, "We are generally getting somewhere around an 8% to 10% return on invested capital for what we’re doing."
Risks and Challenges
- Market Saturation: With a peak in apartment supply expected, Camden may face increased competition.
- Economic Uncertainty: Macroeconomic factors could impact consumer spending and rental demand.
- Geographic Concentration: Efforts to reduce exposure in the DC Metro and Houston markets are ongoing to mitigate risk.
Q&A
During the earnings call, analysts inquired about Camden’s transaction market dynamics and capital recycling strategy. Executives addressed these concerns by outlining their approach to optimizing market-specific performance and enhancing development and acquisition strategies.
Full transcript - Camden Property Trust (CPT) Q4 2024:
Kim Callahan, Senior Vice President of Investor Relations, Camden Property Trust: Good morning, and welcome to Camden Property Trust’s fourth quarter twenty twenty four earnings conference call. I’m Kim Callahan, senior vice president of investor relations. Joining me today are Rick Campo, Camden’s chairman and chief executive officer Keith Oden, executive vice chairman and Alex Jessett, president and chief financial officer. Today’s event is being webcast through the Investors section of our website at kamdenliving.com, and a replay will be available shortly after the call ends. And please note, this event is being recorded.
Before we begin our prepared remarks, I would like to advise everyone that we will be making forward looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the As a As a reminder, Camden’s complete fourth quarter twenty twenty four earnings release is available in the Investors section of our website at camdenliving.com, and it includes reconciliations to non GAAP financial measures, which will be discussed on this call. We would like to respect everyone’s time and complete our call within one hour. So please limit your initial question to one, then rejoin the queue if you have a follow-up question or additional items to discuss.
If we are unable to speak with everyone in the queue today, we’d be happy to respond to additional questions by phone or email after the call concludes. At this time, I’ll turn the call over to Rick Campo.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: Thanks, Kim. Good morning. The theme of our on hold music this quarter is it’s time to move on. The late great Tom Petty captured the current sentiment of team Camden in this verse. It’s time to move on.
It’s time to get going. What lies ahead? I have no way of knowing. But under my feet, baby, grass is growing. It’s time to move on.
It’s time to get going. After a few years of waiting, somewhat impatiently, for better investment opportunities in our markets, we believe 2025 is the year for Camden to move on. In 2024, we saw multifamily deliveries reach a peak level not seen in over forty years. We expect new supply pressure to lessen throughout 2025, setting the stage for a return to improve revenue and net operating income growth. As the headwinds in recent years turn into tailwinds in 2025 and beyond, there are attractive opportunities for us to continue development starts and to pursue acquisitions.
The positive market backdrop positions Camden to begin executing our 2025 strategic plan. The plan follows a similar playbook that we executed after the great financial crisis where we acquired $2,700,000,000 in apartments with an average age of four years, developed $4,200,000,000 of apartments and sold $3,800,000,000 of apartments with an average age of twenty four years. Recycling capital in this way keeps our portfolio competitive, lowers capital expenses and accelerates our return on invested capital, driving long term core FFO growth. It’s time to move on. It’s time to get going.
I want to give a big shout out to Team Camden for their outstanding performance in 2024, exceeding our operating budgets by a wide margin despite record supply. Team Camden works smart, implementing new technologies that continue to improve customer experiences and reduce costs. Occupancy and rents in most sunbelt markets have likely bottomed. Resident retention and customer sentiment remains high. The premium to own versus rent continues to be at historic levels, making apartment homes a more affordable and attractive option for consumers.
Wage growth has outpaced rent growth for the past couple of years, strengthening our residents’ financial prospects and improving rent to income ratios. Population growth to our Sunbelt markets continues to outpace the nation. Texas and Florida added over 1,000,000 new residents in 2024, which was nearly one third of the nation’s population growth. Each new family needed a place to call home. Texas and Florida are projected again to lead the nation’s population growth over the next five years.
The states in which Camden operates captured 58.3% of The U. S. Population growth. This long term megatrend continues to produce outsized housing demand in our markets. We know it’s time to get going, but we will not move on from Camden’s Y, which as many of you know is to improve the lives of our teammates, our customers and our stakeholders, one experience at a time.
Keith Oden is up next.
Keith Oden, Executive Vice Chairman, Camden Property Trust: Thanks, Rick. Camden’s same property revenue growth was 1.3% in 2024, with most of our markets achieving results within 100 basis points of their original budgets. San Diego Inland Empire and Washington DC Metro both outperformed our expectations, while Austin and Nashville came in slightly below budget. For 2025, we anticipate same property revenue growth of 1% within the majority of our markets falling between 02%. Our top five markets should see revenue growth in the range of 2% to 2.5% and these markets account for over 40% of our budgeted revenue.
Several of these markets were top performers last year, including Southern California, Washington DC Metro and Houston, and we expect Tampa to join them as one of our top markets this year. Our next eight markets are budgeted for revenue growth between 01%, and they comprise over half of our 2025 budgeted revenue. These markets include Denver, Atlanta, Phoenix, Raleigh, Orlando, Southeast Florida, Dallas and Charlotte. And our last two markets, Nashville and Austin, which represent 6% of Camden’s revenues, These markets were down roughly 3% on revenues last year and are expected to remain challenged this year given the continued levels of new supply coming online. We expect them to decline another 0% to 3% this year, but we’re cautiously optimistic that they will end 2025 at a better position than where they started.
As many of you know, we have a tradition of assigning letter grades to forecast conditions in our markets at the beginning of each year and ranking our markets in order of their expected performance during 2025. We currently grade our overall portfolio as a B with a stable outlook, slightly better than our B rating with a moderating outlook last year. Our full report card is included as part of our earnings call slide deck, which is incorporated into this webcast and available on our website. The overall economy remains healthy and we expect our Sunbelt focused market footprint will allow us to outperform The U. S.
Outlook. Outlook. We expect to see continued in migration into our markets and strong demand for apartment homes given the relative unaffordability of buying a single family home. We reviewed supply forecasts from several third party data providers and their projections range from 160,000 to 230,000 completions across our 15 markets over the course of 2025 compared with 230,000 to 280,000 apartments delivered in 2024. Despite the wide range of estimates, the unanimous conclusion from each firm was that supply in our markets peaked during 2024 and will be declining as we move through to 2025, setting up 2026 to be a below average year for new supply.
As a reminder, these supply estimates are totals for each of the MSAs and not all this new product will be competitive with our existing portfolio given various submarket locations and price points. As I mentioned earlier, we expect revenue growth in the range of 2% to 2.5% for our top five markets. Four of Camden’s markets received a grade of A- with varying outlooks of improving, stable or moderating. Tampa earns an A- with an improving outlook and it should be one of our best performers this year given strong occupancy levels, manageable supply and a boost in demand that we saw during the fourth quarter of twenty twenty four. Our Southern California markets would be next with both LA Orange County and San Diego Inland Empire expected to finish in the top three again as they did in 2024.
Their growth rates are expected to slow a bit during 2025 given slightly higher levels of supply and less of a tailwind from bad debt declining, thus they received stable to moderating outlooks. Washington DC Metro would also rank as an A- with a moderating outlook. Supply remains in check, particularly in our submarkets in Northern Virginia and Maryland, and we expect revenue growth to be slightly below the 3.7% achieved last year. Houston rounds out the top five with a B plus rating and a stable outlook. Houston ranked number five for revenue growth in 2024 and this year should see more of the same with limited supply and healthy demand.
Most of our eight markets received a B grade with one B plus and two B- ratings, and we’re budgeting revenue growth of zero percent to 1% in all eight. We rate Denver as a B plus with a moderating outlook and expect their revenue growth to be closer to 1% this year versus 1.6% last year given moderating supply coupled with moderating job growth. Atlanta ranks as a B performer with an improving outlook, mainly due to the progress we’ve made in reducing bad debt and fraudulent activity. Phoenix and Raleigh are next integrated B with stable outlooks, followed by Orlando and Southeast Florida with Bs, but moderating outlooks. Phoenix, Raleigh and Orlando should all see slight declines in supply over the course of 2025, but pricing power in those markets will likely be limited for most of this year.
Southeast Florida was one of our top performers in 2024, and we expect to see moderation this year from the above average occupancy levels we achieved there last year. Dallas earns a B- with a stable outlook again this year with minimal revenue growth expected in 2025. While Dallas still ranks as one of the nation’s top metros for job growth and migration and quality of life, the market is still working through much of the new supply that was delivered over the past year. And Charlotte is rated B- with a moderating outlook. The aggregate level of new supply coming online in the Charlotte MSA is still elevated this year, and we expect our main competition will continue to fall in the Uptown, Southend submarket.
And finally, Nashville and Austin received the same grades as last year with C and C- respectively. Both markets posted negative revenue growth in 2024 and will likely repeat that in 2025 as new supply continues to pose a challenge. Our outlook for Nashville is improving, particularly outside of the downtown CBD area, while Austin’s outlook is stable. Now a few details on our fourth quarter twenty twenty four operating results. Rental rates for the fourth quarter had signed new leases down 4.7% and renewals up 3.2 for a blended rate of negative 1.2%.
Renewal offers for February through April were sent out at an average increase of 4%. And as expected, move outs to purchase homes remained very low at 9.6% for both the fourth quarter twenty twenty four and the full year of 2024. I’ll now turn the call over to Alex Jessett, Camden’s President and Chief Financial Officer.
Alex Jessett, President and Chief Financial Officer, Camden Property Trust: Thanks, Keith. Before I move on to our financial results and guidance, a brief update on our recent real estate activities. During the fourth quarter of twenty twenty four, we completed construction on Camden Durham, a four twenty unit, $145,000,000 community located in the Raleigh Durham market of North Carolina, which is now almost 80% leased, in Camden Longmeadow Farms, a 188 unit, 72,000,000 single family rental community located in Suburban Houston, which is now almost 55% leased. Additionally, we continued leasing at Camden Wood Mill Creek, a 189 unit, $72,000,000 single family rental community also located in Suburban Houston. Subsequent to quarter end, we acquired for approximately $68,000,000 Camden Leander, a newly constructed three fifty two unit Suburban Austin community, which is currently 85% occupied.
This community was purchased at a stabilized yield of 5%. Turning to financial results, last night we reported core funds from operations for the fourth quarter of twenty twenty four of $190,400,000 or $1.73 per share, $0.03 ahead of the midpoint of our prior quarterly guidance. This outperformance resulted from $0.05 in higher other income and $0.025 in lower operating expenses driven entirely by lower than anticipated core property insurance claims and lower final tax valuations. For 2024, we delivered same store revenue growth of 1.3%, expense growth of 1.8, and NOI growth of 1.1%. Our 1.8% full year expense growth was driven primarily by declines of 0.216.9% on property taxes and insurance respectively.
You can refer to page 24 of our fourth quarter supplemental package for details on the key assumptions driving our 2025 financial outlook. One of the key drivers of this year’s guidance is an uptick in acquisitions and dispositions with a midpoint of $750,000,000 anticipated for each. Operating a geographically diversified portfolio helps ensure consistent cash flow for our investors. Over the next few years, consistent with past messaging, we will seek greater market balance by reducing our exposure to our two largest markets, D. C.
Metro and Houston, through a combination of select dispositions and growth in our other existing markets, with a target of no one market representing more than 10% of our net operating income and no market representing less than 4% of our net operating income by the end of twenty twenty seven. Additionally, we will dispose of older, more capital intensive assets and redeploy the proceeds into newer, faster growing communities. As we execute this plan, depending upon the location and age of the disposed communities, there may be zero to a hundred basis points negative FFO yield differential for these matching transactions, while we expect AFFO yields to be relatively flat. The end result will be a more geographically diverse, newer and faster growing portfolio. We expect our twenty twenty five core FFO per share to be in the range of $6.6 to $6.9 with the midpoint of $6.75 representing a 0.1 per share decrease from our 2024 results.
This decrease is anticipated to result primarily from an approximate $0.06 per share increase in core FFO related to the growth in operating income from our development, non same store and retail communities, resulting primarily from the incremental contribution from our five development communities in lease up during 2024 and or 2025 a $0.01 per share net increase from the timing of our assumed $750,000,000 of offsetting acquisitions and dispositions for tax efficiency purposes and to facilitate reverse ten thirty one exchanges, we are anticipating completing the acquisitions on average two months before their matching disposition. This $0.07 cumulative increase in anticipated core FFO per share is offset by a $0.1 per share increase in interest expense attributable to $250,000,000 of higher average anticipated debt balances outstanding in 2025 as compared to 2024 and lower levels of capitalized interest as we complete certain development communities. The higher debt balances result in part from the timing of our acquisition and disposition activity. For 2025, we are anticipating $485,000,000 on average outstanding under our line of credit with an average rate of approximately 4.9%, a $0.04 per share decrease in interest and other income due to minimal cash balances in 2025, and an approximate $0.03 per share decrease in core FFO resulting primarily from the combination of higher general and administrative and property management expenses.
At the midpoint, we are expecting flat same store net operating income with revenue growth of 1% and expense growth of 3%. Each 1% increase in same store NOI is approximately $0.09 per share in core FFO. Our 2025 same store revenue growth midpoint of 1% is based upon a flat earn in at the end of twenty twenty four and an effectively flat loss to lease. We expect a 1.4% increase in market rental rates from 12/31/2024 to 12/31/2025. Recognizing half of this annual market rental rate increase results in a budgeted 70 basis point increase in 2025 net market rents.
We are assuming occupancy averages 95.4% in 2025, a 20 basis point annual improvement and that bad debt averages 70 basis points in 2025, a 10 basis point annual improvement. When combining our 70 basis point increase in net market rents with our 20 basis point increase in occupancy and our 10 basis point decline in bad debt, we are budgeting 2025 rental income growth of 1%. Rental income encompasses approximately 90% of our total rental revenues. The remaining 10% of our property revenues is primarily comprised of utility rebilling and other fees and is anticipated to grow at a similar level as our rental income. Our 2025 same store expense growth midpoint of 3% does not contain any significant category outliers.
Page 24 of our supplemental package also details other guidance assumptions, including the plan for up to $675,000,000 of development starts spread throughout the year and approximately $285,000,000 of total 2025 development spend. Non core FFO adjustments for the year are anticipated to be approximately $0.1 per share and are primarily legal expenses and expense transaction pursuit costs. We expect core FFO per share for the first quarter of twenty twenty five to be within the range of a dollar 66 to a dollar 70. The midpoint of a dollar 68 represents a $0.05 per share decrease from the fourth quarter twenty twenty four, which is primarily the result of an approximate $0.04 per share sequential decline in same store NOI driven by an increase in sequential same store expenses resulting from the timing of quarterly tax refunds, the reset of our annual property tax accrual on January 1 of each year, and other expense increases primarily attributable to typical seasonal trends, including the timing of on-site salary increases and an approximate $0.015 per share increase in interest expense from our higher debt balances resulting in part from our actual and anticipated first quarter acquisitions. This $0.055 per share cumulative decrease in quarterly sequential core FFO is partially offset by an approximate $0.05 per share increase in core FFO related to our first quarter acquisition activity.
We are anticipating blended lease trade outs for the first quarter to be relatively flat. At year end, approximately 80% of our debt was fixed rate. We had less than $200,000,000 outstanding on our $1,200,000,000 credit facility, no maturities over the next twelve months and less than $250,000,000 left to fund under our existing development pipeline. Our balance sheet remains strong with net debt to EBITDA at 3.8 times. At this time, we’ll open the call up to questions.
Speaker 4: We will now begin the question and answer session. And your first question today will come from Jamie Feldman with Wells Fargo (NYSE:WFC). Please go ahead.
Speaker 5: Great. Thanks for taking my question. So I was just hoping you could provide some more color on your blend assumptions. Can you talk about what you’re thinking in new and renewal lease growth throughout the year? And how do you think it trends first quarter through fourth quarter?
Alex Jessett, President and Chief Financial Officer, Camden Property Trust: Sure, absolutely. So the way I would look at it for the full year is we’re anticipating somewhere between 1% to 2% on a blend. And if you look at new leases, new leases will be slightly negative for the full year and renewals will probably be in the high 3% range. If I look at how that progresses throughout the year, obviously, we are very optimistic about the way 2025 is going to unfold, in particular with the absorption of a new supply. And so we’re anticipating that by the time we get to the third quarter, this is when we’ll start to see positive new leases and then it will continue from that point on.
Speaker 5: Okay. Thank you.
Speaker 4: And your next question today will come from Brad Heffern with RBC Capital Markets. Please go ahead.
Speaker 6: Yes. Hi, good morning everyone. Are you seeing signs right now of the impact of supply fading on the ground? And if so, what are those signs?
Alex Jessett, President and Chief Financial Officer, Camden Property Trust: So we absolutely are. Go ahead, Alex. We absolutely are. And the largest indicator that we’re looking at is the new signed new lease improvement throughout the fourth quarter. And although we are not going to give quarterly, monthly new lease and renewal data, I will tell you that we’re very encouraged by what we’re seeing so far in January in terms of sign new lease agreements.
Speaker 4: And your next question today will come from Steve Sakwa with Evercore ISI. Please go ahead.
Speaker 7: Hi, thanks. This is Sankal on for Steve. I had a question around transaction guidance. So after a muted couple of years from transaction market standpoint, it seems like things are opening up and you’re guiding to $10,000,000 to $15,000,000 of acquisitions and dispositions. Can you help us provide more color on this in terms of timing, cap rate, what are the type of buyers and seller pools you’re seeing in the market today?
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: Sure. So when you think about the last couple of years, it’s been a very muted sales transaction markets. And what’s happened primarily is that buyers and sellers have been sort of at odds, right? Sellers want high prices and buyers, you know, don’t want to pay high prices. And so that’s created a, you know, a standoff between buyers and sellers.
So transaction volume has been significantly lower in the last couple of years. But I think what’s happened now is that with rates continuing to be higher for longer, it sort of put pressure on the sellers. And then also on the buyer side, you have a pretty constructive view of the future. We believe supply has peaked for sure and that 2025 is going to be a better year than 2024 from a accelerating growth perspective. And then in ’26, ’20 ’7, you’re gonna have some pretty outsized rental increases.
So what that’s allowed buyers to do is to, to increase their pro form a rent growth and feel pretty confident about that so that they could actually pay maybe a higher price than they thought before because the inflection point of positive, you know, second derivatives on rental rates is gonna happen sometime during 2025. So what that’s led to then is sort of a closing
Alex Jessett, President and Chief Financial Officer, Camden Property Trust: of the gap, if you want
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: to call it that, between the buyers and the sellers. And from our perspective, since we’re going to be, you know, recycling capital, we we’re gonna be buying. And then as Alex pointed out earlier, we’re gonna be selling to fund the, those acquisitions. And as we did, you know, in our last, you know, big acquisition slash development disposition cycle, we thought we think that that this next couple years is gonna be pretty much like it was sort of after the the great financial crisis and, where you have a lot of transactions that have to move and you’re gonna have a lot of activity. And and I think that that, it sets up really well for us to recycle capital and to get more aggressive on the acquisition side and the development side going forward.
Speaker 4: And your next question today will come from Jeff Spector with Bank of America (NYSE:BAC). Please go ahead. Great. Thank you. Rick, I’ll ask a follow-up to that point.
I mean, post World Financial Crisis, there was a lot of distress. And as of today, I’d say we’re hearing mix things or not really hearing distress. So what are you I guess, what are you seeing and hearing that gives you confidence that there will be similar distress that Kansing can take advantage of? Thank you.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: Sure. Well, when you go back to the financial crisis, there was moderate distress, but it was primarily in o eight, maybe September ’10. After that, there’s really no distress. I mean, if you think about what happened, you know, the Fed took interest rates to zero, and the and the FDIC and the Federal Reserve propped up banks by saying they didn’t have to mark to market construction loans. And so that that eliminated, you know, a lot of the of the distress that people thought was gonna happen after the great financial crisis.
And today, the difference today during the GFC was that as a result of the GFC, leverage is just over leveraging, which is not part of the equation today. And banks have significantly decreased their commercial real estate exposure, and they’ve also diversified their commercial real estate exposure. So banks are stronger, borrowers are stronger, and you’re in a situation where there’s no real pressure on on borrowers or the banks to force people to sell. And that, of course, is what creates, you know, distress. Now there there’s clearly distress in in, in the sort of sort of c and d part of the market, you know, where you had syndicators, you know, raising money online and through, you know, GoFundMe pages who are buying pretty low quality properties and and leveraging them up.
And those those there’s been some significant, you know, stories about about that kind of distress, but but not in the institutional investor quality space. I mean, today, investors are, you know, the the the borrower the sellers today are not financially stressed. So I don’t think we’re gonna get quote unquote distress out there. What we’re gonna get is just better pricing that we had during the peak, right, when cap rates are were were in the threes. Now cap rates are gonna be four and a half to five, and, and with a better growth prospect, you know, and your pro formas going forward so that you can get your IRs, you know, up into the sevens, on a on an unleveraged basis.
So it’s it’s a little different today. So I don’t don’t don’t think they’re gonna have distress in the market and buy all these great deals. On the other hand, the deals are good. When you look at our our Camden, Leander transaction, it’s a project and lease up in Austin, very complicated market. Obviously, Austin has more supply than most.
The, we’re buying the property at 15% below replacement cost. Rents are depressed. And once the supply gets worked out in Austin over the next year, you know, or so, you’re gonna see outsized growth in Austin. It’s when you look at Austin, in terms of its population growth, it’s like number one in America on a percentage basis for population growth. So Austin’s not Austin’s gonna be great in 2026, ’20 ’7, and 2028.
So we’re able to buy below replacement cost. So I could go build there, but why build when I can buy buy it below replacement cost and then be positioned in the marketplace to to, you know, have outside outsized growth to drive that cap rate up into a really good number.
Speaker 4: And your next question today will come from Haendel St. Juste with Mizuho (NYSE:MFG). Please go ahead. Hey,
Speaker 8: guys. Good morning.
Speaker 7: So I was wondering if
Speaker 8: you could walk us through the quarter a bit and give us some color on how the portfolio performed in terms of new lease rate expectations. They seem to be a bit more resilient in the fourth quarter versus your peers. And with the stability of new lease rates and improvement you noted in January occupancy, I think above 95%, it seems like you could push rate a bit sooner this year than we might have previously expected. So maybe give us some color on how you think what new lease rates are embedded in the first quarter guidance provided, but broadly the sense of how much perhaps the improvement or stability you’re seeing here can result in perhaps you perhaps being a bit more aggressive on that front? Thanks.
Keith Oden, Executive Vice Chairman, Camden Property Trust: Yes. So, Haendel, we did have a our fourth quarter was actually a little bit better than we thought it would be and it was pretty broad across all of our markets and it’s not you know, in terms of expectations for, you know, next year. I think Alex walked through those and his his commentary regarding the the, you know, what what the full year guidance is etcetera. I think that the the improvement that we’re seeing is just stickiness around, occupancy rates across our entire portfolio which allows us to do, you know, in in in our pricing model to do what it’s it does best which is find strength and then price accordingly. So I think I think it’s, you know, really good operating fundamentals, had a good fourth quarter.
And as Alex mentioned, it’s carried over. It looks like it’s carried over into January. So, you know, last year we had a we we started out really strong in January, a good month. You know, we that bled into some optimism around here and maybe other places for, you know, what that, what that foretold for maybe the first quarter of the full year. It turned out that wasn’t really the case and we had a kind of an air pocket in February of last year and we we don’t think we’re gonna see that this year.
Don’t anticipate that, but so far so good. Good month in January for sure and we, you know, we expect that that it’s gonna, you know, it’s gonna continue to improve throughout the year because you’re we are every month that goes by, we’re making a taking another big chunk out of the supply bubble that that we’ve been fighting and and continue to have, have in front of us. But I think things, you know, on the on the horizon back half of 2025 looks to be pretty constructive for us. But I think more importantly, when you get past the 2025 is kind of a transition year between getting back to normal, more normal supply demand dynamics. But when you look out to 2026 and what’s happening what’s been happening on starts and what’s likely to happen on completions in ’26 and ’27, I think I think we’re set up for, you know, one of those two or three year runs that they’re going to be pretty impressive for the entire multifamily sector.
I think where Camden is located in our markets, we’re going to benefit more than most from that.
Speaker 4: And your next question today will come from Eric Wolf with Citi. Please go ahead.
Speaker 9: Hey, thanks. It seems like based on your interest expense guidance, you’re front loading the acquisitions. Can you just talk about the rationale around the strategy? And also you mentioned I think zero to 100 bps of potential GAAP dilution from this activity and that this transaction activity could last through 2027. So should we be building in our models like say 50 bps of GAAP dilution on $750,000,000 of transactions for the next couple of years or is that sort of not what you meant by this sort of this continuing through 2027?
Alex Jessett, President and Chief Financial Officer, Camden Property Trust: Yes. So we’ll hit both parts of it. Absolutely. The first thing is that we anticipate that we’re going to buy before we sell and we’re doing that for tax efficiency purposes. We’ll do these in reverse ten thirty one exchanges.
The second part that you have to look at is what we’re looking at for 2025 is the dispositions that we will first complete will be our older, our more capital intensive assets. And so because of that, you’re probably going to see a larger spread between FFO on the assets we’re buying and FFO on the assets we’re selling. I think it’s important to note that on an AFFO basis, that spread will be very tight, but on FFO basis, it’s going to be a little bit wider, call it around the a hundred basis point range for what we’re going to look at for 2025. If you think about what happens as we go throughout and ’27 completing our plan, we’re going to get to a point in time where we’re going to be trading very comparable assets, but just not in the geography where we want them. So for instance, we’ve talked quite a bit about how we’ll lower our exposure in D.
C. Will lower our exposure in Houston. If we’re going to sell a community in D. C. In ’26 and in ’27, I think likely that it will be a particular community that will probably trade at a pretty good cap rate.
And we’ll be trading that for a community in, you know, call it Nashville or call it Austin. There will also be trading at a at a comparable cap rate. So I don’t think it’s fair to take the dilution that you’re seeing in ’25 and extrapolate that into ’26 and ’27.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: Yeah. The other thing I would add to this is that if you look at the last time we did this where we did 2,700,000,000.0 of of of acquisitions and 3.8 of dispositions, At that time, we were budgeting over 100 basis point negative spread turned out to be flat. And so once the market starts getting attuned to higher revenue growth and higher NOI growth, those cap rates are going to compress and older property cap rates are going to converge to newer property cap rates. And then part of the challenge is that if you look at the or part of the dilution issue is not that it’s permanent dilution because of the spread, but but when you look at the Camden Leander transaction, it was 84% occupied. It’s not finished, right?
It’s not finished leasing or stabilized. So you’re going to have more dilution when we’re buying properties that are not necessarily fully leased up yet. And so that’s part of that equation. But I expect that the transaction market through the middle of the year will start gaining steam, which means that you’ll have the $300,000,000,000 or $400,000,000,000 of capital that’s still waiting in the wings entering the market. So cap rates, I think, are going to be tighter and the spreads will be tighter towards the back half of the year.
But we’re going to we have budgeted this 100 basis points, but I’m sure we’ll do better.
Speaker 4: And your next question today will come from Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust0: Great. Thanks and good morning everyone. So keeping the conversation going on your portfolio management objectives and Alex you hit on this with your comments about selling down some D. C. And Houston which you guys have talked about.
I guess what’s kind of the right exposure for those top markets? Are there any new markets that you could enter with this strategic plan? And then I guess, just given the constructive outlook for fundamentals the next few years, what would it take for you to lean into your balance sheet capacity instead of kind of the tax efficient paired trade strategy? Thanks.
Alex Jessett, President and Chief Financial Officer, Camden Property Trust: Yes. So what I said on the call is that by the end of twenty twenty seven, we do not want to have any one market that’s over 10% of NOI. And so if you think about it, there’s only two markets that we have today that are over that, which is DC, Metro and Houston. So that’s where we’ll be bringing that down. Additionally, it just doesn’t make a ton of sense to us to have a market that has less than 4% of NOI.
The only market that falls into that category today is Nashville. So we’ll be bringing that up and that will obviously be one of our main target markets. When you think about leaning into our balance sheet, absolutely. The reason why we have a 3.8 times debt to EBITDA, which is number one in the multifamily sector, is because it gives us capacity and ability to take advantage of opportunities. If there are opportunities there where we can create some real value for our shareholders and and increase a little bit of leverage, but still still stay below the five times level and we can and take advantage of some great opportunities, we’re going to absolutely do that.
So that’s something that we’re absolutely looking at. I think you’re not going to see that right now because right now what we’re looking for is some more stability in the transaction market. And right now, there’s just not a tremendous amount of opportunity. So the opportunities that are there, we will match fund with dispositions in the near term. But as we go forward and execute the plan, you should see us buying and building more than we are selling.
Speaker 4: And your next question today will come from John Kim with BMO Capital Markets. Please go ahead.
Speaker 8: Thanks. I want to ask about revenue enhancing and repositioning CapEx, which you’re looking to increase this year versus last year. Can you remind or update us on the typical return or rental uplift you get? And what was the contribution to either blended rents or same store revenue that $86,000,000 last year had?
Alex Jessett, President and Chief Financial Officer, Camden Property Trust: Yes, absolutely. Well, first of all, this is the first question we’ve had on repositions in about three years. So thank you, John, for bringing those back in. Our reposition program has been an absolute tremendous success. We are generally getting somewhere around an 8% to 10% return on invested capital for what we’re doing.
And the way you should think about that is that generally equates to about $150 per door in additional rent. When I look at the impact in 2024 from repositions, on an NOI basis, it was call it 10 to 15 basis points, which is certainly not nothing. I mean, it’s certainly something that makes a ton of sense to us. But you have to really remember that the real reason why we do repositions is it refreshes our portfolio. If you think about the type of real estate that we build on the exterior, it is absolutely timeless.
But like everything else, kitchens and bathrooms are what really shows the age of a development. It shows the age of your house. And so if we can go in and we can refresh a kitchen and a bathroom and make it look brand new and on the exterior, it looks brand new. It really does create a natural defense against the new supply that we see in the market. If You think about a brand new asset has a much higher basis.
And of course, whoever owns that must charge much higher rents just to get the adequate return. We can have an asset directly next door or directly adjacent that looks brand new, has brand new kitchens and bathrooms. And because we have a lower basis, we can show we can charge a lower rental rate and it positions us incredibly well. So the reposition program is something that makes a ton of sense to us. It’s something that you’re going to see us do quite a bit.
The other thing that I’d point out is that we are also looking at repurposing some of our real estate. And what that means is looking at space that we have in a community, call it a, an, a basketball court, an indoor basketball court that nobody uses, etcetera, and turning that into additional units. And that makes a lot of sense to us as well.
Speaker 4: And your next question today will come from Rich Hightower with Barclays (LON:BARC). Please go ahead.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust1: Hi, good morning everybody. I just want to get a sense of I mean, I think it’s been a pretty consistent theme, this earning season that there is a pretty progressive step up in blended rents and ultimately rent growth in Sunbelt markets over the course of the year. But I’m trying to get a sense of the risk that
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust0: all of
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust1: us are wrong about the pace of supply dropping off over time and how much of that cushion is baked into the current same store guidance?
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: Well, I think when you look at the anyone’s numbers whether it be Witten or RealPage or you know, the supply is baked. I mean, you know, for the next two years right now, you’re not starting a bunch of units. I mean, most supply is down and markets are down or starts there down 50%, sixty %. And a couple of markets, it’s up a little like Phoenix, but it’s all on the West Side Of Phoenix and we happen to be on the East Side Of Phoenix, which is a big difference. And so I think I don’t think there’s a lot of risk on the supply being ratcheted up.
I mean, when you look at the pressure on the development, developers today, when the tenure is pushing 4.5% and short rates haven’t dropped as much as people thought they would drop. Construction costs, while they’re not up dramatically, they’re also not down dramatically. There’s still a lot of pressure on construction costs just to keep them we’ve done we think that they’re up maybe 1% or 2% from last year, but that doesn’t include tariff issues. We did an analysis on tariffs. And on tariffs, we’ll add another 2% to 3% in cost.
Most of products are bought. Lumber comes out of Canada. A lot of products from Mexico, electrical boxes and things like that. So there’s I would say that with the current cost structure, you have to really pro form a significant rent increases in 2026, ’20 ’20 ’7, ’20 ’20 ’8 in order to make a pro form a work. So I don’t think that there’s a big risk in a big upturn in development starts unless you have rates fall dramatically, construction costs fall dramatically, and that’s just not happening.
So I think there’s pretty low risk from a supply perspective. I think the bigger risk probably is in what happens to the overall economy. I mean, if we have a recession in 2025, then I think all bets are off on how well things you know, progress. And and that’s that that I don’t think that’s on people’s radar screen screen, but I do think that’s probably the bigger risk when you think about how ’25 could play out versus but it’s not gonna be on the supply side. I mean, the supply is coming, we know it’s coming, and then it stops.
And it’s going to take even if it even if you had a 50% increase in in starts this year, they wouldn’t come into play until 2027 or 2028 because it just takes that long to deliver. So I think we’ve got clear sailing on supply at least through the end of ’twenty seven and into ’twenty eight.
Speaker 4: And your next question today will come from Amy Probat with UBS. Please go ahead.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust2: Hi, thanks. So, have you discussed Tampa, LA, San Diego, Washington, D. C. And Houston as the top market. Do you think that Camden’s performance in these markets is representative of the overall market or are there some Camden specific attributes that are leading to stronger performance?
And then, specifically on Tampa, you mentioned a boost in demand in the fourth quarter. So I’m wondering if that’s hurricane related and sustainable? Thanks.
Keith Oden, Executive Vice Chairman, Camden Property Trust: So, yes, on Tampa, it is hurricane related for sure. And and eventually, that will, you know, that will, moderate over time. I mean, we’ve we’ve seen that happen in in in Houston with with Harvey, etcetera. So that’s that was definitely a hurricane related thing. On the on the the performance in those other markets, I think you look at you look at the peer group, and then in those other markets, the the biggest overlap that we have with public, public market peer group is in Washington DC Metro.
And I think everybody had pretty constructive commentary around what’s happening in Washington DC Metro. Houston is is the differentiator for us because we’re the only public, company that has any meaningful presence. And and as Alex pointed out, it’s 13%. It’s our largest NOI concentration, market that we have. Now we’re we’re committed to bringing that down to single digits over some period of time, but the reality is is that Houston has just been a great performer for the last, year and a half and and it, again, looks like it will be in 2025 as well.
And that’s a combination of a relatively low supply. You just didn’t have the waves of, when when when all that the current pipeline was being, put in play a couple years ago, Houston sort of got missed because of a lot of other issues. But, the energy sector is performing incredibly well. I think all indications are that that’s going to continue to be supported, and maybe even much more supported than it has been in the last four years. So, those two markets for sure, I think, you know, anybody that has assets in those markets has done pretty well on, California.
Southern California story has been pretty good as well, and a lot of that is driven by, the cessation and the working through all of the COVID related initiatives to include coming down on bad debts, etcetera. So I think that’s also a pretty good story for anybody that owns assets in Southern California. So we tend to operate better in our markets on metrics, on occupancy and NOI growth across the board. So there’s probably some candidism, just the way and the efficiency with which we operate our portfolio and our time in these markets and understanding on the helps. But, you know, those, all five of those markets, if you’ve got assets in those markets, you’re probably really happy right now and and looking looking forward to, you know, let’s let’s bring on 2025.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: I would brag a little bit more on Camden’s execution ability. You don’t you’re not on the you don’t become one of the 100 best companies to work for, on Fortune 100 fortunes list for seventeen years straight if you don’t have a great team. And we all know Super Bowl is coming up on Sunday, and we know that it’s not just one player, it’s team, it’s it’s philosophy, it’s energy, it’s that that, synergy that brings the the best out of out of the players. And in our case, our players, they’re, you know, working every day and believing that they need that they really want to take care of their customers. And that just adds value and customers feel it.
And so when you have really a very great team, it’s going to have incrementally it’s going to benefit customers and lower turnover. And when you ask somebody to raise their rent, they’re going to say, yeah, okay, I like this place and you guys are fun and great people and so sure I’ll pay more. But that’s I think that’s a big part of Camden. There’s a question.
Speaker 4: And your next question today will come from Rob Stevenson with Janney. Please go ahead.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust3: Good morning, guys. Regarding the $175,000,000 to $675,000,000 start guidance, can you talk about where expected yields on any of these new starts are penciling today given construction costs and expected rents if you need to wait for anything to start those projects? And also where is the expected yield there versus the expected yield on the three North Carolina assets you currently have under construction?
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: Sure. Our projected yields given the current backdrop with cost and rental rate growth and what have you is around 6%. And that’s kind of where our starts our development numbers have been, including the ones in that were under currently under construction. But I will tell you, it’s not easy to find a lot of developments that pencil to those numbers. And so that’s why we haven’t been able to lean in as much as we’d like to.
But I think given the markets that we’re in and where our developments are located, we should have excess outsized rent growth that can get us to those numbers are better.
Speaker 4: And your next question today will come from Adam Kramer with Morgan Stanley (NYSE:MS). Please go ahead.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust4: Great. Thanks for the time. Wanted to ask about Washington, D. C. A little bit and maybe a few questions in here.
But I think just first, just maybe the latest on demand there, obviously a lot of headlines around what’s happening with kind of federal workers and maybe a smaller federal government. So maybe just what’s happening from the demand side in the last couple of weeks there and maybe what your outlook is as maybe the composition of the government changes. And then just as the second part there, again, still in D. C, what are you guys seeing in terms of cap rates or even on a per square foot basis in terms of the transaction market in D. C?
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: Let me hit the current transaction market first. DC is a great transaction market. Cap rates are in the depending on the property in the mid fours or high fours plus or minus. So there’s still a decent demand there. And when you look at the fact that DC has not has been an outperformer from the revenue growth last couple of years and will continue we think be in that kind of A category range.
I think that transaction volume will be good. When you think about government changes, it’s really interesting. You look at some of the single family markets there. I mean, there’s been a spike in prices for sale property there because of the transition, because of the new administration. There’s always tends to be more demand during transitions than if you just had an incumbent win.
I’ll let Keith talk more about the the current demand. Go ahead, Keith.
Keith Oden, Executive Vice Chairman, Camden Property Trust: Yeah. I mean, you know, the it’s, trying to figure out the crosscurrents right now between, you know, kinda what’s being talked about versus kinda thinking about what what do you think is actually gonna happen is, man, it’s it’s a crapshoot, I think. And, you know, you you for every time you you hear, you know, government potential of government downsizing of people, I think the latest number I heard was out of, they offered everybody in the entire Federal government a buyout package. And at the last count, I think it was up to 20,000 or 25,000 people that said they’re going to sign up for that, which is is a rounding error of the total federal workforce. So I I I think I think the at the same time, that conversation’s going on.
You’re having this is another broader conversation about if you’re a federal employee, you’re gonna have to come back to the office. And so I think that there’s probably a knock on effect there of DC proper, which which frankly for us has been the weak link in our DC Metro portfolio for the last two years. And it could very well be that as people have to return to work in an actual office, a preponderance and a big portion of which are in D. C. Proper, that it’s it’s gonna make more sense for them to potentially move back closer to or or into DC proper.
So I I think there’s a lot of crosscurrents. I think there’s a lot of talk. And I I think you you’re probably never gonna go broke betting on the the under on, you know, how many federal employees are actually going to go do something else, regardless of who asked them to do so.
Alex Jessett, President and Chief Financial Officer, Camden Property Trust: And and I’ll tell you, year to date, DC Metro has our highest increase in signed new lease rates.
Speaker 4: And your next question today will come from Julien Bloehn with Goldman Sachs. Please go ahead.
Speaker 5: Yes, thank you. I just wanted to ask on the spread between the low end and the high end development starts in 2025, sort of what drives you to sort of trend closer to the low end versus the high end this year? It’s
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: just a matter of making sure that we hit what we believe would be reasonable spreads and a reasonable return. I mean, if we you know, if one of the things that we’ve seen, just take Nashville as an example. I mean, Nashville is so busy from a development perspective. Costs went up so dramatically, you couldn’t get anybody to bid your jobs. Now we have seven deep of subcontractors bidding on our Nashville nations property.
So so that what happened then is that, a, you had construction costs flatten, maybe go down a little. And then B, on the other hand, you have a broader sub base, which means that that tells me that once we execute contracts, we can probably get buyout of anywhere from 2% to 3% or 4% less when we buy out the con when we actually buy the contracts rather than just asking them to tell us what what they would go for. So, it’s gonna be, so towards the middle of the year, we will we will have a a better view of of when that second derivatives turns positive in a lot of these markets on rental rates and that would just give us more confidence to lean in. So it’s really a decision about we need to get paid for development risk. So we need 100 basis
Speaker 7: points to 150
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: basis points of positive spread between what we can buy for and what we can build for. And then we have to have the confidence that the revenue growth is going to be there in ’26 and ’27 and ’28. We’ll get more confidence to that mid year. So that’ll determine sort of whether we get to the high end of that range. One of the other I think opportunities that we could see basically is merchant builders who can’t get their deals done and we can then step into those deals and get those done.
We have historically done that a lot over the years, especially during transition times like we have now. And so we might be able to pick up some of those that can’t get done either. So that could push us towards the high end of that range as well.
Speaker 4: And your next question today will come from Connor Mitchell with Piper Sandler. Please go ahead.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust3: Hey, thanks for taking my question. Maybe just going back to the broader transaction markets, appreciate all the color so far. And it just seems like there’s still a ton of money bidding on apartments inside financing costs and the expectation is for rent growth to eventually overcome that obstacle. But you guys had talked about the maybe the increased pickup in the back half of the year. So I guess my question is just how much longer do you think the negative leverage will last, especially thinking about how much more there is to come in transactions in the back half?
And I guess just a quick follow-up on that. Do you think that the market might be too aggressive on the rate of growth being underwritten for ’26 to ’27? Or is it really that high of an expectation that justifies the negative leverage? Thanks.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: Well, that’s what people are betting on for sure is that ’26 and ’27 are going to be outsized growth years. And if history is any indication of what might be the future, that’s exactly what’s happened over the years. You have a downturn, you have excess supply, you have a recession or what have you. And then what happens is you have a snapback. And usually supply continues to be robust, but we know that supply is not going to be robust.
And if the job market just holds up and the economy holds up, we get 2% GDP growth or 1.5% to 2%, you can or buyers are going to be underwriting significant rent growth in 2026 and 2027, ’20 ’20 ’8. Otherwise, they wouldn’t ever they can’t make their numbers, right? And especially when you look at where the prices are today. So I think what’s going to happen that will drive buyers and sellers closer together is the NOIs are going to go up in some markets in 2025. And when you think about our top markets, our NOIs are growing.
And so even if the cap rate stays the same, the cash flows are growing and you have a trajectory that you can count on. And then hopefully, I think people are betting on even though rates are going to be higher for longer over a longer period, they believe that they’re going to come down some. So I think the combination of supply, the ability to drive your revenue growth and your NOI growth is going to keep people and they’ll be able that they will continue to buy even with negative leverage day. I think long term, if the NOI growth isn’t there and if rates don’t come down some, then cap rates have to go up or you’re going to have a sale made between the buyers and sellers. And so we’ll see what happens.
But right now the market’s pretty robust. And what happens is really interesting, I mean, there was a transaction, for example, that we were bidding on in Nashville recently. And if you’re trying to buy at a specific cap rate like we are, the seller basically just said, look, we hear your number and we’re gonna hold. And their view is is that they’re gonna get a higher price in the future. The cap rate will be the same perhaps, but their cash flow growth will be higher.
And so there I think there’ll be a interesting it’ll be very interesting to see what happens between now and mid year to the end of the year in 2025. But I think it’s going to be a more robust transaction market. And I think all the signs are that we’ll get that positive second derivative on new rent growth and that’s going to create a lot of opportunity for sellers to come into the market and for buyers to buy.
Speaker 4: And your next question today will come from Michael Lewis (JO:LEWJ) with Truist Securities. Please go ahead.
Speaker 6: Thank you. Wanted to come back to this decision to have no more than 10% of your portfolio in any market. There’s been this trend toward diversification in apartment REITs lately. As you know, a lot of that is coastal investors diversifying into more of your markets. Aren’t there any markets that you just think are better, right?
They’re just flat out better apartment markets for the next ten or fifteen years or whatever it might be. Or is that not really the case? There’s nothing structural or secular there. I’m just thinking about, does this decision say more about Houston and DC or does it say more about a wide opportunity set across your markets and it being a little bit difficult to distinguish?
Keith Oden, Executive Vice Chairman, Camden Property Trust: So I would say it’s more about the opportunity set across all our markets. And when you say some markets are better, well, it depends on when. For example, three years ago, Houston would have been Houston and Washington, D. C. Were the problem children in Camden’s portfolio.
It’s all anybody wanted to talk about, and and and it’s and it’s a lot of what we talked about internally because those are our two largest markets, and they were underperforming and had been for about two, you know, two or three years straight. So fast forward, here we are today. Washington, D. C. Metro and Houston are a top two performer or in the top five and probably slated to be, you know, in the top two or three for this year and probably next year as well.
So if you if you ask that question, you know, some markets just better, yeah, I mean, you know, four years ago, all of them would have been better than Houston and and DC Metro and today it’s it’s reversed. It’s more about just having a a balance among 15 markets that we absolutely love. You know, every market that’s in our portfolio is, has the characteristics that exemplify what we wanna see in migration, job growth, you know, consistently perform performing on the ability to move rents over time and to operate the assets, at an expense, you know, from an expense standpoint at a level that allows us to grow cash flow. So it’s not a statement anyway about D. C.
And Houston. It’s just a statement about we got great opportunities in other markets, growth opportunities in markets like Austin and Nashville where we’re underweight, and it’s just balancing those opportunities.
Speaker 4: And your next question today will come from Nick Yulico with Scotiabank (TSX:BNS). Please go ahead.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust0: Hey, good morning. Daniel for Carrick along with Nick. Alex, I wanted to clarify your answer to Jamie’s question at the beginning. You said new lease rates turning positive in Q3 and continuing from there. Does that mean it’s going to continue to improve on an absolute basis?
Like are you assuming like a normal seasonal pattern into the fourth quarter? Or is there a comp benefit with new product being absorbed that would cause Q4 to look seasonally?
Alex Jessett, President and Chief Financial Officer, Camden Property Trust: Right. So we’re going to return to seasonality and at least that’s what’s in our budgets. And so what that means is, is that you see the positive new lease rates in the third quarter and then in the fourth quarter. That’s always our softest quarter is just there’s just not a lot of people who want to move around the holiday season, etcetera. And that’s usually when we have the least amount of pricing power.
And so you should see it start to return to a more normal seasonal pattern at that point in time.
Speaker 4: And your next question today will come from David Seagal with GreenTree. Please go ahead.
Speaker 6: Hey, thank you. I just wanted
Speaker 8: to drill down a bit more on to the proposed development start. Can you ballpark the rents or rep per unit you would need to achieve in Nashville and Denver to achieve the 6%
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: yields? Yes, those Alex?
Alex Jessett, President and Chief Financial Officer, Camden Property Trust: I don’t. We’ll have to get back to you with that.
Speaker 6: Okay, great. Thank you.
Speaker 4: And your next question today will come from Alex Kim with Zelman and Associates. Please go ahead.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust5: Hey, guys. Thanks for taking my question. I always appreciate the song choices leading up to the call as well. I was wondering if you could talk about your leasing trend so far for the three communities in lease up and how that flowed just into the lease up revenue line for the quarter and then more broadly for your 2025 view? Thanks.
Alex Jessett, President and Chief Financial Officer, Camden Property Trust: Yes, absolutely. So if you look at the communities that we have in lease up, two of them are the single family rental communities. And we’ve been very upfront that our single family rental communities are they’re they’re slow leasing. They just are. It’s the particular demographic that, that looks for for that product type has a tendency to to show up once, then they show up again, then they show up and they measure a bedroom and make sure that their furniture can fit etcetera.
And so it’s it is a slower leasing. Now the good news is is that we think they’re gonna be really sticky and we think once once they’re in the turnover, if it takes them that long to make a decision to move in, we think it’ll take them equally as long to make a decision to move out. But that’s what we’ve been seeing. When I look at Camden Durham, which is our last, the third one that’s in lease up, during the fourth quarter, we had the type of leasing that we’d expect, which is slower. As I said to to one of the previous calls, the fourth quarter is always the slowest quarter, and that’s no different whether or not it’s a a new lease up or or an existing asset.
That being said, if you look where they are, so Wood Mill Creek is, is 89% occupied. Durham is 78% occupied. So both of those are getting very close to stabilization. And so obviously we should get some uptick in 2025 from those two as they stabilize. And then Longmeadow Farms is a little bit behind, the other two just because it started after them at 53% leased.
Speaker 4: This concludes our question and answer session. I would like to turn the conference back over to Rick Kemper (NYSE:KMPR) for any closing remarks.
Rick Campo, Chairman and Chief Executive Officer, Camden Property Trust: Well, I appreciate your time today and we’re glad to close out the earnings season for the large cap multifamily. So we’ll see you at the next conference or next roadshow. Thanks.
Speaker 4: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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