Q4 2019 Earnings Call

there's also a contest but with the

We know that our success is driven by our Camden colleagues. So the contest is for them. The five songs were selected by our Executives on the call today Kim, Alex jesset Malcolm Stewart and me each was asked to select their favorite song of the last decade that just ended five songs. Were Call Me Maybe by Carly Rae Jepsen humble and kind by Tim McGraw Uptown funk by Bruno Mars The Fighter by Keith Urban and Carrie Underwood. Can't stop the Feeling by Justin Timberlake the first person to email Kim correctly matching the executive with the song. They selected will get a shout-out and a prize. Good luck.

In order to move forward into the next decade. I think it's always important to look back and take stock of our accomplishments in the last decade here a few highlights. We improve the quality of our portfolio and creating value for a stakeholders through three billion in sales of properties with an average age of twenty-three years 2.3 billion of Acquisitions with an average age of four years, three billion of developing a creating one point 1 billion a value for stakeholders $500 million dollars of Redevelopment and repositioning of forty thousand of our apartment communities creating 525 million dollars value. We improved our debt-to-ebitda from over eight times to just under four times with all assets unencumbered and all debt unsecured. We doubled our a month for sure and nearly doubled our dividend.

We built.

An amazing culture of employee Excellence that was included on the Fortune 100 best companies to work for list every single year in the decade with a number of of top ten finishes home team can Camden ended the decade with a remarkable performance in 2019, exceeding all of our established goals and we are positioned for a strong start to this new decade as we continue to improve the lives or employees our customers and our stakeholders one experience at a time The Best Is Yet To Come don't believe it. Just watch

Thanks, Rick consistent with prior years. I'm going to use my time on today's call to review the market conditions that we expect to see in Camden's markets during 20/20. I'll address the markets in the order of Vestige Worst by assigning a letter grade to each one as well as our view on whether we believe that market is likely to be improving stable or declining in the year ahead following the market overview all provide additional details on our fourth quarter operations and our 2020 same property guidance. We anticipate same property Revenue growth this year in the range of 2 to 4% in each of our markets with the exception of Phoenix, which remains our top market and should produce Revenue growth in the five to six percent range. The weighted average growth rate is 3.2% at the midpoint of our guidance range and all of our markets receive a grade of C+ or higher this year.

as I mentioned our top

In for 2020 goes to Phoenix are number one performer in 2019 with a 5.9% revenue growth in a three-year average revenue growth of 4.9% We get Faith trading in a stable Outlook supply and demand metrics for 2020 looks strong with estimates calling for nearly fifty thousand new jobs and only 6,000 new apartments coming online this year back up next to rolly and Atlanta both earning and a minus rating was stable Outlook in Raleigh new developments have been coming online steadily with five thousand new units delivered last year and another 6000 expected this year job growth has also been strong in twenty thousand new jobs are projected for 2020 employment growth was also strong in Atlanta last year was approximately seventy thousand new jobs at home and projections call for $45,000 additional jobs in 20 20 completions remain steady with 9000 new apartments delivered last year and eleven thousand more scheduled for this year.

Denver received an A minus rating with a

Cleaning Outlook. Our Denver portfolio has been a strong performer averaging nearly 5% annual same property Revenue growth over the last three years, but we expect the market conditions to moderate over the course of twenty twenty given the somewhat elevated levels of new Supply over thirty thousand new jobs are expected in 2020 with around 9,000 new unit scheduled for delivery.

Orlando makes our top five cut again this year receiving a B+ rating with a stable Outlook job growth has been strong in Orlando over the past few years and that Trend should continue. However, the strength of the Orlando market has attracted morning development activity. So the level of Supply is rising thirty-five thousand new jobs are expected there in 20 20 with eight to ten thousand completions. We gave South California and DC Metro each of the plus rating with a declining Outlook our portfolio and Southern California faces healthy operating conditions with balance supply and demand metrics, but after several years of relative outperformance, we expect some moderation in pricing power this year job growth should be around $130,000 with completions of 25,000 expected in 2028, BC portfolio placed in our top five for Revenue growth last year, but elevated levels of Supply coupled with uncertain employment growth forecasts political risk and an election year make us a bit more cautious on our

outlet for this year

Supply should remain steady with completion of around at 13,000 units in 2020, but most jobs forecasts are predicting a noticeable slowdown in DC this year, which could impact our pricing power in that market in Tampa conditions are currently a be with an improving Outlook. Tampa's new Supply should come down slightly to around 4,000 units with twenty thousand new jobs projected putting the jobs to completion ratio at a healthy level of around five times are Tampa portfolio posted 3.1% same property Revenue growth last year and we believe their growth rate could accelerate during 2020 South Austin and Charlotte both moved up in our rankings this year from B- grades to B's with stable outlooks 2019 budgets for Austin and Charlotte originally called for Revenue growth in the low mm rains our of a market conditions firmed over the over the course of the Year resulting in actual Revenue growth of over 3% for 2019 in each of those markets. We believe that their revenue growth for Thursday.

1020 will be in a similar range to

last year

new Supply remains steady in Austin with approximately ten thousand new units anticipated this year with the economy is strong in the city should add over thirty thousand new jobs again this year conditions conditions in Charlotte or similar with twenty five thousand new jobs projected in eight thousand new units expected for 2020 conditions in Dallas firmed bit since last year's report card in the market earned a B minus with a stable Outlook again this year new supply has been persistent in Dallas with 20,000 completion completions recorded in both 2018 and 2019 and another 20,000 projected to deliver this year job growth continues to be a bright spot with fifty to sixty thousand new jobs expected but given the current supply and demand metrics. We think the Dallas Market will remain very competitive in 2020.

In southeast Florida market conditions rate a C+ but with an improving Outlook new Supply and job growth have remained steady over the past few years and twenty twenty estimates call for over thirty thousand new jobs in nine thousand new units competition from for sale and Rental Condominiums is still an issue in that market, but we expect slightly better operating conditions in 2020 and an improvement from a 1.4% same property growth achieved Revenue growth achieved last year and Houston received received a C+ rating with a stable Outlook as we expect to see limited Revenue growth again this year off estimates for new Supply in 2020 vary widely from low of 9502 over twenty five twenty thousand units coming online this year. So the market is definitely going to see an increase over the roughly 6000 units delivered in 2019 annual completions in Houston have range anywhere from 5,000 units to 22,000 units per year over the past twenty years. So 20/20 Supply level.

We'll be moving back towards historical long.

From averages Houston's job growth may also revert to its long-term average of around forty five thousand new jobs per year resulted in resulting in limited pricing power and revenue growth for our portfolio this year. Overall. Our portfolio rating is a B+ again this year with most of our markets expected to moderate in Revenue growth during 2020. As I mentioned earlier. All of our markets should achieved between two and four percent Revenue growth this year with the exception of Phoenix budget slightly higher and we expect our 2020 total portfolio same property Revenue growth to be at 3.2% at the midpoint of our guidance range.

Now if you details on our 2019 operating results same property Revenue growth was 4.1% for the fourth quarter within 3.7% for the full year our top performance for the quarter of Phoenix 6.3% Raleigh at 6 San Diego Inland Empire at 5.3 DC Metro at 4.8% and Denver at 4.7 rental rate trends for the fourth quarter were as expected with new leases down slightly two-tenths of a percent and renewals up 5.1% for a blended rate of 2.2% growth our preliminary January results indicate 5.54% growth for renewals and eight tenths of a percent for new leases for a blend of 3.1% which is consistently January 2019, February and March renewal offers are being sent out on a average increase of over 5% occupancy average 96.2% during the fourth quarter compared to 96.3% last quarter and 95.8% in the fog.

quarter of of 18

January occupancy has averaged 96.2% compared to 95.9% in January nineteen. So we're off to a good start this year annual net turnover for 2019 wage basis points lower than 2018 at 43% move out to purchase homes where 15.9% for the quarter and 14.6% for the full year compared with 15.5% for fourth quarter of 18 and 14.8% for the full full year of 2018 at this point. I'd like to turn the call over to Alex Jessica Camden's birthday Lobster. Thanks Keith before I move on to our financial results and guidance and brief update on our recent real estate in capital markets activities as mentioned on our prior quarters called Thursday the 4th quarter. We stabilized our Camden McGowen station development in Houston, Texas, and we began construction on Camden Atlantic a $269 unit $100 new development in Plantation job.

late in the fourth quarter

Camden Carolinian a recently constructed 186 home apartment community located in Raleigh, North Carolina and Camden Highland Village a 552 home of community with an adjacent 2.25 acre development site located in Houston, Texas.

The combined purchase price of $222 for a fourth-quarter community Acquisitions with significantly below replacement costs and we expect these Acquisitions to produce a stabilized yield of approximately 5%

For full year 2019. We completed Acquisitions of four communities with 1380 apartment homes for a total cost of approximately $440 and we acquired three undeveloped land Parcels for a total cost of approximately $37 also late in the fourth quarter. We completed the sale of our Corpus Christi, Texas portfolio and exit of that market the assets sold included two wholly-owned communities with 632 Apartment Homes and one joint venture Community with 270 Department of our net proceeds were approximately 75 million dollars this portfolio had an average age of twenty-two years with average monthly revenue of $1,300 per door off of approximately $2,000 per door or using actual capex. This disposition was completed at a five and half percent a f f o yield generating a 12.5

75%

Leverage our our over a 20-year hold. Based on a broker cap rate which assumes $350 per door and capex and a 3% management fee on trailing-twelve-month off. The cap rate would have been 6.25% our time in Corpus. Definitely put sunshine in our investors Pockets subsequent to quarter-end. We acquired 4.9 acres of land in Raleigh for approximately 18.2 million dollars for the future development of approximately 355 Apartment Homes.

On the financing side as previously disclosed during the fourth quarter. We completed a three hundred million dollar thirty years senior unsecured Bond offering with an all in interest rate of 3.4% We use the proceeds for the early Redemption of our existing 250 million dollar 4.8% bonds due June 2021 and the prepayment of our four or five million dollar 4.4% secured mortgage do 2045 these transactions locked in thirty-year debt at near all-time low yields and extending the average duration of our debt by approximately three years after taking into effect these transactions 100% of our debt is now unsecured and all of our assets are now unencumbered in conjunction with the Redemption and prepayment. We encourage her in the fourth quarter at one time charge to ffo of approximately $0.12 per share.

our balance sheet remains

Strong with net debt-to-ebitda at three point nine times and a total fixed charge coverage ratio at six point four times. We end a 2019 with only $44 million dollars outstanding on our $900 unsecured line of credit our current line of credit balance after the January 2020 payment of our fourth quarter dividend and the payment of property taxes, which are proportionately due in January is approximately 180 million dollars at quarter-end. We had $772 of wholly-owned development currently under construction wage is only $359 remaining to fund over the next two years moving on to financial results last night. We were ported funds from operations for the fourth quarter of 2019 with 125.6 million dollars or a dollar twenty four per share exceeding the midpoint of our prior guidance range by $0.01 primarily from higher same song.

net operating income results

Okay from higher levels of occupancy and other property level income and continued lower turnover costs lower taxes and general cost control measures.

For 2019 we delivered full-year same-store Revenue growth of 3.7% expense growth of 2% and noi growth of 4.7% as compared to Jersey original same-store guidance of 3.3% for Revenue expenses. And then align, you can refer to page twenty-seven of our fourth quarter supplemental package for details on those options driving our 2020 Financial Outlook. We expect our 2020 ffo per diluted share to be in the range of $5.30 to $5.56 with the midpoint of $5.40 representing a 36 cents per share increase from our 2019 results after adjusting for the 12,000 Encore prepayment penalty incurred during the fourth quarter of 2019 and the midpoint of our 2020 guidance represents a $0.24 per share core increase dead.

resulting primarily from

An approximate $0.19 per share increase in ffo related to the performance of our same-store portfolio at the midpoint. We are expecting same-store net operating income tax of 3.3% driven by Revenue growth of 3.2% and expense growth of 3% Each 1% increase in same-store noi is approximately 5.75 cents per share in ffo an approximate $0.17 per share net increase in ffo related to operating income from our non same-store properties resulting primarily from the incremental contribution of our for Acquisitions completed in 2019 and our ten development communities in lease up during either 2019 and June 2020 partially offset by the recently-completed disposition of our two wholly-owned Corpus Christi communities and an approximate $0.04 per share increase in ffo home.

to do an assumed

Hundred million dollars a pro forma Acquisitions spread throughout the second half of the year at initial yield of four and half percent this $0.40 cumulative increase in anticipated ffo per share is partially offset by an approximate $0.02 per share decrease in ffo from an assumed $200 of pro forma dispositions at the end of 2020 and approximate $0.04 per share decrease in ffo resulting primarily from the combination of lower interest income resulting from lower cash balances and higher corporate appreciation and amortization through the invitation of a new cloud-based accounting and Human Resources system.

Are combined General and administrative property management and asset management expenses are effectively flat year-over-year.

And approximate $0.07 per share decrease in ffo due to higher net interest expense resulting primarily from actual and projected 2019 and 2020 Jeanette acquisition and development activity partially offset by the 2019 accretive refinancing of debt at the midpoint. Our guidance is seems three hundred million dollars of New Birth debt issued in the first half of the year and finally an approximate $0.03 per share decrease in ffo due to the additional shares outstanding for full-year 2025 following our first quarter 2019 Equity issuance at the midpoint of 3% for expense growth. We are anticipating that most of our expense categories will grow at approximately 33% with a notable exception of property insurance, which is anticipated to increase at approximately 20% due to the currently unfavorable Insurance Market proper Pig.

It's only comprises 3%

And the total operating expenses property taxes represent a third of our total operating expenses and are also projected to increase approximately 3% in 2020 more in line with long-term trends the previously discussed savings on Texas property tax rates as a result of the passage of Texas House Bill, three and Texas Senate Bill two, which reduce School District tax rates by approximately $0.07 in 2019 and an additional $0.06 in 2020 and capped local governments tax revenue increases at three and a half percent for cities and counties and a two and a half percent for school districts without voter approval are offset by property tax increases in other markets including Washington, North Carolina, Georgia and Florida.

Page twenty-seven of our supplemental package also details other assumptions including the plan for $100 to $300 of on-balance-sheet development starts spread throughout the year. We are finalizing our pilot of chirp our mobile access solution and will update you further as we firm up our deployment schedule our 2020 guidance should not assume any incremental ffo impact from this initiative, which we expect to be meaningfully accretive in 2021 and Beyond.

we expect

4share for the first quarter of 2020 to be within the range of a dollar twenty nine $2.33 after excluding the $0.12 per share fourth-quarter a 2093 payment penalty the midpoint of a dollar Thirty One represents a five cents per share decrease from the fourth quarter of 2019, which is primarily the result of an approximate $0.02 per share decrease in sequential same-store net operating income resulting primarily from the reset of our annual property tax accruals on January 1st of each year and other expense increases primarily attributable to typical seasonal Trends, including the timing of on-site salary increases and approximately 1 and 1/2 Cent per share decrease in ffo due to a combination of our interest income resulting from lower cash balances and lower fee and asset management income and approximate $0.01 per share decrease in ffo due to higher interest expense dead.

At approximately $0.01 per share.

Decrease from our previously disclosed fourth quarter 2019 business Interruption Insurance Recovery and an approximate $0.01 per share decrease from our wholly-owned Christy dispositions this 6 and 1/2 Cent per share aggregate decrease in ffo is partially offset by an approximate 1 and 1/2 cents per share incremental increase from our recently completed Houston and Raleigh Acquisitions at this time. We'll open the call up to questions you have before we start our first question and answer we let our Camden folks know that we do have a winner to our Camden contest the first person to correctly identify the songs with the person that submitted them is Laura Brooks who is our Senior Benefits administrator here in Houston wage correctly identified Call Me Maybe by Carly Rae Jepsen with Kim Calahan humble and kind by Tim McGraw with mister Malcolm Stewart.

Can't stop the Feeling by Justin Timberlake with Alex jesset Uptown funk by Bruno Mars Mister Campo and shockingly The Fighter by Keith Urban and Carrie Underwood with me, and I will turn it over to 4 to 4 open it up to questions. Thank you. We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press star than to at this time. We'll pause momentarily to assemble our roster.

And our first question will come from Nick Joseph with City, please go ahead except maybe just started on Houston. You did 2.1%. Same-store Revenue in 2018. It sounds like you're expecting a similar level of growth this year, but given the increasing Supply and the job growth comments that you may just wondering how you can tie those two and what you're seeing more from your portfolio specifically.

Yeah, Nick that you're you're correct. Our original guidance last year for Houston included brought up to 2.1% growth. And that's about where we are this year. So the the name of the challenges on the Houston data is you have estimates from our providers that range all the way from new completions of a low of about 9, ninety Five Hundred Apartments off on the high end almost 20,000 and that's a you know, there's that's a meaningful difference in that in that spread. We we took the average or are we're sort of planning our with our game plan around the average of those two outliers. We have five data providers. The average is about fourteen to fifteen thousand apartment. So even that is so so that that doesn't mean that unmanageable in an environment where we think we're still going to get forty-five to fifty thousand new jobs in the the estimates on the job growth are much more tightly bunched than the new Supply my guests.

This is the new Supply number is still.

There's still a lot of fair amount of uncertainty as to the timing of deliveries and and the which seemed to always be getting extended further and further out. So we think that and then and then the second part of that is is that our our portfolio has a pretty decent mix of urban core and Suburban assets. And even though the a fair amount of the supply is more. So this year than than previous years is coming in the suburbs. We still think that are balanced portfolio is well positioned probably going to see a little bit more impact as we did last year in the urban core just because that's where the current lease ups are happening. Probably going to get a little bit more impact at late in the year from some of the Suburban assets. But over all in all we still feel pretty good about our ability to you know to grind out another 2% in a walk-in in a Houston Market that's you know, that's going to continue to be challenged and there's nothing nothing new or even very interesting about Houston being counter-cyclical to the rest of our portfolio wage.

this is about the seventh or eighth time and

Thirty years that we've seen results like this where Houston is is definitely it's just counter cyclical and you know people dig into and try to put a lot of analysis around it, but I I don't think you really need to overthink it too much. The reality is is that in and it's just a stark is this is that low oil prices are really good for everybody else in the country and not good for Houston and the reverse is also true. So we've been we had a lot of times in the past where Houston was an outlier to the to the to the top end of the range and right now it's an outlier to the bottom. Let me just add that that I am I think the interesting thing and this this will apply to all markets including Houston, but I think it it supports its really supported better in Houston than the other markets. Maybe you know, when when we talk to our service data provides providers like Ron Whitten, for example, I'm going to paraphrase what Ron said on his last last client call with us which which we did last week. You know, the he said that part

Demand is just this proportionally strong versus the underlying economy. If you just look at the underlying economy and you look at job growth slope.

Queen at a supply, you know at at all-time highs you would say well, how how how can you have Revenue growth in apartments? When you're when when you have you know Supply with a backbone of job growth falling year-over-year and the answer is is that is that we just have this really interesting demographic tailwind. And the Tailwind is the term that that off that that Ron uses and I think it applies to Houston as well. You have continued growth and young adults who have a high propensity to read to rent apartments and and you have lifestyle phone setting on couple types that have a higher propensity to lease and there's more of them today and then when you look at a propensity to rent for every demographic age group all the way up into the 16th, those those cohorts have grown dramatically in terms of propensity to rent when you when you think about about you know people that were in their fifties before it's like well they're going to buy a house dog.

Staying houses are already in houses, but actually selling houses and running and so the the the the the rental or enter pop.

Is increasing at a faster rate than we would ever expect given the backdrop of job growth. One of the other really interesting studies that came out was Freddie Mac their housing a summary and 2019. There was some data and it was reported in the Washington Post. Just recently that 40% of rent renter's say they will likely never buy a house and that's up from 23% of renters saying that in 2017 and then 80% of those folks that eighty percent of the 40% says that rent that that rent fits in better for their life. They don't want to be they don't want a mortgage. They don't want they want flexibility in the optionality of being able to move whenever their lease is up. And and so I think that continues to drive all the markets including huge Houston. It does have more Supply coming in on a relative basis than it is in the last few years. So it's keeping that Revenue growth, you know muted But ultimately I think the Dead

The demand side of the equation is definitely far greater.

Than than than the economy would would sort of sort of indicate.

Thanks. That's very helpful. Then maybe just quickly on vcu's mention political risk in an election year. What have you seen in I guess in election years and then maybe the following year that this may be different than yours.

Well, we have done some analysis on Election years versus versus you know, the overall economy and DC and and interestingly enough it sort of picks up during the election year and then I sort of depends on on who gets elected because if you have an incumbent it gets elected. What happens is you don't have a a flurry of changes right? I don't have lobbyists now that need to to retool because they have a new Administration. So that tends to be if you have a new Administration you tend to have more growth in DC during that period because you've sort of the existing incumbent lobbyists and business people sort of having to retool and and figure out how to how to improve their position Visa Vie the new Administration. So, I'm generally it's it's good in the in the in the in the year leading up to to you know, it helps the economy and and and the economy nationally leading up to an election then it

You see actually benefits if there's a change of administration.

Thank you.

And our next question will come from John Kim of BMO Capital markets, please go ahead Thank you regarding Phoenix. It continues to be strong Market if you're forecasting this year as well. When do you think development will pick up in the market to meet that demand and why hasn't this occurred yet? Well, we've got in our Phoenix numbers wage like John we've got completions picking up slightly in in 2020. We were at about 6,800 delivered units last year. Looks like Thursday. We're projecting about 7600 units this year. So that's about a 10% increase. That's probably still not sufficient to get ahead of the demand one of the things about Phoenix that's just different than a lot of other markets that that we operate in is just the lack of competition that we have from public companies and probably a few or Merchant builders that are dead.

indigenous to Phoenix then you have

Some of the other cities that we build in so you just you've got to a different embedded base a little bit different competitive profile and then you gotta you know, I'm not aware of any other publishing companies that have anything currently under construction in Phoenix there maybe maybe one or two but it's it's minimal if if if any as opposed to some of our more, you know, some of our more well-traveled Mark Washington DC Southern California the Florida markets and even even Denver in Dallas, so just a different a different profile, but my guess is is that if you if you look at what projected job growth is again in Phoenix next year where the consensus number is is somewhere in the you know, thirty-four thirty-five thousand jobs if we get 7,500 Apartments that's roughly equilibrium, but I I I just don't think the capacity is there to ramp up the way some of the other markets can inhabit.

historically, but good result

It's like that ultimately will attract competition. I mean, I think the good test case of that is Denver which you know, we operate it in with very little outside competition from the public companies for a number of years and that's obviously changing as well. So it'll I'm guessing it will ramp up. I agree with Keith in that sense that the pipelines in these markets are are pretty much as full as they can get. You know, when you look at Thursday at the you know, sort of the the permit data and what have you were at peak times and the most of these markets and and the the challenge that we have and other developers have is Thursday. It's just really hard to make numbers work in lots of markets including Phoenix. You you construction costs continue to go up faster than than rent, you know rental rate increases go and it's hard to make those numbers work and and I think most people would like to ramp up their their business, but they really have a hard time wrapping up from this high-level already.

Okay, and my second question is to the J T fan Alex.

What are your views on moving to a core ffo per share guidance number and the pros and cons is reporting vs. Core you you know, it's interesting because I I heard yesterday that probably one of the last Hangar on some not having core ffo has has gone over to the dark side. So at this point in time, we plan on reporting ffo based upon the Navy white paper. I think I think there's a lot of importance around doing that if you think about it enables narrate to have a non-gaap measure as long as we're it's consistently applied and and wage and so we're going to we're going to keep with that and we're going to consistently apply it based on the white paper at least for the foreseeable future.

Thank you. Thanks.

And our next question will come from Shirley. Woo of Bank of America, please go ahead guys. Thanks for taking the question. My first question is actually a follow-up to next question. I asked I think your last quarter call you mentioned that historically for you to 50% of a demand of household formation was driven by jobs, but that the capture rate actually fell down to 15% But you were actually seeing it more positive turnaround. Could we get a little bit of extra color in terms of how that has continue to play it out or if that turnaround has continued to improve we we have a higher capture rate of multi-family versus single family. And I think you won't when we made that comment on the last call. It was interesting because we've dug down into this into this database and and it was very unusual for for the for a single-family demand to exceed multi-family demand in Houston and in any Market because that it's been dead.

multifamily demand has has continued to

Outstripped single-family demand from a from a rental perspective and and it was just an aberration. We had our our data providers look at it and part of it was that when the name of the job growth that happened the people were already here because Houston did have a you know, the downturn with the energy business. So you had 80,000 + jobs that were that were lost in the energy business and those people a lot of those people lived in homes. And then when the new jobs were created those people took those jobs there were already in either a red home or a or a or a gnome and the the the demand for multifamily or the competition for those housing those housing units went to single family as opposed to multi-family that has turned around now because we've got more jobs that that and we've also seen the in migration rate from from four people moving into Houston improve and and to go up wage

During twenty, you know, the 2014.

2016 time frame people used to come well before that they were coming here because you get a job easy then during that energy, uh down turn it wasn't as easy. They weren't as I know we did have we didn't have negative job growth but people sort of heard about that and then didn't didn't come to Houston didn't move to Houston to take a job. The other thing that was happening at the same time is that you were having, you know, we have a a historically low unemployment rate in every city. And so so a young adult can get a job in in a in pretty much any city in America if they want to stay there. So there was a little bit of a decline in in migration rates because of that as well and I think just migration rates overall in the country are down because of this very tight labor market there's so if you can get a job in the city you live in you don't necessarily move out of the other city or move moving to another city to get the job that that might be a little dog.

Like for you know the the coastal cities.

Are you still do have out-migration in California and New York and other places for tax reasons and High Cost of Living resource and things like that, but that we we have definitely seen the the game capture rig for multifamily demand increase this year and we think it's going to increase next year. We're not going to have a will will continue to outstrip single-family single family home and versus multi-family.

Got it. That's all full and so was that a question has to do with turnover. So I think turnover has continued to Trend down across the board for all your competitors and Thursday. It's gone solo to a point. Where do you think there will be a continuous acceleration and turn over or do you think it's going to kind of taper off or pick back up?

I don't know surely for the last five years. It's ticked down in our portfolio. And every year I've kind of mused out loud that we've got to be approaching the limits of what the turnover rate can fall off but it fell again last year and and it's you know, I think a lot of the factors that Rick mentioned about that just the demographics have we just have to change our thinking about what turnover rates are likely to be in the future because it's you know, five years is more than enough to call a trend. So I think we're in a probably in a permanently lower turnover part of the cycle. And this is likely to continue. It's hard to know where this is like the falling homeownership rates hard to know where it stops. But at some point you got to believe that life reach some logical endpoint or low point, but we haven't seen it yet.

Got it. Thank you.

And our next question will come from Rich Anderson of SMBC, please go ahead. Thanks. Good morning. I'm still picturing Rick at a Bruno Mars concert but wage. Anyway, I've seen it and we brought him in Friday night of Super Bowl and we we went to that concert. Okay. Anyway, so the the year last year started from a same store and just look at the High Line at 3.5% and you end at the year full year 4.7% It's precisely the same number this year to start for again noi not Revenue at 3.30. I'm curious. You know, how much is is is twenty-twenty perhaps going to look like 2019 where you set a reasonable, but perhaps beatable same-store wage.

as we go through

Or do you feel like 20 20 is different than 2019 at least in that regard?

Rich I'm going to I'm going to answer your question on the revenue side of things because there are a lot of things that happened on the expensive property, you know, I don't know they're just sort of random walk sometimes but on the revenue side of things, you're right we went last year with guidance original guidance was 3.3% and we were we were basically our our forecasting and modeling had occupancy rep pretty much in line with what the prior-year event 2018 we hit ninety 5.8% occupancy in our portfolio wide which was the highest occupancy level on same-store off that we've ever had. So are you to go back twenty years or twenty year average for same-store occupancy is about 94.6% and all of a sudden we get this, you know, we get this increase in October, right? We had a a peek and what we thought would probably be a peak of 95.8% in 2018. Those were kind of we felt like kind of crazy high numbers and then wage.

sort of repeat, but we thought would like, you know, maybe we

Can maintain that so that's what we modeled in 2019 so that the 3.3 had an expectation of somewhere around $95.95. Well as it turns out occupancy rate over the course of the Year ticked up we end up averaging 96.1% occupied for the full year of 2019 which explains a Lion's Share of the difference between a 3.3 Revenue growth in a 3.7 Revenue growth for the year. There were a few other ins-and-outs few out performances. But but the the Lion's Share of that was the increase in the occupancy rate. So our question really is is that are you taking a thirty-year high occupancy rate and saying, you know that's going to be repeatable and in our world it looked like the way the the 96.1% is your rate was a little Black Swan ish? And so they're naturally there's a little bit of reluctance to repeat that in and and as far as modeling for next Thursday.

so we we we moderated the

Since you write a little bit in in light of two two primary primary facts, we know that deliveries and Camden's portfolio of new Supply are going to be up about 15,000 Apartments over last year. That's about a 10% increase so we know we're going to get more new units than we had last year. The flip side of that is we also know that based on the job growth estimates and cannons portfolio wage growth in across our platform is coming down somewhere in the hundred thousand jobs over the course of the Year range. So you going to get fewer jobs going to get more Supply and it just feels to us like a probably got to have a little bit different supply-demand challenge in 2020 than we had last year. So the the the flip side of that is is that if we end up catching lightning in the bottle again, and we we average something in the 1961 range that's captured by the high end of our Revenue range for this year at 3.7. So that's that's how we ended up settling on our guidance for this year.

Okay, and then could you?

Then based on what everything you just said there fewer jobs more Supply and in your in your world decelerating Revenue, at least from the your standpoint today yet. You're ramping development. I think, you know a hundred million dollars more of projects sequentially versus the third quarter on tap. Now, how does that reconcile based on what you just said, you're you're you're showing some confidence in the development side and yet you're you're you know, kind of playing it a little closer to the vest on the operating side. It's primarily because you know the development of our kind of lumpy, right you put you put property under contract. It takes you a while to get especially in California to get permits and and and what have you and so, you know, we we've been a consistent and saying that will be at two hundred two three hundred million dollar a year development start company. And and if you go back to our peak development, we definitely have throttled it back a bit. But but on the other hand washing

when you look at sort of going forward with the 200 to 300 I think is sort of a

Steady-state kind of a not a bullish not necessarily an overly bullish view, but just a more moderate View and when you look at what's happening in the in the in the acquisition market cap rates continue to compress two levels that I can't imagine that I never thought I could imagine when people are paying sub for cap rates in Dallas and Austin and other markets like that and suck. It really makes it makes our our spread between what we can where we can invest our Capital via if we do Acquisitions versus the development that development still gets paid very well off a premium perspective compared to acquisitions.

Okay fair enough. Thank you very much. You bet.

Our next question will come from Austin Schmidt of keybanc capital markets, please. Go ahead.

Thank you and good morning. The other income per occupied unit accelerated this quarter and am interested if that was driven primarily by parking fees and and the rollout of birth Smart Home Technology initiative discussed. And then what do you expect other income growth could look like in 20 20? Yeah, absolutely. So we didn't really pick up much from from the smart access. We do have our parking initiatives, which we're starting to get some some traction on and we're also getting a a slightly higher amount of recapture on our utility income and that's what you're seeing in the fourth quarter if if you go into 2020 we are we're basically assuming that that non call it non apartment rental income will be in touch with our apartment rental income. So so you've got other income which is which is what we all think about but we also do have parking Revenue, which we're not calling other income. We're calling rental Revenue, but when you put that down,

In in there as well. It should all be in line. So there should not be a dilute of impact in 2020 from other income.

Thank you. Appreciate that and then maybe sticking with you Alex as far as the balance sheet. Where do you guys expect to finish the year from a leverage perspective and and what would get you more comfortable level Levering up from home, um, you know from the current levels of around you know, four times called. Yeah, I mean, so we've always said that that we're comfortable in the Fords of five times range. And so we're here today at three point nine times. So obviously we've got quite a bit of capacity when we look at our models. We've got ourselves sort of in the in the mid four times by the end of the year, but but but obviously we'll we'll keep watching that closely and and and make sure that we understand what our Capital raising alternatives are throughout the year.

Thank you.

Our next question will come from Alexander Goldfarb of Piper Sandler, please go ahead. Hey, good morning morning down there. So just two questions, but first month on the on the Nereid ffo vs. Core preference would be named. It just makes comparability easier and the core ffo everyone sort of picks their own metric makes it tough month for comparison. Hopefully you got my answer that I agree with you. I that was that was pretty darn clear. We've so question two questions. First going back to to Nick's question on on Houston. You know, I I hear you Keith that you know, Houston has gone through booms bus been great Market over time, but still since the oil bust it has lagged and to to Rick's point on cap rates and where things are trading it would seem like there's an ARP here where you can maybe trim some of your Houston exposure.

And reinvest that in other markets and the creative spread whether it's either maybe markets with faster growth.

So same cap rate but faster growth or maybe development. So can you just talk about you know, whether you know almost north of 11% of Camden in Houston makes sense. Just given how easy it is performed. Maybe 8% I don't know. I mean, I don't know what the number is but maybe something lower is better and put that money in in markets that are showing more consistent growth.

Got it.

Well, when I when I think of growth I look at it over a long period of time Alex it's not it's not the variability from year to year in a portfolio like ours is not that concerning. It's more. What's the long-term growth Rose man? And if you go back to a twenty year history Houston has out performed most of our other markets over that. On a just a pure NY basis. So it it's it tends to be a little bit more volatile for sure. But in the context of what we're trying to achieve which is a total shareholder return grow grow noi over a long period of time. It's still fits our wage if it's what we're trying to do very well now with with regard to the timing and you know, what your exposure today. Where is it going? I think that that somewhere around given the size of the Houston Market sometime around eleven twelve percent makes sense for a long-term Target, but that having said that it behooves us to be opportunistic as to when we put money to to work in these markets not necessary.

Early in in tune with the underlying you know is is the is the market one?

At the top of the of the peer group today, it's more. Where will it be over the next ten years? So if you think about it from a timing standpoint, we just bought an asset in Houston at the change in the fourth quarter that we think was an extraordinary value play. We we think we bought that that asset at a roughly 30% discount to replacement cost at a 5% off of stabilized yield. Those are numbers that you can't get in most of our certainly the replacement cost members. You can't touch that in any of our other markets. So if you're if you're thinking about this as a tenure, you know sort of a 10,000 Horizon five to ten years. That's an incredible play. So to your point of could you be you know, could you be selling Houston now lightning up and and wage in the capital sure you could do that. But if Houston Houston right now screens as one of our most attractive and I think in 2020 also will screen is one of our most attractive acquisition off.

Tuner T's then it it it's sort of.

it's

Almost it would it would hurt my brain in a really bad way to be thinking of Houston is a fantastic acquisition market and then disposing assets into that. It's hard for me to think about being a great a Great by market and a great sale Market at the same time having said that we clearly have the opportunity when Houston is in a more recovered State and you're in people with eating not necessarily on at discounts replacement cost to sell some of our older assets in Houston at a at an appropriate time, which is we don't think is now but to do that to bring exposure back down to the the level that we wanted to be at and end up with a newer higher quality portfolio in Houston and and just live with the timing aspects that are associated with them.

Okay, that's helpful. And then second is on development. You just bought the Raleigh site. You also issued some ATM. So maybe you can talk about where where you see new development Thursday when you're starting projects. I think you're stabilized stuff. You said was sort of five ish. But maybe where you're underwriting development yields today and uh just understanding how that compares to you know, where you raise capital in the spread.

Well the development yields that were that were targeted day or we're still targeting Suburban development deals in the six range and and the Urban Development development deals and the low fives found the the in terms of of the spread too. I don't think of my spread to issuing Capital today. We think of it on a more broad basis. So the way I think about and we think about about our cost of capital is it's our long-term weighted average cost of capital and we with a balance sheet. That's about 75% Equity 25% debt that spread when you when you do a you know, sort of a capital asset pricing model analysis of what is your what is canvas cost of capital. It's around a little a little slightly higher than 6% So when we look at a development transaction or or an acquisition, we look at what our what our unlevered, irr would be over seven year. Wage.

on that development and that that makes

Needs to be higher than our cost of capital and it needs to be you know, a hundred and fifty basis points wide of our cost of capital plus or minus Acquisitions can be tighter than that because you don't have the development risk. So how he's managed our balance sheet in the in the short-term is sort of take being opportunistic with with debt rates being opportunistic with with with Equity issuances to try to keep our balance sheet cake in in the right place given where we are in the mic Market cycle, but I don't think about incremental costs of capital on whether I'm doing a thirty-year bond deal or issuing equity on the HM.

Thank you, Rick.

Our next question is coming from Rob Stevenson of Jenny, please go ahead.

Good morning, guys giving the California is roughly twelve and half percent of year. I know I across twelve properties with a legislative regulatory ballot issues ETC. How are you guys? Thinking about Kathy deployment there beyond the one project you have under development and potentially the one that's in the shadow pipeline. Yeah, we still like our California portfolio in spite of legislative issues because we're our our our portfolio is is and probably some of the the less risk markets in terms of of rent control. The the Statewide rink State ride home to rent cap really doesn't affect us that much because you know, we're you're talking about a you know, a CPI plus 5 kind of number which we're we're right now not getting off. And so I think I would be a little more nervous especially with the the renewed cost of Hawkins about legislation that's likely to be on the ballot in 2020 birth.

That would allow.

Please to get more aggressive our portfolio just are not in the in not in the cities that are more militant when it comes to rent control and even with all the you know, the sort of cognitive aspects of California with cost of living and and all that. It's still a pretty good Market to be a multi-family owner in and and and I and I like the exposure there. Okay, and then keep talking before about the the turnover being low and can't get much lower Etc. I mean how much I mean there's obviously positive to that from a same-store perspective, but it's just putting a drag on your Redevelopment given the fact that you're getting access to fewer units on an annual basis and how are you guys, you know working around that.

Yeah it at the margins it matters a little bit but you're talking about the difference between a 43 and a 44% turnover rate year-over-year between 2018 and 2019. If you had a you know, a five or 10% Delta in any given year. Yeah, that would probably affect the the repositions but the the the fact is is Rick gave the numbers off in his opening remarks. We've done all 40,000 apartments. And so we're we are down to I think the active reposition pipeline right now is only about $29 a month. So it's the the vast majority of the reposition activity that was was available to happen in our portfolio has already happened.

Okay.

Thank God.

Our next question will come from high tower with evercore, please go ahead. Good morning. Everybody morning. I guess we've got a lot of ground on the call so far, but, you know just along the the topic of you know, very low acquisition cap rates and compressing development yields out there Rick. You've done a good job in the past of sort of Life out what the the competitive landscape looks like just in in the sense of you know, the typical Capital stack for a developer or or maybe competitors on the acquisition side hurdle rates and lender requirements. Can you maybe just walk us through what what the average mass looks like nowadays and maybe how that compared to where we were a year ago.

Well, the a year ago great interest rates were higher right than they are today so that so the the capital stack is improved for the acquisition folks because the interest rates are seriously sick are much lower than they were last year at this time. And and you you did have it it really interesting situation last year when you had what coming out of the 2018 cycle, right? And and so we thought we thought that you would have some pressure on Merchants Builders and pressure on you know, others to to where you would have the buy side of the equation having the advantage versus the sell side and that just hasn't affected its self yet except for maybe a few markets and some unusual situations that we've been able to uncover but you know cap rates continue to be very very sticky if not going down and primarily because of the the the capital is very very available and I even though if you look at at private-equity trying to raise funds from home

Funds those numbers are pretty.

Are down and and getting new funds and new funds being raised in that way is definitely down but there's still a massive amount of capital that's already been raised that's unfunded. It needs to find them find a home. And and so I don't think we lack any capital from the equity or the debt side of the equation is actually improved and created more pressure than than than you would think God. Yeah just to follow up on that we were I was in we were in multi-housing Council National multi-housing Council annual meeting in Orlando last week and just to give you an interesting data point as with regard to how many the amount of capital in the amount of participants that is Brokers and and companies that are are are in a multi-family field and chasing deals right now two years ago at the nmac national meeting comprable meeting. There were fifty five hundred credentials participants.

This year there were eight thousand credentials participants at the same exact.

So in 2 years an additional 2,500 people paid a pretty healthy price to show up and and spend three days at the nmhc so I I am I'm in command to call Peak nmhc and we'll see if it where it goes from there. But it's there is the amount of people interested in the space is grown dramatically the amount of capital there's no there's no end in sight. So I think there's more of the same in store for on transactions. Yeah. I mean that's that's helpful color guys. I mean any quick commentary maybe on Thursdays or or lender requirements, you know debt service coverage those sorts of things. Just just to kind of get a sense of that. Yeah, you know seventy to eighty percent and one thing that's an interesting as as the banks have have sort of tightened their areas debt funds have expanded dramatically debt funds are now over 20% of the multi-family fundings are coming from dead.

Both both a development and and Acquisitions and you know two years ago debt funds were maybe five percent of the market now, they're 20 and so it's not just bank or insurance companies. It's these debt funds. So the there are programs out there too. So so I know developers who put in 10% equity loan 20% and 70% construction loans from from debt funds or Banks. And so you you can get up to 90% financing with them as peace. And the mezz competition is is as aggressive as as we've seen in a long time too. It's you know, you're it's it's definitely a much wider than than than treasuries, but it's, you know, five or six hundred basis points above the tenure, you know, you can get a get a piece to get you to 90% financing.

fascinating

I'm confident. It's all going to end. Well, thanks. Well, we have a balance sheet that is structured that if it doesn't we'll be doing very well. Absolutely. Thanks. Again. Our next question will come from Nick you look of Scotiabank, please go ahead. Oh, thanks. Hi everyone. So I want to go back to the you know, the leverage topic. You know, your Leverage is clearly the lowest in the sector and you know, you look at the rest of the multi-family reach they tend to have debt to eat but five times or maybe above and you know, I know your proxy does spell out that having leverage in the low four times range is a performance metric for executive top. And so I guess I'm just wondering why you feel the need to have it that low of this whole put in place, you know years ago as as a performance metric to get your leverage down. It's come down. Why do you still feel the need to have your leverage so much lower than the peer group?

It's primarily based on sort of where we are in the cycle. You know, we have

Have have called the top of the market a couple of times in the last few years and and missed that Mark obviously, but but I would I would point you back to to the fourth quarter of 2018 when when you know, the world was changing dramatically and their tenure was over three and and all of a sudden people started talking about prices falling and you know, our our stock price fell pretty dramatically along with them. And and so, you know, we're we're ten years into the longest us recovery in the history of since the Great Depression or maybe even the history of America. I'm not sure it's the history of America, but but but I think with the unusual and and maybe it's usual now with low interest rates and maybe it's going to be low forever. I don't know but but you're a peek Supply, you know the month of August recovery ever. I think you need to be cautious in this in this area in our board feels that way and and we're going to keep our debt a debt to ebitda the low end of the range.

And until there's maybe signs for us that that that you know, there may be clear sailing but I I can't imagine not having a recession in the next five years. And so I took if we do I want to I want to be positioned. I want Camden to be positioned to take advantage of what could be interesting opportunities in the discussion that we just had on the last question. When you think about people who are rushing into the space today paying sub for cap rates and leveraging to 90% with Mez. I'd like to know who they are in the future when we have a recession.

Yeah, that's a fair point Rick. I guess I'm just wondering though why it needs to be as low as four times. Right which is clearly. Well, you know is a performance metric that you guys hit max payout on that if you keep it at 5, or you know, why is that the magic number and you know, does it some point the company, you know revisit this and think about hey and maybe now is the time to be doing more development and and so we can do that and I need to keep our leverage that well. Yeah, so so Nick just a point on the performance metric the the the metric is 45% which is the range or debt-to-ebitda. So it it it it mirrors our guidance to the street and I think in in Alex's answer earlier in his commentary if we we have a a bond transaction modeled and if we do our book of business as we currently have it laid out with Acquisitions development funding et cetera will end the year at 4 and half and that's right in the middle of the range. Yep.

given guidance to you know

Need the performance metric but also guidance to the street. So I don't think I think by the end of the year all things being equal. We should be somewhere in the middle of the near the middle of the range of the 4000 half four or five times, which we think is still appropriate given all the all of Rick's commentary.

All right. Thanks everyone.

Our next question will come from Drew Babin with beard, please go ahead. Hey, good morning know it's been a long call. So just one for me to follow up on Houston Supply and it does look based on the data. I'm looking at like the the number of deliveries of the quantity of deliveries picks up kind of as the year goes on this year. And so if given that there's visibility on the first part of twenty, he may be worth a little bit more about kind of the back half of the year and and how things might shape up for 21 or do you look at it as fly kind of naturally spreading itself out a little more kind of those things are delayed just curious anything about them. Yeah. So the way we look at Houston you have to remember Houston is a vast Market 650 Mi a square miles, right? And so one of the things that's really interesting about the Houston supply of this this kind of just shows you what lenders and Merchants Builders have done they are moving out of the core the urban core and moving into the suburbs pretty dramatically to give you an example in Katy dead.

There are three thousand units that will come online this year in Katy. We have two joint-venture properties in Katy and nothing else. There's 3,000 units coming online in The Woodlands. We have one two joint ventures properties that are up towards the Woodlands.

Not witness proper. So that's 6000 units that are coming online in Houston that are really not competitive with our submarkets. So, uh, so the way we look at Houston. So number one. I think that that it's always clearly the the back half of the year is going to be more pressure in the front half of the year just always is with the especially with the with the ramp-up of of of the development starting, you know, sort of beginning of last year. They'll bring products on and it's and we also have clearly continued slippage of ones that were supposed to be in the first and second quarter that go into the into the third and fourth quarter. So with that said the back half of Europe, I'd probably be a little more difficult in the front half but keep in mind that the the key is where is that product and how does it affect our product in the suburbs often? We think that we're reasonably insulated from from a lot of the supply because he's so big okay from a timing perspective. You kind of look at it as maybe more of a a general overview.

And it'll persist for a certain period of time rather than anything potentially, you know, lumpy given how spread out the market.

Yes.

Okay, that's all for me. Thank you.

Our next question will come from new Malkin of Capital One Securities, please go ahead. Hey guys. Hopefully we can keep this call going to like, you know one East Coast time. Why not? Yeah. Oh, yeah. So like I'm in in the Senate. Oh boy. I'd rather be so anyways, you know permits have picked back up and you know recent months talk about debt funds kind of filling the the void there. Um, just wondering if you think we've kind of reached day structural peak in terms of Supply just given, you know, the life of delays and labor constraints such that even though you know permanence maybe might be picking up will continue to see so many delays like is this kind of the most that we can physically produce and and we shouldn't really expect anything really acute the rest of the cycle.

So if you look at our data providers and you look out to 20 20 completions versus 2019 both in Camden's markets and nationally commission's are expected to be up about 10% year-over-year. And then if you look at their and these are not obviously they have a less of a less certainty to them but in the 2021 numbers, there's a slight uptick from that so not not major, but but so the answer to your question is I'm not sure it's I'm not I don't know if it's a structural capacity, but it could very well be that it's a financial wherewithal and and, you know call it developer capacity because you do reach a point where even if, if money is relative, you know, certainly relatively plentiful. There are aggregate limits on what lenders are willing to how much they're willing to play with any any particular sponsor.

um, so I think it's

I don't know if it's structural in in terms of you know, the the construction providers. We clearly have had getting the existing book of business completed for everybody. And every one of our markets has been challenging for the last five years and I just don't know how that gets any better in an environment where you have a constraint on skilled labor, but more projected completions. I just think it gets worse.

Yeah, okay, that makes sense. And last one is and your operating expense guidance. Do you bake in any successful real estate tax appeals actually do so if if you look at home 2019 we got refunds in of about 2.9 Million Dollars in 2020. We are anticipated two point six million dollars of refunds. So pretty I'm pretty close to what we receive in 2019.

Thanks guys.

Our next question will come from John pawlowski of Green Street advisors, please go ahead.

Hey, thanks. I just want for me want to go back to your your cautious comments on for 20 20, I guess are you seeing anything on the ground today in terms of foot traffic concession Trends? That's just that the third-party forecast for slowing job growth could come to fruition cuz declining Outlook from 2019 is level from the mid 4% off gross down from the 4 8 you did this quarter seems to be like a a pretty sharp pivot in terms of the trajectory of pricing power. So it's just caution versus the third-party forecast or are you seeing it happen today? Well, if you take so there's two two things on the on the forecast. Our primary provider is Ron Whitten is is everybody knows and his he's got twenty month twenty twenty employment growth at 13,000 which is at the low end of everybody else is range and we've we've challenged that number and cuz it doesn't seem consistent with what what we're seeing dead.

but if you look at the

Bridge of the data providers that we have includes CBRE Real Page and and Marcus millichap. It's closer to 25,000. So you just it it certainly seems like the average is probably makes it makes more sense when you look at the numbers, but if it's if it's closer to the lower end of that range, then it's going to be a challenging Market cuz we're going to get we know we need to get eleven to twelve thousand additional apartments in DC Metro. Now again, the DC Metro store is always a little bit tricky cuz you got to think about where the footprint is and and our footprint of different than most of our competitors and it includes Northern Virginia and Maryland and in the summer Suburban assets that that we continue to just have incredibly strong results from where we do walk-in only place we do have challenges is where there's a submarket where we've got immediate, you know construction or lease up going on and it we get impacted like anyone else does but so I don't I don't I think I think birth

Game plan next year reflects a fair amount of you know realism in terms of what we expect to see.

Obviously 2019 was an unexpectedly good year for us in in the DC market and I'd love to see it repeat. I'm just not sure that based on the the data that it makes much sense to be particularly bullish more bullish than we are in our forecast sure. I understood but on the ground today, the team is not really seen any recent changes in terms of renewal pricing or concessions off traffic know and in fact in our market update called the other day, I would describe them as very optimistic in terms of their game plan for 2020 month. We we we ask everybody to give us their you know on a scale of 1 to 10 how much evil is this and they were in the nine nine to ten range. So they they feel very comfortable with their game. So no change no no concerns based on current conditions and

Okay, great. Thank you. You bet.

Our next question will come from Saint of please. Go ahead. Hey, good morning out there. So a couple of quick ones for money. So first, I guess I'm curious on any updated perspectives on rent control and some of your Sunbelt markets for this year per National multi-housing. It looks like Florida introduced measures last year that would remove the the preemption of rent control and those bills are poised to consideration here. And then there's also been some chatter in Atlanta while Georgia to has a state-level preemption against run control. It looks like the city council there recently introduced a resolution encouraging the state to allow cities in that state to pass rent control legislation. Yeah, it handled that. There's there's there's talk and there's chatter and there's activism around the idea that some form of rent control in almost every state that we operate in. The question is how far Advanced is it? What's the traction the the the market that I would say is more on Thursday.

My radar screen as far as actionable, you know legislation that that could could impact us would be Denver. I mean

They're pretty there's been a lot of conversations or they're not a lot of of local initiatives around the idea of rent control. I'm not I'm not overly concerned about the other ones you miss Florida, for example, you know, it's possible that some that that there might be something introduced it's hard for me to get my head wrapped around a Statewide initiative in the State of Florida around rent control at this point, but something you got to be you got to be aware of I mean the ground is shifting on this for for for sure and you know, having conversations having conversations and states that five years ago. You took would have said, you know, that's not ever going to be a conversation in the State of Florida or Atlanta or Texas. But it's it's it's just something you got to be really aware of and ultimately the month, you know, how how many of them progressed to the point where you're actually in a in a firefight like you are in California over specific initiatives that remains to be seen. Yeah, and I just don't see it happen in those markets, you know.

As keep pointed out in in Houston, for example, the there there has been discussion of rent control here because housing prices apartment prices have gone up and and affordable housing is really tough life. And the interesting thing is they'll talk about it. And then when you get people in a room that that understand the politics of the area, they know it's never going to happen. And so I think that there's a lot of talking but I don't have the same kind of kind of political polarized, you know, sort of Hardcore blue, you know, folks like you do in California New York and and some of these job markets when when you get to the ultimate and these are red States and pretty much going to be that way for a long time and which which would preempt a lot of state stuff.

Gotta appreciate that.

And can I get you to talk a little bit more about the mobile servicing platform that you're you're planning roll out here. How should we be thinking about that incremental costs? What are the key features or Focus areas off and then maybe you can you talk broadly about the expected benefits and put some you know, maybe some broad numbers around potential expense savings or Noy and margin benefit. You mentioned no accretion this year curious what that could look like, maybe two or three years time.

Yeah, absolutely. So so what it is is it's a mobile access solution that would enable both the residents and vendors to using their smartphone to enter the premises and also enter the locks at the individual communities, you know, we are in the middle of our pilot. The pilot is going is going very well and we will have more information for you as as we get a real deployment schedule. I will tell you that we have done a lot of studies around this and when you really look at what our consumers are willing to pay for, you know, there are a lot of smart home Technologies out there that are getting a lot of press but the reality is is what our consumers are most interested in is access and so so that is what we are primarily focusing on and off in addition to the fact that we know that our our residents are willing to pay for this amenity and it truly is an amenity. We believe that there is going to be efficiencies on the operating side if you think about the job.

The amount of time that we spend either rekey.

Locks letting vendors in dealing with lock outs etcetera. There should be some fairly meaningful savings on the expense side. But once again, we're we're firming all this up as I bought a 2020 is is really our year for for a roll out at a deployment and and in our pledge to you guys is that we will update you quarterly as we know more.

All right fair enough. Thank you.

Our next question will come from article of zelman and Associates, please go ahead.

Hey guys. Thanks for taking my question. I'll keep it quick. Just wanted to dig into the other income was specifically in the fourth quarter and just wear different things are accounted for in a mention briefly parking. As you know, you guys account for it a little differently than other traditional other income. If you could if you could share the breakdown of where parking is, you know, maybe the black cable bundles and all these other things are accounted for that would be yeah, absolutely. So if if you are on page seven of our supplemental package, you'll notice that we have property revenues as a line item. If you go down to our footnote, which is footnote a we we try to break out rental Revenue versus other Revenue that is tied with a contractual obligation wage. So if you sort of think about rental Revenue, we deem parking Revenue because you're effectively renting parking space to be rental Revenue, but but we certainly we certainly wage

think about you know our our Tech package Valley ways to

Et cetera that would fall into the other income category.

Got it. And then at the market level I guess for the same thing. If I'm looking at the rental rate the quench really it's up roughly 70 basis points. But the revenue for home is dead forty. So is that is that just a drag from other income? How do I interpret that at the market level? I think what I would look at is if I go to the fourth quarter comparison a I would say that monthly average average monthly rental rates were up 3.4% yet Revenue per occupied home was up 3.7% off. If you look at the monthly rental rates about three point three point four and then you add your occupancy of for that gets you to 3.8 which is pretty much in line with the 3.7. So I would tell you there's not a drag there from any of our additional other income categories.

Got it. Got it. Thanks. You're welcome.

This concludes our question-and-answer session. I would like to turn the conference back over to Rick campeau CEO for any closing remarks, please. Go ahead sir. We appreciate you being on the call and summer camp in for last decade and look forward to being with you for the next decade. So take care, and thank you.

The conference has now concluded thank you for attending today's presentation. You may now disconnect.