Q1 2024 Camden Property Trust Earnings Call

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Kimberly A. Callahan: Good morning and welcome to Camden Property Trust's first quarter 2024 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.

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Speaker Change: Good morning, and welcome to Camden Property Trust first quarter 2024 earnings Conference call.

Speaker Change: And Kim Callahan Senior Vice President of Investor Relations. Joining me today are Ric Campo Camden's, Chairman and Chief Executive Officer.

Speaker Change: Keith Oden Executive Vice Chairman, and Alex Jessop, President and Chief Financial Officer.

Kimberly A. Callahan: Today's event is being webcast through the investor section of our website at camdenliving.com, and a replay will be available this afternoon. We will have a slide presentation in conjunction with our prepared remarks, and those slides will be available on our website later today or by email upon request. If you are joining us by phone and need assistance during the call, please signal a conference specialist by pressing the star key followed by zero. All participants will be in listen-only mode during the presentation, with an opportunity to ask questions afterward.

Speaker Change: Today's event is being webcast through the investors section of our website at Camden living Dot com and a replay will be available this afternoon.

We will have a slide presentation in conjunction with our prepared remarks, and new slides will be available on our website later today or by E mail or time request.

Speaker Change: If you are joining us by phone and need assistance during the call. Please signal a conference specialist by pressing the star key followed by zero all participants will be in listen only mode. During the presentation with an opportunity to ask questions. Afterwards and please note. This event is being recorded.

Kimberly A. Callahan: 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 SEC, and we encourage you to review them.

Speaker Change: Where 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.

Speaker Change: 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 SEC and we encourage you to review them.

Kimberly A. Callahan: Any forward-looking statements made on today's call represent management's current opinions, and the company assumes no obligation to update or supplement these statements because of subsequent events. As a reminder, Camden's complete First Quarter 2024 earnings release is available in the Investors section of our website at www.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 questions to one, then rejoin the queue if you have additional items to discuss.

Speaker Change: Any forward looking statements made on today's call represent management's current opinions and the company assumes no obligation to update or supplement these statements because its subsequent events.

Speaker Change: As a reminder, camden's complete first quarter 2024 earnings release is available in the investors section of our website at Camden, letting dot com and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call.

Speaker Change: We would like to respect everyones time and complete our call within one hour. So please limit your questions to one and then rejoin the queue. If you have additional items to discuss.

Kimberly A. Callahan: 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.

Speaker Change: 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 Ric Campo.

Richard J. Campo: Thanks Kim. The theme for On Hold Music today was celebrations.

Richard J. Campo: Thanks, Kim the same for on hold music today with celebrations. We recently learned that were included once again on Fortune magazine's annual list of 100 best companies to work for this March 17 consecutive years. The Camden has been included on this prestigious list.

Richard J. Campo: We recently learned that we were included once again on Fortune magazine's annual list of the hundred best companies to work for. This marks 17 consecutive years that Camden has been included on this prestigious list. We celebrate being on the list because it shows that Camden employees value and appreciate being part of a great workplace. Two-thirds of a company's score for inclusion on the Fortune 500 list is based on an anonymous, third-party administered employee survey.

Richard J. Campo: We celebrate being on the list because it shows that Camden employees value and appreciate being part of a great workplace.

Richard J. Campo: Two thirds of a company store for inclusion on the Fortune list is based on an anonymous third party administered employee survey if a companys employees don't love what they do in their workplace, there's no chance that a company would ever make the list. The survey consist of 60 questions and the most important is the final one which asked employee.

Richard J. Campo: If a company's employees don't love what they do in their workplace, there's no chance that a company would ever make the list. The survey consists of 60 questions, and the most important is the final one, which asks employees if they agree with this statement.

Richard J. Campo: If they agree with this statement takes.

Richard J. Campo: Taking everything into account, would you say this is a great place to work? Ninety-five percent of Camden teammates agree. This is truly remarkable and certainly a cause for celebration.

Richard J. Campo: Taking everything into account would you say this is a great place to work.

Richard J. Campo: 95% of our Ft Camden teammates agree with this statement. This is truly remarkable is certainly a cause for celebration.

Richard J. Campo: We believe that smiling, motivated, and committed Camden teammates serving our residents with purpose and commitment to living excellence leads to smiling customers, which always leads to smiling shareholders. I want to thank Team Camden for their continued support of improving the lives of our teammates, our customers, and our shareholders one experience at a time. With the first quarter behind us, I will jump right into the issue that we spend most of our time talking about, apartment supply in our market.

Richard J. Campo: We believe that smiling motivated and committed Camden teammates, serving our residents with purpose and commitment to living excellence leads to smiling customers, which always leads to smiling shareholders I want to thank team Camden for their continued support of improving the lives of our teammates our customers and our shareholders.

Richard J. Campo: One experience at a time.

Richard J. Campo: With the first quarter behind Us I will jump right into the issue that we spend most of our time talking about apartment supply in our markets. Yes. We are at 30 year highs for permit deliveries and yes that is limiting rent growth.

Richard J. Campo: Yes, we are at 30-year highs for apartment deliveries, and yes, that is limiting rent growth in most markets for now. The good news is that the market is adjusting quickly to the post-COVID low interest rate development frenzy.

Richard J. Campo: In most markets for now.

Richard J. Campo: The good news is that the market is adjusting quickly to the post COVID-19 low interest rate development frenzy March apartment starts were the weakest since April of 2020 and are down 53% from peak volume and falling.

Richard J. Campo: March apartment starts were the weakest since April of 2020 and are down 53% from peak volume and falling. Starts will likely fall to just over 200,000 apartments in 2025, primarily driven by low-income properties using tax credits and other government support. New delivery should peak in 2024, falling by 31% in 2025 and 50% in 2026, which would be a 13-year supply low.

Richard J. Campo: Starts will likely fall to just over 200000 apartments in 2025, primarily driven by low income properties using tax credits and other government support.

Richard J. Campo: New delivery should peak in 2024, following by 31% in 2025, and 50% in 2026, which would be a 13 year supply low point.

Richard J. Campo: Apartment demand continues to be strong. During the first quarter, apartment absorption was over 100,000 units, the best first quarter demand in 20 years. The main drivers of apartment demand are population and employment growth. Apartment Affordability and Positive Demographic Trends The most recent 2022-2023 census reported that the top 10 cities increased their populations by 710,000. Nine Camden markets are in the top 10. The bottom 10 cities reported a loss of 200,000 people. These were major cities on the west and east coasts, where Camden had limited exposure.

Richard J. Campo: Apartment demand continues to be strong during the first quarter apartment absorption was over 100000 apartments, but best first quarter demand in 20 years. The main drivers of apartment demand our population and employment growth.

Richard J. Campo: Apartment affordability and positive demographic trends.

Richard J. Campo: The most recent 2022 2023 census reported that the top 10 cities increased their populations by 710009 Camden markets are in the top 10.

Richard J. Campo: Bottom 10 cities reported a loss of 200000 people. These were major cities on the West and East coasts, where Cameron has limited exposure.

Richard J. Campo: Employment growth has been robust in all of our markets except Los Angeles, which continues to struggle. Apartment affordability continues to improve as the average residence has been above 5% for the last 17 months while rents have been relatively flat. Consumers are spending less of their take-home pay on apartments. New Camden residents pay 18.8% of their income towards rent. Mortgage rates and rising home prices have kept move-out-to-buy homes at historic lows. 9.4% of our move-outs in the first quarter were attributed to a resident buying a home, the lowest in our history. The monthly cost of owning a home today is 61% more than leasing an apartment, and this is not going to change any time soon.

Richard J. Campo: <unk> growth has been robust in all of our markets, except Los Angeles, which continues to struggle.

Richard J. Campo: Apartment affordability continues to improve as resin has been above 5% for the last 17 months, while rents have been relatively flat.

Richard J. Campo: Consumers are spending less of their take home pay up for apartments, New Camden residents pay 18, 8% of their income towards rent.

Richard J. Campo: Mortgage rates and rising home prices have kept move out to buy homes at historic lows, 9.4% of our move outs in the first quarter were attributed to erect residents buying a hub lowest in our history. The monthly cost of owning a home today is 61% more than leasing an apartment. This is not going.

Richard J. Campo: Change anytime soon demographic trends continue to be a tailwind supporting demand from high propensity to rent groups, including young adults, aged 3500 apartments should take a larger share of household formations given these demand drivers 'twenty.

Richard J. Campo: Demographic trends continue to be a tailwind, supporting demand from high-propensity to rent groups, including young adults age 35 and under. Apartments should take a larger share of household formations given these demand drivers. 2024 demand should be sufficient in spite of supply concerns to set up accelerating rent growth for 2025 and 2026, assuming the overall economy continues on the current trajectory. Keith Oden is up next.

Richard J. Campo: 2024 demand should be sufficient in spite of supply concerns to setup accelerating rent growth for 2025 and 2026, assuming the overall economy continues on the current trajectory Keystone is up next.

Keith Oden: Thanks, Rick. Our first quarter 2024 same property performance was better than expected, primarily due to lower levels of bad debt and favorable trends for insurance and property taxes, which Alex will discuss in detail. Overall, operating conditions across our portfolio are playing out as we expected. In our market outlook on last quarter's call, we projected our top five markets for revenue growth this year would be San Diego Inland Empire, Southeast Florida, Washington, D.C. Metro, LA Orange County, and Houston.

Thanks, Rick and our first quarter 2020 for same property performance was better than expected, primarily due to lower levels of bad debt and favorable trends for insurance and property taxes, which Alex will discuss in detail.

Keystone: Overall operating conditions across our portfolio our.

Keystone: Or playing out as we expected.

Alexander J. K. Jessett: And our market outlook on last quarter's call, we projected our top five markets for revenue growth. This year would be San Diego Inland Empire, South East, Florida, Washington, D. C Metro L. A orange County, and Houston not surprisingly those were in fact, the top five performers for the quarter with same property revenue growth.

Keith Oden: Not surprisingly, those were in fact the top five performers for the quarter, with same property revenue growth ranging from 3.4 to 6.2 percent in those markets. And, as anticipated, we are seeing the most challenging conditions in Nashville and Austin, with those markets showing slightly negative revenue growth for the quarter.

Alexander J. K. Jessett: <unk> from three four to six 2% in those markets.

Alexander J. K. Jessett: And as anticipated we are seeing the most challenging conditions in Nashville, and Austin with those markets showing slightly negative revenue growth for the quarter.

Alexander J. K. Jessett: As we previously disclosed, we initiated a marketing strategy during February to boost occupancy going into our peak leasing season, allowing us to then increase pricing power. Rental rates for the first quarter were signed new leases down 4.1%, and renewals up 3.4% for a blended rate of negative 0.9%, with average occupancy of 95%. Our preliminary April results show an improvement of 230 basis points for signed new leases to negative 1.8%, with renewal rates at 3.4%, resulting in a positive 0.6% blended rate.

Alexander J. K. Jessett: As we previously disclosed we initiated a marketing strategy during February to boost occupancy going into our peak leasing season, allowing us to that increased pricing power.

Rental rates for the first quarter had signed new leases down four 1%.

Alexander J. K. Jessett: And renewals up three 4% for a blended rate of negative <unk>, 9%.

Alexander J. K. Jessett: With average occupancy of 95%.

Alexander J. K. Jessett: Our preliminary April results show, an improvement of 230 basis points per sign new leases to negative one 8% with renewal rates at three 4%, resulting in a positive six tenths percent blended rate.

Alexander J. K. Jessett: We believe our strategy was successful with April occupancy averaging 95.2% and recently trending around 95.4%. Renewal offers for June and July were sent out with an average increase of 4.2%. And finally, turnover rates across our portfolio remain very low, driven by fewer residents moving out to buy homes. Net turnover for the first quarter of 2004 was 34% compared to 36% in the first quarter of 2003. I'll now turn the call over to Alex Jessett, Camden's President and Chief Financial Officer.

Alexander J. K. Jessett: We believe our strategy was successful with April occupancy, averaging 95, 2% and recently trending around 95, 4% renewal offers for June and July were sent out with an average increase of four 2% and finally turnover rates across our portfolio remained very low driven by fewer Reza.

Alexander J. K. Jessett: And it's moving out to buy homes net turnover for the first quarter of 'twenty four was 34% compared to 36% in the first quarter of 'twenty three I'll now turn the call over to Alex Jessop, Camden's, President and Chief Financial Officer.

Alexander J. K. Jessett: Sure.

Alexander J. K. Jessett: Thanks Keith. Before I move on to our financial results and guidance, a brief update on our recent real estate and capital markets activities. During the first quarter of 2024, we stabilized Camden NODA, a 387-unit, $108 million community in Charlotte, which is now 99% occupied and generating an approximate 6.5% yield. We began leasing at Camden Longmeadow Farms, a 188-unit, $80 million, single-family rental community located in Richmond, Texas.

Thanks, Keith before I move on to our financial results and guidance a brief update on our recent real estate and capital markets activity.

Alexander J. K. Jessett: And we continued leasing at Camden Durham, a 420-unit, $145 million, new development in Durham, North Carolina, and Camden Woodmill Creek, a 189-unit, $75 million, single-family rental community located in the Woodlands, Texas. Additionally, on February 7th, we sold Camden Vantage, a 592-unit, 14-year-old community in Atlanta for $115 million. At the beginning of the quarter, we issued $400 million of 10-year senior unsecured notes with a fixed coupon of 4.9% and a yield of 4.94% and subsequently prepaid our $300 million floating rate term loan. On January 16, we repaid at maturity a $250 million, 4.4% senior unsecured note. In conjunction with the term loan prepayment, we recognize a non-core charge of approximately $900,000 associated with unamortized loan costs.

During the first quarter of 'twenty 'twenty, four we stabilized Camden Noda, a 387 unit $108 million community in Charlotte, which is now 99% occupied and generating an approximate six 5% yield.

Alexander J. K. Jessett: We began leasing at Camden Longmeadow form a 188 unit 80 million single family rental community located in Richmond, Texas, and we continued leasing at Camden Durham, a 420 unit $145 million New development in Durham, North Carolina, and Camden Wood Mill Creek, a 189 unit.

Alexander J. K. Jessett: $75 million single family rental community located in the Woodlands, Texas. Additionally.

Alexander J. K. Jessett: Lee on February the seventh we sold Camden advantage, a 592 unit 14 year old community in Atlanta for $115 million.

At the beginning of the quarter, we issued $400 million of 10 year senior unsecured notes with a fixed coupon of four 9% and a yield of 494% and subsequently prepaid our $300 million floating rate term loan.

Alexander J. K. Jessett: On January 16th we repaid at maturity of $250 million four 4% senior unsecured note.

Alexander J. K. Jessett: In conjunction with a term loan prepayment we recognize a non core charge of approximately $900000 associated with unamortized loan costs.

Alexander J. K. Jessett: During March and April, we repurchased approximately $50 million of our common shares at an average price of $96.88, and we have $450 million remaining under our existing share repurchase authorization. As of today, approximately 85% of our debt is fixed rate, we have no amounts outstanding under our $1.2 billion credit facility, less than $300 million in maturities over the next 24 months, and less than $100 million left to fund under our existing development pipeline. Our balance sheet remains incredibly strong, with net debt to EBITDA at 3.9 times.

Alexander J. K. Jessett: During March and April we've repurchased approximately $50 million of our common shares at an average price of $96 88.

Alexander J. K. Jessett: And we have $450 million remaining under our existing share repurchase authorization.

Alexander J. K. Jessett: As of today, approximately 85% of our debt is fixed rate, we have no amounts outstanding on our $1 $2 billion credit facility less than $300 million of maturities over the next 24 months and less than $100 million left to fund and our existing development pipeline.

Alexander J. K. Jessett: Our balance sheet remains incredibly strong with net debt to EBITDA at three nine times.

Alexander J. K. Jessett: Turning to our financial results, for the first quarter, we reported core FFO of $1.70 per share, three cents ahead of the midpoint of our prior quarterly guidance. Our first quarter outperformance was driven, in large part, by one and a half cents per share and lower than anticipated levels of bad debt. All the municipalities in which we operate have now lifted their restrictions on our ability to enforce rental contracts, and, in particular, Fulton County in Georgia has enacted legislation encouraging renters to abide by their contracts.

Alexander J. K. Jessett: Turning to our financial results for the first quarter, we reported core <unk> of $1 70 per share three cents ahead of the midpoint of our prior quarterly guidance are.

Alexander J. K. Jessett: Our first quarter outperformance was driven in large part by one and a half cents per share and lower than anticipated levels of bad debt.

Alexander J. K. Jessett: All the municipalities in which we operate have now lifted their restrictions on our ability to enforce rental contracts and in particular Fulton County in Georgia has enacted legislation encouraging renters to bide by their contracts.

Alexander J. K. Jessett: As a result, we experienced 80 basis points of bad debt in the quarter, as compared to our budget of 120 basis points. Some delinquent renters did repay past due amounts, but more often, we simply received the benefit of having our real estate back.

Alexander J. K. Jessett: As a result, we experienced 80 basis points of bad debt in the quarter as compared to our budget of 120 basis points.

Alexander J. K. Jessett: Some delinquent renters did repay past due amounts, but more often we simply received the benefit of having our real estate back the opportunity to commence a lease with a resident who abides by their rental contract and lower bad debt from having a new resident who actually pays.

Alexander J. K. Jessett: The opportunity to commence a lease with a resident who abides by their rental contract and lower bad debt from having a new resident who actually pays. The accelerated move out of delinquent residents did put pressure on our physical occupancy, so we made a pricing strategy shift during the quarter, reducing rental rates at communities less than 95% occupied in order to maximize pricing power as we entered our peak leasing season. As a result of this shift, we experienced higher occupancy during the quarter, but that was entirely offset by lower rental rates.

Alexander J. K. Jessett: The accelerated move outs of delinquent residents did put pressure on our physical occupancy. So we made a pricing strategy shift during the quarter, reducing rental rates of communities less than 95% occupied in order to maximize pricing power as we entered our peak leasing season.

Alexander J. K. Jessett: As a result of this shift we experienced higher occupancy during the quarter, but that was entirely offset by lower rental rates.

Alexander J. K. Jessett: Our outperformance for the first quarter was also driven by one and a half cents in lower operating expenses resulting from lower core insurance claims and lower property taxes. Although we are pleased with our first quarter revenue outperformance, at this point, we are maintaining the midpoint of our full-year guidance at 1.5%. However, we are changing some of the underlying assumptions.

Alexander J. K. Jessett: Our outperformance for the first quarter was also driven by one and a half cent to lower operating expenses resulted from lower core insurance claims and lower property taxes.

Alexander J. K. Jessett: Although we are pleased with our first quarter revenue outperformance at this point, we are maintaining the midpoint of our full year guidance of one 5%. However, we are changing some of the underlying assumptions.

Alexander J. K. Jessett: Our original guidance assumed 1.2% of rent growth, comprised of our 50 basis point earn-in at the end of 2023, effectively a flat loss to lease, and approximately 70 basis points in market rental rate growth recognized over the course of the year. We also assume flat occupancy versus 2023 and a 30 basis point contribution from lower bad debt, bringing us to our 1.5% total budgeted revenue growth at the midpoint of our original guidance range.

Alexander J. K. Jessett: Our original guidance assumed 1.2% of rent growth comprised of a 50 basis point earn in at the end of 2023 effectively flat loss to lease and approximately 70 basis points of market rental rate growth recognized over the course of the year.

Alexander J. K. Jessett: We also assumed flat occupancy versus 2023, and a 30 basis point contribution from lower bad debt, bringing us to our one 5% total budgeted revenue growth at the midpoint of our original guidance range.

Alexander J. K. Jessett: Our current revenue guidance reflects the same assumptions of a 50 basis point earn-in and a flat loss to lease, but now with 25 basis points in market rental rate growth and 10 basis points of occupancy gains as a result of our first quarter marketing initiative. In addition, our revised estimates for bad debt will add 65 basis points of revenue growth, bringing us back to the 1.5% midpoint for our current revenue guidance. Last night, we lowered our full-year expense guidance from 4.5% to 3.25%, entirely driven by the assumption of lower than anticipated insurance and property taxes.

Alexander J. K. Jessett: Our current revenue guidance reflects the same assumptions of a 50 basis point earn in in flat loss to lease, but now with 25 basis points of market rental rate growth and 10 basis points of occupancy gains as a result of our first quarter marketing initiatives.

Alexander J. K. Jessett: In addition, our revised estimate for bad debt will add 65 basis points of revenue growth, bringing us back to the one 5% midpoint for our current revenue guidance.

Alexander J. K. Jessett: Last night, we lowered our full year expense guidance from four 5% to 3.25% entirely driven by the assumption of lower than anticipated insurance and property taxes.

Alexander J. K. Jessett: Insurance represents 7.5% of our expenses and was originally anticipated to increase 18%. In addition to lower insurance claims in the first quarter, we just completed a very successful insurance renewal, and we are now anticipating insurance will be flat year over year. Property taxes, which represent approximately 36% of our total operating expenses, were originally projected to increase 3% in 2024. However, we have since received very favorable tax valuations, particularly in Houston, and we are now assuming a 1.5% year-over-year property tax increase. These positive expense variances are partially offset by increases in salaries, in part associated with increased performance incentives, and higher marketing costs associated with higher search engine optimization expenses.

Alexander J. K. Jessett: Insurance represents seven 5% of our expenses and was originally anticipated to increase 18%.

Alexander J. K. Jessett: In addition to lower insurance claims in the first quarter. We just completed a very successful insurance renewal and we are now anticipating insurance will be flat year over year.

Alexander J. K. Jessett: Property taxes, which represent approximately 36% of our total operating expenses were originally projected to increase 3% in 2024.

Alexander J. K. Jessett: We have since received very favorable tax valuation, particularly in Houston.

Alexander J. K. Jessett: And we are now assuming a one 5% year over year property tax increase these.

Alexander J. K. Jessett: These positive expense variances are partially offset by increases in salaries in part associated with increased performance incentives.

Alexander J. K. Jessett: And higher marketing costs associated with higher search engine optimization expenses.

Unknown Executive: After taking into effect the decrease in expenses, we have increased the midpoint of our 2024 same-store NOI guidance from flat to positive 50 basis points. We are maintaining the midpoint of our full-year core FFO at $6.74 as the accretion associated with lower same-store operating expenses is entirely offset by higher-than-budgeted floating rate interest expense, primarily as a result of fewer-than-anticipated Fed rate cuts. At the midpoint of our guidance range, we are still assuming $250 million for acquisitions, offset by an additional $250 million for dispositions, with no net accretion or dilution from these matching transactions, and up to $300 million of development starts in the second half of the year, with approximately $175 million of total 2024 development spend.

Alexander J. K. Jessett: After taking into effect the decrease in expenses, we have increased the midpoint of our 'twenty 'twenty four same store NOI guidance from flat to positive 50 basis points.

Alexander J. K. Jessett: We are maintaining the midpoint of our full year core F. S O at $6.74 as the accretion associated with lower same store operating expenses is entirely offset by higher than budgeted floating rate interest expense, primarily as a result of fewer than anticipated fed rate cuts.

At the midpoint of our guidance range, we are still assuming $250 million for the acquisition.

All set by an additional $250 million of dispositions with no net accretion or dilution from these matching transactions.

Alexander J. K. Jessett: And up to $300 million of development starts in the second half of the year.

With approximately $175 million of total 'twenty 'twenty four development spend.

Unknown Executive: We also provided earnings guidance for the second quarter of 2024. We expect core FFO per share for the second quarter to be within the range of $1.65 to $1.69, representing a $0.03 per share sequential decline at the midpoint, primarily resulting from an approximate $0.01 decrease in interest income due to lower cash balances, a $0.01 increase in overhead costs due to the timing of various public company fees, and a $0.01 sequential decrease in same-store NOI, as higher expected revenues during our peak leasing periods At this time, we'll open the call up to questions.

Alexander J. K. Jessett: We also provided earnings guidance for the second quarter of 2024, we expect core <unk> per share for the second quarter to be within the range of $1 65 to $1 69, representing a three cent per share sequential decline at the midpoint, primarily resulting from an approximate one cent decrease in interest income due to lower cash balances.

Alexander J. K. Jessett: A one cent increase in overhead costs due to the timing of various public company fees and a one point sequential decrease in same store NOI as higher expected revenues during our peak leasing periods are offset by the seasonality of certain repair and maintenance expenses and the timing of our annual merit increases at.

At this time, we'll open the call up to questions.

Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our rock. The first question today comes from Brad Heffern with RBC Capital Markets. Please go ahead. Yeah.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your touched on pause.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: The first question today comes from Brad Heffern with RBC capital markets. Please go ahead.

Bradley Barrett Heffern: Yeah, thanks. Good morning, everybody. Rick, you talked about the record absorption in the first quarter, but despite that, supplies obviously still have a very large impact in the Sun Belt. What do you think would happen if maybe the market demand not necessarily went below normal but returned to normal levels?

Bradley Barrett Heffern: Yeah. Thanks, Good morning, everybody, Rick you talked about the record absorption in the first quarter, but despite that supply is obviously still having a very large impact in the sunbelt. What do you think would happen if maybe the market demand not necessarily went below normal but returned to normal levels.

Brad Heffern: Okay.

Richard J. Campo: Well, I think that if it went to sort of normal levels, we just have a little more pressure, probably a little bit. But at the end of the day, to me, the real issue is, so when you have population growth, migration growth, job growth in the markets we're in, you know, it's hard to imagine that that happens given the backdrop of what's going on. I guess you could have a fall off. Instead of a soft landing, it could be a hard landing. And if it's a hard landing, then it's just gonna be a tougher environment.

Brad Heffern: Well I think the.

Brad Heffern: If it went to know.

Sort of normal levels, we just have a more pressure probably a little bit but at the end of the day.

Brad Heffern: The real issue is so when you have population growth you have migration growths you have job growth in the markets. We're in.

Brad Heffern: It's hard to imagine that that happens given the backdrop of what's going on I guess, you could have a falloff on instead of the soft landing it could be a hard landing and if it's a hard landing minutes just can be a tougher environment obviously.

Richard J. Campo: Okay. And then on the bad debt dynamics, obviously, you've improved the guidance on that front, and things, especially in April, looked really strong. Can you just talk about sort of what's underlying that? I know you went through some more ID verification steps in Atlanta, and presumably, you're continuing to get units back in LA, but just, you know, the underlying progress of that.

Brad Heffern: Okay.

Brad Heffern: And then on the bad debt dynamics, obviously, you've improved your guidance on that front and things are especially in April looked really strong can you just talk about sort of whats underlying that I know you had gone to some more I'd.

Brad Heffern: Verification steps in Atlanta say, presumably are you continually continuing to get units back in L. A but just you know.

Brad Heffern: The underlying progress of that.

Richard J. Campo: Yeah, so it's primarily the fact that a lot of long-term, non-paying renters are continuing to move out. I mean, restrictions have been lifted pretty much everywhere where we operate, but it still takes time to work through the process. There's still a backlog, but we're working through the process.

Speaker Change: Yeah. So the.

Speaker Change: It's primarily the fact that the.

Speaker Change: A lot of long term non paying renters.

Speaker Change: They are continuing to move out I mean, there's the restrictions have been lifted pretty much everywhere, where we operate but it still takes time to work through the process. There is still a backlog, but we're working through the process and every time, we get to.

Richard J. Campo: And every time we get to take someone, you know, through the full cycle, we're going to get more of our apartments back. So I think that the one thing that did make a big difference and probably accelerated our progress was, believe it or not, in Fulton County. You know, miracles happened in Fulton County, which was one of our most problematic areas for how long it took to process an eviction and the amount of non-paying residents we had there.

Speaker Change: It takes them one.

Speaker Change: Through the full cycle.

Speaker Change: We're going to get more of our apartments back. So I think that it's the one thing that did make a big difference and probably accelerated our progress was believe it or not in Fulton County home Miracles happen Walton County, which was one of our most problematic areas for.

Speaker Change: How long it took to process and conviction in the amount of nonpaying residents, we had there they actually passed.

Richard J. Campo: They actually passed an ordinance that basically said, if you don't pay your part, if you're in default of your rent, and you don't pay your rent to the landlord in order to not be evicted, to avoid eviction, you have to pay your rent to the court, and then the court will, you know, it's your day of reckoning; the court will either pay the landlord or return the rent.

Speaker Change: An ordinance that basically said.

Speaker Change: If you don't pay your a part if you are in the.

Speaker Change: A follow up have you read and you don't pay your rent to the landlord in order to not be evicted to avoid eviction you'd have to pay your rent to the court and the court will.

Speaker Change: It's your day of reckoning the court will either.

Pay the landlord or not our returns are in that alone was a huge change. So so the sentiment continues to move in a more positive direction around utilities.

Richard J. Campo: That alone was a huge change. So the sentiment continues to move in a more positive direction around regulatory regimes, around non-payment of rent, and I think that, you know, it's happening a little bit quicker than we anticipated. I do remember that, you know, on previous calls, we've been asked, you know, are you ever going to get back to 50 basis points bad debt expense, which is what we had for 30 years prior to the change from the COVID experience, and my answer to that was ever is a long time, you know, forever, and so it looks like we're making pretty good progress.

Regulatory regimes around nonpayment of rent I think I think that.

It's happening a little bit quicker than we anticipated I do remember that.

Speaker Change: Previous calls we've been asking all of us.

Speaker Change: Or are you ever going to get back to 50 basis point bad debt expense, which is what we had for 30 years prior to the change in the <unk>.

Speaker Change: Covid experience in my answer to that was ever is a long time, you know forever and so it looks like we are.

Richard J. Campo: 80 basis points of bad debt expense is more than halfway back to, you know, our long-term 50 basis point experience for the last 30 years, so I'm more hopeful than I have been in the last two years that we could, in fact, get back close to that number.

Speaker Change: Making pretty good progress 80 basis points of bad debt expense is a is more than halfway back to our long term 50 basis point experience for the last 30 years. So I'm more hopeful that I have been in the last two years that we could in fact get back close to that number.

Richard J. Campo: I think the fact that we can pivot with technology the way we have by adapting to the sort of bad guys who come in and use identity theft to lease apartments and then go through the process. So the fact that we're able to pivot with new technology to be able to weed those people out before they get into our properties is a big part of the equation. When the bad guys figure out that they can't get in the front door, they go to somebody else.

Speaker Change: I think the fact that we can pivot with technology the way we have through through through adapting to the sort of bad guys.

We come in and are in use identity SaaS to.

Speaker Change: At least apartments, and then go through the process. So the fact that we are trying to that we're able to pivot with new technology to be able to find out.

Speaker Change: Wait those people out before they get into our properties was a big part of the equation.

Speaker Change: It's sort of like anything else when you have.

Speaker Change: When bad guys figure out that they can't get in the front door. They go to somebody else and so I think I'm really excited about being able jets.

Richard J. Campo: So I think I'm really excited about being able to deploy technology as quickly as we did and adapt to that situation.

Speaker Change: Deploy technology as quickly as we did it and adapt to that situation.

Haendel Emmanuel St. Juste: The next question comes from Haendel St. Just with Mizzou Hill. Please go ahead.

The next question comes from Handelsbank, Jeff with Mizuho. Please go ahead.

Keith Oden: Hey there, good morning. Can you talk a bit about the operating strategy here for the portfolio going into peak leasing? You talked about pulling back a bit on rates to get occupancy to 95 percent, and it seems like you've been able to maintain that in April. So I'm curious, is the plan to continue to push rates here? Are you willing to trade some occupancy? And maybe which markets do you expect to be able to push rent a bit more in the near term beyond D.C. and maybe SoCal?

Jeff: Hey, there.

Jeff: Good morning.

Good morning, maybe Keith can you talk a bit about what the operating strategy here for the portfolio going into peak leasing you've talked about pulling back a bit on rate to get occupancy was 95%. It seems like you've been at the low came out in April. So I'm curious is the plan to continue to push our rate here are you willing to trade some occupancy and maybe which markets do you expect to be.

Jeff: Push rents a bit more near term beyond D C and D socal. Thanks.

Keith Oden: Sure. Go ahead, Keith. Go ahead.

Jeff: Sure.

Keith Oden: Yeah, Haendel, we're back basically where we want to be from an occupancy standpoint. We were 95.2 at the end of the quarter, and we've actually trended up a little bit since then. In the month of April, we got to 95.4% occupied. And again, when making the decisions on pricing, we're not necessarily looking at what the in-place occupancy is. We're looking at six weeks, eight weeks out on projections. And as we look at what we see right now, we've regained the occupancy in real time that we wanted to. And the next step is you to push rents.

Jeff: Go ahead, Keith go ahead, yeah handheld.

Keith Oden: We were back basically where we want to be from an occupancy standpoint, we were 95 two at the end of the quarter and we've actually trended up a little bit since then.

Keith Oden: In the month of April where we got to 95, 4% occupied and again, we're not looking for making those decisions on pricing, we're not looking at necessarily.

Keith Oden: What in place occupancy as we're looking at six weeks eight weeks out on on projections and as we look at what we see right now we've got regain the occupancy and the real time that we wanted to in the next step as you push rents. So I think our the opportunity we're going to continue to have in the better markets there.

Keith Oden: So I think the opportunity that we're going to continue to have in the better markets that are less supply-impacted, we'll be able to push rents and should be able to hit our revenue targets for the year. I'm certainly pleased to see the kind of..., you know, relative pricing power that we have in our D.C. metro and in Houston. You know, those two markets are really important for us. They're 25 percent of our same store pool, and they are both performing really quite well. And I think that there's a good chance that this will continue.

Keith Oden: Or less supply impacted will be able to push rents and should be able.

Keith Oden: To hit our target revenue targets for the year I'm certainly pleased to see that.

Keith Oden: Okay.

Keith Oden: Relative pricing power that we have in our D C Metro and in Houston, two markets are really important for us, they're 25% of our same store pool and and those are both performing really quite well and I think that there's a good chance that that will continue.

Keith Oden: I appreciate that. If I could ask about new lease rates, you mentioned that you had tweaked some of the underlying assumptions within your same-store revenue, but can you talk about what your expectation on the new lease rate side is here? Maybe give us a sense of where you expect that to be broadly for the year and maybe over the next couple of quarters. Thanks. Yeah, absolutely.

Speaker Change: I appreciate that if I could ask about new lease rates you mentioned that you.

Speaker Change: <unk> tweaked some of the underlying assumptions within your same store revenue, but can you talk about what your expectation on the new lease rate side is here.

Speaker Change: Maybe give us a sense of where you expect that to be broadly for the year and maybe over the next couple of quarters. Thanks.

Keith Oden: Yeah, absolutely. So when we're looking at new leases, we're assuming that we're probably going to be right around a negative 2% for the second quarter and then negative 1% for the next two quarters after that.

Speaker Change: Yes.

Speaker Change: Yeah, absolutely. So when we're looking at new leases, we're assuming that we're going to be probably right around a negative 2% for the second quarter, and then negative 1% for the next two quarters after that.

Thank you.

Speaker Change: Okay.

John P. Kim: The next question comes from John Kim with BMO Capital Markets. Please go ahead.

Speaker Change: The next question comes from John Kim with BMO capital markets. Please go ahead.

Keith Oden: Can I just follow up on that? So your guidance now has 25 basic points of market potential growth, and that's down from the original guidance that's offset by higher occupancy and better bad debt. But I guess my question is, how realistic is that 25 basic points? Is that something that you just plug in to maintain your same-scale revenue guidance, or do you think that's what you're going to achieve?

John P. Kim: Thank you can I just follow up on that so your guidance now has 25 basis points.

John P. Kim: The market rental growth and that's down from original guidance Thats offset by higher occupancy and better bad debt, but I guess my question is how realistic is that 25 basis points is that something that you just plug into <unk>.

John P. Kim: <unk> maintained your same store revenue guidance or do you think that's what you can achieve.

Keith Oden: No, it's absolutely what we think we're going to achieve. Obviously, what we do is we look at the conditions on the ground. We look at our third-party data providers, and we take all that information. And just like we do our original budgets, we do re-forecasts from the community level on up. And so this is exactly what we expect this year.

Speaker Change: No. It's absolutely what we think we're going to achieve but obviously, what we do is we look at the conditions on the ground. We look at our third party data providers and we take all that information in and just like we do our original budgets, we do re forecasts from the from the community level on up and so this is exactly what we expect to achieve.

Keith Oden: And is that the occupancy versus rate trade-off? Or are there some markets that are potentially underperforming your original expectations?

Speaker Change: And is that.

Speaker Change: The occupancy versus rate trade off or are there some markets that are potentially.

Speaker Change: Underperformance your original expectations.

Speaker Change: Yes.

Keith Oden: Well, if you think about it on the occupancy side, all of our markets are doing better than we thought on occupancy, and then clearly, we're bringing down the rental rate, so the rental rate drop is generally across the board. The offset, once again, is the much lower bad debt.

Speaker Change: Well, if you think about it on the occupancy side all of our markets are doing better than we thought and occupancy and then clearly we're bringing down the rental rates and the rental rate bring down. This is generally across the board the offset once again it is the math.

Much lower bad debt.

Speaker Change: Alright, okay.

Austin Todd Wurschmidt: The next question comes from Austin Wurschmidt with KeyBank Capital Markets. Please go ahead.

The next question comes from Austin, <unk> with Keybanc capital markets. Please go ahead.

Alexander J. K. Jessett: Yeah, hi, Alex, just wanted to clarify what the revised lease rate growth assumption is for this year versus the 1.2% you'd previously provided. And can you just share, I guess, you know, what the implied lease rate growth is then you need for the balance of the year?

Austin: Yeah, Hi, Alex just wanted to clarify what the revised lease rates growth assumption is for this year versus the one 2% you had previously provided and can you just share I guess you know what the implied lease rate growth has been you need for the bad.

Speaker Change: The balance of the year.

Alexander J. K. Jessett: Yeah, I mean, here's probably the best way to think about it. We're assuming a 75% blend of new leases and renewals for the full year, 75 basis points positive. And so you've got a component of that that is picking up the earn-in, and then you've got, which is about 50 basis points, and then you've got the 25 basis points that you're getting from the market rent growth. So, that gets you to 75 basis points.

Yeah, I mean, here's probably the best way to think about it we're assuming a 75% and blend the new leasing renewals for the full year 75 basis point positive and so you've got a component of that that is picking up the R&M and then you've got which is about 50 basis points and then you've got the 25 basis.

Speaker Change: Points that youre getting from the market rent growth.

Speaker Change: To that so I guess, you'd 75 basis points to that youre going to add the 10 basis points of higher occupancy 24 versus 23 that gets you to 85 basis points and then we're assuming that our bad debt is going to be 75 basis points for the full year that compares to 140 basis points last year. So that's a 65 basis point pick up and that's how.

Alexander J. K. Jessett: To that, you're going to add the 10 basis points of higher occupancy, 24 versus 23, so that gets you to 85 basis points. And then we're assuming that our bad debt is going to be 75 basis points for the full year. That compares to 140 basis points last year, so that's a 65 basis point pickup. And that's how you get to the one and a half percent.

You get to the one 5%.

Richard J. Campo: Got it. Okay, so it seems like about one and a quarter to one and a half percent, you know, from here out on the blends. That's kind of the math I was getting to. Yeah, yeah, Rick, remarks around the strong absorption, you know, supplies poised to hit multi-year lows in the next couple of years. I guess, how do you further take advantage of that backdrop, you know, prior to, you know, development, ramping back up, and just, you know, opportunity, you know, other types of activity with, you know, others being in a better position from a cost of capital and financing market perspective?

Speaker Change: Got it okay. So it seems like about one and a quarter to one 5% from from here out.

Speaker Change: On the blend is kind of the math I was getting so yeah, yeah, Rick that's where I guess.

Speaker Change: Okay. Thank you for that for clarifying rig with the set up you highlighted in your prepared remarks around the strong absorption.

Speaker Change: Wise poised to hit multi year lows in the next couple of years I guess, how do you get further take advantage of that backdrop.

Speaker Change: Prior to development ramping back up and just you know opportunity.

Speaker Change: Other types of activity with.

Speaker Change: Others being in a better position from a cost of capital and financing market perspective.

Richard J. Campo: Well, clearly, when you think about how you set up for 2627, it would be on the development side of the equation. We have a decent pipeline that we can start. And, and, and I guess the real question is, you know, when do you pivot? And, and I think as we see more cards in terms of how the, you know, the absorption and the demand continues, if it continues the way we think it could and should continue, given everything that we talked about on, ultimately, we'll be able to pivot to a more, a more, you know, aggressive mode when we start seeing that, that, that, that, the supply does get taken up between now and, you know, the middle

Speaker Change: Well clearly the when you think about how you set up for 'twenty six 'twenty seven it would be on the development side of the equation, we have a decent pipeline that we can start in and I guess the real question is when do you pivot.

Speaker Change: And I think as we see more cards in terms of how the how the.

Speaker Change: The absorption and the demand continues if it continues.

Speaker Change: We think it could and should continue given everything that we talked about.

Speaker Change: Earlier, then you will see us pivot and get more aggressive on the development side towards the end of the year and beginning of next year clearly right now the best that trade on the on the.

Speaker Change: In the first quarter was selling assets and buying stock.

Speaker Change: We are buying stock.

Speaker Change: Hi, Hi, six cap rate when the market is trading today.

Speaker Change: Yes.

Speaker Change: Low fives cap rate and so it's a very.

Speaker Change: Reasonable trade to make and so.

Speaker Change: Ultimately, we will be able to pivot to a more.

Speaker Change: More aggressive mode.

Speaker Change: We start seeing.

Speaker Change: Net debt that debt.

Speaker Change: The supply does get taken up between now and say middle of the summer.

Speaker Change: We really need to see.

Speaker Change: <unk>.

Speaker Change: The.

Speaker Change: Peak leasing season, and how that unfolds for us to get more aggressive at this point.

Speaker Change: The next questioner, we're ready rich Anderson.

Richard Anderson: With Wedbush. Please go ahead.

Unknown Executive: Morning, and I'm going to keep to the one question rule here. Thanks. Yeah, it's pretty easy.

Richard Anderson: Good morning, and I'm trying to keep to the one question rule here.

Richard Anderson: So thanks.

Thanks.

Richard Anderson: Yes, it's always best observational stuff, it's pretty easy.

Richard J. Campo: So what do you think explains the difference in perspective between you guys saying, you know, accelerating rent growth in 2025 and 2026 and Equity Residential and Avalon Bay, which, you know, essentially think that you're not going to get any rent growth until 2026? Is there an interpretation issue? Is it just you have more information, so you have more to more sorts of knowledge? Or does it concern you when you hear them say that? Because they're not dummies either, you know, so I'm just curious what you think the difference is. I think the difference is

Wedbush: So what do you think explains the difference in perspective between you guys.

Wedbush: <unk>.

Wedbush: Okay.

Wedbush: Accelerating rent growth in 2025, and 26 and equity residential and Avalon Bay, which essentially think that youre not going to get any rent growth until 2026.

Wedbush: Is there an interpretation issue is it just you have more information. So you have more of a more sort of knowledge.

Does that concern you when you hear them say that because theyre not dummies, either so like I'm. Just curious what you think are the differences.

Richard J. Campo: I think the difference is that pretty much everybody talks their book, right? And that's part of it. Yeah. Is that what you're doing? When I look at the data? No, but well, sure, if we didn't, if we didn't believe what we're saying, we wouldn't say it.

Wedbush: I think the difference is is that pretty much everybody talks their book right.

Wedbush: And that's part of it.

Wedbush: Is that what youre doing when I look at the data.

Wedbush: Sure.

Wedbush: If we didn't if we didnt believe what we're saying we wouldn't say it and I'm sure. They believe what they say, but the issue is they are not operating in these markets. So I'm not going to opine about about what San Francisco is doing even though San Francisco hasn't added Baxter jobs that they lost during COVID-19 yet if you look at so we look at our markets.

Richard J. Campo: And I'm sure they believe what they say, but the issue is they're not operating in these markets. So I'm not going to comment on what San Francisco is doing, even though San Francisco hasn't added back their jobs, you know, that they lost during COVID.

Richard J. Campo: Yet, if you look at, you know, so we look at our markets, and I use a fair number of data providers. And when you look at some of those data providers, they show pretty good demand. And they're, they're, the numbers are, are sort of, when you look at Ron Whitten, for example, I use him a lot.

And.

Wedbush: I use the fare we use in a fair number of data providers and when you look at some of those data providers.

So pretty good demand and there the numbers are our.

Richard J. Campo: And Ron's been around for a long time, he's shown accelerating rent growth in 2025 because of the excess supply, this demand that's coming from multifamily, because of all the things we talked about, you know, at the beginning. So I think there's a certain amount of bias that everybody has about their own markets, and we operate in these markets; we're seeing what's happening every day. It's pretty hard for me, if I had two properties or three properties in New York City, would that give me a sense of what's going on in New York City? And the answer would be no.

Wedbush: When you look at Ron Witten for example, I use him a lot and Ron <unk> been around for a long time he is showing.

Wedbush: Elevating rent growth in 2025, because of the excess demand that's coming from multifamily because of all the things we talked about.

Wedbush: Beginning.

Speaker Change: Excuse me so.

Speaker Change: So I think there is a certain amount of bias that everybody has about their own markets and we operate in these markets weeks, we're seeing what's happening every day pretty hard for me if I would if I had two properties of three properties in New York City does that give me a sense of what's going on in the New York City and the answer would be no.

Richard J. Campo: You have to have a broad sense of these markets. We've operated in our markets for over 30 years, and we understand how the dynamics work.

Speaker Change: To have a broad sense of these markets. We've operated in our markets for over 30 years, we understand how the dynamics work in some of the numbers are just are just incredibly compelling like for example, let's take L. A and San Francisco both have have L. A still has 43000 jobs.

Richard J. Campo: And some of the numbers are just incredibly compelling. Like, for example, let's take LA and San Francisco. Both LA still has 43,000 jobs lost since 2019, San Francisco 52,000 jobs lost, Dallas added 418,000 jobs from 19, Houston 233,000, Austin 205,000, and Phoenix 223,000. So the bottom line is that what's been driving the markets in the Sunbelt continues to drive those markets. And the fact that our West Coast and East Coast brethren are doing better than us from a revenue growth perspective is because their hole is so deep that they're just crawling out of a deep hole.

Speaker Change: <unk> lost since 2019, San Francisco 52000 jobs lost Dallas added 418000 jobs from 19, Houston 233000, Austin 205000, Phoenix 223000, so the bottom line.

Speaker Change: What's been driving the markets in the Sunbelt continues to drive those markets and the fact that our west coast and East Coast Brethren are doing better than us from a from a revenue growth perspective is because their whole was so deep that there that theyre just crawling out of a deep hole in and yes, that's a good way.

Richard J. Campo: And yeah, that's a good way to play stocks now and then, but I don't understand the hundred basis point gap between the implied cap rate for mid-American Camden versus equity in Avalon Bay. And so, ultimately, what's going to happen is that when the markets write themselves from a supply perspective, the same thing that drove outperformance of revenue growth in the past, which is job growth and household formation, and all the positive things that are going on in these markets, is going to continue.

Speaker Change: Place socks, now and then but I don't understand the 100 basis point gap between the implied cap rate or mid American Camden versus equity and Avalon Bay, and so because ultimately what's going to happen is that is when the market's right themselves from a supply perspective, the same thing that drove the outperformance.

Speaker Change: Revenue growth in the past, which is which is job growth and household formation and all the positive things that are going on in these markets is going to continue so unless you bet that we're going back to the SEC.

Richard J. Campo: So unless you bet that we're going back to the sexy six cities that get all the growth, I don't think that's going to happen. I think there's a fundamental change in the dynamics between growth in these markets and growth in the East and West Coast markets. And we can all agree to disagree, but that's what you guys do is you buy stocks based on that, right? So we'll see who's

Speaker Change: Actually six cities that get all the growth I don't think thats going to happen I think there's a fundamental change.

Speaker Change: And the dynamics between growth in these markets.

Speaker Change: Both in the East Coast West Coast markets, and we can all agree to disagree, but that's what you guys. Do is you buy stock based on that right. So we'll see who's right.

Speaker Change: Thanks very much.

Speaker Change: Sure.

Stephen Thomas Sakwa: The next question comes from Steve Sakwa with Evercore. Please go ahead.

Speaker Change: Your next question comes from Steve Barker with Evercore. Please go ahead.

Unknown Executive: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. Well, development needs to

Stephen Thomas Sakwa: Great. Thanks, Good morning, Rick I guess I wanted to piggyback on your comment about the possibility of starting some new development.

Stephen Thomas Sakwa: And I'm just curious you know what.

Stephen Thomas Sakwa: Markets are kind of higher up on your list and if you looked at the economics today, where do those deals pencil or how far away are they from from actually penciling out where you think your development needs to be.

Unknown Executive: Well, development needs, it would be, if you look at our development page on our, you know, in our supplement, you'll see where we have developments and where they're positioned. And we have developments, I would say that the closer ones would start would be Charlotte. And, you know, Charlotte's absorbing, you think about the supply push, and Charlotte has a big supply push, but we're leasing over 40 units a month at our new developments there. And it's just, you know, really quickly and at decent rates.

Stephen Thomas Sakwa: Well development needs.

Stephen Thomas Sakwa: It would be if you look at our development page on our in our supplement you'll see where we have development and where they're positioned and we have developments I would say that.

Stephen Thomas Sakwa: The closer ones would start would be Charlotte.

Stephen Thomas Sakwa: Charlotte's absorbing.

Stephen Thomas Sakwa: Are you thinking about the supply push in Charlotte has a big supply push but releasing over 40 units. We're using 40, making 40 units a month at our new developments there and it's just.

Unknown Executive: And, and so, I would say it'd be, you know, go down that list, and you'll, you'll see where it is. But the economic issues, you know, some properties, clearly, depending on where you are, we have two developments in Nashville, for example, and Nashville does have a bigger supply issue than most cities between Austin and Nashville, they have the biggest supply, is absorbed, and that there, there's going to be rent spikes that happen in 2026 2728 that are going to be similar to 12 1314.

Really quickly and at a decent rate.

Stephen Thomas Sakwa: So.

Stephen Thomas Sakwa: I would say it would be.

Stephen Thomas Sakwa: Yes.

On that list.

Stephen Thomas Sakwa: We'll see where it is but.

Stephen Thomas Sakwa: The economic issues.

Stephen Thomas Sakwa: Some properties clearly depending on where you are.

Stephen Thomas Sakwa: We have two elements in Nashville for example, in Nashville does have a have a bigger supply issue than most.

Stephen Thomas Sakwa: <unk> Austin Nashville, they have the biggest supply.

Stephen Thomas Sakwa: There'd be a supply coming online so we're going to take a hard look at those numbers.

But when you look at it.

Stephen Thomas Sakwa: Current cap rates today.

Stephen Thomas Sakwa: Hurts People's head to think that they are in the low fives. We are trades that are going on today in the high fours and even though you have net they have negative leverage that basically buying based on the pound they are buying it.

Stephen Thomas Sakwa: 50% of replacement cost.

Stephen Thomas Sakwa: That is is that when supply.

Unknown Executive: And so if you do a pro forma like that, then, you know, most of our developments are going to be in the sixes. And so I think that makes sense. But the question is, you know, we still need to see some evidence of this, the, the leasing season this year, and have more confidence in the confidence that, that, before we commit a lot of capital to development, we need to see more cards. And, you know, so to me, it's, you know, just look in the supplement; you'll see where our shirts are.

Stephen Thomas Sakwa: Is.

Stephen Thomas Sakwa: Is absorbed.

Stephen Thomas Sakwa: Jack.

Stephen Thomas Sakwa: That would be rent spikes that happened in 2026, 27, 28, theyre going to be similar to 12, 13 14 and so.

Stephen Thomas Sakwa: So if you if.

Stephen Thomas Sakwa: We do a pro forma like that then.

Most of our developments are going to be in the sixes and so I think that makes sense, but the question is when.

We still need to see see this.

Stephen Thomas Sakwa: The leasing season, this year and have more confidence that.

Stephen Thomas Sakwa: That.

Stephen Thomas Sakwa: Before we commit a lot of capital.

Stephen Thomas Sakwa: Two two development, we need to see more cards and so.

Speaker Change: So to me it's.

Speaker Change: Yeah just.

Speaker Change: Look in the supplement you'll see where our surcharge.

Alexander David Goldfarb: The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Speaker Change: The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Richard J. Campo: Hey, good morning down there and Rick, hopefully you trademark Sexy 6. That sounds like it could be a good money maker. So going to the jobs and the strength of the Sun Belt, clearly a lot of supply, but what's been going on across earnings season is everyone's talking about the strong jobs in the Sun Belt, but at the same time, general, the talking heads and economists and everyone's talking about potential for recession, hard landing, hey, the economy's not great, and yet all the apartments are talking about really good demand, and it's hard to believe that it's only because move-outs to homes are low and your typical renter can't afford a home.

Alexander David Goldfarb: Hey, good morning down there and Rick hopefully you add trademark sexy six.

Alexander David Goldfarb: Sounds like it could be a good good moneymaker.

So going to going to the to the jobs and the strength of the sunbelt, yes, clearly a lot of supply but.

Alexander David Goldfarb: What's been going on across earning season is everyone's talking about the strong jobs in the Sun belt.

Alexander David Goldfarb: But at the same time general the talking heads and economists and everyone's talking about.

Alexander David Goldfarb: Cancel for recession hard landing hey, the job you know the economy is not great and yet all the apartments are talking about really good demand and it's hard to believe that its only because move outs to homes are low when you have.

Alexander David Goldfarb: Your typical renter can't afford a home so it does seem like the economy is stronger across the sunbelt in your markets than what they're talking heads would say would you agree with that or is there some something else. That's explain the disconnect between the broader economic concerns versus the absorption in.

Richard J. Campo: So it does seem like the economy is stronger across the Sun Belt in your markets than the talking heads would say. Would you agree with that, or is there something else that's explaining the disconnect between the broader economic concerns versus the absorption and the demand that you're seeing in your

Alexander David Goldfarb: The demand that youre seeing in your markets.

Richard J. Campo: Well, I think the idea that you have, you know, the risk of recession and hard landing or soft landing, that's out there for sure. There's no question about that. And I think that's what Pete's about, right?

Speaker Change: Well I think the idea of that.

Speaker Change: That you have the risk of recession and in hard landing or a soft landing.

They're for sure. There is no question about that and I think thats, what Pete about right.

Richard J. Campo: I mean, if you look at the first quarter and then the print, the job print that just happened, the 175,000 jobs that were published today, you know, I think that job number, the consensus was 3,000 jobs, and we did 175. And, of course, the market rallies, the tenures, you know, rallying big time as a result of that because that's a goldilocks kind of scenario, right, where it's not too hot, not too cold.

Speaker Change: If you look at the first quarter and then the print the job Brent that just happened to 175000 jobs that was published today.

Speaker Change: I think that that job number.

Speaker Change: Census was three.

Speaker Change: So we did $1 75 and of course, the market rallies with tenures and a rally in big time build to that because thats, what our goal will be kind of.

Speaker Change: Oh, right, where we're at is not too.

Richard J. Campo: And so I think that the question is, I think there's still this concern about what the Fed does and whether they ease or we have a soft landing. The economy today is good. The jobs have been plentiful, and they've been primarily in the sunbelt. And I think as long as we have the same kind of economic construct or a soft landing scenario, we're in demand to take up the supply, and our numbers will be what our numbers are. But on the other hand, if you have a hard landing, and we lose 2 or 3 million jobs, then revise our numbers. Okay. Thank you.

Speaker Change: And so I think that.

Speaker Change: One is I think there still is concerned about what the fed does do that.

Speaker Change: Do they ease or do we have a slot.

Unknown Executive: Okay, thank you.

Speaker Change: We have a hard landing in that then all bets are off right I mean, the what drives multifamily demand and any demand for any product ultimately is.

Speaker Change: Pardon me.

Speaker Change: The economy today is is good the jobs have been plentiful and they've been primarily in the sunbelt.

And I think as long as we have a.

Speaker Change: Same kind of economic times construct or a soft landing scenario then.

Speaker Change: Demand to take up the supply in our numbers will be what our numbers are okay, but but on the other hand, if you have.

Speaker Change: Do you have a hard landing and we lose two or three jobs.

Speaker Change: And revise our numbers.

Speaker Change: Yes.

Speaker Change: Okay. Thank you.

Speaker Change: Yes.

Speaker Change: Yes.

Eric Wolfe: The next question comes from Eric Wolfe. Please go ahead.

Speaker Change: Yes.

Speaker Change: The next question comes from Eric Wold.

Eric Wolfe: Please go ahead.

Unknown Executive: Hey, thanks. I think you said that you expected a 10% bit contribution from Occupancy Now. So just trying to go through the math. I think that means that you're expecting like 95.4% through the year, which would mean they'd call it like 95.5% through the remainder of the year, just based on what you've done so far. Is that the right way to think about sort of what you think Occupancy will average

Eric Wolfe: Hey, thanks.

Eric Wolfe: I think you said that you expect a 10 bps contribution for mob occupancy now so just trying to go through the math I think that means you're expecting like 95.4% through through the year, which would mean they call. It like 95, 5% through the remainder of the year just based on what you've done so far is that the right way to think about sort of what you think.

Eric Wolfe: Occupancy will average.

Unknown Executive: That's exactly right. So we're assuming that we're going to be at about 95.4 for the second quarter, 95.5 for the third quarter, and 95.4 for the fourth quarter. So, exactly in line with your math. Gotcha.

Speaker Change: Yes, that's exactly right. So we're assuming that we're going to be about $95 four for the second quarter.

Speaker Change: 95, five for the third quarter and 95 four for the fourth quarter. So exactly in line with your math.

Unknown Executive: Gotcha. And then you touched on this briefly, but you said that the sort of forward indicators of occupancy were telling you that there could be some improvement. I was just wondering if you could maybe go through the lease rate, the percentage of tenants renewing, just sort of anything that you're seeing that sort of gives you confidence that occupancy should continue to rise.

Speaker Change: Got you and then you touched on this briefly but.

You said that the sort of forward indicators of occupancy, we're telling you that there could be some improvement.

Speaker Change: Was just wondering if you could maybe go to like the lease rate the percentage of tenants renewing sort of anything that youre seeing it sort of gives you confidence that occupancy should continue to rise.

Unknown Executive: Yeah, so what I was referring to, Eric, is when we think about making adjustments to strategy, you know, obviously, we were a, we use Yieldstar, and Yieldstar is forward-looking. It's, you know, it's always looking at least eight, six to eight weeks out for trends, and it projects, you know, kind of what future occupancy is going to be based on where our portfolio is at the time. Renewal, lease renewals that are upcoming, etc.

Speaker Change: Yeah. So what I was referring to Eric is the what do you think about making adjustments to strategy obviously, we.

Speaker Change: We use Youll star and Youll start forward looking at will.

Speaker Change: It's always looking at least eight six to eight weeks out for trends it projects kind of what future occupancy is going to be based on where it could mean, where our portfolio is at the time.

Speaker Change: Renewal lease renewals that are upcoming et cetera, so when.

Unknown Executive: When we're making strategy changes, it's in conjunction with our revenue management team who are using the tool that we have, which is YieldSTAR, to inform us about things not like what's on the ground today. That's obvious. We know what that is.

Speaker Change: When we when we have when.

Speaker Change: Well, we're making strategy changes.

Speaker Change: In conjunction with our revenue management team, who are using the tool that we have which is you will start to inform us about not like what's on the ground today. That's obvious we know what that is the question is what is it going to be if we continue on this path.

Unknown Executive: The question is, what is it going to be if we continue on this path and either don't make a strategy change, or we do make a strategy change? Where does that project our occupancy to be eight weeks out? As we look at it today, we're encouraged to the point where the tool and the algorithm that is YieldSTAR are going to say you have the opportunity to increase rents across certain markets, and we'll take advantage of that.

In either don't make a strategy change or we do make a strategy change where does where does that project our occupancy to be eight weeks out so when we look at.

Speaker Change: We look at it today, we're encouraged that to the point, where we're going to the tool and the algorithm that is youll start is going to say you have the opportunity.

To increase rents across certain markets and we will take advantage of that but that's that's all that's all I was referring to is as the model as forward looking we use the model and obviously with a lot of with a lot of history and experience and judgment applied to it.

Unknown Executive: That's all I was referring to, that the model is forward looking. We use the model, and obviously, a lot of history and experience and judgment applied to it, to help us make decisions about strategy.

Speaker Change: To help us make decisions about strategy.

Unknown Executive: Thank you. That was very helpful.

Speaker Change: Got it. Thank you that was helpful.

Speaker Change: You bet.

Speaker Change: Okay.

James Colin Feldman: The next question comes from Janie Felden with Wells Fargo. Please go ahead.

Speaker Change: Sure.

Speaker Change: The next question comes from Jamie Sullivan with Wells Fargo. Please go ahead.

Unknown Executive: Great. Thank you, and good morning.

Jamie Sullivan: Great. Thank you and good morning, So I'd like to go back to your thoughts on just capital allocation.

Unknown Executive: So, I'd like to go back to your thoughts on just capital allocation. You know, I know you had mentioned buying a stock in area 6 and cap rates in area 5. But if you're thinking, you know, you get red spikes a couple years out, you know, I know you had mentioned $450 million or so left on the repurchase plan, but just how do you think about the next $100 million? [inaudible]

Jamie Sullivan: I know you had mentioned you know buying a stock Mary six in cap rates near five but if you're thinking you get red spiked a couple of years out.

Jamie Sullivan: Hi, I know you had mentioned $450 million or so left on the.

Jamie Sullivan: Repurchase plan, but just how do you think about the next $100 million 200 million and as you think about what's.

Jamie Sullivan: What's going on in the markets and if this is the window to actually buy.

Jamie Sullivan: Or do any kind of.

Jamie Sullivan: I know you don't love JV, but any kind of investment across the capital stack versus buying back shares.

Unknown Executive: Well, you're right; we don't like JBs, so we won't be doing that. We have the most pristine balance sheet from a ownership perspective. We own 100% of everything we own. We don't have any partners, so we do what we want when we want to do it. So, we'll look at all of those things. But like I said before, in order for us to go on offense, we really have to have the peak leasing season come through the way we think it will. The next question comes from Michael Goldsmith with UBS. Please go ahead.

Speaker Change: Well Youre right, we don't like JV, so we won't be doing that.

Speaker Change: The most pristine balance sheet from a from a ownership perspective, we own 100% of everything we own we don't have any partners. So we do what we want when we want to do it.

Speaker Change: The issue.

Speaker Change: Issue of capital allocation.

Speaker Change: It's one of those.

Speaker Change: Interesting discussions we've always said that.

Speaker Change: If there's a big disconnect between our stock price of our stock prices 20, plus percent below what we think the value of the underlying assets.

Speaker Change: And that there is a persistent over time, where we can sell assets and buy stock that is something we do and we obviously did that in the first quarter will be considering that again as we go forward.

Speaker Change: The rest of the year and then ultimately when we decided to move to offense.

Speaker Change: In terms of starting new developments and and potentially acquisitions as well I think this market is an interesting market.

Speaker Change: You look at just the maybe.

Speaker Change: In the 10 year today is appointed.

Speaker Change: Proved people's outlets on transaction volumes, because it's sort of people came in the beginning of the quarter. When the tenure was.

Speaker Change: Doing joined pretty well at the beginning of the quarter and then all of a sudden there had the big run up.

Colbert wash that.

Speaker Change: The energy that people had in transaction market, because if you look backwards where transaction levels that haven't been inkjet since 2014. So there's just not a lot of deals going on.

Speaker Change: There should be some interesting opportunities to buy and sell where we sell some of our properties by other property as you know just a little bit deck chairs around on our our portfolio to improve the quality and ultimately.

Speaker Change: Growth rates going forward, maybe market concentration. So we'll look at all those those things, but like I said before.

Speaker Change: In order for us to go on offense, we really have to have to.

Speaker Change: Half.

The peak leasing season come through the way, we think it will.

Michael Goldsmith: The next question comes from Michael Goldsmith with UBS.

Speaker Change: The next question comes from Michael Goldsmith with UBS. Please go ahead.

Speaker Change: Hi, This is Andy on with Michael.

Michael Goldsmith: I was just wondering it sounds like you've made a lot of progress on the bad debt. So that's good.

Andy: Piece of bad debt reduction and sustainable.

Andy: And is there potentially room for you to improve bad debt below the historical average with enhanced screening processes.

Unknown Executive: Well, so the first thing I'll tell you is, yeah, we think bad debt as it is today is absolutely sustainable. Keith talks about it quite a bit.

Michael Goldsmith: Well so the first thing I'd tell you is yeah, we think bad debt as it is today is absolutely sustainable Keith talks about it quite a bit if you think about Atlanta was one of our was one of our problem market and obviously, we have legislation there that is that that's really helpful for us.

Unknown Executive: If you think about Atlanta was one of our problem markets, and obviously, we have legislation there that's really helpful for us today in making sure that we can enforce contracts. And so we think where we are today is certainly sustainable, and that's why we have it running through the rest of the year. Getting below 50 basis points, which is the long-term average, I think we'll have to see. What we're trying to figure out today is whether or not consumer behavior has changed for the worse.

Michael Goldsmith: And making sure that we can enforce contracts and so we think where we are today is fairly sustainable and that's why we haven't run it through the rest of the year.

Michael Goldsmith: Getting below 50 basis point, which is the long term average I think we'll have to see.

Michael Goldsmith: What we're what we're trying to figure out today is whether or not consumer behavior.

Michael Goldsmith: Has has changed.

Michael Goldsmith: For the worse.

Unknown Executive: And if it has, then I think it's going to be probably a constant battle through the use of technology to offset consumer behavior. But at this point, we're optimistic that we can at least get back to 50 basis points, but certainly not putting any bets on getting better than 50. All right, thanks. Have a great weekend, everyone.

Michael Goldsmith: And if it has and I think it's going to be probably a constant battle through the use of technology to offset.

Michael Goldsmith: Tumor behavior, but at this point, where we're optimistic that we can at least get back to 50 basis points, but surely not not put any bets on getting better than 50.

Great.

Speaker Change: Just add to that.

Speaker Change: Oh go ahead I'm sorry go ahead.

Speaker Change: I was just saying thanks Nick.

Speaker Change: Yes.

Daniel Tricarico: The next question comes from Daniel Tricarico with Scotiabank. Please go ahead.

Speaker Change: The next question comes from Daniel <unk>.

Daniel: With Deutsche Bank. Please go ahead.

Alexander J. K. Jessett: Thanks. Alex, I just wanted to clarify the second half negative 1% new lease rate growth you mentioned earlier. Does that assume new leases get to flat or positive in the third quarter before normal seasonality kind of takes over in the fourth quarter? Or is there a different rent dynamic assumed given the supply backdrop?

Daniel: Thanks, a lot alright, guys, Alex I, just wanted to clarify the second half.

Daniel: Negative, 1% new lease rate growth you mentioned earlier.

Daniel: Does that does that assume new leases get to flat or positive in the third quarter before.

Daniel: Seasonality kind of takes over in the fourth quarter or is there a.

Speaker Change: While I get different rent dynamic assume given the supply backdrop.

Alexander J. K. Jessett: Yeah, no, so if you think about it, right, the negative 1% is fairly consistent from the third quarter and the fourth quarter, so the offset to that is obviously renewals, and so we're assuming that renewals are going to be close to 4% for the third and fourth quarters, so that's the offset, and that's how you get to the blend that we're talking about. And just once again, the blend that we' So, whether or not there comes a point in time when new leases are flat, we do not have that running through our model today.

Speaker Change: Yeah, no. So sorry, if you think about it right. The negative one percentage is fairly consistent from third quarter and the fourth quarter. So.

Speaker Change: But the offset to that is obviously renewals and so we're assuming that renewals are going to be close to 4%.

Speaker Change: The third and fourth quarter. So that's that's the offset and that's how you get to let's say you get to the blend that we're talking about and just once again the blend that we're assuming.

Speaker Change: In the third quarter's one six and $1 two in the fourth quarter.

Whether or not there comes a point in time, where were new leases are flat, we do not have that running through our model today.

Yes.

Unknown Executive: Great, thank you.

Speaker Change: Great. Thank you.

Speaker Change: Okay.

Adam Kramer: The next question comes from Adam Kramer with Morgan Stanley. Please go ahead.

Speaker Change: The next question comes from Adam Kramer with Morgan Stanley. Please go ahead.

Unknown Executive: Hey, thanks for the question. I appreciate it.

Adam Kramer: Okay. Thanks for the question appreciate it.

Adam Kramer: You asked about the cadence of supply really the cadence of deliveries in the coming quarters and really into next year I think the improvements so far year to date in new lease will you be able to do with the occupancy at the same time I think are impressive in the face of kind of this unprecedented supply.

Unknown Executive: I wanted to ask about the cadence of supply, really the cadence of deliveries in the coming quarters and really into next year. Look, I think the improvements so far, year to date and new lease, and what you'll be able to do with occupancy at the same time, I think are impressive in the face of this unprecedented supply. I really just want to know, as deliveries presumably accelerate over the coming months and quarter or two, you know, kind of how you view absorptions kind of in light, again, of this kind of accelerating flow.

Adam Kramer: Just wanted to know as deliveries, presumably accelerate over the coming months in quarter two.

Adam Kramer: Kind of how do you view absorptions.

Adam Kramer: In light again on this kind of accelerating delivery cadence.

Adam Kramer: Okay.

Unknown Executive: Yeah, so the way the wind we use.

Speaker Change: Yes, certainly.

Unknown Executive: We use Ron Witten's numbers primarily because I think he does a little bit better work, more detailed work around the pace of deliveries. And across Camden's portfolio for this year, Witten projects about 230,000 completions. Now, if you get into the granularity of how that occurs, there's probably a slight deceleration to that because Whitten's got deliveries in 2025 at about 200,000, so a decline overall of about 30,000 year-over-year between 2024 and 2025, but the question of that deliveries that are going to happen in 2025, I don't think there's any question that that's going to be front-end loaded because if you go back and look at the STARTS data, the STARTS data was kind of falling pretty dramatically if you kind of go reverse-engineer it 18 months backwards, so my guess is that that's pretty front-end loaded in 2025, and obviously, you know, supply is supply, and we'll have to deal with it, but I certainly don't see 2025 being a worse scenario for us than 2024 in terms of just the total number, and so far, because of all the factors Rick mentioned, our absorption rates have been really strong, and if you look at what's projected, you know, under the sort of the status quo scenario for employment growth and then continued in-migration to the Sunbelt, 2025 looks, if all things are equal and no hard landing, 2025 looks like another really, really good year for absorption of apartments. So front-end loaded supply, continued really good demand in 2025 sounds to me like a pretty constructive environment. The next question comes from Mason.

Speaker Change: The Witten, we use again, Ron Whitman's numbers, primarily because I think he does a little bit better work more detailed work around around the pace of deliveries and across camden's portfolio of $4 24. This year.

Witten projects about 230000 completions.

Speaker Change: If you get into the granularity of how that occurs.

Speaker Change: There's probably a slight deceleration to that because with Scott <unk>.

Speaker Change: Deliveries in 2025 at about 200000 and saw a decline overall of about two of about 30000 year over year between 24 and 25, but the.

Speaker Change: The question.

Speaker Change: <unk>.

Speaker Change: The deliveries that are going to happen in 2025, I don't think Theres any question that that's going to be front end loaded because you. If you go back and look at the starts data. The starts data was kind of falling pretty dramatically.

Speaker Change: If you kind of go reverse engineer it 18 months backwards. So my guess is is that that's pretty front end loaded in 2025 and obviously.

Speaker Change: Supplies supply will have to deal with it but I certainly don't see 'twenty 2025, being a worse scenario for us than 2024 in terms of just the total number and so far is because of all the factors Rick mentioned, our absorption rates have been really strong and if you look at what's projected.

Speaker Change: Under the sort of the status quo scenario for employment growth and then continued.

Speaker Change: And migration to the sunbelt.

Speaker Change: 2025 looks if all things are equal and no hard landing 2025 looks like another really.

Speaker Change: A really good year for absorption of apartments. So front end loaded supply continued really good demand in 2025 sounds to me like a pretty constructive environment.

Unknown Executive: The next question comes from Mason Boole with Baird. Please go ahead. Hey, good morning, everyone.

Speaker Change: The next question.

Speaker Change: Comes from Nathan <unk> with Baird. Please go ahead.

Mason Boole: Looking at your initial market grades.

Nathan: Hey, good morning, everyone looking at your initial market guide from last Cardinal have any of the expectations changed amongst the markets and which ones are maybe better or worse versus your initial thoughts.

Unknown Executive: Yeah, I don't. I always look at that prior to the call, and there's nothing that jumped out at me. If I were rating the portfolio again today, I can't tell you that I would have changed any of the letter grades. I suppose maybe I would have been a little bit harsher on Austin and Nashville than I was a quarter ago because those are our two worst performing markets in terms of new lease rates.

Nathan: Yes, I don't.

Nathan: Please look at that prior to the call and Theres nothing that jumped out at me.

Nathan: If I were writing the portfolio again today I can't tell you that would've changed any of the letter grades I suppose maybe I would've been a little bit harsher on Austin, and Nashville than I was a quarter ago because.

Nathan: Those are the two are two worst performing markets in terms of the new lease rates, but.

Unknown Executive: But we have two assets in Nashville, and then we have our Austin exposure. But those are the only two that kind of jumped out at me and said, eh, probably a little worse than I thought it was going to be. It's just a quarter out. But the rest of them, I would leave them the same. Great, thank you.

Nathan: We have two assets in Nashville and.

Nathan: Then we have our Austin exposure, but those are the only two that kind of jumped at me and say, yeah, probably should've.

Nathan: Probably a little worse than I thought it was going to be just a quarter out but the rest of them I would label the same.

Nathan: Okay.

Speaker Change: Alright, thank you.

Anne Chen: The next question comes from Anne Chen on Green Street. Please go ahead.

Speaker Change: The next question comes from <unk> Chen with Green Street. Please go ahead.

Hey, good morning. Thanks for your time, just wondering do you expect to enter any new markets or exit any existing markets over the next few years.

Unknown Executive: We clearly would like to expand some of our records; as Keith pointed out, we have two.

Chen: We like to Oregon.

Unknown Executive: We clearly would like to expand some of our records. As Keith pointed out, we have two properties in Nashville. We definitely need to have more exposure there, and we've talked for a long period of time about lowering our exposure in Houston and lowering our exposure in D.C. and increasing our exposure in some of the other markets where we have 3 or 4 percent of our NOI. And we will continue to monitor and manage our portfolio over the next few years in that regard.

Chen: We clearly will we do it we would like to expand some of our orange like Keith pointed out we have to.

Chen: Properties in Nashville.

We definitely.

Chen: Need to have more exposure, there and we've talked over a long period of time.

Chen: <unk> lowered our exposure in Houston inquiry, and lowering our exposure in D C and increase our exposure in some of the other markets, where you have three or 4% of our NOI and we will continue to monitor and manage our portfolio over the over the next few years.

Chen: In that regard.

Speaker Change: Got it thank you.

Speaker Change: Okay.

Speaker Change: Okay.

Unknown Executive: This concludes our question and answer session. I would like to turn the conference... It looks like we have a follow-up today from Austin Wurschmidt from KeyBank. Please go ahead.

Speaker Change: This concludes our question and answer session I would like to turn the conference.

Speaker Change: It looks like we have a follow up today from Austin <unk> from Keybanc. Please go ahead.

Austin Todd Wurschmidt: Great. Thanks. Appreciate you speaking this in. Just on the new lease rate growth assumption now, the minus 1%, I guess, what periods historically have you seen that improve sort of in the back half of the year when you typically see seasonality take hold? Is it something to do with comps or getting the long-term delinquent units back that gives you the confidence that you can kind of drive new lease rate growth in a period that usually has a little bit less traffic and less demand?

Austin: Great. Thanks, I appreciate you sneaking this and just on the new lease rate growth assumption now the minus 1% I guess what periods. Historically have you seen that improve sort of in the back half of the year. When you typically see seasonality take hold is it something to do with comps or.

Austin: The long term delinquent units back that gives you the confidence that you can.

Austin: Kind of drive new lease rate growth.

Austin: In a period, usually has a little bit less traffic unless demand. Thanks.

Unknown Executive: Yeah, absolutely. So first of all, the third quarter is a high demand quarter for us in our market. So that's one point.

Unknown Executive: Thanks. Yeah, absolutely. So first of all, the third quarter is...

Speaker Change: Yeah, absolutely. So first of all the third quarter is a is a high demand quarter for us in our markets. So.

Unknown Executive: The second thing that I will tell you is that all the pricing initiatives that we ran through the first quarter gave us the ability to have stronger pricing as we hit peak leasing. And so that's why we think that's going to be very helpful for us as we move throughout the rest of the year. And then the fourth thing is exactly right as the competition becomes much easier as we go through the rest of the year.

Speaker Change: So that's one point.

Speaker Change: The second thing that I will tell you is that with all the pricing.

Speaker Change: By initiatives that we ran through the first quarter that was gave that gave us the ability to have stronger pricing as we hit peak leasing and so that's why we think thats going to be very helpful. For us as we move throughout the rest of the year and then the fourth thing is is exactly right is the comp.

Speaker Change: Become much easier as we go through the rest of the year.

Speaker Change: Great. Thank you.

Speaker Change: Absolutely.

Richard J. Campo: This concludes our question and answer session. I would like to turn the conference back over to Rick Campo for any closing remarks.

Speaker Change: This.

Speaker Change: That question and answer session I would like to turn the conference back over to Ric Campo for any closing remarks.

Unknown Executive: Well, we appreciate your time today. And we did get it done under one hour, which is a record, even though we are the last but not least in terms of reporting. So, we'll look forward to seeing you in NARIT and thanks for being on the call.

Well I appreciate your time today, and we did get it done under one hour, which is a record even though we are the last.

Speaker Change: Not the least in terms of.

Richard J. Campo: Reporting so so we'll look forward to seeing you at NAREIT.

Thank you for being on the call. Thanks.

Unknown Executive: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference is now concluded. Thank you for attending today's presentation you may now disconnect.