Q4 2024 Camden Property Trust Earnings Call
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.
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 fourth quarter 2024 earnings release is available in the investors section of our website at Camden living Dot Com and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call.
We would like to respect everyones time and complete our call within one hour. So please limit. Your initial question to one then rejoin the queue. If you have a follow up question or additional items to discuss.
If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or email. After the call concludes at this time I'll turn the call over to Ric Campo.
Ric Campo: Thanks Kim.
Speaker Change: Good morning, the theme of our on hold music. This quarter is it's time to move on.
Speaker Change: The late Great Tom Petty captured the current sentiment of team Camden. In this first is time to move on it's time to get going what lies ahead I have no way of knowing but under my feet baby grass is growing.
Speaker Change: Time to move on time to get going.
Speaker Change: After a few years waiting somewhat impatiently for better investment opportunities in our markets. We believe 2025 is the year for Camden to move on.
Speaker Change: In 2024, we saw multifamily deliveries reached a peak level not seen in over 40 years, we expect new supply pressure to lessen throughout 2025 setting the stage for a return to improved revenue and net operating income growth as the headwinds in recent years turn into a tailwind in 2025 and beyond.
Speaker Change: There are attractive opportunities for us to continue to develop it starts and to pursue acquisitions.
Speaker Change: Positive market backdrop positions Camden to begin executing our 2025 strategic plan. The plan follows a similar playbook that we executed after the great financial crisis, where we acquired $2 7 billion in apartments with an average age of four years develop $4 $2 billion of apartments.
Speaker Change: And sold $3 $8 billion of apartments with an average age of 24 years.
Speaker Change: Recycling capital in this way keeps our portfolio competitive lowers capital expenses and accelerates our return on invested capital driving long term core SSO growth, it's time to move on time to get going.
Speaker Change: I want to give a big shout out to team Camden for their outstanding performance in 2024 exceeding our operating budgets by a wide margin. Despite record supply team Camden work smart implementing new technologies that continue to improve customer experiences and reduce costs.
Speaker Change: Occupancy and rents in most sunbelt markets have likely bottomed resident retention and customer sentiment remains high.
Speaker Change: The premium to own versus rent continues to be at historic levels, making apartment homes, a more affordable and attractive option for consumers.
Speaker Change: Wage growth has outpaced rent growth for the past couple of years, strengthening our residents' financial prospects and improving rent to income ratios popular.
Speaker Change: Population growth to our Sunbelt markets continues to outpace the nation, Texas, and Florida added over a million new residents in 2024, which was nearly one third of the nation's population growth each new family needed a place to call home.
Speaker Change: Texas, and Florida are projected again to lead the nation's population growth over the next five years.
Speaker Change: Right and which candidate operates captured 58, 3% of the U S population growth.
Speaker Change: This long term Mega trend continues to produce outsized housing demand in our markets.
Speaker Change: We know it's time to get going but we will not move on from Camden's Y which as many of you know is.
Speaker Change: To improve the lives of our teammates our customers and our stakeholders one experience at a time Keith one is up next.
Speaker Change: Thanks, Rick Kevin same property revenue growth was one 3% in 2024 with most of our markets achieving results within 100 basis points of their original budgets, San Diego Inland Empire in Washington D. C Metro both outperformed our expectations, while Austin and Nashville came in slightly below Budd.
Speaker Change: <unk>.
Speaker Change: For 2025, we anticipate same property revenue growth of 1% within the majority of our markets falling between zero and 2%.
Speaker Change: Our top five markets should see revenue growth in the range of two to two 5%.
Speaker Change: And these markets account for over 40% of our budgeted revenue.
Speaker Change: Several of these markets were top performers last year, including Southern California, Washington, D C Metro and Houston, and we expect Tampa to join them as one of our top markets. This year.
Speaker Change: Our next date markets are budgeted for revenue growth between zero and 1% and they comprise over half of our 2025 budgeted revenue. These markets include Denver, Atlanta, Phoenix, Raleigh, Orlando, and Southeast, Florida, Dallas and Charlotte.
Speaker Change: In our last two markets, Nashville, and Austin, which represent 6% of Camden's revenues.
Speaker Change: These markets were down roughly 3% on revenues last year and are expected to remain challenged this year given the continued levels of new supply coming online.
Speaker Change: We expect them to decline another zero to 3% this year, but we're cautiously optimistic that they will in 2025 at a better position than where they started.
As many of you know we have a tradition of assigning letter grades to forecast conditions in our markets at the beginning of each year and ranking our markets in order of their expected performance during 2025.
Speaker Change: We currently great our overall portfolio as a b with a stable outlook slightly better than our b rating with a moderating outlook last year. Our full report card is included as part of our earnings call Slide deck, which is incorporated into this webcast and available on our website the.
Speaker Change: The overall economy remains healthy and we expect our sunbelt focused market footprint will allow us to outperform the U S outlook, we expect to see continued in migration into our markets and strong demand for apartment homes, given the relative on affordability of buying a single family home.
Speaker Change: We reviewed supply forecast from several third party data providers and their projections range from 160000 to 230000 completions across our 15 markets over the course of 2025 compared with 230 to 280000 apartments delivered in 2024 does.
Speaker Change: Spike the wide range of estimates the unanimous conclusion from each firm was that supply in our markets peaked during 2024 and will be declining as we move through 2025, setting up 2026 to be a below average year for new supply.
Speaker Change: As a reminder, the supply estimates our totals for each of the Msas and not all of this new product will be competitive with our existing portfolio given various submarket locations and price points.
Speaker Change: As I mentioned earlier, we expect revenue growth in the range of two to two 5% for our top five markets for Camden's markets received a grade of a minus with varying outlooks of improving stable are moderating.
Speaker Change: Tampa earns in a modest with an improving outlook and it should be one of our best performers. This year, given strong occupancy levels manageable supply and a boost in demand that we saw during the fourth quarter of 'twenty four.
Speaker Change: Our southern California markets would be next with both La Orange County.
Speaker Change: And San Diego Inland Empire expected to finish in the top three again as they did in 2020 for.
Speaker Change: Their growth rates are expected to slow a bit during 2025, given slightly higher levels of supply and less of a tailwind from bad debt declining thus they received stable to moderating outlooks.
Speaker Change: Washington D. C. Metro would also ranked as an a minus with a moderating outlook supply remains in check, particularly our submarkets in northern Virginia, and Maryland, and we expect revenue growth to be slightly below the three 7% achieved last year.
Speaker Change: Houston rounds out the top five with a b plus rating and a stable outlook Houston ranked number five for revenue growth in 2024, and this year should see more of the same with limited supply and healthy demand.
Speaker Change: Most of our eight markets received a b grade with one b plus and to be minus ratings and we're budgeting revenue growth of zero to 1% in all eight.
Speaker Change: We rate Denver, as a b plus with a moderating outlook and expect revenue growth to be closer to 1%. This year versus one 6% last year, given moderating supply coupled with moderating job growth.
Speaker Change: Atlanta ranks as a b performer with an improving outlook, mainly due to the progress we've made in reducing bad debt and fraudulent activity feed.
Speaker Change: Phoenix and Raleigh, our next integrated <unk> with stable outlooks, followed by Orlando and southeast, Florida, with bees, but moderating outlooks, Phoenix, Raleigh, and Orlando should all see slight declines in supply over the course of 2025, but pricing power in those markets will likely be limited for most of this year.
Speaker Change: Southeast, Florida was one of our top performers in 2024, and we expect to see moderation this year from above.
Speaker Change: From the above average occupancy levels, we achieved there last year.
Speaker Change: Dallas earns a b minus with a stable outlook again this year with minimal revenue growth expected in 2025, while Dallas still ranks as one of the nation's top metros for job growth and migration and quality of life. The market is still working through much of the new supply that was for the past year and Charlotte.
Speaker Change: Rated b minus with a moderating outlook the aggregate level of new supply coming online in the Charlotte MSA is still elevated this year and we expect our main competition will continue to fall in the Uptown South end Submarket.
Speaker Change: And finally, Nashville, and Austin received the same grades as last year with C and C minus respectively.
Speaker Change: Both markets posted negative revenue growth in 2024 and will likely repeat that in 2025 as new supply continues to pose a challenge.
Speaker Change: Our outlook for Nashville is improving particularly outside of the downtown CBD area, while Austin's outlook is stable now.
Speaker Change: Now a few details on our fourth quarter 2024 operating results rental rates for the fourth quarter had signed new leases leases down four 7% and renewals up three 2% for a blended rate of negative one 2% renewal offers for February through April were sent out at an average increase.
Speaker Change: It's a 4% and as expected move outs to purchase homes remains very low at nine 6% for both the fourth quarter 24, and the full year of 2024, I will now turn the call over to Alex Jess at Camden.
Alex Jess: Camden's, President and Chief Financial Officer.
Alex Jess: Thanks, Keith before I move on to our financial results and guidance a brief update on our recent real estate activities.
Alex Jess: During the fourth quarter of 2024, we completed construction on Camden Durham, a 420 unit $145 million community located in the Raleigh Durham market of North Carolina, which is now almost 80% leased.
Alex Jess: Camden long Meadow farms, a 188 unit $72 million single family rental community located in suburban Houston, which is now almost 55% leased.
Alex Jess: Additionally, we continued leasing at Camden Wood Mill Creek, a 189 unit $72 million single family rental community also located in suburban Houston.
Alex Jess: Subsequent to quarter end, we acquired for approximately $68 million Camden Leander a newly constructed 352 unit suburban Austin community, which is currently 85% occupied this.
Alex Jess: This community was purchased at a stabilized yield of 5%.
Alex Jess: Turning to financial results last night, we reported core funds from operations for the fourth quarter of 2024 of $194 million or $1 73 per share <unk>.
Alex Jess: <unk> ahead of the midpoint of our prior quarterly guidance.
Alex Jess: This outperformance resulted from half a cent and higher other income and $2 <unk> and lower operating expenses driven entirely by lower than anticipated core property insurance claims and lower final tax valuations.
For 2024, we delivered same store revenue growth of one 3% expense growth of one 8% and NOI growth of one 1%.
Our one 8% full year expense growth was driven primarily by declines of 2% and 16, 9% on property taxes and insurance respectively.
Alex Jess: You can refer to page 24 of our fourth quarter supplemental package for details on the key assumptions driving our 2025 financial outlook.
Alex Jess: One of the key drivers of this year's guidance is an uptick in acquisitions and dispositions with a midpoint of $750 million anticipated for each.
Alex Jess: Operating a geographically diversified portfolio helps ensure consistent cash flow for our investors.
Alex Jess: Over the next few years consistent with past messaging, we will seek greater market balanced by reducing our exposure to our two largest markets D. C Metro in Houston through a combination of select dispositions and growth in our other existing markets with a target of no one market representing more than 10% of our net operating income.
Alex Jess: And no market, representing less than 4% of our net operating income by the end of 2027.
Alex Jess: Additionally, we will dispose of older more capital intensive assets and redeploy the proceeds into newer faster growing communities.
Alex Jess: As we execute this plan depending upon the location and age of the disposed communities. There may be zero to 100 basis points negative <unk> yield differential for these matching transactions, while we expect <unk> yields to be relatively flat.
Alex Jess: The end result will be a more geographically diverse newer and faster growing portfolio.
Alex Jess: We expect our 2025 core <unk> per share to be in the range of $6 60.
Alex Jess: To $6 90.
Alex Jess: With the midpoint of $6 75, representing a <unk> <unk> per share decrease from our 2024 results.
Alex Jess: This decrease is anticipated to result, primarily from an approximate <unk> <unk> per share increase in core <unk> related to the growth in operating income from our development non same store and retail communities.
Alex Jess: Resulting primarily from the incremental contribution from our five development communities in lease up during 2024 <unk> 2025.
Alex Jess: A <unk> <unk> per share net increase from the timing of our assumed $750 million of offsetting acquisitions and dispositions.
Alex Jess: For tax efficiency purposes, and to facilitate reverse 10 31 exchanges, we are anticipating completing the acquisitions on average two months before they're matching disposition.
Alex Jess: This 7% cumulative increase in anticipated core <unk> per share is offset by a <unk> <unk> per share increase in interest expense.
Alex Jess: Charitable to $250 million of higher average anticipated debt balances outstanding in 2025, as compared to 2024 and lower levels of capitalized interest as we complete certain development communities.
Alex Jess: The higher debt balances result in part from the timing of our acquisition and disposition activity.
Alex Jess: For 2025, we are anticipating $485 million on average outstanding under our line of credit with an average rate of approximately four 9%.
Alex Jess: A <unk> <unk> per share decrease in interest and other income due to minimal cash balances in 2025, and an approximate <unk> <unk> per share decrease in core <unk>, resulting primarily from the combination of higher general and administrative and property management expenses.
Alex Jess: At the midpoint, we are expecting flat same store net operating income with revenue growth of 1% and expense growth of 3%.
Alex Jess: Each 1% increase in same store NOI is approximately <unk> <unk> per share and core <unk>.
Alex Jess: Our 2025 same store revenue growth midpoint of 1% is based upon a flat earnings at the end of 2024 and in effectively flat loss to lease.
Alex Jess: We expect a one 4% increase in market rental rates from December 31, 2024 to December 31 2025.
Alex Jess: Recognizing half of this annual market rental rate increase results in a budgeted 70 basis point increase in 2025 net market rents.
Alex Jess: We are assuming occupancy averaged 95, 4% in 2025, a 20 basis point annual improvement and then bad debt average is 70 basis points in 2025, a 10 basis point annual improvement.
Alex Jess: When combining our 70 basis point increase in net market rents with our 20 basis point increase in occupancy in our 10 basis point decline in bad debt. We are budgeting 2025 rental income growth of 1%.
Alex Jess: Rental income encompasses approximately 90% of our total rental revenues.
Alex Jess: The remaining 10% of our property revenues is primarily comprised of utility rebuilding and other fees and is anticipated to grow at a similar level as our rental income.
Alex Jess: Our 2025 same store expense growth midpoint of 3% does not contain any significant category outliers.
Alex Jess: Page 24 of our supplemental package also details other guidance assumptions, including the plan for up to $675 million of development starts spread throughout the year and approximately $285 million of total 2025 development spend.
Alex Jess: Non core <unk> adjustments for the year anticipated to be approximately <unk> <unk> per share and are primarily legal expenses and expense transaction pursuit costs.
Alex Jess: We expect core <unk> per share for the first quarter of 2025 to be within the range of $1 66 to $1 70.
Alex Jess: The midpoint of $1 68 represents a <unk> <unk> per share decrease from the fourth quarter 2024, which is primarily the result of an approximate <unk> <unk> per share a sequential decline in same store NOI driven by an increase in sequential same store expenses, resulting from the timing of quarterly tax refunds the reset of.
Alex Jess: Our annual property tax accrual on January the first of each year and other expense increases primarily attributable to typical seasonal trends, including the timing of onsite salary increases.
Alex Jess: And an approximate one five cent per share increase in interest expense from higher debt balances, resulting in part from our actual and anticipated first quarter acquisitions.
Alex Jess: This $5.05 per share cumulative decrease in quarterly sequential core SFO is partially offset by an approximate half cent per share increase in core <unk> related to our first quarter acquisition activity.
Alex Jess: We are anticipating blended lease trade outs for the first quarter to be relatively flat at.
Alex Jess: At year end, approximately 80% of our debt was fixed rate, we had less than $200 million outstanding on our $1 $2 billion credit facility no maturities over the next 12 months and less than $250 million left to fund under our existing development pipeline or.
Alex Jess: Our balance sheet remains strong with net debt to EBITDA at three eight times at this time, we will open the call up to questions.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you were using a speakerphone. Please pick up your handset before pressing the keys. If at anytime. Your question has been addressed and you would like to withdraw your question. Please press Star and then two.
Speaker Change: And your first question today will come from Jamie Feldman with Wells Fargo. Please go ahead.
Jamie Feldman: Great. Thanks for taking my question. So I was just hoping you could provide some more color on.
Jamie Feldman: You blend assumption can you talk about what youre thinking in a new and renewal.
Jamie Feldman: So throughout the year and how do you think it tret.
Jamie Feldman: Trends first quarter through fourth quarter.
Speaker Change: Sure absolutely.
Jamie Feldman: So the way I would look at it for the full year.
Jamie Feldman: We're anticipating somewhere between 1% to 2% on a blend and if you look at new leases new leases will be slightly negative for the full year.
Jamie Feldman: Renewals will probably be in the high 3% range, if I look at how that progresses throughout the year. Obviously, we are very optimistic about the way 2025 is going to unfold in particular with the absorption of new supply.
Jamie Feldman: We're anticipating that by the time, we get to the third quarter.
Jamie Feldman: This is when you'll start to see positive releases and then it will continue from that point on.
Speaker Change: Okay. Thank you.
Jamie Feldman: Okay.
Speaker Change: And your next question today will come from Brad Heffern with RBC capital markets. Please go ahead.
Brad Heffern: Yeah, Hi, good morning, everyone are you seeing signs right now are the impact of supply, stating on the ground and if so what are those.
Speaker Change: So we absolutely are.
Brad Heffern: Alright.
Brad Heffern: Okay.
Brad Heffern: We absolutely are and the largest indicator that that we're looking at is the new signed new lease improvement throughout the fourth quarter and although we are not going to give quarterly.
Brad Heffern: Monthly new lease and renewal data and I will tell you that we're very encouraged by what we're seeing so far in January in terms of signed new lease improvements.
Speaker Change: And your next question today will come from Steve <unk> with Evercore ISI. Please go ahead.
Speaker Change: Hi, Thanks to this fund get on for Steve.
Speaker Change: It all transaction market transaction guidance. So I was kind of muted couple of years from transaction market standby. It seems like things are opening up and youre guiding to $50 million of acquisitions and dispositions can you help us provide more color on this in terms of timing gap.
Speaker Change: Buyers and seller pools youre seeing in the market today.
Speaker Change: Sure so.
Speaker Change: Think about the last couple of years, it's been a very.
Speaker Change: Muted.
Speaker Change: Sales transaction markets and what's happened primarily is that buyers and sellers have been sort of at odds right.
Speaker Change: Sellers want high prices and buyers.
Speaker Change: Don't want to pay high prices and so.
Speaker Change: That's created.
Speaker Change: Standoff between buyers and sellers so transaction volume has been significantly lower in the last couple of years, but I think what's happened now is that with rates continuing to be higher for longer it sort of put pressure on the others.
Speaker Change: And then also on the buyer side you have you have a.
Speaker Change: Constructive view of the future.
Speaker Change: Supply has a deep for sure in 2025 is going to be it's going to be a better year than 2024.
Speaker Change: Accelerating our growth perspective, and then in 'twenty six 'twenty seven you're going to have some pretty outsized rental increases so but thats allowed buyers to do is just.
Speaker Change: To increase their pro forma rent growths and feel pretty confident about that so that they can actually pay maybe a higher price than they thought support because.
Speaker Change: The inflection point of positive.
Speaker Change: Second derivatives on rental rates is going to happen sometime during 2025. So what that's led to then is that sort of a closing of the gap. If you want to call it that between the buyers and the sellers and from our perspective.
Speaker Change: Since we are going to be recycling capital.
Speaker Change: We're going to be buying that as Alex pointed out earlier would it be selling to fund those acquisitions.
Speaker Change: Acquisitions and.
Speaker Change: And as we did.
Speaker Change: And our last Big acquisition Slash development disposition cycle, we thought it would.
Speaker Change: This next couple of years is going to be pretty much like it was sort of after the great financial crisis.
Speaker Change: We have a lot of transactions that have to move and youre going to have a lot of activity.
Speaker Change: It sets up really well for us to recycle capital into get more aggressive on the acquisition and.
Speaker Change: On the development side going forward.
Jeff Spector: And your next question today will come from Jeff Spector with Bank of America. Please go ahead.
Jeff Spector: Great. Thank you Rick I'll ask a follow up to that point I mean post world financial crisis, there was a lot of distress.
Jeff Spector: And as of today I'd say, what we're hearing mixed things are not really hearing distress or what are you I guess what are you seeing and hearing that gives you confidence that there will be similar just scratch that Camden can take advantage of them. Thank you.
Jeff Spector: Sure well when you go back to the financial crisis, there was moderate distress, but it was primarily in the <unk> nine and 10 after that Theres really no distress I mean, if you think about what happened the fed interest rates are zero and the.
Jeff Spector: FDIC and the federal reserve.
Jeff Spector: Propped up the banks by saying they didn't have to mark to market construction loans and so that that eliminated.
Jeff Spector: A lot of the.
Jeff Spector: Distress that people thought was going to happen after the great financial crisis and today the difference today during the GSC was it that as a result of the GSE leverage.
Speaker Change: Over leveraging which is not part of the equation today and banks have significantly decreased our commercial real estate exposure and they are also diversified their commercial real estate exposure. So banks are stronger borrowers are stronger and youre in a situation where there is no real pressure on on borrower.
Speaker Change: Orders or the banks are forced people to sell and that of course is what creates.
Speaker Change: Distressed now theres, clearly distress and in the sort of sort of C&D part of the market.
Speaker Change: We had syndicators raising money online and through Gofundme pages, we're buying pretty low quality properties and leveraging them up in those.
Speaker Change: As Vince has significant stories about about that kind of distress, but not in the institutional investor quality space.
Speaker Change: Today investors are.
Speaker Change: Are the sellers today are not financially stressed so I don't think we're going to get quote unquote distress out there what we're going to manage it better pricing that we had during the peak right when cap rates are.
Speaker Change: Were in the threes now cap rates are going to be four five to five and.
Speaker Change: With a better growth prospect in your.
Speaker Change: Pro forma going forward. So that you can get your IRR up into the sevens.
Speaker Change: On an unleveraged basis, so it's a little different today, so I don't think theyre going to have distress in the market and buy all these great deals on the other hand the deals are good when you look at our Camden.
Speaker Change: Hey, Andrew transaction.
Speaker Change: Project in lease up in Austin very complicated market, obviously, so that's more supply than most.
Speaker Change: We're buying the property at 15% below replacement cost rents are depressed and what's the supply gets worked out in Austin over the next year.
Speaker Change: Or so.
Speaker Change: Youre going to see outsized growth in Austin, It's when you look at Austin.
Speaker Change: In terms of that.
Speaker Change: Population growth is like number one in America on a percentage basis or populate congrats to Austin.
Speaker Change: Austin is going be great in 2026, 2027, and 2028, so we're able to buy below replacement cost build there, but why build when I can buy buy it below replacement costs and then be positioned in the marketplace too.
Speaker Change: Have outside outsized growth to drive that cap rate up into apps to a really good number.
Speaker Change: And your next question today will come from Hendel, St. Just with Mizuho. Please go ahead.
Speaker Change: Hey, guys.
Speaker Change: Good morning.
Speaker Change: I was hoping you could walk us through the quarter a bit.
Speaker Change: And give us some color on how the portfolio performed in terms of new lease rate expectations, they seem to be a bit more resilient fourth quarter versus your peers and with the stability in new lease rates.
Speaker Change: And improvement you noted a January occupancy above 95% seems like you could push rate a bit sooner this year than we might have previously expected.
Speaker Change: Maybe give us some color on how you think what new lease rates are embedded in our in the first quarter Guide you provided but broadly the sense of how much perhaps the improve it or stability you're seeing here can result in perhaps you, perhaps being a bit more.
Speaker Change: Aggressive on that front. Thanks.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: We did however.
Speaker Change: Our fourth quarter was actually a little bit better than we thought it would be and it was pretty broad across all of our markets and it's not.
Speaker Change: In terms of expectations for.
Alex Jess: Next year, I think Alex walk through those in his commentary regarding the.
Speaker Change: What the full year guidance is et cetera.
Alex Jess: Think that the.
Alex Jess: The.
The improvement that we're seeing is just stickiness around.
Alex Jess: Occupancy rates across our entire portfolio, which allows us to do.
Alex Jess: Our pricing model to do what it does best which is funds strength and then price accordingly, So I think I think it's.
Speaker Change: Really good operating fundamentals had a good fourth quarter and as Alex mentioned is carried over it looks like it has carried over into January. So last year. We had we started out really strong in January that good month.
Speaker Change: Bled into some optimism around here and maybe other places for that.
Speaker Change: Yes.
Speaker Change: The portal for the first quarter and the full year it turned out that wasn't really the case.
Speaker Change: I have an air pocket in February of last year.
Speaker Change: We don't think we're going to see that this year don't anticipate that but so far so good.
Speaker Change: Good month in January for sure and we expect that.
Speaker Change: It's going to continue to improve throughout the year because youre.
Speaker Change: Every every month that goes by we're making on taken another big chunk out of the supply bubble that we've been fighting and continue to have.
Speaker Change: I have in front of us, but I think things.
Speaker Change: On the horizon back half of 2020 looks to be pretty pretty constructive for us, but I think I think more importantly, when you get past. The 25 is kind of a transition year between getting back to normal more normal supply demand.
Speaker Change: Dynamics, but when you look out to 2026, and what's happening what's been happening on starts and what's likely to happen on completions and 26% 27, I think I think we're set up for one of those two or three year runs that theyre going to be pretty impressive for the entire multifamily sector I think we're <unk>.
Speaker Change: <unk> located in our markets, we're going to benefit more than most from that.
Eric Wolfe: And your next question today will come from Eric Wolfe with Citi. Please go ahead.
Eric Wolfe: Hey, Thanks, It seems like based on your interest expense guidance Youre Frontloading. The acquisitions can you just talk about the rationale around the strategy and also you mentioned I think zero to 100 bps of potential GAAP dilution from this activity and that the transaction activity could last through 2027, and so should we be building in our <unk>.
Speaker Change: Models like say 50 bps.
Speaker Change: GAAP dilution on $750 million of transactions for the next couple of years or is that not what you meant.
Speaker Change: By this sort of this continuing through 2027.
Speaker Change: Yes. So it will hit will have both parts of that absolutely. The first thing is is that we anticipate that we're going to buy before we sell and we're doing that for tax efficiency purposes will do these in reverse 10 31 exchanges.
Speaker Change: The second part that you have to look at is what we're looking at for 2025 is the dispositions that we will first complete will be our older or more capital intensive assets and so because of that you're probably going to see a larger spread between <unk> on.
Speaker Change: The assets were buying and <unk> on the assets, we're selling I think it's important to note that on an <unk> basis that spread will be very tight but on an <unk> basis, it's going to be a little bit wider call. It around 100 basis point.
Speaker Change: Our range for what we're going to look at for 2025.
Speaker Change: If you think about what happens as we go throughout <unk>.
Speaker Change: <unk> 26, and 27, completing our plan, we're going to get to a point in time, where we're going to be trading very comparable assets, but just not in the geography, where we want them. So for instance, we've talked quite a bit about how we'll lower our exposure in DC will lower our exposure in Houston, if we're going to sell a community in DC.
Speaker Change: And 26% in 2007, I think likely that it will be.
Speaker Change: Our community that will probably trade at a pretty good cap rate and we will be trading that for our community and call in Nashville or call. It Austin that will also be trading at a comparable cap rate. So I don't think its fair to take the dilution that youre seeing in 'twenty, five and extrapolate that into 'twenty six 'twenty seven.
Speaker Change: Yes, the other thing I would add to this is that if you look at the last time, we did this where we get $2 7 billion.
Speaker Change: Of acquisitions and $3 eight of dispositions at that time, we were budgeting over 100 basis point negative spread turned out to be flat.
Speaker Change: And so whats.
Speaker Change: Once the market starts getting.
Speaker Change: Getting a tune into higher revenue growth and higher NOI growth.
Speaker Change: Those cap rates are going to compress an older property cap rates are going to converge to newer property cap rates and then part of the challenges is that if you look at the our part of the part of the dilution issue is not that its permanent dilution because of the spread but when you look at that candidly Andrew transaction. It was 84% occupied.
Speaker Change: It's not finished right soft finish leasing are stabilized so youre going to have more dilution.
Speaker Change: We're buying properties that are not necessarily fully leased up yet and so that's part of that equation, but I expect that the transaction market through the middle of the year, we'll start gaining steam which means that you'll have the 300 or $400 billion of capital Thats still waiting in the wings.
Speaker Change: Entering the market so cap rates, I think youre going to be tighter and the spreads will be tire towards the back half of the year, but we're going to we have budgeted 100 basis points, but I'm sure we will do better.
Speaker Change: And your next question today will come from Austin, <unk> with Keybanc capital markets. Please go ahead.
Speaker Change: Great. Thanks, and good morning, everyone. So keeping the conversation going on your portfolio management objection objectives and Alex you hit on this with your comments about selling down some DC and Houston, which you guys have talked about I guess whats kind of the right exposure for those top markets.
Speaker Change: Are there any new markets that.
Speaker Change: You could enter with the strategic plan and then I guess, just given the constructive outlook for fundamentals in next few years, what would it take for you to lean into your balance sheet capacity instead of kind of the tax efficient paired trade strategy. Thanks.
Speaker Change: Yes, so what I said on the call is that by the end of 2007, we do not want to have any one market that's over 10% of NOI and so if you think about it there's only two markets that we have today that are over that which is D. C metro in Houston, So that's where we'll be bringing that down. Additionally.
Speaker Change: It just doesn't make a ton of sense to us to have a market that has less than 4% of NOI.
Speaker Change: The only market that falls into that category today is Nashville, So we'll be bringing that up and that will obviously be one of our main target markets.
Speaker Change: When you think about leaning into our balance sheet absolutely. The reason why we have a three eight times debt to EBITDA, which is number one in the multifamily sector is because it gives us capacity and ability to take advantage of opportunities. If there are opportunities there, where we can create some real value for our shareholders and increase a little bit of less.
Average, but still still stay below the five times level and we can.
Speaker Change: Take advantage of some great opportunities, we're going to absolutely do that so that's something that we're absolutely looking at I think youre not going to see that right now because right now what we're looking for is some more stability in the transaction market and right now there is.
Speaker Change: Not a tremendous amount of opportunity. So the opportunities that are there we will match funding with dispositions in the near term, but as we go forward and execute the plan you should see us buy.
Speaker Change: And building more than we are selling.
Speaker Change: And your next question today will come from John Kim with BMO capital markets. Please go ahead.
John Kim: Thanks, I wanted to ask about revenue enhancing repositioning capex, which you are looking to increase this year versus last year.
John Kim: Can you remind you updated us on the typical return or rental uplift you get.
John Kim: And what was the contribution to either blended rents or same store revenue to $86 million.
John Kim: Last year had.
Speaker Change: Yes, absolutely well first of all this is the first question we've had on Repositions in about three years. So thank you John for that.
Speaker Change: We're bringing those back in our reposition program has been an absolutely tremendous success.
Speaker Change: We are generally getting somewhere around an 8% to 10% return on invested capital for what we're doing and the way you should think about that is that generally equates to about 150 plus or minus.
Speaker Change: The dollars per door and additional rent.
Speaker Change: When I look at the impact in 2024 from Repositions.
Speaker Change: On an NOI basis. It was call. It 10 to 15 basis points, which is which is certainly not an update I mean, it's certainly something that that makes a ton of sense to us.
Speaker Change: But you have to really remember that the real reason why we do repositions as it refreshes our portfolio.
Speaker Change: If you think about the type of real estate that we build on the exterior it is absolutely timeless, but like everything else kitchens and bathrooms are what really shows the age of the development. It shows the age of your house and so if we can go in and we can refresh of kitchen, and bathroom and make it look brand new and on the exterior it looks brand new it really does create.
Speaker Change: Eight a natural defense against the new supply that we see in the market.
Speaker Change: Think about a brand new asset has a much higher basis and of course whoever owns that must charge much higher rents just to get the adequate return. We can have an asset directly next door or directly adjacent that looks brand new has branded kitchens and bathrooms and because we have a lower basis. We can share we can charge a lower rental rate.
Speaker Change: And it positions us incredibly well so the reposition program is something that makes a ton of sense to us, it's something that youre going to see us do quite a bit.
Speaker Change: The other thing that I'd point out is that we are also looking at Repurposing some of our real estate and what that means is looking at space that we have in a community call. It.
Speaker Change: In basketball.
Speaker Change: Basketball Court and indoor basketball court that nobody uses et cetera, and turning that into additional units and that makes a lot of sense to us as well.
Rich Hightower: And your next question today will come from Rich Hightower with Barclays. Please go ahead.
Rich Hightower: Hey, good morning, everybody.
Rich Hightower: I just wanted to get a sense.
Rich Hightower: I mean, I think it's been pretty a pretty consistent theme this earning season that there is a.
Rich Hightower: Pretty progressive step up in blended rents and ultimately rent growth.
Rich Hightower: In Sun belt markets over the course of the year, but I'm trying to get a sense of the risk that all of us are wrong about the pace of supply.
Rich Hightower: <unk> off over time, and how much how much of that cushion is baked into the current same store guidance.
Rich Hightower: Well I think when you look at the at.
Speaker Change: Any ones numbers, whether it would be wittner real pager.
Rich Hightower: The supply is baked.
Rich Hightower: For the next two years right now youre not starting.
Speaker Change: Jeanine, it's our most supply is down in markets or downturn starts are down 50%, 60%.
Speaker Change: A couple of markets, it's up a little like Phoenix, but it's all in the west side of Phoenix, and we happen to be on the east side of Phoenix, which is a big difference and so.
Speaker Change: I think I don't think Theres, a lot of risk on the supply being being ratcheted up I mean, when you look at at the pressure on the development developers today.
Speaker Change: The 10 year is pushing four and a half and short rates haven't dropped as much as people thought they would this drops construction cost while they are not up dramatically or also not down dramatically. There is still a lot of a lot of pressure on <unk>.
Speaker Change: Construction costs just to keep them.
Speaker Change: We've done we think that they are up maybe one or 2% from last year, but but.
Speaker Change: Does not include tariff issues, we did an analysis on tariffs tariffs.
Speaker Change: We will add another 2% to 3% in cost most of the products are bought lumber comes out of Canada, a lot of products from Mexico, electrical boxes and things like that so there is.
Speaker Change: Would say that that with the current cost structure.
Speaker Change: You have to really.
Speaker Change: Pro forma <unk>.
Speaker Change: <unk> rent increases in 'twenty six 'twenty 728 in order to make a pro forma work. So I don't think that there is.
Speaker Change: There is a big risk.
Speaker Change: A big upturn in development development starts unless you have rates fall dramatically construction cost fall dramatically.
Speaker Change: Just not happening so I think there is pretty low risk from a supply perspective, I think the risk.
Speaker Change: The bigger risk probably is as in what happens to the overall economy.
Speaker Change: We have a recession in 2025, then I think all bets are off on on how well the.
Speaker Change: How well things.
Speaker Change: Progress in and Thats I don't think Thats on People's radar stream screen, but I do think that's probably the bigger risk. When you think about how 25 could play out versus but it's not going to be on the supply side.
Speaker Change: Supply is coming and we know it's coming and then it stops and it's going to take even if it even if you had <unk>.
Speaker Change: 50% increase in <unk> and <unk>.
Speaker Change: Starts this year they wouldn't come into play until 2027 or 2028 is just takes that long to deliver so I think we've got clear sailing on supply at least through the.
Speaker Change: The NDA.
Speaker Change: 2007 and into 'twenty eight.
Speaker Change: Yes.
Speaker Change: And your next question today will come from Amy <unk> with UBS. Please go ahead.
Speaker Change: Alright. Thanks.
Speaker Change: So.
Speaker Change: Tampa Fla.
Speaker Change: And then the top market.
Speaker Change: Camden's performance in these markets is representative of the overall market or are there. Some camden attributes that are leading to stronger performance and then specifically on Tampa.
Speaker Change: Thank you.
Speaker Change: And then in the fourth quarter, so I'm wondering if that turnkey related and sustainable.
Speaker Change: So yes.
Speaker Change: It is hurricane related for sure.
Speaker Change: And eventually that will.
Speaker Change: That will moderate over time.
Speaker Change: We've seen that happen in Houston.
Speaker Change: Harvey et cetera, so that's.
Speaker Change: That was definitely a.
Speaker Change: Hurricane related thing on the on the.
Speaker Change: The performance in those other markets I think you look at the peer group.
Speaker Change: And those other markets.
Speaker Change: The biggest overlap that we have with public market.
Speaker Change: Public market peer group is on Washington D C Metro and I think everybody has pretty constructive commentary around what's happening in Washington D. C. Metro Houston is the differentiator for us because we're the only.
Speaker Change: The company that has any meaningful presence and as Alex pointed out it's 13%, it's our largest NOI concentration market that we have now we're committed to bringing that down to single digits over some period of time. The reality is is the Houston has just been a great performer for the last.
Speaker Change: A year and a half and again it looks like it will be in 2025, as well and that's a combination of relatively low supply you just didn't have the waves.
Speaker Change: When when all of that.
Current pipeline was being put in place couple of years ago.
Speaker Change: Gotten us because a lot of other issues, but the.
Speaker Change: The energy sector is performing incredibly well.
Speaker Change: All indications are that.
That's going to continue to be supported.
Speaker Change: And maybe even much more supported.
Speaker Change: Has been in the last four years, so those two markets for sure.
Speaker Change: Anybody that has assets in those markets in summary, well on.
Speaker Change: California, Southern California that story has been pretty good as well and a lot of that is driven by.
Speaker Change: The.
Speaker Change: Cessation and working through all of the Covid related initiatives.
Speaker Change: Initiatives to include coming down on bad debts, etc.
Speaker Change: That's also a pretty good story for anybody that owns assets in southern California.
Speaker Change: We tend to we tend to operate better in our markets on that metrics on occupancy.
Speaker Change: And NOI growth.
Speaker Change: The board so theres, probably some Camden is.
Speaker Change: Just the way and the efficiency with which we operate our portfolio in our time in these markets and understanding on that helps but.
Speaker Change: All five of those markets that you have got assets in those markets, you're probably really happening right now.
Speaker Change: Looking forward to bring.
Speaker Change: Bring on 2025.
Speaker Change: I would brag, a little bit more on cabinets execution ability.
Speaker Change: You don't become one of the 100 best companies to work for on Fortune 100, Fortune's list for 17 year straight if you don't have a great team.
Speaker Change: And we all noticed referrals coming up on Sunday, and we know that it's not just one player it's team.
Speaker Change: Philosophy its energy.
Speaker Change: That synergy that brings the best out of out of the players and in our case, our players are working everyday and believing.
Speaker Change: They really want to take care of their customers and that just adds value and customers feel it and so when you have really.
Speaker Change: A very great team.
Speaker Change: Going to have incrementally, it's going to benefit customers and lower turnover and when you ask somebody to raise the rent they're going to say, okay. I like this place and you guys are fun and great people and so sure I'll pay more but that's.
Speaker Change: I think thats, a big part of Camden Theres No question.
Speaker Change: And your next question today will come from Rob Stevenson with Janney. Please go ahead.
Rob Stevenson: Hi, Good morning, guys regarding the $175 million to $675 million development start guidance can you talk about where expected yields on any of these new starts are penciling today, given construction costs and expected rents if you need to wait for anything to start those projects and also where is the expected yield there versus.
Rob Stevenson: The expected yield on the three North Carolina assets you currently have under construction.
Rob Stevenson: Sure.
Rob Stevenson: Our projected yields given the current backdrop with cost and rental rate growth and what have you is around 6% and that's kind of where our starts are our development numbers have been including the ones that were under currently under construction.
Rob Stevenson: But I will tell you, it's not easy to find a lot of developments the pencil to those numbers and so that's why we haven't been able to lean in as much as we'd like to but but.
Rob Stevenson: I think given.
Rob Stevenson: The markets that we're in and where were our developments are located we should have etc.
Rob Stevenson: Outsized rent growth can you get us to those numbers or better.
Rob Stevenson: And your next question today will come from Adam Kramer with Morgan Stanley. Please go ahead.
Great. Thanks for the time wanted to ask about Washington D C a little bit and maybe a few a few questions in here.
Rob Stevenson: I think just first just maybe the latest on demand there obviously a lot of headlines around what's happening with kind of federal workers and maybe.
Rob Stevenson: Smaller federal government. So maybe just what's happening from the demand side and watched a couple of weeks there and maybe what your outlook is as you maybe the composition or the government changes and then just the second part there again still in D. C. What are you guys seeing in terms of cap rates or even you want to.
Rob Stevenson: On a per square foot basis in terms of the transaction market in DC.
Rob Stevenson: Let me have the transaction market first D. C is a great transaction market cap rates are in the depending on the property in the mid fours to high fours.
Rob Stevenson: Plus or minus so there's still a decent demand there and when you look at the fact that D. C has not has been an outperformer from a revenue growth last couple of years and we will continue we think b b in that in that kind of a category range I think that.
Rob Stevenson: That transaction volume, we will be be good when you think about government changes its really interesting when you look at some of the the single family markets. There I mean, there's been a spike in.
Rob Stevenson: And prices for for sale property, there because of the transition because of the new administration Theres always tends to be more demand during transitions than if you just had an incumbent win.
Rob Stevenson: I'll, let Keith talk more about the.
Keith One: Current demand go ahead Keith.
Rob Stevenson: Yes.
Rob Stevenson: The.
Rob Stevenson: It is.
Rob Stevenson: Trying to figure out the cross currents right now between.
Rob Stevenson: Kind of what's being talked about versus Scott thinking about what do you think is actually going to happen is mass.
Rob Stevenson: Perhaps you have I think in.
Rob Stevenson: For every time you hear.
Rob Stevenson: Government potential government downsizing of people I think the latest number I heard was.
Rob Stevenson: Offer to everybody on the entire federal government.
Rob Stevenson: A buyout.
Rob Stevenson: Package.
Rob Stevenson: At the last count I think it was up to 20000 or 25000 people and said, they're going to sign up for that which is which is a rounding error of the total federal workforce.
Rob Stevenson: I think I think.
Rob Stevenson: At the same time that conversations going on you are having.
Rob Stevenson: Another broader conversation about.
Speaker Change: If you're a federal employee you're going to have to come back to the office and so I think that theres, probably a knock on effect there of D. C proper, which frankly for US has been the weak link in our D C Metro.
Speaker Change: Over the last two years and it could very well be that as people.
Speaker Change: Have to return to work and that on an actual office.
Speaker Change: Preponderance are big part of a portion of which are in DC proper.
Speaker Change: Going to make more sense for them to potentially move back closer to oriented D. C. Proper. So I think theres a lot of crosscurrents I think theres a lot of talk and I think.
Speaker Change: You're probably never going to.
Speaker Change: Go broke betting on the.
Under on.
Speaker Change: How many federal employees are actually going to go do something else.
Regardless of who asked them to do so.
Speaker Change: And I'll tell you year to date D. C Metro has our highest increase in signed new lease rates.
Speaker Change: And your next question today will come from Julian Bowen with Goldman Sachs. Please go ahead.
Julian Bowen: Yes. Thank you I just wanted to ask on the spread between the low end and the high end.
Speaker Change: <unk> starts in 2025 sort of what drives.
Speaker Change: You have to sort of trend closer to the low end versus the high end this year.
Speaker Change: It's just a matter of <unk>.
Speaker Change: To ensure that we.
Speaker Change: That we hit what we what we believe would be reasonable spreads.
Speaker Change: And a reasonable return if we.
Speaker Change: Yes.
Speaker Change: One of the things that we've seen.
Speaker Change: Take Nashville in his example in Nashville is so busy from a development perspective cost with Fs. So dramatically you couldnt get anybody to bid your jobs now we have seven deep.
Speaker Change: Sub contractors bidding on our international Nations properties. So so.
Speaker Change: One is that a you had construction costs flatten maybe go down a little and then than be on the other hand, you have a broader sub base, which means that.
Speaker Change: That tells me that once we execute contracts.
Speaker Change: We can probably get by anywhere from two to three or 4% less when we buy out the when we actually buy the contracts rather than just asking them to tell us what they would go for so it's going to be.
Speaker Change: So towards the middle of the year, we will have a better view of.
Speaker Change: When that second derivative turns positive and a lot of these markets on rental rates and that would just give us more confidence to lean in so it's really a decision about we need to get paid for development risks. So we need a 100 to 150 basis points of positive spread between what we can buy for and what we can build for and then we have to have to.
Speaker Change: Confidence that the that the that the rep.
Speaker Change: Revenue growth is going to be there in 2006, and 27% 28 will get more confidence that mid year, so that'll that'll determine sort of.
Speaker Change: Whether we get to the high end of that of that range one of the other I think.
Speaker Change: <unk> that we could see.
Speaker Change: Basically as merchant builders, who can't get their deals done and we can then step into those deals and get those done.
Speaker Change: We have historically done that a lot over the years, especially during transition times like we have now and so we might be able to pick up some of those that can't get done either so that could push us towards the high end of that range as well.
Speaker Change: And your next question today will come from Connor Mitchell with Piper Sandler. Please go ahead.
Connor Mitchell: Hey, Thanks for taking my question, maybe just going back to the broader transaction market I. Appreciate all the color so far and it just seems like there is still a kind of money bidding on apartments inside finance cost and the expectations for branch growth to eventually overcome that obstacle.
Speaker Change: But you guys had talked about the maybe.
Speaker Change: Maybe the increased pickup in the back half of the year. So I guess my question is just how much longer do you think the negative leverage will last especially.
Speaker Change: About how.
Speaker Change: How much more there is to come in transactions in the back half and I guess, just a quick follow up on that do you think that the market might be too aggressive on the rate of growth being underwritten for 'twenty six 'twenty seven or is it really that high of an expectation that justifies the negative leverage.
Speaker Change: Well, that's where people are betting on for sure is that $26 27 are going to be outsized growth years.
Speaker Change: And if history is any indication of.
Speaker Change: What might be it might be the future that's exactly what's happened over the years you have a down's downturn.
Speaker Change: Supply you have a recession or what have you and then what happens is you have a snapback and usually supply continues to be to be.
Speaker Change: Robust, but we know that supply is not going to zero that robust and if the job market just holds up and the economy holds up we'll get.
Speaker Change: 2% GDP growth you wanted to up to 2%.
Speaker Change: You can.
Speaker Change: Buyers are going to be.
Speaker Change: Underwriting significant rent growth in 'twenty, six 'twenty 728, otherwise they would never they can't make their numbers right.
Speaker Change: Especially when you look at it.
Speaker Change: Where the prices are today, so I think what's going to happen that will drive.
Speaker Change: That will drive.
Speaker Change: Buyers and sellers closer together is the NOI is youre going to go up.
Speaker Change: In some markets in 2025, and when you think about the our top markets, our NOI as they're growing and so even if the cap rate stays the same the cash flows are growing and you have a trajectory that you can count on.
Speaker Change: And then hopefully.
Speaker Change: People are betting on even though rates are going to be higher for longer over a longer period.
Speaker Change: I believe that theyre going to come down some so I think the combination of of.
Speaker Change: Supply the ability to drive your revenue growth in your NOI growth is going to keep people in the there'll be able is that they will continue to buy even with negative leverage today I think long term.
Speaker Change: If the NOI growth isn't there and if rates come down some and cap rates have to go up or youre going to have a stalemate between the buyers and sellers.
Speaker Change: So we will see what happens, but right now the market's pretty robust and what happens is really interesting. If there was a transaction for example that we're bidding on in Nashville recently.
Speaker Change: And.
Speaker Change: If you are trying to buy at a specific cap rate like we are.
Speaker Change: Seller basically just said look we hear your number and we're going to pulse and their view is is that they're going to get a higher price in the future. The cap rate will be the same perhaps with their cash flow growth will be higher and so there I think I think there'll be a interesting.
Speaker Change: It'll be very interesting to see what happens between now and midyear to the end of the year in 2025, but I think it's going to be a more robust transaction market and I think all the signs are that that will get that positive second derivative on new rent growth and that's going to create a lot of opportunity for sellers to come into the market and.
Speaker Change: For buyers to buy.
Speaker Change: Yeah.
Speaker Change: And your next question today will come from Michael Lewis with <unk> Securities. Please go ahead.
Speaker Change: Thank you I wanted to come back to this decision to have no more than 10% of your portfolio in any market. So.
Speaker Change: There has been this trend toward diversification an apartment REIT lately as you know a lot of that is postpone benefits diversifying into more of your markets.
Speaker Change: Are there any markets that you just think are better right, they're just flat out better apartment markets for the next 10 or 15 years or whatever it might be.
Speaker Change: Or is that not really the case theres nothing structural or secular there I'm just thinking about.
Speaker Change: Does this decision to say more about Houston, and DC or does it say more about.
Speaker Change: A wide opportunity set across your markets and it being a little bit difficult to distinguish.
Speaker Change: So I would say it's more about it.
Speaker Change: The opportunity set across all our markets and when you say some markets are better well.
Speaker Change: It depends on when.
Speaker Change: For example, three years ago, Houston would benefit Houston, and Washington, D C, where the problem children in Camden's portfolio.
Speaker Change: It's all anybody wanted to talk about.
Speaker Change: And it's a lot of what we talked about internally because those are our two largest markets and they were underperforming and have now for about two or three year strike. So fast forward here. We are today, Washington D C Metro in Houston, our top two performing in the top five and probably slated to be in the top two or three for this year and probably.
Speaker Change: Next year as well so.
Speaker Change: You asked that question.
Speaker Change: Our market some markets is better.
Speaker Change: 40 years ago, all of them would have been better than Houston, and DC Metro and today, it's reversed its more about just having a balance.
Speaker Change: Long.
Speaker Change: <unk> markets that we absolutely love.
Speaker Change: Every market is in our portfolio.
Speaker Change: Has the characteristics that exemplify what we want to see.
Speaker Change: And migration job growth.
Speaker Change: Consistently performed performing.
Speaker Change: On the ability to move rents over time and to operate the assets and.
Speaker Change: From an expense standpoint at a level that allows us to grow cash flows.
Speaker Change: It is not a statement anyway about DC and Houston. It just a statement about we got great opportunities in other markets.
Speaker Change: Opportunities in markets like Austin, and Nashville, where we are underweight.
Speaker Change: And it's just balancing those those opportunities.
Speaker Change: And your next question today will come from Nick <unk> with Scotiabank. Please go ahead.
Speaker Change: Hey, good morning per carat garlic neck.
Speaker Change: Alex I wanted to clarify your answer to Jamie's question at the beginning you said new lease rates turning positive in Q3.
Speaker Change: <unk> from there.
Speaker Change: That mean, it's going to continue to improve on an absolute basis like are you assuming like a normal seasonal pattern into the fourth quarter or is there.
Speaker Change: Is there a comp benefit by being absorbed that would cause Q4 to look seasonally.
Speaker Change: Right. So we're going to return to seasonality in the at least that's what's in our budgets and so what that means is is that you see the positive new lease rates in the third quarter and then in the fourth quarter. That's always our softest quarter is just there's just not a lot of people who want to move around the holiday season et cetera, and that's usually when we have the least amount of pricing power.
Speaker Change: And so you should see it start to return to a more normal seasonal pattern at that point in time.
David: And your next question today will come from David <unk> with Green Street. Please go ahead.
Speaker Change: Hey, Thank you I just wanted to drill down a bit more on the proposed Goldman Spark development starts.
Speaker Change: Can you ballpark the rents or revenue per unit, you would need to achieve in Nashville, and Denver to achieve the 6% yield.
Speaker Change: Yes, Alex.
Speaker Change: I don't we'll have to get back to you with that.
Speaker Change: Okay, great. Thank you.
Speaker Change: And your next question today will come from Alex <unk> with Zelman and Associates. Please go ahead.
Alex Jess: Hey, guys. Thanks for taking my question I always appreciate the song choices, leading up to call it as well.
Speaker Change: I was wondering if you could talk about.
Yeah leasing churn so far for the three communities in lease up.
Speaker Change: And how that flowed into the lease revenue line for the quarter and then more broadly for your 2025 years.
Speaker Change: Yeah, absolutely. So if you look at the communities that we have in lease.
Speaker Change: Two of them are in the single family rental communities and we've been we've been very upfront that our single family rental communities are.
Speaker Change: They are slowly.
Speaker Change: Sorry, it's the particular demographic that that look spreads for that product type has a tendency to to show up once.
Speaker Change: When they show up again, they may show up in a measure of bedroom and make sure that their furniture can fit et cetera.
Speaker Change: And so it is a slower leasing now the good news is is that we think theyre going to be really sticky and we think once once they are in the turnover. If it takes that long to make a decision to move and we think it will take them equally as long to make a decision to move out but that's what we've been seeing when I look at Camden Durham, which is our last.
Speaker Change: Third one that's in lease up.
Speaker Change: During the fourth quarter, we had the type of leasing that we would expect which is which is slower as I said to.
Speaker Change: One of the previous calls the fourth quarter is always the slowest quarter and thats no different whether or not it's a.
Speaker Change: A new lease up or an existing asset.
Speaker Change: That being said if you look where they are so wood mill Creek is.
Speaker Change: Is 89% occupied Durham is 78% occupied so both of those are getting very close to stabilization and so obviously, we should get some uptick in 2025 from those two as they stabilize and then lung metal forms is a little bit behind the.
Speaker Change: The other two just because it it started after them at 53% leased.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Ric Campo for any closing remarks.
Speaker Change: Well I appreciate your time today, and we're glad to close out the earnings season.
Speaker Change: The season for the large cap multifamily. So we will see you in the next conference or not.
Speaker Change: Next roadshow.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.