Q2 2025 Camden Property Trust Earnings Call
Good morning and welcome to Camden Property. Trust second quarter 2025 earnings conference call. I'm Kim Callahan, senior vice president of investor relations joining me today for our prepared, remarks are Rick Campo, Camden's, chairman and chief executive officer, Keith Odin Executive, Vice chairman, and Alex jessett, president, and Chief Financial Officer.
We also have Lori Baker, Chief, Operating Officer and Stanley Jones, senior vice, president of real estate Investments available for the Q&A portion of our call.
Today's event is being webcast through the investor section of our website at camdenliving.com and a replay will be available shortly after the call ends. And please note this event is being recorded.
Before we begin, our prepared remarks. I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs
These statements are not guarantees of future performance, and involve risks and uncertainties that could cause actual results to differ materially from expectations.
further information about these risks can be found in our filings with the SEC and we encourage you to review that
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 second quarter 2025 earnings release is available in the investors section of our website at camdenliving.com and it includes reconciliations to non-gaap financial measures which will be discussed on this call.
We would like to respect everyone's time and complete our call within 1 hour. So please limit your initial question to 1, then rejoin the queue. If you have a follow-up question or additional items to discuss,
If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or email after the call concludes. At this time, I'll turn the call over to Rick Campo.
Thanks Kim.
Good Vibrations continue for our Sun Belt markets, and we should be back to fund fund fund next year.
Second quarter apartment demand was 1 of the best in 25 years. Following a strong first quarter apartment, affordability continued to improve during the quarter with 31 months of wage growth exceeding. Rent growth this expands affordability and increases apartment demand, creating new apartment customers. Came in sector leading resident, rent to income ratio, also continues to improve and are better than preco levels. The historic High Cost of home, ownership continues to support department, demand and lower, move outs to purchase homes. Resident retention has been strong across our markets as a direct result of the living Excellence provided by our on-site teams who have achieved our highest customer sentiment score ever.
Great job team Camden all other apartment macro demand, drivers, including the outside population growth and job growth remain intact for our markets, new additions to supply. Have peaked in our markets, new developments are leasing at a decent pace, given the records demand.
As projects continue to lease up to the balance of 2025 rental rates should firm by the beginning of 2026. Leading to better than average rent growth with advisors projects, better than 4%, rent growth in cabinets markets in 2026 accelerating to 5% in 2027 and Beyond. We look forward to getting back to a more normal market and growth profile after the excesses of the postcovid supply environment end.
Cabinet is positioned well, with 1 of the strongest balance sheets in the industry, with no major dilutive refinancing over the next couple of years. I want to give a big shout out to team Camden for their steadfast commitment to improving the lives of our teammates, our customers, and our stakeholders who want to experience at a time. The next step is Keith Odin.
Thanks. Rick operating conditions. Across our portfolio are still playing out. As we expected rental rates for the second quarter had effective new leases down 2.1% and renewals up 3.7% for a blended rate of 710%.
This was in line with our expectations for the quarter and reflected an 80 basis. Point improvement from the negative 1/10% Blended rate. We reported in the first quarter of 25 and a 60 basis point improvement from the 1/10% reported in the second quarter of 2024. Our preliminary July results are also on track and showing Improvement versus the second quarter of 2025.
Occupancy for the second quarter averaged 95.6%, compared to 95.4% in the first quarter of 2025. We expect occupancy to remain relatively stable in the mid-95% range for the remainder of the year.
Renewal offers for August and September were sent out with an average increase of 3.6%.
Turnover rates across our portfolio remain very low. With the second quarter of 25 annualized, net. Turnover of only 309% a testament to strong resident retention, and satisfaction along with continued low levels of move outs, for home purchases, which were 9.8%. This quarter.
I'll now turn the call over to Alex jessetc Camden's. President and Chief Financial Officer.
Thanks, Keith, and good morning. I'll begin today with an update on our recent real estate activities, then move on to our second quarter results and our guidance for the third quarter and full year 2025.
This quarter, we continued to be active on the asset recycling front purchasing for 139 million Camden. Clear Water, a 360 unit Waterfront Community built in 2020 in the Tampa Market.
And during and subsequent to quarter end disposing of 4 older communities for a total of 174 million.
Three of the four dispositions, communities were located in Houston, and the fourth in Dallas.
These disposition communities were on average, 25 years old and generated a combined unlevered irr of over 10% over. Our average hold period of 24 years
These older, higher capex communities were sold at an average AFO yield of approximately 5.1%.
During the quarter, we stabilized Camden Woodmill Creek, one of our two single-family rental communities located in suburban Houston.
additionally, we continue to make leasing progress on our other 2 development communities, which completed construction during 2024,
Camden Durham a traditional multifamily Community located in the Raleigh Durham Market of North Carolina, which will stabilize in the third quarter.
In addition, lease up continues, a Camden Village District a 369 unit new development in Raleigh, which is currently 37% leased in 29% occupied.
Range. We are still anticipating, 750 million, in both Acquisitions and dispositions.
This implies an additional $412 million in acquisitions and an additional $576 million in dispositions this year.
We are actively marketing additional communities, but clearly in the aggregate are 2025 dispositions will be more back-end loaded.
Our original guidance for development starts in 2025, was 175 to 675 million and today we have started 184 million. We will continue to monitor market conditions and may start additional projects later this year.
Turning to financial results. Last night, we reported core funds from operations, for the second quarter of 187.6 million or $1.70 per share, 1 cent ahead of the midpoint of our prior quarterly guidance.
Driven primarily by the combination of higher property, tax refunds and lower interest expense resulting from the timing of capital spend.
Property revenues were in line with expectations for the second quarter.
We continue to be pleased with how well our property revenues are performing considering the peak lease up competition. We are facing across many of our markets illustrating, the depth of the Sunbelt demand
And we are pleased with our continued property. Expense outperformance, particularly in property, taxes and insurance.
As a result, we are decreasing our full year same store expense midpoint from 3% to 2 and a half percent.
And correspondingly increasing the midpoint of our full year. Same store net operating income from Flat to positive, 25 basis points.
Property taxes. Represent approximately 1/3 of our operating expenses and are now expected to increase by less than 2% versus our prior Assumption of 3%.
This is primarily driven by favorable settlements from prior year tax assessments and lower values from our Texas markets.
Also, we are anticipating that full year property, insurance expense will actually be slightly negative versus our original budget of up high single digits.
Almost entirely as a result of the 25 basis. Point increase in same store. Net operating income, we are increasing the midpoint of our full year. Core ffo guidance by 3 cents per share from $6.78 to $6.81.
This is our second consecutive 3-cent per share, increase to our 2025 cor. Ffo guidance, we also provided earnings guidance for the third quarter, we expect core ffo per share for the third quarter to be within the range of 1.67 to $1.71 representing. A 1 cent per share. Sequential decline of the midpoint primarily resulting from the typical seasonal increases in utility and repair and maintenance expenses.
Non-core FFO adjustments for 2025 are anticipated to be approximately $0.11 per share and are primarily legal expenses and transaction costs.
Our balance sheet remains incredibly strong with net debt to ebaa at 4.2 times. We have no significant debt maturities until the fourth quarter of 2026 and no dilutive debt maturities until 2027.
Additionally, our refinancing interest rate risk is the lowest of the peer group positioning us, well, for outside growth.
At this time, we'll open the call up to questions.
Thank you.
I'd like to ask a question please. Press star the 1 on your telephone keypad.
If your question has already been addressed, and you'd like to remove yourself from the queue, please press star, then 2.
At this time, we'll pause for just a moment to assemble our roster.
And today's first question comes from Eric Wolfe at City. Please go ahead.
Hey, thanks for taking my question. I know you want to stay away from from giving specific July data, but I think the market is trying to understand how the back half of this year could accelerate so much and it seems like your peers saw shorter Peak leaks and seasons in your in a reducing their expectations. So could you maybe just tell us for the degree of acceleration? You saw in July and if you have an expectation around Blends for the third quarter,
Growth at 1%, but we did change some of the components of how we get there. So we'll talk about this components in a second, but the first thing you need to know because you guys are going to ask is, we are now anticipating that our second half Blended rates will be just under 1%
and that will get you to a full year blend of about 50 to 75 basis points. So the way that we are still getting there is through lower bad debt, higher, occupancy, and higher other income than we originally had intended. Now, as, as I've talked with many of you guys at various conferences, I'd like to point out that this is a forecast and it's certainly not a directive to our teams. We give our teams leeway uh to get to our Revenue budgets uh, any way they can. And so this is how we're going to do it, but I would like to take this moment to point out that we're very proud of our teams, um, for managing the delinquency, uh, and also managing the roll out of our new Vero, screening, which is helping delinquency, and is effectively got our bad debt, back to preco levels, keep in mind that we were assuming that we were going to have bad debt of about 70 basis points in 2025, and, and today, it looks like 55 basis points is is probably a pretty good number, uh, also really proud of our teams for
What they've been able to do, on occupancy, they're converting guest cards, on new leases, and they're also. Um, they're also making sure that through the excellent customer experience that our resident retention is the highest level that we've ever seen. So really proud of what our teams are doing. And, and that is how we can get to our to our full year. Numbers Lori. Do you have anything you'd like to add?
Sure, yes.
Occur. And hello.
Me on the call with you today. Uh, you know, cam has ability to continue to maintain strong performance in this environment. It's just a testament to the strength of our operating platform and the agility of our teams, our our culture of care, and responsiveness helps reduce this resident turnover, and we continue to turn, um, residents into satisfied, customers and remain within the Camden family. So, this commitment is translating directly into our performance with strong renewals as Alex just, um, covered and, and a customer sentiment score of 91.6. So I, I want to point out that this is the highest score we've received, since we started measuring customer sentiment in 2014 and then last quarter, we shared with you that our customer sentiment score was 91.1 and celebrated the fact that this was the first time that we had surpassed the score of 91. So the fact that today just a quarter, you know, passed that we are once again, raised the bar
Another 50 basis points with a score of 91.6 just demonstrates that our employees are deeply committed to providing an outstanding customer experience, leveraging our platforms, and improving lives, one experience at a time.
Thank you. And our next question. Today comes from Jamie Feldman at Wells Fargo. Please go ahead.
Uh, great, thank you for the color. Um, our team was debating, whether it would be the Beach, Boys, or Azie Osborne, I guess you went to we debated that as well.
Brian Wilson went first right. There you go. Next quarter.
Oh, all right. Well, hopefully we don't have another option by then.
The um so I guess just following up on on your last answer. Can you talk about the markets? Like what drove the change where things have uh have moved the most?
I think some of your peers have talked about slower lease-up on developments. You know, developers getting more aggressive on concessions. Just maybe more color on what's going on in the markets.
yeah, I mean we're certainly RC
Seeing some of our peer group, uh, get a little bit more competitive on the concession side. And, and, and what we're doing is that we're making sure that that we are positioned appropriately in each of the markets. Um, what I will tell you is, when you sort of go through each of our each of our markets, what you'll find, is that some markets have done, have done, much better than we had originally anticipated. And, and the market that I'd point out for that is, is, is DC. And then some of our markets have just continued to be a little bit softer. I'll tell you that Austin long term, we think is going to be an absolutely fantastic market for us but it is going through just a huge amount of supply and once that Supply gets absorbed, the demand is so strong. That it'll be great. But today it it is continuing to be softer than we had anticipated.
Businesses in general and and let's talk about multifamily operators. Specifically, uh, people have been uh instead of pushing rate, they've been pushing occupancy under the kind of uh, and, and if you think about all the, like I said, came out and didn't didn't raise. But, you know, I'm, I'm, I'm the on the board of the D, Dallas fed, the Houston branch of the Dallas fed and the discussion we had prior to those meetings was was, um, all this uncertainty around tariffs and uncertainty around the economy. And are you going to have a recession and all that? And so I think that what what operators are doing is they're looking at their occupancy and saying, okay, uh I don't know what's going to happen in the future, so they're not pushing and and that is a really interesting issue because it's not that that you can't push its that they aren't pushing. Because they're worried about about, um, the future. And so, I think this uncertainty around around everything that's going on in our economy and politically and all that has caused people to be more cautious.
And and go gone to a more Aggie LED push and when you do that, that means you don't push your new lease rates as much and you try to keep the existing residents as long as you can, right? And so I think that's kind of the industry mindset right now and, uh, and the consumer itself is healthy. I mean we've had 31 months of wage growth and and my apartment rents have been flat. The customer is healthy the customers out there, you know. And and it's not
A customer issue as much as it's a mindset of the operators, trying to protect themselves for the back half of the year, probably.
Thank you, and our next question today comes from handle St. Joseph with mizuho, please go ahead.
Hey, guys, good morning, uh, just to follow up on the last question. I was hoping you could dig a bit more into the DC and La, uh, portfolio performance. Uh, there is, you know, some concerns about the near-term Outlook, uh, given some recent weakening Trends there. So, maybe some call on how they performed, uh, year to date on blend, which you expect from them in the back half of the year. And then also, maybe how, maybe, explain how your DC portfolio has held up. So, well, seem to be a bit of an outlier. Thanks
Yeah, absolutely. So so I'll just walk through some uh, some highlights around DC. So DC had the second highest quarter of a quarter of Revenue growth in our portfolio at at 3.7% interestingly. Uh after listening to some of our peers, our actual highest quarter over a quarter of Revenue. Growth Market was la
Uh, in addition DC had our highest second quarter occupancy at 97.3%, our highest second quarter rental rate growth at 4.1%.
Our highest sequential rental rate growth at 1.2%.
Our highest second quarter Blended rate growth at 5 5.8% and we're seeing absolutely no slowdowns in guest cards. So I will tell you. I I would take every 1 of our markets to be behaving like DC today and when, when you sort of break it down into into its components, remember that we have most of our exposure is in Northern Virginia and then it goes from Northern Virginia to Maryland. And then to the district and Northern Virginia is is the the 1 that's performing the the best
Followed though, this quarter by a little bit of a flip. The district is actually doing slightly better than Maryland. So I think a lot of it is, is where we're positioned in the markets. And I also think a lot of it is, uh, that that the sort of the, um, the Doge, uh, concerns are probably pretty overstated currently, for what we're seeing inside the district,
Thank you. The next question, today comes from Austin. Wmid with Key Bank Capital markets, please go ahead.
Hey, good morning everybody. I guess Rick just giving your comments about affordability, the strong wage growth, you know, and and Supply moderating the coming years. I mean, how good do you think? Rent growth could be in the coming years? And is there a period of time that you know, historically that this reminds you of
Back, we had postco and then you had, you know, free money for a long time. So uh, so you had this massive increase in supply of 50-year high. And so, what's happening? Now, the, the interesting part of that is, we haven't had a demand fall off or demand in the last 2 years has been the highest. It's been in 20 years. And so you have, uh, this interesting issue where we have big-time Supply, and then we have big-time demand, and I would say, you know, in in in the face of big-time demand or big-time Supply when our Topline growth is flat or up a little, I would we're sharing that because usually, when you have massive oversupply, you have massive declines in rents and occupancy. And and it's a, it's an ugly picture for the multi family group. In this case, our our our flat noi growth. And uh, you know, call it flat at 1% is, is really a blessing in in the face of the supply. So, what's happening now? And if you look at
At the, at the, uh, at the starts. I mean, starts are down, 76% in Charlotte, Denver, Austin, Atlanta and D.C. Then on 60 to 76% in Tampa, Orlando, Phoenix in Nashville, they're down 45 to 65% in Dallas. Uh, Houston, uh, West Palm Beach in Fort Worth. So so when you look at those Supply numbers, clearly the supply is not is, is down significantly. It's going to be down significantly. As I said in my original, um,
You know opening comments uh the written advisors has has a kind of an on average 4% growth in 2026 for Camden markets and 5 plus 5 plus in 2020 um 7 and then more Beyond and some of the markets you know are going 67% up. But and it's kind of like um when you think about Austin and Nashville, those markets are down significantly and so you what you're going to have is a snapback when and in the snapbacks going to be pretty, pretty strong. And we've seen this historically over the years. When you have excess Supply in markets, that continue to grow is often continues to grow its 1 of the best job growth markets in America so is Nashville. The problem is is you got all the supply to to uh, you know, to to, to take up. And so I think that 267 and 8 could be as good as 1112 and 13.
Thank you. And our next question for today comes from Steve Sackler there before isi. Please go ahead.
Yeah, thanks. Good morning. Uh, Rick could you maybe talk about the development Outlook? You said that you know you've got a bunch of starts pencils in for the back half of the year. I'm just curious given kind of the week job report. We got this morning and still uncertainty over tariffs and I realized development is a long-term game. But like, how are you thinking about that? How are you adjusting, some of the inputs and I guess what, yields are you targeting on new potential starts?
So we are definitely caught more cautious just because of the uncertainty in the marketplace today for sure. And the developments and some of the developments we have like 1 of the big ones is in Nashville and the Nashville downtown Market which this 1 would compete with is is definitely still weak and still highly concessionary. The suburbs are a lot better in Nashville. Like we we acquired a property in the suburbs and it's actually doing really well compared to our our budget
So um, we we we we are going to be a developer. There's no question about it, we'll start our our developments at some point, but we want to make sure that that the um, you know that the yields are are reasonable and from a yield perspective. You know, we're looking at the low fives to the, to the to the low sixes, to call it Up 5 and 3/4 to a 6 depending upon it. Whether it's Urban or Suburban or and what the nature of the property is but at that allocation of capital to development today is important and that's why we're kind of waiting on uh on you know, to see how the economy unfolds on the other 2 developments that we have 1 in Denver and 1 in uh in Nashville. That could start by the end of the year. Uh what's happening on cost is interesting so we're buying out we're doing a more Suburban Nashville deal right now the the Nashville Nations and we're doing our buyout now and our buyout looks really good. We're we're looking maybe to save anywhere from you know 2 to 3 or 4% on the original budget.
Down, you know, 50% to 60% from what they were at the peak in 2023 and 2024. So, you should have a decent supply construct in 2027-2029 when you're delivering these deals, but that's kind of how we're thinking about it.
Thank you. And our next question comes from Jeff Spectre at Bank of America. Please go ahead.
Great, thank you. Appreciate the comments uh in particular in 26, we don't receive the Whitten data so I'm just curious if you could share with us maybe what, you know, some of the underlying assumptions that they're making in terms of the job market in 26 over 25, uh, you know, given the the weaker report this morning and then, you know, do you
I guess your thoughts on that, uh, you know, specifically, because you've mentioned some, you know, rental projections for Camden's markets in 26, I know you don't do your own forecasts, but you know is that achievable. Do you think it's just simply lower Supply or again, I guess if you could share with us what whitens? Assuming for jobs next year, thank you.
Yeah, so I'll just give you the progression on whitten's numbers for completions. So in 2024 Whitten and these are just for Camden markets. Camden's, 15 operating markets Whitten had uh, completions and and 2024 at about 250.
he's got, he has, um,
Completions in 2025 down to 190 and then they fall further to about 150 in 2026. And if, you know, Rick's when Rick's talking developments, you're really out to 27 and we have written numbers out in 27. And and the the total completions in 2027 across Camden's platform would be about 120,000. So if you, if you think about that progression from 2024, which was the peak in Camden's markets, we expect that to be down to, from 2 245, to 120 between 2024 and 2027. So clearly, you know, you're at that level and when you strip out the
The subsidized piece of that puzzle, you're down to market rate Apartments somewhere around starts of somewhere around 70 to 80,000 across Camden's entire uh footprint which is astonishingly low relative to historical Norms. So we're we're clearly headed in the right way. And the 1 thing about Supply even though you even though it's maybe hard to pinpoint, is it back half of a year or beginning of the year? Is it, does it fall into 25 or 26? The reality, is there over a 3 or 4 year period? It's absolutely knowable what the supply, what the deliveries are going to be in in Camden's market. So we're very encouraged by that and and and we you know we think that we we'll have opportunities to either to continue our acquisition program or to make some of the, you know, look at some of these developments that we have.
Have and from on, in our Legacy land. So, but anyway, looks it looks very constructive Based on whitten's data, looking out for the next couple of years.
Yeah, and on the, on the job side of the equation Whitten has has job growth coming down. Uh, and most of the, uh, so so job growth in his model in their model, uh, shows, uh, slowing job growth. Because if you, you look at job growth, uh, in 2024 was higher than the job growth in 2025 so far and he's, and they have they've taken those numbers down and they have have those numbers coming down again in 26. And I think he has, I think they have less than, um, than a million jobs, being being formed in 2026. And I think the, the, when you think about the, the, the multi family, demand component, jobs are important. And as long as we're continuing to have some job growth, you're going to continue to have decent, uh, multi, family demand, uh, because you're not going to have, unless you have massive interest rate, going down or something, you know, um, something that that that Sparks the homebuilding market, you still have, you know?
The apartment rents are still the most affordable they've ever been relative to home ownership and relative to to wage growth and all that. So, we don't need as much job growth because we have so much less Supply coming into the market to drive those, those, um, numbers that witness put out the 4% and the 5 plus 4% in 2026 in the 5.
Plus percent and 27 and 28.
Thank you. Our next question comes from Alexander Goldfarb with 5% Sandler. Please go ahead.
Loans but given there's no free lunch in in real estate and we've had, you know, blow ups in the past. Do you think the growth in private credit as it pertains to funding? Real estate development is something to be worried about or your view is right now because of how much they, you know, the coupons in those loans. And the fact that Merchant guys are having trouble any way putting deals together, that you're not too concerned about the private credit, sort of flooding, real estate development and causing issues down the way.
No, I don't think so at all. I think. Because when you think about the private credit, I mean somebody getting a mes loan, you know, if you that, you can get a construction loan at at, you know, a reasonable number. Uh, the mes loans are, you know, double digit, uh, returns. Uh, and, uh, and I that, that just puts pressure on the, the numbers, uh, for a developer to get their deal done. So, um, I don't look at that as I mean if, if it was like, you know, 6 7% money or 8% money, maybe but not if it's 10 to, you know, 13
Thank you. And our next question comes from John Kim at BMO Capital Markets. Please go ahead.
Thank you. Um on the revised Blended guidance of uh a little bit under 1% in the second half of the year. Um, suggest that suggests an acceleration in new lease rates in the second from the second quarter.
Given renewals are being sent out at 3.6. So I was wondering how much visibility you have on your lease rates, uh, for this quarter and how you compare third quarter versus the fourth quarter in in terms of Blended.
Yeah, absolutely. So if you look on a blended basis for the second quarter, we were a positive 70 basis points and we are assuming a slight acceleration from that in the third quarter to call it just under 1%. Um, what I will tell you is, keep in mind that we're we're now through July. And remember, that new leases are generally about 25 days ahead of schedule, and renewals are about 60 days ahead of schedule. So we've got pretty good visibility all the way through the third quarter. The other thing that we know is, we know where we are in occupancy, and we've got very good visibility of where I can see looks for 60 days out. So that position is just pretty well to understand what the fourth quarter should look like. So feel very good about our assumptions and very good about the visibility that we have to ensure that we can. We can make these numbers.
Thank you. And our next question today comes from Brad heer. With RBC Capital markets, please go ahead.
Yeah, hi B. Thanks. Um, Rick, do you think the high levels of supply and attractive pricing in in concessions are pulling forward any demand from the future? Obviously that's the whole point of lower prices. So I'm just wondering if some component of the record demand we're seeing is due to prices being so attractive and if maybe that might tail off, if there was a pricing recovery.
Uh no, I don't think so because um when you think about it, you look at our our new lease rent income ratio is 18.9%. And so there's a big room between for people getting really cheap rent today, well, on a relative basis, right? And so uh I know a, I don't think we're pulling demand forward because the the apartment demand doesn't really operate that way. You know, household formation is created when when when when you you you people move out of with out of their appearance homes. So they get a new job or something different like that. And so, because of the affordability of Apartments today, I think we have room to run. So if you think about a $2,000 a month lease and you put a 4% increase on that, it's not a a massive number and on a relative basis since the consumers are are getting a, a quote unquote, really good deal today on apartments, because the supply and demand Dynamics, they're they're uh, they have a capacity.
Capacity to pay more in rent and as long as our teams are, delivering the kind of customer service that they have then, uh, then the, the folks are going to go, you know? I'm I'm I'm living here. I like it. You're taking care of me. Well, uh and yeah. Okay, I get it. You have to, you know, I need to 4% or 5% rent increase. You know, you're talking about about a small amount of money on a relative basis to a very, very, um, well-healed healed consumer. And as long, as they, as long as we provide the service to them, I think we can get those kind of rent increases in the future. So, um, I I don't think we're pulling demand forward and I think our customers are are definitely well, well, positioned to pay more
Thank you. And our next question. Comes from Rob Stevenson and Janie. Please go ahead.
Born in the cycle. He talked about what you're going to be spending in 25 on that. Um, bucket what the expected yields are.
Yeah, absolutely, what I'll tell you is, is we continue to go after repositions? It just makes a ton of sense to us. Um, if you look at, uh, if you look at what we're doing this year, uh, this year, we're going to do around almost 3,00 units. Um, and we're generating an 8 to 10% return, um, which works out to be about $50 per door in additional rent. And so, this just makes so much sense to us. Um, and and in addition, it makes sense no matter where you are in the cycle. But when you're in a, in the point of cycle where you've got a lot of excess Supply, realize that if you can go in and you can do a kitchens and bathrooms program, you can effectively make an asset. That's 15 years old. Look, like it's brand new, and that is a huge competitive Advantage when we've got brand new acids directly next door to us because that brand new assets got a much higher basis than we have. And therefore, they've got to charge much higher rent, our asset has a lower basis but it
Looks just like a brand new asset because we've gone in. We've refreshed that kitchen, we've refreshed the bathroom. And then generally, when we build assets, we make sure that they have Timeless exteriors. And so when we do all of that we're able to compete really, really well against that brand new asset. So yes this is something that you will continue to see us do it is 1 of the best returns we can have out there and and by the way, we're
Really good at doing it. We've done so many of these, uh, over the past 10-15 years, that it just makes sense for us to continue.
Thank you. And our next question comes from Rich high power at Barclays. Please go ahead.
Hey, good morning guys. Um,
So I think, you know, if you decompose rent growth at least over the past couple years, obviously, a lot of it, come on the back of renewals and high retention rates. And so, um, you know, if you, if you were to sort of unwind that and and think of what could cause that to go in the other direction, what do you think it would be? I mean, and, and some of it's been referred to whether it's jobs or, you know, mortgage rates declining and and the the housing market opening up again. But but what would you say?
I would say it's, um,
You know, a recession, you know, where, where, where the consumer definitely gets stressed, and you have job losses, and things like that. That clearly would be something that that, um, that that would be a negative. Uh, you know, for the apartment markets uh, generally in recession, if it's an easy 1 or a, you know, a very shallow 1. You have hunkered down mentality. Uh, so a lot of people don't leave if they don't have to, but if you lost your job and you have to, then downsize and, and readjust your budget, uh, to whether you move in with a roommate, or a friend or, or, you know, family or whatever. That's, that's probably the biggest issue. I don't think home the home. Uh, ownership issue is so far away and
No, I mean, the math, I have been been spending a lot of time. Looking at this, uh, you know, you need a hundred and 150 basis points of of reduction in the long-term rate in order for the housing market, to, to, uh, you know, get get serious legs and so, um, you know, I I don't think that's going to be a big issue, but I, I think it's really just the overall economy.
Thank you. And our next question. Today comes from Adam Kramer Morgan Stanley. Please go ahead.
Hey, thanks for the time here, guys. Um, I just wanted to ask, and I know we've talked about the Whitten Advisors' forecast for the next few years, and it's really helpful to sort of hear the assumptions underlying that. If you think about their rank growth rate, 4% to 5%, I think you said as early as 2026 even.
Wondering sort of what your view is in terms of achievability of that. You know, do you think that sort of Supply deliveries lease up uh will be in a good enough spot that you know, rank growth could average you know, legitimately average 4% in 2026 or do you sort of take the under on that and maybe that's more over 2728 story.
Well, if the economy holds up the way, uh, it is and Whitten has been a pretty good, um, you know, forecaster over the years. Obviously, we have, you know, a few months to go to 2026, uh, but you know, that's why we use Whitten; they're pretty good. Uh, so I can't, I'm not going to pound the table right now and...
26 should be a really good year and should be an inflection point for the Sun Belt markets to start, you know, having having reasonable growth compared to the, you know, the past. And you know if you think about think about it this way you know San Francisco is 1 of the better markets today and growth right? And the reason is, it went down so far they're still digging out of the hole that they that they dug during Co and are still not back to 2019 Rentz yet. And so, we are kind of treading water in the Sunbelt markets because of this excess Supply situation. But once that Supply goes away, you know, all the, the, the, the, the, you know, the, the, the, the, the, the, uh, setup is just really good. And so, unless the economy unwinds or something dramatically weird happens, um, and I think those are pretty good projections.
Thank you. And the next question comes from. Michael Goldsmith at UBS. Please go ahead.
Hi thanks, this is Amy. Um, I was just wondering. Was there anything that surprised you about the construction and Lisa process for the sfr communities? And are you looking at more projects within the sfr space? Or are there any takeaways that may apply to Apartments? Thanks.
Yeah. So what I would tell you about the sfrs. Um obviously we have 2 of them and just as a quick reminder, 1 is in Far, Northern suburbs of Houston. 1 is in the far southwest suburbs of Houston. Uh the 1 that is in the northern suburbs of Houston, we actually just uh just stabilized that assets this year, excuse me, this quarter, it was as I've talked about on several calls an incredibly slow lease up. We were warned, uh, that this particular product type is, is a slow lease up, um, but but I think it did surprise us a little bit. This particular demographic, uh, shows up on a Saturday. Uh, takes a tour comes back. The next Saturday, with their friends takes a tour. Comes back to the next Saturday, with a tape measure and starts measuring bedrooms Etc, to make sure that they're their Furniture can fit. Uh, the good news though, is if it takes you that long to make a decision, I think you're probably going to be pretty sticky. And so you'll stay with us for quite some time. And so that is certainly Our Hope if you look at our asset which is in Far Southwest Houston.
And that's our, that's our Long Meadow Farms Community. Um, that 1's a little bit further behind just because they got started later, and it is having very similar Lisa, uh, Lisa trends that we saw with, with the other assets. So we think that's just Pro just unique to that this particular product type. So I don't think there's really any look through at all, uh, in terms of in terms of leasing, um, and the proof to that is if you think about our Camden Village District community,
Community um which were in the middle of leasing up today. Uh this that particular Community has averaged 27, leases a month in the second quarter when we underwrite a lease up we assumed 20 leases a month. So to have 27, leases a month is far outpacing what we expected and it just goes to show that there is still incredible demand for traditional multi family.
Thank you. And our next question comes from Linda Tsai with Jeffries. Please go ahead.
Yes. Hi. If you were to hit the high end of NOI growth this year, do you think it's more likely you see it from higher revenues or lower expenses, or some combo?
I,
Going to be from some combo. Uh, that being said, um, you know, we we still are waiting to finalize uh, some some appeals on the tax side, uh, which could end up being a positive to us. Um, we continue to be pleasantly surprised by how low our insurance claims are. And so if that Trend continues, that could absolutely be a positive to us. But by the same token, um, incredibly happy with, with how well, we're managing occupancy, and very happy with how well, we're managing delinquency. So, so I I, I think it could be a combination.
Thank you. And our next question comes from Mason Guell with Beard. Please go ahead.
Hey, good morning, everyone. When you're looking at acquisitions currently in lease-up, are you assuming maybe a longer lease-up period now versus the start of the year?
The man in Austin is just extraordinary, but we knew that was going to be a slower feel very good about how that's progressing. Um, and then our other community that has a little bit of of a lease up. Need is, is our Nashville community and that's that's going just fine. I don't know Lori, if you want to add anything about Leander, I mean, I think for um, our Austin deal overall story is still being shaped by Supply. There's just a lot of competition in that submarket. So it's just a near-term supply challenge, that will will work through and long term great asset and a growing job market of Austin and just a compelling play. Our teams are fully engaged and, and will work through this quickly.
Thank you. And our next question comes from omato, AIA with Deutsche Bank, please go ahead.
Hi. Yes, good morning everyone. Uh, I just wanted to go back to uh assumptions around uh blended lease rates for the second half of '25. So again, obviously, you're one of the few apartment REITs that's expecting acceleration in that number. Uh, and while a lot of your peers are not, or are downgrading that number, I’m just trying to understand a little bit better why you're expecting acceleration. I would I would just not looking at the data on enough of a micro-market basis so that your geographic exposure is a little bit different. Is there anything happening from an operational perspective? Just trying to understand that because it's such an outlier versus everybody else.
Yeah, I mean so what what you have to look at? Once again, as I talked about earlier is we've got pretty good visibility into the third quarter. And so, we're assuming that our blend for the third quarter is just under 1%. Keep in mind that our blend from the second quarter was 70 basis points. So we're we're not talking about that significant of an acceleration. And then when we take this out into the fourth quarter, we're assuming uh, we're assuming that the fourth quarter blend looks a little bit like the second quarter blend. Remember that the reason why we haven't had more pricing power, in our markets is not a demand issue. It's a it's a supply issue and we know that we are rapidly working through the excess supplies in our Market. That is why Whitten and others believe that 2026 is going to be so strong. So you you obviously have to start heading towards that direction of having pricing power as that in order to make those type of 26 numbers and and you're going to start seeing that as we continue through the third quarter and the fourth
Quarter because Supply is coming down at such a rapid level. And you keep in mind, we, we keep talking about record levels of Supply. We're also setting records for absorption and as we continue to absorb all that excess Supply, it becomes easier and easier on our comparable, but the periods for us.
Thank you. And our next question comes from Alex Kim at Zelman and Associates. Please go ahead.
Hey guys. Good morning. Thanks for taking my question. Uh, I just wanted to ask about the trajectory of rent growth recovery so far. Uh, what's been different about the leasing environment this year? Uh just compared to historical Norms or even your own expectations. Uh, looking across the sector uncertainties has certainly been a, a common theme. And so, is it just about the lingering effects from the record, high supplier or, or something else? Thanks.
Well, the, the term uncertainty is probably the most overused term in the last 2 earnings calls, uh, season. So, so I'm going to try to stay away from that. Um, what I will tell you is, is that we are seeing the typical Peak leasing, which is in the second quarter and third quarter that is playing out, uh, as normal. So that it's not much of a distinction between uh, between what we typically see in other years. And then when we get to the fourth quarter, uh, you know, the fourth quarter looks a little bit stronger in our estimate today than it would in a typical year. But keep in mind, once again, as I just mentioned, you've got Supply, that is getting absorbed that record paces and so, so that does make sense that you would see a little bit higher of uh or a little bit. Increased pricing power in the fourth quarter than typical. So there's nothing that uh it's it's a little more muted.
Uh, in terms of the swing from the first quarter to through the peak leasing seasons, we typically see, but it does follow the same curve.
Thank you. And our next question is a follow-up from Alexander Goldfarb with Piper Sandler. Please go ahead.
How are the rents trending as well?
No, it is absolutely a function of dispositions. So, so keep in mind, uh, that we are still forecasting. That we're going to hit the midpoint of both our Acquisitions and dispositions guidance, which is 750 million for each. Keep in mind that there is a, uh, sort of short-term dilution that comes from those transactions as we're trading out, uh, some of our oldest, most Capital intensive assets for newer assets. Uh, although they are, uh, although there is some dilution we anticipate that the newer assets will grow faster and so they will overtake that dilution in relatively short order. But you certainly are going to see. Uh, See a slight drag in the second half of the Year entirely entirely driven by the recycling program.
Thank you. And our final question today comes from Rich High Power at Barclays. Please go ahead.
Hey guys, thanks for the follow-up. Um, actually a question for Rick. Um, I was just curious, you know, given your, um, I guess inroads at the Dallas Fed, um, do you find that your counterparts there are any smarter than the rest of us as far as the economy goes and making predictions?
Oh, that's a loaded question. Um I I would I you know I am definitely impressed with the data I'm impressed with their independence too because you know if you you think about how the the fed and the fmoc work is that, that they they do. So the the the district fed the district offices including the Dallas fed, they do a bottom up, uh, analysis of the economy. And so I serve on the board with, with a lot of diverse groups, whether it's Airlines or universities or chemicals oil and gas. And, and what we, what we primarily, primarily do in our meetings is we talk about what's going on in our actual businesses, right? And so, I bring to the table, obviously, multi family. And I think most of, you know that I'm they sit on the board of the, and of the largest privately held home builder in America. And I'm also the chairman of the Port of Houston so. So I, I have a broad view of of the economy.
Economy. Now, what they do is they take that broad view and then they just fill it into into an economic, uh, forecast and use a lot of anecdotal discussions that we have. So, I would say generally I'm I'm definitely impressed with their, with their, um, their analytical capabilities. But when, when we're debating, um, what's happening in the economy? I mean, it it's it's uh, you know, it's a mixed bag, right? I mean, and so, uh, so I I I think I
Don't know that there are any smarter than anybody else, but I think they are definitely meticulous in how they go through their data and how they go through their analysis and their and their each district is independent and they have their own kind of group and and their own economists. And then they take that to DC when they're at the fmoc meeting. And they all debate everything that's going on in the districts with the committee and then they reach their decisions. Um, I I think they're pretty smart people and they're very methodical and they're they and they definitely are apolitical. So the the discussion of of raising or lowering interest rates because because, uh, a political figure wants them lowered that's calling never going to happen.
Because they are independent and I and you you've seen that through some of the discussion with with them. So it's it's a definitely been an interesting, um, interesting, uh, thing for me because I get a lot of of really good economic data from other sectors that really helped me and helped Camden, you know, um, you know, navigate these these interesting times and Waters.
Thank you. This concludes tonight's question-and-answer session. I'd like to turn the conference back over to Rick Campo for closing remarks.
Well, appreciate the time today that everybody's spending with us and uh, if you have any other questions, uh, you can call Kim or Alex or me or Keith Lori, you know? So we're available for follow-ups, um and we will see you in the fall, have a great rest of your summer.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may not expect your lines and have a wonderful day.