Q3 2025 Camden Property Trust Earnings Call
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Speaker #6: Good morning and welcome to CAMDEN PROPERTY TRUST . Third quarter 2020 Earnings Conference call . I'm Tim Callahan , senior vice president of investor relations .
Speaker #6: Joining me today for our prepared remarks are Rick Campeau , Camdens chairman and Chief Executive Officer . Keith Oden , executive Vice Chairman .
Speaker #6: And Alexander 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 .
Speaker #6: Today's event is being webcast through the investor section of our website at Camden dot com , and a replay will be available shortly after the call ends .
Speaker #6: 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 .
Speaker #6: These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC, and we encourage you to review them.
Speaker #6: 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 .
Speaker #6: As a reminder , Camden's complete third quarter 2020 earnings release is available in the investor section of our website at Camden . Com and it includes reconciliations to non-GAAP financial measures , which will be discussed on this call .
Speaker #6: We would like to respect everyone's time and complete our call within one hour . So please limit your initial question to one , then rejoin the queue if you have a follow up question or additional items to discuss .
Speaker #6: 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 .
Speaker #6: At this time , I'll turn the call over to Richard Campo .
Speaker #7: Thanks , Kim are on hold . Music theme . Today was moving . This week we completed the move of Camden's Houston corporate headquarters from Greenway Plaza to the Williams Tower in the Galleria .
Speaker #7: This is a big deal . Camden has been in Greenway Plaza for over 40 years . We are excited about moving on and the new beginnings that it will bring for 2026 and beyond .
Speaker #7: As I was leaving my office for the last time , the thought that popped in my head was don't look back . And that reminded me of a song by the classic rock band Boston .
Speaker #7: The first verse of the song captured my sentiment as I was leaving the building . Don't look back . A new day is breaking .
Speaker #7: It's been too long since I felt this way. I don't mind where I get taken. The road is calling. Today is the day.
Speaker #7: Team Camden is not looking back. We look forward to welcoming you to our new offices, and we look forward to continued success for the next 40 years.
Speaker #7: Strong apartment demand continued through the third quarter , making 2025 one of the best in the last 25 years for apartment absorption , helping to fill up the record number of recent deliveries .
Speaker #7: The summer peak leasing season was met with continuing new supply, slower job growth, and economic uncertainties that led apartment operators to focus on occupancy instead of rental increases earlier in the season than usual.
Speaker #7: Apartment affordability improved during the quarter , with 33 months of wage growth exceeding rent growth and increased affordability improves apartment residents ability to absorb higher rents when new apartment deliveries are leased up in 2026 and beyond , apartments and our shares are on sale , but not for much longer .
Speaker #7: Resident retention continues to be strong , in large part because of living excellence provided by our on site teams . Great job team Camden .
Speaker #7: The case for investing in apartments is compelling . Demand is high . Supply is falling to below ten year pre-COVID averages , bringing balance back to the market .
Speaker #7: Rents are affordable. Apartments provide flexibility and mobility to residents. The rent versus buy economics favor renting more than ever, and demographic and migration trends both support new demand going forward.
Speaker #7: We look forward to moving to a stronger growth profile after the excesses of post-Covid supply environments end . Camden is positioned well with one of the strongest balance sheets and no major dilutive refinances over the next couple of years .
Speaker #7: Private market sales of apartments have been robust , with cap rates for high quality properties landing in the four and three quarter to 5% range .
Speaker #7: And there is a clear disconnect between private and public market value values for apartments in the quarter . We bought back $50 million of our shares at a significant discount to consensus net asset value .
Speaker #7: If market conditions remain at current levels , we will continue to buy the stock and we have $400 million remaining in our authorization .
Speaker #7: This can be funded through dispositions of our slowest growing , higher CapEx properties . 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 .
Speaker #7: When experience at a time . Thank you . And next up is Keith Oden .
Speaker #8: Thanks , Rick . Camden's third quarter 2025 operating results were in line with our expectations . With same store revenue growth of 8/10 of a percent for the quarter , up 9/10 of a percent year to date and up one tenth of 1% sequentially .
Speaker #8: Occupancy for the quarter averaged 95.5% , consistent with third quarter of 2024 and down slightly from 95.6% last quarter . Year to date through September , occupancy has averaged 95.5% versus 95.3% last year .
Speaker #8: Rental rates for the third quarter had an effective new leases , down 2.5% , and renewals up 3.5% . Our blended rate growth was 6/10 of a percent , declining ten basis points from last quarter , and 40 basis points compared to the third quarter of 2020 .
Speaker #8: For our preliminary October results reflect typical seasonality and a moderation in both pricing and occupancy as we move into our slower leasing season .
Speaker #8: During the fourth and first quarters . Renewal offers for December and January were sent out with an average increase of 3.3% . Turnover rates across our portfolio remained 20 to 30 basis points below last year's levels , and move out to Tributed to home purchase , where a record low of 9.1% this quarter .
Speaker #8: Moving into new office space is never easy , especially when it involves five floors and several hundred corporate team members . But the end result was definitely worth a significant amount of time and effort invested by our design and special projects team .
Speaker #8: Our new headquarters look amazing . A big shout out to Ben Mills , Chrissy Hopper , Luther Alaniz , Kevin Neely , Amy Funk , Zeb Maloney , Teresa Watson , Blake Robinson , Pango , Derek Aaron and the entire IT support team .
Speaker #8: And finally , we want to give a special thanks to Camden's team of executive assistants on a job incredibly well done . We can't wait for everyone to get a chance to visit .
Speaker #8: I'll now turn the call over to Alex Jessup , Camden's president and chief financial officer .
Speaker #9: Thanks , Keith , and good morning . I'll begin today with an update on our recent real estate activities . Then move on to our third quarter results and our guidance for the remainder of the year .
Speaker #9: This quarter, we disposed of three older communities for a total of $114 million. Two of the three disposition communities were located in Houston, and the third was in Dallas.
Speaker #9: These disposition communities were on average 24 years old . These older , higher CapEx communities were sold at an average AFFO yield of approximately 5% .
Speaker #9: We used the proceeds in part to repurchase approximately $50 million of our shares at an average price of $107.33, which represents a 6.4% FFO yield and a 6.2% cap rate.
Speaker #9: During the quarter , we stabilized Camden , Durham and completed construction on Camden Village District . Both located in the Raleigh-Durham market of North Carolina .
Speaker #9: Additionally , we continue to make leasing progress on Camden , Longmeadow Farms , one of our two single family rental communities located in suburban Houston .
Speaker #9: At the midpoint of our guidance range , we are now anticipating $425 million of acquisitions and $450 million of dispositions for the full year , reduced from our prior guidance of $750 million in both acquisitions and dispositions .
Speaker #9: This implies an additional $87 million in acquisitions and an additional $276 million in dispositions . In the fourth quarter . Turning to financial results , last night we reported core funds from operations for the third quarter of $186.8 million , or $1.70 per share , $0.01 ahead of the midpoint of our prior quarterly guidance driven primarily by the combination of higher fee and asset management income and lower interest expense resulting from the timing of capital spend and lower floating rates .
Speaker #9: Property revenues were in line with expectations for the third quarter . We are 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 significant depth of demand in the Sunbelt .
Speaker #9: And we did adjust our full year 2025 outlook for same store revenue growth from 1% to 75 basis points and property expenses continue to outperform , particularly property taxes coming in well below our forecast .
Speaker #9: Once again , as a result , we are decreasing our full year same store expense midpoint from 2.5% to 1.75% , and maintaining the midpoint of our full year same store net operating income growth at 25 basis points .
Speaker #9: Property taxes represent approximately one third of our operating expenses and are now expected to decline slightly versus our prior assumption of increasing approximately 2% .
Speaker #9: This is primarily driven by favorable settlements from prior year tax assessments and lower rates , and values , primarily from our Texas and Florida markets .
Speaker #9: For the fourth quarter , we are assuming occupancy will be in the range of 95.2% to 95.4% . Blended lease trade out will be down approximately 1% , and bad debt will be approximately 60 basis points within ten basis points of our pre-COVID levels .
Speaker #9: Almost entirely as a result of the decreased transactional activity anticipated in the fourth quarter . Combined with lower floating rate interest expenses . We are increasing the midpoint of our full year core FFO guidance by $0.04 per share from $6.81 to $6.85 .
Speaker #9: This is our third consecutive increase to our 2025 core FFO guidance and represents an aggregate $0.10 per share increase from our original 2025 guidance.
Speaker #9: We also provided earnings guidance for the fourth quarter . We expect core FFO per share for the fourth quarter to be within the range of $1 .
Speaker #9: $0.71 to $1.75, representing a three-cent per share sequential increase at the midpoint, primarily resulting from the typical seasonal decreases in property operating expenses.
Speaker #9: Favorable final property tax valuations and rates , and lower interest expense , partially offset by the impact of our anticipated fourth quarter net dispositions .
Speaker #9: Non-core FFO adjustments for 2025 are anticipated to be approximately $0.11 per share , and are primarily legal expenses and expense . Transaction costs .
Speaker #9: Our balance sheet remains incredibly strong , with net debt to EBITDA at 4.2 times . We have no significant debt maturities until the fourth quarter of 2026 , and no dilutive debt maturities until 2027 .
Speaker #9: Additionally , our refinancing interest rate risk remains the lowest of the peer group , positioning us well for outsized growth at this time , we'll open the call up to questions .
Speaker #10: Ladies and gentlemen , at this time , we will begin the question and answer session . If you would like to ask a question , you may press star and then one using a touch tone telephone .
Speaker #10: To withdraw your questions , you may press star and two if you are using a speakerphone . We do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality .
Speaker #10: Once again , to ask a question , you may press star and then one . We'll pause momentarily to assemble the roster . Our first question today comes from Eric Wolf from Citi .
Speaker #10: Please go ahead with your question .
Speaker #11: Hey, thanks for taking my question. I was just wondering if you could provide any early thoughts on 2026, in terms of the building blocks earning?
Speaker #11: Any thoughts on other income or whatever else you can share about how you're thinking about how you're thinking about 2026 ? At this stage ?
Speaker #12: Yeah, so certainly we're not giving guidance for 2026 quite yet. What I will tell you is the earnings for us are probably going to be pretty much flat, which is going to be consistent with the earnings that we had for 2025.
Speaker #12: Everything else we will give you when we have our next , our next earnings release . But I will tell you if you if you look at just the broad environment and what's going to be happening in 2026 , it certainly does shape up much better than we saw in 25 .
Speaker #12: In terms of uncertainty . That's out there . If you think about when we were going through 2025 , obviously there was tremendous amount of uncertainty around tariffs , around taxes , etc.
Speaker #12: Most of that should be worked out as we go through 2026. The other thing that we think about is the significant amount of multifamily supply that was absorbed in 2025, which we will not have to absorb in 2026.
Speaker #12: So , as I said , we're not going to give any guidance , but but if you're an optimistic person , there's certainly things to be optimistic about .
Speaker #12: When we look at next year.
Speaker #10: Our next question comes from Jamie Feldman from Wells Fargo . Please go ahead with your question .
Speaker #13: Great . Thank you . You know , you talked about the public private disconnect for apartment valuations . I was hoping to get your thoughts on the current , broader appetite for investment in apartments from private investors , especially for groups that can write the really big checks .
Speaker #13: Given the growing concerns on jobs , immigration , the government's focus on fixing the housing market , and are there any specific markets that stand out in terms of more interest , less interest , or even from your end , more concerned or less concerned , given the macro overlay ?
Speaker #12: So the first thing I'll tell you is there remains robust demand for multifamily . In fact , if you look at the amount of dry supply or excuse me , dry powder that that is there by asset class multifamily absolutely leads all asset classes .
Speaker #12: And so everybody is looking for assets to challenge is is just not a lot out there . Stanley I don't know if you want to opine on this .
Speaker #12: Sure , Alex . Just a little bit of additional color on the current transaction environment . Like Alex said , the market is is healthy .
Speaker #12: There's a ton of debt and equity capital available . There's really good bid depth and thus really strong liquidity in the market . So , you know , with respect to volumes 2025 is trending about the same as 2024 .
Speaker #12: So, we are still well below pre-COVID levels, which is to some extent being driven by lenders continuing to modify and extend loans. So, there is no meaningful distress in the market.
Speaker #12: And from a pricing standpoint , cap rates have really stabilized over the last few quarters with cap rates for class A assets in our markets in the four and a half to 5% range .
Speaker #12: And in the class B space in the in the 5 to 5 and a half mage . Let me add to that , that there's probably been there's definitely been .
Speaker #7: More .
Speaker #12: Sales on the coasts are higher than they have been.
Speaker #7: Been in the Sun .
Speaker #12: Belt . And the reason . being that clearly coastal revenues , you can predict in terms of positive growth easier than you can in the Sunbelt , given given the supply issues that we've been facing , there .
Speaker #12: And when you think about sellers , sellers in the Sunbelt is looking at the market saying , we do know that that supply and demand will be in balance .
Speaker #12: The question is when . And so there's there is a , you know , to Stanley's point , the lenders are not pressing people to sell .
Speaker #12: So why would you sell into a market when , when , when underwriting future growth is more difficult today just because of what's going on in the marketplace ?
Speaker #12: So there's less transaction volume in the Sunbelt. I think what's going to happen, however, is that there'll be a pivot, and that pivot will probably happen sometime in, I would guess, mid-2026.
Speaker #12: And you'll have a combination of lenders . Finally saying , all right , we've extended . Now you need to do something . So that's going to put pressure on sellers to sell .
Speaker #12: But at the same time . Once you get to the middle of 26 based on Alex's discussion a minute ago , you should have a more constructive environment .
Speaker #12: And it should be easier than for people to look out into 27 and 28 and see a very robust rental growth scenario . Given supply and dynamics that we have today .
Speaker #10: Our next question comes from Adam Kramer from Morgan Stanley . Please go ahead with your question .
Speaker #14: Great . Thanks for the time . Here . I just wanted to ask about sort of how you see the fourth quarter shaping up relative to normal seasonality .
Speaker #14: I think one of your peers talked about a sort of a relatively normal fork , maybe even a little bit better than normal seasonality in the fourth quarter .
Speaker #14: I that was a little bit of a surprise , just given some of the headlines and some of that is a little bit sensational out there .
Speaker #14: But just wondering , you know , within your portfolio with absorptions data that actually , I think still looks pretty good for for the Sunbelt and even nationally .
Speaker #14: How do you see the fourth quarter shaping up in terms of lease spreads relative to typical seasonality?
Speaker #12: Yeah . So the first thing I'll tell you is if you think about our portfolio and its important before we talk about the fourth quarter , to go back and look at the third quarter , if you look at the deceleration that we saw from from 2 to 25 to 3 to 25 on a blended rates , it was only ten basis points .
Speaker #12: I think that's the lowest deceleration in the space . And what that tells you is that we're starting to get some footing here in the Sunbelt markets .
Speaker #12: When we go into the fourth quarter , what we're anticipating and what I said in the prepared remarks is that we think our blend will be down about 1% .
Speaker #12: If you sort of think about that on a typical seasonality basis , this sort of is what you see in the fourth quarter .
Speaker #12: And this year . Now , we did sort of hit the slower leasing period one month earlier than we typically would . But the fourth quarter is shaping up like like a traditional fourth quarter .
Speaker #14: Great . Thank you .
Speaker #10: Our next question comes from Austin Wurschmidt from KeyBanc Capital Markets . Please go ahead with your question .
Speaker #15: Great . Thanks . Kind of going back and piggybacking on the last question , I mean , so with this sort of re-acceleration now in lease rate growth , would you expect that to just carry into the early part of next year and into the spring ?
Speaker #15: Leasing season based on , you know , what's going on in the fourth quarter versus what you expect , what you saw in the third quarter , and then just also so is it occupancy ?
Speaker #15: That's the driver of that 25 basis point decrease to 2025 . Same store revenue growth guidance .
Speaker #12: So Austin thanks again for the 26 guidance . Question . We're we're not going to answer 26 guidance questions quite yet . But but what I will tell you is the main driver that we saw in the reduction , which is a very minor reduction in top line revenue growth , was an occupancy driven .
Speaker #12: It was rate-driven, and that is because we were making sure that we could get the occupancy to the level that we felt comfortable for going into the fourth quarter.
Speaker #12: In order to do that , we did have to did have to drop rental rates slightly . Now , I think the the key key takeaway that we're going to give you for 2026 is based on on Alex's , you know , answer to the question , maybe two questions ago .
Speaker #12: And that is there should be less uncertainty in 2026 . And the uncertainty that we have today . We know that tax reform is off the table .
Speaker #12: We know inflation is .
Speaker #7: Coming down .
Speaker #12: We know the Federal Reserve's lowering rates . We know that . And we know that there's a midterm election coming , which means that the administration is going to do whatever they can to make sure the economy is good .
Speaker #12: In November of 2026 , the big tariff debates will likely be less of a debate during that period for for obvious political reasons .
Speaker #12: And we have a 25% reduction in New deliveries in Camden markets . And so with all that said , generally speaking , when you have a midterm election in this environment , you're going to have a unless something really comes off off the rails , it should be a reasonable environment to improve demand and to create , you know , more optimistic scenario in 2026 .
Speaker #12: Now , obviously , there could be lots of , you know , slips that make that that change that . But , you know , we'll see .
Speaker #10: Our next question comes from Steve Sakwa from Evercore ISI . Please go ahead with your question .
Speaker #16: Thanks . Good morning . Rick , I guess going back to your question about the disconnect between public and private , I guess , how big are you willing to lean into that on the share buyback ?
Speaker #16: And , you know , do dispositions , you know , there hasn't been many very large buybacks in the REIT space . And typically , you know , they haven't been overly successful .
Speaker #16: But I'm just curious , you know , how much would you lean into this size wise ?
Speaker #12: Well , the if you go back in history in the leading up to the the bubble and the tech wreck in 2000 , we bought 16% of the company back at that point , we could sell properties on Main Street for $0.75 or for a dollar , and we could buy our stock back for $0.75 on the dollar .
Speaker #12: Right now , with the current stock price today , it's a 30% discount to consensus Nav . It's a mid six , mid six cap rate .
Speaker #12: And and the market today is a four and a half to a 5% cap rate . So with simple math that's a 150 to 200 basis point positive spread .
Speaker #12: To sell an asset . And by stock . And you know I we've always said that we would we would allocate capital in this way if we had a significant discount .
Speaker #12: I think 30 is pretty significant . And it was persistent , meaning that we had enough time to be able to sell assets to fund the buybacks .
Speaker #12: We will not increase leverage to do that . And , you know , it's a very typical capital allocation model . And and over the over the last maybe 7 or 8 years , we've we've had opportunities to , to buy stock back .
Speaker #12: But but it's never lasted long enough . And with the constraints that we have on on how much we can buy in a day and that kind of thing , the opportunity has not lasted long enough to actually make a material difference .
Speaker #12: Today . You know , we'll see how long it lasts . And and we're going to lean in pretty well .
Speaker #10: Our next question comes from Michael Goldsmith from UBS . Please go ahead with your question .
Speaker #17: Good morning . Thanks a lot for taking my questions . Can you talk a little bit about the impact of direct supply and if there's any way to quantify how that will prove , for example , are you able to provide , you know , how much of your portfolio is directly competing , competing with supply .
Speaker #17: Now , how does that compare to last year ? And if there's an anticipated figure for next year ? Thanks .
Speaker #12: Thanks . So you I didn't hear the first part of your question . You said direct supply .
Speaker #17: It's like how much of your portfolio is directly competing with new supply.
Speaker #12: Yes . So every , every part of our portfolio is directly competing with delivered supply . So we're in the between last year and this year going into 2026 , we're going to see the highest number of the largest number of supply across Camden's portfolio in the last 45 years .
Speaker #12: So it's it's pervasive . Obviously some places are better than others , but all everyone is dealing with some level of supply . The highest two markets in our world for supply and the impact thereof is our Austin and Nashville .
Speaker #12: And to various degrees, all our markets are dealing with some level of oversupply. California would probably be at the very far end of the range, but still, there are supply issues and supply that we're having to deal with there.
Speaker #12: So to one degree or another , every market has been impacted . The good news is , as Rick mentioned , we're likely to see a 25% decline in deliveries next year if we continue to see good demand as that has continued across our platforms , you know , incrementally , it should be better in terms of the absorption , making a difference for our ability to push rents and maintain occupancies .
Speaker #12: And when we look at it , when we look at specific assets that are younger , that are directly in submarkets , where there is a tremendous amount of new supply , we are seeing significant improvements on that .
Speaker #12: Last year , when we first started talking about this number , we said that about 20% of all of our assets were directly competing with new supply .
Speaker #12: Thanks to the record level of absorption that we've seen in 25 . The good news is that number is down to 9% . 9% of our portfolio today .
Speaker #12: And that's just going to continue to improve as we go through 26 and into 27 . I think the other thing you have to think about in , and I'll just use an example like Austin , which is like the poster child or poster city for excess supply .
Speaker #12: So in Austin , if even the suburban properties that are older and kind of be properties and good locations are all feeling the supply pressure and the reason it's that they're so competitive with the new supply , is just that consumers in Austin read the paper every day saying apartment rents are coming down and they expect a deal .
Speaker #12: And so you have a consumer sentiment issue in some markets like Austin , Nashville and a couple others , and where the consumers , even though even though there's not as much competition in the in the suburban be properties , the consumer has this mindset that they have to get a discount and then that just kind of feeds into the market and you end up with a with with a , you know , a market that , that where you can't actually raise rents because of that sentiment .
Speaker #12: Once that you have that pivot point , it changes dramatically . And I .
Speaker #18: Would just add , Rick , this is Laurie , that if you look at Austin , which does have quite a bit of supply and a great example of a story where the types of will turn is rainy Street and it can turn quickly .
Speaker #18: And so we're going from the lowest occupied community in our portfolio mid-summer to now , the highest occupied , you know , community .
Speaker #18: So it starting to turn . And when it does , I think it turn quickly .
Speaker #10: And our next question comes from Jana Galan from Bank of America . Please go ahead with your question .
Speaker #19: Thank you . Good morning . And congrats on your move . I was hoping can you provide some commentary on what your team is seeing in greater D.C.
Speaker #19: , given it's in such a strong performer this year and into the third quarter ? But some of your peers noted less activity .
Speaker #19: If you could just comment on that.
Speaker #12: Yeah . So so DC Metro remains our top market . And if you sort of look at how it progressed throughout the year , in the first half of this year , it was just an extreme outlier in terms of new leases and renewals .
Speaker #12: And we think most of that was driven by the return to office movement , in particular on the government side , as we're progressing throughout the year , obviously , we think most of those folks have have returned to office and have now leased their apartments .
Speaker #12: And so now it's gone from being an extreme positive outlier to just being the best market we have, which will still definitely take.
Speaker #12: If you look at it , it is our in the third quarter . It's our top sequential revenue market . It's our top quarter over quarter revenue growth , market and and it just remains incredibly strong when it comes to dosage because obviously that's what we talk about so much .
Speaker #12: I will tell you we are still not seeing any evidence of our consumer being directly impacted by dosage . What we're seeing more is a shift in the market of the way our competitors are reacting .
Speaker #12: And concerns about potential impact from dosage, but we're just not seeing it whatsoever. It remains an incredibly strong market. And as you know, when we talk about D.C.
Speaker #12: Metro , we're really talking about the DMV and the trend continues where Virginia is or Northern Virginia , which is where we have most of our real estate , is incredibly strong , followed by the district .
Speaker #12: And then followed by Maryland.
Speaker #10: And our next question comes from Rich Anderson , from Cantor Fitzgerald . Please go ahead with your question .
Speaker #20: Thanks. Good morning. So I understand the uncertainty, or lack, or maybe lower uncertainty next year. I'm in the camp that I don't know.
Speaker #20: I think we'll always be a lot of uncertainty in the next few years , but we'll see . But in terms of supply and its impact on on 2026 , not a guidance question .
Speaker #20: I just want to know your history is with , you know , when guidance when excuse me when when supply delivers . You know , what's the the typical tale of of disruption from that asset or those collections of assets that come to market essentially vacant .
Speaker #20: Is it is it an 18 plus month sort of issue and maybe the real growth story for Camden ? Doesn't materialize until 2027 ?
Speaker #20: Or is it quicker than that ? And maybe you can say something specific about your portfolio that makes it quicker or longer based on your own circumstances .
Speaker #20: So just want to get some color on how supply might impact things next year . Even though the deliveries are coming down . Thanks .
Speaker #12: Yeah , they are coming down . I think in our portfolio , if you kind of look at the mix between Witten and Realpage's numbers , they've got supply and Camden's markets coming down from 190,000 in 2025 , down to about 150,000 in 2026 .
Speaker #12: If you roll that forward to 2027 on their numbers , you're going to be somewhere around 110,000 completions across Camden's platform . So the trick and the tail that you're talking about , it's always a little tricky because when something delivers , usually the data providers are talking about building completed buildings .
Speaker #12: If they have the granularity to say that they've received their certificate of occupancy , that becomes supply . The reality is , is that people don't go to that level of detail on when an apartment community delivers actual leasable units so that if you think about the time it takes from the beginning of first apartments delivered , and I'm talking suburban , you know , walk up type product that from that point forward on a three , 300 apartment community average lease up is going to be somewhere around 25 units per month .
Speaker #12: So, call it 10 to 12 months. If things are kind of at a normal pace, you would expect to see all of those units absorbed over that 10 to 12 month period.
Speaker #12: From the time that you first start turning your apartments, there's just a lot of gray areas around. When does that happen?
Speaker #12: When does construction end ? Does that really matter ? It doesn't really . What really matters is leasable built . Leasable apartments that are come online for the the developer to be able to put to sign a lease on them .
Speaker #12: So that's kind of what we're looking at . So if you think about the average in in coming down from 190 , 190,000 apartments to 110 over a two year period , it's pretty significant .
Speaker #12: And if the demand side of the equation stays kind of like it is today, it doesn't have to get a whole lot better.
Speaker #12: Just kind of in this zone , then you're going to see a significant impact , positive impact in 2026 . And there's no chance that that doesn't get better in 2027 because that that cake is already baked on deliveries for 2027 .
Speaker #12: I think we need to talk more about demand than supply because we know what supply is , right ? And so when you think about demand , you know , 2025 was the best year in in 20 plus years of apartment absorption , in spite of the incredibly high supply that came into the market , what's driving that is the same thing that's been driving apartment demand for a long time .
Speaker #12: Migration demographics , you know , and today we have even a more interesting one , which is which is the the retention . So retaining more people than we ever have , which means that we don't need as many people coming in the to lease new apartments when the people are moving out .
Speaker #12: And so you have a , you have this really interesting situation where people are staying longer everywhere you have less mobility in America today for lots of different reasons .
Speaker #12: And it's really helping the apartment markets. And then, if you pivot to home purchases and think about that, we have 9% of our people moving out to buy homes.
Speaker #12: That is not going to change anytime soon . You look at the the math on home homes , if you look at median income for a home or median home home price plus interest at current cost , you know it's 3200 bucks a month compared to in 2019 when it was 750 bucks a month .
Speaker #12: And what's driving that? Clearly, there are three major things. One is home price appreciation, which is up over 50% since 2019, with some markets seeing prices double in that time.
Speaker #12: You had increases in interest rates . Obviously , and increases in taxes and insurance . If you had a zero 30 year mortgage rate , the the the monthly cost for a median price home today would be about 1900 bucks a month , compared to 1750 in 2019 .
Speaker #12: And the driver of that is not interest rates . A driver is home price , cost and insurance and taxes . So , you know it's going to be a long time before before you have , you know , people moving out to buy houses .
Speaker #12: The other part of the equation , I think the medium , medium age of a first time homebuyer today is 40 , 40 years old .
Speaker #12: Before Covid , it was like 34 , 35 . So there's been a massive shift in the ability of Americans . To demographics continue to be in our direction .
Speaker #12: Plus migration . And so I think that demand side is going to be much higher than people believe , because of that , that those equations .
Speaker #12: And so I think we need to focus on demand as much as supply, for sure.
Speaker #10: Our next question comes from Alexander Goldfarb from Piper Sandler . Please go ahead with your question .
Speaker #21: Sure . Hey , good morning . Morning down there , Rick . We'll stick with the 40 years of experience that you guys have .
Speaker #21: It was just looking at a stock chart of Camden, and I'm not picking on Camden. But you know, REITs have had a tough go in the public world.
Speaker #21: And maybe the private world isn't any better . But it just seems that in private world the assets are rewarded more than they are in the public world .
Speaker #21: And I'm just curious , in the 40 years you and Keith took Camden public , you know , what do you think is is missing there ?
Speaker #21: And do you think that the current setup, where, as you just described, you know, less home affordability and a greater propensity to rent, do you think it's finally the time where we will see the REITs actually deliver what they're supposed to?
Speaker #12: If you do take a look at the private values and public values over a long period of time , they're pretty close . We have for 40 years or 33 years is above a company .
Speaker #12: There's times when the markets get dislocated like they are now , and generally speaking , it hasn't lasted very long because once the market decides that that the the assets are undervalued , then smart investors come in and buy those stocks .
Speaker #12: So they drive the prices back closer to Nav . And so you know , for me , being a public being in the public market , I think it's great .
Speaker #12: We have access to capital that that none of our private competitors have . We don't have the same sort of of , of business model , which is I got to sell my properties in order to create value for my shareholders , for my , you know , owners .
Speaker #12: So you're constantly , you know , buying and buying and selling and buying and selling or building and selling and that's a great business model for some .
Speaker #12: But but for us , you know , we buy and hold and create long term cash flow and benefits for our shareholders . And I think it's it's a great , great space .
Speaker #12: Yeah . So Alex , the I kind of think of it like the playing field and the playing field over our 30 plus years as a public company .
Speaker #12: Sometimes it's been tilted in our favor; sometimes it's been tilted in the favor of the private guys, and it can happen pretty quickly.
Speaker #12: If you think about , you know , kind of coming out of the Covid world or in the bottom of of that time frame , the the playing field got tilted pretty quickly towards the private guys because debt was free and plentiful .
Speaker #12: And that's never a good that's that that's more interesting to private guys than it is to public companies . So for the last couple of years , it's in my mind it's sort of been tilted our way a little bit on the , you know , certainly on the debt side , certainly on the , on the balance sheet side of things .
Speaker #12: The ability to finance projects that private guys probably couldn't have gotten done in the last 18 months. I think there's still some of that out there.
Speaker #12: And I think that we're going to continue to use that to our advantage . Let me just add one last thing , because oftentimes people would ask me , especially when we get to a , you know , a discount to , like , we are right now , why are you public and why wouldn't you just go private , just tell the company , like , okay , I got that .
Speaker #12: So , so there's a disconnect and its significant , right ? It's like like $3 billion . Okay . So so if somebody buys the company then they're going to make an expected rate of return on on that asset that they buy .
Speaker #12: And ultimately they believe that the prices are going to continue to rise , and therefore you're going to make a reasonable rate of return .
Speaker #12: And so at the end of the day , if the reason that we are are at a significant discount to to Nav is because people don't trust management , we .
Speaker #12: Are a value trap . We we really are a poor operator . And we just are awful . And you can't really bridge that gap .
Speaker #12: Then . Yeah , sell the company , move on . Because the market's voting that you don't deserve to be a public company and valued at at least what your assets could trade for in the private market .
Speaker #12: On the other hand , if you have a dislocation in the market like we have today , right ? So we have , you know , we have slow growth or flat growth , and you have uncertainty environment .
Speaker #12: You have an oversupply condition, and there's a lot of concern about when that supply condition is going to change. That will change.
Speaker #12: And what will happen that the same thing has happened over the last 30 plus years . Is the market will recognize that the stocks are cheap .
Speaker #12: The the stock will go up to or above its Nav and and that you'll be back . And so to me the issue is what is causing the disconnect .
Speaker #12: And then what? How do you get out of that disconnect? Ultimately, the market will figure that out, and it may take longer or shorter.
Speaker #12: It just depends on what what's out there . And what's what's the de jure of investors today . But but we feel pretty comfortable where we are .
Speaker #10: Our next question comes from Wes Golladay from Baird . Please go ahead with your question .
Speaker #22: Hey . Yeah . Good morning everyone . I just want to ask you about selling the assets that you're doing . Are you able to show the taxable gains there ?
Speaker #22: And then, once separate, tax questions, I believe you mentioned there was a big accrual or big rebate you got from a prior year.
Speaker #22: How much of a headwind will that be for next year?
Speaker #12: Yeah . So the first thing I'll tell you is if you look at the sales that we're doing , we are we are doing 1031 exchanges on those with the acquisitions we're doing reverses .
Speaker #12: So we bought we bought the real estate first and then and then we're selling the real estate . So that's what we're going to do now to , to piggyback to one of Rick's earlier comments about buying back shares .
Speaker #12: We do have the ability to sell or to absorb about $400 million of gains, where we don't have to do 1031 exchanges if we want to use those proceeds to repurchase shares.
Speaker #12: When you think about property tax refunds, here's the best way to think about it. If you look at 2024, we had about $6.5 million in property tax refunds.
Speaker #12: If you look at 2025 , that number dropped down to about 5.5 million . But we are consistently good at getting refunds . This is this is something we do as we've talked about in the past .
Speaker #12: We contest almost every one of our valuations. If we go through a normal contesting process and we don't win, and we don't feel comfortable with where we're settling, we will file lawsuits.
Speaker #12: And a lot of what you're seeing are is the settlement of those lawsuits . We have no reason to anticipate that in 26 and 27 and 28 and going on forward , that we won't continue to have the same level of success that we're seeing .
Speaker #12: And so I'm not I'm not anticipating any significant headwinds associated with the the refunds that we got in 25 , in particular , as I said , because refunds , we got in 25 were actually less than the refunds we got in 26 .
Speaker #12: And 24 . And and we're still showing a negative growth on , on property tax side .
Speaker #10: Our next question comes from Rich Hightower from Barclays. Please go ahead with your question.
Speaker #23: Hey good morning guys . Covered a lot of ground this morning . But I believe that Camden sort of has a an operational philosophy not to use concessions .
Speaker #23: But obviously the market around you will use concessions and flex up or down based on , you know , the individual operators . So as you think about as we think about sort of market rents next year , comping against , you know , sort of the net effect of market rents in 25 .
Speaker #23: What's the impact of concessions, as far as you can tell? So it's a bit of a sneaky question. On 26, but just help us understand that component.
Speaker #12: Well , it's a little bit of a sneaky question , but I think what would be helpful for you is for Laurie to sort of give a rundown of what we're seeing in the market , not for Camden , but in the market .
Speaker #12: On the concession side .
Speaker #18: So in our highest supply markets , we continue to see elevated concessions as operators work through the success inventory . But on average , these markets are offering right around five weeks of concessions , approximately 10% .
Speaker #18: So those key markets include Austin , Nashville , Denver and Phoenix . And so where supply pressures remain , most pronounced , that's what we're seeing .
Speaker #18: But despite these headwinds , we've been able to kind of navigate these these markets pretty well . And we're outperforming the market average , each with kind of limited pricing power .
Speaker #18: But again , those are those are embedded into our net prices . So beginning in July , we actually initiated incremental price reductions so that we could prioritize our occupancy .
Speaker #18: And that strategy has really paid off. So, while conditions remain challenging, we are taking a disciplined approach to really position ourselves to remain strong on the occupancy side as we head into next year.
Speaker #12: So , so if you look at the concessionary impact in the market , then so if you look at the at the high supply markets , we just talked about Austin , Nashville , etc.
Speaker #12: . So if they're having 10% concessions or think about , you know , effectively six weeks , that's what needs to burn off in 2026 .
Speaker #12: Now the good news is , is that those concessions are not being prorated . Mostly . And so they're up front , which means that the consumer is used to paying the appropriate rental rates .
Speaker #12: And so when they go to renewals, it shouldn't be a big shock to them. But that is what needs to roll off in those markets.
Speaker #10: Our next question comes from John Kim from BMO Capital Markets. Please go ahead with your question.
Speaker #24: Despite the favorable supply outlook, with new deliveries going back to pre-COVID levels, you haven't started a development project since the first quarter.
Speaker #24: And I'm wondering why projects have not tussled out for you at this time, or do you plan to accelerate development starts as indicated on the last call?
Speaker #12: Yeah , I mean , what I'll tell you is today you can buy real estate at a discount to replacement cost . And if you can buy real estate at a discount to replacement cost , then that is a better use of capital .
Speaker #12: In addition , obviously , as we just talked about , we are using some of our capital to repurchase shares . Now , I will tell you this is going to change .
Speaker #12: We are already seeing construction costs starting to come down. Depending upon where you're building, those costs can be down 5% to 10%, which will certainly help the math.
Speaker #12: The other thing I will tell you is we are very good developers, and when we find land sites, we are actively looking at additional land sites. We've got land sites under contract as well.
Speaker #12: When when we pull the trigger , it's because we believe that we can create value for our shareholders . And we do believe with construction costs coming down , looking at what we call it , 26 , 27 , 28 could look like in terms of revenue growth .
Speaker #12: That can make a lot of math work . And so expect to see us get a little bit more active on the development side .
Speaker #12: But in 2025, as I said, when you can buy at a discount to replacement costs, that just seemed like a better use of capital.
Speaker #10: Our next question comes from Linda Tsai from Jefferies . Please go ahead with your question .
Speaker #25: Hi . Thanks for taking my question . Nice work with your three . Q blends being down only ten bits quarter over quarter with your four Q blends expected to be down 1% .
Speaker #25: Is that all on the new leasing spreads side, as it seems like the Q4 comparisons are a bit easier than Q3's?
Speaker #25: So, just wondering if there are certain markets where you're seeing more softness, or if that's somewhat, you know, reflective of conservatism?
Speaker #12: Yeah . So the first thing I'll tell you is I made the comment that as we were going through the end of the third quarter , we did make a push on the occupancy side .
Speaker #12: And when we made that push on the occupancy side , that was at the expense of some new lease growth . And so when you sign something in the third quarter , you're effectively seeing it in the fourth quarter .
Speaker #12: So yeah , we are expecting new leases in the fourth quarter to be the primary driver of what we're seeing in terms of having a blended fourth quarter of just , you know , -1% , approximately .
Speaker #12: So that's where we're seeing it . Markets that we're seeing additional softness . You . No there's no one market that jumps out I will tell you that we are starting to see some markets that that are doing the inverse that are actually doing doing better than we had expected .
Speaker #12: And , and call out a couple of those markets because I think we focus too much on the on on the ones that are a little softer .
Speaker #12: Let's focus on some of the good ones . And so we are absolutely saw it second or third quarter improvements in in Nashville and Dallas and Charlotte and in and Lori can give some quick Intel of what we're seeing on the ground there .
Speaker #18: Yeah . Absolutely . So while we experienced the elevated supply in these markets , we're starting to see really some encouraging signs on signs as demand rises .
Speaker #18: So on . Or actually I would say as demand really remains strong , but on total net gain for renewals and new leases , blended rents have actually turned positive in Dallas , Charlotte and Nashville .
Speaker #18: And we're also seeing improvements in Atlanta . So some specifics just to give you a little color . So in Dallas , for instance , blended rent gains improved quarter over quarter moving from a negative point or -1.2% to a positive 0.6 .
Speaker #18: We also saw our average days vacant improve by seven days, moving from 38 days in Q2 to 31 days in Q3.
Speaker #18: If you look at Charlotte again , blended gains moved from -0.2% to a positive 0.5% . So an improvement there . We also saw 61 more move ins in Q3 than we saw in Q2 .
Speaker #18: Justin , Charlotte , Nashville . Let's talk about that . Another high supply market . But we saw blended gains improve from a negative one point or yeah , -1.3% to a positive 0.4% in the quarter .
Speaker #18: And we also saw our renewals and transfers peak in August. So again, that was the highest they'd seen in Nashville for the whole year.
Speaker #18: And then all in with Atlanta blended gains increased from . It was already positive , but it was positive 0.3% . And we improved 2.7% quarter over quarter .
Speaker #18: And recorded 96 more movements during the third quarter than the second quarter . So just , you know , some positive improvements , particularly with the the blended shift in rents being strong occupancy trends are signaling just progress we're making in managing these challenges in .
Speaker #18: The these kinds of concessionary, supply-driven markets, and positioning ourselves for really a sustained recovery, if all things remain the same.
Speaker #12: Yeah . I just want to piggyback really quick because Nashville is an interesting market . Granted , we only have two assets in Nashville , but obviously it's a market that we talk about supply quite a bit .
Speaker #12: And Lori talked really briefly about how fast how fast rainy Street in Austin turned in Nashville . When you look at the actual lease rates on new leases , that went up $61 from the second quarter to the third quarter , $61 is pretty dramatic .
Speaker #12: And that tells you how fast things can turn.
Speaker #10: Our next question comes from Michael Lewis from Truist. Please go ahead with your question.
Speaker #11: Great . Thank you .
Speaker #23: So I want to go back.
Speaker #26: To the conversation about demand that came up in a few questions . And I wouldn't push back on anything you said . I agree with all of it , but I think you left out some points .
Speaker #26: And so let's pretend I'm not an optimistic person . And I look at October the most layoffs in any month since 2003 , 22 years ago , manufacturing activity down eight straight months .
Speaker #26: Inflation is now 3%. The Fed's going to be cutting the ADP jobs number that came out. It's really just health and education not really adding jobs anywhere else.
Speaker #26: So you know why shouldn't I be concerned about demand as we kind of move move forward in the next few months . And I know you're not given 26 guidance , but would it be would it be completely shocking if same store revenue was not materially better than it was this year ?
Speaker #26: Like, would that be stunning?
Speaker #12: I think the look I put a I think a cautionary side of the equation , said the glass is half full , but it's still half right .
Speaker #12: And it could be half empty if you don’t believe that the economy will hold in there for the midterms. So, there are things to be optimistic about.
Speaker #12: There are also also things to be worried about . And you just mentioned a number of them , right . I think at least for us , the the good news is we don't need as much demand because we have less supply coming in and we have retention rates that are at historic highs .
Speaker #12: Right ? So we have fewer people moving out . So we don't need as many people to move in to , to offset those folks .
Speaker #12: And so I think these are definitely your your points are , well taken . And are and we understand them . But I don't think any of us know what the economy will look like .
Speaker #12: I think we need fewer jobs than normal to have a reasonable apartment market in 2026 because of the other things we've talked about , but it's still a you know , it's still an issue out there .
Speaker #12: Obviously . And just one follow up , Michael , on the the the idea of the the stats that you gave about layoffs , etc.
Speaker #12: , we , we have a very good barometer in our portfolio , given our given our platform that we know immediately when people start losing their jobs because they move out and it's like almost automatic , you lose your job , you're stressed , maybe you stay a month , but but it's a really quick read through for us and we're just not seeing people .
Speaker #12: We're not seeing that as an increase , as a reason for move out . I lost my job . Obviously there's all economy who's losing , who are losing their jobs , but we've not seen what you're talking about .
Speaker #12: The read through that would suggest that our residents in Camden's markets are losing their jobs . And that's been that's certainly been a hallmark of the past .
Speaker #12: Our our demographic is is different . Our markets , given the given the growth profiles of our markets from migration and the the concentration of jobs , who are that are being created , being the preponderance in Camden's markets , I think we've been pretty resilient in the past .
Speaker #12: And my guess is we will be in the future.
Speaker #10: Our next question comes from Omotayo Okusanya from Deutsche Bank. Please go ahead with your question.
Speaker #27: Hi . Yes . Good morning . Just curious portfolio wise , if you've seen any really big differences in performance in regards to your class versus class B or your urban versus suburban assets .
Speaker #12: Yeah , I'll tell you . And I think it's entirely supply driven . We are seeing our class A assets do a little bit better than our class B , and then I will tell you that in the third quarter , our urban assets actually did a lot better than our suburban assets .
Speaker #12: But once again , that makes sense to me because it's just following where where the supply is . If you think about the first wave of supply was was very urban focused , and then the second wave was suburban focused .
Speaker #12: And so , so now you're seeing the supply disproportionately in the suburban , in the suburban markets .
Speaker #27: But I believe you said your class B is doing your class A is doing better than your B , but a lot of the supply is A , isn't it ?
Speaker #12: Well , a lot of the supply is a . But if you think about where most of our B assets are , most of our B assets are in the suburbs .
Speaker #12: Where the supply is .
Speaker #10: Our next question comes from Julien Luann from Goldman Sachs. Please go ahead with your question.
Speaker #28: Hi . Thank you for taking my question . Alex . On the second quarter earnings call , you mentioned fourth quarter blends would look a lot like the second quarter , but it sounds like guidance .
Speaker #28: Now for the fourth quarter is about 150 bips below the second quarter . I guess when you sort of think of all the things you mentioned earlier , slower job growth , Suppli , economic uncertainties , what what has changed the most in the last 90 days to drive that ?
Speaker #28: Or is it just the posture of landlords sort of moving more aggressively than anticipated to prioritize occupancy over rate?
Speaker #12: I think you nailed it . That's exactly what it is . And it's really interesting to see because , you know , D.C. is a great a great example of that .
Speaker #12: As I talked about earlier , D.C. is incredibly strong . The reason why we saw a drop off in the third quarter and an anticipated continued drop off in the fourth quarter is just all of the talk about Doge resulted in some reactionary actions from from the competitors out there .
Speaker #12: And I think when you when you sort of look at the uncertainty that we've talked about quite a bit on this call already , the uncertainty that is confined to 2025 , I think a lot of a lot of competitors , when they were looking at where they were and realizing that they're about to hit their slow season , which is the fourth quarter and the first quarter really tried to go after occupancy in the way they did .
Speaker #12: That is they dropped rates . And and I will tell you that even though demand is very strong when you have this amount of supply and you've got competitors that are dropping rates all around you , you do have to you do have to sort of move in the same direction .
Speaker #12: And that's exactly what we saw.
Speaker #10: And our next question comes from Alex Kim from Zelman and Associates . Please go ahead with your question .
Speaker #29: Hey , guys . Morning down there . Congrats on the move to the new office . You're down the street from one of my pocket picks , Kenny and Ziggy's .
Speaker #29: Now I want to dive into wanted to dive a little into marketing costs here . A little bit . This expense bucket has been elevated the past couple of years with double digit year over year growth .
Speaker #29: And I was wondering if this is somewhat reflective of weaker front-end demand that's required more advertising to maintain leasing traffic and occupancy, or something else entirely.
Speaker #12: Yeah , I'll tell you what it is . It's really two things . It's number one , we're really big into SEO search engine optimization .
Speaker #12: And so we are buying we're buying the placements . When people search for apartments . And with the level of supply that is out there and folks are trying to are trying to obviously chase the same traffic that we're trying to chase what we found is that that the cost of SEO has gone up pretty dramatically .
Speaker #12: And obviously , if if you've got a lot of folks that are buying and trying to make sure that they're the first name that appears , you're going to expect to see some additional costs on that front .
Speaker #12: So , so we're absolutely seeing that . And then the second thing , which is in line with with your question is if you if you sort of look at although demand is record high , supply is also pretty high .
Speaker #12: And so we're all fighting for the same for the same prospects . And so because of that , we absolutely are trying to make sure that we can generate as much traffic as we possibly can .
Speaker #12: So that's what you're seeing now. I would expect that once we get this supply absorbed, the SEO costs will come down pretty dramatically.
Speaker #10: And ladies and gentlemen , our final question today is a follow up question from Julien Blouin from Goldman Sachs . Please go ahead with your follow up .
Speaker #28: Oh , thank you for taking my my follow up . I just wanted to go back to something you mentioned last last quarter's earnings call , which was that Whitman Advisors was telling you that 20 , 26 , you could see over 4% market rent growth across your markets .
Speaker #28: I'm just curious, are they still telling you there's a path to that kind of market rent growth in 2026, despite the fact that the second half is maybe playing out a little bit weaker than we had hoped?
Speaker #12: The numbers have come down a bit , but they still have 3 or 3.5% in in 26 and , and and you know , over four and in 27 .
Speaker #12: So they have moderated their , their numbers slightly , but it's not dramatic and it's likely to be more second half is what what they've shown in their model .
Speaker #10: And ladies and with that we will be ending today's question and answer session . I'd like to turn the floor back over to Rick Campo for any closing remarks .
Speaker #12: We appreciate you being on the call today, and we will see some of you in Dallas in December for Narrate. So, thanks a lot.
Speaker #12: We'll see you then .
Speaker #10: And with that , ladies and gentlemen , we'll conclude today's conference call . And presentation . We do . Thank you for joining .