The paragraph introduces Camden Property Trust's fourth quarter 2024 earnings conference call, led by Kim Callahan, Senior Vice President of Investor Relations, along with other company executives. The call is being webcast and recorded, with a replay available afterward. Forward-looking statements will be made, based on current expectations but not guaranteed, with potential risks outlined in SEC filings. The complete earnings release, including non-GAAP financial measures, is available on their website. The call aims to finish within an hour, with a request to limit questions, and offers additional follow-up communication post-call. The call then transitions to Ric Campo, CEO, who begins speaking.

The paragraph discusses Camden's strategic outlook for 2025, emphasizing its readiness to seize new investment opportunities after a period of waiting. It suggests that the peak in multifamily deliveries in 2024 will ease in 2025, leading to growth in revenue and net operating income. Camden plans to implement a strategic plan similar to one used successfully post-financial crisis, focusing on capital recycling through acquisitions and developments. The company praises its team's performance in 2024, highlighting their use of technology to enhance customer experiences and reduce costs. Despite a previously challenging market, occupancy and rents have stabilized, making apartments an appealing choice for consumers due to the high cost of homeownership compared to renting.

The paragraph highlights Camden's recent financial performance and future projections. Wage growth has surpassed rent growth, boosting residents' financial situations and improving rent-to-income ratios. Population growth in Sunbelt markets, particularly Texas and Florida, is significant, with these states driving a large portion of national growth and housing demand. Camden's revenue growth in 2024 was 1.3%, with varying performance across different markets. For 2025, Camden projects 1% revenue growth overall, with top markets like Southern California, Washington DC metro, and Houston expected to perform well, while others like Austin and Nashville underperformed. The top five markets, accounting for over 40% of projected revenue, should see 2-2.5% growth, while other key markets are expected to see 0-1% growth.

The paragraph discusses Camden's performance and outlook for its markets, specifically Nashville and Austin, which make up 6% of the company's revenue and are expected to face challenges due to new supply, possibly declining by 0 to 3% this year but improving by 2025. Camden grades its portfolio as a B with a stable outlook, slightly better than last year's grade. The company anticipates outperforming the US market due to strong in-migration and high demand for apartments in the Sunbelt region, driven by the unaffordability of single-family homes. Supply in Camden's markets is expected to decline after peaking in 2024, with estimates ranging from 160,000 to 230,000 new units in 2025. Camden forecasts revenue growth of 2 to 2.5% for its top five markets.

The paragraph discusses the performance and outlook of Camden's markets, highlighting that four markets received an A-minus rating with various outlooks. Tampa, with an improving outlook, is expected to perform well due to high occupancy and demand. Southern California markets like LA, Orange County, and San Diego Inland Empire are also expected to rank high, though growth may slow due to increased supply. Washington DC Metro is rated A-minus with a moderating outlook, anticipating slightly lower revenue growth. Houston is rated B-plus with a stable outlook, expected to maintain its performance. Most other markets received B ratings with varying outlooks. Denver, Atlanta, Phoenix, Raleigh, Orlando, and Southeast Florida have a mix of stable, improving, and moderating outlooks, with specific factors influencing each market's anticipated performance and growth.

In 2024, Southeast Florida was a strong performer, but a moderation in occupancy levels is expected this year. Dallas maintains a stable outlook with minimal revenue growth for 2025, despite being a top metro for job growth and in-migration. Charlotte faces high new supply levels, with main competition expected in the uptown south end submarket. Nashville and Austin remain at C and C-minus ratings, with negative revenue growth continuing due to new supply challenges, although Nashville's outlook is improving outside downtown areas. Rental rates for the fourth quarter of 2024 showed a decline in new leases and an increase in renewals, leading to a blended rate decrease. Renewal offers for early 2025 have increased by 4%, and home purchase move-outs remain low at 9.6%. Camden completed a 420-unit project in Durham, North Carolina, which is now nearly 80% leased.

The paragraph discusses Camden's real estate activities and financial performance. Camden has several single-family rental communities in suburban Houston, with both Camden Longmeadow Farms and Camden Woodmill Creek actively leasing, and recently acquired Camden Leander near Austin, which is 85% occupied. The company reported higher-than-expected core funds from operations for the fourth quarter of 2024, driven by lower operating expenses and insurance claims. In 2024, Camden achieved modest growth in same-store revenue, expenses, and NOI, with notable reductions in property taxes and insurance expenses. They plan to focus on acquisitions and dispositions totaling $750 million each to diversify their portfolio, aiming to reduce exposure in major markets like DC Metro and Houston.

The paragraph outlines the company's strategic financial goals and expectations up to 2027. They aim to diversify their market exposure so that no market contributes more than 10% or less than 4% of their net operating income. This involves selling older, high-maintenance assets to invest in newer, growing communities, potentially impacting their funds from operations (FFO) yield. They project a slight decrease in core FFO per share in 2025 compared to 2024 due to higher interest expenses from increased debt, partially offset by growth in operating income from new developments and strategic acquisitions and dispositions. They plan to complete acquisitions slightly before dispositions to maximize tax efficiency, resulting in higher debt balances and interest costs.

The paragraph discusses financial projections for 2025, highlighting a 4-cent per share decrease in interest and other income due to low cash balances and a 3-cent per share decline in core FFO mainly due to increased administrative and management costs. The expectations include flat same-store NOI, 1% revenue growth, and 3% expense growth. A 1.4% rise in market rental rates and a slight improvement in occupancy and bad debt are projected to result in a 1% rental income growth, which constitutes 90% of total rental revenues. The remaining revenues, mainly from utility rebilling and fees, are expected to grow similarly. The company plans $675 million in development starts and $285 million in development spending for 2025. Non-core FFO adjustments are anticipated to be about 10 cents per share due to legal and transaction costs.

The paragraph discusses financial expectations for the first quarter of 2025, projecting core FFO per share to range between $1.66 and $1.70, which is a decrease from the previous quarter. This decrease is attributed to a decline in same-store NOI due to increased expenses like taxes and salaries, and a rise in interest expenses from higher debt linked to acquisitions. Partly offsetting this decrease is a minor increase in core FFO from new acquisitions. The company expects flat blended lease trade-outs for the quarter. It also highlights that most of its debt is fixed rate, with limited outstanding credit, no near-term debt maturities, and a solid balance sheet with a net debt to EBITDA ratio of 3.8. During a Q&A session, Alex Jessett shares expectations for a 1-2% annual growth in new and renewal lease growth.

The paragraph discusses the real estate market, focusing on expectations for lease developments and transactions. New leases are expected to be slightly negative for the full year, but renewals are anticipated to grow at around 3%. Optimism is expressed for 2025, particularly with new supply absorption, and positive new leases are expected to begin by the third quarter. Alex Jessett mentions seeing signs of supply impact fading, evidenced by improvements in new lease signings. A question from Steve Sakwa's representative, Sanket, addresses transaction guidance following a slow period, noting an estimation of $750 million in acquisitions and dispositions, with ongoing changes in buyer-seller dynamics.

The paragraph discusses the current state of the real estate market, where there's a standoff between sellers wanting high prices and buyers reluctant to pay them, resulting in lower transaction volumes recently. However, with higher interest rates persisting and optimistic future growth projections, buyers are more willing to pay higher prices due to anticipated significant rent increases in the coming years. This situation is closing the gap between buyers and sellers and is expected to lead to increased market activity similar to the post-Great Financial Crisis period, presenting an opportunity for the speaker's organization to aggressively engage in capital recycling through acquisitions and development.

The paragraph discusses the current state of financial distress in the real estate market compared to the period following the World Financial Crisis. Ric Campo highlights that during the crisis, measures like low interest rates and support from the FDIC and Federal Reserve helped prevent extensive distress. Today, leverage is not an issue, banks have reduced and diversified their real estate exposure, and both banks and borrowers are stronger, resulting in little pressure to sell. While there is some distress in lower-quality property markets due to overleveraging, institutional investors are not experiencing significant distress. Consequently, current market conditions are not expected to lead to widespread distressed sales, only adjustments in pricing from the market peak.

The paragraph discusses changes in cap rates, which are expected to increase from the threes to between four and a half to five, allowing for a potential increase in IRRs to the sevens on an unlevered basis. This change in the market doesn't necessarily mean distress and the opportunity to buy great deals, but it suggests that current deals are favorable. The Camden Leander transaction in Austin is highlighted, with the property being purchased at 15% below replacement cost in a market with a lot of supply but high population growth. The expectation is for outsized growth in Austin in the coming years, making it a strategic investment. It is mentioned that the portfolio has shown stability in new lease rates, outperforming peers, with occupancy above 95%, suggesting the possibility to increase rates sooner than expected.

In the paragraph, Keith Oden discusses the positive performance in the fourth quarter, which was better than expected and consistent across various markets. He notes that strong occupancy rates and effective pricing models have contributed to favorable operating fundamentals, continuing into January. Although last year began with optimism that didn't sustain through February, they don't anticipate a similar pattern this year. Oden expects continued improvement throughout the year as they address supply challenges, with a constructive outlook for the latter half of 2025.

The paragraph discusses the multifamily housing market's expected growth from 2026 to 2027, highlighting Camden's advantageous market position. Eric Wolfe from Citi questions Camden's strategy of front-loading acquisitions, given their interest expense guidance, and asks if their activity could potentially cause 50 basis points of gap dilution on $750 million of transactions through to 2027. Alex Jessett explains that Camden plans to buy properties before selling older, more capital-intensive ones for tax efficiency reasons, using reverse 1031 exchanges. This strategy could lead to a wider spread in FFO between newly acquired and sold assets, but on an AFFO basis, the spread will be narrower, estimated at around a hundred basis points for 2025.

The paragraph discusses a plan to rebalance property holdings by reducing exposure in Washington, DC, and Houston, and acquiring properties in Nashville and Austin by 2026-2027. The speaker argues against extrapolating perceived dilution in 2025 to future years and highlights past experience where expected negative spreads turned out flat. They mention that as the market anticipates higher revenue and NOI growth, cap rates for older and newer properties will converge, addressing dilution concerns. The Camden Leander transaction, with its lower occupancy, is cited as a source of temporary dilution. The speaker anticipates increased market activity mid-year, with awaiting capital entering the market.

The paragraph discusses the company's portfolio management strategy, highlighting plans to reduce reliance on the DC Metro and Houston markets, as these currently exceed their target of having no single market contribute more than 10% of net operating income (NOI) by 2027. They also aim to increase their presence in Nashville, which currently contributes less than 4% of NOI. The company is considering using their strong balance sheet, characterized by a low debt-to-EBITDA ratio of 3.8 times, to seize new opportunities instead of relying solely on tax-efficient paired trades.

The paragraph discusses a company's approach to investment and repositioning strategies. The company is keen on creating value for shareholders while maintaining leverage below five times. Currently, they are seeking more stability in the transaction market, where opportunities are limited. However, they plan to actively buy and build more than they sell in the future. John Kim from BMO Capital Markets asks about revenue-enhancing and repositioning capital expenditures (CapEx). Alex Jessett responds, highlighting the success of their repositioning program, which typically yields an 8-10% return on invested capital, translating to approximately $150 more rent per door. The repositioning effort is primarily aimed at refreshing the portfolio, contributing 10-15 basis points to net operating income (NOI) in 2024.

The paragraph discusses a real estate strategy focused on updating interiors, especially kitchens and bathrooms, to keep properties looking new and competitive against newer developments. This approach allows them to offer lower rental rates due to their properties’ lower initial costs. Additionally, they are considering repurposing underutilized spaces, like indoor basketball courts, into additional units. The conversation shifts to Rich Hightower from Barclays asking about the potential risks associated with assumptions about supply decreases and its impact on rental growth in Sunbelt markets, suggesting that such assumptions are included in current guidance. Ric Campo acknowledges that supply considerations are accounted for in the numbers.

The paragraph discusses the current state and future outlook of the real estate development market, highlighting a significant decline in construction starts due to high interest rates, stagnant construction costs, and tariff impacts. While some areas like West Phoenix see slight growth, East Phoenix remains stagnant. The speaker suggests that significant rent increases in the future would be necessary to justify new developments, which seems unlikely unless interest rates and construction costs decrease significantly. They see a low risk of increased supply in the near term but express concern about the potential impact of a recession in 2025 on the overall economy.

The paragraph discusses the performance of Camden in various markets, highlighting that certain factors specific to Camden or broader market trends may influence outcomes. Tampa experienced a demand boost due to a hurricane, similar to post-hurricane effects seen in Houston with Harvey. In Washington, D.C., a significant overlap exists with Camden's public market peers, and the outlook is generally positive. Camden's notable presence in Houston, where it's the only public company with considerable involvement, has contributed to strong performance due to low supply. Despite plans to reduce its Houston market share, the city is expected to continue performing well through 2025.

The paragraph discusses the strong performance of the energy sector and real estate markets, particularly in Houston and Southern California, noting the recovery from COVID-related challenges. It highlights the efficient operation and success in occupancy and NOI growth across markets, suggesting that owners of assets in these regions are satisfied. The speaker, Ric Campo, also praises Camden's execution ability, attributing its long-standing recognition as one of the best companies to work for to a strong team, positive philosophy, and customer-focused culture, drawing an analogy to a well-coordinated Super Bowl team.

The paragraph discusses a conversation during a financial call, where Rob Stevenson from Janney asks about Camden's development start guidance in terms of expected yields, given construction costs and rents. Ric Campo responds that their projected yields are around 6%, but it's challenging to find developments that meet those numbers due to current market conditions. Despite this, he believes their developments in certain markets can achieve or surpass these yields due to anticipated rent growth. Following this, Adam Kramer from Morgan Stanley inquires about the demand in Washington DC, particularly considering recent news about federal workers and the potential downsizing of the federal government.

The paragraph discusses the real estate market in Washington, DC, focusing on the demand and transaction trends. Ric Campo mentions that DC has a robust transaction market, with cap rates ranging from the mid to high fours, and highlights that DC's revenue growth has been strong and is expected to continue. Changes in government administration can impact demand, particularly in the single-family market where property prices often spike during such transitions. Keith Oden comments on the uncertainties around government changes and workforce downsizing, noting that a relatively small number of federal employees are taking buyout packages, which has minimal impact on the overall federal workforce.

The paragraph discusses the impact of federal employees returning to office spaces, particularly in Washington, DC, on the real estate market. The speaker notes that DC has been a weak spot in their metro portfolio for the past two years, but suggests that as federal employees return to work, there may be increased demand for housing closer to or within DC. The speaker is skeptical about significant changes in federal employees' work patterns despite discussions. Alex Jessett mentions an increase in new lease rates in the DC Metro area. Julian Bloyne from Goldman Sachs inquires about development starts in 2025, and Ric Campo explains that decisions depend on achieving reasonable financial returns, citing Nashville's busy development scene and challenges with construction costs and subcontractor availability.

The paragraph discusses the outlook on construction and rental markets, noting that construction costs have stabilized, and there is potential to achieve a 2-4% savings when buying out contracts. The speaker suggests that confidence in positive revenue growth is essential, aiming for a 100-150 basis point positive spread between purchasing and building costs. They anticipate gaining more confidence in revenue growth for 2026-2028 by midyear, which will influence their positioning within a certain range. Additionally, they see opportunities to complete projects that other merchant builders cannot, potentially reaching the higher end of their target range. The paragraph ends with a segue to the next question from Connor Mitchell of Piper Sandler, who comments on the active bidding for apartments amidst financing costs and expectations for rent growth overcoming those challenges.

The paragraph discusses the anticipated economic growth in 2026 and 2027, which some believe will be substantial following a downturn. This expectation is driving current market behaviors and underwriting practices, particularly concerning rent growth. It suggests that despite current negative leverage, the combination of stable job markets, economic growth, and increasing NOIs (Net Operating Incomes) in some markets could lead to improved buyer-seller alignment. Even though interest rates may remain high for some time, there's an expectation that they might eventually decrease, further supporting the anticipated market growth.

The paragraph discusses the dynamics in the real estate market, focusing on current buyer and seller behavior amid fluctuating cap rates and NOI growth. While some sellers believe they can secure higher prices in the future based on anticipated cash flow growth, others are hesitant amid negative leverage. The speaker anticipates a more active transaction market by 2025, with positive rent growth creating opportunities. The conversation then shifts to diversification strategies in apartment REITs, with emphasis on not exceeding a 10% portfolio allocation in any market. There's a trend for coastal investors to diversify into new markets, but it's unclear if certain markets are inherently better for long-term investment.

The paragraph discusses Camden's view on their markets, specifically addressing whether the current strong performance of Houston and Washington DC is indicative of those markets or the broader set of opportunities across all their markets. Keith Oden explains that while Houston and DC were previously underperforming, they are now among the top performers, illustrating the shifting nature of market performance. He emphasizes that it's about maintaining a balanced portfolio across their 15 markets, each chosen for characteristics like in-migration, job growth, and rent growth potential. The focus is on balancing growth opportunities across various markets, including those like Austin and Nashville where they have less presence.

In the paragraph, Alex Jessett discusses the expectation of returning to normal seasonal leasing patterns, with new lease rates turning positive in the third quarter and softening in the fourth quarter due to less demand during the holiday season. David Segall asks about rent requirements to achieve a 6% yield in Nashville and Denver, and Alex Jessett promises to provide that information later. Alex Kim inquires about leasing trends for the three communities in lease-up and how it impacts lease-up revenue for the quarter and projections for 2025.

The paragraph discusses the leasing status of several communities, focusing on single-family rental communities, which have been experiencing slow leasing due to the demographic they attract. The decision-making process for these tenants is lengthy, but this is seen as positive as it suggests they'll be less likely to move out quickly. The communities mentioned include Woodmill Creek, which is 89% occupied, and Camden Durham, 78% occupied, both nearing stabilization. Longmeadow Farms, at 53% leased, lags slightly but started later. The paragraph concludes by referring to the end of a question and answer session and the closing of the earnings season for large-cap multifamily projects.

This summary was generated with AI and may contain some inaccuracies.