Camden Property Trust

Good morning and welcome to Camden Property Trust's second quarter 2024 earnings conference call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today are Rick Campo, Camden's Chairman and Chief Executive Officer, Keith Oden, Executive Vice Chairman, and Alex Jessett, President and Chief Financial Officer. Today's event is being webcast through the Investors section of our website at camdenliving.com, and a replay will be available this afternoon. We will have a slide presentation in conjunction with our prepared remarks, and those slides will also be available on our website later today or by email upon request. If you are joining us by phone and need assistance during the call, please signal a conference specialist by pressing the star key followed by zero. All participants will be in listen-only mode during the presentation with an opportunity to ask questions afterward. And please note, this event is being recorded. Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC, and we encourage you to review them. 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 2024 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 one hour, so please limit your initial question to one, then rejoin the queue if you have 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. The theme of our on-hold music today is waiting. During our meetings with multifamily stakeholders in recent months, the consensus views seem to be that everyone in multifamily is waiting for something. Operations teams are waiting for the pace of multifamily completions to reach a peak and begin to come down and for bad debts to return to pre-pandemic levels. CFOs are waiting for the long-anticipated first interest rate cut by the Fed and as well as a relief in property insurance and property tax expenses. Transaction teams are waiting for the standoff between buyers and sellers to end. Sellers are waiting for buyers to throw in the towel and start buying, while buyers are waiting for the towels to go on sale. While we are certain that the waiting will end eventually, the timing is the debate. In the meantime, as the late, great Tom Petty reminds us, the waiting is the hardest part. With the second quarter behind us, I'm going to reprise most of my comments from last quarter since the markets are playing out as we have expected. We spent most of our time talking about supply in our markets. Yes, we are at a 30-year high for apartment deliveries, and yes, this is limiting rent growth in most of our markets now. The good news is that our markets are adjusting quickly to the post-pandemic low-interest rate development frenzy. Starts are still projected to fall to just over 200,000 apartments in 2025. New deliveries should peak in 2024, falling 21% in 2025. and another 54% in 2026, which would be a 13-year supply low point. Apartment demand continues to be strong. During the first half of the year, net apartment demand was over 200,000 apartments, matching 2018 and 2019. Witten Advisors projects 2024 apartment demand to be in the 400,000 range. The main driver of apartment demand is household formation, driven by population and employment growth, apartment affordability, and positive demographic trends. The most recent 2022-2023 census data reported that the top 10 cities increased their population by 710,000. Nine Camden markets are in the top 10. The bottom 10 cities reported a loss of 200,000 people. These were major cities on the west and east coast where Camden has limited exposure. Employment growth has been robust in all of our markets except Los Angeles, which continues to struggle. Ten of our markets have had job growth greater than 10% compared to the pre-pandemic levels. Apartment affordability continues to improve as resident wage growth has been over 5% while rents have been relatively flat. Consumers are spending less of their take-home pay for apartments. New Camden residents pay 19% of their income towards rents. Mortgage rates and rising home prices have kept move-outs to buy homes near historic lows. 10.3% of Camden residents moved out to buy a home in the second quarter. The monthly cost of owning a home today is about 60% more than leasing an apartment. This is not going to change anytime soon. Demographic Trends continue to be a tailwind, supporting demand for high propensity to rent groups, including young adults aged 35 and under. Apartments should take a larger share of household formations given these demand drivers. 2024 demand should be sufficient despite supply concerns to set up accelerating rent growth in 2025 and 2026, assuming that the overall economy continues the current trajectory. To take advantage of what we believe will be a robust multifamily leasing environment beginning in 2025 and beyond, we are starting construction on Camden South Charlotte and Camden Blakeney 769 suburban apartment homes located in the Ballantyne Submarket of Charlotte, North Carolina. I want to give a big shout out to our Camden team members for their hard work and their commitment to providing living excellence to our residents, which they never wait to do. Keith Oden is up next. Thanks.

Thanks, Rick. Operating conditions across our portfolio are generally playing out as we expected. Our second quarter 2024 same property performance exceeded our forecast, primarily due to continued lower insurance costs and property taxes, which we discussed a bit on last quarter's call. Our top markets for same property revenue growth were San Diego Inland Empire, Washington DC Metro, LA Orange County, Southeast Florida, Houston, and Denver all posting revenue growth above our portfolio average of 1.4% and ranging from 1.7% to 6.1% for the quarter. Austin and Nashville remain our most challenged markets with revenue declines of approximately 2% and 4% respectively for the quarter. Rental rates for the second quarter showed signed leases down 1.8% and renewals up 3.7% for a blended rate of a positive 0.8% with an average occupancy of 95.3%. Preliminary results for July indicate slightly better levels of rate growth with occupancy averaging 95.6%. Renewal offers for August and September were sent out with an average increase of 4.6%. And finally, turnover rates across our portfolio remain very low, driven by fewer residents moving out to buy homes. Net turnover for the second quarter of 24 was 42% compared to 45% in the second quarter of 2023. I'll now turn the call over to Alex Jesset, Camden's President and Chief Financial Officer.