Camden Property Trust

Good morning and welcome to Camden Property Trust's fourth quarter 2025 earnings conference call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today for our prepared remarks are Rick Campo, Camden's Chairman and Chief Executive Officer, Keith Oden, Executive Vice Chairman, and Alex Jessett, President and Chief Financial Officer. We also have Lori Baker, Chief Operating Officer, and Stanley Jones, Senior Vice President of Real Estate Investments, available for the Q&A portion of our call. Today's event is being webcast through the Investors section of our website at camdenliving.com, and a replay will be available shortly after the call ends. And please note, this event is being recorded. Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC and we encourage you to review them. Any forward-looking statements made on today's call represent management's current opinions and the company assumes no obligation to update or supplement these statements because of subsequent events. As a reminder, Camden's complete fourth quarter 2025 earnings release is available in the Investors section of our website at camdenliving.com, and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call. We would like to respect everyone's time and complete our call within one hour, so please limit your initial question to one, then rejoin the queue if you have a follow-up question or additional items to discuss. If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or email after the call concludes. At this time, I'll turn the call over to Rick Campo.

Good morning. The theme for today's On Hold Music, Uncertainty, could not be more fitting for the state of the multifamily REIT sector. It's no exaggeration to say that the words uncertain or uncertainty have echoed through the conference call transcripts during 2025. And why wouldn't they? The operating environment last year was uncertain. And every sign suggests that the first half of 2026 will be marked by the same cautious tone as last year. The songs that you've heard this morning reference uncertain times. However, the song verse that best captures the current uncertain vibe for us is from The Doors' classic Roadhouse Blues. Well, I woke up this morning and I got myself a beer. The future's uncertain and the end is always near. The end of uncertainty, that is. Here's what we are certain about. We are certain that we finished 2025 strong, exceeding our original guidance for core FFO by 13 cents a share. We're certain that people need a great place to live, and we provide that. We are certain that new supply has peaked and is falling like a knife in our markets. We are certain that 2025 had one of the highest levels of apartment absorption in the last 20 years. We are certain that our Sunbelt markets will continue to grow faster than the rest of the country, prompting us to market our California properties for sale. The sale allows us to expand our Sunbelt footprint, simplify our operating platform, and buy our shares at a significant discount to net asset value. We are certain that our residents are resilient and their financial prospects are strong with rent payments at only 19% of their income. We are certain that apartments are significantly more affordable than owning a home and will be for the foreseeable future. We are certain that new lease rates and net operating income will grow in the future. We are certain that Camden has one of the strongest balance sheets in REIT land. We are certain that we have one of the best teams in the business, providing living excellence to our residents. And finally, I'm certain that Keith Oden is up next.

Thanks, Rick. As we reported last night, Camden's same property revenue growth for 2025 came in at 76 basis points, which represents a one basis point beat to the midpoint of our most recent guidance. And our operations teams are celebrating like they just won the Super Bowl. In putting together our projections for 2026, we reviewed supply forecasts and job growth estimates from several third-party data providers. and we budgeted from the individual property level up, taking into account each community's historical performance, current submarket dynamics, and other relevant factors. On the supply front, it is clear that deliveries in almost all of our markets peaked during 2024 and continued to decline in 2025, setting up 2026 and 2027 to be below average years for new supply. Completions as a percentage of inventory peaked at nearly 4% for our portfolio in 2024 and are expected to be less than 2% this year and closer to 1.5% in 2027. Regarding 2026 job growth, I'll echo Rick's comments that uncertainty is still a key theme in the markets this year. But we are certain, also, that whatever jobs are created this year will predominantly be in Camden's Sunbelt markets, which continue to attract corporate relocations and growth as a result of their affordable, business-friendly environments. In 2026, we expect operating conditions will improve over the course of the year, with modest acceleration in the second half of 2026. The midpoint of our 2026 same property revenue guidance range is 75 basis points, basically the same that we achieved last year, with half of our markets falling between 1% and 2% revenue growth and most others flat to up 1%. The two outliers with slight revenue declines will likely be Austin due to continued supply pressure and Denver due to recent regulatory changes affecting income from utility rebilling. As many of you know, we have a tradition of assigning letter grades to forecast conditions in our markets at the beginning of each year and providing outlooks of improving, stable, or moderating for their expected performance during 2026. We currently grade our overall portfolio as a B with a stable but improving outlook. Our first three markets are rated either A- or B+, and should achieve revenue growth in the 1-2% range this year. Washington D.C. Metro ranks as an A- with a moderating outlook. Despite all of the conversations around D.C., Doge, and politics last year, D.C. Metro clearly outperformed our expectations with 3.5% revenue growth in 2025 and heads into 2026 well-positioned with 96% occupancy. Houston is next with a B-plus rating and a stable outlook, the same grade as last year. Supply has been quite limited in Houston for the past couple of years, allowing it to place number four for revenue growth in 2025, and we expect Houston to exceed our average portfolio growth again in 2026. Our Southern California markets earn a B-plus grade with a moderating outlook for 2026. Like DC Metro, Southern California outperformed our original expectations, posting mid-3% revenue growth in 2025, in large part due to declining levels of bad debt. Supply has not really been an issue in most of our California markets, but we do expect less of a tailwind from reducing bad debt as we move through 2026. Denver was our number three revenue growth market in 2025 and receives a grade of B+, with a moderating outlook. Market conditions in Denver are fairly stable, though slightly more challenging in a few of its urban submarkets. But as I mentioned earlier, revenue growth is expected to decline year over year due to lower levels of utility rebilling and other income anticipated in 2026. Our next four markets earned a B-letter grade with improving outlooks. Nashville, Atlanta, Dallas, and Southeast Florida are all expected to improve over the course of 2026 as existing supply is absorbed. We have begun to see the proverbial green shoots in some of these markets and have budgeted between 1% and 2% revenue growth for each market this year. Orlando, Raleigh, and Charlotte received B ratings this year with stable outlooks and budgeted revenue growth of 0-1% compared to relatively flat growth last year. Demand has been solid in all of these markets, but it will take a few more quarters to see any meaningful improvements given the higher than average supply delivered, particularly in the two North Carolina markets. We'd grade Tampa a B with a moderating outlook and Phoenix a B- with a stable outlook and expect relatively flat revenue growth in both markets this year. Tampa benefited from above-average occupancy in 2024 and much of 2025, but has since returned to more normalized levels around 95%, tending to slow the revenue growth there. Phoenix still faces elevated levels of supply, mainly on the western side, so we expect pricing power to be limited for most of 2026. And finally, Austin earns a C-plus this year with an improving outlook after being stuck for a C-minus for the past two years. New supply is finally slowing and there is light on the horizon, but given the overwhelming amount of new apartment homes delivered in 2024 and 2025, It will take a little while longer for market-wide occupancy to improve and concessions to burn off. Stay tuned as we're fully expecting Austin to receive a B or better in 2027. And now a few details on our fourth quarter 25 operating results. Rental rates for the fourth quarter had new leases down 5.3% and renewals up 2.8% for a blended rate of negative 1.6%. which is fairly in line with what we saw in the fourth quarter of 24 and what we expected for the fourth quarter of 25. Renewal offers for first quarter expirations were sent out with an average increase of 3 to 3.5%, and as expected, Move outs to purchase homes remain extremely low at 9.6% for the fourth quarter and 9.8% for the full year of 2025. I'll now turn the call over to Alex Jesset, Camden's President and Chief Financial Officer.