CAMDEN PROPERTY TRUST Q4 FY2024 earnings call

Ric Campo's Remarks

• 2025 is the year for Camden to move on, with new supply pressure lessening in 2025, setting the stage for improved revenue and net operating income growth. Team Camden performed well in 2024 despite record supply, using technologies to improve customer experiences.

Keith Oden's Remarks

• 2024 same property revenue growth was 1.3%, with most markets near budget. 2025 same property revenue growth is anticipated to be 1% with a range of 0 to 2%. Discussed market performance by grade, top five markets' expected growth, and supply forecasts from third-party providers showing supply peaked in 2024 and will decline in 2025.

Alex Jessett's Remarks

• Fourth quarter 2024 core funds from operations were $190.4 million or $1.73 per share, ahead of guidance. Discussed real estate activities like completions of communities in Raleigh and Houston, and acquisition of a community in Austin. Provided 2025 financial guidance including core FFO per share range, development starts, and expense growth assumptions.

Camden's same property revenue growth was 1.3% in 2024. For 2025, same property revenue growth is anticipated to be 1% with a range of 0 to 2%. The top five markets are expected to see revenue growth in the range of 2 to 2.5%, accounting for over 40% of the 2025 budgeted revenue. The next eight markets are budgeted for revenue growth between 0 and 1%, comprising over half of the 2025 budgeted revenue. Nashville and Austin, representing 6% of Camden's revenues, are expected to remain challenged in 2025 with expected declines of 0 to 3%, though cautiously optimistic for improvement by year-end.

Core FFO Per Share

• 2025 core FFO per share is expected to be in the range of $6.60 to $6.90, midpoint $6.75.

First Quarter 2025

• Expected core FFO per share to be within the range of $1.66 to $1.70.

Transactions and Development

• Anticipates $750 million in acquisitions and dispositions, $675 million in development starts, and $285 million in total development spend for 2025.

• Economic recession could impact performance. - Supply forecasts have a wide range, but consensus is supply peaked in 2024 and will decline in 2025. - Uncertainty in transaction market dynamics between buyers and sellers, with potential for differing expectations between buyers and sellers.

Q: Can you provide more color on your blend assumptions and new/renewal lease growth throughout the year?

A: New leases will be slightly negative full year, renewals in high 3% range. Anticipate positive new leases in Q3 and return to seasonality in Q4.

Q: Are you seeing signs of the impact of supply fading on the ground?

A: Yes, encouraged by signed new lease agreements in January, especially in the fourth quarter.

Q: Can you provide more color on transaction guidance, timing, cap rate, etc.?

A: Transaction volume muted due to buyer-seller standoff, but with rates higher for longer and constructive view on future, gap between buyers and sellers is closing, setting up for recycling capital.

Q: What do you see regarding distress similar to post-World Financial Crisis?

A: No distress in institutional investor quality space, but buying below replacement cost in markets like Austin where population growth is strong.

Q: Can you walk us through the quarter and new lease rate expectations?

A: Fourth quarter better than expected, broad across markets, with improvement carried over into January, and optimism for back half of 2025.

Q: Can you talk about the rationale around front-loading acquisitions and transaction dilution?

A: Tax-efficient reverse 1031 exchanges, older assets sold first leading to wider FFO spread initially, but tighter spreads expected later.

Q: Can you discuss portfolio management objectives and balance sheet capacity?

A: Target no market over 10% of NOI by 2027, looking to reduce exposure in DC and Houston, and will lean into balance sheet for opportunities when transaction market stabilizes.

Q: Can you remind us of return on revenue-enhancing CapEx and its impact?

A: 8-10% return on invested capital, ~$150 per door rent uplift, refreshes portfolio and positions against new supply.

Q: What's the risk of supply dropping off over time and its impact on guidance?

A: Low risk of supply upturn, bigger risk in economic recession; supply peaked in 2024 and will decline, with new supply not impacting until 2027-2028.

Q: Do Camden's market performances reflect overall market or specific attributes?

A: Tampa demand in fourth quarter was hurricane-related; other markets' performance due to execution ability, low bad debt, and market trends like energy sector in Houston.

Q: Can you talk about development start yields and comparison to current projects?

A: Projected yields around 6%, challenging to find developments, but expected outsized rent growth in target markets.

Q: Can you provide latest on Washington DC demand and transaction market?

A: DC transaction market has mid-fours to high-fours cap rates, demand good; government transition creates cross-currents in demand.

Q: Can you discuss spread between low and high end of development starts and yield confidence?

A: Need 100-150 basis points positive spread for development risk, more confidence midyear when rental rate second derivatives turn positive.

Q: How long will negative leverage last and is rent growth underwriting too aggressive?

A: Negative leverage likely until NOI growth and rate declines make cap rates align, market betting on 2026-2027 outsized growth justifies current view.

Q: Does diversification decision say more about markets or opportunity set?

A: More about balance across 15 markets, with past underperformance of DC and Houston now reversed, focusing on growth opportunities in other markets.

Q: Can you talk about leasing trend for communities in lease-up?

A: Single-family rental communities lease slower, but Camden, Durham at 78% occupied, Woodmill Creek at 89% occupied, Longmeadow Farms at 53% leased, with stabilization expected.