Camden Property Trust Q2 FY2025 earnings call

• Sunbelt markets continue to have good vibrations with strong apartment demand. Second quarter apartment demand was one of the best in 25 years. Affordability improved with wage growth exceeding rent growth, expanding demand and creating new customers. Resident retention is strong due to excellent on-site teams achieving high customer sentiment scores. New supply additions have peaked, and new developments are leasing at decent pace with rental rates expected to firm by 2026 leading to better rent growth. - Operating conditions: Rental rates had effective new leases down 2.1% and renewals up 3.7% for a blended rate of 0.7%, improving from prior quarters. Occupancy averaged 95.6% in Q2 and is expected to remain in mid-95% range. Renewal offers for August and September had an average increase of 3.6%. Turnover rates were very low at 39%. - Real estate activities: Active on asset recycling, purchasing and disposing of properties. Stabilized one single-family rental community, with others in leasing progress. Lease-up continues at some developments.

Camden's real estate activities included purchasing Camden Clearwater, a 360-unit waterfront community in Tampa for $139 million and disposing of 4 older communities for $174 million. They stabilized Camden Woodmill Creek, a single-family rental community in Houston, and have leasing progress on other development communities. Financial results for Q2 2025 showed core funds from operations of $187.6 million or $1.70 per share, $0.01 ahead of prior guidance, driven by higher property tax refunds and lower interest expense. Property revenues were in line with expectations, and property expenses, especially property taxes and insurance, were outperforming.

• Core FFO guidance: Increased full year core FFO midpoint to $6.81 per share from $6.78, driven by property expense outperformance. - Third quarter guidance: Core FFO per share expected to be in range of $1.67 to $1.71. - Acquisitions and dispositions: Midpoint of guidance is $750 million for both, implying additional $412 million in acquisitions and $576 million in dispositions, with dispositions more back-end loaded. Development starts guidance was $184 million to date, with potential to start more projects later.

• Economic uncertainty: Uncertainty around tariffs, economy, and potential recession could impact apartment markets. Operators being cautious due to uncertainty, focusing on occupancy rather than pushing rates. - Supply and demand dynamics: While demand is strong, excess supply in some markets could impact rental rates if not absorbed properly. - Refinancing risks: Although balance sheet is strong, changes in interest rates could affect refinancing costs.

Q: How much did July data show in terms of acceleration and what's the expectation for third quarter blends?

A: Blend increased monthly April through July, second half blended rates expected to be just under 1% leading to full year blend of about 50-75 basis points. Third quarter blend expected to be just under 1%.

Q: What drove the change in markets and how D.C. and L.A. performed?

A: Some markets did better than expected, others softer. D.C. had high quarter-over-quarter revenue growth, high occupancy, rental rate growth, and no slowdowns in guest cards. L.A. had highest quarter-over-quarter revenue growth in the portfolio. - Q: Thoughts on rent growth in coming years and comparison to post-Great Recession?

A: Reminds of post-Great Recession, with strong demand despite oversupply. Starts down significantly in many markets, leading to expected strong rent growth in 2026 and beyond, similar to post-recession period. - Q: Aggressiveness in kitchen and bath renovations and yields?

A: Continue to pursue repositions, spending around 3,000 units in 2025, generating 8%-10% return with $150 per door additional rent.