• Core FFO: $1.71 per share, $0.03 ahead of prior guidance midpoint.
• Same-Store Revenue Growth: Full year guidance range of 1.1% to 1.5%, midpoint at 1.3%.
• Same-Store Expense Growth: Full year guidance range of 2.1% to 2.5%, midpoint at 2.3%.
• Occupancy: Third quarter average occupancy at 95.5%; fourth quarter expected range of 95.2% to 95.4%.
• Net Turnover: Third quarter 2024 at 46%, compared to 51% in third quarter 2023.
• Development Activity: $320 million in new developments commenced in second half of 2024; $375 million anticipated in early 2025.
• Debt Profile: 80% fixed rate; net debt-to-EBITDA at 3.9 times.
• Interest Expense: Lower interest expense contributed to favorable financial performance.
• Insurance and Property Taxes: Continued lower-than-anticipated expenses.

• Warning! GuruFocus has detected 10 Warning Signs with CPT.

Release Date: November 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Camden Property Trust (NYSE:CPT) reported third-quarter earnings ahead of expectations, with core FFO of $1.71 per share, $0.03 above the midpoint of prior guidance.
• The company experienced strong apartment absorption, the best in 20 years, driven by robust job growth and migration to Camden markets.
• Camden's markets are experiencing faster growth than the national average, with fewer consumers opting for homeownership, supporting rental demand.
• The company maintained a strong balance sheet with a net debt-to-EBITDA ratio of 3.9 times and 80% of its debt at fixed rates.
• Camden Property Trust (NYSE:CPT) plans to commence $375 million in new developments in early 2025, indicating continued growth and expansion.

Negative Points

• New apartment supply is at an all-time high, limiting meaningful rent growth in most markets.
• Camden Property Trust (NYSE:CPT) reported a decline in new lease rates, with signed new leases down 2.8% in the third quarter.
• The company paused four pre-development projects due to unfavorable economic conditions, including high construction costs and muted rent growth.
• Camden's exposure to Houston and Washington, D.C. remains high, with plans to reduce concentration in these markets.
• The company anticipates continued pressure on occupancy and lease rates in the fourth quarter due to typical seasonal declines.

Q & A Highlights

Q: What are the reasons behind pausing the four pre-development projects, and how much would rents need to rise for these projects to be viable? A: Richard Campo, CEO, explained that construction costs have not decreased while rents have fallen, affecting the viability of these projects. The decision to pause was based on conservative financial policies and capital allocation priorities. Rents would need to increase by about 100 basis points above long-term growth averages to make these projects viable. The focus is on reallocating capital to markets with better growth prospects and buying existing properties below replacement cost.

Q: How confident are you in seeing more opportunities from forced sales by merchant developers in the coming years? A: Richard Campo, CEO, expressed confidence in increased transaction volume rather than distressed sales. Merchant builders are incentivized to sell due to profit motivations and the need to reload their pipeline. The upcoming $650 billion in multifamily debt maturities will also drive market activity. While distressed sales may occur, they are likely to involve properties Camden is not interested in.

Q: What is Camden's strategy regarding its exposure to the Houston market, and could dispositions fund new investments? A: Richard Campo, CEO, stated that Camden aims to reduce its exposure in Houston and Washington, D.C., despite these being strong markets currently. The goal is to trim the portfolio in Houston over time, focusing on selling slower-growing assets. Camden's strategy involves maintaining a balanced market exposure, ideally with no double-digit concentration in any single market.

Q: Why did leasing spreads fall significantly in October, and was there a strategic shift towards occupancy? A: Alexander Jessett, CFO, confirmed a strategic shift towards increasing occupancy, which impacted leasing spreads. This approach was intended to maximize revenue, and the impact is expected to continue into the fourth quarter.

Q: How does Camden view the current acquisitions market, and what are the expectations for deal flow in the near future? A: Richard Campo, CEO, anticipates significant deal flow in 2025 due to the large volume of multifamily debt maturing. Camden will focus on acquiring properties below replacement cost and improving operations. The company is prepared to be more active in acquisitions, balancing development and acquisition opportunities based on market conditions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.