Camden Property Trust (CPT) 2015 Q4 法說會逐字稿

Good day and welcome to the Camden Property Trust fourth-quarter 2015 earnings conference call.

(Operator Instructions)

Please note this event is being recorded. I would now like to turn the conference over to Kim Callahan, Senior Vice President of Investor Relations. Please go ahead.

Good morning and thank you for joining Camden's fourth-quarter 2015 earnings conference call. For those of you who listen to our hold music prior to the call, you heard songs from ZZ Top, Beyonce, Kenny Rogers, Archie Bell and the Drells, and Robert Earl Keen. These five artist have one trait in common. If you can identify the unifying trail of these musicians, please email me now at KCallahan@Camdenliving.com. The first person with the correct answer gets a shot out in today's call and the opportunity to help select music for our next call.

Now for the business at hand. 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 2015 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.

Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, President; and Alex Jessett, Chief Financial Officer.

I would like to remind everyone that it is our Company's policy not to comment on market speculation or rumors. An article was published earlier this week regarding a potential sale of several Camden communities. At this time we have no comment on that article and, as such, will not respond to questions related to the content of that article on today's call.

We will try to be brief in our prepared remarks and complete the call within one hour. We ask that you limit your questions to two, then rejoin the queue if you have additional items to discuss. Just a heads, we already have 14 people in the queue so it might be a little bit longer. If we are unable to speak with anyone 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 Ric Campo.

Thanks, Kim. And good morning to most of you, good afternoon in New York. I want to first give a shout out to our Camden team members who worked smart and with integrity to produce another solid year of growth, an improved portfolio and strong balance sheet for the Company.

In 2015 we guided at the beginning of the year to a 4% increase in same-property net operating income, and we finished the year with 5.2% growth in our net operating income. Our geographic and property diversification strategy continues to work for us, stabilizing our operating income as markets go through their business cycles.

I know that the market is forward-looking but it's important to understand the past to set the stage for the future. As Mark Twain famously said -- history doesn't repeat itself, but it rhymes.

In the last cycle that we began in 2010 -- I wanted to give you Camden's scorecard through the end of 2015 -- our average rent increased from $937 a month to $1,322 a month, a 41% increase, producing a 7.1 compound average growth rate. Our average portfolio age began 2010 at 12 years old and ended 2015 at 12 years old. I wish I could do that with my age.

Camden's net operating income growth was the second highest in the sector from 2010 through 2015 at 37.1% growth, which produced a compound average growth rate of 6.5%. Our debt to EBITDA improved from 7.2 times to 5.2 times, producing one of the strongest balance sheets in the sector.

2016 will be another good year for our business with operating trends above long-term averages. Apartment demand for millennials and empty-nesters should be sufficient to absorb new supply and be constructive for rent increases in most markets.

Houston is our second largest market with a 12% net operating income contribution. Last year Houston added 23,000 jobs. The energy sector lost 31,000 but the healthcare, education, hospitality and government added 54,000, offsetting those energy losses.

We expect another slow year for job growth in Houston coming up. Another 20,000 energy jobs look like they're going to be lost but they'll be offset by 42,000 jobs gained in the same sectors that were added in 2015.

In the near term, Houston has too many apartments coming online given the slow job growth that we are experiencing now. Houston is no stranger to oil price volatility. In the last 20 years, oil prices have ranged from $16 a barrel to a high of $145 a barrel, with lots of peaks and valleys along the way.

Over that same period, Camden has experienced only one year where our net operating income was down 10%, and that was during the recession of 2003 with revenues down 3.7%. Our guidance doesn't include such a drop at this point. But for those of you who have a much more bearish outlook for Houston, a 10% decline in our net operating income would reduce our 2016 same-property net operating guidance from 4.5% to 3.5%, and would reduce our FFO by $0.06 a share.

While we expect Houston to be our slowest market in the near term, the market will hold up better than most people expect. Forbes magazine just published a list of the top 10 cities for growth in the US from a business perspective, and Houston, Dallas-Fort Worth, Austin and San Antonio were in the top 10. Low oil prices are good for America and especially for our residents. They have more income to pay rent and other necessities.

Over the last two years, we have been a net seller of properties. We will continue to be a net seller properties in 2016. Apartments are fully valued in the private market. Private apartment companies enjoy a cost of capital advantage over public companies at this point in the cycle. We will continue to sell non-core assets during 2016, using proceeds to fund our development, pay down debt, and return capital to shareholders if we can't find a suitable investment.

With that, I'll turn the call over to Keith Oden. Before I do that, however, we do have a winner, and the winner is Neil Malkin with RBC who correctly guessed that all five of the musicians featured on our pre-call music started in Houston, Texas. Just a reminder that there really are other things other than apartments that get started in Houston, Texas. Over 30 other people had the correct answer so far, but Neil was the first one. So, Neil, good job and we are glad that you're quick on your feed and on your iPad, as well.

Now I will turn it over to Keith, as well

Thanks, Ric. Consistent with prior year's, I'm going to use my time on today's call to review the market conditions that we expect to encounter in Camden's market during 2016. I will address the markets in order of best to worst by assigning a letter grade to each one, as well as our view on whether we believe the market is likely to be improving, stable or declining in the year ahead. Following the market overview I'll provide additional details of our fourth-quarter operations and our 2016 same-property guidance.

Our number one ranking this year goes to Denver, which we rate as an A with a stable outlook. Denver was our top market in 2015, with an 8.2% same-property revenue growth, and we expect it to be one of our top performers again in 2016. Supply should remain below historic levels with 6,500 new apartments expected to open this year, and nearly 30,000 new jobs should be created.

Orlando and Tampa are in the next two spots, both with A-minus ratings and improving outlooks. These markets have been somewhat average performers for us over the past over years but they began to accelerate in mid-2015, and by year end both markets ranked in our top five for quarterly revenue growth. Tampa should see 30,000 jobs created with around new 6,000 units being delivered, job growth in Orlando is projected to be closer to 50,000 with 7,500 new apartments coming online, providing a favorable ratio of supply and demand in both markets.

Rounding out our top five rankings for this year are Dallas and Phoenix with an A-minus rating and a stable outlook. Both markets posted over 7% revenue growth during 2015 and are poised for very good performance again this year. Job growth in Dallas has been very strong with over 80,000 jobs added in 2015.

Estimates remain pretty strong for 2016 with approximately 70,000 new jobs projected. New developments have been coming online steadily for several quarters and another 20,000-plus new units are expected to open this year. While some of the DSW Dallas-Fort Worth submarkets may see increased competition this year, overall demand for apartments should be healthy given the continued strength in the Dallas economy.

55,000 new jobs were added in Phoenix last year and another 60,000 are anticipated during 2016. With 6,000 to 8,000 new units scheduled for delivery this year we think the outlook for Phoenix is very good.

Las Vegas moves up a bit this year after ranking as one of our bottom markets for the past several years. Today we rate Vegas as a B-plus with an improving knowledge. Our revenue growth there has been less than 2% in both 2012 and 2013, but the market began showing a solid improvement in 2014. Last year we posted 6.7% revenue growth. We expect strong results again in 2016. Supply remains minimal with less than 3,000 new apartments to be delivered this year, and 30,000 new jobs are forecast.

Atlanta, Southern California and Austin are next on the list, earning B--plus ratings and stable outlooks. Atlanta's been a top market for the past three years, averaging 7.9% annual revenue growth over that timeframe. And while we expect another good year in 2016, we all know trees don't grow to the sky, and another year of 8% growth seems too ambitious.

Job growth remains solid in Atlanta, with projections ranging from 60,000 to 80,000 new jobs this year. And supply remains very manageable, as well, with 10,000 to 12,000 new apartments scheduled for delivery.

Our Southern California markets also are having a healthy supply and demand outlook, with an aggregate of 190,000 jobs and 30,000 new apartments for our portfolio in LA, Orange County and San Diego. Our San Diego and Inland Empire markets achieved slightly better revenue growth for us in 2015. We think that trend will repeat again this year.

Austin has posted solid numbers for us over the last few years, averaging 6.4% annual revenue growth despite the steady wave of new apartments that have come online. Completions should moderate this year to around 8,000 apartments, and job creation will be similar to last year at 35,000.

We gave Raleigh and South Florida a B rating again this year, both with stable outlooks. Like Austin, Raleigh has faced high levels of new supply for several years but our portfolio has held up well. We expect 2016 to look a lot like 2015 there, with job growth in the 16,000 to 18,000 range and new deliveries of roughly 4,000 apartments. South Florida should also continue on a steady path with around 9,000 new units being easily absorbed by the 47,000 new jobs expected to be created in 2016.

Conditions in Charlotte are currently a B, with a declining outlook. Charlotte added around 12,000 apartments over the last two years and another 8,000 completions are expected again this year. Job growth should remain healthy with 30,000 new jobs versus roughly 35,000 last year, but our occupancy and pricing power will begin to moderate during 2016 as even more new communities come online.

Washington DC moves up one spot this year to a C-plus rating but improving outlook. Revenue growth was 0.7%, just better than flat in 2015, which was the lowest in our portfolio. We expect a modest improvement to roughly 2% in 2016. Completions this year should begin to slow to the 10,000 range, but job growth remains a little bit of a wild card for DC with the estimates ranging from 35,000 up to 60,000 new jobs this year.

It should be no surprise that Houston ranks last this year, with a current rating of C, and conditions are expected to decline during 2016. As Ric mentioned, over the past 20 years of operating in this market our same-store revenue growth has ranged from a minus 4%, roughly 4%, which has happened twice during the recession years of 2003 and 2010, up to a high of 11% in 2012, with the average over that time frame being 3.4%.

We finished 2015 with just under 3% same-store revenue growth in Houston, and that number will likely be zero or completely flat this year for revenues in Houston. While Houston averaged 100,000 new jobs annually from 2010 to 2014, 2015 looks like we will get about 23,000 net jobs for 2015. And it looks like the estimate for 2016 will be in the 20,000 to 30,000 range, as Ric gave a little bit of color around that number. New supply has been significant for the past several quarters, and another 20,000 new apartments are expected to open in 2016, which will continue to add pressure to the overall market.

Overall our portfolio would rank close to a B-plus again this year, which is roughly where it ranked last year, which puts us in a very good starting position for 2016. For the markets we ranked as a B or higher, our same-store revenue growth should average 5% to 7% this year. Factoring in Washington DC at 2% and Houston at flat, our 2016 guidance range for same-store revenue is 4.1% to 5.1%.

Now a few details on our 2015 operating results. Same-store revenue growth was 5.4% for the fourth quarter and 5.2% for the full year. We saw strong performance in the fourth quarter of 2015 with 12 of our 15 markets exceeding 6% revenue growth and 5 of those recording over 8% growth. Our top performers for the quarter were Phoenix at 10.6%, Tampa at 9.8%, San Diego-Inland Empire at 8.8%, Dallas at 8.7%, and Orland at 8.3%.

Rental rate trends for the fourth quarter were as expected, with new lease is 0.6% and renewals up roughly 6%, which was approximately 50 basis points below last year's levels. For January so far, new leases are flat with renewals up 6.2%, which is about 40 basis points under our average gain in January 2015. February and March renewals are being sent out at roughly 7.3%, and those typically get signed within 100 basis points of the original offer.

Occupancy averaged 95.5% during the fourth quarter compared to 95.6% last year. January occupancy has been running at about 95.2%, which is where it stands right now, and the same as it was in January 2014.

Net turnover for 2015 actually came in 200 basis points lower than 2014 at 51% versus 53%. Continuing the years-long trend of well below trend moveouts to purchase homes, moveouts to purchase homes were 14.8% in the fourth quarter of 2015, 14.3% for the entire year, and that compares to 14.2% in 2014.

With that, I will wrap up and turn the call over to Alex Jessett, Camden's Chief Financial Officer.

Thanks, Keith. Last night we reported funds from operations for the fourth quarter of 2015 of $109.6 million or $1.20 per share, exceeding the midpoint of our guidance range by $0.01. This outperformance was due to slightly lower same-store operating expenses driven by effective cost controls, and lower interest expense due to timing of a capital market transaction.

Our prior guidance assumed we would issue an unsecured bond midway through the fourth quarter of 2015. Due to the continued strength of our balance sheet and volatility seen in the bond market in the fourth quarter we felt comfortable delaying the timing of this transaction. As of December 31, 2015, we had $244 million outstanding under our $640 million revolving lines of credit.

These two positives were partially offset by higher overhead expenses relating to a change in the accounting for our trust managers compensation, and a slight acceleration of the planned retirement of our General Counsel. All other line items for the quarter were in line with expectations.

Our new Camden technology package with bundled cable and Internet service is rolling out as scheduled, and for the fourth quarter contributed approximately 40 basis points to our NOI growth. For the year, this initiative has added 60 basis points for our same-store revenue growth, 120 basis points to our expense growth, and 30 basis points to our NOI growth. We now have approximately 23,000 units signed up for our technology package and the program is performing in line with expectations.

Moving on to 2016 earnings guidance, you can refer to page 26 of our fourth-quarter supplemental package for details on the key assumptions driving our 2016 financial outlook. We expect 2016 FFO per diluted share to be in the range of $4.75 to $4.95, with a midpoint of $4.85, representing a $0.31 per share increase over our 2015 results.

The major assumptions and components of this $0.31 per share increase in FFO at the mid of our guidance range are follows. A $0.26 per share, or $23 million, increase in FFO related to the performance of our 47,894 unit same-store portfolio. We are expecting same-store net operating income growth of 3.5% to 5.5%, driven by revenue growth of 4.1% to 5.1% and expense growth of 4.3% to 5.3%. And a $0.20 per share, or $18 million, increase in FFO related to net operating income from our non-same-store properties, resulting primarily from the incremental contribution from our development communities in lease up during 2015 and 2016 and five development communities which stabilized in 2015.

These positives are partially offset by a $0.02 per share, or $2 million, decrease in FFO related to lost NOI from the $147 million of dispositions completed in 2015, a $0.03 per share or $2.5 million decrease in FFO related to forecasted lost NOI from planned 2016 dispositions, a $0.05 per share or $4 million decrease in FFO related to increased interest expense resulting primarily from a planned mid-year $250 million bond transaction and lower levels of capitalized interest. In 2015 we completed 1,500 units of our development pipeline and anticipate completing approximately 1,200 additional units in 2016. Once the units are completed and we receive a certificate of occupancy we must begin expensing all interest and operating costs related to that unit.

A $0.02 per share or $2 million decrease in FFO due to increases in net overhead expenses. And, finally, a $0.02 per share decrease in FFO due to additional shares outstanding resulting from the regularly scheduled vesting of prior and anticipated incentive share issuances.

Taking a closer look at our anticipated same-store expense growth of 4.3% to 5.3% for 2016, we are once again expecting a large increase in property taxes. Property taxes are approximately a third of our total operating expenses and are projected to be up 6% in 2016. 5.5% is core, the result of anticipated increases and assessments for our properties in 2016 due to continuing increases in real estate values. 50 basis points is due to a year-over-year reduction in anticipated refunds from prior-year tax protests.

Additionally, we are anticipating a 10% increase in property utility expenses in 2016 as result of our continued bulk Internet initiative. Utilities are approximately 22% of our total operating expenses, and this initiative is adding approximately 200 basis points to our total 2016 expense growth, approximately 100 basis points to our 2016 estimated same-store revenue growth, and approximately 50 basis points to our same-store NOI growth. Excluding taxes and utilities, the rest of our property level expenses are projected to grow at less than 1.5% in the aggregate.

Page 26 of our supplemental package also details our expected ranges of acquisitions, dispositions and development activities. The midpoint of our 2016 FFO per share guidance range assumes the following. $250 million in on balance sheet disposition towards the latter part of the year, no on balance sheet acquisitions, zero to $200 million of on balance sheet development starts, and a $250 million bond transaction midway through the year.

Currently we estimate that an all-in 10-year bond pricing for Camden would be in the high 3% range. Our balance sheet remains strong with debt to EBITDA at 5.2 times, a fixed charge expense coverage ratio of 5.4 times, secured debt to gross real estate assets at 11%, 80% of our assets unencumbered, and 83% of our debt at fixed rate.

Last night we also provided earnings guidance for the first quarter of 2016. We expect FFO per share for the first quarter to be within the range of $1.16 to $1.20. The midpoint of $1.18 represents a $0.02 per share decrease from the fourth quarter of 2015, which is primarily the result of a $0.02, or approximately $1.5 million decline in sequential same-store net operating income, mainly due to higher property taxes and normal seasonal expense increases, partially offset by the timing of certain insurance reimbursements and a slight increase in same-property revenues due to continued improvements in rental rates.

At this time we'll open the call up to questions.

Jordan Sadler, KeyBanc Capital.

Hi, good morning. It's Austin Wurschmidt here with Jordan. I was just curious, first, on same-store guidance, how conservative do you guys really feel you're being this year versus the position you were in a year ago entering the year?

I think the guidance that we gave is always, we try to not be overly conservative but we also try to be realistic on what we can achieve. I think that one of the things that is interesting to note that wasn't in our prepared remarks, it was just an interesting thing, as I was putting together my notes for the call, is that if you go back to our original guidance for 2015, our 2016 guidance is actually higher than our original guidance for 2015, which I think -- even though we outperformed our guidance. So, obviously some of our markets did substantially better than we thought they were going to do.

Particularly the range that we built around Houston, we basically hit right on our numbers for Houston for 2015. 3% revenue growth was what our original plan was and that's about where we ended up. If you roll forward this year, obviously you've got the roll forward of the rent roll in Houston, which is still providing some benefit to us.

We've got a forecast this year for basically flat on revenue growth, which we think is appropriate. We think it appropriately addresses the conditions of a lot more supply coming online with some pretty muted job growth. But, at the same time, it also reflects the fact that a lot of our portfolio in Houston is not at Ground Zero for the delivery of new supply.

We think we've properly covered the risks that are out there. Obviously Houston is being a little bit more volatility around that number but we think we've got it captured appropriately.

How much of the higher same-store growth, do you think, is a function of what's already earned into the pipeline versus what was earned in last year?

I think the numbers are roughly the same in terms of where the overall effect is going to be. We rolled down roughly 300 basis points from 2014 through 2015, and that's about what we've got again this year. So, I think it's roughly the same.

From an occupancy standpoint we're starting at about the same place we did last year. Clearly over the course of the year you would expect that there's going to be a little bit more pressure on occupancy rates just because the overall market's going to be a little bit sloppier than it was in 2015. But, again, I think we've properly captured the scenario that we think is going to play out in Houston this year, which is 20,000 to 30,000 new jobs, and trying to absorb another 20,000 apartments.

Thanks for the detail. One more for me and then I think Jordan has a follow-up. I was just curious what you're seeing on the ground in Houston. Any increase in moveouts for job losses or uptick in bad debt expense?

None whatsoever in our portfolio on either account -- no uptick in bad debts, and certainly anecdotal evidence is very minor around job losses in the energy sector, but you're talking handfuls of people not anything meaningful in our portfolio. So, so far so good. As Ric mentioned in his comments, you take the 20,000 energy jobs that we lost, it gets offset by employment in other areas and we ended up with a net gain for the year of roughly 23,000 to 25,000 jobs.

I think the key to that, too, is you have to dig into the details of who really loses their jobs. If you think about what's going on, it's similar to what happened in financial services. And you guys, probably, on the call know more about that than we do.

But a lot of the people who are getting laid off in energy are older people, people 45 years and up, and they're hiring younger people, for obvious reasons. Younger people cost less they're more flexible, have new technology in their brains, and 50-year-olds don't. And generally 50-year-olds or 45-year-olds don't live in apartments, they live in homes. And those people, even though they're laid off, they generally have more capital and they are making their home mortgages and things like that, so there's no stress in the market.

I think that part of the equation people miss and just think if you have this print of 31,000 job losses in energy, it's all bad for the market. But, remember, we have 6.5 million people that live in this region and 31,000 people losing their jobs is very tough for them personally but it's a drop in the bucket in the scheme of 6.5 million people in the region.

Thanks for that., Just a quick follow-up. It's Jordan. On asset sales, I know the position you're in vis-a-vis your opening commentary. So, I'm not asking specifically about that. But how are you determining what's non-core? Is it a function of market or is it purely an individual asset underwriting from an IRR perspective?

What we do is we force rank our portfolio by property, to start with, and it's 1 to 172. That model is an econometric model that takes into account the markets, takes into account the CapEx, the return on invested capital. And then that's really a quant kind of analysis.

Then we also analyze every one of our markets and our submarkets within our markets. And we look at that and say -- what do we think this market is doing, where is it going. And then we also look at pricing within the market and on a relative basis where it was in the past, where it is today on a cap rate basis to try to understand if that market is getting a lot more love from investors because the cap rates are substantially lower, perhaps, than they have been in recent history.

So, with all that said, it gets rolled up and we look at it and decide. We, generally speaking, would rather sell the bottom piece of our portfolio. And then when you start looking at submarkets, if we see submarkets that are moving in a different direction, then we might want to exit those submarkets, as well. So, over the long-term that's how we evaluate our asset pricing model and our disposition strategy.

All right. I'll hop back in the queue. Thank you

Nick Joseph, Citigroup.

We've seen a handful of large portfolio sales and privatizations in the apartment sector over the last 12 months, so I'm wondering what your thoughts on selling a larger portfolio of assets given the strong bid, and then how you think about multifamily asset pricing at this point in the cycle overall

Multifamily asset pricing, as I said in my remarks, is priced very full right now. Cap rates are the lowest we've seen them in our business careers in every single market that we operate in. So, when you think about it from that perspective, it really is hard for us to compete with the private people from an acquisition perspective.

That's why last year we had zero acquisitions, even though we had $400 million of joint venture funds money to spend in addition to our own. With that said, we think development's a smarter alternative, even though we are shrinking our development pipeline given where we are in the cycle. As far as portfolio sales go, clearly there is a premium for portfolios today, and to the extent that we can derive value from that premium, we will.

Thanks. What percentage of the portfolio today would you consider non-core?

When you force rank every property you look at the bottom 10% or 15% of your portfolio, and that, by definition, is non-core because it's growing slower than the rest of the portfolio. When an asset is growing slower than the overall portfolio, it's obviously a drag on your cash flow and a drag on your NAV. So, we look at those, we define those as non-core.

And then what happens, generally, is that if a property is experiencing a slowdown in its return of invested capital there's a reason for it. It's either old and requires CapEx that doesn't increase the ability to increase rents, or it may be a submarket that's going sideways. That generally creates the situation, that sub-market situation or market situation, that actually creates the non-core position. We'll always have properties that are non-core.

Our disposition guidance for this year is $150 million to $350 million, and I would say that's the range of what we consider to be non-core.

Okay. And then just exposure -- if you were to hypothetically exit a market, your exposure to the other markets obviously would go up as a relative percentage. So, I'm wondering what your thoughts are on a level of concentration that you'd want to avoid in any one individual market.

When you look at the markets, our largest market is Washington DC. We have properties in Washington DC that could be on that list, too. But the bottom line is that when we think about our geographic exposure, we think about percentages but we are not wed to a specific number.

So, when you think about DC, for example, 16% of our portfolio is Washington DC, plus or minus. Washington DC is a big vast market. We have some in the district, we have some in Northern Virginia, we have some in Loudoun county. So, you can't really say it's all one market, in my opinion.

With that said, we aren't wed to a specific percentage but we do look at the percentages to try to balance the portfolio, because, when you think about a geographic diversification, it's just like a stock diversification. you're trying to lower the volatility of your cash flow. This year our same-store NOI growth is going down 60 basis points at the midpoint from last year, and that's because Houston's going down and other markets are going up to offset that. So, we want to keep a balance. We're really not wed to a specific number.

Thanks.

Rob Stevenson, Janney.

Good morning, guys. Keith, of the eight or so stable markets that you talked about when you ran through your list, any of those that wouldn't surprise you if they moved to declining over the course of 2016?

The stable markets that we have for 2016, just to run over them real quickly because people probably don't have that front of them, we have Denver stable. Dallas, Phoenix, Atlanta, Southern California, Austin, Raleigh and South Florida -- of that group, there's not really one on that group that I think has much volatility associated with it around a stable rating. If you just look at the projected job growth versus the deliveries, all of those are at a range that should sustain what we saw in 2015.

Obviously the ones where we have declining markets, we have Charlotte and Houston as declining markets, and I think those probably have a little more volatility associated with outcomes. And that's primarily because they've got a lot of new supply that's being delivered into the marketplace. When you got merchant builders who are heading for the exits, it always creates the potential for more volatility because they tend to discount now and ask questions later. If you've got lease-ups that are specifically in your competitive market set, in markets that have a lot of supply, then, yes, you're going to be more impacted by it.

We think we've captured those appropriately. But of the stable markets it would surprise me if any of those that I just listed off, that we ended up wishing that we had attached a declining rating to them.

Okay. And then if you look at the expected deliveries in DC over the next couple of years, barring some major unexpected increase in job growth there, is that just a market that is going to continue to be stuck in the mud for a prolonged period of time?

It is a market that is improving. So, instead of just flat or down a little, it's now up 1% or 2%. But we don't see it getting to the point where it's 4% or 5% like the rest of the country because of the supply pressure, even though supply is coming down some.

It will be interesting to see how the presidential election affects it because, generally speaking, when you think about DC, a change of administration, whether republicans come in or Democrats are retained, always creates a lot of movement and activity. And given that we as a country are not doing stupid things like shutting the government down, and things like that, that's obviously a positive for the DC market long term

If you look at -- we've got forecasts in our data that we keep out through 2017. We've given you the numbers for 2016, but if you roll that forward to 2017, and again I'll give you the average of the data providers, it looks like we get another 8,000 apartments in DC Metro in 2017. And the average of the job forecast for the DC Metro area are about 42,000. So, again, those metrics would not add to any pressures. It's sort of a go along/get along scenario, which is what we projected for 2016. It looks like we think we're going to get some additional traction out into 2017, and certainly those job growth and supply numbers are supportive of that.

Okay. And then, just lastly, are there any markets that you're finding it easier to backfill the land supply for future development relative to the others?

No. Not even in Houston.

All right. Thanks, guys

Rich Anderson, Mizuho Securities.

Thanks. Good morning. Ric, could you talk about how the buying public, those folks that are buying multifamily property, how that is changing what types of players are in that side of the table?

I don't think the players are changing much. You do have the big buyers that have emerged obviously, the portfolio buyers. But you still have a combination of, depending on the market you're talking about, what we call country club money buyers, which are private individuals that are using 70% to 80% leverage, floating rate debt. They're buying 5 cap rates or lower than 5 cap rates, financing it with 2%, 2.5% money, generating 8% cash-on-cash returns, and just focusing on cash-on-cash returns more than anything.

Then you have the pension funds that are still big buyers out there in a lot of markets. They're buying core assets and they're paying sub 5 in most markets and sub 4s in coastal markets. So, I think there's a very good combination of private, pension, and large capital players that everyone knows about. And in most markets you are getting multiple bids by all the above players, depending on the property type you're trying to sell.

Okay. If you're having such a walk in the park selling assets -- and I don't suggest it's that easy but, obviously, as you mentioned, pricing is full -- why not just sell more and not do a debt offering? Explain to me that thought process from a capital source perspective.

Sure. When you build guidance you have to build guidance around what you think is going to happen. But, on the other hand, you also have to adapt to the market as it goes forward. So, to the extent that we see opportunity to sell a larger asset base at a really good price, then we would do that. And clearly if we exceed our $250 million midpoint net disposition guidance, we would have to change our strategy and not do a bond deal.

We do have some complicated tax issues that we obviously have to deal with. We've told people in the past, we are probably right at the edge of, if we increase our dispositions from where they are today, we would have to do special dividends most likely unless we did 1031 exchanges. And the 1031 exchange markets, really, you'd have the same challenged buying, and I don't see a lot of opportunity to do that. So, yes, if we sell more, again, we won't do a bond deal and we'll have to change guidance.

Rich, to follow up on that, we have, in fact, been significant net sellers. I think Ric gave you the numbers from 2010 forward of our debt to EBITDA going from 7.2 to 5.2. And the primary source of the paydown in debt over that period of time from 7.2 to 5.2 has been net dispositions. We've been doing that. If you look at our guidance again this year, the midpoint of the dispo range is 250 with no acquisitions. So, we have been big-time net sellers

Thanks.

Alex Goldfarb, Sandler O'Neill.

Hi, good morning down there First, going to Houston, I think, if I heard correctly, you said you're expecting flat NOI but also flat revenue, assuming that expenses are up in Houston. So, can you just walk us through the dynamics? And maybe you were just using an average so maybe there's a range which is why revenue is flat, NOI flat, but when you do the range it makes more sense.

No, it's revenues flat, Alex, and NOI will be down probably 2 percentage, something like that. Our comments on Houston are flat revenues. That's the difference, is we didn't give the expense number. But NOI is down roughly 2%

Okay. And then just based on your experience from last year, where Houston performed as you expected and yet jobs came in a lot lower, to what extent do jobs really matter versus it's really what's going on around the property and in that particular submarket that's the bigger driver. And therefore curious why you guys throw out a jobs metric versus if it's really more a submarket by submarket decision.

Obviously if you've got lease-ups going on in your neighborhood then you're going to be more impacted. But jobs obviously do matter in the sense that people will congregate and aggregate where the new construction is. Most of the new construction has been closer to downtown, which is where the job growth has been, and which is where also people want to live.

Actually in 2015, Alex, between what we thought was going to happen, you have a 3% revenue growth target. We end up hitting 3% but we did that with 20,000, plus or minus, jobs instead of 100,000 jobs. The biggest difference in our forecast was that we also last year had new supply coming online of roughly 20,000 apartments.

Our guess is that roughly 6,000 to 7,000 of those apartments did not get delivered in 2016 that were originally forecasted to be delivered. And the reason for that is delays in construction and just the lack of availability of subcontractor and skilled labor.

So, you start out the year, you think you're going to 20,000 apartments and 80,000 jobs, you roll it forward and you get 25,000 jobs but you only deliver 12,000 to 13,000 apartments. Now, that doesn't mean they went away and they will be delivered, and some of those are going to be delivered into 2016, and obviously some of the 2016s are going to roll over into 2017. To me, the biggest, the explanation for how we still hit 3% revenue guidance in light of a dramatically different job picture was the supply got rolled forward.

I think the other piece of that, too, is there are two other pieces. Again, it's what I said earlier, which is the type of jobs that are being lost and where they're being lost.

And then second, there's something going on, too, that's very interesting. I mentioned empty-nesters. We are having a battle between millennials and empty-nesters, where empty-nesters are moving in from the suburbs because of traffic conditions, have the ability to do that, have the ability to sell their house and move in.

And a lot of the product that's being built today didn't exist in the past, meaning that it's high-rise product, very well-located, walkable neighborhoods, things like that. These empty-nesters are giving up their homes and moving into the urban core and that has helped a lot. And I think that that's why, even with the low job growth we've had, you haven't had the apartment market fall off the edge.

Okay. And then just final -- given the strong demand that we are seeing from the private players, why do you think the volatility in the stock market hasn't scared them, or that volatility is causing more of them to seek direct investment?

The disconnect in the stock prices versus the private sector, if you think about what does prices, first of all, of any commodity or any asset it's liquidity, number one. Number two is supply and demand. Number three is inflation expectations, and number for interest rates.

Right now the private sector, interest rates are the least impactful. When you think about liquidity, the market is still awash with cash, with massive amounts of cash, people are looking for yield. And when you can buy a multifamily property in a reasonably balanced supply-and-demand market, those folks aren't worried about the volatility of the stock market.

In addition, I think it's interesting because when the stock market is volatile, everybody wants something that's not correlated to the stock market. They want an asset that they can invest in, they don't have to worry about it going up and down every day. Oftentimes there's a lot of the people that I know that are selling these country club equities that comes in, they love apartments because they don't know what the value is from day to day, it doesn't go up and down. If they buy Camden stock, the volatility has been huge, obviously.

So, I think there's a huge disconnect between the public markets and the private market today. We've seen it over the years and what happens is, it will be interesting to see whether the public market is right or the private market is right. Right now, until liquidity drives up or supply-and-demand fundamentals change dramatically, the bid for multifamily is going to be strong. And there's nothing going to change that unless you have a massive shift in those issues.

Thank you.

Gena Giuliana of Bank of America.

Thank you. Ric, you mentioned shrinking the size of the development pipeline, and the guidance reflects that. What would cause you to come in at the low end and not have any start this year? Is it a market specific or are you looking at broader economic indicators?

We are looking at both things. Clearly, we want to make sure that we can't deliver yields and returns that are reasonable for the risk you take in development. That's really important.

And then when you look at the cycle, we have been in this recovery cycle for, we're going on six years now. The longest recovery that I can remember was in the early 1990s through 2001, and that was an eight-year cycle. Most other cycles are three to five, maybe six at the longest cycles.

Now, some folks believe that this cycle should be longer or could be longer because we had such a big decline -- 8.5 million jobs. We've added back about 14 million jobs now, and it's been a slow slog, obviously, in terms of the economy trying to recover from that decline.

But when we start looking forward into the future, with all the uncertainty with oil prices, with the Fed, with long in the tooth on the economic cycle, we're just going to be more conservative when it comes to development spent to make sure we are not peaking in a development spend right at the same time when there's some economic situation happens that none of us can foresee at this point.

Thank you. And then, Keith, can you share the new and renewal lease transfer Houston specifically?

For what period of time?

Fourth quarter and if you have January that would be great.

For the fourth quarter, Houston was, new leases were down roughly 2%, renewals up 3.5%, so call it up 0.3 on a blended basis. For the January numbers, those numbers are incredibly volatile on one-month basis because we don't even have a full month in there, but I can tell you at the portfolio level we are roughly, month to date we rolled up new leases basically flat, renewals about 6%, for a total blended of about 3%.

Thank you

Michael Lewis, SunTrust.

Thanks. I liked Ric's comment, that low oil prices are good for America. I'm guessing that might not make you really popular with your neighbors in Houston. But my question is, if you know how many of your residents actually drive cars. Because, given the rise in the millennials and owning less things, I'm wondering if the impact of low gas prices might actually be less impactful than it's been in the past.

Given our market concentration, the Sun Belt, with pretty limited public transportation, I would say that we have a substantial -- there are some millennials that don't drive, for sure, in some of our more urban projects in DC and elsewhere. But I would say, by and large, that low oil prices are definitely helping our residents. They have more money in their pockets.

And even Houstonians, if you're not directly tied to the oil business, 6.5 million people that live here are experiencing pretty good cash flow increases when they fill their cars up, as well. We operate in markets where people rely on their cars.

Fair enough. The supply side in Houston, you've talked in the past about projects getting pushed off because of shortage of labor and costs going up, and things. I'm wondering what's in your outlook. Do you expect this to be gradually delivered or do you think 2016 is a heavy supply year, then maybe it sets up for a little bit of a bounce when we get through all of that?

When you look at the supply, supply is slowing, there's no question about that. Projects are getting pushed off. As Keith mentioned earlier, projects are delayed because of construction workers, so the product's not coming to the market as fast as it would otherwise.

When you look forward into 2017, actually the Greater Houston Partnership has 60,000 jobs projected in 2017, and a fall off in completions in 2017. So, Houston could set up to have a recovery in maybe the middle of 2017 and through 2018, perhaps.

Our numbers for 2017 deliveries, the average of our data providers is about 12,000 apartments, which would be substantially less than either 2014 or 2015. And a pretty big substantial part of that were, originally, if you had asked when they would be delivered there would have been 2017 that have rolled into 2017.

From a permitting standpoint they've fallen off fairly dramatically in 2016. We've got Houston permitting at roughly 8,000 apartments, and a lot of those were things that were already underway in the 2015 and have been pushed out.

The only thing really getting started here now in Houston are pension fund build-the-core type deals, which are the 100% location, irreplaceable, where they already have huge investment in the land and they are willing to go ahead and build because it's a build-the-core kind of strategy. But, by and large, anything that's a normal merchant builder, run-of-the-mill site that has to be financed is not getting done.

Okay, thanks. That's helpful. Finally, you just answered a question about the development starts and how you could be on the low end. You guys were early to take advantage of the opportunity to develop. Are you getting the sense that it's still more attractive than acquisitions but maybe the opportunity there has run his course given costs up and cap rates probably not compressing anymore?

Clearly the development pipeline is not as buoyant from a return perspective as it was at the beginning of the cycle but our pipeline still looks really good. We have a pipeline that has roughly a 7% return. And today in this environment we're still very wide on the acquisition to development spread.

And so, while they're harder to do and more complicated to do today, and maybe we have a 200 to 250 spread on development premium, and early in the cycle it was like 300 or 400 basis point spread, but clearly the thing with development for us is it's more about where we are in the cycle and when is the next recession coming. If you say we're not going to have a recession in 2020, that would be 10 years of recovery. I haven't been, at least in my business career, you didn't have 10 years of straight up.

Thanks.

Tom Lesnick, Capital One Securities.

Hey, guys I'll keep this short since the call is running a little over an hour. But with respect to G&A and guidance, I know you guys give guidance at the beginning of each year, and for 2015 it was initially $41 million to $43 million. And your policy is not really to update G&A guidance through the course of the year. But, given fourth quarter being a little outsized, is that something you would contemplate updating on a more frequent basis, particularly if there was something material that changed it?

Absolutely. But one of the things, Tom, that we do every quarter is I do a full walk from the current quarter to the next quarter. So, if there's anything that we would assume would be unusual movement in G&A or any of our line items, I'd I call it out at that point in time. But absolutely we would update if there was something unusual that we were aware of.

Okay, thanks. And then, Ric, you made some comments about oil having a positive impact on the US consumer. But on the flip side of that, a lot of the sovereign wealth money and foreign capital that's come to the United States has really come, in large part, because of oil's impact over the last cycle. Are you concerned at all about the bid on US assets from foreign capital going forward to 2016?

I haven't seen any indication that foreign capital is pulling back in a big way that is going to change that. We did have a win with the FIRPTA legislation, doubling the ability, that was passed here recently in the tax code. So, that ought to actually help with foreign investment, on the one side.

So, I've not seen any indication of that in any publication or any discussion with anyone at this point. And there's still a big bid for all kinds of different asset classes from foreign investors.

All right, thanks. That's all I've got.

John Pawlowski, Green Street Advisors.

Thanks. With regards to proceeds from planned dispositions, could you give us a rank order of attractiveness of these uses of the proceeds as you see it today?

A rank order, okay. Rank order of proceeds for dispositions would be funding development, because it's required to be funded, paying down debt, and then returning capital to shareholders either through special dividends or share buybacks.

Okay, great, thanks One last one, could you quantify the revenue enhancing CapEx spend in Houston in 2015 relative to 2014? And what are the plans for this year?

It's fairly de minimis. If you look at 2014 to 2015 there was really hardly any repositions done in Houston. And the same for 2016

Okay, great. Thanks.

Drew Babin, Robert W. Baird & Co.

Thanks for taking my question, and I'll make this quick. If we look at a lot of your markets, call it the ex Houston Sun Belt, and you look at two of your competitors that have similar geographies, it would be easy to assume that most of the supply that's come in in 2015 has been more CBD oriented, and that out in the suburbs supply has been a little slower to come into the market and maybe just filling a void from 2010 to 2012.

That said, Camden's portfolio is maybe a little bit between the other two in terms of its urban versus suburban split. And there are instances where new supply is within the realm or relatively close to some of your assets. I was hoping you could talk about the recipe behind the outperformance in those markets, and anything specific you're doing to compete against the new supply and maintain strong operations in that environment.

Sure. I think there is some outperformance caused in two areas. One is we're just better operators. Two, when we talk about geographic diversification, we're also talking about market diversification within product types.

So, we want to make sure that we aren't 100% concentrated in urban core downtown or urban properties because we know what happens in the cycle. Urban properties are very highly sought out by institutional investors, so they get overbuilt first, and therefore you have more competitive pressure on the urban core. So, we keep our properties.

We like urban, for sure. We like to develop urban and we like to own urban, but we want to have a balance between urban and suburban. And we want to have various price points within our portfolio because that price point is where you can outperform, where, if a high-end project is getting pressure from new development, the more moderate priced development is not getting that pressure so you'll have better growth rates in the more moderate versus the high-end price. It's all about balancing your markets within your submarkets, and geographically balancing within the product mix, as well.

Great, thank you. That's all I got.

Kris Trafton, Credit Suisse.

Hi, guys. Just going back to your Houston forecast, it sounds like your revenue forecast is flat with about 20,000 to 30,000 jobs added in 2016. Do you know what oil price that forecast implies? And what is your sense of how long oil can stay at these levels before layoffs become a little bit more substantial?

If you look at oil price projections, they are all over the board, from $20 a barrel to $60 a barrel. So, I have absolutely no clue and I don't think anybody in the world has any clue what oil is going to do.

With that said, the 20,000 jobs, plus or minus, that are projected has oil fairly stable in the level it is today, which is somewhere between high $20s and $40 a barrel. They're not assuming any kind of recovery in oil through the end of the year to get those jobs.

So, even at those prices you don't think there's going to be more widespread losses in the energy sector?

No. I think you have to remember that energy sector is a broad thing. There have been somewhere around 300,000 jobs lost in the energy sector, and we lost 31,000 here in Houston. The energy sector is worldwide. And when you think about the folks that are in Houston, there they tend to save their highest intellectual capital type of folks, and a lot of the deeper job cuts are going to be closer to the wellhead and related to supply chains and things like that that are just not here.

There is also a massive expansion in the petrochemical complex that's going on all the way from Houston down the ship channel to Galveston. And it's extraordinary the capacity that's being built. And if you think from their perspective, the people in the petrochemical industry, low oil prices are a really good thing. It's their feedstock. So, it's a mixed picture, for sure, and there's obviously winners and losers even within the Houston market.

Got it, thanks. And then on development, does that 7% yield with the 225 basis point spread apply just to what you have under construction or does that also apply to the shadow pipeline? And that applies to land bank, is that enough of a margin to give you some leeway in case things turn south?

Both the existing portfolio and the shadow pipeline have similar characteristics in those numbers. So, they're plus or minus within the same band.

And then the question of whether the spread is wide enough to develop, I think you get down to, if all things were equal and we're early in the cycle at 7% return when an asset market is trading at 5 or sub 5 for new development, that's a great spread, and you could do that all day long. The issue we have what that today is that we are long in the cycle, not short in the cycle, and how much development risk do you want to take given the uncertainty about when the next downturn in the market's going to be. And that's what drives our development decisions when it comes to whether we should start or not.

Great. Thanks a lot, guys.

John Kim, BMO Capital.

Good morning. On your same-store expense guidance, first question, how much pressure do you anticipate from wage growth? And, secondly, with the 6% increase in property taxes, are the reversals of some of the large increases from last year no longer on the table or just delayed?

Yes, absolutely. We are assuming that there's really no incremental pressure on wage growth. We've got that at about 3% in our budget., If you look at property taxes, what we've gotten, going up 6% in 2016, and obviously that's slightly lower than it was in 2015 but it's still elevated.

We will continue to protest every single tax assessment that we think we can. But we have certain markets that, based upon what we know today, we assume are going to be high again, although we don't think that Houston is going to be quite as bad as it was last year. But we are anticipating additional pressure on markets such as Dallas and Raleigh.

John, the only place that we have had wage pressure in our portfolio over the last five years has been until recently in Houston. It was a major issue for us from a competitive standpoint. But that changed about 18 months ago and since then it's not really a problem anymore. That's the one outlier, that we did have wage pressure, has certainly diminished greatly as a result of the overall employment situation in Houston.

So, even with increased supply coming into the market you don't see wage pressure as staff potentially move to a competitor?

No, we don't.

And then on Denver, I'm a little surprised you consider it your top market for 2016 given the anticipated new supply coming into the market. Can you just maybe elaborate why you're more immune than your peers?

No one's immune from new supply. But if you look at what's actually going to be delivered in Denver, it's about 6,400 apartments. We're projecting 30,000 new jobs.

Denver was one of our top-performing markets last year. You get a bleed over from your in-place rents as they roll through your 2016 results. Revenue growth in Denver last year was 8.2% in 2015. And obviously some of that rolls forward into 2016.

If you think about where a lot of the new supply is being built, we don't have a lot of direct exposure to the bulk of the new supply in Denver. From our perspective Denver is going to be another great market in 2016.

Okay, thank you.

Karin Ford, Mitsubishi UFJ.

Good afternoon. Ric, you talked on the last call about your thoughts on share buybacks. Since then leverage is down, NAV is up. Can you just update us if your thoughts on buybacks have changed at all since then?

They have not changed. We have consistently said that share buybacks were always on the table as long as the disconnect between NAV and our stock price was persistent. The challenge that we've had has been the volatility. And also, a lot of folks think we should have bought stock in December. Well, you can't because we have these blackout periods.

Stock buybacks are on the table. If we get an open window and it looks good to us we will buy it back.

Thanks. And then my second question is related to same-store revenue guidance. Alex, did I hear you correctly that there is a 100 basis point impact from the tech package rollout embedded in the 2016 number? And do you care to share what the new and renewal increase assumptions are embedded in there?

Sure. I'll take the first part. And, yes, that's correct. We've got about 100 basis points in our 2016 numbers from the tech rollout on the revenue side, another 200 basis points on the expense side. And then that works out, just to close the loop, to 50 bps on NOI.

And then just on new and renewals, can you share what your assumptions are on that?

We don't actually break it out that way. What we do is, when we do our assumptions, we just use a net number based on the market, so we don't really have that data.

Okay, thank you.

Vincent Chao, Deutsche Bank.

Hey, guys, sorry to prolong this a little bit longer. But just curious, in Houston, obviously longer term, happy with the market, but just curious what your appetite for further investment in that market would be? How much would you have to see cap rates back up before it got interesting?

Quite a bit. People call us all the time, private equity people, saying -- hey, can we come down there and take advantage of some of the blood in the water in Houston. And I tell them, I say, don't waste the trip. There's no bargains here at this point. I don't see them happening.

They look at the 1980s collapse and look at history and say -- oh, gee, with everything going on in Houston, it's got to be cheap. And when you look at it, it is not cheap. The capital, when you think about the structure of the capital today, I don't know anybody who's built a property or bought a property that doesn't have anywhere from 25% to 35% equity in the property. And those people don't have pressure on them.

You saw what our numbers look like. We had top-line growth of nearly 3%. We did have a negative NOI print because of the operating expense tax side of the equation. But you don't have that opportunity.

We like Houston long term. We think it's a great market to be in. 12% of our portfolio feels pretty good. I'd rather have less right now but probably more when it recovers. But I don't think there's a lot of opportunity for us to do much in Houston right now given the market and given there's no opportunity at this point for great deals, if you want to call them those.

Right, Okay. And then on Camden [Conteme], how far away from that potentially starting?

We're about three miles from it right now. (laughter) Sorry, I'm getting punchy on this call, it's so long. And I know why it is, because we don't have any other people reporting.

Whenever we have a shadow pipeline, we look at it and we think about the market, we think about capital allocation, we think about what the cost structure would be for us to build that project today. I think people also think that Houston costs have obviously come down, which they haven't. We still have a labor shortage in Houston from a construction perspective. Costs continue to go up.

We will take a look at that. It's likely not to be a 2016 start. I think it's in our shadow pipeline sometime in 2017. But the good news is, we will look at it and decide what we're going to do based on market conditions at the time. So, it's not on the horizon at this point but we always have it on our pipeline.

All right, thanks a lot, guys.

Dan Oppenheim, Zelman & Associates.

Thanks very much. I'll make it quick, given the time now. I'm just wondering about Denver. The last comment was that feeling it'll be another great market in 2016. Given the occupancy loss in the fourth quarter, is that something where you view that just as a hiccup? Are you adjusting based on that? How do you look at that given the comments about the market being great for 2016?

It's cold in the fourth quarter in Denver. Really, we think it's just a seasonal fluctuation. We still have great traffic, very strong. We've got, like I said, we're coming off a year last year where we did 8.2% top line. Our revenue budget for Denver for 2016 is right at 7% top line growth. Again, we think that's very doable

Okay, thank you.

This concludes our question-and-answer session. I would now like to turn the conference back over to Ric Campo for any closing remarks.

I appreciate you being on the call today. And have fun on the rest of the calls for the next week or two. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a great day.