Camden Property Trust (CPT) 2005 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2005 Camden Property Trust earnings conference call. My name is Megan, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. [OPERATOR INSTRUCTIONS]. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Kim Callahan, Vice President of Investor Relations. You may proceed.

Thank you. Good morning, and thank you for joining Camden's first quarter 2005, earnings conference call.

Before we begin, I'd 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 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. As a reminder, Camden's complete, first quarter 2005 earnings release package is available in the investor relations section of our website at www.camdenliving.com, and includes reconciliations to non-GAAP financial measures which may be discussed on this call.

On the call today are Rick Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, President and Chief Operating Officer; and Dennis Steen, Chief Financial Officer. At this time. I would like to turn the call over to Rick Campo.

Thank you, Kim. Good morning. First quarter and the beginning of the second quarter have been a very busy time for our team. We have transformed Camden's operating platform as a result of the completion of the Summit merger. Subsequent to the end of the quarter, we completed the financing for the Summit merger. We've completed property sales of $122 million and the formation of a joint venture with UBS and the Tuckerman Group that generated $369 million of cash. Proceeds from these transactions were used to pay off a $500 million bridge loan that we used to fund the cash portion of the merger consideration. Our original plan had the bridge loan outstanding for 60 to 90 days. We retired the bridge loan in 18 days instead of the 60 to 90. The effective cap rate on the $520 million of property transactions that we completed was 5.7%, using 2004 net operating income, with 3% management fees, and a $250 capital expense reserve.

The merger and the Camden Property transactions has allowed Camden to essentially trade properties from overweighted markets for properties in higher-growth east coast markets on a non-diluted basis. The Summit merger creates four key competitive advantages for Camden. First, we've improved our market balance and geographic focus. The Summit merger has transformed Camden's market concentration by reducing NOI exposure in overweighted markets of Houston, Dallas, and Las Vegas and increase in NOI concentration in Washington D.C. and Southeast Florida. We expect our new markets' net operating income growth to be better than our existing markets. And I think the numbers in the first quarter definitely reflect that. Washington D.C., Southeast Florida and Southern California will provide nearly 25% of our net operating income going forward. All of our markets will represent less than 10% of NOI concentration in any one market. Camden is also positioned in 16 of the top-20 highest projected growth markets over the next five years.

Second, we have improved the quality of our portfolio. Summit's six-year average age properties bring the whole portfolio's average age to nine years. Third, the combined development pipeline of both companies exceeds a billion dollars. 80% of which is located in Washington D.C., Southeast Florida and Southern California. You can see in our supplemental information on Page 14 that we've increased our active development communities from 650 apartments and 39.9 million from the last quarter to 3,161 apartments and 532.8 million with significant -- with a significant shadow pipeline to come. Fourth, operating synergies have made the combined Company more efficient. We have achieved the $10 million projected cost savings that we expected at the beginning of the merger process.

The merger transition and integration process is going very well. I want to thank all of our Camden on-site, regional and corporate support teams for making the merger integration go so well. I'd also like to thank our finance and accounting teams for their efforts, and all of the late nights and weekends that were spent helping transform Camden. At this point, I'd like to turn the call over to Keith.

Thanks, Rick. I have three things to discuss with you today. First, I'll provide a little color on our first quarter operations. Second, I'll update the Summit merger transition. And, third, I wanted to update you on several of our very important technology initiatives.

Last quarter, I provided a market by market assessment of the operating conditions we expect to experience in -- for 2005. And four months into the year, we don't see any material differences in our outlook. We had a number of markets that produced NOI in excess of plan, notably, Las Vegas, Tampa, South Florida and Washington, D.C., and a few below plans such as Dallas, San Diego and Los Angeles. We are still struggling to maintain occupancy in Dallas, which prevents us from reducing concessions, which are still running an average of two months free on a one-year lease. Our shortfall relative to plan in San Diego and Los Angeles is property specific and does not reflect weaker-than-expected market conditions. We expect to see our California results trend back towards plan in the second half of the year.

Overall, concessions for the quarter fell slightly from last quarter, continuing the pattern established in the third quarter of last year. And, while one quarter does not make a trend, it was interesting to see that the percentage of moveouts to purchased homes in Camden's pre-merger portfolio fell from 20.7% to 18.5%, the lowest level that we've seen since 1999. Perhaps the persistent run up in single family home prices is finally having an effect on the consumer's rent versus own decision. This is something that we'll be watching closely in upcoming quarters.

Our outreach marketing efforts are continuing to drive increased traffic to our communities. We had an increase from traffic of 9% in the quarter over the prior year, allowing us to maintain our occupancy rate at 94% while reducing concessions. The Camden portfolio produced the same property revenue gain of 0.5%, while expenses rose 3.4%, resulting in a same-property NOI decline of 1.5%. However, on a sequential basis, revenues were up 0.7 and expenses up only 0.2, resulting in a 1.1% NOI increase. The Summit portfolio produced a 3.3% revenue gain and operating expenses rose just 0.6% compared to the year-ago quarter, resulting in a 4.8% NOI increase. Sequentially, Summit's NOI had a slight decline of 0.3%, with revenue up 1.7, and expenses up 5.9%, primarily due to property tax adjustments. We still expect that for the year our same-store results for the combined portfolios will be within our guidance of a 1 to 3% increase in same-property NOI.

Turning next to the Summit transition, no doubt, February 28th will go down in Camden's history as a defining moment. As Rick pointed out, we cleanly executed the Summit closing, however, that is just the first chapter in this book. Right now, we're writing the next chapters, the integration of business practices and procedures and blending of cultures. It doesn't sound like much of a page-turner, but then you can't always judge a book by its cover. Bottom line, the flawless execution of the transition can only lead to the happy ending that our customers, from our resident and employees to our shareholders expect and deserve.

The good news is that long before February 28, our transition teams were well down the trail of identifying key transition issues, from equipment connectivity and systems needs, to the myriad employee issues that come with adding almost 400 new employees to our team. Our human resource and education services professionals organized training sessions focusing first on our new employee's most critical concerns -- their paychecks and their benefits -- and secondarily, on providing comprehensive orientation and operations training sessions. In fact, on Tuesday, March 1st, the day after the close, five teams of Camden's finest were deployed to Raleigh, Atlanta, Washington D.C., Southeast Florida and Charlotte, and simultaneously conducted the same comprehensive orientation session for every single one of our new Camden employees. This is a testament to our transition team's ability to take on the Herculean task and still manage their day jobs.

By March 18th, a short 14 business days after the close, all of our new employees had attended a comprehensive orientation, at least one training session, and/or been assigned a Camden buddy to support them. Our operations, construction, and development groups began the critical job of completing a side-by-side comparison of our Company's policies, procedures, and practices. All were mapped, evaluated, and adjusted to leverage the combined intellectual capital of both companies. The result? Changes in our business processes that increase our effectiveness and demonstrate our commitment to a best practice approach, to the benefit of our customers.

One example of adopting best practices is centralized utilities billing. Our property services department is preparing to centralize this function, a practice that Summit was already doing with very positive results. Centralized utilities billing saves time and increases the productivity of our on-site teams. Centralizing this function streamlines the billing process, increasing accuracy and timeliness, and provides more time for our on-site teams to lease apartment homes and service our customers.

Another example is the adoption of Summit's transaction approval process for all acquisitions, dispositions, and new developments. With its three levels of review, it provides the control our capital allocation decisions require, and the flexibility that our developers need to compete in today's environment. Our commitment to best practices is deeply ingrained in our culture, and not just something we undertake as part of a merger.

We are also beginning the conversion from AMSI to OneSite leasing and rents on the Summit communities. The implementation of OneSite requires a huge technology initiative. Our IT professionals are improving the connectivity, implementing an upgraded network, securing access, and deploying new computer equipment on each of the Summit sites. The first go-live date is May 28th in Southeast Florida. All Summit communities will be converted to OneSite leasing and rents by August.

The last critical transition issue is extending the Camden brand to our Summit communities. The purpose is to leverage the Camden flagship and gain market share. This key, strategic project includes new community names, designing new collateral material, enhancing our website, and installing sign systems on all of the communities with the new names and the Camden brand. This initiative will enhance our brand's presence, increase customer awareness and recognition, and increase our market share. Of course, it will also enable us to outperform our competition, regardless of market conditions.

Finally, a brief update on technology. One of our key strategies is achieving excellence through best practices. Certainly, our merger with Summit has provided opportunities for to us get even better. Achieving excellence is also about using technology to enhance our residents' lives, improve customer service, and streamline our employees' work flow. We continue to push the envelope in this area. As of April, we completed the rollout of OneSite leasing and rents on our original Camden portfolio and have moved on to the Summit portfolio.

Even before we complete the OneSite rollout, we've begun piloting the next big thing in Camden's world -- revenue management. We're in the midst of piloting YieldStar, the revenue management system we sold to RealPage. The pilot includes five communities of different sizes, demographics, and locations to validate the assumed revenue gains that we anticipate by using an automated pricing engine. We are also piloting a customer-friendly online reservation and leasing system. We expect that all of our communities will be using YieldStar and online reservations and leasing by the end of the year.

In closing, I'd like to share something with you. I received an e-mail this morning from a securities broker that said, "I reviewed your earnings release and looks like your results were fairly routine for the quarter." I took that as an incredible compliment, although I'm not sure it was intended that way. By looking at the numbers, the quarter was, indeed, routine. After one-time adjustments, we were above the midpoint for our quarterly FFO guidance. We reconfirmed our yearly guidance, and provided above -- and performed above plan and property operations -- all routine. Except that in this quarter, we also closed a $2 billion merger, funded and repaid a $500 million bridge loan, closed a $400 million joint venture, started three significant new developments, and assimilated 400 new employees into Camden. All this during the absolute peak of our conversion from AMSI to OneSite, our web-based property management system.

The financial results for the quarter were, indeed, routine. But for our Camden team, the quarter was anything but routine. The credit for making the extraordinary look routine rightfully belongs to all of our Camden and Summit associates who made it happen. To our Camden and newly Camdenized associates involved directly in the merger and integration, congratulations on a job, well done. This merger would make a great case study for people who do such things. To all of our on-site teams, thank you for maintaining your focus on what matters, serving our customers and outperforming the competition, and not letting merger mania get in the way of delivering outstanding performance for the quarter.

And finally, a note of thanks to all Summit personnel who did not join Camden in the merger. They worked their tails off to ensure that the combined companies will have every opportunity to deliver on the promise that the merger holds for Camden and our shareholders.

At this time, I'll turn the call over to Dennis Steen, our Chief Financial Officer.

Thanks, Keith. And good morning to all. I'll start this morning with additional color on our first quarter results. As expected, our acquisition of Summit Properties closed on February 28. So our first quarter results reflect Camden's stand-alone performance for the first two months and combined Company performance for March.

First quarter FFO was $54.4 million, or $1.10 per diluted share, representing a 16.2 million, or $0.24 per share improvement from the prior quarter. Our first quarter results exceeded the guidance of $1 to $1.04 per share we provided in early March, primarily due to fee income we recognized in the first quarter related to the new 12-property venture that was originally scheduled to close in the second quarter. The 16.2 million improvement in FFO from the prior quarter was primarily the result of the following non-recurring items -- 24.2 million of income related to the sale of Camden's investment in rent.com, 13.8 million of other expenses consisting of one-time employee bonuses and transition costs relating to the Summit merger, and 4.3 million of fee income related to the closing of the joint venture. Excluding these three items, FFO for the quarter would have been approximately $0.81 per share, in line with our expectations.

EPS for the first quarter was 166.7 million, or $3.40 per share, compared to 18.5 million, or $0.43 per share in the fourth quarter of 2004, reflecting 146.5 million of gains on the sale of properties and discontinued operations during the quarter. 132.1 million of the gains resulted from the sale of the 12 communities into the joint venture, in which we retained a 20% interest, and we continue to manage. The remaining 14.4 million resulted from the sale of an asset in Las Vegas, which we had previously classified as held for sale. Subsequent to quarter end, we sold Camden Ybor City in Tampa, Florida for 61.5 million, bringing our total disposition volume year-to-date to just under 500 million. These dispositions have allowed to us repay all borrowings incurred in the first quarter to fund the cash portion of the merger with Summit.

We expect to dispose of Summit Lenox in Atlanta, Georgia, the only other community designated as held for sale, by the end of the second quarter. In the second half of the year, we will look to identify an additional 200 to 300 million of non-core assets to sell and target 200 to 300 million of new acquisition opportunities, with anticipation of 100 basis points negative spread on cap rates between acquisitions and dispositions. Given the low cap rate, acquisition environment, dispositions could exceed acquisitions, resulting in additional dilution.

On the development front, we have two completed apartment communities, which are currently in lease up, both from the Summit portfolio. Summit Las Olas in fort Lauderdale is now 91% leased and 87% occupied, and Summit Fallsgrove in Rockville, Maryland is now 86% leased and 84% occupied. We also have nine development communities currently under construction located in the Washington D.C. Metro Area, Orlando, Dallas, Charlotte, Raleigh, and the San Diego County, and expect the total costs of these projects to be nearly $535 million. Construction starts during the first quarter included Camden Potomac Yards and Camden Monument Place in the D.C. area, and Camden Old Creek in San Marcos, California, which account for 270 million of our current pipeline. As for our future development pipeline, we are well positioned for additional development starts late this year and throughout 2006 with land holdings in the Washington D.C. Metro Area, Southern California, Southeast Florida, Houston, and Dallas.

Subsequent to our merger with Summit, our balance sheet remains strong and flexible, with 76% of our assets at cost unencumbered, 74% of our debt unsecured, 82% of our debt at fixed rates, very manageable debt maturities over the next several years, and significant capacity available under our unsecured credit facility. Coverage ratios also remains strong, with total interest coverage of 2.7 times, and total fixed-charge coverage of 2.4 times for the quarter, after excluding the positive impact of the non-recurring items mentioned earlier. At quarter end, we had 365 million outstanding under our $600 million unsecured line of credit. Subsequent to quarter end, we used the proceeds from the 61.5 million sale of Camden Ybor City to pay down the line of credit.

Moving on to 2005 guidance, we continue to expect 2005 FFO to be in the range of $3.39 to $3.59 per diluted share, excluding any future gains from land sales, and second quarter 2005 FFO to be $0.78 to $0.82 per diluted share. Our guidance range is based upon the following assumptions -- same property NOI growth of 1 to 3%, derived from revenue growth of 1.5 to 3% and expense growth of 2 to 3%; additional dispositions of approximately 200 million to 300 million in the second half of 2005, with 100 basis points negative spread on the cap rates between acquisitions and dispositions; the new development starts of approximately 200 to 300 million during the latter part of 2005; G&A and property management expenses of approximately 9.3 million per quarter for the remainder of 2005; $150 million debt offering in September of 2005; and a 30-day LIBOR rate estimated at 4% by December, averaging approximately 3.3% during 2005.

The FFO guidance for the second quarter of 2005 of $0.78 to $0.82 per diluted share is reflective of our first quarter run rate, excluding one-time non-recurring items of $0.81 per share; the growth and same property NOI that Keith discussed earlier; the fact that the impact of the Summit merger and subsequent disposition of Camden assets is slightly accretive, as expected, offset by a reduction of 3.7 million and income from our mezzanine loan portfolio between the first and second quarter, due to lower balances outstanding and the absence of pre-payment penalties resulting from loans paid off in the first quarter.

Before I open up the call, I would like to take a moment to thank all of the finance, accounting, risk management, legal, human resources, and IT professionals of Summit and Camden who worked diligently over the last two quarters to ensure the smooth transition of all of the back-office functions of Summit to Camden's platforms and processes. Due to your efforts, we have completed the transition on time, resulting in Camden realizing the expected synergies in the combination of the two companies. Thanks, again, for you dedication and hard work. I would now like to open the call up for questions.

Thank you, sir. [OPERATOR INSTRUCTIONS]. And your first question comes from the line of Lou Taylor of Deutsche Bank.

Yes, hi. Thanks. Congrats on the quarter and all the work you guys did. That was quite an accomplishment. Dennis, can you just focus on guidance a little bit here? So your 339, 359, that includes, basically, extra $0.30 in Q1; is that correct?

That's correct.

Okay. The second question just pertains to, maybe, to Rick or Keith on the development side. Of the projects you expect to start later this year, where do you expect them to be geographically?

They will be in the D.C. Metro Area, South Florida, and then we probably, I believe we have one Houston project that will probably start towards the end of the year as well.

Okay. And then -- ?

But the whole portfolio is primarily Southeast Florida, California, and D.C. When you take the whole, if you take the -- add the supplement up on Page 14, you can see of the $650 million of total projects, 80% are Southern California, Southeast Florida and D.C.

Okay. And then, what do you guys expect for yield?

Yields are going to range, on the low end, in the low 6s, high end, in the 8 -- in the -- approaching 8, which would be, sort of, Houston-type deals. The coasts are going to be the lower yields with increasing construction cost and land prices being very challenging on the coasts.

Okay. Of the projects you have coming out of the ground right now, the 500 million, what do you expect the blended yield on that to be?

Lou, since those are primarily in the protected markets, we're looking at somewhere in the 6.5 to 6.75 range on this initial -- on this initial grouping.

Okay. Keith, just staying with you for a second. In terms of the first quarter and the properties in San Diego and L.A. that didn't perform particularly well, you said it was property specific. Was it personnel related? Was it weather related? What were some of the issues there?

Well, it was actually, in one case, it was related to the fact that we were under way with a very significant window replacement program on one of our large San Diego assets. But it also was an execution issue in those two communities, and we made appropriate changes, and we expect to get back on track. It's clearly not related to the market.

Okay. And then, last question with regards to the merger and of the employee -- what was your employee retention of the Summit personnel at the property level in terms of, vis-a-vis, your expectations?

At the property level?

Yes.

100%.

100%. And then -- ?

I'm not -- I'm not aware of a single individual -- I know for a fact, there's not anyone that we didn't invite to come over in the merger, and I'm not aware of a single individual at the property level. Actually, you could extrapolate that up through the regional ranks as well. There's not -- I'm not aware of a single person that we invited to come over in the merger at the -- in the operations chain of command that chose not to do so.

Great. Thank you.

You bet.

And you now have a question coming from the line of Jordan Sadler with Smith Barney.

Good morning, guys. I guess my first question is just regarding development. The yields that you're looking for, and some of the stuff in the protected market, how -- what is that, in terms of a spread relative to what you'd be buying at? And what have you historically looked at for a spread in development versus acquisitions?

Well, generally, the development spreads that we look at -- look for are 100 to 150 basis points above the acquisition. And today, because the low cap rates environment that you have in California and D.C., Southeast Florida, we, excluding condo conversions, let's just take that out of the equation a bit, but properties that you can buy on an acquisition basis are pushing five cap rates or less. And so when you look at today, we're probably 175 basis points to 200 basis point spread to the current market.

Is the stuff in Southern California you're doing, do you -- are you -- do you develop with a condo map?

Yes. As a matter of fact, all of our properties are developed with a condo map. So that's a prerequisite day one.

Okay. Just switching over to some of the charges in the quarter. Could you maybe just give a little bit of color on the joint venture fee that you received, the 4.3 million? How does that work? And it looks like it was 1.25 on the full deal.

Yes.

And haven't you received it up front?

Right. Basically, we structured the transaction so we got paid fees associated with putting the Fannie Mae debt on the portfolio and structuring the overall transaction. And we got paid this 1.25, or whatever the percentage is, on the whole deal, yes.

Is that a structuring origination fee, and you'll receive and additional fee beyond that that we should put in our numbers?

No, no, it's a one-time structuring origination fee for putting the deal together. It's a one-time fee. We have fee income that comes from the joint venture, which is basically a 3% property management fee. And in essence, because the properties are -- were already in our portfolio and all the operating costs associated with management, and what have you, is already built into our run rate.

Sure.

3% fee, in essence, is a 100% profit.

Okay. So there's no recurring asset management fee of any sort?

No.

Okay. Now, the mezz that was retired or repaid during the quarter, can you break that out, in terms of what was prepayment versus interest you won't receive? In between 1Q and 2Q you identified it as 3.7 million change.

The actual break out is actually 3.2 million in fees and prepayment penalty, and about $500,000 relating to the actual interest carry on the mezz -- interest income on the mezz.

Okay. Now, was the 3.2 million of fees, which I guess must be about $0.05 or so, $0.06, was that originally in the guidance?

Yes, it was.

Oh, it was?

It was always expected in the guidance, that's correct.

You just thought it would come later in the year, or -- ?

No, it was always in the first quarter. What happened in the first quarter that wasn't expect was the joint venture fee income. It was expected in the second quarter.

Okay. So you knew these were going to be prepaid, I guess?

Yes.

We did at the time we put out guidance; that is correct.

Okay. And what should we expect in terms of mezzanine? And what additionally are you including in the guidance going forward?

We aren't including any prepayments in the guidance, just the existing portfolio and the roll off of some of those that are -- that we're assuming are going to get paid off this summer. There's a couple of them that roll off this year.

Okay. But no additional origination?

The only additional -- I don't think we have any major dollars in the run rate. We could have a positive variance, depending upon how we structure our future development joint ventures, because we have used mezz, mezzanine loans in the past in a development joint venture scenario, and we haven't completed the structuring of our development joint venture that we likely will do this year. And that could have a mezz component, which, perhaps -- which is not included in our numbers, but perhaps could be.

And this is the development you'll be doing for your own account?

Well, yes. We are going to likely structure a development joint venture in the 2 to $300 million range this year. And it could, in fact, have mezz associated with it.

Okay. And what rate would you look for mezz on that kind of joint venture? And how big of the -- of that 200 to 300, what percent of the structure would be mezz?

Generally, the mezz is anywhere from 10 to 15% of the capital structure, and the typical rate is somewhere in the 12 to 14% range.

Okay. Last question. Just on the pipeline, the development pipeline, what's the total value? You have a cost number in there, which is helpful, but just potential developable value from those units?

You talking about the predevelopment pipe -- ?

Yes, the new schedule. The -- on Page 15. You say there's 100 -- 5,206 units, and then a cost to date of 140 million?

That's probably 700, $800 million.

Okay. Thank you.

And you now have a question coming from the line of Andrew Rosivach with CSFB.

Hi, guys. Just one big-picture question. Like you've mentioned, it looks like now between your development and predevelopment you got over 8,000 units in the hopper. Is your plan to continue the capital recycle even after you've done quite a bit at the beginning of the year? Or do you see a future, bigger Camden?

Well, we definitely are going to continue to capital recycle. The challenge in the capital recycling today is that we get great prices on our dispositions, but because of the competitive nature of the acquisition market, it's really hard for us to replace the assets. And so the merger clearly positioned the portfolio very well. We do have assets that we do want to continue to recycle. And the challenge with recycling is we have significant tax issues relative to the recycling, since we've sold, through the joint venture, over $500 million of properties. But the issue of whether Camden can get bigger, clearly if it makes sense, and we continue to see good returns on our development, that's definitely a possibility.

If you might be capped on how much you would do in terms of capital recycling, what do you think would be a source of capital to build out this big pipeline?

Well, development joint ventures are certainly a very positive source today. The way I sort of view the development joint venture is that it's a reasonably -- reasonably low-cost source of equity that is property specific and not Company specific. And you end up in a situation where you're sort of giving up part of the upside on the development, but you're not diluting overall shareholders and you're increasing your equity yields by virtue of the earning fees and promoted interest, and so forth. So right now, joint ventures seem like a good way to manage that process.

Okay. Thanks, Rick.

And your next question comes from the line of Craig Leupold from Green Street Advisors.

Good morning.

Hi, Craig.

You've done an outstanding job, although, Rick, it sounds like it's taking a toll on you, maybe?

No, I think it was the Rockets-Dallas game last night.

Oh, got you. Sorry about that -- or congratulations, I mean, on that.

We're in both markets.

That's right. My question -- I think you might have, maybe, touched on it in your last answer to Andrew's question, that is, sort of, why make acquisitions at all? Given the size of your development pipeline, the spreads you've talked about, the fact that acquisition cap rates are so competitive, why have even -- why have any goal for acquisitions?

That's a really good question, Craig. And we struggle with that. If we -- the concept of just recycling, of course, is if we are selling older assets that aren't going to grow as fast as -- and we can acquire with a reasonable spread, additional assets, then I think it makes some sense to do that, but you're exactly right. I mean, if we can -- we are studying the 1031 exchange situation with respect to development. We may, in fact, recycle capital from the dispositions into the development if we can get a tax-efficient way to do that.

I know Summit felt that they had a program to be able to do that. Is that what you're alluding to?

Exactly.

You're still not entirely comfortable that that's a [indiscernible] program?

Actually, I think it's a decent program, but it's sort of a long-lead-time program. And there's some cost to it. We're in the process of studying that at this point, but it is a real challenge when you look at the current environment for acquisitions.

Craig, the positive side, and when we gave our guidance for the year with regard to the acquisition, disposition, and the recycling is that the compression in cap rates between older assets and newer assets has probably never been narrower than it is right now. And there's a certain attraction, even if it's -- even if it's dilutive to 100 basis points or so, to trade out of older assets into newer assets because that compression. But there is an absolute floor on that trade because at some point you get to alternative uses for the capital, that even if -- even if you are trading new for old at 100 basis point spread, the absolute return on that acquisition side of that trade doesn't make sense, which is exactly what you're alluding to. It's something that we're keenly aware of and that we're -- that we're wrestling with right now in the terms of our activity for the rest of the year.

Yes, I guess I'm just thinking in terms of you're talking about maybe doing a development joint venture later in the year. If you need that capital, why source it from a third party if you can just source it from your own disposition, as opposed to putting it back into acquisition?

Yes. it's all about timing, the tax aspects, and the dilution you're going to take currently.

Okay.

That's the key.

Okay. And then one other question related to, maybe, condo sale opportunities. I mean, you talked about your disposition goals. Given the high-quality nature of the Summit portfolio, D-for-C, dispositions to condo converters, at extremely low cap rates, and then also, if you could -- as part of that -- could you touch on, maybe, your plans for Long Beach and any more thoughts on a potential conversion of part of that asset?

Well, just generally, we have surveyed our portfolio and have a large number of condo convertible assets. There's no question about that, especially in Summit and then some of the Camden development assets. One of the things that's interesting now is that we're starting to see more suburban-style conversions as opposed to the premiere high rises in Southeast Florida or elsewhere. And it's very interesting and compelling, obviously, to look at selling at these really low cap rates. And between Summit and Camden, last year Summit sold somewhere around $250 million worth of condo-conversion-type assets. We sold about, I guess, between us, we sold maybe 310 million, plus or minus. And ultimately it's a tradeoff between the long-term growth rate of that asset versus, like, for example, Long Beach, you mentioned. We've gone round and round looking at that asset and looking at condo conversion aspects of it. On the one hand, can you get a great price and make a great capital gain.

And on the other hand, that property's irreplaceable. You can't find a property like that in California in Long Beach. The growth rate looks like it's going to be good for NOIs in the future. So it's really a tradeoff between, what do you do with the capital, and if you can recycle it into development and get better development yields, then it maybe make sense to do that. But, again, the challenge is the tax aspects because of all these transactions we've done, and then the dilution that you have to take initially because the timing of making those sales, and then reinvesting those into actual cash flowing developments.

Thanks.

Sure.

Thanks, Craig.

[OPERATOR INSTRUCTIONS]. Your next question comes from the line of Rich Anderson with Maxcor Financial.

Thanks, good morning. With are regard to renaming the assets, Camdenizing them, as you called it -- why is it that you chose not to do that with your Oasis assets, but you are doing it with Summit?

Rich, the primary reason was that with the Oasis assets, we were doing that in a joint venture, which we were a 20% owner of the joint venture. And the question -- they already had a pretty significant presence and a brand name in the Las Vegas market. All of those assets were in that market. For the joint -- for our joint venture partner, frankly, the capital investment didn't make sense, given that they were already branded within that single market. The other side of it is, it's something that we're always keenly aware of. It's just having control over our assets from a brand standpoint, when we don't necessarily have complete control from a property presentation standpoint, if you want to call it that.

Okay.

So, with the Summit -- on the Summit side, there's just no issue.

And all of our 100%-owned assets in Las Vegas are branded Camden. So the only ones that in the Oasis brand are the joint venture assets that we did when we spun off roughly $300 million of assets, about 6,000 apartments into the joint venture to fund part of the Summit merger -- or part of the Oasis merger.

Okay. I assume you won't be changing the name of the asset Camden Summit?

Never know. Probably not.

Okay. Another observation I had with the press release was you took out the regional breakout in your same store. I don't know if that was just -- is that -- are you rethinking how you're going to break out regions now with the portfolio?

No. We -- in fact, the regional breakout that we had before was fairly -- was somewhat gerrymandered. It doesn't track what we -- our internal regions, the way that we're set up, and, frankly, when you start trying to define smaller subgroups, when the markets that we're in, everyone is fairly familiar with where those markets are. We just -- we think it's actually easier for people to look at it. It's easier for me to look at in this format than breaking it up somewhat arbitrarily around the --

Well, I was thinking more in terms of how you operate as a Company with Regional VP's, and what have you.

And I -- and what -- that's, Rich, my point is, is that the other breakout was nonsensical, as it related to how we operate internally. We had six regions, six regional operating groups where we have a Regional Vice President in charge of those. Breaking it up in -- breaking it up by those six doesn't make a whole lot of sense, because it's not meaningful to the reader. So we just sort of said, let's put them -- let's list them in some rational order of NOI contribution and people can group them however they like.

Obviously, within the Summit-Camden world, which we reported on a combined basis for same-store presentation, but the only place that we had any overlap was in Charlotte. Other than in Charlotte, you could identify the Summit assets by just picking the four markets that they were in exclusively. But there's no strategy behind it, Rich, other than just trying to get a little bit cleaner presentation on our supplemental. It doesn't tie to what we do internally.

Okay. And last question is you mentioned lower -- or the percentage of unsecured debt to total debt being 74%. But I did notice that your secured debt ratio to gross asset value went up as a result of the merger. Do you have plans to reduce that back down all -- despite it being well below your covenant level?

Yes. And as we have the opportunity to our reduce our secured debt in the Summit portfolio, we will actually reduce it going forward.

Okay. Any sort of target?

Right now, we have a tax protection agreement on the Summit operating partnership that we're evaluating. And based upon the result of that evaluation, we'll start to set some targets.

We are fundamentally an unsecured borrower. We believe that the unsecured nature of the market gives us tremendous flexibility in moving assets around and dealing with those. So we are not a secured borrower, and we will not put secured debt on our balance sheet unless we have to keep it there for tax reasons, or what have you.

Okay, thanks.

Thanks, Rich.

And Chris Pike with UBS has the next question.

Good morning, everyone.

Good morning.

Congratulations on everything you've done. Just a quick question. One of your competitors talked about surging land prices and how, if it weren't for land that has already been taken down through entitlements, that some developments could actually be yielding a negative return. And, Rick, I guess I just have a question for you on that line. Given the pipeline as it seems now, what are your thoughts on that concept?

I think it's very true. The -- I don't know about negative return, but I do know that land today, because of the condo phenomena, if you will, or the condo pressure that's in the marketplace, apartment -- if you're just -- if we're going in competing on a piece of land with a condo developer or a for-sale developer, we lose. And so land that's in our bank now could be sold to for-sale people. And at the end of the day, it is very difficult to compete for that. So it is, I think what's happening then is the supply side of the equation is a lot of for sale is embedded into the supply. And so it is more difficult to develop. That's why we thought so highly of the Summit pipeline, because they had land that had been entitled and committed several years in advance of the merger at really good prices.

So at this point, the majority of the pipeline has already -- the land underlying the pipeline has been entitled? And there's no -- ?

Yes, absolutely.

There's no competition?

Right. All the -- on Page 15 of the supplement, the land, we own.

Okay.

And so there -- it is either entitled, or we're in the process. And most of the land is entitled, and it just needs, sort of, final map and building permits. But not any major entitlement risk at all in this portfolio.

Great. Thanks a lot.

Sure.

And your next question comes from the line of Jay Leupp with RBC Capital Markets.

Thanks, good morning. I'm here with David Ronco. Rick, a lot of talk is particularly in the markets in Southern California and South Florida about these hyper-low cap rates for 4.5%, sometimes sub-4.

Yes.

How much of those assets, or how many of the assets in your portfolio, now that you have a major presence in South Florida and in Southern California, would fit into that category? What do you think, kind of, the dollar value of that chunk of assets in your portfolio is? And what are the chances that you use those types of assets to do existing asset joint ventures, selling a percentage of those and using the capital for development and acquisitions?

Well, to answer the question, I don't have the details about exactly what percent -- what the dollar amounts are on those assets, but I would say that every one of our assets in Southeast Florida and Southern California would fall into that category. Because if you think about it, in Southern California, we've developed every single property there, so it's all brand new development, state-of-the-art, well located. So it's all sub-5 cap rates, if we had to sell it today.

The question about whether we would put that into a joint venture, the answer is probably not. We've already done our joint venture in the funding of the Summit merger, and we elected to use Houston, Dallas, Las Vegas, Phoenix, we did put one Southern California asset in there. But the concept there was to sell down our overweighted markets, and then use that cash to fund the cash portion of the merger, in essence, trade those properties for east coast exposure. What we would likely do is in its development joint venture, bring capital in. But the key aspect of what we're trying to do with our portfolio is have a -- is grow our cash flow going forward. And some of the markets we're talking about have great growth potential in the future. And we're about producing stable, growing cash flow. And it's sort of hard to think about selling down that portfolio, which would, in essence, increase the middle of the country exposure again, which is what we tried to move away from in the Summit merger.

Thank you.

Sure.

You bet.

And you now have a question from the line of Jordan Sadler with Smith Barney.

Hi, guys. I just wanted to follow up on the G&A. What's the full-year G&A number? Is that about 33 million; is that right, Dennis?

I think if you look at the current quarter, excluding the one-time charges, we would have had right at about an $8 million G&A number.

Okay.

And if you take the 9.3 million average going forward, that's what you should expect for the full year.

Okay. And I just maybe -- ?

That's G&A and prop sup. Not -- that's the way you're looking at it, it's both property supervision and G&A.

I'm just -- I was just going off of your comments. I remember you said 9.3 million per quarter. I just want to make sure I had the right number.

Yes, that's right.

Yes, that's it.

Okay. Thanks.

Sure.

And with no further questions, this will conclude the question-and-answer portion of our call. I would now like to turn the call over to Mr. Rick Campo for closing remarks.

We appreciate your attendance on the call today. And we look forward to talking to you again next quarter, when, hopefully, the -- we'll have a -- the full quarter of Summit and Camden together, and we'll be able to go through that with you then. So thank you, very much, and we'll see you next quarter.

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation. And you may now disconnect. Good day.