Camden Property Trust (CPT) 2014 Q2 法說會逐字稿

Good day and welcome to the Camden Property Trust second-quarter 2013 earnings conference call. All participants will be in listen only mode. After today's presentation there will be an opportunity to ask questions.

(Operator Instructions)

Please note this event is being recorded.

I would now like to turn the conference over to Kim Callahan. Please go ahead.

Good morning and thank you for joining Camden's second-quarter 2014 earnings conference call. 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.

A Camden's complete second-quarter 2013 earnings release is available in the investor relations section at our website @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. Our call today is scheduled for one hour so we ask that you limit your questions to two then rejoin the que if you have additional questions.

If we are unable to speak with everyone in the queue today, we would be happy to respond to additional questions by phone or e-mail after the call concludes.

At this time, I'll turn the call over to Ric Campo.

Good morning. Our teams turned in an outstanding quarter again.

Based on our first half performance and an improved outlook for the second half of the year, regarding our original guidance for the full year, we expect to as Michael Jackson sings, just beat it. We have raised our 2014 full year same-store net operating estimates by 50 basis points from 4.25% to a revised midpoint 4 3/4%. The change in guidance is driven by stronger revenue growth in most of our markets.

Demand for apartment in our markets continue to be greater than the new supply that's been delivered to year. We expect this to continue for the next several years keeping the supply bogey man in check. New apartment deliveries are likely to peak late this year or early in 2015.

Population growth and job growth in our markets continue to outpace the nation. Jobs are estimated to grow by 2.8% this year in Camden's market compared to 1.7% for the US overall and 2% for the coastal markets.

It continues to be a very good time to be in the apartment business. Our development properties continue to lease up at or better than expected creating value for our shareholders. In the current apartment transaction market our development pipeline should add $4 per share to our net asset value when completed.

I want to get a big shout out to our Camden teams for the continued focus on delivering living excellence to our customers. Keith, we're going to go ahead and turn the call over to Keith now.

As Ric mentioned our operating conditions across our portfolio remain quite strong. Our operating teams continue to outperform their markets and our expectations. Our same-store revenue growth for the second quarter was 4.5% and was up 1.6% sequentially.

Ten of our markets have 5% or better revenue growth with the top five markets, Atlanta at 8.1%, Corpus Christi at 7.5%, Denver up 7%, Houston up 5.8%, and Austin up 5.7%. D.C. continued to be our weakest market but still managed a 9/10 year-over-year, as well as a sequential revenue growth. Our new leases for the second quarter were up 3.6% and renewals were up 6.2%.

For July, new leases are up 3.1 and renewals are up 6.6. August and September renewal offers went out at roughly 7.5% and we are renewing leasings in the 6 1/4 range. Our same-store occupancy rate averaged 95.7% for second quarter up slightly from 95.6 in the first quarter.

Our net turnover rate was 58% in the second quarter down from 60% for the same period last year, year to date. Net turnover rate year to date was 53%, the same as last year. Moveouts to purchase new homes remain historically low across our entire portfolio at 14.6% for the quarter, which were slightly up from the first quarter rate of 13.7%, but the same we had in the second quarter of last year.

Over the past few years we focused our efforts on improving the quality of our traffic and ensuring that were buying only the traffic we need to maintain occupancy and drive rents. In addition, our in-house contact center, which we established in 2009, allowed us to maximize the conversion rate of the traffic that we do generate.

Last year, we began operating our contact center 24-7. Our contact center is staffed by 32 to full-time professionals, 85% of whom who have a college or advanced degree. Our platform allows our agents to upsell, as well as cross-sell across all Camden communities which is extremely important because many times we have multiple communities in the submarket.

We can also record and review all calls whether they're handled by on-site teams or our contact center agents which is a great tool for ensuring accuracy and improving technique. In the first seven months of the year, the contact center took 209,000 calls and answered 60,000 e-mails. Through July the contact center created 82,000 guest cards and converted 52% of those into on-site appointments.

All of which were subsequently confirmed by the contact center. They also handled 25,000 emergency maintenance requests. If you ever find yourself longing for a great customer service experience, call any Camden community and inquire about leasing an apartment. If our outstanding on-site team members are busy helping others or if it's after hours, after two rings you will get our contact center and experienced truly outstanding customer service. But be forewarned, there is a 52% chance that you'll and up with an appointment to visit a Camden community.

Having Camden team members handle our customers in a professional consistent manner has been a game changer in our continuing quest to provide living excellent to our residents.

We are continuing our discussions with our joint venture partner regarding a possible restructure of a partnership. Pending the outcome of these discussions we have delayed marketing the JV assets, which were assumed to be sold in 2014, and as a result, we removed the 2014 joint venture dispositions from our 2014 guidance.

At this time, I'll turn the call for to Alex Jessett, Camden's Chief Financial Officer.

Thanks, Keith.

Last night we reported funds from operations for the second quarter of 2014 of $94.2 million, or $1.05 per diluted share. Included in our results for the quarter were two nonrecurring items resulting in a net positive impact of $300,000.

First, we sold 4.7 acres of land adjacent to our 904 unit Camden's farmers market community in Dallas, Texas for $8.3 million recognizing a gain of $1.4 million.

And second, based upon a pending sales contracts, we recognized a $1.2 million impairment on 2.4 acres of additional land also located adjacent to our Camden farmers market community. Subsequent to quarter end, we completed the sale of this parcel to a for-sale townhome developer recognizing no gain or loss on the newly impaired value.

Regarding our development pipeline, during the quarter we completed construction at Camden Noma an $101 million community in Washington, D.C. This community is currently 75% leased. Average rents our inline with our budget, while leased percentages is approximately 10% ahead of plan.

We are currently at or above 95% leased at both of our joint venture development communities, Camden South Capital in Washington, D.C. and Camden Waterford Lakes in Orlando, and we recently began leasing at five new communities: Camden Flatirons in Denver. Camden Lamar Heights and Camden La Frontera in Austin Texas, Camden Paces in Atlanta Georgia, and Camden Foothills and Scottsdale, Arizona.

And finally, during the second quarter, we acquired 7.6 acres of land in Montgomery County, Maryland for $23.8 million for the future development of approximately 457 apartment homes. We have begun the marketing process for our $300 million of wholly-owned dispositions that we are forecasting for the fourth quarter.

The pool is made of the seven communities located in North Carolina, Florida, Georgia, and Texas with just under 3,000 total units. The average age of the portfolio is 29 years, and our hold period will be just over 17 years. Our anticipated disposition yield is in the high 5% range. But due to capital intensive nature of these older communities, there AFFO disposition yield is anticipated to be approximately 5%.

Portfolio operating performance continues to be strong. The same-store revenues increased 4.5% in the second quarter and 4.6% year-to-date. These increases were driven primarily by increased rentals rate and improved occupancy. Each of our markets registered positive sequential revenue growth in the second quarter.

Occupancy for our same-store portfolio averaged 95.7% for the second quarter of 2014. 40 basis points higher than the second quarter 2013. This improved occupancy, creates additional pricing power as we head into our peak leasing season.

Based upon our strong year-to-date operating performance and our expectation of continued outperformance for the remainder of the year, we've revised upwards and tightened our 2014 full-year revenue and NOI guidance. We now anticipate full year 2014 same-store revenue growth to be between 4% and 4.6%.

Expense growth to be between 3.4% and 4%, and NOI growth to be between 4.25% and 5.25%. As compared to our prior those prior guidance ranges, our revised revenue midpoint of 4.3% represents a 30-basis point improvement. Our revised expense midpoint of 3.7% represents a 5-basis point improvement, and our revised NOI midpoint of 4.75% or represents a 50-basis point improvement.

As a reminder, our expense growth comparisons become more challenging in the second half of 2014 as compared to the second half of 2013. Expenses for the second half of 2013 only grew at 2% on a year-over-year basis as compared to 4.1% for the first half of 2013. Property operating expenses continue to track in line with expectations.

On page 15 of our supplemental package, we provide a closer look at our same-store expense growth for the quarter and for year-to-date. On both the quarter over quarter and a sequential basis, our largest increases came from salaries and benefits for on-site employees due to the timing of various employee benefit costs.

Our largest decreases come from property insurance due to a successful policy renewal and lower claims under our self-insured retention. Regarding property taxes, the vast majority of our assessments are now in and although many of our initial Texas assessments were higher than we originally had anticipated, we have been very successful with many of our protests and appeals.

Last quarter, we told you that we expected property taxes to increase 7% on a year-over-year basis. At this time, we remain comfortable with that estimate. We have also revised our full year 2014 FFO per share outlook. We now anticipate 2014 FFO per share to be in the range of $4.20 to $4.30 versus our prior range of $4.10 to $4.30, representing a $0.05 per share increased to the midpoint.

The primary components of this $0.05 per share increase are as follows. First, $0.025 in same-store outperformance, as indicated by our 50-basis point increase in the midpoint of our full year 2014 same-store net operating and income guidance. Part of this outperformance has already occurred year-to-date, and we anticipate this outperformance to continue throughout the year.

Second, the $0.01 in net gains from land sells recognized in the first half of 2014.

And third, an approximate $0.02 per share increase related to lower than anticipated joint venture positions. Our revised full year 2014 FFO guidance is based on the following assumptions for the remainder of the year: $300 million in wholly-owned dispositions and $100 million in wholly-owned acquisitions, both occurring in the fourth quarter, with acquisition yields in the low 5% range and disposition yields in the high 5% range. $133 million in new on balance sheet development starts in the fourth quarter and no further 2014 joint venture dispositions. Due to the timing of our discussions with our joint venture partner, we will likely not sell any more communities in 2014. Year-to-date we have completed $66 million in joint venture dispositions.

The midpoint of our original 2014 FFO per share guidance range assumed $450 million in joint venture dispositions during the year. Last night, we also provided earnings guidance for the third quarter of 2014. We expect FFO per share for the third quarter to be with in the range of $1.04 to $1.08. The midpoint of $1.06 represents a $0.01 increase from the second quarter of 2014.

This $0.01 per share increase is primarily the result of the following, a $0.02 per share increase in FFO due to growth in property net operating income resulting from an approximate 1% expected sequential increase in same-store NOI as revenue growth from the combination of rental rate increases, higher occupancies and increases in fee income as we move into our peak leasing periods more than offsets our expected increase in property expenses due to the normal seasonal summer increase in utilities and repair maintenance costs.

And positive NOI contribution from our six developments and lease up. This positive variances are being partially offset by a half cent decline in FFO as a result of the net $300,000 positive impact from land holdings recorded in the second quarter of 2014.

Turning to the capital market, on the last call I told you that based on our estimated development spend in 2014, we anticipate needing approximately $500 million in new capital during the year. Net disposition activity is anticipated to provide $200 million.

For the remaining $300 million needed, we anticipate utilizing the capital markets opportunistically. The final composition of our 2014 capital activity depends on a variety of factors including capital market conditions at the time we go to market. Therefore, we do not intend to give specific guidance regarding the exact composition or timing of our capital markets activities.

In the debt capital markets, we estimate that we can currently issued a 10-year unsecured bond at approximately 3.7%. At the end of the second quarter we had $180 million outstanding under our line of credit and other short-term borrowings.

Our balance sheet remains with the strongest in REIT world with debt to EBITDA in the mid 5 times, a total fixed charge expense coverage ratio of almost 5 times, approximately 75% of our assets are unencumbered and 86% of our debt is at fixed rates.

At this time, we will open the call up to questions.

Thank you. We will now begin the question-and-answer session.

(Operator Instructions)

Nick Joseph, Citigroup.

Thanks. Can you talk about what you're seeing in terms of the volume of product on the transaction market today, and if there's any large portfolios?

Sure. The volume is pretty robust in most markets. And we have seen a few large portfolios lurking around, or moderate-sized portfolios. It is a very robust transaction market, both on the sale and the buy side, with a lot of properties getting multiple, multiple bids. So, it's very robust.

Thanks. And then, you mentioned supply. I'm wondering if you could walk through your larger markets relative expected supply in 2015 versus 2014 levels?

Yes. So, if -- we'll look at completions in 2015 versus 2014, and I'll just hit some of the larger markets and the highlights that -- so, we'll start with Atlanta. In 2014, we project roughly 9,000 completions, and that moves to 9,800 in 2015.

Dallas moves from 13,000 -- or excuse me, from 12,800 in 2014 to 14,000 in 2015. Houston, we show completions in 2014 of about 16,000 units, and flat again, with roughly 16,000 apartments delivered in 2015.

DC is the other one that I'll give you, and then we can give you some of these other ones offline if you're interested. 2014, we showed deliveries of 11,000 apartments, and that drops to about 9,400 in 2015.

So, it's a mixed bag overall, but I think you have to put all of that in the context of the kind of job growth that those markets are seeing. With the exception of Washington, DC, every one of those other markets has sufficient employment growth; we think that we'll end up still with net absorption in all of those other markets relative to job growth.

Great. Thanks.

You bet.

Nick Yulico of UBS.

Thanks. Can you remind us where the development pipeline yields are churning today, as far as initial stabilized yields, and how that compares to when you were underwriting bid developments?

Sure. The developments' stabilized yields are trading at 7%, plus or minus, and lower in California, higher in Florida. But on a portfolio average, around 7%.

And today, properties haven't been -- if we don't own the land, and we're underwriting today, yields are definitely coming down because of the spread between construction costs are growing faster than revenue at this point. That's a real challenge in the market.

I mean, the good news is: I think when we talk about starts and slowing down at the end of this year and the beginning of next year, it really is a function of -- it's much harder to underwrite transactions today than it was given the current sort of peak land prices and construction cost increases.

And then, the 7% that you're thinking about today on the pipeline versus 1.5 years ago when you were starting some of these, were you also expecting 7% or it's gotten better than you expected?

Well, it's interesting. 1.5 years ago, we were developing higher than 7%, 7.5%. In some of the early projects we developed, for example, in Houston were double-digit returns. And some of the Florida properties were 8.5%, 9%s.

And early on in the cycle, it was just out-of-control good because people -- construction costs hadn't peaked, and you had massive rental growth. And people -- construction folks were working for food in those days.

Clearly, development trends -- development yields have trended down, and they continue to trend down. We sort of think at a stabilized 7% -- and maybe the next round is perhaps 6.5% -- but you're still creating a tremendous amount of value when you look at the spread of today acquisitions if you can get -- for the core markets and core urban locations, the spread is still pretty attractive from a development perspective; somewhere in the 150- to 200-basis-point positive spread between acquisition and development yields.

And then, Ric, just had a question on your thinking about possible M&A buying maybe a larger portfolio if it becomes available in the market in the Sunbelt in the next year. One, I'm wondering if you think your stock has an attractive enough currency to compete for a large portfolio. And again, I'm thinking not of a public company, but a private portfolio.

And two, what is your appetite to get larger, expand in markets that you're in, maybe buy some newer assets in bulk. But if you had to do it in a way that maybe might not be FFO or any be accretive in year-one, but has some longer-term strategic benefits.

I mean, how would you think about that? Is it kind of worth it, or are you better off sitting back and let someone else buy it and maybe it shows that your portfolio is not priced right by the public markets? Thanks.

Sure. When you look at M&A, in any case, I think higher stock prices, if you're going to use your currency to buy -- to fund an acquisition is obviously important when you think about the accretion/dilution aspect of trying to have an accretive NAV transaction. So, we obviously do lots of math on that, and we have been opportunistic over the years buying big portfolios. We can do that.

I think that when you get down to the size question -- so, I think we are a very good size. We're sort of a small large cap, and that means that our development activity is very accretive to NAV, and you don't have to do billions and billions to move the needle. So, on the one hand, we are big enough where we can buy products and supplies, and compete effectively with anybody in the space. And then, our stock is liquid, our bonds, spreads are very tight relative to our competitors.

In terms of the quality issue, if you think about Camden's portfolio, and the capital recycling we have done over the years, we have definitely moved our portfolio more urban. We've moved up our average rent per unit. We have improved the quality of the portfolio through selling older assets, and either buying or developing newer assets. And that's just the core competency we have been doing forever.

I remember looking back at -- we moved our offices here last year, and we had to kind of purge a lot of old papers, and I was looking back at some investor presentations we did in the 1990s. We talked about what percentage of our portfolio was built in the 1980s, and that was a positive thing that we had a lot of 1980s products. Today, we have very few 1980s product.

So, the idea of quality is important. The question of whether we would -- when we look at large transactions, I think it has to be strategic and it has to really improve the quality of our portfolio. And if the numbers work, from a long-term perspective, and improves our quality, then I think we would be positively inclined to do something like that.

As far as other markets, for 21 years we have been moving in and out of markets, and we like the markets we are in; we like them because they have the best job growth. And when you look over a long period of time, these markets that have pro-business, pro-growth, good weather, young population, they have the best job growth in the country. And yes, they do have an ability to create supply, and that's what actually drives the economy as well.

Over the last 10 years, you haven't seen any of those markets get incredibly oversupplied. The get a little oversupplied from time to time, which slows the growth, but it's not terrible. So, we like our markets; I wouldn't really reach to get out of our markets.

Alexander Goldfarb, Sandler O'Neill.

Good morning, down there. Ric, let me just carry that a little bit further. If you look at the efficiencies that EQR has gotten out of the Archstone portfolio, does that change your view as far as -- if you think about M&A, the synergy potential beyond just simply looking at another P&L merging it in, saying we eliminate G&A, et cetera. That maybe there are a lot more synergies than meets the eye, just simply by having dense clusters of properties.

I'm not sure it's clusters of properties, but I think clearly the synergies of G&A and things like that are clearly an area that we can improve on.

When you look at our G&A as a percentage of revenue or a percentage of assets, we aren't as efficient as EQR obviously, because of size. But when we look at any transaction, we look at the operational synergies as well. And oftentimes what we find, and when we've done large portfolios, we've found that by putting the Camden secret sauce on a property, we get better outcomes from net operating income growth. A good example would be when we bought the Verde portfolio, I mean, it was amazing the same-property NOI growth that we got just by putting in Camden systems.

So, I do think that when you look at any kind of transaction -- large transaction where you have the ability to improve operational activities, you have to look at that aspect of the business for sure. And it's going to be not only G&A, but operational and procedural changes that could in fact either have the NOI growth grow quicker, and squeezing out those kind of efficiencies are definitely part of any deal.

I mean, because it just seems -- whether it's EQR or Essex, it does seem like there's getting to be a size where you've got enough of a concentration, and you sort of supercharge the synergies, which is maybe why it's more than historically the transactions you've done, maybe future transactions to the extent you're bulking up even more in the market. It would almost seem like the same thing -- that there are synergies beyond what any of us on the outside could model, that's why I'm curious if you think it's changed.

Yes. I think there's some validity to that issue, for sure.

Alex, it's Keith. When we do acquisitions, in particular when we are buying something from the private market as opposed to merger at the public level, the improvements that we get from NOI from implementing the Camden platform, which is from revenue management to our cable program, all throughout the entire suite of things that we do at the property level, that private companies are just not positioned to do. They don't have the scale, they don't have the resources, and they don't have the intellectual capacity in their organization to pull this stuff off.

So, I think that when we buy private assets, the operating synergies are relatively minor compared to the operating performance that we get from those properties. So, when you flip over that thought process, and go to -- what about a public to public scenario. Yes, there's always going to be G&A synergies in that, but the reality is that public to public operators -- and there's, what, 11 of us left -- if you're going to pencil out the top 15 multi-family operators in the country, every public company would be in the top 15.

And so, when you move away from that into the private companies, whether it's Verde or whether it's one-off operations on assets that we acquire, the opportunity is for just improvement at the site level of how we conduct our business, both customer service and the programs that we add value to, and therefore, get value from, far outweigh the relatively minor operating synergies that go with the combinations. I think it's -- in the private world, it's actually -- it actually becomes more meaningful for us than any kind of a public to public merger.

Okay. And then the second question is: On condo activity, obviously you can see what's happening in Miami or New York. But given that move-outs to homes are still low, and land prices are escalating, as you commented on, are you seeing folks increasingly look to target that upper income, single renter to swap them into a condo? Are you seeing increased condo activity to go after that year renter demographic?

We are not. We track move-outs to home purchases, which also includes for-sale condos, and you can see the numbers that we've been reporting for the last three or four years. We're just still, from a historical standpoint, well below what we really should be, if we had a robust recovery in the housing market from a home buyer perspective.

And actually, the whole condo phenomenon, Alex, outside of south Florida and New York, with very limited stuff in California, it's just -- for-sale condos have not come back to be a meaningful part of the overall picture on supply, and there are a lot of reasons for that. Not the least of which the liability that comes with a condominium and a condominium regime where it's a virtual certainty that at sometime in the first 10 years, which is the statute of limitations, you're going to get sued as the developer or if you were ever in the chain of title. It's a fact of life, and I think it has been a huge deterrent at the margins of people wanting to build condominiums. Nothing's forever, and that mindset may change, but I think, by and large, that's kind of what the state of play in the condominium business is today.

Thank you.

Derek Bauer, ISI Group.

Great. Thank you. With regards to revenue guidance for the year, can you provide what you're assuming in the second half on maybe new and renewal rates as well as occupancy to achieve the midpoint?

So, on revenues, we were at 4.5% for the first -- excuse me, 4.6% for the first half. Our guidance for the year is 4.3%, so that math would imply, what, 3.9%, 4%.

In terms of occupancy, your $0.95 for the quarter, where is it today, I guess? And I guess where do you see it ending by the end of the year?

Yes. We're actually a little above $0.96 right now. Last report was $0.962, which is historically high for us, although that is a last-week-of-the-month print, which is always -- throughout the course of a month, there's about a 30- to 40-basis-point swing between first week and last week. So, my guess is by this time when we report next week, we'll be back down below $0.96, but still trending in the high $0.95s.

That's clearly above what our original guidance was, and it's clearly above what our expectations were. My guess is it probably -- that occupancy rate probably moderates in Q3 and Q4, but I wouldn't be surprised from here, to end the year at something in the high $0.95s.

Great. Thank you. And then can you also maybe provide some color on the various options that might be explored today with Texas teachers? I imagine there are some assets in the fund that you guys would like to own outright.

Well, actually, there's probably a lot of them that we would like to own outright. But that's -- and with regard to the status of our conversations, the original conversations were around the notion of just lengthening the partnership because we both recognize that these assets have -- that we've created a ton of value for the teachers of Texas.

But more importantly, from a cash on cash return standpoint to the equity, we're at about an 11% cash on cash return. And so, that's a great state of affairs for us, as well as Texas teachers. And where we go from here is certainly -- that's what we're discussing, and when we get something more concrete, we'll be able to share that with you.

Got it. Thank you.

You bet.

Rich Anderson, Mizuho.

Hey, good morning.

Good morning.

Good morning, Rich.

Two questions on your two top markets. First on DC, at 16.5% of the portfolio, how do you feel about that? Are you willing to let it ride now that we are kind of maybe beyond the worst of it in that market, or do you see that percentage coming down naturally over time?

I love DC. That's why we have a big concentration there. If you look at the mid-Atlantic and the DC region, it's one of the top -- the counties around DC -- two or three counties around there have the highest net worth, the highest percentage of people with both graduate degrees and undergraduate degrees. Mid-Atlantic is an awesome market long term.

Obviously, the government has had some issues, and a market has -- every market goes through its up and downs, but long term I think it is an awesome market. The percentage that we own there probably comes down a little naturally just because we're developing in other cities and we're selling assets in other cities.

The interesting thing about DC is that there was really never sort of a great exit point, in terms of pricing. So, for example, asset prices really haven't changed much there in the sense of -- since people have been talking poorly about DC, and it's definitely one of the lowest growth or negative growth markets out there for some companies, the value of the real estate continues to go up, not down. And there aren't any bargains to go buy in DC or anything like that, which is kind of interesting. So, I think investors generally think DC is a great long-term market.

Your story has always been like no market 10% or greater of NOI though, I mean --

Yes. You look at DC and you have to bisect -- you have to slice the market up.

Okay. That's fair. And then second on Houston, I am just curious what you think about the Super Bowl coming there in 2017. Do you think that has any kind of economic benefit to you, the Business, anything in particular on Houston on that issue specifically, or is it just too much of a one-time event?

I think the Super Bowl is an indication of just the robust economy. And if you think about it, the Final Four's there in 2016, the Super Bowl is in 2017.

The Super Bowl actually does create a lot of momentum, and it's sort of this deadline for people, and especially for governments. When you start thinking about improving roads, improving mobility, improving sort of beautification of the city, getting projects jump started so that they do get, in fact, finished before the Super Bowl. There's a lot of inertia around that. And I can tell you, being the Chairman of the 2017 host committee, and being the Vice Chairman of the host committee, we see that everyday. When I talk to people, to the Mayor and to the county governments, they're all fast forwarding projects, which obviously help the economy to try to get things done by 2017.

I think the other thing that's sort of driving Houston, when people think about Houston besides the Super Bowl, is just that it's -- it's really coming into its own. When you look at some of the investor groups that are buying there now, AFIRE, the association of foreign real estate investors, they control $2.5 trillion of capital that gets invested all over the world, has Houston as the number four city to invest in, in the world in 2014.

It's all related to the sort of secular change in energy with fracking, and Houston is the center of the universe for that business. When you look at the cities above Houston that foreign investors are looking at, it would be New York, London, San Francisco and Houston, and that's the order.

Last year, for example in 2013, Houston was number five on that list. Prior to 2013, Houston was maybe in the top 15, but below 10. So, I think there's just this big change going on because of the fundamental changes that are going on in Texas with our new energy -- with the new sort of energy dynamic.

And just where the rubber meets the road from a REIT perspective, how much time do you think it will take up -- the whole Super Bowl thing with you guys relative to the REIT?

The good news is that we have full-time staff that does it. So, it's like any other civic job that I've done over the years, which is, I'm really good at delegating. So, the Chairman makes sure that you set the direction, you set the budgets, you hire the right people, and you get out of the way and let them execute.

So, the Super Bowl is not going to take any time away from Keith and my running Camden the way we've always run Camden. Because I've always been involved in -- for the last 15 or 20 years, we've been involved in Super Bowl-like things in Houston, and it's done okay.

Go Texans.

There you go.

Thanks.

Thanks.

Dave Bragg, Green Street Advisors.

Thank you, good morning. Going back to your conversations with your JV partner, what are the range of possibilities as you see them now, in terms of potential size?

In terms of potential size?

How large would they like to be? How much larger would they like to be in multi-family and with you and what you are interested in --

Yes. So, they have -- they do have an interest in increasing their allocation to real estate. They get to play in all real estate sectors. They have a pretty decent bet in the multi-family sector at this point.

They have indicated an interest, in the conversations that we've had with them, about increasing their exposure to multi-family, and specifically with Camden. So, they're a $110 billion, $115 billion pension fund, and they have -- over the years, they've been increasing their allocation to real estate.

I think, without putting a number on it, they do have an appetite for growth, both in real estate generally and multi-family in particular. And like I say, as far as range of possibilities of outcomes, we're not far enough along in the process to even put a fence around those, but I would expect that we will get there in the next quarter.

Okay. That's helpful. Thank you.

You bet.

At the beginning of the year, you suggested that revenue enhancing, revenue-enhancing repositions could contribute 50 basis points to NOI growth. Now with the upward revision, what are your expectations, what contribution are you expecting from that activity?

Dave, it is still in the range of 50 basis points. The upward guidance, we independently look at what we're doing, the budgets that we have, the projected returns that we're getting on our pool of redevelopment assets. And those are really unchanged on the year. We're still in the 11% range as far as return on incremental cost.

Thanks. And the last question is on Las Vegas, which appears to have finally outperformed the broader portfolio. Can you just talk about that market?

Well, when we started out the year, I had Las Vegas as a C+ and improving. I think as I look back on it, maybe the C+ might have been a little bit light. It's clear that things are getting better in Las Vegas.

All of the relevant metrics that drive the Business out there, including getting back to job growth, but also on the gaming side of things, have improved pretty materially. And you -- things kind of run their course. All the folks that were going to leave, have left. There's no new construction going on -- any incremental job growth kind of flows through to the bottom line. And it's finally showing up in our result.

So, it was good to see Las Vegas outperform the midpoint of the portfolio, and I think there's a pretty decent shot that that's going to continue into Q3 and Q4. So, I think we sort of indicated that we believe that the bottom was sometime in the third quarter -- second, third quarter of last year. Looking back in the rearview mirror, that still feels about right.

Thank you.

You bet.

Michael Zielinski, RBC Capital Markets.

Good afternoon, guys. Ric, you talked about moving the portfolio more urban over the last several years there -- just as you look at the portfolio today, could you give us just an update, there's been a lot made of urban versus suburban [neighbors]. Can you talk about what you're seeing across your portfolio today, and kind of what you expect over the next 18 months?

Sure. The urban side of the equation is -- (technical difficulty)

Hello?

It looks like -- Please stay patient. It looks like Mr. Campo's line disconnected. We will rejoin him as soon as he dials back in.

Mike, go ahead and restart your -- your question was regarding urban and suburban, and the direction that we're heading?

Yes. Noticeable trends that you are seeing in the portfolio today, and then kind of what you expect to happen over the next, call it, 12 to 18 months.

As you look at our portfolio and our development pipeline, and without looking at assets -- and you can't look at unit counts, you have to look at dollars invested. It's obviously within our $1 billion development pipeline, easily three-quarters of that would qualify as being, quote, urban projects. And a lot of it has to do with just the scale of those communities.

Our two assets in California that we have under construction -- between the two of those, it's $200 million-plus in both clearly urban mid-rise and high-rise products. So, on a dollar -- from a dollar cost standpoint, it's in the 70% to 75% range of our current activity. That happens to be, right now, we believe that there is a long-term trend towards more urbanization, people moving back into the urban core.

In Houston right now, we have two relatively large communities in our development pipeline. Both urban -- but again, that's where people want to be, and they're willing to pay the rent premium that's associated with that.

So, I think that trend will continue across -- because of the nature of the markets that we operate in, but you're also still going to have the sweet spot for us, our transactions in Orlando and Tampa that are just traditional suburban, closer in, but suburban, three-story walk-up surface parks communities.

So, the range of our product will be from the three-story walk-up surface park; we'll continue to do the four-story type wrap product that we've done very successfully. But in these larger cities and the urban core, you're really driven to, because of the premium on land cost, to go more vertical, and that's -- we're going to continue to do that. And as you do that, the dollar cost associated with those investments, it goes up pretty significantly.

So, over time, yes, given the $1 billion that we have in play, once that's stabilized, that's going to be a meaningful impact on the overall mix of our assets. But it doesn't mean that we're less enamored with the returns that we're getting on our suburban products, which, by the way, are in most cases significantly higher as a going-in yield than what we're getting on our urban product.

It's all about balance, and being both geographically diverse and product diverse.

Across your portfolio today though, are you seeing those urban -- is that urban portfolio still outperforming the suburban or have you seen a more improvement in the suburban portfolios relative to the urban, as you are seeing supply come online?

So, on the year-to-date numbers, when we look at urban/suburban, the suburban portfolio actually has an outperformance of 20 basis points to the urban. So, it's a rounding error. They are both performing extremely well.

One of the reasons for that is that as the new supply comes on, it will, as we go forward, it will more and more be concentrated in the urban core, and there's just been less competition in the suburban market. So, we -- in some cases, we've been the only game in town -- in suburban Florida, suburban Tampa, the three jobs that we have in Phoenix right now. One of those would qualify as urban; the other two would clearly be suburban. But there's virtually no competition for those jobs, and on a yield basis, because the costs are much less than the urban product, on a pro forma basis, we have higher yields going in on those jobs.

Okay. And just in terms of redevelopment, obviously you've got the three-year plan kind of working through right now. As you think about the completion of that plan, is there a thought to roll out another plan across the portfolio? And do you see enough opportunity across the portfolio?

We do have another group of assets that we've identified as kind of in the -- would be the phase 4 of that program. But as a matter of scale, the first three phases added up to about $220 million; the fourth group is probably closer to $30 million to $40 million. So, in terms of scale, most of what we believe is appropriate for redevelopment will have been done -- 90% of it will have been done when we finish the first three-year plan.

Appreciate the color. Thank you.

You bet.

Vincent Chao, Deutsche Bank.

Hey, everyone. Just want to go back to some of the numbers that you had provided for the 2014/2015 completions. It looks like about 48,800 units in the four markets you talked about in 2014 -- just curious how many of those have already delivered and how many are pending in 2014? And then, we've heard from a couple different folks that it seems like some of the 2014 completions slipped into 2015, and I'm just curious if that's also what you are seeing.

Yes, so, I think in terms of what's been delivered to date versus what's pending, I don't have the details of that. We can get you that. But I will tell you that the anecdotal evidence would suggest that if someone at the beginning of the year said that they were going to have a delivery in Austin or Houston or even south Florida, if they believed that they were going to have a delivery in the November/December time frame, it's probably not going to happen until 2015.

The reality is that because of the shortage of workers and skilled laborers in these markets, you have fewer people than you would like to have on your jobs. It's a catfight to get subcontractors to fully staff your jobs, and the result of that is it's just taking longer.

We've had good experience and where we've been able to move up the stabilization dates, it's because our lease-ups are going faster. Not because construction is going faster. It is hand-to-hand combat, and if it's hand-to-hand combat for a company like Camden that's been doing this for 30 years and has an incredibly stellar reputation with all of our subcontractors, I can only imagine what it's like somebody kind of doing a one- or two-off deal that doesn't have the kind of capacity and track record that we have.

Okay. Thanks for that color. I mean, do you think that some of those delays that are happening here is benefiting you, in terms of the outlook versus the original? And how much of it do you think is coming from maybe stronger job growth than you had previously anticipated?

Yes, I think -- I really think that it's job growth, not delays. There's plenty of supply that's coming to the market in all of our markets, but when you look at the kind of job growth that we're getting, especially when you see most of our portfolio has better than 5-to-1 job-to-completion ratios, that's what is really driving the market.

It's not delays in construction and then all of sudden you're going to have a bunch of product come in and hurt the market. It's jobs that are helping; also, when you think about the nature of the jobs, the 34 and younger cohort, the millennials, those folks are getting more than half the jobs. They've gotten more than half the jobs in the last 8.5 million jobs that have been created. And so, the demographics are really interesting because when you put the jobs, and then you start thinking about who is getting the jobs, and you think about what that demographic does, the millennials are late to marry, late to have kids, not buying houses -- even the housing market for the starter homes continues to be very difficult.

Where the market is actually reasonable in the housing market is the move-up market and the very high end of the market. But that first-time buyer has a hard time getting a loan and a lot of them don't want to get a loan. A lot of our Sunbelt markets like Houston and Dallas and others [just gets through] that urbanization, the urban product question, they're becoming more urbanized.

Just to give you a sense, we did a study on the different age groups, and where they live and where they work in Houston. And people who work downtown, for example, in the urban core or in the greenway, kind of inside the loop area -- if you look at millennials, 68% of millennials live within 9 miles of their work in the downtown area. The same number of 50- to 59-year-olds, they live within 20 to over 30 miles from their workplace. So, what is happening is the older people are -- and then when you get actually 60, they start coming back into the city, which is sort of interesting. So, the demographics are pushing for this higher absorption rates and the higher demand that we've been seeing pushed by the jobs, but also by the demographics that are very, very strong for this Business.

Okay. Thank you. I appreciate that.

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

We appreciate you being on the call today, and I'm sure we'll see a lot of you when the September, after Labor Day, conference season starts. Thank you very much, and we'll talk to you later.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.