Camden Property Trust (NYSE:CPT) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
New Lease Outlook
Derek Bouwer – ISI Group: I am not sure if I missed this but where is occupancy today and can you talk about how new leases trended throughout the quarter? At NAREIT I think you said that new leases at that time were about 6%?
D. Keith Oden – President and Trust Manager: Right now occupancy is just north of 95%. We were 95.4% for the second quarter and that’s exactly in line with where we would expect it to be this time of year. New leases 5.1% and then subsequent to the quarter it has been in line with that. Renewals are 7.7% for the quarter and in July they’ve continued that trend.
Derek Bouwer – ISI Group: So, June new leases were 5%.
D. Keith Oden – President and Trust Manager: No. For the quarter new leases were up 5.1%. In July, new leases are up in line with the 5.1%.
Derek Bouwer – ISI Group: And then which markets faced the most risk from new supply in your portfolio and what impact do you think the 20% supply increase in Uptown, Dallas do you think is going to have in that market in your view?
D. Keith Oden – President and Trust Manager: I think the two markets where we got the imbalance right now with regard to projected employment growth with new deliveries would be Austin, Raleigh. Those are the two that would screen the most risk with regard to new supply. Actually Uptown, Dallas there is a lot of new stuff coming but the job growth in Dallas is all – if you take that relative to what the total new supply is there is not nearly enough new supply coming for the job growth. Obviously, if you in any particular submarket if you’ve got two lease-ups going on right next door there tends to be pressure because lease-ups act differently than stabilized communities. In particular, if it is a merchant builder they have a tendency to sprint for barn and if they are not hitting their numbers exactly they get real aggressive on concessions. There is no way you can avoid that in someone that’s immediately – immediate proximity to your communities. But I don’t think that Dallas certainly on my radar screen the markets that I’ worried about rent growth either this year or next year…
Richard J. Campo – Chairman and CEO: I think the other thing that’s supporting uptown and also supporting the Houston and Texas, in general, in these urban markets is that you’ve seen a real increase in the urban population moving from suburban to urban and that trend was sort of starting to happen before the recession and then after the recovery side of the equation is come about you’ve seen that accelerate, where young people want to be, where everything is happened and they want to be inside the loop in Houston, they want to be in Downtown, Austin, they want to be in uptown in Dallas and in those urban market. So, not only are they going to have great job growth in these markets, but you also have excess demand generated by the idea of these young people getting jobs and they want to be where the action is, which are those markets.
Derek Bouwer – ISI Group: Then just lastly, looking ahead to your NoMa development. Given the supply that’s going to be in that immediate area, what’s the risk that there is a change to your initial yield there in the first year, whether it comes from additional concession usage or longer lease of term?
D. Keith Oden – President and Trust Manager: Right now, we still like the NoMa market and as matter of fact that the interesting part of NoMa is that if you go back four, five years ago, there was nothing going on there and it was really a very transitionary neighborhood and now with all the new development, it’s really hot area. So, I think the addition of NoMa will be great for our portfolio. We will obviously watch the market and make sure that the numbers that we are underwriting are good. I think long-term it’s a great market and we’d just to have to see, but I don’t think it’s affecting our numbers at this point. The rents are actually higher at number one than we had originated anticipated when we opened it up in the first quarter of 2014. So, we are ways away from the trigger on number two obviously. But our numbers for number one are fine.
Nicholas Joseph – Citigroup: What’s the cost pressure you’re seeing on construction and how do the projected yields differ for the developments delivered in the next few quarters versus what you’re underwriting for the developments that you are starting today?
Richard J. Campo – Chairman and CEO: There definitely is construction cost pressure. When we bought out our first round of jobs, we had significant construction savings in those jobs and that definitely help yields. The good news though is that I think rental rates have gone up enough to offset the construction cost increases so far. It does make newer deals, harder to pencil, and I think that’s one of the reasons why we’re seeing a plateauing of the starts. Is it – it’s just more difficult to make the numbers work. Early yields that we had we’re sort of out-of-control is good. As Alex pointed out our City Center project here in Houston is 10% cash on cash yield. We aren’t going to be able to do yields like that in the future, but the properties that we are going to start this year and next year even with construction cost increase, the rental rates have offset of the construction costs or increased rental rates have offset those, so we’re still in the 7% zone in terms of returns on the starts for this year and early next year.
Nicholas Joseph – Citigroup: You’ve talked about all the changes you’ve seen over the last 20 years at Camden, so looking into the future what markets would you like to increase your presence in and where could you see yourself decrease in?
D. Keith Oden – President and Trust Manager: We are pretty comfortable with our allocation currently. We are pretty meticulous about modeling how much exposure we want to have and it has to do with the size of the market and the projected NOI growth rates long-term in those markets. So, we are actually pretty comfortable with it. We are not currently investigating or doing any footwork in any markets beyond our existing platform. We just think the opportunities in the 17 markets that we are currently in are substantial now and will be over the next 20 years. So, I think, that we are comfortable with our portfolio. There are clearly opportunities in some of our less represented, from a percentage standpoint, for Phoenix (indiscernible) world. We are somewhere around 3% or 4% of NOI in Phoenix and that’s probably going to trend up over time. We just think there are significant opportunities in these markets that we serve. The other thing is that our footprint is so different from the other public companies in the sense that we got entire markets where no other public companies are represented in any meaningful way, one of which is Houston by the way. But that also happens in Phoenix. It is true for the most part in Raleigh. There is a small public presence in Tampa. So, we are in markets where we just don’t have a great deal of overlap or have opportunities to develop and acquire and transact where – we still run into the public companies and I think for the most part that’s a good thing for us.