The executives at Houston-based REIT Camden Property Trust usually look to send a message with their introductory music on their quarterly earnings calls. Their second quarter meeting with analysts earlier this month was no different.

As they waited for the call to begin, listeners were treated to "The Waiting" by Tom Petty and the Heartbreakers. 

“The consensus views seem to be that everyone in multifamily is waiting for something,” CEO Ric Campo said on the call. “Operations teams are waiting for the pace of multifamily completions to reach a peak and begin to come down and for bad debt to return to pre-pandemic levels. CFOs are waiting for the long-anticipated first interest rate cut by the Fed, as well as relief in property insurance and property tax expenses.”

On the transaction side, sellers are waiting for buyers “to throw in the towel and start buying,” according to Campo. On the other hand, buyers are holding out for “the towels to go on sale,” the CEO said.

“While we are certain the waiting will end eventually, the timing is up for debate,” Campo said. “In the meantime, as the late, great Tom Petty reminds us, the waiting is the hardest part.”

Here are three other takeaways from the REIT’s call and earnings report.

The REIT weathers the supply storm

Currently, apartment supply is at a 30-year high, limiting rent growth in many Camden markets. However,  200,000 units were absorbed nationally in the first half of the year, matching 2018 and 2019, Campo said.

“Employment growth has been robust in all of our markets except Los Angeles, which continues to struggle,” Campo said. “Ten of our markets have had job growth greater than 10% compared to the pre-pandemic levels.”

Overall, operating conditions played out as the REIT expected in Q2, Camden President Keith Oden said on the earnings call. New lease rental rates were down 1.8%, and renewal rates rose 3.7%, giving the company a blended rate growth of 0.8%. The company sent out renewal offers at an average increase of 4.6% for August and September.

“Turnover rates across our portfolio remain very low, driven by fewer residents moving out to buy homes,” Oden said. “Net turnover for the second quarter of 2024 was 42% compared to 45% in the second quarter of 2023.”

San Diego; Washington, D.C.; Los Angeles; Southeast Florida; Houston; Denver and the Inland Empire and Orange County in California posted revenue growth above the portfolio average of 1.4%. On the other end of the spectrum, Austin and Nashville saw revenue declines of approximately 2% and 4%, respectively. 

Expenses fall

Like many of its REIT peers, Camden saw expenses fall in Q2, which drove its outperformance in funds from operations. The REIT dropped its full-year expense growth guidance from 3.25% to 2.85%, driven by the assumption of continued lower-than-anticipated insurance premiums and property taxes. 

Property taxes, which represent approximately 36% of Camden’s total operating expenses, were previously projected to increase by 1.5% year over year. “Based on lower Texas property assessments and higher refunds, we are now anticipating that property taxes will be up approximately 1%,” said CFO Alex Jessett on the earnings call.

Insurance, which represents 7.5% of Camden’s operating expenses, was expected to be flat YOY as of Q1. However, the company now expects a 3% decline in insurance costs. Last year, the REIT saw a staggering 40% increase in insurance. Coming into 2024, it projected an 18% jump. 

“Right now, this is still a great business for the insurance providers,” Jessett said. “And every insurance provider that we spoke to when we did our last renewal was trying to find out how they can have more of this business, and the simple way that they can get more of this business is to keep the rates low.”

New projects coming in 2025

In Q2, Camden completed construction on the 189-unit single-family rental community Camden Woodmill Creek in The Woodlands, Texas. It also began two new projects in Charlotte, North Carolina — the 420-unit Camden South Charlotte and the 349-unit Camden Blakeney.

“These are really shovel ready, and we had delayed them, and so we went ahead and started the two in Charlotte that we announced,”  Campo said.

Camden doesn’t expect more development starts in 2024. However, the firm has other projects in the pipeline for 2025 and beyond. “It's just hard to get positioned and to start those other properties that we have between now and the end of the year,” Campo said. “They'll likely be 2025 starts.”

Campo also sees the potential to add more projects. “I also think we'll be able to expand the pipeline by helping other developers out who can't get financing — who have shovel-ready land deals that they're willing to part with,” he said. “If you look at our history in cycles like this, we've always been able to ramp up our development pipeline.”

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