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Camden Property Trust
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Good morning and thank you for joining Camden's First Quarter 2021 Earnings Conference Call. We hope you will enjoy our new, more interactive call format today, which includes a brief video presentation as well as slides detailing some of the remarks from our executive team. Today's webcast will be available for replay this afternoon, and we are happy to share copies of our slides upon request. If you haven't logged in yet, you can do so now through the Investors section of our website at camdenliving.com.
Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC, and we encourage you to review them.
Any forward-looking statements made on today's call represent management's current opinions, and the company assumes no obligation to update or supplement these statements because of subsequent events. As a reminder, Camden's complete first quarter 2021 earnings release is available in the Investors section of our website at camdenliving.com, and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call.
Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, Executive Vice Chairman; and Alex Jessett, Chief Financial Officer. We will attempt to complete our call within one hour as we know that another multifamily company is holding their call right after us.
We ask that you limit your questions to two and rejoin the queue if you have additional items to discuss. If we are unable to speak with everyone in the queue today, we'd 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.
Thanks Kim. The theme for our earnings call music was have fun. We've always believed that our Camden teammates do their best work when they're having fun. That's why 25 years ago, we chose have fun as one of our nine core values. Having fun is an essential ingredient of maintaining a great workplace. When your team is having fun, they have smiles on their faces, which puts smiles on our residents' faces, which ultimately makes our shareholders smile. It's a formula that has allowed us to earn a place on Fortune magazine's 100 Best Places to Work With for 14 consecutive years with seven top 10 finishes.
Just recently, we're pleased to announce that Camden placed number eight on this year's list. Creating a culture that encourages folks to have fun, requires consistent, intentional focus, especially during the pandemic. Over the years, we have created traditions that support having fun from skits and lip-sync contests, the fun videos that deliver important messages to our teams. The pandemic allowed us to come up with new ways to maintain our culture in the new work environment.
Camden’s culture is our superpower that allows us to consistently perform at the highest level. And as Peter Drucker famously said, culture eats strategy for breakfast. Our earnings call platform allows us to share videos and enhance our messaging. Here's an inside view of one of the many cultural messages that we share with all of our Camden teammates this year and now with you.
[Video Presentation]
During the first quarter, we saw operating strength building in most of our markets. Clearly, the opening of the economy driven by the speed at which the COVID-19 vaccinations have been distributed has improved our results for the first quarter and our outlook for the rest of the year. This has led us to increase our net operating income and our FFO guidance. As tough and strange as the pandemic made last year, we have used the time to advance many initiatives that will drive revenues, lower expenses and improve performance in key areas.
To list a few, our investments in Chirp funnel and other AI opportunities will accelerate self-guided tours, virtual leasing and apartment package deliveries and keyless communities, all driving better customer experiences while increasing revenues and lowering expenses. Our investments in our cloud-based ERP systems have made remote working seamless, it streamlines data mining, moving us closer to the Internet of Things.
It creates for a more robust ESG analysis and reporting on our ultimate carbon footprint reductions that we'll publish later in the year, we would be publishing a more expanded ESG report in the fall. I began the call with a discussion and a video on culture. We continue to do the right thing at Camden, moving forward on the journey to a more diverse, equitable, and inclusive workplace.
Last summer, when there was great uncertainty, we advise our teams to focus on things they could control, get in the best health of their lives, embrace their friends and family as true partners with masks, proper social distancing, and vaccinations, of course. We also asked our team members to take care of our residents and each other and not to listen to the noise around them. We told them that the pandemic would pass and the years after would be great for our teams, their families, and our business. We see the light ahead and it's not a train. I want to thank our team Camden, your families for helping us get from there to here. Thank you.
And I'll turn the call over to Keith.
So we’re very proud of the fact that Camden, that we have been included on Fortune magazine's list of 100 Best Companies to Work For, for 14 years. It's an incredible accomplishment that reflects the fact that each of you takes pride in the workplace and continues to work hard, to make Camden a great place to work.
So a lot of people think about the Fortune list and the Camden's culture and all the things that we do to support being a great workplace. And a lot of people look at that and they say, what they see is expense and cost. And what we see is investment. We're investing in our brand. We're investing in our people, we're investing in our culture. And ultimately, we think those things are far more important than the small amount of impact that the expenses that we have around maintaining Camden as a great workplace actually matter.
And one of the ways to look at that is, is that we track our Camden's 20-year investment return against the S&P 500. And it's proof positive that creating a great workplace also creates great results for your shareholders. Over the last 20 years, Camden Property Trust has produced an annual return for our shareholders of over 11%. And the S&P 500 was about 7.5%. So almost 4% per year better than the S&P 500 for a 20-year period, that's pretty incredible. And we think it's directly attributable to the investment that we make in our culture and our people and making Camden a great place to work. So thank you for all you do. And thank you for being a part of this great company for all this period of time.
Now, a few details on our first quarter 2021 operating results, same property revenue growth was down 0.4% for the quarter, and as expected our top performers who are located in our Sunbelt markets. With Phoenix at 5.8%, Tampa up 4.0%, Atlanta 2.2%, Raleigh 1.9% and Denver routing out the top five list at 1.3% up.
Rental rate trends for the first quarter were slightly ahead of plan with sign leases down 0.8%, renewals up 3.4% for a blended rate of 1.2%. For effective leases, which were generally signed in the fourth quarter or early in the first quarter, the blended rate was 100 basis points lower at 0.2%. Our preliminary April results indicated improvements across the board for sign new leases, renewals and blended growth, averaging 4.5%, 4.7% and 4.6% respectively. Future renewal offers are being sent out on average at over 5%.
So our blended rental rates moved up from 1.2% in the first quarter to 4.6% in the month of April, this 340 basis point improvement exceeded our budget and was the primary reason for raising our full year revenue guidance. It's worth noting that Houston showed the fifth best improvement in revenue reforecast among all of Camden's markets and we now expect Houston revenues to be only about 1.5% down from last year.
Occupancy averaged 96% during the first quarter of 2021, which matched our performance in first quarter of 2020, and was the highest quarterly up level achieved since the pandemic began. April 2021 occupancy has accelerated to 96.6%, exceeding our original budget and expectation and setting us up well for our peak leasing season, which has begun and generally runs through early September.
Net turnover for the first quarter of 2021 was 200 basis points lower than 2020 at 35% versus 37% last year, marking yet another quarter of high resident retention and fewer residents choosing to move. Move outs to purchase homes dropped to 16.9% for the quarter versus 19% last quarter, which is in line with our seasonal patterns we usually see from the fourth quarter to the first quarter of each year.
Next up is Alex Jessett, Camden's Chief Financial Officer.
Thanks, Keith. Before I move on to our financial results and guidance, a brief update on our recent real estate activities. During the first quarter of 2021, we commenced construction on Camden Durham, a 354 unit $120 million new development in Durham, North Carolina and we began leasing at both Camden Lake Eola, a 360 unit $125 million new development in Orlando and Camden Buckhead, a 366 unit, $160 million new development in Atlanta. Subsequent to quarter end, we began leasing at Camden Hillcrest, a 132 unit, $95 million new development in San Diego. In the quarter, we collected 98.4% of our scheduled rents with only 1.6% delinquent, this compares favorably to the first quarter of 2020, when we collected 97.9% of our scheduled rents with a higher 2.1% delinquency.
Turning to bad debt. In accordance with GAAP, certain uncollected revenue is recognized by us as income in the current month. We then evaluate this uncollectable revenue and establish what we believe to be inappropriate reserve. This reserve serves as a corresponding offset to property revenues in the same period. When a resident moves owing us money, we typically have previously reserved all past due amounts, and there will be no future impact to the income statement. We reevaluate our reserves monthly for collectability.
For multifamily residents, we have currently reserved $9.2 million as uncollectible revenue against the receivable of $10.2 million. For retail, we are fully reserved against our $2.3 million receivable. In mid-February, Texas experienced a significant winter storm resulting in widespread power outages, which led to among other issues, corresponding water damage from broken water pipes, less than 5% of our Texas units experienced any type of damage, with only 0.25% requiring the resident to temporarily vacate their home. Today, the vast majority of the damage has been fully repaired and operations have returned to normal. We are extremely proud of the efforts of team Camden in responding to this unprecedented event.
Last night, we reported funds from operations for the first quarter of 2021 of $125.8 million or $1.24 per share, $0.01 above the midpoint of our prior guidance range of $1.20 to $1.26. The $0.01 per share variance to the midpoint of our prior quarterly FFO guidance resulted primarily from both higher occupancy and higher rental rates at our same-store and non same-store portfolio, partially offset by the timing of certain property tax refunds in Washington, D.C. and Los Angeles, which we expected in the first quarter and will now likely not receive until the second half of the year.
Contained within our first quarter results is approximately $900,000 of expenses directly associated with the Texas winter storm. Two-thirds of this amount is property level insurance over time and repair and maintenance expense. The remainder is corporate level and tied to relief efforts, including meals provided to our residents. The additional property level expenses were entirely offset by greater than anticipated amounts of unrelated insurance subrogation proceeds.
Last night, based upon our year-to-date operating performance, our April 2021 new lease and renewal rates and our expectations for the remainder of the year, we have increased the midpoint of our full year revenue growth from 0.75% to 1.6%. Additionally, we have increased the midpoint of our same-store expense growth from 3.5% to 3.9%. This increase is entirely to account for additional property level salary expenses now anticipated to result from our reforecasted full year revenue outperformance.
As a result, we have increased the midpoint of our 2021 same-store NOI guidance from negative 0.85% to positive 0.25%. Our 3.9% revised expense growth at the midpoint assumes insurance expense will increase by approximately 22% due to the continued unfavorable insurance market. Property insurance comprises approximately 4% of our total operating expenses. Additionally, our revised expense growth assumes that salaries and benefits will increase by 3.5% as a result of additional compensation tied directly to the now reforecasted revenue outperformance. The remainder of our property level expense categories are anticipated to grow at approximately 3% in the aggregate.
Last night, we also increased the midpoint of our full year 2021 FFO guidance by $0.09 per share. $0.07 of this increase results from our revised same-store NOI guidance with the remaining $0.02 per share increase expected to be generated by our non same-store portfolio. Our new 2021 FFO guidance is $4.94 to $5.24 with a midpoint of $5.09 per share. We also provided earnings guidance for the second quarter of 2021. We expect FFO per share for the second quarter to be within the range of $1.22 to $1.28. The midpoint of $1.25 represents $0.01 per share increase from our $1.24 in the first quarter of 2021. This increase is primarily the result of an approximately $0.01 per share expected sequential increase in same-store NOI, resulting from higher expected revenues during our peak leasing period, partially offset by related compensation expenses, the seasonality of certain repair and maintenance expenses and increases from our May insurance renewal.
As of today, we have just over $1.1 billion of liquidity comprised of approximately $260 million in cash and cash equivalents and no amounts outstanding under our $900 million unsecured credit facility. At quarter end, we have $358 million left to spend over the next three years under our existing development pipeline and we have no scheduled debt maturities until 2022. Our current excess cash is invested with various banks earning approximately 25 basis points. And finally, as I have discussed on prior calls, in 2019 and 2020, we set in play important technological advancements. 2021 will be the transition year that will lead to realize efficiencies in 2022, 2023 and beyond. From cloud-based financial systems to virtual leasing, to mobile access to AI technologies that allow us to meet residents on their schedule, we are poised very well for the future.
At this time, we will open the call up to questions.
We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Alua Askarbek with Bank of America. Please go ahead.
Hi everyone. Congratulations on a great quarter. So I just wanted to start off a little bit big picture, asking more about the transaction in the market. I know you guys were guiding to about $400 million to $500 million. So how are you guys thinking about that now that we are about four or five months into the year and what opportunities are you seeing out there in the market?
Well, definitely we are seeing opportunities, the challenge however, is the pricing is way, way beyond what we expected. The good news is, since we have a balanced disposition and acquisition program, we expect to get higher prices for our properties are going to sell. And so we're going to try to make that trade. If you go back to our last big acquisition disposition programs in the last cycle, we sold a lot of properties, bought a lot of properties and we’re able to upgrade the quality and the – quality of the portfolio over time. But that will tell you, I've never seen cap rates this low in my business career, I'll give you an example of real time property that we’re working on last week in Tampa – this week in Tampa, I just got the e-mail yesterday.
So the original price talk for this reasonable property in Tampa, it's a middle of the road new development, decent property, we'll call it an A minus price talk at the beginning of the process was $77 million plus or minus, which would have been in low 4 cap rate kind of right at 4-ish. The price – the property was awarded at a little over $90 million which is a going in a cap rate of 3.2%. And what you – with a 3% growth in revenue over a seven year period the only way you get to a 6 IRR is to have a 3.75 exit cap rate.
Now that's what properties are trading for in every major market in America today. So I think we'll be able to sell properties and buy properties, but the spread, I think between older and newer is definitely going to be really tight. And it's a good trade for us and we'll continue to do that. But pure acquisitions are pretty tough if you don't have a disposition behind it to try to capture that newer property and capture the lower CapEx part of the equation, that's why we would be doing it in the first place.
Got it. Thank you. And then I think you guys commented a lot on how you wanted to enter Nashville. So what are you guys seeing there in terms of cap rates on the transaction market?
Same. The cap rates are pretty tight in Nashville, too. Nashville is an interesting market because when you look at its supply side, it has probably the second most supply coming into the market. And so I think that of any other city in the country, so we're still – we're looking really hard in Nashville and we're actually – our teams are going to be out there next week and we're actually going out to live in a few properties next week as well. We think we'll be able to move into Nashville this year. And again, it's you – you can acquire properties and we can acquire properties, you just have to pay up today, it's – again, as long as we're selling properties at really high prices and buying properties are really high prices, I'm okay with that. And I think we'll be able to execute in Nashville.
Okay, great. Thank you. Good luck with that.
Thanks.
Our next question comes from Neil Malkin with Capital One Securities.
Hello everybody. First question, can you just talk about what you're seeing in terms of in migration in some of your markets, your kind of larger Sunbelt markets, obviously, COVID has kind of been the great accelerator for that. And just wondering if you people on the ground are telling you that they continue to see that in earnest, if it's accelerating, if it's kind of steady? Any commentary on kind of like where that's coming from, what markets are the biggest beneficiaries?
Yes. So Neil, we continue to see elevated levels across our platform, but it's not new. I mean, we've had in migration going on and that has been exiting the Northeast and parts of California, mainly Northern California for the last decade. But clearly it's accelerated, and I would say the markets that we have – that’s the most impact and most visible right currently are in Atlanta, everywhere in Florida. And again, that's mostly a Northeastern phenomenon. In Austin, Texas, I would say that's the place where anecdotal evidence of out-of-state license plates in particular, California is pretty incredible. The trends in some of our markets around home prices that I think are exhibit characteristics of kind of people coming in and being willing to pay up, in Austin, Texas as an example, it has the highest spread between asking price for a single family home and selling price.
So in the last 12 months, the average price – sales price in Austin, Texas for a single family home is 7% above what the asking price was. So it's just, these are kind of crazy numbers historically that we've never seen before, but I think it is indicative – continues to be indicative of people finding incredible housing value in our markets relative to the markets that they're exiting. So I think it's just a continuation of what's been going on, clearly it's accelerated, and I don't see, I'm not – a lot of people I think or some people think that this is strictly a COVID related increase. I'm not so sure that that's true. So I think the trend that's been in place a long time and continue probably at elevated level.
Neil, if you look at the census numbers that came out, Texas came two congressional seats, California lost one, New York lost one, you go up into the rust belt and a lot of those States lost and Florida gained. And I think we have seen an uptick in Phoenix and in Florida for sure. But I think this was just a continuation, I agree with you totally, that the pandemic is the great accelerator. And I think what will really be interesting will be once the States are open, right, because California talks about being open, but it's really not open yet.
And I mean fully, right, so when we get to a real pandemic is in the rear view mirror, then the question will be how – what happens over the next couple of years when people actually do have the ability to work from home and just use their laptop as their office, right? So I think we're in a good position and we've always wanted to be in these markets because there are pro growth markets and great weather and low housing prices that drives migration.
So I would add to that, if you look at most of our new residents come from Sunbelt markets, but if you think about non-Sunbelt markets, New York is our number one non-Sunbelt provider of new Camden residents.
Okay. Thanks for that. Other one for me is maybe bigger picture, talking about cap rates coming down, and we've talked to brokers pretty much in all of your markets and sub-4 is like the name of the game. And when you think about your portfolio, it's a great aggregated, diversified portfolio, ridiculously low leverage compared to anything private, a lot of growth avenues there. Is there, I mean, do you think that there should be a rerating, or is it fair to say that cap rates on the public side need to come down or they're justified being lower? And if nothing else, the spread between coastal and Sunbelt should be compressed at least over the next several years and not the cycle.
Well, if you calculate at the Camden's NAV based on the current cap rate environment, I mean, we have a spreadsheet that shows sort of various cap rates and what we think our NAV is. And if you use the Tampa number, we don't have that number on our spreadsheet, okay. I mean, we go to like 3.5 cap rates and we stop. And so, clearly the question will ultimately be, who is right, right, is it the private market that's right or the public markets are right. And we've had this debate forever that the public markets sometimes act as real estate and sometimes act as stocks and right. And so when the stocks get hammered, it's not because somebody is thinking about their NAV relationship to the private market, they're just selling the stock because they have an ability to buy some other stock that's going to go up faster or have whatever the reason for that trade is.
I think we're trading more like stocks today for sure, and less like real estate. When you think about why somebody's paying a low 3 cap rate in Tampa, I think it's pretty basic. Number one, the 10 years at a very, very low rate, you still have positive leverage when you finance using a 10 year, let’s say 2.5 or a 10 year mortgage at 2.5 or doing some change and compared to 3.25 cap rate, you have a 100 plus basis, maybe a 90 to 100 basis points of positive leverage on that trade, and then you think about the worry that people have with the current sort of trajectory of trillion dollar here, a trillion dollar they're fed and government stimulus and everything else is going on out there. And you hear the word inflation, and you hear the word, oh, what happens, long-term inflation wise, well, multifamily, we price our property – our leases every single night and our leases roll over, where the fastest roller of lease type other than hotels and 8% plus of our leases roller very month, right?
So it's a great inflation hedge if you're worried about that. And when you think about private capital, looking for a yield, multi-families a pretty good place to be in, and the supply and demand side of the equation is pretty much balanced. You have great job growth going on in most of these markets. And once the markets are opened up, I think the coastal markets will do fine, it'll just take more time for them to get better than it does, like the markets that have opened up. So I think that's why cap rates are really low. And I wouldn't say that the private side is crazy right now and clearly the gap between real cap rates in the private sector versus the public sector is – there is a bigger spread I've probably ever seen in my business career at this point. So who's right?
Yes. Well, obviously could you just – and what is the 3.5 cap translate and due?
Well, I mean, you can do – you can look at just the NAV from the consensus NAV right now, it's like $119 a share. And it's like four – three quarter cap rate or something like that. For every 10 basis points in cap rate is like $2 a share, so you do the math. I'm not going to put a number out there, but I'll – but it's about that $2 a share for every 10 basis points.
Our next question comes from Alexander Goldfarb with Piper Sandler.
Hey good morning. Good morning down there, and Keith, nice job deejaying this morning on the tunes. So two questions, first, obviously there are a lot of articles about the impact of the unemployment, the extended unemployment benefits was talking to a guy does business across a lot of different states. And there is feedback that people won't take a job because they're getting paid more to sit at home. In your portfolio, and I don't know how much of that was a driver of your need to increase the property level payroll, but are you seeing across your markets that sort of the economy is being held back, because people aren't taking jobs or we should read into it that the 4.5% rent increases that you guys got in April is an indication that if two different groups and the impact of the extended unemployment benefits has really no real impact on your guys' ability to perform, basically what I'm asking is as these benefits expire, would we see an acceleration of your portfolio or the two are not related?
I think the two are related, but not directly, because if you think about the people that are unemployed today that are receiving benefits – government benefits, those are people making, I think a vast majority of make under $50,000 a year. And those are folks that are working in hospitality areas and things like that. And they're making 30% more by staying home than they are going back to work. Restaurants, for example, I was driving out yesterday afternoon, I saw a restaurant that had help needed in every position, $500 signing bonus if you come in, right. And so that is holding back some of the economy from that perspective, but our average income is over $100,000, so most of our folks are working, they're continuing to work and doing well.
The biggest issue holding us back from a higher revenue growth are restrictions on increasing rent, certain markets like in California and in Washington D.C. And so our top line number would be higher by at least 50 basis points if we didn't have those restrictions in place in my opinion. So I think that once the economy opens more in these other markets and we get past this CDC restriction and the cap on renewals and things like that, then the multi-family business should be really good in the next six, eight, 10 months, once we get rid of the – get past that piece.
In terms of people, our increase in costs for salaries today are not so much driven by – we can't find employees, but it's by outperforming their original budgets, so we have to increase our bonus accruals for them.
We definitely like hearing about bonus accruals going up, so that's a good thing. The second thing is on the development side, obviously you guys have pared back your program tremendously over the years. But as you look at new markets like Nashville, or just try to deal with rising construction costs, are you guys seeing more opportunity to put Camden capital to work like funding other developer’s third-party and then do it as a takeout? Does that sort of mitigate risk or allow you to broaden your net or your view, is that you really want to do development on your own, because from start to finish, you feel that holistically it's a better risk proposition?
I think that doing anything that isn't 100% Camden owned with Camden control that’s more risk not less risk to the process. And you can't really move the needle on – at least my – our opinion is you can't move the needle on driving revenue and driving new development deals really by doing JVs or doing equity programs or whatever you want to call them. And we still have the sting from a $3 billion joint venture program during 2008 and 2009, where our partners wanted us to default on debt so we could buy the debt back cheaper. And that was we – when we did those joint ventures, the $3 billion didn't really move the needle for Camden, but what it did is it, it created more risks when the market turned down and we had challenges with dealing with our partners, even though they were all deep-pocketed, they didn't want to bring any cash out of their pocket. So we're going to keep our balance sheet pristine, we're not going to do deals like that. Other companies have different views of that, I get it, but that's not Camden.
And Alex, just on your point about the size of the development pipeline, if you take what's in lease up currently, plus what's under construction, we're close to $1.2 billion in new development. So we think we've been very opportunistic about taking advantage of these – delivering these yields into a declining cap rate environment that's going to create a ton of value. So I think $1.2 billion is about equivalent to our all time high in terms of a development pipeline. So we definitely see opportunities everything that we're working on right now based on kind of cap rates that’s in play for acquisition assets look like they're going to be really accretive.
Okay. Thank you.
Our next question comes from Nick Joseph with Citi.
Thanks. Maybe just sticking with construction. What are you seeing on the cost side, both for the in place development pipeline also as you price out feature starts?
So prices are up big time. If you look at – so let's take two periods of time, take April of this year – April of 2019 versus April 2020, costs were up 2% or 3% maybe and some markets actually flat. In the last 12 months since April of 2020 versus 2021 multifamily costs in total are up about 12.5%. And it's all primarily driven by, well, there is three big drivers, one is just commodity prices, if you look at soft lumber prices in last 12 months, soft lumber is up 83%, plywood is up 53% OSB board is up 65%. Even fuel, when you think about gas – fuel, diesel, gasoline is up 50%, 60%. Labor issues are there, supply delays – our supply chain backups are making products more difficult to get. And so the speed at which you can develop is slower.
So it's a tough environment out there when it comes to cost. And good news for us is we did a walk in lumber packages on a several jobs that we had. So we don't have a lot of exposure on lumber at this point. We did lock in about 70% of the package, I really give kudos to our construction folks and our commodity sort of consultants for helping us navigate that – this tough water here. So we don't have – Camden doesn't have a big exposure to this big price increase, but it does affect the way we underwrite new transactions obviously, and it becomes more and more difficult. But I guess on the one hand with cap rates compressing as much as they are the spread on what you can buy an asset for versus what you can build it for a day, even with a cost increase is still pretty wide. And so, that's why you're going to continue to see new developments continue, even though the going in yields are going to be down the spread between what you can sell and buy for is still pretty robust.
Thanks. That's very helpful. And then just on the rental assistance plans. How do you think that impacts Los Angeles and Orange County specific to you?
Well, it doesn't – so far it hasn't affected us in a positive way at all. And part of it is the – all of the various qualifying elements that you have to go through. And [Technical Difficulty] that our resident base does not qualify or has not qualified for any meaningful amount of rental assistance in particular in California, but that's – it's a little bit different market to market, we do have some markets where we've gotten a couple of $100,000 in rental assistance. But overall, this entire – if you take the effect of delinquency, the effect of not being able to get people moved out who are not paying their rent. Overall, the whole event has been a pretty significant net negative for us around the margins. And by that, I mean, we're now at about $9 million in receivables and that's about $8 million and then what we would normally carry in our receivable.
So we hope that over time, a couple of different things will happen. We hope that as the – if the CDC mandate is not extended, which it's currently out to June 30, and I guess it's anybody's guess as to whether it will be or not, but if that is not extended, then we should be in a position to start getting back control of our real estate. And we think that's going to be very helpful and kind of whittling away at that $9 billion in receivables. But overall in our portfolio, that ERAP is not been particularly helpful because of the income of – average income of our resident base. So we'll see if in this next tranche there is fewer restrictions on how that gets used, but I'm not terribly optimistic about that.
One of the challenges that you have in all this is that federal government puts this money out, there is – in the last two stimulus, the one in December and the one that happened in February $46 billion was allocated to rent assistance, which is a huge number, obviously. And to-date there is been just a minute fraction of that money going out. And part of it is that the government requirements to check the box, we were having a meeting with our California folks, and I think the last number I heard Keith was, that we've had to send out 10,000 pages of documents to our residents in California. And it's like what, and so it's all this massive just government requirements to say, you got this right, this right, this right, this right and here's what you can do.
And when you start talking about 10,000 documents, what do you think those people are doing in those apartments are picking that document up, looking at it for the first paragraph and thrown it in the garbage. And so the challenge you have is that government requirements are tough. In Houston, for example, we’re involved in designing the first set of programs for apartment rent relief here. And we streamlined it, we gave out $70 million of money in Houston, Texas and did it really fast. And at the end, we ended up with $10 million more by the end of the year and we couldn't give the $10 million out, so we had to give it to the food bank, otherwise, based on government regulations, you'd have to give it back to the federal government if you didn't spend it.
So the challenge you have with all this stimulus and these things is that, it's really hard to get the money out to people. And the people that are hurting are not the $100,000 households, the people that are hurting are the $30,000, $40,000, $50,000 players that are in C&D properties, that aren't back to work and are not getting stimulus money and what have you. And those are the ones that are the hardest to get check the box on, once they get tight, once they go through a website and you don't have all their information, they just leave and they don't – so you're losing them. So it's a challenge, and those items I think our industry has done a great job of trying to help the most vulnerable people in the multi-family space, but they just don't live at camp and then they don't live at most of the public companies apartments.
Thank you.
Our next question comes from John Kim with BMO Capital Markets.
Thank you. You guys look great on video.
Thanks.
I had a question on the occupancy pick up you had – I had a question on the occupancy pick up you had in April to 96.6%. Were there any particular markets that drove that figure higher? And do you expect it to remain at this level for the remainder of the year? Or do you expect it to trend back down to 96%, which is where you operated back in 2019?
Yes. So I think that if you look at our pre-lease numbers and go out 30, 60 days, the indications are pretty good that we'll stay above 96% for the next couple of months, obviously, we're coming into the best part of our leasing season. The strength was across the board, so just to put some perspective around it, we did – we obviously did a complete reforecast to support our change and increase in guidance. And of our 14 markets, if you look across our portfolio, the bottom up re-forecast revenues went – revenue projections went up in 12 of the 14. So the only two markets where revenue did not increase was San Diego and Orange County, LA. And the reason for that was – has nothing to do with the underlying strength of the market, which are both really good right now, it has to do with bad debt.
So we continue to have a challenge in California with regard to elevated levels of bad debt, because we can't – because of the CDC, eviction mandate and all the rent strikers that we have in our portfolio in Southern California. So absent those two, which by the way we're very – only slightly negative on reforecast because of bad debt. Without the bad debt in California, we’d have been up on all 14 markets. And I don't think I've in my career ever seen a reforecast done where all 14 markets had a positive revenue impact in a reforecast. So I think it's strength across the board. And if you kind of – if you go to the top level of revenues in the new reforecast, we now have out of 14 markets, we have 13 that have positive revenue growth for the year. The exception to that is, I should call out in the opening comments is Houston and Houston is down to 0.5% negative total revenues for the year.
And I can tell you that our Houston folks are working their tails off to get off that list, because they're the only one that has a negative number for the revenue reforecast, all the other 13 markets are really well positioned for peak leasing season.
So John, we've got seasonality in there, but our reforecast assumes that we're going to have 96% occupancy for the full year. Obviously, it's higher occupancy in the second quarter and third quarter coming back down in the fourth quarter, but to compare that to our original budget that's a 70 basis point improvement.
That's helpful. Thank you. And then on the cap rate discussion, we saw some of that cap rate compression was offsetting income, but at times, like that's not the case. But on that exit cap rate that you quoted on example in Tampa at three and three quarters, is the view that if cap rates are going to remain low because of rising construction costs, or is it the potential that the rental growth assumption that you quoted a 3% was a bit conservative?
Well, I think cap rates are a function, not of construction costs going up because that project, by the way, at the price that I stayed at the 90 million price, it's 18% above replacement costs. So replacement cost is not a bogey today that investors are looking at, what they're looking at is what kind of cash-on-cash return am I gonna get from this real estate? And a three, two cap rate is the competitive market today. And so whether when you think about how you do an IRR, right, an unlevered IRR has three components, what you buy in at, what your cash flow grows at and what you exit at.
And so for years, the question of what is your exit cap rate seven years out, has been – that's like the argument about what's real CapEx, right. New development, you put in 250 and you know it's not that long-term, but that's what people use. And so ultimately, what will drive the exit cap rate will be the environment at the time. And we know what drives price of any asset is first liquidity, how much liquidity is in the market.
And we know today that there's massive liquidity in the market beyond belief liquidity. The second thing that drives cap rates and prices is – and these are in the most important order is supply and demand. What's the business look like? Is it excess supply? Long-term how you feel about supply and demand dynamics relative to being able to drive net operating income or cash flow growth in the market today, supply and demand is pretty much imbalanced.
You look at imbalance from – just from that perspective, in most markets. And so when you look at supply and demand, it's good, then the next is inflation. And then people have this inflation view or worry that you could have inflation. And then the last driver is interest rates. Lot of people think interest rates is the number one driver, but it's actually liquidity, supply and demand inflation, and then interest rates.
So with that backdrop, cap rates are where they are because that really the first two issues, I think, and then maybe a little bit of an inflation issue. So who knows whether a three and three quarter cap rate is the right number in seven years, but I guarantee you, that's the only way, if you want a 6% IRR, unlevered IRR in seven years, that's the only way the math works.
So, Ric, are you concerned that people are underwriting between three quarters, or it sounds like you think it's rational at this point?
No, I think people have been – if you want to compete in the market today and you have capital to place, multi-family is a coveted asset class for lots of reasons we talked about before. And so if you have capital that has to go out and you go, where's the alternative investment, if I can't – if I don't like a three, two in Tampa with the growth profile and everything that we talked about, then where are you going to put your money? You're going to go and – we're only 25 basis points on $300 million bucks right now in cash.
The government is penalizing us because of the Fed and everything else going on, penalize anybody with cash. And so when you think about a cash flow stream that can grow, can be inflation protected, where it's a cash flow stream that people – it's hard to disrupt, right, because everyone needs a place to live. You can't live on the internet, or you can't discern mediated by technology or whatever. You can improve it, improve its production with technology. But everybody has to put their head down and go to sleep at night in some place.
They may not need a kitchen, but they definitely need a bathroom. And so with all that said, it's just – it's the whole argument about why our asset prices, where they are and whether – what's your alternative from an investment perspective. And right now, multi-family looks good and people are willing to pay three, two cap. And as long as your weighted average cost of capital long-term is good. And you're making a positive spread on your weighted average cap cost of capital long-term, then go – that's why people are doing it. So I don't think it's wrong. I just think it is.
Interesting stuff. Thank you.
Our next question comes from Amanda Sweitzer with Baird.
Thanks. Good morning. Following up on guidance, can you provide an update on the blended lease rates and bad debt assumptions that underlie your increased ranges?
Yes, absolutely. So I think probably the best way to think about it is if you compare it to what we originally thought for blended rates when we did our original budget, we are increasing that by 50 basis points. So the math sort of works like this, our occupancy is up 70 basis points. Our blended rental rates are up 50 basis points that gets you to about 120 basis points. The offset to that is we are assuming that we're going to have slightly higher bad debt. That's entirely driven by California. And the fact that when we did our original budget, we thought AB-3088 was going to expire in beginning of March.
Now it looks like that's the beginning of July at the earliest and so you've got sort of an offset from that. And so we think that our bad debt is going to be about 160 basis points for 2021, which by the way is in line with what we had in 2020. But if you compare it to 2019, which was a normal year that number would have been about 50 basis points.
That's really helpful. And then on dispositions, are you still targeting sales in Houston, DC today and given some of your cap rate comments, have you changed the assumed cap rate spread between acquisitions and dispositions in your guidance at all? I think you were previously fuming about 150 negative basis points spread.
We are still targeting those two markets, yes, in terms of dispositions. And I think we'll probably – in our guidance, we're continuing to use that same spread. And hopefully, we'll do better than that based on what we're seeing and hearing today where you likely will do better than that spread, but we kept that 100 basis points negative spread in the model. Alex, I'm pretty sure we did.
That's correct. Absolutely correct.
I think the real variation in the model between the buyer and the sell will be timing, right. And that'll be an interesting – so there may be some timing differences given where things are, but and hopefully we will do better than that negative spread. Right now, it looks like we will, but that's what we used in the model.
Thanks. Appreciate the time.
Sure.
Our next question comes from Brad Heffern with RBC Capital Markets.
Hey, everyone. I know we're at the top of the hour, so I'll just keep it to one. I was wondering if you could just talk through Houston, it was a little surprised to see the sequential rent growth down almost 4%. I know, obviously COVID didn't necessarily break that market and COVID leaving isn't going to fix it, but is there anything that you're seeing there that gives you optimism as we go forward, whether it's energy recovery, or supplier, anything else? Thanks.
Yes. So the big challenge that we have in Houston right now is not – it's not employment related jobs that come back quicker than most people thought. The energy business is definitely getting better. It takes a while, but there's a pretty big lag between improvement in price of crude versus improvement in employment prospects in Houston in the energy business. But the issue in Houston is just supply. And we've talked about last year we dealt with about 20,000 new apartments that got delivered in Houston. This year, we're going to get another 20,000 apartments delivered.
And unfortunately, a lot of those are in, they're not distributed geographically very well. So they end up – everybody, all the merchant builders sort of built in the same places. And we definitely are catching a fair amount of shrapnel from the lease up. So the merchant builders in the downtown area as well as uptown and midtown, so that it's more of a supply issue for Houston. We do get some relief next year, thankfully in terms of new supply. And overall, I would tell you that the general vibe of recovery in Houston is, I mean, Houston's open, people are out, restaurants are busier than I've ever seen them.
So it's pretty robust – the feeling right now in Houston is pretty robust. So I think we'll do well as the – we'll do better as the year ensues. I think I shared with you, our reforecast for revenue growth in Houston is only down half a percent from last year. And then if you'd have told me, I certainly wouldn't have made that bet six months ago and we didn't when we were putting together the guidance. But that to me sounds extremely encouraging for our Houston portfolio relative to original expectations.
I think also just to add onto the Houston story, the winter storm had a bigger effect on Houston than it did on the rest of the state and primarily because of what it did to petrochemicals and the plants in and around the ship channel. I mean, there are plants that are still – primary chemical plants that are still offline that are just getting geared up from the winter storm. So the winter storm definitely helped Houston back. It could have been a whole lot better in Houston, I think without the winter storm. And we're just – like I said, we're just starting to get that back.
I think the other thing that's really interesting about Houston is the discussion of energy transition and what's going to happen with big energy and how big energy is going to make the transition from old school energy to more renewables. And we've seen a major acceleration of discussions by the large energy companies. And part of that is driven by investor activism. If you look at ExxonMobil as an example, I mean, I own Exxon’s stock. So I see all their proposals that these activists had put on their – in their votes and what have you.
And finally, the U.S. majors are making a major move into this energy transition that Exxon, for example, just announced $100 billion carbon capture program that could go in and around the ship channel. And it's $100 billion to build it. It needs to be part of the government – maybe it's part of the government stimulus or infrastructure or whatever, in addition to Exxon putting their capital in.
But I think there's going to be continued huge investments in these alternatives and wind and solar and carbon capture and Houston is going to lead that. So we're going to be in a position, where it's not old school energy that drives this market. It's transition energy, Texas already has the largest wind power source of electricity than of any state in the country. And we're investing massive amounts of solar.
You saw Tesla has a big battery plant that a battery program that they're doing just south of Houston. So it's going to be a really interesting thing. So to me, the winter storm held us back, but once we get through the supply, Houston should be move up to the top quartile of our revenue growth in 2020 – middle to the end of 2022 and into 2023 and 2024 in my view.
And I'll also point out if you look at sequential occupancy increase, the largest sequential occupancy increase we had was Houston from fourth quarter to first quarter, it increased 110 basis points.
Yes, fair enough. Okay. Thank you.
Our next question comes from Austin Wurschmidt with KeyBanc.
Great. Thank you. Just sticking with the theme there on Houston, I was curious if the positive guidance revision there was more just around that sequential uptick that you just diluted to an occupancy or are you also seeing a little bit better traction on lease rates as well? And then maybe, Ric, to your comment on when you think Houston starts to get better, is it probably mid-2022 by the time we've absorbed some of this peak supply?
I think that's the peak supply side, plus you'll start getting better job growth in a more normalized environment, because what happened in Houston is you had the normal COVID unfortunately, call it normal COVID, job losses, right. But what's happened, you also have the oil and gas pounding, right. Last year at this time, I think oil and gas was within a few weeks of when negative, right. And so that was a huge issue here. And I think that that's over obviously. And that once we get a more normal environment in Houston and a more normal business environment where people are actually traveling for business and Houston will improve. When you look at visitors to Houston in conventions and things like that, it's more of a business destination than it is a tourism destination.
And so I had a lunch with the head of the convention group that markets Houston's convention business last week. And they said – he said that starting in June, there are 18 citywide events. You have the world petroleum conference coming in December, which is a international event that was supposed to be last December, but it's going to be in December of 2021.
And so once we get more momentum from the business side and the business travel side, we will – Houston will move quicker to that recovery, but I don't think that's – I think that's a mid – the end of 2022 event because of the supply.
If you look at blended rates for signed leases from the first quarter of 2021 to April of 2021, Houston improved by 420 basis points. So still not an incredibly strong number, but an incredibly strong improvement.
Yes. That's really helpful. And then Alex, just to clarify, on the 50 basis points increase in lease rate assumption, same-store revenue guidance, is that reflect simply leases signed at this point, or does it also assume higher lease rates kind of through the balance of the year?
Yes, it does. So it looks at what's effective for the first quarter signed today and signed today is obviously going to take you through the second quarter and a component of the third quarter, and then our expectations for the rest of the year.
That the lease rates in the back half of the year on both renewables and new leases are also higher than your original expectation?
Correct.
Okay. Thank you.
Our next question comes from John Pawlowski with Green Street.
Thanks a lot for keeping the call going. Just helping to better understand how the internal dialogue around share repurchases has evolved. Call it second half of 2020 and even early this year, you enter the downturn with a really well-positioned balance sheet. And suddenly all the only real dislocation comes it's growing your share price and that the private market is remained rock solid. You still believe you're trading at a substantial discount NAV and you've got a bit better clarity really since the summer on operating fundamentals. So just curious why you haven't taken advantage of the well-positioned balance sheet heading into the downturn on the share repurchases side?
Well, the challenge that we have with share repurchases is that the windows that we can buy – or buy back shares is that that they're fairly narrow and what happens oftentimes, like when you think about the – we bought like $62 a share or something like that. And of course, we started talking about, okay, let's back up the truck, right. But on the other hand, then all of a sudden, the shares start moving up. And when you think about – when I think about share buybacks, it's like, okay, I want to be able to buy a lot of shares. I don't want to just go tickle around the edges and do 5 million, 10 million, 20 million or something like that.
And so to me, it has to be persistent down and we have to have the ability to acquire enough to make a difference, because fundamentally, when you think about reap balance sheets and how we manage our balance sheet, we're a leaky bucket, right, in the sense that all of our cash flow or – not all of it, but most of it has to be paid out from dividends.
And so when you're buying stock back in, unless you can make and get a big enough chunk to make a difference, I think it's just a kind of a waste of time. And so if you look back at every time that we've gotten to a point where we looked at the numbers and said, this looks like a really good price. It's gone up dramatically in the – and away from us in the windows that we can acquire the stock.
So it's not that we don't think about it a lot. We do. But on the other hand, there's constraints on doing it, just are oftentimes just not worth the effort in my view. If it's the investors, if we buy the stock back and people go, they think it's cheap, then that's one thing, but you can make your own decision where you think it's cheaper, not in buy or sell it. And to me, it's a real capital allocation issue. If you think about when we did buy back stock big, it was when we had long-term periods and big open windows and one point I think we bought 16% of the stock back at the peak. And that was when the stock was low for months and even years and today it's just not – you don't have that opportunity.
I just mean more from the relative decision, right. So you put a dollar into a kitchen and bath or a dollar into your stock. It's just a relative decision. I mean, more talk about the second half of 2020. I mean, if you believe your NAV, whatever 130 or above, and you had that visibility in the private market side. And there was a good six, seven months where you could be selling assets and repurchasing shares. So it's just more that the dollar is fungible and it is an opportunity to cost the non-acting, I guess the final question.
Yes. You can always do that, but I just think at the end of the day we're long-term, multi-family – long-term owners of multi-family properties. And so there's a lot of friction that goes in between selling assets. And if I could wave a magic wand and sell assets immediately and then – and have no risk of the execution and then buy stock and make a spread, yes. But the world doesn't work that way.
There's a lot of execution risk involved in it. And it's something that when we talk about – when we started talking about doing it, then I don't want to borrow money or use the current strength of the balance sheet and then to buy stock and then go sell assets after it. So I hear you though, it's an asset allocation issue. And we I think investing in our existing assets, creating returns that we think are pretty attractive. That's what we've been doing.
Okay. Thank you for the time.
Sure.
Our next question comes from Alex Kalmus with Zelman & Associates.
Hi, thank you for taking the question. Over the pandemic, we've seen the renewal and new lease spreads pretty wide and your April signings. They seem to reach some parody there. Can you talk about the dynamics on the leasing side and how you're approaching that? Obviously, the occupancy is called through? So it's been a good decision.
Yes, so we use our revenue management system. You'll start to price both new leases and renewals. So the inputs to the model are similar on both sides. I would actually got a little bit of a timing issue in our portfolio because we actually voluntarily froze renewal increases early on in the pandemic. And we kept them frozen through mid-summer. So some of the natural renewal increases that would have happened are going to happen maybe in a little bit more robust way as we work our way through mid-summer but I think it just on both sides, it tells you that the model is foreseeing and foreshadowing. A lot of strength on both the new lease side and the renewal side throughout the balance of our reforecast period.
Got it, thank you. And just touching on the supply side for a sec. We've talked about Houston, do you have some updates on some of your other markets and how that's progressing the – start of the year has been pretty strong on the activity front? So has that changed how you're thinking about certain markets?
No, if you take Witten's numbers for total deliveries in 2020, we were about 100 – across Camden's platform, we were about 154,000 delivered apartments and his forecast for this year is about 151,000. So there's some movement around some shifting among our markets, but in the kind of at 10,000 feet, the supply picture for this year is not going to be much different than it was last year.
And with the exception of Houston, which obviously took the brunt of the 20,000 apartments last year, and then backed up with another 20,000 this year, most of our markets are in really pretty good shape fundamentally. And if you just kind of go back to, again, Witten's numbers, he's got job growth this year at $1.2 million, he's got new supply being deliberative about 150,000 apartments.
And again, at 10,000 feet, that's eight times new employment growth to deliver supply, five times is a long-term equilibrium. So in the aggregate, those ought to be really supportive for – and look like they are going to be supportive for raising rents and renewals throughout the year.
Great. Thank you very much.
This concludes our question-and-answer session. I'd like to turn the call back over to Ric Campo for any closing remarks.
Well, thanks for being with us today. I understand that the have fun video was a little choppy for the group in the replay. You'll be able to see it without being choppy and let us know how you like this new format. I think it's kind of interesting and it makes it a little more interactive and sort of helps go through when you're going through a slug and numbers, like we are kind of helps, you sort of follow that. So we look forward to hearing from you on this format. And then we'll see, and talk to I think most of you in virtual form in NAREIT, so coming up in the next couple of months, so take care and thank you.
Yes. Take care.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.