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Camden Property Trust
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Good morning. And welcome to Camden Property Trust's Second Quarter 2021 Earnings Conference Call. I am Kim Callahan, Senior Vice President of Investor Relations. And joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, Executive Vice Chairman and Alex Jessett, Chief Financial Officer.
If you haven't logged in yet, you can do so now through the Investors section of our website at camdenliving.com. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. And please note, this event is being recorded. Today's webcast will be available for replay this afternoon and we are happy to share copies of our slides upon request.
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 second 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 the call.
We hope to complete our call within one hour as we know that today is another very busy day for earnings calls and other multifamily companies are holding their calls 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.
Good morning. The same for on hold music today was coping with the chaos. Last year when the pandemic began, we held the company wide conference call to share some of the lessons learned from the great financial crisis. I started to call with the first line of the famous Rudyard Kipling poem if there's like this, if you can keep your head when all about you are losing theirs and blaming it on you.
We went on to lay out a list of suggestions to help cope with the chaos that we knew was headed our way. Among other ideas, a few suggestions were included in our on-hold music today. We knew that Queen and David Bowie and our teams are going to find themselves under pressure. And we knew when that happened, we told them just to take the advice from the eagles and take it easy.
We encourage them to embrace innovation, fail fast, and as Boston reminded us don't look back. We said we would rely on Camden's values and culture and do things our way because like Bon Jovi we weren't born to follow. And finally we encourage them to get on board, the OREO feed wagon and roll with the changes.
At the end of the call, we showed a video that was produced by our Dallas Texas Operations Group during the great financial crisis. But seemed just as appropriate for what we faced at the beginning of the pandemic. We thought you might find that interesting today. So go ahead and roll the video.
[Audio-Video Presentation]
When we held our first quarter earnings call, we're beginning to see an acceleration in both occupancy and pricing power across our markets. The actual rate of acceleration that occurred since the call has far exceeded our estimates and resulted in improved earnings guidance we released last night.
Across the board, we are seeing very strong performance and continued improvements in our operating fundamentals. And in almost all cases, where current rental rates exceed their pandemic levels. The outlook from our third-party economists and data providers or providers is also quite positive, and they expect the apartment business will continue to thrive as we move into the second half of 2021 and into 2022.
Despite the ongoing levels of high supply in many markets, demand has been greater than anticipated, allowing positive absorption of newly delivered apartment homes. Our occupancy is currently 97%, leasing activity is strong and turnover remains low. So overall, I would say our outlook for Camden in the multifamily industry is very good.
We are excited to enter the national market with the acquisition of two high-quality apartment properties. Our acquisition and development teams continue to work hard and smart to find opportunities in a very competitive environment. I want to give a shout out to our amazing Camden team members for doing a great job and taking advantage of this strong market. Great customer service and sales acumen is very important in the market like this. We must deliver great customer service and support the Camden value proposition when asking for and getting double-digit rental increases from our customers. Thank you, team Camden for everything you do every day to improve the lives of our teammates, our customers and our stakeholders one experience at a time.
Next up is our Co-Founder Keith Oden.
Thanks, Rick. Now for a few details on our second quarter operating results. Same property revenue growth was 4.1% for the quarter, and was positive in all markets both year-over-year and sequentially. We have remarkable growth in Phoenix and Tampa both at 9.1%, Southeast Florida at 8.6%, Atlanta at 5.7 and Raleigh at 4.6.
We thought the April new lease and renewal numbers we reported on last quarter's call were pretty good at nearly 5% but as Ric mentioned pricing power continues to accelerate. For the second quarter of '21, signed new leases were 9.3% and renewals were 6.7% for a blended rate of 8%. For leases which were signed earlier and became effective during the second quarter. New lease growth was 5.4% with renewals at 4% for a blended rate of 4.7%.
July 2021 looks to be one of the best months we've ever had with new signed new leases trending at 18.7% renewal that 10.5% and a blended rate of 14.6%. Renewal offers for August and September was sent out with an average increase of around 11%. Occupancy has also continued to improve going from 96% in the first quarter of this year to 96.9% in the second quarter, and is currently at 97.1% for July.
Net turnover ticked up slightly in the second quarter to 45% versus 41% last year due to the aggressive pricing increases we instituted, but it remains well below long-term historical levels. Move outs to home purchases, also ticked up slightly from 16.9% in the first quarter of this year to 17.7% in the second quarter, which reflects normal seasonal patterns in our markets.
So despite the constant headlines regarding increased number of single-family home sales, it really has not had an effect on our portfolio performance as the move outs to purchase homes are still slightly below our long-term average of about 18%.
Ric mentioned Camden's why in his opening remarks. It's something we discuss internally often. Our purpose or why is to improve the lives of our teammates, customers and shareholders one experience at a time.
In our company wide meeting at the beginning of the pandemic, we shared the Star Wars video and we emphasized that the chaotic months ahead will provide an extraordinary number of opportunities to improve lives one experience at a time. We focused our efforts on improving our teammates' lives, who likewise focus their attention on improving our residents' lives. The results have been truly amazing, and we could not be more proud of how team Camden has performed throughout the COVID months.
Improving the lives of our team and customers has in turn improve the lives of shareholders, including the approximately 500 Camden employees who participated in the employee share purchase plan this year.
I'll now turn the call over to 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 second quarter of 2021, as previously mentioned, we entered the Nashville market with $186 million purchase of Camden Music Row, a recently constructed 430-unit 18-storey community and the $105 million purchase of Camden Franklin Park, a recently constructed 328-unit, five-storey community. Both assets were purchased at just under a 4% yield.
Also, during the quarter we stabilized both Camden RiNo, a 233-unit $79 million new development in Denver, generating an approximate 6% yield, and Camden Cypress Creek II, a 234-unit joint venture in Houston, Texas, generating an approximate 7.75% yield. Clearly, our development program continues to create significant value for our shareholders. Additionally, during the quarter, we began leasing at Camden Hillcrest a 132-unit $95 million new development in San Diego
On the financing side, during the quarter we issued approximately $360 million of shares under our existing ATM program. We used the proceeds of the issuance to fund our entrance into Nashville. Our existing ATM program is now fully utilized and in line with best corporate practices, we will file a new ATM program next week. In the quarter we collected 98.7% of our scheduled rents with only 1.3% delinquent.
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 uncollected revenue and establish what we believe to be an appropriate reserve, which serves as a corresponding offset to property revenues in the same period.
When a resident moves out owing us money, we typically have previously reserved all pass through amounts, and there'll be no future impact to the income statement. We reevaluate our reserves monthly for collectability. For multi-family residents, we have currently reserved $11 million as uncollectible revenue against a receivable of $12 million.
Turning to financial results, what a difference a year or quarter can make? Last night we reported funds from operations for the second quarter of 2021 of $131.2 million, or $1.28 per share, exceeding the midpoint of our guidance range by $0.03 per share. This $0.03 per share outperformance for the second quarter resulted primarily from approximately $0.03 and higher same-store NOI, resulting from $0.025 of higher revenue, driven by higher rental rates, higher occupancy and lower bad debt and a $0.005 of lower operating expenses driven by a combination of lower water expense and lower salaries due to open positions on-site, and approximately $0.02 in better than anticipated results from our non-same store and development communities.
This $0.05 aggregate outperformance was partially offset by $0.01 of higher overhead costs primarily associated with our employee stock purchase plan, combined with a $0.01 impact from our higher share account resulting from our recent ATM activity.
Last night, based upon our year-to-date operating performance and our expectations for the remainder of the year, we also updated and revised our 2021 full year same-store guidance. Taking into consideration the previously mentioned significant improvements in new leases, renewals and occupancy and our resulting expectations for the remainder of the year, we have increased the midpoint of our full year revenue growth from 1.6% to 3.75%.
Additionally, as a result of are slightly better than expected the second quarter, same-store expense performance and our anticipation of the trend continuing throughout the year, we decreased the midpoint of our full year expense growth from 3.9% to 3.75%. The result of both of these changes is a 350-basis point increase to the midpoint of our 2021 same-store NOI guidance from 0.25% to 3.75%. Our 3.75% same-store revenue growth assumptions are based upon occupancy averaging approximately 97% for the remainder of the year, with the blend of new lease and renewals averaging approximately 11%.
Last night, we also increased the midpoint of our full year 2021 FFO guidance by $0.18 per share. Our new 2021 FFO guidance is $5.17 to $5.37 with a midpoint of $5.27 per share. This $0.18 per share increase results from our anticipated 350-basis point or $0.21 increase in 2021 same-store operating results. $0.03 of this increase occurred in second quarter, with the remainder anticipated over the third and fourth quarters. And an approximate $0.06 increase from our non-same store and development communities.
This $0.27 aggregate increase in FFO is partially offset by an approximate $0.09 impact from our second quarter ATM activity. We have made no changes to our full year guidance of $450 million of acquisitions and $450 million of dispositions.
Last night we also provided earnings guidance for the third quarter of 2021. We expect FFO per share for the third quarter to be within the range of $1.30 to $1.36. The midpoint of $1.33 represents a $0.05 per share improvements from the second quarter, which is anticipated to result from a $0.04 per share or approximate 2.5% expected sequential increase in same-store NOI driven primarily by higher rental rates, partially offset by our normal second to third quarter seasonal increase in utility, repair maintenance, unit turnover and personnel expenses.
A $0.015 per share increase in NOI from our development communities and lease up, our other non-same store communities and incremental contributions from our joint venture communities, and a $0.002 per share increase in FFO resulting from the full quarter contributions of our recent acquisitions. This aggregate $0.075 increase is partially offset by $0.025 incremental impact from our second quarter ATM activity.
Our balance sheet remains strong with net debt to EBITDA at 4.6 times and a total fixed charge coverage ratio at 5.4 times. As of today, we have approximately $1.2 billion of liquidity comprised of approximately $300 million in cash and cash equivalents and no amounts outstanding under a $900 million unsecured facility.
At quarter-end, we had $302 million left to spend over the next three years and 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.
At this time, we'll open the columns to questions.
We will now begin the question-and-answer session. [Operator Instructions] Our first question today comes from John Kim with BMO Capital Markets.
Thank you, Ric and Keith. I know you mentioned that July is on track to be one of the best months you've ever seen. And I thought it would have been clearly the best. But I'm wondering what period the most comparable to this is to? And what may concern you, whether it's affordability, rents, income ratios, or suppliers or something else?
I would say that we've never seen this kind of demand released into the market in our business careers. I mean, you can go to the financial crisis, you can go to the big bust in the '80s and we've never seen this kind of snapback in demand in the history of our business, I think. So it really is unprecedented.
I guess what could sort of slow it all down or stop it or whatever is what's going on with the pandemic today, that uncertainty in the market today about how the massive fiscal and monetary stimulus is going to happen. Again, I'm going to unwind over time is probably the biggest thing that concerns me. Supply has always been the issue, people worry about and supply - the demand is so high today than supply, we're not building enough apartments today, if you can imagine that saying that that to take up this demand.
So it's definitely unprecedented. We're going to enjoy it. Well, it's here. And hopefully, it looks like 2021 is going to be a really, really strong year. And when you sort of look at the backdrop, it looks like next year is going to be the same. Keith, you might want to add a little bit of there.
Yeah. So just the last question that John asked was the concerns and mentioned affordability. And in our portfolio, we're still running about 19% of household income that goes to rent payments. So it's been in the 18% for the last couple of years, so maybe ticked up a little bit.
But the reality is that our residents had the ones that have are not impacted by directly from a job standpoint, COVID. Their wages are increasing as everyone else's are. So yeah, the rents are going to go up, but my guess is that that we're going to see some pretty significant increases in household income as well. And we start from a place of great affordability.
Okay, my second question is on developments. You quoted the yields are trending higher and some of the projects completed. But I was wondering where the development yield stands today on your current $907 million pipeline? And how much bigger you'd envision developments going forward as far as overall pipeline?
Sure in the $900 million pipeline, our yields ranging from five to six and three quarters. And so it's pushing up on an average of roughly five, three quarters to six in total. And that's initial yields. All the IRR is are in the 7.5% to 8.5% range. And that's really instructive when you think about what's been going on in the capital markets are our weighted average cost of capital, given everything that's going on, it's been driven down to the mid-fours. And we're delivering development yields in the mid-eight.
So we're creating the spread between our weighted average cost of capital and our development today, it's been the widest that I've ever seen it. And maybe after the financial crisis, we did some transactions right after the financial crisis, we're making 10. And today, - and our weighted average cost of capital is obviously much higher in 2011 and '12. We have roughly $720 million in our pipeline today. And those yields - we're not protecting mid-sixes or high-sixes like we have now. But you never know, given the current revenue line that we have going up high into the right.
So the other challenge to those yields will be just cost and getting the right workers. We do have worker shortage instruction and supply chain disruptions that are still a big issue out there. So most of our developments in that $720 million pipeline are in the middle five to five and a half, with IRRs that are there in the seven half to eight range.
In terms of - we also are adding to the pipeline. We would like to - development as a great business right now. Obviously, margins have been widened dramatically by the low interest rates and low cost of capital. So we are trying to add to that pipeline as we speak as well.
Great, thank you.
Our next question comes from Neil Malkin with Capital One Securities.
Hey everyone. Good morning, and congratulations on the $150 share price. Unbelievable. First question, can you talk about really - I think the thing that's driving some of this is in migration trends. Clearly people are voting with their feet. Can you just discuss if you've seen any changes acceleration in terms of the percentage of new leases that are from odd date or from higher cost dates, et cetera. We heard that this earnings season that you're seeing an uptick from already elevated levels to sort of new highs in terms of incremental demand from out of state. So any color will be great.
So if you look at a year ago, about 15.6% of our new leases came from folks moving to the Sunbelt from other areas. Today, that number is about 19%. So that's a 350-basis point increase and folks moving from non-Sunbelt markets to the Sunbelt markets and renting with Camden. So really fairly dramatic increase on that side.
Now thing I would add to is, when you look at - I'll take Houston as an example. Houston was our slowest market and our most difficult market because during the pandemic, and after the pandemic, because of the oil and gas influence of Houston. When you look at the number of jobs that have been added back in Houston relative to Austin or Dallas, or Atlanta or some of these other markets, it was at the bottom.
And in spite of those jobs are a lot of jobs aren't being added back at the same rate as other markets, the Houston market is bouncing back at not as strong as some of the other markets but an amazing way. And part of it is this in migration. People believe fundamentally that markets that have pro-business governments that are - that have decent weather and job growth opportunities that they're moving there. Even if the jobs aren't as buoyant today, they're still moving to those markets. And I think that's one of the things that's really pushed up all the demand side of the equation in all of our markets including Houston.
Yeah, that's great. Maybe just talking about the acquisitions or recycling. Obviously, cap rates are very low sub-four. But your AFFO cost equity is also in the mid-to-high-threes. Your leverage is lowest in the industry. Just wondering, given the expectations for outsized growth in Sunbelt markets, and I'm sure your conviction in that thesis as well. Would you look to dive a little bit more into the acquisition market kind of using your currency, picking up some leverage, which you have clearly the capacity to do? And just kind of increase your growth?
The answer is yes. And we sort of showed that in the second quarter when we issued $360 million out of the ATM and brought $300 million in properties in Nashville. As sort of the best match funding we can see with the numbers you just put out, that you just discussed.
When we look at, we look at the incremental sort of dilution rate if you issue equity or bring up debt towards acquisitions and development and but that's not the ultimate arbiter. What we really do is we look at the most important measure from my perspective, and our management team's perspective is our weighted average cost of capital relative to our terminal unlevered IRRs. And those are unlevered IRR, today, when you look at our weighted average cost of capital, it's been driven down obviously through rally of the stock price that tenure treasury being at 1.24% today, and bond price, bond yields being where they are.
So when you look at a mid-fours weighted average cost of capital and we can acquirer a properties like in Nashville. And even though they're lower going in cap rates, when you look at it on a on an unlevered IRR over a seven to 10 year period, 6.5% unlevered IRR when you put in these kind of rent growth that we're having. And I would tell you that 150 basis points positive spread on acquisitions is rare in REIT land, and so that shows - I think it's a green light for growth both in the acquisition side and the development side as long as we manage our balance sheet appropriately.
And you've heard me and our management team Keith and Alex talked about this that our targeted range from debt to EBITDA is five to four times. And during - sort of during good times and strong capital markets, you drive your debt-to-EBITDA down and you get closer to the four during tougher times or bad times, recessions, pandemics and capital market hiccups, it thrives - it sort of naturally goes up when cash flow has declined or interest rates rise. And what have you and that's where it kind of go mostly to five.
So today we're in good times obviously strong capital markets very, very strong operating fundamentals and this is a strong spreads between our weighted average cost of capital and our unlevered IRRs. So we're going to methodically grow our company in this way. And today we already done $300 million of acquisitions way more to come.
And as I said earlier, our $720 million development hopefully get a lot of that starting next year. And this is a time where it's pretty good time. So we're going to make hey while the sun shines.
Yeah, that's great. Congrats on a good quarter and keep up the great work.
Thanks.
Thanks Neil.
Our next question comes from Rich Anderson with SMBC.
Hey, good morning. So I guess 15% increase in rent is improving lives of people. But I am curious is that market or is that Camden plus market because of all the bells and whistles that you can offer people that your competition can't? I just wondering - and I'm referring to the July renewable activity or releasing activity.
Hey, Rich. That's total revenue. So that includes our technology package and all the other amenities that we provide our residents. So yeah, it's all in revenue. And you sort of looking back to the beginning of the year and then looking at asking rents currently. And as to whether it's improving their lives or not, we have - it's a three-legged stool, we are going to improve the lives of our residents, our shareholders, and employees.
And so clearly, we're improving the lives of our shareholders. We've done so much over the last two years to improve the lives of our residents with our resident relief program and all the other things that we did. Obviously, some of that growth is reflects the fact that early on in the pandemic, we were the first company to across the board freeze rents on renewals, and the leases. And so obviously, there's some take back of what kind of could have occurred, had we not done - had we not made that conscious decision to allow our residents some slack in the midst of the early days of the pandemic.
So yeah, it's the real numbers. And it's strong. And if you look out, as you look out - YieldStar, all these recommendations are being driven by our revenue management systems. And YieldStar is forward-looking after 90 to 120 days. So I think that this trend is likely to continue.
Yeah, I would just add. Ric, you made the comment about improving their lives. I mean, we are. There's a candidate advantage, no question. And you don't get people to increase their rents that substantially and smile at the same time, without providing value proposition to that customer. You have to have clean grounds, you have to have well maintained properties, you have to be well located. All those value propositions support driving rents the way we're driving them today. Because our customers understand that we're a business and we need to improve our bottom, our top-line and our bottom line are for them to create value for themselves.
If you look at the apartment industry, go down the scale of sort of more affordable housing where you have, I say, more affordable meaning less cost. But the quality of the housing as you go down with owners that don't understand these should reinvest in your properties, and you should make sure that they're clean and they're safe and all those things. That does really improve the lives of those customers.
And the good news is our customers are all doing really, really well. When you think about our average income is about 100 grand, but the challenge with that number is we don't update it when somebody renews their leases. And when you think about the wages for people that are growing over 100 grand or are actually growing pretty substantially. And those folks all got stimulus money so they don't have money in their pockets. And they understand that the price of things go up.
And as long as the value proposition is there and you took care of and during the pandemic and you can take care of them on an ongoing basis and you do well with that, they're willing to pay a higher price. It's like anything else the brand proposition is about is this price worth this brand? And you can always buy something cheaper. You can go to a lower quality apartment and get a less rent but you don't get the Camden experience.
I didn't mean to put you on the defense I was -
That's okay. It's not defensive, that's just selling the right way.
Of the 14.6, how much of that is rent. And the reason I ask is when Alex mentioned 11% blended expected for the rest of this year. Is that also a fully baked in with fees and all and everything else? Or is that just pure rent? I'm just trying to get a direction off of that 14.6 that you started with July?
Yeah. So the 11% that is pure rent and 14.6 blended rate that we're talking about that is on a rental rate basis. We do pick up other fees, and those other fees are growing slightly north of 3%.
Okay, thanks very much.
Our next question comes from Rob Stevenson with Janney.
Good morning, guys. Keith. I mean it's hard to have underperformers when you're up 15% in July. But when you take a look at the markets, if you're forced to rank order them, what are the markets that are sort of towards the bottom on a relative basis, performance wise? And what differentiates them from the guys that are sort of a step up from them these days?
Well, if you rank them only, just looking at the 14.6 blended rate. And you just go down and scan down to the bottom, Houston is probably still at the bottom. But you're talking about instead of where it was in the first quarter, or fourth quarter of last year, it was still basically flat to down maybe 2% from the beginning of 2020. Houston now has a substantial positive and you're somewhere around 7% or 8%, up in Houston.
So it if it weren't for the fact that the rest of the portfolio is producing as high as 20% trade out. Everybody would be applauding the fact or we would be applauding the fact that Houston is at 7 or 8. If you if you force it to be relative, there's always going to be somebody at the bottom that these are extraordinary growth rates in every single market that we're in.
I guess I'd say that the worse market that was DC - where DC proper where there's a ban on any rental increase.
Okay. And then I mean, in terms of that, when you look at it. I mean, how much of the big jumps here are the removal of concessions versus - so on its effective rate versus at the end of the day pushing rental rate. Like where are the markets that you're pushing the market rate the most? And it's not - part of it's the removal of concessions and or the jump in occupancy that's driving the market performance?
Rob, we don't use concessions. And the only time that we ever use any concessions is on new developments. And that's part of - it's just part of the marketing process and the expectation of residents. But outside of our development pipeline, we don't have any concessions across Camden's portfolio. So it is pure rental increases.
Okay. And then Alex, did you push a bunch of operating costs into the first half of the year? Curious as to how you go from 58 same store expense growth in the first half, to sort of the 375 implied at the midpoint of guidance? How the back half sort of folds out for you?
Yeah, absolutely. It's entirely based upon tax refunds. So to give you the numbers in 2020, we had about $2.3 million of tax refunds. They entirely came in the first half of 2020. In 2021, we are anticipating the exact same number, $2.3 million of tax refunds entirely coming in the second half of the year. So it is just a timing issue around tax refunds.
Okay, thanks, guys. Appreciate the time.
You bet. Sure.
Our next question comes from Nick Joseph with Citi.
Thanks. Curious on the acquisition pipeline, how large you expect Nashville to be in the near term.
We'd like to get Nashville up to 3% or 4%. In the near term. When you start looking at economies of scale and efficiencies, we need - we really need to have 1500-2000 apartments to actually get to that efficiency level. And so we definitely are going to be aggressive in Nashville and continue to push there.
Thanks. And then are there any other new markets that you may be entering over the next year or two?
Right now we'd like our markets. And in the interest in Nashville has been good so far. So we're pretty good with where we are today for now.
Thanks.
Our next question comes from Amanda Sweitzer with Baird.
Thanks. Good morning. Can you provide a bit more of an update on your disposition timing? And where are you seeing buyer interest in pricing in a market like Houston relative to your prior expectation?
Alex go ahead and talk about timing.
Yeah absolutely. So in our model, we are assuming the dispositions happen on November 1. We have two assets in Houston that just hit the market. We've got another two assets in PG County, which are going to hit the market next week. So it's a little bit early to sort of give any updates on pricing. Although we certainly expect that we're going to do much better than the original strike prices we had when we first went out.
And our conversations with the brokerage community specifically around Houston, in the last 60 to 90 days. I think it's clear that the word is out that Houston rents are really, really accelerating hard. And so I think what they're telling us is a whole lot more interest just generally in Houston. As outset, we'll have to wait and see how it all plays out. But, clearly the improvement in Houston overall, is going to be a real positive for selling assets.
Yeah, that's helpful. And then apologies if I missed it, but where do you stand in terms of receiving payments under rent relief programs? Do you expect any payments and how meaningful could potential evictions be in California for you once you're finally able to process them at this point?
So I'll sort of hit ERAP, which is just the payments that we're receiving. Grand total for us is, we're right around $4.1 million year-to-date. And obviously, most of that came in the second quarter. So we're starting to get - we're starting to get some traction. We're finally starting to get some reasonable traction in California. Although California is making up about 20% of our ERAP payments and is about 70% of our delinquency.
So we certainly have a ways to go there. And then the number two market for us, which is interesting, because it has one of the lowest delinquency levels is Houston, which is also right around 20% of our collections.
So we don't have any assumptions, any significant assumptions for ERAP payments coming in throughout the rest of the year. But as we've talked about, we've got sort of an $11 million receivable. So obviously we're going to keep working the process and hope to get some additional payments in.
Of course as that $11 million receivable I think we've reserved like $10 million of the 11 right, Alex?
That's correct.
Yeah. So we get payments. It'll be upside not downside. Now your question about evictions in California, the thing that's really interesting to me about the whole debate over evictions, and I was watching CNBC or CNN or someone last night talking about 12 million residents in America are going to get evicted when the CDC moratorium comes off. And I think that there is a risk of mass evictions, but that the risk is not in Camden's portfolio or any public company's portfolios.
If you look at 70% of our receivables in California, those receivables are rent strikers. Those receivables are people who know that you don't get - there is no penalty for not paying Camden or anybody else to rent. And zero penalty. There's no late fees, there's no interest, there's nothing. And I also saw Gavin Newsom on the on the news last night as well, making the statement that if you haven't paid your rent for 12 months, and you have a quote unquote COVID reason, the State of California is going to pay your rent.
And so when people hear that there's this confusion that, that if you owe rent for more than 12 months in California, the government's going to pay it. But the bottom line is, is that the $45 billion of the U.S. government allocation of money for renters has restrictions on it. It has means testing, it has a lot of restrictions. And those restrictions by the way, are what is why that - only about 10% or a little less than 10% of money has ever reached a resident yet in America.
So are our people driving Tesla's, leasing $4000 a month apartments in Hollywood who have $100,000 in cash in their bank account aren't going to get ERAP money. And the question will, will be ultimately what happens to them? We've reserved against it. And ultimately, those people are going to destroy their credit.
And when they figure that out, maybe they'll take some of that money out of their bank account that they have, and pay their rent. It will be interesting to see, but at least for us, it's not going to move the needle one way or another. Maybe all of a sudden, everybody in California pays their rent. We'll have a $5 million, $6 million or $7 million benefit. But it's not enough to move the needle. And we don't think ERAP is going to be a big thing for us overall, because our residents don't need the money.
The money needs to go to people making $50,000 or less and needs to go to people that are paying $500 to $900 a month in apartment, it's not $1500 to $4000. So that's my little soapbox for government support at this point.
Yeah. Amanda, I would just add to that. Because I think it's an interesting always put these numbers in perspective. We get pretty - we get probably more agitated - probably it's a moral agitation, not a financial agitation. Certainly I'm speaking for myself, but in our portfolio, we have out of our total 70,000 plus or minus apartments, we have 600 high delinquency residents. And our definition of that is there are three or more months behind on the rent.
So it's 1% - a little bit less than 1% of our total resident base. So it's not a huge in terms of numbers, it's kind of big in terms of irritation. But and as Ric said, of that 600 high delinquency or high balance delinquencies, we've written it all off anyway. So anyway, we're going to keep work in the process. And for the residents in our portfolio who are eligible, we're going to make sure that they get taken care of.
Thanks, that perspective was helpful. I appreciate all the commentary.
Next question comes from Rich Hightower with Evercore.
Hey, good morning out there, guys. I wanted to get your take on the fact that a lot of your competitors are starting to expand into markets that are new for them - not though new for Camden. And what are the methods that you can employ to sort of maintain Camden's edge in owning and operating or even developing in those markets?
Well, the good news is these your vast markets. They're big markets, multi-billion dollar markets. So I would just say for years and years and years, we had to go to conferences and talk about how we thought the flyover parts of America are really good places to be and that the coasts were not necessarily our cup of tea.
And I will tell you our experience in Southern California, which is the best part of California, when it comes to pro-business and what have you, shows that during tough pandemic times it was right move from our perspective to say in the flyover states.
So with that said, the markets big market and we love competition. We'll be able to then show just how good Camden's operating edge is against our other public company peers when they start reporting numbers in our markets. So, we welcome to the market with them to the markets. It's great friendly competition and, and come on down.
Yeah, I would just - I would add to that that the public companies where we compete with them. We all make the market better. I mean, they all use revenue management. They all smart, they raise rents when they should. The lowest common denominator in our business is still third-party managed assets that frankly probably aren't managed very well.
So the more high-quality competition we have in a marketplace, the better we tend to do. And the evidence of that been the DC metro area where we've had - we have a significant presence among and with a lot of competition and the other is in California. So it's steel sharpens steel and bring it on.
Thanks for the thoughts.
Our next question comes from Brad Heffern with RBC Capital Markets.
Hey, everyone, the $450 million in dispositions, can you just talk through the use of proceeds there, just given obviously the Nashville acquisition, we're already funded with ATM?
Yeah, absolutely. So we'll use those proceeds for additional acquisitions. Because if you think about the midpoint of our acquisitions is $450 million. And we've done $296 million plus or minus. Additionally, we'll use those for our development pipeline. So at this point in time, we're spending a couple hundred million dollars a year to fund developments, as well as repositions which we're funding and another couple of $50 million a year. So we've got plenty of really sort of accretive uses of the capital.
Okay, got it. And then just thinking about these 14% 15% rent increases in July. Like, what do you think that looks like in 2022? Like, next year, if we still see the same supply demand imbalance. Are we going to see still significantly higher than normal rent increases? Are people going to go you just raise my rent 15% last year, I can't do it again kind of thing?
Well, we're not going to get into 2022 guidance, obviously. But if you look at some of our data providers, like Ron Whitten, he shows very strong 2022 as well, just the backdrop of reopening and continuing demand in the multi-family sector. So trees don't grow to the sky, obviously. And if you look at the long-term history of multi-family, usually you have - when you come out of a big downturn, either a recession or pandemic, you have multi-year up legs.
I think in 2010, we told the market was that we would have the best. The next three years would be the best revenue growth and operating fundamentals that we've had in our business history. And that came true, that was true. '11-'12 and '13 were the best operating fundamentals that we'd ever seen in our business career. Because it was a snap back from but not as big a snapback as the pandemic has been but it was definitely a snap back.
So, I would expect based on the history. And unless something dramatic happens, we have a black swan and delta virus, you know, delta variant or something like that 2022 is going to be pretty good here.
And then as Keith said earlier residents are not rent poor. They're paying 19% of their income for rent. So, on average if you go back to pre-financial crisis, they're paying in the 20s. And so, we are an affordable market still. And if you look at our average rent, it's $1500. And so for $1500 or $1600. So with that said, there's a 15% increase sounds like a lot than it is, but on a relative basis to the income growth that we're seeing. And as long as you're giving the value proposition to the resident, they accept it.
Okay, thank you.
Our next question comes from Alexander Goldfarb with Piper Sandler.
Hey, good morning. Hey, morning down there. So two questions. First of all, if we hear you correctly, you didn't really have any concessions in the portfolio. So it's not like you're copying rents off of a really low base of last year. Yes, there's more population moving in down to the Sunbelt, or to the Free States, whichever terminology that people want to use. But yeah, that continues. But still, the mid-teens rent spreads that you guys are getting in the acceleration.
Just trying to understand that better, is that just something that there's a tonne of jobs, or suddenly everyone who doubled up last year just wants to be back. It just seems like everything is great, but at the same time, the magnitude of that demand just seems incredible.
So I'm just trying to understand. Because again, it's not coming off of a really weak comp. It's like you guys were going 80 miles an hour, and now you bumped up to 120 miles an hour, and which is a pretty strong increase for a rate that was already going at a good rate down the highway.
Yeah. The way I look at it is this. And we've had this debate in-house and talk to data providers like Ron and others. What we kind of settle in on is this, if you think about what happened pre-pandemic, we were having the best quarter that that we had a long time. We have positive second derivatives and most of our markets except Houston, in terms of revenue growth. And we were looking at 2020 has been a - kind of a step up in growth year from a - sort of that also ran years in '18-'19.
So with that said, that demand just shut down. It was really good demand coming in the door, then that shutdown. And during that period too, if you look at some of the demographic numbers, we still had a million people that were - that should have been in the rental market that were not in the rental market. When you look at the millennials that are either doubled up or living at home or whatever that was at the beginning of 2020.
So all that demand shut down. And then if you think about demand in 2020, any new demand that would have come, like in migration, or even people graduating from college or just coming into the marketplace in 2020 didn't happen. And then all of a sudden, you look in 2021, you have vaccines come into play, the masking goes away and help and all these places open up. So you now have 2019 demand coming to the market, 2020 demand coming into the market in 2021 demand coming into the market. All at the same time when the light switch went off at the beginning of or maybe the middle to the end of May.
And so with that you've got - you just have people who were probably potted up with people they didn't necessarily want to be with. And they have plenty of money in their pocket through stimulus and job increases and all that. And they're all hitting the entrance at the same time causing occupancies to spike and therefore rents the spike as well. I don't know Keith if you have any.
So the only thing I would add to it is, I wouldn't think of it as trying to explain 16% and how that works in the first six months of 2021. Because if you think about it in 2020, we were on track, when COVID hit, we were going to blow our budgets away. And we were budgeting up 5% or 6% on top-line revenue growth and we're going to kill those. And then COVID hits and it goes to zero. We froze rents, we froze renewals. So we missed an entire year of rental increases instead of our residents.
And so I think we probably would have ended up 6% or 7% in 2020 ex-COVID. So some of this 16 is just a clawback of the rental increases that we didn't achieve in 2020, specifically, because of COVID. And if you live that way, now you're trying to explain, 9%-10%, which is still a crazy number. But we've seen that before. We've seen 9% 10% top-line rental growth coming out of the great financial crisis and going back to the tech wreck.
So that level is not unprecedented in our world. But I think it's probably a better way to look at it.
And so what you were saying earlier about this spilling into next year. It just means that with basically three years' worth of demand this year, it's going to take into next year to at least satisfy that.
I think that's what our data providers are saying. Yeah.
It's not a onetime shot. Usually it's a methodical process.
Okay. Second question is obviously a lot of new competition, a lot of new entrants coming down to the Sunbelt to your markets. But I was sort of curious, you said that development spreads are the widest they've been? We do hear that in industrial but apartments, I'm a little surprised just given land costs, shortage of labor materials appliances, all the fun stuff. So do you believe that going forward, you're still going to maintain that really wide spread to development and the five and three quarters yields on new stuff or those comments were more on existing projects. But on a go forward basis, those yields are likely to temper maybe two five or something like that.
Well, I think I said under our $720 million that we have in our pipeline that our developments yields are in the low-to-mid-fives. And I think we're going to maintain those. And we might even do better because of revenue, as revenue growth is so strong in these markets that our revenue projections will probably have more than offset costs increases.
In terms of spreads, the reason the development spread is so high today is not that the yields have gone up, it's that the weighted average cost of capital has gone down. And cap rates have gone down. So if you're a merchant builder, and you're budgeting at 150 basis point positive spread on your development which is more a normal spread on development and you look at today and you're selling, you're selling let's say a 5.5 at a 3.5 cap rate, or 3.25 cap rate, you increase your spread. And it's primarily been driven down by the compression of cap rates.
And when I talk about our spread being wide, it's because partially we are doing better on some of our developments from a yield perspective. But mostly, it's being driven down by our lower weighted average cost of capital. And so that's where the spread has been going down, I think that it is still difficult to buy land today and to make the numbers work. But when you look at the supply numbers, I mean, there's at least 400,000 units or 350,000 to 400,000 units that are getting sort of permanent every year that are making their numbers work.
Okay. Listen, thank you, Ric.
Sure.
Our next question comes from Austin Wurschmidt with KeyBanc Capital Markets.
Great, thanks, guys. You've historically talked about jobs to completions as a barometer of strength and fundamentals. So I'm curious what your revised outlook for this year is? And certainly, it sounds like jobs alone isn't really enough to explain some of the strength. But can you give us that figure? And then also, what ratio kind of the third-party forecasts are projecting for next year?
Yeah, so in terms of total supply, deliveries in Camden's markets in 2021 is going to be about 160,000 apartments over the entire footprint. That's roughly in line with what it was last year. And then if you look at Ron Whitten's work in 2022, we still end up with something around $165,000 our unit range in terms of deliveries.
If you look at the numbers this year, it makes complete sense in terms of the ratio. In fact, it looks pretty bullish. You get numbers like seven to one on the 165 deliveries. But I think it doesn't make a lot of sense to think of it that way, just for 2021, you almost have to go back and look at MATCH 2020, where the job losses occurred and then add to it the recovery. We're still - in many of our markets, we're still not back to the employment levels that we were going into the pandemic. And yet here we are with the kind of demand that we've seen. And I think it's all the reasons that Rick talked about earlier in terms of just releasing a lot of pent up demand.
But if you look traditional numbers, you would look at 2021 and 2022, and say, these numbers look really bullish overall. I think you got to temper that by the losses in 2020.
That's helpful. And then with everything that you guys are talking about, on the development side, and the spreads and attractive cost of capital. I mean, it seems like developers might be licking their lips a bit. So really, where are you seeing the most activity from a permitting perspective or shovels in the ground that could move that supply and demand more towards equilibrium as you look maybe two or three years out?
I guess it's complicated, looking two or three years out. Because for the last five years, we've looked out a year or two and said, well our supplies peaking, and because of either cost pressure or banking pressure or whatever. And it's never peaked. It continues to make its way up.
So I think that - and the last numbers I saw from Ron shows, starts coming down in 2023- 2024. And I think that this is the time in the world where it's really hard to figure out what's going to happen a year from now or two years from now. I know that how is the ultimate tapering and the great experiment of massive fiscal and monetary policy. When that's turns around what's going to happen and how is that going to affect everything? And I don't think any of us know. That's why we want to be conservative in our business going forward.
But at least from now, every market is at peak supply. And it doesn't seem to matter from an occupancy or a revenue growth perspective. It will matter at some point when - if we go into other jobs slowed down or some another recession. Obviously, that's when the world - that's when things change. And we'll just have to see. But right now, at least the next 18 months to 24 months things looks like that supplies not going to abate. It's going to continue to be pretty much high in every market.
You do have some markets that are higher than others like Nashville and Austin, but then you look at the rent trade out in Austin and Nashville today. And it's at the highest - some of the highest rent trade outs we have in the market. So I don't know the answer, ultimately, but we'll obviously have to wait and see.
Yeah, Austin, RealPage is our provider for permit data. The permit data is the most - I would say the least precise or reliable just because you're sort of forecasting behavior into the future. But on their numbers, they've got permitting activity of 170,000 apartments in our markets this year, and 169,000 next year. So again elevated activity, but I don't think these numbers reflect the most recent compression in cap rates. And they probably don't reflect the real updated cost numbers. So we're still in a race between cap rate compression and cost to build.
Got it? Appreciate the thoughts, guys. Thank you.
Our next question comes from John Pawlowski with Green Street.
Hey, thank you for keeping the call going. Just one quick question for me. A few months ago, obviously, your cost of capital was a little bit different. So just curious how you thought through issuing equity versus selling a building too?
Sure. So as I said earlier, the cost of capital has come down. And when we think about our capital structure, we think about our debt to EBITDA being between five times and four times. And it seemed opportune we're going to issue equity when it's an all-time high prices. And it was time that we issue.
And the challenge with issuing equity oftentimes is that. And when you decide to do it relates to you know, blackout periods and those kinds of things. Because we don't have the flexibility that regular investors do in terms of buying and selling because of those blackouts. And so we're blacked out 42% of the time, in order to execute transactions like that.
We will continue to recycle capital. So to me, it's not a one choice either you issue stock or you issue debt, or you sell assets. It's a combination of those three things that produce capital. And ultimately over the long-term, you have to layer in all three of those activities. We all know we have $100 million, roughly free cash flow and on a $16 billion company, it's hard to grow the company with $100 million a year. So the only way you can grow the asset base is either through equity or debt issuance.
And on balance, the question of whether we sell assets or issue equity relates to what is the weighted average cost of capital? And what does that look like on a long-term basis? And when your weighted average cost of capital mid-fours and you can put acquisitions on your books at six or better, you should do that. We were going to continue to recycle capital through sales of properties and acquiring other properties. But when the capital markets are conducive to putting long-term accretive transactions on the books, like we have done in Nashville, that's the time that we issue equity.
And now I understand putting assets on the book and developing given the cost of capital. But for the better part of last year, the transaction mark color you've been sharing is signaling pretty sizable NAV discount not today, but several months ago. So just felt like selling assets are a cheaper source of funds than your common stock.
Yeah, I think with cap rate compression the way it is, and that's why we're selling assets. We put up $150 million budget together at the beginning of the year to sell and a $450 million to acquire. And that's when our stock price was $95 a share at the beginning of the year in the way average cost of capital was north of 5. So things changed and the world of capital markets changed between the first year and now and we made the decision to issue equity along with that existing program.
So, I mean, hindsight is always perfect. So last year when the stock was 62, if we could have executed a massive sale of assets that at a low cap rate and bought the stock that would have been opportune. But unfortunately, it didn't stay there that long. And this complication of, of not being able to execute 100% of the time makes it more difficult to do both those kinds of transactions both on the buy and sell.
Okay, understood, thank you.
Sure.
Our next question comes from Joshua Dennerlein with Bank of America.
Hey, guys. Hope everyone's doing well, I just kind of curious on how you're thinking about the kind of leasing season as we head into the fall. It just seems like it's going to go on for longer than expected and whether or not that influences your decision to kind of push rate a lot harder than you normally would, at this time of year?
I think that if you think about our revenue management system, YieldStar is a forward-looking tool. And it's really basing, its most of its calculations on that using the levers, which is primarily price, and looking at 90 to 120 days. So the pricing that is being recommended by YieldStar, both on renewals and new leases and we're very disciplined around our revenue management system, 95% of the recommendations we take. And it's rare that we have an exception to the recommended YieldStar rates.
What that tells me is, YieldStar thinks the market clearing price, that will maintain our occupancy rate north of 96% is 16% increases, looking out 120 days. So YieldStar will continue to push as long as the conditions on the ground permitted.
Okay. And just curious, kind of any tweaks you have to make for next year, just given the change in seasonality or the revenue management system? Just kind of automatically adjust for that?
No, the revenue management system is - the tweaks that we make are around sustainable occupancy levels. Occasionally we get up or down and then YieldStar adjust the price to make that happen over a period of time. Very small adjustments, but over looking at 120 days.
The good thing about YieldStar is you don't have to be able to do that calculus, or have your property managers do any calculus around what's the market clearing price 120 days out that's what YieldStar does.
Got it. Thanks guys.
Our next question comes from Haendel St. Juste with Mizuho.
A Thank you for taking my question. I know it's been a very long call. Just to follow up on the last question, I wanted to better understand the lease expiration schedule I guess the next couple of quarters. How that's been impacted by all the leasing that's been done and the COVID disruption and how that's playing into your thinking about the sustained strength of revenue growth near term?
Yeah, there's always seasonality in our rent roll, but it's not dramatic. But so fourth quarter and first quarter are always - we have fewer transactions, fewer occupancy. Vacancies come available, just because there's less traffic in most of our markets. But it's not dramatic. It's a couple of percent flip flop between first and fourth and second, third quarters. And again, that's within the YieldStar model that it calculates that and maintains those exposure levels at optimized rates.
I understand that. But just want to better understand if there's anything about the number of units coming available that was meaningfully different in the next couple of quarters than say prior years during the same period.
I don't think so.
Okay, thank you. And then the other question I had was I guess you've been pushing rates incurring a bit more turnover. Curious, your sensitivity there on incurring a bit more turnover? How much would you be willing to get comfortable to incur? And you're also pushing renewals more and more aggressively, wondering how much more you think you can push renewal here. Any municipalities or regions like say DC, California with a bit more sensitivity than pushing as aggressively another project portfolio?
Well, in DC proper, we can't increase rents. So we were effectively frozen for rental increases in DC proper. In California, there's some recent legislation around rent control, but when you dig into it, it's CPI plus 6% plus or minus. And in most cases out there we're not impacted by that.
So again, all of the math around recommended rental increases, it's not like we sit around and do what we think we feel like we should be doing for rental increases. It's all driven by the metrics within YieldStar. And we take those recommendations.
Okay, fair enough. Thank you.
This concludes our question-and-answer session. I'd like to turn the call back over to Ric Campo for any closing remarks.
Okay, great. Well, we appreciate you being on the call today. Those of you who are left, sorry, went so long. But we try to answer all questions. If we didn't get this something on your list, we're available. So please give us a call or email Kim or call Kim and we'll get back to you. Thank you very much. And we'll talk to you next quarter or when the conference season starts after Labor Day. So take care. Thanks.
Take care. Bye.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.