Camden Property Trust

NYSE:CPT

Earnings Call Transcript 2021-Q3

[Kim Callahan, Senior Vice President of Investor Relations]

Good morning, and welcome to the Camden Property Trust Third Quarter 2021 Earnings Conference Call. I am Kim Callahan, Senior Vice President of Investor Relations. 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. [Operator Instructions] 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 third 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.

We hope to complete our call within one hour and we ask that you limit your questions to two then 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 email after the call concludes.

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

[Ric Campo]

Thanks Kim. The theme for our pre call music today was Camden Cares. For many years, our Camden Cares initiatives have provided assistance to people in need among Camden's family or Camden residents, as well as the communities where we live and work. Our music today included a song by the late great Bill Withers with this great wisdom. Lean on me when you're not strong. I'll be your friend. I'll help you carry on for it won't be long till I'm gonna need somebody to lean on. These words capture the spirit of all that our Camden associates do for others in need, under our Camden Cares banner. Camden's why, our purpose is to improve the lives of our teammates, customers and our shareholders one experience at a time. At the outset of the pandemic, it was clear that disruption from COVID-19 was going to be massive, and lead millions needing someone to lean on. We encourage our teams to view the widespread chaos as an opportunity to go big on our pledge to improve people's lives one experience at a time. And not surprisingly, Team Camden responded and truly extraordinary ways that we captured in this brief video. [Video played]

Camden's carrying culture was recognized by People magazine this year on their 100 companies that care list, ranking Camden at number 7. I want to thank all of our Camden team members for all they do to make our communities better every single day. We are pleased to report another very strong quarter of results and another raise to our 2021 earnings guidance. We're seeing high levels of rent growth along with sustained occupancy levels over 97% for our portfolio, which bodes well for the remainder of the year.

Camden is always focused on operating in markets with high employment and population growth and strong migration patterns. And this strategy is clearly paying off, as evidenced by the ULI PwC report that was issued for 2021 real estate transcend at the ULI Fall Conference in Chicago last week, Camden's markets, eight of Camden's markets ranked in the Top 10 for 2022 investor demand. We were very fortunate today to be in really strong apartment market and in the right markets. At this point, I will go ahead and turn over the call to Keith Oden.

[Keith Oden, Executive Vice Chairman of the Board]

Thanks Ric. Now for a few details on our third quarter operating results. Same property revenue growth exceeded expectations yet again at 5.1% for the quarter, and was positive in all markets both year-over-year and sequentially. We posted double digit growth in Phoenix in South Florida both at 10.1% followed by Tampa at 9.5%. Year-to-date, same property revenue growth is 2.9%. And we expect strong performance in the fourth quarter across our portfolio, resulting in our revised 2021 guidance range of 4% to 4.5% for full year revenue growth. New lease and renewal gains are still strong with double digit growth posted in both categories. For thre3Q, '21, signed new leases were 19.8% and renewals were 12.1% for a blended rate of 16% flat. For leases, which were signed earlier and became effective during the third quarter, new lease growth was 16.6% with renewals at 8.5% for a blended rate of 12.2%. October 2021 remain strong, with sign new leases trending at 18.3%, renewals at 13.8% and a blended rate of 16.5%.

Renewal offers for November and December were sign out with an average increase of 15% to 16%. Occupancy has also been very strong it was 97.3% for the third quarter of '21 and is still holding at 97.3% for October today. Net turnover remains low at 47% for the third quarter of '21 versus 49% in the third quarter of last year. And move out to home purchases moderated from 17.7% in the second quarter of '21 to 15% in the third quarter of '21, trending below our long term average of about 18%. It's worth noting that these strong results have continued into what has historically been a seasonally weaker period for our portfolio. We want to acknowledge team Camden for continuing to produce outstanding and better than forecast results. This marks our third straight quarter in which we increased our same property NOI and FFO per share guidance. Our team is focused on finishing the year strong, which will position us for another solid year in 2022.

I'll now turn the call over to Alex Jessett, Camden's Chief Financial Officer.

[Alex Jessett]

Thanks Keith. Before I move on to our financial results and guidance, a brief update on our recent real estate activities. During the third quarter of 2021, we purchased Camden Central, a recently constructed 368 unit 15 story community in St. Petersburg, Florida and subsequent to quarter end, we purchased Camden Greenville, a recently constructed a 558 unit mid rise community in Dallas. The combined purchase price for these two acquisitions is approximately $342 million and both assets were purchased at just under a 4% yield. Also, during the quarter, we stabilized Camden Downtown, a 271 unit $132 million new development in Houston. And subsequent to quarter end, we stabilized ahead of schedule Camden North End II, a 343 unit, $79 million new development in Phoenix. Additionally, during the quarter, we completed construction on Camden Lake Eola, a $125 million new development in Orlando. Subsequent to quarter end, we purchased five acres of land in Denver for future development purposes.

On the financing side, during the quarter we issued approximately $220 million of shares under our existing ATM program. We use the proceeds of the issuance to fund in part the previously discussed acquisitions. Turning to financial results. Last night, we reported funds from operations for the third quarter of 2021 of $142.2 million, or $1.36 per share exceeding the midpoint of our guidance range by $0.03 per share, which resulted primarily from approximately $0.01 in higher same store NOI resulting from $0.02 higher revenue driven by higher rental rates, higher occupancy and lower bad debt, partially offset by $0.01 of higher operating expenses entirely driven by higher than anticipated amounts of self insured expenses. Approximately $0.015 and better than anticipated results from a non same store, development and acquisition communities. And approximately $0.01 from the timing effort for third quarter acquisition.

This $0.035 aggregate outperformance was partially offset by a $0.005 impact from our higher share count 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 our continued significant improvement 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 same store revenue guidance from 3.75% to 4.25%. And we have increased the midpoint of our full year same store NOI guidance from 3.75% to 4.50%. We are maintaining the midpoint of our same store expense guidance at 3.75% as the higher than expected third quarter insurance expenses are anticipated to be entirely offset by lower than expected property tax expenses in the fourth quarter.

We're now anticipating that our full year property tax growth rate will be approximately 1.6% which includes $1.8 million of property tax refunds anticipated in the fourth quarter. Our 4.25% same store revenue growth assumption is based upon occupancy averaging approximately 97% for the remainder of the year with the blend of new lease and renewals averaging approximately 16%. Last night we also increase the midpoint of our full year 2021 FFO guidance by $0.10 per share. Our new 2021 FFO guidance is $5.34 to $5.40 with the midpoint of $5.37 per share, this $0.10 per share increase results from our anticipated 75 basis point, or approximately $0.05 increase in 2021 same store operating results. $0.01 of this increase already occurred in the third quarter, an approximate $0.05 increase from a non same store development and acquisition communities, of which $0.025 already occurred in the third quarter, and an approximate $0.02 increase in FFO from later and lower than anticipated fourth quarter disposition activities.

We now anticipate approximately $110 million of dispositions in early November, and approximately $220 million of dispositions in early December, as compared to our previous expectations of $450 million to dispositions, all occurring in early November. This $0.12 aggregate increase in FFO is partially offset by an approximate $0.02 impact for our third quarter ATM activity. Last night, we also provided earnings guidance for the fourth quarter of 2021. We expect FFO per share for the fourth quarter to be within the range of $1.46 to $1.52. The midpoint of $1.49 represents a $0.13 per share improvement from the third quarter, which is anticipated to result from an $0.11 per share or approximate 7.5% expected sequential increase in same store NOI driven by both a 2.5% or $0.055 per share sequential increase in same store revenue, resulting primarily from higher rental rates, and a $0.065 decrease in sequential same store expenses, driven primarily by $0.025t fourth quarter decrease in property taxes. Combined with a fourth quarter, $0.015 decrease in property insurance expenses, and a $0.015 third to fourth quarter a seasonal decrease in utility, repair and maintenance, unit turnover and personnel expenses. A $0.03 per share increase in NOI from our development communities and lease up and our non same store communities and a $0.02 per share increase in FFO resulting from the full quarter contribution of our recent acquisitions.

This aggregate $0.16 increase is partially offset by $0.015 decrease in NOI from our plan fourth quarter disposition activities, and a $0.015 per share incremental impact from our third quarter ATM activity. Our balance sheet remains strong with net debt to EBITDA at 4.4x and a total fixed charge coverage ratio at 5.8x. As of today, we have approximately $1.1 billion of liquidity comprised of approximately $200 million in cash and cash equivalents and no amount outstanding under a $900 million unsecured credit facility. At quarter end, we had $242 million left to spend over the next three years under our existing development pipeline. Our current excess cash is invested with various banks earning approximately 20 basis points.

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

[Operator]

[Operator Instructions]

And the first question comes from Neil Malkin with Capital One Securities.

[NeilMalkin]

Good morning, everyone. Great quarter. First question maybe higher level in terms of just secular tailwinds. What is in your opinion driving historically strong rent growth? I mean is it -- are you continuing to see accelerating in migration, corporate relocation? Is it a wage growth thing? Because supply is pretty consistent give or take over the last couple years and expect it to be next year maybe a little bit higher but if you can just talk about what you think the main drivers there because you're 97%, and you're pushing double digit. So any thought would be great.

[RicCampo]

Sure. So when we think about what's going on it really, when you think about our customer base, right, our customer base average income is little over $100,000 a year. And if you think about what's been going on in the economy, the unemployment rate is very low. But we think about the jobs that haven't been, or the people that aren't employed today, 75% of those folks are making under 50 grand a year. So our customer base is really, really in good shape. Number one, they're employed. Number two, they have massive savings as a result of the pandemic. And a lot of them that doubled up with their parents homes or doubled up in apartments during the pandemic. That's all expanding. So you really have almost three years of demand hitting the market in 2021, in a very buoyant job market for our customers. And then also, you just have the financing scenario, or you think about wages going up pretty dramatically plus savings rates going up pretty dramatically all the government support that these -- our customers got, and probably they didn't spend it.

So what's that has done is it that's allowed a lot of folks that maybe financially had to double up prior to the pandemic, who are in doubling. So you now have just normal economic growth. Plus, the unbundling of people that were either living at home or bundled up in when roommate scenarios because we know that people generally are have roommates, not because they want them but because they have to have them because of financial issues. And so we just have a very, our customers are really in good financial shape today. And I think that's what's sort of driven the demand not just for apartments, but for single family homes. Anything that's home today is full. And so we've been under building for a long, long time. And I think it's just that we have this unusual situation where everybody has money in their pocket and are willing to go out and lease apartments.

[KeithOden]

Yes, I'd just add, as I've mentioned in migration and the continuation there, across Camden's platform on using Ron Whitman's numbers for 2021. He still estimates over 440,000 net migrations across Camden's 15 markets. So it is a minute's an important part of the story as well as the people that are have been sort of liberated to live where they choose to live and not where they have to live, making choices and big numbers to continue the migration patterns that started a decade and a half ago. So that is an important part of this 440,000 folks are going to show up in Camden's markets this year just from immigration.

[AlexJessett]

And Neil I'd add to that if you look at move-ins from in our markets, we saw a 600 basis point improvement in people moving from non Sun Belt markets to move into our communities in the Sun Belt. So that's the manifestation of keys immigration numbers.

[NeilMalkin]

Okay, yes, thank you all for the color. Just interesting is some of your peers are making talking about people coming back into the coastal market. So it's like, I'm not really sure where the people are coming from, but I think your absolute market rent speak for themselves. The other one for me is can you just talk about capital allocation priorities how you're going to get pretty aggressive on the developments, that you only started one this year so far. Can you just talk about how your cost of equity, current market fundamentals, and potential supply chain issues, weigh into your factors of focusing on ramping the development pipeline, versus focusing more on acquisition? Thanks.

[RicCampo]

Well, a lot of questions, kind of in that question. But fundamentally we think that development is a very good spot to be in today with the constructive rent growth that we're seeing, in spite of supply chain issues, I would say just to, so next year, we'll probably start anywhere between $375 million and $450 million of developments, developments take a long time to put in place, so you can't just move on a dime to increase development pipeline. So that's where we'll be development wise, in terms of supply chain and how that relates to development, supply chain disruptions, and I have a little bit of insight knowledge into this because part of my Camden Care is my personal Camden Care is part of my equation is, I'm the Chairman of the Port of Houston. And so it's an unpaid political job. But so I'm spending a fair amount of time understanding the supply chain issues and they're real.

And it's not because the supply chain is broken, it's just the supply chain is jammed. And we have high end, very, very increased high demand for every kind of product because of the pandemic, there's just too many products coming into the beginning of the supply chain. And they're getting stuck at every level. And that's causing big problems. So what that means for us is our projects are taking 30 to 60 days longer to build. When you look at price inflation, because of supply chain issues, we're looking at 10% to 12% increases in labor and in construction costs. The good news is, is that rental rates have gone up so much over the last six or eight months that we're able to offset that with higher rental costs, higher rental rates, obviously, just to give you a little tidbit on this too.

So in California, we are releasing up our Hillcrest project and also needing replacement refrigerators, we had to go out. And we bought a couple 100 refrigerators from Best Buy in a week. So we went to Best Buy after Best Buy after Best Buy loading up on a refrigerator. So it's not going to change anytime soon. And that pressure is going to be there for a long time. As far as capital allocation to acquisitions, we obviously have bought a lot of acquisitions here with $633 million so far, and we had a budget of about $400 million. When you look at cost of capital, our cost of capital has gone down as a result of just the overall interest rate environment and stock price. And so that allows us to make a really good spread on both acquisitions and development. And that's why we're ramping up the acquisition side of the equation. And we will continue to do that given the construct of the market, and so it just makes a lot of sense for us to grow in this environment, even with low cap rates on a relative basis.

[Operator]

The next question comes from John Kim with BMO Capital Markets.

[JohnKim]

Thanks. Good morning. I was wondering what markets were leading and lagging on the 18% release growth? Is it similar to the market performance and same store revenue? Or there are some markets with stronger momentum than the same store revenue results?

[KeithOden]

I think the best guy would just be looking at the same store revenue results, John. I mean, look at the -- if you look at the sequential numbers on revenues, the big ups were San Diego, it's over 7%, you got Orange County at close to 7%, Phoenix at 4% Charlotte, South Florida both at 4% so I mean, there's a lot of strength in sequential numbers like that. But it's cross our entire platform and the only the markets that it kind of it's hard to even talk about underperformance when they're -- when the numbers are at the levels that they are but we still have some regulatory headwinds in Washington DC and so the Maryland and DC proper, we're still have some constraints on the ability to push rents same in California, most of the California, most of them except for Hollywood have lapsed. But that doesn't mean that we're back in a position of the ability to make changes to our resident base immediately, there's a process you have to go through. So that stuff that will get better over time because the market fundamentals are better than the regulatory environment has allowed us to take advantage of in those in two markets, but the rest of the platform business as usual.

And you can see what the kind of unregulated and unconstrained market clearing rents are and that's what we're getting our new lease renewals.

[JohnKim]

I was going to ask you about DC because that seems like the one market that's underperformed your financial outlook for the year. And I know there are some regulatory concerns in DC itself, maybe not too much in suburban, Maryland and Virginia. But I was wondering, do you think there's going to be a catch up next year? And or are you thinking about decreasing your exposure to DC given it's by far your biggest market?

[RicCampo]

So I'll take that. It's interesting because the beginning of the year, we talked about how we were going to sell $450 million of assets and buy $450 million plus or minus and we're going to sell those properties in Houston and DC to lower our exposure in our two largest markets, and then reallocate that capital into Nashville, and some of the other markets like Tampa, that have better constructs from growth perspective, sort of longer term. And we're doing that, I mean, we will close the Houston transactions, the DC transactions in the next month. That when you look at a DC, and I'll sort of throw Houston in this bucket too, because to your question of slower growth, okay, we have slower growth in Houston and in DC, DC is definitely related to the fact that we can't raise rents on renewals, because of regulatory constructs there. And so there's definitely pent-up, occupancies are high if we didn't have the government control on not being able to raise rents through the end of the year, we would be pushing it pretty hard, just like the rest of the country.

So fundamentals underlying are great in DC, but it's just this government construct in the district in Maryland, where you can't raise rents. Houston, on the other hand, is probably our slowest growing market, even though we're getting really good rent increases on a relative basis, they're substantially lower than the rest of the country. And the reason there is, if you look at the sort of the four, three or four cities in America that haven't added back their jobs, from the pandemic, Houston would be one of those, Houston, LA, New York, and that's primarily driven by oil, and we lost 80,000 or 60,000 jobs in the oil business. And we've added back about 23,000 of those jobs. And so there's only we're pushing up towards 70% recovery of the jobs. But if you look at Dallas, Austin, Charlotte, Raleigh, they're all over 100% recovered from their -- the Phoenix, they're 100%, recovered from their job losses in the pandemic.

So, the good news is that even with the kind of drag we're getting from that, we're still putting really good numbers up and I kind of look at it like this, that we have a geographically diverse portfolio, geographically diverse, and that product diverse, and the whole idea is you never know, which markets going to give you the best growth in any one year just depends on their local economies and how the supply and demand dynamics work. And so I look at DC and Houston as sort of gas in the tank for next year because those markets are improving. And once we get the regulatory construct out of DC, which should happen by the end of the year, maybe early second, the first quarter, then we'll be able to experience the same kind of growth that the rest of the country is doing today.

And then Houston continues to improve and, oils at $85 a barrel and there's a lot of after the winter when people pay 30% more for their energy, I think you're going to get back to more investments in the fossil fuel area and Houston will do fine, too.

[Operator]

The next question comes from Nich Joseph with Citi.

[NicholasJoseph]

Thanks. What's the loss to lease for the portfolio overall? And then I recognize that someone at the moving target and you've touched on some regulatory issues, but how long do you think it will take to capture and regain that loss to lease over the next few months, or over the next year?

[KeithOden]

So you're right, it certainly is a moving target. Loss to lease today is right around 16%. But now, you'll have to remember that the way our pricing works, obviously, is dynamic pricing. And so this loss to lease has some variability to it. And if you're trying to sort of think about the impact, and how long will it take for us to recoup all of that, you have to remember that we're generally not bringing our renewals up fully to market. And we're doing that in order to make sure that we can keep up our resident retention. So I wouldn't expect for us to make up that full 16% in 2022, I think it's probably a longer lead time probably getting you into 2023.

[NicholasJoseph]

Thanks. That's helpful. And then just given where the occupancy is today versus history, how are you thinking about seasonality and kind of the push and pull of rent versus occupancy over the next few months?

[KeithOden]

Yes, so our -- we do have seasonality and historically have in our portfolio and if you go back and look at it throw out the two COVID years and look at the prior phase. On average, our occupancy between third and fourth quarter drops about 40 basis points. So that's sort of typical well in this year, between second and third, we actually went up 40 basis points. And as we sit here today, we're still at 97.3%. So my guess is there will be some seasonality from the 97.3% but maybe not the full 40 basis points that we've seen in the past. And then if you look at from a rental perspective it's, there's also seasonality on our new leases. I mean, we typically see 2% to 3% decline from third to fourth quarter. And, yes, as we sit here today, we've actually increased that number. So throughout the month of October, so I think we will see some seasonality maybe not to the extent that we have in the past, but you're talking about seasonal adjustments from historically high numbers, both on occupancy and rents.

[Operator]

The next question comes from Amanda Sweitzer with Baird.

[AmandaSweitzer]

Thanks. Good morning. If you look at it 2022, can you just talk about how you're thinking about the expense outlook today? Is there a level of expense growth that is already known to either kind of in place insurance or tax increases? And then how you thinking about controllable expense growth?

[AlexJessett]

Yes, so obviously, we are in the midst of our budget process. And so it's a little bit early to give some really detailed information around expenses, what I will tell you is that, obviously, we've had a very, or anticipate having a very good year in 2021 when it comes to property taxes, which is the largest component of our expenses. Based upon what we're hearing from our consultants, we think that there will be a slight uptick, but still within a normal range in property taxes. And if you think about the second largest line item, which is salaries and benefits we're certainly getting some very real efficiencies that hopefully, we'll get, we'll start to see some incremental benefit from in 2022. But hang tight, and we'll get you some better information next quarter.

[AmandaSweitzer]

That's helpful. And I appreciate your caution until you give access. And then just want to follow up on your comments about it'd be an attractive time to grow more aggressively externally, can you talk about how your stack ranking your sources of capital, as you look out to 2022 and are you planning to further lighten your exposure in any markets beyond the planned sale, we've talked about this year.

[RicCampo]

Well, in terms of lighting exposure, we will continue to -- the good news is when you grow in smaller markets, that lightens your exposure on a percentage basis and in your over weighted market. So we'll continue to trade out assets. We, I think about lowering exposure in DC and Houston, we can do it the two ways one is to grow outside of there. And the other is to move assets out of those markets and trade them for other assets. And we'll do some of that as well. In the end, it's really more of a, like a two or three year program. If you think about what we did in '20, starting in sort of 2013 kind of timeframe, we made a lot of moves we sold out a Vegas and increase exposure in a lot of other markets. And so we'll continue to do that. When I think about our capital stack, it's pretty simple.

We've talked about for a long time how we're going to keep our debt to EBITDA in the 4% to 5%, 4x to 5x range. And when you look at weighted average cost of capital, our weighted average cost of capital has gone down as a result of everything that's going on in the market with the 10 year being where it is and with equity prices where they are. And we -- so we're sitting right at 4.4x debt to EBITDA today. Had we not issued equity under our ATM program and just bought assets and funded them with debt, we'd be at 5.2x debt to EBITDA today instead of 4.4x. So the way I think about this, the kind of times we're in now is that we have very low cost of capital. And so we know that our equity cost is the highest cost of capital that we have. And so we're going to continue to balance the capital stack to make sure that we're driving this growth in a very positive way. Today, I haven't seen a time in my business career where we've had AFFO yields lower than our acquisition if you think about our AFFO yield on our stock relative to what we're buying. We have a accretive transactions when we're issuing stock and putting that debt piece on it as well and then buy an asset so that's a-- that's me a greenlight to grow. But it's always about keeping that debt to EBITDA in that 4x to 5x range. So today what we're really doing when we have times like this, we're in that debt to EBITDA down to the 4x. And that -- what that does is gives us tremendous capacity to lever up, if, in fact, the market changes in the future. And there are more attractive opportunities when the world sort of changes. And the question will be how long does it last? And I don't think any of us know. But I do know that good times don't last forever, and that rents don't go up always. And that at some point, our strength in our balance sheet will pay us big dividends in the future. And that's the way we think about our capital stack and sort of the growth opportunities that we have today.

[Operator]

The next question comes from Rich Anderson with SMBC.

[RichAnderson]

Hey, thanks. Good morning, all. So the stock is up about 65%, 70% this year. And I don't think the value of your portfolio is up that much back of the envelope, if I were to cut my cap rate by 100 basis points maybe you could say 30%, 35%, 40% up in terms of property value. So there's a fair amount of enthusiasm driving the stock today, enthusiasm toward something that is arguably unsustainable. You mentioned 3x, the demand in one year. So I guess the question is, and maybe sort of answered in the last question, but how do you keep people from running from the stock next year, in the year after, because then they suddenly realize that 20% blended, or new lease rates is just not something that's going to happen probably next year, either. So I'm just wondering what the bull case for Camden is in year '22 and beyond.

[AlexJessett]

Well, first of all, we don't manage to the stock price, obviously. And its stocks can go up and down. And that's just what they do, right? You guys are the ones who figure out what they're going to do. But if -- but to your point, if you just take the base, right, in January of this year, and we start out at $95 a share, and now we're up to $162, or something like that $95, a share was incredibly cheap, it was definitely a significant discount to NAV there. So I would argue that from January to now we've had at least a 30% or 40% increase in the real estate value. But we were undervalued to start with, right. And so to me, the -- it's not about 65% growth in the stock price versus 30% or 40% growth in the asset value, we started out at a low number. And so you had to get back to an NAV number. And when you look at our NAVs relative to the streets, I mean, it's not that far off of where the stock price is today, some people have it higher, some people have it lower. In terms of why would somebody, why -- what's the big bull case for Camden next year? I think it's pretty simple. And you're coming off a really big year this year, but you have embedded growth next year that we've never seen in our business history.

When you look at next year, we have embedded revenue growth of 5%, just if we do nothing next year, and we just maintain our occupancy and our leases, you have 5% top line revenue growth. And then if you think that the loss to lease is some of that loss of lease is going to get captured, you're going to have a probably one of the best years that multifamily has seen in a very long time for top line growth. And so the question will be how long it does last? And I know people get very stressed out about negative second derivatives on revenue. But you have an unusual situation today where there's just more demand than supply. And for all the reasons that we talked about before, and then as long as the economy continues to chug along the way it's chugging along today, then 2022 looks pretty darn good. And then 2023 could be another interesting year or two. So when you think about how high rents can go keep in mind that these 20% increases today are on top of pretty much zero increase in 2021 limited increases and 2020, we had maybe a 3% growth in 2019. And so you have a fair amount of pent-up growth that would just catch up growth or not like new growth, and then the new growth is going to come in 2022 with the economy doing what it's doing. So I would make the argument that's the bull case for Camden.

[RichAnderson]

Okay, good stuff, and then second question is, you have a rock solid plan from a succession standpoint, I hate to bring this up, because I'd hate to see both any of you guys go. But obviously, it's important for you to do that, do you expect you'll be here many, many years to come or just any kind of comment on succession because obviously, you two guys and Alex and everyone are very important.

[RicCampo]

So let me take a quick shot at it. So yes, we have a long-term succession plan. And it's a good one because you really have two CEOs here, right, Keith and me; we were co-founders of the company. And so if one of us decides to leave tomorrow, or gets hit by a truck or whatever, or maybe by foul ball, the Astros game on game seven, then you have the other one. And we have a very deep bench when it comes to our other team members. And when you think about Alex, I mean, Alex, you started here when you're in your 30s. Now you're still pretty young dude, even though you may [Indiscernible] in the last 20 years, but so we have a great plan, we are all good from that perspective. Keith, you want to add to that?

[KeithOden]

I was going to say that it's entirely internal.

[RichAnderson]

Yes, absolutely.

[KeithOden]

Completely confident that our succession plan is internal.

[Operator]

The next question comes from Daniel Santos with Piper Sandler.

[DanielSantos]

Hey, good morning, guys. Thanks for taking my questions. As we look at sort of sub market mix, how do you rank for infill versus suburbs versus outer ring from a pricing power perspective in the sort of near to medium term?

[AlexJessett]

So what I would tell you is that Class B and suburban communities continue to outperform. And that is primarily driven by where the supply is. And so I think you would expect to see that at least in the near term, continue that way.

[DanielSantos]

Got it. Thank you. And then, apologies if you covered this already. But can you give us an update on the delinquent rent in Southern California? And what's your view on when you might be able to start evicting tenants? Or is your view that internally that the eviction moratorium will be sort of extended kind of indefinitely?

[AlexJessett]

Yes, so if you think about delinquency, for us, it was 120 basis points for the quarter. By the way, California was 410 basis points of that or was 410 basis points. So if you exclude California, we would have actually had a delinquency number of about 80 bps. We do not believe that we're going to see any extensions. And obviously, right now, we are looking at how we are going to handle the consumer debt. But we are certainly anticipating that 2022 is going to be a more normal year in terms of California and people being required to be current on current rent, obviously, the past rent, as you know turns to consumer debt, and then we'll have to look at our various avenues to collect those amounts.

[Operator]

The next question comes from Rob Stevenson with Janney.

[RobStevenson]

Good morning, guys. How much redevelopment are you doing these days? And how are you thinking about that business over the next several quarters, given the downtime for units and the strong demand for those units in the [Indiscernible] high occupancy?

[AlexJessett]

Yes, so we expect in 2021, that we're going to have about 2,200 units that we will reposition that works out to be about $53 million worth. We think it's a fantastic business, we're going to keep doing it, as long as we have the opportunities, the downtime, we've gotten really, really efficient about it. And obviously, we go back and we sort of backtrack, all this and back check and what we're finding is reposition units are outperforming those units that have not been repositioned even in this environment. So I think it's a great book of business, we're getting very strong return on invested capital and it's something that we'll keep doing.

[RobStevenson]

Okay. And then obviously, pricing continues to increase but what is five acre land in Denver. Was there, is there something else on that? Is that a title for multifamily development, and how we sort of characterize the pool of entitled multifamily development land in the markets and sub markets that you want to develop in today?

[RicCampo]

The general property does have some warehouses on it right now and is multifamily. And we've had it under contract for quite a while. And we went through the zoning process to make sure that it was developable as multifamily. So the closing was required, once we got our right entitlements so we wanted, and then we will now start our construction drawings and knock the buildings down. And hopefully, we'll be under construction late this year, early next year on that project. In terms of land availability, land availability is still out there, people talk about oh, gee, and they're not making any more land. But what's happening is, there's been a lot of product types that are just underutilized lands that you're -- that are out there, that so I think that the land availability is still fine, you're still able to buy it, the big issue is land prices have accelerated, along with rents and other costs. So it just makes it more difficult to make numbers work on projects. And that's the challenge we have, we want to make a certain rate of return IRR, and going in yield and that's the challenge in this environment now, the good news is rents are helping us make those numbers obviously, with the significant increases that people are having today or rent increases that is.

[Operator]

The next question comes from Rich Hightower with Evercore.

[RichHightower]

Hey, good morning, guys. Thanks for all the color so far. So I want to go back, I think it's been asked a few times, but I'm going to put a twist on it this sort of 3x demand normal demand. Figure that, Rick, I think you mentioned in the answer to one of the question. So as I think about that, I mean, you're not so much pulling forward, future demand, you're sort of calling it back from an air pocket that existed during the depths of COVID. And so we might consider that the industry is sort of over earning currently on demand, and therefore, rents at the moment. And so as I think about what next year and beyond are going to look like, I mean, would you say that, we are going to have a more sort of trend like, demand figure in 2022 and beyond? And what does that do to a pricing algorithm? If you're comparing sort of year-over-year, and you do see what looks like an air pocket as measured against what's happened in 2021. How do we figure out where the puck is going in that regard?

[RicCampo]

Yes, so I think if we think about it that way, I don't disagree with that we'd have more demand, because people were doubled up in the past. And there's just more household formation, and people are choosing more apartments, part of it is that people are choosing to rent rather than to buy or live in a single family home too and when you look at single family market, it's full from a rental perspective. But it's also full from a sales perspective, and you can't build houses fast enough today. And so I think that the clawback, if you want to call it is going to stay in place, right. So that means that occupancy levels assuming that you have normal economic activity, right, meaning that we don't go into recession, or there's some black swan event that happens, a Fed makes a mistake and shuts down the economy or COVID, or whatever, then if you have -- you start out with pretty amazingly strong occupancy, and those people stay in place that came out of the market, then what you have is normal demand in a very tight rental market.

And so if you have normal demand, that is just household formation and population growth and job growth, through 2022 and 2023, that you shouldn't have an air pocket. An air pocket, the only certain way that would happen is if there was some economic dislocation, right? And then that demand that was there goes away, or the new demand that normally happens during the normal year doesn't happen. And so you can always come up with scenarios that we don't know about today, or I could just said that I make some mistake or something like that and you have an air pocket. And then what happens is, if you do is to demand then at least our occupancies are higher. And so maybe the rental growth slows some and with our dynamic pricing model you would have, you would definitely see a slowdown in the rate of growth of new leases. But that is you need to have a real economic shock to make that air pocket happen, I think.

[KeithOden]

So, Rich, just to add to that on Whitman's numbers for 2022 in Camden's markets, he's got employment growth at $1.2 million. And he's got completions across Camden's markets at 160,000 flat -- with 2021. So I mean that that math tells me that we're going to have excess demand in 2022, and probably in 2023, as well, because the he's got completions ticking up a little bit in 2023, but not much. There's not the fact that you see this excess demand right now, you say, well, what's the response to that? Well, the response to it as people will build more, but it's a two to three year process. To me, it's not like going to the grocery store and getting cornflakes. These projects are long lead time, they're complex, expensive, and so it's just -- it's the supply response will happen. But it just -- it's not going to happen until 2020. Whatever's if it's not under construction already, it's not going to be a factor until the end of 2023. So I think it's just by the numbers, it still looks like that we did pull -- that we had some pent-up demand that got in the 3x. But going forward, I think you're going to get back to more of a normal situation. But a normal situation demand is going to continue to outstrip supply.

[RichHightower]

Right, my kids can confirm it's hard to get cornflakes too at the moment. Would you say that implies that if I think about occupancy, I mean 98 becomes the new 97, is 97 has become the new 96? I mean, is that possible next year?

[AlexJessett]

Is that also about flakes? People still move in and move out. And that move in move out is going to limit the ability to get like occupancy in the 98, 99 kind of range, Rich, you might see a tick up a bit but it's really hard to maintain that because , people are still moving around. You'll get our -- even though we had a drop in our turnover rate, we are still 47%, right?

[Operator]

The next question comes from Chandni Luthra with Goldman Sachs.

[ChandniLuthra]

Hi, thank you for taking my questions. Most of the questions have been answered. So I'll just ask one on cap rates. So what direction do you see CapEx go from here? I mean, obviously, there has been a lot of compression already. But how do you see this continue into 2022? Or do you think that we are finally at a point wherein the second derivative here slows? Just trying to understand that dynamic? If you could throw some light on that?

[AlexJessett]

Yes, I've bet against cap rates, compressing sort of every quarter for the last 10 years. So I think that the challenge, you haven't predicting what cap rates are going to do is, it's really driven clearly by the massive amount of capital out there that's trying to find a yield. And I sort of hurt my head when cap rates had a three on it, and a high three, now hurts my head that cap rates have a low three, but then when you put a 20% growth in an embedded rent over a 12 month period, I get that, right. So until we start alternative investments that produce the kind of cash flow growth that multifamily does. And it also has an inflation and inflation hedge, then I think cap rates are going to stay low, and maybe go lower until that dynamic changes. So if you have a significant negative second derivative, and there's other and rates rise or were there other alternatives for investors to get cash flow returns that they need, then that's probably when cap rates rise, but when you think about what -- how to assets price, the number one reason an asset is going up in value or cap rates are going down, it's liquidity in the market. And we have the most amazing liquidity that we've had ever in my business career. And then the second reason they go up and down is because of supply and demand dynamics, and we have great supply and demand dynamics, right. And then the third thing is interest rates. And then the fourth thing is inflation, I'm sorry its inflation expectations then interest rates. So until the dynamics of those four things change, cap rates are going to continue to be really low and maybe go lower until that change.

[ChandniLuthra]

Makes sense and then my second question, so you just on the last one gave some color on supply and talked about how people are building, but that's a two to three year process. So it's not going to be a factor until the end of 2022. But as we think about sort of all the capital that is finding its way into the Sun Belt markets, is there a risk of crowding out? I mean just overcrowding at some point. And then near term looking into 2022, how do you think about these two opposing forces that on the one hand all that sort of air pocket that got created in construction last year, perhaps, finally gets to be finished? But on the other hand we've had construction delays, and you I think yourself talk about 30 to 60 days, delays there. So how do you sort of square those two often, where do you think 2022 will ultimately shake out to be from a supply standpoint?

[RicCampo]

I mean the supplies pretty much baked in for 2022 now, and those construct -- those delays are real. And so that will probably supply we think is going to come into 2022 is probably not coming until 2023 because of those issues. As far as overcrowding or crowding out, I guess, I'm not sure I understand that part of the equation, your question? Are you saying there's not enough room to build or there's one --

[ChandniLuthra]

Well, I guess just oversupply.

[RicCampo]

Oh, yes. So I think the issues on oversupply, markets go up and down demand perspective, right now, we have an excess demand versus supply, and the supply is taking longer to put into the market. So I think an oversupply condition in 2022 is very unlikely. And then you have to start looking out to 2023. And when in 2023, do you have that happen, so I think it's really hard to go, okay, I think there's going to be a supply problem in 2024. But each market is dynamic and unique in its own way. And you will have some markets that have excess supply and less demand, and that's why we have a geographically diverse portfolio. Right now, Houston, even though we're getting 8% to 10% red trade out, if we're not getting 30, like we're in -- like we're getting in Tampa because of supply -- supply but related to the demand with job growth. And so I think we're pretty clear on imbalance of excess supply through 2022 and in the middle of 2023. And after that, it's tell me what the economy does, do we get 1.02 million jobs each year for the next two or three years in our markets? If we do, you're probably good for another two or three year. But that's the uncertainty. We know, supply is coming. I know it's taking longer, but we just don't know what the demand is in middle of 2023 to 2024 or 2025. That's the crapshoot, I think.

[Operator]

The next question comes from Alex Kalmus with Zelman and Associates.

[AlexKalmus]

Hi, thank you for taking the question. Can you talk a little bit about the dynamics in St. Petersburg? There have been a lot of high profile office relocations. And Camden obviously been doing well, has it - can you just talk about the dynamics there and the reason for the acquisition?

[KeithOden]

Yes, St. Petersburg has some of the best market fundamentals of anything across our entire portfolio. And a lot of it has to do with just the re-envisioning and reimagining of what St. Petersburg is and there have been tremendous growth in terms of commercial assets, retail support, and of course that's brought with it some very high end apartment development and but our rent trade out right now in St. Petersburg is among the highest in our entire portfolio. Even on the brand new acquisition we have there. The rent trade out is crazy. So we love St. Petersburg, we love the market dynamics, we love where that -- where it's headed and ultimately we'd like to have some additional exposure there. But it's not a real big market. There's not a lot of stuff to trade. As a sub market for us is just on fire right now for sure.

[AlexKalmus]

Great, thank you. And is there any data behind move out to single family rentals in the portfolio? Appreciate the color on move out supply there.

[KeithOden]

Yes, I mean, we track that separately. And it's trended up from 1%, five years ago to about 2% today; it's still just not a meaningful number in our portfolio that my guess is that probably will tick up over time. But just because there are more purpose built single family, kind of four rental communities there that are being built in there that ultimately is probably a better solution for someone that's an apartment renter that doesn't want to have -- just doesn't want to own a home but needs more space in the suburbs. So that asset class purpose built single family rental only developments over time probably at the margins will make that number tick up, but it's -- I don't ever see it being a huge number of big competitor to our portfolio, I think it's our resident base is just more suited to their next move being purchasing a home. And while I guess our numbers right now for the last quarter were about 15%, which is still way below our long term trend of about 18 for that category.

[Operator]

The next question comes from Austin Wurschmidt with KeyBanc.

[AustinWurschmidt]

Great, thank you. Sorry, if I missed this, but I was curious. Did you guys collect any rental assistance in the third quarter, most notably from California? And can you provide what your outstanding receivable balance is today?

[AlexJessett]

Yes, absolutely. So outstanding receivable balance today is about $12.5 million, of which we have reserved about $12 million. So we're almost fully reserved on that front. If you think about in the third quarter, for same store, we collected about $4.2 million total portfolio was about $5.3 million. And so that gets us to a year-to-date number, same store of about $7.5 million in total about $9.4 million.

[AustinWurschmidt]

And are you assuming any collections into the fourth quarter in the guidance?

[AlexJessett]

Yes, we are assuming some additional collections going into the fourth quarter.

[AustinWurschmidt]

And then separately, second question, curious if you could provide an update on how deep the acquisition pipeline is today. And maybe how that compares versus six months ago or so?

[KeithOden]

Well, there's a lot acquisition pipeline, you mean the properties available for it to acquire is pretty deep --

[AustinWurschmidt]

Just property you guys are underwriting, yes, underwriting that kind of meet your acquisition criteria, and just how that scaled up given your higher propensity to be acquirers.

[RicCampo]

Sure, it's scaled up quite a bit. I mean, we, there's a lot of property out there on the market. But what we're looking for there's, might said tons of properties, but what we're looking for is a real specific product type one where we can add value, one where we can move the rents pretty hard because of either management or some issues that the properties have. And those are harder to find than just sort of run of the mill merchant builder deal in the suburbs, or in urban core. So there is a buoyant aqua market. There are a lot of people that are trying to create value and sell today and there. It was sort of interesting, because there's a lot of year end madness kind of going on, right? Where people are trying to lock in capital gains rates with all the tax changes that have been bantered about and all that. And I think that 2022 is going to be another banner year, we're at record sales for multifamily at this point. And we have had a number of transactions that we really wanted to acquire that we didn't get to the finish line on because we are disciplined on price. And we just didn't see the value proposition to go to the next level on those bids, but we'll get our fair share. It's just, but it's a very competitive environment no question.

[Operator]

The next question comes from Joshua Dennerlein with Bank of America.

[JoshuaDennerlein]

Yes. Hey, everyone. Hope you're all doing well. The operating stat update for October was great. I just wanted to see if there was any color or thoughts on or maybe how we should think about the new lease rate from the date sign just coming off peak levels in 3Q, everything else seemed to be moving out. So just trying to get a sense of where it might be heading in the month ahead.

[KeithOden]

Yes, so in my earlier I think I mentioned that are -- early on the lease rates, some third, fourth quarter. And this is over a long period of time is 2% to 3%, down from third, four. So there is seasonality and historically has been in our portfolio. So the fact that you saw the wiggle like -- it's just really a wiggle down in new lease rates at the end of October is not of any concern. And it just -- it's less seasonality than what we would normally see. And all the other metrics that we look at, in particular turnover rate at 97.3% occupancy, it leads me to believe that we're more strength and probably less seasonality than what we would typically see. So I think it's still it's pretty strong.

[JoshuaDennerlein]

Okay, all right. Do these renewals follow that typical leg down as well? Or do you think that can kind of keep rising from here?

[KeithOden]

Yes. My guess is that I didn't look at it that way. But because new lease is really the market clearing price because a lot of times we don't take renewals all the way up to the market clearing price for a lot of different reasons. But my guess is that it would be similar. Maybe less seasonality slightly on the renewals and new leases.

[Operator]

Unfortunately, we are out of time for questions. So this concludes our question-and-answer session. I'll turn it back over to Ric Campo for any closing remarks.

[Ric Campo]

Well, thank you. I appreciate your time on the call today and we will, I'm sure be talking to a lot of you and NAREIT coming up so look forward to doing that. So take care and thank you. Go Astros.

[Keith Oden, Executive Vice Chairman of the Board]

Go Astros. Take care.

[Ric Campo]

I think if Braves win, if the Braves win we're happy about that too, because they we do have more. We do have a lot of properties in Atlanta and we love our Atlanta teams as well. So thanks. Take care.

[Operator]

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