Camden Property Trust's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Camden Property Trust (CPT)

Q1 2012 Earnings Call

April 27, 2012 12:00 PM ET

Executives

Kimberly Callahan – VP, IR

Richard Campo – Chairman and CEO

Keith Oden – President and Trust Manager

Dennis Steen – SVP- Finance and CFO

Analysts

Alex Goldfarb – Sandler O’Neill

Dave Bragg – Zelman & Associates

Rich Anderson – BMO Capital Markets

Eric Wolfe – Citigroup

Seth Laughlin – ICI Group

Michael Salinsky – RBC Capital Markets

Paula Poskon – Robert W Baird

Rob LaQuaglia – Wells Fargo

Presentation

Operator

Good afternoon. And welcome to the Camden Property Trust First Quarter 2012 Earnings Release Conference Call. All participants will be in listen only-mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Kim Callahan, Vice President of Investor Relations. Please go ahead.

Kimberly Callahan

Good morning and thank you for joining Camden’s first quarter 2012 earnings conference call. 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.

As a reminder, Camden’s complete first quarter 2012 earnings release is available in the Investor Relations section of our website at camdenliving.com, and it includes reconciliations to non-GAAP financial measures which will be discussed on the call.

Joining me today are Ric Campo, Camden’s Chairman and Chief Executive Officer, Keith Oden, President, and Dennis Steen, Chief Financial Officer. Our call today is scheduled for one hour and as a result we ask that you limit your questions to two with one follow-up and rejoin the queue if you have additional questions. If we’re unable to speak with everyone in the queue today, we’ll 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.

Richard Campo

Good morning. The strength of the multi-family fundamentals of Jackson Brown thinks about stay a little bit longer. We think that nation has lead to a great start to the year for Camden and will stay much longer without having to ask please, please, please.

Same-property revenue increased 6.8% with every market contributing including Las Vegas for the second consecutive quarter. Same-property NOI increased 9.6% over the first quarter of 2011 which was only exceeded by the first quarter of 2006 as the best quarterly NOI growth rate that we’ve had in the last 15 years.

Strong operating fundamentals continued to be driven by broad macro factors, pushing more consumers into rental markets. 60% of the new jobs are going to our customer’s, people of 34 years and younger. Homeownership rate continues to fall, while new home mortgages are harder for consumers to fallback for. New supply is not read to at least 2014. In spite of rising rental costs for our customers, their ability to pay higher rents has been consistently improving.

Annual incomes for our customers have increased from $62,400 in the first quarter of 2011 with $69,200 today nearly an 11% increase. A percentage of rent income has declined from 18.4% in the first quarter of 2011 to 18% today in spite of significant rent increases.

Historically, our customers have paid between 22% and 24% of their incomes for rent, but you will not believe that the rental increase cycle has peaked. We are riding a monster way that has a long way to go before getting to shore. I commend our revenue management teams and our on-site teams for getting as much out of this way that they will give. We continued to focus on external growth and improving the quality of our portfolio through acquisitions, dispositions and our development programs. Our 10 active development programs will deliver 2,800 new apartments for a little over $500 million and are leasing up at a faster rate and at higher rates with no concessions then we expect in our original underwriting.

We anticipate starting seven additional properties this year, which will add another 2,061 apartments for an investment of around $400 million. We plan on acquiring $250 million of properties and disposing of a like amount this year. Our real estate investment group and support groups will be very busy. It’s a great time to be in the apartment business.

I’ll turn the call over to Keith now.

Keith Oden

Thanks, Ric. Compared to our expectations, we are off to a great start in 2012. This is one of those quarters that makes me reluctant to talk much about for fear of jinxing any subsequent quarters. With that in mind, my comments will be brief today.

Virtually every metric that we used to monitor the conditions on the ground at our community is either very good or excellent. For the first quarter, same-store average rents on new leases were up 3.1% and renewals were up 8% or blended increase of 4.9%. More importantly in March, new leases came in with a 6.3% increase and renewals averaged 8.4% for a blended increase of 7.1% for the month of March.

Revenue growth year-over-year was strong across 14 of our 15 operating – reporting markets. We saw double digit revenue increases in 5 of our 15 markets, Houston, Austin, Charlotte, Dallas, and Denver. And double digit NOI growth in 7 of our 15 markets. The most amazing turnaround was here in Houston. In the first quarter of 2011, Houston same-store revenue declined by eight-tenths of a percent and in this quarter revenues were up 12%, approximately a 1,300 basis point improvement over the year.

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