Camden Property Trust (CPT) Q1 2014 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Camden Property Trust First Quarter 2014 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. And I would now like to turn the conference over to Kim Callahan. Please go ahead.

Good morning, and thank you for joining Camden's First Quarter 2014 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 2014 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 this call. Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, President; and Alex Jessett, Chief Financial Officer. Our call today is scheduled for 1 hour. [Operator Instructions] If we are 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. Since we are one of the last multifamily companies to report, and our numbers are pretty straightforward, we'll keep our prepared remarks to a minimum today. At this time, I'll turn the call over to Ric Campo.

Thanks, Kim. AC/DC reminds us that it's a long way to the top, which is certainly how it felt in 2010 when Keith and I were telling anyone who had listened that 2011, '12 and '13 were going to be the best years -- best 3 years of our net operating income growth in Camden's history. As always, our Camden team delivered on that promise and made us look smart. Camden had the highest net operating income growth in the multifamily sector over the last 3 years, and we're on track to have another great year in 2014. Our geographic and product diversification has served us well. Washington, D.C., which led the recovery markets out of the recession, has slowed, and our growth has come from other markets, including Houston, Atlanta, Charlotte, Austin and Phoenix, with net operating income growth above 6%. Our markets continue to produce outsized job growth, keeping development leasing robust and the threat of oversupply, not an issue. We expect the next several years to continue to produce above long-term trend revenue and net operating growth for Camden. I'd like to turn the call over now to Keith Oden.

Thanks, Rick. We're off to another solid start this year. Although our NOI growth rate has certainly moderated from the extraordinary levels of the last 3 years, from a historical perspective, our growth rate's still very strong. All of the data that we review with our on-site teams continue to indicate that 2014 is going to be a very good year in Camden's markets. For the first quarter, same-store average rents on new leases were up 1.8%, and renewals were up 6.8%, and that compares to 1.5% on new leases and 6.7% on renewals last year. For April, new leases were up 2.7%, renewals up 6.5%, and again, that compares to 3.3% and 6.7% last year. So if you take all that together, it still looks like our initial guidance is going to be where we need to be for the year. Same-store revenue growth was 4.7% for the first quarter of '14, and that was up 0.6% sequentially. 10 of our top -- of our markets had revenue growth of 5.5% or higher, and the top 5 markets this year are the -- for the quarter in revenue growth were Atlanta at 7.3%; Corpus Christi, 7.1%; Charlotte, 6.7%; and Houston and Austin, both at 6.5%. Washington, D.C. was the outlier, but still positive at 0.7% revenue growth. Our other 5 markets were in the 3% to 5% range. Overall, our same-store portfolio averaged 95.6% occupancy for the first quarter. We stood at 95.6% for April, and we currently still stand at 95.6%, which leaves us very well positioned as we head into our peak leasing season. Our occupancy rate for the first quarter was roughly 30 basis points higher than planned, which was the main component of our outperformance in revenues. Our budget contemplated rising occupancy rates into the second and third quarters, so the occupancy-related gain in revenue is not likely to recur in future quarters. Qualified traffic remains strong across all of our markets, and despite our aggressive renewal rate increases, our net turnover rate was 48%, compared to 47% in Q1 of last year. Our residents' financial health continues to improve, and our current average rent as a percentage of household income is 17.2%, and that's down from 17.7% this time last year. 13.7% of our residents moved out to purchase homes in the quarter, and that compares to 12.3% for all of last year, but down from 15.5% in the fourth quarter, as we saw a spike in move-outs to purchase homes. All of this is still well below our long-term average of roughly 18% of residents moving out to purchased homes. Now I'll turn the call over to Alex Jessett, Camden's Chief Financial Officer.

Thanks, Keith. Last night, we reported funds from operations for the first quarter of 2014 of $94.8 million, or $1.05 per diluted share. These results represent a $1.3 million, or $0.01 per share improvement from the $1.04 midpoint of our guidance range, and a 9% increase from the first quarter of 2013. This $0.01 per share positive variance primarily resulted from $600,000 in better-than-expected operating performance from our communities; $350,000 due to the timing of corporate expenses; and a $350,000 gain on the sale of 3 acres of land adjacent to our Paces development in Atlanta. The sale of this outparcel was part of the original development plan for the site. The $600,000 better-than-expected performance from our communities is the result of the following: property revenues from our consolidated communities exceeded our forecast by $1.1 million, due primarily to the combination of slightly higher average rental rates and occupancy, lower bad debt expense and higher fee income. Property expenses from our consolidated communities came in approximately $500,000 worse than our expectations, resulting almost entirely from increased insurance costs at one of our non-same-store communities, which sustained damages during the recent earthquake in Southern California. At our same-store communities, property operating expenses were slightly positive to plan, due to lower repair and maintenance expenses resulting from lower-than-expected unit turnover rates, and the movement of certain expensed exterior projects from the first quarter to the second quarter. In the first quarter 2014, same-store net operating income increased 6.3% as compared to the first quarter of 2013. These results were approximately 110 basis points ahead of plan, with revenues increasing 4.7%, approximately 50 basis points ahead of plan, and same-store operating expenses increasing 2.1%, approximately 20 basis points better than plan. On Page 14 of our supplemental package, we provide a closer look at our same-store expense growth for the quarter. On both the quarter-over-quarter and sequential basis, our largest increases come from property taxes, which make up approximately 30% of our total operating expenses. Last quarter, we told you that we expected property taxes to increase 7% on a year-over-year basis. At this time, we are still comfortable with that estimate. Also on Page 14 of our supplemental package, you'll note that same-store property insurance decreased by 14.6% as compared to the first quarter 2013. This is primarily the result of higher-than-usual same-store insurance expense in the first quarter 2013 relating to prior year hailstorm damages. One last thing on our first quarter results. I'm sure many of you noticed the large sequential increase in Phoenix same-store operating expenses this quarter. As I mentioned last quarter, one of our Phoenix communities received a very favorable property tax refund in the fourth quarter of 2013, driving this unusual comparison. Although we are encouraged by our first quarter results, we are maintaining our full year same-store guidance ranges, with net operating income between 3.25% to 5.25%, driven by revenue growth of 3.5% to 4.5%, and expense growth of 3.25% to 4.25%. As a reminder, our expense growth comparisons become more challenging in the latter part of 2014. Last night, we also affirmed our prior full year 2014 FFO guidance range of $4.10 to $4.30 per share, and provided earnings guidance for the second quarter of 2014. We expect FFO per share for the second quarter to be within the range of $1.02 to $1.06. The midpoint of $1.04 represents a $0.01 decrease from the first quarter of 2014. This $0.01 per share decrease is primarily the result of the following: a $0.015 per share increase in FFO due to growth in property net operating income as a result of an approximate 1% expected sequential increase in same-store NOI, as revenue growth from the combination of rental rate increases and increases in fee income as we move into our peak leasing periods more than offsets our expected increase in property expenses due to the normal seasonal summer increase in utilities and repair and maintenance costs. The NOI contributions from our non-same-store communities will be relatively flat quarter-over-quarter, as the additional NOI contribution from our one community and lease-up and the positive sequential impact from the first quarter earthquake-related insurance expense at our non-same-store California community, is being offset by revenue lost at our lone student housing community in Corpus Christi, Texas. Occupancy declined significantly in May through August of this community. The growth in our property net operating income is being offset by: a $0.01 per share decrease in FFO due to lower net fee and asset management income, resulting from lower levels of third-party and joint venture construction and development activities; a $0.01 per share decrease in FFO due to higher general and administrative expenses resulting from delayed first quarter corporate overhead expenses, and the timing of our annual trust manager grants; and $0.005 decline in FFO as a result of the $350,000 in landfill gains recorded in the first quarter of 2014. Turning to the capital markets. On the last call, I told you that based on our estimated development spend in 2014, we anticipate needing approximately $500 million of new capital during the year. Net disposition activity is anticipated to provide $200 million. For the remaining $300 million needed, we anticipate utilizing the capital markets opportunistically. The composition of our 2014 capital activity depends upon a variety of factors, including capital market conditions at the time we go to market. Although we do not intend to enter the capital markets in the immediate term, we believe that we could currently issue a 10-year unsecured bond at 3.75%, based on a 2.6% Treasury and a spread of 115 basis points; a 7-year unsecured bond at 3.2% based on a 2.2% Treasury and a spread of 100 basis points; and a 5-year unsecured bond at 2.4% based, on a 1.65% Treasury and a spread of 75 basis points. Unsecured 5-year term loan pricing for us would be LIBOR plus 105 basis points. At the end of the first quarter, we had approximately $425 million of availability under our $500 million unsecured line of credit. At this time, we will open the call up to questions.

[Operator Instructions] Our first question comes from Nick Joseph with Citigroup.

I was wondering if you could talk about the decision to reposition and backfill the development pipeline. Why sell the land in Atlanta, and what was attractive about the acquired land in Houston, Maryland?

Well, the land in Atlanta was always part of a development plan, it was an outparcel, and we always planned on selling it. It's a great retail site, so it really enhances the value of the multifamily, when you have serviceable retail in front of it. And so that, that was the reason for that. And then in terms of development pipeline, we added 2 downtown Houston blocks. There's Renaissance going on in downtown Houston, where the city is incenting developers to build downtown, and there's really sort of a urbanization that's been going on across the country for the last 10 years has finally caught up in downtown Houston, and we think it's a very reasonable and profitable way to play in that. And then the project in Maryland, we have been working on for a long time. We -- it's been under contract for a couple of years, and we've been going through the entitlement process. And I think if you think about our development pipeline, with everything that's going on at this point, we need to continue to fill our pipeline for the future. Otherwise, we think it's an important part of our business.

Then in terms of the remaining $300 million in capital markets, where does equity fit into that? And would you issue equity below consensus NAV?

Well, we have always been focused on making sure that we take advantage of capital markets as they manifest. And it doesn't make a lot of sense to us to sell equity below what we think our NAV is, and it makes sense to sell assets instead of equity. But if our average cap rate that we can sell assets at is higher than our -- than the average cap rate on our stock, we issue stock. And so at this point, we are not in that mode, but when the stock price is high and has an average cap rate that is lower than our -- than we can dispose of, then we issue stock. We're not there yet though, obviously.

The next question comes from Andrew Schaffer at Sandler O'Neill.

In your markets, have you seen strong growth as Texas -- Is there a disparity in growth between asset classes? And are you seeing your lower price point assets accelerating and driving growth?

We have not seen a big differential between A and B properties in Texas, and I think it's primarily because the supply -- generally, when you see B is doing better than A is, when there's pressure on the supply side of the A, and then people really don't have an alternative in the B. But we have not seen any pressure on the supply side of the equation in Texas right now, because of the buoyant job growth that is -- that Texas has enjoyed. Ultimately, you might see a differentiation between A and B, and we just haven't seen it yet, and that's why we keep a product diversification in our portfolio, so we have some A and some B. And today, we don't see much differentiation.

And does the same apply for Atlanta?

Yes, across our portfolio, we just don't think we're in a position yet, as Ric talked about, when you get supply pressure at -- coming from new development. If you don't have the job growth to soak that up, then merchant builders tend to get very antsy and aggressive with their pricing. And prices come under pressure, at the A end of the market and not so much of the B end of the market. But across our portfolio, we've not seen that. The only market where you have an imbalance right now is in Washington, D.C. And even in D.C., our -- the makeup of our assets is -- footprint's a little bit different than most of our competitors, and we just haven't seen the differentiation, even in the D.C. market.

Our next question comes from Nick Yulico at UBS.

Ric, I was hoping you could talk about, we're hearing that, it's a little early, but that people are, some in the real estate community, and others, might be pushing for like a limited type of zoning in Houston. Have you heard anything about that? Could you talk about that a little bit?

I have heard a lot about it. The -- yes, there was a big project that was being built in a very high-end neighborhood. And it's called the Ashby High Rise. And there was a big neighborhood revolt, if you will. They sued the developer and this developer sued the city, and so it's been a big problem. The civic homeowner group won a lawsuit that, I think, gave them somewhere around $1.5 million worth of damages, which is very interesting when you think about it, awarding damages for a prospective development that hasn't been built yet, it's fairly unique. So the lawsuit has created a lot of discussion about whether Houston ought to have zoning. The zoning fight in Houston has been going on for 30 years. And it's kind of interesting, because on the one hand, a company like Camden would welcome zoning, because it really helps the people who are entrenched, that have the capital to deal with those kinds of issues and to basically makes development more expensive, and therefore harder to do and harder for entrants to get involved in. So we actually support more planning than less planning. Houston may be at a point where the urbanization and the litigation around people not wanting to have high rise buildings built in their backyard could put pressure on civic leaders to revisit the issue.

Okay, we'll stay tuned on that. It sounds like it could be interesting. One other question I had was you cite the 50 basis point benefit to your same-store revenue growth from redevelopment. I was wondering if you could break that out a little bit more into the contribution in say, Texas or Florida, which are some of your better markets, versus say, Washington D.C. or other markets. I mean, how much are the -- is the redevelopment program this year and last year has been in your more Sunbelt markets?

Yes, we can -- we've not calculated it that way, but the reason for it is, the way we look at it is, the return on the incremental investment at each community. So whether it's in D.C. or whether it's in Charlotte or the Texas markets, we expect to get not only a market rate increase, but an increase over that, that's somewhere in the 10% to 10.5% range. We don't have a single redevelopment underway right now that is less than the 10% threshold. We had some as high as 12%, so that on an average basis over the entire portfolio, we're somewhere around 10.5% return on incremental cost above a market rate increase. So whether -- we could do the weighted average of where it's occurring, but if your question is, is it getting a pickup because you're doing a bunch of repositionings in Houston, that's not true. We're getting the pickup everywhere that we're doing the repositioning.

Yes. Also, the 50 basis points is in net operating income, not in revenue, because when you ramp up a redevelopment, you actually get hurt in revenue, and you get your 50 basis points from expenses until -- and you don't get the pickup until it's after a year at least, plus or minus, because of the downtime that you're experiencing in lease-up. But we can send you off-line where the redevelopment is without any trouble.

The next question comes from Dave Bragg, Green Street Advisors.

Thanks for quantifying for us the impact of the rehab activity on same-store growth. But could you also quantify the impact of the expansion of the same-store pool, looks like it's about a 16% expansion, happens to take down your D.C. exposure, your Houston exposure goes up a little bit. So as it relates to your NOI growth outlook for 2014, what impact does that expansion have?

Dave, when you look at the approximate 7,000 units we added to same-store this year, they are performing about 100 basis points ahead of the prior same-store pool without them in it.

Okay, that's helpful. And then the second question relates to the disposition environment. Can you update us on what you're seeing and what your plans are for the remainder of the year?

Sure. The disposition market is still very robust. With interest rates where they are and the expectation for a reasonable growth above trend in multifamily, we see no shortage of buyers in the market to acquire our dispositions.

Yes. So the other point I would add to that is that we gave a pretty wide range of guidance for dispositions in our joint venture pool, and we did that for a specific reason. We are in the process of conducting some preliminary talks with our large joint venture partner, that if they are successful, the net effect would be that those get put into a longer-term hold. So that the upper end of the guidance would indicate that we don't get something done on a longer-term basis, in which case we'll be active -- we'll be actively putting some of the joint venture communities into the sales bucket in the summer, with an expectation of closing in the third and fourth quarter, which is what our original guidance was always predicated on. And if we do end up with putting those into a longer hold period, which would be our preference, then we would be much closer to the low end of the guidance of $100 million on JVs. But the market itself is still, as Ric mentioned, is still extremely strong, and we would expect that both for the balance sheet assets and to the extent that we do additional dispositions out of the JV, we're going to meet a lot of really solid demand for all those assets. They're all very high-quality assets, and they happen to be located in markets where we're still experiencing the best growth.

The next question comes from Michael Salinsky at RBC Capital Markets.

Just going back to that last question, would there be an interest in expanding the relationship then with your JV partner, to take in additional assets? And then also, the predevelopment costs during the quarter went up a little bit on several predevelopments. Was that a change in design or cost escalation? If you could comment on that as well.

Yes, on the first question, we do have and have had conversations with our JV partner about the possibility of doing something on a larger basis. But that would be predicated around the notion of a strategic transaction. They've indicated an interest in getting additional exposure in multifamily, and they've also indicated a strong interest in doing it with us. And to the extent that there was a strategic transaction that required a significant amount, infusion of capital, something that Camden -- it's something we would entertain for sure, and it's something that they would be very amenable to.

On the development side, the predevelopment pipeline, there were a couple of projects that did go up in cost, one of which is the most significant would be the Camden McGowen Station in Houston. Originally, the project was budgeted to be a 251-unit wood frame development. Now it is a 320-unit, 8-storey concrete development. So the development totally changed, so those numbers are sort of apples and oranges, and that's why the big change there. In terms of the other significant ones, would have been Camden Buckhead and Camden Lincoln Station. And what's going on there is we're just refining the models and refining exactly what we're going to do, and so the unit counts have changed, and the construction cost has been updated with the current environment. Now the good news is, our yields are pretty sticky there because the rents have gone up as well.

Okay, that's helpful. Then just as a follow-up to another previous question, you talked about A versus B. Can you talk about just in the portfolio what you're seeing in some of the urban infill locations versus the suburban portfolio? And then just curious if you could relate that to D.C., what you're kind of seeing inside the Beltway in D.C., versus the majority of our portfolio outside the Beltway there?

Very little difference in the D.C. portfolio. You know, there was a time, up until probably 18 months ago, where the inside, the D.C. proper assets were significantly outperforming the suburban assets, and then that's almost completely gone away over the last 18 months. So very, very little difference in the D.C. portfolio. Interestingly enough, in the markets where we have the strongest job growth, which right now happens to be in Houston, Atlanta and Austin, a lot of that job growth is being pushed, probably not by choice, but just by the lack of availability of units in the more urban setting. Now, yes, there's supply coming and maybe this time next year, we're having a different conversation, but our suburban assets in Houston, Austin, Atlanta and Dallas are just killing it. So I would -- I don't have the exact breakdown, we can provide that to you. But based on the last set of numbers that I saw, we were actually outperforming in the suburban assets in those locations versus the urban.

Yes, the thing I think is that people need to remember in this whole equation is that during the financial crisis, we were -- we as a country were in a position of negative supply, meaning we're tearing down more properties than we were building. So what's going on in these markets that have great job growth is they actually needed supply a lot sooner than they got it. And because of the sort of hole in the market, if you will, that was created as a result of the financial crisis, there's no place to go. Houston had 125,000 people move here last year, 120,000 jobs a year before, 80,000 last year, and they're thinking 70,000 to 80,000 this year. And the challenge is occupancies are 96%, and people are moving in every day and there's no place for them to go. And so it's a great time to be a multifamily company in markets like this, but it really has to do with the sort of remnants of the lack of supply during the financial crisis, and it's manifesting itself by no room for people to move into when they're moving.

And just to follow up on that point, the percentage of residents moving out to buy homes ticked back down pretty significantly in the first quarter, which we kind of expected it to. The fourth quarter was a spike, but so it spiked up to 15.5%, but for all of last year, it was 12.3%, we start out with 13.7% this year. We're still so far below what we think is a sort of a market-clearing set of facts, which would be, in our portfolio, somewhere around 18% or 19%. If we -- if trend is going back down to 13% or 14%, to Ric's point, people are just -- they're not capable, our residents in many cases are not financially capable, of qualifying for a mortgage. So even the people who are here who -- if they're in a multifamily apartment, they would be in a condition right now, from a family status standpoint, to want to move to a home. They're just, in many cases, can't do it. It's just a lot more pressure on multifamily.

[Operator Instructions] And our next question comes from Karin Ford at KeyBanc Capital Markets.

You mentioned a couple of times the job growth in Texas. Do you expect that the recent announcement of the move of headquarters of Toyota to Plano to have an impact on North Dallas in the years ahead?

Absolutely. I mean, that's what it's all about. You got to move people here, they're going to have good jobs. And most of the time, when people come do -- when they move to a new city, they rent an apartment to try to figure out where they're going to be, and then they end up buying a house if they have a kid -- have kids and have that scenario. So the whole job growth market in a lot of these Sunbelt cities are companies that are exiting higher-cost and higher-tax environments for a bit more business-friendly type of environments, which is what the Sunbelt markets tend to be.

Okay. And then second question. I'm sorry if I missed it in your expense discussion. Did you mention if you had any extraordinary expenses due to weather in the quarter?

I did not mention it, but we did not have any.

So Karen, we really tried hard to have a conference call, after looking at some of the other folks, without mentioning the word weather. So we weren't going to mention weather at all, but now that you brought it up, it's lovely here today in Houston. It's about 82 degrees and sunny.

Just out of curiosity, how did you not have an impact in D.C.?

Yes, I mean, so our above plan snow removal in D.C. was about $40,000. So again, is it not worth mentioning? But yes, there was some additional snow removal, but it wasn't meaningful.

The next question comes from Ryan Bennett at Zelman & Associates. Ryan H. Bennett - Zelman & Associates, LLC: Just on your current development pipeline, could you give an update on how you're seeing your lease-up relative to expectations on NoMa and any changes in your rent projections across the development pipeline?

We are on plan for all of our developments at this point, including NoMa. And we're feeling pretty good about our yields and our lease-up velocity, and our rents have not changed. Ryan H. Bennett - Zelman & Associates, LLC: Okay, got it. And then just one point of clarification on McGowen, you talked about this structure being different, and now contributing to the increase in cost and the unit change. What will you expect, I guess, in terms of the higher rents now for that asset?

Well, that -- the area in midtown Houston is, in downtown, is just on fire. And so we're expecting probably $2.30 a square foot in rent. And this product, because it's concrete construction and just to kind of give a little history, we've owned this land for 12 years, and we've been working with the city and the local tax increment reinvestment zone to really develop this 6-acre tract in a major way. And part of the deal that we made on this is we're building a 400-space parking garage underneath our building, and then there's retail that is owned by the TIRZ on the corner. And then we -- south of the property, we have a 3-acre city park that also fronts on our Camden Travis Street product. So we think that this is going to be one of the most desirable locations in Houston. It's also -- the property is adjacent to a -- to the light rail stop, so you can get on the light rail, go downtown or go to the medical center. So we think our rents are going to be much higher than we originally pro forma-ed in the sort of 5-storey or 4-storey sort of wood product, so we're really excited about getting that project started finally.

The next question comes from Stephen Dye at Robert W. Baird. Stephen Dye - Robert W. Baird & Co. Incorporated, Research Division: This is Stephen standing in for Paula today. Most of my questions have been answered so far. I was wondering if you could talk a little bit about Vegas. You saw some acceleration there in same-store. How well is that market closing the gap to its pre-recession peak? Is that on schedule in your opinion?

So Vegas is the 1 market out of our 15 that is still below the previous peak in terms of rent. Although we're clearly off the bottom, we've clawed our way about halfway back to the rental rate loss that we saw during the downturn. So making good progress, but still a fairly long way to go to get back to where we were on peak rents. Like I said, it's the only 1 of the 15 that has not fully recovered. A lot of positive things going on in terms of the metrics that matter to Las Vegas in terms of visitor, visitor days, inbound flights, all of the -- it's all pointing in the right direction, but it was a pretty deep hole. Stephen Dye - Robert W. Baird & Co. Incorporated, Research Division: And I assume still no real hint of supply there at all?

None. I think there was a 400 apartments permitted in the second half of 2013.

The next question comes from Vincent Chao at Deutsche Bank.

Just wanted to go back to the conversation about the home-buying impacts. I know you said that a lot of your tenants are not necessarily financial capable of getting a mortgage. But just curious what percentage of your tenants are sort of in that home-buying demographic, families and that kind of thing?

So from what used to be the home-buying demographic was 25- to 34-year-olds, that represents about 50% of our -- about 45% of our entire demographic. I'm not so sure it makes much sense anymore to even think about age and cohorts that go with that. You just have people making very different decisions. I -- we don't have really great data, but eventually, I suspect it will -- somebody will figure out how to get this data. And when they do, I think what you're going to find is that anecdotally, you hear it all the time, 25- to 34-year-olds are delaying when they get married. They are getting married later, and they're having fewer children and having their children later. Both of those are -- have historically been triggering events for, "I'm going to move from multifamily to single family somewhere." And I think that, that entire demographic has shifted probably 2 to 3 years at a minimum in terms of the overall impact to, "I'm going to buy a home because my family status has changed," as opposed to the period we went through before the crash, where people were buying homes for the wrong reasons, and not necessarily for family status reasons, but for speculation. The speculation's gone, we've probably gone too far in the other direction, with regard to people being averse to home ownership. We know that over some period of time, that'll come back, but we're a long way from even getting back to the average of home ownership, people moving out of our apartments to buy homes.

Our next question comes from Derek Bower, ISI Group.

I just wanted to touch on the overall transaction market. Are you seeing any change in appetite from investors for portfolio deals or single assets? And then maybe just as a follow-up, has there been any change in cap rates and where do you think buyer IRRs are today?

I don't think there's been any change in appetite for portfolios or for individual assets, and the -- so if you're thinking about institutional investors that actually look at IRRs, which there are many of those, but there -- and those IRRs are probably in the 6.5% -- core holders in the 6% to 6.5% range, value-adds probably in the 7% to 7.5% range of IRR, unleveraged IRRs. But I will tell you that there are probably, over half the investors, if you ask them what their IRR hurdle is, they'll go what IRR hurdle are you talking about? And I've asked that to many buyers that have bought Camden properties, and they don't look at IRR hurdles, they're looking at cash on cash returns to equity, they're looking at price per unit, price per square foot. And when you can buy an asset today, and half the buyers that are buying assets today are buying with short-term floating rate debt, because they want the optionality of being able to sell their -- the asset without having to worry about prepayment penalties and the like. And when you think about that, that's LIBOR plus 200 today, so somebody's buying an asset in Japan, 2% and then what, 2.15%, plus or minus, so their cash on cash returns when they buy a 5% or a 5.5% cap rate are pretty substantial, you have this massive positive leverage. And so their cash and cash returns are, most of the time, double digits, so that's why they don't even think about terminal IRRs.

At this time, we show no further questions. I would like to turn the conference back over to Mr. Campo for closing remarks.

We appreciate your time on the call today, and we will speak to you next quarter and at NAREIT. Thanks.

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