Camden Property Trust (CPT) Q2 2014 Earnings Report, Transcript and Summary

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

Good morning, and thank you for joining Camden's Second 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 second 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 one hour. [Operator Instructions] If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or e-mail after the call concludes. At this time, I'll turn the call over to Ric Campo.

Good morning. Our teams turned in an outstanding quarter again. Based on our first half performance and an improved outlook for the second half of the year, regarding our original guidance for the full year, we expect to, as Michael Jackson sings, just beat it. We have raised our 2014 full year same-store net operating income estimates by 50 basis points from 4.25% to a revised midpoint of 4.75%. The change in guidance is driven by stronger revenue growth in most of our markets. Demand for apartments in our markets continue to be greater than the new supply that's been delivered this year. We expect this to continue for the next several years, keeping the supply boogie man in check. New apartment deliveries are likely to peak late this year or early in 2015. Population growth and job growth in our markets continue to outpace the nation. Jobs are estimated to grow by 2.8% this year in Camden's market compared -- markets compared to 1.7% for the U.S. overall and 2% for the coastal markets. It continues to be a very good time to be in the apartment business. Our development properties continue to lease up at or better than expected, creating value for our shareholders. In the current apartment transaction market, our development pipeline should add $4 per share to our net asset value when completed. I want to give a big shout out to our Camden teams for their continued focus on delivering living excellence to our customers. Keith -- we're going to go ahead and turn the call over to Keith now.

As Ric mentioned, our operating conditions across our portfolio remain quite strong. Our operating teams continue to outperform their markets and our expectations. Our same-store revenue growth for the second quarter was 4.5% and was up 1.6% sequentially. 10 of our markets had 5% or better revenue growth with the top 5 markets, Atlanta at 8.1%; Corpus Christi at 7.5%; Denver, up 7%; Houston, up 5.8%; and Austin, up 5.7%. D.C. continued to be our weakest market, but still managed a 0.9% year-over-year as well sequential revenue growth. Our new leases for the second quarter were up 3.6% and renewals were up 6.2%. For July, new leases were up 3.1% and renewals were up 6.6%. August and September renewal offers went out at roughly 7.5%, and we're renewing leases in the 6.25% range. Our same-store occupancy rate averaged 95.7% for the second quarter, up slightly from 95.6% in the first quarter. Our net turnover rate was 58% in the second quarter, down from 60% for the same period last year, year-to-date. Net turnover rate year-to-date was 53%, the same as last year. Move-outs to purchase new homes remain historically low across our entire portfolio at 14.6% for the quarter, which was slightly up from the first quarter rate of 13.7%, but the same as we had in the second quarter of last year. Over the past few years, we've focused our efforts on improving the quality of our traffic and ensuring that we are buying only the traffic we need to maintain occupancy and drive rents. In addition, our in-house contact center, which we established in 2009, allows us to maximize the conversion rate of the traffic that we do generate. Last year, we began operating our contact center 24/7. Our contact center is staffed by 32 full-time professionals, 85% of whom have a college or advanced degree. Our platform allows our agents to upsell, as well as cross-sell across all Camden communities, which is extremely important because many times we have multiple communities in the same submarket. We can also record and review all calls, whether they're handled by on-site teams or our contact center agents, which is a great tool for ensuring accuracy and improving technique. In the first 7 months of the year, the contact center took 209,000 calls and answered 60,000 e-mails. Through July, the contact center created 82,000 guest cards and converted 52% of those into on-site appointments, all of which were subsequently confirmed by the contact center. They also handled 25,000 emergency maintenance requests. If you ever find yourself longing for a great customer service experience, call any Camden community and inquire about leasing an apartment. If our outstanding on-site team members are busy helping others or if it's after hours, after 2 rings, you'll get our contact center and experience truly outstanding customer service. But be forewarned, there's a 52% chance that you'll end up with an appointment to visit a Camden community. Having Camden team members handle our customers in a professional, consistent manner has been a game-changer in our continuing quest to provide living excellence to our residents. We are continuing our discussions with our joint venture partner regarding a possible restructure of our partnership. Pending the outcome of these discussions, we have delayed marketing the JV assets, which were assumed to be sold in 2014, and as a result, we removed the 2014 joint venture dispositions from our 2014 guidance. At this time, 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 second quarter of 2014 of $94.2 million or $1.05 per diluted share. Included in our results for the quarter were 2 nonrecurring items resulting in a net positive impact of $300,000. First, we sold 4.7 acres of land adjacent to our 904-unit Camden Farmers Market community in Dallas, Texas for 80 -- for $8.3 million, recognizing a gain of $1.4 million. And second, based upon a pending sales contract, we recognized a $1.2 million impairment on 2.4 acres of additional land, also located adjacent to our Camden Farmers Market community. Subsequent to quarter end, we completed the sale of this parcel to a for-sale townhome developer, recognizing no gain or loss from the newly impaired value. Regarding our development pipeline. During the quarter, we completed construction at Camden NoMa, a $101 million community in Washington D.C. This community is currently 75% leased. Average rents are in line with our budget, while leased percentage is approximately 10% ahead of plan. We are currently at or above 95% leased at both of our joint venture development communities, Camden's South Capitol in Washington, D.C. and Camden Waterford Lakes in Orlando. And we recently began leasing at 5 new communities: Camden Flatirons in Denver, Colorado; Camden Lamar Heights and Camden La Frontera in Austin, Texas; Camden Paces in Atlanta, Georgia; and Camden Foothills in Scottsdale, Arizona. And finally, during the second quarter, we acquired 7.6 acres of land in Montgomery County, Maryland for $23.8 million for the future development of approximately 457 apartment homes. We have begun the marketing process for our $300 million of wholly owned dispositions that we are forecasting for the fourth quarter. The pool is made up of 7 communities located in North Carolina, Florida, Georgia and Texas with just under 3,000 total units. The average age of the portfolio is 29 years, and our hold period will be just be over 17 years. Our anticipated disposition yield is in the high 5% range. But due to the capital intensive nature of these older communities, their AFFO disposition yield is anticipated to be approximately 5%. Portfolio operating performance continues to be strong, as same-store revenues increased 4.5% in the second quarter and 4.6% year-to-date. These increases were driven primarily by increased rental rates and improved occupancy. Each of our markets registered positive sequential revenue growth in the second quarter. Occupancy for our same-store portfolio averaged 95.7% for the second quarter of 2014, 40 basis points higher than the second quarter of 2013. This improved occupancy creates additional pricing power as we head into our peak leasing season. Based upon our strong year-to-date operating performance and our expectation of continued outperformance for the remainder of the year, we have revised upwards and tightened our 2014 full year revenue and NOI guidance. We now anticipate full year 2014 same-store revenue growth to be between 4% and 4.6%, expense growth to be between 3.4% and 4% and NOI growth to be between 4.25% and 5.25%. As compared to our prior guidance ranges, our revised revenue midpoint of 4.3% represents a 30 basis point improvement. Our revised expense midpoint of 3.7% represents a 5 basis point improvement and our revised NOI midpoint of 4.75% represents a 50 basis point improvement. As a reminder, our expense growth comparisons become more challenging in the second half of 2014 as compared to the second half of 2013. Expenses for the second half of 2013 only grew at 2% on a year-over-year basis as compared to 4.1% for the first half of 2013. Property operating expenses continue to track in line with expectations. On Page 15 of our supplemental package, we provide a closer look at our same-store expense growth for the quarter and for year-to-date. On both the quarter-over-quarter and sequential basis, our largest increases come from salaries and benefits for on-site employees due to the timing of various employee benefit costs. And our largest decreases come from property insurance due to a successful policy renewal and lower claims under our self-insured retention. Regarding property taxes. The vast majority of our assessments are now in. And although many of our initial taxes assessments were higher than we had originally anticipated, we have been very successful with many of our protests and appeals. Last quarter, we told you that we expected property taxes to increase 7% on a year-over-year basis. At this time, we remain comfortable with that estimate. We have also revised our full year 2014 FFO per share outlook. We now anticipate 2014 FFO per share to be in the range of $4.20 to $4.30 versus our prior range of $4.10 to $4.30, representing a $0.05 per share increase to the midpoint. The primary components of this $0.05 per share increase are as follows: first, $0.025 in same-store outperformance as indicated by our 50 basis point increase to the midpoint of our full year 2014 same-store net operating income guidance. Part of this outperformance has already occurred year-to-date and we anticipate this outperformance to continue throughout the year; second, the $0.01 in net gains from land sales recognized in the first half of 2014; and third, an approximate $0.02 per share increase related to lower-than-anticipated joint venture dispositions. Our revised full year 2014 FFO guidance is based on the following assumptions for the remainder of the year: $300 million in wholly owned dispositions and $100 million in wholly owned acquisitions, both occurring in the fourth quarter, with acquisition yields in the low 5% range and disposition yields in the high 5% range; $133 million in new on-balance sheet development starts in the fourth quarter; and no further 2014 joint venture dispositions. Due to the timing of our discussions with our joint venture partner, we will likely not sell any more communities in 2014. Year-to-date, we have completed $66 million of joint venture dispositions. The midpoint of our original 2014 FFO per share guidance range assumes $450 million in joint venture dispositions during the year. Last night, we also provided earnings guidance for the third quarter of 2014. We expect FFO per share for the third quarter to be within the range of $1.04 to $1.08. The midpoint of $1.06 represents a $0.01 increase from the second quarter of 2014. This $0.01 per share increase is primarily the result of the following: a $0.02 per share increase in FFO due to growth in property net operating income resulting from an approximate 1% expected sequential increase in same-store NOI as revenue growth from the combination of rental rate increases, higher occupancies 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; and positive NOI contribution from our 6 developments and lease-up. These positive variances are being partially offset by a $0.005 decline in FFO as a result of the net $300,000 positive impact from landholdings recorded in the second 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 final composition of our 2014 capital activity depends upon a variety of factors including capital market conditions at the time we go to market. Therefore, we do not intend to give specific items regarding the exact composition or timing of our capital markets activities. In the debt capital markets, we estimate that we could currently issue a 10-year unsecured bond at approximately 3.7%. At the end of the second quarter, we had $180 million outstanding under our line of credit and other short-term borrowings. Our balance sheet remains one of the strongest in REIT world with debt-to-EBITDA in the mid-5x, a total fixed charge expense coverage ratio of almost 5x, approximately 75% of our assets are unencumbered and 86% of our debt is at fixed rates. At this time, we will open the call up to questions.

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

Could you talk about what you're saying in terms of the volume of product on the transaction market today and if there's any large portfolios?

Sure. The volume is pretty robust in most markets, and we have seen a few large portfolios lurking around or moderate-sized portfolios. It is a very robust transaction market, both on the sell and the buy side with a lot of properties getting multiple, multiple bids. So it's very robust.

And then you mentioned supply. I'm wondering if you could walk through kind of your larger markets' relative expected supply in 2015 versus 2014 levels.

Yes, so if -- we'll look at completions in 2015 versus 2014, and I'll just hit some of the larger markets and the highlights that -- so we'll start with Atlanta. In 2014, we project roughly 9,000 completions and that moves to 9,800 in 2015. Dallas moves from 13,000 in -- or excuse me, from 12,800 in '14 to 14,000 in '15. Houston, we show completions in '14 of about 16,000 units and flat again with roughly 16,000 apartments delivered in 2015. D.C. is the other one that I'll give you and then we can give you some of these other ones off-line if you're interested. 2014, we show deliveries of 11,000 apartments and that drops to about 9,400 in 2015. So it's a mixed bag overall, but I think you have to put all of that in the context of the kind of job growth that those markets are seeing. With the exception of Washington, D.C., every one of those other markets has sufficient employment growth, we think, that we'll end up still with net absorption in all those other markets relative to job growth.

Our next question comes from Nick Yulico of UBS.

Could you remind us where the development pipeline yields are sort of churning today as far as initial stabilized yields and how that compares to when you're underwriting developments?

Sure, the developments are -- stabilized yields are trending at 7%, plus or minus. Lower in sort of California, higher in Florida, but on a portfolio average around 7%. And today, properties haven't been -- we've been on the land and we're underwriting today, the yields are definitely coming down because of the spread between construction costs are growing faster than revenue at this point. Now that's a real challenge in the market. I mean, the good news is I think when we talk about starts and slowing down at the end of this year and the beginning of next year, it really is a function of it's much harder to underwrite transactions today than it was given the current sort of peak land prices and construction cost increases.

And then the 7% that you're thinking about today on the pipeline versus 1.5 years ago when you're starting on some of these, I mean, was -- were you also expecting 7%? Or it's gotten better than you expected?

Well, it's interesting. 1.5 years ago, we were making -- we were developing higher than 7%, 7.5% and some of the early projects we developed, for example, in Houston were double-digit returns and some of the Florida properties were 8.5%, 9s. And early on in the cycle, it was just out-of-control good because people -- construction costs hadn't peaked and you had massive rental growth and people -- construction folks were sort of working for food in those days. So clearly, development trends -- development yields have trended down and they continue to trend down. But we sort of think at a stabilized 7% and maybe the next round is perhaps 6.5%. But you're still creating a tremendous amount of value when you look at the spread of -- today acquisitions, if you can get for the core markets and core urban locations, the spread is still pretty attractive from a development perspective, somewhere in the 150 to 200 basis point positive spread between acquisition and development costs -- or development yields.

And then, Ric, just -- had a question on your thinking about possible M&A, buying maybe a larger sort of portfolio if it becomes available in the market in the Sunbelt for the next year. One, I'm wondering if you think your stocks has attracted enough currency to compete for a large portfolio, and again, I'm thinking I'm not a public company but a private portfolio. And two, what is your appetite to get larger, expand in markets that you're in, maybe buy some newer assets in bulk and -- but if you had to do it in a way that maybe might not be FFO or NAV accretive in year 1, but has some longer-term strategic benefits. I mean, how would you think about that? Is it kind of worth it? Or you're better off sitting back and let someone else buy it and maybe it shows that your portfolio is not priced right by the public markets?

Sure. When you look at M&A in any case, I think higher stock prices, if you're going to use your currency to buy -- to fund an acquisition is obviously important when you think about the accretion dilution aspect of trying to have an accretive NAV transaction. So we, obviously, do lots of math on that and we have been opportunistic over the years buying big portfolios. We can do that. I think that when you get down to the size question, so I think we are a very good size. We're sort of a small large-cap and that means that our development activity is very accretive to NAV and you don't have to do billions and billions to move the needle. So on the one hand, we are big enough where we can buy products and supplies and compete effectively with anybody in the space and then -- and our stock is liquid, our bonds are -- spreads are very tight relative to our competitors. In terms of the quality issue, if you think about Camden's portfolio and the capital recycling we have done over the years, we have definitely moved our portfolio more urban. We've moved up our average rent per unit. We have improved the quality of the portfolio through selling older assets and either buying or developing newer assets and that's just a core competency we've been doing forever. I remember looking back at we moved our offices here last year and we had to kind of purge a lot of old papers, and I was looking back at some investor presentations we did in the '90s. We talked about what percentage of our portfolio was built in the '80s and now that was a positive thing, that we had a lot of '80s product. Today, we have very few '80s product. And so the idea of quality is important. So the question of whether we would -- when we look at large transactions, I think it has to be strategic and it has to really improve our -- the quality of our portfolio. And if we -- if the numbers work from a long-term perspective and improves our quality, then I think we'd be positively inclined to do something like that. As far as other markets, for 21 years we have been moving in and out of markets. And we like the markets we're in, we like them because they have the best job growth. And when you look over a long period of time, these markets that have pro business, pro growth, good weather, young population, they have the best job growth in the country. And yes, they do have ability to create supply and that's what actually drives the economy as well. Over the last 10 years, you haven't seen any of those markets get incredibly oversupplied. They get a little oversupplied from time-to-time, which slows the growth, but it's not terrible. And so we like our markets, and so I wouldn't really reach to get out of our markets.

Our next question comes from Alexander Goldfarb of Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Ric, let me just carry that a little bit further. If you look at the efficiencies that EQR has gotten out of the Archstone portfolio, is that change -- does that change your view as far as, if you think about M&A, the synergy potential beyond just simply looking at another P&L merging it in and then saying, we eliminate G&A, et cetera, that maybe there are a lot more synergies than meets the eye just simply by having that clusters of properties?

I'm not sure it's clusters of properties, but I think, clearly, the synergies of G&A and things like that are clearly an area that we can improve on. When you look at our sort of G&A as a percentage of revenue or percentage of assets, we aren't as efficient as EQR, obviously, because of size. But when we look at any transaction, we look at the operational synergies as well. And oftentimes, what we find and when we've done large portfolios, we found that by putting sort of the Camden secret sauce on a property, we get better outcomes from net operating income growth. A good example would be when we bought the Verde portfolio. I mean, it was amazing the same-property NOI growth that we got just by putting in Camden systems. And so I do think that there's -- when you have -- when you look at any kind of transaction, a large transaction where you have the ability to improve operational activities, there -- that you have to look at that aspect of the business, for sure. It's going to be not only G&A, but operational and procedural changes that could, in fact, either have the NOI grow quicker and squeezing out those kind of efficiencies are definitely part of any deal. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. Because it just seems -- I mean, whether it's EQR or Essex, it does seems like there's getting to be a size where you get enough of a concentration and you sort of supercharge the synergies, which is maybe why it's more than, historically, the transactions you've done, maybe future transactions to the extent you're bulking up even more in the market. So it would almost seem like the same thing, that there are synergies beyond what any of us from the outside could model. That's why I'm curious if you think that the -- that it's changed.

Yes, I think there is some validity to that issue, for sure.

Alex, this is Keith. That the -- I think that in -- when we do acquisitions, in particular when we're buying something from the private market as opposed to merger at the public level, the improvements that we get from NOI from implementing the Camden platform, which is from revenue management to our cable program, all throughout the entire suite of things that we do at the property level, that private companies are just not positioned to do. They don't have the scale, they don't have the resources and they don't have the intellectual capacity in their organization to pull the stuff off. So I think that when we buy private assets, the operating synergies are relatively minor compared to the operating performance that we get out from those properties. So when you flip over that thought process and go to what about a public-to-public scenario, yes, there's always going to be G&A synergies in that. But the reality is that the public-to-public operators and there is, what, 11 of us left, if you're going to pencil out the top 15 multifamily operators in the country, every public company would be in the top 15. And so when you move away from that into the private companies, whether it's Verde or whether it's one-off operations that -- on assets that we acquire, the opportunities for just improvement at the site level of how we conduct our business, both customer service and the programs that we add value to and therefore get value from, far outweigh the relatively minor operating synergies that go with the combination. So I think it's -- in a private world, it's actually -- it actually becomes more meaningful for us, I guess, any kind of a public-to-public merger. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. And then the second question is, on condo activity, I mean, obviously, you can see what's happening in Miami or New York, but given that move-outs to homes are still low and land prices are escalating, as you commented on, are you seeing folks increasingly look to target that sort of upper income renter -- single renter to swap them into a condo? Are you seeing increased condo activity to go after that, sort of your renter demographic?

We are not. We track move-outs to home purchases, which also includes for-sale condos and you can see the numbers that we've been reporting for the last 3 or 4 years. We're just still, from a historical standpoint, well below what we really should be if we had a robust recovery in the housing market from a homebuyer perspective so -- and actually, the whole condo phenomenon, Alex, outside of South Florida and New York with very limited stuff in California, it's just -- for-sale condos have not come back to be a meaningful part of the overall picture on the supply, and there are a lot of reasons for that, not the least of which the liability that comes with a condominium regime where it's a virtual certainty that at some time in the first 10 years, which is the statute of limitations, you're going to get sued as the condominium as the developer or if you're ever in the chain of title. It's just a fact of life and it is -- I think it has been a huge deterrent at the margins of people wanting to build condominiums. Now nothing's forever and that mindset may change. But I think, by and large, that's kind of what the state of play in the condominium business is today.

Our next question is from Derek Bower of ISI Group.

With regards to revenue guidance for the year, can you provide what you're assuming in the second half on renewal rates as well as occupancy to achieve the midpoint?

On revenues, we were at 5%, 4.5% for the first -- excuse me, 4.6% for the first half. Our guidance for the year is 4.3%. So that math would imply, what, 3.9%?

4%.

4%.

And just in terms of occupancy, your 95.7% for the quarter. Where is it today, I guess? And I guess, where do you see it ending by the end of the year?

Yes, we're actually a little above 96% right now. The last report was 96.2%, which is historically high for us, although that is a last week -- that's a last week of the month trend, which is always -- throughout the course of a month, there's about a 30 to 40 basis point swing between first week and last week. So my guess is by this time when we report next week, we'll be back down below 96% but still trending in the high 95%. So that's clearly about what our original guidance was, and it's clearly above what our expectations were. My guess is that probably -- that occupancy rate probably moderates in Q3 and Q4, but I wouldn't be surprised from here to the end the year at something in the high 95s.

Great. And then could you also maybe provide some color on the various options that might be explored today with Texas Teachers? I imagine there are some assets in that fund that you guys would like to own outright.

Well, actually, there's probably a lot of them we would like to own outright, but that's -- with regard to the status of our conversations, we're -- the original conversations were around the notion of just lengthening the partnership because we both recognize that these assets have -- that we've created a ton of value for the teachers of Texas. But more importantly, from a cash-on-cash return standpoint to the equity, we're at about an 11% cash-on-cash return and so that's a great state of affairs for us as well as Texas Teachers. And where we go from here is certainly the -- that's what we're discussing and we -- and when we get something more concrete, we'll be able to share that with you.

Our next question is from Rich Anderson of Mizuho.

Two questions on your 2 top markets, first, on D.C. At 16.5% of the portfolio, how do you feel about that? Are you willing to let it ride now that we're kind of maybe beyond the worst of it in that market? Or do you see that percentage coming down naturally over time?

I love D.C. That's why we have a big concentration there. If you look at the mid-Atlantic in the D.C. region, it's one of the top -- the counties around D.C., I think, 2 or 3 counties around there have the highest net worth, the highest percentage of people with both graduate degrees and undergraduate degrees. I mean, it's -- the Mid-Atlantic is an awesome market long term. Obviously, the government has had some issues and a market has -- every market goes through its up and downs. But long term, I think it's an awesome market. The percentage that we own there probably comes down a little naturally just because we're developing in other cities and we're selling outfits in other cities. The interesting thing about D.C. is that there is really never sort of a great exit point in terms of pricing. So for example, asset prices really haven't changed much there in the sense that since people have been talking poorly about D.C. and it's definitely one of the lowest growth or negative growth markets out there for some companies, the value of the real estate continues to go up, not down and there aren't any bargains to go buy in D.C. or anything like that, which is kind of interesting. But for the -- I think investors generally think D.C. is a great long-term market.

Your story has always been like no market 10% or greater of NOI, though. I mean. . .

Yes, but you look at D.C. and you have to bisect them -- you have to slice the market up out there.

Okay. And then second, on Houston, I'm just curious what you think about the Super Bowl coming there in 2017. Do you think that has any kind of economic benefit to you, the business? Anything in particular on Houston on that issue, specifically? Or is it just too much of a onetime event?

Oh, I think the Super Bowl is an indication of just the robust economy. And if you think about the Final Four is there in '16, the Super Bowl is in '17, the Super Bowl actually does create a lot of momentum and it's sort of this deadline for people, so for -- and especially for governments. When you start thinking about improving roads, improving mobility, improving sort of beautification of the city, getting projects jump-started so that they do get, in fact, finished before the Sup Bowl, there's a lot of inertia around that. And I can tell you that having been the Chairman of the 2017 Host Committee and Keith being the Vice Chairman of the Host Committee, we see that every day when I talk to people, to the mayor and to the county governments, they're all fast-forwarding projects which obviously help the economy to try to get things done by '17. I think the other thing that's sort of driving Houston when people think about Houston besides the Super Bowl is just that it's really coming into its own. I mean, when you look at some of the investor groups that are buying there now, AFIRE, the Association of Foreign Real Estate Investors (sic) [ Association of Foreign Investors in Real Estate ], that control $2.5 trillion of capital that gets invested all over the world has Houston as the #4 city to invest in, in the world in 2014. And it's all related to the sort of the secular change in energy with frac-ing and Houston is the center of the universe for that business. And when you look at the cities above Houston that foreign investors are looking at, it'd be New York, London, San Francisco and Houston and that's the order. Last year, for example, in '13, Houston was #5 on that list. Prior to '13, Houston was maybe in the top 15, but below 10. So I think there's just this big change going on because of the fundamental changes that are going on in Texas with our new energy -- with the new sort of energy dynamic.

And just as where the rubber meets the road from a REIT perspective, I mean, how much time do you think it'll take up, the whole Super Bowl thing, with you guys relative to the REIT?

Well, the good news is, is that we have full-time staff that does it. So it's like any other civic job that I've done over the years, which is I'm really good at delegating. So the Chairman makes sure that you set the direction, you set of the budgets, you hire the right people and then you get out of the way and let them execute. So the Super Bowl is not going to take any time away from Keith and my running Camden that way we've always run Camden because I've always been involved in -- for the last 15 or 20 years, we've been involved in Super Bowl-like things in Houston and it's done okay.

Our next question comes from Dave Bragg of Green Street Advisors.

Going back to your conversations with your JV partners, what are the range of possibilities as you see them now in terms of potential size?

In terms of potential size?

How large would they like to be -- how much larger would they like to be in multifamily? And -- with you and what's your interest in...

Yes, so they have a -- they do have an interest in increasing their allocation to real estate. You -- they get to play in all real estate sectors. They have a pretty decent bet in the multifamily sector at this point. They have indicated an interest in the conversations that we've had with them about increasing their exposure to multifamily and specifically with Camden. So they're a $110 billion, $115 billion pension fund and they have -- over the years, they've been increasing their allocation to real estate. So I think that, without putting a number on it, they do have an appetite for growth, both in real estate generally, in multifamily in particular. And like I say, as far as range of possibilities of outcomes, we're not far enough along in the process to even put a fence around those, but I would expect that we will get there in the next quarter.

Okay, that's helpful. At the beginning of the year, you suggested that revenue-enhancing repositions could contribute 50 basis points to NOI growth. Now with the upward revision to your expectations, what contribution are you expecting from that activity?

David, it's still in the range of 50 basis points. I mean, the upward guidance -- we independently look at what we're doing. The budgets that we have, the projected returns that we're getting on our pool of redevelopment assets and those are really unchanged on the year. We're still in the 11% range as far as return on incremental costs.

And the last question is on Las Vegas, which appears to have finally outperformed the broader portfolio. Can you just talk about that market?

Well, when we started out the year, I had Las Vegas as a C+ and improving. I think as I look back on it, maybe the C+ might have been a little bit light. It's clear that things are getting better in Las Vegas. All of the relevant metrics that drive the business out there, including getting back to job growth but also on the gaming side of things, have improved pretty materially. And you sort of -- things kind of run their course. All the folks that were going to leave have left. There's no new construction going on. Any incremental job growth kind of flows through to the bottom line and it's finally showing up in our results. So yes, it was good to see Las Vegas outperform the midpoint of the portfolio. And I think it's -- there's a pretty decent shot that that's going to continue into Q3 and Q4. So I think we sort of indicated that we believe that the bottom was some time in the third quarter or second, third quarter last year. I think looking back in the rearview mirror, that still feels about right.

Our next question comes from Michael Salinsky of RBC Capital Markets.

Ric, you talked about moving the portfolio more urban over the last several years there. Just as you look at the portfolio today, can you give us just an update -- there's been a lot made of urban versus suburban neighbors. Can you talk about what you're seeing across your portfolio today and kind of what you expect over the next 18 months?

Sure. The urban side of the equation is... [Technical Difficulty]

Mike, go ahead and restart -- your question was regarding urban and suburban and the direction that we're heading?

Yes, just the noticeable trends that you're seeing in the portfolio today and then kind of what you expect to happen out over the next, call it, 12 to 18 months.

Yes, so as you look at our portfolio and our development pipeline and without looking at assets and you can't look at accounts, you have to look at dollars invested, well, it's obviously within our $1 billion development pipeline, easily 3/4 of that would qualify as being "urban projects" and a lot of it has to do with just the scale of those communities. Our 2 assets in California that we have under construction, between the 2 of those, it's $200-plus million in both clearly urban mid-rise and high-rise products. So on a dollar -- from a dollar cost standpoint, it's in the 70% to 75% range of our current activity. That happens to be, right now, we believe, that there is a long-term trend towards more urbanization and people moving back into the urban core. In Houston right now, we have 2 relatively large communities in our development pipeline, both urban. But again, there's -- that's where people want to be and they're willing to pay the rent premium that goes -- that's associated with that. So I think that trend will continue across -- because of the nature of the markets that we operate in. But you're also still going to have the sweet spot for us, our transactions in Orlando and Tampa that are just traditional suburban closer in, but suburban, 3-story walk-up, surface-park communities. So the range of our product will be from the 3-story walk-up surface park. We'll continue to do the 4-story type wrap product that we've done very successfully. But in these larger cities in the urban core, you're really driven to, because of the premium on land cost, to go more vertical and that's -- we're going to continue to do that. And as you do that, the dollar costs associated with those investments goes up pretty significantly. So I mean, over time, yes, given the $1 billion that we have in play, once that's stabilized, that's going to be a meaningful impact on the overall mix of our assets. But it doesn't mean that we're less enamored with the returns that we're getting on our suburban products, which, by the way, are, in most cases, significantly higher as a going-in yield than what we're getting on our urban product.

It's all about balance and being both geographically diverse and product diverse.

Across our portfolio today, though, are you seeing those urban -- is that urban portfolio still outperforming the suburban? Or have you seen a more improvement in the suburban portfolios relative to the urban as you're seeing supply come online?

So on the year-to-date numbers, when we kind of look at urban-suburban, the suburban portfolio actually has an outperformance of 2 -- 20 basis points to the urban. So I mean, it's surrounding areas. They're both performing extremely well. One of the reasons for that is that as the new supply comes on, it will -- going -- as we go forward, it will more and more be concentrated in the urban core and there's just been less competition in the suburban market. So we -- in some cases, we've been the only game in town in suburban Florida, suburban Tampa. The 3 jobs that we have in Phoenix right now, one of those would qualify as urban, the other 2 would clearly be suburban. But there's virtually no competition for those jobs. And on a yield basis, because the costs are much less than the urban product, on a pro forma basis, we've got higher yields going in on those jobs.

Okay. And then just in terms of redevelopment, obviously you've got the 3-year plan kind of working through right now. As you think about the completion of that plan, is there a thought to roll out another plan across the portfolio and you see enough opportunity across the portfolio?

We do have another group of assets that we've identified as kind of in the -- would be the Phase 4 of that program. But on a -- as a matter of scale, the first 3 phases were added up to about $220 million. The third -- the fourth group is probably closer to $30 million to $40 million. So in terms of scale, most of what we believe is appropriate for redevelopment will have been done -- 90% of it will have been done when we finish the first 3-year plan.

Our next question comes from Vincent Chao of Deutsche Bank.

I just wanted to go back to some of the numbers that you had provided for the 2014-2015 completions. It looks like about 48,800 units in the 4 markets you talked about in '14. Just curious, how many of those have already delivered and how many are pending in '14? And then we've heard from a couple different folks that it seems like some of the '14 completions slipped into '15. I'm just curious if that's also what you're seeing.

Yes, so I think that the -- in terms of what's been delivered to date versus what's pending, I don't have the details of that. We can get you that. But I will tell you that the anecdotal evidence would suggest that if someone, at the beginning of the year, said that they were going to have a delivery in Austin or Houston or even South Florida, if they believe that they were going to have a delivery in the November-December time frame, it's probably not going to happen till 2015. The reality is that because of the shortage of workers and skilled laborers in these markets, it's -- you've got fewer people than you would like to have on your jobs, it's a catfight to get subcontractors to fully staff at your jobs. And the result of that is it's just taking longer. We've had good experience on -- where we've been able to move up the stabilization dates, it's because our lease-ups are going faster, not because the construction is going faster. It is a -- it's a -- it's hand-to-hand combat. And if it's hand-to-hand combat for a company like Camden that's been doing this for 30 years and has an incredibly stellar reputation with all of our subcontractors, I can only imagine what it's like if somebody kind of doing a one-off or 2-off deal that doesn't have the kind of capacity and the track record that we have.

Okay. I mean, do you think that some of those delays that are happening here is benefiting you in terms of the outlook versus the original? And how much of it is do you think is coming from maybe stronger job growth than you had previously anticipated?

I think -- I really think that it's job growth and not delays. I mean, there's plenty of supply that's coming to the market in all of our markets. But when you look at the kind of job growth that we're getting, especially when you see most of our portfolio has better than 5:1 job-to-completion ratios, that's what's really driving the market. It's not delays in construction and all of a sudden you're going to have a bunch of product come in and hurt the market. It's jobs that are helping. Also when you have to -- when you think about the nature of the jobs, the 34 and younger cohort, the millennials, those folks are getting more than half the jobs. They've got more than half the jobs in the last 8.5 million jobs that we've -- that have been created. And so the demographics are really interesting because when you put the jobs on and then you start thinking about who's getting the jobs and thinking about what that demographic does, the millennials are late to marry, late to have kids, not buying houses. Even the housing market, for the starter homes, continues to be very difficult where the market is actually reasonable and the housing market is to move upmarket in the very high end of the market. That first-time buyer has a hard time getting a loan and a lot of them don't want to get a loan. A lot of our Sunbelt markets like Houston, Dallas and others are -- just gets to that urbanization, sort of the urban product question, they're becoming more urbanized. Just to give you a sense, we did a study on the sort of different age groups and where they live and where they work in Houston. And people who work downtown, for example, in the urban core in the Greenway kind of inside the loop area, if you look at millennials, 68% of millennials live within 9 miles of their work in the downtown area. The same number of 50- to 59-year olds, they live within 20 -- say, over 30 miles from their workplace. So what's happening is the older people are -- and then when you get actually 60, they start coming back into the city. It's just sort of interesting. So the demographics are pushing for this, the higher absorption rates and the higher demand that we've been seeing pushed by the jobs, but also by the demographics that are very, very strong for this business.

This concludes our question-and-answer session. I would like to turn the conference back over to Ric Campo for any closing remarks.

We appreciate you being on the call today, and I'm sure we'll see a lot of you when the September, after Labor Day, conference season starts. So thank you very much, and we'll talk to you later.

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