Good morning, and welcome to the Camden Property Trust Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Kim Callahan, Senior Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining Camden's Fourth Quarter 2018 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. 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 fourth quarter 2018 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. Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, President; and Alex Jessett, Chief Financial Officer. We will be brief in our prepared remarks and try to complete the call within 1 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 email after the call concludes. At this time, I'll turn the call over to Ric Campo.

Good morning. As our holding music artist Queen suggests, our Camden team members surely are the champions of the world -- well, maybe not the world but at least, their markets, by outperforming their competition and driving customer sentiment scores to new highs. I'd like to give my entire Camden team a shout out for a great 2018. They, in a major way, supported Camden's purpose as a company, which is to improve the lives of our employees, our customers and our shareholders one experience at a time. 2018 was another solid year for Camden. We ended the year above our original guidance that we gave at the beginning of the year. Revenues were slightly better than we projected, and we outperformed our expense guidance, primarily as a result of our attack-the-run-rate initiative along with lower health care costs and an adept property management -- property tax team that really worked hard in 2018. 2019 should be a lot like 2018, with slightly increasing revenue growth and increasing operating expenses a bit, ultimately keeping our net operating income growth at similar levels to 2018. We begin the year with the strongest balance sheet in the multifamily sector. Our development pipeline continues to provide increasing FFO and NAV contribution. New supply of apartments in our markets is relatively the same as 2018, while demand continues to be strong enough to absorb that supply while continuing to allow us to produce same-store revenue growth. We'll continue to pursue our development acquisition opportunities in a very competitive environment. We appreciate your continued support, and I'll now turn the call over to Keith Oden to give us an update on markets.

Thanks, Ric. Consistent with prior years, I'm going to use my time on today's call to review all the market conditions we expect to encounter in Camden's markets during 2019. I'll address the markets in the order of best to worst by assigning a letter grade to each one as well as our view on whether we believe that market is likely to be improving, stable or declining in the year ahead. Following the market overview, I'll provide additional details on our fourth quarter operations and our 2019 same property guidance. We anticipate some property revenue growth -- same property revenue growth will be between 2% and 5% this year in each of our markets, with a weighted average growth rate of 3.3% at the midpoint of our guidance range, and all of our markets received a grade of B- or higher this year. As Ric said, 2019 should look very similar to 2018 for Camden, and that's reflected in how little movement we have in comparing our 2018 revenue growth to our projected 2019 revenue growth among our 13 markets. Only 2 markets moved more than 2 spots in the rankings this year. Orlando moved from #1 to #5 and Southern California moved from #6 to #3. And no market moved from top half to bottom half or vice versa. Further, 10 of our 13 markets are rated as stable for 2019. All this is pretty unusual for Camden's portfolio. So here we go. Our top ranking for 2019 goes to Denver, which we rate an A with a stable outlook. Our Denver portfolio has been a strong performer, averaging 5% annual same property revenue growth over the last 3 years. Approximately 40,000 new jobs are expected during 2019, and supply remains steady with 13,000 new units scheduled for…

Thanks, Keith. Before I move on to our financial results and guidance, a brief update on our recent real estate and financing activities. During the fourth quarter, we reached stabilization at Camden NoMa Phase 2 in Washington, D.C. This $109 million development is expected to deliver a stabilized yield of approximately 8.25%, creating over $80 million of value for our shareholders. Also during the quarter, we completed construction at Camden Washingtonian, an $87 million development in Gaithersburg, Maryland; and Camden McGowen Station, a $91 million development in Houston. In 2018, we completed $300 million of acquisitions and started $280 million of new development, with no community dispositions for $580 million of net real estate transactions. Turning to our fourth quarter financing activities. On October 1, we repaid at par $380 million of secured debt, consisting of $175 million of 2.86% floating rate debt and $205 million of 5.77% fixed rate debt for a blended average interest rate of approximately 4.4%. The repayment of this secured debt unencumbered 17 communities valued at approximately $1.1 billion. We repaid the secured debt using proceeds from a $400 million 10-year unsecured bond offering, which we completed on October 4. The effective interest rate on this new unsecured issuance is approximately 3.74% after giving effect to the settlement of in-place interest rate swaps and deducting underwriter discounts and other estimated expenses of the offering. After taking into effect these transactions, at year-end, 79% of our debt was unsecured and 89% of our assets were unencumbered. Our balance sheet is strong with net debt-to-EBITDA at 4.1x and a total fixed charge coverage ratio of 5.5x. We ended the quarter with no balances outstanding on our $645 million of unsecured lines of credit. Our current line of credit balance after the January 2019 payment of our fourth…

[Operator Instructions]. Our first question comes from Trent Trujillo of Scotiabank.

So guidance calls for you to be a net acquirer, which makes sense with your low leverage. But can you talk about the deal flow that you've seen and maybe talk about the pricing and buyer pool competition for the assets and how you expect to find attractive deals?

Sure. So we just got back from National Multi Housing Council meeting in San Diego. They had a record attendance of, I believe, over 7,000 people and which sort of indicates the sort of popularity of multifamily with investors today. So it remains a very competitive environment, there's no question about that. And I think so what's happening sort of right now is that there's sort of a standoff between buyers and sellers. And buyers understand that it's -- that you have sort of a kind of a normal revenue growth as opposed to white-hot revenue growth. So you have this kind of spread between bid and ask at this point. And so there really hasn't been a lot of transactions between sort of the last part -- last half -- or last month or two in '18. And then clearly, there hasn't been enough data points to really understand what's going on out there now. What we think is going happen, though, is that there will be a movement sort of towards the center of that bid-ask spread gap today because sellers need to sell and buyers will need to buy. I think it's going to continue to be competitive. If you look at the last 4 -- 3 or 4 properties that we bought, we're looking for below replacement cost transactions that are in the sort of mid-4s to low 4s cap rate that -- where we believe we can -- through improved operations and sort of Camden-izing the property, we can move that cap rate up pretty quickly over a couple of years to 5, 5 plus or minus. So we think there will be opportunities. The guidance obviously of $200 million to $400 million is today pretty much everything. It's $100 million or more. So you end up with -- so we're talking about 3 or 4 transactions perhaps. And we think that, given the backdrop for sellers coming towards the buyers, are actually going to happen. The key for us, though, is finding that kind of needle in the haystack where we think it's very undermanaged and where we can come in and move the NOI up, not by hoping the market goes up, but by knowing that we can operate the properties better.

Great, that's very helpful. And just a follow-up, can you perhaps talk about the concessionary environment in some of your largest markets that are facing high supply? I mean, we've looked at Atlanta and Dallas, and you touched on those markets in your prepared remarks. But are you seeing supply pressures easing there and pricing power coming back in 2019? But basically, what's the concessionary environment?

So in the development business, the concessionary environment varies depending on submarket and market. So you can't just say, okay, it's 2 months free or 1 month free or three months free. So it really definitely varies by submarkets and developers who are leasing projects up. When you have a vacant building that just opens, sort of free rent doesn't really matter to them because they're just trying to get to a stabilized occupancy. And so the more aggressive the market, you have three months free, and generally you don't go over that. And the more moderate markets are 1 to 2. Just for an example, in Houston, prior to sort of the Harvey event 1.5 years ago-ish, there was 3 months free in downtown. Today, it's more like 2 to 1.5, and yet the market is starting to sort of turnover in a sense. If you have a 350-unit apartment and you're at 75%, 80% occupied and it's taking you a year or so to get there, you now start having renewals and the question will be whether those concessions are having to be given to the renewals. But generally speaking, markets like that are very, very competitive in Dallas, are 2 to 3 months free, which should be in the sort of the uptown area. Charlotte was pretty concessionary. But I think we've seen some of the concessions sort of moderate as properties are leasing up. But the good news is, for us, is that when you have a 95% occupied property that is stabilized and you think about the number of leases you need to capture in order to keep that stabilized 95%, it's pretty small actually. So the fact that a new property is giving significant concessions doesn't mean that existing properties have to. And so that sort of supports our same-store revenue growth because we have a very stabilized portfolio and you just don't have to give those kinds of concessions to capture market share in the stabilized properties. So on the one hand, you have concessions in the development side of the equation; and on the other hand, you don't have concessions in the operating portfolio. What you have is just the moderate ability to increase your revenues 2% to 3% or 4% depending on the market.

Our next question comes from Nick Joseph of Citi.

On Houston, does the 70,000 job growth assumption contemplate oil prices at their current level? Do you need to see job growth in the energy sector? Or do you think you can get enough job growth in medical and petrochemical sectors that will drive enough demand?

Yes. So the 70,000 job growth in Houston does not contemplate any large contribution from the oil companies. There -- still, the recency effect is pretty strong among the Houston oil companies from 3 years ago when they were still kind of downsizing and laying people off. So when you come from that as your backdrop, there's a great deal of reluctance to add staff even in an environment where volumes are increasing, which they clearly are. So $55 -- $54 to $55 a barrel is probably a steady-state in terms of total activity. Activity has increased pretty significantly in the field from where it was 2 years ago. But most of what goes on here is the back office and support operations, and the oil companies are still pretty reluctant to be adding staff. But there'll come a point where they've stretched to the limit and they will continue to -- start to add jobs, but that's not a 2019 event. The 70,000 jobs are primarily in areas -- in the medical center and just distributed across Harris County. So I think the 70,000 is probably very doable for 2019. The most important part of the Houston picture is the 7,000 completions that we're going to get in 2019. That's almost a 10:1 ratio, and that's very healthy for where we are in Houston right now.

And then on the Phoenix and San Diego future development projects, what's driving the estimated cost increases? Is it a change in scope or market construction cost pressures?

No, it's both. But the San Diego project, we have reconfigured it and made it more efficient and trying to maximize the views of the -- that we have from that elevated site. And so generally, we had to have scope changes in both of those projects, but also cost continues to be an issue in every market.

Our next question comes from John Kim of BMO Capital Markets.

Keith, on your market outlook for the year, I think that's based primarily on same-store revenue. But if you were to look at it on same-store NOI, would there be any markets that differ in your outlook?

Well, you get swings in the NOI primarily based on things like property tax, kind of one-offs like the situation that Alex described that we're going to have in Charlotte this year where you have an 8-year revaluation event going on. So when I look at these results, I tend to focus on -- primarily on same-store revenue growth year-over-year but also look back over a 3-year trend. And then the second piece of that, that's really critical is looking at the jobs-to-completions ratio market-by-market because it's -- even though if you look at it in total across Camden's platform, for 2019, we're going to get -- on estimates, we're going to -- we should get about 135,000 jobs, and that is -- or excuse me, 642,000 jobs. We're going to get about 135,000 new apartments. And that's a 4.7x ratio. We've always talked about 5 ratio, 5.0 being equilibrium. And that's interesting. But if you look -- you've got to dig into that data because at the low end of that ratio range, you have a Denver that's a 3.0 and then you have D.C. at 3.1. And at the high end of that range, you have Houston at over 10 and you've got Atlanta at a 7. So those are the biggest indicators to me about the directionality of the market. But again, you get back to the -- our overall portfolio rankings, we've got 13 -- 10 of our 13 markets rated as stable. So there's not a lot of swings that we're anticipating in the portfolio.

And then also, external growth is a component of your FFO guidance that might be a little bit unique in the sector. Earlier today, your stock hit a 5-year high. If you hit your acquisition target for the year, what is your appetite to raise common equity again versus utilizing perhaps your ATM or dispositions or maybe raising your leverage level?

Well, clearly, we have the luxury of having the best balance sheet in the sector. So we have capacity on the debt site. And when we look at raising capital via either debt or common stock or dispositions or other mechanisms kind of in between, it's always a balance about keeping a strong balance sheet, but understanding that if you're growing externally, you have to have capital. And we just sort of look at each of those capital levers, if you will, and decide what is the most appropriate and efficient at the time. So we're excited about our stock hitting an all-time high. But on the other hand, debt levels are low and interest rates are low as well. And so it's just a balance between trying to figure out what the best fit is for the capital.

But was there anything with the last raise that you did as far as not deploying the capital as quickly as you anticipated that you would think of it differently this time around?

I think you take all facts into consideration whenever you're thinking about capital transactions and try to balance them together. We did -- when we did the equity in 2017, we did think that 2018 was going to be where the buyers are going to have more leverage than the sellers and that there would be more opportunity, and there just wasn't. I mean, we had '18's sales for multifamily increased over what '17 was. The good news for us, though, even though we only -- we didn't hit our acquisition guidance last year, we did increase development. So on the one hand, you can't deploy all your capital when you start a development because it takes 18 to 24 months to actually get that capital out. So the way we looked at that equity raise was we could do acquisitions and/or development. And when you add the acquisitions and development, we actually exceeded our development projections but underachieved our acquisitions. So even though people think that we didn't deploy, we actually did. It just takes time to deploy the development.

Our next question comes from Austin Wurschmidt of KeyBanc Capital Markets.

Just curious if the peak deliveries in Houston from 2017 have been absorbed at this point. And then could you just provide what your supply outlook for Houston is for 2020?

Yes. The deliveries in '17, I think the ones that started at the beginning of the year have probably all been absorbed. Those that started at the -- delivered at the end of '17 are probably still in the process, depends on how many -- what the size of the project was. The deliveries in -- so I would say, substantially, the '17 stuff has been absorbed. But the -- we had huge deliveries in 2018 that are still an overhang on the market. And the markets -- the submarkets that got most of the activity, which were downtown, midtown and the uptown area -- in Galleria, they still have, since that was -- those were the locations that attracted the most capital and most new deals, they're still in the -- fighting -- plugging it out, hand-to-hand combat. And as Ric mentioned earlier, we're still in the 1.5 to 2-month concession range in those submarkets. So if you -- when you move beyond those 3 areas that got most of the new supply in 2018, it's a totally different picture. And our footprint in Houston has some exposure in those impacted markets, but we have a lot of exposure that's not impacted by new supply. And that's why we've been able to produce the results that we did last year in Houston and why it forms the basis for our optimism for 2019. In terms of deliveries for -- so in Houston for -- I think we mentioned earlier, we've got about 7,000 apartments this year with -- and has deliveries in 2020 up to 13,000. So on a -- from a supply standpoint, that's not -- still not a terribly troubling number for Houston as long as we get what we normally get in terms of job growth. So the progression would be 7,000 in '19 and, call it, 13,000 in 2020.

And then you guys have referenced a few times having the best balance sheet in the sector. I guess, what's your appetite to increase leverage from current levels?

We have talked about keeping our debt-to-EBITDA in the 4x to 5x range. And right now we're at the low end of that range.

Where do you expect to end the year in '19?

At year-end, we'll be somewhere around 4.4x.

Our next question comes from Shirley Wu of Bank of America Merrill Lynch.

So currently, you're guiding to 2.8% to 3.8% in terms of revenue growth. What do you think it will take in order to get to the high or low end of that range?

A lot better than expected job growth or a lot worse than expected job growth, I think that's the single biggest variable when we look out on -- when we look out at performance, the supply is pretty easy to predict because it's -- for whatever that's coming in 2019 is known and knowable. The wildcard is jobs. You've got to like the trend this morning at over 300,000 new jobs. I think our Wheaton's numbers for projected job growth for national 2019 is right at 1.9 million. And obviously, you're not going to get a bunch of -- you may not get a bunch of 300s, but it doesn't take -- so we've got 300,000 of the 1.9 million in our estimates. So I like our odds of getting over the 1.9 million total that we're using in our forecast.

Got it. And on development, a lot of your competitors have noted that there have been delays due to tight labor markets. But I noticed that your Camden North End I is actually delivering a quarter early. What do you think you're doing differently? And even going forward, do you anticipate labor to affect your future deliveries?

Labor is definitely an issue, and that's what's caused most delays in construction. And I think in Camden -- in the case of Camden North End, we just have a great team out there that executed amazingly. And all of our development teams, I applaud because they're definitely doing what they can to beat their competitors to market and to be very efficient. I think -- if you think about the delays, we've been talking about delays for the last 3 years. And so one of the things that I think we did as a team is try to really anticipate the delays in our construction budgets. And so you have a little kind of erring on the side, when you think of your schedule, okay, we know we're going to have issues, let's kind of stretch it out. So when the team executes amazingly well, you end up bringing it in faster than you thought and at a lower cost than you thought. Because if you're bringing it faster, you're general conditions and your other costs that are associated with time go down. And so we were very fortunate in Arizona, and we're trying to achieve that in other projects, too.

Your next question comes from Drew Babin of Baird.

I wanted to talk about D.C. a little bit. Obviously, your price point is more on kind of the value-oriented side of the spectrum there. And I guess, how do you feel about where you're positioned there relative to where new supply is pricing, where you are geographically around D.C. Metro? And also, kind of are you hearing anything about -- from your properties about waived late fees or anything like that with regard to the government shutdown?

Yes. So for 2019, we've got D.C. at a B stable, which is exactly what we had it rated last year -- for 2018. That still feels about right. 40,000 new jobs in the D.C. Metro area, roughly 13,000 completions, so that's -- you would think of that as adding to pressure, and I think that's right. The difference is it just depends on the geography of your footprint. The most supply impacted markets have been D.C. proper and then the Crystal City area. We have a very different footprint than a lot of our competitors do. And so our Northern Virginia, Southern Maryland assets have continued to really put really good results. I think it really just depends. I think we -- our forecast for D.C. has revenue -- total revenue growing at about 3%, that's up from 2.8% last year. And that seems about right to me. In terms of the impact from the shutdown, we literally have had a handful of folks that have indicated that they needed relief. And we indicated to all of our folks that are impacted that we would work with them on late fees and the like. And so the good news is that -- I guess, by today, most people would have gotten their backpay. And if they've made it this long without -- being under financial duress, they're probably okay until the next shutdown.

Yes. I think it's interesting when you think about the shutdown and how it affected people because given that we have had all kinds of different things over the years from hurricanes to snowstorms to all kinds of different things that caused residents to be dislocated and not be able to pay, in this situation, when the shutdown started, our teams put together a program for anyone that was government related. And not just government employees because what happened is a lot of contractors get laid off -- or not laid off but furloughed as well, so it's private companies that are working on government projects. And so I was really excited and happy that our teams were way in front of that and sent out information. It's not just D.C., it's all over the country, right? So we were prepared to deal with the issues. And as good corporate citizens, understanding our customers are having trouble making their rent when they don't get paid by the government, our teams were way in advance of that, and we hadn't missed a step on helping our customers.

Great, that's helpful. And then quickly transitioning to Southern California. I think it's a similar dynamic where kind of your positioning, your price point may differ from some of your peers; and like D.C., the supply is kind of coming in pockets where you're either sort of affected by it or not. I guess, can you talk about your broad Southern California exposure where there might be pockets of supply you're exposed to, but also just who's adding jobs in the Inland Empire, Orange County, San Diego and then kind of your main focused markets there?

Sure. Our portfolio is a very different footprint. I mean, when we're aggregating these numbers, we're giving you results that go all the way from San Diego up to Hollywood. There's -- I would say there's not any place other than directly adjacent to or near Irvine where there -- where I would say that there is --'s we have a supply concern. We just don't. I mean, it's just so difficult, takes so long and the planning and delivery process for apartments is just really difficult all over Southern California. So you're looking at 23,000 deliveries over that entire footprint, 118,000 new jobs projected for that Southern California footprint. That's a 5, 0. So as long as you don't have immediately in your market impact area, as long as you don't have 2 or 3 deals trying to get leased up at the same time, that's just a very healthy situation for our operators. And so again, footprint's a little bit different than some folks, but Southern California sure feels like a place that's going to have -- that's set up to have the next couple of years be really strong. We've got it rated as an A- but improving. Last year, we had it as an A and stable. So I think we're really well positioned in Southern California. There's not a single one of our assets that I have any particular concern about as it relates to exposure to new supply.

Our next question comes from Alexander Goldfarb of Sandler O'Neill.

Just first question is on Houston. Just there were some recent commentary just speaking to folks down there that suggested that late in the year, there was softness in the market that the jobs expectations had been revised down. But from your comments, it doesn't sound like anything unusual going on in Houston. So was there just some -- maybe it was just tough year-over-year comps? Or was there, in fact, some momentary pause in the market that caused a little bit of concern for some folks?

I can give you my hypothesis. So let's answer the numbers question first. We didn't see that other than the normal seasonal -- fourth quarter is always a little bit weaker in Houston than the other 3 quarters. That's just the way it is. But if you put that aside, we didn't see anything in our numbers that would indicate that there was any cause for concern or resetting of the ability to raise rents or get renewals. So that's just what our experience is. My hypothesis on the noise, and obviously, we heard that, too, because we get some of the same phone calls you get. If you come to Houston and you have -- if you go on a sort of guided tour and you go to the areas that I've already described as being the most impacted with new supply, that would be downtown, midtown and the Galleria area, and if you're having a conversation with someone who happens to be a merchant builder, which, by the way, 99.2% of all the product in Houston that's being built right now is merchant builders because Camden's the only non -- only public company that has any exposure to new construction in Houston. So that's the preponderance of all of the assets that are being leased up right now. If you talk to a merchant builder who currently is in a lease-up in either downtown, midtown or the Galleria area, I promise you, they feel like they are getting their brains beat in because they're in the second or third year of 2 months-plus fee rent. And so that's certainly not what they anticipated. They're probably way off on their pro forma numbers. They're under stress because they wanted -- would have ideally already had an exit at a better rent roll than they currently have. So there's just a lot of doom and gloom if you talk to those guys. But if you go anywhere other than in the Houston Metropolitan area, those -- the 3 areas I just described, you'll hear people like more -- that have a more of tone of what you would hear from us, which is, yes, some of our projects, our communities that are impacted by supply. We've been dealing with that for a while. We'll get through it. We always do. But by and large, our portfolio is really performing and outperforming most of our competitors. I just think it's sort of a selection bias on who you're talking to. But -- and then that becomes the report, right? And so the report sounds like -- if that's the 3 areas you visited, sounds like there's a lot of weakness and maybe something that was unanticipated that you're about to have another slip back, but we don't see that.

Okay. So it's really just localized oversupply, not anything market-wide?

Absolutely.

Okay. And then the second question is on the expense control, especially on wages. Alex mentioned that last year came in really low on the self-insurance, don't expect that to repeat. But can you talk a bit about what you're seeing for payroll? And just given how low unemployment has been and how strong the labor market has been, rising minimum wage, it does seem like this is a pressure point. So just sort of curious to your thoughts or whether this is a blessing if, in fact, it means that your residents are getting higher income. So if you have to pay your leasing folks and maintenance people more, your residents are having more income, so the rent increase offsets that. If you can provide some color.

Sure. I think it's interesting when you think about wage pressure, right? Because when people consider the company that they work for, wages are not the #1 reason why they stay at a company. It has to do with culture and it has to do with a feel of belonging and a feel of trust and their job is important and it's more than a job. So on the one hand, we -- as Alex mentioned, we did make some adjustments for folks that were clearly under-market because of wage pressure and low unemployment and all that. But we don't have people just leaving because of wages. I think part of the equation is making sure that our wages and what we pay our employees are fair and in the market. I'll give you an example of that. I know a lot of our competitors, for example, their lowest paid employees would be sort of groundskeepers and folks like that, and they're paying maybe minimum wage, maybe slightly higher than minimum wage. Our base pay for the lowest common denominator person would be $13.50 an hour. And so we have always sort of pushed that up, that cost or that wage up, so they -- the folks were not at the sort of bare minimum, minimum wage kind of thing. And so I would think that companies that haven't been proactive in trying to take care of their employees and create great culture and make sure their salary levels are competitive in the marketplace probably have more wage pressure than we do. So we have it sort of built into our run rate already. And I do agree that higher wages, generally speaking, are better for our customers. And if you look at, our customers have changed pretty dramatically over the last 5 or 6 years. We went from -- at the beginning of sort of the uptick in the market, we went from 60,000 and change median household income and now we're like 90,000. So we have -- not as many people used to make 60,000, now they make 90,000. But a lot of them -- a lot of people have moved into these properties that have higher wages and higher incomes.

Okay. But it does sound like higher wages are something that's going to be consistent with us for at least the foreseeable future.

Absolutely, no question about it.

Our next question comes from Rob Stevenson of Janney.

What's the expected stabilized yield of the 6 developments currently under construction? And how does that compare with expectations for the $200 million to $300 million that you expect to start this year?

So our yields are in the 6% to 6.5% range for the developments we have right now. The challenge of the future portfolio is it probably comes -- they probably come in on the lower end of that range just because of cost pressure. Costs have gone up faster than rents. And so -- but when you think about the current market today for an acquisition, it's 4.25 plus or minus kind of across America. So we're still getting a nice 150 -- or 250 to 200 basis point positive spread to our development pipeline, even though the properties that we built 2 or 3 years ago, we're getting 7%, 7.5%. And now we're 6%, 6.5%.

Okay. And then in the guidance, you guys provided some detailed guidance for both the revenue-enhancing CapEx and repositions as well as wholesale redevelopments. How many units are roughly in each of these buckets? And what are the expected stabilized returns of each?

Yes. So for repositions, you've got approximately 2,000 units, and we're sort of looking at still right around a 10% return. When you go to redevelopments, you've got three projects that are in there, so you're talking about approximately 900 to 1,000 units. And those yields are closer to development-type yields.

Okay. And then in terms of that, I mean, what's the opportunity set for you guys over the next couple of years? And are you sort of limited in terms of the amount of internal Camden people and availability of external Camden people to be able to do this? I mean, if you had additional capacity, would you do more on an annual basis? Or is this basically what needs to be done this year in the portfolio and there really wouldn't be a lot of extra units to do even if you had capacity?

Yes. We have capacity to do more, substantially more than we're doing right now. I think at the peak, we were doing close to 6,000, 7,000 units annually when we first started the process. The governor and the limitation on it is, assets that are in a condition, both from an age standpoint and the submarket that they serve such that we can underwrite them to get an incremental increase on our dollars of somewhere in the 8% to 10% range. So that's kind of our -- that's kind of the bucket that we're looking for. The best-case scenario are deals that are still in great submarkets, maybe even submarkets where there's new development that's occurring. But they're 12 to 15 years old. Externally, they're cared for in a way -- architecturally they present themselves that to the uninitiated consumer, once you do a reposition and you've done the -- completely redone the interiors up to what today's market apartments' delivered new construction look like, the average consumer can't tell the difference between our asset and our competitors' asset that happens to be brand new. So maybe you're not going to get the full 100% rental rate on the new construction, but you'll get something pretty close to it. So if you can underwrite those types of assets, and on incremental investments, somewhere in the 8% to 10% range, that's the opportunity set. And so we go through a process that starts pretty organically at the district level and we look at recommendations, and the teams make their case and then we vet the numbers. And if it passes muster with everybody around here, then we go forward. But yes, we don't -- I wish we had another 5,000 in reposition right now because it's still the best bet on the table from Camden's perspective.

Our next question comes from Wes Golladay of RBC Capital Markets.

Looking at wage growth, I'm just wondering when does wage growth become a bigger part of the equation for rent growth? Is this something we have to wait for supply to slow?

Yes, I think so. We're absorbing enough in every market to absorb the supply that's coming online. But that supply does have an impact on being able to raise existing rents in existing portfolios. If you didn't have the supply, obviously, you'd have more -- and you have the same demand, you could raise your rents a whole lot more. And when you look at sort of the progression of revenue growth from, say, 2010 to 2016, it was kind of straight up into the right and primarily because you didn't have a lot of supply. And now the supply has been pretty stable for the last couple of years and the demand has still been there, but that supply just takes your ability to raise rents beyond 2% or 3% or 4% off the table.

And how is rent to income trending maybe at year-end '18 versus year-end '17? Is it materially improved?

We're still about 18x rent to income, which we've been in that range for the last 2 or 3 years, which tells me that our -- on average, our residents are getting wage increases as a group that have mirrored pretty much what our rental increases have been. And that's been -- we've been running 4%, 5% now for almost 6 years. So the good news is that our resident population is managing to keep up from an income standpoint with what the underlying rental increases are. 18% of disposable income, I don't even think we would see any impact until that number got closer to 20%.

[Operator Instructions]. Our next question comes from Hardik Goel of Zelman & Associates.

Just a couple of clarifying questions. On the development yields, you mentioned 6% to 6.5%. What would that number be if it was unlevered cash flow, so including some allocation for property management expense and ongoing maintenance CapEx?

Generally, those are 50 basis points plus or minus in terms of costs if you included those numbers.

Got it, got it. Just one more. On the labor delays you mentioned, if you had to split those up by market, which markets are seeing more labor delays versus others? And as you think about your starts and you look at your predevelopment pipeline, are you factoring that in to which developments you'd choose to start? Because you have, I think, 600 in predevelopment and roughly $200 million to $300 million of starts on guidance?

We definitely are factoring in what we think the real development time frame is and when we do a pro forma. So our -- if you compare it to, say, maybe 4 years ago when we didn't have this kind of issue, our developments on sort of stick-built would have -- we probably extended those times by 4 to 6 months. And then on high rise, probably anywhere from -- maybe a 12-month period where we extended that construction period because of labor. Labor, it's pretty -- I think most markets are pretty much sustained. There's some maybe that -- Charlotte was a tough, tough market. We don't have anything really under construction there at this point. Just because they had so much at the same time, so the labor pool there was more difficult. But I think generally speaking, it's a -- there's not like one market that doesn't have a labor shortage. They all sort of do. And depending upon where they are -- at peak in their cycle is when you have the most sort of acute situation. And it depends also on the size of the market. But we are definitely including what we think real, achievable construction periods and lease-up periods are in all of our new developments. And that has been part of what's caused the sort of the decline in projected yields.

Our next question comes from Haendel St. Juste of Mizuho.

So Ric, I guess, I'm curious, how much pressure are you seeing specifically in your Texas and South Florida markets from homebuying? We've heard from the homebuilders that homebuying trends seem to be fairly strong in those regions, especially amongst the entry-level price points.

Well, yes, overall, the home -- moving out to buy homes has been 15% of our portfolio. And in specific markets like Houston and South Florida, I don't think it's any higher or lower than it has been. And when you think about -- the challenge with the whole idea where people can afford a home in Houston because the median price is so much lower than other places, but if you go into urban core in Houston, the average home is the same price as San Diego, right? And the challenge is, is that affordable home is 45 minutes to 1.5 hours out of the central city. And then the other thing that I think -- that you need to -- that people need to understand is that when you buy a home -- buying a home is not a financial decision. It's a demographic decision, right? So we know that our millennials are getting married later in life, having kids later in life and making those kind of demographic things that drive them to want an ownership situation. A lot of the millennials want optionality. They want to be able to move around and not be burdened by a specific location or a mortgage. And so I think that's one of the things that's kind of driving the fact that homeownership rate hasn't spiked up in spite of low interest rates and what have you.

Just a note on that, in the fourth quarter of '18, in Houston, we had about 17% of our move-outs indicated it was to purchase a home. That's probably a 1 or 2 percentage points higher than it's been in the last 5 years on average. So Houston had a great year for new home sales. It set a record in terms of total units. So despite that, the multifamily market in Houston and our relevance stayed in the 94%, 95% occupied, and we never drop below 95%. So it's pretty robust. You're right, what you're hearing from the builders is correct. They're selling a lot of homes in Houston, particularly starter homes in Houston. Southeast Florida is a different story. There were only 8.5% of our residents that moved out to purchase homes in the fourth quarter of '18. And that, again, is probably 1 or 2 percentage points below the long-term trend. So probably not a big part of the story in either market, and part of it in Houston is we got 120,000 jobs trailing 12 months and probably 25,000, 30,000 in South Florida.

That's helpful. Would you say -- actually, could you quantify what percentage of your Houston rents come from the three markets with heavier supply and maybe what the rent growth differential between those areas are versus your other Houston submarkets?

So I don't have the exact of those three submarkets, but I can give it to you broadly because we look at it between urban and suburban in all of our markets. So all three of those submarkets would identify in our urban category bucket for Houston. And the differential for the last year was clearly in favor of suburban products, and the differential was about 1.2% on revenue growth. So it's not nothing. It's a meaningful number in terms of -- if you're in the urban area, that would be those three submarkets that are impacted versus suburban.

Great. And then lastly, I'm not sure if I missed it or not. But what was the blended rent in January? And how does that compare to January of last year?

It's about 2.4% this year, and I don't think we gave the blended from last year. But I can get that to you if you call me later. So it's roughly flat on new leases and about -- up 5% on renewals. And if you do the math, that's about 2.4%.

Our next question comes from Daniel Bernstein of Capital One.

I was also at the NMHC and heard the bid-ask spread comments there. And just wanted to ask you your thoughts on where maybe those bid-ask spreads are widening out, A, assets; B, suburban, urban. Just trying to understand where you think the opportunities are going to be for you on the acquisition side better.

Sure. So the most overbid properties are valued-add. Now that's a really crowded space. And so I think that the value-add space is definitely a space we're not involved -- we're not interested in as much because what we want -- what we are trying to get -- we think the sweet spot is the bid-ask spread differential between merchant builders who have owned their property now for a year or 2, it's stabilized. They're not making their original returns, but they're definitely able to sell above what the original cost was. And so given that they have generally IRR hurdles for them to make their promote, every day they wait, they get eroded from the profit on their promote. So what we're looking for -- and I think the bid-ask spread in that type of product because it's less traveled, if you will, because you're buying newer properties, and they're sort of -- you don't have a great story on the new properties. Gee, I'm going to take this older property, value add, I'm going to buy it for a really low cap rate. But I put 10,000 to 20,000 in it, and then all of a sudden, I can convince myself perhaps that there's a story on being able to get a better yield there. And that's -- like I said, we're not in that space. But we want to buy them below replacement cost and from specific merchant builders that don't manage their own properties and they're managed by third-party property managers, which tend to be sort of managing to the middle as opposed to trying to maximize the utility of what their property really is because they just have so many. So I think that spread will compress and the buyers will come towards the sellers of it. But I think that the sellers because there's so many properties that have to trade are going to have to come to the buyers a little bit closer as opposed to just sort of meeting in the middle, if you will.

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

Well, thanks, everybody, for being on the call. And I'm sure we're going to see a lot of you over the next month or two in the various conferences. So take care, and we'll talk to you when we see you. Thank you.

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