Good day and welcome to the Camden Property's First Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. 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 First Quarter 2020 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 first quarter 2020 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, Executive Vice Chairman; and Alex Jessett, Chief Financial Officer. We will attempt to complete our call within one hour, so we ask that you limit your questions to two, then rejoin the queue if you have additional items to discuss. If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or e-mail after the call concludes. At this time, I'll turn the call over to Ric Campo.

Thanks, Kim and good morning. Our on-hold music today was unsurprisingly pandemic themed and included a couple of selections for Michael Bilerman's personal COVID-19 playlist. Four of the five songs were probably familiar to many of you and the fifth song was a unique cover of a Led Zeppelin classic. Even that song has a COVID-19 connection. A resident at Camden's high-rise community in St. Petersburg, Florida wanted to do something special for his wife's birthday and despite the at-home stay order. He asked if he could use the roof of the community's parking garage to sage a concert for his wife. Of course, we agreed. Not only did he surprise and delight her, but all of the other residents whose homes overlooked the garage rooftops. They got to enjoy an incredible performance by Sean Hopper and Chris Barbosa from their perfectly socially distant balconies. This is just one example of the many ways that we and our residents are working together to help ensure we make the best of this complicated journey we're on. I want to give a big shout out to team Camden for their resilient, their commitment to improving the lives of teammates, customers and shareholders, one experience at a time. Our on-site property teams have really stepped up to help our residents during this unprecedented time, to make their homes a true place of refuge. Our corporate and regional support teams have continued to be highly productive, adapting to telecommunity without missing a beat. During times like this, it brings the importance of our homes to the forefront. I'm proud of Team Camden. Thank you. We'll use most of the call today answering questions about what we're seeing in our business in real time. We won't spend much time talking about the distant first quarter and will not provide guidance for the rest of 2020 in this uncertain environment. We are more prepared for this recession than any other, thanks to the lessons learned in the financial crisis. We know that we will come out of this recession in a great position with financial strength and a focused motivated team. Keith?

Thanks, Ric. Someday, someone will write a novel titled "A Tale of two Quarters" and it will begin like this. It was the best of quarters, it was the worst of quarters. Camden just arguably had the best quarter in our 28-year history. We had the highest FFO per share of $1.35. We had the biggest quarterly outperformance relative to our established guidance. We had a sector-leading same-store NOI growth rate of 5.7%. And yet, in the last two weeks of the quarter, everything changed. Fortunately, our leadership team has been together for decades and we've dealt with our share of disasters and disruptions. Our experience with previous dislocations provided us with a road map for navigating this pandemic. First, take care of the Camden team. Make sure that they were operating in the safest possible environment. Also, make sure that we address their financial well-being. Employees that are under personal financial distress will never be able to do their best work. To accomplish this, we did two things. First, we added $1 million to our long-standing employee emergency relief fund. $750,000 of that came from Camden and $250,000 came from Camden's executives. We provided grants of up to $3,000 that were made available to our employees whose family's income had been impaired or whose living expenses had increased due to the COVID-19 impact. To date, we have provided 350 employees with total grants exceeding $1 million. Second, last week we announced a bonus exclusively for our frontline employees, both on-site operations and on-site construction teams of $2,000 for each full-time employee, totaling approximately $3 million. The best way for us to ensure that our residents are afforded living excellence is to ensure that our Camden team remains physically, mentally and financially healthy. Our next priority was to assist our…

Thanks, Keith. Eight weeks ago, our corporate and regional teams began to work remotely. In two months so much has changed, but our teams continue to adapt and respond to each new situation. The technology investments we have made in the recent past are paying dividends. We just completed our first ever virtual quarterly close, a task that would have been so much harder without our investment in a cloud-based financial system. Our on-site teams are having great success with virtual leasing and we are preparing for our first ever virtual annual meeting of shareholders. Understandably taking a backseat to the discussion of current operational trends, Camden had a great first quarter, helping to position us well for the COVID-19-related environment we now face. Details about our first quarter performance are included in the earnings release and supplement published last night and available on our website. So right now, I will focus primarily on operating trends we've seen in the second quarter. But first, rental rate trends for the first quarter were as expected until mid-March when our leasing offices were closed to the public and we began offering existing residents 0% increases on renewals. For the first quarter of 2020, new leases were up 0.5% and renewals were up 4.2% for a blended growth rate of 2.5%. Our April results indicate a 2.5% decline for new leases and a 0.1% growth for renewals for a blended decrease of 0.8%, which is approximately 500 basis points below the blended growth of 4.1% achieved in April 2019 when we were clearly operating under more normal circumstances in a pre-COVID environment. As a reminder, our new lease and renewal growth data is based on when leases are signed versus many of our peers that report based upon when a lease becomes effective.…

Thank you. And we will now begin the question-and-answer session. [Operator Instructions] Our first question today is from Derek Johnston of Deutsche Bank. Please go ahead.

Hi everybody and thank you. Some of your peers have focused on maintaining occupancy over price, some have paused pricing and lost occupancy, while others have temporarily put in place concessions to kind of bridge the gap. So, I guess the question is, how are you balancing these scenarios at this point? And to what level could occupant decline to where you're still comfortable if you want to maintain price?

Yes. So our long-term average occupancy is in the 95%, 95.5% range. We've been running above that for about the last 1.5 years. And at the same time, part of what was driving that was we had really great traffic and we had the ability to push rents without having any impact on occupancy. So if you think about where we came from at the end of the first quarter, we were at 96%. That was about in line with our plan for the quarter. We dropped to 95.6% by the end of April. And as we sit here today, we're about 95%. So yes we have seen a decline in our occupancy. It's not anything that we're overly concerned about at this point. We would like to maintain our occupancy somewhere around the 95% range and we'll adjust our metrics to make sure that that happens. With regard to your question about concessions, we don't -- we use net effective pricing. We have not offered concessions. So, it's all based on our revenue management model. And we think our customers are smart enough to make that determination on their own about upfront concessions versus net effective rents. The other thing is that in this environment, we just think it's you're unnecessarily taking unnecessary risk and complication when you start concession in an environment where you've got tenants -- there are residents that are under potential financial distress going forward, so that's something that is not something that we have done and not likely to do. So, yes, I think we'll make sure that we -- based on the traffic that we're seeing and the pricing trends that we're seeing, we'll do -- we need to do to try to maintain our occupancy somewhere around the 95% level.

Okay. And just a quick follow-up is, how has leasing demand evolved from let's say April into May? And how do you see it unfolding through the important spring and summer season?

Yeah. So, if you think about it in three time frames, the first would be something that's relatively normal in our world and that would be from the beginning of January through March 15, when kind of the world changed and that – in that time frame, over the prior year our traffic, our guest cards visits new leases we're all almost exactly in line with where we would have been in 2019. So, it was clearly business as usual good steady heavy traffic and converting roughly 8% or 9%, of all of the guest cards and about 20% of all the traffic. So the next period of time is kind of the March 16 through April 12 that four-week period where it was the maximum kind of the shock effect of people being told to stay at home. Obviously, we had a huge impact on our guest cards in that time frame dropped about 45% of normal. Our visits – our physical visits dropped about 84% of normal. So, huge change in consumer behavior and our new leases during that time frame were roughly 50% of what they would have normally been. The next time frame that, I think is relevant for you to think about would be sort of from the April 13 timeframe through this week. And we're getting closer back to something that looks and feels a little bit more normal on guest cards. We're down about a 13% over where we were this time last year for that time – for that three-week timeframe. Well, we're still way down on visits and that's not necessarily concerning to us. We're still 62% on physical visits from where we have been but that's because we've completely changed our business practice to virtual leasing and that's – there's some actual – some interesting benefits to the – that our residents have pointed out about being able to lease an apartment that way. So that one is not particularly concerning, new leases are definitely down over the prior period. We're down about 21% on new leases from where we were for that three-week period in 2019. The offset to that has been our renewal rate has increased pretty substantially. We had the lowest turnover rate that we've ever had in our company's history at about 37%. I didn't think I would ever live long enough to see an apartment portfolio with a 37% turnover rate, but that's kind of where we are. So I hope that gives – I mean, so big shock for the first four weeks and then a recovery through this week that's getting within hailing distance of looking like normal.

Thank you.

Our next question today will come from Michael Bilerman of Citi. Please go ahead.

Hey. I wanted to sort of get your perspective on how you think about the $10 million of relief that you provided to your residents. It's 1.5% of annual NOI, 6% on a quarterly basis and 18% of sort of monthly. I guess, is this going to be a recurring? Should tenants not be able or need more assistance in the future? Do you sort of view this as a concessionary tactic of being able to provide additional funds for them to be able to ultimately – I mean cash, is fungible, right? They can pay the rent or they can pay their normal expenses. So, how should investors be thinking about future programs like that?

Yeah. So the way – I think the easiest way to think of it is in a couple of different pieces. One piece was the immediate financial impact to 8,000 of our residents. And while there was a lot of talk about stimulus checks and there's a lot of talk about PPP money and then possibly even stimulus checks that were going to be sent out. The reality is that in state unemployment that people were trying to get through the queue and the reality is that, the impact of this was so sudden and so many of our residents were caught off guard and didn't have the financial resources. It wasn't really about paying rent. It was about paying groceries and medical bills and transportation expenses, child care and those kinds of things that were completely unexpected to a lot of people. So we just felt like that because we were getting anecdotal evidence and feedback from our frontline teams about the financial difficulty and the urgency of the situation that, we felt like we could do something quicker for most people that honestly was intended to be a bridge to get to something that's more durable, whether it's state unemployment, whether it's the stimulus check or ultimately one of the PPP grants. So part of it was an immediacy part of it for financial need, part of it was the ability to assist our residents at a time of their maximum financial stress. Now we – so if you think about our resident base, we have roughly 80,000 adult lease folks their signatories on a lease. And about one in 10 ended up getting the resident relief funding from us and so it was to address an immediate need to get people to a bridge to a more…

Yeah. Let me just add to that a little color too. Because to me, there's been a lot of discussion these days about how companies ought to be more socially responsible how they -- it's not about the bottom-line only, it's about taking care of customers, it's about taking care of communities, taking care of employees. And so, we just thought that the benefit of immediacy, very quickly getting the folks the money when it was hard to get money from the government, it created a -- put a zip in the step of our employees. And even residents that didn't apply for the grant actually communicated with us and sent us, just thousands of congratulatory e-mails, saying, no. I don't need the money. But I understand now why, I really live at Camden. And as long as I'm a renter, I'll be with you. So, to me, this is our way to sort of say to the industry. And the corporate world in general, these are the right things you should do. I will tell you that multiple companies followed our lead. And I spoke with probably 10 different companies on, how we did it and why we did it, around the country and that was a good thing. So to me, it really is about the long game. And it's about being a good corporate citizen to your community and your customer.

How did you weigh providing capital? And checks to people versus simply, entering into deferral agreements for a period of time, for their rent until the government assistance, comes into play?

Well, we did that as well. Over 2% of our people have payment plans now or 2.5% something like that. And so, so we did both. But ultimately, when you think about -- when we started thinking about, what could we do that was a major statement that was going big, if you want to call it that that would be an amazing thing for not only our employees, but residents and residents that didn't need the money, right? And so that's why, we sort of did what we did, as opposed to saying "Hey, we'll defer your rent." And the idea was look, bridge people from point A to point B, because one of the things I think is really fascinating is, when the government obviously stepped up in a major way with increasing unemployment insurance benefits by $600 extending them beyond what the states had as well. So a person -- if we had a two income household and each person made $40,000 each our average household is about $105,000 or $110,000 something like that. But the maths that I’ve seen is based on a $40,000 person. Their take-home pay was roughly $6,500 a month and the rent says $1,500. And once they apply for unemployment insurance, if they both lost their jobs then you have a situation, where they actually get an increase in their income of roughly $1500. And so, the amazing -- so from our perspective we thought, it's going to be hard for people. Because there are so many people applying all at the same time people to get this money. But ultimately when you bridge that gap, they will have funds available that -- if they lost their jobs. And then, the other part on your question is the, whole gig economy. We have tons of gig economy, people that work for us or that -- not work for us, but our residents. And they're having just a tough time, navigating legacy systems that states have with respect to unemployment. And it's really hard for those guys to get lined up. So that's kind of -- that was the longer thought process behind it rather than just saying okay we'll defer your rent.

That's really helpful. And just last question, so out of those 8,000 residents who took the money, what percentage of those paid their full rent? What percentage of those paid no rent? And what percentages are on deferrals?

Yeah. The exact numbers I don't have right here. But the vast majority of the folks that receive money from us paid their full rent.

Okay. Thank you.

And I think in Alex's opening comments he gave indications that our May collections are actually running slightly ahead of April collections. And that's certainly to me a little bit unexpected given what's happened in the world in the last 30 days.

Right, yeah. Thanks very much.

Our next question today will come from Jeff Spector of Bank of America. Please go ahead.

Good morning. Thank you. And thanks for all you're doing. For what it's worth, BofA's ESG strategists continue to point to the growing importance of ESG. So thanks again for your efforts. My question today is on, Houston. If you could just talk about, the Houston market it seems to be more resilient than we were expecting possibly even you and your team in terms of collections occupancy. It looks like it was up year-over-year 40 bps. And then, if you could also discuss your downtown project that you're leasing up please?

Sure. So Houston is definitely a very interesting market. The -- when you look at what's happened in Houston there were 342,000 people filed for unemployment, through this current period. By the end of the month, it will probably be more like 400,000. And I know people sort of connect Houston with Energy and they should because Energy is a big part of the economy here. But it's also a broad economy 7.2 million people fourth largest city in America. And there are a lot of other things that go on besides Energy. And so Energy is definitely top of mind. Energy obviously has had a real rough road that they've been on. And probably will be a rough road going forward. The -- to give you a sense of the last cycle in Energy here in 2014 to 2016, Houston lost a net 5,000 jobs. And what Energy did is they lost 950,000 jobs. And then other -- the economy was doing well in the other parts of the Houston economy, that are more related to the U.S. economy were doing well. Petrochemical businesses were doing well because of low oil prices or their feedstock and that tends to give them higher margins. As long as the overall economy is doing well, then the sort of downstream part of Energy does well. In this situation we have the U.S. economy going down and at the same time that Energy is going down. The 95,000 jobs that were lost in Energy they've added back about 30000 of those jobs. So what was going on with Energy prior to the pandemic was that Energy was actually starved for capital during the 18 months prior to the pandemic. And they really didn't add all the 95,000 jobs they lost. And the interesting…

Comments were very helpful. One follow-up on a previous question. To confirm are you saying that your applications are back to normal your recent applications let's say as of this past week or 2?

No. They're not back to normal. In terms of guest cards which would be kind of the what you think of as the starting process for leading to a lease we're about 13% below where we were this time last year. And that's for the period between April 13th and May 6th. We're about 13% below what we would normally see or what we saw last year in terms of guest cards.

Okay. Thanks for clarifying. Thank you.

Our next question today will come from Austin Wurschmidt of KeyBanc. Please go ahead.

Hi, good morning everybody. You guys have indicated that you're offering flat renewals, but I don't believe you've specified a time horizon where some of your peers had said 90 days or maybe through June 30th. So, curious how you're thinking about when you might start to take more of a market-based approach or let the revenue management system take over as it relates to renewals. What are your thoughts on kind of changing your stance there at this point?

Well, I think what we all have to do in this environment is sort of play it by ear and see how the market is responding. So, we have put out guidance that we are going to hold things flat for 60 days. And the 60 days would have been sort of I guess expiring in mid-June perhaps but maybe to the end of June. But I think what we really have to do is kind of feel out the market try to understand how our customers are feeling and our employees are feeling. Because if you think about a renewal let's say if you're getting a 4% increase in a renewal we're talking about $45 or $50 a month to a resident. And when we're in a -- the reason, we froze them and the reason, we did all of the other things we already talked about doing is we wanted our employees focused on one thing and one thing only. And that was taking care of those people in real-time right now with their issues. I don't want to have those employees having to knock on the door and say, hey, by the way, I know, this is really a tough time, but can you give me $45 more, because we need it. And so for our view our view is that we stated the 60-day, but we will plan it -- we will make changes as the market dictates. Once we get back to a more normal situation, our customers know that we're like any other business and, a, they need to pay their rent; and, b, ultimately they -- we provide value to them through all of the packages that we have. And part of the issue you have today is they can't even use the pool or the barbecue grills or the gyms or things like that. And so I hate to ask somebody to pay higher rent, when they're not even getting the full complement of amenities and packages like that. So we will -- 60 days from now and then we will evaluate as we go forward. And ultimately, I think it will be better for our customers, better for our employees to evaluate it in that way.

Got it. Got it. No, that's helpful. But just to understand it then. Is that renewal -- the flat renewal offer then end of June, is that for renewals then into kind of July August that those are getting offered?

Yes. Our renewals we generally go 60 days out, but right now we're going 90 days out.

Got it. Thank you. And then just last one kind of following up on the Houston commentary. Helpful comparison from kind of 2016, 2017, when things turn negative certainly a delay from when oil rolled over from late 2014, but curious how the supply setup looks differently than last time. I think I recall supply ramping pretty significantly into 2016 and 2017. And today things are fairly shut down. So how would you compare and contrast that side of the equation?

I would say, the supply -- well the Houston supply is actually peaking right now. We had -- when you think through the supply, it actually fell off in 2015, 2016, 2017. And then when Hurricane Harvey hit in 2017, we ended up with very high occupancy. And so Houston was the only market in America that where you could tell a story that had a recovering economy and a declining supply picture. So what productive developers did was, they ramped up development in Houston. And so today we have 21,000 units that were permitted in 2019. And the projections for 2020 were 14,000, 15,000. That will probably fall off some. But Houston will have more supply to deal with than it did during the 2017, 2018, 2019 kind of time frame. And so ultimately, though, however, when you look at some of the projections on supply everywhere, the peak supply was somewhere around 400,000 units. And most of the analysis that we see around the country are supply dropping to barely over 100,000 units net. And that generally is what you see in a economic situation like this is equity for new development and construction loans from new development are very, very, very difficult to get today. And if you didn't have it already lined up, you're probably not getting that done. And it'll be interesting to see how that all plays out, but Houston does have a supply issue, it has to work through in this environment. That's why I said, our Downtown project is going to be tough sledding for the next year and a half.

No, I appreciate the thoughts. It’s helpful. Be well. Thank you.

Our next question is from Nick Yulico of Scotiabank. Please go ahead.

Hi, everyone. Ric, I just wanted to ask you about the balance sheet. I mean, clearly you're in a very good position low leverage a lot of cash. How should we think about your deployment of the balance sheet over the next year? And are you seeing any interesting acquisition opportunities opening up yet realizing, it maybe early also thinking along the lines of maybe partnering with private developers who need capital. I mean, how are you kind of envisioning the opportunity set here?

Well clearly the -- our balance sheet is the strongest in the sector. We're sitting on over $0.5 billion of cash with an unfunded $900 million line of credit. And this is exactly where we want to be. Over the last two years in every single conference that Keith and I and Kim and Alex attend people pound the table going, why are you going under leveraged? Why are you sell under leveraged? Why are you issuing equity? Those kinds of issues. And what our answer was, was that we're in the longest economic recovery in American history. And something is going to come along, that's going to change that. I don't know what it is, but when that happens, I want to be positioned to have the best balance sheet in the sector, because there should be opportunities that come up over that. Now all of a sudden now we know what happened, right? And now could we have all predicted this? We didn't predict the why it happened, but we did predict that it could happen and would happen and it did. So that's the positioning we're in. Now about opportunity, opportunity will happen. There's no question, because if you look at the merchant builder model they have high prefs or prefs that eat at their profits and their capital every single month. And as you have -- when you have an environment like this, where the future is uncertain and you have capital issues that are much more leveraged than we are. So are there going to be amazing opportunities like during -- that presented themselves and in 2009 and 2010? Unfortunately, we weren't positioned to be able to deal with the amazing opportunities we saw then. I think there will be some, but it's very early…

And in your experience, how long is it going to take before you can become more comfortable with underwriting rents for the future development pipeline?

Well I think the – I don't know how long it is yet because we've only been in it for 1.5 months, right? But I think that there are some fundamental things that you can count on. You can count on people needing a place to live. You know what the forward supply picture looks like. And you can also sort of plan for some scenarios on how the market will open over time. And so I think that gives you once we get a little closer to how does it – how do places open and how do industries adapt, industries like leisure industries or the oil and gas business in Houston and those kinds of issues that will give you more clarity. And with capital structure we have now we'll be able to make earlier decisions and make more aggressive bets than others I think. So I think that it will become more clear probably in the next three to six months. And then you'll start seeing activity and people making decisions on what they're going to do going forward. And so I don't think it's going to be years but it's definitely going to be a few months.

Okay. Thanks. Appreciate it.

The next question will come from Neil Malkin of Capital One. Please go ahaed.

Hey, thanks, guys. I guess just kind of maybe digging into the previous question. What is your view on development within your portfolio and your markets over the next 12 months? I mean like you said starts are expected to be close to nothing but you're in a position balance sheet-wise where it would behoove you to start now and really reap the benefits in 2022. Any thoughts there?

Yes. We have – we've got a decent development pipeline. We think it's appropriately sized given kind of the opportunity set out there right now. As far as additional starts we had original guidance. We had a couple of starts for 2020. We'll wait and see on those. The one in Florida Atlantic, we had literally just were in the process of finalizing our pulling permits for construction. We really hadn't – doing some site work et cetera. So we just put that on hold out of an abundance of caution. But at some point, my guess is is that when we see a little bit more clarity on what the job and the reemployment situation is going to look like in some of these markets then, yes, we'll probably forge ahead with our planned developments whether it gets done this year or whether it leads over into the first quarter of next year. We still think fundamentally there's a lot of value to be derived. And – from doing what we do with our construction and development team. So a little – as Ric said it's too early to kind of even start speculating on that because we need to see a few more cards. It's still really early but we're clearly going to use our balance sheet strength to do two things. We have $235 million left to fund on our existing pipeline and it's a great development pipeline that's being delivered in a very geographically diverse way. So that's one thing that's a priority for us is to complete that and not have to have any stress at all about funding $235 million to complete that pipeline. And then secondly, we'll turn to opportunities for capital allocation whether we'll look at what does new development look like in the new arena and then compare and contrast that to potential acquisition opportunities that inevitably are going to come our way.

Makes sense. Other one for me is can you just juxtapose or compare and contrast your kind of core Sunbelt markets with your Southern California markets, just in terms of delinquencies, people who contacted you about payment plans. And then how things are performing on a submarket and price point spectrum?

Yes absolutely. And as I said in the prepared remarks if you look at California for us, for the month of April, California was 9% delinquent. If you sort of break that into two categories, LA, Orange County being one that was around 11% and then San Diego, Inland Empire was around 6%. If you compare that to obviously to our Sunbelt markets, our Sunbelt markets are considerably lower and in fact, if you look at our total delinquency, which we reported at 3.2%, if you were just to back out California alone that number would drop to 2.4%. So California is definitely putting a – is putting a drag on our numbers.

So just one of the things that's interesting that we – data that we got from the resident relief fund is we really didn't see a disproportionate number of residents applying for the resident relief fund from California, which is kind of interesting if you think about it. It was -- it's about what you would expected it to be. And about -- it was pretty equivalent across our entire footprint of our portfolio. So plus or minus we have 80,000 adult lease signatories with over 8,000 people who applied and verified that they either lost their job or lost significant income. And we didn't really see a big -- there wasn't a disproportionate amount in California and yet we're 10% delinquent. So what -- so one conclusion from that is that, while our California portfolio is not under any disproportionate financial stress it's under disproportionate behavior stress. And those are very different things. And as long as policymakers continue to kind of accommodate that behavior, it's going to remain under stress. I just don't -- I don't see any way around it, but that's very different than saying can they pay -- do they have the ability to pay? If they were financially impaired they would have applied for the resident relief fund. And so we know that there's a chunk of residents in California who are behaviorally acting not appropriately.

Huge -- amount of hazard out there. Thanks guys with the question.

Our next question today is from Alexander Goldfarb of Piper Sandler. Please go ahead.

Hey, good morning, everyone. And I would echo, I mean, I think you guys have been great for your residents employees. I mean remember back with Harvey, you guys helped your employees rebuild. So I think it's good that you guys help out. And interesting the moral hazard comment Keith on the -- on Southern Cal. Not to leave Jessett -- Alex Jessett out of the conversation, but a double question for him. One it just -- in full disclosure of the accounting treatment for the $10 million -- or I guess $11 million, but $10 million when you net out the senior comp -- how that will hit the P&L? And then a separate but included in the question for you, have you seen the rating agencies change their tune this time? It seems like we've seen very few REIT downgrades. Clearly, apartments are better than retail, but still everyone's been affected. Are you -- is your sense from the rating agencies like you guys just did your issuance last week that the agencies are giving the companies more time to settle out what the run rate NOI impact will be before taking action? Or what's your sense?

Yes, absolutely. So the first question when you look at the resident relief funds the way we will account for it is as an offset to revenue. Now we're not going to run it through same-store, but it will be in revenue. And if you think about our Components of NOI page in our supplement, it will be its own separate category. So we'll take the entire amount in the second quarter as an offset to revenue. When you think about the rating agencies yes, obviously, I've spoken to all the rating agencies over the past couple of weeks as we got ready for a bond issuance and as we completed a bond issuance. The first thing, I would tell you is that REITs by and large are so much stronger today than they were leading up to the last downturn. And I think that is giving the rating agencies some comfort. I think the other thing that you have to look at is one of the big issues that rating agencies look at is access to capital. And when Camden is able to go out and start with what was originally issued -- or originally, sort of, whispered as a $300 million bond transaction. And really quickly grew to over $8 billion of demand which led us to upsize it to $750 million, I think, events like that give the rating agencies a great deal of comfort about the access to capital that most of us have. And I think that's why you're going to see them obviously, be much slower in making rating decisions than they were in the past. And then I'll add to that, that if you think about what did happen during the last downturn there were a couple of rating agencies in particular that were very reactionary and sort of, moving people down two steps in one action. And I think they really quickly realized that that was an overreaction. And I think they've, sort of, learned on that side as well so.

Okay. And then the second is I don't think you addressed the hospitality market in a question, but you did say that Orlando, Tampa and I think Phoenix, were all some of your best rent collection markets. So can you just comment on what's going on there? Maybe your residents aren't as into hospitality as other people in those markets, but what the impact is?

Yes. I wouldn't have included Orlando in the less than impacted. We are seeing outsized impact in Orlando. Tampa not at all is performing better than most and so is Phoenix. So of those three markets that you mentioned, I think that the weakest of those three would be Orlando and it would probably be in our bottom three or four.

What is that Keith? Orlando 10% collection -- 8%?

No. So Orlando -- so what Keith was talking to is pricing power in Orlando. If you actually look at delinquent in Orlando, Orlando is only 2% delinquent. Maybe it's a matter of time and we'll see how May results end up, but it is holding on remarkably well in April.

Thank you.

Our next question today is from Rob Stevenson with Janney.

Thank you. Good morning. You guys have given April occupancy rent numbers, but how should we be thinking about operating expenses? I mean, you're saving on turnover cost. There's probably some other expense lines that you're also saving on. But then you probably have higher insurance and maybe utility costs with everyone staying at home. And then there's some extra COVID expenses. How does this all offset? Are operating expenses higher or lower today? How should we be thinking about that?

Yes. Ultimately, you've got a couple of things that are going on there. So first of all, the $3 million bonus that we discussed that is going to be booked to operating expenses.

I mean, I'm just talking about the normalized excluding the stuff that's not recurring?

So once you pull out the $3 million and you look at the salary side, we should expect to have some general salary savings associated with open positions that are going to stay open a little bit longer. The other thing that everybody is seeing really across the board is that benefit costs are coming down. Ultimately in this, sort of, COVID-19 environment, people are just not going to the doctor unless they absolutely have to. And in fact I will tell you that most of the hospitals and doctors that we know personally are really seeing a downturn in the amount of cases they're seeing today. So I think you're going to see savings on the salary side ex the bonus. When we come to utilities, obviously, the trash is going to be a little bit higher but keep in mind that we rebuild almost all the utilities back to our residents. And then where you really are going to have savings is on R&M. So as we retain more of our residents, obviously, our turn costs go down and that's a reasonable number for us. Property taxes for us right now, we started the year thinking we're going to be at 3%. We don't have any reason to believe that's any different. We just went through our insurance renewal. We thought our insurance for the full year was going to be up somewhere around 20%. That's exactly where we ended up. So I think by and large once you strip out the non-recurring events you should have some minor savings on expenses.

Okay. And COVID doesn't overwhelm that?

Yeah. And then the last thing to add and I know you wanted to strip out expenses that were sort of nonrecurring. But we do have property level COVID-19 expenses. When we look at our number for April, that's right around $300,000. And that's associated with additional cleaning masks the fact that we're having special services come out to enter into units to do the repair work. So you absolutely are going to have some COVID-19 related costs.

Okay. And the second one for me is when you look back at the global financial crisis, which I guess is probably the best example that we have at this point. What was the final collectability rate at the end on those tenants that deferred rent got put on payment plans, made promises to pay the noncash payers at that point in time? What did you wind up collecting at the end?

Yeah. So if you go back to that point in time we really didn't have deferred programs. I think probably the better way to look at it is to look at what did bad debt do. And so bad debt started off right around 50 basis points. And it actually increased to about 100 basis points during the crisis.

Okay. Thanks guys. Appreciate it.

Absolutely.

Our next question today will come from Rich Anderson of SMBC. Please go ahead.

Thanks. Good morning, everyone.

Morning.

Appreciate as always on-hold music, WCPT. So question -- first question is you get good results relative to perhaps some expectations in terms of rent collection in April. Looking even a little bit better in May, at what point do you say, boy this is pretty resilient, we might actually be able to provide some guidance in the second quarter. How many successive of months of proof that you've got a good flow of rent coverage by your residents that will get you to a comfort even if we're not past this and we're still in quasi lock down around the country?

I need to see a couple of weeks where we don't have another $3 million -- three million unemployment claims filed.

Yeah, okay.

I mean, I guess, its better that it's not six million, but three million is just a staggering number. So until we kind of get to maybe an inflection point or somewhere where you kind of say everybody that's going to be unemployed by this by and large already is. Then I think you can start making some more rational estimates of what does the next 60 or 90 days look like. But to me it feels like there's still -- it's kind of still moving away. I guess, there are some of the good -- I guess there's good news in a sense that as it turns out all these the state unemployment claims turn out to be lagging numbers, because people have been in the queue for -- they've been unemployed for longer than they've been able to get their claim filed. So it's entirely possible that what we're seeing now is kind of in the rearview mirror, but I don't think we'll know the answer to that for another month or two. But I can -- I think I can speak for everybody here by saying Rich as soon as we get to a point where we think we can give you some meaningful guidance we'll do it.

And then the other thing is all of you, you and your peers were ahead of a curve in terms of tech investments and that's obviously helping you now through the leasing process. Curious though if you were somewhat concerned going into it maybe not ready for prime time yet as they were not fully rolled out. If that was something that has proven itself out so far there have been any hiccups in the process. And a corollary to that question is, do you see any scenario where you can have more robust leasing activity in this environment when you consider elevated close rates and people just processing and coming to grips with this new normal in terms of the leasing process in today's environment. Could we actually get to a point where it's almost just like it but for different reasons?

Yeah. Rich we had several different pilots underway for doing some version of virtual leasing and self-guided tours. So we were -- we had put in a lot of time and effort on it. But we had not yet convinced ourselves that our customers would accept in large numbers that not having the one-on-one interaction, personal touch, Camden cares approach to the leasing experience. I think we've put that one to rest in the sense that the feedback from our customers regarding the virtual leasing experience. So number one we ramped up -- we went from our toes are in the water and maybe up to our ankles to we just dove off. And I mean we're just in it head deep, and so we were able to quickly do that because of our history of rolling things out and technology initiatives and getting buy-in very quickly. So, that all -- getting that process in place and just taking the plunge and saying you don't have an option now and we're not going to talk about it anymore. We're going to do it. So that was good in the sense that our folks quickly adapted. The flip side of it is, is that the feedback from the residents has been incredibly positive. I mean to the point where there are a lot of people who've indicated, I like this better than whatever process we had in place previously that involved a personal visit and a tour and the rest. So I think that there are permanent changes that are coming out of this. That's just one of them. There's going to be a bunch of others, but that's probably the most immediate in terms of business practices that when we come out of this even if somebody waived a wand and we were back to January type conditions, we're not going back to that from the standpoint of how we operate on-site. There's too many too many clear advantages and also consumer behavior is probably ahead of where we were.

Yeah. Let me add too on -- just on the work side of the equation. Our corporate office and our regional offices we have been out of the office for a long time now. And I think Alex had his fastest close in terms of closing our quarter all done virtually all done in the cloud and we took -- we spent a fair amount of money and it took us two years to implement a cloud-based technology. And we complained about it forever until we had to actually use it. And now people are going wow that's amazing. So I think there's going to be dramatic changes in how people think about the workplace, how they think about how do you start your workplace back? Do you start at 25% people 50% people? And I think we have a fair number of people that really like Zoom and like telecommuting the way they did. I drove in and it usually takes me from -- I'm sheltering, I'm in between houses here in Houston. So I have a place out in Columbus, Texas, which is about an hour in a normal commute day it's an hour and a half-ish or an hour and 45 minutes. And it took me less almost about an hour to get in today. So a lot of -- I think there are going to be a lot of fundamental changes in how we all do business not just on-site but in our corporate offices as well. And companies that haven't invested in the technology and don't have that ability to immediately plug-and-play at their homes are going to be really disadvantaged. And I think it's going to make us think more about the homes and what -- our people need to have high speed Internet. They need to have -- it needs to be secure and all those things. And I'm sort of excited about that a bit because it could deal with a lot of really -- you could end up with a lot of really cool and more flexible workplaces than we've had in the past.

I'm enjoying a four second commute myself so. Yes. All right. Thanks guys and gal.

Thank you, Ric.

Yeah.

And our next question today will come from Zach Silverberg of Mizuho. Please go ahead.

Hi. Thanks for taking my questions. Just curious on some comments you made about turnover. How low do you think they can actually end up? And are you seeing any extra benefits on the revenues and expenses side?

Well, I never thought we would get to 37%. So I'm probably not a good one to ask but can it go lower? Yes, I think so because the -- for a couple of reasons that people who are enjoying the living experience that they -- and it's not everybody understands it's not optimal to be sheltering in place. But the companies who have taken extraordinary care not just turning -- keeping the place open keeping the lights on. The companies who have taken extraordinary care which are by and large our public competitors and probably a dozen or so really, really well-run private companies are going to differentiate themselves as a place to live for the next five years out of this kind of mess that we're in. And so, I think it's actually been a time where, if you love the place that you live in and you're being cared for and you're being in extraordinary ways being taken care of. You got to question why would you leave that? Because the pain associated with not being cared for correctly and properly in this kind of environment is probably not a risk that a lot of people are going to want to take. So, that's not going away anytime soon. So could the 37% become 33%? I suppose it could but we'll see.

On revenue expenses generally, lower turnover lowers expenses. You don't have to relet. You don't have to have commissions on it. You don't have to redo carpet stuff like that. And on revenue, I'd always rather have a renewal at a maybe a lower rate than a new lease because you're saving all the other costs, so low turnover is a real good thing long-term for this business and for Camden.

Great. Appreciate the color. And just on your press release, you outlined last April or a more typical month about 1.5% delinquency. What percentage of this 1.5% do you end up ultimately collecting? And what is sort of the time frame behind that?

Yes absolutely. So, it usually takes us sort of a month or so and we'll work that 1.5% down to what is typical which is about 50 basis points.

Great. Thank you.

Our next question is from Hardik Goel of Zelman & Associates. Please go ahead.

Hi. This is Alex Kalmus on for Hardik. Thank you for taking my question. On the expense front, property taxes were obviously a tailwind this quarter. Can you walk us through the market level buildup for this decline and what you expect on going ahead? Is this all from Texas?

Yes. So if you think about what we had for property taxes, it was predominantly driven by some select refunds that came -- that we got in. And those were all refunds that we knew were going to come our way. You've got -- you had Dallas was represented as was Atlanta. And so, that was all very typical. If you think about property taxes in general, I started the year believing that property taxes were going to be up right around 3%. And I still think that is going to be the case. If you think about the markets for us that are sort of a little bit of an outlier on the property tax side. You've got Houston currently which is sort of up 7%. And you've got Orlando which is up about 9%. But you've got that offset by some of our markets that are actually having negative growth when you think about refunds. So, where we are today, we think 3% is probably a pretty good number. What I will tell you is what typically happens. When you go through cycles like this the great thing about property taxes is it's the one large expense item that actually can turn negative. And in fact, it did turn negative during the last downturn. And I assure you that all of us that have very good tax consultants and I know that Camden has some of the best tax consultants out there. And I know that because our peers often call us and ask us who we use. Our tax consultants are out there and they're ready to fight. And so, maybe we don't get the benefit in 2020, but I'd expect to see benefits in 2021.

Thank you for the color. And just a quick follow-up. With regards to the renewals that you're offering are a lot of these -- are some of these under 12 months? Or are we thinking mostly 12-month lease renewals?

The vast majority of them are taking 12-month renewals. We offer the terms depending on anywhere from nine months to 15 months, but it's predominantly 12 months. If your question is short-term renewals, no, we're not seeing that. People are -- I think people are wanting certainty of their living conditions for the next year.

Got it. Thank you.

Ladies and gentlemen, this will conclude the question-and-answer session. And at this time, I'd like to turn the conference back over to Ric Campo for closing remarks.

Great. Well thanks. We appreciate taking the time to visit with us today and we will talk to you soon. Take care.

The conference has now concluded. We thank you for attending today's presentation and you may now disconnect.