Camden Property Trust (CPT) — Q1 2020 Earnings Call Transcript

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 email 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 stage 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 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 resilience and 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, making their homes a true place of refuge. Our corporate and regional support teams have continued to be highly productive, adapting to telecommuting 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.

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 roadmap for navigating this pandemic. First, take care of the Camden team. Make sure that they are operating in the safest possible environment. Also, make sure 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 residents who had lost jobs or substantial income from the COVID-19 impact. In April, we announced a $5 million resident relief fund for Camden's residents who were experiencing financial losses caused by the COVID pandemic. The resident relief fund was intended to help impacted residents by providing financial assistance for living expenses such as food, utilities, medical expenses, insurance, childcare, or transportation. The objective was to provide residents with a bridge to get to other forms of assistance such as unemployment insurance, stimulus checks, or PPP loans, many of which had been delayed beyond their expectations. We subsequently approved and delivered relief funding to nearly 2,400 Camden residents totaling over $4.5 million. We didn't give out the entire $5 million. Some people asked for less than the maximum amount of the grant, and some of the applications in the initial group were not qualified. So, to fulfill our commitment to distribute the entire $5 million of funding, we allowed additional residents to submit applications on April 20. All residents who submitted a qualified application demonstrating loss of income due to COVID-19 were eligible to split the remaining $460,000. Between the date we announced the resident relief fund and the date we reopened the fund—which was only nine days—an additional 12 million Americans filed unemployment claims. We knew the need for relief had increased, but we really had no idea how much. In the second round of resident relief, we reviewed and approved over 5,800 additional applications, which would have amounted to $79 per person if we had stuck to the original plan to split it among the remaining $460,000. As a result, we decided to increase our initial commitment of $5 million to $10.4 million, allowing all the approved applicants to receive grants of $1,000 each. This brought the total number of Camden residents receiving resident relief fund assistance to approximately 8,200. We're very proud of the way that we have been able to support our residents as well as our Camden team members during these complicated times. At this point, I'll turn the call over to Alex Jessett, Camden's CFO.

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, this is 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. We believe our methodology represents a more real-time view of what is happening on the ground. However, if we use the same methodology as our peers and look at leases that became effective in April, our new leases would have declined 1.2% and our renewals would have increased 4.5% for a blended increase of 2%. Occupancy averaged 96.1% during the first quarter and 95.6% in April compared to 96% in April 2019. Our current occupancy rate is 95%. Although current situations are certainly affecting people's living decisions, we continue to have great success in conducting alternative method property tours for prospective residents and retaining many of our existing residents. In April 2020, we signed 3,807 leases in our same property portfolio comprised of 1,322 new leases and 2,485 renewals as compared to 2019 when we signed 3,756 leases comprised of 2,025 new leases and 1,731 renewals. For April 2020, we collected 94.3% of our scheduled rents, with 2.5% of our residents entering into a deferred rent arrangement and 3.2% becoming delinquent. In a typical month, delinquency would be approximately 2%. So our April collections were 96% of typical. Markets experiencing higher than normal delinquency rates include Southern California at 9% and Southeast Florida at 4%. Markets with delinquencies at or below 2% include each of our Texas markets, Austin, Dallas, and yes, Houston, along with Phoenix, Tampa, and Orlando. So far, rent collections in May are trending slightly ahead of April. Regardless of our current collections, rent is still contractually due to Camden from each of our residents. According to GAAP, certain uncollected rent is recognized by us as income in the current month. Any rent recognized as income in the current month without corresponding cash receipt will be re-evaluated in subsequent months depending upon future payment history. The resident relief funds that Keith mentioned, also according to GAAP, will be recognized as a separate offset to property revenues in the quarter. The $750,000 contribution to the employee relief fund will be expensed to Camden's corporate level G&A, and the approximate $3 million bonus to our frontline employees will be predominantly booked to property-level expenses. In addition, Ric Campo and Keith Oden have each agreed to voluntarily reduce the amount of their annual bonuses, which may be awarded in the future by $500,000. The aggregate $1 million reduction in compensation will serve as a contribution to the just-mentioned payments. And now, a brief update on our real estate activities. During the first quarter of 2020, we stabilized Camden Grandview Phase Two, a $22.5 million, 28-home development in Charlotte, and we began leasing at Camden Downtown, a 271-home new development in Houston. Also, during the quarter, we acquired five acres of land in Raleigh for the future development of approximately 355 apartment homes, and we sold approximately five acres of land adjacent to one of our operating properties, also in Raleigh, to facilitate a public right of way. This disposition created an unbudgeted gain on sale of land of approximately $400,000, recognized as FFO in the first quarter. We decided to temporarily suspend construction activity on our recently announced Camden Atlantic development in Plantation, Florida, as only very minor site work had been completed to date. Due to the impacts of various local ordinances combined with current market conditions, we have delayed the expected dates for initial occupancy, construction completion, and project stabilization by one to two quarters at almost all of our new developments. We will continue to update these dates as we gain more clarity. Turning to liquidity. Subsequent to quarter-end, we issued $750 million of senior unsecured notes with a coupon of 2.8% and an all-in yield of 2.9%. We received net proceeds of approximately $743 million net of underwriting discounts and other estimated offering expenses. As of today, we have approximately $1.5 billion of liquidity comprised of almost $600 million in cash and cash equivalents and have no amounts outstanding under our $900 million unsecured credit facility, and we have no scheduled debt maturities until 2022. At quarter-end, we had $235 million left to spend over the next 2.5 years under our existing development pipeline. Our balance sheet is strong with net debt-to-EBITDA at 4.2 times, a total fixed charge coverage ratio at 6.4 times, and 100% of our assets unencumbered. Our 2022 debt maturities include $100 million in January and $350 million in December. We have not yet made any decisions about prepaying those or any other future debt maturities. Our current excess cash is invested with various banks earning approximately 30 basis points. Turning to financial results. Last night, we reported funds from operations for the first quarter of 2020 of $136.3 million or $1.35 per share exceeding the midpoint of our guidance range by $0.04. This $0.04 per share outperformance for the first quarter primarily resulted from approximately $0.005 in higher same-store net operating income resulting from higher rental income and general expense control measures, approximately $0.0075 in better-than-anticipated results from our non-same-store and development communities including our recent acquisitions, approximately $0.01 in lower interest expense as our original guidance anticipated a $300 million 30-year issuance mid-February at 3.4%, approximately $0.005 from the previously discussed gain on sale of land in Raleigh, and approximately $0.0075 in a combination of lower overhead costs and higher fee income. Given the uncertainty surrounding the social and economic impact from COVID-19, we withdrew our previous 2020 earnings guidance and we will not provide an update to our financial outlook this quarter.

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 occupancy 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 use net effective pricing. We have not offered concessions, so it's all based on our revenue management model. 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 unnecessarily taking unnecessary risk and complication when you start concessions in an environment where you've got tenants—there are residents that are under potential financial distress going forward, so that's something that we have not done and are not likely to do. So, yes, I think we'll make sure that we—based on the traffic and pricing trends that we're seeing, we'll do whatever 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. In that time frame, over the prior year our traffic, our guest card visits, and new leases were 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 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 timeframe 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 13% over where we were this time last year for that three-week timeframe. While 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 there are some interesting benefits 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, which 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 you a sense of what we've experienced: a 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.

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 recurring? Should tenants not be able or need more assistance in the future? Do you 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 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. While there was a lot of talk about stimulus checks and the possibility of stimulus checks that were going to be sent out, the reality is that in state unemployment benefits, people were trying to get through the queue, and the reality is the impact of this was so sudden; 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, medical bills, transportation expenses, childcare, and those kinds of things that were completely unexpected to a lot of people. We felt like, based on the feedback from our frontline teams, we could do something quickly for most people that was intended to be a bridge to get to something more durable, whether it's state unemployment, whether it's the stimulus check, or ultimately one of the PPP grants. Regarding our resident base, we have roughly 80,000 adult lease signers, and about one in 10 ended up getting the resident relief funding from us and it was to address immediate need to get people through a difficult time. The issue of what they do with their money is that cash is fungible, and we made no requirement whatsoever that you apply it to rent. Some people may, but that's the choice they will make. It really is more about the long-term brand issue for what Camden stands for, and I think as this unfolds, we'll see a positive effect of the actions we took on behalf of our residents and our employees; we're willing to play the long game. All of the financial impact, as you walk through those numbers, are correct. That will all be in the second quarter, and then we'll be back to a more normal run rate. Regarding the third question, which is do you anticipate doing this in the future? We have no current plans to do any other resident relief plans. It's possible that if our employees continue to have financial needs, we may look at replacing our emergency relief fund, but that's a program that's been in place for over a decade. So, immediacy, assistance, and the brand long-term about how we conducted ourselves at a time of maximum financial stress for our residents were all things that we had in mind.

Yeah. Let me just add to that a little color too. To me, there's been a lot of discussion these days about how companies ought to be more socially responsible; how it's not about the bottom line only; it's about taking care of customers, taking care of communities, and taking care of employees. So, we just thought that the benefit of immediacy—very quickly getting folks the money when it was hard to get money from the government—created a positive effect. We received thousands of congratulatory emails from residents who mentioned that while they didn't need the money, they understood why they really live at Camden. This is to say to the industry and the corporate world in general that these are the right things you should do. I can tell you that multiple companies followed our lead, and I spoke with probably 10 different companies about how we did it and why we did it around the country, and that was a good thing. To me, it really is about the long game, and 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. So we did both. When we were thinking about what could we do that was a major statement and that would be an amazing thing for our employees and residents—some residents who didn’t need the money—so we decided to do something bigger to help. It was to bridge people from point A to point B. There are many people trying to get funds from government sources; it’s just really hard for them navigating legacy systems that states have in the face of unemployment. So that was the thought process behind our decision.

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 received money from us paid their full rent.

Okay. Thank you.

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 and occupancy. It looks like it was up year-over-year 40 basis points. 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. 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, the fourth-largest city in America. There are a lot of other things that go on besides energy. Energy is definitely top of mind; energy obviously has had a rough road and probably will be a rough road going forward. To give you a sense of the last cycle in energy, from 2014 to 2016, Houston lost a net 5,000 jobs, and energy lost 950,000 jobs. During that time, the economy was doing well in other sectors that are more related to the U.S. economy. The good news is that even prior to this pandemic, energy executives were calling for transition plans as oil demand was supposed to peak around 2030. I think this pandemic, combined with the Saudi-Russia issue when oil went negative, has created a wake-up call for the energy folks. I think it’s a major happening right now. So, that could be a positive for Houston over the long term. The downtown project we are in the early stages of leasing up. It's definitely tough sledding right now. We've been absorbing about 10 units a month which is pretty slow. We are making leases in the last couple of weeks. We're I think 16% leased at this point. We did have part of the building structured as a Y hotel. They had the highest number of pre-bookings of any Y hotel that they've ever done. Of course, we know what happened to that now in the pandemic. So, we're not sure exactly how that's going to play out over time, but it's a great piece of real estate. It will be great long-term, but in the near-term it's going to be definitely difficult to lease that project.

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 two?

No, they're not back to normal. In terms of guest cards, which would be the starting process for linking a lease, we're about 13% below where we were this time last year for that timeframe. That's for the period between April 13 and May 6. We're about 13% below what we would have seen last year.

Okay. Thanks for clarifying. Thank you.

Hi, good morning everyone. 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. The 60 days would have been sort of—I guess expiring in mid-June perhaps but maybe to the end of June. Our customers know that we're like any other business and they need to pay their rent; ultimately, we provide value to them through all of the packages that we have. We will plan it—we will make changes as the market dictates. Once we get back to a more normal situation, our customers will see that they need to pay their rent ultimately. We will 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 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 turned 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; 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. After Hurricane Harvey hit in 2017, we ended up with very high occupancy. For the market, Houston was the only one in America where you could tell a story that had a recovering economy and a declining supply picture. When Hurricane Harvey hit, they ramped up development in Houston. Houston will have more supply to deal with than in 2017, 2018, 2019. Most of the analysis that we see around the country are supply dropping to barely over 100,000 units net. Developers that didn't have it already lined up will probably not be getting that done. It will be interesting to see how that plays out, but I think 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.

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 and 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 may be early? Also, thinking along the lines of maybe partnering with private developers who need capital; how are you kind of envisioning the opportunity set here?

Clearly, 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. This is exactly where we want to be. Over the last two years, in every single conference that Keith and I attend, people pound the table, asking, why are you going under-leveraged? Our answer has always been that we're in the longest economic recovery in American history, and something is going to come along to change that. We positioned our balance sheet to have the best possible position because opportunities will come up over that time. Could I have predicted what happened? No, but we did position ourselves for it. Opportunity will happen; if you look at the merchant builder model, they have high prefs or prefs that eat into their profits. In an uncertain environment, capital issues will arise. There will be amazing opportunities that present themselves like 2009 and 2010, but it’s too early to tell what they will look like now. It will take a few months for the market to settle; not a lot of transactions are occurring. Regarding private developers, we've been fielding many calls from them seeking help. We're not going to partner with private developers or do mezzanine financing. We aim for a very simple structure, and our cash is our cash.

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?

I don't know how long it will take yet because we've only been in it for 1.5 months. However, some fundamental things you can count on include people needing a place to live and knowing what the forward supply looks like. We can plan for some scenarios on how the market will reopen. It will become clearer in the next three to six months as we gain more clarity, and then you'll start seeing activity and decisions on what we will do going forward. I don't think it's going to take years, but it will take a few months.

Okay. Thanks. Appreciate it.

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've got a decent development pipeline, and we think it's appropriately sized given the opportunity set out there right now. As far as additional starts, we had original guidance for a couple of starts for 2020. We'll wait and see on those. The one in Florida, Camden Atlantic, we had literally just begun finalizing our permits for construction. We put that on hold out of an abundance of caution. At some point, my guess is when we see a little more clarity on what the job and reemployment situation looks like across the markets, then yes, we will probably move ahead with our planned developments whether it happens this year or rolls into the first quarter of next year. A little early to speculate since we need to see a few more cards, but I think we will use our balance sheet strength for two primary things: to complete our existing pipeline and then look at potential acquisition opportunities.

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 how things are performing on a submarket and price point spectrum?

Yes, absolutely. 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 was around 11%, and then San Diego and the Inland Empire were around 6%. If you compare that to our Sunbelt markets, they're considerably lower. 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 putting a drag on our numbers.

So just one of the things that's interesting is that data we received from the resident relief fund showed we really didn't see more residents applying for the relief fund from California than elsewhere, which is interesting because it was pretty equivalent across our entire footprint. So we have 80,000 adult lease signatories with over 8,000 folks who applied and verified that they either lost their job or lost significant income. So while our California portfolio is not under disproportionate financial stress, it's under disproportionate behavioral stress. As long as policymakers continue accommodating that behavior, I don't see any way around it, but that's very different than saying they can pay—do they have the means to pay? If they were financially impaired, they would have applied for the resident relief fund, and so we know that there's a sector of residents in California who are acting out—not appropriately.

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

Hey, good morning, everyone. And I would echo that I think you guys have been great for your residents and employees. I remember back with Harvey, you helped your employees rebuild. I think it's good that you guys helped out. And interesting the moral hazard comment Keith on Southern California. Not to leave Jessett—Alex Jessett—out of the conversation, but a double question for you. One, just in full disclosure, 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. Is your sense from the rating agencies—like you guys just did your issuance last week—are they giving 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 regarding the resident relief funds—the way we will account for it will be as an offset to revenue. We won't run it through same-store, but it will be in revenue. 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, I've spoken to all of the rating agencies over the past couple of weeks as we got ready for our bond issuance. I can tell you that REITs today are so much stronger than they were leading up to the last downturn, and I think that's giving rating agencies comfort. Another issue they consider is access to capital. Camden was able to go out and start with what was originally issued as a $300 million bond transaction and quickly grew demand to over $8 billion, which led us to upsize it to $750 million. I think events like that give the rating agencies a great deal of confidence about access to capital that most of us have. I think that’s why you're going to see them be much slower in making rating decisions than in the past. I can also tell you that during the last downturn, there were a couple of agencies that were very reactionary, moving people down in ratings by two steps in one action. I think they quickly realized that was an overreaction, and I think they have learned from that.

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. 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 impacted. We are seeing outsized impact in Orlando. Tampa, not at all, is performing better than most, and so is Phoenix. So, of the three markets you mentioned, I think 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—what Keith was talking to is pricing power in Orlando. If you actually look at delinquency in Orlando, it 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.

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