Camden Property Trust (CPT) — Q2 2025 Earnings Call Transcript

Good morning, and welcome to Camden Property Trust Second Quarter 2025 Earnings Conference Call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today for our prepared remarks are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, Executive Vice Chairman; and Alex Jessett, President and Chief Financial Officer. We also have Laurie Baker, Chief Operating Officer; and Stanley Jones, Senior Vice President of Real Estate Investments, available for the Q&A portion of our call. Today's event is being webcast through the Investors section of our website at camdenliving.com, and a replay will be available shortly after the call ends. And please note, this event is being recorded. 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 second quarter 2025 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. We would like to respect everyone's time and complete our call within 1 hour. So please limit your initial question to rejoin the queue if you have a follow-up question or 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. Today's on-hold music featured The Beach Boys, as a tribute to Co-Founder, Brian Wilson, who passed away in June. The Beach Boys upbeat musical themes included good vibrations, Surfing USA and fun, fun, fun, all fit with Team Camden and our culture to a tee, it's Tepper that is. Good vibrations continue for our Sunbelt markets, and we should be back to fun, fun, fun next year. Second quarter apartment demand was one of the best in 25 years following a strong first quarter. Apartment affordability continued to improve during the quarter with 31 months of wage growth exceeding rent growth. This expands affordability and increases apartment demand, creating new apartment customers. Camden's sector-leading resident rent-to-income ratio also continues to improve and is better than pre-COVID levels. The historic high cost of homeownership continues to support apartment demand and lower move-outs to purchase homes. Resident retention has been strong across our markets as a direct result of the living excellence provided by our on-site teams who have achieved our highest customer sentiment score ever. Great job team Camden. All other apartment macro demand drivers, including the outsized population growth and job growth, remain intact for our markets. New additions to supply have peaked in our markets. New developments are leasing at a decent pace given the record demand. As projects continue to lease up through the balance of 2025, rental rates should firm by the beginning of 2026, leading to better-than-average rent growth. With Advisors projects better than 4% rent growth in Camden's markets in 2026, accelerating to 5% in 2027 and beyond. We look forward to getting back to a more normal market and growth profile after the excesses of the post-COVID supply environment end. Camden is positioned well with one of the strongest balance sheets in the industry with no major dilutive refinancings over the next couple of years. I want to give a big shout out to Team Camden for their steadfast commitment to improving the lives of our teammates, our customers and our stakeholders, one experience at a time. And next up is Keith Oden.

Thanks, Ric. Operating conditions across our portfolio are still playing out as we expected. Rental rates for the second quarter had effective new leases down 2.1% and renewals up 3.7% for a blended rate of 0.7%. This was in line with our expectations for the quarter and reflected an 80 basis point improvement from the negative 0.1% blended rate we reported in the first quarter of '25 and a 60 basis point improvement from the 0.10% reported in the second quarter of 2024. Our preliminary July results are also on track and showing improvement versus the second quarter of 2025. Occupancy for the second quarter averaged 95.6% versus 95.4% in the first quarter of '25, and we expect occupancy to remain relatively stable in the mid-95% range for the remainder of the year. Renewal offers for August and September were sent out with an average increase of 3.6%. Turnover rates across our portfolio remain very low with the second quarter of '25 annualized net turnover of only 39%, a testament to strong resident retention and satisfaction, along with continued low levels of move-outs for home purchases, which were 9.8% this quarter. I'll now turn the call over to Alex Jessett, Camden's President and Chief Financial Officer.

Thanks, Keith, and good morning. I'll begin today with an update on our recent real estate activities, then move on to our second quarter results and our guidance for third quarter and full year 2025. This quarter, we continued to be active on the asset recycling front, purchasing for $139 million Camden Clearwater, a 360-unit waterfront community built in 2020 in the Tampa market. And during and subsequent to quarter end, disposing of 4 older communities for a total of $174 million. Three of the 4 disposition communities were located in Houston and the fourth in Dallas. These disposition communities were on average 25 years old and generated a combined unlevered IRR of over 10% over our average hold period of 24 years. These older, higher CapEx communities were sold at an average AFFO yield of approximately 5.1%. During the quarter, we stabilized Camden Woodmill Creek, one of our 2 single-family rental communities located in suburban Houston. Additionally, we continue to make leasing progress on our other 2 development communities, which completed construction during 2024. Camden Long Meadow Farms, our second single-family rental community, which we now anticipate will stabilize in early 2026, and Camden Durham, a traditional multifamily community located in the Raleigh-Durham market of North Carolina, which will stabilize in the third quarter. In addition, lease-up continues at Camden Village District, a 369-unit new development in Raleigh, which is currently 37% leased and 29% occupied. At the midpoint of our guidance range, we are still anticipating $750 million in both acquisitions and dispositions. This implies an additional $412 million in acquisitions and an additional $576 million in dispositions this year. We are actively marketing additional communities, but clearly, in the aggregate, our 2025 dispositions will be more back-end loaded. Our original guidance for development starts in 2025 was $175 million to $675 million. And to date, we have started $184 million. We will continue to monitor market conditions and may start additional projects later this year. Turning to financial results. Last night, we reported core funds from operations for the second quarter of $187.6 million or $1.70 per share, $0.01 ahead of the midpoint of our prior quarterly guidance, driven primarily by the combination of higher property tax refunds and lower interest expense resulting from the timing of capital spend. Property revenues were in line with expectations for the second quarter. We continue to be pleased with how well our property revenues are performing, considering the peak lease-up competition we are facing across many of our markets, illustrating the depth of the Sunbelt demand. And we are pleased with our continued property expense outperformance, particularly in property taxes and insurance. As a result, we are decreasing our full year same-store expense midpoint from 3% to 2.5% and correspondingly increasing the midpoint of our full year same-store net operating income from flat to positive 25 basis points. Property taxes represent approximately one-third of our operating expenses and are now expected to increase by less than 2% versus our prior assumption of 3%. This is primarily driven by favorable settlements from prior year tax assessments and lower values from our Texas markets. Also, we are anticipating that full year property insurance expense will actually be slightly negative versus our original budget of up high single digits. Almost entirely as a result of the 25 basis point increase in same-store net operating income, we are increasing the midpoint of our full year core FFO guidance by $0.03 per share from $6.78 to $6.81. This is our second consecutive $0.03 per share increase to our 2025 core FFO guidance. We also provided earnings guidance for the third quarter. We expect core FFO per share for the third quarter to be within the range of $1.67 to $1.71, representing a $0.01 per share sequential decline at the midpoint, primarily resulting from the typical seasonal increases in utility and repair and maintenance expenses. Non-core FFO adjustments for 2025 are anticipated to be approximately $0.11 per share and are primarily legal expenses and expense transaction pursuit costs. Our balance sheet remains incredibly strong with net debt-to-EBITDA at 4.2x. We have no significant debt maturities until the fourth quarter of 2026 and no dilutive debt maturities until 2027. Additionally, our refinancing interest rate risk is the lowest of the peer group, positioning us well for outsized growth. At this time, we will open the call up to questions.

I know you want to stay away from giving specific July data, but I think the market is trying to understand how the back half of this year could accelerate so much when it seems like your peers saw a shorter peak leasing season and are reducing their expectations. So could you maybe just tell us to the degree of acceleration you saw in July? And if you have an expectation around blends for the third quarter?

Yes, absolutely. So the first thing I'll tell you is that our blend actually increased monthly April through July. So the trend is exactly in line with what we'd like to see. Now that being said, last night, we maintained our full year revenue growth at 1%, but we did change some of the components of how we get there. So we'll talk about those components in a second. But the first thing you need to know because you guys are going to ask is we are now anticipating that our second half blended rates will be just under 1% and that will get you to a full year blend of about 50 to 75 basis points. So the way that we are still getting there is through lower bad debt, higher occupancy and higher other income than we originally had intended. Now as I've talked with many of you guys at various conferences, I'd like to point out that this is a forecast, and it's certainly not a directive to our teams. We give our teams leeway to get to our revenue budgets any way they can. And so this is how we're going to do it. But I would like to take this moment to point out that we are very proud of our teams for managing the delinquency and also managing the rollout of our new Vero screening, which is helping delinquency and has effectively got our bad debt back to pre-COVID levels. Keep in mind that we were assuming that we were going to have bad debt of about 70 basis points in 2025. And today, it looks like 55 basis points is probably a pretty good number. Also really proud of our teams for what they've been able to do on occupancy. They're converting guest cards on new leases. And they're also making sure that through the excellent customer experience that our resident retention is the highest level that we've ever seen. So really proud of what our teams are doing, and that is how we can get to our full year numbers. Laurie, do you have anything you'd like to add?

Sure. Yes. This is Laurie Baker, and hello to all of you. It's great to be on the call with you today. Camden's ability to continue to maintain strong performance in this environment is just a testament to the strength of our operating platform and the agility of our teams. Our culture of care and responsiveness helps reduce this resident turnover, and we continue to turn residents into satisfied customers and remain within the Camden family. So this commitment is translating directly into our performance with strong renewals, as Alex just covered and a customer sentiment score of 91.6. So I want to point out that this is the highest score we've received since we started measuring customer sentiment in 2014. And then last quarter, we shared with you that our customer sentiment score was 91.1 and celebrated the fact that this was the first time that we had surpassed the score of 91. So the fact that today, just a quarter past that we are once again raised the bar another 50 basis points with a score of 91.6 just demonstrates that our employees are deeply committed to providing an outstanding customer experience, leveraging our platform and improving lives one experience at a time.

Our team was debating whether it would be The Beach Boys or Ozzy Osbourne, I guess you went with The Beach Boys.

We debated that as well.

Alright. A little more upbeat.

Brian Wilson went first.

Yeah. Right. There you go.

Stay tuned next quarter.

Alright. Hopefully, we won't have another option by then. I just wanted to follow up on your last answer. Can you discuss the markets and what drove the changes? Where have things shifted the most? I know some of your peers mentioned slower lease-up on development and that developers are becoming more aggressive with concessions. Could you provide more insight into what's happening in the markets?

Yes. I mean we certainly are seeing some of our peer group get a little bit more competitive on the concession side. And what we're doing is that we're making sure that we are positioned appropriately in each of the markets. What I will tell you is when you sort of go through each of our markets, what you'll find is that some markets have done much better than we had originally anticipated. And the market that I'd point out for that is D.C. And then some of our markets have just continued to be a little bit softer. I'll tell you that Austin long-term, we think, is going to be an absolutely fantastic market for us, but it is going through just a huge amount of supply. And once that supply gets absorbed, the demand is so strong that it will be great. But today, it is continuing to be softer than we had anticipated.

I believe one of the main issues we've observed over the past couple of days is that businesses, particularly multifamily operators, have been focusing on increasing occupancy rather than pushing for higher rates. Given the current economic uncertainties, including discussions about tariffs and concerns over a potential recession, operators are cautious about the future. As a result, they are prioritizing occupancy and choosing not to raise lease rates significantly. This cautious approach stems from the overall uncertainty in the economy and political landscape. Consequently, rather than pushing new lease rates, operators are aiming to retain existing residents for as long as possible. Despite these trends, the consumer market remains healthy, with 31 months of wage growth, while apartment rents have stabilized. The issue at hand is more about the operators' mindset as they prepare for the latter half of the year.

Just to follow up on the last question. I was hoping you could dig a bit more into the DC and L.A. portfolio performance. There is some concerns about the near-term outlook given some recent weakening trends there. So maybe some color on how they performed year-to-date on blend what you expect in the back half of the year? And then also maybe how maybe explain how your D.C. portfolio has held up so well, it seemed to be a bit of an outlier.

Yes, definitely. Let me highlight some key points about D.C. D.C. achieved the second highest quarter-over-quarter revenue growth in our portfolio at 3.7%. Interestingly, after comparing with some of our peers, L.A. had the highest quarter-over-quarter revenue growth. Additionally, D.C. recorded the highest second quarter occupancy at 97.3%, the highest second quarter rental rate growth at 4.1%, the highest sequential rental rate growth at 1.2%, and the highest second quarter blended rate growth at 5.8%. We are also not seeing any slowdowns in guest cards. I would love for all our markets to perform like D.C. Currently, most of our exposure is in Northern Virginia, which is performing the best, followed by a slight shift this quarter where D.C. is outpacing Maryland. I believe our market positioning plays a significant role in this performance, and I think concerns about the local market are overblown based on what we're experiencing in the district.

I guess, Ric, just given your comments about affordability, the strong wage growth and supply moderating in the coming years. I mean how good do you think rent growth could be in the coming years? And is there a period of time that historically that this reminds you of?

It reminds me of the period after the Great Recession in 2008, 2009, and 2010. We emerged in 2010 when there was still a lot of negativity around the apartment markets. At that time, we confidently stated that the next three years would see the highest apartment revenue growth we had experienced in two decades, and that turned out to be accurate. Although the current COVID situation is quite different from the financial crisis, both scenarios involve oversupply coupled with a significant drop in demand. During the financial crisis, demand was severely impacted. Currently, we have oversupply due to an exuberance following COVID and the rapid rent recovery we saw afterward, along with a prolonged period of low interest rates that resulted in a massive increase in supply—reaching a 50-year high. However, what's interesting is that we have not seen a drop in demand; in fact, our demand over the last two years has been at its peak in 20 years. Therefore, we find ourselves with significant supply coupled with strong demand. It is noteworthy that in light of this substantial supply, our top-line growth has been flat or slightly up, which is a positive sign because typically, in situations of major oversupply, we would expect significant declines in both rent prices and occupancy rates, which would be concerning for the multifamily sector. In our case, the flat net operating income growth, around 1%, is actually a favorable outcome given the supply situation. Looking at the construction starts, there's been a significant decline: down 76% in cities like Charlotte, Denver, Austin, Atlanta, and D.C.; down 60% to 76% in Tampa, Orlando, Phoenix, and Nashville; and down 45% to 65% in Dallas, Houston, West Palm Beach, and Fort Worth. Clearly, supply is decreasing markedly. As I mentioned in my initial comments, Wit Advisors projects an average of 4% growth for Camden markets in 2026 and over 5% in 2027, with some markets seeing growth of 6% to 7%. Notably, places like Austin and Nashville are experiencing significant declines. We can expect a strong recovery as demand continues to grow in these markets, especially since Austin and Nashville are among the top job growth markets in the country. The challenge lies in absorbing the existing supply. I believe that the years 2026, 2027, and 2028 could be as favorable as 2011, 2012, and 2013.

Ric, could you maybe talk about the development outlook? You said that you've got a bunch of starts penciled in for the back half of the year. I'm just curious, given kind of the weak job report we got this morning and still uncertainty over tariffs. And I realize development is a long-term game. But like how are you thinking about that? How are you adjusting some of the inputs? And I guess, what yields are you targeting on new potential starts?

We are certainly taking a more cautious approach due to the current market uncertainties. One significant development is in Nashville, where the downtown market remains weak and heavily reliant on concessions. However, the suburban market is performing much better; we recently acquired a property in the suburbs that is exceeding our budget expectations. We intend to engage in development projects, but we want to ensure that the yields are reasonable. We are targeting yields in the low 5s to low 6s, approximately 5.75% to 6%, depending on whether the property is urban or suburban. The allocation of capital to development is currently critical, which is why we are waiting to see how the economy progresses with our two developments in Denver and Nashville, which could commence by the end of the year. On the cost side, we are involved in a more suburban project in Nashville and are currently in the buyout phase, which looks promising. We expect to save 2% to 4% on the original budgeted costs. The positive news for developers is that cost structures are stabilizing or slightly decreasing, although input pressures remain challenging for finalizing deals. Therefore, we anticipate that potential start numbers in 2026 and 2027 will be down 50% to 60% from their peaks in 2023 and 2024. Consequently, we expect a more balanced supply in 2027, 2028, and 2029 when these projects are completed. That's our perspective on the situation.

Great. Appreciate the comments. In particular, in '26, we don't receive the Wheaton data. So I'm just curious if you could share with us maybe what some of the underlying assumptions that they're making in terms of the job market in '26 over '25, given the weaker report this morning. And then do you, I guess, your thoughts on that specifically because you've mentioned some rental projections for Camden's markets in '26. I know you don't do your own forecast, but is that achievable? Do you think it's just simply lower supply? Or again, I guess if you could share with us what Wheaton is assuming for jobs next year?

Yes. I will update you on Wheaton's completions numbers. In 2024, for Camden's 15 operating markets, Wheaton expects around 250 completions. This number declines to 190 in 2025 and further to about 150 in 2026. When referring to developments, we're looking towards 2027, where total completions across Camden's platform are projected to be about 120,000. This shows a significant decrease from the peak of 245,000 in 2024 to approximately 12,000 by 2027. Stripping away the subsidized portion, the market-rate apartments across Camden's entire area would be around 70,000 to 80,000, which is extremely low by historical standards. We believe we are on the right path. While it might be challenging to determine the exact timing of supply changes, we can confidently predict what the deliveries will look like in Camden's market over the next several years. We are optimistic about the prospects, and we anticipate either continuing our acquisition program or exploring opportunities related to some developments on our existing land. Overall, the outlook based on Wheaton's data for the upcoming years appears very positive.

Yes. On the job growth front, Wheaton is seeing a decline in job growth projections. Their model indicates that job growth in 2024 is expected to be higher than in 2025, and they've adjusted their forecasts downward for 2026, predicting less than 1 million jobs to be created that year. In terms of multifamily demand, jobs play a crucial role. As long as there is some job growth, multifamily demand should remain solid, especially since apartment rents are currently more affordable compared to homeownership and wage growth. Therefore, we don't need significant job growth because the limited supply entering the market supports the forecasts of 4% in 2026 and over 5% in 2027 and 2028 that Wheaton has provided.

Ric, just a question on private credit. Certainly been a growing theme. And in speaking to people, it sounds like for banks, it's much more lucrative from a credit reserve perspective to make loans to private credit versus construction loans. But given there's no free lunch in real estate, and we've had blowups in the past, do you think the growth in private credit as it pertains to funding real estate development is something to be worried about? Or your view is right now because of how much the coupons in those loans and the fact that merchant guys are having trouble anyway putting deals together that you're not too concerned about the private credit sort of flooding real estate development and causing issues down the way?

No, I don't think so at all. When considering private credit, someone receiving a mezzanine loan can secure a construction loan at a reasonable rate, while mezz loans offer double-digit returns. This creates pressure on developers to finalize their deals. I don’t see this as a concern unless the rates were around 6%, 7%, or 8%, but given the current range of 10% to 13%, it's not an issue.

On the revised blended guidance of just under 1% for the second half of the year, it indicates an acceleration in new lease rates for the second quarter, with renewals being issued at 3.6%. I'm curious about how much visibility you have on new lease rates for this quarter and how you see the third quarter compared to the fourth quarter in terms of blending.

Yes, absolutely. So if you look on a blended basis for the second quarter, we were a positive 70 basis points, and we are assuming a slight deceleration from that in the third quarter to, call it, just under 1%. What I will tell you is keep in mind that we're now through July. And remember that new leases are generally about 25 days ahead of schedule and renewals are about 60 days ahead of schedule. So we've got pretty good visibility all the way through the third quarter. The other thing that we know is we know where we are in occupancy, and we've got very good visibility of where occupancy looks for 60 days out. So that positions us pretty well to understand what the fourth quarter should look like. So I feel very good about our assumptions and very good about the visibility that we have to ensure that we can make these numbers.

Ric, do you think the high levels of supply and attractive pricing and concessions are pulling forward any demand from the future Obviously, that's the whole point of lower prices. So I'm just wondering if some component of the record demand we're seeing is due to prices being so attractive and if maybe that might tail off if there was a pricing recovery.

No, I don't think so because our new lease rent-to-income ratio is 18.9%. There's significant room for people to secure relatively inexpensive rent today. I don't believe we're pulling demand forward since apartment demand operates differently; household formation occurs when individuals move out of their parents' homes or start new jobs. Given the affordability of apartments right now, I see potential for growth. For instance, if you have a $2,000 a month lease and apply a 4% increase, it’s not a substantial amount. Consumers are currently getting great deals on apartments due to supply and demand dynamics, which means they can afford to pay more in rent. As long as our teams continue to provide excellent customer service, residents will appreciate where they live and be agreeable to a 4% or 5% rent increase. It's a minor increase compared to what well-off consumers can handle. I don't believe we're pulling demand forward, and I think our customers are well positioned to handle higher rent.

How aggressive are you pursuing kitchen and bath renovations as well as the larger scale redevelopments at this point in the cycle? Can you talk about what you're going to be spending in '25 on that bucket what the expected yields are?

Yes, absolutely. What I'll tell you is we continue to go after repositions. It just makes a ton of sense to us. If you look at what we're doing this year, this year, we're going to do around almost 3,000 units. And we're generating an 8% to 10% return, which works out to be about $150 per door in additional rent. And so this just makes so much sense to us. And in addition, it makes sense no matter where you are in the cycle, but when you're in the point of cycle where you've got a lot of excess supply, realize that if you can go in and you can do a kitchens and bathrooms program, you can effectively make an asset that's 15 years old look like it's brand new. And that is a huge competitive advantage when we've got brand-new assets directly next door to us because that brand-new asset has got a much higher basis than we have, and therefore, they've got to charge much higher rent. Our asset has a lower basis, but it looks just like a brand-new asset because we've gone in, we've refreshed that kitchen, we've refreshed the bathroom. And then generally, when we build assets, we make sure that they have timeless exteriors. And so when we do all of that, we're able to compete really, really well against that brand-new asset. So yes, this is something that you will continue to see us do. It is one of the best returns we can have out there. And by the way, we're really good at doing it. We've done so many of these over the past 10, 15 years that it just makes sense for us to continue.

If we look at rent growth over the last couple of years, it's clear that renewals and high retention rates have played a significant role. If we consider what could lead to a shift in that trend, what do you think might cause it? Some factors mentioned include job changes, declining mortgage rates, and the housing market becoming more accessible again. What are your thoughts?

I would say it's a recession where the consumer definitely gets stressed and you have job losses and things like that, that clearly would be something that would be a negative for the apartment markets. Generally, in a recession, if it's an easy one or a very shallow one, you have hunker down mentality. So a lot of people don't leave if they don't have to. But if you lost your job and you have to then downsize and readjust your budget to whether you move in with a roommate or a friend or family or whatever, that's probably the biggest issue. I don't think the home ownership issue is so far away now. I mean the math I've been spending a lot of time looking at this. You need 150 basis points of reduction in the long-term rate in order for the housing market to get serious legs. And so I don't think that's going to be a big issue, but I think it's really just the overall economy.

I wanted to ask about Wheaton Advisors' forecast for the upcoming years, which has been helpful to understand their underlying assumptions. In terms of their projected rent growth of 4% to 5%, particularly by 2026, what is your perspective on its feasibility? Do you believe that supply deliveries and lease-up will be sufficient to support an average rent growth of 4% in 2026, or do you think that's more likely to be a scenario for 2027 or 2028?

If the economy remains stable as it is now, Wheaton has proven to be a reliable forecaster over the years. While we have several months until 2026, that’s why we trust Wheaton’s insights. I won’t make bold claims about what will happen in 2026 and 2027, but the facts are clear: supply is decreasing, and deliveries are projected to drop by 50% in our markets by 2026 compared to 2023 and 2024. Demand remains strong, and unless the economy changes dramatically or something unexpected occurs, 2026 is likely to be a strong year and a turning point for growth in the Sunbelt markets. For example, San Francisco is currently one of the better growth markets due to its significant decline during COVID, and it has yet to recover to 2019 rent levels. Meanwhile, the Sunbelt markets are experiencing a kind of stagnation due to excess supply. However, once that supply issue is resolved, the conditions will be quite favorable. Therefore, barring any major economic setbacks or unusual occurrences, I believe these projections are realistic.

This is Amy. I was wondering, was there anything that surprised you about the construction and lease-up process for the SFR communities? And are you looking at more projects within the SFR space? Or are there any takeaways that may apply to apartments?

Yes. Regarding the single-family rentals, we currently have two properties. One is located in the far northern suburbs of Houston and the other in the far southwest suburbs of the city. We just stabilized the northern property this quarter, and the leasing process was notably slow, which we anticipated but still found surprising. The local demographic tends to take their time in making decisions, often visiting multiple times and measuring spaces to ensure their furniture fits. The silver lining is that if prospects take longer to decide, they are likely to remain long-term residents. Our other property in the far Southwest Houston, Long Meadow Farms, is experiencing a similar delayed lease-up due to a later start. This seems typical for this type of product. However, I don't think it's indicative of the broader leasing market. For instance, our Camden Village District community is currently leasing up, and it has averaged 27 leases per month in the second quarter, exceeding our expectation of 20 leases per month. This trend illustrates the strong demand for traditional multifamily housing.

If you were to hit the high end of NOI growth this year, do you think it's more likely you see it from higher revenues or lower expenses or some combination?

I think it's likely going to be from some combination. That being said, we still are waiting to finalize some appeals on the tax side, which could end up being a positive to us. We continue to be pleasantly surprised by how low our insurance claims are. And so if that trend continues, that could absolutely be a positive to us. But by the same token, I'm incredibly happy with how well we're managing occupancy and very happy with how well we're managing delinquency. So I think it could be a combination.

When you're looking at acquisitions currently in lease-up, are you assuming maybe a longer lease-up period now versus the start of the year?

No, not really. I mean if you think about the acquisitions that we have, so we have one in Austin, which is our Camden Leander community. This was bought in lease-up. We knew that it was going to be a slow process just because of the amount of competition that is in Austin. And by the way, we talk about the competition in Austin so much. We cannot forget that the demand in Austin is just extraordinary. But we knew that was going to be slower. We feel very good about how that's progressing. And then our other community that has a little bit of a lease-up need is our Nashville community, and that's going just fine. I don't know, Laurie, if you want to add anything about Leander.

I mean, I think for our Austin deal, overall story is still being shaped by supply. There's just a lot of competition in that submarket. So it's just a near-term supply challenge that we'll work through and long-term, great asset in a growing job market of Austin and just a compelling play. Our teams are fully engaged, and we'll work through this quickly.

I just wanted to go back to assumptions around blended lease rates for the second half of '25. Again, obviously, you're one of the few apartment routes that's expecting acceleration in that number. And while a lot of your peers are not already downgrading that number. So just trying to understand a little bit better why you're expecting acceleration? Are we just not looking at the data on enough of a micro market basis, but that your geographic exposure is a little bit different? Is there anything happening from an operational perspective? Just trying to understand that because it's just an outlier versus everybody else?

Yes. What you need to consider, as I mentioned earlier, is that we have good visibility into the third quarter. We're forecasting our blend for the third quarter to be just under 1%. It's important to note that our blend from the second quarter was 70 basis points, so we aren't expecting a significant acceleration. For the fourth quarter, we anticipate that the blend will resemble what we saw in the second quarter. The reason we haven't experienced more pricing power in our markets isn't due to demand; it's related to supply. We are actively working through the excess supplies in our market, which is why Wheaton and others are optimistic about 2026. We need to move towards establishing pricing power to achieve those projections for 2026. You'll start to see this develop as we progress through the third and fourth quarters since supply is decreasing rapidly. While we've mentioned record levels of supply, we are also achieving record absorption. As we continue to absorb the excess supply, it will become easier to compare periods.

I just wanted to ask about the trajectory of rent growth recovery so far. What's been different about the leasing environment this year just compared to historical norms or even your own expectations? Looking across the sector, uncertainty has certainly been a common theme. And so is it just about the lingering effects from the record high supply or something else?

The term uncertainty has been heavily used in recent earnings calls, so I will avoid it. What I can share is that we are experiencing the usual peak leasing period during the second and third quarters, which aligns with what we typically observe in other years. Looking ahead to the fourth quarter, it appears to be stronger in our current estimation than what we would expect in a typical year. It's important to note that supply is being absorbed at record rates, which suggests we may see slightly higher pricing power in the fourth quarter than usual. Overall, while the fluctuations from the first quarter through the peak leasing season are somewhat muted compared to what we typically see, the trend still follows the expected pattern.

Just going back to the back half Alex, you mentioned that you expect third quarter to be a little bit better. But if we look at your implied fourth quarter versus the Street, fourth quarter implied for you guys is below the Street. So is this a function of the dispositions weighing down? Or is it also just how the rents are trending as well?

No, it is absolutely related to dispositions. We are still forecasting that we will reach the midpoint of our guidance for both acquisitions and dispositions, which is $750 million for each. There is some short-term dilution resulting from these transactions as we are exchanging some of our oldest, most capital-intensive assets for newer ones. While there is some dilution, we expect that the newer assets will grow at a faster pace, allowing us to recover from that dilution in a relatively short time. However, you will notice a slight impact in the second half of the year, which is entirely driven by the recycling program.

Actually, a question for Rick. I was just curious, given your, I guess, inroads at the Dallas Fed, do you find that your counterparts there are any smarter than the rest of us as far as the economy goes and making predictions.

That's a challenging question. I am genuinely impressed by the data and the independence of the Fed and the FMOC. They conduct a bottom-up analysis of the economy through their district offices, like the Dallas Fed. In my role on the Board, I work with a variety of groups such as airlines, universities, chemicals, and oil and gas, where we primarily discuss what's happening in our respective businesses. I bring my perspective from the multifamily sector, along with my involvement as a board member of the largest privately held homebuilder in America and as Chairman of the Port of Houston, which gives me a broad view of the economy. They take this collective insight and develop an economic forecast that incorporates our anecdotal discussions. Overall, I find their analytical capabilities impressive. However, when we discuss the economy, it presents a mixed picture. I wouldn’t necessarily say they are smarter than anyone else, but they are diligent in their data analysis, and each district operates independently, with their own economists contributing to discussions in D.C. at FMOC meetings, where various issues are debated before reaching decisions. They are intelligent, methodical, and non-political, so decisions on interest rates based on political pressure are unlikely. Their independence is evident in their discussions. For me, it has been beneficial to receive valuable economic data from other sectors that aid Camden in navigating these complex times.

Great. Well, I appreciate the time today that everybody is spending with us. And if you have any other questions, you can call Kim or Alex or me or Keith, Laurie. So we're available for follow-ups, and we will see you in the fall. Have a great rest of your summer.