Camden Property Trust (CPT) — Q4 2025 Earnings Call Transcript

Good morning, and welcome to Camden Property Trust's Fourth 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 fourth 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 one, and 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 email after the call concludes. At this time, I'll turn the call over to Ric Campo.

Good morning. The theme for today's on-hold music, uncertainty, could not be more fitting for the state of the multifamily REIT sector. It's no exaggeration to say that the words uncertain or uncertainty have echoed through the conference call transcripts during 2025. And why wouldn't they? The operating environment last year was uncertain. Every sign suggests that the first half of 2026 will be marked by the same cautious tone as last year. The song that you've heard this morning references uncertain times. However, the song verse that best captures the current uncertain vibe for us is from The Doors classic Roadhouse Blues. Well, I woke up this morning and I got myself a beer. The future is uncertain and the end is always near. The end of uncertainty that is, here's what we are certain about. We are certain that we finished 2025 strong, exceeding our original guidance for core FFO by $0.13 a share. We are certain that people need a great place to live, and we provide that. We are certain that new supply has peaked and is falling like a knife in our markets. We are certain that 2025 had one of the highest levels of apartment absorption in the last 20 years. We are certain that our Sunbelt markets will continue to grow faster than the rest of the country, prompting us to market our California properties for sale. The sale allows us to expand our Sunbelt footprint, simplify our operating platform and buy our shares at a significant discount to net asset value. We are certain that our residents are resilient and the financial prospects are strong with rent payments at only 19% of their income. We are certain that apartments are significantly more affordable than owning a home and will be for the foreseeable future. We are certain that new lease rates and net operating income will grow in the future. We are certain that Camden has one of the strongest balance sheets in REIT land. We are certain that we have one of the best teams in the business, providing living excellence to our residents. And finally, I'm certain that Keith Oden is up next.

Thanks, Ric. As we reported last night, Camden's same-property revenue growth for 2025 came in at 76 basis points, which represents a 1 basis point beat to the midpoint of our most recent guidance. Our operations teams are celebrating like they've just won the Super Bowl. In putting together our projections for 2026, we reviewed supply forecasts and job growth estimates from several third-party data providers, and we budgeted from the individual property level up, taking into account each community's historical performance, current submarket dynamics and other relevant factors. On the supply front, it is clear that deliveries in almost all of our markets peaked during 2024 and continued to decline in 2025, setting up 2026 and 2027 to be below average years for new supply. Completions as a percentage of inventory peaked at nearly 4% for our portfolio in 2024 and are expected to be less than 2% this year and closer to 1.5% in 2027. Regarding 2026 job growth, I'll echo Ric's comments that uncertainty is still a key theme in the markets this year, but we are certain also that whatever jobs are created this year will predominantly be in Camden Sunbelt markets, which continue to attract corporate relocations and growth as a result of their affordable business-friendly environments. In 2026, we expect operating conditions will improve over the course of the year with modest acceleration in the second half of 2026. The midpoint of our 2026 same-property revenue guidance range is 75 basis points, basically the same that we achieved last year, with half of our markets falling between 1% and 2% revenue growth and most others flat to up 1%. The two outliers with slight revenue declines will likely be Austin due to continued supply pressure and Denver due to recent regulatory changes affecting income from utility rebilling. As many of you know, we have a tradition of assigning letter grades to forecast conditions in our markets at the beginning of each year and providing outlooks of improving, stable or moderating for their expected performance during 2026. We currently grade our overall portfolio as a B with a stable but improving outlook. Our first three markets are rated either A- or B+ and should achieve revenue growth in the 1% to 2% range this year. Washington, D.C. Metro ranks as an A- with a moderating outlook. Despite all of the conversations around D.C., DOGE and politics last year, D.C. Metro clearly outperformed our expectations with 3.5% revenue growth in 2025 and heads into 2026 well positioned with 96% occupancy. Houston is next with a B+ rating and a stable outlook, the same grade as last year. Supply has been quite limited in Houston for the past couple of years, allowing it to place #4 for revenue growth in 2025, and we expect Houston to exceed our average portfolio growth again in 2026. Our Southern California markets earn a B+ grade with a moderating outlook for 2026. Like D.C. Metro, Southern California outperformed our original expectations, posting mid-3% revenue growth in 2025, in large part due to declining levels of bad debt. Supply has not really been an issue in most of our California markets, but we do expect less of a tailwind from reducing bad debt as we move through 2026. Denver was our #3 revenue growth market in 2025 and receives a grade of B+ with a moderating outlook. Market conditions in Denver are fairly stable, though slightly more challenging in a few of its urban submarkets. But as I mentioned earlier, revenue growth is expected to decline year-over-year due to lower levels of utility rebilling and other income anticipated in 2026. Our next four markets earned a B letter grade with improving outlooks. Nashville, Atlanta, Dallas and Southeast Florida are all expected to improve over the course of 2026 as existing supply is absorbed. We have begun to see the proverbial green shoots in some of these markets and have budgeted between 1% and 2% revenue growth for each market this year. Orlando, Raleigh and Charlotte received B ratings this year with stable outlooks and budgeted revenue growth of 0% to 1% compared to relatively flat growth last year. Demand has been solid in all of these markets, but it will take a few more quarters to see any meaningful improvements given the higher-than-average supply delivered, particularly in the two North Carolina markets. We grade Tampa B with a moderating outlook and Phoenix of B- with a stable outlook and expect relatively flat revenue growth in both markets this year. Tampa benefited from above-average occupancy in 2024 and much of 2025, but has since returned to more normalized levels around 95%, tending to slow the revenue growth there. Phoenix still faces elevated levels of supply, mainly on the Western side. So we expect pricing power to be limited for most of 2026. And finally, Austin earns a C+ this year with an improving outlook after being stuck for a C- for the past 2 years. New supply is finally slowing and there is light on the horizon. But given the overwhelming amount of new apartment homes delivered in 2024 and 2025, it will take a little while longer for market-wide occupancy to improve and concessions to burn off. Stay tuned as we're fully expecting Austin to receive a B or better in 2027. And now a few details of our fourth quarter '25 operating results. Rental rates for the fourth quarter had new leases down 5.3% and renewals up 2.8% for a blended rate of negative 1.6%, which is fairly in line with what we saw in the fourth quarter of '24 and what we expect for the expected for the fourth quarter of '25. Renewal offers for first quarter expirations were sent out with an average increase of 3% to 3.5%. And as expected, move-outs to purchase homes remain extremely low at 9.6% for the fourth quarter and 9.8% for the full year of 2025. 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 and financial activities, then move on to our fourth quarter results and our guidance for 2026. During the fourth quarter, we disposed of three communities located in Houston and Phoenix for a total of $201 million, acquired one community in Orlando for $85 million and stabilized Camden Long Meadow Farms, one of our two build-to-rent communities located in suburban Houston. Our transaction activity for full year 2025 included the sale of seven older, higher CapEx communities with an average age of 22 years for $375 million and the acquisition of four newer assets with an average age of 5 years for $423 million. We recently began marketing for sale our 11 California operating communities. Obviously, the market will dictate final pricing, but preliminary indications of value and market chatter range from $1.5 billion to $2 billion. We are assuming this transaction closes midyear. Additionally, we are assuming that approximately 60% of the sales proceeds will be reinvested through 1031 exchanges into our existing high-demand, high-growth Sunbelt markets. And the remainder of the proceeds, modeled at $650 million will be used for share repurchases. We have already completed nearly $400 million of the $650 million of share repurchases associated with the planned asset sales, and we expect to complete the remaining buybacks in early 2026. In anticipation of this additional buyback activity, our Board recently approved a new $600 million share repurchase authorization. The just over $1 billion of 2026 acquisitions from the California sales proceeds are projected to occur during the summer months. Based upon this timing of asset sales, asset purchases and share repurchases, we are assuming no accretion or dilution in 2026 from this strategic transaction. Variability in transaction timing is considered in our core FFO guidance ranges. Turning to financial results. Last night, we reported core funds from operations for the fourth quarter of $193.1 million or $1.73 per share, $0.03 ahead of the midpoint of our prior quarterly guidance, driven entirely by higher fee and asset management income from our third-party construction business as we favorably closed out several jobs, which came in well under budget. Property revenues, expenses and NOI were exactly in line with expectations. Turning to guidance. You can refer to Page 24 of our fourth quarter supplemental package for details on the key assumptions driving our 2026 financial outlook. We expect our 2026 core FFO per share to be in the range of $6.60 to $6.90 with a midpoint of $6.75, representing a $0.13 per share decrease from our 2025 results. This decrease is anticipated to result primarily from an approximate $0.04 per share decrease in fee and asset management income as the outperformance we experienced in this category, particularly in the fourth quarter of 2025, is not anticipated in 2026, an approximate $0.045 per share or 3% increase in general overhead and other corporate expenses and an approximate $0.045 per share decrease in same-store net operating income. The growth in operating income from our development, non-same-store and retail communities is entirely offset by the impact of our disposition of older, higher FFO yielding communities in 2025. At the midpoint, we are expecting same-store net operating income of negative 50 basis points with revenue growth of 75 basis points, in line with 2025 and expense growth of 3% versus 1.7% in 2025. Each 1% increase in same-store NOI is approximately $0.09 per share in core FFO. Our same-store guidance includes California for the full year, and California is accretive to our numbers by approximately 25 basis points on revenue and 40 basis points on NOI. The midpoint of our 2026 same-store revenue growth of 75 basis points assumes 55 basis points of growth attributed to rental income and 20 basis points of growth from other income. We expect market rent growth of approximately 2% for our portfolio over the course of the year, with most of that growth occurring in the second half of the year, recognizing a portion of this rental rate growth with our slightly negative earn-in, flat occupancy and a slight improvement in bad debt results in expected growth of approximately 55 basis points for rental income. Other income which is primarily comprised of utility rebilling and fee income represents 10% of our total property revenues and is expected to grow around 2% in 2026. Adding approximately 20 basis points to same-store revenue growth. Page 24 of our supplemental package also details other guidance assumptions, including the plan for up to $335 million in development starts at the end of the year and approximately $200 million of total 2026 development spend. Noncore FFO adjustments for the year are anticipated to be approximately $0.14 per share and are primarily legal expenses and expense transaction pursuit costs. We expect core FFO per share for the first quarter of 2026 to be within the range of $1.64 to $1.68. The midpoint of $1.66 represents a $0.10 per share decrease from the fourth quarter of 2025, which is primarily the result of an approximate $0.05 per share sequential decline in same-store NOI driven by an increase in sequential same-store expenses resulting from the timing of quarterly tax refunds, the reset of our annual property tax accrual on January 1 of each year, and other expense increases, primarily attributable to typical seasonal trends, including the timing of on-site salary increases. An approximate $0.04 per share decrease in fee and asset management income from the large outperformance we recorded in the fourth quarter, an approximate $0.04 per share increase in interest expense from higher debt balances resulting in part from our actual anticipated share repurchases and an approximate $0.02 per share decrease in non-same-store NOI due to our late 2025 and anticipated first quarter 2026 disposition activity. This $0.15 per share cumulative decrease in quarterly sequential core FFO is partially offset by an approximate $0.05 per share increase in core FFO related to our share repurchase activity. And finally, we plan on launching a new $400 million to $500 million bond transaction later this quarter. At this time, we will open the call up to questions.

It's Nick Joseph here with Eric. Just on the Southern California portfolio sale. Can you talk about why now is the right time to do that, just given obviously the considerations of California right now? I think over the past few years, you've thought about kind of that portfolio exposure relative to the rest. And so essentially why now?

We believe now is the right time because we see a pivotal moment in the growth story of the Sunbelt, and we want to be ahead of that rather than lagging behind. We anticipate strong growth in the Sunbelt region, and when it shifts, we expect it to do so quite significantly. Additionally, looking at transaction volumes across the country, the coasts have remained the most active markets. For developers, selling in places like California has shown decent revenue growth, making it a preferable option compared to Austin right now. This means buyers don't need to time the market's turnaround. These are the main reasons for our decision. Lastly, we recognize the opportunity to execute transactions in a strong buyer's market and redeploy capital not just in the Sunbelt but also to buy back shares. Selling our California portfolio at a cap rate significantly lower than what is reflected in our stock's implied cap rate influenced our decision as well.

And then you're marketing that portfolio, but how are you thinking about either splitting up into smaller portfolios or individual assets? Or is the goal really to sell it all at once?

Well, the good news is that there's lots of buyers and there are lots of different permutations of the portfolio and how it can be either done in a portfolio deal or individually. And what we're going to do is maximize the purchase price, whether it's individually or separate or combinations of thereof.

Great, thank you. I guess just going back to some of your guidance and the thoughts on the pickup in the second half. Can you just walk us through your thoughts on new and renewal rents and blends as you go throughout the year? And are there any markets that are more or less concerning as you think about hitting your numbers?

Yes, absolutely. So what we're expecting in the first quarter is slight improvements versus the fourth quarter of '25 in both in terms of new leases and renewals, which obviously will translate to slight improvement on a blended rates for the first quarter of '26. As we go through the second quarter and beyond, we're going to have a lot more visibility because we'll start to get into our peak leasing season. And at that point in time, we'll give you some more color on exactly what we assume for new lease renewals and blends for the rest of the year. But I will tell you, obviously, included in our numbers is an improvement and is an improvement at the back half of the year, which is what I said in the prepared remarks. When I look at individual markets, as Keith walked through when he gave his letter grades, certainly we've got quite a few markets that are improving. And really, we don't have any markets that are declining. So based upon that, there's nothing that really sort of jumps out to us as a big concern. We're absolutely seeing green shoots in some of our markets that have been a little more challenged throughout last year and the year prior. So we feel like we're in good shape. But obviously, we need to get into the peak leasing season and see how the rest of this year unfolds.

A question on the guidance, and thank you for covering some of this in your prepared remarks, but can you clarify how to think about the timing of the 1031 exchange acquisitions? And I think some of the miss relative to the Street, maybe that you're net seller this year, but it does also sound like some of the share buyback activity is front-end loaded. So if you could kind of help me kind of walk through that.

Yes, definitely. For the full year, focusing on California, I'm referring to the sale in California, as well as the redeployment of around $1.1 billion of capital into the Sunbelt and about $650 million into share repurchases. Overall, we anticipate that this will have no net impact on our 2026 guidance. In terms of timing, we expect California to close around midyear, and we also anticipate that the $1.1 billion redeployment will occur during the summer months, roughly around the same midyear timeframe. There might be slight delays where we sell before we buy, but we're aiming to be as efficient as possible throughout this process. Regarding share repurchases, given our stock price today, we believe it's an excellent opportunity to buy back shares, and we plan to initiate these purchases as soon as we can. This outlines our expectations for the full year. I don't think the difference between our numbers and the street's predictions is significantly affected by California, as it’s effectively net neutral.

You guys are obviously penciling in some development starts this year. Could you maybe just talk about your expectations for stabilized returns. What are you seeing on costs? And how are you underwriting rents today in those development projects?

Yes, with the cost. Go ahead Alex.

Yes. On a cost basis, the good news is that costs are decreasing, showing a reduction of 5% to 8%. However, developments remain challenging. Looking at our activities in 2025, they were more subdued, and our guidance for 2026 suggests any new starts will occur in the latter half of the year. We do have a few land sites that we own and control, which we could potentially close on to start this year. Nonetheless, developments continue to present difficulties. Regarding rental rates, our approach is not to focus too much on trends but to consider the situation on an untrended basis. We're observing a rental rate increase of about 5% to 5.5% on that untrended basis, which could translate to around 6% when we look at trends.

Can we just get a bit more color on the $14 million of legal expenses. And I know that you guys switched to core from NAREIT, but still across the industry, these legal expenses, settlement political advocacy, whatever, in aggregate, is all becoming more a regular part of the business. So if you could just talk; one on the $14 million and two, how you guys are thinking about legal, political advocacy and stuff on a go-forward basis?

Yes. So I'll hit the first part. So the first part is, is that $14 million is the combined number of noncore adjustments, which includes legal and costs associated with development and acquisition activity, et cetera. But legal costs, I mean, it's well known, the legal battles that we're in the middle of and legal cost is becoming a significant number. And the good news is that it will go away at some point, right? This is some very specific actions that you guys know about. Those things will resolve itself, and we'll return to a more normal cadence when it comes to that category. In terms of how we're thinking about activation, Ric?

Sure. When considering the political action issues, it's quite straightforward. Over the past five years, we focused our political action activity mainly in California, where 92% of our political efficacy spending occurred. Once we complete that portfolio, the political efficacy in the Sunbelt region will be virtually nonexistent.

This is Ami on with Michael. What gives you confidence that you can redeploy the capital received from the asset sales within the 1031 window given some of the increased competition that we've been seeing and pretty low cap rates across the Sunbelt? And then if you can't redeploy it, what's the potential impact to earnings? Is there a tax implication here that you would have to pay? Thanks.

Yes. We just returned from NMHC, where we spoke with many sellers who have portfolios and individual assets they would like us to purchase. Camden is a highly regarded buyer, and sellers appreciate that we have no financing contingencies and a long-established reputation from our 33 years in the business. We are the type of buyer that sellers prefer, so I don't foresee any challenges in redeploying this capital. Additionally, we have one of the best acquisition teams in the industry, dedicated to this effort full-time, which further alleviates my concerns. However, it's important to note that there are tax implications to consider. If we aren't able to redeploy this capital, we might need to issue a special dividend.

Just going back to the acquisition opportunities. Just wondering the types of deals that you're looking at? Are these development deals that are in lease-up, are they mostly stabilized transactions? And then could you just also talk about some of the specific markets you're evaluating and whether there's any new markets included in that?

This is Stanley. In terms of acquisitions, we are currently assessing multiple opportunities across all our markets, focusing on stabilized options, both on and off the market. We plan to utilize our relationships to identify ways to reinvest the proceeds from the California sales. As Alex mentioned, our investment team is prepared for this task. We completed $423 million in acquisitions in 2025, and we could have pursued even more if we had chosen to. We feel very positive about the opportunities before us and are already making progress.

And at this point, we're not anticipating any new markets.

Another one on the SoCal portfolio trade. I guess, a bit of a 2-parter. First, it looks like those assets are still in the same-store pool, and that taking them out would be about a 15 basis point drag to annualized same-store revenue forecast. So first of all, is that fair? And then secondly, if you're able to actually achieve closer to the upper end of the range that you outlined, closer to the $2 billion. I'm curious how you think about the incremental capital deployment of that if they would also be earmarked for acquisitions or any tax limitations there?

Yes. So as I mentioned in the prepared remarks, the impact of California coming out of same store will be about 25 basis points on revenue. So that's how you need to think about it. If the portfolio sells for $2 billion, which we would appreciate, we would expand the 1031 exchange and likely increase the buyback.

Yes, everybody, demand question. There have obviously been a lot of issues with the job market for college graduates. I'm wondering if you've seen a noticeable impact on your business from that. And is that something that's a potential upside lever if that proves to be just a 2025 phenomenon?

The job prospects for college graduates in 2025 were among the worst in a decade. Currently, the unemployment rate for individuals aged 18 to 24 stands at 10%. Additionally, the number of young adults living at home has returned to pre-COVID levels, similar to what we saw in 2019, after a significant decrease over the last few years. Thus, it is indeed a challenging market for recent graduates, although there may be a tailwind if we see reasonable job growth in the latter half of the year. Many believe that job growth will improve in 2026 compared to 2025. Factors such as the benefits of the recent economic stimulus package, tax refunds, and the easing of tariffs that have contributed to economic uncertainty in 2025 could play a role. After the recent significant changes, companies, including ours, faced uncertainty about how to proceed, leading to a hiring freeze. It remains to be seen if that freeze will continue into 2026, especially with a more supportive economic context. I see this as a potential advantage once demand picks up, as most individuals in that demographic aspire to live independently.

Alex, you gave the impact on same-store revenue from California in '26. I'm wondering if you could provide that same figure for '25, just to get an apples-to-apples where same-store revenue is going for your remaining portfolio? And then going forward, how do you think that impacts same-store expenses? Just to get in California really helps mitigate property taxes? What's the going-forward impact on same-store expense growth?

Yes. If you consider 2025, the revenue impact would remain at 25 basis points, which is consistent with 2026. Regarding expenses for 2026, there is no significant effect on our expense figures. You are correct that Prop 13 does limit taxes, which benefits the growth rate in California. However, we've seen in our other markets that while property taxes can increase, they can also decrease. In our 2025 results, the total growth in property tax was zero. California's numbers were up, but most of our other markets were down. Therefore, I don't anticipate a substantial impact on expenses going forward.

Let me add to that. If you consider the portfolio costs, particularly the expenses related to our political advocacy group in California, these costs have been excluded from our same-store occupancy numbers over the last 5 or 6 years. If we average those costs over that period, they account for 80 basis points of our net operating income. In other words, if California's net operating income is growing at 4%, while the rest of our portfolio is also at 4%, we need to deduct that 80 basis points from California since it's part of our corporate general and administrative expenses. Therefore, California effectively achieved a 3.2% net operating income compared to the rest of the country, which does not bear those additional operating costs. Consequently, the overall Sunbelt portfolio outperformed California by 80 basis points due to those excess costs, even though they are not reflected in the net operating income growth.

I think since Keith brought up 2027 as it relates to Austin specifically in the prepared comments. I'm going to assume '27 is in play for this call. So maybe as we think about a lot of your core markets going forward, just give us a sense of kind of what that deepness of the recovery curve, that exit velocity, whichever metaphor you want to use, where do the market stack up in your current forecasting as we think about the end of '26 and then into 27?

So now we have to say we're not going to give the guidance for 2027, but we will talk about it, Rich. So our guidance... Yes, exactly. One of the interesting aspects of our situation is that it provides us with some optimism regarding the Sunbelt markets, not just at the end of 2026, but also into 2027 and beyond. If you examine Camden's rents for properties built in the last five years, we have returned to the rent levels we achieved at the end of 2021. Currently, we are entering our fifth year without any rental growth, which is unprecedented. In nearly 40 years of experience, we have never encountered a three-year period of flat or declining rents, not even during the Global Financial Crisis or COVID-19. As we begin 2026, our guidance reflects this situation. If everything goes as we anticipate, we will be 4.5 years into a period of minimal rental growth, which is not sustainable in the long term. We've seen recovery following the GFC and COVID-19; typically, when the market turns, it doesn't just move from 1% to 2.5%. Over the past five years, the average income of our renters has increased by 4% annually, resulting in a 20% rise in their household income, while their rents have remained nearly flat. Our residents are financially healthy, and when the market does turn, it usually does so quite significantly. It’s challenging to pinpoint exactly when that will happen, but we feel we are well along a path of flat rent growth and due for a change.

The only thing I would add is that when you think about markets, Keith gave Austin a C plus. The issue there is that there's good drop growth, but there has been a significant amount of supply added—more than 15% in three years. Therefore, Austin and Nashville may take a bit longer to recover. However, the other markets are well-positioned for the demand to pick up over the next 12 months as supply gets absorbed. This means we'll see more demand than supply, leading to an increase in rent. Additionally, when we consider concessions, people often receive one month or even two months free when leasing, and while some places might offer up to three months free, those instances are rare. As developers or operators reach a point where they no longer need to provide that month or two of free rent, stopping these concessions can result in an immediate 8.3% increase in the rent roll simply by eliminating one month of free rent. This is why the growth isn't just a gradual shift from flat to one or two percent; discontinuing concessions leads to an immediate boost in rental income on the next lease. It takes some time to roll the leases over and realize that revenue growth, but it's going to happen due to basic supply and demand principles. When rents spiked significantly in 2021 and 2022, it was primarily due to insufficient supply and high demand, leading to unprecedented price increases. For example, in St. Pete, we experienced a 50% rent increase over just three months due to being 98% occupied and having a limited number of available units, causing the market prices to surge. I believe we are currently experiencing a recency effect in the market, as three years of flat rent growth may lead to an additional five or six years of similar trends, but such stagnation is not sustainable long-term. The market will eventually adjust, and supply and demand dynamics will favor us in the coming years.

And just keep this in mind for 2027 as a fun theme song reference. My question is about new lease rate growth. Alex, you mentioned you'll provide an update as we approach the spring leasing season. However, from what I see, the fourth quarter of '24 had a decline of 4.7%, and the fourth quarter of '25 is projected to be down 5.3%. I understand that it takes time for changes to occur, even after the peak deliveries you mentioned, Keith. I'm curious about the likelihood of seeing new lease rate growth this year surpassing the 0% mark, which seems crucial for the multifamily sector, especially in the Sunbelt. How likely do you think it is to achieve that? I know you might want to be cautious about expectations, but what's your perspective on its probability?

Yes. So clearly, that inflection point is very important. You're exactly right. And my belief is, is that as soon as we all hit that inflection point, I think a whole lot of generalists that have been out of our stocks are going to come flooding into our stocks, and we're all going to see massive pops. So it's just a matter of when, definitely not if, because it will occur. I think it's probable. I think it's probable that it could happen this year. Now obviously, we're going to continue to update you guys as we get each quarter's worth of activities as we see what's happening on site. But I certainly think it's probable.

I apologize if I missed something since I joined the call late, but I wanted to discuss the changes in the Denver regulation regarding utility rebilling and reimbursements, as well as any other sources of income. Could you provide some insight into the specific legislation? Are there any other concerning draft laws in other states or markets that might negatively impact your additional income, considering how proactive you've been over the years and the bundling of services? I'm worried about the long-term risk to your other income streams.

Yes. So we didn't talk about it in the prepared remarks, but what you're referring to is House Bill 25-1090 and yes, this is a new legislation that was put in place in Colorado effective January 1 of this year, which no longer enables us to bill for common area utilities. It is a significant item for us. The total value of this is about $1.8 million. If you extrapolate that out, that's close to 19 basis points of same-store NOI. So it certainly is an issue. It's something that we're having to account for. And obviously, we certainly do make sure that we monitor regulations that are out there. The good news is, is that most of our markets, the reason why they grow so fast is because they're pro business pro growth and obviously, putting the legislation like that in place is not pro business or pro growth. So not really worried about it in other places, but we're certainly paying attention to Denver. I don't know, Laurie, do you have anything to add?

I mean I would just add, you asked about some of the specifics of Colorado. And I mean the key impacts are no hidden rental fees. So it's full transparency. We're seeing this across the country. We're all kind of mobilizing as an industry to ensure that there is transparency and that our residents know exactly what they're paying for. But in this particular Bill, the landlords have to show the tenants the full cost of renting before they sign anything, and that includes this common area maintenance and giving some estimates of what their utilities would be. And so that's some of the impact here trying to average out what you assume each renter's utilities bills will be. So that's the impact we're seeing. There are some things you are not allowed to charge back to our residents. So sub-metering is important. Because of this restriction, we have submeter all of our properties. And we did it fast and furious at the end of the year to make sure that we were able to capture as much of the information we needed. But it did eliminate any unclear utility pass-through charges and just really requires more disclosures. And so that's the impact overall. And as Alex said, I don't think we're expecting in any of our other markets something similar to this, but we are closely monitoring that within Camden as well as at the industry level. And I play a big role with the National Multi-Housing Council and this is something we're paying attention to across the country.

Do you talk about if you're seeing any difference in performance or rent growth between your urban and suburban assets and kind of your expectations through the balance of the year as well?

Yes, certainly. It’s interesting to note that our urban assets are performing significantly better and are starting to show a noticeable improvement compared to what we experienced in the fourth quarter of '25 revenue. I believe, based on our modeling, that this trend will likely continue throughout 2026. This marks a shift from what we've seen over the last 3 to 4 years. Currently, Class A urban properties are doing much better, although they were initially more adversely affected, which gives them some advantage to recover and progress from where they were.

I think you mentioned you're expecting market rent growth of around 2% in markets this year. I think on the third quarter call, that was in the sort of 3% to 3.5% range, maybe 2 quarters ago, I think third parties were maybe talking more over 4%. I guess what has changed the most in that outlook to sort of drive that revision downwards? And then as we think about that 2% expectation for this year, what does that assume in terms of job growth? And sort of how do you think of maybe sort of the down case scenarios to that?

Yes, as Ric mentioned at the beginning of this call, we are in a period of uncertainty. Economists are predicting that by mid-2025, supply will significantly decline. Historically, when supply reaches the level we anticipate, we see substantial growth, but the timing of this growth and the rate at which excess supply is absorbed are uncertain. It appears that it is taking longer than expected to absorb this excess. For instance, the hiring of May graduates was notably weak, and job growth has not met expectations, which has added some pressure. However, as I mentioned before, it’s not a question of whether this momentum will return, but rather when it will, and it has simply been delayed.

Yes. Regarding the employment growth outlook, Wheaton initially projected job growth in Camden's markets to be around 350,000 for 2025, but this estimate was significantly revised down to 170,000 by the end of the year. The forecast for 2026 is now 257,000 jobs in Camden's markets. One of the confounding factors for forecasters has been the misinterpretation of 1 million jobs that seemed to vanish from the reported figures for 2025. After revisions, it was clear that the actual numbers were far from what was initially thought. This discrepancy likely stemmed from reliance on data sets and BLS statistics that were adjusted. We hope 2026 will bring more reliable data, and achieving 257,000 jobs across Camden's platform would represent a strong year for us, especially as we near the completion of the significant development pipeline we've been navigating for the past three years.

Just want to go back to the comments on lack of rent growth. Certainly, in the past number of years, everything else has gone up, Uber rides, groceries, everyone has streaming services, et cetera. So Ric, do you think the traditional sort of 20% rent to income still holds? Or do you think because of inflationary pressure on people's lives, plus all their other activities and subscriptions that maybe that number is no longer 20%, maybe it's something lower than that?

No, I don't think so. That number is still quite good. At $20, it's a very affordable option. Over the past 3.5 to 4 years, real job growth and wage growth have been 4% to 5% after adjusting for inflation. When I consider our customers, we spend a lot of time understanding their financial situations and preferences for apartments. Looking at consumer confidence metrics, affordability is the main concern today. However, for our demographic, the average income is $121,000, and their earnings have increased by 4% to 5% in real terms over the last 3 to 5 years. So, what's really going on? Why do they feel dissatisfied? The low consumer confidence can be attributed to the psychology surrounding high inflation, which has affected prices across the board. A significant psychological factor affecting the overall housing market, including the single-family home sales market, is pandemic-driven low interest rates and increased demand that sharply raised housing prices. Interest rates have now doubled for 30-year mortgages, making single-family homes considerably more expensive than they were pre-COVID. This weighs heavily on consumers' minds. Even with a solid financial outlook, they feel negative about the economy, particularly because of rising single-family home prices and the prevailing narrative. If we look at other significant expenses, like gasoline, I recently filled up my vehicle for $2.17 a gallon. Although food prices remain high and some costs have increased due to inflation, gas prices have dropped and rents are stable. Therefore, the issues facing American consumers today are more psychological rather than based on actual financial strain. From an apartment perspective, it is more about the broader sentiment influencing the perception that everything is more expensive, despite their financial situation being relatively good.

Looks like your revenue enhancing and repositioning CapEx guide is down from last year. Can you talk about why this has guided lower and what initiatives you are working on in this category?

Yes. On the repositioning side, it is slightly down, but we typically do this every year. We are nearing the point where we've completed about 70% to 80% of our portfolio, and there are fewer opportunities this year. However, I still believe this is one of our best uses of capital and we absolutely plan to continue with it. I have no doubt that our repositioning team is aware of this discussion and is pleased that their hard work is being recognized. So yes, we will keep pursuing this as it remains a good use of our capital.

I want to revisit the question about development economics. Regarding the four properties you currently have in the pipeline at today's market rents, could you provide an estimate of their yields? Are they within the low 5% to 5.5% range? Alex, you mentioned the shadow development pipeline. I'm curious about how these four assets are performing, especially considering the stagnation in market rent growth over the past few years.

Yes. Our development pipeline currently includes two projects: Baker in Denver and Gulch in Nashville. Additionally, we have a few other sites under our control that we could potentially close on this year and possibly start development this year. The returns on these sites appear to be slightly better, averaging mid-5 percent on an untrended basis. However, Baker and Gulch present more challenges. Initially, we projected their start dates for 2025, but now we believe they may not begin until late 2026. Development in downtown Denver is particularly difficult at this moment. While I believe the economic conditions will improve, we are waiting to see evidence of these changes before proceeding. Regarding buyouts, they are decreasing by 5% to 8%, and there’s a possibility of further reductions, which would enhance the economic viability. Similarly, while downtown Nashville is an excellent market, there is significant oversupply that requires further clarity before we can assess the potential for starting developments there. We will not proceed unless we can do so in a manner that benefits our shareholders. Currently, we're taking a patient approach, aiming to start toward the end of this year.

Thank you. We appreciate you being on the call today, and we'll talk to you soon, I'm sure.