Good morning, and welcome to Camden Property Trust third quarter 2022 earnings conference call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer, Keith Oden, Executive Vice Chairman and President, and Alex Jessett, Chief Financial Officer. Today's event is being webcast through the investors sections of our website at camdenliving.com, and a replay will be available this afternoon. We will have a slide presentation in conjunction with our prepared remarks, and those slides will also be available on our website later today or by email upon request. If you are joining us by phone and need assistance during the call, please signal a conference specialist by pressing the star key followed by zero. All participants will be in listen-only mode during the presentation with an opportunity to ask questions afterward. 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 third quarter 2022 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 hope to complete our call within one hour, and 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. Good morning. The theme of our on-hold music today was thank you. Earlier this year, our board of trust managers wanted to send a message of thanks to Team Camden for their unwavering commitment to our customers, each other, and our shareholders throughout the pandemic and beyond. The idea resulted in this video that was shared with all Camden teammates during our annual 15-city award ceremony tour. Hi, Camden. Happy ACE Award day. Oh, ACE Award day is the most fabulous day of the year for us Camdenites. I am here live in Houston, Texas, at the Camden corporate offices. Not only is it ACE Award day, today is another special day. For the first time in two years, our board of trust managers are meeting in person for their regular meeting, not virtually, in person. Guess what else? Camden has added another board member, and today is their first day on the job. Ric and Keith are on a Teams call, and they're gonna be joining us shortly. While we wait, why don't we go into the boardroom and say hello to our biggest fans. Come on, follow me. Hello, Camden team. I want to congratulate the Camden's operations leadership team and district managers for reimagining Camden's workplace. I am absolutely certain these changes will improve lives for both employees and our residents. I am so proud of you. Keep dreaming, keep improving, and keep learning. Hello, I'm Javier Benito, the new kid on the block. My first board meeting. I'm so proud to be part of this company that for the last 14 years, you have made it part of the Fortune's lists of the best places to work. Bravo for all of you, and thank you. Hello, Team Camden. I'm Steve Webster. I've had the privilege of serving on the board since the company's inception in 1993. Over all this time, I've seen Team Camden do so many amazing things. However, the team's performance during last year's great Texas freeze was truly remarkable. Your selfless care for so many residents without water and power for more than a week was incredible. Well done. Hello, Team Camden. I'm Frances Aldrich Sevilla-Sacasa, and I've been with Camden for 11 years. I would like to commend our Denver teams for the amazing job y'all did with the very scary fires on New Year's Eve. The personal sacrifices you made to ensure that all of our residents were safe and comfortable were incredible, and we are very proud of you. Thank you for all you do. Hello, everyone. I'm Mark Gibson. I've been on the Camden board for two years, and it is a great privilege to serve. I wanna give a special shout-out to our investment and construction teams for the amazing value they're creating for shareholders and residents. With all those acquisitions and new builds, you're giving our ops teams some amazing homes to offer our residents and even further exceed their expectations. Great job. Hi, Team Camden. Howdy. I'm Heather Brunner, and I have been proudly serving Camden for the last five years, and it has been fantastic to see how Camden is leading our industry with technology innovations like Chirp and Funnel. It's just absolutely amazing. Keep leading the way. Keep leading by example, Camden. Greetings, Camden. Kelvin Westbrook here. I'm the lead outside director. I've had the pleasure of serving on the board for 14 years. I am extremely proud of Camden for having made the commitment to dedicate the resources necessary to put in place top-tier diversity, equity, and inclusion program. Camden is indeed a great place to work. Thank you so much for all you do for Camden. Greetings, Camden team. I'm Scott Ingraham. I've been on the Camden board since Camden and Oasis merged almost 24 years ago in 1998. I wanna give a virtual high five to all of Camden's maintenance teams. Despite two years of working through the pandemic with short staffing and constantly changing rules and regulations, y'all have managed to deliver living excellence to our wonderful residents. They love you, and so do we. Excuse me. It's NASA. Oh, Ric and Keith, they're on their way. Dude, you told me our board meeting was gonna be a Teams call. I thought it was also. Oh my God. Whatever. Sorry. Operating fundamentals continue to be strong and above long-term trends. Rents are following their normal seasonal slowdown as customers prepare for the holidays. Even as seasonality comes into play, new and renewal rents are much higher than historical pre-pandemic levels, setting us up for a strong start in 2023. Demand continues to outstrip supply, and given the rise in interest rates and home price appreciation, apartment affordability is at an all-time high relative to homeownership in all of our markets. Our development pipeline continues to be a source of external growth. As we discussed on our last earnings call, we will not be selling or buying properties for the balance of the year. Apartment transactions remain quiet as participants' cost of capital continues to rise and price discovery continues. Our balance sheet is one of the strongest in REIT land and positions us to take advantage of opportunities as they unfold. I would like to thank all of our Camden teammates for all they do to improve the lives of our teammates, our customers, and our shareholders, one experience at a time. Next up on the call is Keith Oden. Thanks, Ric. Now a few details on our third quarter 2022 operating results and October 2022 trends. Same-property revenue growth was 11.7% for the quarter and 11.6% year to date. Our performance was in line with our expectations, so we've maintained our outlook for 2022 full year revenue growth of 11.25% at the midpoint of our guidance range. Rental rates for the third quarter had signed new leases up 11.8% and renewals up 11.5% for a blended rate of 11.6%. To date, leases signed during October are trending at 6.9% blended growth with new leases at 5.2% and renewals at 9.4%. For leases that became effective in October, the blended rate was approximately 10%. Occupancy averaged 96.6% during the third quarter, down slightly from 96.9% last quarter and 97.2% in the third quarter of 2021. October 2022 occupancy is currently trending at 96.1%. Net turnover for the third quarter was 51% versus 47% last year, and move-outs to purchase homes dropped to 13.2% versus 15.1% last quarter. We would expect to see a continued decline in move-outs to purchase homes through the remainder of the year given the recent increase in mortgage rates. Next up is Alex Jessett, Camden's Chief Financial Officer. Thanks, Keith. Before I move on to our financial results and guidance, a brief update on our recent real estate and finance activities. During the third quarter of 2022, we stabilized both Camden Buckhead, a 366-unit, $164 million new development in Atlanta, and Camden Hillcrest, a 132-unit, $92 million new development in San Diego. We began leasing at Camden Atlantic, a 269-unit, $100 million new development in Plantation, Florida, and we began construction on Camden Woodmill Creek and Camden Longmeadow Farms, two single-family rental communities, both in the Houston Metro area with a combined 377 units and a combined cost of $155 million. During the quarter, we increased our existing unsecured line of credit capacity from $900 million - $1.2 billion and extended the maturity to August 2026, with two further six-month extension options. We also added a $300 million delayed draw term loan with an August 2024 maturity with a further one-year extension option. Currently, we have approximately $30 million drawn under our line of credit and no amounts outstanding under our term loan. We will likely use our term loan and line of credit to pay off our $350 million, 3.2% unsecured bond, which matures on December 15th of this year. Our board recently increased our share repurchase authorization from $269 million - $500 million. We did not repurchase any shares during or after quarter end. Our balance sheet remains strong, with net debt to EBITDA for the third quarter at 4.2 x, and at quarter end, we had $348 million left to spend over the next three years under our existing development pipeline. Last night, we reported funds from operations for the third quarter of $187.6 million, or $1.70 per share. Included in our results are approximately $1 million or $0.01 per share of property expenses associated with Hurricane Ian, which are excluded from our same-store results. Excluding the impact from Ian, our third quarter results would have been $0.01 above the midpoint of our prior guidance range. This $0.01 per share positive variance resulted primarily from the combination of slightly higher other property income and slightly lower corporate overhead expenses. During the quarter, we experienced higher than anticipated repair and maintenance and utility expenses resulting from inflationary pressures. However, these increased amounts were entirely offset by lower levels of employee health insurance expense due to lower claims amounts. Last night, we reconfirmed the midpoint of our previous full-year same-store growth guidance at 11.25% for revenue, 5% for expenses, and 14.75% for net operating income. Our 11.25% same-store revenue growth assumption is based upon occupancy averaging 95.8% for the remainder of the year, with a blend of new lease and renewals averaging approximately 8.5%. These expected increases compared to achieved blended increases of approximately 15.5% in the fourth quarter of 2021. Last night, we also increased the midpoint of our full-year 2022 FFO guidance by $0.01 per share for a new midpoint of $6.59. This $0.01 per share increase results primarily from lower than previously anticipated corporate overhead costs. We also provided earnings guidance for the fourth quarter of 2022. We expect FFO per share for the fourth quarter to be within the range of $1.72-$1.76. The midpoint of $1.74 represents a $0.04 per share increase from the $1.70 recorded in the third quarter. This increase is primarily the result of the previously mentioned $0.01 per share third quarter impact from Hurricane Ian, an approximate $0.06 Sequential increase in same-store NOI, resulting from $0.03 in increased revenue driven by higher net market rents, partially offset by lower occupancy, and $0.03 In lower property expenses resulting from our typical seasonal decrease in utility, repair and maintenance, and unit turnover expenses, combined with the timing of property tax refunds. An approximate $0.03 Sequential increase in NOI from our development communities in lease-up and our other non-same-store communities. This $0.10 aggregate increase is partially offset by a $0.03 Decrease in the amortization of net below-market leases related to our second quarter acquisition of the fund assets. As we discussed on our first quarter earnings call, purchase price accounting required us to identify either below or above market leases in place at the time of the acquisition and amortize the differential over the average remaining lease term, which is approximately seven months. Therefore, in 2022, we will recognize $0.07 of FFO from the non-cash amortization of net below market leases assumed in the acquisition. We recognized $0.035 of FFO in the third quarter of 2022 from this amortization, and we will recognize the final $0.005 in the fourth quarter. If leases were above market, the amortization would have resulted in an FFO reduction over the remaining lease term. A $0.015 decrease in FFO related to higher interest expense, primarily attributable to higher variable interest rates, and $0.015 in higher other corporate costs related to anticipated higher health insurance expenses and the timing of certain year-end accruals. At this time, we'll open the call up to questions. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Jeff Spector with Bank of America. Please go ahead. Great. Good morning. My first question is a follow-up to Ric's comment on demand continues to outstrip supply, and I know there's various supply forecasts for next year, different forecasts, I should say. I guess, Ric, you know, is that common for now, or do you feel that in 2023 that will continue? How are you guys thinking about supply in 2023 in your markets? Sure. Supply in 2023 is definitely gonna be out there. I think we have a projected supply from Ron Witten's number, about 180,000 new units coming into our markets. You know, with decent job growth and migration to our markets that we think that's gonna continue. So new supply should, you know, we should be able to continue to raise rents during that period. You know, but barring some big economic issue, obviously, that could be out there on the horizon. You know, we feel pretty good about the number of units that we absorbed, you know, in 2022, and think that 2023 should be, you know, a decent year even with the supply coming on. Thank you. My second is on the development pipeline. You know, how are you thinking about that as we, you know, head into 2023? I mean, there does seem to be some, you know, clear signposts of the consumer, you know, pulling back, weakening. You know, how are you thinking about that as we head into 2023? Clearly, development, we're looking at each one of our developments and making decisions on when we start or if we start in these deals in 2023, you know. I think good news is there's a fair number of them that are middle of the year towards the end of the year. We'll just have to see how the you know, the market works, you know, from that perspective. I think one of the things that we are starting to feel is that construction pricing is flattening out, which is good. Maybe it makes sense to wait to see a few more cards on cost and also how the market, you know, how the economy does next year. Thank you. The next question will come from Nicholas Joseph with Citi. Please go ahead. Thank you. Recognize you've been mostly out of the transaction market, but hoping you can provide some color on where cap rates have trended more recently across your market. Also recognize that probably not a lot is traded, but any kind of recent data points or thoughts around that would be appreciated. Sure. Yeah, I think that's exactly right, that the market's very quiet from a you know a deal perspective. We have a little technical problem going here, so Keith isn't gonna join me on my side here. Yeah. You know, if you think about the market today, if you don't have a reason to get into price discovery, then you're probably not going to do it in this market. I think that's the key point is that there's just no reason to transact in this uncertain environment. Cost of capital has gone up for everyone. The buyers that were using debt, especially floating rate debt, are having to rethink their models. I think ultimately this is the high tech version of when you fix computer issues. I think it's, you know, people are sort of waiting for the first quarter to see what happens. You know, the good news is cap rates definitely have risen, you know, substantially, and the property values, you know, depends on who you talk to, are down anywhere from 10%-20%. The good news is you saw our numbers and all of our competitors' numbers are, you know, we're still driving NOI way above what we normally get. That's kind of helping offset some of the cap rate rise. I think ultimately, you know, there will be transactions done. There's still a wall of capital out there that wants to invest in multifamily. 2023 is gonna be a really good year. You know, I think even in a slowing market, we're still gonna have decent rent growth, and I think we have a great embedded start for the year. You know, when you start thinking about cash flow growth in 2023, it's gonna be better than it is on average, but probably a lot slower than 2022. That should have some benefit in terms of keeping values, you know, from falling dramatically more than they have already. Thanks. That was very helpful. Then as you think about kind of uses of capital, obviously we've touched on development a bit, you mentioned the share repurchase program. How do you think about executing there? You know, your stock's in the mid- to high-5% implied cap rate today. At what point does that become a more attractive use of capital? Well, as you saw in our release, we increased our buyback program authorized by the board of $500 million. You know, historically, we've been a big buyer of the stock, not recently. You know, the stock buybacks are interesting on the one hand, because clearly our. It's hard to tell what asset values are today, but it's, you know, the stock is, when you think about FFO yield and its implied cap rate, it's a pretty attractive price. The issue you have in REIT land is that, you know, it's hard to buy a lot of stock back, and we definitely wanna keep our balance sheet strong, so we're not going to go out and borrow money to buy stock. As we've done in the past, when you can sell assets in the, you know, private market at $1.00 on the dollar and buy your stock at $0.75 on the dollar, that's a pretty good investment. We'll do it through sales and not through debt. We'll take our time. We've always said the stock price has to be, you know, 25%-ish off at a discount, and it has to be persistent, so we can get in the market on a moderate basis, and we'll. That That continues to be our philosophy. Thank you. Mm-hmm. The next question will come from Steve Sakwa with Evercore. Please go ahead. Good morning, team. It's Flora with Steve Sakwa from Evercore. I just have a follow-up question about development front. How much more conservative are you being in underwriting, and how much have you changed your development hurdles on new deals given the change in cost of capital? Thank you. Well, the development deals that we had under contract that we didn't have hard earnest money on, we definitely have changed our hurdles. You know, our cost of capital has gone up substantially, obviously, like everyone else's. You know, when you get down to it, we're not gonna do a development that isn't a positive spread of at least 100-150 basis points wide of our weighted average cost of capital. Our weighted average cost of capital has gone from five and some change to seven and some change. We definitely have implemented that new hurdle into future development pipelines. Then each one of our existing developments that we haven't started today, we're putting that new hurdle on it. The good news is that rental rates have gone up substantially, as you've seen in our numbers. We've been able to do better than we anticipated in terms of rents. We also think that usually we were putting a 1% construction cost increase per month, so call it 12% a year. We think that number's gonna slow or go negative when we start seeing you know, starts fall. Because most merchant builders are telling me today that their starts are gonna be down substantially in 2023 and 2024, given cost of capital and the lack of bank financing. Yes, in fact, we have increased our hurdles, and we are reviewing all of our projects that fit into the new hurdle rate. Okay, that's really helpful. My second question, there was a $0.07 contraction from the previous top end of guidance, so kind of indicating a more conservative outlook. Could you provide some color on the operating trends you've seen so far, and what may be limiting the upside? Yeah. There was a $0.07 decline in the top end, but there was a $0.07 rise in the bottom end. Really it just reflects the fact that we're, you know, we're a month into the last quarter of the year, and you there's a lot better visibility in our world when you're looking out 60 days than when you are 120 days or a full year. So it's really more just narrowing the guidance because we think there is likely to be less variability. The amount of the width of the guidance that we took into the third quarter was primarily around the just the uncertainty on the collections. I mean, it, you know, and ERAP payments. It's just very hard to model those two items because they're in this environment, particularly in California and Washington, D.C., not things that we have direct control over. Our guidance was reflected that in the third quarter, and we've got a little bit better visibility. We kept the midpoint the same, actually raised the guidance $0.01 for the full year. Yeah, it's just really just less time that over the forecast period and trying to give investors a little bit more clarity around where we think we're likely to end up at the midpoint. Okay, thank you. That's it for me. All right. You bet. The next question will come from Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead. Great. Thanks, and good morning, guys. First, do you guys still expect to commence the Camden Nations deal this year? Secondly, you know, going back to development, last quarter, I think you had discussed yields on future starts ranging from the low 5s to low 6s. Ric, you just mentioned rents have gone up some, which has helped, but how much do costs need to go down from here for you to achieve that new 7% hurdle rate? Well, to answer the first part, we're not gonna start Nations this year. It'll be a next year start, depending upon, you know, how the cards fall in the first and second quarter. In terms of construction costs going down, we don't think they're gonna go down substantially very soon. Usually, it takes a really big economic you know situation or bad situation to drive costs down. We had that in the financial crisis in a big way, but we're not really anticipating that, you know, next year at this point, unless you assume a financial crisis style you know problem. What will happen though is, as the pipelines do moderate, there'll be fewer developments being done, and then costs will just at least stay flat, maybe down a little. We've already seen, you know, some commodity prices like lumber. We're at pre-pandemic prices for lumber and, you know, tripled during the pandemic. I think there will be some less pressure on cost, which is. I also think that we'll be able to shorten our development timeframe, which will take cost out of it, out of the system. With fewer developments getting done, rather than having to add time to the schedule, we might be able to take some time out of the schedule and compress that to save money as well. Ultimately, it will be about where rental levels are. The good news is that, you know, rents, given where we are today, are likely to be strong in 2023, and that should help those yields as well. Looking at the backlog of future start that you have today, you know, based on some of those assumptions, maybe, you know, today's rents and sort of current cost, you know, how many projects and what sort of volume would that represent, that meet the 7% hurdle? Right now we haven't really spent a bunch of time looking at each development in the pipeline and wondering what it's gonna be at this point, because we're not at that point yet. We have around 3,000 units or 3,300 units in our pipeline, and each one's gonna be evaluated on an independent basis, you know, with the new hurdle rate lens that we're gonna put on it. Now, the good news too is that when you think about the capital markets that we have today, you know, debt prices, you really don't wanna go into the debt market if you don't have to. You really don't want to go to the equity market, obviously. What we will likely do is use dispositions to fund development in the future. When you start looking at that, then you start thinking about trading, right? You're trading an existing asset with a certain growth rate at a certain price for a new development that has a different profile. We'll look at what the incremental sort of accretion dilution is from that model. Then you know, so that I think that rather than just saying, "Okay, I have to have a certain hurdle rate on the development," if we can sell assets and create a limited dilution scenario by selling and funding development and buying other properties, then we'll do that. That will change the dynamic a little bit on the hurdle rate for new developments for next year. The bottom line is we'll have to figure out, you know, or the market will have to show us whether there's an ability to fund development and other activities, stock buybacks, and what have you, through dispositions, and we'll just have to see how that all plays out next year. Understood. Thanks for the comments. Mm-hmm. The next question will come from Neil Malkin with Capital One Securities. Please go ahead. Thanks everyone. Good morning. First question. You know, it seemed like you've been raising guidance every quarter, obviously Sunbelt very strong. That's great. But then, you know, the maintaining, you know, it looked like it had to do with potentially D.C., L.A., either elevated vacancies from long-term delinquent move-outs or some sort of bad debt issue as the California coffers are running out of reimbursement funds. I noticed that occupancy in October dipped 50 basis points to like 96.1. Previously, I think Alex mentioned you guys were assuming you would average 96.6 in the back half of this year. It seems like you took that down, you know, by 80 basis points. Maybe can you just talk about what you're seeing and what's leading to that, the drop and all the things I just mentioned? Alex, you wanna take that? Yeah, absolutely. The first thing I would touch on is occupancy. Occupancy is certainly a little bit lower than we had expected, but by the same token, our asking rents or our net market rents are higher than we thought. It was really sort of a trade between occupancy and rental rates. The second thing I will point out, and you are correct, especially in California, we did have less ERAP proceeds from the second quarter to the third quarter, and that was primarily the driver of what you saw in the growth differential on a sequential basis for San Diego and L.A. To give you an idea, San Diego had about $225,000 less ERAP received in the third quarter as compared to the second quarter. If you normalize both of those, then our sequential revenue in San Diego would have been up 2.25%. If you look at L.A., and in particular the Camden in Hollywood, we had about $220,000 less in ERAP in the third quarter as compared to the second quarter. Obviously, that would have a significant impact. Then in Phoenix, we also had you know higher bad debt and less reletting income in the third quarter as compared to the second quarter. If you normalize that would have been up 2.7%. That really is sort of the drivers of what you saw. Okay. Nothing, just to be clear, nothing about the, you know, potentially elevated move-outs for long-term delinquents, particularly in your California portfolio contributing to any of that. It's really essentially all you've delayed out there. Well, if you have. So we- We did have more skips and evictions than normal and than we did in the second quarter. We had more in the third quarter than the second quarter, and some of that is clearly driven by people who are moving out. One of the things that's really interesting when you look at the numbers is that in the second quarter, we had a higher collection rate. I think Alex, it was like 97% and some change. Then the third quarter was 94% and some change. That was primarily driven by California, and you had a situation where most residents thought they would have to pay their rent, and then California extended the eviction moratorium until January 2023. You know, when you give people, you know, runway and say, "Gee, you don't, you're not gonna be able to be evicted, and you don't have to pay your rent," they take an opportunity to do that. Hopefully, you know, starting in January, we have no eviction moratoriums or, you know, things driving bad consumer behavior, and that will, you know, hopefully improve in 2023. Okay, thanks. Other one for me is maybe in-migration. Talk about that a little bit. Seems like that continues to be very strong. Certainly commentary we've heard from brokers across the Sunbelt seems like just job growth and attraction from employers continues to ramp. There's been some conversation of potential reversal of that as some companies implement return to office. I was hoping you could maybe give us some data points or you know bigger picture thoughts on in-migration, your confidence in that, and then you know any anecdotal or early signs that there may be some sort of reversion of the in-migration, or if it you know continues to be just very strong one way. Yeah. Ron Witten's numbers for migration, net migration into Camden's markets for 2022 are at 153,000 net to Camden. He's got based on the same numbers for 2023, he has net in-migration of 179,000. Not only is it not reversing, but in his, the work that he's done indicates that net in-migration will actually increase in 2023, and then it stays elevated in 2024. Now obviously, these are the forecast numbers, and they're subject to a lot of variability. I think directionally, in-migration is gonna continue to be a pretty significant positive to Camden's overall geography. I'd add to that, if in our particular markets, so 21.5% of our move-ins in the third quarter came from non-Sunbelt markets, and that's actually up 100 basis points sequentially. If you compare that to the third quarter of 2020, it's up 400 basis points. We continue to see sequential increases in migration to our markets. Okay. Thank you, everyone. Mm-hmm. The next question will come from Rich Anderson with SMBC. Please go ahead. Hey, thanks. Good morning, everybody. I wanted to add a sort of a big picture question, and kind of looking back at history to see if we could have some clues about what might happen from all this. Because the changes that we're seeing, some of it are normal seasonal patterns, as you described, Ric, but then we have a recession potentially coming. I'm wondering if this is chapter one of a pretty meaningful deceleration beyond what would be called normal seasonal patterns. You know, if you look back at last time, you know, multifamily, or the last several times multifamily fell into a negative same-store growth scenario, what is it about the current fundamental setup today that you think protects against an outcome like that? Is there m aybe that could happen in your mind and, you know, you leave that option or that scenario open to potentially happening. I'm just curious, you know, what confidence you have that the firm and the industry will avoid something really draconian, call it, a year from now. Yeah. I think first of all, if you have a financial crisis, right, like we had in 2008 and 2009, it's sort of a different world. I'm not gonna assume- You can't avoid that. I get that. Yeah. Yeah. a financial crisis, right? Yeah. Yeah. You know, a normal recession or a hard landing recession or soft landing, whatever you wanna call it, the multifamily business is gonna do well. The reason is that number one, you're starting out from high numbers, right? Occupancy is at a high level across the country. That's number one. Number two, the consumer, our consumers are doing really well. Our average income is, you know, $117,000-$118,000 for our new people. They're paying less than 20% of their income in rent. They have a lot of cash in the bank still. They're well employed. It's, you know, our consumers are doing great. When you have this in-migration coming in, we have supply coming, but, you know, we've had supply coming to these markets for the last 30 years as we've been a public company, and supply has never killed the golden goose. It might slow growth a little bit, but in some cases, but because of the diversified portfolio we have, it really doesn't impact the business that much. So when you think about. Now let's take the single-family home move-outs. We were at 15% in the summer. We're at 13% now. I think the trending numbers through October are down to 12%, and we think that number is gonna go to single digits when you start thinking about interest rates being tripled for single-family home, folks, and the pricing, and, you know, the pricing model today for multifamily is as good as it's ever been in our history relative to people moving out to buy houses. I serve on the board of the largest privately held home builder in America, and our sales are down 50% from June forward, and they're not going up. With all that, all those backdrops, multifamily should be a really good place to be in any economic slowdown. Rich, I would just add to that if you start the year, and I think we've given guidance to 2023 with sort of embedded rent growth, and we start the year at 4.5%-5% up on rents and rental revenue, it would take. As long as this is a sort of a normal type recession, even if the landing is a little bit on the hard side, as long as it doesn't persist into far into 2024, I think multifamily is gonna be a really protected place. Ric mentioned earlier, our residents are in really good shape, and if, as long as our residents don't lose their job, now that's, it's a different, obviously a different scenario than the Great Financial Crisis. As long as they still have their job, they're gonna live where they live, they're gonna continue to live out their lease term, and it implies that we'll be up 5% on rental growth. I think there's just a lot of mitigating factors to where we sit today. That doesn't mean that you know, at the margins, of course, it affects things if we lose 2 million or 3 million jobs in the economy, but it's just not a direct impact to our portfolio over the near term, call it end of 2023. Just a quick aside to that, you mentioned rent to income of 20%. What, how bad has it gotten in history for you guys? And how does 20% compare to, you know, when it was at its worst, at its highest? We actually have stayed in that zone. We've never had. I think it just has to do with our markets. We're in, you know, high growth, low cost markets, right? So the rents aren't, you know, nosebleed rents anywhere in our markets. I think we've probably been at 22% maybe over the years and driven by West Coast and East Coast. You know, if you look at, California's probably higher than that, it's in the 24%-25%. Bottom line is that one of the reasons that the Sun Belt has done so well is because it's affordable. People. That's why I think you don't have a lot of the move back. You know, if once you move to Charlotte and see that you can get a really cool apartment for, you know, half the price of a New York City apartment, you know, people like it and they stay. I think that yeah, the market, we've never had pressure on our residents' income to rent ratios, you know, really for the last 30 years really. Okay, great. Thanks very much. Sure. The next question will come from Alexander Goldfarb with Piper Sandler. Please go ahead. Hey, morning down there. Yeah. Two questions. Just, you know, going back to the analyst who asked about, you know, Southern Cal and D.C., and obviously right now is not the time to be doing any large transactions just given, you know, the capital markets. You know, if you look at your portfolio, and especially comparing it to your, to your peer Mid-America, it would seem like having D.C. and having Southern Cal are not helping the overall portfolio mix. I mean, especially D.C. is, you know, an outsized weighting. When the markets return, it would seem like these are markets to, you know, to downweight and exit or severely, you know, sell down and fund elsewhere. Just sort of curious because the Sun Belt has definitely proven a lot more resilient in its economic diversification and ability to push through supply, whereas D.C. seems to be on a decade-plus supply issue in Southern Cal, while better than the other parts of Northern Cal right now, you know, still has, you know, the California cost of living and taxes, etc. Just curious your thoughts as you look at your portfolio over the next two to three years. The way I look at it, Alex, is that our California portfolio and big chunks of our D.C. metro portfolio have still not experienced the rental rate reset that all of our other markets have. I just think that the economics are pervasive. They, you know, ultimately the water will seek the proper level. I think ultimately rents are going up in California, probably at some point will exceed the average of our portfolio and the same in D.C. metro. Your underlying question of, you know, long term is D.C. at 17% the right number? I mean, we've said consistently that we'd like to shrink that over time. California at 12%, you know, maybe. The reality is that until there's two things going on right now. You have a really huge disconnect in valuations to kind of what you think the underlying asset ought to trade at. Then more importantly, long term, you've got this opportunity to get the rental reset in those three markets, which by the way, just between those two markets, all of California and D.C. Metro is almost 30% of our portfolio. I'm more interested in, you know, let's get through this period of kind of turmoil and uncertainty in pricing, and then let's reap what we know, what I believe to be the underperformance and level setting that needs to happen in those two markets, and then we'll look at it at that point. You know, that doesn't mean that around the edges, we still won't do something, as Ric talked about, opportunistically to support, you know, our development program or even possibly share buyback program if the math works. Great. If you think about what we've done trading assets in the last like 10 years, we sold $3 billion and developed and/or bought $3 billion. Ultimately, we have moved the market concentration around pretty substantially in the last 10 years. Over a long period of time, you'll see us do some of that. Okay. The second question is just going back to supply. Again, Sun Belt, you know, traditionally has actually done pretty well with managing supply, you know, apart from like a Houston. As you look at your markets over the next 12 months, are there any markets or any submarkets where you're saying, "Hey, maybe, you know, next year, you know, you guys could be citing, you know, this submarket or that submarket that could have, you know, a supply, you know, a supply issue?" Or as you look at all of your properties across all the portfolio, your view is that there's not any area where supply is an outsized concentration or risk? Alex, I would tell you that the answer to that puzzle rests in tell me what the job growth is in these cities. Because if I look at 2022 completions in a market like Austin, where we had almost 17,000 apartments. Yet Austin has continued to outperform our overall portfolio. It just tells me that there's continues to be real strength in two places, in the employment growth, but also in migration. Same thing in Charlotte. If you roll that forward to 2023, the supply market actually increases in almost all of Camden's markets. I think Witten's got completions at about 130 this year, moving to about 180,000 completions next year across Camden's portfolio. That's meaningful, but it's not necessarily concerning to us in light of what's happened on job growth and in-migration. I think the good news and all of Witten's data that we look at is if you roll forward into 2023, his data indicate that starts across Camden's markets go from 210,000 down to less than 150, and then they fall further to about 115 in 2024. Now, that's probably a lot of good news for the multi-family world in 2025 and 2026, now we're way out on the horizon. The reality is starts are coming way down. Completions, we're gonna have to slug through for the next year and a half or so, because they're gonna continue to be elevated by historical norms. It's, you know, it's our view that we'll continue to be able to backfill that, with our geography between new job growth and in-migration. Thank you. Mm-hmm. The next question will come from Chandni Luthra with Goldman Sachs. Please go ahead. Hi. Thank you for taking my question. I wanted to talk about Hurricane Ian. Are you guys seeing any increase in short-term leases or any impact on rates in the aftermath of the hurricane? No, we are not. We are not. Fortunately for us, we had very little damage. We had no displaced residents, nor did we have any seriously impacted employees. We got lucky. A different path of that storm, maybe where it was originally forecast over the top of Tampa Bay, we'd be having a different conversation with you. No, it's just been very little disruption. We had minimal amount of damage. The estimate that we gave was a little less than $1 million, which given the size and magnitude of that storm and the fact that it went right over the top of Orlando as a Category One storm. We were very pleased with how that turned out. We've neither seen benefit from people moving from the really badly affected areas into our markets. That wouldn't be a normal place where those people would kind of seek, you know, short-term shelter while they try to rebuild their homes on the Gulf Coast of Florida. Overall, it's been not a big issue for us, either physically on our assets or financially. Got it. As a follow-up, any preliminary thoughts on expenses next year? How should we think about real estate taxes, insurance, all the other line items that go into that bucket? Thank you so much. Yeah, absolutely. Real estate taxes, I'll address that one first. Obviously, that's our largest expense line item. 2023 is gonna be an interesting year because if you think about what assessors look at, they typically look at the preceding year's sort of NOI growth, and obviously 2022 has been a fantastic growth year. They're also supposed to look at real values, and clearly real values have come down. I think we're gonna have a lot of protests and probably a lot of lawsuits working through this process in 2023. You know, I think if I was. Obviously, we're still working through our budgets, but at this point in time, I would believe that our property tax expenses are probably gonna be towards the high end of our typical range. If you think about the rest of the expense categories, clearly R&M and utilities are gonna be driven by the inflationary pressures, so it depends upon what inflation's doing at that point in time. On the salary side, as I talked about on our last earnings call, we rolled out this year our Work Reimagined program, which is a benefit to us on site in 2022 by about $1 million, but should be a benefit to us on site in 2023 about $4 million-$5 million. Obviously that's a positive that should offset a lot of these expense pressures that are potentially out there. Then on the insurance side, although we did have a large storm in Florida, this has been a pretty light year in terms of sort of global events. My hope is that insurance starts to normalize. Thank you for that detail. Absolutely. Mm-hmm. The next question will come from Rob Stevenson with Janney. Please go ahead. Good morning, guys. What's the current expected stabilized yield on the $758 million development pipeline? What's the current market that you're seeing for land? Has pricing come off there and are you seeing transactions or is that on hold just like actual property transactions? Yeah. The yield is in the. We have properties that are, you know, 5.5%-6.5%, so it's, you know. Call it, you know, right at 6%-ish. In terms of land, we have seen some landowners. You know that we were negotiating with lower their price. The challenge you have today is it's really hard to kind of peg what the price ought to be. There is definitely some, you know, sort of movement on land sellers in terms of what should the price be in the future. I think again, it's hard to underwrite today and even with land prices going down some we haven't executed. What we have been doing, though, our land positions that we already have and that are under contract and hard earnest money, we are pushing those out. People are agreeing to push them out, understanding that if we had to make a decision today, that we likely would either ask for a haircut or not close. I think that's. The land tends to be stickier during the early part of a repricing scenario. Once they start seeing contracts drop. Because I know almost all of my merchant builder friends, if they're not hard on a contract and have significant investments, they've dropped their contracts. They know that those land sellers are all getting dropped across the country. It'll be interesting to see what happens in the first quarter. Okay. The second question. Given the strong rent growth, what's the earn-in today heading into 2023? Yeah. Absolutely. The earn-in for us right now is about 5%. Okay. All right. Thanks, guys. Appreciate the time. Have a good weekend. You too. You too. Thanks. The next question will come from Wes Golladay with Baird. Please go ahead. Hey, everyone. I just have a question on the supply. If we look out to midyear last year, we were tracking for about 165,000 forecast for the 2022 supply, and now it's looking like about 130,000. Do you think the same thing will play out next year with a 180,000 forecast now? Yeah. I think the difference is just the slippage in time frames for the deliveries on the completions. We've seen it on all of our construction projects, and I assume that everyone else is experiencing either that or worse because there's lots of folks that don't have near the reach and the experience and relationships that we do to get these things brought to the finish line, and it's still a battle. I know that the Witten and RealPage both have tried to capture some of the delay and because they had this persistent issue of saying, "We think completions will be X." For three straight years, it's turned out that they were 80% of X. I know they've tried to adjust their forecasting. My guess is they still haven't captured it in the 2023 numbers. It wouldn't surprise me to see some of that 180 shift into 2024. I don't really. You know, I think the right way to look at the completions number is over maybe a two to three-year period. Just, you know, add them all up. Because if it's started, it's gonna complete. The question is, you know, sort of not if it's a rounding error if it completes in 2023 or first quarter of 2024. I would. I think it would be more useful for most folks to look at it and say, "You know, give me three years' worth of numbers and and over that period of time, I'll give you my employment forecast, and we'll see how that matches up," versus trying to, you know, trying to handicap any individual year. My guess is they probably still haven't captured it all, and it's likely to be less than the 180. Okay. I'd like to talk about Houston. I believe the plan was to reduce exposure, but then you bought a JV, your JV that had high Houston exposure, and then you have two starts with Houston. I'm detecting a little bit more bullish view. Maybe zooming out maybe a few years, in the past you had mentioned that Houston was more than an energy city, and you had at some point cited the chemical industry and medical. But right now we have a big energy differential between the U.S. and everyone else around the world, it seems. I just wonder if your industry contacts have indicated that they may have plans for bigger expansions in the area, if this differential were to persist. Sure. We had a unique opportunity with the acquisition of the fund with Texas Teachers to acquire properties that had zero execution risk, right? We knew we had to do something with that, with the fund over the next two or three years because of the finite life of it, so it just made sense for us to do that. Yeah, it kind of went against the grain of we want to reduce our exposure in Houston over time. The other part of it is we started two development deals, which were our single-family rental, you know, for rent properties. That on that side, that's an opportunity for us to really understand the market and learn the market because I think it's a very compatible business with the regular multifamily business. Long-term, you know, if you think about where Houston is right now, Houston has not had the same reset of rents that Dallas, Austin, or Florida or other major markets. The reason being was because energy in 2020 got hammered, right? When oil prices were negative. Wall Street has, you know, taken the energy companies to the woodshed multiple times and has required more dividends and stock buybacks. Rather than drill, baby, drill, they're not doing that. What they're doing is they're being very methodical in their capital allocation and making sure they have dividends to pay their shareholders. That has muted the job growth in Houston compared to these other markets. For example, Austin and Dallas recouped their pre-pandemic employment and went substantially higher than pre-pandemic employment about eight or nine months before Houston did. Now, we hit our pre-pandemic employment this summer. Now, we're still doing well in Houston, but on a relative basis, it's not as robust as the other markets. I think Houston. I've said in a couple calls that Houston has gas in the tank, and it really does because when you think about energy cycles, they tend to be anywhere from five to, you know, ten-year cycles. Most folks think we're in a super cycle right now because of the lack of drilling domestically because the government doesn't really want a lot of domestic oil and gas drilling. There's a lot of pushback from the Biden administration. You have the Saudis cutting production 2 million bbl. You got the Russian-Ukraine situation. You know, we know we have to have energy, and the world has to have energy, and it's not going to renewables as fast as people think. I think Houston is really well positioned over the next few years. When you add in the energy transition, which is ultimately we know we have to transition, but Houston's going to be likely the energy transition capital of the world as well. Primarily because when you think about the Inflation Reduction Act, there's about $100 billion of capital that we think is gonna come to Houston, be it carbon capture that we. If you look at what Exxon and some of these other big companies have done, they've gone out in the Gulf and started leasing shallow water wells that are spent, so that they can store carbon in those fields that are all depleted. When you think about the fact that Houston is the number one exporter of energy in the country and in some categories in the world, and there's a lot of production with chemicals. When you start thinking about decarbonizing that industrial complex, the carbon capture, the green hydrogen, and ammonia and all those things that are gonna propel us forward into an energy transition is happening here, and the headquarters companies are here. I think it's gonna be Houston's gonna be a great market over the long term, and it'll have more gas in its tank than the rest of the markets in a recession because of that. Now ultimately, we fundamentally wanna lower our exposure in markets we're really concentrated in because it may be great over the next two or three years, but the way that our portfolio's been constructed is to be diversified geographically. When you have D.C., Houston, and California being our three largest markets, we wanna diversify ultimately. We will do some trading in this environment. Like I said before, we've done over $3 billion of moving assets around into markets, and we'll continue to do that. Hopefully, we can do it. In the last year or two, we've been able to do it on a non-dilutive basis, and hopefully, that will continue. You know, whatever the prices are when they reset, I don't think there's gonna be a massive differential between cap rates in Houston or in D.C. or California versus the rest of the Sun Belt. If we can sell assets and fund development or buy newer higher growth assets in the other markets where we're underweighted, we will lean into that. Great. Thanks for that answer, and happy weekend everyone. Sure. You too. You too. The next question will come from John Pawlowski with Green Street. Please go ahead. Hey, thanks for keeping the call going. Alex, you mentioned bad debt in Phoenix is ticking up. What is bad debt as a percent of revenues in that market? Are there any other markets seeing upward pressure right now outside of just timing impacts in regulated markets? Yeah, absolutely. If you look at collections, our collections right now for the quarter were right around 98.6%, and that compares to the last quarter when it was right around 99.2%. If you look at Phoenix, our collections there were 99.2%. But to a point that Ric made earlier, if you look at California, our collections in the second quarter in California were 97.3%. That dropped off to 94.2% in the third quarter of 2022. That's the real collection story. Keith, are your local teams seeing a slowdown in traffic in any markets outside of the normal seasonality right now? No. I mean, traffic, we still continue to have. You know, a lot of the technology that we put in place, in particular Funnel. The complaint that I hear most commonly is that we have more traffic than we can reasonably handle or that we can effectively handle because of the very low vacancies across the entire portfolio. We're generating plenty of traffic. There's still tons of people that wanna live in Camden apartments across all 15 cities. You know, even though our occupancy rate did fall from the second quarter, you know, you're still north of 96% in the fourth quarter, and those are, you know, crazy good numbers from a historical perspective for Camden. Okay, just one follow-up there. Again, don't wanna be pedantic, but I thought it was assumed that occupancy would slip into the high 95s over the balance of this year, but you're still seeing occupancy above 96% today? So the- We're gonna- Yeah. Go ahead, Alex. Yeah. We will average 95.8% for the full year. That is where our average is. And obviously, that assumes that occupancy will follow a seasonal pattern as we get towards the end of the year. All right. Thanks. Have a good weekend. You too. You too. The next question will come from Barry Luo with Mizuho. Please go ahead. Hey, thanks for taking my question. I just wanted to quickly ask if you guys disclosed the loss to lease with? Loss to lease to us is about 5.5%. Okay. Is there any chance you see that loss to lease go negative during this year? Uh, during- No. Yeah. No. Okay. Thank you. For just secondly on expenses, do you think any? Can you talk any about like tax efficiencies in terms of mitigating labor pressures? I'm sorry, what's the question? Just any tax efficiencies on mitigating like labor pressures for next year and tech initiatives? Tech initiatives. Absolutely. If you recall, you know, we talked about our Work Reimagined program, which could not happen without our tech initiatives that we have in place, mainly Chirp and Funnel. Because of those factors, we should be able to pick up about a net $4 million-$5 million benefit on the salary side in 2023. Absolutely. Okay. Thank you. Mm-hmm. The next question will come from Dennis McGill with Zelman & Associates. Please go ahead. Hi. Thank you. Just to start, I wanted to clarify the occupancy comment. I thought in the prepared remarks you said 95.8% for the rest of the year, meaning the fourth quarter for guidance, and I think just a minute ago you said 95.8% in a different way. Can you just clarify that first? 95.8% in the fourth quarter. Okay. That's what I thought. Just generally as we think about that number and that 80 basis points deceleration from the third quarter, recognizing they're healthy levels, that's a pretty stark change relative to what you've seen in the past seasonally. At the same time, you're talking about still good traffic, income growth and strong income metrics. You talked about in-migration being favorable. You got for-sale affordability is going against the consumer, so the narrative is they're staying in apartments longer. I guess all of that collectively would suggest that you wouldn't have to make the trade-off of occupancy and rate right now. What are some of the offsets you think that are filtering through that's causing that sequential deceleration? Well, I think you've got a couple of factors. Number one, we are pushing rents, and as we follow normal seasonal patterns, if you push rent, you should see occupancy come down. Number two, as we've talked about, our turnover has picked up a little bit, and that is driven by, you know, people finally that have been long-term non-payers, starting to move out. As we have the ability to enforce contracts, we should expect to see that number tick up a little bit. That, by the way, is a good thing because those are folks who are not paying, and if we can move them out, although our physical occupancy will come down, it doesn't actually have any net impact on our financial occupancy. Those are a couple of factors that are driving that. Okay. When you think about that, I guess is now that that's come down a bit, that 95.8% and a half point between physical and economic, but do you start to think about pricing power getting back to pre-pandemic levels here then pretty soon since that's a bit below occupancy where you were in the fourth quarter 2019? Is that the transition that we're seeing as you move into the first part of next year? I think we continue to have a lot of very strong things going in our favor in terms of migratory patterns that we've talked about, job creation in our markets. I think what we have to see is what is the long-term job creation in 2023. I think we are gonna remain in a pretty good, strong position in terms of our ability to push rents. Once we keep pushing rents, we should be able to push some occupancy a little bit further. As I said, it depends upon what do we see in the economy in 2023. We could have 96% occupancy all the time if we wanted to. Remember, we have a dynamic revenue pricing system, and we've made a choice, and that choice is based on keeping rental rates going up. If you think about Alex mentioned that our average rental rate was eight and some change, or our average revenue growth is gonna be eight and some change, new leases through the end of the year. That's a really good number. If you look at historical, go back to pre-pandemic levels, I mean, we're usually negative to zero in the last two months of the year on revenue in terms of new leases, renewals and new leases. We're gonna be 600 or 800 basis points above pre-pandemic levels going into 2023. We just think it's the right fit. To Alex's point earlier, we want people to move out that aren't paying us. We're trying to help them understand that. You know, we've had discussions about paying people to move out, right? I mean, because it's just and it's primarily, you know, D.C. and California. You know, I don't look at the 80 basis points as a flaw in the system. I look at it as keeping pressure on the rent and making sure you're starting 2023 at a really good place with an earn-in and a loss to lease that is pretty substantial. All right. I appreciate the color. Thank you, guys. Thanks. Sure. This concludes our question and answer session. I would like to turn the conference back over to Mr. Ric Campo for any closing remarks. Please go ahead. Great. Well, we appreciate your time today on the call, and we will see some of you at Nareit in San Francisco. We'll have a lot of new stuff to talk about then, probably since it will be about a week and a half. Take care and have a great weekend and go Astros. Take care. Bye. Bye. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.