Good morning, welcome to Camden Property Trust's second quarter 2023 earnings conference call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today are Rick 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 section of our website at camdenliving.com, and a replay will be available this afternoon. We will have slide presentations 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 0. 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 second quarter 2023 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 one hour. Please limit your initial question to one. 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 Rick Campo. Good morning! Our on-hold music theme for today was Happy Birthday. Last week, Camden's board and executive management team rang the closing bell at the New York Stock Exchange to celebrate Camden's 30th birthday as a public company. We were joined by the rest of Camden's 1,700 team members from coast to coast to commemorate this special day. It's been a remarkable journey, and we want to share a few memorable moments with you. Here we go with 30 years in 2 minutes and 30 seconds. Our business was built to last. In 1993, we started with 6,000 apartments in 3 Texas markets, with an enterprise value of $200 million. Today, we have 60,000 Sun Belt geographically and product-diverse apartments with a value of $15.5 billion. Over the years, we have created a best-in-class operating and investment team platform that focuses on constant improvement. Camden exists to improve the lives of our team members, our customers and our stakeholders, one experience at a time. Our business continues to be strong. Market conditions continue to moderate from the post-COVID unprecedented housing boom that we all knew would happen. The transaction market is still quiet. With 70% decline from last year, new permits are starting to fall, given the difficult financing environment and increased cost of capital. This should bode well for our markets as supply is absorbed over the next 18 months. Move-outs to buy single-family homes to continue to trend lower than past years and quarters. Finally, I really want to give a big shout-out to our Camden teams for their hard work and their commitment to providing living excellence to our residents. Next up is Keith Oden. Thanks, Rick. Now for some details on our second quarter 2023 operating results and July 2023 trends. Same-property revenue growth for the quarter was in line with our expectations at 6.1%, and we have maintained the midpoint of our 2023 revenue guidance as a result. Consistent with the past several quarters, we saw the highest growth rates in our three Florida markets: Tampa, Orlando, and Southeast Florida, with very strong results in both Charlotte and Nashville as well. Despite the understandable concerns about elevated levels of supply in Camden's Sun Belt markets, demand for high-quality apartments in our markets remain strong. Second quarter signed leases grew by a blended rate of 4.1%, with new leases up 2.2% and renewals up 5.9%. Our preliminary July results show moderating rates of growth with blended rates in the mid 3% range. Renewal offers for August and September were sent out in the high 5% range. Occupancy averaged 95.4% during the second quarter of 2023 and trended slightly higher in July at 95.6%. Our portfolio is currently 95.8% occupied, positioning us well for the normal seasonal slowing we typically see in the fourth quarter. Net turnover for the second quarter of 2023 was 44%, and move-outs to purchase homes were 11.8% for the quarter and 11% year to date versus 15.1% in the second quarter of 2022 and 13.8% for the full year of 2022. I'll now turn the call over to Alex Jessett, Camden's Chief Financial Officer. Thanks, Keith. During the quarter, our lease-ups remained stronger than usual as we completed construction and, subsequent to quarter end, stabilized well ahead of schedule Camden Tempe II, a 397 unit, $107 million community in Phoenix with a yield north of 7%. In addition to stabilizing ahead of schedule, Camden Tempe II's rents are approximately 10% ahead of pro forma. Also, during the quarter, we continued leasing at Camden NoDa, a 387 unit, $108 million community in Charlotte, which is now over 60% leased, averaging over 45 leases per month. At the end of June, we disposed of Camden Sea Palms, a 138 unit community in Costa Mesa, California, for $61.1 million. We sold this 33-year-old community for a 5.7% FFO yield and a 4.25% tax-adjusted cap rate, generating an approximate 13% unleveraged IRR over our 25-year hold period. On May 31st, we utilized our unsecured line of credit to retire approximately $185.2 million of secured variable rate debt with a weighted average interest rate of 7.1%. We recognized the charges in conjunction with this early retirement of debt of approximately $2.5 million. 91% of our debt is now unsecured. For the second quarter, we reported Core FFO of $1.70 per share, $0.02 ahead of the midpoint of our prior quarterly guidance. This outperformance was driven by $0.01 in higher non-same-store Net Operating Income, primarily driven by the previously mentioned accelerated leasing activity at our development communities, and $0.01 associated with the timing of certain corporate overhead expenses and fee income. Last night, we reaffirmed our same-store revenue, expense, and NOI midpoints at 5.65%, 6.85%, and 5% respectively. Our revenue growth midpoint of 5.65% is based upon an anticipated 1.5% average increase in new leases and a 5% average increase in renewals for the remainder of the year, for a blend of approximately 3.25%. We are anticipating that our occupancy for the remainder of the year will average 95.6%. We continue to experience a higher than typical level of move-outs by non-paying residents. As a reminder, all of the municipalities in which we operate have now lifted the restrictions on our ability to enforce rental contracts. As a result, we now have twice the amount of early move-outs of non-payers year to date as compared to the first half of last year. We reserve for effectively 100% of delinquent balances, and therefore there is no net negative revenue impact when non-paying residents leave. Rather, we receive the benefit of having our real estate back, the opportunity to commence a lease with a resident who abides by their rental contract, and lower bad debt from having a new resident who pays. However, we have noticed higher than normal repair and maintenance costs, which I will discuss shortly, partially associated with the move-outs of these delinquent payers.... Although we have maintained the midpoint of our expense growth at 6.85%, we have updated some of the underlying assumptions. Recently, the Texas Legislature passed a tax reform bill subject to voter approval in November. Upon approval, which we believe is likely, Senate Bill 2 will reduce independent school district tax rates by $0.107 per $100 of assessed value. Average independent school district tax rates in our Texas markets are approximately 1% of assessed value or 45% of the total Texas tax rate. Excluding valuation increases and other tax rate increases, this anticipated reduction equates to an approximate 4.8% reduction in Texas taxes. We have assumed some rate rollbacks in Texas in our prior guidance, this reduction is not dollar for dollar to the bottom line. We have also had greater than anticipated success with our Houston valuations, both current year and prior year settlements. As a result of all of these tax adjustments, we now expect total property taxes to increase by 4.5%. Repair and maintenance make up 13% of our total expenses and are now anticipated to increase by 8.5%, a 350 basis point increase from our prior expectations, resulting from higher unit turnover costs and other miscellaneous repair items. The remaining offset to the property tax favorability is primarily from continued increased levels of insurance expenses resulting from smaller claims, generally under $25,000 per occurrence, which do not count towards our aggregate $3 million exposure. Last night, we also increased the midpoint of our full year 2023 Core FFO guidance by $0.02 per share for a new midpoint of $6.88 per share. This $0.02 per share increase results primarily from the $0.01 per share second quarter outperformance of our development communities and $0.01 in lower interest expense associated with the second quarter prepayment of secured debt. We also provided earnings guidance for the third quarter of 2023. We expect Core FFO per share for the third quarter to be within the range of $1.71-$1.75. The midpoint of $1.73 represents a $0.03 per share increase from the $1.70 recorded in the second quarter. This increase is primarily the result of an approximate $0.015 sequential increase in same-store NOI, resulting from higher expected revenues during our peak leasing periods, partially offset by the seasonality of utility expenses and leasing incentives. A $0.0075 sequential increase related to additional NOI from our non-same store and development portfolio, a $0.01 decline in net overhead expenses, primarily associated with the timing of certain public company costs, and a $0.005 decline in interest expense associated with the second quarter debt prepayment. This $0.0375 cumulative increase in Core FFO is partially offset by $0.0075 of lost FFO from our Camden CPOM second quarter disposition. Our balance sheet remains strong, with net debt to EBITDA for the second quarter at 4.2 times. At quarter end, we had $212 million left to spend over the next 2 years under our existing development pipeline. 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 1 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 2. At this time, we'll pause momentarily to assemble our roster. Our 1st question will come from Eric Wolfe with Citi. You may now go ahead. Hi, good morning. It's actually Nick Kerr on for Eric this morning. I just wanted to ask what you're all seeing in terms of recent competitive starts, you know, specifically, which markets are more or less insulated? When you all kind of expect that to start to abate, given the current in-process pipeline. The good news is that we've definitely started seeing starts decline in all the markets. You know, if you look at the RealPage headline that came out just recently, the headline was, "Starts finally start to decline." Starts in May were down May over June, or June over May, were down 13.5%. In June from last year, they're down 33%. Clearly the, the tight financial markets and the difficulty of getting bank financing and equity financing, along with increased cost of capital, is having its you know, the Fed's desire to ex, you know, result, which is that its slowing everything down. In terms of absorption, when you look at how we've been absorbing, in most of our markets, it's been good. As Alex pointed out in our you know, opening remarks, you know, all of our developments have actually done better than we anticipated, from a net absorption perspective. You know, we think it's gonna be, you know, 12 months, 18 months kind of time frame to, to absorb all this new supply. Then, then when you, you know, when you, when you think about what the market might look like in 20, sort of towards the end of 2024 and into 2025, it's pretty, pretty constructive for, for the supply side of the equation. And as Alex pointed out, we, we, we haven't seen, you know, this, the wall of supply that everybody's worried about. It has just not, not really negatively impacted our portfolio. A lot of reasons for that but you know, one of which is that, you know, a substantial portion of our, of our properties, are just not affected by it because they're lower price points, and they're, you know, not in competitive, in the competitive, you know, sort of high-end market. Our product diversity is really helping us from a supply perspective. There's no question about that. Thanks. Appreciate the color. Then I guess sort of follow up on that is with presumably less deliveries in, I guess, 2025, 2026, what's Camden's appetite for ramping up your deliveries, and you have the balance sheet to do so? Well, clearly, if things work out the way we think they might, you know, there'll be plenty of opportunity to to acquire shovel-ready deals that can't get financed. We have. History has shown that we will be aggressive in that, in that area for sure. Thank you. Appreciate the color. ........ Our next question will come from Austin Wurschmidt with KeyBanc Capital Markets. You may now go ahead. Great. Great, thank you. How do we reconcile the 95.6% average occupancy assumption for the back half of the year with the economic impact from backfilling non-paying residents versus just, you know, normal course turnover? Yeah, the normal course turn-turnover is happening as, as we would normally expect it. The, the big difference in our portfolio over the last six months has been the, the incidence of sort of what we call short-term notices to vacate. Primarily, those are people who have not been paying rent. They've been protected by a statutory moratoria on getting our real estate back. In all of our markets that we operate in, those moratoriums have run their course. As people sort of reach the end of the game, which is we can now proceed in normal order and have them removed from our property for non-payment of rent, when that day of reckoning gets close, they typically resolve. Most of them resolve that by just moving out. And those, they end up being in our portfolio, what we refer to as skip. They're just people who disappear. As Alex said, that's not necessarily a bad thing because these, these are people who haven't been paying rent, but they've been living in the apartment. If you have people who move out because they skipped, as opposed to the ordinary course, where we would get 30 or 60 days notice and have an opportunity to backfill that apartment, it just creates a much tougher dynamic for our on-site teams. As I think Alex mentioned, the number, we have roughly 2 times as many folks in that category, which is short-term notice to move out, as, as we would normally have or we had pre-COVID. You have the, you know, it's the double impact of the normal turnover cycle, but on top of that, you have this, this cohort of people who sort of move out in the middle of the night, and it takes a different set of factors to react to that for our on-site teams, and that shows up in the, the occupancy rate, in the 95.6% that we're projecting through the balance of the year. If you were to put a number of units or you know, how much of the occupancy that represents those, you know, skips and/or vacant units related to long-term delinquent tenants, can you just put some numbers around that? Then could you also share what just bad debt is today? Yeah, there's a couple things. The first one is, if you actually look at our total turnover, our total turnover is actually down, and it's because we have less folks moving out to purchase houses. That's, that's the offset to that. Based upon that, that's why we actually think we're gonna see occupancy continue to pick up from this level. Keith said in his prepared remarks that we're at 95.8%. We're actually gonna be about 96% by next week, We continue to have strong occupancy because the turnover is, is maintaining, is pretty low. If you look at our bad debt, we think our bad debt for the full year is gonna average about 120 basis points. That is. We're thinking that probably in the fourth quarter, it should be around 90 basis points. That's compared to historical of about 50 in normal times. Very helpful. Thank you. Yeah. Austin, just to put a number on, you know, the, the Alex's point about the move out to purchase homes, we were about 11% for last quarter, but as we roll up that number forward into July, it actually dropped to single digits at 9.8%. We haven't seen single digit move-outs to purchase homes since you'd have to go back to the great financial crisis. We had a couple of quarters in there where we were, we were single digits on, on that metric, and we hit that again in July. That trend continues for sure. Our next question will come from Steve Sakwa with Evercore ISI. You may now go ahead. Yeah, thanks. Good morning. I just was wondering if you could provide a little bit more color on the the kind of monthly trends on the new lease rates and kind of on on the signings, just to give us a sense for the trend, April, May, June, and into July. I guess with, you know, deliveries set to ramp over the next four quarters, I'm just wondering, do you expect new leases at all to go negative in, say, the next four quarters? Yeah. If you, if you look at the trend, obviously for the second half of the year, we, we told you new leases would be up 1.5%, renewals up 5% for a blend of 3.25%. At this point in time, we're heading into our peak leasing periods, and so it's gonna follow some normal seasonality over the next couple of months, and then obviously coming back down into the fourth quarter. In terms of rents going negative, if you're just looking at sequential month-over-month, you do typically see some negative, typically in November and December, and that's what we are anticipating. That being a decline going from October to November to December, and as I said, that's just typical seasonal patterns. Thanks. Our next question will come from Haendel St. Juste with Mizuho. You may now go ahead. Hey there. Thanks for taking the question. A couple here. First, what's the portfolio loss-to-lease overall, and where, where is it highest and lowest amongst your core markets? Yeah, so our overall loss-to-lease is in the sort of 2%-3% range. The lowest loss-to-lease is Phoenix, which is, which is, you know, teetering right on the edge of flat loss-to-lease to a slight gain-to-lease. Our highest would actually be San Diego, Inland Empire, followed by Denver and Nashville. Amongst your larger markets, Houston, Atlanta, D.C., where does that lie? Houston is right around a 1%. Atlanta is right around call it 0.5%. DC is actually pretty high. It's right around sort of mid-fours. Okay, got it. When I think about the, the, the loss to lease, and then you mentioned the 3.25 blended rent expectation in the back half of the year, ballpark- ...... What does that imply for 2024 earning? Yeah, right around 1.8%. If we, if we hit our numbers for the rest of the year, getting to December of 2023, that should be 1.8% earning. Thank you. ..... Our next question will come from John Kim with BMO Capital Markets. You may now go ahead. Thanks, and happy birthday, everyone. A question On your same-store revenue guidance that you've maintained, it sounds like the bad debt is coming in better than expected with your guidance for the year, 20 basis points lower than prior. When you isolate leases signed in June, it looks like it decelerated from 4.8% in May to about 3.4%. I was wondering if that deceleration had come in steeper than you had thought. No. I mean, right now, we are progressing exactly as we had anticipated. Remember also that we did increase guidance in the first quarter, but so as compared to what we thought when we last increased guidance, everything is, is progressing as we expected. Okay. Alex, you mentioned that you already anticipated some of the, the Texas reduction in taxes. ...... I think in May, you discussed Texas and Florida as potential- .... states. just an update on Florida, if that was already factored into your guidance for the year. Yeah. Florida, for us, we are anticipating. I'll just sort of do it by market. Tampa is up 10%, Orlando is up 10%, and South Florida is up 7%. Obviously, some of our higher growth markets in terms of taxes. You know, that compares to Texas, which we think our total tax number is going to be up 1.4%. The, the reduction in, in millage rates are not, anticipated in Florida? No, we do have some reductions in millage rates. This is the, the total. If I look at tax rates, we're anticipating. ..... ... about 1% down in Tampa, 1.5% down in Orlando, and 1.5% down in South Florida on, on millage. It's all driven by value. You know, the values- Yep are continuing to, to, you know, be assessed higher in most markets. Right. Okay, great. Thank you. Thanks. Our next question will come from Alexander Goldfarb with Piper Sandler. You may now go ahead. Thank you. Yeah, happy 30th. Although, you guys don't look a day over 20, so happy birthday. Two questions here. The first question is on the skips and evictions. I get that for markets like, you know, maybe L.A. or Atlanta, your occupancies were down across the portfolio, which almost says that you guys were focusing more on driving rate this quarter. Maybe just broadly, if you can put a little bit more color on evictions, you know, and skips, if it's beyond, you know, Atlanta and L.A. Two, you know, for all the talk that we hear about supply in the Sun Belt, you guys are pretty good at driving rents up, you know, 7% or so, or revenues up 7%. Maybe just a bit more color on what you're seeing operationally, so we can understand the difference between how much of the portfolio is impacted by the elevated skips and evictions versus, you know, supply, versus just normal pricing policy that you guys use in the peak leasing season. Yeah, let's start with the supply question first, and then we'll come back to the, to the skips and evictions. One of the things that we've always done is when we think about our operating plan for the year, it's a very much a bottom-up process. We have to do that because the one big variable in our markets is typically, are you gonna be impacted by lease-ups in your sub-market? To the extent we have communities that are gonna be impacted by competitors and new supply, they need to take that into consideration when they're thinking about their game plan. We do a bottom-up analysis. If when you do that, and you start with at the sub-market level. We, we use, we use our own kind of gathering of assets to define a sub-market, but if you want to use RealPage, it's a pretty good proxy for that. If, if you've got lease-ups that are going to be going on in a sub-market, that we have existing communities in, that's the first level, that, that clearly is going to. That community will be impacted. Then the second thing you look at is, is what's the age of Camden's asset relative to the new development? We use a, a filter of 10-year-old assets or, or, or older. You know, we define them as that's a different price point, and they're probably not going to be competing with brand-new development. When you, when you take the supply that, that everybody is, you know, understandably focused on and concerned about, but if you run it through those two filters, is it an asset that's being built in a sub-market that affects a Camden asset? Is it, is a Camden asset less than or more than 10 years old? When you run all of the supply in all of Camden's markets through those two filters, what comes out of that is, is about 15% of the total supply, market by market, is impacted, is, is impacting a Camden community. It's, you know, the scary headline numbers of, you know, 400,000 apartments being delivered over Camden's 16 markets in a 6-quarter period. When you, when you, when you go through the analysis from bottom up and look at, is this really likely to impact a Camden community? It turns out that it's about 15% of the supply is in that category. That's a big part of the reason why, even though you see sometimes you see these numbers that look kind of crazy in a market like Austin, where over the 2023, 2024 time frame, you've got, you know, in 2023 and 2024, roughly 40,000 apartments being delivered. That's a scary headline number for sure, but when you do the bottom-up analysis, you know, you discover that it's really only about 20% of that supply that's even impacting any of Camden's communities. I think our... So far, we've, we've been able to handle whatever supply is impacting Camden communities in, with the, you know, with the in-migration and strong job growth in these markets. I, you know, we, we expect that, that, you know, some version of that is likely to continue throughout 2023 and 2024. Okay. Then, and then is it fair to say it's just the evictions and skips are really just Atlanta and L.A., right? Is it other markets as well that are being impacted? Yeah. Clearly, Atlanta and California are the outliers, but I will tell you that we are seeing upticks in some of our other markets. That, by the way, is a good thing. All, all of the courts have opened up, but all the courts are delayed, and you're starting to see some acceleration on the court side, which is really getting folks that have not been abiding by the rental contracts for quite some time, and you're starting to get them out much quicker now, which is obviously, as I said, is a good thing. You should expect to see these numbers start tailing off pretty good as we move through the year, because once again, the, the, the systems are open, and, and things are starting to flow a lot better. Okay. Second question is, Avalon, you know, as you guys saw, was released from the RealPage. I don't know what you guys can add from, from your standpoint, but do you see that you guys may also be released from this, you know, this class action litigation? We're not gonna comment on class action litigation on this call. Thanks. Okay, thank you. .... Our next question will come from Joshua Dennerlein, Dennerlein with Bank of America. You may now go ahead. Yeah. Hey, guys, thanks for the time. Just wanted to clarify, I think, a, a comment after Austin's question on new lease growth in the second half of the year. I think you said month-over-month seasonality, things might turn negative, but what about on a year-over-year basis for new lease growth in 4Q? No. You're still assuming positive? Okay. That is correct, yes. Okay. All right, perfect. Thanks, guys. Thanks. Mm-hmm. Our next question will come from Brad Heffern with RBC. You may now go ahead. Hey, thanks. Good morning, everybody. I just wanted to dig into the occupancy commentary a little bit more. Have you had a, a shift in pricing strategy to more of an occupancy focus, and that's what's driving the, the recent uptick to 96%, or is there something else that's driving it? Yeah, we had the situation that I described earlier, which is you have this, this elevated level of, you know, short-notice move-outs. We absolutely. It's more than double what it should be historically, and we saw that beginning to impact our occupancy numbers in several of our markets, in the, you know, sort of the May, June timeframe. We adjusted, you know, marketing spend, and then we also adjusted pricing to make sure that we maintained our occupancy through this period of time where it's elevated. I think the good news is that we're probably pretty far along, like with the exception of maybe California, as Alex said, maybe in California, possibly a little bit in Atlanta. We're probably pretty far along in the process of getting rid of that, that cohort of people who've been living with us, not paying rent, facing an eviction, then just leaving of their own volition. There's a finite number of them. I mean, they, they, they moved in, many of them been there not paying rent for two years. The gig is up. You know, the time, the clock is running. Eventually they will either be evicted or they'll move out just prior to, to that. There's a finite group. It's an elevated concern right now. It's probably, we've probably got another quarter, or so of kind of grinding through that process, at the end of which things should return to normal in terms of the, the cadence of getting proper notices, being able to backfill, pre-lease, et cetera. I, I think we're getting closer to the end of that. We're just not there yet. Okay, got it. Then on the development side, can you talk about where construction costs have trended and if the math on, you know, a new start today is, is penciling out better than it has over the past couple of quarters? Construction cost has, has definitely flattened but has not not gone down. In terms of, and when you look at land costs, you know, landholders are, are, are probably, if you're really motivated, land costs are down, you know, 20%, 30% probably. But there's not a lot of a lot of motivated land sellers. You know, a 30% decline in land costs with a construction cost that is, that has stayed flat but not gone up, still is very, very hard to pencil. When you think about, about, rental rates and sort of, occupancy rates, system-wide, are not going up as much as they were. You still have a very, very difficult time penciling development yields today. You know, hence the significant drop in, in, you know, in starts, in, in the June number relative to the June number last year, you know, almost a third. We think that, that fundamentally, because of this dynamic, and it's not just the lack of availability of funds, because if you, if we, you know, if you, if developers could show that they can make a, you know, a 7+, you know, cash-on-cash return on a new development, I think lenders would probably fund it. The problem is, is that, is that, you know, if you're, if you're dealing with the current environment, it's, especially with interest rate costs going up as much as they have, that's a pretty big part of the construction, you know, overall project cost. It, it just doesn't pencil. We have not seen any kind of relief in the construction costs. I really don't think you will. I mean, you have a. When you think about about just even though construction is going down in the multifamily space, you still have a lot of contractors that are that are building out what's under construction, and that takes, you know, 12 to 18 months, and those folks are are really busy now. Now, what will be really interesting to see is that if this continues the way, the way you think it may continue, you should see some pretty interesting cost numbers in 2025, 2026. Because when contractors start looking out into the future and they don't see a pipeline, they're, they're gonna have to be more competitive and, and start tightening their margins and, and thinking about how they, how they have to compete to get the next job in, in 2025 and 2026. We could see some, you know, cost reductions next year towards the end of the year. Right now, you know, the pipeline's full and, and, you know, contractors are still printing money. Thank you. ..... Again, if you have a question or a follow-up, please press star then 1. Our next question will come from Jamie Feldman with Wells Fargo. You may now go ahead. Great. Thank you. Maybe shifting gears a little bit to the balance sheet. Can you talk... I know you, you know, you put some refinancings on the credit line during the quarter. Can you just talk about the, the impact that had on your guidance? And then just as you're thinking about, I assume, turning, turning it out into some unsecured at some point, what could, what, you know, how you think about the variability to your numbers if, you know, if you can't get that done in a reasonable time or at a reasonable price? And then, as you look ahead to your 2024 expirations, you know, how do you factor that into, you know, potential unsecured needs? Yeah, absolutely. If, if you look at the debt that we prepaid, the rate on that debt was about 100 basis points north of our line of credit rate, so it was actually accretive to prepay that debt. That is the penny, $0.01 of the $0.02 increase that we had in our guidance for our full year numbers is coming from lower than anticipated interest expense, entirely associated with that early prepayment. I will tell you that in our full year numbers, we are not assuming any bond transactions. Today, we could, we could do a 10-year that would be probably at least 75 basis points inside of what we're borrowing underneath our line of credit. If we do a bond transaction, sometime this year, assuming that rates- ... rates hold or improve, it's gonna be accretive to our numbers. Yeah, the, the variable rate- Okay, thank- that we have today is, is embedded in our run rate and won't change our numbers. Any kind of capital markets transaction in the bond market would be accretive to our numbers this year and next year. Right. You know, the interesting thing when you think about floating rate debt today, is that historically, floating rate debt has been cheaper than long-term debt. Obviously, with the Fed doing what they're doing, short-term debt is now actually more expensive than long-term debt, and we expect that to change in the future. Over the long term, floats have been always cheaper, and you have the optionality without having to fix rates long term and all that. Ultimately, we with a, you know, 4.2x debt to EBITDA, we have, you know, one of the strongest balance sheets in the sector. You know, we will take an opportunity to put some of that accretion into our earnings when the market is right for, for that. Okay, great. That's very helpful. Then, you know, you make a great point on the leverage. I mean, how are you thinking about capital if you were to find some really interesting opportunities on the acquisition side? Would you just increase leverage or JVs, or just what are your latest thoughts? Well, we, we definitely have room in our leverage. We've always talked that our leverage is gonna remain between four and five times, and so we have dry powder to be able to, you know, to increase the leverage if we choose to with the right opportunities. Today, today, there really isn't a lot of great opportunities, just given, given the bid-ask spread between, between, you know, the buyers and sellers. Given the, the horizon on construction costs perhaps coming down in 2025, and 2025, 2026 being a lean year for development, it might, it, it seems to us that, that, that might be something we'd lean into before acquisitions. The, the, comment on joint ventures, no, we will not do joint ventures. We have the most pristine and simple balance sheet in REIT land, with 0 joint ventures and 0 complicated things on our balance sheet, and we're gonna keep it that way. We would rather invest 100% of our shareholders' dollars into fewer transactions rather than, than dilute our management's focus on whose, whose and who, whose investment we are, we are the stewards of. We just think it complicates our balance sheet and, and complicates our world, and, and we just aren't gonna do that. Okay, that's very helpful. If you don't mind me just squeezing in one more because one of your investors just emailed me this question. Can you talk about occupancy stabilization potential in Atlanta and Austin? I mean, what are you referring to? Just, you know, at what point do you think markets, occupancy can stabilize there? It seems like those are two of the outliers versus the portfolio average. Yeah. Well, you've got... Go ahead. Yeah. Okay. So both of those markets are in the, in the mid-94s, which is down from where they were last year. You know, for a long period of time, we considered sort of 95 to be the number in terms of where we wanted to operate our portfolio. That's come up over time for a whole lot of reasons, primarily around the ability to, to turn units more quickly and some efficiencies- ..... ... and just getting it, the real estate prepared to release. You got two separate issues. You have, in Austin, you do have a ton of units that are coming to market. Market-wide, my guess is, is that you're still gonna see pressure broadly in Austin, as they, you know, kind of work our way through close to 40,000 apartments in 2023 and 2024 that are being delivered. I mean, the point I would make and I made earlier is, only about 20% of that supply we think is relevant to Camden's world, but obviously, the other 80% is relevant to somebody else's world. And so my guess is we're gonna stay under pressure, the, the entire market will stay under pressure, but I don't I think Camden's gonna be okay and, you know, in, in terms of being able to handle the, the supply that's coming. Atlanta is a little bit different case. They, they have much fewer, fewer units that are coming. They do have supply that's coming in 2023 and 2024, obviously, but there's, you know. Atlanta has been a little bit of a, a microcosm of fraud and, and just, you know, bad acts that have nothing to do with COVID. It all, most of this came about post-COVID, but it was actually pretty widespread. It's one of those things that, that once it gets into the network of the, of the bad fraudsters, the, until you react and put in countermeasures, which we have done and most of our competitors have done, once they get in the door, it's, you know, in the environment we're in, it's kind of hard to... It still takes 6-7 months to go through the process. Even though you, you can technically evict and, and, for non-payment in Atlanta, the reality on the ground is, is that it's a process, it's crowded, there are a lot of people trying to get, get through the process, so it's slow. There was a, there's an issue in Atlanta that's separate and apart from any of the supply issues. It's just we've got people that are, we've got folks in our apartments that we're working through to get out. My guess is most of our competitors do as well. ... again, that'll run its course over the next 4 to 6 months, and I think Atlanta will be fine. I'll give you a, a, a personal example of, of this issue. Last year, I rented an apartment in Chicago. I opened a bank account at Bank of America that has thousands of dollars flowing through of it, through it. I opened a Bank of America credit card, which I immediately ran up to the limit and then defaulted on. By the way, I've never lived in Chicago. I never leased an apartment or opened a bank account or had, had a Bank of America credit card that I defaulted on. My credit score went to 500-510, and just recently, I tried to rent an apartment at a competitor in Charlotte, and the competitor happened to be, happened to know my name because they're, they're, you know, we're pretty well known. They sent the, sent the, the, information to a regional vice president and said, "By the way, is Rick Campo really trying to lease an apartment in Charlotte?" The answer was, "No, he isn't." This fraud is really interesting, and it's sort of a cottage industry on the internet, where, where people go on the internet and say, "How do you live in an apartment for free for six months or for three months or for nine months?" They, you know, cipher through the, you know, the, the system and figure out how to do it. Six months to get my credit score back to where it should be, and to, and to get all the, the fraud off of my, my, you know, personal credit report. Having been personally, you know, where my identity was stolen and trying to rent apartments with our competitors has been a real eye-opener, and it, it's something that, that, unfortunately is happening in our industry. Yeah, it, it's crazy. ........ All right. Well, thank you very much for your tolerance, and I appreciate you letting me squeeze in that last question. Sure. Our next question will come from Michael Goldsmith with UBS. You may now go ahead. Hi, this is Ami Probandt. I'm thinking about the long-term outlook for the portfolio and, how supply impacts it. Do you think that you can avoid a large chunk of potential future supply by being selective in the submarkets that you acquire or develop in, or is supply just really not avoidable in the Sun Belt? Well, I think as Keith pointed out earlier, our portfolio, we, we diversify our portfolio geographically and through product. The way we do it product-wise is we buy in submarkets, maybe buy properties that have different, different price points. New development oftentimes is, it, it has to be because of the cost structure in building new properties, you have to be generally at the top of the market, you know. When you think about, about housing in America and including rental housing, not just for single-family, for sale, we have a shortage of, of, of affordable apartments in America, a big shortage. The challenge with that shortage is that the numbers don't work to build to that middle market. The numbers have to be, when you, when you bring new development in, it has to be at the top end of the market, and so, or to the middle-top end of the market. When you have a portfolio like Camden's that, that, that, that it has a lot of middle-market properties, that, that, that, you know, where, where you think the, where the rents are, you know, 30%, 40% less than what it costs to, to do a new development, people are not gonna lower their rents unless they have to, which, which today, they, they don't have to. You don't have any major oversupply anywhere, including the Sun Belt. You, you're in a situation where those folks that are in those middle-market properties are not gonna move up into the A properties or the top of the market properties because they just can't afford them. So, you know, that's- so our portfolio is built for the long haul. We, we're gonna have some of our properties, as Keith pointed out, that, that do have competition from new development, which is the top end of our properties. A lot of our properties are middle market, and they're not going to be negatively affected. So, you know, and, and the, the idea that Sun Belt, Sun Belt supply is always a problem, well, you know, we've operated in the Sun Belt for 30 years, and we've continued to do well in up and down markets, in oversupply and undersupply. The good news today is that the market is really efficient. Once a market overshoots supply, guess what? People stop building. We've seen it in all of our markets, and you're gonna be seeing significant declines in starts and in over the next, you know, 18 months. Then we're gonna be in a situation where people are gonna say, "When do you think supply is gonna start in the Sun Belt again?" After we have, you know, really good rent growth in, you know, towards the end of 2024 and 2025. The reason the Sun Belt builds is because we need the supply, because that's where the job growth is, that's where the in-migration is, that's where the, you know, folks are, are moving. It's not that you build just to build, you build to make a reasonable rate of return on your investment. People in the Sun Belt have done a great job in making a return on their investment, but when they can't, they stop. We're gonna see that stop coming very soon, and then we'll go back to the cycle where, where we've overshoot. The building didn't happen, so rents will rise and occupancies will rise faster than normal in 2025 and 2026 as a result of that cycle. They'll catch up with supply in 27, 28, and rents will, rents will, and occupancies will, will, you know, will go down probably some, a little. The bottom line is, is that's just the normal cycle, and, and the good news is, is that cycle has happened, you know, over multiple times over the last 30 years, and we continue to, to do really well long term, in this business. Okay, just a quick one: If you were to start a development project today, what would be the yields that you would target? The... We, We, we have a development pipeline today, and the projects we're starting all have roughly 6%, you know, sort of cash flows with a, with an IRR that's, that's 7.75%-8.5%, something like that. Okay, thank you. .... This concludes our question and answer session. I would like to turn the conference back over to Rick Campo for any closing remarks. We appreciate you being on the call today and supporting Camden, for now over 30 years. We look forward to the, the start of the fall conference season, and we'll see you soon. Thank you. Thanks. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.