Good morning, welcome to the Camden Property Trust second quarter 2019 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Kim Callahan, Senior Vice President of Investor Relations. Please go ahead.
Good morning. Thank you for joining Camden's second quarter 2019 earnings conference call. Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC, and we encourage you to review them. Any forward-looking statements made on today's call represent management's current opinions, and the company assumes no obligation to update or supplement these statements because of subsequent events. As a reminder, Camden's complete second quarter 2019 earnings release is available in the Investors section of our website at camdenliving.com, and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call.
Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer, Keith Oden, Executive Vice Chairman, and Alex Jessett, Chief Financial Officer. We will be brief in our prepared remarks and try to complete the call within one hour. 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 would be happy to respond to additional questions by phone or email after the call concludes. At this time, I will turn it over to Ric Campo.
Thanks, Kim. Good morning. Our on-hold music today was courtesy of Dire Straits. Although our cost of capital has decreased over the years, we still don't get our money for nothing. However, our unique culture allows our associates to experience that ain't work. That's the way you do it. Thanks to our Camden team members for improving the lives of our employees, our customers, and our stakeholders, one experience at a time. Our multifamily business continues to be strong. Market fundamentals remain good as the supply gets absorbed in all of our markets. During the first half of 2019, we completed over $1 billion of debt and equity transactions designed to strengthen our balance sheet and give us maximum financial flexibility in this part of the real estate cycle.
We accomplished these fundings and have been able to increase FFO guidance in spite of having more cash earning lower rates than we originally anticipated. FFO growth per share for the quarter and the year increased 7.6% and 6.8% respectively. We added to our development pipeline and completed the acquisition of Camden Rainey Street in Austin in the quarter. We are on track to meet or exceed our original acquisition targets of $300 million for 2019 in spite of a very difficult acquisition environment. I'd like to take this opportunity to congratulate Malcolm Stewart on his promotion to President of Camden. Malcolm will continue in his role of Chief Operating Officer. Keith will continue his responsibilities as Executive Vice Chairman. These moves are part of our long-term succession planning initiative, creates position space for other senior executives in the future.
I will now turn the call over to our new Executive Vice President, Keith Oden.
Thanks, Ric. Regarding my new title, I'd like to address the biggest concern that's been expressed so far. Yes, I will continue to co-host Camden's annual happy hour at the summer Nareit meeting. Now back to business. Our second quarter revenue results were in line with our increased guidance, which sets us up for continued strong results for the balance of the year. Overall, same-store revenues were up 3.4% for the quarter and up 1.5% sequentially. Second quarter growth in our top four markets were Phoenix at 5.7%, Denver 5.1%, L.A. Orange County 4.8% up, and Atlanta at 4.6% up. As expected, our weakest markets for the quarter were South Florida, Charlotte, and Houston, with revenue growth in the 1%-2% range. Regarding rents on new leases and renewals, second quarter new leases were up 4.1%, and renewals were up 5.6% for a blended increase of 4.9%.
The second quarter 2019 blended rate of 4.9% was a 30-basis-point improvement from the second quarter last year of 4.6%. July preliminaries are at 4.1% increase on new leases, 5.3% on renewals for a blended growth rate of 4.7%. As expected, we've seen steady improvement in our new lease rates from January through June, and as is normal, the new lease pricing will begin to taper off as we approach the end of our spring-summer peak leasing season. Our August and September renewal offers continue to reflect a healthy rental environment that are being sent out at an average increase of 5.7%. Our qualified traffic remains strong and supportive of our above-trend occupancy levels across all of our markets.
We averaged a strong 96.1% occupancy in the second quarter versus 95.8% occupancy in the first quarter of 2019 and a 95.7% in the second quarter of last year. July occupancy is trending to 96.3% versus 96% last year. Our turnover rates continue to run at historically low rates, with a net turnover in the second quarter at 46% versus 49% last year. During the quarter, our move-outs to home purchase remained low at 14.3% versus 14% in the first quarter, with both quarters well below the 14.8% for the full year of 2018. It appears that the rising price of starter homes will continue to put a damper on homeownership. At this point, I'll turn the call over to Alex Jessett.
Thanks, Keith. Before I move on to our financial results and guidance, a brief update on our recent real estate activities. During the second quarter of 2019, we purchased for $120 million, Camden Rainey Street, a newly constructed 326-unit, eight-story building located in downtown Austin. We began construction on Camden Cypress Creek II, a 234-unit joint venture in Houston, Texas. We stabilized ahead of schedule our Camden Washingtonian development in Gaithersburg, Maryland, generating a 6.5% stabilized yield. We also purchased approximately four acres of land in the NoDa neighborhood of Charlotte for the future development of approximately 400 apartment homes. Purchased approximately 12 acres of land in Tempe, Arizona, also for the future development of approximately 400 apartment homes.
On the financing side, in mid-June, we completed a $600 million, 10-year senior unsecured bond offering with an effective average interest rate of approximately 3.67% after giving effect to the settlement of in-place interest rate swaps and deducting underwriters discounts and other estimated expenses of the offering. As a result of these in-place interest rate swaps, we will recognize interest expense at 3.84% for the first seven years of the note and will recognize interest expense at 3.28% thereafter. Turning to financial results. Last night, we reported funds from operations for the second quarter of 2019 of $128.6 million, or $1.28 per share, exceeding the midpoint of our guidance range by $0.02.
Our $0.02 per share outperformance for the second quarter resulted primarily from approximately $0.01 in higher same-store net operating income, resulting from lower levels of self-insured employee healthcare costs, lower property taxes, and lower other property expenses that resulted from general cost control measures. Approximately half a cent in better than anticipated results from our non-same-store and development communities and approximately half a cent in a combination of lower overhead expenses and higher fee and joint venture income. Last night, based upon our year-to-date operating performance and our expectations for the remainder of the year, we also updated and revised our 2019 full-year same-store guidance. Because of our better than expected second quarter same-store expense performance and our anticipation of lower property taxes in the back half of the year, we decreased the midpoint of our full-year expense growth from 3.35% to 2.75%.
These anticipated property tax savings in the back half of the year are primarily being driven by Atlanta and Houston, where we have both received favorable current year tax valuations and had success with prior year appeals. As a result, we are now anticipating full-year property taxes for our same-store portfolio to increase at just under 3%, approximately 100 basis points inside of our original budget. The result of this decreased expense guidance is a 35 basis point increase to the midpoint of our 2019 same-store NOI guidance from 3.4%-3.75%. Last night, we also increased the midpoint of our full-year 2019 FFO guidance by $0.02 per share from $5.07- $5.09. This $0.02 per share increase results from our anticipated 35 basis point or $0.02 increase in 2019 same-store operating results.
$0.01 of this increase occurred in the second quarter, with the remainder anticipated over the third and fourth quarters, and an approximate $0.01 from our second quarter outperformance not associated with same-store results. This $0.03 aggregate increase in FFO is partially offset by the approximate $0.01 combined impact of our $200 million larger than anticipated June bond issuance and the timing of various real estate transactions. Last night, we also provided earnings guidance for the third quarter of 2019. We expect FFO per share for the third quarter to be within the range of $1.26- $1.30.
The midpoint of $1.28 is in line with our second quarter results, as expected sequential increases in revenue are offset by the typical seasonality of our operating expenses, and the incremental contribution from our development and acquisition communities are offset by additional interest expense resulting from our June bond offering. Our balance sheet remains strong, with net debt to EBITDA at 3.9 times and a total fixed charge coverage ratio at 6.4 times. We ended the quarter with no balances outstanding on our $900 million unsecured line of credit and $150 million of cash on hand. 98% of our debt is unsecured and 99% of our assets are unencumbered. We have $577 million of on-balance-sheet developments currently under construction, with $311 million remaining to fund over the next two and a half years. 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 telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Nick Joseph of Citi. Please go ahead.
Thanks. Just looking at your weighted average monthly revenue per occupied home, it looks like it's about 40 basis points below the rental rate growth. I'm wondering what's the drag from other revenue that's causing that, and then how do you expect it to trend for the remainder of the year?
Yeah, absolutely. Because we have higher occupancy and because we're having lower turnover, what we're starting to see is the incremental impact from damage and cleaning fees and bad debt is coming down on a year-over-year basis. That's the impact of what you get when people just aren't moving out.
Would you expect that spread between the two to continue for the rest of the year? Or are you expecting turnover to pick up?
At this point, we're anticipating that although we're having exceptionally low levels of turnover, we think generally it's going to stay fairly low for the rest of the year.
Thanks. Just on the land purchases, you bought more in the quarter. What are you seeing in terms of pricing there? Maybe tie it to what you saw earlier in the cycle for land pricing.
Land prices definitely have increased along with everything else, up with costs and what have you. While land prices have increased, the idea that construction costs along with land prices have driven yields to the point where some of the projects aren't making sense. I think sellers are adjusting and making sure that they can sell at some level. I don't think that land prices are continuing to rise as fast as they were, given the difficulty of underwriting in today's environment.
Also, Nick, just to add to that, the Phoenix site that we bought is something that we've been working on for the last several years. That's reflective of pricing that was two or three years ago, and the site in Charlotte, it's an emerging market for sure, and we have had great success in kind of getting ahead of where the growth is coming. We felt like we got a really attractive price for that site as well.
Thanks for the color.
Our next question comes from John Kim of BMO Capital Markets. Please go ahead.
Thank you. Can you remind us what percentage of your same-store revenue comes from multifamily rents versus fees, retail rents, and other income items?
I would say it's probably pretty close to about 95%, but we'll have to get back to you on that.
Okay. Alex, in an answer to the prior question, the lower other income, is that all turnover-related fees, or was there an impact on technology fees?
Yeah. The largest component of it, as I said, is turnover related. If you think about damage fees, cleaning fees, and bad debt. There is a slight component that's associated with the tech package, because obviously we finished rolling out the tech package last year, and so we're not really getting that much of an incremental impact in 2019. That's a slight component of it.
You don't expect turnover to go up with new lease growth being so strong?
I would tell you, if you would've asked us this question last year, we expected turnover to go up, and it continues to stay at record low levels.
Part of it is this whole idea that when you think about in-migration to different markets and about the way people move around in the country today, they just don't move as much. That's been a trend for the last two or three years, and a lot of it has to do with the unemployment rate being so low everywhere. People sort of think they don't have to move to another hot city to get a better job because the jobs in the cities they're in are doing well given the low unemployment rate. You've started to see migration rates slow in a lot of different markets, and that just keeps people kind of in their apartments longer because they're not moving around.
That's very helpful. Thank you.
Our next question comes from [Lee Wu] of Bank of America. Please go ahead.
Hey, guys. Good morning, and thanks for taking the question. Could you guys talk about some of the markets that you've seen outperformance or markets that have lagged your initial expectations? Any extra color on what's driving that outperformance versus underperformance would be great.
Lee, if you were to line up our results halfway through the year with our initial letter grades that we issue at the beginning of each year with our guidance, I would tell you that there's not a single one that I would change other than maybe a plus to a minus here and there. We're really tracking about as we expected we would across our entire platform. In the second quarter, obviously, we do a reforecast for our original guidance. We do a reforecast every quarter. On $250 million worth of revenue forecasted for the second quarter, we were within $100,000. Pluses and minus here and there, but nothing that would even be worth calling out to your question. The markets that we expected to be at the top of the charts are there.
Obviously the weaker markets, the Houston, Charlotte, and South Florida are the most impacted by new supply relative to job growth. Again, that's pretty predictable and was predicted.
Great. Could you guys maybe talk about the Houston market a little bit more, and also your development in lease up your McGowen Station. How's that been doing versus initial expectations?
Yeah. Houston is, again, at the beginning of the year, we projected it to be one of our weaker markets, and primarily because just the geography of the competitive set and the units that were delivered in 2018 that are still in the process of trying to get absorbed. There were so many apartments that were delivered in the Midtown and Downtown area that all of the new developments, as well as existing assets, have suffered by the competitive nature of merchant builders trying to get to the finish line. The challenge has been that the merchant builders are not getting to the finish line. Most of them thought their Downtown and Midtown assets would've been stabilized by the end of 2018, and it just hasn't happened.
One of the things, even though Houston created almost 80,000 jobs, or is on track to create 80,000 jobs this year, the nature of those jobs is a little bit of a mismatch with the high-end product that got built in Midtown and Downtown. The jobs that have been created, by and large, are hospitality, retail, construction to a certain extent. The sector that has not participated in job growth is the energy sector. All of the large integrated oil companies, which are still primarily the preponderance are located in the Downtown area for their office space, they are just not in a hiring mood. It remains to be seen when that's gonna happen. You don't have to go back till really a little over three years ago, the energy companies were just finishing their downsizing.
The recency effect of having to lay people off and then fast-forward three years later, there's a great deal of reluctance to start increasing headcount. I think the energy companies are kind of doing more with less, and at some point that will reach a breaking point and they'll start hiring again. In the meantime, the jobs that are being created, even though they looks good in terms of aggregate numbers, they're not jobs that necessarily support the kind of rents that you need to live in the Midtown and Downtown area.
Thanks for the color. Our next question comes from Trent Trujillo of Scotiabank. Please go ahead.
Hi. Good morning. Just wanted to go back to revenue. The operational update you provided earlier this quarter at Nareit, it was showing a blended rate growth of 4.7 through May. There was some overtures that it could accelerate further in June based on historical trends, which would possibly lead to raising same-store guidance. It sounded like it had picked up. How much thought did you give to raising same-store revenue guidance, given where first half came in?
Yeah. As I mentioned, we did the reforecast for our second quarter, and we ended up almost exactly on top of where our reforecast was. Based on that, we feel like we have really good visibility for third and fourth quarter, and obviously we've gone through the reforecast for that. We still feel very comfortable with our guidance that we've reiterated. We did raise revenue guidance last quarter, and we've maintained it for this quarter. We're comfortable with where we are in terms of where we think the end of the year will shake out at a 3.4% total revenue increase.
Okay. That's helpful. Then shifting, I guess going back to acquisitions, you've alluded to achieving or even exceeding the high end of your range. Could you give some indication as to what's in your pipeline and the confidence that you can put to work all the capital that you have raised so far?
Sure. The last chart I looked at had 14 properties that were in excess of $1 billion that we had in various stages of due diligence in terms of whether we were going to try to be the ultimate winner. The interesting thing about acquisition guidance is that you can always hit your guidance if you're just the highest bidder. We try to be as disciplined as possible in this very aggressive acquisition environment. I think we have better confidence today in that the properties that we're looking at now, we think there's several that are in the sort of sweet spot of what we're looking for. What we're looking for is newer properties that haven't stabilized or have management issues. We think there are gonna be some opportunities for us to at least meet our guidance and hopefully exceed it.
Okay. One quick follow-up, maybe for modeling purposes. On recurring CapEx, you spent about $31 million year to date, and I fully realize that this spending can be lumpy, but are you still comfortable with the original guidance of $68 million-$72 million for the year?
Yes, we're still comfortable with that.
Okay. Thank you.
Our next question comes from Daniel Santos of Sandler O'Neill. Please go ahead.
Hey, good morning. Thanks for taking my questions. Just two quick ones for me. The first one is on the management shuffle. Should we expect any G&A impacts from any internal promotions? Other than maybe who's going to host the Nareit happy hour, are there any changes in role responsibilities?
The answer is no to both.
No to both.
There are no major-
Unfortunately, the answer is no. Yeah, especially Nareit.
Fair enough. Then second, are there any sub-markets where you're starting to get maybe a little nervous about supply that's coming down the pike, that's making you maybe reconsider your exposure in the future?
No. The thing I think has been very interesting and positive about this real estate cycle is that all markets have been able to absorb their supply, even when the supplies are at peak levels. We think next year, we start seeing some moderation in the peak in some markets. The good news is we've had enough job growth and had enough stickiness of the existing customer base, because the fact that we have lower turnover means we don't have to find as many new residents. That in combination with a decent job growth market and great situations in each city, you've been able to absorb the supply without having a major negative impact. Now, clearly, markets like Charlotte and Southeast Florida, maybe Charlotte's a great example, where you've had a lot of supply, but you've had great job growth to back it up.
While it's moderated, it's put a damper on big rent increases for existing properties. You're still positive, maybe 1% or 2%. In light of how much supply is coming on, I think that's a very good backdrop. Ultimately, the real question for us longer term is, where are we in this cycle? When you look at projections out further, the question of, with an unemployment rate in the threes, where do you find the people to add the jobs? There's jobs available and the economy's doing well, but there's a lot of concern about the ability of job growth slowing as a result of the inability of people to find people to actually take those jobs. Heretofore we've had, at least in the last year, there's been people coming back into the workforce and what have you, to fill those jobs.
Generally, supply, it's been really good and well absorbed.
Awesome. That's it for me. Thank you.
Our next question comes from Austin Wurschmidt of KeyBanc Capital Markets. Please go ahead.
Hi. Good morning. Thanks for the time. I want to go back to last quarter's call, as we were discussing new lease rates and the expectation that new lease rates wouldn't push much higher than the 2.8% you achieved in April. In fact, you did see significant improvement in May, and June also seems strong. I guess I'm also curious what may have offset the benefit from the higher new lease rates, as it seems like renewals are pretty much in line with expectation, and that you're tracking above the 3% to 3.5% blended lease rates that I believe you assumed in your initial outlook.
Yeah. Our guidance assumes total revenue growth of 3.4%. We were 3.7 in the first quarter. Clearly, when we do our re-forecast and looking out, the fact is that some of our markets, in particular Houston, Charlotte, a little bit in South Florida, and also beginning to see signs in Austin, that just the constant backdrop of too many apartments being delivered in sub-markets where we're competitive with that new supply, at some point, it takes a toll. Obviously, I think you're seeing some of that in those four markets, and we expect that to continue throughout the balance of 2019. The good news is we still have markets that are doing 5%+ on blended growth rates, and those are going to continue to help.
Clearly, when you're modeling your 3.7% in the first quarter, we maintained guidance that raised it to 3.4%, but maintained it at 3.4%. The math is pretty simple that you're going to see some deceleration in blended average rental rates or total revenues through the third and fourth quarter. That's what we expect. We think it's moderate in terms of the deceleration that we could see in the third and fourth quarter. If we get to the end of this year and we have another print of 3.4% total revenue growth on top of what we had the last couple of years, we'll probably all shake our heads and say, "Job well done.
Yeah. No, I appreciate the thoughts there, and that kind of leads a little bit into my next question. You gave a little bit of a glimpse into 2020 supply and as well as how 2018 and 2019 were shaking out. As we sit here today, I'm curious, how's 2019 playing out to date versus your expectation, and are you just assuming what wasn't delivered in the first half gets delivered in the second half? How was Ron Witten's forecast for 2018 from initial projection perspective, and then what ultimately played out in 2018?
Witten, which is who we primarily use for completions across our platform. The actuals for 2018 were about 137,000 deliveries across our platform, which was a little bit less than what he had at his origin. If you go back 12 months prior, he was off by about.
About 8,000 apartments. He had 145,000, ±, being delivered in 2018. The consequence of that is, as you just mentioned, that ends up rolling into 2019. 2019, currently, he has almost spot on with 2018 at 137,000 again. There's movement around in our platform, but the aggregate deliveries across our platform are almost identical from actuals of 2018 to what he's projecting in 2019. Where it shows up is that now, whereas for two years, we were sort of pointing to, and everyone was pointing to 2019 being the peak deliveries nationally, and we thought that would play out in Camden's portfolio as well.
Based on Witten's new numbers for 2020, which he has going up from 137 to 151,000, clearly some of that 8,000 from 2019 rolled to 2019, and another 8,000 or 9,000 from 2019 has now rolled to 2020, and it looks like 2020's going to be the peak. I hope that we're finally reaching the actual peak for deliveries across our platform. He's got them, starts coming back down in 2021. Not a huge amount. I think it's very likely that the rollover from 2018 to 2019 continued, and will continue throughout 2019, and I hope that we're going to see the peak deliveries of somewhere around 150,000 completions in 2020.
What % of the 137,000 in 2019 is expected to be delivered in the second half of the year? Absolute numbers?
Yeah, I don't have that in front of me, but I'd be surprised if it wasn't pretty equal across our platform, where there's not a whole lot of seasonality in how and what we build, with the exception of Denver.
Okay, great. Thanks, Keith.
You bet.
Our next question comes from Haendel St. Juste of Mizuho. Please go ahead.
Hey there. Good morning.
Good morning.
I wanted to follow up on an earlier question. Can you actually talk a little bit about the timing of the development starts for the new land purchases in Charlotte and Tempe, and what type of yields, ballpark, are you currently projecting there?
Sure. The starts for those units will be towards the end of this year and beginning of next year. Mostly 2020 starts, when you get down to it. In terms of development yields, our yields in our pipeline are anywhere from 5%, roughly, on the high-rise urban, and about 6.5% on our suburban. Just to give you some color, there's been a lot of discussion about yield compression because of cost increases going up faster than rental rates. In our last book of business, our ranges were 5%-7.5%, and now they're about 5%-6.5%.
Okay, that's helpful. Maybe you could tell me, I'm assuming they're stabilized yields you're projecting there, so maybe some color on the projected rent and expense increases you're projecting as part of that?
Are you talking about rent increases in a development profile?
The yield. Yes, I'm assuming they're stabilized yields you quoted. Just curious what's embedded within them.
That depends on the market, but generally, we're not inflating our rents much more than 2% or 3%, given where we are in the current market. Generally, what we do is we do two methods of analysis. One is untrended returns, and the other is what we expect the returns to be. Those are the returns I just gave you. I think the rent increases are, like I said, anywhere between 2% and 3% max. Operating costs, we're inflating them at pretty much 2% to 3% as well.
Okay. I'm curious about the Charlotte development in particular, given the relative revenue weakness and the supply commentary you mentioned earlier on that market. I guess I'm curious, what about that project specifically gives you the confidence to start that in light of your earlier commentary?
Well, as Keith said earlier, it's Charlotte's NoDa, which is on the rail line, and it's basically north of downtown Charlotte. We're going to start construction on that project in January of 2020. It's not going to deliver really effectively until end of 2021 or middle of 2021 into 2022. The Charlotte market, while it's having some issues now with absorption, over time, it's one of our best markets, and we think that fundamentally that this project will, given where it is and on the rail line, that it'll absorb into the market the way the other ones are absorbing in the market today, which would be a very positive, reasonable yield, and another great asset for us in Charlotte.
That's helpful. Thanks. One last one, if I may. I don't know if I missed earlier, but maybe you could share some color on the initial yield for the Austin acquisition, and maybe some of the longer-term operating upside, if there's any there. Thanks.
We're trying to buy our models. Our acquisition program today is to buy assets that have not been stabilized from a lease-up perspective, and the Austin asset would definitely categorize as that, at a below replacement cost, somewhere between 10% and 20% below replacement cost.
Then having upside to be where we can bring our management team in, bring our technology packages in, and then drive cash flows up. Generally, the theme of that is you're going to buy properties that are in the low fours, 4.25-ish kind of existing cap rates. We're going to try, we think fundamentally within a couple of years, we'll be able to get it up to a 5% cap rate in terms of by implementing Camden revenue management systems and technology packages and what have you. That would be the model we're looking for. That's pretty much where Austin is.
Thanks, Ric.
Our next question comes from Drew Babin of Baird. Please go ahead.
Hey, good morning.
Morning.
Question on maintenance CapEx. It ran a little high, relative to our estimates, kind of on a per unit basis in the second quarter. I guess, is this a sign of trends, the same factors influencing development costs influencing CapEx? Maybe, if there's kind of a per unit number you think is kind of budgeted for this year, if you could remind us what that is.
Yeah. What I would tell you is it's entirely timing based. If you looked at our original guidance, it was $68 million-$72 million, and we anticipate being right in that range. What you saw in the second quarter as compared to your model is probably just a little bit of a timing issue.
Okay, that's helpful. Question on Southeast Florida. Obviously, that's a market that maybe the job growth hasn't been as hot as the rest of the Sun Belt. Obviously, there's some supply there. Can you talk about who is adding jobs there and what types of factors might get that market going again? Could a currency fluctuation or something like that possibly maybe bring more activity in? Just based on your experience in the market, I was hoping you could maybe give some color there.
I think if you take Witten's numbers for projected job growth in Fort Lauderdale, 27,000 jobs this year, and that drops a little bit into 2020. Same thing for Miami. Miami's Witten's got 2019 jobs at 20,000, going to 14,000 in 2020. Also, commercial construction activity. I don't think it's the character of the jobs in the Miami, Fort Lauderdale markets. I just think it's the amount of supply of both for sale and for rent product that we've had to try to absorb there.
To your point of currency valuation changes and what have you, I think there is definitely an impact on Southeast Florida, given it's sort of the capital of South America, if you want to call it that, or Central America. You have seen when there are times of volatile currencies issues down there's been flight capital and folks that have come into the market. A lot of the condos that Keith is talking about that are competing with apartments are actually people generating hard currency that are South American owners that'll lease a very expensive apartment or condo cheap in order to just get some hard currency. It's an interesting market. Long term, it's a great market, but it just has a few headwinds right now.
Okay, that's all helpful. Just one last quick question on Southern California. Obviously, your performance in that market looks better than peers, kind of as a product of what you own and where you own it. The last couple of quarters, it seems like the revenue growth has been more occupancy gains and decent rental rate growth and outperforming rental rate growth, but still kind of in the upper twos. I guess, have you seen anything so far in the third quarter that would indicate any kind of marginal softening in Orange County or near San Diego, or have kind of trends in the first part of the year kind of continued, and you still expect to do pretty well in those markets?
I think that L.A., Orange County, and our San Diego platform, as you mentioned, we have a little bit different geography than most of our comp set do. I think that the strength that we've seen for the last two quarters was we modeled that strength, and so I think when you look out on our reforecast, it looks like it's going to continue. Yes, we've had occupancy gains in both those markets, but that's been true across our entire platform. I think I gave you in the prepared remarks, a preliminary number of it looks like we're trending in July towards a 96.3% occupancy, which is, as you all know from long years of doing this with us, that's really unusual in our portfolio.
We've operated in the 95%-95.5% range for so many years that it feels a little bit unusual to be in the 96s, much less 96.3%. The occupancy picked up is not just a Southern California phenomenon, but it's really pretty much across our entire platform.
I take that to mean rental growth trends as far as leasing activity so far into the third quarter are pretty much on target with budget?
They are.
Okay. That's very helpful. Thank you.
Our next question comes from John Pawlowski of Green Street Advisors. Please go ahead.
Thanks. On the acquisition front, would the Pure Multi-Family REIT portfolio have met your quality criteria?
It would not have met our existing quality criteria at this point. It was definitely an interesting portfolio and an interesting print pricing wise. We evaluated the portfolio, the challenge for us with it was, number 1, it wasn't in that kind of sweet spot that we're looking at today. Number 2, it was highly concentrated in Dallas with some suburban properties that we weren't really excited about. There were a lot of sort of other issues around it, we would not have ever been as aggressive pricing wise that it ultimately traded at.
Okay. Just broader question on portfolio acquisitions, what is the appetite? I know pricing matters and markets matter, but what is the appetite to do just larger portfolio deals right now?
For the right product and the right portfolio, we'd be fine doing a large transaction. I think the challenge you have with large transactions, Pure is probably a good example of it. I think if Keith was answering this question on Pure, he would say there were three properties in the whole portfolio that we would've wanted to buy. On the other hand, you might change your strategy from an acquisition perspective if the pricing was where you wanted it to be, and you could change your criteria, too, if you thought there was value to be had in it. I think the challenge you have with portfolios, just fundamentally, is that they tend to have assets in them that you don't really want. You kind of have to take them to get what you want.
The question is how much, what percentage of the portfolio is something you really want to buy? What are you going to do? Is the ones that you don't want to buy, that you have to buy, are you having to pay a price where you think you can either move out of them or trade them around in the future? Oftentimes we see these portfolios and go, if we wanted to buy $1 billion of properties or $1.2 billion of properties like Pure had, we'll just go be the highest bidder on $1,200 million projects that we want to buy.
To me, unless there's something strategic around it or the pricing is so good that you kind of will want to do that kind of business, then that's why we haven't done a large transaction in a while. The pricing today is very robust for everything. Actually, you probably get a premium for if you're a seller of a large portfolio today.
Okay, is pricing getting irrational or too irrational in any market where you'd consider ramping dispositions right now?
You know what? I don't think it's irrational, I think because when you look at the math on Pure or the math that we're seeing on these other properties, people have just reduced their return requirements to a certain extent, and multifamily fundamentals continue to be reasonable, even in markets that are oversupplied, or that have lower rent growth because they're oversupplied from that perspective. I haven't seen any real head scratchers. When it comes to dispositions, we've sold a lot of properties in this last cycle, and we've traded out 20-plus-year-old assets for newer properties in the four to five year range and used dispositions to fund development as well. We don't have a lot of assets that we really want to part with right now.
I haven't felt like the market is so irrational pricing wise, that I got to get in there and sell into it. When you sell into it, the question is, do you think prices are going to go down or so we can redeploy that capital. Given the interest rate cycle we're in, given the length of the recovery, and given the fundamentals for the business, it's really hard to make a case for apartment cash flow and cap rates to change dramatically right now. The answer would be no.
Okay. Makes sense. Thank you.
Okay.
Our next question comes from Karin Ford of MUFG. Please go ahead.
Hi, good morning. I wanted to ask about the management transition. Should we be expecting more management changes in your term as part of the succession planning? Ric, how should we be thinking about your tenure?
I don't think you should anticipate something next quarter or the quarter after that. We've been in a succession planning mode for quite a while. I do have my 65th birthday next week, I'm glad we didn't do the conference call right on that day. Keith and I are. Keith's younger than me, by the way.
Always will be.
He will be. Really, I know Malcolm's probably going to hit me for saying this. He actually is slightly older than me. When I think about succession planning, I think you have to, especially in a culture like Camden, we're going to internally grow our next tier of management, and they're all with Camden right now.
Keith and I have had for a long time, a longstanding succession plan with our board. I know some people on the call have asked us this specific question, and we've told them about it. Each year, at the beginning of the year, we commit to a three-year term, and it's basically a letter that we send to the board that says, "Keith and Ric are going to stay for three years." If there's a reason or we don't fulfill that commitment, maybe health issue or something like that, then the person who doesn't fill it So if I didn't make it through that three year, the person that doesn't make it agrees to stay at least two years for transition. Both of us are healthy. We love Camden, we love our structure, and we plan on being here for a while.
The question is, now creating space in the organization allows our most senior people to get more experience in areas that they may not have as much experience in, which positions us ultimately for a transition. That transition is going to happen in the future. Is it next year, the year after, the year after that? I don't know. It's a well-thought-out program, and we fundamentally believe that our next generation of leadership, we have them at Camden now, and we want to make sure that they stay at Camden. That's one of the reasons for the opening up of the space in the titles.
Okay, that sounds good. Then my second question is, at Nareit, you called out Washington, D.C., as performing better than planned. It ended up decelerating 90 basis points in the second quarter, and now you're saying everybody's in line with plans. Has D.C. fallen off at all, and are you starting to see any demand impact there from HQ2 yet?
For the second quarter, D.C. was at 3.8% revenue growth, which would place it as the fifth highest in our portfolio. I called out the top four. The next one would've been D.C. Metro. Out of 15 markets, it would be fifth, which it's been a long time in Camden's world since D.C. Metro would've been in the top five. I don't know about the comparison to the Nareit, but in our world, 3.8% in D.C. Metro for the quarter is a really good quarter. I would tell you that the commentary from our D.C. Metro operating staff on the call that we do quarterly to get an update on market conditions, is the most positive and constructive tone that I've heard out of our D.C. Metro operations team in probably three or four years.
All that to me, bodes well for continued good performance in our D.C. Metro portfolio, which over the last two or three years, has outperformed most of our peer group. A lot of that just has to do with our geography in the D.C. Metro area versus a lot of our peers.
Great. Thanks for taking the questions.
You bet. Mm-hmm.
Our next question comes from Hardik Goel of Zelman. Please go ahead.
Hey, guys. Thanks for taking my question. I just wanted to kind of wrap together a bunch of different questions, I guess, that were already asked, and just talk about capital allocation and how you guys kind of think through it. You guys have talked about the acquisition environment being really aggressive and hard to stay disciplined if you want to win deals. You're also filling in your pre-development pipeline. Is the option here to build more? What does your starts outlook look like longer term, but specifically 2020? How do you think about the incremental dollar invested today and what to do with it?
The incremental dollar, given the spread between acquisition pricing and development, if we could just wave a wand and make the development pipeline larger, we would definitely err on the development side. Between late this year and next year, we have $210 million. That would be the Phoenix project and the Charlotte project, two of those, $210 million. The late starts this year with two projects, one in Florida and one in California. It's $180 million. When you add those two together, that's $370 million that could start or should start between the end of 2019 and through 2020. Again, we would definitely be more development-oriented than acquisition-oriented, even though I think the challenge that we have with development is getting projects that actually pencil.
That's why we'll do a combination of the two, and try to find those sort of diamonds in the rough that we can drive the earnings growth over a couple of years in this environment, up pretty dramatically so we can get them up into fives.
Thanks so much for that detailed response. Just a quick follow-up. When you think about development in the markets, is it very case by case and project specific, or are there a few markets where construction costs are less of a burden or they're increasing less? We hear from your peers that construction's really difficult. In some markets, whereas it can be easier in others. Which are the markets that you're kind of focused on today and where is the opportunity?
Well, I think that all markets are definitely the same in terms of construction cost and time. It takes longer to build today because of lack of construction workers. I think each market is definitely unique, and we're trying to find those sort of projects in the markets we operated in that we can make those numbers work. I don't think there's any easy market or a market where you can't find something. It's probably more difficult in California because all the California issues, than it is in some of the other markets. The California project that I talked about for a start at the end of this year, early next year, we've been working on it for three or four years or longer.
Generally speaking, I think you hit the nail on the head that it's hard to build everywhere, and if we could expand the pipeline, we would, if we could get reasonable yields. That's where we're constrained, is the discipline on making sure that we're not investing that incremental capital at a return that isn't in our guidelines.
I'm guessing that when you're hearing from our peers about hard and easy to build in, they're probably referring to the entitlement process, not the cost pressures. Cost pressures are significant relative to what underwritten yield you're trying to achieve that makes sense. They're as hard in Houston, Texas, as it is in Southern California. On the other hand, the actual regulatory regime and the entitlement process is a different animal in California versus Houston. You would have to put them on an array, but the array of hard to easy or relatively easy entitlement process would start with California and probably end with some of our Texas markets, and then the others would be spread along the way. The cost pressures are significant and real across all 15 markets that we're trying to operate in.
Thanks so much for the color.
Our next question comes from Rich Anderson of SMBC. Please go ahead.
Hey, thanks. Hopefully, I'm the last question. When I was reading Keith's bio, I have to say, you guys are remarkably spry for the amount of time that you've been doing this, and so credit to you. I was going to ask the question, what's the end game, as you guys start to consider closing out your career, succession, go private or some sort of combination? It sounds like the answer, if I were to answer for you, would be succession, which is great. Are things like levering up and going private or some sort of reverse merger, since you would ultimately financially have to be a buyer in a public-to-public type thing, but where your portfolio would improve another, where the reverse would not be true in your eyes, I'm assuming?
Are those two other alternatives completely off the table for Camden, at this point, or just wondering if you could comment on that?
I think they're totally unrelated to succession, right?
That is fair.
Yeah.
Okay.
To me, the issue of what you do with Camden as an entity or assets or how you drive total shareholder return and how you compete in the marketplace is one issue, and I would never connect a succession issue to a financial transaction that is either good or bad or indifferent for a Camden shareholder. I think that when I think about Camden as the CEO, chairman, and large shareholder, I think about maximizing the ability of the company to have longevity and to compete in the marketplace effectively and in the top quartile of returns. If there was a private transaction or a public transaction or any transaction where we could drive that objective, then we would do it. I think each transaction that you mentioned has their own issues and own risks and things.
They're definitely not related to Keith and my longevity or spryness or succession plans. Ultimately, I think this is a great long-term business. We've been doing it for 26 years, almost going on 27 now, and have had great returns and create a lot of value for shareholders over the years. I think it will continue. Ultimately, the question about what we do, I think, will be unrelated to what Camden does or what we do as a company from that perspective.
Yep, fair enough. Appreciate the color.
Sure.
This concludes our question and answer session. I would like to turn the conference back over to Ric Campo for any closing remarks.
Great. Well, I appreciate the time today and the consideration. Have a great rest of your summer, and we'll see you on the circuit in September. Take care. Thanks.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.