Good day, and welcome to the Camden Property Trust Second Quarter 2018 Conference Call. All participants will be in listen only mode. After today's presentation there will be an opportunity Please note this 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, and thank you for joining Camden's second quarter 2018 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 the company assumes no obligation to update or supplement these statements because of subsequent events.
As a reminder, Camden's complete second quarter 2018 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 Rick Campo, Camden's Chairman and Chief Executive Officer Keith Oden, President, and Alex Jessett, Chief Financial Officer. We will be brief in our prepared remarks and try to complete the call within 1 hour. We ask that you limit your questions to 2, then rejoin the queue if you have additional items to discuss. 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.
Thanks, Kim, and good morning. Today's on hold music was selected by Austin Wurschmidt and his team at KeyBanc We won our contest on last quarter's call. Austin picked up on the accelerated pace of M and A activity and REIT industry in 2018 with 8 deals totaling 56,000,000,000 in equity valuation, either closed or pending. That's a lot of collaboration, which led to his theme of famous collaborations of musical variety. Thank you, Austin and your team.
And for this quarter's contest, be the first email Kim Callahan for artists and or bands featured on today's on hold music. And you will have the honor of Select in our music for our next earnings call. Our cabin team members delivered solid earning results this quarter. We continue to create value through our development business and will be at the high end of our 2018 starts guidance. The acquisition environment is challenged team with high demand driving higher prices and lower cap rates, more than we anticipated at the beginning of the year, rising interest rates and modest growth rates have not had any effect on buyer demand in the multifamily business.
We've held our acquisition guidance of $500,000,000 for the year that have moved $300,000,000 into the 4th quarter. We still believe we'll hit our acquisition targets on maintaining our discipline by the end year. I'll now turn the call over to Keith Oden. Thanks, Rick. Today marks Camden's 100th quarterly earnings call and Rick and I've had the privilege to be on every one of them.
A lot has changed in re in the REIT world over the last 25 years. The one thing that has always been true is that good numbers made for good earnings calls. I'd like to acknowledge and thank our Camden team members for producing another quarter of good numbers for us to discuss on our call today. We are indeed pleased with the results this quarter, which were better than our expectations for both the quarter and year to date. Overall conditions remain healthy across entire portfolio.
Sequential revenue growth was up 1.8% led by Corpus Christi at 6.4% and importantly, in 2nd place was DC Metro quarter for Camden and with this in mind and the fact that with the end of earning season, I'll keep my remarks brief to allow for more time to discuss what interests y'all about quarter. Starting with same store results, revenue growth was 3.2% for the quarter and 3.3% year to date. Second quarter revenue growth was led by Corpus at 4.5.4 Percent Orlando 5.2 Phoenix 4.7 Tampa 4.5, Raleigh at 4.3 and Houston at 3.7. As we expected, our 2 largest markets posted better revenue growth compared the first quarter with Houston up 3.7 DC Metro up 2.5%. Rents on new leases and renewals continue to look encouraging versus our original guidance.
In the second quarter, new leases were up 3.3% and renewals were up 5.9%. That produced a blended growth rate of 4 point percent versus 3.32 in second quarter of 'seventeen and 2.7% for the last quarter. July prelims are running at 4.8 percent for new leases, 5.6 percent for renewals for a blended rate of 5.2%. As we expected, new lease pricing is has seen good improvement during our peak leasing season. August, September renewal offers are going out at an at about a 6.1% increase.
Our occupancy rate averaged 95.8 percent in the 2nd quarter versus 95.4 in the 1st quarter and was above the 95 3 from the second quarter of last year. Our July occupancy rate actually reached 96%, slightly better than our 957 July. Our net turnover rate continues to see an all time lows at 49% for the, for the 2nd quarter and 44% year to date. The lower turnover rate in tandem with a historically low number of move outs to purchase homes continues contribute to our strong and somewhat better than expected operating results. I'll turn the call now over to Alex Jessett, Camden's Chief Financial Officer.
Thanks, Keith. And before I move on to our financial results and guidance, a brief update on our recent real estate activities. During the second quarter of 2018, we began construction on Camden Lake Eola, a $120,000,000 360 unit, 13 story building in a Lake Eola submarket of Orlando, Florida. During the second quarter, we also began leasing at our Camden McGowan Station Development in Houston, our Camden North End Development in Phoenix, and our Camden Washingtonian Development in Gaithersburg, Maryland. In the third quarter, we began construction on Camden Buckhead in Atlanta.
This $160,000,000 365 Unit Development will be the 2nd phase of our existing Camden Paces community and will consist of 18 and 19 story concrete building. Previous cost estimates in our supplement for this development were based upon the construction of 1 four story wood frame app building. Due to this project's irreplaceable location in the heart of Buckhead and the success of our Camden of our phase 1 Camden Paces High Rise, We've made a decision to significantly enhance this development, including moving to 2 type 1 concrete high rise structures. Turning to financial results. Last night, we reported funds from operations for the second quarter of 2018 of $116,100,000 or $1.19 per share, exceeding the midpoint of our guidance range performance for the second quarter, result is primarily from approximately 0 0.5% and higher same store revenue, half a cent in higher non same store net operating income, which was primarily driven by better than expected results from both our recent acquisitions and our development communities.
In the aggregate, our same store operating expenses were in line with expectations, Although property taxes were $1,000,000 higher than anticipated, entirely due to Atlanta property tax valuations. This negative tax variance was entirely offset by lower than anticipated expenses in almost all particularly lower repair and maintenance expense and lower levels of self insured employee health care costs. Turning to property taxes. Fulton County, Georgia, which includes Atlanta, significantly raised their valuations for residential assets. The valuation increase for our entire Atlanta Metro portfolio was approximately 28% with a 41% increase for our Fulton County communities.
This Atlanta valuation increase was not anticipated and will result in $2,000,000 expense in 2018. As is our policy, we accrued 6 months of this increase or $1,000,000 in the second quarter to catch up. The remaining $1,000,000 will be booked over the rest of 2018. We have already filed appeals on these valuation increases. However, due to the amount of property owners in Atlanta that will be contesting their valuations this year, it is unlikely we will get any settlement before the end of received.
We are now anticipating full year property taxes for our same store portfolio to increase approximately 6%. We believe anticipated cost savings in our other operating expense categories and have therefore left the midpoint of our same store expense guidance unchanged at 3.5%. We've updated and revised our 2018 full year same store revenue and FFO guidance based upon our year to date operating performance and our expectations for the remainder of the year. Our same store revenue performance has been better than expected for the 1st 6 months of the year driven primarily by higher levels of occupancy. Based upon our trends and our expectations for the remainder of the year, we are increasing the midpoint of our full year revenue growth from 3% to 3.15%.
This increased revenue guidance and the maintenance of our expense guidance results in an increase to our 2018 same store NOI guidance from 2.7% to 3%. Last night, we also increased the midpoint of our full year 2018 FFO guidance by $0.02 from $4.72 to $4.74 per anticipated 30 basis points or $0.015 increase in 2018 same store operating results. Half a percent of this increase occurred in the 2nd quarter. With the remainder anticipated over the 3rd and 4th quarters, and 1 and a half cents of additional non same store outperformance. Half a cent of this increased also occurred in the 2nd quarter, with the remainder anticipated over the 3rd and 4th quarters.
This $0.03 aggregate increase is partially offset by $0.01 from delayed acquisition timing. Our current guidance now assumes approximately $300,000,000 of additional acquisitions all in the fourth quarter. If we do not
dollars
FFO per share for the third quarter to be within the range of a dollar 17 team is in line with our 2nd quarter results as expected sequential increases in revenue are offset by the typical seasonality of our operating expenses. Our balance sheet is strong with net debt to EBITDA at 4 times, a total fixed charge coverage ratio at five and a half times, secured debt to gross real estate assets of 10%, 81% of our assets unencumbered, and 92% of our debt at fixed rates. We ended the quarter with no balances outstanding on our unsecured lines and credit and $64,000,000 of cash on hand. We have $633,000,000 of developments currently under construction with $283,000,000 remaining to fund over the next 2 years. Later in 2018, we will repay at maturity $175,000,000 of secured floating rate debt with a current interest rate of 2.9 percent and will repay at par $205,000,000 of secured fixed rate debt with an interest rate of approximately 5.8 percent.
We currently anticipate issuing $400,000,000 of unsecured debt late in 2018 at a rate of approximately 3.8%. In anticipation of this offering, We have entered into $400,000,000 of forward starting swaps effectively locking in a 10 year treasury at approximately 2.6%. At this time, we will open the call up to questions.
Yeah. Before we take our first question, we do have a winner in the contest. John Kim of BMO Capital Market was the first to get 4 correct artists. We look forward to working with you, John, on next quarter's music. Now we'll open it up for questions.
Thank you.
Thank you. Session. Our first question comes from Nick Joseph of Citi. Please go ahead.
First question on Houston, for the merchant build product, are you still saying concessions or has vacancy paid in and the leasing environment meaningfully approved? On the merchant bill product, we have, we continue to see concessions and it's very typical in this kind of environment. It's interesting because the market is very bifurcated from that perspective. So just give you an example on our Camden McGowan Station project. We are 30% leased after opening up the first quarter.
So our velocity is very good, but the concession environment is is, basically 2 months free in that product. The the, when you think about the operating portfolio overall, 9000 apartments that we have plus or minus in in Houston, our operating portfolio you know, doing really well from a from a revenue growth perspective. But merchant builders are very typical in when they start out with, with with an empty building, they they focus on pushing the the, occupancy as fast and as hard as they can. And their view is is that free rent, gets you there, and it's a very typical thing that is used in the marketplace. So it hasn't negatively impacted overall market, just the development market.
And once the projects are leased up, obviously, the concessions are hope to burn off. Given the supply situation, the fact that there's only 7000 units being delivered this year and then less next year, we expect that that the free rent will basically dissipate by the probably end of this year, maybe middle of next in the new development properties. Great. Thanks. And one other question.
I see here that the estimated cost of the Buckhead deal the development pipeline increased by 55,000,000. What's driving that? And, and how does it impact the expected stabilized yield? And when would you expect that to start?
So as I mentioned in my prepared remarks, the previous cost estimates for that development was upon a, a four story wood frame wrap building. And, due to its location in Buckhead, and the success of our adjacent Camden Paces High Rise, we made decisions to significantly enhance that development, including moving to 2 type 1 concrete high rise structures.
Our next question comes from Juan Sanabria of Bank of America Merrill Lynch. Please go ahead. Hi.
This is actually Shirley Wu with, Juan Sanabria. So I wanted to touch on Houston a little bit more. For the back half of twenty eighteen, what do you think will be trajectory will be put for occupancy costs this year. And also, what's the range of your occupancy losses built into the guidance for the second half?
I'd, I didn't get the second part of that question, shortly. So let me, let me address the first part first, which is the, on Houston and sort of the trajectory. We will have some, very difficult occupancy comps in Houston in the fourth quarter as you some of you may recall, we actually, at one point, last year, as a result of the the aftermath of the hurricane, Harvey, we actually hit 99% occupied in the 4th quarter and obviously we'll be nowhere close to that. So we had while we continue to make good gains, our new leases, have ticked up since the beginning of the year, and we're basically up about 1% in the 2nd quarter. Our renewals were, were running, you know, 5 to 6% on renewals in Houston We do expect to see that new lease rate continue to tick up throughout the end, from now through the end of the year, but offsetting that will be the fact that we'll be nowhere near 99% occupied.
I think we closed out, closed out July at about 95.5% occupied in Houston, which is, you know, that's more typical a more typical occupancy rate. So we're likely to see something more akin to that as we as we roll out through the end of the year and then we'll continue to get better results on the new leases and, renewals. And I I didn't hear this. I'm sorry. I didn't hear the second part of your question.
So I
was just wondering, in terms of occupancy losses, is that built into your guidance? And is that mostly focused on 4Q like they were saying, or is it like a bit in 3Q as well?
Well, it's not occupancy losses, but occupancy relative to, you know, our same store results last year. It's obviously going to be, much less probably by 50 basis points plus or minus less than what our occupancy was at this time, are, are in the fourth quarter of last year. But we're not projecting occupancy losses from where we are today throughout the end of the year. It's just that we're going to have a really tough comp in the fourth quarter, like 3rd and into the fourth quarter of, of 20 team.
Got it. Thanks for the color.
You bet.
One more question. For new and renewals, can I get the 2Q numbers your portfolio across your different markets? So for 2nd quarter,
new leases, 3.3%. Renewals, 5.9% and the blended rate is 4a half. Our
next sorry. Go ahead? Yep.
Okay. Do you have a market breakout?
Yeah. But we, you know, we're we're operating 15 market if you would we'll give you that offline, but going through those, it it take me, you know, I don't I don't need we don't need to get in that level of detail on the call, but you we they're available when you get them offline.
Thank you.
Thank you.
Our next question comes from Austin Wurschmidt of KeyBanc Capital Please go ahead.
Hi, good morning. I
was just curious if you
could give a sense on how 29 supply outlook is shaping up as one of your peers indicated supply growth to be down in the high teens next year. And I was curious if you were seeing a similar decline.
So, it, it, our 2 data providers are Witten and RealPage that we have, we look at completions for 2018, 2019, And honestly, there's not a nickel's worth of difference in their forecast, between 'eighteen and 'nineteen. Witten is basically at 138 1000 deliveries. And I'm talking only in Camden's markets, not not nationally, but only in Camden's markets. And he's got that drop into 136 in 20 18, a RealPage number is a little bit less than that at 14218 and drops to 140. So you're less than 1% difference between the 2 data providers that we have on what we think completions will be between 2018 2019.
So I think that both of them, at least in our conversations with them, they have attempted to, capture the what what has been a phenomenon that's been going on for 2 years now, which is the delay in getting completions to the finish line but they think they've, they've made their best guess at things that may shift between 20 projected 2018 completions that roll over into 2019. So we'll see how good they were able to, to forecast that, but it's certainly been a trend for the last 2 years. My guess is going to continue and, and they tell us that they've made their best guess at factoring in delays of 2018 2019. But I think for our purposes, from a standpoint of our planning, we're assuming 20182019 are roughly equivalent across our platform. Way.
That's that's just a different animal given given the the the nature of Houston when when supply is just falling off the edge the earth, you know, in 'eighteen and 'nineteen? Yes, they're basically that we've got, Witten and, has got 20 18 at 7000 Apartments, and that drops to about 6019 for Houston. So in the historically, those are crazy low numbers for them.
Yes. Appreciate the detail there. And then separately, you talked about the competitiveness in the acquisition in the transaction market, but that sounds like you're pretty comfortable with your acquisition guidance. So I was just curious what gives you that level of confidence? And do you have anything under contract today?
Well, what gives us the confidence is that we are working on lots of transactions. And while we we don't really talk about what we have under contract or not at this point level in the game. We feel that we'll be able to hit that target by the end of the year. It is a it is it was somewhat surprising to us that that with the tenure hitting 3 and markets, prices being where they are that there wasn't a little less sort of frothiness in the market, but, like I said, in my in my comments, that hasn't been the case. And, you know, people are either lowering their their their terminal IRR numbers or to get to where they're going.
But our specific, you know, the box that we're looking for is, you know, newer construction with with a below replace the costs with some embedded concessions so that we can grow those cash flows going forward. And it's just harder to find there's still a massive bid for for value add. And we're good news for us is that we're not really looking at value add. We're for that sort of a different product, but there's still a huge bid out there for any multifamily. And I think part of it stems from the whole issue of the the 10 years at 3% or 3a half because we have great growth going on in in the country.
And you have inflation sort of picking up some the idea that multifamily reprices pretty much every day their product and the lease rollover on average of 8% to 10% of the whole portfolio rolls every month. Some investors are banking on hiring inflation. And therefore, therefore, cash flow is growing faster than than cap rates rising if if you do have longer term interest rates rise. So that's just getting them over the hump on multifamily sites hotel is the best inflation hedge as long as you're growing the economy and not having service stagflation, which doesn't look like that's on the horizon. Great.
Thanks for the time.
Farb of Sandler O'Neill. Please go ahead.
Hey, good morning down there. Just two questions. First, Rick or Keith, on California, just given it's it's about 8% of your portfolio. Do you have any sense in your markets there, the municipalities what their sense is for if Costa Hawkins is repealed. If you think that any of your, markets will face rent control measures or you feel pretty good with where your communities are right now and understanding the issues, especially as it revolves around vacancy B control.
Yeah. So, Alex, we've, there are 22 things that 2 comments. One would be there's, there's sort of the state level initiative that there's a lot of pension on right now and and we certainly are are participating in the fighting the good fight on the on the repeal effort at the state level. I I've, you know, I I'm sort of if you put put a gun at my head, I'm probably thinking that that the state level initiative may actually get through, but that's not really where the game where the game is won or lost on this issue. It's gonna be at at the municipal level, which you're correct to point out.
Obviously, you have, you you got a different dynamic in San Diego, Orange County, inland empire than you do in Northern California, and then LA County. So there was a piece done by one of the, good analyst firms, and I'm not gonna mention the name, but it's a it's it's pretty well done. And and it stratifies all of the REIT holdings in California by municipality and sort of assigns a a high risk to low risk, value to those. And in our portfolio, only about 10% of Camden's assets fell into what, what would be called the high risk, a bucket for municipal level, adopt of some kind of rent control measures. So now you're, you know, 10% of our, 11% of our NOI and roughly 10% of that's in the high risk bucket.
So I think our, our specific exposure is pretty limited, to the Costa Hawkins thing, but obviously it's a a huge thing. There's a lot of attention. We're participating with all the other REITs and, you know, NAREIT and, on both sides of this issue in California, and it'll be interesting to see how it plays out.
Okay. Okay. I guess it makes you happy that your Texas base And then the second question is Denver, suddenly it's become everyone's popular market. You guys you know, have been there a long time. You never left.
But I recently haven't seen as much, you know, on the investment side there. So what are your thoughts on Denver? And then overall, I think your footprint is much broader than just Denver proper you guys extend out. So are you thinking about the market any differently in how you invest there? Meaning maybe concentrated more infill or you like the market as a broad market to invest in?
Like the market as a broad market to invest in. If you look at what we've been doing with our developments, our developments have been oriented development. We currently have a development underway in Rhineau, which is the RiverNorth area, which right adjacent to downtown. The challenge that we've seen in the in the in trying to get more urban in Denver is it that, it sort of hurts my head paying, you know, sub-four cap rates for native element there. And that's what they're trading at today.
So, we, we like where we are in Denver and our properties, so we have a nice balance between, you know, new transit oriented developments some urban and then suburban so that when you do have a correction in the Denver market someday, we have a balance between A and B frequent suburban and urban properties. But generally Denver is definitely on everybody's list of getting into and wiped it for a long time for lots of reasons and continues to be a good market.
Our next question comes from Rob Stevenson of Janney. Please go ahead.
Hi, good morning guys. Beyond the Buckhead development, many of the other pipeline communities are you planning to start in the second half of this year? And where are, at this point, do you think stabilized returns are for the current pipeline and then on stuff that you would start?
Sure. So, the the, start that we have that we've announced, including the bucket, is we we might start 1 more, but but it would be right at the end of the year, maybe beginning beginning of next year. And so our pipeline with the ones we've announced, we're at $280,000,000 plus or minus and just really close to our $300,000,000 guidance. In terms of yields, clearly development yields have come down from from some pretty lofty levels that they were at and you know, our our yields today, you know, instead of sort of 7 and some change, there's 6 and some change. And so, construction cost continue to rise up 4% to 8%, maybe 10% in some markets and rents are going up 3%.
So that definitely has compressed those yields. On the other hand, on the other hand, we have still 150 to 200 basis point positive spread between our, our going in yields for we can buy going in yields from an acquisition perspective. So you still have a a nice spread for taking the development risk.
Okay. And then Alex, given your comments about property taxes, can you talk about how successful Camden's been over the last 3 years or so? In terms of winning property tax appeals. I mean, do you guys, you know, could test everything? And so, therefore, your appeal you know, win rate is is low.
Are you guys making just sort of conscious efforts to appeal the egregious ones? And sort of, you know, when you do appeal, you know, what's your sort of, winning percentage there?
Yeah. Absolutely. So so we don't appeal every single thing, but we do appeal a lot. And and actually, in getting some form of reduction, we we're typically about 70% effective. So it's a it's a pretty good winning rate.
And then when and that 70%, I mean, what's the what's the magnitude? I mean, is it just getting a little bit? I mean, is it, you know, a lot? I mean, how significant does it is that negotiation or is that sort of movement between what you get assessed at and what you wind up paying? On an annual basis?
Yeah. So, so we set target rates for every single, every single community that we own. And, and when we say 70% we're we're shooting to get to that target rate. Obviously, it's it's never a it's never perfect, but, but we get pretty close to it.
Okay. Thanks guys.
Our next question comes from John Kim of BMO Capital Markets. Please go ahead.
I'm still riding the emotional hide when you're contest. Thank you so much. It's made my week. For sure. The 4 a half percent blended rate you got in the 2nd quarter is trending higher in July.
Do you think that 52 is something that you can achieve the rest of the quarter? And what are you assuming as far as, blended lease growth to achieve the midpoint of your same store revenue guidance
Yeah. So I the, the the July numbers are, you know, probably end up being the high watermark for the year because you've got you got markets like Dallas, Austin, and, South Florida that are trailing away as we go through the year. And then you've got Houston, which is gonna be a real interesting comp in the, into the 3rd fourth quarter. So my guess is the 5 the 52 in July probably ends up being the high watermark. You know, and our our guidance right now for the year is is a 353.15 on revenues.
You know, so we're we think the implication of that is that we're about 3% plus or minus in the back half of the year and those things about right to me.
Okay. And then Alex mentioned
the $400,000,000 of unsecured debt that you expect to raise It sounds like part of that is to repay the debt maturing next year, but as far as the remaining $644,000,000 expiring, how do you expect to refinance that?
Yes, absolutely. So we've got a lot of options to how we're going to do that. Obviously, we're looking at the secured market and looking at, various tenures. And, and then we, we always have the ability to, to do dispositions of this property as well. So we're, We're still working through our strategy on exactly how we intend to, to refinance the rest of that debt.
Could you give pricing levels unsecured debt versus the unsecured?
Yeah. So, unsecured versus secured. So the easiest way to think about it is on a on a if you don't lock in your rates, which we already have, the spread for us on a 10 year unsecured is is somewhere right around a 110 basis points. And if you went to Fannie Mae, for instance, Fannie Mae is gonna be sort of, in the 200, 200 basis point spread. Lifeco's today are actually your, your very best option out there.
Lifeco's are are trying to trying to build business and and you can probably get a Lifeco deal done in that 120 over.
Great. Thank you.
One thing I will mention though is we even though you can get some secured debt, we are an insured borrower. And generally, we will unless there's something really wacky going on in the unsecured market, we're gonna stay an unsecured borrower. And one of the things that happens with this refinance is that we get rid of a lot of secured debt that we put in place during the financial crisis. And if you remember how we did that secured debt. We went out and borrowed money from Fannie and Freddie and bought our unsecured bonds back at a discount.
And now with where we are in the cycle gonna recycle that capital with new unsecured debt that will take our credit metrics even better by getting rid of a lot of unsecured debt that we have on our balance sheet at this point. Thanks.
Our next question comes from Drew Babin of Baird. Please go ahead.
Hey. Good morning. Good morning, Drew. I wanted to touch
on Southern California briefly. It looks like while revenue growth is still strong there, it looks like it decelerated a bit sequentially, in both the LA Orange County San Diego Inland Empire markets. And I was just curious Is that the result of pockets of supply? Is it a result of sort of the tangential effect of more urban supply are the dynamics driving that?
Yes. So in LA, for example, and I'll give you LA and Orange County, in LA, the It looks like the 2018, we're going to end up getting around 60,000 jobs this year. And that's against about 14,000 new apartments. So that's, you know, that's relatively in line a little bit of pressure implied if you go out into 2019 in LA, the the the the drop the drop jobs are forecast to drop to about 40,000 done for the supply maintains pretty constant about 14,000 additional apartments. So it's just the, you know, the ramp of supply that's finally getting to the marketplace in in LA similar store in Orange County, in 2018.
It looks like we'll get about 30,000 jobs, and we will have to absorb about, 7000 Apartments in in 18 and the, and the math is pretty similar in 'nineteen. So I I from from my perspective, our portfolio is actually doing, pretty well. And and we're pleased with the performance. It's actually outperforming what our original plan was. And some of that has to do with our location is just not nearly as as impacted by the the high levels of deliveries that are going on across the Southern California platform.
Great. That helps. And then, one more, maybe more conceptual question on the concept of replacement cost. I think, you know, a bowl would say, you know, replacement, you're buying assets at a discounted replacement cost. You know, replacement costs is probably only going to trend up with tariffs and just more inflation in in materials, labor costs, things like that.
A bear might say that replacement cost is sort of artificially elevated right now kind of fluctuates over time, maybe even more volatile than rents. Over a long period of time. And I guess some if you kind of give both sides of the argument and kind of why you look at that, with regard to acquisition opportunities as a benchmark it is a bit of a moving target.
Sure. I agree with with with what you just said for sure. But the the way we sort of look at it in this prism. And that is if we since we have a robust development business, if I can build it and and and build it today at a cost that is higher than what I can buy it at today. So I we look at it that way of saying, okay.
We we know what it will cost us to build. And if I can buy it at a lower price of what it can cost me to build, then that makes a lot of sense to me. On the flip side, if you buy it at above replacement cost, and I look at that and say, geez, Atlanta. I know exactly where it's costing us to build our 2nd phase of Buckhead. Why would I buy a property across this from what I can build when I can build it, you know, at a cheaper price per door and per square foot than the one I'm when people are buying across the street.
So to me, it's more about our ability to to develop and and understand those costs. And I get why, you know, at at some point, the argument on the bull or the bear side will roll today. But but from our perspective, if we're going to commit capital, I want to commit capital. I'd rather develop my own properties than buy that are more costly than ones I can develop.
Our next question comes from Rich Anderson of Mizuho Securities. Please go ahead.
Over 20 years, and I haven't won squad, so I don't know what's going on here.
So but I one thing
I do remember way back when, when, when there was a a signal of a of a health multifamily market was when new rents exceed new rent growth exceeded renewal rent growth. That hasn't really happened in a in a while. And I'm wondering if there's a systemic reason why it won't happen again, or do you think that there's a chance that you could see your new rent growth cross with your renewals at some point in the next couple of years?
No, Rich. I it's, I think it's certainly possible. Some of it has to do with, you know, when you look at new and renewal rents, the question a big part of it is is is what happened at the last, you know, 12 months ago when that person signed a lease. And if you have, if you're in a, an increasing, a market that's constantly increasing upwardly in rent, that it doesn't it doesn't surprise me greatly that you would continue to see renewals, renewal rents above new leases The weird part, the odd part about where we had been for the last 7 or 8 years is you've been in a constantly increasing rent market, although, you know, the 2nd derivative has moved around a little bit on on the rate of growth, but the fact is rents have been growing for 8 straight, you know, 8 or 9 straight years, which is unusual. So when you have, you think about what, the experience that we had in Houston with the the downturn in the oil markets and rents actually go on negative, you know, there's no question that we were, we were renewing, rents in many cases at below what we were off bring new rents at.
And part and part of that had to do with, at some point, you're just trying to maintain occupancy. So it it depends a little bit on where you are in the cycle. But I, I would expect that as, as things continue to get, you know, as this cycle unfolds and moves into the next cycle, yeah, my guess you'll see that happen again.
But I am remembering correctly. Right? That that is a fair way to to look at it.
Okay.
And and then Secondly, on the topic of Denver, I I heard what you said, Rick, but it's it's interesting that suddenly many of your peers are are certainly, you know, very optimistic about a market that's not currently maybe great today. Is there something incremental that is a is a common knit to all of these views that are coming from people like EQR and AvalonBay know, taking a look at at Denver, or is it just the basic fundamental stuff that you described?
Well, I can't really get inside their investment thesis other than the broad one where the companies have been pounding the table forever that the coastal is where that where everything is, right, where in rent summer go down Francisco, New York. And we've always argued that that we want to be in high growth markets, both to grow and the market to grow on this and what happens as a byproduct of that growth is that they allow municipality allowed development. And then the argument is that the market's overshoot from a development perspective and and and the supply constraint markets don't, right? Well, we know that that just isn't true anymore or at least it's more evidence today that it's as true as it has been. And so, I think if I were a company that had those kind of market dynamics, I look for growth and I look for market that have really good long term dynamics.
And I think Denver has that. I mean, it's a real when you think about cities that are that are classified as really high, high propensity for millennials to go there, you know, with Denver has a lot of those really high value propositions. It's got recreation in the mountains. There's a lot of good things going on in Denver that's not and those things are not going to change given the sort of dynamic of our renter base. So it doesn't surprise me that that I look at that market and say, you know, if I'm gonna buy a non coastal market, it might be Denver, my South Florida.
And because it sort of holds to their, they don't have to totally abandon the coastal low supply thesis with those with a couple of markets.
So not rolling the dice on HQ2, you're saying?
Oh, I don't think they're rolling 22 is a, you know, a wild card, and I don't think it's on the dice on that.
Yeah. I'm being to see Thanks very much.
Our next question comes from John Guinee of Stifel. Please go ahead.
Great. Thank you. Just a curiosity question. Camden Buckhead, you have the tone development costs last quarter as a product at about 2 77 a unit, and then going with type 1 vertical you're up to about 4.38 a unit. Is there really a $160,000 unit increase when you go from, wrap to, concrete?
Well, there's two pieces. So the answer is yes, there's a big differential a question about it. And then second, when you do go to to a concrete product and a high rise product, you start you improve the interior quality of the property and the space as well. So if you're trying to get a premium rent, you're going to have to put in premium finishes more than you would then you would do a wrap product. So part of it is just the differential between wrap and high rise.
None of the amenity packages and the finishes And then third, between both of those, that was sort of a the wrap product was a placeholder. And since the so it's probably not a great comp because construction costs have have continued to rise. And our we we have not not tried to tweak our sort of future development numbers very much. So that number that was put in for the wrap product was put in, you know, a couple of years ago, and and and you've definitely had some construction price creep in that number. So that base number was probably low.
And then, second, do you control land via options etcetera. And, can you give people a sense for what you might have that doesn't show up on the supplemental?
We we, We try to control land for a long period of time, but it's it's very hard to do in this current environment. And I this point, we're working on transactions, but what you see is what you get on our supplemental information right now.
Great. Thank you.
Our next question comes from Wes Golladay of RBC Capital Markets. Please go ahead.
Hey, good morning, everyone.
Can we go back to the Fulton County tax increase? Were you entering this year well below your target rate? Do they overshoot, or is it just a, case where a municipality is trying to plug their budget using commercial real estate?
West, there's actually a lot of really interesting articles online where you can read about this. But effectively, what happened is is the state of Georgia has sued Fulton County alleging that their valuations are under market. And so this is, Fulton County's way of of responding to it. I will tell you this is not a Camden unique issue. In fact, last count, there are 40,000 appeals of property tax valuations in Fulton County.
That's over 8% of all of all property owners. And in fact, there's actually an 8% threshold where if you go over 8% of appeals, the the county actually to get the courts to certify, certified or tax register. So this is a this is a a a, sort of across the board Fulton County issue. I I will tell you that they've clearly we believe they've clearly overshot. We've filed all of our appeals, but, Once again, if you have 40,000 appeals that they have to work through, I think it's gonna it's it's gonna be highly unlikely that that we're gonna get any resolution until 2019.
Okay. And then looking at the acquisition guidance being pushed to the fourth quarter, is that just a function of developments taken longer to build, maybe getting a little bit of a delivery delay pushing the the the timing of a lease up acquisition later, or is it just trying to figure out which one you wanna buy? It's more trying to figure out which one we want to buy. Okay. Thanks a lot.
There's too many we're going through more and more transactions trying to find the right one. And it's not so much a delay in deliveries. Okay. And real quick follow-up to that. How many people do you run into for competition you're trying to buy lease ups, I get that, you know, value add in core may have a lot of competition, but when you look at the lease ups, is it just a bid ask spread, or is it just a lot of people chasing these?
Think it's both. You have you clearly have, so on a value add, you may have
20, 30 bidders in a
sort of core, you know, uh-uh, you know, below food replacement cost type of asset, we might have 10 or 12, 10 15, but you still have trust me, there's still a lot of competition. It's just less competition in that space and there is a value add.
This concludes our question and