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Good morning, and welcome to Camden Property Trust Second Quarter 2026 Earnings Conference Call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today for our prepared remarks are Ric Campo, Camden's Executive Chairman; Alex Jessett, Chief Executive Officer; Laurie Baker, President and Chief Operating Officer; Ben Fraker, Chief Financial Officer; Keith Oden, our Executive Vice Chairman; and Stanley Jones, Senior Vice President of Real Estate Investment, who will also be available for the Q&A portion of our call. Today's event is being webcast through the Investors section of our website at camdenliving.com, and a replay will be available shortly after the call ends. And please note, this event is being recorded. Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC, and we encourage you to review them. Any forward-looking statements made on today's call represent management's current opinions, and the company assumes no obligation to update or supplement these statements because of subsequent events. As a reminder, Camden's complete second quarter 2026 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 the call. We would like to respect everyone's time and complete our call within 1 hour, so please limit your initial question to one, then rejoin the queue if you have a follow-up question or additional items to discuss. If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or e-mail after the call concludes. At this time, I'll turn the call over to Ric Campo.
Good morning. Our on-hold music today featured a song about each of the five Camden markets which recently hosted World Cup soccer games: Houston, Dallas, Miami, Atlanta and Los Angeles. Now that the World Cup has been completed, the host cities are celebrating the success and the economic benefits that the games produced. The last time the U.S. hosted the World Cup was 32 years ago in 1994, the year after Camden joined the New York Stock Exchange. That year, nine cities hosted games and only two Sunbelt cities were included, Dallas and Orlando. This year, 11 cities hosted the games and the Sunbelt representation doubled. Camden has significant presence in all four Sunbelt host cities. Sunbelt cities have led the nation in population growth, employment growth, and domestic in-migration over the last three decades. During this time, the Sunbelt has gained stature and recognition as confirmed by its prominence in this year's World Cup. We believe these trends will continue to make the Sunbelt an attractive place in which Camden's residents can live, work and play. As you know, we made the decision this year to improve our market concentration in the Sunbelt markets due to the sale of our California properties and reallocation of the proceeds to our Sunbelt markets. The plan was straightforward: sell the California properties for $1.625 billion, acquire $1 billion of newer properties in our existing markets and spend the remainder to buy back Camden's shares. Sounds simple — to execute $3.25 billion in transactions in six months or so. At the same time, continue to operate our California properties at a high level, ensuring the sales success. Easier said than done. As it turns out, the execution has been nearly flawless with only $200 million of acquisition properties left to identify. This is a direct result of our amazing team at Camden, including our West Coast property operations 100-member team led by Carter Powell; our national operations and asset management teams led by Laurie Baker, Travis Oden and Mike Zimmerman; our Real Estate Investment team led by Stanley Jones with Landon Bass leading the California sales effort; our Legal Team led by Josh Lebar; our HR team led by Allison Dunavant; our IT and Marketing teams led by Kristy Simonette; our construction team led by Steve Heffner; our Investor Relations team led by Kim Callahan; and our finance, treasury, tax, risk and accounting teams led by Ben Fraker and Kevin Necas. Truly a great team effort — job well done at Camden. We operated in California for 28 years. Saying goodbye is truly bittersweet. I want to thank Team Camden California for a job well done and all the best in the future. Hope our paths cross again soon. Up next is Alex Jessett.
Thanks, Rick, and good morning. As just mentioned, our time in California came to a close this week. As we've often said, Camden exists to improve people's lives. Over the years, we improved the lives of our Camden team in California by providing a great workplace where they could do their best work and have fun. We improved the lives of our residents by providing quality homes, which were expertly maintained and managed by some of our industry's finest professionals. And finally, we are and we will continue to improve our investors' lives through the reinvestment of the California proceeds into both faster-growing, newer Sunbelt communities and Camden stock. The biggest negative of the sale was having to part ways with approximately 100 Camden team members, many who have been with Camden for 10-plus years. I want to acknowledge the loyalty and professionalism they exhibited throughout our years together, which continued through Wednesday's closing. Thank you for all that you did to make our years in California fun, meaningful and rewarding. The California sales proceeds were in line with our expectations, and I would like to thank the buyers for their professionalism throughout the process. The $1.625 billion of consideration for this 19-year-old portfolio represents for Camden a trailing 12-month FFO yield of 5.6% and an AFFO yield of 5.2%. The Prop 13 adjustment for the buyer should represent an approximate 30 basis point reduction from these numbers. In addition to the $694 million of Camden shares we repurchased at an FFO yield of 6.4% and an AFFO yield of 5.5%, we closed on $645 million of acquisitions with an average age of five years and an FFO yield just under 5% and two development land sites for a total of $45 million. Additionally, we've been awarded two other acquisitions and an additional land site for a total of $195 million. We are actively underwriting several other acquisition opportunities and remain confident we can effectively deploy the remaining 1031 proceeds from the California sale. As mentioned previously, this strategic market rebalancing is FFO-neutral in year one and we anticipate it to be accretive in short order as the newer Sunbelt communities we acquire should grow faster than the older California assets we disposed of. In addition, we will no longer be subject to high levels of regulatory and advocacy spend in California. This spend, which we booked to property management expense, would have reduced our California portfolio's annual NOI by approximately 80 basis points. Camden already has the youngest portfolio in the multifamily REIT sector and the sale of our California assets, combined with our 2026 new acquisitions, further reduces our average age by one year. In addition, we expect our future recurring CapEx spend per unit to decline by 5% and our bad debt to be reduced by 10 basis points after the sale. At the beginning of the year, we gave initial full-year FFO guidance of $6.75 per share at the midpoint of our guidance range. Last night, despite all of the moving parts this year, we reaffirmed that midpoint of $6.75 per share. Our initial guidance for same-store growth contemplated 50 basis points for revenue and negative 90 basis points for NOI when excluding the California portfolio. We are maintaining that full year same-store revenue guidance and increasing our full year same-store NOI guidance on better expense control. I know we are all looking for green shoots and they're becoming plentiful. Sequentially, signed blended lease rates improved 160 basis points in the second quarter as compared to a 70 basis point sequential increase this time last year. In July, almost 50% of our communities had positive signed new leases, up from only 20% in March. Looking across our markets, the majority of our communities in Atlanta, Charlotte, Dallas, Raleigh and Southeast Florida achieved positive signed new lease growth in July and approximately half of our communities in Houston, Orlando and Washington, D.C. did as well. Additionally, signed renewal gains have increased by 170 basis points from March to July. And finally, on an effective basis, 50% of our communities had positive blends in the second quarter, increasing to 65% in July. On a blended signed basis, 55% of our communities were positive in the quarter, increasing to 75% in July. The trend is our friend. And finally, one of the questions I've been asked the most over the past couple of years is when Camden will start registering positive signed new lease growth. As you know, we have dynamic pricing, which changes daily, and I'm happy to report that system-wide average signed new leases have been positive a handful of days this month, including at least two days this week, and that is a very green shoot. Camden has been extremely busy this year, and I echo Ric's shout-out and thanks to our fantastic team members who have worked tirelessly to make all this happen. I will now turn the call over to Laurie Baker, our President and Chief Operating Officer.
Thank you, Alex, and good morning, everyone. Operating conditions across our portfolio are playing out as anticipated with steady improvements seen across our 13 current markets. Rental rates for the second quarter, now excluding California, had effective new leases down 3.3% and renewals up 2.8% for blended rate growth of negative 0.2%. This was in line with our expectations and reflected a 220 basis point improvement from negative 5.5% new lease rate growth in the first quarter of 2026. We also saw a 140 basis point improvement in blended rate growth from negative 1.6% in the first quarter 2026 to negative 0.2% for the second quarter 2026, and our blended rate growth turned positive in both June and July. Our renewal rates were fairly steady for the first half of 2026 but began to improve during our summer leasing season. The effective growth rate for renewals in both the first and second quarter was slightly below 3%. However, our signed renewal increase was 3.4% in June and over 4% in July, which positions us well for those leases becoming effective during the third quarter. Renewal offers to residents with August and September expirations were sent out with an average increase of 4.2%. Occupancy has also shown improvement and has been trending slightly ahead of budget with second quarter averaging 95.7% versus 95.1% in the first quarter of 2026. July occupancy was 95.8%, and we expect occupancy rates to remain relatively stable through the third quarter before moderating slightly with normal seasonal trends towards year-end. Turnover rates across our portfolio remained very low with second quarter 2026 annualized net turnover consistent with second quarter 2025 at 39%. A testament to our strong resident retention and satisfaction, and move-outs for home purchases also remained low at 10.4% for the second quarter. So while we're not declaring victory, we are encouraged by what we are seeing. Our operating story in the second quarter is one of improvements, strong renewal execution and broad-based pricing recovery across the portfolio. The green shoots are becoming more visible and our teams are doing exactly what Camden teams do best: executing locally and staying disciplined in positioning the portfolio to capture upside as market conditions continue to improve. With that, I'll turn the call over to Ben.
Thank you, Laurie, and good morning, everyone. I will cover our second quarter results, the California disposition and related capital allocation activity, our balance sheet and our updated third quarter and full year outlook. Camden reported second quarter core FFO of $1.68 per share, $0.01 above the midpoint of our guidance range of $1.67 per share. The outperformance was driven primarily by stronger-than-anticipated occupancy across our stabilized operating communities. We are encouraged by continued improvement in leasing trends; new supply is past peak levels in most of our markets. Concessions are beginning to moderate and underlying demand remains healthy. As a result, revenues and NOI exceeded our expectations for the quarter. Next, I will discuss capital allocation and balance sheet activity. On July 29, we completed the sale of our 11 California operating communities for a combined $1.625 billion. The transaction was a major strategic step that allowed us to redeploy capital into higher growth markets, repurchase Camden shares and maximize tax efficiency. Our capital allocation priorities were clear: maximize long-term shareholder value and shift capital towards our existing Sunbelt markets with stronger population growth, employment growth, migration, household formation and long-term multifamily demand. First, we repurchased $694 million of Camden common shares during the second half of 2025 and the first half of 2026 at an average price of $105.17 per share. That was well below our estimated consensus NAV of around $130 per share and represented a 6.4% FFO yield. Second, we designated $1 billion of the California sales proceeds for 1031 Exchange Transactions in order to maximize tax efficiencies. And as Alex mentioned, we are making great progress on that front. Completed investments include seven operating community acquisitions in Atlanta, Orlando, Nashville, Dallas, Phoenix, Tampa and Charlotte as well as two development land sites in the suburbs of Raleigh and Tampa. Approximately $900 million of the California proceeds were used to repay all outstanding balances under our line of credit and commercial paper program. $195 million will be used to purchase awarded real estate, including two communities and one land site in the third quarter. Approximately $200 million is anticipated to be used for future 1031 acquisitions to occur by late fourth quarter, and the remaining $330 million will be used for general corporate purposes. The repayment of our line of credit and commercial paper further strengthened Camden's balance sheet, resulting in a pro forma net debt to EBITDA at a strong 4.5x at the end of July and preserving substantial liquidity to fund acquisitions, development opportunities and other capital allocation priorities. Subsequent to quarter end, we closed and funded a new one-year $350 million unsecured term loan. As this term loan is not revolving, we are leaving the balances outstanding to further enhance liquidity as we continue to opportunistically recycle capital. Turning to guidance. For the third quarter, we are providing core FFO guidance of $1.69 per share at the midpoint, up $0.01 from our second quarter core FFO of $1.68 per share. The sequential increase is driven by the following items. First, we expect a $0.03 benefit from improved same-store operations reflecting higher revenues during peak leasing season, lower insurance expense following our favorable renewal and lower property taxes from incrementally higher third quarter tax refunds. Second, we expect $0.02 of incremental interest income from cash balances currently held for future acquisitions and general purposes. Third, we expect $0.02 from lower corporate expenses primarily due to the timing of public company fees, lower disposition related costs and the elimination of regional overhead costs previously supporting our California operations. Finally, we expect a $0.01 benefit from lower interest expense due to lower debt balances. Together, these items add to a positive $0.08, partially offset by $0.07 from lower NOI following the California sale, net of NOI contributions from acquisitions completed in the second quarter and completed or expected in the third quarter. The result is our projected $0.01 sequential increase in core FFO per share. For the full year, we are maintaining our core FFO guidance midpoint of $6.75 per share, unchanged from our prior annual guidance. Operating performance has exceeded our expectations, and we now expect a $0.03 per share full year benefit from better-than-expected same-store NOI performance, driven primarily by lower operating expenses. That benefit is primarily offset by the timing of real estate transactions throughout 2026. On same-store guidance, I want to provide additional perspective on the California disposition. At the beginning of the year, our same-store midpoint outlook, including California, was revenue growth of 0.75%, expense growth of 3% and an NOI decline of 0.5%. Because California is no longer in the same-store pool, the more relevant comparison is our original outlook excluding California. On that basis, the original midpoint implied revenue growth of 0.5%, expense growth of 3% and an NOI decline of 0.9%. Our updated outlook, excluding California, shows revenue tracking in line with that original expectation and materially better expense performance. On an apples-to-apples basis, excluding California, revenue is in line with our initial outlook. Expenses are 50 basis points better and expected same-store NOI has improved by 30 basis points from a 0.9% decline to a 0.6% decline. Our revised same-store midpoint outlook, excluding California, is now revenue growth of 0.5%, expense growth of 2.5% and an NOI decline of 0.6%. The expense improvement is primarily driven by better utility performance, including lower water consumption, improved trash contract pricing, favorable insurance subrogation recoveries and insurance renewal pricing that came in better than originally anticipated. In summary, we are pleased with our second quarter results and the continued improvement in occupancy and operating fundamentals across the portfolio. The California disposition was a significant strategic milestone. We used the proceeds to repurchase shares at an attractive discount to NAV, reinvest tax efficiently through 1031 exchanges and increased exposure to attractive Sunbelt growth markets. With improving operating fundamentals, a flexible balance sheet and a younger, more growth-oriented portfolio, Camden remains well positioned for the future. Thank you, and we will now open the call to questions.
分析師問答
Our first question today comes from Eric Wolfe from Citi.
For the 50 basis points same-store revenue guidance, can you talk about how you're going to get there from an occupancy rate, bad debt and other income perspective? And then obviously, you threw out a lot of statistics there in terms of what you're seeing in July and August thus far. But maybe help us understand sort of what you're seeing in terms of blends and how that plays into the guidance?
Absolutely. Thanks, Eric. So the first thing, obviously, and we did throw out a lot of stats there. And I hope the overriding view is that we're seeing a lot of green shoots. And so we're not going to get into our total July numbers, but what I will tell you is when we look at the effective July rates that we have, both on new leases and renewals on a blended basis, it's looking pretty good. And when we look at signed, the signed has really given us a lot of comfort as the way the rest of this year can roll forward. And if you think about it on the signed basis, if you look at a new lease, every new lease, we signed it about 25 days before the people move in. And then if you look at it on the renewal side, we're about 60 days before they move in. So we've got pretty good visibility right now to the way the rest of the third quarter is going to look. And it is really a sharp acceleration versus what we saw this time last year. And then when you look at the occupancy side, so obviously, we're really, really comfortable with where our occupancy is right now. We are anticipating a slight uptick in the third quarter, which is normal. And then we are anticipating a slight downtick in the fourth quarter. Now if you compare that to what we saw in the fourth quarter of last year, in the fourth quarter last year, we saw a pretty significant drop-off in occupancy — I think it got down to about 95.1%. We're absolutely not anticipating that that's going to occur this year. And once again, we've got pretty good visibility on a couple of months — going out about three months — and things are looking really, really strong for us right now.
Our next question comes from Jamie Feldman from Wells Fargo.
This is Connor on with Jamie. And congratulations on such a well-managed portfolio sale. Can you clarify whether the $1.625 billion sale price is stated before or after transaction costs and fees? And if before, approximately how much of transaction-related fees should investors assume?
Yes, absolutely. And thanks, Connor, for the congratulations. It absolutely goes to our teams in the field. They did a wonderful job in getting this transaction across the finish line. When you look at the $1.625 billion, that is before transaction costs and transaction costs for us are in the neighborhood of $15 million. I will point out that over half of that is management tax on one transaction that we had in Los Angeles, the city of Los Angeles. So you see some of the additional costs that are just associated with operating in that marketplace. But yes, it's about $15 million.
Our next question comes from Haendel St. Juste from Mizuho.
I wanted to go back to the subject of stock buybacks. Earlier, you mentioned that you hit your target from the portfolio redeployment, and you still have some acquisitions that you're targeting. So I'm curious, given where the stock is broadly, are stock buybacks off the table? And would they require any incremental dispositions, broadly your thoughts on capital deployment with a range of options in front of you today?
Haendel, I think we have to — let me just talk about how we think about capital allocation first. When you think about capital allocation, there's lots of things you can do: you can buy assets, you can develop, you can improve your portfolio through enhancements that we are doing through our rehab programs and redevelopment programs and you can buy stock. And so we clearly have bought a lot of stock. And if you take a look at the last two years, just to put it in perspective, we sold $2.1 billion of older assets. We bought roughly $1.1 billion so far. We have $200 million left on this 1031 exchange program to try to minimize the special dividend that we might have to have. And we decided that rather than doing a special dividend, if we're going to send capital back to shareholders, we'd rather do it in a buyback than a special dividend. So when you think about all that calculus and we do some development — and the development that we're doing is definitely lower than we normally do, primarily because it's hard to make numbers work — I would say that just generally, if you look at the best investment we can make today, it's buying our stock even at this level today. We are in the real estate business long term. So we don't want to sort of shut down our operations of being able to buy and sell and develop. But on the other hand, we're going to definitely lean toward the capital allocation that creates more value for shareholders. And today, when you look at the existing market and you look at our NAV, the consensus NAV is somewhere in that $130 range and you look at our stock at $111 today, that's a gap, a big gap. And we've always said that we will lean into buying stock if it's at a significant discount and it persists over a reasonable period of time so we can actually execute. And then we are going to lever up long term to buy stock. So we would have to sell additional assets. But I wouldn't say that we're done buying stock back. I would just say that if the market continues and we're able to thread the needle between the tax efficiency and the ability to create some cash flow out of asset sales without having to pay special dividends, we could lean into buying the stock again too. Alex, you might want to augment that.
Yes, absolutely. That's exactly right. And the way we look at it right now is we have maximized the tax efficiency aspects, and that's why we are buying assets entirely for that reason. But repurchasing shares is a great use of our capital. As I tell most of you guys and we met at NAREIT or other conferences, Camden is a screaming buy, and we believe that too, so that's why we're out there buying.
Our next question comes from Brad Heffern from RBC.
Alex, you gave that commentary around system-wide signed new leases having been positive a few days in July. I just want to make sure I understand that right. Should we assume that that means new leases should be close to flat in July and August? Or does that just bounce around a lot day-to-day and you have some more negative days and it just blends to something lower?
Yes, it absolutely does bounce around quite a bit. But we are getting pretty close to the point where it's going to be flat. Now it's not going to be flat for the full quarter. And whenever anybody asks me about this, I already said third quarter, but not for the entire third quarter. I said it might be a day, it might be a couple of days, and that's exactly what we've hit. I think you have to remember that if you think about the way the peak leasing cycle or peak leasing season works, you really peak out towards the latter part of August and then in September it starts the decline of the typical seasonality. So I wouldn't expect to see it for the full quarter, but absolutely love the direction that we're going, love these green shoots, and this is the first time in several years that we can sit here and tell you we've seen system-wide some positive new leases. So it's absolutely wonderful, a wonderful green shoot for us.
Our next question comes from Steve Sakwa from Evercore ISI.
Just maybe sticking on that theme, Alex. I think at NAREIT you had sort of maybe talked about a further improvement in new lease pricing into the fourth quarter. And I'm just wondering, just based on all the green shoots you're seeing, is that still your expectation for new leases? And if you could just maybe give us a sense for maybe what your expected blended rent growth is for the back half? That would be great.
Yes, absolutely. So if you look at the third quarter and the fourth quarter, I think on the new lease side, they're going to look fairly similar. And a lot of it is that the fourth quarter becomes an easier comp for us. If you look at it on a blended basis, what we're anticipating is both the third quarter and the fourth quarter to be positive on the blend, sort of in the 1% and just over 1% type range. That's what we're expecting. And once again, what's different this year in our math than what you would typically see is that the fourth quarter last year was decidedly weaker and that does help us with the comparisons.
I'm sorry, the interesting part of this equation is, I think that a lot of folks have the recency effect, right, which is, 'Gee, from 2024, 2025 and 2026, revenue grew on average for cumulatively through that period 2.1%.' So we have had 41 months of — and if you go just back before into 2023 because you started having your slowdown because of supply then — so you had 41 months so far where we've had rents that have basically been flat or down in most markets. And so the market has this recency effect like, 'Oh, well, that's just going to — let's just take the graph, and we'll just take it out into 2026, 2027, 2028, and that's what's going to happen.' But if you look at post-financial crisis, our revenue went down roughly 5.1% in 2009 and 2010. From 2011 through 2019, the highest growth rate was 6.5%, the lowest growth rate was 0.9%. And through that eight-year period it averaged somewhere around 4%. We're going to go back to a more normalized economy. You never had — we had an unprecedented situation where you had a 50-year high in supply, and so that's clearly something that we had to work through and we'll continue to work through. And once we do get to this point where you have a balance in supply and demand — we still have high demand in our markets — and we know that supply is going down. And so when you hit that pivot point, it's going to be more like a hockey stick than a slow slog growth, in my opinion. And just because of the history of where we operate and the history of how these markets work when you have demand higher than supply, which is getting ready to happen next year probably.
Our next question comes from Jana Galan from Bank of America.
Curious, just following up on the term loan, what the plan is for the debt maturities in the back half of the year?
Sure. So the reason we put the term loan in place was to enhance our liquidity as we were waiting to sell our California portfolio, and we have that for one year, which is going to give us continued flexibility and full availability under our line of credit and commercial paper program as we approach that maturity. So we're going to continue to watch the markets. And if it makes sense, we will issue another long-term bond to refinance that in November, but the term loan does allow us to have that additional liquidity and financial flexibility under our line and commercial paper.
Our next question comes from Rich Anderson from Cantor Fitzgerald.
So Alex, when we were at NAREIT we talked about this sort of hockey stick concept of future growth, and you implied that in the third quarter you expect — and I don't want to put words in your mouth — but there would be some sort of real visible hockey stick-type of event in the third quarter, and that was what was behind your guidance. I understand you're laying out all these green shoots, but it still doesn't feel like a hockey stick to me. So I'm wondering if you're pulling back on that third quarter thesis a little bit or if it's still very much intact as you look into the coming quarter?
Absolutely. Not pulling back whatsoever. And maybe that's just because I'm in Texas, and I don't really know what a hockey stick looks like. Here is what I tell you guys. The third quarter is looking really strong. We have tons of green shoots. And because of that, we feel really good that the third quarter in terms of new leases, renewals, blends, is going to be an outlier as compared to what we've seen in the third quarter last year and what we're seeing in the second quarter this year. So I feel really, really good about that. And then that's going to give us the pricing power that we need as you move into the typical weaker fourth quarter. And so we feel very good and are not pulling back on our thought process whatsoever.
The interesting part of this equation is that a lot of folks have a recency bias. From 2024 through 2026 revenue growth has been muted and that impacts perceptions. But historically, after periods of oversupply and as markets normalize, growth can accelerate. We believe we're approaching that pivot point where supply and demand balance will drive stronger rent growth. So from a longer-term historical perspective, we think this can feel more like a hockey stick than a slow slog once the pivot occurs.
Our next question comes from Wes Golladay from Baird.
A quick question on concessions. I know you don't typically like to use them, but I believe you were using them last year. Have you pulled back on that?
Yes. We're continuing to see concessions in the markets level off. And where we're seeing them the most is where there's development in these high supply areas. As a practice, we do not use concessions broadly, but we have on a handful of our communities where we've had acquisitions or new developments that we are leasing up — that is something we usually put into our pro forma. We always assume at least a month of concessions for development. And then we have to manage throughout the lease-up what makes the most sense with sometimes specials for early move-ins. We are seeing concessions moderate across most markets and where we're seeing it moderate is also where we're seeing the opportunity to pick up both occupancy and our new leases and renewals. For example, Austin, one of the highest concession markets and one of the most challenged with supply, is quickly changing. We're continuing to work through that supply but also continuing to see strong demand absorption with more than 11,000 units absorbed in the last 12 months. If you look at the beginning of last year through now, we've seen occupancy improve six quarters straight. Quarter-over-quarter we're continuing to see occupancy improve. Second quarter 2025 occupancy was at 94.7% and this quarter we delivered 96.1%. So you have 140 basis points better, and in July our occupancy is sitting at 96.6%. As occupancy firms up, concessions burn off and we have the ability to improve our pricing. So we're managing around concessions and continuing to balance occupancy and price across the portfolio.
Our next question comes from John Kim from BMO Capital Markets.
Just listening to this call and the other calls in the sector so far, there hasn't been a lot of talk about AI or technology advancements or data analytics, Airbnb. I was wondering if there's anything else that you're doing on this front that would meaningfully drive same-store revenue? Or has most of this already been accomplished?
We are incredibly bullish about what AI can do for every single line item on an income statement. The approach we're taking at Camden is divided into three words: leadership, crowd and lab. Leadership is a concept that all of us in leadership positions encourage — encouraging AI, encouraging our teams to work with AI, encouraging our teams to come up with AI-driven solutions. The next is the crowd: the best solutions often come from those closest to the problem, so we are empowering all of our team members to experiment with AI to create efficiencies. Once they come up with solutions that work, we have put together a lab — a sandbox — where they can pilot and ensure it is safe and effective before broader rollout. If you look at an income statement, starting at the top, if we can use AI to increase our renewal percentages, that dramatically flows through the bottom line. If we can use AI to proactively minimize property insurance expense — property insurance is about 7% of our total expenses — and to analyze where claims occur, that will help. If we can use AI to reduce workers' compensation claims by analyzing patterns, that helps. If we can use AI to better understand utility spend, that will be helpful. We believe AI will help Camden and help our team members be more efficient, and we are very bullish about it. Every Senior Vice President in this company meets monthly to discuss AI initiatives in their departments. I firmly believe that at this point next year we will be talking about real, tangible benefits to the bottom line for Camden. So we're incredibly excited about it and feel we are at the forefront.
Our next question comes from Ami Probandt from UBS.
This is Ami on with Michael. So I know you guys just sold out of California, but are there any other noncore markets in the portfolio that you could target for sales in the future — maybe the D.C. portfolio — and become a pure-play Sunbelt REIT or anything else that you might be looking to do with the portfolio moving forward?
So the rest of our markets are like our children — we love them all equally. Sometimes we get annoyed with some of them, but we love them all equally. We have no intention to sell out of any of our existing markets. Now as I've mentioned before, we will reduce our exposure to our two largest markets, and that's Washington, D.C. Metro and Houston, and that's just for portfolio allocation purposes. Expect us to reduce our exposure there slightly. But no, the rest of our markets we intend to stay in for the long term.
Our next question comes from Adam Kramer from Morgan Stanley.
Great. I'll sneak in a two-parter here, if that's okay. First is just on sort of market level: if you go sort of your expectations going into 2Q, which markets had the strongest improvement relative to expectations and which markets maybe disappointed relative to those expectations? And then second part, I think we asked earlier, apologies if I missed the answer: just thinking about your same-store revenue guidance midpoint now, what would be sort of the rough contribution from occupancy, rent growth and then sort of ancillary revenue?
I'll take the second one first. As far as the same-store revenue guidance goes, it is made up of all components. We've seen better occupancy in the second quarter, and as Alex said earlier, we're planning on seeing an uptick in the third quarter with a slight downtick back in the fourth quarter. Our bad debt is normalized as expected. We think it's going to come in for the new same-store portfolio at around 40 basis points, which compares to our prior 50 basis points guidance; that 10 basis point improvement is primarily driven by California being gone. Our other income we expect to grow somewhere around 3%. And as Alex touched on earlier, our back half blends will be around 1% or north of that in the back half. We feel very comfortable with our guidance the way it is laid out based on the green shoots we've seen, the occupancy strength we've seen and the renewals we've begun to sign.
And on the market-specific question, there's not any one market that was really an outlier from what we expected. As I mentioned in my prepared remarks, we had a lot of markets showing green shoots. That's what we expected. Markets that are a little behind would include Austin, Denver and Phoenix, but when I look more closely, Austin is showing some of the highest improved momentum among major U.S. markets. Across operators in Austin there's been about 360 basis points less decline in rents March to June. For Camden, in March signed new leases in Austin were down 11%; in July they're down 3% — that's an 800 basis point improvement. So even markets that had been softer are starting to show meaningful green shoots. Phoenix is a story of east versus west and we are concentrated on the east side, which is outperforming. No single market is doing dramatically better or worse than we expected; they're aligning with our expectations and we're seeing improving trends across the board.
Alex, I would just add: you mentioned Denver and it's been one that's had a lot of talk about being challenged, but we're seeing some of the biggest gains in our effective leases from the second quarter to where we're sitting today, moving from negative 7.7% on effective new leases in the second quarter to now negative 4.3%. So again, you're seeing improvements across the board even in those that have been a little more challenged, whether it is supply or other market dynamics. That leads us to believe we're trending the right direction and are positioned for steady improvement as those leases become effective in our third and fourth quarters.
Our next question comes from Austin Wurschmidt from KeyBanc Capital Markets.
I realize things can change quickly as you just alluded to with the examples in Austin, Phoenix and Denver. But what percentage of leases today are at a gain to lease? And what's kind of the magnitude of that gain to lease?
Here's the way I would look at it, and I come back to my prepared remarks. In July, 50% of our communities had positive signed new leases, compared to 20% in March, which is the direction we want to be in. If the question is about gain or loss to lease on a financial side, in July we actually rolled into a loss to lease situation earlier in the year, and we haven't been in a loss to lease situation this year, so we feel really good — that's the direction we're going. If you look at gain-to-lease pockets, we have slight gain to lease in Austin and a little in Nashville, but the rest of the portfolio is operating a loss to lease at this point.
Our next question comes from Alexander Goldfarb from Piper Sandler.
I just wanted to follow up on Ami's question. I understand that you're going to reduce your top two markets’ exposure, but as you conducted this process, I know originally years ago you ran Kansas City, but certainly the landscape has changed, especially as we think about where supply and demand are. Are any of the Midwestern markets or any of those attractive to you from pro-growth, low-supply markets that you'd want to enter? Or as you undertook this California repositioning exercise, did you look at the Midwest and determine that your best investment remains in the Sunbelt?
We look at where population growth and employment growth are strongest. The markets in which we currently operate lead the nation in both categories. Some Midwest markets are showing more population growth due to affordability, but we haven't seen evidence yet that those are durable long-term trends worth a big strategic shift. We're a capital-intensive, slow-moving business, so we vet markets carefully to avoid chasing short-term trends. We typically do deep dives on two to three markets per year. Nashville screened well for us previously; others we've looked at since then haven't screened favorably. If a Midwest market or any market shows sustained long-term growth and fits our investment profile, we'll consider entering, but right now we believe our current Sunbelt positioning is the right place to be.
Our next question comes from Rich Hightower from Barclays.
Just a small one for me. I know it's a relatively minor line item in the OpEx stack, but I did notice that your marketing and leasing expense, which I know is separate from the concession question earlier, has gone up double digits year-to-date, well above any other cost category. Does that signal anything about the strength or weakness of the market beyond the revenue commentary?
I'll answer that. Our customer acquisition costs have increased year-over-year; guests are more expensive. But the marketing spend was intentionally ramped up as we entered peak leasing season where demand is typically high. We wanted to make sure we captured as much demand as possible. Remember, we were coming off 95.1% occupancy in the first quarter, not where we want to be, so we didn't want to hold back on marketing. The good news is lead volume has been up. We've driven more qualified traffic as evidenced by an increase in guest card to visit ratios, up a little over 7% year-over-year. So the marketing spend was deliberate and, so far, effective.
Our next question comes from Peter Abramowitz from Deutsche Bank.
Just wondering if you could give us an update on migration in your markets so far this year. Curious how it's been relative to historical levels and your expectations coming into the year, and which markets has it been stronger or weaker than your expectations?
Domestic in-migration into our markets is continuing. John Burns Research had a good headline: 'Domestic Migration is Normalizing, Not Disappearing.' The long-term trend into the Sunbelt has been strong for decades and remains favorable. In the second quarter, 16% of our new renters were move-ins from non-Sunbelt locations. A year ago it was 15.5%, and the year prior it was 14%. So we haven't seen a drop-off in domestic in-migration. Our markets have plentiful jobs, attract young people, and are relatively affordable compared to some coastal markets. Those drivers continue to bring people into our markets and we are seeing that reflected in our data.
Our next question comes from Julien Blouin from Goldman Sachs.
I just wanted to go back to the blends expectation for the back half. It sounds like a little over 1%, which I think would imply around 200 basis points of improvement versus the first half. Just wondering, your portfolio is assuming just 30 basis points of improvement in the back half versus the first half. I guess I was wondering if you had any thoughts on why the ramp for your portfolio would be so much stronger over the coming months. Do you think the variance is maybe driven by market exposures? Is it age of assets? Do you feel like you have maybe just a more fundamentally bullish view of the coming months?
I think it really comes down to what we've seen so far on the occupancy momentum we've picked up as well as the renewal momentum we've started to see and sign. That, combined with green shoots across various markets on the new lease side as concessions begin to roll off with competing lease-ups, is driving our confidence. So it's based on current performance and what we're seeing so far.
I'll add that our peers are great operators and their experiences may differ based on portfolio mix and strategies. What's different for us this year is we are intentionally leaning into getting occupancy up in order to generate pricing power as the market tightens. That positioning helps explain why our back-half blends may be stronger as occupancy and renewals improve.
Our next question comes from John Pawlowski from Green Street.
My question is on the pricing on the seven acquisitions you did in the quarter. There could be a meaningful difference between the spot going-in cash NOI yield versus a year-1 or year-2 stabilized yield just based on what you assume for concession burn-off. Could you share the spot going-in cash NOI yield and then how you guys underwrote like maybe year-2 yield on these acquisitions?
John, when we look at year-1 yields, as Alex mentioned in his prepared remarks, the book of business is in the high 4s based on current effective rents. Six of these acquisitions are offering some concessions, ranging from none up to just over 1.5 months. I would caution against painting those concessions across all deals with a broad brush — it's not always on every floor plan or lease term; oftentimes it's on vacant units. Regarding submarket supply, these have been competitive submarkets and the acquisitions are in places with just a few units left to absorb and very little new construction on the horizon. Our underwriting is conservative; we are assuming no meaningful effective rent growth until 2027 and 2028 and gradually removing concessions. Once concessions are removed over the next one to one-and-a-half years, you could see a path to yields in the mid-5s.
I'll just add that being able to trade out of a 19-year-old California portfolio into a five-year-old portfolio, perform share repurchases and do it on a year-1 FFO neutral and year-2 accretive basis is a remarkable accomplishment and speaks to the strength of our capital allocation.
Our next question comes from Alex Kim from Zelman & Associates.
I wanted to ask about development lease-up velocity. Just curious how that's going in the two projects you guys have in lease-up and how are rents and concessions tracking relative to underwriting. And then potentially what are the expected stabilization yields?
If you go back to original pro formas, with a lot of these deals when underwriting we didn't expect to be dealing with the recent high supply environment. That said, our developments are doing well. We have one deal in lease-up — the Village District deal — and it's getting towards the end of lease-up, which tends to slow pace as you get to the back half, but we feel good about where that one is and expect a stabilized yield around 6%. For deals under construction, like the South Charlotte project and another under-construction project, construction costs are changing materially relative to original expectations; the converse is that denominator effects are moving in our favor. Those projects are on track and we expect stabilized yields in the high 5s to around 6%. Nations is a little earlier in the process and not leasing yet. Overall, leasing velocity is acceptable and stabilizations should be in the mid-to-high single-digit yield range depending on the asset.
And our next question comes from Eric Wolfe from Citi as a follow-up.
You mentioned July renewals were over 4% and you were sending out these renewals at the 4.2% level. I guess what would you expect to achieve on that 4.2%? Historically you've said maybe 50 basis points lower, but didn't know if the movement on new leases maybe meant that it could come in a little tighter than historical. So just curious what you think you can achieve on those renewals?
As you said, renewals are going out and by the time they're signed the effective is somewhere within an expected range. With August and September renewals going out at an average of 4.2% and the September numbers even stronger than August, we feel good about that continued trend. As long as it's moving directionally closer to the high 4s, we feel good about the third quarter and into the fourth.
And then maybe just last one: you gave the occupancy number and the renewal number for July. What's the hesitancy to provide the new lease number for July? You gave pieces of it, but why not just provide that number? Is it misleading because it changes day-to-day?
It's always funny because at one point in time we started giving more frequent monthly lease and renewal information, and that put us on a treadmill where people focused too much on small data points rather than the whole picture. That said, we do have good numbers and we want to share them, but providing monthly numbers consistently tends to force a focus on short-term volatility. We gave you enough color to gather our new lease, renewal and occupancy trends are pretty good for July, but at this point we're going to try to stay away from providing monthly numbers.
When I think about real time data like exact lease rates signed today versus tomorrow, The Street reacts to second derivatives and short-term changes. We've made a statement that the second derivative for Camden's portfolio is very positive and on a steep upward trajectory. But that hasn't necessarily changed investor expectations immediately. Giving day-to-day data tends to create volatility in perceptions, and the market reacts strongly to those short-term moves. So we prefer longer-term trend data that shows sustained direction rather than daily noise.
And ladies and gentlemen, with that, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Alex Jessett for any closing comments.
Thank you for joining us today, and we look forward to visiting with many of you at the upcoming conference season that begins in September. Take care.
And with that, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.