Camden Property Trust (CPT) Q1 2013 Earnings Report, Transcript and Summary

Good day, and welcome to the Camden Property Trust's First Quarter 2013 Earnings Release Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kim Callahan, Senior Vice President, Investor Relations. Please go ahead.

Good morning, and thank you for joining Camden's First Quarter 2013 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. As a reminder, Camden's complete first quarter 2013 earnings release is available in the Investor Relations section of our website at camdenliving.com, and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call. Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; and Keith Oden, President. Dennis Steen, our Chief Financial Officer, will not be on the call today as he is attending to a family medical need. As such, the financial section of our prepared remarks today will be covered by Keith. Our call today is scheduled for 1 hour, as another multifamily company will begin their call at 1:00 p.m. Eastern. [Operator Instructions] 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.

Thanks, Kim. Good morning. As Marshall Tucker, in their -- in our pre-conference music lyrics suggest, the sun is definitely shining in our Texas markets. Same-property revenue increased 5.9% and net operating income increased 6.7% for the quarter. It looks like 2013 operating fundamentals will be again well above our long-term average. The continued above-trend performance is driven by macro factors that should keep growth above trends through at least 2016. Apartment fundamentals in our markets continue to benefit from above-average job growth compared to the rest of the country. Supply concerns are in most people's minds, we know that. The new supply that's being delivered in and started in 2013 doesn't come close to meeting new demand and filling the supply deficit that was created during the financial crisis. REIT advisers estimates that the multifamily supply deficit created during the 2009 and -- through 2012 period is nearly 500,000 apartments. The single-family housing market has finally started to improve, with home prices and new construction rising. We welcome the improvements in the single-family home market as it adds jobs and creates more rental demand than move-outs to home purchases takes away from rental demand, so we end up with net new rental demand as a result of the stronger economy. The single-family housing market has been a drag on the economy, so far in their recovery, hopefully that is turning around and will provide a boost to the economy. We continue to focus on improving the quality of our portfolio through recycling older properties, buying and developing new generation of properties. Our balance sheet is one of the strongest in the apartment sectors and was confirmed by a recent investment grade rating upgrade from S&P. This puts Camden in the S&P top 10 strongest rated companies in all of REIT land. A big thanks goes out to our on-site and corporate support teams for another great quarter. Keith, I'll turn the call over to you now.

Thanks, Ric. We're off to another solid start this year. Although our NOI growth rate has moderated from the extraordinary levels of 2012, from a historical perspective, our growth rate is still very strong. All of the data that we review with our on-site teams continue to indicate that 2013 will be a very good year in Camden's markets. For the first quarter, same-store average rents on new leases were up 1.9% and renewals were up 6.9%, and that compares to 3.1% and 7.9% last year. For April, new leases were up 3.3%, renewals up 6.9% and May renewals are also trending 6.9%, with 42% completed. Revenue growth year-over-year was strong across almost all of our 16 markets, with double-digit increases in Houston and Charlotte. Houston continues to see exceptional strength, with an 11.6% increase in same-store revenue over last year, and we currently maintain a 96.6% occupancy rate throughout the quarter. This trend is likely to continue throughout the year. Although weak by comparison to our other markets, Las Vegas and San Diego did have revenue growth of 1.7% and 2.7%, respectively. Our same-store portfolio averaged 95.2% for the first quarter, 95.4% for the month of April and currently stands at 95.6%, which leaves us very well positioned as we head into our peak leasing season. Our occupancy rate for the first quarter was roughly 50 basis points higher than planned, which was the main component of our outperformance in revenues. Traffic remains strong across all markets. Despite our aggressive renewal rate increases, our turnover rate was 47% compared to 48% in the first quarter of last year. Our residents' financial health continues to improve, and our current average rent as a percentage of household income stands at 17.7%, a very healthy number. Also, our reported move-outs for financial reasons or job loss fell to 5.1% versus 6.1% a year ago. 12.3% of our residents moved out to purchase homes in the quarter compared to 11.5% a year ago and 13.3% in the fourth quarter. This is still well below our long-term average of roughly 18%. Moving on to first quarter results. We reported funds from operations for the first quarter of 2013 of $86.6 million or $0.97 per diluted share, representing a $2.8 million or $0.03 per share improvement from the $0.94 per share midpoint of our guidance range for the first quarter that we established at $0.92 to $0.96 per share and an increase of 17% per share from the first quarter of 2012. The $2.8 million in FFO outperformance for the first quarter relates primarily to a 2.2% -- $2.2 million in better-than-expected results from our consolidated and joint venture communities and approximately $700,000 in land sale gains we recorded in the first quarter on the sale of 2 outparcels of undeveloped land adjacent to our development communities in Houston and Atlanta. The $2.2 million better-than-expected results from our communities is a result of the following. First, property revenues from our consolidated communities exceeded our forecast by $1.3 million, due primarily to the combination of slightly higher average rental rates and occupancies, lower bad debt expense and higher fee income from stabilized communities. Additionally, we experienced higher-than-expected leasing velocity at each of our 3 lease-up communities and our development pipeline. As an example, Camden City Centre II in Houston, which began lease-up in the first quarter of this year, is already 46% leased and 33% occupied at rental rates over 20% above the original pro forma. Property expenses from our consolidated communities came in approximately $700,000 better than our expectations, with the controllable expense categories of salaries and benefits, utilities, repairs and maintenance and other property expenses coming in $2.4 million below our first quarter expectations. This favorable variance was primarily the result of: first, lower salaries and benefits due to lower medical benefits claim cost and slightly lower base salary and bonus payments; second, lower utilities expense due to a mild winter in the majority of our markets and the absence of budgeted rate increases for electric, water and gas utilities; and third, lower repair and maintenance expense due to lower-than-expected unit turnover rates for the portfolio in the first quarter. The positive variance in controllable expenses was partially offset by unfavorable variances of $1.1 million in property insurance expense and $600,000 in real estate tax expense. Property insurance expense was $1.1 million higher than anticipated, entirely due to our self-insured deductibles related to a 37-unit fire at one of our communities in California and hailstorm damage at one of our communities in Atlanta. Barring any significant property claims in future quarters, we expect same-store insurance expense to drop back down to the $3.2 million range for each of the last 3 quarters of 2013. Property tax expense for the first quarter was $600,000 higher than planned, entirely due to revised expectations for valuation increases at our Houston, Dallas and Austin communities, based on preliminary assessments we've just received. We now expect same-store property tax expense for 2013 to be approximately $2 million above our original plan due to the revised valuations for our Texas communities. As a result, 2013 same-store property tax expense is now anticipated to be 13% above 2012 levels. Based on all of the above, we still expect 2013 full year same-store expense growth to be in the range of 3.2% to 4%, but we will probably be in the upper-end of that range due to the change in our property tax expectations. The last component of outperformance from our communities in the first quarter is a $200,000 favorable variance in FFO contribution from our joint venture communities. Like our wholly-owned communities, our 37 operating joint venture communities experienced similar positive gains in revenues and slightly lower-than-expected expenses. Turning to earnings guidance for the second quarter of 2013. We expect projected FFO per diluted share within the range of $0.96 to $1 per share. The midpoint of $0.98 per share represents a $0.01 per share increase from the first quarter of 2013. This $0.01 per share increase is primarily the result of the following. A $0.02 per share increase in FFO due to growth in property net operating income as a result of 2 things: first, an approximate 1.9% expected sequential increase in same-property NOI as revenue growth from the combination of rental rate increases, higher occupancies and increases in fee income as we move into our peak leasing periods more than offsets our expected increase in property expenses due to the normal seasonal summer increase in utilities and repair and maintenance costs; and second, the NOI contribution from our non-same-property communities and development communities. And lease-up will be relatively flat quarter-over-quarter as the additional NOI contribution from our communities in lease-up and net acquisition disposition activity completed so far this year will be offset by revenue lost at our student housing community in Corpus Christi, Texas. Occupancy always declines significantly in the May through August period at this community. The positive impact of growth in property NOI is being partially offset by a $0.01 per share decline in FFO as a result of the $700,000 in land sale gains recorded in the first quarter of 2013. No land sales gains are expected in the second quarter. We've not changed our same-store growth or projected transactional assumptions for 2013, but we have increased the bottom end of our 2013 full year FFO per share guidance range by $0.04, primarily to reflect our FFO outperformance in the first quarter of this year. We now expect full year FFO per share to be in the range of $3.89 to $4.05 per diluted share. At this time, we'll open the call up to any questions that you might have.

[Operator Instructions] Our first question comes from Nicholas Joseph of Citi.

You mentioned that traffic remained strong, but can you give the actual figures for traffic relative to last year and then for D.C. specifically?

Yes, actually, our traffic, the way that we have historically calculated, is -- on a year-over-year basis is down about 7%. Although it's kind of interesting because in one of the things that we are in the process of doing is taking a hard look at whether we should redefine how we historically have counted traffic. The incidence of Internet traffic has gotten to be such a huge part of how people go about finding us and us transacting business, where we can literally sign leases online without someone ever actually physically coming to the community and filling out a guest card. So we are in the process of rethinking that. Clearly, we've got enough traffic in our communities because we're -- I think we're doing a better job of targeting the traffic, and we've got plenty of traffic to maintain our occupancy for the quarter, above 95%. And right now, we stand at about 95.6%, which is really high for our portfolio, from a historical standpoint.

I think what I would add to that is that we are now utilizing a very sophisticated big data analysis of our traffic and our spend on advertising. And one of the questions that you have when you have high occupancy and high lease conversion rates, it's, "Why have the traffic if you don't need it?" We don't need the traffic right now. So looking at traffic numbers year-over-year, I would say if you're an efficient operator and using big data and you're analyzing this with all the smart MBA types that we have looking at this data, I got to tell you, I'd rather have it go down substantially more, have occupancy go up and have our spend from an operating cost go down. So I think if you -- you got to be very careful about looking at traffic trends in this sort of big data Internet environment because I think they're meaningless.

Okay. And then in terms of your development pipeline, how much cost pressure have you seen from increasing costs, and how does this affect your assumed stabilized yields?

Cost pressure is definitely out there, and it really depends on the market. But we've seen cost pressure in markets, primarily Texas for now, because the market is so strong. We're also impacted by the oil plays in South Texas. But we're seeing anywhere from 5% in some markets to 10% or 12% in others. The good news, however, is that yields haven't really been negatively impacted yet because rental rates have risen faster than anybody projected or that we had projected in our numbers. The sort of a good news is, is we've got a lot of development in before the cost increases. As a matter of fact, we saved somewhere in the $30 million range of construction costs that was under budget in the last cycle, and our developments leased up at an average of 10 months early because of the strength of the market. So what's happening now is that costs are definitely under pressure. And in some markets, South Florida, for example, we're not seeing much cost pressure; in Atlanta, not much cost pressure. But clearly in Texas -- D.C.'s got some pressure because of all the construction going on there. But I think that the cost pressure is actually a good thing for the market because people are having to really sharpen their pencil, and the easy deals and the low-hanging fruit is over. So you have a situation where it's much more difficult to make the numbers work because of this cost pressure.

The next question comes from Rob Stevenson of Macquarie.

Keith, can you just talk a little bit about the D.C. market and where you're seeing pockets of strength, where you might be seeing pockets of weakness and what the operating strategy is as you face the big deliveries here in '13?

Yes. So let's talk about the -- let's kind of set the stage, first of all, on the deliveries. We think that this year, we're going to get somewhere in the range of 10,000 apartments completed in the D.C. Metro area, and obviously, that's spread out all the way from Maryland to Northern Virginia. In places where you have concentration of activity, that's where you're going to see the impact because on a macro basis, if you think about the deliveries that we had last year in D.C., we delivered roughly 5,000 apartments. So add 5,000 to 10,000 we're going to get this year, you got 15,000 apartments. And yet in D.C. last year, we had about 40,000 jobs, and this year, the numbers are in this 35,000 to 40,000 range again. So kind of using the 1:5 ratio that we have used historically, that's really not that out of kilter from a supply and demand standpoint looking at it over the 2 years combined. So our operating plan this year, we've got a target of -- NOI target of roughly 4%. That's about what we did in the first quarter in D.C. So we think we're on track to deliver somewhere in the 4% same-store NOI growth rate in D.C. this year. Now that's not to say that there aren't individual pockets where if you've got 3 deals that are all trying to get through the door at the same time that there's not going to be some pressure on the lease-up, there certainly will be. The good news is, is that most of our portfolio is not located in those markets that -- our stabilized portfolio is not in the markets that have the most development activity. We do have -- we just opened our -- the doors and began lease-up on our South Capitol project, and that's leasing up, we're having great traffic, we're having good conversions, and it's well above our original pro forma rate for rent. So, so far, so good. The second -- the other community that we have is under construction. I don't think we deliver units there until 2014, and that's North of Massachusetts or NOMA. Those 2 are both in the district proper. As you get out beyond that, it gets pretty spotty as to whether we think there's going to be specific impact to our communities. But overall, D.C. feels like a market that, again, in certain submarkets, you're going to have some pressure, but overall, I think we're going to be okay.

Have you guys -- in any of the submarkets where you're likely to face meaningful supply, have you guys been sending out renewals even earlier than you otherwise would to try to lock these people down before they get the opportunity to move out into a new project?

No, Rob. We haven't -- we're not -- a lot of this 10,000-unit supply that's coming on this year is backloaded because it got started in the middle of last year. So we're not to that point of having to make any kind of strategic pricing or renewal decisions based on the supply, not to say that we won't at some point in this year, but not so far.

Okay. And then just lastly on the development. You guys have sort of said this year, 250,000 to 400,000 of starts. Is that still -- given what you're seeing out there, still about where you expect to be? And the -- is the schedule in the supplemental likely to be the sort of ordering at which stuff comes out?

We're still comfortable with the 250,000, 400,000, and yes, the supplement is sort of in the order it will come out.

The next question comes from Alexander Goldfarb of Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Just 2 questions. The first question is, as Texas is clearly benefiting from the oil boom and energy, how are your thoughts about future investment in Texas relative to other areas? How are you thinking about that? Are you thinking that you want to grow your exposure to Texas? Or does this mean as you're investing more in Texas, we should expect more selling of older assets to keep the exposure constant? And as part of that, just was curious about the land sale in Houston, just given -- I didn't know if that's factored in here or if that was sold for different reasons.

Well, first of all, we love Texas. I mean, it's an awesome market. And when you think about what's going on in the energy complex with frac-ing across the country, but -- not only across the country, but across the world. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Not in New York, though, we don't have it here.

Well, perhaps. You have it pretty close, though, in Pennsylvania, right? So with that said, there's a lot of discussion about how the frac-ing is going to create energy independence over the next 10 to 15 years. All that activity is happening right here in Houston. All those mining jobs or technology jobs, they're basically running all this activity around the world here. So we think that Texas overall is going to have a multiyear run that might look like the sort of oil rush in the 70s, if you will. And so with that said, we love Texas, we want to continue to expand our portfolio. Now we also have a view that you don't want to have all your eggs in one basket and you should be geographically diverse and market diverse and product diverse. So with that said, we're going to balance our portfolio over time. And we've just acquired a large property here in Houston and sold -- we funded that with 2 sales outside of Texas. But bottom line is, we'll continue our geographic focus, we'll continue to recycle older into newer and into better locations. As far as the land sale goes, the land sale was an outparcel in our Andrau parcels. I think we have 1 or 2 additional sites out there that we could develop on. But we do have a pretty high concentration of properties out there now, so we're just selling some excess land at a pretty good price. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. And then the next question is, given, Ric, you're sort of a spokesman for the GSEs. Your view of Mel Watt, do you think that this, in any way, affects the exit or the accelerated exit for multifamily for the GSEs? Or you think his main focus is going to be single-family and really should not impact the exit of the multifamily, the pace of the exit for multifamily?

I don't think it has any effect. I think if you just remember, multifamily is the very tail -- the tiptop of the tail of the GSEs and not the dog. And until they figure out a way to exit the overall single-family situation, multifamily is going to just continue down the trail. And I think that the broader thing on multifamily, it's interesting when you think about the GSEs related to multifamily, today, the GSEs are still a big player in multifamily, but they're the biggest player. If you look at market share overall, it's in the 40%, 50% range. But if you take it and you look at the market share of the GSE relative to the top-tier markets -- to the top-tier properties and top-tier markets, they're very small. It's dominated by life companies and REITs. And where the GSEs are dominant are in secondary and tertiary cities with older, smaller, more complicated assets that none of the investment groups like publicly traded REITs or top-tier investors actually go to. So when you get there, mostly individuals and local players who play in that, and that's probably 90% funded by the GSEs. So I think with that said, there's going to be a lot of sort of grassroots pressure to make sure that there's a GSE-style entity out there to handle that -- those tertiary and secondary cities. So I think that's going to be a big political deal once they come to some resolution, which I don't think there's any political will to create a resolution any time soon.

The next question comes from Ross Nussbaum of UBS.

What was the cap rate on Post Oak in Houston?

The forward cap rate is around 5% and some change.

How did that transaction come about? Was that marketed, or did that come to you?

It was marketed to a select group, and we had a relationship with the seller. We actually sold -- the seller of this property, we sold them our Philadelphia property. So we sort of just changed the names and the numbers and executed the contracts. So we had a relationship with the seller. They didn't market it, but because of our relationship, we were able to capture the transaction. It's definitely a trophy asset in Houston.

Can you talk a little bit about Austin? I know it's a small market for you, but I guess, the concern in Austin is there's about as much supply coming on as there is in Houston, but the job growth numbers don't look quite as strong. Is that a market that you think sort of underperforms over the next year or two relative to what you're getting in some of your other markets?

Austin is probably at the top of our list for watching, in terms of the effect of new supply. You've got roughly 14,000 apartments under construction in Austin. We think about 9,000 of those deliver this year and about 5,000 of that spills over into next year. So it's going to be really important in Austin to keep an eye on the permitting activity. Austin is -- so the broad thought is, 14,000 apartments is a lot, I don't care where your assets are located in Austin, and so it's -- we're likely to see some impact into 2014. But like everything else, all real estate is local, and a big chunk of that 14,000 apartments is being built in the CBD and just south of the university. So if you kind of stratify what's going on in Austin, you've got almost 6,000 apartments that are being built in that, what we would call the south university and CBD submarket. And unfortunately for the folks who are under construction in that part of town, virtually all of them are targeting very high-end rents, a lot of high-rise construction. I just think there's a real -- there's a real question in my mind as to how many $2.10 per square foot apartment rentals are going to be in demand in the CBD south university submarket. So fortunately for us, we don't really have anything that competes in that submarket. The closest thing that we have is -- we have one deal under construction on North Lamar, which is north of the university. You're probably going to get some collateral damage there from the 5,000 or 6,000 apartments. But we don't really have anything in the downtown market that's currently under construction or lease-up. So I think there's good room for some healthy skepticism over what happens on permitting in Austin from now through the end of the year, and that's something that we're going to be looking at very carefully.

Okay. And then last question is on Vegas. As you know, we were just there, and it was surprising to see the pretty substantial increase in home prices over the last 6 to 9 months, 20%, in some case, 30% in some of the submarkets there. Do you think that, that spike in home prices is going to translate through to a pickup in rent growth over the next year in Vegas?

I think it will. I think that they're related somewhat. Part of the challenges in Vegas in the single-family home market is that Nevada implemented a legislative, I guess, procedure or law, whatever you want to call it, that has sort of masked the ability of -- or limited the ability of people to foreclose on homes, and they're trying to fix that now. So part of the problem is as you've got this sort of phantom supply of homes out there that are basically zombie homes where people are living in them, not paying the mortgage and the lender can't foreclose. So that needs to be resolved. But I think when you look at Las Vegas, you look at supply and demand fundamentals, there's been nothing new built. Demand has been increased. They do have had reasonable job growth. The casinos are starting to add more people, and the sort of employment per hotel room is starting to rise. We look to Las Vegas to actually be in one of the top 10 growth from a revenue perspective over the next 2 or 3 years. And if you sort of use Phoenix as an example, Phoenix went from -- we lost maybe, I think, 18%, 19% of our revenue there, and we've replaced -- that's all been recouped since the downturn, plus or minus a few. And I think Las Vegas will do the same thing. It's just a year or two behind or maybe 2 or 3 years behind the rest of the market.

Yes. And -- so on the multifamily side, in 2013, we're forecasting total multifamily completions of less than 1,000 apartments. If you roll that over into 2014, which we -- you would have fairly good visibility in at this point, our forecast is for about 1,100 apartments now. My question is, who's -- who in the world build the 900 or the 1,100, but the reality is it's a drop in the bucket relative to the total embedded base. We think that we'd get 25,000 apartments -- excuse me, jobs this year, and the forecast for next year is about 35,000. If you get those 2 numbers, it's not going to -- what's happening on the housing markets will be an aside story to what's happening in employment growth relative to multifamily completions.

The next question comes from Karin Ford of KeyBanc.

On the property tax side, are you guys through the assessment process in all your markets, or could there be any other surprises on the tax side?

No. We're through the part of the process where we got the bad news. But we're -- we have not yet begun the fight of where we end up from the standpoint of what the final valuations are. These are preliminary numbers. We are very aggressive and assertive in how we deal with our property tax valuations that we have been historically. We've gotten very good results over the years. We have dedicated resources in-house. We use the best local property tax consultants and we fight tooth and nail. Because it's -- you got valuations -- preliminary valuations in Dallas, a 33% increase over last year and preliminary valuations in Houston, 38% increase over last year. These are crazy numbers, and we'll fight like heck. But in the meantime, the prudent thing to do from our perspective is to sort of roll those through the process and see where that puts you and reserve accordingly, which we're going to do.

Second question is on new rent -- new lease rent growth. So it accelerated from 1Q to April. Can you talk about what your expectations are, given the increasing occupancy level on your ability to keep pushing on the new rent side?

Yes, I think at 95.6% occupied, which is kind of where we are right now, as we roll over into the peak of our leasing season, you're going to see that accelerate. Our same-store guidance this year is roughly 1% below where it was last year for revenues, and it would make sense that our new leases, as well as renewal rents, would trend below where they were last year. But yes, in order to get to our guidance that we laid out for the year on revenue growth, we're going to have to see an acceleration on the new rent side, which we always do in the second and third quarters. So I think we're -- we still feel like we're in pretty decent shape relative to plan. And again at 95.6% occupied, it tells us that we've got a fair amount of room to continue to push on not only new leases but renewals as well.

The next question comes from Jeff Spector of Bank of America Merrill Lynch.

This is Jana for Jeff. I just wanted to follow-up on some of the development questions, and particularly, how you were thinking about the size of the development pipeline in 2014 and '15 as we approach a more normalized level of supply entering the market?

Sure. The development pipeline, we've talked about for a while being -- we're comfortable starting $250 million to $400 million annually. But with that said, you have to evaluate where you are at any point in time. And I think the point to keep in the development pipeline in a moderate level is that we're sort of finishing properties and then starting properties, finishing properties and starting properties, so that your overall exposure is managed in a reasonable way. We're also making sure that we fund these developments as we go, either through dispositions or other capital market activities. So we feel comfortable as long as we can continue to get yields that are 150 to 200 basis points over the untrended yield and cap rate that you can buy in a new asset and we're going to continue to develop. But we -- clearly, we'll watch each submarket and each property within that -- within the development pipeline gets analyzed 100 different ways as you can. And we'll make decisions as we go, depending on the micro aspects of the submarket for each development.

And do you like the size of the landholdings, or would you potentially be looking to sell a bit more of land this year? Or are you, on the other side, seeing attractive opportunities and could potentially buy more land?

The land market is at fever pitch right now and really hasn't come down. I mean, land market is higher now than it was at the peak in 2007 for new development. So we have not seen any "value" in land at this point. We do -- we have a land bank that is a reasonable size, and we will -- we manage that land bank. We don't really have assets -- land that we're -- that we want to sell right now because we don't want to develop. But we'll keep -- sort of the land bank is going to be kept at a reasonable size sort of like the pipeline starts just so that if -- when the market turns -- because this is a cyclical business obviously, and if the market turns hard against us, we don't want to be sitting on a bunch of nonearning land. But on the other hand, we want to keep our pipeline robust enough to be able to take advantage of the opportunities, so there's a balance there.

The next question comes from Rich Anderson of BMO Capital Markets.

Ric, you said through 2016, you thought business would be good. I missed it. Did you say that about yourself or about the overall industry?

I think the overall industry because you have this -- I think a lot of people don't realize how big a hole the market created in supply during the 2009, 2012 timeframe. And between the echo boomers that are still doubled-up, we still have a 7.5% unemployment rate, and the real one's supposedly 10% when you think about underemployment and things like that. So you have a deficit of supply; you have high occupancy. Most markets are -- I mean, Houston for example, to be as high occupied as it is, it's just way over trend. So you have -- you've got just a lot of great fundamental factors that should drive our business above trend for the next 2 or 3 years. And I think that, that's -- I feel pretty good about that nationally. I feel a lot better about it in our markets because we get oversized job growth relative to other markets. So that's why -- I think it's going to be good for the industry overall, but I think it might be better for us.

Okay, fair enough. And then my second question is, with the strength that you're seeing in some of your Texas markets and maybe some of the pullback you're seeing in D.C., is there a point in time where you'll see an opportunity to be a seller in Texas and a buyer in D.C.? And when do you think that time might come to think a step or 2 ahead of where fundamentals are currently?

That's an interesting question because we debate it all the time, should we sell here, buy there, and it's just a balancing act. And when you're 100% long apartments 100% of the time, timing markets is a really tough thing. And the great thing about the REIT world is if you want to time apartments, you just sell the apartment REITs, right, and buy somebody else. Well, the way we look at our portfolio, it's really hard to move assets around and make any big difference when you think about it on a market basis because the assets are -- you have to sell a lot of assets to move the needle. So we try to -- what we try to do is in our normal disposition program, which is, let's look at -- rank our -- force rank our assets for future growth rate, CapEx, what our return on invested capital will be for those assets in the future, we then rank those by just pure return on invested capital growth for the future. And what happens is slower growing markets tend to then come to the top of the disposition area. The challenge you get to when you start thinking about, "Well, Texas is hot, so let's sell our best assets in Texas," is that the reason they're the best assets is because they're in the best markets and best submarkets, and while somebody will pay you a very low cap rate and a very high price, the question then is, "Where do you reinvest that, and how do you get the exposure you want in those markets?" So with that said, we sort of do sell -- serve the slower growing markets quicker than we do the hottest markets. But it's always trying to balance where you are overall in your portfolio.

The next question comes from Paula Poskon of Robert W. Baird. Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division: Ric, just sort of a qualitative question. All this new supply we keep talking about ultimately will need staff to run them. Are you at all worried about pressure on payroll costs and increased employee turnover? Or do you think Camden's 100 Best Places to Work culture will actually diminish that risk by helping your retention?

Well, I think that clearly being on the Best Places to Work list helps us recruit talent, and when you have a great workplace, people want to stay in a great workplace. So we have one of the lowest turnover rates in the industry. I don't think that just having new construction and new development and new supply puts huge pressure on the wage side of the equation. In certain markets like Texas, you do have wage pressure that's being put on by virtue of all the activity and just the buoyant economy. And so we do have some rent wage pressure there, and we feel that in our corporate office a lot, not just for on-site workers, but -- I think that we will see sort of normal wage pressure, but I don't think that -- I think that, that -- the whole idea that you're going to see a spike in job costs, I don't think you're going to see that. Keith, you want to add to that?

Yes, Paula, that's a great question. Our turnover rate last year on-site at our communities was something just short of 20%, which is, as anybody knows, this industry knows, that's a kind of a crazy low number. And that's a combination of a lot of things. It's creating -- allowing people to be able to work at a great workplace, but it's also making sure that from a compensation standpoint, both in base salary, benefits, plus annual incentives, that we keep people at very competitive salary levels and from a total compensation standpoint. So yes, Houston is a very competitive job market right now. There are a lot of opportunities out there. But I can tell you this, it is a rare day that we lose a Camden team member to go to another multifamily company. We lose them to go leave the business, we lose them to change -- go different paths in their career. It is rare that we lose a Camden associate to another multifamily employer.

[Operator Instructions] Our next question comes from Michael Salinsky of RBC.

Just a couple of operating questions. Keith, first question, you gave renewal and new lease statistics for the first quarter. What was the blended increase on rents signed in the quarter? And then, how does that compare to the first quarter of last year? How much moderation have you seen in rents, blended rents, on a year-over-year basis?

Yes. Well, so if you think about the -- you're down roughly 1% on renewals, as well as new leases year-over-year, which is exactly where you would expect to be, given our revenue guidance, revenue actuals last year and our guidance this year. I'll get you the math on it, but it's pretty -- you can do it with me here if you want to. Your renewal increases, we're up 6.9% on renewal increases, and that's -- and our turnover rate is 47%. We're up 1.9% on new leases. So whatever that math works out to, I'll get it to you after the call. But if you think about it relative to last year, we're down 1% on both new lease rates, as well as renewals. And the blend of the two would put you down 1%, which would be right in line with our guidance.

Okay, that's helpful. And the second question is also an operating question. You guys are obviously ramping up redevelopment slash revenue-enhancing spending. What was the benefit in the same-store revenue number from that? And how should we expect expenses to play out over the balance of the year?

Sure. On same-store revenue, it was about 25 basis points of pickup in same-store revenue because of the repositioning program. And we think overall through the end of the year, the NOI piece of that equation will be about 50 bps.

Okay. And then finally just in terms of the units that are being turned. What kind of bump in rents relative to market are you seeing on the redeveloped or renovated units?

So our estimated return on the incremental dollars is roughly 11% is what we're targeting. We're putting in roughly on average $9,000 to $10,000 per door and getting an 11% increase on that. That's in addition to whatever the market rate increase would be in whatever submarket that happens to be in. Roughly $105 -- about $105 per door if you take the entire program into consideration.

This concludes our question-and-answer session. I would like to turn the conference back to Ric Campo, CEO and Chairman of the Board, for closing remarks.

Great. Well, thanks for being on the call today, and we'll see you at NAREIT.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.