Oct 31, 2008
Executives
Kim Callahan - VP of Investor Relations Rick Campo - Chairman and CEO Keith Olden - President Dennis Steen - CFO
Analysts
David Bragg - Merrill Lynch Dustin Pizzo - Banc of America Securities Lou Taylor - Deutsche Bank Jay Habermann - Goldman Sachs Michelle Ko - UBS David Toti - Citigroup Rob Stevenson - Fox-Pitt Kelton Rich Anderson - BMO Capital Markets Alexander Goldfab Karen Ford - KeyBanc Capital Markets Michael Salinsky - RBC Capital Markets Paula Poskon - Robert W Baird Haendel St. Juste - Green Street Advisors Eileen See - Credit Suisse
Operator
Welcome to the Camden Property Trust third quarter 2008 Earnings Call. (Operator Instructions).
Now, I would like to turn the conference over to Ms. Kim Callahan, Vice President of Investor Relations.
Ms. Callahan, you may begin.
Kim Callahan
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Rick Campo
Good morning and happy Halloween. It's appropriate that our call is on Halloween, relative to the tricks and treats that we are experiencing in our markets, and the general state of the capital markets.
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Given the challenging economy and job losses today we are pleased with the third quarter property operations. Our on site teams are doing a great job navigating these uncertain times, and I thank them for their continued commitment to provide living excellence to our residence.
We measure our on-site teams quarterly performance relative to MPF published market data. Our teams consistently outperformed the local markets.
For the quarter, we outperformed 13 of our 16 markets; our charge to our on-site teams continues to be that we ask them to outperform the market in spite of market conditions. We will not be providing 2009 guidance on this call, we will provide 2009 guidance on our fourth quarter conference call.
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You might be surprised by these numbers. If you put them in perspective, during 2002 to 2004, recession our net operating income declined from peak to trough to about 11.5%.
So, why would the NOI decline be less in this recession? First, our view is that we have been in recession in our challenged markets since the first quarter, but there are essentially three economic drivers that are significantly different this time around, I worry about saying, this time its different, but there are lot of specific things that are different.
First the supply of multi family housing is 45% less, going into this recession compared to the last recession. Supply was peaking at a time of significant demand declines in the last recession.
Given what has happened in the credit markets, the fact that new developments and financing have essentially dried up, we expect future supply to fall through at least 20 year lows, and as a matter of fact, our future supply probably will off set substantially by demolitions, so we will have negative supply over the next two or three years in the multi-family business.
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You might be surprised by these numbers. If you put them in perspective, during 2002 to 2004, recession our net operating income declined from peak to trough to about 11.5%.
So, why would the NOI decline be less in this recession? First, our view is that we have been in recession in our challenged markets since the first quarter, but there are essentially three economic drivers that are significantly different this time around, I worry about saying, this time its different, but there are lot of specific things that are different.
First the supply of multi family housing is 45% less, going into this recession compared to the last recession. Supply was peaking at a time of significant demand declines in the last recession.
Given what has happened in the credit markets, the fact that new developments and financing have essentially dried up, we expect future supply to fall through at least 20 year lows, and as a matter of fact, our future supply probably will off set substantially by demolitions, so we will have negative supply over the next two or three years in the multi-family business.
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Given the current tighter credit underwriting for home loans and the negative consumer sentiment, these dynamics will actually increase rental demands during this cycle, rather than taking rental demand away from us, as the last cycle. The third major difference in that is demographics.
The baby boom echo is producing many more 18 to 24 year olds in the last cycle and they have the highest propensity to rent apartments. When job growth returns there will be significant pent-up demand.
We believe that there will be shortage of multi-family units, beginning in late 2010 and through 2013.
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Keith Olden
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The third quarter is always our highest turnover quarter, but 78% for the quarter was higher than we had anticipated. We are still well below plan on expenses for the year.
The 3.4% increase in expenses year-to-date, adjusted for the impact of our cable and valet waste initiatives, is slightly less than 1%. So we continue to see good expense controls on sites.
We expect to finish the year at the low end of our original expense guidance, however, our fourth quarter expenses will likely show a significant increase over the prior year, due to the $1.6 million in property tax reductions that we had in the fourth quarter of 2007. We averaged 94.9% occupancy for the quarter, as our revenue management systems maintained rents flat to the second quarter, in order to hold occupancy.
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The largest revisions among our markets occurred in Atlanta, which went from a projected 16,000 gain, in the second quarter, to what is now projected as a 3,000 job loss. Los Angeles was projected at 14,000 job losses is currently projected at 56,000 losses.
Phoenix was revised from a loss estimate of 12,000 jobs to 39,000 jobs, and Tampa was revised from flat to down 13,000. This 123,000 downward revision to the employment outlook in our markets in the second half of this year will continue to create challenges.
Consistent with our expectations for slowing demand as jobs are lost, we experienced a 7% decline in traffic from the third quarter of 2007, and our closing percentage fell from 34% in Q2, to 32% in this quarter. Since quarter end, our occupancy rate has come down to right at 94%, which is higher by 20 basis points than our historical seasonal decline from second to third quarter.
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The largest revisions among our markets occurred in Atlanta, which went from a projected 16,000 gain, in the second quarter, to what is now projected as a 3,000 job loss. Los Angeles was projected at 14,000 job losses is currently projected at 56,000 losses.
Phoenix was revised from a loss estimate of 12,000 jobs to 39,000 jobs, and Tampa was revised from flat to down 13,000. This 123,000 downward revision to the employment outlook in our markets in the second half of this year will continue to create challenges.
Consistent with our expectations for slowing demand as jobs are lost, we experienced a 7% decline in traffic from the third quarter of 2007, and our closing percentage fell from 34% in Q2, to 32% in this quarter. Since quarter end, our occupancy rate has come down to right at 94%, which is higher by 20 basis points than our historical seasonal decline from second to third quarter.
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Dennis Steen
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Excluding these non-recurring items that were not included in our prior guidance, FFO for the third quarter would have been $51.2 million, or $0.87 per diluted share at the midpoint of our prior guidance range of $0.85 to $0.89 per share. Our FFO, excluding the non-recurring items, achieved the midpoint of our FFO guidance range for the third quarter of 2008, based on the following: Moderating same store revenue growth and slightly higher than anticipated same store operating expenses, as Keith just discussed, produced $1.3 million or $1.6 million unfavorable variance to our same store net operating income expectations for the third quarter.
This unfavorable variance was offset by a $400,000 favorable variance in net operating income from communities in our development pipeline as all communities under lease-up are progressing positively towards stabilization and a $700,000 favorable variance in general and administrative expenses due to lower salary and benefits, incentive compensation and legal expense. During the third quarter, we continued to make significant progress towards the execution of our 2008 disposition program.
During the quarter, we sold five operating assets to third parties, generating total proceeds of $115.6 million and resulting in a gain on sale of $65.6 million. This brings our year-to-date disposition volume of operating real estate assets up to approximately 2,400 units, which had an average age of 24 years, generating $140 million in proceeds.
The average cap rate on our 2008 dispositions was 6%. Using 2008 annualized NOI and CapEx per unit of $650 and the unlevered IRR was approximately 12%.
We are currently marketing for sales seven additional communities with an average age of over 20 years. Three of the communities are currently under contract but we do not expect any to close in 2008.
Additionally, in August, we sold Camden South Congress, a 253-unit community in Austin to the Camden multi-family value added fund for $4.2 million resulting in a gain of $1.8 million on the sale. And current with the purchase, the fund obtained a seven-year floating rate loan from Freddie Mac to finance 70% of the purchase price.
Turning to the capital markets, we and the rest of corporate America continue to navigate through the current credit crisis. We made significant progress during the quarter in further strengthening our balance sheet and liquidity position.
On September 24, we closed on a new $380 million Fannie Mae credit facility. The facility has a term of ten years, and was comprised of a $205 million, 5.625% fixed rate loan and a $175 million variable rate loan currently priced at 4.2%.
The proceeds were used for payment of all our remaining debt maturities for 2008 and to pay down amounts outstanding on $600 million unsecured line of credit. As of September 30, our liquidity position is sound.
With $29 million in cash on the balance sheet, no debt maturities for the remainder of 2008, and full availability on our $600 million unsecured line of credit, which after all extensions, matures in January of 2011. Additionally our dividends continue to be adequately covered by operating cash flows, and we have a significant unencumbered asset pool of approximately $4.3 billion which continues to be available for potential financing.
We also have the ability to replace a significant amount of unsecured debt with secured debt and still satisfy our financial covenants. Based upon our existing liquidity position, potential proceeds from asset sales, and our ability to incur additional secure debt, with Fanny and Freddy still very active in the multi-family space, we are very comfortable that we can meet our upcoming debt maturities.
Please say page 23 of our supplemental financial package for additional details on quarterly debt maturities through the year 2010. 2009 debt maturities total only $198 million or 7% of our outstanding debt.
$50 million of the 209 maturities are secured notes, $46 million of which matures in the first quarter of 2009 but can be extended at our option to the first quarter of 2010. Based upon current interest rates, we plan on exercising this option.
Looking forward at our capital needs and liquidity position, assuming our only development spin relates to the $40 million required to complete the communities in our current development pipeline that all debt maturities are paid off with availability on our line, and the only proceeds from asset dispositions relate to the communities currently being marketed, results in our line of credit being fully available at the end of 2008, and have an approximately $400 million in availability at the end of 2009. We are committed to maintaining a strong balance sheet with sufficient liquidity to weather the current uncertainty in the credit markets.
Moving onto earnings guidance. We expect fourth quarter 2008 FFO of $0.85 to $0.89 per diluted share, resulting in full year 2008 FFO of $3.57 to $3.61 per diluted share.
The midpoint of our fourth quarter guidance of $0.87 per share is in line with our third quarter core results, after excluding the non-recurring impact of gains on the early retirement of debt and insurance cost related to Hurricane Ike from third quarter results. Our fourth quarter guidance is reflective of the following: A $0.02 per share projected increase in non-same store net operating income as the positive impact of a continued lease-up of seven communities in our development pipeline was only partially offset by NOI loss on third quarter dispositions.
A $0.005 per share projected increase in same store net operating income as our expected seasonal decline in property operating expenses is slightly greater than our expected decline in property revenues, due to the fourth quarter decline in average occupancy and lower levels of other property income in the fourth quarter due to a reduction in turnover and leasing activities. Full year 2008 same property NOI growth is now projected to be a negative 0.2%, to a negative 0.6%, revenue growth of 1.4% to 1.8%, an expense growth of 4.8% to 5.2%.
These two positives are being offset by a projected $0.02 per share increase in interest expense. This projected increase is primarily due to the fact that the average rate on our new 10-year $380 million Fannie facility of approximately 5% is higher than the average interest rate incurred in the third quarter on-line of credit balances and maturing mortgages paid off with the Fannie facility proceeds.
We expect total property supervision, fee and asset management, and G&A expenses for the fourth quarter to be inline with third quarter amounts. At this time I will open the call up to questions.
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Excluding these non-recurring items that were not included in our prior guidance, FFO for the third quarter would have been $51.2 million, or $0.87 per diluted share at the midpoint of our prior guidance range of $0.85 to $0.89 per share. Our FFO, excluding the non-recurring items, achieved the midpoint of our FFO guidance range for the third quarter of 2008, based on the following: Moderating same store revenue growth and slightly higher than anticipated same store operating expenses, as Keith just discussed, produced $1.3 million or $1.6 million unfavorable variance to our same store net operating income expectations for the third quarter.
This unfavorable variance was offset by a $400,000 favorable variance in net operating income from communities in our development pipeline as all communities under lease-up are progressing positively towards stabilization and a $700,000 favorable variance in general and administrative expenses due to lower salary and benefits, incentive compensation and legal expense. During the third quarter, we continued to make significant progress towards the execution of our 2008 disposition program.
During the quarter, we sold five operating assets to third parties, generating total proceeds of $115.6 million and resulting in a gain on sale of $65.6 million. This brings our year-to-date disposition volume of operating real estate assets up to approximately 2,400 units, which had an average age of 24 years, generating $140 million in proceeds.
The average cap rate on our 2008 dispositions was 6%. Using 2008 annualized NOI and CapEx per unit of $650 and the unlevered IRR was approximately 12%.
We are currently marketing for sales seven additional communities with an average age of over 20 years. Three of the communities are currently under contract but we do not expect any to close in 2008.
Additionally, in August, we sold Camden South Congress, a 253-unit community in Austin to the Camden multi-family value added fund for $4.2 million resulting in a gain of $1.8 million on the sale. And current with the purchase, the fund obtained a seven-year floating rate loan from Freddie Mac to finance 70% of the purchase price.
Turning to the capital markets, we and the rest of corporate America continue to navigate through the current credit crisis. We made significant progress during the quarter in further strengthening our balance sheet and liquidity position.
On September 24, we closed on a new $380 million Fannie Mae credit facility. The facility has a term of ten years, and was comprised of a $205 million, 5.625% fixed rate loan and a $175 million variable rate loan currently priced at 4.2%.
The proceeds were used for payment of all our remaining debt maturities for 2008 and to pay down amounts outstanding on $600 million unsecured line of credit. As of September 30, our liquidity position is sound.
With $29 million in cash on the balance sheet, no debt maturities for the remainder of 2008, and full availability on our $600 million unsecured line of credit, which after all extensions, matures in January of 2011. Additionally our dividends continue to be adequately covered by operating cash flows, and we have a significant unencumbered asset pool of approximately $4.3 billion which continues to be available for potential financing.
We also have the ability to replace a significant amount of unsecured debt with secured debt and still satisfy our financial covenants. Based upon our existing liquidity position, potential proceeds from asset sales, and our ability to incur additional secure debt, with Fanny and Freddy still very active in the multi-family space, we are very comfortable that we can meet our upcoming debt maturities.
Please say page 23 of our supplemental financial package for additional details on quarterly debt maturities through the year 2010. 2009 debt maturities total only $198 million or 7% of our outstanding debt.
$50 million of the 209 maturities are secured notes, $46 million of which matures in the first quarter of 2009 but can be extended at our option to the first quarter of 2010. Based upon current interest rates, we plan on exercising this option.
Looking forward at our capital needs and liquidity position, assuming our only development spin relates to the $40 million required to complete the communities in our current development pipeline that all debt maturities are paid off with availability on our line, and the only proceeds from asset dispositions relate to the communities currently being marketed, results in our line of credit being fully available at the end of 2008, and have an approximately $400 million in availability at the end of 2009. We are committed to maintaining a strong balance sheet with sufficient liquidity to weather the current uncertainty in the credit markets.
Moving onto earnings guidance. We expect fourth quarter 2008 FFO of $0.85 to $0.89 per diluted share, resulting in full year 2008 FFO of $3.57 to $3.61 per diluted share.
The midpoint of our fourth quarter guidance of $0.87 per share is in line with our third quarter core results, after excluding the non-recurring impact of gains on the early retirement of debt and insurance cost related to Hurricane Ike from third quarter results. Our fourth quarter guidance is reflective of the following: A $0.02 per share projected increase in non-same store net operating income as the positive impact of a continued lease-up of seven communities in our development pipeline was only partially offset by NOI loss on third quarter dispositions.
A $0.005 per share projected increase in same store net operating income as our expected seasonal decline in property operating expenses is slightly greater than our expected decline in property revenues, due to the fourth quarter decline in average occupancy and lower levels of other property income in the fourth quarter due to a reduction in turnover and leasing activities. Full year 2008 same property NOI growth is now projected to be a negative 0.2%, to a negative 0.6%, revenue growth of 1.4% to 1.8%, an expense growth of 4.8% to 5.2%.
These two positives are being offset by a projected $0.02 per share increase in interest expense. This projected increase is primarily due to the fact that the average rate on our new 10-year $380 million Fannie facility of approximately 5% is higher than the average interest rate incurred in the third quarter on-line of credit balances and maturing mortgages paid off with the Fannie facility proceeds.
We expect total property supervision, fee and asset management, and G&A expenses for the fourth quarter to be inline with third quarter amounts. At this time I will open the call up to questions.
Operator
(Operator Instructions). Our first question comes from David Bragg with Merrill Lynch.
Please go ahead.
David Bragg - Merrill Lynch
Hi, good morning.
Keith Olden
Good morning. David.
David Bragg - Merrill Lynch
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Dennis Steen
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David Bragg - Merrill Lynch
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Keith Olden
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So those would be the three that I would think would be most likely candidates to move, based on projected job losses from one category to the other. Going the other direction, in our northern Virginia market, we think it has seen pretty decent stabilization.
Our DC Metro has held up well, the Maryland has held up well. The big challenge has been northern Virginia.
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David Bragg - Merrill Lynch
Rick Campo
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From an underwriting perspective, we are definitely tightening our underwriting up, lowering growth rates and actually putting recession scenarios, the numbers that I of went through in my prepared remarks. We are using those from an underwriting perspective today.
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David Bragg - Merrill Lynch
Okay. So just generally speaking, the, NOI growth figures that, from Woodland that you indicated seem appropriate for 2009, 2010 and 2011 as you look forward for acquisitions?
Keith Olden
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David Bragg - Merrill Lynch
Okay. Thanks a lot.
Keith Olden
Sure.
Operator
Our next question will come from Dustin Pizzo from Banc of America Securities. Please go ahead.
Dustin Pizzo - Banc of America Securities
Hi, thanks. Good morning, everyone.
Keith Olden
Good morning.
Dustin Pizzo - Banc of America Securities
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Keith Olden
Yes.
Dustin Pizzo - Banc of America Securities
Okay.
Keith Olden
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Dustin Pizzo - Banc of America Securities
Yes.
Keith Olden
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Rick Campo
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Dustin Pizzo - Banc of America Securities
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Rick Campo
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Dustin Pizzo - Banc of America Securities
Right, just on more like core, core product.
Rick Campo
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Dustin Pizzo - Banc of America Securities
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Rick Campo
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Dustin Pizzo - Banc of America Securities
Okay. Thank you.
Rick Campo
You bet.
Operator
Our next question comes from Lou Taylor from Deutsche Bank. Please go ahead.
Lou Taylor - Deutsche Bank
Thanks. Good morning, guys.
Rick Campo
Good morning. .
Lou Taylor - Deutsche Bank
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Keith Olden
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Lou Taylor - Deutsche Bank
Okay. And then how about development in leasing, how is the pace going, and what are you having to do there from a pricing standpoint to maintain the leasing pace?
Keith Olden
It depends on where you are. The pace is going reasonably well.
We have seen some degradation in lease rates by virtue of having to provide a little more concession than we do, we do concessions in the development side of the house versus the stabilized operating side of the house that uses revenue management. We are doing well in terms of getting the projects leased up.
I think in our last call I talked about probably a degradation of 25 basis points at least from just slower rent side of the equation in the original yields.
Lou tailor - Deutsche Bank
And then how about just in terms of what are the markets or projects are the concessions running a little heavier than, say, some other regions?
Keith Olden
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Lou tailor - Deutsche Bank
Great. Thank you.
Operator
Our next question comes from Jay Habermann from Goldman Sachs. Please go ahead.
Jay Habermann - Goldman Sachs
Hi, guys. Good morning.
Jay Habermann here with [Slone] as well.
Rick Campo
Hi Jay.
Jay Habermann - Goldman Sachs
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Keith Olden
Well, Jay, I think the good news is that the starts continued to plummet. The second piece of it is that, in some of these markets you have seen real spikes new home sales.
I saw the other day that in California for the reporting period for one month, now one month is not a trend, but year-over-year the sales were actually up almost 100% from the same period a year ago, the bad news is, is that the price was off about 35% from the prior year.
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Rick Campo
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Jay Habermann - Goldman Sachs
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Dennis Steen
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Keith Olden
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Jay Habermann - Goldman Sachs
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Dennis Steen
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Keith Olden
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Jonathan Habermann - Goldman Sachs
Okay, great. Just last question.
You mentioned seven additional assets for sale. Is that something you look to expand upon or is that do you feel comfortable with the asset sales than obviously the liquidity measures that Dennis spoke to?
Rick Campo
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Jonathan Habermann - Goldman Sachs
Great. Thank you.
Operator
Our next question comes from Michelle Ko from UBS. Please go ahead.
Michelle Ko - UBS
Hi, good morning.
Keith Olden
Good morning.
Michelle Ko - UBS
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Keith Olden
We have got seen any in Dallas. We saw a little bit weakness relative, I mean, Austin has been an incredibly strong market for us for the last two-years.
But I would say that we did see a little bit of weakness in our numbers in Austin but again you are talking about from a level that has been really strong for us. The interesting thing is that on the job growth revisions that I was mentioning earlier and I was giving you the ones where there were negative job revisions, but there were also positive job revisions from the second quarter, and the biggest ones occurred in Dallas.
It went from a projected 20,000 to a projected now 37,000. Houston went from a projected 37 to a projected 41.
And Austin actually came down from a projected 16,000 to a projected 11.4, still a decent number, but less than the projection even in the second quarter.
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Rick Campo
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Michelle Ko - UBS
Okay. And also in terms of your revised same store revenue guidance for 2008, are you anticipating that the fourth quarter NOI growth is going to deteriorate from the third quarter?
Rick Campo
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Michelle Ko - UBS
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Dennis Steen
It actually is going to decline slightly because of decrease in occupancy and decrease in other income due to lower turn over and the fees relating to that turn over.
Michelle Ko - UBS
Okay, great. Thank you very much.
Operator
Our next question will come from Michael Bilerman from Citigroup. Please go ahead.
David Toti - Citigroup
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Keith Olden
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David Toti - Citigroup
Okay.
Keith Olden
But again, over in my initial comments, traffic in the third quarter year-over-year was down 7%.
David Toti - Citigroup
All right. Also could you provide a little bit of color with regard to discussions the board had relative to buying back that and your appetite for more, going forward?
Keith Olden
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David Toti - Citigroup
Okay. And then, did I miss a few comments on your expectations for the timing and the proceeds related to the land sales?
Keith Olden
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David Toti - Citigroup
Yes.
Keith Olden
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David Toti - Citigroup
Any rough idea of proceeds or amounts?
Keith Olden
About 10 million. If it happens, it will be about $10 million on our land dispositions.
Rick Campo
Just land or our total dispositions?
David Toti - Citigroup
Just the land.
Keith Olden
Just the land, yes, 10 million.
David Toti - Citigroup
Okay. And then lastly, Rick, can you give us a little bit of a view of your take on capital markets recovery?
How this would play out? And how you guys are underrating or underwriting interest rates going forward.
Rick Campo
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David Toti - Citigroup
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David Toti - Citigroup
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Operator
Our next question will come from Rob Stevenson from Fox-Pitt Kelton. Please go ahead.
Rob Stevenson - Fox-Pitt Kelton
Good morning, guys. Just to follow up on that last question.
What are the thoughts about, with the stock at a five-year low about accelerating the disposition program and buying back stock?
Keith Olden
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Rob Stevenson - Fox-Pitt Kelton
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Keith Olden
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And so that was a big win for National Multi Housing Council. And if you go back to that Bill, the homebuilders were really upset about it, because they got nothing out of the Bill.
They actually wanted to expand the ability of homebuilders to go back two years and take operating losses back more than two years, which would have been basically just the Treasury writing the homebuilders a check, and we were effective in lobbying and negotiating that away, and it was a big win for apartments and a loss for homebuilders.
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Rob Stevenson - Fox-Pitt Kelton
Okay. Thanks, guys.
Operator
Our next question will come from Rich Anderson from BMO Capital Markets. Please go ahead.
Rich Anderson - BMO Capital Markets
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Rick Campo
Bad?
Rich Anderson - BMO Capital Markets
Another song he wrote.
Rick Campo
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Rich Anderson - BMO Capital Markets
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Rich Anderson - BMO Capital Markets
Okay. The next question was going to be, sold at 6% cap rate this quarter, and I was going to ask, if you would be a buyer for good assets at 6%?
Rick Campo
No.
Rich Anderson - BMO Capital Markets
Okay. Then just a quick one, could you foresee anything in your future where you guys would have to reconsider your dividend policy and cut the dividend, noticing you are not getting paid for almost a 10% yield and conserving capital that way?
Rick Campo
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Rich Anderson - BMO Capital Markets
Okay. Great.
Thank you.
Operator
Our next question will come from Alexander Goldfab, a private investor, please go ahead.
Alexander Goldfab
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Keith Olden
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Alexander Goldfab
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Keith Olden
No.
Alexander Goldfab
Okay. Thank you.
Operator
Our next question will come from Karen Ford from KeyBanc Capital Markets. Please go ahead.
Karen Ford - KeyBanc Capital Markets
Just a couple quick ones. The $4 million cost savings, is that 2/3, 1/3 split good as far as splitting it between the G&A and the operating expense line items?
Keith Olden
No. Because the positions that were corporate would have been a higher average than salary than the on site.
Karen Ford - KeyBanc Capital Markets
Got it. So more heavily weighted towards G&A.
Keith Olden
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Karen Ford - KeyBanc Capital Markets
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Keith Olden
Okay.
Operator
Our next question will come from Michael Salinsky from RBC capital markets. Please go ahead.
Michael Salinsky - RBC Capital Markets
Good afternoon: Looking at your operating performance by market, it looks like Florida seemed to actually show some improvement just from a quarter-to-quarter basis. Was that a function of just using your comps or anything you switched gears doing down there or what are you seeing basically in that market?
Keith Olden
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Michael Salinsky - RBC Capital Markets
Okay. I was referring more towards Tampa and Orlando where it seem like the rate of negative growth, and both of those markets seemed to actually decelerate essentially from the first quarter.
Keith Olden
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Michael Salinsky - RBC Capital Markets
Okay. You talked about turn over.
Has your ability to push for insider renewals decelerated materially from last quarter?
Keith Olden
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Michael Salinsky - RBC Capital Markets
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Keith Olden
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Michael Salinsky - RBC Capital Markets
Okay. And finally, a question for you Keith, just given your guidance here, as far as the Eagles, can you specify, which song will be on the next conference call?
Keith Olden
No. But before the call I can get you a set list.
Rick Campo
Probably in the long run or something.
Michael Salinsky - RBC Capital Markets
Long run.
Keith Olden
Not Hotel California. Thanks.
Rick Campo
May be Witchy Woman.
Michael Salinsky - RBC Capital Markets
Thank you.
Rick Campo
Thank you.
Operator
Our next question will come from Paula Poskon from Robert W Baird. Please go ahead.
Paula Poskon - Robert W Baird
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Keith Olden
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Paula Poskon - Robert W Baird
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Keith Olden
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Paula Poskon - Robert W Baird
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Rick Campo
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Keith Olden
And we currently have availability at Dallas Station. So send them our way.
Paula Poskon - Robert W Baird
And just on this quarter, in particular, it looks like expenses were up at a higher rate than usual in the metro area. Is that attributable to something specific?
Keith Olden
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Paula Poskon - Robert W Baird
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Rick Campo
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Our take on that is that its really not all that different, because the, at the, at the margins, $70 or $65, $70 oil if we can stabilize in that range, still is very attractive for the Gulf operations, the on-shore operations, in terms of finding new, doing exploration and development. And obviously the refining piece of it, which is a huge component of the oil and gas industry in the Houston Metro area, I suppose at $2 gas is better than a $4 gas for them.
Paula Poskon - Robert W Baird
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Keith Olden
You bet.
Operator
Our next question will come from Haendel St. Juste from Green Street Advisors.
Please go ahead.
Haendel St. Juste - Green Street Advisors
Thanks, Keith. You actually took my question.
I was going to ask you; at what level do you begin to worry about jobs in Houston and Dallas with how oil has traded lately?
Keith Olden
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Haendel St. Juste - Green Street Advisors
Okay. Looking at those markets, the Dallas, the Houston, the Austin markets, how would you grade those markets to their near term outlook using your grading system?
Keith Olden
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Haendel St. Juste - Green Street Advisors
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Haendel St. Juste - Green Street Advisors
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Rick Campo
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Haendel St. Juste - Green Street Advisors
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Dennis Steen
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Haendel St. Juste - Green Street Advisors
Okay. Guys.
Thank you.
Rick Campo
Thank you, Del.
Operator
Our next question will come from Eileen See from Credit Suisse. Please go ahead.
Eileen See - Credit Suisse
Hi, thank you. What was the NOI decline in your weakest market in the last recession?
And second question, regarding your balance sheet structure are you planning to move toward a higher percentage of secured debt, as a percentage of your total debt and if credit market did you do (Inaudible) Would you move back to lowering the percent secured debt.
Dennis Steen
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Eileen See - Credit Suisse
Oh. My other question was, regarding the balance sheet structure, are you planning to move towards a higher percent of secured debt if the credit markets continue to be challenged?
And then conversely if credit markets improve, would you then move toward lowering the percent of secured debt?
Dennis Steen
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Eileen See - Credit Suisse
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Dennis Steen
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Eileen See - Credit Suisse
And then when credit markets improve would you move back towards lowering the percent of secured debt?.
Dennis Steen
Sure. I mean, based upon the differential and the actual spreads on those two products, but we would look on that based upon current market conditions.
Eileen See - Credit Suisse
Okay. Thank you.
Rick Campo
The answer to your first question. The worst market in the recession on a one year basis was Austin, Texas.
And it was down, NOI was down 16.3%. And Austin is really a good example, because what was happening in Austin in 2001, as you recall, it was the hotbed of the tech industry in Houston or in Texas.
They call Austin the silicone valley of Texas basically. You had Dell Computer there, you had Intel building a plant.
So what happened in Austin that supply peaked right in 2001, and then all of a sudden a tech bust hit and you had massive job losses, because of tech, and you had peak in the supply and then a big drop off of NOI during that period. So Austin was the worst market, and in the peak one year decline was Austin at 16%.
Eileen See - Credit Suisse
Do you think that any of your current markets could experience that big of a decline?
Keith Olden
No.
Eileen See - Credit Suisse
Okay. Thank you very much.
Keith Olden
Thank you.
Rick Campo
Certainly.
Keith Olden
Okay. Great.
That was the last call. So we appreciate the lengthy call, and all the questions, and support.
We will talk to you next quarter and see you there. Thanks.
Operator
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