May 1, 2015
Executives
Kimberly Callahan - Senior Vice President of Investor Relations Richard Campo - Chairman, Chief Executive Officer and Chairman of Executive Committee Keith Oden - President and Trust Manager Alexander Jessett - Chief Financial Officer and Treasurer
Analysts
Jordan Sadler - KeyBanc Capital Markets Vincent Chao - Deutsche Bank Drew Babine - Robert W. Baird Ian Weissman - Credit Suisse David Bragg - Green Street Advisors Thomas Lesnick - Capital One Securities Dan Oppenheim - Zelman & Associates Nick Joseph - Citigroup Jana Galan - Bank of America Merrill Lynch Nick Yulico - UBS John Ken BMO - Capital Markets Alex Goldfarb - Sandler O’Neill Rich Anderson - Mizuho Securities
Operator
Good morning, and welcome to the Camden Property Trust First Quarter 2015 Earnings Conference Call. All participants will be on a listen-only mode.
[Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator instruction] Please also 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.
Kimberly Callahan
Good morning and thank you for joining Camden’s First Quarter 2015 Earnings Conference Call. Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs.
These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC, and we encourage you to review them.
Any forward-looking statements made on today's call represent management's current opinions, and the company assumes no obligation to update or supplement these statements because of subsequent events. As a reminder, Camden's complete first quarter 2015 earnings release is available in the Investor Relations section of our Web site at camdenliving.com and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call.
Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, President; and Alex Jessett, Chief Financial Officer. As you probably know, another multifamily company is hosting their call at 1:00 p.m.
Eastern Time today, So we will try to be brief in our prepared remarks and complete the call within 1 hour. We ask that you limit your questions to two then rejoining the queue if you have other items to discuss.
If we are unable to speak with everyone in the queue today, we'll 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.
Richard Campo
Thanks, Kim. One of the things that I was looking for in 2015 was a decrease in the amount of time that I spend talking about the oil business.
But just like Bono I still haven’t found what I’m looking for. During the quarter we continued our capital recycling program.
We sold two older properties and started construction on Camden NoMa II in Washington D.C. We will continue to recycle capital taking advantage of the robust demand and attractive pricing for our properties.
Capital recycling improves our portfolio competitiveness, the quality and the average age. We’ve increased the average revenue per month from $1,040 per apartment four years ago to $1,440 apartment today.
Our development program continues to add value to our cash flow and to our net asset value. Camden’s geographic diversification continues to drive our strong revenue performance for the quarter and for the past four years.
We favor markets with pro business governments, strong job growth, strong population growth and with an educated and young work force. We are currently seeing a market rotation in our portfolio in 2015 with Huston slowing due ot the oil and gas economy.
I didn’t think I was going to talk about oil and gas but I probably will on this call; and increasing supply here in Huston. While markets like Phoenix, Atlanta and Sothern California are accelerating other markets are sort of holding their own as well.
So, at this point I really want to give a shot out to our team Camden for such a strong start for the year. I really appreciate everything they do, everyday, taking care of our customers and taking care of their Camden customers.
At this point I’ll turn the call over to Keith Oden.
Keith Oden
Thanks, Ric. We are off to a really good start for 2015 with the same store revenue growth of 4.6% for the first quarter which is virtually on top of last year’s first quarter revenue growth of 4.7%.
And from a historical perspective 4.6% revenue growth is really strong. As we review their quarterly results with our operating team last week.
All indication are that 2015 will be another very good year for Camden, for the first quarter same store average rents on new leases were up 1.3% and renewals were 6.3% and that compares to 1.8% on new leases and 6.7% on renewals last year. For April new leases were up 4% and renewals were up 6.5% and that compares favorably to 2.8% and 6.6% at this time last year.
Based on this early strength we point our guidance up by 25 basis points for the full year. May and June renewal offers have been sent out at roughly 7.5% increases.
Channel of our markets head year-over-year revenue growth of 5.5% or higher which interestingly is exactly the same number as in the first quarter of 2014. Our top five markets for quarterly revenue growth were Atlanta at 8.9%, Denver at 8.7%, Austin 6.7%, Dallas 6.2% and Phoenix at 6.1%.
Although Huston fell out of the top five, the growth for the quarter was still at respectable 3.9%. With the exception of Washington DC metro and Corpus Christi, all other Camden markets saw sequential revenue growth.
Overall our same store portfolio averaged 95.5% occupancy for the first quarter, the same as last year and down just 1/10th of a percent from the fourth quarter. Occupancy in April averaged 95.9% and we currently stand at 96% occupied portfolio wide.
Our budget contemplated rising occupancy rights into the second and third quarters. So the occupancy related revenue gains will likely moderate in future quarters.
Qualified traffic was strong across all of our markets and despite our aggressive renewal rate increases, our occupancy rates remained above planned. In part this reflects the second lowest net turnover rate we’ve ever reported at 43% versus 48% for the first quarter of 2014.
Our residence financial health remains strong and our current average rent as a percentage of household income stands at 17.1% versus 17.2% for the same period last year. 13.2% of our residents move out to purchase homes in the quarter and that compares to 13.7% in the first quarter of 2014 and 14.2% for the full year.
All of the home purchase numbers remain well below our long-term average of 18% of move outs to purchase homes. The home ownership rates reportedly fail again in the first quarter of this year to 63.7%, down from the peak of roughly 69%.
Finally, since our last conference call, we learned that we’re once again included in Fortune magazine’s List of 100 Places to Work. In fact we moved back into the top 10.
Eight straight years on the list, 5 times in the top 10, which is a rarity. In all the years fortune has compiled the list, only 10 companies have ever made it into the top 10, five or more times.
We claim this on behalf of all our brotherhood in REIT land and we give credit to our Camden team which has allowed us to achieve our vision of creating a great work place. I’ll turn the call over to Alex Jessett, Camden’s Chief Financial Officer.
Alexander Jessett
Thanks, Keith. Before I move on to our financial results, a brief update on our first quarter transactional activities.
During the quarter we sold two communities with an average age of 24 years for a total of $114 million, delivering to our shareholders an unleveraged internal rate of return of 10.8% over a 19 year hold period. These communities were sold at an average FFO yield of 6.4% and an average AFFO yield of 5.2% based on trailing 12 month NOI.
The difference between the FFO yield and the AFFO yield is $1,300 per door in actual CapEx. During the quarter completed construction at Camden La Frontera and Camden Lamar Heights, both in Auston, began leasing at Camden Chandler and Phoenix and Camden Southline in Charlotte and commenced construction at Camden NoMa Phase II in Washington DC.
Also during the quarter we finalized our third fund agreement with Texas teachers. Camden will have a 20% ownership in this new fund which has a total investment capacity of approximately $450 million based upon 70% leverage.
The mid-point of our current earnings guidance is not the same in any investments in this third fund in 2015. Moving on to financial results.
Last night, we reported funds from operations for the first quarter of 2015 of $98.5 million or $1.08 per share. These results of $1.8 million or $0.02 per share better than the $0.06 midpoint of our product guidance range.
This $0.02 per share positive variance primarily resulted from $1.1 million in better than expect operating performances from our communities and $500,000 in lower than expect corporate expenses. The $500,000 positive variance in corporate expenses is primarily driven by timing and lower employee compensation cost.
The $1.1 million is better than expected performance from our communities is a result of the following. Property revenues from our same store communities exceeded our forecast by $1.3 million as both rental and fee income were favorable to plan.
Our new Camden technology package with internet service which discussed last quarter is rolling out as scheduled and contributed approximately 30 basis points to our first quarter same store revenue growth in line with expectations. Property revenues from our consolidated non same store and developing communities exceeded our forecast by $500,000 as a result of better than expected occupancy at our student housing community and accelerated leasing at our developing communities.
Our Camden Boca Raton development is now 95% leased and our Camden La Frontera development is 96% leased, both ahead of schedule. The $1.8 million in better than anticipated property revenues from our consolidated communities was partially offset by $700,000 in higher than expected property tax expense which makes up approximately one third of our total operating cost.
Certain property tax refunds we anticipated receiving in the first quarter will now be received in the second quarter. And late in the first quarter we will see larger than anticipated tax valuation increases for our Houston and Austin communities and adjusted our tax accruals accordingly.
Property values continue to increase in all of our Texas markets and the tax assessors are taking notice. Our original operating budgets were based upon a 5.75% full year increase in property taxes which we now anticipate to be closer to 7%.
On page 14 of our supplemental package, we’ve provided a closer look at the components of our same store expense growth for the quarter. Excluding property taxes, the quarterly results from many of our expense line items included certain timing and nonrecurring events in current and prior quarters which were accounted for in our original budget.
We expect each subsequent quarter's total expense growth to be in a 4% to 5% range. For full year 2015, we anticipate larger than usual expense increases for taxes and utilities.
With the remaining expense categories averaging in an approximately 2.5% increase. In line with expectations, our new Camden technology package with internet service contributed approximately 70 basis points to our total first quarter same store expense growth and approximately 340 basis points to our total utility increase.
The combined revenue and expense component from this technology initiative added about 10 basis points to our total same store NOI growth for the quarter. Based upon our first quarter operating results, we’ve revised our 2015 same store guidance.
We now anticipate full year 2015 same store revenue growth to be between 4% and 5%, expense growth to be between 4.7% and 5.25%, and NOI growth to be between 3.5% and 5%. As compared to our prior guidance ranges, our revised revenue midpoint of 4.5% represents a 25 basis points improvement, our revised expense midpoint of 5% represents a 25 basis point increase and our revised NOI midpoint of 4.25% represents a 25 basis point improvement.
The expense increase is entirely driven by higher property taxes. We’ve also revised our full year 2015 FFO per share outlook.
We now anticipate 2015 FFO per share to be in the range of $4.40 to $4.56 versus our prior range of $4.36 to $4.56 representing a $0.02 per share increase to the prior midpoint primarily driven by our first quarter performance. Last night we also provided earnings guidance for the second quarter of 2015.
We expect FFO per share for the second quarter to be within the range of $1.08 to $1.12; and midpoint of $1.10 represents a $0.02 increase from the first quarter 2015. This $0.02 per share increase is primarily the result of the following: A $0.04 per share increase in FFO due to growth in property net operating income as a result of an approximate 2% or $0.03 per share expected sequential increase in same-store NOI as revenue growth from the combination of higher rental and fee income as we move into our peak leasing periods combined with the receipt of prior year tax refunds more than offsets our expected increase in other property expenses due to normal seasonal summer increases in utility and repair and maintenance costs.
And an approximate $0.01 per share increase from our non-same-store communities as the additional NOI contribution from our nine communities and lease-up will be partially offset by the lost NOI from our first quarter dispositions and lower occupancy at our student housing community in Corpus Christi, Texas. Occupancy declined significantly from May through August at this community.
The growth in our property net operating income is being partially offset by a $0.02 per share decrease in FFO due to higher property supervision and general and administrative expenses resulting from delayed first quarter corporate overhead costs and the timing of our annual trust manager compensation cost. Finally, our capital position remains very strong.
We finished the quarter with a $174 million of cash on hand, no amounts outstanding under our $500 million unsecured line of credit and a net debt to EBITDA ratio of 5.3 times. At this time, we will open up the call to questions.
Operator
Thank you. We will now begin the question and answer session.
[Operator Instructions] At this time, we will pause momentarily to assemble our roster. And our first question comes from Nick Joseph of Citigroup.
Please go ahead.
Nick Joseph
Two questions on Houston actually. On the last call you mentioned that you thought job growth to be at 50,000 to 60,000 and that guidance for same-store revenue would be about 3.4%.
Do you have updates to either of those or are you still tracking towards that?
Richard Campo
So the data provider that we rely most heavily on is Ron Whitten and he still got Houston job growth numbers at about 63,000 for the year. I would tell you that that his 63 is a soft 63 based on what he’s seeing right now preliminarily.
He has not redone his forecast number, so it’s still, so his official forecast is still in the 63,000 range. As you know one of the challenges is that the bid ask spread on job growth in Houston for 2015 runs all the way from essentially 0 to the high end of the range which is still in the 60,000 range.
So I think that’s the thing everybody is still trying to get their hands around. And we’ll just have to see as it plays out through the year.
Obviously the first quarter was weak not only in Houston, but weak all across the entire country in terms of job growth, so we’ll have to see how that pans out. We’ve not changed our forecast for the full year in terms of revenue growth for Houston.
We’re still in the mid 3s. We still think that’s achievable, and the one thing that could make that slide if the 0 turns out to be the case and not something closer to the 50,000 to 60,000 jobs that we’d forecast last quarter then obviously that that will come into play in the third and fourth quarter this year.
But at this point, we still think that 3.5 is the right number for the year.
Nick Joseph
And I know you mentioned the values are increasing in all your Texas markets. Can you talk about cap rates in the transaction market in Houston specifically?
Richard Campo
Sure, cap rates continue to be very-very sticky and low here in Houston. The thing that the real change or so, there’s been really no change in cap rates in Houston.
What’s happened is instead of 15 aggressive to 20 aggressive bidders, now you have 8 to 10 which say you have fewer but still enough liquidity and enough activity on the bid side to keep prices very high. And Alex mentioned our fund, 450 million in acquisitions that we are trying to do for our fund, and we have been beat on a number of Houston transactions where we just couldn’t stomach the price and when you get down to 4.5 cap rate on a really high quality property in Houston, that’s happening every day here.
I wouldn’t say that if you have had lower quality properties that don’t have a good rehab story or they’re just in core locations, you probably have lot less bid for that kind of property. But any kind of property that has quality like Camden's or anything in the B plus A category is still a voracious bid and a high price.
Operator
Our next question comes from Jana Galan of Bank of America Merrill Lynch. Please go ahead.
Jana Galan
I'm just hoping if you could provide an update on D.C, it's been -- 2014, you are holding up better than peers, but this quarter you were a little bit weaker?
Richard Campo
Yeah, we had a soar of revenue, perhaps this year -- for the quarter was down one-tenth of percent. Interestingly enough that’s the first negative revenue number that we’ve had in D.C.
since the downturn. So our portfolio did hold up much better than many of our peers, whom, I think all of which reported in a couple of negative quarters that in last year.
So we held up a little better than the peers, but yeah we did have a negative one-tenth. But really that was basically inline with our budget for the first quarter of 2015.
And we still think that we’ll be positive on revenues by the end of 2015. It’s not going to be a big number, but we think it’s in the 1% to 2% range for the year and we still think that’s doable.
So my update would be for D.C., it’s really as we expected it to be and we still expect to positive revenue contribution from D.C. for the full year.
Jana Galan
And then on your communities and lease-up, it has been successful and also it’s in high supply market. So I was just curious, if you’re seeing competitors not too much in terms of concessions or how you’re having so much success there?
Richard Campo
Sure. The new development is still very robust around the country.
And when you think about concessions, it just depends on which market you’re in and it depends on the sub-market. Most merchant builders are very quick to pull the trigger on free rent.
And the logic is you’ve got an empty building, so free rent is easy to give since all your units are not paying rent the day you open. So most people put in, including Camden at least a month free concession on your lease-ups.
And so we have some markets for example that like in Boca, for example we lease-up Boca much faster than where thought. We gave very few concessions and in the early part of the cycle they’re really no concessions to be had.
Today, they range anywhere from two weeks free or look and lease kind of thing to, in some markets a month free to six weeks free. It just depends on the sub-market.
But it’s fairly typical and even with those kinds of concessions we’re leasing up at generally faster than we anticipated. But there are concessions in the market just because of the nature of having an empty building that you need to fill in up.
Operator
Our next question comes from Nick Yulico of UBS. Please go ahead.
Nick Yulico
Just going back to new sales, hoping you could give a little bit more detail on where renewals and new leases or trending so far in the second quarter?
Richard Campo
Yes. So for April and Houston the new leases came in at about 1.7% up, the renewals came in at about 4%.
So the weighted average or those two is just short of 3%. That trend is continued.
It actually got a little better on the renewals that have been sent out. They have been sent out in the 4.5% to 5% range out into May and June.
So slight improvement from the first quarter, but I mean keep in mind that when we gave our forecast for Houston in our guidance call, in last quarter, we graded Houston as a B market and declining. And so I think that the market is kind of rolling out exactly as we had anticipated in our guidance.
So it’s stable, we’re continuing to push occupancy. We’ve got occupancy in Houston.
The current occupancies is about 96%, which is higher than what we would normally see this time in a year. It tells me that if 96% occupied and still able to get 2% to 3% increases on new leases that we are not under a whole lot of stress from an operating standpoint.
But it’s early in the year and we will just have to see how the rest of the year plays out.
Nick Yulico
And just one other follow up is do you have any visibility at on how the new graduate markets work and kids coming out of college, getting jobs in Huston. It seem that to be starting to work at apartments, any insight on whether any of these bigger energy firms are starting to tell their [indiscernible] don’t bother coming or any insight on that would be helpful.
Richard Campo
Sure. The new graduates are not as robust as they were in terms of, say if you go back a year clearly because the big energy was hiring really big.
I think what’s happening now is they are not pulling back offers or anything like that. And one of the most important news at least from my family was my daughter got graduated from University of Huston with a Masters in Geology in December, and actually got a job with an Oil Field Services company, you can imagine that.
And so what’s happening in having the -- I have a lot of conversations with oil & gas people here and whether not, they are not hiring as many young graduates. What they are doing is they are completely not hiring.
But what often happens -- and I had a conversation with one of my people at big integrated oil that I actually went to school with, and he is likely to get a retirement package and basically he told me was that they are going to give him a retirement package and then they'll hire two younger people and save the third of his total comp. And that generally is what happens in these kinds of situations as you end up with more younger and less older.
And if you think about the economy and the jobs we create since the downturn, somewhere in the tune of the 60% of all the jobs have gone to people 30 to 40 years and younger. So I think that trend is probably going to happen here in energy as well or where you’ll see sort of older people getting packages and younger people getting hired.
So I think it’s pretty good right now. I was at EU of age event this week and I didn’t hear anybody talking about people not getting jobs.
So I think there is still a fairly robust economy around the petrochemical business, the medical business and the Port.
Operator
And our next question comes from John Ken [ph] of BMO Capital Markets. Please go ahead.
John Ken
If I can quote another YouTube song, that looks like you are running to stand still in taxes regarding the higher property taxes. So how did you comfortable that this won’t happen again in 2016?
Richard Campo
That’s really one of the challenges we have here for sure. And of course, our State legislature is in session and they meet every two years because they don’t want to meet every year because they might do something stupid.
So they are actually talking about a $3 billion property tax cut in the State right now. The challenge you have with where we are on property taxes here is that during the downturn we pounded on the values big times and got them down pretty aggressively and now we are on the way up.
I think that the good news is that we had substantial increases and the question will be can we fight those increases effectively. We generally have been very effective at that and one of the things I think that you have to remember on property taxes is that it’s not so much about, is of property tax evaluation exactly what the current market value is your property.
And is there a fairness of test which means that if there are 4 properties in a line and your property happens to be assessed at a higher value as the one next to you. You can argue even though your value may not be as right at your net asset value of that property.
You can argue for property tax reduction on a fairness basis. So with that said yes, we’re at risk about with property taxes in Texas.
But on the other hand we’ve been a fairly good battler in that area and hopefully we’ll be able to do that again in ’16.
John Ken
Okay, thanks for the color. On your balance sheet you’ve been very consistent in using a very modest amount of floating rate deck compared to your peers.
Is this something that you can contemplate increasing and in particular how do you fund the $250 million maturity this year?
Richard Campo
Yes, so obviously we do look at floating rate deck quite a bit. We think for us probably about 20% is the maximum amount that we would like to go up to.
Obviously we are under that number right now. So we do think we’d have the capacity to take on some more float We do have a $250 million bond maturity in June of this year, but as I said earlier, we’ve got full capacity underneath our $500 million line of credit and we’re sitting on about $174 million worth of cash.
So we’ve got a lot of options when it comes to how do we handle that maturity. On the flip side of that equation with interest rates as low as they are today, when you lock in a ten year unsecured bond at 3.25% or 3.5%, five years from now that might look really-really good.
So that’s the sort of the push pull, right. You can really feast on the incredibly low rates.
But on the other hand if you can lock up long term debt at pretty historical lows there’s some compelling arguments about that as well.
Operator
And our next question comes from Alex Goldfarb of Sandler O’Neill. Please go ahead.
Alex Goldfarb
Just a few quick questions. First on Houston.
As we watch the oil price bounce around, obviously had a low like close to 40 and now it’s up in the mid 50s. Can you just help us understand how all your friends in the oil business view that?
I mean they see a lot more long term than finance firms in the operator business. But still it would seem like people are breathing a much better sigh of relief now that oil has rebounded up versus the lows that it was.
But just curious if that’s changed any of the sort of talking the chatter among your executive peers?
Richard Campo
The interesting part of what’s going on is that a lot of people thought there’d be more sort of carnage in that space, right. You’d have more M&A, you’d have -- they actually in the Houston Chronicle publisher what they called a death list, and it’s the companies that are on the edge that levered up and we’re blowing and going and using short term debt, you know faster business and didn’t have positive cash flow.
And so they made this list and one of the top companies on that list that and I think their stock price collapsed to about a $1 a share and their bonds were trading at $0.30 on the dollar. Well that company about a month ago got a $1.5 billion infusion on a secured basis to take out their challenges.
And now they’re sitting raising their stock quadrupled went from like a $1 to $4 or something like that. And so what’s happened here is that there’s massive amount of capital that has been accumulative and that’s sitting on the sidelines waiting for the big drop, almost like we were in 2009 and ’10.
And then the big drop or the big value or the free lunch if you will never came for real-estate obviously and it may not come for oil and gas because there’s so much liquidity and people are getting deals done. So there’s not a lot of carnage there.
And the people that have low debt and prepared for the cycle are very excited about having opportunities to deploy capital in a lower cost environment. And so on the one hand people talk about great things happening, being able to buy things, but on the other hand there’s not a lot for sale.
We do have these two big mergers that are going on right now with Shell and the BG Group and you also have Halliburton and Becker Hughes. And so there are going to be some divestitures around that and in the discussions that I’ve heard with some of those people that are close to it.
They said they have buyers lined up to buy their assets and it’s going to be very robust pricing. Probably a lot less robust if it was a year ago when the price of oil was $100.
So I think part of the issue is there's just a huge amount of liquidity and capital so there’s no capital shortage in that. Therefore you don’t have a lot of wounded companies out there rather just trying to -- others are really trying to make a deal.
Alex Goldfarb
And then the second question is on the property tax, you discussed Texas a bit, but broader when you think about Florida and some of the other heavy property tax states, how much of a mark do you think still exists in your portfolio between where as far as the big true-ups? Do you expect still a lot more or in your view most of the assessors have taken your properties to market?
Richard Campo
Obviously we evaluate that constantly. I think we have a very good team that contest all of these taxes on a regular basis certainly tax assessors has been getting more aggressive in some of these market but Florida and particularly we’ve done a very pretty good job of keeping them in check and it’s not a market that we look at and think there is a tremendous amount of risk.
Keith Oden
That’s like a hard question to really answer because the problem is that net asset value or the value of the property is interesting in a discussion but not what really drives the tax discussion, what drives it is the relative valuations of the properties in the market place you’re comparing yours with. So, most of the properties are probably substantially under their market value, the question is how much are you under the market value compared to your competitors gross history and that’s where you negotiate.
Alex Goldfarb
I mean you’re not obviously giving 2016 guidance but if you’re raising the impact of real estate taxes this year, we saw the same thing with post where they’ve been hit with that successive years. Is this something you think is going to be an issue over the next few years or your view this one time pressure is more this year and otherwise it’s just normal property tax.
Richard Campo
Since property tax is third of our operating cost, we are vigilant and we are focused on this every single day with our team in the field, assessors want to have values going up. The good news is we get hit sort of regionally, what has happened has right now in Texas is getting smacked and the couple of years ago Florida was and so, it’s always going to be something that we’re worried whether it’s above trend, next year it’s likely to be above its long term trend or three but we’ll be seven, we hope not but I’m not sure what the numbers will look like in ’16.
The key is making sure that you constantly on and you have the best people focused on it and we have that.
Operator
Our next question comes from Rich Anderson of Mizuho Securities. Please go ahead.
Rich Anderson
So Ric, is there one care right now about West Texas being up 11% this year up 40% from the trough is that having any impact on business in Houston or people who have kind of letting that that off for the time being.
Richard Campo
It don’t have an impact because when you think about companies that have debt and their debt is tied to their value of their production and the value of the assets in the ground, it’s important to them because they have more value when they starting marking their assets to market and they compare to their debt. So, it is a big deal to have it up 10 or 11 bucks and I think the biggest issue that most people they all feel want, they just need less volatility.
They want to make sure if they get $60 oil or $58 they can live with that as long as they believe that it’s not going to $30.
Keith Oden
I think just to add to that the stack is probably more directly impacting and impactful, is not necessarily is the gyrations in the price of west Texas crude; it’s the drilling rate count. And so that is probably a more meaningful thing to watch in terms of directional impact on the overall economy and we’re down at 932 rigs which is about a half of what we were a year ago but the rate of decline in rig count has slowed pretty dramatically.
I think the last decline was 20 rigs or so and at one point they were dropping 75 to 80 rigs on a weekly basis. So, I think watching the rig count over the next quarter or two is probably more telling to what the prognoses or the oil patch in Taxes is going to be throughout 2015 and in 2016, assuming that oil stays approximately in some band around $45 to $60 a barrel the more interesting thing to watch is probably rig count.
Rich Anderson
Because of it’s forward looking in?
Keith Oden
Well, it’s also because it directly impact it’s eployment and when the rig stops drilling those are great quarter in the wall street generally other day that basically said something about paraphrase that, the probability that you lose your job is directly related to the proximity of your job to an oil rig. So, I think there is a lot of truth in that.
So, when you think about all the layoffs that have been announced today -- not all of them but substantially all of the layoffs that have been announced in oil field services companies and the majors have been in the oil patch and oil field workers and that those people are not in Houston now. Ultimately there is flow through you can’t have a 50% drop in active rigs and not have the derivative impact on Houston and where we are and finding out how big that’s going to be, I think that’s what’s causing the bid spread of zero jobs to 60,000.
Rich Anderson
The decline and rig also is driving force to pushing oil prices up?
Richard Campo
It is, but it’s less than you then what you might think because you’re talking about drilling rigs, dropping 50 overall week over week basis. That production does come on pretty quickly, but it’s in the scheme World Oil Supply, it’s a drop.
Keith Oden
The other challenge with supply dropping is at the frac wells both in Texas and in North Dakota. Once they drill and they deplete really fast, something like 45% to 50% in the first year, which means that they bring that oil out really fast.
So you still have even though the rig count drops, you still have production ramping up, because you’re bringing that oil out really fast. I have heard anecdotally that people are now drilling wells, testing them out and then copying them waiting for lower oil prices rather than brining the oil out selling it and then having to story in Oklahoma.
So that’s been an interesting situation now or they drilling company.
Richard Campo
The tankers are waiting offshore to get a better price.
Rich Anderson
And then the second question is I’m assuming the impact, the real immediate impact of all this and has been is on the office sector, and assuming someone who loses their job doesn’t call Ric Campo and given the bad news I’m leaving my apartment, I think that’s more of extended impact on your business and the multi-family business. So if this kind of stay that as well and 2016 is a decline from 2015 and you talked about recycling capital.
Why won’t you -- and you have talked about a bit in Houston. So why wouldn’t you be more inclined to be a seller in Houston today before that 2016 impact?
Richard Campo
I think, it’s all about, at the margins, we’ve sold out sets in Houston, it doesn’t make sense to me really to sale the assets we have here. When we look at our asset pricing model and we rank our assets and we rank which ones in our portfolio, the right ones to sale.
Houston is not even in the top, in the bottom third in terms of sort of return the forward return on invested capital growth rate. And so to me, I look at our portfolio globally and I don’t react to and try to tie in market, because we’re going to be long real-estate, a 100% of the time and I want to be long the right properties in the markets that we are going to be in long-term and we want to sell the properties that are going to grow slower on a return on invested capital and that is on real cash flow on AFFO and we have other assets in our portfolio that are just higher priority sales.
Operator
And our next question comes from Jordan Sadler of KeyBanc Capital Markets. Please go ahead.
Jordan Sadler
It’s been a while since you guys have been involved in the M&A game. And but obviously have had an appetite historically.
I’m curious where we are in the cycle and just the opportunities that seem to be out there. What sort of your current latest thinking on the environment?
Richard Campo
I think its fun to watch. But we having involved in M&A and we focused, when I think about buying a company or doing M&A, it’s all about, is it a strategic opportunity that improves our ability, our long-term growth in our NAV, in our cash flow or and that’s one type.
And then the other would be tactical which doesn’t really change your world, but it improves the quality of the portfolio, the growth rate going forward and things like that. As long if you could do it leverage neutral and we did it on a way where it was not significantly dilutive.
Then right, let’s do it, I think the problem that you have today or the challenge with company to company M&A is when you look at our stock price, our currency isn’t a great currency right now to swap somebody else given that we’re trading a substantially below our net asset value. So that’s kind of hard to go by somebody and premium at NAV and then give more stock and discount NAV that make a lot of sense to me.
So I mean when you get down to the whole M&A issue, M&A tends to be socially driven and not necessarily because somebody wants to sell so, I think there is lot of social issues around it, we have been successful in the past and everything we’ve ever done is been strategic that has created value for Camden and shareholder long term and we saw something like that and it worked financially great, but I don’t see a lot of it and what we have like nine companies left, 35 since over the last 20 years.
Jordan Sadler
Getting slimmer.
Richard Campo
It is.
Unidentified Analyst
Hi guys, this is [indiscernible] you’ve talked in the past about construction cost decline across D.C. and potentially Houston and you starting new project in D.C.
this quarter. Would you guys consider any starts in Houston or is that stabled for now?
Richard Campo
We have our construction starting in Houston we did last year, which was towards the last year, which is McGowen Station and we do think that construction cost is going to coming down in Houston. McGowen Station project has a fairly long lead in terms of been able to go to start up building, we’re building a 400 space parking garage and a Camphor Park [ph] 3 acre park adjacent to property which will take us probably into the fall to get to the point where we’re actually going vertical on our building.
So, we are going really slow on our buyout on our job and hopefully we’ll be in a situation where we can get some favorable pricing later in the fall and towards the end of the year but by due thing construction costs are going to come down here. When you look at office building, for example there is 17 million square feet under construction right now and they’re very likely won’t be a lot of spec with the construction going forward a lot of that staff, 4.5 million square feet at the 2017 is Exxon’s new facility up in North Huston and that’s almost finished.
So, what’s happening is the construction workers that are working on those jobs and a construction contractor are looking on the horizons going where is my pipeline and the pipeline is going to shrink pretty dramatically, I think the same think is going to happen with multifamily here in Houston. If you don’t have your project financed today it’s highly likely that you’re not going to get finance.
So, what’s the pipeline that we see today, what coming online in 2015 and 2016 you’re going to probably see a significant drop at least 50% drop from ’16 to ’17. And that should have the downward pressure on construction cost when construction companies today are at premium margins and may be get back to more normal margins.
Unidentified Analyst
So, just to be clear would you start another one in Houston this year?
Richard Campo
Probably not, we have one that we started and I think we have two tracks of land in downtown, the downtown market is really robust and doing well but even if we wanted to start this year we really couldn’t because when I finish with plans and what it could be a ’16 start but we watch to market and make sure that our time is right on that.
Operator
And our next question comes from Vincent Chao of Deutsche Bank. Please go ahead.
Vincent Chao
Just want to stick with Houston here, if we’re at 3:9 today and it sounds like 3:5 is sort of the expectation for the year, I guess. Would you expect the number two to end the year at lowest level or do you think we’ll bottom out sometime in 2015 and potentially have the opportunity to see that go up again in 2016 or towards the end of 2015.
Richard Campo
My guess is that you would draw straight line from 3:9 down to mathematical average of 3:4 because the timing of the supply than the wildcard on that forecast is gets back to the job, the jobs number whether it’s the bearish into the spectrum or more towards the bullish into the spectrum. But, what we are seeing right now and what’s happening in Houston is completely in line with the plan that we laid out because when we laid our plan out the 22,000 apartments they’re going to be delivered in 2015 we’re 100% notable.
Now, there is been a little bit of shifting in timing of the deliveries of those apartments just because contractors haven’t had enough labors to get the units turned but they’re coming and it’s pretty easy to identify where they are and where the impacts going to be we did that on a submarket by submarket basis around our communities and we think we have properly anticipated and got a fence surround the supplying impact and then you are left with the question of demand and job growth.
Vincent Chao
Okay, that makes sense. Maybe just another question a little bit of different slant here but obviously your long term positive on Huston, you’ve got a little bit… you got some additional land tracks that you mentioned but I was just wondering if you’ve made comments that cap rates really haven’t moved on income producing.
I was just wondering if land prices have changed at all and that you have had any interest in picking up some additional land in Huston?
Richard Campo
Land prices have a change some they went from white hot to too hot and they were opportunities in a big land, people selling land at a big discount, we might look at that, you haven’t seen any bargains or anybody in trouble. You have a classic situation here where people expect you have the job losses and everything they talk about Huston and then they go let’s go find some value and guess what there is no value any more, value is defined.
I got to find somebody who is down on the luck and willing to sell me a property of $0.50 on the $1, property is that land for example that was going for selling numbers like $200 a foot and up from a $100 a foot, now it’s $150 a foot. But it’s still pretty high and it’s still in order for that land to be utilized properly in a development you still have to build the very high end product very dense.
So there really is not a lot of value opportunity there are guys who are definitely looking, who are trying to find some of those things. But we still see land that was under contract closing at really high prices here.
So there are really not a lot of great value, we are searching for it.
Operator
Our next question comes from the Drew Babine of Robert W. Baird.
Please go ahead.
Drew Babine
Good question on the way supply is going to shaping up and ’17 for DC based on what looking at it looks like things trail off little bit in ’16, but your rumblings and there maybe some supply coming in ’17. I was hoping you could talk about its early to kind of pin point number, but where that supply maybe coming on especially relative Camden?
Richard Campo
Our forecast for new supply in DC and this year is about 11,000 apartments and we’ve got it coming down to about 7,000 next year and then if the number are at the ’17 with too much less reliable are also around 7,500. If you get the kind of job growth that we are currently forecasting for DC metro area which is in 40,000 to 50,000 apartments, 11,000 of new supply is not a really troublesome number.
If you get the 40,000 to 50,000 jobs and then if you look out and to the ’16 and ’17 time frame unless something changes pretty quickly that ’16 number of 7,500 apartment is going to be fairly reliable and then in that case for equilibrium you need to create another 30,000-35,000 in DC metro and I certainly hope that would be something that a number that we could surpass if we get some kind of recovery in the DC metro area 30,000 to 40,000 jobs in DC metro area still fairly anemic relative to the long-term employment growth in that whole region. So I think the wildcard is still the only employment side of things.
Right now, completions what [talk/thought] they would be fairly manageable in DC metro.
Drew Babine
Any indication of this point in terms of submarket within DC metro and where the supply is more likely to be concentrated?
Richard Campo
Well, that you’ve got a fair amount of construction going on right now on the District. But that’s historically has been the area, that’s been the strongest in terms of bringing in new people to live in District where people want to live.
I guess the whole host of reasons and then the historical rent growth has been better there, when we look at DC Metro and we kind of look at it property community by community when we account with our game plan for 2015 with our operating teams, it’s really not submarket related in terms of Northern Virginia, Maryland versus DC proper it’s really submarket driven with regard to new supply. So if you have a community that’s got two new lease-ups that are considered comparable and in the same sub-market that community is going to struggle with the lease-up.
It doesn’t really matter whether it’s, what part of Northern Virginia and what part D.C. Metro is in.
So it’s more matter of find out with this new supply is coming online and that is likely to be where the pressure is going to be, it certainly been that case for our portfolio.
Operator
And our next question comes from Ian Weissman of Credit Suisse. Please go ahead.
Unidentified Analyst
Hi guys, this is Chris for Ian. I’m just curious if you could update us on the shadow pipeline NoMa to put $115 million and to your 300 million guidance and it sounds like you’ve Shady Grove and content logistic 2016.
Are you kind of done with starts for the year or do you think that -- come online this year, I’ll start? Thanks.
Richard Campo
Okay, on NoMa, there are definitely two to three other projects here including other one base project, which is right across the street from us. And the NoMa is an interesting case, because NoMa you think about in last three years ago NoMa was plays that was kind of nowhere and also said now you have a robust workable area very, very high demand and we leased up NoMa Phase I ahead of schedule and ahead of budget on rents and returns.
And so we really like the Phase II investment and we like NoMa long-term. I think it’s going to be fine there with the number of apartments that are coming up, it’s not over committed or over, there is not too much to absorb, I don’t think.
Especially when some of the additional improvements are done in the NoMa, it’s very good.
Keith Oden
And just to clarify Shady Grove has not been shelf as a 2015 start, I think that was the second --.
Richard Campo
Yes the second question was Shady Grove. Shady Grove is start for 2015.
Keith Oden
And if you add those two together that’s roughly $200 million and that’s kind of mid one of our guidance range of 100 to 300 starts.
Richard Campo
And the Atlanta deal is probably a 16 start not a 15 start. And if you look at our pipeline on page 17, you can see there are four in the pipeline and Shady Grove is one of the other three are likely to be either end of sometime in 16 or even 17 depending on how we feel about Houston.
Unidentified Analyst
Got it. I think I misunderstood your last comments.
So just going back to D.C. quickly, you talked about how supply and different sub-markets effects rent growth.
But just want to talk about what you’re actually seeing on the ground right now referred some of the peers that the CBD is actually kind of catching up with the suburban markets. What are you seen in the different sub-markets of Washington DC?
Richard Campo
So actually in the, since the end of the quarter, I think I gave you the April new lease from renewal numbers for D.C. which is really pretty good.
Where 2.3% on new leases, 4.3% on renewals and that’s weighted average of about 3.2% and that was for actual in April. Our renewal offers that have gone out in the entire D.C.
Metro area that go out into through May and June are actually have gone out at about 4.6%. So that and I also, I think I share with you occupancy rate was it currently it’s currently a little bit above 96%.
So we were 94.7% occupied in the first quarter, there are a whole lot of reasons for that obviously whether was -- D.C. But notwithstanding that we’re back at 96% occupied and our new lease and renewal numbers are stronger now than they were in the first quarter.
So all that sounds a lot more constructed to me. And I think that’s why we still feel despite one-tenths down in the first quarter on revenue that by the end of the year, we’re going to have a positive revenue number for D.C.
Metro.
Operator
And our next question comes from David Segal of Green Street Advisors. Please go ahead.
Unidentified Analyst
Hi [indiscernible] with the quick one before David goes. The question is just falling up on your comments that you trade, you think your stock is that a substantial discount NAV.
And you seen have a lot more conviction in outlook for asset values in Houston and the public market. So why not repurchase shares right now?
Richard Campo
We’ve always said that we are we would repurchase our shares if they were to substantial discount for a reasonable period of time. The challenge that we've had this year is that the volatility has been kind of wild, right?
You know $82 to $72 to $79 to wherever it is today and the challenge. So to me, the issue is we need to sell assets and then buy the stock.
And if we're going to do that and we need to make sure that it's -- that we have a period of time to be able to do then and we just haven’t seen that opportunity. It's been so volatile.
But if we have a period of time where we have the ability to sell assets and buy the stock and it has substantial discount, we'll do that.
Unidentified Analyst
Okay and based on your past experience doing this and we all know you put an active buyer___ of your on stock in the past, how much time does that usually take?
Richard Campo
Well it's got to be more than a week or two. And that's kind of what we're seeing or may be a month.
And so to me the challenge -- the other challenge you have is, you have these long blackout periods, where you can't buy either right? Somebody will say aren't you buying your stock right now and we have only a certain windows and time that we can actually do that with black out periods and so to me it's got to be persistent.
It's got to be more than a month.
Unidentified Analyst
And is it fair to assume that given the significantly better value seen in your stock than in the transaction market you've put in any of your acquisition plans on hold for now?
Richard Campo
Well, we have $450 million to spend the fund. So no, we haven't put our acquisitions from the fund on hold.
If you look at our history the last three years we have net seller of property and we the question will be whether we are going to continue to be a net seller property. So, clearly to me the thing that's attractive to trading assets in the capital recycling part is that we've been able to trade older 20 plus year old assets for newer asset to the very, very low spread to negative spread to real cash flow or AFFO and to me that is a good thing to do in an environment like this.
Generally the spread between older assets and newer assets has been very wide and we're really historically tight spread there. So we will continue to try to turn those assets that way, increase the quality of the portfolio, raise the rents, increase the or decrease the average age and so we may do some of that as well.
But that wouldn't preclude us if we have the opportunity with a reasonable amount of time just to sell assets by stock either.
Unidentified Analyst
Great. This is David.
Can you talk about the difference in performance between your urban Houston assets and some of your suburban Houston assets. It looks like the higher price more of over located properties has had so are rent growth.
And I'm curious if you could just kind of talk about that.
Richard Campo
Its interesting that something that we do look at and if you go back over a 4 year time frame the difference in the As and Bs is rounding. There are points in time and right now is one that the -- there is probably more pressure on the urban stuff, but I don’t think that's a function of product type or mindset of the renter or the renter -- the choice that they're making.
I think it’s as simple as -- that’s also where most of the new supplies coming online. So, if you -- my thesis is that it's always more instructive to look at where the -- in a market that's growing supply look where the new supply is and that’s likely to be where you're going to get an impact of this proportionate impact on the ability of raised rents.
It doesn’t mean that people's attitudes have changed where they want to live. It just means there is a ton more under construction and being delivered in the urban areas, which is flowing through in some cases to our urban communities.
So I don't think it's -- I think I would say that's the distinction in the market place. It's just more supply.
Keith Oden
Yes, it’s a cycle. Today clearly the urban properties are under more pressure than the suburban properties.
So, said very simply the As are definitely going to outperform the Bs. And that’s exactly what part of the -- what happens in this cycle.
Richard Campo
That’s why we also have a diversified product base within our portfolio of a fair amount of Bs and As we like to keep them that way. So that we have a balance of that -- we're all sitting all in the urban core and then when the market gets to where it is today we end up suffering more than having to balance portfolio.
Unidentified Analyst
Great. And last question, do you expect the rents on the NoMa Phase II to be comfortable with the Phase I and what kind of yield are you expecting for that development?
Richard Campo
Sure. We think they’re going to be higher than, but slightly higher than, because new pain is always more expenses in old pain and not but two will be a couple of years all more finished.
And our yields are very robust, the yield we have is interestingly number one is an 8% plus or minus, I think our number two is projected David, I think maybe 7.5% on plus or minus on NoMa 1. So the thing is interesting about people love to talk about D.C.
and lack rent growth, but on the hand, we can develop a $115 million project and have an 8% yield and the market we can settlement survive that creates a lot of new asset value.
Operator
Our next question comes from Thomas Lesnick of Capital One Securities. Please go ahead.
Thomas Lesnick
Hi, thanks. Most of my questions have been answered at this point.
But Rick I just want to ask about big picture geographic investment allocation decisions. In the context Vegas D.C.
Houston any recent development push with Austin, LA and Charlotte. Can you share some live to the extent that you can without disclosing something for priority to process by which you make those geographic allocation decisions and what is a lead time what you’re making them?
Richard Campo
Sure. So every budget cycle, we go through a massive review of each market and within the market, we rank assets within that market.
And then we look at a broad macro a view going forward. So it’s always interesting look backwards, but forward is more important in my view.
So we look at or the growth is going to be over the next two to three years and where we want to position our assets from that perspective and then we make decisions on development starts, acquisitions dispositions along that cycle. We do review this every quarter as well and each market get it analysis from a macro perspective and then we drill down into the sub-markets and that’s how we make our long-term decisions and what we’re going to sell, what we’re going to buy and what we’re going to build.
Operator
And our next question comes from Dan Oppenheim of Zelman & Associates. Please go ahead.
Dan Oppenheim
Thanks very much. I was wondering about the renewals, we talking about 7.5% and May and June but also talking about 4.5% Houston presumably over the next Houston closure to eight.
Wondering if you’re doing that also in April, what you’re seeing in terms of retention, if you think that puts us secures would be retention that any as you comments early on about there has been second lower, second lowest turnover you’ve seen. Do you think, you can get 7.5% and keep turn over that low or just start to keep-up last year goes on?
Richard Campo
So on the 7.5% that’s the rate increased that renewals go out at. And we typically through the process of compensations end up losing about 100 basis points on that.
So you an, is there the 7.5% renewal probably turns into 6.5% on executed renewals. That’s portfolio wide it sort of backup to your April question new leases were up about 4% in April across the entire portfolio renewals were up about 6.5.
So May, June I look a whole lock April, which is --. So is that answer your question.
Dan Oppenheim
It’s very nice. In terms of the turnover, you expecting that without levels of renewal increases we see turnover status look?
Richard Campo
The 43% is an unusually low number and our turnover rate always lowest in the first quarter. So throughout the year that will -- backup but from a 43% versus 48% in the quarter last year.
I mean I think clearly, we should be on the year, we’re going to be left turnover than we had in 2014. But that’s the number in 2014 if our number right was about 56% plus or minus on turnover.
So maybe that number is 52%, 53%, but Yeah it will trained up because it always does throughout the year.
Dan Oppenheim
But if you don’t only seasonally, you’re now expecting that the higher rent will push to return?
Richard Campo
We have not seen that in April no have we seen it in the renewals that have gone out in May and June.
Operator
And this conclude our question and answer session. I'd like to turn the conference back over to Ric Campo for any closing remarks.
Richard Campo
Okay, great. We really appreciate you being on the call today and we will see you at [indiscernible] Thanks.
Operator
Thank you. The conference has now concluded.
And we thank you all for attending today's presentation. You may now disconnect.