Jul 31, 2015
Executives
Kimberly Callahan - SVP of IR Ric Campo - Chairman and CEO Keith Oden - President and Trust Manager Alexander Jessett - CFO and Treasurer
Analysts
Nicholas Joseph - Citigroup Alex Goldfarb - Sandler O’Neill Richard Anderson - Mizuho Securities Ian Weissman - Credit Suisse Nicholas Yulico - UBS Rob Stevenson - Janney Montgomery Scott, LLC Drew Babin - Robert W. Baird Vincent Chao - Deutsche Bank Dave Bragg - Green Street Advisors Dan Oppenheim - Zelman & Associates Tom Lesnick - Capital One Securities, Inc.
Austin Wurschmidt - KeyBanc Capital Markets
Operator
Good day and welcome to the Camden Property Trust Second Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode.
[Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please also note today’s 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 second 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 second quarter 2015 earnings release is available in the Investor Relations section of our website at camdenliving.com and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call.
Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, President; and Alex Jessett, Chief Financial Officer. As there are several multi-family calls today we will try to be brief in our prepared remarks and complete the call within one hour.
We ask that you limit your questions to two then rejoin 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 email after the call concludes.
At this time I'll turn the call over to Ric Campo.
Ric Campo
Thanks, Kim. A few weeks ago our team had to discuss topics for this quarter’s conference call and as always we started with most important item, picking the pre-call music.
Well it’s been a really hot summer here in Houston. The summer is in full swing so we decided to use songs about summer as a theme.
We sort through dozens of summery songs and settled on five, one of which was All Summer Long by Kid Rock. A few days later I got a research report from our REIT analyst group whose name I won’t mention, except to say that the name rhymes with Fernings Beat [ph].
The report was an update on the residential REIT’s titled All Summer Long an obvious reference to the song by Kid Rock. Honestly what are the odds that we would both reference a somewhat obscure Kid Rock song in the same week.
I'm guessing the odds are very low and certainly less than 20%. I’d like to thank our operating teams in the field and our corporate teams supporting our field teams for their contribution to our strong quarterly results.
I know that some of you were surprised that we produced a strong quarter and raised guidance for the second time this year. We are however not surprised.
We have built our portfolio based on a philosophy that geographic and product diversifications, in markets where population growth and job growth lead the nation will produce long term net operating income growth with lower volatility. Houston has been on everyone’s question list and is great example about how geographic and product diversification has served us well over the years.
For the last three years, Houston has led our NOI growth and our revenue growth and as Houston moderates, we now have Atlanta, Denver and Austin leading the way for our revenue and NOI growth producing very good numbers. During the quarter we acquired two development sits, that I think they deserve discussions.
They illustrate our disciplined and our strategy in this part of the apartment business cycle. It’s really difficult to compete for acquisitions given the low yields generated by the incredible law of capital that continues to invest in the multi-family business.
So we’ve taken our objectives towards development and value creation to development and we’ve created a fair amount of value in our $1.3 billion of completed and under construction developments that will add $400 million of value to Camden’s NAV or nearly $4.50 a share. Development is also becoming more difficult as land prices continue to accelerate and construction costs and labor shortages are the order of the day.
We acquired the two sites on a very attractive basis. The first I’ll talk about is the Arts District in Los Angeles.
We’ve been working on this project for three years. There been multitude of zoning and entitlement issues and everything you can imagine that goes on in Southern California but we stayed with it.
We focused - since we’ve been working on this job for three years, we acquired the land for $86 a square foot in a market that’s $250 to $400 a square foot today and we’re ahead of most of our competition there. The land in Arizona is an interesting story.
So we bought the land from the State of Arizona adjacent to the Mayo Clinic, which is an incredible site that’s never been on the market, that we’ve been working on for five years. Complicated transaction buying from the state in an open auction, not always the thing you want to do.
However since we were the only bidder, we bought the property for the lowest possible price. The fact that we were the only bidder was a result of the complexities and the timing the state required for bidders to put up dollars and also the due diligence.
So being the only bidder in an incredibly attractive site is how we create value long term. So these two transactions I really think typify how you have to focus on a part of the market you’re in, if you can’t do acquisitions and you can’t do things that you’re used to doing.
It’s really about discipline and focusing on trying to create value and wherever you can in this kind of the cycle and that’s what we are with these kinds of transactions. With that said, we’re very excited about what’s going on with Camden and we appreciate our teams in the field and I’ll turn the call over to Keith.
Keith Oden
Thanks Ric. As Ric mentioned the operating conditions across our portfolio remain very strong.
Same store revenue growth for the second quarter was up 5.2% and 2.2% sequentially. The quarterly revenue growth of 5.2% represents our best growth rate in eight quarters and 12 of our 16 markets had revenue growth of better than 5%.
Our top four markets for revenue growth were Atlanta at 9.2, Austin 8.4, Denver 7.9 and Phoenix at 7.2%. Houston and DC Metro continue to perform in line with expectations, posting revenue growth year-to-date of 3.7% for Houston and 0.6% for DC Metro.
As a reminder in my market-by-market outlook for 2015, I assigned DC Metro a letter grade of C with a stable outlook and I rated Houston as a B market with a declining outlook. Both of these markets are performing slightly better than original budget and it’s certainly in line with our expectations for the first half of the year.
Regarding Houston’s performance year-to-date, it’s perhaps a little surprising that our original revenue guidance is holding up in light of the substantial downward revisions to the employment growth outlook. Our original budget for Houston was based on an employment growth estimate of 60,000 new jobs for the year.
Despite adding 4,000 jobs in June Houston’s job growth rate year-to-date rounds to zero. Based on the weak job growth in the first half of the year the employment growth estimates for Houston have been revised downward by Whitman Associates to 23,000 for the full year and by Greater Houston Partnership to 25,000.
Although there are certainly more bearish estimates out there we believe it’s still possible that Houston ends the year with 20,000 or so net new jobs. Based on historical data from the Greater Houston Partnership, Houston typically adds 50% to 60% of its annual job growth in the months from September to December.
Houston’s job growth is well below our original estimates and our revenues year-to-date are slightly ahead of budget which seems like a conundrum. We think there are two factors which have helped soften the impact of lower job growth.
First, the skilled labor shortage has most likely pushed back the scheduled multi-family deliveries by at least a quarter. This is an issue in every market where we're building and its particularly acute here in Houston.
Whitman is estimating 22,000 completions for the year in Houston. However we believe some of these deliveries will be pushed in to 2016.
Secondly we believe that there is much higher level of pent-up demand for new apartment homes than we anticipated at the beginning of the year. In the four years leading into 2015, Houston added 400,000 new jobs and completed only 40,000 new apartment homes.
Using the five to one ratio of jobs to apartments as a measure of equilibrium an estimated excess demand of 10,000 apartment homes was created. Some of the current absorption is undoubtedly coming from this pool of excess demand.
Despite the downward revision to job growth our regional budget for Houston revenues still looks achievable at roughly 3.5% for the year and obviously Houston job growth in the second half of the year will greatly influence our outlook for 2016 results when we get to that. Back to our overall portfolio results, new leases for the second quarter were up 4.5%, renewals were up 6.7%, both better than the second quarter of ‘14 which were 3.6% and 6.3% respectively.
July new leases were up 5.2% and renewals were up 6.8%, again both ahead of last year's results of 3% and 6.6%. August and September renewals were sent out at averaging at 8.3% increase and we're currently renewing leases in the 7% range.
Our same store occupancy averaged 96% in the quarter, up from 95.5% last quarter and that from 95.6% in the second quarter of 2014. July occupancy averaged 96%, we currently stand at 95.8%.
Our net turnover rate year-to-date was 48%, down 500 basis points from the 2014 levels and then finally our move-outs to purchase new homes remains historically low across our portfolio at 14.8% versus 14.6% in the second quarter of last year. To all of our associates we greatly appreciate your dedication to providing living excellence to our residents, especially during the dog days of summer.
Hang in there, the long hot summer will be over before you know it. And as Kid Rock sings in All Summer Long now nothing seems as strange as when the leaves begin to change or how we thought those days would never end.
We'll see you soon. Now I'll turn the call over to Alex Jessett, Camden's Chief Financial Officer.
Alexander Jessett
Thanks, Keith. Before I move onto our financial results, a brief update on our second quarter development activities.
During the quarter we reached stabilization at three communities; Camden Lamar Heights and Camden La Frontera both located in Austin, Texas and Camden Boca Raton in Florida. These three communities had a combined cost of approximately $135 million, delivered a 7% plus yield and created approximately $50 million of value to our shareholders, based on current market cap rates.
Additionally, during the quarter we completed construction at Camden Hayden, a $44 million development in Tempe, Arizona, began leasing at Camden Glendale, a $115 million development in Glendale, California and began construction at Camden Shady Grove, a $116 million development in Rockville, Maryland. Also during the quarter we purchased two land parcels for future development in Los Angeles, California and Phoenix, Arizona.
Subsequent to quarter end we completed construction at Camden Flatirons, a $79 million development in Denver, Colorado. As we do each quarter, on page 17 of our quarterly supplemental package we've adjusted our cost and timing for our developments to reflect our current estimates.
The only significant change relates to our Camden Paces development in Atlanta, Georgia. We've increased our cost estimates by approximately 6%.
Half of this increase is associated with own enhancements and the remainder relates to previous weather delays. This community is currently 57% leased and should deliver a 7% yield.
Moving onto financial results, last night we reported funds from operations for the second quarter of 2015 of a $102 million dollar or $1.12, per share. These results were 0.02% per share better than the $1.10 mid-point of our prior guidance range.
This positive variance resulted almost entirely from better than expected operating performance from our consolidated and non-consolidated communities, as both rental and fee income continue their favorability to plan, driven primarily by higher occupancy and additional pricing power which enabled us to collect higher net fees at move in. Our turnover for the quarter was 400 basis points better than this point last year while our occupancy for our same-store portfolio averaged 96% for the second quarter of 2015, 40 basis points higher than the second quarter of 2014.
Each of our markets registered positive sequential revenue growth in the second quarter. Our new Camden technology package with Internet service is rolling out as scheduled and for the second quarter contributed approximately 45 basis points to our same-store revenue growth, a 100 basis points to our expense growth and 20 basis points to our NOI growth, all in line with expectations.
Regarding property taxes, the majority of our assessments are now in, and although many of our initial tax assessments were higher than we had originally anticipated. We've had some degree of success with our protest and appeals.
Last quarter we told you that we expected property taxes to increase 7% on a year-over-year basis. At this time we remain comfortable with that estimate.
Based upon our strong year-to-date operating performance and our expectation of continued out performance for the remainder of the year we've revised upwards and tightened our 2015 full year revenue and NOI guidance. We now anticipate 2015 full year same-store revenue growth to be between 4.75% and 5.25%, expense growth to remain between 4.75% and 5.25% and NOI growth to be between 4.75% and 5.25%.
As compared to our prior guidance ranges, our revised revenue midpoint of 5% represents a 50 basis point improvement and our revised NOI midpoint of 5% represents a 75 basis point improvement. For the second time this year we've also revised upwards our full year 2015 FFO per share outlook.
We now anticipate 2015 FFO per share to be in the range of $4.47 to $4.57 versus our prior range of $4.40 to $4.56, representing a $0.04 per share increase to the prior midpoint. This increase is anticipated to result entirely from same store outperformance, as indicated by our 75 basis point increase in the midpoint of our full year 2015 same-store net operating income guidance.
Part of this outperformance occurred in the second quarter and we anticipate this outperformance to continue throughout the remainder of the year. Our revised full year 2015 FFO guidance assumes a $100 million in wholly owned dispositions and $100 million in wholly owned acquisitions, both occurred in the fourth quarter with acquisition yields in the high-4% and dispositions yields in the high-5% range.
Last night we also provided earnings guidance for the third quarter of 2015. We expect FFO per share for the third quarter to be within the range of $1.12 to $1.16.
The midpoint of the $1.14 represents a $0.02 increase from the second quarter of 2015. This $0.02 per share increase is primarily due to higher property net operating income as a result of an approximate 1% or $0.01 per share expected sequential increase in same-store NOI, as revenue growth from the combination of higher rental and net fee income as we continue into our peak leasing periods, more than offset our expected increase in other property expenses due to timing of second quarter property tax refunds and normal seasonal summer increases in utilities and repair and maintenance cost, and an approximate $0.01 per share increase from our non-same-store communities as the additional NOI contributions from our six communities and lease up will be partially offset by the lost NOI from our student housing community in Corpus Christi, Texas.
Occupancy declined significantly from June through August for this community. Turning to the capital markets, we anticipate completing the refinancing of our existing $500 million line of credit in the next few weeks.
This will increase our borrowing capacity by $100 million to $600 million in total, extend the maturity date by four years and decrease our borrowings by about 20 basis points. Our balance sheet remains one of the strongest in the REIT world, with debt-to-EBITDA in the low five times a fixed charge expense coverage ratio at five times, secured debt to gross assets at 12%, 80% of our assets unencumbered and 85% of our debt at fixed rates.
At this time we'll open the call up to questions.
Operator
Thank you. We will now begin the question-and-answer session.
[Operator Instructions]. Our first question comes from Nick Joseph of Citigroup.
Please go ahead.
Nicholas Joseph
Thanks. For same store revenue growth, at the beginning of the year you expected a 25 to 50 bps benefit from the bulk internet initiative.
What does the updated guidance assume for that?
Alexander Jessett
Right now, it's rolling out exactly as we had anticipated. So we are still in line with that estimate, might be a little bit towards the high end of that range.
Nicholas Joseph
Okay and then when looking into 2016, is there going to be a continued benefit from that or will it lead absent anything else to deceleration in kind of the other revenue line?
Alexander Jessett
So 2015 and 2016 are both roll out years. Obviously more of the roll out in '15 than '16 and then ultimately this will become a meaningful number for us, probably around $5 million.
Nicholas Joseph
Okay, thanks. And that's true on the expense side as well, right?
Alexander Jessett
That's correct. Generally what happens is you will see more of the expenses upfront.
Nicholas Joseph
Okay, so the actual NOI benefit will be more focused in 2016 in terms of the growth rates?
Alexander Jessett
That's correct.
Nicholas Joseph
Okay, great. Thanks.
Operator
Our next question comes from Alex Goldfarb of Sandler O’Neill. Please go ahead.
Alex Goldfarb
Good morning, down there. Hey, just quickly on the development, you guys obviously you walked through the background on each of these deals.
But at the same time your common theme on this quarter has been - which has been for some time now, has been the difficulty in finding attractive acquisitions and development sites. So should we anticipate more developments from you guys or were these two sides just sort of one offs that guys have been working for some time and therefore we shouldn't expect a pick-up in new development starts from you guys?
Ric Campo
Definitely these project have been worked on for quite a while and we continue to - our teams continue to try to find those needles in the haystack, like we found in these two transactions. We think the development business is definitely more difficult today and it’s harder to cancel deals and we definitely pass on more than we buy.
We have been consistent in our discussion about where we are on the development cycle and where we are in the permit cycle overall and as we finish developments we'll starts others. But we definitely have peaked in terms of the total under construction that we have now and will be adding anywhere from $200 to $400 million annually going forward on the development assuming we find can the right deals.
Alex Goldfarb
Okay. And then the second question is of course Houston.
Oil has taken another leg down. Clearly - well it seems that the initial oil decline didn't translate to massive job loss that was some concern over Houston apartments.
Now with the latest job loss the headlines talk about more job cuts and it seems like more are coming to the office rather than out in the field. So can you just give us what are you hearing from your oil neighbors and what's being going on recently with this oil defined and the lay-off announcements?
Ric Campo
Sure. You definitely have seen some announcements, especially from some of the big integrated oils and so we are not sure what to expect there.
There have been some big numbers but when I talk to the people that are actually running these companies here locally, they tell me that they are definitely tightening their belts. But they are not doing any massive type of scenarios because the challenge they have is that they have, in terms of being able to replace those employees in the future, they have some real issues with that and so they are trying to hold on to all their talented tech people and geologists and those kinds and then there is more support people that are probably being let go that weren't otherwise.
So we have not felt that and even though they talk about it, it's still a really big employment market here and so we really haven't seen much of that. I will tell you that, that in some of the conversations with some of the big oil, for example there is a 50 storey building that’s been planned to house one of big oil companies downtown and already have two 50 storey buildings.
And what they were telling me in their office, I’m going to name them, but [indiscernible], they have an office in California where they are headquartered and they said that the downturn is actually supporting their thesis to their management that they need to go to a lower cost market, including Houston and so that building, given construction cost is falling is likely to be started and those people move here in the next couple of years. So…
Keith Oden
So, I’ll just add, Alex I think we are going to continue to see net job losses in the oil industry in Houston. But I think June was kind of interesting because we got 4,000 net new jobs which got us to basically flat for the year, but within that 4,000 net new jobs there were 6,000 created, total jobs created and about 2,000 lost, in oil-related jobs.
So the net of 4,000 is not that bad a number if we can continue to see that. And there is a lot of information about - from the Great Eastern Partnership that indicates that even in recession Houston has historically created jobs, backend loaded jobs between September and December.
So we just need to see whether that pans out again this year and if it does then I think that bodes pretty well for 2016, the count what would be looking at for 2016. But yeah, I think clearly those jobs losses in the oil patch are going to continue, the question is how much and then how much is the offset from all other sectors of the economy which continue to grow.
Ric Campo
The other thing, I didn’t mentioned was the downstream operations, because when you have the big oil with oil prices down and natural gas prices still very low as well there is still a big boom going on from a construction perspective around the Gulf Coast and on the east side of Houston for all our petrochemical factories and what have you. As long as the U.S.
economy continues to do well and manufacturing continues to do well, those basic products have to be made and there is something like 30 billion under construction and a $50 billion backlog of new primary chemical activities and plans going on in the Gulf Coast. So that part of the equation should add jobs on the construction side and on the product manufacturing side of the equation that hopefully offsets some of the layoffs in the G&A side of the Energy business.
Alex Goldfarb
Okay. Thank you.
Operator
Our next question comes from Rich Anderson of Mizuho Securities. Please go ahead.
Richard Anderson
Thanks. Good morning.
Just one more on Houston. I mean wouldn’t it be expected that this wouldn’t be the year that you would see any meaningful impact to your performance in Houston, that it would be a second or third year impact?
I mean if somebody who’s lost my job the last thing I am going to do is double down and leave my apartment. I probably want to give that some time and then reconsider a year later or something like that.
So wouldn’t this - isn’t the real litmus test here going to be 2016?
Ric Campo
I think that clearly the 2016 - the jury’s out on 2016, there is still 20,000 apartments that’s going to deliver in 2016 and the question will be whether there is enough jobs to support that. Keith mentioned a couple of things being the pent-up demand that we’ve had because of the job growth that we had prior to this downturn.
And the other thing - what he didn’t mention though was the inversion that’s happening here, which is the people moving from the suburbs into the urban core and a lot of the development is in the urban core. And it’s still - the traffic is not really great here and people continue to do that.
Anecdotally just to give you a sense some of the high rise for example that’s been developed in Houston today, which high rise product, you really didn’t have a lot of high rise product in Houston, maybe five or six buildings max from a rental perspective. Now we have something like 10 that are in lease-up and what’s happening is there is a whole new product that has opened up in to Houston.
And its high-end urban, high rise and so one of the lease-ups that’s going on right now with one of our competitors for example. We went through the data on that, and the average income for this project - and by the way this is $3 a square foot, average units of 1,500 square feet, so at a $3,000 average, or actually more than, $4,500 average apartment rent and they are giving zero concessions in Houston today, zero now, not some, but zero, the project’s 80% leased, it’s the 30 storey building in the Galleria, the average age of the person leasing this property is 55 years old, and their average income is $385,000 a year.
Now those folks are not energy accountants getting laid off. Those folks are people making the decision they want to move in from their house in the suburbs and live in the urban core.
And so there’s a fair amount of that going on as well, but I mean at the end of the day 2016 will be determined based on what the overall economy does for Houston. Do we have more pent-up demand, do we have some of this inversion going on that’s actually helping the market more than we thought, and you’re right on the issue of people hunkered down.
When people have a tough situation and they are laid off and they have the funds to stay in their apartment, they do tend to hunker down. So your turnover rates go down, which means that we don’t have to lease as many apartments, because our people are staying longer in those apartments and so it will definitely depend on what happens job wise in 2016, and then how the supply plays out.
At least we know that the supply is going to play out in ‘17 and ‘18 because it’s really hard to get a new deal financed in Houston today.
Richard Anderson
Great color, thanks and then a bigger picture. How do you get to the top end of your FFO guidance range, seems like something very special would have to have to happen in the third and fourth quarter, more like the fourth quarter?
Alexander Jessett
Yeah, obviously I think a lot of it comes down to whether we end up being at the very high end of our NOI range. If we are at the very high end of our NOI range that will get us most of the way there and then obviously there’s also timing on acquisitions and dispositions can have an impact too.
Richard Anderson
So no, nothing one-timish land gains, anything like that in fourth quarter that gets you to the top end?
Alexander Jessett
No.
Richard Anderson
Okay, great, thank you.
Operator
Our next question comes from Ian Weissman of Credit Suisse. Please go ahead.
Ian Weissman
Yes, good morning. Just a question on the balance sheet.
You paid off your $250 million June maturity with your credit facility and I just want to get your thoughts on long term financing with the rates coming down here. How are you guys thinking about just continuing to use the balance sheet or going a little bit longer out on the lending curve?
Alexander Jessett
Although treasuries have been moving around quite a bit and I think the tenure is at 2020 today and if you assume that we can borrow, say a 160 on top of that, I think 3.8% for ten year money is a great rate and we’ll do that all day long. We obviously do look at longer, we looked at 30s before, we’re not quite sure whether that’s something we want to do quite yet, but certainly we think in this type of interest rate environment it’s still very attractive to go along when you can.
Ric Campo
We are old school real estate people that match long term assets with long term liabilities. We hate short term debt, floating rate debt.
We have a certain amount that we’ll keep but bottom line is that real estate, if you look at the real estate frame racks [ph] over the history of time it’s all about financing, short or long term assets and then all of a sudden you have a hiccup in the capital markets and somebody needs to fund and they can’t fund. That’s why we are trying to take our maturities out.
I think if you look at our maturities we have one of the longest maturities in the apartment sector and it’s not long enough for us. But it’s the longest.
And then the other thing is that when you think about financial flexibility long term, as Alex said at the beginning of the call we have 80% of our assets that are unencumbered, meaning that they have no mortgages on them. So we do have a financial hiccup like we had, maybe you don’t call ‘08 ‘09 as a hiccup, maybe it’s a retching, then we have the ability to put mortgages on those assets.
So we’re old school long term fixed rate kind of shop here.
Ian Weissman
I appreciate that color. And just lastly, just want to get your thoughts on where you see margins moving overtime.
I mean do you think Camden is able to maintain the same store revenue growth in the mid to high 4s and also on the expense side, it’s been running high over the last several quarters, is there much more tax assessment catch up left that would cause you to kind of keep expense growth in the 4% to 5% range?
Alexander Jessett
Yeah, so long term same store revenue growth, 4% if you look backwards for the last 20 years it’s been in the 3% range, high 2s, low 3s and I think that’s probably more appropriate thought process for what the next ten years look like. Obviously the last four years have been quite an anomaly relative to that long term trend.
On the expense side the challenge that we've had has been exclusively contained in property taxes. So [indiscernible] that we thought that there would be some relief this year, obviously there wasn't particularly in the Texas markets.
So that's going to be something that we're going to continue to probably have to deal with. We've been very effective over the years in terms of being aggressive on property tax increases.
We're continuing that trend this year. It looks like we're going to have a ton of lawsuits on our Texas valuations that we're going to have to work our way through, but that's just part of the process and we know that that's something we're going to have to deal with.
The interesting thing is about property taxes that we spent a lot of fair amount of time studying this, because it’s obviously it’s been a big issue in our same store expense numbers for the last two years. If you go back for - and do an analysis over 20 years in our portfolio, the average annual increase in property tax expense over that 20 year time frame has been 2.1% which is actually less than all other non-property tax components of our expenses combined.
So it’s even though right now it’s very painful and it’s very painful to our same stores results and certainly to all of our operations folks that are getting hammered with these property tax numbers, the reality is that it is - over a long period and time it’s actually been pretty manageable. We think our property taxes they are one of the only two expense line items in our - a lot of our expenses that ever go down.
So we're - it’s something that we do spend a time on. Over the long period and time we think it’s manageable but obviously it’s painful right now.
Ian Weissman
Just last question, I appreciate the color. Not to beat the horse, the dead horse I should say, on Houston but can you just give us an update on where renewals are trending in the third quarter in Houston?
Ric Campo
Yes. So the horse is not dead.
He’s galloping and he has had a heck of a run for the last four years, at a 100 degrees, he’s sweating pretty bad today too. So we said our renewals are going our right now at an average of roughly 8%.
In Houston they are going out at about - that's portfolio-wide, in Houston they are going out at about 4% and we think we'll get them signed, most of them in the 3.5% to 3.75% quarter range. So that's consistent with what we think we will end up for the year.
I think in my prepared remarks, I said I thought we will end up revenue growth for Houston of about 3.5% for the full year and we are still pretty comfortable with that. So we just keep chopping away at it and the horse keeps running.
Ian Weissman
I appreciate that. Thank you so much.
Operator
And our next question comes from Nick Yulico of UBS. Please go ahead.
Nicholas Yulico
Thanks, Ric or Keith, I was hoping you just talk a little bit about supply and where you see deliveries. If you think that they are sort of peaking in your market this year or and 2016 might be an easier number?
Keith Oden
Yeah. So if you - in Camden’s entire portfolio, if you're looking at completions for 2015 our current working guestimate looks like it’s about a 133,000 over the entire - all of Camden’s markets combined.
And that number looks relatively flat to 2016. Obviously there is a lot of movement around in that number.
Houston in particular is, as Ric mentioned I think we are at, probably 21,000 guestimated deliveries this year although that may - some of that may slip into 2016. And if that trend continuous then some of the ‘16 is going to slip in to ‘17 but based on current thinking we're likely to get in this crop of 2015 class of apartments somewhere around 21,000 and that number comes down but not very much in 2016 to about 20,000.
So we've working on the supply side. We're still going to have a fair amount of supply to work our way through in the next two years in Houston.
Ric Campo
I think nationally one other thing, question we get a lot of is why if the permitting business is so good and, which it is obviously based on all the numbers that all of our competitors and public companies report out there, why wouldn't starts go from 300,000 to 500,000. And I think a lot of investors are worried about that, right because there is lot of capital trying to invest in multi-family.
I think one of the governors that - there are actually two big governors on the system that I think today. One is it is harder to make your numbers work and from our land cost and construction cost and there's a limit of skilled labor.
So everyone in the business is spending - staying up at night, thinking about can I get my project built and for how much. And then the next big thesis that the financial crisis, when happened it really did change the multi-family finance, as it relates to merchant builders, which merchant builders create 85% in the entire market for new development.
And the merchant builder, prior to 2008 was able to guarantee debt from banks and the guarantees basically were infinite guarantees. There was no tangible capital behind their guarantees.
Today however, merchant builders have to have tangible capital, they have that have real cash or real liquid securities on their balance sheets to guarantee certain amounts of debt. Now that has been it's been flexed now and there are today, because the markets so good, they're requiring less than they did two years ago.
But the fact is they're requiring tangible net worth which actual cash, not just real estate value in order to guarantee debt. So you have a natural governor on the amount of deals that can be done because we just don't have that amount of construction workers nationwide to do it.
And second, the financial, there is financial discipline in the banking system so far. Now do they get out of control in the future, who knows.
I think it's going to be tough for that happen for a while anyway.
Keith Oden
And just one more thought on that and because I thought - I think it’s kind of interesting, and I'll give attribution to Ron Whitten [ph], he did some interesting work on that. There is a lot of conversation about the June starts number which looked like it spiked to on an annualized rate of about 450,000 of multi-family starts.
But when you dig into that there was a tax incentive in New York that was expiring, or it did expire at the end of June. And there were roughly 8,000 starts, close starts in the month of June.
If your annualize that it's about 100,000. If you back that out you're back to about a 340,000 annual run rate on starts which looks pretty rational with where demand is.
Nicholas Yulico
Right, now, that is helpful. Just one other question, looks like - I mean is your development pipeline going to be coming down, if I just look at the pipeline of communities versus what underway right now.
And are you starting sort of less incrementally now?
Keith Oden
Yes, we are. We have a $1.1 billion under construction and we're going - when we finished we will start, but we will start less than we're finishing over a period of time.
And we think it's prudent in this part of the cycle to do that.
Nicholas Yulico
So not only is it part - I mean is it not only that you think it's prudent, it's also just that you don't have as much land that you could really keep the pipeline this high?
Keith Oden
Absolutely. We went through our legacy land that we kept during the down cycle and we're pretty much out of our legacy land in '16.
And so we have to add new land to it and the new land is just harder to add. And also we just think given where we are in the economic cycle and funding issues and we just we think it's prudent to sort of bring it down little bit.
Ric Campo
So just to put some big numbers around that concept. We get - in 2016, we'll have roughly $750 million that rolls out of our development pipeline into stabilized.
And our guidance for this year is $300 million in starts and we tell people that that's kind what it’ll look like on a run rate going forward. So the math is pretty easy from there, the development pipeline’s coming down.
Nicholas Yulico
All right thanks guys. Appreciate it.
Operator
Our next question comes from Rob Stevenson of Janney. Please go ahead.
Rob Stevenson
Good morning, guys. Can you talk about what the sort of monthly trends have been in the DC market?
Have you seen more stability, more traction as we’ve gone from May to June to July or has it sort of been back and forth, back and forth.
Ric Campo
Well the big change for us Rob was the change in occupancy. We had a pickup in occupancy for the quarter.
We had a negative revenue quarter-over-quarter per unit in the first quarter for the first time in this entire cycle. And most of our competitors have had numerous negative revenue per units.
And it one tenth to 1% negative. But we were - we're pleased to see that jump backup.
And I think that obviously a chunk of that was occupancy. I would say that scrapping along the bottom still feels about right.
I mean our budget for - our game plan for DC this year was revenue growth of somewhere around 1% maybe slightly better than that. And I think that's what we're on track to see.
So it's hard to see that as being a real positive scenario and that' why we've rated that market as C and stable. I think that's kind of what we're looking at through the balance of this year.
I think if you look at on 2016 you get roughly on Whitman’s numbers you get 40,000 jobs and we get about 8,000 new apartments and that again sounds a lot like equilibrium to me on five to one ratio. But I think things are improving.
I think the worst is probably over for most operators in the DC market. Our geography is a fair bit different than many of our competitors and I think that worst is probably over.
But we are sort of scraping along the bottom in DC.
Rob Stevenson
Okay, and then can you talk about the Atlanta market? I mean this has been multiple quarters in a row that this has been very, very strong from a rental rate growth.
You were seeing somewhere probably between 2% and 2.5% new supply still being injected there. Is it just job growth has come in, in and above everybody's expectation that’s been driving this or has it been some other phenomena where people have been moving more towards the core, like Rick was saying in Houston.
You talked what about the phenomenon is that's been driving the Atlanta results.
Keith Oden
So we are on the 2015 forecast for jobs is still 75,000 in Atlanta multi-family completions. Looks like they are going to be roughly 10,000 apartments and that's very, very healthy.
If we think about Atlanta it was a little bit late to the cycle. So we did not - and that's why you get 10,000 completions in Atlanta versus some of the other markets that are delivering more units.
So from the standpoint of new supply it's been delayed relative to some of the markets. But in terms of rent growth, in a market like Atlanta where you are growing that kind of jobs and you are a little bit out of balance on supply, I don't think it would be unusual to see Atlanta have another great year in 2016.
If you just kind of look at the Houston experience, going back to 2011-’12-’13 and ‘14 we had - Houston was our top performing market for four years straight. So when the conditions are right and you don't have - and the supply doesn't kind of overwhelm the job growth then you can have a pretty good run and I think that's where we are in Atlanta.
Yeah, the market just seems very strong and no let-up in sight.
Rob Stevenson
And I don't know where you guys are with your sort of supply numbers. But some of the data providers are actually showing less supply in '16 and '15.
I mean if that's the case, I mean is there anything that really interrupts you guys being able to post sort of 8%-9% rental rate growth in that market for the foreseeable future?
Keith Oden
If the job forecast is correct that we have which shows another 70,000 jobs and roughly another 9,000 apartments is correct, then yeah you are going to have another year in '16 that looks a lot like this year.
Rob Stevenson
Okay, thanks guys.
Operator
Our next question comes from Drew Babine of Robert W. Baird.
Please go ahead.
Drew Babin
Hi, thanks for taking the question. Given that most of the new supply that been delivered over the last couple of years has been ubiquitously urban, high rise CBD type development.
So are there any markets where you are seeing your suburban assets significantly outperform urban? Just among your markets are there any kind of worth bringing [ph] in that apartment and what is sort of keeping new supply from springing up in the suburbs relative to city?
Ric Campo
The best example of that would be in Houston. I mean right now our suburban assets are clearly much less affected by - they are not catching near the competition that some of our close-in assets are catching.
There is construction going on the suburbs. It's in market that we operate in, we built suburban assets in Orlando and in Tampa and they have done incredibly well.
So there is construction going on. It's just not to the same scale as you want you see in some in the urban core markets.
The flip side of that is that there right now, the natural demand seems to be where the job growth is happening in these cities is closer to the urban core and that's where people want to live. So I mean there is - it's not completely irrational that developers have trended back towards the urban core.
You’ve got tons of issues with mobility and these large employment growth markets like Houston, Atlanta, Phoenix et cetera. People want to live closer to where they work, they want to live closer to where their social life is and by and large that’s the urban core.
So it's not completely irrational. It's probably going to be, when it's all said and done, there will probably be the more competition and more pressure in the Houstons of the world in the close-in assets than in the suburban assets.
Drew Babin
Thank you. That's helpful.
Operator
And our next question comes from Vincent Chao of Deutsche Bank. Please go ahead.
Vincent Chao
Hey, good afternoon everyone. Most of my questions been answered here.
But just curious, I know you're not necessarily looking to enter new markets or/and the pipeline is coming down. But I was just curious, if there are any markets that even if you're not necessarily getting ready to jump in, that seem to be still offering good yields and also maybe have an improving longer term outlook from your perspective.
Ric Campo
We like the markets we're in. We always are looking at other markets and trying to decide whether it make sense to enter those markets.
And the challenge is most of those markets are very highly priced and the development aspects are really high priced too. So you try to get some sort of - we want to have a scale - we just want to - you don't want to go do one-offs in markets you're not in.
And so it's just - we keep our eye out and we think about it a lot and we debated a lot. We haven't gone there yet and we'll see what happens in the future.
Vincent Chao
Got it. And on the starts coming down, I was just curious with land cost and construction cost are both going up and shortages of labor, I mean do you think the yields are going to continue to kind of - it doesn't sound like they have compressed necessarily near term.
But I mean over the next couple of years, do you expect them to compress or do you think rental rate growth will keep up with the construction inflation?
Ric Campo
I think development yields have been compressing and they will continue to compress. And the challenge you have is that as they compress then the justification that developers use is that well yeah but if you do have five trended transactions in California you can sell it for a 3.5.
And because in California, for example in the LA every deal where you look at as a three something cap rate that's on an acquisition. So the challenge with that is that as cap rates compress, they and development yields compress, the risks associated with rising cap rates or what have you is just higher.
And then the risk of actually delivering the five trended with construction cost and labor shortages is higher risk then it was. So that's why our development pipeline is shrinking as it's much more difficult and higher risk to deliver those kind of yields today.
So yields have definitely compressed from when the cycles began. And now they're getting - and I think they will compress in the future.
And the question will be, will developers take the risk of lower spreads and lower risk return relationships because they have the capital and I think a lot of institutional investors are building the core now. And a lot of capital continues to come into the sector.
We on the other hand don't have the need to or the stomach to take the risk on those kinds of low spreads. And so that's where discipline comes in and one of the - I can tell you our development teams don't like to hear this.
But that's what you got to do in when the market is heated as it is in our business.
Vincent Chao
Okay, thank you.
Operator
Our next question will come from David Bragg of Green Street Advisors. Please go ahead.
Dave Bragg
Hi, good morning. We're pleased to hear that your big [indiscernible] ends too.
So it is to get them for the Super Bowl half time show Rick.
Ric Campo
Dave, you've added yourself.
Dave Bragg
Okay, we're proud fans. Anyway, on the Internet rollout, is that uniform across the country or there are some markets that are benefitting disproportionately relative to the 45 basis points of revenue growth upside seen this quarter?
Alexander Jessett
Yeah, it's across the whole platform. And it really is dependent on where the contracts, who the provider is, whether it's Comcast or whether it's Time Warner.
So as we get the contracts in place and get them renegotiated then that's where the rollout occurs. Now there is also a just a physical limit on how many of these things you can roll out at one time based on personnel constraints and people constraints.
But yeah it's pretty uniform across the portfolio and it's - but ultimately we think we will have coverage of somewhere upwards of 85% to 90% of the communities that will have an Internet high speed Internet solution bundled with cable.
Dave Bragg
Okay, so as we think about your numbers relative to peers, we can be confident that there is no markets where you're getting a 75 to 100 basis point boost right now.
Alexander Jessett
No.
Dave Bragg
Okay.
Alexander Jessett
No, you bet.
Dave Bragg
The next question is can you just provide your latest thinking on dispositions?
Ric Campo
Sure, dispositions, we have sold about 1.8 billion of assets in the last four years and we continue to think that it makes a lot of sense to sell assets into this market given the robust bid. On the other hand we’ve pretty much dealt with our low hanging fruit and so in terms of being able to recycle that capital.
The challenge we have today - we have a couple of challenges in that given that all those asset sales that we’ve done in the past, we have some tax considerations and tax constraints on how we sell and what we sell. But it’s still a decent environment to sell in and we’ll be selling assets.
Keith Oden
And Dave, the other thing that we talk about with folks is that we really want to match our dispositions with acquisitions. Obviously we can always - at least from disposition perspective you can control and you can sell assets whenever you want to.
The flip side of that, which is matching it with acquisitions, is something that we have really struggled with in terms of the pricing of these assets and where the cap rates are. Let me just give you the latest example on - I know there lots of anecdotal evidence floating around, but I want to give - I’ll give you one from the last two weeks without naming names, we were in the - got in the best and filed for an asset in downtown Denver.
It’s great location but it’s ten year old product and kind of little bit tired and had some little bit of a floor plan challenges so it was not a pristine physical asset but it’s a great location. Having said that we thought we could go in kind of do our renovation, our rehab program, do all of our ancillary programs and we really, really pushed hard from an underwriting standpoint, got in the best in file, we were given guidance that - thought the asset would trade in the $83 million range.
So we decided to go nuts from our perspective and raised our bid even though we were given guidance of 83 million we raised our bid to 83.75 million and we finished dead last of the four companies that bid. So it ended up - the asset ended up going - it contracted at about $85 plus million, almost $2 million above what we’ve thought was kind of a crazy high number.
And on our numbers it was a trail - a 3.6% cap rate on trailing 12 months on real live underwriting. So that’s the challenge that we have from the standpoint, Ric talked about being disciplined.
We’re just going to be disciplined on acquisitions and we’re going to pick our spots but when you’re trying to match developments - dispositions with acquisitions I mean that’s just the world that we’re in today.
Dave Bragg
Last quarter you - when I asked about share buybacks you explained that you needed time, you needed time to sell assets and then observe where the stock is trading. The stock’s been very volatile since October.
So the reason we asked is just to understand why not to sell some assets now and create that opportunity for yourself should it present itself in the stock rather than stabilize assets?
Alexander Jessett
Well I think it gets to the same - to the issue, you just hit which is the volatility right. So that’s an interesting scenario.
It’s the challenge we have with that is just on the side of is there an opportunity to buy the stock, and we talked about it being persistent, the challenges because of the volatility and because of blackout periods makes it difficult, in terms of selling assets and putting cash on the balance sheet and having tax considerations associated with that, that’s what makes it more difficult.
Ric Campo
And David just to be clear on the share buybacks we don’t have a philosophical high bound mindset against share buybacks. In fact over the last - as a public company we bought back almost $500 million of our shares in the open market.
And we bought those shares at an average discount to NAV of about 20%. So it’s not that we’re philosophically opposed to it.
It’s just that sometimes when we talk about persistency and then gap to - closing the gap to NAV and given the volatility that we’ve had in our stock in the last nine months it would have been a real challenge to put all those - that Rubik cube together to make it make sense to buy the stock. The other thing that goes in from a consideration standpoint is obviously we have a development pipeline that where you have assets that are under construction that needs to be funded and there has to be a source of funding for that.
So it’s just - it’s balancing all those things but it’s not - certainly not something that we’re philosophically opposed to, and we've done a ton of it.
Dave Bragg
Okay, thank you.
Ric Campo
You bet.
Operator
Our next question comes from of Dan Oppenheim of Zelman Associates. Please go head.
Dan Oppenheim
Thanks very much. I was wondering if - do you see - there was one other question there, so do you see occupancy now 40 basis points above the company average after the 170 basis points sequential increase in second quarter, but you still seem somewhat cautious, I understand the cautious in the environment overall.
But how's that impacting what you're doing in terms of renewals in the market, given where you are on occupancy now?
Ric Campo
So we're not - we are back to an occupancy level that we're comfortable with. But when you look at many of our competitors in the comp set that we deal with, they are struggling day in and day out just to get to the 94%, 94.5% level and that gets reflected in their pricing and we don't operate in a vacuum.
And so their challenges become our challenges. I think that our guidance for the year that we think we'll end up with revenue growth of 1% or slightly better than that, it just reflects the fact that you don't have a lot of pricing power.
Now obviously you can get more aggressive on - less aggressive on renewals, close the back door, get some occupancy, which is clearly what we needed to do. You can't even think about pushing prices when you're not above 95% occupied.
So job one is get the occupancy back, make sure that you have stability in your rent role and then you can start testing increases which is what we are doing right now? But I still don’t think anyone should expect that by the time it’s all said and done for 2015 that we're going to be far away from 1% growth.
Dan Oppenheim
Okay. Then in terms of turnover, you talked about down 400 basis points year-over-year and pushing rent significantly in some market.
How do you think about that in terms of any risks, in term of affordability driven turnover with some of the rental rate increases?
Ric Campo
Yeah. So our portfolio for this quarter, the average, the percentage of our household income that went to pay rent was 17.2% and it’s been in the 17% range for the last six quarters.
Historically that's a very low place for us. I think we only have market of all of our 15 markets where it’s about 20%, its 21% in Southern California.
Most were in the 14%, 15%, 16% and a few in the 18%. There is absolutely no question from an affordability standpoint, our residents, their financial health is better than it’s been in the last five years.
They have the ability to pay higher rents and we want to give them that opportunity.
Dan Oppenheim
Great. Thank you.
Operator
Our next question comes from Tom Lesnick from of Capital One. Please go ahead.
Tom Lesnick
Hey guys, good afternoon. My first question, I just wanted to get clarification on your comments earlier about merchant builders, obviously hugely contingent on financing from banks.
I am just trying to get sense of your 85% comment was that nationally or was that with respect to Houston specifically. I am just trying to get a sense for how much of the supply in ‘15 and ‘16 could potentially be turned off or held or delayed?
Keith Oden
It's nationally. So merchant builders as defined by the [indiscernible] of the world, the Hanovers of the world, those folks are by - are build and sell builders and 85% of - and this data comes from National Multi-Housing Council.
They do analysis of who is building and what structure they are building under. So the REITs are building and these very a little bit annually but the REITs generally around 15% of the market nationally and the merchant builders are 85% of the market.
Tom Lesnick
And with respect to Houston specifically?
Keith Oden
Houston specifically it’s about the same, actually it’s probably less. And Houston specifically because there only one REIT that I know of that’s building anything and it might be Camden and we're building one project out of - so we have a 300 unit component of the market and the rest are being built by merchant builders.
So obviously I would say it’s a 100% in Houston and the under construction we have is 300 units out of 20,000 units that are being delivered may be in 2016.
Tom Lesnick
Got it. And then my second question, obviously a huge factor in urbanization trends over the last several years has been lower crime rates in cities leading to development in emerging sub-markets and there has been reports over the last of couple of months or so an uptick in crime in NoMa obviously your existing asset is doing well and NoMa II has just announced in development last quarter.
But couple of your competitors recently announced new projects in NoMa. I'm just trying to gauge how you guys are thinking about demand risk to emerging sub-markets like NoMa.
Ric Campo
So when we went into NoMa to start with, it was a very, very transitioning neighborhood and the local government really wanted to change the nature of NoMa. They put in a bunch of financial incentives for developers to build, office developers, multi-family developers, they got MPR to move there, they committed to the management teams they were - and investors who were investing those monies that they would improve the quality of life, they would improve policing and all those things, and they actually have done a great job.
And NoMa has really turned into an incredible success story of a district that was a very transitionary and difficult neighborhood. I think with the additional investments that people are making including Camden and the additional office tenants that have come there, it's going to be a great, great long term neighborhood.
Now do urban neighborhoods have issues? Sure, you have homelessness, you have crime and things like that.
But the more people you get down here and the more new people that come in and the more people that are being served in those areas the better it gets. So I don't think that we have any risk in NoMa or any other emerging market.
I could give you 10 emerging markets like that ARTS District in downtown LA as an example that are all getting better and not worse and I think that municipalities really want this inversion to happen because when inversion happens it solves a lot of other social issues and that get to mobility and just being able to concentrate people in locations. So it's a really a huge benefit for cities long term.
So I don't see it turning back.
Tom Lesnick
All right, great. Thanks guys.
Operator
And our next question comes from Austin Wurschmidt of KeyBanc. Please go ahead.
Austin Wurschmidt
Hey, guys. Thanks for taking the question.
I know we are running a little long here. So I'll keep it tight.
I was just curious your four market saw some strong acceleration this quarter and just curious about your thoughts about the acceleration and then what your outlook is for these markets?
Ric Campo
Our top four markets?
Austin Wurschmidt
No, I'm sorry. For the Florida markets.
Ric Campo
Florida, I'm sorry. Florida markets they had acceleration.
Go ahead, Keith
Keith Oden
Yeah, they did and they are - combination of pretty decent job growth in all three markets and very low. I mean there is some stuff that's in the planning process right now.
But both Tampa and Orlando have been very late to the supply party and that’s served us well. So I think we got good runway in Florida markets throughout 2016.
Austin Wurschmidt
And what kind of supply are you expecting next year?
Keith Oden
For 2016, in Tampa looks like completions are going to be 5,000 apartments which is very manageable for that sub market and in Orlando looks like 4,400 apartments. Again those are very historically low markets for this point in the recovery cycle for those two markets.
Austin Wurschmidt
Great, thanks for the detail.
Operator
And this concludes our question-and-answer session. I'd like to turn the conference back over to Ric Campo for any closing remarks.
Ric Campo
Great, we appreciate your time on the call today and we hope that you have a great rest of the all summer and it's a nice all summer long for you. Thank you very much.
Take care.
Operator
Thank you sir. Today’s conference has now concluded.
And we thank you all for attending today's presentation. You may now disconnect your lines.