Oct 30, 2015
Executives
Kimberly Callahan - SVP of IR Ric Campo - Chairman and CEO Keith Oden - President and Trust Manager Alexander Jessett - CFO and Treasurer
Analysts
Michael Bilerman - Citigroup Nick Joseph - Citigroup Gina Glenn of Bank - America/Merrill Lynch Alexander Goldfarb - Sandler O’Neill Rob Stevenson - Janney Austin Wurschmidt - KeyBanc Capital Markets Dave Bragg - Green Street Advisors Wes Golladay - RBC Capital Markets Dan Oppenheim - Zelman & Associates Vincent Chao - Deutsche Bank Tom Lesnick - Capital One Securities Richard Anderson - Mizuho Securities John Kim - BMO Capital Markets
Operator
Good day and welcome to the Camden Property Trust Third Quarter 2015 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. Please go ahead, Ma’am.
Kimberly Callahan
Good morning and thank you for joining Camden’s third 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 third 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 the call.
Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, President; and Alex Jessett, Chief Financial Officer. 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. And good morning.
Let me begin by congratulating our onsite and sport teams for delivering a package, a package of solid results directly to our shareholders and resident front [ph] doors. For the third quarter, your hard work has supported an increase in our same store property net operating income guidance.
Our developments, re-development and construction teams continue to create value for our company. A $1.1 billion development pipeline will add nearly $350 million of value to our shareholders when completed and leased.
We will again be a net seller properties in 2015 as we were in 2014. Pricing in the acquisition market remains robust, given the wall of capital that continues to bid for apartment properties in all of our markets.
Since 2011, we have sold over $1.7 billion of 22 year old properties that had lower revenue growth potential and increased capital expense requirements. This represents a 20% turnover of our portfolio in a very short timeframe increasing the portfolio quality, revenue growth profile and lowering capital expenditures.
Our capital recycling program will continue in 2016 using sales proceeds to fund further development costs. The [Indiscernible] apartment market was slowing continues to perform at our expectation for the year.
Demand is holding that well given the flat job picture. Apartment fundamentals are stronger improving in all of our other markets and are likely to be above our long term trend for 2016.
At this point I’ll turn the call over to Keith Oden Thanks Ric. At the beginning of this year we found ourselves in familiar territory.
As we began rolling out a solution to a challenge facing the multi family industry. It’s just the latest example of Camden leading the way in our industry.
In 1998 we were the first multi family company to build residence for water usage, an initiative that promoted water conservation. Other controversy over the time, today the vast majority of apartment communities have followed our lead.
In 2005, we were one of the first companies to roll out a system wide revenue management solution. In 2006, we implemented our bulk [ph] cable option which continues to provide significant savings to our residents compared to their one-off retail subscription offering.
We are in the process of rolling out bulk high speed internet with additional savings to come for our residents. Earlier this year we communicated with the largest package carriers that we wanted to begin offering our residents the same service single family home margin [Indiscernible] front door delivery.
Based on the local and national media coverage of our approached package delivery it’s clear that there are misconceptions that need to be cleared out. So first a little background, the number of onsite packages delivered to our communities has grown from a handful eight, ten years to an average of 150 per community, per week.
We had a total of one million packages in 2014 and that number is growing by 30% to 50% per year and there is no slowdown in sight. A few years ago we began getting requests from our onsite teams for things such as new package tracking software, package locker systems and additions to staff to handle packages.
While we were evaluating these requests the response of our onsite teams was merely to work harder and longer to improve the package dilemma for our residents but we were loosing the battle. Before we started trying any of these new, the new adhoc solutions to package handling, we decided to make sure that whatever policy we adopted would meet three key objectives.
Number one, it would provide the best customer service to the greatest number of our residents, number two, it would have to free up our onsite task time from package management so they could get back to property management. And number three it had to be a solution that was scalable and could withstand a five times increase in volume or in our case upto 5 million packages per year which is very likely where we are headed over the next five to ten years.
So we studied the package problem for six months including all currently available package solutions in the industry or solutions being proposed by vendors. After doing this we concluded that there were three classes of customer service solutions that the apartment communities that didn’t have a 24/7 concierge service option.
Camden has 11 high rise communities with 24/7 concierge service and they were not included in this rollout. We identified our first class solution and that is the delivery of a residence package directly to their door step by the best package delivery companies in the world.
Using state of the art tracking software with complete transparency regarding date and time of delivery. This is a service that I enjoy at my house.
I suspect that many of you also enjoy this first class solution at your homes. We also identified a second class solution.
This occurs when carriers deliver packages to an intermediary, in our case a management company which takes possession and then engages their personnel in completing the delivery through a variety of ways. Some use package room, some use package lockers and some use neighbourhood distribution centers made available by the carriers.
While not as good as first class service, because residents still had to go retrieve their package and transport it back to their home, atleast the residents had better access to retrieve the package at a time of their choice. Finally, we identified a third class solution.
Our management company takes possession of the package and holds it hostage in their office until the resident can get around to picking up their package during office hours. For many residents this was a poor solution.
Unfortunatley this was a the Camden model which is why our efforts to solve this dilemma internally became known as package gate. Not only were our customers limited to office hours to pick up their packages we were compounding the problem by having our staff to more and more time shuffling packages instead of attending to our residents or their needs.
As we studied the second class solutions it became clear that no matter which of the options we adopted and no matter how good we got it executing them we could never achieve the original three objectives that we set out. The solution that we ultimately adopted was a hybrid of first class and second class solutions.
Work with the carriers to allow easy access to deliver packages directly to the door step of our residents and provide those who for whatever reason prefer to not have door step delivery with information on how to direct their package delivery to the carriers closest distribution centers. As always we are getting new initiatives, we did a pilot, we piloted the program with 11 communities and we got really good results and then we rolled it up to an entire district, then a region and then ultimately throughout the entire company.
The rollout was completed this summer. The results so far we estimate that over half of our residents now enjoy first class service and we think that facility will grow overtime as neighbours see and hear the excellent results they are enjoying by having packages delivered directly to their door steps.
The most common reason we heard for reluctance to opt for door step delivery is concerned that their package might be lost or stolen. Our results so far show this fear is largely unfounded.
Since we adopted this hybrid approach an estimated 500,000 packages have been delivered to resident’s door steps and we have not seen an increase in reports of packages being lost or stolen. The response from our residents was predicted by our pilots and our initial rollouts.
The majority of residents are fine with the new approach. This isn’t surprising since we were moving all of them from third class service to their first class or second class service.
Despite this, not everybody was happy and there was a small but -- minority of residents who preferred the old approach, change always creates anxiety. And even after several months to a long as a year under the new plans, some residents remain unhappy.
Last week, a few of them had the opportunity to share their opinions on local and national news. I’m not sure why the media got so interested in a change on how we handle packages but they did.
Finally we had 100,000 plus residents and as of last week we are not aware of more than a handful of resident communications to our onsite staff that the resident would not be renewing their lease due to our change in package handling. All of our onsite policies are designed to provide living excellence to the greatest possible percentage of current and future residents.
Our experience over the last year with our package delivery policy indicates that we are achieving that objective. We are always looking to improve our customer service and if a better solution for a package handling comes along regardless of whose idea it is we’ll adjust our policy accordingly.
In the meantime we’ll continue to support the carriers who are providing first class delivery service to the majority of our residents. In addition we’ll continue to look for better ways to provide second class service to our residents.
We you don’t use the door step delivery option. We are well past worrying about how many of our residents might leave because of our improved package policy.
We are focussed on how many residents are more likely to stay or sign new leases with us because we offer them the first class experience of having their packages delivered directly to their front door step. Meanwhile, back at the ranch, operating conditions across oru portfolio remained strong as we posted the best quarterly revenue growth in nine quarters.
Same store revenue growth for the third quarter was 5.5% with all markets except Houston and DC over 5%. Our top 5 markets exceeded 8% growth, Denver at 9.3%, Phoenix at 8.5%, Atlanta 8.4%, Santiago Inland Empire 8.3% and Dallas at 8.2%.
DC and Houston performed as expected for the quarter with approximately 1% and 3% revenue growth. All markets performed well sequentially with 2.1% revenue growth over last quarter.
New leases for the second quarter were up 3.5% and renewable were up 6.9% both 20 basis points better than at this time last year. October new leases and renewals are running 1.1.% and 6% and this November, December renewals newer offers are going out at about 7.3%.
For the third quarter, occupancy averaged 96% versus 95.5% last quarter and 95.9% in the third quarter of last year. Year-to-date our net turnover was 3% below last year at 53% versus 56%, move-outs to purchase new homes fell in line with seasonal trends at 14.2% versus 14.8% last quarter and basically flat with a year ago.
Our onsite teams continue to outperform their competitors as well as their budgets, keep it up finish strong, we’ll see you soon. I'll turn the call over to Alex Jessett, Chief Financial Officer.
Alexander Jessett
Thanks, Keith. Last night we reported funds from operations for the third quarter of 2015 of $104.4 million or $1.14 per share.
These results are in line with the midpoint of our prior guidance range for the third quarter of $1.12 to $1.16 per share. For the third quarter, total property revenue exceeded our forecast by approximately $900,000 or $0.01 per share.
With half of the variance coming from our same store communities and half of the variance coming from our non-same store and development communities. Fee income continues to be favourable to plan driven primarily by higher occupany and additional pricing power which enabled us to collect higher net fees and move them.
This positive variance was entirely offset by higher than anticipated property level expenses related to higher employee benefit and healthcare charges and the timing of property tax refunds we now anticipate during the fourth quarter. All other line items for the quarter were in line with expectations.
Our new Camden technology package with bundled cable and internet service is rolling out as scheduled and for the third quarter contributed approximately 30 basis points to our NOI growth. For the year, this initiative has added 50 basis points to our same store revenue growth, 100 basis points to our expense growth and 20 basis points to our NOI growth.
We now have approximately 20,000 units signed up for our technology package and the program is performing in line with expectations. Based upon our year-to-date operating performance we revised upwards and tightened our 2015 full year revenue expense and NOI guidance.
We now anticipate full year 2015 same store growth to be between 5.1% and 5.3% for revenue, expenses and NOI. The new midpoint of 5.2% for both revenue and NOI represented 20 basis point improvements.
We are increasing our expenses midpoint by 20 basis points as a result of the previously mentioned higher than anticipated levels of employee benefit and healthcare charges we recognised in the third quarter. 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 $4.51 to $4.55 versus our prior range of $4.47 to $4.57 representing a $0.01 per share increase in the midpoint. This result mainly from higher same store NOI growth now expected in the fourth quarter.
Our revised full year 2015 FFO guidance assumes no additional real estate transactions in the fourth quarter. Last night, we also provided earnings guidance for the fourth quarter of 2015.
We expect FFO per share for the fourth quarter to be within the range of $1.17 to $1.21. The midpoint of $1.19 represents a $0.05 per share increase from the third quarter of 2015.
This $0.05 per share increase is primarily a result of the following. A $0.065 per share increase in FFO due to growth in property and net operating income comprised of a $0.03 per share increase resulting from an approximate 2% expected sequential increase in same store NOI driven primarily by a normal third to fourth quarter seasonal decline in utility, repair and maintenance, unit turnover and personal expenses and the timing of certain property tax refunds.
A $0.02 per share increase resulting from the NOI contributions of our five developments and lease up, a $0.02 per share increase resulting from the normal third to fourth quarter seasonal increase in revenue from our Camden Miramar student housing community and a $0.05 per share decrease due to the loss of NOI from our recently completed $33 million disposition. This $0.065 per share increase in FFO will be partially offset by $0.015 per share decrease in FFO as a result of the planned fourth quarter bond transaction.
Turning to the capital markets, during the third quarter we completed the refinancing of our existing line of credit increasing our borrowing capacity by $100 million to $600 million in total extending the maturity date by four years and decreasing our borrowings led by 20 basis points. Although our current plan for the fourth quarter contemplates a new $250 million 10-year bond transaction we are flexible to the exact time and issuance.
We are monitoring bond market conditions closely and may complete this issuance this year or early next year. Currently we estimate that all in ten year bond pricing for Camden will be in the high 3% range.
Our balance sheet remained strong with debt to EBITDA 5.4 times, a fixed charge expense coverage ratio at 5.3 times, secured debt to gross rate asset with 11%, 78% of our assets unencumbered and 84% 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]. And our first question today comes from Nick Joseph of Citigroup.
Please go ahead.
Michael Bilerman
Hey it’s Michael Bilerman here for Nick. Rick, you talked a lot about the private market and acquisition pricing being robust.
We have clearly seen some M&A deals through larger portfolio transactions. I guess how aggressive are you going to be to try to now just tap between your stock and your NAV.
How much of the company would you sell, would you entertain a failed company? I’m just curious how you are going to take advantage of it?
Richard Campo
Well, we clearly have taken advantage of upgrading the quality of our portfolio by selling a substantial amount of assets into this market and redeploy the capital into either development or acquisitions and also lowering our dept profile pretty dramatically over that period of time as well. So, it does make a lot of sense to take advantage of the acquisition, but then the high bid prices that are out there and we'll continue to do that.
As far as selling the company, when you get into the discussion of that kind of thing, so the question about whether you want to sell your company or not is really a function of you think the value proposition is spread between the NAV of the company today and a current stock price is a permanent issue because of something wrong with company. For example, if people don't trust management or there's a fundamental CASM between the public markets and the private markets.
But generally over the 22 years that we've been in this business we found that those times are around, but they generally aren't permanent and generally the markets those spread between NAV and prior market value and stock prices narrow all the time if you do the right thing, which is continuing to allocate capital properly during these market times. And then making sure that you are executing above and beyond what the private market is executing on from a net operating income perspective.
We tell our people in the field that we want them to exceed the market conditions, outperform their market no matter what the market conditions are. As long as we do that the management team, we keep our debt low.
We focus on executing in the field every single day, the gap between our stock price and our NAV will narrow over time. If we didn't think that would narrow and it was a permanent, investors didn't want to invest in REIT stocks and there was a long term permanent disconnect than we would clearly look at making sure we harvest that value for shareholders.
Nick Joseph
Thanks. And this is Nick here.
You mentioned that almost all your markets are stronger improving and then you like to see above long terms trend in 2016 except for Houston obviously, so what is your expectations for Houston revenue growth both to finish in 2015 and looking ahead to next year?
Richard Campo
Nick, we still think we'll finish in the 3% range for Houston this year and with regard to next year we're just in the process. Right now doing our Roundup budgets and once we get numbers some in the field we're very much – very decentralize as it relates to our budgeting process.
We give guidelines. But ultimately our operators in the field have the best intelligence and do the best job given the information that we provide them with.
And coming up with your budget, so we'll see what comes out of that process in the next 30 days or so. And then we'll put together a plan for 2016 that's approximately given that input.
Alexander Jessett
Houston, clearly its not going to be better than 2016 better than 2015, but I will tell you that lot of people surprised by the demand side of the equation given the supply coming in and also given the job growth being flat. And so, there's a lot of interesting things, dynamics that are going on in this market that people don't get.
One of which is we had a housing shortage here for a long period of time and we're just filling that sort of shortage whole to this new supply coming in. And then the other thing that's been happening that's very interesting is that product has been built, it's delivered in Houston today, a lot of it, it hasn't ever existed in the market.
We're talking about high end, high rise buildings, urban developments that today are leasing for $2.50 to $3 a square foot and that's creating its own new demand suburban flight if you will, people moving in because of the traffic and the product is bigger, its more luxurious and its more sort of welcoming to that [Indiscernible] investor crowd that is trying to sort of get rid of the traffic scenario. So, that's been a really interesting and unusual situation, because in last cycles you said sort of regular apartments.
Today, we have apartments that are actually appealing to the non-traditional apartment dweller, somebody who has an average income of a quarter a million and up and can afford to live wherever they want.
Nick Joseph
Just a follow-up on that supply, what percentage of that supply being built in Houston has been done by merchant builders?
Richard Campo
80% and 90%, 95%.
Nick Joseph
Does that…
Richard Campo
Well, so let's put it this way, there's only one development being built today in Houston by a public company which is Camden and all the rest are merchant builders. So its actually 99% probably.
Nick Joseph
And what's your expectation around what type of concessions that they will use to lease up?
Richard Campo
Merchant builders are very typically and we are too, new developments tend to when you have a zero occupied property giving free rent is easy to do since you don't have any revenue anyway right. So, free rent today range is depending where you are to zero for the hottest properties and up to month or two months free for some of the merchant builder property that here today.
But there is a sort of dichotomy happening, the shift between the As and the Bs, which is very typical in cycles like this where sort of the suburban properties in Houston doesn't have as much competition, everyone wanted to be in the urban course, so the urban core is probably weaker than the suburban core and the A properties are growing at a – or getting more pressure from that supply than the B properties.
Nick Joseph
Thanks.
Operator
And our next question comes from Gina Glenn of Bank of America/Merrill Lynch. Please go ahead.
Gina Glenn
Thank you. Maybe following up on that, new type of supply that’s been delivered, you have great results in Denver and Atlanta, but those markets that are seeing a lot of mid and high rise product built, can you maybe comment on how portfolio compares in the price point?
Richard Campo
So, in both Denver and Atlanta, our portfolio was less exposed to where the bulk of the construction has been going on. It tends to be in the population and job growth centers outside of the CVD and obviously we got a couple of assets in those markets, but generally speaking we're going to be less effected.
In both of those markets, if you look at supply and demand situation out in to 2016, they both look still pretty strong. And Denver it looks like our forecast for 2016 is about 30,000 jobs and forecast for new deliveries in 2016 is about 7,000 apartments, so that's really not that far off what we would considered to be equilibriums.
The numbers in Atlanta, 2016 forecasting 65,000 jobs, forecasting 11,000 new apartments and that's actually a condition that would add to overall market tightness, not the other direction. So obviously if you in a submarket and you have three new – two or three new communities that are trying to get least up and your direct competitors you're going to catch some track note from that, I don't care really what the market conditions are, but generally speaking we think those markets.
We're very well positioned in those markets at the submarket level and on – if you just look at the macro level those should continue to be pretty strong market for us next year.
Alexander Jessett
I think the thing that's interesting too when you think about those markets with strong job growth. You still have a 1 million to 1.
5 million of millennials that are still living at home more than they were living in home in 2007. So, there still unbundling that's coming, that's happening as a result of these of job gross.
And then when you look at the idea that the millennials are not buying homes now, we just saw the new home sales numbers were pretty down across the country in the last week or so. And so, the home purchases, we don't have as many people moving out to buy homes, so and the millennials are taking time to get married and change jobs and things like that.
So that demand side is a whole lot more robust which means you need a whole less job growth in order to fill up the properties you have to create more demand for multifamily and you saw the homeownership rate I think flatten and stop declining, but it still at very low levels, so that just bodes well for the increase and demand in these markets like Denver, Atlanta and Chevrolet and in Florida, Southern California.
Gina Glenn
Thank you. And appreciate the update on move outs for home trend seem kind of flat.
Do you have an update on affordability for your markets?
Richard Campo
Yes. We've been bumping around 17.1, 17.2 for a long time.
We did have a slight uptick in the quarter to about 17.5, but again well below what we think kind of the long term average of affordability is in our portfolio which is over 20 years, its closer to about 19%. So we still think we got a fair amount of room there and again quarter to quarter blips are kind of hard to read much into, but it did tick up 17.5.
Gina Glenn
Thank you.
Richard Campo
You bet.
Operator
And our next question comes from Alexander Goldfarb of Sandler O’Neill. Please go ahead.
Alexander Goldfarb
Good morning. Hey, referring to Billerman’s question, maybe I missed it but did you address or talk about maybe a chunk of the portfolio not a full company, but clearly if the demand is strong you guys have massive discount, it seem like a good time to sell assets that may not fit longer term.
I'm sure you could price shelter fair amount and pay a nice special dividend and reward investors. So what are your thoughts about that?
Richard Campo
Well, clearly we showing that we're willing to sell assets, 1.7 billion and we continue to look at the portfolio and turn the portfolio where we think in [Indiscernible] trend, so that's out of the question. It's just the matter of the right moves at the right time, at the right price.
And so we clearly recognize that there is disconnect today and we're going to maximize the value per shareholders anyway we can including portfolio analysis.
Q – Alexander Goldfarb
Okay. And then switching to Houston, if you just think about what may go on there and let's assume that it’s a replay, what happened in Washington DC., we sort of have prolong soft market.
Are there any lessons that you took away from operating in DC. over the past number of years that will help you sort of maybe do a bit better in Houston, vis-à-vis its sort of soft market with supply continuing to come out.
I get it that you know its more higher end supply, but still it supply. So is there anything – any takeaways from operating in D.C.
that make you help perform Houston to the next – during this soft time?
Richard Campo
It's not really -- Alex, it's really not from lessons learned from DC. This is lessons learned from 30 years of been in this business and operate in bunch of different markets.
And one of the things that we always do when we're forecasting weakness in the market ahead as we start adjusting things like least term, which we've already – we started that process some time ago here in Houston. Normally we would encourage 12 months leases, so that in a raising market we get to reset the price every 12 months.
And obviously as you start doing your forecasting and you see that you're not going be in the strong rent growth period potentially not a strong rent growth period. Longer leases are better for the landlord [ph] and we've already done that.
The other thing is that you try to – one of the things that we know is that as much dollars bring on your product they're going to get very aggressive on concession, so one of the things that we do is we very much more aggressive on renewals that can get increasingly expensive to backfill units and in an environment where merchant builders are willing to give pretty substantial concessions to try to get to the finish lines. So, we've done all that and obviously we did that in the first part of the Washington DC cycle.
You kind of never know how long these things are going to persist. I do think it's interesting though on our numbers in commentary we seem to get people at sort of lumping Houston and DC together, obviously they are two weakest performing markets in our portfolio right now.
So there is – I understand the natural tendency to do that. But I think you're talking about markets that are in very different places.
So Washington DC has been in our either bottom one or two for four years. Houston has been on our top four for four straight years.
So this is the first year in five that Houston won't be our top performing market. So, I just think you get markets that are in very different states and obviously the operations formula for that is those two are very different.
Alexander Goldfarb
Okay. Appreciate it.
And I like the opening music, looks like you guys had some fun with your [Indiscernible]. Thanks.
Operator
Our next question comes from Ian Weissman of Credit Suisse. Please go ahead.
Unidentified Analyst
Hi guys. This is Chris for Ian.
Great quarter on revenue growth, but same-store OpEx is up 5.7%, we talked about on previous calls. You talked about higher employer benefit.
Could you talk a little bit more about number overall? What drove that 12.8% increase in Houston?
And then just the overall 9.2% increased in property taxes?
Richard Campo
Yes, absolutely. So, if you look at Houston, the12.8% is almost entirely driven by property taxes.
But Houston for the year on property tax basis is going to be up approximately 20%. If you look at what it was for the quarter taken in account certain refunds we got a year ago same quarter was of course 24%.
So that's what drove the Houston operating expense issue. When we think about operating expenses in general, so taxes for us this year is going to up approximately 7%.
Taxes make up a third of our total operating expenses, so right off the bat you got approximately 2.1% increase in operating expenses before you look at anything else. And then, on top of that the new technology package we're rolling out with [Indiscernible] adding about 100 basis points to our full year expense number.
Those are really the outliers. Once you extract those the rest of our operating expenses are in line with the expectations and we'll pass the history.
Unidentified Analyst
Great. And when we hear you have a huge refund in 2014 versus this year, what's driving your ability to get that big refund last year versus not being able to do kind of something similar this year?
Richard Campo
So the refinance I was referring to refunds in Houston last year because in regards to the 12.8% increase in expenses for Houston, a lot of that just timing. So what happens is when we get all of our assessments out from the appraisal district we obviously contest the vast majority of them and lots of them end up actually go in the litigation and so settlement timing is really dependent upon when you get the final resolution with the appraisal district.
Unidentified Analyst
Got you. And then just moving over to the Camden Washington you remain partial acquired earlier this months and did you talk about maybe the capital budget for the project.
What you underwrite in terms of the stabilized deals. And then where does that fit into the shallow pipeline in terms of expected starts?
Richard Campo
Sure. The Washingtonian underwritten yield is in the mid 6s and the start is scheduled for 2016.
We have – when you look it our search this year we started two projects this year. Development pipeline is definitely shrinking and it's appropriate in this part of the cycle and with capital constraints the way they are.
So we are – we think that project is great project, great yield and we will evaluate start in 2016 when we get closer to it.
Unidentified Analyst
Great. Thank you very much.
Operator
And our next question comes from Jordan Sadler of KeyBanc Capital Markets. Please go ahead.
Mr. Sadler, is your phone on mute?
Richard Campo
We cannot hear him.
Operator
Your next question then comes from Rob Stevenson of Janney. Please go ahead.
Rob Stevenson
Good afternoon guys. When you think about run rate for same-store expenses given personal cost and given the property taxes, given your exposure to markets like Texas and others that are being hyper-aggressive on passing through, I mean, what's out there that sort of gives you relief over the next couple of years that you don't keep seeing, 4.5%, 5% same-store expense growth?
Richard Campo
Well, ultimately when you endure Alex, mentioned 29% increases in tax cost in the market, how many of those can there be that before there is no gap between assess value and market value. So each year that you get one of those behind you think you're making progress.
In terms of long term expense, we back 20 years and look at our reported same-store operating expenses, its roughly 3% on all expenses and the interesting thing is over that same time frame property taxes, the increase in property taxes over 20 years is been about 2.1% in our portfolio. So even though right now we're getting killed by property taxes and it certainly makes us to pull our hair out.
Reality is that over a long period of time they've been below the average of all other expenses in our portfolio. So, we're definitely getting slam right now, and some of that is just reflects the reality that everyone knows that property values even in markets like Houston which are getting a lot of scrutiny right now.
The stuff is still trading the CapEx rate that's going to make you eyes expand. So I think long term it’s a 3%, 2.5% to 3% cost market in terms of expense growth, long term its 2% on taxes but right now I tell you we're upside down with 2%.
Rob Stevenson
Okay. And then, today how do you guys think about redevelopment within the portfolio, I mean, what's the overall opportunity there and how much did you guys spend in 2000 for going to spend on 2015 and what are return sort of averaging for you guys?
Richard Campo
So, the entire program that we laid out a couple of years ago had a spent of about $230 million associated with it, with a pro forma yield of about 11, and that's what we have return year to-date on our redevelopment, so obviously the bulk of that's behind us. I think this year we're on track to do about 2500 to 3000 apartments we probably go another numbers similar to that, that would be available for 2016, but obviously the bulk of it having done 20,000 apartments already is those that were didn't make sense for economically and given their market position have been done.
Rob Stevenson
Okay. Thanks guys.
Operator
And our next question comes from Jordan Sadler of KeyBanc Capital Markets. Please go ahead.
Austin Wurschmidt
Hi, guys. This is Austin Wurschmidt here with Jordan.
I was wondering if you could provide some thoughts on the elevated multifamily permit levels and then what your thoughts were on the homebuilders getting into the multifamily business more permanently.
Richard Campo
The multifamily, the elevation of the supply is a function of the demand that's been met, if you go back to the over the last five years, we've had a shortage of multifamily housing in America for last five years, that's why occupancy rates were the highest they been and rental rate growth has been robust for long time. so we're basically delivering and starting projects that are being absorb near the marketplace very efficiently.
So I think that the ability for multifamily to increase the level of production from this level is very limited even with home builders getting into the business, also there's been a bunch of office companies get into it, high ends is now developing the permits as well as these office companies or the [Indiscernible] challenge we have today is that, if you look at ours, our delivery for example Camden, everyone of our projects is delayed at least two months and in some times as long as six to eight, nine months, its primarily because the lack of construction workers and the lack of ability to get product complete. And I think some of the worry about supply has been muted or at least the effect of supply have muted by the fact that you have a lot of projects under construction that can't delivered the market because of this construction worker shortage.
So I don't think that the industry has the capacity to increase the supply side of the equation very much from where it is today. The other think that will hold that back through a certain extent is because of this shortage of construction workers cost have gone up dramatically, land cost have gone and the financing model that was used in the last cycle before the great recession has changed dramatically where banks actually look for merchant builders liquidity and they actually test for contingent liabilities relative to real tangible capital which is amazing right.
In 2007 most merchant builders had infinite contingency as to capital and/or guarantees to capital which is pretty amazing. So today I don't think we have even with the new competition coming in, but you don't have an ability to really increase the number of units that re being build based on sort of at today's level.
Austin Wurschmidt
Thanks for all the detail there. And then just could you comment on the performance in DC between your suburban and CBD properties and which set of properties really are you more optimistic about headed into 2016?
Richard Campo
Our DC proper communities have historically outperformed our suburban assets. In the last four years it hasn't been much spread because there's been, there has whole lot of pricing power, but the pricing power that we have had was in our DC proper assets, obviously we had great success with our normal one lease up.
We had great success with South Capital and those sort of came on the market at a time where there wasn't a whole lot of other competition in DC proper based on that we started, number two which again we are again we think we're going to hit the market at a really opportune in time. So my guess is there is probably a permanent benefit to DC proper assets if you look at over ten-year timeframe versus suburban.
But before DC kind of hit the skids on in this cycle both of those asset classes were doing extremely well. But they've – DC proper would have a premium than as well.
Richard Anderson
Great. Thank you.
Ric Campo
You bet.
Operator
And our next question comes from Dave Bragg of Green Street Advisors. Please go ahead.
Dave Bragg
Thank you. Good morning.
Just going back to the topic of capital allocation, despite the unfavourable cost of capital Camden is really still a net grower this year when we factor into development, and the stocks underperformance this year and over the long-term doesn’t really make it clear that this strategy is working. So its good hear that you're considering a more aggressive approach on the asset sales.
So the question is about development, the continued focus on development, kind of sticks out given your cost of capital. How do you think about the risk adjusted returns available on development versus the stock?
Ric Campo
Well, the – we've had a lot's of discussions about stock buy backs and the challenge that we've had with buying the stock back is been the volatility and the blackout periods that we've been in. And when you look at the disconnect between the stock price in NAV and historically we have been big buyer of the stock back and we purchased A huge amount of the stock in the past and we typically done it with a 20% discount to NAV.
And so I think that’s a reasonable opportunity to do if we have what we've been saying all along which is persistent sort of disconnect and in last time I looked in the last three months we were 52 week high and 52 week low and that happened during our blackout period the last time. So when you think about our development pipeline we've definitely shrunk it and we're definitely not driving that to high levels today because of the capital situation and the cycle in the market.
So if this persistent disconnect between NAV and the actual stock price continues, we will be in the market buying to stock back.
Dave Bragg
Thanks for that Ric. So now that maybe the stocks performance today takes it back closer to a 20% discount and the stocks been trading out of discount for the group for about a year now that might be said and you have further opportunity to do that?
Ric Campo
Yes. We've always said, its persistent and a significant discount that allows us to sell assets and buy stock and keep it on leverage neutral basis, we will be doing that.
Dave Bragg
Okay. The second question, besides the capital allocation, the other key reasons that might be trading up a discount, that it is, its probably Houston.
What are you thoughts on selling assets in Houston proving out private market values there?
Ric Campo
I don’t think selling assets in Houston proves anything, because the private market is robust. So you can look at lots of trade that have been done in the last 60 days at sub five cap rates and selling the couple of assets in Houston is not going to convince people that Houston is not going off the cliff in 2016 and '17.
So I think its sort of a moot or its sort of game that wouldn’t get you anything. And so when we look at selling assets, we want to sell assets that are slow growing assets, with that high CapEx, that somebody will pay a premium for because they don’t put the real CapEx number in their underwriting, and we want to keep the portfolio quality long-term really good.
And we like our Houston assets. We think Houston is going to be a great market long-term and our Houston assets don’t scream in the bottom quartile of our properties when we look at them on that basis.
Dave Bragg
Okay. Thank you.
Operator
And our next question comes from Wes Golladay of RBC Capital Markets. Please go ahead.
Wes Golladay
Hello, everyone. I wanted to go back to that point you made about the pent-up demand in Houston, where were these people staying, were they coupled up or they outside Beltway.
And would some your properties be impacted by their supply, your properties that are outside the Beltway, if people were to start to move into the city?
Ric Campo
The people that are moving into the city are leaving homes and not apartments, a lot of them…
Wes Golladay
Okay.
Ric Campo
And so new supply is just coming in that is new to that – new product type, that’s attracting investor into the urban core, they are definitely coming out of homes not apartments. Those are typical people who, you know, kids got to college, so they have a big house and husband and wife or what have you and they now move in.
In terms of the – where the people were, I think there were lot of people doubled up, no question about that and a lot of people would come in to Houston and they would, sort of settle into a specific area and the figure the city out and then move to where they ultimately wanted to be. So there was definitely a fair amount of doubled up folks.
The other thing I think what's happening to this, and I think this is supporting suburban, and that is that, the suburban supply has not been as robust at the urban supply in Houston. So those folks were filling the suburban properties up to the point where they had 97%, 98% occupancy's and that’s just unsustainable.
I mean, Houston generally is a 95% occupied market, maybe even a 94-5 [ph] market and today we probably have 200 basis points of excess occupancy in the overall market because of the people moving in.
Wes Golladay
Okay. And then how is the Tenet Health [ph] out three, are you now seeing any up tick in bad debt expense in your Houston properties?
Ric Campo
No, not all. We have meeting every, I think at least once a month, but also when we have conference call, we check with our managers and we haven’t had very limited information about people moving up because they lost their job and energy or something like that.
And so it has not been a massive wave of energy losses that have impacted our specific properties. And I'll give an example, when Enron went bust in 2001, I mean, we had a property in downtown or in midtown Houston that went from 95% occupancy to 75% in like a day and that nothing like that is happening here today in Houston, Texas.
Wes Golladay
Okay. And then you offered up some preliminary job forecast for some of the markets, did you happen to have one for Houston, are you guys still working on that?
Ric Campo
We've got Houston and these are not our numbers, these are Ron Whitman's number just to be clear. We've got Houston ahead about 30,000, 31,000 jobs forecasted for 2016.
He still carry in 25,000, 20 to 25,000 for 2015. Houston historically has big chunk of their annual job growth in the fourth quarter.
So we'll see if that happens or not, but in any case his number for 2016 is about 31,000.
Wes Golladay
Okay. Thanks a lot.
I appreciate all the color.
Ric Campo
You bet.
Operator
And our next question comes from Dan Oppenheim of Zelman & Associates. Please go ahead.
Dan Oppenheim
Thanks very much. Ric, you had talked about the development pipeline coming down going forward and so just based on capital and the environmental overall.
Just kind of curios, how much do you think starts will come down for you in '16 and '17 versus, say '15?
Ric Campo
Well, in '15 we started two projects. I don’t think we'll start more than two in any of those years, given the current environment.
So they likely will come down some because of just project cost. In '15 Camden NoMa is a big project and other ones will be probably be smaller than that in '16 or '17 in terms of total dollars.
Dan Oppenheim
And then you are talking about the funding environment being more difficult. What about the funding via assets sales given how strong interest there, so at this point?
Ric Campo
The funding – the assets sales are – there is no limit to the number of assets that you can sell today given the robust bid. The issue with asset sales to fund development is that we have limited amount that we could sell and not have to pay a special dividend because of the tax aspects of REIT land.
I think we have – we've said in the past that we can sell somewhere in the $300 million, plus or minus depending on the game structure without paying a special dividend. But every dollar over that from a sales perspective you have to do either do a 1031 exchange or you have to do a special dividend of the game.
And which we're not opposed to if it make sense and we can create value in that way.
Dan Oppenheim
Great. Thank you.
Operator
And our next question comes from Vincent Chao of Deutsche Bank. Please go ahead.
Vincent Chao
Hi, good afternoon everyone. Just a going back to the job growth side of things.
I think in the opening comments you talked about expecting for most of the markets to see continued above trend job growth. I was just curious, you know, does that presume that job growth picks up from sort of where it’s been in the last couple months.
We've seen a little bit of dip here, but just curious what kind of overall growth you're sort of thinking about?
Ric Campo
So the numbers that we gave you today on job growth in the markets for 2016 forecast are from Ron Whitman and he is using a national or US number in 2016 of 2.5 million and that would compare to his, what he is forecasting for full year 2015 of about 2.9 million. So he is actually forecasting fewer jobs in 2016, than what were created in 2015, were about 3,000.
So that then derives or drives his analysis at the individual city level. So you - if you carry that across all of our markets, you'd say that the job market – overall job market is not going to be a little bit lesser robust in 2016 than 2015.
But 2.5 million jobs overall next year I think most people would take that and we certainly would.
Vincent Chao
Okay. And it sounds like he is projecting Houston to actually be up.
So I guess is there any market that is projected to really fall, thinking maybe West Coast where things have been extremely strong?
Ric Campo
's
But our markets tend to create more jobs than the national average does and that’s the reason we operate in these markets. So I can send it to you market-by-market.
Vincent Chao
Okay. Thanks.
I'll follow up afterwards. But – and then just one other question on the expense side.
It sounds like most of that was – we talked about the key drivers. But have had to think about changing your market expense at all, in terms of trying to adjust the current additions and drive demand, drive volume?
Ric Campo
So what we do, in terms of total marketing spend, our actual marketing spend has been down for the last three or four years, primarily because of the ability to do better targeting and through our search engine. What we do more of now is rotating dollars between markets and then even between sub markets, sometimes targeting specific community.
So where there is a need then we do a much better job of allocating that resource where it’s needed. Where as before we sort of had to take the – if Houston is showing some weakness, then we would support all of Houston communities and we longer do that.
I mean, because in Houston even today despite the fact that the overall market is 3% we got a whole lot of our communities that are still below 5% and 6% and again the primarily suburban assets. So where we need to spend the money, we're lot smarter about spending it overall, marketing spend for the last couple of years is down slightly.
If you go back to the total spend as a percentage of where we were say five, six years ago, its down pretty significantly. So it’s – just been smarter about where you spend your money and have in better idea of what communities need support and what – at what parts of the cycle.
Vincent Chao
Okay. That makes sense.
Thanks.
Operator
And our next question comes from Tom Lesnick of Capital One Securities. Please go ahead.
Tom Lesnick
Hey, guys. It looks like most of your under construction lease of properties improved by double-digit lease up sequentially.
But looking at Camden Flatirons that will only improve a couple of percentage points. Just wondering what if anything was driving that and what are your thoughts generally on Denver's supply right now?
Vincent Chao
So on Camden Flatirons that’s 424 unit community and this is - we always know that this happens, you get to a point in your lease up where you're actually competing with yourself in a sense that you got residents that moved in 12 months ago. We've averaged over the [indiscernible] into our timeframe with that lease up about 25 to 30 apartments per months.
So if you do the math, somewhere when you get to about 80% occupied you start running into the residents that you put in there on day one. So it’s just – its part of what we know is going to happen.
So yes, that one was a little weak in the quarter, but we're well along the way if that one stay last. Overall in Denver, still a really good environment to be leasing in.
There is a fair amount of new stuff that’s been build right now, but we were very early to the – our starts in Denver and they have come online at a very good time for getting well above pro forma rents in every case.
Tom Lesnick
Okay. And then Alex, I am just curious on the fourth – the plan unsecured this year in 4Q, where you heard another company talk about their known debt financing need this quarter and their preference actually to utilize the term loan market as opposed to the unsecured market right now, so I think volatility in the unsecured markets.
So I’m just wondering have you guys considered a term loan and will of the unsecured or what are your thoughts there?
Ric Campo
So the unsecured bond market certainly has then -- has had some ups and downs during the last quarter. The thing I’ll tell you is when you are still at a historical low interest rate it seems best to get duration.
The challenge with the bank term loan market is five is a preference and some have got the sevens. But interest rates this were we still like ten is a longer.
Tom Lesnick
Okay, fair enough. Thanks guys.
Operator
And our next question comes from Richard Anderson of Mizuho Securities. Please go ahead.
Richard Anderson
Thanks. I know it’s going to be a busy day, so I FedEx my questions.
Did you receive them?
Ric Campo
Yeah, as a matter of fact it got delivered directly to my door step.
Richard Anderson
Oh good, good.
Ric Campo
Because I demand first class service.
Richard Anderson
So what’s your answer then?
Ric Campo
The answer is no.
Richard Anderson
So Keith, if you were to look at Dallas, Austin, Charlotte and Denver, you know we talk a lot about Houston and DC, but those are some markets where I think you know you can argue there is some fly issues. Would you be changing your kind of rank on them you know in terms of the direction they were going from maybe neutral positive to decline on four -- any one of those four?
Keith Oden
You know not right now Rich. If you look at the job growth that those four markets are getting this year and what’s projected next year, they are still all four of those very strong markets.
Yeah, of those on a percentage basis you got -- the Charlotte market has a lot of new constructions that’s kind of working its way through the pipeline, but you know even Charlotte next year projecting about 16,000 new apartments plus or minus and Charlotte has projected to be about 32,000 jobs, so that’s dis equilibrium in this near term. But I would tell you that we have not seen any real pressure from the new developments to this point.
And I think its speaks to what Ric talked about earlier is that if you just kind of look at traditional measures of digi growth jobs and what was the multi family supply. I don’t think you can get to the answer that we’ve absorbed almost 14,000 units in Charlotte, and we’re still 96%, 97% occupied and raising rents.
So it just doesn’t make any sense, so there is got to be other things in play and I think the unbundling that Ric described is certainly in evidence in Charlotte.
Richard Anderson
Okay. And follow up to Ric early on in the conversation you said you know your company is not broken or you know beyond repair and you are not going to sell and I get all that and no one is arguing the quality of the organization.
But looking at it the other way if you had the equity markets to back you up, do you see any kind of situations out there of scale that are kind of “broken” or permanently below NAV that you would be buying right now if you could ?
Ric Campo
I think that’s a complicated mass situation with stock prices where they are at this point because you would have to use massive leverage which would be countered to what we want to do with leverage wise. But I don’t think I see that out there.
I mean, you are talking about public companies, the sort of broken ones have been taken out and you know we are always looking for interesting opportunities but when you look at this capital environment it will be pretty hard to make the math work with the equity prices where they are today.
Richard Anderson
No doubt. Okay, thank you very much.
Operator
And our next question comes from John Kim of BMO Capital Markets. Please go ahead.
John Kim
On Houston organic growth, its pretty much what you expected at the beginning of the year, but is it safe to say the employment situation is not as strong. And are you concerned at all with the recent announcement by Chevron and Halliburton hires white collared jobs being cut?
Ric Campo
So we are definitely concerned about the long term aspect of what’s going on in Energy obviously. And if energy prices continue to stay at these low levels and these companies have to adjust its definitely going to impact Houston.
We understand that. But, the interesting part is it’s hard to say when and where and like to the issue with Chevron and Halliburton they have both -- they are reticent to say where the jobs are being cut and a lot of them are cutting jobs outside of Houston but and bringing people in Houston to warehouse some in Houston.
So, its really hard to say how that’s all going to play out and that’s why there is probably pretty limited visibility into what happens in 2016. And you know on the one hand you got the bulls who say that oil is going to be 70 bucks by June 2016 and on the other hand you have you know the Bears who its 20 and obviously there is a big difference between those two numbers in terms of how that economy overall performed.
So at this point you haven’t seen any major employer just give pink slips to a ton of apartment dwellers that live in our properties.
John Kim
Ric, you referenced your experience with Enron and now the situation appears to be different, but is there anything that you could do this time around if thing did turn sour quickly?
Ric Campo
Well the key as we manage it every single day we mark our properties to market every day. We extended our leases as Keith discussed so that we have longer duration.
And beyond that you just have to offer the best living experience in the market and outperform the market no matter what the conditions are. And we’ve been to this movie before, Houston is as a market that we know how to operate on the uptick and we know how to operate on the downtick.
And so we will get through this time in a I think a very reasonable way and what is it going to look like next year the year after you know it’s anybody’s guess at this point. The good news is they are tubulising [ph] that people do about Houston and you think about it’s 12.5% of our portfolio and the reason we -- its only 12.5% is we don’t want to have any one market, the dominant market that’s going to take the whole company south.
If you have a 10% decline in Houston’s NOI next year it’s a 100 basis point change in our overall same property NOI for the portfolio or 110 or something like that. So at the end of the day, you can tubulise Houston but it hasn’t -- we haven’t seen it manifest and I think that it’s well over blown and already in the stock.
John Kim
Okay moving on to potentially something else that’s over blown package gate. I think you did a good job explaining your rationale, but it seems like the cost to handle the extra packages is really not that significant especially when you consider all the media attention brought to it.
How serious are you at this point considering other options like these competitors have to drive there.
Ric Campo
So when the -- so to answer your question about considering other options, we’re not because we are perfectly happy with the solution that we have put in place. Now about half of our residents in our portfolio get the package -- the package is delivered directly to the front door which we think is a far better customer experience for almost everyone.
I think ultimately that number of 50% of our residents will continue to climb and at some point our residents, the people who come to our community will begin asking as they are in the market shopping, they will begin asking our competitors why don’t they have the option of having their package delivered directly to their door. And when question starts being asked in large numbers by our customer base then we’ll see what other people do.
But we are perfectly comfortable with where we are and we think that we are providing higher level of service to a large number of our residents all ready, we think that number is going to grow. If you look at what happened when we starting drilling for water [Indiscernible] you are not taking something away from somebody and in this case we are improving their service by the packages.
But when we build for water we have properties across the street from us, with big Billboard banded signs on their property saying free water here, don’t lease at Camden. Well I can tell you that those properties today charge for water, any property in the institutional quality real estate realm today charges for water.
So somebody has to lead the way and start paving the way and we’re going to take some arrows from the press and maybe competitors saying no I can’t believe they are doing that, but at the end of the day it’s a better solution for the customers, it’s a better solution for us and our competitors will follow you watch.
John Kim
Now when you are talking about customer satisfaction to the state, how do you track this, is this on surveys or your property manager feedback or?
Ric Campo
Property manager feedback, you know you just kind of look at the numbers, right. And when we ask our top 170 property community managers how many people in your community have actually given notice or made a change to their living status based on a package policy, the answer is those are handful.
So you can -- you know anybody from the outside looking in unless you have access to the fact I can’t imagine that you could make an informed judgement about what’s better for us or our customers. The solution that we’ve rolled out is the only one that I’m aware of that actually meets the three objective that we set out for making a change to our package policy, provides best customer service, frees up our on-site staff time and it’s a solution that’s scalable upto 5 million packages.
If you got another one that meets those objectives I want to hear it.
John Kim
I think that was fine. Thank you.
Operator
This concludes our question and answer session. I would like to turn the conference back over to Ric Campo for any closing remarks.
Ric Campo
Well I appreciate your time today and we will see you -- in a few weeks. Thank you.
Operator
This concludes our conference. Thank you for attending today’s presentation.
You may now disconnect.