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Q4 2023 Camden Property Trust Earnings Call

Participants

Alexander J. K. Jessett; Executive VP, CFO & Assistant Secretary; Camden Property Trust

D. Keith Oden; President & Executive Vice Chairman of the Board of Trust Managers; Camden Property Trust

Kimberly A. Callahan; SVP of IR; Camden Property Trust

Richard J. Campo; Chairman of the Board of Trust Managers & CEO; Camden Property Trust

Adam Kramer; Equity Analyst; Morgan Stanley, Research Division

Alexander David Goldfarb; MD & Senior Research Analyst; Piper Sandler & Co., Research Division

Anthony Paolone; Senior Analyst; JPMorgan Chase & Co, Research Division

Austin Todd Wurschmidt; VP; KeyBanc Capital Markets Inc., Research Division

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Bradley Barrett Heffern; Analyst; RBC Capital Markets, Research Division

Eric Wolfe

Haendel Emmanuel St. Juste; MD of Americas Research & Senior Equity Research Analyst; Mizuho Securities USA LLC, Research Division

James Colin Feldman; Equity Analyst; Wells Fargo Securities, LLC, Research Division

John P. Kim; MD & Senior U.S. Real Estate Analyst; BMO Capital Markets Equity Research

Michael Goldsmith; Associate Director and Associate Analyst; UBS Investment Bank, Research Division

Omotayo Tejumade Okusanya; Research Analyst; Deutsche Bank AG, Research Division

Richard Charles Anderson; MD; Wedbush Securities Inc., Research Division

Robert Chapman Stevenson; MD, Head of Real Estate Research & Senior Research Analyst; Janney Montgomery Scott LLC, Research Division

Robyn Luu

Stephen Thomas Sakwa; Senior MD & Senior Equity Research Analyst; Evercore ISI Institutional Equities, Research Division

Wesley Keith Golladay; Senior Research Analyst; Robert W. Baird & Co. Incorporated, Research Division

Presentation

Kimberly A. Callahan

Good morning, and welcome to Camden Property Trust Fourth Quarter 2023 Earnings Conference Call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today are Rick Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, Executive Vice Chairman and President; and Alex Jessett, Chief Financial Officer.
Today's event is being webcast through the Investors section of our website at camdenliving.com, and a replay will be available this afternoon. We will have a slide presentation in conjunction with our prepared remarks, and those slides will also be available on our website later today or by e-mail upon request. (Operator Instructions) And please note, this event is being recorded.
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 fourth quarter 2023 earnings release is available in the Investors section of our website at camdenliving.com, and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call. We would like to respect everyone's time and complete our call within 1 hour. (Operator Instructions)
At this time, I'll turn the call over to Ric Campo.

Richard J. Campo

The theme for our on-hold music today was friends and teammates helping each other. The verse from the theme song of the popular TV show, Friends, sums it up nicely. I'll be there for you when the rain starts to pour. I'll be there for you like I've been there before. I'll be there for you because you've been there for me, too. One of Camden's 9 core values is team players. We recognize our employees who live Camden's values through our annual ACE Awards program. Each year, Camden employees nominate their peers and coworkers for an ACE award. And from our 1,700 employees, 14 are selected to be national ACE winners. Those 14 individuals are recognized and celebrated at our national leadership meeting. Being selected as a national ACE Award winner is the highest honor that Camden associates can achieve and represents the best of the best from Team Camden.
I want to introduce you to one of our national ACE Award winners for 2023, [Santos Castelo].
(presentation)

Richard J. Campo

It's folks like Santos who make it certain that no matter what's going on in the world, Camden will always honor our 9 values to ensure that we improve the lives of our teammates, our residents and our stakeholders, one experience at a time. Our finance, accounting, legal and real estate investment teams have had a busy year-end and beginning of 2024, closing over $1.2 billion in refinancing the sales transactions. We began 2024 with a strong balance sheet and are prepared for the growth opportunities as they may develop this year. Our operations and support teams finished the year strong and are positioned to outperform our local submarket competitors again in 2024.
2024 should be a transition year from peak new apartment deliveries to a more constructive market after supply is absorbed. 2025 starts are projected to plummet to a low -- in the 200,000 range due to difficult market conditions. 2024 apartment absorption is projected to be a little over 400,000 units nationwide with over 200,000 units absorbed in Camden's markets. 2024 apartment demand will be driven more by demographics and migration dynamics than traditional job growth. Apartments will take market share from the single-family market.
Beginning in 2011 and through 2019, apartments had an average market share of 20% of household formations. Apartments are projected to double that market share to 40% between 2024 and 2026. This is because, first, home affordability is at 20-year low with rising home prices and current interest rates, and no signs of the pressure easing anytime soon, even with rates continuing to fall. In-migration to Camden markets continues to grow. More young adults are in the workforce with solid job growth and wage growth. 30% of the households choose to live alone, which is at an all-time high. Camden's markets continue to lead the nation in job growth.
We look forward to what looks to be a very interesting year. I know that our Camden team is equipped and ready to excel in 2024 by being great friends and great teammates. Thank you, Team Camden for all that you do for Camden and our residents.
Keith Oden is up next.

D. Keith Oden

Thanks, Ric. For 2023, Same Property revenue grew by 5.1%, consistent with our original projections. Six of our markets achieved results within 50 basis points of their original budget and another 6 outperformed their budgets. Of the remaining 3, L.A., Orange County and Atlanta, both underperformed mainly for reasons related to bad debt, skips and evictions and fraud. In Phoenix, the underperformance resulted from market conditions moderating more quickly than we anticipated over the course of 2023. For 2024, we anticipate Same Property revenue to be in the range of 0.5% to 2.5%, with the majority of our markets falling within that range. The outliers on the positive side are expected to be Southern California markets along with Southeast Florida, while Orlando, Nashville and Austin, will likely underperform given outsized competition from new supply this year.
Our top 6 markets should achieve 2024 revenue growth between 2% and 4% and includes San Diego Inland Empire, Southeast Florida, Washington, D.C. Metro, L.A., Orange County, Houston and Charlotte. Our next 5 markets are budgeted for revenue growth between 1% and 2% and include Denver, Tampa, Atlanta, Raleigh and Phoenix. Our remaining 4 markets of Dallas, Orlando, Nashville and Austin, are expected to have revenue growth of plus or minus 1%. As many of you know, we have a tradition of assigning letter grades to forecast conditions in our markets at the beginning of each year and ranking our markets generally in order of their expected performance during 2024. We currently grade our overall portfolio as a B with a moderating outlook as compared to an A- with a moderating outlook last year.
Our full report card is included as part of our earnings call slide deck, which is incorporated into this webcast and will be available on our website after today's call. While job growth is expected to moderate over the course of 2024, the overall economy remains healthy, and we expect our Sunbelt-focused market footprint will allow us to outperform the U.S. outlook. We expect to see continued in-migration into Camden's markets and strong demand for apartments homes in 2024, given the relative unaffordability of buying a single-family home. We reviewed 2024 supply forecasts from several third-party data providers and their projections range from 230,000 to 330,000 completions across our 15 markets over the course of the year.
After analyzing the submarket locations and price points for these new deliveries, we expect that roughly 20% of those deliveries are between 50,000 and 70,000 new units may be competitive to our existing portfolio. Our top 3 markets for 2024 were the same as our top 3 markets for revenue growth in the fourth quarter of 2023, and they remain strong entering 2024. Their growth rates are expected to slow from the 5% to 8% range they achieved in 2023 and thus have moderating outlooks. Therefore, we've ranked San Diego Inland Empire as an A, Southeast Florida as an A- and Washington, D.C. Metro as a B+. L.A., Orange County, Houston and Charlotte round out the top 6 with L.A., Orange County receiving a B with an improving outlook and the other 2 ranking as a B with moderating outlooks. We anticipate the improvement in L.A. Orange County will come primarily from a reduction in bad debt as we repopulate many of our vacant units with residents who actually pay their rent.
L.A. Orange County will also see a manageable level of supply this year, which should also serve as a benefit. Our Houston portfolio had steady growth during 2023 and should continue to perform well in 2024. Supply remains in check and the number of competitive deliveries in our submarkets should decline over the course of the year. Charlotte ranks as our #6 projected market this year versus #5 in 2023, so it is still an above average performer, but with revenue growth likely closer to 2% than the almost 7% we reported in 2023. The aggregate level of supply coming into the Charlotte MSA will be elevated this year, and we expect our main competition will fall in the Uptown South End submarket, which is slated to receive 3,000 units this year.
Similar to Houston and Charlotte, Denver and Tampa also earned B ratings with moderating outlooks. Denver's revenue growth has been above average in our portfolio for the past 3 years and to continue that trend in 2024. Deliveries will tick up slightly this year, primarily in 1 or 2 of our submarkets, but should be met with solid demand. Tampa has been our #1 market over the last 3 years, averaging over 11% annual revenue growth. The growth will slow to the low single-digit range this year. New supply looks to be manageable in most of our submarkets there, but we are actively monitoring our 2 recently built high-rise assets in the St. Petersburg submarket for competition with the new product being delivered there. In Atlanta, our current assessment of market conditions rates of B- with an improving outlook.
Similar to L.A., Orange County, we expect to see a reduction in bad debt during 2024, which should boost our revenue growth from the less than 1% achieved in 2023. On the new supply front, Atlanta MSA will continue to add new units in 2024, and we anticipate the most competition from deliveries in our Midtown submarket.
Next up are Raleigh and Phoenix, both receiving grades of B-, but with stable outlooks. In the aggregate, these markets performed just under our portfolio average in 2023 for revenue growth and they should remain in that area for 2024 with 1% to 2% growth. And once again, while both of these markets face elevated levels of supply versus historical averages, we expect that only a handful of assets in each market will face head-to-head competition from 2024 deliveries. Dallas would also rate as a B- with a stable outlook, but its revenue growth may fall just under the 1% mark this year. While Dallas still ranks as one of the nation's top metros for job growth and in-migration, the outsized level of supply set to deliver this year will keep pricing power and rent growth muted there.
Orlando delivered outsized levels of revenue growth for the past few years, but it has dropped from above average to below average in recent quarters, thus earning a C+ grade with a moderating outlook. The economy in Orlando remains strong, but above average completion slated for 2024, will likely result in minimal revenue growth for the market this year. Our last 2 markets, Nashville and Austin, consistently ranked as top markets for multi-family construction and scheduled delivery of new apartments in recent quarters, while they also rank as 2 of the top U.S. markets for job growth, in-migration, quality of life, et cetera. The sheer amount of new supply coming in 2024 will likely result in flat to slightly negative revenue growth for both of those markets. And we believe 30% to 40% of the new supply in those markets may compete directly with Camden's assets. We have signed both markets a stable outlook for the remainder of 2024 with ratings of C and C-, respectively, given current market conditions.
Now a few more details on our 2023 operating results in January 2024 trends. Rental rates for the fourth quarter had signed new leases down 4.3% and renewals up 3.9% for a blended rate of negative 0.6%. Our preliminary January results indicate a slight improvement in signed new leases and moderation in renewals for a slightly better blended rate on our January signed leases to date. February and March renewal offers were sent out with an average increase of 4.1%. Occupancy averaged 94.9% during the fourth quarter '23. In January 2024, occupancy is trending in the same range. And as expected, move-outs to purchase homes remained very low at 10.4% for the fourth quarter of '23, 10.7% for the full year of '23. January move-outs will likely remain in the same range.
I'll now turn the call over to Alex Jessett, Camden's Chief Financial Officer.

Alexander J. K. Jessett

Thanks, Keith. Before I move on to our financial results and guidance, a brief update on our recent real estate and capital markets activity. During the fourth quarter of 2023, we completed construction on Camden NoDa, a 387-unit, $108 million community in Charlotte, which is now approximately 90% leased. We began leasing at Camden Woodmill Creek, a 189 unit, $75 million single-family rental community located in the Woodlands, Texas, and we continued leasing at Camden Durham, a 420-unit, $145 million new development in Durham, North Carolina.
Additionally, at the end of the quarter, we sold Camden Martinique, a 714-unit, 38-year-old community in Costa Mesa, California, for $232 million. The community was sold at an approximate 5.5% yield after management fees and actual CapEx and generated a 10.6% unleveraged return over our almost 26-year hold period. Additionally, during the quarter, we issued $500 million of 3-year senior unsecured notes with a fixed coupon of 5.85%. We subsequently swapped the entire amount of the offering to floating rate at SOFR plus 112 basis points. After quarter end, we issued $400 million of 10-year senior unsecured notes with a fixed coupon of 4.9% and a yield of 4.94%. Also, after quarter end, we prepaid our $300 million floating rate term loan. And on January 16, we repaid at maturity, a $250 million, 4.4% senior unsecured note. In conjunction with the term loan prepayment, we will recognize a noncore charge of approximately $900,000 associated with unamortized loan costs.
As of today, approximately 85% of our debt is fixed rate. We have almost full availability under our $1.2 billion credit facility and we have less than $300 million of maturities over the next 24 months with only $138 million left to fund under our existing development pipeline. Our balance sheet remains strong with net debt-to-EBITDA at 4x. Turning to financial results. Last night, we reported core funds from operations for the fourth quarter of 2023 of $190.5 million or $1.73 per share, $0.01 ahead of the midpoint of our prior quarterly guidance. This outperformance resulted almost entirely from lower-than-anticipated levels of bad debt. As previously reported, in September, we experienced an unusual spike in bad debt, which we forecasted to extend through the fourth quarter.
Fortunately, September appears to have been an anomaly, and bad debt for the fourth quarter averaged 1.1% as compared to our forecast of 1.5%. Additionally, we delivered same-store occupancy for the fourth quarter of 94.9%, 10 basis points ahead of our forecast. For 2023, we delivered same-store revenue growth of 5.1%, expense growth of 6.7% and NOI growth of 4.3%. You can refer to Page 24 of our fourth quarter supplemental package for details on the key assumptions driving our 2024 financial outlook. We expect our 2024 core FFO per share to be in the range of $6.59 to $6.89 with the midpoint of $6.74 representing an $0.08 per share decrease from our 2023 results.
This decrease is anticipated to result primarily from an approximate $0.07 per share increase in core FFO related to the growth in operating income from our development, nonsame-store and retail communities resulting primarily from the incremental contribution from our 7 development communities in lease-up during either 2023 and/or 2024. A $0.07 per share decrease in interest expense attributable to approximately $185 million of lower average anticipated debt balances outstanding in 2024 as compared to 2023, partially offset by lower levels of capitalized interest as we complete certain development communities.
The lower debt balances result from the previously mentioned Camden Martinique disposition and an additional $115 million disposition of an Atlanta community scheduled for next week. For 2024, we are anticipating $41 million on average outstanding under our line of credit with an average rate of approximately 5.5% and an average rate of approximately 5.8% on our $500 million floating rate unsecured bond. We are not anticipating any additional unsecured bond offerings in 2024. A $0.035 per share increase in fee and asset management and interest and other income, resulting from increased third-party general contracting fees and interest earned on cash balances.
We are assuming average cash balances of $60 million in 2024, earning approximately 4.6%. This $0.175 cumulative increase in anticipated core FFO per share is entirely offset by an approximate $0.155 per share decrease in core FFO from the $293 million of 2023 completed dispositions, an approximate $0.06 per share decrease from the disposition anticipated next week and an approximate $0.04 per share decrease, resulting primarily from the combination of higher general and administrative and property management expenses.
At the midpoint, we are expecting flat same-store net operating income with revenue growth of 1.5% and expense growth of 4.5%. Each 1% increase in same-store NOI is approximately $0.085 per share in core FFO. Our 2024 same-store revenue growth midpoint of 1.5% is based upon an approximate 0.5% earning at the end of 2023 and an effectively flat loss to lease. We also expect a 1.4% increase in market rental rates from December 31, 2023 to December 31, 2024, recognizing half of this annual market rental rate increase, combined with our embedded growth results in a budgeted 1.2% increase in 2024 net market rents.
We are assuming that bad debt continues to moderate through the year, reaching 1% by the fourth quarter and averaging 1.1% for the full year, a 30 basis point improvement over 2023. When combining our 1.2% increase in net market rents, with our 30 basis point decline in bad debt, we are budgeting 2024 rental income growth of 1.5%. Rental income encompasses 89% of our total rental revenues. The remaining 11% of our property revenues is primarily comprised of utility rebilling and other fees and is anticipated to grow at a similar level to our rental income due to decreased pricing power and increased regulatory constraints. Our 2024 same-store expense growth midpoint of 4.5% results primarily from anticipated above-average insurance increases.
Insurance represents 7.5% of our total operating expenses and is anticipated to increase by 18% as insurance providers continue to face large global losses and resulting financial pressures. Our remaining operating expenses are anticipated to grow at approximately 3.4% in the aggregate, including property taxes, which represent approximately 36% of our total operating expenses and are projected to increase approximately 3% in 2024. Excluding our planned disposition next week, the midpoint of our guidance range assumes $250 million of acquisitions, offset by an additional $250 million of dispositions with no net accretion or dilution from these matching transactions.
Page 24 of our supplemental package also details other assumptions for 2024, including the plan for up to $300 million of development starts in the second half of the year and approximately $175 million of total 2024 development spend. We expect core FFO per share for the first quarter of 2024 to be within the range of $1.65 to $1.69. The midpoint of $1.67 represents a $0.06 per share decrease from the fourth quarter of 2023, which is primarily the result of an approximate $0.035 per share sequential decline in same-store NOI, driven by an approximate $0.04 per share increase in sequential same-store expenses resulting from the timing of quarterly tax refunds, the reset of our annual property tax accrual on January 1 of each year and other expense increases, primarily attributable to typical seasonal trends, including the timing of on-site salary increases.
This is partially offset by a $0.005 per share increase in sequential same-store revenue, primarily from higher levels of fee and other income. We are anticipating occupancy will remain effectively flat quarter-to-quarter. An approximate $0.035 per share decrease attributable to our December 28, 2023, $232 million disposition of Camden Martinique, an approximate $0.01 per share decrease attributable to our planned $115 million disposition next week and an approximate $0.005 per share decrease resulting primarily from the timing of various other corporate accruals.
This $0.085 per share cumulative decrease in quarterly sequential core FFO is partially offset by an approximate $0.015 per share decrease in interest expense, resulting from the lower debt balances as a result of the disposition proceeds and an approximate $0.01 per share increase in core FFO related to additional interest income earned on cash balances. Anticipated noncore adjustments for the first quarter include a combined $0.03 from freeze damage related to Winter Storm Gerri, the previously mentioned charge associated with unamortized loan costs from our term loan and costs associated with litigation matters.
At this time, we will open the call up to questions.

Question and Answer Session

Operator

(Operator Instructions) And the first question will come from Michael Goldsmith with UBS.

Michael Goldsmith

Can you just talk a little bit about the macro assumptions that you have built into your guidance today, we're seeing 353,000 jobs added. So how much elasticity is there in your guidance that could be influenced by the job market. And then along those lines also, are there continue -- can you provide an update a little bit on the migration trips to the Sunbelt as part of your response?

Richard J. Campo

Sure. So the job number today and the revision for December was definitely, I think, the market is putting it -- calling it a blowout, right? And it certainly is. And our overall economic backdrop for what we think demand is going to be in our markets is definitely not based on blowout numbers. Clearly, job -- we thought and I think most of the market believe that job growth has slowed dramatically in 2024. So obviously, more job growth helps us. When you look at where the job growth is, it's in our markets. If you look at Texas and Florida have led the nation in job growth post-COVID, and we'll continue to do that. So it obviously is very good for us, and it's not -- that kind of drop growth is definitely not baked into our numbers.
When you think about what's really driving demand in 2024 and 2025, we don't think it was -- increased job growth driving that demand. What's been happening is multifamily has been taking market share from single family as I said in my -- in the beginning of the call, we've gone from a historic average of 20% multifamily demand in total household formations to 40%, and that's driven by everything we know, right, that single-family market is really hard for somebody to buy a house today. I mean we had, I think, a total of 10.7% of people moved out to buy houses at Camden in 2023.
And so when you think about those dynamics, and there's other broader dynamics, too, which is 30% of Americans today are living alone, and that benefits apartments. And that number is way up from the past time frame. So the blowout job numbers obviously help our numbers. And if we continue at this level, it will be pretty interesting. As far as in-migration, Alex, you can talk about in migration. When you look at the demand side, for example, we expect over 200,000 units of demand in 2024 and that's on a 220-unit supply, right, plus or minus, or completions. And so it's pretty balanced when you get down to it. But ultimately, when you look out, for example, their projection showing 380,000 total demand for the U.S., from 400,000 in '24 to 380,000 in '25. So demand is being driven by different drivers today, not just the old adage of 1 apartment for every 5 jobs. It just doesn't work anymore because of the in-migration.
The other thing also is not just in-migration from other cities, it's actually total immigration because immigration was way down during COVID, and now it's back to more normal and those immigrants tend to -- and this is legal immigration, I'm not opining on [border] or anything like that, but it's -- so that's helped us, too. Alex, you might hit the in-migration a bit.

Alexander J. K. Jessett

Yes, absolutely. So we continue to have really strong in-migration to our apartment. So if you look at those who have moved from non-Sunbelt to Sunbelt for us, in the fourth quarter, it was about 17.5% of our total move-ins. By the way, that's fairly consistent with what we've seen over the past couple of years. So that remains really strong. And one of the other things that we track is that we track Google searches from people in New York or people in California looking for apartments to rent in our markets. And just to give you a really -- this is interesting to me, New York searches for Texas apartments were up 72% in the fourth quarter of '23 as compared to the fourth quarter of '22. California searches for Texas apartments were up 52% in the fourth quarter of '23 to the -- as compared to the fourth quarter of '22. So still very strong demand for folks coming out of New York, out of California to our markets.

Operator

Next question will come from Steve Sakwa with Evercore ISI.

Stephen Thomas Sakwa

But I guess I had a question on what your implicit blended new and renewal kind of leasing spreads were and maybe how that tied into your occupancy assumptions? I guess what I'm really asking is are you guys really solving more for occupancy here and will give up on the new rate side? Or are you willing to let occupancy drift lower and sort of keep pricing firmer?

Alexander J. K. Jessett

Yes. So we're assuming that occupancy is going to be flat in 2024 as compared to 2023, and that number is 95.3%. And we are driving towards that number. When we look at new lease and renewals and the trade out for the full year. What we're anticipating is new leases to be down 0.6%, renewals up 3.6% for a blended increase of 1.2%. And that is going to sort of follow what you would think be typical seasonal patterns.

Operator

The next question will come from Brad Heffern with RBC Capital Markets.

Bradley Barrett Heffern

Can you just talk about how your assumptions for rent growth in '24 compared to how you would guide in a normal year without all these supply headwinds? I think you said 1.4% market rent growth so where would you normally start the year? And I guess -- why is that the right differential to that given the supply backdrop?

Alexander J. K. Jessett

Yes. We would typically -- I mean, obviously, every year is different, and every year has its own unique parameters around supply and demand. In our business, the typical year is 3%. And you can see that we're at 1.4%, and that's obviously driven by the supply factors were there. As we've talked about on the prepared remarks, we think demand is still incredibly strong, but we are cognitive of the supply issues, and that's why you're coming up with a 1.4% for the full year.

D. Keith Oden

So Brad, to put it in context on the issue of demand and the job number that came out today, we used 2 primary data providers. They had very different views about employment growth for 2024, and we basically ended up taking the midpoint of the 2 of them because they both had their own story that they could tell around it. But the midpoint of our 2 data providers forecast for total employment growth across Camden's markets for 2024 was about 300,000. And we just got that in the month of January. So it's -- I think we've tried to build in some realism around the numbers and the forecast. But clearly, our forecast did not anticipate anything like having the entire job growth projected for the year in the first month, so...

Operator

The next question will come from Austin Wurschmidt with KeyBanc Capital Markets.

Austin Todd Wurschmidt

I was just wondering, I know you guys don't offer concessions across the stabilized portfolio, but just wondering what kind of has changed just on concessions as far as what you're seeing across those markets that are most exposed to some of the new supply?

Richard J. Campo

It's very typical of what we've seen. The toughest markets like -- would be Austin, Texas and Nashville. And there the concessions are significant, anywhere from 2 to 3 months free. Generally, merchant builders don't go beyond 3 months free, but you're seeing that in the most supply constraint -- supply markets. When you get to more markets that aren't as pressured, then compared to those 2, you're anywhere from 1 month to 6 weeks to 2 months max. And that's kind of what we're seeing in some of the other markets.

Operator

The next question will come from Rich Anderson with Wedbush.

Richard Charles Anderson

So I wonder if we could talk a little bit about the longer-term view. Either Avalon and EQR said, well, peak supply in '24 means peak revenue declines in 2025 or in theory, no one knows for sure. Do you feel like that is at least in the wheelhouse of a possibility in that what we're seeing today in terms of your outlook, which I think most people think looks better than expectations going in, could actually sort of see a downdraft next year as the full lot of the supply is absorbed into your portfolio?

Richard J. Campo

Based on some of the providers we use, they show an uptick in '25 in our markets, not a downtick. And if you think about the supply discussion that I had a minute ago, the supply project or the supply we know about, the demand is the real issue, right? So when you look at the demand projections for this year, it's -- they're nationwide, over 400,000 units. And then the projection for the following year, even with a slow -- very low job growth mark, is something like 380,000 units of demand. So the demand drivers, interestingly enough, are just not usual demand drivers in multifamily. It's always been about job growth, right? And today, it's about taking market share from single families -- single-family market because it's so upside down on a cost to rent perspective and lack of inventory in the resale market.
And what's happened -- what's really interesting is that if you want to buy a new house in America today, you pretty much have to buy or if you want to buy a house, you pretty much have to buy a new house. And when you look at the -- usually, when interest rates go up this high, the single-family homebuilders all crash and lay people off of. They had about a 5- or 6-month hiatus and then went back to hardcore building houses because there was no inventory to be -- for single-family buyers to buy, and that's continuing. So I think that these demand drivers that are actually -- that are driving this really positive outlook for demand in 2024 are going to be in place in 2025 as well. And especially if you have a backdrop of job growth that looks like it's -- I'm not sure you can say January is going to be a print every month in this year.
But clearly, the job market is a lot stronger than people thought it might be, and that could help with the absorption and in 2025 as well. So I haven't seen very many projections that show 2025 where rents are going down. They're bottom -- most of the numbers that we see from folks, they're bottoming in 2024 and then they start an uptick in 2025 because you've absorbed a lot so many units in 2024.

Operator

The next question will come from Eric Wolfe with Citi.

Eric Wolfe

So correct me if this is wrong, but I assume that you had a gain to lease today. So I was just wondering based on your history, if there's a certain gain to lease level where you're no longer able to pass through like 3.5% to 4% type renewal increases. And then for that 4.1% renewals you sent out for February and March, I was wondering what the right sort of achieve rate to think about would be on that?

Alexander J. K. Jessett

So first of all, we're actually not at a gain to lease. We have -- we're basically a flat -- no loss lease or gain to lease. When you think about renewals, we're anticipating the fourth -- excuse me, the first quarter that we're going to get it right around 3.9%, so fairly close to what we're sending out. And then the other question, which I think is sort of really around the differential between new leases and renewals. When we look at our math, the differential for the full year actual percentage-wise between somebody with a sign a new lease for a renewal is really only about 1.5% differential. So it's not that significant and not something that we think is problematic.

Operator

The next question will come from Haendel St. Juste with Mizuho.

Haendel Emmanuel St. Juste

Just hoping you could talk about development for a moment here. I see you have up to $300 million of new starts, including the guide. So curious when we could see those starts, how they're penciling today from a yield or IRR perspective and which markets we can see those in?

Richard J. Campo

The developments that we have in that model or in the model are in Charlotte and they're suburban 3-story walk-up type product. And we would start those depending on how the year unfolds in the back half of the year, so that we could deliver into '26 and '27. And the yields are anywhere from in the mid-5s to low 6s in terms of stabilized yields. And when you look at IRRs, it's really kind of complicated to figure an IRR today given what are you going to expect cap rates to be. But ultimately, we think there's going to be a pretty constructive market in '26 and '27 when these properties deliver. We have another -- a number of them in the pipeline as well in other markets. But these 2 because they're pretty simple and they come in at a price point that's very affordable relative to urban high-rise in the same market is pretty attractive.

Haendel Emmanuel St. Juste

Okay. And then maybe on the real estate tax guide. You also, I think you mentioned, Alex, 3.5%, I think it was embedded in your same-store expense guide there. A little bit lower than I think a lot of us were thinking and certainly given what we've seen recently, I'm curious if we're kind of past the peak headwinds there for real estate taxes and selling into a new norm here or maybe you're perhaps benefiting from something else that's less obvious to us.

Alexander J. K. Jessett

Yes, absolutely. So the property tax number that we have in our guidance is 3%. And if you think about it, it's really the same number that we experienced in 2023. And so it seems that we are reverting back to the long-term mean, which is in that sort of 3% to 3.5% range. Really, the big driver that you have is Texas. And as we discussed in prior earnings calls, Texas is very favorable when it comes to property taxes, especially with a new bill that was passed last year. And so we're receiving the benefit of that for a second year in a row. And we actually think that our total property taxes in Texas are going to be up about 2.2%, which is really a pretty low number, and that makes up about 40% of all of our property taxes. So that's the primary driver there.

Operator

The next question will come from Alexander Goldfarb with Piper Sandler.

Alexander David Goldfarb

Just want to go back, I think -- Ric or Keith, I think at the beginning of the call, you mentioned the expectation for nationally 400,000 unit absorption this year, 200,000 of which would be in the Camden markets. But I think they're like close to 700,000, 650,000 units expected to be delivered this year. So just wanted to better understand the comments around absorption. And then also as part of that, are you -- we all understand what's going on with the supply, but are you suggesting that the share of housing going to apartments versus single-family will obviously continue to sustain? And therefore, versus historically where jobs would be more of the factor, it's really more the household formation that's really the factor now into next year.

Richard J. Campo

It sounds like you answered the question. Yes, that's what's going on. I mean we're -- without amazing job growth, we're still able to produce a lot of demand, and it's all a function of different demand drivers and jobs, right? And today, if you look at a share that we're -- that apartments are taking from the household formations and you look at it historically, it's double what it has been for a long time. And so that's -- it's almost the same as what's happening in the single-family for sale market is their market share has doubled at least and maybe even tripled from the norm because of the lack of inventory of single-family homes to buy because of the lock-in effect.
So you have an interesting situation here where we are continuing to benefit from the high cost of homeownership and continuing to benefit from in-migration, both international immigration and in-migration from other cities. So yes, there's a lot of units under construction, we know that. But the demand, it seems to be if these demand numbers running close to being right, is going to create, if you will, a soft landing for the supply. And that's kind of the -- that's the model that we put forth there.

D. Keith Oden

And Alex (inaudible) talking that.

Alexander David Goldfarb

Yes, the 400,000 versus the 670,000.

Richard J. Campo

No. 670,000 is not what the absorption is going to be, Keith, you have those absorption numbers...

D. Keith Oden

Yes, in Camden's markets, I just want to clarify -- yes, the completions that we have that we're modeling are 230,000 apartments across Camden's platform in 2024. And that number drops to about 200,000 in 2025. So just to make sure we're talking apples and apples versus national numbers. It's 230,000 in Camden's markets.

Richard J. Campo

Yes. And that 600,000 coming in the pipeline doesn't all get delivered in 2024. A part of that is into 2025 as well.

Operator

Next question will come from Jamie Feldman with Wells Fargo.

James Colin Feldman

I just wanted to get your thoughts on timing of fundamentals. So just thinking about your guidance for new leases, slightly negative, but they were much worse in January on both effective and signed. And then if you look at your current occupancy versus your projected occupancy, it seems like an uptick. So do you think that -- when you think about the first half versus the back half, do you think it gets better into the back half, and that's where the pickup is? Or do you think that January was -- or January is kind of an anomaly and the numbers are just going to look better off the bat?

Alexander J. K. Jessett

So the first thing I would tell you is if you look at our signed new leases in January -- excuse me, our signed blended leases in January are better than are effective, which is a leading indicator of improvements. What we are anticipating that we're going to have blended trade outs in the first quarter of about 0.2%. So a slight uptick from where we are today, but we are anticipating that occupancy is going to remain flat in the first quarter at 95%. And then the improvement comes throughout the year as, number one, we have better comps, which are very helpful for us. And then we also sort of hit our seasonal strong periods as we move from the second quarter into the third quarter.

James Colin Feldman

And then you think it stays strong in 4Q or you (inaudible)?

Alexander J. K. Jessett

Yes, we've got a 4Q blended trade out of 1.6% and occupancy of about 95.2%. So I think that sort of follows the normal seasonal patterns that you would see.

Operator

The next question will come from Adam Kramer with Morgan Stanley.

Adam Kramer

I just wanted to ask about external growth and acquisitions specifically, given where the balance sheet is, net debt to EBITDA at 4x at quarter end, I mean what would kind of be needed to happen further to be upside to the acquisition number? And you kind of step into that underlevered balance sheet?

D. Keith Oden

So the primary thing that would have to happen on acquisitions is we have to see better going in yields, even though there's been a lot of -- transaction volumes are way down, there's still a huge bid-ask spread between buyers and sellers. There's just -- we just don't see -- we don't see value right now in the acquisition market versus other uses of capital. Now that's not to say that at some point, that doesn't change. I mean, obviously, there is with all of this new supply that's been built and primarily by the merchant build community, at some point, they need to move past the current crop of their development pipeline and kind of recharge their organizations. They are in the business of building apartments.
And so they all -- I think they all have way too much -- way more than they would normally care to have in terms of their development pipeline and holdings. So at some point, there's going to be a rationalization not just in the rental supply market between supply demand. But in the transaction market between a product that needs to find a permanent home, not in the merchant build community and people that are willing to provide that and have the capital to do it. So we are in the latter group, we just don't think we're there yet. And we just think being patient right now is the right strategy for the acquisition market.

Richard J. Campo

NMHC just completed this week, and we had, of course, our huge team out there, and this is kind of the start of the sort of acquisition disposition dance. And people were -- compared to last year -- last year, I would categorize as during the headlights. And this year is a little less during the headlights and more cautious optimism because rates have come down some. And that's keeping some of the pressure off of people having to sell. But there's still just a massive bid-ask spread between people who want to buy versus people who want to sell.
And so the question will be how do the operating fundamentals look going forward? And what -- how do people feel about the world and what happens to rates? And I think people are more optimistic now that they can enter the acquisition market because last year was, I don't want to make a mistake what if the Fed does all these things now we're on a trajectory, it looks like to lower rates someday. And therefore, it's easier to sort of create a model that works financially today with a falling rate scenario in the next 2 or 3 years. But we're not there yet for sure in terms of that inflection point.

Operator

The next question will come from John Kim with BMO Capital Markets.

John P. Kim

I wanted to ask about dispositions. I guess, this month, you're going to be selling Camden Vantage in Atlanta. Why this particular asset? It's not old. It's in one of your core Sunbelt markets. We calculated the cap rate north of 7%, so I didn't see my pricing was that great. But going forward, where else do you see disposition activity, will it be in California or focused on more of your older products?

Alexander J. K. Jessett

So I'll take the cap rate question first, and then I think maybe Keith can opine on the disposition choice. But for Camden Vantage, we are showing this at using actual CapEx and a management fee at a 5.75% cap rate, tax adjusted 5.65% cap rate and an AFFO yield before management fees of 6.09%. So definitely a lower yield than you're calculating.

D. Keith Oden

Yes. And on the dispose side, I mean we keep a list of and have ongoing conversations with our operating groups about if there were to be a sale out of one of your markets or submarkets, which assets would be in that conversation. And Vantage almost always came up as one that would be on the list of management's list of assets that they would rather someone else take care of. So I'll just leave it at that.

John P. Kim

Can I just follow up, what was the CapEx consumption on Vantage?

Alexander J. K. Jessett

Yes. The CapEx on that one, I think it's probably around $1,800 a door, but I'll have to get back to you with the exact.

Operator

Next question will come from Rob Stevenson with Janney.

Robert Chapman Stevenson

Just on the dispositions, given how low your leverage is, the sizeable free cash flow and the minimal development spending remaining, how aggressive are you willing to be and sell more assets without corresponding acquisitions? Because it seems like given Keith's acquisition market commentary that acquisitions at best would be back half end loaded and may not come at all if the draft doesn't come.

D. Keith Oden

Yes. So our guidance assumes that we basically match dispositions and acquisitions. So we would look to be kind of net zero on the year. And the answer on the acquisitions really dispositions kind of gets back to when we find value and we believe that there's a real opportunity on acquisitions, then we would -- those clearly would be assets that we wanted to -- newer assets that we want to add to the portfolio, and we're always willing to improve the portfolio by selling a corresponding number of dollar amount of assets to fund that. So our working assumption and what's reflected in the guidance is, is that we're willing to be pretty aggressive when we see value in acquisitions, but not before then.

Robert Chapman Stevenson

Okay. That's helpful. And then just a point of clarity. The mid-5 to low 6s that you guys talked about on development yields on a stabilized basis, was that for the 2 Charlotte ones that you might start this year? Or was that to stabilize yields on the 4 properties in the current development pipeline?

Richard J. Campo

Actually, the numbers are the same. The current development pipeline, we have some in the sort of the low to mid-6s and some in the sort of low 5s. The new developments in Charlotte, we're still working on what the model looks like, but we wouldn't start them if they were in that zone.

Robert Chapman Stevenson

Okay. And are you seeing any real relief on materials or labor on the development side, given the sort of pull back in other areas of development? Or is it still competitively priced versus the last couple of years?

Richard J. Campo

Not yet. We haven't seen a big -- any big drops in cost. What's happened is the costs haven't been going up as much. I mean if you go back a couple of years, we were having like 1% to 1.5% inflation every single month. And so today, that's a little -- you don't have that part of the equation, but there hasn't been a material shift in pricing. And that's one of the challenges you have -- every merchant builder and Camden has is that if costs aren't coming down, but rents are flat and it's a very competitive market, you just -- it's really hard to justify new construction. That's why the starts are projected to fall to low 200,000s in 2025. It's just that a math doesn't really work well when rents are flat and construction costs haven't fallen.

Operator

The next question will come from Wes Golladay with Baird.

Wesley Keith Golladay

The question on the development delivery forecast. Do you think this year is going to be more at risk to delays versus prior years? And are you seeing any of the developers going bust yet?

Richard J. Campo

We haven't seen anybody going bust yet. And I think that banks are definitely -- we hear a lot of anecdotal information about banks working very well with their borrowers today. The banks are much more -- they're well capitalized and the -- it's pretty common knowledge that in the next couple of years, the economic drop -- backdrop of operating fundamentals and lower interest rates are all going to help -- is going to help get some of these deals through that system. So in terms of that perspective, I don't think that you're going to have any -- there's not going to be any major bankruptcies for major defaults with merchant builders.
They might be stressed to sell, but that doesn't mean there -- I think there's still equity in their deals, most of them anyway. In terms of delays, it's still hard to get a project to be delivered when you expect it to because so many people left the labor for us. We don't have excess labor supply. And so there's still a fair amount of risk in deliveries and when the delivery is going to come. And so that could actually be beneficial to the backdrop of our supply and demand equation. If starts do plummet or I think they will, but when you actually start seeing more and more of that, if we delay some of the '24 supply into '25 and some of the '25 into '26, that could be a lot smoother, softer landing for those markets given the demand side.

Operator

The next question will come from Anthony Paolone with JPMorgan.

Anthony Paolone

So it sounds like the stress is in the system, just isn't there to create a lot of opportunities right now. So wondering what it might take for you to use some capacity to buy back stock?

D. Keith Oden

Yes. We've -- it's something that we look at constantly in terms of the opportunity set for allocation of capital. And in the past, we haven't been bashful about buying back stock when it made sense to do so. It's always a little bit of a challenge because of the rules and the trappings around buying stock in size and doing it in the windows that are available. But yes, it's something we've talked about. We've discussed and that we would pursue when the -- when we think the opportunity makes sense.

Operator

The next question will come from Omotayo Okusanya with Deutsche Bank.

Omotayo Tejumade Okusanya

Yes. Just thoughts on bad debt expense. The forecast was $24 million, 1.1% of total revenues doesn't really change that much from where you were at 4Q. So just wondering why we're not seeing incremental improvement kind of post all the moratoriums and improvements on the fraud management side.

Alexander J. K. Jessett

So I think we're sort of in unprecedented times right now where we're trying to figure out what is the new normal. And so at this point, what we're assuming is that the first and second quarter look a lot like the fourth quarter. And then we have some slight improvements as we go into the latter part of the year. Clearly, if we return to 50 basis points, which is what our historic norm had been before all of this, then we got some potential upside sort of running through the math. But at this point, we're just being patient and seeing how it plays out.

Operator

The next question will come from Robyn Luu with Green Street.

Robyn Luu

Alex, just a question for you. There was a decent step up in CapEx budget for the year, particularly in nonrecurring CapEx. Can you provide more detail as to what's driving the high spend?

Alexander J. K. Jessett

Yes, absolutely. So we've got a couple of things that are running through the nonrecurring side. And they're mainly focused around a couple of communities we have that have some large exterior projects and foundational projects that we need to do. So that's what you've got going through the math.

Robyn Luu

Do you expect that to extend to other properties in like '25 or '26 as well?

Alexander J. K. Jessett

No, I don't think so. We go through and we look at all of our communities, really do a deep dive every year, as you would expect. And so these were a couple of communities that have been identified. As I said, they did have the foundational and exterior challenges that we knew we needed to fix. And so our intention is to get it done in 2024, and I wouldn't expect to see a number like this in '25.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Ric Campo for any closing remarks. Please go ahead, sir.

Richard J. Campo

Great. Well, thank you for being on the call today. We appreciate the opportunity to go through what 2024 looks like to be an interesting year. So we'll see you in the conference circle and circuit here in the next month or 2. So take care, and thank you.

Operator

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