CAMDEN PROPERTY TRUST Q2 FY26 earnings call CPT

Camden completed the sale of its 11 California operating communities for $1.625 billion on July 29, representing a trailing 12-month FFO yield of 5.6% and AFFO yield of 5.2% for Camden. This strategic move aims to redeploy capital into higher-growth Sunbelt markets and Camden shares, maximizing tax efficiency. The company repurchased $694 million of common shares at an average price of $105.17 per share and closed on $645 million of acquisitions in Sunbelt markets, with an additional $195 million awarded and $200 million anticipated for future 1031 exchanges.

The company reported sequential improvements in leasing trends, with signed blended lease rates improving by 160 basis points in Q2 compared to Q1. In July, 65% of communities had positive effective blends, and 75% had positive blended signed leases, up from 50% and 55% respectively in Q2. Occupancy averaged 95.7% in Q2, slightly ahead of budget, and reached 95.8% in July, with expectations to remain relatively stable through Q3 before moderating slightly with normal seasonal trends towards year-end.

Proceeds from the California sale were used to repurchase shares, fund 1031 exchange acquisitions, and repay $900 million of outstanding balances on the line of credit and commercial paper program. This resulted in a pro forma net debt to EBITDA of a strong 4.5x at the end of July. A new 1-year $350 million unsecured term loan was also closed subsequent to quarter-end to further enhance liquidity and provide financial flexibility.

The sale is expected to be FFO-neutral in year one and accretive thereafter, as the newer Sunbelt communities acquired are anticipated to grow faster than the older California assets disposed of. The disposition also reduces future recurring CapEx spend per unit by 5% and bad debt by 10 basis points. Furthermore, the company will no longer incur approximately 80 basis points of annual NOI reduction from regulatory and advocacy spend in California.

Camden is actively pursuing AI integration across its operations, adopting a 'leadership, crowd, and lab' approach to encourage AI adoption, empower team members to find solutions, and test them in a safe environment. The company is bullish on AI's potential to improve efficiency across all income statement lines, from increasing renewal percentages to minimizing property insurance and utility expenses, with anticipated real benefits to the bottom line within the next year.

Management highlighted broad-based pricing recovery across the portfolio, with specific improvements noted in markets like Atlanta, Charlotte, Dallas, Raleigh, and Southeast Florida, where the majority of communities achieved positive signed new lease growth in July. Even previously challenged markets like Austin and Denver are showing significant positive momentum in new lease trends, driven by firming occupancy and moderating concessions, indicating a positive directional shift.