Camden Properties Turns To Sun Belt Markets In 2022 As Coastal Cities Disappoint

Multifamily companies like Houston-based Camden Property Trust are turning to warmer climes and hot markets in the Sun Belt for growth amid middling coastal revenues, as 2021 year-end performances are announced.

Camden, which announced its Q4 results Feb. 4, said it doubled its profits in the past year on the back of southern migration, rent gains and improved leasing that saw its full-year profits hit $303.9M. The company's revenues rose 9.56% year-over-year, reaching $1.14B in 2021.

"Clearly, geographic diversification and primarily being in the Sun Belt has definitely helped us a lot," Camden CEO Ric Campo said in an earnings call. "And I think, ultimately, as we do that sort of portfolio redistribution over the next couple of years, it will help us do more geographically. If you look at the last cycle in terms of how much we bought and sold, we really transformed the portfolio from 2010 through … to the pandemic."

Camden said it was seeing overall rent increases of nearly 16%, spurred by high growth in cities in Florida, as well as in Phoenix, with swaths of people moving to those markets. Phoenix was ranked as the company's best market, followed by southeast Florida, Tampa and Orlando. The company said it expected revenue growth of at least 10% in all four markets in the new year, with Atlanta, Austin and Raleigh, North Carolina, leading the next tier and growing up to 9.75%.

Conversely, Camden President Keith Oden said in the call that Los Angeles, Houston and Washington, D.C., were growing more slowly, with Washington, D.C., called "challenging" due to Covid-19 restrictions in the area. Camden is budgeting relatively low revenue growth in the area for 2022, in the low-to-mid-single digits.

"So, somebody always has to be at the bottom. And right now Washington, D.C., is at the bottom," Campo said, adding the company's Los Angeles County portfolio was also struggling due to high delinquencies and bad debt relative to other markets.

In Houston, Camden recently sold off two apartment communities to Los Angeles investor TruAmerica Multifamily, including the 364-unit Camden Oak Crest and 288-unit Camden Park. Executive Vice President and Chief Financial Officer Alex Jessett said it was part of the company's strategy to limit exposure in slower-growth markets and reinvest in hot markets where the company is underweighted.

But Jessett said both cities "have gas in their tank." Houston, in particular, has room to grow as it climbs back to pre-pandemic employment levels and the energy sector rebounds.

"The problem is you've got the markets like Tampa and Phoenix are just out-of-control good," Jessett said. "And so the slowness of Houston makes you feel like it's dragging on because, I mean, it is on a fundamental basis, but it's still really good, well above trend for Houston."

Campo said he expects 2022 to be Camden's best year on record and that markets with Camden properties will see strong job and population growth. In weaker performing Houston and Washington, D.C., Campo said that the company may sell down its properties, focusing on its overlooked markets, instead.

“2021 turned out to be a remarkable year and we clearly exceeded our original guidance that we provided at this time last year,” he said.

Camden said residents signing leases in the fourth quarter were paying an average 15.5% more rent than one year ago. The company is forecasting overall revenue growth of 7.75% to 9.75% in 2022 and plans to spend more than $600M to add nearly 1,800 apartments across five of its markets.

Camden is not alone in seeing a Sun Belt spike. Mid-America Apartment Communities also reported double-digit rental increases in Q4 and a 9.4% year-over-year revenue boost driven by an acceleration of southern migration driven by the pandemic.

"In the markets that we're seeing, 25% of move-ins are in Phoenix, 22% in Tampa, 20% in Nashville, 19% in Charleston," MAA Chairman and CEO Eric Bolton said in a Feb. 3 earnings call. "Honestly, it's just a continuation of the trends we have been seeing and we've been talking about for the last year or so."