Camden Property’s rising revenue paves the way for single-family rentals

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Camden Property Trust is moving forward with two single-family, build-to-let communities in the Houston area as its revenue continues to rise despite worries of a possible recession, Camden executives said Friday.

The Houston-based National Apartment Company said real estate revenue climbed 27% in the third quarter to $373 million, from $294 million in the same period in 2021. The rise in spending due to higher taxes and property management costs, however, kept profits essentially flat at $29 million.

Still, the national apartment company is pursuing millions of dollars in new development projects in the south, as it expects Sun Belt apartment markets to weather any economic downturn relatively well.

In the third quarter, Camden dipped into the increasingly popular single-family build-to-rent sector with two projects in the Houston area. The company told investors on Friday that it broke ground on a 189-home single-family rental community called Camden Woodmill Creek, a $75 million project in the Woodlands north of Houston. He also recently began construction on the 188-home single-family rental community called Camden Long Meadow Farms, a planned $80 million project near Grand Parkway and West Bellfort Street in Richmond, southwest Houston.

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Although Camden has developed and owned thousands of apartments, including more than 9,000 in Houston, The Woodlands and Richmond projects represent the company’s first foray into single-family rental development.

“This is an opportunity for us to really understand the market,” Camden CEO Ric Campo said on a conference call.

The popularity of single-family rentals is expected to be boosted by renters delaying home purchases due to rising mortgage rates and higher prices. In the second quarter, the share of renters at Camden properties moving to buy a home fell to 15.1% from 17.2% a year earlier, Camden executives said. Now, moves to buy a home have fallen to 13.2%.

That trend, coupled with rising rents and population growth across much of its Sun Belt-focused portfolio, has Camden optimistic about the year ahead despite economic uncertainty. Rising rents are putting increased pressure on consumers, especially low-income tenants, but Camden operates in the luxury apartment sector. The company said most of its tenant households earn more than $100,000 a year and so far have been able to absorb rental rate increases.

“(Many tenants in Camden) pay less than 20% of their income in rent. They still have a lot of money in the bank, they are well employed, so our consumers are doing very well,” Campo said.

Across the Camden portfolio, rents for new leases jumped 11.8% in the third quarter, while rents for renewals rose 11.5%. in a context of high energy prices.

“Houston is going to be a big market long term and it will have more gas in its tank during the recession,” Campo said. It is well positioned for the energy transition,” Campo said.

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High interest rates are having an impact on Camden, however. The company is holding back the buying and selling of properties, at least for the rest of the year, waiting to see where interest rates stabilize. The Federal Reserve is expected to raise its benchmark interest rate two more times before the end of the year.

“There is no reason to trade in this uncertain environment,” Campo said. “The cost of capital has gone up. I think people are kind of waiting for the first quarter to see what’s happened.

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