David Segall

David Segal from Green Street asked how the pricing for national builder assets in the 4% yield range compares to suburban multifamily product. He also inquired about the fair long-run occupancy rate for the single-family rental business.

Answer

CEO Bryan Smith stated that his understanding is that suburban multifamily cap rates are in the high 4% range, consistent with the builder assets. Regarding occupancy, Smith believes the new expectation has moved from a pre-COVID norm of 95% to a new sustainable level in the 96% range, supported by greater appreciation for professionally managed rentals and AMH's improved platform.

David Segall asked for more details on how the company plans to backfill missing demand from Canadian customers with domestic customers, and whether this strategy involves discounted rates. He also questioned if the several hundred annual RV sites released in the quarter were reletting vacated sites or different ones, and why their addition doesn't significantly impact the outlook for the remainder of the year.

Answer

Marguerite Nader, CEO, explained the marketing strategy involves exposing customers to properties through social media, engaging previous guests, and leveraging current news/events, with concessions decided on a market-by-market basis. Paul Seavey, EVP and CFO, stated the impact is modest due to the late timing in the year, clarifying that all sites are available for transient, and filling annuals naturally offsets transient availability, with the filled sites being a mix.

David Segall asked for more color on how the company plans to backfill missing Canadian demand with domestic customers, and whether this might involve discounted rates. He also inquired about the several hundred annual RV sites released in the quarter, asking if they were re-letting vacated sites and why this didn't significantly impact the outlook.

Answer

Marguerite Nader, CEO, described marketing strategies including engaging previous guests, leveraging social media, topical news, and online travel agents, noting that rate concessions are decided on a market-by-market basis. Paul Seavey, EVP and CFO, explained that the impact of filling annual RV sites is modest due to the remaining time in the year. He clarified that annual site fills naturally offset transient availability, and it was a mix of sites filled, not necessarily the same vacated ones.

David Segall asked about the expected timeline for backfilling the lost occupancy in the annual RV segment and inquired about the drivers behind the reduced guidance for property management and G&A expenses.

Answer

CEO Marguerite Nader stated the annual RV occupancy loss was in summer-focused properties, and marketing efforts to backfill those spots would target the following year's season. EVP & CFO Paul Seavey attributed the G&A guidance reduction primarily to compensation savings from open positions and expected savings from legal and other administrative items.

David Segall inquired about the timeline for backfilling lost annual RV occupancy and asked for color on the reduced guidance for property management and G&A expenses.

Answer

CEO Marguerite Nader explained that the lost occupancy was in summer-focused properties and would be marketed for backfill next year. EVP & CFO Paul Seavey attributed the G&A guidance reduction to compensation savings from open positions and expected savings in legal and other administrative items.

David Segall asked about the expected timeline for backfilling the lost occupancy in the annual RV segment. He also requested color on the reasons for the reduction in the property management and G&A guidance.

Answer

CEO Marguerite Nader explained that the occupancy loss occurred in summer-focused properties, and marketing efforts to backfill those sites would target the following year's season. EVP & CFO Paul Seavey attributed the lower G&A guidance primarily to compensation savings from open positions and expected savings on legal and other administrative items.

David Segall asked about the timeline for backfilling the lost occupancy in the annual RV segment. He also requested color on the drivers behind the reduced guidance for property management and G&A expenses.

Answer

CEO Marguerite Nader explained that the occupancy loss was in summer-focused properties, and efforts to backfill those sites would target the next summer season. EVP & CFO Paul Seavey stated that the G&A guidance reduction was primarily due to compensation savings from open positions and expected savings in legal and other administrative items.

David Segall asked about the expected timeline for backfilling the lost occupancy in the annual RV segment. He also requested color on the reasons for the reduction in the property management and G&A guidance.

Answer

CEO Marguerite Nader explained that the occupancy loss was in summer-focused properties, and the company will market to backfill those sites for next year. EVP & CFO Paul Seavey attributed the reduced G&A guidance primarily to compensation savings from open positions and expected savings from legal and other administrative items.

David Segall from Green Street inquired why expected transaction activity from lender pressure has not materialized and if it's merely delayed. He also asked about the drivers behind the reduction in CapEx guidance.

Answer

EVP & CIO Alexander Brackenridge explained that lenders have been more willing to extend loans than anticipated, as they want to keep capital deployed in multifamily. However, he believes pressure is still building and opportunities will emerge later. He attributed the lower CapEx guidance to timing delays on a few projects, which are now expected to proceed in the next 12 months.

David Segall from Green Street Advisors inquired why expected pressure from lenders has not materialized into more transaction activity and whether this activity is merely delayed. He also asked about the reason for the reduction in CapEx guidance.

Answer

EVP & CIO Alexander Brackenridge explained that lenders have been more willing to extend loans than anticipated, as they want to keep capital deployed in multifamily amidst a slowdown in new business. He believes pressure is still building long-term and opportunities will eventually arise. He also noted the CapEx reduction was due to minor project timing delays that will be caught up in the coming year.

David Segall from Green Street asked about the diverging performance between the Bay Area and Seattle, and questioned the relative attractiveness of acquisitions, share buybacks, and development.

Answer

COO Michael Manelis stated that while Seattle had more momentum entering the year, San Francisco is now showing stronger-than-expected improvement, with both markets having significant recovery potential. CEO Mark Parrell added that the best opportunity remains acquiring existing assets in expansion markets, though development is becoming more attractive. He emphasized that future investments will be funded by dispositions in a 'recycling exercise' due to market uncertainty.

David Segall from Green Street questioned the timing of the UK ground lease buyouts, asking why the decision was made now. He also asked about the potential uses for the over $400 million in capital that was released from the 1031 exchange accounts.

Answer

EVP & CFO Fernando Castro-Caratini described the ground lease buyout as an 'opportunistic acquisition' that enhanced financial and strategic flexibility. Chairman & CEO Gary Shiffman addressed the use of proceeds, stating that all options remain available, including other tax mitigation strategies, acquiring MH communities outside the 1031 exchange, executing the stock buyback program, or even acquiring more UK land leases, emphasizing a thoughtful approach to capital allocation.

David Segall from Green Street asked for a quantification of the RV booking pace specifically for Canadian customers and inquired about plans for further portfolio pruning through asset sales.

Answer

Executive John McLaren stated that while the booking pace for Canadian guests has been down, the overall impact is limited as Canada represents only 4% of annual and 5% of transient RV business. He reiterated the focus is on recouping any shortfall with domestic travelers. Regarding asset sales, Executive Gary Shiffman indicated that the major strategic dispositions are complete and future sales would likely be 'onesies and twosies' of non-core assets as part of routine asset management.

David Segall pressed for more specific details on capital allocation, asking for an upper or lower limit on the amount of debt that will be repaid and the potential size of a special dividend. He also questioned if the company intends to hold a significant amount of cash for an extended period.

Answer

Executive Fernando Castro-Caratini consistently responded that the company will update the market with a detailed plan for the use of proceeds once it is closer to the transaction's closing, declining to provide specific ranges for debt paydown, dividends, or cash balances at this time.

David Segall asked about potential attrition in the annual RV business and sought more color on the changes in revenue growth assumptions across the company's business segments.

Answer

Fernando Castro-Caratini, Executive, clarified that the annual RV segment is seeing occupancy gains and strong renewals, not attrition, with nearly 2,000 transient-to-annual site conversions this year. He explained that revenue guidance was lowered due to weaker transient demand in RV and marinas, and fewer home sales due to hurricane impacts.

David Segall asked for Essex's thoughts on Washington State's rent control proposal, comparing it to California's experience, and inquired about the expected timeline for bad debt to fully normalize.

Answer

Executive Angela Kleiman noted that the proposed Washington rent cap is similar to California's AB 1482, which did not meaningfully impact their business due to a long-standing self-imposed 10% rent increase cap. Executive Barb Pak stated that bad debt was at 50 basis points in Q1, close to the 40 basis point historical average, and reaching that normalized level by year-end is a 'realistic possibility.'

David Segall asked for clarification on the expected pricing for the smaller, less efficient assets planned for sale relative to the 5% market cap rate mentioned. He also questioned if this strategy implied a potential exit from markets like Massachusetts.

Answer

CEO Mahbod Nia clarified that the 5% cap rate was a specific reference to the Massachusetts market. He stated the expectation is to sell the operating assets within the disposition plan at cap rates in the 'low 5s'. Mr. Nia confirmed the assets for sale are a combination from across the portfolio and could include properties in Massachusetts, Westchester, and D.C., as well as joint ventures, based on a review of size, liquidity, and pricing.

David Segall requested specific financial metrics, asking for the per-unit rents required in Nashville and Denver to achieve the company's target 6% development yield.

Answer

President and CFO Alexander Jessett stated that he did not have the specific figures on hand and would have to follow up with the information after the call. The question was not answered with specific data during the session.

David Segall asked about the performance difference between Camden's urban and suburban assets and whether the company's strategic view on this divide is consistent across all markets.

Answer

President and CFO Alexander Jessett stated that suburban assets continue to outperform, with revenue growth approximately 80 basis points higher than urban assets across the entire portfolio. Chairman and CEO Richard Campo added that this is driven by demographics, as the majority of their target renters live in the suburbs. He also noted that a decade-long development trend focused on urban cores has resulted in more supply and downward rent pressure there, reinforcing the long-term outperformance of suburban properties.