Camden Property Trust - Q3 2023
October 27, 2023
Transcript
Operator (participant)
Good day, and welcome to the Camden Property Trust Q3 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Kim Callahan, Senior Vice President of Investor Relations. Please go ahead.
Kim Callahan (SVP of Investor Relations)
Good morning, and welcome to Camden Property Trust Q3 2023 earnings conference call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today are Ric 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 email upon request. All participants will be in listen-only mode during the presentation, with an opportunity to ask questions afterward. 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 Q3 2023 earnings release is available in the investor 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, as there are other multifamily companies hosting calls later today. Please limit your initial question to one, then rejoin the queue if you have additional items to discuss.
If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or email after the call concludes. At this time, I'll turn the call over to Ric Campo.
Ric Campo (Chairman and CEO)
Thanks, Kim, and good morning. Our on-hold music was in honor of, and memory of, Jimmy Buffett. One of Jimmy's recurring themes in his songs was how to navigate through life's storms, including actual hurricanes. Ironically, this is the first year in memory that we did not have any hurricanes in any of our markets. On the other hand, the hurricane in the capital markets is blowing hard. As a result of the turmoil, we are encouraging our teams to heed Jimmy's advice from one of his songs that he wrote for New Orleans after the devastation of Hurricane Katrina, and this is from the song: "If a hurricane doesn't leave you dead, it'll make you strong. Don't try to explain it, just nod your head. Breathe in, breathe out, move on." Which is exactly what we plan to do. Our business is strong.
We've been through many cycles. This cycle has been different in that we're coming off the best year we ever had, driven by the COVID reopening consumer high. 2023 has been a year of getting back to a more normal multifamily business. I say more normal because we are still not back to normal customer behavior, where they actually pay their rent, and if they don't, they move out. We have high cancellations due to identity theft and fraud, elevated skips, and lease breaks. Seasonality is back, but it started earlier this year and was stronger than pre-COVID levels. We had planned for a more normal Q4, but that didn't happen. As a result, we have revised our Q4 full year guidance to reflect weaker new lease growth, lower occupancy, and higher bad debts than we expected, even in the summer.
In a normal growth year, however, we would cheer for revenue growth of 5%. Fundamentals for our business are good overall, taking the challenges and the opportunities together. On the demand side, job growth remains robust. US consumer demographics continue to be supportive for apartment demand. The share of 25- to 34-year-olds is stable. The share of 34- to 48-year-olds is growing, and they have a high propensity to rent, given the record high cost of buying a home. The buy to rent premium today is at 30-year highs, with homeownership out of reach for many people. This should increase the apartment business share of the housing market at least through 2026. The US share, or the share of US households that are living alone continues to grow to nearly 30% over the next few years.
The long-term trend of in-migration to our markets continues. On the supply side, starts have peaked, and the capital markets hurricane has begun to reduce new starts. Annualized August starts fell 42%. Witten Advisors projects starts will fall to 250,000 units in 2024, and just above 200,000 units in 2025. Completions will be elevated through the end of 2024, but demand drivers should allow for an orderly lease absorption in our markets. I want to give a big thanks and shout-out to Team Camden for improving the lives of our teammates, our customers, and our stakeholders one experience at a time. Keith Oden's up next.
Keith Oden (Executive Vice Chairman of the Board and President)
Thanks, Ric. Overall, our Q3 2023 operating results were in line with expectations. Year-over-year, same property revenue growth was positive for the quarter in 14 of our 15 markets, and positive on both a sequential and year-to-date basis in all of our markets. Occupancy for the Q3 averaged 95.6%, ending September at 95.3%, as we shifted more to a defensive strategy, entering our slower leasing season in the Q4 and Q1. October occupancy is currently trending at 94.9% and should continue to moderate slightly over the remainder of the year. Rents are also moderating, given our focus on maintaining occupancy versus raising rental rates. During the Q3, our effective growth rates were 0.8% for new leases, 5.9% for renewals, and 3.4% for blended rate growth.
Effective new lease growth for October is currently -2.5% and is expected to trend a bit further down a bit further between now and the end of the year. Effective renewal rate growth for October to date is 4.7% and should average around 4% for the full Q4. Effective blended lease rates for October remain positive at 1.4%. Gross turnover rates for the Q3 were up 200 basis points compared to last year due to higher levels of skips and lease breaks, but our net turnover was down 200 basis points due to high levels of resident retention by our on-site teams.
Move-outs to purchase homes accounted for just over 10% of our total move-outs during the quarter, which is near the lowest level we've seen in over the past 30 years. Supply will remain a factor in many of our markets for the next several quarters, and as expected, we're seeing elevated competition for our Camden communities located in those submarkets where new deliveries exceed long-term historical averages. 16% of Camden's communities are being impacted by new supply, but the vast majority are not. We are seeing some encouraging news regarding the future as the level of new starts has begun to fall, which bodes well for the supply environment in 2025 and 2026. I'll now turn it over to Alex Jessett, Camden's Chief Financial Officer.
Alex Jessett (EVP and CFO)
Thanks, Keith. For the Q3, we reported Core FFO of $73 per share, in line with the midpoint of our prior quarterly guidance. Although our net results met expectations, we experienced $0.015 of lower than anticipated revenue for the quarter, which was entirely offset by $0.015 of lower than anticipated expenses. The lower revenue resulted primarily from an unexpected rise in bad debt. Our lower than anticipated operating expenses resulted almost entirely from lower property taxes in Texas. As previously discussed, the Texas State Legislature passed a tax reform bill subject to voter approval in November. Upon approval, which we believe is likely, Senate Bill 2 will reduce independent school district tax rates by 10.7 cents per $100 of assessed value.
Average independent school district tax rates in our Texas markets are approximately 1% of assessed value or 45% of the total Texas tax rate. Therefore, excluding valuation increases and other tax rate increases, this anticipated reduction equates to an approximate 4.8% reduction in Texas taxes. We had previously assumed these independent school district tax rate rollbacks in Texas would be partially offset by other Texas rate increases. However, these other increases have not occurred. We now expect total property taxes to increase by 2.9% as compared to our prior expectations of 4.5%, for a total savings of $0.025 per share from our prior guidance. $0.015 of this savings occurred in the Q3, and the remaining $0.01 will be recognized in the Q4.
Turning back to revenue, we had expected same store bad debt would be 100 basis points for the Q3, 90 basis points for the Q4, and 120 basis points for the full year. Instead, bad debt was 40 basis points higher, or 140 basis points in total for the Q3, with the increase happening primarily in September. We are now anticipating 150 basis points of bad debt for both the Q4 and full year 2023. This 40 basis point increase in bad debt for the Q3 equates to approximately $0.01 per share, and the 60 basis point increase in the Q4 equates to approximately $0.015 per share.
In conjunction with the increase in bad debt on rental revenues, we also experienced higher bad debt on administrative and other fees of another $0.005 per share for the Q3, and we are anticipating the same additional $0.005 for fees in the Q4. We believe this higher bad debt is primarily consumer behavior driven and not tied to financial stress of our residents. Our prior guidance called for 95.6% same-store average occupancy in the third and fourth quarters, with fairly consistent occupancy levels throughout the back half of the year. We actually had higher than anticipated occupancy in both July and August, entirely offset by lower occupancy of 95.3% in September. In combination with higher than anticipated skips and evictions, we believe that historic seasonality, which has been unpredictable since the pandemic, has returned.
We now anticipate occupancy will average 94.8% in the Q4, and the impact of this 80 basis points adjustment from prior estimates is approximately $0.02 per share. As a result of the decline in occupancy, we lowered asking rents more than anticipated in September. We had expected a 1.5% average increase in new leases and a 5% average increase in renewals for a blend of approximately 3.25% in the back half of the year. Our effective blended rates were higher than this, at 3.4% for the Q3. However, lower occupancy caused a reduction in signed rates, which is flowing through our Q4 guidance.
We are now anticipating Q4 new leases of -4.5% and a 4% average increase in renewals for a blend of approximately -0.7%, resulting in a decline of approximately 1.5 cents per share for the Q4. The cumulative same-store impact of the greater than anticipated third and Q4 bad debt and lower Q4 occupancy and rents is approximately 7 cents per share, of which 5.5 cents per share is in the Q4. As a result, we have decreased the midpoint of our full-year same-store revenue guidance from 5.65% to 5%, effectively in line with our original revenue guidance midpoint at the beginning of this year. Turning to expenses. As previously mentioned, we had $0.015 of favorability, primarily in taxes in the Q3.
We are also anticipating favorability in taxes of $0.01 per share in the Q4. This $0.025 of tax favorability is anticipated to be partially offset by $0.015 of higher Q4 repair and maintenance and marketing expenses associated with higher skips and evictions and lower occupancy. As a result, we have adjusted the midpoint of our full-year same-store expense guidance from 6.85% to 6.5%, or a net $0.01 per share. Our resulting full-year same-store NOI midpoint has been reduced from 5% to 4.2%. Last night, we also lowered the midpoint of our full-year 2023 core FFO guidance by $0.07 per share to a new midpoint of $6.81 per share.
This $0.07 per share decline resulted primarily from the previously mentioned $0.035 per share increase in same-store bad debt, the $0.02 per share decrease in same-store occupancy, and the $0.015 per share decline in same-store rents, partially offset by the $0.01 per share in lower property expenses resulting from lower taxes. In addition to this net $0.06 per share decline in same-store NOI, we are also anticipating an additional $0.01 in lower non-same-store NOI for similar reasons. We also provided earnings guidance for the Q4 of 2023. We expect core FFO per share for the Q4 to be within the range of $70-$74. The midpoint of $72 represents a $0.01 per share decline from the $73 recorded in the Q3.
This is primarily the result of approximately $0.01 in lower same-store NOI, resulting from $0.035 in decreased revenue, driven by 80 basis points of lower occupancy and 10 basis points of higher bad debt, partially offset by $0.025 in lower property expenses resulting from typical seasonal declines. Our balance sheet remains strong, with net debt to EBITDA for the Q3 at 4.1 times, and at quarter end, we had $181 million left to spend over the next two years under our existing development pipeline. At this time, we'll open the call up to questions.
Operator (participant)
We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Michael Goldsmith with UBS. Please go ahead.
Michael Goldsmith (Equity Research Analyst)
Good morning. Thanks a lot for taking my question. How have concessions on the merchant build products trended over the last two months, and are there any other notable drivers on the consumer side? And then alongside this, are you seeing supply impact properties that you previously thought would compete directly with new supply due to either sub-market or price point? Thank you.
Ric Campo (Chairman and CEO)
Let me take the first part, and I'll let Keith do the last part. From a merchant builder perspective, there's an old joke in the merchant builder world that you don't want to be the last one on the street to get the three months free. Depending on the market you're in, like, if you're in a market like Nashville, for example, there's three months free in the market with merchant builder product. There's no question about that. In other markets, though, that don't have the, you know, mar— and Nashville was, you know, Nashville and Austin, Texas, are the number one supply markets in America right now, with maybe 6% new supply coming in. The...
You definitely are seeing kind of peak merchant builder concessions there. When you look at other markets like Charlotte, for example, there, you know, there's a month, maybe six weeks free or something like that. Most merchant builders are gonna, in any market, are gonna have discounts or, or, or free rent to, you know, to incent people to come in. I think that part of the equation is, is happening pretty normally. The markets that are gonna be more, that have the higher concentration, are gonna have closer to the three-month free number. In terms of consumer behavior, you know, when we think about what our, our, you know, what...
The way we looked at the Q4, you know, consumer behavior is, it's affected by this new supply for sure. But because of the nature of our portfolio that Keith will talk about in a minute, it's not a huge issue, and supply isn't, like, changing consumer behavior. The thing that surprised us, and maybe we were just too optimistic on this, was that post-COVID consumer behavior would return to more normal behavior sooner rather than it has. Let me describe what I mean by that. I'm talking about when somebody moves into an apartment, and they aren't paying their rent.
Today, consumers know that if you're in Atlanta, for example, that you can stay in your apartment for 7 or 8 months before you, you actually have to leave. And so that consumer behavior, they know that, and you can just go online and say, "How do I live in a, live in an apartment for free as long as I can?" And they'll give you what you need to do. And so that, if you, if you look at Atlanta, for example, our bad debts there are, like, 3%. And normally Atlanta would be 50 basis points. So that part of the consumer behavior has definitely... They understand the system, and they haven't—we haven't been able to, you know, convince them that they, they ought to pay, and if they don't pay, they should move.
I think that will change because what's happening is, you know, every market is getting tighter in terms of the ability to move people out. The governments are, you know, backlogged, and now they're starting to get, you know, better, and over the next, you know, six or eight months, I think it'll go back to a more normal situation from that perspective. Keith, why don't you address the issue on supply in our portfolio and-
Keith Oden (Executive Vice Chairman of the Board and President)
Yeah, I think-
Ric Campo (Chairman and CEO)
... last-
Keith Oden (Executive Vice Chairman of the Board and President)
I think the question, the question, Michael asked was, is the, is the pool of impacted, communities-
Ric Campo (Chairman and CEO)
Mm-hmm
Keith Oden (Executive Vice Chairman of the Board and President)
... shifted, and the short answer to that is no. But I do wanna give you a little bit more color and detail around how we look at the supply challenge and how we quantify it, and then how we, you know, how we make sure that we've properly anticipated that. So we stratify our portfolio 'cause it's really important to do so in times of elevated supply, into those markets that are likely to be impacted by new lease-ups and those that are not. And so that's filter one. And the second filter is, if it is in a submarket where we have existing assets, then is the price point actually gonna be affected by the new lease-ups?
Our proxy for that is we use age as a proxy for that, and we make the cut at 15 years. It's not completely scientific, but it's been useful over the years to look at it that way. So when you stratify Camden's portfolio that way, about 16% of Camden's total apartment units are in markets that have a supply challenge. Now, the interesting thing is that of all the things that we have to forecast at the beginning of the year, new supply, impact from new supply is probably one of the most reliable because it's, you know, the community is either under construction or not.
You may, you may miss the delivery time by a quarter or two, but the supply, once it gets started, it's gonna be there, and it's gonna... it's something you're gonna have to deal with. So if you take... If you think about it that way, in the Q2 of this year, for that 16% of our communities that we believe are being impacted directly by supply, the impacted communities had a lower new lease rate than the 84% non-impacted communities by 260 basis points. So it's important, and it's meaningful, but it's only 16% of our portfolio. But yes, supply matters, and it matters more directly to those communities where it's happening.
So if you roll that forward to the Q3, I know there's still a lot of elevated anxiety about supply and what's coming and what the impact is gonna be, and I think it's and there's probably just a view that supply is a bigger part of the challenge in our progression of results from the second to Q3. If you roll it, roll those numbers forward to the Q3, same 16% is impacted. So instead of 260 basis points differential between the impacted and non-impacted community, that number moved to 310 basis points. So it's 50 basis points on 16% of our communities, and it's only new leases.
So if you, if you kinda roll that down, do the math, and roll that to the bottom line, we think that the challenge of 2Q to 3Q that was directly attributable to increased supply was about 15 basis points. And if you compare that to what the, the stats that Alex gave you on the, on the, delinquency or bad debts, you know, that, that number alone is 50 basis points, of impact in the quarter. So yeah, it matters, and it's something that we pay a lot of attention to because our operations team has to take that into consideration, when they're, when they're making their pricing decisions. But it's... I mean, in our portfolio, yeah, it's in the run rate. We've been dealing with supply for almost 9 months now.
It's gonna continue for at least through the end of 2024, for sure, and that's just something we're gonna have to deal with. So-
Haendel St. Juste (Equity Research Analyst)
... Thank you very much for the thorough answer. Good luck in the Q4.
Keith Oden (Executive Vice Chairman of the Board and President)
Yep. Thanks.
Operator (participant)
Our next question comes from Brad Heffern with RBC Capital Markets. Please go ahead.
Brad Heffern (Equity Research Analyst)
Hey, thanks, everybody. Do you think Camden's being negatively impacted in this time of high supply because you have the policy of not offering concessions? And is there any chance that you might change that policy, at least on a near-term basis?
Keith Oden (Executive Vice Chairman of the Board and President)
Yeah, we're not... We do offer concessions on our new lease-ups because that's traditional, and it's kind of expected by the consumer. But, we find that our consumers are much, you know, just be transparent, tell me what the rent is, and that's the way the algorithm and YieldStar works. So I can't see us-- we have no intention of going back to quoting, you know, a month free rent and then prorating that month over the balance of the lease term. It's, to me, it's confusing to consumers, and it's also, it just makes it-- it puts a little bit more pressure on managing the, you know, the bad actor move in, pay your rent expectation that we've had forever in this business.
So we'll continue to do it on our new development lease-ups, because that's just part of what we bake into the cake when we think about our pro forma, but not on established communities.
Brad Heffern (Equity Research Analyst)
Okay, got it. And then thinking about 2024, not asking for guidance or anything like that, but I'm curious how you guys are thinking about market rent growth at this point. Do you think there's a chance that we won't see it next year based on what we've seen recently, or how have your thoughts on that evolved?
Ric Campo (Chairman and CEO)
Well, when you look at, we use Ron Witten and Witten Advisors' information a lot, and it's interesting because, you know, development falls off pretty dramatically, or at least starts to in 2024, and you start absorbing that real estate. You know, you have countervailing factors like homeownership rate going down or in terms of people moving out to buy homes are down at 10%, and the prospect for people buying homes next year looks pretty dismal relative to the current environment. And so you have, you do have crosscurrents that, where you don't need as much job growth for demand, that to create demand for apartments because you have fewer people moving out to buy homes. You have more people that are...
I've quoted a number of, you know, the percentage of people, of adults that live alone in the U.S. And when you get close to a third of the people that are living alone, they don't go out and buy houses, they rent apartments. And so that older demographic becomes a higher propensity to rent apartments, and that stabilizes the system as well. So, you know, Ron thinks that you're gonna have occupancy levels that stay kind of where they are now, and that you're gonna have, you know, some modest rent growth in markets. And so I think, are the rent, you know, we had a 5% rent growth in 2023, are we gonna have, you know, the same in 2024? The answer is probably no.
But is it a sort of a slower year? Yes, but is... I think that there's, you know, there is definitely a construct and a model that would argue that you should have reasonable occupancy and some rent growth in 2024.
Brad Heffern (Equity Research Analyst)
Okay. Thank you.
Ric Campo (Chairman and CEO)
Mm-hmm.
Operator (participant)
Our next question comes from Haendel St. Juste with Mizuho. Please go ahead.
Haendel St. Juste (Equity Research Analyst)
Hey, guys, good morning. I was hoping to talk a bit more about the decision to let occupancy trend down in October. I would've expected occupancy to pick back up, a bit here, certainly heading into seasonally lower demand, higher supply. It sounds like you expect that now to continue into year-end, maybe even mid-next year. So I'm curious if, in hindsight, that might have been a tactical misstep and perhaps where occupancy in the portfolio is falling the most and when we might be able to get back to 95%. Thank you.
Ric Campo (Chairman and CEO)
Well, remember, occupancy and rent are correlated, right? I mean, we could be at 95%-97% occupancy if we wanted to go out and buy occupancy by lowering rents dramatically. And so we just think it's a better fit. You know, our revenue team, we debate where we ought to have our settings on an ongoing basis, and we feel really comfortable with where we are. You know, I would rather have higher rent and higher occupancy, but in this environment, with seasonality and with the consumer doing what they're doing, we feel comfortable with where we are, and we think we're gonna set up for a reasonable start to 2024.
Keith Oden (Executive Vice Chairman of the Board and President)
Handel, just to follow up on that, you know, the idea that, you know, that we let occupancy go to 94.9% is, it kind of, it kind of implies that that was a conscious decision, and clearly that wasn't, 'cause our occupancy guidance for the back half of the year was at 95.6% going into October. So if you wanna kind of connect the dots a little bit, what Alex talked about on our delinquency, but also our continued elevated level of skips and lease breaks.
You know, we had planned at the beginning of the year that, you know, we felt, we really felt like that, that 2023 would go a long way towards getting back to normal metrics around delinquency and skips and lease breaks, and it would kind of happen ratably over the course of the year. And we did make good progress in the first two quarters, and there was certainly an expectation, and we talked about the expectation of getting to, you know, 90 basis points of delinquency by the end of 2023. Well, guess what?
You know, we were on a glide path to get there, and then all of a sudden, instead of dropping again in the at the end of the Q3, that metric reversed, and all of a sudden, you're at 140 basis points instead of a glide path to get to 90. So that was. I mean, that was completely unexpected. But the way that flows through in our portfolio is, skips and lease breaks are, you know, in the same category of short-term lease terminations, and they're really the. They're hard to anticipate. You have no idea who's gonna skip or when, or when they're gonna move out.
Obviously, if they're facing, you know, the termination of their lease, then by judicial means, then yeah, they probably eventually move out before that date. But there's no way to anticipate it, and the challenge is when somebody moves out in the middle of the night, which these, you know, skips and lease breaks typically do. A, you don't have a chance to do anything to pre-lease the apartment, and B, that people who move out in the middle of the night typically don't take real good care of the asset.
So not only do you not get notice, it takes you longer to turn a unit because it's been probably maybe a little bit more harshly used, and so the days to turn an apartment that is in that category of short-term lease break are just elongated. And we thought we would be getting shorter and fewer of those, and so that's the biggest reason why, you know, that it compounded our challenge of seasonality, certainly wasn't anything we thought, you know, "Hey, wouldn't it be great to get into the 94s on occupancy?" But it just happens as a result of those factors.
Haendel St. Juste (Equity Research Analyst)
Got it. Got it. Certainly understand the complexity involved and appreciate the thinking, the thought process here. Maybe can you give us an update on where the portfolio loss to lease is overall today and where it's highest and lowest? And I think last quarter you mentioned the earn-in for full year 2024 was around 1.8% if you were to hit your budget. For the rest of the year, obviously, the numbers come in a bit, so perhaps you can give us an update on where you feel that earn-in for next year is. Thanks.
Ric Campo (Chairman and CEO)
Yeah, absolutely. So loss to lease for us is just under 1%, and we're actually showing our embedded growth. If assuming we make our reforecast for the Q4, our embedded growth should be right around 0.9% for 2024.
Keith Oden (Executive Vice Chairman of the Board and President)
Yeah. So on the challenge, you know, which where do you have the most challenge on maintaining occupancy? It's in the markets where, you know, we knew that we were gonna have a challenge in the Q4 with our supply-impacted markets. So it's, you know, it's Atlanta, it's Austin, it's Charlotte. Those would be the big three in terms of, you know, kind of a compounding of both supply that we did anticipate, and then, you know, kind of continued elevated lease breaks, which we did not anticipate.
Haendel St. Juste (Equity Research Analyst)
Great, guys. Thank you so much.
Ric Campo (Chairman and CEO)
Sure.
Operator (participant)
Our next question comes from Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.
Austin Wurschmidt (Equity Research Analyst)
Yeah, good morning. Thank you. You guys referenced that a couple of times, that only 16% of the communities are being impacted by new supply, but clearly, new lease rate growth has dropped dramatically, occupancy has fallen as well. I guess, is it your belief that 4Q is as bad as lease rate growth, you know, and occupancy could get, and that we actually see both, you know, rate growth and occupancy re-accelerate into 2024, just given some of the items you highlighted around the impact from seasonality, skips and evicts, et cetera? And I guess, what would change that view?
Ric Campo (Chairman and CEO)
I think the issue will be what happens in 2029 with the economy overall, right? I mean, if we have, continue to have robust job growth like we, like we've had so far, and we know we had seasonality this year more than we've had, you know, since the pandemic, then you would expect to have a similar pattern, a similar seasonal pattern in the Q1 of 2024, which is, you know, very typical, where you have the slowdown start in September, October, you know, you bottom in January, and then you start moving up in February, March, April. I think that is very plausible, and it really just depends on, you know, the strength of the economy.
The consumer, you know, still has a fair amount of savings, and the consumer, you know, you look at consumer spending, you know, it was very robust in the last number that came out. I think the PCE today came out pretty strong, where people are actually, you know, spending more than wages are rising. So the consumer continues to be, you know, pretty resilient, and assuming that you have a, you know, a reasonable, you know, construct for 2024, you should have a pickup in leasing and occupancy levels, like we have had every year, you know, before the pandemic.
Keith Oden (Executive Vice Chairman of the Board and President)
Austin, I would say that of the three things that we've highlighted and talked about, supply, bad debts, and skips and evictions. On supply, we're gonna have the challenge in 2024 that's similar to what we've had in 2023. The number of deliveries that are coming is gonna be about the same in Camden's market. From our perspective, we have already lived in that environment now for almost a year or nine months or so, and it's in our run rate. I mean, if you just—if you stratify our portfolio between impacted and non-impacted, the differential is, in the second and Q3, was somewhere around 300 basis points between those two groupings of assets, impacted and not impacted.
The ones that are impacted now are probably gonna continue to be impacted in 2024. So I think the good news is, from the standpoint of as an operator, that that's in our run rate, it's probably gonna stay there at least through 2024. In terms of bad debts and skips and evictions, I mean, we still have a very, you know, clear expectation that this is a process of kind of cleansing the COVID and the bad behavior that came as a result of all the regulatory construct during COVID. But there's no reason that, to me, we would expect bad debts to continue to be as elevated as they are right now, or expect to be in the Q4.
I mean, if you just go back to, you know, the 27 or 28 years in of, of this portfolio prior to COVID, our bad debt averaged 50 basis points a year forever. And then all of a sudden in COVID, it peaks at 200, and then we start making progress. We, we think that we're on a glide path to get to 90 basis points by the end of the year, and lo and behold, we're not. But I, I still have every expectation that, that this is a, a process of unwinding a lot of bad behavior and a lot of bad actors. And, and I do think, you know, we, we obviously thought a lot more of that would happen in 2023, but I think that's a continuing process that probably, you know, it gets wrapped up in, in 2024.
The same on skips and evictions. You know, skips and evictions are double the level that they were in our portfolio prior to, prior to COVID. And again, we've probably gonna have some bad behavior. We've taught some renters some really bad habits over the last two and a half years. Maybe it stays a little bit elevated from what it was, but I can't see it being double what it was pre-COVID, you know, in, you know, into in throughout 2024. So I think that those two will work their way out in 2024. But the supply challenge is gonna be with us in 2024, but I think we've captured that already, most of that in our run rate.
Joshua Dennerlein (Equity Research Analyst of REITs)
Got it. Thanks for the thoughts, and that's my one question.
Operator (participant)
Our next question comes from Eric Wolfe with Citi. Please go ahead.
Eric Wolfe (VP and Equity Research Analyst of REITs)
Hello, thanks. I just wanted to follow up on that last answer. I guess I'm trying to understand what you think would sort of change from a sort of process perspective to sort of get the bad debt down, whether, you know, it's sort of external or internal, because it feels like we're pretty removed with COVID at this point, and to your point, it's super easy to just kind of look up ways to get out of leases now, and it's sort of embedded in people's mentality. So is there anything, like, you think you can do on an internal perspective? Maybe there's some warning signs for the recent skips and evictions, like a common factor or something that you found with them?
Just trying to understand what would, what would bring that down from the 150 basis points or 140 basis points that you're running at. And, and, you know, as you're thinking about guidance for next year, I mean, I guess, how would you come up with an estimate for, for bad debt, just given all this noise that you're seeing now?
Keith Oden (Executive Vice Chairman of the Board and President)
Yeah, I mean-
Rich Hightower (Equity Research Analyst, REITs)
Go ahead, Keith.
Keith Oden (Executive Vice Chairman of the Board and President)
Yeah. So no, there's no question, and it'll be a challenge. We certainly faced that this year as well, and we were more optimistic than it looks like we should have been in terms of bad debts. But what will solve it is two things. One, making sure that we do everything possible to accelerate and to move forward the process of getting folks who are in our apartments paying, that are not paying rent, out. Now, the good news is that in virtually every one of our markets and submarkets, the regulatory prohibition on being able to move forward to get someone out of your apartment from a judicial perspective, that's not paying rent, those have all lapsed. So what we're left with is municipalities who are just... There's a huge backlog. They're overwhelmed.
Some cities have done a whole lot better job than others at kind of getting their act together and, you know, and moving things through the process. But even the worst of the players have, for example, in Atlanta, in Montgomery County, up in the D.C. area, even those have improved. They just haven't improved as much as most of the other cities. So part of it is just, we got to get the bad actors out, and there's a pathway for that. It's just, it's still taking longer than it did historically, and in some places it's still taking way too long for that to happen. And we're doing everything possible, but it's just like pushing on a string when you're trying to get municipalities to, you know, to focus on something like this.
So, yeah, I think that, I think that that will work itself out, and I think ultimately, you know, the skips and evictions, we have done some things internally, where we have the highest incidence of kind of people who are fraudsters and bad actors. We've instituted things like, you know, income verification, which we, you know, back in the old days, in the dark ages, we did on every lease. And then we've, you know, we went to a purely online system in the interest of making it frictionless for our customers.
Well, you know, we're gonna have to probably go back in some more of these submarkets and municipalities and introduce some more friction that will be a burden to the good actors, but will also deter and catch the bad actors. We've done that in Atlanta. We're testing it in a bunch of other submarkets, but obviously, there's a balancing act between putting impediments to do business with good people, which, you know, income verification and these other things are, versus letting bad actors get into your community and then having to go through a 5-6 months process to get them to move on. So yeah, it's complex calculus, but our folks are really good at doing forecasting.
I think one of the things that Ric said that I personally think is quite remarkable is that when we started the year, based on our ops team's original guidance that we shared with the street, we said that we thought total revenues would be up 5.1% for the entire year. Okay, that was our original guidance. Then we increased the guidance in the Q1 because it looked like things were getting a little better, and then again in the Q2. But when it's all said and done, if we make our Q4 numbers, which we fully expect to do, our ops team will have delivered 5% same-store NOI revenue growth. That's 10 basis points off of our original guidance on a $1.6 billion number.
Given all the crosscurrents and you know, forecasting and assumption-making and then execution that goes with that, I think that's pretty remarkable.
Eric Wolfe (VP and Equity Research Analyst of REITs)
Yep. No, that makes sense, and, and I agree. I guess, you know, what's concerning people, sort of, the, the shift maybe in tone and trying to understand what's driving it, you know, at this moment, right? Because it did seem like things were pretty good up until maybe August or September, and then there's some kind of shift that happened, and people are trying to figure out whether it's supply or, or a shift in the consumer, you know, and so just trying to understand how that's gonna then impact 2024. But, I mean, I guess along those lines, you know, we got 16% of your properties that are, are directly impacted by supply. I was just curious, you know, how that number will, will sort of look throughout next year.
It goes up, goes down, and then if you sort of have a view on the impact of supply will peak, next year.
Keith Oden (Executive Vice Chairman of the Board and President)
Yeah. So, my guess is that number will move some. It may tick up a little bit next year, but I would be very surprised if it went above 18% or so of impacted communities. Because honestly, where the stuff is under construction right now, it's just a matter of, you know, merchant builders tend to be herd animals, and they build in the same places. And so a lot of the product that's gonna be coming in 2024 is in the same submarkets as 2023.
I think it may tick up a little bit, but I think that, you know, again, based on the analysis that we've done internally, and it's pretty detailed at the property level, you know, we think that we're probably—it's probably most of it is in our run rate for a year similar in 2024 to what we had this year.
Eric Wolfe (VP and Equity Research Analyst of REITs)
Okay. Thank you. Appreciate it.
Operator (participant)
Our next question comes from Joshua Dennerlein with Bank of America. Please go ahead.
Joshua Dennerlein (Equity Research Analyst of REITs)
Yeah. Hey, guys. I just want to explore a comment I thought I heard from you earlier about just like, I think it was like supply you'll have to deal with through the end of 2024. Was that implying that maybe the softness we're seeing in the new lease rate growth will continue through the end of 2024, or is it just like a general comment on supply? Just trying to think through, like, kind of what we could be in store for.
Ric Campo (Chairman and CEO)
Yeah, it's a general comment on supply, but to Keith's point on the 16% of our portfolio that is impacted by supply, and he threw those numbers out there about the differential between, you know, the differential between those 16% and the balance of the portfolio. And so, you know, we're gonna have more supply, you know, through 2024, but again, it's limited to that piece of the portfolio now. And there's the discussion earlier about, well, what is it? Is it the sort of softness in the Q4, is it all supply? Is it all consumer behavior? Is it all... You know, and what's happening is it's a combination of everything, right?
Supply is on the one hand, it is an issue for part of the portfolio. Consumer behavior is probably the biggest part of the equation because when you have more move-outs than you thought you'd have because people are skipping or breaking their leases, then you have to backfill those folks. And when you backfill them, and if you didn't have that, you didn't have to backfill them. And then when you have the bad debt side of the equation, it's sort of a circular equation. So it's really three different things that are happening, and supply will be, you know, a headwind for that part of the portfolio in 2024.
Hopefully, we won't have as much of a headwind from skips and breaks and bad debts because we're implementing things that are trying to keep the bad actors out. The municipalities are all getting better, and they're, you know, there aren't, as Keith mentioned, there are just not as many barriers to getting people out. There is a backlog, but that backlog is starting to improve. If you look just at a few markets, for example, every market in the country except three are 1%, you know, 1.5%, 1.8%, kind of bad debts, and the three that are having trouble are California and Atlanta.
In California, our bad debts are still 4.3%, and now the moratoriums are out or have been taken off, but the courts are backlogged. And so those backlogs will fix, and what will happen is that, and what's happening now with certain folks is that they understand that they can stay longer, and they do. And then when they get close to the edge, when they know that there's no other, you know, sort of administrative way for them to stay in, then they skip in the middle of the night.
I think 85% of our skips and lease breaks are people who owe us money, which, you know, on the one hand, is a really good thing because we're getting them out of the property because they haven't been paying. On the other hand, it creates more vacancy, and it creates more bad debt. So you have to look at that part of the equation and say, "All right, because of seasonality, we needed to fill more apartments at a slower time." And that's the circular effect of that, of those things. So I think that next year, even with new supply, we'll still have that as a headwind in some of our properties, but we should be getting more clarity on getting our real estate back faster and having bad debts go down.
Joshua Dennerlein (Equity Research Analyst of REITs)
... Okay, appreciate that color.
Ric Campo (Chairman and CEO)
Sure.
Joshua Dennerlein (Equity Research Analyst of REITs)
And then, I don't think we touched on it yet, but just any plans for the floating rate debt exposure, if you guys are just gonna keep it as is, or there's something you guys wanna do at this point with it?
Ric Campo (Chairman and CEO)
So, when you think about floating rate debt, and if you think over a long period of time, floating rate debt has always been cheaper than long-term debt. Today, we're in a very unusual situation with a flat yield curve, and so, even though it's steepening a little bit because of long-term rates going up, but at the end of the day, the bottom line in our portfolio is we have very, very low debt. So when you look at it as a percentage of total debt, it looks high, but because we have low debt, it is very manageable. And so it's already in our run rate, you know, with our line of credit costs and our term loan at this point.
And so it doesn't make a lot of sense to me to worry too much about what floating rate debt is gonna be over the next couple of years, because, you know, I think ultimately, the yield curve will steepen, and either short rates will come down, and I just don't think we need to be betting on on long-term bonds right now, given the volatility in the bond market. So, you know, we're comfortable with the level we have today, and I look at it as sort of gas in the tank to a certain extent, because when rates start dropping, you know, that'll flow through to our FFO because we'll start having, you know, lower interest costs.
The worst thing in the world would be to fix long-term rates today at these current rates, and then see the whole yield curve move down over the next couple of years.
Joshua Dennerlein (Equity Research Analyst of REITs)
Okay. Thanks, Ric. Appreciate it.
Operator (participant)
Our next question comes from Steve Sakwa with Evercore ISI. Please go ahead.
Steve Sakwa (Senior Managing Director, Senior Equity Research Analyst, REITs)
Yeah, thanks. Just about one question. I know with capital deployment, probably not really high on the list right now. I think we've got the stock probably trading, you know, north of a 7.5% implied cap rate. So I guess, how are you thinking maybe about share repurchases and marrying that up if there is a disposition market? I know there's a lot of institutional capital looking for high-quality apartments, so sort of any thoughts on shrinking the company a bit and buying back stock?
Ric Campo (Chairman and CEO)
Well, we've been really consistent in how we've described our stock buyback sort of appetite in the past, and that has been that, you know, it had to have at least a 20-25% discount to what we thought NAV was, and needed to be persistent, and we needed to sell assets to fund it. And maybe this is the time where we have persistence. We've had times in the past where we had the opportunity, but we didn't have the timing to be able to sell assets and buy. You know, we have sold one asset this year, a small one, for $61 million. And it, you know, when you think about capital deployment today, pretty hard to get a...
You know, when you look at an implied cap rate of 7.5, and if you look at a long-term, you know, model of what apartments will do once we get through this uncertainty of, and the supply cliff that everybody's worried about, you should see, you know, reasonable, you know, returns for multifamily companies come back again. So, you know, it makes sense for us to do that. We do have, there is a disposition market. Yes, you know, dispositions or the acquisition market is slow. It's down 60%-70%, you know, from the prior year.
But, you know, I think it's really interesting when you think about that, it sounds 60%-70%, which the flip side of that means that, you know, there's deals getting done. And so, you know, for us, you know, we, we were aggressive buyers of the stock when, when the, when the stock, was, down substantially for a long period of time. And if, if we have the opportunity to do it, we probably will.
Steve Sakwa (Senior Managing Director, Senior Equity Research Analyst, REITs)
Great, thanks. That's it for me.
Ric Campo (Chairman and CEO)
Mm-hmm.
Operator (participant)
Our next question comes from John Kim with BMO Capital Markets. Please go ahead.
John Kim (Managing Director)
Thank you. I just wanted to clarify two items mentioned on this call in my one question. Alex, I think you mentioned that you're expecting new lease growth rates at -4.5%, but renewals at +4%. I'm just wondering how sustainable that is, especially when you have loss to lease at around 1%. And then for Ric and Keith, in your response to Haendel's question on occupancy, I just wanted to clarify that you're okay operating at or below 95% for the time being. There's no immediate focus to get it above 95%?
Alex Jessett (EVP and CFO)
So, yeah, go ahead.
Keith Oden (Executive Vice Chairman of the Board and President)
Yeah, I'll take the occupancy first and then give it back to Alex. Yeah, and so in light of the fact that we, our guidance for the Q4 included, you know, occupancy of our prior guidance before we just issued revised guidance, had an occupancy rate being flat at about 95.6%-95.7%, that was our expectation. We're at 94.9% as we closed out October. So, no, we're not good with operating at 94.9%. The target that we set was 95.6%, and we'd like to get back to that as quickly as possible, but we're not, you know. So we're not going to, you know, make silly decisions on our either new leases or our renewal rates in order to achieve that.
It just doesn't make sense. But, yeah, within the limits of the levers that we can pull and still get back to 90, you know, mid-90s, that would be our preference.
Alex Jessett (EVP and CFO)
And then to your question on whether or not we think that the new leases and renewals that we have in our guidance for the Q4 is sustainable, obviously, we're sitting here today almost to November. And keep in mind that, if you're doing a renewal, you're typically signing that renewal a month to two months ahead of time, and new leases are typically, call it, 15 to 20 days ahead of time. I think we feel very confident about these rates for the quarter.
John Kim (Managing Director)
My question was more on the spread between the renewal and the new lease, it's 850 basis points.
Alex Jessett (EVP and CFO)
Yeah, you know, 850 basis points is historically a little wide, but it's not completely out of the realm of where we have operated at points in time. So we think we can maintain that.
John Kim (Managing Director)
Okay. Thank you.
Keith Oden (Executive Vice Chairman of the Board and President)
Mm-hmm. Mm-hmm.
Operator (participant)
Our next question comes from Rich Anderson with Wedbush. Please go ahead.
Rich Hightower (Equity Research Analyst, REITs)
Hey, thanks. Good morning. So I wonder if all of this noise in the system could create an opportunity for you. I imagine you guys are managing the skip and evict process a lot better than your neighboring peers, and you're managing supply better. Ric, you said something about maybe consumer behavior settles down within the next six months. Not that there's distress, but you're obviously a premier operator in your markets, particularly relative to your private competition. Do you think that there could be an opportunity to step in where people are perhaps a little bit less prepared or ill-prepared to handle these stresses?
That despite what Steve said about you're probably not gonna buy anything, maybe you start buying stuff, in a little bit more aggressive fashion as we get into the latter part of next year?
Ric Campo (Chairman and CEO)
Well, it's an interesting question, Rich, for sure. Welcome back, by the way. And, you know, bottom line is, capital allocation is an interesting thing, and we look at what the most opportune. We try to figure out what the most opportune, you know, investment, you know, strategy is, and we'll try to execute that. You know, right now, there really is, even with the transactions that are going on today, you know, deals are still trading at 5.5, you know, or 5.25. And so there isn't a lot of distress in the marketplace today.
And so I think you have had a sort of a narrowing of the gap between the buy, the bid, and the ask, and it's definitely been coming from primarily the sellers and not the buyers. But there is a big wall of capital that continues to be out there waiting for that some more clarity on, you know, what is the long-term tenure gonna look like? When is the Fed done? How is supply impacting? You know, all these uncertainties that we have in the market today, and that wall of capital is just sitting there waiting. So the question will be: will there be distress? And, you know, it's hard to say.
I mean, the deals that are blowing up today, and there are plenty of deals blowing up today, are really C and, you know, C, C-minus transactions that were over-leveraged, all with floating rate debt, that were properties that I would never wanna take you on a property tour to do, because I wouldn't want you to, you know, be on those, be in that part of town. And so, and I wouldn't wanna be there either. And so those are the deals that are blowing up, and those are not our type of properties, okay? And so there is really no stress in the investment-grade market today. And we'll see if there is, if there happens in the future, but, you know, right now, there's just no opportunity there.
Rich Hightower (Equity Research Analyst, REITs)
Okay. And then the 16% supply-impacted portfolio, how do you marry that with where you're seeing this skip and evict situation? Is there any meaningful, like, shared markets, or is the skip and evict issue sort of more of a overall portfolio phenomenon, or is it sort of-
Ric Campo (Chairman and CEO)
Yeah
Rich Hightower (Equity Research Analyst, REITs)
... located anywhere in particular?
Keith Oden (Executive Vice Chairman of the Board and President)
Yeah, the skip and evict is highly concentrated in the markets that continue to have the worst COVID regulatory restrictions against pursuing-
Rich Hightower (Equity Research Analyst, REITs)
California.
Keith Oden (Executive Vice Chairman of the Board and President)
Yeah, California, D.C. proper, you know what? Montgomery County, Atlanta for a different reason, but that's, that's prime. We've talked about on the last call, but that's primarily a, kind of a localized fraud, you know, infestation of fraudsters. But, but if you took those four, I, I think Ric gave the number in California alone, you know, our bad debts, which is, which is tied directly to the skip and evict question, is, you know, it's, it's almost of our 140 basis points, California alone is, is almost 30 basis points of that. So it's, you know, it's not, that's not a generalized problem. The, the supply, I would say, is generalized. It's, it's better in some places, worse than others, but they're...
You know, we're in, we're in markets that everybody, you know, people wanna move to, people wanna do business in, and people wanna build apartments in. And, you know, while we're, while we're sharing merchant builder, you know, maxims from, from, from the ages, the, the mantra of a, of a merchant builder is: Anything worth doing is worth doing to excess. And so that's kind of where we find ourselves today, and, and that's true in every one of our markets. There's, there's a supply issue to one, to one, degree or another.
Ric Campo (Chairman and CEO)
The interesting thing about-
Rich Hightower (Equity Research Analyst, REITs)
Great
Ric Campo (Chairman and CEO)
... about the fraudsters is they tend to go to the highest-end properties, and they tend to go to new properties. For example, our downtown Houston building, which is a 22-story building in downtown, has the most fraud of any building in Houston, also the highest rents of any building we have in Houston. And if you go to Atlanta, Buckhead, I think we have 35 lease breaks there, and they were all fraudulent people. And so it's interesting because the fraud folks tend to be the higher end, going to the higher end property, more sophisticated. And then to Keith's point in California, our bad debts in L.A. County are 5.3%, and in San Diego, they're 3.2%.
And the difference between those two numbers is that San Diego is just more open and less sort of militant, if you want to say that, than LA County. And so it's definitely driven by the regulatory construct that has trained people to know that they don't really have to pay. You know, in the past, you paid your phone bill first, then you paid your apartment rent. And now, because of the government doing what they did during COVID, apartment rent's down the list for more people than it should be. But we're gonna push it so that it goes to be right next to cell phones again.
Keith Oden (Executive Vice Chairman of the Board and President)
Awesome. Thanks very much, everyone.
Ric Campo (Chairman and CEO)
Sure.
Operator (participant)
As a reminder, please limit yourself to one question. Our next question comes from Connor Mitchell with Piper Sandler. Please go ahead.
Connor Mitchell (Equity Research Analyst)
Hey, thanks. Thanks for taking my question. So I'll just keep it to the one as we're at the top of the hour. With the updated guidance and the updated outlook for the current environment, can you just talk about how this impacts and affects the investment appetite, development timing, deliveries for you guys, and then the underwriting process and some assumptions that are going into that?
Ric Campo (Chairman and CEO)
So our current development pipeline is doing really well. The lease-ups that we're doing are doing really well. We just finished Tempe, and it was a really solid, you know, return that we're making on those. So we're doing well on the existing portfolio. In terms of new starts or acquisitions or, you know, other capital deployment, I mean, this is a very unusual time. What-- Our cost of capital has gone up dramatically, and we recognize that, and we understand that it doesn't make a lot of sense to underwrite transactions today at the current-- in the current environment based on our cost of capital. And so we have pushed back development starts, and we have, you know, been very quiet on the acquisition front, obviously.
And so, you know, I think, though, that as we get more stability, because I think what the world hates, and we all hate the most, is volatility and not having some sort of stability and knowing having a view of what things are gonna be in the future, right? And I think that's what's sort of causing all this consternation in the market. When you start thinking about capital in the future, though, we think what's gonna happen to development costs, for example, when developments go from 550,000 units to 200,000 units, there'll be lots of contractors that will work for food, and that will squeeze margins.
That, that should, with inflation overall coming down, with workers not having jobs as a result of construction costs or construction being, being shut down, we should be able to get a whole lot better pricing on properties in the future than we can today. That has to play out in, during 2024. And so, when that happens, then the question is, if you, if you actually believe those start numbers, then in 2025 and 2026, it's gonna be a very constructive environment to deliver new properties.
If the capital markets are forcing merchant builders not to build, which is exactly what it's doing, and we have the capital to build, then maybe we will—if we get the right returns and balance our returns, you know, from a cost of capital and a spread perspective in the right zone, then perhaps we would start developing to be able to deliver into a really good market in 2026 and 2027. We're playing the long game here, and we will—if that's a countercyclical move relative to our competitors, we'll do that. The same thing goes with acquisitions. You know, we have been—if you look at our history, since, you know, starting really in 20...
Probably, maybe 10 years ago, you know, we sold over $3 billion of properties, bought, you know, a bunch of properties, and we, you know, sold older properties with lower growth and higher CapEx, and reinvested in newer, lower CapEx, higher-growth properties. And we did that on a very accretive basis. So this opportunity next year with capital the way it is today could open the opportunity for us to do a lot of that portfolio management as well.
Yeah, I think the bottom line is that today it's a really weird world, and there's—it makes sense to sort of sit, stand pat with one of the strongest balance sheets in the sector and kind of wait and see to see where capital, you know, could be deployed in the future and what the best, you know, returns that we could make on that would be.
Connor Mitchell (Equity Research Analyst)
Thanks. I appreciate all the color. That's it for me.
Ric Campo (Chairman and CEO)
Sure.
Operator (participant)
Our next question comes from Wes Golladay with Baird. Please go ahead.
Wes Golladay (Equity Research Analyst)
Hi, everyone. Thanks for sticking around. I have a question on the, the delta for the new leases in your five markets. Would that be worse than your, your supply markets? And for those tenants that are, that can pay but won't pay, what type of recovery can you get there?
Keith Oden (Executive Vice Chairman of the Board and President)
So the recovery on can pay but won't pay, you know, obviously we turn people over to collection agencies, we pursue them. You know, my guess is that before those folks actually go, you know, face the eviction music, in some cases, they will, you know, try to have a conversation about, "If I pay this, would you not pursue me?" Those conversations go on all the time, to varying degrees of success. But the can pay, won't pays are an interesting subgroup. The can pay, the won't pay, can't pay, the recovery is actually quite low, but we do pursue them. I'm sorry, I didn't catch the first part of your question, Wes.
Robin Lu (Equity Research Analyst)
Oh, yeah, the, yeah, the delta on the new, the new leases in the fraud market. I mean, I get that supply will be here next year, you know, so yeah, and that's in the run rate. I'm trying to see what kind of potential lift you can have from just having a more normal lease market in the, the fraud market. I mean, is it artificially low right now on the new leases in, in those markets you cited?
Alex Jessett (EVP and CFO)
Absolutely it is. I mean, if you think about, so to give you an idea, in Atlanta, our new lease effective trade out for October was down 7.1%. So that's a pretty good indication of a market where we've got an ability, once we get that fraud sorted out, to get that back to a far more normal run rate. So absolutely.
Robin Lu (Equity Research Analyst)
Great. Thanks for taking the time.
Alex Jessett (EVP and CFO)
Mm-hmm. Mm-hmm.
Operator (participant)
Our next question comes from Jamie Feldman with Wells Fargo. Please go ahead.
John Pawlowski (Managing Director of Research and Healthcare)
Hi, team. This is John on for Jamie. There was comments about this before, but just trying to think about revolver and what we need to fund right now for development and, you know, where interest rates are, how do you think about growth in this environment?
Ric Campo (Chairman and CEO)
I'm sorry, you kind of broke up. We have $80 million roughly left to spend on the development that we have in place now. And what was the other part of your question? Because you broke up.
John Pawlowski (Managing Director of Research and Healthcare)
I understand. Sorry, can you hear me now?
Ric Campo (Chairman and CEO)
Yeah.
John Pawlowski (Managing Director of Research and Healthcare)
Perfect. Just trying to understand, given maturities in 2024, you know, the size of your revolver right now, just how do you afford to, you know, to grow in this environment?
Ric Campo (Chairman and CEO)
Alex, you want to take that?
Keith Oden (Executive Vice Chairman of the Board and President)
Well, bottom line is-
Ric Campo (Chairman and CEO)
Well, you know, we have access to lots of capital markets, right? And the bond market's open. And, you know, the great thing about the multifamily business is that, so the capital markets are open. We could issue bonds to take out the maturities, and we obviously have access to that market. We also have... And if the bond market isn't open, we have access to Freddie and Fannie, and there's still a robust lending environment out there for multifamily. So, you know, we're not concerned at all about our capital issues, and that isn't a constraint, I don't think, given our low debt.
And, you know, we built this balance sheet for times like this, and when you are sitting at a 4.1 debt-to-EBITDA with, you know, with very low debt and having somewhere around, you know, $12 billion worth of real estate that has no mortgage on it, that's a pretty safe position to sit in and to be able to fund maturities and fund capital for opportunities, you know, if they manifest themselves.
Alex Jessett (EVP and CFO)
Yeah, I would just add to that, that the revolver is not the constraint at all. And obviously, we're not thrilled about a 10-year costing us, you know, 6%, but that is still a lot cheaper than what it would cost a private person to go out and borrow money. And so if the opportunities are really there, and if we can do something accretively to the debt in 2024, that's what we'll absolutely do. And for once, we actually do have a cost of capital advantage over the private guys.
John Pawlowski (Managing Director of Research and Healthcare)
Mm-hmm. Got it. Thank you.
Ric Campo (Chairman and CEO)
Sure.
Operator (participant)
Our next question comes from Robin Lu with Green Street. Please go ahead.
Robin Lu (Equity Research Analyst)
Hi, good morning. Just one from me. Just want to touch on development. You did well in competing Tempe lease-up without much concessions or outside concessions. How are you thinking about the lease-up strategy for the new Raleigh and Houston properties now that those properties are entering the market at a time with more competition? Do you expect to provide more incentives to increase occupancy quicker?
Ric Campo (Chairman and CEO)
Well, so as I said before, the, you know, it really just depends on the market conditions. Right now, you know, we're offering, I think, 4-6 weeks free, and on those properties, and we're, you know, getting, you know, traction on them and are leasing them up. We, you know, our Camden NoDa, for example, is doing really well in Charlotte, and we don't have, you know, the kind of concessions I think that people are worried about, the 3 months free or something like that. But, you know, at the end of the day, concessions are just part of the equation for in the merchant builder world, and we will, you know, compete effectively with all the rest of the properties that are out there.
Ultimately, they will lease up. If you look at the absorption rates that we've had, you know, and I think Phoenix is a great example. I mean, Phoenix was or is one of the markets with a lot of supply, yet at the same time, we leased up, you know, Tempe II with a, you know, very, very fast pace with limited, we did give concessions, but not, you know, dramatically. So, I think we're gonna be fine leasing up the properties that we built in both Raleigh and Charlotte going forward.
Robin Lu (Equity Research Analyst)
All right. Thank you. Appreciate your time.
Ric Campo (Chairman and CEO)
Absolutely.
Operator (participant)
This concludes our question and answer session. We'd like to turn the call back over to Ric Campo for any closing remarks.
Ric Campo (Chairman and CEO)
Great. Well, I appreciate everybody on the call today, and we will see you very soon at NAREIT in LA, so take care, and thank you.
Operator (participant)
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.