Apartments multiply as job growth slows
Camden Property Trust CEO expects a more sluggish market in the third quarter
Houston’s multifamily market is “feeling a little worse” than it did three months ago, Camden Property Trust’s CEO said Friday during a conference call to discuss the company’s firstquarter earnings.
“The good news is that construction lending has come to a stop in Houston,” CEO Ric Campo said.
Still, revenue from the company’s operations in Houston is flat and could fall into negative territory during the second quarter.
Even though oil prices have ticked up recently, the local job market is still softening and more apartment buildings are coming online.
“Everyone has dramatically revised their job growth projections,” Camden president Keith Oden said, citing new estimates of 12,000 to 15,000 net jobs being created in 2016.
“We’ve still got 22,000 apartments in terms of new supply,” he said. “My guess is we’ll feel slightly worse in the third quarter as we do today.”
Occupancy in the high-end market in which Camden builds is falling, and landlords are upping their leasing specials.
Montrose/Midtown, Tom- ball/Spring and downtown have more than half of the 27,412 units under construction, according to Transwestern, a commercial real estate firm.
In Texas last year, the energy industry lost nearly all of the 63,800 jobs it created from 2012 to 2014, and the state’s employment growth slipped to 1.5 percent, according to the Federal Reserve Bank of Dallas. The carnage has continued so far this year.
To those in the energy business, “whether the price of oil is
at $35 or $45 is not a big difference maker in the way they process it,” Oden said. “Until you see a stop in the fall in the rig count, all the rest of it is sort of background noise.”
The Houston-based real estate investment trust reported first- quarter funds from operations of $100.8 million, or $1.20 per diluted share, compared with $87.8 million, or $1.08 per diluted share, in the same period last year. The funds from operations figure is a widely used measure used to evaluate real estate investment trusts.
Net i ncome was $42.9 million, compared with $ 121 million in the year-earlier quarter.
Camden said it hasn’t seen a dramatic change in the number of tenants moving out of apartments because they were laid off in the energy industry.
Many of its Houston renters are millennials, and layoffs tend to affect older workers first because they are typically the highest paid, Campo said.
Millennials who live in the company’s area properties are “a little insulated,” he said. “The 45- to 50-year-old is in a house in west Houston. With their severance and all the help the energy com- panies are doing for their laid-off employees, these people are staying in their homes and looking for new jobs.”
Also during the first quarter, the company sold a portfolio of properties in Las Vegas for $630 million, and it expects another $400 million to $600 million of additional sales. It expects to use $675 million to pay debt and fund development.
Campo said the Las Vegas portfolio was twice as old and created lower revenue than the rest of its properties.