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Camden Property Trust (NYSE:CPT)

Q3 2007 Earnings Call

November 02, 2007 11:00 am ET

Executives

Kim Callahan - Vice President of Investor Relations

Richard Campo - Chairman and Chief Executive Officer

Keith Oden - President and Chief Operating Officer

Dennis Steen - Chief Financial Officer

Analysts

Craig Melcher - Citigroup

Alex Goldfarb - UBS

Mark Biffertok - Goldman Sachs

David Bragg - Merrill Lynch

Matt Ostrower - Morgan Stanley

John Stewart - Credit Suisse

Richard Paoli - ABP Investments

Haendel St. Juste - Green Street Advisors

Craig Leupold - Green Street Advisors

Karin Ford - KeyBanc Capital Markets

Rich Anderson - BMO Capital Markets

Michael Salinsky - RBC Capital Markets

Operator

Greetings and welcome to the Camden Property Trust Third Quarter 2007 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ms. Kim Callahan, Vice President of Investor Relations for Camden Property Trust. Thank you. You may begin.

Kim Callahan

Good morning and thank you for joining Camden's third quarter 2007 earnings conference call. We hope you enjoyed the music this morning, which featured several songs by our in-house band, the Camden Birds. Before we begin our prepared remarks I would like to advice 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. As a reminder, Camden's complete third quarter 2007 earnings release is available in the Investor Relations section of our Web site at camdenliving.com, and it includes reconciliation’s to non-GAAP financial measures, which may be discussed on this call.

Joining me today are Richard Campo, Camden's Chairman and Chief Executive Officer, Keith Oden, President and Chief Operating Officer, and Dennis Steen, Chief Financial Officer.

At this time, I’d like to turn the call over to Rick Campo.

Rick Campo

Good morning. I’d like to thank the Camden Birds as well for providing our pre-conference call music. And for the part they play in supporting Camden's culture. As many of you know, having fun is one of Camden's core values. With the uncertainties and challenges that our business faces today, it is more important than ever for people to have fun. Without smiles on the faces of our Camden team members, it is impossible to provide living excellence to our customers.

Overall, earnings growth for the quarter were in line with our expectations. Same property revenue and net operating income growth were not. Pricing power declined across many of our markets, primarily as a result of increased competition from single-family home rentals, while the magnitude of the oversupply in the single-family rental markets is hard to get your arms around and varies by market. We know that apartment demand is being muted by increased rental home competition. How long this situation lasts is a much-debated topic. I will talk about that going forward on the call.

At this point, I would like to call on Keith Oden to continue this discussion.

Keith Oden

Thanks, Rick. I want to address three areas in my remarks today. First, I’ll provide my thoughts on the overall market conditions, and how they're being reflected in our fourth quarter guidance. Second, I’ll provide some additional details of our third quarter and year-to-date performance, and finally, I will address the recent SEC ruling regarding exclusive access agreements.

Let's start with the current market conditions. For the last two quarters we have experienced decelerating revenue growth and we had said we expected that to continue throughout 2007, so nothing new there. What is new in Camden's world is that our fourth quarter re-forecasts, which were completed as part of our 2008 budget process, indicates that the slowdowns will likely accelerate in the fourth quarter.

What makes the forecast slowdown significant is that it is being felt in all six of our geographically diversified operating regions. As a point of reference, in the first quarter, all six of our regions exceeded budgeted NOI In the second quarter; two regions fell short of plan. For the third quarter, five were short of plan, and in the most recent re-forecast, all six operating regions are projecting fourth quarter NOI to fall short of our original budget for the fourth quarter.

Some of the misses are relatively minor but in Camden's compensation structure, a miss is as good as a mile. The deceleration in the fourth quarter forecast is sufficiently widespread that its explanation must go well beyond condo-mania, which we believe has had some impact in markets such as Orlando, Tampa, Las Vegas, and Washington, D.C.

We believe that there are two major culprits, one, the continued deterioration in the single-family home market, which is bringing more home rentals into competition with apartments. And oversupply of unsold single-family homes is a condition that exists in all 15 of Camden's core markets.

This condition will continue as a headwind for multi-family until the inventory of unsold homes begins shrinking. Based on the most recent projections of new home completions versus sales, the inflection point will likely occur in the middle of 2008.

The second culprit is the declining employment growth forecast. From last quarter the employment growth numbers were revised downward for 2008, in 14 out of 15 of Camden's markets, with Raleigh as the only upward revision.

In the aggregate, the employment growth forecast for Camden's markets was revised downward by 143,000 jobs, or about 25%, leaving the revised job growth forecast for Camden's markets at around 375,000 for 2008. This represents about a 25% slowdown from the 2007 job growth rate. Not bad, but than anticipated.

Based on today's better-than-expected jobs number, we could see an upward revision to the 2008 forecast, which would certainly be welcome. Two interesting data points for the quarter are that our a percentage of move-outs to purchase homes actually sell to 17% in the third quarter, the lowest level we've seen in three years, and we also began tracking the percentage of move-outs to home or condo rentals in the second quarter, and for the third quarter, this category accounted for less than 1% of our total move-out.

If you combine this with the fact that our overall traffic was down 9% over the prior year, you get some statistical data that supports the anecdotal evidence from our operations group that a meaningful amount of would-be renters are bypassing the multifamily options in favor of other options, most probably single family rentals. So, how does all this square up with Camden's results? Well, this is my take.

First of all, recall that Camden is the only publicly reporting multi-family company that has applied a revenue management tool since the beginning of this current rent growth cycle, which began in the first quarter of 2005.

The Yield Start system attempts to provide the best possible fit between underlying market conditions and the market-clearing price for our rental inventory at any point in time. In order to accomplish this, it is very much a forward-looking system, and at any time, any given time is attempting to anticipate market conditions five to six months out and make minor mid-course adjustments well in advance of forecast horizons, attempting to avoid price volatility in the future.

In a purely theoretical sense, the results we would expect to see from this tool applied to our communities is as follows. As markets begin to recover, and pricing power improves, the forward-looking nature of the pricing engine would raise rents sooner than our competitors.

At some point out in the future, as evidenced of the market improvement as apparent, the competition will respond and raise rents as well. When market conditions begin to deteriorate, the reverse will happen. Our forward-looking model will begin moderating rent increases prior to our competitors.

Interestingly, the facts seem to support the theory. Beginning in the third quarter of 2005 Camden's revenue growth was at the top of the sector and this continued through the first quarter of 2007. In fact from the first quarter of '05 through the second quarter of 2007, Camden's cumulative revenue increase was second highest of all publicly reporting multi-family companies. So we achieved larger rental increases and we got them sooner than our competitors.

Beginning in the third quarter of this year our revenue slowed to our peers, which is consistent with a revenue management tool that is attempting to get ahead of the curve of a slowing market. So, it will interesting to see what happens in the next two quarters regarding the revenue growth rate of us, and our competitors.

If they do not begin to experience the slowdown that we are currently pricing into our rents, then we will seek other remedies for our relative underperformance.

Moving on to third quarter results, during the quarter, revenue growth was positive in all markets except Orlando, where we have clearly seen a negative impact from both condo-mania and the single family inventory overhang.

For the quarter our best revenue growth was in Austin, 8.9%, Denver at 7.8%, Raleigh 6.9%, and Charlotte at 8.9%. Sequentially, we saw same store revenue declines in three markets, Tampa, Orlando, and Phoenix. We experienced sequential NOI declines in most markets due to seasonally higher operating expenses in the third quarter.

Year-to-date, our operating expenses are up 3.8%. However, it is important to note that excluding the expense component of our bulk cable and valet waste initiatives our year to date increase in operating expenses would be about 2%.

Moving through our year-to-date same store results, best revenue growth year-to-date is in Austin at 8.8%, Raleigh 7.7%, Charlotte 7.2%, Denver 6.3%, and Phoenix 6.2%. NOI growth was positive in all markets except Orlando, which was essentially flat.

The best NOI growth was in Austin with 17.6%, Denver at 9.3%, Charlotte at 9.0%, Houston at 8.8%, and Dallas at 8.4%. Overall, our occupancy was down 40 basis points from the second quarter, 94.9 to 94.5 and currently stands at about 94.3. Our turnover rates were up sequentially from the second quarter but were in line with the 2006 results.

Finally, I would like to give you our take on this week's SEC ruling. Based on our discussions at the SEC's meeting and press conference on October 21, 2007, and the written statements of the SEC commissioners and their news release, we understand the following.

The SEC ruled that existing and future exclusive arrangements for video services and agreements between apartment owners and cable companies are unenforceable. The ban is limited to exclusive access, which is defined as a grant of rights provided through an easement or license to a video service provider to exclusively provide cable services, utilize the cable system and a market service to residents in the community.

Camden is a party to three such agreements, and this ruling will actually allow us to pursue more favorable agreements on those three communities. Bulk service arrangements such as Camden's Perfect Connections are not in any way affected by the ruling.

In fact, one commissioner expressed substantial support for bulk service arrangements. Exclusive marketing agreements were also not affected by the ruling, although the SEC did indicate that it would seek comment in the future on whether it should take any action on bulk or exclusive marketing arrangements.

Camden's Perfect Connection is consumer friendly as it provides cable service to our residents at a discount to the market for individual subscribers of the incumbent provider.

In summary, the immediate impact of the ruling is a slight positive to us, and we believe that there is minimal risk to our cable revenue in the foreseeable future. Next up, we have Dennis Steen, Camden's Chief Financial Officer.

Dennis Steen

Thanks, Keith. I will begin this morning with a review of our third quarter results. Camden reported FFO for the quarter of $56.3 million, or $0.91 per diluted share, at the midpoint of our prior guidance of $0.89 to $0.93 per share.

We achieved the midpoint of our third quarter FFO guidance as moderating revenue growth in our market as Keith just discussed produced a $1.1 million, or 0.9% unfavorable variance to our same store revenue expectations for the third quarter.

This unfavorable variance was completely offset by favorable variances in other income, property management expense and property operating expense.

One additional item of note on our operating results, interest expense for the third quarter totaled $27.7 million, in line with our expectations, but down $1.5 million from the second quarter of 2007. The decline from the second quarter is the result of the reversal of interest accruals, totaling $2.5 million in the year to date period, relating to tax positions we inherited in the Summit merger.

The reversal more than offset the increase in interest expense on higher debt balances incurred in the third quarter to fund our increase in real estate assets and share repurchases.

On the transaction front, we completed no acquisitions or dispositions during the third quarter. Nine assets classified as held for sale at quarter end, the two Fort Worth communities, Camden Terrace and Ridge, were sold in October for $24.2 million in line with our expectations.

Six communities, Camden Ridgeview in Austin, Camden Eastchase in Timber Creek in Charlotte, Camden Glenn in Landover, our two assets in Greensboro and Camden Isles in Tampa are all currently under contract and expected to close during the fourth quarter.

Camden Pinnacle, the last of the nine in Denver, is currently being marketed but not expected to close until 2008. Assuming the fourth quarter closing on the six assets currently under contract, our 2007 disposition volume will be approximately $180 million of 20-plus-year-old communities as we continue to exit non-core markets and trim our exposure to older, more capital-intensive assets in our core markets.

Taking a look at our debt structure as detailed on page 22 of our supplemental package, unsecured debt increased $133 million during the quarter, as we used our line of credit and other short-term borrowings to fund our increase in real estate assets and our share repurchases during the quarter.

Total outstandings under our line of credit and other short-term borrowings were $548 million at September 30. On October 4, we entered into a $500 million unsecured term loan facility, using the proceeds to repay all short-term borrowings and reducing the balance under our $600 million line of credit to less than $100 million.

With over $500 million available under our line of credit, we have ample capacity to meet our funding needs over the next several quarters. The $500 million term loan is a five-year term after extension options. It is priced at LIBOR plus 50 basis points and we fixed our LIBOR rate through an interest rate swap for the entire term at 4.74%, resulting in an effective interest rate of 5.24% for the five years.

Moving on to earnings guidance, we expect fourth quarter FFO of $0.91 to $0.96 per diluted share, resulting in full-year 2007 FFO of $3.62 to $3.67 per share. The midpoint of our fourth quarter guidance of $0.935 cents represents a $0.025 per share improvement from the third quarter, resulting primarily from the following.

A $0.02 per share increase in same-store net operating income, as same-store revenues are expected to be relatively flat, and property expenses declined as seasonally expected in the fourth quarter.

Full-year 2007 same property NOI growth is now projected to be between 4.5% to 5%, with revenue growth between 4% and 4.5% and expense growth between 3.4% and 3.8%. We also will have a $0.01 per share increase in non-same store NOI as the increasing contribution from development communities and lease-up more than offset NOI loss on expected dispositions.

A $0.03 per share increase in non-property income related to fees and other income from third party development and construction activities. These three positives will be partially offset by a $0.04 increase in interest expense, primarily due to the interest accrual reversals recorded in the third quarter that I previously mentioned.

At this point, we'll now open the call up to questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will be now conducting a question-and-answer session (Operator Instructions). Our first question is from Jonathan Litt with Citigroup. Please state your question.

Craig Melcher - Citigroup

Hi, it is Craig Melcher here with Jon. I just wanted to get a little more color on the 4Q cautionary statements, and how has October shaped up? Has that been softer than the 3Q average or is this purely on what you're expecting based on the lease numbers?

Keith Oden

Craig, the results in October are consistent with our reforecast, which was a basis for us moving our guidance on same store NOI results. So yes, the October results are consistent with that. We don't have final results, but we have enough insight into the revenue expense components to know that it is consistent with our forecast.

Craig Melcher - Citigroup

And how is YieldStar incorporating the renting out of the single family homes into the numbers which would be causing the rents coming down a bit more than you're seeing, the competitors?

Keith Oden

It is a good question, Craig. There is really not any, there is no direct comping that we can do as we can do with our multifamily competitors, but where it shows up in is in reduced traffic and reduced overall demand at our communities and our competitor's communities.

So while there is no direct link in the model, clearly that is part of the background of what is going on from on the supply side of the equation, and it shows up in the model through reduced traffic numbers, and then also weaker results at our communities and our competitors.

Craig Melcher - Citigroup

The last question is just on the development pipeline. Does this revision impact your views on any development activity or development starts going forward?

Dennis Steen

Craig, our investment committee reviews all of our developments on a periodic basis, and pretty much every couple of weeks or months, in terms of where we are on the various starts.

And at the end of the day, each project is evaluated and we evaluate it given its current marketing conditions if it hasn't started already and I can tell you, we have delayed a couple of projects, based on current market conditions in Florida and we may delay some more.

But it just depends on sort of what is happening in the markets, and the answer is yes, we're reviewing our developments on an ongoing basis, and we are dealing with them appropriately.

Craig Melcher - Citigroup

Thank you.

Operator

Thank you. The next question is from Alex Goldfarb with UBS. Please state your question.

Alex Goldfarb - UBS

Good morning.

Richard Campo

Good morning Alex.

Alex Goldfarb - UBS

Maybe I missed it in the opening discussion, but could you just give us your thoughts on cap rates? A number of your peers have commented, essentially it has been maybe a 25 basis points shift plus or minus, depending on location and quality but just curious on your thoughts.

Richard Campo

Right. I think we're in that same camp, I mean we have -- we are active in the market with all of our folks and in our various regions, looking at properties, and trying to, ferret out value out there.

And you really haven't seen any major moves in cap rates. I think that most people are talking, 25 bits plus or minus and I think we have sort of evidence based on some sales we just completed, the two properties that sold in Fort Worth actually closed in the last week or so.

They were originally put under contract in August, went through their due diligence period. This is a small example, but the original price under contract was around 24.7 or 24.8, something like that, and we ultimately took a reduction in the price of $600,000.

Closed the deal at a $24.2 million number, which effectively increased the return by about 18 basis points to the investor, and they financed the project with a Freddie Mac 77% loan to value mortgage, so there is financing out there, it was closed.

And the effective cap rate was in the sort of mid sixes, if you use sort of standard underwriting, which is 250 a door and 3% management fees. If you put actual CapEx that we were experiencing, the cap rate was 5.4, 5.5, something like that, so we have seen actual deals close.

But yes, the cap rates have gone up slightly, but again in that particular example, that was in the range of our target from our low to our high, in terms of what we thought the property would trade for.

So we were happy to get the deal done at an 18-debt increase in cap rate. It was within our tolerance zone of where we thought the property should trade at.

Alex Goldfarb - UBS

Okay. The second question is just your thoughts on where -- on the term market, term loan market, versus the unsecured market, just want to get your sense of what you see as a tradeoff between rates and covenants, and then also, are you seeing any openings in the unsecured debt market that you may be willing to -- to go back to issuing unsecured in the near term?

Dennis Steen

Well, first, as it relates to covenants, the covenants under our term note are identical to the covenants that we actually have under our line of credit. So we were already operating under those covenants, so there is really no impact to us.

As it relates to the term loan market itself, when we closed the transaction, it was probably 60 to 70 basis points inside of what we could do in an unsecured bond offering. That probably has narrowed a little bit, probably more in the 50 to 60 basis points difference.

So there still is a premium that the unsecured bond market is getting over the term loan market itself.

Keith Oden

I think at the end of the day, the term loan just shows that there are additional pockets of liquidity out there for well-run companies to go tap and it is because of the issues in the other part of the unsecured market, it just was more -- cheaper to go out and deal with the term loan as opposed to going to the unsecured market.

The other thing that is out there for multifamily that is very different than other commercial real estate is Freddie and Fanny. I mean they are a tremendous fours in the multifamily market and they are out there financing lots of different borrowers currently.

Alex Goldfarb - UBS

So you're not inclined to back to the unsecured market in the near term.

Dennis Steen

Only through our joint ventures, but we are very happy to work with Freddy, and fanny on our joint ventures and we will continue to do that. We will not put secured financing on Camden's balance sheet, but we will through our joint ventures.

Alex Goldfarb - UBS

But unsecured, the unsecured debt market.

Dennis Steen

Oh, I'm sorry, absolutely, we will be back in the unsecured debt market when it makes sense to go back in there. I think at the end of the day, I think it’s come back some from the sort of -- some of the uncertainty in the summer and after Labor Day.

But, when you can execute a transaction like our financial team did on the term loan, there is no reason to go into the unsecured market. So we will go -- we will be an unsecured borrower, we will issue bonds in the future.

And when the market settles down, and you can have less uncertainty in that marketplace, and less volatility, we will be back. But it is sort of the -- at the end of the day, it’s all about where you can get the best pricing for your financing, and the term loan was a much better option to do.

Alex Goldfarb - UBS

Thank you.

Operator

The next question is from Jonathan Habermann with Goldman Sachs. Please state your question.

Mark Biffertok - Goldman Sachs

Hey guys its Mark Biffertok. First question I guess over the few years, the talk is been about the gap between the cost rankers is own in the market. And given that you're now saying that housing is becoming much more competitive, can you just talk a little bit about where that spread is currently? And you know, are people willing to pay more to be in a house if it is a smaller gap?

Keith Oden

Yes. The gap is still -- I mean the numbers that we look at, which Ron Witten employs and I think most people look at them that way, the gap from rent to own is still significantly, from an historical standpoint, a benefit, to the benefit of renting.

Now the gap has narrowed, there is no question about it. And that’s primarily come from the decline in single-family home prices. But offsetting that in the last six months has been the increase in the interest rates that people have to pay.

So there has been some narrowing. But from the standpoint of competitiveness, the rent to buy issue with regard to single-family home purchases is still a significant advantage. The difference and the distinction is what’s going on, on the single-family rental side of the equation.

And the fact that people -- that the underlying rents on vacant single-family homes did not necessarily bear any relation to what the cost of a homeowner to own that home would be. It would be is sort of whatever the market-clearing price is in that rental.

So, the change of the competitive balance in our portfolio has been primarily the result of the influx of rental inventory of single-family homes. Not necessarily a narrowing of the rent to own spread for single-family housing.

Richard Campo

We've seen the percentage of people moving out to buy homes go to a very low level, 17% during the quarter, compared to 20s two or three or four quarters ago. So it’s not about people wanting to go buy a home, but when you have inventory when you can rent a home relatively cheap because somebody is not covering their mortgage payment and they really don't care about, that they're just trying to get the best amount of cash flow they can, that’s where the competition is. It is not the psychology changing from people to go buy homes again.

Keith Oden

And Mark, also, one of the things that is very different with regard to the single-family home situation that we are seeing right now, is that it is also an issue for qualifying. What was going on previously wasn't so much about the competitive pricing and can someone, can they afford ultimately the payment on the mortgage that they took out.

But all of the -- the fallout from the sub prime borrowing, and the no doc loans, et cetera, that piece of the puzzle is where we were getting hit the hardest with regard to move-out and home purchases out of our rental inventory. And that, regardless of what happens on home prices in the future, I think for the most part, that era is behind us, at least until the next time.

Mark Biffertok - Goldman Sachs

Okay. And the unit types that were hit the hardest, is that your three and two bedroom?

Keith Oden

Yes, absolutely. Three bedrooms, those are always going to feel the impact first, but most of -- we don't have a large percentage of three bedrooms in our inventory, somewhere around 5% in the total portfolio.

But we definitely are seeing the impact. And if you look at the vacancy and you stratify it, we have a much higher percentage of two bedrooms vacant right now than what you would typically see.

So I think that’s consistent with the underlying theory that a lot of these folks are ending up in a rental home.

Mark Biffertok - Goldman Sachs

Okay. So if you look at the fourth quarter guidance that you guys have given, what puts you had the top end of that range versus the low end? Are there any land sale gains or things that would potentially coming in the fourth quarter that would push it to the high end or is it simply a matter of maintaining occupancy?

Keith Oden

I don't think there is anything unusual in the fourth quarter so hitting our occupancy number is the key driver for the fourth quarter.

Mark Biffertok - Goldman Sachs

Okay. Thanks.

Operator

The next question is from David Bragg with Merrill Lynch. Please go ahead with your question.

David Bragg - Merrill Lynch

Hi, good morning. Just want to follow up on Alex's question earlier, and touch on the assets that are under contract right now. Where might we see cap rates come out there versus your expectations of a few months ago? Would it be in line with that 25 basis point move?

Dennis Steen

Well, actually the projects that are contract right now were negotiated post summer. So, we put the properties on the market during the summer, and then had a very widely marketed situation, and the pricing for those that came in where we fix those or sign those contracts about maybe less than a month ago, we're negotiating the current market.

So, we didn't expect a lot of changes from where we were in these particular assets, because the market was the market. By the time they were sold. Or they were put under contract. So what we did get, pretty much in the middle of the zone of where we thought we would get pricing on these properties, when we put them out for sale at the beginning of, sort of the middle of the summer.

So, we haven't, at the end of the day, we still feel really good about the pricing on those properties, and are hitting right in the middle of the range of our expectations.

David Bragg - Merrill Lynch

Okay. And then after closing on those, just as we look dispositions going forward, where might we see just market-wise that activity coming from? Is there any change to your thinking on what markets to sell in? And then also given that, could you just provide your updated thoughts on buying back the stock at these levels?

Keith Oden

Our dispositions, once the kind of non-core markets have been dealt with and included in these asset packages of transactions in Greensboro, which cleans up the non-core, markets.

Our disposition strategy will continue to be looking at the assets that are scheduled and slated in our world to have the lowest year-over-year change in return on invested capital, and those are almost always going to be the assets that tend to be older, that have more CapEx requirements, and then the second consideration is always maintaining our market balance.

So, where we have a significant development pipeline, a new supply coming, we're always looking at those markets for recycling capital, but at the end of the day, our disposition strategy absent the core markets and exiting the non-core markets is driven by our expectations of future changes in return on invested capital.

Dennis Steen

As far as the stock buyback, we will continue to be in the market on a selective basis. At the end of the day, it is about where we can make the best return on our investment.

And today, with the current sort of uncertainty in the stock market, and financial stocks, and REIT stocks in general, and ours specifically, we think that the stock at this level is a good value relative to what properties sell on Main Street for, and as evidenced by sort of our determination in the last sort of cycle where we had this happen, in the sort of '98, '99 time frame, where we bought back nearly 20% of the outstanding shares.

So far, we bought back 86 or $87 million. We have a $200 million authorization from our board. As long as we can continue to sell assets on Main Street for a dollar, buy them back from Wall Street for a discount on that dollar, and maintain our balance sheet flexibility, and our sort of leveraged neutral situation with buying the stock, we will continue to do that.

David Bragg - Merrill Lynch

Okay. Just the last question for you, at your investor day, you touched on your efforts targeting foreclosed homeowners, but what other marketing activities are you looking into?

For example we noticed a couple of weeks ago on your website you were highlighting a deal of the century in Tampa offering no fees. What type of activities such as those are you pursuing and how are those being received so far?

Keith Oden

Well, the one that you mentioned is kind of interesting because it started as an initiative here in Houston, the Deal of the Century, and that's something that we, as we develop national marketing programs with our marketing group here, we make them available to our regional operators, and depending on what their needs are, they will either access them or not, but that is one in particular that we've had great success with.

We are a marketing-driven company. And we are heavily oriented towards outreach marketing. It is a requirement of all of our on-site marketing professionals, that they engage in systematic outreach marketing to the businesses in the communities that we serve, and so that is never going to change.

Now, as the market changes, different opportunities will present themselves. The one that you mentioned about marketing specifically to those unfortunate homeowners who are facing a foreclosure, that's going to be an issue in more and more of our markets. If our view of what is going on in the single family housing markets continues to unfold.

Right now, that program is actively engaged in Las Vegas and Tampa, which are probably two of the more challenged markets with regard to single family inventory, but I would expect that over as the foreclosures pile up in some of these other markets, it is going to be an initiative that we're going to utilize there as well.

We are constantly seeking ways to make sure that we are at the forefront of marketing our communities and now more than ever is the appropriate time to be doing those kinds of things so we will continue along those lines.

David Bragg - Merrill Lynch

Okay. Thank you.

Keith Oden

You bet.

Operator

The next question is from Matt Ostrower with Morgan Stanley. Please go ahead with your question.

Matt Ostrower - Morgan Stanley

Good morning. Just, can you guys comment on the degree that this, it is very hard to quantify the rental market from the single family perspective, but can you talk about the degree to which that is being affected by price point in your communities?

Are you finding that the lower rent part of your communities are somehow less affected by this than some of the higher rent communities?

Keith Oden

I don't really, as you look at the results in our re-forecast for the fourth quarter, I would have to tell you that it is across the board. Because while you might be intuitive to say well, if you stratified your portfolio, and you had a price point of X, and Y market, the problem with doing that is the price point for the entry level to the rental market is very different market to market. And you know, southern California is a totally different experience than Denver, which is completely different than Orlando.

But I can just tell you that the anecdotal evidence from our on-site staff and that is kind of supported by the top-down macro view is that this is probably the largest, and we think the largest culprit in the weak demand, and then second to that would be the moderating job growth.

But it is -- I think it is across the board and clearly there is probably a little bit of bias towards if are you in a Tampa, maybe there is a bias towards the higher end of our portfolio, but as I look at our move-outs to home purchases, across our entire portfolio, in the last quarter, it ranged from a high of 27% in Charlotte, to a low of 8% in L.A. So there is quite a bit of variation in those numbers, but overall, I think the trend is pretty intransigent.

Richard Campo

I would add, though, that even though it is hard to get your arms around some of this data about people moving out for home, the demand being siphoned off the top for home, we do have a higher vacancy in our two bedrooms than our one bedrooms and that would indicate that price point is definitely an issue, the two bedrooms are going to be more expensive than the one bedroom, so you have people who are in the one bedrooms, and the lower price point product that where we have our best occupancy.

So, I think that when you look at the components of where we're struggling, it is definitely in the more expensive apartments by virtue of them being bigger.

So I think that you could draw some inference to that being that the lower price point folks are not moving into houses as much as the higher price point people, and then the higher price point people perhaps are folks that require extra space, and then get pushed even further into a single family home option because they want more space for a lower price, if you will.

Matt Ostrower - Morgan Stanley

Okay. Thanks. And then on the timing that you talked about, you talked about potentially the starting to abate in mid '08. It just seems to me that a lot of the forecasts out there really aren't calling, that a lot of these sort of recovery numbers are being pushed way out, right?

Especially given all of the re-sets that start to happen next year. Why would you be saying '08 instead of '09 or even 2010.

Keith Oden

My mention of '08 in my comments is strictly the inflection point of the difference between the addition to new, the incremental addition of new homes to the inventory, through completions, and the projected single-family home sales rate.

That is not a resolution of the plus or minus $1.5 million to $2 million unsold homes that are out there. It is simply saying we think that is probably the peak of the unsold inventory.

Dennis Steen

The other thing I think you add to that too is that when you go market-by-market-by-market, you look at Las Vegas as an example, I mean they clearly are one of the poster markets for foreclosed homes and excess and all of that.

And the complication in Las Vegas, however, is that the timing of new casinos coming online, it just so happens that there is not a lot of new casinos this year, but there are a bunch under construction that open next year, so the job outlook for Las Vegas, which has fallen off from - Las Vegas for the last 15 years, has been in the top two or three markets on a percentage basis for job growth, this year it has had very anemic job growth because there haven't been any new hotels opening; they are in the pipeline, but they haven't been opening and next year the Las Vegas job growth is projected to be a lot better than this year.

So, along with sort of a moderating, sort of a peaking of the home inventory, you are also having a pick-up in jobs. The same thing can be argued about Orlando as well. Even though it looks like Orlando has sort of perhaps turned the corner and maybe should improve sort of towards the second and third quarter of 2008 and it is definitely job related.

And so you have to sort of take both the inventory numbers, the single-family home overhang and then what is going to happen to the job market. Again, that is really the driver.

Matt Ostrower - Morgan Stanley

Okay. Great. And then just in terms of the timing of your re-forecast, did you do that re-forecast before or after your investor meeting?

Dennis Steen

After.

Matt Ostrower - Morgan Stanley

Okay. Great. Thank you very much.

Dennis Steen

We also did one before the conference as well, but every quarter, we re-forecast, so it is not like we re-forecasted because we were worried about the world. We just re-forecast as a general rule.

Operator

The next question is from John Stewart with Credit Suisse Group. Please state your question.

John Stewart - Credit Suisse

Thank you. Rick, can you give us a sense for how much of the portfolio that you think, what's kind of non-core that you would expect to move through in 2008?

Richard Campo

The question is non-core?

John Stewart - Credit Suisse

Yes. In other words, I'm trying to get a sense for what level of dispositions we might look for next year?

Richard Campo

Our level of dispositions, generally, are going to run anywhere from if we just in a perfect world, they're going to run anywhere from 200 to $300 million.

John Stewart - Credit Suisse

Okay. And can you kind of speak briefly to your investment philosophy going forward? I guess that particularly given your comments about the leverage neutral share buyback any additional share repurchases would probably be funded with proceeds from asset sales, but you're obviously kind of pulling in the reins on development a little bit.

How do you think about where you might be inquisitive given where you see cap rates going forward? And to what extent do you think you need to keep your powder dry in this environment?

Richard Campo

I think keeping your powder dry sort of right now is a good thing to do. And just given the uncertainty of cap rates and those kinds of issues, so we are not a very aggressive buyer of properties or acquisitions at this point.

We are being definitely more selective on our development side. I think at the end of the day, it really will be -- we will just have to see how it plays out and if the arbitrage between the private market and the public market continues and we see the opportunity to sell more assets and buy stock, we will do that.

On the other hand, you always have to be in the market, we're in the business of buying, selling and developing real estate, and when it makes sense to buy, we will buy, and when it makes sense to develop, we will develop and when it makes sense to do nothing, we will do nothing. And that is sort of the philosophy.

It is hard for me to imagine the value in terms of being able to its my investment decision is buying the stock at these levels, or buying an asset from Main Street at a dollar, I just can't see us doing that. Now, that doesn't necessarily mean we wouldn't do a joint venture or we wouldn't have a structured type of transaction, maybe we will be in the mezzanine business again.

And there is a lot of opportunity out there in this dislocation. With the lower leverage that is required in this current marketplace, there are definitely, when there are dislocations, there are opportunities for people with the powder dry.

John Stewart - Credit Suisse

Okay. That's helpful, thank you. Keith, you mentioned that you guys are the only publicly traded multi-family REIT that has had a revenue management system really through the cycle. What are you doing to stay ahead of the curve, tracking the single-family shadow market?

Keith Oden

Well, the single-family shadow market, as we talked about, a little bit, is very hard to get your hands around. But what you can do, though, is you can look at market-by-market and you can look at the historical levels of kind of the normal level of unsold inventory and then you sort of compare that to what excess inventory is in the markets today, relative to historical norms and if you just go down the list, there is not a; I think we have one market of ours that currently has less single-family home inventory than what the historical norm is.

And that happens to be Raleigh, which interestingly enough is only market that had a positive forecast in the fourth quarter. So, the fact is, is that the unsold inventory well above historical levels, we know that that is going to find a home, whether it is a single-family home sale, kind of at a fire sale price or where people are going to hang on and put them in some kind of a rental mode.

What percentage of that falls into which camp, that is a really hard one to tell, but I can just tell that you the anecdotal evidence from our on-site staff is pretty compelling that when they're losing, people give their notice of non-renewal and our community managers as part of our discipline call them up and say what's the deal and more and more, they're hearing, we have an opportunity to rent a really great home.

And the pricing of those rental homes has become very, very competitive in the markets that we operate in. So, it’s hard to quantify it. What we know, though, is when we see our traffic rates down and we see the anecdotal evidence from our community managers that that is in fact occurring, you just put two and two together and the conclusion is kind of self evident, but I think it will be interesting to see how it plays out in the next couple of quarters.

John Stewart - Credit Suisse

Okay. Thank you.

Keith Oden

You bet.

Operator

The next question is from Richard Paoli with ABP Investments. Please state your question.

Richard Paoli - ABP Investments

Hi, guys. I'm curious to recall the treatment of concessions through the Yield Star system, I think that you basically do upfront right pricing and not really a lot of concessions and contrast that with what you used to do in the past before this.

Is it just that we're maybe seeing, the real effects of sort of softening rents faster because they're up front versus sort of kind of burning down concessions, building up concessions over time and amortizing that?

Keith Oden

Rich, the short answer to your question on revenue management is, is that we do it completely on net effective pricing. So, in our world today, if were you to look at it, the amount of concessions and it only would be fee concessions and those type things is trivial, so the answer is yes, we do net pricing. It is a very interesting point you raised though and it is with regard to what behavior would have been among our regional staffs and our on-site community managers in the old world and by the order world, I mean absent revenue management.

In the old scenario, without the discipline of a revenue management system, where people make decisions, pretty much on an emotional basis and are almost always driven by what their current occupancy or forecast, 60-day out occupancy is, the bad behavior that comes from that, which is impossible to administer in any kind of disciplined way, the bad behavior that comes from that is, if you see that your projected NOI is might fall below what is in your budget, then there are all kinds of things and machinations and hoops that people will jump through in order to maintain currently above NOI or budgeted NOI, because there are great incentives built into our process and our culture and our bonus structure, with regard to making your monthly NOI number.

So, the bad behavior of the old days, which is make in order to maintain occupancy at all costs, is you see heavy discounting of rents or concessioning. And in a revenue management world, that is not possible. It is a market-clearing rent.

But it leads to me that conversation leads to the next one, which is there is unquestionable, in my mind, that what many of our competitors are doing right now, and I'm not necessarily talking about the public companies, I'm just talking, it is a very small percentage of the overall universe, I'm talking about the world out there, and the lowest common denominator.

There is no question in my mind that what they're doing is exactly the bad old behavior from the bad old days, which is heavily discounting units that don't need to be discounted in order to plug a hole in an occupancy which only creates a bigger problem six and 12 months out.

So in a revenue management world, yes, you're going to see the impact of that slowdown sooner, but you're going to maintain a discipline that will allow you to maintain the integrity of your overall rental structure so that when things do turn around, and stop declining, then we will be in a position with a well-positioned rent role to take advantage of that.

So that is also in my mind part of the explanation for why you kind of look at the competitive set today, and their NER performance versus ours I think that is part of the answer and really the next six months will tell.

Richard Paoli - ABP Investments

So if we as onlookers need to get a little more accustomed to I guess both reported rent volatility on both the down side and the up side because of the smoothing nature of the concessions.

Keith Oden

What I think you should be looking for, as more people take on revenue management, you should look for a closer fit to the underlying market conditions. So, whatever if there is a real hard up-tick, as we saw in 2005.

You should see a hard up-tick in revenues. If there is a really hard downtick, the revenue management system will recognize that and respond accordingly. But what you also can expect is that over the period of a cycle, both up and down, that the total revenues will be maximized.

Richard Paoli - ABP Investments

Right.

Keith Oden

You may get there in a really different way than what you saw in the past, which is this lagging behavior, as people try to figure out if the market was really getting better, and then this incredibly lagging behavior as people hung on to last month's pricing in the face of a declining market.

Richard Paoli - ABP Investments

My only other question is, and forgive me if I missed this, on the sequential operating expense increase, I know seasonality played a big factor but I think just in my own mind's eye the number looks a little larger than normal. Is there any sort of unusual items that drove that?

Keith Oden

Yes, we had some big tax adjustments in the quarter, Rich, which is other than the seasonality that we normally see, because of the turn costs in the quarter, and some higher utility costs, it is all explained by some relatively significant tax adjustments in the quarter.

And again, I would caution and guide people back to the year to date expenses, which are year to dates 3.8 and if you strip out the utility component of the expense items that we have to run through for our Perfect Connection and Valet Waste, it is closer to 2% year-over-year and that's the number that we're very happy with.

Richard Paoli - ABP Investments

Does the higher and I know you're not officially getting '08 and haven't probably finished the budget but the higher tax adjustments portend a little higher level of expense growth next year?

Keith Oden

Rich, I don't think so. We have in the past three or four years, when the dust all settles on revaluations and rates and our protests and lawsuits, we consistently come in around the 3% year-over-year expense adjustment. And I don't think that our '08 budgets will be materially different from that.

But it is a fight every year. And you start out with valuations that always scare everybody around here, and then we work through the process, and somehow or another, it always ends up at about a 3% expense increase on the taxes.

Richard Paoli - ABP Investments

I see. So this was -- these are sort of new tax bills coming in for the future year, and not necessarily a win or a loss on stuff that you are fighting on this year?

Keith Oden

It is a combination of both.

Richard Paoli - ABP Investments

Okay.

Keith Oden

It is a combination of both. But I think when it is all said and done this year on tax, we had some adjustments earlier in the year that we took a positive adjustments, and we had some give-back in this quarter, but overall, to plan, taxes are not going to be a big part of the problem.

Richard Paoli - ABP Investments

Great. Thank you.

Keith Oden

You bet, Rich.

Operator

The next question is from Haendel St. Juste from Green Street Advisors. Please state your question.

Haendel St. Juste - Green Street Advisors

Thanks, guys. Actually, my questions have been asked. But I think Craig has a question.

Craig Leupold - Green Street Advisors

Yes, Keith, just from your prepared remarks and your comments about an accelerating slowdown in the fourth quarter, I kind of worked through your numbers for full-year guidance versus year to date, and it looks like you're kind of implying a fourth quarter year-over-year revenue growth number in the low 3% range.

And I know you guys haven't provided guidance for '08, but I mean that is a pretty negative trend coming from 3.6 in the third quarter where you guys were in the first half of the year. Do you think that carries out to further deceleration in '08 or is there some level of seasonality in that fourth quarter number?

And I'm trying to sort of contrast where you guys are and sort of your negative comments versus the only other two companies that are providing guidance for '08 at all on a revenue side are kind of in the high 3% to low 4% range for next year.

Keith Oden

First of all, you're very quick with your math, although there is a way to move, when you're using the midpoint of the guidance, I think what we will end up with at our midpoint of our guidance is about a 3.4% revenue growth versus the 3 that your numbers indicated.

So I don't think that the deceleration is quite what you had in mind. But as you look out into 2008, we're going to go through our process, and we're in the midst of that right now. And with regard to kind of thinking through where '08, puts us, we will just have to see, and we will provide you with real detailed guidance on that when we have it.

But I think that the fourth quarter will be interesting. Not only for us, but also some of our other competitors, and I think as you look at the fourth quarter of '07, and out into the first quarter of '08, I think they will be real instructive for what the direction of the market is.

Craig Leupold - Green Street Advisors

How much of that, though, might reflect seasonality? Or is this really kind of more market trend as opposed to….

Keith Oden

Craig, there is always seasonality in the fourth quarter, but we also budget for seasonality in the fourth quarter, so what is -- the thing that has got our attention that is very unusual for us is to have all six operating regions with a reforecast that is below fourth quarter original budgets.

I mean that is just -- I can't tell you -- I mean I've been doing this for 15 years and I don't think I've ever seen that happen before. Except in the year where we -- I think we had one year where we revised guidance and everybody missed, but heck, that was evident by the second quarter that everybody was going to miss.

So that is a little bit unusual for us. And so yes, there is some seasonality in it. But we also -- we plan for some seasonality. So it is something different than that.

Craig Leupold - Green Street Advisors

Okay. Thanks.

Keith Oden

You bet.

Operator

The next question is from Karin Ford with KeyBanc Capital Markets. Please state your question.

Karin Ford - KeyBanc Capital Markets

Hi, good morning. If I'm looking at my numbers correctly, I think sequentially from the third to the fourth quarter last year, you guys lost about 90 basis points of occupancy. Do you think you could see the same type of sequential decline in occupancy sequentially again this year?

Or do you think that because you're starting from a lower base, that number won't be quite so dramatic?

Keith Oden

Yes, I don't think we will see that kind of decline, Karen. We ended the third quarter was 94.5 on average and we're slightly below that as we stand here today. But the decline last year was really the unusual part of that was the third quarter occupancy number.

So I don't think we will see anything like that. I think we will see some -- potentially see some moderation from the 94.5, but I don't see it anything like it was in the third and fourth quarter and last year.

Karin Ford - KeyBanc Capital Markets

Second question, I wanted to ask you about your comments on the SEC. I think you said the commission viewed your bulk purchase arrangement in Perfect Connection positively.

But just given the rationale behind the ruling was to give renters more choices and to provide more competition among the providers, I'm curious as to whether or not you think the commission at some point would want to modify the sort of the forced purchase of the requirement that residents purchase cable in Perfect Connection in the future.

Keith Oden

The only specific comments, and these were in conversations that Greg McDonald, who heads up all of our cable initiatives, and deals with all of the regulatory matters, he actually had a conversation with one of the commissioners, and in the course of the conversation, there were some publicly reported positive comments about bulk agreements.

But the rationale behind the positive view on bulk agreements is simply what you just said which is, the commission, at least this one commissioner, viewed that, that is a way for consumers to aggregate their purchasing power and actually get a better bargain with the cable companies.

Because, if you think about the Perfect Connection, in the markets where we are operate, in every case, we are offering our residents a lower monthly cable rate than what they could get individually as subscribers.

So the SEC's view of that is I think, ultimately it is a consumer friendly arrangement as long as we are passing on what in effect is a bulk discount and some portion of that to our consumers. So I think there is a totally different political question or concept with regard to the bulk agreements.

With regard to the exclusive access, the reality is, is that our agreements right now do not preclude, and would not in the future preclude AT&T or Verizon or some one who has the technology to transmit cable programming over a phone line from doing so.

In fact that is no different than the situation we have right now with regard to satellite dishes. We still, believe it or not, we still have quite a few people in our portfolio, we have fewer, which is a good thing, but we still have quite a few who have a satellite dish attached to their railing outside their apartment.

But they're making the choice to say, yes, they're going to pay for not only Perfect Connection, but they want to pay for whatever programming they're getting from a dish that they can't get through the incumbent provider.

And most cases, there are a lot of foreign language channels that aren't available through the incumbent providers. But the point is that is the reality that we have right now with regard to satellite dishes. And people can choose to do that.

Now, the question of saying, yes, but you're requiring the bulk arrangement, well, that's true, we're requiring the bulk arrangement, because that's the only way that business model works and that's the only way we can guarantee the discount to our existing customers.

Karin Ford - KeyBanc Capital Markets

Okay.

Keith Oden

But I think it is a different thing than what they've trying to get at right now, which is the exclusive access agreements that there really anti-competitive, and we've seen said that and we've been screaming at for years and we have three agreements that we would love to get rid of. So anyway, I think it is a different set of facts.

Karin Ford - KeyBanc Capital Markets

SEC aside, given the direction the market looks to be heading, do you think that could affect your ability to have people accept things like the Perfect Connection in the future?

Keith Oden

That's not even, I could tell you it is not even on the radar screens of the questions that we are having right now with our, and conversations we're having with our on-site staff. It really has not been an issue with regard to rolling it out.

We continue to roll it out in new markets. We just kicked off Las Vegas here about three months ago. And we're way ahead on our penetration rates of what we expected in every case.

So, I think people, that's a value proposition, cable penetration rates on most of our communities are in the 80, 90% range. People are paying for it now, with Perfect Connection, they get it, they pay less.

Karin Ford - KeyBanc Capital Markets

Okay. Thanks.

Keith Oden

You bet.

Operator

The next question is from Rich Anderson with BMO Capital Markets. Please state your question.

Rich Anderson - BMO Capital Markets

Hi, good morning still for you guys. I guess, the first question is I listen to this and it is like Yield Star has been around for two years, has two years of history, and we're really hanging our hat on something that doesn't have the history that you guys have, as real estate professionals.

So, I mean is there a chance that it could be wrong?

Richard Campo

Rich, that is a very interesting question.

Rich Anderson - BMO Capital Markets

I'm picturing you guys going to work every morning and like kneeling in front of the Yield Star terminal and bowing to it or something.

Richard Campo

No, look, Yield Star is a tool, okay? It has to be managed by people. And people have to ask the question every day, on-site manager, your district managers and we have Yield Star pricing specialists that deal with issues that come up, and so it is in fact a tool, not a panacea.

It is not on autopilot. It is managed every single day by the people running their properties. The different in the past was you didn't have an ability to forecast and you didn't have an ability to run all of the numbers that Yield Star runs.

What it does simply is forecast and figure out all of the permutations that you need to understand as you're marketing, as you're running a property.

Now, I will tell that you, we have had a lot of discussion in-house about okay, what about Yield Star, we question it all the time, we analyze it, we have people running numbers, on what it is doing and when it is doing it and how it is doing it.

And so it is not just on autopilot and we run our business and don't look at what it is doing every day. The issue you get is you have to remember that in the past, and what a lot of people are still doing today that don't use yield management is they're using their emotions to drive their decisions.

And when a manager gets to 93 or 94% occupied and they're missing their budgets, it is easy for them to discount units. And you have to think about the math on discounting units.

If you drive occupancy up 100 basis points by giving a month or two free and then amortize in that month or two free over the life of that lease, you are much better off letting your occupancy drop and having a lower rental rate to make that deal as opposed to giving two months away that affects your cash flow stream over a much longer period.

Rich Anderson - BMO Capital Markets

I understand that it is not, as you described. I mean there is a lot of thought that goes into it, but I think it was Keith who sort of said we're the only company that are using revenue management over an X period of time and you think that that is the reason, why you guys are seeing it and other people aren't seeing it.

Richard Campo

I think that's right, because our people aren't giving two months free and jacking their occupancy up.

Rich Anderson - BMO Capital Markets

But what happens next quarter, or the quarter after that, your peers aren't seeing this single-family rental, in fact, could we then conclude that this is just a Camden thing?

Richard Campo

I think that is a very good question, because that’s the question that we debate in-house. Because we obviously look at all of the market data, we look at all of the competitors with that information and we compare it to our properties and we go, let's scratch our head, what's going on and when you start looking at the net effect of rents and you also have conference calls with all of our regional people.

And when regional people tell us that their competitors across the street are giving a month free or two months free and we're not, we know what is going on and when you start looking at the net effect of rents and you also have conference calls with all of our regional people and when regional people tell us that their competitors across the street are giving a month free or two months free and we're not, we know what is going on.

And so I would say that if we see that Camden is under performing over the next two or three quarters compared to our competitors then we have to say, well we have something else going on other than the market falling apart or the market being weak because of home sales or something like that.

But if you take key sort of went through these numbers and we don't want to say, well, look at last year when we under performed this year, but if you take the rental rates that people are charging at the beginning of 2006, and you take the rental growth in the markets and put a top set together of the same markets to our competitors.

Our average rent per apartment is higher now than our competitors if you take rent to rent from 2006 to where it is today. Now, we got a lot of our growth in 2006, and our growth moderated in 2007, but the absolute rent that we're collecting on our properties is higher today than our competitors.

Now the issue you have now, however is that our rental revenues are moderating. And if our rental rates or rental revenues continue to moderate and our competitors don't, then we have a bigger discussion and a bigger question to ask. But a quarter or two doesn't make a trend. We will see what happens.

Rich Anderson - BMO Capital Markets

To your point it will be interesting.

Richard Campo

It will be very interesting and we absolutely believe that revenue management is something that helps our people operate their businesses a lot more effectively than the emotional roller coaster that they're on without any kind of help.

Rich Anderson - BMO Capital Markets

Okay. The second question is, on buying back stock, if you knew that your stock was going to be unaffected in sort of the next year or so, from a buyback program, you knew it was going to go down, or somehow, you had the foresight would you still buy back stock?

The question is, are you buying back stock to support your stock price or are you buying back stock because you think it is the right investment?

Richard Campo

We are not buying back stock to support the stock price. There is no way you can buy enough stock with the current rules that you have and when you can buy…

Rich Anderson - BMO Capital Markets

Send a signal.

Richard Campo

To support your stock price in any way. So our investment decision, on buying stock, has nothing to do with our ability to affect the stock price. It is a real simple calculation. Basically, whether you think that reasonable investments at that price relative to the alternative investments that you have.

Rich Anderson - BMO Capital Markets

Understood. I just wanted to send some strong signals about buying back stock, and so are others, and it clearly is probably the right investment, but, you are eating up dry powder in the process, and it is not getting anywhere in the stock.

Richard Campo

Well, as long as a disconnect exists on Main Street and we can buy stock at good prices and sell it cheaper than we can assets and then make sense.

Rich Anderson - BMO Capital Markets

Thanks, guys.

Richard Campo

You bet.

Operator

The next question is Michael Salinsky from RBC Capital. Please state your question.

Michael Salinsky - RBC Capital Markets

Good morning, guys. With your reduction in NOI and revenue growth expectations, have you seen any movement in development yields or have cost moderations basically, specifically on the garden side, products, helped offset this? I know you had mentioned pushing back a couple of projects in Florida.

Richard Campo

From a development perspective, our current pipeline, we haven't seen any real erosion of our yields and our current pipeline that is under construction today an I think you're exactly right and less pressure on costs and we're not having big cost overruns now which is a good thing.

Obviously, and I think where the pressure is, and from a development perspective, is the pipeline that hasn't started today, and yes, we have delayed a couple of projects, as a result of pressure in the markets that we didn't anticipate.

So we don't need to start projects tomorrow. We're not we're driven by total return on our projects, and at the end of the day, we will evaluate them as the market goes, and if they don't make sense, we won't build them.

Michael Salinsky - RBC Capital Markets

Secondly, with regard to the land parcels that have you for sale, have you seen any moderation in land prices to date?

Richard Campo

We have seen some moderation in land prices. No question. The homebuilders and condo buyers that were running land prices are up clearly not doing that now and they're marking to market some of their land portfolios. We as a matter of fact have had a number of land parcels under contract, for new development pipelines that we have renegotiated and dropped or cut prices on and what have you.

So yes, land prices have moderated. And the properties we're holding for sale have moderated some. But we have pretty big profits built into these land sales so we don't have any diminution of any land on our balance sheet or anything like that.

Michael Salinsky - RBC Capital Markets

Okay then final question, at your investor day, you had mentioned that you had sent out some pamphlets to some of the people essentially that are under pressure, the single-family markets. Have you seen any change in credit quality or have you seen any demand pickup or positive results from that?

Richard Campo

We haven't seen any diminution of credit quality. The key point to the marketing program is that we are still underwriting credit, and as long as the people, if they have a foreclosure, getting ready to be foreclosed, we will ignore that as part of the credit, but we will not ignore bad credit.

So if the people were not paying their credit card bills, or paying their phone bills or whatever, then they're still not going to be able to lease a Camden apartment. If they just have happen to be the unfortunate one and didn't read fine print on the mortgage and it went up and doubled and can't make that payment.

We're okay. Or we have seen leases in Las Vegas and I think in Tampa with the program. And it is working. How much, we just started a few months ago, so we haven't been able to get a big fix on how many actual leases we're getting but we know we are getting leases.

Michael Salinsky - RBC Capital Markets

Thanks, guys.

Richard Campo

Absolutely.

Operator

There are no further questions in queue. I would like to turn the call back over to Mr. Campo for closing remarks.

Richard Campo

Great. We appreciate the time everyone spent on the call today and we look forward to seeing a lot of you at NAREIT in a couple of weeks. So thank you very much and we'll talk to you next quarter, and see you at NAREIT.

Operator

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Source: Camden Property Trust Q3 2007 Earnings Call Transcript
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