Here’s why Camden is coming out of California as a big bet in the Sun Belt
Camden Property Trust Companyone of the nation’s largest residential investment trusts, has long complained about California’s challenging regulatory environment.
Frustration rose to a crescendo in the early 2020s. The suspension of evictions during the COVID-19 pandemic, which effectively reduced a large portion of rents, left landlords alone to manage operating costs and property costs during that time.
Now the Houston-based REIT is selling its California-based portfolio of hard-working, bankable real estate to buyers willing to take advantage of that regulatory environment. Company officials told Wall Street analysts in its Friday filing that there is strong interest in the portfolio — valued at about $1.5 billion. They expect to close the deal within a year.
Camden executives downplayed the regulatory climate and operational challenges in their track record of talks about the buildings. Under the spotlight, however, those challenges have influenced strategic change and reflected how investors move money in and out of states in response to regulation.
They characterized the sale as part of an ongoing portfolio management strategy that reallocates capital to high-yield, growth-enhancing, market-supporting Sun Belt businesses while continuing to repurchase shares. That means there are fewer, less robust leases, which developers and homeowners blame for higher operating costs.
The costs of regulatory climate and political activity
Camden CEO Ric Campo offered an overview of the company’s thinking, focusing on Colorado’s new law — Protection Against Manipulatory Pricing Practices — that went into effect earlier this year.
“The good news is that in many of our markets, the reason why they are growing so fast is because they support businesses, they promote growth,” said Campo. “Obviously, putting such a law in place is not conducive to business or growth.”
The law requires transparent price disclosure in areas such as utility bills and restricts landlords from charging certain prohibited rents. Nationally, tenant advocates have stepped up criticism in the past few years of so-called “junk fees” being charged to landlords, saying they add financial pressure to tenants on top of rapidly rising rents. Fees have become a growing source of income for homeowners
Keith Oden, Camden’s executive vice chairman, noted on the call that the Colorado law is expected to cut income this year for the nearly 3,000 homes it owns in the Denver area. “The total of this is approximately $1.8 million.” He said that works out to about 0.19% of total same-store operating revenue.
It also costs money to fight unwanted legislation. Campo said California covered 92% of the cost of political representation and accounted for 0.8% of net operating income in California properties. If its California properties have the same NOI as Sun Belt properties, the Sun Belt is doing very well, he said.
“Once we close that position, political representation in the Sun Belt is almost zero,” he said.
Marketing marks a change in thinking
Camden owns 11 properties in Southern California with a total of 3,600 units. They are 95% residential and split evenly between the San Diego/Inland Empire and Los Angeles/Orange County counties. Camden’s Los Angeles and Orange County properties recorded the highest revenue growth in the company, at 4.3%, and ranked third in NOI growth.
Camden properties in San Diego registered revenue growth of 2.9%, third behind Washington, DC-area properties. Oden said Southern California real estate – no older than 2001 – exceeded expectations due to a decline in bad debt on the books.
“Buying hasn’t really been a problem in most of our California markets, but we expect there to be little change in reducing bad debt as we go through 2026,” he said.
However, three years ago, California’s regulatory environment did not concern the administration more than the suspension of deportations.
“California is actually a very good story to own because as hard as it is to manage real estate, it’s three times harder to build real estate” in the state, Oden said when asked if he should leave.
With little new supply and strong demand, existing units can gradually increase their prices. That’s in contrast to Florida and Austin, where a flood of new units has driven down rents
Betting on rich markets
Camden wants to build and buy in places like Nashville and Florida, where managers see more future benefits.
Alex Jessett, Camden’s president and chief financial officer, said the company expects about $1.1 billion to be reinvested this summer from expected mid-year sales. That means mostly shopping.
“We are already exploring a number of opportunities in all of our markets, and those opportunities are stable, both in and out of the market,” Campo added.
Camden spent $423 million on real estate last year as the apartment purchase market showed good health after a few sluggish years. Apartment sales have stagnated amid high interest rates and sellers unwilling to lower prices. Record sales years turned into record lows
A significant portion of Camden’s portfolio is located in Texas, Florida, North Carolina and Georgia. It has three locations in the Nashville area and about 4,100 units in Arizona. Jessett said the company does not expect to expand into new markets.
The massive supply of new units from the building epidemic has begun to slow, and new construction permits have fallen to record lows. Camden is looking forward to when supply slows to a trickle and demand remains strong. That change could happen this year or next.
“You will have a situation where simple and demand economics will work, which means we will have more demand than supply, and taxes will go up,” said Campo.
A few rules to chase
California has passed a number of laws to make it easier to build more affordable housing. However, lawmakers there have mandated stronger employer protections at the state and local levels
South has a very interesting regulatory environment. The laws in Texas and Florida are focused solely on improving housing affordability by reducing regulations and warning local governments against zoning to build more owner-occupied and rental housing. Laws against “junk funds” do not apply
Florida passed a law in 2023 that allowed landlords to give tenants a monthly fee in lieu of a security deposit. Critics argue that the fees are not limited, do not cover damages and are not refundable when the tenant moves out. Camden is also betting that finding owner-occupied housing remains difficult despite the law’s efforts.
“We are convinced that apartments are more affordable than owning a home and will be for the foreseeable future,” said Campo.
