An apartment real estate investment trust critical of the eviction moratoriums instituted during the pandemic reported that its bad debt has dropped faster than expected this year now that the emergency bans have been lifted.
Bad debt caused by non-payment of rent at properties owned by Houston-based Camden Property Trust helped drive the REIT’s better-than-expected earnings in the first quarter, its top executive told analysts on the company’s first quarter earnings call Friday. When a tenant vacates their apartment before their lease ends, it often is referred to as a skip.
“Our skips and evictions are basically double in the first quarter what they normally are,” Ric Campo, Camden’s CEO, told analysts. “And 80% of those skips and evictions were people that owed us significant amounts of money.”
But Alex Jessett, Camden’s chief financial officer, said there was no net negative impact from a higher-than-expected level of move-outs. “Rather, we receive the benefit of having our real estate back, the opportunity to commence a lease with a resident who abides by their rental contract, and lower bad debt from having a new resident who actually pays,” Jessett said.
Camden regularly noted in earnings calls the impact on rent collections because of eviction moratoriums, citing Los Angeles County where the REIT owns three apartment properties and is building another. The moratorium, which has been extended several times, ended March 31.
In February, one analyst questioned why Camden would even continue to operate in California because of the state’s regulatory environment. Keith Oden, the company’s president and executive vice chairman, said then that while it’s a difficult state to operate in, it’s even harder to build new properties there that would increase competition for renters.
The company’s percentage of bad debt went up to 1.5% of collections during the pandemic, a percentage point higher than a near three-decade historical norm. Today, the bad debt number has dropped to 1.2%, Oden said.
Camden owns 58,300 apartment units across the country, ranking it at No. 16 on the National Multifamily Housing Council’s annual list. The largest portion is in the REIT’s home state of Texas.
The REIT’s property revenue increased 8% to $378.1 million in the first quarter compared to the same period last year. Core funds from operations, a key performance measure for REITs, rose to $183 million, from $158.6 million.
Camden’s earnings report reflects the slowing of rent growth across the country. Rents on new leases average 2.7% higher in April compared to 14.5% in April 2022. Renewals were 5.9% higher in April compared to 14.1%.
Occupancy dropped in the first quarter to 95.3% from 97% in the first three months of 2022, in part because of the higher number of those skipping out on rent and evictions.