While we're closing out another record-breaking year, we're looking ahead to one that will be a little bit slower, but by all means healthy and stable.

To get an idea of how the industry is preparing to handle the maturing cycle, we asked five executives across the country to share their thoughts on current market conditions. Here, they reveal what surprised them this past year, what indicators they're watching now, and what has them excited about the year ahead.

+Ella Shaw Neyland +Ric Campo +Jim Butz +Brad Cribbins +Mike Schall
Joe McKendry

RIC CAMPO

The ever-cautious but optimistic CEO of Camden Property Trust has cashed in on this cycle, selling off billions in assets. As the market matures, he’s still planning for the worst and hoping for the best.

What have been the biggest surprises or upsets in the past year for the apartment industry?
One of the biggest surprises was investors buying properties and paying what we consider [to be] very high prices and low cap rates for older properties.

There wasn’t a big spread between what an investor would pay for a brand-new property at 5 years old or [younger and] one that was 22 years old. We ended up selling $1.2 billion [worth] of older communities that had an average age of 22 years and sold them on a cash yield for a little less than 5%.

I’ve never seen cap rates that low for that age of an asset, and I’ve never seen the spread between newer properties and older properties as tight as it is today. That’s why we backed the truck up and sold a lot. Since 2013, we’ve sold $3 billion [worth] of assets and haven’t bought any.

Where do you see the most potential or opportunity for 2017?
We feel like there are two opportunities that continue to be positive. The first is redevelopment opportunities in our own portfolio. We have 52,000-plus apartments in 151 communities. We can invest in those properties by upgrading the kitchens and baths and improving the resident experience. I think the last three or four years we’ve invested nearly $300 million in that type of investment and we’re making over 10% yield on that.

No. 2 would be development. We continue to develop, maybe not as robustly as we have in the past because we are late in the cycle, but we’re still getting a lot better development yields from an acquisition perspective. We actually haven’t bought a property in three years.

We’re a big net seller rather than a net buyer. Probably the most potential for my business is investing in the people and systems and culture, because we’re later in the cycle here and what’s most important is to keep the residents you have, and investing in people and processes and technology that improves the resident experience is something that’s the biggest areas we invest in, as opposed to transaction-type investments.

When things slow down, a lot of companies skimp on investing in their systems and people. How are you making it work?
Investing in people and culture gives you a competitive advantage in a more competitive environment. The Camden folks do much better in a competitive environment because our competitors are whining while we continue to invest in things that improve the resident relationship with our employees.

We’re going back to a more mature market, and I fundamentally believe that the best investments are in your people and making sure they’re the most competitive out there, [whereas] our competitors are trying to improve their margins by cutting employee investments.

What are the biggest threats for 2017?
The biggest unknown is what the economy is going to do in 2017. There’s a fair amount of risk, because we’re late into this recovery, and recovery is fueled by low interest rates globally. How long and how much that changes and how it unwinds, no one knows. Where people get in trouble in their planning is they think the current status of a market is going to be there forever and they overleverage and pay too much for properties. Then they get in trouble when they can’t refinance their debt. The economy is cyclical. If you run your business conservatively and plan for downturns, you should be fine.

Next: Jim Butz, CEO of Jefferson Apartment Group