Further - CWS Capital Partners LLC

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Further
CWS Capital Partners has evolved from the company that was founded in 1969. Its key principals and advisors, CEO -Steve Sherwood,
President-Gary Carmell, Chief Investment Officer-Mike Engels and
Bill Williams, have a combined 121 years with the firm. If we had to
title ourselves, it would be “a fully-integrated real estate investment
management company.” We search throughout America for real estate investment opportunities and negotiate the purchase and sale of
the properties. We access debt and equity capital to finance both the
purchase and development of those properties. And finally, we manage
them. Throughout each project, we correspond regularly with our investment partners and coordinate all the necessary financial reporting and
tax return generation. Importantly, the CWS principals believe in these
projects strongly enough to personally invest in every single one.
The road ahead is not always
straight and smooth. Often times it
is filled with obstacles and different
surfaces. CWS Capital Partners is a
high-performance vehicle equipped to traverse any road condition,
while keeping our passengers safe
and out of harms way. Join us in
our continued journey as we charge
ahead of our competition with our
experienced drivers and real-time
navigation system.
Page 1
140
120
120
160
100
100
180
Budget
200
0122.6M
00.
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40
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udget
150
280
( in millions )
100
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1
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150
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125
150
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00
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1015.7M
0
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A
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12. 1 1%
200
120
s
8
100
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0
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0
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Combined
Equity Exchanged
( in millions )
Deferred Gain
Associated with Equity
( in millions )
200
000.0
00
0
236.4M
2
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0.0
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4M
M
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3 CWS Capital Partners LLC
500
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333.3M
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Apartment Portfolio Performance Summary
F rom January 1 to D ecember 31, 2012
A c t ua l
Bu d ge t
Var ian c e
Per c en t
Total Revenue
$
219,477,648
$
211,950,084
$
7,527,564
3.55%
Total Operating Expenses
$
96,889,829
$
96,202,396
$
(687,433)
– 0.71%
Net Operating Income/(Loss)
$
122,587,819
$
115,747,688
$
6,840,131
5.91%
C o mbine d
Eq ui t y
E x c h a n ge d
D ef erred
G ai n A sso c iat ed
w it h t h e Eq u it y
1031 Exchange History
Pr ivat e TIC
Eq ui t y E x c h a n ged
Y e ar
1985
$
4,969,908
$
7,496,092
1986
596,835
618,897
1989
1,238,238
1,871,750
1990
3,591,187
9,283,218
1991
1,267,266
575,893
1992
1,800,396
4,759,007
4,546,184
1993
4,219,577
1995
1,252,827
2,115,161
1996
5,578,435
10,424,092
1997
12,737,361
19,012,046
1998
30,945,816
43,385,626
55,438,498
1999
31,046,933
2000
31,828,056
37,942,895
2002
14,187,460
23,078,845
2003
1,305,981
4,334,016
2004
10,427,349
16,610,408
2006
$
462,436
12,345,388
14,347,576
2007
$
2,988,418
33,802,022
50,402,997
10,402,648
2008
$
537,560
6,176,165
2011
$
10,912,000
13,973,008
2012
$
7,213,848
Grand Total
$
22,114,262
3,764,844(1)
13,119,722
$
236,409,930
12,928,392(1)
$
333,339,085
Properties Refinanced in 2012
Pro per t y
The Marquis at Town Centre
Mon t h
R ef in a n c ed
February
The Marquis at Deerfield
March
The Marquis at Ladera Vista
March
The Marquis of Carmel Valley
March
The Marquis at Park Central
March
The Marquis at Texas Street
May
The Marquis at Turtle Creek
June
The Marquis of State Thomas
June
The Marquis at Stonegate
June
The Marquis at Briarcliff
July
The Marquis at Carmel Commons
Austin Midtown Apartments
July
September
Properties Sold in 2012
Pro per t y
Mon t h s ol d
The Marquis at Barton Creek
May
Canada Manufactured Housing Communities
November
Upcoming Events in 2013
Pro per t y
R ef in a n c e
The Marquis at Willow Lake
•
The Marquis at West Village
•
Marquis Downtown Lofts
•
The Marquis at Caprock Canyon
•
The Park at Walker's Ranch
•
Marquis at Lantana
•
•
•
Track Record
Pro per t y
L o c at io n
D at e A c qui r ed
L en d er Gr o u p
Pay o f f
S ale
S ale D at e
In v e s t o r R e t u r n s
N e t o f F ee s
Mul t ipl e
N e t o f F ee s
Ashbury Parke
Austin, TX
Jul – 93
Jun – 96
22.36%
1.71
The Marquis at Ladera Vista (2)
Austin, TX
Nov – 94
Nov – 96
13.54%
1.27
Austin, TX
Dec – 90
Mar– 98
20.10%
2.78
Plaza Villa
Montclair, CA
Feb – 95
Aug – 98
21.91%
1.92
The Marquis of Carmel Valley (2)
Charlotte, NC
Jan – 97
May – 99
28.78%
1.66
Austin, TX
Nov – 92
Jun – 00
18.23%
2.30
Barton’s Lodge (3)
Marquis Apartments
Argonne Forest
Austin, TX
Dec – 91
Aug – 00
19.65%
2.85
Edge Creek
Austin, TX
Aug – 93
Dec – 00
22.88%
2.83
1.70
O’Connor Ridge
Waterbury Place
Laguna Terrace
Montclair Parc
Northcreek Apartments
The Marquis at Castle Hills
The Marquis at Walker’s Bluff
Dallas, TX
Nov – 95
Feb – 02
10.12%
Arlington, TX
Jun – 90
Mar– 02
8.97%
2.17
Dallas, TX
Jul – 96
Apr– 03
9.58%
1.57
Charlotte, NC
Jul – 97
Oct– 04
5.27%
1.37
Durham, NC
Jul – 97
Oct– 04
9.50%
1.67
San Antonio, TX
Jun – 03
Mar– 06
28.49%
1.92
Austin, TX
Oct– 98
Apr– 06
8.15%
1.63
Dallas, TX
Sep – 04
Jun – 06
10.30%
1.18
Bedford, TX
Nov – 97
Jun – 06
9.38%
1.87
Farmers Branch, TX
Dec – 89
Aug – 06
7.57%
2.57
Fort Worth, TX
Mar– 89
Mar– 07
11.35%
3.62
San Antonio, TX
Jan – 04
Mar– 07
29.44%
2.16
Austin, TX
Dec – 04
Apr– 07
38.03%
2.11
San Antonio, TX
Apr– 98
Jun – 07
3.92%
1.34
The Marquis at DTC
Denver, CO
Sep – 99
Jul – 07
9.29%
1.84
Town Lake of Coppell
Coppell, TX
Mar– 04
Sep – 07
38.11%
2.99
The Marquis at Crossroads
Raleigh, NC
Dec – 00
Sep – 08
7.37%
1.59
Flower Mound, TX
Jul – 06
Dec – 08
3.51%
1.09
The Marquis at Frankford Springs
Shoal Creek
Huntington Cove
Papillon Parc
The Marquis at Quarry
The Marquis at Iron Rock Ranch
Talavera (4)
Marquis at Lantana
The Marquis on McKinney
Dallas, TX
Apr– 02
Jun –11
9.63%
2.16
Park at Fox Trails
Plano, TX
Dec – 06
Dec –11
7.70%
1.43
Austin, TX
Jul – 00
May –12
7.41%
2.28
12.11%
1.89
The Marquis at Barton Creek
Portfolio Weighted Average
(1) Deferred gain from new 1031 exchange investor not included as the investor’s personal deferred gain from non-CWS original properties was not tracked by CWS. (2) These
investments were recapitalized after the development was complete. These returns represent the IRRs produced for investors exiting after the development phase. (3) A portion
of the investment was set aside for investors completing a 1031 exchange. Because their capital was invested later their IRR is higher than the initial investors. (4) This property investment IRR was calculated with the inclusion of lender group investments and returns. These two lender groups produced IRRs of 18.97% and 8.04% respectively.
Great Visibility Ahead
For this year’s Annual Investor Report we
have transitioned to a car-oriented theme.
We feel we are truly hitting on all cylinders.
We have engineered an extremely capable
vehicle. At the wheel is our deep and experienced management team that has navigated through diverse terrain and all types
of weather. We have come to learn that not
all roads go straight forever and that conditions on the ground and in the environment
can change more quickly than we expect.
It is vitally important that the car is well
maintained, safe, and gets to our financial
destination as smoothly as possible.
We truly believe that arriving at the
same destination from the same starting point does not necessarily result in two
journeys of equal risk. Different routes and
the way the car is driven can produce far
riskier journeys than others despite getting
to the same end point. CWS is intensely
focused on the risk we are bearing when
going on our financial journey together. It
is vitally important that the risk of losing
any of one’s investment be a very, very
small probability event. We are not willing
to increase those probabilities materially
in order to generate additional rewards. It
is only after we get comfortable with the
Page 6
downside protection and that the route
we’re taking is navigable by our drivers (in
virtually all conditions) and the vehicle is
very well cared for and safe that we can
focus on the destination and the commensurate rewards.
In my 25+ years with CWS I am hard
pressed to think of a more solid investment
climate that matches our core competencies than we have been experiencing. Apartments have performed remarkably well
since 2009 as the economic recovery has
generated far more renter households than
home owners.
If you have been following our semi-annual conference calls, attending our annual
investor meetings, or reading our Quarterly
Updates, this phenomenon has been something we’ve been communicating about
fairly regularly for quite some time. We were
firm believers that the violent contraction in
credit that took place between late 2007
and mid-2010 would result in a dramatic
reduction in the new supply of apartments.
At the same time, there was no way single-family housing would lead us out of the
recession as it had done in almost all previous ones since it was the epicenter of the
financial earthquake that almost took down
“We feel we are truly
hitting on all cylinders.”
the world economy. The government would
not support loose credit standards after
supporting Fannie Mae and Freddie Mac to
the tune of approximately $140 billion. In
addition, the biggest abusers, Wall Street
investment banks securitizing toxic mortgages, were exiting the business left and
right. As a result, we believed that, once
jobs started to materialize and some of the
young adults that had moved back home
started moving out again, an overwhelming percentage would rent. Combined with
minimal new supply, the conditions were
ripe for powerful rent increases, which is
what exactly happened.
During the downturn, CWS kept its car
in the garage and focused on making sure
that our mechanics were well-trained and
the car was being maintained before we
took it back on the road. We pulled back
and didn’t buy a property in 2009 and
purchased only one in late 2010. Since
2011, however, we have taken the car out
and put the pedal to the metal because we
have such good visibility through our windshield. Construction is still insufficient to
meet the demand, jobs are re-materializing, mortgages are still difficult to access,
and our prime demographic (20 –30 year
Page 7
olds) is growing strongly. In short, supply
and demand are still quite favorable. Our
car has the latest maps feeding its GPS so
we feel as though we have an edge in terms
of knowing where the roads lead and the
conditions we may be facing. The yields at
which we can purchase properties exceed
the cost of our debt. Our markets are producing jobs at a more rapid pace than
the country as a whole, and there are still
selective opportunities to purchase quality properties below replacement cost, as
well as build new ones in select locations.
While we are acutely aware that the conditions may change, we do feel that this is
one of the better times to go for a long ride
and perhaps put the top down.
With strong capabilities in evaluating
and purchasing investments, accessing
the best financing, managing the properties, and communicating with our investors, along with our ability to build new
properties and reposition older ones, we
believe that the CWS investment vehicle is
the perfect car for the extraordinary roads
we’ll be traveling together for the next
number of years.
Gary Carmell, CFA Partner -- President
“CWS is like an expertly engineered car,
designed and built for excellent performance
and durability. It is a car that’s made to keep
its passengers as safe as possible on their
journey to reach their destination.”
flexibility of renting, we expect the apartment
Well-Engineered
market to be very favorable far into the future.
CWS has been thoughtfully designed to be
by Steve Sherwood
around for decades to come and to perform well
Founder, Chief Executive Officer
for our investors, residents, and employees. CWS
& Chairman of the Board
is like an expertly engineered car, designed and
built for excellent performance and durability. It is
At the last two CWS annual investor meetings,
a car that is made to keep its passengers as safe as
our message was that the apartment market
possible on the journey to reach their destination.
looked quite favorable based on the current and
growing imbalance between the supply of apart-
when the road ahead is smooth and visibility is
ments (not enough) and the demand for them.
good. When visibility diminishes, the specially
As a result, the outlook for apartments to per-
designed headlights peer out into the distance
form well had never been more clear to us. Fortu-
much further than most. CWS proprietary de-
nately, those statements were right on the mark
mand models predict demand and real-time op-
as values have risen dramatically as occupan-
erating feedback from on-site teams shed light
cy tightened and rents continued to grow. The
on what might lie ahead. When adversity is fore-
clarity today is still quite good and the outlook
seen, early signals from our teams allow us to
for apartment performance in 2013 and 2014
slow the car immediately with a very sensitive
is also outstanding.
braking system and begin preparing for roads
New apartment development is an excellent
in poor condition. CWS focuses heavily on pre-
indicator of supply over a 12 to 18 month period.
serving capital and protecting our partners’ in-
Coupling current development with permits can
vestments. To accomplish this, the CWS car is
extend the view of future supply to 24 months.
designed to travel efficiently through almost any
Each sub-market is a bit different, but overall,
off-road conditions and even at slower speeds.
current development is not adequate to meet the
Our many years of experience operating effec-
current demand. It is a little harder to predict be-
tively in favorable and competitive market con-
yond two years, but the lack of building the last
ditions is what guides us and steers us onto the
The CWS car can operate at very high speeds
four years leaves plenty of room for significant
most beneficial path. This state of the art nav-
new construction without the risk of an over-sup-
igation system provides the CWS car with the
plied market. As more young people prefer the
best and fastest route to a paved road in good
Page 8
“We feel great about rotating the tires,
changing the oil, replacing spark plugs
and filters, and performing any other
regularly scheduled maintenance.”
condition while many competitors are still stuck
Chapter 1. Purpose and Values Vital to our compa-
in four wheel drive.
ny is a clear purpose, “Enhancing Lives The CWS
Way.” and our shared values, that we all buy into
It is our belief that all cars in a race run well
when the conditions are good. However, the race
as a company.
will be won by the operator who lifts off the gas
first and taps the brakes before the conditions get
Chapter 2. Planning and Budgeting The next step
bad. This is why we are all glad the CWS car was
is a comprehensive, multi-departmental, bot-
designed with not only ideal conditions in mind,
tom-up planning and budgeting process that pro-
but also less favorable ones. We are confident
duces our corporate and property level objectives.
that the CWS car will continue to tackle the road
We value open communications in a trusting envi-
ahead no matter what the conditions may be.
ronment where everyone’s input is respected. In
regard to potential new investments, our planning
process is driven by opportunities we see in the
The CWS Owner’s Manual
market, not by opportunities to access capital. The
by Mike Engels
at the expense of long-term investor results.
latter is a strategy for short-term corporate profits
Partner -- Chief Investment Officer
Chapter 3. Hire and Retain the Right People
CWS is the kind of company that gets excited when
The key to implementation of our plan is hiring the
the odometer rolls to the next 3,000 mile mark
right people to execute it effectively and efficient-
and it’s time for a service check. We feel great
ly. We choose individuals who are not only able to
about rotating the tires, changing the oil, replacing
do the job right, but are a fit with our culture and
spark plugs and filters, and performing any other
values. Our disciplined hiring process includes
maintenance. We know that by doing these things,
skill tests, personality assessments, interviews,
the CWS car will keep running smoothly, no matter
background and reference checks, and drug tests.
what conditions we encounter.
To retain the right people, we first and foremost
The “purr” of our motor that investors have
require frequent communication between each
been hearing lately is the sound of properties gen-
employee and his or her supervisor to address any
erating cash flow for distribution, which is music
issues before they become problems. These com-
to one’s ears. How do we keep the engine humming
munications at a minimum include annual writ-
at CWS? Here’s a glimpse of our Owner’s Manual…
ten reviews and monthly one-to-one meetings.
Page 9
“Come along for the
ride. The CWS car
is running great!”
“When adversity is seen out in
the future, early signals from our
teams allow us to slow the car
immediately with a very sensitive
braking system and begin preparing for roads in poor condition.”
Lastly, we keep our overhead as lean as possible.
long haul. Why risk an accident or breakdown?
Too many obligations to feed too large a team can
As one of the Indianapolis “500” winners said,
jeopardize optimal investor decisions.
“To finish first, you must first finish.” At CWS,
we have the good fortune of having experienced
Chapter 4. The Service Profit Chain Successful
drivers in Steve Sherwood and Bill Williams, who
execution of a strategy requires more than just
understand that real estate investing is a long-
the right people. The Service Profit Chain phi-
term proposition, and have set up the company
losophy states that having satisfied employees
with that in mind.
is the best way to produce satisfied customers,
with the leading driver of employee satisfaction
Chapter 6. Hop In! We at CWS feel very fortunate
being how well they are trained and supported
to find ourselves in a segment of the housing
to do their job effectively. We invest heavily in
sector that has been underappreciated by inves-
training, systems, and internal support teams
tors and residents alike for many years, and is
so our frontline employees can meet and exceed
now in the early stages of hitting its stride. Come
the expectations of our resident and investor
along for the ride, the CWS car is running great!
customers. Moreover, CWS holistically supports
each team member through BRIDGE, a program
which encourages and celebrates each employee’s community service, and our Wellness pro-
CWS – A High Performance Vehicle
gram, which supports each employee’s efforts at
by Bill Williams
living a healthy lifestyle. Each CWS team mem-
Founder & Advisory Board Member
ber personally knows that CWS is on their side.
A car chassis has a framework made up of: a susChapter 5. Built for the Long Haul Around the In-
pension system, an exhaust system and a steering
terests of Our Investors In the cross country trip
box. These items make up the solid base of a high
of the investment world, there are times to pass
performance machine.
the car in front of you, to stay steady on cruise
control, and to pull over for a rest. It is very easy
has been built on three fundamentals:
For 44 years the framework of CWS operations
for an investment management company to keep
“passing,” which maximizes the opportunity for
1. Ethical dealings with everyone who rides with us
short-term corporate profits. CWS is built for the
2. Striving for high quality and excellence
Page 10
“The frame (chassis) of
a high performance
machine has to be built
to take lots of flexing
during its lifetime.“
3. Communicating with everyone involved in
“We are continually
improving the CWS frame
design for the needs of the
people that will be driving
the Company’s future.”
3. Do we have a great communication system
our operations
within this organization and with our investors
to get fast feedback at all levels, both internal
and external?
The CWS frame was built to invest in income producing real estate with cash flow producing a real
return of 5 to 9% above the inflation rate. We are
We are constantly asking for and seeking ways to
continually improving the CWS frame design for
be a better organization. When our investors and
the needs of the people that will be driving the
our employees are satisfied, we are succeeding.
Company’s future. They need to know the operat-
ing characteristics of the frame which are:
chine has to be built to take lots of flexing during
1. Select and manage every property as if we will
made up of:
The frame (chassis) of a high performance ma-
its lifetime. The flexing we must be ready for is
own it forever.
2. Quality of construction and carefully selected
1. Interest rates changing and loan availability
locations are paramount.
3. CWS principals invest in every property
alongside their investors.
during the next five to ten years.
2. The economy today and two years ahead.
3. Inflation, stagflation, and recession’s effect on
a multifamily housing in the CWS portfolio.
Testing The CWS Frame The frame has been
4. Black Swans (major catastrophies) – being
solid enough to hold up for 44 years. With this
prepared to endure severe headwinds resulting
time tested framework, we will continue to build
from natural or manmade causes.
on our reputation as top notch operators with
an excellent track record and reward CWS in-
Multifamily residential income properties are the
vestors with dividends and property apprecia-
track CWS has chosen to race on and we have main-
tion. The questions we continually ask about our
tained a steady place in the top five companies on
framework are:
this track.
1. Do we have the best people running
each operation?
2. Do we have the optimum equipment to
run each operation?
Page 11
Thanks for your trust in CWS and the people who
run this high performance machine. We consider
your trust the highest order of compliment, and we
gladly take the responsibility to continue to earn it
for the years ahead.
Taking Each Turn Carefully.
All out speed driving can be dangerous, but controlled, calculated
driving involving an ideal combination of throttle, steering, and
braking inputs provides for the best balance in terms of travel
efficiency and safety. CWS Capital Partners always has safety in
mind, as the primary objective, but is keen to take advantage of
openings in the road that allow for more speed.
14 CWS Capital Partners LLC
Pr o pert y Name
Loc at io n
The Marquis at Ladera Vista
Austin
Unit s
224
The Marquis on Volente
Austin
208
The Marquis at Caprock Canyon
Austin
336
Northwest Hills Apartments
Austin
314
Windsor at Barton Creek
Austin
134
Riverside Place
Austin
145
Riverside Square
Austin
100
The Marquis at Great Hills
Austin
406
The Marquis at Tree Tops
Austin
240
Austin Midtown Apartments
Austin
276
Marquis at Canyon Ridge
Austin
264
Marquis Round Rock
Austin
224
Marquis at Tech Ridge
Austin
294
348
Marquis at Center Ridge
Austin
Marquis at Barton Trails
Austin
150
Marquis Shoreline
Austin
280
Total
3,943
Austin
Austin remains the fastest growing metro area in
Texas, and one of the fastest growing in the nation.
Employment remains stable in Austin despite the
recession. Austin has vaulted itself to the top of the
list of best apartment and job markets in the nation.
The Austin-San Marcos, TX MSA experienced a 1.7%
increase in employment in 2011 and a 3.3% increase
from September of 2011 to September 2012. These
growth figures were some of the best in the nation and
equaled approximately 26,600 new jobs. Austin is
one of the few markets nationally that has recovered
all jobs lost during the recession. Unemployment in
Austin has dropped to 5.4% and is no longer an issue.
Moody’s predicts that in 2013 Austin will add 28,500
jobs or about 3.5% to the workforce. For the past two
years new apartment deliveries have been significantly
lower than historical averages with only 949 new
units delivered in 2011, and 1,384 units delivered in
2012. This compares with approximately 7,500 new
units delivered in 2009. Occupancy jumped to 95.9%
as demand for apartments coupled with limited new
supply have resulted in limited availability across the
city. Rents in 2012 increased 4.4%. It is anticipated
that Austin will experience similar positive results in
2013 and 2014 due to job growth and an increase
in the area’s population. Austin’s high quality of
living, highly-educated workforce and availability of
office space should help Austin to continue to grow
faster than the national average. It is anticipated that
occupancy and rents will continue their upward trend
for the next several years, after which the supply and
demand fundamentals point to continued growth.
Pr o pert y Name
Loc at io n
The Marquis at Riverchase
Coppell
Unit s
The Marquis at Turtle Creek
Dallas
98
The Marquis at West Village
Dallas
179
360
The Marquis at Park Central
Dallas
308
The Marquis on Gaston
Dallas
480
The Marquis on Cedar Springs
Dallas
165
The Marquis at Texas Street
Dallas
302
The Marquis of State Thomas
Dallas
211
Marquis at West End
Dallas
146
248
Marquis at Lantana
Flower Mound
The Park at Flower Mound
Flower Mound
352
The Marquis at Stonegate
Fort Worth
308
138
The Marquis at Willow Lake
Fort Worth
The Marquis at Bellaire Ranch
Fort Worth
316
Firestone West 7th
Fort Worth
350
The Marquis at Stonebriar
Frisco
347
The Marquis at Silver Oaks
Grapevine
480
Brooks on Preston
Plano
342
The Park on Spring Creek
Plano
278
The Marquis at Waterview
Richardson
528
Total
5,936
Dallas/Fort Worth
New apartment supply levels remain very low by
Dallas standards. In 2012’s fourth quarter, completions totaled 2,227 units. Annually, new supply tallied
5,619 units, which expanded Dallas’ inventory base
1.1%. Meanwhile, Dallas posted demand for 1,569
units in 4th qrtr 2012, taking the annual absorption
tally to 6,696 units. Occupancy increased 0.4% year
over year to 93.9%. 3% rent growth was posted for
2012 and marks Dallas’s 11th consecutive quarter
of rent increases. Dallas was one of the nation’s
top employment growth centers in the year ending
November 2012, ranking seventh in the nation with
Page 16
the addition of 45,400 jobs or 2.2% job growth.
New apartment supply levels remain very low by
Fort Worth standards. The metro added 630 units
in the fourth quarter and 1,841 units annually,
expanding the inventory base 1.1%. Fort Worth
absorbed 348 units in 2012’s 4th quarter. Occupancy increased 0.5% to land at 93.2%. Fort Worth
logged year-over-year rent growth of 2.1%, which was
the ninth consecutive annual increase for Fort Worth.
Fort Worth ranked number 16 nationally with 27,200
jobs added in the year ending November 2012. That
translated to an expansion rate of 3.1%.
18 CWS Capital Partners LLC
Pr o pert y Name
Loc at io n
The Marquis at Deerfield *
San Antonio
Unit s
The Marquis at Rogers Ranch *
San Antonio
246
The Park at Walker’s Ranch
San Antonio
300
340
The Marquis at Stone Oak
San Antonio
332
Marquis at La Cantera
San Antonio
208
Total
1,426
San Antonio
New supply emerged as a key storyline in San
Antonio’s apartment market at the conclusion of
2012. San Antonio hit a three-year high for quarterly
apartment completions with 1,911 units being
delivered in 4Q 2012. The new supply expanded
the metro’s inventory base by 1.2 percent. While
this spike reflects a rebound in new apartment
development, this number will more than likely prove
to be an outlier. Quarterly new supply is scheduled to
top 1,000 units in only one of the next four quarters.
Annually, new supply levels are still moderate by
historic standards. San Antonio added 2,993 units
in 2012, still less than half of peak levels seen
earlier in the decade. A similar number of units are
on track to be completed in 2013. Annual rent growth
levels have topped 3 percent in each of the past six
quarters, making this the best stretch in more than
a decade in San Antonio. The metro added north of
20,000 jobs in 2012 and leading economists are
forecasting growth of 26,000 jobs over the next twelve
months. Given that new supply levels going forward
should remain moderate while employment growth
improves, San Antonio’s apartment market appears
poised for another year of solid rent increases.
Pr o pert y Name
Loc at io n
The Marquis at Bellaire
Houston
Unit s
The Marquis at Pin Oak Park
Houston
474
The Marquis at Westchase
Houston
216
The Marquis on Briar Forest
Houston
396
The Marquis on Eldridge Parkway
Houston
270
The Marquis on Memorial
Houston
104
581
The Marquis on Westheimer
Houston
288
Marquis Downtown Lofts
Houston
244
Marq on Voss
Houston
307
Marquis Lofts at Hermann Park
Houston
380
Marquis Lofts on Sabine
Houston
198
Marquis at Katy
Katy
258
280
Marquis at the Woodlands
Spring
Marquis at Sugar Land
Sugar Land
312
Marquis at Clear Lake
Webster
364
Total
4,672
Houston
According to the latest U.S. Census, Houston has a
population of over two million people, making it the
fourth-largest city in the nation. Further, Houston
recently overtook the Philadelphia metropolitan
area as the fifth-largest metropolitan area with
6.22 million people in the 10-county metro. In
2012, Houston’s economy had another strong year
of employment growth with 94,400 jobs added
equating to a 3.6% job growth figure. This was well
above the 55,000–60,000 jobs that Houston was
projected to add. This outsized growth is expected to
continue in 2012 with an estimated gain of 55,000–
60,000 jobs. Houston’s relatively recession proof
economic drivers include: the energy industry,
international trade through the Port of Houston,
Page 20
and the Texas Medical Center, the largest medical
complex in the nation. These industries have helped
to shield Houston’s unemployment rate at levels that
are lower than the national average. For example, as
of September 2012, Houston’s unemployment rate
stood at 6.3% down from 8.2% one year earlier. The
Houston MSA population is expected to grow by 2.9
million people by 2030.
All the factors listed above have fueled apartment
rental demand not seen since 2005. While new
supply is accelerating it is anticipated that Houston’s
continued job growth will ensure the new units will be
absorbed. Over the past 12 months occupancies in
Houston have risen 1.5% while effective rental rates
have climbed 5.5%.
CWS Portfolio
S tat e
Cit y
Pr o pe rt y Na me
Year
Ac q u i r e d
Year
Buil t
Un i t s
Po te nti a l
Bu il d -O u t
T ot al
Po te nti a l
Un i t s
California
Folsom
Fairmont at Willow Creek*
2001
2001
260
0
260
Colorado
Broomfi ld
The Marquis at Town Centre
2000
2000
283
0
283
Denver
Marquis at the Parkway
2005
1983
460
0
460
Georgia
North
Carolina
Texas
Atlanta
The Marquis at Briarcliff
2006
1995
104
0
104
Atlanta
Marquis at Perimeter Center
2012
1980
204
0
204
Atlanta
Marquis of North Druid Hills
2013
1994
182
0
182
Atlanta
Marquis Midtown West Apartments
2013
1997
156
0
156
Duluth
Marquis at Sugarloaf
2013
1995
303
0
303
Cary
The Marquis at Preston
2000
1996
292
0
292
Cary
The Marquis at Silverton
2005
1996
216
0
216
Charlotte
The Marquis of Carmel Valley*
1998
1998
424
0
424
Charlotte
The Preserve at Ballantyne Commons 1999
1998
270
0
270
Charlotte
The Marquis at Carmel Commons*
2001
2001
312
0
312
Huntersville
The Marquis at Northcross
2006
1996
312
0
312
Raleigh
The Marquis on Cary Parkway
2006
1998
388
0
388
352
Raleigh
The Marquis on Edwards Mill
2006
1996
352
0
Austin
The Marquis at Ladera Vista*
1996
1996
224
0
224
Austin
The Marquis at Caprock Canyon
2000
1994
336
0
336
Austin
Northwest Hills Apartments
2005
1978/79
314
0
314
Austin
Windsor at Barton Creek
2005
1978
134
0
134
Austin
Riverside Place
2006
1969
145
0
145
Austin
Riverside Square
2006
1973
100
0
100
Austin
The Marquis at Great Hills
2007
1995
406
0
406
Austin
The Marquis at Tree Tops
2007
1997
240
0
240
208
Austin
The Marquis on Volente
2011
1999
208
0
Austin
Austin Midtown Apartments
2011
1978
276
0
276
Austin
The Marquis at Canyon Ridge
2011
2008
264
0
264
Austin
The Marquis Round Rock
2011
2008
224
0
224
Austin
Marquis Shoreline
2012
2001
280
0
280
Austin
Marquis at Barton Trails
2012
1998
150
144
294
Austin
Marquis at Center Ridge
2012
2008
348
0
348
Austin
Marquis at Tech Ridge
2012
2007
294
0
294
Coppell
The Marquis at Riverchase
2006
1999
360
0
360
Dallas
The Marquis at Turtle Creek
2002
1998
98
0
98
Dallas
The Marquis at West Village
2004
2002
179
0
179
Dallas
The Marquis at Park Central
2005
1999
308
0
308
480
Dallas
The Marquis on Gaston
2005
1996
480
0
Dallas
The Marquis on Cedar Springs
2006
2002
165
0
165
Dallas
The Marquis at Texas Street
2007
2003
302
0
302
Dallas
The Marquis of State Thomas*
2009
2009
211
0
211
Dallas
Marquis at West End
2012
2008
146
0
146
CWS Portfolio (cont.)
S tat e
Texas
Cit y
Pr o pe rt y Na me
Year
Ac q u i r e d
Year
Buil t
Un i t s
Po te nti a l
Bu il d -O u t
T ot al
Po te nti a l
Un i t s
248
Flower Mound Marquis at Lantana
2008
2000
248
0
Flower Mound The Park at Flower Mound
2011
1984/98
352
0
352
Fort Worth
2002
1996
308
0
308
138
The Marquis at Stonegate
Fort Worth
The Marquis at Willow Lake
2002
1996
138
0
Fort Worth
The Marquis at Bellaire Ranch
2003
1997
316
0
316
Fort Worth
Firestone West 7th
2012
1999
350
0
350
Frisco
The Marquis at Stonebriar
2006
1998
347
0
347
Grapevine
The Marquis at Silver Oaks
2005
2002
480
0
480
Houston
The Marquis at Bellaire
2006
1990
581
0
581
Houston
The Marquis at Pin Oak Park
2007
1992
474
0
474
Houston
The Marquis at Westchase
2007
1995
216
0
216
Houston
The Marquis on Briar Forest
2007
2004
396
0
396
Houston
The Marquis on Eldridge Parkway
2007
2004
270
0
270
Houston
The Marquis on Memorial
2007
1993
104
0
104
Houston
The Marquis on Westheimer
2007
1998/99
288
0
288
Houston
Marquis Downtown Lofts
2010
2002
244
0
244
Houston
Marq on Voss
2012
2010
307
0
307
Houston
Marquis Lofts at Hermann Park
2012
2005
380
0
380
Houston
Marquis Lofts on Sabine
2013
2002
198
0
198
Katy
Marquis at Katy
2012
2008
258
0
258
Plano
Brooks on Preston
1998
1998
342
0
342
Plano
The Park on Spring Creek
2006
1984
278
0
278
Richardson
The Marquis at Waterview
1999
1998
528
0
528
San Antonio
The Marquis at Deerfield*
1996
1996
340
0
340
San Antonio
The Marquis at Rogers Ranch*
2001
2001
246
0
246
San Antonio
The Park at Walker’s Ranch
2007
1995
300
0
300
San Antonio
The Marquis at Stone Oak
2012
2000
332
0
332
San Antonio
Marquis La Cantera
2012
2000
208
0
208
Spring
Marquis at the Woodlands
2012
2007
280
0
280
Sugar Land
Marquis at Sugar Land
2012
2009
312
0
312
Webster
Marquis at Clear Lake
2012
2006
364
0
364
Apartment Totals
20,495
144
20,639
125
Current Developments
Texas
Austin
The Block on Campus Phase III
0
125
Texas
Katy
Broadstone Greenhouse
0
370
370
0
495
495
411
0
411
Development Totals
Manufactured Housing Communities
Texas
Dallas
Harston Woods
MHC Totals
*CWS Developments
411
0
411
CWS Portfolio Totals 20,906
639
21,545
Page 24
Pr o pert y Name
Loc at io n
The Marquis at Briarcliff
Atlanta
Unit s
104
Marquis at Perimeter Center
Atlanta
204
Marquis of North Druid Hills
Atlanta
182
Marquis Midtown West Apartments Atlanta
156
Marquis at Sugarloaf
303
Total
Duluth
949
Atlanta
With a metro population estimated at 5.45 million as
of 2012, the Atlanta MSA is the ninth largest in the
nation. By 2020, the population is projected to total
6.3 million, translating into average annual population
growth of over 100,000 per annum over this period.
Employment numbers continue to climb as Atlanta
has now posted year-over-year employment gains
for 29 straight months. Almost 34,000 jobs were
added in the metro over the twelve months ending
November of 2012, an increase of 1.5% which is
just above the 1.4% increase nationally. Industries
with the greatest percentage increase in jobs include
trade, transportation, and utilities, professional and
business services, education and health services, and
manufacturing. Job losses were posted in government,
financial activities, and construction. The outlook
is for employment gains to accelerate in 2013,
potentially adding as many as 50,000 new jobs.
The lack of gains in construction employment is
hardly surprising as construction activity remains at
much lower levels than those posted between 2000
and 2009. During that period, single-family and multifamily permits averaged 54,000 units (22% multifamily) per annum; the number of permits issued in
2012 totaled only 14,100 units (35% multi-family),
75% below the 10-year average. The limited amount
of new units being added to supply bodes well for
both multi-family rent growth and occupancy. Over
the past twelve months, effective rental rates have
climbed by 2.8% while occupancy increased by
1.2%. These metrics are expected to increase by
another 3.6% and 0.3%, respectively, in 2013.
Pr o pert y Name
Loc at io n
The Marquis of Carmel Valley
Charlotte
The Marquis at Carmel Commons
Charlotte
312
The Preserve at Ballantyne Commons Charlotte
270
The Marquis at Northcross
Unit s
Huntersville
Total
Charlotte
The Charlotte MSA is a six-county area with a current
population of approximately 1.9 million. By 2020, the
population is expected to exceed 2.2 million, indicating annual growth upwards of 40,000 per annum.
Local employment grew by 26,000 jobs or 3.1%
during 2012, well ahead of the national average
of 1.4%. The 2012 results are substantially better
than those achieved in 2011, being the largest
increase since 2007. This relatively strong pace of
employment growth is expected to continue through
2015 with the addition of an estimated 23,000 to
27,000 new jobs annually.
Multi-family permits have escalated to over 5,300
units, the highest level since 2000. This pace of
development could pose challenges to the health
of the apartment market. However, occupancy is
currently 94.8% and the timeframe over which
Page 26
these units will be delivered is long enough that
the adverse impact on occupancy rates is expected
to be modest. Specifically, occupancy is expected
to remain over 94% through 2016 despite these
additions to inventory. This is due in large part to
the absorption of these new units, which is expected to keep pace with the deliveries as long
as local employment continues to improve.
Demand for apartments in the Charlotte MSA
is expected to remain strong due to the area’s
favorable rental demographic and home ownership
not being as competitive a housing option as it is
in many metros. Effective rents climbed 4.6% in
2012 and will maintain almost the same level of
momentum with an increase of 4.3% projected
in 2013. In fact, the lowest projected rental
growth rate over the next five years is 3.5%.
424
312
1,318
Page 28
Pr o pert y Name
Loc at io n
The Marquis at Preston
Cary
The Marquis at Silverton
Cary
216
The Marquis on Cary Parkway
Raleigh
388
The Marquis on Edwards Mill
Raleigh
Total
Unit s
292
352
1,248
Raleigh
The Raleigh-Durham Cary CSA (or Raleigh/Durham)
currently has a population of nearly 1.75 million
people, with an expansion of 47,000 in 2012. By
2020, Raleigh/Durham’s population is expected to
increase to approximately 2.2 million, equating to
average increases of almost 60,000 per annum.
Raleigh/Durham has a diverse employment base
consisting primarily of technology, government,
biotechnology, and education. This diversity has
enabled the local economy to fare better than
most through the recent economic challenges.
In 2012, approximately 16,500 jobs were added
in Raleigh/Durham, equating to a 2.1% gain and
exceeding the national average of 1.4%. This pace
is expected to accelerate substantially in 2013
with a projected 25,000 new jobs being added.
Multi-family development activity has been
ramping up with 8,056 units permitted in 2012,
a new high-water mark for the metro. This level of
activity has been spurred to some degree by the
recent strength of the Raleigh/Durham apartment
market. The occupancy rate ended 2012 at 95.6%,
an improvement of 0.7% during the year. Furthermore,
effective rental rates climbed by 3.5% during this
same period. With job growth expected to accelerate
in 2013, the outlook remains favorable moving forward. Despite the significant additions to inventory,
occupancy is expected to remain at 95% or higher
through 2016. Rental growth is also expected to
be in the mid to upper 4% range though 2016.
Pr o pert y Name
Loc at io n
The Marquis at Town Centre
Broomfield
Unit s
283
Marquis at the Parkway
Denver
460
Total
Denver
Metro Denver, with a population of nearly 2.9
million people, has achieved a growth rate that is
consistently above that of the nation. By 2020,
Metro Denver’s population is anticipated to increase
to more than 3.2 million, equating to average
annual increases of slightly greater than 40,000.
Metro Denver has an enviable quality of life that
makes it one of the best places in the United States
to live and work. Denver continues to offer a lifestyle
that attracts young, educated workers and is also
home to nine Fortune 500 companies such as Dish
Network and Liberty Media. In 2012, employment
in Denver grew with the addition of 35,200 jobs,
equating to a 2.9% increase, well above the national
average of 1.4%. This pace is expected to moderate
slightly in 2013 as 20,000 new jobs are projected.
Page 30
In this economic environment, demand for
rental housing continues to expand as vacancy
dropped from 4.6% at the end of 2011 to 3.9%
as 2012 ended. Over the same period, effective
rents climbed by 4.3%. With a large percentage of
younger workers (below age 30), recent declines in
the home ownership percentage, and construction
of new housing units at multi-decade lows, market
conditions continue to improve. Apartment completions during 2012 totaled only 1,023 units, a
mere 0.6% increase in total inventory. Apartment
construction activity will be increasing from the
low current levels, as just under 8,500 units are
expected to be delivered between now and the end
of 2014. However, absorption is expected to keep
pace with deliveries as vacancy is actually projected
to be 3.8% at the end of 2014, marginally less
than it is now. Rental rate growth in the Denver
apartment market is expected to strengthen,
climbing to the upper 4% range through 2015.
743
B.R.I.D.G.E.
B.R.I.D.G.E. is a corporate volunteer program designed to encourage employees to give back to their
community through volunteer work.
B.R.I.D.G.E. contributes $20 for each
hour of community service an employee completes up to a maximum
of 12 hours ($240). An employee may
volunteer time at any type of institution, agency, or community service
program, except activities that directly
relate to a political party or office. An
employee can decide where half of the
Page 32
annual contribution goes at any time
during the year. The remaining half of
an employee’s contribution is put into
a company-wide pool and distributed
based on employee nominations taken
at the end of the year. Since its inception in 1996, B.R.I.D.G.E. has become
an integral part of CWS culture and a
means to demonstrate our company
values on a daily basis. From 2001 to
2012, over $520,000 was donated to
hundreds of organizations and donation recipients.
2012 B.R.I.D.G.E. Service Organizations & Donation Recipients
Sandy Hook School Support Fund
For the Sake of One
CC Pals
American Foundation for Suicide Prevention
Cystic Fibrosis Foundation
Crisis Assistance Ministries
Amber’s Angels
Ronald McDonald House of Dallas
Safe Place Austin
Vera Bradley Foundation for Breast Cancer
Columbia Football League
Heifer International
Habitat for Humanity
YMCA of Austin
Austin Pets Alive
American SIDS Institute
Wounded Warriors
Leukemia and Lymphoma Society
Celebration of Love / Soldiers of America
Lutheran Church Charities / K9 Comfort Dogs
The Childrens’ Attention Home
Burke Center for Youth
Royal Rangers
Crisis Assistance Ministries
Alsheimer’s Association
Irresistible Community Influence
Dell Children’s Medical Center Foundation
Multiple Myeloma Research Foundation
Freedom Place
Community Partners of Dallas
Coppell CPAL
Texas Football Club
Sandhills Teen Challenge
Pets on Wheels
Village Bicycle Project
American Melanoma Foundation
Children’s Heart Foundation
Summitt Elementary PTA
Pancreatic Cancer Action Network
Meals on Wheels
The Link Counceling Center / The House Next Door
Shriners Hospitals for Children
Dallas CASA
Carolina Voices
Erin Krielow Lahr Scholarship
Newtown Youth and Family Services / Sandy Hook
RAICES, Inc
South Texas Children’s Home
Corporate Officers
Founders
Capital Partners
Investments
Steve Sherwood
Founding Partner, CEO,
& Chairman of the Board
Since 1977
Gary Carmell
Partner -- President
Since 1987
Mike Engels
Partner -- Chief Investment Officer
Since 1998
Brian Rose
Chief Financial Officer
Since 1997
Daniel Ebner
Senior Vice President,
Investments
Since 2004
Bill Williams
Founding Partner
& Advisory Board Member
Since 1969
Jim Clayton
Founder
Since 1969
Corporate Housing
Sue Mills
Vice President,
Human Resources
Since 1991
Mary Ellen Barlow
Director, Transaction Services
Since 1995
Tracy Hayes
President, Corporate Housing
Since 1994
Trevor Dallas
Managing Director,
CWS Strategic Apartment Fund
Since 2005
Manufactured Housing
Marcus Lam
Director of Investments
Since 2005
Joe Sherwood
Senior Vice President,
Manufactured Housing
Since 1986
Page 34
Mike Brittingham
Investments,
Austin, TX
Since 2006
Gregg Kantak
Investments,
Charlotte/Raleigh, NC
& Atlanta, GA
Since 2007
Justin Leahy
Investments,
Atlanta, GA, Houston
& San Antonio, TX
Since 2011
Capital Partners
Operations (cont.)
Operations (cont.)
Lauretta Anderson
Vice President, Investor Relations
Since 1986
Janis T. Cowey
Director of Operational
Excellence & B.R.I.D.G.E.
Head Coach
Rich Fagan
Regional Director
Director of Due Diligrence
& Integration
Since 2001
Development
Paige Gutierrez
Regional Director
Austin, TX
Since 1998
Sunnie Juarez-Mills
Investor Services Relationship
Manager
Since 1997
Susan Rayshell
Director, Investor Relations
Information Systems
Since 2008
Albert Stein
Assistant Asset Manager
Since 2009
Operations
Marcellus Mosley
Vice President,
Director of Operations
Since 2002
Shellie McDaniel
Vice President, Marketing
Since 2001
Sarah Colandra
Due Diligrence &
Integrations Manager
Since 2007
Carey McDonald
Director of
Revenue Management
Since 2012
Page 35
Greg Miller
Vice President, Development
Since 1994
Brad Brakhage
Vice President,
Construction
Since 2006
Jeff Lahr
Development Manager
Since 2012
Operations
Gina Roberts
Assistant Director of Operations
& Regional Director,
Charlotte/Raleigh, NC
& Atlanta, GA
Since 1997
Debra Buck
Regional Director
Houston, TX
Since 2007
Amber Cox
Regional Director
Fort Worth, TX
Since 1998
Brett McDaniel
Regional Director
Dallas & San Antonio, TX
Since 2001
Joe Krumrey
Regional Director
Dallas, TX
Since 2004
Lindsay Nylander
Regional Director
Denver, CO & Austin, TX
Since 2009
Monica Escobedo
Assistant Regional Director
Houston, TX
Since 2006
Leslie White
Assistant Regional Director
San Antonio, TX
Since 2001
Recognition
Investor Information
Additional Information
Winner of CEL’s Year
2004–2010 Real Estate Award
CWS has been honored with CEL’s
prestigious award for achieving the
highest level of customer service
excellence out of any multi-family
operator in Category I (41 properties
or more; 2008–2010) and Category II
(31–40 properties; 2004–2007).
CEL & Associates, Inc. is the nation’s
largest surveyor of resident satisfaction within the multi-family industry.
Go to www.celassociates.com for
more information.
Limited partners, financial advisors,
investment advisors, or CPAs seeking
additional information about CWS
Investments or 1031 Exchange candidate investments should contact:
Marcus Lam
Director of Investments
(800) 466 – 0020
mlam@cwscapital.com
For additional information on
CWS and its affiliated companies,
please see the following websites:
cwscapital.com, cwsapartments.com,
cwshousing.com, or cwsbridge.com.
Page 36
Supplemental Information
An electronic file of the Supplemental Report is available behind
our Investor Portal for all existing investors and potential investors
that have registered with our office. To view detailed earnings
overviews for each of our properties and submarket discussions
for each of our regions, please visit www.cwscapital.com and log
in to your account by clicking on the “My Account” link. If you
have trouble accessing your account, please call Investor Relations at (800) 466–0020.
CWS Capital Partners LLC
14 Corporate Plaza, Suite 210
Newport Beach, CA 92660
Telephone 949.640.4200
cwscapital.com