Circulating Value - CWS Capital Partners LLC

2006 annual report
C WS
Circulating Value
CWS Capital Partners LLC
Learn how one real estate investment management
company is using one word to drive efforts for
long-term value for its investors.
Circulation is life. Circulation of money and access to capital fuels economic growth
which, in turn, allows for the allocation of money to its highest and best use. With
very favorable financial and real estate markets, 2006 was a year of circulating value
at CWS.
We refinanced eight properties and sold six resulting in the exchange
of over $10.5 million of equity into two new assets and the distribution of nearly
CWS Capital Partners LLC has evolved from a company that was founded in 1969. Its key principals and advisors,
$10 million in sale proceeds to investors. Using institutional and private capital,
CEO – Steve Sherwood, Bill Williams, and President – Gary Carmell, have a combined 75 years with the firm. If
our portfolio expanded with the acquisition of ten new communities, half of which
we had to put a title on ourselves, it would be “a fully-integrated real estate investment management company.”
are development or condo-conversion and two are in new markets (Atlanta and
We search throughout America for real estate investment opportunities and negotiate the purchase and sale
of the properties. We access both debt and equity capital to finance both the purchase and development of
Houston).
Refinancing strengthens existing assets’ financial health, selling
those properties. And finally, we manage them. Throughout each project, we correspond regularly with
provides new investment opportunities and the option to extract cash, and acquiring
our investment partners and coordinate all the necessary financial reporting and tax return generation.
assets in new ventures and new markets offers a fresh start from which to begin again
Importantly, the CWS principals believe in these projects strongly enough to personally invest in every single one.
the bountiful process of circulating capital for creating value.
CWS understands
the value of its resources — the discretionary dollars of our investment partners,
the much sought after capital supplied by institutions, the talent of our esteemed
employees. We treat these with our utmost respect and attention, adding value at every
opportunity and putting the financial health of our investors and CWS at the forefront
of our decisions to adapt to changing economic, social, and demographic trends.
Actual
Budget
From January 1,
to December 31,
Variance
Percent
Total Revenue
$
121,114,870
$
119,601,465
$
1,513,405
1.27%
Total Operating Expenses
$
57,463,295
$
56,468,851
$
(994,444)
(1.76%)
Net Operating Income/(Loss)
$
63,651,575
$
63,132,614
$
518,961
0.82%
Year
month
refinanced
The Marquis of Carmel Valley
February
The Marquis at Deerfield
March
The Marquis at DTC
September
The Marquis at Ladera Vista
March
The Marquis at Town Centre Loan Mod
August
The Marquis at Waterview
April
The Preserve at Ballantyne Commons
August
West Village Lofts & Apartments
May
Year
Property
Location
Date Acquire d
Sale Date
Ashbury Parke
Austin, TX
Jul-93
Jun-96
21.51%
Marquis at Ladera Vista*
Austin, TX
Nov-94
Nov-96
16.39%
Barton’s Lodge**
L . P . IRR
Austin, TX
Dec-90
Mar-98
19.28%
Plaza Villa
Montclair, CA
Feb-95
Aug-98
24.26%
Marquis of Carmel Valley*
29.35%
Charlotte, NC
Jan-97
May-99
Marquis Apartments
Austin, TX
Nov-92
Jun-00
17.98%
Argonne Forest
Austin, TX
Dec-91
Aug-00
20.65%
23.34%
Edge Creek
Austin, TX
Aug-93
Dec-00
O’Connor Ridge
Dallas, TX
Nov-95
Feb-02
9.79%
Waterbury Place
Arlington, TX
Jun-90
Mar-02
11.04%
Dallas, TX
Jul-96
Apr-03
9.89%
Charlotte, NC
Jul-97
Oct-04
5.29%
Laguna Terrace
Montclair Parc
Northcreek
Durham, NC
Jul-97
Oct-04
9.61%
Castle Hills
San Antonio, TX
Jun-03
Mar-06
27.50%
Walkers Bluff
Austin, TX
Oct-98
Apr-06
8.11%
Swanson’s Crossing
Austin, TX
Jul-02
May-06
9.73%
9.02%
Shoal Creek
Huntington Cove
Bedford, TX
Nov-97
Jun-06
Farmers Branch, TX
Dec-89
Aug-06
7.34%
Average
15.56%
* These investments were recapitalized after the development was complete. These returns represent the IRRs produced for investors exiting after the development phase.
** 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.
m o n t h s o ld
Huntington Cove Apartments
August-06
Shoal Creek Apartments
June-06
The Marquis at Castle Hills
March-06
The Marquis at Frankford Springs
June-06
The Marquis at Swanson’s Crossing
May-06
The Marquis at Walkers Bluff
April-06
Year
refinance
Canada Manufactured Housing Communities
sale
lender group
3
3
Fairmont at Willowcreek
Papillon Parc
3
3
Talavera/Legends*
The Marquis at Barton Creek
3
The Marquis at Carmel Commons
3
The Marquis at Crossroads
3
The Marquis at DTC (Deercreek)
3
3
3
The Marquis at Iron Rock
The Marquis at Quarry
The Marquis at Rogers Ranch
3
The Marquis at State Thomas
3
The Marquis at Town Centre
Property
1985
$
*In the event the property is not sold, then it will either be refinanced or re-capitalized with a Lender Group.
2
$
7,496,092
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
1993
4,219,577
4,546,184
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
1999
31,046,933
55,438,498
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
12,345,388
Total
$
3
3
The Marquis on McKinney
4,969,908
1986
3
The Marquis at Willow Lake
deferred gain
a ss o c i a t e d
with the
equity
equity
exchanged
* Net of boot of $5,524,966
3
169,339,013
15,532,451*
$
257,025,079
CWS Capital Partners LLC
CWS Capital Partners LLC
2006 Annual R epor t
2006 Annual R epor t
Name
Title
was an apartment building in Huntington
thought that the risk/reward was extraordi-
Beach and after that we gravitated to manu-
nary. To capitalize these opportunities, we
factured housing communities which were
started recirculating money from our Cali-
known as mobile home parks back then.
fornia mobile home parks in the late 1980’s
We grew the mobile home park business
because we saw that conditions in California
fairly aggressively over a 20-year period as
were top dead center in the sense that prices
evidenced by CWS becoming one of the larg-
were extremely high and the fundamentals
est owners and operators of mobile home
going forward were very much at risk as de-
parks in the country. At our peak, we oper-
fense spending was contracting and a large
was in the checkout line in Barnes
outstanding risk/reward relationship for a
ated in nine states, including both coasts,
number of high paying jobs were going to be
& Noble and I noticed the discount
long period of time. To ensure that we extract
and in Canada.
lost. When this was combined with California’s
book bin as I was waiting. The first book to
the maximum value from the investment we
As our sophistication grew and capa-
high cost of living and relatively anti-business
catch my eye was about reflexology, a special
must make sure that we are circulating our
bilities strengthened, we shifted to more
climate, we were quite bearish on California
type of hand and foot massage. To pass the
talent, capital, and residents so that we are
value-added opportunities by developing,
real estate, particularly housing prices.
time I picked up the book and started leaf-
attracting the best customer base capable of
expanding, and redeveloping communities
ing through it. The first thing I saw when I
paying what we hope will be growing rents.
as well as turning around problem proper-
parks that we sold in California and reinvested
opened it up was a quote that said, “Circu-
Since change is the one constant we can
ties brought about by unprecedented eco-
this money in depressed assets in Texas and
lation is life.” It was such a simple statement
rely on as a result of the shifting winds of eco-
nomic turmoil experienced in Texas after
did quite well on our investments there.
yet so profound in that it goes way beyond its
nomic conditions, demographic forces, and
the price of oil collapsed and large numbers
obvious application to health, and it caused
the risk appetite of investors, standing still is
of S&Ls failed.
ment industry was starting to gain traction
me to immediately think about it in the con-
not a viable option. These forces may require
We realized that at the same time that we
and many of the markets that we were in
text of investing and CWS.
us to make more significant changes by alter-
were dealing with challenges in our mobile
were stopping new development because
ing geographic emphasis or even the types of
home park portfolio, there were tremendous
money was not available, vacancy rates were
business is we always have to keep moving
properties we purchase or develop.
opportunities developing in the tumultuous
too high, and rents were too low to support
forward and circulate our capital in ways
The history of CWS is one of a company
apartment industry with the creation of the
new construction, we realized that over time
that ensure we are aligning our manage-
that has been nimble and flexible in making
Resolution Trust Corporation, or the RTC,
there would be an opportunity to create
ment capabilities with the best opportu-
significant strategic moves over the last 30-
as it was better known.
new apartment communities that would be in
nities available. This does not necessarily
plus years to make certain that we are cap-
high demand.
mean we always have to be buying and sell-
turing the opportunities that we believe
ple to exploit the innumerable opportunities
ing. On the contrary, it may mean sticking
offer the best risk/reward relationship.
to buy foreclosed properties from insurance
some of the modern class A apartment com-
with investments that we believe offer an
companies, the RTC, and banks because we
munities which had far more amenities and
What I’ve learned over the years in our
6
The very first investment that CWS made
We put together a team of focused peo-
7
We moved capital from mobile home
In addition, once we saw that the apart-
In the early 1990’s, we started developing
CWS Capital Partners LLC
CWS Capital Partners LLC
2006 Annual R epor t
2006 Annual R epor t
were better designed than the apartments
80%, venture capital funding dried up, and
lated some of our money and talent to more
and interiors and to position these proper-
that were built in the 1980’s. We were able
companies that were hiring were now laying
of an urban focus. As commuting times in-
ties to offer a competitive alternative to the
to produce attractive rates of return as these
workers off and heavily focused on restruc-
crease and people become more interested
higher priced new construction properties
proved to be in high demand among renters
turing and cutting costs.
in the cultural aspects of city life — the fine
but at lower rents.
willing to pay greater than projected rents.
Additionally, at the same time this hap-
dining, the lifestyle, and the ability to walk
As that market started to mature, we
pened, we were saddled with high-cost debt
or take public transportation to these places,
can never remain complacent or stand still
gravitated towards older communities that
that could not be repaid prior to maturity
there is more of a premium put on urban
because so many variables are always chang-
could be repositioned with some interior
given the extraordinary prepayment penal-
assets among consumers and investors. We
ing, particularly in the capital markets.
upgrades and exterior improvements to
ties we would incur because interest rates
entered this arena somewhat early with the
Certain types of assets that were the dar-
allow us to attract a higher paying resident
had dropped significantly. Lenders do not
development of The Marquis at McKinney
lings of investors become out of favor and
clientele. These also proved to be successful.
like getting back their money early in a lower
in Dallas in 2001 and then followed up with
vice versa; those that are out of favor become
From repositioning properties, we shift-
interest rate environment and charge bor-
the purchase of The Marquis at Turtle Creek
much more in demand. And right now, every-
ed to buying very high quality properties
rowers penalties to compensate for their lost
and other urban assets in Denver and Austin.
thing seems to be in demand, quite frankly,
in markets that we felt would grow at faster
yield. These penalties were astronomical as
We now have a very good urban foot-
because there is an enormous supply of capi-
rates than the average cities or economies
borrowing rates dropped from 7% -8% to
print that has allowed us to capitalize nicely
tal and a voracious appetite among investors
in the United States. These included Austin,
3% -5%.
on the resurgence of urban living and the
worldwide to capture yield that is available
Dallas/Fort Worth, Charlotte, Raleigh, and
While we would have liked to have re-
demand among institutional investors for
from real estate investments.
Denver. These were younger cities with a
circulated capital from those investments,
urban assets. We also have strong manage-
tech-oriented workforce and a high degree
we really couldn’t so we had to focus on im-
ment and the acquisition capabilities to
written was inspired by a book about foot
of education and the land and pro-business
proving our operations by re-circulating our
evaluate new investment opportunities, in-
massage. Yet, it really is true that “circula-
environment to enable growth to occur at a
talent. This required us to be much more
tegrate them into our portfolio, and run
tion is life”. Our blood needs to be flowing,
fairly rapid pace.
focused on operational excellence and more
them effectively.
our people growing, and our capital consis-
However, this strategy was not as suc-
defensive in terms of working with lenders
Today, we are focused on taking advan-
tently monitored and optimized to ensure
cessful as we would have liked as we didn’t
and our investors to recapitalize many of our
tage of the combination of improving fun-
that it is invested in opportunities offering
count on the tech meltdown having such a
properties. We also had to make sure we had
damentals in the apartment market and the
the best risk/reward relationship. We look
devastating economic impact. For the first
the strongest players on the field to ensure
increasing costs of construction. We have
forward to doing our best in the years ahead
couple of years when we owned these as-
our properties would not lose their com-
seen an opportunity to improve well-located
to ensure that much of this capital circula-
sets they performed well. But then, market
petitive edge. Fortunately, we have worked
assets with nice amenities and good floor
tion is flowing back to you in the form of
conditions changed greatly as the technol-
through many of those issues.
plans that lack the modern interiors of new
increased dividends, refinance distribu-
ogy downturn hit the US economy with
We are very happy with the portfolio
construction properties. We see a terrific
tions, and sale proceeds from value that has
dramatic fashion. The NASDAQ dropped
we have in place. And now, we have circu-
opportunity to upgrade these communities
been created over the last few years.
8
9
The point of all this is that one really
It’s hard to believe that what I have
Name
S
CWS Capital Partners LLC
CWS Capital Partners LLC
2006 Annual R epor t
2006 Annual R epor t
Title
t
e
o
ve
Sherw
o
Name
d
Title
b
s
il
l w
am
illi
It has been 30 years since I had the good for-
Looking into the future, we do not see
The reality in investing is we only have the vagu-
we are adding to our debt at the rate of $500
tune of joining Bill Williams and Jim Clayton
the cap rates going up significantly in the
est idea how the stock, bond, and real estate
billion per year. To pay off this debt we could
to become the “S” in CWS. I began investing
near term. CWS is currently buying exist-
markets will fare in the years ahead. Layered
slowdown our economy, raise taxes, and start
in CWS projects at the same time, when we
ing apartment communities at lower prices
on top of that is a heap of personal uncertainty,
paying down the debt — which is a very unpop-
purchased only Texas mobile home parks.
than it would cost to build a similar commu-
including what will happen with our jobs or
ular move that the American public would vote
I have learned a lot in these 30 years and
nity. As the scheduled rent increases con-
businesses, what surprise expenses we might
down. The alternative is to inflate our way out,
tinue during 2007, the values should in-
face and how long we each might live. Make
i.e. reduce the value of the US dollar through
you. But before I do, I would like to make it
crease to a level approaching replacement
no mistake: managing risk — in all of its many
inflation. Inflation at the rate of 3.5% per year
clear that the reason that CWS has been so
cost. As this occurs, it will be interesting to
facets — is critical to managing money. So it
would reduce the purchasing power of the US
successful is because of our group of inves-
see if the cap rates move up during the next
is important to follow time tested investment
dollar to approximately zero in 20 years.
tor partners whom we have also enjoyed as
couple of years. I believe that the cap rates
principles and focus on key issues like diversi-
Because of the potential for inflation to re-
friends. CWS made it through the mid-eight-
will not expand as rapidly as the NOI, which
fying broadly, saving regularly, limiting taxes,
duce the purchasing power of your savings, a
ies and then the 2001 “tech-wreck” without
should result in still higher prices in most of
and clamping down on investment costs. Your
hedge against inflation is very important and
losing any investor capital. This is largely be-
our markets.
investment portfolio is driven by how you divide
real estate is one of the best because rents can
cause of the staying power provided by our
The demand should continue to shift
or diversify your money. With CWS this means
be adjusted to maintain income growth to ex-
loyal investors. I would like to take this op-
away from home ownership to renting, as a
owning several different properties in several
ceed inflation. Investors need a “real” return of
portunity to thank all of you one more time.
result of the higher prices and the tighten-
different markets.
4.5% — that means to cover inflation of 3.5%
As we enter 2007, the apartment market,
ing of credit, especially for first-time buyers.
Most CWS investors begin investing in real
plus an added 4.5% real return for an overall
as well as office, retail, and industrial mar-
The level of new apartment construction is
estate beyond their homes between the ages of
return of 8.0% every year. This is commonly
kets are all at a place they have not been be-
such that 2007 and 2008 should be very good
40 and 50 and are convinced that it gives them
called an 8% IRR (internal rate of return).
fore. All of the real estate products are be-
years for apartment owners.
four major long-term benefits:
The CWS goal for 2007 is an overall cash dis-
ing sold at record low cap rates; which means
The future of well-located apartment com-
1.Appreciation due to inflation driving up
tribution of 5% on our apartment portfolio. In
higher prices. These prices are based on the
munities looks quite good; therefore, the fu-
the value of real estate over 5 to 7 years.
addition we should see inflation moving up the
net operating income (NOI) being pro-
ture looks good for CWS. We have been lis-
2.Cash flow on an annual basis that is par-
value of our real estate portfolio in the range of
duced by the property at the time of closing.
tening to our investors and have heard that
tially sheltered from taxes by deprecia-
3.5% or more due to the influx of money from
tion accounting.
around the world that is continuing to push
The price 5 years ago was 12 to 14 times the
our investors are happy to pass along a large
NOI. It is now 20 times the NOI! This has
estate to their kids, but want to have cash
to keep improving by trading a real
backing away from zero-down, interest-only
been extremely beneficial to all of us, as the
flow to spend on themselves until then. Our
estate position for a better one without
loans, there will be many more apartment rent-
properties we own have appreciated dramat-
goal is to have the average distribution from
paying tax at the time of the exchange.
ers. We are seeing improved occupancy levels
ically without growth in NOI. We are now ex-
our portfolio at or above five percent. We are
periencing a significant upward movement
seeing things in the markets that allow us to
known organization like CWS that has a
year for CWS investors. The management team
in rents that is translating into growing NOI
feel good about accomplishing this goal. I
good long-term track record.
at CWS invests in every property along with you
and therefore, values. It is a very good time
look forward to celebrating this accomplish-
The USA is now the world’s largest debtor na-
and we are driven to maximize the return on all
to be an apartment owner.
ment together.
tion at approximately $40 trillion dollars and
investments. We are off to a good start in 2007.
would like to share some of my thoughts with
10
3.Exchange options that allow an investor
up apartment prices. With sub-prime lenders
4.The security of dealing with a well
in 2007 and indications that it will be a good
11
CWS Capital Partners LLC
CWS Capital Partners LLC
2006 Annual R epor t
2006 Annual R epor t
Be consoled if you are having a hard time finding
ment cost are essential in this cycle. Returns for
Our 2006 focus continues to be directed to-
exemplary new hire orientations and employees
adequate yields on your cash; investors around
real estate investments initiated since 2002 have
wards adding value to your investments through
to our properties with optimum job skills, keen
been strong. Most CWS investments initiated in
revenue increases and income generation. To
sales training and excellent customer service
chasing cash flow, and the macro global demo-
that time period have not yet been sold, so CWS
make this happen requires focused people and
skills. At the company, regional, and site levels,
graphic drivers of this situation show no signs of
investors have not yet tangibly seen the strong
making value-added capital improvements to
the training department will provide marketing
changing any time soon. What are the implica-
results. Rising commodity prices resulting in
our properties.
expertise and programs designed to fill the
tions of this condition for CWS and its investors?
higher replacement costs and lower interest rates
the world are similarly frustrated. Capital is
translating to lower cap rates have helped pro-
communities with desirable residents willing to
People
We made key personnel and orga-
pay the highest market rents.
nizational changes in 2006 that have greatly
increased our ability to add value to your assets.
in turn develop other employees to serve our
investors in this most recent cycle. These high
In July, we reorganized our operations, promot-
residents well, grow the value of our assets
sets. CWS is in the process of selling a number of
returns have opened the capital spigots to ad-
ing Marcellus Mosley to Director of Operations,
through rent growth and disciplined expense
assets in various markets. The demand for each
ditional real estate investment, and as a result
a role in which he will supervise our Regional
management, and maintain highly desirable
of these assets has been strong at historically
a number of marginal investments are being
Managers and strongly focus on training and
communities, are all critical to achieving pro-
high asset values, and CWS is working hard to
made. This time, there is no certainty that falling
developing our on-site employees. We also ex-
forma distributions and commanding target
cap rates or rising replacement cost will bail out
panded the number of Regional Managers from
sale prices to hit our projected internal rates
five to seven in order to reduce the portfolio
of return.
1. There is strong demand in the marketplace for
vide attractive returns to numerous real estate
low cash flow or even non-cash flow producing as-
come up with the highest possible price for each.
While the quest for the very best price sometimes
these investments. For these reasons, it is more
lengthens the sale process, we believe that this
imperative than ever to focus on the fundamen-
additional time and effort is in the investor’s best
tals and to act accordingly.
interest and will result in a satisfactory outcome.
4. Selectively utilize value-add techniques such
Promoting outstanding employees who can
size each one oversees and allow more intense
focus on property operations, enhancing asset
Capital Improvements We see great potential
value, and increasing revenue, which should
to enhance asset value at certain CWS commu-
increase net income and get us closer to our
nities through interior improvements such as
goal of an overall portfolio cash distribution
countertop, fixture, and flooring replacements,
2. The margin for error in purchasing is very
as rehabs and change of use from rental to for-
of 5%. The average portfolio size under each
cabinetry upgrades, and paint in order to raise
slim, and above average revenue growth will be
sale product. CWS has purchased older assets in
Regional Manager decreased approximately
rents that might otherwise be stagnant due to
well rewarded. Most assets purchased in this era
outstanding locations and is upgrading the in-
33% from nine properties to six greatly increas-
age or newly constructed competitors. In 2007,
will have minimal initial yields. From an invest-
teriors to provide residents with the modern fin-
ing management guidance and supervision of
investors should expect to see Lender Group
ment perspective, these purchases can work out
ish out they desire in exchange for significantly
each asset. Of these new Regional Managers,
opportunities on currently owned assets with
well to the extent that solid revenue growth can
higher rent. Additionally, there continues to be
four are graduates of the CWS Executive Intern
targeted returns in excess of 20%. This repre-
soon grow the cash flow. However, should the rev-
a strong desire in select markets for residents to
Program. The result is that Regional Managers
sents a very real circulation of value as we not
enue growth not occur, or even decline, these as-
own rather than rent. As such, some rental resi-
are spending more time on site training employ-
only offer targeted returns on newly invested
sets will quickly be in trouble. The counter to this
dential and even office buildings have a higher
ees to attract and retain our target residents
dollars in current assets but we also increase
scenario is that even a small amount of growth
and better use as for-sale residential product in
while also pricing our product to capture the
the overall value of originally invested dollars
will quickly be rewarded in terms of monetiza-
the form of condominiums. CWS will continue
highest rents.
through increased revenues.
tion of those cash flows into asset value.
to look for opportunities similar to the ones
it has seized in Austin and Dallas to find
3. Focus on the fundamentals of loca-
value in underutilized assets through
tion, supply, demand, and replace-
a change of use.
Name
ik
ls
e enge
12
McDaniel, has been promoted to fill the newly
Again, I thank you for the opportunity to
serve your investment needs. The operations
created role of Director of Training and
team remains committed to achieving
Marketing. The newly restructured
your proforma distributions on both
training department will deliver
Title
m
Former Dallas Regional Manager, Shellie
new and existing assets.
Name
Title
s
ja
ck sipe
13
CWS Capital Partners LLC
2006 Annual R epor t
Propert y Name
Location
Units
Austin
Austin
Austin
Austin
Austin
Austin
Austin
Austin
250
336
300
224
314
145
100
134
The Marquis at Barton Creek
The Marquis at Caprock Canyon
The Marquis at Iron Rock Ranch
The Marquis at Ladera Vista
Northwest Hills Apartments
Riverside Place
Riverside Square
Windsor at Barton Creek
Total Units :
01
1,803
Austin Region
Property Total:
8
sources :
CNNMoney.com, Money Magazine Online Edition
www.austin-chamber.org
The Austin-San Marcos, TX MSA economy experienced expansion during 2006 as job growth
averaged 2.77%. Apartment demand was slightly elevated from last year, resulting in modest
rent growth. Austin was ranked #2 in “Best Big Cities”, Money Magazine, July 2006. Austin’s high
quality of living, highly educated work force and availability of office space resulted in corporate
relocations and expansion of Austin area companies. The long-term fundamentals look favorable
for Austin as employment is projected to grow by approximately 25% through 2015.
16
CWS Capital Partners LLC
2006 Annual R epor t
Propert y Name
Brooks on Preston
The Estates of Highland Park
The Marquis at Bellaire Ranch
The Marquis on Cedar Springs
The Marquis on Gaston
The Marquis at Lantana
The Marquis on McKinney
The Marquis at Park Central
The Marquis at Riverchase
The Marquis at Silver Oaks
The Park on Spring Creek
The Marquis at Stonebriar
The Marquis at Stonegate
The Marquis at Turtle Creek
The Marquis at Waterview
The Marquis at West Village
The Marquis at Willow Lake
Papillon Parc
The Park at Fox Trails
Townlake of Coppell
Total Units :
02
Location
Units
Plano
Highland Park
Fort Worth
Dallas
Dallas
Flower Mound
Dallas
Dallas
Coppell
Grapevine
Plano
Frisco
Fort Worth
Dallas
Richardson
Dallas
Fort Worth
Fort Worth
Plano
Coppell
342
55
316
165
480
248
144
308
360
480
278
347
308
98
528
179
138
76
286
398
5,534
Dallas / Ft. Worth Region
Property Total:
20
sources :
Federal Reserve Bank of Dallas Online,
Dallas Business Journal and Real Estate Center,
Dallas-Fort Worth-Arlington: Multifamily Market News
The Dallas - Fort Worth, TX MSA (“D/FW”) has one of the most diverse economies in the nation.
The Fort Worth area has one of the lowest downtown office vacancy rates in the nation at 6%, as
evidenced by downtown redevelopment such as Sundance Square which boasts two Class A office
towers consisting of 1.5 million square feet of office space and the conversion of former Bank
One towers to apartments. The growth of the high-tech industries in the Dallas area suggests
that many jobs will be created by area tech companies as they expand. Companies flock to the
Dallas/Fort Worth area because of the region’s transportation infrastructure, cost of living, and
tax advantages. Multi-family permits remained steady at slightly over 4,000 units. We anticipate
the apartment market will continue to experience modest rent growth between 3% -4% and falling
vacancy rates in 2007.
19
CWS Capital Partners LLC
2006 Annual R epor t
Propert y Name
The Marquis at Deerfield
The Marquis at Legends
The Marquis at Quarry
The Marquis at Rogers Ranch
Talavera
Total Units :
03
Location
Units
San Antonio
San Antonio
San Antonio
San Antonio
San Antonio
340
306
224
246
336
1,452
San Antonio Region
Property Total:
5
sources :
San Antonio Business Journal and Toyota Motors
The San Antonio, TX MSA experienced quality expansion during 2006 with job growth remaining
strong at 2 percent with the creation of 15,600 jobs. The opening of the Toyota Motors plant in
November 2006 was a major economic event in San Antonio, and will create more than 4,000 jobs in
the area. Other major employers in San Antonio include AT&T (formerly SBC Communications),
H.E.B. Food Stores, United Services Automobile Association, and Baptist Health system and
the United States Military. San Antonio’s low cost of living, quality work force, and government
incentives make it very appealing for corporate expansion. Multi-family permits were down 6% for
the first three quarters of 2006, resulting in a tighter supply of apartment homes. We anticipate the
record creation of jobs in the metro area will help to stabilize the weakness the apartment sector
has been experiencing as a result of a large number of new communities being built.
20
CWS Capital Partners LLC
2006 Annual R epor t
Propert y Name
The Marquis at Briarcliff
Total Units :
04
Location
Units
Atlanta
104
104
Atlanta Region
Property Total:
1
sources :
Metro Atlanta Chamber of Commerce - Economic Development:
Vital Statistics
The metro Atlanta, GA MSA economy experienced tremendous expansion during 2006 as 69,000
net new jobs were added, making it fifth in the nation for job creation. Each year for the last ten
years, metro Atlanta has led the nation in new housing permits, indicating high demand for all
types of housing. Atlanta’s quality of life, highly educated work force and availability of office space
resulted in corporate relocations and internal growth of Atlanta area companies, as evidenced by
its #3 ranking in Expansion Management Magazine’s “America’s 50 Hottest Cities for Business
Expansion and Relocation”. We should continue to experience great apartment supply/demand
fundamentals as employment growth is anticipated to grow 18.8% in the next 10 years.
23
*CWS Developments
M u lt i - f a m i ly
Ap a r t m e n t s C o m m u n i t i e s
Year
B u i lt
Year
Acquired
Property Name
City
S tate a n d
Country
Units
Potential
B u i ld O u t
Tota l
Potential
Units
California
Colorado
2001
2002
Fairmont at Willow Creek*
Folsom
California
260
0
260
1998
1999
The Marquis at DTC
Denver
Colorado
238
0
238
1983
2005
Marquis at the Parkway
Denver
Colorado
460
0
460
2000
2000
The Marquis at Town Centre
Broomfield
Colorado
283
0
283
1995
2006
The Marquis at Briarcliff
Atlanta
Georgia
104
0
104
2001
1999
The Marquis at Carmel Commons*
Charlotte
North Carolina
312
0
312
1998
1997
The Marquis of Carmel Valley*
Charlotte
North Carolina
424
0
424
1998
2006
The Marquis on Cary Parkway
Raleigh
North Carolina
388
0
388
2000
2000
The Marquis at Crossroads
Raleigh
North Carolina
296
0
296
1996
2006
The Marquis on Edwards Mill
Raleigh
North Carolina
352
0
352
1996
2006
The Marquis at Northcross
Huntersville
North Carolina
312
0
312
1996
2000
The Marquis at Preston
Cary
North Carolina
292
0
292
1996
2005
The Marquis at Silverton
Cary
North Carolina
216
0
216
1998
1999
The Preserve at Ballantyne Commons
Charlotte
North Carolina
270
0
270
342
Georgia
North Carolina
Texas
1998
1998
Brooks on Preston
Plano
Texas
342
0
2001
2007
The Estates of Highland Park
Highland Park
Texas
55
0
55
2000
2000
The Marquis at Barton Creek
Austin
Texas
250
0
250
1990
2006
The Marquis at Bellaire
Houston
Texas
581
0
581
1997
2003
The Marquis at Bellaire Ranch
Fort Worth
Texas
316
0
316
1994
2000
The Marquis at Caprock Canyon
Austin
Texas
336
0
336
1996
1996
The Marquis at Deerfield*
San Antonio
Texas
340
0
340
2002
2004
The Marquis at Iron Rock Ranch
Austin
Texas
300
0
300
1996
1996
The Marquis at Ladera Vista*
Austin
Texas
224
0
224
2000
2006
The Marquis at Lantana
Flower Mound
Texas
248
0
248
1998
1998
The Marquis at Legends
San Antonio
Texas
306
0
306
1999
2005
The Marquis at Park Central
Dallas
Texas
308
0
308
1994
2004
The Marquis at Quarry
San Antonio
Texas
224
0
224
1999
2006
The Marquis at Riverchase
Coppell
Texas
360
0
360
2001
1999
The Marquis at Rogers Ranch*
San Antonio
Texas
246
0
246
2002
2005
The Marquis at Silver Oaks
Grapevine
Texas
480
0
480
1998
2006
The Marquis at Stonebriar
Frisco
Texas
347
0
347
1996
2002
The Marquis at Stonegate
Fort Worth
Texas
308
0
308
1998
2002
The Marquis at Turtle Creek
Dallas
Texas
98
0
98
1998
1999
The Marquis at Waterview
Richardson
Texas
528
0
528
2002
2004
The Marquis at West Village
Dallas
Texas
179
0
179
1996
2002
The Marquis at Willow Lake
Fort Worth
Texas
138
0
138
2002
2006
The Marquis on Cedar Springs
Dallas
Texas
165
0
165
1996
2005
The Marquis on Gaston
Dallas
Texas
480
0
480
2002
2003
The Marquis on McKinney*
Dallas
Texas
144
0
144
1978/79
2005
Northwest Hills Apartments
Austin
Texas
314
0
314
1985
1990
Papillon Parc
Fort Worth
Texas
76
0
76
1981
2006
The Park at Fox Trails
Plano
Texas
286
0
286
1984
2006
The Park on Spring Creek
Plano
Texas
278
0
278
1969
2006
Riverside Place
Austin
Texas
145
0
145
1973
2006
Riverside Square
Austin
Texas
100
0
100
1996
1998
Talavera
San Antonio
Texas
336
0
336
1985/86
1978
2004
2005
Townlake of Coppell
Windsor at Barton Creek
Coppell
Austin
Texas
Texas
398
134
0
0
398
134
The Marquis at State Thomas
Apartment Totals
Dallas
Texas
13,577
0
0
127
13,577
127
The Marquis Uptown
Dallas
Texas
0
300
300
The Block on Campus Phase I
Austin
Texas
0
330
330
The Block on Campus Phase II
Downtown Austin Condos
Austin
Austin
Texas
Texas
0
0
360
80
360
80
Chateau at Onion Creek
Canadian Properties
Development Totals
Austin
Surrey
Texas
British Columbia, Canada
0
350
664
1,197
0
0
1,197
350
664
Current Developments
Manufactured Housing Communities
2005
1988
Manufactured Housing Communities Totals
CWS Portfolio Totals
24
25
1,014
0
1,014
14,591
1,197
15,788
L o c a t i o n U n i t s
DFW
Austin
San Antonio
Raleigh
Charlotte
Denver
Houston
Sacramento
Atlanta
Perc .
5534 40.7%
1803 13.3%
1452 10.7%
1544 11.4%
1318
9.7%
981
7.2%
581 4.3%
260
1.9%
104 0.8%
CWS Capital Partners LLC
2006 Annual R epor t
Propert y Name
The Marquis at Carmel Commons
The Marquis of Carmel Valley
The Marquis of Northcross
The Preserve at Ballantyne Commons
Total Units :
05
Location
Units
Charlotte
Charlotte
Charlotte
Charlotte
312
424
312
270
Property Total:
4
1, 318
Charlotte Region
sources :
UNC Public Relations & Marketing News Release
and the Red Capital Group Market Overview
Charlotte, NC experienced strong employment growth during 2006 as the construction, financial,
and government sectors continued to expand, resulting in new job growth of approximately 2%.
Multi-family permits have declined from their annualized high in 2001 and are expected to keep
declining throughout 2007. The combination of lower multi-family supply and accelerated job
growth resulted in improved apartment market fundamentals in 2006. This was evidenced by
physical vacancy rates falling to its lowest rate of 7.6%, since 2001. With higher interest rates, strong
job growth, and limited new supply, we project the apartment market will continue to improve
resulting in even lower vacancy rates and stronger rent growth.
28
CWS Capital Partners LLC
2006 Annual R epor t
Propert y Name
Location
Units
The Marquis on Cary Parkway
The Marquis at Crossroads Commons
The Marquis on Edwards Mill
The Marquis at Preston
The Marquis at Silverton
Morrisville
Raleigh
Raleigh
Cary
Cary
388
296
352
292
216
Total Units :
06
1,544
Raleigh Region
Property Total:
5
Headway Corporation, Red Capital Group
Market Overview, Raleigh/Durham BizSpace and the
Triangle Business Journal
sources :
The Raleigh, NC MSA has a diverse employment base consisting primarily of technology, government, biotechnology, and education. Raleigh’s economy has gradually improved during the past
three years and is currently experiencing improving 3.8% job growth as of 3Q06. The Raleigh area
is consistently ranked among the nation’s best places to live, work and earn a world class education.
Headway Corporate Resources Inc., a human capital management company, is planning to move its
corporate headquarters and central offices from New York City to Raleigh, North Carolina, creating
new full-time jobs in the state of North Carolina over the next five years. Raleigh was ranked #4 “Best
Places to Live” by Money Magazine, July 2006. Multi-family permits have decreased by thirty percent
when compared to 2005, with only 374 permits issued in 2006, compared to 535 permits issued in
2005. With steady job growth and a very low supply of new apartments, Raleigh’s apartment market
should experience improvement and falling vacancy rates during 2007.
31
CWS Capital Partners LLC
2006 Annual R epor t
Propert y Name
The Marquis at DTC
Marquis at the Parkway
The Marquis at Town Centre
Total Units :
07
Location
Units
Denver
Denver
Broomfield
238
460
283
981
Denver Region
Property Total:
3
sources :
Metro Denver Economic Development Corporation
Denver is an attractive investment market and is viewed as one of the best places to live and to do
business in America. This is evidenced by the fact that eight of the Fortune Top 1000 companies are
located in Denver. Multi-family permits decreased from a September high of 1,314 to 944, the lowest
monthly level since 1992. Denver recently reported positive job growth of 1.6% as of January 2007.
Due to strong absorption and the lack of new construction, apartment vacancy rates have decreased
from 6.9% to 6.7%, the lowest level since 2001. Average monthly apartment rents have also increased
from the second to third quarter of 2006, ending with an average rent of $875. We believe the Denver
market has seen its worst days, and should see a return to robust rental growth rates.
32
CWS Capital Partners LLC
2006 Annual R epor t
Propert y Name
Location
Units
Breakaway Bays
British Columbia
345
Crestway Bays
British Columbia
119
Crispen Bays
British Columbia
192
Total Units :
08
656
Canada Region
Property Total:
3
sources :
Canadian National and British Columbia, BC Stats
The economic trends in Surrey and the White Rock area of British Columbia, B.C. continue to
show positive growth. The British Columbia gross domestic product (GDP) is forecasted to grow
3.5% during 2007 with employment growth of 2.3%. Prices for Fraser Valley Homes increased on
average 19.3% for single-family, 17% for townhouses, and 9.6% for condominiums over last year.
Demand for housing in the area should remain high by historical standards and occupancy rates at
the communities should remain stable in 2007. The property management team will continue new
home sales efforts and will seek to acquire desirable for-sale homes in the communities to preserve
curb appeal. A 3.9% rent increase is being implemented in 2007.
35
B.R.I.D.G.E.
CWS Capital Partners LLC
CWS Capital Partners LLC
2006 Annual R epor t
2006 Annual R epor t
2006 Events (partial list)
BRIDGE is a CWS Capital Partners LLC program designed to encourage
individuals to provide community service and volunteer work, as well as,
provide a company sponsored pool of money for various community needs.
Irving Police Assoc. Golf Classic Oct. 25, 2006
pet food, vegetables, instant foods, etc… to
CWS participated in the Irving Police Associa-
make it easier for the food bank to assemble
tion benefit golf classic, benefiting the Make
boxes to meet the specific needs of recipients.
A Wish foundation. CWS volunteers were sta-
In addition to our monthly volunteer hours,
tioned at designated holes raffling tickets for
Surrey Food Bank executive Marilyn Hermann
give a ways and handing out goodies to all the
was delighted, to receive a $1,240 check from
golfers. We successfully helped Make A Wish
CWS. The food bank really appreciates our do-
collect enough money to send another child on
nation of time and money and the Canadian
their wish. Make A Wish is a wonderful organi-
group of volunteers has a great time helping
zation that grants children wishes from the ages
out the organization.
of 2-18 living with a life threatening illness. It is
wonderful feeling knowing that we are helping
Operation Christmas Child Dec. 5, 2006
raise money for a child to get their wish granted
CWS Apartment Homes corporate emloyees
and for them to forget for awhile about all the
along with CWS Corporate Housing employees
fear and pain of the illness they live with.
assembled and collected 30 shoe boxes filled
with goodies and toys to be shipped overseas
Surrey Food Bank Drive Oct. 27, 2006
as part of Operation Christmas Child. This is
Once a month, the Surrey Food Bank in Brit-
the 4th consecutive year that both companies
ish Columbia opens its warehouse after hours
have participated.
for CWS volunteers to come in for two hours
Corporate Officers
Steve Sherwood
Gary Carmell
Mike Engels
Jack Sipes
Founding Partner,
CEO, & Chairman
of the Board
Joined CWS in 1977
Newport Beach,
California
Partner & President
Joined CWS in 1987
Newport Beach,
California
Partner &
Chief Investment Officer
Joined CWS in 1998
Austin, Texas
Partner &
Chief Operating Officer
Joined CWS in 1996
Austin, Texas
Lauretta Anderson
Greg Miller
Marcellus Mosley
Vice President,
Investor Relations
Joined CWS in 1986
Newport Beach,
California
Vice President,
Development
Joined CWS in 1994
Austin, Texas
Director of Operations
Joined CWS in 2002
Austin, Texas
Bill Williams
Advisory Board Member
Founding Partner 1969
Newport Beach,
California
Sunnie Juarez-Mills
Tracy Hayes
President,
CWS Corporate Housing
Joined CWS in 1994
Austin, Texas
Senior Vice President,
Manufactured Housing
Joined CWS in 1986
Longwood, Florida
Investor Relations,
Development Associate
Joined CWS in 2005
Newport Beach,
California
JeriAnn Price
Chief Financial Officer
Joined CWS in 1997
Austin, Texas
Investor Relations
Specialist
Joined CWS in 2007
Newport Beach,
California
Sue Mills
Vice President,
Human Resources
Joined CWS in 1991
Austin, Texas
The Caring Place Dec. 11, 2006
consists of both CWS employees and Crestway
On Tuesday, December 11th the Women In
Shellie McDaniel
Bays residents. We help the organization by
Leadership Group volunteered at The Caring
carefully sorting all of the items received into
Place in Georgetown Texas. The group invento-
specific categories such as baby food, diapers,
ried, sorted and stocked food in the warehouse.
Director of Training
& Marketing
Joined CWS in 2001
Dallas, Texas
Vice President,
Investments
Joined CWS in 2004
Dallas, Texas
Jill Carlisle
Vice President
Joined CWS in 1996
Newport Beach,
California
Region Manager,
Fort Worth
Joined CWS in 1998
Fort Worth, Texas
Charlotte Eaker
Vice President of
Construction
Joined CWS in 2006
Austin, Texas
Region Manager,
North Carolina
Joined CWS in 1998
Charlotte,
North Carolina
Rich Fagan
Tori Hill
Director of Due Diligence
Joined CWS in 2001
Dallas, Texas
Region Manager,
Colorado/California
Joined CWS in 2004
Denver, Colorado
Brad Brakhage
Brian Rose
to organize food donations. The CWS group
38
Manager, Investor Services
Joined CWS in 1997
Newport Beach,
California
Marcus Lam
Joe Sherwood
Amber Cox
Daniel Ebner
Gina Roberts
Region Manager
Austin, Texas
Joined CWS in 1997
Austin, Texas
Cali Wood
Region Manager
San Antonio, Houston
Joined CWS in 2002
Austin, Texas
39
Brett McDaniel
Region Manager,
Dallas
Joined CWS in 2001
Dallas, Texas
CWS Capital Partners LLC
2006 Annual Repor t
Corporate Information
Ethics in America Honoree
Winner of CEL’s Year 2004
CWS Capital Partners LLC was selected in 2005 to
& 2005 Real Estate Award
receive this award because of its success by excep-
CWS was honored for the second year in a row with CEL’s
tional commitment to ethical excellence. CWS is
prestigious award for achieving the highest level of cus-
proud to share this distinguished recognition with
tomer service excellence out of any multi-family operator
the National Honoree Guest Speaker, Coach John R.
managing 30-50 communities. CEL & Associates, Inc.
Wooden, a man who has long been associated with
is the nation’s largest surveyor of resident satisfaction
outstanding character and leadership. We are espe-
within the multi-family industry. Go to
cially proud of all of our employees and we thank
www.celassociates.com for more information.
them for continuing to stand by our stated values. In
addition, we thank all of our investors, vendors and
Congratulations to CWS’ Year 2006
associates for their continued business and support.
Community Director of the Year, Grace Phelps-Verkler
Community of the Year, Marquis at Bellaire Ranch
Additional Information
Maintenance Director of the Year, Mark Moore
For additional information on CWS and its affiliated
Best Renewal Probability, Marquis at Deerfield
companies, please see the following websites:
Best Response Rate, Preserve at Ballantyne Commons
cwscapital.com, cwsapartments.com,
Best Leasing Property, Marquis at Iron Rock Ranch
cwshousing.com, or cwsbridge.com.
Best Leasing Individual, Jennifer Vasquez
Best Property NOI Growth, Marquis at Iron Rock Ranch
Investor Information
Best Property Delinquency, Marquis at Barton Creek
Limited partners, financial advisors, investment
advisors, or CPAs seeking additional information
Best Customer Service
about CWS Investments or 1031 Exchange
Office Team, Marquis at Stonegate
candidate investments should contact:
Property Team, Marquis at Iron Rock Ranch
Marcus Lam, Investor Relations,
Maintenance Team, Marquis at Bellaire Ranch
Development Associate, (800) 466-0020, ext. 297
or via email to [email protected].
Appendix
Sources may be found in the Appendix on the accompanyClayton Williams & Sherwood Investments is a member of the NASD and SIPC.
ing Supplemental Report Disk included with this report
40
2006 Annual Report
TEL8 0 0 4 6 6 0 0 2 0
c w s c a p i t a l. c o m
CWS Capital Partners LLC
800 Newport Center Drive, Suite 400
Newport Beach, CA 92660