The official 40-Year Commemorative Leadership Manual of

A n in v estor’s Guide to stay ing prepa red
f o r t h e f u t u r e o f r e a l e s t a t e m a n ag e m e n t
Two
Principles,
Thousand
Eight
Aims & Methods
Survival for a
Annual
Report
Changing Global
Marketplace
The Official 40-Year Commemorative Leadership Manual of
C W S C a p i ta l Pa r t n e r s LL C
CWS has evolved from a company that was
founded in 1969. Its key principals and advisors, CEO-Steve Sherwood, Bill Williams,
President-Gary Carmell, and Chief Investment Officer-Mike Engels have a combined 100
years with the firm. If we had to put a title on
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
both 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.
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1
~
Four
Decades
of
Being Prepared
What you hold in your hands is the CWS Capital Partners LLC 2008
annual report. This is our leadership guidebook that will help you understand and learn the CWS way of life on the real estate investment
management frontier. It tells much about the aims and methods that
our company follows. We take pride in the wise utilization of capital
from our investment partners and the skills of our esteemed employees. Most importantly, it solidifies the importance of focusing on the
key principles that our principals have used to lead this company
to where it is today.
Since our establishment 40 years ago, we
have always been prepared for the real estate trail ahead. We have
pledged to keep the interests of our investment partners at the forefront of our journey and have demonstrated true and honorable stewardship in the face of uncertainty. Through these 40 years, we have
strengthened our resilience from the foundation we have built from
our unwavering commitment to our core values: A demand for excellence with a sense of urgency, A respect for people, Requirement for
profitability, Honoring our word and Ethical dealings are paramount.
~
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a n c e S u m m a ry ~
~ A pa r t m eFnr ot mPJoarn tu fa royl 1i ot oP De ercfeomrb m
e r 31, 2 0 0 8
Actual
Budget
Total Revenue
$ 175,528,859
$ 183,044,096
$
(7,515,237)
Variance
(4.11%)
Total Operating Expenses
$
86,373,037
$
83,311,116
$
(3,061,922)
(3.68%)
Net Operating Income/(Loss)
$
89,155,821
$
99,732,980
$
(10,577,159)
(10.61%)
~ Properties Refinanced ~
Month Refinanced
The Marquis at Bellaire Ranch
March-08
The Marquis at Barton Creek
November-08
~ Properties Purchased ~
Month Purchased
Marquis at Lantana
December-08
~ Properties Sold ~
Month Sold
The Marquis at Crossroads
September-08
~ 10 31 E xc h a n g e H i s t o ry ~Combined
Year
Percent
Private TIC
Equity Exchanged
1985
Deferred Gain
Associated
with the Equity
Equity
Exchanged
$
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
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
15,532,451
2006
$
462,436
12,345,388
2007
$
2,988,418
33,377,000
52,289,714
2008
$
537,560
6,176,165
10,275,976
Grand Total
$
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319,590,769
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~ Upcoming Events 2009 ~
Property
Refinance
Sale
Lender Group
The Marquis at Rogers Ranch
5
The Park at Walker’s Ranch
5
~ Track Record ~
Property
Location
Date
Acquired
Sale Date
IRR
Ashbury Parke
Austin, TX
Jul-93
Jun-96
21.51%
The Marquis at Ladera Vista *
Austin, TX
Nov-94
Nov-96
16.39%
Barton’s Lodge **
Austin, TX
Dec-90
Mar-98
19.28%
Plaza Villa
Montclair, CA
Feb-95
Aug-98
24.26%
The 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%
Edge Creek
Austin, TX
Aug-93
Dec-00
23.34%
O'Connor Ridge
Dallas, TX
Nov-95
Feb-02
9.79%
Arlington, TX
Jun-90
Mar-02
11.04%
Dallas, TX
Jul-96
Apr-03
9.89%
Charlotte, NC
Jul-97
Oct-04
5.29%
Waterbury Place
Laguna Terrace
Montclair Parc
Northcreek Apartments
Durham, NC
Jul-97
Oct-04
9.61%
San Antonio, TX
Jun-03
Mar-06
22.81%
The Marquis at Walkers Bluff
Austin, TX
Oct-98
Apr-06
8.11%
Swanson’s Crossing
Austin, TX
Jul-02
May-06
9.73%
The Marquis at Castle Hills
The Marquis at Frankford Springs
Shoal Creek
Huntington Cove
Papillon Parc
The Marquis at Quarry
The Marquis at Iron Rock Ranch
Dallas, TX
Sep-04
Jun-06
9.82%
Bedford, TX
Nov-97
Jun-06
9.02%
Farmers Branch, TX
Dec-89
Aug-06
7.34%
Fort Worth, TX
Mar-89
Mar-07
8.75%
San Antonio, TX
Jan-04
Mar-07
28.98%
41.27%
Austin, TX
Dec-04
Apr-07
San Antonio, TX
Apr-98
Jun-07
3.30%
Denver, CO
Sep-99
Jul-07
8.29%
Town Lake of Coppell
Coppell, TX
Mar-04
Sep-07
25.56%
The Marquis at Crossroads
Raleigh, NC
Dec-00
Sep-08
Talavera***
The Marquis at DTC
Straight Average
7.30%
15.72%
* These investments were recapitalized after the development was completed. 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.
*** Talavera’s 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.
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Guidance
We’re Prepared to
Help Lead You to Your Destination
As Scoutmaster, CWS has helped guide our investment
partners through a large variety of economic climates
over the past 40 years. When times were good we charged
ahead, but also demonstrated caution when things were
too good to be true. When times were tough, we proved to
be prepared to weather the storm. We plan to help guide
our investors for at least another 40 years.
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~ F il l ing t he G a p ~
While a great running back is generally unable to create holes by his own volition, he has extraordinary instincts to see when holes are developing far more
quickly than his peers. This is the same for great investors and businesses. In
this, our 40th year, we believe that “Filling the Gap” is an appropriate theme
for my letter this year. CWS could not have navigated the turbulent economic
waters for over four decades without having successfully anticipated what
gaps were developing. Some gaps should be avoided because they can be unbridgeable chasms while others should be filled. While by no means perfect, we
have been fortunate to avoid many of the gaps that have tripped up so many
others in the past two years. We are now embarking upon a time in which the
gaps that are arising are ones that need to be filled and should provide great
opportunities and profit potential for those who do. We hope you will be part of
this next phase of our journey as we think it will be interesting, at times exciting, and hopefully very lucrative.
The first thing to always remember (or never forget) is that the gap is al-
ways changing. In the investment arena there could be a gap of courage, where
people are too fearful to take chances or risks. Conversely, there are times
when people should be much more patient and moderate in their temperament
in order to avoid the frenzy of activity displayed by the majority of investors.
In order to effectively identify the gaps that are forming and exist before
others can see them or are willing or able to see them, it’s important that an
organization and individuals be very aware of their blind spots and the things
that can get in the way of seeing reality for what it is.
I’ve written a lot over the years about human misjudgments, individual
fallibility, the desire to see what you want to see, and institutional constraints
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and incentives for organizations to look at the world in the way they want to
see it versus the way it is.
While CWS has had its share of errors of commission and omission over
these past 40 years, I would say our track record is an enviable one and has
been built on extraordinary relationships and bonds of trust we have with our
investors. It is also driven by an intensely rational view of the world and of
ourselves which forms our core belief and recognition that the first objective in
investing is to not lose one’s capital. Only after taking the appropriate steps to
protect our downside can we focus on maximizing return relative to the risk
we are willing to take.
Unfortunately, far too many investors and investment managers lost sight of
protecting one’s capital first before seeking to maximize reward. Global wealth
destruction is estimated to have exceeded $20 trillion since mid-2007. A dearth
of common sense was parlayed into a bull market in complexity in which a dizzying array of incomprehensible financial instruments were created for the sole
purpose of being sold to a gullible and needing-to-believe group of global investors who were left holding financial grenades that blew up in their hands. We
are left with a wake of financial destruction and the severing of bonds between
investors and their advisors and investors who put their capital in U.S. banking
institutions like Bear Stearns, Lehman Brothers, AIG, Fannie Mae, Freddie
Mac, Citigroup, Merrill Lynch, Bank of America, GE (via GE Capital), Washington Mutual and Wachovia, just to name some of the most prominent ones.
While China has justifiably received much criticism and a loss of credibil-
ity for exporting tainted toys and food products, the United States financial
system, once the envy of the world, has polluted the globe with toxic financial
products as our formerly reputable rating agencies like Moodys and Standard
& Poor prostituted their highly coveted and respected AAA ratings for huge
fees. The fees turned out to be lucrative and short-term in nature, while the
damage to their reputations has cost them billions in market value and will be
long lasting and possibly irreparable.
Trust has been decimated and investors no longer know who should be ap-
propriate custodians of their money. As a result, we have savers and investors
around the world willing to lend their money to the U.S. government, historically the ultimate, most trustworthy borrower of capital, at short-term interest
rates that have approached zero percent. This is a very unusual set of circumstances, and reflects deep problems in the economy and investor psychology
gripped by fear, mistrust, and uncertainty.
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People are paying a huge premium for security right now. This confidence
and courage gap creates an opportunity for those organizations that can think
coolly, calmly, collectedly and very rationally about the risk/reward situation
that is developing in this very dislocated world. It’s one thing to recognize that
dislocation creates extraordinary opportunities, it’s another to be able to capitalize on them. To do so requires the ability to aggregate capital and communicate the opportunities available, the risks associated with pursuing them, and
the potential rewards that may result. For those firms and individuals with
a little foresight, courage and perspective, the opportunities forming could
represent a once-in-a-generation set of opportunities last seen during the RTC
days of the early 1990s. Having cash right now when it is in such short supply
is highly valuable. CWS has always set out to have capital when it is very difficult for others to access it. We believe we can do this again like we did in the
early 1990s because of our unique relationship with our individual investors.
Not to mix metaphors but prior to August 2007 with the blow up of Bear
Stearns, people would step up to the plate and swing at any pitch that was
thrown their way thinking that they would never strike out and they would be
paid great rewards if they could hit a single or even just get their bat on the
ball. In many ways they could be paid compensation traditionally reserved for
home run hitters despite having poor batting averages and no demonstrated
ability of producing continuous success over a string of years. One good year
could generate outsized rewards. Those days are over and firms with longevity
and continuous success in protecting investors’ capital will be highly sought
after by capital providers.
Today most investors are letting pitches come right down the middle of the
plate with no inclination to swing due to a fear of striking out or looking foolish. Even though the odds have improved greatly because the pitches that are
coming their way are much better and easier to hit, they’re willing to let them
pass by because of great fear and uncertainty.
I believe that we are going to return to a time in which entrepreneurial
firms will be aggregating capital from other entrepreneurs and individuals
because it is they who are not constrained by institutional decision-making
processes and investment committees that are looking through the rear view
mirror, that are worried about their careers and appearing foolish. They are
playing not to lose when the more profitable view may be to shift more of one’s
focus to begin playing to win. That is not to say that the times we are going to
be facing won’t be extraordinarily challenging, difficult, and generate tremen-
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dous uncertainty, but for those with strong relationships with investors, the
ability to communicate a comprehensive and coherent investment strategy for
the long-term and why people should liberate their capital from extraordinarily
low rates of return and put them in the hands of capable, talented custodians of
that money should prosper in this very different and difficult environment.
When one combines this gap of courage, perspective, and strong investor
relationships, all attributes CWS is fortunate to possess, with the extraordinary gap that will be developing in the apartment market, then CWS believes
this is an ideal time to raise money to capitalize on tremendous opportunities
that will be available to those with capital over the next few years.
With development financing non-existent, the cost of capital having ris-
en to access money from equity investors, and construction costs not having
dropped meaningfully at this point, the rents required to justify building new
apartments is far higher than can be achieved in our markets. This should
lead to extraordinary rent growth for apartment owners when the economy
regains its growth trajectory and the children of the Baby Boomers continue to
enter their prime renting years in force over the next ten years.
Add to this the generational change that has taken place in the home
financing market that is returning to much more traditional underwriting
standards that will require real down payments, verifiable income, reserves in
the bank, greater due diligence, and more conservative appraisal standards,
apartment renting demand fundamentals should be quite favorable. We are
reasonably confident that within the next five years we will see a meaningful imbalance between new apartment supply and the demand for renting
apartments. It will not happen overnight, but, like a great running back, our
instincts tell us that an extraordinary hole is going to develop that has the
possibility of leading to a spectacular touchdown.
To help make this hole even wider so we can take advantage of it, we will be
recruiting you, our loyal investors, to develop a powerful offensive line to improve
our odds of reaching the goal line. We will do this by being much more active
on the fund raising front to take advantage of the gap we see forming. We look
forward to having you join us in the beginning phase of our next 40-year journey and filling the enormous gap we see developing in the apartment industry.
Gary Carmell, CFA
Partner -- President
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We’ve prospered
the first 40 years,
& are prepared for
the next 40 years!
CWS history
1969 Jim Clayton and Bill Williams
combine their own equity with
equity from friends and family to
start Clayton and Williams. Clayton
& Williams purchased their first
investment property
4
0
Y
19 6 4
u.s. history
1977 Steve Sherwood joins Clayton
and Williams to form Clayton,
Williams and Sherwood, Inc. CWS
implements a strong acquisition
campaign for highly undervalued
manufactured housing, which offers
a good risk/reward relationship
1980s CWS establishes itself as
the largest owner and operator of
manufactured housing in the U.S.
e
a
r
1987 CWS makes its first
international investment into a
mobile home community in Canada
1989 CWS shifts its focus to
undervalued apartment assets
and purchases its first apartment
community named Papillon Parc
located in Fort Worth, TX
s
19 6 9
1973 Arab “oil embargo” is
imposed on the U.S., which
causes the price of oil supplied
to the U.S. to skyrocket
1970 Recession begins
1971 Nixon announces “New
Economic Policy” to stimulate the
economy postwar
1986 First CWS-built manufactured
housing community is named
Creekside located in Lewisville, TX
1974 OPEC lifts oil embargo.
Nixon resigns from office
1980 U.S. prime interest rate
reaches an all-time high of 21.5%
o
f
1974
1981 Inflation reaches 14% and
unemployment reaches 7.4%
1982 Unemployment reaches
10.8%, the highest since 1940
1986 S&Ls crisis – the majority
of S&Ls fail in Texas, which
forces the state into recession.
Real estate values collapse
The S&P 500 historical graph seen in the background represents the macroeconomic landscape during 1969-2009.
Early 1990s A large number of
loan restructurings take place
within the CWS portfolio resulting
in a significant reduction in debt
C
1979
S & P 5 0 0 1969 -2 0 0 9
Late 1980s Manufactured housing
demand begins to peak while
apartment sector values plummet
W
s
19 8 4
1986 Tax Reform Act of 1986
eliminates the ability to use
tax write-offs from passive real
estate investments against W-2
income. Passive losses can only
be used against passive income
1987 “Black Monday”
Dow Jones loses 508 points
1991 President Bush
appropriates $25 billion to cover
losses in the failure of S&Ls
1996 First CWS apartment
developments: The Marquis at
Deerfield located in San Antonio, TX
and The Marquis at Ladera Vista
located in Austin, TX
1997 CWS completes its transition
from manufactured housing to
apartment communities after the
merger of its manufactured housing
management company into a private
real estate investment trust (REIT)
called CWS Communities Trust
1998-2000 “The Great Exchange”
CWS exchanges over $93 million in
equity and provides re-investment
opportunities into the apartment
sector enabling investors to defer
paying taxes on $136 million of gain
C a p i t a l
19 8 9 19 9 4
1994 North American Free Trade
Agreement (NAFTA) takes effect
1999 Dow Jones tops 11,000
points in May
1995 Dow Jones closes at 5,117.12,
up 33.5% for the year in December
2000 GDP growth rate for 4th
quarter: 7.3%, strongest since
1984. U.S. oil inventories at their
lowest levels since 1976; crude oil
prices rise significantly
1997 Taxpayer Relief Act of 1997
reduces capital gains taxes, estate
taxes, revises home sales taxing
rules and provides college tuition
tax credits
S&P 500
1998 CWS Capital Partners LLC
and CWS Apartment Homes LLC
are created after the sale of
the manufactured housing
management company
1969 -2 0 0 9
2003 Relationship is forged with
GE Capital to acquire multi-family
assets across the nation
2006 CWS portfolio grows to over $1
billion in assets and over 13,000 mulitfamily units under management
2009 CWS celebrates its
40th anniversary of existence,
with another 40 years to
look forward to
P a r t n e r s
19 9 9
2001 Federal Reserve reduces the
federal funds rate to 1.75% from
6.5% and the discount rate to
1.25% from 6.0% in a series of cuts
throughout the year
2004 Homeownership rate
percentage peaks at 69.2%
2007-2008 Subprime
mortgage crisis
2 0 0 4
2009
2008 $700 billion Troubled
Asset Relief Program (TARP)
put into effect to help the U.S.
banking system recover from the
subprime mortgage crisis. Oil
reaches $147 a barrel
2009 $787 billion economic
stimulus plan put into affect
to help energize a stagnant
U.S. economy
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~ Ge t t ing Back T o Our R oo t s ~
What is it about CWS that has allowed us to flourish over the past 40
years? The first thing that comes to mind for me is the group of investors that trusts the CWS team with their hard-earned money. Our
investors are our friends and partners. Over the past 40 years, we have
raised children, become seasoned in our careers, and many of us are
now enjoying roles as grandparents. Without the support of our investor partners, there would be no story to tell or roots to trace.
When I recall the frequent conversations that Jim Clayton, Bill
Williams and I used to have in those early years, there were some key
elements that were often present. We used these important criteria to
assess future and current opportunities and qualify them as opportunities we would continue to consider.
The first question was always, “Do we have the big picture right?”
— meaning what part of the country will experience more than its
share of the national job growth. Our next step was to figure out,
“Within these growth markets, where do people want to live and why?”
Our discussions focused on the various housing options and determining which ones were most valued by our target customers.
The conclusions most often led us to Sun Belt markets with a high-
ly educated workforce, a reasonable cost of living, a pro-business environment, major universities and a diversified group of employers. To
be successful in these markets, it was important to recognize where
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we were in the supply/demand cycle. Today, this factor certainly holds
true and our plan is to continue to invest in the Sun Belt cities throughout Texas and North Carolina. In 2008, Texas had the largest net gain
when comparing the number of moving vans entering versus leaving
the state.
As an investment opportunity was more seriously considered, we
critically discussed the preservation of capital and the potential for cash
flow. It served us well then and, in these economic times, a return to a
focus on cash flow is in order. I believe future opportunities will provide
significant cash flow.
Our biggest successes have occurred when we stuck to our area of
specific knowledge and used our market experience plus our operating experience to project future performance. This is very true today,
and all of our current activities are in markets where we have specific
hands-on knowledge.
Once convinced a property met our criteria, we began to use our nego-
tiating skills to make the deal as attractive as possible. The most important factor in this phase is the discipline to walk away when appropriate.
It is a fine line to know when to move forward and when to let an opportunity go. Being very selective has served us well and is particularly
important in the current environment.
A key element to our success is that CWS has always managed all of
the properties we own which allows us to focus a well-trained team on a
plan to add value to the property. This is one of CWS’ major strengths.
Some of our most valuable assets are the experienced people in the organization who run our properties. This includes everyone from those who
interact with our customers daily to those who manage regions, all the
way up to the top. Our employees will continue to be the key to our success.
It is during uncertain times that it feels very appropriate to consid-
er our roots and stick to those principles that have made us successful.
Steve Sherwood
Founder, Chief Executive Officer & Chairman of the Board
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Diversity
We’re Prepared for Long-term Sustainability.
Our environment is constantly changing and we
must adapt. CWS believes that adaptation through
diversity is necessary to stay ahead of the pack.
Our underlying long-term strategy is intact, and
we must continuously evolve to ensure a sustainable and stable future. We are focused on the longterm outlook of the company and our investors.
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~ L ook ing at t he R oa d A he a d ~
The country and the world are experiencing a significant
economic downturn. What is CWS doing in response to these
challenging economic times? What has CWS been doing to
“Be Prepared” in the truest sense of a good Boy Scout?
CWS has made a number of adjustments. We are very focused on expenses. For example, we have reduced company
overhead, through attrition and otherwise, by over $900,000
annually. These reductions will result in reduced bill back
expenses throughout our portfolio. At the property level, in
some cases we have reduced staffing through outsourcing,
resulting in lower expenses and better execution. We have
also instituted a salary freeze both on site and at the corporate level as part of a larger austerity program focused on
minimizing expenses wherever possible.
Another adjustment has been to refocus resources from
growth to our existing assets. Some of our acquisition professionals have been reassigned to roles in asset management (whom we call internally our “investment managers.”)
This function will allow us to maximize the performance
of our assets for our investors. For example, the largest op-
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erating expense at our properties is real estate taxes. In
many of our markets, the final tax number is the result of a
negotiated resolution with the taxing authorities. Our ability to make the best case possible in an environment of declining valuations is more important than ever, and we are
staffed better than ever to do so. Other investment management responsibilities include financial projections, capital
budgeting and responding to investor questions.
Our operations team is focusing on a number of important initiatives for the coming year. We are instituting “rent
optimizer” pricing software. This software, similar in concept to what airlines and hotels use, will enable us to price
new leases and renewals with the help of complex computer
driven algorithms. The system has produced significant increases in net collected rent in many cases within the industry, and many of the top names in the industry are already
using it. Our operations team is also very focused on our
internet presence, the “first impression” of our properties
for a large number of our customers. We have initiatives regarding all aspects of our websites, from their appearance,
to how individuals link to them, to monitoring the number
of hits and their sources and costs, to the functionality of
the website. One example of functionality is “on-line” leasing, allowing anyone to lease an apartment 24 hours a day,
seven days a week.
Another area where we are honing our focus is in capital
projects. We have transitioned our best personnel from construction to capital projects management with a net reduction in overhead. This focus will ensure that we get the most
out of every precious capital dollar that we spend. While we
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are carefully watching costs, we are also as committed as
ever to keeping our properties in first class condition that
will create the most long-term value for our investors. A
particular area of success has been upgrading units with
hard surface flooring. Not only will our residents pay more
for this, but it saves money on carpet replacement.
What does the economic downturn mean for our investors? Undoubtedly asset values have been impacted from a
year ago, but there have been so few transactions that it is
difficult to gauge this with any level of confidence. In addition, to date, operating incomes have held up, and in some
cases have even continued to improve despite very challenging economic conditions. We expect to be facing serious economic headwinds over the next 18 months which will make
it difficult for us to continue to generate the revenue growth
we have been experiencing. While many of our markets are
outperforming the rest of the country, they are not without
concern--many of our markets have significant new development coming on line, with a dearth of net job growth. We
will be challenged to meet our budgeted operating incomes,
which are generally flat in 2009 relative to 2008.
Fortunately for CWS investors, the financing situation
for the vast majority of our assets is such that we had neither planned to sell nor do we have a requirement to sell
any of our properties into this downturn. Another “silver
lining” is the effect of the downturn on future supply. While
the pipeline of new supply coming on line in 2009 is very
significant, filled with projects that were committed to prior
to the bust, post-2009 new supply is virtually non-existent.
Furthermore, it will take 24 months from when it is clear
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19
an economic recovery is in place and adequate rent levels
can be achieved to justify the risks of development before
any new product is delivered. Year in and year out, the markets that CWS assets are in continue to receive significant
in-migration of population. Texas, for example, grows at
around 500,000 people per year. We apartment owners also
have the wind at our back in terms of long-term demographic trends that we have discussed before, including:
The leading edge of the huge demographic bubble of the
“Echo Boomers” is just now reaching its prime renting
age, and
The percentage of renters is growing and returning to
more historical levels versus home ownership.
This “baked in” coming demand, combined with the cutoff in new supply, will provide a significant opportunity to
grow rents once the economy resumes its growth trajectory.
While we are experiencing some difficult economic times,
we know that the seeds of success are sown in tough times.
Our perseverance in these times and our constant efforts at
improving our operating activities will bear fruit when the
economy returns to growth and when there will be little new
supply with which me must compete. Be prepared and stay prepared is the motto of CWS this year! Indeed, the preparations
that we have been making over many years will enable us to
not only weather this downturn but to prosper from it as well.
Mike Engels
Partner -- Chief Investment Officer
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The Austin-San Marcos, TX MSA employment growth slowed substantially from
4.03% in 2007 to 1.2% in 2008. Despite the slowdown, Austin compared favorably
to the national economy as the rest of the nation experienced an overall job loss of
2%. During 2008 approximately 10,000 new apartments were added to the existing
inventory, which along with slower job growth caused market-wide occupancy to
drop from 93.5% at the end of 2007 to 89.2% at the end of 2008. It is anticipated that
Austin may have negative 0.4% job growth in 2009. 8,500 new apartment units will
be delivered in 2009. The combination of slightly negative job growth and a large
number of new apartments in 2009 will make for a very challenging year. The longterm fundamentals look favorable for Austin. Austin ranked No. 2 by Moody’s for
Business Vitality in 2008. 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. There should be very few new apartments developed in 2010 and
2011. It is anticipated that 2009 and possibly 2010 will be difficult year(s) in Austin,
after which the supply and demand fundamentals point to a strong rebound.
Property Name
L o c at i o n
Units
The Marquis at Ladera Vista
Austin
224
The Marquis at Caprock Canyon
Austin
336
The Marquis at Barton Creek
Austin
250
Windsor at Barton Creek
Austin
134
Northwest Hills Apartments
Austin
314
Riverside Square
Austin
100
Riverside Place
Austin
145
The Block on 28th
Austin
101
The Block on Leon
Austin
133
The Block on Pearl
Austin
96
The Block on 23rd
Austin
92
The Block on 25th
Austin
160
The Block on Rio Grande
Austin
85
The Marquis at Great Hills
Austin
406
The Marquis at Tree Tops
Austin
240
Sources: Austin Investor Interests, Austin Business Journal
cws capital part n ers llc
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Au s t in R e g ion
F eat u r e d
P r o pe r t y :
The Marquis at Tree Tops
~
Da l l a s / F t. Wor t h R e g ion
F eat u r e d
P r o pe r t y :
The Marquis at Park Central
~ pa g e ~
23
The Dallas-Fort Worth, TX MSA (“D/FW”) has been somewhat insulated from the
national recession to date but challenges lay ahead. The most recent Bureau of Labor Statistics (BLS) reports reflect that D/FW created 46,900 jobs through the year
ending November 2008. However, many now believe that these numbers will be revised downward when more data becomes available. Multi-family net leasing was
negative 5,870 units for the fourth quarter, registering one of the worst quarterly
performances in recent history. Sales of pre-owned homes fell 14% in 2008. Overall
apartment occupancy in D/FW was 91.4% as of 4Q2008, the lowest level in three
years. Same store effective rents fell 0.3% across the D/FW region during 2008.
Property Name
Brooks on Preston
L o c at i o n
Units
Plano
342
The Marquis at Waterview
Richardson
528
The Marquis at Stonegate
Fort Worth
308
The Marquis at Willow Lake
Fort Worth
138
The Marquis at Turtle Creek
Dallas
98
Fort Worth
316
The Marquis on McKinney
Dallas
144
The Marquis at West Village
Dallas
179
The Marquis at Park Central
Dallas
308
The Marquis at Bellaire Ranch
The Marquis on Gaston
The Marquis at Silver Oaks
Dallas
480
Grapevine
480
The Park on Spring Creek
Plano
278
Flower Mound
248
The Marquis at Riverchase
Coppell
360
The Marquis at Stonebriar
Frisco
347
The Marquis on Cedar Springs
Dallas
165
Plano
286
Dallas
302
Marquis at Lantana
The Park at Fox Trails
The Marquis at Texas Street
Source: M/PF Research
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The San Antonio market experienced job growth of 1.8% or 14,900 new jobs in
2008, compared to job growth of 2.3% in 2007. Despite a difficult national economy,
San Antonio growth was consistent with its stable reputation. Major employers
include AT&T, H.E.B Food Stores, United Services Automobile Association (USAA),
Baptist Health System, and the United States Military. The low cost of living, high
quality workforce, NAFTA related trade hub, and government incentives make
it very appealing for corporate expansions and relocations. Rents increased .91%
in 2008. The overall occupancy for the San Antonio MSA was 89.1% at the end of
2008, compared to 89.2% at the end of 2007. During 2008, 4,519 new units were
delivered in the marketplace. There are 4,229 additional new units expected in
2009. It is expected that 2009 will be a challenging year with the combination
of slowing job growth and a relatively large number of new units. The long-term
fundamentals for the market look very healthy, however, as post-2009 construction
should experience a significant drop.
Property Name
L o c at i o n
Units
The Marquis at Deerfield
San Antonio
340
The Marquis at Rogers Ranch
San Antonio
246
The Park at Walker's Ranch
San Antonio
300
Sources: San Antonio Business Journal, Austin Investor Interests
cws capital part n ers llc
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2 0 0 8 a n n u al report
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S a n A n t onio R e g ion
F eat u r e d
P r o pe r t y :
The Marquis at Rogers Ranch
~
Hou s t on R e g ion
F eat u r e d
P r o pe r t y :
The Marquis on Briar Forest
~ pa g e ~
27
Houston is among the fastest growing and most diverse metropolitan areas in the
nation. 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 and the sixth-largest
metropolitan area with 5.5 million people in the 10-county area. Houston’s economy
has shown some signs of slowing with a MSA job growth rate of 2.1% over the past
12 months, down from 3.3% a year ago. Houston’s diverse markets including the
energy industry, international trade through the Port of Houston, and the Texas
Medical Center, the largest medical complex in the nation, have helped to shield
Houston’s unemployment rate of 5.5% as compared to the statewide average of
5.6% and the national average of 7.2%. The metropolitan region’s population base
has grown by an impressive 800,000 people (19.4%) from 2000 to 2006 ranking the
area third in population growth during the period. The Houston MSA population
is expected to grow by another 2.9 million people by 2030. Healthy in-migration
and the youngest population of the nation’s ten largest metro areas are major
contributing factors to this future population expansion.
Property Name
L o c at i o n
Units
The Marquis at Bellaire
Houston
581
The Marquis on Eldridge Parkway
Houston
270
The Marquis at Pin Oak Park
Houston
474
The Marquis at Westchase
Houston
216
The Marquis on Westheimer
Houston
288
The Marquis on Memorial
Houston
104
The Marquis on Briar Forest
Houston
396
Sources: US Census Bureau, Holiday Fenoglio Fowler, Real Estate Center at Texas A&M University,
Energy Corridor Management District, Apartment Data Services
cws capital part n ers llc
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Fra
ALBERTA
Atha
Reindeer Lake
basca
Edmonton
BRITISH
COLUMBIA
SASKATCHEWAN
Kamloops
Vancouver
T co
Ta
oma
Kelowna
Seattle
Yakima
Portland
Saleem
Eugene
Medford
Fargo
Salt Lake City
Provo
NEVADA
San Francisco
UTAH
Fresno
Visalia
Arroy
o o Grande
CALIFORNIA
Sai
Sioux Falls
Mil
Casper
No
Boulder
en
Oakland
Saint Cloud
Rapid S O U T H D A K O T A
City
Minneapolis
WYOMING
Gre
W od
Wo
dland
r th
IOWA
Pl a N E B R A S K A
tt e
COLORADO
Des Moines
Omaha
Denver
Kansas City
Colorado Springs
rado
Colo
Superior
MINNESOTA
Idaho Falls
Logan
Great Salt Lake
Grand Forks
Bismarck
Billings
Snake
Th
Lake of
the Woods
Minot
NORTH DAKOTA
Yellowstone
Boise
Twin Falls
Sacramento
Lake Manitoba
Missouri
IDAHO
Red
dding
D A
MONTANA
Butte
Eureka
Lake Winnipeg
Brandon
Walla Walla
OREGON
A
Spokane
Missoula
Col um
bia
Albany
N
Regina
Lethbridge
WASHINGTON
Prince Albert
Calgary
C A
Red
V cttoria
Vi
MANITOBA
Arka K A N S A S
nsas
Pueblo
San Diego
Phoenix
Albuquerque
Enid
Mem
Oklahoma City
ARIZONA
NEW MEXICO
Tucson
Ensenada
T
Tulsa
Santa Fe
San Bernardino
El Paso
Wichita Falls
OKLAHOMA
Fort Worth
Dallas
ARKAN
Ja
LOUIS
Waco
TEXAS
Miss
Wichita
V nttura
Ve
Los Angeles
MISSOUR
Lufkin
Austin
Hermosillo
Guaymas
San Antonio
Chihuahua
Piedras Negras
M E X IMoC
O
nclova
Houston
R io
Monterrey
La Pazz
Culiacan
M zatlan
Ma
Saltillo
Reynosa
Ciudad Vi
V ctoria
Durango
Aguascalientes
Guadalajara
de
an
Pacif ic
Ocean
Corp
r us Christi
Gr
Los Mochis
Tamp
m ico
Guanajuato
Morelia
Toluca De Lerdo
Acapulco De Juarez
Puebla
Tuxtla Gutierrez
H
QUEBEC
St. John's
ONTARIO
Albany
Rimouski
Lake Nipigon
hunder
Bay
s
Detroit
L. Erie
OHIO
Mis
siss
ippi
Philadelphia
A tlantic
Ocean
Raleigh
N O R T H C A R O L I N A Wilson
Atlanta
Charlotte
SOUTH
CAROLINA
Macon
ALABAMA
Selma
MISSISSIPPI
New York
VIRGINIA
Durham
Birmingham
IANA
MASSACHUSETTS
C T Worcester
RI
Virginia Beach
Huntsville
ackson
Boston
DE
Lexington
TENNESSEE
Tuscaloosa
NJ
MD
KENTUCKY
mphis
Portland
VIRGINIA
Cincinnati
Nashville
H um
Ho
ma
Allentown
to
Columbus
WEST
INDIANA
Saint Louis
NSAS
Hartford
NH
PENNSYLVANIA
Pittsburgh
Indianapolis
souri
Buffalo
London
ILLINOIS
RI
L. Ontario Albany
Connecticut
L. Mic
higan
Peoria
NOVA
SCOTIA
Bang
n or
NEW
YORK
Toronto
MICHIGAN
Chicago
MAINE
VT
L. Huron
lwaukee
H lif
Ha
ifax
Montreal
Sault Ste. Marie
Appleton
P.E.I.
Fredericton
a
taw
Ot
L. Superior
WISCONSIN
NEW
BRUNSWICK
Quebec
Timmins
int Paul
Chicoutimi
Jonquiere
Charleston
GEORGIA
Columbus
Jacksonville
Mobile
New Orleans
Titu
usville
Ocalla
Orlando
Saint Pe
P tersburg
r
FLORIDA
W st Palm Beach
We
cws e x i s t i n g p r o p e r t i e s
F rt My
Fo
M erss Regional Distribution of Apartment Units as Percentage of Total Portfolio 2008
Gulf of Mexico
Merida
Cancun
Vallad
dolid
Miami
l ocat ion
units
percent
Dallas/Ft. Worth
5,307
35.3%
Austin
2,816
18.8%
Houston
2,329
15.6%
Charlotte
1,318
8.8%
Raleigh
1,248
8.3%
San Antonio
886
5.9%
Denver
743
4.9%
Sacramento
260
1.7%
Atlanta
104
0.7%
Belize City
t
San Pedro Sula
E x i s t ing P r op e r t ie s
Multi-Family
Apartment Communities
Ca l i f o r n i a
Color a do
Georgi a
N o r t h Ca r o l i na
Tex as
Year Built
Year Acquired
Property Name
2001
2000
1983
1995
1998
1998
2001
1996
1996
1996
1996
1998
1996
1996
1998
1998
2001
1994
2000
1996
1996
1998
1997
2002
2002
1978
1996
1999
2002
1978/79
1969
1973
1981
1984
1990
1998
1999
2002
1992
1993
1995
1995
1995
1997
2003
2004
2004
2007
2007
2007
1998/99
2008
2008
2008
2000
2002
2000
2005
2006
1997
1999
1999
2000
2005
2006
2006
2006
1996
1996
1998
1999
1999
2000
2000
2002
2002
2002
2003
2003
2004
2005
2005
2005
2005
2005
2006
2006
2006
2006
2006
2006
2006
2006
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2008
2008
2008
2008
Fairmont at Willow Creek *
The Marquis at Town Centre
Marquis at the Parkway
The Marquis at Briarcliff
The Marquis of Carmel Valley *
The Preserve at Ballantyne Commons
The Marquis at Carmel Commons *
The Marquis at Preston
The Marquis at Silverton
The Marquis on Edwards Mill
The Marquis at Northcross
The Marquis on Cary Parkway
The Marquis at Deerfield *
The Marquis at Ladera Vista *
Brooks on Preston
The Marquis at Waterview
The Marquis at Rogers Ranch *
The Marquis at Caprock Canyon
The Marquis at Barton Creek
The Marquis at Stonegate
The Marquis at Willow Lake
The Marquis at Turtle Creek
The Marquis at Bellaire Ranch
The Marquis on McKinney *
The Marquis at West Village
Windsor at Barton Creek
The Marquis on Gaston
The Marquis at Park Central
The Marquis at Silver Oaks
Northwest Hills Apartments
Riverside Place
Riverside Square
The Park at Fox Trails
The Park on Spring Creek
The Marquis at Bellaire
The Marquis at Stonebriar
The Marquis at Riverchase
The Marquis on Cedar Springs
The Marquis at Pin Oak Park
The Marquis on Memorial
The Marquis at Westchase
The Marquis at Great Hills
The Park at Walker’s Ranch
The Marquis at Tree Tops
The Marquis at Texas Street
The Marquis on Eldridge Parkway
The Marquis on Briar Forest
The Block on 28th *
The Block on Leon *
The Block on Pearl *
The Marquis on Westheimer
The Block on 23rd *
The Block on 25th *
The Block on Rio Grande *
Marquis at Lantana
The Marquis of State Thomas
The Block on Campus Phase III
Cu r rent De v elopments
Ma n u fac t u r e d H o u s i n g C o m m u n i t i e s
*CWS Developments
2007
2005
1988
Hartston Woods
Chateau at Onion Creek
Canadian Properties
City
State
Folsom
Broomfield
Denver
Atlanta
Charlotte
Charlotte
Charlotte
Cary
Cary
Raleigh
Huntersville
Raleigh
San Antonio
Austin
Plano
Richardson
San Antonio
Austin
Austin
Fort Worth
Fort Worth
Dallas
Fort Worth
Dallas
Dallas
Austin
Dallas
Dallas
Grapevine
Austin
Austin
Austin
Plano
Plano
Houston
Frisco
Coppell
Dallas
Houston
Houston
Houston
Austin
San Antonio
Austin
Dallas
Houston
Houston
Austin
Austin
Austin
Houston
Austin
Austin
Austin
Flower Mound
California
Colorado
Colorado
Georgia
North Carolina
North Carolina
North Carolina
North Carolina
North Carolina
North Carolina
North Carolina
North Carolina
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Texas
Apartment Totals
Texas
Texas
Development Totals
Texas
Texas
British Columbia, Canada
MHC Totals
CWS Portfolio Totals
Dallas
Austin
Dallas
Austin
Surrey
Units
Potential
Build-Out
Total
Potential Units
260
283
460
104
424
270
312
292
216
352
312
388
340
224
342
528
246
336
250
308
138
98
316
144
179
134
480
308
480
314
145
100
286
278
581
347
360
165
474
104
216
406
300
240
302
270
396
101
133
96
288
92
160
85
248
15,011
0
0
0
411
350
656
1,417
16,428
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
210
125
335
0
0
0
0
335
260
283
460
104
424
270
312
292
216
352
312
388
340
224
342
528
246
336
250
308
138
98
316
144
179
134
480
308
480
314
145
100
286
278
581
347
360
165
474
104
216
406
300
240
302
270
396
101
133
96
288
92
160
85
248
15,011
210
125
335
411
350
656
1,417
16,763
~ pa g e ~
32
Atlanta has long been the economic powerhouse of the Southeast. The area’s high
quality of life, extensive infrastructure and relatively low costs have maintained its
attraction as the leading net new-job generator and newcomer magnet over the last
decade. The Atlanta MSA is being impacted by the national recession as evidenced
by job losses during 2008. Construction, financial services, and manufacturing
have been the hardest hit industries. Despite this temporary setback, the outlook
remains positive over the longer term. According to the U.S. Census Bureau, the
Atlanta metro ranked #2 among the nation’s 361 metro areas for number of new
residents for the year ending June 30, 2007. The estimated metro population is 5.4
million as of 2008; this represents a 26% increase since 2000. This upward trend is
projected to continue over the next five years, as the Atlanta MSA is projected
to grow by 13.0%, compared to the U.S. projected population growth of 4.8%. The
growth trend is due in large part to an average median household income that exceeds the national average by 12% combined with a median cost of living that is 2%
below the national average.
Property Name
L o c at i o n
Units
The Marquis at Briarcliff
Atlanta
104
Sources: Metro Atlanta Chamber of Commerce, Carter, REIS, Moody’s Economy.com,
U.S. Bureau of Labor Statistics, U.S. Census Bureau, and Real Estate Center at Texas A&M University
cws capital part n ers llc
~
2 0 0 8 a n n u al report
~
At l a n ta R e g ion
F eat u r e d
P r o pe r t y :
The Marquis at Briarcliff
~
Ch a r l o t t e R e g ion
F eat u r e d
P r o pe r t y :
The Preserve at Ballantyne Commons
~ pa g e ~
35
The Charlotte MSA experienced stable employment during 2008, as the gains
achieved in the first half of the year were offset by job losses in the second half
of the year as recessionary forces began to take hold. Multi-family permits have
declined to 4,502, a reduction of 23% over the prior year but still much higher
than ideal given the current economic climate. With the addition of 2,473 units to
the multi-family market during 2008, vacancy has climbed to 7.3% as these additions outpaced the level of absorption. Despite the challenges of this environment,
effective rents grew by 2.4% in 2008. Looking ahead, vacancy is expected to rise
to approximately 8.2% by the end of 2009 as demand remains at modest levels
and additional product deliveries occur. Although 2009 is expected to be a tough
year for the multi-family market, demand for apartments in the Charlotte MSA
is expected to be strong once the economic recovery is underway, given the area’s favorable rental demographics and the more stringent lending requirements
for homeownership. In this environment, a larger percentage of households should
find that renting an apartment is the best solution for their housing needs.
Property Name
L o c at i o n
Units
The Marquis of Carmel Valley
Charlotte
424
The Preserve at Ballantyne Commons
Charlotte
270
The Marquis at Carmel Commons
Charlotte
312
Huntersville
312
The Marquis at Northcross
Sources: Greater Charlotte Chamber of Commerce, Real Estate Center at Texas A&M University,
REIS, Portfolio & Property Research, and U.S. Bureau of Labor Statistics
cws capital part n ers llc
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2 0 0 8 a n n u al report
~ pa g e ~
36
The Raleigh-Durham-Cary MSA has a diverse employment base consisting primarily of technology, government, biotechnology, and education. While the local economy has been impacted by the recession, it has fared better than most.
Through November of 2008, employment had increased by approximately 1% over
the prior year; as of 3Q 2008, housing prices had climbed by 3.8% over the past
year. Raleigh is consistently ranked among the nation’s best places to live and
work. Within the past year, Forbes.com ranked Raleigh as the top metro for Business and Careers, Inc.com rated it as the best city for doing business, and msnbc.
com gave Raleigh the top ranking as the best place to live in the U.S. Multi-family
units permitted in 2008 were slightly higher than the 2007 level, climbing to approximately 5,000 units. As of 3Q 2008, vacancy was estimated to be 7.0%. However, vacancy is expected to increase to almost 8.0% by the end of 2009 and remain
in the 8.0-8.3% range through 2011. Rents are expected to grow by 1.5% in 2009
and accelerate from there.
Property Name
L o c at i o n
Units
The Marquis at Preston
Cary
292
The Marquis at Silverton
Cary
216
The Marquis on Edwards Mill
Raleigh
352
The Marquis on Cary Parkway
Raleigh
388
Sources: Greater Raleigh Chamber of Commerce, Durham Chamber of Commerce,
The Research Triangle Park, Real Estate Center at Texas A&M University, REIS,
U.S. Bureau of Labor Statistics, Office of Federal Housing Enterprise Oversight
cws capital part n ers llc
~
2 0 0 8 a n n u al report
~
R a l e igh R e g ion
F eat u r e d
P r o pe r t y :
The Marquis at Preston
~
De n v e r R e g ion
F eat u r e d
P r o pe r t y :
The Marquis at Town Centre
~ pa g e ~
39
Denver remains an attractive investment market and offers a lifestyle that attracts
young, educated workers and is also home to ten Fortune 500 companies. Denver
has experienced a slight loss in job growth at -0.65% as of December 2008. The
economic debacle has impacted the local economy allowing vacancy to rise to 7.08.0%. Construction took off in 2008 with a total of 7,600 under construction as of
December 2008. In addition, the metro has an estimated 5,400 proposed units to
be delivered in the coming years.
Property Name
L o c at i o n
The Marquis at Town Centre
283
Denver
460
Marquis at the Parkway
Sources: Property & Portfolio Research, Inc., REIS, Broomfield Chamber of Commerce
cws capital part n ers llc
~
Units
Broomfield
2 0 0 8 a n n u al report
~ pa g e ~
40
Surrey is British Columbia’s second largest city by population after Vancouver
City. By 2011, the City of Surrey estimates a total population of 500,646. British
Columbia’s gross domestic product (GDP) is forecasted to grow 2.3% during 2009
with employment growth of 2.0%. In the Fraser Valley, housing prices during 2008
increased on average by less than 2.0% for single-family detached homes, 3.0% for
townhouses, and 5.0% for condominiums/apartments when compared to December
2007. Demand for housing in the area is currently below average and projects are
no longer being sold out prior to or during construction. The occupancy rates in the
communities should improve slightly in 2009.
Property Name
L o c at i o n
Units
Breakaway Bays
British Columbia
345
Crestway Bays
British Columbia
119
Crispen Bays
British Columbia
192
Sources: Canadian National and British Columbia, BC Stats
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F eat u r e d
P r o pe r t y :
Crispen Bays
~ 3. ~
Stewardship
We’re Prepared to Look Ahead.
CWS is built upon relationships forged with our investors and
cultivated with strong values. We are pleased that our investors
have placed their trust in us to invest their hard-earned dollars
over the last 40 years. Often times investors can be their own
worst enemies when it comes to making prudent decisions free
of emotion. We like to say that CWS “helps save people from
themselves” by allowing us to manage their investments in illiquid assets that cannot be freely traded on a whim.
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~ T ime l e ss W i s dom ~
The five most important steps to Wise Investing:
No. 1 ~ Weighing Risk vs. Reward We live in a free market capitalistic society in which we invest and take risk. Risk is part of every investment. The challenge is to pick an investment that you understand and is within your tolerance
for risk. The higher the return on investment, the higher the risk. When making
an investment requiring substantial cash, the wise investor always evaluates
the elements of risk to decide “go” or “no go”.
No. 2 ~ Carefully Examine the Character of the People Involved in the
Management of the Investment We learn about trust at an early age from
friends who could keep a secret or promise and those who couldn’t. As we mature
we become wiser in the ways of human nature. The Madoff affair has made everyone think twice about whom they can trust and why this trust is justified. To see
and understand the many ways trust can be misplaced, watch “American Greed”
on CNBC Wednesday nights at 6pm. This will sharpen your awareness of where
to place your trust and what to watch out for before investing.
No. 3 ~ Transparency of How Your Money is Being Used Once You Invest
You should have several sources to draw on to confirm the facts you receive about
your investment. Various sources: financial reports, tax information, dividends,
reviewing the company website, and talking to company staff people running
the investment day to day.
No. 4 ~ Calculating Current and Future Value of Your Investment You
know the return on a risk-free investment in U.S. Treasury bills the day you buy
them and at maturity. Seeking greater returns by investing in bonds, real estate, stocks, commodities, currencies, and artwork involves a much more careful
analysis of the investment due to the increased risk. The value of an investment
is basically the net present value of the expected cash flow or dividends and the
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profit on sale from a 5 or 10-year holding period. A great deal of effort needs to
be expended to become wise in the evaluation process. For real estate investing
at CWS we call it doing our “due diligence” before finally investing. We examine
all aspects of the property: the building construction, location advantages or disadvantages, books, records, and inspection of individual apartment units. Then
CWS makes a final determination of value and the “go” or “no go” decision.
No. 5 ~ Understanding Fees, Taxes and the Capital Expense Budget and
How They Affect Return on Investment Knowing management fees, tax
regulations, and charges such as capital expenses that affect the investment can
help you decide where and what to invest in. The wise investor is aware that high
fees, a history of increasing taxes, or ever increasing capital expense requirements can make a substantial difference in the long-term investment outcome.
~ W I S DOM IN LIFE & B U S INE S S ~
Living a balanced life with family, friends, business, community, country, and
a philosophy of accepting responsibility for the actions we take is the ultimate
indication that we have gained wisdom.
CWS examples of Wisdom used to make wise decisions in business:
CWS decided from the beginning that the real estate investment objective is to
preserve capital first and then invest to obtain cash flow and long-term gains.
Tax shelter is to be considered a secondary benefit of real estate investing. In
the late 1980’s CWS competitors who invested primarily for tax shelters went
out of business as the IRS disallowed their shelter claims a few years later.
From the beginning CWS made a commitment to communicate regularly with
investors, telling the good or bad like it is — being a straight shooter.
CWS formalized a culture of ethical dealings from the beginning. It governs our
dealings with investors, employees, suppliers, and residents at the properties.
IQ has been shown to have a strong correlation with success. Mix smart people
with a good education, lots of experience and the result is talented people like
Steve Sherwood, Gary Carmell, and Mike Engels and the great staff members
who select and run CWS properties.
Thanks for being a wise CWS investor, and I look forward to you joining us for
the 2009 Annual Investor Meeting as we celebrate a major milestone — our 40th
year in business.
Bill Williams
Founder & Advisory Board Member
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Resilience
We’re Prepared for Tomorrow’s Rebirth.
For the ill-prepared, the current economic crisis can be characterized as catastrophic. For others, however, it could offer
extraordinary opportunity. CWS has a track record of coping with downturns by utilizing the foresight of our leaders
to make prudent decisions. We have proven to be resilient in
tough economic times and this should be no exception.
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~
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 their 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 their 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.
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~
2 0 0 8 B. R . I . D.G . E . S e r v ice Or g a ni z at ion s
a nd Don at ion R e cip ie n t s *
ALS Association
Keep Austin Beautiful
AIDS Foundation of Austin
National Multiple Sclerosis Society
American Cancer Society
Michael J. Fox Foundation for Any Baby Can
Parkinson’s Research
Austin Human Society
Operation Kindness
Autism Speaks
Nelson Children’s Center
Avon Walk for Breast Cancer
Ronald McDonald House
Big Brothers Big Sisters
North Texas Food Bank
Capital Area Food Bank
SafePlace
Boy Scouts of America
Restoration Outreach Ministry
Central Texas Blood & Tissue Center
San Antonio AIDS Foundation
Children’s Health Fund
Scottish Rite Hospital
Children’s Attention Home
Settlement Home for Children
Cystic Fibrosis Foundation
Semiahoo Peninsula
Community Resources for
Marine Rescue Society
People with Autism
SPCA of Texas
Family Crisis Center
Sjogren’s Syndrome Foundation
Dell Children’s Medical Network
Stop Hunger Now
Family Eldercare Center
Susan G. Komen Breast Cancer Girl Scouts of America
Foundation
Houston Food Bank
Surrey Food Bank
Hospice Austin
The Children’s Health Fund
Houston SPCA
The G.R.E.E.N. Foundation
The Human Option
Thoughtful House Center for Children
It’s My Heart
Uptown Shelter
Juvenile Diabetes Foundation
We Give Thanks Food Project
Make A Wish Foundation
Yellow Ribbon Fund
* Over 100 organizations were serviced by CWS employees in 2008. This list represents the top 50.
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T he T op Br a ss
founders
32
Since ‘77
Steve Sherwood
Founding Partner, CEO,
& Chairman of the Board
Capital Partners
investments
22
11
Since ‘87
Gary Carmell
Partner -- President
Since ‘98
Mike Engels
Partner -- Chief
Investment Officer
Since ‘69
Bill Williams
Founding Partner &
Advisory Board Member
Since ‘86
Lauretta Anderson
Vice President,
Investor Relations
3
Since ‘06
Mike Brittingham
Investments,
Houston, TX
4
40
Since ‘69
Jim Clayton
Founder
5
Since ‘04
Daniel Ebner
Vice President,
Investments
Since ‘97
Sunnie Juarez-Mills
Manager, Investor Services
Manufactured
housing
23
Since ‘86
Joe Sherwood
Senior Vice President,
Manufactured Housing
Since ‘05
Trevor Dallas
Managing Director,
CWS Strategic
Apartment Fund
2
Since ‘07
JeriAnn Price
Investor Relations
Specialist
2
Since ‘07
Gregg Kantak
Investments, Charlotte/
Raleigh, NC &
Atlanta, GA
1
Since ‘08
Susan Rayshell
Director,
Investor Relations
Information Systems
2
Since ‘07
Michael Wardlaw
Investments, Austin
& San Antonio, TX
development
Capital Partners
12
Since ‘97
Brian Rose
Chief Financial Officer
18
Since ‘91
Sue Mills
Vice President,
Human Resources
Since ‘07
Debra Buck
Regional Director,
Houston, TX
2
4
15
Since ‘94
Tracy Hayes
President,
Corporate Housing
Since ‘01
Shellie McDaniel
Assistant Director
of Operations
2
Since ‘05
Marcus Lam
Development Associate
12
corporate housing
7
Since ‘02
Marcellus Mosley
Director of Operations
8
23
40
operations
15
Since ‘94
Greg Miller
Vice President,
Development
Since ‘07
Sarah Colandra
Marketing Manager
11
Since ‘98
Amber Cox
Regional Director,
Fort Worth, TX
8
Since ‘01
Rich Fagan
Regional Director
Sacramento, CA
Dallas, TX,
Denver, CO
11
Since ‘98
Paige Gutierrez
Regional Director,
Austin, TX
8
Since ‘01
Brett McDaniel
Regional Director, Dallas
& San Antonio, TX
3
Since ‘06
Brad Brakhage
Vice President,
Construction
12
Since ‘97
Gina Roberts
Regional Director,
Charlotte/Raleigh, NC,
Atlanta, GA
14
Since ‘95
Mary Ellen Barlow
Director, Transaction
Services
9
Since ‘00
Amy Roos
Revenue Manager
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~
C ompa n y L og i s t ics
Investor Information
Congratulations to CWS’ Year 2008
Limited partners, financial advisors,
Community Director of the Year, Sunny Gilmore
investment advisors, or CPAs seeking
Community of the Year, The Marquis at Deerfield
additional information about CWS
Maintenance Director of the Year,
investments or 1031 exchange candidate
Curt Parsley & Ziggy Jablonski
investments should contact:
Best Renewal Probability, The Preserve at Ballantyne
Marcus Lam, Development Associate
Best Response Rate, The Marquis at Stonebriar
(800) 466-0020 or via email to:
Best Leasing Property, The Marquis at Barton Creek
mlam@ cwscapital.com
Best Leasing Individual, Lindsey Wolters
Additional Information
The Marquis at Briarcliff &
For additional information on CWS and its
The Marquis at Edward’s Mill
Best Property NOI Growth,
affiliated companies, please see the following
Best Property Delinquency,
websites: cwscapital.com, cwsapartments.com,
The Marquis at Park Central &
cwshousing.com, or cwsbridge.com.
The Marquis at Silver Oaks
Winner of CEL’s Year 2004-
Best Customer Service
2008 Real Estate Award
Office Team, Property Team, Maintenance Team,
CWS was honored for the fifth year in
The Preserve at Ballantyne
a row with CEL’s prestigious award for
achieving the highest level of customer
Clayton Williams & Sherwood Investments
service excellence out of any multi-family
is a member of FINRA and SIPC.
operator managing 30-50 communities.
CEL & Associates, Inc. is the nation’s
Design & Production
largest surveyor of resident satisfaction
Ramp Creative+Design
within the multi-family industry. Go to
www.celassociates.com for more information.
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~
Ce l e br at ing 4 0 y e a r s of s e r v ice
This year, we would like to recognize the CWS
founding partners: Steve Sherwood, Bill Williams and
Jim Clayton for their vision and leadership that have
allowed this company to prosper for the past 40 years.
We look forward to another 40 years!
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S u p p l e m e n ta l I n f o r m at i o n
Starting this year, we have made an electronic file of the Supplemental Report available
behind our new Investor Portal for all existing investors. 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 into your
account by clicking on the “My Account” link.
If you have trouble accessing your account,
please call our Investor Relations Department
at (800) 466-0020.
cws capital pa r tne r s llc
14 C o r p o r a t e P l aza D r i v e , S u i t e 210 , N e w p o r t B e ac h Ca 9 2 6 6 0
T e l e p h o n e 8 0 0 . 4 6 6 . 0 0 2 0 www.c ws c a p i ta l .c o m