2022 CWS Annual Investor Meeting

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The CWS Annual Investor Meeting provides an opportunity for you to learn about our apartment markets, investment strategies, along with our view on the economy, interest rates, and our outlook going forward.

 

2022 CWS Annual Investor Meeting Webinar

CWS would like to thank all our investors and guests who participated in our 2022 Annual Partners Meeting webinar that was held on May 17, 2022, via Zoom. For those who were not able to attend, a recording of the event can be viewed by clicking on the following link: https://youtu.be/f9vSomTgrZ8.

The meeting began with Partner Gary Carmell speaking about the “The Perfect Storm,” which is our theme for this year. Our interpretation of this theme is the opposite of what one might think from the movie of the same name where the ending did not turn out well. This storm shifted dramatically and provided a major tailwind that we were able to ride. The start of the pandemic brought many questions and an equal amount of challenges, specifically in the multifamily industry, but to our benefit our properties performed better than expected and the low interest rate environment produced higher cash flow for our investors as a result of our lower debt-service.

Partner Mike Engels presented an operational overview of how CWS’ same-store properties performed over the past 12 months. Revenues were higher by 4.3% which helped produce a positive Net Operating Income of 5.1% and improved cash flow by 23.8% due in part to lower interest rates and capital expenditures. Year-over-year rents through April 2022 resulted in new leases increasing by approximately 19% and renewals by approximately 13%. For the remainder of the year, although interest rates are expected to move higher, we continue to anticipate meeting our budgeted distributions for 2022, although it is possible there may be some exceptions. We feel very good about the supply and demand fundamentals for apartments which we believe will keep rents growing in the near term.

Next up to present was Gary Carmell who introduced the topic of Stress for Success in terms of analyzing how the current and projected environment will affect our properties’ performances. CWS’ investment strategy is based on making key decisions with a long-term perspective that will allow the company to stay on the playing field under all conditions. Approximately 80% of CWS’ debt is variable rate. The Partners believe that variable-rate loans will continue to be beneficial despite rising interest rates as they offer lower rates compared to their fixed-rate equivalent loans, increased prepayment flexibility allowing for less onerous penalties for paying off loans early in cases of refinances or sales, and a recessionary hedge as the Federal Reserve typically will reduce interest rates during economic downturns which typically put pressure on our revenues. Careful market selection has benefited our firm by having locations with strong in-migration and business friendly environments, resulting in either break-even or positive rent growth. Single family housing further supports apartment demand due to rising interest rates that have made purchasing homes less affordable, values that have increased at a faster rate compared to average income, and a continued shortage of housing supply.

Founding Partner and Chairman Steve Sherwood discussed the macro forces that have been impacting the apartment market and how they will affect CWS’ decision-making and capital allocation. A lack of housing has created a tight market for rentals as we have seen rent growth soar along with a lack of housing options. Our markets are typically located where people are migrating to when leaving their home states, particularly states like Texas. Building costs have gone up which makes development of new housing and apartments more expensive. We have seen a 63% increase in the cost to build garden-style apartments from eight years ago. As values have increased, we are also seeing property tax valuations increase dramatically which has necessitated CWS to protest these assessments, especially in Texas whose properties are assessed on an annual basis. We are seeing insurance premiums going up as well. As we are acquiring properties, CWS is looking at newer product over older ones as they are pricing about the same per dollar of net operating income before capital expenditures.

Concluding the presentation was Co-Founder and Board Member Bill Williams who described the time when the company first began in 1969 with a 15-unit apartment building in Huntington Beach with a $15,000 down payment. Today, CWS is well-positioned to grow while also maintaining a strong cash position as preservation of investor capital is at the forefront of every decision that the company makes. Bill thanked our valued CWS investors for their trust.

CWS thanks you for your trust over the past 53 years in allowing CWS to represent you in owning, managing, and building apartments. We feel a great sense of honor and responsibility to preserve your hard-earned capital, to provide timely and relevant communications, and to deliver exceptional returns.