CWS Annual Partners Meeting

2025 Annual Partners Meeting Summary

Thank you to all who attended our CWS’ 56th Annual Partners Meeting held at the Irvine Marriott Hotel on April 8, 2025. For a full recording of the meeting, you may view it by clicking here.

The meeting began with a welcoming slideshow of investor names displayed on the large screens in celebration of those who have invested with CWS over the decades, including some over 40+ years ago. Immediately following, the screens transitioned to displaying names of our cherished investors who sadly passed away over the previous 12 months. At this moment, conversations quieted down to a whisper as many reminisced about their fellow investors and friends with whom they had shared fond memories over the years. After the slideshow, the CWS Partners began the presentation portion of the meeting.

Gary Carmell discussed the volatility that is currently happening in the market and real estate as an asset class has not been immune to these market forces over the past couple years, although multifamily apartments have fared much better than others including office buildings. This is not surprising as apartments in well-located, growing areas can produce durable income streams due to providing a basic human need, supply constraints, population inflow, wage growth, inflation hedge, tenant diversification, and operational leverage, among others.

Gary discussed the “deep freeze” of 2023 and 2024 when the Fed drove up interest rates at a record pace resulting in many of our property loans with variable-rate debt, along with their higher cap rates, to reduce property cash flow. This resulted in capital calls at approximately 20% of our overall portfolio but was a rather small 1.3% in terms of dollars as a percentage of our total portfolio equity. In addition, these conditions necessitated reduced or suspended distributions in most of our portfolio as the properties went into defense mode. Recently, the deep freeze has been slowly “thawing” as CWS has refinanced 18 properties and sold two properties producing an average of 2.5 times one’s original investment from 2023 to date. Our debt strategy has shifted to fixed-rate loans from variable rates due to lower indexes and spreads offered in the fixed market. The presentation concluded by evidencing the large cost gap of buying a home versus renting. Construction costs are too high (and may go higher due to tariffs) and rents are too low to attract the capital necessary to justify new housing development. When the market is able to clear the new supply coming online within the next 12-18 months, we should expect to see a low supply environment that provides a positive tailwind for apartment investors.

Next, Mike Engels presented our same store roll-up performance comparison for CWS properties over the past two years and to our objectives for 2025. The main objective for 2024 was expense control and we succeeded in this area. Expense control is once again our objective for 2025 as we expect revenue to be flat this year. Overall, we project to have an approximate 10% increase in operating cash flow in 2025 versus 2024.

Mike presented an insightful graph showing absorption over the past 30 years and where we are today. Housing deliveries peaked in late 2024 with notable supply relief projected in 4Q25. In addition, the market outlook shows rent gains in 2025 with further gains in 2026-27. The cost gap of buying a home and renting was further evidenced by a real-time comparison of an apartment that CWS recently purchased in Kingwood (Houston, TX) and that of a typical apartment rental in the area. Overall, the market outlook is promising for those who are willing to buy as a result of new supply lease-up, new starts on hold until rents can rise significantly, opportunities to purchase high-quality assets at significant discounts to replacement cost, and less aggressive competitors due to lower investor sentiment.

Steve Sherwood began his presentation by expressing that these are the most uncertain times that he has seen in his 50 year career with CWS. Looking back at CWS’s history, we have had success in investing in uncertain times with a clear goal of minimizing risk. We prefer to purchase properties in markets where we have an existing presence which allows for real-time feedback of submarket performance. Our preferred approach to buying is having an existing financial buffer in place rather than anticipating a buffer based on trends, which gives us unique insight into the maximum price we would pay for a property. Oftentimes we can lose out on a deal but find that the seller comes back to us when their highest bidder can’t perform, which has helped us build a great reputation for closing in the marketplace.

There are currently a large number of apartment developments being delivered that started construction two to three years ago. This bulge in deliveries should be processed throughout 2025 with housing starts in our markets dropping off as current rent levels compared to the cost to build don’t provide sufficient returns to incentivize capital to invest in new developments. Until rents are significantly higher there won’t be a major increase in apartment starts.

Steve communicated that CWS has a positive track record when investing in uncertain times like these. Our company was designed for long-term investing. The ability to be patient allows us to only invest when our investment criteria is being met. The Partners believe now is a good time to be investing. He concluded by thanking investors for trusting CWS with their hard-earned dollars.

Following the presentation portion of the event was a tribute video to Bill Williams, who sadly passed away at the age of 92. Bill co-founded CWS in 1969 and has been an inspiration for our mission, strategy, and values that have served CWS and its investors well over our 56 year history.