January 16, 2023

Welcome to People and Properties, the Cohen-Esrey newsletter where we celebrate the successes of our team members and keep you informed about what is happening in the Cohen-Esrey world. If you have something you would like to share or an achievement that you would like to celebrate, please send it to Lee Harris at lharris@cohenesrey.com. If you are on a property, please print and distribute this newsletter to each member of your property team. You can also find People and Properties on KnowledgeNet. Click here to view previous editions.

CEC Assumes Management of The Maxwell

Cohen-Esrey Communities (CEC) has assumed management of a new third-party assignment, The Maxwell in Kansas City, MO. The four-story 103-unit property was constructed in 1986 and is located in the historic Southmoreland neighborhood adjoining the Kemper Museum of Contemporary Art, the Kansas City Art Institute, the Donald J. Hall Sculpture Park, and the Nelson-Atkins Museum of Art. Southmoreland Park is home to various cultural events year-round, including Shakespeare in the Park. Hotels, office buildings, cafes, coffee shops, and parks are interspersed between these art institutions, but residents also enjoy proximity to Country Club Plaza, one of the most popular commercial hubs in the city. Southmoreland also neighbors other trendy neighborhoods including Old Westport, Valentine, and Hanover, all known for incredible dining and nightlife. One-bedroom units range from 580 to 680 square feet and rent for $1,275 to $1,375 per month. Two-bedroom units are 980 square feet and rent for $1,750 to $1,800 per month. Three-bedroom units are 1,890 square feet and rent for $2,590 to $2,690 per month. Unit interiors feature bookshelves, white cabinets, stainless steel appliances, fireplaces, window seats, plank-style flooring, and private balconies. Upper-level units have vaulted ceilings and skylights. This gated community has elevator service, and amenities include covered parking, a fitness center, club room, tiled courtyards with Spanish fountains, a swimming pool, and a sun deck.

We welcome back Chanda Lutz (2018), as the Property Manager. Chanda began working for CEC in August 2018 as the Assistant Property Manager at Jefferson on the Lake in Olathe, KS, and was promoted in November 2019 to Property Manager of Huntley Ridge Apartments in Topeka, KS. In October 2021 Huntley Ridge was sold. James Huss (2014) is the Regional Manager, Paige Bohling (2022) is the Property Accountant, Garrett Cook (2022), is the Accounting Assistant, and Rodney Chmidling (2015) is the Accounts Payable Specialist.

We welcome the following new team members to Cohen-Esrey and the Nexus 5 Group.

Chanda Lutz – The Maxwell, Kansas City, MO – Property Manager
Danny Vela – Loretto at Creekside, Live Oak, TX – Maintenance Technician
Jessica Zapata – Loretto at Creekside, Live Oak, TX – Assistant Property Manager
Misti Steger – Jefferson on the Lake, Olathe, KS – Assistant Property Manager
Ashley Harper – Corporate Office – Executive Assistant
Kendric Eshmon – Park at Forest Hill, Memphis, TN – Make-Ready Technician
Cameron Lewinson – Park at Forest Hill, Memphis, TN – Maintenance Technician

Meet Small Property Single-Person Teams

Pam Weatherford

Jose Sauceda

Paula Elliott

Periodically, we will feature photos of team members who are managing small properties – and they are the only person dedicated to a particular property. In this issue, meet Pam Weatherford (2016) from Freedom Place in St. Louis, MO; Jose Sauceda (2019) from the Brewery Lofts in Hastings, NE; and Paula Elliott (2013) from Bluejacket Lodge in Shawnee, KS.

A Year in Review – 2022

We’re going to take a quick peek in the rearview mirror at how Cohen-Esrey fared during 2022.

Cohen-Esrey Apartment Investors (CEAI)

During 2022, CEAI closed the purchase of Loretto at Creekside (320-units) in San Antonio, TX; Brighton Creek (306-units) in Kansas City, MO; and Park Edge (260-units) in Lenexa, KS.
Loretto and Brighton Creek were transactions that originated in 2021.
CEAI also sold one asset in 2022, Appling Lakes (312-units) in Cordova, TN (Memphis metro).
Since 2011, CEAI has acquired 36 apartment communities totaling 9,668 units in 14 states at a total cost of $1.06 billion and $356.5 million in equity.
Seventeen assets have been sold generating a weighted annual return to our investors of 22.01%.
CEAI co-investment funds have raised nearly $50 million in co-investment equity that pairs with limited partner equity.

Brighton Creek in Kansas City, MO was a 2022 CEAI closing.

A significant increase in interest rates caused a slowdown in CEAI’s ability to acquire Class B apartment communities. Sellers have not yet made the necessary adjustments to sale prices to compensate for higher interest rates. CEAI has chosen to be very selective in identifying assets that make financial sense to acquire. We believe that once the Federal Reserve stabilizes interest rates, sellers may moderate their expectations and transact on a more reasonable basis. This is unlikely to happen until at least Q3 2023. As a result, we are targeting only three to six acquisitions during 2023. We expect to sell one asset during 2023.

CEAI continues to refine its approach to acquiring Class B apartment communities focusing on those constructed in the 1990s and beyond. Larger markets are targeted in the Sunbelt and Midwest with a particular interest in metropolitan areas that are seeing significant population and job growth as well as Class B rent growth. The sweet spot continues to be apartment properties of 350-units and larger, though smaller complexes will be purchased if the circumstances make sense. The good news is that demographics continue to favor the apartment lifestyle. Millennials and Generation Z (Zoomers) are the primary apartment renters, though retired Baby Boomer renters are increasing in number. Demand for apartments is as high as ever and expected to remain so for many years into the future.

Matt von Ende (2017), Vice President of Acquisitions, assumed a greater role during, leading the overall acquisition process. Calvin Fletcher (2021) joined the team as an Underwriting Analyst. Lydia Kinkade (2013), Fund Manager, now manages three co-investment funds and had considerable success raising co-investment capital for CEAI during 2022.

Park Edge in Lenexa, KS, was a 2023 market-rate acquisition for CEAI.

Cohen-Esrey Development Group (CEDG)

CEDG had a banner year during 2022. We closed the partnerships for five projects this year including Loma Vista Lofts – 212-units, San Antonio, TX, Lofts at Creekview – 301-units, San Antonio, TX, Sinclair Flats – 48-units, Mankato, MN, Trails at Lehow – 82-units, Englewood, CO, and Panorama Heights – 133-units, Colorado Springs, CO.
Construction and the lease-up was completed for the Lofts at Ventura – 200-units, San Antonio, TX.
Construction was completed and lease-up commenced for the Village on Main – 50-units, Waunakee, WI, and The Landing at 818 – 100-units, Sun Prairie, WI.
Currently CEDG has 16 projects in some form of development (with site control) or construction totaling 2,601 units in nine states at a total projected cost of $645.7 million.
Since 2014, CEDG has completed 16 affordable/workforce communities totaling 1,083 units in eight states at a total cost of $195.5 million.

New construction is the primary approach being utilized by CEDG though it will selectively consider historic renovation and acquisition/rehab opportunities. The ideal project is between 100 and 300 units and can take as long as three years to bring to fruition from the idea stage to construction completion. Increases in interest rates and construction costs have made development more difficult. However, unlike market-rate development, there are many more sources of funds available to make affordable workforce housing a reality. The average per unit development cost is approaching $250,000, which would necessitate rental rates approaching $2,500 per month in a market-rate environment. With the various development subsidies that CEDG utilizes, rents typically range from $900 to $1,200 per month.

The Lofts at Ventura in San Antonio, TX, was completed during 2022.

The shortage of affordable workforce housing has reached a crisis stage in our country. One recent study shows this shortfall to be more than seven million units. CEDG is poised to help resolve this massive issue by continuing to expand and scale its operations. Development Directors and Development Managers are being recruited for Texas, the Ohio Valley, and Florida regions. A Vice-President of Development is being recruited to support Development Managers as well as more Project Managers who work under the Construction Technologies (CT) banner to provide construction management services for CEDG projects. During 2023, we expect CEDG to launch another 10 or 12 projects.

CEDG welcomed four new team members during 2022 including Clark Mills, Development Director (based in Charleston, SC), Nick Emenhiser, Development Manager (based in Denver, CO), Stan Waterhouse, Development Director (based in El Paso, TX), and Matthew Heirigs, CT Project Manager (based in the Corporate Office). And finally, we bade a sad farewell to our friend, the late Jay Johnson, who left a legacy of affordable workforce apartment communities in Texas.

The Landing at 818 in Sun Prairie, WI, was completed in 2022.

Cohen-Esrey Communities (CEC)

CEC saw contraction and expansion of its property management portfolio during 2022.
The company has seen an influx of Cohen-Esrey owned apartment communities over the past few years through market-rate acquisitions by CEAI and the development of affordable workforce housing by CEDG.
Including CEDG projects in construction/development, CEC had a total portfolio of 11,093 units at year-end in 83 assets across 16 states.
Market rate properties accounted for 25% of the total number of assets and 53% of the unit count. Affordable/workforce properties accounted for 7% of the total number of assets and 47% of the unit count.
Properties owned by Cohen-Esrey entities accounted for 85% of the unit count and 71% of the total assets.
Since its founding in 1970, Cohen-Esrey has managed more than 77,000 multi-family units in 600 properties across 24 states.

CEC continued to refine its systems and processes during 2022 with a particular emphasis on training programs. With our RealPage software we rolled out “BI” Business Intelligence, a module that offers a wide range of useful reports that can be run at any time by property, by region, by portfolio, and for a week, a month, or a year. Facilities Plus was a second module rollout where a service request can be completed via phone by a maintenance technician when in the field and synced throughout the day.

Other system rollouts included AME – Accounting Month End – a KNET application enabling properties to go directly to AME in KNET and complete their month end close-out. They no longer need to send it to the Regional Manager for review and no more e-mails to the accountants to roll into the next month. Mobile Paylocity allows all team members to clock in and out from their phones. Section 8 Utility Pay Cards are now being utilized instead of cutting check each month, sending them to the properties, and requiring the residents to come to the office to pick up their “utility check.” Now these are loaded onto a pay card each month which has reduced some of the burden for the Property Accountant and site teams

CEC began managing Loretto at Creekside in San Antonio, TX, during 2022.

With the courts re-opened, we have been able to eliminate many of our residents who are habitual non-payers. Market-rate properties averaged 69.9% retention on lease renewals for the year, and we had a portfolio average rent increase of 11% for 2022.

The KPI for Regional Manager property inspections was a success for three quarters during 2022. The KPI requires completing an 80% portfolio inspection rate each quarter. In Q2, the inspection rate was 92.4%; Q3 saw an 89.22% inspection rate, and Q4 had an 85.5% inspection rate. In 2021, the average inspection rate for the year was only 41.5%.

During 2022, two Regional Managers become CPM Candidates – congratulations to James Huss (2014) and Sarah Cranford (2022). James Huss was promoted from Area Manager to Regional Manager, and Alyssa Garza (2022) was promoted from Property Manager to Area Manager. Carolyn Henson (2021) was promoted from Property Manager to Regional Manager. CEC also welcomed three new Regional Managers during 2022 including Dawn Boyer, Nicole Collins-Watson, and Loretta Chavez. Michele Rollo-Burns (2018) was promoted to Director of Revenue. Connie Riley (2012) was promoted to Senior Deputy Managing Director for the Market-Rate Division, and Kristina Viera (2017) was promoted to Deputy Managing Director of the Affordable Division.

The Annual Leadership Conference was held in Kansas City during April 2022.

Two Property Accountants joined CEC during 2022 including Leslie Whitney and Paige Bohling. Michael Gioia (2020) was promoted to Senior Property Accountant. Emily Fletcher, Lana Frank, and Garrett Cook joined CEC as Property Accounting Assistants during 2022. Noelle Wilson and Robert Sholl were hired in 2022 as RealPage/Customer Fulfillment Specialists.

Nexus 5 Group (N5)

The 51 team members of the Nexus 5 Group worked hard to produce the company’s biggest year ever in terms of gross revenue.

Gross revenue was $21.3 million, up from $18.4 million in 2021, and $14.988 million in 2020.
N5 performed a total of 1,611 projects including: 220 construction projects: 50 mechanical projects, and 1,341 maintenance service projects.
The Service and Mechanical Divisions replaced 235 HVAC condensers, 136 furnaces, 3,200 pounds of refrigerant, and installed 7,625 linear feat of metal ductwork.
Commercial tenant improvements totaled 235,000 square feet. One of the most unique projects was the completion of a two-bay jet aircraft hangar and N5 is working with a client to build another one.
Multi-family construction included the replacement of 1,750 windows, 700 patio doors, 50,000 square feet of roofing, exterior repainting of 10 apartment communities, and 80 apartment units renovated.
N5 completed projects in seven states.

N5 continued to wow its customers as evidenced by its stellar +89 Net Promoter Score. The ServeWell mantra has become ingrained in all aspects of the N5 operations and has been totally embraced by every team member. The Construction Division completed another strong year. In its second year of existence, the Mechanical Division has seen significant growth and is gaining considerable momentum heading into 2023. The Service Division also posted a record year due to the Commitment and cohesiveness of the team members. Regular training sessions have been a mainstay for N5, with an emphasis on safety.

Tom Hoelting and Todd Smith joined N5 during 2022 as Project Managers. Cory Modgling was added to the Superintendent team. And N5 moved Kimberly Epperson (2021), Gavin Renft (2020), and Amanda Flynn (2022), into the office and hired Kathryn Reed (2022), all as Project Engineers.

Cohen-Esrey Capital Partners (CECP)

Cohen-Esrey Capital Partners (CECP) is the capital formation unit for Cohen-Esrey. During 2022, we welcomed Phil Melton as the new Managing Director. Phil hit the ground running and procured $14.5 million in preferred equity for the CEAI purchase of Brighton Creek in Kansas City, MO; $55 million in debt for Park Edge (CEAI) and Panorama Heights (CEDG) projects, as well as establishing a pre-development line of credit for CEDG totaling $5 million and expandable to $10 million. Further, Phil has opened a new relationship with a capital source that is handling the private placement of $15 million in bond financing for the upcoming CEDG acquisition and renovation of Astoria Park in Amarillo, TX. He assisted in the closing of $17 million Opportunity Zone funds for Railyard Lofts, a 348-unit project being developed by CEDG in Ogden, UT. And, he has also taken a leading role in identifying large pools of limited partner equity for future CEAI acquisitions and as well as recapitalizing several existing portfolio assets, and laid the groundwork for new relationships that will be a catalyst for CEDG and CEAI growth in 2023 and beyond. Finally, Phil coordinated the efforts to gain approval for Cohen-Esrey to market potential equity opportunities on the CrowdStreet crowd funding platform.

Phil Melton arranged funding for the CEAI purchase of Brighton Creek in Kansas City, MO.

CECP continues to syndicate federal and state historic tax credits. During 2022, Wisconsin state affordable housing tax credits were syndicated for The Landing at 818 in Sun Prairie, WI, with a large national insurance company as the investor. The Heartland Historic Preservation Fund VI (HHPF-VI) has committed to investments for five historic renovation projects developed by third parties in Kansas City, MO, Denver, CO, Lebanon, MO, Abilene, TX, and Manhattan, KS. A long-time friend of the company, Mike Marsh, partnered with CECP to launch HHPF-VI. Carol Lowe (2011) continues to make a market in state historic and state affordable tax credits. etc.

Historic tax credits for the Fountain Inn in Denver, CO, are being syndicated for a third-party developer by CECP.

Innovation in Motion (iiM)

iiM had a very busy year during 2022. We made investments in eight early-stage companies totaling $2,126,000 in the Agriculture, Animal Health, and Human Health verticals. Two were follow-on investments in companies that had already been in the iiM portfolio.
Since September 2015, iiM has made 32 investments in 22 early-stage companies totaling $6.82 million. The average investment per company is $310,000.
Total investment dollars break down with 45% into Human Health, 39% into Agriculture, and 16% into Animal Health companies.
One company in the Agriculture vertical was sold to the John Deere Company in December 2021 at a very nice profit for the investors. A company in the Human Health vertical may be going out of business.
iiM welcomed one new investor member and three new syndicate members during 2022. At year-end there were 22 investor members and 15 syndicate members.

iiM has a remarkable track record. Industry averages show at least 50% of early-stage companies will go out of business. What makes iiM unique in the venture capital world is attributable to several factors. First, we specialize in only three industry verticals. Many angel investment groups aren’t particular about the type of companies in which they invest and often are infusing amounts that are much less than iiM’s $310,000 average investment per company. Our investor group has significant domain expertise in each of the three verticals – something that few other early-stage investment groups can claim. Because we have such strong domain expertise, we can perform extensive due diligence on the companies in which we consider making an investment. Again, most angel investment groups do not go to the extent iiM does to investigate their portfolio companies.

A little-known fact during all this investor interest is that iiM has a direct tie to our CEAI investor base. Over the years, 23 investors affiliated with iiM have invested a total of $9,125,000 into our various CEAI funds and bridge note programs. This means that a subset of iiM investors have invested 1.33 times the amount money into CEAI as they have into iiM companies. This level of crossover investing has been extremely beneficial to our ever-expanding investor base.

During 2022, Nicholas Hense (2021) was promoted to Principal and assumed a greater role in identifying companies in which to invest and leading the due diligence process. Lydia Kinkade (2013) is the Managing Director for iiM.

Another Empowerment Story

By Nicholas Hense (2021), Principal, Innovation in Motion (iiM)

Nicholas Hense (2021), is a Principal for Innovation in Motion (iiM). Here is what he has to say about his Empowerment:

I grew up in Prairie Village, KS and have seven brothers and sisters – naturally, family is of utmost importance to me. After graduating from the University of Notre Dame, I felt compelled to return close to my family and embark on my personal and professional journey in Kansas City with the ultimate goal of becoming a leader in our community and empowering others to thrive.

Over the past several years, I have been closely involved with Boys Hope Girls Hope of Kansas City as a member of the Young Professionals Board of Directors. This organization helps motivated middle and high school students rise above disadvantaged backgrounds. The objective is to graduate young people who are physically, emotionally, and academically prepared for post-secondary education and a productive life, breaking barriers so they can become community-minded leaders. Seeing the tangible impact one can have on someone else’s life with the same values and goals has inspired me to apply these efforts to my professional career, as well.

Since joining the iiM team in 2021, I have felt “Empowered to Thrive” in a multitude of ways and have had the opportunity to continue to instill empowerment in others. I have been challenged to foster relationships with startup founders both in Kansas City and across the country and have been able to act as a mentor to these founders, just as I have been able to mentor the Boys Hope Girls Hope scholars. One example was having the chance to offer strategic advice and guidance to UMKC students hoping to start their own company someday. In addition, the iiM and broader Cohen-Esrey teams have promoted a family-like environment, which has made for a personally rewarding experience. Lastly, iiM has supported my efforts to apply for a notable Kansas City leadership development program, for which I am grateful. I hope to continue to be a positive influence in our community and empower others to thrive. For as Aristotle said, “the whole is greater than the sum of its parts.”

Construction Happening Everywhere!

Construction is underway on six affordable/workforce apartment communities being developed by the Cohen-Esrey Development Group (CEDG).

A bird’s eye view of the massive environmental remediation that has been underway at the Lofts at Creekview in San Antonio, TX.

Work continues at Sinclair Flats in Mankato, MN, despite snowy conditions.

The building foundation is taking form at the Trails at Lehow in the Denver suburb of Englewood, CO.

Initial sitework is underway at Panorama Heights in Colorado Springs, CO.

Work is progressing on a retaining wall at the Loma Vista Lofts in San Antonio, TX.

Lumber has been delivered to the Loma Vista Lofts site and the project will be going vertical shortly.

Cabinets are being installed at the Lofts at the Grim.

Finishing touches being applied to the Lofts at the Grim in Texarkana, TX.

Another Blast From the Past

Did you know that there have been multiple business units in Cohen-Esrey’s past that aren’t part of our family of companies today? We have been running a series in People & Properties where we will highlight one such business unit. Here is another.

When Robert E. Esrey and Company was founded in 1970, the company focused on both multi-family and commercial property management. We have previously reported how Bob Esrey (1970) became friends with Roger Cohen (1969) shortly after Bob launched his company. They exchanged small ownership interests in each other’s firms and proceeded to operate in a loose partnership for the ensuing years – the Esrey Company handled commercial property management assignments and the Cohen Company provided commercial leasing and brokerage services. This arrangement continued until 1979 when the two founders discussed a potential merger but could not come to terms. At that point, the ownership interests were transferred back to the respective firms and the Cohen Company established a commercial property management operation. The Esrey Company formed a boutique leasing and brokerage division, and the two companies were friendly competitors for several years.

In 1987, Bob and Roger had further discussions about a merger and the two firms were eventually combined that year to become Cohen-Esrey Real Estate Services, Inc. The merged company became a powerhouse in the commercial real estate field in Kansas City and throughout the Midwest. At its peak, the company had more than 40 licensed agents, managed a cumulative total of 27 million square feet of office building, shopping center, and industrial space, and consummated an average of 500 leasing and sale transactions annually. The firm invested heavily in computer hardware and software in the late 1990s and had a marketing department with four or five team members. It took a lot to support a large team of sales agents. Commercial clients included the likes of Aetna Life Insurance, Travelers Insurance, Prudential Insurance, Farmers Insurance, US Life, Connecticut Mutual Life Insurance, the New England Life Insurance, Blue Cross/Blue Shield, Sprint, the Kansas Public Employees Retirement System, Merrill Lynch, Northwestern Mutual, and Allstate Insurance – just to name a few.

In the late 1990s and early 2000s, the commercial real estate industry began to change. There were always brokers on both sides of a transaction – often involving another real estate firm which effectively reduced commissions to Cohen-Esrey by 50%. Due to competition from national firms, there was significant compression on commissions. And there was a pronounced trend for large leasing, management, and brokerage listings to be awarded to national firms. In late 2002, Roger Cohen unexpectedly passed away. By 2005, it was decided that Cohen-Esrey would focus solely on apartment ownership, development, and property management, and the commercial leasing/brokerage and property management units were sold to a group of Cohen-Esrey brokers who continued to operate independently thereafter.