A Letter from the Chairman, Joseph Keough
Partners and Friends:
2022 was another outstanding year for Wood Partners. While a previously robust capital markets environment started softening in the second quarter, we were still able to produce extremely strong results in 2022. I am proud to see our team continue to execute at a high level. Turning to the new year, we are encouraged to see early signs of cost inflation abating as well as continued solid operating performance across our operating assets. However, more cautious and choppy capital markets will limit new development pipeline opportunities in 2023 (relative to 2022). As always, we will be prudent with our predevelopment investment and, though this year will be slower than last, we are excited about the projects currently in our pipeline. In 2023, we expect our project start volume will be consistent with our long-term annual average over the past 10+ years. This ability to execute through the cycle is a testament to the depth and breadth of our capital relationships that put their trust in the Wood Partners organization. Thank you.
Wood’s financial position is as strong as ever. The average loan-to-cost of our portfolio is 56% (<55% for 2022 starts), we do not have any land loans on our balance sheet, and debt maturities are limited to seven loans through 2024 (including only one outstanding loan maturity in 2023). Following a year of record new development starts, our working capital level is elevated and will further serve to mitigate any market choppiness during the next 12 to 24 months. Some highlights from 2022 include:
- Starting 32 new development projects comprising more than 10,000 multifamily homes and nearly $3Bn total capitalization.
- Selling 17 properties representing nearly $1.7Bn total value.
- Ending the year with more than 50 projects under construction.
- Growing our property management portfolio by nearly 40% to 23,000 homes, primarily through growth in our third-party relationships.
Our property management platform continues to excel. In addition to the focus we place on the Wood Partners’ lease-up portfolio, we are thrilled to now manage more than 12,000 multifamily homes for valued third-party clients. The expansion of our third-party management portfolio allows us to continue to invest in our property management team to ensure our teams and properties perform at the top of the market. Our growing portfolio also provides additional opportunities for Wood Partners’ associates to continue to develop within our organization.
The COVID-19 epidemic disrupted temporarily our growing relationship with Habitat for Humanity, but we are pleased and proud that Wood Partners’ associates around the country participated in nine builds in the past 12 months. Our associates have enjoyed swinging hammers alongside colleagues from construction job sites, operating communities, and corporate offices while giving back to the communities that have been so good to us. We look forward to continuing to grow this relationship in 2023 and beyond.
As we look forward to 2023, it is clear that capital markets will be more challenging. We appreciate the challenges this current outlook brings and although no company is immune to these headwinds, Wood Partners’ track record, strong culture, and financial discipline allows us not only to endure but to prosper in this type of environment. Multifamily has proven its resilience as an asset class through the Great Financial Crisis and COVID epidemic, and we believe that the industry will continue to outperform. As we enter 2023, we will continue to balance our careful approach to risk management with the entrepreneurial mindset necessary to identify opportunities we believe will provide compelling risk-adjusted returns. During times of capital market stress, we usually see a “flight to quality” as our capital partners choose their operating partners more carefully. We welcome this flight-to-quality mentality and we look forward to partnering with you in 2023