Q4 2019 Earnings Call
Good day and welcome to the Kennedy Wilson fourth quarter 2019 earnings call in webcast.
This conference is being recorded.
After today's presentation, there will be an opportunity to ask questions. She asked a question you may prices Star then one on your telephone keypad to withdraw your question Press Star then Q.
I would now like to turn the conference over to Mr., Devin Oh, sorry. Please go ahead.
Thank you and good morning. This is daven bhavsar joining us today are building moral chairman and CEO Kennedy Wilson, Mary Ricks, President Kennedy Wilson, Matt Windisch Executive Vice President Kennedy Wilson, and Justin Enbody, Chief Financial Officer. Kennedy Wilson today's call is being webcast slides will be archived for replay the replay will be available by phone for one week by webcast with remote.
Please see the Investor relations website for more information.
On this call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income you can find a description of these items along with a reconciliation of the most directly comparable.
GAAP financial measure and our fourth quarter 2019 earnings release, which is posted on the Investor Relations section of our website.
Statements made during this call may include forward looking statements actual results may materially differ from forward looking information discussed on this call due to a number of risks uncertainties and other factors indicated in reports and filings with the Securities and Exchange Commission.
No what you're trying to call over to our chairman and CEO Bill Mcmorrow.
Thanks, gentlemen.
Good morning, everybody and thanks for joining us today.
We're pleased to report record results for both the fourth quarter in a full year 2019.
It was result of strong execution of our strategic initiatives I'm pleased to report the 2019 or check to your as a public company was also our most successful year as we produced the highest annual levels of gout <unk> adjusted EBITDA.
Adjusted net income since going public in 2009.
This morning, we will discuss our progress our key growth initiatives are 2019 operating results.
As well as review, our key highlights and outlook for 2020 twice.
Our global team remains focused on executing our three strategic initiatives growing that operating income from our properties.
Non recurring see revenue from our investment management business and selling non core assets.
We made progress on all three fronts in 2019 and look forward to continuing this momentum into the 2020.
So starting with number one growing our property NOI.
In 2019 were able to grow our estimated annual NOI by $14 million to 421 million to start despite being a net seller of assets and reinvesting in our development pipeline.
The growth was supported by strong same property results as well as progress on stabilizing our newly constructed assets.
Our goal is to continue growing our property NOI meaningfully in the next three years as we focus on both organic growth through the implementation of our value add asset management program and the completion of our construction projects and leasing initiatives.
We expect to out at 105 million about a wide by year end 2023, including 34 million by the end of next year from the implementation of our construction projects and leasing initiatives.
We will also grow NOI through selective new property acquisitions.
We completed $1.9 billion gross acquisitions in 2019, which kw sure was 33%.
Bringing our total to 23 billion of acquisitions at cost since going public in 2009.
The second initiative, a growing our fee bearing capital and recurring management fees.
2019 was a strong your for our investment management business.
We we grew our fee bearing capital by 39% to 3 billion.
And also generated 79 million in investment management fees, including promotions.
We ended the year on a high note with the final closing of fund six in the U.S. at 775 million, which came in above our niche initial targets.
This adds to the approximately 11 billion a private capital we have raised since going public.
Private capital. Thank you we continue to see very strong global demand for commercial real estate and continue to raise capital both in the U.S. got in Euro.
We have built a unique global company over the last 31 years with a proven long term truck brokers that is drawing interest from a number of the world's major pension plans sovereign wealth funds insurance companies.
For 2020, our goal is to raised an additional 1 billion of gross fee bearing capital.
We've already made great progress in the first two months of the year I'd expect further growth in our investment management business in the first half of Twentytwenty.
Number three the sale of our non core assets, we continue to execute our asset sale program selling non core assets and investments, where we have completed our business plan and can recycle capital into other higher quality assets with a higher returns.
Potential.
For the quarter.
We sold $511 million of assets, which are ownership was 79%.
94% of our sales in Q4, when our European portfolio.
Where we disposed of 19 wholly owned assets for 378 million.
Generating a return on cost of 38%.
Our quarterly sales were focused on wholly owned hotels and retail assets, which together now account for only 18% of our total portfolio down from 25% a year ago.
For the year.
We sold 1.4 billion of assets, which are ownership was 54%.
Our sales were 56% in Europe, and 44% of the U.S. and generated $536 million of cash to kw.
On the investment front in 2019, we deployed $503 million bar capital with 58% going to new investments.
8% into Capex in development.
4% into share repurchases.
2020, we expect to generate an excess of 400 million of cash to kw from noncore asset sales.
Including the 130 million dollar sale of pioneer point 294 unit multifamily asset in East, London, which closed last month.
These proceeds will be recycled into our development and value add capex projects and used to fund new investment opportunities across our platform.
The global real estate investment environment today remains strong with historically low interest rates and over 13 trillion dollars a negative yielding global data.
Commercial real estate continues to be a highly sought after asset class.
Having purchased $23 billion about sets a costs in the last 10 years, we're able to leverage our global relationship network and find off market opportunities.
Half of our Q4 transactions were sourced off market, where we transacted directly with the seller.
Across all of our major markets, including the Western U.S., Dublin, and the UK, we continue to see very favorable economic drivers of demand from both multifamily in office investment.
Including job growth population growth.
Low unemployment and good University systems that continually generate a talented pool of young workers.
Many of whom will seek rental housing.
Large U.S. technology companies continue to expand in the Pacific Northwest Salt Lake City Dublin.
Creating incremental demand for both apartments on office space.
To summarize.
I'm pleased with the underlying fundamentals in the long term goal growth prospects of our markets.
We have in excess of $4 billion of in purchasing power.
Our on balance sheet.
Liquidity in our commingled funds in separate accounts deploying this capital will enable us to continue growing both our rental wide and recurring investment management fees, we expect another great year and Twentytwenty.
Now to discuss our global same property results in more detail I'd like to turn the call for to Matt Windisch. Thanks, Bill our stabilized portfolio analyze stood at 421 million as of yearend split roughly 50 50 between the U.S. in Europe.
We're focused on growing our in Hawaii through our strong same property results through the completion of our developments and the lease up of our unstabilized assets as well as through selective acquisitions.
So starting with our same property results.
Finally, our same property revenues were up 4.3% and are kind of why was up 4.9% for the quarter.
For the year same property revenues were up 3.5% and analyze it was up 4.1%.
Our western U.S. multifamily and are you can't Irish commercial portfolio together account for 75% of our same property portfolio and I'd like to provide more detail on each.
In the U.S., our garden style suburban apartment portfolio continues to perform well.
Our two largest regions the Pacific Northwest and the Mountain States delivered strong results as we have seen throughout the year.
In the Pacific Northwest, we had solid growth with an ally up 6.2%.
This region continues the strong performance we've seen over the last few years driven in part by the continued growth of tech companies.
Amazon, which opened its first office in Bellevue two years ago, now has approximately 3 million square feet.
Side of Seattle and has reportedly looking to grow its current headcount to 15000 employees in Bellevue, which would be an increase of more than seven times their head count in that Submarket.
It's not just Amazon that is expanding Facebook, Microsoft Google and Apple are also continuing to expand their presence in that region as they are similarly, Dublin Ireland.
We remain very optimistic that significant new jobs will continue to fuel the overall growth at the Pacific Northwest.
We also saw continued strength in our mountain state apartment portfolio, which primarily consists of salt Lake City, Boise and Reno.
This region saw revenues increased by 7.4% the strongest growth in all of our regions. This led to an NOI growth of 8.6%.
We have now grown our Martin Mountain state apartment portfolio from 3600 units at the start of 2017 to almost 8500 units today, including 1300 units under development.
Back to Pacific Northwest job growth remained strong in the mountain states.
In 2019, Utah, and Idaho, where the top two states with the highest percentage change in job growth.
Utah's economy is booming thanks in part to strong population growth, which grew at the fastest rate of any state in the last decade.
Utah also hit its lowest unemployment rate ever at 2.3%, which is the lowest rate in the country.
Our mountain state departments currently have the lowest average monthly rate in our global portfolio and we are confident that there was further upside both from the favorable job market.
Migration growth trends in this region as well as the completion of our value at initiatives.
Our U.S. multifamily team has completed approximately 2000 unit renovations in the past two years with an average cost of 11000 per unit.
An average return on cost of 23%.
We currently have another 2000 units that we plan to renovate over the next few years as well as numerous other amenity enhancements at our properties. The majority of which are taking place and our Pacific Northwest and mountain state assets.
And our global commercial portfolio, we completed leasing across almost 1 million square feet in Q4, leading to same store NOI growth of 4.4%.
The majority of our leasing took place in our European portfolio, which accounts for over 70% of the commercial same store pool.
In Q4 are you can't Irish commercial same store saw revenues increased 2.6% and NOI increased by 2.1%.
We had a strong leasing quarter in Europe, where we completed 47 lease transactions across 800000 square feet and added 4.5 million of annual income.
Over 2019, the team added 9.7 million of annual income completing 159 lease transactions over 2 million square feet.
The biggest contributor in the quarter was 111 Buckingham Palace Road, our largest central London, UK office asset at over 224000 square feet.
Following the significant leasing momentum we had in Q4 and into Q1, we are on pace to bring the annual NOI for 111, Buckingham Palace rose to approximately $17 million.
With that I'd like to turn the call over to Mary Ricks. Thanks, Matt.
The second important way for us to grow our annualized through the completion of our global developments and the lease up of our Unstabilized portfolio, where we have over $3 billion as gross development and stabilization projects underway and are on track to deliver $34 million of analyzed by the end of next year and in total.
No $105 million by year end 2023.
I'd like to provide a quick update on our near term Irish and U.S. developments.
In Dublin Clancy Quay three has 266 units currently under development.
Which will make Clancy quay, the largest multifamily community in Ireland was 865 units once complete.
We originally acquired Clancy back in 2013, when it had only 423 completed units and an eight and have acre and develop site.
Construction of the final phase is progressing well and we're on track to complete this development by the end of Q2 2020.
At 10, Hanover Key 69000 square front office development adjacent to our capital Dot campus construction started in the quarter.
We're expecting to reach practical completion in early 2021, and we've seen good early leasing interest.
And at 20, Kildair Street, 64000 square foot office development near St. Stephen screen and the Shelburne construction started in January.
We expect to reach completion in mid 2021.
Office demand in Dublin remains very robust in December office vacancy at 4.7%, a 20 year low for Dublin.
In the U.S., our near term development includes approximately 2600 multifamily units. This includes 558 market rate units. The majority of which are in the mountain state and remain on track to be completed by Q1 2021.
We're also currently developing over 2000 units and our senior and affordable multifamily joint venture vintage housing.
We initially acquired vintage for $78 $78 million in 2015 with 5500 units.
In four and a half years, we've received all of our initial investment back and we are on pace to grow the vintage platform from 7400 stabilized units today to approximately 10000 stabilize units in the near term.
This represents 35% growth from year end and almost 82% growth since acquisition.
Completion of these projects in the U.S. and Europe will bring our global multifamily portfolio to approximately 30000 units.
We're also adding to enter why in a meaningful way through new acquisitions, we completed $946 million of acquisitions in the quarter of which our share was 45%.
In the U.S., we acquired a western U.S. multifamily portfolio off market.
It's almost 1500 units for $342 million.
Our average ownership and this portfolio is 38%.
We also acquired Hamilton landing wholly owned 406000 square foot office campus in Northern California for $115 million within initial cap rate.
6.8%.
Okay.
In the UK just outside of greater London, We purchased the Heights, a 350000 square foot Prime office Park for $190 million in which we have a 51% ownership interest.
This also had an initial cap rate of 6.8%.
We have already leased 11000 square feet previously vacant space in the park at 34 pounds per foot and this is more than 15% ahead of the average rent at the park at the time at acquisition.
Heights in a number of our other UK assets are located in the southeast office market, where fundamentals remain strong with great a vacancy at 4%.
In the UK, we saw a dramatic rebound of investment activity in the market in Q4.
20.5 billion pounds of investment volumes up a significant 76% from Q3 2019 and up 23% on Q4 18.
Turning to our investment management platform, we had a successful year livery raised capital in our commingled funds and our separate accounts and grew our fee bearing capital by 39%.
In December we closed on six in the U.S. at $775 million, bringing in a number of new high quality institutional investors.
Additionally, we continue to grow our separate account business, where we invest alongside our partners and acquire high quality real estate and in many cases are able to generate mid teen levered returns on our capital.
Our separate accounts represent 65% of our $3 million at fee bearing capital.
With that I'd like to hand, the call back to Bill.
Thanks Mary.
2019 of the $1.9 billion of acquisitions, we completed 90% were completed in our unconsolidated co investment portfolio, which includes our separate accounts and co mingled flaws and 10% we're hopefully all.
Looking ahead and 2020, we will look to selectively add to our on balance sheet, while also continuing to grow or unconsolidated investment portfolio.
As a point of reference when you're looking at the kw balance sheet.
$1.3 billion of unconsolidated investments represents our ownership and $8 billion in assets in joint ventures generating $342 million about a lot.
In which we have at 29% ownership interest.
This is an addition to the consolidated assets our on balance sheet, which on a combined basis results in a total of $14 billion of assets under management at carrying value.
Turning to the capital markets and the quarter, we announced a 300 million dollar investment by Eldridge industries, which came in the form of a convertible preferred stock.
The injunction whether this transaction. We also increased the targets for our JV platform with security benefit an affiliate of Eldridge to $1.5 billion an asset purchases.
Today, we have completed $386 million of asset purchases and look to continue growing this platform and twentytwenty.
The average transaction help to further strengthen our balance sheet, which at year end had $574 million of cash and $500 million of availability are fully undrawn line of credit.
During the quarter, we paid off the remaining balance of our line of credit and the 200 million dollar term Rome Walton relating to the too.
2017 acquisition of kw week.
We have only a $145 million of debt maturities in 2020, which 100 million is planned to be repaid in full in April.
So to summarize.
We had an exceptional year and 22019 expect 2020 to be another solid year for Kennedy Wilson.
We continue to improve the quality of our portfolio, which is and is producing strong cash flow in growing markets and we will remain focused on 2020 on continuing to drive growth in both our real estate portfolio and our investment management business, so with that I'd like to open it up.
Up to any questions.
We will now be taking my question answer session.
Ask this question you May Press Star then one on your telephone keypad.
You are using speakerphone, please pick up your handset, that's where pricing monkeys.
Withdraw your question Press Star then to you at this time, we will not materially to similar roster.
We will now go to our first question.
That's question comes from.
Tony I'm sorry.
One moment please.
Thank you for your patience, we will now go to our first question coming from Tony Paolone with JP Morgan. Please go ahead.
Okay. Thanks, good morning.
And Tony.
First question just you mentioned the billion dollar goal for raising capital I think you've mentioned was aren't gross basis for 2020.
How should we think about just any offsets in terms of dispositions or harvesting prior funds get towards more of it that number.
Sure Yeah, I mean in particular, we have a commingled fund in the U.S. that that we are selling assets out of and so I think you could expect somewhere in the range of three to 400 million of.
Of equity a third party see bearing capital that's in essence being sold in the year.
And then as we mentioned we plan to raise in excess of $1 billion of new fee bearing capital.
Okay.
And Oh, so as it relates to.
Your your funds in your various partners and joint ventures can you talk about just how by boxes may differ between.
What you're looking to buy on behalf of security benefit and that JV versus a fund six for instance, and maybe even Axa and your fund.
Yes, I think in the U.S. side.
This is Matt ill take that so.
If you look at our Commingled fund in the U.S. its value add fund the has Oh and investment period, where we're targeting assets that we can buy and sell within generally three to five years and where we're trying to produce value add type returns and so to the extent there are opportunities that are more transitional in nature.
That bucket has a first priority on those types of opportunities.
And then if you look at.
Some of the other.
Separate account and joint ventures, we have including the security benefit bucket, that's more of an accord a core plus bucket with a much longer duration investment they're looking at so it's a pretty clear delineation between the more transitional shorter term properties and the longer term properties that we tend to finance the 10 year fixed rate.
Anthony.
And then in Europe, Tony our joint venture in Ireland has first right on all terrorists or multifamily assets and then we have a European fund that we're currently raising.
It also helps first right for any commercial.
Investments in Europe.
Thanks.
And just one one thing to note I mean on the on the transaction around the joint venture that we have in Ireland, we have existing assets in that and and a very full pipeline in terms of what we're building so in that.
Completed will be over $2.5 billion, upsize, which we started about a year and a half ago. So we've made really really good progress without joint venture with an insurance company in Ireland.
One thing just to add to it in all these platforms GW is a significant co investor.
So with the OXXO platform. Its 50, 50 and security benefits, we're putting up 20% in our funds where a significant co investor. So we're investing in all these transactions are Kennedy Wilson.
Yeah, and that's again my math says I think 21 last thing is all of our investors really like that alignment.
So for US, it's it's really important for us to continue that not alignment with our investors.
Okay and just my last question is Youre done well with the mountain state strategy and it seems like a number of those markets are coming up on institutional investor radar screens, and where where do you see the most opportunity right now, whether it's a geographically or or by property type or.
Type of investment.
Yes, I think part of the key Tony as we've always tried to be early to markets.
Where we've talked or were those characteristics that I talked about in the body of the script today.
So when you think about Seattle, we started their 16 years ago.
Today, I don't know that were.
The largest over we're certainly one of the top five largest stores of full departments and commercial properties in that Seattle markets and the same thing as was true would salt Lake City in Boise and so we.
We have a very very strong position, there I'm, not saying dominant but certainly like in the Boise marker, we have a dominant position there.
And and the same thing is true kind of secondarily it in the Reno market, particularly in our ROE.
Affordable and senior business and when you look at the number of communities that we have on our.
Affordable on senior business, we started with 30 communities.
Four and a half years ago by the time, we're done with the construction on well what we're going to be up to 50 communities. Those are all generally in those markets about what we call those melt state markets.
So we the drivers the fundamental drivers of any of these and as I've said on these calls before.
Seattle market on the Dublin market share very common characteristics and you've got the I would call to top cystine highly capitalize tech companies.
That are expanding job was in both those markets and then the other piece of this is that.
As we've said on previous calls when you look at the state income tax rates in the state of California, being 13.5% and in the state of Washington Zero.
And in the state of Idaho, roughly 4% and roughly the same in Salt Lake City.
You've got.
This millennial population.
Net loss.
I would say a higher quality of life.
And also was affordability in their housing.
So we don't see any.
Slowdown in those characteristics over the next 10 15 years, we think those fundamentals just continue in the same fashion that they are already ALS.
Okay. Thank you.
Thank you we will move now to our next question.
Question comes from Dare Johnston with Deutsche Bank. Please go ahead.
Hi, everyone. Good morning, and thank you.
Then when we look at the 105 million NOI target by 2023.
Can you discuss the trajectory of this goal I think you mentioned 34 million by the end of 2021, but is there a good amount to assume for our models for 2020.
I think the number for 20, Twond is probably somewhere around 15 to 20 million.
But I think the point I really want to make them term not to get lost in the construction is that we're also doing new acquisitions.
And.
We have.
A very very strong pipeline of.
Oh.
[noise] acquisitions that were looking at both here in the U.S. and in our two.
So you are core market of the United Kingdom.
When you think about us in Ireland were already either the number one or number two.
Owner of commercial real estate, there and we have as we've described a very very big part of our development pipeline is in Ireland.
And so.
[music].
While the development is clearly an important component, we expect to meaningfully add to the on a lie over the next two or three years through acquisitions.
Capital as I outlined is basically coming out of non core assets that we're selling at that.
Nice gains.
And then taking that capital and redeploying it into longer term.
Value add assets that have 10 to 15 year type of lives.
Excellent Bill. Thank you and then just you know segue into Ireland. As you discussed is it possible for you guys that go through the dynamics in the market fundamentals in Ireland for both the office as the and the residential endeavors. Similarly to you just did for the mountains.
Stage, just so we can understand the mindset, there and adding yearend as as far as a those endeavors.
I'm going to let Mary give you the me to have that Derrick, but but I think they always these things need some perspective and so.
Without bragging I mean, we were really first movers in Ireland, starting in 2011, and so when you look at what's happened there.
The 10 year bond rate in 2011 in Ireland was 14.5% the unemployment rate was close to 16 of the how percept.
So now you you fast forward to.
The.
Tenure bond rate is down to zero in Ireland as it is in many of these European countries have the unemployment rate is it solved.
5% today.
And the other part of this which just can't be underestimated is.
The great University systems that exist in.
Dublin.
A number of though that are producing these young workers for not only the tech companies, but also for the financial services companies.
Our capital Dock project.
You know houses JP Morgan.
When you.
Going and look at that space and block. This space, it's really space that is geared to what they call technologists that are younger people that are being hired out of the you really out of the University system.
Our London in Ireland, you can go to if you're an Irish citizen your go to school there.
Beginning to the Randy your education for for free.
But without I'd like to kind of have Mary give you a little bit more granular information on higher.
Yes, I mean, I think so when you think about Ireland for US, let's meaningful there is the prs market multifamily and the office market.
And as Bill said I mean, we really were first movers in Ireland in 2012, there really wasn't Prs market I think it earlier in the first buyers of Prs, We bought the alliance and Sanford Lodge at that time.
Fast forwarding to today and the Prs market, there was $2.4 billion Prs deals that traded in Ireland in 2019.
Seabury estimates at their 6 billion of capital chasing Kara SASSA.
And when you sort of think about where are we evaluate where are we in in the market in the curve.
It's interesting when you look at Ireland and yields where for example still on Prs.
3.75% on average obviously, that's looking back because those are sales that have occurred.
I just heard yesterday, there was a deal that happened at three and a high 3.5% and when you look at Ireland versus other big European cities.
It's trading way wide as of our peers and when you think about.
Larry can borrow and so just the spreads on what you're buying it's it's a very very attractive asset class.
And there's real demand so theres, a big housing shortage in Ireland.
The Central Bank has come out and said, there's 34000 residential units needed to fill that demand.
And when you think about Prs there is very very little built up to the third quarter of 2019.
So and then just another stat for yet I'm only 7%.
In Dublin people or rent is actually in Ireland, 7% are renting apartments versus in Europe. The rest of Europe, it's 41%.
So, it's a really really new young sort of market.
And as Bill talked about all the technology companies really driving the growth in Ireland and a lot of that as young young people.
Which is the majority of the population in Ireland under 30, 25%.
So all of that sort of leads to real demand for Irish multifamily and we're trying to do our part in that.
In the needs of housing in Ireland right now.
Yes, and marry that it was great and I think the other piece that that I would add to what marriages said as one of the great strengths of the Kennedy Wilson platform is our ability to what I call share best practices across.
Both oceans, so to speak but.
If you look at what Mary and her team, we're able to do and Ireland. It was really taking the model what we had created here in the United States in terms of Amenitized thing.
These properties with gyms and business centers, and and actually a leasing center.
And those concepts really didnt exist in Ireland. So she took that really transported out and the same thing is very true of what we're doing on the construction and development side. So our.
Our construction team based in Ireland was handles everything that we do in Ireland, and the rest of Europe and our construction teams here.
They were both your yesterday for example at our headquarters office and they share best practices in terms of general how to run those parts of our business.
And the other part of what.
Thats great about our company is that when you look at up from an investment perspective, we're able to look at.
At best risk adjusted returns in.
In really global markets and so it gives us the framework of where we want to put our capital.
Whether it's our capital or partners capital to give up the best risk adjusted returns.
Interesting, let's say helpful. Thanks, everyone.
Thank you we will move our next question coming from Jamie Feldman of Bank of America. Please go ahead.
Great. Thank you I just want to go back to your initial comment thing very strong demand from global capital looking to invest in real estate.
You talked about the 1 billion in 2020, but just as you look longer term.
How much do you think that can grow and I guess, even more importantly are you seeing signs that that capital is looking for either new regions or a shift in the types of assets, whether its core value add opportunistic just kind of what did the landscape look like today.
This is what you've seen historically.
Well I would have to have Mary answer part of this question too, but I think the.
Oh, the global demand for yield.
It is really what.
Part is what's driving the.
Oh.
Interest in the real estate investment platform and I think but the other part of it too is that the.
The number of big players in the real estate.
World just like the banking industry whatever was 10 years ago bought ahead 15000 branches and it's shrinking the number of people who can really played in these bigger asset purchases continues to get somewhat smaller.
Look at just the two acquisitions to.
The come to my mind that we did married in the fourth quarter. One was 350 million warm was 190 million where there aren't.
And in today's world to be competitive you have to be able to move with the speed.
So the other great thing about our platform is that we do all of our we don't third party really hardly anything all do due diligence on the and the asset management of our assets as all done in house.
And now having done this for 30 years together.
We have it information system.
That is second to none in terms of knowing the mark the markets that we're in.
So.
I would say without getting into the numbers over time, you know our platform is going to continue to attract.
Way more capital than we're forecasting for this year.
And the thing I would add to that is just because were operators.
Able to attract capital that from from Allocators, and and we're real operators of real estate. So Great example is the heights deal that we thought.
Just outside of London, which is in the southeast Ariad, the UK, where we where we've done a lot of office product over time.
In very short order I think was 30 days since we closed we did an 11000 square foot deal office lease at 15% about previous passing rents. So we just have the team in place and the knowledge and the know how to take that leasing risk.
In different locations and not really add value whether it be renovating a building.
Taking some leasing risk.
Building apartments were value creators through our platform, saying, we're going to continue to attract that capital.
Mary's, making a really important point here because when you you think about.
And not be little ing them, because they've got great businesses, but when you think about most of the investment managers, there reallocate ers of somebody else's capital to another real estate operating.
Entity.
So you've got a.
Im calling it a pension funds, giving money to an investment banker that has or investment manager that has no operating.
Capability, who then goes in finds real estate.
Investor that they allocate that capital too so what we do at Kennedy Wilson really cuts out.
One of these steps were the operator, so the capital is coming to us from any of these investors, we're not going out of looking for an operator to find the investments. We are finding these investments ourselves out of this network that we've developed over the last 30 plus years.
We have.
Relationships now really all over the world that allow us to find these off market opportunities.
When we take.
We execute as quickly as reasonable all these opportunities and then we operate the assets ourselves.
So it's it's really big distinction when you think about it as far as an investment management business.
Okay. Thank you that's very helpful. And then as you think about your pipeline today I mean do you think that.
Either this year, just going forward and what you're watching I mean do you see do you think you'll see more of the 350 million dollar in larger type deals.
Fair enough.
Well I don't know and I would say that we have we never started a year with a goal in terms of what we want to invest because we've got to make sure that the.
We don't want to.
Get in some.
Crazy mindset that we have to put money to work and so we're always mindful of the fact that the only time, we're going to invest money is if we think it's a good opportunity not because we have to put money to work to earn fees.
So.
But I would say our pipeline right now things were looking out as big as we've ever seen on the acquisition front.
It's clearly different than it was in 2009 and 10 11.
But there is there's there's really good.
Assets available as long as you can find these things yourselves in off market.
Types of opportunities, where there isn't as much efficiency on the Marcos.
Is it weighted towards any region every asset class.
No I would say you know I call at Lucky, but we just happen to be lucky to be done.
I would say three.
I'm going to say one more thing I think to to successfully and best you have to be in jurisdictions, where there is actually transparency in terms of financial system, and where there was actually.
What I call rule of law.
And and so we're extremely lucky to be.
Testers here in the United States in the Western part of the United States and of the United Kingdom and in Ireland.
And I think the third piece of that equation is that there has to be a free of the ability to freely move capital.
You know without currency restrictions or any of those sorts of things and so.
I would say the.
We're seeing.
Our main investment opportunities, primarily in the United Kingdom, and the markets that we've outlined in the western United States.
And that that's only because in Ireland right now when you looked at the amount of development, we're doing and the properties we are already own.
We're very dominant player there.
And then when you look at our portfolio about basically 50% as in the United States and 50% as in the United Kingdom in Ireland now.
And.
That's pretty much I think what you're going to see going forward that same.
Percentage split.
Okay and then last question for me can you just talk about the preferred you did with Eldridge I know you have a relationship with them, but maybe just talk about how you think about that as compared to your other opportunities for cost of capital.
And just what the strategy is behind that.
Well I mean, I would let Matt partially answer his question, but I think the clear strategy was to have alignment with with.
An industrial run our stock and by that alignment I mean, having somebody that also at a willingness and desire to deploy capital and do our best or real estate investment platform and so when you look good.
Going back to I think 2011, when we close the first equity investment from Fairfax financial and they currently own almost 13 million shares of our stock.
The.
The idea, which is exactly the same as the security benefit idea was to have somebody that owned or stock and had a strong interest in seeing the company's succeed. There was also giving us capital to grow our investment business, which allowed us to grow our recurring out ally in our investment management fees. So it's the same.
Concept with security benefit.
And it just creates this perfect alignment I would say that so.
You know when you think back to the kw, we acquisition, which just happened in 2017.
At that time, you know to refresh everybody's memory, we only own 24% of that company.
We bought in the public market through a very long.
Intricate process, we bought the 76% that we Didnt know.
Including the special dividend that we paid the close of the transaction. We've now distributed over a billion dollars of cash out of that acquisition.
So it was always is always in these situations for us is trying to find the right.
Alignment with our partners and then I would say marry those last piece of this as we like to look at things over a long term periods of time.
Many of these like the security benefit relationship.
We're way goes back to really our first bond offering in 2000 Twelves.
And.
Obviously, the Fairfax relationship, where we deployed a lot of capital together goes back to almost the beginning of time when we went public.
We're doing a development project in San Francisco right now with the Takenaka Corporation.
And the first transaction that we did with them was in 1995.
So it's always about.
Creating these relationships with alignment, but then keeping these relationships going for long periods of time.
Okay, great. Thank you for your thoughts.
Thank you.
Moving to our next question if you would like to ask a question. Please press Star then one.
We will now go to our next question that question comes from Alan Cardoso from L. Corn partners. Please go ahead.
Hi, Bill met and everyone else.
You spoke a in your earlier comments about.
The fact that there's so much oh sovereign debt trading yet.
Negative ratings.
And you have the five and seven eight.
Bonds out there currently trading at about 575 yield.
What are your thoughts about.
Thinking that in refinancing that with either European.
Low interest debt or whatever.
Yes, good question, Alan I mean, the but really when you look at the overall cost of Kennedy Wilson is dead, you've got to look at not only the unsecured debt, but you've got to look at the property leveled out.
And our overall cost of debt is roughly 3.5%.
How's the duration of right around five years right now and as we talked about earlier in the call we hardly any debt maturities as sure.
[music].
And then you know Alan do your point I mean pointed Merry maids.
We're able to borrow.
In Europe.
Basically the same duration is here in the United States at the property level between 212.5% fixed.
Here in the United States actually we did alone here in the United States yesterday at the best tenure rate, we've ever done one out of 3.07%.
And on one of our apartment properties in Boise, Idaho.
Look we're always looking at opportunities I can't really get end any details about what we're thinking about doing on this call, but up we're always looking at opportunities to lower our cost of debt.
And you know the bond markets, obviously as we all know today or are not in the best to shape. After the last three or four days, but the 10 year. This morning was down to the lowest level the.
Ever saying.
It was at 125 this morning, even in the credit crisis, I think the tenured hit to like 135 140. So we're now lowest level is going out.
Over 10 years. So you know is something that we obviously keep our eye on but I can't specifically talk about what our plans are for for that particular and.
Just one so far.
Alan one thing to add it in Ireland has to be clear I mean, we can borrow sub 2% in.
In many cases on the Trs space, you're going to 1% kind of range so on property level debt.
Very very very tight.
Okay. So with.
On another more another note right now do you see the Corona virus.
Anyway, the affecting you either in your minority interest in Japan or anywhere else in any of your properties.
Well I think to clarify one part of your question Alan I mean, we in 2015.
We sold all of our remaining interest.
Our Japanese assets. So we don't have a single dollar investing in Asia.
Bob.
You know my comment about.
Your question on this other viruses that.
We're taking all of the expected.
For cautions.
But I think for any company I don't care, whether its sauce or Microsoft or Apple or wherever it is I mean, we're in.
You know on charted territory here in terms of how this impacts people's businesses.
But im not of all trying to minimize what's going on globally, but.
Thank you always house to.
Whether it's a credit crisis like occurred and I'll wait or old nine.
Or whether it's something like this you have to.
Longer term and look.
Yes, this in a positive way.
But you know we're taking all of the.
[music].
Expected to precautions and our properties our company whatever it is but what the outcome of all this and the duration of it as I have no idea.
Thank you.
Thank you. This concludes our question and answer session I would like to turn the conference back over to Mr. Bill Mcmorrow for any closing remarks.
Well, thanks, everybody for listening in and.
The questions and listening to what we consider to be the best your we've had in our history last year.
And as always is any of us or.
Available to us.
Talk offline. So thank you very much should have a great day.
Thank you. The conference has now concluded. Thank you all for attending today's presentation.
[noise].
[noise] [noise].
[music].