Q1 2020 Earnings Call
Our 2020 earnings conference call and webcast.
All participants will be in listen only not said you need.
No it converts.
Starkey solid I think.
After today's presentation, there will be an opportunity to ask questions.
A question Star then one on your catch sounds.
Please note that being recorded I would now like to turn the conference over to Daven Bhavsar VP of Investor Relations. Please go ahead.
Thank you and good morning, Daven, Bhavsar, joining us today or Bill Mcmorrow, Chairman and CEO Kennedy Wilson.
He ricks President Kennedy Wilson that when this executive Vice President Kennedy Wilson, and Justin Enbody, Chief Financial Officer. Kennedy Wilson today's call will be webcast slide that will be archived replay the replay will be available by phone for one week by webcast for three months. Please see the Investor Relations website for more information on this call we will.
First a certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income you can find a description of these items along with the reconciliation of the most directly comparable GAAP financial measure and our first quarter 2020 earnings release, which is posted on the Investor Relations section of our website statements made during this call may include forward.
These 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 and reports and filings with the Securities and Exchange Commission I would now like to turn the call over to our chairman and CEO Bill Mcmorrow.
Yeah. Thanks, very much good morning, everybody and thank you for joining us today.
Well I hope everybody on this call new examples you doing as well as possible during this challenging period, it's hot.
Before I discuss the highlights from the first quarter held steady run collections in April which valuable discussed in greater detail.
I'd really like chipset my heartfelt thanks to those Socofar snow safety well begin to help bothers through this crisis.
Great and healthcare workers first responders fire requires police officers and many others.
There are bravely body central services, Rob the goal.
No you all feel that's why they deserve or keep its gratitude an outbreak.
Well the cobot 19 pandemic has created them faster than challenges fall bus I'm thankful for the global kw team is healthy.
Our communication across all parts of the company has never been better.
I'd like close to comment on what we're doing what should I was just continues to run smoothly.
As we grow our company over the past three decades, one office 11 people 50 about $7000 in capital.
Global real estate investment business, a hallmark at Kennedy Baltimore has been our ability to communicate a cost business why.
The March we rolled out of a boat global communications play on that as wild all ourselves well both for the past two bonds without missing a beat.
We have daily calls with our senior management team or asset management team of financing cash management team.
And we've increased the frequency of or board meetings.
Sure there were all the same age of up to date, but it's called the develops.
In addition, we continue to be a constant dialogue with our human resources legal show its accounting I see.
Communication teams, which form the backbone about comp.
I'd like to express my greatest gratitude and thanks to our employees.
Board members and their families.
There are tremendous and tireless contributions during the past two months.
I am very certain that what we have all gone through together will make us better people at a better companies for the long trial.
With that to touch on our highlights for the quarter. We produced EBITDA <unk> 12 billion of adjusted net income of 45 million.
The quarter was highlighted by strong same property NOI growth 5%.
He family portfolio continued growth in our investment management platform.
Their progress on our asset sales and good progress in our construction development pipeline.
Is it also has got a kw today and it's all about capital allocation while preserving.
Liquidity.
The quarter reallocated $95 billion capital at 42% acquisitions, 41% to Capex and 27% to share buybacks.
And the investment side of the core war that sell them as we have done over the last few years.
Completed $199 million of acquisitions in the quarter.
Which our ownership interest is 13%.
We sold $341 billion of real estate investments, which are ownership was 100%.
The largest distribution in the quarter was finer points are only multifamily outside of United Kingdom.
We acquired this asset as a non performing loan in 2015.
And after we completed all value at asset management plan, including adding 10000 square feet of residential embedded de space.
We sold this 294 unit outfit in February.
3.8% capillary.
She was unlevered.
I have returned $127 billion Takeda.
I'm pleased to report the strong brokers sonar does from a management platform in 2019 continued into Q1 of 2020.
During the quarter, we raised an additional $300 million fee bearing capital, bringing our total to 3.3 billion.
This is 80 this is up 83% since Q4 2017.
Looking ahead.
Given the low interest rate environment, we're involved with.
We currently expect our key financial partners and other investors to continue investing in high quality real estate.
Resolve this will allow us to continue growing our investment management platform.
Last September we relaunched start got platform, where we are investing alongside our partners Unlevered got endorsements secured by high quality real estate.
It's going public in 2000 lives and primarily as a result is a great recession.
Originated or acquired over $6 billion and real estate related.
We typically take 5% to 10% interest in these investments and also on recurring management fees.
The last nine months, we've completed $400 million in bulk purchases.
Quoting 125 billion dollar loan investment that we completed in April we were up 5% investor.
When you include our management fees, we already double digit Unlevered returns our capital.
At quarter end would quickly turned our attention to April.
For married it's got since April one collections and leasing like to give you a little context on how we began two years ago preparing for this type of all nominal doubts.
Our past earnings calls I've described your plan to keep higher levels of cash on a house in order to mitigate any unforeseen RIS.
I'm grateful to say that we started the year position of strength.
Armed with the most liquidity to we've ever had in our history.
We are constantly been adding to our liquidity by big that sell over these past two years.
Since January 2018.
We have sold $3.1 billion about that's what's Kennedy Wilson share was 2 billion.
And whats harvested gains of approximately $750 million Takeda.
These sales also included the disposal many non core real estate and hotel allows us.
More recently, our balance sheet was further strengthened by the 300 million bar preferred equity investments Eldridge industries in October of last year.
Its investment coincided with the expansion or separate account platform with Eldridge its affiliate security benefit.
Increasing it to $1.5 billion in total asset purchase power.
And that platform, we've acquired approximately $400 million now sits today.
I've got the quarter out we have $735 million worth of cash and an additional $500 billion of availability our water right up.
For a total $1.2 billion of dry powder.
It also mentioned that in the middle of this volatile period or line of credit was extended during the quarter four four more years with the option for 50 or while improving our pricing.
When you include the $600 million cash available within our two discretionary funds we ever currently have a total 1.8 billion dollar some discretionary dry powder.
Additionally, we have several strategic partners, who are well positioned with billions of dollars of liquidity a strong interest in partnering with Kennedy Wilson.
Our debt maturity profile remains very favorable with $29 million maturing for the remainder of this year and a $157 million maturing next year.
All of our debt maturities through the next year or non recourse secured property level financings.
So we were on great financial position of having both ample liquidity limited debt maturities.
As you May know, we've always maintained a diversified real estate portfolio, both by geography and by product type, which is dominated by multifamily and office.
Provides an update on where we stand on collections in April and on our commercial leasing activities I'd like to turn the call or to our president very rich.
Thanks, Phil.
To start by echoing your sentiment and thank you to all of our employees.
I hope everyone on the calling your family are doing well.
As Bill mentioned, our two largest asset classes globally, our multifamily and office, which together account for 80% of our estimated annual and Hawaii and 87% of our April rent.
Our multifamily portfolio totaled 30000 units globally and consists of high quality community, where we haven't had a resident experience through offering a variety of tenant amenities.
As of quarter end average rents totaled $1660 and our portfolio was 95% occupied close to all time highs and putting us on solid ground going into April.
Our onsite management teams have performed very well during this difficult time and as a result, I'm happy to report that multifamily rent collections in April totaled 97%.
And our market rate portfolio, the U.S. saw rent collections of 97% and in Ireland, we saw rent collection of 99%.
And in our vintage housing senior in affordable apartment portfolio, we saw rent collection of 98%.
That's across the board, we saw extremely high rent collection levels in April and have a good very good start in may.
Our office portfolio globally was 93% occupied as of quarter end with the weighted average lease term at 6.2 years.
Our top 20 office tenants include strong credit quality companies like Costco.
Microsoft Google KPMG State Street, the bank of Ireland, Indeed, and the UK and Italian government to name a few.
I'm pleased to report that we collected 98% of April rent from our top 20 tenant.
And in total global office rent collections in April were 97%.
Looking regionally in the U.S. office rent collections were at 97%.
Our top 20 office tenants account for 76% of the portfolio and we collected 98% a very program.
In Europe, we collected 97% of our office rents.
Our top 20 tenants in Europe account for 76% of our portfolio and rent collection for the top 20 was at 98%.
We're very proud of our office tenant base and fortunate to have large credit worthy tenant on long term leases.
The April rent due from our retail portfolio totaled $4.7 million.
We have collected 49% with 2.4 million outstanding.
We expect smaller retail tenants to eventually utilize the various government relief program that are available to them and therefore expect moderate increases in the retail collection figures.
Finally, we have a small industrial portfolio in the UK with $860000 of rent due in April of which we have 240000 outstanding.
So across our retail and industrial portfolio, we have only $2.6 million of route rent outstanding in April.
In total we collected 91% of our share of rents due in April across our global portfolio.
And as we look ahead I'd like to note that the majority of our European office tenants pay the rent quarterly in advance in April the us much of our rent collections in April gave us a head start in collecting may and June rent.
I'd also like to touch on our robust leasing activity.
We continue to see encouraging leasing data as we pursue and complete lease extensions and renewal across our commercial portfolio.
Our office portfolio continues to be well position to retain or existing tenants and attract new companies looking for high quality space and well located asset.
Priced attractively given the corporate continued to be mindful of occupancy costs.
This is proved out even today with the leasing activity throughout our portfolio.
Globally, we've completed lease extensions reviews and renewal on 60 commercial lease transactions across 493000 square feet. So far this year, which includes 83000 square feet in April.
These lease transaction had a weighted average lease term of 6.6 years.
I'm resulted in incremental income of $6.8 million.
We have another 450000 square feet and legal currently across 51 lease transaction.
And as many of our tenants are looking to secure their long term space requirements and again, a very encouraging sign for the strength of our tenants and for the long term confidence in our asset.
And our U.S. multifamily portfolio, we had been rolling out new technology for prospective tenants.
Allowing them to take virtual tours of our assets and apply and signed leases online.
By the end of next week, 100% of our U.S. market rate portfolio will have this capability as well as our largest Irish multifamily communities with plans to roll out to 100% of our Irish properties by the end of June.
We completed 808, new leases and our U.S. multifamily portfolio in April a 6% increase from April 2019.
94% of these leases were completed virtually until we have seen promising early traction in this exciting new virtual technology without I'd like to turn the call back over to Bill.
Thanks Mary.
Now I'd like to update you on our major construction initiatives with a focus on or near term projects.
Most of the equity for these construction projects have been fully funded already like Kennedy Wilson.
Our development and leasing initiatives are currently expected to be completed by 2024 and include 5000 multifamily units 2.9 million square commercial square feet One hotel.
Virtually all of our major construction projects or 50, 50 joint ventures, with our strategic capital partners, but in total we enjoy a 60% ownership and our development and leasing portfolio.
Yes expect to spend only $20 million of cast for Capex commitments in Q2, and approximately 50 to 75 million for the remainder 20 twond it.
As it relates to our development doublet and we currently expect construction reopen later this month.
Soon thereafter, we will finish Clancy Quay phase, three which totals 266 units.
Which is on track to be completed by the end of June.
We originally acquired plants in 2013, which at the time had 423 developed phase one units and eight may have acres of undeveloped land.
Phases, one and two which are now complete or currently 97% occupied.
We're excited to finish the final phase, which will make the largest apartment community in all borrower with a total of 865 units.
The two Dublin office construction projects and publicly until their total 133000 square feet.
We're currently on track to finish the construction next year.
That's really where remaining iris projects the grades Cooper's crossing larger parks are all longer term developments, we expect completed 2024.
The U.S., we continue to make progress on all of our developments at Santa Rosa, Northern California, and Rolls Wood River point horror Boise, Idaho, which together totaled 558 units construction has continued with minimal disruption.
Completion date for Santa Rosa enrolls works is a third quarter of 2020.
Completion date for clarity is Q1 to 2021.
We're also making great progress or ventured housing developments or where you're acquired three new land sites in the quarter and currently have 1800 units under construction or lease up but another 800 units and the pipeline.
In total we were adding 2600 units to be existing 7400 units as we're on track to grow the plot form 10000 say boys stabilized units at the end the 2022.
Representing an increase of 82% since we acquired the portfolio in 2015.
Looking ahead.
I'd like to put this crisis in context of what we've experienced these while 42 years at Kennedy Wilson.
The current crisis marks the sixth major economic correction lab gone through my career, starting with my teenager, they treat period, which had a 21% prime interest rate and high inflation.
1990 to 99 retreat savings on crisis, the 2000 collapse of the dotcom bubble.
Economic fall from the Brooks it could bounce of September 11, 2001.
Of course, the most recent the great recession.
Each of these moments Kennedy Wilson bulb was 99 before we open the first Kennedy Wilson office in Japan that ultimately led to the IPO Kennedy Wilson, Japan on the Tokyo stock exchange in 2002.
2000, we lost or flooded the management business and during the great reception, we went public on the NYSE.
A year later, we entered Europe for the first time, which led to our 1.7 billion dollar IPO in 2014, the second largest real estate RTL and this is true well given stock exchange.
After the dislocation calls by Brexit in the summer 2016, we acquired the remaining 76% of Kennedy Wilson that we did not all the all.
That closed in October of 2017.
But we all know cities crisis has a beginning and eventually an out.
While the timing is currently difficult to predict this one will be no difference.
Challenging times, it's extremely important that you have four key components.
Strong record cash flow excess liquidity strong joint venture partners.
And the same team of people that have been successfully working together over a long period of talk.
Today, I'm grateful, we say we able for.
We have a very high quality real estate portfolio best in class developments that we will finish over the next four years.
We have to bolster liquidity, we've had since going public.
And we have very well capitalized partners alongside of screw themselves have significant liquidity.
We have a senior management team that has decades of experience working endeavor through many cycles and the team has a proven track record the dusting during periods of opportunity.
We also continue to benefit from having the leadership of our board of directors.
Most recent addition to our board was taught boldly joined in March part as co founder and Chairman of Eldridge Industries diversified investment committee without sits on the management of $40 billion.
I'm honored to have taught on our board.
Well, we were able to tout his extensive experience and knowledge.
Well 2020 will undoubtedly percent ongoing challenges I believe we're well positioned to an absolute well. The same time, we also plan to leverage our extensive experience and deal sourcing relationship network into uncovering new opportunities.
Kennedy Wilson team is ready for any challenge I'm confident that together, we will emerge out of this is stronger company.
So with that Devon, I'd like to open to adopt any questions.
Thank you well now begin the question and answer session to ask the question in My Press Star then one on your catch can sound who are using a speakerphone. Please pick up your handset before pressing the key till the try your question. Please press Star then tip.
First question today comes from Anthony Hello, with JP Morgan. Please go ahead.
All right. Thanks, good morning, everybody.
My first question if I just.
Just bigger picture given your your track record and everything you are seeing over the years, what's what's your thought process on where cap rates are you know go or what change in property values were quite coming out of this.
Yeah.
Well I think before I answer that question directly you know you got to.
Kind of frame lease where we see the company that all I'll get to your your question I would start by saying that.
We're in we're early in this whole process I mean, I think anybody the good news in adults tours earlier in this process because as everybody knows this food.
That make.
At this location only started two months ago and.
And so there's always a lag time between.
When opportunities show wall.
And when you're actually ready to two in Dallas.
When you you think about.
What happened during the great recession, when we want to starting in Ireland.
We made our first trip there in 2010 and it was all he was 10 months later that we made our first investment there.
But what I would say is that when you think about Kennedy Wilson born a very very different spot today than we were out during the great recession in the following sense.
We have.
More bar on liquidity as I already won through them we had back.
And we had.
Many more capital partners, but so a lot of those capital partners during that period of time actually have their own financial issues.
And so we'd have to smuggle was hot cultivating new or third party financial partners and.
Create deal flow.
And at the core of bar operation has always been the extensive relationships that rehab with financial institutions all over the world. We work on for 30 plus years, whether it's you're in the United States, Georgia Europe over the last 10 years or in Japan as I mentioned.
And I think that what you would.
I believe what you would hear from most of the financial institutions that we do business with is that we're extremely reliable counterparty in other words, we do exactly what we say we're going to do.
And.
The last thing I will say before answering your question is that art. The people that we have them a company now all gone through.
The exact management team that we have today.
All went through the experience or going through the great recession, whether it was in the United States or in Europe, and so you can't discount.
What experience means in this period of time.
I think as far as I've said this on calls now.
I think at least for the last couple of years choice, but having a perspective of global investment platform and having better Japan now for over.
30 years.
I believe.
That we were going to stay in actually an ultra low interest rate environment for a long period of time before.
These events that happened.
In the last two months.
And so when you look at the various asset classes that people would best in over a long period are taught not looking at no one stretch of 90 days or six months.
You're going to have them wipes and you're going to how.
Low interest rates.
Ultimately, we're going to be followed by lower cap rates and so but there was going to be a period of time here were as everybody well most banks have taken major reserves and so there's going to be a period of time Bill where there are so it's a dislocation.
In in the process, which is <unk> hold off sensitive extremely sensitive to this one.
That's what will create the opportunities out of the financial institutions, but I believe long term.
So we're going to say low cap rates are going to stay low.
And there at this time, there's no there's still.
Even with all the.
I would say terrible economic news, if we see coming from every direction, there's still a lot of liquidity and strong desire.
Oh for.
For people, who invest in real estate I think one of things that we really should have said in addition, or internal communication, we've been very outward, reaching the last two months.
Are there other than to our shareholder base or to our partners.
And we've been a constant communication with our major partners.
Assessing with.
Where we see.
The things going Directionally.
I would tell you that all of our partners that we do business works and we really look through all of our platforms. It's not just the insurance companies that we have a separate account partners. We've got no major household names and in both of our.
Funds that have separate account capability.
So.
But you've got to.
You got to be patients during these trade at times.
You can't chose to.
No started jumping into the market.
So I.
I hope I answered that question that was long winded that but I wanted to give you a little background, but specifically I think you're going to see over the longer term.
With low interest rates, you're going to suit cap rate compression.
And that's question comes from Sheila Mcgrath with Evercore. Please go ahead.
I guess I'm good morning, I wanted to get a little bit more information on the pioneer point disposition.
Uh-huh because you did mention that you.
I see some loan investment opportunities do you can just remind us I think that was the loan investment opportunity loan to own and how that ended up in terms of the IR Arctic Kennedy Wilson.
[noise] right Mary you want to take a hsulin everyone through their history on that transaction.
Sure Hi, Sheila I mean.
Not that deal came from we popped up from a German bank and you are right to remember that that was that was a loan deal.
Not was really in the period in Europe that we where we were buying a lot of debt.
And that was a deal that we did off market German bank had to get rid of viasat not outside its two towers, a one with completely closed at the time and one was just partially rented and so what we did as we took title to the outside which was somewhat complex but.
As I think as you now.
Much of our team has a lot of background and have been lenders in the past so.
In terms of an opportunity set in terms of buying debt and then take entitled to real estate, that's something that we know how to do and so we took title did the real estate and then we went ahead and open the other tower did whatever improvements we needed to do and put a whole amenity block on the ground floor, which is which is kind of a kw.
Signature make sure we're offering sort of best in class.
Multifamily and a little bit unique to to the UK and really European multifamily asset class.
I would put all of our amenities in place and then when it hadn't did a lease up and linked let it up very very well and the team did a great job and it was stabilized than we sold it on and I think the next buyer will do well and you know as well that's a really good asset.
And the Iraq Oh, Yes go ahead, yeah, I mean, you saw below the low cap rate I mean, I think you know the IR would have to have been in the probably mid twentys I'd have to get back on the specific number.
But it was an excellent return per kw.
Okay, Great and I've I, just wondered on Bill maybe you could comment on your bigger picture thought thoughts on the office sector.
With everybody home right now and any update on we've we work as far as paying rent and the plans at your London property.
Yeah.
Yep.
I'm going to let Mary talk about we work, which is you know very very small part of our office portfolio.
In a second but as far as the office is concerned you know when there's obviously a lot of discussion going wrong about that everybody's worked remotely that you're going to see had diminished need for office space and.
You know, how many I listen to all of that she would 2000, there when the tech bubble hopped or what was going on in the tech world without time, including the big accounting firms I remember like yesterday.
They were all talking about how they work in all four crumble.
And I think to the tune social things you relate to office space that can't be underestimated as the need for human contact.
And and.
The fact that its logistically, it's not easy to work at home.
When you've got other distraction going I know when our old company one of the things that we've had to be sensitive too.
In this period of time is it you know we've got a lot of younger families. In the company. They all have younger kids at home the Dow aren't going to school.
And so that presents its own set of distractions and then finding a place that you can actually worked in your house.
And so.
My belief is that there'll be a little bit of.
I would say they'll be extended discussions of this topic, but I think over the long term.
It's really not going all mouth to anything.
And I do think that there is also bought them a tremendous amount of office over building at the markets that were it.
And so I don't see any.
[music].
Over the long term I don't see any reduction in the amount of office space that you know people are going to have people to the Laos.
I'd say five years, maybe longer have been we could see during their space.
Into more open.
Open spaces with Wes.
Ah emphasis on the private office functions.
And I don't see that changing at all.
No while we're stuck getting all the things of all that out your second we go back to work I think for a period of time.
Most companies or or going to leave it to the individual employees. So just side.
The in their own mines.
You know what they want to do as far as the office are working remotely more obviously going to help to respect.
The whole new social distancing.
Issues.
But long term I I think to the office markets going to be just fine in the good markets.
And I would say shield to before I turn it to marry that's the other big difference in our company is that.
We work.
Stably soon a lot of the markets that we're in today, when you think Doc even to the great recession.
You know we have now how extensive platform all throughout the western United States, which didnt exist and we didnt help either of the platforms in the United Kingdom or Ireland.
When a great recession started.
But as it relates to we work when you think about our apartment business of 30000 units and just choose a thousand square feet, including the common areas plus our office space, we have 50 million square feet.
Oh space this occupied by somebody.
And.
In the we work Mary I think when do you look out of it in totality.
There are less than a.
Our share as part of us in all under 200000 square feet isn't it.
Yeah, It's a couple of hundred thousand square feet. It represents just about 2% of our of our income. So it's very small and then the other thing I would add it and you know honestly they have some of our best space, maybe 400 Cowen San Francisco, we only on 10% about outside that's one of the best located and one of the.
That's built out assets that is fully occupied by an enterprise tenant for we work.
And then Chile, you referenced the office building that we work is taking in London, which is in the South Bank sub market, which is one of the best performing tightest markets and all of London or.
In the city, it's it's less than 5% vacancy rate rents have have increased significantly over the past three years.
If you recall, we got that asset that was actually another loan to own type transaction that we did in London, our basis is very low and not outside and actually London and in particular in South Bank that is one of we worked best performing a sub markets. So there right now.
Now I'm working on the construction on that asset and they plan to be in by later this year.
Okay, great. Thank you and Spielo tear off a very good.
They also paid a harder for some other wrapped in April two is that correct fully paid correct.
On all their location.
Correct, Okay, great. Thank you.
Sure.
And if you have a question. Please press Star then one next question comes from Tom, Tennessee, Let's touch Bank. Please go ahead.
Good morning, my questions in reference I guess to raising new fee bearing capital and you've been on piece for you know you're you've been doing about a billion dollars plus a year I mean in a recessionary environment, sometimes it's tough to do that you anticipate any challenges with that or is it the opposite the reputation do you guys have had for especially.
Situations investing, especially essentially a couldn't make it make you get new new partners are adding additional capital from other partners [noise].
Yeah.
Yeah, I think do you have to frame out one do you know.
Currently.
It's obviously a news this world today Everything's on swaps I can tell you the.
We have had.
Many inbounds from capital partners that we never done business with us and from our existing people that we already do business with their existing companies that we do business works and so.
On the assumption that there are opportunities out there.
I see us.
Quite significantly growing.
The fee bearing capital during the next two years.
On the assumption that there's going to be opportunities here of it made sense to investor, but like we've always said at Kennedy Wilson, we never feel like we're under any pressure to invest money unless it's the right opportunity.
So that would be the rig we keep the victims. The money is clearly available to us there has to be the right opportunity.
The other thing, though that makes a ton of sense I guess, just a follow up on that though too I mean, and you had mentioned or would Ireland in it and reading 10 months before your you made a jump in there, but I mean would what we have here. It seems right for you know hobbies dislocations in the course near term I mean do you anticipate.
Being more of a net buyers in 2020.
It depends on what the opportunity. So there is no I'm not trying to world sidestepped the but.
You know when every.
Cycle.
Generally the additional opportunities tend to be get purchasers, even like the one the marriage just describe the pioneer point and.
When you think about.
Some of the assets as we continue to own today in Europe, we acquired those through.
Yeah.
Acquisitions, and there's really two types of debt acquisitions that we've done historically really I guess three.
A modest amount of our own origination.
And then we would buy death.
Basically to collect.
The principal amount and then there was this issue I think mention the debt that you buy this along to all.
And especially in Europe.
Where there was a receivership system.
You know people don't pay their interest basically it goes into receivership and receivers are fantastic selling the outside.
Ah that tends to happen pretty quickly.
In the United States. There is as we all know there's many different protections that to borrowers can seek but the first.
Opportunities, we believe that will surplus in this cycle, we're going to be on the debt side.
As it takes longer.
So the equity.
Ownership to Chris will go through the system.
So the fee bearing capital will definitely grow.
Assuming under the assumption underlying that 10 times that there are investment opportunities that make sense, we haven't available to us.
We just need to be a smart enough to find places to were put it safely.
Good risk adjusted returns.
Thanks, Bill that was what those very helpful.
Next question I'm Kinda, sorry, Jamie Feldman Bank of America Merrill Lynch. Please go ahead.
Thank you.
I was just wanted to get your thoughts on leverage levels and you know do you think about your liquidity you did draw New line and then you have.
Some of that a lot of that liquidity still on the credit line just how do you think about how you'd be willing to take leverage.
If you found opportunities.
What are the Governor you think about from that perspective.
Yeah.
Yeah Okay.
Okay. So Matt you I'm going to pump that questions about windisch.
Sure Yeah. So if you look at our leverage levels were definitely comfortable with where they are today a I'd note that over the past two years, we've reduced leverage.
On our consolidated debt were down 20% over the last two years, our net that's come down by 10% over that same period of time.
And then if you look at what we did you know towards the latter half of last year, we raised 300 million of.
Preferred equity use the proceeds to pay down debt.
And we have less than 4% of our debt maturing in the next two years all of that being non recourse.
And as Bill mentioned in his remarks, we have you know the highest levels of liquidity.
We've ever had as a company. So we feel very comfortable with the debt position, we think that some of the opportunities present themselves, particularly in the debt space that may come over the next several quarters, we're likely to do that on an unlevered basis as we typically have.
And we certainly have.
Enough liquidity within the business and with our capital partners to.
Acquire assets to the extent there are good opportunities and doing that in a way. We're we're not increasing leverage that's at the business.
So.
I guess, the summing up we're very comfortable with our.
Leverage and liquidity levels, and we certainly don't see the leverage levels going up as we as we invest capital over the next couple of years.
Do you have like a high end of where you'd be comfortable operating.
I think I think where we're at now is the highest we're going to go.
Okay. So you wouldn't want to take leverage anywhere where you are today.
Correct.
Okay.
And then as you think about the on stabilized portfolio in the development portfolio do you think you got to push out any of the.
Stabilization dates are kinda fully leased development you fully leased states.
Based on.
Potential leasing delays or even construction delays.
Do you feel pretty confident on your original underwriting.
Well, if we do in the multifamily side, particularly I mean, we had.
As I said in the in the U.S. basically there wasn't much disruption in.
Northern California at Santa Rosa Boise and on the vintage assets are there.
We were allowed to continue work on site during the last couple of months and now.
No you all know many of the states in the Western United States, Utah, and other places there, they're starting to actually reopened everything.
So we don't see any big Oh.
Timing differences and <unk> in the U.S.
In Europe in the United Kingdom, Ireland. The course, they they shot the sites now Ireland as analysis.
That they're going to allow reopening of the construction sites on the 18th of May with all of the new guidelines in terms of you know, we're testing thing and safety and and all of that.
So clancy that I'd mention too, which is one of the largest projects we've ever undertaken that's gonna be completely finished at the end of June. It's really basically finished now we just have to move in in Ireland, new regular apartments fully furnished we just have to move the furniture and it finished.
The extra aerial landscaping.
And so.
We'll see how how that leasing goes we don't have any crystal ball that but I think the thing that has been extremely encouraging as this staff that Mary.
Pointed out earlier in the call about the virtual leasing in the success of the virtual this thing.
That has been a rely opener to us.
To do 800 leases or the bulk of April.
And 94% of those being done virtually and having that be up 6% over what it was there for 2019 as there's quite a compelling statistic the only a property.
That we.
Wanted to take extra time to make sure that we had correct.
With the hotel property that we have in the United States, you put 50 50 venture with a very.
Very strong capital partner.
And that related really to two things it didn't relate to the pandemic at all what related to the fact that we wanted to make sure that we had every single cost button down.
And we wanted to get our construction wall.
In place before we undertook the lion's share the government.
That construction loan that we did.
Closed in.
In March and so you know were off and running right now, but we intentionally.
Moved out out by almost a year, but but everything else is.
Progressing.
No on time.
And on budget.
I mentioned the three.
Big projects that we're doing in Ireland, good art, yet completely under construction there they're in the process.
What we're doing their resolve the architectural design work and unable anymore.
But two of those are multifamily projects actually three of them there the Grange and Cooper's crossing over the two biggest swabs and those are both joint venture partners with joint venture deals with the major major.
Insurance company, that's based in Europe.
And then the last piece is the office there were doing that's also a 50 50 venture work that well capitalized partner, but those three.
It will be more in the no 2024.
Range.
But a big big Big part of the construction pipeline are these multifamily assets.
Both the market rate and the vintage assets that are all running right on time.
One little boy that we've had in Ireland, one class C.
Okay.
And then you've got a pretty unique market footprint to its kind of the west coast focus and mountain state focus if you see disruption in other parts of the U.S. either on the apartment or residential or commercial side. I mean would you be willing to go to like a new Yorkers some of these other.
Coast markets.
Are you still going to concentrate around your current footprint.
Look I never like to say never but I think it's unlikely.
The markets that we're in.
We had deep embedded relationships goal for me.
I would call it the acquisition capabilities slots and also on the asset management's job with all over a long teams on the ground.
And the key.
Very big Q.
And these types of endeavors is to make sure that Youve got the same team of people that are doing the same.
Work.
Every day.
And.
You just can't underestimate how important that is in no time like we're in a time, where you're going to dust hopefully the kind of money that were poor we're planning on.
So I think the markets that we have a foot for them, which is basically the western United States.
In the west to the Rockies.
And.
Got it Kingdom in Ireland is where we're going to spend our time I would say that that we've done a.
[laughter] tobacco better way to put it we've done a pioneer on the west coast and going to.
Markets well before they became I would say you came on the radar screen for institutional investors and so we have a good platform now in the Rocky Mountain States that you know.
Yeah, Seattle voice in Salt Lake City.
And so on and Denver and Weve Dawn.
Into some other smaller markets on the West coast here in the last 12 months.
So there's plenty of opportunities you know in the markets to that we already have turned out.
So to answer your question I think it's unlikely we go out about what we have to see what's the opportunity so to us.
Okay.
And then finally, you know you that we could use some decent take exposure in the portfolio just from the office side any anecdotes of conversations you're having with your larger office tenants in terms of how they may be changing their space planning or needs.
Yeah, I I think it's what I said earlier I think it was answering sheilas question, but oh sure they'll be a lot of discussion around it through a period of time and then.
It is things over the next 12 to 24 months longer get back to normal.
The wherever the new normal is I think you're not going to see any significant changes words were very very fortunate that we have high quality credit tenants in our properties.
And.
So.
And you know some of the tenants obviously the.
Hi Tech tenants that we house.
What's you are.
You know the dominant tenants.
And.
Clearly the Seattle market.
San Francisco market and in Dublin.
Or actually.
No news to anybody on this call I mean, they're all doing well.
The Google some Microsoft's and so on.
So.
Over the longer term <unk> idle married to any significant change and then maybe changes and how people can reconsider their space.
Right.
But.
But and I think the other part of this too which always happens is that there won't be any availability of construction lending.
Sure New office space.
The near term within X 24 to 36 months and so outhouses way too.
Self correcting.
Many suppliers shoes.
Yeah, Mary I know what I, what I was just says what we're hearing from a lot of our tenant.
I think our portfolio plays really well in terms of the to new normal if you will.
And obviously the return to work takes significant planning, especially in how sort of work environments are configured as Bill said you have to facilitate special kits and saying enhance cleaning one way ingress and egress pantry technology those kinds of things and I think look the way our properties we don't have.
50 storey high rises where people have to Q to take elevators, you know we have more of that low rise type.
Office product, which I think plays itself very well to tenants need today.
And we're hearing from a lot of our tenants right now that want to take more space.
Ah because they just you know they want to spread there people out help I think it's gonna be interesting I think our portfolio will do very very well I wish list. These new normal.
Okay all right. Thank you.
This concludes our question and answer session I would now I turn the conference back over to Bill Mcmorrow for any closing remarks.
Well as I always say on these calls we appreciate your support we thank you for your interest in the company and.
I would say on this call is I closed at all I wish everybody and your family is.
Good health.
Safety.
And ER.
We'll talk soon so thank you very much.
[laughter]. Thank you for attending today's presentation, you may now that.