Q4 2020 Kennedy-Wilson Holdings Inc Earnings Call
Good day and welcome to all of the Kennedy Wilson, the fourth quarter of 2020 earnings conference call and webcast.
All participants will be in listen only mode share do you need assistance. Please signal of the conference specialist by pressing the Starkey followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Devin Bhavsar Vice President of Investor Relations. Please go ahead.
Thank you and good morning. This is Devin bhavsar on joining us today are bill Mcmorrow, Chairman and CEO of Kennedy Wilson, Mary Ricks, President of Kennedy Wilson, Matt Windisch Executive Vice President of Kennedy Wilson, adjusted and body Chief Financial Officer of Kennedy Wilson today's call will be webcast live and will be archived for replay the replay will be available by phone from.
One week and by webcast for three months. Please see the Investor Relations website for more information on this call we will refer to certain non-GAAP financial measures, including adjusted EBITDA on 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 fourth quarter 2020 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 the number of risks uncertainties and other factors indicated in 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.
Devin Thank you.
Everybody and thank you as always for joining this call today.
Yesterday, we reported a record quarter of financial results.
Which caps off a year of tremendous resilience, while adapting to a new environment as we grew the company on a meaningful way.
I am extremely proud of our global team's accomplishments in 2020, the not only advanced our strategic initiatives in our core businesses during the year of uncertainty.
But it also positions us for growth in the future.
We ended the year with a record $1 billion in cash, which we will deploy across our investment platforms into assets, which produced solid risk adjusted returns.
We are currently evaluating work completing of tremendous pipeline of new transactions for our market rate multifamily and vintage housing portfolios in the U S. Our industrial portfolio in the U K as well as debt origination opportunities in office acquisitions for our separate accounts.
And fund management businesses.
We expect a very active acquisition year in 2021, as we grow Barth, our net operating income and our fee streams.
Through the expansion of our new partnerships, we successfully grew our investment management platform and our fee bearing capital throughout 2020, which reached $3 $9 billion in the quarter.
Representing a 30% growth in the year.
The growth was a direct result of deploying capital through our debt platform and our new urban logistics joint venture with GIC, which launched in December.
Our operational performance across our largely suburban multifamily and office portfolio was strong as we maintained high occupancy and continued strong rent collections across our global portfolio with 95% of rents collected in Q4 and 96% overall.
All for 2020.
Finally, we delivered.
Very attractive returns across our dispositions.
As we saw a strong pickup in transactional activity, we resumed our asset recycling program on a meaningful way in Q4.
We completed approximately $800 million in gross dispositions in the quarter generating gains on sale of approximately $300 million to kw.
We also completed $400 million of new investments in Q4.
And thus far in 2021 as I mentioned, our acquisition pipeline is very strong.
Okay on our financial results in Q4, we produced a record quarter of earnings with GAAP EPS of $1 21 per share adjusted EBITDA of $347 million and adjusted net income of $223 million.
For the year, we produced GAAP EPS of <unk> 66 per share adjusted EBITDA of $608 million and adjusted net income of $307 million.
As a result of the dispositions in Q4 as I mentioned are of a good liquidity position grew to $1 billion on cash with $300 million of availability on our line of credit.
Our cash position has now doubled since the end of 2018, while our total assets have remained constant.
We also continued to use our buyback authorization opportunistically in Q4.
In 2020, the company returned $185 million to shareholders in the form of dividends and share repurchases or approximately $1 31 per share.
Post quarter end, we took advantage of the strength in the bond market to improve our overall cost of debt and maturity profile.
We completed the issuance of 1 billion of unsecured bonds in two separate tranches with 500 million maturing in eight years and $500 million in 10 years.
In total this issuance had on average weighted interest rate of 487, 5%.
On a weighted average maturity of nine years.
The proceeds were used to pay off the majority of our existing 5.8, 75% unsecured bonds due in 2024.
As a result, we extended the duration of our bonds by six years.
With a 100 basis point improvement in rates, we will achieve an annual savings of $10 million on interest.
In 'twenty and 'twenty, one we of less than 2% of our debt maturing, which is all property level secured debt, which we anticipate refinancing the.
Most of our improved debt profile together with our record liquidity puts us in a very strong position to continue growing our businesses.
One of our key initiatives is to strategically grow our investment management business, which we accomplished in 2020 largely through launching two new platforms first.
First in May we launched a new $2 billion debt platform focused on loans secured by high quality real estate and our existing U S markets with strong sponsorship and with the average loan sizes of $55 million.
We grew our debt platform by 7%, which now totals $788 million.
We have an 11% ownership in this platform, which between the interest rates and fees as generating double digit unlevered returns to kw.
Secondly, we launched a new $1 billion urban logistics platform with GIC, Singapore's sovereign wealth fund focused on opportunities in the UK with the.
The potential to expand the new Ireland and Spain.
This joint venture was seeded with an existing $220 million portfolio across 18 assets with prime locations in the U K.
Kennedy Wilson as of 20% interest in this new platform.
As a result of these two new platforms, our fee bearing capital as I mentioned grew by 30%.
Our loan platform is well on track to surpass the $1 billion.
Shortly.
And we see the opportunity to grow our new logistics platform as rapidly accelerating e-commerce, and the changing needs of consumers strength and the need for urban logistics sites closer to the end consumer.
Across all of our various platforms, we have a robust pipeline of over $500 million of opportunities that we expect to close in 2021.
Our fee bearing capital has more than doubled since the beginning of 2018.
Given the additional capacity we have on our announced platforms, we have the potential blew out to $2 billion, the incremental fee bearing capital to the existing $3 9 billion.
We are very focused on growing our recurring NOI from our property portfolio and growing our fee streams.
So with that I'd like to turn it over to Mary Ricks.
Yes.
Phil Q4 portfolio of rent collections remain very strong and outperformed the market with 98% of rents collected across our global office and multifamily properties, which day.
Together accounts for 81% of our stabilized portfolio I am pleased to report that across all assets, we collected 96% of our range from 2020 and.
In our multifamily portfolio occupancy of our being solid at 95, 2% compared to 94, 4% at the end of 2019.
Urban assets account for 88% of our multifamily NOI and our average monthly rent stood at $1684 per month.
We added another 888 multifamily units to our mountain state portfolio in the U S. Inc. Q4 from an off market acquisition, showing our sourcing capability and a challenging market.
And that with state market, where we were an early investor is now our largest region accounting for nearly half of our U S market rate units, we have approximately 9400 units, including 574 units under development in the mountain States per day.
According to estimates released by the U S Census Bureau, Idaho, Arizona, Nevada, and Utah, where the top four states on population growth in 2020, Inc.
These trends are positively impacting our mountain state results.
Chad of strong quarter with same property revenue up 3% and NOI of three 5%, resulting in approximately 5% revenue and NOI growth for 2020.
It's worth noting that over the last 15 months, we have been.
Wired assets in new markets, including Phoenix, Albuquerque, and Colorado Springs, and we continue to evaluate attractive new opportunities to grow our portfolio in this region on.
On the disposition side, we felt club Palisades and the state of Washington for $175 million. We originally acquired this property back in 2011.
The first $68 million and since then we implemented our value add asset management program on trading and carrier renovation and enhancement of all of the tenant amenities and total NOI increased by 88% during our ownership and the sale of realized an impressive gain of $76 million.
And doubling the rent collections remain very high on over 99% in Q4 non.
From the occupancy in Dublin that at 91, 3% slightly down from Q3 as a result of move outs, mostly related to foreign workers moving back to their home countries. When the pandemic started as employers around working from home.
Encouragingly occupancy has increased from the November low.
We have seen this positive momentum continues through February as prospective residents aim to upgrade to our highly of monetized professionally managed apartments.
We believe our unique offering will continue to be attractive in the post COVID-19 world as apartment completions of approximately two to 3000 units per year are well short of the 4500 units needed annually to address the structural shortage of the apartments in Dublin.
This is best demonstrated at Clancy Quay Phase III.
The thing at the end of Q4 was ahead of our budget and we are now 50% leased.
And we look forward to continuing to provide the much needed housing in Dublin.
Turning to our global office portfolio occupancy remained stable at 94, 2% at the end of the year compared to 95, 2% at the end of 2019.
Our top office tenants include Costco, Microsoft KPMG State Street, Indeed, and the UK and Italian governments to name a few.
And overall, our stabilized office portfolio has an attractive weighted average lease term of six five years to exploration.
For the quarter rent collections continue to remain very strong as we once again collected 98% of our office rents.
So far of rent collections in Q1 have remained on track.
On the disposition side as we discussed on our last call. We sold <unk> Plaza in Dublin during the quarter. The sale of this unlevered asset generated cash of $165 million.
Gain of $85 million and demonstrates the strong demand for quality office product from institutional capital.
Globally, we saw strong leasing activity and completed new leases and lease extensions across 655000 commercial square feet, which brings our 2020 total to $2 6 million square feet of commercial leasing what they want at five seven years.
As a reminder, 98% of of the NOI in our office portfolio comes from the low and mid rise property and 74% of our NOI is generated from buildings that are either occupied predominantly by a single tenant or in an office park.
And the use of the largest office deals that we completed in Q4 exemplified demand for these low range office flex spaces from both the renewal and new tenants looking for space in our suburban locations.
We've seen a growing focus on drop in regional or local hubs.
Where people can continue to connect these facilities and work collaboratively with colleagues and clients when required as.
As an example of this hub and spoke model of momentum, we're seeing of accounting and financial firms reserving suburban space to reduce commuting and provide resources to those outside the city center.
All of it it's too early to tell the final outcome, we're starting to see some evidence of firms providing their employees with flexibility in both ours and choice of office location and we feel our low rise suburban office portfolio is positioned to benefit from net.
As companies begin to look beyond Covid, our leasing activity remains strong with debt.
Over 400000 square feet and our pipeline at the end of Q4.
We are working hard to close these lease transactions in the first half of this year and we've already completed 12 lease transaction, adding $1 $4 million of the incremental income per kw in 2021. So we're off to a good start and with that I'd like to turn the call back to Bill.
Thank you Mary.
I'd now like to discuss our development on lease up portfolio, which includes 4400 multifamily units $2 6 million commercial square feet of one hotel.
The completion of these initiatives is an important near term strategic focus for us as we build new product to achieve higher unlevered returns that can be achieved from buying finished the assets the.
The majority of our construction is expected to be substantially complete by the end of 2023.
Many of these projects are 50, 50 joint ventures with strategic partners, who themselves are extremely well capitalized.
In the U S. We acquired one new development project called 38 degrees North phase two in Q4, which totals 10 acres of land and sits adjacent to Kennedy Wilson 38 degrees North phase one.
Phase one totaling 120 units was completed in September and as leasing extremely well with the 85% of the units now leaves.
Phase two will add another 172 units, bringing the total community of 292 units.
Looking further out we are completing 2300 multifamily units that will be delivered into a strong U S markets in the next 12 to 18 months.
On the market rate side, we're well underway on two multifamily developments of Boise, Idaho, where we continue to see very healthy demand for our product.
First is the clairol, which totals 277 units roughly half of these units are already complete and stabilized with the balance to be delivered by the end of June.
We're also making great progress of River point in the 89 unit property in Boise that will complete in early 2022.
This development sits adjacent to one of our communities with 204 units that is currently achieving a 98% of occupancy range.
Within our vintage housing joint venture we of approximately 1800 affordable units of the development pipeline with roughly 800 completing in 2021.
We have developed able to develop these units with minimal equity required from kw.
This venture continues to perform extremely well the same property revenue was up one 4% and on NOI up one 7% in Q4 and.
And rent collections at 99% since March.
As there continues to be strong demand for affordable housing options on the Western U S. We are exploring new opportunities to continue growing this portfolio, which now totals approximately 10000 units vs 5000 units when we acquired our interest in the company five years ago.
<unk>.
In Dublin, we have two projects completing this year Hanover key and Kildare.
Which totals of 133000 square feet of commercial space.
We remain confident in the lease up of these two exciting developments.
King out of a bit further we have four projects completing in Dublin in 2023, we're adding approximately 1000 multifamily units and 421000 square feet of commercial space.
Once we finish all of our global development on lease up projects, we expect two out of $107 million of estimated annual NOI to the company.
And so to summarize 2020 was truly a year like no other.
Very proud of how we're positioned for the future.
Armed with record liquidity and of greatly simplified business model, our near term growth initiatives include as I've mentioned growing our recurring cash flow through new acquisitions organic NOI growth and the completion of our construction of lease up projects as well as significant cash.
Savings to the company from lower interest and overhead costs.
And two we will continue leveraging our strategic institutional partnerships to meaningfully grow our investment platforms and our fee bearing capital.
I'd like to thank our entire global team.
For their hard work on a challenging year and our shareholders our investment.
<unk> on our board for the continued support of Kennedy Wilson.
So with that I would like to open it up to any questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
The first question will be from Anthony <unk> of Jpmorgan. Please go ahead.
Thanks, and hi, everybody.
Hi, Tony.
My first question is on the urban logistics platform can you just talk about how you think of your competitive advantage in that space and how you'll go about competing in what seemed like a pretty hot area right now.
Yes.
So of Mary you want to handle that.
Sure Hi, Tony Yes, I mean, it's the space that we as the company, we know very very well we've had great success in putting up the returns over 30% IRR over really of our history. Since we started our business.
In Europe.
We've.
Basically we've got highly experience.
Take sector specialist if you will in Europe has been in the space for decades, we've got extensive networks relationships across.
Our occupational investment markets, which we think of key in this area and we always talk about relationships being important to the company.
But we focus on micro market fundamental and really the strength of any location.
And the key investment driver, we tend to buy multi let of state.
Our land adjacent to what we already own with strong investment fundamentals and it's really around urban centers. So the last mile locations.
Where supply and demand is favorable and we can drive rents and possibly assemble space to add square footage for tenants, which we kind of on the path.
Our target assets.
We have significant ability to add value and drive rents which of the macro.
On supply demand dynamic right now in the U K, where we're largely focused on it.
In our favor and there was there was 10 million square feet of take up in Q4 alone.
And so we've been doing this now for quite a long time and we've got as Bill said in his remarks of very very strong pipeline to grow the business. We're excited about it.
Okay great.
And then second question is as it relates to the development pipeline you added the northern California multifamily project and you talked about how much delivers over the next few years do you think the pipeline.
Winds down a bit or do you think you'll have incremental starts that debt.
The roughly $1 7 billion.
And that in that range.
Overtime.
Well I mean, it's hard to say, Tony we only have one other.
I would say active project in the pipeline the <unk>.
We're evaluating as far as new construction is concerned.
We have a very strong pipeline here in the <unk>.
Well, let me back up a second.
We made a decision.
Several years ago the <unk>.
We thought we could get.
Much better returns.
By building brand new product and I think one of the thing is particularly in the multifamily space one of the things that we've learned.
Is that there is a very very big attraction, particularly in the environment, we've been through for people who live in new <unk>.
Buildings.
And.
So I think you can see from kind of the leasing activity that we've had both in Clancy three and from Santa Rosa, one and from our Boise projects that are leasing up extremely fast we have one called rosewood that we finished.
The last summer and of two months, we leased 100% of the units above our pro forma rents.
But these projects take.
There are long lead times involved and there's a lot of hidden expertise that has to go into these in terms of entitling them and planning them and so the lead times are long.
And so as we kind of wind into the eye.
Look at this as more of an assembly line.
As more and more of these.
Roll off.
We're going to be very very selective about not only the number that we would have in the pipeline, but also the markets that we do the men.
And.
You also have to weigh this against the cost structures of.
Of building.
Because we started these early on we have benefited from <unk>.
Cost savings.
A lot of the material costs and labor costs have gone up here, particularly in the last 12 to 15 months.
So.
Except for one site that is adjacent to an existing site that we are already on.
That is really really doing well.
It's really the only future development that we have on our.
Underwriting and Bill just to add one thing to that the majority of the development pipeline that we're building today is on land that we acquired.
During the credit crisis for little to no cost. So we had a real key.
Competitive advantage, there with very low land basis to build to very attractive yields. So that's the majority of what we're building today.
Tony two if I could add just one footnote to the debt business.
This is one of the great advantages that we have in underwriting the debt positions.
Matt and his team are looking out.
We're both acquiring and we're building.
And so we we know costs, we know what we're willing to have low loan to value out of.
And because we utilize all of the various expertise of people on the company that's allowed us in this debt platform.
The two to grow in a very prudent way, but but in a meaningful way over relatively short period of time.
Got it.
Do you have much land just in the portfolio now on the multifamily side for the future or do you think of additional projects you really have to take.
Take them on as they go on because they come.
Matt Yes, Tony there is a handful of projects, where we are very low density where we could potentially build additional density. There is a couple of office assets with some excess land that we're exploring entitlements on so there are still a handful of of assets with what we would consider little to no basis that we're evaluating.
Potential future developments.
Okay, great. Thank you.
The next question is from Derek Johnston of Deutsche Bank.
Hi, everybody good morning, and thank you.
Can you talk about and share more insight into 2021 acquisitions, given the large liquidity position at 1.3 day.
And you did mentioned almost $1 billion on cash what opportunities property types or geographies or how do you envision deploying this capital.
Yes.
Well.
I think first of all of you know as we've talked.
We've probably been talking on these calls for of at least two years, maybe three years, because I was always out worldwide.
Worry about most in.
And.
My answer has always been the when I look at the financial systems across the world that the banking system.
It's usually is a big driver of corrections and the economy is the healthiest that I've ever seen it.
And so the thing that I've said now for two or three years certainly inside the company of the thing I worried about the most was really.
The unknown.
And so we started really of couple of years ago with the plan that we wanted to build our of liquidity.
Things were very perfect, but we were worried about the unknown.
And so what has happened of course is that interest rates across the globe of gone to ultra low levels.
That allowed us to continue building our liquidity.
And I think also demonstrated the quality of our very very.
The high quality underlying assets and so this was really all part of a plan to do two things to put us in a position, where we would have great liquidity going into 2021, and where we had developed new partnerships with big institutional partners.
Whether that was acts of Fairfax or security benefit are now GIC and a whole bunch of other names that are involved in our fund management business, so that as opportunities presented themselves.
And whenever there is a.
Price or tragedy that we've all lived through here of the last year, there's always a time lag.
Between when the opportunities show up and won that particular crisis started.
So.
My my long winded answer to you is the we do think that there are going to be some really really outstanding opportunities for value add.
Acquisitions, which is really our core strength value add individual acquisitions.
We're not.
Very successful at these bid kind of situations, we always tend to be the losers in those because of our underwriting doesn't always meet those standards.
So our core strength as a company over the 30 years of Mary and Ive been together as the relationships we've created.
People know we are of very very reputable counter party.
And we're where we're able to acquire assets through off market transactions, where we can give the seller certainty of close and.
So when you look at our balance sheet today on the partners we're aligned with.
We have kind of of the perfect storm of of attributes that's going to allow us to execute here this year.
I would say Mary and you can add to this the.
Sure.
Our January <unk>.
Even in the February here has been the busiest.
The early part of the year we've had.
In terms of evaluating new opportunities and <unk>.
Even though we're very very selective we just have a very strong pipeline of new things that we're either buying.
Right now we're underwriting.
So Mary I don't know, what you would add to that.
Yes, I mean, I'm, just really excited because as you just said, though our pipeline has never been not never been net over the last 12 months. This is the strongest it's been.
I think if you think about like our funnel of business in the U S.
What we're really focused on is we're about 70% to 80% of the return is coming from income.
In markets, where there is wage growth job growth population growth.
About the last few things that we bought.
On one asset the Parkway centre, which is.
The <unk> 10 minutes from the airport 10 minutes from downtown low rise, where there's excellent credit we have Verizon in one building we of Amazon <unk> pharmacy in one building and another building the multi let.
<unk> is really where the value add opportunity is because theyre short short leases there and then additionally, we also have two pads on that site.
That we put in zero value on.
So we're kind of focusing on that the bourbon low rise or flex product.
That we think is extremely defensive and we think we can can really do our thing on the asset management side and drive returns.
And then in Europe, we're seeing equal.
Equally of very very large pipeline I think that there has been pent up product on.
We're perhaps foreign owners got into the market two to three years ago did not get out there of shirt short term income and now is the time for them.
To try to sell.
And so we're really seeing a huge window.
On the pipeline for our value add funds.
For our industrial platform.
And so we're super excited about what 2021 holds in terms of growth.
Thank you very much of that was very helpful. This one maybe more for Matt maybe Justin or anybody.
Just same store NOI was down considerably given for Qs bad debt reserves.
Meaningfully higher than previous quarters. So was this the time in <unk>, where you kind of look back of the accumulated over the course of the pandemic and basically started making some decisions.
The other words.
This isn't something we should expect to repeat in future quarters, right, I mean, especially of the pandemic seems to be coming under control.
Yes, I mean, if you just.
As adjusted if you look at our.
Same store performance of sort of the majority of the.
The negative is related to.
Our reserve I'll call it, but if you if you think about the accounting.
The accounting rules basically require us to.
Not not accrue revenue, where we think something is less than probable which is a pretty high standard and so on our mind.
Along with our peers I think everybody is being relatively conservative and youre seeing in certain markets, even legislation that might allow us to collect amounts that we haven't accrued this far.
And then lastly, I would say, yes. This is very unique to the situation and it's Covid ends we expect to sort of be right back to normal.
Okay. Thanks, that's all from me very helpful.
The next question is from Sheila Mcgrath of Evercore ISI.
Hi, yes, good morning.
I was wondering as we look at 2021 in terms of realizations of games, what your expectation is versus 2020.
On the <unk> really picked up and I'm just wondering if we should expect more activity in 2021.
Thanks Sheila.
Hi.
It's always hard to project that I mean, we have a plan and we've identified a certain group of assets that we were going to try and move this year.
But it's just the very fluid situation, you know quarter to quarter on on.
On what you're doing.
So I can't really give you of.
The forecast in terms of what we plan to dispose of.
But.
It's going to be something in the area of what we did this last year.
Okay, Great. Matthew do you have anything that I would just add to that that the liquidity as we mentioned earlier really came back into the market in Q4, and we're seeing that continue into Q1. So it feels right now like the market for selling assets continues to be attractive and liquid, but obviously as bill said that can that can change and we are.
We have plans but.
Not willing to give the specific forecast on what we think the gains.
I think one thing Sheila that I should of that it is the actually cap rates have continued to compress.
And so.
There is.
We all know there is great global search for any kind of yield right now.
And the asset class that is.
Really come into favor with the institutional investors as real estate high quality real estate.
And so on.
We have many many options in <unk>.
Terms of what we keep ourselves for the long term.
And the added advantage of all of this construction is now coming online of course is that.
That.
Yeah.
We're adding recurring on a lie at the same. We're we're same time, we may be disposing of assets because as I said several times on the call.
One of the things that.
It's front and center on our mind is to continue growing our recurring NOI.
Okay great.
It might be interesting for you we sold two assets on the east side of <unk>.
That'll where there's real liquidity.
Because the market fundamentals are there.
And kind of fix and we realized 46 and <unk>, 75% of errors of both of those two times multiple.
Way early into our business plan the team our asset management team did a great job on executing.
And did the lease up of the asset and one of the sold at a sub five cap and the other is sold in the mid five cap rate range.
That's our obviously, our trading business and from six.
But but as bill alluded to there is a lot of liquidity in the market, where we can opportunistically put up big returns as long as of our continuing to grow our NOI.
We will continue to to deal.
And you call us marry those those two deals in January Ryan.
Yes, that's true just closed we have another one and not the same market that has an escrow day to close on a month.
Also excellent returns we have another asset that is.
On market now and these are really interesting data point so within the first two weeks, we got 80 confidentiality agreement signed with <unk>.
Had multiple tours so to Bill's point there is there's just.
A wall of cash.
Capital looking for returns somewhere that that liquidity window on when we can.
Hit Outsize returns.
Especially in our fund businesses, where we're trading in and out of assets. We will continue to put up those kind of returns on recycle our capital.
Were those multifamily Mary.
No actually those were to flex office buildings.
On the product that we like a lot of as I said earlier.
Okay. That's helpful. And then I was wondering if you could give us an update on the larger development projects that are due to be completed this year like capital dock mixed use and Clancy Quay phase III, how they're progressing with construction and lease up and rent versus your original expectation and.
Has there been any impact on those projects from the pandemic.
Mary.
Sure it's of Clancy Quay three is done its completed.
We think it's the the best development in all of Ireland.
We're super proud of it the team did just take the nominal John.
As I said in my remarks during the call. We are 50% left there, which we're really pleased with.
We are ahead of budget in terms of absorption and in terms of rents were also slightly ahead of where we budgeted rent, which again, we're proud of given given the dynamics of what's going on in the world.
Thank God asset really speaks to our whole portfolio, it's very similar and the same nature, which it has it's highly of monetized. It has outside areas that have the dog Park has it play area for kids.
There is an area of business center, where people if their home. They can go use of the business centers of Jim.
So really that's the offering that we're out in the market with and we're really proud of it.
In terms of capital Dock the office portion of that is completely done retail portion is done.
<unk> family is done and I think we've seen actually it's been interesting as we've seen since June of pickup and demand for those apartments, which are extremely high and very beautiful apartments.
And what's really happened over the last couple of quarters is with work from home a lot of companies and Dublin sent their workers home and said you don't have to come back.
Regionally they were supposed to come back into the country by January and now of those companies have moved that date to the end of the second quarter. So we expect to see a really nice uptick in demand for for that high quality product later this year.
Okay and one more question from me your multifamily portfolio has generally been in suburban location.
And you allocated more dollars to the mountains debt.
Mountain States, which in hindsight has been fortunate with the current market conditions. I was just wondering if you could give us some insights on what were some of the factors that drove the strategy. When other major players, we're shifting capital to Central business District, like San Francisco and Manhattan, just what did kw.
Theme.
That was different.
Sheila it's going to sound like I'm, bragging, which is not.
<unk> now malls, but our company you don't like Marriott had been together for three decades.
We started in Japan of $19 94.
When nobody thought that was an opportunity and created the first.
Public real estate company of U S Real estate company. There we started in Europe in 2010.
When really nobody wanted to go there with our focus on the UK and Ireland.
And it was a similar strategy here on the Western United States, because we were a California based company, but we could look at.
We started almost 17 years ago in the greater Seattle market.
And today, we have one of the larger businesses in the greater real estate business is in the greater Seattle market.
And so as it was with Salt Lake City, and Denver, now Boise, Idaho in Albuquerque in Arizona.
We just we were looking at population trends and job growth trends.
And also in the markets that we're in generally speaking there has to be a very great University system is producing.
Great Young people.
And so we just kept studying these markets and looking at these trends that were going on.
You had the fortune 500 companies in southern California, basically selling the out of state companies and and reducing their jobs here in the certainly in the southern California market.
And.
We had also let's say downtown L. A for example, we had been a big owners over the year starting back in 1995 of assets in downtown Los Angeles, but we could see the.
That experience there was very little rent growth.
A market that is extremely.
Easy compared to other places to get things entitled and So you had sold many people come in there and start building the building at a very high cost structure is the same in downtown San Francisco and so when we looked at these very high cost structures and we looked.
The rents you would have to get in order to achieve your returns it just to us didn't make sense and so consumers are very very smart and so on rents get very very high they look for lower cost alternatives. So we went to the east Bay instead of trying to be in.
Core San Francisco, we went to suburban southern California cash.
<unk> of real for example, and then of course as I've laid out here. We just we had a conviction really going back 17 years ago.
These other markets outside California and of.
As I've said on these calls before if you look at the Seattle There are more fortune 500 companies headquartered in Seattle than there are on southern California.
So these were all factors that led us in the direction, we have gone in and it's really been amplified our conviction because of the things that have gone on in the last year.
You've got this two groups of.
Age groups, you've got the 25 to 35 year olds that are looking for affordability of higher quality of life.
And the.
And then you've got the the age group of I would say 55 and above.
That and a lot of cases of retirees or people to just wanted to change careers and they're also looking for the same things that the 25% to 35 year old age group is looking for affordability higher quality of life and when I say affordability is not just.
The rent the rent number.
Nevada has zero state income taxes, the state of Washington has zero state income taxes, Idaho was half of California, and you can go kind of on and on down the list.
And so on.
I've learned over the years the.
People are very resourceful in terms of how they're going to spend their time on their money.
The one we do these things too we always take a long of long term view.
The study hard before we go in but then we take a long term view.
And the.
We like to be the first.
Entrants into the entry into these markets and then we like to plan, our fag end of big wave of like we've done in Boise.
Thanks, a lot.
Again, if you have a question. Please press Star then one.
Seeing no further questions I would now like to turn the conference back over to Bill Mcmorrow for any closing remarks.
Well I'd like to thank everybody for taking the time to listen to us today for supporting US overall these years.
I hope that everybody stays healthy as we start to turn the corner on.
We've all been experiencing here of this last year. So thank you very much for your time this morning.
The conference has now concluded. Thank you all for attending today's presentation. You may now disconnect your lines have a great day.
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