Q2 2021 Kennedy-Wilson Holdings Inc Earnings Call
Good day, everyone and welcome to the Kennedy Wilson second quarter 2021 earnings conference call and webcast all participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be the opportunity to ask questions to ask a question you May press. The Star then 1. Please note that this event is being recorded.
Now I'd like to turn the conference over to Devin Bhavsar, Vice President 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 on the archived for replay the replay will be available by phone for 1 week and by webcast from <unk>.
3 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 and adjusted net income you can find the description of these items along with the reconciliation of the most directly comparable GAAP financial measure and our second quarter of 2021 earnings release, which is posted on the Investor Relations section of our website statements made during this call may include forward looking.
<unk> 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 I'd now like to turn the call over to our chairman and CEO of Bill Mcmorrow.
Thanks, Devin and good morning, everybody and thank you for joining us today.
I'm pleased to report on our record quarterly results of the best in our history and the significant progress we've made on our long term growth initiatives growing our recurring property net operating income and growing our fee bearing capital and recurring fee income, which together will lead to increasing the net asset.
Value per share of Kennedy Wilson.
We had a tremendous quarter completing a total of $1.7 billion of the investment transactions, which is the highest level of transactions. We've completed since the onset of the pandemic.
For the first half of the year, we allocated $573 million of our own kw capital.
With 79% going to new investments, 18% to Capex.
3% of share repurchases.
Looking ahead, we are of great pipeline of new opportunities strong capital base and well capitalized institutional partners.
That will accelerate further progress on our long term growth initiatives.
So starting with our financial results in Q2, we had of GAAP EPS per diluted share of $1.53, compared to a loss of 30 cents in Q2 of last year.
Adjusted net income in Q2 grew to $265 million from 12 million last year.
And finally adjusted EBITDA in Q2 grew to $410 million from $73 million in 2020.
Our core investment markets continue to grow in the U S, particularly in the mountain the states, where we are uniquely positioned rent growth remains strong given the employment growth relative affordability and the strong migration trends these markets are experiencing.
We have seen the values of multifamily assets assets continue to appreciate which is very positive for the net asset value of Kennedy Wilson.
In our European markets, we are seeing the reopening of the United Kingdom on the Irish economy take hold which we expect to have a positive impact on our assets both in terms of occupancy and rent growth.
In Q2, we continued to see global liquidity and transaction volumes increase supported by very healthy capital markets and low interest rates.
We took advantage of market conditions and made great progress on our key growth initiatives as we locked in new property financings and refinancings at very favorable interest rates.
In the U S. We are seeing the lowest 10 year fixed rate in the history of our multifamily business at sub 3%.
And in Europe, our borrowing rates ranging from 2 to 2 on a half percentage.
Our acquisitions in the quarter added $28 million of estimated annual NOI.
In the U S. Our focus remains on growing our multifamily presence in the mountain States region.
Where we continue to see strong fundamental growth.
We acquired 3 new communities in Boise, and 1 new asset in Albuquerque, which together added 984 units and $9 million of estimated annual NOI.
We also have 2 new opportunities zone development projects with a partner that we acquired 1 in Boise and 1 in Bozeman, Montana, which will add another 500 units and over $5 million of the NOI to our mountain state portfolio once completed in 2023.
Yes.
We have created substantial scale in the mountain state regions with now total over 11000 units, including units underdevelopment and remains our largest region for multifamily.
In Europe, we acquired 2 office properties, the 100% owned embassy gardens.
In London, and the capital building and Brock now on the United Kingdom, which we have of 51% ownership interest.
These 2 assets totaled $325 million of purchase price and added $14 million of estimated annual NOI to kw.
And finally, we made great progress on the 2 new platforms, which we launched in mid 2020, our global debt platform and our European logistics business.
Which together completed $350 million of transactions in the core.
We also announced in the quarter of the formation of a 1.5 billion dollar U S core class a multifamily joint venture with a large global institutional investor.
We seeded this platform with an $800 million portfolio of 9 previously 100 persona at 100% owned assets.
We sold of 49% interest in this portfolio and we will continue to have of 51% interest going forward.
The transaction.
Resulted in cash proceeds to Kennedy Wilson of $254 million.
Gain on sale of $330 million.
As well as an increase to fee bearing capital of the $175 million.
Over the next several quarters, we will look to buy an additional $700 million of core plus multifamily in this platform.
Additionally, we will look to redeploy the cash flow proceeds that I mentioned from the aforementioned sale into approximately $400 million of a 100% owned multifamily assets.
We continue to make progress on our lease up initiatives.
And we stabilized 3 additional properties in the quarter.
Clancy key phase III the.
The Clara Boise, Idaho, and Seatac by vintage, which totals 600 units and added $6 million of estimated annual NOI to kw.
The result of our Q2 activity was a net increase to our estimated annual NOI of $14 million.
Which now totals $403 million.
We also increased our fee bearing capital by 10% on the quarter to $4.5 billion.
Turning to the balance sheet in Q2, we completed the refinance 1.15 billion of unsecured debt due in 2024 <unk>.
Extending the maturities to 2029 and 2031.
While lowering the annual interest expense by $10 million.
In addition, we completed the partial redemption of our K W E bonds in 'twenty.
Due in 'twenty 'twenty, 2 further lowering our interest expense.
We now have paid down $386 million of the KWE 'twenty 'twenty 2 sterling bonds that have of remaining balance of $300 million due on June 2022.
We had minimal share buyback activity in Q2, largely due to being on a blackout period for the majority of the quarter.
Since March of 'twenty 18, we have bought back and retired $14.6 million shares or approximately 10%.
Outstanding shares.
We look forward to resuming our buyback in the second half of the year.
I would now like to turn the call over to Mary Ricks, The President of Kennedy Wilson to discuss our operational performance.
Mary.
Thanks Bill.
The performance across our largely the bird.
Multifamily and office portfolio, which accounts for 82% of our estimated annual NOI was strong with high occupancy of 96 per cent for multifamily and 94% per office assets.
And then our fast growing industrial portfolio occupancy was at 100% as of quarter end.
Our multifamily portfolio is uniquely positioned and outperforming many of our peers, who on average saw declines across both revenue and NOI are.
Our strongest performing region. The mountain States for same property revenues grew by 9% and NOI by 13% cities such as Boise in Salt Lake City continued to post impressive rent growth driven by in migration and affordability with average rents at just over 1300 dollar.
Per month.
The Pacific Northwest and northern and Southern California continue to be impacted by pandemic related moratoriums, which limits rental increases on renewals leading to an embedded loss to lease.
Going ahead, we are very optimistic.
Domestic on the recovery of these regions as the moratoriums for rent increases are set to expire in Q3.
We are seeing positive NOI growth in all of our U S region since Q1, including strong leasing spreads on new leases completed in Q2 of which averaged 20% across our U S portfolio and.
And asking rents that have now increased above pre pandemic levels in all of our U S market.
In Dublin during the second quarter, we stabilized the final phase of Clancy key Ireland's largest apartment community the.
The final phase was 91% occupied at quarter end today, that's the 94% and expect it to increase to 99% once leases already signed moving.
And the amazing 8 year journey with the community. We originally acquired Clancy in 2013, which at the time had only 423 units and 8 acres of undeveloped land.
Since then we have more than doubled the unit count to 877 units and also adding market leading resident amenities, while at the same time, ensuring preservation and undertaking sensitive conservation of the old Army barracks the NAV.
On housing agency in Ireland has estimated that 90000 extra of apartments will be needed in Dublin over the next 20 years to meet existing demand and projected population growth of 25 per cent.
Currently apartment completions of 2000 to almost 3000 units per year are well short of the 4500 units needed adding to our conviction that fundamentals in Ireland continue to be attractive as we have in excess of 1000 units in our development pipeline.
Turning to our global office portfolio, approximately 90% of the NOI comes from low and mid rise property.
And 73% of our office NOI is generated from buildings that are either occupied predominantly by a single tenant or are located in an office park.
And it is in the suburban locations, where we are seeing the most demand in terms of leasing activity.
We completed 560000 square feet of leasing in Q2, a 75% increase from Q1 with the Walt of 5 years.
This brings our year to date total to 880000 square feet with the Walter of 8 years.
Looking ahead, we have a robust pipeline of leasing opportunities with 1 million square feet either in Legals are in negotiation, which we are focused on closing in the second half of the year.
Our strategy for office acquisitions is to focus on well capitalized tenants and fast growing sectors, including life Sciences media and technology.
As Bill referenced earlier, we had 2 significant office acquisitions in the U K.
First as embassy gardens, a 156000 square foot wholly owned office property the added over 12 months.
Related to annual NOI with.
We acquired this property using proceeds from the sale of Friars Bridge Court, which sold in Q1 out of 3.5% cap rate.
And with the gardens is located in the fast growing Battersea Submarket of London and is located directly next to the new U S. Embassy.
We anticipate the area to benefit from the tech clustering impact from the arrival of Apple in 'twenty 'twenty, 2 which is establishing its new 500000 square foot U K headquarters at Battersea power station neighboring our assets.
The trend witnessed in similar London regeneration sounds has been a dramatic increase has seen the doors.
Attic increase in absorption and prime rents following the arrival of the major tech occupiers, such as Google and the Kings Cross on Amazon and the shortage, which push rents by 35% to 45%.
We also acquired the Capitol building, a great a suburban office campus totaling 173000 square feet for $66 million.
We have a 51% ownership in this property, which was acquired at over a 7% cap rate the.
This asset is 97% occupied with the majority of the tenants focused on high growth industries, particularly large cap tech tenants the.
The asset is well located and breadth now and the Thames Valley, which is the second largest technology hub outside of London and home to 40000 technology jobs, the Capitol buildings close proximity to affluent towns and of <unk>.
Significantly under market rent rents.
Rents make this an exciting investment for us.
In addition to our core multifamily and office investments, we are focused on the expansion and introduction of new strategies, such as our logistics joint venture in Europe, and our fast growing global credit platform that Matt will talk about later on this call.
We leverage our deep and enduring relationships with both large global institutions and insurance companies, allowing us to significantly expand our ability to deploy capital globally, which meaningfully enhances our ability to scale, our investment management business and generate attractive returns for kw of shares.
<unk>.
Our 1 billion dollar of European Logistics joint venture continues its strong progress we completed another $83 million of investments in Q2, bringing the total platform to $573 million 6 months from inception.
We expect our U K portfolio to grow to $1 billion as we close new investments and have a robust pipeline of further deals and expect this platform to grow in other key markets, including Ireland and Spain.
On the back of the success, we are accumulating smaller box multi tenant last mile logistics properties through our fund business in the U S. As.
As consumer habits continue to migrate towards online shopping and shorter delivery window times with proximity to employment bases urban West Coast and mountain State Metro centers and access of freeway arteries, reaching a huge part of the population within 24 hours has become increasingly.
Important.
We are in various stages of acquiring 11 assets totaling over 400 thousands per feet in this space and a pipeline of another 500000 square feet as we make investments out of funds 6 now I'd like to turn the call over to Matt Windisch to discuss our global debt platform.
Mary in Q2, we completed another $265 million of loan investments in the U S.
This brings our debt platforms of $1.2 billion in loans outstanding.
Representing 25% growth in the quarter.
Kw of investment in its debt platform is currently $120 million or 10%.
And we are earning approximately 12% unlevered annual returns on our investments, including interest and management fees.
We've also been able to attract strong institutional sponsors with high quality assets to our debt business with an average loan size of roughly $60 million.
And considering that we are largely using existing kw of investment professionals to operate this platform.
The result is of high margin attractive net risk adjusted return for our shareholders.
We also recently announced the expansion of our debt platform with the new 700 million dollar commitment from our global institutional investor targeting loans secured by real estate in the U K and Europe.
This brings our total debt platform commitments to over $3 billion.
With this most recent commitment we now have the flexibility to invest across every aspect of the debt capital stack in the U S and Europe.
Post quarter end on a global basis, we've closed.
$250 million of new loans, and with a robust pipeline, we should be at $1.8 billion by the end of Q3.
We expect to see continued strong growth in our global debt business, which should be a big contributor to the further growth of our investment management business.
We also wanted to take an opportunity to update everyone on the progress we have made within our affordable housing portfolio.
We acquired a majority interest in vintage housing in 2015, driven.
Driven by our thesis that there was a significant under supply of senior and affordable housing in the markets that we own and operate.
Through our investment in and partnership with the principles of vintage housing, we've been able to double the size of the portfolio to over 10000 units over the past 6 years supplying high.
High quality of affordable housing to over 25000 people in the Western U S.
In particular, our recent focus has been on building new properties in the state of Washington, and the state of Nevada on.
Our portfolio, which on average is only 13 years old.
Currently over 97% occupied and produces strong stable cash flow to kw.
In fact since our original investment in 2015, we have recouped all of our equity and continue to earn significant recurring cash flow on a monthly basis.
We still believe there is a sizable opportunity to grow this asset class and we're not alone in our thinking as more institutional investors have begun entering the affordable housing market recently with that I'd like to pass it back to bill.
Alright, Thanks, Matt I'd like to outline our thoughts on capital allocation and growth for the long term.
First we continue to make progress on our development on lease up portfolio, we have $2.5 billion of construction underway in <unk>.
Total, including lease up assets, we have 4300 multifamily units 2.4 million square feet of commercial and 1 hotel that once completed.
As expected to grow our estimated annual NOI by approximately $100 million over the next 3 to 4 years.
Our development pipeline is building 2 of 6 to 7 on a 5% yield on cost and will generate substantial value creation when valued at market cap rates, which are significantly lower than our projected stabilized yields.
We are nearing completion for several projects in 2022 and remain on track to complete the remainder of our construction on time and on budget in 2023 of 2024.
Second as I mentioned, we are focused on recycling the proceeds generated from recent asset sales into new 100% on multifamily assets in the western New wells.
Finally, our newly announced debt and equity platforms continue their growth, especially our global debt platform on our logistics platform in Europe.
In total we of approximately $5 billion of new investment capacity across all of our existing platforms.
We have a clear path to grow our recurring NOI of the rate of 10% to 15% per year over the next 3 years driven by strong organic NOI growth, new acquisitions and the completion of our construction.
We also plan to grow our fee bearing capital and resulting fees by 15% to 20% per year over the next 3 years the.
The combination of these factors should lead to significant growth on the net asset value per share over time.
So to summarize I'm pleased with the growth we've seen on the first half of the year.
But more importantly, the foundation, we have set for continued long term growth of kw.
We now have the ability to invest across all parts of the capital structure and capitalize on both debt and equity opportunities in the U S and on Europe.
We have $900 million of liquidity at the kw level.
On several strategic partners with which we have a well established long term relationships and each of these partners is extremely well capitalized.
I'd like to end by thanking our incredible Kennedy Wilson team of people.
Our shareholders on our co investment partners for their continued support of Kennedy Wilson.
Especially over the last 18 months as we all adapted to the many challenges brought on by the pandemic.
So with that Devon, and I'd like to open it up to any questions.
We will now begin the question and answer session to ask the question you May Press Star then 1 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 2.
And at this time, we will pause momentarily to some of the roster.
And the first question today will come from Anthony per loan with J P. Morgan. Please go ahead.
Thanks, Hi, everybody.
Right.
My first question relates to the buyback that you expressed.
Sure the increase.
The increase here as you go into the second half of the year anyway to put some brackets around order of magnitude and.
Just how you think about the stock in any NAV.
Any of the discount that might exist today.
Yeah.
Well we.
Originally back as I said, Tony back in 2018, we approved the $250 million share.
Share buyback program that we exhausted through the purchase of the <unk>.
14, plus million shares that I mentioned.
And so low.
Last year.
Year on I believe on the fourth quarter, we approved a new $250 million share buyback.
But we were a bit ham strong in the first half of the year for the reason that I've mentioned before in terms of utilizing that.
I would.
Answer by saying that we view of the stock to be a very compelling by now.
As I said in my remarks, we plan to.
Resume the buyback program now that will be it on open windows starting next week.
Okay.
And then second question as it relates to the multifamily JV platform that you've put together.
It's the range of markets that Youre looking at.
For that I think.
So you can pay of the contribution.
Of assets into it but just.
What are the other markets you're focused on with that platform.
Yes, I mean, we're.
So I think we've expressed I mean, we're very focused on the western United States and of course, we have a big multifamily business.
Ireland.
And I would say that the.
The quality of the assets over the last several years the wheel on us.
<unk> significantly and.
And I don't think Theres any mystery, we've been first movers in some of these.
The states and cities that we've heard of 4 we're really not.
Traffic to them by institutional investors so.
We still believe very very strongly on markets like Albuquerque, Salt Lake City, you saw us going in the Bozeman.
Probably the largest property on the multifamily owner now on Boise, Idaho.
But there are still plenty of bandwidth we did our first acquisition in Arizona in the first half of the year.
And so I would say you know any of these.
Smaller to medium sized markets in the Western United States and then I think the same thing we find true zero on the state of California.
It's really the.
Infill urban markets.
Of the most difficult the over the last 18 months, but when we own assets for example in the middle part of the state of California, Santa Maria.
We have several properties, there and they've performed exceptionally well.
We just finished construction on the first phase of the multifamily project of 120 units in Santa Rosa.
And we bought the <unk>.
Jason on land there in about a month or about to start construction on 200 units on that adjacent piece of land and so we'll end up with 300 units there.
Similarly.
Suburban location here in southern California on camera Rio.
We bought for.
400 units about 3 or 4 years ago.
Extremely.
Good results over the last 3 years and so we're about to embark on up on.
On a major project on adjacent lab, there are 20 plus acres.
But we're going to build.
<unk>.
700 to 800 units of both senior and affordable and market rate units on so the.
The focus is really these.
The lack of a better way to put it the smaller cities throughout the western United States.
There is still plenty of room.
To take market share in those markets.
Even when you look at the state of Arizona, I mean, that's the stay where the population of almost 7 million people.
So even though.
Characterized on the smaller markets user.
Zero.
Large states.
I think the the 1 that I left out of course is in Nevada by accident of early but we're in the process of buying a property right now in Reno.
We're on the process of buying another asset in Sacramento.
So all of these.
The city is up and down the the west coast West of the Rockies, including Denver.
In Colorado Springs in suburban Denver.
All have in our opinion.
Great growth prospects.
Okay.
And then just my last 1 the.
The softness in the U S office portfolio.
What's kind of behind that.
Mary you want to take that.
Hey, Tony really to 2 assets in a lot of it has to do with <unk>.
Tenants sort of easing moratoriums.
Not pay rent so it's really in 2 of our assets the Marina view, which is in Marina del Rey.
Couple of large tenants and 1 being of residential real estate brokerage house, which they are probably more profitable in these last 2 quarters than they've ever been so again the mortgage part of it makes it really difficult to enforce lease lease terms there.
But we actually have seen.
A big pickup in demand in the Marina del Rey market.
I think what's the moratoriums.
Subsides, we'll be able to do what we would normally do on in a normal market and things will change there.
And then Hamilton landing, which is in Marin.
She is a really unique beautiful property on a very big piece of land.
We had 1 of our big tenants, probably the nicest space at Hamilton landing, we did of deferral agreement with them the big architecture firm and they just have struggled to sort of pay on time.
But again just like it at Marina view, we actually have 300000 square feet of the leasing pipeline at Hamilton landing.
So I think some of this pandemic not fun, but all of it as pandemic related but I'm super encouraged by the pipeline of leasing so I would expect that to wane over the next couple of quarters and leasing volume just to pick up.
Okay, great. Thanks for the true.
Thanks, Tony.
And our next question will come from Sheila Mcgrath with Evercore ISI. Please go ahead.
Yes. Good morning, I was wondering if you could talk about your thought process on the new multifamily joint venture and feeding it with some previously wholly owned.
The high quality assets is this too so the structure of going to help you grow your U S. Multi platform more quickly as cap rates have compressed just why sell those assets now.
Yes.
I'm going on.
The start here and then I'll, let Mary jump in here, but to give it some context. This is the force venture.
Some scale that we've done with this particular investor and so it's part of an overall relationship Sheila that we have.
In the United Kingdom in terms of the industrial platform and the debt platform.
And they are on an industrial on 1 of our funds and so.
This is a very large Asian sovereign wealth fund the has tremendous bandwidth to invest on a global basis and so the multifamily piece that we did in the United States was to give us access to what I would call more core.
Capital.
And so as these cap rates of compressed it gives us the ability to play in these markets and the and the lower return kind of threshold.
But it's all part of an overall strategy that we have with this particular investor.
And Mary I don't know if there's anything you want to add to that.
No I mean, I think that's exactly right and I I mean, the 1 thing I guess Sheila that I would add is.
As a.
Core plus mandate.
It really gives us.
Capital with this group sort of across the spectrum of of returns.
As Bill said.
The major Asian Sovereign wealth fund that we've had a very very long standing relationship with that were.
We're talking to them about additional platform. So I think we're poised for acceleration.
As you've seen in this quarter in the near term here with the same investor.
Okay.
Thank Sheila to the last thing on what out as of when you think of other comments of Mary made and that made myself the.
Really for the first time on our history, we've got the ability when you think about Kennedy Wilson 10, 12 years ago, we were basically just able to do value add higher return kind of investing.
This is now, allowing us to particularly grow our investment management business by being able as Matt said the play in every part of the capital stack and in every return threshold.
And so.
The.
When you think about our capabilities right now we are not only on the equity of cyber on the debt side, but we can play up and down the return threshold.
Whether its value add high value add or whether its core plus like marriage of style blind.
Okay. That's helpful and then on the.
Bill you did a good job.
Highlighting the opportunity to grow with the development pipeline of $2.5 billion. I was just wondering if you could help us understand the embedded growth opportunity.
In NOI, returning to pre pandemic levels, it looks like Theres more upside in occupancy from Ireland multifamily, which is around 92% now and also on.
The hotel in Dublin, the Shelburne BCE help us understand that.
So I'm going to let Mary answer of the shoe of the part about Dublin, but.
When you when you think about.
Investing over the long term.
And you think about the construction that we have going on you have to everybody needs to recognize this was a decision that we made 7 years ago.
And so.
You are creating value all along the way when youre doing construction from the time you buy of the property to the time you get it entitled to getting of finance to getting it built and then of course stabilizing when it shows up in your own alive, but.
As Mary outlined with the Clancy.
Build out.
We started with 423 units there, but now we have 900 units on the same property.
And the total NOI on class C. Now is approaching the roughly 20 million.
Dollars, but if you go back 7 years ago.
It was a fraction of that and so the the.
The thing you have to remember with the <unk> and in hindsight and hindsight's, a very beautiful thing in hindsight our decisions of 2.
To handle construction of the way we have is turned out to be a fantastic decision because now is starting to all roll off the assembly of Lord.
So like class C like Claire.
Like the assets that.
Vintages building on their platform. They are now all sequentially starting to roll off.
And as I said in my earlier remarks, the majority of our construction is going to get finished in 2022 through 2024. So the decisions that we made 7 years ago are now really coming to an end.
But as I also said earlier I think we we've all sort of the.
Buying existing properties like we did university of Glen on camera real where you then can end up with additional land next door that you can build on.
After you have actually proven out the market by seeing what those first 400 units of achieved.
It's turned out to just the I don't want to say brilliant, but its turned out to be of very very good strategy.
To get a little bit more granular as it relates to Ireland Mary.
Can you.
Address the question that Sheila.
Sure.
So Sheila.
Sheila it's interesting because as you probably remember we had done all of the refurbishment work really kit of major room renovation of lobby renovation added 2 bars and restaurants did a huge job at the Shelburne Jessica part of the pandemic, so our expectation of NOI and the <unk>.
2020, when we started the year on 2020 was was $19.5 million day in Hawaii for the shelter.
Today, we're using 9 million so.
Really there is $10 million of NOI upside when things return to normal.
And things are actually picking up Ireland's reopened.
And so we think that we're going to see.
Really nice increase in our NOI, but sort of if you know.
When things are normalized you've got 10 million there Shelburne.
Capital to off from making great progress to stabilize that asset which is obviously also in Dublin.
We'll drop of $4.5 million to the bottom line and then all of our other Irish developments.
The family and office that will be finishing between early 2022, and 2024 will add another $36 million so on.
All of in Ireland, we have about $50 million of additional NOI.
To play for that we're making really good progress on Phil Super optimistic about.
Okay, Great 1 more quick question the mountain states in the quarter were on fire with NOI up I think over 12%.
What is the rate growth look like or is this more occupancy driven.
Matt you want to answer them as Sheila yeah. So it's the occupancies of have gone up slightly but it's primarily rate driven.
As well as we continued throughout the last 18 months doing value add in the mountain states portfolio, where some of the other properties in.
La Northern California, Seattle, we paused some of it.
And of value add programs during the pandemic. So that's the combination of just market.
Rent growth as well as the value add we continue to do over the past year and a half.
I think the thing I could add to that Sheila too I mean the.
Mindy Crandall, who runs our asset management group has been doing this now for 14 years.
And the the management of multifamily properties.
The asset level was actually way more sophisticated than than you might think and there was a tremendous amount of technology that is involved in setting rates using yield star and other management techniques.
And so.
1 of the very big keys to our success over all these years has been to to basically keep the same team of people.
On the ground in these various markets.
And the.
So.
I think youll see as we as we buy assets.
Generally are of learned it takes a couple of years from the time, we buy a finished assets to actually implement all of the value add strategies that Mindy and her team are so good at.
But generally.
Every asset that we ended up buying over time on the multifamily space you end up seeing real improvement in the in the NOI and in some cases, the the occupancy through actually just more sophisticated management techniques.
Okay. Thank you.
And once again, if you would like to ask the question. Please press Star then 1 of.
Our next question will come from Jamie Feldman with Bank of America Merrill Lynch. Please go ahead.
Alright, Thank you and good morning.
Just wanted to dig a little deeper into your comments on.
Office tenant demand you had mentioned life science Tech and media.
Can you just talk about more about where exactly you're seeing that what types of tenant sizes.
And how.
How long you think it would take before those types of tenants really get more active in science on leases.
Actually move in.
So Barry you want to take that.
Sure I mean, we're actually seeing it across our portfolio as I mentioned most of our portfolio is it's suburban.
Assets and that's really in the U K, so in the South East of London.
As I mentioned the breakdown of building is a great example, with in terms of technology tenants.
Really almost all of the leases that we have done in the quarter and in our pipeline are either tech related.
Or.
There is a life science very big tenant that we're talking to you on Hamilton landing.
It's.
I mean, the kind of makes sense because the you know really the the drive and the the growth of the economies today are coming from those kind of tenants.
Really saying as the demand for kind of low rise space, where we can provide amenities and tests can sort of spread out so were really seeing them.
I think we're expecting density rates on offices will reduce.
To facilitate social distancing and overall I think tenants are.
Balancing sort of lower employee density and workplace settings alongside of staff working from home.
But we think that you know really these 2 approaches will really be offsetting in the resulting.
Staples space requirements.
Across the board, whether it be in Denton, and the U K or the height.
We're talking to very large Japanese technology company.
From 40000 square feet, that's the business park in the UK and waiver and which of the wealthy residential suburb of London.
Or whether it be the Oaks, which we're trying to stabilize.
And that's in southern California.
<unk> technologies was the deal that we just did with the with the Tech company because.
The open floor plan sits on.
On a very large piece of land, we're providing amenity space. There so that theme really whether it's in the U K whether it's.
You know in southern California are across our portfolio really of balance so suburban low rise tenants controlling their own front door.
<unk> technologies is in Silicon Valley of research and design Center.
Except that we own in our funds on 6.
We just did a big deal with them 40000 square feet.
Kind of across really across the board of what we're saying.
Okay. That's helpful and you had mentioned life science.
Any appetite for your next fund to be life science related or how much of anything you could grow that platform.
Yeah, I mean, we actually just the acquired share we just acquired a really nice asset of the stone of Med Tech Park, which is in Campbell, California in the Silicon Valley and that's in front of fix so the BOP that for $147 million.
Really just to sort of our appetite in terms of the life science or the medical.
It's on 16 and a half acres Kaiser is the largest tenants there they've been in the park for 23 years.
So they have various specialty space.
And then there's another tenant there.
And that same sort of life science mode doing a lot of research so theres very specialist tenant improvements there theres clean rooms.
They just have the half so that's the camp.
Work from home you have to have space there they are actually growing in the park.
That's the deal that we like a lot of the existing cash on cash return on that outside of 14%.
And we think there's really big upside in terms of the rental rates as well. So we're pretty excited about that so our focus right now and from fixed or we've.
Invested.
About $600 million of the 775 of the equity that we've raised has been on the.
These types of of assets either med tech.
The life Science, you know of kind of the.
Tenants.
Also joining as I mentioned in my remarks.
The industrial aggregation strategy that we've been really successful on the U K doing well.
We're also focused on doing that and in Ireland and in Spain.
But because that's been so successful and because in the markets that were embedded in the mountain states the western markets that we've all talked about.
And theres so much growth there that we really like this industrial small box strategy. So lately, what we've been buying in the fund is that aggregation strategy and then we've thought recently a couple of assets on multifamily assets 1 in Reno and 1 in Sacramento that we have under contract so pretty fired up about them.
What we're buying and fun sex.
Okay.
And then is just with this the med tech or the life Science I mean do you feel like.
In terms of the skill set required to manage those assets you need to.
Hire people or change your platform or is the stuff pretty much kind of run around like a normal.
Otherwise zone.
Yeah, I mean, we have.
The people on our team that our real estate veteran for 20 years 30 years that have been doing it. So long have have had experience in the in the asset class. So I think the whether it's the team and in the U S or in the UK and Ireland, we've got the experience across the board.
Really fortunate to have the great teams that we have.
Okay.
And as it looks like.
Felipe.
Coming out of the pandemic.
Slowly, but getting there.
I mean as you put your opportunistic cats on I mean do you think this over the next 6 to 9 months or so this is the moment to really get aggressive on some stuff that's more of a beaten up or do you think it will just be kind of more of the same paying for paying for quality and markets. You think will have better growth.
I think it's more of the latter Tony.
Jamie the.
We're all witnessing ultra low interest rates here.
The.
So.
That can cover up any problems really for some period of time that anybody might have.
But I would say too to add on to Mary's comments the other.
Ancillary benefit of our debt business.
Matt and the on it as silver runs in Europe.
As it were.
<unk>.
We're we're collecting a lot of information off of the debt business out of our equity playing on both the debt side of the business on the equity side of the business gives us. So many data points in terms of what's going on real time and all of our markets the were concentrated.
And so.
I would say the.
Generally speaking, we're not really other than the obvious.
Yes.
Whatever might have happened in the retail space, we're not really seeing any distress and of particularly we're doing some hotel financing here on the western United States of.
Very strong.
<unk>.
The drive to kind of luxury plus hotels are actually doing extremely well.
Well again.
So.
On the near term horizon, I wouldn't say that we see any real distress in the market.
Okay, and then finally from me.
Are your investors partners are there any other property types, where there maybe pushing you to look at maybe youre not in yet.
Hmm.
I can't I can't think of any of that were really the idea.
On the.
I don't think pushing is really what I would I don't mean to split of words with you but.
I just think we've got we've got the platforms built out with <unk>.
The major institutional partners, including our own and as I said in my earlier remarks. The number of these partners of people, we've been doing business with.
Really long period of time.
And they they.
They trust our judgment.
As to what asset class in what direction.
We're going in.
But I mean, we touched just about every property type now.
So now for US it's all about as I said at the beginning of my remarks building up.
Our recurring net operating income or recurring.
The fees from our investment management business, which we think has great.
Scale.
The ability to attach to it.
And really when you think about debt investment management business it really didn't exist in any.
Size or even 2 and a half 3 years ago. So on a very very short period of time.
We've really been able to grow that business and I think the particularly the debt business that the math.
The.
And others have responsibility for.
That has.
Great ability to scale.
The.
And you heard in matts remarks that the <unk>.
Criticized loans, we're doing of $60 million, but it's really really high quality sponsors.
And as ever.
Everybody on this call knows everybody in the World is looking for some form of.
Yes.
So.
I think the investment management business, particularly the debt piece of our investment management business has greater ability to scale over the next 3 to 4 years.
Okay, great. Thanks for the thoughts.
And this will conclude our question and answer session I would like to turn the conference back over to Bill Mcmorrow for any closing remarks.
Well listen thank you everybody and as I said at the we've all come through.
The period of time here over the last 18 months and for our company and Fortunately in Burger in the best shape, we've ever been in.
And so I. Thank you all for your support on your interest in the company and look forward to talking to you either individually or on our next call. So thank you again.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines of this time.
Okay.
Yeah.
Okay.
Sure.
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