Q4 2021 Kennedy-Wilson Holdings Inc Earnings Call
Okay.
Good day and welcome to the Kennedy Wilson fourth quarter, 'twenty, 'twenty, one earnings call and webcast.
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Please note. This event is being recorded I would now like to turn the conference over to Devin Bhavsar VP of Investor Relations. Please go ahead.
Thank you and welcome this is Devin Bhavsar and joining us today from Kennedy Wilson are Bill Mcmorrow, Chairman and CEO , Mary Ricks, President, Matt Windisch, Executive Vice President and Justin and body Chief Financial Officer, today's call will be webcast live and will be archived for replay a replay will be available by phone for 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 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 fourth quarter 2021 earnings release, which is posted on the Investor Relations section of our website statement.
Statements made during this call may include forward looking statements actual results may materially differ from forward looking information discussed on this call due to a number of risks uncertainties and other factors indicated in reports and filings with the Securities and Exchange Commission.
I'd now like to turn the call over to our chairman and CEO Bill Mcmorrow.
Thanks, Kevin and welcome everybody. This morning, Thank you for joining us.
I'm very pleased with the strong Q4 results that we reported yesterday, which capped off a year that generated record annual results across all our key financial metrics.
Putting a 53% increase in our adjusted EBITDA to a record $928 million.
In Q4, we had another active quarter completing $1 $5 billion of investment transactions, bringing our 2021 transaction total to a record $5 9 billion, which is greater than both 2019 and 2020 combined.
Our assets under management grew by 23% in 2021 to a record 22 billion.
We've seen this momentum continue into 2022 with over $800 million of new investments that we have either close or currently have under contract the majority of which will close in Q1.
Yeah.
I'd like to start by providing some perspective on what we're seeing in the markets Global real estate transaction volumes remained elevated in Q4 and deal flow should remain robust in 2022.
Relative to certain asset classes, we believe institutional demand for certain real estate assets will remain high given the natural inflation hedge provided by the underlying cash flow.
In the U S. We once again saw strong apartment revenue growth in excess of inflation across all our regions, including double digit NOI growth across every U S market rate regions.
Leases in our multifamily portfolio are short term in nature, which coupled with an approximate 50% annual turnover is an attractive feature given the current environment.
Our global multifamily portfolio grew from 29840 units at the beginning of 2020 to over 35000 units a quarter at <unk>.
Including over 5100 units under development, which we expect to complete at yields well above current market cap rates.
We will continue expanding our multifamily portfolio with another 1500 units that are either closed already this quarter or will close by the end of Q1.
In Europe , we saw strong leasing in our U K office portfolio and are starting to to.
See some of our iconic Dublin developments complete where we're delivering brand new developments with leading ESG credentials.
We are currently seeing a significant return to office in both London, and Dublin, which will benefit our existing office and apartment assets as well as our near term developments two of which are in Dublin and are nearing completion.
We have taken a number of steps to greatly simplify our business over the past few years, including the acquisition of KWE Kennedy Wilson Europe in 2017.
Sale of our non core research and property management.
Management divisions in 2018 and 2020.
Kw has transformed into a strong global franchise that generate cash flow from our two main businesses. Our consolidated portfolio, which consists of mostly wholly owned assets on our balance sheet.
And our co investment portfolio, which includes investments we make alongside our strategic partners and also earn fees, which enhance our returns.
Yeah.
Our capital deployment strategy for our consolidated portfolio will be focused primarily on growing our western U S multifamily footprint and our European office portfolio, where we can leverage our track record and sourcing capabilities to find attractive off market opportunities.
And implement value add initiatives with short consistently delivering outsized returns.
And our core investment portfolio, we have ambitious plans to continue expanding our various strategies, including our discretionary commingled funds, our global depth platform and our European logistics logistics platform.
Our Q4 acquisitions exemplifies this strategy.
Our consolidated portfolio, we acquired a 528 unit multifamily property in Las Vegas, and a class a 254000 square foot suburban office campus in the UK for a combined purchase price of $243 million.
These two wholly owned acquisitions added $10 million of estimated annual net operating income to kw with significant upside of both due to value added initiatives and capturing the embedded loss to lease.
And our investment portfolio in Q4, we added over $1 billion of new investments, including the continued expansion from both our global debt business and our European logistics portfolio.
These two investments added $6 million of estimated annual NOI and over $400 million to our fee bearing capital.
I'd now like to pass the call to our Chief Financial Officer, Justin and buy to highlight Q4 and 2021 financial results.
Thanks, Bill in Q4, we had GAAP EPS of 2007.
Per diluted share adjusted net income of $86 million and adjusted EBITDA of $187 million for.
For the year, we had record results across the board, including GAAP EPS of $2 24 per share adjusted net income of $509 million and adjusted EBITDA of $928 million.
You will also notice and enhancement we made to our income statement. This quarter as a result of the growth in our investment management business. We expanded our income statement to include additional information around our investment income from our co investment portfolio, which includes our unconsolidated funds and joint ventures.
We've also moved the results from our co investment business as well as our capital recycling program above expenses as we feel this presentation better reflects the prominence of these core income streams.
Our co investment portfolio saw another strong quarter of investment performance, resulting in 170 million $75 million and income from unconsolidated investments in Q4 compared to only $36 million in Q4 of 2020.
For the year, our co investment portfolio generated $389 million in income compared to $81 million in 2020, driven by higher levels of performance allocations and an over 50% increase to base investment management fees.
Turning to our balance sheet and debt profile.
During the last two years, we've continually took advantage of the lower interest rate environment to decrease our cost of capital and extend out our maturities.
Our cost of debt has improved to an average interest rate of three 5% with an improved weighted average maturity of six one years.
We have less than 9% of our debt maturing by the end of 2023, which is our property level debt.
Finally, 88% of our debt is either fixed or hedged using interest rate derivatives.
And with that I'd now like to turn the call over to Matt Windisch to discuss our multifamily portfolio. Thanks, Justin in Q4, we saw our global multifamily portfolio continued its track record of outperformance.
Our unique combination of high quality suburban assets in growing markets in the Western U S.
With our best in class professionally managed portfolio in Dublin day.
<unk> delivered robust same property NOI growth of 14% in Q4.
Despite concerns around the omicron variant, we continue to see improving conditions in our markets.
Including growing rents and lower delinquencies in.
In the U S. We saw continued strong momentum in our apartment portfolio with double digit NOI growth across every region.
Our top two regions the mountain West and the Pacific Northwest NOI grow by 13% and 14% respectively.
What drove these results.
First of all leasing spreads remained robust in the U S. In Q4 with spreads on new leases of 16% and renewals at 12%.
Asking rents in our U S portfolio are firmly above pre pandemic levels with occupancies at around 96%.
Re rent concessions are not currently being utilized and we were down 92% to Q4 of 2020 and 60% from Q3 of 'twenty one.
We also continue to work with our tenants and take advantage of the rent relief measures that are available.
Which has resulted in $2 3 million of rent collections in the quarter.
We continue to see strong demand in January with leasing spreads on renewals at 13% and new leases at 17%.
Our U S market rate portfolio has an average loss to lease of 14%.
With over half of our units yet to be renovated which sets us up for continued growth this year and beyond <unk>.
Similarly in Dublin demand for rental housing remains strong occupancy across our Dublin portfolio has now increased back to 96% or roughly 600 basis points from the pandemic level.
In Q4, we stabilized our best in class capital Dock apartment community, which comes on the heels of stabilizing plants a key in Q2.
We believe residential fundamentals remain attractive in Dublin.
Supported by strong population growth and inward migration due to the continued growth from multinational corporations.
We anticipate will benefit the approximately 1000 units, we expect to deliver in Ireland by the end of 2024.
With that I'd like to turn the call over to our President Mary Ricks to discuss our office portfolio and our investment management business.
Thanks, Matt.
Turning to our office portfolio, our Q4 global office portfolio performed well and saw same property NOI growth of 4% as a result of strong rent collections lower bad debt and the fair enough at pre rent.
Over 70% of our office NOI comes from European assets are we continuing to find exciting opportunity in Q4, we acquired the forum, a 254000 square foot high quality suburban business Park in the U K for $75 million. The property sits on 30 acres and was it.
Wired it over a 6% cap rate.
It's a form its currently $5 million, which we expect to increase to $7 million over the next three years through both growing rents and leasing up to 15% vacant space with the adjacent 11 acre vacant parcel, providing optionality for future development.
In place rents are approximately 13% under market, which is one of the reasons, we really like this asset.
It provides us a great opportunity to grow the cash flow organically the business park benefits from a flight to quality as the workers return to the office.
As Bill mentioned, we're seeing a strong desire from our tenants to finally have their teams back in the office and are seeing robust leasing momentum across our global markets I'm happy to report that we completed 465000 square feet of leasing in Q4.
This brings our total year to date total to $1 9 million square feet of commercial lease transactions, including 1 million square feet of new leasing, which is 65% higher than our 2020, new leasing and 900000 square feet of renewals.
These lease transactions were completed with an attractive weighted average unexpired lease term of eight and a half years.
The leasing market continues to come back to life in Q1, and our largest office asset in London 111, Buckingham Palace Road occupancy stood at approximately 80% at year end and including the strong leasing momentum into Q1, we are now 100% leased including agreements for lease and deals and league.
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As a reminder, when we acquired this asset back in 2014, the NOI was $14 million. Following the addition of amenities and extensive building white refurbishment works now fully leased the NOI stabilizing at $19 million, which is a 31% increase over our hold period.
At the height, an affluent suburb of Weybridge, our latest leasing activity has taken occupancy at this 356000 square foot suburban office from 88, 5% to 95, 5%.
And similarly, we have grown NOI by 8% since acquiring two years ago.
Welcoming new tenants to the park and right sizing existing tenants.
In the U S. Physical usage of offices continues to increase with the majority of our tenants looking to come back into the office next month and they've already started to come back as the first quarter.
And thus we remain optimistic about the improving fundamentals across our global office portfolio.
Turning to our investment management platform, we continued to see strong growth in the quarter in fee bearing capital, which grew to $5 billion, increasing by an impressive 28% in 2021 and more than doubled in the last three years.
The growth in the quarter was largely largely driven by two.
Of our more recent strategies, which we launched to benefit from major themes that we see in the markets.
The first theme is the search for yield, which we address through our global debt platform on.
On the heels of a new $700 million commitment security in Q3, our global debt platform completed $344 million of loan originations in Q4, resulting in 20% growth and 120% growth for the year.
The debt platform stood at $2 billion at year end, including $280 million in future unfunded commitments. The average loan size is 70 million.
Dollars and 77% of loans are floating rate.
We also announced yesterday, an additional $3 billion of commitments to our debt platform.
Total commitments for this platform has now tripled from our initial $2 billion less than two years ago and today totaled $6 billion.
The second theme relates to the strong demand for last mile logistics.
Which will benefit from the continued rise in E Commerce, which we address through our European logistics platform.
This sector continues to benefit from strong occupational demand, which is driven vacancy to an all time low in the U K of 4% and we believe the continued growth of e-commerce , coupled with tight supply in this sector will lead to further rental growth.
Including investments made through our fund our European logistics platform grew by an impressive 63% in Q4 and stood at total assets of $1 $1 billion. Our deal pipeline remains solid with another $200 million of assets under offer.
In addition to our existing $5 billion of fee bearing capital we have another $4 5 billion of commitments, which we look to deploy.
This strong momentum we are seeing in our global credit platform and our European logistics platform combined with other potential opportunities with our strategic partners will allow us to meaningfully grow our investment management business in 2022 and beyond.
Finally, I'd like to quickly update you on a few of our larger development, which is an important area of focus for us.
In total our development and lease up portfolio is expected to add $105 million.
Estimated annual net operating income to kw.
90% of which relates to assets that will either complete lease up our finished construction by the end of next year.
Developments are being completed on average to 86% development yield versus market cap rates today, which are approximately 200 basis points lower.
In Q4, we stabilized capital dock with year end occupancy of 83% improving to over 90% in Q1.
We also completed development of two multifamily assets within our vintage portfolio and turn over key in Dublin, a great. A 69000 square foot office warehouse, which was built with lead and well Gold's credentials and it's under offer to a top fintech occupier for the entire.
Space.
At our Kildare Street office development in Dublin, which is also targeting lead and well build certifications. We are seeing strong demand from prospective tenants for this unique <unk>.
65000 square foot property, which is on track to complete in early Q2.
We remain on track to complete the majority of our other construction projects and 23 and 2024 on time and on budget with that I'd like to pass it back to bill. Thanks.
Thanks Mary.
We're very pleased with the progress our team made over the course of 2021.
I look ahead I am extremely excited about the growth opportunities for Kennedy Wilson.
As I've said on previous calls our goal is to grow our estimated annual NOI at a rate of 10% to 15% per year.
And to grow our fee bearing capital by 15% to 20% per year over the next three years.
I'm pleased to say, we have both of those targets in 2021 with estimated annual NOI growing by $40 million or 10% in fee bearing capital growing by 28%.
We continue to have strong access to capital, including $950 million of liquidity at year end.
No significant unsecured debt maturities until 2025.
Strong joint venture relationships and improving cash flows from our properties.
We also announced yesterday, a $300 million preferred equity investment from Fairfax financial.
Long time strategic partner of Kennedy Wilson.
In conjunction with this investment as Mary mentioned Fairfax has increased its commitment to our global depth platform from $2 billion to $5 billion.
This investment further strengthens our financial position.
Aid in driving further assets under management.
Net asset value growth.
I can comfortably say that Kennedy Wilson is coming out of the pandemic in a much stronger position.
With more ways for us to grow our business and continue to generate and continuing to generate attractive returns for our shareholders and partners.
I'd like to thank a tremendous kw team our shareholders our partners and our board for their continued support of Kennedy Wilson.
And with that Jeff.
I would like to open it up to any questions.
We will now begin the question answer session.
You ask a question you May press Star then one on your Touchtone phone.
If you were using a speakerphone please pick up your handset before pressing the keys.
Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Okay.
The first question comes from Anthony Pallone from Jpmorgan. Please go ahead.
Alright, great. Thank you.
My first question relates to just the investment environment, and where youre seeing the biggest opportunities are.
By product type or geography, and where those returns seem to be penciling. These days.
Well I've been told me that as we outlined.
It reflects a little bit I mean, where we're focused is the multifamily business. Both here in the western United States and in Dublin.
The debt platform that we're growing.
The European logistics business.
Mary and others are responsible for running.
And the office.
Assets that we like in the United Kingdom.
Were the lease terms.
Alrighty.
Actually higher than what we can get here in the United States in terms of the.
The cap rate that were buying out.
So that's really where our focus is but.
We continue to work out office acquisitions here in the United States, but we're doing those.
Primarily it's not 100% and our.
Discretionary fund.
Partnership platforms.
We view those office assets, even though everybody is coming back to the office the capital requirements attached to those office assets.
Or such that we view those office assets is trading assets.
And the big difference.
You can get from both the logistics assets.
The apartment assets and the debt platform as we're getting monthly.
Cash flow.
And so.
That's pretty much how were looking at it were.
We're keeping a very a vigilant eye on fixing rates on anything that we're buying and where we're not fixing rates.
We're.
We're putting hedges in place to make sure that those rates are fixed.
And so as we've always done at the company. We don't play the interest rate game, we're just trying to lock in our spreads at the time, we make the acquisitions and then go through our value add initiatives and we have.
I'm biased, but we are very outstanding asset managers across our global platform.
That are really good at implementing value add strategies on the things that we.
<unk> bye.
So I mean.
That's how we're looking at the market right now.
Okay. Thanks, and then.
Maryann I think mentioned $4 $5 billion of commitments that could help drive the fee bearing capital base and you had talked previously I think it was a 15% to 20% growth number if I recall like I guess.
What what do you see as maybe redemptions or headwinds that.
That might happen in 2020 to that.
It would cause that to just not grow faster because it just seems like you have the capital there to potentially grow fee bearing capital at a faster clip.
We do I'm going to let Matt answer the.
The question in part but.
We've never.
Been a company that actually set some goals for everybody in terms of how you deploy capital because I've learned over the years, that's just the wrong way to look.
You have to wait until you find the right opportunities to deploy capital into so we're we're patient in that respect.
But to give you.
So a direct answer Matt do you want to answer that I'd say are our best estimation as we probably deploy that capital over the next 18 to 24 months.
And then in terms of redemptions, obviously with the credit platform and the debt business.
By nature, you're going to get paid off I mean, that's when you have success. When you get paid off so you will start to see certainly some some payoffs coming in 2022.
Certainly we have the number out there are 15% to 20% I think we can.
We're confident we can hit that in.
Hopefully, we can do a bit better so.
Kind of how we're thinking about it is really that 15% to 20% growth number.
Okay, and then just lastly.
As you think about the fee bearing capital base, you raised a little bit of.
Capital with the Fairfax deal do you think to get that $4 5 billion that seems to be.
Out there committed more or less.
Do you think you need any more capital at kw to invest alongside that.
Well I mean, we currently don't have any plans because you use beyond those 300 currently I underline.
Because <unk> got really three sources of capital that <unk> got the 300 that we've raised <unk> got asset sales that were embarked on.
For this year.
Which is very much a fundamental part of our business and then you've got the operating cash flows that come out of the properties.
So.
We believe that based on the plans that we have for this year or the current capital.
It's coming out of those three sources is sufficient to take us through this year.
Okay, great. Thank you.
The next question comes from Sheila Mcgrath from Evercore. Please go ahead.
Hi, Yes. Good morning, I was just wondering if you could give us a little more color on that.
Preferred equity and warrants a sale talk about pricing timing and capital needs and also their expansion.
And the commitment on the debt platform that would be great.
Thanks, Sheila and I'll turn it over to Matt, but we've had a.
Very great relationship with Fairfax now for 12 years.
That.
We've done almost $8 billion of transactions with <unk>.
Exclusive of the capital that's gone into to Kennedy Wilson So.
We've got a long track record of working together.
And you know at every level of the company and so this is a very trusted partner really outstanding.
Company and a trusted partner.
And so that's part of the background. So Matt you want to comment I'd say, we evaluated multiple options in terms of raising permanent capital for the company.
To support the growth initiatives that we've laid out on this call and we determined. This was this was our best option.
In particular, if you consider the capital that we deploy into our co investment business.
And focusing in on our debt platform, where Fairfax just.
Increase the commitment by $3 billion, we generally earn somewhere between 15 and 20% annual returns.
<unk> the cash flow, we're generating as well as the management fees, we earn for overseeing the platforms.
So I think it's also worth noting that over the past four years, we've bought back $17 4 million shares of stock at.
At an average price of $18 64.
So if you think about the warrant price on this transaction represents a 23% premium.
To the price at which we bought back our stock over the past few years.
The last thing I'd say is just permanent.
Permanent capital, we just raised it further strengthens our balance sheet and really provides us the firepower we need.
To continue to grow our net asset value per share over time.
Okay, Thanks, Matt and just switching to multifamily development.
Have projects both in the U S and Ireland I was just wondering if you could help us understand the lease up dynamic on your projects in the U S.
Are they stabilizing more quickly than Ireland, how the cost per unit comparison is and also the.
Kind of going cap rate comparison between U S and Dublin might compare.
Or were there a lot of parts to that question there Sheila So let me see if I can.
Answer that.
I would say one of the decisions that we made at the beginning of the pandemic, but let me back up a second the construction that we started in the business that we started there that's really a decision we made eight years ago.
And.
It turned out to be a very fortuitous decision because the.
The.
Cap rates, we've been able to stabilize all of these development assets are way outside.
What we would have had to pay to buy those assets and our brand new.
You are correct that most of the development that we have going on except for the two office buildings actually three office buildings in Dublin is multifamily.
We made a decision at the beginning of the pandemic that we werent unless there was a governmental jurisdiction that shut down a site.
Not going to stop our construction.
That decision that we made two years ago has just proves out to be also a very good decision.
And as we've been able to finish these brand new products. For example projects. We finished about a 300 unit project up in Boise, Idaho.
Last year 300 units I believe.
Correct, we leased the entire project Didnt have 120 days, which is unheard of one off project size and similarly in Ireland Clancy Quay, which is the largest individual apartment project in Dublin, It's almost 900 units.
Mary you can correct me here, but when we finish the last 300 units, we leased all of that within four to six months and so we've seen.
Not that it would be any surprise to anybody there is that.
Newer properties really are attractive to us.
Your clients.
As far as the.
Construction side, you know, we've been able to do everything on time and on budget.
No hiccups on the construction side if anything.
The cost of building per unit very.
From geography to geography.
<unk>.
And here in the Western United States.
You can build that cost.
In the mountain states somewhat less can you count here.
California.
And the other thing you really is the key to remember too a lot of the construction that we did in the multifamily space was on sites.
<unk>, we already adjacent to properties, we already all.
And so one of the key components in the construction process is to keep your land costs as low as you possibly can.
Yeah.
So for example, we're doing a <unk>.
Second Phase project in Santa Rosa, California, right now.
That's almost 200 units on top of 120 units next door.
But on that 200 unit property, we only paid $3 million for the layout.
And so that's kind of a theme that we've done over the years is to find these sites, where there is either additional land.
Or where there is land next door the weekend bye.
And in title.
Thank.
I guess the last thing I would say Mary about that too was both in Europe and here we have.
Exceptional teams that have great relationships with the.
Jurisdictions that theyre in and so the entitlement process for us, which can sometimes be difficult. We've really had a very very very good track record of 100% track record of getting.
Projects approved.
So.
I would say mirror unless you've got something to add I mean, that's about it.
Just if you could.
Bill or Mary just tell us the prevailing cap rates have stabilized assets and multifamily how they might compare in Dublin to.
Your markets in the.
Western U S.
Yeah, Hi, Sheila.
Being stabilized cap rates are really best in class.
SaaS and doubling of sub three 5%.
So you know obviously you can in Europe rates are extremely low so you're still you still have.
Widespread between the cap rate and what you can borrow at and then the last thing I would say about Ireland is compared to other European markets that cap rate still has actually room to grow so you're seeing in other markets, whether that'd be Germany.
Our frown cap rates, even lower than that it's an extremely defensive asset class.
So there's still really good opportunity that we're seeing and as we're developing these assets in Dublin about 1000 units, where we're developing those between five and 6% cap rates, it's a very.
Big spreads to where that came out that it is trading.
Thank you.
Saying as the spreads are 200 to 300 basis points wide of what you would have to pay if you are buying that asset right.
And that is.
Pretty comparable to what's going on here in the United States.
It depends on again, the geography, you're in but we.
The project in Boise that I mentioned, the 300 units we've stabilized that.
Close to a 7% cap rate.
And you would.
If you are buying that today you'd be paying somewhere in the low fours for that house. So.
Okay, great. Thank you.
The next question comes from Derek Johnston from Deutsche Bank. Please go ahead.
Hi, everyone. Thank you.
You mentioned the cap rates on the acquisitions in U K office can we spend a second on cap rates with the logistics platform and then outside of caps, how our acquisitions decided.
As to where they ultimately go between the European logistics platform, where you have a 20% share.
<unk> is the co mingled fund, where you generate fee capital.
Sure Hi, Derek.
So on the logistics side in terms of where does that investment go it really depends on the underwritten returns.
So for our value add fund, that's a sort of 13% to 15% Levered IRR that we're targeting and for our logistics platform, which is more of a core plus platform and a longer term hold now it's more of a 9% to 11% Levered return that we're targeting.
And what.
But we're seeing really in the U K on the logistics side is is that record breaking in terms of take up we've seen 55 million square feet be leased in 2021 in the U K.
Vacancies and as I said in my remarks, 4%. So these are record breaking.
Statistics in fundamentals and we just think that Theres a whole lot of room to go not only in the U K, but also in Ireland, where we've just started investing in the in the logistics space and also in the Madrid area in Spain.
What that has to do with is the online retail penetration. So if you think about the U K from even three years ago.
Online retail penetration. So every dollar spent in the retail space was 11% online that's growing to 30% that's in the U K and Ireland, and Spain is well behind that so we just think fundamentally it's a great space to invest and we have a significant cash.
Partners that like the trade.
Along with us.
We're really excited for the growth in that platform both in our in our fund business and in our logistics, our core plus business.
No. It really seems as if you guys are putting together a platform that's going to be pretty significant kind of brick by brick with which a lot of the public.
Industrial Reits, they cant really move the needle doing what youre doing but I think at the end of the day it should be pretty exciting.
Want to switch gears I think this may have been touched on but I might have missed it.
The U K is certainly using restrictions post December omicron Serge.
With back to office and you have had some decent recovery in the.
Ireland.
Multifamily, but.
In Q1 here, where a couple of months in you know how is the leasing kind of translated from the few for Q <unk>.
The first Q in Dublin multifamily.
And so far in first quarter, if you could if you could expand on that a little bit.
Sure I mean, so Dublin multifamily, we've we've grown our occupancy by 500 basis points. So we're now at 97% leased.
We stabilized as I said in my remarks capital dock multi.
Multifamily at 90% and there's further room to grow there. So there has been really big growth and really what that has to do with is just the reopening of the Irish economy.
People coming back into the country.
Ireland has been the fastest growing economy in all of Europe , we've seen before.
Foreign direct investment and.
Just continue to flow into Ireland, there's been 30000, new jobs created.
It's a growing population, it's a young population and so we're very very bullish on what's going on in Ireland.
As you know, we're completing some of our developments there.
A key office development 69000 square feet.
We're under offer with to a very very.
Credit worthy tenant for the entire building that'll really stabilize the entire capital dock square there.
And then killed there which is in just across the street from the Shelburne, It's a great location right on the Green.
That actually we have great activity as well from from office tenants that will probably multi tenant that building, which will allow us to really push rents and achieve well beyond our underwriting. So we're just really excited about what's going on in the Irish market.
Okay. Thank you just one more quick one just on the multifamily.
Family Affordable segment.
It was interesting to see revenue up six 2% in the fourth quarter now of course, a gain and a 180 basis points of occupancy.
Certainly account for most of that but could you guys remind us what.
Rent increases are tied to are they tied to inflation or some measure where we can kind of understand and model the potential revenue and rent growth and the affordable segment.
Yeah, Great question Derik. So this is Matt.
So that business is tied to area median income so basically it's just salaries of people in the area.
And so I think when you when you go back to when we first invested in this business, we had assumed very minimal rent growth.
102% you kind of look at what's happened, it's been more like 5% to 6% on average.
So there is definitely a very.
It's very much tied to inflation in terms of what you can do with the rents and if you think about these rents relative to market rate rents I mean, your 30%, 40% below market rate.
So theres room to the extent median incomes go up generally you can pass through almost all of that to the tenants.
And in some cases theyre getting some government assistance to help with those payments as well.
Thank you helpful.
The next question comes from Jamie Feldman with Bank of America. Please go ahead.
Great. Thank you I just want to go back to Matt's comment that you made.
Fairfax warrant and preferred deal was.
One of several investments you considered can you talk more about.
What else you did if I, assuming I heard you right can you talk.
More about what else you did consider.
You know why you felt like you you even needed to do a deal like this right now and then how should we think about the pricing and the warrant versus your view of NAV.
Yeah. So like I said, we did look at a number of options. So.
Perpetual preferred would have come in 300 basis points or more higher above the dividend rate that we're paying.
So that was an option we looked at a straight equity transaction.
It comes in obviously at a discount to the stock price anywhere from.
4% to six 7% discount.
So the stock price where in this case.
The warrants were struck at a premium to the current stock price and a 23% premium to where we've been.
Buying back stock so for US I mean, we're really looking at this over the long run how do we grow the NAV.
For sure and by having this accretive capital we can deploy it into our.
Various platforms, where we're earning 15% to 20% returns on capital.
And at the rate we've been growing the business. We just feel this is prudent to be putting more.
Permanent capital into the company to allow us to grow the business in a prudent way.
In addition to the $3 billion of fresh.
Fresh powder for this for the debt platform, which we obviously will earn fees on.
Yeah.
Hello My question any.
This concludes our question and answer session.
I would like to turn the call back over to Bill Mcmorrow for any closing remarks.
Well. Thank you everybody for taking the time to listen to our call today and as always as I say they were always available to answer any questions offline. If you have any.
We appreciate your support so thank you very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yes.