Q1 2022 Kennedy-Wilson Holdings Inc Earnings Call
Good day and welcome to Kennedy Wilson's first quarter 2022 earnings conference call and webcast all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions. You asked me. A question you May Press Star then one on your telephone keypad to withdraw yourself in the question queue. Please press Star then two please.
Please also note. This event is being recorded and now I would 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 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 the replay will be available by phone for one week and by webcast for three months.
Please see the Investor Relations section of our website for more information on this call, we will refer to certain non-GAAP financial measures, including it.
And adjusted net income you can find a description of these items along with a reconciliation to the most directly comparable GAAP financial measure and our first quarter 2022 earnings release, which is posted on the Investor Relations section of our website.
Statements made during this call may include forward looking statements actual results may materially differ from forward looking information discussed on this call due to a number of risks uncertainties and other factors indicated in reports and filings with the Securities and Exchange Commission I would now like to turn the call over to our chairman and CEO Bill Mcmorrow.
Good morning, everyone and thanks, Kevin and thank you everybody for joining us today.
I am pleased with the Q1 results that we reported yesterday.
After a year of record results in 2021, our business is off to a very strong start in 2022.
Operating results continue to improve driven by robust tenant demand the completion of construction, new acquisitions, and increasing rental rates and asset values, all resulting in an improvement in our key financial metrics, including adjusted EBITDA, which increased by 25% from Q.
One of last year and totals $160 million.
I'd like to start by providing some background on what we're seeing in our best markets.
In the U S. We once again saw strong results out of our market rate apartment portfolio.
Putting double digit same property NOI growth across several U S region.
As Matt will go into in just a moment. These results were driven by strong demand for our high quality largely suburban multifamily communities.
Including the acquisitions, we announced last week, our global multifamily portfolio totals 37600 units, which has grown by 25% in the last two years.
The unit count includes over 4500 units underdevelopment with roughly 50% expected to be completed in 2023 and the remainder in 2024.
In the U K and Ireland, we said when we saw a significant improving operating environment, which in turn drove an increase in leasing velocity for both our office and multifamily properties.
In Dublin.
Were coincidently Mary and I are today, we've recently seen a few of the world's largest asset managers announced multibillion dollar office or corporate investments recently, which reinforces the long term attractiveness of the market speaks towards the value of our existing office and development portfolio.
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Investment transaction levels and deal flow remains solid in Q1.
We completed almost $1 billion of transactions in the quarter, which grew our assets under management to 23 billion versus 22 billion at 12, 31, 21, and 18 billion at 12 31 'twenty.
These transactions along with a strong organic NOI growth and stable SaaS.
Stabilization across our existing portfolio grew our estimated annual NOI by 6% to $461 million a quarter round.
This represents a 19% increase from Q1 of last year.
Similarly, our fee bearing capital grew by an impressive 6% from year round to $5 3 billion and 29% growth over Q1, 2021.
Finally, we completed a 300 million dollar perpetual preferred equity investment from Fairfax for National in Q1.
Which further strengthened our financial position and our ability to take advantage of future opportunities.
Along with this investment Fairfax also increased their commitment to our debt platform by $3 billion, which is not the death platform now totals $5 billion of blending capacity.
I'd like now to pass the call over to our CFO , Justin and body to highlight our Q1 financial results.
Thanks, Bill in Q1, we had GAAP EPS 24 cents per diluted share compared to <unk> in Q1 of last year. Adjusted net income was $85 million compared to $47 million last year and as Bill mentioned earlier, adjusted EBITDA was $160 million compared to 128.
Last year.
During the quarter, we delivered solid growth in our consolidated revenues, which increased by 25% to $125 million from Q1 of 2021. This was driven by strong revenue growth from our multifamily portfolio, new acquisitions, improving hotel revenues as well as continued growth in our investment.
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Our co investment portfolio continues to generate attractive returns for our shareholders and.
In Q1, we saw another strong quarter of investment performance and increasing asset values, resulting in $105 million and income from unconsolidated investments in Q1 compared to only $18 million in Q1 of 'twenty one.
Total investment management fees, which include our base management fee and accrued promote income totaled $39 million in Q1 up from $7 million in Q1 of last year.
Turning to our balance sheet and debt profile, we continue to monitor the movements in interest rates and have been actively managing our debt as a reminder, we refinanced all of our unsecured debt last year extended the maturities from 2024 to between 2029 and 2031, while lowering our borrowing costs.
Less than 10% of our share of debt matures by the end of next year, which is all secured at the property level. Additionally, 94% of our debt is either fixed or hedged using interest rate derivatives.
With that I'd now like to turn the call over to Matt Windisch to discuss our multifamily portfolio. Thanks, Justin Kw's Global multifamily portfolio now comprises over half of our estimated annual NOI.
This compares to only 39% four years ago.
In Q1, we acquired four additional communities, which totaled 1150 units through our co investment portfolio.
For a gross purchase price of 370 million <unk>.
Including another 450 units in the Pacific Northwest roughly 700 units in the mountain West.
We saw a continuation in the quarter of the recent strong operating trends as our portfolio delivered robust same property NOI growth of 14%.
So starting with the U S leasing spreads remained elevated with new leases, increasing by 16% and renewables by 12% occupancy.
He remained solid at over 95% with no current concessions to speak of.
Same property revenue grew by 11% in the quarter, including 14% in our largest region, which is the mountain west.
Average rents in the mountain West are approximately $1400.
Which we think remains extremely attractive given that this region.
Still sees robust in migration as people relocate from higher cost states.
We continue to allocate capital to these high growth markets in Q2, and as Bill mentioned earlier, we recently acquired off market and another 1100 units across three assets in Scottsdale Albuquerque in Las Vegas.
$418 million, which brings our unique mountain west portfolio up to almost 14000 units.
Our Pacific Northwest and California assets also continued to grow with same property NOI up double digits in each region.
Looking at our sequential results, we have seen a strong increase in NOI by 5% from Q4 with increases seen across every U S region.
Our U S market rate portfolio has an average loss to lease up 12% and.
And as a reminder, over half of these units have yet to be renovated.
Positioning us well for the typically strong summer leasing months.
Same property revenue and NOI was up 5% and our vintage affordable housing portfolio rent.
Rents for this portfolio are tied to the changing area median income which is on track to continue growing as wages increase.
The debt had vintage has an attractive weighted average maturity of 14 years.
We have another 2000 units, we will be adding to the existing 9000 units, resulting in doubling the original 5500 units we acquired back in 2015.
Turning to Dublin, we saw a boost in leasing as the economy has reopened and employees are returning back to the office.
Same property occupancy improved by six 5% to over 97%, which resulted in same property NOI growth of 9%.
Our best in class offering at capital Dock is now 94% leased.
With a growing population and a structural under supply of housing we continue to be believers in the long term Dublin multifamily market and remain on track to complete an additional 1000 units by 2024.
So with that I'd like to turn the call over to our President Mary Rex to discuss our office portfolio and our investment management business.
Thanks, Matt.
Turning to our office portfolio.
Over 70% of our office NOI comes from European assets, where we continue to find strong investment opportunities and.
In Q1, we acquired we really gain a prime well located 204000 square foot office property in the U K for $105 million.
It is adjacent to the main railway station and with excellent transport connectivity, including walking and cycling Waverly gate, both leading environmental and wellness features.
It is 96% occupied and includes high quality tenants, such as Amazon, Microsoft and the Scottish government.
We expect to increase the initial NOI of $5 $4 million over our investment period as current in place rents are approximately 35% under rented and an extremely tight market that currently has a 2% vacancy rate.
Waverly Gate has significant similarities to our largest U K office 111, Buckingham Palace Road in London, where we have successfully refurbished and added tenant amenities and wellness features and delivered a number of environmental initiatives.
<unk> enhancing their building management system, reducing energy consumption and transitioning to an almost all electric building from renewable sources at 111.
We have taken the occupancy from 79% at the end of Q4, 2021% to 100% leased including a recent signing of a new 14000 square foot lease in Q1, and a further lease expected to close in Q2 driving growth in total estimated annual NOI to 18 million.
We've seen we've recently seen a market increase in foot traffic physical and usage of buildings prospective tenant inquiries and inspections across our entire commercial portfolio.
Activity remains strong completing 660000 square feet of lease transactions in Q1 with an attractive weighted average unexpired lease term of eight nine years.
Turning to our office developments, we continue to see meaningful occupier interest in newer office assets with leading environmental wellness and intelligent building technologies.
Across our own portfolio, Devlin leasing demand and rental rates achieved on new developments are exceeding pre COVID-19 business plans.
In Q1, we stabilized our 68000 square foot Hanover key development in Dublin, which was completed with lead well and wired scored gold certification.
We leased the entire building to a fortune 500, fintech tenants on an attractive 15 year lease term with rents ahead of our business plan, resulting in a yield on cost in excess of 6%.
We are also making great progress at leasing our Kildare Street office development, which is scheduled to complete in Q2.
We already have 75% of the building under offer at rents at that business plan.
Looking further ahead, our Coopers cross development in Dublin, which totaled 395000 commercial square feet and 471 multifamily units is slated to complete next year and is targeting top ESG credentials, which will make it one of the most efficient and desirable mixed use city center.
Emphasis in the market.
In total our global development and lease up portfolio, which is 40% multifamily and 39% office is expected to add $101 million of estimated annual NOI to kw.
Approximately 90% of this incremental NOI relates to assets that will either complete lease up or finished construction by the end of next year.
Our developments are being completed on average to a 6% development yield which is a substantial spread to current market cap rates.
Turning to our investment management platform growth in fee bearing capital in the quarter continues its upward trajectory growing by 6% from year end to $5 $3 billion and up 29% from Q1 2021.
The two largest drivers in the quarter or our debt platform and European logistics portfolio.
Our debt platform completed another $246 million of loans with high quality sponsors growing outstanding loans to $2 $2 billion with another $200 million in successful realizations since launch.
We secured an additional $3 billion of commitments in the quarter, which drove total commitments to $6 million with our loan origination capacity at quarter end at $3 $5 billion.
Kw is earning attractive double digit returns from this platform, which stands to benefit as interest rates rise given the 80% of the loans are floating rate.
We also delivered significant growth across our European logistics portfolio, which is focused on last mile logistics assets that benefit from the continued rise in e-commerce.
A man from occupiers remains very strong as they increasingly shift from just in time to just in case inventory management.
Importantly, our acquisition teams with deep contacts across our markets continue to find attractive opportunities in the U K as well as Ireland and Spain.
Including investments made through our fund and deals under offer we are on track to grow our European logistics platform to approximately $2 billion across 74 assets that make up approximately 10 million square feet and generate $66 million of NOI currently.
The existing industrial portfolio has delivered 16% rental uplift uncompleted lease transactions over the last 12 months.
Fundamentals remain attractive with U K industrial market rents expected to continue to grow with little available supply.
Which hit a record low of three 7% at the end of Q1 2022.
Our own portfolio benefits from low vacancies and remains under rented with current in place rents, 18% below estimated rental values.
We believe the macro environment, coupled with strong property fundamentals will continue to benefit both our credit and our logistics platforms.
We have over four and a half a billion dollars of non discretionary capital, which we look to deploy across all our announced platforms. This will add significantly to our existing five $3 billion of fee bearing capital and with that I'd like to pass it back to bill.
Thank you Mary.
We are off to a very great start to the year and we continue to simplify our global business, which is focused on growing our two core initiatives.
Rolling our recurring net operating income and growing our investment management business, where we receive our share of the NOI plus management fees.
As I previously mentioned our financial position was strengthened in February with the 300 million dollar investment from Fairfax financial.
We ended the quarter with $962 million of cash and available lines of credit and we have minimal debt maturities through 2023.
As Justin mentioned, 94% of our corporate and property level debt carries a fixed rate.
Or is hedged against rate increases.
We continue to partner with and attract capital from well capitalized global strategic partners, who have significant capital to deploy into our investment management business.
We have an extremely talented team of kw of that is invested together over several decades.
Our teams have consistently German straight at the ability to source sound risk adjusted investment opportunities that enhance our returns through hands on asset management initiatives.
I'd like to thank the global kw team, our shareholders partners and our board for all of your support of Kennedy Wilson.
Add Devin I would like to send it back to you to open it up for any questions.
Sure.
Okay.
We will now begin the question and answer session.
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We will pause momentarily to assemble the roster.
Okay.
And the first question comes from Derek Johnston with Deutsche Bank. Please go ahead.
Hi, everybody good morning out there the fee bearing capital is becoming a very meaningful part of the business and you know Bill you mentioned the growth sequentially, 6% and 29% year over year.
On that basis, I mean, do you see a few more years of growth or runway to continue adding and building this asset base or at some point is there a limit on or perhaps a scaling.
On how large the fund business may grow.
Mhm.
Well I would let Mary amplify on a derik, but I've met there's no ceiling on where we can go with this and I think.
You know without.
Bragging I think our name among institutional capital partners has only improved over the years and decades that we've been investing.
We have partners that have been investing with us in some cases like Fairfax, we've been investing together now going on almost 12 years.
So I think the partners have a lot of confidence in our it's not just the ability to deploy capital it's our ability to.
Asset manage.
The properties.
That we buy and or the lending.
Business that Matt has responsibility for them.
When you look at the asset classes that we really like to invest in the three main asset classes that are growing our investment management business or the debt business as Barry mentioned in the industrial business.
And then I would say.
Thirdly, while where were we.
Continue to grow the multifamily business on our balance sheet. We also have co investment platforms.
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For our multifamily business and so those three asset classes really are the ones along with the office, but office.
The office assets are a smaller part of the fund management business or the asset management business today, but I mean to answer your question directly as I said I don't see any ceiling on those but Mary you want to add to that yeah. I mean, I think the one thing that I would add that the partners, who we have very.
Deep relationships with them are all looking for for income.
And so when you when you really think about the asset classes that we're growing.
For example, I can talk a lot about the logistics platform, which is extremely reversionary in nature. So I think especially when you think about it.
Just the macro trends and the.
E Commerce business and the and in fact, the inflationary environment that we're in.
We're looking for the reversion in and rental income and the supply demand dynamics that I think are driving many of our businesses that are well healed capital partners want to invest alongside of us doesn't really multifamily where you're marketing those rents.
And and you know industrial end and on the debt and in the debt space, Yeah, and I think too Mary and Derek.
Was masked in the <unk>.
Assets under management number, which is now 23 billion and as I said it grew from $18 billion.
Just two years ago is that Youre also disposing of assets along the way.
And.
Uh huh.
We're tip.
Typically disposing of somewhere between $1 billion to 1 billion $500 billion worth of assets each year and so when you kind of factor that into the thought process you can really see how much the.
Assets under management has really grown over the last couple of years.
No that makes a lot of sense and thank you and I was going to ask about the near term development pipeline in Hanover key but in the opening remarks, I think Mary did a really good job of not only talking about that project, but you know the ones that are behind it so I.
Would just pivot to something but I don't think we've talked about in a while but.
Clearly Dublin occupancy rebound in multifamily.
Really an impressive snapback right in occupancy year over year six 4%.
Which kind of begs the question you know the Sherbrooke hotel.
How do you see that performing in a post pandemic type of ore.
You know what what would be the expected NOI contribution in 'twenty two.
Yeah, I mean, we're we're super excited about the Dublin occupancy and we've just seen I mean, but as bill said in his remarks, we're here in Dublin, we have been here for the week and the city is buzzing Theres a lot of energy and we're really excited about you know the occupancy and how well our multifamily assets are performing.
And we expect to see that just continue.
In terms of the Shelburne, it's the same comment I mean, it's great to see the Shelburne Super busy.
We have we.
We've been doing about a million dollars a month in NOI them at the end of March and I think April will look is looking similar to that.
We're just doing the numbers now and then when you think about what we're really excited about is the book of business that we've already built at the Shelburne. So we're about 50%.
Rooms sold out for the balance of the year and so in the hotel World. That's a great baseline to start driving your rate.
And the other thing we were just talking to the team about this you.
You know as the euro sort of weekends that obviously drives the American tourists.
And we're seeing about 68% of our room bookings right now are from America, and that really hasn't been been like that since.
March of 2020.
So we're really excited about where the chevron's going we expect for it to.
Would be at least a $10 million euro NOI this year and we could exceed that.
Yeah, I think maybe to add to that and I'm just not remembering the March numbers that gives you. The contrast.
I believe the revenue and the hotel with March was slightly over $3 million 22 last year that same amount there was $300000.
So.
And I think the other interesting thing.
It could be slightly off on those vary but the roughly 60% of the revenue in March came from U S travelers that's right.
So what youll see I think because you'll go into really the very busy season here.
And Dublin kind of starts.
May through October .
And so youre going to see very strong.
No.
Several results.
Very easy to get in and out of Dublin now there is not.
I don't know how to describe this but theres not some of those still standing restrictions that we have in the United States and so I can tell you that the restaurants are full.
The hotels are doing well.
As you've heard from Mary the.
The office occupancy in the office leasing is very very strong and as you pointed out there.
The apartment Occupancies have increased as you know in a very big way.
Thank you good stuff.
Yeah.
Yeah.
The next question comes from Anthony Powell alone with J P. Morgan. Please go ahead.
Okay. Thank you I guess, where will stay with Dearborn for a minute here so.
So you do get that occupancy back on the residential side, there and we saw what happened in the U S win when that came back and how quickly rents moved to do you think that's the playbook or what could happen. There from this point now that the occupancy is back.
I mean, we're seeing.
Rental rental growth and I think as you think about our development pipeline coming through.
You know, we're building really best in class apartments.
And with with a lot of amenities and everything that we're building. So we're seeing those market rents continue to move up and so I think we can really drive our NOI into our new development projects for sure and just working on containing expenses and continuing to run a tight ship and and COO.
Our occupancy.
I think marriage I mean.
To add a little bit of it Tony you'd have to see I mean, it's these developments that were doing here or a remarkable both in scale.
And the quality of planning and design.
You think about Coopers cross I mean, that's a million square foot development 400000 square feet of office and then obviously the remainder is the 500, new apartment units that Mary and I were on.
Besides there yesterday with our construction people in.
It's these are big undertakings to do but when they're finished.
Clancy Quay is a good example of that is the largest single project in Dublin on the multifamily side, it's almost 900 units.
And it could be a little off memory, but I think the occupancy there is 97%, 97% over almost 900 units, but but when you're on that property in U C.
The.
Quality.
Both the amenities supermarket that's there.
Fitness centers.
And so on.
You just you see why.
Our clients all call. It are attracted to these new developments and we've got.
Three.
Sizable projects underway here right now.
And I would say the last thing to walk on this whole development discussion is that we our team made in it we made a decision at the beginning of Covid that we were going to continue on through the construction pipeline and it turned out to be a really very very soon.
Alan decision because now we're finishing things in a period of time, where there is well known supply chain issues and the other thing that our development people did here and we did it in the United States as they started buying out things.
As they started projects a year year and a half ago in some cases two years ago.
We stored these materials.
And whatever locale, where we're building it and so we haven't had any.
Supply chain issues or cost overrun issues to speak of and Thats you know against a very large development pipeline that we have going on.
So I would say that are you know.
Our development teams, both in Europe , and the United States have really done an exceptional job of managing through the building of all of these assets.
Okay, and then the Coopers Cross office component can you remind me is that something you expect to go to a single tenant or a small number of tenants or do you think that there's some more multi tenant asset.
So that's two buildings, Tony its 100000 square foot building and a 295000 square foot building.
So the 100000 square foot building, we could definitely see going to tier one occupier. The larger one could also because it could just be a very large citycenter campus with with all the amenities on site with.
The largest city park.
With you know with all the commercial concessions in restaurants, and dog parks and all the things that bill talked about and that is really one of the things that is so exceptional about our team, which is our really our development team and our asset management team working just lock step as we go to.
Develop and plan and and then develop this out so.
It's hard to say and we will have the flexibility to multi tenant it which is what we did at the Kildare Street development, which is just across the street.
From the Shelburne, which is just right on St. Stephen's Green and so we've multi tenanted that but and I would say impressively our asset management team has managed to keep a 12 year term certain on all the leases.
And so that's often the benefit of doing at least to one single tenant is you can really drive that term and in the multi <unk> a lot of times that the smaller tenants you have shorter lease terms and in this case.
We're doing 12 year term certain deal so back to Cooper's, it's really hard to say what I will say is that I think it'll be the best development in Dublin and <unk>.
You noticed probably in my remarks, I talked a lot about ESG and environmental credentials in smart buildings, and wired buildings and Coopers Cross really is going to be cutting edge in that space and that is really what we've seen the occupier demand.
And that's really what is driving our our developments are really driving that demand.
Because of all these really impressive credentials.
Mary.
I think to that point you might comment about.
How.
Tenants are working at that and how important that is big call.
I mean, it you know I would say, even as little as a year ago that the conversation around ESG. It was.
Sure people are interested but now literally every single tour.
It is top of mind and its in every single conversation. So you know that the corporations around the world are demanding.
And I think their employees and all it goes down to the person that are working or living.
In and assets that are requiring some sort of ESG credentials. So we're excited because we believe in it we've got a really strong program.
Kennedy Wilson is very focused in this space.
Okay, and then last one if I could probably for Matt.
Does the rate environment and the volatility that's unfolded does that have any impact make it easier or harder indifferent as you originate in the debt platform.
Yes, that's a great question, Tony So 80% as we mentioned about 80% of what we've been doing historically has been floating rate.
And so obviously on the loans, we did floating rate with low floors, which most of them have were moving up as the fed increases rates.
But if you think about it from a borrower's perspective, and as we're really underwriting these loans over three to five years, we have to be thoughtful around making sure. We have proper interest reserves. These things are capitalized for a rising rate environment.
The volume we've seen in the business has continued to be very strong.
Over the past several months and several weeks.
And so I think it'll be an opportunity for us to deploy capital in that space.
Doing it thoughtfully with strong sponsorship understanding that the returns we're making out of the gate are actually going to move up as rates move up.
I'd say the fixed rate market interestingly.
Last year, there was very little in the way of Mezz that was being broken off.
Of Securitizations that has changed pretty dramatically over the past couple of months.
So I think in our Mezz platform, we could see substantially more volume there.
The ltvs that we're getting securitized a year ago were 20 or 30% higher than they are today and so there'll be more opportunity in the fixed rate mezz space, but we're definitely being very thoughtful around locking in.
Rates for long term and our lending platform.
Okay. Thanks for the help.
Okay.
And as a reminder, if you'd like to join the question queue Press Star then one and the next question comes from Sheila Mcgrath with Evercore. Please go ahead.
Hi, Yes. Good morning, I was wondering if you could help us understand the potential upside in the.
NOI in the mountain state portfolio.
What the loss to lease is there how much you think you can push rents and also on the renovation opportunity. If you could give us some more detail on them that opportunity.
Matt you want to take a shot at that yeah, no problem Sheila.
The loss to lease there is it's pretty much in line with the overall portfolio roughly call. It 12, 15% loss to lease on those assets.
Similar to the rest of the portfolio, you've got about 50%, maybe a little bit more of the units that are on renovated at this point.
So doing some kind of simple math, if the loss to lease was 15%.
And let's just say over the next three years, we can raise rents overall at 10%.
Over those three years Youre looking at a 25% deferred.
Differential between kind of where rents would be in three years versus where we're locked in today.
So there's a pretty good paas.
To continue increasing rents there.
Over the next several years.
And that being said you were starting from a pretty low base relative.
Relative to other markets about 1400.
Per unit per month, and so you still have relative affordability when you compare the rents in our apartments to the average incomes in the area.
So.
And as you know.
We're resetting rents generally on an annual basis, but we have leases coming due every day and so in particular when tenants move out and new tenants are coming in a lot of them coming from higher cost states.
We have the ability on a pretty regular basis too.
To move rents up where it makes sense.
And then just on the renovation capital is there any rough idea of how much you think you could spend annually and what the returns on that capital.
Yes, I mean generally we're trying to get to about 20% returns on capital when we invest.
I don't have an exact figure for how much we would spend it will depend on turnover and things like that but generally as we are deploying money into units, where we're trying to underwrite 20% returns on that capital.
Okay, Great and then just on the simplification process.
So some more noncore I think retail assets.
Where are you in the process of selling noncore assets and how much more do you have to sell.
Matt you want to answer that yes sure yeah. So we've been a net seller of retail.
For several years now.
And you've seen us redeploy that capital really into our investment management business as well as into our <unk>.
Wholly owned multifamily portfolio.
So we do see that trend continuing we have a number of.
Noncore assets on the market.
Though we expect to to sell this year.
And so.
If you look at the.
Really the core of the business being 80% plus multifamily and office.
The other 20% we've been more opportunistic and how we've invested it.
And so you could see us over the next couple of years.
<unk> two.
Locking our returns on those assets and redeploy it into the higher growth parts of our business.
Okay, Great and last question just on the performance fees.
That was well ahead of you know.
What we were expecting and I realize it's lumpy.
Is there any if he would.
Could give any detail on that result in the quarter and is there any rule of thumb that could help us.
That going forward or is it just episodic.
No Sheila.
This is Justin I'm happy to take all of them.
Generally our performance fees are a function of valuations and so our valuations are increasing and as we see values continue to increase you should see correlated performance correlated result, with our performance fees.
Okay. Thank you.
Okay.
Okay.
This concludes our question and answer session I'll turn the conference back over to management for any closing remarks.
Tom Thank you and thank you everybody again.
I always say any of us are available.
If there are further questions that you want to follow up on at a later time. So thanks again for taking the time to be on the call.
Talk to you later.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.