Q2 2022 Kennedy-Wilson Holdings Inc Earnings Call
Good day and welcome to the Kennedy Wilson second 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 Star then zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.
So withdraw your question. Please press Star then two.
Please note. This event is being recorded I would now like turn the conference over to Devin Bhavsar Vice President of Investor Relations. Please go ahead Sir.
Thank you and good morning, everyone. 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 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 a reconciliation of the most directly comparable GAAP financial measure and our second quarter of 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.
Kevin Thanks, Ed and thank you everybody for joining us today.
Yesterday, we reported our Q2 results and our business was off to a very strong start for the first half of the year.
In Q2, we saw a record same property revenue growth from our U S multifamily portfolio.
Well as a strong performance from our recent multifamily and industrial investments.
We generated adjusted EBITDA of $119 million in the quarter.
The year to date, we have generated 279 million and adjusted EBITDA compared to 538 million for the first half of 2021.
Like to point out that in Q2 of 2021 we have a $330 million gain related to selling a 49% interest in <unk>.
Portfolio of wholly owned multifamily assets.
Let's say all served as the foundation of a new $1 5 billion dollar U S multifamily platform.
Done in partnership with a global institutional investor.
Our estimated annual NOI grew to $479 million, an increase of 10%.
The current year and a 19% increase from Q2 of 2021.
Our assets under management totaled 23 billion.
And is comprised of over 38000 multifamily units at 26 million commercial square feet.
Including $2 $6 billion of gross development projects, which 62% is represented by new construction.
Proximately 4700 multifamily units.
Kw has a 54% ownership interest in its development projects, the majority of which will complete construction by the end of 'twenty 'twenty four and stabilized in the first half of 2025.
In Q2, we completed a $1 $7 billion of investment transactions, including $1 $2 billion in acquisitions and loan investments.
Our year to date total new investments to approximately $2 billion.
Our key acquisitions in the quarter included adding three wholly owned apartment communities totaling 1100 units, which we added to our mountain west portfolio.
In the mountain West we have doubled our unit count in the last three years and currently own over 12000 stabilized units with another 1500 units in development.
Our investment management business, we completed $444 million of new investments in our European logistics portfolio.
Which grew to $1 $4 billion in total assets.
We also completed approximately $176 million of new originations and our debt platform, which has total loan outstandings at quarter end up $2 2 billion.
Both of these platforms continue to perform extremely well since their launch.
'twenty 'twenty.
I'd like to explain what we're seeing in our markets today.
Interest rates globally have changed significantly since the end of Q1.
As a company we have always looked to minimize our interest rate risk.
And ended the quarter with 94% of our debt either fixed or hedged with an average interest rate of three 8%.
The average maturity.
Just under six years.
Fundamentals across our multiple multifamily debt and logistics portfolios, which are core asset classes remain very strong.
The U S multifamily rents continue to outpace inflation.
To execute our value add strategy of amenity and unit interior upgrades.
The strong momentum we saw in Q2 has continued into July .
As a reminder, we acquired many of our high quality assets through the execution.
All of our capital recycling strategy has greatly improved the quality of our overall asset portfolio.
The debt platform, we have a strong pipeline.
Of origination opportunities and have closed $220 million of new loans, thus far in Q4 Q3, sorry.
The returns of this platform have improved as interest rates have gone up given that 85% of our loans are floating rate.
This platform has an average loan size of $65 million with.
High quality institutional sponsors.
Dublin job growth and the return to office has been positive for both tenant demand for our newly developed offices.
Renter demand for our best in class a apartments.
And in the U K, we continue to see attractive opportunities for our rapidly growing logistics platform.
Fundamentals remain strong in this sector with UK, reaching a record low and vacancies in Q2.
Have a positive impact on our portfolio where in place rents are significantly below market.
We will expand on each of these in a mall, but but I'd like to pass the call now over to our CFO , Justin and body the highlight for Q2.
I will highlight some more detail.
Boston.
Thanks, Bill I appreciate that in Q2, our adjusted net income, which adds back noncash expenses, such as depreciation totaled $41 million or approximately 30 cents per share and.
And adjusted EBITDA totaled $118 million.
For the first half of the year, we have generated GAAP EPS of <unk> 19 cents per share adjusted net income of $127 million or approximately 92 cents per share and adjusted EBITDA of 279 million.
As Bill mentioned, our comparative results were impacted by $330 million of gains recognized last year as a part of the launch of our $1 5 billion dollar U S multifamily platform.
We continue to see further improvement in our recurring revenue our consolidated revenues grew by an impressive 9% from Q1 of this year and 26% on a year over year basis.
Including unconsolidated investments our share of recurring NOI loan income and fees increased by 33% to $130 million in the quarter.
From Q2 of last year.
The growth in these results has been driven by strong same property performance out of our multifamily portfolio net new acquisitions and the growth of our debt and logistics platform.
To give you some context of the size and scale of our portfolio at the 100% level. Our stabilized portfolio was producing $1.5 billion of gross annual revenue of which our share is approximately 50%.
Yeah.
Turning to our balance sheet and debt profile, we continue to monitor the movements in interest rates and remain in a strong position with less less than 7% of our share of debt maturing by the end of next year.
Our strategy on new acquisitions has always been to minimize our interest rate exposure.
As of the quarter and to reiterate what Bill mentioned, 94% of our debt is either fixed or hedged against interest rate increases.
Actually we have $711 million in liquidity, which includes 461 million of consolidated cash and 250 million of availability on our line of credit.
With that.
I'd now like to turn the call over to Matt Windisch to discuss our multifamily portfolio.
Thanks, Justin our global multifamily portfolio, which now comprises 55% of our estimated annual NOI continues to be an important area of growth for kw.
Multifamily leasing conditions in the U S remains strong leasing spreads came in well ahead of inflation with new leases, increasing by 19% and renewables increasing by 13%.
Occupancy remains strong at 94, 5%.
Same property revenue grew at a record pace in the U S increasing by 13% in the quarter. This resulted in U S same property NOI growth of 16% in Q2, which is our fourth consecutive quarter of double digit NOI growth.
The strongest performance came out of our southern California assets, where NOI increased by 27%. These.
These results were driven by lower bad debt reserves and strong organic rent growth with rents, increasing 28% on new leases and 10% on renewals we.
We expect further strength out of our southern California assets as we continue to capture the embedded 20% loss to lease.
We also saw strong performance in our mountain West region, which is our largest department region and were same property NOI grew at 15%.
As Bill mentioned, we acquired three wholly owned mountain West communities totaling 1100 units for 418 million.
These new investments located in Scottsdale, Albuquerque, and Las Vegas were acquired off market with significant value add potential.
Our plan is to renovate over 65 per cent of the units as well as to capture the significant embedded loss to lease.
This region continues to see positive migration trends is the increasing cost of homeownership has driven demand for rental housing.
Average rents in the mountain West our 1468 per month.
Which remains very affordable compared to other high cost states.
In our Pacific Northwest portfolio leasing spreads totaled 20% on new leases and 12% on renewals.
Strong rent growth led to NOI, increasing by 12%.
Overall, our U S market rate portfolio has an average loss to lease of 14%, which.
Which to put into context, if fully captured equates to an additional $27 million of NOI to kw overtime.
With over half of our units yet to be renovated we have we remain well positioned for continued growth.
Almost all of our consolidated U S multifamily assets have property level debt that is assumable with an average rate of 3.55% in over six years to maturity.
Property debt that can be assumed by a buyer at rates significantly below market is a unique feature of our multifamily portfolio.
Our vintage affordable and senior portfolio also had a strong quarter.
Rents, which are directly tied to the change in area median income increased by 6% and occupancy was solid at 97%.
Our vintage portfolio stands to benefit from growing area median income in our markets with the majority of the units located in the Pacific Northwest and the mountain West.
Since acquiring this portfolio in 2015, we have more than doubled the unit count to over 11000 units, including over 2000 units 2000 units in development.
In Dublin same property occupancy improved by 6% to 98%, which resulted in same property NOI growth of 10, 5%.
We continue to see strong demand for our high quality communities in Dublin.
For example, capital Dock is now 97% occupied and Clancy Quay, the largest apartment community in Ireland is 99% occupied.
This strong demand bodes well for the approximately 1000 units, which we will start delivering next year in Dublin.
Turning to our investment management business, an important source of growth for kw has been our global debt platform.
Well, we have been originating loans with high quality sponsors during the quarter, we completed $210 million and new fundings offset by 322 million and repayments.
Post quarter end, we have completed another $220 million of net new loans bring.
Bringing our platform to $2 4 billion in loan investments of which kw has a 7% interest.
Kw is earning attractive unlevered double digit returns, including fees from our credit platform, which stands to benefit as rates rise given that 84% of our loans are floating rate.
Backed with a strong pipeline of opportunities. We currently have additional capacity of over $3 billion to continue growing this business.
With that I'd like to turn the call over to our President Mary Ricks.
Thanks, Matt.
Another important engine of growth for kw investment management business has been the growth of our global logistics platform, which saw exceptional growth in Q2 and post quarter end and now stands at $10 8 million square feet.
In Europe , our platform was launched at the end of 2020 with 18 seed assets and its focused on acquiring attractive industrial and last mile logistics assets that are significantly under rented.
We completed an impressive 28 acquisitions totaling $444 million in Q2 growing the platform to $1 $4 billion across 76 assets.
Our Q2 acquisitions added one 9 million square feet growing our premium portfolio to six and a half million square feet and 18 months in Europe .
With strong occupancy in excess of 97% and solid term certain of 6.8 years, an 8.3 years to expiry all notable achievements by the team.
Logistics fundamentals remains strong in Europe , U K and logistics vacancy hit a new low of under 2% as demand is outstripping supply, especially as companies look to mitigate further disruption.
Our supply chain as they have experienced over the last few years.
Rents in our industrial portfolio continued to rise and thus far in the year. We have completed 300000 square feet of lease transactions, resulting in rents increasing by 24%, which is 11% ahead of our business plan.
Including investments made through our fund and deals exchanged we are on track to grow our European logistics platform to approximately $1 $7 billion across 95 assets that make up nine and a half million square feet and generate $62 million of gross N O I.
With low vacancy and in place rents at 24% below market. We are in a strong position to continue delivering significant industrial rental growth and look forward to expanding this platform in the second half of the year.
Our capital partners are committed to growing this platform along with us and we continue to see attractive opportunities underpinned by strong underlying property and market fundamentals.
Our investment management platform has over $4 billion of non discretionary capital, which we look to deploy across all of our announced platforms.
This will add significantly to our existing five $3 billion of fee bearing capital today.
Turning to our office portfolio.
70% of our office NOI comes from our assets in Europe , primarily in the U K and Dublin, where our portfolio has a strong tenant profile at an attractive weighted average unexpired lease term of seven six years to exploration.
As a reminder, the majority of leases in Europe are typically much longer term in nature compared to the U S and our leases are completed on a fully repairing and ensuring basis, which is a triple net equivalent.
We continue to see improved leasing velocity for our office assets in Europe with recent leasing ahead of pre COVID-19 levels.
For example, a year ago, we acquired embassy gardens in the U K, which are which is our largest office acquisition in the past year unless 82% occupied.
At that time and I'm happy to report that we have fully leased the remaining vacancy to meet global pharmaceutical tenant with eight years of term certain at rents 21% ahead.
Average rents at acquisition.
Across our European portfolio, we completed 33 commercial lease transactions in the quarter.
<unk> and $3 $7 million of incremental income with the $6 five year weighted average lease lengths.
We have solid we have a solid pipeline with 50 lease transactions and Legals, which if completed would results in approximately $5 million of incremental rental income.
We are also seeing strong leasing demand for newly constructed office assets in Dublin, which are being delivered with leading environmental wellness and intelligent building technologies and achieving rents ahead of business plan.
In Q1, we discussed fully leasing 10, Hanover key which sits adjacent to capital dock and that was on a 15 year lease and in Q2, we have made great progress at our Kildare Street development in Dublin, which completed construction in the quarter.
This unique 65000 square foot office development has both lead and well gold accreditation.
This property is already 51% occupied growing to 80%, including leases in legals and under offer at market leading rental rates.
We are on track to have the building stabilized this year.
This strong demand for newly built office assets with leading ESG credentials bodes well for our Coopers Cross development in Dublin, which totaled 395000 commercial square feet and 471 multifamily units.
We remain on track to complete Coopers Cross next year as we look to deliver one of the most efficient and desirable mixed use citycenter campuses in the market.
In total we expect to meaningfully grow our estimated annual NOI from our development and lease up portfolio, adding $98 million as we near completion on many of these projects.
Approximately 85% of our development projects are expected to either finish lease up or complete construction by the end of next year.
Our developments are being completed to a 6% to 7% development yield which is they stepped substantial spread to current market cap rates of core assets and with that I'd like to pass it back to bill.
Thanks Mary.
Despite the many uncertainties that exist today I remain extremely confident in the future of kw and our team's outstanding ability to continue executing our strategic initiatives aimed at growing our recurring cash flow.
With over three years decades of three decades of experience together, including investing through six economic saying cycles out of pandemic.
All Mark of Kennedy Wilson.
Has been creating value through periods of uncertainty.
Between our balance sheet and the liquidity of our strategic partners. We remain on track to continue growing our business, while also being very well positioned to take advantage of any dislocations that arise from the current environment.
I'd like to thank the global kw team, our shareholders partners and our board for their support of Kennedy Wilson.
Finally, I'd like to mention to everybody that on September 22nd of 2022, we'll be holding a property tour in Investor day.
On our outfits in Boise, Idaho.
We would welcome any shareholders would like to hear more about our mountain west strategy and see firsthand.
Quality assets in Boise.
Would very much like to have you all there.
So with that Devin I'd like to open it up to any questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone. Please pick up your handset before pressing the keys if at 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.
Our first question will come from Sheila Mcgrath with Evercore ISI. Please go ahead.
I guess good morning, I was wondering if you could comment a little in a little more detail on the industrial platform that's growing.
Very quickly is that exclusively in the U K or which other countries are you targeting and what kind of leverage are you using in that venture and just comment on cap rates.
Merit.
Sure Hi, Sheila.
It is.
Mostly focused on the U K, but we also have it within our platform with our very large capital partner, a new focus in Ireland and are less so, but a little bit and in Madrid, Spain.
In Ireland, there's a serious opportunity for growth there because there's just not a lot of product.
And I think given with Brexit what's happened there is that companies want to have their their goods and an EU location. So we've just been recently buying buying in in Ireland, well below replacement cost.
And Spain as well along the ring road in Madrid.
And so we're very very focused there.
I would say that the key with with all of that sort of tailwind in the logistics sector is is focused on rental growth. So it's really about growing our income.
We're buying roughly at cap rates right around 4%.
But are anticipating as I said in my remarks major rental growth.
And we are capturing major rental growth.
And one of the things that we're looking at is when.
When we think about our rent reviews of our existing portfolio that are coming up in the next 18 months, our top 20 rent reviews.
We are anticipating growth of 30% above passing.
So we're just seeing really major growth opportunities and in the the you know rental growth.
And where financing that.
Really.
Probably right around 2% with a margin of just also right around one and a half to $1 75.
And we're buying either caps or we're swapping that.
So really it's not negative leverage going in but with the rental growth than we're seeing a positive cash flow streams.
Okay. Thank you and then just on the hotel performance.
For the shell born I still think there's probably upside since.
Where the historic peak was can you tell us around where the NOI is tracking and where it was.
Previous peak NOI.
Yeah.
I mean, Eric I can right now so yeah sure in in July Sheila we had occupancy of almost 90%.
We also had a monthly record of our ADR that was in the high right around 460 euros in the month of July .
So N O Y wise, we're looking at roughly close to 2 million euros just for the month of July .
Which June was very similar.
We've got a lot of bookings between now and the end of the year, we've got about 50% of the hotel pre booked already so.
That's a really good book of business of which now we can build upon that.
Another interesting I think factors that about half of our guests that have stayed in Q1 and Q2 are our U S gas.
And in June actually there were 63% of the guests coming from the U S.
So I think that will continue as the dollar remains strong and the U S travelers are really back.
So N O Y wisely, we anticipate a significant.
Growth of our NOI is through the balance of the year.
And that sort of pre Covid, we were at roughly 15 million euros of NOI.
So we anticipate that we can break through that over the next 12 months.
Okay, Great and then my last question for me Bill maybe.
Maybe you could just comment on your view of you know maybe doing some noncore asset sales and stock buyback I'm just thoughts on a share buyback at this point.
Yeah.
Well Sheila I think we've been we've been very focused over the last two or three years long.
I would call. It the continued simplification of the company and the sale of non core assets.
We've made a lot of headway in.
2020 one on these sales.
We still have a reasonable pipeline of things that we're going to sell here over the next 18 months.
But it's not at the same size level is what we did in 2020 one.
And the simple idea so that everybody understands is we're obviously continuing to grow our multifamily business both in unit counts.
And in terms of recurring.
Revenue in NOI that we're getting from our.
New lease transactions.
The other part of the business that were.
Very focused on growing of course is the investment management business are primarily.
Primarily through the industrial platform that Mary just went through in the Dot platform that now has responsibility for.
So I think if you think about you know, particularly the investment management business we have.
Quite a bit of unused capacity.
Either commitments that we have.
Or platforms that we've created.
Please something on the order of three or $4 billion, but we can add to our existing five $3 billion.
Investment management capital that we're managing.
So.
I see great.
Growth opportunities as we continue to recycle as I said earlier capital out of these noncore assets into either growing our investment management platform.
Or into growing our our multifamily business either on our own balance sheet.
And partners with other in partnership with other people.
Okay. Thank you Oh buyback is concerned.
You know, we we we over the years have been active in the stock buyback program I think we've spent almost $300 million since 2018.
Yeah, obviously always gets weighed against what are other investment opportunities are.
So we don't really set out any.
Strict.
Rules about it it just depends on what the opportunities are and where our liquidity sits.
I would say that in general those Sheila.
We're very.
Intent on building our liquidity.
Even more so than we have right now between now and the end of the year.
We have very.
Very few transactions in escrow right now.
Even though we've got a very active.
Pipeline, both in the debt business in the industrial business in terms of the use of Kw's capital.
We have a limited call on it we only have one apartment building.
Albuquerque that we're building that we're buying and closing in August .
I would say that in general.
We're.
Sitting tight with our cash.
Just to see how things evolve here over the next three or four months.
Okay. Thank you Bill.
Our next question will come from Anthony <unk> of J.
P. Morgan. Please go ahead.
So bill just following up on on the last comment it sounds like you're being a little bit more careful in terms of.
The investments, you're making like how should we think about just fee bearing capital over the balance of the year and whether that grows or pauses here.
Yeah, well I think Tony what we.
Good good question, we've what we've said to the market over the last few calls is that we really feel like we've got the ability to grow our recurring NOI.
On an annual basis is somewhere between 10, and 15% and as far as the fee bearing capital and fees related to that.
We feel like we have the capacity to grow that <unk>.
15% to 20% a year.
And I don't want them. This lead you I I.
As I said, you know we've been through a lot of cycles.
In the three decades, with Mary and Ive been together at Kennedy Wilson, and a lot of our team.
Who's been with us for the better part of two decades.
<unk>.
When you go into a period like this you're in what I call a discovery period of time.
Where you're you're you have your.
You have everybody out there looking for new transactions, but you're just evaluating what what do you think is going to happen.
And I think it is.
Unclear I think when you look at interest rates today.
By any historical measure.
There are still very very attractive.
So.
We just have to see what opportunities come out of this period of time.
And I can't emphasize enough how important it's stuff that we've always had the strategy of what I'd call fixing our spreads.
And so the.
Very very valuable outfit that we have which is that all of our 94% of our debt is fixed.
And so but during this period of the last three or four years, where these ultra low interest rates a lot of people have chosen to.
Yeah.
He was high leverage.
With floating rate interest rates.
So we just have to see how that all plays out and whether that presents opportunities for us.
Yeah.
So.
We just you know where where I would say we're in a very much in a discovery in an evaluation period of time right now in terms of new acquisitions.
Okay.
And then with regards to the multifamily business how are you thinking.
Thinking about what goes on to Kw's balance sheet wholly owned versus into the.
Strategic venture because you did a couple of who we are and things in the quarter or it sounds like you've got another one teed up for August here. So I'm just wondering how you split it.
Yeah look good point, yeah. The one in August we're doing on our balance sheet, but we're doing it out of the proceeds of.
So we're doing.
Now nonrefundable.
So we're in effect, we're exchanging into that new outfit in Albuquerque out of an asset.
We're selling.
<unk>.
Matt do you want to answer that question.
Yeah sure I mean, if you think about like our our fund in the U S, which is a value add fund, which right now we're in between funds, but to the extent, there's a fund up and running if there's a a shorter term value add opportunity.
Our multifamily deal would go in there.
Otherwise you know to the extent it is a longer term opportunity that that would tend to go into either our balance sheet or into a platform, where we have a lot more equity invested.
Okay, and then just last question.
The last thing.
That I would add to that I mean, we we have.
Difficultly grown our unit counts over the last couple of years.
And.
So we've probably grown from 29000 to 48000 units that we talked about.
And then really when you think back over time and I may be a little off on these numbers, we probably sold.
Over 15000 units over the last 15 years.
I would say that unless it's in a platform like not describe or we're clearly less inclined.
It would be sellers of these very high quality multifamily houses because they're hard to replace.
<unk>.
And then the other point I would make Tony is that the.
App rates.
We're stabilizing these newer assets that we're building out our way above.
Market cap rates.
And these were decisions that we made eight years ago.
To embark on these construction programs for example, we're finishing a.
Our apartment project in Boise right now that's an add on to some existing units that we own next door.
But we're we're stabilizing that.
Close to a 7.5% cap rate brand new.
<unk>.
It's probably.
200, plus basis points above what you would be buying up to that.
So this development pipeline that we started working on eight years ago.
That you're now seeing.
Multifamily assets in these two assets that Mary mentioned and in Ireland.
They're kind of rolling off the Assembly line now this year.
<unk> next year.
So you're going to see significant growth in our recurring NOI because of the completion of those.
<unk>.
Okay.
Thanks, just last last one for me.
And on multifamily in Dublin.
We've seen the occupancy rebound here as you look ahead is there.
An opportunity to see revenue growth accelerate on the on the from the rate side. The way we've seen in the U S last year.
A year or so or the dynamics, there just going to be different.
Mary.
Hi, Tony.
Yeah, I mean, I think market rate rents will continue to grow.
And so for new product that were rolling off the assembly line to tease Bill's phrase there.
Those market rents will just continue increasing so I think on the development side is as we complete our very high end.
Multifamily those rents will go above business time would be my guess.
Because there's just really no new supply to speak of and you can see by the fact that our portfolio is 98%, but you know that's just telling you you need you need more apartments in Dublin, especially given.
Really how the economy is going and the growth in.
And then in the F D I that that continues to happen and in Dublin.
Or existing portfolio. There is rent control. There. So you know there's going to be a limit to how you grow those rents.
But definitely on I mean, you can see what happens with the Occupancies.
And the growth of our NOI.
I would say to summarize our developments will provide a very large increases to our NOI.
Okay, great. Thank you.
Again, if you have a question. Please press Star then one our next question will come from Derek Johnston with Deutsche Bank. Please go ahead.
Hi, everybody. Thank you.
Just on the debt platform what type of deals look interesting today, and obviously taking into consideration the macro.
Shifts that we've even seen from first quarter to two quarter, you know, what's enticing there and.
Given the rise in rates you know what yields can you attract.
Good question Matt.
Yeah. Thanks, Eric So I'd say the pipeline, we have right now within our our debt investment platform is the biggest it's been a really since we launched it a couple of years ago I think a couple of reasons for that one some of the players that were there before who are using repo financing and doing C. L. O's.
Just aren't able to access that capital the way they were previously or our platform's completely unlevered. So we're not relying on any back financing.
So you've had you know certain players are they just aren't as competitive.
Banks have stepped away a bit and so what we've been able to do now.
It was really go after even higher quality assets higher quality sponsors and bringing our LTV is down slightly from where we were.
You know three to six months ago, just given the rising rates and so we what we've found is some larger transactions that are that are quite interesting, where we've been able to achieve better spreads than we were getting.
A couple of quarters ago, but at the same time, we've been able to bring our LTV levels down.
And so it could be anything from you know a lease up apartment building. We just closed on one a couple of weeks ago, well leased office buildings with high quality tenants and strong sponsorship that we've been doing generally around 50% LTV.
And larger portfolios of assets from again from high quality sponsors. So we're really seeing.
I think unique opportunities for us that have really come into our strike zone in terms of pricing.
Where we can put out some some capital into two great assets with great sponsors.
Yes.
Hello, Matt Matt. Thank you very much and then I just actually had like too quick.
Housekeeping follow ups I think one is for Mary just on the EU logistics platform and I'm, sorry, if I missed it you know other people do talk about it then you did talk about rents do you kind of have a feel for the portfolio Mark to market as it stands right now at the $1 $7 billion level, it would probably certainly poised to grow.
The mark to market and your vision there.
Yeah.
And we think that we would mark to market like today's cap rate would be roughly 6%, but it's been interesting because.
We've been actually going like like I said, 11% of that business plan on on the 300000 square feet of leases that we executed on.
So all of that was 24% above previous passing rent it was still 11% above our business plan. So let's say, we're buying something out of four we think the market to market today at a six.
But again, we're achieving 11% above that so.
It's easy to see how you get up into the six's and beyond with just the underlying fundamentals that are so strong in the sector.
And that sounds it sounds so thank you keep it going and last one.
I think at some point the Shelburne came out of the same store pool and I. Just was wondering if if it's back in the pool or if there are plans to add it back in the pool now that.
It looks like we've recovered in the hotel's performing.
But I can't Matt, Matt I'll I'll take the beginning of it and it came out of that it was just it kept clothing and then open and close and open so that we couldn't really depict a real story there.
Now we are on track for an open hotel and record breaking results.
Matt I don't know if you have anything else to add.
Yeah, I mean, it's.
It's the only consolidated hotel we have so in essence, you can see it on the face of the financials, but you know we're.
Certainly we can talk offline. If it's helpful. We can think about putting it back in the pool, but it's you know as I said, it's right on the face of the income statement.
Alright, and I know the Hawaii asset is a couple of years away but.
Certainly looking forward to that as well. Thank you guys. That's it for me Thanks Derek.
This concludes our question and answer session I would like to turn the conference back over to Bill Mcmorrow CEO for any closing remarks.
Well. Thank you everybody for joining us today and as I always say to all of you. We appreciate your support but also we're always available for any follow up questions that you might think about.
And we'll look forward to talking soon and I hope to see many of you in Boise, Idaho on September 22nd So thank you very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.