Kennedy-Wilson Holdings, Inc. (KW) Q3 2016 Earnings Report, Transcript and Summary

Good morning and welcome to the Kennedy-Wilson Third Quarter 2016 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Daven Bhavsar, Director of Investor Relations. Please go ahead.

Good morning and welcome to Kennedy-Wilson’s third quarter 2016 earnings conference call. This is Daven Bhavsar. And joining us today are Bill McMorrow, Chairman and CEO of Kennedy-Wilson; Mary Ricks, President and CEO of Kennedy-Wilson Europe; Matt Windisch, Executive Vice President of Kennedy-Wilson; and Justin Enbody, Chief Financial Officer of Kennedy-Wilson. Today’s call is being webcast live and will be archived for replay. The replay will be available by phone for 1 week and by webcast for 3 months. Please see the Investor Relations section of Kennedy-Wilson’s 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 measures in our third quarter 2016 earnings release, which is posted on the Investor Relations section of our website. Statements made during this conference call may include forward-looking statements. Actual results may materially differ from the 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.

Thanks, Daven and good morning, everyone. Thank you for joining us today. We are pleased to have reported a strong third quarter driven by growth in recurring income across our platforms and highlighted by the performance of our multifamily business. We would like to discuss the following topics today. We will start by discussing our key financial highlights for the quarter, followed by a review of the operating performance across our real estate portfolio. Next, we will discuss our balance sheet before turning to a summary of our investment activity for the quarter. We will then give you an update on our major value-add projects that we have in progress. And finally, we will discuss our current market outlook before opening up to your questions. So, starting off with the financial highlights for the third quarter, adjusted EBITDA was $88 million, an increase of 6% compared to $83 million during Q3 2015. The increase in our adjusted EBITDA for the quarter was largely due to a substantial increase in our recurring cash flow year-over-year. To provide a bit more detail around these results, during the third quarter of 2016, our pro rata share recurring NOI, property level NOI was up by $9 million or 17% to $61 million. Now, I would like to review the key parts of our investment portfolio. At the end of the quarter, we had an ownership interest in 444 real estate properties. Geographically, 62% of our portfolio is in the Western U.S. and 35% is located in Europe, which is primarily in the UK and Ireland. The Western U.S. multifamily represents our largest sector. The NOI of our multifamily portfolio continues to produce significant recurring income for the company, which is driven by our increased ownership in the portfolio coupled with the exceptional performance of our properties. For the quarter, our share of total multifamily revenues increased by 10% and our share of NOI was up nearly 13% on a same property basis. Looking at some of the larger public multifamily REITs, NOI growth has averaged 5% on a same property basis versus 13% for our portfolio. For KW, our Western U.S. portfolio, which represents 85% of our unit count lead the way. In particular, in the state of Washington which is our largest apartment market, our portfolio saw strong same property growth with our share of revenues up almost 11% and NOI up 15%. Driven by job creation from some of the world’s largest companies based in Washington, including Amazon, Microsoft and Starbucks to name a few, the states population has also grown by more than 50% since 1990 to over 7 million people today. This compares to growth in the country’s overall population of less than 30% over the same period. We remain bullish on our portfolio of over 10,000 units in Washington, the majority of which are in and around the city of Seattle. Turning back to our global multifamily portfolio, which is currently 95% leased, the majority of our assets sit in or adjacent to high growth cities, such as Seattle or San Francisco with attractive underlying fundamentals. Through value-add programs, our typical communities offer upgraded units and newly amenitized common areas, but come at a substantial discount to Class A CBD rents. Our average rent per month is approximately $1.75 per square foot or $1,500 per unit across the portfolio. In total, our multifamily portfolio has almost 26,000 units and produces $276 million of annual NOI, which is up over $100 million since the beginning of 2014. Our share of that NOI is $150 million or roughly 54%. Also, we now have 8,400 units that we own 100% and that generate $96 million of NOI for Kennedy-Wilson on an annual basis. Looking at our commercial portfolio for the quarter, occupancy grew by 1%, while our share of revenues and NOI increased by 3% on a same property basis. In particular, we saw strength in our Western U.S. office and retail portfolio, with NOI up 7% on a same property basis. We expect further upside in our recurring income in the commercial business as we continue to make progress across our un-stabilized commercial portfolio. That portfolio is comprised of 14 properties, 6 in the U.S. and 8 in Europe totaling 1.3 million square feet. While these properties were only 56% occupied, they are currently 75% leased. Over the next few quarters, you will see some of these properties move into the stabilized bucket, including office properties in Marina Del Rey and Beverly Hills, which will represent some of the highest rents in our entire U.S. commercial portfolio. Also I would like to touch on the performance of our hotel portfolio, which is now comprised of 972 keys or rooms across 5 properties, 2 of which are owned through KWE. This product type currently represents about 7% of our total investment portfolio. The largest component of our hotel portfolio is the Shelbourne in Dublin, Ireland, which is 100% owned by Kennedy-Wilson U.S. At the Shelbourne, we have seen stabilized NOI increased by 36% to $16 million over the past year. We continue to invest in this historic property having completed a renovation of the exterior façade earlier this year and we are currently in the process of upgrading the interiors, which will be finished by the end of next year. We expect these capital expenditures to continue to drive an increase in our ADR and NOI. The Shelbourne is 1 of 15 remaining assets that we acquired in Europe prior to the formation of KWE in 2014. The remainder of our European portfolios held through KWE, in which we own as of today, 22.6% of the share of capital and act as its investment manager. Earlier this morning, KWE released its third quarter 2016 business update. The annualized NOI in KWE’s portfolio as of September 30 stands at $203 million. KWE’s portfolio of 265 properties is 95% occupied. During the quarter, KWE completed sales of $80 million at a 3.4% premium to book value, valued as of June 30, as well as completing 31 commercial leases post Brexit, which added over $2 million of incremental annualized NOI. In September, KWE sold and an additional £2 million of unsecured bonds maturing in 2022. The yield on those bonds was 3.6%. At the end of Q3 2016, KWE’s cash positions stood at $625 million. Additionally, in September, KWE announced a share buyback of £100 million. As of today, KWE has repurchased and retired 4.9 million shares for a total purchase price of £15 million. Turning to the KW balance sheet, during the quarter of Kennedy-Wilson raised $250 million of unsecured debt maturing in 2024 with a fixed rate of 5.875%. We used the proceeds to pay off our line of credit and for general corporate purposes. We closed the quarter with nearly $300 million of cash and $475 million of availability on our un-drawn revolver for a total of over $750 million of liquidity at the KW corporate level, with no corporate debt maturities for another 8 years. We also have minimal property level debt maturities in the next couple of years. For the two largest maturities in 2017, which represent over half of our property level debt maturities for next year, we have already received commitments and have locked rates in advance of the closing of these refinances in December and January. In total, 71% of our corporate and property level debt is fixed at a fixed rate and an additional 15% was hedged against long-term rate increases. Although we are focused on building the liquidity position of the company, we continue to find great opportunities to invest our capitol both within our existing platforms and in new acquisition opportunities. During the first nine months of 2016, Kennedy-Wilson invested approximately $250 million of cash from our balance sheet. Of that, roughly half of our investment dollars went towards a combination of KWE share repurchases, KWE stock purchases and value add capital X spent on our existing portfolio where we expect to add new sources of recurring income. The other half of our investment dollars went into new acquisitions. As part of our capital recycling program, we continue to selectively harvest gains from investments where we have completed our value added business plan. The sales proceeds have helped us fund a combination of our CapEx programs, share purchases as well as our property acquisitions where we have been upgrading the quality and location of our portfolio. In total, the company and its equity partners completed approximately $900 million in investment transactions in Q3, bringing our year-to-date total to $2.2 billion, with $1 million of acquisitions and $1.2 billion of dispositions. For the quarter, we and our equity partners acquired $460 million of real estate, all of which is located in the Western U.S. On the disposition side, together with our partners we sold $444 million of real estate. Excluding KWE’s sales, KW’s equity multiple on these realized investments was 2.2x including our share of promoted interest. For the year, we have sold $190 million of non-income producing assets, which our share is $60 million. We remain focused on reducing our non-income producing assets in the company by either selling or creating income through asset management and construction initiatives. Also after the end of the quarter, we and our partners entered into separate contracts to sell five investments in the Western U.S. including three multifamily properties, one office property and a residential land investment. The aggregate sales price for these transactions if they all close, is $309 million. Additionally, the company is currently under contract to purchase a multifamily investment in Portland for $93 million. I would like to go a little bit – into a little bit more detail on the acquisition and disposition activity of our multifamily portfolio. So far in 2016, we have now completed over $1 billion in multifamily investment transactions. On the buy side, including one deal that closed in October, we have acquired a total of $684 million across 2,800 units in which we have an average 51% ownership interest. We have also sold $325 million of multifamily assets totaling 1,240 units in which we held only 23% average ownership. From these transactions, we are adding almost $15 million net of annual NOI to Kennedy-Wilson, which we think will grow substantially as our various value add asset management initiatives are completed on the newly acquired properties. Finally, I would like to discuss our major development initiatives where we continue to make great progress. Many of these projects are big built on excess land, which we originally acquired with little or no basis within or adjacent to income producing assets that we also own. This is allowing us to build below replacement costs and create new income streams at above market cap rates. In total, we expect to invest between $150 million to $200 million of KW’s cash over the next 12 months to 18 months into these projects and we are targeting a 10% to 15% annual return on that equity once these assets or stabilized. Additionally, within KWE there is CapEx of over $100 million planned over the next 12 months to 18 months. I would like to give you an update on some of our larger projects that are in progress. At the Capital Dock campus which is being developed in the Docklands Section of Dublin, Ireland and sits adjacent to our State Street office building, which is fully occupied by State Street on a lease with over 11 years remaining. We are on track to deliver the first new office building in 2017, with the project expected to be fully completed by 2019. The South Docklands sub-market currently has less than 2% vacancy for Class A office space. Kennedy-Wilson has a 42.5% ownership stake in Capital Dock, which is one of the largest development projects in all of Ireland. When completed, this spectacular waterfront project will deliver a total of 690,000 square feet including 425,000 square feet of office, 25,000 square feet of retail and 190 multifamily units house in a 23-story high-rise. The site, which is in excess of 5 acres will create a unique live work campus environment in the heart of Dublin. At Clancy Quay, which is situated on the Southern bank of River Liffey in Dublin, Ireland, we are building an additional – additional apartment units on 8 acres situated adjacent to an existing 423 unit apartment community that we purchased in 2013. Those 423 units are currently 97% occupied. As part of Phase 2, we are delivering 163 units in total, including 46 units completed during the third quarter, with another 32 units expected to be completed in Q4 of 2016 and the remaining 85 units expected to be completed by Q3 of 2017. Phase 3, which is still in design, will deliver another 213 units by 2020. When completed, Clancy Quay will total almost 800 units making it one of the largest residential communities in Dublin. As an aside we have new videos up on our website on both Capital Dock and Clancy Quay, which would be a good way for you to see the size and scale of these two projects. In the U.S, we continue to build multifamily units through our Vintage Housing joint venture. Vintage, which is 62% owned by Kennedy-Wilson is engaged in the development and management of a portable housing on the West Coast with a focus on independent senior living. As of September 30, the portfolio has grown to 5,600 units across 35 properties. Additionally, Vintage has 1,300 units either in planning or under construction in Seattle and in Santa Rosa that we expect to complete over the next 12 to 13 months. Looking ahead into 2017 and beyond we believe that we will continue to experience global volatility, but it’s important to remember a few key points. Number one, we have invested through many decades with a strong track record of creating long-term value. We remain disciplined in how we allocate our capital, investing for the long-term to create value for our shareholders. Number two, with $1.6 billion of liquidity between KW and KWE, we remain well-positioned to take advantage of any market dislocations, but also remain very focused on executing our business plan, which involves creating value and recurring income through asset management strategies on properties that we already own. And finally, we have built a proprietary global network of relationships that have been cultivated over many decades, which provide us both market intelligence, as well as new investment opportunities. With that, I would like to open it up to any questions.

[Operator Instructions] Our first question comes from Mitch Germain of JMP Securities. Please go ahead.

Good morning.

Good morning, Mitch.

I am just curious some of your peers on the multifamily side have been seeing indications of some headwinds. I am just – in terms of talking to the people that are working at the various properties that you own, are you seeing any patterns in terms of reduced level of showings or indications that you might be seeing some softness upcoming?

We are really not. But I think the point really to remember is just the location of our properties and the types of properties that we have invested in and own currently. But remember that generally none of our properties are located in the CBD like downtown San Francisco, where you have got extremely high rents and where they are clearly as flattening or slowing in rent increases. And so when you think about Northern California, virtually all of our apartments over 5000 units are located in the East Bay, which is really an easy commute into downtown San Francisco. And so you are seeing people move to what are considered less expensive apartment communities and the same thing is really true in the Seattle market, which on the West Coast are two main markets. And I think two when you look at the U.S., the point we were trying to make with what’s going on in the state of Washington, up and down on the West Coast, whether it’s California with a population of almost 40 million people, Oregon with a population of almost 4 million people, and then Washington with a population of 7 million people. All three of those population sectors in those three states are growing and jobs are getting created, particularly in the Seattle market, where as I mentioned you have got these really great companies like Amazon that’s currently building out campus there that ultimately will encompass almost 6 million square feet of space. And so, it’s all really driven in our markets by the location of our properties where there is still a value proposition and what’s happening with job growth in those locations.

Great. And over in Europe, I know you guys have a number of developments I know you are doing a bunch of investment in your portfolio. With regards just to the market itself, is it kind of the holding pattern to see what happens from the political standpoint coupled with the fact that there really hasn’t been as much of a decline in asset values is kind of when do you start getting comfortable putting capital to work again in M&A or acquisitions?

Well, again as I was trying to outline, I mean, you have to remember two, Mitch, with the number of properties that we own and with some of the large capital projects that we have going on right now. Our primary focus in Europe right now is finishing those major capital programs, finishing the asset management initiatives that we have. And so when you think about Europe, out of that almost 300 properties, we have 25 properties that are either undergoing major capital expenditure initiatives or where we are actually building ground up in the case of Clancy and Capital Dock. And so that’s a big part of our focus. And we intentionally went into Brexit with a position that we were going to conserve our capital, see what the outcome of the bolt was going to be and then make decisions as we move forward. I think the good news out of Brexit that maybe Mary you can amplify on a little bit is that post-Brexit we have done over 30 new leases and so commercial transactions are happening there in terms of – at the business level. There clearly is a difference between the bid and the ask and on acquisitions and our strategy right now is to wait and see and wait until we have a little more clarity, which is going to take time on what comes out of Brexit. But as I said also we are in effect reinvesting in our own business by initiating a program to buyback almost 10 million shares of stock. We have done half of that since we announced that. And also in Europe in addition to all the capital expenditures, some of the portfolios we bought came with smaller properties and when I say smaller, I am talking a number of them under £5 million in value. And so we continue to work through those properties, because they are not generally long-term holds for us. And I think the good news on those properties just as it is here in the United States there is a very, very liquid market with people unable to achieve the kind of yields that they want obviously by keeping their money in the bank or any other place. There is a very, very strong desire on the parts of smaller owners and entrepreneurs to own real estate, where they can achieve returns of 3%, 4%, 5%. So right now in summary, we are focused on everything that we currently own. We are focused on the capital expenditure side. In Europe, we are focused on the disposition of the smaller assets and the completion of the stock repurchases while we over time get some clarity hopefully on what’s going to happen here with Brexit.

Great, that’s really helpful. And last one for me, I think the $309 million sales, is that to unwind of a venture that you have right now or…?

No, these are separate properties that were in the case of the apartment units – sorry let me back you a second. One other properties that we sold is not in that five is office building here in Southern California, 5200 Lankershim. We had a very nice profit on that deal, but the building was basically stabilized as we have said several times we are not, in KW, we are deemphasizing the ownership of office building. So we sold that at a nice profit and that cash from that transaction is the money that we are using to close the $92 million apartment acquisition in Portland. The other five sales that were doing, three of which are multifamily assets, all of that cash is going to be re-circulated into really higher quality properties. We already, like for example and I think Madison or supplemental, we have announced previously that we sold to the reserve property in Federal Way, Washington and so that was a property, an older property that we bought several years ago. We took the profit and the cash from that transaction and invested it in a building called the Equinox, which is more of a Class A steel frame construction building situated South – near Lake Washington with views of the lake that was built condo specs in 2008, 2009. And so we are taking profits not only out of our office portfolio but some of these older apartment assets and re-circulating those into higher quality assets in better locations.

Great. Thank you.

Our next question comes from Vincent Chao of Deutsche Bank. Please go ahead.

Yes. Good morning everyone. Just wanted to maybe touch based on the acquisition this quarter, I think the cap rates are a little lower than we have seen, I know a lot of it was because it’s all sort of multifamily in the Western U.S. and also skewed by LIV Bel-Red, I am just curious what the cap rate excluding LIV Bel-Red would have been. And then also can you just talk a little bit about that project and what the play is there, given I think that was sort of mid-5s kind of deal as well, but just maybe low-5s, but curious to what the opportunity is?

Well, I am going to let Matt answer part of that Vin, the size of that acquisition was $175 million. So it’s a big property in a great location in the Seattle market where we believe through asset management there is real upside both in the occupancy and rents, but Matt, do you want to...?

Yes. So if you exclude that transaction we would have been closer to 6% cap rate for the quarter and as we have talked about before and a lot of these apartment assets were buying things that have lost the lease and have upside through value-add initiatives, so our plan on all these assets is to grow the NOI over the next several years and get them to a much higher yield.

I guess on that one, in particular though it’s fairly recent build, so is it just sort of a weak initial lease up or…?

I think we are in the business of owning and operating these assets and we know these markets very well. We have over 10,000 units kind of in that market. So we think we will be able to really add some good leasing and asset management to that asset. And a lot of times on these lease ups there are concessions that take place that actually in essence lower the kind of the yield, but once those burn-off and the loss of lease goes away, they stabilize at much higher yields.

Got it, okay. And the just on the split up of the affordable bucket, which I guess enters the same-store pool today, I guess it doesn’t make sense to include it with the market rates if there is some caps on your rental rate growth, but can you just remind us on those deals I think the vintage portfolio, what the return expectations are there, because I think that was more of a basis play than rate growth kind of idea?

Yes. I mean we are not really anticipating substantial rent growth in that portfolio. Like you mentioned its, there is caps on the rents and it’s based on area median income, how those move up. So in our underwriting we don’t have an expectation of high rent growth in that portfolio.

Okay.

As far as the returns or concerned, they tend to be very high returns because they take minimal capital on our part.

Got it, okay. And then last question just on the overall opportunity set, I guess where do you see the best opportunities to deploy and where are you looking to reduce if there is any sort of geographic or property type or any other kind of risk exposure that you are looking to either add or subtract from?

Well, I mean look, we still – we believe very strongly in this Western U.S. market. And but we are trying to be very – as I have said for several quarters now we are being very selective in the things that we buy because anything that we buy has to have in addition to what we are buying has to have some upside through management initiatives whether it’s building units or just better management at the property level. We want to continue to grow our multifamily business, but in a large part we are doing that by recycling capital as I mentioned out of these older assets. But when you really think about what’s happening this year, you have got very strong sources of income coming on stream really and it’s really starting in latter part of ‘17 and into ‘18 and ‘19 through the build out of these major capital expenditure programs that we have going on. So that’s really what kind of when you think about building for the future. A lot of the income growth is going to come out of the build out of these larger assets.

Okay. And how does Canada fit into the equation at this point?

Well, I mean it doesn’t fit in terms of at all. We don’t own anything in Canada. I can tell you that for several years now we have been carefully studying the market. We – and as I think I have said it going back 4 years, 5 years ago, we never like to just jump into a market until we really have studied it and understand it thoroughly. Canada itself is a very attractive place to be because similar to the United States and the UK and Ireland and other places in the world, there is a real sensible rule of law and so on so forth. And s we are studying it, but today we haven’t seen the kind of opportunities that we think we should put our capital into. And we have our eye on though.

Got it, alright. Thank you.

The next question comes from David Ridley-Lane of Bank of America/Merrill Lynch. Please go ahead.

Sure. Can you update us on the progress of deploying capital at the Fund V and maybe any potential for additional U.S. value-add funds?

Yes. So, we have deployed about 75% of the capital now in Fund V, which is the total commitments in Fund V were roughly $500 million, not roughly they are $500 million. With that capital being provided with some of the biggest household names both in the endowment and pension fund world mostly here in the United States although we have a couple of foreign investors in that fund. We are going to be launching shortly what I will call Fund VI and the expectation is that we are going to raise capital in that fund that will exceed Fund V and we have obviously had preliminary discussions with a number of the investors that are in both Fund IV and Fund V and we expect many of them to kind of re-up into that vehicle and in some cases with upsized commitments.

It sounds good. And then can you talk about the dividend policy, I mean, since you have initiated, it’s been growing quite frequently. But do you have sort of a guidepost in terms of the payout ratio or percentage of your current cash flow that you would target over time?

You are talking about KW U.S.?

Yes, KW U.S. dividend.

Yes. I think look we sit down with our board really in the February timeframe once we really had a full assessment of the year and what the future looks like. We will lay out specific policy as far as our dividend is concerned, but it’s obviously something that we will take a hard look at it in February with our board and make a decision then.

And then if Kennedy-Wilson were to become a bit more aggressive on disposals next year, what would be kind of the top uses of cash flow, because I asked because Kennedy-Wilson Europe has good liquidity, the acquisitions, dispositions in the U.S. are running at a pretty similar pace?

I would say, look, it’s almost impossible to predict the future in terms of where the opportunities come from. I think the point I was trying to make at the end of my formal presentation is that throughout the world now over 28 years that I have been here at Kennedy-Wilson and Mary over 25 years and all the team members that we have across the globe. We have built up a very, very strong set of relationships with financial institutions, both banks and insurance companies and with companies that run certain fund businesses that at the end of their lives have the disposal of assets. And so you never really know where the opportunities are going to come from, but I can tell you that our reputation – we have just very, very strong reputations with particularly the financial institutions that we do business with. And so you just have to – but I will tell you that the markets that we are in which in my opinion are the most attractive markets in the world and so given that background and given the relationships that we have built and given the recurring cash flow that we are creating and the cash flow that will come on from our capital expenditure programs, our whole strategy has been to keep our liquidity levels at reasonably high levels. At the same time, we are executing pretty big capital expenditure programs. So not sure exactly where the next opportunity will be, but we are ready for it wherever it is.

Okay, thank you very much.

The next question comes from Craig Bibb of CJS Securities. Please go ahead.

Good morning.

Good morning.

You guys sold some land in the quarter, is there an optimal percentage of the portfolio that should be allocated to land?

Well, it’s a small part of our investment portfolio. And generally speaking, although there are exceptions to this, the land that we are involved in has to have clear exit. And by that I mean there has to be, even though we have an entitlement capability both in Europe and here in the United States, we like to – it’s not something that we are trying to land bank, we are trying to figure out ways to create value and profits and get out of. But there is no set percentage, but it’s a very small percentage of our total investment portfolio.

Right. And if you look at a lot of the land that we bought, it was part of other transactions, so like the Capital Dock project we talked about, we bought an office building and it came with a piece of land and we bought that 3 or 4 years ago. So, as Bill mentioned in his remarks, I mean, we are looking to certainly shrink that over the next couple of years either by selling or by building on and creating long-term income.

Yes. And I think Matt you make a good point just to reiterate I mean like the 8 acres that we own at Clancy Quay when we bought that we really didn’t allocate a lot of value to it, because it wasn’t clear at that time what would happen in that market. So that 8 acres, the 5 acres next to the State Street Bank building and so on are really kind of good examples of the land that we have ended up well. But generally, not generally, I would say that we are much more focused on creating value out of assets that have existing cash flow.

Okay. And then it looks like loans are running off, is that kind of what we should expect until the next downturn?

Yes. I mean, when you think back to 2008 and ‘09 and it always kind of cycles that way that the first opportunities generally speaking are to buy loan portfolios from the financial institutions and those loan portfolios are bought either with the intent to just get the loans paid off hopefully par or to own the asset. And so as you go through a recovery cycle as we have now really starting in 2010 and ‘11 your loan portfolios by definition will really run down to almost zero. And obviously when you look at what we have done over the last 5 or 6 years, it gets taken over by the equity investments that you are making in properties that are going to create long-term recurring income for you.

Okay. And then at Capital Dock, look at the video after the call, but are you close to topping out there and what is the level of [indiscernible] for your office space?

Well, no, I mean, Mary you want to answer that question?

Yes. I mean, so where our core is almost completely done. We are making unbelievably good progress. We have got – the costs are locked down. So, we are feeling very good about that and we are on time with everything that we are doing. I think Bill talked about in his remarks that we would have – it would be ready for occupation kind of mid-2018. And obviously, it’s very, very big project. And I think Bill said, it’s the biggest project really in Ireland. So, we have had a lot of tours have been going on looking at the model, talking about the market, meeting with the senior management team in Ireland. And we think with Brexit, we think that presents an opportunity for us and for Capital Dock. So, I would say feeling very comfortable with the level of interest right now.

Mary, I think the cores are done and we are actually coming out of the ground now. I saw a picture yesterday. And so we are almost at ground level. And from there on up, you are going to see pretty rapid progress now over the next 6 to 9 months.

And then I know it’s early, but can you give us a ballpark on projected NOI once it’s done and fully stabilized?

Yes.

Go ahead.

We have the number and I just don’t – I am not sure Bill how do you want to handle that?

Well, I mean excluding land the total cost of build-out is roughly €300 million. And so you can really pick whatever cap rates you want out for that. And so that’s really up to you, we have an idea where we think it’s going to end up obviously. But it’s going to be a very meaningful number once you allocate the land value and that cost number that I just said to you. So I think that’s about it. I think you have got to do your own math from there.

Okay. And then Matt, could you walk us through the broad strokes of the reporting change in the ownership percentages?

Sure. Yes. So and this is all really supplemental information. Nothing at all on the financial statements, but what we have now provided is our pro rata share of NOI in particular across the apartment portfolio and the commercial portfolio. To give a more detailed look at the cash flow we are generating to the KW shareholders. Similarly, we are giving our pro rata share of the debt across those two product types. So you can see – again what – from a KW shareholder perspective what our shareholder of the debt is. So it will just give you a more detailed look at the portfolio. Same thing with ownership, we are looking at the ownership from an NOI perspective as opposed to a balance sheet perspective. Again to give a better indication of what is actually being returned to the KW shareholders.

Okay. And last one, just what was the IRR and the equity multiple on the November’s disposition?

Which dispositions?

Subsequent to the quarter, that $309 million?

We haven’t sold those. Those are not sold. Those are under contract, pending closing. So we are not going to talk about the multiples or IRRs until those were done.

Okay, alright. Well, thanks a lot guys.

Thanks.

And this concludes our question-and-answer session. I would now like to turn the conference back over to Bill McMorrow for any closing remarks.

Alright. Again, I would like to thank everybody for joining the call. And as always, we very, very much appreciate all the support we received from everybody. So thanks very much.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect. Have a great weekend.