Good day, and welcome to the Kennedy-Wilson First Quarter 2019 Earnings Call and Webcast. Today's call is being recorded. After today's presentation, there will be an opportunity to ask questions. [Operator instructions]. I would now like to turn the call over to Daven Bhavsar. Please go ahead.

Thank you and good morning. This is Daven Bhavsar, and joining us today are Bill McMorrow, Chairman and CEO of Kennedy-Wilson; Mary Ricks, President of Kennedy Wilson; Matt Windisch, Executive Vice President of Kennedy-Wilson; 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 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 first-quarter 2019 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 the 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. Good morning, everybody, and thank you for joining us today. After a record year of financial results in 2018, we're pleased to have a solid start to 2019. This morning, I'll review our financial and property operating results for the quarter and then update you on the progress we've made on our key strategic initiatives. And then we'll open it up for questions. So starting with our results for the quarter. GAAP EPS was a $0.04 loss per share compared to a $0.02 loss in Q1 2018. Adjusted EBITDA was $120 million in the quarter compared to $123 million in Q1 of 2018. And adjusted net income totaled $54 million compared to $63 million in Q1 of 2018. Our real estate portfolio ended the quarter with an estimated annual NOI of $405 million, with 49% coming from the western U.S. and 51% from Europe, primarily in Ireland and the United Kingdom. 74% of our portfolio was represented by multifamily and office assets. As we will discuss later in the call, we expect substantial growth in our NOI, primarily from the completion of development initiatives and through organic growth in our existing property portfolio. We had another good quarter of property operations with same property revenue and NOI, each growing by 3% across our global same property portfolio. These results were negatively impacted by our hotel portfolio, where we were completing some value-add initiatives that led to a drop-in occupancy. These initiatives have now been completed. Excluding hotels, our same property portfolio had a 5% NOI growth. Healthy fundamentals continue to support rental growth in our multifamily portfolio, which includes assets in growing markets and where we continue to invest in value-added capital initiatives. In the quarter, we saw robust growth with same property revenue up 6% and NOI…

Great. Thanks, Bill. In Europe, it's been a busy quarter, setting the groundwork in place for future NOI growth. In the UK, occupational demand remained solid, including good activity levels we've seen after the quarter-end and more on this in a moment. Our Irish business, which has very strong fundamentals, is being underpinned by an additional layer of demand. Starting with Dublin at Capital Dock, we're making excellent progress on the 26,000 square feet retail component where we have leased or are in lease negotiations on almost all the space, bringing top artisanal food and beverage occupiers to this dynamic urban campus, so really doing some place making there. We expect to be fully leased by the end of Q2 and operational by year-end. We're also seeing strong demand for our high-quality multifamily units at Capital Dock, which represent one of the best and most unique rental offerings in the market today. Our other key multifamily development is Clancy Quay 3, where we're on track to deliver 259 Phase 3 units in the second half of next year, which will bring the total to 845 units once complete, which represents the largest multifamily community in Ireland. The multifamily leasing market in Ireland continues to perform very strongly, driven by high demand and significant undersupply. Dublin City alone is estimated to require 13,000 units per annum between 2019 and 2022. It's also important to note that there still remains a lack of institutional ownership of apartments in Dublin with less than 5% of tenancy controlled by landlords with 100 units or more. As the renting philosophy evolves in Dublin, we continue to see strong demand for our amenitized professionally managed offering. And our goal is to be a leader in delivering much needed new housing in Dublin, and we remain firmly…

Thank you very much, Mary. The third area that I mentioned, the focus is our asset sale program on the recycling of capital. During the quarter, we sold $323 million of assets, of which our share was $145 million, producing cash of $93 million to KW. The biggest disposition in the quarter was the Ritz-Carlton at Lake Tahoe for $120 million. The Ritz was a 50:50 venture with a major insurance company. We, KW, earned a cash profit of $37 million and an IRR to KW of 26% on this investment since the beginning of time when it was acquired in 2012. This included a gain of $12 million and promotes recognized in Q1. We also sold three U.S. retail properties for $53 million, as well as $21 million in noncore UK assets. Going forward, we will continue to focus our asset sale program on selling smaller assets, noncore assets, and assets where we have completed our value-add business plans. We intend to reallocate that capital into high-quality investment opportunities where we see higher growth potential, in some cases with partners, where we're also earning attractive management fees and promotes. This quarter also represented the first full quarter since the sale of our Meyers research division at the end of last year. In the quarter, this sale resulted in a reduction of fees by three million as well as a decrease in overhead and G&A costs by $4 million. During Q1, we allocated $78 million in investment capital as follows. 71% to CapEx, 19% to new investments which were completed with partners, and 10% to our stock repurchase plan. And finally, at the end of the quarter, we and our partners completed a EUR 261 million refinance on Capital Dock. This refinance lowered our cash basis in the asset to 0, with the 5% interest only floating rate loan was completed at an effective interest rate of 1.56%, which is the lowest rate finance that we've completed in our history and represents fantastic execution on the part of our European team. So once again, I'm pleased with the positive trends we continue to see in our investment markets and the continued progress of our key initiatives. So with that, I'd like to open it up to questions.

We will now begin the question-and-answer session. [Operator instructions]. At this time, we will pause momentarily to assemble our roster. And our first question comes from Mitch Germain of JMP Securities.

Good morning, Bill. You guys have always been really good in market. You've always been really good in terms of timing and market. I'm curious about timing sectors. Retail's 17% of your NOI or asset base. In terms of the way that you're looking at that sector, is it time to maybe look to be a little more opportunistic there, or do you think you actually want to maybe lighten up your exposure?

Well, I think that the simple answer's we're actually doing both. I think, as you saw in the first quarter, we sold three, what I would call, grocery anchored shopping centers. In one of our funds about a year ago, we bought a fairly large retail asset in Salt Lake City that sits on a very big piece of land. It's got very good occupancy, and it also has some redevelopment opportunities. And the same thing in the UK. I mean, we are looking at selling some of our smaller assets there, but we're also adding value to -- for example, we own a property in Ireland by the name of Stillorgan, which sits in one of the really, really affluent submarkets of Dublin. And we've spent roughly $20 million upgrading that asset. That allowed us to do a long-term lease with Tesco and a number of other tenants at the property. So it's something that we're studying. It would be in, I would say, very specific geographic markets. And in our opinion on some of the better-quality assets, there's been a bit of an overreaction to -- which has hurt values. So it's something we're looking at, but like I said at the beginning, we're actually doing both. We're selling and adding value through our CapEx programs through the things that we own, and in some cases, we're looking at buying things.

Okay. That's helpful. Is the increase in construction costs, is that making any change or impact in terms of the way that you're looking about not really what's been commenced, but really the next phase of your development pipeline?

I'd say particularly, if you're focused, as I did, where we said that 40% of that new NOI is coming from Ireland, we have an incredibly great construction management team there. And so, compared to other markets globally, we've been able to hold the line there on costs. And I think when you look at Capital Dock, which at the end of the day, cost-wise was somewhere between right around $400 million in total construction costs, we completed that on time and on budget. And so, construction costs are really, I would say, not the big concern, Mitch. I would say that what we are seeing, and it's -- is that land prices have escalated. And so, while we have some, I would say, very nice embedded gains in the existing things that we own, I think it's a very good time to be careful along anything new that you're buying. Land prices, I would say, globally in the markets that we're in have gotten to what I consider to be very retail prices.

Great. Last one from me. Based on Mary's comments regarding the Shelbourne lobby renovation and some other common area work, it seems like it's back up and running. So how should we think about the revenue build in the second quarter and beyond? Does it get back to more -- does the hotel sector get back to more normalized levels, or is it a bit of a ramp to get there?

No. Even in April it continued to perform well. It's a little hard on this call to explain it, but the lobby shutdown. There's two food and beverage operations that sit off of the lobby, actually three, and so those were heavily impacted by the renovation. And the Shelbourne bar is a very big -- a nice profit center for us. And Mary, in looking -- you might add some clarity here, but in looking at the forecast for the balance of the year, we're expecting the occupancies to run in the very high 80s, maybe even touching 90%. And by going on to this Autograph brand, away from the Renaissance brand, we have a belief that over time that's going to help us also with room rights.

Yes, that's the goal, really pushing our ADRs, which we've already seen coming through for the balance of the year. So we feel good about where we're going with our NOI growth there.

Yes. I think, Mary, to be clear, I mean, we expect a very strong -- we expected a very strong nine months for the balance of the year based on the forecasts that we're seeing and the bookings that we have.

And it's really driving, also, the high-end leisure market now. And Dublin, as we've all been talking about, it's really booming. And Shelbourne is the most iconic hotel in Ireland. So the team are doing a great job with it.

Yes. I think one more footnote, Mitch.

Yes, please.

The Shelbourne last year in Ireland was voted the number one hotel in the whole country. So we just had a, I call it a temporary occupancy and revenue decrease for the first 90 days of the year.

Got you. Okay, so just expect 2Q to be business as usual, basically, right?

Yes, yes. I mean, we actually -- the lobby was actually closed, and the hotel was fully shut down for some period of time. So that really explains the drop in NOI. But now it's completely open, bookings are back, and actually we are driving ADR. And the bookings that we have for the balance of the nine months are very solid, so I mean, you're going to expect to see everything else on track and growing NOI over the next three quarters.

And to put some numbers around it in the quarter, NOI was down about $2 million. So we expect that to come back and then some now that the renovations are done.

Got you. I mean, I'm just look at income. I don't have NOI in front of me, but looking at income, you were down north of $20 million from the fourth quarter. So just trying to understand how we should think about the ramp. And I know you sold some hotel assets as well in the first quarter, but --

Yes. Yes. The majority of that's the sale of some hotels. It was $2 million in the quarter related to the Shelbourne, so $8 million annualized.

And our next question comes from Anthony Paolone of J.P. Morgan.

Thank you and good morning. First question is on the apartment side. The same-store results continue to be real strong. Can you talk about how you think about the runway for pricing power in some of your mountain states, whether it's Boise, Reno, Salt Lake City and some of those places where you just had very good success? And wondering how much further you could push it.

I'm going to let Matt answer that. But I would say that one common characteristic in those markets that you mentioned, but particularly, Matt, in Reno. I mean, we've got both sides of the market there. We've got a big construction pipeline on the affordable and senior piece, and we also own market rate units there. And the same in Boise, not so much as it relates to the affordable and senior. But as we did in Salt Lake City probably six or seven years ago, we were one of the first if not the first institutional owners to get into those markets. And so, we've got a -- compared to the size of the market in Boise, we're probably the largest institutional owner, including what we have in our development pipeline. And so because of how we amenitize these assets and run them, that gives us real pricing power. But Matt, you might want to get a little more granular.

Sure. Yes, so Tony, a couple stats. I mean, in terms of the same-store growth in the mountain states, we were at 7% on the apartment portfolio, which we've been really at those levels now for a couple quarters. And I think a couple drivers of growth there, one key one is affordability. And so relative to other places in the western U.S., these markets continue to be relatively affordable. And if you look at our average monthly rent in our mountain state portfolio, it's at $1,100 a month. If you compare that to our Southern California portfolio, which is still relatively affordable, that's $2,000 a month. And so, we think the runway to continue to rent at a good pace is quite strong because just of the general affordability of those markets. And then if you look at the employment growth that's happening there, the great education systems around a lot of the cities that we're in, and tax rates as a final thing, we think there's just a lot of positive momentum in those markets. And there's clearly a lack of institutional competition there relative to places like LA, San Francisco and Seattle.

Right. Tony, this is Justin. I think if you look at our strategies, when a lot of REITs were going CBD in some of the bigger markets, we were looking at affordability and going more suburban. And this is sort of the second trade, where we're looking at the mountain states and going after affordability again. And you can obviously see the success. We're seeing great rental growth, and we're getting good occupancy in those markets.

Okay. Great, good to hear. And then just staying on apartments for one moment, maybe for, Mary. Don't know if you'd have this off hand, but you'd mentioned in Dublin the need for about 13,000 units a year to satisfy what's happening with that economy. Do you have a sense as to what's in the ground and in the pipeline to be delivered on the supply side of that the next couple years?

No. I can come back to you with that, though, Tony. I mean, I know that there's definitely been a few more entrants in the market, which we find to be positive because it's a lot more -- it's more of an institutional, now, product type. But let me come back to you with those numbers.

I think what you can say, or we can say, Mary, it that the overall need for getting just the apartment site for housing in Ireland, we've seen different numbers, but it's somewhere between 25,000 and 30,000 units a year. And probably, at least what we've seen, is that when you talk about the single-family market and the apartment market, somewhere between half of that in 20,000 is what people have the capacity to build right now. And as I've said in prior calls, if you -- and Tony, you know this, but if you go to Dublin and Seattle and you look at these two cities, they have very, very common characteristics with both markets having these very well capitalized technology companies, and in the case of Dublin, the banks, like JP Morgan, and Bank of America, and Citi and others that are hiring these younger people out of these, as Matt said, these great university systems. And again, as I've said in these calls, if you're an Irish citizen, you can virtually go -- unlike here in the United States, you can go to the university beginning to end at extremely low cost, almost zero. And you've got an average population -- the median population age, I believe, Mary, in Dublin is 37-years-old. It's the youngest population in Europe. But Mary will come back to you with specific numbers on the apartment units.

Yes, sure.

Okay. Thanks. And then just in terms of the capital raising, how should we think about just how much the pipeline is in terms of separate accounts versus discretionary fund capital? I mean, just how I'm trying to think about it is if we look at the $2.3 billion, if you found a lot of investment opportunities, could that number just jump because you have sort of a shadow, so to speak, of investors that could just jump in and suddenly that number goes up? How should we think about that?

Yes. So right now, so the $2.3 billion is -- about 37% of that is in comingled funds, and the balance is separate accounts. It's just what you said, really. So the separate account investors that we have, we basically have platforms where, okay, if assets hit these returns and meet these certain targets, then there's capital for those deals. And so, you saw what we did in the first quarter. We've got a big pipeline of the core fund assets. We have a pipeline of opportunities in Ireland with AXA. And we also have just sort of a mountain of other capital providers that we've done business with in the past, repeat business, where as we find transactions and we need capital, we can find the capital. So we believe that our separate account businesses will continue to grow, as well as obviously we're working on a fund in Europe which we've got really good momentum on. And then we're finishing up Fund VI here in the U.S. And so both of those are discretionary funds. So really, all angles of capital we're covering. And we expect to, like I said, hit those numbers that we talked about for this year. And then going forward over the next couple years, we'll keep growing that business.

Okay. In the $200 million that you said from two separate accounts in the first quarter, is that in the $2.3 billion, or has that not begun to earn these yet?

It is.

It is, yes. That is in the $2.3 billion.

Our next question comes from Sheila McGrath of Evercore.

Good morning. Acquisitions for the quarter were low, typical for first quarter. Just wondering how the pipeline is looking and where we should expect you to prioritize allocating capital. Is it U.S. versus Europe, multifamily or other sectors?

Yes. Thanks, Sheila. Last year we did about $2.7 billion of transactions, which roughly was split about the same between acquisitions and dispositions. And as I always say, we don't have any specific goals in terms of numbers that we want to buy during the year. It's obviously predicated on what the opportunities are where we see we can make the best risk-adjusted returns. As the company has achieved scale over the years, we see lots and lots of opportunities. And so, we've got a big pipeline of opportunities. I would say, as anyone would expect, that you've got to do more looking today than you would have eight or nine years ago because there's capital out there. And so, one of the key things that really Matt put in place last year, and Mary, were these core investment platforms. And so, I think to follow onto the point that Tony and Mary was adding too, we've got any number of separate accounts, particularly from insurance companies, that are willing to invest at core kinds of returns. So I think you're going to see at the end of the year a similar kind of number to last year that I just said at the beginning. But you're correct. I mean, the first quarter was a slow quarter. And I think part of that really related to how busy we were in the fourth quarter.

Okay. And Bill, can you remind us what your target or what you expect on the disposition front in terms of volume?

We're more looking at it from a, as I said -- as we've ramped up the percentage ownership in the assets that we own, the amount that we're selling, the gross amount, will decline over time. But the cash that we're getting out of it will increase in comparison to the gross number. What we said this year -- last year, we generated a little over $600 million of cash to KW from asset sales. And I expect this year that that number will be something in excess of $400 million. And I think the percentages that you saw in the first quarter, they're not going to end up exactly this way for the balance of the year. But we've got about $250 million of capital expenditures either on existing assets or on construction that we're doing that will take up part of that cash that we're recycling.

Okay. Great. And then on the fair value adjustment, I was just wondering if you could get into a little bit more detail on what's driving that. And it was pretty positive variance in the quarter.

Sure. Sheila, this is Matt. So the majority of the fair value adjustment was in our Vintage Housing business. So at the end of the year, we had that at $102 million, and at the end of the quarter we're at $122 million. So that was a result of some third-party evidence that came about on a recent indication that's happening. And so that drove up the value of some of our assets in that region. But that was the main driver, was Vintage.

Okay. And then, I was wondering if we could get an update on how the multifamily lease up is going at Capital Dock; is it performing in line with expectations?

Hi, Sheila. Yes, it is. It's going really well, actually. We've had quite a few events there, like I talked about in terms of the retail that we're doing. So now we're really -- it's maturing in terms of the place making there. So as I mentioned, we've got some really great restaurants that will be going in, some sort of beverage type restaurants as well, and so -- because that area historically was just -- it's a plot of land and vacant. So we're doing place making where we're driving people down to that end of the docks. But the leasing's going very, very well. It's really on target as we expected, to be fully let by either year-end or Q1 2020 at the rents as we budgeted, so solid rents.

Yes. So we have 200-plus units there roughly. And like Mary said, by the end of the year we expect to be at what we consider full occupancy, 95%.

Okay. And then just on the hotel. Obviously, the Shelbourne is a crown jewel. But just curious what your long-term plans might be with the hotel. And Scotland and Hawaii, I guess, is still under development, so that's a way off. But just your views longer-term on those assets.

Sure. So on our Scottish hotel, the Fairmont at St. Andrew's, we just renovated that and did a whole sort of common area lobby renovation, cleaned up our rooms, so did a beautiful job on that. And we've been driving NOI. We actually had a good year in 2018, and actually more business on the books in 2019 than we had for all of 2018. So all the things that we were hoping were going to happen in terms of the revenue, the corporate bookings, because we also just renovated our corporate big conference rooms and did a beautiful job there. And so, the bookings for 2019 are very, very strong, all the things that we thought were going to happen. So that is an asset that we're looking to possibly sell at the right price later this year.

And our next question comes from Tom Hennessy of Deutsche Bank.

Good morning. When you look at the new opportunities out there to deploy capital and you compare the U.S. versus the UK, lower funding costs overseas seemed to open up more opportunities that you wouldn't otherwise explore. I mean, funding at one and a half percent would be a solid head start. And are you looking at more opportunities, more in Dublin than in the U.S., or is it a mix?

Well, I think, yes, you're making a really good point, Tom. I mean, the Capital Dock in totality will probably stabilize right around an 8% cap rate, and so we're financing that at 1.5%. And so obviously, that six and a half percent spread is generally not achievable here in the United States. That same financing here in the United States would have a 4% or high-threes in front of it. And so that is -- just through a number of other reasons, that's part of the rationale for what we're doing construction-wise in Ireland. There's a very big debt financing advantage there, but the debt financing alone doesn't really drive our thinking in terms of what we do from an acquisition standpoint. Setting aside the core platforms that we have, for 30 years our DNA is really to either get into markets before other people get there that we think have growth opportunities or, quite simply, to find bargains. And so that's our DNA. And so, none of that really is driven by what debt costs are. But having said that, there's clearly an advantage in the United Kingdom and Ireland to doing the debt financing compared to here in the United States.

Yes. In fact, I think the spread between gilts and cap rates are at historical levels, so you're spot on. And as Bill said, that's helpful, but that's what -- we obviously have a lot of other ways where we're adding value, not just on the financial side.

Okay. Yes, that makes a lot of sense. Now, just a follow up on the noncore side of things. Going beyond the Meyers sale, whether it be the hotels or retail assets. I mean, how do you prior size the future dispositions of sales of these? I mean, do you have a timeline in mind, or will you use them more opportunistically and to fund some development?

Tom, it's all of those things. I mean, as Mary said in her comments, for example, we did a sale in the fourth quarter in Ireland that we didn't even have on our plan for 2018. But somebody came along and made us an offer that we thought was more than fair, and we took it. But I would say in general, the strategy is to -- we have almost $2 billion of unencumbered assets, and the strategy is to -- and as I've said on earlier calls, we ended up with a couple large portfolios numbers-wise in terms of number of properties, particularly in the United Kingdom. And the plan right from the get go was to reduce those numbers into the higher quality assets that we wanted to keep or that we could add value to long term. And so, I think that's really the strategy, is to continue to sell things that we don't think really fit for us as core assets long-term.

[Operator instructions]. We'll go next to Craig Bibb of CJS Securities.

Hi, guys. The refi on Capital Dock was impressive. But I was looking at the terms. I mean, five years, interest only, floating. Does that mean that it might not be a core asset after you finish leasing up the multifamily?

No. I think Capital Dock is -- it's a pretty core asset for us.

I think, too, Mary you might describe the State Street. It was part Capital Dock and part of the State Street building.

Yes. I mean, that whole area -- so, Craig, I've been there with you in Dublin, so I know you've seen it. We've got the State Street asset next door. We have Capital Dock, which obviously involves the office, the resi, the retail. So the loan that we did was on all of those components in terms of the Capital Dock project. And then we have Hanover Quay, which will finish off that whole end of the docks there. And that's a 65,000 square foot. That'll be a jewel box office building that we're going to start -- break ground on here soon. We're doing some enabling works there now. So that whole end of the docklands there is very core for us. And the loan, which is a five-year term certain with two one-year extensions, which we believe that we will get, so it's a seven-year loan and we bought a cap on that. So the loan can never be more than -- so yes, I mean, so you're never going to be above mid-2% range for that whole term.

And that's an asset that I would say generally speaking is not one that we would ever sell, especially as Mary outlined that whole development plan for that area. And she pointed out, I mean, we've been able to take out all of our equity out of the Capital Dock project. And so now we've got an income stream that is going to go on for a long time. The deed lease that you did, Mary, has what kind of term on it?

15 years.

Yes. So that's a 15-year term certain lease. And then of course these 200 apartment units are going to get leased up. And we're very close to finalizing a 100% occupancy on the retail. And then once 10 Hanover Quay is finished in a couple years, it's a very, very unique jewel box building. That'll get leased on probably the same kind of term certain.

Okay. And I'm sorry; I got on the call late. Mary, did you lay out what the city block is going to look like when you guys are done with it?

No, but we launched planning on that and we expect to hear back sometime in the second quarter. But we're super excited about that. We like our basis on a -- sorry?

Yes, but you guys had two. That's one of the two very large development projects that are going on. Were you close to seeing what the layout -- what they're going to look like in more detail?

Yes. I mean, as soon as we get planning, we will definitely share that with everyone, which we expect hopefully soon. But that's in the north docks. Craig, I know you've seen it. We're really excited about what that whole campus, which is going to be a combination mixed use of resi, where we already own the Northbank Apartments that we bought from NOMA about a year and a half ago. And we bought a site next to that with one of our partners, and then we bought the commercial site with another really great partner. So that together will be a very big, impressive campus. The team are working really hard on that. So hopefully in the next one to two quarters we can announce our plans there, but they're all very positive.

Okay. And I guess the last question's for maybe more Justin and Matt. We're all updating our interviews right now. Cap rates within the U.S. really not following. Rates up at the end of last year and not following them back down now. Are you guys seeing something different real-time in terms of cap rate movements?

I'm not sure if I follow that, Craig. Can you say that one more time?

Oh, cap rate spreads got really narrow when the treasuries were moving up. They've continued to pull in. The public doubt over cap rates is showing pretty stable. But that's 60 dates late, or 30 days late. I'm wondering if you guys are seeing anything.

Yes. Generally, in the U.S., I'd say cap rates have stayed the same, maybe come down a little bit, and I think in Ireland they've come down a bit in the past couple months.

Yes. I mean, cap rates in Ireland right now for resi averaged 3.85%. And part of that is, as we've all been talking about on the call, is just the cost of debt. There's still a very big spread. And the other thing that I think is going on in Ireland, and this is on the commercial and the resi side, is you're seeing a lot of international entrance. So the whole market has changed, I mean, from when we first went there, Bill, which was all Americans going into the market. Now you see there is an office building in the docklands that's just been marketed, and you have bids at very big numbers from Italians, Germans, South Koreans. The whole market has moved on. But on the resi, back to your original question in Ireland, cap rates on average are 3.85%.

Okay. And I think you said this earlier, but REITs are pushing cap rates in a direction that you don't think it's comfortable in Seattle and elsewhere in the West Coast. You're not buying on West Coast of the U.S. right now?

Well, yes, I didn't mean to mislead anybody as far as what we're looking at doing. I mean, because of the size of our company now, we see off-market opportunities. And look, to the extent that there's a value-add component attached to it, I think that's really the key. And it's nothing earth shaking, but what we've learned in the multifamily business is the housing market ownership has declined. You have to be able to deliver product to the public, to our clients, that is highly amenitized and where there's a service element to it. And so I'm not saying we're going to buy or not buy, but even if it's an attractive cap rate, if there's a value add component that allows us to grow that cap rate to 200, 300 basis points more than we're paying over a three-year period of time, then we're interested in taking a look at it. But we're not generally, unless it's in one of these core platforms that really Matt has responsibility for running, we're obviously not buying core assets. The other thing that we continue to avail ourself of is our ability to exchange to the extent we're selling something tax deferred into a better asset. And so, we're selling a office building here in Southern California right now that we own, but we're going to exchange the proceeds and the gains from that sale into a higher quality multifamily asset here in Southern California.

All right. And finally, you might have addressed this already, but NOI's coming down faster than debt as you're pairing assets. Is there going to be a catch-up later in the year, or is that money just being reallocated into development projects?

Yes. I mean, I think if you look at the allocation of capital for the quarter, as you saw, the majority of it went into CapEx. And most of that CapEx is in the development pipeline. And as we discussed, there's $100 million of NOI coming of that development pipeline, including 30 million the next 18 to 24 months. And so, it's really a timing difference in terms of the cash flow catching up. And so, once these things are stabilized, as we talk about in our materials, we think we're going to be getting 6% to 7% unlevered returns on these assets that are class A type properties.

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

So thank you everybody for your support and your time today. And as I always say, any of us are available to talk if you've got any further follow-up questions. So thanks again.

The conference is now concluded. Thank you for attending today's presentation.