Kennedy-Wilson Holdings, Inc. (KW) Q4 2019 Earnings Report, Transcript and Summary

Good day and welcome to the Kennedy-Wilson Fourth Quarter 2019 Earnings Call and Webcast. Today’s conference is being recorded. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]I would now like to turn the conference over to Mr. 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 the reconciliation of the most directly comparable GAAP financial measure and our fourth 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 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. We are pleased to report record results for both the fourth quarter and the full year of 2019. As a result of strong execution of our strategic initiatives, I'm pleased to report that 2019 our 10th year as a public company was also our most successful year as we produced the highest annual levels of GAAP EPS, adjusted EBITDA, and adjusted net income since going public in 2009.This morning, we will discuss our progress on our key growth initiatives, our 2019 operating results, as well as review our key highlights and outlook for 2020. Our global team remains focused on executing our three strategic initiatives, growing net operating income from our properties, growing recurring fee revenue from our investment management business, and selling non-core assets.We made progress on all three fronts in 2019, and look forward to continuing this momentum in 2020. So, starting with number one, growing our property NOI. In 2019, we're able to grow our estimated annual NOI by $14 million to $421 million, despite being a net seller of assets, and reinvesting in our development pipeline.The growth was supported by strong same property results as well as progress on stabilizing our newly constructed assets. Our goal is to continue growing our property NOI meaningfully in the next three years as we focus on both organic growth through the implementation of our value add asset management program, and the completion of our construction projects and leasing initiatives.We expect to add $105 million of NOI by year-end 2023 including $34 million by the end of next year from the implementation of our construction projects and leasing initiatives. We also grow NOI through selective new property acquisitions. We completed $1.9 billion of gross acquisitions in 2019 of which KW’s share was 33%, bringing our total to 23 billion of acquisitions at cost since going public in 2009.The second initiative of growing our fee bearing capital and recurring management fees. 2019 was a strong year for our investment management business. We grew our fee bearing capital by 39% to $3 billion and also generated $79 million in investment management fees including promotes.We ended the year on a high note with the final closing of Fund VI in the U.S. at $775 million, which came in above our initial targets. This adds to the approximately $11 billion of private capital we have raised since going public.Private Capital. Thank you. We continue to see very strong global demand for commercial real estate and continue to raise capital both in the U.S. and in Europe. We have built a unique global company over the last 31 years with a proven long term track record that is drawing interest from a number of the world's major pension plans, sovereign wealth funds and insurance companies.For 2020, our goal is to raise an additional 1 billion of gross fee-bearing capital. We have already made great progress in the first two months of the year, and expect further growth in our investment management business in the first half of 2020.Number three, the sale of our non-core assets. We continue to execute our asset sale program selling non-core assets and investments, where we have completed our business plan, and can recycle capital into other higher quality assets with a higher return potential.For the quarter, we sold $511 million of assets of which our ownership was 79% .94% of our sales in Q4 were in our European portfolio where we disposed of 19 wholly-owned assets for 378 million, generating a return on cost of 38%.Our quarterly sales were focused on wholly-owned hotels and retail assets, which together now account for only 18% of our total portfolio down from 25% a year ago. For the year, we sold 1.4 billion of assets of which our ownership was 54%. Our sales were 56% in Europe and 44% in the U.S. and generated $536 million of cash to KW.On the investment front, in 2019 we deployed $503 million of our capital with 58% going to new investments, 38% into CapEx and development, and 4% into share repurchases. In 2020, we expect to generate in excess of $400 million of cash to KW from non-core assets sales, including the $130 million sale of Pioneer Point, a 294-unit multifamily assets in East London, which closed last month. These proceeds will be recycled into our development and value-add CapEx projects and used to fund new investment opportunities across our platform.The global real estate investment environment today remains strong with historically low interest rates and over $13 trillion in negative yielding global debt. Commercial real estate continues to be a highly sought after asset class.Having purchased $23 billion of assets of costs in the last ten years, we're able to leverage our global relationship network and find off-market opportunities. Over half of our Q4 transactions were sourced off-market where we transacted directly with the seller.Across all of our major markets including the Western U.S. Dublin and the U.K. we continue to see very favorable economic drivers of demand from both multifamily and office investment, including job growth, population growth, low unemployment and good university systems that continually generate a talented pool of young workers, many of whom will seek rental housing.Large U.S. technology companies continue to expand in the Pacific Northwest, Salt Lake City and Dublin, creating incremental demand for both apartments and office space. To summarize, I'm pleased with the underlying fundamentals and the long term growth prospects of our markets. We have in excess of $4 billion in purchasing power through our own balance sheet and liquidity in our comingled funds and separate accounts.Deploying this capital will enable us to continue growing both our NOI and recurring investment management fees. And we expect another great year in 2020. Now to discuss our global same-property results in more detail, I'd like to turn the call over to Matt Windisch.

Thanks, Bill. Our stabilized portfolio NOI stood at $421 million as of year-end, split roughly 50:50 between the U.S. and Europe. We're focused on growing our NOI through our strong same property results through the completion of our developments, and the lease up of our unstabilized assets, as well as through selective acquisitions.So starting with our same property results. Globally, our same property revenues were up 4.3% and our NOI was up 4.9% for the quarter. For the year, same property revenues were up 3.5% and NOI was up 4.1%.Our Western U.S. multi-family and our U.K. and Irish commercial portfolio together account for 75% of our same property portfolio. And I'd like to provide more detail on each. In the U.S. our garden style suburban apartment portfolio continues to perform well. Our two largest regions, the Pacific Northwest, and the Mountain States delivered strong results as we have seen throughout the year.In the Pacific Northwest, we had solid growth with NOI up 6.2%. This region continues the strong performance we've seen over the last few years, driven in part by the continued growth of tech companies.Amazon which opened its first office in Bellevue two years ago, now has approximately 3 million square feet, on the east side of Seattle and is reportedly looking to grow its current headcounts to 15,000 employees in Bellevue, which would be an increase of more than seven times their headcount in that submarket. It's not just Amazon that is expanding, Facebook, Microsoft, Google and Apple are also continuing to expand their presence in the region as they are similarly in Dublin, Ireland.We remain very optimistic that significant new jobs will continue to fuel the overall growth of the Pacific Northwest. We also saw continued strength in our Mountain State Department portfolio, which primarily consists of Salt Lake City, Boise and Reno. This region saw revenues increased by 7.4% the strongest growth in all of our regions. This led to NOI growth of 8.6%. We have now grown our Mountain State Department portfolio from 3600 units at the start of 2017 to almost 8500 units today, including 1300 units under development.Like the Pacific Northwest, job growth remains strong in the Mountain States. In 2019, Utah and Idaho were the top two states with the highest percentage change in job growth. Utah’s economy is booming, thanks in part to strong population growth, which grew at the fastest rate of any state in the last decade. Utah also hit its lowest unemployment rate ever at 2.3% which is the lowest rate in the country. Our Mountain State apartments currently have the lowest average monthly rate in our global portfolio, and we are confident that there is further upside both from the favorable job market and migration growth trends in this region, as well as the completion of our value add initiatives.Our U.S. multifamily team has completed approximately 2000 unit renovations in the past two years with an average cost of 11000 per unit and an average return on cost of 23%. We currently have another 2000 units that we plan to renovate over the next few years as well as numerous other amenity enhancements at our properties, the majority of which are taking place in our Pacific Northwest and Mountain State assets.In our global commercial portfolio, we completed leasing across almost 1 million square feet in Q4, leading to same store NOI growth of 4.4%. The majority of our leasing took place in our European portfolio, which accounts for over 70% of the commercial same-store pool.In Q4, our U.K. and Irish commercial same-store saw revenues increase 2.6% and NOI increase by 2.1%. We had a strong leasing quarter in Europe where we completed 47 leased transactions across 800,000 square feet and added 4.5 million of annual income.Over 2019, the team added 9.7 million of annual income completing 159 lease transactions over 2 million square feet. The biggest contributor in the quarter was 111 Buckingham Palace Road, our largest Central London U.K. office asset at over 224,000 square feet.Following the significant leasing momentum we had in Q4 and into Q1, we are on pace to bring the annual NOI for 111 Buckingham Palace Road to approximately $17 million.With that, I'd like to turn the call over to Mary Ricks.

Thanks, Matt. The second important way for us to grow our NOIs through the completion of our global developments and the lease up of our unstable portfolio, where we have over $3 billion of gross development and stabilization projects underway, and are on track to deliver $34 million of NOI by the end of next year. And in total, $105 million by year-end 2023.I'd like to provide a quick update on our near term Irish and U.S. developments. In Dublin, Clancy Quay Phase 3 has 266 units currently under development, which will make Clancy Quay the largest multifamily community in Ireland with 865 units once complete. We originally acquired Clancy back in 2013 when it had only 423 completed units, and an 8.5 acre undeveloped site.Construction of the final phase is progressing well, and we are on track to complete this development by the end of Q2, 2020. At 10 Hanover Quay, a 69,000 square foot office development adjacent to our Capital Dock campus, construction started in the quarter. We are expecting to reach practical completion in early 2021 and we've seen good, early leasing interest.And at 20 Kildare Street, 64,000 square foot office development near St. Stephen’s Green and the Shelbourne, construction started in January. We expect to reach completion in mid-2021. Office demand in Dublin remains very robust.In December, office vacancy hit 4.7%, a 20-year low for Dublin. In the U.S. our near-term development includes approximately 2600 multifamily units. This includes 558 market rate units, the majority of which are in the Mountain States and remain on track to be completed by Q1, 2021. We are also currently developing over 2000 units in our senior and affordable multifamily joint venture, vintage housing.We initially acquired vintage for $78 million in 2015 with 5500 units. In four and a half years, we’ve received all of our initial investment back and we are on pace to grow the vintage platform from 7400 stabilized units today to approximately 10,000 stabilized units in the near term.This represents 35% growth from year-end and almost 82% growth since acquisition. The completion of these projects in the U.S. and Europe will bring our global multifamily portfolio to approximately 30,000 units.We are also adding to NOI in a meaningful way through new acquisitions. We completed $946 million of acquisitions in the quarter of which our share was 45%. In the US, we acquired a Western U.S. multi-family portfolio off-market with almost 1500 units for $342 million.Our average ownership in this portfolio is 38%. We also acquired Hamilton Landing, a wholly owned 406,000 square foot office campus in Northern California, for $115 million with an initial cap rate of 6.8%.In the U.K. just outside of Greater London, we purchased The Heights, a 350,000-square-foot prime office park for $190 million in which we have a 51% ownership interest. This also had an initial cap rate of 6.8%. We have already leased 11,000 square feet of previously vacant space in the park at £34 per foot and this is more than 15% ahead of the average rent at the park at the time of acquisition.The Height and a number of our other U.K. assets are located in the South East office market where fundamentals remain strong with Grade [Ph] A vacancy at 4%. In the U.K. we saw a dramatic rebound of investment activity in the market in Q4 with £20.5 billion of investment volumes, up a significant 76% from Q3, 2019 and up 23% on Q4, 18.Turning to our investment management platform, we had a successful year where we raised capital in our commingled funds, and our separate accounts and grew our fee bearing capital by 39%. In December, we closed Fund 6 in the U.S. at $775 million bringing in a number of new high quality institutional investors.Additionally, we continue to grow our separate account business where we invest alongside our partners and acquire high quality real estate, and in many cases are able to generate mid-teen levered returns on our capital.Our Separate accounts represent 65% of our $3 billion of fee-bearing capital.With that, I'd like to hand the call back to Bill.

Thanks Mary. In 2019 of the $1.9 billion of acquisitions we completed, 90% were completed in our unconsolidated co-investment portfolio, which includes our separate accounts and comingled funds and 10% were wholly owned.Looking ahead in 2020, we will look to selectively add to our own balance sheet while also continuing to grow our unconsolidated investment portfolio. As a point of reference, when you're looking at the KW balance sheet, the $1.3 billion of unconsolidated investments represents our ownership and $8 billion in assets and joint ventures, generating $342 million of NOI, in which we have a 29% ownership interest. This is in addition to the consolidated assets our own balance sheet, which on a combined basis results in a total of $14 billion of assets under management at current value.Turning to the capital markets, in the quarter we announced, a $300 million investment by Eldridge industries, which came in the form of a convertible, preferred stock. In conjunction with this transaction, we also increased the target for our JV platform with security benefit, an affiliate of Eldridge to $1.5 billion in asset purchases. Today, we have completed $386 million of asset purchases, and look to continue growing this platform in 2020.The Eldridge transaction helped to further strengthen our balance sheet, which at year-end had $574 million of cash and $500 million of availability on our fully undrawn line of credit. During the quarter, we paid off the remaining balance of our line of credit and the $200 million term home loan relating to the 2017 acquisition of KWE.We have only a $145 million of debt maturities in 2020, which $100 million is planned to be repaid in full in April. So to summarize, we had an exceptional year in 2019 and expect 2020 to be another solid year for Kennedy Wilson. We continue to improve the quality of our portfolio, which is producing strong cash flow in growing markets, and we will remain focused in 2020 on continuing to drive growth in both our real estate portfolio and our investment management business.So with that I'd like to open it up to any questions.

We will now begin the question-and-answer session. [Operator Instructions] we will now go to our first question coming from Tony Paolone with JPMorgan. Please go ahead.

Okay, thanks. Good morning. First question just, you mentioned the $1 billion goal for raising capital. I think you mentioned was on a gross basis for 2020. How should we think about just any offsets in terms of dispositions or harvesting prior funds to get to like more of a net number?

Yes, I mean in particular we have a common goal fund in the U.S. that we are selling assets out of. And so I think you could expect somewhere in the range of three to four hundred million of equity, a third party seed bearing capital that's in essence being sold in the year. And then, as we mentioned we plan to raise in excess of $1 billion of new seed bearing.

Okay. And also as it relates to your funds in your various partners in joint ventures. Can you talk about just how the buy boxes may differ between what you're looking to buy on behalf of security benefit and that JV versus Fund VI, for instance, and maybe even AXA and Europe fund.

Yes. So I think in the U.S. side. This is Matt. I'll take that. So, if you look at our commingled fund in the U.S. It's value-add fund that has an investment period where we're targeting assets that we can buy and sell within generally three to five years and where we're trying to produce value-add type returns. And so, to the extent there are opportunities that are more transitional in nature, that bucket has a first priority on those types of opportunities.And then, if you look at some of the other separate account and joint ventures we have including the security benefit bucket. That's more of a core-to-core plus bucket with a much longer duration -- investment that they're looking at. So, it's a pretty clear delineation between the more transitional shorter-term properties and the longer term properties that we tend to finance with 10-year fixed rate financing.

And then, in Europe, Tony, our joint venture in Ireland has first right on PRS and multifamily assets. And then we have a European fund that we're currently raising, that also has first right for any commercial investments in Europe. And just one thing to note. I mean, on the transaction or on the joint venture that we have in Ireland, we have existing assets in that and a very full pipeline in terms of what we're building. So when that's completed we'll be over $2.5 billion of size which we started about a year and a half ago. So we've made really, really good progress with that joint venture with an insurance company in Ireland.

I think one thing just to add to it in all these platforms, TW is significant co-investor, so with the AXA platform it's 50/50 and security benefits, we're putting up 20% and our funds where a significant co-investor. So, we're investing in all these transactions through Kennedy-Wilson.

Okay.

And that's a good point Matt. Because I think, Tony, one last thing is all of our investors really liked that alignment. For us it's really important for us to continue that alignment with our investors.

And just my last question is, you've done well with the Mountain State strategy and it seems like a number of those markets are coming up on institutional investor radar screens. Where do you see the most opportunity right now. Whether it's geographically or by property type of investment?

Yes. I think part of the key, Tony, is that we've always tried to be early to markets where we thought there were those characteristics that I talked about in the body of the script today. And so when you think about Seattle, we started there 16 years ago. And today I don't know that we're the largest or we were certainly one of the top five largest owners of both apartments and commercial properties in that Seattle market. And the same thing was true would Salt Lake City and Boise. And so we have a very, very strong position there, I'm not saying dominant, but certainly like in the Boise market we have a dominant position there. And the same thing is true kind of secondarily in the Reno market particularly in our affordable and senior business.And when you look at the number of communities that we have on our affordable and senior business, we started with 30 communities four and a half years ago. And by the time we're done with the construction we outlined, we're going to be up to 50 communities. Those are all generally in those markets, the map what we call those Mountain State markets. So we -- the drivers, the fundamental drivers of any of these and as I've said on these calls before, the Seattle market and the Dublin market share very common characteristics and you've got that, I would call it the top 15 highly capitalized tech companies that are expanding job wise in both those markets.And then the other piece of this is that, as we've said on previous calls when you look at the state income tax rates in the State of California being 13.5% and in the State of Washington zero and in the State of Idaho roughly 4% and roughly the same in Salt Lake City. You've got this millennial population that wants, I would say a higher quality of life and also wants affordability in their housing. And so we don't see any slowdown in those characteristics over the next 10, 15 years. We think those fundamentals just continue in the same fashion that they are already have.

Okay. Thank you.

Thank you. We will move now to our next question. Our question comes from Derek Johnston with Deutsche Bank. Please go ahead.

Hi, everyone. Good morning and thank you. When we look at the $105 million NOI target by 2023. Can you discuss the trajectory of this goal? I think you mentioned $34 million by the end of 2021. But is there a good amount to assume for our models for 2020?

I think the number for 2020 is probably somewhere around $15 million to 20 million. But I think the point I really want to make in terms not to get lost in the construction is that we're also doing new acquisitions. And we have a very, very strong pipeline of acquisitions that we're looking at both here in the U.S. and in our two -- I'd say, our core market of the United Kingdom. When you think about us in Ireland, we're already there the number one or number two owner of commercial real estate there and we have as we've described a very, very big part of our development pipeline is in Ireland. And so, while the development is clearly an important component we expect to meaningfully add to the NOI over the next two or three years through acquisitions. And that capital as I outlined is basically coming out of non-core assets that we're selling at that. Nice gains. And then taking that capital and redeploying it into a longer term value-add assets that have 10 to 15 year type of rights [ph].

Excellent, Bill. Thank you. And then just segwaying into Ireland as you discussed. Is it possible for you guys to go through the dynamics and the market fundamentals in Ireland for both the office and the residential endeavors similarly to you just did for the Mountain States. Just so we can understand the mindset there? And what inning you're in as far as those endeavors ?

I'm going to let Mary give you the meta of that there, Derek. But I think that always these things need some perspective. And so without bragging, I mean, we were really first movers in Ireland starting in 2011. And so when you look at what's happened there, the 10-year bond rate in 2011 in Ireland was 14.5% and the unemployment rate was close to 16.5%. And so now you fast forward the 10-year bond rate is down near zero in Ireland as it is in many of these European countries. And the unemployment rate is its up [ph] 5% today. And the other part of this which just can't be underestimated is the great university systems that exist in Dublin, a number of them that are producing these young workers for not only the tech companies but also for the financial services companies. Our capital dock project houses JP Morgan. And when you go in and look at that space and block this space, it's really space that is geared to what they call technologies that are younger people that are being hired out of the -- really out of the university system in Ireland. In Ireland, you can go to. If you're an Irish citizen you go to school there beginning to the end of your education for free. But with that, I'd like to kind of have Mary give you a little bit more granular information on Ireland.

Yes. I mean I think -- so, when you think about Ireland for us, what's meaningful there is the PRS market and multifamily and the office market. And as Bill said, I mean, we really were first movers in Ireland. In 2012 there really wasn't a PRS market. I think we were the first buyers of PRS. We bought the alliance and simply large at that time. Transporting to today, the PRS market there was $2.4 billion of PRS deals that traded in Ireland at 2019.CBRE estimates that they're $6 billion of capital chasing PRS assets. And when you sort of think about where are we, you ask where are we in the market and the curve, it's interesting when you look at Ireland and yields were for example so on PRS, at 3.75% on average, obviously that's looking back as those are sale that have occurred.I just heard yesterday there was a deal that happened at 3.5%. And when you look at Ireland versus other big European cities, it's trading way wide of our peers. And when you think about where you can borrow, and so just the spreads on what you're buying, it's a very attractive asset class. And there is real demand.So, there is a big housing shortage in Ireland, the Central Bank has come out and said there is 34,000 residential units needed to fill that demand. And when you think about PRS, there is very little build up to the third quarter of 2019. So, and then just another staff for here, only 7% in Dublin, people or rent. It's actually in Ireland, 7% are renting apartment versus in Europe, the rest of Europe it's 41%.So, it's a really new young sort of market. And as Bill talked about all the technology companies really driving the growth in Ireland and a lot of that is young people which is a majority of the population in Ireland under 30, 25%. So, all that sort of leads to real demand for Irish multi-family. And we're trying to do our part in that in the needs of housing in Ireland right now.

And Mary, that was great and I think the other piece that I would add to what Mary just said is one of the great strengths of the Kennedy-Wilson platform is our ability to what I call share best practices across both oceans, so to speak. But if you look at what Mary and her team were able to do at Ireland, it was really taking the model of what we had created here in the United States in terms of amenitizing these properties with gyms and business centers and actually a leasing center.And those concepts really didn’t exist in prior one. So, she took and really transported that and the same thing is very true of what we're doing on the construction and development side. So, our construction team based in Ireland which handles everything that we do in Ireland and the rest of Europe and our construction teams here.They were both here yesterday for example in our headquarters office and they share best practices in terms of how to run those parts of our business. And the other part of what is great about our company is it when you look at it from an investment perspective, we're able to look at best risk adjusted returns in really global markets.And so, it gives us the framework of where we want to put our capital, whether it's our capital or our partner's capital to get the best risk-adjusted returns. So, that's it.

Interesting, and helpful. Thanks, everyone.

Thank you. We will move to our next question coming from James Feldman of Bank of America. Please go ahead.

Great, thank you. I just want to go back to your initial comments. And strong demand from Global Capital looking to invest in real-estate. You talked about the $1 billion in 2020.But just as you look longer-term, how much do you think that can grow and I guess even more importantly are you seeing signs that that capital's looking for either new regions or a shift in the types of assets whether its core value add opportunistic, just kind of what is the landscape look like today versus what you've seen historically?

Well, I would and I'd have Mary answer part of this question too. But I think the global demand for yield it is really what in part as what's driving the interest in the real-estate investment platform. And I think but the other part of it too is that the number of big players in the real-estate world just like the banking industry whatever was 10-years ago might have had 15,000 branches and it's shrinking.The number of people that can really play in these bigger asset purchases continues to get somewhat smaller. And if you look at just the two acquisitions that come to my mind that we did Mary in the fourth quarter, one was $350 million, one was a $190 million. But there are -- and in today's world to be competitive, you have to be able to move with speed.And so, the other great thing about our platform is that we do all of our, we don’t third-party really hardly, anything all of the due diligence and the asset management of our assets is all done in-house. And now having done this for 30-years together, we have an information system that is second-to-none in terms of knowing the mark the markets that we're in.So, I would say without getting in the numbers over time, our platform is going to continue to attract way more capital than we're forecasting for this year.

Yes. And the thing I would add to that is just because we're operators, we're able to attract capital that from allocators and we're real operators of real-estate. So, great example is The Heights you know that we bought just outside of London which is in the South East area of the U.K. where we go into a lot of office product over time.In very short order I think was 30-days since we closed, we did it in an 11,000 square feet deal office lease at 15% above previous passing rents. So, we just have the team in place and the knowledge and the know how to take that leasing risk in different locations and really add value, whether it'd be renovating a building, taking some leasing risk, building apartment, we're value creators through our platform.So, I think we're going to continue to attract that capital.

Mary's making a really important point here because when you think about and not belittling them because they got great businesses. But when you think about most of the investment managers, they are real locators of somebody else's capital to another real-estate operating entity.So, you got a guy that pension fund giving money to an investment banker that has or investment manager that has no operating capability who then goes and finds a real-estate investor that they allocate that capital to. So, what we do at Kennedy-Wilson really cuts out one of these steps. We're the operator, so the capital was coming to us from any of these investors.We're not going out and looking for an operator to find the investments, we are finding these investments ourselves how this network that we've developed over the last 30+ years. And we have relationships now really all over the world that allow us to find these off-market opportunities and then we take, we execute as quickly as it's reasonable all these opportunities and then we operate the assets ourselves.So, it's a really big distinction when you think about it as far as an investment management business.

Okay, thank you. That's very helpful. And then, as you think about your pipeline today, I mean do you think that either this year or just going forward and what you're watching, I mean do you see do you think you'll see more of the $350 million in larger type deals for your investment?

Well, I don’t know and I would say that we never start a year with a goal in terms of what we want to invest because we got to make sure that the we don’t want to get in some crazy mindset that we have to put money to work. And so, we're all as mindful of the fact that the only time we're going to invest money is it we think it's a good opportunity not because we have to put money to work to earn these.So, but I would say our pipeline right now, things we're looking at is is big as we've ever seen on the acquisition front. It's clearly different than it was in 2009, and '10 and '11. But it there is really good assets available as long as you can find these things yourself and in off-market types of opportunities where there isn’t as much efficiency in the market.

Is it weighted towards any region of asset class?

I would say you know what I call it lucky but we just happened to be lucky to be in I would say three. Well, I'm going to say one more thing. I think to successfully invest, you have to be in jurisdictions where there is actually transparency in terms of the financial system and where there's actually what I call "rule of law." And so, we're extremely lucky to be investors here in the United States, in the Western part of the United States and in the United Kingdom and in Ireland.And I think the third piece of that equation is that there has to be a free, the ability to freely move capital without currency restrictions or any of those sorts of things. And so, I would say that we're seeing our main investment opportunities primarily in the United Kingdom and in the markets that we've outlined in the Western United States. And that's only because in Ireland right now when you look at the amount of development that we're doing and to the properties we already own, we're very dominant player there.And then, when you look at our portfolio math, basically 50% is in the United States and 50% is in the United Kingdom and Ireland now. And that's pretty much I think which we're going to see going forward. That same percentage split.

Okay. And then, last question from me. Can you just talk about the preferred that you did with Eldridge, I know you have a relationship with them. But maybe just talk about how you think about that as compared to your other opportunities for cost-to-capital and just what the strategy is behind that?

Well, I mean I would like Matt partially answer this question but I think the clear strategy was to have alignment with an investor in our stock. And by that alignment I mean having somebody that also had a willingness and a desire to deploy capital into our invest our real-estate investment platform.And so, when you look at going back to I think 2011 when we caused the first equity investment from Fairfax Financial, and they currently own almost 13 million shares of our stock. The idea which is exactly the same as the security benefit idea was to have somebody that owned our stock and had a strong interest in seeing the company succeed that was also giving us capital to grow our investment business which allowed us to grow our recurring NOI and our investment management fees.So, it's the same concept with security benefit. And it just creates this perfect alignment. I would say that when you think back to the KWE acquisition which just happened in 2017. At that time to refresh everybody's memory, we only on 24% of that company. We bought in the public market to a very long and intricate process we bought the 76% that we did know. Including this special dividend that we pay at the close of the transaction, we now distributed over a $1 billion of cash out of that acquisition.So, it was always in these situations for us, it's trying to find the right alignment with our partners. And then, I would say Mary, the last piece of this is we like to look at things over long-term periods of time. Many of these like the security benefit relationship in as where way goes back to really our first bond offering in 2012 and obviously the Fairfax relationship where we deployed a lot of capital together it goes back to almost the beginning of time when we went public.We're doing a development project in San Francisco right now with the Takenaka Corporation and the first transaction that we did with them was in 1995. And so, it's always about creating these relationships with alignment but then keeping these relationships going for long periods of time.

Okay, great. Thank you, for your thoughts.

Thank you. [Operator Instructions] We will now go to our next question, that question comes from Alan Parsow from Elkhorn Partners. Please go ahead.

Hi Bill and Matt and everyone else. You spoke in your earlier comments about the fact that there is so much sovereign debt trading at negative ratings. And you have a 578 bond out there currently trading at about 575 yield. What are your thoughts about taking that in and refinancing that with either European low-interest debt or whatever?

Yes, good question, Alan. I mean, but really when you look at the overall cost of Kennedy-Wilson's debt, you've got to look at not only the unsecured debt but you got to look at the property level debts. And our overall cost of debt is roughly 3.5% and it has a duration of right around five years right now.And as we talked about earlier in the call, we have hardly any debt maturities this year. And then, Alan, to your point I mean the point that Mary made, we're able to borrow in Europe for basically the same duration as here in the United States at the property level between 2% and 2.5% fixed here in the United States.Actually we did a loan here in the United States yesterday at the best tenure rate we've ever done one at a 3.07% and on one of our apartment properties in Boise, Idaho. We're look we're always looking at on opportunities either I can't really get into any details about what we're thinking about doing but on this call but that we're always looking at opportunities to lower our cost of debt.And the bond markets are obviously as we all know today are not in the best of shape after the last three or four days. But the 10 year this morning was down at the lowest level that I had ever seen. I think it was at 125 this morning. Even in the credit crisis, Alan, I think the 10 year hit like 135, 140, so we're not at the lowest level that's been out. And over 10 year.So, yes it's something that we obviously keep our eye on but I can't specifically talk about what our plans are for that particular bond.

And just one thing to add --. Alan, one thing to add and in Ireland just to be clear, I mean we can borrow sub-2% in many cases on the PRS space, you are in the 1.5% kind of range. So, on property level debt, very tight.

Okay. So, with on another more another note, right now do you see the coronavirus in any way it effecting you even in your minority interest in Japan or anywhere else in any of your properties?

Well, I think to clarify one part of your question, Alan, I mean we in 2015 we sold all of our remaining interest in our Japanese assets. So, we don’t have a single dollar invested in Asia. My comment about your question on this virus is that we're taking all the expected precautions but I think for any coupe I don’t care whether it's Azure, Microsoft, or Apple or whoever it is. I mean, we're in uncharted territory here in terms of how this impacts peoples businesses.But and I'm not at all trying to minimize what's going on globally but I think you always asked whether it's a credit crisis like occurred in '08 or '09, or whether it's something like this, you have to think longer term and look past this in a positive way. But we're taking all of the expected precautions in our properties or company whatever it is. But what the outcome of all this and the duration of it is I have no idea.

Thank you.

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

Well thanks everybody for listening in and the questions and listening to what we consider to be the best year we've had in our history last year. And as always any of us are available to talk off line. So thank you very much and have a great day.

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