Kennedy-Wilson Holdings, Inc. (KW) Q1 2020 Earnings Report, Transcript and Summary

Good morning, and welcome to the Kennedy-Wilson First Quarter 2020 Earnings Conference Call and Webcast. [Operator Instructions].I would now like to turn the conference over to Daven Bhavsar, VP of Investor Relations. 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 will be 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 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 2020 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.

Daven, thanks very much, and good morning, everybody, and thank you for joining us today. I hope everybody on this call and your families are doing as well as possible during this challenging period of time. And before I discuss the highlights from the first quarter and our outstanding rent collections in April, which Mary will discuss in greater detail, I'd really like to extend my heartfelt thanks to those sacrificing their own safety and well-being to help others through this crisis, including health care workers, first responders, firefighters, police officers and many others. They are bravely providing essential services around the globe. I know you all feel this way, but they deserve our deepest gratitude and admiration.While the COVID-19 pandemic has created unprecedented challenges for all of us, I'm thankful to report that the global KW team is healthy, and our communication across all parts of the company has never been better. I'd like first to comment on what we're doing to ensure our business continues to run smoothly.As we grew our company over the past 3 decades from 1 office, 11 people and $57,000 in capital into a global real estate investment business, a hallmark of Kennedy-Wilson has been our ability to communicate across business lines. In March, we rolled out a remote global communications plan that has allowed all of our staff to work remotely for the past 2 months without missing a beat. We have daily calls with our senior management team, our asset management team, our finance and cash management team, and we've increased the frequency of our Board meetings to ensure that we are all on the same page and up-to-date on the latest global developments.In addition, we continue to be in constant dialogue with our human resources, legal, insurance, accounting, IT and communication teams, which form the backbone of our company. I'd like to express my greatest gratitude and thanks to our employees, our Board members and their families for their tremendous and tireless contributions during the past 2 months. I am very certain that what we have all gone through together will make us better people and a better company for the long term.With that, to touch on our highlights for the quarter, we produced EBITDA of $112 million and adjusted net income of $45 million. The quarter was highlighted by strong same-property NOI growth of 5% in our multifamily portfolio, continued growth in our investment management platform, further progress on our asset sales and good progress on our construction development pipeline. As it always has been at KW, today, it's all about capital allocation while preserving liquidity.In the quarter, we allocated $95 million of capital, with 42% to acquisitions, 31% to CapEx and 27% to share buybacks. On the investment side in the quarter, we were a net seller, as we have been over the last few years. We completed $199 million of acquisitions in the quarter, in which our ownership interest was 13%. We sold $331 million of real estate investments in which our ownership was 100%.The largest distribution in the quarter was Pioneer Point, our only multifamily asset in the United Kingdom. We acquired this asset as a nonperforming loan in 2015. And after we completed our value-add asset management plan, including adding 10,000 square feet of residential amenity space, we sold this 294 unit asset in February at a 3.8% cap rate, which was unlevered and returned $127 million to KW. I'm pleased to report that the strong growth we saw in our investment management platform in 2019 continued into Q1 of 2020.During the quarter, we raised an additional $300 million in fee-bearing capital, bringing our total to $3.3 billion. This is up 83% since Q4 2017. Looking ahead, given the low interest rate environment we are in globally, we currently expect our key financial partners and other investors to continue investing in high-quality real estate. As a result, this will allow us to continue growing our investment management platform.Last September, we relaunched our debt platform, where we are investing alongside our partners in unlevered debt investments secured by high-quality real estate. With going public in 2009 and primarily as a result of the great recession, we've originated or acquired over $6 billion in real estate-related debt. We typically take 5% to 10% interest in these investments and also in recurring management fees.In the last 9 months, we've completed $400 million in loan purchases, including $125 million loan investment that we completed in April, where we are a 5% investor. When you include our management fees, we are earning double-digit unlevered returns on our capital.At quarter end, we quickly turned our attention to April. Before Mary discusses April rent collections and leasing, I'd like to give you a little context on how we began two years ago preparing for this type of own model debt. Our past earnings calls have described our plan to keep higher levels of cash on hand in order to mitigate any unforeseen risks. I'm grateful to say that we started the year from a position of strength, armed with the most liquidity we've ever had in our history. We have constantly been adding to our liquidity by being a net seller these past 2 years. Since January 2018, we have sold $3.1 billion of assets, of which Kennedy-Wilson's share was $2 billion and has harvested gains of approximately $750 million to KW. These sales also included the disposal of many noncore real estate and hotel assets.More recently, our balance sheet was further strengthened by the $300 million preferred equity investment in the Eldridge Industries in October of last year. This investment coincided with the expansion of our separate account platform with Eldridge's affiliate, Security Benefit, increasing it to $1.5 billion in total asset purchase power. In that platform, we've acquired approximately $400 million of assets to date. As of the quarter end, we have $735 million worth of cash and an additional $500 million of availability on our line of credit for a total of $1.2 billion of dry powder. We also mentioned that in the middle of this volatile period, our line of credit was extended during the quarter for 4 more years with the option for fifth year while improving our pricing.When you include the $600 million of cash available within our 2 discretionary funds, we have -- currently have a total of $1.8 billion in discretionary dry powder. Additionally, we have several strategic partners who are well positioned with billions of dollars of liquidity and a strong interest in partnering with Kennedy-Wilson.Our debt maturity profile remains very favorable with $29 million maturing for the remainder of this year and $157 million maturing next year. All of our debt maturities through the next year are nonrecourse secured property-level financings. So we are in great financial position of having both ample liquidity and limited debt maturities.As you may know, we have always maintained a diversified real estate portfolio, both by geography and by product type, which is dominated by multifamily and office.To provide you an update on where we stand on rent collections in April and on our commercial leasing activities, I'd like to turn the call over to our President, Mary Ricks.

Thanks, Bill. I'd like to start by echoing your sentiments, and thank you to all of our employees and hope everyone on the call and your families are doing well. As Bill mentioned, our 2 largest asset classes globally are multifamily and office, which together account for 80% of our estimated annual NOI and 87% of our April rents. Our multifamily portfolio totaled 30,000 units globally and consists of high-quality communities, where we have enhanced our resident experience through offering a variety of tenant amenities.As of quarter end, average rents totaled $1,660, and our portfolio was 95% occupied, close to all-time highs and putting us on solid ground going into April. Our on-site management teams have performed very well during this difficult time. And as a result, I'm happy to report that multifamily rent collections in April totaled 97%. In our market rate portfolio, the U.S. saw rent collections of 97% and in Ireland, we saw rent collections of 99%. And in our vintage housing, senior and affordable apartment portfolio, we saw rent collections of 98%. Thus, across the board, we saw extremely high rent collection levels in April and have a very good start in May.Our office portfolio globally was 93% occupied as of quarter end, with a weighted average lease term of 6.2 years. Our top 20 office tenants include strong credit quality companies like Costco, Microsoft, Google, KPMG, State Street, the Bank of Ireland, Indeed and the U.K. and Italian governments to name a few. I am pleased to report that we collected 98% of April rent from our top 20 tenants, and in total, global office rent collections in April were 97%. Looking regionally, in the U.S., office rent collections were at 97%. Our top 20 office tenants account for 76% of the portfolio, and we collected 98% of variable rent. In Europe, we collected 97% of our office rents. Our top 20 tenants in Europe account for 76% of our portfolio and rent collection for the top 20 was at 98%. We're very proud of our office tenant base and fortunate to have large creditworthy tenants on long-term leases.The April rent due from our retail portfolio totaled $4.7 million. We have collected 49% with $2.4 million outstanding. We expect smaller retail tenants to eventually utilize the various government relief programs that are available to them and therefore, expect moderate increases in the retail collection figures. Finally, we have a small industrial portfolio in the U.K. with $860,000 of rent due in April, of which we have $240,000 outstanding. So across our retail and industrial portfolio, we have only $2.6 million of rent outstanding in April.In total, we collected 91% of our share of rents due in April across our global portfolio. And as we look ahead, I'd like to note that the majority of our European office tenants pay their rents quarterly in advance in April. Thus, much of our rent collections in April gave us a head start in collecting May and June rents. I'd also like to touch on our robust leasing activity. We continue to see encouraging leasing data as we pursue and complete lease extensions and renewals across our commercial portfolio. Our office portfolio continues to be well positioned to retain our existing tenants and attract new companies looking for high-quality space and well-located assets, priced attractively given that corporates continue to be mindful of occupancy costs. This is proved out even today with the leasing activity throughout our portfolio.Globally, we've completed lease extensions, reviews and renewals,on 60 commercial lease transactions across 493,000 square feet so far this year, which includes 83,000 square feet in April. These lease transactions had a weighted average lease term of 6.6 years and resulted in incremental income of $6.8 million.We have another 450,000 square feet in legals, currently across 51 lease transactions. And thus, many of our tenants are looking to secure their long-term space requirements. And again, a very encouraging sign for the strength of our tenants and for the long-term confidence in our assets. In our U.S. multifamily portfolio, we have been rolling out new technology for prospective tenants, allowing them to take virtual tours of our assets and apply and sign leases online. By the end of next week, 100% of our U.S. market rate portfolio will have this capability as well as our largest Irish multifamily communities with plans to roll out to 100% of our Irish properties by the end of June. We completed 808 new leases in our U.S. multifamily portfolio in April, a 6% increase from April 2019. 94% of these leases were completed virtually. And so we have seen promising early traction in this exciting new virtual technology.With that, I'd like to turn the call back over to Bill.

Thanks, Mary. Now I'd like to update you on our major construction initiatives with a focus on our near-term projects. Most of the equity for lease construction projects has been fully funded already by Kennedy-Wilson. Our development and leasing initiatives are currently expected to be completed by 2024 and include 5,000 multifamily units, 2.9 million square -- commercial square feet and 1 hotel. Virtually all of our major construction projects are 50-50 joint ventures with our strategic capital partners. And in total, we enjoy a 60% ownership in our development and leasing portfolio.We expect to spend only $20 million of cash for our CapEx commitments in Q2 and approximately $50 million to $75 million for the remainder of 2020. As it relates to our developments in Dublin, we currently expect construction to reopen later this month. Soon thereafter, we will finish Clancy Quay Phase 3, which totals 266 units, which is on track to be completed by the end of June. We originally acquired Clancy in 2013, which at the time had 423 developed Phase 1 units and 8.5 acres of undeveloped land. Phases 1 and 2, which are now complete, are currently 97% occupied. And we are excited to finish the final phase, which will make it the largest apartment community in all of Ireland, with a total of 865 units.The two Dublin office construction projects, Hanover Quay and Kildare total 133,000 square feet. We are currently on track to finish the construction next year. The 3 remaining Irish projects, the Grange, Coopers Crossing and Leisureplex are all longer-term developments, we expect to complete in 2024.In the U.S., we continue to make progress on all of our developments at Santa Rosa in Northern California and Rosewood, River Pointe and Clara, Boise, Idaho, which together total 558 units. Construction has continued with minimal disruption. The completion date for Santa Rosa and Rosewood is the third quarter of 2020, and the completion date for Clara is Q1 of 2021.We're also making great progress on our vintage housing developments, where we acquired 3 new land sites in the quarter and currently have 1,800 units under construction or in lease-up with another 800 units in the pipeline. In total, we are adding 2,600 units to the existing 7,400 units as we are on track to grow the platform to 10,000 stabilized units by the end of 2022, representing an increase of 82% since we acquired the portfolio in 2015.Looking ahead, I'd like to put this crisis in context of what we've experienced these last 42 years at Kennedy-Wilson. The current crisis marks the sixth major economic corrections that I've gone through in my career, starting with 1980 to '83 period, which had a 21% prime interest rate and high inflation, the 1990 to 1993 savings and loan crisis, the 2000 collapse of the dot-com bubble, the economic fallout from the tragic events of September 11, 2001, and of course, the most recent, the great recession.In each of these moments, Kennedy-Wilson mobilized. In 1994, we opened the first Kennedy-Wilson office in Japan that ultimately led to the IPO of Kennedy-Wilson, Japan on the Tokyo Stock Exchange in 2002. In 2000, we launched our fund and management business. And during the great recession, we went public on the NYSE. A year later, we entered Europe for the first time, which led to our $1.7 billion IPO in 2014, the second largest real estate IPO in the history of London Stock Exchange. And after the dislocation caused by Brexit in the summer of 2016, we acquired the remaining 76% of Kennedy-Wilson that we did not already own, that closed in October of 2017.But we all know that each crisis has a beginning and eventually an end. While the timing is currently difficult to predict, this one will be no different. Challenging times is extremely important that you have 4 key components: long recurring cash flow; excess liquidity, strong joint venture partners; and the same team of people that have been successfully working together over a long period of time.Today, I'm grateful to say we have all 4. We have a very high-quality real estate portfolio with best-in-class developments that we will finish over the next 4 years. We have the most liquidity we've had since going public, and we have very well capitalized partners alongside us who themselves have significant liquidity. We have a senior management team that has decades of experience working together through many cycles and the team has a proven track record of investing during periods of opportunity.We also continue to benefit from having the leadership of our Board of Directors. The most recent addition to our Board was Todd Boehly, who joined in March, Todd is Co-Founder and Chairman of Eldridge Industries, a diversified investment company with assets under management of $40 billion. I'm honored to have Todd on our Board, where we are able to tap his extensive experience and knowledge.While 2020 will undoubtedly present unknown challenges, I believe we are well positioned financially, while at the same time, we also plan to leverage our extensive experience and deal sourcing relationship network into uncovering new opportunities.Kennedy-Wilson team is ready for any challenge, and I'm confident that together we'll emerge out of this a stronger company.So with that, Daven, I'd like to open it up to any questions.

[Operator Instructions]. First question today comes from Anthony Paolone with JPMorgan.

My first question -- just bigger picture, given your track record and everything you all have seen over the years, what's your thought process on where cap rates go or what change in property values look like coming out of this?

Yes. Well, I think before I answer that question directly, I've got to kind of frame at least where we see the company, and then I'll get to your question. I would start by saying that we're early in this whole process. I mean I think anybody that is an investor is early in this process because as everybody knows this whole pandemic, this location only started two months ago. And so there's always a lag time between when opportunities show up and when you're actually ready to invest.And when you think about what happened during the great recession, when we went to starting in Ireland, we made our first trip there in 2010, and it was 10 months later that we made our first investment there. But what I would say is that when you think about Kennedy-Wilson, we're in a very, very different spot today than we were at during the great recession in the following sense. We have more of our own liquidity, as I already went through, than we had back then.And we had many more capital partners, but a lot of those capital partners during that period of time actually had their own financial issues. And so we had to spend a lot of time cultivating new third-party financial partners and create deal flow. And at the core of our operation has always been the extensive relationships that we have with financial institutions all over the world that we've worked on for 30-plus years, whether it's here in the United States or in Europe over the last 10 years or in Japan, as I mentioned.And I think that what you would -- I believe what you would hear from most of the financial institutions that we do business with is it we're extremely reliable counterparty. In other words, we do exactly what we say we're going to do.And the last thing I would say before I answer your question is that the people that we have in the company now have all gone through the exact management team that we have today, all went through the experience of going through the great recession, whether it was in the United States or in Europe. And so you can't discount what experience means in this period of time.I think as far as -- and I've said this on calls now, I think, at least for the last couple of years, Tony, that having a perspective of a global investment platform and having been in Japan now for over close to 30 years, I believe that we were going to stay in actually an ultra-low interest rate environment for a long period of time before these events that happened in the last 2 months. And so when you look at the various asset classes that people will invest in over a long period of time, not looking at one stretch of 90 days or 6 months, you're going to have -- in my tenure, you're going to have low interest rates that ultimately are going to be followed by lower cap rates. And so -- but there's going to be a period of time here where, as everybody well knows, the banks have taken major reserves. And so there's going to be a period of time here where there's a dislocation in the process, which is -- although I'm sensitive, extremely sensitive to this one, that's what will create the opportunities out of the financial institutions. But I believe long term, rates are going to stay low and cap rates are going to stay low.And there -- at this time, there's still -- even with all of the, I would say terrible economic news that we see coming from every direction, there's still a lot of liquidity and a strong desire for people to invest in real estate. I think one of the things that we've really should have said, in addition to our internal communication, we've been very outward reaching in the last 2 months, whether that's been to our shareholder base, or to our partners. And we've been in constant communication with our major partners, assessing with them where we see things going directionally.I would tell you that all of our partners that we did business with, and when you really look through all of our platforms, it's not just the insurance companies that we have separate account partners, we've got major household names in both of our funds that have separate account capability. So -- but you've got to be patient during these period of times. You can't just start jumping into the market. So I hope I answered that question. It was long-winded, but I wanted to give you a little background. But specifically, I think you're going to see over the longer term, with low interest rates, you're going to see cap rate compression.

The next question comes from Sheila McGrath with Evercore.

I wanted to get a little bit more information on the Pioneer Point disposition. Because you did mention that you do see some loan investment opportunities. If you can just remind us, I think that was a loan investment opportunity loan to own? How that ended up in terms of the IRR to Kennedy-Wilson?

All right. Mary, do you want to take Sheila and everyone through the history on that transaction?

Sure. Sheila, so that deal came from -- we bought that from a German bank, and you were right to remember that, that was a loan deal. That was really in the period in Europe where we were buying a lot of debt. And that was a deal that we did off market. German bank had to get rid of the asset. That asset, it's 2 towers, 1 was completely closed at the time and 1 was just partially rented. And so what we did is we took title to the asset, which was somewhat complex, but I think, as you know, much of our team has a lot of background and have been lenders in the past. So in terms of an opportunity set, in terms of buying debt and then taking title to the real estate, that's something that we know how to do.And so we took title to the real estate and then we went ahead and opened the other tower, did whatever improvements we needed to do and put a whole amenity block on the ground floor, which is kind of a KW signature, make sure we're offering sort of best-in-class multifamily and a little bit unique to the U.K. and really European multifamily asset class.So we put all of our amenities in place and then went ahead and did a lease up, and we let it up very, very well, and the team did a great job. And it was stabilized, and we sold it on. And I think the next buyer will do well as well. So it's a really good asset.The IRR -- Yes, I mean you saw the low cap rate. I mean I think the IRR would have to have been in the probably mid-20s, I'd have to get back to you on the specific number. But it was an excellent return for KW.

Okay. Great. And I just wondered, Bill, maybe you could comment on your bigger picture thoughts on the office sector with everybody home right now? And any update on WeWork as far as paying rent and the plans at your London property?

Yes. Yes. I'm going to let Mary talk about WeWork, which is a very, very small part of our office portfolio in a second. But as far as the office is concerned, and there's obviously a lot of discussion going on that now that everybody is working remotely that you're going to see a diminished need for office space. And having -- I listened to all of that Sheila in 2000, when the tech bubble happened. What was going on in the tech world at that time, including the big accounting firms, I remember like yesterday, they were all talking about how they were going to all work remotely.And I think the two social things that relate to office space that can't be underestimated is the need for human contact and the fact that it's -- logistically, it's not easy to work at home when you've got other distractions. And I know in our own company, one of the things that we've had to be sensitive to in this period of time is that we've got a lot of younger families in the company that all have younger kids at home and now aren't going to school. And so that presents its own set of distractions and then finding a place that you can actually work in your house. And so my belief is that there'll be little bit of a -- I would say there'll be extended discussions of this topic, but I think over the long term, it's really not going to amount to anything.And I do think that there has also not been a tremendous amount of office overbuilding in the markets that we're in. And so I don't see any -- over the long term, I don't see any reduction in the amount of office space that people are going to have. People for the last, I'd say, 5 years, maybe longer, have been reconfiguring their space into more open spaces with less emphasis on the private office functions. And I don't see that changing at all, while respecting all the things that we're all going to have to expect when we go back to work. I think for a period of time, most companies are going to leave it to the individual employees to decide in their own mind what they want to do as far as the office or working remotely, and we're obviously going to have to respect the whole new social distancing issues. But long term, I think that the office market is going to be just fine in the good markets.And I would say, Sheila, too before I turn it to Mary, that the other big difference in our company is that we weren't establishing a lot of the markets that we're in today when you think back even to the great recession. We now have extensive platform all throughout the Western United States, which didn't exist, and we didn't have either of the platforms in the United Kingdom or Ireland when the great recession started.But as it relates to WeWork, when you think about our apartment business of 30,000 units and just choose 1,000 square feet, including the common areas, plus our office space, we have 50 million square feet of space that's occupied by somebody. And in the WeWork, Mary, I think when you look at it in totality, there are less than -- our share is probably less than 100,000, 200,000 square feet, isn't it?

Yes. It's a couple of hundred thousand square feet. It represents just about 2% of our income, so it's very small. And then the other thing I would add is, honestly, they have some of our best space. I mean, 400 Cal in San Francisco, we only own 10% of that asset. That's one of the best located and one of the best built out assets. That is fully occupied by an enterprise tenant for WeWork. And then Sheila, you referenced the office building that WeWork is taking in London, which is in the Southbank submarket, which is one of the best-performing tightest markets in all of London in the city, it's less than 5% vacancy. Rents have increased significantly over the past 3 years. If you recall, we got that asset. That was actually another loan-to-own type transaction that we did in London. Our basis is very low in that asset.And actually, London and in particular in Southbank, that is one of WeWork's best-performing submarkets. But they're right now working on the construction on that asset, and they plan to be in by later this year.

And Sheila -- Mary, they also paid 100% of the rent in April, too. Is that correct?

Fully paid. Correct.

On all their locations?

Correct.

[Operator Instructions]. The next question comes from Tom Hennessy with Deutsche Bank.

My question is in reference, I guess, to raising new fee-bearing capital, and you've been on pace for -- you've been doing about $1 billion-plus a year. I mean, in a recessionary environment, sometimes it gets tough to do that. Do you anticipate any challenges with that? Or is it the opposite, the reputation you guys have had for special situations investing essentially could make it -- make you get new partners or adding additional capital from other partners?

Yes. Yes. I think you have to frame that one. Currently, well, obviously, in this world today, everything is in flux. I can tell you that we have had many inbounds from capital partners that we have never done business with and from our existing people that we already do business with or existing companies that we do business with. And so on the assumption that there are opportunities out there, I see us quite significantly growing the fee-bearing capital during the next 2 years on the assumption that there's going to be opportunities here that makes sense to invest in. But like we've always said, at Kennedy-Wilson, we never feel like we're under any pressure to invest money unless it's the right opportunity. So that would be the key thing. The money is clearly available to us. There has to be the right opportunity.

That makes a ton of sense. I guess just a follow-up on that [indiscernible]. I mean -- and you had mentioned with Ireland and waiting 10 months before your -- you made a jump in there. But I mean, with what we have here, it seems right for obvious dislocations in close to near term. I mean do you anticipate being more of a net buyer in 2020?

It depends on what the opportunity set is. I'm not trying to sidestep it, but in every cycle, generally, the initial opportunities tend to be debt purchases, even like the one that Mary just described at Pioneer Point. And when you think about some of the assets that we continue to own today in Europe, we acquired those through debt acquisitions. And there's really two types of debt acquisitions that we've done historically, really, I guess, three, a modest amount of our own origination and then we would buy debt basically to collect the principal amount. And then there was, as Sheila, I think, mentioned, the debt that you buy this a loan to own.And especially in Europe, where there's a receivership system that people don't pay their interest, basically, it goes into receivership and the receivers are then tasked with selling the asset. That tends to happen pretty quickly. In the United States, as we all know, there's many different protections that borrowers can seek. But the first opportunities we believe that will surface in this cycle are going to be on the debt side as it takes longer for the equity ownership to go through the system.So the fee-bearing capital will definitely grow assuming -- under the assumption underlying that 10x that there are investment opportunities that make sense. We have it available to us. We just need to be smart enough to find places to put it safely and with good risk-adjusted returns.

The next question comes from Jamie Feldman with Bank of America Merrill Lynch.

I just wanted to get your thoughts on leverage levels. And if you think about your liquidity, you did draw on your line and then you have some of that -- a lot of that liquidity is still on the credit line. Just how do you think about how high you'd be willing to take leverage if you found opportunities? And what are the governors you think about from that perspective?

Yes. Yes. Okay. So Matt, I'm going to punt that question to Matt Windish.

Sure. Yes. So if you look at our leverage levels, we're definitely comfortable with where they are today. I'd note that over the past two years, we've reduced leverage. On our consolidated debt, we're down 20% over the last two years. Our net debt has come down by 10% over that same period of time. And then if you look at what we did towards the latter half of last year, we raised $300 million of preferred equity, used the proceeds to pay down debt. And we have less than 4% of our debt maturing in the next two years, all of that being nonrecourse.And as Bill mentioned in his remarks, we have the highest levels of liquidity we've ever had as a company. So we feel very comfortable with the debt position. We think that some of the opportunities that present themselves, particularly in the debt space that may come over the next several quarters, we're likely to do that on an unlevered basis as we typically have. And we certainly have enough liquidity within the business and with our capital partners to acquire assets to the extent there are good opportunities, and doing that in a way where we're not increasing leverage at the business.So I guess to sum it up, we're very comfortable with our leverage and liquidity levels. And we certainly don't see the leverage levels going up as we invest capital over the next couple of years.

Do you have like a high end of where you'd be comfortable operating?

I think where we're at now is the highest we're going to go.

Okay. So you wouldn't want to take leverage any higher than when you are today?

Correct.

Correct.

Okay. And then as you think about the unstabilized portfolio and the development portfolio, do you think you need to push out any of the stabilization dates or kind of fully leased development, fully leased dates based on potential leasing delays or even construction delays? Do you feel pretty confident on your original underwriting?

Well, we do -- in the multifamily side, particularly, I mean, we had, as I said, in the U.S., basically, there wasn't much disruption in Northern California, Santa Rosa and Boise and the vintage assets, they're -- we were allowed to continue to work on-site during the last couple of months. And now as you all know, many of the states in the Western United States, Utah and other places, they're starting to actually reopen everything. So we don't see any big timing differences in the U.S.In Europe, in the United Kingdom and Ireland, of course, they shut the sites. Now Ireland has announced that they're going to allow reopening of the construction sites on the 18th of May,with all of the new guidelines in terms of work distancing and safety and all of that.So Clancy, that I mentioned to you, which is one of the largest projects we've ever undertaken, that's going to be completely finished at the end of June. It's really basically finished now. We just have to move in. In Ireland, you rent your apartments fully furnished. We just have to move the furniture and finish the exterior landscaping. And so we'll see how the leasing goes. We don't have any crystal ball on that. But I think that the thing that has been extremely encouraging is the stat that Mary pointed out earlier in the call about the virtual leasing and the success of the virtual leasing. That has been a real eye opener to us, to do 800 leases in the month of April, and 94% of those being done virtually and having that be up 6% over what it was in April of 2019 is quite a compelling statistic.The only property that we wanted to take extra time to make sure that we had correct. It was the hotel property that we have in the United States with a 50-50 venture with a very strong capital partner. And that related really to 2 things. It didn't relate to the pandemic at all. It related to the fact that we wanted to make sure that we had every single cost buttoned down and we wanted to get our construction loan in place before we undertook the lion's share of the development. And that construction loan that we did close in March. And so we're up and running right now. But we intentionally moved that out by almost a year. But everything else is progressing on time and on budget.I mentioned the 3 big projects that we're doing in Ireland that aren't yet completed, they are under construction. They're in the process of -- what we're doing there is all the architectural and design work and enabling work. But 2 of those are multifamily projects, actually, 3 of them, the Grange and Coopers Crossing are the 2 biggest ones. And those are both joint venture partners with -- joint venture deals with a major, major insurance company that's based in Europe. And then the last piece is the office that we're doing, it's also a 50-50 venture with a well-capitalized partner.But those three will be more in the 2024 range. But a big, big part of the construction pipeline are these multifamily assets, both the market rate and the vintage assets that are all running right on time with the one little delay that we've had in Ireland on Clancy.

Okay. And then you've got a pretty unique market footprint with kind of the West Coast focus and Mountain State focus. If you see disruption in other parts of the U.S., either on the apartment or resident -- or commercial side, I mean would you be willing to go to like a New York or some of these other East Coast markets? Or are you still going to concentrate around your current footprint?

Look, I never like to say never, but I think it's unlikely. The markets that we're in we have deep embedded relationships, both on the, I would call, the acquisition capabilities front and also on the asset management front with all of our own teams on the ground. And the key -- a very big key in these types of endeavors is to make sure that you've got the same team of people that are doing the same work every day. And you just can't underestimate how important that is in a time like we're in, in a time where you're going to invest, hopefully, the kind of money that we're planning on.So I think the markets that we have our footprint in, which is basically the Western United States, west of the Rockies and the United Kingdom and Ireland is where we're going to spend our time, I would say that we've been a, lack of better way to put it, we've been a pioneer on the West Coast in going to markets well before they became, I would say, came on the radar screen for institutional investors. And so we have a big platform now in the Rocky Mountain states, that Seattle, Boise, Salt Lake City and so on, and Denver. And we've gone into some other smaller markets on the West Coast here in the last 12 months. So there's plenty of opportunities in the markets that we already have a footprint in. So to answer your question, I think it's unlikely we go out of that. But we have to see what the opportunity set is.

Okay. And then finally, you had some decent tech exposure in the portfolio. Just from the office side, any anecdotes of conversations that you're having with your larger office tenants in terms of how they may be changing their space planning or needs?

Yes. I think it's what I said earlier, I think it was answering Sheila's question that sure, there'll be a lot of discussion around it for a period of time. And then as things over the next 12 to 24 months or longer get back to a normal, whatever the new normal is, I think you're not going to see any significant changes. We're very, very fortunate that we have high-quality credit tenants in our properties. And so -- and some of the tenants, obviously, the tech tenants that we have, which are the dominant tenants in clearly the Seattle market, the San Francisco market and in Dublin are actually no news to anybody on this call. I mean they're all doing well, the Googles, the Microsofts and so on. So over the longer term, I don't, Mary, see any significant change. And there may be changes in how people can reconfigure their space.

Right.

And I think the other part of this, too, which always happens is that there won't be any availability of construction lending for new office space for the near term, for the next 24 to 36 months. And so that has this way of self-correcting any supply issues. But Mary, I don't...

Yes, Bill, what I was going to say is, we're hearing from a lot of our tenants, I think our portfolio plays really well in terms of the new normal, if you will. And obviously, the return to work takes significant planning, especially in how sort of work environments are configured. As Bill said, you have to facilitate social distancing, enhanced cleaning, when we ingress and egress, hands-free technology, those kinds of things. And I think with the way our properties, we don't have 50-story high rises where people have to queue to take elevators. We have more of a low-rise type office product, which I think plays itself very well to tenants' needs today.And we're hearing from a lot of our tenants right now that want to take more space because they just -- they want to spread their people out. So I think it's going to be interesting, and I think our portfolio will do very, very well with these new normals.

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

Well, as I always say on these calls, we appreciate your support. We thank you for your interest in the company and I would say on this call, as I close it out, I wish everybody and your families with good health and safety. And we'll talk soon. So thank you very much.

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.