Kennedy-Wilson Holdings, Inc. (KW) Q4 2020 Earnings Report, Transcript and Summary

Good day and welcome to the Kennedy-Wilson Fourth Quarter 2020 Earnings Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Daven Bhavsar, Vice President 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, 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 the reconciliation of the most directly comparable GAAP financial measure and our fourth 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 the 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 thank you. Good morning, everybody and thank you, as always, for joining this call today. Yesterday, we reported a record quarter of financial results, which caps off a year of tremendous resilience while adapting to a new environment as we grew the company in a meaningful way. I am extremely proud of our global team’s accomplishments in 2020 that not only advanced our strategic initiatives and our core businesses during a year of uncertainty, but it also positions us for growth in the future. We ended the year with a record $1 billion in cash, which we will deploy across our investment platforms into assets, which produce solid risk-adjusted returns. We are currently evaluating or completing a tremendous pipeline of new transactions for our market rate multifamily and vintage housing portfolios in the U.S., our industrial portfolio in the UK as well as debt origination opportunities and office acquisitions for our separate account and fund management businesses. We expect a very active acquisition year in 2021 as we grow both our net operating income and our fee streams. Through the expansion of our new partnerships, we successfully grew our investment management platform and our fee-bearing capital throughout 2020, which reached $3.9 billion in the quarter, representing a 30% growth in the year. The growth was a direct result of deploying capital through our debt platform and our new urban logistics joint venture with GIC, which launched in December. Our operational performance across our largely suburban multifamily and office portfolio was strong as we maintained high occupancy and continued strong rent collections across our global portfolio, with 95% of rents collected in Q4 and 96% overall for 2020. Finally, we delivered very attractive returns across our dispositions. As we saw a strong pickup in transactional activity, we resumed our asset recycling program in a meaningful way in Q4. We completed approximately $800 million in gross dispositions in the quarter, generating gains on sale of approximately $300 million to KW. We also completed $400 million of new investments in Q4. And thus far, in 2021, as I mentioned, our acquisition pipeline is very strong. Looking at our financial results, in Q4, we produced a record quarter of earnings with GAAP EPS of $1.21 per share, adjusted EBITDA of $347 million and adjusted net income of $223 million. For the year, we produced GAAP EPS of $0.66 per share, adjusted EBITDA of $608 million, and adjusted net income of $307 million. As a result of the dispositions in Q4, as I mentioned, our liquidity position grew to $1 billion in cash, with $300 million of availability on our line of credit. Our cash position has now doubled since the end of 2018, while our total assets have remained constant. We also continue to use our buyback authorization opportunistically in Q4. In 2020, the company returned $185 million to shareholders in the form of dividends and share repurchases or approximately $1.31 per share. Post quarter end, we took advantage of the strength in the bond market to improve our overall cost of debt and maturity profile. We completed the issuance of $1 billion of unsecured bonds in two separate tranches with $500 million maturing in 8 years and $500 million in 10 years. In total, this issuance had an average weighted interest rate of 4.875% and a weighted average maturity of 9 years. The proceeds were used to payoff the majority of our existing 5.875% unsecured bonds due in 2024. As a result, we extended the duration of our bonds by 6 years. And with a 100 basis point improvement in rates, we will achieve an annual savings of $10 million in interest. In 2021, we have less than 2% of our debt maturing, which is all property level secured debt, which we anticipate refinancing. Thus, our improved debt profile, together with our record liquidity, puts us in a very strong position to continue growing our businesses. One of our key initiatives is to strategically grow our investment management business, which we accomplished in 2020, largely through launching two new platforms: first, in May, we launched a new $2 billion debt platform focused on loans secured by high-quality real estate in our existing U.S. markets with strong sponsorship and with average loan sizes of $55 million. We grew our debt platform by 7%, which now totals $788 million. We have an 11% ownership in this platform, which between the interest rates and fees, is generating double-digit unlevered returns to KW. Secondly, we launched a new $1 billion urban logistics platform with GIC, Singapore’s sovereign Wealth Fund, focused on opportunities in the UK with the potential to expand into Ireland and Spain. This joint venture was seeded with an existing $220 million portfolio across 18 assets with prime locations in the UK. Kennedy-Wilson has a 20% interest in this new platform. As a result of these two new platforms, our fee-bearing capital, as I mentioned, grew by 30%. Our loan platform is well on track to surpass $1 billion shortly, and we see the opportunity to grow our new logistics platform as rapidly accelerating e-commerce and the changing needs of consumers strengthen the need for urban logistics sites closer to the end consumer. Across all of our various platforms, we have a robust pipeline of over $500 million of opportunities that we expect to close in 2021. Our fee-bearing capital has more than doubled since the beginning of 2018. Given the additional capacity we have in our announced platforms, we have the potential to add $2.2 billion of incremental fee-bearing capital for the existing $3.9 billion. We are very focused on growing our recurring NOI from our property portfolio and growing our fee streams. So with that, I would like to turn it over to Mary Ricks.

Thanks, Bill. Q4 portfolio rent collections remain very strong and outperformed the market, with 98% of rents collected across our global office and multifamily properties, which, together, accounts for 81% of our stabilized portfolio. I’m pleased to report that across all assets, we collected 96% of our rents in 2020. In our multifamily portfolio, occupancy remained solid at 95.2% compared to 94.4% at the end of 2019. Suburban assets account for 88% of our multifamily NOI and our average monthly rent stood at $1,684 per month. We added another 880 multifamily units to our Mountain State portfolio in the U.S. in Q4, through an off-market acquisition, showing our sourcing capabilities in a challenging market. The Mountain State market, where we were an early investor, is now our largest region, accounting for nearly half of our U.S. market rate units. We have approximately 9,400 units, including 574 units under development in the Mountain States today. According to estimates released by the U.S. Census Bureau, Idaho, Arizona, Nevada and Utah were the top 4 states in population growth in 2020. These trends are positively impacting our Mountain State results, which had a strong quarter with same-property revenue up 3% and NOI up 3.5%, resulting in approximately 5% revenue and NOI growth for 2020. It’s worth noting that over the last 15 months, we’ve acquired assets in new markets, including Phoenix, Albuquerque and Colorado Springs, and we continue to evaluate attractive new opportunities to grow our portfolio in this region. On the disposition side, we sold Club Palisades in the state of Washington for $175 million. We originally acquired this property back in 2011 for $68 million. And since then, we implemented our value-add asset management program, including interior renovations and enhancements of all the tenant amenities. In total, NOI increased by 88% during our ownership and the sale realized an impressive gain of $76 million. In Dublin, rent collections remained very high at over 99% in Q4. Multifamily occupancy in Dublin stood at 91.3%, slightly down from Q3 as a result of move-outs mostly related to foreign workers moving back to their home countries when the pandemic started as employers allowed working from home. Encouragingly, occupancy has increased from the November lows. We have seen this positive momentum continue through February as prospective residents aim to upgrade to our highly amenitized professionally managed apartments. We believe our unique offering will continue to be attractive in a post-COVID world as apartment completions of approximately 2,000 to 3,000 units per year are well short of the 4,500 units needed annually to address the structural shortage of apartments in Dublin. This is best demonstrated at Plan CT Phase 3 where leasing at the end of Q4 was ahead of our budget, and we are now 50% leased. And we look forward to continuing to provide this much needed housing in Dublin. Turning to our global office portfolio, occupancy remained stable at 94.2% at the end of the year compared to 95.2% at the end of 2019. Our top office tenants include Costco, Microsoft, KPMG, State Street, Indeed and the UK and Italian governments to name a few. And overall, our stabilized office portfolio has an attractive weighted average lease term of 6.5 years to expiration. For the quarter, rent collections continue to remain very strong as we once again collected 98% of our office rents. And so far, rent collections in Q1 have remained on track. On the disposition side, as we discussed on our last call, we sold Baggot Plaza in Dublin during the quarter. The sale of this unlevered asset generated cash of $165 million, a gain of $85 million and demonstrates the strong demand for quality office product from institutional capital. Globally, we saw strong leasing activity and completed new leases and lease extensions across 655,000 commercial square feet, which brings our 2020 total to 2.6 million square feet of commercial leasing with a walt of 5.7 years. As a reminder, 98% of the NOI in our office portfolio comes from low and mid-rise properties, and 74% of our NOI is generated from buildings that are either occupied predominantly by a single-tenant or in an office park. In the U.S., the largest office deals that we completed in Q4 exemplified demand for these low rise office flex spaces for both renewals and new tenants looking for space in our suburban locations. We’ve seen a growing focus on dropping regional or local hubs where people can continue to connect, use facilities and work collaboratively with colleagues and clients when required. As an example of this hub-and-spoke model momentum, we are seeing accounting and financial firms reserving suburban space to reduce commuting and provide resources to those outside the city center. While it is too early to tell the final outcome, we’re starting to see some evidence of firms providing their employees with flexibility in both ours and choice of office location, and we feel our low-rise suburban office portfolio is positioned to benefit from this. As companies begin to look beyond COVID our leasing activity remains strong with over 400,000 square feet in our pipeline at the end of Q4. We are working hard to close these lease transactions in the first half of this year. And we’ve already completed 12 lease transactions, adding $1.4 million of incremental income to KW in 2021. So we are off to a good start. And with that, I would like to turn the call back to Bill.

Thank you, Mary. I would now like to discuss our development and lease-up portfolio, which includes 4,400 multifamily units, 2.6 million commercial square feet and 1 hotel. The completion of these initiatives is an important near-term strategic focus for us as we build new product to achieve higher unlevered returns than can be achieved from buying finished assets. The majority of our construction is expected to be substantially complete by the end of 2023. Many of these projects are 50:50 joint ventures with strategic partners, who, themselves, are extremely well capitalized. In the U.S., we acquired one new development project called 38 Degree North Phase 2 in Q4, which totals 10 acres of land and sits adjacent to Kennedy-Wilson’s 38 Degree North Phase 1. Phase 1 totaling 120 units was completed in September and is leasing extremely well with 85% of the units now leased. Phase 2 will add another 172 units, bringing the total community to 292 units. Looking further out, we are completing 2,300 multifamily units that will be delivered into strong U.S. markets in the next 12 to 18 months. On the market rate side, we are well underway on two multifamily developments in Boise, Idaho, where we continue to see very healthy demand for our product. First is The Clara, which totals 277 units. Roughly half of these units are already complete and stabilized, with the balance to be delivered by the end of June. We are also making great progress at River Point, a 89-unit property in Boise that will complete in early 2022. This development sits adjacent to one of our communities with 204 units that is currently achieving a 98% occupancy rate. Within our vintage housing joint venture, we have approximately 1,800 affordable units in the development pipeline with roughly 800 completing in 2021. We are able to develop these units with minimal equity required from KW. This venture continues to perform extremely well, with same-property revenues up 1.4% and an NOI up 1.7% in Q4 and rent collections at 99% since March. As there continues to be strong demand for affordable housing options in the western U.S., we’re exploring new opportunities to continue growing this portfolio, which now totals approximately 10,000 units versus 5,000 units when we acquired our interest in the company 5 years ago. In Dublin, we have two projects completing this year, Hanover Quay and Kildare, which totals 133,000 square feet of commercial space. We remain confident in the lease-up of these two exciting developments. Looking out a bit further, we have four projects completing in Dublin in 2023. We were adding approximately 1,000 multifamily units and 421,000 square feet of commercial space. Once we finish all of our global development and lease-up projects, we expect to add $107 million of estimated annual NOI to the company. And so to summarize, 2020 was truly a year like no other and I am very proud of how we are positioned for the future. Armed with record liquidity and a greatly simplified business model, our near-term growth initiatives include, as I’ve mentioned, growing our recurring cash flow through new acquisitions, organic NOI growth, and the completion of our construction and lease-up projects as well as significant cash savings to the company from lower interest and overhead costs and two, we will continue leveraging our strategic institutional partnerships to meaningfully grow our investment platforms and our fee-bearing capital. I would like to thank our entire global team for their hard work and a challenging year and our shareholders, our investment partners and our Board for the continued support of Kennedy-Wilson. So with that, I would like to open it up to any questions.

[Operator Instructions] The first question will be from Anthony Paolone of JPMorgan. Please go ahead.

Thanks and hi, everybody.

Hi, Tony.

My first question is on the Urban Logistics platform, can you just talk about how you think of your competitive advantage in that space and how you will go about competing? And what seems like a pretty hot area right now?

Yes. So Mary, you want to handle that?

Sure. Hi, Tony. Yes, I mean, it’s a space that we, as a company, we know very, very well. We have had great success in putting up returns over 30% IRRs over – really over our history since we have started our business. In Europe, we have – basically, we have got highly experienced, I would say, sector specialists, if you will, in Europe, who have been in the space for decades. We’ve got extensive networks relationships across our occupational investment markets, which we think is key in this area. We always talk about relationships being important to the company, but we focus on micro market fundamentals and really the strength of any location as a key investment driver. We tend to buy multi-led states or land adjacent to what we already own with strong investment fundamentals. And it’s really around urban centers, so last mile locations where supply and demand is favorable, and we can drive rents and possibly assemble space to add square footage for our tenants, which we’ve done in the past. Our target assets have significant ability to add value and drive rents, which is the macro supply demand dynamic right now in the UK where we are largely focused is really in our favor. There was 10 million square feet of take-up in Q4 alone. So we have been doing this now for quite a long time and we have got, as Bill said in his remarks, a very, very strong pipeline to grow the business. We are excited about it.

Okay, great. And then second question is as it relates to the development pipeline, you added the Northern California multifamily project and you talked about how much delivers over the next few years. Do you think the pipeline winds down a bit or do you think you will have incremental starts that keep the roughly $1.7 billion in that range over time?

Well, I mean, it’s hard to say, Tony. We only have one other, I would say, active project in the pipeline that we are evaluating as far as new construction is concerned. We have a very strong pipeline here in the – well, let me back up a second. We made a decision several years ago that we thought we could get much better returns by building brand new product. And I think one of the – particularly in the multifamily space, one of the things that we have learned is that there is a very, very big attraction, particularly in the environment we have been through for people to live in new buildings. And so I think you can see from kind of the leasing activity that we have had both in Clancy 3 and from Santa Rosa 1 and from our Boise project, they are leasing up extremely fast. We have one called Rosewood that we finished last summer and in 2 months, we leased 100% of the units above our pro forma rents, but these projects take – there are long lead times involved. And there’s a lot of hidden expertise that has to go into these in terms of entitling them and planning them. And so the lead times are long. And so as we kind of wind into the – I look at this as more of an assembly line. As more and more of these roll off, we’re going to be very, very selective about not only the number that we would have in the pipeline but also the markets that we do them in. And you also have to weigh this against the cost structures of building. Because we started these early on, we have benefited from cost savings. A lot of material costs and labor costs have gone up here, particularly in the last 12 to 15 months. So except for one site that is adjacent to an existing site that we already own that has really, really done well. That’s really the only future development that we have in our underwriting.

And Bill, just to add one thing to that, the majority of the development pipeline that we are building today is on land that we acquired during the credit crisis for little to no cost. So, we had a real competitive advantage there with very low land bases to build to very attractive yield. So, that’s the majority of what we are building today.

Tony, too, if I could add just one footnote to the debt business, this is one of the great advantages that we have in underwriting the debt positions that Matt and his team are looking at. We are both acquiring and we are building. And so we know costs. We know what we are willing to have a loan-to-value at. And because we utilize all the various expertise of people in the company that’s allowed us in this debt platform to grow in a very prudent way, but in a meaningful way over a relatively short period of time.

Got it. And do you have much land just in the portfolio now on the multifamily side for the future or do you think that you would have additional projects that you will really have to take them on as they come?

Matt?

Yes. Tony, there is a handful of projects where we are very low density, where we could potentially build additional density. There is a couple of office assets with some excess land that we are exploring entitlements on. So, there are still a handful of assets with what we would consider little to no basis that we are evaluating potential future developments.

Okay, great. Thank you.

The next question is from Derek Johnston of Deutsche Bank.

Hi, everybody. Good morning and thank you. Can you talk about and share more insight into 2021 acquisitions given the large liquidity position at 1.3B and you did mention almost $1 billion in cash, what opportunities, property types, geographies or how do you envision deploying this capital?

Well, I think, first of all as we have talked – we have probably been talking on these calls for at least 2 years, maybe 3 years, because I was always asked, what do I worry about most? And my answer has always been that when I look at the financial systems across the world that the banking system, which usually is a big driver of corrections in the economy is the healthiest that I have ever seen it. And so the thing that I’ve said now for 2 or 3 years is certainly inside the company. The thing I worried about the most was really the unknown. And so we started really a couple of years ago with a plan that we wanted to build our liquidity. Things were very perfect, but we were worried about the unknown. And so what has happened, of course, is that interest rates across the globe have gone to ultra-low levels. That allowed us to continue building our liquidity and I think also demonstrated the quality of our very, very high-quality underlying assets. And so this was really all part of a plan to do two things: to put us in a position where we would have great liquidity going into 2021; and where we had developed new partnerships with big institutional partners, whether that was AXA or Fairfax or Security Benefit or now GIC and a whole bunch of other names that are involved in our fund management business, so that as opportunities presented themselves. And whenever there is a crisis or tragedy that we’ve all look through here the last year, there is always a time lag between when the opportunities show up and when that particular crisis started. So my longwinded answer to you is that we do think that there are going to be some really, really outstanding opportunities for value-add acquisitions, which is really our core strength, value add, individual acquisitions. We’re not very successful at these bid kind of situations. We always tend to be the losers in those because our underwriting doesn’t always meet those standards. So our core strength as a company, over the 30 years that Mary and I have been together, is the relationships we’ve created where people know we are a very, very reputable counterparty and where we’re able to acquire assets through off-market transactions where we can give the seller certainty of calls. And so when you look at our balance sheet today and the partners we’re aligned with, we have kind of the perfect storm of attributes that’s going to allow us to execute here this year. I would say, Mary, and you can add to this, that our January and even into February here has been the busiest early part of the year we’ve had in terms of evaluating new opportunities. And even though we’re very, very selective, we just have a very strong pipeline of new things that we are either buying right now or underwriting. So Mary, I don’t know what you would add to that.

Yes. I mean, I am just really excited because as you just said, though, our pipeline has never been – or not never but, over the last 12 months, this is the strongest it’s been. And I think if you think about like our fund business in the U.S., what we’re really focused on is we’re about 70% to 80% of the return is coming from income, in markets where there is wage growth, there is job growth, there is population growth. If you think about the last few things that we bought, one asset called the Parkway Center, which is in Utah, 10 minutes from the airport, 10 minutes from Downtown, low-rise where there is excellent credit. We have Verizon in one building. We have Amazon PillPack Pharmacy in one building and another building that’s multi-led, which is really where the value-add opportunity is because there is short leases there. And then additionally, we also have two pads on that site that we put zero value on. So we’re kind of focusing on that suburban low-rise or flex product that we think is extremely defensive, and we think we can really do our thing on the asset management side and drive returns. And then in Europe, we’re seeing equally a very, very large pipeline. I think that there is been pent-up product where perhaps foreign owners got into the market 2 and 3 years ago did not get out. There is short-term income and now is the time for them to try to sell. And so we’re really seeing a huge window of a pipeline for our value-add funds and for our industrial platform and so we are super excited about what 2021 holds in terms of growth.

Okay, thank you very much. That was very helpful. This one, maybe more for Matt, maybe Justin or anybody, just same-store NOI was down considerably given 4Q’s bad debt reserves, meaningfully higher than previous quarters. So was this a time in 4Q where you kind of look back at the AR accumulated over the course of the pandemic and basically started making some decisions or in other words, this isn’t something we should expect to repeat in future quarters, right, I mean, especially if the pandemic seems becoming under control?

Yes. I mean, if you – this is Justin. If you look at our same-store performance, that sort of the majority of the negative is related to the AR reserve, I’ll call it. But if you think about the accounting, the accounting rules basically require us to not accrue revenue where we think something is less than probable, which is a pretty high standard. And so in our mind, along with our peers, I think everybody is being relatively conservative. And you’re seeing in certain markets, even legislation that might allow us to collect amounts that we haven’t accrued this far. And then lastly, I would say, yes, this is very unique to the situation, and it’s COVID, and we expect to sort of be right back to normal.

Okay, thanks. That’s all for me. Very helpful.

Next question is from Sheila McGrath of Evercore ISI.

Hi. Yes, good morning. I was wondering, as we look at 2021 in terms of realizations or gains, what your expectation is versus 2020? 4Q really picked up and I am just wondering if we should expect more activity in 2021?

Thanks, Sheila. Yes, it’s always hard to project that. I mean, we have a plan, and we’ve identified a certain group of assets that we’re going to try and move this year, but it’s just a very fluid situation quarter-to-quarter on what you’re doing. So I can’t really give you a forecast in terms of what we plan to dispose of, but it’s going to be something in the area of what we did this last year.

Okay, great.

Matt, do you have anything to add?

Yes. I would just add to that, the liquidity, as we mentioned earlier, really came back into the market in Q4, and we’re seeing that continue into Q1. So it feels right now like the market for selling assets continues to be attractive and liquid, but obviously, as Bill said, that can change. And we’re – we have plans, but I’m not willing to give a specific forecast on what we think that gains to make.

I think one thing, Sheila, that I should have added is that actually, cap rates have continued to compress. And so there is this as we all know there is this great global search for any kind of yield right now. And the asset class that has really come into favor with the institutional investors is real estate, high-quality real estate. And so we have many, many options in terms of what we keep or sell for the long-term. And the added advantage of all of this construction is now coming online, of course, is that we’re adding recurring NOI at the same, we’re – at the same time, we may be disposing of assets, because as I said several times in the call, one of the things that is front and center on our mind is to continue growing our recurring NOI.

Okay, great.

And Sheila, this might be interesting for you. We sold two assets on the East side of Seattle, where there is real liquidity because the market fundamentals are there in Fund VI, and we realized 46% and 75% IRRS, both of those 2x multiple, way early into our business plan. So the team – our asset management team did a great job in executing and did the lease-up of those assets. And one of those sold at a sub 5 cap, and the other is sold in the mid-5 cap range. So that’s our – obviously, our trading business in Fund VI. But as Bill alluded to, there is a lot of liquidity in the market. So where we can opportunistically put up big returns as long as we’re continuing to grow our NOI, that’s what we’ll continue to do.

And you closed, Mary, those two deals in January, right?

Yes. Those two just closed. We have another one in that same market that is in escrow due to close in a month with also excellent returns. We have another asset that is on market now, and these are really interesting data points. So within the first 2 weeks, we got 80 confidentiality agreements signed. We’ve had multiple tours. So to Bill’s point, there is just a wall of capital looking for returns. So where there is that liquidity window where we can hit outsize returns, especially in our fund businesses, where we’re trading in and out of assets, we will continue to put up those kind of returns and recycle our capital.

Were those multifamily, Mary?

No. Actually, those were two flexed office buildings, a product that we like a lot, as I said earlier.

Okay, that’s helpful. And then I was wondering if you could give us an update on the larger development projects that are due to be completed this year, like capital dock, mixed-use and Clancy Quay Phase 3, how they are progressing with the construction and lease-up and rents versus your original expectation? And has there been any impact on those projects from the pandemic?

Mary?

Sure. So Clancy Quay 3 is done. It’s completed. We think it’s the best development in all of Ireland. We’re super proud of it. The team did just take a phenomenal job. As I said in my remarks, during the call, we’re 50% let there, which we’re really pleased with. We’re ahead of budget in terms of absorption. And in terms of rents, we’re also slightly ahead of where we budgeted rents, which again we are proud of given the dynamics of what’s going on in the world. And I think that asset really speaks to our whole portfolio. It’s very similar in the same nature, which it has – it’s highly amenitized. It has outside areas. It has a dog park. It has a play area for kids. There is an area, there is a business center where people – if they are home, they can go use the business center. There is a gym. And so really, that’s the offering that we’re out in the market with, and we’re really proud of. In terms of capital dock, the office portion of that is completely done. Retail portion is done. Multifamily is done. And I think we’ve seen – actually, it’s been interesting because we’ve seen since June a pickup in demand for those apartments, which are extremely high end, very beautiful apartments. And what’s really happened over the last couple of quarters is with work from home, a lot of companies in Dublin sent their workers home and said, you don’t have to come back. Originally, they were supposed to come back into the country by January. And now those companies have moved that date to the end of the second quarter. So we expect to see a really nice uptick in demand for that high-quality product later this year.

Okay. And one more question for me. Your multifamily portfolio has generally been in suburban locations. And you allocated more dollars to the Mountain States, which, in hindsight, has been fortunate with the current market conditions. I was just wondering if you could give us some insights on what were some of the factors that drove the strategy when other major players were shifting capital to central business districts like San Francisco and Manhattan. Just what did KW see that was different?

Sheila, it’s going to sound like I’m bragging, which is not our ammo, but our company, like Mary and I have been together for three decades. We started in Japan in 1994, when nobody thought that was an opportunity, and created the first public real estate company – a U.S. real estate company there. We started in Europe in 2010, when really nobody wanted to go there with our focus on the UK and Ireland. And it was a similar strategy here in the Western United States because we were a California-based company, but we could look at – we started almost 17 years ago in the Greater Seattle market. And today, we have one of the larger businesses in the – greater real estate businesses in the greater Seattle market. And so as it was with Salt Lake City and Denver, and now Boise, Idaho and Albuquerque and Arizona, we just – we were looking at population trends and job growth trends. And also in the markets where – and generally speaking, there has to be a very great university system that’s producing great young people. And so we just kept studying these markets and looking at these trends that were going on, where you had Fortune 500 companies in Southern California basically selling to out-of-state companies and reducing their jobs here in the – certainly in the Southern California market. And we had also – let’s say, Downtown LA, for example. We had been a big owner over the years, starting back in 1995, of assets in Downtown Los Angeles. But we could see that with that experience, there was very little rent growth. It’s a market that is extremely easy compared to other places to get things entitled. And so you have so many people come in there and start building the building at a very high cost structure as this is the same in Downtown, San Francisco. And so when we looked at these very high cost structures and we looked at the rents you would have to get in order to achieve your returns that just, to us, didn’t make sense. And so consumers are very, very smart. And so when rents get very, very high, they look for lower cost alternatives. So we went to the East Bay instead of trying to be in core San Francisco. We went to suburban Southern California, Camerio, for example. And then, of course, as I’ve laid out here, we just – we had a conviction really going back 17 years ago, that these other markets outside California. And if you – as I’ve said on these calls before, if you look at Seattle, there are more Fortune 500 companies headquartered in Seattle than there are in Southern California. And so these were all factors that led us in the direction we have gone in. And it’s really been amplified, our conviction, because of the things that have gone on in the last year. You’ve got these two groups of age groups. You’ve got the 25 to 35-year-olds that are looking for affordability, a higher quality of life. And then you’ve got the age group of, I would say, 55 and above, that, in a lot of cases, are retirees or people that just want to change careers, and they are also looking for the same things that the 25 to 35-year-old age group is looking for affordability, higher quality of life. And when I say affordability, it’s not just the rent – that rent number. Nevada has zero state income taxes. The state of Washington has zero state income taxes. Idaho is half of California. And you can go kind of on and on down the list. And so I’ve learned over the years that people are very resourceful in terms of how they are going to spend their time and their money, that when we do these things, too, we always take a long-term view. We study hard before we go in but then we take a long-term view. And we like to be the first entrants into the entry into these markets. And then we like to plant our flag in a big way like we’ve done in Boise.

Thanks a lot.

[Operator Instructions] Seeing no further questions, I would now like to turn the conference back over to Bill McMorrow for any closing remarks.

Well, I’d like to thank everybody for taking the time to listen to us today, for supporting us over all these years. I hope that everybody stays healthy as we start to turn the corner on what we’ve all been experiencing here this last year. So thank you very much for your time this morning.

The conference has now concluded. Thank you all for attending today’s presentation. You may now disconnect your lines. Have a great day.