Kennedy-Wilson Holdings Inc.

Good day and welcome to the Kennedy-Wilson fourth quarter 2021 earnings call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Devin Bobsar, VP of Investor Relations. Please go ahead.

Thank you, and welcome. This is Devin Bobsar, and joining us today from Kennedy Wilson are Bill McMorrow, Chairman and CEO, Mary Ricks, President, Matt Windisch, Executive Vice President, and Justin Enbody, Chief Financial Officer. Today's call will be 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 2021 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, Devin, and welcome everybody this morning. Thank you for joining us. I'm very pleased with the strong Q4 results that we reported yesterday, which capped off a year that generated record annual results across all our key financial metrics. including a 53% increase in our adjusted EBITDA to a record $928 million. In Q4, we had another active quarter completing $1.5 billion of investment transactions, bringing our 2021 transaction total to a record $5.9 billion, which is greater than both 2019 and 2020 combined. Our assets under management grew by 23% in 2021 to a record $22 billion. We've seen this momentum continue into 2022 with over $800 million of new investments that we have either closed or currently have under contract, the majority of which will close in Q1. I'd like to start by providing some perspective on what we are seeing in the markets. Global real estate transaction volumes remained elevated in Q4 and deal flow should remain robust in 2022. Relative to certain asset classes, we believe institutional demand for certain real estate assets will remain high given the natural inflation hedge provided by the underlying cash flow. In the U.S., we once again saw strong apartment revenue growth in excess of inflation across all our regions, including double-digit NOI growth across every U.S. market rate region. Leases in our multifamily portfolio are short-term in nature, which coupled with an approximate 50% annual turnover is an attractive feature given the current environment. Our global multifamily portfolio grew from 29,840 units at the beginning of 2020 to over 35,000 units at quarter end, including over 5,100 units under development, which we expect to complete at yields well above current market cap rates. We will continue expanding our multifamily portfolio with another 1,500 units that are either closed already this quarter or will close by the end of Q1. In Europe, we saw strong leasing in our UK office portfolio and are starting to see some of our iconic Dublin developments complete, where we are delivering brand new developments with leading ESG credentials. We are currently seeing a significant return to office in both London and Dublin. which will benefit our existing office and apartment assets, as well as our near-term developments, two of which are in Dublin and are nearing completion. We have taken a number of steps to greatly simplify our business over the past few years, including the acquisition of KWE Kennedy Wilson Europe in 2017, and the sale of our non-core research and property management divisions in 2018 and 2020. KW has transformed into a strong global franchise that generates cash flow from our two main businesses. Our consolidated portfolio, which consists of mostly wholly owned assets on our balance sheet, and our co-investment portfolio, which includes investments we make alongside our strategic partners and also earn fees which enhance our returns. Our capital deployment strategy for our consolidated portfolio will be focused primarily on growing our Western U.S. multifamily footprint and our European office portfolio, where we can leverage our track record and sourcing capabilities to find attractive off-market opportunities and implement value-add initiatives which are consistently delivering outsized returns. In our core investment portfolio, we have ambitious plans to continue expanding our various strategies, including our discretionary commingled funds, our global debt platform, and our European logistics platform. Our Q4 acquisitions exemplify this strategy. In our consolidated portfolio, we acquired a 528-unit multifamily property in Las Vegas, and a Class A 254,000 square foot suburban office campus in the UK for a combined purchase price of $243 million. These two wholly owned acquisitions added $10 million of estimated annual net operating income to KW with significant upside of both due to value add initiatives and capturing the embedded loss to lease. In our investment portfolio in Q4, we added over $1 billion in new investments, including the continued expansion from both our global debt business and our European logistics portfolio. These two investments added $6 million of estimated annual NOI and over $400 million to our fee-bearing capital. I'd now like to pass the call to our Chief Financial Officer, Justin Enbody to highlight Q4 and 2021 financial results.

Thanks, Bill. In Q4, we had GAAP EPS of $0.27 per diluted share, adjusted net income of $86 million and adjusted EBITDA of $187 million. For the year, we had record results across the board, including GAAP EPS of $2.24 per share, adjusted net income of $509 million, and adjusted EBITDA of $928 million. You will also notice an enhancement we made to our income statement this quarter. As a result of the growth in our investment management business, we expanded our income statement to include additional information around our investment income from our co-investment portfolio, which includes our unconsolidated funds and joint ventures. We've also moved the results from our co-investment business as well as our capital recycling program above expenses as we feel this presentation better reflects the prominence of these core income streams. Our co-investment portfolio saw another strong quarter of investment performance, resulting in $175 million in income from unconsolidated investments in Q4, compared to only $36 million in Q4 of 2020. For the year, our co-investment portfolio generated $389 million in income compared to $81 million in 2020, driven by higher levels of performance allocations and an over 50% increase to base investment management fees. Turning to our balance sheet and debt profile. During the last two years, we continually took advantage of the lower interest rate environment to decrease our cost of capital and extend out our maturities. Our cost of debt has improved to an average interest rate of 3.5%, with an improved weighted average maturity of 6.1 years. We have less than 9% of our debt maturing by the end of 2023, which is all property-level debt. Finally, 88% of our debt is either fixed or hedged using interest rate derivatives. And with that, I'd now like to turn the call over to Matt Windisch to discuss our multifamily portfolios.

Thanks, Justin. In Q4, we saw our global multifamily portfolio continue its track record of outperformance. Our unique combination of high-quality suburban assets in growing markets in the western U.S., coupled with our best-in-class, professionally managed portfolio in Dublin, delivered robust same-property NOI growth of 14% in Q4. Despite concerns around the Omicron variant, we continue to see improving conditions in our markets, including growing rents and lower delinquencies. In the U.S., we saw continued strong momentum in our apartment portfolio with double-digit NOI growth across every region. Our top two regions, the Mountain West and the Pacific Northwest, saw NOI grow by 13% and 14% respectively. So what drove these results? First of all, leasing spreads remained robust in the U.S. in Q4, with spreads on new leases of 16% and renewals at 12%. Asking rents in our U.S. portfolio are firmly above pre-pandemic levels with occupancies at around 96%. Rent concessions are not currently being utilized, and we were down 92% to Q4 of 2020 and 60% from Q3 of 21. We also continue to work with our tenants and take advantage of the rent relief measures that are available, which has resulted in 2.3 million of rent collections in the quarter. We continue to see strong demand in January with leasing spreads on renewals at 13% and new leases at 17%. Our U.S. market rate portfolio has an average loss to lease of 14% with over half of our units yet to be renovated, which sets us up for continued growth this year and beyond. Similarly, in Dublin, demand for rental housing remains strong. Occupancy across our Dublin portfolio has now increased back to 96% or roughly 600 basis points from the pandemic low. In Q4, we stabilized our best-in-class capital dock apartment community, which comes on the heels of stabilizing Clancy Key in Q2. We believe residential fundamentals remain attractive in Dublin, supported by strong population growth and inward migration due to the continued growth from multinational corporations. which we anticipate will benefit the approximately 1,000 units we expect to deliver in Ireland by the end of 2024. With that, I'd like to turn the call over to our President, Mary Ricks, to discuss our office portfolio and our investment management business.

Thanks, Matt. Turning to our office portfolio, our Q4 global office portfolio performed well and saw same property NOI growth of 4%. as a result of strong rent collections, lower bad debt, and the burn off of free rent. Over 70% of our office NOI comes from European assets, where we continue to find exciting opportunities. In Q4, we acquired The Forum, a 254,000 square foot high quality suburban business park in the UK for $75 million. The property sits on 30 acres and was acquired at over a 6% cap rate. The NOI at the forum is currently $5 million, which we expect to increase to $7 million over the next three years through both growing rents and leasing up the 15% vacant space, with the adjacent 11-acre vacant parcel providing optionality for future development. In-place rents are approximately 13% under market, which is one of the reasons we really like this asset. It provides us a great opportunity to grow the cash flow organically as the business park benefits from a flight to quality as workers return to the office. As Bill mentioned, we're seeing a strong desire from our tenants to finally have their teams back in the office and are seeing robust leasing momentum across our global markets. I'm happy to report that we completed 465,000 square feet of leasing in Q4. This brings our total year-to-date total to 1.9 million square feet of commercial lease transactions, including 1 million square feet of new leasing, which is 65% higher than our 2020 new leasing, and 900,000 square feet of renewals. These lease transactions were completed with an attracted weighted average unexpired lease term of eight and a half years. The leasing market continues to come back to life in Q1. At our largest office asset in London, 111 Buckingham Palace Road, occupancy stood at approximately 80% at year end, and including the strong leasing momentum into Q1, we are now 100% lease, including agreements for lease and deals in legals. As a reminder, when we acquired this asset back in 2014, the NOI was $14 million. Following the addition of amenities and extensive building-wide refurbishment work, now fully lease the NOI stabilizing at $19 million, which is a 31% increase over our hold period. At the height and affluent UK suburb of Weybridge, our latest leasing activity has taken occupancy at this 356,000 square foot suburban office from 88.5% to 95.5%. And similarly, we have grown NOI by 8% since acquiring two years ago. through welcoming new tenants to the park and right-sizing existing tenants. In the U.S., physical usage of offices continues to increase with the majority of our tenants looking to come back into the office next month, and they've already started to come back this first quarter. And thus, we remain optimistic about the improving fundamentals across our global office portfolio. Turning to our investment management platform, we continue to see strong growth in the quarter in fee-bearing capital, which grew to $5 billion, increasing by an impressive 28% in 2021 and more than doubled in the last three years. The growth in the quarter was largely driven by two of our more recent strategies, which we launched to benefit from major themes that we see in the markets. The first theme is the search for yields. which we addressed through our global debt platform. On the heels of a new $700 million commitment secured in Q3, our global debt platform completed $344 million of loan originations in Q4, resulting in 20% growth and 120% growth for the year. The debt platform stood at $2 billion at year end, including $280 million of future unfunded commitments. The average loan size is $70 million and 77% of loans are floating rates. We also announced yesterday an additional $3 billion of commitments to our debt platform. Total commitments for this platform has now tripled from our initial $2 billion less than two years ago and today totals $6 billion. The second theme relates to the strong demand for last mile logistics, which will benefit from the continued rise in e-commerce. which we address through our European logistics platform. This sector continues to benefit from strong occupational demand, which has driven vacancy to an all-time low in the UK of 4%. And we believe the continued growth of e-commerce, coupled with tight supply in this sector, will lead to further rental growth. Including investments made through our fund, our European logistics platform grew by an impressive 63% in Q4, and stood at total assets of $1.1 billion. Our deal pipeline remains solid, with another $200 million of assets under offer. In addition to our existing $5 billion of fee-bearing capital, we have another $4.5 billion of commitments which we look to deploy. The strong momentum we are seeing in our global credit platform and our European logistics platform, combined with other potential opportunities with our strategic partners, will allow us to meaningfully grow our investment management business in 2022 and beyond. Finally, I'd like to quickly update you on a few of our larger developments, which is an important area of focus for us. In total, our development and lease-up portfolio is expected to add $105 million of estimated annual net operating income to KW, 90% of which relates to assets that will either complete lease-ups or finish construction by the end of next year. Our developments are being completed on average to a 6% development yield versus market cap rates today, which are approximately 200 basis points lower. In Q4, we stabilized capital dock with year-end occupancy of 83%, improving to over 90% in Q1. We also completed development of two multifamily assets within our vintage portfolio, and Hanover Key in Dublin, a Grade A 69,000 square foot office warehouse, which was built with LEED and WELL gold credentials, and is under offer to a top fintech occupier for the entire space. At our Kildare Street office development in Dublin, which is also targeting LEED and WELL gold certifications, we are seeing strong demand from prospective tenants for this unique 65,000 square foot property, which is on track to complete in early Q2. We remain on track to complete the majority of our other construction projects in 23 and 2024 on time and on budget. With that, I'd like to pass it back to Bill.

Thanks, Mary. We're very pleased with the progress our team made over the course of 2021. As I look ahead, I'm extremely excited about the growth opportunities for Kennedy Wilson. As I've said on previous calls, our goal is to grow our estimated annual NOI at a rate of 10 to 15% per year and to grow our fee-bearing capital by 15 to 20% per year over the next three years. I'm pleased to say we have both of those targets in 2021. with estimated annual NOI growing by $40 million, or 10%, and fee-bearing capital growing by 28%. We continue to have strong access to capital, including $950 million of liquidity at year end, no significant unsecured debt maturities until 2025, strong joint venture relationships, and improving cash flows from our properties. We also announced yesterday a $300 million preferred equity investment from Fairfax Financial, a longtime strategic partner of Kennedy Wilson. In conjunction with this investment, as Mary mentioned, Fairfax has increased its commitment to our global debt platform from $2 billion to $5 billion. This investment further strengthens our financial position, and will aid in driving further assets under management and net asset value growth. I can confidently say that Kennedy Wilson is coming out of the pandemic in a much stronger position with more ways for us to grow our business and continuing to generate attractive returns for our shareholders and partners. I'd like to thank the tremendous KW team our shareholders, our partners, and our board for their continued support of Kennedy Wilson. And with that, Devon, I'd like to open it up to any questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Anthony Poloni from J.P. Morgan. Please go ahead.

Great. Thank you. My first question relates to just the investment environment and where you're seeing the biggest opportunities either by product type

geography and where those returns seem to be counseling these days well I mean Tony as we outline out to you know reflect a little bit I mean where we're focused is is the multifamily business both here in the western United States and in Dublin the debt platform that we're growing the European logistics business that Mary and others are responsible for running, and the office assets that we like in the United Kingdom, where the lease terms and the quality are actually higher than what we can get here in the United States in terms of the cap rate that we're buying out. So that's really where our focus is, but we continue to look at office acquisitions here in the United States, but we're doing those primarily, if not 100%, in our discretionary fund and partnership platforms, because we view those office assets, even though everybody's coming back to the office, The capital requirements attached to those office assets are such that we view those office assets as trading assets. And, you know, the big difference that you can get from both the logistics assets and the apartment assets and the debt platform is we're getting monthly cash flow. And so that's pretty much how we're looking at it. We're keeping a very vigilant eye on fixing rates on anything that we're buying. And where we're not fixing rates, we're putting hedges in place to make sure that those rates are fixed. And so as we've always done at the company, we don't play the interest rate game. We're just trying to lock in our spreads at the time we make the acquisitions and then go through our value-add initiatives. And we have I'm biased, but we have very outstanding asset managers across our global platform that are really good at implementing value-add strategies on the things that we buy. So, I mean, that's how we're looking at the market right now.

Okay, thanks. And then... Mary, I think, mentioned $4.5 billion of commitments that could help drive the fee-bearing capital base. And you had talked previously, I think it was a 15% to 20% growth number, if I recall. I guess, what do you see as maybe redemptions or headwinds that might happen in 2022 that you know, would cause that to just not grow faster? Because it just seems like you have the capital there to potentially grow fee-bearing capital at a faster clip.

We do. I'm going to let Matt answer the question in part, but we've never been a company that actually sets goals for everybody in terms of how you deploy capital, because I've learned over the years that's just the wrong way to look. You've You have to wait until you find the right opportunities to deploy capital into, so we're patient in that respect. But to give yourself a direct answer, Matt, do you want to answer that?

Yeah, I'd say our best estimation is we probably deploy that capital over the next 18 to 24 months. And then in terms of redemptions, obviously with the credit platform and the debt business, it's by nature, you're going to get paid off. I mean, that's, that's when you have success is when you get paid off. So you will start to see certainly some, uh, some payoffs coming, uh, in 2022. So I think, you know, certainly we have the number out there at 15 to 20%. I think we can, you know, we're confident we can hit that and, um, hopefully we can do a bit better. So that's kind of how we're thinking about it. It's really that 15 to 20% growth number.

Okay. And then just lastly, um, you know, as you think about the fee-bearing capital base, you know, you raised a little bit of capital with the Fairfax deal. Do you think to get that $4.5 billion that seems to be, you know, out there committed more or less, do you think you need any more capital at KW to invest alongside that?

Well, I mean, we currently don't have any plans because beyond those 300 currently underlined plans, Because you've got really three sources of capital. You've got the 300 that we've raised. You've got asset sales that were embarked on for this year, which is, you know, very much a fundamental part of our business. And then you've got the operating cash flows that come out of the properties. And so we believe that based on the plans that we have for this year, that the current capital coming out of those three sources is sufficient to take us through this year.

Okay, great. Thank you.

The next question comes from Sheila McGrath from Evercore. Please go ahead.

Yes, good morning. I was just wondering if you could give us a little more color on the preferred equity and warrants sale. Talk about pricing, timing, and capital needs and also their expansion in the commitment on the debt platform. That would be great.

Yeah, thanks, Sheila. I'll turn it over to Matt. But, you know, we've had a very great relationship with Fairfax now for 12 years that we've done almost $8 billion of transactions with exclusive of the capital that's gone into Kennedy Wilson. So, We've got a long track record of working together and at every level of the company. And so this is a very trusted partner, really outstanding company and a trusted partner. And so that's part of the background. So Matt, you want to comment?

Yeah, I'd say we evaluated multiple options in terms of raising permanent capital for the company to support the growth initiatives that we've laid out on this call, and we determined this was our best option. In particular, if you consider the capital that we deploy into our co-investment business, and focusing in on our debt platform where Fairfax just increased the commitment by $3 billion, we generally earn somewhere between 15% and 20% annual returns, including the cash flow we're generating as well as the management fees we earn for overseeing the platforms. So I think it's also worth noting that over the past four years, we've bought back 17.4 million shares of stock at an average price of $18.64. So if you think about the warrant price on this transaction, it represents a 23% premium to the price at which we've bought back our stock over the past few years. The last thing I'd say is this permanent capital we just raised, it further strengthens our balance sheet and really provides us the firepower we need to continue to grow our net asset value per share over time.

Okay, thanks, Matt. And just switching to multifamily development, you have projects both in the U.S. and Ireland. I was just wondering if you could help us understand the lease-up dynamic on your projects in the U.S. Are they stabilizing more quickly than Ireland? How the cost per unit comparison is, and also the – kind of going cap rate comparison between U.S. and Dublin might compare?

Well, there are a lot of parts to that question there, Sheila, so let me see if I can answer that. I would say one of the decisions that we made at the beginning of the pandemic, well, let me back up a second. The construction that we started and the business that we started there, that's really a decision we made eight years ago. And It turned out to be a very fortuitous decision because the cap rates that we've been able to stabilize all of these development assets are way outside what we would have had to pay to buy those assets, and they're brand new. You're correct that most of the development that we have going on, except for the two office buildings, actually three office buildings in Dublin, is multifamily. We made a decision at the beginning of the pandemic that we weren't, unless there was a governmental jurisdiction that, you know, shut down a site, we were not going to stop our construction. That decision that we made two years ago has just proved out to be also a very good decision. And as we've been able to finish these brand new products, for example, projects, we finished about a 300 unit project up in Boise, Idaho. last year 300 units i believe if i'm correct we leased the entire project in 120 days which is unheard of on a project that size and similarly in ireland clancy key which is the largest individual apartment project in dublin it's almost 900 units mary you can correct me here but when we finished the last 300 units we leased all of that within four to six months and so we've seen not that it would be any surprise to anybody there's a newer properties really are attractive to your clients as far as the Construction side, you know, we've been able to do everything on time and on budget. We have had no hiccups on the construction side of anything. The costs of building per unit, you know, vary from geography to geography. And here in the western United States, you know, you can build at costs that are, say, in the mountain states, somewhat less than you can here in California. And the other thing that really is the key to remember, too, a lot of the construction that we did in the multifamily space was on sites of properties that we already, adjacent to properties we already owned. And so one of the key components in the construction process is to keep your land costs as low as you possibly can. So, for example, we're doing a second phase project in Santa Rosa, California right now that's almost 200 units on top of 120 units next door. But on that 200-unit property, we only paid $3 million for the land. And so that's kind of a theme that we've done over the years is to find these sites where there's either additional land or where there's land next door that we can buy and entitle. And I guess the last thing I would say, Mary, about that, too, is both in Europe and here we have exceptional teams that have great relationships with the jurisdictions that they're in. And so the entitlement process for us, which can sometimes be difficult, We've really had a very, very, very good track record, 100% track record of getting projects approved. So I would say, Mary, unless you've got something to add, I mean, that's about it.

Just if you could, Bill or Mary, just tell us the prevailing cap rates of stabilized assets in multifamily, how they might compare in Dublin to... you know, your markets in the western U.S.

Yeah, hi, Sheila. We're seeing stabilized cap rates for really best-in-class assets in Dublin of sub-3.5%. So, you know, obviously you can, in Europe, rates are extremely low, so you still have, you know, a very wide spread between the cap rate and what you can borrow at. And then the last thing I would say about Ireland is compared to other European markets, that cap rate still has actually room to grow. So you're seeing in other markets, whether that be Germany or France, cap rates even lower than that. It's an extremely defensive asset class. So, you know, there's still really good opportunity that we're seeing. And as we're developing these assets in Dublin, about 1,000 units, we're developing those between 5% and 6% cap rates. So very big spreads to where that same asset is trading.

Okay, thank you. What you're saying is that the spreads are 200 to 300 basis points wide of what you would have to pay if you were buying that asset. That's right. And that is, you know, pretty comparable to what's going on here in the United States. It depends on, again, the geography you're in, but we – that – project in Boise that I mentioned, the 300 units, we've stabilized that at close to a 7% cap rate. And you would, if you were buying that today, you'd be paying somewhere in the low fours for that asset.

Okay, great. Thank you.

The next question comes from Derek Johnson from Deutsche Bank. Please go ahead.

Hi, everyone. Thank you. You mentioned the cap rates on the acquisitions in UK office. Can we spend a second on cap rates with the logistics platform? And then outside of caps, you know, how are acquisitions decided as to where they ultimately go between the European logistics platform where you have a 20% share or versus the commingled fund where you generate fee capital?

Sure. Hi, Derek. So on the logistics side, in terms of where does an investment go, it really depends on the underwritten returns. So for our value-add fund, that's a sort of 13% to 15% levered IRR that we're targeting. And for our logistics platform, which is more of a core plus platform and a longer-term hold, that's more of a 9% to an 11% levered return that we're targeting. And, you know, what we're seeing really in the UK on the logistics side is record-breaking in terms of take-up. We've seen 55 million square feet be leased in 2021 in the UK. Vacancies, you know, as I said in my remarks, 4%. So these are record-breaking statistics and fundamentals. And we just think that there's a whole lot of room to go, not only in the UK, but also in Ireland, where we've just started investing in the logistics space, and also in the Madrid area in Spain. And really what that has to do with is the online retail penetration. So if you think about the UK from even three years ago, the online retail penetration, so every dollar spent in the retail space was 11% online. That's growing to 30%. That's in the U.K., and Ireland and Spain is well behind that. So we just think fundamentally it's a great space to invest in. We have significant capital partners that like the trade along with us, and we're really excited for the growth in that platform, both in our fund business and in our logistics core plus business.

No, it really seems as if you guys are putting together a platform that's going to be pretty significant, kind of brick by brick, which a lot of the public, you know, industrial REITs, you know, they can't really move the needle doing what you're doing. But I think at the end of the day, it should be pretty exciting. Did want to switch gears. I think this may have been touched on, but I might have missed it. You know, the UK is certainly easing restrictions post, you know, December's kind of Omicron surge. with back to office. And you have had some decent recovery in the Ireland multifamily. But we're in Q1 here. We're a couple of months in. How is the leasing kind of translated from the 4Q into first Q in Dublin multifamily? And so far in first quarter, if you could expand on that a little bit.

Sure. I mean, so Dublin multifamily, we've grown our occupancy by 500 basis points, so we're now at 97% leased. We've stabilized, as I said in my remarks, capital dock multifamily at 90%, and there's further room to grow there. So there's been really big growth, and really what that has to do with is just the reopening of the Irish economy, people coming back into the country, Ireland has been the fastest growing economy in all of Europe. We've seen foreign direct investment just continue to flow into Ireland. There's been 30,000 new jobs created. It's a growing population. It's a young population. And so we're very, very bullish on what's going on in Ireland. As you know, we're completing some of our developments there. The Hanover Quay office development, 69,000 square feet. We're under offer to a very, very credit-worthy tenant for the entire building. That'll really stabilize the entire capital dock square there. And then Kildare, which is just across the street from the Shelburne. It's a great location right on the green. That, actually, we have great activity as well from office tenants. But we'll probably multi-tenant that building, which will allow us to really push rents and and achieve well beyond our underwriting. So we're just really excited about what's going on in the Irish market.

Okay, thank you. Just one more quick one just on the multifamily affordable segment. It was interesting to see, you know, revenue up 6.2% in the fourth quarter. Now, you know, of course, a gain in 180 basis points of occupancy, you know, can certainly account for most of that. But could you guys remind us, you know, what rent increases are tied to? Are they tied to inflation or some measure where, you know, we can kind of understand and model the potential revenue and rent growth in the affordable segment?

Yeah, great question, Derek. So this is Matt. Yeah, so that business is tied to area median income. So basically it's just salaries of people in the area. And so I think when you go back to when we – first invested in this business, we had assumed very minimal rent growth, 1%, 2%. If you kind of look at what's happened, it's been more like 5% to 6% on average. And so it is definitely a very – it's very much tied to inflation in terms of what you can do with the rents. And if you think about these rents relative to market rate rents, I mean, you're 30%, 40% below market rate. So there's room to the extent median incomes go up. Generally, you can pass through almost all of that to the tenants. And in some cases, they're getting some government assistance to help with those payments as well.

Thank you. Helpful.

The next question comes from Jamie Feldman with Bank of America. Please go ahead.

Great, thank you. I just want to go back to Matt's comment that, you know, the Fairfax warrant and preferred deal was one of several investments you considered. Can you talk more about, you know, what else you did? If I assuming I heard you right, can you talk more about what else you did consider? You know, why you felt like you even needed to do a deal like this right now? And then how should we think about the pricing on the warrant versus your view of NAV?

Yeah, so we, like I said, we did look at a number of options. So, you know, perpetual preferred would have come in 300 basis points or more higher above the dividend rate that we're paying. So that was an option we looked at. A straight equity transaction, you know, comes in obviously at a discount to the stock price, anywhere from, you know, four to six, 7% discount to the stock price, where in this case, you know, the warrants were struck at a premium to the current stock price and a 23% premium to where we've been buying back the stock. So for us, I mean, we're really looking at this over the long run. How do we grow the NAV per share? And by having this accretive capital, we can deploy it into our, you know, various platforms where we're earning 15 to 20% returns on capital. And at the rate we've been growing the business, we just feel this is prudent to be putting more, you know, permanent capital into the company to allow us to grow the business in a prudent way.

In addition to the $3 billion of fresh powder for the debt platform, which we obviously will earn fees on.

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

Well, thank you, everybody, for taking the time to listen to our call today. And as always, as I say, we're always available to answer any questions offline if you have any. And we appreciate your support. So thank you very much.

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