Kennedy-Wilson Holdings (KW) Q2 2019 Earnings Call Transcript

Kennedy-Wilson Holdings (KW 2.42%)
Q2 2019 Earnings Call
Aug 01, 2019, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Kennedy-Wilson second-quarter 2019 earnings call and webcast. Today's presentation is being recorded. [Operator instructions] I would now like to turn the conference over to Daven Bhavsar, vice president of investor relations. Please go ahead.

Daven Bhavsar -- Vice President of Investor Relations

Thank you and good morning. This is Daven Bhavsar, and joining us today are Bill McMorrow, chairman and CEO of Kennedy-Wilson; Mary Ricks, president of Kennedy-Wilson; Matt Windisch, executive vice president of Kennedy-Wilson; and Justin Enbody, chief financial officer of Kennedy-Wilson. Today's call is being webcast live and will be archived for replay. The replay will be available by phone for one week and by webcast for three months.

Please see the Investor Relations website for more information. On this call, we will refer to certain non-GAAP financial measures including adjusted EBITDA and adjusted net income. You can find a description of these items, along with a reconciliation of the most directly comparable GAAP financial measure and our second-quarter 2019 earnings release, which is posted on the Investor Relations section of our website. Statements made during this call may include forward-looking statements.

Actual results may materially differ from forward-looking information discussed on this call due to a number of risks, uncertainties and other factors indicated in reports and filings with the Securities and Exchange Commission. I would now like to turn the call over to our chairman and CEO, Bill McMorrow.

Bill McMorrow -- Chairman and Chief Executive Officer

Thanks, Daven. Good morning, everybody, and thanks for joining us today. We're pleased to report a solid quarter of results highlighted by continued strength in our same-property results, the successful disposition of noncore assets with proceeds being reinvested into capex at existing properties or higher-growth property opportunities, and the continued growth of our separate account business through our new joint venture at Capital Dock. This morning, I'll review our financial and property operating results for the quarter and then update you on the progress we made on our key strategic initiatives before opening it up for questions.

So starting with our results, for the quarter, GAAP EPS was $0.36 per share, compared with $0.77 per share in Q2 of 2018. Adjusted EBITDA was $187 million in the quarter, compared to $271 million in Q2 of 2018. Adjusted net income totaled $105 million, compared to $171 million in Q2 of 2018. Our results are always impacted by the level of gains in any given quarter and we had $68 million and fewer gains in Q2 2019 compared to Q2 of last year.

However, both on a GAAP EPS and adjusted EBITDA basis this past quarter, it was one of the strongest quarters of financial results we've had in the last decade. Our global same-property portfolio continues to perform very well with same-property revenue up 4% and NOI up 6%. We continue to see strong growth in our Western US multifamily portfolio, where our strategy involves buying assets and growing markets where we can unlock value through the completion of our value-add initiatives and through institutional asset management. As we've seen in for many quarters, this strategy is resulting in leading same store results against many other publicly traded real estate companies.

And once again, in Q2, we saw this trend continue with same-property revenue up 5% and NOI up 8%. Leading the charge this quarter was our Mountain State portfolio, which now totals 22 market rate and affordable assets located primarily in Salt Lake City and Boise, Idaho. Same-store revenue was up 7% and NOI was up 9% in the quarter. This is on top of the 8% NOI growth we saw in both 2018 and 2017.

These markets continue to benefit from population growth and job growth with an affordable cost of living compared to high tax states like California, along with offering an outdoor recreational lifestyle that is highly desired by today's young professionals. The Greater Salt Lake area continues to grow at a robust pace across the board. In June, the unemployment rate fell to 2.8%, the lowest in 12 years. Jobs are growing at the third fastest pace in the country, housing demands continue to be fueled by rapidly growing population coupled with the approximately 39,000 college graduates produced each year in the state.

There is also a 3.6 million square feet of office under construction that is expected to be delivered over the next two years, 43% of which is pre-leased. With our Mountain State apartments having average rents of less than $1,200, we feel confident that the positive economic activity in this region will continue to drive strong growth in our portfolio. I'm also pleased with the favorable trends in the Pacific Northwest, where we saw NOI growth by over 7% in the quarter. This region continues to see significant job growth with approximately seven million square feet of office under construction between Seattle and Bellevue, the majority of which is pre-leased.

Amazon alone currently house over 11,000 full-time job openings in Seattle. We maintain a positive outlook for this region, which is our largest multifamily market. Finally, in Ireland, our growing multifamily portfolio continues to perform well; the same-property NOI up 5%. The multifamily sector remains fundamentally undersupplied while we continue to see expansion similar to Seattle that is driven by the large technology companies.

We currently have approximately 1,100 units under development and when you also add the 550,000 commercial square feet under development, Ireland is on track to become our largest European market by NOI. In a moment, Mary will provide you with an update on that market. Turning to our commercial portfolio, of which office assets represent the largest components, we had a good quarter with revenue growth of 5% and NOI growth of 6% on a same-property basis, driven by occupancy increasing by 2.5% in our Southern California portfolio, as well as continued strength in Irish office portfolio. Finally, on the last call, we discussed the lobby renovations that were being finished at The Shelbourne Hotel on April.

I'm pleased to say that we saw a meaningful pickup of The Shelbourne Hotel and across our other two hotels in Europe. In total, our quarterly hotel NOI grew by $7 million compared to Q1 of 2019. In total, our real estate portfolio ended the quarter with an estimated annual NOI of $410 million with 48% coming from the Western US and 52% from Europe, primarily in Ireland and the UK. 80% of our NOI comes from wholly owned assets.

Our multifamily and office portfolio accounts for 76% of our portfolio and ended the quarter with occupancy of 94%. Now, I'd like to review our three key strategic global initiatives that we believe will deliver growth over the long term. Number one, growing our NOI at the property level; number two, growing our investment management in the business; and number three, executing our capital recycling and asset sale program, where we are producing outsized returns on our investments and recycling capital into other strategic opportunities. So starting with number one, in the U.S., we continue to focus on completing strategic value-add capex projects, which are aimed at growing our NOI organically.

For example, at Santa Fe, a 492-unit apartment community in Salt Lake. In the quarter, we completed a new leasing center, fitness center, and enhanced other tenant outdoor amenities, as well as completing interior renovations. Our strategy there resulted in revenue growing by 9% and NOI growing by 14% compared to Q2 of last year. And at Alpine Meadows, a 222-unit apartment community also in Salt Lake City, we recently renovated the leasing center and many of the other amenities at the property, as well as implementing green initiatives, which are aimed to reduce water usage by 20%.

So far, we are seeing NOI grow ahead of business plan since acquiring the property in Q4 of 2018. In total, our U.S. multifamily team completed another 230 multifamily unit renovations in the quarter, bringing our total to date -- year to date to approximately 400. Our goal is to renovate another 1,000 units to 1,500 units over the next 12 to 18 months, where on average, we are earning a 22% to 25% return on costs.

We will also add to our recurring NOI through completing our lease up initiatives and/or development projects, which at quarter end include 4,300 market rate and affordable multifamily units, 2.9 million square feet of commercial property, and the Kona Village resort. During the quarter, we stabilized Leavesden Park in the UK and two vintage assets here in the U.S., adding $8 million to our estimated annual NOI. Based on current market conditions, we expect these assets, once complete and stabilized, to add approximately $105 million of annualized NOI by the end of 2023, with roughly 37% being delivered in the next 24 to 30 months. In the U.S., we have over 2,000 units under development through our Vintage Housing joint venture, which is engaged in the management and development of senior and affordable housing.

We expect to complete and stabilize almost 600 units later this year, another 1,500 by the end of 2021. These projects will bring KW an expected $17 million of cash, from the sale of tax credits and $6 million in estimated annual NOI. We remain on track to grow this joint venture to 10,000 units over the next few years with minimal cash required from KW. Lastly, 40% of our current development pipeline is in Dublin, Ireland.

This market continues to be significantly undersupplied, and we are able to leverage our scale and depth of relationships to on average achieved development yields that are roughly 200 basis points higher than market yields. I'd now like to turn the call over to Mary Ricks. Mary?

Mary Ricks -- President

Thanks, Bill. We're making excellent progress across our European asset management initiatives, including stabilizing assets and deploying CapEx across our development projects. The European portfolio generates $212 million or almost 52% of the global estimated annual NOI, with the strong stabilized commercial occupancy at 96% at the end of Q2, up 40 basis points on the previous quarter. Strong leasing at Capital Dock in Dublin, Merlin Park in Manchester, and to global online fashion retailer ASOS at Leavesden Park in Watford, following the completion of their works, contributed to the improved occupancy and the additional $5 million of estimated annual NOI.

As Bill mentioned, the Shelbourne refurbishment completed last quarter and the displaced income is now beginning to come back on stream. The hotel continues to perform well against its peer set. Capital Dock was a significant contributor to our NOI uplift in the quarter. We signed three retail leases covering over 18,000 square feet, with top food and beverage occupiers.

This included a new craft beer operator occupying the flagship restaurant with bar and terrace called the quarterdeck. We also signed a gourmet grocer and artisanal food offering, all joining JP Morgan and indeed at Capital Dock later this year. We believe these tenants will help continue the strong demand we're seeing for 190 premium multifamily units, which is the premier, amenity-rich, multifamily offering in the Dublin rental market today. During the quarter, we increased our stake in Capital Dock from 42.5% to 50%, with AXA IM Real Assets and existing JV partner in Ireland acquiring the remaining 50% from the other two investors in the project.

KW remains asset manager for the entire campus. Also, we recently started construction at Hanover Quay, which is adjacent to Capital Dock and Kildare Street, which is adjacent to the Shelbourne. On a combined basis, these two office projects will total 133,000 square feet and will deliver in 2021. Almost all our development in Europe is in the high-growth Dublin market, and we continue to make solid progress on all of our projects.

Shortly after the quarter, the multifamily element of Cooper's Cross, which was previously referred to a City Block 3, was granted full planning permission for 449 multifamily units. We expect to submit planning permission in Q3 for 390,000 square feet of Class A office space as we look to create the next signature campus development for Dublin's thriving North Docks. Our other key multifamily development is Clancy Quay 3 where we remain on track to deliver 266 Phase 3 units in the second half of next year. This will bring the total to 865 units at Clancy.

Dublin fundamentals continue to outperform other markets and remain supported by Ireland's position as one of the fastest-growing economies in Europe. Unemployment rate at the end of Q2 was 4.5%, it's a 140 basis points lower than the previous year with 81,000 jobs created in Q1 alone, as Ireland's attractive attributes for employers continue to be part of Ireland success. With the youngest population in Europe, a third of the population is under 25, and one of the most educated workforce in the world with almost 55% of 30 to 34 year olds having a post-secondary qualification, compared to 40% for the EU. It is no coincidence that a third of the multinational companies in Ireland have had operations for over 20 years.

We've seen this with the likes of Google, who celebrated their 15th year in Dublin last year. They have a workforce of 8,000 with 2018 its biggest hiring year yet. Facebook completed the largest lending last year of 870,000 square feet in Ballsbridge, which will allow them to expand their workforce by 5,000 and leased a further 175,000 square feet in Sandyford this year. And the other monster deal was Salesforce taking 430,000 square feet in the North Docks.

This commitment to Ireland has been key to the development of top-rated sectors across medtech, pharma financials and IT. Ireland has 10 of the world's top 10 pharma companies, 20 of the top 25 financial services companies, 14 of the top 15 medtech companies and nine of the top software companies. Office take-up remains very attractive and reservations bode well for the rest of the year. The market remains balanced with attractive office to take-up levels, well in excess of the 2.5 million square foot, 10-year average, strong reservation levels and almost half of the 4.4 million square feet currently under construction is already pre-leased.

Over 90% of new offices delivered between 2014 and 2018 are already leased. Dublin's multifamily market is underpinned by strong demand for city center apartments and increasing demand for premium level of resident amenities and services. There remains a significant undersupply of new build, good quality stock, which is growing the multifamily leasing market, a market that is witnessing a strong shift in tenure from ownership to renting. This is pronounced in Dublin with year-over-year growth of 11% and 125,500 units to 139,300 units.

And currently 26% of all households are renting compared to 12% in 1991. Our aim is to be a leader in delivering much needed build-to-rent apartments in Dublin. With the current portfolio including future pipeline on sites we already own at over 4,000 units, we remain firmly on track to hit our near to medium-term goal of growing our multifamily portfolio to 5,000 units. In the UK, at Leavesden Park the lease in Park and Watford, our largest Southeast office asset, we completed the works for ASOS during the quarter and the property is now stabilized, with ASOS having fully rented the entire building.

Other strategic vacancies include The Link in Maidenhead where we are two-thirds of the way through a full building refurbishment, which is due to complete later this year and we're progressing our full back-to-frame refurb at Stockley Park, which will come to market in the first half of 2020. We're excited to rollout these developments in the Southeast market where there continues to be significant occupier demand. During the quarter, KW and its equity partners closed on the acquisition of Ditton Park, a spectacular 200-acre office campus in the Southeast for GBP41.3 million. Ditton Park provides 197,000 square feet of Class A offices in a beautifully landscaped setting right off the M4 and close to Heathrow Airport with excellent links to Central London.

We're super excited about this asset as it is a unique opportunity to reposition a high-quality and well-located building. Our second key global initiative is growing our fee business. In the US, we continue to raise fee bearing capital both through commingled fund and our separate account business. In Europe, we're making great progress on our 50-50 Irish multifamily joint venture with AXA IM Real Assets.

In total, our platform with AXA totals over $1.5 billion in assets, with 1,800 built units across nine properties with excellent growth prospects. We have approximately 1,100 units at various stages of development on sites already in our ownership and we continue to look at attractive investment opportunities. Post quarter end, globally, we have approximately $400 million in investments that we are committed to acquiring with insurance company partners, which would further increase our fee bearing capital in the second half of the year. Globally, over the last two years, we've completed almost $2 billion in asset purchases with insurance company partners.

And with that, I'd like to turn the call back over to Bill.

Bill McMorrow -- Chairman and Chief Executive Officer

Thanks, Mary. The third area of focus is our asset sale program, where our strategy includes disposing assets that are not core or assets that do not fit our long-term investment strategies, and recycling the proceeds into other higher quality growth opportunities. Since the beginning of 2018, we've sold approximately 75 assets, which have generated an IRR of 21% back to KW. During the quarter, we sold $339 million of assets, which our share was $70 million.

Our dispositions resulted in a 19% IRR to KBW. In Q2, our U.S. commingled fund, Fund V, sold the portfolio of three office buildings in the greater Seattle area for $252 million, generating a gross IRR of 30%. We also sold $72 million of noncore retail assets in both the U.S.

and the UK. For the year, we have sold $662 million of assets, of which our share was, $216 million. These sales have generated an IRR of 19% to KW. So far in 2019, excluding sales from our commingled funds, 85% of our asset sales have been either retail, hotel or residential assets.

In Q2, we allocated a $117 million in investment capital as follows: 53% to new investments, which were completed through either our commingled funds of where we increased our ownership in an existing asset; 41% to capex; and 6% to our stock repurchase plan. For the year, we have allocated a $195 million with 53% to capex, 39% to new investments and 8% to share repurchases. Looking ahead, and -- we expect an increase in transaction levels for the second half of the year and currently have over $800 million of investment transactions in our pipeline, including $612 million of acquisitions and $204 million of dispositions. In total, we expect to generate an excess of $400 million of cash to KW from our asset sale program in the second half of the year.

Turning to balance sheet, we ended the quarter with $404 million of cash and $450 million of availability under our line of credit. Our debt has a weighted average interest rate of 3.9% and we have limited maturities in the near term with only 3% of our debt maturities -- debt maturing by the end of 2019. So in summary, I'm pleased with our results and how our portfolio and management team are positioned today. I'd like to leave you today with three key takeaways about Kennedy-Wilson.

Number one, our investment markets continue to grow and are underpinned by strong fundamentals, as we are especially seeing in the Mountain States, greater Seattle area and the Dublin, Ireland market. Number two, our business model includes a high-quality, stabilized real estate portfolio, a growing third-party feed business and ongoing value creation initiatives, which are aimed to grow NOI both organically and through our development pipeline and growing recurring fees to KW. And number three, the management team remains highly aligned with our shareholders with a focus on delivering long-term cash flow growth through the execution of our key strategic growth initiatives. So with that, I'd like to open it up to any questions.

Questions & Answers:

Operator

[Operator instructions] And we will now take our first question from Mitch Germain with JMP Securities.

Mitch Germain -- JMP Securities -- Analyst

Thank you. We're hearing about some pressure in the development side, growing costs, labor, steel. Anything that's provided you any caution or impacting your yields?

Bill McMorrow -- Chairman and Chief Executive Officer

Not -- Mitch, thanks. Yes, not in the markets that we're in. When you think about Ireland, we really focused most of our building activity -- well, let me back up a second. First of all, we have two separate construction management teams inside KW; one in Ireland run by Peter McKenna, and one in the United States run by Mike Eadie.

And so -- and we have great depth in both of those teams. And I think over many years now, our team has developed and demonstrated the ability to deliver very large-scale projects on time and on budget as witnessed by the Capital Dock project, which is the largest single-phase project to ever been done in Ireland. And so just -- we haven't had any surprises on the construction cost side or timing. I mean, what we are hearing, of course, is that they're -- in certain markets, there has tended not to be a shortage of skilled labor because there's construction going on literally all over the world, but it hasn't really impacted our budgeting process or cost to complete.

Mitch Germain -- JMP Securities -- Analyst

Gotcha. When we talked about asset sales, I think you said about $400 million to KW in the back part of the year. What -- how should we characterize that with regards to what sector it might be included?

Bill McMorrow -- Chairman and Chief Executive Officer

It's going to be across most asset sectors. And I mean, in our footnote to the earnings release, we said that we have sold -- we're now under binding contracts on two of the multifamily assets that we're selling. There is a third one that we're selling that's under contract now. But those three assets are going to generate $76 million -- just those three are going to generate $76 million of cash for us, which by the way, we're 1031-ing the proceeds of those asset sales and to a very high quality business Park in the Marin County market and the differential in cap rates that were trading the apartment assets into what I consider to be a very A quality assets, but the differential in cap rates is almost 200 basis points.

In other words, we're selling the multifamily assets for 500 -- for 5% cap rate and we're buying the office park at a stabilized yield of 7%.

Mitch Germain -- JMP Securities -- Analyst

Great. Last question on the fund raising front. I guess, Mary, you mentioned a couple of insurance companies that you're working with. I'm curious with the different products from the separate account and the commingled fund, are you seeing any new relationships that are evolving or are you seeing existing relationships that are expanding?

Mary Ricks -- President

Yes, a little bit of both. I mean, we're having really good success on the commingled fund side, both in Europe and the U.S. And then on separate account side, we're working on something with another insurance company that could be big. And then as you know, you continue to see AXA grow with us in Ireland.

So it's a little bit of both, new relationships, as well as our existing.

Mitch Germain -- JMP Securities -- Analyst

Thank you.

Operator

I will now take our next question from Tony Paolone with J.P. Morgan.

Tony Paolone -- J.P. Morgan -- Analyst

Thank you. My first question is just on the transaction environment and your potential deal flow picking up here it seems. How much of it's been either a change in the market and what you're seeing versus any change in how you're underwriting the return hurdles on the capital you bring into those deals?

Bill McMorrow -- Chairman and Chief Executive Officer

Well, I think I've said on previous calls, Tony. I think we have really good acquisition teams, both here and in Europe. But you have to sift through really more transactions today obviously than you did in 2010 and '11. And when you look back over this last 10 years now, we've acquired at cost over $22 billion of assets, but you've got to look at more opportunities today on existing assets than you ever have because the capital markets is no surprise to anybody, they are very efficient, and there is a lot of capital around.

And once you find something that you think makes sense to do, you have to be able to move with speed, which we do. And I think the other great thing about our company is that all of the due diligence -- we don't outsource really hardly anything to other people. And so whether it's our construction management team or due diligence teams, all of that is housed inside the company. And so it allows us to be very nimble when we find something that we like to buy.

I think, two, the reputation of the company over -- I've been here for over 30 years, the reputation of the company is really good in the -- I'll call it the transactional market. And so people like having us as a counterparty on their transaction. So it's always competitive. I don't care what point in the cycle you're in and today is no different.

But we're still finding opportunities and I think as Mary said earlier too, we are having very, very good success on the third-party capital raising front, particularly in the insurance industry. And so we've got the capital and it's just really a matter of finding things that make sense to do and I would say. Then the last thing I would say, to answer your question is that as we've said a lengthier today, the development work that we're doing, which is going to be completed over the next two or three years, is really a very, very key part of our strategy because we're able to build today at very high returns. The Capital Dock project stabilized at an 8% cap rate.

And so when you think about that, that's a cap rate that I'm not trying to prognosticate the market, but that's a cap rate that's certainly 300 basis points to 400 basis points for an asset quality of that size above the transaction market. So it's all part of this whole combination of things that we're doing.

Tony Paolone -- J.P. Morgan -- Analyst

Got it. Thank you for that. And then, in the Mountain States, the numbers have been strong and it's been primarily multifamily. Are there opportunities and other property types in the region or do you see it is primarily being a place that is where multifamily works best?

Bill McMorrow -- Chairman and Chief Executive Officer

I mean, we're looking at things. I think for us in those -- in the Mountain State markets, it's generally multifamily will be the dominant product type. I mean, when we do -- in separate accounts, we have some office assets in Denver, which is a very, very good office market. And then outside of the Mountain States, of course, in the Pacific Northwest, we have a very decent size office portfolio there and then one of the big properties that Matt was responsible for acquiring here in the subsequent to quarter-end is a property in Bellevue and that's a $227 million office project.

And then, by the way, that's the largest office acquisition we've ever done in the United States. So it just depends on where the opportunities are but to go back to specifically answer your question, I think in the Mountain States, the focus is really going to be on the multifamily assets.

Tony Paolone -- J.P. Morgan -- Analyst

OK. And then just last question with regards to your same-store NOI growth. Is there a way to gauge how much that the market is giving you versus the value-add component of what you're doing?

Bill McMorrow -- Chairman and Chief Executive Officer

Matt, do you want to answer that?

Matt Windisch -- Executive Vice President

Sure. I mean, if you compare what we're doing to some of the peers, obviously, we're significantly outperforming a number of the public multifamily companies. And so, I think clearly there is some secret sauce here in terms of the value-add we're doing. So I'd say probably half of the growth is driven by the value-add we're doing and half is related to the market.

Tony Paolone -- J.P. Morgan -- Analyst

OK. In that pipeline of value-add activity to do in the portfolio is still pretty deep?

Matt Windisch -- Executive Vice President

It is. Particularly on the multifamily side, we still have several thousand units we're looking to turn here in the next few years, especially on some of the properties we bought over the past 12 months to 18 months. We're just getting going on the value-add initiatives at those properties. So there is still a big pipeline of value-add across the portfolio.

Tony Paolone -- J.P. Morgan -- Analyst

OK. Thank you.

Operator

[Operator instructions] We will now take a question from Sheila McGrath with Evercore.

Sheila McGrath -- Evercore ISI -- Analyst

Yes. Good morning. On Shelbourne, now that the hotel is fully operational in June and July, I'm wondering if you could give us an update how things are trending and are you seeing any benefit yet with the asset added to the Autograph Collection in terms of rate.

Bill McMorrow -- Chairman and Chief Executive Officer

So, Mary, I'll let you go with that one.

Mary Ricks -- President

Sure. Hi, Sheila. Yes, so you mentioned -- really mainly the decrease in NOI was due to the refurbishment displacement in the lobby, as well as the ballroom, which just completed mid-July. And then, we also had the hotel close for two full days in April to work on some M&A systems.

So now that that is all completed and the hotel looks amazing -- Bill and I were just there a couple of weeks ago. We are seeing the group and the high-end leisure business come back. The high-end leisure bookings, they're about 10% up on this time last year and then group inquiries as well are up over about a 1,000 room nights. So both segments we're seeing come back nicely.

And I would say that the hotel is operating well against its peer set. So, yes, I mean, we're seeing it come back and we think we're going to have a good second half.

Sheila McGrath -- Evercore ISI -- Analyst

OK. That's great. And then, I guess, sticking with the Ireland. Bill mentioned yield on Capital Dock at 8%.

So if you look across most of your development, it is like 7% plus. Just wondering if you could give us some insight if there has been any recent comparable sale transactions in the Dublin market, so we can see how that spread is currently comparing to prevailing cap rates?

Mary Ricks -- President

Yes, I mean, so the Dublin -- it's kind of Dublin Class A office yields are holding at about 4%. So when you think about what we built Cap Dock to kind of where yields are today, I mean, there are a lot of trades that will show that, that was a significant spread. On the PRS side, we're seeing yields trend below 4%. so, then they are averaging right around 3.85%.

So everything that we're building to in Ireland, whether it's multifamily or commercial, we've got a significant -- somewhere between 200 basis point and 400-basis-point spread to where things are trading.

Sheila McGrath -- Evercore ISI -- Analyst

Great. And if you could talk about the multifamily portfolio in the Western United States you sold for over $200 million, just the interest level in the portfolio and maybe some insight on the cap rate?

Bill McMorrow -- Chairman and Chief Executive Officer

Occasionally, one of them was in the Sacramento market and then two of them were in the Greater Seattle area, they weren't in downtown Seattle, but they were suburban Seattle. And there were multiple bidders on all three of the assets. And I would say that the appetite for multifamily assets in the Western United States is as high as I've ever seen it. So there is no shortage of people looking to add to their multifamily portfolio.

And then so much of it, Sheila, is driven not only -- it's not only driven by the 10-year now down below 2% today, but it is also driven by the significant job growth that's going on in the western part of the United States and the great university systems that are producing all of these younger people. So it was a very competitive process on all three of these assets and we're really pleased with the final outcome of what happened. And as I said earlier too, we're also pleased with the fact that this gave us an opportunity on a tax-deferred basis to upgrade the income and upgrade the quality of the assets. And I think that's what -- I always say the hardest thing I get around with Mary and everybody to a lot of our properties.

The hardest thing to describe over these phone calls is the incredible level of upgrading we've been able to do over the last three or four years in the quality of the assets that we own. And so the sale of those three properties, and I'm not belittling the contributions they made, but we've now trade -- we're trading that into what I consider to be a much higher quality long-term asset.

Sheila McGrath -- Evercore ISI -- Analyst

And then last question. G&A year over year was down in the quarter. Is there any detail that you could give us on that? That looked good?

Bill McMorrow -- Chairman and Chief Executive Officer

Well, we have had a conscious effort over this last six months to not only stabilize our payroll numbers, which were down on a -- when you look back over this last year 12 months to 12 months, we've reduced our base payroll by almost $12 million with the Meyers sale and some other things that we've done. And I think -- and on the G&A front, we've reduced that by about $4.5 million to year to date and part of that came from the sale of the Meyers Group but part of it just come from our efforts to reduce costs. And so what you're seeing at the Company and generally speaking like on the personnel front today, if we're hiring somebody that's a replacement position, we're not really adding significantly to our payroll. And so with all of the things that we're doing globally, we have a lot -- we obviously have a lot of bandwidth within our existing 336 people to grow the business without growing either of those cost categories.

Sheila McGrath -- Evercore ISI -- Analyst

OK. Thank you.

Operator

With no more questions, I'd like to turn the call back to Bill McMorrow for final remarks.

Bill McMorrow -- Chairman and Chief Executive Officer

Thank you, everybody, for joining the call today. And as I always say, whether it's myself or Matt [Audio gap]

Duration: 46 minutes

Call participants:

Daven Bhavsar -- Vice President of Investor Relations

Bill McMorrow -- Chairman and Chief Executive Officer

Mary Ricks -- President

Mitch Germain -- JMP Securities -- Analyst

Tony Paolone -- J.P. Morgan -- Analyst

Matt Windisch -- Executive Vice President

Sheila McGrath -- Evercore ISI -- Analyst

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