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Kennedy-Wilson Holdings (NYSE:KW)
Q4 2019 Earnings Call
Feb 27, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, and welcome to the Kennedy-Wilson fourth-quarter 2019 earnings call and webcast. Today's conference is being recorded after this presentation. [Operator instructions] I would now like to turn the conference over to Mr. Daven Bhavsar.

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 1 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 fourth-quarter 2019 earnings release, which is posted on the investor relations section of our website. Statements made during this call may include forward-looking statements.

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

Bill McMorrow -- Chairman and Chief Executive Officer

Thanks, Daven. Good morning, everybody, and thank you for joining us today. We're pleased to report record results for both the fourth quarter and the full year of 2019. As a result of strong execution of our strategic initiatives, I'm pleased to report that 2019, our 10th year as a public company, was also our most successful year, as we produced the highest annual levels of GAAP EPS, adjusted EBITDA, and adjusted net income since going public in 2009.

This morning, we will discuss our progress on our key growth initiatives, our 2019 operating results, as well as review our key highlights and outlook for 2020. Our global team remains focused on executing our three strategic initiatives-growing net operating income from our properties, growing recurring fee revenue from our investment management business, and selling noncore assets. We made progress on all three fronts in 2019 and look forward to continuing this momentum in 2020. So starting with No.

1, growing our property NOI. In 2019, we were able to grow our estimated annual NOI by $14 million to $421 million despite being a net seller of assets and reinvesting in our development pipeline. The growth was supported by strong same-property results, as well as progress on stabilizing our newly constructed assets. Our goal is to continue growing our property NOI meaningfully in the next three years as we focus on both organic growth through the implementation of our value-add asset management program and the completion of our construction projects and leasing initiatives.

We expect to add $105 million of NOI by year-end 2023, including $34 million by the end of next year from the implementation of our construction projects and leasing initiatives. We also grow NOI through selective new property acquisitions. We completed $1.9 billion of gross acquisitions in 2019, of which KW's share was 33%, bringing our total to $23 billion of acquisitions at cost since going public in 2009. The second initiative of growing our fee-bearing capital and recurring management fees, 2019 was a strong year for our investment management business.

We grew our fee-bearing capital by 39% to $3 billion and also generated $79 million in investment management fees, including promotes. We ended the year on a high note with the final closing of Fund VI in the U.S. at $775 million, which came in above our initial targets. This adds to the approximately $11 billion of private capital we have raised since going private capital, thank you.

We continue to see very strong global demand for commercial real estate and continue to raise capital both in the U.S. and in Europe. We have built a unique global company over the last 31 years with a proven long-term track record that is drawing interest from a number of the world's major pension plans, sovereign wealth funds, and insurance companies. For 2020, our goal is to raise an additional $1 billion of gross fee-bearing capital.

We've already made great progress in the first two months of the year and expect further growth in our investment management business in the first half of 2020. Number 3, the sale of our noncore assets. We continue to execute our asset sale program, selling noncore assets and investments where we have completed our business plan and can recycle capital into other higher-quality assets with a higher return potential. For the quarter, we sold $511 million of assets, of which our ownership was 79%.

94% of our sales in Q4 were in our European portfolio, where we disposed of 19 wholly owned assets for $378 million, generating a return on cost of 38%. Our quarterly sales were focused on wholly owned hotels and retail assets, which together now account for only 18% of our total portfolio, down from 25% a year ago. For the year, we sold $1.4 billion of assets, of which our ownership was 54%. Our sales were 56% in Europe and 44% in the U.S., and generated $536 million of cash to KW.

On the investment front in 2019, we deployed $503 million of our capital with 58% going to new investments, 38% into capex and development, and 4% into share repurchases. In 2020, we expect to generate in excess of $400 million of cash to KW from noncore asset sales, including the $130 million sale of Pioneer Point, a 294-unit multifamily asset in East London, which closed last month. These proceeds will be recycled into our development and value-add capex projects and used to fund new investment opportunities across our platform. The global real estate investment environment today remains strong, with historically low interest rates and over $13 trillion in negative yielding global debt.

Commercial real estate continues to be a highly sought-after asset class. Having purchased $23 billion of assets at cost in the last 10 years, we're able to leverage our global relationship network and find off-market opportunities. Over half of our Q4 transactions were sourced off-market where we transacted directly with the seller. Across all of our major markets, including the western U.S., Dublin, and the U.K., we continue to see very favorable economic drivers of demand from both multifamily and office investment, including job growth, population growth, low unemployment, and good university systems that continually generate a talented pool of young workers, many of whom will seek rental housing.

Large U.S. technology companies continue to expand in the Pacific Northwest, Salt Lake City, and Dublin, creating incremental demand for both apartments and office space. To summarize, I'm pleased with the underlying fundamentals and the long-term growth prospects of our markets. We have in excess of $4 billion in purchasing power through our own balance sheet and the liquidity in our co-mingled funds in separate accounts.

Deploying this capital will enable us to continue growing both our NOI and recurring investment management fees, and we expect another great year in 2020. Now, to discuss our global same property results in more detail, I'd like to turn the call over to Matt Windisch.

Matt Windisch -- Executive Vice President

Thanks, Bill. Our stabilized portfolio NOI stood at $421 million as of year-end, split roughly 50-50 between the U.S. and Europe. We're focused on growing our NOI through our strong same-property results through the completion of our developments and the lease-up of our unstabilized assets, as well as through selective acquisitions.

So starting with our same-property results. Globally, our same-property revenues were up 4.3% and our NOI was up 4.9% for the quarter. For the year, same-property revenues were up 3.5% and NOI was up 4.1%. Our western U.S.

multifamily and our U.K. and Irish commercial portfolio together account for 75% of our same-property portfolio. And I'd like to provide more detail on each. In the U.S., our garden-style suburban apartment portfolio continues to perform well.

Our two largest regions, the Pacific Northwest and the Mountain states, delivered strong results, as we have seen throughout the year. In the Pacific Northwest, we had solid growth with NOI up 6.2%. This region continues the strong performance we've seen over the last few years, driven in part by the continued growth of tech companies. Amazon, which opened its first office in Bellevue two years ago, now has approximately 3 million square feet in the east side of Seattle and is reportedly looking to grow its current headcount to 15,000 employees in Bellevue, which would be an increase of more than seven times their headcount in that submarket.

It's not just Amazon that is expanding. Facebook, Microsoft, Google and Apple are also continuing to expand their presence in the region as they are similarly in Dublin, Ireland. We remain very optimistic that significant new jobs will continue to fuel the overall growth of the Pacific Northwest. We also saw continued strength in our Mountain state apartment portfolio, which primarily consists of Salt Lake City, Boise, and Reno.

This region saw revenues increase by 7.4%, the strongest growth in all of our regions. This led to NOI growth of 8.6%. We have now grown our Mountain state apartment portfolio from 3,600 units at the start of 2017 to almost 8,500 units today, including 1,300 units under development. Like the Pacific Northwest, job growth remained strong in the Mountain states.

In 2019, Utah and Idaho were the top two states with the highest percentage change in job growth. Utah's economy is booming thanks in part to strong population growth, which grew at the fastest rate of any state in the last decade. Utah also hit its lowest unemployment rate ever at 2.3%, which is the lowest rate in the country. Our Mountain state apartments currently have the lowest average monthly rate in our global portfolio, and we are confident that there is further upside both from the favorable job market and migration growth trends in this region, as well as the completion of our value-add initiatives.

Our U.S. multifamily team has completed approximately 2,000 unit renovations in the past two years with an average cost of $11,000 per unit and an average return on cost of 23%. We currently have another 2,000 units that we plan to renovate over the next few years, as well as numerous other amenity enhancements at our properties, the majority of which are taking place in our Pacific Northwest and Mountain state assets. In our global commercial portfolio, we completed leasing across almost 1 million square feet in Q4, leading to same-store NOI growth of 4.4%.

The majority of our leasing took place in our European portfolio, which accounts for over 70% of the commercial same-store pool. In Q4, our U.K. and Irish commercial same-store saw revenues increase 2.6% and NOI increase by 2.1%. We had a strong leasing quarter in Europe, where we completed 47 lease transactions across 800,000 square feet and added $4.5 million of annual income.

Over 2019, the team added $9.7 million of annual income, completing 159 lease transactions over 2 million square feet. The biggest contributor in the quarter was 111 Buckingham Palace Road, our largest Central London U.K. office asset, at over 224,000 square feet. Following the significant leasing momentum we had in Q4 and into Q1, we are on pace to bring the annual NOI for 111 Buckingham Palace Road to approximately $17 million.

With that, I'd like to turn the call over to Mary Ricks.

Mary Ricks -- President

Thanks, Matt. The second important way for us to grow our NOI is through the completion of our global developments and the lease-up of our unstabilized portfolio, where we have over $3 billion of gross development and stabilization projects under way and are on track to deliver $34 million of NOI by the end of next year; and in total, $105 million by year-end 2023. I'd like to provide a quick update on our near-term Irish and U.S. developments.

In Dublin, Clancy Quay 3 has 266 units currently under development, which will make Clancy Quay the largest multifamily community in Ireland, with 865 units once complete. We originally acquired Clancy back in 2013 when it had only 423 completed units and an 8.5 acre undeveloped site. Construction of the final phase is progressing well, and we are on track to complete this development by the end of Q2 2020. At 10 Hanover Quay, a 69,000 square foot office development adjacent to our Capital Dock campus, construction started in the quarter.

We are expecting to reach practical completion in early 2021, and we've seen good early leasing interest. And at 20 Kildare Street, a 64,000 square foot office development near St. Stephens Green and The Shelbourne, construction started in January. We expect to reach completion in mid-2021.

Office demand in Dublin remains very robust. In December, office vacancy hit 4.7%, a 20-year low for Dublin. In the U.S., our near-term development includes approximately 2,600 multifamily units. This includes 558 market rate units, the majority of which are in the Mountain states, and remain on track to be completed by Q1 2021.

We are also currently developing over 2,000 units in our senior and affordable multifamily joint venture, Vintage Housing. We initially acquired Vintage for $78 million in 2015 with 5,500 units. In 4.5 years, we've received all of our initial investment back, and we are on pace to grow the Vintage platform from 7,400 stabilized units today to approximately 10,000 stabilized units in the near-term. This represents 35% growth from year-end and almost 82% growth since acquisition.

The completion of these projects in the U.S. and Europe will bring our global multifamily portfolio to approximately 30,000 units. We are also adding to NOI in a meaningful way through new acquisitions. We completed $946 million of acquisitions in the quarter, of which our share was 45%.

In the U.S., we acquired a western U.S. multifamily portfolio off-market with almost 1,500 units for $342 million. Our average ownership in this portfolio is 38%. We also acquired Hamilton Landing, a wholly owned 406,000 square feet office campus in northern California for $115 million with an initial cap rate of 6.8%.

In the U.K., just outside of greater London, we purchased The Heights, a 350,000 square foot prime office park for $190 million in which we have a 51% ownership interest. This also had an initial cap rate of 6.8%. We have already leased 11,000 square feet of previously vacant space in the park at GBP34 per foot, and this is more than 15% ahead of the average rent at the park at the time of acquisition. The Heights and a number of our other U.K.

assets are located in the southeast office market, where fundamentals remain strong with Grade A vacancy at 4%. In the U.K., we saw a dramatic rebound of investment activity in the market in Q4, with GBP20.5 billion of investment volumes, up a significant 76% from Q3 2019 and up 23% on Q4 2018. Turning to our investment management platform, we had a successful year where we raised capital in our co-mingled funds and our separate accounts and grew our fee-bearing capital by 39%. In December, we closed Fund VI in the U.S.

at $775 million, bringing in a number of new high-quality institutional investors. Additionally, we continued to grow our separate account business, where we invest alongside our partners and acquire high-quality real estate, and in many cases are able to generate mid-teen levered returns on our capital. Our separate accounts represent 65% of our $3 billion of fee-bearing capital. With that, I'd like to hand the call back to Bill.

Bill McMorrow -- Chairman and Chief Executive Officer

Thanks, Mary. In 2019, of the $1.9 billion of acquisitions we completed, 90% were completed in our unconsolidated co-investment portfolio, which includes our separate accounts and co-mingled funds, and 10% were wholly owned. Looking ahead in 2020, we will look to selectively add to our own balance sheet while also continuing to grow our unconsolidated investment portfolio. As a point of reference, when you are looking at the KW balance sheet, the $1.3 billion of unconsolidated investments represents our ownership in $8 billion in assets and joint ventures, generating $342 million of NOI in which we have a 29% ownership interest.

This is in addition to the consolidated assets on our own balance sheet which, on a combined basis, results in a total of $14 billion of assets under management at carrying value. Turning to the capital markets, in the quarter we announced a $300 million investment by Eldridge Industries, which came in the form of a convertible preferred stock. In conjunction with this transaction, we also increased the target for our JV platform with Security Benefit, an affiliate of Eldridge, to $1.5 billion in asset purchases. To date, we have completed $386 million of asset purchases and look to continue growing this platform in 2020.

The Eldridge transaction helped to further strengthen our balance sheet, which at year-end had $574 million of cash and $500 million of availability on our fully undrawn line of credit. During the quarter, we paid off the remaining balance of our line of credit and the $200 million term loan relating to the 2017 acquisition of KWE. We have only $145 million of debt maturities in 2020, of which $100 million is planned to be repaid in full in April. So to summarize, we had an exceptional year in 2019 and expect 2020 to be another solid year for Kennedy-Wilson.

We continue to improve the quality of our portfolio, which is producing strong cash flow in growing markets. And we will remain focused in 2020 on continuing to drive growth in both our real estate portfolio and our investment management business. So with that, I'd like to open it up to any questions.

Questions & Answers:


Operator

[Operator instructions] We will now go to our first question coming from Tony Paolone with JP Morgan. Please go ahead.

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

OK. Thanks. Good morning. First question, just you mentioned the $1 billion goal for raising capital.

I think you mentioned it was on a gross basis for 2020. How should we think about just any offsets in terms of dispositions or harvesting prior funds to get to more of a net number?

Matt Windisch -- Executive Vice President

I mean, in particular, we have a co-mingled fund in the U.S. that we are selling assets out of. And so I think you could expect somewhere in the range of $300 million to $400 million of equity, of third-party fee-bearing capital that's, in essence, being sold in the year. And then, as we mentioned, we plan to raise in excess of $1 billion of new fee-bearing capital.

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

And also as it relates to your funds and your various partners and joint ventures, can you talk about just how the buy boxes may differ between what you're looking to buy inaudible a security benefit in that JV versus Fund VI, for instance, and maybe even AXA in the Euro Fund?

Matt Windisch -- Executive Vice President

Yes. This is Matt. I'll take that. So if you look at our co-mingled fund in the U.S., it's a value-add fund that has an investment period where we're targeting assets that we can buy and sell within generally three to five years and where we're trying to produce value-add type returns.

And so, to the extent there are opportunities that are more transitional in nature, that bucket has a first priority on those types of opportunities. And then, if you look at some of the other separate accounting joint ventures we have, including a security benefit bucket, that's more of a core to core-plus bucket with a much longer duration investment that they're looking at. So it's a pretty clear delineation between the more transitional, shorter-term properties and the longer-term properties that we tend to finance with 10-year fixed-rate financing.

Mary Ricks -- President

And then, in Europe, Tony, our joint venture in Ireland has first right on all PRS, or multifamily assets. And then, we have a European fund that we're currently raising that also has first right for any commercial investments in Europe. And just one thing to note. On the joint venture that we have in Ireland, we have existing assets in that and a very full pipeline in terms of what we're building.

So, when that's completed, we'll be over $2.5 billion of size, which we started about a year and a half ago. So we've made really, really good progress with that joint venture with an insurance company in Ireland.

Matt Windisch -- Executive Vice President

I think one thing just to add, too, in all these platforms, KW's a significant co-investor. So with the AXA platform, it's 50-50, and Security Benefit, we're putting up 20%. And in our funds, we're a significant co-investor. So we're investing in all these transactions through Kennedy-Wilson.

Mary Ricks -- President

Yes, and that's a good point, Matt, because Tony, one last thing is all of our investors really like that alignment. So for us, it's really important for us to continue that alignment with our investors.

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

My last question is you all have done well with the Mountain state strategy, and it seems like a number of those markets are coming on institutional investor radar screens. Where do you see the most opportunity right now, whether it's geographically or by property type, or type of investment?

Bill McMorrow -- Chairman and Chief Executive Officer

Yes. I think part of the key, Tony, is that we've always tried to be early to markets where we thought there were those characteristics that I talked about in the body of the script today. And so when you think about Seattle, we started there 16 years ago. And today, I don't know that we're the largest, but we're certainly one of the top five largest owners of both apartments and commercial properties in that Seattle market.

And the same thing was true with Salt Lake City and Boise, and so we have a very, very strong position there. I'm not saying dominant, but certainly like in the Boise market, we have a dominant position there. And the same thing is true, kind of secondarily, in the Reno market, particularly in our affordable and senior business. And when you look at the number of communities that we have in our affordable and senior business, we started with 30 communities 4.5 years ago.

And by the time we're done with the construction that we outlined, we're going to be up to 50 communities. Those are all generally in those markets, what we call those Mountain state markets. So the drivers, the fundamental drivers of any of these, and as I've said on these calls before, the Seattle market and the Dublin market share very common characteristics. And I would call it the top 15 highly capitalized tech companies that are expanding, job-wise, in both those markets.

And then, the other piece of this is that, as we've said on previous calls, when you look at the state income tax rates in the state of California being 13.5% and in the state of Washington 0%, and in the state of Idaho roughly 4% and roughly the same in Salt Lake City, you've got this millennial population that wants, I would say, a higher quality of life and also wants affordability in their housing. And so, we don't see any slowdown in those characteristics over the next 10, 15 years. We think those fundamentals just continue in the same fashion that they already have.

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

OK. Thank you.

Operator

We will move now to our next question. Our question comes from Derek Johnston with Deutsche Bank.

Derek Johnston -- Deutsche Bank -- Analyst

When we look at the $105 million NOI target by 2023, can you discuss the trajectory of this goal? I think you mentioned $34 million by the end of 2021, but is there a good amount to assume for our models for 2020?

Bill McMorrow -- Chairman and Chief Executive Officer

I think the number for 2020 is probably somewhere around $15 million to $20 million. But I think the point I really want to make, not to get lost in the construction, is that we're also doing new acquisitions. And we have a very, very strong pipeline of acquisitions that we're looking at, both here in the U.S. and I would say our core market of the United Kingdom.

When you think about us in Ireland, we're already either the number one or number two owner of commercial real estate there, and we have, as we've described, a very, very big part of our development pipeline is in Ireland. And so, while the development is clearly an important component, we expect to meaningfully add to the NOI over the next two or three years through acquisitions. And that capital, as I outlined, is basically coming out of noncore assets that we're selling at nice gains, and then taking that capital and redeploying it into longer-term value-add assets that have 10- to 15-year type of lives.

Derek Johnston -- Deutsche Bank -- Analyst

And then just segwaying into Ireland as you discussed, is it possible for you guys to go through the dynamics and the market fundamentals in Ireland for both the offices and the residential endeavors, similarly to you just did for the Mountain states, just so we can understand the mindset there and what inning you're in as far as those endeavors?

Bill McMorrow -- Chairman and Chief Executive Officer

I'm going to let Mary give you the meat of that, Derek. But I think always these things need some perspective. And so, without bragging, I mean, we were really first movers in Ireland starting in 2011. And so, when you look at what's happened there, the 10-year bond rate in 2011 in Ireland was 14.5% and the unemployment rate was close to 16.5%.

And so, now you fast-forward it, the 10-year bond rate is down near zero in Ireland, as it is in many of these European countries, and the unemployment rate is sub-5% today. And the other part of this which just can't be underestimated is the great university systems that exist in Dublin, a number of them that are producing these young workers for not only the tech companies, but also for the financial services companies. Our Capital Dock project houses JP Morgan. And when you go in and look at that space and walk the space, it's really space that is geared to what they call technologists that are younger people that are being hired really out of the university system in Ireland.

And in Ireland, if you're an Irish citizen, you go to school there beginning to the end of your education for free. But with that, I'd like to have Mary give you a little bit more granular information on Ireland.

Mary Ricks -- President

Yes. I mean, I think, so when you think about Ireland for us, what's meaningful there is the PRS market, multifamily, and the office market. And as Bill said, I mean, we really were first movers in Ireland. In 2012, there really wasn't a PRS market.

I think we were the first buyers of PRS. We bought The Alliance and Sanford Lodge at that time. Fast-forwarding to today, the PRS market, there was $2.4 billion of PRS deals that traded in Ireland in 2019. CBRE estimates that there's $6 billion of capital chasing PRS assets.

And when you think about where are we, you asked where are we in the market in the curve, it's interesting when you look at Ireland and yields where, for example, still on PRS, at 3.75% on average, obviously that's looking back because those are sales that have occurred. I just heard yesterday there was a deal that happened at 3.5%. And when you look at Ireland versus other big European cities, it's trading way wide of our peers. And when you think about where you can borrow, and so just the spreads on what you're buying, it's a very, very attractive asset class, and there's real demand.

So there's a big housing shortage in Ireland. The Central Bank has come out and said there's 34,000 residential units needed to fill that demand. And when you think about PRS, there was very, very little built up to the third quarter of 2019. And then just another stat for you.

Only 7% in Dublin, people are -- actually in Ireland, 7% are renting apartments versus in Europe, the rest of Europe it's 41%. So it's a really, really new, young sort of market. And as Bill talked about, all the technology companies really driving the growth in Ireland, and a lot of that is young people, which is the majority of the population in Ireland under 30, 25%. So all of that sort of leads to real demand for Irish multifamily.

And we're trying to do our part in the needs of housing in Ireland right now.

Bill McMorrow -- Chairman and Chief Executive Officer

Mary, that was great. And I think the other piece that I would add to what Mary just said is that one of the great strengths of the Kennedy-Wilson platform is our ability to what I call share best practices across both oceans, so to speak. But if you look at what Mary and her team were able to do in Ireland, it was really taking the model of what we had created here in the United States in terms of amenitizing these properties with gyms and business centers and actually a leasing center, and those concepts really didn't exist in Ireland. So she took that and really transported that, and the same thing is very true of what we're doing on the construction and development side.

So our construction team based in Ireland, which handles everything that we do in Ireland and the rest of Europe, and our construction teams here, they were both here yesterday, for example, in our headquarters office, and they share best practices in terms of how to run those parts of our business. And the other part of what is great about our company is that, when you look at it from an investment perspective, we're able to look at best risk-adjusted returns in really global markets. And so it gives us the framework of where we want to put our capital, whether it's our capital or our partner's capital, to get the best risk-adjusted returns.

Derek Johnston -- Deutsche Bank -- Analyst

Thanks everyone.

Operator

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

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Great. Thank you. I just want to go back to your initial comments saying very strong demand from global capital looking to invest in real estate. You talked about the $1 billion in 2020.

But just as you look longer-term, how much do you think that can grow? And I guess even more importantly, are you seeing signs that that capital is looking for either new regions or a shift in the types of assets, whether it's core, value-add, opportunistic? Just what does the landscape look like today versus what you've seen historically?

Bill McMorrow -- Chairman and Chief Executive Officer

Well, I'm going to have Mary answer part of this question too, but I think the global demand for yield is really in part is what's driving the interest in the real estate investment platform. But the other part of it, too, is that the number of big players in the real estate world, just like the banking industry, whatever it was 10 years ago, might have had 15,000 branches, and it's shrinking. The number of people that can really play in these bigger asset purchases continues to get somewhat smaller. And if you look at just the two acquisitions that come to my mind that we did, Mary, in the fourth quarter, one was $350 million, one was $190 million.

And in today's world, to be competitive, you have to be able to move with speed. And so the other great thing about our platform is that we don't third-party really hardly anything. All of the due diligence and the asset management of our assets is all done in-house. And now having done this for 30 years together, we have an information system that is second to none in terms of knowing the markets that we're in.

So I would say, without getting into the numbers over time, our platform is going to continue to attract way more capital than we're forecasting for this year.

Mary Ricks -- President

Yes. And the thing I would add to that is just, because we're operators, we're able to attract capital from allocators, and we're real operators of real estate. So great example is The Heights deal that we bought just outside of London, which is in the Southeast area of the U.K. where we've owned a lot of office product over time, in very short order, I think it was 30 days since we closed, we did an 11,000 square foot deal office lease at 15% above previous passing grants.

So we just have the team in place and the knowledge and the know-how to take that leasing risk in different locations and really add value, whether it be renovating a building, taking some leasing risk, building apartments. I mean, we're value creators through our platform. So I think we're going to continue to attract that capital.

Bill McMorrow -- Chairman and Chief Executive Officer

Mary's making a really important point here, not belittling them, because they've got great businesses, but when you think about most of the investment managers, they're reallocators of somebody else's capital to another real estate operating entity. So you've got pension fund giving money to an investment manager that has no operating capability, who then goes and finds a real estate investor that they allocate that capital to. So what we do at Kennedy-Wilson really cuts out one of these steps. We're the operator.

So the capital is coming to us from any of these investors. We're not going out and looking for an operator to find the investments. We are finding these investments ourselves out of this network that we've developed over the last 30-plus years. And we have relationships now really all over the world that allow us to find these off-market opportunities, and then we execute as quickly as is reasonable on these opportunities, and then we operate the assets ourselves.

So it's a really big distinction, when you think about it, as far as an investment management business.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

OK. Thank you. And then, as you think about your pipeline today, I mean, do you think that either this year or just going forward and what you're watching, do you think you'll see more of the $350 million and larger type deals for your investments?

Bill McMorrow -- Chairman and Chief Executive Officer

Well, I don't know, and I would say that we never start a year with a goal in terms of what we want to invest, because we've got to make sure that we don't want to get in some crazy mindset that we have to put money to work. And so we're always mindful of the fact that the only time we're going to invest money is if we think it's a good opportunity, not because we have to put money to work to earn fees. But I would say our pipeline right now of things we're looking at is as big as we've ever seen on the acquisition front. It's clearly different than it was in 2009 and 2010 and 2011.

But there's really good assets available as long as you can find these things yourself in off-market types of opportunities where there isn't as much efficiency in the market.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Is it weighted toward any region or asset class?

Bill McMorrow -- Chairman and Chief Executive Officer

I would say I call it lucky, but we just happen to be lucky to be in, I'm going to say one more thing. I think to successfully invest, you have to be in jurisdictions where there's actually transparency in terms of the financial system and where there's actually what I call rule of law. And so we're extremely lucky to be investors here in the United States, in the western part of the United States, and in the United Kingdom and in Ireland. And I think the third piece of that equation is that there has to be the ability to freely move capital without currency restrictions or any of those sorts of things.

And so I would say that we're seeing our main investment opportunities primarily in the United Kingdom and in the markets that we've outlined in the western United States. And that's only because in Ireland right now, when you look at the amount of development that we're doing and the properties we already own, we're a very dominant player there. And then, when you look at our portfolio map, basically 50% is in the United States and 50% is in the United Kingdom and Ireland now. And that's pretty much, I think, what you're going to see, going forward, that same percentage split.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

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

Bill McMorrow -- Chairman and Chief Executive Officer

Well, I mean, I would let Matt partially answer this question, but I think the clear strategy was to have alignment with an investor in our stock. And by that alignment, I mean having somebody that also had a willingness and a desire to deploy capital into our real estate investment platform. And so, when you look at going back to 2011 when we closed the first equity investment from Fairfax Financial, and they currently own almost 13 million shares of our stock, the idea, which is exactly the same as the Security Benefit idea, was to have somebody that owned our stock and had a strong interest in seeing the company succeed but was also giving us capital to grow our investment business, which allowed us to grow our recurring NOI and our investment management fees. So it's the same concept with Security Benefit.

And it just creates this perfect alignment. I would say that, when you think back to the KWE acquisition, which just happened in 2017, at that time, to refresh everybody's memory, we only owned 24% of that company. We bought in the public market, through a very long and intricate process, we bought the 76% that we didn't own. Including the special dividend that we paid at the close of the transaction, we've now distributed over $1 billion of cash out of that acquisition.

So it's always in these situations for us. It's trying to find the right alignment with our partners. And then I would say, Mary, the last piece of this is we like to look at things over long-term periods of time. Many of these, like the Security Benefit relationship, where it goes back to really our first bond offering in 2012.

And obviously, the Fairfax relationship where we've deployed a lot of capital together goes back to almost the beginning of time when we went public. We're doing a development project in San Francisco right now with the Takenaka Corporation, and the first transaction that we did with them was in 1995. And so it's always about creating these relationships with alignment, but then keeping these relationships going for long periods of time.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Great. Thank you for your thoughts.

Operator

Thank you.[Operator instructions] We will now go to our next question. That question comes from Alan Parsow from Elkhorn Partners.

Alan Parsow -- Elkhorn Partners -- Analyst

You spoke in your earlier comments about the fact that there's so much sovereign debt trading at negative ratings. And you have a five to seven-eights bond out there currently trading at about 575 yield. What are your thoughts about taking that in and refinancing that with either European low-interest debt or whatever?

Bill McMorrow -- Chairman and Chief Executive Officer

Yes, good question, Alan. But really, when you look at the overall cost of Kennedy-Wilson's debt, you've got to look at not only the unsecured debt, but you've got to look at the property level debt. And our overall cost of debt is roughly 3.5%, and it has a duration of right around five years right now. And as we talked about earlier in the call, we have hardly any debt maturities this year.

And then, Alan, to your point, I mean, the point that Mary made, we're able to borrow in Europe for basically the same duration as here in the United States at the property level between 2% and 2.5% fixed. Here in the United States, actually we did a loan here in the United States yesterday at the best 10-year rate we've ever done one at, at 3.07% on one of our apartment properties in Boise, Idaho. Look, we're always looking at opportunities. I can't really get into any details about what we're thinking about doing on this call, but we're always looking at opportunities to lower our cost of debt.

And the bond markets obviously, as we all know today, are not in the best of shape after the last three or four days, but the 10-year this morning was down at the lowest level that I've ever seen. I think it was at 1.25% this morning. Even in the credit crisis, Alan, I think that the 10-year hit 1.35%, 1.40%. So we're now at the lowest level it's been at in over 10 years.

So it's something that we obviously keep our eye on, but I can't specifically talk about what our plans are for that particular bond.

Mary Ricks -- President

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

Alan Parsow -- Elkhorn Partners -- Analyst

So on another note, right now, do you see the Coronavirus in any way affecting you, either in your minority interest in Japan or anywhere else in any of your properties?

Bill McMorrow -- Chairman and Chief Executive Officer

Well, I think to clarify one part of your question, Alan, I mean, in 2015, we sold all of our remaining interest in our Japanese assets. So we don't have a single dollar invested in Asia. My comment about your question on this virus is that we're taking all of the expected precautions. But I think for any company, I don't care whether it's us or Microsoft or Apple or whoever it is.

I mean, we're in uncharted territory here in terms of how this impacts people's businesses. And I'm not at all trying to minimize what's going on globally, but I think you always have to, whether it's a credit crisis like occurred in '08 or '09, or whether it's something like this, you have to think longer-term and look past this in a positive way. But we're taking all of the expected precautions in our properties, our company, whatever it is. But what the outcome of all this and the duration of it is, I have no idea.

Operator

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

Bill McMorrow -- Chairman and Chief Executive Officer

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

Operator

[Operator signoff]

Duration: 58 minutes

Call participants:

Daven Bhavsar -- Vice President of Investor Relations

Bill McMorrow -- Chairman and Chief Executive Officer

Matt Windisch -- Executive Vice President

Mary Ricks -- President

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

Derek Johnston -- Deutsche Bank -- Analyst

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Alan Parsow -- Elkhorn Partners -- Analyst

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