Kennedy-Wilson Holdings Inc (KW) 2012 Q3 法說會逐字稿

Welcome to the Q3 2012 Kennedy Wilson earnings conference call. My name is Sandra, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Ms. Christina Cha. Ms. Cha, you may begin.

Thank you. Good morning, everyone. Joining us on today's call are Bill McMorrow, Chairman and CEO of Kennedy Wilson; Matt Windisch, Executive Vice President of Kennedy Wilson; and Justin Enbody, Chief Financial Officer of Kennedy Wilson.

I'd like to remind you that this 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 one year. Please see the Investor Relations section of the Kennedy Wilson website for more information.

Please note that statements made during this conference call may be 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 will now turn the call over to Bill McMorrow.

Thanks, Christina. Good morning, everybody, and before I start the body of the call, we are closing in now on our third-year anniversary of going public. It was November 13 of 2009, and since I won't be talking to anybody during that period of time, I wanted to take a chance to thank everybody for their support. I think as you will see as we talk about not only the quarter, but the context of the last three years, that it has been a great period of time for the Company. So thank you for that, and with that, I am going to start the call.

As you can see from the earnings release, our EBITDA for the third quarter was $17.5 million, a 94% increase from $9 million in the same period of 2011. For the nine months ending September 30 of 2012, our EBITDA was $55.5 million, which is a 33% increase from $41.6 million during the same period of time in 2011.

As it relates to our investment account, it closed the quarter at $658 million, which is an increase from $582.8 million at the end of December 2011. But what I want to point out is there is always a lot of ins and outs in that investment account, and I believe I said earlier in the year that we thought the distributions out of that account would be somewhere between $75 million to $100 million this year.

So what has actually happened during the year is that the change was comprised of $239 million of new investments, but we had distributions out of that account of $164 million, including a little over $47 million worth of distributions in the third quarter. So while we've been actively investing during the year, we've also been actively taking distributions and harvesting out of that account.

One of the new metrics that we are going to include in our press releases going forward is the next one, which shows our square footage that we own. So on a rentable basis, not a gross basis, we own 14.6 million rentable square feet of real estate, which includes almost 14,000 apartment units and 24 commercial properties. On top of that, we own about $2 billion of loans secured by real estate. And as we will talk about here in a little bit, we've had a reduction in that account for good reason, because we've had very great collections and resolutions of our UK loan portfolio that we bought in October of 2011.

The other thing -- and I'll talk a little bit more about it in subsequent events here -- but when you look at what we are closing here in the fourth quarter, that square footage number is going to increase from 14.6 million to roughly 16.5 million square feet.

Our apartment business, we have about 1000 units that we are closing on the acquisition side here in the fourth quarter, of which we've already closed one that we did last week, which is this project called Lake Merritt in Oakland. So our apartment unit count is going to end up the year right around 15,000 units.

Included in that -- and I can talk about this because it has been in the press in Ireland -- tomorrow, we are closing on a 50-50 joint venture with Fairfax the acquisition of one of the really fine apartment projects in Dublin called Sandford Lodge. So that will be the second multifamily asset that we have acquired in Ireland.

So to continue back on the press release here, I think the breakout of the EBITDA is self-explanatory. From January of 2010 through the end of the third quarter, we've acquired $6.7 billion of real estate investments. Including what we already have under contract to close here in the fourth quarter -- we've got about another $400 million that we are closing here in the fourth quarter -- we are going to end up this three-year period of time at about $7.1 billion of acquisitions.

Compared to when we did this first call in the first quarter of 2010, I indicated to everybody that our goal -- even though I said we would not buy anything that didn't make sense -- our goal was to try and buy around $6 billion worth of assets during this three-year period of time. And so we are going to exceed that by a pretty good margin.

For the first nine months of the year, we acquired $1.5 billion of real-estate-related investments, including $659 million that we closed in the third quarter. We invested on our side roughly $176 million of our equity in all of those activities, including almost $69 million that we invested in the third quarter.

So when I break down the composition of the $1.5 billion, during the first nine months, along with our equity partners, we acquired $969 million of real estate investments, including $180 million in the third quarter.

When you look at the geographic locations, 68% in terms of our equity were in the United States, 32% in Ireland. It included seven multifamily properties of almost 2000 units and 11 commercial properties totaling 2 million square feet.

During the nine months, we, along with our equity partners, acquired $563.6 million of loans, including $478.6 million during the third quarter, at an average discount of 20% to their principal balances. In addition, KW and our equity partners originated a loan of $8.6 million at a 10.8% interest rate. These loans were all secured by 108 underlying properties located primarily in the western US and Ireland. We invested approximately $95.2 million of our equity in the loans, including $41 million in the third quarter.

During the first nine months of 2012, our equity partners and KW, we sold four multifamily properties located in the western US for a total of $243 million, which resulted in total gains at the 100% level of almost $33 million, and our share was almost $8 million. In addition to that, we returned $17.5 million of our equity to KW. We sold our interest -- in the third quarter, we sold our interest in a 324-unit apartment building in San Jose, which resulted in a gain of $2.2 million.

At the property level -- you know, we've been very active on the financing side. For the first nine months, we completed $476 million of property financings and refinancings at an average rate of 3.3% and a weighted average maturity of 6.6 years. For the nine months, we completed $829 million of property financings or refinancings at an average rate of 3.6%. This is 2011. And so the point that we are trying to make there is what we -- as I've said numerous times -- is what we are doing this year is extending out the maturity dates on the underlying debt on our ownership. We're not only extending out the maturity dates, but we've also been able to lower the average interest rates.

One of the many great success stories of what has happened during the last year has been the resolution of our loan portfolio that we bought in October of 2011, just a year ago. The unpaid principal balance of that portfolio of loans that were basically fully performing was $2.1 billion. And as of September 30, 2012, the unpaid principal balance has been reduced to $1.3 billion. We've had resolutions of almost $757 million, representing 36% of the portfolio. And as you are going to see here in just a second, since the end of the quarter, we've resolved about 100 -- almost $200 million of additional loans in that portfolio.

You might also recall that Kennedy Wilson and Fairfax purchased 25% of that original portfolio, and against our 25%, we had a loan that totaled roughly $350 million.

$325 million.

$325 million. That debt now, including the resolutions that we've had post the end of the third quarter, has been paid down to right around $100 million. So we've pay back $250 million of that debt during this period of time.

We also announced the formation of two platforms in Europe during the year. On March 13, we announced the EUR250 million or $325 million capital commitment from Fairfax. As I mentioned, we are closing the Sandford Lodge transaction tomorrow. We closed the Alliance apartment building transaction inside that venture. And we closed the Brooklawn office building in Dublin inside that venture.

In addition to that, we announced a platform with a major European financial institution that in dollar terms totaled $2.5 billion. And inside that platform, we acquired from a British bank a group of Irish loans that had an unpaid principal balance of $449 million. In that transaction, we invested roughly $7.5 million of our equity.

In Japan, as well as our multifamily business here in the United States, it continues to perform at a very high level. In the US, our average occupancy is running roughly 95%. In Japan, it is running 97%. And in both cases -- and now it is also true in Ireland -- we are doing meaningful cash distributions out of that entire portfolio on a monthly basis. If you look at just Japan by itself, since September of 2010, we've distributed $51.5 million of cash out of that platform, of which our share was $24 million.

As our investment platform and our third-party business grows, obviously, the income in our service business continues to grow. So our management and leasing fees increased by 12% to $12.5 million for the three months ending September 30 from $11.1 million for the same period in 2011. And during the three months ending September 30, our service business achieved an EBITDA of $4.8 million, which was a 50% increase over the same period of 2011.

Our management and leasing fees increased by 35% to $35.5 million from $26 million. And during the nine months, our service business EBITDA increased to $11.2 million, which was a 72% increase over the same period of 2011.

On the financing side, as you all know, in July, we issued 8.6 million additional common shares, which resulted in gross proceeds of $112 million, of which $40 million was used to pay off our $100 million line of credit.

And then, as I alluded to, we've had subsequent events that are meaningful. Subsequent to September 30, we've acquired or entered into contracts to acquire $391.8 million of real-estate-related investments, which as I said earlier, are going to represent 1.8 million rentable square feet, comprising almost 1000 apartment units and six commercial properties. All of those transactions will close here in the first quarter -- or the fourth quarter. And so, as I said earlier, that will take -- assuming we don't do any other transactions, that will take our three-year total to $7.1 billion of acquisitions.

And then as I also said earlier, subsequent to the end of the third quarter, we've resolved an additional $190 million in our UK loan pool, which will go to -- not only those distributions will go to all our partners, but it will increase our debt secured by our piece of that venture by another $35.5 million. So the good news on the UK loan portfolio is we are running not only ahead of the time frames that we had laid out in our business plan, but the resolutions, in terms of the total dollar resolutions, are running ahead of our original forecast.

So with that overview, I'd like to open it up to any questions that everybody has.

(Operator Instructions) Jason Ursaner, CJS Securities.

Bill, first question, I want to concentrate on the flowthrough of JV income. Your equity in JV income on the P&L hasn't really shown a lot of growth as you add properties, but it is mainly -- it looks like it is related to higher pro forma share of D&A and interests. So it is more of a shielding income issue, not an NOI issue.

So I guess I would have thought you may have to show more income, given all the refinancing there. So I just want to make sure I am understanding. Is it a lower yield on any of these properties, or just generally how is the P&L equity income comparing to cash flow at, say, the JV level or, more importantly, the property level right now?

I'd ask Matt to answer that question.

You're right, the equity in JV income line has not gone up with the new acquisitions, and the reason why is, generally speaking, as we acquire new properties, they run at a loss because of the depreciation that runs through those properties. And so really the metric I would point you to is the EBITDA at the investment level. And so if we are not selling assets out of the equity and JV income line, it tends to run at breakeven or a small loss. And so that is why you're not seeing -- as we add properties, you're not seeing that line go up.

But in terms of how the properties have performed, looking at just the apartment buildings, same-store, we had 12,000 units last year that we continue to own this year. The NOI at those properties are up 7.5% year-over-year. And that is on occupancy that has basically remained steady at 95%.

On the office buildings -- commercial properties, there are 19 properties that we owned last year that we continue to own this year. Occupancy there has ticked up about 1%. NOI is up 10% year-over-year. So the operating performance at the properties improves the equity and JV income line; however, it doesn't reflect that because of the additional depreciation we are taking as we buy more assets.

I think too, Matt, it is not totally material, but one other thing to remember is that under the anomaly of accounting, one of the changes that has taken place in the last couple of years is that you can't -- you buy a property, like say the Alliance apartment building, we had about $1,300,000 of closing costs related to that, and that is comprised of a whole lot of different factors. It could be legal fees, it could be transfer tax, it could be fees you are paying on your loan financing. And up until a couple years ago, all of those costs would have been capitalized actually into the acquisition.

Today, all of those things get written off in the period that you acquire the asset. So in the case of like the Alliance building, where we own 50% of that, half of that got taken into -- as a write-off got taken into the period you acquire.

And so if you are in an active what I will call hard asset acquiring mode, like we have been in, you are going to see those charges in the current period. But then as you go, say, into 2013, you will start seeing the real benefit of the income from those properties because it won't be burdened by taking what I would call the closing costs and writing those off in the current period. So I think that is one other factor that tends to influence us when you are in an active acquiring mode.

Got it. So the pickup on the investment income is taking longer than maybe it has previously, given some of these issues?

I wouldn't say longer, but it is just a difference in the accounting treatment than it was a couple years ago. And -- not our change in accounting. It is just the way the accounting standards have changed.

Right, okay. And then just a quick follow-up on the figure, Matt, that you said, the 7.5% NOI growth. Obviously, the multifamily class is the biggest part of the story right now, almost 40% of the total investment account. So I just want to make sure I understand the managed growth opportunity there.

Because right now, if I look at that portfolio, it is almost at a 5 -- almost over a 5.5 cap at your book equity. So on current NOI, if I looked at it say at an average of 5 cap, it is roughly an $100 million embedded gain. But if I look out one or two years, if I'm taking that 7.5% growth in NOI and I use that as an annual growth rate, the embedded gain that you guys have grows tremendously. Obviously, it is highly sensitive to the cap rate and that NOI growth.

So I guess if you could just walk through what led to that 7.5% growth in NOI. Was it rental growth? Did you see the leverage you would have expected to see on rental growth? And how you are thinking about that managed growth story still as we look out a year or two in the multifamily (multiple speakers).

I want Matt to answer that question again, Jason. But also remember that -- and it's true of the office buildings we acquire and the apartment buildings we acquire -- there is always a story to those things in terms of the value-add component.

And so when you are -- like this deal in Lake Merritt is a good example. We are -- of the 150-plus units in that building, 50 of them are rent-controlled. But we are going to embark on a $3 million capital program on that property to not only upgrade the units, but upgrade the common area. And so even though we are growing this income significantly, you have to get that money put back into the property. So that can sometimes take you six to nine months before you've recycled that capital into fixing up the property, where you are actually really able to move rents.

So there is a bit of a time lag, because virtually everything that we do has some sort of a value-add at the property level -- I would call rehab component. But Matt, do you want to answer that more specifically?

Sure. Jason, the way the NOI growth works, because the revenue at the properties is higher than the expenses, there is operating leverage such that to get 7.5% NOI growth, you are really only talking about 4% to 5% rent growth at the revenue line. So if we are able to continue to grow rents in the mid-single digits, you are going to see similar NOI growth over the next several years, if we are able to continue to grow the rent. But the point is that it takes less than rent growth, so to get 7.5% NOI growth, let's say, it only takes 3% to 4% or 5% rent growth.

Because your expenses aren't increasing at the same rate.

Exactly, and the revenues are higher than the expenses.

Right. But in order to get those revenue increases, you are not only getting them because the market is accepting those rent increases, but you are doing improvements to the property. You are fixing up those individual units and you are fixing up the common areas. So the day that you buy an apartment building or an office building, the work to start getting all those rent increases can lag by six to nine months, because you are doing the work from the day you acquire the building.

Got it. I guess (inaudible) just as you look at that opportunity, I just want to make sure I'm understanding the same way you are thinking about it when you talk about managed growth. If you are looking out at $150 million $155 million, $160 million of NOI in a few years, is that the reason you are still kind of in this strategy of managed growth? Because it is a huge number. I just want to make sure I am not crazy looking at it in terms of how your book equity, even excluding a promote, I mean, it grows exponentially as you are increasing this NOI.

That's right. And so, because it is fresh in my mind, I can talk to you about the Alliance property. It is a more simple example in Dublin. We didn't have to do a big CapEx program there. We put a new leasing office in. We put a couple models in. We cleaned up the property. But it was running 100% occupancy when we bought it and it continues to run 100% occupancy.

But because of what we are doing from a management perspective with the new leasing office and so on and so forth, on renewals there now, we are increasing rents 10% to 15%. But there is also a little bit of a lag, too, because you are trying -- in that case, it is a 200-unit building. You are not turning the whole building over in three or four or five months. It can take you a year, year and a half to two years to turn over a building like that in terms of tenancy at the increased rent levels.

But I think we are very comfortable telling you that the numbers that Matt gave you would show roughly a 4.5% revenue increase are achievable across our portfolio, because we own assets that are -- as I've said I think earlier on, everything that we've bought is pretty much in high barrier to entry markets. So if you are in a high barrier to entry market, like say central Dublin or central Tokyo or Southern California or San Francisco or Seattle, which are our primary markets, where there is not a lot of new construction going on, you are able to achieve rental growth.

The other thing that -- obviously, when you -- and I've said before on these calls -- when you think about Ireland, even though it can get masked inside this whole euro situation, there is actually corporate growth going on in Dublin, whether that is Google or Facebook or any of these companies. And so you've got growing populations in confined, hard, high barrier to entry markets with high quality assets that we own. So you are going to get rent growth over -- year-over-year.

Okay, great. I appreciate all those details. I'll let some others have a chance. Thanks, guys.

David Ridley-Lane, Merrill Lynch.

So last quarter, you mentioned three big European loan portfolios that you were looking at. Could I get an update on the status of those loan sales?

Yes, there are several that are still underway. There were -- look, we are not going to win every one, and if we do, then probably we are doing something wrong. And so one of the big ones, which was the Kildare loan portfolio, we did not get. But we've got several other big ones that we kind of are in the thick of right now.

I would tell you that in terms of Europe, if you want to look at it in baseball terms, we are kind of in then -- in my opinion anyway -- we're still in the first or second inning of what is going to happen over there. And so there will continually be -- the pace of loan sales has certainly picked up. And there are several big ones that we're right in the middle of here as we sit here in the fourth quarter. But we are going to win some and we are going to lose some. Some we are not going to be able to get to the final numbers.

So what we are trying to do in Europe, and particularly in Ireland and the UK, particularly Ireland, since we are also supplementing what we are doing on the loan portfolio acquisitions with these hard asset purchases. And to give you a frame of reference, again, like on that Brooklawn office building, it sold, right or wrong, to those investors in 2006 for EUR47 million. We bought it for EUR15 million. And so on these repriced, high-quality, infill, high barrier to entry assets in Ireland particularly, we are going to continue to barbell the loan purchases that we are doing with these hard asset purchases.

Okay, great. The European banks certainly continue to shrink their balance sheets, and glad to hear you say that the pace of loan sales has picked up. I'm a little bit interested -- have you seen any potentials of, say, European-based banks looking to shed US loans, and any opportunities around that?

There will be. We did a relatively small transaction here in the -- did that close in the third quarter, the Dallas? We just closed a small purchase of a condominium project in the Western United States in the -- it was either the end of the third quarter or beginning of the fourth quarter -- that came out of a European bank.

I still believe, as happened in Japan, where the Japanese banks were not only selling assets in Japan that we were able to buy, but we were able to buy US assets, that there will be a certain level of assets that are sold out of the European banking system that are here in the US. And there is all kinds of different reports out there, David. But there is probably as much as $300 billion to $500 billion of loans here in the United States that the European banking system has originated.

And in addition to that, as I've said on these calls before, there is all kinds of different estimates, but there is probably as much as $1 trillion of assets that are inside the banking system in Europe that are European-based that are going to trade hands here over the next three years.

So we now have, in Europe under Mary Ricks' direction, we've got 29 people on the ground. And one of the keys to being able to execute the right way the kind of strategy that we are doing in Europe is to have your own team in place. It is not like you -- you can't be what I call an astronaut kind of investor, that is just flying in and out of a market and making your investments. So we've got a real team in place.

I said on the last call that we've just opened an office in Madrid that is primarily focused on the auction business. But the Spanish government has just set up an institution similar to what was set up in Ireland. It's a liquidation entity that they are moving banking assets into. So that may present some investment opportunities, and the Spanish banks have a big exposure outside of Spain to the real estate business.

So it is all going to -- it is all playing out, I think, just as we felt it would when Matt and I made that first trip to Dublin in -- it was only two years ago. We are going on two years that we made our first trip to Dublin. And so it is, I think, playing out sort of just as we scripted.

All right. That sounds good. Can I just get an update on the number of West Coast apartment buildings that you're actively marketing for sale?

We have -- we've got three West Coast apartment buildings that total about 1100 units in total that we've got identified as sales candidates. Closer -- yes, it's about 1100 units in total. But I don't think any of those are going to come off the books here in the fourth quarter. They are all next year transactions.

Got it. And then maybe one last one for me. Maybe just sort of a bigger-picture question. You talked about hard asset purchases in Ireland. I think the multifamily story there is very well-understood, but you did purchase the Dublin office building in the third quarter. And I'm interested in hearing your thoughts on the attractiveness of office in Ireland.

Well, you've got -- as I said, you've got a growing corporate -- what is masked in Ireland is that obviously you've got a banking situation and you've got whatever is going on externally as it relates to the euro. But you have a growing -- for a variety of reasons, you've got a growing corporate population, as I've mentioned those names several times. So you've got almost 500 US companies that have their European headquarters in Ireland.

But you've got not only a confined geographic space, you've got a limited office market there. So you are going to start seeing vacancy rates, in my opinion, in central Dublin continue to decline. And so the office building that we bought -- and we are looking at several other office buildings -- the first office building we bought, we bought that at an unlevered yield of a little over 14%. And we don't have any debt on it. We did that in a 50-50 venture with Fairfax.

But you are going to see those kind of opportunities. It is a great small building in a really A kind of location in Dublin. So you are going to see a few more of those higher -- what we are trying to do there is buy -- where it makes sense, we are trying to buy really the highest quality of asset in these infill kind of locations. Those will always be the first to recover in value and rent.

It just sounds like more an opportunity to pick up high-quality assets versus the rent growth that you're seeing in the multifamily sector in Ireland already.

That's true, but what I'm trying to say also is if you can kind of take a perspective of looking out three years -- maybe five, but three for sure -- you don't have any new construction going on there. And so if you've got a growing user base of these companies that are continuing to grow. They've got a really great education system in Ireland, and it's particularly not only the tax rates, but it's attractive to particularly these US companies, half the population in Ireland is under 35. And so it is the only EU country, I think, in the last 10 years that has got a positive population growth.

And so when you look at all of those factors with no new construction, it's my opinion that three to five years from now you're going to actually see higher rental rates in the office market as well as what is happening -- clearly happening in the apartment market.

All right. Thank you very much.

(Operator Instructions) Will Marks, JMP Securities.

To take some of these questions a little step further, who is the competition over in Europe that you are seeing for these office and apartment deals?

Well, good question. More liquidity is returning to the European market. And if you really even think about the last 120 days, up until the beginning of July, there was really no debt -- when you were buying a loan portfolio, there was no ability to finance that. They call it a loan on loan. Like last year, when we bought the Bank of Ireland loan portfolio and paid $1.8 billion, except for the piece that we were able to leverage, we did that all-equity.

Starting in July, you've seen a real change in the environment in Europe among the bigger, healthier banks. And so I can think of a half a dozen lending institutions now that are actively chasing the loan-on-loan business, where they are financing up to 50%, sometimes 60% of the acquisition price. And so that is allowing people to look at higher levered returns.

So I would say there is half a dozen active buyers on the loan pool side. They are primarily -- as I think about it, Will, I'd say 100% of them are US capital. I don't know where the capital is coming from in their platforms, but they are US companies. So that is kind of on the loan side.

On the harder asset side, there is not great financing yet that has developed in that market. And so if you are buying a EUR27 million deal, even though that converts to say $35 million, although there were a number of people that wanted to buy that Sandford Lodge deal, you are doing these things, like we are closing that on an all-cash basis. It weeds out the number of buyers that are going to buy that kind of an asset, because there is not as active a financing market on the hard asset purchase side, particularly in Ireland. That financing for Ireland generally, with the exception of one bank, has to come from external lenders.

So there is more competition on the debt purchasing side, but there is still plenty of opportunity to do transactions there that make sense to do.

But like I said earlier, not to mislead anybody -- it is not like we're out there by ourself and it's not like we're going to try and win every single transaction. I could care less if we make any investments to fill out our platform if they don't make sense from an investment perspective.

It almost sounds like, from one of your first responses to my question, that there is more optimism, given if the banks are more willing to participate, more optimism in terms of the economic outlook. But we don't really hear about that in general, I guess.

I think that generally, my experience has been -- and this having done it for 25 years here -- that the newspapers were always at least six months to a year behind reality. And if you think back to when we first started looking, Ireland, as I've said, is a 100% better place than it was two years ago, both psychologically and economically.

And so the banks -- being an ex-banker myself -- ultimately, when you go through these what I call restructuring periods, you eventually wake up and realize you have to make money. And they are awash in deposits right now on a global basis. And so they are looking at opportunities where they can lend money now on these loan portfolios at interest rates that are somewhere between 500 and 600 over LIBOR, which is an attractive use of their capital. So it has all started again -- not again -- but it has started in Europe, where more liquidity is -- by market forces is being driven back into the system.

Okay. Makes sense. It is good to hear that what I read is a little bit behind, I guess.

Always is.

I think I need to get over there. Okay, so a couple other things. One is there was some press -- I can't remember if it was in the Wall Street Journal or where it was -- about some Hawaii land property that was for sale. And any news on that?

You're talking about the Dillingham Ranch. Yes, it is --

Yes, sorry, Dillingham Ranch.

Yes, it on Oahu. It is 2700 acres, including 18 acres on the beach. We own that inside the Company on an attractive basis, but we don't have any debt on it. And we -- it is in market. We've had it in market now for probably 120 days, I would guess. We had a big broker open house over there in -- I think it was July or June, and we had about 50 -- we had in excess of 50 brokers from all over the world. Because this is the kind of property that needs to be marketed on an international basis.

But it is one that is going to take some time to sell. There is not -- you don't want -- with something like this, it is a great, great asset, and it is only 35 minutes from the Honolulu Airport. And so -- but more than likely, it is going to get sold to an international buyer. But no, there is no pending contract or anything like that right now. But hopefully that is a 2013 sale.

Okay, perfect. I appreciate the color. That's all for me. Thank you.

David Gold, Sidoti.

Just two quick ones. One was, on the last conference call, you called out about $20 million of incremental EBITDA. And was curious if all of -- proportionally if the $5 million was entirely in the third quarter or if that is still coming in house.

That $5 million is -- that is all in the third quarter.

Okay, perfect.

There has been additional acquisitions we've had in the third quarter on top of the $20 million annual that Bill had mentioned on the last call that you will see in the fourth quarter.

Got you.

As I mentioned, too, David, you are going to see the real benefits of the things that we are closing in the fourth quarter will be showing up next year. And so we've got another $400 million worth of acquisitions that we are closing in the fourth quarter, all of which, except for one, have meaningful NOIs. And so that -- the benefit of those things that we are doing in the fourth quarter are going to show up next year.

Sure. And just for what you did in the third quarter, is there an EBITDA number you are comfortable putting out?

What do you mean? I'm not sure I understand.

In other words, similar to what you called out in the second quarter, incremental EBITDA pickup that we should look for.

For the acquisitions that were closed in the third quarter, not including what we've closed in the fourth and what is under contract, it is roughly $8 million on an annual run rate basis, in-place NOI.

Excluding fourth quarter.

This is just the third quarter only.

Sure, perfect. Thanks. And then just one other. Can you give us a little bit more color on -- obviously, we've gotten a bit on how you are -- thinking on the world. But it looks like from -- on the sales side, basically in multifamily, it is selling West Coast and buying presumably other areas of the country. Is that how to think about it -- and overseas?

I wouldn't say so much other parts of the country. What we've continued to stay focused on in the US is the West Coast. We are, in the fourth quarter, buying an apartment building in Salt Lake City. And I think I had mentioned on the last call that we had made one other investment in the third quarter in Salt Lake City.

And so we've expanded our West Coast footprint, if you will, only to really one additional city of any meaningful nature. And so the West Coast, it is still Seattle, San Francisco and Los Angeles. And then we've made -- now we are making our second investment in Salt Lake City. We're buying project an apartment project up there that we're paying about $43 million for. It is a little over 400 -- right around 400 units, and on 35 acres of land.

And so -- but that is kind of it in terms of the expansion of our West Coast. And then the other -- we are not really doing any new investing in the apartment market in Japan. So then the only other market that we are focused on is really Dublin.

Perfect. Thank you both.

This concludes the question-and-answer session of today's call. I will now turn the call back to Bill McMorrow for closing remarks.

Okay, so, thanks, everybody, for taking time. And as always, Matt or Justin or I are available for any additional follow-up questions. And as I said at the beginning of the call, in closing, we really appreciate the support that everybody has given us over the last three years that has allowed us to grow the Company the way we have. So with that, I'll close the call.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.