Kennedy-Wilson Holdings Inc (KW) 2014 Q3 法說會逐字稿

Welcome to the Q3 2014 Kennedy-Wilson earnings conference call. My name is Paulette and I will be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded.

I will now turn the call over to Helga Richardson-Thomsen. You may begin.

Thank you. Good morning, everyone. Joining us today are Bill McMorrow, Chairman and CEO of Kennedy-Wilson; Matt Windisch, Executive Vice President of Kennedy-Wilson; Justin Enbody, Chief Financial Officer of Kennedy-Wilson; and Mary Ricks, President and CEO of Kennedy Wilson Europe calling in from London today.

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 one year. Please see the Investor Relations section of Kennedy-Wilson's website for more information.

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, Helga, and good morning, everybody. And, as is our normal practice here, we're going to go through the earnings release and then we'll open it up for questions.

So as a starting point for the 3 months ended 9/30, 2014, our adjusted EBITDA was $69.5 million which is a 67% increase over the $41.5 million for the same period of 2013. For the 9-month period, our adjusted EBITDA was $261 million, which represents a 138% increase from $109 million for the same period of 2013.

Our adjusted net income was $129 million for the 9 months or $1.45 per basic share compared to $41.9 million or $0.61 per basic share for the same period of 2013.

Our GAAP net income to common shareholders was $44.6 million or $0.47 per basic and diluted share compared to a loss of $10.2 million or a $0.15 loss per basic and diluted share for the same time period of 2013.

As I said in the press release, we continue to find attractive investment opportunities. But at the same time, as we'll talk about a little bit later, we're realizing on a significant amount of investments that have either reached their peak value or don't fit our strategic business plan.

Then secondly, we're very focused on the asset management of the individual properties where we have big upside in terms of the net income. And at the same time, we're maintaining meaningful liquidity to take advantage of the big pipeline that we have both in Europe and here in the United States.

In terms of the third quarter highlights, in August 2014, we converted the notes secured by the landmark Shelbourne Hotel, which is located in Dublin, Ireland, into a direct 100% ownership in the property. As a result of taking title to the property, the Company consolidated the assets and liabilities at fair value and recognized an acquisition gain of $28.6 million.

The Shelbourne Hotel is really one of the most recognized and iconic properties in Ireland. And along with the recovery that has taken place in Ireland over the last couple of years, the hotel has benefited greatly from this recovery, as evidenced by the fact that the year-to-date occupancy is approximately 90%. And we've had growth in both revenue and net income year-to-date.

We've also implemented a capital improvement plan at the property, which we hope will continue the trend and meaningfully increase the operating performance of the hotel.

The second highlight of the third quarter was that the Company and its consolidated subsidiaries have approximately $1.5 billion of potential liquidity, which includes approximately $665 million of availability under our lines of credit, both at Kennedy-Wilson Holdings and at Kennedy Wilson Europe.

Just as a frame of reference, I've been here for now 26 years. Our first line of credit was $400,000, so we've grown that from $400,000 to $665 million.

During the 3 months ended September 30, 2014, the Company and its equity partners, including KWE, completed approximately $732 million of investment transactions. The Company invested $108 million in $452 million of acquisitions. And we received back to the Company $52 million from the disposition of $280 million of assets.

In terms of the year-to-date highlights, for the 9 months ending September 30, 2014, the Company and its investment partners, including KWE, completed $3.6 billion of investment transactions. The Company invested $403 million of equity in $2.6 billion of acquisitions. And we received $163 million back from the sale of $963 million of assets.

I want to take a moment here. Next week, on the 13th of November, we're going to celebrate our fifth anniversary of going public. So I want to share a few -- three stats from 2009 to today.

Since January of 2010, we've grown our assets under management by 213% from $5.6 billion to $17.5 billion. During that same period of time, we've acquired $13.5 billion of assets at cost across the US, the United Kingdom, Ireland and Japan.

And as I mentioned earlier, our adjusted EBITDA for the first 9 months of this year was $261 million, which compares to the full year of 2009, in which our EBITDA was $37 million. So we've gone from $37 million in 2009 to the first 9 months of this year, $261 million.

In terms of the investment business, by way of a little background, our investment portfolio now totals 31.3 million rentable square feet and includes 128 commercial properties and 19,400 multifamily units. Subsequent to September 30, we acquired an additional 312 multifamily units in Denver, bringing our global multifamily portfolio to 19,700 units.

Currently, we have approximately $138 million under contract comprising almost 1,200 multifamily units in the Western US, which by year end, obviously, will bring our multifamily units to over 20,000 units globally.

I mentioned on the last conference call that in addition to the new acquisitions, we have entitled, or we're in the process of entitling, approximately 3,000 multifamily units both in the United States and Europe on land that is adjacent to, generally speaking, properties that we already own, where we have little or no basis on these sites.

Our investment account at September 30 stood at $1.5 billion, which is an increase of 29% since the end of 2013. This increase was driven primarily by our investment in multifamily assets in the Western United States and our investment in KWE.

To break down now the quarter a little more, for the 3 months ended September 30, 2014, the investment segment of our Company reported an EBITDA of $65.2 million, which was a 74% increase from $37.5 million for the same period in 2013.

For the same-store property multifamily units, our total revenue increased 8%. Our net operating income increased 9%; and occupancy remained steady at 95% compared to the same period of 2013.

On the commercial side, generally our office buildings, total revenue increased 4%; net operating income increased 6%; and the occupancy stayed relatively flat at 85%.

But remember, we have a number of office buildings that we have purchased that were at very low occupancy where we're rehabbing those office buildings. So I would expect over time, as we finish the rehab of those office buildings, that you'll see that 85% occupancy number increase.

The Company and its equity partners acquired approximately $452 million of real estate during the quarter, which included $270 million acquired by KWE. As I mentioned earlier, we invested -- KW -- $108 million of equity in these transactions, representing approximately a 24% weighted average ownership stake.

The Company's investments for the quarter were directed 60% to the United Kingdom and Ireland and 40% to the Western US.

As I said earlier, we continue to dispose of certain assets. And during the quarter, the Company and its equity partners sold three commercial properties, two multifamily properties, one condo unit, one residential investment, which resulted in gross sale proceeds of $280 million.

The Company's share of the net proceeds, after repayment of debt, was approximately $52 million, including promoted interest. This compared to the book value of those assets of $39 million.

For the 9 months, the Company's investment segment reported EBITDA of approximately $231 million, which was a 142% increase from the $95.2 million for the same period in 2013.

For our multifamily units, total revenue increased 7%; net operating income increased 10%; and the occupancy stayed at 95%.

On the commercial side of our properties, the total revenue increased 3%; net operating income increased 1%; and the occupancy levels increased 1% to 85%.

For the 9-month period, the Company and its equity partners acquired approximately $2.6 billion of real estate related assets, including $2 billion that were acquired by KWE. The Company invested $403 million of equity, representing an approximate 16% weighted average ownership stake. But remember that the ownership stake in KWE of KW Holdings is 13.3%.

The Company's investments year-to-date were directed 82% to the United Kingdom and Ireland and 18% to the Western United States.

For the 9 months of 2014, the Company and its investment partners sold 16 commercial properties, 3 multifamily properties, 6 condo units and 3 residential investments, which resulted in gross sale proceeds of almost $1 billion.

The Company's share of net proceeds after the repayment of debt was $163 million, which included our promoted interest compared to a book value for these investments of $93 million.

On the service side of our business for the 3 months ended September 30, 2014, our adjusted fees were $22.2 million which was a 1% increase. Our adjusted EBITDA was $8.7 million. But for the 9 months, our adjusted fees were $89.1 million, which is a 57% increase from $56.7 million for the same period of 2013.

Our adjusted EBITDA for the service business for the 9 months was $47 million, which is an 87% from the $25.2 million for the same period.

In terms of the financing side of our operation, in July 2014, the Company increased its unsecured line of credit from $140 million to $300 million. We also, in September, the Company paid off $40 million of junior subordinated debt, which was due in April 2013 (sic - see press release, "April 2037"). We paid that off because that was carrying an interest rate of 9.1%. So obviously, doing the math, we've now saved $3.6 million in interest expense by paying that off.

In terms of Kennedy Wilson Europe, Kennedy-Wilson Holdings, as I mentioned earlier, owns 13.3% of KWE's total share of capital as of September 30. And one of our wholly owned subsidiaries serves as KWE's external manager, in which capacity we receive certain management fees and performance fees.

Since KWE's inception, which was the end of February of 2013, through 9/30, 2014, the management fees paid or payable by KWE to KWEH are approximately $8.7 million. And remember, on the management fees, 50% are paid in cash and 50% are paid in KWE shares.

In October 2014, KWE completed a successful secondary offering of approximately $565 million of ordinary shares. KWH acquired approximately 75 million of KWE's ordinary shares, which allowed us to maintain our 13.3% ownership stake in KWE.

In total, KWH owns approximately 18 million shares of KWE with a cost basis of almost $300 million. After KWE's recent secondary offering, the annual management fees to KWH now total approximately $22 million a year, 50% of which are paid in cash and 50% are paid in shares.

Of note also, KWE this morning announced the doubling of its quarterly dividend from 2p to 4p, which represents a 1.5% annual yield, which demonstrates the increased cash flows generated by the portfolio.

So since its launch, which was only 8 months ago in February of 2014, through Mary Ricks and her team's great efforts, KWE has acquired 79 direct real estate assets with approximately 6.4 million square feet and three loan portfolios secured by 42 real estate assets totaling $2 billion in purchase price. That portfolio currently produces approximately $132 million of annualized net operating income.

During the third quarter, KWE completed $505 million of financings secured by three portfolios with a total of 61 commercial properties as collateral for that financing. These properties were located throughout the United Kingdom. The loans have a weighted average maturity of October 2019 with an average interest rate spread of LIBOR plus 1.84%.

In September 2014, KWE entered a 3-year unsecured floating rate revolving credit facility of approximately $365 million, with a syndicate of banks. The facility was undrawn as of September 30, 2014.

Since we started investing in the UK and Ireland in 2011, there's been significant improvement in the borrowing costs. In fact, if you go back to 2011, the debt market basically was nonexistent for real estate acquisitions in Europe.

Our first few loans that we did, secured by properties primarily in London and Ireland, were at spreads of 300 to 400 basis points. Today, the spreads have come in where they're sub-200 basis points. So what we're doing not only here in the United States, but in Europe, we're taking advantage of these improved borrowing rates.

And at KWE, yesterday, actually, we were able to lock a 10-year financing on a property that we own in Ireland, 10 years fixed, sub-3% interest-only for 10 years. So as you can see from that, the borrowing costs have come in greatly.

The other interesting point is that the 10-year financing market here in the United States is almost 100 basis points wide now with what we're able to do in Europe.

So with that summary, that's a lot of information that I just went through. I'd like to open it up now to any questions that anyone might have.

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Jason Ursaner from CJS Securities.

Congratulations on a great quarter. It was a lot of information, but do really appreciate the level of transparency you guys go through.

Just, Bill, the number that stuck out to me the most as being impressive in the quarter was the 8% same-property rental growth you guys generated in the US in multifamily. There has been, it seems like, some slowing maybe in the central business areas and it seems like it's starting to show the strength of your decision to not go into those areas and be around the outskirts in areas like the East Bay.

I'm just wondering how close do you think some of your markets are moving towards parity or maybe what you feel should be an appropriate level to some of these other downtown areas. And just whether you think that rental growth can continue moving higher.

I think -- and Mary can weigh in on this too in Ireland particularly -- but we're very fortunate to be here primarily in the Western United States where there's significant job growth really in the markets that we like to invest in. So if you look at Seattle, for example, where we own almost 5,000 units, you've got more Fortune 500 companies headquartered in Seattle than we have here in Los Angeles.

And all of those companies, whether it's Boeing or Microsoft or Costco, Starbucks -- you can go on down the list -- they're all adding jobs. So in the State of Washington over the last 20 years, I think the population has approximately doubled there. And much of the growth has come in the Seattle area.

And similarly with the East Bay because of the technology growth in primarily San Francisco, South of Market, with very, very expensive rents in the city, that has spilled over to people moving to the East Bay, where we also own almost 5,000 units.

So we were lucky to get our flag down not only in Europe during what I'll call that distressed period of time of 2009 and 2010 and into 2011. But as prices got more and more expensive, what we decided to do was to go to these other markets. So we've had really great luck in Seattle, the East Bay.

We have a pretty good footprint now in Salt Lake City. And we're acquiring next week our first asset in Boise, Idaho. And all of those markets have experienced great job growth .

The other underlying fundamental is that there are fewer younger people buying houses. And the mortgage rates, although low, the qualification process still is very tough. And you also have a shift, I think, in the psyche of the young people where they would prefer to be in a rental apartment unit versus owning a house. So we think that in the --

And then the last thing I'd say is that we have typically bought -- in Ireland, it's different. We bought really class A properties at significant discounts to replacement cost. In the US, we're buying generally what I would consider to be B quality assets that we're improving to B-plus or in some cases A-minuses by dedicating capital to it.

The one great thing about the Company today is we've got sufficient capital, whether it's at the Shelbourne in these apartment buildings that I just mentioned, to improve the assets. And by improving those assets, it's allowing us to be more competitive not only with our competition, but it's allowing us to push rental rates.

So we don't see anything really. The rental rates that we've experienced in Ireland, Mary, are very high. I'm not sure that those are completely sustainable at those levels. But you might comment on that, Mary.

What we're seeing right now in Dublin is apartment rental growth up 12% annually. And Bill, like you alluded to in terms of just mortgage restrictions, the Central Bank have imposed several restrictions, like 80% LTVs and certain loan-to-income hurdles, etc., that's making it very difficult for young people to borrow money and take out mortgages to buy houses.

And remember, I think apartments or multifamily living with great amenities like we do in the US, which is what we've brought over to Dublin, is new really in Dublin. So the concept is new. So we're actually seeing now it becoming more of a theme that people are happy to lease their apartment and pay good rent.

So we're seeing, I think across the board on all of our multifamily apartments in Dublin, when we're putting CapEx into the units themselves, furniture packages where we're spending EUR7,000 to EUR10,000 a unit, we're seeing double-digit increases straight to the bottom line in rent.

So I think the summary is we feel very good about the multifamily asset class and your ability, particularly here in the United States, to finance these long-term 10 to 12-year fixed rate financing. So you're locking in spreads that are only improving over time as you spend the capital on these properties and you exert better management at the property level.

Okay, great. Just real quick on the financing side, obviously, you guys have expanded the credit line. This quarter, you paid back the $40 million trust preferred. I'm just wondering what was the decision behind that time-wise. And if you continue to see any other refinance opportunities either at the corporate or property level.

At the property level, for sure, we are looking at every asset that we own. Mary in Europe has a number of things that we bought back in the early part of the recovery that we had borrowing rates of 400 to 500 point spreads over LIBOR.

So we're right in the middle of refinancing some of those assets right now. And it's also true in the United States, but we are looking at -- whether it's at the corporate level or at the asset level, we're always looking for opportunities to save money on interest costs.

So one of the first steps at the corporate level, of course, was to pay off this trust preferred. That had a fixed rate of 9.1% and we have sufficient liquidity, and had sufficient liquidity. So as our balance sheet has gotten stronger and so on, we just didn't think that was an appropriate piece of paper to have in the Company any longer.

Then remember, next year too that in May, the Fairfax convert, which is $100 million, has a mandatory conversion to common equity. So that will -- there's a 6% rate attached to that. So that will also go away in May of next year. So we're looking for opportunities anywhere we can find them to save money on our interest costs.

Okay, great. Appreciate all the details and I'll let others have a chance. Thanks.

Mitch Germain from JMP.

I'm just curious, the rationale behind the equity raise for KWE. Obviously, you guys have been running at a bit lower leverage there. So why make that decision when you did?

In Europe, it's a slightly more complicated process than it is here in the United States, where in the US, you could be raising capital around a transaction or a deal that you were buying. But in Europe, if you're raising in excess of 9.9% -- in our case, we had roughly 100 million shares outstanding before we did the offering -- you have to do what's called a rights offering and that whole process is a longer lead time.

So you've got to -- and we could see that we have a very significant pipeline of things that we're not only looking at closing here in the fourth quarter, but are going to spill over to the first quarter. So we needed to raise capital really in advance of those transactions.

So even though we have a low leverage currently in KWE, we needed to have the capital available to us for the transactions that we see coming down the pike here in the fourth quarter and the first quarter of next year. So we now have 135 million shares outstanding in that company approximately. And as I mentioned, KWH here in the United States owns approximately 18 million of those shares.

Great, okay. Last question -- I know that in the past, you guys have been an aggregator of multifamily. Trimming some commercial, I know that you sold some multifamily this quarter. Is there anything we should read about that? Or anything specific about those assets that didn't fit the profile of what you're looking for?

Mitch, it's Matt. So the apartments that we sold, those were primarily held in ventures where we had relatively low ownership interest. And we achieved the business plan.

So as you can see, some of the recent acquisitions we've done, we've taken some larger stakes with longer-term views on these assets, as I mentioned, with a smaller ownership. And the fact they've reached business plan, we felt it was a good time to sell.

Excellent. Thanks, guys; great quarter.

David Gold from Sidoti.

A broader question on geographies. I think -- I note in the KWE at least there was some commentary on yield spreads contracting in some of the markets. And broadly speaking, I was curious if you can comment on the little bit of heat-up perhaps that we've been seeing in the UK and Ireland.

Are there assets in those markets that are still right for you guys? Or is it perhaps one of those moments when we start sniffing more closely at some of the other geographies you've been looking at?

Mary, do you want to answer that?

Sure. We are looking at Spain and Italy. And we've analyzed quite a few portfolios and assets there and we continue to do so. In the markets where we've been active in Ireland -- I'll talk about Ireland first. The deals that we've done there have either been bilateral transactions, i.e., the Elliott loan portfolio that we bought directly from a UK bank that's exiting Ireland, and we've transacted with them in the past.

So that's really a way for us to, I think, buy things at attractive yields. And as you can see from our IMS, we're already executing an asset management plan there. So we're increasing our NOI.

And then we're also doing -- we've got a couple other deals that we're working on. So we're trying to do more targeted transactions, off-market deals and where there's really an angle in Ireland. But we also have a team of 30 people, so I would say that we know the markets better, as good and/or better than a lot of our competitors there. We know what's going on in the occupier market.

We're working on a deal right now in one of our office buildings in central Dublin on a major lease transaction there that we hope to announce in the next couple of months. So that's really all driven by our local team in just knowing the market and what's going on there.

In terms of the UK, we have seen, in the secondary market, some yield compression. But we're still seeing opportunities to buy assets that are under-managed and have been under-capitalized for a number of years. And that I think is -- we're going to continue to see yield compression. And we're seeing rental growth in a lot of those submarkets that we're transacting in.

So there's still quite a few opportunities. Not only are the banks deleveraging; we're seeing the insurance company coming to market with assets, insurance companies, as well as building societies, which are like savings and loans comparable to that in the US. So we're seeing different vendors coming to the market and selling assets.

I think the difference now between when we started in Europe is that the sellers now are marked to trade. So they're provisioned way better. And that really goes back to the question of why did we raise capital in Europe when we did.

It's really to have the war chest available to us, to take advantage of the massive pipeline that we have, as Bill said. So we're seeing great opportunities still in all the markets we're transacting in. And a lot of it is not only -- we feel like we're doing well on the buy, but it's also the execution on the asset management. So we're well into executing on quite a few of those initiatives now that will add value to the whole portfolio.

I think it's been our theme for 26 years, and what Mary and her team are executing in Europe, is that we transact primarily with financial institutions certainly in Europe. But it's surprising even here in the United States in the third quarter, we bought an apartment property, a multifamily property, in the Seattle area, from a financial institution that they had foreclosed on.

So what's happened is that, given the size of our platform, we just continue to see very, very good investment opportunities. But the other side of that, and I think that what I tried to point out, we also disposed of almost $1 billion of assets in the first 9 months of the year. So even though we're seeing very, very good opportunities to invest, we also recognize that in this yield-starved world that we're in today, there are people that want to buy things.

So when there's an opportunity to, as Matt said, to sell out of something where we have small ownership interest in, or an asset or asset class that doesn't fit our investment strategy today, we have a good window right now to also take advantage of that.

Okay. Perfect, that's helpful. To Bill or Mary, there was some commentary on the capital being raised at KWE for some opportunities that are either in the pipeline or maybe under contract with expected fourth quarter, first quarter closes. Can you give a sense there for both geographies and asset types? Are we sticking with the -- is it UK and Ireland then?

Mary?

We can't comment on that yet, but hopefully, we'll have some announcements out soon. Sorry about that.

No worries, understood. Just one last one, probably for Matt. As we look at -- in the first 9 months of the year, there were a few different gains driven by accounting or fair market value step-up. Curious there, are we done with -- many of those were from the JVs coming on the books. Are we largely done with that? Or are there some more large gains that you can call out that are foreseeable for the fourth quarter?

David, we talked about before our strategy of when we have large ownership stakes, seeking control over investments. That continues to be our strategy. So there are a few more out there that we're pursuing and we'll have to see whether our partners are amenable or not.

Perfect, thank you all.

I think, too, Matt, not to -- really this is not to amplify that answer, but two of the apartment buildings we're closing here in the next 3 weeks we're buying as 100% ownership. So what we're doing right now is redeploying cash that we're taking out of some of these investments into assets that are going to meaningfully increase our net income and EBITDA here over the upcoming years.

Great, perfect. Thanks so much, Bill.

(Operator Instructions) David Ridley-Lane from Bank of America.

So when you look at the realized gains from dispositions year-to-date, is there anything extraordinary in that pool of sales? Would you call it fairly representative of your investment portfolio?

I think it is representative in that we have sold some things in Europe, some things in the US. We've sold some assets that we've held for 4 to 5 years. We sold some assets we held for shorter time periods. So I'd say all in all, the legacy of the assets we sold is representative of the investment account today.

Got it. You've recognized some very strong equity multiples on those, so that's great to hear. On the timing of dispositions, I know it's always difficult, but curious if what you have out listed today is similar in scale to what you had out listed for sale over the last 12 months. I.e., can you keep up this pace of dispositions that you've been at?

Well, I'm not sure that -- David, the goal is not to keep up a certain pace. It really more has to do -- does that asset, either from an ownership perspective or from a strategy perspective, fit what our ongoing plan is. We have four more office buildings here in the United States that we're in the process of either listing or selling that'll happen next year.

But the decisions to sell those assets really don't relate to any kind of a pace that we're trying to keep up. It really relates to a strategy or the ownership structure that it might be in. And remember too that as we've gotten more capital into the Company, what we're trying to -- and as I think Matt said earlier -- some of these asset dispositions that we've been doing go back in time where we had small ownership interest in these deals.

So it's more just -- rather than setting a pace, it's just really having a strategy as to the ownership levels of these assets and whether that particular asset fits in our long-term plan or not.

No, I completely understand. It's strategy driven versus picking a target.

Right.

But sometimes I stare at Excel a little too much.

Yes. But I think the other thing too for everybody to really think about is that, particularly on the office side here in the US, it's a much different market than it is in Europe. The European market, particularly in the United Kingdom and Ireland, is a much, much better office market, as Mary can attest. We just did a lease in Aberdeen and I think it's public information, Mary, right, the --

Yes.

So we did a 15-year term-certain lease with ConocoPhillips on an office building that we own in Aberdeen. So here in the United States in the office market, particularly here in Southern California where you don't have as much the technology drivers that you do in Northern California, the lease terms generally average 5 years, in some cases, 7 years. So you're constantly putting capital back into some of these office buildings in order to maintain the same tenant base.

It's very, very different in Europe where you've got these longer term term-certain leases. So that then feeds into a strategy: where do you want to keep your capital?

Do you want to have it in a multifamily asset that we can earn 10% to 12% cash-on-cash returns? Or do you want to keep it in an office building that you have a partial ownership interest in that is going to continue to need capital to keep its tenant base here in the United States? So it's those kind of thought processes that we go through when we decide about these dispositions.

Got it. Then on the discounted loan purchases, are we getting to a point on some of these where as part of your business plan on handling the loans you're preparing to take ownership? Should we see that loan-to-own increase over the next couple of quarters relative to the pace it's been over the last couple of quarters?

Matt?

So I think what you've seen over the past few quarters is actually a lot of conversions of loans into real estate. So like what we did with the Shelbourne and some other assets recently. So I think you will see some continuation of that trend, in particular -- and Mary might want to weigh in -- most of the loan purchases we're doing, by volume, are being done in Europe right now.

Yes. There are very few of those loan-to-own strategies here in the United States today. That ship sailed here in the US maybe 2 years ago or more. But that is a big part of Mary's business.

Right. And the one thing I'd say -- the most recent example is the Elliott portfolio where the unpaid principal balance was EUR202 million. We paid EUR75 million. And our business plan there is to take title to three of the largest assets in that portfolio. So that is the business plan. We're working through just the structuring of doing that. So I expect to do that in the next one to two quarters.

I think Mary's making a good point. When you look at the -- and I said it earlier -- that not only the loans that we're buying that ultimately, we end up in ownership. But the very, very significant discounts to original cost.

So when you look at the assets that we bought both in KWE and the assets that we bought over the last 4 or 5 years, and you think about that $13.5 billion of acquisitions which will increase somewhat here between now and the end of the year, virtually all of those assets have been bought at meaningful discounts to their original values.

Got it. All right. Thank you very much.

And we're showing no further questions. I will now turn the call back over to Bill McMorrow for closing comments.

Okay. So thanks, everybody. We appreciate everybody's support on everything that we're doing. As I said earlier in the call, here next week is the fifth anniversary of us going public. It's been quite a great period of time for the Company and for all of us shareholders. And we appreciate everything that you've all done for us. Thanks very much.

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