Good day, and welcome to Kennedy Wilson’s first quarter 2022 earnings conference call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to withdraw yourself from the question queue, please press star then two. Please also note this event is being recorded. Now I would like to turn the conference over to Daven Bhavsar, Vice President of Investor Relations. Please go ahead.
Thank you and good morning. This is Daven Bhavsar. Joining us today from Kennedy Wilson are Bill McMorrow, Chairman and CEO, Mary Ricks, President, Matt Windisch, Executive Vice President, and Justin Enbody, Chief Financial Officer. Today's call will be webcast live and will be archived for replay. The replay will be available by phone for one week and by webcast for three months. Please see the investor relations section of our website for more information. On this call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. You can find a description of these items, along with the reconciliation to the most directly comparable GAAP financial measure, and our first quarter 2022 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.
Good morning, everyone, and thanks, Daven, and thank you everybody for joining us today. I'm pleased with the Q1 results that we reported yesterday. After a year of record results in 2021, our business is off to a very strong start in 2022. Operating results continue to improve, driven by robust tenant demand, the completion of construction, new acquisitions, and increasing rental rates and asset values, all resulting in an improvement in our key financial metrics, including adjusted EBITDA, which increased by 25% from Q1 of last year and totals $160 million. I'd like to start by providing some background on what we are seeing in our investment markets. In the U.S., we once again saw strong results out of our market rate apartment portfolio, including double-digit same-property NOI growth across every U.S. region.
As Matt will go into in just a moment, these results were driven by strong demand for our high quality, largely suburban multifamily communities. Including the acquisitions we announced last week, our global multifamily portfolio totals 37,600 units, which has grown by 25% in the last two years. The unit count includes over 4,500 units under development, with roughly 50% expected to be completed in 2023 and the remainder in 2024. In the U.K. and Ireland, we similarly saw a significant improving operating environment, which in turn drove an increase in leasing velocity for both our office and multifamily properties.
In Dublin, where coincidentally Mary and I are today, we've recently seen a few of the world's largest asset managers announce multi-billion dollar office or corporate investments recently, which reinforces the long-term attractiveness of the market and speaks towards the value of our existing office and development portfolio. Investment transaction levels and deal flow remained solid in Q1. We completed almost $1 billion of transactions in the quarter, which grew our assets under management to $23 billion versus $22 billion at 12/31/2021 and $18 billion at 12/31/2020. These transactions, along with a strong organic NOI growth and stabilizations across our existing portfolio, grew our estimated annual NOI by 6% to $461 million at quarter end. This represents a 19% increase from Q1 of last year.
Similarly, our fee-bearing capital grew by an impressive 6% from year-end to $5.3 billion and 29% growth over Q1 2021. Finally, we completed a $300 million perpetual preferred equity investment from Fairfax Financial in Q1, which further strengthened our financial position and our ability to take advantage of future opportunities. Along with this investment, Fairfax also increased their commitment to our debt platform by $3 billion, which net the debt platform now totals $5 billion of lending capacity. I'd like now to pass the call over to our CFO, Justin Enbody, to highlight our Q1 financial results.
Thanks, Bill. In Q1, we had GAAP EPS $0.24 per diluted share compared to $0.04 in Q1 of last year. Adjusted net income was $85 million compared to $47 million last year. As Bill mentioned earlier, adjusted EBITDA was $160 million compared to $128 million last year. During the quarter, we delivered solid growth in our consolidated revenues, which increased by 25% to $125 million from Q1
Of 2021. This was driven by strong revenue growth from our multifamily portfolio, new acquisitions, improving hotel revenues, as well as continued growth in our investment management fees. Our co-investment portfolio continues to generate attractive returns for our shareholders. In Q1, we saw another strong quarter of investment performance and increasing asset values, resulting in $105 million in income from unconsolidated investments in Q1, compared to only $18 million in Q1 of 2021. Total investment management fees, which include our base management fee and accrued promote income, totaled $39 million in Q1, up from $7 million in Q1 of last year. Turning to our balance sheet and debt profile, we continue to monitor the movements in interest rates and have been actively managing our debt.
As a reminder, we refinanced all of our unsecured debt last year, extended the maturities from 2024 to between 2029 and 2031, while lowering our borrowing costs. Less than 10% of our share of debt matures by the end of next year, which is all secured at the property level. Additionally, 94% of our debt is either fixed or hedged using interest rate derivatives. With that, I'd now like to turn the call over to Matt Windisch to discuss our multifamily portfolio.
Thanks, Justin. KW's global multifamily portfolio now comprises over half of our estimated annual NOI. This compares to only 39% four years ago. In Q1, we acquired four additional communities, which totaled 1,150 units through our co-investment portfolio for a gross purchase price of $370 million, including another 450 units in the Pacific Northwest, roughly 700 units in the Mountain West. We saw a continuation in the quarter of the recent strong operating trends as our portfolio delivered robust same-property NOI growth of 14%. Starting with the U.S., leasing spreads remained elevated, with new leases increasing by 16% and renewals by 12%. Occupancy remains solid at over 95% with no current concessions to speak of.
Same-property revenue grew by 11% in the quarter, including 14% in our largest region, which is the Mountain West. Average rents in the Mountain West are approximately $1,400, which we think remains extremely attractive given that this region still sees robust in-migration as people relocate from higher-cost states. We continue to allocate capital to these high-growth markets in Q2. As Bill mentioned earlier, we recently acquired off-market another 1,100 units across three assets in Scottsdale, Albuquerque, and Las Vegas for $418 million, which brings our unique Mountain West portfolio up to almost 14,000 units. Our Pacific Northwest and California assets also continued to grow with same-property NOI up double digits in each region. Looking at our sequential results, we've seen a strong increase in NOI by 5% from Q4, with increases seen across every U.S. region.
Our US market rate portfolio has an average loss to lease of 12%. As a reminder, over half of these units have yet to be renovated, positioning us well for the typically strong summer leasing months. Same-property revenue and NOI was up 5% in our vintage affordable housing portfolio. Rents for this portfolio are tied to the change in area median income, which is on track to continue growing as wages increase. The debt at Vintage has an attractive weighted average maturity of 14 years. We have another 2,000 units we will be adding to the existing 9,000 units, resulting in doubling the original 5,500 units we acquired back in 2015. Turning to Dublin, we saw a boost in leasing as the economy has reopened and employees are returning back to the office.
Same property occupancy improved by 6.5% to over 97%, which resulted in same property NOI growth of 9%. Our best-in-class offering at Capital Dock is now 94% leased. With a growing population and a structural undersupply of housing, we continue to be believers in the long-term Dublin multifamily market, and remain on track to complete an additional 1,000 units by 2024. With that, I'd like to turn the call over to our president, Mary Ricks, to discuss our office portfolio and our investment management business.
Thanks, Matt. Turning to our office portfolio. Over 70% of our office NOI comes from European assets, where we continue to find strong investment opportunities. In Q1, we acquired Waverley Gate, a prime well-located 204,000 sq ft office property in the U.K. for $105 million. It is adjacent to the main railway station and with excellent transport connectivity, including walking and cycling, Waverley Gate boasts leading environmental and wellness features. It is 96% occupied and includes high-quality tenants such as Amazon, Microsoft, and the Scottish Government. We expect to increase the initial NOI of $5.4 million over our investment period as current in-place rents are approximately 35% under-rented in an extremely tight market that currently has a 2% vacancy rate.
Waverley Gate has significant similarities to our largest U.K. office, One Eleven Buckingham Palace Road in London, where we have successfully refurbished and added tenant amenities and wellness features and delivered a number of environmental initiatives, including enhancing the building management system, reducing energy consumption, and transitioning to an almost all-electric building from renewable sources at One Eleven. We have taken the occupancy from 79% at the end of Q4 2021 to 100% leased, including a recent signing of a new 14,000 sq ft lease in Q1 and a further lease expected to close in Q2, driving growth in total estimated annual NOI to $18 million. We've recently seen a marked increase in foot traffic, physical usage of buildings, prospective tenant inquiries, and inspections across our entire commercial portfolio.
Leasing activity remains strong, completing 660,000 sq ft of lease transactions in Q1, with an attractive weighted average unexpired lease term of 8.9 years. Turning to our office developments, we continue to see meaningful occupier interest in newer office assets with leading environmental, wellness, and intelligent building technologies. Across our own portfolio, Dublin leasing demand and rental rates achieved on new developments are exceeding pre-COVID business plans. In Q1, we stabilized our 68,000 sq ft Hanover Quay development in Dublin, which was completed with LEED, WELL, and WiredScore Gold certifications. We leased the entire building to a Fortune 500 fintech tenant on an attractive 15-year lease term, with rents ahead of our business plan resulting in a yield on cost in excess of 6%.
We are also making great progress at leasing our Kildare Street office development, which is scheduled to complete in Q2. We already have 75% of the building under offer at rents above business plan. Looking further ahead, our Cooper's Cross development in Dublin, which totals 395,000 sq ft commercial square feet and 471 multifamily units, is slated to complete next year and is targeting top ESG credentials, which will make it one of the most efficient and desirable mixed-use city center campuses in the market. In total, our global development and lease-up portfolio, which is 40% multifamily and 39% office, is expected to add $101 million of estimated annual NOI to KW. Approximately 90% of this incremental NOI relates to assets that will either complete lease-up or finish construction by the end of next year.
Our developments are being completed on average to a 6% development yield, which is a substantial spread to current market cap rates. Turning to our investment management platform, growth in fee-bearing capital in the quarter continues its upward trajectory, growing by 6% from year-end to $5.3 billion and up 29% from Q1 2021. The two largest drivers in the quarter were our debt platform and European logistics portfolio. Our debt platform completed another $246 million of loans with high-quality sponsors, growing outstanding loans to $2.2 billion, with another $200 million in successful realization since launch. We secured an additional $3 billion of commitments in the quarter, which drove total commitments to $6 billion with our loan origination capacity at quarter end at $3.5 billion.
KW is earning attractive double-digit returns from this platform, which stands to benefit as interest rates rise, given that 80% of the loans are floating rate. We also delivered significant growth across our European logistics portfolio, which is focused on last mile logistics assets that benefit from the continued rise in e-commerce. Demand from occupiers remains very strong as they increasingly shift from just-in-time to just-in-case inventory management. Importantly, our acquisition teams with deep contacts across our markets continue to find attractive opportunities in the U.K. as well as Ireland and Spain. Including investments made through our fund and deals under offer, we are on track to grow our European logistics platform to approximately $2 billion across 74 assets that make up approximately 10 million sq ft and generate $66 million of NOI currently.
The existing industrial portfolio has delivered 16% rental uplifts on completed lease transactions over the last 12 months. Fundamentals remain attractive with U.K. industrial market rents expected to continue to grow with little available supply, which hit a record low of 3.7% at the end of Q1 2022. Our own portfolio benefits from low vacancies and remains under-rented, with current in-place rents 18% below estimated rental values. We believe the macro environment coupled with strong property fundamentals will continue to benefit both our credit and our logistics platforms. We have over $4.5 billion of non-discretionary capital, which we look to deploy across all our announced platforms. This will add significantly to our existing $5.3 billion of fee-bearing capital. With that, I'd like to pass it back to Bill.
Thank you, Mary. We are off to a very great start to the year, and we continue to simplify our global business, which is focused on growing our two core initiatives, growing our recurring net operating income and growing our investment management business where we receive our share of the NOI plus management fees. As I previously mentioned, our financial position was strengthened in February with the $300 million investment from Fairfax Financial. We ended the quarter with $962 million of cash and available lines of credit, and we have minimal debt maturities through 2023. As Justin mentioned, 94% of our corporate and property-level debt carries a fixed rate or is hedged against rate increases.
We continue to partner with and attract capital from well-capitalized global strategic partners who have significant capital to deploy into our investment management business. We have an extremely talented team at KW that has invested together over several decades. Our teams have consistently demonstrated the ability to source sound, risk-adjusted investment opportunities, and then enhance our returns through hands-on asset management initiatives. I'd like to thank the global KW team and our shareholders, partners, and our board for all of your support of Kennedy Wilson. With that, Daven, I'd like to send it back to you to open it up for any questions.
We will now begin the question-and-answer session. If you'd like to join the question queue, press star then one to join. If you're using a speakerphone, please pick up your handset before pressing any keys. If you'd like to remove yourself from the question queue, press star then two. We will pause momentarily to assemble the roster. The first question comes from Derek Johnston with Deutsche Bank. Please go ahead.
Hi, everybody. Good morning out there. The fee-bearing capital is becoming a very meaningful part of the business. You know, Bill, you mentioned the growth sequentially 6% and 29% year-over-year on that basis. I mean, do you see a few more years of growth or runway to continue, you know, adding and building this asset base? Or, you know, at some point, is there a limit on or perhaps a ceiling on how large the fund business may grow?
Well, I would let Mary amplify on it, Derek, but I mean, there's no ceiling on where we can go with this. I think you know, without bragging, I think our name among institutional capital partners has only improved over the years and decades that we've been investing. We have partners that you know have been investing with us in some cases, like Fairfax. We've been investing together now going on almost 12 years. I think the partners have a lot of confidence in our... It's not just the ability to deploy capital, it's our ability to asset manage the properties that we buy and/or the lending business that Matt has responsibility for.
When you look at the asset classes that we really like to invest in, the three main asset classes that are growing our investment management business are the debt business, as Mary mentioned, and the industrial business. I would say, thirdly, while we continue to grow the multifamily business on our balance sheet, we also have co-investment platforms for our multifamily business. Those three asset classes really are the ones along with office. Office, the office assets are a smaller part of the fund management business or the asset management business today. I mean, to answer your question directly, as I said, I don't see any ceiling on this. Mary, you wanna add to that?
Yeah. I mean, I think the one thing that I would add is that the partners, who we have very deep relationships with, are all looking for income. So, when you really think about, you know, the asset classes that we're growing, for example, I can talk a lot about the logistics platform, which is extremely reversionary in nature. I think especially when you think about just the macro trends in the e-commerce business and in fact the inflationary environment that we're in, we're looking for, you know, the reversion in rental income and the supply-demand dynamics that I think are driving many of our businesses that our well-heeled, you know, capital partners want to invest alongside of us.
Really multifamily where you're marking those rents, and you know, industrial and in the debt space.
Yeah. I think too, Mary, and Derek, what is masked in the assets under management number, which is now $23 billion, and as I said, it grew from $18 billion just two years ago, is that you're also disposing of assets along the way. You know, we're typically disposing of, you know, somewhere between $1 billion-$1.5 billion worth of assets each year. When you kind of factor that into the thought process, you can really see how much the assets under management has really grown over the last couple of years.
Now, that makes a lot of sense, and thank you. You know, I was going to ask about the near-term development pipeline in Hanover Quay, but in the opening remarks, I think Mary did a really good job of not only talking about that project but, you know, the ones that are behind it. You know, I would just pivot to something like I don't think we've talked about in a while, but, you know, clearly Dublin occupancy rebound in multifamily, really an impressive snapback, right, in occupancy year-over-year, 6.4%. You know, which kind of begs the question, you know, The Shelbourne Hotel, you know, how do you see that performing in a post-pandemic type of era? You know, what would be the expected NOI contribution in 2022?
Yeah. I mean, we're super excited about the Dublin occupancy, and we've just seen, I mean, as Bill said in his remarks, we're here in Dublin. We've been here for the week, and the city is buzzing. There's a lot of energy, and we're really excited about, you know, the occupancy and how well our multifamily assets are performing, and we expect to see that just, you know, continue. In terms of The Shelbourne, it's the same comment. I mean, it's great to see The Shelbourne super busy. We've been doing about $1 million a month in NOI at the end of March, and I think April is looking similar to that. We're just doing the numbers now.
When you think about what we're really excited about is the book of business that we've already built at The Shelbourne. We're about 50% rooms sold out for the balance of the year. So, in the hotel world that's a great base when to start driving your rates. You know, the other thing, we were just talking to the team about this, you know, as the euro sort of weakens, that obviously drives the American tourists. We're seeing about 68% of our room bookings right now are from America. That really hasn't been you know, been like that since, you know, March of 2020. We're really excited about where The Shelbourne's going. We expect for it to, you know, be at least a EUR 10 million NOI this year, and we could exceed that.
Thank you.
I think, you know, Mary, to add to that, and I'm just re-remembering the March numbers. To give you the contrast, I believe the revenue in the hotel in March was slightly over $3,000,022. Last year, that same month, it was $300,000.
That's right.
I think the other interesting thing that, you know, I could be slightly off on this, Mary, but that roughly 60% of the revenue in March came from U.S. travelers.
That's right.
What you'll see, I think, as you go into really the very busy season here in Dublin, kind of starts in May through, you know, October. You're gonna see very strong summer results. It's very easy to get in and out of Dublin now. There's not... I don't know how to describe this, but there's not some of the still standing restrictions that we have in the United States. I can tell you that the restaurants are full. You know, the hotels are doing well. As you've heard from Mary, the office occupancy and the office leasing is very, very strong. As you pointed out, Derek, the apartment occupancies have increased, you know, in a very big way.
Thank you. Good stuff.
The next question comes from Anthony Paolone with JPMorgan. Please go ahead.
Okay. Thank you. I guess we'll stay with Dublin for a minute here. You did get that occupancy back on the residential side there, and we saw what happened in the U.S. when that came back and how quickly rents moved. Do you think that's the playbook, or what could happen there from this point now that the occupancy is back?
I mean, we're seeing, you know, rental growth. I think as you think about our development pipeline coming through, you know, we're building really best-in-class apartments, and with a lot of amenities in everything that we're building. We're seeing those market rents continue to move up. I think we can really, you know, drive our NOI into our new development projects for sure. You know, just working on containing expenses and, you know, continuing to run a tight ship and keep our occupancy.
I think you know, Mary, I mean, to add a little bit to. Tony, you'd have to see. I mean, it's these developments that we're doing here are remarkable, both in scale and the quality of planning and design. You know, you think about Cooper's Cross, I mean, that's a 1 million sq ft development, you know, 400,000 sq ft of office. Then there obviously the remainder is the 500 new apartment units that, you know, Mary and I were on site there yesterday with our construction people, and I mean, it's you know, these are big undertakings to do, but when they're finished, like Clancy Quay is a good example. That is the largest single project in Dublin on the multifamily side. It's almost 900 units.
I could be a little off, Mary, but I think the occupancy there is-
97%.
... 97% over almost 900 units. When you're on that property and you see, you know, the quality of both the amenities, the, you know, the supermarket that's there, the fitness centers, the... and so on, you see why, you know, our clients, I'll call it, are attracted to these new developments. We've got, you know, three sizable projects underway here right now. I would say the last thing too on this whole development discussion is that we, our team, we made a decision at the beginning of COVID that we were gonna continue on through the construction pipeline. It turned out to be a really very, very sound decision because now we're finishing things in a period of time where, you know, there's well-known supply chain issues.
The other thing that our development people did here, and we did it in the United States, is they started buying out things as they started projects a year, a year and a half ago, in some cases, two years ago. We stored these materials in whatever locale we were building in. We haven't had any supply chain issues or cost overrun issues to speak of. That's, you know, against a very large development pipeline that we have going on. I would say that, you know, our development teams have both in Europe and in the United States have really done an exceptional job of managing through the building of all of these assets.
Okay. At the Cooper's Cross office component, can you remind me, is that something you expect to go, like, to a single tenant or a small number of tenants, or do you think that is a more multi-tenant asset?
That's two buildings, Tony. It's a 100,000 sq ft building and a 295,000 sq ft building. The 100,000 sq ft building we could definitely see going to one occupier. The larger one could also because it could just be, you know, a very large city center campus with all the amenities on site, with the largest city park, with you know with all the commercial concessions and restaurants and dog parks, and all the things that, you know, Bill talked about. That is really one of the things that is so exceptional about our team, which is really our development team and our asset management team, working just lockstep as we go to, you know, develop and plan and then develop this out.
It's hard to say. We'll have the flexibility to multi-tenant it, which is what we did at the Kildare Street development, which is just across the street from The Shelbourne, which is just right on St. Stephen's Green. We've multi-tenanted that. I would say impressively, our asset management team has managed to keep 12-year terms certain on all the leases. That's often, you know, the benefit of doing a lease to one single tenant, is you can really drive, you know, that term. And in the multi, a lot of times with the smaller tenants, you know, you have shorter lease terms. Well, in this case, you know, we're doing 12-year terms certain deals. Back to Cooper's, it's really hard to say.
What I will say is that I think it'll be the best development in Dublin. You know, you noticed probably in my remarks, I talked a lot about ESG, and environmental credentials, and smart buildings, and wired buildings, and Cooper's Cross really is gonna be cutting edge in that space. That is really what we've seen, the occupier demand. Our developments are really driving that demand because of all these really impressive credentials.
Mary, you, I mean, I think to that point, you might comment about how tenants are looking at that and how important that has become.
I mean, you know, I would say even as little as a year ago that the conversation around ESG was, you know, sure, people were interested, but now literally every single tour that it is top of mind and it's in every single conversation. You know, the corporations around the world are demanding. I think their employees, you know. It goes down to the person that are working or living in assets that are requiring, you know, some sort of ESG credentials. We're excited 'cause we believe in it. We've got a really strong program, and Kennedy Wilson is very focused in the space.
Okay. Last one, if I could, probably for Matt. Does the rate environment and the volatility that's unfolded, does that have any impact, make it easier, harder, indifferent, as you originate in the debt platform?
Yeah. That's a great question, Tony. 80%, as we mentioned, about 80% of what we've been doing historically has been floating rate. Obviously, on the loans we did floating rate with low floors, which most of them have. We're moving up as the Fed increases rates. If you think about it from a borrower's perspective, and as we're really underwriting these loans, over three to five years, we have to be thoughtful around making sure we have proper interest reserves. These things are capitalized for a rising rate environment. I could say, you know, the volume we've seen in the business has continued to be very strong, over the past several months and several weeks.
I think it'll be an opportunity for us to, you know, deploy capital in that space, doing it thoughtfully with strong sponsorship, understanding that the returns we're making out of the gate are actually gonna move up as rates move up. I'd say the fixed rate market, interestingly, last year, there was very little in the way of mezz that was being broken off of securitizations. That has changed pretty dramatically over the past couple of months. I think in our mezz platform, we could see substantially more volume there. The LTVs that were getting securitized a year ago were 20% or 30% higher than they are today, and so there'll be more opportunity in the fixed-rate mezz space. We're definitely being very thoughtful around locking in, you know, rates for long term in our lending platform.
Okay, thanks for the help.
As a reminder, if you'd like to join the question queue, press star then one. The next question comes from Sheila McGrath with Evercore. Please go ahead.
Yes. Good morning. I was wondering if you could help us understand the potential upside in the NOI in the Mountain West portfolio. Just what the loss to lease is there, how much you think you can push rents, and also on the renovation opportunity, if you could give us some more detail on that opportunity.
Matt, you wanna take a-
Sure.
...shot at that?
Yeah, no problem. Sheila, so, the loss to lease there is. It's pretty much in line with the overall portfolio, roughly call it 12%-15% loss to lease on those assets. Similar to the rest of the portfolio, you've got about 50%, maybe a little bit more of the units that are unrenovated at this point. So, you know, doing some kind of simple math, if the loss to lease is 15%, and let's just say over the next three years, we can raise rents overall at 10% over those three years, you're looking at a 25% differential between kinda where rents would be in three years versus where we're locked in today. So, you know, there's a pretty good path to continue increasing rents there over the next several years.
That being said, you know, you're starting from a pretty low base relative to other markets, about $1,400 per unit per month. You still have relative affordability when you compare the rents in our apartments to the average incomes in the area. As you know, you know, we're resetting rents generally on an annual basis, but we have leases coming due every day. In particular, when tenants move out and new tenants are coming in, a lot of them coming from, you know, higher cost states, we have the ability on a pretty regular basis to, you know, to move rents up where it makes sense.
Just on the renovation capital, is there any rough idea of how much you think you could spend annually and what the returns are on that capital?
Yeah. I mean, generally, we're trying to get to about 20% returns on capital when we invest. I don't have an exact figure for how much we'd spend. It'll depend on turnover and things like that. Generally, as we're deploying money into units, we're trying to underwrite 20% returns on that capital.
Okay, great. Just on the simplification process, you've sold some more non-core, I think, retail assets. Where are you in the process of selling non-core assets, and how much more do you have to sell?
Matt, you wanna answer that?
Yeah, sure. Yeah. We've, you know, been a net seller of retail for several years now. You've seen us redeploy that capital really into our investment management business, as well as into our wholly owned multifamily portfolio. We do see that trend continuing. We have a number of non-core assets on the market that we expect to sell this year. You know, I'd say if you look at, you know, really the core of the business being 80% plus multifamily and office, that other 20%, we've been more opportunistic in how we've invested it.
You could see us, you know, over the next couple of years, you know, continuing to, you know, lock in our returns on those assets and redeploy it into the higher growth parts of our business.
Okay, great. Last question, just on the performance fees, that was well ahead of, you know, what we were expecting, and I realize it's lumpy. Is there any, you know, if you could give any detail on that result in the quarter, and is there any rule of thumb that could help us, you know, project that going forward, or is it just episodic?
Matt-
Hey, Sheila. This is Justin. I'm happy to take that.
Justin.
Generally, our performance fees are a function of valuations, and so our valuations are increasing. As we see values continue to increase, you should see, you know, correlated performance, correlated result with our performance fees.
Okay, thank you.
This concludes our question and answer session. I'll turn the conference back over to management for any closing remarks.
Operator, thank you. Thank you, everybody, again. As I always say, any of us are available, if there are further questions, that you wanna follow up on at a later time. Thanks again for taking the time to be on the call. Talk to you later.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.