Good day, and welcome to the Kennedy Wilson first quarter 2023 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 a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Daven Bhavsar. 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, CFO. 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 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 of the most directly comparable GAAP financial measure and our first quarter 2023 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, William McMorrow.
Thanks, Daven, thank you, everybody, for joining the call. Yesterday we reported our Q1 results, and I'm pleased with the performance of our global portfolio. The record levels of estimated annual NOI and fee-bearing capital that we achieved, and the progress we have made on our $3 billion of new developments, many of which are nearing completion. Our assets under management total $23 billion, which has increased by $5 billion since the end of 2020. Starting in July and through year-end, we will begin delivering almost 1,500 multi-family units in the U.S. and Dublin. The iconic 150-room oceanfront Kona Village Resort, and in Dublin, a mixed-use property comprised of 471 multi-family units and two office buildings totaling 400,000 sq ft. In Dublin, both office and apartment leasing fundamentals remain very strong.
Our portfolio is concentrated in asset classes where we're seeing cash flow growth, including apartments, logistics, hospitality, and our floating rate loan book. These sectors account for approximately two-thirds of our portfolio. Occupancy remains solid, totaling 94% for our multi-family and office, and 98% for our industrial portfolio. The global transaction market for real estate remained quiet in the quarter, primarily as a reaction to higher interest rates. In the U.S., transaction volumes dropped by an estimated 60%. We remain patient on new investments with our capital deployment limited in Q1 to our debt origination platform, where we completed $113 million in new originations and additional fundings. Towards finishing our construction projects, where we deployed $60 million of capital in the quarter.
In total, over the last three years, we have spent $500 million of capital on these long-term value add construction developments. The disposition front, we made further progress on our non-core asset sale program and completed $118 million of wholly owned asset sales from our consolidated portfolio, generating $82 million of cash to KW. Looking ahead, we remain very focused on executing several important strategic initiatives aimed at growing the recurring cash flow to KW. The first is the completion and leasing of several large development projects. The majority of our development pipeline will be completed by the middle of 2024. In total, our development and lease-up portfolio is expected to generate $97 million of additional NOI to KW, 70% of which is expected to stabilize by the end of 2024.
Another important initiative is to capitalize on the momentum in our investment management platform, which allows us to grow our recurring fee revenue in a capital-wide manner. Our debt and logistics strategies were launched in 2020 and have seen rapid growth backed by very strong institutional strategic partners that are still very keen to continue deploying capital with KW. Since going public in 2009, KW has now completed over $9 billion in debt investments. Since 2020, we have grown our global logistics portfolio to over $1.7 billion in assets. We have ample dry powder in both of these platforms as opportunities present themselves.
Third, our multifamily portfolio, which is our largest asset class, continues to see revenue and class cash flow growth with meaningful new cash flow expected as we complete our 5,000 units under development in both the U.S. and Dublin. 90% of our U.S. apartment assets are suburban and offer a high quality lifestyle at an affordable price point, and are located in cities and states with lower costs. We believe rental demand will remain strong as the cost of homeownership remains high. In the U.S. and Ireland, both places continue to face an undersupply of quality housing over the long term. With that, I'd like to turn the call over to our CFO Justin Enbody to discuss our financial results.
Thanks, Bill. On a year-over-year basis, our consolidated revenue grew by 6%, driven by higher levels of rental and hotel income. Looking across our entire portfolio, our share of property NOI, loan income, and base management fees increased by 4% to $127 million in Q1, or $508 million on an annualized basis. As Bill just mentioned, our Q1 results highlight our achievement of improving our recurring investment income, which has been and continues to be an important focus for us. This improvement, along with higher levels of realized gains on sale, were offset by decreases in the level of non-cash unrealized fair value adjustments and performance allocations on a year-over-year basis. GAAP EPS totaled a loss of $0.30 per share and adjusted EBITDA for the quarter totaled $91 million. Turning to our balance sheet and debt profile.
At quarter end, we had $349 million of consolidated cash and $249 million drawn on our $500 million line of credit. During the quarter, we paid down that line of credit by $34 million. We continue to execute on our strategy of minimizing our interest rate exposure, and we ended the quarter with 97% of our debt either fixed or hedged. As a reminder, we generally hedge using interest rate caps, and these hedges have a weighted average maturity of two years. We also have a handle on our near-term debt maturities, with less than 3% of our debt maturing this year. Overall, our debt has a weighted average maturity of 5.6 years and has an effective interest rate of 4.3% when taking into account the caps and swaps.
With that, I'd now like to turn the call over to Matt Windisch to discuss our multifamily and debt portfolio.
Thanks, Justin. As Bill mentioned, our multifamily portfolio is our largest sector, representing 54% of our global portfolio and $270 million of annual NOI to KW. Our portfolio totals over 32,000 stabilized units, with another 5,000 units in lease up or development that are expected to add $45 million in multifamily NOI to KW. Our ownership in our leased up and development assets is approximately 60%. Our global market rate portfolio produced same-property revenue growth of 6% and NOI growth of 5% in Q1. In our largely suburban apartment communities in the Western U.S., leasing spreads increased by 5%, resulting in same-property revenue growth of 6.4% and NOI growth of 5.4%.
Operating expenses increased by 8.4%, primarily due to increased labor costs as we filled positions that were open in Q1 of last year. However, compared to Q4 of 2022, our operating expenses have actually declined by 3% sequentially. At quarter end, our in-place rents were 7% below market. Looking at this regionally, the strongest performance came out of our top two apartment regions, the Mountain West and the Pacific Northwest, which generated same-property NOI growth of 9% and 10% respectively. Leading the charge in the Mountain States were our assets in Utah, where same-property NOI grew by an impressive 12% from Q1 of last year. Our assets in Colorado saw NOI growth of 15%.
In our smaller but growing portfolio in New Mexico, same-property NOI grew by a robust 23% from Q1 of 2022. We believe that our Mountain West portfolio is positioned to continue generating strong demand for rental housing, supported by a solid combination of lower cost of living, large growing university systems, steady job growth, and low unemployment. Large cap companies such as Micron Technology in Boise and Texas Instruments in Utah are investing $billions into the development of large chip facilities. We also continue to see expansion by local universities and healthcare facilities to keep up with some of the fastest population growth in the country. In the Pacific Northwest, our second-largest region, occupancy has remained stable and same-property revenue grew by 8%, resulting in NOI growth of 10%.
We expect this region to benefit from increased demand from employees who return to work, such as Amazon, who started to have workers in person starting on May 1st. We are already seeing signs of increased traffic at our properties in and around Seattle. In our Northern and Southern California assets, similar to what we saw in Q3 and Q4 last year, the ending of the eviction moratoriums has resulted in higher bad debt and property-level expenses, along with lower occupancy. Over the next few quarters, we will go through the process of recapturing units from non-paying tenants and look forward to resetting these units to market rents, as both of these regions in California have a loss to lease nearing 10%.
Excluding our California multifamily assets, our US same-property portfolio produced NOI growth of 9.2% quarter-over-quarter versus 5.4% when including California. We also made progress on our renovation program, completing another 330 units at an average cost of $12,000, which resulted in a 21% increase in rents. We have another 6,000 units that are remaining to be renovated in the US, with 75% of those units located in the Mountain West and Pacific Northwest regions, which positions us well for future portfolio growth. April leasing looks solid in the US, with blended leasing spreads of 5% across our market rate portfolio. Turning to Dublin, where we have a 50% ownership in over 2,500 units, we continue to see the highest levels of occupancy at 99%.
Demand for our institutionally managed, high-quality rental apartments remains strong in Ireland. Similar to the US, there remains an undersupply of housing. We look forward to beginning to deliver our approximately 1,000 units under development in the third quarter. In our Vintage Housing affordable portfolio, which totals 9,200 stabilized units and another 2,400 under development, we continue to see strong demand with occupancy of 97% and same-property NOI growth of 5% in the quarter. Post quarter end, we sold the wholly owned apartment community in Reno into our Vintage portfolio. The sale generated $11 million of cash to KW. We expect Vintage to produce another $20 million of cash to KW in the short term, primarily driven by the sale of tax credits, resulting in robust quarterly distributions from this platform.
Turning to our investment management business, our fee-bearing capital ticked up to $6 billion in Q1. Our growth over the last few years has been driven primarily from our debt and logistics platforms. The launch of our debt investment strategy back in 2020 has been very beneficial as the private credit asset class continues to generate attractive returns in the current lending environment. We've seen tightness in the banking sector and a pullback in lending from traditional providers of capital, which benefits our platform. Higher rates and spreads have resulted in solid, unlevered risk-adjusted returns north of 20%, inclusive of our asset management fees.
In Q1, we completed $113 million of new floating rate originations and fundings with an average spread of 390 basis points over SOFR and an LTV of 50%, resulting in growth of the platform by 5% to $2.8 billion. We have additional loan capacity of approximately $3 billion and look forward to growing this business as opportunities arise. With that, I'd like to turn the call over to our president, Mary Ricks, to discuss our industrial platform.
Thanks, Matt. The rapid expansion of our global industrial portfolio has been a key driver of growth for our investment management platform. Our portfolio now totals 11 million sq ft, with over 80% of our stock comprising institutional quality last mile assets located across the U.K., where we continue to see solid fundamentals. Industrial vacancy rates in the U.K. remain very low at 2.7%, significantly below long-term averages. Occupier demand for quality assets remains strong as they seek to build supply chain resilience and achieve greater operational efficiency. On the supply side, higher financing and construction costs are slowing new developments, which we anticipate will support further growth in rents. These attractive fundamentals resulted in a solid quarter of leasing, during which we completed lease transactions across 637,000 sq ft with an average term of 7.6 years.
These transactions delivered rental growth well ahead of our expectations, with in-place rents growing by 50%. Even with our successful leasing in the quarter, our portfolio's in-place rents remain 30% under market, providing us with a runway for future growth. We have over $1 billion in capacity in our logistics joint venture and are actively looking for new opportunities to continue growing our portfolio in Europe, as well as our logistics footprint in our U.S. markets. In total, our investment management platform has an incremental $3.4 billion of nondiscretionary capital, which we are looking to deploy across all of our announced platforms. This will add significantly to our existing $6 billion of fee-bearing capital, which has doubled since the start of 2020. Turning to our office portfolio.
The majority of our stabilized office assets are owned through partnerships or funds within our co-investment portfolio. In total, our consolidated portfolio sits at 3.9 million sq ft and is centered around well-located, high-quality office buildings with leading tenant amenities and strong ESG credentials. As the polarization in the office market between Grade A stock and the rest accelerates, we are well positioned to continue attracting tenants who are relocating to the highest quality space. With that said, we're pleased to report we have seen a pickup in leasing activity in 2023, and we completed 380,000 sq ft of global office leasing through April with a weighted average term of 6.2 years. This is more than double the leasing activity we saw for the same period last year.
Approximately 70% of our office NOI comes from our European assets, predominantly the UK and Ireland. In the UK, the lack of Grade A supply and absence of speculative development activity across the country is a very different backdrop to previous downturns, supporting headline rents and encouraging occupiers to secure the best space while it's still available. In Dublin, location and sustainability remain pivotal themes behind Q1 deals. With most space occupied in the core areas of Dublin City Center with good energy and sustainable credentials. In Q1, we saw strong improvement in occupancy in the UK, and we completed successful rent reviews in Ireland, leading to an increase in our global same-store office NOI of 6%.
Our European office portfolio has many resilient characteristics, which reduces our risk ex-exposure in today's market, including strong occupancy of 95%, an eight year weighted average lease term to maturity, landlord-friendly lease structures with 97% of our office leases in Europe full repairing and ensuring, or FRI leases, similar to a triple net lease in the US. A solid roster of high-quality credit tenants, which make up 90% of our European rental income, including State Street, KPMG, and Fiserv, to name a few, and stable in-place income, which we continue to grow through rent reviews and active asset management. For example, in Ireland, our best-in-class office portfolio is made up of nine properties with a weighted average lease term of 11 years to expiration and average occupancy of over 95%.
We have an active leasing pipeline for our limited remaining space, which we look forward to executing over the remainder of the year. Turning to our development and lease-up portfolio. As we've been discussing on our last few calls, we are nearing completion on many of our developments, as well as making progress on our lease-up portfolio. Our development and lease-up portfolio is expected to add $97 million to our estimated annual NOI over the next several years. One of the projects we're very excited about is the redevelopment of the iconic and historic Kona Village Resort, situated on an unmatched location on the Kohala Coast of the Big Island of Hawaii. KW has a 50% ownership interest in this reconstructed luxury resort, which totals 150 stand-alone guest chalets and suites and will be providing incredible guest amenities across 81 acres.
The property will also feature solid sustainability features, such as generating and storing 100% of renewable energy on-site and is targeting LEED certification. Travel demand has remained robust as we are seeing very strong forward bookings for the second half of the year. We look forward to welcoming our first guests in July. We are also making great progress at our six market-rate and affordable multifamily developments in the U.S. and our 3three Dublin developments, all expected to complete construction later this year. In total, the developments and lease-up we expect to complete this year represent $64 million of estimated annual NOI to KW when stabilized, laying the foundation for strong future growth. With that, I'd like to pass it back to Bill.
Thanks, Mary. Over our three decades of investing in real estate equity and debt, KW has a long history of uncovering opportunities in periods of economic uncertainty like we're in today. We are prepared to react alongside our well-capitalized strategic partners to take advantage of any new opportunities, which generally are sourced through our global network of established relationships that enable us to find off-market negotiated transactions. We have a great team with extensive experience in acquiring, renovating, building, and asset management, which will allow KW to continue growing in a sound manner. I'd like to thank our entire global team for their dedication and hard work. With that, Devin, I'd like to open it up to any questions.
We will now begin the question-and-answer session. To ask a question, you may press Star, then One on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then Two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Derek Johnston with Deutsche Bank. Please go ahead.
Hi, good morning out there, and thanks for taking the question. Really excited about the development portfolio that's gonna deliver, and, you know, stabilize hopefully by year-end 2024. Mary did touch on the hotel in Hawaii. You know, I just had a question. I hear that there are bookings coming in, but, you know, how are the initial bookings tracking, you know, towards your underwriting initially? Secondarily on this question, you know, how is the labor situation, which tends to be difficult in Hawaii, how have you been able to staff the hotel in preparation for the grand opening?
Thanks, Derek. This is Justin. I'll take that question. So far what we're seeing, we have meaningful amount of bookings ahead of the opening, and we're seeing the ADRs far in excess of what our underwriting was. There's significant demand. This hotel, as you know, has a lot of followers and, you know, historically has been open for a very long time, and we're seeing a lot of people who can't wait to get back. We're very pleased with what we've seen so far in the future bookings. As it relates to employment, obviously, as you know, on the island, it's difficult. There's a limited supply of employees, but so far, we've staffed a meaningful amount of the property already. The team on-site has done a great job. Rosewood has done a great job.
We're excited to be open on July 1 and start welcoming our guests.
Okay, great. Thank you. On the debt platform, it was nice to see it grow here in first quarter in a tough environment. I would assume your positioning is pretty favorable given banks are pulling back and, you know, even non-banks like private equity, you know, they use repos which, you know, obviously are part of the banking system. You know, the secret sauce that you guys have, you know, clearly is your partners in mostly insurance companies. Have you seen any pullback or differences in their ability to, you know, underwrite deals that you bring to them as the success rate remained high? Any insights you can give us on the debt platform strategic positioning would be helpful.
Yep. Happy to answer that, Derek. You hit it to the nail on the head there. I mean, we're not relying on the banking system to utilize our debt platform, so we're not using any repo financing. We're using primarily insurance company and sovereign wealth money globally throughout our platform. We're in a unique situation right now. Although the transaction volumes are certainly down, so kind of the overall pie for debt financings is smaller, we've been able to capture a bigger market share just given our platform and the certainty of close. You know, we've been able to attract very high quality sponsors. We've been able to keep our pricing levels, you know, kind of in line with where they were last quarter.
We've also been able to bring down the loan to values across our most recent originations. We feel very comfortable kind of where we are in the capital structure being at, you know, like we said, 50% LTV last quarter on the originations. You know, there are certainly fewer players in the market, but we're being very selective in how we deploy capital. That all being said, the demand from the institutional side to place money with the platform remains extremely robust with our existing partners and certainly demand from others who have, you know, gotten some incoming calls from people wanting to participate as well. We feel very positive about the future growth prospects.
The other thing I'd say is in terms of payoffs, they've been very limited because the availability of financing from other lenders, is a bit more limited than it was, historically. The level of payoffs we expect this year are gonna be relatively low as well.
Very helpful. Thanks, and understood. I guess lastly from me, and then I'll pass the mic. Could you talk about your office portfolio outperformance? You know, what it's contributed to clearly is completely different than, you know, what we've seen from other public office REITs that are primarily based here in the U.S. You can kind of just, you know, walk us through some of the competitive advantages that, you know, you secured in your portfolio and why it's bucking the trend, versus, you know, all other office REITs. Even though it's a small piece of the pie and you're basically a residential REIT, your office portfolio really surprised me this quarter.
Sure. I'm happy to answer that. I mean, I would start by saying in the U.K. and Ireland, it's a completely different office market than in the U.S. I think the U.K. in general, it has seen muted new supply, and that's been over the last probably eight years. You know, overall, the U.K. office markets have a vacancy of 8%, for example. Edinburgh has a vacancy rate of 2%. You're really seeing, you know, not a huge vacancy, and this has been going on now for many years. I would say, you know, unlike the U.S. CBDs, some of which are struggling, the European markets really don't have those factors. I would also say that tenants are paying up for best-in-class assets with ESG credentials.
You really don't have an overhang of space, which I just described. Really, I think corporates are prioritizing their employees, the workplace and highly amenitized assets, which is really what characterizes our assets. When you think about our portfolio, and if you think about the same store, for example, our Buckingham Palace Road asset, which is our largest office asset, in Victoria, which is the West End. The West End has low single digit vacancy. There's really just no space to speak of, and that's now fully let actually a corporate and a security company, gaming company took the remainder of the space. At Embassy Gardens, which is in London, a pharmaceutical company took the remainder of that space. That's long walled.
If you turn to our Irish portfolio, we have nine office assets there, and we have a very long walled over 11 years. It's just a solid office market there. Our assets, I would say, are new, and they have ESG credentials. As I've been talking about the amenities, which I think is really what the corporates are bringing people back to work given all the amenities that our office assets are providing. I think we just have a different portfolio and the market itself is quite different than in the U.S.
Good stuff. Thank you. That's it for me.
Great.
The next question comes from Anthony Paolone with JPMorgan. Please go ahead.
Great. Thank you. I guess first question is around just share issuance in the quarter. You guys, it seems like you tapped the ATM and just curious thoughts around that and, you know, desire to either do more or raise liquidity or however you were thinking about it?
Yep. Hey, Tony, it's Matt. You know, our view on that is we thought it made sense to add a little bit of liquidity, in Q1 just given the current environment and what we expect to be, you know, some pretty interesting opportunities that will present themselves over the short to medium term. We were able to utilize, you know, significantly higher volumes in the stock as a result of the index inclusion that took place. That's when we did the vast majority of the issuance under that program. I'd say going forward, you know, we have a number of options, at our disposal to create additional liquidity. I think it's worth noting we're kinda past the peak of our development spend. Q1 was really the peak, and we now expect to have cash flow coming off those investments soon.
I guess what I'd say is, you know, we'll continue to be very thoughtful towards any future use under this ATM program.
Okay. Thank you for that. Just as you mentioned, thinking about opportunities, you do have some developments in Ireland. You've done well there. What's just the desire to own more there, just increase the scale of that platform versus, say, other parts of the world where you're operating?
Yeah. Hey, I would say on the multifamily side, we definitely have a big appetite there. Our portfolio is operating at 99% occupancy, so really virtually no space. We continue to see demand. I mean Irish unemployment is at a 22 year low, so it's sub 4%. It's just it's a market that we like and, you know, as I'm sure as you know, we have a very well-capitalized French insurance company as our partner, a great relationship with an incredible portfolio that we'd like to grow. You've seen us put quite a lot of capital into that portfolio in building our assets that we're adding to. A lot of that land that we built on, we acquired during, you know, the last basically downturn with very low basis.
We feel really good about our basis and our portfolio, and we'd like to continue growing that.
Okay. Where would you put, you know, cap rates in Dublin or, yeah, I guess in multifamily, particularly right now? It's have a better sense for the US, but it's hard to tell there.
Yeah. I mean, in Dublin, we've seen some recent trades in the low four cap rate range. It really just depends 'cause there's a mixed bag of stock. You have some that's older, and, you know, you can't compare our portfolio to the older stock that's trading. You also have some assets that have zero amenities. You know, we have assets that have parks and gyms and dog parks and, you know, nurseries for kids and restaurants. I would really, as a, you know, obviously, I'm biased, but I would say that our portfolio is the best-in-class multifamily portfolio in Ireland, and that will just continue with the roughly 1,000 units that we're adding to that portfolio. If you think about our portfolio, there's really no comp. Long-winded answer, but I would say low four cap rate range.
Okay. That's helpful. Just, you know, I guess last one on the debt platform. You know, I think most of what you've done with that thus far has either been you've originated or participated in originations. Is there an appetite to also just buy existing debt? Also just, and if so, just how you're thinking about that, and I ask partly in the context of, I think, you know, Bill, your historical strong suit you had, for a long time was just the relationships, with banks and working through some of the issues they had, and here we are in this environment?
Tony, so actually a handful of the assets we've originated under the debt platform have been purchases, and a number of those discounted. You're correct. I mean, you know, if you look historically at where we've participated in the debt space, the majority of it has been, you know, heavy discounted, no purchases. We're very well equipped to handle that. We have obviously the teams that understand the assets and the teams that understand the debt. We think that will be a big opportunity that may be coming here in the next several quarters out of the banking system. We're monitoring everything. We're watching what's happening, and we've got the capital ready to the extent those opportunities present themselves.
Yeah, I think, Tony, to this, Bill, the only thing I would add to that is that, you know, it was a very good point you made that as I think about it, with over the years, we've probably transacted with over 100 different banks around the world. We're viewed as a very trustworthy counterparty. I mean, I think I can remember, Mary, during the last Great Recession, we probably transacted with 30 individual banks in Europe.
Mm-hmm.
This is something we've always really made sure we cultivated were these types of relationships. As I said in my remarks, the most important thing to us is to try to find transactions that, you know, are directly negotiated with, you know, somebody that we're buying from. We, you know, we'll see how this all unfolds here over the next 12 to 18 months. That's a very important part of our strengths, I would say. I think as I've said a number of times, the other part of this is that the team of people here at Kennedy Wilson are basically the same people that have been together for pretty much a couple decades. Those relationships are maintained. We've all worked through one recession in 2008 and 2009.
Of course, we've all come through this period of three years where we've worked through any of the challenges that any of us had related to the pandemic. You know, you've got a time-tested group of people with all these existing relationships. I would say the last thing is that the biggest difference between 2008 and 2009 for us is that we have a very significant stable base of recurring cash flow. Maybe just as important, in 2008 and 2009, there was a dearth of cap. There wasn't capital available around the world at the beginning. Today, unlike then for us, we have big capital partners that we're already doing business with, who in themselves are very well capitalized. As opportunities present themselves, all of these factors are gonna play into what we do.
Great. Thank you for that.
As a reminder, if you would like to ask a question, please press star then one to be joined into the question queue. The next question comes from Joshua Dennerlein with Bank of America. Please go ahead.
Good morning, everyone. Thanks for the time. I just wanted to touch base on the Vintage Housing platform. It's a pretty unique platform you guys have. Just kinda thoughts on your expectations of future growth within it.
Vintage, it's definitely a unique platform and, you know, we've been an owner in the business now, since 2015, and certainly has exceeded our expectations from when we made the investment. In terms of kind of growth and adding units to the platform, we've been, you know, building ground up, using tax-exempt bond financing and tax credits primarily to fund those developments. You know, we've got a handful of those assets coming online here in the next year, and we continue to look for opportunities in that space to find new, you know, to find new investments. You know, historically, we've been doing these more one-off, you know, finding one investment and building it. We're always out there looking for other entities that may have more scale.
It's a very fragmented industry. We've been able to grow at a very good pace, but certainly would be out there looking and always trying to find bigger opportunities. For the time being, you know, we're generally adding, you know, 3-4 new assets per year to the platform, which adds, you know, great recurring cash flow. Then in terms of just growth within the portfolio itself, like NOI growth, you know, it's all tied to area median income in terms of how you can grow the rents. You know, with the inflation we've seen over the past couple years, in wages, we've been able to, you know, raise rents in that platform at a higher growth rate than we thought initially.
Appreciate that color. One thing that's come up on... It came up on another earnings call on the broader housing starts and permits data, was that there might have been an elevated level of affordable housing coming online through that. Is that something you guys are seeing, and does that impact your platform at all?
Yeah. I mean, in the markets we're in, we haven't seen, you know, an oversupply of affordable housing. In fact, I mean, we're running at 97% occupancy. Most of the assets we're building, we generally are 50%-60% pre-leased before we even open. There's a couple instances where we actually have a wait list of people to get in. You know, certainly in the markets that we operate in, we haven't seen any of that. In fact, you know, in certain states, it's becoming more challenging to get tax credits and bond allocations. If anything, we're seeing more of an undersupply of affordable housing in our markets than an oversupply right now.
Thank you.
This concludes our question-and-answer session. I would like to turn the conference back over to William McMorrow for any closing remarks.
Well, listen, thank you, everybody, for taking the time to listen to our story today. As I always say, we're always available offline if anybody has any follow-up questions that you think of. Thank you very much, and have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.