Kennedy-Wilson Holdings, Inc. (KW) Q3 2012 Earnings Report, Transcript and Summary

Welcome to the Q3 2012 Kennedy-Wilson Earnings Conference Call. My name is Sandra and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I'll now turn the call over to Ms. Christina Cha. Ms. Cha, you may begin.

Thank you, good morning everyone. Joining us on today's call are Bill McMorrow, Chairman and CEO of Kennedy-Wilson, Matt Windisch, Executive Vice President of Kennedy-Wilson and Justin Enbody, Chief Financial Officer of Kennedy-Wilson. I'd like to remind you that this call is being webcast live and will be archived for replay. The replay will be available by phone for 1 week and by webcast for 1 year. Please view the investor relation section of the Kennedy-Wilson website for more information. Please note that statements made during this conference call may be forward-looking statements. Actual results may materially differ from forward-looking information discussed on this call due to a number of risk, uncertainties and other factors indicated in reports and filings with the Securities and Exchange Commission. I will now turn the call over to Bill McMorrow.

Thanks Christina. Good morning everybody and before I start the body of the call, we're closing in now on our third year anniversary of going public. It was November 13th of 2009 and since I won't be talking to anybody during that period of time. I wanted to take a chance to thank everybody for their support. I think as you will see as we talk about not only the quarter but the context of the last 3 years that it's been a great period of time for the company. So thank you for that and with that, I'm going to start the call. As you can see from the earnings release, our EBITDA for the third quarter was $17.5 million a 94% increase from $9 million in the same period of 2011. For the 9 months ending September 30, 2012 our EBITDA was $55.5 million; which is a 33% increase from $41.6 million during the same period of time of 2011. As it relates to our investment account it closed the quarter at $658 million which is an increase from $582.8 million at the end of December 2011. But what I want to point out is there is always a lot of ins and outs in that investment account and I believe I said earlier in the year that we thought that distributions out of that account would be somewhere between $75 million to $100 million this year. So, what's actually happened during the year is that the change was comprised of $239 million of new investments but we had distributions out of that account of $164 million including little over $47 million worth of distributions in the third quarter. So, while we have been actively investing during the year, we've also been actively taking distributions and harvesting out of that account. One of the new metrics that we are going to include in our press releases going forward is the next one which shows our square footage that we own. So, on a rentable basis, not a gross basis, we own 14.6 million rentable square feet of real estate which includes almost 14,000 apartment units, 24 commercials -- and 24 commercial properties on top of that we own about $2 billion of loans secured by real estate and as we talk about here in a little bit we've had a reduction and that account for good reason because we've had very great collections and resolutions of our UK loan portfolio that we bought in October of 2011. The other thing and then I'll talk a little bit more about it and subsequent events here but when you look at what we were closing here in the fourth quarter that's square footage numbers going to increase from 14.6 million square feet to roughly 16.5 million square feet. Our Apartment business, we have about 1,000 units that we are closing on the acquisition filed here in the fourth quarter of which we've already close one that we did last week which is this project called Lake Meritt in Oakland so our apartment unit count is going end up the year right around 15,000 units. Included in that, and I can talk about this because it's been in the press in Ireland, tomorrow we are closing a 50-50 joint venture with Fairfax, the acquisition of AEP, one of the really fine apartment projects in Dublin called Sandford Lodge. So that will be the second multi-family asset that we've acquired in Ireland. So, to continue back on the press release here, I think the breakdown of the EBITDA is self-explanatory. From January 2010 through the end of the third quarter, we've acquired $6.7 billion of real estate investments including what we already have under contract to close here in the fourth quarter, with that about another $400 million that we are closing here in the fourth quarter. We are going to end this 3 year period of time at about $7.1 billion of acquisitions compared to when we did this first call in the first quarter of 2010. I indicated to everybody that our goal, even though I said we would not buy anything that didn't make sense, our goal was to try and buy around $6 billion worth of assets during this 3 year period of time. And so we are going to exceed that by a pretty good margin. For the first 9 months of the year we acquired $1.5 billion of real estate related investments including $659 million that we closed in the third quarter. We invested on our side roughly $176 million of our equity in all of those activities, including almost $69 million that we invested in the third quarter. So, when I break down the composition of the $1.5 billion, during the first 9 months along with our equity partners we acquired $969 million of real estate investments including a $180 million in the third quarter. When you look at the geographic locations, 68% in terms of our equity were in the United States, 32% in Ireland. It included 7 multi-family properties of almost 2,000 units and 11 commercial properties totaling 2 million square feet. During the 9 months, we along with our equity partners acquired $563.6 million of loans including $478.6 million during the third quarter at an average discount of 20% to their principal balances. In addition, KW and our equity partners originated a loan of $8.6 million at a 10.8% interest rate. These loans are all secured by 108 underlying properties located primarily in the Western U.S. and Ireland. We invested approximately $95.2 million of our equity in the loans, including $41 million in the third quarter. During the first 9 months of 2012, our equity partners and KW sold 4 multifamily properties located in the Western U.S. for a total of $243 million, which resulted in total gains at the 100% level for almost $33 million and our share was almost $8 million. Addition to that, we returned $17.5 million of our equity to KW. We sold our interest -- in the third quarter, we sold our interest in a 324 unit apartment building in San Jose, which resulted in a gain of $2.2 million. At the property level, we've been very active on the financing side. For the first 9 months, we completed $476 million of property financings and refinancings at an average rate of 3.3% and a weighted average maturity of 6.6 years. For the 9 months we completed $829 million of property financings or refinancings for an average rate of 3.6%. This is 2011 and so the point that we are trying to make there is that we -- and I have said numerous times, what we are doing this year is extending out the maturity dates on the underlying debt on our ownership. We are not only extending out the maturity dates but we've also been able to lower the average interest rates. One of the many great success stories of what's happened during the last year has been the resolution of our loan portfolio that we bought in October of 2011, just a year ago. The unpaid principle balance of that portfolio of loans that were basically fully performing was $2.1 billion. And as of September 30th, 2012 the unpaid principle balance has been reduced to $1.3 billion. We've had resolutions of almost $757 million representing 36% of the portfolio and as you are going to see here and just to second we, since the end the quarter, we've resolved about $100 million, almost $200 million of additional loans in that portfolio. You might also recall that Kennedy-Wilson and Fairfax purchased 25% of that original portfolio and against our 25% we had a loan that totaled roughly $350 million -- $325 million. That debt now including the resolutions that we had post end of the third quarter has been paid down to right around the $100 million, so we paid back $250 million of that debt during this period of time. We also announced the formation of 2 platforms in Europe during the year. At March 13th we announce the ?215 million or $325 million capital commitment from Fairfax. We've, as I mentioned, we are closing the Sandford Lodge transaction tomorrow. We closed the Alliance Apartment Building transaction inside that venture and we close the Brooklawn office building in Dublin inside that venture. In addition to that we announced a platform with a major European financial institution that in dollar terms totaled $2.5 billion, and inside that platform we acquired from a British bank a group of Irish loans that had an unpaid principle balance of $449 million. In that transaction we invested roughly $7.5 million of our equity. In Japan, as well as our multifamily business here in the United States, it continues to perform at a very high level. In the U.S. our average occupancy is running roughly 95%. In Japan it's running 97%. And in both cases and now it's also true in Ireland, we are doing meaningful cash distributions out of that entire portfolio on a monthly basis. If you look at just Japan by itself since September of 2010, we have distributed $51.5 million of cash out of that platform of which our share was $24 million. As our investment platform and our third party business grows, obviously the income in our service business continues to grow. So our management and leasing fees increased by 12% to $12.5 million for the 3 months ending September 30th from a $11.1 million for the same period in 2011. And during the 3 months ending September 30th, our service business achieved an EBITDA of $4.8 million which was a 50% increase over the same period of 2011. Our management and leasing fees increased by 35% to $35.5 million from $26 million and during the 9 months, our service business EBITDA and increased to $11.2 million, which was a 72% increase over the same period of 2011. On the financing side as you all know, in July, we issued 8.6 million additional common shares which resulted in gross proceeds of $112 million of which $40 million was used to pay off our $100 million line of credit. And then as I alluded to, we've had subsequent events that are meaningful. Subsequent to September 30th, we have acquired or entered into contracts to acquire $391.8 million of real estate related investments, which as I said earlier, were going to represent 1.8 million rentable square feet comprising almost a 1,000 apartment units and 6 commercial properties. All of those transactions will close here in the first quarter ? or the fourth quarter and so as I've said earlier, that will take -- assuming we don't do any other transactions, that will take our 3 year total to $7.1 billion of acquisitions. And then as I also said earlier subsequent to the end of the third quarter, we've resolved an additional $190 million in our U.K. loan pool which will go to -- not only will those distributions will go to all of our partners but it will increase our debt secured by our piece of that venture by another $35.5 million. So the good news on the U.K. loan portfolio is we are running not only ahead of the timeframe that we had laid out in our business plan, with the resolutions in terms of the total dollar resolutions are running ahead of our original forecast. So, with that overview I'd like to open it up to any questions that everybody has.

[Operator Instructions] The first question is from Jason Ursaner from CJS Securities.

Bill, just first question, I want to concentrate on the flow through of JV income. Your equity in JV income on the P&L hasn't really shown a lot of growth as you add properties but it's mainly, looks like it's related to higher pro forma share of D&A and interest. So, it's more of a shielding income issue not an NOI issue. So I guess I would thought you may have to show more income given all the refinancing there, so I just want to make sure I am understanding is it -- is it a lower yield on any of these properties or just generally how is the P&L equity income comparing to cash flow at say the JV level or more importantly the property level right now?

I'm going to ask Matt to answer that question.

So you are right. The equity and JV income line has not gone up with the new acquisition and the reason why is, generally speaking, as we acquired new properties they run at a loss because of the depreciation that runs through those properties. And so really the metric I would point to you is the EBITDA at the investment level. And so, if we are not selling asset out of the equity in JV income line it tends to run at breakeven or a small loss. And for that's why you are not seeing as we add properties, you are not seeing that line go up. But in terms of how the properties have performed, looking at just the apartment buildings, same store we had 12,000 units last year that we continue to own. This year the NOI of those properties are up 7.5% year-over-year, and that's on occupancy that basically remained steady at 95%. On the office buildings -- commercial properties there are 19 properties that we owned last year that we continue to own this year. Occupancy there has ticked up about 1%. NOI is up 10% year-over-year. So the operating performance at the properties improves. The equity in JV income line, however, doesn't reflect that because of the additional depreciation we are taking as we buy more assets.

I think too Matt, one -- it's not totally material, but one other thing to remember is that under the anomaly of accounting one of the changes that's taken place in a last the couple of years is that you can't new buy a property like say the Alliance Apartment Building. We had about $1,300,000 million of closing cost related to that and that's comprisable whole lot of different factors it could be legal fees, it could be transport tax, it could be fees you are paying on your loan financing and up until a couple of years ago all of those costs would have been capitalized actually into the acquisition. Today all of those things get written off in the period that you acquire the asset. So, that the case of like the Alliance Building where we own 50% of that, half of that got taken into -- as a write-off, got taken into the period you acquire. And so, if you are in an active, what I'll call hard asset acquiring mode like we have been in you are going see those charges in the current period but then as you go say in the 2013, those -- you will start to seeing the real benefit of the income from those properties because it won't be burdened by taking the well I call the closing costs and writing those off in the current period. So, I think that's one other factor that tends to influence us when you are in an active acquiring mode.

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

I would say longer. But it's just a difference in the accounting treatment than it was a couple of years ago, And not our change in accounting. It's just the way the accounting standards have changed, right.

Okay. And then just a quick follow-up on the figure, Matt, that you said the 7.5% NOI growth, yes, obviously the multifamily class is the biggest part of the story right now, almost 40% of the total investment accounts, I just want to make sure -- I understand that's a managed growth opportunity there because right now if I look at that portfolio, it's almost sort of 5% -- almost over a 5.5% cap of your booked equity, so on current NOI, if I look that's an average of 5% cap. I mean, it's roughly $100 million embedded gain, but if I look out 1 or 2 years, if I'm taking that 7.5% growth in NOI and I use that as an annual growth rate, I mean the embedded gain that you guys have grows tremendously, obviously its highly sensitive to the cap rate and that NOI growth. So I guess if you could just walk through what led to that 7.5% growth in NOI, was it rental growth, did you see the leverage you would have expected to see on rental growth and how you're thinking about that managed growth story as we look at 1 year or 2 in the multifamily?

Yes, I'm going to ask Matt to answer that question again, but also remember that -- and it's true of the office buildings we acquire and the apartment buildings we acquire, there is always a story to those things in terms of the value-add component and so, when you're -- like this deal in Lake Merritt is a good example, of the 150 plus units in that building 50 of them are rent control. But we are going to embark on the $3 million capital program on that property to not only upgrade the units but upgrade the common area. And so even though we are growing this income significantly, you have to get that money put back into the property, so that can sometimes take you 6 to 9 months before you've recycled that capital into fixing up the property where you are actually really able to move rents. So there is a bit of a time lag because virtually everything that we do has some sort of value add at the property level, I would call rehab component but Matt you want to answer that more specifically?

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

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

Exactly. And the revenues are higher than the expense.

But in order to get those revenue increases you are not only getting them because the market is accepting those rent increases, but you are doing improvements to the property. You are fixing up those individual units and you are fixing up the common areas. So the day that you buy an apartment building or an office building, that the work to start getting those all those rent increases can lag by 6 to 9 months, because you are doing the work from the day you acquired the building.

Got it. I guess I was saying more. I mean just as you look at that opportunity, I just want to make sure I am understanding in the same way you think about it. When you talk about managed growth, I mean if you are looking at $150 million, $155 million, $160 million of NOI in the few years, is that the reason you are still kind of in the strategy of managed growth. Because it's huge number I just want to make sure I am not crazy looking at it in terms of how you are -- your book equity even excluding promote, I mean it grows exponentially as you are increasing this NOI?

That's right and so I mean, because it's fresh in my mind, I can like talk to you about the Alliance properties, it's a more simple example in Dublin. We didn't have to do the CapEx program there. We put a new leasing office in, we put a couple of models in, we cleaned up the property. But it was running 100% occupancy when we bought it and continues to run 100% occupancy. But because of what we are doing from a management perspective with the new leasing office and so on and so forth. On renewals there, now we are increasing rent 10% to 15%. But there is also little bit of a lag too because you are trying in that case, it's a 200 unit building, you are not turning the whole building over in 3 or 4, 5 months, it can take you 1 year, 1.5 years to 2 years to turnover of a building like that in terms of tenancy at the increased rent level. Well, I think we are very comfortable telling you that the numbers that Matt gave you which show roughly 4.5% revenue increase are achievable across our portfolio because we own assets that, as I said I think earlier on, everything that we bought is pretty much in the high-barrier-to-entry market, so if you're in a high-barrier-to-entry market like say Central Dublin or Central Tokyo or Southern California or San Francisco or Seattle which are our primary markets, where there is not a lot of new construction going on, you are able to achieve rental growth. The other thing that obviously when you -- I said before on these call when you think about Ireland even though it can get massed in that whole euro situation, there is actually corporate growth going on in Dublin whether it's Google or Facebook or any of these companies. And so you've got growing populations and can find hard high-barrier-to-entry markets with high quality assets that we own. So you are going to get rent growth over -- year-over-year.

And the next question is from David Ridley-Lane from Merrill Lynch.

Sure. So last quarter you mentioned 3 big European loan portfolios that you were looking at, could I get an update on sort of the status of those loan sales?

Yes. There's several that are still underway. There were, you know, we're not going to win every one, and if we do, then probably we're doing something wrong. And so one of the big ones which was the Kildaire loan portfolio, we did not get. And -- but we got several other big ones that we kind of are in the thick of right now. I would tell you that in terms of Europe, if you want to look at in baseball terms, we're kind of in the, in my opinion anyway, we're still in the first or second inning of what's going to happen over there. And so they'll continually be -- the pace of loan sales has certainly picked up, and there are several big ones that we're right in the middle of here as we sit here, here in the fourth quarter, but we're going to win some and we're going to lose some. Some we're not going to be able to get to the final numbers. So, what we're trying to do in Europe and particularly in Ireland, in the U.K., particularly Ireland, is that we're also supplementing what we are doing on the loan portfolio acquisitions with these hard asset purchases. And to give you a frame of reference again like on that Brooklawn office building it sold right or wrong to those investors in 2006 for ?47 million. We bought it for ?15 million. And so on these re-priced high quality infill, hard entry assets in Ireland particularly, we are going to continue to barbell the loan purchases that we are doing with these hard asset purchases.

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

Yes, there will be. I mean we did a relatively small transaction here in the -- did that close in the third quarter, the Dallas? We just closed a small purchase of a condominium project in the Western United States at the end of the third quarter beginning of the fourth quarter that came out of a European bank. I still believe, as happened in Japan where the Japanese banks were not only selling assets in Japan that we are able to buy, but we are able to buy U.S. assets, that there will be certain level of assets that are sold out of the European banking system that are here in the U.S. And there is all kinds of different reports out there, David. But there is probably as much as $300 billion to $500 billion of loans here in the United States that the European banking system has originated. And in addition to that, as I've said on these calls before there is all kind of different estimate. But, there is probably as much as $1 trillion of assets through inside the banking system at Europe that are European based that are going to trade hands here over the next 3 years. So we now have in Europe under Mary Ricks's direction we've got 29 people on the ground. And one of the keys to being able to execute the right way the kind of strategy that we are doing in Europe is to have your own team in place. It's not like you can't be what I call an astronaut kind of investors that's just flying in and out of market and making your investments. So we've got a real team in place. I said on last call that we've just opened an office in Madrid that is primarily focused on the auction business. But the Spanish Government has just setup an institution similar to what was setup in Ireland. It's a liquidation entity that they're building banking assets into, so that may present some investment opportunities and the Spanish banks have a big exposure outside of Spain to the real estate business. So it's all going to ? it's all playing out, I think just as we felt it would when Matt and I made that first trip to Dublin and it was only 2 years ago, we're going on 2 years that we made our first trip to Dublin. And so it's, I think, playing out sort of just as we scripted.

All right. That's sound good. Can I just -- can I update on the number of west coast apartment buildings that you're actively marketing for sale?

We have -- sorry -- we've got 3 west coast department buildings that total about 1,100 units in total that we've got identified as sales candidates. Closer -- yes it's about 1,100 units in total. But none of -- I don't think any of those are going to come off the books here in the fourth quarter, they're all next year transactions.

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

Well, you've got -- as I said, you've got a growing corporate -- what's massed in Ireland is that obviously you've got a banking situation and you've got whatever is going on externally as it relates to the euro, but you have a growing -- for a variety of reasons you've got a growing corporate population. I've mentioned those names several clients, and so you've got almost 500 U.S. companies that have their European headquarters in Ireland, but you've got not only a confined geographic space, you've got a limited office market there. So, you're going to start seeing vacancy rates, in my opinion, in Central Dublin continue to decline. And so the office building that we've bought, we're looking at several other office buildings. The first office building we bought that as an unlevered yield of a little over 14%, and we don't have any debt on it. We did that in a 50-50 venture with Fairfax. But you're going to see those kind of opportunities. It's a great small building in a really A kind of location in Dublin. So, you're going to see a few more of those higher called -- what we're trying to do there is buy what makes sense. We're trying to buy really the highest quality of asset in these infill kind of location. Those will always be the first to recover in value and rent.

It just sounds like more an opportunity to take up high quality assets versus the rent growth that you are seeing in the multifamily sector and in Ireland already.

That's true but I am trying to say also as if you can kind of take a perspective of looking out 3 years, maybe 5 but 3 for sure, you don't have any new construction going on there. And so you've got a growing user base of these companies that are continuing to grow. They've got a really great education system in Ireland and it's particularly, not only the tax rates, what is attractive particularly to these U.S. companies, half the population in Ireland is under 35. And so it's the only EU country I think in the last 10 years that has a positive population growth. And so when you look at all of those factors with no new construction [indiscernible] in the 3 to 5 years from now you are going to actually see higher rental rates in the office market as well as what's happening, clearly happening in the apartment market.

[Operator Instructions] And the next question is from Will Marks from JMP Securities.

Take some of these questions, a little step further. Who is the competition over in Europe, you are seeing for the office and apartment deals?

Well, good question. It's that more liquidity is returning to the European market. And if you really even think about the last 120 days, up until the beginning of July, there was really no debt. When you were buying a loan portfolio, there was no ability to finance that. They call it a loan-on-loan. Like last year when we bought the Bank of Ireland loan portfolio and paid $1.8 billion, except for the piece that we were able to leverage, we did that all equity. Starting in July, you've seen a real change in the environment in Europe along with bigger healthier banks, and so I can think of half a dozen lending institutions now that are actively chasing loan-on-loan business where they're financing up to 50%, 60% of the acquisition price. And so that's allowing people to look at higher levered returns. So, I would say there is half a dozen active buyers on the loan pool side. They are primarily, as I think about it, I will say 100% U.S. capital. I don't know where their capital is coming from in their platform but they're U.S. companies. So that's it kind of on the loan side. On the harder asset side there is not great financing yet that has developed in that market and so if you are buying ?27 million deal even though that converts to say $35 million, although there were all number people who want to buy that Sandford Lodge deal, if you are doing these things like we are closing that on all cash basis if we doubt the number of buyers they are going to buy that kind of an asset because there is not as active a financing market on the hard asset purchase side particularly in Ireland. That's financing for Ireland generally. With the exception of one bank, it has to come from external lenders. So, there is more competition on the debt purchasing side but there is still plenty of opportunity to do transactions there that make sense to do. But like I said earlier not to mislead anybody, it's not like we are out there by ourselves and it is not like we are going to try and win every single transaction. I could care less if we make any investments to fill our platform if they don't make sense from an investment perspective.

It almost sounds like from one of your first responses to my questions that there is more optimism given if the banks are more willing to participate, more optimism in terms of the economic outlook, but we don't really hear about that and chant her like that.

Well, I think that generally my experience has been, and this is having done it for 25 years here, that the newspaper is always that we 6 months to 1 year behind reality. And if you think back to when we first started looking, Ireland as I've said is a 100% better place than it was 2 years ago and -- both psychologically and economically. And so the banks, being an ex-banker myself, ultimately when you go through these well I call restructuring periods you'll eventually wake up and realize you have to make money. And they're awash in deposits right now on a global basis and so they are looking at opportunities where they can lend money now on these loan portfolios at interest rates that are like somewhere between 500% and 600% over LIBOR which is an attractive use of their capital. So it's all started again -- it's not again but it's started in Europe where more liquidity by market forces is being driven back into the system.

Okay. Make sense. It's good to hear that what I read is little bit behind I guess.

Always is.

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

Oh, you're talking about the Dillingham Ranch. Yes.

Yes, sorry, Dillingham.

Yes. It's on Oahu, it's 2,700 acres including 18 acres on the beach. We own that inside the company on an attractive basis, but we don't have any debt on it. And we -- it's in-market, we've had in-market now for probably 120 days I would guess. We had a big broker open house over there in July or June. And we had about...

50?

We have in excess of 50 brokers from all over the world because this is the kind of property that needs to be marketed on an international basis. And -- but it's one that's going to take some time to sell. There is not -- with something like this you're, it's a great, great asset and it's only 35 minutes on the Honolulu Airport. And so -- but more than likely it's going to get sold to an international buyer, but no, there is no pending contract or anything right now, but hopefully that's a 2013 sale.

And the last question is from David Gold from Sidoti.

Just 2 quick ones. One was on the last conference call, you called out that $20 million of incremental EBITDA, and I was curious if all of -- proportionally if the $5 million was entirely in the third quarter or if that's still coming in-house.

David, it's Matt Windisch, that $5 million is in the -- that is all in the third quarter.

Okay. Perfect.

There's been additional acquisition we've had in the third quarter, on top of the $20 million annually that Bill mentioned on the last call that you'll see in the fourth quarter.

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

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

What do you mean? I mean, I am not sure I understand.

So in other words similar to what you pulled down in the second quarter, an incremental EBITDA pick-up that we should look for.

Yes. So for the acquisitions that were closed in the third quarter not including what we've closed in the fourth and that were under contracts, its roughly $8 million on annual run rate basis emplace NOI.

So including...

Third quarter.

This is just a third quarter only.

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

I wouldn't say so much other parts of the country. I mean, what we've continued to stay focused on the U.S. is the West Coast. We are in the fourth quarter buying an apartment building in Salt Lake City. And I think I had mentioned on the last call that we've made one other investment in the third quarter in Salt Lake City. And so we've expanded our West Coast footprint if you will only to really one additional city of any meaningful nature. And so the West Coast, it's still Seattle, San Francisco and Los Angeles and then we have made now -- we're making our second investment in Salt Lake City. We're buying an apartment project up there that we're paying about $43 million for. It's a little over 400 -- right around 400 units and on 35 acres of land. But that's kind of in terms of the expansion of our West Coast and then the other, we're not really doing any new investing in the apartment market in Japan. So then the only other market that we're focused on is really Dublin.

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

Okay. So, thanks, everybody for taking time. As always Matt or Justin or I are available for any additional follow-up questions. And as I said at the beginning of the call, we -- in closing we really appreciate the support that everybody has given us over the last 3 years that have allowed us to grow the Company the way we have. So with that I'll close the call.

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