Helga Richardson-Thomsen - Investor Relations Bill McMorrow - Chairman and Chief Executive Officer Matt Windisch - Executive Vice President Justin Enbody - Chief Financial Officer Mary Ricks - President and Chief Executive Officer, Kennedy-Wilson Europe.

Jason Ursaner - CJS Securities Mitch Germain - JMP David Gold - Sidoti David Ridley-Lane - Bank of America.

Welcome to the Q3 2014 Kennedy-Wilson Earnings Conference Call. My name is Paulette and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Helga Richardson-Thomsen.

You may begin..

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

Today’s call is being webcast live and will be archived for replay. The replay will be available by phone for 1 week and by webcast for 1 year. Please see the Investor Relations section of Kennedy-Wilson’s website for more information. Statements made during this conference call may be forward-looking statements.

Actual results may materially differ from forward-looking information discussed on this call due to a number of risks, uncertainties and other factors indicated in reports and filings with the Securities and Exchange Commission. I will now turn the call over to Bill McMorrow..

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

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

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

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

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

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

In terms of the third quarter highlights, in August 2014, we converted the note secured by the landmark Shelbourne Hotel, which is located in Dublin, Ireland into a direct 100% ownership in the property.

As a result of taking a title to the property, the company consolidated the assets and liabilities at fair value and recognized an acquisition gain of $28.6 million.

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

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

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

Just as a frame of reference, I have been here for now 26 years. Our first line of credit was $400,000, so we have grown that from $400,000 to $665 million. During the three months ended September 30, 2014, the company’s equity partners including KWE completed approximately $732 million of investment transactions.

The company invested $108 million in $452 million of acquisitions and we received back to the company $52 million from the disposition of $280 million of assets.

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

I want to take a moment here. Next week on the 13 of November we are going to celebrate our fifth anniversary of going public and so I want to share a few – three stats from 2009 to today. Since January of 2010, we have grown our assets under management by 213% from $5.6 billion to $17.5 billion.

During that same period of time we have acquired $13.5 billion of assets at costs across the U.S., the United Kingdom, Ireland and Japan. And as I mentioned earlier our adjusted EBITDA for the first nine months of this year was $261 million, which compares to the full year of 2009 in which our EBITDA was $37 million.

So we have gone from $37 million in 2009 to the first nine months of this year $261 million. In terms of the investment business, by the way I have a little background our investment portfolio now totals 31.3 million rentable square feet and includes 128 commercial properties and 19,400 multi-family units.

Subsequent to September 30, we acquired an additional 312 multi-family units in Denver bringing our global multi-family portfolio to 19,700 units. Currently we have approximately $138 million under contract comprising almost 1200 multi-family units in the Western U.S.

which by year end obviously will bring our multi-family units to over 20,000 units globally.

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

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

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

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

On the commercial side, generally our office buildings, total revenue increased 4%, net operating income increased 6%, and the occupancy stayed relatively flat at 85%. But remember, we have a number of office buildings that we have purchased that had very low occupancy, where we are rehabbing those office buildings.

So, I would expect over time as we have finished the rehab of those office buildings that you will see that 85% occupancy number increase. The company and its equity partners acquired approximately $452 million of real estate during the quarter, which included $270 million acquired by KWE.

As I mentioned earlier, we invested, KW, a $108 million of equity in these transactions representing approximately a 24% weighted average ownership stake. The company’s investments for the quarter were directed 60% to the United Kingdom and Ireland and 40% to the Western U.S.

As I have said earlier, we continue to dispose of certain assets and during the quarter the company and its equity partners sold 3 commercial properties, 2 multi-family properties, 1 condo unit, 1 residential investment, which resulted in gross sale proceeds of $280 million.

The company’s share of the net proceeds after repayment of debt was approximately $52 million, including promoted interest and this compared to the book value of those assets of $39 million.

For the nine months, the company’s investment segment reported EBITDA of approximately $231 million, which was a 142% increase from the $95.2 million for the same period in 2013. For our multi-family units, total revenue increased 7%, net operating income increased 10%, and the occupancy stayed at 95%.

On the commercial side of our properties, the total revenue increased 3%, net operating income increased 1%, and the occupancy levels increased 1% to 85%. For the nine-month period, the company and its equity partners acquired approximately $2.6 billion of real estate related assets, including $2 billion that were acquired by KWE.

The company invested $403 million of equity representing an approximate 16% weighted average ownership stake, but remember that the ownership stake in KWE of KW Holdings is 13.3%. The company’s investments year-to-date were directed 82% to the United Kingdom and Ireland and 18% to the Western United States.

For the nine months of 2014, the company and its investment partners sold 16 commercial properties, 3 multi-family properties, 6 condo units and 3 residential investments, which resulted in gross sale proceeds of almost $1 billion.

The company’s share of net proceeds after the repayment of debt was $163 million, which included our promoted interest compared to a book value for these investments of $93 million. On the service side of our business, for the three months ended September 30, 2014, our adjusted fees were $22.2 million, which was a 1% increase.

Our adjusted EBITDA was $8.7 million, but for the nine months, our adjusted fees were $89.1 million, which is a 57% increase from $56.7 million for the same period of 2013. Our adjusted EBITDA for the service business for the nine months was $47 million, which is an 87% increase from the $25.2 million for the same period.

In terms of the financing side of our operation, in July 2014, the company increased it’s unsecured line of credit from $140 million to $300 million. We also in September, the company paid off $40 million of junior subordinated debt which was due in April 2013.

We paid that off because it’s carrying – and that was carrying an interest rate of 9.1%, so obviously doing the math we have now saved $3.6 million in interest expense by paying that off. In terms of Kennedy-Wilson Europe, Kennedy-Wilson Holdings as I mentioned earlier owns 13.3% of KW’s total share capital as of September 30.

And one of our wholly-owned subsidiaries serves as KWE’s external manager which capacity we received certain management fees and performance fees. Since KWE’s inception, which was the end of February of 2013 through 9/30/2014, the management fees paid or payable to by KWE to KWH are approximately $8.7 million.

And remember on the management fees 50% are paid in cash and 50% are paid in KWE shares. In October 2014 KWE completed a successful secondary offering of approximately 565 million of ordinary shares. KWH acquired approximately 75 million of KWE’s ordinary shares which allowed us to maintain our 13.3% ownership stake in KWE.

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

Of note, also KWE this morning announced the doubling of its quarterly dividend from £0.02 to £0.04 which represents 1.5% annual yield which demonstrates the increased cash flows generated by the portfolio.

So since it’s launch which was only eight months ago in February of 2014 through Mary Ricks and her team’s great efforts KWE has acquired 79 direct real estate assets with approximately 6.4 million square feet and three loan portfolios secured by 42 real estate assets totaling $2 billion in purchase price.

That portfolio currently produces approximately $132 million of annualized net operating income. During the third quarter KWE completed $505 million of financings secured by three portfolios with a total of 61 commercial properties as collateral for that financing. These properties were located throughout the United Kingdom.

The loans have a weighted average maturity of October 2019 with an average interest rate spreads of the LIBOR plus 1.84. In September 2014 KWE entered a three year unsecured floating rate revolving credit facility of approximately $365 million with a syndicate of banks. The facility was undrawn as of September 30, 2014.

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

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

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

And the other interesting point is that the 10-year financing market here in the United States is almost 100 basis points wide now with what we are able to do in Europe. So, with that summary, that’s a lot of information that I just went through, I’d like to open it up now to any questions that anyone might have..

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Okay. And our first question comes from Jason Ursaner from CJS Securities. Please go ahead, Jason..

Good morning. Congratulations on a great quarter. It was a lot of information, but I do really appreciate the level of transparency you guys go through. Just, Bill, the number that stuck out to me the most as being impressive in the quarter was the 8% same-property rental growth you guys generated in the U.S.

in multifamily, there has been – it seems like some slowing maybe in the central business areas and it seems like it’s starting to show the strength of your decision to not go into those areas and kind of be around the outskirts in areas like the East Bay.

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

Well, I think and Mary can weigh in on this too in Ireland, particularly, but we are very fortunate to be here primarily in the Western United States, where there is significant job growth really in the markets that we like to invest in.

So, if you look at Seattle, for example, where we own almost 5,000 units, you have got more Fortune 500 companies headquartered in Seattle than we have here in Los Angeles. In all of those companies whether it’s Boeing or Microsoft or Costco, Starbucks, you can kind of go on and on down the list, they are all adding jobs.

And so in the state of Washington over the last 20 years, I think the population is approximately double there and much of the growth has come in the Seattle area.

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

And so we were lucky to get kind of our flag down not only in Europe during what I will call that distressed period of time of ‘09 and ‘10 and into ‘11, but as prices got more and more expensive, what we decided to do was to go to these other markets.

And so we have had really great look in Seattle, the East Bay, we have a pretty good footprint now in the Salt Lake City and we are acquiring next week our first asset in Boise, Idaho. And all of those markets have experienced great job growth. The other underlying fundamental is that there are fewer younger people buying houses.

And the mortgage rates are although low, the qualification process still is very tough and you also have kind of shifts like in the psyche of the young people where they would prefer to be in a rental apartment unit versus owning a house.

So we think that in the – and then the last thing I would say is that we have typically bought – in Ireland it’s different, we bought really Class A properties at significant discounts to replacement cost. In the U.S.

we are buying generally what I would consider to be B quality assets that we are improving to B plus or in some cases A minuses by dedicating capital to it.

And the one great thing about the company today is that we have got sufficient capital whether it’s at the Shelbourne or (Rodney’s) apartment buildings that I have just mentioned to improve the assets and by improving those assets it’s allowing us to be more competitive not only with our competition, but it’s allowing us to push rental rates.

So we don’t see anything really – the rental rates that we have experienced in Ireland Mary are very high and I am not sure that those are completely sustainable at those levels, if you might comment on that Mary?.

Well, I think I mean what we are seeing right now in Dublin is apartment rental growth up 12% annually and Bill like you alluded to in terms of just mortgage restrictions, the Central Bank have imposed several restrictions like 80% LTVs and certain loan to income hurdles etcetera that’s making it very difficult for young people to borrow money and take up mortgages to buy houses.

So and remember I think apartments or multi-family living with great amenities like we do in the U.S. which is what we have brought over to Dublin is new really in Dublin. So the concept is new, so we are actually seeing now it’s becoming more of a theme that people are happy to lease their apartments and pay good rents.

So we are seeing I think across the board on all of our multi-family apartments in Dublin when we were putting CapEx into the units themselves furniture packages where we are spending €7,000 to €10,000 a unit we are seeing double-digit increases straight to the bottom line in rents..

So I think the summary is we feel very good about the multi-family asset class and your ability particularly here in the United States to finance these long-term 10 year to 12 year fixed rate financing.

And so you are locking in spreads that are only improving over time as you spend the capital on these properties and you exert better management at the property level..

Okay, great.

And just real quick on the financing side, obviously you guys have expanded the credit line this quarter you paid back the $40 million trust preferred, just wondering what was sort of the decision behind that time wise and if you continue to see any other refinance opportunities either at the corporate or property level?.

Yes. I mean at the property level for sure we are looking at every asset that we own, Mary in Europe has a number of things that we bought back in the early part of the recovery that we were had borrowing rates of 400 to 500 point spreads over LIBOR. So we are right in the middle of financing – refinancing some of those assets right now.

And it’s also true in the United States that we are we are looking at whether it’s at the corporate level or at the asset level we are always looking for opportunities to save money on interest costs. And so one of the first steps at the corporate level of course was to pay off this trust prefer that had a fixed rate of 9.1%.

And we have sufficient – we have sufficient liquidity and had sufficient liquidity and so as our balance sheet has gotten stronger and so on we just didn’t think that was an appropriate piece of paper to have in the company any longer.

And then remember next year or two that in May, the Fairfax convert, which is $100 million, has a mandatory conversion to common equity. And so that will – there is a 6% rate attached to that. And so that will also go away in May of next year. And so we are looking for opportunities anywhere we can find them to save money on our interest costs..

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

And our next question comes from Mitch Germain from JMP. Please go ahead..

Good morning, guys. Thanks..

Hi, Mitch..

I am just curious the rationale behind the equity raise for KWE, obviously you guys have been running at a bit lower leverage there, so kind of why make that decision when you did?.

Well, it’s – in Europe, it’s a slightly more complicated process than it is here in the United States, where in the U.S. you could be raising capital around the transaction or a deal that you were buying, but in Europe, if you are raising in excess of 9.9%. In our case, we have roughly 100 million shares outstanding before we did the offering.

You have to do what’s called a rights offering and that whole process is a longer lead time. And so you have got to – and we could see that we have a very significant pipeline of things that we are not only looking at closing here in the fourth quarter, but are going to spill over to the first quarter.

And so we needed to raise capital really in advance of those transactions. So, even though, we have a low leverage currently in KWE, we needed to have the capital available to us for the transactions that we see coming down the pike here in the fourth quarter and the first quarter of next year.

So, we now have 135 million shares outstanding in that company approximately. And as I mentioned KWH here in the United States owns approximately 18 million of those shares..

Great, okay.

Last question, I know that in the past you guys have been an aggregator of multi-family, trimming some commercial, I know that you sold some multi-family this quarter, is there anything we should read about that or anything specific about those assets that didn’t fit the profile of what you are looking for?.

Hey, Mitch, it’s Matt. So, yes, on the apartments that we sold those are primarily held in ventures, where we had relatively low ownership interest and we have achieved the business plan.

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

Excellent. Thanks, guys. Great quarter..

Thank you..

And our next question comes from David Gold from Sidoti. Please go ahead..

Hi, good morning..

Hi, David..

Broader question on geographies, I think in the KWE at least some commentary on yield spreads contracting in some of the markets.

And broadly speaking, I was curious if you could comment on with the little bit of heat up perhaps that we have been seeing in the UK and Ireland? Are those markets – are there assets in those markets that are still right for you guys or is it perhaps one of those moments when we start sniffing more closely at some of the other geographies you have been looking at?.

Mary, you want to answer that?.

Sure. So, I mean, we are looking at Spain and Italy and we have analyzed quite a few portfolios and assets there and we continue to do so. In the markets where we have been active in Ireland, I will talk about Ireland first.

I mean, some of the deals that we have done there have either been bilateral transactions, i.e., the Elliott loan portfolio that we bought directly from a UK bank that’s exiting Ireland and we have transacted with them in past. So, that’s really a way for us to I think buy things at attractive yields.

And as you can see from our IMS, we are already executing on asset management plan there. So, we are increasing our NOI. And then – and we are also doing, we have got a couple other deals that we are working on.

So, we are trying to do more sort of targeted transactions, off-market deals and where there is really an angle in Ireland, but we also have a team of 30 people. So, I would say that we know the markets better as good and/or better than a lot of our competitors there. We know what’s going on in the occupier market.

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

In terms of the UK, we have seen in the secondary markets some yield compression, but we are still seeing opportunities to buy assets that are under-managed and have been undercapitalized for a number of years.

And that I think is we are going to continue to see yield compression and we are seeing rental growth in a lot of those submarkets that we are transacting in.

And so there are still quite a few opportunities, not only are the banks de-leveraging, we are seeing the insurance company coming to market with assets, insurance companies as well as building societies, which are like savings and loans comparable to that in the U.S. So, we are seeing different vendors coming to the market and selling assets.

And I think the difference now between when we started in Europe is that the sellers now are marked to trade.

So, they are provisioned way better and that really goes back to the question of why did we raise capital in Europe when we did? It’s really to have the warchest available to us to take advantage of the massive pipeline that we have as Bill said.

So, we are seeing opportunities still in all the markets we are transacting in and a lot of it is not only we feel like we are doing well on the buy, but it’s also the execution on the asset management. And so we are well into executing on quite a few of those initiatives now that will add value to the whole portfolio..

Yes.

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

And so what’s happened is that given the size of our platform, we just continue to see very, very good investment opportunities. But the other side of that and I think that what I tried to point out, we also disposed of almost $1 billion of assets in the first nine months of the year.

And so even though we are seeing very, very good opportunities to invest, we also recognized that in this yield star world that we are in today, there are people that want to buy things.

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

Okay, perfect. That’s helpful. And as to Bill or Mary maybe some commentary on the capital being raised at KWE for some opportunities that are either in the pipeline or maybe under contract with expected fourth quarter, first quarter closes.

Can you give a sense there for both geographies and asset types? Are we sticking with the – is it UK and Ireland then and….

Mary?.

We can’t comment on that yet, but hopefully we will have some announcements out soon. I am sorry about that..

No worries, understood. Just one last one and probably for Matt, as we look at in the first nine months of the year, there were a few different gains driven by accounting or fair market value step-up.

Curious there are we done with – many of those were from the JVs coming on the books, are we largely done with that or there were some large gains that you can call out that are foreseeable for the fourth quarter?.

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

Perfect. Thank you..

But I think too Matt it’s not to – really this is not to amplify that answer, but two of the apartment buildings we are closing here in the next three weeks, we are buying as 100% ownership.

And so what we are doing right now is redeploying cash that we are taking out of some of these investments and to assets that are going to meaningfully increase our net income and EBITDA here over the upcoming years..

Great, perfect. Thanks so much Bill..

Thanks..

(Operator Instructions) And your next question comes from David Ridley-Lane from Bank of America. Please go ahead..

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

I mean I think it is representative and we have sold things, some things in Europe, some things in the U.S. We have sold some assets that we held four to five years. We sold some assets we held for shorter time periods. So I would say all-in-all kind of the legacy of the assets we sold is representative of the investment account today..

Got it. And you have recognized some very strong equity multiples on those, so that’s great to hear. On the timing of dispositions I know it’s always difficult, but curious if –what you have out listed today is similar in scale to kind of what you have had out listed for sale over the last 12 months, i.e.

can you keep up this pace of dispositions that you have been at?.

Well, I am not sure that David the goal is not to kind of keep up a certain pace. It really more has to do, does that asset either from a ownership perspective or from a strategy perspective fit what our ongoing plan is.

We have four more office buildings here in the United States that we are in the process of either listing or selling that will happen next year. But the decisions to sell those assets really don’t relate to any kind of a pace that we are trying to keep up, it really relates to a strategy or the ownership structure that it might be in.

And remember too that as we have got more capital into the company what we are trying to do – and as I think Matt said earlier some of these asset dispositions that we have been doing go back in time where we had small ownership interest in these deals.

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

Okay. I completely understand, its strategy driven versus taking a target, but sometimes I stare at (Excel) a little too much..

But I think the other thing too for everybody to really think about is that particularly on the office side here in the U.S. it’s a much different market than it is in Europe.

The European market particularly in the United Kingdom and Ireland is a much, much better office market as Mary can attest that she – we just did a lease in Aberdeen and I think it’s public information Mary, right..

Yes..

Yes, you did a 15-year term certain lease with ConocoPhillips on an office building that we own in Aberdeen. But here – so here in the United States in the office market, particularly here in Southern California, where you don’t have as much the technology drivers that you do in Northern California.

The lease terms generally average 5 years, in some cases, 7 years. And so you are constantly putting capital back into some of these office buildings in order to maintain the same tenant base. It’s very, very different in Europe, where you have got these longer term lease terms, certain leases.

So, that then feeds into a strategy, where do you want to keep your capital.

Do you want to have it in a multi-family asset that we can earn 10% to 12% cash on cash returns or do you want to keep it an office building, which you have a partial ownership interest in that is going to continue to need capital, to keep its tenant base here in the United States.

So, it’s those kinds of thought processes that we go through when we decide about these dispositions..

Got it.

And then on the discounted loan purchases, are we getting to a point on some of these where as part of your business plan on handling the lines, you are preparing to take ownership? Should we see kind of level loan to own increase over the next couple of quarters relative to the pace it’s been over the last couple of quarters?.

Matt?.

Yes, sure. So, I think what you have seen over the past few quarters is actually a lot of conversions of loans into real estate, so like what we did with the Shelbourne and some other assets recently.

And so I think you will see some continuation of that trend, in particular, and Mary might want to weigh in, most of the loan purchases we are doing by volume are being done in Europe right now..

Yes, there is very few of those loans to own kind of strategies here in the United States today. I mean, that ship kind of sailed here in the U.S. maybe 2 years ago or more, but that is a big part of Mary’s business..

Right. I mean, the one thing I would say the most recent example is the Elliott portfolio, where the unpaid principal balance was €202 million, we paid €75 million and our business plan there is to take title to three of the largest assets in that portfolio. So, that is the business plan we are working through just the structuring of doing that.

So, I expect to do that in the next one to two quarters..

Yes. And I think the – Mary is making a good point, when you look at the – and I said it earlier that not only the loans that we are buying that ultimately we end up in ownership, but the very, very significant discounts to original cost.

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

Got it. Alright, thank you very much..

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

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

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