Colony Capital, Inc.
Q2 2015 Earnings Call Transcript

Published: 8 Aug 2015

[Operator:]

Greetings and welcome to the Colony Capital, Inc. Second Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I would now like to turn the conference over to your host, Lasse Glassen of Addo Communications. Thank you. You may now begin.

[Lasse Glassen:]

Good morning everyone, and welcome to Colony Capital Inc's second quarter 2015 earnings conference call. With us today are the Company's Chief Executive Officer, Richard Saltzman; and Chief Financial Officer, Darren Tangen. Kevin Traenkle, the Company's Chief Investment Officer; and Neale Redington, the Company's Chief Accounting Officer, are also on hand to answer questions. Before I hand the call over to them, please note that on this call, certain information presented contains forward-looking statements. These statements are based upon management's current expectations and are subject to risks, uncertainties, and assumptions. Potential risks and uncertainties that could cause the company's business and financial results to differ materially from those forward-looking statements are described in the company's periodic reports filed with the SEC from time to time. All information discussed on this call is as of today, August 6, 2015, and Colony Capital does not intend and undertakes no duty to update future events or circumstances. In addition, certain of the financial information presented in this call represents non-GAAP financial measures. The company's earnings release, which was released earlier this morning and is available on the company's website presents reconciliations to the appropriate GAAP measure and explanation of why the company believes such non-GAAP financial measures are useful to investors. And now, I'd like to turn the call over to Richard Saltzman, Chief Executive Officer of Colony Capital. Richard?

[Richard Saltzman:]

Thank you, Lasse. And welcome everyone to our second quarter 2015 earnings call. I'm pleased to report our first quarterly results as the new Colony Capital, Inc. As a reminder, on April 2, we completed the combination transaction where Colony Capital, LLC, the parent of our prior external manager, contributed substantially all of its real estate and investment management business and operations to CLNY. This transformative transaction included both the internalization of our external manager and the acquisition of Colony's private fund management business. We are now in the unique position of being a global real estate and investment management firm structured as a diversified equity REIT and possessing a $10 billion balance sheet. Over time, our new business model will permit us to redeploy capital in the general partner and similar sponsored positions in funds and other vehicles that invest in various strategies around the world. By investing on average approximately 20% of the equity in these vehicles, we will maintain exposure to attractive assets, while simultaneously turbo charging our equity returns through the overlay of investment management economics. In terms of financial results for the second quarter of 2015, the company reported FFO of $0.62 per share, which as a result of the combination transaction includes $38 million or $0.29 per share fair value step up gain resulting from the requirement to consolidate various investment entities that were previously unconsolidated. Among other adjustments, we exclude this required re-measurement gain in the calculation of Core FFO, which was $0.46 per share for the second quarter. Although we had strong second quarter results, at this juncture, it nearly represents the combination of two businesses which are performing well, but does not yet reflect any revenue or expense synergies that we expect to realize over the next several years. Before turning it over to Darren who will provide a more granular analysis of our financial performance, I'd like to focus on the tremendous progress we've made in connection with our equity portfolio, including the building or acquiring of platforms as well as select other investments that we consummated. The Colony Light Industrial Platform or CLIP produced a second quarter annualized Core FFO yield of approximately 10% against our average equity cost basis during the quarter of $386 million. Portfolio was approximately 90% leased at the end of the quarter and net effective rents on new leases and lease renewals average more than 10% above underwriting during the quarter. CLIP is also in the process of optimizing its portfolio through accretive acquisitions and dispositions. During the second quarter, CLIP acquired 13 light industrial buildings totaling 2.8 million square feet for approximately $151 million and subsequent to quarter-end CLIP acquired another seven buildings totaling 700,000 square feet for approximately $57 million. The overall CLIP portfolio now stands at 322 properties comprising 34 million square feet across 16 major US markets and has a total cost basis of $1.9 billion. CLIP has also begun the process of terming out some of its original acquisitions as evidenced by a new life insurance company $166 million, 10 year interest-only mortgage with a 3.8% fixed interest rate. In addition, CLIP recently closed on $100 million acquisition credit facility and has $87 million of uncalled capital commitments from third parties to pursue additional acquisitions. Based upon visibility on the near-term deployment of this dry powder, we expect to complete efforts to sell down our ownership position in CLIP from 62% to 51% and for CLIP to initiate a meaningful regular-way dividend and raise additional equity capital for growth. Turning to Colony American Homes, operating and financial performance have continued to trend very positively, which allowed CAH to make $325 million special dividend distribution to their shareholders last month and initiate a regular-way dividend that equates to 1.4% annualized dividend yield on our adjusted original cost basis. Special dividend represents a return of approximately 14% of CLNY's original investment in CAH and CLNY's share of this combined distribution totaled approximately $75 million. CAH currently owns approximately 19,000 homes and portfolio occupancy at CAH was 94% at quarter end, up from 91% in the prior quarter. CAH's stabilized portfolio generated 9.6% gross revenue yield and 5.4% net unlevered yield at the property level during the second quarter with core NOI margins of approximately 60%. Now that portfolio occupancy is at a more stabilized level, we have seen more meaningful rental growth of 4.7% on lease renewals in the second quarter, up from 3.8% in first quarter and we expect this trend to continue. Furthermore, we retain 77% of the tenants who had expiring leases, up slightly from 76% in the first quarter. The demographics of CAH's resident base also remains attractive with an average household income at $87,000 and average income rent coverage of approximately five times, which compares favorably to the demographics of the apartment industry. Finally, the Colony American Finance lending unit continues to grow with approximately $900 million in loans closed to-date and a pipeline in excess of $1 billion. In fact, CAF is now at a position to complete its own securitization to provide further growth capital for the business. This follows the successful $113 million private placement of equity capital raised subsequent to quarter end for the CAF business and CAH will now benefit from both management fees and carried interest. This is a strong vote of confidence by third parties in this business and demonstrates the potential self sufficiency of the business model if we choose to operate independently at some future date. We continue to believe CAF is an important growth and value differentiator for CAH. Notwithstanding all these achievements from both an operating and financial standpoint, we continue to actively pursue various strategic alternatives for CAH and look forward to providing future updates in this regard. In terms of other equity investments, couple of highlights. First, our largest acquisition during the quarter was 101,000 square meter global Statoil headquarters office building in Norway for approximately $324 million. Simultaneously, we entered into a new 15-year triple net lease that when combined with non-recourse Norwegian kroner matched currency 3.9% fixed rate mortgage-bond financing that we secured at acquisition produces an initial levered cash yield of 8.7%. In subsequent years, we enjoy upward only annual adjustments in the rent based upon changes in Norwegian CPI. In addition to the very attractive long-dated foundational returns that an asset like this produces, we also see an opportunity to form significant dedicated third party capital around this and other European assets that we've been acquiring. We hope to report more on this topic in ensuing quarters. Second, I just want to remind everyone that we invested $100 million at the beginning of the year in the private combined Safeway and Albertsons Company, keeping $50 million for CLNY and laying off the other $50 million to a co-investor. Our $50 million investment represents an approximate 2.2% ownership stake in the company, and as many of you already know, Albertsons filed an IPO registration statement on July 8 with an expectation of coming to market sometime this fall. Last but not least, I'd like to spend a few minutes on investment management. With the Colony Capital merger behind us, we have been busy reviewing options in order to prioritize go forward fund formation and other third party capital leasing opportunities where we will make a significant co-investment, generally around 20% of total equity capitalization. At the top of the list are logical next generation funds improving strategies where we continue to see great opportunities. Most noteworthy in this category is our next global distressed credit fund, CDCF IV, as we have just about completed investing all of CDCF III. Not far behind on the list are more geographic focus programs like the European vehicle I previously mentioned, as well as sector specific programs in the US, CLIP and perhaps a new venture in the core plus value added space. Finally, we are seeing some interesting smaller niche opportunities at juncture [ph] real estate that we may pursue as well. In conclusion, this first quarter performance post merger doesn't yet reflect any of the revenue or expense synergies that we expect to realize primarily through redeployment of our now $10 billion balance sheet. Fortunately, what we've built and acquired in terms of platforms and investments during the last 6 years is paying off handsomely, while we move expeditiously to launch the growth and foundational engines that will take us forward. And now I'm going to turn the call over to Darren Tangen, our CFO, for a more detailed summary of our second quarter financial results.

[Darren Tangen:]

Thank you, Richard. To recap, the company reported second quarter Core FFO of $0.46 per share, FFO of $0.62 per share and net income of $0.43 per share in our first earnings report since the completion of the Colony Capital combination transaction. There are a couple of important changes to our financial statements resulting from the combination transactions that I would like to highlight. First, the Colony Capital acquisition involved the creation of an UPREIT structure and the majority of the consideration involved in the combination transaction included the issuance of OP units from Colony Capital, Inc.'s operating company subsidiary or OP. As a result, Colony Capital, Inc., the publicly traded REIT, owns approximately 84% of its subsidiary OP and the other 16% is held by non-controlling interests owned by various management insiders. These OP units are exchangeable for common shares of Colony Capital, Inc. on a one for one basis. Secondly, the combination transaction triggered a requirement under GAAP, whereby we had to consolidate 52 investment level entities that were previously unconsolidated and accounted for under the equity method. As a part of this consolidation process, we were required to mark each of the investment entities to fair value, which led to an approximate $38 million step up gain, net of income tax expense accrual and a foreign exchange rate mark-to-market of all related non-US dollar denominated investments and hedge exposures. While our second quarter GAAP net income and FFO results include the required fair value step up gain from the consolidation of these investment level entities, we have excluded this gain in the computation of Core FFO for the second quarter. And Core FFO will continue to exclude the mark-to-market impact of the combination transaction going forward, to isolate what we believe is a more useful and meaningful income metric. In addition, nominal dollar FFO, and Core FFO results are reported in the aggregate for the operating company or OP, which includes the non-controlling OP interest. As of today, there are 112 million common shares outstanding at Colony Capital, Inc., the publicly traded REIT. But if all of the outstanding non-controlling OP units were exchanged for common shares, the total common shares outstanding would be 134 million. Total assets in our balance sheet are $9.9 billion as of June 30, up from $6.2 billion as of March, 31. The increase is primarily due to the $2 billion investment and deconsolidation grows up, the value of the acquired Colony Capital, LLC business of approximately $700 million, the issuance of $288 million of Series C preferred stock in April and the issuance of additional debt to fund continued investment activity. These second quarter activities led to an overall deleveraging of our balance sheet. Total balance sheet leverage as of June 30, is 38%, a sharp decrease from 50% as of March 31. We are also pleased to announce a dividend increase to $0.38 per share for the third quarter, a reflection of strong performance across our investment portfolio, including the initiation of a regular-way dividend by Colony American Homes and the expectation that CLIP will initiate a dividend in the near future. Turning to investment activity, we have remained extremely busy having deployed approximately $1.6 billion year-to-date. During the second quarter, we invested and committed to invest approximately $833 million. Approximately $334 million was invested in 11 loan originations, most of which we have financed or plan to finance with non-recourse match term debt to achieve a blended yield in excess of 12% on our retained interest. The other $500 million of deployment in the second quarter was invested across six real estate equity investments. Similar to our loan originations, we have financed or plan to finance these equity investments with non-recourse max term debt to achieve an expected levered internal rate of return of approximately 14% on a blended basis. The bulk of our loan origination activity domestically continues to reside within our transitional commercial real estate lending platform known as Colony Mortgage Capital or CMC. CMC currently has 19 loans warehoused totaling in excess of $450 million of loan balance at an average interest rate of approximately LIBOR plus 500 basis points. We expect to pursue a max term non-recourse capital market financing of this loan portfolio sometime in the third quarter and given current financing spreads, we expect to be able to generate a mid-teen return on our retained interest. Geographically, we continue to see very healthy deal flow coming from Europe, 45% of our $830 million second quarter deployment or $375 million was made in four separate European transactions, one loan origination and three equity investments. As Richard highlighted, our largest investment in the second quarter was the $324 million acquisition of the Class A global headquarters of Statoil in Norway. We are also harvesting portfolio gains in Europe. For example, in July, we entered a binding agreement with an investment group to forward fund the development of a prime office development site in Dublin, Ireland where Colony had a participating land loan originated in July 2014. This loan has now been repaid in full resulting in an IRR of 25% and equity multiple of 1.24 times over a 12-month full period. Going forward, Colony retains a 30% residual upside participation in the development, which will crystallize following practical completion and successful letting of the property scheduled for 2017. Once completed, we expect to realize a blended IRR in excess of 35% and an equity multiple of 1.4 times to 1.5 times, that's in euros, across our loan and profit participation. CLNY's original cost basis in this investment was $24 million, while a relatively small investment, it demonstrates Colony's ability to source and execute on attractive deal flow in Europe. We are expecting similar positive realizations amongst some of our other European investments in the second half of 2015. Our investment portfolio remains well diversified with approximately half of our assets in equity or equity-linked investments and the balance in debt oriented investments. Within the equity or equity-linked portion of our portfolio, 11% relates to our investment in CAH or Colony American Homes, 39% in CLIP and 50% is other equity investments. Geographically, approximately 81% of our investment portfolio is in North America and 19% is in Europe on a net book value basis with a trend towards increased exposure to Europe. Finally, I would like to touch on our capital markets activity and liquidity. Early in the second quarter, we issued $288 million of seven and one eight percent Series C Preferred Stock. Subsequent to quarter end, we exercised the accordion feature of our revolving credit facility by increasing commitments by $155 million, resulting in a total facility size of $800 million. Inclusive of availability under this upsized credit facility, cash on hand and proceeds we anticipate from financing, sales and repayments in the second half of 2015, we will have over $700 million of liquidity to pursue our investment program. All in all, it was another solid quarter for the company, even when you exclude the fair value step up gain resulting from the combination transaction. All of our investable segments are beginning to make meaningful contributions to our consolidated results, which bodes well for our future performance, particularly when some of the synergies from the Colony Capital combination transaction begin to materialize in the years ahead. With that, I'd like to turn the call over to the operator to begin Q&A.

[Operator:]

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Jade Rahmani from KBW.

[Jade Rahmani:]

Hi, Good morning. And thanks for taking my questions. Richard, I was wondering if you could provide your view of the state of the commercial real estate market, the cycle, et cetera. From your perspective, do you view overall fundamentals in real estate as continuing to improve and do you also believe there is too much capital chasing real estate right now and if so, where do you think the greatest pockets of frothiness might be?

[Richard Saltzman:]

Okay. Morning, Jade. Thanks. So look, we continue to remain quite sanguine about the investing environment and I think this cycle has been a little bit different than most people who are active today in business have experienced in their life times in the sense that the initial 4 or 5 years of what people deem to be recovery really for the most part was financial healing here in the United States, but not real fundamental recovery. And it's only been within the last couple of years in my judgment, that we've really entered the real fundamental recovery stage. And so you have an interesting juxtaposition because financial recovery took place first at very low interest rates. You had capital values rising really ahead of fundamental recovery, and now fundamental recovery is really kicking in, in high gear and you can see it across some of the results that we are reporting this morning. And the real question is, here in the United States, is, is there going to be a tug of war between fundamental recovery continuing as versus the potential for higher interest rates possibly being a drag on capital banks. So we remain very bullish in terms of the fundamentals and we're a little bit more circumspect with respect to the capital market flows here in the United States. And therefore, you got be very careful in terms of which pockets, which niches, you really choose to focus on here in the US, which is what we're trying to do. On the other hand, I think in Europe, as we've stated previously, we're weighing more at the beginning of the financial recovery. We're still kind of three to four years behind the United States and therefore we're able to take advantage of a capital mismatch as well as very attractive asset price. So we're much more at the beginning stages there. And then I think there are potentially moving opportunities in other parts of the globe. I would mention emerging markets as an example where because of the implosion with respect to commodity pricing, oil in particular, but also other commodities, you have a fair amount of damage control now going on in certain obvious places where these were quite robust pipeline real estate markets that might provide interesting opportunistic distressed opportunities for us to participate in. So we remain very sanguine about the investing environment and feel we've got many good years ahead of us still in terms of this cycle.

[Jade Rahmani:]

Thanks a lot. Couple of small items. I was hoping you could provide an update regarding the Greek resort mezzanine loan and also what's been going on with Colony Realty and if you expect any impact there?

[Richard Saltzman:]

Yes. So in terms of where we're invested in Greece, which is a very tiny modest investment, we are in a 5 star resort property which basically caters to international customers and clients. And it really appears to be quite immune from the domestic financial situation in Greece. And so far so good, everything is fine, just as expected according to underwriting and no concerns and worries. I think when you refer to Colony Realty, there was a reference in the press, incorrect reference in the press to a bankruptcy filing of the fund, where in fact it was a smaller pool of assets within a fund, the legacy fund dating back to basically the 2006, 2007 period, where in order to protect those assets and hopefully effectuate a restructuring that is amicable with all parties, we felt we needed to file for bankruptcy protection. So, we're still working through that but it's just an isolated part of the portfolio in a legacy funding back from the '06 and '07 period.

[Jade Rahmani:]

Okay. You mentioned, Darren mentioned the potential for a CLIP dividend. I assume that the current $0.38 dividend is not reflecting any CLIP earnings and would you provide some color on what kind of magnitude you might expect?

[Richard Saltzman:]

Well, I mean, it's still not a 100% decided on, but I mean, certainly based on the operating performance that we described, there is a lot of capacity there to pay a healthy dividend. And we have a sequence of things that we're trying to do, including selling down our position to 51%, which we're in the middle of doing and then once we initiate the dividend, then going out for more growth capital. Because we think that's one of the niche areas where we're taking advantage of the cycle, light industrial for sure was a laggard in terms of industrial recovery. In the capital flows that we were talking about earlier what necessarily is focused on light industrial. So we see much more of an arbitrage and a catch up in terms of the small to medium size business demand, that those warehouse buildings typically cater to and also a capital mismatch that we're trying to take advantage of in scale. So our hope is that over time we're going to be able to evolve into some type of permanent capital structure that's able to expand and grow that business line for us really in perpetuity and where we set the initial distribution level will be part of that overall long-term strategy.

[Jade Rahmani:]

Okay. And just finally on Colony American, can you talk about trajectory of earnings growth there, some of the public players are paying around 3% dividend currently and also, how much capital do you think could be dividended back through - basically through leverage? For example, if we assume 15% cumulative home price appreciation, could you get back an additional, potentially more than $100 million of equity?

[Richard Saltzman:]

I think we did the dividend recap, which basically got back about 15% of everyone's capital and we initiated regular way dividend which is now at around 1.5% of remaining capital. And I think for the moment, while we are looking at various strategic alternatives for the company, from a go-forward dividend perspective, we are really focused on continuing to grow the business. Because both the regular-way fundamental ownership of homes is really now also kicking in to high gear in terms of starting to produce more robust rental increases based on the 94%, 95% occupancy that we're currently operating at. And so we see a really good trajectory there and then also the Colony American Finance business continues to mushroom in terms of its growth. So there's always this tension, if you will, between wanting to provide more growth capital for the business, as well as wanting to repatriate capital for all of the shareholders in Colony American Homes and I think what you saw in terms of the 15% plus starting the regular way distribution was our best view of really trying to balance those two competing interests if you will. So, again, we're really pleased with where the performance is in the business. I think, for the moment, we're not planning any other extraordinary capital distributions. We do plan to grow the regular-way dividend, we plan to grow the company and simultaneously we're looking at various strategic options as I mentioned.

[Jade Rahmani:]

Thanks very much for taking my questions.

[Richard Saltzman:]

Okay. Thank you.

[Operator:]

Thank you. Our next question comes from Eric Beardsley from Goldman Sachs.

[Eric Beardsley:]

Hi, thanks. Just back to the industrial portfolio, what's the earnings contribution from that in this quarter?

[Darren Tangen:]

So, Eric, I mean, I think you heard Richard in his comments mention that the annualized second quarter Core FFO yield was 10% on invested equity of approximately $386 million for the quarter. So, I think with that metric, you can kind of get a general sense of at least what the Core FFO contribution was from the segment.

[Eric Beardsley:]

Got it. And you mentioned potentially selling down to 51%. I guess would you just redeploy that capital into more light industrial assets over time or I guess, are there other areas where you would see more near term opportunity?

[Darren Tangen:]

Well, I think that would certainly be part of it. But I think there's also really substantial opportunity in Europe as we've been discussing both in terms of distressed opportunity, as well as in terms of some of the credit sale leasebacks that we've been pursuing. So, I wouldn't limit it to light industrial and we also have underway various other capital formation programs that we're planning to launch in the near future where again we plan to be some of the seed capital in connection with those fund launches. So, we're going to be judicious in terms of making sure that we pick the right priorities and we put the capital where it's going to do the best for us.

[Eric Beardsley:]

Got it. And then how should we think about the pace of EUM growth in the asset management business moving forward. You mentioned potential of raising CDCF IV and potentially some geographic programs. I guess, how far along are those efforts and then, I guess within the existing business, how should we think about the pace of run-off there?

[Darren Tangen:]

Yes. So, I think we're fairly substantially far along in connection with the formation of some of these vehicles and maybe more at the beginning with respect to some of the others. And I think therefore the pace of growth in AUM and EUM is likely to be somewhat lumpy just in terms of when we're able to kind of get to closing this. And then provide a lot more granularity and transparency to the market with respect to exactly what we've done, because for regulatory reasons, it's very difficult for us to get too granular from a public reporting standpoint, while we are raising this money whether it's through private placements and or through even potentially public offerings, we're subject to all sorts of different restrictions. So, I mean, again, we feel really confident about our ability to meet the objectives that we've been describing, which is to double our fee paying EUM within the next 5 years and hopefully not have to take 5 years to actually get there. But it's going to be somewhat lumpy, and we hope in the next quarter or two to be able to report a lot more with respect to progress on some of the things that we mentioned today.

[Eric Beardsley:]

Okay. Great, thank you.

[Darren Tangen:]

Thank you.

[Operator:]

Thank you. [Operator Instructions] Our next comes from Dan Altscher from FBR Capital Markets.

[Dan Altscher:]

Hey. Good morning, everybody. I wanted to – I'm sorry if I'm missing the prepared script, but on the Hamburg acquisition, can you just give us a little bit of sense what you think maybe the economics are there in terms of the earnings power that we could maybe expect out of that?

[Richard Saltzman:]

Okay. Dan, its Richard. Hi, good morning.

[Dan Altscher:]

Good morning.

[Richard Saltzman:]

Look, it's a small investment for us. It was only €20 million for a 50% interest in Hamburg Trust. The interesting thing about Hamburg Trust is it gives us a window into the German market that really only domestic players in Germany have, because they have the BaFin license to basically be able to syndicate real estate funds and raise money from high net worth investors, smaller and medium-sized institutions. And, as you may know, the open end funds in Germany, which historically were 800-pound gorillas had major difficult issues through the financial crisis and really had been winding down for the most part and getting dimidiated. And we think Hamburg Trust is a platform through which we can become a very significant player in Germany or be it through an investment management model like we want to pursue everywhere else in our business where being a 50% partner is kind of a requirement, because it’s the only way a firm like ours, a non-German firm, gets to qualify for the BaFin license that we now enjoy. So, it's tremendous optionality in terms of the size of the investment that we made to be able to hopefully really pursue growth opportunities in Germany, really more regularly as opposed to distressed opportunities typically pursued through CDCF series of funds where historically CLNY has invested alongside CDCF and we've had some very positive results. There isn't that much distress really in Germany. So when we talk about distress in Europe, it's really in other regions, other countries. The German opportunity is more because the economy is so strong, more regular way opportunity and again, we think through this platform investment, we're really in a terrific position to take advantage of.

[Dan Altscher:]

It’s great. And Richard, I mean, it seems like there is a lot of things potentially on the table that you're looking at, but is it kind of safe to say that other sort of 50, 50 investments with other asset managers whereas in Germany or others on the continent are other sort of things that you're looking at or maybe try to again exploit those or get deeper into their respective regions?

[Richard Saltzman:]

Well, only in the case, I mean, it’s not generally speaking, it's our preference going 100%, we control 100% of what we're pursuing. And we would only do 50% in circumstances where there is a really sound strategic reason to do a 50% joint venture. So I don't want to say Hamburg Trust will be the only one, for sure, there could be others. But it really has to have a strategic foundation in terms of why we would do it. It's not for capital, it needs to be strategic.

[Dan Altscher:]

Okay. That makes sense. There's also been some other headlines around I guess a large potential Irish loan sale. Any comments maybe you can provide around that if you're still bidding on that, if you even were bidding on it or anything around there?

[Richard Saltzman:]

No, we really can't comment on speculation in the press about specific deals. But for sure we've been active in Ireland as of late and Darren cited in his comments some success we just had in connection with a land acquisition loan with participating features that we recently got all our capital back and some profit, where we still have a fairly significant equity interest in the property. So we're having good success in Ireland and we hope to continue to have good success in Ireland, but I can't really comment on deals that are in the market right now.

[Dan Altscher:]

Okay. Maybe a deal that maybe perhaps already was in the market, there is I think a fairly large NPL pool that was sold by Freddie recently, but I think its resi [ph] is that type of stuff at this point of time you're just not even really contemplating it, everything is just focused on commercial assets, does that test your legacy that where we're just not in that realm anymore?

[Richard Saltzman:]

Well, never say never. I mean, as a general rule, in the US, my comments with respect to Germany are also applicable to the US, is not very much distress. Single family is, of course, still an area where there is legacy distress and the market hasn't recovered yearly, as well as people were hoping it was going to recover. And I think that's part of the reason why the general GDP figures are not quite as robust as people thought they should be in a regular way of recovery and it's part of the reason why we think there is legs in the single-family for rent business where you continue to watch that home ownership rate in the United States go from the almost 70% level it got to pre-crisis to now down below 64%. Most experts think it's going closer to 60%, if not through 60%, which is just driving the economics of rental real estate, residential real estate all over the country, whether its apartments and or single family for rent. So we think that's going to continue. But I have to tell you, it's just going to be rifle shot one offs in terms of occasional distress. We are working on a deal right now which is a distress deal here in the US that I can't provide too much transparency on. But it's kind of a one-off bank REO sale there we're about to consummate, but it's the exception rather than the rule.

[Dan Altscher:]

Okay. I appreciate all the comments Richard.

[Richard Saltzman:]

Thank you, Dan.

[Operator:]

Thank you. [Operator Instructions]

[Richard Saltzman:]

Okay. I know it's a busy schedule out there in terms of all other different earnings releases that have been happening this week and today. So we appreciate everybody taking the time to join us and listen to our results for the quarter. And we look forward to reporting more good news with you here soon. Thank you.

[Operator:]

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.