We are starting to see opportunities show up there. So, the development piece, it’s always the case that it runs its cycle. You have higher quality – we have very, very, very high quality assets now that we have completed generally, in platforms with big, big institutional partners where we plan to keep these assets long-term. The development business in the kind of cycle that we are in right now really starts to show up as people get long land positions where discounts come into play, which is something that happened for us in Ireland during the Great Recession. But most of the development that we have done has been on properties that were adjacent to properties that we already own where there was existing cash flow. So, Clancy, in Ireland is a really, really good example of that.
We bought a property that had 420 finished units, but there was roughly another eight acres that we owned that came along with that property. Today, we have – it’s the largest multifamily property in Ireland. We built out another 500 units approximately, and so it’s a 900-unit project, but it’s on the same piece of land that we bought back in 2013.
Josh Dennerlein: Appreciate that color. And one more from me, just on the co-investment fair value accounting, could you walk us through that and then just maybe how to think about it as we go forward for, on a go-forward basis?
Bill McMorrow: Yes. I am going to ask Justin to really answer that question, but I would start the answer if I could, Justin, by just saying that the adjustments you saw in the quarter were basically inside three partnerships where you have got three institutional quality owners that have over $2 trillion of assets under management. And so these were never assets that were intended to be sold, they are long-term – they are assets that we are holding for the long-term, but then I would turn this over to Justin to amplify on that.
Justin Enbody: Yes. Hey Josh. So, there is about $2 billion in that investment bucket that exists that sits sort of in what we call fair value partnerships in every quarter, we go through the process of valuing those investments. And as you know, they go up and down over time, and we have had times where they have gone up and we have had times where they have gone down. Ultimately, obviously, in our disclosures, our goal is to also communicate to you the cash flows of those properties and what our long-term investment plans are. And so – but I think to your point, there is, as I mentioned, there is about $2 billion of properties that are going to have quarterly valuations attached to them, and ultimately, we would communicate differently if they are ever realized.
Bill McMorrow: I would say, too, Justin, I don’t – I am not – you basically should ignore these ups and downs as best you can. As I have said, these are assets that we plan to hold long-term, but as Justin said earlier in his part, when you have got interest rates rising, the implied cap rates widen, and so you have got to make these adjustments that are non-cash in nature.
Josh Dennerlein: Okay. Thanks for the time guys.
Operator: [Operator Instructions] Our next question comes from Tayo Okusanya with Deutsche Bank. Please go ahead.
Tayo Okusanya: Hi. Yes. Good afternoon everyone. I just wanted to stick with multifamily for a second. The first question just around, again, the California portfolio and just some of the more – some of the challenges going on in California. Just kind of curious your thoughts on how you see that ultimately playing out, how soon some of these kind of eviction issues and things like that, ultimately end up playing out, and how quickly that becomes less of a headwind to the portfolio?
Matt Windisch: Thanks Tayo. This is Matt. Yes, I think we are getting towards the end of it. There is still a little bit of time to go to get this all cleaned up. So, I think as we have said in the prepared remarks, right now it’s a headwind, but I think the interesting part is the loss to lease on those assets in California is actually quite high. And so as we are able to re-tenant some of those buildings, you are going to see a nice leasing spread come in on those assets. So, it’s hard to put an exact time around it, but I think it’s probably another quarter or two quarters where you will see a bit of a headwind. But I think pretty quickly you will see that become a tailwind where you will see occupancy go up and you will see some good lease trade-outs. It’s really a point-in-time issue. I think once we get through this, those properties are going to perform very, very well over the next couple of years.
Tayo Okusanya: Okay. Matt, that’s helpful. And then on the development side, just with the multi-portfolio, again, just given a lot of the assets are about to deliver. Just curious, again, what you have seen in the markets about the take-out of your construction loans on those assets. I am just curious what – how lenders are looking at this, if they are getting more conservative on NOI outlooks or debt service coverage ratios are getting tighter, and what could that ultimately mean for kind of like the permanent financing you need to get to take out the construction loans, and if potentially you may even have to put in some equity or something else, some cash-out lease to kind of balance all that out?
Matt Windisch: Yes. If you look at our overall development and lease-up pipeline, the overall leverage is roughly 33% against our gross asset value. So, we feel very comfortable, like on the multifamily assets we are finishing, we started these 3 years ago, the rents are significantly higher than we thought. Obviously, interest rates are up. So, there is a pretty good counterbalance on that. So, we think, if anything, it’s probably going to be a net-neutral, maybe some ability to take cash-out on some of the deals, but we don’t see a need to really put a lot of capital in given where the market conditions are today. And I think a lot of that has to do, again, with what’s happened with NOIs on our projections, 3 years ago versus where we are today. So, we are very comfortable with financing all of that, whether it’s original or with the agencies.
