Market Overview

Kennedy Wilson Reports Record Second Quarter 2018 Results

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Kennedy-Wilson Holdings, Inc. (NYSE:KW)
today reported results for 2Q-2018:

 
 

2Q

 

YTD

(Amounts in millions, except per share data) 2018   2017 2018   2017

GAAP Results

GAAP Net Income to Common Shareholders $109.6 $9.4 $107.2 $10.2
Per Diluted Share 0.77 0.08 0.74 0.09
 

Non-GAAP Results

Adjusted EBITDA $270.5 $102.2 $393.1 $179.5
Adjusted Net Income   170.9   51.0   234.1   93.7

"We are pleased to complete a record quarter that resulted in the
highest level of profits in our Company's history," said William
McMorrow, Chairman and CEO of Kennedy Wilson. "Our global team remains
focused on completing our key development and value-add initiatives
while growing our investment management platform both in the U.S. and
Europe."

2Q Highlights

  • Strong Same Property Performance with NOI up 6%:
 
 

2Q - 2018 vs 2Q - 2017

 

YTD - 2018 vs YTD - 2017

Occupancy   Revenue   NOI   Occupancy   Revenue   NOI
Multifamily - Market Rate (0.4)% 4.7% 5.6% —% 5.2% 6.7%
Multifamily - Affordable (0.1)% 4.7% 5.2% (0.4)% 5.3% 6.3%
Commercial 0.4% 4.1% 4.1% 0.3% 3.6% 3.0%
Hotel N/A   8.8%   15.5%   NA   3.8%   9.1%
Total       5.3%   5.6%       4.3%   4.9%
  • In-place Estimated Annual NOI of $427 million with an Additional
    $52 Million Expected from Unstabilized and Development Assets by 2021:
    • Estimated Annual NOI from the stabilized portfolio decreased by 3%
      to $427 million from $439 million at year-end 2017. The decrease
      is due to the net sale of assets for the six months ended June 30,
      2018 as well as a decrease of $6 million due to changes in foreign
      currency exchange rates.
    • An additional $36 million of Estimated Annual NOI is expected to
      be in place by the end of 2019 (of which 67% is either multifamily
      or pre-leased office development), and an incremental $16 million
      is expected to be in place by the end of 2021, through the planned
      completion of development and stabilization initiatives.
  • New Irish Multifamily Platform with Leading Global Insurance
    Company:
    Formed and closed first transaction in a new
    joint-venture platform with AXA Investment Managers - Real Assets to
    further grow its multifamily/PRS portfolio in Ireland. The Company is
    currently pursuing multiple new investment opportunities for this
    platform.
  • Asset Sales and New Platform Generate Gains and Fees of $184
    million to KW:
    • Sold a six-property multifamily portfolio in the Western U.S.
      generating cash of $104 million, gains and performance fees of $71
      million, an IRR of 35% and an equity multiple of 3.0x to KW.
    • Contributed its existing 50% interest in three multifamily
      properties in Dublin, Ireland into its new Irish multifamily
      joint-venture platform resulting in gains and fees of $93 million.
  • $133 Million of Share Repurchases in 2Q1: 7.4
    million shares were repurchased for $133 million and canceled under
    the Company's $250 million share repurchase plan. Year to date, the
    Company has repurchased and retired 8.6 million shares for $153
    million at an average price of $17.85.

Investment Activity: $786M in 2Q; $1.3 billion
YTD

  • Acquisitions: The Company, together with its equity partners,
    completed the following acquisitions:
 
($ in millions)   Gross   Kennedy Wilson's Share
Acquisitions

Aggregate

Purchase

Price

 

Income

Producing

 

Estimated

Annual

NOI

 

Cap

Rate(2)

 

Est. Forward

Return on

Cost (2)

 

Non-income

Producing /

Development

  Total
2Q - 2018 $211.6 $119.6 $ 5.2   4.4%   6.3%   $ 0.8   $120.4
YTD - 2018   510.3   232.7     11.4   4.9%   6.2%     39.2   271.9

● The majority of the acquisitions completed in 2Q and YTD have
significant value-add components which, once completed, are
expected to significantly increase net operating income.

  • Dispositions: The Company, together with its equity partners,
    completed the following dispositions:
 
($ in millions)   Gross   Kennedy Wilson's Share
Dispositions

Aggregate

Sale Price

 

Income

Producing

 

Estimated

Annual NOI

 

Cap

Rate(2)

 

Non-income

Producing /

Development

  Total
2Q - 2018 $ 574.0 $ 291.2 $

17.4

  6.0%   $ 30.6   $ 321.8
YTD - 2018     743.1     412.3    

23.6

  5.7%     42.1     454.4

● Total cash of $327 million to KW from YTD dispositions.

● NOI growth averaged 29% for assets sold YTD from the time of
acquisition.

  • Capital Allocation: In the quarter, the Company invested $195
    million of capital, allocating 68% to share repurchases, 20% to new
    acquisitions, and 12% to value-add capital expenditures. For the first
    half of the year, the Company invested $317 million of capital,
    allocating 48% to share repurchases, 33% to new acquisitions, and 19%
    to value-add capital expenditures.

Investment Management and Real Estate Services
Business

  • Adjusted Fees: For the quarter, adjusted fees were $31 million,
    an increase of $13 million from 2Q-2017. The increase is primarily
    related to $19 million of promote fees earned from the sale of assets
    during the quarter.

Balance Sheet and Liquidity

  • Liquidity: Liquidity totaled $947 million, including cash of
    $447 million(3) and $500 million of undrawn capacity on its
    revolving line of credit.
  • Debt Profile: Kennedy Wilson's debt had a weighted average
    interest rate of 3.8% and a weighted average remaining maturity of 5.8
    years, with 77% of total debt (at share) fixed and another 14% hedged
    against increases in interest rates.

Foreign Currency Fluctuations and Hedging

  • Income Statement
    • 2Q Impact: For 2Q-2018, changes in foreign currency rates
      increased both consolidated revenue and Adjusted EBITDA by 3%
      compared to foreign currency rates as of June 30, 2017.
    • YTD Impact: For FY-2018, changes in foreign currency rates
      increased both consolidated revenue and Adjusted EBITDA by 3%
      compared to foreign currency rates as of June 30, 2017.
  • Shareholders' Equity
    • During the first half of the year, GBP and EUR foreign currency
      rates decreased by 2% on average against the USD. The net decrease
      in shareholders' equity related to fluctuations in foreign
      currency and related hedges (in the GBP and EUR) was $13 million,
      equating to less than 1% of total Kennedy-Wilson Holdings, Inc.
      shareholders' equity.

Footnotes

 
(1) Future purchases under the program may be made in the open market,
in privately negotiated transactions, through the net settlement of
the company's restricted stock grants or otherwise, with the amount
and timing of the repurchases dependent on market conditions and
subject to the Company's discretion.
 
(2) Excludes non income-producing and unstabilized properties. Please
see "common definitions" for definitions.
 
(3) Includes $79.2 million of restricted cash, which is included in cash
and cash equivalents.

Conference Call and Webcast Details

Kennedy Wilson will hold a live conference call and webcast to discuss
results at 7:00 a.m. PT/10:00 a.m. ET on Thursday, August 2. The direct
dial-in number for the conference call is (844) 340-4761 for U.S.
callers and (412) 717-9616 for international callers.

A replay of the call will be available for one week beginning two hours
after the live call and can be accessed by (877) 344-7529 for U.S.
callers and (412) 317-0088 for international callers. The passcode for
the replay is 10121783.

The webcast will be available at: https://services.choruscall.com/links/kw180802IiuXW7KM.html.
A replay of the webcast will be available one hour after the original
webcast on the Company's investor relations web site for three months.

About Kennedy Wilson

Kennedy Wilson (NYSE:KW) is a leading global real estate investment
company. We own, operate, and invest in real estate both on our own and
through our investment management platform. We focus on multifamily and
office properties located in the Western U.S., UK, and Ireland. For
further information on Kennedy Wilson, please visit www.kennedywilson.com.

Kennedy-Wilson Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)

(Dollars in millions)

 
  June 30,   December 31,
  2018     2017  
Assets
Cash and cash equivalents $ 447.1 $ 351.3
Accounts receivable 64.6 62.7
Loan purchases and originations 28.9 84.7
Real estate and acquired in place lease values, net of accumulated
depreciation and amortization
6,097.7 6,443.7
Unconsolidated investments 613.7 519.3
Other assets   253.4     263.1  
Total assets $ 7,505.4   $ 7,724.8  
 
Liabilities
Accounts payable $ 25.8 $ 19.5
Accrued expenses and other liabilities 491.1 465.9
Mortgage debt 2,993.9 3,156.6
KW unsecured debt 1,249.9 1,179.4
KWE unsecured bonds   1,295.0     1,325.9  
Total liabilities   6,055.7     6,147.3  
Equity
Common stock
Additional paid-in capital 1,747.7 1,883.3
Accumulated deficit (40.7 ) (90.6 )
Accumulated other comprehensive loss   (436.7 )   (427.1 )
Total Kennedy-Wilson Holdings, Inc. shareholders' equity 1,270.3 1,365.6
Noncontrolling interests   179.4     211.9  
Total equity   1,449.7     1,577.5  
Total liabilities and equity $ 7,505.4   $ 7,724.8  
 
Kennedy-Wilson Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)

(Dollars in millions, except share amounts and per share data)

 
  Three Months Ended June 30,   Six Months Ended June 30,
  2018       2017     2018       2017  
Revenue
Rental $ 134.9 $ 123.8 $ 269.2 $ 248.1
Hotel 37.8 29.0 74.1 58.5
Sale of real estate 32.8 12.8 42.2 13.6
Investment management, property services and research fees 12.3 10.3 22.4 21.3
Loan purchases, loan originations and other   0.5     4.5     1.1     6.5  
Total revenue 218.3 180.4 409.0 348.0
Operating expenses
Rental operating 39.7 36.6 81.3 72.6
Hotel operating 29.4 22.8 60.2 47.2
Cost of real estate sold 31.4 9.6 39.8 10.3
Commission and marketing 2.1 1.7 3.5 3.7
Compensation and related 44.9 45.5 84.5 78.2
General and administrative 13.5 10.0 24.9 19.9
Depreciation and amortization   51.5     52.1     107.2     101.8  
Total operating expenses 212.5 178.3 401.4 333.7
Income from unconsolidated investments, net of depreciation and
amortization
  10.9     10.8     36.9     39.8  
Operating income 16.7 12.9 44.5 54.1
Non-operating income (expense)
Gain on sale of real estate 236.8 66.3 264.8 71.7
Acquisition-related expenses (0.2 ) (0.9 ) (0.2 ) (1.2 )
Interest expense (67.2 ) (52.1 ) (126.1 ) (102.1 )
Other income   10.6     4.4     10.1     4.9  
Income before provision for income taxes 196.7 30.6 193.1 27.4
Provision for income taxes   (29.4 )   (8.8 )   (26.8 )   (4.6 )
Net income 167.3 21.8 166.3 22.8
Net income attributable to noncontrolling interests   (57.7 )   (12.4 )   (59.1 )   (12.6 )
Net income attributable to Kennedy-Wilson Holdings, Inc. common
shareholders
$ 109.6   $ 9.4   $ 107.2   $ 10.2  
Basic earnings per share(1)
Income per basic $ 0.77 $ 0.08 $ 0.74 $ 0.09
Weighted average shares outstanding for basic 141,483,445 111,723,952 144,696,059 111,945,354
Diluted earnings per share(1)
Income per diluted $ 0.77 $ 0.08 $ 0.74 $ 0.09
Weighted average shares outstanding for diluted 142,707,159 111,723,952 145,872,617 111,945,354
Dividends declared per common share $ 0.19 $ 0.17 $ 0.38 $ 0.34
 

(1) Includes impact of the Company allocating income
and dividends per basic and diluted share to participating
securities.

 
Kennedy-Wilson Holdings, Inc.
Adjusted EBITDA
(Unaudited)

(Dollars in millions)

 

The table below reconciles Adjusted EBITDA to net income
attributable to Kennedy-Wilson Holdings, Inc. common shareholders,
using Kennedy Wilson's pro-rata share amounts for each adjustment
item.

 
  Three Months Ended   Six Months Ended
June 30, June 30,
  2018       2017     2018       2017  
Net income attributable to Kennedy-Wilson Holdings, Inc. common
shareholders
$ 109.6 $ 9.4 $ 107.2 $ 10.2
Non-GAAP adjustments:
Add back (Kennedy Wilson's Share)(1):
Interest expense 70.2 43.1 132.2 83.6
Depreciation and amortization 52.5 32.2 108.2 63.4
Provision for income taxes 29.4 8.1 26.8 2.2
Share-based compensation   8.8     9.4     18.7     20.1  
Adjusted EBITDA $ 270.5   $ 102.2   $ 393.1   $ 179.5  
 

(1) See Appendix for reconciliation of Kennedy Wilson's
Share amounts.

 

The table below provides a detailed reconciliation of Adjusted
EBITDA to net income.

 
Three Months Ended Six Months Ended
June 30, June 30,
  2018     2017     2018     2017  
Net income $ 167.3 $ 21.8 $ 166.3 $ 22.8
Non-GAAP adjustments:
Add back:
Interest expense 67.2 52.1 126.1 102.1
Kennedy Wilson's share of interest expense included in
unconsolidated investments
6.1 6.0 11.2 11.5
Depreciation and amortization 51.5 52.1 107.2 101.8
Kennedy Wilson's share of depreciation and amortization included in
unconsolidated investments
3.1 4.4 6.6 8.7
Provision for income taxes 29.4 8.7 26.8 4.6
Share-based compensation 8.8 9.4 18.7 20.1
EBITDA attributable to noncontrolling interests(1)   (62.9 )   (52.3 )   (69.8 )   (92.1 )
Adjusted EBITDA $ 270.5   $ 102.2   $ 393.1   $ 179.5  
 
(1)   EBITDA attributable to noncontrolling interest includes $2.1 million
and $24.3 million of depreciation and amortization, $3.1 million and
$15.0 million of interest, and $0.0 million and $0.6 million of
taxes, for the three months ended June 30, 2018 and 2017,
respectively. EBITDA attributable to noncontrolling interest
includes $5.6 million and $47.1 million of depreciation and
amortization, $5.1 million and $30.0 million of interest, and $0.0
million and $2.4 million of taxes, for the six months ended June 30,
2018 and 2017, respectively.
 
Kennedy-Wilson Holdings, Inc.
Adjusted Net Income
(Unaudited)

(Dollars in millions, except share data)

 

The table below reconciles Adjusted Net Income to net income
attributable to Kennedy-Wilson Holdings, Inc. common shareholders,
using Kennedy Wilson's pro-rata share amounts for each adjustment
item.

 
  Three Months Ended   Six Months Ended
June 30, June 30,
  2018       2017     2018       2017  
Net income attributable to Kennedy-Wilson Holdings, Inc. common
shareholders
$ 109.6 $ 9.4 $ 107.2 $ 10.2
Non-GAAP adjustments:
Add back (Kennedy Wilson's Share)(1):
Depreciation and amortization 52.5 32.2 108.2 63.4
Share-based compensation   8.8     9.4     18.7     20.1  
Adjusted Net Income $ 170.9   $ 51.0   $ 234.1   $ 93.7  
 
Weighted average shares outstanding for diluted 142,707,159 111,723,952 145,872,617 111,945,354
 

(1) See Appendix for reconciliation of Kennedy Wilson's
Share amounts.

 

The table below provides a detailed reconciliation of Adjusted Net
Income to net income.

 
Three Months Ended Six Months Ended
June 30, June 30,
  2018     2017     2018     2017  
Net income $ 167.3 $ 21.8 $ 166.3 $ 22.8
Non-GAAP adjustments:
Add back (less):
Depreciation and amortization 51.5 52.1 107.2 101.8
Kennedy Wilson's share of depreciation and amortization included in
unconsolidated investments
3.1 4.4 6.6 8.7
Share-based compensation 8.8 9.4 18.7 20.1
Net income attributable to the noncontrolling interests, before
depreciation and amortization(1)
  (59.8 )   (36.7 )   (64.7 )   (59.7 )
Adjusted Net Income $ 170.9   $ 51.0   $ 234.1   $ 93.7  
 
Weighted average shares outstanding for diluted 142,707,159 111,723,952 145,872,617 111,945,354
 
(1)   Includes $2.1 million and $24.3 million of depreciation and
amortization for the three months ended June 30, 2018 and 2017,
respectively, and $5.6 million and $47.1 million of depreciation and
amortization for the six months ended June 30, 2018 and 2017

Forward-Looking Statements

Statements made by us in this report and in other reports and statements
released by us that are not historical facts constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements are necessarily
estimates reflecting the judgment of our senior management based on our
current estimates, expectations, forecasts and projections and include
comments that express our current opinions about trends and factors that
may impact future operating results. Disclosures that use words such as
"believe," "anticipate," "estimate," "intend," "may," "could," "plan,"
"expect," "project" or the negative of these, as well as similar
expressions, are intended to identify forward-looking statements. These
statements are not guarantees of future performance, rely on a number of
assumptions concerning future events, many of which are outside of our
control, and involve known and unknown risks and uncertainties that
could cause our actual results, performance or achievement, or industry
results, to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements.
These risks and uncertainties may include the factors and the risks and
uncertainties described elsewhere in this report and other filings with
the Securities and Exchange Commission (the "SEC"), including the
Item 1A. "Risk Factors" section of our Annual Report on Form 10-K for
the year ended December 31, 2017, as amended by our subsequent filings
with the SEC. Any such forward-looking statements, whether made in this
report or elsewhere, should be considered in the context of the various
disclosures made by us about our businesses including, without
limitation, the risk factors discussed in our filings with the SEC.
Except as required under the federal securities laws and the rules and
regulations of the SEC, we do not have any intention or obligation to
update publicly any forward-looking statements, whether as a result of
new information, future events, changes in assumptions, or otherwise.

Common Definitions

  • "KWH," "KW," "Kennedy Wilson," the "Company," "we," "our," or "us"
    refers to Kennedy-Wilson Holdings, Inc. and its wholly-owned
    subsidiaries. The consolidated financial statements of the Company
    include the results of the Company's consolidated subsidiaries.
  • "KWE" refers to Kennedy Wilson Europe Real Estate plc, which was a
    London Stock Exchange-listed company that we externally managed
    through a wholly-owned subsidiary. On October 20, 2017 we acquired
    KWE, which is now a wholly-owned subsidiary. Prior to the acquisition,
    we owned approximately 24% and in accordance with U.S. GAAP, the
    results of KWE were consolidated in our financial statements due to
    our role as asset manager.
  • "Adjusted EBITDA" represents net income before interest expense, our
    share of interest expense included in income from investments in
    unconsolidated investments, depreciation and amortization, our share
    of depreciation and amortization included in income from
    unconsolidated investments, loss on early extinguishment of corporate
    debt and income taxes, share-based compensation expense for the
    Company and EBITDA attributable to noncontrolling interests.

    Please
    also see the reconciliation to GAAP in the Company's supplemental
    financial information included in this release and also available at www.kennedywilson.com.
    Our management uses Adjusted EBITDA to analyze our business because it
    adjusts net income for items we believe do not accurately reflect the
    nature of our business going forward or that relate to non-cash
    compensation expense or noncontrolling interests. Such items may vary
    for different companies for reasons unrelated to overall operating
    performance. Additionally, we believe Adjusted EBITDA is useful to
    investors to assist them in getting a more accurate picture of our
    results from operations. However, Adjusted EBITDA is not a recognized
    measurement under GAAP and when analyzing our operating performance,
    readers should use Adjusted EBITDA in addition to, and not as an
    alternative for, net income as determined in accordance with GAAP.
    Because not all companies use identical calculations, our presentation
    of Adjusted EBITDA may not be comparable to similarly titled measures
    of other companies. Furthermore, Adjusted EBITDA is not intended to be
    a measure of free cash flow for our management's discretionary use, as
    it does not remove all non-cash items (such as acquisition-related
    gains) or consider certain cash requirements such as tax and debt
    service payments. The amount shown for Adjusted EBITDA also differs
    from the amount calculated under similarly titled definitions in our
    debt instruments, which are further adjusted to reflect certain other
    cash and non-cash charges and are used to determine compliance with
    financial covenants and our ability to engage in certain activities,
    such as incurring additional debt and making certain restricted
    payments.
  • "Adjusted fees" refers to Kennedy Wilson's gross investment
    management, property services and research fees adjusted to include
    Kennedy Wilson's share of fees eliminated in consolidation, Kennedy
    Wilson's share of fees in unconsolidated service businesses and
    performance fees included in unconsolidated investments. Effective
    January 1, 2018, we adopted new GAAP guidance on revenue recognition
    and implemented a change in accounting principles related to
    performance allocations, which resulted in us now accounting for
    performance allocations (commonly referred to as "performance fees" or
    "carried interest") under the GAAP guidance for equity method
    investments and presenting performance allocations as a component of
    income from unconsolidated investments. Our management uses Adjusted
    fees to analyze our investment management and real estate services
    business because the measure removes required eliminations under GAAP
    for properties in which the Company provides services but also has an
    ownership interest. These eliminations understate the economic value
    of the investment management, property services and research fees and
    makes the Company comparable to other real estate companies that
    provide investment management and real estate services but do not have
    an ownership interest in the properties they manage. Our management
    believes that adjusting GAAP fees to reflect these amounts eliminated
    in consolidation presents a more holistic measure of the scope of our
    investment management and real estate services business.
  • "Adjusted Net Income" represents net income before depreciation and
    amortization, our share of depreciation and amortization included in
    income from unconsolidated investments, share-based compensation and
    net income attributable to noncontrolling interests, before
    depreciation and amortization. Please also see the reconciliation to
    GAAP in the Company's supplemental financial information included in
    this release and also available at www.kennedywilson.com.
  • "Cap rate" represents the net operating income of an investment for
    the year preceding its acquisition or disposition, as applicable,
    divided by the purchase or sale price, as applicable. Cap rates set
    forth in this presentation only includes data from income-producing
    properties. We calculate cap rates based on information that is
    supplied to us during the acquisition diligence process. This
    information is not audited or reviewed by independent accountants and
    may be presented in a manner that is different from similar
    information included in our financial statements prepared in
    accordance with GAAP. In addition, cap rates represent historical
    performance and are not a guarantee of future NOI. Properties for
    which a cap rate is provided may not continue to perform at that cap
    rate.
  • "Consolidated investment account" refers to the sum of Kennedy
    Wilson's equity in: cash held by consolidated investments,
    consolidated real estate and acquired in-place leases gross of
    accumulated depreciation and amortization, net hedge asset or
    liability, unconsolidated investments, consolidated loans, and net
    other assets.
  • "Equity partners" refers to non-wholly-owned subsidiaries that we
    consolidate in our financial statements under U.S. GAAP and
    third-party equity providers.
  • "Estimated annual NOI" is a property-level non-GAAP measure
    representing the estimated annual net operating income from each
    property as of the date shown, inclusive of rent abatements (if
    applicable). The calculation excludes depreciation and amortization
    expense, and does not capture the changes in the value of our
    properties that result from use or market conditions, nor the level of
    capital expenditures, tenant improvements, and leasing commissions
    necessary to maintain the operating performance of our properties. Any
    of the enumerated items above could have a material effect on the
    performance of our properties. Also, where specifically noted, for
    properties purchased in 2018, the NOI represents estimated Year 1 NOI
    from our original underwriting. Estimated year 1 NOI for properties
    purchased in 2018 may not be indicative of the actual results for
    those properties. Estimated annual NOI is not an indicator of the
    actual annual net operating income that the Company will or expects to
    realize in any period. Please also see the definition of "Net
    operating income" below. The Company does not provide a reconciliation
    for estimated annual NOI to its most directly comparable
    forward-looking GAAP financial measure, because it is unable to
    provide a meaningful or accurate estimation of each of the component
    reconciling items, and the information is not available without
    unreasonable effort. This is due to the inherent difficulty of
    forecasting the timing and/or amount of various items that would
    impact estimated annual NOI, including, for example, gains on sales of
    depreciable real estate and other items that have not yet occurred and
    are out of the company's control. For the same reasons, the Company is
    unable to meaningfully address the probable significance of the
    unavailable information and believes that providing a reconciliation
    for estimated annual NOI would imply a degree of precision as to its
    forward-looking net operating income that would be confusing or
    misleading to investors.
  • "Estimated Forward Return on Cost" represents the Company's estimate
    of future net operating income once it has completed its value-add
    asset management initiatives divided by the purchase price plus
    additional capital expenditure costs that are expected to be incurred
    in accordance with the Company's original underwriting at the time of
    acquisition. This information is not audited or reviewed by
    independent accountants and may be presented in a manner that is
    different from similar information included in our financial
    statements prepared in accordance with GAAP. Estimated Forward Return
    on Cost is based on management's current expectations and are based on
    assumptions that may prove to be inaccurate and involve known and
    unknown risks. Accordingly, the actual return on cost of an investment
    made by the Company may differ materially and adversely from the
    Estimated Forward Return on Cost figure set forth in this release.
  • "Gross Asset Value" refers to the gross carrying value of assets,
    before debt, depreciation and amortization, and net of noncontrolling
    interests.
  • "Investment account" refers to the consolidated investment account
    presented after noncontrolling interest on invested assets gross of
    accumulated depreciation and amortization.
  • "Investment Management and Real Estate Services Assets under
    Management" ("IMRES AUM") generally refers to the properties and other
    assets with respect to which we provide (or participate in) oversight,
    investment management services and other advice, and which generally
    consist of real estate properties or loans, and investments in joint
    ventures. Our IMRES AUM is principally intended to reflect the extent
    of our presence in the real estate market, not the basis for
    determining our management fees. Our IMRES AUM consists of the total
    estimated fair value of the real estate properties and other real
    estate related assets either owned by third parties, wholly owned by
    us or held by joint ventures and other entities in which our sponsored
    funds or investment vehicles and client accounts have invested.
    Committed (but unfunded) capital from investors in our sponsored funds
    is not included in our IMRES AUM. The estimated value of development
    properties is included at estimated completion cost.
  • "Net operating income" or "NOI" is a non-GAAP measure representing the
    income produced by a property calculated by deducting operating
    expenses from operating revenues. Our management uses net operating
    income to assess and compare the performance of our properties and to
    estimate their fair value. Net operating income does not include the
    effects of depreciation or amortization or gains or losses from the
    sale of properties because the effects of those items do not
    necessarily represent the actual change in the value of our properties
    resulting from our value-add initiatives or changing market
    conditions. Our management believes that net operating income reflects
    the core revenues and costs of operating our properties and is better
    suited to evaluate trends in occupancy and lease rates. Please also
    see the reconciliation to GAAP in the Company's supplemental financial
    information included in this release and also available at www.kennedywilson.com.
  • "Noncontrolling interests" represents the portion of equity ownership
    in a consolidated subsidiary not attributable to Kennedy Wilson.
  • "Pro-Rata" represents Kennedy Wilson's share calculated by using our
    proportionate economic ownership of each asset in our portfolio,
    including our approximate 24% ownership in KWE immediately prior to
    our acquisition of KWE. Please also refer to the pro-rata financial
    data in our supplemental financial information.
  • "Property net operating income" or "Property NOI" is a non-GAAP
    measure calculated by deducting the Company's Pro-Rata share of rental
    and hotel operating expenses from the Company's Pro-Rata rental and
    hotel revenues. Please also see the reconciliation to GAAP in the
    Company's supplemental financial information included in this release
    and also available at www.kennedywilson.com.
  • "Same property" refers to properties in which Kennedy Wilson has an
    ownership interest during the entire span of both periods being
    compared. The same property information presented throughout this
    report is shown on a cash basis and excludes non-recurring expenses.
    This analysis excludes properties that are either under development or
    undergoing lease up as part of our asset management strategy.

Note about Non-GAAP and certain other financial
information included in this presentation

In addition to the results reported in accordance with U.S. generally
accepted accounting principles ("GAAP") included within this
presentation, Kennedy Wilson has provided certain information, which
includes non-GAAP financial measures (including Adjusted EBITDA,
Adjusted Net Income, Net Operating Income, and Adjusted Fees, as defined
above). Such information is reconciled to its closest GAAP measure in
accordance with the rules of the SEC, and such reconciliations are
included within this presentation. These measures may contain cash and
non-cash acquisition-related gains and expenses and gains and losses
from the sale of real-estate related investments. Consolidated non-GAAP
measures discussed throughout this report contain income or losses
attributable to non-controlling interests. Management believes that
these non-GAAP financial measures are useful to both management and
Kennedy Wilson's shareholders in their analysis of the business and
operating performance of the Company. Management also uses this
information for operational planning and decision-making purposes.
Non-GAAP financial measures are not and should not be considered a
substitute for any GAAP measures. Additionally, non-GAAP financial
measures as presented by Kennedy Wilson may not be comparable to
similarly titled measures reported by other companies. Annualized
figures used throughout this release and supplemental financial
information, and our estimated annual net operating income metrics, are
not an indicator of the actual net operating income that the Company
will or expects to realize in any period.

KW-IR

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