Market Overview

Kennedy Wilson Reports 4Q and Full Year 2018 Results

Share:

Kennedy-Wilson Holdings, Inc. (NYSE:KW)
today reported the following results for the fourth quarter and full
year of 2018:

         
  4Q   Full Year
(Amounts in millions, except per share data) 2018   2017 2018   2017

GAAP Results

GAAP Net Income to Common Shareholders $ 30.7 $ 99.2 $ 150.0 $ 100.5
Per Diluted Share 0.21 0.69 1.04 0.83
 

Non-GAAP Results

Adjusted EBITDA $ 177.7 $ 200.6 $ 712.7 $ 455.7
Adjusted Net Income   88.8     113.9     397.0     242.5

"The fourth quarter concluded a record year of financial results driven
by increases in our recurring cash flow along with significant capital
gains from our asset sales program," said William McMorrow, chairman and
CEO of Kennedy Wilson. "Kennedy Wilson is well positioned to continue
our momentum into 2019 with a focus on active asset management and
continued progress across our development pipeline while at the same
time increasing our third-party fee-bearing capital."

4Q & Full Year Highlights

  • 46% Increase in Property NOI: The Company's share of Property
    NOI increased to $424 million in 2018 from $290 million in 2017, an
    increase of $134 million, which was primarily driven by the
    acquisition of KWE in 4Q-17.
  • Gains from Sale of Real Estate: The Company's share of total
    gains from the sale of real estate in 4Q-2018 was $88 million, a
    decrease of $55 million from 4Q-2017. For the year, the Company had
    $326 million in gains from the sale of real estate, an increase of
    $114 million from 2017.
  • 37% Increase in Pro-rata Revenue: In 2018, the Company's share
    of revenue, excluding sale of real estate, increased by 37% to $806
    million.
  • Strong Same Property Performance with NOI up 6.6% in 4Q-18 and 5.4%
    for FY-18
                   
  4Q - 2018 vs 4Q - 2017   FY - 2018 vs FY - 2017
Occupancy   Revenue   NOI Occupancy   Revenue   NOI
Multifamily - Market Rate 0.5 % 4.8 % 5.6 % 0.2 % 5.0 % 5.8 %
Multifamily - Affordable (0.4 )% 4.8 % 6.7 % (0.3 )% 5.0 % 6.3 %
Commercial 0.4 % 1.9 % 2.1 % (0.1 )% 3.7 % 2.2 %
Hotel NA     6.8 %   54.9 %   NA     5.8 %   20.6 %
Weighted Average         4.1 %   6.6 %         4.8 %   5.4 %
  • In-Place Estimated Annual NOI of $407 Million; Targeting an
    Additional $100 Million From Development and Leasing by 2023:
    • The Company's estimated annual NOI from its stabilized portfolio
      decreased by $32 million to $407 million from $439 million on
      December 31, 2017 primarily as a result of the net sale of assets
      during 2018.
    • For the year, the Company added $19 million to Estimated Annual
      NOI through the completion of lease-up and stabilization
      initiatives.
  • Fee-Bearing Capital Growth: The Company's fee-bearing capital
    grew from $1.8 billion to $2.2 billion in 2018. During the year, the
    Company raised an additional $600 million in fee-bearing capital
    offset by a decrease of $200 million due to asset dispositions.
  • Meyers Research Sale: During the quarter, Kennedy Wilson sold
    its research subsidiary, Meyers Research, LLC ("Meyers"), to MidOcean
    Partners, a private equity firm. As a result of the sale, Kennedy
    Wilson recognized a $40 million gain. Meyers had nearly 150 employees
    in 10 offices with revenues of $15 million and expenses of $17 million
    in 2018.

Investment Activity

  • $2.7 Billion in 2018 Investment Transactions: The Company
    completed acquisitions totaling $1.3 billion (of which KW's share was
    $622 million) and dispositions totaling $1.4 billion (of which KW's
    share was $971 million).
  • Cash Generated from Asset Sales: The Company generated $169
    million of cash from asset sales in 4Q-18 and $634 million in FY-2018.
  • Capital Recycling: During the quarter, the Company invested
    $151 million of capital with 58% into new investments, 32% into capex,
    and 10% into its share repurchase program. For the year, the Company
    invested $659 million of capital with 51% into new investments, 27%
    into its share repurchase program, and 22% into capex.
  • 4Q-18 Acquisitions: The Company, together with its equity
    partners, completed $450 million of acquisitions in 4Q-18, including
    the following key transactions:
    • The Grange, Dublin, Ireland: The Company and AXA Investment
      Managers - Real Assets in a 50/50 joint venture acquired The
      Grange, a 274-unit apartment community and four-acre development
      site targeting an additional 235 multifamily units in the South
      Dublin suburb of Sandyford. The purchase was made from Grant
      Thornton Receiver, on behalf of the National Asset Management
      Agency ("NAMA"), for $184 million.
    • Alpine Meadows, Sandy, Utah: The Company acquired Alpine
      Meadows, a 222-unit wholly owned apartment community in the Salt
      Lake City, Utah region, for $49 million. The property was acquired
      through a 1031 exchange with profits generated from the recent
      sale of the Bay Village Apartments, which was built a decade
      before Alpine Meadows.
    • Reedhouse, Boise, Idaho: The Company acquired off-market a
      wholly-owned 188-unit apartment community in Boise, Idaho for $24
      million via 1031 exchange. More than $6 million is planned to be
      invested to upgrade the unit interiors, and improve the clubhouse,
      fitness center and pool.
  • 4Q-18 Dispositions generated an 81% return on equity: The
    Company, together with its equity partners, completed $313 million of
    dispositions in 4Q-18, including the following key transactions:
    • Dublin Office Sale: The Company sold South Bank House and
      The Warehouse located in Dublin, Ireland totaling 82,000 square
      feet, to Google Ireland Limited, following strong execution of
      value-enhancing asset management initiatives.
    • Northern California Multifamily Sale: The Company sold the
      Bay Village Apartments in the San Francisco suburb of Vallejo,
      California. Kennedy Wilson had a 50% ownership in the 260-unit
      property that was acquired alongside a joint-venture partner in
      2010. The proceeds were used to acquire Alpine Meadows in Sandy,
      Utah via 1031 exchange.
    • UK Hotel Portfolio Sale: The Company sold a portfolio of
      six hotels totaling 864 rooms located across the U.K. for $54
      million. Kennedy Wilson originally acquired the portfolio in 2015,
      and during the ownership period, executed tenant surrender and
      asset management strategies and completed a structured sales
      process.

Balance Sheet and Liquidity

  • 32% Increase in Liquidity: Liquidity totaled $988 million,
    consisting of cash and cash equivalents of $488 million(1)
    and $500 million of undrawn capacity on the Company's revolving line
    of credit, a 32% increase from $751 million as of December 31, 2017.
  • $50 Million Term Loan Paydown: The Company paid down its term
    loan by $50 million in 4Q-18. The term loan has a remaining balance of
    $75 million. The term loan had an initial balance of $200 million at
    origination in October 2017.
  • Global Debt Profile: Kennedy Wilson's debt had a weighted
    average interest rate of 4.0% per annum, a weighted average remaining
    maturity of 5.7 years, and approximately 81% of total debt (at share)
    is fixed with another 13% hedged against increases in rates. 45
    percent of the Company's debt is either Euro or Sterling denominated
    and 55% is U.S. dollar denominated.
  • Share Repurchase Program(2): In 2018,
    the Company repurchased and retired 9.7 million shares for $175
    million at a weighted-average price of $17.94 per share. As of
    December 31, 2018, the Company had $85 million remaining available
    under its $250 million share repurchase plan. In 2018, the Company
    returned $289 million to shareholders in the form of dividends and
    share repurchases, equating to approximately $2.00 per share.
  • Dividend Tax Treatment: For U.S. federal tax purposes, Kennedy
    Wilson's 2018 dividend was classified 77% as return of capital and 23%
    as dividend income.

Foreign Currency Fluctuations and Hedging

  • Income Statement
    • Changes in foreign currency rates had an impact on our financial
      results as shown in the following metrics:
                             
  4Q-18 vs 4Q-17   FY-2018 vs FY-2017
Consolidated Revenue (3 )% (1 )%
Adjusted EBITDA   (3 )%   (1 )%
  • Shareholders' Equity
    • During 2018, GBP and EUR foreign currency rates decreased by 6%
      and 5%, respectively, 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 $14 million,
      equating to 1% of total Kennedy-Wilson Holdings, Inc.
      shareholders' equity.

Subsequent Events

In January, the Company and its equity partner sold the Ritz-Carlton,
Lake Tahoe, for $120 million. Since acquiring the hotel in 2012, Kennedy
Wilson grew the average daily rate by 63% and revenue per available room
by 100%. The Company realized a cash profit of $37 million over the life
of the investment, and upon sale, recognized gains of approximately $13
million.

Footnotes

(1)   Includes $88 million of restricted cash, which is included in cash
and cash equivalents.
(2) 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.
 

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, February 28. The
direct dial-in number for the conference call is (888) 254-3590 for U.S.
callers and (786) 789-4797 for international callers.

A replay of the call will be available for one week beginning one hour
after the live call and can be accessed by (888) 203-1112 for U.S.
callers and (719) 457-0820 for international callers. The passcode for
the replay is 3592717.

The webcast will be available at: https://services.choruscall.com/links/kw190228c8wuZJVL.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)

 
  December 31,
2018   2017
Assets
Cash and cash equivalents $ 488.0 $ 351.3
Accounts receivable 56.6 62.7
Real estate and acquired in place lease values 5,702.5 6,443.7
Loan purchases and originations 27.8 84.7
Unconsolidated investments 859.9 519.3
Other assets 222.3   263.1  
Total assets $ 7,357.1   $ 7,724.8  
 
Liabilities
Accounts payable $ 24.1 $ 19.5
Accrued expenses and other liabilities 489.0 465.9
Mortgage debt 2,950.3 3,156.6
KW unsecured debt 1,202.0 1,179.4
KWE unsecured bonds 1,260.5   1,325.9  
Total liabilities 5,925.9   6,147.3  
Equity
Common Stock
Additional paid-in capital 1,744.6 1,883.3
Accumulated deficit (56.4 ) (90.6 )
Accumulated other comprehensive loss (441.5 ) (427.1 )
Total Kennedy-Wilson Holdings, Inc. shareholders' equity 1,246.7 1,365.6
Noncontrolling interests 184.5   211.9  
Total equity 1,431.2   1,577.5  
Total liabilities and equity $ 7,357.1   $ 7,724.8  
 
Kennedy-Wilson Holdings, Inc.
Consolidated Statements of Income
(Unaudited)

(Dollars in millions, except per share data)

 
  For the Three Months Ended   For the Year Ended
December 31, December 31,
2018   2017 2018   2017
Revenue
Rental $ 122.0 $ 131.1 $ 514.6 $ 504.7
Hotel 38.1 31.7 155.7 127.5
Sale of real estate 8.1 8.1 56.8 111.5
Investment management, property services, and research fees 10.5 10.2 45.3 42.9
Loan purchases, loan originations, and other   0.2   1.1   15.2  
Total revenue 178.7 181.3 773.5 801.8
Expenses
Rental 41.3 40.7 160.8 151.2
Hotel 30.7 27.0 121.5 100.3
Cost of real estate sold 6.9 6.5 52.5 80.2
Commission and marketing 1.3 1.3 5.9 7.2
Compensation and related 46.0 63.7 168.8 177.2
General and administrative 14.2 11.5 50.8 42.2
Depreciation and amortization 47.4   55.3   206.1   212.5  
Total expenses 187.8 206.0 766.4 770.8
Income from unconsolidated investments 17.8 20.4 78.7 77.8
Gain on sale of real estate, net 67.6 149.7 371.8 226.7
Gain on sale of business 40.4 40.4
Acquisition-related expenses (1.1 ) (2.1 ) (1.7 ) (4.4 )
Interest expense (56.9 ) (58.8 ) (238.2 ) (217.7 )
Other (loss) income (1.5 ) 3.7   12.0   8.3  
Income before (provision for) benefit from income taxes 57.2 88.2 270.1 121.7
(Provision for) benefit from income taxes (24.3 ) 17.2   (58.0 ) 16.3  
Net income 32.9 105.4 212.1 138.0
Net income attributable to the noncontrolling interests (2.2 ) (6.2 ) (62.1 ) (37.5 )
Net income attributable to Kennedy-Wilson Holdings, Inc. common
shareholders
$ 30.7   $ 99.2   $ 150.0   $ 100.5  
Basic earnings per share (1)
Income per basic $ 0.21 $ 0.69 $ 1.04 $ 0.83
Weighted average shares outstanding for basic 141,253,645 140,490,974 142,895,472 119,147,192
Diluted earnings per share (1)
Income per diluted $ 0.21 $ 0.69 $ 1.04 $ 0.83
Weighted average shares outstanding for diluted 143,098,291 140,490,974 144,753,421 119,147,192
Dividends declared per common share $ 0.21 $ 0.19 $ 0.78 $ 0.70
 

(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 Year Ended
December 31, December 31,
2018   2017 2018 2017
Net income attributable to Kennedy-Wilson Holdings, Inc. common
shareholders
$ 30.7 $ 99.2 $ 150.0 $ 100.5
Non-GAAP adjustments:
Add back (Kennedy Wilson's Share)(1)
Interest expense 63.3 59.5 256.4 189.2
Depreciation and amortization 48.9 50.5 209.9 148.4
Provision for (benefit from) income taxes 25.6 (17.6 ) 59.3 (20.8 )
Share-based compensation 9.2   9.0   37.1   38.4  
Adjusted EBITDA $ 177.7   $ 200.6   $ 712.7   $ 455.7  
 

(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 Year Ended
December 31, December 31,
2018 2017 2018 2017
Net income $ 32.9 $ 105.4 $ 212.1 $ 138.0
Non-GAAP adjustments:
Add back:
Interest expense 56.9 58.8 238.2 217.7
Kennedy Wilson's share of interest expense included in
unconsolidated investments
7.7 6.0 26.0 23.0
Depreciation and amortization 47.4 55.3 206.1 212.5
Kennedy Wilson's share of depreciation and amortization included in
unconsolidated investments
3.2 3.2 13.2 16.2
Provision for (benefit from) income taxes 24.3 (17.2 ) 58.0 (16.3 )
Share-based compensation 9.2 9.0 37.1 38.4
EBITDA attributable to noncontrolling interests (1) (3.9 ) (19.9 ) (78.0 ) (173.8 )
Adjusted EBITDA $ 177.7   $ 200.6   $ 712.7   $ 455.7  
 
(1) EBITDA attributable to noncontrolling interests includes $1.7
million and $7.9 million of depreciation and amortization, $1.3
million and $5.3 million of interest, and $(1.3) million and $0.4
million of taxes, for the three months ended December 31, 2018 and
2017, respectively. EBITDA attributable to noncontrolling interests
includes $9.4 million and $80.3 million of depreciation and
amortization, $7.8 million and $51.5 million of interest, and $(1.3)
million and $4.5 million of taxes, for the year ended December 31,
2018 and 2017, respectively.
 
Kennedy-Wilson Holdings, Inc.
Adjusted Net Income
(Unaudited)

(Dollars in millions, except per 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 Year Ended
December 31, December 31,
2018   2017 2018 2017
Net income attributable to Kennedy-Wilson Holdings, Inc. common
shareholders
$ 30.7 $ 99.2 $ 150.0 $ 100.5
Non-GAAP adjustments:
Add back (Kennedy Wilson's Share)(1):
Depreciation and amortization 48.9 50.5 209.9 148.4
Share-based compensation 9.2 9.0 37.1 38.4
One-time tax remeasurement(2)   (44.8 )   (44.8 )
Adjusted Net Income $ 88.8   $ 113.9   $ 397.0   $ 242.5  
 
Weighted average shares outstanding for diluted 143,098,291 140,490,974 144,753,421 119,147,192
 

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

(2) Recorded as a result of US tax reform legislation,
commonly referred to as the "Tax Cuts and Jobs Act," signed into
law on December 22, 2017.

 

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

 
Three Months Ended Year Ended
December 31, December 31,
2018 2017 2018 2017
Net income $ 32.9 $ 105.4 $ 212.1 $ 138.0
Non-GAAP adjustments:
Add back:
Depreciation and amortization 47.4 55.3 206.1 212.5
Kennedy Wilson's share of depreciation and amortization included in
unconsolidated investments
3.2 3.2 13.2 16.2
Share-based compensation 9.2 9.0 37.1 38.4
Net income attributable to the noncontrolling interests, before
depreciation and amortization(1)
(3.9 ) (14.2 ) (71.5 ) (117.8 )
One-time tax remeasurement(2)   (44.8 )   (44.8 )
Adjusted Net Income $ 88.8   $ 113.9   $ 397.0   $ 242.5  
 
Weighted average shares outstanding for diluted 143,098,291 140,490,974 144,753,421 119,147,192
 

(1) Includes $1.7 million and $7.9 million of
depreciation and amortization for the three months ended
December 31, 2018 and 2017, respectively, and $9.4 million and
$80.3 million for the year ended December 31, 2018 and 2017,
respectively.

(2) Recorded as a result of US tax reform legislation,
commonly referred to as the "Tax Cuts and Jobs Act", signed into
law on December 22, 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.
  • "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.
  • "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 Yield on Cost" represents the Company's estimate of
    future net operating income, assuming it has completed its planned
    value-add asset management initiatives, divided by the sum of the
    purchase price and 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. For example, Estimated Forward Return
    on Cost is based in part on data made available to us during the
    course of our due diligence process in connection with asset
    acquisitions and assumes the timely and on-budget completion of our
    value-add initiatives, the timely leasing of all additional capacity
    and the absence of customer defaults or early lease terminations.
    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 figures set forth in this release, and we caution you
    not to place undue reliance on such figures. This information is not
    provided for development assets with no current income-producing
    component.
  • "Fee-Bearing Capital" represents total third-party committed or
    invested capital that we manage in our joint-ventures and commingled
    funds that entitle us to earn fees, including without limitation,
    asset management fees, construction management fees, acquisition and
    disposition fees and/or promoted interest, if applicable.
  • "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 certain property
    expenses from property 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 in the fourth quarter of 2017. Please also
    refer to the pro-rata financial data in our supplemental financial
    information.
  • "Property NOI" or "Property-level NOI" is a non-GAAP measure
    calculated by deducting the Company's Pro-Rata share of rental and
    hotel property 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.
  • "Return on Equity" is a ratio calculated by dividing the net cash
    distributions of an investment to Kennedy Wilson, after the cost of
    leverage, if applicable, by the total cash contributions by Kennedy
    Wilson over the lifetime of the investment.
  • "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

View Comments and Join the Discussion!