Kennedy Wilson Reports Q4 and Full Year 2023 Results

Company Provides Update on Strategic Asset Recycling and Cost Reduction Plan

BEVERLY HILLS, Calif.–(BUSINESS WIRE)–$KW—Kennedy-Wilson Holdings, Inc. (NYSE: KW), a leading global real estate investment company with $25 billion in AUM across its real estate equity and debt investment portfolio, today reported the following results for the fourth quarter and full year of 2023:

“The fourth quarter capped off a strong year for our investment management platform which grew by 42% and contributed to 8% growth in Baseline EBITDA for 2023. Our 2023 financial results were impacted by $439 million in non-cash items primarily resulting from an unrealized decline in the real estate values of our co-investment portfolio driven by higher theoretical cap rates on high-quality assets held in long term well-capitalized strategic partnerships,» said William McMorrow, Chairman and CEO of Kennedy Wilson. “The near-term completion of development projects coupled with the cost reduction plan announced in December will enhance our recurring cash flow, while our strategic asset sale program will provide additional dry powder as we continue to seek opportunities in the current environment alongside our well-capitalized partners.”

Financial Results

• Multifamily Same Property Performance¹ :

• Office Same Property Performance¹ :

Update on Strategic Asset Recycling and Cost Reduction Plan

In Q4-23, the Company announced a strategic asset recycling and cost reduction plan over an 18-month period which included non-core asset sales that are expected to generate $550-$750 million of cash and a cost efficiency plan targeting $15-20 million in annual overhead reductions:

• Asset sales update: Since Q3-23, the Company has sold or is under contract to sell assets that are expected to generate approximately $320 million in net proceeds.

• Cost reduction: Since Q3-23, the Company has either implemented or identified over $12 million of cost reductions.

Portfolio Update

• Estimated Annual NOI of $492 million and Fee-Bearing Capital of $8.4 billion:

• Development and Lease-up Portfolio To Add $91 million in Estimated Annual NOI:
  • Q4 Lease-Up Portfolio Update:
    • Stabilized Pointe by Vintage, a 161-unit multifamily property in the Pacific Northwest, and The Oaks, an office asset in Southern California, which together added $5 million to Estimated Annual NOI.
  • Multifamily Development Projects Expected To Add 3,800 Units and Produce $43 million in Est. Annual NOI at Stabilization by YE-25:
    • Dublin To Add 990 Stabilized Multifamily Units: The Company is 54% leased across its two newly completed multifamily communities in Dublin (as of February 20, 2024), totaling 758 units, with lease-up performing ahead of business plan. The Company remains on track to deliver another 232 units in Dublin in Q1-24. In total, the Company’s apartment developments in Dublin are expected to produce $13 million of Est. Annual NOI at stabilization.
    • U.S. Portfolio Expected To Add Over 2,800 Stabilized Multifamily Units:
      • Market Rate: The Company has 1,230 units expected to complete construction by YE-24, expected to add approximately $22 million in Est. Annual NOI once stabilized. Leasing has begun at 563 units that have been delivered, of which 55% have been leased.
      • Vintage: The Vintage affordable housing platform has 1,604 multifamily units under development, which upon completion will add $8 million to Estimated Annual NOI and grow the Vintage platform to approximately 12,000 stabilized units.
• 44% Growth in Investment Management Fees in Q4-23:
  • Investment Management fees grew by 44% to $16 million in Q4-23 (vs Q4-22), and by 38% to $62 million in FY-23 (vs. FY-22).
• Fee-Bearing Capital Grew to a Record $8.4 billion in Q4-23:
  • In addition to the $8.4 billion in Fee-Bearing Capital, the Company has approximately $5.2 billion in incremental non-discretionary capital with certain strategic partners that is currently available for investment.
• Debt Investment Platform Grew By 148% to $6.6 Billion in 2023:
  • Debt Platform grew to $6.6 billion in loans (including $4.9 billion in outstanding loans and $1.8 billion of future funding commitments) in which the Company has an average ownership interest of 5%. The Debt Platform totals $4.6 billion of Fee-Bearing Capital at quarter-end.
  • In Q4-23, originated $220 million in new construction loans, completed $281 million in additional fundings on existing loans, and realized $84 million in repayments, increasing the Debt Platform by 4% in Q4-23.
  • Raised $2 billion in new platform capital, increasing capital available for new originations to approximately $4 billion.

Investment Activity

• $133 million in Gross New Investments in Q4 ($27 million at share):
  • Co-Investment Acquisitions: Completed $133 million in gross real estate acquisitions, including $131 million invested in two industrial assets. In total, the Company had a 20% ownership interest in its Q4-23 acquisitions.
• $289 million of Gross Dispositions and Loan Repayments in Q4 ($148 million at share):
  • Consolidated Portfolio Completes $125 million of Non-Core Dispositions:
    • Sold one UK office asset and six U.S. and EU retail assets for $125 million. These wholly-owned asset sales generated $83 million of cash to KW.
  • Co-Investment Portfolio Completes $156 million of Dispositions and Repayments: Sold $72 million of real estate investments and realized loan repayments of $84 million in its Debt Investment Platform. KW’s average ownership interest in these assets was 13%.

Balance Sheet and Liquidity

• Cash and Line of Credit Availability: As of December 31, 2023, Kennedy Wilson had cash and cash equivalents of $314 million⁽¹⁾ and $150 million drawn on its $500 million revolving credit facility.
• Debt Profile: Kennedy Wilson’s share of debt had a weighted average effective interest rate of 4.4% per annum and a weighted-average maturity of 5.3 years as of December 31, 2023. Approximately 99% of the Company’s share of debt is either fixed (73%) or hedged with interest rate derivatives (26%).
• Interest Rate Hedging Strategy: The Company hedges its floating rate exposure through the use of interest rate caps and swaps. The Company’s interest rate hedges have a weighted-average maturity of 1.6 years as of December 31, 2023. The Company received $13 million in Q4-23 and $38 million FY-23 in payments from its interest rate derivative contracts which are not reflected as an off-set to its share of interest expense.
• Foreign Currency Hedging Strategy: Kennedy Wilson hedges its exposure to foreign currency fluctuations by borrowing in the currency in which it invests and using foreign currency hedging instruments. As of December 31, 2023, the Company has hedged approximately 96% of the carrying value of its foreign currency investments, using local currency debt as well as hedging instruments with a weighted-average term of 2.0 years.
• Share Repurchase Program: In Q4-23, the Company repurchased 0.7 million shares at a weighted- average price of $11.15. The Company has approximately $125 million remaining on its $500 million share repurchase authorization.
• 2023 Dividend Taxability: The Company’s 2023 dividend distributions were characterized as 100.00% non-taxable return of capital. Please refer to kennedywilson.com for further information.

Subsequent Events

The Company sold a wholly-owned retail asset in the UK and is under separate contracts to sell one wholly-owned Irish hotel asset, one wholly-owned office asset in the Pacific Northwest, and one wholly-owned retail asset in the UK, for a total sale price of approximately $340 million. If completed, these sales will generate cash to KW of $240 million (after debt repayments of $90 million) and total expected GAAP gains on sale in excess of $100 million.

The Company’s debt investment platform has closed $55 million in new originations and has a pipeline of new transactions under non-binding term sheets totaling $1.3 billion. KW expects to have a 2.5% interest in these debt investments.

There can be no assurance that the Company will close the sales under contract as described above or the described originations under non-binding term sheets in part or at all.

The Company drew an additional $75 million on its revolving credit facility.

Footnotes

Conference Call and Webcast Details

Kennedy Wilson will hold a live conference call and webcast to discuss results at 9:00 a.m. PT/ 12:00 p.m. ET on Thursday, February 22. 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 one hour 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 3814270.

The webcast will be available at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=hoiuq1cu. 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 through our balance sheet and through our investment management platform in the United States, United Kingdom, and Ireland. We primarily focus on multifamily and office properties as well as industrial and debt investments in our investment management business. For further information on Kennedy Wilson, please visit www.kennedywilson.com.

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, 2022, and Item 1A. «Risk Factors» section of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 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.

• “Adjusted EBITDA” represents net income before interest expense, loss on early extinguishment of debt, our share of interest expense included in unconsolidated investments, depreciation and amortization, our share of depreciation and amortization included in unconsolidated investments, provision for income taxes, our share of taxes included in unconsolidated investments, 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 or consider certain cash requirements such as tax and debt service payments.

Contacts

Daven Bhavsar, CFA

Vice President of Investor Relations

(310) 887-6400

[email protected]
www.kennedywilson.com

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