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May 07, 2012 at 18:44 PM EDT
Kennedy Wilson Reports First Quarter 2012 Earnings

Kennedy-Wilson Holdings, Inc. (NYSE: KW) (“Kennedy Wilson,” "we," "us," "our," or the “Company”), an international real estate investment and services company, today reported a first quarter 2012 net loss attributable to common shareholders of $3.4 million (or $0.07 per basic and diluted share) compared to a net loss of $1.0 million (or $0.02 per basic and diluted share) for the same period in 2011. Net loss attributable to common shareholders, adjusted for stock-based compensation expense, was $2.5 million (or $0.05 per basic share) compared to net income of $0.2 million for the same period in 2011.

The Company's earnings before interest, taxes, depreciation and stock-based compensation expense (“Adjusted EBITDA”) for the first quarter 2012 was $19.2 million compared to $15.1 million for the same period in 2011.

“As part of our original business plans, we have begun to realize gains on some assets acquired in 2010 and 2011,” said William McMorrow, chairman and CEO of Kennedy Wilson. “We continue to see many opportunities to grow the recurring cash flow of the company through reinvestment of the return of capital and gains achieved from sales.”

Kennedy Wilson Recent Highlights

Balance Sheet

  • Our investment account (Kennedy Wilson's equity in real estate, joint ventures, loan investments, and marketable securities) decreased by 3% to $566.7 million from $582.8 million at December 31, 2011 due primarily to sales of real estate and marketable securities and resolution of loan investments.
  • The Company received distributions from joint ventures and loan pool participations of $18.5 million during the three months ended March 31, 2012 as compared to $3.4 million for the same period in 2011, an increase of $15.1 million.
  • Our cash position increased to $122.3 million at March 31, 2012 versus $115.9 million as of December 31, 2011.
  • Our corporate debt to book equity as of March 31, 2012 was 0.7 to 1.0.
  • Our deal-level leverage stood at 53% as of March 31, 2012.

Operating metrics

  • During the three months ended March 31, 2012, the Company achieved an adjusted EBITDA of $19.2 million, a 27% increase from $15.1 million for the same period in 2011.
  • During the three months ended March 31, 2012, the investments business achieved an EBITDA of $17.7 million, a 28% increase from $13.8 million for the same period in 2011.
  • During the three months ended March 31, 2012, the services business achieved an EBITDA of $2.8 million, a 56% increase from $1.8 million for the same period in 2011.

Acquisition/disposition program

  • During the three months ended March 31, 2012, the Company and its equity partners closed or are under contract to close approximately $441.0 million of real estate related investments. Since January 1, 2010, acquisitions total approximately $5.6 billion.
  • During the three months ended March 31, 2012, the Company and its equity partners sold a 180-unit apartment building for a total gain of $16.0 million of which our share was $2.2 million.
  • During the three months ended March 31, 2012, the Company sold a portion of its marketable securities for a net gain of $2.9 million.
  • Subsequent to March 31, 2012, the Company and its equity partners sold a 213-unit residential tower and a 440-unit apartment building for combined gains of approximately $15.0 million of which our share was $5.5 million.
  • As of May 4, 2012, the Company and its equity partners’ apartment portfolio, including units sold and deals under contract, totals 13,876 units.

Services business

  • Management and leasing fees increased by 74% to $8.7 million for the three months ended March 31, 2012 from $5.0 million for the same period in 2011, driven primarily by higher asset management fees.
  • Commissions decreased by 38% to $1.6 million for the three months ended March 31, 2012 from $2.6 million for the same period in 2011, driven primarily by higher acquisition fees in 2011.

Debt financing

  • Since January 1, 2011, the Company and its equity partners have completed over $1.7 billion of property financings (including approximately $976.3 million of refinancings) at an average interest rate of 4.1% and a weighted average maturity of 4.1 years.

United Kingdom and Ireland

  • In December 2011, we and our equity partners acquired a loan pool secured by real estate located in the United Kingdom with an unpaid principal balance of $2.1 billion. As of May 4, 2012, the unpaid principal balance was $1.4 billion due to loan resolutions of approximately $688.6 million, representing 33% of the pool.
  • Subsequent to March 31, 2012, we announced a €250 million capital commitment from Fairfax Financial Holdings to acquire real estate and loans secured by real estate in the United Kingdom and Ireland. We are under contract to close our first investment within this platform - the historic 210-unit Gasworks apartment building in Dublin, Ireland located adjacent to Google's European headquarters.

Japan

  • Maintained 95% occupancy in 50 apartment buildings with over 2,400 units.
  • Refinanced approximately $80 million of property level debt for 5 years at an interest rate of 1.6%.
  • Since September 2010, we have distributed a total of $44.7 million of which our share was $20.9 million.

Conference Call and Webcast Details

The Company will hold a live conference call and webcast to discuss results on Tuesday, May 8 at 7:00 a.m. PT/ 10:00 a.m. ET.

The direct dial-in number for the conference call is (866) 831-6272 for U.S. and Canadian callers and (617) 213-8859 for international callers. The access code for the live call is 32692166.

A replay of the call will be available for one week beginning two hours after the live call and can be accessed by calling (888) 286-8010 for U.S. and Canadian callers and (617) 801-6888 for international callers. The access code for the replay is 80304293.

The webcast will be available at: http://www.media-server.com/m/acs/d37f28463d2521aa7204ee0e69d219cd. A replay of the webcast will be available two hours after the original webcast on the Company's investor relations web site for one year.

About Kennedy Wilson

Founded in 1977, Kennedy Wilson is an international real estate investment and services company headquartered in Beverly Hills, CA with 23 offices in the U.S., Europe and Japan. The company offers a comprehensive array of real estate services including auction, conventional sales, property services, research and investment management. Through its fund management and separate account businesses, Kennedy Wilson is a strategic investor of real estate investments in the U.S., Europe and Japan. 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 (the “Securities Act”) and Section 21 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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,” “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 these 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, 2011. 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.

Non-GAAP Financial Information

In addition to the results reported in accordance with U.S. generally accepted accounting principles (GAAP) included within this press release, Kennedy Wilson has provided certain information, which includes non-GAAP financial measures (pro forma Statements of Income, Adjusted Net (Loss) Income Attributable to Kennedy Wilson Common Shareholders, Basic Adjusted Net (Loss) Income Attributable to Kennedy Wilson Common Shareholders Per Share, EBITDA and Adjusted EBITDA). Such information is reconciled to its closest GAAP measure in accordance with the SEC rules and is included in the attached supplemental tables. Management believes that these non-GAAP financial measures are useful to both management and the Company'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.

Kennedy-Wilson Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

March 31,
2012
December 31,
2011
Assets
Cash and cash equivalents $ 122,317,000 $ 115,926,000
Accounts receivable 3,535,000 3,114,000
Accounts receivable — related parties 19,537,000 15,612,000
Notes receivable 8,250,000 7,938,000
Notes receivable — related parties 34,830,000 33,269,000
Real estate, net 112,790,000 115,880,000
Investments in joint ventures 336,699,000 343,367,000
Investment in loan pool participations 91,162,000 89,951,000
Marketable securities 13,571,000 23,005,000
Other assets 19,837,000 20,749,000
Goodwill 23,965,000 23,965,000
Total assets $ 786,493,000 $ 792,776,000
Liabilities
Accounts payable $ 997,000 $ 1,798,000
Accrued expenses and other liabilities 27,461,000 24,262,000
Accrued salaries and benefits 2,301,000 14,578,000
Deferred tax liability 22,671,000 18,437,000
Senior notes payable 249,398,000 249,385,000
Mortgage loans payable 30,748,000 30,748,000
Junior subordinated debentures 40,000,000 40,000,000
Total liabilities 373,576,000 379,208,000
Equity
Common stock 5,000 5,000
Additional paid-in capital 408,217,000 407,335,000
Retained earnings 3,765,000 9,708,000
Accumulated other comprehensive income 11,619,000 5,035,000
Shares held in treasury at cost (11,889,000 ) (11,848,000 )
Total Kennedy-Wilson Holdings, Inc. shareholders' equity 411,717,000 410,235,000
Noncontrolling interests 1,200,000 3,333,000
Total equity 412,917,000 413,568,000
Total liabilities and equity $ 786,493,000 $ 792,776,000

Kennedy-Wilson Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations

Three Months Ended March 31,
20122011
Revenue
Management and leasing fees $ 8,741,000 $ 5,011,000
Commissions 1,619,000 2,561,000
Sale of real estate 417,000
Rental and other income 1,470,000 738,000
Total revenue 11,830,000 8,727,000
Operating expenses
Commission and marketing expenses 965,000 638,000
Compensation and related expenses 9,000,000 7,832,000
Cost of real estate sold 397,000
General and administrative 3,669,000 2,813,000
Depreciation and amortization 937,000 434,000
Rental operating expenses 870,000 411,000
Total operating expenses 15,441,000 12,525,000
Equity in joint venture income 5,516,000 5,256,000
Interest income from loan pool participations and notes receivable 538,000 2,546,000
Operating income 2,443,000 4,004,000
Non-operating income (expense)
Interest income 1,117,000 266,000
Gain on sale of marketable securities 2,931,000
Realized foreign currency exchange loss (112,000 )
Interest expense (6,170,000 ) (1,529,000 )
Income from continuing operation before benefit from (provision for) income taxes 209,000 2,741,000
Benefit from (provision for) income taxes 1,483,000 (663,000 )
Income from continuing operations 1,692,000 2,078,000
Discontinued Operations
Income from discontinued operations, net of income taxes 2,000
Loss from sale of real estate, net of income taxes (212,000 )
Net income 1,482,000 2,078,000
Net income attributable to the noncontrolling interests (2,798,000 ) (1,038,000 )
Net (loss) income attributable to Kennedy-Wilson Holdings, Inc. (1,316,000 ) 1,040,000
Preferred dividends and accretion of preferred stock issuance costs (2,036,000 ) (2,036,000 )
Net loss attributable to Kennedy-Wilson Holdings, Inc. common

shareholders

$ (3,352,000 ) $ (996,000 )
Basic and diluted loss per share attributable to Kennedy-Wilson Holdings, Inc. common shareholders
Continuing operations $ (0.06 ) $ (0.02 )
Discontinued operations, net of income taxes
Earning per share - basic and diluted (a) $ (0.07 ) $ (0.02 )
Weighted average number of common shares outstanding 51,160,270 40,022,940
Dividends declared per common share $ 0.05 $

__________

(a) EPS amounts may not add due to rounding.

Kennedy-Wilson Holdings, Inc. and Subsidiaries

Pro Forma Consolidated Statements of Income

Three Months Ended March 31,
20122011
ConsolidatedPro Rata Unconsolidated InvestmentsPro Forma TotalConsolidatedPro Rata Unconsolidated InvestmentsPro Forma Total
Revenue
Management and leasing fees $ 8,741,000 $ $ 8,741,000 $ 5,011,000 $ $ 5,011,000
Commissions 1,619,000 1,619,000 2,561,000 2,561,000
Sale of real estate 15,200,000 15,200,000 417,000 6,126,000 6,543,000
Rental and other income 1,470,000 17,801,000 19,271,000 738,000 14,382,000 15,120,000
Interest income 2,255,000 2,255,000 3,239,000 3,239,000
Total revenue 11,830,000 35,256,000 47,086,000 8,727,000 23,747,000 32,474,000
Operating expenses
Commission and marketing expenses 965,000 965,000 638,000 638,000
Compensation and related expenses 9,000,000 400,000 9,400,000 7,832,000 7,832,000
Cost of real estate sold 11,900,000 11,900,000 397,000 4,732,000 5,129,000
General and administrative 3,669,000 100,000 3,769,000 2,813,000 2,813,000
Depreciation and amortization 937,000 3,900,000 4,837,000 434,000 3,725,000 4,159,000
Rental operating expenses 870,000 6,100,000 6,970,000 411,000 5,856,000 6,267,000
Total operating expenses 15,441,000 22,400,000 37,841,000 12,525,000 14,313,000 26,838,000
Equity in joint venture income 5,516,000 (5,516,000 ) 5,256,000 (5,256,000 )
Interest income from loan pool participations and notes receivable 538,000 (538,000 ) 2,546,000 (2,546,000 )
Operating income 2,443,000 6,802,000 9,245,000 4,004,000 1,632,000 5,636,000
Non-operating income (expense)
Interest income 1,117,000 (1,117,000 ) 266,000 (266,000 )
Carried interest on realized investment 1,900,000 1,900,000
Remeasurement gain 4,100,000 4,100,000
Gain on sale of marketable securities 2,931,000 2,931,000
Realized foreign currency exchange loss (112,000 ) (112,000 )
Interest expense (6,170,000 ) (7,285,000 ) (13,455,000 ) (1,529,000 ) (5,466,000 ) (6,995,000 )
Other non-operating expenses (300,000 ) (300,000 )
Income from continuing operation before benefit from (provision for) income taxes 209,000 209,000 2,741,000 2,741,000
Benefit from (provision for) income taxes 1,483,000 1,483,000 (663,000 ) (663,000 )
Income from continuing operations 1,692,000 1,692,000 2,078,000 2,078,000
Discontinued Operations
Income from discontinued operations, net of income taxes 2,000 2,000
Loss from sale of real estate, net of income taxes (212,000 ) (212,000 )
Net income $ 1,482,000 $ $ 1,482,000 $ 2,078,000 $ $ 2,078,000

Kennedy-Wilson Holdings, Inc. and Subsidiaries

Adjusted Net (Loss) Income Attributable to Kennedy Wilson Common Shareholders

Three months ended March 31,
20122011
Net loss attributable to Kennedy-Wilson Holdings, Inc. common

shareholders

$ (3,352,000 ) $ (996,000 )
Non-GAAP adjustments:
Add back:
Stock based compensation 871,000 1,167,000
Adjusted Net (Loss) Income Attributable to

Kennedy Wilson Common Shareholders

$ (2,481,000 ) $ 171,000
Basic weighted average number of

common shares outstanding

51,160,270 40,022,940
Basic Adjusted Net Loss Attributable to

Kennedy Wilson Common Shareholders Per Share

$ (0.05 ) $

Kennedy-Wilson Holdings, Inc. and Subsidiaries

EBITDA and Adjusted EBITDA

Three months ended March 31,
20122011
Net income $ 1,482,000 $ 2,078,000
Add back:
Interest expense 6,170,000 1,529,000
Kennedy Wilson's share of interest expense included in investment

in joint ventures and loan pool participations

7,285,000 5,466,000
Depreciation and amortization 937,000 434,000
Kennedy Wilson's share of depreciation and amortization included

in investment in joint ventures

3,900,000 3,725,000
(Benefit from) provision for income taxes (1,483,000 ) 663,000
EBITDA18,291,00013,895,000
Stock-based compensation 871,000 1,167,000
Adjusted EBITDA$19,162,000$15,062,000

Contacts:

Kennedy Wilson
Christina Cha
Director of Corporate Communication
(310) 887-6294
ccha@kennedywilson.com
www.kennedywilson.com
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