Kennedy Wilson Reports First Quarter 2022 Results

Kennedy-Wilson Holdings, Inc. (NYSE: KW) today reported results for 1Q-2022:

“After a year of record financial results, our business continues to perform exceptionally well," said William McMorrow, Chairman and CEO of Kennedy Wilson. "In 1Q, we executed on our strategic initiatives, including expanding our U.S. multifamily portfolio and our debt and logistics platforms while making further progress on completing and stabilizing our construction projects. We also completed a $300 million investment from Fairfax Financial and secured an additional $3.4 billion in Fee-Bearing Capital commitments for our debt and logistics portfolios, which sets us up for continued growth as we remain optimistic about our opportunities going forward."

1Q Highlights

• Adjusted EBITDA of $160 million (vs. $128 million in 1Q-21):
  • KW's share of recurring property NOI, loan income and fees totaled $122 million in 1Q-22, an increase of $25 million from 1Q-21.
  • KW's share of gains from the sale of real estate, increases in fair values and performance allocations (net of performance allocation compensation) totaled $75 million in 1Q-22, an increase of $3 million from 1Q-21.

• $300 Million Preferred Equity Investment: The Company received a $300 million investment from affiliates of Fairfax Financial Holdings Limited (collectively, "Fairfax"). Under the terms of the investment, Fairfax purchased $300 million in perpetual preferred stock carrying a 4.75% annual dividend rate and is callable by Kennedy Wilson at any time. Additionally, Fairfax acquired 7-year warrants for approximately 13.0 million common shares with an initial strike price of $23.00 per share.

• Multifamily and Office Same Property Performance⁽¹⁾:

^{(1) Excludes minority-held investments and includes the effects of straight-line rent}

• 6% Growth in Estimated Annual NOI to $461 Million in 1Q; 19% increase from 1Q-21:
  • Estimated Annual NOI grew by $27 million, or 6%, to $461 million from YE-21, driven by strong rental growth in its multifamily portfolio, new acquisitions, and stabilization of new developments.
  • Stabilized Hanover Quay in Dublin, Ireland by executing a full-building 15-year lease with a Fortune-500 tenant, generating a yield on cost in excess of 6%. The Company also stabilized the Farm by Vintage in the Western U.S. In total, these stabilizations added $5 million to Estimated Annual NOI.
  • Development and lease-up portfolio expected to add approximately $101 million in Estimated Annual NOI upon completion of construction by 2024 and stabilization by 2025.

• 6% Growth in Fee-Bearing Capital to $5.3 Billion; 29% increase from 1Q-21: Fee-Bearing Capital totaled $5.3 billion as of 1Q-22, a 6% increase from YE-21. In addition, the Company has approximately $4.7 billion in additional non-discretionary capital with certain strategic partners that is currently available for investment.
  • 14% Growth in Debt Platform in 1Q: Completed loan investments totaling $246 million in 1Q-22, resulting in 14% growth from YE-21. The Company has a 7% ownership in its debt platform, which totals $2.2 billion of outstanding loans (including $266 million of future funding commitments) and $1.8 billion of Fee-Bearing Capital as of quarter-end.
  • $3 Billion In New Commitments for Debt Platform: Along with the equity investment described above, Fairfax increased its commitment to the Company's debt platform by $3 billion to $5 billion. Including commitments from other partners, the Company has total commitments of $6 billion under its debt platform.
  • Expanded Target Size of European Logistics Platform by $1.5 Billion: The Company's European logistics platform, which seeks last-mile logistics investment opportunities, increased its target size of asset purchases to $2.5 billion, up from an initial target of $1 billion. Kennedy Wilson has a 20% ownership in this platform. Kennedy Wilson's logistics platform stood at $1.0 billion at quarter-end, with an additional $1.5 billion in new investment capacity.

1Q-22 Investment Activity

Completed $1.0 billion in Investment Transactions Which Grew Estimated Annual NOI and Fee-Bearing Capital:

• Consolidated Portfolio Completes $140 Million in Investment Transactions:
  • Acquisitions: Acquired Waverleygate, a wholly-owned 204,000 square-foot prime office building in Edinburgh, U.K. for $105 million, which added $5 million to Estimated Annual NOI.
  • Dispositions: The Company also sold four non-core retail assets and one office asset for $35 million.

• Co-investment Portfolio Completes $823 million in Investment Transactions:
  • Acquisitions: Kennedy Wilson completed $419 million of real estate investments, including $377 million in Western U.S. apartments and $42 million in European logistics assets. The Company had a 42% ownership interest in these investments. The Company also completed $246 million of debt investments through its debt platform described above, in which it has a 7% interest. In total, the new real estate acquisitions and loan originations added $8 million to Estimated Annual NOI and $336 million in Fee-Bearing Capital.
  • Dispositions: The Company also completed $158 million of gross dispositions, in which KW had a 15% ownership interest.

Balance Sheet and Capital Markets

• $962 million in Cash and Lines of Credit: As of March 31, 2022, Kennedy Wilson had a total of $462 million⁽¹⁾ in cash and cash equivalents and $500 million of capacity on its undrawn revolving line of credit.

• Debt Profile : As of 1Q-22, Kennedy Wilson's share of debt had a weighted average interest rate of 3.6% per annum and a weighted-average maturity of 6.0 years. Approximately 94% of the Company's debt is either fixed or hedged with interest rate caps.

• Share Repurchase Program⁽²⁾: In 1Q-22, Kennedy Wilson repurchased 1.4 million shares for $31 million at a weighted-average price of $22.57 per share.

Subsequent Events

Subsequent to 1Q-22, the Company acquired three mountain west multifamily properties for $418 million (excluding closing costs) in three separate off-market transactions. The Company invested $255 million of total equity in the three properties and it currently expects these assets to add an additional $15 million to the Company’s Estimated Annual NOI.

Also, subsequent to 1Q-22, the Company drew $250 million on its corporate unsecured credit facility.

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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, May 5. 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 2523360.

The webcast will be available at : https://services.choruscall.com/mediaframe/webcast.html?webcastid=je7DjK2k. 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.

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, 2021, 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 (benefit from) income taxes, our share of taxes included in unconsolidated investments, share-based compensation, and EBITDA adjustments 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. 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 (loss) before depreciation and amortization, our share of depreciation and amortization included in unconsolidated investments, share-based compensation, preferred dividends 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.

· “Annual Return on Loans” is a metric that applies to our real estate debt business that represents the sum of annual interest income, transaction fees and the payback of principal for discounted loan purchases, amortized over the life of the loans and divided by the principal balances of the loans.

· "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.

· "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. For the Company’s hotel portfolio, the Company provides a trailing-12 month NOI of $8.5 million, which excludes the period during which the hotel was fully closed due to restrictions related to the COVID-19 pandemic. Additionally, for assets wholly-owned and fully occupied by KW, the Company provides an estimated NOI for valuation purposes of $4.1 million, which includes an assumption for applicable market rents. 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 2022, the NOI represents estimated Year 1 NOI from our original underwriting. Estimated year 1 NOI for properties purchased in 2022 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. 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.

· "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.

· "Internal Rate of Return" (“IRR”) is based on cumulative contributions and distributions to Kennedy Wilson on each investment that has been sold and is the leveraged internal rate of return on equity invested in the investment. The IRR measures the return to Kennedy Wilson on each investment, expressed as a compound rate of interest over the entire investment period. This return does take into account carried interest, if applicable, but excludes management fees, organizational fees, or other similar expenses.·

· "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.

· "Performance allocations” relates to allocations to the general partner, special limited partner or asset manager of Kennedy Wilson's co-investments it manages based on the cumulative performance of the fund and are subject to preferred return thresholds of the limited partners.

· "Performance allocation compensation” - the compensation committee of the Company’s board of directors approved and reserved between twenty percent (20%) and thirty-five percent (35%) of any performance allocation earned by certain commingled funds and separate account investments to be allocated to certain non-NEO employees of the Company.

· "Principal co-investments” consists of the Company’s share of income or loss earned on investments in which the Company can exercise significant influence but does not have control. Income from unconsolidated investments includes income from ordinary course operations of the underlying investment, gains on sale, fair value gains and losses.

· "Pro-Rata" represents Kennedy Wilson's share calculated by using our proportionate economic ownership of each asset in our portfolio. 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.

· "Real Estate Assets under Management" ("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 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 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 AUM. The estimated value of development properties is included at estimated completion cost.

· "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

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