BEVERLY HILLS, Calif.–(BUSINESS WIRE)–Kennedy-Wilson Holdings, Inc. (NYSE: KW) today reported results for 1Q-2022:
1Q
(Amounts in millions, except per share data)
2022
2021
GAAP Results
GAAP Net Income (Loss) to Common Shareholders
$34.8
($5.6
)
Per Diluted Share
0.24
(0.04
)
Non-GAAP Results
Adjusted EBITDA
$160.1
$127.6
Adjusted Net Income
85.4
47.0
“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):
1Q – 2022 vs. 1Q – 2021
Occupancy
Revenue
NOI
Multifamily – Market Rate
(0.4
)%
10.9
%
13.5
%
Multifamily – Affordable
0.5
%
5.2
%
5.4
%
Office
(2.0
)%
(2.1
)%
(4.9
)%
Total
5.9
%
5.4
%
(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 $1.0 billion in Investment Transactions Which Grew Estimated Annual NOI and Fee-Bearing Capital:
Gross Transaction Value
($ in millions)
Est. Annual NOI To KW
($ in millions)
Fee-Bearing Capital
($ in billions)
As of 4Q-21
$
434
$
5.0
Gross acquisitions and loan investments
$
770
13
0.3
Gross dispositions
193
(2)
—
Assets stabilized
—
5
—
Operations
—
14
—
FX and other
—
(3)
—
Total as of 1Q-22
$
963
$
461
$
5.3
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.
________________________________________________________________________________________
Footnotes
(1)
Represents consolidated cash and includes $35 million of restricted cash, which is included in cash and cash equivalents and primarily relates to lender reserves associated with consolidated mortgages that we hold on properties. These reserves typically relate to interest, tax, insurance and future capital expenditures at the properties. Additionally, we are subject to withholding taxes in the extent we repatriate cash from certain of our foreign subsidiaries. Under the KWE Notes covenants we have to maintain certain interest coverage and leverage ratios in order to remain in compliance. Due to these covenants, we evaluate the tax and covenant implications before we distribute cash, which could impact the availability of funds at the corporate level. The Company’s share of cash, including unconsolidated joint-ventures, totals $571 million.
(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. The program does not obligate the Company to repurchase any specific number of shares and, subject to compliance with applicable laws, may be suspended or terminated at any time without prior notice.
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.
Kennedy-Wilson Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in millions)
March 31,
2022
December 31,
2021
Assets
Cash and cash equivalents
$
462.1
$
524.8
Accounts receivable
39.1
36.1
Real estate and acquired in place lease values (net of accumulated depreciation and amortization of $854.5 and $838.1)
5,067.4
5,059.8
Unconsolidated investments (including $2,012.7 and $1,794.8 at fair value)
2,166.9
1,947.6
Other assets
188.8
177.9
Loan purchases and originations
143.5
130.3
Total assets
$
8,067.8
$
7,876.5
Liabilities
Accounts payable
$
15.9
$
18.6
Accrued expenses and other liabilities
575.1
619.1
Mortgage debt
3,029.1
2,959.8
KW unsecured debt
1,778.1
1,852.3
KWE unsecured bonds
606.4
622.8
Total liabilities
6,004.6
6,072.6
Equity
Cumulative perpetual preferred stock
593.1
295.2
Common stock
—
—
Additional paid-in capital
1,658.4
1,679.6
Retained earnings
191.6
192.4
Accumulated other comprehensive loss
(405.6
)
(389.6
)
Total Kennedy-Wilson Holdings, Inc. shareholders’ equity
2,037.5
1,777.6
Noncontrolling interests
25.7
26.3
Total equity
2,063.2
1,803.9
Total liabilities and equity
$
8,067.8
$
7,876.5
Kennedy-Wilson Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)
(Dollars in millions, except share amounts and per share data)
Three Months Ended March 31,
2022
2021
Revenue
Rental
$
104.2
$
88.9
Hotel
6.5
0.8
Investment management fees
11.3
7.4
Property services fees
0.4
0.7
Loans and other
2.3
1.6
Total revenue
124.7
99.4
Income from unconsolidated investments
Principal co-investments
78.2
18.8
Performance allocations
27.2
(0.4
)
Total income from unconsolidated investments
105.4
18.4
Gain on sale of real estate, net
1.9
73.5
Expenses
Rental
35.7
33.0
Hotel
4.3
1.6
Compensation and related
29.0
27.0
Share-based compensation
7.1
7.7
Performance allocation compensation
11.8
—
General and administrative
7.9
6.8
Depreciation and amortization
43.3
44.4
Total expenses
139.1
120.5
Interest expense
(50.5
)
(51.6
)
Loss on early extinguishment of debt
—
(14.8
)
Other income (loss)
5.8
(3.3
)
Income before provision for income taxes
48.2
1.1
Provision for income taxes
(8.2
)
(2.7
)
Net income (loss)
40.0
(1.6
)
Net loss attributable to noncontrolling interests
0.1
0.3
Preferred dividends
(5.3
)
(4.3
)
Net income (loss) attributable to Kennedy-Wilson Holdings, Inc. common shareholders
$
34.8
$
(5.6
)
Basic earnings (loss) per share
Earnings (loss) per share
$
0.25
$
(0.04
)
Weighted average shares outstanding
136,815,290
138,772,819
Diluted earnings (loss) per share
Earnings (loss) per share
$
0.24
$
(0.04
)
Weighted average shares outstanding
150,420,132
138,772,819
Dividends declared per common share
$
0.24
$
0.22
Kennedy-Wilson Holdings, Inc.
Adjusted EBITDA
(Unaudited)
(Dollars in millions)
The table below reconciles net income attributable to Kennedy-Wilson Holdings, Inc. common shareholders to Adjusted EBITDA, using Kennedy Wilson’s pro-rata share amounts for each adjustment item.
Three Months Ended
March 31,
2022
2021
Net income (loss) attributable to Kennedy-Wilson Holdings, Inc. common shareholders
$
34.8
$
(5.6
)
Non-GAAP adjustments:
Add back (Kennedy Wilson’s Share)(1):
Interest expense
61.2
58.8
Loss on early extinguishment of debt
—
14.8
Depreciation and amortization
43.5
44.9
Provision for income taxes
8.2
2.7
Preferred dividends
5.3
4.3
Share-based compensation
7.1
7.7
Adjusted EBITDA
$
160.1
$
127.6
(1) See Appendix for reconciliation of Kennedy Wilson’s Share amounts.
The table below provides a detailed reconciliation of net income to Adjusted EBITDA.
Three Months Ended
March 31,
2022
2021
Net income (loss)
$
40.0
$
(1.6
)
Non-GAAP adjustments:
Add back:
Interest expense
50.5
51.6
Loss on early extinguishment of debt
—
14.8
Kennedy Wilson’s share of interest expense included in unconsolidated investments
11.3
7.9
Depreciation and amortization
43.3
44.4
Kennedy Wilson’s share of depreciation and amortization included in unconsolidated investments
1.1
1.7
Provision for income taxes
8.2
2.7
Share-based compensation
7.1
7.7
EBITDA attributable to noncontrolling interests(1)
(1.4
)
(1.6
)
Adjusted EBITDA
$
160.1
$
127.6
(1)
EBITDA attributable to noncontrolling interest includes $0.9 million and $1.2 million of depreciation and amortization, $0.6 million and $0.7 million of interest, and $0.0 million and $0.0 million of taxes, for the three months ended March 31, 2022 and 2021, respectively.
Kennedy-Wilson Holdings, Inc.
Adjusted Net Income
(Unaudited)
(Dollars in millions, except share data)
The table below reconciles net income attributable to Kennedy-Wilson Holdings, Inc. common shareholders to Adjusted Net Income, using Kennedy Wilson’s pro-rata share amounts for each adjustment item.
Three Months Ended
March 31,
2022
2021
Net income (loss) attributable to Kennedy-Wilson Holdings, Inc. common shareholders
$
34.8
$
(5.6
)
Non-GAAP adjustments:
Add back (Kennedy Wilson’s Share)(1):
Depreciation and amortization
43.5
44.9
Share-based compensation
7.1
7.7
Adjusted Net Income
$
85.4
$
47.0
Weighted average shares outstanding for basic
136,815,290
138,772,819
(1) See Appendix for reconciliation of Kennedy Wilson’s Share amounts.
The table below provides a detailed reconciliation of net income to Adjusted Net Income.
Three Months Ended
March 31,
2022
2021
Net income (loss)
$
40.0
$
(1.6
)
Non-GAAP adjustments:
Add back (less):
Depreciation and amortization
43.3
44.4
Kennedy Wilson’s share of depreciation and amortization included in unconsolidated investments
1.1
1.7
Share-based compensation
7.1
7.7
Preferred dividends
(5.3
)
(4.3
)
Net income attributable to the noncontrolling interests, before depreciation and amortization(1)
(0.8
)
(0.9
)
Adjusted Net Income
$
85.4
$
47.0
Weighted average shares outstanding for basic
136,815,290
138,772,819
(1) Includes $0.9 million and $1.2 million of depreciation and amortization for the three months ended March 31, 2022 and 2021, respectively.
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.
Contacts
Daven Bhavsar, CFA
Vice President of Investor Relations
(310) 887-3431
dbhavsar@kennedywilson.com
www.kennedywilson.com
