Earnings call transcript Q4 2022

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Operator

Good day and welcome to the Kennedy-Wilson Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded today. I would now like to turn the conference over to Daven Bhavsar, Vice President of Investor Relations. Please go ahead.

Daven Bhavsar

Thank you and good morning. Bhavsar. Daven is This

and from X President; Bill information. Relations President; Matt Today’s X available see webcast Enbody, today The Please for CEO; will months. and replay and Chairman for by Mary website CFO. be live be will Ricks, Windisch, phone call Investor be Kennedy-Wilson us more archived McMorrow, replay. for are by and Justin will week Joining the Executive for Vice webcast

to certain and refer financial this measures, EBITDA will On call, adjusted non-GAAP adjusted including we income. net

our description can find GAAP these You fourth which Relations the with website. reconciliation in of on measure the a quarter comparable of directly posted items earnings release, Investor is along most XXXX our of the financial section

may factors statements. materially forward-looking and during in Statements to Actual discussed this call other made from filings differ the number and call this and indicated may the uncertainties on Exchange due information Commission. forward-looking Securities reports with risks, results of include

would I McMorrow. turn to over CEO, call Chairman the and our Bill like now to

Bill McMorrow

reported you, we Good delivered performance I initiatives. our pleased the Welcome, fourth quarter results everybody. XXXX morning. am with Yesterday, full on and how and our Daven. we company of for and strategic Thank year our

$XX On our by to includes million EBITDA generated portfolio. changes offset an from the earnings lower sales NOI $XXX value which and fees front, by adjusted in increase recurring XXXX, we million of and in asset fair our gains

to Estimated a $XXX year. grew the annual record NOI by million XX% during

of the out billion. line a XX% grew results These were at the goals by we with capital that fee-bearing $X.X year. set to the beginning Our in record

billion years year management billion, at under up ago. from closed just $XX $XX Our the X assets

of across apartments, XX%. the We by of our same-store two-thirds strong occupancy hotel year sectors stabilized portfolio. logistics, sectors flow in across almost and including portfolio growth, where XXXX. and with ended we XX% concentrated stabilized strong Fundamentals NOI in floating remain our growing saw these loan multifamily over apartment strong cash rate have portfolio commercial with We our

investment volumes, platform, patient to unlevered, construction returns capital our and QX, we billion is primarily as for debt our to generating continue very In new remain our attractive towards lower investments. of transaction Turning double-digit through on which our deployment our our pipeline. activity, see completion shareholders was we $X

sales apartment On in the California consolidated portfolio in interest of venture property disposition XX% into per Santa key the of a this a XXX-unit million related we U.S. quarter. sale of in from front, multifamily at to community door. the sold Maria. $XXX completed our disposition partial $XXX,XXX joint The our a We price platform

portfolio, our cash of consolidated We and QX. of co-mingled co-investment $XXX retail on and sales million in sale. also our gains In portfolio generated further our $XX commercial completed total, funds reduced totaling sales, $XX in XXX,XXX of feet million our million square

ahead, As for look of we KW. see important we a growth areas for number

deliver First is to expect we from several the of large projects. development completion NOI

including between NOI these X shown expect time when deliver million to generate XX plan, generating every to assets expect in complete million XXXX, stabilization and NOI. ahead team’s almost project and currently multifamily portfolio single stabilize lease-up and we has to assets after total, additional stabilized. are development with is to construction. our record construction development KW on underway XX from assets track that we of XXXX, expected In to stabilized $XX on recent Our months of annual office and we In our that business of ability $XX

platforms years, well-capitalized are strong this partners, is by continue experiencing quality well And logistics of are both our our renters of that to have driven opportunities. debt to and very a growing. management located in platform, be also in Second, provide which our part its multifamily anticipate will growth to and been These We deploy was high-quality poised has which our business the look life. by investment markets platform, fastest funded desire growth growing high positioned a pipelines communities recent continue growth to KW. job continue to of very continue with who third, portfolio as for have capital amenity rich, of

With CFO, results. that, to to the I our call our Enbody, would like over financial to turn Justin discuss

Justin Enbody

non-cash EBITDA for the EPS GAAP in totaled QX, million to Adjusted as per resulting of depreciation, bringing and share million. share year. $X.XX in $X.XX which $X.XX adds Bill. totaled Thanks, net $XXX share total per year-to-date in the adjusted QX for approximately $XX million per or $X.XX back in EBITDA our net quarter, $XXX XXXX. income, or expenses, $XXX million Adjusted totaled income such adjusted

to which in revenue see X% quarter to the QX growth, compared continue grew We ‘XX. further by

improvement Looking our impressive related leading by year. us. in which investment and focus recurring compensation while XX% Consolidated costs the important is at in ‘XX annual revenues an This is grew results. our an for an XX% income, in to declined

Looking base increased were income base and and of XXXX. fees investment across NOI, These hotel levels fees. driven strong of by XX% loan same-property our estate XX% portfolio, portfolio, multifamily significantly XX% higher and management of loan share $XXX our our to entire our property to a results increase management NOI, out entire of real NOI portfolio in growth our million

over balance in gains of sheet extinguishment. a completed million our on our resulting $XXX $XX and debt quarter, debt the to little million profile, early discounted we of in turning repurchases Now,

that December. interest today, hedge utilize have the sit rehedged to XX%. at we expired floating and to a rate as ended quarter-end, fixed our continue at we exposure. We year We XX% minimize Post few hedged had in or hedging contracts we

maturity Additionally, years. hedges of X.X our have weighted rate interest a average

near-term maturities. We solid on our a handle have

of line of million availability that $XXX only X% million quarter to credit. cash $XXX maturing asset process. roughly have already million $XXX We our in $XXX approximately our on debt At million end, pay-off of we we consolidated half from expect sales or are this which of had and year, of

effective of an and maturity X.X%. weighted a rate years X.X has of debt Our average

like that, with now call multifamily to over And debt to turn Windisch the Matt I’d portfolio. discuss our and to

Matt Windisch

Justin. Thanks,

just XX% that growth ended planning. of the our and strongest portfolio performance global two came top XX% XX,XXX represents compared units projects which We In the Mountain to U.S., of Our both are the stabilized apartment with out a still in the NOI global development under XXXX. the our portfolio few multifamily currently year Northwest, Pacific and saw with in X,XXX West same-property another today of XX%. regions:

This Our was X% basis on Mountain in spreads QX. Leasing blended and out West by of results Idaho rents XX% by and is the Mountain to data Utah a Migration the shown have before ranked in were with that U.S., grew West. for in Mountain a top as been have respectively. Idaho, and solid Utah pandemic XX% Arizona, been the State greater net our in-place assets, seen arrangements connectivity where boon has trends driven performance domestic consistent all and the in remote work Nevada states flexible migration.

with to Northwest, incomes average In in per over this XX%. $X,XXX just in-place at largest grew region be Rental rent by our continue rents region, Pacific our attractive month. second the

region and from largely this value-add in suburban benefit assets continue program. to Our are our

for ‘XX. less debt in to Blended saw the QX the bad Pacific X% of in also leasing QX Northwest. compared spreads totaled We quarter

of we higher lower level bad occupancy Northern QX expenses our ending debt California in have the and assets, result Southern seen and to compared ‘XX. the and moratorium property In of eviction

quarter, noted of recapture we and we temporary units on throughout As this part we from as tenants last increasing begin as view year. occupancy increase non-paying to focused the

were in new improvement already we in leases January on totaling paying with not We spreads QX units, seeing Northern California which as through leasing rents. are XX% in an work

across X% which Blended is slow entire in spreads leasing given portfolio month. U.S. January our totaled that is leasing seasonally a usually January, strong

a roughly cost In exceeded ‘XX, X,XXX almost with interiors – year. a interior an targets return cost. renovations XX,XXX we at our of renovated XX% average average program on renovation goal return an average X,XXX and Our

have is We a XX% our continued majority that Northwest, provides runway units X% and are the improved XX% yet occupancy renovated, of on record. of which our Dublin, to highest Pacific in in ownership Mountain which units, the In where solid XX%, X,XXX to are a occupancy we growth. have be by West over the which for same-property still

the in Dublin. robust growth rental in high-quality same-store operating resulting XX% Europe remains in The NOI. for persist last lower saw in year. Ireland, amenity-rich which very in growing quarter housing robust of economy once the was to also We in housing a Demand fastest undersupply expenses again continues

We expect currently this which strong X,XXX under units we demand start for development, will summer. our delivering approximately

which take our from availability debt pullback a debt of Management environment, business, has continues current Investment traditional has which Turning debt platform advantage capital lower of our Less XX%, capital. lending sources to our attractive to the impacted many positively results fees seen our newest to lending north higher as on with business origination returns are higher management rates, quality leverage inclusive at points we base unlevered originations. of sponsors asset of our now in

million QX, average rate In and basis $XXX of LTV points we an of new XXX originations with XX%. an completed average of floating spread

also that very the quarter, growth of of May platform This up million in billion. growth repayments We rapid to had back business $XX scratch in net a in XXXX. of resulting the is $X.X started for from

in KW reminder, currently our has debt X% ownership a a interest platform. As

billion grow have to of forward business additional arise. We and loan as $X look opportunities approximately capacity continuing this to

to Ricks. the like turn call over our I’d that, to With President, Mary

Mary Ricks

platform $X.X on assets The has focused been management an platform. feet, important potential logistics to portfolio source European NOI. expansion growth year At end, almost of which grow significant portfolio square billion. rapid XXX our launched AUM Matt. investment institutional through with quality, of sector this has growth totals our in The XXXX, Thanks, last our total of assets Logistics our million mile XX is our in with acquiring majority across industrial for been of Global

rents of $XXX feet we in portfolios assets XXXX, as year, platform, fundamentals regions QX. XXX,XXX in growth remained in $XXX XX% $X.X increase XX% where UK we completed In tight in XX in resulting remains double-digit at XXXX the growth and assets, strong fee-bearing XX capital, remains industrial acquired strong square transactions, over in Most portfolio our representing billion XX% our XX% UK in totaling rents. at the to in very in a this million totaling in Occupancy and UK in X%. lease saw last vacancy million

stalling now currently demand Vacancy Occupier low that flexibility a projected. growth new higher development are elevated at further levels in financing to with under rental is rent continued market growth due continued underpin XX% strong build rents as costs, of chains. are remains existing signs remains In-place supply the and will to which result we desire seeing stock. historic into

square strong XXXX is Rents levels. XXXX of continue leasing per across in fantastic remains particularly – greater exceed foot £XX off in deals with implies London volumes under with our expect start, we increase logistics ahead increase business which last Greater of plan pushing to offer leases of portfolio. a Demand XX% rents that our a pipeline years. for than over space as a a number the be to strong X lease to over assets,

ripple the demand seeing for positive also Southeast from effect of our market, are and the being smaller driving is We in rental growth portfolio. London, pushed tenants which broader Central away

will a investment in capital, management incremental which our X in platform doubled so by for our announced This billion As our in portfolio $X.X years. non-discretionary of fee-bearing XX% billion across grew has have existing to In capital, of $X.X capacity is has reminder, we an add logistics billion the last our of which and $X.X that EU we billion all platform. significantly look the $X.X another to deploy and target total, XXXX platforms.

Northern has portfolio, strong completed NOI office XXX,XXX out square and which office Turning with closing office feet completed. our to property office UK our QX, grew million lease of in by same-store strong year where comes X.X an feet a years. in X.X X% and from improvement California our of saw QX. in our unexpired our primarily over occupancy, to we of leasing We Dublin, office the expiration term portfolio lease attractive office transactions Europe, of square Two-thirds UK NOI

higher quality with quality a for best-in-class space. We to buildings flight continue occupiers as look see to

improvement an office grew by XX%, by Our robust a European occupancy. driven, in same-property NOI again,

Buckingham improved growing XX% June QX XXXX. which One foot from Elms Road Similarly, ‘XX. office London, occupancy Palace XXX,XXX to the XXX% occupancy a from submarket, ‘XX at London For largest QX Gardens, grew located asset, in Embassy example, in square in XX% at property Nine was acquired XXX our Central XXX% in to in

ahead We of developments in Hanover last high-quality again, office showing tenants Tilzer credentials. to leading rents year and Dublin, also space be new plan, stabilized in with desire for at two Quay business ESG the

start and We see year. continue a demand to the off leasing strong to in to solid QX are

portfolio. our and development to Turning lease-up

the many of are top the our surpassed the at rents time call, have mentioned our out achieving initial mid Bill developments this cases, to In As track stabilization we on complete of remain year. on underwriting.

NOI. stabilized lease-up developments million once will XX% we made these portfolio thank take in tenants on transactions completing global QX, and through lease-up is Oaks on of move new and I’d in development to projects is budget completing this our our time a to the portfolio now the like for later calls. lease $XX add our annual of number teams Our to progress In estimated to into portfolio future Southern which occupancy the leased. expected our and updating you on year. our important great progress This development look forward asset on California, at

I’d With Bill. it to to that, pass like back

Bill McMorrow

parts the that strong X long-term investment very cycle. our our the people, record, over company last continue of decades. all our been move their Thank you, our work we our to about in and cultivated strategy risk-adjusted global – particularly entire based returns developed creating optimistic and relationship the track over network years portfolio has hard past on dedication for have our three Mary. and team we I’d as to grow for shareholders. the of remain assets over forward, and the global built partners We thank to The our like thank KW long-term

to With that, like Daven, open I’d any it to up questions.

Operator

first our JPMorgan. Please ahead. Anthony will And Paolone Instructions] here [Operator go with from come question

Anthony Paolone

broader you probably duration could in the question, seen your a about the sense that pullback to and wondering I Dublin just to effect as for thus quality, on any? but step us back happening if the and I you. in you’ve understand the comments there portfolio lease market and with Thank My give tech what’s just if Dublin office far, flight is the was I the first think, Mary.

Mary Ricks

had all you jobs. Sure. Hi, X,XXX been that’s in new rightsizing headlines, tech because that XXXX, And the say, read from Anthony. really only added I to has the the the those mean about jobs staffing of happening sector pandemic it’s start interesting but totaled the would Ireland. I XX,XXX tech

and concerned. completing Cross prospects. not And Coopers about excited we’re of a interesting we’re lot have So commercial

Anthony Paolone

to question maybe the then platform. Matt, is Okay. second And relates debt for as it

how with to capital you, but back, is – thinking seems same opportunity Just some other you continue the down. vendors pulling that? just pipeline and time, a opportunity broadly markets it that’s are the like grow about for good to activity Because at

I’m continue that ability So wondering and just this of out net nets how maturities the just to to grow it year?

Matt Windisch

that I a So we within our strong platform. pipeline correct. debt have you’re very think remains And

dependent We have the repo those back, capital traditional or are that are seen of a back especially number leverage pull of sources on market. financing using securitization the

and doing on securitizing everything partners, we’re us, we’re not anything. no balance with leverage, sheet For our with

I So we’ve think the of become of choice. one lenders

And leverage owner’s We these and primarily things. with we’re We’re entire easy things we estate, underwrite specialists execute mindset. within our owner assets of look at KW real know so to really network can with. work the an global we and industry We to well. an

more bit to obviously, really two, to do the lower getting floating in been everything And so borrowers we’ve we’re we’ve is that actually market transactions of Fed lend and And to three, conditions, or the able a benefit cases, been us, five in on part given rate We’ve rising most rate. do of been we’ve LTVs. just had we’ve we’ve a some for able And spreads. doing at repeat the lot business funds the able our – what six four, now with. also, do done for what been with

we’ve we can be and able larger do transactions. very selective so to And been

look from year large million balance – up a this we’ve a average closing signed our million ago, $XX to is moved about of which was it we closer today. we’ve to up deals And $XX So got couple forward quarter. that

So we and got pipeline, about very execute. place good in the to feel team we’ve a

Anthony Paolone

just potentially office it as one to last from and to just maybe would type property just that in for invest you relates what in get take the for Okay. here? the maybe And Bill, U.S., then it contrarian

Bill McMorrow

the as down X part you really States. buildings across, the cut to – office start are saying, we in would is answer that of really would own as wholly-owned question we’re far but your we United think know, capital here company concerned. started The in going Tony, that what be as X you to I years to when ago assets see to as I of terms our the or by X light more down we’re we’re is plan going Well, really to

sheet. us to going office balance assets on not see You’re putting our

United at States. looking trading in is We’re assets. those the There really here really

so And in. of high-rise the in California, kind Western or urban are that, to say interest into United assets in have that attractive size our States, still we suburban platforms. I little very would general, in the the four they’ll in But properties. partnership go something the particularly range assets three story

so to depends the what some a though, We price. that asset have assets in and And patient. the Europe. say right anything, to And extremely on is other I buy company logistic for the tried at across think single being I escrow us, like it beginning, than in don’t now we’re

early we’re in opinion. in the And so cycle our

so and the think meaningful of can I going before you’re at see end of year terms to or this Kennedy-Wilson, latter really repricing. in any looking And year you’re of next part really you – next –

Anthony Paolone

you. thank Okay,

Operator

question Please go our Derek come Johnston will Bank. And Deutsche from ahead. next with

Derek Johnston

funded, question Thanks. Any is lease-up refinancing? portfolio? would level guess the development sales that’s whether you KW think remaining? have appreciated. XX%. everybody. what’s around insight of share billion or remaining be be how Good I here guys what’s I Hi, afternoon. will with Good $X morning. property One associated it And non-core expenses

Matt Windisch

It’s Matt.

development Of is to pipeline. of from lease-up million projects. roughly So roughly financing we’ve construction the got share that, come complete those a and going to capital total $XXX XX% at

our at the development projects. So to fund sold focus speak, the be non-income-producing majority in finish those million And on these remaining of are be asset with roughly that sales, non-core from you’re $XXX of so to looking KW of out of to that particular, we to $XXX could expect our funded million, that costs. from pocket, that some assets

Derek Johnston

platform, kind and up back are the question And seems flowing debt yes, to actually almost and banks great. on ebb of Okay, on Tony’s monthly. following look, really flow

what’s little about a debt know or Like important in get to Because the probably find drive competitive borrowers to I an trying mean your component or I advantage? do secret value think out sauce here. So continue growth. How capabilities? order Kennedy-Wilson’s to that’s

Matt Windisch

I throughout look, the known within mean, on of Yes. ours. been debt things. of people a of property transacting the we’ve have the transacted lot the years. with They side we’ve space them been partners We

think loan someone more we’ve teams earlier, business, industry, and is the the in reputation I just lot understand and it’s a transaction who is to built the they time. I a do I once just obviously, up of as can documents, very knowledgeable, And complex out, the of you and with, I someone talk network time, mentioned and established and extend trying brokers easier. who people as think to work over And to easy a ourselves all lot a situations. with it’s borrowers talking have set repeat think

it So help right grow. for – the execute day, end do borrowers, think and we at but business will of I if our well the the

Derek Johnston

end early here be And not season, an be early how a the one, know really any to would nearing February, on markets it’s does multifamily I lease-up and your great. and we seem glimpse of how just I out quick do are it’s then performing? Okay, but mean key renewals helpful? going just last

Matt Windisch

kind rents saw stabilize fourth of definitely the quarter. in line We Yes. and flat Sure.

in see fourth – rent growth did really quarter, lot didn’t you the whole loss So lot market of growth although to we the lease. a capture a rent of

we clip. were a obviously grow able good So rents to the at

rents up. we to seen We have in tick start back bit and seen February, January that change a market where have

the in were lease numbers in and strong. our than quarter fourth higher trade-out remains occupancy seeing were So January X% we’re they

a pace So into back saw our growth faster we at than are we in seeing markets QX. rent come

to off So I’d year. a say start so far this good we’re

Derek Johnston

for That’s Matt. Thanks, it me, everyone.

Operator

will [Operator here Our America. of [indiscernible] next from Instructions] question with come go Bank Please ahead.

Unidentified Analyst

Yes. development, time. what more get ground. the guys everyone. you development guess you would the to on on the What Thanks excited I more Question for projects are looking put Hi, guys for?

Bill McMorrow

development what are that these made you been X side we I mean when we’ve ago. of Well, the think about decisions years doing,

you’ve got middle that, of lead boards. – have – newer XXXX. What so amenitized I won’t long have, And the great development rents. of same project you would only said of very project these the attract drawing start not not on a the what up though, completion we say quickly, can time particularly But it’s attract point multifamily lease say, couple highly that a meaningful only I in category properties. but They learned, – project in times. of would the until one I a think we kind in as That’s that other the than I’ve this at space, now. times

being see see to pricing in. patient along We’re come what very settles and opportunities where to

And we we’re here. – not think said, we we we’ve want fishing Matt for I moving finish as got. were units to almost And X,XXX – so don’t what

at tail it. end big And undertaking, the a and of so that’s we’re

that to get it lease, get get and that stabilized get in. want So income we done, coming the

Matt Windisch

one to the we just Bill. grow one housing certainly are try business. add area The affordable on side, thing that, development maybe that continuing to to And to our it’s

Bill McMorrow

Good point.

Matt Windisch

units inflation. That of a past also is tied X,XXX the very we that business it in here in to almost wage platform, we’ve and can Within added manner. years do couple really capital-light

in focus is, to demand of and KW not raise housing it’s But affordable on trying obviously, based an capital need said, the changes rents like a there where that’s so income, – I huge and we really in median area build. each for on any to counties. markets. You of continue And our from

Bill McMorrow

we’re site. Camarillo, project made. XXX on super And a Southern California, but suburb along rate Yes, of Josh, on that’s interesting same California, for just example, a a that XX-acre we’re XX% Matt in it’s because the which kind market affordable that really site, units, on XX% point and doing doing senior to great XXX is we’re units

is mean so a for and And tremendous that’s continue to is plan business housing. and XXX% that there senior Matt a pent-up correct. we demand I growing just affordable

Unidentified Analyst

back that the platform picture, external the Are is there it’s right insightful appreciate management stepping like investment seems maybe any considering have that And any be now. you of there debt big that’s platform. and pretty I color. other there your logistics business? either maybe if just partners to kind out of opportunity It like opportunities kind you’re as a or fun actually turned attractive down

Mary Ricks

Yes, sure.

Fund $XXX So that closing launched. will vehicle our million that roughly we we’ve X closing. had get have We’ve our first first that in

Ireland. of million a $XXX logistics roughly UK in States. launching And then be which the a follow-on to Fund was value-add the That’s we targeting Europe, is and value-add X, which on that soon, will Fund United in fund X focused basically fund is We’re equity. mainly

Unidentified Analyst

Appreciate that. guys. Thanks,

Mary Ricks

Thank you.

Operator

over Bill question-and-answer we like that, our session. for will remarks. any to to conclude back the I’d with McMorrow And turn conference closing

Bill McMorrow

we you much. that for any very for us available Thank you Thank to might And say your the all you as you have thank will hear are everything. time today. support. I further story study for our have you follow-up taking questions

Operator

you has now for today’s conference The presentation. attending very concluded. Thank much

disconnect lines. now may your You

Kennedy-Wilson (KW) 22 Feb 232022 Q4 Earnings call transcript