Kennedy-wilson Holdings Inc. · NYSE:KW
Kennedy-wilson — Kennedy Wilson Europe Real Estate — FY2015 Earnings Presentation
74 slides from Kennedy-wilson's earnings presentation, Feb 26, 2016
Slide 1: Year-end results 2015
Year-end results For the year ended 31 December 2015 26 February 2016
Slide 2: Agenda
Agenda Overview Mary Ricks, CEO Financial review Fraser Kennedy, Head of Finance Portfolio review Peter Collins, COO Summary Mary Ricks, CEO Q&A 1 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 3: Overview
Overview Mary Ricks 2 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 4: Completed redevelopment of Lochside Avenue
Overview Financial review Portfolio review Summary Appendix Completed redevelopment of Lochside Avenue Lochside Avenue, Edinburgh (Artemis portfolio) Before After 3 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 5: KWE investment proposition
Overview Financial review Portfolio review Summary Appendix KWE investment proposition Unlocking value of under-resourced real estate Growing income through asset management +15.3% +12.9% £19.4m NOI growth on re-letting Ahead of valuers ERV on Target incremental NOI from and lease renewals1 re-letti
Slide 6: Highlights
Overview Financial review Portfolio review Summary Appendix Highlights Financial Net investments 14.6% 1,175p £157.1m +11.5% £262m 17 mths Adjusted NAVPS growth Valuation uplift (like-for-like) Disposals Hold period (2015) (2015) (to date) 4.1% 35p +480% 5.8% 240bps NOI growth (like-for-like) DPS pa
Slide 7: Operational achievements
Overview Financial review Portfolio review Summary Appendix Operational achievements Portfolio AM transactions £2,793m 7.3% £7.6m +69% Portfolio value Under-rented portfolio Incremental NOI from AM 2014: £1,490m (Based on 31 Dec 15 ERVs) 2014: £4.5m £161m £211.8m +8.2% 1.3m sq ft Annualised NOI (£m)
Slide 8: Finance review
Finance review Fraser Kennedy 7 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 9: Strong NAV and earnings growth
Strong NAV and earnings growth Total accounting Adjusted NAV Dividend return return per share growth +18.0% +14.6% +3.4% 2014-15 2014-15 2014-15 8 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 10: Financial highlights
Overview Financial review Portfolio review Summary Appendix Financial highlights Income statement 2015 2014 Net operating income (£m) 130.1 50.7 Adjusted earnings1 (£m) 65.0 23.1 Adjusted earnings1 (p per share) +84.9% 47.9 25.9 Dividends (p per share) 35.0 6.0 Balance sheet 2015 2014 Portfolio valu
Slide 11: Strong investment activity growing earnings
Overview Financial review Portfolio review Summary Appendix Strong investment activity growing earnings 2015 part period acquisition NOI 2014 acquisition NOI 140 +130.1 120 2015 adjusted earnings (£m) +43.3 -10.9 100 -15.2 80 +86.8 +4.8 Dividend Cover: 1.4x 60 -36.2 -7.6 40 65.0 47.5 35p/share 20 0
Slide 12: 20% quarter-on-quarter dividend increase for Q1 2016
Overview Financial review Portfolio review Summary Appendix 20% quarter-on-quarter dividend increase for Q1 2016 Cumulative dividend cover Quarterly dividend paid 2015 2016 14 1.8 12.0p Dividend cover on adjusted earnings (x) 12 1.7x 1.7 10.0p 10.0p Dividend (p per share) 10 8.0p 1.6 8 7.0p 1.5x 1.5
Slide 13: Strong adjusted NAV per share growth driven by valuation uplift
Strong adjusted NAV per share growth driven by valuation uplift Adjusted NAV per share growth +14.6% 2014-15 12 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 14: 14.6% adjusted NAV per share growth
Overview Financial review Portfolio review Summary Appendix 14.6% adjusted NAV per share growth Adjusted earnings £65.0m Realised gains £14.6m 1,800 1,700 +79.6 Movement in adjusted NAV (£m) +211.8 1,600 -47.5 -29.7 -4.6 1,500 1,400 1,596.5 or 1,300 1,174.5p 1,386.9 1,200 or 1,100 1,025.2p 1,000 ≈ 9
Slide 15: Valuation surplus components
Valuation surplus components LFL 2015 acquisitions Total £157m 1 £55m £212m +11.5% +4.5% over 7 months +8.2% Notes 1 On constant currency basis 14 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 16: Total valuation surplus +8.2% or £212m
Overview Financial review Portfolio review Summary Appendix Total valuation surplus +8.2% or £212m 3,000 Valuation +55 2,800 surplus +1,210 Portfolio value contributors (£m) 2,600 £212m 2,793 2,400 2,200 2,000 1,800 +157 1,600 1,400 1,490 1,528 -119 1,200 1,371 ≈ 1,000 Portfolio Net LFL LFL LFL Net
Slide 17: Long term fixed rate debt raised
Long term fixed rate debt raised Term to maturity Fixed debt Total cost of debt 7.5 years 88% 3.2% Debt raised in 2015 16 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 18: Unsecured BBB bonds 41% of total debt
Overview Financial review Portfolio review Summary Appendix Unsecured BBB bonds 41% of total debt £351.2m 32% £300m Secured debt UK unsecured bond TTM1: 5.8 years TTM1: 7.0 years No. of facilities: 4 £946.0m Maturity: 30 June 2022 Wtd average cost: 2.96% debt raised Total cost: 3.35%2 Fixed interest
Slide 19: Ensuring an efficient capital structure
Ensuring an efficient capital structure Term to maturity Total cost of debt LTV 5.9 years 2.9% 39.7% Dec 2015 Dec 2015 Dec 2015 18 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 20: Well staggered debt maturities
Overview Financial review Portfolio review Summary Appendix Well staggered debt maturities Total Term Facilities £m Margin cost (years) Fixed 58% 829.5 Na 319bps 7.7 Floating 42% 606.6 209bps 245bps 3.6 Total 100% 1,436.1 209bps 288bps 5.9 600 507.5 500 400 Debt expiry (£m) 296.3 2 year extension op
Slide 21: Efficient hedging programme
Efficient hedging programme Fixed interest debt Euro balance sheet FX hedging 85% 83% Dec 2015 Dec 2015 20 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 22: Hedging reduces volatility
Overview Financial review Portfolio review Summary Appendix Hedging reduces volatility 85% fixed interest debt 83% Euro balance sheet FX hedging Investments (properties + loans) Debt Working capital FX derivatives 1,600 58% 15% 1,400 172 Euro balance sheet at Dec 15 (€m) 85% 1,200 1,325 310 21% FX d
Slide 23: Pro forma financing capacity £672.2m
Overview Financial review Portfolio review Summary Appendix Pro forma financing capacity £672.2m 31 Dec PPE (£m) 2015 disposals Pro forma Cash 326.5 120.7 447.2 Undrawn facilities 225.0 225.0 Financing capacity 551.5 120.7 672.2 Total drawn debt 1,436.1 (16.8) 1,419.3 Net debt 1,109.6 (137.5) 972.1
Slide 24: Portfolio review
Portfolio review Peter Collins 23 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 25: Four target markets, four target sectors
Four target markets Four target sectors 24 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 26: 93% of portfolio in our core sectors
Overview Financial review Portfolio review Summary Appendix 93% of portfolio in our core sectors 5% 65% 7% 49% 6% 6% 6% Office UK £2,792.7m Ireland Spain 7% £2,792.7m Retail Residential Industrial Italy 24% Loans 1 Other 25% Notes 1 Includes hotel and leisure assets 25 Kennedy Wilson Europe Real Est
Slide 27: £2,792.7m portfolio
£2,792.7m portfolio 2015 acquisitions (direct real estate and loans) £1,135.5m 26 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 28: Portfolio assembly in 2015: 7.1% YOC
Overview Financial review Portfolio review Summary Appendix Portfolio assembly in 2015: 7.1% YOC £1,135.5m acquisitions (net purchase price) Gatsby portfolio Park Inn loans portfolio 9 Puerta del Sol Pioneer Point loan Postigo UK: £498.1m UK: £61.9m Madrid, Spain: £22.0m London, UK: £68.5m Madrid, S
Slide 29: Secure cash flows
Secure cash flows Diversified Strong occupancy Long term cash flows c.550 96.0% 7.3 years No. of tenants Dec 2015 WAULT (to first break) 28 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 30: Secure income with upside
Overview Financial review Portfolio review Summary Appendix Secure income with upside Top 10 tenants Well staggered 7% 29% of total lease breaks Under-rented rent and expiries portfolio Under-rented portfolio Total rent Under/ (£m) (over) rented1 Office 77.9 11% Retail 45.5 -2% Industrial 11.8 6% Re
Slide 31: NOI progression from asset management
NOI progression from asset management Target incremental NOI £19.4m Over next 2 years 30 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 32: Target incremental NOI
Overview Overview Financial review Portfolio review Summary Appendix Target incremental NOI Incremental NOI £19.4m 170 +11.2 160 +8.2 -8.6 165.8 150 160.6 -5.6 Annalised NOI (£m) -14.2 154.6 140 146.4 130 120 110 100 Annualised PPE PPE Contracted Contracted Incremental Total NOI disposals pro-forma
Slide 33: Selected asset management NOI drivers
Selected asset management NOI drivers Target incremental NOI £11.2m Over next 2 years 32 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 34: Target incremental NOI +£11.2m
Overview Overview Financial review Portfolio review Summary Appendix Target incremental NOI +£11.2m Friars Bridge Court AM activity 2016-17 Block K BPR Pioneer Point 33 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 35: Dublin, Central London & South East delivered 90% of LFL uplift
Dublin, Central London & South East delivered 90% of LFL uplift 34 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 36: Delivering like-for-like gains
Overview Financial review Portfolio review Summary Appendix Delivering like-for-like gains +6.9% LFL ERV growth +11.5% LFL valuation uplift 10 20 +8.5% +16.4% +8.0% +15.2% LFL valuation growth (%) 8 LFL ERV growth (%) 15 6 +5.0% 10 +8.0% 4 +6.4% +2.8% 2 5 0 0 Office Residential Retail Industrial Ind
Slide 37: Significant reversion opportunity across office portfolio
OFFICE Significant reversion opportunity across office portfolio Potential reversion LFL valuation uplift +11%, £8.8m +15% 2014-15 36 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 38: 90% of office portfolio in institutional markets
Overview Financial review Portfolio review Summary Appendix 90% of office portfolio in institutional markets UK IRELAND £842m 62% £371m 27% Valuation Aberdeen 3 Valuation Dublin 2,749 568 12 Edinburgh Area (‘000 sq ft) 4 Area (‘000 sq ft) 37 12 Assets Assets Leeds Manchester 2 ITALY Milan Sheffield
Slide 39: KWE office portfolio summary
Overview Financial review Portfolio review Summary Appendix KWE office portfolio summary 71% Dublin, C. London & SE 2015 office asset management wins 10% 27% Re-gear New lease Total No. of transactions 8 17 25 Dublin Central London Area (000 sq ft) 101.7 233.4 335.1 19% £1,354m South East NOI uplift
Slide 40: Value add projects
Overview Financial review Portfolio review Summary Appendix Value add projects Baggot Plaza: on time and budget with 100% pre-let to BOI €39.0m 8.6% 2015 valuation uplift Stabilised YOC €47.50 psf €50.00 psf Baggot Plaza, Dublin 4 Passing rent ERV Dec 15 BPR: significant reversions 10.3% 70% 2015 Vi
Slide 41: Retail: diversified, high occupancy and secure income
RETAIL Diversified, high occupancy and secure income Occupancy WAULT LFL valuation uplift 94.6% 9.1 years +8% Dec 2015 Dec 2015 2014-15 40 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 42: KWE retail portfolio by location
Overview Financial review Portfolio review Summary Appendix KWE retail portfolio by location x% UK IRELAND £399m 58% £148m 21% Cavan Valuation SCOTLAND Valuation Dundalk 4 2,200 451 Dublin 4 Area (‘000 sq ft) Area (‘000 sq ft) Dublin County 126 NORTH 8 Cork Assets 29 Assets MIDLANDS SPAIN 14 £145m 2
Slide 43: KWE retail portfolio summary
Overview Financial review Portfolio review Summary Appendix KWE retail portfolio summary 61% London/SE, Dublin, Spain 2015 retail asset management wins 10% 29% Re-gear New lease Total London & SE No. of transactions 21 28 49 11% Spain Area (000 sq ft) 74.1 102.4 176.5 £692m UK North NOI uplift (£m)
Slide 44: La Moraleja Green shopping centre, Madrid
Overview Financial review Portfolio review Summary Appendix La Moraleja Green shopping centre, Madrid Significant value enhancing asset management opportunities €71m 6.3% Real estate value Yield on cost 80+ 80% Retailers Occupancy €4.5m 303,500 NOI at purchase Area (sq ft) Key tenants 1.8 3.5m WAULT
Slide 45: Delivering on £300m of non-core disposals
Delivering on £300m of non-core disposals Disposals since Jan 2015 Return on cost £262m 23% Includes PPE disposals 44 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 46: Sale of assets completed
Overview Financial review Portfolio review Summary Appendix Sale of 50 assets completed Net sale Premium Return Hold No. of proceeds to book on cost period assets (£m) value (%) (months) Deals completed to date TOTAL 50 262 5.8% 23% 17 Pipeline and future disposal targets (all figures are estimates)
Slide 47: Asset management achievements driving disposals
Overview Financial review Portfolio review Summary Appendix Asset management achievements driving disposals Avon, UK loan portfolio (PPE) Neal St, London (Artemis portfolio) Gatsby, 17 UK assets (PPE:6) Fire control centres Covent Garden, retail and office Heartlands, Daventry office £93.5m £813 £8.
Slide 48: Summary
Summary Mary Ricks 47 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 49: Great progress meeting our goals
Overview Financial review Portfolio review Summary Appendix Great progress meeting our goals 2015 goals Total return focused 18.0% 35p/share Total accounting return 2015 dividend paid Efficient capital structure 2.9% £594.8m Total cost of debt Unsecured BBB rated bonds Creating value through 11.5% €
Slide 50: 2016 delivering on our investment proposition
Overview Financial review Portfolio review Summary Appendix 2016 delivering on our investment proposition Income growth £19.4m Target incremental NOI from selected asset management Solid dividend 48p/share +37% 2016 annualised dividend Recycling capital £200m further sales June 2016 – June 2017 Oppo
Slide 51: Questions
Questions 50 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 52: Appendix
Appendix 51 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 53: Adjusted earnings
Overview Financial review Portfolio review Summary Appendix Adjusted earnings Adjusted EPS 47.9p, (Dec 14: 25.9p) 1 Year to 31 Dec 2015 Period to 31 Dec 2014 (£m) (p) (£m) (p) Profit for the period after taxation 259.0 191.0 78.5 88.0 Net change in fair value (213.1) (157.2) (55.3) (62.0) Fair value
Slide 54: Summary balance sheet
Overview Financial review Portfolio review Summary Appendix Summary balance sheet EPRA net assets 31 Dec 2015 31 Dec 2014 (£m) (£m) 1 Investment property 2,613.5 1,279.3 Loans secured by real estate 179.2 211.1 PORTFOLIO VALUE 2,792.7 1,490.4 Cash and cash equivalents 326.5 441.9 Bank borrowings (1,
Slide 55: December 2015 portfolio
Overview Financial review Portfolio review Summary Appendix December 2015 portfolio Top ten tenants Top ten assets Total rent % of total UK/ Area Tenant (£m) rent Asset Ireland City Sector (sq ft) Italian Government 10.2 6.7 Buckingham Palace Road UK London, SW1 Office 227k Telegraph Media Group 5.8
Slide 56: December 2015 sector break down
Overview Financial review Portfolio review Summary Appendix December 2015 sector break down UK portfolio summary Area No. of Portfolio NOI EPRA NIY Acq'n YOC WAULT EPRA Sector (m sq ft) assets value1 (£m) (£m) (%) (%) (years) Occup'y (%) Office 2.7 37 841.7 51.2 5.7% 7.1% 4.8 95.6% Retail 2.2 126 39
Slide 57: December 2015 sector break down (cont'd)
Overview Financial review Portfolio review Summary Appendix December 2015 sector break down (cont’d) SPAIN portfolio summary Area No. of Portfolio NOI EPRA NIY Acq'n YOC WAULT EPRA Sector (m sq ft) assets value1 (£m) (£m) (%) (%) (years) Occup'y (%) Retail 0.9 17 117.1 7.7 6.3% 6.6% 3.6 84.4% 2 Deve
Slide 58: Secure income with upside
Overview Financial review Portfolio review Summary Appendix Secure income with upside Under-rented portfolio Well staggered lease breaks and expiries 60% Under/ 52% Total rent % of (over) WAULT WAULT 50% (£m) total rent rented1 break expiry 40% Office 77.9 52% 11% 5.9 6.9 Retail 45.5 30% -2% 9.1 12.
Slide 59: 2015 portfolio assembly
Overview Financial review Portfolio review Summary Appendix 2015 portfolio assembly Gatsby portfolio Park Inn loans portfolio 9 Puerta del Sol Pioneer Point loan Postigo UK UK Madrid, Spain London, UK Madrid, Spain Purchase date 30 Jan Purchase date 16 Feb Purchase date 13 May Purchase date 18 May P
Slide 60: Delivering our disposals target
Overview Financial review Portfolio review Summary Appendix Delivering our disposals target £262m completed since Jan 15, ROC 23% in 17 months Net sale Premium Return on Hold No. of Area proceeds to book cost period assets (000 sq ft) (£m) value (%) (months) Deals completed Office 13 896 74 5% 44% 1
Slide 61: Key 2016 capex of £96m including £35m development
Overview Financial review Portfolio review Summary Appendix Key 2016 capex of £96m including £35m development Development schemes on budget and on time Total Asset Target Target 1 Completed ERV CTC cost incl. profit on stabilised PC 2 Scheme name area (sq ft) (£m) (£m) Capex (£m) cost (%) YOC (%) ti
Slide 62: £61.4m of value enhancing refurbishments
Overview Financial review Portfolio review Summary Appendix £61.4m of value enhancing refurbishments 1 Current New area CTC PC Occ’y Scheme name Location Sector area (sq ft) (sq ft) (£m) Description timing2 (%) Pioneer Point Ilford PRS 294 units 294 units 21.6 Internal & external remedial Q1-17 56 w
Slide 63: Strong foothold in PRS market in Dublin and London
PRS Strong foothold in PRS market in Dublin and London UK PRS units purchased LFL valuation uplift 294 +6% 2015 2014-15 62 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 64: KWE PRS portfolio by location
Overview Financial review Portfolio review Summary Appendix KWE PRS portfolio by location UK IRELAND PRS PRS £72m 40% £108m 60% Valuation Valuation 294 659 Potential units Potential units Ilford Station LONDON PIONEER POINT DUBLIN Phoenix Park Stratford LIFFEY TRUST HERBERTON Tower of London Canary
Slide 65: KWE PRS portfolio summary
Overview Financial review Portfolio review Summary Appendix KWE PRS portfolio summary 100% London, Dublin & Co Dublin Stabilised PRS 8% 52% £180m Co Dublin London Dublin 40% Liffey Trust Vantage, Central Park Dublin 1 Leopardstown, Co.Dublin Total Dec-15 lettable units 516 PRS growing to 953 units 1
Slide 66: New lettable units to drive PRS rent growth
Overview Financial review Portfolio review Summary Appendix New lettable units to drive PRS rent growth Block K: capitalise on Dublin rental market 10.5% 5.6% Rental growth last year Target YOC for 2 bed in Vantage Block K, Dublin 18 Pioneer Point: add amenities & transform to PRS operation 2.3% +3.
Slide 67: Strong industrial capital growth
INDUSTRIAL Strong industrial capital growth LFL valuation uplift +16% 2014-15 66 Kennedy Wilson Europe Real Estate Plc Year-end results 2015
Slide 68: 87% located in institutional markets
Overview Financial review Portfolio review Summary Appendix 87% located in institutional markets x% SOUTH Luton UK Banbury Wolverton Chelmsford EAST M25 2 £179m 100% Wokingham Benfleet Newbury Valuation Glasgow 2 Sittingbourne 2,775 Mertsham Area (‘000 sq ft) 3 33 Assets Leeds LONDON 2 Manchester Mi
Slide 69: KWE industrial portfolio summary
Overview Financial review Portfolio review Summary Appendix KWE industrial portfolio summary 87% in institutional markets 2015 industrial asset management wins 3% 31% 7% Re-gear New lease Total North No. of transactions 3 1 4 13% South East Area (000 sq ft) 456.2 10.1 466.4 £179m Midlands Greater Lo
Slide 70: Melton Enterprise Park, Hull
Overview Financial review Portfolio review Summary Appendix Melton Enterprise Park, Hull Successful re-gear of challenging asset Part of Jupiter £2.7m +247% £6.7m portfolio Purchase price Since acquisition 2015 valuation June 14 Re-gear £357k +40% £500k with strong Rent before On re-gear Rent after
Slide 71: Summary of Investment Management Agreement
Overview Financial review Portfolio review Summary Appendix Summary of Investment Management Agreement Annual fee Payment Base fee 1% of EPRA NAV 50% in shares Paid quarterly in arrears 50% in cash Performance fee 20% of total shareholder return above 100% in shares 10% hurdle rate 3-year lock-up, 1
Slide 72: Performance fee calculation
Overview Financial review Portfolio review Summary Appendix Performance fee calculation £148.4m outperformance 1,800 Performance fee calculation (£m) 47.5 2014 EPRA NAV 1,388.6 1,600 1,628.3 Add: 10% hurdle 138.8 138.8 TOTAL HURDLE (A) 1,527.4 1,400 2015 EPRA NAV 1,628.3 1,388.6 Add: dividends 47.5
Slide 73: Shareholder alignment
Overview Financial review Portfolio review Summary Appendix Shareholder alignment 18.2% Shareholding 1 Single largest investment for KW at £254.9m KW 18.2% owner + Majority of fees paid in stock Growing Shareholding from fees KW KWE 100% of performance fee paid in shares 50% of management fee
Slide 74: Disclaimer
Disclaimer This presentation is being provided to you for information purposes only. This presentation does not constitute an offering of securities or otherwise constitute an offer or invitation or inducement to any person to underwrite, subscribe for or otherwise acquire or dispose of securities i
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