Kennedy-wilson Holdings Inc. · NYSE:KW
Kennedy-wilson — Kennedy Wilson Europe Real Estate — H1 2016 Earnings Presentation
58 slides from Kennedy-wilson's earnings presentation, Aug 5, 2016
Slide 1: Half-year results
Half-year results For the period ended 30 June 2016 5 August 2016
Slide 2: Agenda
Agenda Overview Mary Ricks Financial review Fraser Kennedy Portfolio review Peter Collins UK portfolio Mike Pegler Summary Mary Ricks 1 Kennedy Wilson Europe Real Estate Plc Half-year results 2016
Slide 3: Overview
Overview Mary Ricks, CEO 2 Kennedy Wilson Europe Real Estate Plc Half-year results 2016
Slide 4: KWE investment proposition
Overview Financial review Portfolio review UK focus Outlook Appendix KWE investment proposition Unlocking value of under-resourced real estate Diversified cash flows underpin robust dividends £165.4m 7.0 / 9.0 24p Topped-up NOI1 H1 16 WAULT (years) H1 16 DPS paid (first break) / (to expiry) Growing
Slide 5: Diversified cash flows underpin robust dividends
Overview Financial review Portfolio review UK focus Outlook Appendix Diversified cash flows underpin robust dividends Asset base and income diversified across Europe 30% 22% 42% Euro 33% Euro assets income Portfolio NOI : 1 Portfolio value : Ireland 2 5% £3,063.2m Spain Italy £165.4m 6% 7% UK 67% 5%
Slide 6: Growing income through asset management
Overview Financial review Portfolio review UK focus Summary Appendix Growing income through asset management Completed redevelopment of Baggot Plaza, Dublin 4 NOI of £5.1m, 20 year term certain FRI lease to Bank of Ireland Before After 5 Kennedy Wilson Europe Real Estate Plc Half-year results 2016
Slide 7: Creating value through AM and selective recycling
Overview Financial review Portfolio review UK focus Summary Appendix Creating value through AM and selective recycling Disposals: £165.5m Acquisitions: £172.8m Smaller properties with Strong locations with good limited future upside covenants and asset management upside 96% 88% Occupancy Occupancy £
Slide 8: Highlights
Overview Financial review Portfolio review UK focus Summary Appendix Highlights Financial Net investments 1,234p +5.1% 7.1% £315m 17 mths Adjusted NAV per share Accounting return Disposals Hold period (H1 16) (H1 16) (to date, incl PPE) +34.7% £47.3m +1.6% 5.8% NOI growth Valuation uplift Exit yield
Slide 9: Operational achievements
Overview Financial review Portfolio review UK focus Summary Appendix Operational achievements Portfolio AM transactions £3,063m 8.8% +4.3% Portfolio value Under-rented portfolio1 Ahead of passing rent on 2015: £2,793m (Based on 30 Jun 16 ERVs) previously occupied space 95% 278 +1.8% Occupancy Number
Slide 10: Finance review
Finance review Fraser Kennedy, Head of Finance 9 Kennedy Wilson Europe Real Estate Plc Half-year results 2016
Slide 11: Strong liquidity and solid earnings
Overview Financial review Portfolio review UK focus Summary Appendix Strong liquidity and solid earnings Income statement highlights YoY change H1 2016 H1 2015 (%) Net operating income (£m) 78.7 58.4 35 Adjusted earnings1 (£m) 36.2 31.0 17 Adjusted earnings1 (p per share) 26.8 23.0 17 Dividends (p p
Slide 12: Accounting return of 7.1% for six months to Jun-16
Overview Financial review Portfolio review UK focus Summary Appendix Accounting return of 7.1% for six months to Jun-16 Balance sheet highlights Six-month H1 2016 FY 2015 change (%) Portfolio value (£m) 3,063.2 2,792.7 9.7% Cash (£m) 459.0 326.5 40.6% Secured debt (£m) 905.8 841.3 7.7% Unsecured deb
Slide 13: Strong NOI underpins sustainable dividends
Overview Financial review Portfolio review UK focus Summary Appendix Strong NOI underpins sustainable dividends 90 80 +78.7 H1 2016 adjusted earnings (£m) 70 -6.0 -8.1 60 50 40 +3.4 Dividend Cover: 1.1x -28.9 30 -2.9 36.2 32.6 20 24p/share 10 0 NOI NOI Admin Admin costs Investment Investment Net Net
Slide 14: 5.1% adjusted NAV growth
Overview Financial review Portfolio review UK focus Summary Appendix 5.1% adjusted NAV growth 1,700 +36.4 +29.6 +47.3 Movement in adjusted NAV (£m) -32.6 1,600 1,677.2 1,500 or 1,596.5 1,233.8p or 1,174.5p 1,400 ≈ 1,300 Adjusted NAV Valuation Retained Dividends FX /other Adjusted NAV 31 Dec 15 surpl
Slide 15: Well staggered debt maturities
Overview Financial review Portfolio review UK focus Summary Appendix Well staggered debt maturities Total Term Facilities £m Margin cost (years) Fixed 57% 994.0 Na 321bps 7.1 Floating 43% 745.8 204bps 235bps 4.4 Total 100% 1,739.8 204bps 288bps 6.0 600 507.9 500 459.0 Debt expiry (£m) 400 292.1 2 ye
Slide 16: Hedging reduces volatility
Overview Financial review Portfolio review UK focus Summary Appendix Hedging reduces volatility 88% fixed interest debt 89% Euro balance sheet FX hedging 61% 1,800 Euro balance sheet at June 16 (€m) 12% 145 1,600 1,400 360 21% FX derivatives 88% 1,200 1,000 debt fixed or 800 1,553 hedged 600 1,157 6
Slide 17: Significant liquidity
Overview Financial review Portfolio review UK focus Summary Appendix Significant liquidity 34% (£m) FY 2015 H1 2016 £459m Cash 326.5 459.0 cash Undrawn facilities 225.0 150.0 66% Total liquidity 551.5 609.0 EUR cash: €188.1m GPB cash: £302.0m 16 Kennedy Wilson Europe Real Estate Plc Half-year result
Slide 18: Portfolio review
Portfolio review Peter Collins, COO 17 Kennedy Wilson Europe Real Estate Plc Half-year results 2016
Slide 19: Asset management focus H1 16
Overview Financial review Portfolio review UK focus Summary Appendix Asset management focus H1 16 Progressing Intensive Smart key projects, day to day recycling development AM of capital & refurbs Moraleja Green, Madrid Block K, Dublin Lakelands RP, Cavan Hambridge Lane, Newbury Baggot Plaza, Dublin
Slide 20: Portfolio assembly 2016: £173m
Overview Financial review Portfolio review UK focus Summary Appendix Portfolio assembly 2016: £173m Towers Business Park The Chase Leisureplex Manchester: £82.0m (May 2016) Dublin: £49.5m (May 2016) Dublin: £11.9m (Apr 2016) Dukes Park Industrial Blackrock Business Park Schoolhouse Lane Chelmsford:
Slide 21: Suburban office acquisitions, South Dublin
Overview Financial review Portfolio review UK focus Summary Appendix Suburban office acquisitions, South Dublin €76.9m €340 psf Purchase price Purchase price 14 3 Tenants Buildings The Chase, South Dublin Blackrock, South Dublin c.44% 74% Day 1 reversion Occupancy Key tenants 3.9 226,000 WAULT (year
Slide 22: £300m disposal programme complete
Overview Financial review Portfolio review UK focus Summary Appendix £300m disposal programme complete Gross sale Premium Return Hold No. of Area proceeds to BV on cost period assets (000 sq ft) (£m) (%) (%) (months) Disposals1 Office 15 955 80 6% 45% 17 Retail 14 215 44 12% 35% 13 Industrial 1 407
Slide 23: Key projects driving significant value growth
Overview Financial review Portfolio review UK focus Summary Appendix Key projects driving significant value growth Practical completion Work in progress In planning Concept & design 2 assets 5 assets 2 assets 4 assets Baggot 111 BPR, 9 Puerta La Moraleja Plaza, Victoria, del Sol, Green SC, Dublin 4
Slide 24: 42% of portfolio from Euro assets
Overview Financial review Portfolio review UK focus Summary Appendix 42% of portfolio from Euro assets 30% 8% 52% 1% 6% Office Ireland 8% Retail £3,063.2m Spain Italy £3,063.2m Residential Industrial UK Loans 7% Other1 5% 25% 58% Notes 1 Includes hotel and leisure assets and Park Inn NPL 23 Kennedy
Slide 25: Secure income with upside
Overview Financial review Portfolio review UK focus Summary Appendix Secure income with upside Long-term c. 560 tenants Top 10 Strong cash flows diversifying tenants represent occupancy 7.0 yrs / 9.0 yrs cash flows 30% of rent 95% WAULT (to first break / expiry) Portfolio 9% under-rented Well stagge
Slide 26: Topped-up NOI (£m)
Overview Overview Financial review Portfolio review UK focus Summary Appendix Target incremental NOI Incremental NOI £16.0m 180 +10.1 +15.1 170 -3.3 +5.9 160 -6.6 -5.0 150 -9.9 Topped-up NOI (£m) 140 171.5 165.4 161.4 130 120 110 100 Topped-up PPE/pipeline Contracted Contracted Net key AM Target NOI
Slide 27: Strong ERV growth across Euro assets
Overview Financial review Portfolio review UK focus Summary Appendix Strong ERV growth across Euro assets +2.6% LFL ERV growth across the portfolio 10 9.7% 10 LFL ERV growth (%) LFL ERV growth (%) 8 8 +5.9% 6 +5.4% 6 4 4 +3.0% +2.2% 2 +1.3% 2 1.7% +0.6% 0 0 Italy Ireland UK Spain Residential Office
Slide 28: Strong Euro asset valuations
Overview Financial review Portfolio review UK focus Summary Appendix Strong Euro asset valuations +1.6% LFL valuation uplift across the portfolio 8 8 LFL valuation growth (%) LFL valuation growth (%) +6.1% +5.8% 6 6 +4.5% 4 +3.6% 4 2 2 +1.5% +1.3% 0 0 -0.4% -1.0% -2 -2 Ireland Spain Italy UK Residen
Slide 29: UK portfolio
UK portfolio Mike Pegler, Head of AM – UK, Spain & Italy 28 Kennedy Wilson Europe Real Estate Plc Half-year results 2016
Slide 30: UK portfolio highly diversified across sectors
Overview Financial review Portfolio review UK focus Summary Appendix UK portfolio highly diversified across sectors Leisure Hotels PRS 4% 7% Industrial 1% Strong fundamentals to drive NOI forward 11% 40% Regional offices UK NOI1: Diversified, high quality portfolio Central London office 12% £110.1m
Slide 31: Broad income diversity across UK tenants & industries
Overview Financial review Portfolio review UK focus Summary Appendix Broad income diversity across UK tenants & industries Top 10 UK tenants represent 20% of total portfolio rent1 Other Government General merchandise Telecom 4% 4% 5% 18% Leisure 5% Financial institutions 6% Consumer 10% staples Tran
Slide 32: Delivering on UK leasing
Overview Financial review Portfolio review UK focus Summary Appendix Delivering on UK leasing 63 leases signed in 20161 Strong activity post Referendum 63 12 167,800 Number of commercial Number of commercial Area (sq ft) leases signed leases signed 500,700 +£0.9m +6.1% Area (sq ft) Additional income
Slide 33: Leasing activity continues to drive income
Overview Financial review Portfolio review UK focus Summary Appendix Leasing activity continues to drive income Apex House, Birmingham Portlethen RP, Aberdeen Eley Road, Edmonton Odyssey portfolio Gatsby portfolio Gatsby portfolio Big Lottery Fund Renewal B&M New letting SIG Trading Re-gear Tenant T
Slide 34: Delivering on non-core UK disposals
Overview Financial review Portfolio review UK focus Summary Appendix Delivering on non-core UK disposals £298m disposals completed £24m disposals completed since January 20151 post Referendum 55 5.9% 4 Number of assets Exit yield Number of assets 25.9% 17 mnths 5.9% ROC Hold period Exit yield 10.0 8
Slide 35: Asset management achievements driving disposals
Overview Financial review Portfolio review UK focus Summary Appendix Asset management achievements driving disposals Imperial House (Tiger portfolio) Icon (Tiger portfolio) Gatsby, 25 UK assets Birmingham office Stevenage office Maidenhead high street retail £11.2m £186 £7.3m £75 £35.1m £160 Purchas
Slide 36: Summary
Summary Mary Ricks, CEO 35 Kennedy Wilson Europe Real Estate Plc Half-year results 2016
Slide 37: Significant progress meeting goals
Overview Financial review Portfolio review UK focus Summary Appendix Significant progress meeting goals Income growth £7.9m £1.8m Baggot Plaza & Rent signed post Block K NOI to come 23 June Solid dividend +60% 24p/share H1 16 dividend growth H1 16 dividend growth over H1 15 Recycling capital 25.6% £
Slide 38: Appendix
Appendix 37 Kennedy Wilson Europe Real Estate Plc Half-year results 2016
Slide 39: Adjusted earnings
Overview Financial review Portfolio review UK focus Summary Appendix Adjusted earnings Adjusted EPS 26.8p, (June 15: 23.0p) Half year to 30 June Half year to 30 June 2016 2015 (£m) (p) (£m) (p) Profit for the period after taxation 78.7 57.9 149.3 110.2 Net change in fair value (45.7) (33.6) (119.5)
Slide 40: Summary balance sheet
Overview Financial review Portfolio review UK focus Summary Appendix Summary balance sheet EPRA net assets 30 Jun 2016 31 Dec 2015 (£m) (£m) 1 Investment property 2,981.3 2,613.5 Loans secured by real estate 81.9 179.2 PORTFOLIO VALUE 3,063.2 2,792.7 Cash and cash equivalents 459.0 326.5 Borrowings
Slide 41: Balanced debt structure
Overview Financial review Portfolio review UK focus Summary Appendix Balanced debt structure £834.0m 52% £905.8m Unsecured debt Secured debt TTM1: 7.4 years TTM1: 4.7 years Total fixed cost: 3.3% £1,739.8m Total cost : 2.5% Fixed debt: 100% debt Total fixed/hedged debt: 78% 48% Secured debt Unsecure
Slide 42: Good covenant headroom
Overview Financial review Portfolio review UK focus Summary Appendix Good covenant headroom NOI Valuation headroom of 59% headroom of 30% 5.0 80% 70% 4.0 LTV maximum covenant: 60% 60% 3.0 50% LTV (%) ICR (x) 3.7x 40% 41.8% 2.0 30% ICR minimum: 1.5x 20% 1.0 10% 0.0 0% Group Group interest cover lever
Slide 43: June 2016 portfolio
Overview Financial review Portfolio review UK focus Summary Appendix June 2016 portfolio Top ten office & retail tenants Top ten assets Topped Topped Area -up rent % of Top 10 retail -up rent % of UK/ (‘000 Top 10 office tenants (£m) total tenants (£m) total Asset Ireland City Sector sq ft) Italian
Slide 44: June 2016 sector break down
Overview Financial review Portfolio review UK focus Summary Appendix June 2016 sector break down UK portfolio summary Area No. of Portfolio NOI2 EPRA NIY Acq'n YOC WAULT EPRA Sector (m sq ft) assets value1 (£m) (£m) (%) (%) (years) Occup'y (%) Office 2.8 32 879.3 54.4 5.8% 6.9% 4.6 95.1% Retail 2.1
Slide 45: June 2016 sector break down (cont'd)
Overview Financial review Portfolio review UK focus Summary Appendix June 2016 sector break down (cont’d) SPAIN portfolio summary Area No. of Portfolio NOI2 EPRA NIY Acq'n YOC WAULT EPRA Sector (m sq ft) assets value1 (£m) (£m) (%) (%) (years) Occup'y (%) Retail 0.9 17 138.1 9.0 6.1% 6.7% 3.3 83.3%
Slide 46: 2016 portfolio assembly
Overview Financial review Portfolio review UK focus Summary Appendix 2016 portfolio assembly Towers Business Park The Chase Leisureplex Manchester, UK Dublin 18, Ireland Co. Dublin, Ireland Purchase date 4 May Purchase date 3 May Purchase date 21 Apr No. of buildings 10 No. of assets 1 No. of assets
Slide 47: £71.6m of capex spend
Overview Financial review Portfolio review UK focus Summary Appendix £71.6m of capex spend Current area New area CTC1 PC Scheme name Description Location Sector Occ’y (sq ft) (sq ft) (£m) timing2 Completed development schemes 3 Block K, Vantage Ground up resi development Dublin PRS - 166 units £8.2
Slide 48: Office
Overview Financial review Portfolio review UK focus Summary Appendix Office UK IRELAND1 £879m 55% £545m 34% Valuation Aberdeen 3 Valuation Dublin 2,778 798 14 Edinburgh Area (‘000 sq ft) 4 Area (‘000 sq ft) 1 Dublin County 32 15 Assets Assets Leeds Manchester 2 ITALY Milan Sheffield Birmingham £166m
Slide 49: KWE office portfolio summary
Overview Financial review Portfolio review UK focus Summary Appendix KWE office portfolio summary 70% Dublin, C. London & SE1 H1 16 office asset management wins 34% Re-gear/ New Rent 11% Total renewal lease review Dublin No. of 2 3 4 9 Central London transactions 19% £1,590.2m South East Area (000 s
Slide 50: Towers Business Park, Manchester
Overview Financial review Portfolio review UK focus Summary Appendix Towers Business Park, Manchester £82m £284 psf Purchase price Purchase price 21 10 Tenants Buildings Worthington House Scotscroft c.20% 96% Day 1 reversion Occupancy Key tenants 5.0 289,100 WAULT (years) Area (sq ft) 6.7% 1 c.8.0%
Slide 51: Retail
Overview Financial review Portfolio review UK focus Summary Appendix Retail UK IRELAND £411m 54% £159m 21% Valuation SCOTLAND Valuation Dundalk 4 2,097 516 Dublin 4 Area (‘000 sq ft) Area (‘000 sq ft) Dublin County 131 NORTH 7 Cork Assets 36 Assets MIDLANDS SPAIN1 17 £195m 25% Pontevedra Vizcaya WAL
Slide 52: KWE retail portfolio summary
Overview Financial review Portfolio review UK focus Summary Appendix KWE retail portfolio summary 63% London/SE, Dublin, Spain1 H1 16 retail asset management wins 26% Re-gear/ New Rent 9% Total renewal lease review London & SE No. of 12% 29 8 23 60 Spain transactions £765.0m 25% UK North Area (000 s
Slide 53: PRS
Overview Financial review Portfolio review UK focus Summary Appendix PRS UK IRELAND1 PRS PRS £76m 35% £144m 65% Valuation Valuation 294 523 Potential units Potential units Ilford Station LONDON PIONEER POINT DUBLIN Phoenix Park Stratford LIFFEY TRUST Tower of London Canary Wharf City Airport VANTAGE
Slide 54: KWE PRS portfolio summary
Overview Financial review Portfolio review UK focus Summary Appendix KWE PRS portfolio summary 100% London, Dublin & Co Dublin1 Key AM wins 8% 57% Co Dublin £219.5m London Dublin 35% Vantage, Central Park, 276 units Block K, 166 units Refurb of tenant amenities completed PC July 16, on time and on b
Slide 55: Industrial
Overview Financial review Portfolio review UK focus Summary Appendix Industrial x% SOUTH Luton UK Banbury Wolverton Chelmsford EAST M25 3 £190m 100% Wokingham 2 Benfleet Newbury Valuation Glasgow 2 Sittingbourne 2,929 Merstham Area (‘000 sq ft) 3 34 Assets Leeds LONDON 2 Manchester Middlewich Walsal
Slide 56: KWE industrial portfolio summary
Overview Financial review Portfolio review UK focus Summary Appendix KWE industrial portfolio summary 87% in institutional markets H1 16 industrial asset management wins Re-gear/ New Rent 6% 3% 28% Total renewal lease review North No. of 13% South East 3 6 3 12 transactions £190.0m Midlands Greater
Slide 57: Summary of Investment Management Agreement
Overview Financial review Portfolio review UK focus 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 l
Slide 58: 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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