Kennedy-wilson Holdings Inc. · NYSE:KW
Kennedy-wilson — Q4 2017 Earnings Presentation
42 slides from Kennedy-wilson's earnings presentation, March 2018
Slide 1: Q4-17 Investor Update
Q4 -17 Investor Update (As of December 31, 2017)
Slide 2: Disclaimer/Forward-Looking Statements
Disclaimer/Forward-Looking Statements Statements made by us in this presentation and in other reports and statements released by additional real estate assets; continued high levels of, or increases in, unemployment and a us that are not historical facts constitute “forward-looking statements” withi
Slide 3: Table of Contents
Table of Contents Page Strategic Review 3 Financial Performance Review 8 Market Review 20 Appendix 34 2 Q4-17 INVESTOR UPDATE
Slide 4: Strategic Review
Overview Strategic Review 3 Q4-17 INVESTOR UPDATE
Slide 5: About Kennedy Wilson
About Kennedy Wilson We are 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., the U.K., and Ireland. Office: 150 S. El
Slide 6: KW overview
KW overview 1 KENNEDY WILSON (NYSE:KW) AT A GLANCE $7.0bn $1.0bn $439mm Carrying value of Non-income producing real estate1 and unstabilized assets Estimated Annual NOI2 498 25 4.5% $0.19 Total employees No. of offices Dividend yield3 Quarterly Dividend 1 Information shown at share as of December 31
Slide 7: Excellent scale across multifamily and office
Excellent scale across multifamily and office 72% Multifamily & Office Sectors Geography Multifamily: 39% Western US: 47% $439mm $439mm Office: 33% UK: 29% Retail: 19% Ireland: 18% Estimated Annual Hotel & Estimated Annual Italy & Spain: 6% NOI1 Industrial: 9% NOI1 360 27,161 18.8m 94.0% No. of asse
Slide 8: Two key investment segments
Two key investment segments Balance Sheet Portfolio Investment Management Platform Office: 90 East Multifamily: Clancy Quay, Office: Corporate Campus East, Bellevue, WA, USA Issaquah, WA, USA Dublin, Ireland • Permanent capital vehicle focused on maximizing • Buy it, fix it, sell it property cash fl
Slide 9: The Kennedy Wilson story
The Kennedy Wilson story 1 Global business is positioned to grow 2 Unrivalled long-term relationships with major institutions 3 Local investment and service expertise to accretively allocate capital 4 First-mover advantage from early entry in key target markets 5 30-year track record as global real
Slide 10: Near-term strategic priorities
Near-term strategic priorities Strategically grow multifamily portfolio in the U.S., Ireland 1 Balance Sheet and the U.K. Investment Raise $1bn by YE-2018 2 Management Expand capital raising to Europe Development & Additional $35mm of Estimated Annual NOI through 3 projects completed by YE-2019 Unst
Slide 11: The KW investment proposition
The KW investment proposition Since 2009, raised $12bn of ✓ Growing recurring property cash flow public and private equity to fund $20bn of real estate ✓ Strong track record of fundraising acquisitions Deep alignment of interest with both shareholders and investors ✓ ► 13% insider stock ownership 1
Slide 12: Financial Performance Review
Overview Financial Performance Review 11 Q4-17 INVESTOR UPDATE
Slide 13: Solid base with strong growth potential
Solid base with strong growth potential Strong NOI and dividend per share growth Adjusted EBITDA growth ($mm) Recurring property NOI growth ($mm) 456 500 439 371 350 400 318 300 241 206 159 200 144 97 102 100 55 0 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 Dividend track record $0.7
Slide 14: Solid balance sheet with good liquidity levels
Solid balanced sheet with good liquidity levels Ample liquidity ($mm) Reduced floating rate risk Cash: 47% Fixed: 69% $751mm Revolving credit facility: 53% 80% Hedged via interest rate cap: 11% Dry powder Fixed or hedged Floating: 20% debt Improved credit rating ✓ BB + S&P corporate rating upgraded
Slide 15: Target incremental Estimated Annual NOI
Target incremental Estimated Annual NOI 500 17.1 18.2 400 300 457.0 474.1 200 438.8 100 0 Q4-17 Income from Income from Target Estimated developments by 2019 unstabilized by 2019 Annual NOI YE-2019 14 Q4-17 INVESTOR UPDATE
Slide 16: Components of Value
Components of Value Below are key valuation metrics as of December 31, 2017. Investments Kennedy Wilson’s Share Income Producing Assets Description Est. Annual NOI(1)(3) 1 Multifamily 23,865 units $ 172.1 2 Commercial 17.1 million sq. ft. of office, retail, and industrial 240.8 3 Hotels 5 Hotels / 9
Slide 17: Development opportunities
Overview Development opportunities 16 Q4-17 INVESTOR UPDATE
Slide 18: +$35 million of NOI by YE-2019
+$35 million of NOI by YE-2019 Stabilizing Work in progress In planning In design Pioneer Point, London Moraleja Green, Madrid 9 Puerta del Sol, Madrid Kona Village Resort, Kona, Hawaii Northbank, Dublin 1 Eastgate, Mill Creek, WA University Glen, Los Angeles Santa Rosa, Santa Rosa, CA The Chase, Du
Slide 19: Delivering Dublin's iconic mixed-use campus
Delivering Dublin’s iconic mixed-use campus 346,000 sq ft office element 100% leased JV partners 190 Luxury multifamily units 360,000sq ft Commercial space Tenant Roster 200 Capital Dock sold 100 & 300 Capital Dock fully leased 18 Q4-17 INVESTOR UPDATE
Slide 20: Market Review
Overview Market Review Multifamily & Office 19 Q4-17 INVESTOR UPDATE
Slide 21: KW Western US markets outpace other US metros
KW Western US markets outpace other US metros Real gross metro product growth Real GDP Growth 4.5% 4.0% 4.0% 4.0% 3.6% 3.5% 3.0% 3.0% 2.5% 2.1% 2.0% 2.0% 1.5% 1.0% Kennedy Wilson Markets U.S. Major Metros Less KW Markets 2014 2015 2016 Sources: U.S. Bureau of Economic Analysis; Moody's Analytics; Co
Slide 22: KW's strong track record vs peer markets forecast to continue
KW’s strong track record vs peer markets forecast to continue Real gross metro product indices Real GDP Index (2000=100) 180 170 160 150 140 9.9% 130 120 110 100 90 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 Kennedy Wilson Markets U.S. Major Metros Less KW Markets Sources:
Slide 23: Multifamily Portfolio: $172.1mm of Estimated Annual NOI
Multifamily Portfolio: $172.1mm of Estimated Annual NOI US Ireland $152.7mm $19.4mm Estimated Annual NOI Estimated Annual NOI Seattle WA MT Assets Units Assets Units 81 22,517 6 1,3002 1 1 2 Portland OR Dublin $76.1mm ID $9.9mm Pacific Northwest Dublin Assets Units CA Assets Units 47 11,454 5 858 Sa
Slide 24: Strong demand for multifamily underpinning NOI growth
Strong demand for multifamily underpinning NOI growth KW consistently beating peers on same-store basis Growing “Millennials” population with high propensity to rent Young adults choosing to marry and Same global trends have children later in life impacting our current and future growth locations in
Slide 25: Significant housing shortfall across KW's Western US markets
Significant housing shortfall across KW’s Western US markets Contributing to multifamily demand # Of New Households & Housing Units Construction/Household Formation (000s) Since 2012 Ratio 160 0.80 0.72 0.72 140 0.70 0.66 120 0.60 0.54 100 0.50 0.50 80 0.40 60 0.30 40 0.20 20 0.10 0 0.00 Los Angeles
Slide 26: Home ownership less affordable across KW western markets
Home ownership less affordable across KW western markets Resulting in attractive multifamily dynamics Down Payment (15%) As A % Of Median HH Income 180% 160% 153.3% 140% 134.1% 120% 100% 88.5% 80.9% 80% 63.2% 60% 40% 20% 0% San Francisco Los Angeles Seattle Portland Salt Lake City Down Payment (15%)
Slide 27: Home ownership less affordable across KW western markets
Home ownership less affordable across KW western markets Resulting in attractive multifamily dynamics Homeownership Rate 70% 68% 66% 64% 62% 60% 58% 56% 54% 05 06 07 08 09 10 11 12 13 14 15 16 17 Average Homeownership Rate KW Markets Average Homeownership Rate U.S. Souces: U.S. Census Bureau Housing
Slide 28: Growth in high income renting households strongest in KW western US markets
Growth in high income renting households strongest in KW western US markets Growth In Households Aged 15-34, Earning Over $100K (2010-2017Q4) 56% 53% 52% 49% 48% 44% 44% 41% 40% 36% 36% 32% 28% 24% 20% Kennedy Wilson South U.S. Northeast Midwest Target Markets Sources: Neustar; U.S. Census; CoStar P
Slide 29: Our footprint in Washington
Our footprint in Washington 2006 First acquisition in WA 11,414 Apartments (incl.1,301 under development) 1.5 million Office sq ft $ 78 million Estimated annual NOI1 to KW 1 As defined in definitions section in the appendix 28 Q4-17 INVESTOR UPDATE
Slide 30: Seattle and Portland leading on renter affordability
Seattle and Portland leading on renter affordability Income to rent ratio of top 8 major US cities $10,000 70% $9,000 60% 60% $8,000 $7,000 44% 50% 40% $6,000 36% 40% $5,000 27% 25% 30% $4,000 24% 22% $3,000 20% $2,000 10% $1,000 $- 0% Denver Seattle Portland Chicago Los Angeles San Francisco Boston
Slide 31: Seattle Market Overview
Seattle Market Overview Annual Population Growth 2.5% Forecast 2.0% 1.5% 1.0% 0.5% 0.0% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 U.S. Seattle Sources: U.S. Census; Moody's Analytics; CoStar Portfolio Strategy As of 17Q4 *Last historical data through 2016 30 Q4-17 INVESTOR
Slide 32: Office Portfolio: $143.5mm of Estimated Annual NOI
Office Portfolio: $143.5mm of Estimated Annual NOI US Europe $36.5mm Seattle $107.0mm Estimated Annual NOI WA Estimated Annual NOI Assets Area (sq ft) MT Assets Area (sq ft) 1 2 12 2.8m OR 45 4.4m ID $14.9mm WY $31.2mm Pacific Northwest CA Ireland Assets Area (sq ft) San NV Assets Area (sq ft) Franc
Slide 33: Strong office fundamentals and favorable UK & Irish lease structures
Strong office fundamentals and favorable UK & Irish lease structures UK & Irish leases KW UK & Ireland office portfolio Long-term with 5-year rent reviews 6.8yrs 59% WAULT (to first break) Upward-only rent Upward-only rent reviews in reviews or fixed uplifts UK (and pre-2010 in Ireland) 11% 95% ‘Ful
Slide 34: Ireland: KW a dominant presence in Dublin
Ireland: KW a dominant presence in Dublin Alliance South Bank House Alto Vetro Hanover Quay State Street Capital Dock 33 Q4-17 INVESTOR UPDATE
Slide 35: Ireland: growing market opportunity
Ireland: growing market opportunity Market overview Record take-up combining with declining unemployment One of the fastest growing Dublin office take-up 4 (m sq ft) Unemployment rate (RHS) 5 EU economies 3.0 15.0% 4.8% (million sq ft) 12.5% 2.0 2017 GDP growth1 10.0% 1.0 Institutionalized market 7.
Slide 36: Robust European office fundamentals driving future growth
Robust European office fundamentals driving future growth Key European office markets for KW M25 London Q3-17 Q4-17 Watford South East Q3-17 Q4-17 Harlow Prime rents (£ psf) 105.00 Prime rents (£ psf) 39.00 M25 London Take-up (m sq ft) 13.2 Reading Windsor Take-up (m sq ft) 2.4 Vacancy (%) 4.7 Hook
Slide 37: Strong office market rental growth in Seattle & LA vs the rest of the US
Strong office market rental growth in Seattle & LA vs the rest of the US Average annual office rental growth in core KW markets vs US Office Rent Growth CAGR 6% 5.1% 5% 4.5% 4% 3.4% 3% 2.9% 2.0% 2% 1.0% 1% 0% Seattle Los Angeles U.S. 2011-17Q4 2018-20Q4 Source: CoStar Portfolio Strategy As of 17Q4 3
Slide 38: Appendix
Overview Appendix 37 Q4-17 INVESTOR UPDATE
Slide 39: KW top 20 assets
KW top 20 assets Accounts for 37% of Estimated Annual NOI KW share of Commercial Units Acquisition Asset name Location Region Sector NOI ($mm) (000 sq ft) /rooms date 1 Shelbourne Dublin Ireland Hotel 16.6 - 265 Aug-14 2 111 BPR London UK Office 15.3 224 - Nov-14 3 Bella Vista Richmond, CA Northern
Slide 40: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA ($ in millions) 2017 2016 2015 2014 2013 2012 Net income $ 138.0 $ 76.5 $ 59.0 $ 90.1 $ 13.9 $ 6.7 Non-GAAP adjustments: Add back (less): Interest expense 217.7 191.6 155.7 103.4 51.7 28.6 Early extinguishment of corporate debt - - 1.0 27.3 - - Kennedy
Slide 41: Experienced leadership team with a strong track record
Experienced leadership team with a strong track record 13% insider ownership US-based Europe-based William J. McMorrow Kent Y. Mouton Matt Windisch Justin Enbody Mary L. Ricks Fraser Kennedy Peter Collins Fiona D’Silva Chairman & CEO Executive Vice Executive Vice CFO President & CEO, Head of Finance
Slide 42: Definitions
Appendix DEFINITIONS: Adjusted EBITDA: represents net income before interest expense, our share of interest expense included in income from investments in unconsolidated investments, depreciation and amortization, our share of depreciation and amortization included in income from unconsolidated inve
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