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Kennedy Wilson Reports Second Quarter 2012 Earnings

Kennedy-Wilson Holdings, Inc. (NYSE: KW) (“Kennedy Wilson,” “we,” “us,” “our,” or the “Company”), an international real estate investment and services company, today reported a second quarter 2012 net loss attributable to common shareholders of $3.2 million (or $0.06 per basic and diluted share) compared to a net loss attributable to common shareholders of $2.4 million (or $0.06 per basic and diluted share) for the same period in 2011. Net loss attributable to common shareholders, adjusted for stock-based compensation expense, was $2.0 million (or $0.04 per basic share) compared to net loss of $1.1 million for the same period in 2011 (or $0.03 per basic share).

The Company's earnings before interest, taxes, depreciation and stock-based compensation expense (“Adjusted EBITDA”) for the second quarter of 2012 was $18.8 million compared to $17.5 million for the same period in 2011. Excluding the remeasurement gain of $6.3 million recognized during the three months ended June 30, 2011, the Company achieved a 69% increase in adjusted EBITDA for the three months ended June 30, 2012 as compared to the same period in 2011.

“The Company had many outstanding achievements in the second quarter including increases in cash flow and fees from our investments and services businesses,” said William McMorrow, chairman and CEO of Kennedy Wilson. “During the quarter, the Company and our equity partners acquired $889 million of income producing assets with attractive current returns that will significantly increase our recurring EBITDA. Additionally, our balance sheet has been strengthened by the recent capital raise which added $106 million of equity. Our experienced management team and strong liquidity, combined with capital from our co-investment partners, continues to allow us to take advantage of our significant pipeline of opportunities in our core markets.”

Kennedy Wilson Recent Highlights

Operating metrics
  • During the three months ended June 30, 2012, the Company achieved an adjusted EBITDA of $18.8 million, an 8% increase from $17.5 million for the same period in 2011. Excluding the remeasurement gain of $6.3 million recognized during the three months ended June 30, 2011, the Company achieved a 69% increase in adjusted EBITDA for the three months ended June 30, 2012 as compared to the same period in 2011.
  • During the six months ended June 30, 2012, the Company achieved an adjusted EBITDA of $38.0 million, a 17% increase from $32.6 million for the same period in 2011. Excluding the remeasurement gain of $6.3 million recognized during the six months ended June 30, 2011, the Company achieved a 45% increase in adjusted EBITDA for the six months ended June 30, 2012 as compared to the same period in 2011.

Investments business

Investment Account
  • Our investment account (Kennedy Wilson's equity in real estate, joint ventures, loan investments, and marketable securities) increased by 7% to $626.0 million from $582.8 million at December 31, 2011. This change was comprised of approximately $160.0 million of cash contributed to and income earned on investments and approximately $116.6 million of cash distributed from investments.

Operating metrics
  • During the three months ended June 30, 2012, our investments business achieved an EBITDA of $17.0 million, a 2% increase from $16.6 million for the same period in 2011. Excluding the remeasurement gain of $6.3 million recognized during the three months ended June 30, 2011, the Company achieved a 65% increase in adjusted EBITDA for the three months ended June 30, 2012 as compared to the same period in 2011.
  • During the six months ended June 30, 2012, our investments business achieved an EBITDA of $34.7 million, a 14% increase from $30.5 million for the same period in 2011. Excluding the remeasurement gain of $6.3 million recognized during the six months ended June 30, 2011, the Company achieved a 44% increase in adjusted EBITDA for the six months ended June 30, 2012 as compared to the same period in 2011.

Acquisition/disposition program
  • During the six months ended June 30, 2012, the Company and its equity partners acquired approximately $889.5 million of real estate related investments. We invested $107.0 million of our equity in the investment vehicles that acquired these real estate related investments. Additionally, as of June 30, 2012, we and our equity partners are under contract to acquire approximately $514.0 million of real estate related investments. Since January 1, 2010 through June 30, 2012, we, together with our equity partners, have acquired or are under contract to acquire approximately $6.5 billion of real estate related investments. As of June 30, 2012, the Company and its equity partners own or are under contract to own 14,114 apartment units and approximately 3.6 million square feet of commercial real estate.
  • The composition of the $889.5 million of real estate related investments acquired by the Company and its equity partners during the six months ended June 30, 2012 is as follows:
    • During the six months ended June 30, 2012, we, along with our equity partners, acquired approximately $788.8 million of income producing real estate assets. The underlying assets are located primarily in the Western U.S. (70% in terms of our equity invested) and Ireland (30% in terms of our equity invested) and include six multifamily properties with 1,801 units and eight commercial properties totaling 1.6 million square feet. We invested $52.8 million of our equity in the joint ventures that acquired these real estate assets.
    • During the six months ended June 30, 2012, we, along with our equity partners, acquired or originated approximately $100.7 million of loans at an average discount of 14% to their principal balance. These loans are secured by 12 underlying properties all located in the Western U.S. and have an average coupon rate of 10.6% per annum. We invested approximately $54.2 million of our equity in participations in these loans. In addition, we generally earn origination and exit fees on our share of these loans.
  • During the six months ended June 30, 2012, the Company and its equity partners sold four multifamily properties located in the Western U.S. for a total of $243.0 million, which resulted in a total gain of $32.6 million, of which our share was $7.9 million.

Debt financing
  • During the six months ended June 30, 2012, the Company and its equity partners completed approximately $283.3 million of property financings at an average interest rate of 3.1% and a weighted average maturity of 7.9 years. During the six months ended June 30, 2011, the Company and its equity partners completed approximately $731.2 million of property financings at an average interest rate of 3.5% and a weighted average maturity of 4.4 years.

United Kingdom and Ireland
  • In December 2011, we and our equity partners acquired a loan pool secured by real estate located in the United Kingdom with an unpaid principal balance of $2.1 billion. As of June 30, 2012, the unpaid principal balance was $1.4 billion due to loan resolutions of approximately $689.6 million, representing 33% of the pool.
  • On March 13, 2012, we announced a €250 million (approximately $325 million) capital commitment from Fairfax Financial Holdings to acquire real estate and loans secured by real estate in the United Kingdom and Ireland. Investments under this program require Fairfax's agreement to participate on an investment by investment basis. In June 2012, we purchased our first investment within this platform, the historic 210-unit Alliance Building in Dublin, Ireland, located adjacent to Google's European headquarters, for $50.0 million. We invested $15.8 million of our equity in the joint venture that acquired this asset.
  • On May 2, 2012, we entered into a term sheet with a major European financial institution to create a framework to target the acquisition of €2 billion (approximately $2.5 billion) of performing, sub-performing and non-performing loans secured by commercial and residential real estate in Europe, with a focus on the United Kingdom and Ireland.

Japan
  • Maintained 93% occupancy in 50 apartment buildings with over 2,400 units. Excluding one 86-unit building with an expired corporate master lease that is now being leased to individual tenants, our Japanese apartment portfolio maintained 96% occupancy.
  • Since Fairfax became our partner in the Japanese apartment portfolio in September 2010, we have distributed a total of $51.5 million, of which our share was $24.0 million.

Services business
  • Management and leasing fees and commissions increased by 67% to $12.6 million for the three months ended June 30, 2012 from $7.6 million for the same period in 2011.
  • During the three months ended June 30, 2012, our services business achieved an EBITDA of $3.6 million, a 140% increase from $1.5 million for the same period in 2011.
  • Management and leasing fees and commissions increased by 52% to $23.0 million for the six months ended June 30, 2012 from $15.1 million for the same period in 2011.
  • During the six months ended June 30, 2012, our services business achieved an EBITDA of $6.3 million, a 91% increase from $3.3 million for the same period in 2011.

Corporate financing
  • In June 2012, we amended our existing revolving credit facility to, among other things, increase the total amount that may be borrowed thereunder by $25.0 million to $100 million and extend the maturity to June 30, 2015. Existing and future loans under the amended facility will bear interest at a rate equal to LIBOR plus 2.75%.

Subsequent events
  • In July 2012, the Company issued 8.6 million shares of common stock primarily to institutional investors, resulting in gross proceeds of $112.1 million of which $40 million was used to pay off the outstanding balance on our line of credit.
  • In July 2012, the Company was awarded its first auction assignment from a European financial institution and simultaneously opened an auction office in Madrid, Spain.

Supplemental Financial Information, Conference Call and Webcast Details

Supplemental financial information is available on the homepage of the Company's website: www.kennedywilson.com.

The Company will hold a live conference call and webcast to discuss results on Tuesday, August 7 at 7:00 a.m. PT/ 10:00 a.m. ET.

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