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Kennedy Wilson Reports Third 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 third quarter 2012 net loss attributable to common shareholders of $6.2 million (or $0.11 per basic and diluted share) compared to a net loss attributable to common shareholders of $6.9 million (or $0.16 per basic and diluted share) for the same period in 2011. Net loss attributable to common shareholders, adjusted for stock-based compensation expense, was $3.3 million (or $0.06 per basic share) compared to a net loss of $5.6 million for the same period in 2011 (or $0.13 per basic share).

The Company's earnings before interest, taxes, depreciation and stock-based compensation expense (“Adjusted EBITDA”) for the third quarter of 2012 was $17.5 million, a 94% increase from $9.0 million for the same period in 2011.

“The company had a very active and successful third quarter with more than $650 million of acquisitions in the U.S. and Ireland," said William McMorrow, chairman and CEO of Kennedy Wilson. "Our key operating metrics improve each quarter, and we continue to see significant investment opportunities in our core markets."

Kennedy Wilson Recent Highlights

Operating metrics

  • During the three months ended September 30, 2012, the Company achieved an adjusted EBITDA of $17.5 million, a 94% increase from $9.0 million for the same period in 2011.
  • During the nine months ended September 30, 2012, the Company achieved an adjusted EBITDA of $55.5 million, a 33% increase from $41.6 million for the same period in 2011.

Investments business

Investment Account

  • As of September 30, 2012, our investment account (Kennedy Wilson's equity in real estate, joint ventures, loan investments, and marketable securities) increased by 13% to $658.1 million from $582.8 million at December 31, 2011. This change was comprised of approximately $239.3 million (including $79.4 million during the third quarter) of cash contributed to and income earned on investments and approximately $164.0 million (including $47.4 million during the third quarter) of cash distributed from investments.
  • As of September 30, 2012, the Company and its equity partners owned 14.6 million rentable square feet of real estate including 13,950 apartment units and 24 commercial properties. Additionally, as of September 30, 2012, the Company and its equity partners owned $2.0 billion in loans secured by real estate.

Operating metrics

  • During the three months ended September 30, 2012, our investments business achieved an EBITDA of $12.6 million (inclusive of $0.4 million of acquisition related costs), a 108% increase from $6.0 million for the same period in 2011. There were no material acquisition related costs in the corresponding period in 2011.
  • During the nine months ended September 30, 2012, our investments business achieved an EBITDA of $47.2 million (inclusive of $1.2 million of acquisition related costs), a 29% increase from $36.6 million (inclusive of $0.3 million of acquisition related costs) for the same period in 2011.

Acquisition/disposition program

  • From January 1, 2010 through September 30, 2012, the Company and its equity partners, acquired approximately $6.7 billion of real estate related investments.
  • During the nine months ended September 30, 2012, the Company and its equity partners, acquired approximately $1.5 billion of real estate related investments, including $659.4 million during the third quarter. We invested $175.6 million (including $68.6 million during the third quarter) of our equity in the vehicles that acquired these investments.
  • The composition of the $1.5 billion of real estate related investments acquired by the Company and its equity partners during the nine months ended September 30, 2012 is as follows:
    • During the nine months ended September 30, 2012, we, along with our equity partners, acquired approximately $969.1 million of real estate investments, including $180.8 million during the third quarter. The underlying assets are located primarily in the Western U.S. (68% in terms of our equity invested) and Ireland (32% in terms of our equity invested) and include seven multifamily properties with 1,961 units and 11 commercial properties totaling 2.0 million square feet. We invested $80.4 million of our equity in vehicles that acquired these real estate assets, including $27.6 million during the third quarter.
    • During the nine months ended September 30, 2012, we, along with our equity partners, acquired approximately $563.6 million of loans (including $478.6 million during the third quarter) at an average discount of 20% to their principal balance (weighted based on our equity invested). In addition, we and our equity partners originated a loan of $8.6 million at a 10.8% interest rate. These loans are secured by 108 underlying properties located in the Western U.S. and Ireland. We invested approximately $95.2 million of our equity in loans, including $41.0 million during the third quarter.
  • During the nine months ended September 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 ($17.5 million of our equity invested). We also sold our interest in a 324-unit apartment building in San Jose, California generating a gain of $2.2 million to the Company ($3.2 million of our equity invested).

Property level debt financing

  • During the nine months ended September 30, 2012, the Company and its equity partners completed approximately $475.8 million of property financings and re-financings at an average interest rate of 3.3% and a weighted average maturity of 6.6 years. During the nine months ended September 30, 2011, the Company and its equity partners completed approximately $829.7 million of property financings and re-financings at an average interest rate of 3.6% and a weighted average maturity of 4.1 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 September 30, 2012, the unpaid principal balance was $1.3 billion due to loan resolutions of approximately $756.9 million, representing 36% of the pool. The total debt incurred at the venture level at the time of purchase of these loans was $323.4 million with a maturity date of October 2014. As a result of the loan resolutions, the venture level debt has been paid down by $176.6 million to $146.8 million as of September 30, 2012.
  • On March 13, 2012, we announced a €250 million (approximately $325 million) capital commitment from Fairfax Financial Holdings ("Fairfax") 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. As of September 30, 2012, we have purchased two investments within this platform, the historic 210-unit Alliance Building in Dublin, Ireland, located adjacent to Google's European headquarters, for $50.0 million and Brooklawn House, a Dublin office property, for $18.5 million. We invested $25.7 million of our equity in the investment vehicles that acquired these assets.
  • 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. In August 2012, we made our first investment within this platform. We, along with our equity partner acquired a loan pool secured by real estate located in Ireland with an unpaid principal balance of $449.0 million. We invested $7.4 million of our equity in the vehicle that acquired these assets.

Japan

  • Maintained 97% occupancy in 50 apartment buildings with over 2,400 units.
  • 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 12% to $12.5 million for the three months ended September 30, 2012 from $11.1 million for the same period in 2011.
  • During the three months ended September 30, 2012, our services business achieved an EBITDA of $4.8 million, a 50% increase from $3.2 million for the same period in 2011.
  • Management and leasing fees and commissions increased by 35% to $35.5 million for the nine months ended September 30, 2012 from $26.2 million for the same period in 2011.
  • During the nine months ended September 30, 2012, our services business achieved an EBITDA of $11.2 million, a 72% increase from $6.5 million for the same period in 2011.

Corporate financing

  • 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 $40.0 million was used to pay off the outstanding balance on our line of credit.

Subsequent events

  • Subsequent to September 30, 2012, we have acquired or have entered into contracts to acquire approximately $391.8 million of real estate related investments which include 1.8 million rentable square feet of real estate comprised of 926 apartment units and 6 commercial properties. We expect the acquisitions to be a combination of wholly owned and joint venture investments.
  • Subsequent to September 30, 2012, we have resolved an additional $190.5 million of the loan pool secured by real estate located in the United Kingdom which lowered the unpaid principal balance to $1.1 billion. Our venture level debt balance will be reduced by an additional $35.5 million to $111.3 million.

Conference Call and Webcast Details

The company will hold a live conference call and webcast to discuss results at 7:00 a.m. PT/ 10:00 a.m. ET on Tuesday, November 6.

Stock quotes in this article: KW 

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