Le Lézard
Classified in: Business
Subjects: EARNINGS, Conference Call, Webcast

Kennedy Wilson Reports Third Quarter 2023 Results


Kennedy-Wilson Holdings, Inc. (NYSE: KW), a leading global real estate investment company with $25 billion in AUM across its real estate equity and debt investment portfolio, today reported results for Q3-2023:

"With high levels of inflation, interest rates at multi-decade highs, and rising geopolitical issues, the global investment environment continues to face headwinds. These factors have impacted our results due to non-cash mark-to-market adjustments in our fair value portfolio for assets which are generally being held as long-term investments in well capitalized joint ventures with institutional partners and are currently producing excellent net operating income," said William McMorrow, Chairman and CEO of Kennedy Wilson. "We saw continued strong demand for rental housing and further growth in our debt investment platform and our Fee-Bearing Capital. We also remain on track to complete and lease-up several development projects in the near term, including approximately 1,000 multifamily units delivered in Q3 and over 1,300 units expected to complete by the end of Q2-24, which will continue to convert non-income producing investments into cash flowing assets."

Financial Results

 

Q3

 

YTD

(Amounts in millions, except per share data)

2023

 

2022

 

2023

 

2022

GAAP Results

 

 

 

 

 

 

 

GAAP Net (Loss) Income to Common Shareholders

($92.2

)

 

$16.4

 

($94.0

)

 

$42.2

Per Diluted Share

(0.66

)

 

0.12

 

 

(0.67

)

 

0.31

 

 

 

 

 

 

 

 

 

Non-GAAP Results

 

 

 

 

 

 

 

Adjusted EBITDA

$33.2

 

 

$165.9

 

 

$319.2

 

 

$444.4

 

Adjusted Net (Loss) Income

(46.7

)

 

68.7

 

 

44.6

 

 

195.5

 

 

Est. Annual NOI To KW
($ in millions)

 

Fee-Bearing Capital
($ in billions)

As of Q3-22

$473

 

 

$5.6

 

As of Q4-22

$491

 

 

$5.9

 

As of Q2-23

$499

 

 

$7.9

 

Gross acquisitions and loan investments

3

 

 

0.3

 

Gross dispositions and loan repayments

(11

)

 

(0.2

)

Assets stabilized/unstabilized

2

 

 

?

 

Operations

(1

)

 

?

 

FX and other(1)

(7

)

 

0.2

 

Total as of Q3-23

$485

 

 

$8.2

 

(1) See further discussion of foreign currency hedging strategy below.

 

Q3 - 2023 vs. Q3- 2022

YTD - 2023 vs. YTD - 2022

 

Occupancy

 

Revenue

 

Expenses

 

NOI

Occupancy

 

Revenue

 

Expenses

 

NOI

Multifamily - Market Rate

0.1%

 

3.6%

 

5.3%

 

2.8%

(0.6)%

 

4.1%

 

5.7%

 

3.3%

Multifamily - Affordable

(0.5)%

 

7.0%

 

14.5%

 

3.5%

(0.9)%

 

8.2%

 

15.4%

 

4.9%

Total

?%

 

4.1%

 

6.6%

 

2.9%

(0.6)%

 

4.7%

 

7.4%

 

3.5%

(1) Excludes minority-held investments and assets under going development or lease-up.

 

Q3-2023 vs. Q3-2022

YTD - 2023 vs. YTD - 2022

 

Occupancy

 

Revenue

 

Expenses

 

NOI

Occupancy

 

Revenue

 

Expenses

 

NOI

Office

0.3%

 

0.5%

 

6.3%

 

(0.4)%

1.0%

 

1.3%

 

2.9%

 

1.0%

(1) Excludes minority-held investments and assets under going development or lease-up.

Investment Activity

Investment Management

Balance Sheet and Liquidity

Subsequent Events

In October, the Company sold a wholly-owned office property located in the United Kingdom for a sale price of $46 million, resulting in a gain on sale of approximately $13 million.

________________________________________________________________________________________

Footnotes

(1)

Represents consolidated cash and includes $65 million of restricted cash, which is included in cash and cash equivalents and primarily relates to lender reserves associated with consolidated mortgages that we hold on properties. These reserves typically relate to interest, tax, insurance and future capital expenditures at the properties. Additionally, we are subject to withholding taxes to the extent we repatriate cash from certain of our foreign subsidiaries. Under the KWE Notes covenants we have to maintain certain interest coverage and leverage ratios to remain in compliance (see "Indebtedness and Related Covenants" for more detail on KWE Notes in the Company's quarterly report). Due to these covenants, we evaluate the tax and covenant implications before we distribute cash, which could impact the availability of funds at the corporate level. The Company's share of cash, including unconsolidated joint-ventures, totals $425 million.

Conference Call and Webcast Details

Kennedy Wilson will hold a live conference call and webcast to discuss results at 9:00 a.m. PT/ 12:00 p.m. ET on Thursday, November 2. The direct dial-in number for the conference call is (844) 340-4761 for U.S. callers and (412) 717-9616 for international callers. A replay of the call will be available for one week beginning one hour after the live call and can be accessed by (877) 344-7529 for U.S. callers and (412) 317-0088 for international callers. The passcode for the replay is 1180933.

The webcast will be available at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=7Cb4wg0G. A replay of the webcast will be available one hour after the original webcast on the Company's investor relations web site for three months.

About Kennedy Wilson

Kennedy Wilson (NYSE:KW) is a leading global real estate investment company. The company owns, operates, and invests in real estate through the balance sheet and through an investment management platform in the United States, United Kingdom, and Ireland. Kennedy Wilson primarily focuses on multifamily and office properties as well as industrial and debt investments in the investment management business. For more information on Kennedy Wilson, please visit: www.kennedywilson.com.

Kennedy-Wilson Holdings, Inc.

Consolidated Balance Sheets

(Unaudited)

(Dollars in millions)

 

 

 

September 30,
2023

 

December 31,
2022

Assets

 

 

 

 

Cash and cash equivalents

 

$

330.9

 

 

$

439.3

 

Accounts receivable

 

 

47.4

 

 

 

40.8

 

Real estate and acquired in place lease values (net of accumulated depreciation and amortization of $922.1 and $882.2)

 

 

4,849.6

 

 

 

5,188.1

 

Unconsolidated investments (including $2,089.2 and $2,093.7 at fair value)

 

 

2,232.7

 

 

 

2,238.1

 

Other assets

 

 

211.7

 

 

 

216.1

 

Loan purchases and originations

 

 

238.0

 

 

 

149.4

 

Total assets

 

$

7,910.3

 

 

$

8,271.8

 

 

 

 

 

 

Liabilities

 

 

 

 

Accounts payable

 

$

14.0

 

 

$

16.2

 

Accrued expenses and other liabilities (including $284.0 and $303.7 of deferred tax liabilities)

 

 

593.1

 

 

 

658.2

 

Mortgage debt

 

 

2,821.2

 

 

 

3,018.0

 

KW unsecured debt

 

 

1,928.9

 

 

 

2,062.6

 

KWE unsecured bonds

 

 

500.8

 

 

 

506.4

 

Total liabilities

 

 

5,858.0

 

 

 

6,261.4

 

Equity

 

 

 

 

Cumulative perpetual preferred stock

 

 

790.5

 

 

 

592.5

 

Common stock

 

 

?

 

 

 

?

 

Additional paid-in capital

 

 

1,717.7

 

 

 

1,679.5

 

Retained (deficit) earnings

 

 

(72.3

)

 

 

122.1

 

Accumulated other comprehensive loss

 

 

(427.3

)

 

 

(430.1

)

Total Kennedy-Wilson Holdings, Inc. shareholders' equity

 

 

2,008.6

 

 

 

1,964.0

 

Noncontrolling interests

 

 

43.7

 

 

 

46.4

 

Total equity

 

 

2,052.3

 

 

 

2,010.4

 

Total liabilities and equity

 

$

7,910.3

 

 

$

8,271.8

 

Kennedy-Wilson Holdings, Inc.

Consolidated Statements of Operations

(Unaudited)

(Dollars in millions, except share amounts and per share data)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue

 

 

 

 

 

 

 

 

Rental

 

$

102.4

 

 

$

110.9

 

 

$

315.6

 

 

$

324.4

 

Hotel

 

 

16.6

 

 

 

14.0

 

 

 

42.7

 

 

 

33.2

 

Investment management fees

 

 

15.5

 

 

 

11.2

 

 

 

45.6

 

 

 

33.5

 

Property services fees

 

 

0.7

 

 

 

0.5

 

 

 

1.6

 

 

 

1.3

 

Loans and other

 

 

6.1

 

 

 

3.0

 

 

 

14.5

 

 

 

8.0

 

Total revenue

 

 

141.3

 

 

 

139.6

 

 

 

420.0

 

 

 

400.4

 

 

 

 

 

 

 

 

 

 

(Loss) income from unconsolidated investments

 

 

 

 

 

 

 

 

Principal co-investments

 

 

(56.1

)

 

 

30.3

 

 

 

(33.4

)

 

 

147.9

 

Performance allocations

 

 

(17.9

)

 

 

(18.0

)

 

 

(36.3

)

 

 

0.5

 

Total (loss) income from unconsolidated investments

 

 

(74.0

)

 

 

12.3

 

 

 

(69.7

)

 

 

148.4

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate, net

 

 

30.4

 

 

 

37.0

 

 

 

138.6

 

 

 

50.8

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

Rental

 

 

38.4

 

 

 

38.6

 

 

 

113.7

 

 

 

110.7

 

Hotel

 

 

9.8

 

 

 

8.6

 

 

 

27.4

 

 

 

20.5

 

Compensation and related (including $7.3, $7.3, $21.7, $21.7 of share-based compensation)

 

 

31.1

 

 

 

33.8

 

 

 

98.7

 

 

 

103.7

 

Performance allocation compensation

 

 

(6.0

)

 

 

(6.6

)

 

 

(5.5

)

 

 

3.2

 

General and administrative

 

 

8.4

 

 

 

9.2

 

 

 

25.5

 

 

 

26.5

 

Depreciation and amortization

 

 

38.8

 

 

 

46.1

 

 

 

118.3

 

 

 

132.7

 

Total expenses

 

 

120.5

 

 

 

129.7

 

 

 

378.1

 

 

 

397.3

 

Interest expense

 

 

(64.2

)

 

 

(57.1

)

 

 

(192.5

)

 

 

(160.8

)

Loss on early extinguishment of debt

 

 

?

 

 

 

(1.3

)

 

 

(1.6

)

 

 

(2.4

)

Other income

 

 

3.2

 

 

 

36.7

 

 

 

24.5

 

 

 

46.1

 

(Loss) income before provision for income taxes

 

 

(83.8

)

 

 

37.5

 

 

 

(58.8

)

 

 

85.2

 

Benefit from (provision for) income taxes

 

 

19.7

 

 

 

(13.9

)

 

 

13.3

 

 

 

(22.5

)

Net (loss) income

 

 

(64.1

)

 

 

23.6

 

 

 

(45.5

)

 

 

62.7

 

Net (income) loss attributable to noncontrolling interests

 

 

(17.3

)

 

 

0.7

 

 

 

(21.4

)

 

 

0.5

 

Preferred dividends

 

 

(10.8

)

 

 

(7.9

)

 

 

(27.1

)

 

 

(21.0

)

Net (loss) income attributable to Kennedy-Wilson Holdings, Inc. common shareholders

 

$

(92.2

)

 

$

16.4

 

 

$

(94.0

)

 

$

42.2

 

Basic earnings (loss) per share

 

 

 

 

 

 

 

 

(Loss) earnings per share

 

$

(0.66

)

 

$

0.12

 

 

$

(0.67

)

 

$

0.31

 

Weighted average shares outstanding

 

 

139,391,316

 

 

 

136,840,874

 

 

 

138,914,964

 

 

 

136,832,102

 

Diluted (loss) earnings share

 

 

 

 

 

 

 

 

(Loss) earnings per share

 

$

(0.66

)

 

$

0.12

 

 

$

(0.67

)

 

$

0.31

 

Weighted average shares outstanding

 

 

139,391,316

 

 

 

137,078,495

 

 

 

138,914,964

 

 

 

137,136,352

 

Dividends declared per common share

 

$

0.24

 

 

$

0.24

 

 

$

0.72

 

 

$

0.72

 

Kennedy-Wilson Holdings, Inc.

Adjusted EBITDA

(Unaudited)

(Dollars in millions)

 

The table below reconciles net income attributable to Kennedy-Wilson Holdings, Inc. common shareholders to Adjusted EBITDA, using Kennedy Wilson's pro-rata share amounts for each adjustment item.

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net (loss) income attributable to Kennedy-Wilson Holdings, Inc. common shareholders

 

$

(92.2

)

 

$

16.4

 

$

(94.0

)

 

$

42.2

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Add back (Kennedy Wilson's Share)(1):

 

 

 

 

 

 

 

 

Interest expense

 

 

89.4

 

 

 

72.9

 

 

 

259.6

 

 

 

201.8

 

Loss on early extinguishment of debt

 

 

?

 

 

 

1.3

 

 

 

1.6

 

 

 

2.4

 

Depreciation and amortization

 

 

38.2

 

 

 

45.0

 

 

 

116.9

 

 

 

131.6

 

(Benefit from) provision for income taxes

 

 

(20.3

)

 

 

15.1

 

 

 

(13.7

)

 

 

23.7

 

Preferred dividends

 

 

10.8

 

 

 

7.9

 

 

 

27.1

 

 

 

21.0

 

Share-based compensation

 

 

7.3

 

 

 

7.3

 

 

 

21.7

 

 

 

21.7

 

Adjusted EBITDA

 

$

33.2

 

 

$

165.9

 

 

$

319.2

 

 

$

444.4

 

(1) See Appendix for reconciliation of Kennedy Wilson's Share amounts.

Adjusted Net Income

(Unaudited)

(Dollars in millions, except share data)

 

The table below reconciles net income attributable to Kennedy-Wilson Holdings, Inc. common shareholders to Adjusted Net Income, using Kennedy Wilson's pro-rata share amounts for each adjustment item.

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net (loss) income attributable to Kennedy-Wilson Holdings, Inc. common shareholders

 

$

(92.2

)

 

$

16.4

 

$

(94.0

)

 

$

42.2

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Add back (Kennedy Wilson's Share)(1):

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

38.2

 

 

 

45.0

 

 

 

116.9

 

 

 

131.6

 

Share-based compensation

 

 

7.3

 

 

 

7.3

 

 

 

21.7

 

 

 

21.7

 

Adjusted Net (Loss) Income

 

$

(46.7

)

 

$

68.7

 

 

$

44.6

 

 

$

195.5

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding for diluted

 

 

139,391,316

 

 

 

137,078,495

 

 

 

138,914,964

 

 

 

137,136,352

 

(1) See Appendix for reconciliation of Kennedy Wilson's Share amounts.

Forward-Looking Statements

Statements made by us in this report and in other reports and statements released by us that are not historical facts constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are necessarily estimates reflecting the judgment of our senior management based on our current estimates, expectations, forecasts and projections and include comments that express our current opinions about trends and factors that may impact future operating results. Disclosures that use words such as "believe," "anticipate," "estimate," "intend," "may," "could," "plan," "expect," "project" or the negative of these, as well as similar expressions, are intended to identify forward-looking statements. These statements are not guarantees of future performance, rely on a number of assumptions concerning future events, many of which are outside of our control, and involve known and unknown risks and uncertainties that could cause our actual results, performance or achievement, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties may include the factors and the risks and uncertainties described elsewhere in this report and other filings with the Securities and Exchange Commission (the "SEC"), including the Item 1A. "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2021, as amended by our subsequent filings with the SEC. Any such forward-looking statements, whether made in this report or elsewhere, should be considered in the context of the various disclosures made by us about our businesses including, without limitation, the risk factors discussed in our filings with the SEC. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, changes in assumptions, or otherwise.

Common Definitions

Note about Non-GAAP and certain other financial information included in this presentation

In addition to the results reported in accordance with U.S. generally accepted accounting principles ("GAAP") included within this presentation, Kennedy Wilson has provided certain information, which includes non-GAAP financial measures (including Adjusted EBITDA, Adjusted Net Income, Net Operating Income, and Adjusted Fees, as defined above). Such information is reconciled to its closest GAAP measure in accordance with the rules of the SEC, and such reconciliations are included within this presentation. These measures may contain cash and non-cash acquisition-related gains and expenses and gains and losses from the sale of real-estate related investments. Consolidated non-GAAP measures discussed throughout this report contain income or losses attributable to non-controlling interests. Management believes that these non-GAAP financial measures are useful to both management and Kennedy Wilson's shareholders in their analysis of the business and operating performance of the Company. Management also uses this information for operational planning and decision-making purposes. Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measures. Additionally, non-GAAP financial measures as presented by Kennedy Wilson may not be comparable to similarly titled measures reported by other companies. Annualized figures used throughout this release and supplemental financial information, and our estimated annual net operating income metrics, are not an indicator of the actual net operating income that the Company will or expects to realize in any period.

KW-IR


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