Kennedy-Wilson Holdings, Inc. Q4 FY2023 earnings call

Management Statement and Operational Highlights

• Bill McMorrow highlighted investment management platform outperformed in 2023 with fee-bearing capital growth, and the $4.1 billion loan portfolio acquisition.
• Announced an 18-month cost reduction plan to save $15-20M annually and a noncore asset sale program to generate over $550M.
• Justin Enbody discussed Q4 financial results, including consolidated revenues, fair value adjustments, and dispositions of non-core assets.
• Matt Windisch talked about multifamily performance, credit platform growth, and details of the industrial portfolio, including high occupancy and rent increases.

Segment Performance

• Investment Management: Fee-bearing capital grew 42% to a record $8.4 billion in 2023, with a 148% increase in the credit platform driven by a $4.1 billion construction loan portfolio acquisition. Recurring property NOI and fees totaled $524 million on an annualized basis in Q4.
• Multifamily Portfolio: Global multifamily portfolio had NOI growth. In the US, same-property revenue grew 4% and NOI up ~3% in Q4. Vintage Housing affordable portfolio saw 10% revenue growth and 7% NOI growth. Dublin portfolio was 97% occupied at year end with new units delivered.
• Credit Platform: Grew 148% in 2023, representing 56% of total fee-bearing capital. Has $1.3 billion in closing pipeline and expects to originate ~$3 billion in 2024.
• Industrial Portfolio: European industrial portfolio over 98% occupied, added assets, with a 53% rent increase in 2023. US industrial portfolio has over 2 million sq ft of space.

Guidance

• Expect more opportunities in 2024 as inflation eases and Fed may pivot to lower interest rates.
• Anticipates originating ~$3 billion in new loans in 2024 depending on market conditions.
• Believes entering a period with more supportive backdrop for improved inflation and cost of capital post-year end.

Risks

• Non-cash fair value adjustments due to interest rate environment impacting valuations.
• Muted dispositions affecting cash flow.
• Potential challenges in loan origination if construction activity continues to slow.
• Market uncertainties affecting property valuations.

Question and Answer

Q: Anthony Paolone asked about dispositions, leverage, buybacks, and dividend.

A: Bill McMorrow and Matt Windisch discussed that asset sales will help lower debt and redeploy capital, with $125 million left in share buyback program and dividend reviewed quarterly.

Q: Josh Dennerlein inquired about Mountain West markets and office portfolio.

A: Matt Windisch talked about Mountain West market fundamentals and office portfolio leasing prospects, including a Bellevue asset tenant move-out and re-leasing plans.

Q: Tayo Okusanya questioned loan book growth and construction activity.

A: Matt Windisch responded that while construction activity is slowing, the team's expertise and pipeline position them to capture a larger share of the market, with over $1 billion in closing pipeline.