Kennedy-Wilson Holdings, Inc. Q1 FY2024 earnings call

Key Points - Fee-bearing capital grew to a record $8.6 billion, and investment management fees increased by 94% in Q1. - Successfully completed $360 million in non-core asset distributions, generating $236 million of cash and $106 million in gains. On track to generate $550 million to $750 million from non-core asset sales by Q1 2025. - Completed $2.5 billion development pipeline, delivered over 800 new apartment units. Assets under management totaled $25 billion. - Shifted business to emphasize growth in investment management platforms, targeting 15%-20% fee income growth over several years. Focus on rental housing, credit, and logistics sectors. - Resized dividend rate to $0.12 a quarter to save $66 million annually, with cash to be deployed into stock buybacks, debt reduction, and investment management growth.

Consolidated revenues grew by 3% to $136 million for the quarter. Investment Management revenue grew by 94% to $21 million in Q1, driven by origination fees from the debt business and higher levels of fee-bearing capital. Baseline EBITDA grew by 8% to $103 million. Across the co-investment portfolio, values were largely stable in Q1. Asset realization activity increased, with non-core wholly-owned assets sold in Q1 generating $236 million of cash and $106 million of net gain on sale. GAAP net income was $0.19 per share, while adjusted EBITDA totaled $203 million and adjusted net income totaled $71 million.

Forward-looking Statements - Expect to continue growing fee income at a rate of 15% to 20% over the next several years. - Non-core asset sales plan to generate $550 million to $750 million in cash proceeds. - Remaining 2024 debt maturities total $210 million, all nonrecourse at the property level.

Risks - Uncertainty across the globe due to high interest rate levels and geopolitical risks. - Need to monitor debt repayment schedule and continue originating to grow the debt platform.

Q: Can you talk a bit about maybe expectations for additional asset sales over the next 12 months? And any sense as to how much you might have in the market for sale now?

A: Sure, as Bill mentioned, we're on track to hit the $550 million to $750 million target. We have assets on the market now and several in the pipeline. We're comfortable with the target and if there are further opportunities to sell non-core assets and redeploy into investment management, debt reduction, etc., we're focused on that.

Q: Just kind of curious on the rationale for capital allocation in 1Q. You cut the dividend, but you leaned into share repurchases. Just kind of how should we think about that on a go-forward basis?

A: It's in line with our plans. The combination of asset sales and resizing the dividend will be used for growing the investment management business, paying down the revolver, and stock buybacks. The asset sale proceeds were back-ended in Q1, and we were active in the stock buyback program in the quarter, with focus on Q2 as well.

Q: Staying on the development front here, it's quite an active quarter with over 800 units delivered. Could you speak to the leasing activity and tenant demand here? And maybe going forward, if you kind of talk about how you plan to use these developments and how they fit indicative of this vision as investment management becomes a larger part of the business?

A: We're seeing great leasing velocity at developments in the US and Dublin. For example, Anacapa Canyon had strong leasing, with vintage assets 100% leased in 3 months. We're confident in our construction teams and transitioning to a more capital-light model, earning different fee streams. The Investment Management business is opportunity-driven, with significant growth potential assuming right opportunities exist, and we've grown fees at 25% compounded over 5 years.