Kennedy-Wilson Holdings, Inc. Q3 FY2024 earnings call

• AUM grew to $28 billion, estimated annual NOI to $492 million, and fee-bearing capital reached a record $8.8 billion.
• The $3 billion ground-up development program started in 2014 is nearing completion with only $3 million of KW equity remaining to be spent.
• Investment management fees grew by 51% to $69 million year-to-date in 2024, on track to hit ~$100 million in 2024.
• Credit business completed $2.1 billion in new loan originations in 2024 with a strong pipeline of over $1.2 billion of new loan origination opportunities.
• Disposed of $234 million of assets in Q3, generating $63 million of cash, with year-to-date total cash to KW at $375 million, and Q4 planned asset sales expected to generate over $150 million of cash to KW.
• Launched a new platform in the U.K. focused on the single-family rental housing market in October, partnering with CPPIB.
• Redeemed EUR 175 million of KWE bonds, funded by cash proceeds from asset sales, to lower overall unsecured leverage.

Investment Management revenue grew by 39% to $22 million in Q3, driven by new debt originations and higher fee-bearing capital. Baseline EBITDA totaled $102 million in Q3 and $309 million year-to-date. Adjusted EBITDA doubled in Q3 to $66 million and was $349 million for the year. Investment management fees grew by 51% to $69 million year-to-date in 2024, on track to hit ~$100 million in 2024. Credit business completed $2.1 billion in new loan originations in 2024 with a pipeline of over $1.2 billion. AUM grew to $28 billion, estimated annual NOI to $492 million, and fee-bearing capital to a record $8.8 billion. Rental housing portfolio has 60,000 multifamily or student housing units. $3 billion ground-up development program started in 2014 has completed 9,000 units. Q3 stabilized two additional multifamily properties, adding $12 million to estimated annual NOI. Disposed of $234 million of assets in Q3, generating $63 million of cash, with year-to-date total cash to KW at $375 million. Q4 planned asset sales expected to generate over $150 million of cash to KW. Launched U.K. single-family rental housing platform in October, partnering with CPPIB, targeting £1 billion in asset purchases. Redeemed EUR 175 million of KWE bonds, funding from asset sales.

• Investment management fees are on track to hit approximately $100 million in 2024 compared to $25 million in 2019.
• Completed $2.1 billion in new loan originations in 2024 with a strong pipeline of over $1.2 billion of new loan origination opportunities.
• Q3 disposed of $234 million of assets, generating $63 million of cash, with year-to-date total cash to KW at $375 million, and Q4 planned asset sales expected to generate over $150 million of cash to KW, on track to achieve the $550 million to $750 million target.
• Redeemed EUR 175 million of KWE bonds, satisfying almost 40% of the maturity in November, funded by cash proceeds from asset sales.
• Roughly half of 2025 maturities are KWE bonds maturing in November, with the redemption addressing almost 40% of that maturity.

• Actual results may materially differ from forward-looking information due to numerous risks, uncertainties and other factors indicated in reports and filings with the Securities and Exchange Commission.
• Risks related to real estate market fluctuations, interest rate changes, asset sale execution, credit business default risks, and international market operations.

Q: My first question relates to the brackets you put around fee revenue for next year, about $120 million. Can you talk about maybe what we need to see in terms of originations or just other capital being raised to kind of hit that number?

A: Yes. Good question, Tony. So as I mentioned, we've got $6 billion of capital that's not included in our fee-bearing capital that relates to future funding commitments, as well as commitments from partners such as CPPIB in our various platforms. And so based on the pipeline, we're seeing both in the credit business, and the equity business, we feel like just deploying the capital we've raised alone is going to allow us to continue to grow the investment management business at a very good clip.

Q: And then second one, just on the new SFR strategy. Can you maybe give us a little more detail around what cash yields look like for U.K. single-family? Maybe like are there experienced operators over there to kind of help you with the platform and running these assets?

A: Okay. Thanks, Tony. I'll take that. Mike Pegler, President of the European business. I mean, firstly, I just want to say, how excited I am about finding a great partner such as CPPIB, with which to scale this business. As Bill and Matt said, rental housing has always been a key part of Kennedy-Wilson's story, a key part of our portfolio and a key part of our expertise. And really to find an opportunity to scale this business in the U.K. is something we've been looking at for a while. And we think we've got a great partner to scale here. They've committed $500 million of equity to this venture as an initial commitment. We're going to be investing that on a 90-10 split. So we'll be co-investing alongside them. So with leverage, we expect to deploy in excess of $1 billion as part of this initial commitment. We're projecting we're going to be leasing up these houses, which we are buying brand new from large U.K. house builders primarily in cohesive blocks on the edge of key cities, mainly in the South of England. We're projecting we're going to yield initially something between high-5s, pushing towards 6%. And with rental growth, we expect it to stabilize north of 6% yields. We've got a great team that we put together with a lot of residential expertise across the Kennedy-Wilson business. We're clearly leveraging off the expertise that we've got in other markets. We've got a very significant portfolio in the U.S. and in Ireland, and we're going to be taking the lessons we've learned to the U.K. market. Really proud of the team, we've put this venture together and who are going to be managing it. In terms of, let's say, property management, rent collection, that type of thing, we're going to outsource that. We've got a best-in-class team there, and we'll evaluate how that works as the platform grows.