Kennedy-Wilson Holdings, Inc. Q2 FY2025 earnings call

• Deployed $1.7 billion in new capital in Q2, with total capital deployment for the first half of 2025 at $2.6 billion, on track to exceed 2024's $4.3 billion deployment. - Executed over $600 million in noncore asset sales, generating $275 million in cash proceeds, used to reduce unsecured line of credit and fund new investments. - Assets under management grew to a record $30 billion, up 70% since 2021. - Rental housing is expected to grow to over 80% of assets under management in the next 2 years. - Q2 investment management fees reached $36 million, a 39% increase from the prior quarter, with fee-bearing capital at a record $9.2 billion. - Made solid progress on noncore asset sales, generating $275 million in cash YTD, on track to achieve $400 million by year-end.

Kennedy-Wilson's assets under management reached a record $30 billion, with rental housing accounting for 65% of AUM, comprising approximately 70,000 units. In the second quarter, $1.7 billion of new capital was deployed, with 96% directed toward the rental housing sector, including $1.3 billion in new rental housing construction loans. The investment management platform saw fee-bearing capital reach a record $9.2 billion, and investment management fees surged 39% in Q2 to $36 million. Stabilized investments generate $1.6 billion in revenue and $1.3 billion in stabilized NOI, with KW holding a 37% weighted average ownership interest in these assets.

• Aim to surpass the $4.3 billion capital deployment achieved in 2024. - Plan to use asset sale proceeds to further reduce unsecured debt, including repaying $350 million of KWE bonds in October. - Remain optimistic about record new capital deployment in the remainder of 2025 with the support of major global strategic partners. - $100 million remains on the share repurchase plan.

• Competition in the private credit space, though KW's focus on residential construction lending with secured financing mitigates some impact. - Uncertainties in the real estate market that could affect asset valuations and investment outcomes. - Potential impact of government policy changes, such as evolving rent control measures in regions like Ireland.

Q: Talk about the single-family rental (SFR) business in the U.K. and the expected returns.

A: Michael Pegler stated the SFR business in the U.K. is in its early stages, with the market having much lower penetration than the U.S. They aim for mid-teens returns at the asset level, with fees and promotes potentially pushing returns higher. The goal is to reach around 2,000 homes by the end of 2025.

Q: Regarding the debt platform moving beyond residential real estate.

A: Matthew Windisch mentioned the focus remains on residential construction lending, but there's an opportunity to expand into bridge and permanent lending within the residential sector over the short to medium term.

Q: How is competition affecting the credit business?

A: Matthew Windisch noted while there's a lot of private credit capital, KW's focus on residential construction lending with no back leverage means they're not seeing significant impact in their specific area. However, banks are more active, and spreads on construction lending have come in 30-50 basis points, but it remains an attractive space.

Q: Thoughts on stock buybacks and capital allocation?

A: William McMorrow said they started small buybacks in Q2, with $100 million remaining on the share repurchase plan, and see the stock as an opportunity for capital allocation.

Q: Plans for 2026 debt maturities?

A: Justin Enbody said they'll use noncore asset sales proceeds to handle maturities, and Matthew Windisch added maturities on assets in disposition plans, with incremental refinancing costs expected to be in line with current rates.