KW

1. Quarterly highlights: Saw improvement in key financial metrics like adjusted EBITDA and adjusted net income compared to Q3 of the previous year. 2. Investment management growth: Assets under management and fee-bearing capital both experienced growth. 3. Capital deployment: Deployed or committed approximately $900 million in Q3, with a focus on rental housing-related credit and equity investments. Originated $600 million in new rental housing construction loans, and total year-to-date originations reached $2.6 billion. 4. Europe activity: Continued to expand the U.K. single-family rental platform with CPPIB, adding $62 million in new investments in Q3, and the total portfolio reached 1,300 homes. 5. Recap and sale activity: Recapitalized 2 U.S. multifamily joint ventures, sold a multifamily asset, generated approximately $200 million in cash to KW, $130 million of additional fee-bearing capital, and $30 million of realized gains. 6. Acquisition: Pending acquisition of Toll Brothers Apartment Living platform, which will immediately add $5 billion to assets under management, and pro forma total AUM is expected to increase to $36 billion with over 70% attributable to rental housing. 7. Balance sheet: Paid off the last tranche of KWE unsecured bonds totaling $352 million, with total debt 96% fixed or hedged, a weighted average maturity of 4.5 years, a weighted average effective interest rate of 4.7%, and $255 million of consolidated unrestricted cash. 8. Portfolio update: Rental housing sector occupancy ended the quarter at over 94%, U.S. same-store NOI grew by 2.4%, the vintage housing affordable portfolio surpassed 11,000 units, Ireland same-property occupancy grew by 1.7%, and the European stabilized office portfolio ended the quarter with 91% occupancy after asset management efforts.

Anticipate closing the pending transaction with Toll Brothers in Q4.

Investment management business: Assets under management grew to $31 billion in Q3, a year-over-year increase of 11%. Fee-bearing capital reached $9.7 billion, up 10% from the previous year. The stabilized real estate investments generate an estimated annual NOI of $434 million to KW, with 70% positioned in the key conviction sectors of rental housing and industrial.

The Board of Directors received a proposal letter from a consortium regarding a potential take-private transaction. The Board formed a special committee to evaluate the proposal and its options. The company does not plan to provide ongoing updates until there is a definitive transaction to announce or the process is terminated, and no questions regarding this potential transaction or related matters were taken on the call.

Q: I was wondering if you can talk about just where cap rates are for multifamily in your various markets. And then also as it relates to Toll Brothers, if we think about the development platform there for multifamily, like where would you develop? And like what would the spread be versus like market cap rates?

A: Tony, it's Matt. So in terms of cap rates we're seeing in the market, it really depends on a number of factors, including age of the assets and the submarket you're in and what's happening around supply. So we've seen things trade in the high 4s. We've seen things trade in the high 5s. It's really kind of a broad range depending on those factors, but they seem to be holding relatively steady over the past couple of quarters at those levels. And in terms of the Toll Brothers portfolio and kind of the future pipeline, we continue to like the markets they've historically built in. So it will be some of the West Coast markets we currently own and operate as well as some East Coast markets where we've historically just been a lender. And we think, generally speaking, again, depending on markets and a number of factors that we can generally build the spreads of somewhere between 125 and 175 basis points on new developments relative to market cap rates. That's kind of the target in terms of how we'd be looking to capitalize these deals.

Q: I get the sensitivity around the go-private proposal, but maybe I missed this. Did -- was it outlined who on the Board is on like comprises the committee that will kind of go through this and make the decisions?

A: Yes, Tony, it's Matt. So we -- again, we can't talk about anything related to the offer that was made a couple of days ago. But that was not outlined in the offer, who the special committee may be.

Q: Congrats on a really nice quarter. I was curious if there was any impact thus far from the government shutdown on the affordable multifamily portfolio?

A: Yes. I mean we haven't seen anything there. We did see a bit of weakness in terms of NOI in the quarter, as we pointed out, but that was more expense driven, not really related to anything from the government shutdown or any subsidies that would be passed on to the tenants. So no, we have not to date seen any impact from that yet.

Q: Congrats on the impressive growth in the investment management platform. Just wondering if you can maybe talk to kind of fundraising right now globally and where you guys think you're taking market share?

A: Yes. That's a good question. I think it's evident and at least from what I read that the capital raising, particularly in the private equity firms is there's challenges associated with it. I think what we have seen is that really the discretionary funds have become somewhat less prevalent unless you're one of the really big capital raisers. And generally speaking, people want to do their capital deployment through separate accounts. I think the -- in our case, we've had great -- we've had good success in really several geographies, but particularly in Asia, where we've been for 30 years and here in the United States and Canada and parts of Europe. But we continue to see our capital deployment increasing, but we think that we've got the capability to raise capital to support all of that.

Q: In regards to the buyout offer, while I know the company can't make any comments specifically, I don't know if it's possible for Bill to make any comments about why or his rationale for making the offer.

A: Yes. Tayo, it's Matt. Again, I'm sorry, we just -- we can't comment on anything beyond what we said on the call earlier about the offer that was made.

Q: Next question, just around origination volume in the -- from the loan business. Again, granted 2Q was kind of a record, but in 3Q, there is a slowdown. Just kind of curious, is that seasonality? Is that more competition? Just kind of curious what was happening there.

A: Yes. Good question. Yes. So we -- historically, Q3 has been a bit slower and if you kind of look at the prior year as well. So Q3 tends to be a [ little lower ] on the origination volumes kind of coming out of the summer. And so certainly, there's heightened competition. I think we talked about that on the last call, and we've seen some spreads coming in over the past year. But we're still very active in the space and have a strong pipeline, and we expect to continue to originate out of that business.

Q: Okay. That's helpful. And if we could go international just for a minute, the SFR platform, again, some additional acquisitions there. Just kind of talk a little bit about how that's coming along, how that's growing, what the ultimate economics of that business will be?

A: Yes, I'll pick that one up. Obviously, we're a year into the venture now. We signed the venture with CPPIB in October last year, I believe. And so we've had really good growth over that period. We're really pleased with the number of houses we've committed to. We're up and running with our leasing. We've got almost 200 houses actually physically built and leased now. And we're -- including the acquisitions that we reported today, we're up to, I think it's about 1,300 homes. We've got a great pipeline ahead of us and a good appetite for doing more. I think by the year-end in Q4, we're expecting several more acquisitions to complete. We still see a good pipeline coming out of the housebuilders in the U.K. who are seeing this as a way to deliver additional stock. And we have strong support from CPPIB to grow the platform. So I would expect you'll see more acquisitions in Q4, and we look forward to continue to grow into 2026 as well. I think we've got some good ways to go on this.

Q: Okay. That's helpful. And then you kind of still stay international. Just quick thoughts on U.K. office. Again, the occupancy decline, just kind of talk a little bit about was that just an actual lease move-out? Or was it an actual termination? And if you also kind of talk about lease-up at Coopers Crossing as well.

A: Yes. In terms of U.K., we've had a couple of lease move-outs that effectively we've been backfilling, but the backfills haven't kicked in yet. There are a number of cases where we've actually signed agreements for lease that haven't completed. So I would expect that occupancy to go back up over the course of the next couple of quarters. In fact, we've got committed deals that are going to send that occupancy back up again. And beyond that, we have a good pipeline of leasing. So I don't see a structural problem in our office leasing. It's really a timing issue around the time taken to bring these buildings back into circulation after a couple of lease breaks. But actually, we're re-leasing at better rents in most cases. And the demand has actually proved decent to the positive side. So I think on the U.K. office occupancy, I would expect that to tick back up over the next few quarters. In terms of Coopers Cross, we have a good pipeline. We are under offer to a really interesting tenant who's looking to take some space. Hopefully, we can get that deal done in the next quarter, and we've got a good pipeline of interest. It's clearly taken a little bit longer than we'd like, but that market is coming back to life now, and we see a better pipeline than we've seen in quite a while.