Seattle Property Day July 2018 (Information as of March 31, 2018 unless otherwise noted)

Transcription

1 July 208 (Information as of March 3, 208 unless otherwise noted)

2 Disclaimer/Forward-Looking Statements Statements made by us in this presentation and in other reports and statements released by us that are not historical facts constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 933, as amended, and Section 2E of the Securities Exchange Act of 934, as amended. These forwardlooking statements are necessarily estimates reflecting the judgment of our senior management based on our current estimates, expectations, forecasts and projections and include comments that express our current opinions about trends and factors that may impact future operating results. Some of the forward-looking statements may be identified by words like believes, expects, anticipates, estimates, plans, intends, projects, indicates, could, may and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Accordingly, actual results or the performance of Kennedy-Wilson Holdings, Inc. (the Company ) or its subsidiaries may differ significantly, positively or negatively, from forwardlooking statements made herein. Unanticipated events and circumstances are likely to occur. Factors that might cause such differences include, but are not limited to, the risks that the Company s business strategy and plans may not receive the level of market acceptance anticipated; disruptions in general economic and business conditions, particularly in geographic areas where our business may be concentrated; the continued volatility and disruption of the capital and credit markets, higher interest rates, higher loan costs, less desirable loan terms, and a reduction in the availability of mortgage loans and mezzanine financing, all of which could increase costs and could limit our ability to acquire additional real estate assets; continued high levels of, or increases in, unemployment and a general slowdown in commercial activity; our leverage and ability to refinance existing indebtedness or incur additional indebtedness; an increase in our debt service obligations; our ability to generate a sufficient amount of cash from operations to satisfy working capital requirements and to service our existing and future indebtedness; our ability to achieve improvements in operating efficiency; foreign currency fluctuations; adverse changes in the securities markets; our ability to retain our senior management and attract and retain qualified and experienced employees; our ability to attract new user and investor clients; our ability to retain major clients and renew related contracts; trends in the use of large, fullservice commercial real estate providers; changes in tax laws in the United States, Europe or Japan that reduce or eliminate our deductions or other tax benefits; future acquisitions may not be available at favorable prices or with advantageous terms and conditions; and costs relating to the acquisition of assets we may acquire could be higher than anticipated. Any such forward-looking statements, whether made in this report or elsewhere, should be considered in the context of the various disclosures made by us about our businesses including, without limitation, the risk factors discussed in our filings with the U.S. Securities and Exchange Commission ( SEC ). Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, change in assumptions, or otherwise. The information with respect to the projections presented herein is based on a number of assumptions about future events and is subject to significant economic and competitive uncertainty and other contingencies, none of which can be predicted with any certainty and some of which are beyond the company s control. There can be no assurances that the projections will be realized, and actual results may be higher or lower than those indicated. Neither the company nor any of their respective security holders, directors, officers, employees, advisors or affiliates, or any representatives or affiliates of the foregoing, assumes responsibility for the accuracy of the projections presented herein. The modeling, calculations, forecasts, projections, evaluations, analyses, simulations, or other forward-looking information prepared by Property and Portfolio Research, Inc. (Licensor) and presented herein (the Licensor Materials ) are based on various assumptions concerning future events and circumstances, all of which are uncertain and subject to change without notice. Actual results and events may differ materially from the projections presented. All Licensor Materials speak only as of the date referenced with respect to such data and may have changed since such date, which changes may be material. You should not construe any of the Licensor Materials as investment, tax, accounting, or legal advice.

3 Agenda Welcome Bill McMorrow, Chairman and CEO, Kennedy Wilson 2 Seattle overview Kurt Zech, President, Kennedy Wilson Multifamily 3 Vintage Housing Holdings Ryan Patterson, President, Vintage Housing Holdings 4 Asset tour 2

4 Overview. Welcome Bill McMorrow Chairman and CEO, Kennedy Wilson 3

5 KW overview KENNEDY WILSON (NYSE:KW) AT A GLANCE $7.2bn Carrying value of real estate $.0bn Non-income producing and unstabilized assets $46m Estimated Annual NOI 2 5 Total employees 24 No. of offices 3.6% Dividend Yield 3 $0.9 Quarterly Dividend Information shown at share as of March 3, As defined in definitions section in the appendix. 3 Based on annual dividend of $0.76 and share price of $2.5 on 6/30/8. 4

6 Diversified portfolio and solid track record Global real estate portfolio Transactions since going public $46m Estimated Annual NOI Sectors Multifamily: 39% Office: 33% Retail: 8% Hotel & Industrial: 0% $30bn Investment transactions (gross) Acquisitions: $20B Dispositions: $0B 9.0m Commercial area (sq ft) 2 27,508 Multifamily units 3 Disposition track record 4 30% IRR on dispositions to KW As defined in definitions section in the appendix. 2 Includes.m sq ft of unstabilized assets and 0.7m sq ft under development. 3 Includes 48 unstabilized units and 2,530 units under development. 4 Approximate IRR on realized investments since going public through March 3, 208. Disposition track record excludes loan pools. 5

7 The Kennedy Wilson story Global business is positioned to grow 2 Unrivalled long-term relationships with major institutions 3 Local investment and service expertise to accretively allocate capital 4 First-mover advantage from early entry in key target markets 5 30-year track record as global real estate investor and operator 6

8 Near-term strategic priorities Development Additional $32mm of Estimated Annual NOI through projects completed by YE Balance Sheet Strategically grow multifamily portfolio in the U.S., Ireland and the U.K. 3 Investment Management Raise $bn in third-party capital by YE-208 Expand capital raising to Europe 4 Non-core Asset Sales Generate $500mm of additional cash by YE-209 7

9 Washington is KW s largest U.S. market; represents 35% of US portfolio NOI 2006 First acquisition in WA,0 Apartments (incl.,930 in development or 2 under contract).4m Office sq ft $7m Estimated annual NOI ()(3) to KW As of March 3, 208 and pro-forma for asset sales announced and completed subsequent to Q As defined in definitions section in the appendix. 2 There can be no assurances that such units will be acquired and/or fully developed. 8

10 Overview 2. Seattle market overview Kurt Zech President, Kennedy Wilson Multifamily 9

11 Seattle by the numbers 3.9m Regional population 3.6% Wage growth 5.m $0 Sq.ft. of office under No state income tax construction 3.8% Unemployment rate $60bn Committed to transportation projects Source: JLL Meyers Research; U.S. Bureau of Labor Statistics. For the year ended March

12 Seattle s diverse employer base 64k 43k 45k 30k 6k 6k 8k k k 9k 9k 7k 0k 0k 20k 30k 40k 50k 60k 70k Sources: Puget Sound Business Journal; CoStar Portfolio Strategy Numbers are representative of full-time employees.

13 Seattle is still a leader in job creation Year-over-year non-farm job growth 3.5% 3.3% 3.3% 3.0% 3.0% 2.8% 2.5% 2.0%.5%.0% 2.4% 2.%.6%.6%.4%.4%.2% 0.9% 0.7%.6% 0.5% 0.0% 2-Month Employment Growth U.S. Average Sources: U.S. Bureau of Economic Analysis; Moody s Analytics; CoStar Portfolio Strategy. As of May

14 Job growth exceeding multifamily supply 8.4m 78% 48,000 2,520 Projected commercial sq.ft. added by 2020 Pre-leased Potential new jobs (75 sq ft per employee) New apartments delivered by 2020 Sources: CBRE Research; JLL Includes South Lake Union, Denny Triangle, Capitol Hill/First Hill, Queen Anne/Magnolia/Ballard, University District/Greenlake/Fremont, North Seattle, and South Seattle. 3

15 Rising home prices make it cheaper to rent Record median home prices May-8 May-7 Eastside $960, % Seattle King County $830, % $725, % Sources: Northwest Multiple Listing Service; Seattletimes.com Source: JLL 4

16 Greater Seattle is a preferred destination for Bay Area workers 0 Fortune 500 companies headquartered in the greater Seattle 0 Fortune 500 companies headquartered in the Bay Area with a significant headcount in the greater Seattle Source: JLL 5

17 Affordability case study: Seattle vs San Francisco 30% more disposable income in Seattle Seattle San Francisco Average Software Engineer Salary $35,000 $50,000 State Income Tax $0 $0,890 Federal Income Tax $33,660 $37,440 Class A, -Bedroom Apartment $27,860 27% of after-tax income $45,290 45% of after-tax income Disposable Income $73,480 $56,380 Source: JLL 6

18 US Multifamily portfolio overview 7

19 Washington represents 38% of US multifamily NOI $56m Estimated Annual NOI ()(2) Product Type Market Rate: 73% Affordable: 27% 38 No. of stabilized assets 9,80 No. of stabilized multifamily units,930 VHH units in development or under contract 2 2 Atlas, Issaquah, WA Vintage at Urban Center, Lynwood, WA As defined in definitions section in the appendix. 2 As of March 3, 208 and pro-forma for asset sales announced and completed subsequent to Q

20 Stable income with upside potential Communities / Units Market rate portfolio 5 / 4,97 KW Ownership 6% Estimated Annual NOI 2 to KW $4m Occupancy 93% Loss to lease 6% As of March 3, 208 and pro-forma for asset sales announced and completed subsequent to Q As defined in definitions section. 9

21 Suburban assets outperforming Same-property market-rate revenue growth comparison % 6,000 0% 4,457 5,075 5,279 5,000 9% 4,000 8% 7% 2,346 2, % 3,000 6% 5% 5.8% 6.8% 6.7% 7.6% 7.% 8.5% 5.8% 7.% 2,000,000 4% Q'8 Kennedy Wilson Public Real Estate Company Average KW Same-Property Units 4.5% - As defined in definitions section in the appendix. 20

22 KW s suburban market-rate portfolio positioned for growth Washington average rents comparison Submarket Federal Way: 25% $,582 $2,94 $4m Estimated Annual NOI Puyallup: 20% Issaquah: 5% South Lake Union: 2% Bellevue/Redmond: 9% Renton: 8% Tacoma: 5% Tumwater: 3% Kennedy Wilson Public Real Estate Company Average Other: 3% As defined in definitions section in the appendix. 2

23 Value creation through asset management Before Belara interior renovations After $7,600 $2,400 32% Avg. unit renovation cost Avg. increase in rent/yr Return on cost Before Onyx interior renovations After $,500 $3,000 26% Avg. unit renovation cost Avg. increase in rent/yr Return on cost 22

24 Overview 3. Vintage Housing Holdings Ryan Patterson President, Vintage Housing Holdings 23

25 Vintage Housing: Growing our portfolio with minimal equity KW expects to have all invested equity returned by YE-208 At acquisition (2Q-5) Today YE-202 Communities (stabilized) Stabilized units 5,500 6,400 9,20 KW cash basis $78m $4m The figures below are projections. There can be no assurances that such projections will be realized, and actual results may be higher or lower than those indicated. 24

26 Washington represents 7% of US affordable NOI 4,209 Stabilized Units,930 Units in development or under contract 97% Occupancy $5m Estimated annual NOI 2 to KW There can be no assurances that such units will be acquired and/or fully developed. 2 As defined in definitions section in the appendix. 25

27 Affordable housing 0 Low-Income Housing Tax Credits Program (LIHTC lie-tech ) Enacted in 986, it is an indirect Federal subsidy used to finance the construction and rehabilitation of affordable rental housing for low-income households. How it works Section 42 of the Internal Revenue Code allows for two types of LIHTC s based on the nature of project Provides an incentive for developers through awarding tax-exempt bonds for qualified projects Bonds allow for creation of tax credits which can be sold to raise capital for their projects Who qualifies Families with an income of 60% or less of area median incomes ( AMI ) Seniors 55 years of age or older with an income of 60% or less of AMI Investors receive a dollar-for-dollar credit against their Federal tax liability for a period of 0 years 26

28 Tax credit investment process Federal Government allocates tax-exempt bonds and tax credits to states TAX-EXEMPT BONDS TAX CREDITS State Housing Agencies allocate bonds and credits to affordable housing development TAX CREDITS TAX-EXEMPT BONDS Affordable Development TAX CREDITS $ Limited Partners (major financial institutions) 27

29 Mill Creek case study $2.3m -Land $2.4m - Permits $5.7m - Developer Fee $28.2m -Building & FFE Key Stats Units: 220 Close date: August 206 Cost per door: $85K Construction completion: June 208 $5.7m Total developer fee Remaining developer fee to the partnership to be paid from future cash flows. 28

30 Generating attractive cash flow through resyndication Resyndication: Dissolve an existing partnership and recapitalize into a new partnership with tax-exempt bonds and tax credits which are sold to a new tax credit limited partner. completed resyndications generated $55m for rehab capex & $44m cash to KW additional resyndications expected by 2022 Case Study Timbers by Vintage 205 KW equity of $2.2m at acquisition Bought out original tax credit LP and secured bridge loan, resulting in $0.8m of cash to KW 206 Resyndicated the project into a new venture, generating $4.5m in proceeds to KW Began rehab totaling $36K per door 207 Completed rehab and converted property, generating $2.m in fees to KW $2.2m KW equity at acquisition $7.4m KW total proceeds 29

31 Overview 4. Seattle asset tour 30

32 Tour Map 3

33 KW top assets in Washington by NOI Asset name 90 East Club Palisades Atlas Belara Bella Sonoma Harrington Square The Onyx Radius Apex Equinox Vintage Housing Location Issaquah, WA Federal Way, WA Issaquah, WA Auburn, WA Fife, WA Renton, WA Redmond, WA Seattle, WA Tacoma, WA Seattle, WA Various Sector Office Multifamily Multifamily Multifamily Multifamily Multifamily Multifamily Multifamily Multifamily Multifamily Multifamily KW share of est. NOI ($m) $ $ MF Units ,5 4,209 Commercial (000 sq ft) Represents asset on Seattle property tour $64.2 7, As of March 3, 208 and pro-forma for asset sales announced and completed subsequent to Q-208. Please see appendix for definition of Estimated Annual NOI. Acquisition date Jun-7 Jan- Nov-7 Jul-6 Nov-4 Nov-2 Jun-08 Feb-7 Apr-4 Oct-6 Various 32 Club Palisades Belara Bella Sonoma

34 Overview Appendix 33

35 Appendix DEFINITIONS: Estimated Annual NOI: Estimated annualized NOI" is a property-level non-gaap measure representing the estimated annual net operating income from each property as of the date shown, inclusive of rent abatements (if applicable). The calculation excludes depreciation and amortization expense, and does not capture the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures, tenant improvements, and leasing commissions necessary to maintain the operating performance of our properties. Any of the enumerated items above could have a material effect on the performance of our properties. Also, where specifically noted, for properties purchased in 208, the NOI represents estimated Year NOI from our original underwriting. Estimated year NOI for properties purchased in 208 may not be indicative of the actual results for those properties. Estimated annual NOI is not an indicator of the actual annual net operating income that the Company will or expects to realize in any period. Please also see the definition of "Net operating income" below. The Company does not provide a reconciliation for estimated annual NOI to its most directly comparable forward-looking GAAP financial measure, because it is unable to provide a meaningful or accurate estimation of each of the component reconciling items, and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and/or amount of various items that would impact estimated annual NOI, including, for example, gains on sales of depreciable real estate and other items that have not yet occurred and are out of the Company s control. For the same reasons, the Company is unable to meaningfully address the probable significance of the unavailable information and believes that providing a reconciliation for estimated annual NOI would imply a degree of precision as to its forward-looking net operating income that would be confusing or misleading to investors. Net Operating Income: "Net operating income" or " NOI is a non-gaap measure representing the income produced by a property calculated by deducting operating expenses from operating revenues. Our management uses net operating income to assess and compare the performance of our properties and to estimate their fair value. Net operating income does not include the effects of depreciation or amortization or gains or losses from the sale of properties because the effects of those items do not necessarily represent the actual change in the value of our properties resulting from our value-add initiatives or changing market conditions. Our management believes that net operating income reflects the core revenues and costs of operating our properties and is better suited to evaluate trends in occupancy and lease rates. Public Real Estate Company Average: Simple average of Essex Property Trust, Inc., AvalonBay Communities, Inc., UDR, Inc., and Equity Residential. 34