Kennedy Wilson Reports Fourth Quarter and Full Year 2010 Earnings

BEVERLY HILLS, Calif. (March 14, 2011) – Kennedy-Wilson Holdings, Inc. (NYSE: KW) (“Kennedy Wilson,” “Company,” "us" and "we"), an international real estate investment and services company, today reported fourth quarter 2010 net income attributable to Kennedy-Wilson Holdings, Inc. common shareholders of $0.3 million (or $0.01 per basic and diluted share). Adjusted net income attributable to Kennedy-Wilson Holdings, Inc. common shareholders, adjusted for non-cash stock based compensation, was $2.4 million (or $0.06 per basic share). The Company’s adjusted earnings before interest, taxes, depreciation and amortization and non-cash stock based compensation for the fourth quarter 2010 was $14.3 million (or $0.37 per basic share).

The Company's full year 2010 net loss attributable to Kennedy-Wilson Holdings, Inc. common shareholders was $1.1 million (or $0.03 per basic and diluted share). The Company’s full year adjusted net income, attributable to Kennedy-Wilson Holdings, Inc. common shareholders, adjusted for loss on early extinguishment of corporate debt, merger related compensation expense and non-cash stock based compensation, was $14.1 million (or $0.36 per basic share). The Company’s full year adjusted earnings before interest, taxes, depreciation and amortization, loss on early extinguishment of corporate debt, merger related compensation expense and non-cash stock based compensation expense was $58.4 million (or $1.50 per basic share).

Following are the Company’s key achievements in 2010:

Strengthened balance sheet

  • Our book equity increased by 74% to $313 million at December 31, 2010 from $179 million as of December 31, 2009.
  • Our investment account (Kennedy Wilson's equity in real estate and loan investments) increased by 72% to $364 million at December 31, 2010 from $212 million as of December 31, 2009.
  • The amount available for us to borrow under our line of credit facility increased to $75 million from $30 million in 2010.
  • We decreased our debt to book equity to 0.4x at December 31, 2010 from 0.7x at December 31, 2009, with a long term strategy of maintaining modest leverage.

Improved operating metrics

  • We achieved a FY 2010 Adjusted EBITDA of $58 million: our best year in history versus an Adjusted EBITDA in 2009 of $37 million, an increase of 58%.
  • Our investments segment Adjusted EBITDA for 2010 increased by 47% to $56 million from $38 million for FY 2009.
  • Our services segment Adjusted EBITDA for FY 2010 increased by 164% to $9 million from $4 million for FY 2009.

Capital raising success and robust acquisition program

  • Since and including our public listing in November 2009, we have raised $221 million of equity for us and over $1 billion of equity partner capital (including commitments) for our acquisition program.
  • In 2010, we closed $2.025 billion of real estate and debt acquisitions through direct and joint venture investments (including approximately $1.3 billion of multifamily acquisitions and $650 million of debt purchases secured by real estate). These acquisitions were all in our target markets.

Significant multifamily platform

  • Our current multifamily platform, owned directly and through joint ventures including two deals that were in escrow as of December 31, 2010 and have subsequently closed, consists of 11,971 units within 78 apartment communities. The units are located in California (50%), the Pacific Northwest (30%) and Japan (20%).
  • As of December 31, 2010, our multifamily portfolio was 96% occupied and on a trailing twelve month basis (annualized for communities purchased mid-year) produced a net operating income of $103 million. As of December 31, 2010, the debt associated with these properties was approximately $1.3 billion and our equity interest in the portfolio was approximately 32%. In many cases, in addition to our ownership percentage, we have a promoted interest in the profits of these investments. Management believes that our multifamily investments are in supply constrained markets which will experience significant rent growth over the next several years.
  • We increased our investment in our Japanese multifamily subsidiary to 41.5% as of December 31, 2010 from 35.0% as of December 31, 2009; our Japanese portfolio is currently 96% occupied and our subsidiary has a currency gain in excess of $50 million.

Accessed debt financing

  • We took advantage of the historically low interest rate environment to reduce our cost of debt at the corporate and joint venture levels.
  • We borrowed in excess of $750 million of joint venture debt through acquisition financing and strategic property refinancing.

Expansion of service business

  • Our management and leasing fees increased by 11% to $21 million for FY 2010 from $19 million for FY 2009 driven primarily by increased asset management fees earned through our acquisition activities.
  • Our commissions increased by 140% to $12 million for FY 2010 from $5 million for FY 2009 driven primarily by increased auction commissions and acquisition fees.
  • Our assets under management (owned and third-party) total approximately $7 billion as of December 31, 2010.
  • We auctioned and conventionally sold over 40 projects in three countries and 18 states including California, Washington, Hawaii, Oregon, Texas, Nevada, Florida, Georgia, and North Carolina.
  • We conducted commercial auctions, signaling the transition of the current real estate cycle.
  • We added numerous new accounts to our property management business through organic growth and the acquisition of Sachse Real Estate.
  • Our services business sourced several key acquisitions for the investment division through relationships with bank clients.

“Kennedy Wilson reached a number of milestones in 2010,” stated William McMorrow, chairman and CEO of Kennedy Wilson. “Our year end results reflect the hard work and dedication of our people as well as the strength of our investments and services platforms. We transitioned into 2011 with great momentum, acquiring $215 million of multifamily properties and continuing to move forward on a strong pipeline of deals.”

Conference Call and Webcast Details
The Company will hold a live conference call and webcast to discuss results at 7:00 a.m. Pacific Time/ 10:00 a.m. Eastern Time on Tuesday, March 15th.

The direct dial-in number for the conference call is (866) 203-3436 for U.S. and Canada callers and (617) 213-8849 for international callers. The access code for the live call is 17981018.

A replay of the call will be available for one week beginning two hours after the live call and can be accessed by (888) 286-8010 for U.S. and Canada callers and (617) 801-6888 for international callers. The access code for the replay is 52878366.

The webcast will be available at: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=217898&eventID=3833349.  A replay of the webcast will be available two hours after the original webcast on the Company’s investor relations web site for one year.

About Kennedy Wilson
Founded in 1977, Kennedy Wilson is an international real estate investment and services company headquartered in Beverly Hills, CA with 22 offices in the U.S. and Japan. The company offers a comprehensive array of real estate services including property and asset management, brokerage and auction services, and construction and trust services. Through its fund management and separate account businesses, Kennedy Wilson is a strategic investor and manager of real estate investments in the U.S. and Japan. For further information on Kennedy Wilson, please visit www.kennedywilson.com.

Forward-Looking Statements
This news release contains forward-looking statements as well as historical information. Statements of goals and strategies and words such as “plan,” “believe,” “anticipate,” “expect,” “objectives,” “forecast,” “predict” and other similar words are intended to

identify forward-looking statements.  These forward looking statements are included in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and involve risks, uncertainties and other factors that may cause the Company's actual results, performance, or financial condition to be materially different from any results, performance, or financial condition suggested by the statements in this news release. These risks and uncertainties may include the risk factors described in the Company’s  filings with the Securities and Exchange Commission (the “SEC”), including in the Item 1A. “Risk Factors” section of the Company’s annual report on Form 10-K for the year ended December 31, 2009. Any such forward-looking statements, whether made in this news release or elsewhere, should be considered in the context of the various disclosures made by the Company about its business including, without limitation, the risk factors discussed in the Company’s filings with the SEC. Except as required under the federal securities laws and the rules and regulations of the SEC, the Company does not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, changes in assumptions, or otherwise.

Non-GAAP Financial Information

In addition to the results reported in accordance with U.S. generally accepted accounting principles (GAAP) included within this press release, Kennedy Wilson has provided certain information, which includes non-GAAP financial measures (proforma statement of income, adjusted net income, adjusted earnings per share and adjusted EBITDA).  Such information is reconciled to its closest GAAP measure in accordance with the SEC rules and is included in the attached supplemental data.  Management believes that these non-GAAP financial measures are useful to both management and the Company’s shareholders in their analysis of the business and operating performance of the Company.  Management also uses this information for operational planning and decision-making purposes.  Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measures.  Additionally, non-GAAP financial measures as presented by Kennedy Wilson may not be comparable to similarly titled measures reported by other companies.

Tables Follow


Kennedy-Wilson Holdings, Inc.
Consolidated Balance Sheets

 

 

December 31,

 

 

2010

 

2009

Assets

 

 

 

 

Cash and cash equivalents

 

 

$46,968,000

 

 

 

$57,784,000

 

Accounts receivable

 

2,097,000

 

 

887,000

 

Accounts receivable—related parties

 

7,062,000

 

 

4,278,000

 

Income tax receivable

 

 

 

6,848,000

 

Notes receivable

 

20,264,000

 

 

541,000

 

Notes receivable—related parties

 

3,837,000

 

 

6,644,000

 

Real estate, net of accumulated depreciation

 

82,701,000

 

 

40,581,000

 

Real estate available for sale

 

 

 

2,472,000

 

Investments in joint ventures ($34,687,000 and $19,612,000 carried at fair value as of December 31, 2010 and    2009, respectively)

 

266,886,000

 

 

185,252,000

 

Investment in loan pool participations

 

25,218,000

 

 

 

Other assets

 

8,850,000

 

 

7,005,000

 

Goodwill

 

23,965,000

 

 

23,965,000

 

Total assets

 

$

487,848,000

 

 

$

336,257,000

 

Liabilities and equity

 

 

 

 

Liabilities

 

 

 

 

Accounts payable

 

 

$1,504,000

 

 

 

$860,000

 

Accrued expenses and other liabilities

 

9,064,000

 

 

8,648,000

 

Accrued salaries and benefits

 

10,721,000

 

 

4,401,000

 

Deferred tax liability

 

25,871,000

 

 

15,439,000

 

Notes payable

 

24,783,000

 

 

26,133,000

 

Borrowings under line of credit

 

27,750,000

 

 

10,000,000

 

Mortgage loans payable

 

35,249,000

 

 

23,968,000

 

Convertible subordinated debt

 

 

 

27,472,000

 

Junior subordinated debentures

 

40,000,000

 

 

40,000,000

 

Total liabilities

 

$174,942,000

 

 

$156,921,000

 

Equity

 

 

 

 

Cumulative Preferred stock, $0.0001 par value, 1,000,000 shares authorized, $1,000 per share liquidation preference:

 

 

 

 

6.00% Series A, 100,000 and 0 shares issued and outstanding as of December 31, 2010 and 2009, respectively, mandatorily convertible on May 19, 2015

 

 

 

 

6.452% Series B, 32,550 and 0 shares issued and outstanding as of December 31, 2010 and 2009, respectively, mandatorily convertible on November 18, 2018

 

 

 

 

Common stock, $0.0001 par value, 125,000,000 and 80,000,000 shares authorized, 41,291,596 and 41,177,658 shares issued and 40,179,906 and 41,177,658 shares outstanding as of December 31, 2010 and 2009, respectively

 

4,000

 

 

4,000

 

Additional paid-in capital

 

284,669,000

 

 

155,878,000

 

Retained earnings

 

17,777,000

 

 

18,829,000

 

Accumulated other comprehensive income

 

9,043,000

 

 

2,603,000

 

Shares held in treasury at cost, $0.0001 par value, 1,111,690 and 0 held as of December 31, 2010 and 2009, respectively

 

(11,301,000

)

 

 

Total Kennedy-Wilson Holdings, Inc. stockholders’ equity

 

300,192,000

 

 

177,314,000

 

Noncontrolling interests

 

12,714,000

 

 

2,022,000

 

Total equity

 

312,906,000

 

 

179,336,000

 

Total liabilities and equity

 

 

$487,848,000

 

 

 

$336,257,000

 

 

Kennedy-Wilson Holdings, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)

 

Year ended December 31,

 

 

2010

 

2009

 

2008

Revenue

 

 

 

 

 

 

Management and leasing fees

 

 

$8,913,000

 

 

 

$9,026,000

 

 

 

$10,671,000

 

Management and leasing fees—related party

 

12,417,000

 

 

10,138,000

 

 

8,380,000

 

Commissions

 

6,359,000

 

 

4,204,000

 

 

5,906,000

 

Commissions—related party

 

5,375,000

 

 

727,000

 

 

4,295,000

 

Sale of real estate

 

3,937,000

 

 

52,699,000

 

 

 

Sale of real estate—related party

 

9,535,000

 

 

6,698,000

 

 

 

Rental and other income

 

4,000,000

 

 

2,743,000

 

 

2,973,000

 

Total revenue

 

$50,536,000

 

 

$86,235,000

 

 

$32,225,000

 

Operating expenses

 

 

 

 

 

 

Commission and marketing expenses

 

3,186,000

 

 

3,411,000

 

 

2,827,000

 

Compensation and related expenses

 

38,155,000

 

 

24,789,000

 

 

21,292,000

 

Merger-related compensation and related expenses

 

2,225,000

 

 

12,468,000

 

 

 

Cost of real estate sold

 

2,714,000

 

 

36,179,000

 

 

 

Cost of real estate sold—related party

 

8,812,000

 

 

5,752,000

 

 

 

General and administrative

 

11,314,000

 

 

6,351,000

 

 

6,074,000

 

Merger-related general and administrative

 

 

 

3,652,000

 

 

 

Depreciation and amortization

 

1,618,000

 

 

1,122,000

 

 

920,000

 

Rental operating expense

 

1,913,000

 

 

1,148,000

 

 

1,458,000

 

Total operating expenses

 

$69,937,000

 

 

$94,872,000

 

 

$32,571,000

 

Equity in joint venture income

 

10,548,000

 

 

8,019,000

 

 

10,097,000

 

Interest income from loan pool participations and notes receivable

 

11,855,000

 

 

 

 

 

Operating income (loss)

 

$3,002,000

 

 

$(618,000

)

 

$9,751,000

 

Non-operating income (expense)

 

 

 

 

 

 

Interest income

 

192,000

 

 

102,000

 

 

221,000

 

Interest income—related party

 

662,000

 

 

400,000

 

 

341,000

 

Remeasurement gain

 

2,108,000

 

 

 

 

 

Gain on early extinguishment of mortgage debt

 

16,670,000

 

 

 

 

 

Loss on early extinguishment of corporate debt

 

(4,788,000

)

 

 

 

 

Interest expense

 

(7,634,000

)

 

(13,174,000

)

 

(8,596,000

)

Other than temporary impairment

 

 

 

(328,000

)

 

(445,000

)

Income (loss) before (provision for) benefit from  income taxes

 

10,212,000

 

 

(13,618,000

)

 

1,272,000

 

(Provision for) benefit from income taxes

 

(3,727,000

)

 

3,961,000

 

 

(605,000

)

Net income (loss)

 

6,485,000

 

 

(9,657,000

)

 

667,000

 

Net income attributable to the noncontrolling interests

 

(2,979,000

)

 

(5,679,000

)

 

(54,000

)

Net income (loss) attributable to Kennedy-Wilson Holdings, Inc.

 

3,506,000

 

 

(15,336,000

)

 

613,000

 

Preferred stock dividends and accretion of issuance costs

 

(4,558,000

)

 

 

 

 

Net (loss) income attributable to Kennedy-Wilson Holdings, Inc. common shareholders

 

(1,052,000

)

 

(15,336,000

)

 

613,000

 

Other comprehensive income, net of tax

 

6,440,000

 

 

2,601,000

 

 

240,000

 

Total comprehensive income (loss)

 

$

5,388,000

 

 

$

(12,735,000

)

 

$

853,000

 

Basic income (loss) per share attributable to Kennedy-Wilson Holdings, Inc. coommon shareholders

 

$

(0.03

)

 

$

(0.57

)

 

$

0.03

 

Weighted average shares outstanding for basic (loss) income per share

 

38,978,272

 

 

26,891,304

 

 

22,892,498

 

Diluted income (loss) per share attributable to Kennedy-Wilson Holdings, Inc. common shareholders

 

$

(0.03

)

 

$

(0.57

)

 

$

0.03

 

Weighted average shares outstanding for diluted (loss) income per share

 

38,978,272

 

 

26,891,304

 

 

24,310,299

 

 

Kennedy-Wilson Holdings, Inc.
Proforma Statement of Income
(Unaudited)

Year ended December 31, 2010

Pro Rata

(Non-GAAP)

Unconsolidated

Adjusted

Consolidated

Investments

Total

Management and leasing fees

$21,330,000

$21,330,000

Commissions

11,734,000

11,734,000

Sales of real estate

13,472,000

3,751,000

17,223,000

Rental and other income

4,000,000

46,369,000

50,369,000

Interest income

14,425,000

14,425,000

Total revenue

50,536,000

64,545,000

115,081,000

Commission and marketing expenses

3,186,000

3,186,000

Compensation and related expenses

38,155,000

38,155,000

Merger related expense

2,225,000

2,225,000

Cost of real estate sold

11,526,000

2,473,000

13,999,000

General and administrative

11,314,000

11,314,000

Depreciation and amortization

1,618,000

10,054,000

11,672,000

Rental operating expense

1,913,000

14,959,000

16,872,000

Total operating expenses

69,937,000

27,486,000

97,423,000

Equity in joint venture income

10,548,000

(10,548,000)

Income from loan pool participation

11,855,000

(11,855,000)

Total operating income

3,002,000

14,656,000

17,658,000

Non-operating income (expense)

Interest income

854,000

(854,000)

Remeasurement gain

2,108,000

2,108,000

Gain on extinguishment of debt

16,670,000

16,670,000

Interest expense

(7,634,000)

(13,802,000)

(21,436,000)

Loss on extinguishment of debt

(4,788,000)

(4,788,000)

Income (loss) before income taxes

10,212,000

10,212,000

(Provision for) benefit from income taxes

(3,727,000)

(3,727,000)

Net income

6,485,000

6,485,000

Net income attributable to the noncontrolling interests

(2,979,000)

(2,979,000)

Net income (loss) attributable to Kennedy-Wilson Holdings, Inc.

3,506,000

3,506,000

Preferred stock dividend

(4,558,000)

(4,558,000)

Net income (loss) attributable to Kennedy-Wilson Holdings, Inc. common shareholders

(1,052,000)

(1,052,000)

Other comprehensive income, net of tax

6,440,000

6,440,000

Total comprehensive income (loss)

$5,388,000

$5,388,000

 

Kennedy-Wilson Holdings, Inc.
Earnings Per Share and Adjusted Earnings Per Share
(Unaudited)

 

Three months
ended December 31, 2010

Year ended
December 31, 2010

Net income (loss) attributable to Kennedy-Wilson Inc. common shareholders

$308,000

$(1,052,000)

Basic shares outstanding

38,728,299

38,978,272

GAAP basic and diluted earnings per share

0.01

(0.03)

Net income (loss) attributable to Kennedy-Wilson Inc. common shareholders

308,000

(1,052,000)

Non-GAAP adjustments:

 

 

Plus: Loss from early extinguishment of corporate debt

4,788,000

Plus: Merger-related compensation expense

2,225,000

Plus: Stock based compensation

2,118,000

8,094,000

Adjusted net income

$2,426,000

$14,055,000

Non-GAAP adjusted basic earnings per share

$0.06

$0.36

 

Kennedy-Wilson Holdings, Inc.
Adjusted EBITDA
(Unaudited)

 

Three months
ended December 31, 2010

Year ended
December 31, 2010

 

Adjusted EBITDA:

 

 

 

Net income (loss)

$2,947,000

$6,485,000

 

Add back:

 

 

 

Interest  expense

1,142,000

7,634,000

 

Kennedy Wilson’s share of interest expense included in investment in joint ventures and loan pool participations

5,421,000

13,802,000

 

Depreciation and amortization

421,000

1,618,000

 

Kennedy Wilson’s share of depreciation and amortization included in investment in joint ventures

2,851,000

10,054,000

 

Loss from early extinguishment of corporate debt

4,788,000

 

Income taxes

(608,000)

3,727,000

 

Merger related compensation expense

2,225,000

 

Stock based compensation expense

2,118,000

8,094,000

 

 

$14,292,000

$58,427,000

 

 

 

 

 

Adjusted EBITDA

$14,292,000

$58,427,000

 

Basic shares outstanding

38,728,299

38,978,272

 

Adjusted EBITDA per basic share

$0.37

$1.50

 

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9701 Wilshire Blvd., Suite 700Beverly Hills, CA 90212
Phone:
(310) 887-6400
Fax:
(310) 887-3410