Kennedy Wilson Reports Fourth Quarter and Full Year 2012 Earnings Adjusted EBITDA for FY 2012 grows by 41% to $100.3 million; Company increases dividend by 40% to $0.07 per common share for first quarter 2013 Business Wire BEVERLY HILLS, Calif. -- March 12, 2013 Kennedy-Wilson Holdings, Inc. (NYSE: KW) ("Kennedy Wilson," "we," "us," "our," or the "Company"), an international real estate investment and services company, today reported a fourth quarter 2012 net income attributable to common shareholders of $8.9 million (or $0.15 and $0.14 per basic and diluted share, respectively) compared to a net income attributable to common shareholders of $8.0 million (or $0.17 and $0.14 per basic and diluted share, respectively) for the same period in 2011. Net income attributable to common shareholders, adjusted for stock-based compensation expense, was $12.0 million (or $0.20 per basic share) compared to a net income of $9.3 million for the same period in 2011 (or $0.20 per basic share). Full year 2012 net loss attributable to common shareholders was $3.9 million (or $0.07 per basic and diluted share) compared to a loss of $2.4 million (or $0.05 per basic and diluted share) for the same period in 2011. Net income attributable to common shareholders for the full year 2012, adjusted for stock-based compensation expense and common stock issuance discount treated as preferred dividend (for 2011), was $4.3 million (or $0.08 per basic share) compared to net income of $3.3 million (or $0.08 per basic share) for the same period in 2011. The Company's earnings before interest, taxes, depreciation, and stock-based compensation expense ("Adjusted EBITDA") for the fourth quarter of 2012 was $44.9 million, a 51% increase from $29.7 million for the same period in 2011. The Company's Adjusted EBITDA for the full year ended December31, 2012 was $100.3 million, a 41% increase from $71.2 million for the same period 2011. "The company had a very active and successful fourth quarter with more than $1.3 billion of acquisitions in the U.S., United Kingdom and Ireland," said William McMorrow, chairman and CEO of Kennedy Wilson. "Our key operating metrics and recurring cash flow are improving each quarter, and we continue to see significant investment opportunities in our core markets." The company also announced that it will pay a dividend of $0.07 per share, a 40% increase from the previous quarter, to common shareholders of record as of March 22, 2013 with a payment date of April 2, 2013. The quarterly payment equates to an annual dividend of $0.28 per common share. Kennedy Wilson Recent Highlights Investments business Investment Account *As of December31, 2012, our investment account (Kennedy Wilson's equity in real estate, joint ventures, loan investments and marketable securities, less mortgage debt) increased by 42% to $828.3 million from $582.8 million at December31, 2011. This change was comprised of approximately $469.6 million (including $230.3 million during the fourth quarter) of cash contributed to, offset by income earned on investments and approximately $224.0 million (including $60.0 million during the fourth quarter) of cash distributed from investments. *As of December31, 2012, the Company and its equity partners owned 16.1 million rentable square feet of real estate including 14,764 apartment units and 30 commercial properties. Additionally, as of December31, 2012, the Company and its equity partners owned $2.2 billion in loans secured by real estate and over 3,300 acres of land. Operating metrics *During the three months ended December31, 2012, our investments business achieved an Adjusted EBITDA of $42.0 million, a 159% increase from $16.1 million for the same period in 2011. *During the year ended December31, 2012, our investments business achieved an Adjusted EBITDA of $88.5 million, a 68% increase from $52.7 million for the same period in 2011. *During the year ended December 31, 2012, based on 9,015 same property multifamily units, rental revenues and net operating income increased by 3.6% and 5.9%, respectively, while percentage leased decreased by 0.2% from 2011. In addition, based on 2.2 million square feet of same property commercial real estate, rental revenues, net operating income and occupancy increased by 9.9%, 13.2% and 5.1%, respectively. Acquisition/disposition program *From January 1, 2010 through December31, 2012, the Company and its equity partners, acquired approximately $8.0 billion of real estate related investments (includes unpaid principal balance of loan purchases). During 2012, the Company and its equity partners acquired $2.9 billion of real estate related investments. This includes $1.4 billion of real estate and $1.5 billion of loans secured by real estate in which we invested $206.1 million and $196.2 million, respectively. *During the year ended December 31, 2012, the Company and its equity partners sold six multifamily properties (through property sales and sale of equity interest) located in the Western U.S. for a total of $251.7 million, which resulted in a total gain of $33.7 million, of which our share was $10.1 million ($20.7 million of our equity invested). Property level debt financing *During the year ended December 31, 2012, the Company and its equity partners completed approximately $928.7 million of property financings and re-financings at an average interest rate of 3.8% and a weighted average maturity of 6.0 years. *During the year ended December 31, 2011, the Company and its equity partners completed approximately $1.6 billion of property financings and re-financings at an average interest rate of 4.2% and a weighted average maturity of 3.3 years. Key Investment Updates UK Loan Pool *Our current equity in this investment is $60.4 million; we own 12.5% before carried interest. *In December 2011, we and our equity partners acquired a loan pool secured by real estate located in the United Kingdom with an unpaid principal balance of $2.1 billion. As of December31, 2012, the unpaid principal balance was $765.8 million due to loan resolutions of approximately $1.3 billion, representing 64% of the pool. The total debt incurred at the venture level at the time of purchase of these loans was $323.4 million with a maturity date of October 2014. As a result of the loan resolutions, the venture level debt has been paid down by $297.6 million to $25.8 million as of December31, 2012. KW Residential, LLC *Our current equity in this investment is $102.7 million; we own 40.9% before carried interest. *Maintained 96.4% occupancy in 50 apartment buildings with over 2,400 units. *Since Fairfax Financial became our partner in the Japanese apartment portfolio in September 2010, we have distributed a total of $56.5 million, of which our share was $26.4 million. Services business *Management and leasing fees and commissions decreased by 42% to $17.8 million for the three months ended December31, 2012 from $30.8 million for the same period in 2011. *During the three months ended December31, 2012, our services business achieved an EBITDA of $9.0 million, a 53% decrease from $19.2 million for the same period in 2011. *Management and leasing fees and commissions decreased by 7% to $53.3 million for the year ended December31, 2012 from $57.1 million for the same period in 2011. Included in management and leasing fees and commissions for the year ended December31, 2012 and 2011 are $4.4 million and $21.6 million, respectively, of acquisition fees related to the acquisition of the Bank of Ireland stock and the UK loan pool in 2011. Excluding the acquisition fees, the Company achieved a 38% increase in management and leasing fees and commissions for the year ended December31, 2012 as compared to the same period in 2011. *During the year ended December31, 2012, our services business achieved an EBITDA of $20.2 million, a 22% decrease from $25.7 million for the same period in 2011. Excluding the acquisition fees related to the acquisition of the Bank of Ireland stock and the UK loan pool in 2011 of $4.4 million and $21.6 million for the year ended December31, 2012 and 2011, respectively, the Company achieved a 282% increase in its services EBITDA for the year ended December31, 2012 as compared to the same period in 2011. Corporate financing *In July 2012, the Company issued 8.6 million shares of common stock primarily to institutional investors, resulting in gross proceeds of $112.1 million, of which $40.0 million was used to pay off the outstanding balance on our line of credit. *During the three months ended December31, 2012, the Company issued $155.0 million of senior notes. Subsequent events *Subsequent to December31, 2012, we have acquired or have entered into contracts to acquire approximately $1.2 billion of real estate related investments which include 1.6 million rentable square feet of real estate, comprised of 725 apartment units and one commercial property along with $727.6 million of loans secured by real estate and 301 residential lots. We expect the acquisitions to be joint venture investments. *Subsequent to December 31, 2012, KW Residential, LLC settled several Japanese yen related hedges resulting in cash proceeds of $23.7 million to the joint venture, of which our share was $10.6 million. *In December 2012, we invested $43.6 million of our equity and borrowed $79.3 million to acquire a loan secured by a shopping center in the United Kingdom. Additionally, in partnership with an institutional investor, we acquired a loan pool with an unpaid principal balance of $232.3 million, comprised of seven loans secured by 23 underlying properties in the United Kingdom. Our investment in the pool totaled $16.0 million. Subsequent to December 31, 2012, we sold 50% of our interest in both investments to an institutional investor. As a result of the sale, the loan secured by a shopping center will no longer be consolidated. *During March 2013, we drew $35 million on our unsecured credit facility. Conference Call and Webcast Details The company will hold a live conference call and webcast to discuss results at 7:00 a.m. PT/ 10:00 a.m. ET on Wednesday, March 13. The direct dial-in number for the conference call is (800) 706-7745 for U.S. callers and (617) 614-3472 for international callers. The confirmation number for the live call is 14209752. 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. callers and (617) 801-6888 for international callers. The passcode for the replay is 20403213. The webcast will be available at: http://edge.media-server.com/m/p/rgvcnd5k/lan/en. 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 24 offices in the U.S., U.K., Ireland, Spain and Japan. The company offers a comprehensive array of real estate services including auction, conventional sales, property services, research and investment management. Through its fund management and separate account businesses, Kennedy Wilson is a strategic investor of real estate investments in the U.S., U.K., Ireland and Japan. For further information on Kennedy Wilson, please visit www.kennedywilson.com. Forward-Looking Statements Statements made by us in this report and in other reports and statements released by us that are not historical facts constitute "forward-looking statements" within the meaning of Section27A of the Securities Act of 1933, as amended (the "Securities Act") and Section21 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking 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. Disclosures that use words such as "believe," "anticipate," "estimate," "intend," "could," "plan," "expect," "project" or the negative of these, as well as similar expressions, are intended to identify forward-looking statements. These statements are not guarantees of future performance, rely on a number of assumptions concerning future events, many of which are outside of our control, and involve known and unknown risks and uncertainties that could cause our actual results, performance or achievement, or industry results, to differ materially from any future results, performance or achievements, expressed or implied by such forward-looking statements. These risks and uncertainties may include these factors and the risks and uncertainties described elsewhere in this report and other filings with the Securities and Exchange Commission (the "SEC"), including the Item1A. "Risk Factors" section of our Annual Report on Form 10-K for the year ended December31, 2011. 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 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, 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 (Pro Forma Statements of Operations, Adjusted Net Loss Attributable to Kennedy Wilson Common Shareholders, Basic Adjusted Net Loss Attributable to Kennedy Wilson Common Shareholders Per Share, EBITDA and Adjusted EBITDA). Additionally, there are certain revenue and expense line items in our pro forma consolidated statements of operations or income that would otherwise be classified as discontinued operations on a GAAP statement. Such information is reconciled to its closest GAAP measure in accordance with the SEC rules and is included in the attached supplemental tables. 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. Kennedy-Wilson Holdings, Inc. and Subsidiaries Consolidated Balance Sheets December 31, 2012 2011 Assets Cash and cash $ 120,855,000 $ 115,926,000 equivalents Short term investments 10,000,000 — Accounts receivable 3,647,000 3,114,000 Accounts receivable—related 22,393,000 15,612,000 parties Notes receivable 136,607,000 7,938,000 Notes receivable—related — 33,269,000 parties Real estate, net of accumulated 289,449,000 115,880,000 depreciation Investments in joint 543,193,000 343,367,000 ventures Investments in loan 95,601,000 89,951,000 pool participations Marketable securities — 23,005,000 Other assets 38,079,000 20,749,000 Goodwill 23,965,000 23,965,000 Total assets $ 1,283,789,000 $ 792,776,000 Liabilities Accounts payable $ 1,762,000 $ 1,798,000 Accrued expenses and 29,417,000 24,262,000 other liabilities Accrued salaries and 24,981,000 14,578,000 benefits Deferred tax liability 22,671,000 18,437,000 Mortgage loans and 236,538,000 30,748,000 notes payable Senior notes payable 409,640,000 249,385,000 Junior subordinated 40,000,000 40,000,000 debentures Total liabilities 765,009,000 379,208,000 Equity Cumulative Preferred stock: 6.00% Series A, — — 100,000 shares 6.45% Series B, 32,550 — — shares Common stock 6,000 5,000 Additional paid-in 512,835,000 407,335,000 capital Retained earnings (5,910,000 ) 9,708,000 (accumulated deficit) Accumulated other 12,569,000 5,035,000 comprehensive income Shares held in (9,856,000 ) (11,848,000 ) treasury Total Kennedy-Wilson Holdings, Inc. 509,644,000 410,235,000 stockholders’ equity Noncontrolling 9,136,000 3,333,000 interests Total equity 518,780,000 413,568,000 Total liabilities and $ 1,283,789,000 $ 792,776,000 equity See accompanying notes to consolidated financial statements. Kennedy-Wilson Holdings, Inc. and Subsidiaries Consolidated Statements of Operations For the Three Months Ended For the Year Ended December 31, December 31, 2012 2011 2012 2011 Revenue Management and $ 10,996,000 $ 9,308,000 $ 40,304,000 $ 27,116,000 leasing fees Commissions 6,790,000 21,531,000 12,955,000 29,960,000 Sale of real estate 996,000 — 2,271,000 417,000 Rental and other 4,094,000 1,781,000 8,526,000 5,140,000 income Total revenue 22,876,000 32,620,000 64,056,000 62,633,000 Operating expenses Commission and 874,000 950,000 4,550,000 3,965,000 marketing expenses Compensation and 25,176,000 16,567,000 55,834,000 41,129,000 related expenses Cost of real estate 955,000 — 2,230,000 397,000 sold General and 5,797,000 5,273,000 19,448,000 14,455,000 administrative Depreciation and 2,034,000 970,000 4,937,000 2,798,000 amortization Rental operating 1,858,000 1,060,000 4,496,000 3,308,000 expenses Total operating 36,694,000 24,820,000 91,495,000 66,052,000 expenses Equity in joint 9,055,000 5,346,000 21,527,000 12,507,000 venture income Interest income from loan pool 2,130,000 2,051,000 9,256,000 7,886,000 participations and notes receivable Operating (loss) (2,633,000 ) 15,197,000 3,344,000 16,974,000 income Non-operating income (expense) Interest income 435,000 1,072,000 2,938,000 2,306,000 Acquisition related 25,476,000 — 25,476,000 6,348,000 gain Gain on sale of marketable 1,422,000 — 4,353,000 — securities Acquisition-related (675,000 ) — (675,000 ) — expenses Interest expense (8,616,000 ) (6,634,000 ) (28,595,000 ) (20,507,000 ) Income from continuing operations before 15,409,000 9,635,000 6,841,000 5,121,000 (provision for) benefit from income taxes (Provision for) benefit from income (4,913,000 ) (148,000 ) 208,000 2,014,000 taxes Income from continuing 10,496,000 9,487,000 7,049,000 7,135,000 operations Discontinued Operations Income from discontinued — 8,000 2,000 8,000 operations, net of income taxes Gain (loss) from sale of real — 335,000 (212,000 ) 335,000 estate, net of income taxes Net income 10,496,000 9,830,000 6,839,000 7,478,000 Net income (loss) attributable to the 401,000 163,000 (2,589,000 ) (1,132,000 ) noncontrolling interests Net income attributable to 10,897,000 9,993,000 4,250,000 6,346,000 Kennedy-Wilson Holdings, Inc. Preferred stock dividends and (2,036,000 ) (2,036,000 ) (8,144,000 ) (8,744,000 ) accretion of issuance costs Net income (loss) attributable to Kennedy-Wilson $ 8,861,000 $ 7,957,000 $ (3,894,000 ) $ (2,398,000 ) Holdings, Inc. common shareholders Basic earnings per share Income (loss) per basic - continuing $ 0.15 $ 0.16 $ (0.07 ) $ (0.06 ) operations Income (loss) per basic - — 0.01 — 0.01 discontinued Earnings (loss) per $ 0.15 $ 0.17 $ (0.07 ) $ (0.05 ) share - basic ^(a) Weighted average shares outstanding 60,450,450 47,412,858 55,285,833 42,415,770 for basic Diluted earnings per share Income (loss) per diluted - $ 0.14 $ 0.13 $ (0.07 ) $ (0.06 ) continuing operations Income (loss) per diluted - — 0.01 — 0.01 discontinued Earnings per share $ 0.14 $ 0.14 $ (0.07 ) $ (0.06 ) - diluted ^(a) Weighted average shares outstanding 72,266,197 58,896,137 55,285,833 42,415,770 for diluted Dividends declared $ 0.20 $ 0.11 $ 0.05 $ 0.04 per common share _________ ^(a) EPS amounts may not add due to rounding. Kennedy-Wilson Holdings, Inc. and Subsidiaries Adjusted Net Loss Attributable to Kennedy Wilson Common Shareholders Three Months Ended Year Ended December 31, December 31, 2012 2011 2012 2011 Net income (loss) attributable to $ 8,861,000 $ 7,957,000 $ (3,894,000 ) $ (2,398,000 ) Kennedy-Wilson Holdings, Inc. common shareholders Non-GAAP adjustments: Add back: Stock based 3,147,000 1,294,000 8,147,000 5,055,000 compensation Common stock issuance discount — — — 600,000 treated as preferred dividend Adjusted Net Income Attributable to $ 12,008,000 $ 9,251,000 $ 4,253,000 $ 3,257,000 Kennedy Wilson Holdings, Inc. Common Shareholders Basic weighted average number of 60,450,450 47,412,858 55,285,833 42,415,770 common shares outstanding Basic Adjusted Net Loss Attributable to $ 0.20 $ 0.20 $ 0.08 $ 0.08 Kennedy Wilson Holdings, Inc. Common Shareholders Per Share Kennedy-Wilson Holdings, Inc. and Subsidiaries EBITDA and Adjusted EBITDA Three Months Ended Year Ended December 31, December 31, 2012 2011 2012 2011 Net income $ 10,496,000 $ 9,830,000 $ 6,839,000 $ 7,478,000 Non-GAAP adjustments: Add back: Interest 8,616,000 6,634,000 28,595,000 20,507,000 expense Kennedy Wilson's share of interest expense included in investment 6,048,000 8,472,000 29,412,000 23,453,000 in joint ventures and loan pool participations Depreciation and 2,034,000 970,000 4,937,000 2,798,000 amortization Kennedy Wilson's share of depreciation and amortization 9,614,000 2,342,000 22,599,000 13,900,000 included in investment in joint ventures Provision for (benefit from) 4,913,000 148,000 (208,000 ) (2,014,000 ) income taxes EBITDA 41,721,000 28,396,000 92,174,000 66,122,000 Stock-based 3,147,000 1,294,000 8,147,000 5,055,000 compensation Adjusted $ 44,868,000 $ 29,690,000 $ 100,321,000 $ 71,177,000 EBITDA Contact: Kennedy Wilson Christina Cha Vice President of Corporate Communication 310-887-6294 firstname.lastname@example.org www.kennedywilson.com
Kennedy Wilson Reports Fourth Quarter and Full Year 2012 Earnings
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