Kennedy Wilson Reports Third Quarter 2020 Results

Rhea-AI Summary

Kennedy-Wilson Holdings (KW) reported a net loss of $25.1 million for Q3 2020, compared to a net income of $20.7 million in Q3 2019. The company's Adjusted EBITDA also saw a significant decline to $76.3 million from $142.5 million year-over-year. Despite low transaction volumes in Q2 and Q3, KW anticipates a more active Q4, highlighted by the sale of Baggot Plaza for $165 million, generating an estimated gain of $85 million. The company's Fee-Bearing Capital rose by 9% to $3.8 billion, further bolstered by significant loan investments totaling $335 million in the quarter.

Positive

• 9% growth in Fee-Bearing Capital, totaling $3.8 billion.
• $335 million in loan investments completed in Q3-20.
• Expected gain of approximately $85 million from the sale of Baggot Plaza.

Negative

• Net loss of $25.1 million in Q3 2020 compared to a profit of $20.7 million in Q3 2019.
• Adjusted EBITDA decreased to $76.3 million from $142.5 million year-over-year.
• Recurring property NOI and fees declined by $4 million in Q3-20.

BEVERLY HILLS, Calif.--(BUSINESS WIRE)--Kennedy-Wilson Holdings, Inc. (NYSE: KW) today reported results for 3Q-2020:

	3Q						YTD
(Amounts in millions, except per share data)	2020			2019			2020			2019
GAAP Results 1
GAAP Net (Loss) Income to Common Shareholders	($25.1)			$20.7			($77.1)			$66.2
Per Diluted Share	(0.18)			0.15			(0.55)			0.47
Non-GAAP Results
Adjusted EBITDA	$76.3			$142.5			$261.1			$450.0
Adjusted Net Income	27.3			73.9			84.1			232.8

1	Includes KW's share of depreciation and amortization totaling $44.8 million and $46.9 million for 3Q-20 and 3Q-19, respectively, and $136.7 million and $142.7 million for YTD-2020 and YTD-2019, respectively.

"The third quarter was highlighted by the stable occupancy and strong rent collections we saw across our suburban multifamily and office portfolio, significant growth of our investment management business and further progress on completing our construction and leasing initiatives," said William McMorrow, Chairman and CEO of Kennedy Wilson. "Despite historically low transactions in Q2 and Q3, we expect a more active fourth quarter during which the majority of our 2020 asset sales will be completed, as evidenced by the sale of Baggot Plaza, a wholly-owned office property in Dublin, Ireland which was sold for $165 million on October 30, 2020 and will generate a gain on sale of approximately $85 million to Kennedy Wilson."

3Q Highlights

• 9% Growth in Fee-Bearing Capital: The Company's Fee-Bearing Capital totaled $3.8 billion as of September 30, 2020, a 9% increase from 2Q-20 and a 27% increase from YE-19. In addition, the Company has approximately $1.7 billion in additional non-discretionary capital with certain strategic partners that is available for investment. If invested, these amounts will be added to the Company's Fee-Bearing Capital.
• Debt Platform Growth: The Company completed loan investments totaling $335 million in 3Q-20, bringing its YTD total to $608 million. The Company has a 12% ownership in its debt platform. There are currently an additional $182 million of loan investments with signed non-binding term sheets that are expected to close in 4Q-20.
• Development and Lease-up Completions: The Company completed the development of Stockley Park, an office property in the UK, and 38° North, a multifamily property in Northern California, which will total $5 million in Estimated Annual NOI upon expected stabilization. The Company also completed the lease-up of Rosewood, a multifamily property in Boise, Idaho, and two commercial properties, Horizon Centre and Malibu Sands, which added $2 million to Estimated Annual NOI. The Company's development and lease-up portfolio totals 4,519 units, 2.8 million commercial square feet, and one hotel and in which the Company has a weighted-average ownership of 59%.
• Strong Liquidity Position: The Company continues to maintain a strong liquidity position with $793 million⁽¹⁾ in cash, cash equivalents, and restricted cash and $300 million available on its revolving credit facility.
• 3Q-20 Adjusted EBITDA of $76 million (vs. $143 million in 3Q-19):
  • KW's share of gains from the sale of real estate, increases in fair value and promotes totaled $9 million in 3Q-20, a decrease of $74 million from 3Q-19.
  • KW's share of recurring property NOI and fees totaled $101 million in 3Q-20 , a decrease of $4 million from 3Q-19.
  • For 3Q-20 general and administrative and compensation and related expenses (excluding share-based compensation) decreased by $10 million or 26% (vs. 3Q-19).
• In-Place Estimated Annual NOI of $410 Million; 81% of which is Multifamily and Office:
  • The multifamily portfolio totals 25,471 stabilized units, with a weighted-average physical occupancy of 94.4% (from 94.5% in 2Q-20). In 3Q, we completed 2,083 leases across our global market-rate multifamily portfolio.
  • The office portfolio totals 10.3 million stabilized square feet with weighted-average physical occupancy of 94.5% (from 95.0% in 2Q-20). In 3Q, we completed 260,000 square feet of leasing activity, including renewals and extensions, across our global office portfolio.
• Sale of Property Services Division: In October, Kennedy Wilson sold its third-party property services and brokerage division, Kennedy-Wilson Properties, Ltd. ("KWP"). KWP had 111 employees with revenues of $11.4 million and expenses of $12.6 million over the last 12 months. Kennedy Wilson's headcount has decreased by 60% primarily driven by the combined sales of KWP and Meyers Research in 2018.
• Same Property Performance:

	3Q - 2020 vs. 3Q - 2019					YTD - 2020 vs. YTD - 2019 1
	Occupancy		Revenue		NOI	Occupancy		Revenue		NOI
Multifamily - Market Rate	0.7%		0.6%		(0.6)%	0.4%		2.0%		1.0%
Multifamily - Affordable	(0.8)%		2.0%		2.5%	(0.4)%		3.6%		4.6%
Commercial	(0.6)%		(3.9)%		(3.6)%	0.2%		(4.1)%		(4.1)%
Total2			(1.4)%		(1.8)%			(0.3)%		(1.1)%

1	The same property performance includes $2.4 million of COVID-19 related bad debt reserves in 3Q-20 (2% of same-property rents) and $5.3 million for YTD-20 (2% of same-property rents).
2	Hotels are excluded from the YTD same store analysis due to being non-operational during 2Q-20. For 3Q-20, the change in Hotel same property revenue was (77.4%) and NOI was (88.2%). If included, the change in total same property revenue for 3Q-20 would be (10.0%), and the change in total same property NOI would be (7.2%).

Rent Collection Update

The following is a summary of KW's share of contractual cash rent collections for 3Q-20. Additionally, the Company's overall rent collections in October are trending in-line with 3Q-20:

Asset Class	3Q-20 Rent Collections	% of Portfolio
Multifamily	98%	57%
Office	96%	29%
Retail(3)	67%	12%
Industrial(3)	84%	2%
Total	93%	100%

3Q-20 Investment Activity

• Capital Investment: In 3Q-20, the Company invested $108 million of cash, allocating 59% to new investments, 24% to capex and development initiatives, and 17% to share repurchases. For YTD-20, the Company invested $232 million of cash, allocating 48% to new investments, 33% to capex and development initiatives, and 19% to share repurchases.
• New Investments: The Company completed $335 million of loan investments in 3Q-20, of which its share was 17%.
• Dispositions: The Company completed $47 million of wholly-owned dispositions in 3Q-20, which generated net cash proceeds of $45 million.

Balance Sheet

• $1.1 billion in Cash and Lines of Credit: As of September 30, 2020, Kennedy Wilson had total cash and cash equivalents of $793 million⁽¹⁾ and $300 million of capacity on its revolving line of credit.
• Global Debt Profile: Kennedy Wilson's share of debt had a weighted average interest rate of 3.7% per annum and a weighted average remaining maturity of 4.2 years, with only 3% maturing before 2022.
• Increase in Existing Share Repurchase Program⁽²⁾ to $500 million: The Company's board of directors authorized an expansion of its existing $250 million share repurchase plan to $500 million. In 3Q-20, Kennedy Wilson repurchased 1.4 million shares at a weighted-average price of $14.67 per share (totaling approximately $20 million). Since the $250 million share repurchase plan was authorized on March 20, 2018, the Company has repurchased and retired 12.9 million shares at a weighted-average price of $18.04 per share, with $18 million remaining under the program as of September 30, 2020.

Subsequent Events

In October, the Company closed on the sale of Baggot Plaza, a wholly-owned 129,000 square foot office property in Dublin, Ireland for $165 million, generating net proceeds of $165 million and a gain on sale of $85 million.

In October, the Company acquired off-market three multifamily properties totaling 880-units in the mountain states region of the Western U.S. for $198 million. The assets were acquired by Kennedy Wilson and various investment vehicles managed by Kennedy Wilson. Rockrimmon, a wholly owned 260-unit community in Colorado Springs, Colorado was acquired for $66 million, representing a $28 million equity investment by Kennedy Wilson. The 220-unit RockVue community in Broomfield, Colorado and the 400-unit Tempe Station community in Tempe, Arizona are held in the company’s co-investment portfolio and Kennedy Wilson has an average ownership of 10% across these two assets. In total, Kennedy Wilson and its equity partners invested $87 million of equity in the portfolio of which Kennedy Wilson's share was $34 million.

In October, Kennedy Wilson Europe Real Estate Limited (“KWE”), a wholly-owned subsidiary of the Company completed its cash tender offer (the “Tender Offer”) for part of its £500 million 3.95% sterling-denominated bonds due 2022 (the “Bonds”). KWE purchased approximately £130 million, or 26%, of its Bonds in the Tender Offer. KWE used cash and £100 million of proceeds from two new property-level financings, each with a fully extended maturity in 2025 and an interest rate of approximately 3.0%, to fund the Tender Offer consideration.

Footnotes

(1)	Includes $40 million of restricted cash and our share of cash held at unconsolidated joint-ventures. Approximately $476 million of our share of cash is in foreign currencies of GBP and EUR, including $407 million which is held at Kennedy Wilson Europe.
(2)	Future purchases under the program may be made in the open market, in privately negotiated transactions, through the net settlement of the company's restricted stock grants or otherwise, with the amount and timing of the repurchases dependent on market conditions and subject to the Company's discretion. The program does not obligate the Company to repurchase any specific number of shares and, subject to compliance with applicable laws, may be suspended or terminated at any time without prior notice.
(3)	The Company has $5.6 million in 3Q 2020 rents outstanding for its retail and industrial portfolio, excluding amounts deferred.

Conference Call and Webcast Details

Kennedy Wilson will hold a live conference call and webcast to discuss results at 7:00 a.m. PT/ 10:00 a.m. ET on Thursday, November 5. The direct dial-in number for the conference call is (844) 340-4761 for U.S. callers and (412) 717-9616 for international callers. A replay of the call will be available for one week beginning one hour after the live call and can be accessed by (877) 344-7529 for U.S. callers and (412) 317-0088 for international callers. The passcode for the replay is 10145822.

The webcast will be available at: https://services.choruscall.com/links/kw201105nbn4Oq6E.html. A replay of the webcast will be available one hour after the original webcast on the Company’s investor relations web site for three months.

About Kennedy Wilson

Kennedy Wilson (NYSE:KW) is a leading global real estate investment company. We own, operate, and invest in real estate both on our own and through our investment management platform. We focus on multifamily and office properties located in the Western U.S., UK, and Ireland. For further information on Kennedy Wilson, please visit www.kennedywilson.com.

Kennedy-Wilson Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in millions)
		September 30, 2020				December 31, 2019
Assets
Cash and cash equivalents		$	727.2			$	573.9
Accounts receivable		50.9				52.1
Real estate and acquired in place lease values (net of accumulated depreciation and amortization of $805.2 and $703.2)		4,786.7				5,080.2
Unconsolidated investments (including $1,114.6 and $1,099.3 at fair value)		1,277.0				1,326.5
Other assets		334.8				271.8
Total assets		$	7,176.6			$	7,304.5
Liabilities
Accounts payable		$	13.3			$	20.4
Accrued expenses and other liabilities		510.6				518.0
Mortgage debt		2,520.1				2,641.0
KW unsecured debt		1,331.3				1,131.7
KWE unsecured bonds		1,284.7				1,274.2
Total liabilities		5,660.0				5,585.3
Equity
Cumulative perpetual preferred stock		—				—
Common stock		—				—
Additional paid-in capital		2,025.1				2,049.7
(Accumulated deficit) retained earnings		(122.5)				46.2
Accumulated other comprehensive loss		(413.7)				(417.2)
Total Kennedy-Wilson Holdings, Inc. shareholders’ equity		1,488.9				1,678.7
Noncontrolling interests		27.7				40.5
Total equity		1,516.6				1,719.2
Total liabilities and equity		$	7,176.6			$	7,304.5

Kennedy-Wilson Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)
(Dollars in millions, except share amounts and per share data)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Revenue
Rental		$	102.2			$	108.3			$	308.8			$	336.1
Hotel		3.1				25.1				10.4				62.9
Sale of real estate		—				—				—				1.1
Investment management and property services fees		8.9				9.6				25.2				27.3
Total revenue		114.2				143.0				344.4				427.4
Expenses
Rental		33.5				39.0				102.2				113.3
Hotel		2.7				17.3				10.9				47.6
Cost of real estate sold		—				—				—				1.2
Commission and marketing		0.9				1.2				2.5				2.9
Compensation and related (includes $7.6, $6.3, $24.5 and $23.9 of share-based compensation)		26.3				35.6				85.1				107.9
General and administrative		8.6				8.4				26.1				30.2
Depreciation and amortization		44.3				46.4				135.1				141.7
Total expenses		116.3				147.9				361.9				444.8
Income from unconsolidated investments, net of depreciation and amortization		14.9				84.0				45.0				131.6
Gain on sale of real estate, net		4.0				6.3				47.7				252.4
Transaction-related expenses		(0.1)				(4.0)				(0.6)				(5.9)
Interest expense		(50.8)				(51.8)				(151.3)				(162.8)
Other (loss) income		1.6				—				1.7				(0.6)
(Loss) income before benefit from (provision for) income taxes		(32.5)				29.6				(75.0)				197.3
Benefit from (provision for) income taxes		12.8				(10.2)				10.3				(35.1)
Net (loss) income		(19.7)				19.4				(64.7)				162.2
Net loss (income) attributable to noncontrolling interests		(1.1)				1.3				0.5				(96.0)
Preferred dividends		(4.3)				—				(12.9)				—
Net (loss) income attributable to Kennedy-Wilson Holdings, Inc. common shareholders		$	(25.1)			$	20.7			$	(77.1)			$	66.2
Basic (loss) earnings per share(1)
(Loss) income per basic		$	(0.18)			$	0.15			$	(0.55)			$	0.47
Weighted average shares outstanding for basic		140,119,442				139,947,518				140,181,438				139,669,971
Diluted (loss) earnings per share
(Loss) income per diluted		$	(0.18)			$	0.15			$	(0.55)			$	0.47
Weighted average shares outstanding for diluted		140,119,442				140,538,139				140,181,438				141,445,947
Dividends declared per common share		$	0.22			$	0.21			$	0.66			$	0.63

(1)	Includes impact of the Company allocating income and dividends per basic and diluted share to participating securities.

Kennedy-Wilson Holdings, Inc.
Adjusted EBITDA
(Unaudited)
(Dollars in millions)
The table below reconciles net income attributable to Kennedy-Wilson Holdings, Inc. common shareholders to Adjusted EBITDA, using Kennedy Wilson’s pro-rata share amounts for each adjustment item.
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
Net (loss) income attributable to Kennedy-Wilson Holdings, Inc. common shareholders		$	(25.1)			$	20.7			$	(77.1)			$	66.2
Non-GAAP adjustments:
Add back (Kennedy Wilson's Share)(1):
Interest expense		57.5				58.4				173.7				182.1
Depreciation and amortization		44.8				46.9				136.7				142.7
(Benefit from) provision for income taxes		(12.8)				10.2				(9.6)				35.1
Preferred dividends		4.3				—				12.9				—
Share-based compensation		7.6				6.3				24.5				23.9
Adjusted EBITDA		$	76.3			$	142.5			$	261.1			$	450.0
(1) See Appendix for reconciliation of Kennedy Wilson's Share amounts.

The table below provides a detailed reconciliation of net income to Adjusted EBITDA.
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
Net (loss) income		$	(19.7)			$	19.4			$	(64.7)			$	162.2
Non-GAAP adjustments:
Add back:
Interest expense		50.8				51.8				151.3				162.8
Kennedy Wilson's share of interest expense included in unconsolidated investments		7.5				7.7				24.7				23.6
Depreciation and amortization		44.3				46.4				135.1				141.7
Kennedy Wilson's share of depreciation and amortization included in unconsolidated investments		1.7				2.1				5.2				6.4
(Benefit from) provision for income taxes		(12.8)				10.2				(10.3)				35.1
Kennedy Wilson's share of taxes included in unconsolidated investments		—				—				1.1				—
Share-based compensation		7.6				6.3				24.5				23.9
EBITDA attributable to noncontrolling interests(1)		(3.1)				(1.4)				(5.8)				(105.7)
Adjusted EBITDA		$	76.3			$	142.5			$	261.1			$	450.0

(1)

EBITDA attributable to noncontrolling interest includes $1.2 million and $1.6 million of depreciation and amortization, $0.8 million and $1.1 million of interest, and $0.0 million and $0.0 million of taxes, for the three months ended September 30, 2020 and 2019, respectively. EBITDA attributable to noncontrolling interest includes $3.6 million and $5.4 million of depreciation and amortization, $2.3 million and $4.3 million of interest, and $0.4 million and $0.0 million of taxes for the nine months ended September 30, 2020 and 2019, respectively.

Kennedy-Wilson Holdings, Inc.
Adjusted Net Income
(Unaudited)
(Dollars in millions, except share data)
The table below reconciles net income attributable to Kennedy-Wilson Holdings, Inc. common shareholders to Adjusted Net Income, using Kennedy Wilson’s pro-rata share amounts for each adjustment item.
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
Net (loss) income attributable to Kennedy-Wilson Holdings, Inc. common shareholders		$	(25.1)			$	20.7			$	(77.1)			$	66.2
Non-GAAP adjustments:
Add back (Kennedy Wilson's Share)(1):
Depreciation and amortization		44.8				46.9				136.7				142.7
Share-based compensation		7.6				6.3				24.5				23.9
Adjusted Net Income		$	27.3			$	73.9			$	84.1			$	232.8
Weighted average shares outstanding for diluted		140,119,442				140,538,139				140,181,438				141,445,947
(1) See Appendix for reconciliation of Kennedy Wilson's Share amounts.

The table below provides a detailed reconciliation of net income to Adjusted Net Income.
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
Net (loss) income		$	(19.7)			$	19.4			$	(64.7)			$	162.2
Non-GAAP adjustments:
Add back (less):
Depreciation and amortization		44.3				46.4				135.1				141.7
Kennedy Wilson's share of depreciation and amortization included in unconsolidated investments		1.7				2.1				5.2				6.4
Share-based compensation		7.6				6.3				24.5				23.9
Preferred dividends		(4.3)				—				(12.9)				—
Net income attributable to the noncontrolling interests, before depreciation and amortization(1)		(2.3)				(0.3)				(3.1)				(101.4)
Adjusted Net Income		$	27.3			$	73.9			$	84.1			$	232.8
Weighted average shares outstanding for diluted		140,119,442				140,538,139				140,181,438				141,445,947

(1)	Includes $1.2 million and $1.6 million of depreciation and amortization for the three months ended September 30, 2020 and 2019, respectively, and $3.6 million and $5.4 million of depreciation and amortization for the nine months ended September 30, 2020 and 2019, respectively.

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 Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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," "may," "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 the factors and the risks and uncertainties described elsewhere in this report and other filings with the Securities and Exchange Commission (the "SEC"), including the Item 1A. "Risk Factors" sections of each our Annual Report on Form 10-K for the year ended December 31, 2019, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as amended by our subsequent filings with the SEC. 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.

Common Definitions

• “KWH,” "KW," “Kennedy Wilson,” the "Company," "we," "our," or "us" refers to Kennedy-Wilson Holdings, Inc. and its wholly-owned subsidiaries.
• “Adjusted EBITDA” represents net income before interest expense, our share of interest expense included in income from investments in unconsolidated investments, depreciation and amortization, our share of depreciation and amortization included in income from unconsolidated investments, loss on early extinguishment of corporate debt and income taxes, share-based compensation expense for the Company and EBITDA attributable to noncontrolling interests.
  Please also see the reconciliation to GAAP in the Company’s supplemental financial information included in this release and also available at www.kennedywilson.com. Our management uses Adjusted EBITDA to analyze our business because it adjusts net income for items we believe do not accurately reflect the nature of our business going forward or that relate to non-cash compensation expense or noncontrolling interests. Such items may vary for different companies for reasons unrelated to overall operating performance. Additionally, we believe Adjusted EBITDA is useful to investors to assist them in getting a more accurate picture of our results from operations. However, Adjusted EBITDA is not a recognized measurement under GAAP and when analyzing our operating performance, readers should use Adjusted EBITDA in addition to, and not as an alternative for, net income as determined in accordance with GAAP. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, Adjusted EBITDA is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not remove all non-cash items (such as acquisition-related gains) or consider certain cash requirements such as tax and debt service payments. The amount shown for Adjusted EBITDA also differs from the amount calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges and are used to determine compliance with financial covenants and our ability to engage in certain activities, such as incurring additional debt and making certain restricted payments.
• "Adjusted Fees" refers to Kennedy Wilson’s gross investment management, property services and research fees adjusted to include Kennedy Wilson's share of fees eliminated in consolidation, Kennedy Wilson’s share of fees in unconsolidated service businesses and performance fees included in unconsolidated investments. Our management uses Adjusted fees to analyze our investment management and real estate services business because the measure removes required eliminations under GAAP for properties in which the Company provides services but also has an ownership interest. These eliminations understate the economic value of the investment management, property services and research fees and makes the Company comparable to other real estate companies that provide investment management and real estate services but do not have an ownership interest in the properties they manage. Our management believes that adjusting GAAP fees to reflect these amounts eliminated in consolidation presents a more holistic measure of the scope of our investment management and real estate services business.
• “Adjusted Net Income” represents net income before depreciation and amortization, our share of depreciation and amortization included in income from unconsolidated investments, share-based compensation, preferred dividends and net income attributable to noncontrolling interests, before depreciation and amortization. Please also see the reconciliation to GAAP in the Company’s supplemental financial information included in this release and also available at www.kennedywilson.com.
• “Annual Return” is a metric that applies to our real estate debt business that represents the sum of annual interest income, transaction fees and the payback of principal for discounted loan purchases, amortized over the life of the loans and divided by the principal balances of the loans.
• "Cap rate" represents the net operating income of an investment for the year preceding its acquisition or disposition, as applicable, divided by the purchase or sale price, as applicable. Cap rates set forth in this presentation only includes data from income-producing properties. We calculate cap rates based on information that is supplied to us during the acquisition diligence process. This information is not audited or reviewed by independent accountants and may be presented in a manner that is different from similar information included in our financial statements prepared in accordance with GAAP. In addition, cap rates represent historical performance and are not a guarantee of future NOI. Properties for which a cap rate is provided may not continue to perform at that cap rate.
• "Consolidated investment account" refers to the sum of Kennedy Wilson’s equity in: cash held by consolidated investments, consolidated real estate and acquired in-place leases gross of accumulated depreciation and amortization, net hedge asset or liability, unconsolidated investments, consolidated loans, and net other assets.
• "Equity partners" refers to non-wholly-owned subsidiaries that we consolidate in our financial statements under U.S. GAAP and third-party equity providers.
• "Estimated Annual 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 2020, the NOI represents estimated Year 1 NOI from our original underwriting. Estimated year 1 NOI for properties purchased in 2020 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, the sale of real estate that have not yet occurred and other items 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.
• "Estimated Forward Yield on Cost” represents the Company’s estimate of future net operating income, assuming it has completed its planned value-add asset management initiatives, divided by the sum of the purchase price and additional capital expenditure costs that are expected to be incurred in accordance with the Company’s original underwriting at the time of acquisition. This information is not audited or reviewed by independent accountants and may be presented in a manner that is different from similar information included in our financial statements prepared in accordance with GAAP. Estimated Forward Yield on Cost is based on management’s current expectations and are based on assumptions that may prove to be inaccurate and involve known and unknown risks. For example, Estimated Forward Return on Cost is based in part on data made available to us during the course of our due diligence process in connection with asset acquisitions and assumes the timely and on-budget completion of our value-add initiatives, the timely leasing of all additional capacity and the absence of customer defaults or early lease terminations. Accordingly, the actual return on cost of an investment made by the Company may differ materially and adversely from the Estimated Forward Return on Cost figures set forth in this release, and we caution you not to place undue reliance on such figures. This information is not provided for development assets with no current income-producing component.
• "Fee-Bearing Capital" represents total third-party committed or invested capital that we manage in our joint-ventures and commingled funds that entitle us to earn fees, including without limitation, asset management fees, construction management fees, acquisition and disposition fees and/or promoted interest, if applicable.
• "Gross Asset Value” refers to the gross carrying value of assets, before debt, depreciation and amortization, and net of noncontrolling interests.
• "Internal Rate of Return" (“IRR”) is based on cumulative contributions and distributions to Kennedy Wilson on each investment that has been sold and is the leveraged internal rate of return on equity invested in the investment. The IRR measures the return to Kennedy Wilson on each investment, expressed as a compound rate of interest over the entire investment period. This return does take into account carried interest, if applicable, but excludes management fees, organizational fees, or other similar expenses.
• "Investment account” refers to the consolidated investment account presented after noncontrolling interest on invested assets gross of accumulated depreciation and amortization.
• "Investment Management and Real Estate Services Assets under Management" ("IMRES AUM") generally refers to the properties and other assets with respect to which we provide (or participate in) oversight, investment management services and other advice, and which generally consist of real estate properties or loans, and investments in joint ventures. Our IMRES AUM is principally intended to reflect the extent of our presence in the real estate market, not the basis for determining our management fees. Our IMRES AUM consists of the total estimated fair value of the real estate properties and other real estate related assets either owned by third parties, wholly owned by us or held by joint ventures and other entities in which our sponsored funds or investment vehicles and client accounts have invested. Committed (but unfunded) capital from investors in our sponsored funds is not included in our IMRES AUM. The estimated value of development properties is included at estimated completion cost.
• "Net operating income" or "NOI” is a non-GAAP measure representing the income produced by a property calculated by deducting certain property expenses from property 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. Please also see the reconciliation to GAAP in the Company’s supplemental financial information included in this release and also available at www.kennedywilson.com.
• "Noncontrolling interests" represents the portion of equity ownership in a consolidated subsidiary not attributable to Kennedy Wilson.
• "Pro-Rata" represents Kennedy Wilson's share calculated by using our proportionate economic ownership of each asset in our portfolio. Please also refer to the pro-rata financial data in our supplemental financial information.
• "Property NOI" or "Property-level NOI" is a non-GAAP measure calculated by deducting the Company's Pro-Rata share of rental and hotel property expenses from the Company's Pro-Rata rental and hotel revenues. Please also see the reconciliation to GAAP in the Company’s supplemental financial information included in this release and also available at www.kennedywilson.com.
• "Return on Equity" is a ratio calculated by dividing the net cash distributions of an investment to Kennedy Wilson, after the cost of leverage, if applicable, by the total cash contributions by Kennedy Wilson over the lifetime of the investment.
• “Same property” refers to properties in which Kennedy Wilson has an ownership interest during the entire span of both periods being compared. The same property information presented throughout this report is shown on a cash basis and excludes non-recurring expenses. This analysis excludes properties that are either under development or undergoing lease up as part of our asset management strategy.

Note about Non-GAAP and certain other financial information included in this presentation

In addition to the results reported in accordance with U.S. generally accepted accounting principles ("GAAP") included within this presentation, Kennedy Wilson has provided certain information, which includes non-GAAP financial measures (including Adjusted EBITDA, Adjusted Net Income, Net Operating Income, and Adjusted Fees, as defined above). Such information is reconciled to its closest GAAP measure in accordance with the rules of the SEC, and such reconciliations are included within this presentation. These measures may contain cash and non-cash acquisition-related gains and expenses and gains and losses from the sale of real-estate related investments. Consolidated non-GAAP measures discussed throughout this report contain income or losses attributable to non-controlling interests. Management believes that these non-GAAP financial measures are useful to both management and Kennedy Wilson'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. Annualized figures used throughout this release and supplemental financial information, and our estimated annual net operating income metrics, are not an indicator of the actual net operating income that the Company will or expects to realize in any period.

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