Kennedy Wilson Reports Second Quarter 2013 Earnings
Kennedy Wilson Reports Second Quarter 2013 Earnings
Adjusted EBITDA increases 97% from same period of last year
BEVERLY HILLS, Calif.--(BUSINESS WIRE)-- Kennedy-Wilson Holdings, Inc., an international real estate investment and services company, today reported a second quarter 2013 Adjusted EBITDA of $37.1 million, a 97% increase from $18.8 million for the same period in 2012. For the six months ended June 30, 2013, Adjusted EBITDA was $69.0 million, a 82% increase from $38.0 million for the same period in 2012.
Adjusted Net Income for the second quarter 2013 was $13.8 million or $0.19 per basic share compared to Adjusted Net Income of $3.0 million for the same period in 2012, or $0.06 per basic share. U.S. GAAP net loss attributable to common shareholders for the second quarter 2013 was $2.5 million, or $0.03 per basic and diluted share, compared to a loss of $3.2 million, or $0.06 per basic and diluted share, for the same period in 2012.
"Our gross investment account crossed the $1 billion mark during the second quarter demonstrating our ability to find attractive investment opportunities globally," said William McMorrow, chairman and CEO of Kennedy Wilson. "Our recurring cash flow and distributions continue to increase through strategic acquisitions and focused asset management."
Kennedy Wilson Recent Highlights
Investments business
Investment account
As of June 30, 2013, our gross investment account was $1.1 billion, compared to $908.9 million as of December 31, 2012. Accumulated depreciation and amortization was $98.3 million and $71.3 million as of June 30, 2013 and December 31, 2012, respectively. The net investment account was $962.0 million, compared to $837.6 million at December 31, 2012. The change in the net investment account was comprised of $233.3 million of cash contributed to and income earned on investments and $108.9 million of cash distributed from investments.
As of June 30, 2013, the Company and its equity partners owned 19.3 million rentable square feet of real estate, including investments in 16,679 apartment units and 60 commercial properties. Additionally, as of June 30, 2013, the Company and its equity partners owned in excess of $2 billion in unpaid principal balance of loans secured by real estate.
Operating metrics
During the six months ended June 30, 2013, our investments business achieved an EBITDA of $61.2 million, a 77% increase from $34.7 million for the same period in 2012.
During the six months ended June 30, 2013, based on our investments in 11,923 same property multifamily units, rental revenues, net operating income and occupancy at the property level increased by 6%, 7% and 1%, respectively, from the same period in 2012. In addition, based on our investments in 3.0 million square feet of same property commercial real estate, rental revenues, net operating income and occupancy at the property level increased by 13%, 20% and 4%, respectively, from the same period in 2012.
Acquisition program
From January 1, 2010 through June 30, 2013, the Company and its equity partners have acquired approximately $9.6 billion of real estate related investments (including unpaid principal balance of loan purchases). During the six months ended June 30, 2013, the Company and its equity partners acquired $1.6 billion of real estate related investments. This includes $834.1 million of real estate and $733.9 million of unpaid principal balance of loans secured by real estate in which we invested $155.9 million and $51.6 million, respectively. These investments were directed 40% and 60% to the Western US and the United Kingdom and Ireland, respectively.
During the second quarter, the Company and its equity partner foreclosed on a Class A office building and adjacent 3.5 acre site in Dublin, Ireland. As a result of the foreclosure, the Company and its equity partner recognized a $30.1 million acquisition-related gain. The Company's portion of the gain was $15.0 million and was recognized in equity in joint venture income.
Property level debt financing
During the six months ended June 30, 2013, the Company and its equity partners completed approximately $530.1 million of property financings and re-financings at an average interest rate of 3.13% and a weighted average maturity of 8.5 years. This includes re-financings of $122.1 million at a fixed interest rate of 1.35% in our Japanese multifamily portfolio.
During the six months ended June 30, 2012, the Company and its equity partners completed approximately $283.3 million of property financings and re-financings at an average interest rate of 3.07% and a weighted average maturity of 8.0 years. This includes re-financings of $80.5 million at a fixed interest rate of 1.61% in our Japanese multifamily portfolio.
As of June 30, 2013, the Company and its equity partners had approximately $2.6 billion of property level debt of which 70% is at fixed interest rates, 18% is floating with interest rate caps and 12% is at floating interest rates.
Key investment updates
UK Loan Pool
Our book equity in this investment is $23.0 million; we own 12.5% before carried interest.
In December 2011, the Company and its 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 June 30, 2013, the unpaid principal balance was $316.7 million due to loan resolutions of approximately $1.8 billion, representing approximately 85% of the pool. During the six months ended June 30, 2013, the Company received $38.9 million in distributions related to resolutions.
Japan multifamily
Our book equity in this investment is $76.7 million; we own 40.9% before carried interest.
We maintained 96% occupancy in 50 apartment buildings with a total of more than 2,400 units.
Since Fairfax Financial became our partner in the Japanese multifamily portfolio in September 2010, we have distributed a total of $96.0 million, of which our share was $45.0 million.
Services business
Management and leasing fees and commissions increased by 44% to $33.1 million for the six months ended June 30, 2013, from $23.0 million for the same period in 2012.
During the six months ended June 30, 2013, our services business achieved an EBITDA of $14.8 million, a 135% increase from $6.3 million for the same period in 2012.
Corporate financing
In April 2013, we issued approximately 1.4 million shares of common stock as a result of the underwriters fully exercising their option to purchase additional shares, which resulted in gross proceeds of $21.2 million.
Subsequent events
In July 2013, the Company and its equity partners have acquired approximately $418.3 million of real estate investments, totaling 0.7 million rentable square feet of real estate, comprised of 15 commercial properties, in the United Kingdom and Ireland in which we invested $77.4 million.
In July, the Company drew an additional $40.0 million on its line of credit to fund acquisitions.
Conference Call and Webcast Details
The Company will hold a live conference call and webcast to discuss results at 7 a.m. PT/ 10 a.m. ET on Wednesday, August 7.
The direct dial-in number for the conference call is (888) 895-5479 for U.S. callers and (847) 619-6250 for international callers. The confirmation number for the live call is 35310499.
A replay of the call will be available for one week beginning two hours after the live call and can be accessed by (888) 843-7419 for U.S. callers and (630) 652-3042 for international callers. The passcode for the replay is 35310499#.
The webcast will be available at: http://edge.media-server.com/m/p/64nx4hm8/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 Section 27A of the Securities Act of 1933, as amended and Section 21 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," "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" section of our Annual Report on Form 10-K for the year ended December 31, 2012, 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.
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 Income Attributable to Kennedy Wilson Common Shareholders, Basic Adjusted Net Income 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 | ||||||||||||||
(Unaudited) | ||||||||||||||
June 30, 2013 | December 31, 2012 | |||||||||||||
Assets | ||||||||||||||
Cash and cash equivalents | $ | 139,651,000 | $ | 120,855,000 | ||||||||||
Short term investments | — | 10,000,000 | ||||||||||||
Accounts receivable | 7,384,000 | 3,647,000 | ||||||||||||
Accounts receivable - related parties | 22,170,000 | 22,393,000 | ||||||||||||
Notes receivable | 12,840,000 | 136,607,000 | ||||||||||||
Notes receivable - related parties | 8,552,000 | — | ||||||||||||
Real estate, net of accumulated depreciation | 488,435,000 | 289,449,000 | ||||||||||||
Investments in joint ventures | 694,664,000 | 543,193,000 | ||||||||||||
Investments in loan pool participations | 68,719,000 | 95,601,000 | ||||||||||||
Other assets | 46,867,000 | 38,079,000 | ||||||||||||
Goodwill | 23,965,000 | 23,965,000 | ||||||||||||
Total assets | $ | 1,513,247,000 | $ | 1,283,789,000 | ||||||||||
Liabilities | ||||||||||||||
Accounts payable | $ | 2,051,000 | $ | 1,762,000 | ||||||||||
Accrued expenses and other liabilities | 37,788,000 | 29,417,000 | ||||||||||||
Accrued salaries and benefits | 11,349,000 | 24,981,000 | ||||||||||||
Deferred tax liability | 12,720,000 | 22,671,000 | ||||||||||||
Mortgage loans and notes payable | 318,813,000 | 236,538,000 | ||||||||||||
Senior notes payable | 409,348,000 | 409,640,000 | ||||||||||||
Borrowings under line of credit | 30,000,000 | — | ||||||||||||
Junior subordinated debentures | 40,000,000 | 40,000,000 | ||||||||||||
Total liabilities | 862,069,000 | 765,009,000 | ||||||||||||
Equity | ||||||||||||||
Cumulative Preferred stock: | ||||||||||||||
6.00% Series A, 100,000 shares | — | — | ||||||||||||
6.45% Series B, 32,550 shares | — | — | ||||||||||||
Common stock | 7,000 | 6,000 | ||||||||||||
Additional paid-in capital | 663,575,000 | 512,835,000 | ||||||||||||
Accumulated deficit | (22,283,000 | ) | (5,910,000 | ) | ||||||||||
Accumulated other comprehensive income | 361,000 | 12,569,000 | ||||||||||||
Shares held in treasury | — | (9,856,000 | ) | |||||||||||
Total Kennedy-Wilson Holdings, Inc. stockholders' equity | 641,660,000 | 509,644,000 | ||||||||||||
Noncontrolling interests | 9,518,000 | 9,136,000 | ||||||||||||
Total equity | 651,178,000 | 518,780,000 | ||||||||||||
Total liabilities and equity | $ | 1,513,247,000 | $ | 1,283,789,000 | ||||||||||
Kennedy-Wilson Holdings, Inc. and Subsidiaries | ||||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||||
Revenue | ||||||||||||||||||||
Management and leasing fees | $ | 4,754,000 | $ | 4,101,000 | $ | 9,463,000 | $ | 7,257,000 | ||||||||||||
Management and leasing fees - related parties | 9,356,000 | 6,131,000 | 17,313,000 | 11,716,000 | ||||||||||||||||
Commissions | 936,000 | 1,370,000 | 1,460,000 | 2,036,000 | ||||||||||||||||
Commissions - related parties | 4,448,000 | 1,031,000 | 4,840,000 | 1,984,000 | ||||||||||||||||
Sale of real estate | 6,096,000 | — | 8,514,000 | — | ||||||||||||||||
Rental income | 10,365,000 | 1,477,000 | 16,762,000 | 2,947,000 | ||||||||||||||||
Total revenue | 35,955,000 | 14,110,000 | 58,352,000 | 25,940,000 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||
Commission and marketing expenses | 1,336,000 | 1,340,000 | 1,834,000 | 2,305,000 | ||||||||||||||||
Compensation and related expenses | 18,264,000 | 10,294,000 | 31,884,000 | 19,294,000 | ||||||||||||||||
Cost of real estate sold | 5,130,000 | — | 7,002,000 | — | ||||||||||||||||
General and administrative | 6,387,000 | 4,888,000 | 11,814,000 | 8,557,000 | ||||||||||||||||
Depreciation and amortization | 4,415,000 | 977,000 | 7,472,000 | 1,914,000 | ||||||||||||||||
Rental operating expenses | 4,582,000 | 921,000 | 7,685,000 | 1,791,000 | ||||||||||||||||
Total operating expenses | 40,114,000 | 18,420,000 | 67,691,000 | 33,861,000 | ||||||||||||||||
Equity in joint venture income | 11,920,000 | 5,108,000 | 11,576,000 | 10,624,000 | ||||||||||||||||
Interest income from loan pool participations and notes receivable | 3,281,000 | 2,876,000 | 6,226,000 | 3,414,000 | ||||||||||||||||
Operating income | 11,042,000 | 3,674,000 | 8,463,000 | 6,117,000 | ||||||||||||||||
Non-operating income (expense) | ||||||||||||||||||||
Interest income | 199,000 | 1,207,000 | 239,000 | 2,324,000 | ||||||||||||||||
Acquisition-related gain | — | — | 9,459,000 | — | ||||||||||||||||
Acquisition-related expenses | (510,000 | ) | — | (510,000 | ) | — | ||||||||||||||
Gain on sale of marketable securities | — | — | — | 2,931,000 | ||||||||||||||||
Interest expense | (12,531,000 | ) | (7,054,000 | ) | (23,963,000 | ) | (13,224,000 | ) | ||||||||||||
Other | — | 38,000 | — | (74,000 | ) | |||||||||||||||
Loss from continuing operations before benefit from income taxes | (1,800,000 | ) | (2,135,000 | ) | (6,312,000 | ) | (1,926,000 | ) | ||||||||||||
Benefit from income taxes | 469,000 | 1,138,000 | 2,172,000 | 2,621,000 | ||||||||||||||||
(Loss) income from continuing operations | (1,331,000 | ) | (997,000 | ) | (4,140,000 | ) | 695,000 | |||||||||||||
Discontinued Operations | ||||||||||||||||||||
(Loss) income from discontinued operations, net of income taxes | — | — | (3,000 | ) | 2,000 | |||||||||||||||
Gain (loss) from sale of real estate, net of income taxes | — | — | 217,000 | (212,000 | ) | |||||||||||||||
Net (loss) income | (1,331,000 | ) | (997,000 | ) | (3,926,000 | ) | 485,000 | |||||||||||||
Net loss (income) attributabl | ||||||||||||||||||||
