Kennedy Wilson(US:KW)2020-08-10 01:47Financial Data and Key Metrics Changes - In Q2 2020, the company reported adjusted EBITDA of $73 million and adjusted net income of $12 million, with year-to-date adjusted EBITDA of $185 million and adjusted net income of $57 million, primarily impacted by a slowdown in transactional volume [9][10][14] - The company maintained a strong liquidity position with $788 million in cash and $300 million available on its line of credit, totaling $4 billion in discretionary purchasing power [14] Business Line Data and Key Metrics Changes - The multi-family and office portfolio accounted for 81% of estimated annual NOI, with strong rent collection and high occupancy rates [8][15] - The multi-family portfolio consists of 30,000 units globally, with 88% of NOI coming from suburban assets, achieving 98% rent collection in Q2 [16][17] - The global office portfolio had a weighted average occupancy of 95% and high rent collections of 96% in Q2, benefiting from single-tenant properties and suburban locations [18][19] Market Data and Key Metrics Changes - The company observed a 68% decline in transaction volumes across all property types in Q2 due to the pandemic, but anticipates increased transactional activity in the latter half of the year [7][8] - In Ireland, the company noted significant demand for multi-family deals, with €500 million in transactions occurring in the quarter [35] Company Strategy and Development Direction - The company is focused on growing its investment management platform, having added $200 million to fee-bearing capital in Q2, representing a 6% growth from Q1 and 17% year-to-date [10] - A new $2 billion debt platform was launched to target first mortgage loans secured by high-quality real estate, with a robust pipeline of $200 million in origination opportunities [11][12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the third and fourth quarters, citing strong rent collections and a robust leasing environment despite the pandemic [8][15] - The company anticipates an increase in debt acquisition opportunities over the next 6 to 12 months as financial institutions increase loan loss provisions [12][41] Other Important Information - The Shelbourne hotel reopened on June 29, 2020, and has been outperforming its competitive set since reopening, with a strong booking outlook for 2021 [21][22] - Leasing activity across the commercial and multi-family portfolio remains robust, with 900,000 square feet leased in Q2 and an additional 650,000 square feet in the pipeline [23][24] Q&A Session Summary Question: Can you talk about where you're finding transactions given your volumes are lower? - Management noted that they had no transactions in escrow at the onset of the pandemic and are seeing active interest in their European assets, particularly in lower-rise suburban office buildings and multi-family assets [32][33] Question: What are your thoughts on the multi-family business and potential impacts from stimulus expiration? - Management indicated that their multi-family properties are in strong markets with high-quality tenants, and they do not foresee significant changes in rent collections despite potential stimulus impacts [42][43] Question: Can you provide insights on the debt investments for the new fund? - The company is focusing on transitional opportunities, providing financing for completed properties in lease-up phases, filling a gap left by banks retreating from construction financing [60][62] Question: How do you view the capital allocation priorities going forward? - Management emphasized maintaining liquidity and continuing construction activities, with a focus on finding good risk-adjusted investments rather than rushing to deploy capital [50][51] Question: What is the outlook for the lease-up at Clancy Quay? - The lease-up at Clancy Quay is exceeding expectations, with demand significantly higher than budgeted, indicating strong market interest [71][72]