Kennedy Wilson(KW) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record results for both Q4 and the full year of 2019, achieving the highest annual levels of GAAP EPS, adjusted EBITDA, and adjusted net income since going public in 2009 [8] - Estimated annual NOI grew by $14 million to $421 million in 2019, despite being a net seller of assets [10][12] - The investment management business generated $79 million in fees, with fee-bearing capital increasing by 39% to $3 billion [13][14] Business Line Data and Key Metrics Changes - The company completed $1.9 billion in gross acquisitions in 2019, with a 33% share, bringing total acquisitions to $23 billion since going public [12] - Same property revenues increased by 4.3% and NOI by 4.9% for Q4, while for the year, revenues were up 3.5% and NOI up 4.1% [26] - The U.S. multifamily portfolio saw strong performance, particularly in the Pacific Northwest and Mountain States, with NOI growth of 6.2% and 8.6% respectively [28][30] Market Data and Key Metrics Changes - The global real estate investment environment remains strong, with historically low interest rates and over $13 trillion in negative yielding global debt [20] - The U.K. and Irish commercial same-store revenues increased by 2.6% and NOI by 2.1% in Q4 [34] - Dublin's office vacancy hit a 20-year low of 4.7%, indicating robust demand in the market [41] Company Strategy and Development Direction - The company focuses on three strategic initiatives: growing property NOI, increasing recurring fee revenue from investment management, and selling non-core assets [9] - The goal for 2020 includes raising an additional $1 billion in gross fee-bearing capital [16] - The company aims to add $105 million of NOI by year-end 2023, with $34 million expected from construction projects and leasing initiatives by the end of 2021 [12][38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the underlying fundamentals and long-term growth prospects in key markets, driven by job and population growth [23] - The company is well-positioned with over $4 billion in purchasing power to continue growing both NOI and investment management fees [23] - Management acknowledged the uncertainty surrounding the impact of the coronavirus but emphasized a long-term perspective [120] Other Important Information - The company sold $511 million of assets in Q4, with 94% from its European portfolio, generating a return on cost of 38% [17] - The company has a strong pipeline of acquisitions and expects to generate over $400 million in cash from non-core asset sales in 2020 [19] Q&A Session Summary Question: How should we think about offsets in terms of dispositions or harvesting prior funds to get to a net number for the $1 billion goal for raising capital? - Management indicated that they expect around $300 to $400 million of equity from selling assets in the year, while planning to raise over $1 billion in new fee-bearing capital [59] Question: Can you discuss the dynamics and market fundamentals in Ireland for both office and residential endeavors? - Management highlighted that Ireland's PRS market is growing, with significant demand and a housing shortage, making it an attractive investment opportunity [76][80] Question: What are your thoughts about taking in and refinancing your current bond with either European low-interest debt? - Management noted that the overall cost of Kennedy-Wilson's debt is approximately 3.5%, and they are always looking for opportunities to lower their cost of debt [113][114]