Kennedy Wilson(KW) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2019, GAAP EPS was $0.36 per share, down from $0.77 per share in Q2 2018 [8] - Adjusted EBITDA decreased to $187 million from $271 million in Q2 2018 [8] - Adjusted net income fell to $105 million compared to $171 million in Q2 2018 [8] - The quarter experienced $68 million in fewer gains compared to Q2 2018, but it was still one of the strongest quarters in the last decade [9] Business Line Data and Key Metrics Changes - Global same property revenue increased by 4% and NOI rose by 6% [10] - The Western U.S. multifamily portfolio saw same-store revenue up 5% and NOI up 8% [11] - The Mountain State portfolio reported same-store revenue growth of 7% and NOI growth of 9% [12] - The commercial portfolio had revenue growth of 5% and NOI growth of 6% on a same property basis [17] Market Data and Key Metrics Changes - The Greater Salt Lake area had an unemployment rate of 2.8%, the lowest in 12 years, with significant job growth [13] - The Pacific Northwest saw NOI growth of over 7% [15] - In Ireland, the multifamily sector's same property NOI increased by 5%, with a significant undersupply in the market [16] Company Strategy and Development Direction - The company focuses on three key strategic initiatives: growing NOI at the property level, expanding investment management, and executing capital recycling and asset sale programs [20] - The company aims to complete strategic value-add CapEx projects to grow NOI organically [22] - The development pipeline includes 4,300 multifamily units and 2.9 million square feet of commercial property [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the economic activity in the Mountain States and the Pacific Northwest, expecting continued strong growth [14][15] - The company anticipates an increase in transaction levels for the second half of the year, with over $800 million in investment transactions in the pipeline [50] - Management noted a strong demand for multifamily assets in the Western U.S. driven by job growth and low interest rates [79] Other Important Information - The company ended the quarter with $404 million in cash and $450 million available under its line of credit [51] - The weighted average interest rate on debt is 3.9%, with only 3% maturing by the end of 2019 [51] Q&A Session Summary Question: Concerns about rising development costs - Management indicated that they have not faced significant issues with construction costs or timing, thanks to their experienced construction management teams [56] Question: Details on asset sales and sectors involved - Management confirmed that asset sales would span multiple sectors, including multifamily and office assets, generating significant cash [58] Question: Insights on fundraising and new relationships - Management noted success in both new and existing relationships, particularly in the insurance sector [59] Question: Transaction environment and deal flow - Management highlighted the efficiency of their acquisition teams and the importance of being nimble in the current market [62] Question: Opportunities in the Mountain States - Management stated that multifamily will remain the dominant product type in the Mountain States, with some office assets also being considered [67] Question: Update on the Shelbourne hotel performance - Management reported a positive trend in high-end leisure bookings and group inquiries following the completion of renovations [76] Question: Cap rates in Dublin market - Management indicated that Dublin Class A office yields are holding at about 4%, with significant spreads compared to their development yields [78] Question: Interest in multifamily portfolio in the Western U.S. - Management noted high demand for multifamily assets, with competitive bidding observed during recent sales [79] Question: General and administrative expenses reduction - Management explained that they have consciously reduced payroll and G&A costs, stabilizing their workforce without significant additions [82]