Kennedy Wilson(KW)2025-05-08 17:00Financial Data and Key Metrics Changes - The company reported a GAAP EPS loss of $0.30 for Q1 2025, compared to an income of $0.19 per share in Q1 2024, which included $0.47 per share from the sale of the Shelburne Hotel [14] - Baseline EBITDA for Q1 2025 was $108 million, a 5% increase year-over-year, bringing the trailing twelve-month baseline EBITDA to $412 million [14] - Assets under management grew by 26% over the past two years to $29 billion, producing approximately $575 million in estimated annual NOI and fees [6] Business Line Data and Key Metrics Changes - The rental housing sector, representing 66% of assets under management, is expected to grow to over 80% in the next three years [7] - Same property multifamily occupancy increased to 95%, with same property revenue growing by 3% and same property NOI by 4.3% in Q1 [8] - Investment management fees grew by 17% in Q1 to $25 million, reflecting strong performance in the credit platform and continued growth in equity platforms [10][27] Market Data and Key Metrics Changes - In the U.S., real estate transaction volumes increased by 23% in Q1, with no material changes in sentiment observed in Q2 [7] - The company noted strong apartment demand in Q1, with blended leasing spreads increasing to 1.5% and a significant improvement in new lease rents [20] - In Ireland, same property NOI in the apartment portfolio was up 3.5%, driven by occupancy growth and strong operating expense management [23] Company Strategy and Development Direction - The company is focused on executing a non-core asset sale plan, aiming to generate between $400 million to $450 million from asset sales and recaps by year-end [12] - The strategy includes reducing unsecured debt and simplifying the business by focusing on core sectors of rental housing and industrial [30] - The company is expanding its credit solutions to include mezzanine debt and preferred equity investments, enhancing its ability to capture opportunities within the credit space [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving fee revenue growth targets of 20% to 25% annually, supported by a strong pipeline of activity [11] - The company believes that the best risk-adjusted returns are found in the rental housing sector due to demand driven by housing shortages and declining new supply [7] - Management highlighted the importance of relationships in maintaining competitiveness amid increased market volatility and competition [34] Other Important Information - The company has a strong pipeline of $2.5 billion in loan originations and real estate equity acquisitions, primarily within the rental housing sector [5] - The total debt is 96% fixed or hedged, with a weighted average maturity of 4.8 years and a weighted average effective interest rate of 4.7% [18] - The company is actively monitoring potential impacts from government changes on affordable housing, with 15% of tenants having some form of HUD backing [54][57] Q&A Session Summary Question: Regarding fee-bearing capital growth - Management confirmed confidence in achieving 20% to 25% growth in fees, citing a strong pipeline and future funding commitments [32][33] Question: On liquidity and partner capital costs - Management acknowledged increased competition but emphasized strong relationships and flexibility in pricing to remain competitive [34][36] Question: Stock buyback plans - The focus remains on paying down unsecured debt, with potential reconsideration of stock buybacks after addressing debt obligations [37][39] Question: Dispositions and cap rates - Management indicated that dispositions are well underway, with expected closures in June, but refrained from commenting on specific cap rates [42][44] Question: Loan origination rates and prepayments - Loan origination rates have seen downward pressure, but the quality of projects remains high; a significant prepayment was noted as an outlier [51][53] Question: Exposure to government-backed housing - Approximately 15% of tenants have HUD backing, but management does not foresee immediate concerns regarding capital availability [56][60]