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Operator: Good day and welcome to the Kennedy-Wilson Fourth Quarter 2022 Earnings Conference Call. Please note that this event is being recorded today. I would now like to turn the conference over to Daven Bhavsar, Vice President of Investor Relations. Please go ahead.

Daven Bhavsar: Thank you and good morning. This is Daven Bhavsar. Joining us today from Kennedy-Wilson are Bill McMorrow, Chairman and CEO; Mary Ricks, President; Matt Windisch, Executive Vice President; and Justin Enbody, CFO. Today’s call will be webcast live and will be archived for replay. The replay will be available by phone for 1 week and by webcast for 3 months. Please see the Investor Relations website for more information. On this call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. You can find a description of these items along with the reconciliation of the most directly comparable GAAP financial measure in our fourth quarter 2022 earnings release, which is posted on the Investor Relations section of our website.

Statements made during this call may include forward-looking statements. Actual results may materially differ from forward-looking information discussed on this call due to the number of risks, uncertainties and other factors indicated in reports and filings with the Securities and Exchange Commission. I would now like to turn the call over to our Chairman and CEO, Bill McMorrow.

Bill McMorrow: Thank you, Daven. Welcome, everybody. Good morning. Yesterday, we reported our fourth quarter and full year results for 2022 and I am pleased with the performance of our company and how we delivered on our strategic initiatives. On the earnings front, we generated $592 million of adjusted EBITDA in 2022, which includes an increase in our recurring NOI and fees by $76 million offset by lower gains from asset sales and changes to our fair value portfolio. Estimated annual NOI grew by 13% to a record $491 million during the year. Our fee-bearing capital grew by 18% to a record $5.9 billion. These results were in line with the goals that we set out at the beginning of the year. Our assets under management closed the year at $23 billion, up from $18 billion just 2 years ago.

We have concentrated almost two-thirds of our stabilized portfolio in sectors where we saw strong cash flow growth, including apartments, logistics, hotel and our floating rate loan portfolio. Fundamentals remain strong across these sectors with multifamily same-store NOI growing by 11% in 2022. We ended the year with strong occupancy across our stabilized apartment and commercial portfolio of over 95%. Turning to our investment activity, as we continue to see lower transaction volumes, we remain very patient on our new investments. In Q4, our capital deployment was primarily through our debt platform, which is generating attractive unlevered, double-digit returns for our shareholders and towards completion of our $3 billion construction pipeline.

On the disposition front, we completed $127 million of sales from our consolidated portfolio in the quarter. The key disposition related to the partial sale of a 208-unit California apartment community in Santa Maria. We sold a 49% interest in this property into our U.S. multifamily joint venture platform at a price of $470,000 per door. We also further reduced our retail portfolio and in total, our consolidated sales generated $58 million of cash and $53 million of gains on sale. In our co-investment portfolio, our co-mingled funds completed $184 million of sales, totaling 333,000 commercial square feet in Q4. As we look ahead, we see a number of important areas for growth for KW. First is the NOI we expect to deliver from completion of several large development projects.

Our recent track record has shown our team’s ability to deliver and stabilize assets on time and ahead of business plan, including 5 multifamily and office assets that we stabilized in 2022, generating $10 million of annual NOI. In 2023, we expect to complete construction on almost every single development project that is currently underway with stabilization expected between 12 to 18 months after construction. In total, we expect to generate $96 million of additional NOI to KW from our development and lease-up portfolio when these assets are stabilized. Second, our investment management platform, which has been the fastest growing part of our business in recent years, is well positioned to continue growing. We anticipate this growth will be driven by our debt and logistics platform, both of which have strong pipelines of opportunities.

These platforms are funded by very well-capitalized partners, who continue to have a desire to deploy capital with KW. And third, our multifamily portfolio was poised to continue its growth as renters continue to look for amenity rich, high-quality communities located in markets that are experiencing job growth and also provide a very high quality of life. With that, I would like to turn the call over to our CFO, Justin Enbody, to discuss our financial results.

Justin Enbody: Thanks, Bill. GAAP EPS totaled $0.16 per share in Q4 and $0.47 for the year. Adjusted net income, which adds back non-cash expenses, such as depreciation, totaled $69 million or approximately $0.50 per share in Q4, resulting in total adjusted net income of $265 million or $1.91 per share for 2022. Adjusted EBITDA totaled $147 million in the quarter, bringing our year-to-date adjusted EBITDA to $592 million. We continue to see further revenue growth, which grew by 6% in the quarter compared to Q4 €˜21. Looking at our annual results. Consolidated revenues grew by an impressive 19% in €˜22 while compensation and related costs declined 17% in the year. This is leading to an improvement in our recurring investment income, which is an important focus for us.

Looking across our entire real estate portfolio and our entire loan portfolio, our share of property NOI, loan income and base management fees increased 18% to $510 million in 2022. These results were driven by strong same-property NOI growth of 11% out of our multifamily portfolio, significantly higher levels of hotel NOI, and a 27% increase to our base investment management fees. Now, turning to our balance sheet and debt profile, we completed a little over $100 million of discounted debt repurchases in the quarter, resulting in $22 million of gains on our early extinguishment. We continue to utilize hedging to minimize our floating interest rate exposure. We ended the year at 93% fixed or hedged as we had a few hedge contracts that expired in December.

Post quarter-end, we have rehedged and today, we sit at 97%. Additionally, our interest rate hedges have a weighted average maturity of 2.1 years. We have a solid handle on our near-term maturities. We have only 4% of our debt or approximately $323 million maturing this year, of which roughly half we expect to pay-off from asset sales that are already in process. At quarter end, we had $439 million of consolidated cash and $218 million of availability on our $500 million line of credit. Our debt has a weighted average maturity of 5.6 years and an effective rate of 4.2%. And now with that, I’d like to turn the call over to Matt Windisch to discuss our multifamily and debt portfolio.

Matt Windisch: Thanks, Justin. Our global multifamily portfolio today represents 54% of our global portfolio compared to just 39% in 2017. We ended the year with 33,000 stabilized units with another 5,000 currently under development and a few projects that are still in planning. In the U.S., the strongest performance came out of our two top apartment regions: the Mountain West and the Pacific Northwest, which both saw same-property NOI growth of 12%. Our Mountain State performance was driven by solid results out of our Utah and Idaho assets, where in-place rents grew by 15% and 10% respectively. Leasing spreads in the Mountain West were 6% on a blended basis in Q4. Migration data has shown that in the U.S., Idaho, Arizona, Nevada and Utah have all been ranked top states for domestic net in migration.

This is consistent with trends seen before the pandemic as greater remote connectivity and flexible work arrangements have been a boon to the Mountain West. Rental incomes continue to be attractive in this region with our average rent at just over $1,500 per month. In the Pacific Northwest, our second largest region, in-place rents grew by 11%. Our assets in this region are largely suburban and continue to benefit from our value-add program. We also saw less bad debt in the quarter compared to Q4 of €˜21. Blended leasing spreads totaled 5% in Q4 for the Pacific Northwest. In our Northern and Southern California assets, we have seen the ending of the eviction moratorium result in higher bad debt and property level expenses and lower occupancy compared to Q4 of €˜21.

As we noted last quarter, we view part of this increase as temporary as we begin to recapture units from non-paying tenants and focused on increasing occupancy throughout the year. We are already seeing an improvement in Q1 with leasing spreads on new leases in January totaling 11% in Northern California as we work through units, which were not paying rents. Blended leasing spreads across our entire U.S. portfolio totaled 5% in January, which is strong given that January is usually a seasonally slow leasing month. Our renovation program targets roughly 1,600 interior renovations a year. In €˜22, we exceeded our goal with almost 1,700 interiors renovated at an average return €“ an average cost of 12,000 and a 22% average return on cost. We still have 54% of our units that are yet to be renovated, the majority of which are in the Mountain West and the Pacific Northwest, which provides a solid runway for continued growth.

In Dublin, where we have a 50% ownership in over 2,500 units, same-property occupancy improved by 2% to 99%, which is our highest occupancy on record. We also saw lower operating expenses in the quarter resulting in a very robust 11% growth in same-store NOI. Demand for high-quality amenity-rich rental housing remains robust in Ireland, which was once again the fastest growing economy in Europe last year. The undersupply of housing continues to persist in Dublin. We expect strong demand for our approximately 1,000 units currently under development, which we will start delivering this summer. Turning to our Investment Management business, our debt platform continues to take advantage of the current lending environment, which has seen a pullback from many traditional sources of capital.

Less debt capital availability has positively impacted our debt origination business as we are now lending to higher quality sponsors at lower leverage points with higher base rates, which results in attractive unlevered returns north of 20%, inclusive of our asset management fees on our newest originations. In Q4, we completed $240 million of new floating rate originations with an average spread of 420 basis points and an average LTV of 55%. We also had repayments of $62 million in the quarter, resulting in net growth of the platform up to $2.7 billion. This is very rapid growth for a business that started from scratch back in May of 2020. As a reminder, KW currently has a 6% ownership interest in our debt platform. We have additional loan capacity of approximately $3 billion and look forward to continuing to grow this business as opportunities arise.

With that, I’d like to turn the call over to our President, Mary Ricks.

Mary Ricks: Thanks, Matt. The rapid expansion of our Global Logistics portfolio has been an important source of growth for our investment management platform. At year end, our industrial portfolio totals 109 assets across almost 11 million square feet, with total AUM of $1.7 billion. The majority of our growth in this sector has been through our European logistics platform launched in 2020, which is focused on acquiring institutional quality, last mile assets with significant potential to grow NOI. In 2022, we acquired 35 assets, totaling $500 million in this platform, representing 40% growth to $1.2 billion in assets and $400 million in fee-bearing capital, over 80% of our industrial portfolios in the UK where fundamentals remains strong in Q4.

Most regions in the UK saw double-digit growth in rents in 2022 and UK vacancy remains very tight at 2%. Occupancy in our portfolio remained strong at 98% as we completed 40 lease transactions, totaling 700,000 square feet last year, resulting in a 32% increase in rents. In-place rents are currently 33% under market with further rent growth projected. Vacancy remains at historic low levels and we are now seeing signs that new development is stalling as a result of higher financing costs, which will underpin continued strong rental growth in existing stock. Occupier demand remains elevated due to the continued desire to build flexibility into supply chains. 2023 is off to a fantastic start, with a strong pipeline of leases €“ lease deals under offer that exceed business plan as we expect our leasing volumes to be ahead of 2022 levels.

Rents continue to increase across our logistics portfolio. Demand for space in Greater London remains particularly strong with rents pushing over £20 per square foot in a number of assets, which implies a greater than 50% increase over the last 5 years. We are also seeing the ripple effect of smaller tenants being pushed away from Central London, driving demand and rental growth in the broader Southeast market, which is positive for our portfolio. As a reminder, the target for our EU logistics portfolio is $2.5 billion and so we have another $1.3 billion of capacity in that platform. In total, our investment management platform has an incremental $3.5 billion of non-discretionary capital, which we look to deploy across all our announced platforms.

This will add significantly to our existing $5.9 billion of fee-bearing capital, which grew by 18% in 2022 and has doubled in the last 3 years. Turning to our office portfolio, we saw strong improvement in our UK and Northern California office occupancy, which grew our same-store property office NOI by 8% in Q4. We completed 270,000 square feet of office leasing in Q4, closing out a strong year with over 1.2 million square feet of office lease transactions completed. Two-thirds of our office NOI comes from Europe, primarily the UK and Dublin, where our portfolio has an attractive unexpired lease term to expiration of 7.5 years. We continue to see a flight to quality as occupiers look for higher quality buildings with best-in-class space. Our European office same-property NOI grew by a robust 10%, driven, again, by an improvement in occupancy.

For example, at 101 Buckingham Palace Road in Central London, our largest office asset, occupancy improved from 80% in Q4 €˜21 to 100% in Q4 €˜22. Similarly, occupancy grew from 84% to 100% at One Embassy Gardens, a 156,000 square foot property located in the growing Nine Elms London submarket, which was acquired in June 2021. We also stabilized two new office developments in Dublin, Tilzer and Hanover Quay last year at rents ahead of business plan, again, showing the desire for tenants to be in high-quality space with leading ESG credentials. We continue to see solid leasing demand in Q1 and are off to a strong start to the year. Turning to our development and lease-up portfolio. As Bill mentioned at the top of the call, our developments remain on track to complete on time mid of this year.

In many cases, the rents we are achieving out stabilization have surpassed our initial underwriting. Our development and lease-up portfolio is expected to add $96 million to our estimated annual NOI. In Q4, we made great progress in our lease-up portfolio through completing lease transactions at the Oaks in Southern California, which is now 82% leased. This asset will move into our stabilized portfolio once the new tenants take occupancy later this year. I’d like to thank our global development teams for completing these projects on time and on budget and look forward to updating you on the progress of a number of our important developments on future calls. With that, I’d like to pass it back to Bill.

Bill McMorrow: Thank you, Mary. The KW portfolio and our investment strategy has been built to grow in all parts of the cycle. We remain very optimistic about our company over the long-term based on our track record, our people, our assets and the global relationship network of partners that we have developed and cultivated over the last three decades. I’d like to thank €“ particularly thank our entire global team for their dedication and hard work over the past 3 years as we continue to move forward, creating strong long-term risk-adjusted returns for our shareholders. With that, Daven, I’d like to open it up to any questions.

Operator: And our first question here will come from Anthony Paolone with JPMorgan. Please go ahead.

Anthony Paolone: Thank you. My first question, I think, is probably for Mary. I understand the comments about the office lease duration in your Dublin portfolio and the flight to quality, but I was just wondering if you could step back and give us a sense as to what’s happening with the tech pullback in Dublin and just the broader effect that you’ve seen on the market there thus far, if any?

Mary Ricks: Sure. Hi, Anthony. I mean it’s interesting because you read all those headlines, but really from the start of the pandemic to 2022, the tech sector had added 35,000 new jobs. And the rightsizing that I would say, the tech staffing that’s been happening has only totaled about 1,000 jobs in Ireland. So we’re not concerned. And we’re excited about completing Coopers Cross commercial and have a lot of interesting prospects.

Anthony Paolone: Okay. And then second question is maybe for Matt, as it relates to the debt platform. Just €“ how are you thinking about just the pipeline and opportunity to continue to grow that? Because it seems like with some other vendors pulling back, that’s a good opportunity for you, but at the same time, capital markets activity broadly is down. So I’m just wondering how that nets out and just the ability to continue to grow it net of maturities this year?

Matt Windisch: So we have a very strong pipeline that remains within our debt platform. And I think you’re correct. We have seen a number of the traditional sources of capital pull back, especially those that are using back leverage repo financing or are dependent on the securitization market. For us, we’re doing everything on balance sheet with our partners, with no leverage, and we’re not securitizing anything. So I think we’ve become one of the lenders of choice. We’re easy to work with. We execute well. We know the assets and we leverage our entire global network and industry specialists within KW to underwrite these things. And we’re primarily an owner of real estate, so we can look at things really with an owner’s mindset.

And so what we’ve been able to do now is really do a lot of repeat business with borrowers that we’ve done two, three, four, in some cases, five or six transactions with. And for us, what we’ve been able to do also, just given the market conditions, we’ve been able to lend at actually lower LTVs. We’ve been getting a bit more on our spreads. And obviously, we’ve had the benefit in the €“ and we’re doing everything floating rate for the most part of rising Fed funds rate. And so we’ve been able to be very selective and we can do larger transactions. So we’ve moved our average balance up from €“ it was about $50 million a year ago, which is closer to $75 million today. And we’ve got a couple of large deals signed up that we look forward to closing this quarter.

So we feel very good about the pipeline, and we’ve got a team in place to execute.

Anthony Paolone: Okay. And then just maybe the last one for maybe Bill, just as it relates to office in the U.S., just what would it take for you to get contrarian and potentially invest in that property type from here?

Bill McMorrow: Well, I would start by saying, as you know, Tony, we’re down to €“ in terms of the wholly-owned office assets as part of our plan that we really started 3 or 4 years ago when we’re down to 3 buildings that really we own here in the United States. The answer to your question really would cut across, but I think what you are going to see is we’re going to be more capital light as far as the company is concerned. You’re not going to see us putting office assets on our balance sheet. We’re really looking at those here in the United States. There is really trading assets. And so they’ll go into our partnership platforms. I would say that, in general, in the Western United States, particularly in California, the urban high-rise assets or something that we have little interest in.

But the suburban assets in the three to four story kind of size range are still very attractive properties. And so like anything, for us, it depends on the price. And I think what I tried to say at the beginning, though, is that we’re being extremely patient. We don’t have a single asset in escrow right now to buy across the company and other than some logistic assets in Europe. And so we’re early in the cycle in our opinion. And so you’re going to really €“ in terms of Kennedy-Wilson, I think you’re looking at the latter part of next €“ this year and end of next year or before you can see really any meaningful repricing.

Anthony Paolone: Okay, thank you.

Operator: And our next question will come from Derek Johnston with Deutsche Bank. Please go ahead.

Derek Johnston: Hi, everybody. Good morning. Good afternoon. One question is what’s KW share of remaining development expenses associated with the $3 billion lease-up portfolio? I think you guys have around 58%. I guess what’s remaining? And how will it be funded, whether that’s non-core sales or property level refinancing? Any insight here would be appreciated. Thanks.

Matt Windisch: It’s Matt. So we’ve got a share roughly $400 million of total capital to complete the development and lease-up pipeline. Of that, roughly 50% is going to come from construction financing at those projects. So you’re looking at roughly $200 million from KW out of our pocket, so to speak, to finish these projects. And of that $200 million, the majority of that we expect to be funded from non-core asset sales, in particular, with the focus on some of our assets that are non-income-producing that could be sold to fund those remaining development costs.

Derek Johnston: Okay, great. And kind of following up on Tony’s question on the debt platform, look, yes, banks are flowing back and really actually seems to ebb and flow almost monthly. So I mean trying to get a little secret sauce here. Like what’s the Kennedy-Wilson’s competitive advantage? How do borrowers find out or value or know about your debt capabilities? Because I think that’s probably an important component in order to continue to drive growth.

Matt Windisch: Yes. I mean, look, a lot of the people we’ve been transacting within the debt space we’ve known throughout the years. They have been partners of ours. We transacted with them on the property side of things. I think a lot of it’s repeat business, as I mentioned earlier, just once you do a transaction with someone and they have a set of loan documents, it’s a lot easier. And people talk in the industry, and I think we’ve established ourselves as someone very easy to work with, who is knowledgeable, who can understand more complex situations. And I think just over time, the reputation is built up and teams out, obviously, talking to borrowers and brokers and trying to extend the network all the time. So €“ but I think at the end of the day, if we execute well and do right for our borrowers, it will help the business grow.

Derek Johnston: Okay, great. And then just a quick last one, I mean we are here nearing the end of February, just on multifamily renewals going out and how does how do your markets seem to be performing? I know it’s an early and it’s not really key lease-up season, but any early glimpse would be helpful?

Matt Windisch: Sure. Yes. We definitely saw rents kind of stabilize and flat line in the fourth quarter. So you really didn’t see a whole lot of rent growth €“ market rent growth in the fourth quarter, although we did capture a lot of the loss to lease. So we were able to obviously grow the rents at a good clip. We have seen that change a bit in January and February, where we have seen market rents start to tick back up. So our lease trade-out numbers in January were 2% higher than they were in the fourth quarter and we’re seeing occupancy remains strong. So we are seeing rent growth come back into our markets at a faster pace than we saw in Q4. So I’d say we’re off to a good start so far this year.

Derek Johnston: Thanks, Matt. That’s it for me, everyone.

Operator: Our next question here will come from with Bank of America. Please go ahead.

Unidentified Analyst: Yes. Hi, everyone. Thanks for the time. Question on the development, I guess what would get you guys more excited to put more development projects on the ground. What are you guys looking for?

Bill McMorrow: Well, when you think about the development side of what we’ve been doing, I mean these are decisions that we made 7 years ago. And so you’ve got long lead times. What we have learned, though, particularly in the multifamily space, the completion of these highly amenitized newer properties. They not only attract €“ not only lease up quickly, but you can attract very great rents. I would say that at this point in time €“ we have, I would say, one project €“ a meaningful project on the drawing boards. That’s a development project that won’t start until the middle of 2024. But other than that, I think it’s kind of in the same category as what I’ve said a couple of times now. We’re being very patient to see what opportunities come along and to see where pricing settles in.

And so we don’t €“ we’re not moving for €“ we want to finish what we’ve got. And as I think Matt said, we were fishing almost 5,000 units here. And so that’s a big undertaking, and we’re at the tail end of it. So we want to get that done, get that lease, get it stabilized and get the income coming in.

Matt Windisch: And maybe just to add one thing to that, Bill. The one area that we certainly are continuing to try to grow on the development side, it’s our affordable housing business.

Bill McMorrow: Good point.

Matt Windisch: Within that platform, we’ve added almost 5,000 units here in the past couple of years and we can do it in a very capital-light manner. That business also is really tied to wage inflation. You raise rents based on changes of median income, each of the counties. And €“ so that’s an area where we continue to focus on trying to build. But like I said, it’s not in really any capital from KW and there is, obviously, a huge need and demand for affordable housing in our markets.

Bill McMorrow: Yes, Josh, that’s a really great point that Matt just made. And for example, we’re kind of 30% to 40% along on a project in Camarillo, California, which is a suburb Southern California, but it’s super interesting because on that 32-acre site, we’re doing 300 affordable senior units, and we’re doing 300 market rate units on the same site. And so Matt is 100% correct. I mean that’s a business that we plan to continue growing and there is just a tremendous pent-up demand for affordable and senior housing.

Unidentified Analyst: I appreciate that color. And maybe just kind of stepping back big picture, you have the debt platform and the logistics platform. It seems like it’s pretty attractive to your external partners right now. Are there any other investment management opportunities out there that you’re either considering or maybe be insightful if there is any kind of opportunity that’s actually turned down as like a fun business?

Mary Ricks: Yes, sure. So we have Fund 7 that we’ve launched. We’ve had our first closing in that vehicle that will get roughly $275 million our first closing. We’re targeting roughly $750 million of equity. That’s a value-add fund in the United States. And then Fund 3 in Europe, we will be launching soon, which is basically a follow-on to Fund 2, which was mainly logistics value-add fund that is focused on the UK and Ireland.

Unidentified Analyst: Appreciate that. Thanks, guys.

Mary Ricks: Thank you.

Operator: And with that, we will conclude our question-and-answer session. I’d like to turn the conference back over to Bill McMorrow for any closing remarks.

Bill McMorrow: Thank you all for taking the time to hear our story today. I will say we have us are available for any follow-up questions that you might have as you further study everything. And thank you for your support. Thank you very much.

Operator: The conference has now concluded. Thank you very much for attending today’s presentation. You may now disconnect your lines.