Kennedy-Wilson (KW) 7 Nov 24 2024 Q3 Earnings call transcript

Kennedy-Wilson Holdings Inc. recently reported its third-quarter results, highlighting a mix of improvements and strategic moves that underscore the company's resilience and growth potential. The earnings call, led by CEO Bill McMorrow, provided a comprehensive overview of the company's financial performance, strategic initiatives, and future outlook.

Financial Highlights and Strategic Focus

The third quarter of 2024 saw Kennedy-Wilson post strong results, with an increase in assets under management (AUM) to $28 billion, a 20% growth from the previous year. The company's multifamily portfolio, a significant focus, now comprises 60,000 units, a testament to its commitment to rental housing. The company's investment management business also experienced significant growth, with fee-bearing capital reaching a record $8.8 billion, up from $25 million in 2019. This growth is attributed to a 51% increase in investment management fees and a solid momentum in the credit business.

Strategic Initiatives and Market Outlook

Kennedy-Wilson has been actively pursuing strategic initiatives, with a particular focus on non-core asset sales. The company has disposed of $234 million worth of assets in Q3, including its final wholly-owned asset in Spain, generating $63 million in cash. The company is on track to achieve its target of $550 million to $750 million from asset sales by the end of the year.

In terms of market conditions, Kennedy-Wilson has observed an improvement in real estate investment sentiment, with the long-awaited beginning of rate cutting cycles by central banks. The debt capital markets have also shown improvement, with liquidity remaining robust for high-quality real estate assets. This positive outlook, coupled with the lack of high-quality and affordable housing in various markets, positions Kennedy-Wilson well for growth in the rental housing sector.

Strategic Announcements and Future Prospects

The call highlighted two significant strategic announcements. First, the launch of a new platform in the United Kingdom focused on the single-family rental housing market, in partnership with the Canadian Pension Plan Investment Board (CPPIB). This venture is expected to address the structural undersupply of housing in the U.K., with a target of GBP 1 billion in asset purchases. Second, the company's decision to redeem EUR 175 million of its KWE bonds, representing almost 40% of the remaining outstanding balance, is aimed at lowering its overall unsecured leverage.

Q&A Session and Investor Insights

The Q&A session provided valuable insights into investor concerns, particularly regarding fee revenue and the new SFR strategy in the U.K. The company's response indicated a confident outlook, with plans to maintain a steady growth trajectory in both debt originations and investment management fees. The new SFR strategy, with a projected initial yield of high-5s to 6%, was seen as a promising opportunity, given the under-supply of rental housing in the U.K.

Conclusion

Overall, Kennedy-Wilson's third-quarter performance and strategic initiatives underscore its commitment to growth and resilience in a challenging market. With a focus on rental housing, strategic asset disposals, and a robust investment management business, the company is well-positioned to capitalize on the positive trends in the real estate sector. The strategic partnership with CPPIB in the U.K. and the planned asset sales are expected to further strengthen its financial position and set the stage for continued growth in 2025 and beyond.