OUR LOCATIONS
U.S.
Bellevue
3055 112th Ave. NE, Suite 125
Bellevue, WA 98004
Beverly Hills
(Global Corporate Headquarters)
151. S. El Camino Drive
Beverly Hills, CA 90212
Boise
365 N. Whitewater Park Blvd.
Boise, ID 83702
Denver
6200 S. Quebec St.
Englewood, CO 80111
Portland
2270 NW Savier St.
Portland, OR 97210
Salt Lake City
1496 Spring Lane
Holladay, UT 84117
San Francisco
505 Montgomery St., Suite 1102
2nd Floor
San Francisco, CA 94111
Europe
Dublin
94 St Stephen’s Green
Dublin 2
Ireland
London
50 Grosvenor Hill
London, W1K 3QT
United Kingdom
Luxembourg
21, rue Philippe II
Luxembourg L-2340
Bellevue
Portland
Boise
Salt Lake City
Denver
San Francisco
Beverly Hills
Corporate
Headquarters
Madrid
C/ Fernando El Santo
17 3º Izq.
28010 Madrid, Spain
St. Helier
29 Broad Street
St. Helier, Jersey JE2 3RR
Channel Islands
Dublin London
St. Helier
Luxembourg
Madrid
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151 South El Camino Drive
Beverly Hills, CA 90212
Tel: +1 (310) 887-6400
www.kennedywilson.com
ANNUAL
REPORT
2020
Hamilton Landing
N O V A T O , C A L I F O R N I A
Kennedy Wilson grew out of a small office in Santa Monica, California built on trust
and a people-first attitude. Relationships are still at the heart of our global real estate
investment company as we have grown to $18B of assets under management. It is
those relationships and mutual trust that enable us to empower the communities
we activate and to design high-quality places for people to live, create and flourish.
Today, we are a leading global real estate investment company. We own, operate,
and invest in real estate through our balance sheet and through our investment
management platform with a focus on multifamily and office properties located in
the Western U.S., U.K. and Ireland.
406,000
Square-Foot
Office Campus
On the Cover: Clancy Quay
Dublin, Ireland
865 Multifamily Units
See page 77 for certain definitions and reconciliations of non-GAAP
measures to the most directly comparable GAAP measures. Information
shown as of December 31, 2020, except where indicated.
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William J. McMorrow
Chairman and
Chief Executive Officer
DEAR FELLOW SHAREHOLDERS
At Kennedy Wilson, we have successfully navigated several economic
From our senior leadership team to the thousands of people at the
cycles and periods of uncertainty throughout our 33-year history,
property level and those working behind the scenes, we all made a quick
however, 2020 was a year like no other. With a shift to remote work
pivot at the beginning of the year and did not skip a beat. We maintained
in March, our ability to adapt and succeed was a direct result of our
smooth operations, including steady occupancies and strong rent
outstanding team of people who have worked together for decades as
collections across our multifamily and office portfolios, and focused on
well as our high-quality properties in diverse geographic markets. The
building our investment management business and fee-bearing capital.
circumstances of 2020 narrowed our focus to our core businesses and
We ended the year with record quarterly earnings in the fourth quarter.
led us to identify new opportunities while continuing the completion of
our development pipeline. In my opinion, the Kennedy Wilson team did a
remarkable job of facing every challenge in 2020.
There was no way of predicting exactly what 2020 had in store for us,
but in recent years, we felt it was prudent to begin preparing for volatility.
We entered 2020 with more capital on hand than any other period in our
We have discovered through these cycles that there is no substitute for
history and we ended the year in a very strong financial position, with
having the same group of driven people on the field. Our hardworking
$1 billion of cash and over $4 billion of purchasing power in our various
Kennedy Wilson team leaned in together with a renewed commitment
strategic partnership platforms. In 2020, we also extended our $500
to communication and sharing best practices globally in 2020. I am so
million unsecured revolving credit facility from a global group of nine banks
proud of our team of highly confident, but humble people who have a
led by Bank of America and J.P. Morgan and limited our debt maturities in
strong willingness to face challenges in lockstep with one another and
the next several years, further strengthening our liquidity position.
with respect for each other.
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Sunset North
B E L L E V U E , W A S H I N G T O N
464,000
Square-Foot
Office Campus
We relied on our deep industry relationships and our global reputation
and 22 million square feet of commercial space and hotels. Since going
Looking ahead, we are focused on the following key initiatives that
Developing and Stabilizing Assets – Completing our $3 billion
to launch new partnerships in 2020, secure accretive financing, and gain
public, we have significantly grown our consolidated assets from
will continue our growth trajectory and increase value across our
development pipeline and lease-up portfolio totaling 4,400 multifamily
preferred access to investment opportunities. We completed another
$336 million to approximately $7.5 billion and our adjusted EBITDA
$2.3 billion of gross investment transactions during the year. Over the
from $37 million in 2009 to $608 million in 2020.
past 11 years, we have closed $25 billion in asset acquisitions, many
of which were sourced off-market as a result of our track record of
performance and the long-term relationships our teams have built in our
key geographic investment markets.
We built on our history of creating sustainable long-term value for our
shareholders in 2020. We continued to streamline the business, lower our
overall cost structure through interest rate savings and reduced payroll
and G&A expenses, while taking significant steps to increase our future
We closed out 2020 with $394 million in Estimated Annual NOI from our
NOI with property acquisitions and completing key development projects.
stabilized assets and $3.9 billion in fee-bearing capital across a globally
Between the sale of our third-party property services and brokerage
diversified, high-quality portfolio that includes 30,000 multifamily units
division in 2020 and the sale of our property research business in 2018,
our employee headcount has decreased by 60% while compensation and
G&A expenses decreased by over $30 million in the last two years.
As a result of Kennedy Wilson’s performance, we returned $1.31 per
share to shareholders through common dividends and share repurchases
in 2020, an increase from $1.00 in 2019, equating to $185 million in
total. We also expanded our share buyback program from $250 million
to $500 million.
Portfolio by Geography
• 56% Western U.S.
• 20% U.K.
• 20% Ireland
• 4% Italy & Spain
Portfolio by Sector
• 46% Multifamily
• 35% Office
• 14% Retail
• 5% Hotel & Industrial
global portfolio:
Driving NOI Growth
Our goal is to meaningfully grow our recurring cash flow through new
acquisitions and organic NOI growth, and to make further progress on our
development pipeline and lease-up projects.
Hands-On Asset Management – We are focused on increasing property
NOI with the implementation of our value-add asset management program
that included deploying $140 million for capital improvements in 2020.
We maintained strong occupancies of 94% in our office portfolio and 95%
across our multifamily portfolio in 2020, which I attribute in large part to
the expansion of our virtual leasing platform and the digital resident portals
we now offer in our multifamily properties across the globe. We also
collected 96% of our global rents in 2020, a testament to the product we
are delivering, the strength of the employment markets in these regions
as well as the relationships and creativity of our on-the-ground property
management teams.
units and 2.6 million square feet of commercial space is a major priority in
the next three years as we aim to add $109 million of Estimated Annual
NOI during that time period. We are building on the success of several
significant developments completed in 2020 including the final phase of
Clancy Quay in Dublin, which is now the largest multifamily community in
Ireland at 865 units. Two of our commercial developments in Dublin are
also nearing completion, including 20 Kildare Street, which sits adjacent
to the Shelbourne Hotel, and Hanover Quay, just steps away from Capital
Dock, which will add over 130,000 square feet of new space and have the
potential to significantly drive NOI in the near term.
In the U.S., we completed the first phase of development at 38° North
in Santa Rosa, California this year, and hit significant construction
milestones at the 277-unit The Clara and 234-unit Rosewood multifamily
communities in Boise, Idaho, where Kennedy Wilson is now the largest
owner of traditional multifamily property. The newly delivered units in
Santa Rosa and Boise are leasing up well ahead of business plans, driven
by continued population and employment growth in these markets.
Particularly in the Mountain States, where Kennedy Wilson has been
an early investor, we see a desire by both employers and individuals to
seek out housing affordability, a friendly business environment, better
infrastructure, and access to the outdoors. These trends that existed for
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years leading up to the pandemic were accelerated over the last year as
We also continue to upgrade the quality of our portfolio by selling non-
portions of the two largest segments of the population, Baby Boomers and
core assets and investments where we have completed our business plan
Millennials, sought a higher quality of life in these more affordable regions.
and then recycle capital into newer, higher-quality assets with better
Within our Vintage Housing senior and affordable multifamily housing
joint venture, we are on track to grow the platform from 8,000 units today
to approximately 10,000 stabilized units over the next three years with
minimal equity required from Kennedy Wilson. We have received all of
our initial investment back since we originally acquired a 61% interest in
Vintage Housing’s 5,500 unit portfolio in 2015.
Acquiring High-Quality Real Estate – With travel restricted significantly
through 2020, our local, boots-on-the-ground approach to investing in
our key markets paid off, particularly with generating our own market
intelligence and conducting due diligence. In 2020, we acquired $442
million of real estate assets, with 74% in the U.S. and 26% in Europe.
Looking ahead, we are targeting property acquisitions in our main target
markets – Western U.S., Ireland and the U.K. – where we continue to
see favorable long-term structural and economic drivers of demand for
multifamily and office investment, including job growth, population growth
and great university systems.
return potential. In 2020, we sold $1.2 billion of assets, generating $794
million of cash to Kennedy Wilson and $326 million in gains on sale. The
sale of Club Palisades in December was a good example of our strategy of
recycling proceeds into new opportunities with higher potential for NOI
growth. We will be using the nearly $83 million of cash from the sale of
the aging community in Federal Way, Washington to recycle into newer
multifamily properties across the Mountain States as well as our new
development pipeline, where we are projecting to stabilize properties at
cap rates well above the rates we can achieve through acquisition.
Maintaining High Levels of Liquidity and Managing Debt – We ended
2020 with the best access to capital in the history of our company and
have doubled our cash position since 2018. As of year-end, our liquidity
stood at $1 billion in cash, with $300 million available on our line of
credit and over $4 billion of purchasing power across our investment
platforms. We have less than 2% of our debt maturing in 2021. As I laid
out in last year’s letter, low global interest rates strengthened our ability
to generate interest expense savings through 2020. We took advantage
of strength in the bond market and completed a $1.2 billion unsecured
bond offering across two separate tranches, with $600 million maturing in
265
Room, 5 Star
Luxury Hotel
The Shelbourne
D U B L I N , I R E L A N D
7
2029 at 4.75% and $600 million maturing in 2031 at 5%. This transaction
therefore are able to see industry and financing trends across multiple
allowed us to fully retire our $1.15 billion 5.875% 2024 unsecured bonds
asset classes in real time. We continue to leverage our unique relationship
It is a direct result of our success that Kennedy Wilson is able to give back
to others in such a significant way. In 2020, our commitment didn’t waiver,
early and led to approximately $10 million of interest savings annually
network and monitor transaction activity in our core U.S. markets to
and our support included:
while also significantly extending our duration. We have also repaid £280
uncover new debt investment opportunities.
million ($390 million) of our £500 million KWE sterling-denominated debt
maturing in 2022, further reducing our unsecured debt profile.
We also seized on the growing opportunity in the urban logistics market,
where we have been an active player for the past decade and launched
Growing our Investment Management Platform
a $1 billion platform focused on last-mile urban distribution center
We continued to build on our proven investment management track
investments in Europe alongside Singaporean sovereign wealth fund GIC.
record in 2020, growing our business with the launch of new partnerships
Our goal is to build on our track record of raising capital from some of
and the creation of entirely new platforms. We increased our fee-bearing
the world’s largest pension plans, sovereign wealth funds and insurance
capital by 30% to $3.9 billion, which has now more than doubled since
companies to grow our fee-bearing capital.
2018, with a robust pipeline of $2.2 billion of additional non-discretionary
fee-bearing capital to be deployed.
ESG Updates
The far reaching human and economic challenges caused by the pandemic
In May, as our team saw a significant pocket of opportunity starting
underscored the importance of environmental, social and governance
with loan investments secured by high-quality real estate across the
initiatives by companies, and Kennedy Wilson continues to make progress
Western U.S., we launched a $2 billion debt platform alongside our
in growing our own ESG program. Giving back to the communities where
long-term partners and, just nine months later, the platform crossed $1
we do business has always been a core part of our corporate character and
billion in loans. Since then, we have seen a steady uptick in debt related
that commitment to doing good, through ESG initiatives and operating
opportunities and a solid volume of high-quality sponsors showing an
our business responsibly, was reflected in a recent recognition by
appetite for the more nimble, creative approach we are able to offer
Newsweek, which listed Kennedy Wilson as one of the most responsible
through Kennedy Wilson’s debt platform. We are in a unique position
companies in America in 2021.
as we have an ownership interest in $18 billion of assets globally, and
•
helping veterans and families of those who have served through the
Navy SEAL Foundation and the C4 Foundation;
•
providing meals to the Downtown Women’s Center to help feed
women experiencing homelessness in Los Angeles;
•
purchasing medical equipment that will lead to faster diagnoses at
Our Lady’s Children’s Hospital in Ireland;
•
expanding access to education through organizations like With Your
Shield and the Neighborhood Academic Initiative at USC and Bringing
Hope to the Family in Uganda;
•
launching a new partnership with Daylight, the recipient of a
For more details on our ESG initiatives, visit
esg.kennedywilson.com
City of Los Angeles HHH Innovation Challenge award, which will
provide advancement opportunities for women and people of diverse
deliver nearly 100 new units of housing for individuals experiencing
backgrounds and I am grateful for the leadership of Kennedy Wilson
homelessness in Los Angeles over the next two years.
President Mary Ricks and her contributions to these efforts through her
Embracing diversity and a variety of viewpoints has been a longstanding
which is focused on advancing women in real estate and finance while
oversight of our ESG Committee as well as Kennedy Wilson Women,
part of our culture at Kennedy Wilson, and over the past 33 years
deepening our industry’s talent pool.
we have been consistent in our belief that inclusion ultimately drives
innovation and performance. I am proud to report that our senior
We also continue to expand our social impact investing arm through
management team consists of 46% women, as well as team members
our partnership with Vintage Housing, which provides affordable rental
from a variety of backgrounds. We aim to build on our initiatives to
housing for income-qualified families and active seniors. We are on pace
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298
Affordable Units
Southside by Vintage
S E A T T L E , W A S H I N G T O N
to deliver an additional 2,000 affordable units to the existing 8,000-unit
through it all was uniquely focused on sharing his talents with others. His
portfolio by 2023, deploying services and environmentally sustainable
contributions made a significant impact on Kennedy Wilson’s success and
initiatives to provide high-quality homes that enrich their surrounding
the success of other companies, but more importantly, he impacted the
communities. We are proud to provide seed capital to Langdon Park
lives of so many individuals through the mentorship he provided. We will
Capital, a newly launched institutional real estate investment company led
remember John for his kindness, the calmness he always exuded, and his
by veteran J.P. Morgan finance executive and former NFL player Malcolm
perpetual smile. We will miss him every day.
Johnson, that will address the chronic undersupply of high-quality real
estate in diverse communities throughout the country. Our support for
Malcolm and the Langdon Park Capital team reflects our shared values, our
emphasis on investing alongside good people and our deep desire to help
create value and solutions that make our communities stronger.
Lastly, I want to express my gratitude to all of our Kennedy Wilson
teammates for their commitment to our success, our board members for
their leadership and counsel, our shareholders, lenders, and our partners
for the capital support we need to grow our business. As we turn the page
on a unique year, we are optimistic about 2021 and looking forward to
It is with profound sadness that I share the recent passing of Kennedy
another great year of accomplishments at Kennedy Wilson.
Wilson Board Member and my dear friend of over 40 years, John Taylor.
John was a legend in the financial institution accounting world and
throughout his impressive career he provided professional accounting
and auditing services to countless commercial banks, savings and loans,
mortgage banks, mutual funds, trust companies, real estate investment
trusts, business development companies and finance companies. Prior
to his retirement in 2011, John served as a senior audit partner in KPMG
LLP’s financial services practice group, where he worked for 38 years.
He was the lead audit engagement partner on nearly all of KPMG’s
significant public banking and finance clients in Southern California, and
William J. McMorrow
Chairman and Chief Executive Officer
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5
The Grange
Dublin, Ireland
274 Multifamily Units
Multifamily
Kennedy Wilson pursues multifamily acquisition opportunities
where we can unlock value through a myriad of strategies, including
institutional management, asset rehabilitation, repositioning and creative
recapitalization. We focus primarily on apartments in supply-constrained,
infill markets. We currently hold investments in more than 30,000
multifamily units located throughout the Western U.S. (primarily Seattle,
Salt Lake City, Boise, Greater Los Angeles and the San Francisco Bay
Area) and Dublin, Ireland.
30,000
Multifamily Units
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Rosewood Premier
Boise, Idaho
66 Multifamily Units
Clancy Quay
Dublin, Ireland
865 Multifamily Units
Steamboat by Vintage
Reno, Nevada
360 Affordable Units
The Clara
Boise, Idaho
277 Units
Multifamily Development
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10 Hanover Quay
Dublin, Ireland
69,000 Square-Foot
Commercial Development
Commercial
We source, acquire, and finance various types of commercial real estate
including office, industrial, and retail assets. After acquisition, the
properties are generally repositioned to enhance market value. Assets
are either sold as part of property-specific investment strategies
designed to deliver above-market returns to our clients and shareholders
or held if producing above average returns. Kennedy Wilson owns
interests in 161 commercial properties located primarily in the Western
U.S., United Kingdom and Ireland.
161
Commercial
Properties
22M
Square Feet
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Kona Village
Kailua-Kona, Hawaii
150-Key Iconic Hotel Redevelopment
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20 Kildare Street
Dublin, Ireland
64,000 Square-Foot
Commercial Development
Coopers Cross Development
Dublin, Ireland
394,000 Commercial Square Feet
472 Multifamily Units
Mixed-Use
Kennedy Wilson’s mixed-use projects focus on place making by
integrating high-quality housing and offices with best-in-class amenities
and public spaces to bring underutilized sites to life. Our projects
are located in close range of city centers, with easy access to public
transportation and within markets experiencing long-term structural and
economic drivers of demand, including job growth, population growth
and strong university systems that generate a talented pool of workers.
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The Art of Coffee
Dublin, Ireland
BrewDog
Dublin, Ireland
Capital Dock
Dublin, Ireland
243,000 Commercial Square Feet
190 Multifamily Units
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Stockley Park
Heathrow, United Kingdom
54,000 Square-Foot Office Campus
Financial Report 2020
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Financial Report
Table of Contents
Business
Business
Selected Financial Data
3 Management(cid:317)s Discussion and Analysis of Financial Condition and Results of Operations
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Performance Graph
0 Market for Registrant(cid:317)s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Forward-Looking Statements
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Company Overview
Kennedy Wilson is a global real estate investment company. We own, operate
and develop real estate with the ob(cid:102)ective of maximi(cid:140)ing earnings over the long
run for ourselves and our equity partners. We focus primarily on multifamily and
office properties located in the Western (cid:38)nited States, (cid:38)nited Kingdom, and
Ireland. As of December 31, 2020, we have 202 employees in 12 offices primarily
located throughout the (cid:38)nited States, the (cid:38)nited Kingdom, Ireland and Spain. As of
December 31, 2020, our Real Estate Assets under Management (“A(cid:38)M”) are at (cid:362)17.6
billion. The real estate that we hold in our global por(cid:127)olio consists primarily of (51(cid:1143))
multifamily apartments and (49(cid:1143)) commercial properties based on Consolidated NOI
and JV NOI. Geographically, we focus on the (58(cid:1143)) Western (cid:38)nited States, the (21(cid:1143))
(cid:38)nited Kingdom and (17(cid:1143)) Ireland (including 4(cid:1143) in other).
Our investment activities involve ownership of 10,350 multifamily units, 8.6 million
square feet of commercial space and one hotel that are consolidated on our financial
statements with revenues of (cid:362)417.8 million and, consolidated net operating income
(“Consolidated Por(cid:127)olio NOI”) of (cid:362)262.3 million during the year ended December 31,
2020 and A(cid:38)M of (cid:362)7.2 billion. Our ownership interests in such consolidated
properties make up our Consolidated Por(cid:127)olio (“Consolidated Por(cid:127)olio”) business
segment as discussed in detail throughout this report.
In addition to investing our shareholder(cid:317)s capital, we invest capital on behalf of our
partners in real estate and real estate related assets through our Co-investment
Por(cid:127)olio (“Co-investments Por(cid:127)olio”). This fee-bearing capital represents total
third-party committed or invested capital that we manage in our (cid:102)oint ventures and
commingled funds that entitle us to earn fees, including without limitation, asset
management fees, construction management fees, acquisition and disposition fees
and/or promoted interest, if applicable. As of December 31, 2020, our fee-bearing
capital was (cid:362)3.9 billion and we recogni(cid:140)ed (cid:362)22.5 million in recurring investment
management fees and (cid:362)2.6 million of performance fees from equity partners in these
vehicles during the year ended December 31, 2020. We generally invest our own
capital alongside our equity partners in these (cid:102)oint ventures and commingled funds
that we manage. As of December 31, 2020, we held ownership interests in 9,509
market rate multifamily units, 9,982 affordable rate multifamily units, 13.3 million
square feet of commercial space, two hotels and (cid:362)795.8 million of real estate debt (of
which our share was (cid:362)95.1 million), all of which are held through (cid:102)oint ventures and
three commingled funds that we manage (which are represented as unconsolidated
investments on our financial statements). For the year ended December 31, 2020,
these (cid:102)oint ventures and commingled funds that we manage generated revenues
and JV NOI of (cid:362)162.2 million and (cid:362)102.5 million, respectively, and had an A(cid:38)M of
(cid:362)10.4 billion as of December 31, 2020. In our Co-investments Por(cid:127)olio 88(cid:1143) of our
carrying value is accounted for at fair value. Our interests in such (cid:102)oint ventures and
commingled funds and the fees that we earn from such vehicles make up our
Co-investments Por(cid:127)olio segment as discussed in detail throughout this report.
In addition to our income-producing real estate, we also engage in development,
redevelopment and value add initiatives through which we enhance cash (cid:89)ows or
reposition assets to increase value. Our total share of development pro(cid:102)ect costs with
respect to these investments are estimated at (cid:362)696.0 million over the next four years.
These costs are generally financed by cash from our balance sheet, capital provided
by partners (if applicable), cash (cid:89)ow from the investment and construction loans. Cost
overrun risks are reduced by detailed architectural plans, guaranteed price contracts
and supervision by expert Company executives and personnel. When completed,
the construction loans are generally replaced by long-term mortgage financing. See
additional detail in the section titled Development and Redevelopment below.
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Acquire high quality assets, either on our own or with strategic partners
The table below highlights some of the Company(cid:317)s performance metrics over the past five years:
Reposition assets to enhance cash (cid:89)ows post-acquisition
Explore development opportunities on underutili(cid:140)ed portions of assets, or acquire
development assets that fit within our overall investment strategy
Continuously evaluate and selectively harvest asset and entity value through
strategic reali(cid:140)ations using both the public and private markets
Business (continued)
Investment Approach
The following is our investment approach:
Identify countries and markets with an attractive investment landscape
Establish operating pla(cid:127)orms in our target markets
Develop local intelligence and create long-lasting relationships, primarily with
financial institutions
Leverage relationships and local knowledge to drive proprietary investment
opportunities with a focus on off-market transactions that we expect will result in
above average cash (cid:89)ows and returns over the long term
During the last five years, occupancy, NOI, Ad(cid:102)usted EBITDA and fee-bearing capital of the Company was as follows (at share):
($ in millions, except fee bearing capital which $ in billions)
Multifamily Occupancy
(cid:1143) change
Commercial Occupancy
(cid:1143) change
Consolidated NOI(1)
(cid:1143) change
JV NOI(1)
(cid:1143) change
Ad(cid:102)usted EBITDA(1)
(cid:1143) change
Fee-bearing capital(2)
(cid:1143) change
(1) Please refer to “Certain Non-GAAP Measures and Reconciliations” for a reconciliation of certain non-GAAP items to U.S. GAAP.
(2) Amounts in fee-bearing capital exclude $1.4 billion as of December 31, 2016 relating to KWE prior to it being wholly-owned.
2020
95.2 (cid:1143)
0.8 (cid:1143)
93.4 (cid:1143)
0.1 (cid:1143)
262.3
(14.1)(cid:1143)
102.5
31.7 (cid:1143)
608.0
(16.5)(cid:1143)
3.9
30.0 (cid:1143)
2019
94.4 (cid:1143)
(0.3)(cid:1143)
93.3 (cid:1143)
(1.0)(cid:1143)
305.2
(17.1)(cid:1143)
77.8
40.7 (cid:1143)
728.1
2.2 (cid:1143)
3.0
36.4(cid:1143)
2018
94.7 (cid:1143)
1.0 (cid:1143)
94.2 (cid:1143)
(cid:1143)
368.3
52.2 (cid:1143)
55.3
15.0 (cid:1143)
712.7
56.4 (cid:1143)
2.2
22.2 (cid:1143)
Year Ended December 31,
2017
93.8 (cid:1143)
(cid:1143)
94.2 (cid:1143)
2.8 (cid:1143)
242.0
27.8 (cid:1143)
48.1
(5.9)(cid:1143)
455.7
30.2 (cid:1143)
1.8
12.5 (cid:1143)
2016
93.8 (cid:1143)
(cid:1143)
91.6 (cid:1143)
(cid:1143)
189.4
(cid:1143)
51.1
(cid:1143)
349.9
(cid:1143)
1.6
(cid:1143)
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(In millions, except per share amounts)
Statements of income data and dividends:
Revenue
Net income to Kennedy-Wilson Holdings Inc. common shareholders(1)
Basic income per share
Dividends declared per share of common stock
Ad(cid:102)usted EBITDA(2)
Ad(cid:102)usted EBITDA annual increase (decrease)
Ad(cid:102)usted Net Income(2)
Ad(cid:102)usted Net Income annual increase (decrease)
Balance sheet data:
Cash and cash equivalents
Total assets
Mortgage debt
KW unsecured debt
KWE unsecured bonds
Kennedy Wilson equity
Noncontrolling interests
Total equity
Common shares outstanding
2020
2019
2018
2017
2016
Year Ended December 31,
(cid:362) 450.9
92.9
0.66
0.88
608.0
(16)(cid:1143)
306.9
(31)(cid:1143)
(cid:362) 569.7
224.1
1.60
0.85
728.1
2 (cid:1143)
442.5
11 (cid:1143)
(cid:362) 773.5
150.0
1.04
0.78
712.7
56 (cid:1143)
397.0
64 (cid:1143)
(cid:362) 801.8
100.5
0.83
0.70
455.7
30 (cid:1143)
242.5
27 (cid:1143)
(cid:362) 690.4
2.8
0.01
0.56
349.9
191.3
2020
2019
2018
2017
2016
As of December 31,
(cid:362) 965.1
7,329.0
2,589.8
1,332.2
1,172.5
1,644.5
28.2
1,672.7
141.4
(cid:362) 573.9
7,304.5
2,641.0
1,131.7
1,274.2
1,678.7
40.5
1,719.2
151.6
(cid:362) 488.0
7,381.8
2,950.3
1,202.0
1,260.5
1,246.7
184.5
1,431.2
143.2
(cid:362) 351.3
7,724.8
3,156.6
1,179.4
1,325.9
1,365.6
211.9
1,577.5
151.6
(cid:362) 885.7
7,656.6
2,770.4
934.1
1,185.7
1,048.0
1,295.1
2,343.1
115.7
(1) GAAP Net Income to Common Shareholders for the year ended December 31, 2017, includes a one-time tax benefit of $44.8 million that was recorded in the quarter ended December 31, 2017, or $0.38 per share.
(2) See Non-GAAP Measures and Certain Definitions and “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP measures” for a description of adjusted EBITDA and adjusted net
income and a reconciliation of these metrics to net income as reported under GAAP.
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•
•
•
•
•
•
•
•
—
—
—
—
—
—
—
—
Business (continued)
Business Segments
Our operations are defined by two business segments: our consolidated investment
por(cid:127)olio (the “Consolidated Por(cid:127)olio”) and our co-investment por(cid:127)olio (the
“Co-Investment Por(cid:127)olio”)
Our Consolidated Por(cid:127)olio consists of the investments in real estate and real
estate-related assets that we have made and consolidate on our balance sheet.
We typically wholly-own the assets in our Consolidated Por(cid:127)olio.
Our Co-investment Por(cid:127)olio consists of (i) the co-investments in real estate and
real estate-related assets, including loans secured by real estate, that we have
made through the commingled funds and (cid:102)oint ventures that we manage(cid:312) and
(ii) the fees (including, without limitation, asset management fees, construction
management fees and performance fees) that we earn on our fee bearing capital.
We typically have a 5(cid:331)50(cid:1143) ownership interest in the assets in our Co-investment
Por(cid:127)olio. We have a weighted average ownership of 39(cid:1143) as of December 31,
2020.
In addition to our two primary business segments our Corporate segment includes,
among other things, our corporate overhead and our property services group (prior to
the sale of the group in October 2020).
Segment Presentation
We evaluate our reportable segments in accordance with the guidance of ASC Topic
280, Segment Reporting. We had historically presented Investments and Services as
our two main operating segments. As we have expanded on our separate account and
commingled fund pla(cid:127)orms, we determined that the segment presentation detailed
herein is more indicative to how the business is being run and evaluated by the chief
operating decision makers. For additional detail with respect to the impact of this
change see Item 7, Management(cid:317)s Discussion and Analysis of Financial Condition and
Results of Operations, and Note 16 of the Company(cid:317)s audited financial statement for
the year ended December 31, 2020.
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Consolidated Portfolio
Our Consolidated Por(cid:127)olio is a permanent capital vehicle focused on maximi(cid:140)ing
property cash (cid:89)ow. These assets are primarily wholly-owned and tend to have
longer hold periods and we target investments with accretive asset management
opportunities. We typically focus on office and multifamily assets in the Western
(cid:38)nited States and commercial assets in the (cid:38)nited Kingdom and Ireland within this
segment.
The non-GAAP table below represents a summari(cid:140)ed balance sheet of our
Consolidated Por(cid:127)olio as of December 31, 2020 and December 31, 2019. This table
does not include amounts from our corporate segment such as corporate cash and the
KWH Senior Notes.
($ in millions)
Cash(1)
Real estate
Accounts receivable and other assets
Total Assets
Accounts payable
Accrued expenses
Mortgage debt
KWE bonds
(cid:36)o(cid:124)a(cid:1140) (cid:21)iabi(cid:1140)iti(cid:59)s
q uity
December 31,
2020
December 31,
2019
(cid:362) 733.2
4,720.5
146.5
5
1
.2
28.9
184.5
2,589.8
1,172.5
.7
.5
(cid:362) 338.8
5,080.2
198.3
5
1
.3
18.4
210.3
2,641.0
1,274.2
.9
.4
(1) Excludes $231.9 million and $235.1 million as of December 31, 2020 and December 31, 2019 of corporate
non-property level cash.
Co-Investments Portfolio
We utili(cid:140)e different pla(cid:127)orms in the Co-investment Por(cid:127)olio segment depending on
the asset and risk return profiles.
The table below represents the carrying value of balance sheet of our Co-Investment
Por(cid:127)olio at our share of the underlying investments as of December 31, 2020 and
December 31, 2019. The Co-Investment Por(cid:127)olio consists of our unconsolidated
investments as well as our loan investments which are included within other assets on
our consolidated financials.
($ in millions)
Cash
Real estate
Loans
Accounts receivable and other assets
Total Assets
Accounts payable and accrued expenses
Mortgage debt
(cid:36)o(cid:124)a(cid:1140) (cid:21)iabi(cid:1140)iti(cid:59)s
q uity
December 31,
2020
December 31,
2019
(cid:362) 77.3
2,654.4
107.1
205.0
3
1
.8
64.6
1,582.8
.4
.4
(cid:362) 60.7
2,461.5
13.4
222.1
2
1
.7
85.6
1,337.5
.1
.6
Commingled funds(cid:332)We currently have three closed end funds that we manage and
through which we receive investment management fees. We focus on sourcing
investors in the (cid:38).S., Europe and Middle East and target investments in the (cid:38).S. and
Europe with respect to our commingled funds. Each of our funds have, among other
things, defined investment guidelines, investment hold periods and target returns.
Currently our (cid:38).S. based funds focus on value-add properties that have an expected
hold period of 5 to 7 years. Our European fund focuses on value add commercial
properties in the (cid:38)nited Kingdom and Ireland that also have expected hold periods of
5 to 7 years. As of December 31, 2020, our weighted average ownership interest in
the commingled funds that we manage was 12(cid:1143).
Separate accounts(cid:332)We have several equity partners whereby we act as the general
partner and receive investment management fees including acquisition, disposition,
financing, construction management, performance and other fees. In addition to
acting as the asset manager and general partner of those (cid:102)oint ventures, we are
also a co-investor in these properties. Our separate account pla(cid:127)orms have defined
investment parameters such as asset types, leverage and return profiles and expected
hold periods. As of December 31, 2020, our weighted average ownership interest in
the various (cid:102)oint ventures that we manage was 45(cid:1143).
VHH—Through our Vintage Housing Holdings (“VHH”) partnership we acquire and
develop income and age restricted properties. See a detailed discussion of this
business in the Multifamily section below.
Investment Types
The following are the product types we invest in through our Consolidated Por(cid:127)olio
and Co-Investment Por(cid:127)olio segments:
Multifamily
We pursue multifamily acquisition opportunities where we can unlock value through
a myriad of strategies, including institutional management, asset rehabilitation,
repositioning and recapitali(cid:140)ation. We focus primarily on apartments in supply-
constrained, infill markets.
As of December 31, 2020, we hold investments in 116 assets that include 10,350
consolidated multifamily apartment units and 9,509 units within our market rate
Co-Investment Por(cid:127)olio and 9,982 affordable units in our VHH pla(cid:127)orm. Our largest
Western (cid:38)nited States multifamily regions are the Pacific Northwest, primarily the
greater Seattle area and Portland, and the Mountain States region, which includes
(cid:38)tah, Idaho, Montana, Colorado and Nevada. The remainder of the Western (cid:38)nited
States por(cid:127)olio is located in Northern and Southern California. In Ireland we focus on
Dublin city center and the suburbs of the city.
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Business (continued)
Our asset management strategy entails installing strong property management teams
to drive leasing activity and upkeep of the properties. We also add amenities designed
to promote health and wellness, celebrate local and cultural events and enhance the
lives of residents living in our communities. We also incorporate spaces for rest and
sociali(cid:140)ation across our global multifamily por(cid:127)olio, including clubhouses, fitness
centers, business suites, outdoor play areas, pools and dog parks.
Multifamily—Affordable Housing
Through our VHH pla(cid:127)orm we also focus on affordable units based on income or
age restrictions. With homes reserved for residents that make 50(cid:1143)(cid:331)60(cid:1143) of the
area(cid:317)s median income, VHH provides an affordable long-term solution for qualifying
working families and active senior citi(cid:140)ens, coupled with modern amenities that are a
hallmark of our traditional multifamily por(cid:127)olio. Fundamental to our success is a shared
commitment to delivering quality affordable homes and building communities that
enrich residents(cid:317) lives, including providing programs such as social support groups, a(cid:91)er-
school programs, transportation assistance, computer training, and wellness classes.
VHH typically utili(cid:140)es tax-exempt bond financing and the sale of federal tax credits to
help finance its investments. We are entitled to 50(cid:1143) of the operating cash (cid:89)ows from
the VHH partnership in addition to any investing distributions we receive from federal
tax credits or refinancing activity at the property level. We invested the time to
understand Vintage Housing(cid:317)s culture and business model and saw them as a natural
partner as we expanded into this growing sector.
When we acquired VHH in 2015, the por(cid:127)olio consisted of 5,485 units. As of
December 31, 2020, the VHH por(cid:127)olio includes 8,017 stabili(cid:140)ed rental units with
another 1,965 units currently under stabili(cid:140)ation, development or undergoing
entitlements in the Western (cid:38)nited States. We acquired our ownership interest in
VHH in 2015 for approximately (cid:362)80.0 million. As of December 31, 2020 we have
contributed an additional (cid:362)87.9 million into VHH and have received (cid:362)202.1 million
in cash distributions. VHH is an unconsolidated investment that we account for using
the fair value option which had a carrying value of (cid:362)142.9 million as of December 31,
2020. We have recorded (cid:362)130.8 million worth of fair value gains on our investment in
VHH including (cid:362)11.5 million during the year ended December 31, 2020.
Commercial
Our investment approach for office acquisition criteria differs across our various
investment pla(cid:127)orms. For our Consolidated Por(cid:127)olio we look to invest in large high
quality properties with high replacement costs. In our separate account por(cid:127)olios our
partners have certain characteristics whether it be location, financing (unencumbered
properties) or hold period. The commingled funds typically look for opportunities that
have a value-add component that can benefit from our asset management expertise.
We do not typically own high-rise buildings in city centers and we instead look to
invest in mid-to-low rise buildings in areas ad(cid:102)acent to city centers and suburban
markets. A(cid:91)er acquisition, the properties are generally repositioned to enhance
market value.
Our retail por(cid:127)olio has different characteristics based on the geographic markets
wherein the properties are located. In Europe, we have a mixture of high street retail,
suburban shopping centers and leisure assets which are mainly located in the (cid:38)nited
Kingdom as well as Dublin and Madrid. In our Western (cid:38)nited States retail por(cid:127)olio,
we invest in shopping centers that are generally grocery anchored.
Our industrial por(cid:127)olio consists mainly of distribution centers located in the (cid:38)nited
Kingdom.
As of December 31, 2020, we hold investments in 161 commercial properties, totaling
over 21.9 million square feet, predominately in the (cid:38)nited Kingdom and Ireland with
additional investments in the Pacific Northwest, Southern California, Spain and Italy.
Our Consolidated por(cid:127)olio consisted of 8.6 million square feet while our
Co-Investment por(cid:127)olio consists of 13.3 million square feet.
Development and redevelopment
We have a number of development, redevelopment and entitlement pro(cid:102)ects that
are underway or in the planning stages. (cid:38)nlike the residential pro(cid:102)ects that are held
for sale and described in the Residential and Other section below, these initiatives
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may ultimately result in income-producing assets. As of December 31, 2020, we are
actively developing 1,529 multifamily units, 0.6 million commercial rentable square
feet and 150 hotel rooms. If these pro(cid:102)ects are brought to completion, the Company(cid:317)s
estimated share of the total capitali(cid:140)ation of these pro(cid:102)ects would be approximately
(cid:362)1.1 billion (approximately 36(cid:1143) of which has already been funded), which we expect
would be funded through our existing equity, third party equity, pro(cid:102)ect sales, tax
credit financing and secured debt financing. This represents total capital over the
life of the pro(cid:102)ects and is not a representation of peak capital and does not take into
account any distributions over the course of the investment. We and our equity
partners are under no obligation to complete these pro(cid:102)ects and may dispose of
any such assets a(cid:91)er adding value through the entitlement process. Please also see
the section titled “Liquidity and Capital Resources—Development and redevelopment”
in the Management(cid:317)s Discussion and Analysis of Financial Condition and Results of
Operations for additional detail on these investments.
Real Estate Debt
In the second quarter of 2020, we formed a (cid:362)2 billion pla(cid:127)orm (“KW/FF debt
pla(cid:127)orm”) with Fairfax Financial Holdings Limited (“Fairfax”) that pursues first
mortgage loans secured by high-quality real estate in the Western (cid:38).S., Ireland
and the (cid:38)nited Kingdom. In our role as asset manager, we will earn customary
management and performance fees. We will also invest alongside Fairfax in these
loans with an ownership interest between 10(cid:1143) to 25(cid:1143). We currently expect that
these investments will all be made without the use of any leverage. Since its inception
to December 31, 2020, we closed on (cid:362)497.0 million of loans in the pla(cid:127)orm, our share
of which is (cid:362)73.1 million.
In addition to the KW/FF debt pla(cid:127)orm we acquire performing and non-performing
loans and/or originate loans secured by real estate on our own or with other
partners. As of December 31, 2020, we held interests in 16 loans with an average
interest rate of 6.4(cid:1143) per annum and a carrying value of (cid:362)95.1 million located in
the Western (cid:38)nited States and are primarily invested through our Co-investment
Por(cid:127)olio consisting of loans within the KW/FF debt pla(cid:127)orm and with other partners.
In addition to interest income we earn on loans we also earn customary asset
management fees from our partners for managing loan investments.
Our current loan por(cid:127)olio including the KW/FF debt pla(cid:127)orm is focused on
performing loans. However, if market conditions deteriorate, we expect more
opportunities to arise in acquiring loan por(cid:127)olios at a discount from their contractual
balance due as a result of deteriorated credit quality of the borrower or market
conditions. Such loans are underwritten by us based on the value of the underlying
real estate collateral. Due to the discounted purchase price for such loans, we seek,
and are generally able to, accomplish near term reali(cid:140)ation of the loan in a cash
settlement or by obtaining title to the property. Accordingly, the credit quality of the
borrower is not of substantial importance to our evaluation of the risk of recovery
from such investments.
Hotel
We acquire hotels in certain opportunistic situations in which we are able to purchase
at a discount to replacement cost or can implement our value-add investment
approach. As of December 31, 2020, we owned one consolidated operating hotel
with 265 hotel rooms located in Dublin, Ireland. Additionally, in our Co-investment
Por(cid:127)olio, we have a five-star resort development that will contain 150 rooms in Kona,
Hawaii and a hotel property in Hawaii that consists of 72 rooms which is owned in
one of our commingled funds.
Residential and Other
In certain cases, we may pursue for-sale housing acquisition opportunities, including
land for entitlements, finished lots, urban infill housing sites and partially finished
and finished housing pro(cid:102)ects. On certain income-producing acquisitions, there are
ad(cid:102)acent land parcels for which we may pursue entitlement activities or, in some
cases, development or re-development opportunities.
This group also includes our investment in liquid non-real estate investments
which include investment funds that hold marketable securities and private equity
investments.
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Business (continued)
As of December 31, 2020, we hold 20 investments which are primarily comprised
of 239 residential units/lots and 3,881 acres located in Hawaii and the Western
(cid:38)nited States. As of December 31, 2020, these investments had a Gross Asset Value
of (cid:362)293.5 million and the Company had a weighted average ownership in such of
investments of 72(cid:1143). These investments are in various stages of completion, ranging
from securing the proper entitlements on land positions to sales of units/lots.
Fair Value Investments
As of December 31, 2020, (cid:362)1.1 billion or 88(cid:1143) of our investments in unconsolidated
investments (16(cid:1143) of total assets) are held at estimated fair value. As of December 31,
2020, there were cumulative fair value gains of (cid:362)262.6 million which comprises
23(cid:1143) of the (cid:362)1.1 billion carrying value of fair value unconsolidated investments that
are currently held. Our investment in VHH is our largest unconsolidated investment
held at estimated fair value and was held at (cid:362)142.9 million and (cid:362)142.8 million as of
December 31, 2020 and 2019, respectively. Fair value changes consist of changes in
the underlying value of properties and associated mortgage debt as well as foreign
currency (cid:89)uctuations (net of any hedges) for non-dollar denominated investments.
During the year ended December 31, 2020, we recogni(cid:140)ed (cid:362)49.9 million of fair value
gains and performance fees on unconsolidated investments.
In determining these estimated fair market values, we use discounted cash (cid:89)ow
models that estimate future cash (cid:89)ows (including terminal values) and discount
those cash (cid:89)ows back to the current period. The accuracy of estimating fair value for
investments cannot be determined with precision and cannot be substantiated by
comparison to quoted prices in active markets and may not be reali(cid:140)ed in a current
sale or immediate settlement of the asset or liability. Additionally, there are inherent
uncertainties in any fair value measurement technique, and changes in the underlying
assumptions used, including capitali(cid:140)ation rates, discount rates, liquidity risks, and
estimates of future cash (cid:89)ows could significantly affect the fair value measurement
amounts. As such, below are ranges of the key metrics included in determining these
estimated values.
Multifamily
Office
Retail
Hotel
Residential
Capitali(cid:140)ation Rates
3.80(cid:1143)(cid:331)5.75(cid:1143)
4.00(cid:1143)(cid:331)7.00(cid:1143)
5.00(cid:1143)(cid:331)8.75(cid:1143)
6.00(cid:1143)
N/A
Estimated Rates (cid:38)sed For
Discount Rates
5.75(cid:1143)(cid:331)8.15(cid:1143)
5.00(cid:1143)(cid:331)9.00(cid:1143)
7.50(cid:1143)(cid:331)11.25(cid:1143)
7.50(cid:1143)(cid:331)8.25(cid:1143)
12.00(cid:1143)
In valuing indebtedness, the Company considers significant inputs such as the term
of the debt, value of collateral, market loan-to-value ratios, market interest rates and
spreads, and credit quality of investment entities. The credit spreads used by Kennedy
Wilson for these types of investments range from 0.37(cid:1143) to 4.90(cid:1143).
There is no active secondary market for our development pro(cid:102)ects and no readily
available market value given the uncertainty of the amount and timing of future
cash (cid:89)ows. Accordingly, our determination of fair value of our development pro(cid:102)ects
requires (cid:102)udgment and extensive use of estimates. Therefore, we typically use
investment cost as the estimated fair value until future cash (cid:89)ows become more
predictable. Additionally, the fair value of our development pro(cid:102)ects may differ
significantly from the values that would have been used had a market existed for such
investments and may differ materially from the values that we may ultimately reali(cid:140)e.
If we were required to liquidate an investment in a forced or liquidation sale, we could
reali(cid:140)e significantly less than the value at which we have recorded it. In addition,
changes in the market environment and other events that may occur over the life
of the investments may cause the gains or losses ultimately reali(cid:140)ed or incurred on
these investments to be different than the unreali(cid:140)ed gains or losses re(cid:89)ected in the
currently assigned valuations.
We continue to assess the impact of the COVID-19 pandemic and its impact on
the fair value of investments. Valuations of our assets that are reported at fair
value and the markets in which they operate, to date, have not been significantly
impacted by the COVID-19 pandemic as there has been little disruption to pro(cid:102)ected
cash (cid:89)ows or market driven inputs on the underlying properties. As a result of the
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rapid development, (cid:89)uidity and uncertainty surrounding this situation, we expect
that information with respect to fair value measurement may change, potentially
significantly, going forward and may not be indicative of the actual impact of the
COVID-19 pandemic on its business, operations, cash (cid:89)ows and financial condition
for the year ended December 31, 2020 and future periods.
Value Creation
Our differentiated and unique approach to investing is the cornerstone of how we
create value for our shareholders. Our investment philosophy is based on three core
fundamentals:
Leverage our global footprint and complementary investment and investment
management businesses to identify attractive investment markets across the
world.
Selectively invest in opportunities across many real estate product types with a
goal of maximi(cid:140)ing cash (cid:89)ow and risk-ad(cid:102)usted return on capital.
Actively manage assets and finance our assets in a manner designed to generate
stable, predictable and growing cash (cid:89)ows for shareholders and clients.
Kennedy Wilson is able to create value for its shareholders in the following ways:
We are able to identify and acquire attractive real estate assets across many
markets, in part due to the significant proprietary deal (cid:89)ow driven from an
established global network of industry relationships, particularly with financial
institutions. This can create value by allowing us to maintain and develop a large
pipeline of attractive opportunities.
Our operating expertise allows us to focus on opportunistic investments where
we believe we can increase the value of assets and cash (cid:89)ows and include
transactions with distressed real estate owners or lenders seeking liquidity,
or purchases of under-managed or under-leased assets, and repositioning
opportunities.
We have been able to create place-making areas in our investment locations where
we are able to make multiple investments in a particular city either through direct
investments or development initiatives that further drives interest in the area.
Many times, these investments are acquired at a discount to replacement cost or
recent comparative sales, thereby offering opportunities to achieve above average
total returns. In many cases, this may lead to significant additional returns, such as
a promoted interest (where we have partners), based on the performance of the
assets.
Our long-lasting and deep relationships with financial institutions allow us to
refinance loans to reduce interest rates and/or increase borrowings due to
property appreciation and thereby obtain cash (cid:89)ow to use for new investments.
We generally implement this strategy a(cid:91)er our value-add initiatives have been
executed, thus allowing us to maintain moderate levels of leverage.
We have been able to attract third party capital due to our ability to generate
above-market returns for our partners, diversity of geographic markets and
investment product types as well as our (cid:89)exibility in structuring deals through
funds, separate accounts and equity partner arrangements.
We understand that real estate is cyclical. Our management team employs a
multi-cyclical approach that has resulted in our A(cid:38)M being globally diversified
across many sectors of real estate while maintaining a healthy liquidity position
and adequate access to capital.
Competitive Strengths
We have a unique pla(cid:127)orm from which to execute our investment and investment
management strategy. The combination of an investment and investment
management pla(cid:127)orms provides several competitive strengths when compared to
other real estate buyers and asset managers operating stand-alone or investment-
focused firms and may allow us to generate superior risk-ad(cid:102)usted returns. Our
investment strategy focuses on investments that offer significant appreciation
potential through intensive asset management, leasing, repositioning, redevelopment
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Business (continued)
and the opportunistic use of capital. We differentiate ourselves from other firms in the
industry with our full service, investment-oriented structure.
Our competitive strengths include:
• Transaction experience: Our senior management team has an average of 25 years
of real estate experience and has been working and investing together on average
for over 10 years. Members of the senior management team have collectively
acquired, developed and managed in excess of (cid:362)30 billion of real estate
investments in the (cid:38)nited States, the (cid:38)nited Kingdom, Ireland, Spain, Italy and
Japan throughout various economic cycles, both at our Company and throughout
their careers.
• Extensive relationship and sourcing network: We leverage our relationships in
order to source off-market deals. In addition, the senior management team and
our acquisition team have transacted deals in nearly every ma(cid:102)or metropolitan
market on the West Coast of the (cid:38)nited States, as well as in the (cid:38)nited Kingdom,
Ireland, Spain, Italy and Japan. Their local presence and reputation in these
markets have enabled them to cultivate key relationships with ma(cid:102)or holders of
property inventory, in particularly financial institutions, throughout the real estate
community.
• Structuring expertise and speed of execution: Prior acquisitions completed by
us have taken a variety of forms, including direct property investments, (cid:102)oint
ventures, exchanges involving stock or operating partnership units, participating
loans and investments in performing and non-performing mortgages at various
capital stack positions with the ob(cid:102)ective of long-term ownership. We believe we
have developed a reputation of being able to quickly execute, as well as originate
and creatively structure acquisitions, dispositions and financing transactions.
• Strategic partnerships: Through our relationships and transaction experience
we have been able to establish various strategic partnerships with a variety of
different companies and institutions in which we are highly collaborative and
aligned with our partners in the deals. Coupled with our ability to structure
acquisitions in a variety of ways that fit the needs of our strategic partners we
have been able to access various forms of capital due to our experience and
versatility.
• Vertically integrated platform for operational enhancement: We have 202 employees
in 12 offices throughout the (cid:38)nited States, the (cid:38)nited Kingdom, Ireland, Spain
and Jersey. We have a hands-on approach to real estate investing and possess
the local expertise in property and asset management, leasing, construction
management, development and investment sales, which we believe enable us to
invest successfully in selected submarkets.
• Calculated risk taking: We underwrite our investments based upon a thorough
examination of property economics and a critical understanding of market
dynamics and risk management strategies. We conduct an in-depth sensitivity
analysis on each of our acquisitions. This analysis applies various economic
scenarios that include changes to rental rates, absorption periods, operating
expenses, interest rates, exit values and holding periods. We use this analysis to
develop our disciplined acquisition strategies.
• Management’s alignment with shareholders: As of December 31, 2020, our directors
and executive officers and their respective affiliates owned an aggregate of
approximately 13(cid:1143) of the outstanding shares of our common stock. Due to
management team(cid:317)s ownership interest in the Company its interests are in
alignment with common shareholders of the Company and gives us an owner(cid:317)s
mentality on the investments we own and manage.
The real estate business is cyclical. Real estate cycles are generally impacted by many
factors, including availability of equity and debt capital, borrowing cost, rent levels,
and asset values. Our strategy has resulted in a strong track record of creating both
asset and entity value for the benefit of our shareholders and partners over these
various real estate cycles.
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Environmental, Social and Governance (ESG)
Kennedy Wilson(cid:317)s approach to ESG aligns with our business strategy by maximi(cid:140)ing
the inherent value of our assets and delivering long-term social, environmental and
economic value across our por(cid:127)olio and to our key stakeholders. Globally, we create
offices and homes that provide space for social interaction and exercise, as well as
tenant engagement programs to create healthy environments for employees and
residents who live and work in our buildings. We aim to strengthen the communities
around us by providing public spaces and amenities, protecting heritage aspects of our
buildings and supporting local philanthropic initiatives through the Kennedy Wilson
Charitable Foundation, which awarded approximately (cid:362)2 million in grants and gi(cid:91)s
in 2020. Recogni(cid:140)ing the need for affordable, high-quality housing across the West
Coast, Kennedy Wilson is delivering 10,000 affordable units for residents that make
50(cid:1143)(cid:331)60(cid:1143) of the area(cid:317)s median income through a (cid:102)oint venture with VHH.
We take a building-by-building approach to optimi(cid:140)ing resources, first through measuring
usage, identifying cost-efficient initiatives and then upgrading systems within our broader
asset management programs. In 2020, we reached our goal of 33(cid:1143) carbon emissions
reduction in our Europe por(cid:127)olio vs. baseline, and our utility measurement program
continues to expand with our directly managed (cid:38).S. commercial and multifamily por(cid:127)olio
now included in our global monitoring system. Kennedy Wilson is a member of the (cid:38).S.
Green Building Council and commits to targeting sustainability certifications under LEED
for our ma(cid:102)or remodel and ground-up commercial development pro(cid:102)ects globally, as well
as BREEAM, NZEB, fitwel and WELL Building Standard certifications for our large-scale
mixed-use pro(cid:102)ects in Ireland and the (cid:38).K.
We operate responsibly to ensure business-wide transparency and accountability,
with a focus on empowering people and providing a healthy work environment for
our employees. In addition to providing significant employee benefits and training
opportunities, we strive to maintain a diverse corporate culture that includes
people who represent different viewpoints and historical perspective. As a result
of our efforts, Kennedy Wilson earned recognition as one of the Most Responsible
Companies in America by Newsweek in 2020.
Industry Overview
Key Investment Markets
Western United States
In 2020, the onset of the COVID-19 pandemic created unprecedented economic
challenges. As the economy was forced to lockdown, GDP decreased by 31.4(cid:1143) in (cid:32)2
on an annuali(cid:140)ed basis. In turn, transactions in the (cid:38)S real estate market fell sharply,
with volumes decreasing by 68(cid:1143) according to Real Capital Analytics. In March,
congress passed a (cid:362)2.2 trillion economic stimulus package that helped stabili(cid:140)e the
economy. The year ended with the election of a new President and renewed optimism
that COVID-19 vaccines would soon be made available and would help to control the
global pandemic. GDP is currently expected to rebound in 2021 but will depend on if
the COVID-19 pandemic can be resolved through widespread vaccination.
As a result of the pandemic and the ability of individuals to work from home, vacancy
rates in higher cost Class A apartments were impacted more significantly than suburban
Class B communities. The desire of renters to leave high cost urban apartments to more
affordable suburban options has resulted in continued population growth into areas
such as the Mountain States and out of large western (cid:38).S. coastal cities. The suburban
markets are expected to continue to perform strongly in 2021 due to a number of
factors, including the continuing ability to work remotely and the desire for more
space. According to CBRE, investment volume in multifamily is expected to increase in
2021, supported by the continuation of low yields. Kennedy Wilson(cid:317)s (cid:38).S. multifamily
por(cid:127)olio is largely comprised of garden style communities with approximately 90(cid:1143) of
our por(cid:127)olio located in suburban markets. The Company has shi(cid:91)ed its market-rate
por(cid:127)olio to the Mountain states, which now is the largest market-rate region by unit
count and primarily consists of its assets in (cid:38)tah, Idaho, and Nevada.
A large impact of pandemic was the shi(cid:91) for many (cid:38).S. office occupiers to remote
working. Companies are expected to begin returning to the office in 2021 a(cid:91)er
vaccines have been made widely available to the general public. The usage of office is
expected to continue to be re-evaluated as a result of the pandemic. Many companies
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Business (continued)
have discussed incorporating more (cid:89)exible space, additional amenity offerings and
a lower density configuration, while also potentially adopting a hybrid work style.
Kennedy Wilson(cid:317)s (cid:38).S. office por(cid:127)olio is primarily located in Southern California and
the Greater Seattle market. The ma(cid:102)ority of the (cid:38).S. office is owned with partners
through the Company(cid:317)s co-investment segment.
Housing affordability has reached crisis levels across much of the Western (cid:38).S., with
rapidly growing cities, such as Seattle, facing a dearth of affordable housing options.
This not only impacts the delivery of vital public services as workers are priced out of
local areas, it also puts stress on the social fabric of cities and neighborhoods.
Hawaii
The Hawaiian economy was significantly impacted by the COVID-19. Travel to Hawaii
by visitors in 3(cid:32)(cid:331)20 decreased by over 97(cid:1143), and estimates for the year totaled
2.7 million visitors to Hawaii in 2020, a decrease of 73.7(cid:1143) compared to 2019. The
Hawaiian economy is expected to rebound in 2021, as tourism to the island should
improve with over 6 million visitors expected in 2021.
United Kingdom
The (cid:38).K. economy showed increased resilience in the second half of 2020, despite
a challenging landscape that began the year with the withdrawal from the European
(cid:38)nion, followed by the impacts of the COVID-19 global pandemic resulting in two
national lockdowns. A contraction of only 2.6(cid:1143) during the second lockdown in
November compared to 20(cid:1143) during the first lockdown in April and a steady and
stronger than expected growth in output between these two periods. GDP contracted
by 9.9(cid:1143) overall in 2020. Despite the economic contraction, the (cid:38).K. unemployment
rate is expected to finish the year at 5.2(cid:1143), an increase of only 1.3(cid:1143) compared to the
end of last year, owing to strong government interventions. Fiscal policy remains
supportive with an extension of the furlough program, helping to reduce (cid:102)ob losses.
The impact of COVID-19 was felt across (cid:38).K. investment volumes, which finished
2020 at (cid:364)42 billion, down 21(cid:1143) compared to 2019. The year finished with almost 40(cid:1143)
of total investment volumes ((cid:364)16.5 billion) invested in (cid:32)4. Offices remained supported
by a transparent investment environment and strong foreign investments into the
(cid:38).K., making up 55(cid:1143) of the total investment volume.
South East office investment volumes reached (cid:364)1.9 billion in 2020, which saw a (cid:89)urry
of investment deals complete in (cid:32)4. Although this is 12(cid:1143) less than in 2019, market
performance in the South East compares well to the average decrease across the (cid:38)K.
Vacancy of 6.8(cid:1143) remains below the 10-year average of 7.3(cid:1143), with new and grade A
vacancies si(cid:2478)ng at 5.2(cid:1143). The industrial and logistics sectors remained the strongest
performers, establishing 2020 as a record year with total investment volumes reaching
(cid:364)8 billion, with fourth quarter investment volumes up 2.5 times on the previous
quarter and contributing to more than half of total transactions for the year. The
occupier market re(cid:89)ected strong demand-supply dynamics with absorption totaling
a record-high 43 million square feet in 2020, well ahead of the 10-year average.
Demand remained led by online retailers, representing 31(cid:1143) of all space taken up
in 2020 and closely followed by third party logistics at 29(cid:1143) with online retail sales
further supported by the (cid:38).K.-wide lockdowns. Solid market fundamentals underpin
the expectation for industrial occupational demand to continue to be resilient in 2021.
The (cid:38).K. retail sector was under significant pressure in 2020 with the closure of non-
essential retail stores during lockdowns pu(cid:2478)ng severe stress on retailers(cid:317) revenues and
weakening occupation demand as further high-profile retailers went bankrupt during
2020 and rent pressure was particularly felt across secondary and tertiary shopping
centers. Stronger performers include supermarkets, home ware and DIY retailers, that
were able to keep their stores open throughout the (cid:38).K. lockdown periods.
Ireland
Ireland(cid:317)s economy saw the only positive GDP growth across the E(cid:38) at 3.0(cid:1143) in 2020
and the IMF is forecasting Ireland to have the highest GDP growth of any ma(cid:102)or
European economy.
Investment volumes reached (cid:360)3.6 billion for 2020, a resilient figure given the fallout
from COVID-19 and an impressive 25(cid:1143) higher than the 10-year average of (cid:360)2.9 billion.
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Demonstrating Ireland(cid:317)s position as an attractive global real estate market, over 75(cid:1143)
of investments were from institutional investors, and 48(cid:1143) of the volume came from
European buyers. Multifamily accounted for 48(cid:1143) of total investments followed by
offices at 37(cid:1143).
Dublin office absorption was about 1.7 million square feet in 2020 with the significant
impact of COVID-19 demonstrated as 69(cid:1143) of absorption occurred in the first quarter.
Given the increased occupier demand for space, prime headline south suburbs rents
remained stable at (cid:360)29.50 per square foot compared to a slight so(cid:91)ening of prime
headline city center office rents.
The Irish multifamily sector remains firmly in demand, with strong fundamentals
underpinning institutional demand and for the first-time multifamily investment
volumes eclipsed commercial office. Kennedy Wilson is forecast to be the second
largest institutional owner with 16(cid:1143) market share in a market with more than 15,500
multifamily units. Prime yields remained steady at 3.75(cid:1143) through 2020 as rent
collection and occupancy remained strong.
It is expected that the increase in household savings during 2020 may help support a
more rapid bounce back in retail sales activity in 2021.
Following a very active year in 2019, transactional activity in the Irish hotel property
market was severely curtailed in 2020 because of COVID-19, which imposed travel
restrictions, forcing hotels to pivot their focus on domestic leisure guests.
Competition
We compete with a range of global, national and local real estate firms, individual
investors and other corporations, both private and public. Our investment business
competes with real estate investment partnerships, real estate investments trusts,
private equity firms and other investment companies and regional investors and
developers. We believe that our relationships with the sellers and our ability to close
an investment transaction in a short time period at competitive pricing provide us a
competitive advantage.
Foreign Currency
Approximately 46(cid:1143) of our investment account is invested through our foreign
pla(cid:127)orms in their local currencies. Investment level debt is generally incurred in
local currencies and we consider our equity investment as the appropriate exposure
to evaluate for balance sheet hedging purposes. We typically do not hedge future
operations or cash (cid:89)ows of operations in foreign exchanges rates which may have a
significant impact on the results of our operations. In order to manage the effect of
these (cid:89)uctuations, we generally hedge our book equity exposure to foreign currencies
through currency forward contracts and options.
We wholly-own Kennedy Wilson Europe Real Estate Limited (“KWE”) which is
domiciled in the (cid:38)nited Kingdom and has GBP as its functional currency. KWE has
investments in assets that have functional currencies of GBP and euros. Kennedy-
Wilson Holdings, Inc. does not have a direct interest in the euro denominated
investments but has indirect ownership through its interest in KWE. We cannot
directly hedge the foreign currency movements in these euro denominated assets but
hedge foreign currency movements in euro assets at the KWE level through GBP/E(cid:38)R
hedging instruments. We then can hedge the (cid:38)SD/GBP foreign currency exposure
through our direct interest in KWE.
Within KWE we utili(cid:140)e three types of contracts to hedge our GBP/E(cid:38)R exposure:
foreign forward currency contracts, a cross currency swap on the KWE Bonds
(swapped GBP to E(cid:38)R) and the KWE Euro Medium Term Notes (“KWE Notes”). The
KWE Notes were issued in euros and held by KWE but we have elected to treat the
foreign currency movements as a net investment hedge on our euro denominated
investments in KWE. The foreign currency movements on these hedge items above
are recorded to unreali(cid:140)ed foreign currency derivative contract gains/losses within
other comprehensive income for GBP/E(cid:38)R movements. However, when we translate
our investment in KWE from (cid:38)SD/GBP the foreign currency movements on these
items go through unreali(cid:140)ed foreign currency translation gains/losses within other
comprehensive income.
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Business (continued)
Selected Financial Data
Please refer to Item 7. Management(cid:317)s Discussion and Analysis of Financial Condition
and Results of Operation for a discussion regarding foreign currency and currency
derivative instruments.
Transaction-Based Results
A significant portion of our cash (cid:89)ow is tied to transaction activity which can affect
an investor(cid:317)s ability to compare our financial condition and results of operations
on a quarter-by-quarter basis or to easily evaluate the breadth of our operation.
Historically, this variability has caused our revenue, net income and cash (cid:89)ows to be
tied to transaction activity, which is not necessarily concentrated in any one quarter.
Employees
As of December 31, 2020, we have 202 employees in 12 offices throughout the
(cid:38)nited States, the (cid:38)nited Kingdom, Ireland, Spain and Jersey. We believe that we have
been able to attract and maintain high quality employees. There are no employees
sub(cid:102)ect to collective bargaining agreements. In addition, we believe we have a good
relationship with our employees.
Available Information
Information about us is available on our website (http://www.kennedywilson.com)
(this website address is not intended to function as a hyperlink, and the information
contained in, or accessible from, our website is not intended to be a part of this filing).
We make available on our website, free of charge, copies of our Annual Report on Form
10-K, (cid:32)uarterly Reports on Form 10-(cid:32), Current Reports on Form 8-K, Proxy Statements
on Schedule 14A and amendments to those reports and other statements filed or
furnished pursuant to Section 13(a), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended, as soon as reasonably practicable a(cid:91)er filing or submi(cid:2478)ng such material
electronically or otherwise furnishing it to the SEC. In addition, we have previously filed
registration statements and other documents with the SEC. Any document we file is
available at the SEC(cid:317)s internet address at http://www.sec.gov (this website address is
not intended to function as a hyperlink, and the information contained in, or accessible
from, the SEC(cid:317)s website is not intended to be a part of this filing).
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The following tables summari(cid:140)e our selected historical consolidated financial information. This information was derived from our audited financial statements for each
of the years ended December 31, 2020, 2019, 2018, 2017 and 2016. This information is only a summary. You should read this information together in con(cid:102)unction with
“Management(cid:317)s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere in this document.
(In millions, except per share amounts)
Statements of income data and dividends:
Revenue
Net income to Kennedy-Wilson Holdings Inc. common shareholders(1)
Basic income per share
Dividends declared per share of common stock
Ad(cid:102)usted EBITDA(2)
Ad(cid:102)usted EBITDA annual increase (decrease)
Ad(cid:102)usted Net Income(2)
Ad(cid:102)usted Net Income annual increase (decrease)
Balance sheet data:
Cash and cash equivalents
Total assets
Mortgage debt
KW unsecured debt
KWE unsecured bonds
Kennedy Wilson equity
Noncontrolling interests
Total equity
Common shares outstanding
2020
2019
2018
2017
2016
Year Ended December 31,
(cid:362) 450.9
92.9
0.66
0.88
608.0
(16)(cid:1143)
306.9
(31)(cid:1143)
(cid:362) 569.7
224.1
1.60
0.85
728.1
2 (cid:1143)
442.5
11 (cid:1143)
(cid:362) 773.5
150.0
1.04
0.78
712.7
56 (cid:1143)
397.0
64 (cid:1143)
(cid:362) 801.8
100.5
0.83
0.70
455.7
30 (cid:1143)
242.5
27 (cid:1143)
(cid:362) 690.4
2.8
0.01
0.56
349.9
191.3
2020
2019
2018
2017
2016
As of December 31,
(cid:362) 965.1
7,329.0
2,589.8
1,332.2
1,172.5
1,644.5
28.2
1,672.7
141.4
(cid:362) 573.9
7,304.5
2,641.0
1,131.7
1,274.2
1,678.7
40.5
1,719.2
151.6
(cid:362) 488.0
7,381.8
2,950.3
1,202.0
1,260.5
1,246.7
184.5
1,431.2
143.2
(cid:362) 351.3
7,724.8
3,156.6
1,179.4
1,325.9
1,365.6
211.9
1,577.5
151.6
(cid:362) 885.7
7,656.6
2,770.4
934.1
1,185.7
1,048.0
1,295.1
2,343.1
115.7
(1) GAAP Net Income to Common Shareholders for the year ended December 31, 2017, includes a one-time tax benefit of $44.8 million that was recorded in the quarter ended December 31, 2017, or $0.38 per share.
(2) See Non-GAAP Measures and Certain Definitions and “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP measures” for a description of Adjusted EBITDA and Adjusted Net
Income and a reconciliation of these metrics to net income as reported under GAAP.
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Selected Financial Data (continued)
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Real Estate Assets Under Management (AUM)
A(cid:38)M generally refers to the properties and other assets with respect to which we provide (or participate in) oversight, investment management services and other advice, and
which generally consist of real estate properties or loans, and investments in (cid:102)oint ventures. Our A(cid:38)M is principally intended to re(cid:89)ect the extent of our presence in the real
estate market, not the basis for determining our management fees. Our A(cid:38)M consists of the total estimated fair value of the real estate properties and other real estate related
assets either owned by third parties, wholly-owned by us or held by (cid:102)oint ventures and other entities in which our sponsored funds or investment vehicles and client accounts
have invested. Committed (but unfunded) capital from investors in our sponsored funds is not included in our A(cid:38)M. The estimated value of development properties is included
at estimated completion cost.
The table below details the changes in the Company(cid:317)s A(cid:38)M for the twelve months ended December 31, 2020:
(in millions)
AU M
December 31, 2019
(cid:362) 18,144.0
Increases
(cid:362) 3,071.6
Decreases
(cid:362) (3,646.3 )
December 31, 2020
(cid:362) 17,569.3
A(cid:38)M decreased 3(cid:1143) to approximately (cid:362)17.6 billion as of December 31, 2020. The decrease is primarily due our sale of the Property Services group at the beginning of the
fourth quarter 2020 which managed A(cid:38)M of (cid:362)2.5 billion. The increase in A(cid:38)M for the year was driven by new acquisitions primarily through our new debt pla(cid:127)orm and within
our commingled funds as well as increases in values of underlying assets. In addition to the sale of the Property Services group we also had decreases due to our sale of assets
within our Consolidated Por(cid:127)olio.
(cid:13)o(cid:117)(cid:59)i(cid:93)n cu(cid:117)(cid:117)(cid:59)ncy and cu(cid:117)(cid:117)(cid:59)ncy d(cid:59)(cid:117)i(cid:136)ati(cid:136)(cid:59) ins(cid:124)(cid:117)u(cid:108)(cid:59)n(cid:124)s
Please refer to Item 7. Management(cid:317)s Discussion and Analysis of Financial Condition and Results of Operation for a discussion regarding foreign currency and currency
derivative instruments.
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The following discussion and analysis should be read in conjunction with the financial
statements and related notes and the other financial information appearing elsewhere in
this report. This discussion and analysis contains forward-looking statements that involve
risks, uncertainties and assumptions. See the section titled “Forward-Looking Statements”
for more information. Actual results could differ materially from those anticipated in the
forward looking statements as a result of many factors, including those discussed in the
section titled “Risk Factors” in our 10-K filing with the SEC.
Unless specifically noted otherwise, as used throughout this Management’s Discussion and
Analysis section, “we,” “our,” “us,” “the Company” or “Kennedy Wilson” refers to Kennedy-
Wilson Holdings, Inc. and its wholly-owned subsidiaries. “Equity partners” refers to the
subsidiaries that we consolidate in our financial statements under U.S. GAAP (other than
wholly-owned subsidiaries) and third-party equity providers. Please refer to “Non-GAAP
Measures and Certain Definitions” for definitions of certain terms used throughout this report.
Overview
Kennedy Wilson is a global real estate investment company. We own, operate
and develop real estate with the ob(cid:102)ective of maximi(cid:140)ing earnings over the long
run for ourselves and our equity partners. We focus primarily on multifamily and
office properties located in the Western (cid:38)nited States, (cid:38)nited Kingdom, and
Ireland. As of December 31, 2020, we have 202 employees in 12 offices primarily
located throughout the (cid:38)nited States, the (cid:38)nited Kingdom, Ireland and Spain. As of
December 31, 2020, our A(cid:38)M stood at (cid:362)17.6 billion. The real estate that we hold
in our global por(cid:127)olio consists primarily of (51(cid:1143)) multifamily apartments and (49(cid:1143))
commercial offices based on Consolidated NOI and JV NOI. Geographically, we focus
on the (58(cid:1143)) Western (cid:38)nited States, the (21(cid:1143)) (cid:38)nited Kingdom and (17(cid:1143)) Ireland
(including 4(cid:1143) in other).
COVID-19 Impact and Business Update
The following discussion is intended to provide shareholders with certain
information regarding the Company(cid:317)s operations and the impact of the COVID-19
pandemic on our business and management(cid:317)s efforts to respond to the same.
The pandemic commenced during the first quarter of 2020 and the duration and
magnitude of it still remain uncertain at this time. (cid:38)nless otherwise specified, the
statistical and other information regarding our por(cid:127)olio and tenants are estimates
based on information available to us as of February 18, 2021. As a result of the
rapid development, (cid:89)uidity and uncertainty surrounding this situation, we expect
that such statistical and other information may change, potentially significantly,
going forward and may not be indicative of the actual impact of the COVID-19
pandemic on our business, operations, cash (cid:89)ows and financial condition for 2021
and future periods.
Health and Safety of our Employees and Tenants
Our primary ob(cid:102)ective during the COVID-19 pandemic has been to protect the health
and safety of our employees as well as the tenants and service providers across our
por(cid:127)olio. We have started to open our offices in (cid:102)urisdictions where applicable laws
permit us to do so. Even with the reopening of certain offices, to date, we have not
made it mandatory for employees to return to the office if they can perform their
(cid:102)obs from home. Prior to reopening any office, we have strictly followed applicable
laws in preparing and maintaining the space to be as safe as possible and providing an
environment that encourages the following of social distancing guidelines, including,
without limitation, staggering employees(cid:317) schedules to ensure ample space is available
between work spaces and occupied offices. In (cid:102)urisdictions where applicable laws have
not permitted us to reopen our offices, our employees continue to work remotely.
We will continue to monitor and follow local laws and guidance to assess our ability
to reopen or keep open our offices across the globe. Our IT infrastructure and
communications are robust and we are focused on maintaining business continuity,
while doing our share to support each community where we do business. The daily
operations of our business are not materially directly dependent on a supply chain or
production chain that may be disrupted due to the pandemic.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Impact to the Global Economy and Jurisdictions We Invest in
As a result of the unprecedented measures taken across the globe, the disruption
and impact of the COVID-19 pandemic to the global economy and financial markets
has been significant. We continue to closely monitor changes in applicable laws
and COVID-19 guidance provided by local, state and federal regulators, or their
equivalents, in the (cid:102)urisdictions in which we operate. Nearly all the markets in which
we operate continue to enforce some form of restriction on the operations of
businesses due to the COVID-19 pandemic. These precautions led to the shutdown of
nonessential services, which led to closures of stores in our retail por(cid:127)olio and limited
business operations of some of our office tenants. In addition, this caused us to close
The Shelbourne hotel in Dublin, Ireland from March 15, 2020 to June 29, 2020. On
October 21, 2020, due to a spike in new cases, Ireland implemented new lockdown
measures that closed non-essential businesses and limited travel from home to a
distance of five kilometers for several weeks. Although Ireland eased restrictions in
December, it has since implemented another national lockdown effective January 1,
2021 that remains in effect through at least March 5, 2021. Although the Shelbourne
has remained open since June 30, 2020, we have experienced and continue to expect
significantly limited activity at the property. Additionally, in early January 2021, the
(cid:38)nited Kingdom also implemented a national lockdown that closes non-essential
businesses as cases have continued to rise there as well.
The continued and long-lasting economic impact of the COVID-19 pandemic may
lead to some of our multifamily tenants having difficulty in making rental payments
on time, or at all. The Department of Labor reported that as of the end January 2021,
the unemployment rate was 6.3(cid:1143), with 14.8 million people reporting they had been
unable to work because their employer closed or lost business due to the pandemic.
Although the unemployment number has come down from its peak in April and May
2020, many sectors of the economy still remain at a virtual standstill. The Bureau of
Economic Analysis (“BEA”) reported that the (cid:38).S. Gross Domestic Product (“GDP”)
shrank 4.8(cid:1143) in the first quarter 2020 and 34.3(cid:1143) in the second quarter of 2020.
Coming off the second quarter 2020, which was the worst quarter in history for GDP
growth, the (cid:38).S. economy grew at its fastest pace ever in the third quarter 2020 and
continued to grow in the fourth quarter, however we expect continued uncertainty
going forward as the COVID-19 pandemic continues to effect the global economy.
Liquidity
Kennedy Wilson has a strong financial and capital position to withstand the potential
near-term cash (cid:89)ow impact caused by the COVID-19 pandemic. As of December 31,
2020, we had (cid:362)965.1 million ((cid:362)640.3 million of which is in foreign currencies of GBP
or E(cid:38)R) of cash on our consolidated balance sheet. We also currently have (cid:362)300
million available to draw on our unsecured revolving credit facility.
As of December 31, 2020, we have 4.1 weighted average years to maturity on our
debt obligations. We have limited debt maturities over 2021, which total (cid:362)123.7
million which are secured by non-recourse property-level financings and represent
only 2(cid:1143) of our total outstanding debt obligations. Subsequent to December 31, 2020,
we also closed the offering of (cid:362)500 million aggregate principal amount of 4.750(cid:1143)
senior notes due 2029 (the “2029 Notes”) and (cid:362)500 million aggregate principal
amount of 5.000(cid:1143) senior notes due 2031 (the “2031 Notes,” and together with the
2029 Notes, the “Notes”). We intend to use the proceeds from the offering of the
Notes to repurchase (through a previously announced tender offer) or redeem (cid:362)1
billion aggregate principal amount of our outstanding 5.875(cid:1143) senior notes due 2024
(the “2024 Notes”).
Investment portfolio and Fourth Quarter 2020 and 2021 Rent Collections
As of February 18, 2021, we have collected a total of 95(cid:1143) of our share of rents for
the quarter ended December 31, 2020 from our properties in our global investment
por(cid:127)olio. As of February 18, 2021, our share of rent collections for the month of
January 2021 has been materially in line with rent collection levels that we achieved
in prior periods. Such collection rates may not be indicative of collections in any future
period. As of December 31, 2020, 86(cid:1143) of our share of the total rents that we collect
are generated from our global multifamily and office properties. During the year ended
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December 31, 2020, we identified (cid:362)15.0 million of receivables and other lease-related
assets that are no longer probable of being collected. Accordingly, the Company will
account for these leases on a cash basis and recogni(cid:140)e rental income to the extent the
Company receives cash from the tenants. Of the (cid:362)15.0 million identified, (cid:362)13.5 million
related to our Consolidated por(cid:127)olio and was recorded as a reduction of rental
income and (cid:362)1.5 million related to our share of rental income on our Co-Investments
por(cid:127)olio investments and was recorded as a reduction of income from unconsolidated
investments.
Global Commercial Property Portfolio Rents and Leasing Update
As of February 18, 2021, we have collected 98(cid:1143) of our share of rents for the year
ended December 31, 2020 from properties in our global office property por(cid:127)olio and
80(cid:1143) of our share of rents for the year ended December 31, 2020 from the properties
in our global retail property por(cid:127)olio. January 2021 rental collections have been in line
with prior periods. As of December 31, 2020, 12(cid:1143) of the total rents that we collect
are generated from our global retail por(cid:127)olio and 30(cid:1143) are generated from our global
office por(cid:127)olio.
Global Multifamily Property Portfolio Rents and Leasing Updates
As of February 18, 2021, we have collected a total of 98(cid:1143) of our share of rents for the
year ended December 31, 2020 from our properties in our global multifamily property
por(cid:127)olio. January 2021 rental collections have been in line with prior periods. We
have benefited from certain of our tenants taking advantage of the various legislation
passed in the (cid:38)nited States and other (cid:102)urisdictions where we hold multifamily assets.
Our multifamily tenants typically pay through direct debit transactions, and tenants
within our affordable unit por(cid:127)olio generally receive some assistance from various
government programs, which helps enhance our collection efforts. As the COVID-19
pandemic continues, however, some of our multifamily tenants may have difficulty in
making rental payments on time, or at all.
Since the onset of the COVID-19 pandemic our multifamily group has rolled out
initiatives and achieved the following accomplishments:
Placed greater emphasis on virtual leasing during 2020.
Virtual paperless leasing capabilities are in place across our global multifamily
property por(cid:127)olio. Improved the virtual tour experience with updated video and
360-degree imagery as well as video tours of available units.
Occupancy and in-place rents has increased slightly to 95.2(cid:1143) and (cid:362)1,684 per unit
at December 31, 2020 from 94.4(cid:1143) and (cid:362)1,675 per unit December 31, 2019.
We also have a small number of investments in assets located in Spain and Italy that
sit in our global commercial property por(cid:127)olio. All of our Italian properties are fully
occupied by government agencies and have paid rent through the end of January
2021. As of February 18, 2021, we have collected 56(cid:1143) of our share of rents for the
year ended December 31, 2020 at our Spanish retail properties. January 2021 rental
collections have been in line with prior periods. The Spanish por(cid:127)olio comprises 2(cid:1143) of
our global por(cid:127)olio monthly rental collections.
Since the onset of the COVID-19 pandemic our commercial group has rolled out
initiatives and achieved the following accomplishments:
Similar to our multifamily por(cid:127)olio we are utili(cid:140)ing virtual leasing technology for
our commercial por(cid:127)olio. During year ended December 31, 2020, we closed on
approximately 227 leasing deals across 2.6 million sq. (cid:91).
In the Western (cid:38)nited States, we closed 84 leasing deals across 1.1 million sq. (cid:91)
In (cid:38)nited Kingdom and Ireland, we closed 143 leasing deals across 1.5 million
sq. (cid:91)
Global Development and Hotel Update
In our development and redevelopment por(cid:127)olio we have experienced delays, but
we currently do not expect material cost increases as we have fixed-rate construction
contracts on pro(cid:102)ects that are currently under construction and for pro(cid:102)ects that
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•
•
•
•
•
•
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
are in early phases we have not had to halt activities as we are mainly in the pre-
construction phase and are able to continue progress on pro(cid:102)ects. Ireland is currently
in a nationwide lockdown that started on January 8, 2021 with an expected
reopening date of March 5, 2021, which has halted construction during the lockdown.
We expect that this will push out our timeline on development pro(cid:102)ects by four
months but we believe that any associated costs can be covered within our existing
contingency plans on the assumption that there are no further lockdowns. We have
three properties that consist of 0.1 million square feet of office space and 277 market
rate multifamily units that should complete construction by the end of 2021. We
also have five properties consisting of 0.3 million square feet of commercial space
and 576 market rate multifamily units that are unstabili(cid:140)ed and undergoing lease up
that we expect will be stabili(cid:140)ed by the end of 2021. Our VHH por(cid:127)olio also has 932
units that we expect will finish construction or complete lease up by the end of 2021.
Please refer to Development and Redevelopment in the Liquidity and Capital Resources
section for a more detailed discussion regarding our development initiatives.
The COVID-19 pandemic continues to significantly impact the hospitality industry due
to travel restrictions and stay-at-home or similar directives resulting in cancellations
and significantly reduced travel around the world. We voluntarily closed the Shelbourne
hotel on March 15, 2020 and reopened the hotel on June 29, 2020 when we were
permitted to do so under applicable laws and guidelines. On October 21, 2020, due to a
spike in new cases Ireland has moved to a six week lockdown that closed non-essential
businesses and limits travel from home to a distance of five kilometers. As discussed
above Ireland will be in lockdown for the ma(cid:102)ority of the first quarter of 2021. The
Shelbourne will remain open during this period but we expect significantly limited activity
at the property. Revenues at the Shelbourne hotel for the year ended December 31,
2020 were down 63(cid:1143) and Consolidated NOI was down approximately (cid:362)14 million
compared to the prior year due to the hotel closure during the reporting period.
Investment Activity
Investment activity may be diminished until a ma(cid:102)ority of people have been vaccinated
or there has been a significant reduction in the number of COVID-19 cases. This
slowdown in investment transactions may impact our ability to sell properties in
the future and our ability to generate cash and gains from the sale of real estate.
Despite historically low transactions in the second and third quarter of 2020, we
had an active fourth quarter 2020 during which the ma(cid:102)ority of our 2020 asset sales
were completed, as evidenced by the sale of Baggot Pla(cid:140)a, a wholly-owned office
property in Dublin, Ireland, Club Palisades, a wholly-owned multifamily property in the
state of Washington and the contributions of 18 previously wholly-owned industrial
properties located in the (cid:38)nited Kingdom to a newly created (cid:102)oint venture with
sovereign wealth fund (which the Company will hold a 20(cid:1143) ownership interest in and
act as a general partner). These asset dispositions generated a total gain on sale of
(cid:362)287.0 million. In addition to these asset dispositions, in October 2020, we acquired
off-market three multifamily properties totaling 880-units in the mountain states
region of the Western (cid:38).S. for (cid:362)198 million. We have also seen a strong response to
our new debt pla(cid:127)orm and expect deal activity to continue in 2021.
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Results of Operations
The following tables summari(cid:140)e the Company(cid:317)s revenue, expenses, other income (expenses) and net income (loss) and calculate EBITDA and Ad(cid:102)usted EBITDA by segment for
the years ended December 31, 2020, 2019 and 2018 and is intended to be helpful in understanding the year over year explanations following the tables:
(Dollars in millions)
Revenue
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Investment management, property services and research fees
Total revenue
E xp enses
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Commission and marketing
(cid:1354)Compensation and related
(cid:1354)General and administrative
(cid:1354)Depreciation and amorti(cid:140)ation
Total exp enses
(cid:1354)Income from unconsolidated investments, net of depreciation and amorti(cid:140)ation
(cid:1354)Gain on sale of real estate, net
(cid:1354)Acquisition-related expenses
(cid:1354)Interest expense
(cid:1354)Other income
(cid:1354)Provision for income taxes
Net income ( loss)
(cid:1354)Net income attributable to the noncontrolling interests
(cid:1354)Preferred dividends and accretion of preferred stock issuance costs
(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314) co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s
Add back (less):
(cid:1354)Interest expense
(cid:1354)Kennedy Wilson(cid:349)s share of interest expense included in unconsolidated investments
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)Kennedy Wilson(cid:349)s share of depreciation and amorti(cid:140)ation included in unconsolidated investments
(cid:1354)Provision for income taxes
(cid:1354)Kennedy Wilson(cid:349)s share of taxes included in unconsolidated investments
(cid:1354)Fees eliminated in consolidation
(cid:1354)Share-based compensation
(cid:1354)Preferred dividends and accretion of preferred stock issuance costs
(cid:1354)EBITDA add backs attributable to noncontrolling interests(2)
Ad(cid:102)usted EBITDA(1)
(1) See “Non-GAAP Measures and Certain Definitions” for definitions and discussion of Adjusted EBITDA.
Consolidated
Co-Investments
Year Ended December 31, 2020
Total
Corporate
(cid:362) 403.9
13.9
(cid:362) (cid:332)
(cid:362) (cid:332)
417.8
135.7
13.8
59.7
20.6
179.6
409.4
338.0
(0.9)
(141.7)
(0.6)
(18.4)
184.8
2.3
187.1
141.7
179.6
18.4
(1.1)
(9.8)
5
.9
22.5
22.5
21.0
5.9
26.9
81.0
76.6
76.6
33.0
6.9
1.1
1.1
10.6
10.6
2.8
63.7
8.1
74.6
(69.5)
5.1
(25.2)
(153.6)
(17.2)
(170.8)
69.5
25.2
32.3
17.2
(cid:362) 403.9
13.9
33.1
450.9
135.7
13.8
2.8
144.4
34.6
179.6
510.9
81.0
338.0
(0.9)
(211.2)
4.5
(43.6)
107.8
2.3
(17.2)
92.9
211.2
33.0
179.6
6.9
43.6
1.1
32.3
17.2
(9.8)
1
.7
(
.6
6
.0
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—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
1
5
$
1
8
$
2
6
)
$
0
8
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(Dollars in millions)
Revenue
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Sale of real estate
(cid:1354)Investment management, property services and research fees
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:117)(cid:59)(cid:136)(cid:59)nu(cid:59)
E xp enses
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Cost of real estate sold
(cid:1354)Commission and marketing
(cid:1354)Compensation and related
(cid:1354)General and administrative
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:59)(cid:138)(cid:114)(cid:59)ns(cid:59)s
(cid:1354)Income from unconsolidated investments, net of depreciation and amorti(cid:140)ation
(cid:1354)Gain on sale of real estate, net
(cid:1354)Acquisition-related expenses
(cid:1354)Interest expense
(cid:1354)Other income (expenses)
(cid:1354)Provision for income taxes
(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) (cid:336)(cid:1140)oss(cid:337)
(cid:1354)Net income attributable to the noncontrolling interests
(cid:1354)(cid:1354)Preferred dividends and accretion of preferred stock issuance costs
(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314) co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s
Add back (less):
(cid:1354)Interest expense
(cid:1354)Kennedy Wilson(cid:349)s share of interest expense included in unconsolidated investments
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)Kennedy Wilson(cid:349)s share of depreciation and amorti(cid:140)ation included in unconsolidated investments
(cid:1354)Provision for income taxes
(cid:1354)Fees eliminated in consolidation
(cid:1354)Share-based compensation
(cid:1354)Preferred dividends and accretion of preferred stock issuance costs
(cid:1354)EBITDA add backs attributable to noncontrolling interests(2)
(cid:3)d(cid:102)us(cid:124)(cid:59)d E(cid:6)(cid:17)(cid:36)(cid:9)(cid:3)(
(1) See “Non-GAAP Measures and Certain Definitions” for definitions and discussion of Adjusted EBITDA.
0
2
0
2
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Consolidated
Co-Investments
Year Ended December 31, 2019
Total
Corporate
(cid:362) 447.4
80.5
1.1
529.0
152.9
60.1
1.2
71.0
26.3
187.6
499.1
434.4
(6.8)
(145.6)
2.8
(14.5)
300.2
(94.4)
205.8
145.6
187.6
14.5
(18.1)
(13.2)
5
.2
(cid:362) (cid:332)
(cid:362) (cid:332)
24.9
24.9
15.1
5.6
20.7
179.7
183.9
183.9
32.1
8.2
18.1
15.8
15.8
3.8
65.7
10.5
80.0
(69.5)
(2.4)
(26.9)
(163.0)
(2.6)
(165.6)
69.5
26.9
30.2
2.6
(cid:362) 447.4
80.5
1.1
40.7
569.7
152.9
60.1
1.2
3.8
151.8
42.4
187.6
599.8
179.7
434.4
(6.8)
(215.1)
0.4
(41.4)
321.1
(94.4)
(2.6)
224.1
215.1
32.1
187.6
8.2
41.4
30.2
2.6
(13.2)
2
.3
(
.4
7
.1
(Dollars in millions)
Revenue
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Sale of real estate
(cid:1354)Investment management, property services and research fees
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:117)(cid:59)(cid:136)(cid:59)nu(cid:59)
E xp enses
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Cost of real estate sold
(cid:1354)Commission and marketing
(cid:1354)Compensation and related
(cid:1354)General and administrative
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:59)(cid:138)(cid:114)(cid:59)ns(cid:59)s
(cid:1354)Income from unconsolidated investments, net of depreciation and amorti(cid:140)ation
(cid:1354)Gain on sale of real estate, net
(cid:1354)Gain on sale of business
(cid:1354)Acquisition-related expenses
(cid:1354)Interest expense
(cid:1354)Other (expenses) income
(cid:1354)(Provision for) benefit from income taxes
(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) (cid:336)(cid:1140)oss(cid:337)
(cid:1354)Net income attributable to the noncontrolling interests
(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) (cid:336)(cid:1140)oss(cid:337) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314) co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s
Add back (less):
(cid:1354)Interest expense
(cid:1354)Kennedy Wilson(cid:349)s share of interest expense included in unconsolidated investments
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)Kennedy Wilson(cid:349)s share of depreciation and amorti(cid:140)ation included in unconsolidated investments
(cid:1354)Provision for (benefit from) income taxes
(cid:1354)Fees eliminated in consolidation
(cid:1354)Share-based compensation
(cid:1354)EBITDA add backs attributable to noncontrolling interests(2)
(cid:3)d(cid:102)us(cid:124)(cid:59)d E(cid:6)(cid:17)(cid:36)(cid:9)(cid:3)(
(1) See “Non-GAAP Measures and Certain Definitions” for definitions and discussion of Adjusted EBITDA.
Consolidated
Co-Investments
Year Ended December 31, 2018
Total
Corporate
(cid:362) 514.6
155.7
56.8
727.1
160.8
121.5
52.5
64.7
28.1
206.1
633.7
371.8
(1.7)
(161.0)
0.7
(14.0)
289.2
(62.1)
227.1
161.0
206.1
14.0
(13.6)
(15.9)
5
.7
(cid:362) (cid:332)
(cid:362) (cid:332)
15.4
15.4
29.9
29.9
20.5
7.5
28.0
78.7
5.9
83.6
15.2
104.7
40.4
(77.2)
12.4
(44.0)
66.1
(143.2)
66.1
(143.2)
26.0
13.2
13.6
77.2
44.0
37.1
(cid:362) 514.6
155.7
56.8
45.3
772.4
160.8
121.5
52.5
5.9
168.8
50.8
206.1
766.4
78.7
371.8
40.4
(1.7)
(238.2)
13.1
(58.0)
212.1
(62.1)
150.0
238.2
26.0
206.1
13.2
58.0
37.1
(15.9)
1
.9
1
.1
7
.7
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49
—
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—
—
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$
2
2
$
4
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$
3
6
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$
2
8
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1
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$
7
8
$
1
8
$
5
$
1
2
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Kennedy Wilson Consolidated Financial Results: Year Ended December 31, 2020
Compared to the Year Ended December 31, 2019
For 11.2 million square feet of same property commercial real estate for the year
ended December 31, 2020 as compared to the prior period:
Financial Highlights
GAAP net income to common shareholders was (cid:362)92.9 million and (cid:362)224.1 million for
the year ended December 31, 2020 and 2019, respectively.
Ad(cid:102)usted EBITDA was (cid:362)608.0 million for the year ended December 31, 2020, a 16(cid:1143)
decrease from (cid:362)728.1 million for 2019, primarily due to lower gains on sale of real
estate in our Consolidated and Co-Investment por(cid:127)olios and lower fair value gains
on our commingled funds and VHH. We were a net seller of assets and during the
year ended December 31, 2020 and 2019, our share of net sales of assets were
(cid:362)741.6 million and (cid:362)115.5 million, respectively. NOI from our properties was down
in 2020 primarily due to a significant decrease to our hotel business as a result of
COVID-related shutdowns and closures. The impact from lower gains on sales of
real estate and NOI was partially offset by reductions in compensation and general
and administrative expenses due to a lower headcount as a result of the sale of our
Property Services group in the beginning of the fourth quarter 2020. We also had
lower travel and office related expenses and lower discretionary compensation.
With proceeds from asset sales, we have funded development and redevelopment
initiatives that, once complete, we expect will increase the NOI we receive from our
properties (see “Liquidity and Capital Resources— Development and Redevelopment”).
Operational Highlights
Same store property highlights for the year ended December 31, 2020 include:
For our 14,728 same property multifamily units for the year ended December 31,
2020 as compared to the prior period:
occupancy increased 1(cid:1143) to 95(cid:1143)
net operating income decreased 1(cid:1143)
total revenues increased 1(cid:1143)
occupancy remained (cid:89)at at 96(cid:1143) from the same period in 2019
net operating income decreased 7.5(cid:1143)
total revenues decreased 6.7(cid:1143)
Investment Transactions
acquired (cid:362)1.1 billion of assets (our share of which was (cid:362)242.0 million) and sold
(cid:362)1.2 billion of assets (our share of which was (cid:362)983.6 million)
Significant Transactions
Consolidated Asset Sales; New Separate Account
In 2020, among other sales, the Company sold Pioneer Point, a wholly-owned
multifamily property in the (cid:38)nited Kingdom, Baggot Pla(cid:140)a, a wholly-owned office
property in Ireland, Club Palisades, a wholly-owned multifamily property in the state
of Washington and contributed 18 previously wholly-owned industrial properties
located in the (cid:38)nited Kingdom to a newly-created (cid:102)oint venture with a sovereign
wealth fund (the “Industrial JV”). These transactions generated cash proceeds of
(cid:362)649.3 million to the Company and a total gain of (cid:362)307.1 million. The proceeds from
these sales were and will be used to fund development pro(cid:102)ects and new acquisitions.
Please see “Liquidity and Capital Resources—Development and Redevelopment” for
additional details with respect to these pro(cid:102)ects.
The Company will continue to hold a 20(cid:1143) ownership interest in the assets contributed
to the j oint venture through its ownership interests in the Industrial JV
JV will target urban logistics properties in the (cid:38)nited Kingdom, with the potential to
expand into Ireland and Spain. As the Company does not control the Industrial JV, the
assets are no longer consolidated and its investment in the Industrial JV
is accounted
for under the equity method. The Company elected the fair value option and going
forward the investments are accounted for as fair value unconsolidated investments
with operating activity included within income from unconsolidated investments.
. The Industrial
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AXA Joint Venture and Related Transactions
During the second quarter of 2018, the Company and A(cid:42)A Investment Managers(cid:332)Real
Assets (“A(cid:42)A”) entered into a (cid:102)oint venture agreement targeting multifamily assets in
Ireland. The A(cid:42)A (cid:102)oint venture commenced with A(cid:42)A investing in a 50(cid:1143) ownership
stake in 1,173 multifamily units across three assets in Dublin, Ireland previously
held by the Company and a different equity partner (held in 50/50 (cid:102)oint ventures)
and was initially consolidated in the Company(cid:317)s financial statements. The Company
continues to hold a 50(cid:1143) ownership interest in these assets through its ownership in
this new (cid:102)oint venture with A(cid:42)A. As the Company does not control the (cid:102)oint venture
with A(cid:42)A, the assets are no longer consolidated and its investment with A(cid:42)A is
accounted for under the equity method. The investments are accounted for as fair
value unconsolidated investments with operating activity included within income from
unconsolidated investments.
During the third quarter of 2018, the Company sold an additional 411 multifamily
units across two assets in Dublin, Ireland and one in Cork, Ireland into the (cid:102)oint
venture with A(cid:42)A that were both previously wholly owned by the Company. The
(cid:102)oint venture has also made investments in 274 units in Dublin and acquired two
development sites on which it expects to build an estimated 684 additional units
(collectively with the transactions described in the paragraph above the “2018 A(cid:42)A
Transactions”).
During the second quarter of 2019, A(cid:42)A invested in a 50(cid:1143) ownership stake in the
State Street office building, Capital Dock office buildings and Capital Dock residential
tower in Dublin, Ireland that was previously held by the Company and different
equity partners. These investments were previously consolidated in the Company(cid:317)s
consolidated financial statements.
The table below summari(cid:140)es the impact A(cid:42)A Transactions had on our consolidated
financial statements during the year ended December 31, 2019 and 2018:
(Dollars in millions)
2018
2019
Total
G ross G ain on Sale
of Real E state
Noncontrolling
(cid:17)n(cid:124)(cid:59)(cid:117)(cid:59)s(cid:124)s
Net G ain on Sale of
Real E state
(cid:362) 169.5
317.8
.3
4
(cid:362) (66.8)
(105.4)
)
(
.2
(cid:362) 102.7
212.4
.1
3
In addition to the net gain on sale of real estate we earned (cid:362)12.4 million and (cid:362)9.4
million of performance fees for the year ended December 31, 2019 and 2018 which
were recorded through net income attributable to noncontrolling interests. We also
had (cid:362)2.1 million and (cid:362)1.5 million on acquisition and disposition fees recorded to
investment management fees for the year ended December 31, 2019 and 2018.
For the year ended December 31, 2020 and 2019 we recogni(cid:140)ed (cid:362)47.3 million and
(cid:362)25.3 million of fair value gains on assets held within the A(cid:42)A (cid:102)oint venture including
(cid:362)4.9 million and (cid:362)4.3 million of performance fees, respectively. Gains were due to
property and foreign exchange appreciation offset by fair value losses on debt.
The deconsolidation of the assets above has led to a decrease in total assets and total
liabilities as we have gone from showing 100(cid:1143) of the gross balance sheet items to our
net investment through unconsolidated investments. Prior to deconsolidation these
assets had an asset value of (cid:362)1.0 billion and as of December 31, 2019 they have an
unconsolidated investment balance of (cid:362)401.7 million.
There were no significant transactions completed by the A(cid:42)A (cid:102)oint venture during the
year ended December 31, 2020.
During the fourth quarter of 2019, the Company sold 468 multifamily units across
three assets in Dublin, Ireland into the (cid:102)oint venture with A(cid:42)A that were previously
wholly owned by the Company (collectively with the transactions described in the
paragraph directly above the “2019 A(cid:42)A Transactions” and with the 2018 A(cid:42)A
Transactions “A(cid:42)A Transactions”).
Issuance of Preferred Stock
In October 2019, the Company announced the issuance of a (cid:362)300 million perpetual
preferred equity investment in Kennedy Wilson by affiliates of Eldridge Industries
(collectively, “Eldridge”). (cid:38)nder the terms of the agreement, Eldridge purchased (cid:362)300
million in convertible perpetual preferred stock carrying a 5.75(cid:1143) annual dividend rate,
K
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•
•
•
•
•
•
•
•
•
•
•
$
8
7
$
1
7
2
$
1
5
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
with an initial conversion price of (cid:362)25.00 per share, representing a premium of 15(cid:1143) to
the daily volume weighted average price per share of Kennedy Wilson(cid:317)s common stock
over the 20 trading days ending, and including, October 16, 2019. The preferred stock
is callable by Kennedy Wilson on and a(cid:91)er October 15, 2024.
Revenues
Net Income
Ad(cid:102)usted EBITDA
Year Ended December 31, 2019
Consolidated
Co-Investment
Total
(cid:362) (0.1)
(0.7)
(0.5)
(cid:1143)
(cid:1143)
(cid:1143)
(cid:362) (0.1)
(0.2)
(0.5)
(cid:1143)
(cid:1143)
(cid:1143)
(cid:362) (0.2)
(0.9)
(1.0)
(cid:1143)
(cid:1143)
(cid:1143)
Sale of Kennedy-Wilson Properties, LTD. (“KWP Sale”)
On October 2, 2020, we sold KWP, a wholly owned subsidiary operating in the
third-party real estate services industry, including property management, commercial
brokerage (leasing and sale), facilities management and lease administration, to an
entity controlled by certain members of KWP(cid:317)s management (the “Purchaser”). As
part of the transaction, 110 employees and 25 independent contractors that were
employed by KWP are now employed by the Purchaser.
Foreign Exchange—Results of Operations
A significant portion of our investments are in foreign currencies. We typically do not
hedge future operations or cash (cid:89)ows so changes in foreign currency rates will have
an impact on our results of operations. We have included the table below to illustrate
the impact these (cid:89)uctuations have had on our revenues, net income and Ad(cid:102)usted
EBITDA by applying the relevant exchange rates for the prior period. Please refer to
the section titled “Currency Risk—Foreign Currencies” in Item 3 for a discussion of risks
relating to foreign currency and our hedging strategy and the “Other Comprehensive
Income” section below for a discussion of the balance sheet impact of foreign currency
movements on our results of operations.
Revenues
Net Income
Ad(cid:102)usted EBITDA
Year Ended December 31, 2020
Consolidated
Co-Investment
Total
(cid:362) (5.5)
(0.8)
(5.8)
(1)(cid:1143)
(1)(cid:1143)
(1)(cid:1143)
(cid:362) 0.1
1.5
1.6
(cid:1143)
2 (cid:1143)
(cid:1143)
(cid:362) (5.4)
0.7
(4.2)
(1)(cid:1143)
1 (cid:1143)
(1)(cid:1143)
Consolidated Portfolio Segment
Revenues
Rental income was (cid:362)403.9 million for the year ended December 31, 2020 as
compared to (cid:362)447.4 million for 2019. The (cid:362)43.5 million decrease is primarily due
to selling a 50(cid:1143) equity interest of certain previously consolidated properties to the
A(cid:42)A (cid:102)oint venture in the second and fourth quarters of 2019. The assets sold include
the State Street office building, Capital Dock office and residential buildings and the
Central Park multifamily properties which caused these investments to move from our
Consolidated Por(cid:127)olio to our Co-Investment Por(cid:127)olio. As the assets are now treated
as unconsolidated investments (with our ownership percentage remaining the same
with respect to certain assets and our ownership percentage dropping with respect
to certain assets), our share of rental revenues is part of income from unconsolidated
investments in the current period and is no longer treated as consolidated rental
revenue. The income that we receive from the 50(cid:1143) of the ownership interests in
these assets that we hold a(cid:91)er these transactions with A(cid:42)A moved from being
recogni(cid:140)ed as rental income to income from unconsolidated investments during the
year ended December 31, 2020. Additionally, as a result of the COVID-19 pandemic,
we recogni(cid:140)ed a (cid:362)13.5 million reduction to rental income for the year ended
December 31, 2020 as we assessed the full collection of certain rents as no longer
probable. We had no comparable activity in the prior period.
Hotel income was (cid:362)13.9 million for the year ended December 31, 2020 as compared
to (cid:362)80.5 million for 2019. The (cid:362)66.6 million decrease is primarily due to the sale of
two consolidated hotels during the fourth quarter of 2019 ((cid:362)32.9 million decrease)
0
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and the decline in hotel income due to operations being significantly reduced or
halted at the Shelbourne hotel ((cid:362)33.7 million decrease) as a result of the COVID
pandemic during the year ended December 31, 2020.
Expenses
Rental expenses decreased to (cid:362)135.7 million for the year ended December 31,
2020 as compared to (cid:362)152.9 million for the year ended December 31, 2019. The
decrease is due to the sale of assets into the A(cid:42)A (cid:102)oint venture as discussed above.
As the assets are now treated as unconsolidated investments (with our ownership
percentage remaining the same with respect to certain assets and our ownership
percentage dropping with respect to certain assets), our share of rental expenses is
part of income from unconsolidated investments in the current period and is no longer
treated as consolidated rental expense. Additional decreases in rental expenses were
recogni(cid:140)ed year-over-year as a result of certain one-time non-capitali(cid:140)able repair and
maintenance expenses that we recogni(cid:140)ed during the year ended December 31, 2019
to prepare an office property in the (cid:38)nited Kingdom for a new tenant. We recogni(cid:140)ed
additional decreases as a result of a reduction in property taxes during the year ended
December 31, 2020 due to a property tax refund on an office property in the (cid:38)nited
Kingdom.
Hotel expenses decreased to (cid:362)13.8 million for the year ended December 31, 2020 as
compared to (cid:362)60.1 million for the year ended December 31, 2019 primarily due to
the sale of two consolidated hotels during the fourth quarter of 2019 ((cid:362)26.3 million
decrease) and the reduced activity at the Shelbourne hotel ((cid:362)20.0 million) during the
year ended December 31, 2020.
Compensation expense decreased to (cid:362)59.7 million for the year ended December 31,
2020 as compared to (cid:362)71.0 million for the year ended December 31, 2019 primarily
due to lower discretionary compensation expense.
General and administrative expenses decreased to (cid:362)20.6 million for year ended
December 31, 2020 as compared to (cid:362)26.3 million for the year ended December 31,
2019 due to a substantial overall decrease in general and administrative expenses
across the board, including travel and office expenses due to the COVID-19
pandemic.
Depreciation and amorti(cid:140)ation decreased by (cid:362)8.0 million primarily due to sale of
assets into the A(cid:42)A (cid:102)oint venture and sales of assets in the prior period.
Other
Gains on sale of real estate, net were (cid:362)338.0 million for the year ended December 31,
2020 as compared to (cid:362)434.4 million in the prior period. The gains recogni(cid:140)ed during
the year ended December 31, 2020 primarily relate to the sale of (cid:38)K industrial
por(cid:127)olio to the Industrial JV, the Club Palisades multifamily property in the Western
(cid:38)nited States, Baggot Pla(cid:140)a in Dublin, Ireland, Pioneer Point a multifamily property
in the (cid:38)nited Kingdom and certain other non-core assets in Europe. Included in the
gains on sale of real estate, net for December 31, 2020 is an impairment loss of (cid:362)15.6
million on five retail properties in the (cid:38)nited Kingdom and a residential property
in the Western (cid:38)nited States. For the year ended December 31, 2019, the activity
relates to the deconsolidation of the investments that went into the A(cid:42)A (cid:102)oint venture
(as described above), the sale of the Rit(cid:140) Carlton Hotel in Lake Tahoe and smaller, non-
core retail assets in the Western (cid:38)nited States and non-core commercial properties in
the (cid:38)nited Kingdom.
Interest expense was (cid:362)211.2 million for the year ended December 31, 2020 as
compared to (cid:362)215.1 million for the year ended December 31, 2019. The decrease
is due to lower consolidated property level debt balances resulting from the sale of
assets into the A(cid:42)A (cid:102)oint venture and sales of assets in the current and prior period.
These decreases were offset by (cid:362)9.3 million in prepayment penalties associated
with the KWE tender offer completed in 2020, early repayment of mortgages on
K
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—
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—
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—
—
—
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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
assets as part of the (cid:38)K Industrial por(cid:127)olio sale and the refinance of a mortgage on a
multifamily property in the Western (cid:38)nited States.
Transaction-related expenses were (cid:362)0.9 million for the year ended December 31,
2020 as compared to (cid:362)6.8 million for the same period in 2019. The decrease is due
to expenses incurred in 2019 investigating potential transactions that ultimately were
not consummated.
Co-investment operations
In addition to our management of investments in the Co-Investment Por(cid:127)olio, we
have ownership interests in the properties. The table below represents a breakout of
the amounts within income from unconsolidated investments which represents our
share of underlying property investments in the Co-Investment Por(cid:127)olio assets and
any performance fees relating to our management of these properties for the year
ended December 31, 2020 and the year ended December 31, 2019:
We had net income of (cid:362)2.3 million attributable to noncontrolling interests during the
year ended December 31, 2020 compared to net income of (cid:362)94.4 million attributable
to noncontrolling interests during the year ended December 31, 2019. The decrease
in income attributable to noncontrolling interest is due to allocation of gains in 2019
associated with the sale of Rit(cid:140) Carlton, Lake Tahoe hotel and the A(cid:42)A (cid:102)oint venture to
our equity partners.
Co-Investment Portfolio Segment
Investment Management
On our Co-Investment Por(cid:127)olio assets, we receive asset management fees for
managing assets on behalf of our partners. During the year ended December 31,
2020, fees recorded through revenues were (cid:362)22.5 million as compared to (cid:362)24.9
million for the same period in 2019. During the year ended December 31, 2020
we had higher base management fees as a result of having more assets under
management in our Co-Investment pla(cid:127)orm mainly from the A(cid:42)A (cid:102)oint venture.
However, this was offset by (cid:362)6.4 million of acquisition related fees that we received
from equity partners in the prior period with no comparable activity in the current
period. These fees are recorded as a component of investment management, property
services and research fees. Performance fees are recorded as part of income from
unconsolidated investments and discussed below.
Expenses increased to (cid:362)26.9 million for the year ended December 31, 2020 as
compared to (cid:362)20.7 million primarily due to severance costs and costs associated with
our fund management business including certain discretionary compensation.
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Revenue
(cid:1354)Rental
(cid:1354)Sale of real estate
(cid:1354)Performance fees
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:117)(cid:59)(cid:136)(cid:59)nu(cid:59)
E xpen ses
(cid:1354)Rental
(cid:1354)Cost of real estate sold
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:59)(cid:138)(cid:114)(cid:59)ns(cid:59)s
(cid:1354)(Loss) gain on sale of real estate, net
(cid:1354)Interest expense
(cid:1354)Other loss
(cid:1354)Fair Value/other ad(cid:102)ustments
(cid:1354)Provision for income taxes
Year Ended December 31,
2020
2019
(cid:362) 148.1
11.5
2.6
162.2
(cid:362) 114.7
26.7
36.2
177.6
45.6
13.3
6.9
65.8
(11.5)
(33.1)
(13.7)
43.9
(1.0)
36.9
23.9
8.2
69.0
53.5
(32.1)
(9.3)
57.7
(cid:1354)(cid:1354)(cid:17)nco(cid:108)(cid:59) (cid:61)(cid:117)o(cid:108) unconso(cid:1140)ida(cid:124)(cid:59)d in(cid:136)(cid:59)s(cid:124)(cid:108)(cid:59)n(cid:124)s
8
.0
1
.4
Our share of JV NOI (rental income net of rental operating expenses) increased in
the current period due to the sale of interests in previously consolidated properties
into unconsolidated partnerships resulting in moving the recognition of income
from these assets from our Consolidated por(cid:127)olio to our Co-Investment por(cid:127)olio
as described above. In addition, during the year ended December 31, 2020, we
received a surrender premium, which is a breakage fee we received from a tenant
in the (cid:38)nited Kingdom related to the early extinguishment of its lease and we
experienced an increase in NOI in our VHH por(cid:127)olio. Increases in JV NOI were
offset by an impairment loss recorded in the third quarter of 2020 included in the
table above within loss on sale of real estate of (cid:362)6.7 million relating to a property in
a retail por(cid:127)olio in the (cid:38)nited Kingdom that was subsequently sold during the year.
We had an additional impairment loss of (cid:362)4.2 million in the fourth quarter 2020 on
this por(cid:127)olio that brought the carrying value of this (cid:102)oint venture to (cid:140)ero. During
the year ended December 31, 2019, we had gains on sale of real estate of (cid:362)53.5
million primarily relating to the sale of two multifamily properties in the Western
(cid:38)nited States which was offset by an impairment of (cid:362)10.3 million on a residential
development in the Western (cid:38)nited States that was subsequently sold in the first
quarter of 2020.
During the year ended December 31, 2020 we had fair value gains on VHH
primarily relating to conversions of development pro(cid:102)ects to operating properties
as construction work was completed and lease up of the properties commenced.
We also had fair value gains associated with the completion of Clancy (cid:32)uay Phase 3
which is currently undergoing lease up and net foreign exchange gains relating to the
strengthening of the euro against the (cid:38).S. dollar on our euro denominated fair value
investments.
During the year ended December 31, 2019, we had higher fair value gains on
VHH due to resyndications and improved property performance on the underlying
investments within VHH.
During the year ended December 31, 2020, we recorded a net (cid:362)2.6 million increase
in the accrual for performance fees. This was mainly due to increased values in the
A(cid:42)A (cid:102)oint venture primarily due to the completion of Clancy (cid:32)uay Phase 3 as further
discussed above and a por(cid:127)olio of office buildings we manage in the Seattle area.
These increases were offset by reductions in accrued performance fees associated
Fund V and VI due to lack of transactional activity for the period. During the year
ended December 31, 2019, we had approximately (cid:362)18 million of performance fee
income accruals in Fund V and VI from increases in fair value and reali(cid:140)ed gains. We
also had approximately (cid:362)12 million in promote fees from a por(cid:127)olio of multifamily
assets held at fair value in a Las Vegas held in a separate account pla(cid:127)orm that sold in
the fourth quarter of 2019.
Corporate
Real estate related services fees decreased to (cid:362)10.0 million during the year ended
December 31, 2020 as compared to (cid:362)16.5 million for December 31, 2019, primarily
due to the sale of KWP at the beginning of the fourth quarter as discussed above.
Expenses for the year ended December 31, 2020 were approximately (cid:362)74.6 million
as compared to (cid:362)80.0 million for the year ended December 31, 2019. Compensation
and related expenses decreased by (cid:362)5.4 million due to the sale of KWP and lower
discretionary compensation.
Interest expense was (cid:362)69.5 million for the year ended December 31, 2020 which was
(cid:89)at to the same period in 2019.
Our provision for income taxes and effective tax rate for 2020 was (cid:362)43.6 million
and 28.8(cid:1143) as compared to (cid:362)41.4 million and a 11.4(cid:1143) effective tax rate in 2019. The
increase in the effective tax rate for fiscal 2020 is primarily due to non-deductible
executive compensation as a percentage of pretax income being higher, a reduction in
income allocable to non-controlling interests and an increase in valuation allowances
on deferred tax assets. During the year ended December 31, 2020, valuation
allowances were recorded against certain (cid:38)K and Spanish subsidiaries(cid:317) tax loss
carryforwards as their ability to generate future income has been negatively impacted
by the COVID-19 pandemic.
Preferred dividends and accretion on preferred stock issuance costs were (cid:362)17.2 million
for the year ended December 31, 2020 as compared to the same period in 2019. The
increase is due to the Company issued 300,000 shares of its 5.75(cid:1143) Series A Cumulative
Perpetual Convertible Preferred Stock, par value (cid:362)0.0001 per share (the “Preferred
Stock”), for gross proceeds of (cid:362)300 million during the fourth quarter of 2019.
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7
8
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Other Comprehensive Income
The two maj or components that drive the change in other comprehensive income are
the changes in foreign currency rates and the gains or loss of any associated foreign
currency hedges. Please refer to the section titled “Currency Risk—Foreign Currencies”
in Item 3 for a discussion of our risks relating to foreign currency and our hedging
strategy. Below is a table that details the activity for the years ended December 31,
2020 and 2019.
(Dollars in millions)
Net income attributable to Kennedy-Wilson Holdings, Inc.
(cid:1354)common shareholders
(cid:38)nreali(cid:140)ed foreign currency translation gain (loss), net of
(cid:1354)noncontrolling interests and tax
Amounts reclassified out of accumulated other comprehensive loss
(cid:1354)during the period
(cid:38)nreali(cid:140)ed foreign currency derivative contract (loss) gain, net of
(cid:1354)noncontrolling interests and tax
(cid:38)nreali(cid:140)ed loss in interest rate swaps
Year Ended December 31,
2020
2019
(cid:362) 92.9
(cid:362) 224.1
65.8
0.8
(37.8)
(5.2)
(23.9)
10.4
38.7
(0.7)
(cid:7)o(cid:108)(cid:114)(cid:117)(cid:59)h(cid:59)nsi(cid:136)(cid:59) inco(cid:108)(cid:59) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314)
(cid:1354)co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s
1
.5
2
.6
Included within the net income attributable to Kennedy-Wilson Holdings, Inc.
common shareholders are reali(cid:140)ed foreign exchange amounts relating to translation
of cash amounts held in different functional currencies of the subsidiary that holds
it and reali(cid:140)ed gains and losses on derivative investments that are not treated as
net investment hedges. The table below represents the amount of foreign exchange
movements recorded to the statement of income for the year ended December 31,
2020 and 2019:
(Dollars in millions)
Reali(cid:140)ed foreign currency exchange loss(cid:332)consolidated statements
(cid:1354)of income
Reali(cid:140)ed foreign currency derivative contract gain (loss)(cid:332)
(cid:1354)consolidated statements of income
Year Ended December 31,
2020
2019
(cid:362) (cid:332)
(cid:362) (0.2)
(cid:34)(cid:124)a(cid:124)(cid:59)(cid:108)(cid:59)n(cid:124) o(cid:61) (cid:27)(cid:114)(cid:59)(cid:117)ations(cid:332)(cid:117)(cid:59)a(cid:1140)i(cid:140)(cid:59)d (cid:61)o(cid:117)(cid:59)i(cid:93)n cu(cid:117)(cid:117)(cid:59)ncy (cid:59)(cid:138)chan(cid:93)(cid:59)
(cid:362) (cid:332)
(
.2
)
The main currencies that the Company has exposure to are the euro and pound
sterling. The table below represents the change in rates over the year ended
December 31, 2020 and 2019 as compared to the (cid:38).S. Dollar:
Euro
GBP
Year Ended December 31,
2020
2019
9.0 (cid:1143)
3.0 (cid:1143)
(2.0)(cid:1143)
4.0 (cid:1143)
Comprehensive income, net of taxes and noncontrolling interests, for the year ended
December 31, 2020 and 2019 was (cid:362)116.5 million and (cid:362)248.6 million, respectively.
The Company experienced net unreali(cid:140)ed gains on foreign currency through other
comprehensive income for the period due to the weakening of the (cid:38).S. dollar against
the Euro and GBP. (cid:38)nreali(cid:140)ed hedge losses were driven by hedges that KWE holds on
its euro denominated investments which were offset by hedges that the Company has
on its GBP denominated investments. The unreali(cid:140)ed hedge losses on KWE primarily
related to cross currency swap and KWE Notes due to the euro strengthening against
the GBP. See Foreign Currency in Item 1. Business section for more detail on the
foreign currency impact of these instruments.
The Company entered into interest rate swap contracts to swap some of its variable rate
mortgage loans to fixed rate terms. The Company recogni(cid:140)ed (cid:362)4.2 million of interest
expense savings that were recorded to the statement of operations relating to interest
savings on interest rate swaps and forward point amorti(cid:140)ation on hedge contracts.
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Amounts reclassified out of accumulated other comprehensive income are for
amounts associated with the A(cid:42)A (cid:102)oint venture that are moved out of other
comprehensive income and recogni(cid:140)ed on the consolidated statements of income.
Kennedy Wilson Consolidated Financial Results: Year Ended December 31, 2019
Compared to the Year Ended December 31, 2018
Financial Highlights
GAAP net income to common shareholders was (cid:362)224.1 million and (cid:362)150.0 million for
the year ended December 31, 2019 and 2018, respectively.
Ad(cid:102)usted EBITDA was (cid:362)728.1 million, a 2(cid:1143) increase from (cid:362)712.7 million for 2018,
due primarily to higher reali(cid:140)ed gains on the sale of consolidated and unconsolidated
real estate investments and higher fair value gains and performance fees. These were
offset by a gain on the sale of our Meyers Research business during the year ended
December 31, 2018. Also we were a net seller of assets during the years ended
December 31, 2019 and 2018 and during the year ended December 31, 2019 and
2018, our share of net asset sales of assets were (cid:362)115.5 million and (cid:362)348.4 million,
respectively. We also had foreign currency exchange losses and some disruption to
our hotel business due to value-add capital expenditures all of which contributed
to a decrease in NOI from our properties. This was partially offset by increases in
rental income and NOI at our same store operating properties as described below as
we executed our asset management initiatives. With proceeds from asset sales, we
have funded development and redevelopment initiatives that, once complete, we
expect will increase the NOI we receive from our properties (see “Liquidity and Capital
Resources— Development and Redevelopment”).
net operating income increased 7(cid:1143)
total revenues increased 5(cid:1143)
For 11.2 million square feet of same property commercial real estate for the year
ended December 31, 2019 as compared to the prior period:
occupancy decreased 0.1(cid:1143) to 96.9(cid:1143) from the same period in 2018
net operating income decreased 3.7(cid:1143)
total revenues decreased 3.6(cid:1143)
Investment Transactions
acquired (cid:362)1.9 billion of assets (our share of which was (cid:362)624.6 million) and sold
(cid:362)1.4 billion of assets (our share of which was (cid:362)740.1 million)
Significant Transactions
Meyers Research Sale
In December 2018, we sold Meyers Research for (cid:362)48.0 million and recogni(cid:140)ed
a gain on sale of business of (cid:362)40.4 million. We used part of the proceeds from
such sale to reinvest (cid:362)15.0 million for an 11(cid:1143) ownership interest in a new
partnership between Meyers Research and another premiere residential real
estate construction service company. We no longer control Meyers Research and
treat the investment as an unconsolidated investment.
Please also see the description of certain other significant transactions described
in “Kennedy Wilson Consolidated Financial Results: Year Ended December 31, 2020
Compared to the Year Ended December 31, 2019” that may be applicable in the
discussion of the periods described in this section.
Operational Highlights
Same property highlights for the year ended December 31, 2019 include:
For our 13,387 same property multifamily units for the year ended December 31,
2019 as compared to the prior period:
occupancy remained at 94(cid:1143) from 2018.
Foreign Exchange—Results of Operations
A significant portion of our investments are in foreign currencies. We do not hedge
future operations or cash (cid:89)ows and therefore changes in foreign currency rates will
have an impact on our results of operations. We have included the table below to
illustrate the impact these (cid:89)uctuations have had on our revenues, net income and
Ad(cid:102)usted EBITDA by applying the applicable exchange rates for the prior period.
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$
4
8
—
—
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0
•
•
•
•
•
•
•
•
•
•
•
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Please refer to the section titled “Currency Risk— Foreign Currencies” in Item 3 for a
discussion of risks relating to foreign currency and our hedging strategy and the
section titled (cid:324)Other Comprehensive Income” below for a discussion of the balance
sheet impact of foreign currency movements on our results of operations.
Revenues
Net Income
Ad(cid:102)usted EBITDA
Revenues
Net Income
Ad(cid:102)usted EBITDA
Year Ended December 31, 2019
Consolidated
Co-Investment
Total
(cid:362) (0.1)
(0.7)
(0.5)
(cid:1143)
(cid:1143)
(cid:1143)
(cid:362) (0.1)
(0.2)
(0.5)
(cid:1143)
(cid:1143)
(cid:1143)
(cid:362) (0.2)
(0.9)
(1.0)
(cid:1143)
(cid:1143)
(cid:1143)
Year Ended December 31, 2018
Consolidated
Co-Investment
Total
(cid:362) (5.7)
(4.5)
(7.2)
(1)(cid:1143)
(3)(cid:1143)
(1)(cid:1143)
(cid:362) (0.1)
0.5
0.3
(cid:1143)
(cid:1143)
(cid:1143)
(cid:362) (5.8)
(4.0)
(6.9)
(1)(cid:1143)
(3)(cid:1143)
(1)(cid:1143)
Consolidated Portfolio Segment
Revenues
Rental income was (cid:362)447.4 million for the year ended December 31, 2019 as
compared to (cid:362)514.6 million for 2018. The (cid:362)67.2 million decrease is primarily
due to the A(cid:42)A Transactions described above. As the assets are now treated as
unconsolidated investments (with our ownership percentage remaining the same
with respect to certain assets and our ownership percentage dropping with respect
to certain assets), our share of rental revenues is part of income from unconsolidated
investments in the current period and is no longer treated as consolidated rental
revenue. We have also been a net seller of assets during the current and prior periods
which has led to a decrease in rental income.
Hotel income was (cid:362)80.5 million for the year ended December 31, 2019 as compared
to (cid:362)155.7 million for 2018. The (cid:362)75.2 million decrease is primarily due to the sale
of the Rit(cid:140) Carlton, Lake Tahoe hotel during the first quarter of 2019 and the sale of
the Portmarnock and Fairmont St Andrews during the fourth quarter of 2019. We
also sold six Park Inn hotels located in the (cid:38)nited Kingdom during the fourth quarter
of 2018 and an extensive value add renovation of the lobby and reception at the
Shelbourne hotel led to lower occupancy rates at the hotel during the first quarter of
2019.
There was minimal activity for the sale of real estate for the year ended December
31, 2019 as compared to (cid:362)56.8 million for the same period in 2018. During the year
ended December 31, 2018, we recogni(cid:140)ed the sale of real estate of 200 Capital
Dock, a 130,000 sq. (cid:91). office building under development in Dublin, Ireland, as a
result of the construction progress on the building. The 200 Capital Dock pro(cid:102)ect was
accounted under percentage of completion and therefore variation in periods is due to
the pro(cid:102)ect achieving different milestones in its development timeline. We completed
the construction of the building during the first quarter of 2019.
Expenses
Rental expenses decreased to (cid:362)152.9 million for the year ended December 31,
2019 as compared to (cid:362)160.8 million for the year ended December 31, 2018. The
decrease is primarily due to the A(cid:42)A Transactions. As the assets are now treated as
unconsolidated investments (with our ownership percentage remaining the same
with respect to certain assets and our ownership percentage dropping with respect
to certain assets), our share of rental expenses is part of income from unconsolidated
investments in the current period and is no longer treated as consolidated rental
expense. We have also been a net seller of assets during the current and prior period
which has led to a decrease in rental expense.
Hotel expenses decreased to (cid:362)60.1 million for the year ended December 31, 2019 as
compared to (cid:362)121.5 million for the year ended December 31, 2018 primarily due to
the sale of the Rit(cid:140) Carlton, Lake Tahoe hotel during the first quarter of 2019 and the
sale of the Portmarnock and Fairmont St Andrews during the fourth quarter of 2019.
We also sold six Park Inn hotels located in the (cid:38)nited Kingdom during the fourth
quarter of 2018.
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2
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During the year ended December 31, 2019, we recogni(cid:140)ed minimal additional costs
to complete 200 Capital Dock. During the year ended December 31, 2018, we
recogni(cid:140)ed (cid:362)52.5 million in sale-related costs on 200 Capital Dock.
Compensation expense increased to (cid:362)71.0 million for the year ended December 31,
2019 as compared to (cid:362)64.7 million for the year ended December 31, 2018 primarily
due to one-time incentive payments during the prior period.
General expenses decreased to (cid:362)26.3 million for year ended December 31, 2019
as compared to (cid:362)28.1 million for the year ended December 31, 2018 due to higher
travel-related expenses and charitable contributions in our European businesses in the
prior year.
Depreciation and amorti(cid:140)ation decreased by (cid:362)18.5 million primarily due to the A(cid:42)A
Transactions and the Company being a net seller of assets in 2018 and 2019.
Other
Gains on sale of real estate, net were (cid:362)434.4 million for the year ended December 31,
2019 as compared to (cid:362)371.8 million in the prior period. The gains recogni(cid:140)ed during
the year ended December 31, 2019 primarily relates to the 2019 A(cid:42)A Transactions,
the sale of the Rit(cid:140) Carlton Hotel, Lake Tahoe and smaller, non-core retail assets
in the Western (cid:38)nited States and non-core commercial properties in the (cid:38)nited
Kingdom. Gains on sale of real estate in 2018 primarily to the 2018 A(cid:42)A Transactions
and the ordinary course sales of certain multifamily and office assets located in the
Western (cid:38)nited States, Ireland, (cid:38)nited Kingdom and Italy. Such gains were offset by
an impairment loss on a vacated office building in the (cid:38)nited Kingdom which was
subsequently sold during the year ended December 31, 2018.
Interest expense was (cid:362)215.1 million for the year ended December 31, 2019 as
compared to (cid:362)238.2 million for the year ended December 31, 2018. The decrease
is due to the A(cid:42)A Transactions, the net sale of properties which were encumbered
by mortgage debt and increased capitali(cid:140)ed interest relating to our development
properties.
Transaction-related expenses were (cid:362)6.8 million for the year ended December 31,
2019 as compared to (cid:362)1.7 million for the same period in 2018. The increase is due
to expenses incurred investigating potential transactions that ultimately were not
consummated.
We had net income of (cid:362)94.4 million attributable to noncontrolling interests during
the year ended December 31, 2019 compared to net income of (cid:362)62.1 million
attributable to noncontrolling interests during the year ended December 31, 2018.
The increase in income attributable to noncontrolling interest is due to the allocation
of gains associated with the sale of Rit(cid:140) Carlton, Lake Tahoe hotel and the 2019 A(cid:42)A
Transactions to our equity partners.
Co-Investment Portfolio Segment
Investment Management
On our Co-Investment Por(cid:127)olio assets, we receive asset management fees for
managing assets on behalf of our partners. During the year ended December 31,
2019, we had fees recorded through revenues of (cid:362)24.9 million which was an increase
from fees of (cid:362)15.4 million for the same period in 2018. During the year ended
December 31, 2019 we had higher base management fees as a result of having more
assets under management in our Co-Investment pla(cid:127)orm mainly from the A(cid:42)A (cid:102)oint
venture and higher acquisition related fees that we received from equity partners
compared to the prior period. These fees are recorded as a component of investment
management, property services and research fees. Performance fees are recorded as
part of income from unconsolidated investments and discussed below.
Expenses decreased to (cid:362)20.7 million for the year ended December 31, 2019 as
compared to (cid:362)28.0 million primarily due to lower discretionary compensation
expense.
Co-investment operations
In addition to our management of investment in the Co-Investment Por(cid:127)olio we
also hold have ownership interests in the properties. The table below represents
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—
—
—
—
—
—
—
—
—
—
—
—
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
a breakout of the amounts within income from unconsolidated investments which
represents our share of underlying property investments in the Co-Investment
Por(cid:127)olio assets and any performance fees relating to our management of these
properties for the year ended December 31, 2019 and the year ended December 31,
2018:
Revenue
(cid:1354)Rental
(cid:1354)Sale of real estate
(cid:1354)Performance fees
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:117)(cid:59)(cid:136)(cid:59)nu(cid:59)
Ex pens es
(cid:1354)Rental
(cid:1354)Cost of real estate sold
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:59)(cid:138)(cid:114)(cid:59)ns(cid:59)s
(cid:1354)(Loss) gain on sale of real estate, net
(cid:1354)Interest expense
(cid:1354)Other loss
(cid:1354)Fair Value/other ad(cid:102)ustments
(cid:1354)(cid:1354)(cid:17)nco(cid:108)(cid:59) (cid:61)(cid:117)o(cid:108) unconso(cid:1140)ida(cid:124)(cid:59)d in(cid:136)(cid:59)s(cid:124)(cid:108)(cid:59)n(cid:124)s
Year Ended December 31,
2019
2018
(cid:362) 114.7
26.7
36.2
177.6
36.9
23.9
8.2
69.0
53.5
(32.1)
(9.3)
57.7
1
.4
(cid:362) 96.4
19.2
27.5
143.1
41.1
18.6
13.4
73.1
23.0
(26.0)
0.9
9.2
7
.1
Our share of JV NOI (rental income net of rental operating expenses) increased
in the current period due to the sale of interests in previously consolidated
properties resulting in moving the recognition of income from these assets from our
Consolidated Por(cid:127)olio to our Co-Investment Por(cid:127)olio as described above. During
the year ended December 31, 2019, we had gains on sale of real estate of (cid:362)53.5
million primarily relating to the sale of two multifamily properties in the Western
(cid:38)nited States which was offset by an impairment of (cid:362)10.3 million on a residential
development in the Western (cid:38)nited States that was subsequently sold in the first
quarter of 2021. During the year ended December 31, 2019, we had higher fair value
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gains on VHH due to resyndications and improved property performance on the
underlying investments within VHH.
For the year ended December 31, 2018, income from unconsolidated investments
was primarily related to operating distributions. During the year ended December
31, 2018, the Company recogni(cid:140)ed fair value gains primarily to resyndications under
our VHH partnership and improved property performance by its fair value option
investments and investments held within the commingled funds managed by the
Company.
During the year ended December 31, 2019, we recorded a (cid:362)36.2 million increase in
the accrual for performance fees relating to our commingled funds. In the year ended
December 31, 2019, we also recorded an increase in the accrual for performance
fees related to the increase in the underlying fair value of assets held by Fund V, Fund
VI and the A(cid:42)A Joint Venture. We also had approximately (cid:362)12 million in promote
fees from a por(cid:127)olio of multifamily assets held at fair value in a Las Vegas held in a
separate account pla(cid:127)orm that sold in the fourth quarter of 2019. During the year
ended December 31, 2018 we recorded performance fees relating to Fund V.
Corporate
Real estate related services fees decreased slightly to (cid:362)16.5 million during the
year ended December 31, 2019 as compared to (cid:362)16.9 million for December 31,
2018, primarily due to lower property management fees from fewer assets under
management. We sold Meyers Research in the fourth quarter of 2018 which resulted
in the loss of research fees. During the year ended December 31, 2018 we earned
(cid:362)15.1 million of research fees.
Expenses for the year ended December 31, 2019 decreased to (cid:362)80.0 million as
compared to (cid:362)104.7 million for the year ended December 31, 2018 primarily due to
lower compensation and general and administrative expenses as a result of the sale of
the Meyers Research, which reduced our employee headcount by 140 people period-
over-period.
Interest expense was (cid:362)69.5 million for the year ended December 31, 2019 as
compared to (cid:362)77.2 million for the same period in 2019. The decrease is due to the
prior period having a higher corporate debt balance due to the term loan still being
outstanding.
Gain on sale of business of (cid:362)40.4 million during year ended December 31, 2018 is
related to our sale of Meyers Research.
Other expense was (cid:362)0.4 million for year ended December 31, 2019 as compared to
other income of (cid:362)13.1 million for the same period in 2018. The income during the
year ended December 31, 2018 relates to reali(cid:140)ed gains on non-designated currency
hedging derivative investments on the Euro.
Our provision for income taxes and effective tax rate for 2019 was (cid:362)41.4 million and
11.4(cid:1143) as compared to an income tax expense of (cid:362)58.0 million and a 21.5(cid:1143) effective
tax rate in 2018. The decrease in income tax expense is primarily as a result of higher
income attributable to non-controlling interests in non-taxable entities, which is not
sub(cid:102)ect to corporate tax, a tax benefit relating to remeasurement of our net (cid:38).S.
deferred tax liability to a lower state effective tax rate and lower tax gains on sales of
real estate by KWE.
Preferred dividends and accretion on preferred stock issuance costs were (cid:362)2.6
million for the year ended December 31, 2019 with no comparable activity for the
prior period. The Company issued 300,000 shares of its 5.75(cid:1143) Series A Cumulative
Perpetual Convertible Preferred Stock, par value (cid:362)0.0001 per share (the “Preferred
Stock”), for gross proceeds of (cid:362)300 million during the fourth quarter of 2019.
Other Comprehensive Income
The two maj or components that drive the change in other comprehensive income are
the changes in foreign currency rates and the gains or loss of any associated foreign
currency hedges. Please refer to the section titled “Currency Risk— Foreign Currencies”
in Item 3 for a discussion of our risks relating to foreign currency and our hedging
strategy. Below is a table that details the activity for the year ended December 31,
2019 and 2018.
(Dollars in millions)
Net income attributable to Kennedy-Wilson Holdings, Inc. common
(cid:1354)shareholders
(cid:38)nreali(cid:140)ed foreign currency translation (loss) gain, net of
(cid:1354)noncontrolling interests and tax
Amounts reclassified out of accumulated other comprehensive loss
(cid:1354)during the period
(cid:38)nreali(cid:140)ed foreign currency derivative contract gain (loss), net of
(cid:1354)noncontrolling interests and tax
(cid:38)nreali(cid:140)ed (loss) gain on marketable securities
Year Ended December 31,
2019
2018
(cid:362) 224.1
(cid:362) 150.0
(23.9)
(65.9)
10.4
38.7
(0.7)
13.2
38.3
(cid:7)o(cid:108)(cid:114)(cid:117)(cid:59)h(cid:59)nsi(cid:136)(cid:59) inco(cid:108)(cid:59) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314)
(cid:1354)co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s(
2
.6
1
.6
Included within the net income attributable to Kennedy-Wilson Holdings, Inc.
common shareholders are reali(cid:140)ed foreign exchange amounts relating to translation
of cash amounts held in different functional currencies of the subsidiary that holds
it and reali(cid:140)ed gains and losses on derivative investments that are not treated as
net investment hedges. The table below represents the amount of foreign exchange
movements recorded to the statement of income for the year ended December 31,
2019 and 2018:
(Dollars in millions)
Reali(cid:140)ed foreign currency exchange (loss) gain(cid:332)consolidated
(cid:1354)statements of income
Reali(cid:140)ed foreign currency derivative contract gain (loss)(cid:332)
(cid:1354)consolidated statements of income
(cid:34)(cid:124)a(cid:124)(cid:59)(cid:108)(cid:59)n(cid:124) o(cid:61) (cid:27)(cid:114)(cid:59)(cid:117)ations(cid:332)(cid:117)(cid:59)a(cid:1140)i(cid:140)(cid:59)d (cid:61)o(cid:117)(cid:59)i(cid:93)n cu(cid:117)(cid:117)(cid:59)ncy (cid:59)(cid:138)chan(cid:93)(cid:59)
(
.2
)
Year Ended December 31,
2019
2018
(cid:362) (0.2)
(cid:362) (1.1)
12.7
1
.6
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$
7
8
$
7
—
1
)
$
4
8
$
3
5
—
$
0
$
1
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
The main currencies that the Company has exposure to are the euro and pound
sterling. The table below represents the change in rates over the year ended
December 31, 2019 and 2018 as compared to the (cid:38).S. Dollar:
Euro
GBP
Year Ended December 31,
2019
2018
(2.0)(cid:1143)
4.0 (cid:1143)
(5.0)(cid:1143)
(6.0)(cid:1143)
Comprehensive income, net of taxes and noncontrolling interests, for year ended
December 31, 2019 and 2018 was income of (cid:362)248.6 million and (cid:362)135.6 million,
respectively. The Company experienced net unreali(cid:140)ed losses on foreign currency
through other comprehensive income for the period due to the strengthening of the
(cid:38).S. dollar against the Euro offset by (cid:38).S. dollar weakening against GBP. (cid:38)nreali(cid:140)ed
hedge gains were driven by hedges that KWE holds on its euro denominated
investments which were offset by hedges that the Company has on its GBP
denominated investments. The unreali(cid:140)ed hedge gains on KWE primarily related to
cross currency swap and KWE Notes due to the euro weakening against the GBP
which led to unreali(cid:140)ed gains of (cid:362)56.0 million. The translation of the cross currency
swap and KWE Notes from GBP to (cid:38).S. dollars resulted in an unreali(cid:140)ed (cid:362)12.4 million
foreign currency translation loss. See Foreign Currency in Item 1. Business section for
more detail on the foreign currency impact of these instruments.
The Company entered into interest rate swap contracts to swap some of its variable
rate mortgage loans to fixed rate terms. The Company recogni(cid:140)ed (cid:362)5.8 million of
interest expense savings that were recorded to the statement of operations relating
to interest savings on interest rate swaps and forward point amorti(cid:140)ation on hedge
contracts.
Amounts reclassified out of accumulated other comprehensive income are for
amounts associated with the A(cid:42)A (cid:102)oint venture that are moved out of other
comprehensive income and recogni(cid:140)ed on the consolidated statements of income.
Liquidity and Capital Resources
Our liquidity and capital resources requirements include acquisitions of real estate
and real estate related assets, funding development pro(cid:102)ects, capital expenditures
for consolidated real estate and unconsolidated investments, working capital needs,
interest and principal payments on our debt and dividends to our common and
preferred shareholders. We finance these activities with internally generated funds
through general operations including rental income, asset sales, borrowings under our
revolving line of credit, sales of equity and debt securities and cash out refinancings
to the extent they are available and fit within our overall por(cid:127)olio leverage strategy.
Our investments in real estate are typically financed with equity from our balance
sheet, third party equity and mortgage loans secured by that real estate. These
mortgage loans are generally nonrecourse in that, in the event of default, recourse
will be limited to the mortgaged property serving as collateral, subj ect to limited
customary exceptions. In some cases, we guarantee a portion of the loan related to a
consolidated property or an unconsolidated investment, usually until some condition,
such as completion of construction or leasing or certain net operating income criteria,
has been met. We do not expect these guarantees to materially affect liquidity or
capital resources. Please refer to the section titled “Off Balance Sheet Arrangements”
for further information.
Our short-term liquidity requirements primarily consist of operating expenses and
other expenditures associated with our properties, dividend payments to our common
and preferred shareholders, interest on our unsecured corporate debt, development,
redevelopment and capital expenditures and, potentially, share repurchases and
acquisitions. We currently expect to meet our short-term liquidity requirements
through our existing cash and cash equivalents plus capital generated from our
investments, sales of real estate as well as availability on our current revolving
lines of credit. As of December 31, 2020, we and our consolidated subsidiaries had
approximately (cid:362)965.1 million ((cid:362)640.3 million of which is in foreign currencies of GBP
or E(cid:38)R) of consolidated cash (as shown on our consolidated balance sheet), our share
of cash held at unconsolidated Co-Investment Por(cid:127)olio assets of (cid:362)77.3 million and
had (cid:362)300.0 million of availability under lines of credit. As of December 31, 2020, we
0
2
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have (cid:362)101.7 million of restricted cash, which is included in cash and cash equivalents,
that primarily relates to lender reserves associated with consolidated mortgages that
we hold on properties. These reserves typically relate to interest, tax, insurance and
future capital expenditures at the properties.
Subsequent to December 31, 2020 we refinanced (cid:362)1 billion worth of our 2024
Notes with (cid:362)500.0 million 2029 Notes and (cid:362)500.0 million 2031 Notes and
lowered interest rate from 5.875(cid:1143) to 4.875(cid:1143). We also repaid (cid:362)100.0 million on
our revolving credit facility and now have (cid:362)400.0 million available to draw.
Additionally, we are sub(cid:102)ect to withholding taxes to the extent we repatriate cash
from certain of our foreign subsidiaries. (cid:38)nder the KWE Bonds and KWE Notes
covenants, we have to maintain certain interest coverage and leverage ratios to
remain in compliance (see “Indebtedness and Related Covenants” for more detail
on KWE Bonds and KWE Notes). Due to these covenants, we evaluate the tax and
covenant implications before we distribute cash, which could impact the availability
of funds at the corporate level. During the second quarter of 2020, we contributed
(cid:362)56.4 million to KWE which holds the KWE Bonds and KWE Notes in order ensure
that we maintain headroom on certain covenants associated with the KWE Bonds
and KWE Notes. This amount is included within the (cid:362)640.3 million of foreign cash
mentioned above and is allowed to be used by KWE and other wholly-owned foreign
subsidiaries within KWE for certain permitted investments.
As discussed throughout this report, COVID-19 pandemic could potentially have a
significant impact on our liquidity and capital resources depending on the duration
for which the pandemic lasts and its effect on the global economy. Despite these
uncertainties we believe we have sufficient liquidity to support our business
operations during the currently foreseeable term of the COVID-19 pandemic through:
Consolidated cash of (cid:362)965.1 million as of December 31, 2020
(cid:362)300.0 million available under our revolving credit facility as of December 31,
2020
Minimal debt maturities in 2021, which currently are (cid:362)123.7 million for our
consolidated debt obligations and our share of debt maturities within our Co-
Investment por(cid:127)olio representing less than 2(cid:1143) of our total debt obligations
Rent collections of 96(cid:1143) across our global investment por(cid:127)olio for the year ended
December 31, 2020 rents as of February 18, 2021
Our need to raise funds from time to time to meet our capital requirements will
depend on many factors, including the success and pace of the implementation
of our strategy for strategic and accretive growth where appropriate. Additionally,
we may opportunistically seek to raise capital (equity or debt) when we believe
market conditions are favorable and when consistent with our growth and financing
strategies. We may also seek third party financing to the extent that we engage in
additional strategic investments, including capital necessary to execute potential
development or redevelopment strategies or acquisition of real estate, note por(cid:127)olios,
or other real estate related companies or real estate related securities. Similarly, as
we recently did with our 2024 Notes, we may from time to time seek to refinance
our existing indebtedness opportunistically in order to reduce our overall cost of debt
capital or optimi(cid:140)e the maturity schedule of our outstanding indebtedness, or for
other strategic reasons. Please also see the section titled “COVID-19 Impact” above
and Part I. Item 1A Risk Factors in our 10K filing with the SEC.
Development and redevelopment
Kennedy Wilson has a number of market rate development, redevelopment and
entitlement pro(cid:102)ects that are underway or are in the planning stages. These initiatives,
if completed, will result in market-rate income producing assets. As of December 31,
2020 we have 1,529 multifamily units, 0.6 million commercial rentable square feet
and 150 hotel rooms we are actively developing. If these pro(cid:102)ects were brought to
completion the estimated share of the Company(cid:317)s total cost would be approximately
(cid:362)1.1 billion, which we expect would be funded through our existing equity, third party
equity, pro(cid:102)ect sales and secured debt financing. This represents total capital over
the life of the pro(cid:102)ects and is not a representation of peak equity and does not take
into account any distributions over the course of the investment. As of December 31,
2020, we have incurred (cid:362)395.0 million of costs to date and expect to spend an
K
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•
•
•
•
•
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
additional (cid:362)696.0 million to develop to completion or complete the entitlement
process on these pro(cid:102)ects. Of the (cid:362)696.0 million of remaining costs to complete we
currently expect (cid:362)334.0 million of it to be funded through cash from us over the life
of the pro(cid:102)ects. When development pro(cid:102)ects are completed they typically move into
our unstabili(cid:140)ed bucket as they undergo lease up post-completion. Clancy (cid:32)uay Phase
3, which was completed in the second quarter of 2020, is now included as part of our
unstabili(cid:140)ed por(cid:127)olio and is expected to be stabili(cid:140)ed during 2021.
In addition to the market rate development and redevelopment pro(cid:102)ects described
above, we have 1,965 affordable and/or age-restricted multifamily units within our
VHH pla(cid:127)orm that we are currently developing or in the process of stabili(cid:140)ing. We
expect to have no cash equity basis in these pro(cid:102)ects at completion due to the use
of property level debt and proceeds from the sale of tax credits. If these pro(cid:102)ects are
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brought to completion we expect to receive (cid:362)21.9 million in cash from paid developer
fees and proceeds from the sale of tax credits.
The scope of these pro(cid:102)ects may also change. The estimated costs and amounts of cash to complete pro(cid:102)ects re(cid:89)ected in the table below represent management(cid:317)s current
expectations and the total costs incurred to date include the land costs of these pro(cid:102)ects.
The figures described in the two preceding paragraphs and in the table below are
budgeted costs and are sub(cid:102)ect to change. There is no certainty that the Company
will develop or redevelop any or all of these potential pro(cid:102)ects and the Company
and its equity partners are under no obligation to complete these pro(cid:102)ects and may
dispose of any such assets a(cid:91)er adding value through the entitlement process. As
these are budgeted figures and are sub(cid:102)ect to change (increase or decrease) due to
a number of factors (some of which are beyond our control), including, that these
pro(cid:102)ects are being developed under construction management contracts with the
general contractors and therefore we and our equity partners could be called upon
to contribute additional capital in the event that actual costs exceed budgeted costs.
The table below describes the market rate development or redevelopment pro(cid:102)ects that the Company is undergoing or considering, and excludes the affordable and/or age-
restricted multifamily units that it is developing in its VHH pla(cid:127)orm and its residential investments.
Location
Ireland(3)
Ireland(3)
ID
ID
Nor California
Ireland(3)
Ireland(3)
Ireland(3)
Ireland(3)
Hawaii
Type
Office
Office
Multifamily
Multifamily
Multifamily
Multifamily
Office
Multifamily
Mixed-(cid:38)se
Hotel
Total
Investment
Kildare(5)
Hanover (cid:32)uay(5)
The Clara(5)
RiverPointe(5)
Status
(cid:38)nder Construction
(cid:38)nder Construction
(cid:38)nder Construction
(cid:38)nder Construction
Santa Rosa Phase II(5)
Planning Received
Coopers Cross(6)
Coopers Cross(6)
Grange(6)
Leisureplex(5)
(cid:38)nder Construction
(cid:38)nder Construction
Planning Received
Planning Received
Kona V
illage Resort(6)
(cid:38)nder Construction
Est.
Completion
Date(1)
2021
2021
2021
2022
2023
2023
2023
2023
2023
2023
If Completed
Current
Commercial
Sq. Ft.
MF (cid:38)nits /
Hotel Rooms
KW Est.
Total Cost(4)
KW Costs
Incurred(4)
KW Est. Costs
to Complete(2)
64,000
69,000
394,000
7,000
20,000
(cid:362) 65
(cid:362) 35
(cid:362) 30
277
89
172
472
287
232
150
40
47
23
65
179
131
73
132
336
1
32
37
5
5
58
64
24
25
110
3
8
10
18
60
121
67
49
107
226
6
(1) The actual completion date for projects is subject to several factors, many of which are not within our control. Accordingly, the projects identified may not be completed when expected, or at all.
(2) Figures shown in this column are an estimate of our remaining costs to develop to completion or to complete the entitlement process, as applicable, as of December 31, 2020. Total remaining costs may be financed with third-party
cash contributions, proceeds from projected sales, and/or debt financing. We expect to fund $334 million of our share of remaining costs to complete with cash over the life of these projects. These figures are budgeted costs and are
subject to change. There is no guarantee that we will be able to secure the project-level debt financing that is assumed in the figures above. If we are unable to secure such financing, the amount of capital we will have to invest to
complete the projects above may significantly increase. Our cost to complete differs from our share total capitalization as the latter includes costs that have already been incurred to date while the former relates to future estimated
costs.
(3) Estimated foreign exchange rates are €0.82 = $1 USD and £0.73 = $1 USD, related to NOI.
(4) Includes land costs.
(5) Included in Consolidated Portfolio Segment.
(6) Included in Co-Investment Portfolio Segment.
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—
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—
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5
5
4
,
0
0
0
1
,
6
7
9
$
,
0
9
1
$
9
5
$
9
6
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Unstabilized and Value Add Capital Expenditure Programs
We currently have 13 assets that comprise 1.3 million commercial square feet and 576 multifamily units that are currently unstabili(cid:140)ed and are undergoing various stages of
lease-up, value-add or development. In order to stabili(cid:140)e these assets we pro(cid:102)ect our share of costs to complete to be (cid:362)38.9 million. The cost to complete this work and the time
frame described is sub(cid:102)ect to many uncertainties that are beyond our control, and the actual costs may be significantly higher than the estimates shown below.
The table below describes assets that are currently unstabili(cid:140)ed:
Property
Location
Old School
Capital Dock
Clancy (cid:32)uay(cid:332)Phase 3
38(cid:358) North
400/430 California
Stockley Park
Maidenhead
The Oaks
V arious
V arious
(cid:38)nited Kingdom(2)
Ireland(2)
Ireland(2)
Northern California
Northern California
Sub total
(cid:38)nited Kingdom(2)
(cid:38)nited Kingdom(2)
Southern California
(cid:38)nited Kingdom(2)
(cid:38)nited Kingdom(2)
Sub total
(cid:36)o(cid:124)a(cid:1140) (cid:21)(cid:59)as(cid:59)(cid:330)(cid:38)(cid:114)
Type
Office
Mixed-(cid:38)se
Multifamily
Multifamily
Office
Office
Office
Office
Retail
Office
KW
Ownership (cid:1143)
(cid:370) of Assets
Commercial
Sq. Ft.
MF (cid:38)nits
Leased (cid:1143)
KW Est. Costs to
Complete(1)
100(cid:1143)
50(cid:1143)
50(cid:1143)
91(cid:1143)
10(cid:1143)
100(cid:1143)
100(cid:1143)
100(cid:1143)
100(cid:1143)
100(cid:1143)
1
1
1
1
1
1
1
1
3
2
21,000
27,000
7,000
263,000
54,000
65,000
357,000
184,000
281,000
190
266
120
(cid:332)
67 (cid:1143)
54
38
73
88
%
64
34
%
%
(cid:362) 0.5
3.1
1.8
1.8
2.1
9
.3
0.2
0.1
11.3
3.3
14.7
.6
.9
3
Note: The table above excludes fund assets and one asset expected to sell, totaling 0.6 million commercial sq. ft., and KW Gross Asset Value of $81.4 million.
(1) Figures shown in this column are an estimate of KW’s remaining costs to develop to completion or to complete the entitlement process, as applicable, as of December 31, 2020. Total remaining costs may be financed with third-party
cash contributions, proceeds from projected sales, and/or debt financing. These figures are budgeted costs and are subject to change. There is no guarantee that the Company will be able to secure the project-level debt financing that
is assumed in the figures above. If the Company is unable to secure such financing, the amount of capital that the Company will have to invest to complete the projects above may significantly increase.
(2) Estimated foreign exchange rates are €0.82 = $1 USD and £0.73 = $1 USD, related to NOI.
0
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In addition to our development, redevelopment and stabili(cid:140)ation initiatives, we
regularly implement a value-add approach to our consolidated and unconsolidated
investments, which includes rehabbing properties and adding or updating property
amenities. The capital required to implement these value-add initiatives is typically
funded with capital calls, refinancing or supplemental financings at the property level.
We are not required to make these investments, but they are a key driver in our ability
to increase net operating income at our properties post acquisition.
Liquidating Residential Development Projects
We have liquidating residential development pro(cid:102)ects primarily in Hawaii and the
Western (cid:38)nited States where we and our equity partners are developing single family
homes and condos that will be sold. We expect to incur approximately (cid:362)375.8 million in
construction costs over the life of these pro(cid:102)ects, which will be funded by cash from us,
cash received from selling the homes and condos, third party equity or debt financing.
Share Repurchase Plan
On March 20, 2018, our Board of Directors approved the repurchase of up to (cid:362)250
million of the Company(cid:317)s common stock. On November 3, 2020, the Company(cid:317)s
board of directors authori(cid:140)ed an expansion of its existing (cid:362)250 million share
repurchase plan to (cid:362)500 million. Repurchases under the program may be made in
the open market, in privately negotiated transactions, through the net settlement of
the Company(cid:317)s restricted stock grants or otherwise, with the amount and timing of
repurchases dependent on market conditions and sub(cid:102)ect to the company(cid:317)s discretion.
The program does not obligate the Company to repurchase any specific number
of shares and, sub(cid:102)ect to compliance with applicable laws, may be suspended or
terminated at any time without prior notice. As of December 31, 2020, we had (cid:362)256.7
million remaining under the plan for stock repurchases. Please see the section titled
“Purchases of Equity Securities by the Company” in Part II of this annual report on Form
10-K for additional information.
Cash Flows
The following table summari(cid:140)es the cash provided by or used in our operating,
investing and financing activities for the years ended December 31, 2020, 2019 and
2018:
(Dollars in millions)
Net cash (used in) provided by operating activities
Net cash provided by investing activities
Net cash used in financing activities
Year ended December 31,
(cid:362) (12.6)
590.8
(206.6)
(cid:362) (19.5)
182.3
(85.8)
(cid:362) 93.1
593.1
(528.8)
Operating
Our cash (cid:89)ows from operating activities are primarily dependent upon operations
from consolidated properties, the operating distributions and fees from our Co-
Investment Pla(cid:127)orm, general and administrative costs, compensation and interest
expense payments. For the years ended December 31, 2020, 2019 and 2018,
substantially all of the cash (cid:89)ows used by operations of (cid:362)12.6 million and (cid:362)19.5
million and cash (cid:89)ow from operations (cid:362)93.1 million, respectively, were generated
from rental collections from consolidated assets and operating distributions from Co-
Investments. The (cid:89)uctuations in cash (cid:89)ow from operations has been driven by the
timing and amounts of discretionary compensation.
We have experienced a decline in cash (cid:89)ows from rental properties as we have been
a net seller of consolidated assets and used those proceeds to fund development
initiatives and value add capital expenditures which has also led to a temporary
decrease in operating cash (cid:89)ows. At the same time, we have been growing our third
party fee bearing capital which has shi(cid:91)ed to more assets in our Co-Investment
por(cid:127)olio. Going forward with the completion of construction, stabili(cid:140)ation of
development assets and greater fee bearing capital we should have increases in our
cash (cid:89)ow from operations.
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2
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2
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$
8
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0
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0
2
0
1
9
2
0
1
8
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Investing
Our cash (cid:89)ows from investing activities are generally comprised of cash used to
fund property acquisitions, investments in unconsolidated investments, capital
expenditures, purchases of loans secured by real estate, as well as cash received from
property sales and return of capital from our co-investments.
million to unconsolidated investments which mainly related to multifamily and
office properties in the Western (cid:38)nited States and (cid:38)nited Kingdom and capital calls
associated with development pro(cid:102)ects in Dublin, Ireland. We received (cid:362)115.0 million
from distributions on unconsolidated investments from sales of multifamily assets in
Western (cid:38)nited States and refinancings and resyndications within our VHH por(cid:127)olio.
Net cash provided by investing activities totaled (cid:362)590.8 million for the year ended
December 31, 2020. During the current period we spent (cid:362)70.1 million on acquisitions
of consolidated real estate and (cid:362)194.1 million on capital expenditures on consolidated
assets, as well as continued investments in our development properties and value add
properties. We received (cid:362)827.8 million from the sale of industrial assets in the (cid:38)nited
Kingdom to the Industrial JV, Baggot Pla(cid:140)a in Dublin, Club Palisades multifamily
property in the Western (cid:38)nited States and non-core assets in Europe. Issuance of
new loan investments were (cid:362)88.6 million during the year ended December 31, 2020
as our debt pla(cid:127)orm has grown during the year. We had (cid:362)34.1 million of collections
on loans primarily from the sale of a loan in Dublin secured by a multifamily property.
We received (cid:362)177.5 million in investing distributions from our co-investments
primarily from the sale of an additional 30(cid:1143) interest of three multifamily properties
to A(cid:42)A as part of our separate account pla(cid:127)orm. We also contributed (cid:362)111.6 million
to unconsolidated investments that were primarily used to fund our share of capital
calls on our commingled funds and investments undergoing development. The
settlement of foreign currency derivatives netted (cid:362)15.5 million during the year ended
December 31, 2020.
Net cash provided by investing activities totaled (cid:362)182.3 million for the year ended
December 31, 2019. During the year ended December 31, 2019, we spent (cid:362)210.9
million on acquisitions of consolidated real estate and (cid:362)191.1 million on capital
expenditures on consolidated assets, our development properties and value add
properties. We received (cid:362)701.0 million from the sale of Rit(cid:140) Carlton Lake Tahoe,
Fairmont and Portmarnock hotels and non-core retail and commercial properties
in the Western (cid:38)nited States and (cid:38)nited Kingdom. We also contributed (cid:362)266.0
Net cash provided by investing activities totaled (cid:362)593.1 million for the year ended
December 31, 2018. During the year ended December 31, 2018, we had (cid:362)571.8
million of purchases and additions to real estate primarily for additions to real estate
in our Mountain States multifamily por(cid:127)olio and a multifamily property in Cork,
Ireland and (cid:362)396.1 million contributions to unconsolidated investments which
mainly related to our new A(cid:42)A (cid:102)oint venture pla(cid:127)orm and to fund new investments
and capital expenditures which included acquisitions in Fund VI. The cash used in
the aforementioned investing activities was offset by receipt of (cid:362)1,386.1 million,
mainly from sales of multifamily properties in the Western (cid:38)nited States (which
were then tax deferred and exchanged into higher quality multifamily properties in
the Western (cid:38)nited States), non-core commercial properties in the (cid:38)nited Kingdom,
Ireland and Italy as well as assets into the A(cid:42)A (cid:102)oint venture pla(cid:127)orm. On our Capital
Dock development, we spent (cid:362)29.1 million and received (cid:362)81.0 million for reaching
completion milestones. We received (cid:362)63.7 million in investing distributions on
unconsolidated investments primarily relating to resyndications in our VHH por(cid:127)olio
and property sales. The sale of our research subsidiary, Meyers Research, generated
(cid:362)43.4 million in proceeds. We also received (cid:362)7.4 million from the liquidation of our
marketable securities por(cid:127)olio.
Financing
Our net cash related to financing activities is generally impacted by capital-
raising activities net of dividends and distributions paid to common and preferred
shareholders and noncontrolling interests as well as financing activities for
consolidated real estate investments. Net cash used in financing activities totaled
0
2
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(cid:362)206.6 million for the year ended December 31, 2020. We received proceeds of
(cid:362)296.4 million from mortgage loans to finance property acquisitions and to refinance
existing investments, which were offset by the repayment of (cid:362)487.1 million of
investment debt mainly driven by repayment of mortgages on sold consolidated
properties. During the year ended December 31, 2020, we borrowed (cid:362)200.0 million
on our credit facility. Distributions of (cid:362)18.9 million were paid to noncontrolling
interest holders primarily as a result of asset sales and cash received from financings.
During the year ended December 31, 2020, we paid (cid:362)126.1 million of dividends to our
common stockholders and (cid:362)13.6 million of dividends to our preferred shareholders.
We also returned (cid:362)57.4 million to shareholders through share repurchases as part of
our share repurchase plan discussed above.
Net cash used in financing activities totaled (cid:362)85.8 million for the year ended
December 31, 2019. We received proceeds of (cid:362)295.2 million from the issuance of
Preferred Stock and (cid:362)488.6 million from mortgage loans to finance and refinance
consolidated property acquisitions, which were offset by the repayment of (cid:362)391.4
million of investment debt mainly driven by repayment of mortgages on sold
consolidated properties. During the year ended December 31, 2019, we borrowed
(cid:362)125.0 million on our credit facility and repaid (cid:362)200.0 million (as of December 31,
2019 our credit facility is undrawn). Distributions of (cid:362)264.0 million were paid to
noncontrolling interest holders primarily as a result of asset sales and cash received
from financings. During the year ended December 31, 2019, we paid (cid:362)114.9 million
of dividends to our common stockholders and (cid:362)2.6 million of dividends to our
preferred shareholders. We also returned (cid:362)20.7 million to shareholders through share
repurchases as part of our share repurchase plan discussed above.
Net cash used in financing activities totaled (cid:362)528.8 million for the year ended
December 31, 2018. We received proceeds of (cid:362)246.6 million from the issuance
of additional 2024 Notes and (cid:362)725.0 million from mortgage loans to finance and
refinance consolidated property acquisitions, which were offset by the repayment of
(cid:362)866.8 million of investment debt mainly driven by repayment of mortgages on sold
consolidated properties. During the year ended December 31, 2018, we borrowed
(cid:362)225.0 million on our credit facility and repaid (cid:362)450.0 million (as of December 31,
2018 our credit facility is undrawn). Distributions of (cid:362)116.0 million were paid to
noncontrolling interest holders primarily as a result of asset sales and cash received
from financings. During the year December 31, 2018, we paid dividends to our
common stockholders of (cid:362)111.2 million which is an increase over prior periods due
to an increase in share count as part of the KWE Transaction as well as an increase in
the dividend per share amount as compared to prior periods. We also returned (cid:362)177.9
million to shareholders through share repurchases as part of our share repurchase plan
discussed above.
Contractual Obligations and Commercial Commitments
At December 31, 2020, Kennedy Wilson(cid:317)s contractual cash obligations, including debt,
lines of credit, operating leases and ground leases included the following:
P ayments due b y p eriod
(Dollars in millions)
Contractual obligations
Borrowings:(1)(4)
(cid:1354)Mortgage debt(2)(4)
(cid:1354)Senior notes(3)(4)
(cid:1354)KWE unsecured bonds(4)(5)
(cid:1354)Total borrowings
(cid:1354)Operating leases
(cid:1354)Ground leases(8)
Less than
Total
1 year 1(cid:331)3 years 4(cid:331)5 years
A(cid:91)er 5
years
(cid:362) 683.6
(cid:362) 2,597.8
1,150.0
1,176.9
5,124.7
3.5
24.8
(cid:362) 47.4 (cid:362) 965.9 (cid:362) 900.9
1,150.0
504.8
672.1
47.4
1.3
0.2
2,820.7
1.9
0.4
1,573.0
0.3
0.4
683.6
23.8
(cid:36)o(cid:124)a(cid:1140) con(cid:124)(cid:117)ac(cid:124)ua(cid:1140) cash ob(cid:1140)i(cid:93)ations(
5
.0
4
.9
2
.0
1
.7
7
.4
(1) See Notes 7–9 of our Notes to Consolidated Financial Statements. Figures do not include scheduled interest
payments. Assuming each debt obligation is held until maturity, we estimate that we will make the following
interest payments: Less than 1 year—$192.9 million; 1–3 years—$447.4 million; 4–5 years—$110.5 million;
After 5 years—$39.8 million. The interest payments on variable rate debt have been calculated at the interest
rate in effect as of December 31, 2020.
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7
)
$
,
1
5
3
$
8
$
,
8
2
3
$
,
5
7
3
$
0
7
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(2) Excludes $4.5 million net unamortized debt premium on mortgage debt.
(3) Excludes $3.1 million unamortized debt discount on senior notes.
(4) Excludes $29.2 million of unamortized loan fees.
(5) Excludes $2.8 million net unamortized discount on KWE unsecured bonds.
(6) Kennedy Wilson’s share of contractual obligations, (excluding amounts that are attributable to noncontrolling
interests), including debt, lines of credit, operating leases and ground leases, consisted of the following: Less than
1 year—$46.2 million; 1–3 years—$2,800.2 million; 4–5 years—$1,536.7 million; After 5 years—$695.0 million.
(7) Table above excludes $97.4 million unfulfilled capital commitments to our unconsolidated investments.
(8) Ground leases on consolidated assets. Amounts are undiscounted and have leases that expire as far out as
2258.
Indebtedness and Related Covenants
The following describes certain indebtedness and related covenants.
Senior Notes Payable
In March 2014, Kennedy-Wilson, Inc. (“KWI”), completed a public offering of (cid:362)300.0
million aggregate principal amount of 5.875(cid:1143) Senior Notes due 2024 (the “2024
Notes”), for approximately (cid:362)290.7 million, net of discount and estimated offering
expenses. The 2024 Notes were issued pursuant to an indenture dated as of March
25, 2014, by and among Kennedy-Wilson, Inc., as issuer, and Wilmington Trust
National Association, as trustee, as supplemented by a supplemental indenture, dated
as of March 25, 2014, by and between Kennedy-Wilson, Inc. as issuer, Kennedy-
Wilson Holdings, Inc., as parent guarantor, certain subsidiaries of the issuer, as
subsidiary guarantors, and Wilmington Trust National Association, as trustee (the
indenture, as so supplemented, the “2024 Indenture”). The issuer(cid:317)s obligations
under the 2024 Notes are fully and unconditionally guaranteed by Kennedy-Wilson
Holdings, Inc. and the subsidiary guarantors. At any time prior to April 1, 2019, the
issuer may redeem the 2024 Notes, in whole or in part, at a redemption price equal
to 100(cid:1143) of their principal amount, plus an applicable “make-whole” premium and
accrued and unpaid interest, if any, to the redemption date. At any time and from time
to time on or a(cid:91)er April 1, 2019, the issuer may redeem the 2024 Notes, in whole
or in part, at the redemption price specified in the 2024 Indenture, plus accrued and
unpaid interest, if any, to the redemption date. Interest on the 2024 Notes accrues
at a rate of 5.875(cid:1143) per annum and is payable semi-annually in arrears on April 1
and October 1 of each year, commencing on October 1, 2014. The 2024 Notes will
mature on April 1, 2024. In November 2014, August 2016 and March 2018, we
completed additional public offerings of (cid:362)350 million, (cid:362)250 million and (cid:362)250 million,
respectively, aggregate principal amounts of 5.875(cid:1143) Senior Notes, due 2024 (the
“Additional Notes”). The Additional Notes have substantially identical terms as the
2024 Notes described above, and are treated as a single series with the 2024 Notes
under such 2024 Indenture. The Additional Notes were issued and sold at public
offering prices of 100.0(cid:1143) in November 2014, 100.0(cid:1143) in August 2016 and 98.625(cid:1143) in
March 2018 of their principal amount, plus accrued interest. The amount of the 2024
Notes included in the accompanying consolidated balance sheets was (cid:362)1.1 billion at
December 31, 2020. Subsequent to December 31, 2020, the Company repurchased
a total of approximately (cid:362)577 million of the 2024 Notes through a tender offer using
a portion of the proceeds from the 2029 Notes and 2031 Notes as described below.
The Company announced that it would redeem an additional (cid:362)373 million of the 2024
Notes with the remaining proceeds from the 2029 Notes and 2031 Notes and cash on
its balance sheet.
In February 2021, KWI, completed a public offering of (cid:362)500.0 million aggregate
principal amount of its 4.750(cid:1143) Senior Notes due 2029 (the “2029 Notes”) and (cid:362)500.0
million aggregate principal amount of its 5.000(cid:1143) Senior Notes due 2031 (the “2031
Notes,” and together with the 2029 Notes, the “Notes,” and together with the 2024
Notes and the 2029 Notes, the “KWI Notes”). The Notes were issued pursuant
to a base indenture, dated as of March 25, 2014, between KWI and the Trustee,
as supplemented by a supplemental indenture for each series of Notes (each, a
“Supplemental Indenture,” and each Supplemental Indenture, together with the Base
Indenture, an “Indenture”), dated as of February 11, 2021, among KWI, the guarantors
(including Kennedy-Wilson Holdings, Inc.) and the Trustee. KWI(cid:317)s obligations under
the Notes are fully and unconditionally guaranteed by Kennedy-Wilson Holdings,
Inc., and the subsidiary guarantors. At any time prior to March 1, 2024 (in the case of
0
2
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the 2029 Notes) or March 1, 2026 (in the case of the 2031 Notes), KWI may redeem
the Notes of either series, in whole or in part, at a redemption price equal to 100(cid:1143)
of their principal amount, plus an applicable “make-whole” premium and accrued and
unpaid interest, if any, to the redemption date. At any time and from time to time on
or a(cid:91)er March 1, 2024 (in the case of the 2029 Notes) or March 1, 2026 (in the case
of the 2031 Notes), KWI may redeem the Notes of either series, in whole or in part,
at redemption prices specified in the applicable Indenture, plus accrued and unpaid
interest, if any, to, but excluding, the redemption date. Interest on the Notes accrues
at a rate of 4.750(cid:1143) per annum (in the case of the 2029 Notes) or 5.000(cid:1143) (in the case
of the 2031 Notes) and is payable semi-annually in arrears on March 1 and September
1 of each year commencing on September 1, 2021. The Notes will mature on March
1, 2029 (in the case of the 2029 Notes) or March 1, 2031 (in the case of the 2031
Notes), unless earlier redeemed or repurchased. In connection with the issuance of
the Notes, the Company announced that it intends to use the proceeds from the
Notes to repurchase or redeem a total of (cid:362)1 billion aggregate principal amount of the
2024 Notes.
KWE Senior Notes Payable
KWE has bonds outstanding (“KWE Bonds”) of approximately (cid:362)504.7 million (based
on December 31, 2020 rates) ((cid:364)369.8 million) in 3.95(cid:1143) fixed-rate senior unsecured
bonds due 2022. KWE effectively reduced the interest rate to 3.35(cid:1143) as a result of
it entering into swap arrangements to convert 50(cid:1143) of the proceeds into Euros. On
October 7, 2020, KWE launched a cash tender offer to repurchase a portion of the
outstanding balance of the KWE Bonds (the “Tender Offer”). KWE purchased (cid:364)130.2
million ((cid:362)177.7 million based on December 31, 2020 rates) in aggregate nominal
amount of the KWE Bonds, or 26.04(cid:1143) of the (cid:364)500.0 million aggregate nominal
amount of the KWE Bonds outstanding in Tender Offer. The purchase price for the
KWE Bonds validly tendered and accepted for purchase pursuant to the Tender Offer
was a price equal to 101(cid:1143) of the nominal amount of the relevant KWE Bonds, plus
accrued and unpaid interest to, but not including, October 22, 2020. The total Tender
Offer consideration was (cid:364)133.1 million, including accrued and unpaid interest and was
settled on October 22, 2020.
KWE also established a (cid:364)2.0 billion (approximately (cid:362)2.7 billion based on
December 31, 2020 rates) Euro Medium Term Note Programme (“EMTN”). (cid:38)nder
the EMTN Programme, KWE may issue, from time to time, up to (cid:364)2.0 billion of
various types of debt securities in certain markets and currencies. KWE has drawn
down under its EMTN Programme, with issuances of senior unsecured notes for an
aggregate principal amount of approximately (cid:362)672.4 million (based on December 31,
2020 rates) ((cid:360)550 million) (the “KWE Notes”). The KWE Notes were issued at a
discount and have a carrying value of (cid:362)669.7 million, have an annual fixed coupon of
3.25(cid:1143), and mature in 2025. The KWE Notes rank pari passu with the KWE Bonds,
and are sub(cid:102)ect to the same restrictive covenants.
Borrowings Under Line of Credit
Kennedy-Wilson, Inc. (the “Borrower”), a wholly-owned subsidiary of Kennedy-
Wilson Holdings, Inc. (the “Company”), KWH and certain subsidiaries of the Company
(the “Subsidiary Guarantors”) on March 25, 2020 extended its existing (cid:362)500 million
revolving line of credit (“Second A&R Facility”). Loans under the Second A&R Facility
bear interest at a rate equal to LIBOR plus between 1.75(cid:1143) and 2.50(cid:1143), depending on
the consolidated leverage ratio as of the applicable measurement date. The Second
A&R Facility has a maturity date of March 25, 2024. Sub(cid:102)ect to certain conditions
precedent and at Kennedy-Wilson, Inc.(cid:317)s (the “Borrower”) option, the maturity date of
the Second A&R Facility may be extended by one year.
The Company has (cid:362)200.0 million outstanding on the A&R Facility on December 31,
2020 with (cid:362)300.0 million available to be drawn under the revolving credit facility.
Subsequent to December 31, 2020, the Company repaid (cid:362)100.0 million on our
revolving credit facility and now have (cid:362)400.0 million available to draw.
Debt Covenants
The Second A&R Facility and the indentures governing the KWI Notes contain
numerous restrictive covenants that, among other things, limit Kennedy Wilson(cid:317)s
and certain of its subsidiaries(cid:317) ability to incur additional indebtedness, pay dividends
or make distributions to stockholders, repurchase capital stock or debt, make
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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
investments, sell assets or subsidiary stock, create or permit liens on assets, engage
in transactions with affiliates, enter into sale/leaseback transactions, issue subsidiary
equity and enter into consolidations or mergers. The Second A&R Revolving Facility
requires Kennedy Wilson to maintain a minimum tangible net worth and a specified
amount of cash and cash equivalents.
The Second A&R Facility has certain covenants as defined within its Second Amended
and Restated Credit Agreement, dated as of March 25, 2020 (the “Credit Agreement”)
that, among other things, limit the Company and certain of its subsidiaries(cid:317) ability
to incur additional indebtedness, repurchase capital stock or debt, sell assets or
subsidiary stock, create or permit liens, engage in transactions with affiliates, enter
into sale/leaseback transactions, issue subsidiary equity and enter into consolidations
or mergers. The Credit Agreement requires the Company to maintain (i) a maximum
consolidated leverage ratio (as defined in the Credit Agreement) of not greater than
65(cid:1143), measured as of the last day of each fiscal quarter, (ii) a minimum fixed charge
coverage ratio (as defined in the Credit Agreement) of not less than 1.70 to 1.00,
measured as of the last day of each fiscal quarter for the period of four full fiscal
quarters then ended, (iii) a minimum consolidated tangible net worth equal to or
greater than the sum of (cid:362)1,700,000,000 plus an amount equal to fi(cid:91)y percent (50(cid:1143))
of net equity proceeds received by the Company a(cid:91)er the date of the most recent
financial statements that are available as of the March 25, 2020, measured as of the
last day of each fiscal quarter, (iv) a maximum recourse leverage ratio (as defined in
the Credit Agreement) of not greater than an amount equal to consolidated tangible
net worth as of the measurement date multiplied by 1.5, measured as of the last day
of each fiscal quarter, (v) a maximum secured recourse leverage ratio (as defined in
the Credit Agreement) of not greater than an amount equal to 3.5(cid:1143) of consolidated
total asset value (as defined in the Credit Agreement) and (cid:362)299,000,000, (vi) a
maximum ad(cid:102)usted secured leverage ratio (as defined in the Credit Agreement) of not
greater than 55(cid:1143), measured as of the last day of each fiscal quarter, and (vii) liquidity
(as defined in the Credit Agreement) of at least (cid:362)75.0 million. As of December 31,
2020, the Company was in compliance with these covenants. The obligations of the
Borrower pursuant to the Credit Agreement are guaranteed by the Company and
certain wholly-owned subsidiaries of the Company.
The indentures governing the KWI Notes limit the ability of Kennedy Wilson and
its restricted subsidiaries to incur additional indebtedness if, on the date of such
incurrence and a(cid:91)er giving effect to the new indebtedness, the maximum balance
sheet leverage ratio (as defined in the indenture) is greater than 1.50 to 1.00.
This ratio is measured at the time of incurrence of additional indebtedness. As of
December 31, 2020, the Company was in compliance with these covenants.
The KWE Bonds and KWE Notes require KWE to maintain (i) consolidated net
indebtedness (as defined in the trust deed for the notes) of no more than 60(cid:1143) of
the total asset value(cid:312) (ii) consolidated secured indebtedness (less cash and cash
equivalents) of no more than 50(cid:1143) of total asset value(cid:312) (iii) an interest coverage ratio
of at least 1.5 to 1.0, and (iv) unencumbered assets of no less than 125(cid:1143) of the
unsecured indebtedness (less cash & cash equivalents). The covenants associated
with KWE Bonds and KWE Notes are not an obligation of KWH and these amounts
are presented as a component of our investment debt as it is an unsecured obligation
relating to an underlying investment of ours. During the second quarter of 2020,
we contributed (cid:362)56.4 million to KWE which holds the KWE Bonds and KWE Notes
in order ensure that we maintain headroom on covenants associated with the KWE
Bonds and KWE Notes. This amount is included within the (cid:362)640.3 million of foreign
cash and is allowed to be used by KWE and other wholly-owned foreign subsidiaries
within KWE for certain permitted investments. As of December 31, 2020, the
Company was in compliance with these covenants.
In addition, loan agreements that govern the Company(cid:317)s property-level non-recourse
financings that are secured by its properties may contain operational and financial
covenants, including but not limited to, debt yield related covenants and debt service
coverage ratio covenants and, with respect to mortgages secured by certain properties
in Europe, loan-to-value ratio covenants. Property-level non-recourse financings with
such loan-to-value covenants require that the underlying properties are valued on
a periodic basis (at least annually). The failure by the Company to comply with such
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covenants and/or secure waivers from lenders could result in defaults under these
instruments. In addition, if the Company defaults under a mortgage loan and/or such
loan is accelerated by the lender, it may automatically be in default under any of its
property and corporate unsecured loans that contain cross-default and/or cross-
acceleration provisions. Please also see the section titled “COVID-19 Impact” above
and Part I. Item 1A Risk Factors in our 10K filing with the SEC. As of December 31,
2020, the Company received waivers on certain debt covenants in loan agreements
governing a total of (cid:362)266.9 million or 10(cid:1143) of our consolidated mortgage balance.
These mortgages are secured by certain retail and hospitality assets in the (cid:38)nited
Kingdom and Ireland. All of these loans are non-recourse to the Company and the
waivers are through March 31, 2021 and beyond and typically cover interest coverage
and loan-to-value covenants. The Company expects to be in compliance with these
covenants subsequent to December 31, 2020, or will seek additional waivers and/
or extensions as, and if needed. In the event the Company is required to seek such
additional waivers and/or extensions, the Company is currently confident that it will
be able to secure the same. We also received covenant waivers on (cid:362)169.8 million of
mortgages within our Co-Investment por(cid:127)olio (our share of which is (cid:362)58.0 million and
our equity in the properties securing the mortgage is (cid:362)14.3 million). The Company
is current on all payments (principal and interest) for its property-level mortgages
including the loans discussed above.
As of December 31, 2020, the Company was in compliance with or had received
waivers on property-level mortgages on all covenant calculations a(cid:91)er taking into
consideration the waivers discussed above.
Off-Balance Sheet Arrangements
Guarantees
We have provided guarantees associated with loans secured by consolidated
assets. At December 31, 2020, the maximum potential amount of future payments
(undiscounted) we could be required to make under the guarantees was approximately
(cid:362)22.5 million at December 31, 2020. The guarantees expire through 2025 and our
performance under the guarantees would be required to the extent there is a shor(cid:127)all
in liquidation between the principal amount of the loan and the net sale proceeds
of the applicable properties. If we were to become obligated to perform on these
guarantees, it could have an adverse effect on our financial condition.
As of December 31, 2020, we have unfulfilled capital commitments totaling (cid:362)97.4
million to our unconsolidated investments. In addition to the unfunded capital
commitments on its (cid:102)oint venture investments, the Company has (cid:362)155.9 million
of equity commitments relating on consolidated and unconsolidated development
pro(cid:102)ects. As we identify investment opportunities in the future, we may be called upon
to contribute additional capital to unconsolidated investments in satisfaction of our
capital commitment obligations.
Non-Recourse Carve Out Guarantees
Most of our real estate properties within our equity partnerships are encumbered by
traditional non-recourse debt obligations. In connection with most of these loans,
however, we entered into certain “non-recourse carve out” guarantees, which provide
for the loans to become partially or fully recourse against us if certain triggering
events occur. Although these events are different for each guarantee, some of the
common events include:
the special purpose property-owning subsidiary(cid:317)s filing a voluntary petition for
bankruptcy(cid:312)
the special purpose property-owning subsidiary(cid:317)s failure to maintain its status as a
special purpose entity(cid:312) and
sub(cid:102)ect to certain conditions, the special purpose property-owning subsidiary(cid:317)s
failure to obtain lender(cid:317)s written consent prior to any subordinate financing or
other voluntary lien encumbering the associated property.
In the event that any of these triggering events occur and the loans become partially
or fully recourse against us, our business, financial condition, results of operations and
common stock price could be materially adversely affected.
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•
•
•
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
In addition, other items that are customarily recourse to a non-recourse carve out
guarantor include, but are not limited to, the payment of real property taxes, liens
which are senior to the mortgage loan and outstanding security deposits.
Impact of Inflation and Changing Prices
In(cid:89)ation has not had a significant impact on the results of operations of our company
in recent years.
Our exposure to market risk from changing prices consists primarily of (cid:89)uctuations
in rental rates of commercial and multifamily properties, market interest rates
on investment mortgages and debt obligations and real estate property values.
Rental rate increases are dependent upon market conditions and the competitive
environments in the respective locations of the properties. To the extent that we
engage in development activities, we may have exposure to changing prices in
materials or cost of labor. The revenues of the investment management operations
with respect to rental properties are highly dependent upon the aggregate rents of the
properties managed, which are affected by rental rates and building occupancy rates.
Employee compensation is the principal cost element of investment management.
Qualitative and Quantitative Disclosures about Market Risk
Our primary market risk exposure relates to changes in interest rates in connection
with our short-term borrowings, some of which bear interest at variable rates
based on the lender(cid:317)s base rate, prime rate, E(cid:38)RIBOR, GBP LIBOR, or LIBOR plus
an applicable borrowing margin. These borrowings do not give rise to a significant
interest rate risk because they have short maturities. However, the amount of income
or loss we recogni(cid:140)e for unconsolidated (cid:102)oint ventures or consolidated interest
expense from property level debt may be impacted by changes in interest rates. Our
exposure to market risk also consists of foreign currency exchange rate (cid:89)uctuations
related to our international operations.
Interest Rate Risk
We have established an interest rate management policy, which attempts to minimi(cid:140)e
our overall cost of debt while taking into consideration the earnings implications
associated with the volatility of short-term interest rates. As part of this policy,
we have elected to maintain a combination of variable and fixed rate debt. As of
December 31, 2020, 83(cid:1143) of our consolidated debt is fixed rate, 6(cid:1143) is (cid:89)oating rate
with interest caps and 11(cid:1143) is (cid:89)oating rate without interest caps.
We hold variable rate debt on some of our consolidated properties that are sub(cid:102)ect
to interest rate (cid:89)uctuations. In order to mitigate some of the risk associated with
increasing interest rates we have purchased interest rate caps that limit the amount
that interest expense can increase with rate increases. However, some of our debt
is uncapped and the mortgages that do have interest caps are subj ect to increased
interest expense until rates hit the level of caps that have been purchased. If there
was a 100-basis point increase or decrease, we would have a (cid:362)22.4 million increase
in interest expense or (cid:362)2.8 million in interest expense savings during 2020 on our
current consolidated mortgages. The weighted average strike price on caps and
maturity of Kennedy Wilson(cid:317)s variable rate mortgages is 1.66(cid:1143) and approximately
2.3 years, respectively, as of December 31, 2020.
The table below represents contractual balances of our financial instruments at
the expected maturity dates as well as the fair value as of December 31, 2020. The
weighted average interest rate for the various assets and liabilities presented are
actual as of December 31, 2020. We closely monitor the (cid:89)uctuation in interest rates,
and if rates were to increase significantly, we believe that we would be able to either
hedge the change in the interest rate or refinance the loans with fixed interest rate
debt. All instruments included in this analysis are non-trading.
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(Dollars in millions)
Interest rate sensitive assets
Cash equivalents
Average interest rate
Fixed rate receivables
Average interest rate(1)
V ariable rate receivables
Average interest rate
Total
Weighted average interest rate(1)
Interest rate sensitive liabilities
V ariable rate borrowings
Average interest rate
Fixed rate borrowings
Average interest rate
Total
2021
2022
2023
2024
2025
Therea(cid:91)er
Total
Principal Maturing in:
Fair Value
December 31, 2020
(cid:362)
965.1
(cid:362) 965.1
(cid:362) 965.1
(cid:362)
(cid:362)
0.01 (cid:1143)
9.8
5.00 (cid:1143)
21.8
3.94 (cid:1143)
(cid:1143)
(cid:1143)
7.4
7.45 (cid:1143)
(cid:1143)
8.3
6.19 (cid:1143)
44.4
7.34 (cid:1143)
(cid:362) 996.7
(cid:362)
7.4
(cid:362) 52.7
0.12 (cid:1143)
7.45 (cid:1143)
6.22 (cid:1143)
(cid:362) 220.5
(cid:362) 303.1
(cid:362) 162.0
4.95 (cid:1143)
15.7
4.29 (cid:1143)
1.95 (cid:1143)
518.1
3.97 (cid:1143)
2.98 (cid:1143)
257.6
3.11 (cid:1143)
(cid:362)
(cid:362)
(cid:362)
(cid:1143)
1.0
5.00 (cid:1143)
(cid:1143)
1.0
5.00 (cid:1143)
43.1
3.02 (cid:1143)
1,305.2
5.63 (cid:1143)
(cid:362)
(cid:362)
(cid:362)
(cid:1143)
8.8
(cid:1143)
(cid:1143)
8.8
(cid:1143)
77.8
3.14 (cid:1143)
1,216.1
3.43 (cid:1143)
(cid:362)
(cid:362)
(cid:362)
(cid:1143)
4.9
6.25 (cid:1143)
0.8
(cid:1143)
5.7
5.37 (cid:1143)
89.2
1.73 (cid:1143)
916.3
3.80 (cid:1143)
0.01 (cid:1143)
32.8
6.28 (cid:1143)
74.4
6.33 (cid:1143)
(cid:362) 1,072.3
1.74 (cid:1143)
(cid:362)
895.7
3.01 (cid:1143)
4,229.0
4.24 (cid:1143)
(cid:362) 236.2
(cid:362) 821.2
(cid:362) 419.6
(cid:362) 1,348.3
(cid:362) 1,293.9
(cid:362) 1,005.5
(cid:362) 5,124.7
32.8
74.4
(cid:362) 1,072.3
(cid:362) 813.3
4,096.0
(cid:362) 4,909.3
Weighted average interest rate
4.91 (cid:1143)
3.22 (cid:1143)
3.06 (cid:1143)
5.55 (cid:1143)
3.42 (cid:1143)
3.61 (cid:1143)
4.03 (cid:1143)
(1) Interest rate sensitive assets’ weighted average interest rates are exclusive of non-performing receivables.
Currency Risk—Foreign Currencies
The financial statements of Kennedy Wilson(cid:317)s subsidiaries located outside the (cid:38)nited
States are measured using the local currency as this is their functional currency. The
assets and liabilities of these subsidiaries are translated at the rates of exchange
at the balance sheet date and income and expenses are translated at the average
monthly rate. The foreign currencies include the euro and the British pound sterling.
Cumulative translation ad(cid:102)ustments, to the extent not included in cumulative net
income, are included in the consolidated statement of equity as a component of
accumulated other comprehensive income. Currency translation gains and losses and
currency derivative gains and losses will remain in other comprehensive income unless
and until the Company substantially liquidates underlying investments.
Approximately 46(cid:1143) of our investment account is invested through our foreign
pla(cid:127)orms in their local currencies. Investment level debt is generally incurred in
local currencies and therefore we consider our equity investment as the appropriate
exposure to evaluate for hedging purposes. Additionally, the costs to operate these
businesses, such as compensation, overhead and interest expense are incurred
in local currencies. We typically do not hedge future operations or cash (cid:89)ows of
operations denominated in foreign currencies, which may have a significant impact
on the results of our operations for both the investment and services segments. In
order to manage the effect of these (cid:89)uctuations, we generally hedge our book equity
exposure to foreign currencies through currency forward contracts and options. As
of December 31, 2020 we have hedged 95(cid:1143) of the gross asset carrying value of our
euro denominated investments and 87(cid:1143) of the gross asset carrying value of our GBP
denominated investments.
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—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Our service businesses typically do not require much capital, so foreign currency
translation and derivative activity primarily relates to the investments segment as that
has greater balance sheet exposure to foreign currency (cid:89)uctuations.
Hotel—hotel expenses consists of expenses of our consolidated hotel investments,
including items such as property taxes, insurance, maintenance and repairs, utilities,
supplies, salaries and management fees.
If there was a 5(cid:1143) increase or decrease in foreign exchange rates on the currencies
we invest to the (cid:38).S. Dollar our net asset value would increase by (cid:362)17.1 million or
decrease by (cid:362)17.2 million. If rates moved 10(cid:1143) we would have an increase of (cid:362)34.1
million and a decrease of (cid:362)34.5 million.
Financial Measures and Descriptions.
Revenue
Rental(cid:332)rental income is comprised of rental revenue earned by our consolidated real
estate investments.
Hotel(cid:332)hotel income is comprised of hotel revenue earned by our consolidated hotels.
Sale of real estate(cid:332)sales of real estate consists of gross sales proceeds received on the
sale of consolidated real estate that is not defined as a business by (cid:38).S. GAAP.
Investment
Investment Management, Property Services and Research Fees—
management, property services, and research fees are primarily comprised of
base asset management fees, and acquisition fees generated by our investment
management division. Property management fees, leasing fees and sales commissions
generated by our property services division until its sale in the fourth quarter of
2020 and consulting fees generated by Meyers Research until the Company(cid:317)s sale
of Meyers Research in the fourth quarter of 2018. Fees earned from consolidated
investments are eliminated in consolidation with the amount relating to our equity
partners being recogni(cid:140)ed through income attributable to noncontrolling interests.
Expenses
Rental(cid:332)rental expenses consists of the expenses of our consolidated real estate
investments, including items such as property taxes, insurance, maintenance and
repairs, utilities, supplies, salaries and management fees.
Commission and marketing(cid:332)commission and marketing expenses includes fees paid to
third party sales and leasing agents as well as business development costs necessary
to generate revenues.
Compensation and related(cid:332)compensation and related expenses include: (a) employee
compensation, comprising of salary, bonus, employer payroll taxes and benefits paid
on behalf of employees and (b) share-based compensation associated with the grants
of share-based awards.
General and administrative(cid:332)general and administrative expenses represent
administrative costs necessary to run Kennedy Wilson(cid:317)s businesses and include things
such as occupancy and equipment expenses, professional fees, public company costs,
travel and related expenses, and communications and information services.
Depreciation and amortization(cid:332)depreciation and amorti(cid:140)ation is comprised of
depreciation expense which is recogni(cid:140)ed ratably over the useful life of an asset and
amorti(cid:140)ation expense which primarily consist of the amorti(cid:140)ation of assets allocated
to the value of in-place leases upon acquisition of a consolidated real estate asset.
Income from unconsolidated investments(cid:332)Income from unconsolidated investments
consists of the Company(cid:317)s share of income or loss earned on investments in which the
Company can exercise significant in(cid:89)uence but does not have control. Income from
unconsolidated investments includes income from ordinary course operations of the
underlying investment, gains on sale, fair value gains and losses and performance-
based fees.
Transaction-related expenses(cid:332)Transaction-related expenses consists of the costs
incurred and the write off of any costs associated with acquisitions which did not
materiali(cid:140)e.
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Gain on sale of real estate, net—Gain on sale of real estate, net relates to the amount
received over the carrying value of assets sold that met the definition of a business
under (cid:38).S. GAAP.
Interest expense—Interest expense represents interest costs associated with our senior
notes payable, revolving credit facility, mortgages on our consolidated real estate, and
unsecured debt held by KWE.
Other income (expense)(cid:332)Other income (expense) includes the reali(cid:140)ed foreign currency
exchange income or loss relating to the settlement of foreign transactions during the
year which arise due to changes in currency exchange rates, reali(cid:140)ed gains or losses
related to the settlement of derivative instruments, the gain or loss on the sale of
marketable securities, and interest income on bank deposits.
Income taxes(cid:332)The Company(cid:317)s services business operates globally as corporate entities
sub(cid:102)ect to federal, state, and local income taxes and the investment business operates
through various partnership structures to acquire wholly-owned or (cid:102)ointly-owned
investments in multifamily, commercial, residential and development properties.
The Company(cid:317)s distributive share of income from its partnership investments will
be sub(cid:102)ect to federal, state, and local taxes and the related tax provision attributable
to the Company(cid:317)s share of the income tax is re(cid:89)ected in the consolidated financial
statements.
Noncontrolling Interests(cid:332)Noncontrolling interests represents income or loss
attributable to equity partners for their ownership in investments which the Company
controls. Income or loss is attributed to noncontrolling interest partners based on their
respective ownership interest in an investment.
Accumulated other comprehensive income— Accumulated other comprehensive
income represents the Company(cid:317)s share of foreign currency movement on translating
Kennedy Wilson(cid:317)s foreign subsidiaries from their functional currency into the
Company(cid:317)s reporting currency. These amounts are offset by Kennedy Wilson(cid:317)s
effective portion of currency related hedge instruments.
Foreign Currency
As of December 31, 2020, approximately 46(cid:1143) of our investment account is invested
through our foreign pla(cid:127)orms in their local currencies. Investment level debt is
generally incurred in local currencies and therefore we consider the carrying value of
our equity investment as the appropriate exposure to evaluate for hedging purposes.
Fluctuations in foreign exchange rates may have a significant impact on the results
of our operations. In order to manage the effect of these (cid:89)uctuations, we generally
hedge our book equity exposure to foreign currencies through currency forward
contracts and options. Please see the section titled “Qualitative and Quantitative
Disclosures About Market Risk—Currency Risk—Foreign Currencies” for a detailed
discussion with respect to foreign currency.
Non-GAAP Measures and Certain Definitions
“KWH,” “KW,” “Kennedy Wilson,” the “Company,” “we,” “our,” or “us” refers to Kennedy-
Wilson Holdings, Inc. and its wholly-owned subsidiaries. The consolidated financial
statements of the Company include the results of the Company(cid:317)s consolidated
subsidiaries.
“KWE” refers to Kennedy Wilson Europe Real Estate Limited (formerly known as
Kennedy Wilson Europe Real Estate plc), which was a London Stock Exchange-listed
company that we externally managed through a wholly-owned subsidiary. On October
20, 2017 we acquired KWE, which is now a wholly-owned subsidiary.
“Ad(cid:102)usted EBITDA” represents net income before interest expense, loss on early
extinguishment of debt, our share of interest expense included in income from
investments in unconsolidated investments, depreciation and amorti(cid:140)ation, our
share of depreciation and amorti(cid:140)ation included in income from unconsolidated
investments, provision for (benefit from) income taxes, our share of taxes included in
unconsolidated investments, share-based compensation expense for the Company
and EBITDA attributable to noncontrolling interests. Please also see “Management(cid:317)s
Discussion and Analysis of Financial Condition and Results of Operations(cid:332)Non-GAAP
measures” for a reconciliation of Ad(cid:102)usted EBITDA to net income as reported under
K
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77
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
GAAP. Our management uses Ad(cid:102)usted EBITDA to analy(cid:140)e our business because
it ad(cid:102)usts net income for items we believe do not accurately re(cid:89)ect the nature of
our business going forward or that relate to non-cash compensation expense or
noncontrolling interests. Such items may vary for different companies for reasons
unrelated to overall operating performance. Additionally, we believe Ad(cid:102)usted EBITDA
is useful to investors to assist them in ge(cid:2478)ng a more accurate picture of our results
from operations. However, Ad(cid:102)usted EBITDA is not a recogni(cid:140)ed measurement under
GAAP and when analy(cid:140)ing our operating performance, readers should use Ad(cid:102)usted
EBITDA in addition to, and not as an alternative for, net income as determined in
accordance with GAAP. Because not all companies use identical calculations, our
presentation of Ad(cid:102)usted EBITDA may not be comparable to similarly titled measures
of other companies. Furthermore, Ad(cid:102)usted EBITDA is not intended to be a measure
of free cash (cid:89)ow for our management(cid:317)s discretionary use, as it does not remove all
non-cash items (such as non-cash acquisition-related gains or expenses) or consider
certain cash requirements such as tax and debt service payments. The amount shown
for Ad(cid:102)usted EBITDA also differs from the amount calculated under similarly titled
definitions in our debt instruments, which are further ad(cid:102)usted to re(cid:89)ect certain other
cash and non-cash charges and are used to determine compliance with financial
covenants and our ability to engage in certain activities, such as incurring additional
debt and making certain restricted payments.
“Ad(cid:102)usted Net Income” represents net income before depreciation and amorti(cid:140)ation,
our share of depreciation and amorti(cid:140)ation included in income from unconsolidated
investments, share-based compensation, preferred dividends and accretion of
preferred stock issuance costs and net income attributable to noncontrolling interests,
before depreciation and amorti(cid:140)ation. Please also see “Management(cid:317)s Discussion
and Analysis of Financial Condition and Results of Operations(cid:332)Certain Non-GAAP
Measures and Reconciliations” for a reconciliation of Ad(cid:102)usted Net Income to net
income as reported under GAAP.
“Consolidated Por(cid:127)olio NOI” refers to the NOI that is generated from the properties
that we have an ownership interest in and are held in our Consolidated Properties
business segment. Please also see “Management(cid:317)s Discussion and Analysis of
Financial Condition and Results of Operations(cid:332)Certain Non-GAAP Measures and
Reconciliations” for a reconciliation of Consolidated Por(cid:127)olio NOI to net income as
reported under GAAP.
“Equity partners” refers to non-wholly-owned subsidiaries that we consolidate in our
financial statements under (cid:38).S. GAAP and third-party equity providers.
“ Fee Bearing Capital” represents total third-party committed or invested capital that
we manage in our (cid:102)oint-ventures and commingled funds that entitle us to earn fees,
including without limitation, asset management fees, construction management fees,
acquisition and disposition fees and/or promoted interest, if applicable.
“Gross Asset Value” refers to the gross carrying value of assets, before debt,
depreciation and amorti(cid:140)ation, and net of noncontrolling interests.
“Real Estate Assets under Management” (“A(cid:38)M”) generally refers to the properties
and other assets with respect to which we provide (or participate in) oversight,
investment management services and other advice, and which generally consist of real
estate properties or loans, and investments in (cid:102)oint ventures. Our A(cid:38)M is principally
intended to re(cid:89)ect the extent of our presence in the real estate market, not the basis
for determining our management fees. Our A(cid:38)M consists of the total estimated fair
value of the real estate properties and other real estate related assets either owned
by third parties, wholly-owned by us or held by (cid:102)oint ventures and other entities in
which our sponsored funds or investment vehicles and client accounts have invested.
Committed (but unfunded) capital from investors in our sponsored funds is not
included in our A(cid:38)M. The estimated value of development properties is included at
estimated completion cost.
“Co-Investment Por(cid:127)olio NOI” refers to the NOI that is generated from the properties
that we have an ownership interest in and are held in our Co-investment Properties
business segment. Please also see “Management(cid:317)s Discussion and Analysis of
Financial Condition and Results of Operations(cid:332)Certain Non-GAAP Measures and
Reconciliations” for a reconciliation of Co-Investment Por(cid:127)olio NOI to net income as
reported under GAAP.
0
2
0
2
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78
“Net operating income” or “ NOI” is a non-GAAP measure representing the income
produced by a property calculated by deducting certain property expenses from
property revenues. Our management uses net operating income to assess and
compare the performance of our properties and to estimate their fair value. Net
operating income does not include the effects of depreciation or amorti(cid:140)ation or
gains or losses from the sale of properties because the effects of those items do not
necessarily represent the actual change in the value of our properties resulting from
our value-add initiatives or changing market conditions. Our management believes
that net operating income re(cid:89)ects the core revenues and costs of operating our
properties and is better suited to evaluate trends in occupancy and lease rates.
“Noncontrolling interests” represents the portion of equity ownership in a
consolidated subsidiary not attributable to Kennedy Wilson.
(Dollars in millions)
Net income
(cid:25)on(cid:330)(cid:14)(cid:3)(cid:3)(cid:30) ad(cid:102)us(cid:124)(cid:108)(cid:59)n(cid:124)s(cid:313)
Add back:
(cid:1354)Interest expense
(cid:1354)Kennedy Wilson(cid:317)s share of interest expense included in investment in unconsolidated investments
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)Kennedy Wilson(cid:317)s share of depreciation and amorti(cid:140)ation included in unconsolidated investments
(cid:1354)Provision for (benefit from) income taxes
(cid:1354)Kennedy Wilson(cid:317)s share of taxes included in unconsolidated investments
(cid:1354)Share-based compensation
(cid:1354)EBITDA attributable to noncontrolling interests(1)
(cid:3)d(cid:102)us(cid:124)(cid:59)d E(cid:6)(cid:17)(cid:36)(cid:9)(cid:3)(
(1) (2) See “Non-GAAP Measures and Certain Definitions” for definitions and discussion of Adjusted EBITDA.
“Same property” refers to properties in which Kennedy Wilson has an ownership
interest during the entire span of both periods being compared. The same property
information presented throughout this report is shown on a cash basis and excludes
non-recurring expenses. This analysis excludes properties that are either under
development or undergoing lease up as part of our asset management strategy.
We use certain non-GAAP measures to analy(cid:140)e our business, including Ad(cid:102)usted
EBITDA and Ad(cid:102)usted Net Income. We use these metrics for evaluating the success
of our company and believe that they enhance the understanding of our operating
results. A reconciliation of net income to Ad(cid:102)usted EBITDA and Ad(cid:102)usted Net Income
is presented below:
2020
2019
2018
2017
2016
(cid:362) 107.8
(cid:362) 321.1
(cid:362) 212.1
(cid:362) 138.0
(cid:362) 76.5
Years Ended December 31,
211.2
33.0
179.6
6.9
43.6
1.1
32.3
(7.5)
.0
215.1
32.1
187.6
8.2
41.4
30.2
(107.6)
.1
238.2
26.0
206.1
13.2
58.0
37.1
(78.0)
.7
217.7
23.0
212.5
16.2
(16.3)
38.4
(173.8)
.7
191.6
23.0
198.2
20.8
14.0
65.1
(239.3)
.9
K
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0
2
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79
—
—
—
—
2
)
$
6
0
8
$
7
2
8
$
7
1
2
$
4
5
5
$
3
4
9
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
(Dollars in millions)
Net income
(cid:25)on(cid:330)(cid:14)(cid:3)(cid:3)(cid:30) ad(cid:102)us(cid:124)(cid:108)(cid:59)n(cid:124)s(cid:313)
Add back:
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)Kennedy Wilson(cid:317)s share of depreciation and amorti(cid:140)ation included in unconsolidated investments
(cid:1354)Share-based compensation
(cid:1354)Net income attributable to the noncontrolling interests, before depreciation and amorti(cid:140)ation(1)
(cid:1354)Preferred dividends and accretion of preferred stock issuance costs
(cid:1354)One-time tax remeasurement(3)
(cid:3)d(cid:102)us(cid:124)(cid:59)d (cid:25)(cid:59)(cid:124) (cid:17)nco(cid:108)(cid:59)(
(1) (2) See “Non-GAAP Measures and Certain Definitions” for definitions and discussion of Adjusted Net Income.
(3) Recorded as a result of US federal tax legislation, commonly referred to as the “Tax Cuts and Jobs Act”, signed into law on December 22, 2017.
Net Operating Income
2020
2019
2018
2017
2016
(cid:362) 107.8
(cid:362) 321.1
(cid:362) 212.1
(cid:362) 138.0
(cid:362) 76.5
Years Ended December 31,
179.6
6.9
32.3
(2.5)
(17.2)
187.6
8.2
30.2
(102.0)
(2.6)
206.1
13.2
37.1
(71.5)
.9
.5
.0
212.5
16.2
38.4
(117.8)
(44.8)
.5
198.2
20.8
65.1
(169.3)
.3
Net income
Less: Provision for income taxes
Less: Income from unconsolidated investments
Less: Gain on sale of real estate, net
Less: Gain on sale of business
Add: Interest expense
Add: Transaction-related expenses
Less: Other (loss) income
Less: Sale of real estate
Less: Investment management and property services
Add: Cost of real estate sold
Add: Commission and marketing
Add: Compensation and related
Add: General and administrative
0
2
0
2
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Years Ended December 31,
2020
Co-
Investment
Por(cid:127)olio
8
.0
1.0
11.5
33.1
13.7
(11.5)
(2.6)
13.3
2019
Co-
Investment
Por(cid:127)olio
1
.7
(53.5)
32.1
8.0
(26.7)
(36.2)
23.9
Consolidated
Por(cid:127)olio
2
.1
58.0
(78.7)
(371.8)
(40.4)
238.2
1.7
(13.1)
(56.8)
(45.3)
52.5
5.9
168.8
50.8
Consolidated
Por(cid:127)olio
3
.1
41.4
(179.7)
(434.4)
215.1
6.8
(0.4)
(1.1)
(40.7)
1.2
3.8
151.8
42.4
Consolidated
Por(cid:127)olio
1
.8
43.6
(81.0)
(338.0)
211.2
0.9
(4.5)
(33.1)
2.8
144.4
34.6
2018
Co-
Investment
Por(cid:127)olio
7
.7
(23.0)
26.0
(2.5)
(19.2)
(27.5)
18.6
Add: Depreciation
Less: Fair value ad(cid:102)ustments
Less: NCI ad(cid:102)ustments
(cid:25)(cid:59)(cid:124) (cid:27)(cid:114)(cid:59)(cid:117)atin(cid:93) (cid:17)nco(cid:108)(cid:59)
Net income
Less: (Benefit from) provision for income taxes
Less: Income from unconsolidated investments
Less: Gain on sale of real estate, net
Add: Interest expense
Add: Transaction-related expenses
Less: Other (loss) income
Less: Sale of real estate
Less: Investment management and property services
Add: Cost of real estate sold
Add: Commission and marketing
Add: Compensation and related
Add: General and administrative
Add: Depreciation
Less: Fair value ad(cid:102)ustments
Less: NCI ad(cid:102)ustments
(cid:25)(cid:59)(cid:124) (cid:27)(cid:114)(cid:59)(cid:117)atin(cid:93) (cid:17)nco(cid:108)(cid:59)
Consolidated
Por(cid:127)olio
179.6
2020
Co-
Investment
Por(cid:127)olio
6.9
(43.9)
Consolidated
Por(cid:127)olio
187.6
2019
Co-
Investment
Por(cid:127)olio
8.2
(57.7)
(6.0)
(9.7)
2
.3
1
.5
3
.2
7
.8
Years Ended December 31,
2018
Co-
Investment
Por(cid:127)olio
13.4
(9.2)
5
.3
Consolidated
Por(cid:127)olio
206.1
(19.7)
3
.3
Years Ended December 31,
2017
Co-
Investment
Por(cid:127)olio
7
.8
(10.5)
23.2
(5.6)
(108.2)
(17.3)
77.4
0.9
2.6
16.1
(8.3)
4
.1
Consolidated
Por(cid:127)olio
7
.5
14.0
(126.6)
(130.7)
191.6
(6.7)
(19.2)
(29.3)
(59.4)
22.1
8.0
186.5
45.4
198.2
(181.0)
1
.4
2016
Co-
Investment
Por(cid:127)olio
1
.6
(59.6)
22.9
(0.4)
3.4
(48.8)
(12.5)
38.8
0.9
3.6
20.8
(44.6)
5
.1
Consolidated
Por(cid:127)olio
1
.0
(16.3)
(77.8)
(226.7)
217.7
4.4
(23.5)
(111.5)
(42.9)
80.2
7.2
177.2
42.2
212.5
(138.7)
2
.0
K
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0
2
0
/
81
—
—
—
—
—
—
—
2
)
$
3
0
6
$
4
4
2
$
3
9
7
$
2
4
2
$
1
9
1
$
0
7
$
1
$
2
1
$
7
9
$
1
2
$
8
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
6
2
$
0
2
$
0
5
$
7
$
6
8
$
5
$
3
8
$
7
$
6
$
2
6
—
—
—
—
—
—
—
—
—
—
—
$
4
2
$
8
$
8
9
$
1
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Same property analysis
The same property analysis re(cid:89)ects, and is weighted by, Kennedy Wilson(cid:317)s ownership in each underlying property. Previously, the Company had presented this analysis without
ad(cid:102)usting for Kennedy Wilson(cid:317)s ownership interest.
The table below is a reconciliation of Non-GAAP measures included within the Company(cid:317)s same property analysis, to their most comparable GAAP measures.
Year Ended December 31, 2020 Year Ended December 31, 2019
Same Property
Same Property
Same P rope rty ( Repo rted)
Commercial(cid:332)Same Property
Multifamily Market Rate Por(cid:127)olio(cid:332)Same Property
Multifamily Affordable Por(cid:127)olio(cid:332)Same Property
Same P rope rty
Year Ended December 31, 2020
Year Ended December 31, 2019
Same Property
Same Property
Revenue
(cid:362) (cid:1363)149.3
221.6
29.7
4
.6
NOI
Revenue
(cid:362) (cid:1363)128.9
145.9
20.7
2
.5
(cid:362) (cid:1363)160.0
220.4
28.9
4
.3
NOI
(cid:362) (cid:1363)139.4
147.4
19.9
3
.7
Revenue
NOI
Revenue
(cid:25)(cid:59)(cid:124) (cid:17)nco(cid:108)(cid:59)
Less: Provision for income taxes
Less: Income from unconsolidated investments
Less: Gain on sale of real estate, net
Add: Acquisition-related expenses
Add: Interest expense
Less: Other income
Less: Sale of real estate
Less: Investment management, property services and research fees
Add: Rental expenses
Add: Hotel expenses
Add: Cost of real estate sold
Add: Commission and marketing
Add: Compensation and related
Add: General and administrative
Add: Depreciation and amorti(cid:140)ation
Less: NCI ad(cid:102)ustments(1)
Add: (cid:38)nconsolidated investment ad(cid:102)ustments(2)
Add: Straight-line and above/below market rents
Less: Reimbursement of recoverable operating expenses
Less: Properties bought and sold(3)
Less: Other properties excluded(4)
Other Reconciling Items(5)
1
.8
43.6
(81.0)
(338.0)
0.9
211.2
(4.5)
(33.1)
135.7
13.8
2.8
144.4
34.6
179.6
(5.4)
100.9
(10.5)
(24.5)
(56.8)
(29.6)
8.7
1
.8
43.6
(81.0)
(338.0)
0.9
211.2
(4.5)
(33.1)
2.8
144.4
34.6
179.6
(1.2)
74.1
(10.5)
(39.9)
(4.9)
9.6
Same P roper ty
4
.6
2
.5
3
.1
41.4
(179.7)
(434.4)
6.8
215.1
(0.4)
(1.1)
(40.7)
152.9
60.1
1.2
3.8
151.8
42.4
187.6
(14.7)
99.5
(4.6)
(24.4)
(108.1)
(72.9)
6.6
4
.3
NOI
3
.1
41.4
(179.7)
(434.4)
6.8
215.1
(0.4)
(1.1)
(40.7)
1.2
3.8
151.8
42.4
187.6
(4.4)
73.1
(4.6)
(59.3)
(23.7)
10.7
3
.7
(1) Represents rental revenue and rental expenses and hotel revenue and hotel expenses attributable to non-controlling interests.
(2) Represents the Company’s share of unconsolidated investment rental revenues and rental expenses, as applicable, which are within the applicable same property population.
(3) Represents properties excluded from the same property population that were purchased or sold during the applicable period.
(4) Represents properties excluded from the same property population that were not during the applicable period.
(5) Represents other properties excluded from the same property population that were not classified as either a commercial or multifamily property within the Company’s portfolio. Also includes immaterial adjustments for foreign
exchange rates, changes in ownership percentages, and certain non-recurring income and expenses.
Critical Accounting Policies
A critical accounting policy is one that involves an estimate or assumption that is
sub(cid:102)ective and requires (cid:102)udgment on the part of management about the effect of a
matter that is inherently uncertain and is material to an entity(cid:317)s financial condition
and results of operations. Estimates are prepared using management(cid:317)s best (cid:102)udgment,
a(cid:91)er considering past and current economic conditions and expectations for the
future. Changes in estimates could affect our financial position and specific items in
our results of operations that are used by stockholders, potential investors, industry
analysts and lenders in their evaluation of our performance. Of the significant
accounting policies discussed in Note 2 to the Consolidated Financial Statements,
those presented below have been identified by us as meeting the criteria to be
considered critical accounting policies. Refer to Note 2 for more information on these
critical accounting policies.
Performance fees—Performance fees or carried interest are allocated to the general
partner, special limited partner or asset manager of Kennedy Wilson(cid:317)s real estate
funds and fair value option unconsolidated investments based on the cumulative
performance of the fund and are sub(cid:102)ect to preferred return thresholds of the limited
partners and participants. At the end of each reporting period, Kennedy Wilson
calculates the performance fee that would be due as if the fair value of the underlying
investments were reali(cid:140)ed as of such date, irrespective of whether such amounts have
been reali(cid:140)ed. As the fair value of underlying investments varies between reporting
periods, it is necessary to make ad(cid:102)ustments to amounts recorded as performance fees
to re(cid:89)ect either (a) positive performance resulting in an increase in the performance
fee allocated to the general partner or asset manager or (b) negative performance
that would cause the amount due to Kennedy Wilson to be less than the amount
previously recogni(cid:140)ed, resulting in a negative ad(cid:102)ustment to performance fees
allocated to the general partner or asset manager.
Real Estate Acquisitions(cid:332)The purchase price of acquired properties is recorded
to land, buildings and building improvements and intangible lease value (value of
above-market and below-market leases, acquired in-place lease values, and tenant
relationships, if any). The ownership of the other interest holders in consolidated
subsidiaries is re(cid:89)ected as noncontrolling interests. Real estate is recorded based on
cumulative costs incurred and allocated based on relative fair value.
K
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0
2
0
/
83
0
2
0
2
t
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$
0
7
$
0
7
$
2
1
$
2
1
—
—
—
—
—
—
—
—
—
—
$
0
0
$
9
5
$
0
9
$
0
6
$
0
0
$
9
5
$
0
9
$
0
6
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Report of Independent Registered Public Accounting Firm
The valuations of real estate are based on management estimates of the real estate
assets using income and market approaches. The indebtedness securing the real
estate is valued, in part, based on third party valuations and management estimates
also using an income approach.
The indebtedness securing the real estate are valued, in part, based on third party
valuations and management estimates also using an income approach. The use of
different assumptions to value the acquired properties and intangible assets and
assumed liabilities could affect the future revenues and expenses we recogni(cid:140)e over
the estimated remaining useful life or lease term.
Fair Value Investments— Kennedy Wilson records its investments in certain commingled
funds it manages and sponsors (the “Funds”) that are investment companies under
the Investment Companies ASC Subtopic 946-10, based upon the net assets that
would be allocated to its interests in the Funds assuming the Funds were to liquidate
their investments at fair value as of the reporting date. Thus, the Funds re(cid:89)ect their
investments at fair value, with unreali(cid:140)ed gains and losses resulting from changes in
fair value re(cid:89)ected in their earnings. Kennedy Wilson has retained the speciali(cid:140)ed
accounting for the Funds as discussed in ASC Subtopic 323-10 in recording its equity
in (cid:102)oint venture income from the Funds.
Additionally, Kennedy Wilson elected the fair value option for 29 investments in
unconsolidated investment entities. Due to the nature of these investments, Kennedy
Wilson elected to record these investments at fair value in order to report the value in
the underlying investments in the results of our current operations.
The use of different assumptions to fair value these investments could have material
impact on the consolidated statements of income.
Recently Issued Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements.
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84
To the Shareholders and Board of Directors
Kennedy-Wilson Holdings, Inc.:
Opinion on the Consolidated Financial Statements—We have audited the accompanying
consolidated balance sheets of Kennedy-Wilson Holdings, Inc. and subsidiaries (the
Company) as of December 31, 2020 and 2019, the related consolidated statements
of income, comprehensive income, equity, and cash (cid:89)ows for each of the years in
the three-year period ended December 31, 2020, and the related notes and financial
statement schedule III(cid:332)Real Estate and Accumulated Depreciation (collectively,
the consolidated financial statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2020 and 2019, and the results of its operations and its
cash (cid:89)ows for each of the years in the three-year period ended December 31, 2020,
in conformity with (cid:38).S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board ((cid:38)nited States) (PCAOB), the Company(cid:317)s internal control
over financial reporting as of December 31, 2020, based on criteria established in
Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organi(cid:140)ations of the Treadway Commission, and our report dated February 26, 2021
expressed an unqualified opinion on the effectiveness of the Company(cid:317)s internal
control over financial reporting.
Basis for Opinion—These consolidated financial statements are the responsibility of
the Company(cid:317)s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to
the Company in accordance with the (cid:38).S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for
our opinion.
Critical Audit Matter—The critical audit matter communicated below is a matter arising
from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that:
(1) relates to accounts or disclosures that are material to the consolidated financial
statements and (2) involved our especially challenging, sub(cid:102)ective, or complex
(cid:102)udgment. The communication of a critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not,
by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of the fair value of certain unconsolidated investments and commingled funds—
As discussed in Notes 2 and 5 to the consolidated financial statements, the Company
elected to record certain unconsolidated investments using the fair value option to
more accurately re(cid:89)ect the timing of the value created in the underlying investments
and report those changes in current operations. Additionally, the Company records its
investments in its managed commingled funds (the “Funds”) based upon the net assets
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Report of Independent Registered Public Accounting Firm (continued)
that would be allocated to its interests in the Funds, assuming the Funds were to
liquidate their investments at fair value as of the reporting date. As of December 31,
2020, these investments had a fair value of (cid:362)1,136.5 million.
We identified the evaluation of the fair value of certain unconsolidated investments
and commingled funds as a critical audit matter. A high degree of sub(cid:102)ectivity was
required in applying and evaluating results from procedures over the respective
discounted cash (cid:89)ow models used to calculate the fair value of the underlying real
estate investments. Specifically, the respective discounted cash (cid:89)ow models were
sensitive to changes in certain key assumptions, including discount and terminal
capitali(cid:140)ation rates, which have a significant effect on the determination of fair value
of these investments.
The following are the primary procedures we performed to address this critical
audit matter. We evaluated the design and tested the operating effectiveness of
certain internal controls over the Company(cid:317)s fair value process for unconsolidated
investments and commingled funds, including controls related to the development of
the discount rate and terminal capitali(cid:140)ation rate assumptions. For a selection of the
Company(cid:317)s investments, we involved valuation professionals with speciali(cid:140)ed skills and
knowledge who assisted in comparing the discount rate and terminal capitali(cid:140)ation
rate used by the Company to independently developed ranges using market
information obtained from third-party real estate publications or to rates observed in
similar investments in the current period.
/s/ KPMG LLP
We have served as the Company(cid:317)s auditor since 2002.
Los Angeles, California
February 26, 2021
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86
To the Shareholders and Board of Directors
Kennedy-Wilson Holdings, Inc.:
Opinion on Internal Control Over Financial Reporting—We have audited Kennedy-
Wilson Holdings, Inc. and subsidiaries(cid:317) (the Company) internal control over financial
reporting as of December 31, 2020, based on criteria established in Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organi(cid:140)ations
of the Treadway Commission. In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2020,
based on criteria established in Internal Control—Integrated Framework (2013) issued by
the Committee of Sponsoring Organi(cid:140)ations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board ((cid:38)nited States) (PCAOB), the consolidated balance
sheets of the Company as of December 31, 2020 and 2019, the related consolidated
statements of operations, comprehensive income, equity, and cash (cid:89)ows for each of
the years in the three-year period ended December 31, 2020, and the related notes
and financial statement schedule III—Real Estate and Accumulated Depreciation
(collectively, the consolidated financial statements), and our report dated February 26,
2021 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion—The Company(cid:317)s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management(cid:317)s
Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Company(cid:317)s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance with the (cid:38).S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in
all material respects. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting(cid:332)A company(cid:317)s
internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A company(cid:317)s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly re(cid:89)ect the transactions and dispositions of
the assets of the company(cid:312) (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authori(cid:140)ations of management
and directors of the company(cid:312) and (3) provide reasonable assurance regarding
prevention or timely detection of unauthori(cid:140)ed acquisition, use, or disposition of the
company(cid:317)s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, pro(cid:102)ections of any evaluation of effectiveness
to future periods are sub(cid:102)ect to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ KPMG LLP
Los Angeles, California
February 26, 2021
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Consolidated Balance Sheets
Consolidated Statements of Income
(Dollars in millions)
Assets
Cash and cash equivalents
Accounts receivable (including (cid:362)12.6 and (cid:362)11.2 of related party)
Real estate and acquired in place lease values (net of accumulated depreciation and amorti(cid:140)ation of (cid:362)815.0 and (cid:362)703.2)
(cid:38)nconsolidated investments (including (cid:362)1,136.5 and (cid:362)1,099.3 at fair value)
Other assets
Total assets(
(cid:21)iabi(cid:1140)iti(cid:59)s
Accounts payable
Accrued expenses and other liabilities
Mortgage debt
KW unsecured debt
KWE unsecured bonds
(cid:36)o(cid:124)a(cid:1140) (cid:1140)iabi(cid:1140)iti(cid:59)s(
q uity
Series A cumulative preferred stock, (cid:362)0.0001 par value, (cid:362)1,000 per share liquidation preference, 1,000,000 shares authori(cid:140)ed, 300,000 shares outstanding as of December 31, 2020
and December 31, 2019
Common Stock, (cid:362)0.0001 par value, 200,000,000 authori(cid:140)ed, 141,365,323 and 142,283,109 shares issued outstanding as of December 31, 2020 and December 31, 2019
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
(cid:36)o(cid:124)a(cid:1140) (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314) sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s(cid:317) (cid:59)(cid:116)ui(cid:124)y
Noncontrolling interests
Total eq uity
(cid:36)o(cid:124)a(cid:1140) (cid:1140)iabi(cid:1140)iti(cid:59)s and (cid:59)(cid:116)ui(cid:124)y
December 31,
2020
2019
(cid:362)
965.1 (cid:362)
47.9
4,720.5
1,289.3
306.2
573.9
52.1
5,080.2
1,326.5
271.8
(cid:362) 7,329.0 (cid:362) 7,304.5
(cid:362)
30.1 (cid:362)
531.7
2,589.8
1,332.2
1,172.5
20.4
518.0
2,641.0
1,131.7
1,274.2
5,656.3
5,585.3
295.2
295.2
1,725.2
17.7
(393.6)
1,644.5
28.2
1,754.5
46.2
(417.2)
1,678.7
40.5
1,672.7
1,719.2
(cid:362) 7,329.0 (cid:362) 7,304.5
(1) The assets and liabilities as of December 31, 2020 include $166.0 million (including cash held by consolidated investments of $9.1 million and real estate and acquired in place lease values, net of accumulated depreciation
and amortization of $150.0 million) and $107.7 million (including investment debt of $97.5 million), respectively, from consolidated variable interest entities (“VIEs”). The assets and liabilities as of December 31, 2019 include
$267.5 million (including cash held by consolidated investments of $10.3 million and real estate and acquired in place lease values, net of accumulated depreciation and amortization of $243.5 million) and $219.7 million (including
investment debt of $206.0 million), respectively, from VIEs. These assets can only be used to settle obligations of the consolidated VIEs, and the liabilities do not have recourse to the Company.
See accompanying notes to consolidated financial statements.
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(Dollars in millions, except per share data)
Revenue
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Sale of real estate
(cid:1354)Investment management, property services, and research fees (includes (cid:362)22.7, (cid:362)26.1, and (cid:362)15.3 of related party fees, respectively)
(cid:1354)(cid:1354)Total revenue
E xpe nses
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Cost of real estate sold
(cid:1354)Commission and marketing
(cid:1354)Compensation and related (includes (cid:362)32.3, (cid:362)30.2, and (cid:362)37.1 of share-based compensation)
(cid:1354)General and administrative
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:59)(cid:138)(cid:114)(cid:59)ns(cid:59)s
(cid:1354)Income from unconsolidated investments, net of depreciation and amorti(cid:140)ation
(cid:1354)Gain on sale of real estate, net
(cid:1354)Gain on sale of business
(cid:1354)Transaction-related expenses
(cid:1354)Interest expense
(cid:1354)Other income
(cid:1354)(cid:1354)(cid:17)nco(cid:108)(cid:59) b(cid:59)(cid:61)o(cid:117)(cid:59) (cid:114)(cid:117)o(cid:136)ision (cid:61)o(cid:117) inco(cid:108)(cid:59) (cid:124)a(cid:138)(cid:59)s
Provision for income taxes
(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59)
Net loss (income) attributable to the noncontrolling interests
Preferred dividends and accretion of preferred stock issuance costs
(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314) co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s
Basic E arnings pe r share
(cid:1354)(cid:1354)Income per basic
(cid:1354)(cid:1354)Weighted average shares outstanding for basic
(cid:9)i(cid:1140)u(cid:124)(cid:59)d Ea(cid:117)nin(cid:93)s (cid:114)(cid:59)(cid:117) sha(cid:117)(cid:59)
(cid:1354)(cid:1354)Income per diluted
(cid:1354)(cid:1354)Weighted average shares outstanding for diluted
(cid:9)i(cid:136)id(cid:59)nds d(cid:59)c(cid:1140)a(cid:117)(cid:59)d (cid:114)(cid:59)(cid:117) co(cid:108)(cid:108)on sha(cid:117)(cid:59)
See accompanying notes to consolidated financial statements.
2020
403.9 (cid:362)
13.9
33.1
450.9
135.7
13.8
2.8
144.4
34.6
179.6
510.9
81.0
338.0
(0.9)
(211.2)
4.5
151.4
(43.6)
107.8
2.3
(17.2)
92.9 (cid:362)
Year ended December 31,
2018
2019
447.4 (cid:362)
80.5
1.1
40.7
569.7
152.9
60.1
1.2
3.8
151.8
42.4
187.6
599.8
179.7
434.4
(6.8)
(215.1)
0.4
362.5
(41.4)
321.1
(94.4)
(2.6)
224.1 (cid:362)
514.6
155.7
56.8
45.3
772.4
160.8
121.5
52.5
5.9
168.8
50.8
206.1
766.4
78.7
371.8
40.4
(1.7)
(238.2)
13.1
270.1
(58.0)
212.1
(62.1)
150.0
0.66 (cid:362)
1.60 (cid:362)
139,741,411
139,729,573
0.66 (cid:362)
1.58 (cid:362)
140,347,365
141,501,323
0.88 (cid:362)
0.85 (cid:362)
1.04
142,895,472
1.04
144,753,421
0.78
(cid:362)
(cid:362)
(cid:362)
(cid:362)
(cid:362)
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89
1
)
1
)
E
—
—
—
—
—
—
—
Consolidated Statements of Comprehensive Income
Consolidated Statements of Equity
Year ended December 31,
2020
2019
2018
(cid:362) 107.8 (cid:362) 321.1 (cid:362) 212.1
66.5
0.8
(37.8)
(5.3)
24.2
(13.3)
10.4
38.7
(0.7)
35.1
(62.6)
13.2
38.3
(11.1)
132.0
1.7
201.0
(65.4)
(cid:362) 133.7 (cid:362) 251.2 (cid:362) 135.6
356.2
(105.0)
(Dollars in millions)
Net income
Other comprehensive income, net of tax:
(cid:38)nreali(cid:140)ed foreign currency translation gain (loss)
Amounts reclassified out of AOCI during the year
(cid:38)nreali(cid:140)ed currency derivative contracts (loss) gain
(cid:38)nreali(cid:140)ed losses on interest rate swaps
Total other comprehensive income (loss) for the year
Comprehensive income
Comprehensive income (loss) attributable to noncontrolling interests
Comprehensive income attributable to Kennedy-Wilson Holdings, Inc.
See accompanying notes to consolidated financial statements.
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(Dollars in millions, except share amounts)
Year Ended December 31, 2020
Preferred Stock
Common Stock
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interests
Total
(cid:362) (cid:332)
(cid:362) 1,754.5
(cid:362) 46.2
(cid:362) (417.2)
(cid:362) 40.5 (cid:362) 1,719.2
300,000
(cid:362) 295.2
142,283,109
(62,710)
2,543,551
(571,983)
(2,826,644)
(cid:6)a(cid:1140)anc(cid:59)(cid:311) (cid:9)(cid:59)c(cid:59)(cid:108)b(cid:59)(cid:117) (cid:402)(cid:400)(cid:311) (cid:401)(cid:399)(cid:400)(cid:406)
Shares forfeited
Restricted stock grants (RSG)
Shares retired due to RSG Vesting
Shares retired due to common stock repurchase program
Stock based compensation
Other comprehensive income (loss):
(cid:1354)(cid:38)nreali(cid:140)ed foreign currency translation gains, net of tax
(cid:1354)(cid:38)nreali(cid:140)ed foreign currency derivative contract losses, net of tax
(cid:1354)(cid:38)nreali(cid:140)ed loss on interest rate swaps, net of tax
Common stock dividends
Preferred stock dividends
Net income
Contributions from noncontrolling interests
Distributions to noncontrolling interests
KW Europe II deconsolidation
(cid:6)a(cid:1140)anc(cid:59)(cid:311) (cid:9)(cid:59)c(cid:59)(cid:108)b(cid:59)(cid:117) (cid:402)(cid:400)(cid:311) (cid:401)(cid:399)(cid:401)(cid:399)
See accompanying notes to consolidated financial statements.
(11.6)
(50.0)
32.3
4.2
(125.6)
(17.2)
110.1
66.1
(37.8)
(4.7)
300,000
(cid:362) 295.2
141,365,323
(cid:362) (cid:332)
(cid:362) 1,725.2
(cid:362) 17.7
(cid:362) (393.6)
(11.6)
(45.8)
32.3
0.6
66.7
(37.8)
(4.7)
(125.6)
(17.2)
107.8
4.5
(18.9)
3.8
(cid:362) 28.2 (cid:362) 1,672.7
(2.3)
4.5
(18.9)
3.8
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—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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—
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—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Consolidated Statements of Equity (continued)
(Dollars in millions, except share amounts)
Year Ended December 31, 2019
(Dollars in millions, except share amounts)
Year Ended December 31, 2018
Preferred Stock
Common Stock
Shares Amount
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
(cid:362) (cid:332) 143,205,394
(cid:362) (cid:332) (cid:362) 1,744.6
(cid:362) (56.4)
(cid:362) (441.5)
300,000
295.2
Noncontrolling
Interests
Total
(cid:362) 184.5 (cid:362) 1,431.2
295.2
64,458
(764,909)
(221,834)
(16.4)
(3.9)
30.2
(0.4)
—
—
—
—
(4.3)
29.3
(0.7)
(121.1)
(2.6)
226.7
300,000 (cid:362) 295.2 142,283,109
(cid:362) (cid:332) (cid:362) 1,754.5
(cid:362) 46.2
(cid:362) (417.2)
(16.4)
(4.3)
30.2
10.6
6.3
29.3
(0.7)
(121.1)
(2.6)
321.1
15.0
(264.0)
(cid:362) 40.5 (cid:362) 1,719.2
94.4
15.0
(264.0)
(cid:6)a(cid:1140)anc(cid:59)(cid:311) (cid:9)(cid:59)c(cid:59)(cid:108)b(cid:59)(cid:117) (cid:402)(cid:400)(cid:311) (cid:401)(cid:399)(cid:400)(cid:405)
Shares forfeited
Restricted stock grants (RSG)
Shares retired due to RSG Vesting
Shares retired due to common stock repurchase program
Stock based compensation
Other comprehensive (loss) income:
(cid:1354)(cid:38)nreali(cid:140)ed foreign currency translation losses, net of tax
(cid:1354)(cid:38)nreali(cid:140)ed foreign currency derivative contract gain, net of tax
(cid:1354)(cid:38)nreali(cid:140)ed losses on marketable securities
Common stock dividends
Net income
Contributions from noncontrolling interests
Distributions to noncontrolling interests
(cid:6)a(cid:1140)anc(cid:59)(cid:311) (cid:9)(cid:59)c(cid:59)(cid:108)b(cid:59)(cid:117) (cid:402)(cid:400)(cid:311) (cid:401)(cid:399)(cid:400)(cid:1142)
See accompanying notes to consolidated financial statements.
(cid:6)a(cid:1140)anc(cid:59)(cid:311) (cid:9)(cid:59)c(cid:59)(cid:108)b(cid:59)(cid:117) (cid:402)(cid:400)(cid:311) (cid:401)(cid:399)(cid:400)(cid:1142)
Cumulative preferred stock
Restricted stock grants (RSG)
Shares retired due to RSG Vesting
Shares retired due to common stock repurchase program
Stock based compensation
Other comprehensive (loss) income:
(cid:1354)(cid:38)nreali(cid:140)ed foreign currency translation loss, net of tax
(cid:1354)(cid:38)nreali(cid:140)ed foreign currency derivative contract gain, net of tax
(cid:1354)(cid:38)nreali(cid:140)ed losses on interest rate swaps
Common stock dividends
Preferred stock dividends
Net income
Contributions from noncontrolling interests
Distributions to noncontrolling interests
(cid:6)a(cid:1140)anc(cid:59)(cid:311) (cid:9)(cid:59)c(cid:59)(cid:108)b(cid:59)(cid:117) (cid:402)(cid:400)(cid:311) (cid:401)(cid:399)(cid:400)(cid:406)
See accompanying notes to consolidated financial statements.
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Preferred Stock
Common Stock
Shares Amount
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interests
Total
(cid:362) (cid:332) (cid:362) 1,883.3
(cid:362) (90.6)
(cid:362) (427.1)
(cid:362) 211.9 (cid:362) 1,577.5
(cid:362) (cid:332) 151,561,284
(30,100)
1,524,383
(486,032)
(9,364,141)
(8.8)
(167.0)
37.1
(2.1)
(113.7)
150.0
(47.5)
33.2
(0.1)
(cid:362) (cid:332) 143,205,394
(cid:362) (cid:332) (cid:362) 1,744.6
(cid:362) (56.4)
(cid:362) (441.5)
(8.8)
(169.1)
37.1
3.3
(44.2)
33.2
(0.1)
(113.7)
212.1
23.2
(116.0)
(cid:362) 184.5 (cid:362) 1,431.2
62.1
23.2
(116.0)
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—
—
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—
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Consolidated Statements of Cash Flows
(Dollars in millions)
(cid:7)ash (cid:89)o(cid:137)s (cid:61)(cid:117)o(cid:108) o(cid:114)(cid:59)(cid:117)atin(cid:93) acti(cid:136)iti(cid:59)s(cid:313)
(cid:1354)Net income
(cid:1354)Ad(cid:102)ustments to reconcile net income to net cash (used in) provided by operating activities:
(cid:1354)(cid:1354)Gain from sale of real estate, net
(cid:1354)(cid:1354)Gain on sale of a business
(cid:1354)(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)(cid:1354)Above/below and straight-line rent amorti(cid:140)ation
(cid:1354)(cid:1354)Provision for deferred income taxes
(cid:1354)(cid:1354)Amorti(cid:140)ation of loan fees
(cid:1354)(cid:1354)Amorti(cid:140)ation of discount and accretion of premium on senior notes payable
(cid:1354)(cid:1354)(cid:38)nreali(cid:140)ed net gains on derivatives
(cid:1354)(cid:1354)Income from unconsolidated investments
(cid:1354)(cid:1354)Accretion of interest income on loans
(cid:1354)(cid:1354)Stock compensation expense
(cid:1354)(cid:1354)Deferred compensation
(cid:1354)(cid:1354)Operating distributions from unconsolidated investments
(cid:1354)(cid:1354)Operating distributions from loans
(cid:1354)(cid:1354)Change in assets and liabilities:
(cid:1354)(cid:1354)(cid:1354)Accounts receivable
(cid:1354)(cid:1354)(cid:1354)Other assets
(cid:1354)(cid:1354)(cid:1354)Accrued expenses and other liabilities
(cid:1354)(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash (cid:336)us(cid:59)d in(cid:337) (cid:114)(cid:117)o(cid:136)id(cid:59)d by o(cid:114)(cid:59)(cid:117)atin(cid:93) acti(cid:136)iti(cid:59)s
(cid:7)ash (cid:89)o(cid:137)s (cid:61)(cid:117)o(cid:108) in(cid:136)(cid:59)stin(cid:93) acti(cid:136)iti(cid:59)s(cid:313)
(cid:1354)(cid:1354)Issuance of loans
(cid:1354)(cid:1354)Proceeds from collection of loans
(cid:1354)(cid:1354)Net proceeds from sale of consolidated real estate
(cid:1354)(cid:1354)Net proceeds from sale of a business
(cid:1354)(cid:1354)Purchases of consolidated real estate
(cid:1354)(cid:1354)Capital expenditures to real estate
(cid:1354)(cid:1354)Nonrefundable escrow deposits
(cid:1354)(cid:1354)Investment in marketable securities
(cid:1354)(cid:1354)Proceeds from sale of marketable securities
(cid:1354)(cid:1354)Investing distributions from unconsolidated investments
(cid:1354)(cid:1354)Contributions to unconsolidated investments
(cid:1354)(cid:1354)Proceeds from settlement of foreign currency derivative contracts
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(Dollars in millions)
(cid:1354)(cid:1354)Purchases of foreign currency derivative contracts
(cid:1354)(cid:1354)Additions to development pro(cid:102)ect asset
(cid:1354)(cid:1354)Proceeds from sale of development pro(cid:102)ect asset
(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash (cid:114)(cid:117)o(cid:136)id(cid:59)d by in(cid:136)(cid:59)stin(cid:93) acti(cid:136)iti(cid:59)s
(cid:7)ash (cid:89)o(cid:137) (cid:61)(cid:117)o(cid:108) (cid:67)nancin(cid:93) acti(cid:136)iti(cid:59)s(cid:313)
(cid:1354)(cid:1354)Borrowings under senior notes payable
(cid:1354)(cid:1354)Borrowings under line of credit/term loan
(cid:1354)(cid:1354)Repayment of line of credit/term loan
(cid:1354)(cid:1354)Borrowings under mortgage debt
(cid:1354)(cid:1354)Repayment of mortgage debt
(cid:1354)(cid:1354)Payment of loan fees
(cid:1354)(cid:1354)Repurchase of common stock
(cid:1354)(cid:1354)Issuance of preferred stock
(cid:1354)(cid:1354)Common stock dividends paid
(cid:1354)(cid:1354)Preferred stock dividends paid
(cid:1354)(cid:1354)KWE closing dividend
(cid:1354)(cid:1354)Borrowings (repayment) of shareholder loans to noncontrolling interests
(cid:1354)(cid:1354)Contributions from noncontrolling interests
(cid:1354)(cid:1354)Distributions to noncontrolling interests
(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash us(cid:59)d in (cid:67)nancin(cid:93) acti(cid:136)iti(cid:59)s
(cid:1354)(cid:1354)Effect of currency exchange rate changes on cash and cash equivalents
(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) chan(cid:93)(cid:59) in cash and cash (cid:59)(cid:116)ui(cid:136)a(cid:1140)(cid:59)n(cid:124)s
(cid:1354)(cid:1354)Cash and cash equivalents, beginning of year
(cid:1354)(cid:1354)(cid:1354)(cid:7)ash and cash (cid:59)(cid:116)ui(cid:136)a(cid:1140)(cid:59)n(cid:124)s(cid:311) (cid:59)nd o(cid:61) y(cid:59)a(cid:117)
See accompanying notes to consolidated financial statements.
Year ended December 31,
2020
2019
2018
(cid:362) 107.8 (cid:362) 321.1 (cid:362)
212.1
(338.0)
(434.3)
179.6
(10.2)
27.2
0.8
8.5
(5.4)
(81.0)
(0.9)
32.3
6.4
59.7
0.7
4.5
(4.6)
(12.6)
(88.6)
34.1
827.8
187.6
(4.6)
26.7
9.3
1.6
(5.9)
(179.7)
(0.1)
30.2
3.8
74.1
1.0
(25.8)
(24.5)
(19.5)
(2.7)
0.6
701.0
(70.1)
(194.1)
(210.9)
(191.1)
(12.1)
10.2
177.5
(111.6)
15.5
115.0
(266.0)
33.4
(376.1)
(40.4)
206.1
(14.6)
39.3
13.5
1.7
(11.7)
(78.7)
(0.6)
37.1
61.4
0.6
1.9
(0.6)
42.1
93.1
(2.2)
5.8
1,386.1
43.4
(355.8)
(216.0)
(5.0)
(0.2)
7.4
63.7
(396.1)
10.7
Year ended December 31,
2020
2019
2.2
(1.2)
4.2
2018
(0.6)
(29.1)
81.0
590.8
182.3
593.1
200.0
296.4
(487.1)
(5.6)
(57.4)
(126.1)
(13.6)
1.2
4.5
(18.9)
(206.6)
19.6
391.2
573.9
125.0
(200.0)
488.6
(391.4)
(4.8)
(20.7)
295.2
(114.9)
(2.6)
(11.2)
15.0
(264.0)
(85.8)
8.9
85.9
488.0
246.6
225.0
(450.0)
725.0
(866.8)
(9.5)
(177.9)
(111.2)
(17.2)
23.2
(116.0)
(528.8)
(20.7)
136.7
351.3
(cid:362) 965.1
(cid:362) 573.9
(cid:362) 488.0
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—
—
—
Consolidated Statements of Cash Flows (continued)
(cid:34)u(cid:114)(cid:114)(cid:1140)(cid:59)(cid:108)(cid:59)n(cid:124)a(cid:1140) cash (cid:89)o(cid:137) in(cid:61)o(cid:117)(cid:108)ation(cid:313)
(Dollars in millions)
Cash paid for:
(cid:1354)Interest(1)(2)
(cid:1354)Income taxes
Year ended December 31,
2020
2019
2018
(cid:362) 209.7
12.6
(cid:362) 211.1
20.6
(cid:362) 225.3
6.6
(1) $4.3 million, $3.5 million, and $6.9 million attributable to non-controlling interests for the years ended
December 31, 2020, 2019, and 2018.
(2) Excludes $3.4 million, $3.8 million, and $3.9 million of capitalized interest during the for the years ended
December 31, 2020, 2019 and 2018.
As of December 31, 2020, 2019, and 2018 we have (cid:362)101.7 million, (cid:362)54.5 million,
and (cid:362)88.0 million, respectively, of restricted cash, which is included in cash and cash
equivalents, that primarily relates to lender reserves associated with consolidated
mortgages that we hold on properties as well as escrow deposits associated with
acquisitions and dispositions. These reserves typically relate to interest, tax, insurance
and future capital expenditures at the properties.
(cid:34)u(cid:114)(cid:114)(cid:1140)(cid:59)(cid:108)(cid:59)n(cid:124)a(cid:1140) disc(cid:1140)osu(cid:117)(cid:59) o(cid:61) non(cid:330)cash in(cid:136)(cid:59)stin(cid:93) and (cid:67)nancin(cid:93) acti(cid:136)iti(cid:59)s(cid:313)
During the year ended December 31, 2020, the Company deconsolidated its interest
in KW Real Estate II (“KW Europe Fund II”) that were previously consolidated in the
Company(cid:317)s financial statements. The portion of the Company(cid:317)s share of real estate,
mortgage loan and other balance sheet items were removed from the consolidated
balance sheet. These items along with an increase of (cid:362)7.8 million to unconsolidated
investments were all recorded as non-cash activities.
During the year ended December 31, 2020, the Company sold its interest in a
development pro(cid:102)ect in the Western (cid:38)nited States to its equity partner. The Company
received cash, a loan receivable and three parcels of land valued at (cid:362)16.5 million
that the Company now wholly owns. The parcels of land were treated as a non-cash
increase to the real estate balance.
Due to the adoption of AS(cid:38) 2016-02 on January 1, 2019, the Company recorded
a right of use asset and a corresponding lease liability of (cid:362)13.6 million, which was
recorded as a component of other assets and accrued expenses, respectively, in the
accompanying consolidated balance sheets.
During the year ended December 31, 2019, the Company deconsolidated its
interests in the State Street office building, Capital Dock office buildings and Capital
Dock residential tower in Dublin, Ireland that were previously consolidated in the
Company(cid:317)s financial statements. The portion of the Company(cid:317)s share of real estate,
mortgage loan and other balance sheet items were removed from the consolidated
balance sheet. These items along with an increase of (cid:362)125.5 million to unconsolidated
investments were all recorded as non-cash activity.
During the year ended December 31, 2019, the Company sold a 20(cid:1143) interest across
three assets in Dublin, Ireland comprising 468 multifamily units into the (cid:102)oint venture
with A(cid:42)A that were previously wholly owned by the Company. As the Company no
longer controlled the assets it deconsolidated its interests in these assets. The portion of
the Company(cid:317)s share of real estate, mortgage loan and other balance sheet items were
removed from the consolidated balance sheet. The Company has approximately (cid:362)23
million as part of cash (cid:89)ows received from investing activity relating to the 20(cid:1143) interest
it sold. The remaining 80(cid:1143) of these items along with an increase of (cid:362)92.2 million to
unconsolidated investments were all recorded as non-cash activity.
During the year ended December 31, 2018, the Company gained control over a pool
of loans secured by six hotels located in the (cid:38)nited Kingdom that were previously
accounted for as loan purchases. The assets and liabilities of these properties were
consolidated in the Company(cid:317)s financial statements at fair value. The hotels were
subsequently sold during the fourth quarter of 2018.
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Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
NOTE 1—ORGANIZATION
Kennedy-Wilson Holdings, Inc. (“KWH,” NYSE: KW), a Delaware corporation and its
wholly owned and consolidated subsidiaries (collectively the “Company” or “Kennedy
Wilson”), is a global real estate investment company. The Company owns, operates,
and invests in real estate both on its own and through its investment management
pla(cid:127)orm. The Company focuses on multifamily and office properties in the Western
(cid:38)nited States, (cid:38)nited Kingdom and Ireland.
NOTE 2—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BASIS OF PRESENTATION(cid:332)The consolidated financial statements include the
accounts of Kennedy Wilson and voting interest entities which it controls. All
intercompany balances and transactions have been eliminated in consolidation. In
addition, Kennedy Wilson evaluates its relationships with other entities to identify
whether they are variable interest entities (“VIE”) as defined by Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 810,
Consolidation and to assess whether it is the primary beneficiary of such entities. In
determining whether Kennedy Wilson is the primary beneficiary of a VIE, qualitative
and quantitative factors are considered, including, but not limited to: the amount
and characteristics of Kennedy Wilson(cid:317)s investment(cid:312) the obligation or likelihood for
Kennedy Wilson to provide financial support(cid:312) Kennedy Wilson(cid:317)s ability to control
or significantly in(cid:89)uence key decisions for the VIE(cid:312) and the similarity with and
significance to the business activities of Kennedy Wilson.
The Company determines the appropriate accounting method with respect to all
investments that are not VIEs based on the control-based framework (controlled
entities are consolidated) provided by the consolidations guidance in ASC Subtopic
810. The Company accounts for (cid:102)oint ventures where it is deemed that the Company
does not have control through the equity method of accounting while (cid:102)oint ventures
that the Company controls are consolidated in Kennedy Wilson(cid:317)s financial statements.
(cid:38)SE OF ESTIMATES(cid:332)The preparation of the accompanying consolidated financial
statements in conformity with (cid:38).S. generally accepted accounting principles (“GAAP”)
requires management to make estimates and assumptions about future events. These
estimates and the underlying assumptions affect the amounts of assets and liabilities
reported, disclosure about contingent assets and liabilities, and reported amounts
of revenues and expenses. Management evaluates its estimates and assumptions on
an ongoing basis using historical experience and other factors, including the current
economic environment, which management believes to be reasonable under the
circumstances. Management ad(cid:102)usts such estimates and assumptions when facts and
circumstances dictate. As future events and their effects cannot be determined with
precision, actual results could differ significantly from these estimates. Changes in
those estimates will be re(cid:89)ected in the financial statements in future periods.
REVEN(cid:38)E RECOGNITION(cid:332)Revenue consists of rental and hotel income,
management fees (including performance fees), leasing and commission fees, and
sales of real estate. ASC Topic 606, Revenue from Contracts with Customers, is a five
step model to recogni(cid:140)e revenue from customer contracts. The model identifies
the contract, any separate performance obligations in the contract, determines the
transaction price, allocates the transaction price and recogni(cid:140)es revenue when the
performance obligations are satisfied. Management has concluded that, with the
exception of performance fees, the nature of the Company(cid:317)s revenue streams is
such that the requirements are generally satisfied at the time that the fee becomes
receivable.
Rental income from operating leases is generally recogni(cid:140)ed on a straight-line basis
over the terms of the leases in accordance with ASC Topic 842, Leases. Refer to
section COVID-19 Lease Modification Accounting Relief below for the impact of rent
deferrals and other lease concessions to lessees on the Company(cid:317)s rental income
amounts. Hotel income is earned when rooms are occupied or goods and services
have been delivered or rendered. Sales of real estate are recogni(cid:140)ed when title to
the real property passes to the buyer and there is no continuing involvement in the
real property.
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Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
Management fees are primarily comprised of investment management and property
services fees. Investment management fees are earned from limited partners of
funds, co-investments, or separate accounts and are generally based on a fixed
percentage of committed capital or net asset value. Property services fees are earned
for managing the operations of real estate assets and are generally based on a fixed
percentage of the revenues generated from the respective real estate assets. The
Company sold its property services group (“Property Services”) at the beginning of the
fourth quarter 2020 with the sale of KWP (as further discussed in Note 10(cid:332)Related
Party Transactions) and will have minimal property services fees going forward. The
Company provides investment management and property services on investments
it also has an ownership interest in. Fees earned on consolidated properties are
eliminated in consolidation and fees on unconsolidated investments are eliminated for
the portion that relate to the Company(cid:317)s ownership interest.
Commissions primarily consist of acquisition and disposition fees, auction and
consulting fees and, prior to the sale of Property Services, also consisted of real estate
sales commissions, and leasing commissions. Acquisition and disposition fees are
earned for identifying and closing investments on behalf of investors and are based
on a fixed percentage of the acquisition or disposition price, as applicable. Acquisition
and disposition fees are recogni(cid:140)ed upon the successful completion of an acquisition
or disposition a(cid:91)er all required services have been performed. In the case of auction
and real estate sales commissions, the revenue is generally recogni(cid:140)ed when escrow
closes. In accordance with the guidelines established for Reporting Revenue Gross
as a Principal versus Net as an Agent in the ASC Topic 606, Kennedy Wilson records
commission revenues and expenses on a gross basis. Of the criteria listed in ASC
Topic 606, Kennedy Wilson is the primary obligor in the transaction, does not have
inventory risk, performs all or part of the service, has credit risk, and has wide latitude
in establishing the price of services rendered and discretion in selection of agents and
determination of service specifications. Leasing fees that are payable upon tenant
occupancy, payment of rent or other events beyond Kennedy Wilson(cid:317)s control are
recogni(cid:140)ed upon the occurrence of such events.
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Sales of real estate are recogni(cid:140)ed when title to the real property passes to the
buyer and there is no continuing involvement in the real property. ASC Subtopic
610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets,
was also adopted effective January 1, 2018. Management concluded that the new
standard did not have a significant impact on the amount, timing or classification of
real estate sales in the financial statements or related disclosures. This conclusion
was based on the Company(cid:317)s current business mix and general approach to sales
of real estate which are generally completed without seller financing or continuing
involvement that would indicate that a performance obligation is not met at the time
the transaction closes. With the adoption of ASC Subtopic 610-20, the Company
recogni(cid:140)es the entire gain attributed to contributions of real estate properties to
unconsolidated entities.
Interest income from investments in performing loans which Kennedy Wilson
originates or acquires are recogni(cid:140)ed at the stated interest rate plus any amorti(cid:140)ation
of premiums/discounts or fees earned on the loans. Interest income from investments
in loans acquired at a discount are recogni(cid:140)ed using the effective interest method.
When a loan or loans are acquired with deteriorated credit quality primarily for the
rewards of collateral ownership, such loans are accounted for as loans until Kennedy
Wilson is in possession of the collateral. However, accrual of income is not recorded
during the conversion period under ASC Subtopic 310-30-25, Receivables—Loans and
Debt Securities Acquired with Deteriorated Credit Quality. Income is recogni(cid:140)ed to the
extent that cash is received from the loan.
REAL ESTATE AC(cid:32)(cid:38)ISITIONS(cid:332)The purchase price of acquired properties is recorded
to land, buildings and building improvements and intangible lease value (value of
above-market and below-market leases, acquired in-place lease values, and tenant
relationships, if any). The ownership of the other interest holders in consolidated
subsidiaries is re(cid:89)ected as noncontrolling interests. Real estate is recorded based on
cumulative costs incurred and allocated based on relative fair value.
The valuations of real estate are based on management estimates of the real estate
assets using income and market approaches. The indebtedness securing the real
estate is valued, in part, based on third party valuations and management estimates
also using an income approach.
(cid:38)NCONSOLIDATED INVESTMENTS(cid:332)Kennedy Wilson has a number of (cid:102)oint venture
interests that were formed to acquire, manage, and/or sell real estate. Investments in
unconsolidated investments are accounted for under the equity method of accounting
as Kennedy Wilson can exercise significant in(cid:89)uence, but does not have the ability
to control the unconsolidated investment. An investment in an unconsolidated
investment is recorded at its initial investment and is increased or decreased by
Kennedy Wilson(cid:317)s share of income or loss, plus additional contributions and less
distributions. A decline in the value of an unconsolidated investment that is other than
temporary is recogni(cid:140)ed when evidence indicates that such a decline has occurred in
accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures.
Kennedy Wilson records its investments in certain commingled funds it manages
and sponsors (the “Funds”) that are investment companies under the ASC Topic 946,
Financial Services—Investment Companies, based upon the net assets that would be
allocated to its interests in the Funds assuming the Funds were to liquidate their
investments at fair value as of the reporting date. Thus, the Funds re(cid:89)ect their
investments at fair value, with unreali(cid:140)ed gains and losses resulting from changes in
fair value re(cid:89)ected in their earnings.
Additionally, Kennedy Wilson elected the fair value option for 29 investments in
unconsolidated investment entities (“FV Option” investments). Due to the nature of
these investments, Kennedy Wilson elected to record these investments at fair value
in order to report the change in value in the underlying investments in the results of
our current operations.
Performance fees or carried interest are allocated to the general partner, special
limited partner or asset manager of Kennedy Wilson(cid:317)s real estate funds based on the
cumulative performance of the fund and are sub(cid:102)ect to preferred return thresholds
of the limited partners. At the end of each reporting period, Kennedy Wilson
calculates the performance fee that would be due as if the fair value of the underlying
investments were reali(cid:140)ed as of such date, irrespective of whether such amounts have
been reali(cid:140)ed. As the fair value of underlying investments varies between reporting
periods, it is necessary to make ad(cid:102)ustments to amounts recorded as performance fees
to re(cid:89)ect either (a) positive performance resulting in an increase in the performance
fee allocated to the general partner or asset manager or (b) negative performance
that would cause the amount due to Kennedy Wilson to be less than the amount
previously recogni(cid:140)ed as revenue, resulting in a negative ad(cid:102)ustment to performance
fees allocated to the general partner or asset manager.
The Company has concluded that performance fees to the Company, based on
cumulative fund performance to-date, represent carried interests. For equity method
investments, these fees are included as a component of the income reported from
the underlying equity method investee and for equity method investments where the
fair value option has been elected, these fees are included in the determination of fair
value under Topic 820, Fair Value Measurement.
FAIR VAL(cid:38)E MEAS(cid:38)REMENTS(cid:332)Kennedy Wilson accounts for fair value
measurements of financial assets and financial liabilities and for fair value
measurements of non-financial items that are recogni(cid:140)ed or disclosed at fair value in
the financial statements on a recurring basis under the provisions of ASC Topic 820.
ASC Topic 820 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When estimating fair value in the absence of an orderly
transaction between market participants, valuations of real estate are based on
management estimates of the real estate assets using income and market approaches.
The indebtedness securing the real estate and the investments in debt securities
are valued, in part, based on third party valuations and management estimates also
using an income approach. The use of different market assumptions or estimation
methodologies may have a material impact on the estimated fair value amounts. See
Note 5 for further discussion of the estimation uncertainty related to COVID-19.
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Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
FAIR VAL(cid:38)E OF FINANCIAL INSTR(cid:38)MENTS(cid:332)The estimated fair value of financial
instruments is determined using available market information and appropriate
valuation methodologies. Considerable (cid:102)udgment, is necessary, however, to interpret
market data and develop the related estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that could be reali(cid:140)ed
upon disposition of the financial instruments. The use of different market assumptions
or estimation methodologies may have a material impact on the estimated fair
value amounts.
DISTRIB(cid:38)TIONS FROM (cid:38)NCONSOLIDATED INVESTMENTS(cid:332)The Company utili(cid:140)es
the nature of distributions approach and distributions are reported under operating
cash (cid:89)ow unless the facts and circumstances of a specific distribution clearly indicate
that it is a return of capital (e.g., a liquidating dividend or distribution of the proceeds
from unconsolidated investments(cid:317) sale of assets), in which case it is reported as an
investing activity. This enables Kennedy Wilson to look to the nature and source of
the distribution received and classify it appropriately between operating and investing
activities on the statement of cash (cid:89)ows based upon the source.
FOREIGN C(cid:38)RRENCIES(cid:332)The financial statements of Kennedy Wilson(cid:317)s subsidiaries
located outside the (cid:38)nited States are measured using the local currency as this is their
functional currency. The assets and liabilities of these subsidiaries are translated at the
rates of exchange at the balance sheet date, and income and expenses are translated
at the average monthly rate. The foreign currencies include the euro and the British
pound sterling. Cumulative translation ad(cid:102)ustments, to the extent not included in
cumulative net income, are included in the consolidated statement of equity as a
component of accumulated other comprehensive income.
Investment level debt is generally incurred in local currencies. Fluctuations in foreign
exchanges rates may have a significant impact on the results of the Company(cid:317)s
operations. In order to manage the effect of these (cid:89)uctuations, the Company enters
into hedging transactions, in the form of currency derivative contracts, that are
designed to reduce its book equity exposure to foreign currencies. KWE has also
entered into currency derivative contracts to manage its exposure to euro to British
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pound currency (cid:89)uctuations. See Note 5 for a complete discussion on currency
derivative contracts.
DERIVATIVE INSTR(cid:38)MENTS AND HEDGING ACTIVITIES(cid:332)Kennedy Wilson has
derivatives to reduce its exposure to foreign currencies. All derivative instruments
are recogni(cid:140)ed as either assets or liabilities in the balance sheet at their respective
fair values. For derivatives designated in hedging relationships, changes in fair value
of cash (cid:89)ow hedges or net investment hedges are recogni(cid:140)ed in accumulated other
comprehensive income, to the extent the derivative is effective at offse(cid:2478)ng the
changes in the item being hedged until the hedged item affects earnings.
Fluctuations in foreign exchanges rates may have a significant impact on the
Company(cid:317)s results of operations. In order to manage the potential exposure
from adverse changes in foreign exchange rates arising from the Company(cid:317)s net
investments in foreign operations, the Company may enter into currency derivative
contracts to hedge all or portions of the net investments in the Company(cid:317)s non-(cid:38).S.
dollar denominated foreign operations.
GOODWILL(cid:332)Goodwill results from the difference between the purchase price and
the fair value of net assets acquired based upon the purchase method of accounting
for business combinations. In accordance with ASC Subtopic 350-20, Accounting
for Goodwill, goodwill is reviewed for impairment on an annual basis. The Company
performs its annual review of impairment at year end and when a triggering event
occurs between annual year end reviews. As a result of the evaluation performed as
described above, Kennedy Wilson has determined that there was no impairment of
goodwill as of December 31, 2020, 2019 and 2018.
CASH AND CASH E(cid:32)(cid:38)IVALENTS(cid:332)Cash and cash equivalents consist of cash and all
highly liquid investments purchased with maturities of three months or less. Cash and
cash equivalents are invested in institutions insured by government agencies. Certain
accounts contain balances in excess of the insured limits. Kennedy Wilson(cid:317)s operations
and financial position are affected by (cid:89)uctuations in currency exchange rates between
the euro and British pound sterling against the (cid:38).S. Dollar. As of December 31, 2020,
2019, and 2018 we have (cid:362)101.7 million, (cid:362)54.5 million, and (cid:362)88.0 million,
respectively, of restricted cash, which is included in cash and cash equivalents, that
primarily relates to lender reserves associated with consolidated mortgages that
we hold on properties as well as escrow deposits associated with acquisitions and
dispositions. These reserves typically relate to interest, tax, insurance and future
capital expenditures at the properties.
LONG-LIVED ASSETS(cid:332)Kennedy Wilson reviews its long-lived assets (excluding
goodwill) whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable in accordance with ASC Subtopic 360-10,
Impairment of Long-Lived Assets. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to estimated
undiscounted future cash (cid:89)ows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated undiscounted future cash (cid:89)ows,
an impairment charge is recogni(cid:140)ed in gain on sale of real estate, net in the amount
by which the carrying amount of the asset exceeds the fair value of the asset. Assets
to be disposed of are presented separately in the balance sheet and reported at
the lower of the carrying amount or fair value less costs to sell, and are no longer
depreciated. The assets and liabilities of the assets to be disposed of are classified as
held for sale and would be presented separately in the appropriate asset and liability
sections of the balance sheet.
ACCO(cid:38)NTS RECEIVABLE(cid:332)Accounts receivable are recorded at the contractual
amount as determined by the underlying agreements and do not bear interest.
The Company recogni(cid:140)es revenue to the extent that amounts are probable that
substantially all rental income will be collected. See COVID-19 Lease Modification
Accounting Relief below for discussion of bad debt expense recorded for the year
ended December 31, 2020. For the year ended December 31, 2020 the Company
had (cid:362)15.0 million of bad debt expense recorded as a reduction in rental revenue in
accordance with ASC 842. For the year ended December 31, 2019 the Company had
an immaterial amount of bad debt expense recorded to rental income.
CONCENTRATION OF CREDIT RISK(cid:332)Financial instruments that sub(cid:102)ect
Kennedy Wilson to credit risk consist primarily of accounts and notes receivable,
cash equivalents and derivative instruments. Credit risk is generally diversified due
to the large number of entities composing Kennedy Wilson(cid:317)s customer base and their
geographic dispersion throughout the (cid:38)nited States, the (cid:38)nited Kingdom, Ireland,
Spain and Italy. Kennedy Wilson performs ongoing credit evaluations of its customers
and debtors.
EARNINGS PER SHARE(cid:332)Basic earnings per share is computed based upon the
weighted average number of shares of common stock outstanding during the periods
presented. Diluted earnings per share is computed based upon the weighted average
number of shares of common stock and potentially dilutive securities outstanding
during the periods presented. The dilutive impact of potentially dilutive securities
including convertible securities, and unvested stock which were outstanding during
the period. (cid:38)nvested stock are calculated by the “treasury stock” method and the
convertible securities under the “if converted” method.
COMPREHENSIVE INCOME (LOSS)(cid:332)Comprehensive income (loss) consists of
net income (loss) and other comprehensive income (loss). In the accompanying
consolidated balance sheets, accumulated other comprehensive income consists of
foreign currency translation ad(cid:102)ustments and unreali(cid:140)ed gains (losses) on interest rate
swaps and derivative instruments.
REP(cid:38)RCHASE OF E(cid:32)(cid:38)ITY INSTR(cid:38)MENTS(cid:332)(cid:38)pon the decision to retire repurchased
equity instruments, Kennedy Wilson records the retirement as a reduction to
additional paid in capital for the amount that shares were initially issued at with the
excess paid going to retained earnings.
SHARE-BASED PAYMENT ARRANGEMENTS(cid:332)Kennedy Wilson accounts for its
share-based payment arrangements under the provisions of ASC Subtopic 718-10,
Share-Based Payments. Compensation cost for employee service received in exchange
for an award of equity instruments is based on the grant-date fair value of the share-
based award that is ultimately settled in equity of Kennedy Wilson. The cost of
employee services is recogni(cid:140)ed over the period during which an employee provides
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Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
service in exchange for the share-based payment award. Share-based payment
arrangements with only services conditions that vest ratably over the requisite service
period are recogni(cid:140)ed on the straight-line basis and performance awards that vest
ratably are recogni(cid:140)ed on a tranche by tranche basis over the performance period.
INCOME TA(cid:42)ES(cid:332)Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recogni(cid:140)ed for the future tax
consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax basis and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recogni(cid:140)ed in income
in the period that includes the enactment date. In accordance with accounting for
uncertainty in ASC Subtopic 740-10, Income Taxes, Kennedy Wilson recogni(cid:140)es the
effect of income tax positions only if those positions are more likely than not of being
sustained. Recogni(cid:140)ed income tax positions are measured at the largest amount that is
greater than 50(cid:1143) likely of being reali(cid:140)ed. Changes in recognition or measurement are
re(cid:89)ected in the period in which the change in (cid:102)udgment occurs.
Kennedy Wilson records interest related to unrecogni(cid:140)ed tax benefits in interest
expense and penalties in general and administrative expenses.
NONCONTROLLING INTERESTS(cid:332)Noncontrolling interests are reported within
equity as a separate component of Kennedy Wilson(cid:317)s equity in accordance with ASC
Subtopic 810-10. Revenues, expenses, gains, losses, net income or loss, and other
comprehensive income are reported in the Consolidated Statements of Income at
the consolidated amounts and net income and comprehensive income attributable to
noncontrolling interests are separately stated.
RECENT ACCO(cid:38)NTING PRONO(cid:38)NCEMENTS
COVID-19 LEASE MODIFICATION ACCO(cid:38)NTING RELIEF(cid:332)Due to the business
disruptions and challenges severely affecting the global economy caused by the
COVID-19 pandemic, many lessors may be required to provide rent deferrals and
other lease concessions to lessees. While the lease modification guidance in ASC
Topic 842 addresses routine changes to lease terms resulting from negotiations
between the lessee and the lessor, this guidance did not contemplate concessions
being so rapidly executed to address the sudden liquidity constraints of some lessees
arising from the COVID-19 pandemic and restrictions intended to prevent its spread.
In April 2020, the FASB staff issued a question and answer document (the “Lease
Modification (cid:32)&A”) focused on the application of lease accounting guidance to lease
concessions provided as a result of the COVID-19 pandemic. (cid:38)nder existing lease
guidance, on a lease by lease basis the Company would have to determine, if a lease
concession was the result of a new arrangement reached with the tenant (treated
within the lease modification accounting framework) or if a lease concession was
under the enforceable rights and obligations within the existing lease agreement
(precluded from applying the lease modification accounting framework). The Lease
Modification (cid:32)&A allows the Company, if certain criteria have been met, to bypass
the lease by lease analysis, and instead elect to either apply the lease modification
accounting framework or not, with such election applied consistently to leases with
similar characteristics and similar circumstances. The Company had no significant
deterioration to its rental collections during the year ended December 31, 2020.
During the year ended December 31, 2020, the Company identified (cid:362)15.0 million of
receivables and other lease-related assets that are no longer probable of collection.
Accordingly, the Company will account for these leases on a cash basis and recogni(cid:140)e
rental income to the extent the Company receives cash from the tenants. Of the
(cid:362)15.0 million identified, (cid:362)13.5 million was related to the Company(cid:317)s Consolidated
por(cid:127)olio and recorded as a reduction of rental income and (cid:362)1.5 million was related
to the Company(cid:317)s share of Co-Investments por(cid:127)olio and recorded as a reduction of
income from unconsolidated investments. The Company has received some requests
for lease modifications and has granted some deferrals but the amount that may
no longer be probable of collection over the lease term generally has not changed
so there has been minimal impact to rental revenues from lease modifications. The
Company will continue to evaluate the extent of lease concessions granted to tenants
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as a result of the COVID-19 pandemic in future periods and the elections made by the
Company at the time of entering into such concessions.
Effective January 1, 2019, the Company adopted AS(cid:38) 2016-02, Leases (Topic 842),
and other related follow-on AS(cid:38)s issued in connection with ASC Topic 842, which sets
out the principles for the recognition, measurement, presentation and disclosure of
leases for both parties to a contract (i.e., lessees and lessors). The effects of adoption
discussed below were not considered material to the Company(cid:317)s consolidated
financial statements.
Lessees
On January 1, 2019, due to the adoption of AS(cid:38) 2016-02 the Company has
recorded a right of use asset and a corresponding lease liability of (cid:362)13.6 million,
which is recorded as a component of other assets, net and accrued expenses,
respectively, in the accompanying consolidated balance sheets. The average
remaining lease term is 95 years and the weighted average discount rate is 2.9(cid:1143)
as of December 31, 2020.
Lessors
The Company elected the practical expedient to not separate rental recovery
revenue from the associated rental revenue as the timing and pattern of transfer
are the same for operating leases. Accordingly, the Company accounts and
presents for rental revenue and rental recovery revenue as a single component.
Consistent with the transition guidance under AS(cid:38) 2018-11, Leases (Topic 842):
Targeted Improvements, all prior period disclosures remain in accordance with ASC
Topic 840.
In January 2017, the FASB issued AS(cid:38) 2017-04, Intangibles—Goodwill and Other (Topic
350): Simplifying the Test for Goodwill Impairment, which requires an entity to no longer
perform a hypothetical purchase price allocation to measure goodwill impairment.
Instead, impairment will be measured using the difference between the carrying
amount and the fair value of the reporting unit. The Company adopted this standard
on January 1, 2020 and the adoption of this standard did not have a material impact
on the Company(cid:317)s consolidated financial statements.
In August 2017, the FASB issued AS(cid:38) 2017-12, Derivatives and Hedging (Topic
815): Targeted Improvements to Accounting for Hedging Activities, which changes
the recognition and presentation requirements of hedge accounting, including:
eliminating the requirement to separately measure and report hedge ineffectiveness,
and presenting all items that affect earnings in the same income statement line
item as the hedged item. The AS(cid:38) also provides new alternatives for (a) applying
hedge accounting to additional hedging strategies, (b) measuring the hedged item
in fair value hedges of interest rate risk, (c) reducing the cost and complexity of
applying hedge accounting by easing the requirements for effectiveness testing,
hedge documentation and application of the critical terms match method, and (d)
reducing the risk of material error correction if a company applies the shortcut
method inappropriately. The Company adopted this standard on January 1, 2019
and the adoption of this standard did not have a material impact on the Company(cid:317)s
consolidated financial statements.
In February 2018, the FASB issued AS(cid:38) 2018-02, Income Statement—Reporting
Comprehensive Income (Topic 220)—Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income, which allows a reclassification from
accumulated other comprehensive income to retained earnings for stranded tax
effects resulting from the Tax Cuts and Jobs Act. The Company adopted this standard
on January 1, 2019 and the adoption of this standard did not have a material impact
on the Company(cid:317)s consolidated financial statements.
In August 2018, the FASB issued AS(cid:38) 2018-13, Disclosure Framework—Changes to
the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure
requirements on fair value measurements in ASC Topic 820, including: the removal
of valuation processes for Level 3 fair value measurements. The AS(cid:38) also adds new
requirements including (a) the changes in unreali(cid:140)ed gains and losses for the period
included in other comprehensive income for recurring level 3 fair value measurements
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•
•
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
and (b) the range and weighted average of significant unobservable inputs used to
develop level 3 fair value measurements. The Company adopted this standard on
January 1, 2020 and the adoption of this standard did not have a material impact on
the Company(cid:317)s consolidated financial statements.
In June 2016, the FASB updated ASC Topic 326, Financial Instruments—Credit Losses
with AS(cid:38) 2016-13, Measurement of Credit Losses on Financial Instruments (“AS(cid:38)
2016-13”). AS(cid:38) 2016-13 enhances the methodology of measuring expected credit
losses to include the use of forward-looking information to better inform credit
loss estimates. This AS(cid:38) is effective for all entities for annual and interim periods in
fiscal years beginning a(cid:91)er December 15, 2019. In addition, in November 2018 the
FASB issued AS(cid:38) 2018-19, which clarifies that receivables arising from operating
leases are not within the scope of the credit losses standard, but rather, should be
accounted for in accordance with ASC Topic 842. The Company adopted this standard
on January 1, 2020 and the adoption of this standard did not have a material impact
on Kennedy Wilson(cid:317)s consolidated financial statements. During the course of 2020
the Company has launched a debt pla(cid:127)orm originating and acquiring performing
loans. As of December 31, 2020 the Company has (cid:362)107.1 million of investments in
loan originations and acquisitions. Since the Company has no history of having issues
with loans being uncollectible and current loans are performing and backed by credit
worthy borrowers the Company does not expect significant credit losses but will
monitor and evaluate loans in accordance with AS(cid:38) 2016-13.
In March 2020, the FASB issued AS(cid:38) No. 2020-04, Reference Rate Reform (Topic 848),
which provides optional expedients and exceptions for applying GAAP to contracts,
hedging relationships, and other transactions affected by reference rate reform
if certain criteria are met. The amendments apply only to contracts, hedging
relationships, and other transactions that reference LIBOR or another reference
rate expected to be discontinued because of reference rate reform. The AS(cid:38) was
effective upon issuance on a prospective basis beginning January 1, 2020 and may
be elected over time as reference rate reform activities occur. The Company is
currently evaluating the impact of adopting AS(cid:38) 2020-04 on its consolidated financial
statements as the Company has not had any reference rate reform activities occur
through December 31, 2020.
In December 2019, the FASB issued AS(cid:38) No. 2019-12, Simplifying the Accounting
for Income Taxes (Topic 740), removes certain exceptions to the general principles in
Topic 740 related to the approach for intraperiod tax allocation, the methodology
for calculating income taxes in an interim period and the recognition of deferred tax
liabilities for outside basis differences. The new guidance also simplifies aspects of the
accounting for franchise taxes and enacted changes in tax laws or rates and clarifies
the accounting for transactions that result in a step-up in the tax basis of goodwill.
This AS(cid:38) is effective for the Company for all interim and annual periods beginning
January 1, 2021, with early adoption permitted. The Company early adopted AS(cid:38)
2019-12 beginning January 1, 2020 on a prospective basis. The adoption of this
standard did not have an impact on the Company(cid:317)s condensed consolidated financial
statements and related disclosures.
The FASB did not issue any other AS(cid:38)s during the year ended December 31, 2020
that the Company expects to be applicable and have a material impact on the
Company(cid:317)s financial position or results of operations.
RECLASSIFICATIONS(cid:332)Certain balances included in prior year(cid:317)s financial statements
have been reclassified to conform to the current year(cid:317)s presentation.
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NOTE 3—REAL ESTATE AND ACQUIRED IN PLACE LEASE VALUE
The following table summari(cid:140)es the Company(cid:317)s investment in consolidated real estate
properties at December 31, 2020 and 2019:
(Dollars in millions)
Land
Buildings
Building improvements
Acquired in-place lease values
Less accumulated depreciation and amorti(cid:140)ation
Real estate and acq uired in pl ace lease values, net of accumulated
d(cid:59)(cid:114)(cid:117)(cid:59)ciation and a(cid:108)o(cid:117)ti(cid:140)ation
December 31,
2020
2019
(cid:362) 1,225.1
3,436.0
546.6
327.8
5,535.5
(815.0)
(cid:362) 1,330.6
3,630.4
469.5
352.9
5,783.4
(703.2)
4
.5
5
.2
Real property, including land, buildings, and building improvements, are included in
real estate and are generally stated at cost. Buildings and building improvements are
depreciated on the straight-line method over their estimated lives not to exceed
40 years. Acquired in-place lease values are recorded at their estimated fair value and
depreciated over their respective weighted-average lease term which was 7.5 years
at December 31, 2020.
Depreciation and amorti(cid:140)ation expense on buildings, building improvements and
acquired in-place lease values for the years ended December 31, 2020, 2019 and
2018 was (cid:362)165.7 million, (cid:362)173.4 million and (cid:362)190.3 million, respectively.
Consolidated Acquisitions
The purchase of property is recorded to land, buildings, building improvements,
and intangible lease value (including the value of above-market and below-market
leases, acquired in-place lease values, and tenant relationships, if any) based on their
respective estimated relative fair values. The purchase price generally approximates
the fair value of the properties as acquisitions are generally transacted with third-
party willing sellers.
During the year ended December 31, 2020, Kennedy Wilson acquired the following consolidated properties:
(Dollars in millions)
Location
Description
Western (cid:38).S.
One multifamily property
(cid:38)nited Kingdom One industrial property
Ireland
One commercial property
(1) Excludes net other assets.
Purchase Price Allocation at Acquisition(1)
Acquired
in-place lease
values(2)
Investment debt
KWH
Shareholders(cid:317)
Equity
Land
Building
(cid:362) 13.4
(cid:362) 53.6
(cid:362) 0.5
(cid:362) 38.7
(cid:362) 106.3
40.2
1.3
40.2
1.3
(cid:362) 13.4
(cid:362) 95.1
(cid:362) 0.5
(cid:362) 38.7
(cid:362) 147.8
(2) Above- and below-market leases are included in other assets, net and accrued expenses and other liabilities, respectively, on the accompanying consolidated balance sheets.
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$
,
7
2
0
$
,
0
8
0
—
—
—
—
—
—
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
During the year ended December 31, 2019, Kennedy Wilson acquired the following consolidated properties:
(Dollars in millions)
Location
Description
Western (cid:38).S.
One multifamily property and one commercial property
(cid:38)nited Kingdom One commercial property and one industrial property
Ireland
One commercial property
Purchase Price Allocation at Acquisition(1)
Acquired
in-place lease
values(2)
Investment debt
KWH
Shareholders(cid:317)
Equity
Land
Building
(cid:362) 39.9
(cid:362) 123.0
(cid:362) 37.2
(cid:362) 112.2
(cid:362) 87.9
29.0
7.2
39.2
31.7
2.9
3.4
58.6
44.0
12.5
(1.7)
(cid:362) 76.1
(cid:362) 193.9
(cid:362) 43.5
(cid:362) 214.8
(cid:362) 98.7
(1) Excludes net other assets.
(2) Above- and below-market leases are included in other assets, net and accrued expenses and other liabilities, respectively, on the accompanying consolidated balance sheets.
Gains on Real Estate, Net
During the years ended December 31, 2020, 2019 and 2018, Kennedy Wilson recogni(cid:140)ed the following net gains on sale of real estate. Included in the net gains for December
31, 2020 is an impairment loss of (cid:362)15.6 million on five retail properties in the (cid:38)nited Kingdom and a residential property in the Western (cid:38)nited States. Included in the net gains
for December 31, 2018 is an (cid:362)1.8 million impairment loss on a vacated office building in the (cid:38)nited Kingdom which was subsequently sold. During the year ended December 31,
2019 there were no impairments on consolidated properties.
(Dollars in millions)
Gain on sale of real estate
Year ended
December 31,
2020
2019
2018
Description
Consolidated(1)
NCI Net of NCI
20 industrial properties (including the deconsolidation of previously consolidated real estate as discussed below), 19 retail properties, three office properties
and one multifamily property in (cid:38)nited Kingdom, two multifamily properties and two office properties in Ireland, one retail property in Spain, and one
multifamily property in Western (cid:38)nited States
11 commercial properties and one hotel in the (cid:38)nited Kingdom, one hotel in Ireland, 10 Spanish retail properties, five retail properties, one hotel, and one
multifamily property in the Western (cid:38)nited States, and the deconsolidation of previously consolidated real estate as discussed below
26 commercial properties in (cid:38)nited Kingdom, three commercial properties in Ireland, two commercials properties in Italy, six multifamily properties in
Ireland, three multifamily properties in Western (cid:38)nited States, and one residential property in Ireland, and one residential property in Western (cid:38)nited States
(cid:362) 353.6 (cid:362) (cid:332)
(cid:362) 353.6
434.9
116.7
318.2
369.6
70.6
299.0
(1) Includes sale of real estate and cost of real estate sold, which are presented net in the table above.
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Deconsolidation of Previously Consolidated Real Estate
(cid:38)nder ASC Subtopic 610-20, due to the transactions resulting in the deconsolidation
for the Company(cid:317)s interest in the new (cid:102)oint ventures representing a noncontrolling
interest of certain assets, the Company recogni(cid:140)ed (i) (cid:362)126.3 million through gain on
sale of real estate, net during the year ended December 31, 2020, (ii) a gain of
(cid:362)317.8 million through gain on sale of real estate, net, of which the Company(cid:317)s share,
net of noncontrolling interest, was (cid:362)212.4 million during the year ended December
31, 2019, and (iii) a gain of (cid:362)169.5 million through gain on sale of real estate, net, of
which the Company(cid:317)s share, net of noncontrolling interest, was (cid:362)102.7 million during
the year ended December 31, 2018.
Leases
The Company leases its operating properties to customers under agreements that
are classified as operating leases. The total minimum lease payments provided for
under the leases are recogni(cid:140)ed on a straight-line basis over the lease term. The
ma(cid:102)ority of the Company(cid:317)s rental expenses, including common area maintenance,
real estate taxes and insurance, are recovered from the Company(cid:317)s tenants. The
Company records amounts reimbursed by customers in the period that the applicable
expenses are incurred, which is generally ratably throughout the term of the lease.
The reimbursements are recogni(cid:140)ed in rental income in the consolidated statements
of operations as the Company is the primary obligor with respect to purchasing and
selecting goods and services from third-party vendors and bearing the associated
credit risk.
The following table summari(cid:140)es the minimum lease payments due from the
Company(cid:317)s tenants on leases with lease periods greater than one year at
December 31, 2020:
(Dollars in millions)
2021
2022
2023
2024
2025
Therea(cid:91)er
Total
Minimum
Rental Revenues(1)
(cid:362) 167.9
156.7
127.8
105.2
87.9
355.3
(cid:362) 1,000.8
(1) These amounts do not reflect future rental revenues from the renewal or replacement of existing leases, rental
increases that are not fixed and exclude reimbursements of rental expenses.
NOTE 4—UNCONSOLIDATED INVESTMENTS
Kennedy Wilson has a number of (cid:102)oint venture interests including commingled
funds and separate accounts, generally ranging from 5(cid:1143) to 50(cid:1143), that were formed
to acquire, manage, develop, service and/or sell real estate. Kennedy Wilson
has significant in(cid:89)uence over these entities, but not control. Accordingly, these
investments are accounted for under the equity method.
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Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
Joint Venture and Fund Holdings—The following table details Kennedy Wilson(cid:317)s
investments in (cid:102)oint ventures by investment type and geographic location as of
December 31, 2020:
(Dollars in millions) Multifamily Commercial
Western (cid:38).S.
Ireland
(cid:38)nited Kingdom
Total
(cid:362) 226.2
389.7
6
.9
(cid:362) 83.0
129.7
56.4
2
.1
Hotel
(cid:362) 86.3
8
.3
Funds
(cid:362) 118.1
3.7
15.4
1
.2
Residential and
Other
(cid:362) 180.8
Total
(cid:362) 694.4
523.1
71.8
1
.8
1
.3
The following table details the Kennedy Wilson(cid:317)s investments in (cid:102)oint ventures by
investment type and geographic location as of December 31, 2019:
(Dollars in millions) Multifamily Commercial
Western (cid:38).S.
Ireland
(cid:38)nited Kingdom
Total
(cid:362) 230.5
378.7
6
.2
(cid:362) 78.1
139.4
48.7
2
.2
Hotel
(cid:362) 72.8
Funds
(cid:362) 139.6
Residential and
Other
(cid:362) 238.7
Total
(cid:362) 759.7
518.1
48.7
7
.8
1
.6
2
.7
1
.5
During the year ended December 31, 2020, the change in unconsolidated investments
primarily relates to (cid:362)111.6 million of cash contributions to unconsolidated
investments, (cid:362)237.2 million of distributions from unconsolidated investments, (cid:362)81.0
million of income from unconsolidated investments (including (cid:362)47.2 million of fair
value gains), a (cid:362)16.4 million non-cash distribution related to the sale of a residential
pro(cid:102)ect in which the Company received three parcels of land that are wholly-owned
and a (cid:362)24.4 million increase related to other items which primarily related to foreign
exchange movements.
As of December 31, 2020 and December 31, 2019, (cid:362)1,136.5 million and (cid:362)1,099.3
million of unconsolidated investments were accounted for at fair value. See Note 5 for
more detail.
Contributions to Joint Ventures—During the year ended December 31, 2020, Kennedy
Wilson contributed (cid:362)111.6 million to (cid:102)oint ventures, primarily to fund investments and
existing development pro(cid:102)ects in Ireland and the Western (cid:38)nited States. In addition,
on December 18, 2020, the Company and a sovereign wealth fund entered into a (cid:102)oint
venture agreement targeting urban logistics properties in the (cid:38)K, with the potential
to expand into Ireland and Spain (“Industrial JV”). The Industrial JV commenced with
Industrial JV investing in an 80(cid:1143) ownership stake in 18 industrial assets located
throughout the (cid:38)nited Kingdom. The Company previously wholly-owned the assets
and continues to hold an interest in these assets subsequent to their sale to the
Industrial JV through its retained 20(cid:1143) ownership interest in the (cid:102)oint venture. As the
Company does not control the Industrial JV, the assets are no longer consolidated and
the Industrial JV is accounted for under the equity method. The Company elected the
fair value option and going forward the investments are accounted for as fair value
unconsolidated investments with operating activity included within income from
unconsolidated investments.
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Distributions from Joint Ventures—The following table details cash distributions by investment type and geographic location for the year ended December 31, 2020:
(Dollars in millions)
Western (cid:38).S.
Ireland
(cid:38)nited Kingdom
Total
Multifamily
Commercial
Funds
Residential and Other
Total
Operating
Investing Operating
Investing Operating
Investing Operating
Investing Operating
Investing
(cid:362) 25.8
8.5
(cid:362) 28.7
2.5
(cid:362) 6.4
12.2
3
.3
3
.2
1
.6
(cid:362) 2.6
96.0
1.1
9
.7
(cid:362) 6.7
0.1
(cid:362) 13.3
(cid:362) (cid:332)
(cid:362) 33.3
(cid:362) 38.9
20.8
(cid:362) 77.9
98.5
1.1
6
.8
1
.3
(cid:362) (cid:332)
3
.3
5
.7
1
.5
Investing distributions resulted primarily from the sales of two multifamily properties
in Ireland and a residential pro(cid:102)ect in the Western (cid:38)nited States.
Income from Unconsolidated Investments—The following table presents income from
unconsolidated investments recogni(cid:140)ed by Kennedy Wilson during the years ended
December 31, 2020, 2019 and 2018:
Year Ended December 31,
(Dollars in millions)
2020
2019
Income from unconsolidated investments(cid:332)operating performance
(cid:362) 43.4
(cid:362) 35.5
Income from unconsolidated investments(cid:332)reali(cid:140)ed gains
Income from unconsolidated investments(cid:332)fair value
Income from unconsolidated investments(cid:332)performance fees
Income from unconsolidated investments(cid:332)reali(cid:140)ed losses and
(cid:1354)impairment
2018
(cid:362) 18.8
22.1
10.4
27.4
47.2
2.7
53.5
64.7
36.3
(12.3)
8
.0
(10.3)
1
.7
7
.7
Operating performance is related to the underlying performance from unconsolidated
investments. Reali(cid:140)ed gains are related to asset sales. Fair value gains and
performance fees are primarily related to conversions and resyndications under the
Company(cid:317)s VHH partnership, asset sales, cap rate compression, net foreign exchange
movements and improved property performance by the Company(cid:317)s FV Option
investments and investments held within the Funds managed by the Company.
(cid:32)uarterly the Company evaluates the carrying value of its historical cost based
investments and to the extent the carrying value is in excess of its fair value an
impairment loss is recorded. Reali(cid:140)ed losses and impairment are related to asset sales
on non-core retail assets in the (cid:38)nited Kingdom in the current year and a residential
development pro(cid:102)ect in the Western (cid:38)nited States in the prior year.
Vintage Housing Holdings (“VHH”)—As of December 31, 2020 and 2019, the carrying
value of the Company(cid:317)s investment in VHH was (cid:362)142.9 million and (cid:362)142.8 million,
respectively. The total equity income recogni(cid:140)ed from the Company(cid:317)s investment
in VHH was (cid:362)22.8 million, (cid:362)50.0 million and (cid:362)27.3 million for the years ended
December 31, 2020, 2019 and 2018. respectively. Current period fair value gains
were offset by distributions associated with operating properties and investing
distributions associated with return of capital from mortgage financing or sale of
interests to equity partners on development pro(cid:102)ects. Fair value gains in the current
period are due to the conversion of development pro(cid:102)ects to stabili(cid:140)ed operating
properties and resyndications in which VHH dissolves an existing partnership and
recapitali(cid:140)es into a new partnership with tax exempt bonds and tax credits that are
sold to a new tax credit partner and, in many cases, yields cash back to VHH. (cid:38)pon
resyndication, VHH retains a GP interest in the partnership and receives various
future streams of cash (cid:89)ows including: development fees, asset management fees,
other GP management fees and distributions from operations. Prior period fair value
gains are due to improved property performance, cap rate compression as a result of
declines in borrowing rates and conversions.
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—
—
—
—
—
$
1
5
$
6
9
$
6
$
3
7
$
8
0
$
,
2
8
9
—
—
—
—
—
—
—
$
0
9
$
6
6
$
2
$
3
9
$
3
8
$
,
3
2
6
—
—
—
—
—
—
—
—
—
—
—
$
4
$
1
$
8
$
9
$
$
3
$
3
$
9
$
7
7
—
—
$
1
$
7
9
$
8
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
Changes in Control—During the year ended December 31, 2020, the Company
deconsolidated its investment KW Europe Fund II as the Company no longer held a
controlling financial interest in it. As of December 31, 2020, the carrying value of the
Company(cid:317)s investment in KW Europe Fund II was (cid:362)19.1 million.
Refer to the description of the Industrial JV above for a discussion of the change in
control transaction that occurred during the year ended December 31, 2020. As of
December 31, 2020, the carrying value of the Company(cid:317)s investment in the Industrial
JV was (cid:362)19.0 million.
In 2018, A(cid:42)A Investment Managers(cid:332)Real Assets (“A(cid:42)A”) and the Company
established a (cid:102)oint venture pla(cid:127)orm (“A(cid:42)A Joint Venture”) targeting multifamily and
office assets in Ireland. As of December 31, 2020, the A(cid:42)A Joint Venture consists of
2,536 multifamily units and 0.4 million square feet of office space across 13 assets in
Dublin, Ireland. These assets were previously wholly owned by the Company or were
held with a different equity partner (held in 50/50 (cid:102)oint ventures) that were previously
consolidated in the Company(cid:317)s financial statements. As the Company does not control
the A(cid:42)A Joint Venture, the assets are no longer consolidated and its investment
with A(cid:42)A is accounted for under the equity method. The Company has elected the
fair value option on its interest in the (cid:102)oint venture and records the investment at
fair value. The Company continues to hold a 50(cid:1143) ownership interest in the assets
discussed above through its ownership in the A(cid:42)A Joint Venture. As of December 31,
2020 and 2019, the carrying value of the Company(cid:317)s investment in the A(cid:42)A Joint
Venture was (cid:362)507.5 million and (cid:362)479.4 million, respectively.
Meyers Research Sale—In December 2018, Kennedy Wilson sold Meyers Research for
(cid:362)48.0 million and recogni(cid:140)ed a gain on sale of business of (cid:362)40.4 million. Kennedy
Wilson used part of the proceeds from such sale to reinvest (cid:362)15.0 million for an
11(cid:1143) ownership interest in a new partnership between Meyers Research and another
premiere residential real estate construction service company (“Meyers JV”). The
Meyers JV has continued to build out and further develop its Zonda pla(cid:127)orm which
focuses on real time housing related data. Kennedy Wilson no longer controls Meyers
JV and treats the investment as an unconsolidated investment. As of December 31,
2020, the carrying value of the Company(cid:317)s investment in Meyers JV was (cid:362)19.0 million.
The fair value increase has been driven by improvements in Meyers JV(cid:317)s operating
results.
Capital Commitments—As of December 31, 2020, Kennedy Wilson had unfulfilled
capital commitments totaling (cid:362)97.4 million to four of its unconsolidated (cid:102)oint ventures,
including (cid:362)77.2 million relating to three closed-end funds managed by Kennedy
Wilson, under the respective operating agreements. In addition to the unfunded
capital commitments, the Company has (cid:362)155.9 million of equity commitments on
development pro(cid:102)ects. The Company may be called upon to contribute additional
capital to (cid:102)oint ventures in satisfaction of such capital commitment obligations.
0
2
0
2
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NOTE 5—FAIR VALUE MEASUREMENTS AND THE FAIR VALUE OPTION
The following table presents fair value measurements (including items that are
required to be measured at fair value and items for which the fair value option has
been elected) as of December 31, 2020:
(Dollars in millions)
(cid:38)nconsolidated investments
Net currency derivative contracts
Total
Level 1
Level 2
Level 3
Total
(cid:362) (cid:332) (cid:362) (cid:1363) (cid:332)
(cid:362) 1,136.5
(cid:362) 1,136.5
(64.0)
(64.0)
(cid:362) (cid:332) $
(
.0
1
.5
1
.5
The following table presents fair value measurements (including items that are
required to be measured at fair value and items for which the fair value option has
been elected) as of December 31, 2019:
(Dollars in millions)
(cid:38)nconsolidated investments
Net currency derivative contracts
Total
Level 1
Level 2
Level 3
Total
(cid:362) (cid:332) (cid:362) (cid:332)
(34.7)
(cid:362) 1,099.3
(cid:362) 1,099.3
(34.7)
(cid:362) (cid:332) $
(
.7
1
.3
1
.6
Unconsolidated Investments— Kennedy Wilson elected to use the FV Option for 29
unconsolidated investments to more accurately re(cid:89)ect the timing of the value created
in the underlying investments and report those changes in current operations.
Kennedy Wilson(cid:317)s investment balance in the FV Option investments was (cid:362)999.2
million and (cid:362)959.7 million at December 31, 2020 and 2019, respectively, which are
included in unconsolidated investments in the accompanying balance sheets.
Additionally, Kennedy Wilson records its investments in its managed commingled
funds (the “Funds”) based upon the net assets that would be allocated to its interests
in the Funds, assuming the Funds were to liquidate their investments at fair value as
of the reporting date. The Company(cid:317)s investment balance in the Funds was (cid:362)137.3
million and (cid:362)139.6 million at December 31, 2020 and 2019, respectively, which is
included in unconsolidated investments in the accompanying consolidated balance
sheets.
In estimating fair value of real estate held by the Funds and the 29 FV Option
investments, the Company considers significant unobservable inputs to be the
capitali(cid:140)ation and discount rates.
The following table summari(cid:140)es the Company(cid:317)s investments in unconsolidated
investments held at fair value by type:
(Dollars in millions)
FV Option
Funds
Total
December 31, 2020
December 31, 2019
(cid:362) 999.2
137.3
1
.5
(cid:362) 959.7
139.6
1
.3
The following table presents changes in Level 3 investments, investments in
investment companies and investments in (cid:102)oint ventures that elected the fair value
option, for the years ended December 31:
(Dollars in millions)
Beginning balance
(cid:38)nreali(cid:140)ed and reali(cid:140)ed gains
(cid:38)nreali(cid:140)ed and reali(cid:140)ed losses
Contributions
Distributions
Foreign Exchange
Non-cash contributions (distributions), net
E nding Balance
2020
2019
2018
(cid:362) 1,099.3
(cid:362) 662.2
(cid:362) 380.7
109.8
(13.5)
109.2
(189.7)
24.5
(3.1)
.5
161.1
(26.9)
191.2
(104.1)
(3.4)
219.2
.3
87.7
(33.1)
335.9
(76.3)
(4.0)
(28.7)
.2
The change in unreali(cid:140)ed and reali(cid:140)ed gains and losses are included in income from
unconsolidated investments in the accompanying consolidated statements of income.
K
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6
4
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$
,
1
3
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7
2
—
—
3
4
)
$
,
0
9
9
$
,
0
6
4
$
,
1
3
6
$
,
0
9
9
$
1
,
1
3
6
$
1
,
0
9
9
$
6
6
2
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
The change in unreali(cid:140)ed gains and losses on Level 3 investments during 2020 and
2019 for investments still held as of December 31, 2020 and 2019 were gains of
(cid:362)27.4 million and (cid:362)64.9 million, respectively.
In determining estimated fair market values, the Company utili(cid:140)es discounted cash
(cid:89)ow models that estimate future cash (cid:89)ows (including terminal values) and discount
those cash (cid:89)ows back to the current period. The accuracy of estimating fair value for
investments cannot be determined with precision and cannot be substantiated by
comparison to quoted prices in active markets and may not be reali(cid:140)ed in a current
sale or immediate settlement of the asset or liability. Additionally, there are inherent
uncertainties in any fair value measurement technique, and changes in the underlying
assumptions used, including capitali(cid:140)ation rates, discount rates, liquidity risks, and
estimates of future cash (cid:89)ows could significantly affect the fair value measurement
amounts. The table below describes the range of inputs used as of December 31,
2020 for real estate assets:
Multifamily
Office
Retail
Hotel
Residential
Capitali(cid:140)ation Rates
3.80(cid:1143)(cid:332)5.75(cid:1143)
4.00(cid:1143)(cid:332)7.00(cid:1143)
5.00(cid:1143)(cid:332)8.75(cid:1143)
6.00(cid:1143)
N/A
Estimated Rates Used For
Discount Rates
5.75(cid:1143)(cid:332)8.15(cid:1143)
5.00(cid:1143)(cid:332)9.00(cid:1143)
7.50(cid:1143)(cid:332)11.25(cid:1143)
7.50(cid:1143)(cid:332)8.25(cid:1143)
12.00(cid:1143)
In valuing indebtedness, Kennedy Wilson considers significant inputs to be the term
of the debt, value of collateral, market loan-to-value ratios, market interest rates and
spreads, and credit quality of investment entities. The credit spreads used by Kennedy
Wilson for these types of investments range from 0.37(cid:1143) to 4.90(cid:1143).
There is no active secondary market for the Company(cid:317)s development pro(cid:102)ects and
no readily available market value given the uncertainty of the amount and timing
of future cash (cid:89)ows. Accordingly, determination of fair value of its development
pro(cid:102)ects requires (cid:102)udgment and extensive use of estimates. Therefore, the Company
0
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2
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typically uses investment cost as the estimated fair value until future cash (cid:89)ows
become more predictable. Additionally, the fair value of its development pro(cid:102)ects may
differ significantly from the values that would have been used had a market existed
for such investments and may differ materially from the values that the Company
may ultimately reali(cid:140)e. If the Company were required to liquidate an investment in a
forced or liquidation sale, it could reali(cid:140)e significantly less than the value at which the
Company has recorded it. In addition, changes in the market environment and other
events that may occur over the life of the investments may cause the gains or losses
ultimately reali(cid:140)ed on these investments to be different than the unreali(cid:140)ed gains or
losses re(cid:89)ected in the currently assigned valuations.
The Company assessed the impact of the COVID-19 pandemic and its impact on the
fair value of investments. Valuations of its assets that are reported at fair value and the
markets in which they operate, to date, have not been significantly impacted by the
COVID-19 pandemic. As a result of the rapid development, (cid:89)uidity and uncertainty
surrounding this situation, the Company expects that information with respect to
fair value measurement may change, potentially significantly, going forward and may
not be indicative of the actual impact of the COVID-19 pandemic on its business,
operations, cash (cid:89)ows and financial condition for the year ended December 31, 2020
and future periods.
Currency derivative contracts—Kennedy Wilson uses foreign currency derivative
contracts such as forward contracts and options to manage its foreign currency risk
exposure against the effects of a portion of its certain non-(cid:38).S. dollar denominated
currency net investments. Foreign currency options are valued using a variant of
the Black-Scholes model tailored for currency derivatives and the foreign currency
forward contracts are valued based on the difference between the contract rate and
the forward rate at maturity of the underlying currency applied to the notional value
in the underlying currency discounted at a market rate for similar risks. Although the
Company has determined that the ma(cid:102)ority of the inputs used to value its currency
derivative contracts fall within Level 2 of the fair value hierarchy, the counterparty
risk ad(cid:102)ustments associated with the currency derivative contracts utili(cid:140)e Level 3
inputs. However, as of December 31, 2020, Kennedy Wilson assessed the significance
of the impact of the counterparty valuation ad(cid:102)ustments on the overall valuation of
its derivative positions and determined that the counterparty valuation ad(cid:102)ustments
are not significant to the overall valuation of its derivative. As a result, we have
determined that our derivative valuation in its entirety be classified in Level 2 of the
fair value hierarchy.
Changes in fair value are recorded in other comprehensive income in the
accompanying consolidated statements of comprehensive income as the portion of
the currency forward and option contracts used to hedge currency exposure of its
certain consolidated subsidiaries qualifies as a net investment hedge under ASC Topic
815, Derivatives and Hedging.
The fair value of the derivative instruments held as of December 31, 2020 and 2019
are reported in other assets for hedge assets and included in accrued expenses and
other liabilities for hedge liabilities on the accompanying consolidated balance sheet.
See Note 14 for a complete discussion on other comprehensive income including
currency forward and option contracts and foreign currency translations.
The table below details the currency forward contracts and currency option contracts Kennedy Wilson had as of December 31, 2020:
(Dollars in millions)
Currency Hedged
Outstanding
E(cid:38)R
E(cid:38)R(1)
E(cid:38)R(1)(2)
GBP
Total Outstanding Settled
E(cid:38)R
E(cid:38)R
GBP
Total Settled
Total
(cid:38)nderlying Currency
Notional Hedge Asset Hedge Liability
Change in (cid:38)nreali(cid:140)ed
Gains (Losses)
Reali(cid:140)ed Gains (Losses)
Interest Expense
Cash Received (Paid)
December 31, 2020
Year Ended December 31, 2020
(cid:362) (1.1)
(cid:362) (22.0)
(cid:362) 3.4
(cid:362) (cid:332)
(cid:360) 232.5
(cid:360) 212.6
(cid:364) 410.0
(cid:362) 1.4
10.6
12.0
(cid:362) 17.3
34.7
23.9
75.9
(cid:38)SD
GBP
GBP
(cid:38)SD
(cid:38)SD
GBP
(cid:38)SD
(3.7)
35.1
(12.9)
17.4
0.4
(4.0)
18.4
14.8
(cid:362) 12.0
(cid:362) 75.9
(cid:362) 32.2(3)
(22.0)
4.7
4.7
(cid:362) (17.3)
4.4
7.8
0.6
0.9
1.5
(cid:362) 9.3
13.6
(17.1)
18.9
15.4
(cid:362) 15.4
(1) Hedge is held by KWE on its wholly-owned subsidiaries.
(2) Relates to KWE’s Euro Medium Term Note. See discussion in Note 9.
(3) Excludes deferred tax benefit of $0.2 million.
The gains and (losses) recogni(cid:140)ed through other comprehensive income (loss) will remain in accumulated other comprehensive income (loss) until the underlying investments
they were hedging are substantially liquidated by Kennedy Wilson.
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—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
Interest Rate Swaps—During the years ended December 31, 2020 and 2019, the
Company entered into (cid:362)138.4 million notional of interest rate swaps on some
variable rate property-level mortgage loans. During the year ended December 31,
2020, the Company had additional interest rate expense relating to difference in
variable rate and fixed interest rates of (cid:362)1.2 million and had interest rate savings of
(cid:362)0.2 million during the year ended December 31, 2019. The changes in fair value
on these contracts were a loss of (cid:362)6.9 million and (cid:362)0.7 million for the years ended
December 31, 2020 and 2019 and are recorded to other comprehensive loss. During
the year ended December 31, 2020, due to the sale of a consolidated multifamily
property which had an interest rate swap designated on one of its variable rate
mortgages a loss of (cid:362)0.7 million that had been recorded to other comprehensive
income was reclassified to the income statement and reduced the gain on sale of real
estate associated with the property.
Fair Value of Financial Instruments—The carrying amounts of cash and cash equivalents,
accounts receivable including related party receivables, accounts payable, accrued
expenses and other liabilities approximate fair value due to their short-term
0
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maturities. The carrying value of loans (excluding related party loans as they are
presumed not to be an arm(cid:317)s length transaction) approximates fair value as the terms
are similar to loans with similar characteristics available in the market.
Debt liabilities are accounted for at face value plus net unamorti(cid:140)ed debt premiums.
Debt assumed in an asset acquisition, or business combination, is recorded at fair
value on the date of acquisition. The fair value as of December 31, 2020 and 2019
for mortgages, KW unsecured debt, and KWE unsecured bonds were estimated to
be approximately (cid:362)4.9 billion and (cid:362)5.2 billion, respectively, based on a comparison of
the yield that would be required in a current transaction, taking into consideration the
risk of the underlying collateral and the Company(cid:317)s credit risk to the current yield of a
similar security, compared to their carrying value of (cid:362)5.1 billion and (cid:362)5.0 billion as of
December 31, 2020 and 2019, respectively. The inputs used to value mortgages, KW
unsecured debt, and KWE unsecured bonds are based on observable inputs for similar
assets and quoted prices in markets that are not active and are therefore determined
to be level 2 inputs.
NOTE 6—OTHER ASSETS
Other assets consist of the following:
(Dollars in millions)
Loan purchases and originations
Straight line rent receivable
Deferred taxes, net
Goodwill
Furniture and equipment net of accumulated depreciation of (cid:362)27.2 and (cid:362)21.9 at December 31, 2020 and December 31, 2019, respectively
Other, net of accumulated amorti(cid:140)ation of (cid:362)2.1 and (cid:362)2.0 at December 31, 2020 and 2019, respectively
Above-market leases, net of accumulated amorti(cid:140)ation of (cid:362)58.3 and (cid:362)51.0 at December 31, 2020 and 2019, respectively
Hedge assets
Prepaid expenses
Right of use asset, net
Leasing commissions, net of accumulated amorti(cid:140)ation of (cid:362)7.4 and (cid:362)4.7 at December 31, 2020 and 2019, respectively
ther Assets
December 31,
2020
2019
(cid:362) 107.1
51.6
22.1
23.9
22.3
19.0
15.0
12.0
11.8
11.2
10.2
(cid:362) 37.5
47.3
24.4
23.9
23.7
16.5
26.1
32.6
14.3
13.6
11.9
.2
.8
Depreciation and amorti(cid:140)ation expense related to the above depreciable assets were (cid:362)13.6 million, (cid:362)14.2 million, and (cid:362)15.8 million for the years ended December 31, 2020,
2019 and 2018, respectively.
Loan Purchases and Originations—The Company has various loans bearing interest at rates ranging from 2.74(cid:1143) to 13.00(cid:1143), and maturities ranging from 2021 to 2030. Loans have
been evaluated for credit losses as of December 31, 2020 and the Company has determined that no credit losses are apparent. The Company(cid:317)s loan positions are predominantly
senior mortgage loans, but it also holds real-estate me(cid:140)(cid:140)anine and similar loans.
Right of use asset, net—The Company, as a lessee, has three office leases and four ground leases, which qualify as operating leases, with remaining lease terms of 5 to 239 years.
The payments associated with office space leases have been discounted using the Company(cid:317)s incremental borrowing rate which is based on collaterali(cid:140)ed interest rates in the
market and risk profile of the associated lease. For ground leases the rate implicit in the lease was used to determine the right of use asset.
K
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$
3
0
6
$
2
7
1
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
The following table summari(cid:140)es the fixed, future minimum rental payments, excluding
variable costs, which are discounted to calculate the right of use asset and related
lease liability for its operating leases in which we are the lessee:
various acquisitions and are amortized into interest expense over the remaining term of the related debt in a
manner that approximates the effective interest method. The net unamortized loan premium as of December
31, 2020 and 2019 was $4.5 million and $4.0 million, respectively.
(Dollars in millions)
2021
2022
2023
2024
2025
Therea(cid:91)er
Total undiscounted rental payments
Less imputed interest
(cid:36)o(cid:124)a(cid:1140) (cid:1140)(cid:59)as(cid:59) (cid:1140)iabi(cid:1140)iti(cid:59)s
Minimum
Rental Payments
(cid:362) 1.5
1.5
0.8
0.5
0.4
32.4
37.1
(25.9)
(cid:362) 11.2
NOTE 7—MORTGAGE DEBT
The following table details mortgage debt secured by Kennedy Wilson(cid:317)s consolidated
properties as of December 31, 2020 and 2019:
The mortgage debt had a weighted average interest rate of 3.31(cid:1143) and 3.41(cid:1143) per
annum as of December 31, 2020 and 2019, respectively. As of December 31, 2020,
73(cid:1143) of Kennedy Wilson(cid:317)s property level debt was fixed rate, 13(cid:1143) was (cid:89)oating rate
with interest caps and 14(cid:1143) was (cid:89)oating rate without interest caps, compared to
76(cid:1143) fixed rate, 14(cid:1143) (cid:89)oating rate with interest caps and 10(cid:1143) (cid:89)oating rate without
interest caps, as of December 31, 2019.
Mortgage Loan Transactions and Maturities(cid:332)During the year ended December 31,
2020, one acquisition was partially financed with mortgages, four existing mortgages
were refinanced, and five existing investments that closed with all equity were
subsequently partially financed with mortgage loans. See Note 4 for more detail on
the acquisitions and the investment debt associated with them.
The aggregate maturities of mortgage loans subsequent to December 31, 2020 are as
follows:
(Dollars in millions)
Mortgage Debt by Product Type
Multifamily(1)
Commercial(1)
Commercial
Commercial(1)
Hotel
Commercial
Mortgage debt (excluding loan fees)(1)
(cid:38)namorti(cid:140)ed loan fees
(cid:36)o(cid:124)a(cid:1140) Mo(cid:117)(cid:124)(cid:93)a(cid:93)(cid:59) (cid:9)(cid:59)b(cid:124)
Region
Western (cid:38).S.
(cid:38)nited Kingdom
Western (cid:38).S.
Ireland
Ireland
Spain
Carrying amount of
mortgage debt as of
December 31,(1)
2020
2019
(cid:362) 1,345.5 (cid:362) 1,324.7
514.5
405.4
289.6
80.8
40.3
2,655.3
(14.3)
429.6
375.2
320.5
88.0
43.6
2,602.4
(12.6)
.8
.0
(1) The mortgage debt payable balances include unamortized debt premiums (discounts). Debt premiums
(discounts) represent the difference between the fair value of debt and the principal value of debt assumed in
(Dollars in millions)
2021(1)
2022
2023
2024
2025
Therea(cid:91)er
(cid:38)namorti(cid:140)ed debt premium
(cid:38)namorti(cid:140)ed loan fees
(cid:36)o(cid:124)a(cid:1140) Mo(cid:117)(cid:124)(cid:93)a(cid:93)(cid:59) (cid:9)(cid:59)b(cid:124)
Aggregate
Maturities
(cid:362) 47.5
330.9
428.8
206.1
547.2
1,037.4
2,597.9
4.5
(12.6)
.8
(1) The Company expects to repay the amounts maturing in the next twelve months with new mortgage loans, cash
generated from operations, existing cash balances, proceeds from dispositions of real estate investments, or as
necessary, with borrowings on our A&R Facility.
0
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As of December 31, 2020, the Company received waivers on certain debt covenants
in loan agreements governing a total of (cid:362)266.9 million or 10(cid:1143) of our consolidated
mortgage balance. These mortgages are secured by certain retail and hospitality
assets in the (cid:38)nited Kingdom and Ireland. All of these loans are non-recourse to
the Company and the waivers are through April 30, 2021 and beyond and typically
cover interest coverage and loan-to-value covenants. The Company expects to be
in compliance with these covenants subsequent to December 31, 2020, or will seek
additional waivers and/or extensions as, and if needed. In the event the Company is
required to seek such additional waivers and/or extensions, the Company is currently
confident that it will be able to obtain them. The Company is current on all payments
(principal and interest) for its consolidated mortgages including the loans discussed
above.
As of December 31, 2020, the Company was in compliance with or had received
waivers on all financial mortgage debt covenants.
NOTE 8—KW UNSECURED DEBT
The following table details KW unsecured debt as of December 31, 2020 and 2019:
(Dollars in millions)
Credit Facility
Senior Notes(1)
KW (cid:38)nsecured Debt
(cid:38)namorti(cid:140)ed loan fees
(cid:36)o(cid:124)a(cid:1140) (cid:20)W (cid:38)ns(cid:59)cu(cid:117)(cid:59)d (cid:9)(cid:59)b(cid:124)
December 31,
2020
2019
(cid:362)
200.0
1,146.9
(cid:362)
1,346.9
(14.7)
1,146.1
1,146.1
(14.4)
.2
.7
(1) The senior notes balances include unamortized debt discounts. Debt discounts represent the difference between
the fair value of debt and the principal value of debt assumed in various acquisitions and are amortized into interest
expense over the remaining term of the related debt in a manner that approximates the effective interest method.
The unamortized debt discount as of December 31, 2020 and 2019 was $3.1 million and $3.9 million, respectively.
Borrowings Under Credit Facilities—The Company, through a wholly-owned subsidiary,
has a (cid:362)700 million unsecured revolving credit and term loan facility (the “A&R
Facility”). The A&R Facility is comprised of a (cid:362)500 million revolving line of credit
and a (cid:362)200 million term loan facility. On March 25, 2020, the Company extended
its existing (cid:362)500 million revolving line of credit (“Second A&R Facility”). Loans
under the Second A&R Facility bear interest at a rate equal to LIBOR plus between
1.75(cid:1143) and 2.50(cid:1143), depending on the consolidated leverage ratio as of the applicable
measurement date. The Second A&R Facility has a maturity date of March 25, 2024.
Sub(cid:102)ect to certain conditions precedent and at Kennedy-Wilson, Inc.(cid:317)s (the “Borrower”)
option, the maturity date of the Second A&R Facility may be extended by one year.
The Second A&R Facility has certain covenants as defined within its Second Amended
and Restated Credit Agreement, dated as of March 25, 2020 (the “Credit Agreement”)
that, among other things, limit the Company and certain of its subsidiaries(cid:317) ability
to incur additional indebtedness, repurchase capital stock or debt, sell assets or
subsidiary stock, create or permit liens, engage in transactions with affiliates, enter
into sale/leaseback transactions, issue subsidiary equity and enter into consolidations
or mergers. The Credit Agreement requires the Company to maintain (i) a maximum
consolidated leverage ratio (as defined in the Credit Agreement) of not greater than
65(cid:1143), measured as of the last day of each fiscal quarter, (ii) a minimum fixed charge
coverage ratio (as defined in the Credit Agreement) of not less than 1.70 to 1.00,
measured as of the last day of each fiscal quarter for the period of four full fiscal
quarters then ended, (iii) a minimum consolidated tangible net worth equal to or
greater than the sum of (cid:362)1,700,000,000 plus an amount equal to fi(cid:91)y percent (50(cid:1143))
of net equity proceeds received by the Company a(cid:91)er the date of the most recent
financial statements that are available as of the March 25, 2020, measured as of the
last day of each fiscal quarter, (iv) a maximum recourse leverage ratio (as defined in
the Credit Agreement) of not greater than an amount equal to consolidated tangible
net worth as of the measurement date multiplied by 1.5, measured as of the last day
of each fiscal quarter, (v) a maximum secured recourse leverage ratio (as defined in the
Credit Agreement) of not greater than an amount equal to 3.5(cid:1143) of consolidated total
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$
2
,
5
8
9
$
2
,
6
4
1
$
2
,
5
8
9
—
$
1
,
3
3
2
$
1
,
1
3
1
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
asset value (as defined in the Credit Agreement) and (cid:362)299,000,000, (vi) a maximum
ad(cid:102)usted secured leverage ratio (as defined in the Credit Agreement) of not greater
than 55(cid:1143), measured as of the last day of each fiscal quarter, and (vii) liquidity (as
defined in the Credit Agreement) of at least (cid:362)75.0 million.
aggregate principal amount of 2024 Notes through a tender offer and redemption
under the indentures governing the 2024 Notes. See Note 19 for more detail.
As of December 31, 2020, the Company was in compliance with all financial
covenants.
As of December 31, 2020, the Company was in compliance with all financial covenant
calculations. The obligations of the Borrower pursuant to the Credit Agreement are
guaranteed by the Company and certain wholly-owned subsidiaries of the Company.
As of December 31, 2020, the Company had (cid:362)200.0 million outstanding balance on
the Second A&R Facility with (cid:362)300.0 million available to be drawn under the revolving
credit facility. Subsequent to December 31, 2020, the Company repaid (cid:362)100.0 million
of the (cid:362)200.0 million outstanding balance on the Second A&R Facility.
The average outstanding borrowings under credit facilities was (cid:362)146.4 million during
the year ended December 31, 2020.
2024 Notes—Kennedy Wilson, Inc., (the “Issuer”) has (cid:362)1.2 billion of 5.875(cid:1143) senior
notes due 2024 (the “2024 Notes”). The indentures governing the 2024 Notes contain
various restrictive covenants, including, among others, limitations on the Company(cid:317)s
ability and the ability of certain of the Company(cid:317)s subsidiaries to incur or guarantee
additional indebtedness, make restricted payments, pay dividends or make any other
distributions from restricted subsidiaries, redeem or repurchase capital stock, sell
assets or subsidiary stocks, engage in transactions with affiliates, create or permit liens
on assets, enter into sale/leaseback transactions, and enter into consolidations or
mergers. The indentures governing the 2024 Notes limit the ability of Kennedy Wilson
and its restricted subsidiaries to incur additional indebtedness if, on the date of such
incurrence and a(cid:91)er giving effect to the new indebtedness, the maximum balance
sheet leverage ratio (as defined in the indenture) is greater than 1.50 to 1.00. This
ratio is measured at the time of incurrence of additional indebtedness. See Note 17
for the guarantor and non-guarantor financial statements.
Subsequent to December 31, 2020, the Company issued (cid:362)1.0 billion in aggregate
principal of senior notes due in 2029 and 2031 and plans to redeem (cid:362)1.0 billion
NOTE 9—KWE UNSECURED BONDS
The following table details the KWE unsecured bonds as of December 31, 2020 and
2019:
(Dollars in millions)
KWE Bonds
KWE Euro Medium Term Note Programme
KWE (cid:38)nsecured Bonds (excluding loan fees)(1)
(cid:38)namorti(cid:140)ed loan fees
(cid:36)o(cid:124)a(cid:1140) (cid:20)WE (cid:38)ns(cid:59)cu(cid:117)(cid:59)d (cid:6)onds
December 31,
2020
2019
(cid:362) 504.7 (cid:362) 662.9
669.7
614.7
1,174.4
1,277.6
(1.9)
(3.4)
.5
.2
(1) The KWE unsecured bonds balances include unamortized debt premiums (discounts). Debt premiums (discounts)
represent the difference between the fair value of debt and the principal value of debt assumed in various
acquisitions and are amortized into interest expense over the remaining term of the related debt in a manner that
approximates the effective interest method. The net unamortized loan premium (discount) as of December 31,
2020 and 2019 was $(2.8) million and $(3.1) million, respectively.
KWE has (cid:364)500 million of 3.95(cid:1143) fixed-rate senior unsecured bonds due 2022 that
have a carrying value of (cid:362)504.7 million and (cid:362)662.9 million as of December 31, 2020
and 2019, respectively. KWE effectively reduced the interest rate to 3.35(cid:1143) as a result
of entering into swap agreements to convert 50(cid:1143) of the proceeds into Euros. On
October 7, 2020, KWE launched a cash tender offer for part of its (cid:364)500 million of
the KWE Bonds (the “Tender Offer”). KWE purchased (cid:364)130.2 million ((cid:362)177.7 million
based on December 31, 2020 rates) in aggregate nominal amount of the KWE Bonds,
or 26.04(cid:1143) of the (cid:364)500.0 million aggregate nominal amount of the KWE Bonds
outstanding in Tender Offer. The purchase price for the KWE Bonds validly tendered
and accepted for purchase pursuant to the Tender Offer was a price equal to 101(cid:1143)
0
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of the nominal amount of the relevant KWE Bonds, plus accrued and unpaid interest
to, but not including, October 22, 2020. The total Tender Offer consideration was
(cid:364)133.1 million, including accrued and unpaid interest and was settled on October 22,
2020. The Company recogni(cid:140)ed (cid:362)2.3 million of interest expense due to the premium
paid and the accelerated amorti(cid:140)ation of portion of unamorti(cid:140)ed loan fees associated
with the Tender Offer.
In addition, KWE has a (cid:364)2.0 billion (approximately (cid:362)2.7 billion based on December 31,
2020 rates) Euro Medium Term Note (“EMTN”) Programme. (cid:38)nder the EMTN
Programme, KWE may issue, from time to time, up to (cid:364)2.0 billion of various types
of debt securities in certain markets and currencies. KWE issued senior unsecured
notes for an aggregate principal amount of approximately (cid:362)672.4 million (based on
December 31, 2020 rates) ((cid:360)550 million) (the “KWE Notes”). The KWE Notes were
issued at a discount with an annual fixed coupon of 3.25(cid:1143), and mature in 2025. As
KWE invests proceeds from the KWE Notes to fund equity investments in new euro
denominated assets, KWE designates the KWE Notes as net investment hedges under
ASC Topic 815. Subsequent (cid:89)uctuations in foreign currency rates that impact the
carrying value of the KWE Notes are recorded to accumulated other comprehensive
income. During the year ended December 31, 2020, Kennedy Wilson recogni(cid:140)ed
a gain of (cid:362)35.1 million in accumulated other comprehensive income due to the
weakening of the euro against the GBP during the period. The KWE Notes rank pari
passu with the KWE Bonds, and are sub(cid:102)ect to the same restrictive covenants.
The trust deed that governs the bonds contain various restrictive covenants for KWE,
including, among others, limitations on KWE(cid:317)s and its material subsidiaries(cid:317) ability
to provide certain negative pledges. The trust deed limits the ability of KWE and its
subsidiaries to incur additional indebtedness if, on the date of such incurrence and
a(cid:91)er giving effect to the incurrence of the new indebtedness, (1) KWE(cid:317)s consolidated
net indebtedness (as defined in the trust deed) would exceed 60(cid:1143) of KWE(cid:317)s
total assets (as calculated pursuant to the terms of the trust deed)(cid:312) and (2) KWE(cid:317)s
consolidated secured indebtedness (as defined in the trust deed) would exceed 50(cid:1143)
of KWE(cid:317)s total assets (as calculated pursuant to the terms of the trust deed). The trust
deed also requires KWE, as of each reporting date, to maintain an interest coverage
ratio (as defined in the trust deed) of at least 1.50 to 1.00 and have unencumbered
assets of no less than 125(cid:1143) of its unsecured indebtedness (as defined in the trust
deed).
As of December 31, 2020, KWE was in compliance with these financial covenants.
NOTE 10—RELATED PARTY TRANSACTIONS
Related party revenue is fees and other income received from investments in which
we have an ownership interest, excluding amounts eliminated in consolidation
discussed below. Kennedy Wilson earned related party fees of (cid:362)22.7 million, (cid:362)26.1
million and (cid:362)15.3 million for the periods ended December 31, 2020, 2019 and 2018,
respectively.
The Company provides asset and property management and other property related
services on properties in which it also has an ownership interest. Fees earned on
consolidated properties are eliminated in consolidation and fees on unconsolidated
investments are eliminated for the portion that relate to the Company(cid:317)s ownership
interest. During the years ended December 31, 2020, 2019 and 2018 fees of
(cid:362)1.1 million, (cid:362)18.1 million and (cid:362)13.6 million were eliminated in consolidation.
On October 2, 2020, the Company completed the sale of Kennedy-Wilson Properties,
Ltd. (“KWP”), a wholly-owned subsidiary of the Company operating in the third-party
real estate services industry, including, property management, commercial brokerage
(leasing and sale), facilities management and lease administration, to an entity controlled
by certain members of KWP management (the “Purchaser”). As part of the transaction
and in exchange for an annual fee, the Company will provide certain services to KWP,
including the use of certain office space and information technology related services,
in addition to a license to use its trademark in connection with the operation of its
business for a period of two years, with a two-year extension option exercisable by
the Purchaser sub(cid:102)ect to certain conditions being met. The Company also provided
financing to the Purchaser in connection with its purchase of KWP as well as a three-
year line of credit. As of the closing date, the Purchaser will employ the approximately
110 employees and 25 independent contractors previously employed by KWP.
K
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$
1
,
1
7
2
$
1
,
2
7
4
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
NOTE 11—INCOME TAXES
The table below represents a geographical breakdown of book income before the
provision for income taxes:
Year ended December 31,
(Dollars in millions)
Domestic
Foreign
Total
2020
2019
2018
(cid:362) (37.0) (cid:362) 249.5 (cid:362) 156.5
113.6
113.0
188.4
.4
.5
.1
The (cid:38).S. and foreign components of provision for income taxes consisted of the
following components. However, it is not re(cid:89)ective of the cash tax results of the
Company.
(Dollars in millions)
Federal
Current
Deferred
State
Current
Deferred
Foreign
Current
Deferred
Total
Year ended December 31,
2020
2019
2018
(cid:362)
(cid:362)
(cid:362)
23.3
23.3
31.2
31.2
33.4
33.4
1.5
0.4
1.9
14.9
3.5
18.4
.6
0.3
(4.6)
(4.3)
14.4
0.1
14.5
.4
10.6
10.6
18.4
(4.4)
14.0
.0
A reconciliation of the statutory federal income tax rate of 21(cid:1143) with Kennedy Wilson(cid:317)s effective income tax rate is as follows:
(Dollars in millions)
Tax computed at the statutory rate
Tax deduction in excess of book compensation from restricted stock vesting
Domestic permanent differences, primarily disallowed executive compensation
Foreign permanent differences, primarily non-deductible depreciation, amorti(cid:140)ation and interest expenses in the (cid:38)nited Kingdom
Effect of foreign tax operations on (cid:38).S. taxes, net of foreign tax credits and valuation allowance
Noncontrolling interests
State income taxes, net of federal benefit
Other
P rovision f or income taxes
0
2
0
2
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Year ended December 31,
2019
2018
2020
(cid:362) 31.8 (cid:362) 76.1 (cid:362) 56.7
1.8
3.8
1.4
1.1
(15.1)
8.0
0.3
.0
0.1
7.2
2.0
(3.7)
(0.9)
2.9
4.2
.6
0.3
6.1
1.3
(16.8)
(22.2)
(3.4)
.4
(cid:362) 4
(cid:362) 5
Cumulative tax effects of temporary differences are shown below at December 31, 2020 and 2019:
(Dollars in millions)
Deferred tax assets:
Foreign currency translation
Net operating loss carryforward and credits
Investment basis difference
Stock option expense
Hedging transactions
Lease liability
Accrued reserves
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Investment basis and reserve differences
Depreciation and amorti(cid:140)ation
Right of use asset
Prepaid expenses and other
Capitali(cid:140)ed interest
Total deferred tax liabilities
(cid:9)(cid:59)(cid:61)(cid:59)(cid:117)(cid:117)(cid:59)d (cid:124)a(cid:138) (cid:1140)iabi(cid:1140)i(cid:124)y(cid:311) n(cid:59)(cid:124)
Year ended December 31,
2019
2020
(cid:362) 3.7
137.1
91.2
3.0
13.4
0.1
0.6
249.1
(204.4)
44.7
159.5
20.0
0.1
2.8
1.3
183.7
(cid:362) 4.9
138.6
96.2
1.3
7.2
248.2
(209.2)
39.0
145.7
2.8
2.4
1.3
152.2
(
.0
(
.2
The (cid:38)nited Kingdom enacted Finance Act 2019, which introduced a new capital
gain tax for non-(cid:38)K resident investors who dispose of (cid:38)K real estate. The new
capital gain tax law became effective April 6, 2019. Beginning on this date, non-(cid:38)K
resident investors are sub(cid:102)ect to (cid:38)K tax on gains arising from the direct and indirect
dispositions of (cid:38)K real estate held for investment purposes. Transitional provisions
allow rebasing of (cid:38)K real estate values to fair market value as of April 5, 2019 (“(cid:38)K
Basis Step-(cid:38)p”), because only gains arising from property value increases a(cid:91)er such
date is sub(cid:102)ect to tax. The step-up led to a higher tax basis relative to the carrying
value of the (cid:38)K real estate, thus resulting in a (cid:38)K deferred tax asset of (cid:362)107.0 million.
The reali(cid:140)ability of this deferred tax asset is dependent on future disposition of real
estate at a fair market value in excess of appraised value as of April 5, 2019. Given
uncertainties surrounding Brexit and its potential impact on future real estate values,
the Company concluded that the (cid:38).K. deferred tax asset did not meet the more
likely than not threshold of being reali(cid:140)able and therefore, a full valuation allowance
is necessary. During fiscal 2020, the valuation allowance on the (cid:38)K Basis Step-(cid:38)p
decreased to (cid:362)97.8 million due to a reduction in (cid:38)K deferred tax assets arising from
the sale of certain (cid:38)K properties.
During March 2018, Kennedy Wilson elected to treat KWE as a partnership for (cid:38).S.
tax purposes retroactive to December 29, 2017. Due to unreali(cid:140)ed foreign exchange
losses not yet deductible for tax purposes and the consideration paid to acquire the non-
controlling interests in KWE exceeding the book carrying value of the non-controlling
interests in KWE, the Company(cid:317)s tax basis in KWE exceeded its book carrying value at
December 29, 2017, and every period therea(cid:91)er. Prior to the election to treat KWE as a
K
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$
1
5
1
$
3
6
2
$
2
7
0
—
—
—
—
$
4
3
$
4
1
$
5
8
—
$
4
3
1
8
—
—
—
$
1
3
9
)
$
1
1
3
)
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
partnership, KWE was taxed as a controlled foreign corporation. As a controlled foreign
corporation, the Company was precluded from recogni(cid:140)ing a deferred tax asset for its tax
basis in excess of book carrying value for its investment in KWE as the excess tax basis
from the investment was not expected to reverse in the foreseeable future. However, as
a result of the conversion of KWE to a partnership for (cid:38).S. tax purposes, the Company
was required to record a deferred tax asset for its investment in KWE. As of December
31, 2018, the Company recorded a (cid:362)98.3 million deferred tax asset related to its excess
tax basis over book carrying value for its investment in KWE. As a significant portion
of the excess tax basis would only reverse upon a strengthening of foreign currencies
or upon a disposition of KWE, the Company determined that a valuation allowance of
(cid:362)98.3 million was required for the tax basis that was in excess of the Company(cid:317)s carrying
value for its investment in KWE as it did not meet the more likely than not recognition
threshold. During the years ended December 31, 2020 and 2019, a portion of the excess
tax basis over book basis in KWE reversed as a result of lower tax gains on sales of real
estate. As of December 31, 2020, Kennedy Wilson(cid:317)s excess tax basis in KWE and the
related valuation allowance is (cid:362)66.5 million and (cid:362)66.5 million, respectively.
As of December 31, 2020, Kennedy Wilson had federal, California and other state net
operating losses of (cid:362)2.3 million and (cid:362)96.5 million, and (cid:362)9.3 million respectively. All
of the federal net operating losses relate to tax years a(cid:91)er December 31, 2017. The
post-2017 federal net operating losses do not expire but in taxable years beginning
a(cid:91)er December 31, 2020 are only eligible to offset 80(cid:1143) of taxable income. California
net operating losses begin to expire in 2034. As of December 31, 2020, Kennedy
Wilson had (cid:362)245.5 million of foreign net operating loss carryforwards, which have no
expiration date. The Company has foreign tax credit carryforwards of (cid:362)67.2 million,
which begin to expire in 2023.
The Company(cid:317)s valuation allowance on deferred tax assets decreased by (cid:362)4.8 million in
2020 and increased by (cid:362)78.1 million in 2019. The decrease in the valuation allowance
during 2020 principally relates to a decrease in the deferred tax asset related to the
KWE partnership investment due to lower tax gains on the sales of real estate in 2020.
The increase in the 2019 valuation allowance principally relates to a valuation allowance
recorded against the deferred tax asset established for the (cid:38).K. Basis Step (cid:38)p.
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During July 2019, the IRS initiated an income tax examination of the Company(cid:317)s
federal consolidated tax return for the period ended December 31, 2017. Items
requested by the IRS thus far are standard schedules utili(cid:140)ed and produced during
the normal course of tax return preparation. As of December 31, 2020, the Company
is not aware of specific tax position under the scrutiny of the IRS. There were no
gross unrecogni(cid:140)ed tax benefits at December 31, 2020 and 2019. Management
has considered the likelihood and significance of possible penalties associated with
Kennedy Wilson(cid:317)s current and intended filing positions and has determined, based on
its assessment, that such penalties, if any, would not be significant.
Kennedy Wilson(cid:317)s federal and state income tax returns remain open to examination
for the years 2017 through 2019 and 2016 through 2019, respectively. However,
due to the existence of prior year loss carryovers, the IRS may examine any tax
years for which the carryovers are used to offset future taxable income. Our foreign
subsidiaries(cid:317) tax returns remain open to examination for the years 2016 through 2019.
The Spanish loss carryovers may be sub(cid:102)ect to tax examination for a period of 10
years from the period in which such losses were generated.
NOTE 12—COMMITMENTS AND CONTINGENCIES
Future minimum lease payments under scheduled operating and ground leases that
have initial or remaining noncancelable terms in excess of one year are as follows:
(Dollars in millions)
Year ending December 31,
2021
2022
2023
2024
2025
Therea(cid:91)er
Total minimum pa yments
(cid:362) 1.5
1.5
0.8
0.5
0.4
32.4
$
3
.1
Rental expense was (cid:362)1.0 million, (cid:362)1.4 million, and (cid:362)4.1 million for the years ended
December 31, 2020, 2019 and 2018, respectively, and is included in general and
administrative expense in the accompanying consolidated statements of income.
CAPITAL COMMITMENTS(cid:332)As of December 31, 2020 and 2019, the Company
has unfunded capital commitments of (cid:362)97.4 million and (cid:362)109.2 million to its (cid:102)oint
ventures under the respective operating agreements. In addition to the unfunded
capital commitments on its (cid:102)oint venture investments, the Company has (cid:362)155.9
million of equity commitments relating on consolidated and unconsolidated
development pro(cid:102)ects. The Company may be called upon to contribute additional
capital to (cid:102)oint ventures in satisfaction of the Company(cid:317)s capital commitment
obligations.
LITIGATION(cid:332)Kennedy Wilson is currently a defendant in certain routine litigation
arising in the ordinary course of business. It is the opinion of management and legal
counsel that the outcome of these actions will not have a material effect on the
financial statements taken as a whole.
NOTE 13—STOCK COMPENSATION PLANS
In July 2014, Kennedy Wilson adopted and its shareholders approved the Amended
and Restated 2009 Equity Participation Plan (the “First Amended and Restated
Plan”) under which an additional 6.0 million shares of common stock were reserved
for issuance pursuant to grants of restricted stock and other awards to officers,
employees, non-employee directors and consultants. During the years ended
December 31, 2016, 2015 and 2014, 1.0 million, 1.7 million and 3.3 million,
respectively, of restricted common stock were granted under the First Amended
and Restated Plan. The terms of the awards granted under the First Amended and
Restated Plan were set by the Company(cid:317)s compensation committee at its discretion.
The shares of restricted common stock granted under the First Amended and
Restated Plan have vested or will vest, as applicable, ratably over a three, four or
five-year period based on the achievement of certain performance targets. The
performance periods that will be measured for these awards are the Company(cid:317)s fiscal
years ending from December 31, 2014 through December 31, 2020. The shares of
restricted common stock which were granted with a three-year vesting period have
a three-year sale restriction period upon vesting. Due to the lack of marketability of
these shares with the three-year sale restriction period upon vesting, a 15(cid:1143) discount
was applied to the grant price these shares when computing stock compensation
expense. From inception of the plan through December 31, 2020, 5,949,100
shares vested and 136,400 have been forfeited. As of December 31, 2020, all the
compensation costs for the First Amended and Restated Plan have been recogni(cid:140)ed.
In June 2017, Kennedy Wilson adopted and its shareholders approved the Second
Amended and Restated 2009 Equity Participation Plan (the “Second Amended and
Restated Plan”) under which an additional 3.3 million shares of common stock were
reserved for issuance pursuant to grants of restricted stock and other awards to
officers, employees, non-employee directors and consultants. The Second Amended
and Restated Plan also allows for share recycling on net settled restricted stock
awards, restricted stock unit awards, performance unit awards and performance
share awards. During the years ended December 31, 2020, 2019 and 2018, the
compensation committee of the board of directors approved the total grant of 2.0
million shares of performance-based restricted shares of Company common stock,
1.9 million performance-based restricted stock units and 1.4 million shares of
performance-based restricted shares of Company common stock or performance-
based restricted stock units covering Company common stock, respectively, sub(cid:102)ect
to vesting based on the Company(cid:317)s total shareholder return (the “TSR restricted
awards”), performance-based restricted shares of Company common stock or
performance-based restricted stock units covering Company common stock sub(cid:102)ect
to vesting based on the Company(cid:317)s return on equity (the “ROE awards”), and time-
based restricted shares of Company common stock or time-based restricted stock
units covering Company common stock (the “time-based awards”) (collectively, the
“awards”), under the Second Amended and Restated Plan. (cid:38)p to 100(cid:1143) of the TSR
awards will be eligible to vest based on the Company(cid:317)s total shareholder return
relative to the MSCI World Real Estate Index during a three-year performance period
(sub(cid:102)ect to continued employment through the vesting date), with the actual number
of shares sub(cid:102)ect to such TSR awards that vest and cease to be sub(cid:102)ect to restrictions
K
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7
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
with respect to the performance period determined by multiplying (i) the total number
of shares sub(cid:102)ect to the TSR award by (ii) the applicable vesting percentage (which
is determined based on the level of the Company(cid:317)s relative total shareholder return
attained during the performance period). (cid:38)p to one-third of the ROE awards will be
eligible to vest with respect to each Company fiscal year of the performance period
(each, a “performance year”) to the extent that the Company satisfies the return on
equity goals for such performance year (sub(cid:102)ect to continued employment through the
vesting date). One-third of the time-based awards will vest on each of the first three
anniversaries of the grant date, sub(cid:102)ect to continued employment through the vesting
date. Stock-based compensation expense is based on the fair values on the date of
grant for the ROE awards and time-based awards. Certain ROE awards and time-
based awards were granted with a three-year sale restriction period upon vesting.
Due to the lack of marketability of these shares with the three-year sale restriction
period upon vesting, a 12.5(cid:1143) discount was applied to the grant price of these shares
when computing stock compensation expense. The fair value of the TSR awards
are estimated using a Monte Carlo simulation. From inception of the plan through
December 31, 2020, 2,171,163 shares have vested and 77,710 shares have been
forfeited. As of December 31, 2020, there was (cid:362)31.0 of unrecogni(cid:140)ed compensation
cost for the Second Amended and Restated Plan related to unvested shares which will
vest over the next three years.
(cid:38)pon vesting, the restricted stock granted to employees discussed directly above
is net share-settled to cover the withholding tax. Shares that vested during the
years ended December 31, 2020, 2019 and 2018 were net-share settled such that
the Company withheld shares with values equivalent to the employees(cid:317) minimum
statutory obligations for the applicable income and other employment taxes, and
remitted the cash to the appropriate taxing authorities. The total shares withheld
during the years ended December 31, 2020, 2019 and 2018 were 571,983 shares,
764,909 shares, and 486,032 shares respectively, and were valued based on the
Company(cid:317)s closing stock price on the respective vesting dates. During the years
ended December 31, 2020, 2019 and 2018, total payments for the employees(cid:317) tax
obligations to the taxing authorities were (cid:362)11.6 million, (cid:362)16.4 million, and (cid:362)8.8 million
0
2
0
2
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respectively. These figures are re(cid:89)ected as a financing activity on the accompanying
consolidated statements of cash (cid:89)ows.
During the years ended December 31, 2020, 2019 and 2018, Kennedy Wilson
recogni(cid:140)ed (cid:362)32.3 million, (cid:362)30.2 million, and (cid:362)37.1 million of compensation expense
related to the vesting of restricted common stock and is included in compensation and
related expense in the accompanying consolidated statements of income.
The following table sets forth activity under the Amended and Restated Plan, the First
Amended and Restated Plan, and the Second Amended and Restated Plan for the
Company(cid:317)s fiscal years ending December 31, 2020, 2019 and 2018:
Nonvested at December 31, 2018
Granted
V ested
Forfeited
Nonvested at December 31, 2019
Granted
V ested
Forfeited
Nonvested at December 31, 2020
Shares
3,916,948
64,458
(1,729,046)
2,252,360
2,543,551
(1,279,433)
(62,710)
3,453,768
NOTE 14—EQUITY
Preferred Stock(cid:332)In October 2019, the Company announced the issuance of a (cid:362)300
million perpetual preferred equity investment in Kennedy Wilson by affiliates of
Eldridge Industries (collectively, “Eldridge”). (cid:38)nder the terms of the agreement,
Eldridge purchased (cid:362)300 million in convertible perpetual preferred stock carrying
a 5.75(cid:1143) annual dividend rate, with an initial conversion price of (cid:362)25.00 per share,
representing a premium of 15(cid:1143) to the daily volume weighted average price per share
of Kennedy Wilson(cid:317)s common stock over the 20 trading days ending, and including,
October 16, 2019. The preferred stock is callable by Kennedy Wilson on and a(cid:91)er
October 15, 2024. The convertible perpetual preferred stock is treated as permanent
equity in accordance with ASC Topic 480, Distinguishing Liabilities from Equity.
Common Stock Repurchase Program—On March 20, 2018, the Company announced
that its board of directors authori(cid:140)ed a (cid:362)250.0 million stock repurchase program.
Repurchases under the program may be made in the open market, in privately
negotiated transactions, through the net settlement of the Company(cid:317)s restricted
stock grants or otherwise, with the amount and timing of repurchases dependent on
market conditions and sub(cid:102)ect to the Company(cid:317)s discretion. On November 4, 2020,
the Company(cid:317)s board of directors authori(cid:140)ed an expansion of its existing (cid:362)250 million
share repurchase plan to (cid:362)500 million.
During the year ended December 31, 2020, Kennedy Wilson repurchased and retired
2,826,644 shares for (cid:362)45.8 million. During the year ended December 31, 2019,
Kennedy Wilson repurchased and retired 221,834 shares for (cid:362)4.3 million under the
previous stock repurchase program.
Dividend Distributions—Kennedy Wilson declared and paid the following cash
dividends on its common stock:
(Dollars in millions)
P ref erred Stock
Common Stock(
Year Ended
December 31, 2020
Year Ended
December 31, 2019
Declared
Paid
Declared
Paid
(cid:362) 17.2
(cid:362) (cid:1363)13.6
(cid:362) (cid:1363)2.6
(cid:362) (cid:1363)2.6
125.6
126.1
121.1
114.9
(1) The difference between declared and paid is the amount accrued on the consolidated balance sheets.
Taxability of Dividends—Earnings and profits, which determine the taxability of
distributions to stockholders, may differ from income reported for financial reporting
purposes due to the differences for federal income tax purposes in the treatment of
revenue recognition, compensation expense, derivative investments and the basis of
depreciable assets and estimated useful lives used to compute depreciation.
The Company(cid:317)s dividends related to its common stock will be classified for (cid:38).S. federal
income tax purposes as follows:
Record Date
Payment Date Distributions Per Share Ordinary Dividends
Return of Capital
12/27/2019
3/31/2020
6/30/2020
9/30/2020
1/2/2020
4/7/2020
7/9/2020
10/8/2020
Totals
(cid:362) 0.2200
0.2200
0.2200
0.2200
0
.8
(cid:362) 0.0597
0.0597
0.0597
0.0597
0
.2
(cid:362) 0.1603
0.1603
0.1603
0.1603
0
.6
K
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—
1
)
$
8
0
0
$
3
8
8
$
4
1
2
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
Accumulated Other Comprehensive Income (Loss)—The following table summari(cid:140)es the changes in each component of accumulated other comprehensive income (loss) (“AOCI”),
net of taxes:
The following table sets forth the computation of basic and diluted earnings per share:
(Dollars in millions)
Balance at December 31, 2019
(cid:1354)(cid:38)nreali(cid:140)ed (losses) gains, arising during the period
(cid:1354)Taxes on unreali(cid:140)ed (losses) gains, arising during the period
(cid:1354)Amounts reclassified out of AOCI during the period, gross
(cid:1354)Amounts reclassified out of AOCI during the period, taxes
(cid:1354)Noncontrolling interest
(cid:6)a(cid:1140)anc(cid:59) (cid:336)o(cid:61) (cid:20)(cid:59)nn(cid:59)dy Wi(cid:1140)son(cid:349)s sha(cid:117)(cid:59)(cid:337) a(cid:124) (cid:9)(cid:59)c(cid:59)(cid:108)b(cid:59)(cid:117) (cid:402)(cid:400)(cid:311) (cid:401)(cid:399)(cid:401)(cid:399)
Foreign Currency Translation
Foreign Currency
Derivative Contracts
Interest Rate Swaps
Total Accumulated Other
Comprehensive Income(1)
(cid:362) (98.3)
67.6
(1.2)
0.3
(0.6)
(
.2
(cid:362) 40.4
(38.0)
0.2
2
.6
(cid:362) (0.7)
(6.9)
1.7
0.7
(0.2)
(
.4
(cid:362) (58.6)
22.7
0.7
1.0
(0.2)
(0.6)
(
.0
(Dollars in millions, except share amounts and per share data)
Net income attributable to Kennedy-Wilson Holdings, Inc. common shareholders
Net income and dividends allocated to participating securities
Net income attributable to Kennedy-Wilson Holdings, Inc. common shareholders, net of allocation to participating securities
Dividends declared on common shares
(cid:38)ndistributed earnings attributable to Kennedy-Wilson Holdings, Inc. common shareholders
Distributed earnings per share
(cid:38)ndistributed earnings per share
(1) Includes $358.4 million of inception to date accumulated other comprehensive losses associated with noncontrolling interest holders of KWE that the Company was required to record as part of the KWE Transaction in October
2017.
The local currencies for our interests in foreign operations include the euro and the
British pound sterling. The related amounts on our balance sheets are translated into
(cid:38).S. dollars at the exchange rates at the respective financial statement date, while
amounts on our statements of income are translated at the average exchange rates
during the respective period. (cid:38)nreali(cid:140)ed losses on foreign currency translation is a
result of the weakening of the euro and British pound sterling against the (cid:38).S. dollar
during the year ended December 31, 2020.
In order to manage currency (cid:89)uctuations, Kennedy Wilson entered into currency
derivative contracts to manage its exposure to currency (cid:89)uctuations between its
functional currency ((cid:38).S. dollar) and the functional currency (Euro and GBP) of certain
of its wholly-owned and consolidated subsidiaries. See Note 5 for a more detailed
discussion of Kennedy Wilson(cid:317)s currency derivative contracts.
NOTE 15—EARNINGS PER SHARE
In accordance with ASC Topic 260-10-45, Earnings Per Share, the Company uses
the two-class method to calculate earnings per share. Basic earnings per share is
calculated based on dividends declared (“distributed earnings”) and the rights of
common shares and participating securities in any undistributed earnings, which
0
2
0
2
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126
represents net income remaining a(cid:91)er deduction of dividends declared during
the period. Participating securities, which include unvested restricted stock, are
included in the computation of earnings per share pursuant to the two-class method.
The undistributed earnings are allocated to all outstanding common shares and
participating securities based on the relative percentage of each security to the total
number of outstanding securities. Basic earnings per common share and participating
securities represent the summation of the distributed and undistributed earnings
per common share and participating security divided by the total weighted average
number of common shares outstanding and the total weighted average number of
participating securities outstanding during the respective periods. We only present
the earnings per share attributable to the common shareholders.
Net losses, a(cid:91)er deducting the dividends to participating securities, are allocated in
full to the common shares since the participating security holders do not have an
obligation to share in the losses, based on the contractual rights and obligations of the
participating securities. The following is a summary of the elements used in calculating
basic and diluted income per share for the years ended December 31, 2020, 2019 and
2018:
Income per share— basic
Income per share— diluted
Weighted-average shares outstanding for basic
Weighted average shares outstanding for diluted
Dividends declared per common share
There was a total of 13,236,896, 13,133,785 and 0 during the years ended
December 31, 2020, 2019 and 2018 potentially dilutive securities were not included
in the diluted weighted average shares as they were anti-dilutive, respectively.
Potentially anti-dilutive securities include preferred stock and unvested restricted
stock grants.
NOTE 16—SEGMENT INFORMATION
Segment Presentation
The Company evaluates its reportable segments in accordance with the guidance of
ASC Topic 280, Segment Reporting. Kennedy Wilson historically presented Investments
and Services as its two main operating segments. As the Company has expanded on
its separate account and commingled fund pla(cid:127)orms, it determined that the segment
presentation detailed below is more indicative of how the business is being run and
evaluated by the chief operating decision makers. (cid:38)nconsolidated investments that
had historically been part of the Investments segment and are now included in the
Co-Investment Por(cid:127)olio segment. The Investment Management and Property Services
businesses were historically included in the Services segment. The Investment
Management business is now presented in the Co-Investment Por(cid:127)olio segment. This
combines the equity the Company invests as well as the fees it earns from its partners
on co-investments into one segment to provide a better understanding and evaluation
of the total performance of these investments by the Company(cid:317)s chief decision
makers. As the Company has grown its Consolidated Por(cid:127)olio and Co-Investment
Por(cid:127)olio, the Property Services has had a less significant impact on the Company(cid:317)s
results and thus Property Services is now presented in Corporate. With the sale of
KWP in the fourth quarter of 2020, the Property Services is no longer part of the
Company(cid:317)s results.
K
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Year ended December 31,
2020
92.9 (cid:362)
92.9
(125.6)
(32.7) (cid:362)
0.88 (cid:362)
(0.22)
0.66
0.66 (cid:362)
2019
224.1 (cid:362)
(0.3)
223.8
(121.1)
102.7 (cid:362)
0.85 (cid:362)
0.75
1.60
1.58 (cid:362)
139,741,411
140,347,365
139,729,573
141,501,323
0.88 (cid:362)
0.85 (cid:362)
(cid:362)
(cid:362)
(cid:362)
(cid:362)
(cid:362)
2018
150.0
(0.9)
149.1
(113.0)
36.1
0.78
0.26
1.04
1.04
142,895,472
144,753,421
0.78
—
—
—
—
—
$
3
2
)
$
$
5
)
$
3
5
)
—
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
Segments
The Company(cid:317)s operations are defined by two business segments: its Consolidated
investment por(cid:127)olio (the “Consolidated Por(cid:127)olio”) and its Co-Investment Por(cid:127)olio:
opportunities. The Company typically focuses on office and multifamily assets in the
Western (cid:38)nited States and commercial assets in the (cid:38)nited Kingdom and Ireland
within this segment.
Consolidated Por(cid:127)olio consists of the investments that the Company has made
in real estate and real estate-related assets and consolidates on its balance sheet.
The Company typically wholly-owns the assets in its Consolidated Por(cid:127)olio.
Co-Investment Por(cid:127)olio consists of (i) the co-investments that the Company has
made in real estate and real estate-related assets, including loans secured by real
estate, through the commingled funds and (cid:102)oint ventures that it manages(cid:312) and
(ii) the fees (including, without limitation, asset management fees, construction
management fees and performance fees) that it earns on its fee bearing capital.
The Company typically owns a 5(cid:331)50(cid:1143) ownership interest in the assets in its Co-
investment Por(cid:127)olio.
In addition to the Company(cid:317)s two primary business segments the Company(cid:317)s
Corporate segment includes, among other things, corporate overhead and Property
Services for all periods prior to its sale in the fourth quarter 2020.
Consolidated Portfolio
Consolidated Por(cid:127)olio is a permanent capital vehicle focused on maximi(cid:140)ing property
cash (cid:89)ow. These assets are primarily wholly-owned and tend to have longer hold
periods and the Company targets investments with accretive asset management
Co-Investment Portfolio
Co-investment Por(cid:127)olio segment consists of investments the Company makes with
partners in which it receives (i) fees for managing its partners equity and (ii) rental
income from its co-investments in these assets. The Company utili(cid:140)es different
pla(cid:127)orms in the Co-investment Por(cid:127)olio segment depending on the asset and risk
return profiles.
During the year ended December 31, 2020, the Company deconsolidated its
investment in KW Europe Fund II as the Company no longer held a controlling
financial interest in it. Amounts for KW Europe Fund II are in the Consolidated
Por(cid:127)olio segment in the prior period and in the Co-Investment Por(cid:127)olio segment for
the current period.
No single third-party client accounted for 10(cid:1143) or more of Kennedy Wilson(cid:317)s revenue
during any period presented in these financial statements.
The following tables summari(cid:140)e the income and expense activity by segment for the
years ended December 31, 2020, 2019 and 2018 and total assets as of December 31,
2020 and 2019.
(Dollars in millions)
Revenue
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Investment management, property services and research fees
(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:117)(cid:59)(cid:136)(cid:59)nu(cid:59)
E xpe nses
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Commission and marketing
(cid:1354)Compensation and related
(cid:1354)General and administrative
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)Total expe nses
(cid:1354)Income from unconsolidated investments, net of depreciation and amorti(cid:140)ation
(cid:1354)Gain on sale of real estate, net
(cid:1354)Transaction-related expenses
(cid:1354)Interest expense
(cid:1354)Other (loss) income
(cid:1354)Provision for income taxes
Net income ( loss)
(cid:1354)Net loss attributable to noncontrolling interests
(cid:1354)Preferred dividends and accretion of preferred stock issuance costs
Consolidated Co-Investments
Corporate
Total
Year Ended December 31, 2020
(cid:362) 403.9
13.9
417.8
135.7
13.8
59.7
20.6
179.6
409.4
338.0
(0.9)
(141.7)
(0.6)
(18.4)
184.8
2.3
(cid:362) (cid:332)
(cid:362) (cid:332)
22.5
22.5
10.6
10.6
(cid:362) 403.9
13.9
33.1
450.9
21.0
5.9
26.9
81.0
2.8
63.7
8.1
74.6
(69.5)
5.1
(25.2)
76.6
(153.6)
(17.2)
135.7
13.8
2.8
144.4
34.6
179.6
510.9
81.0
338.0
(0.9)
(211.2)
4.5
(43.6)
107.8
2.3
(17.2)
(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) (cid:336)(cid:1140)oss(cid:337) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314) co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s
(cid:362) 187.1
(cid:362) 76.6
(cid:362) (170.8)
(cid:362) 92.9
K
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0
2
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2
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•
•
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
(Dollars in millions)
Revenue
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Sale of real estate
(cid:1354)Investment management, property services and research fees
(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:117)(cid:59)(cid:136)(cid:59)nu(cid:59)
Ex pens es
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Cost of real estate sold
(cid:1354)Commission and marketing
(cid:1354)Compensation and related
(cid:1354)General and administrative
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:59)(cid:138)(cid:114)(cid:59)ns(cid:59)s
(cid:1354)Income from unconsolidated investments, net of depreciation and amorti(cid:140)ation
(cid:1354)Gain on sale of real estate, net
(cid:1354)Transaction-related expenses
(cid:1354)Interest expense
(cid:1354)Other income
(cid:1354)Provision for from income taxes
Net income ( loss)
(cid:1354)Net income attributable to noncontrolling interests
(cid:1354)Preferred dividends and accretion of preferred stock issuance costs
Consolidated
Co-Investments
Corporate
Total
Year Ended December 31, 2019
(cid:362) 447.4
(cid:362) (cid:332)
(cid:362) (cid:332)
(cid:362) 447.4
80.5
1.1
529.0
152.9
60.1
1.2
71.0
26.3
187.6
499.1
434.4
(6.8)
(145.6)
2.8
(14.5)
300.2
(94.4)
24.9
24.9
15.8
15.8
15.1
5.6
20.7
179.7
3.8
65.7
10.5
80.0
(69.5)
(2.4)
(26.9)
183.9
(163.0)
(2.6)
80.5
1.1
40.7
569.7
152.9
60.1
1.2
3.8
151.8
42.4
187.6
599.8
179.7
434.4
(6.8)
(215.1)
0.4
(41.4)
321.1
(94.4)
(2.6)
(Dollars in millions)
Revenue
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Sale of real estate
(cid:1354)Investment management, property services and research fees
(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:117)(cid:59)(cid:136)(cid:59)nu(cid:59)
E xpe nses
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Cost of real estate sold
(cid:1354)Commission and marketing
(cid:1354)Compensation and related
(cid:1354)General and administrative
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:59)(cid:138)(cid:114)(cid:59)ns(cid:59)s
(cid:1354)Income from unconsolidated investments, net of depreciation and amorti(cid:140)ation
(cid:1354)Gain on sale of real estate, net
(cid:1354)Gain on sale of business
(cid:1354)Transaction-related expenses
(cid:1354)Interest expense
(cid:1354)Other income
(cid:1354)Provision for income taxes
Net income ( loss)
(cid:1354)Net income attributable to noncontrolling interests
Consolidated
Co-Investments Corporate
Total
Year Ended December 31, 2018
(cid:362) 514.6
155.7
56.8
727.1
160.8
121.5
52.5
64.7
28.1
206.1
633.7
371.8
(1.7)
(161.0)
0.7
(14.0)
289.2
(62.1)
(cid:362) (cid:332)
(cid:362) (cid:332)
15.4
15.4
29.9
29.9
20.5
7.5
28.0
78.7
5.9
83.6
15.2
104.7
40.4
(77.2)
12.4
(44.0)
66.1
(143.2)
(cid:362) 514.6
155.7
56.8
45.3
772.4
160.8
121.5
52.5
5.9
168.8
50.8
206.1
766.4
78.7
371.8
40.4
(1.7)
(238.2)
13.1
(58.0)
212.1
(62.1)
(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) (cid:336)(cid:1140)oss(cid:337) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314) co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s
(cid:362) 227.1
(cid:362) 66.1
(cid:362) (143.2)
(cid:362) 150.0
(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) (cid:336)(cid:1140)oss(cid:337) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314) co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s
(cid:362) 205.8
(cid:362) 183.9
(cid:362) (165.6)
(cid:362) 224.1
K
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2
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131
0
2
0
2
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n
A
/
n
o
s
l
i
W
y
d
e
n
n
e
K
/
130
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
(Dollars in millions)
Assets
Consolidated
Co-investment
Corporate
Total assets
(Dollars in millions)
Ex pend itures f or long lived assets
Investments
December 31,
(cid:362) 5,562.4 (cid:362) 5,679.7
1,396.4
1,326.5
370.2
298.3
.0
.5
December 31,
(cid:362) (264.2) (cid:362) (402.0) (cid:362) (571.8)
NOTE 17—GUARANTOR AND NON-GUARANTOR FINANCIAL
STATEMENTS
The following consolidating financial information and condensed consolidating
financial information includes:
(1) Condensed consolidating balance sheets as of December 31, 2020 and 2019,
respectively(cid:312) consolidating statements of income and comprehensive (loss) income for
the years ended December 31, 2020, 2019 and 2018, respectively(cid:312) and condensed
consolidating statements of cash (cid:89)ows for the years ended December 31, 2020, 2019
and 2018, respectively, of (a) Kennedy-Wilson Holdings, Inc. on an unconsolidated basis
as the parent (and guarantor), (b) Kennedy-Wilson, Inc., as the subsidiary issuer,
(c) the guarantor subsidiaries, (d) the non-guarantor subsidiaries and (e) Kennedy-Wilson
Holdings, Inc. on a consolidated basis(cid:312) and
Geographic Information
The revenue shown in the table below is allocated based upon the region in which
services are performed.
(2) Elimination entries necessary to consolidate Kennedy-Wilson Holdings, Inc., as
the parent guarantor, with Kennedy-Wilson, Inc. and its guarantor and non-guarantor
subsidiaries
(Dollars in millions)
(cid:38)nited States
Europe
Total revenue
Year Ended December 31,
(cid:362) 274.2 (cid:362) 275.7 (cid:362) 327.7
176.7
294.0
444.7
$
.9
.7
.4
Kennedy Wilson owns 100(cid:1143) of all of the guarantor subsidiaries, and, as a result, in
accordance with Rule 3-10(d) of Regulation S-(cid:42) promulgated by the SEC, no separate
financial statements are required for these subsidiaries as of December 31, 2020 or
2019 and for the years ended December 31, 2020, 2019 or 2018.
(Dollars in millions)
Assets
(cid:1354)Cash and cash equivalents
(cid:1354)Accounts receivable
(cid:1354)Real estate and acquired in place lease values, net of accumulated depreciation and amorti(cid:140)ation
(cid:1354)(cid:38)nconsolidated investments
(cid:1354)Investments in and advances to consolidated subsidiaries
(cid:1354)Other assets
Total assets
(cid:21)iabi(cid:1140)iti(cid:59)s
(cid:1354)Accounts Payable
(cid:1354)Accrued expenses and other liabilities
(cid:1354)Mortgage debt
(cid:1354)KW unsecured debt
(cid:1354)KWE unsecured bonds
(cid:36)o(cid:124)a(cid:1140) (cid:1140)iabi(cid:1140)iti(cid:59)s
q uity
(cid:1354)Kennedy-Wilson Holdings, Inc. shareholders(cid:317) equity
(cid:1354)Noncontrolling interests
Total eq uity
(cid:36)o(cid:124)a(cid:1140) (cid:1140)iabi(cid:1140)iti(cid:59)s and (cid:59)(cid:116)ui(cid:124)y
Parent
Kennedy-
Wilson, Inc.
Guarantor
Subsidiaries
Non-guarantor
Subsidiaries
Elimination
Consolidated
Total
Condensed Consolidating Balance Sheet
as of December 31, 2020
(cid:362)
1,686.5
(cid:362) 105.5
0.2
15.1
3,173.4
10.3
(cid:362) 174.5
15.5
2,009.7
459.4
1,768.4
69.3
(cid:362) 685.1
32.2
2,710.8
814.8
226.6
(cid:362) (cid:332)
(6,628.3)
(cid:362) 965.1
47.9
4,720.5
1,289.3
306.2
(cid:362) 1,686.5
(cid:362) 3,304.5
(cid:362) 4,496.8
(cid:362) 4,469.5
(cid:362) (6,628.3)
(cid:362) 7,329.0
42.0
0.2
285.6
1,332.2
1.9
49.6
1,271.9
42.0
1,618.0
1,323.4
1,644.5
1,686.5
3,173.4
1,644.5
1,686.5
3,173.4
28.0
154.5
1,317.9
1,172.5
2,672.9
1,768.4
28.2
1,796.6
(6,628.3)
(6,628.3)
30.1
531.7
2,589.8
1,332.2
1,172.5
5,656.3
1,644.5
28.2
1,672.7
(cid:362) 1,686.5
(cid:362) 3,304.5
(cid:362) 4,496.8
(cid:362) 4,469.5
(cid:362) (6,628.3)
(cid:362) 7,329.0
0
2
0
2
t
r
o
p
e
R
l
a
u
n
n
A
/
n
o
s
l
i
W
y
d
e
n
n
e
K
/
132
K
e
n
n
e
d
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W
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s
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n
n
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2
0
2
0
/
133
2
0
2
0
2
0
1
9
$
7
,
3
2
9
$
7
,
3
0
4
2
0
2
0
2
0
1
9
2
0
1
8
2
0
2
0
2
0
1
9
2
0
1
8
4
5
0
$
5
6
9
$
7
7
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
E
—
—
—
—
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
(Dollars in millions)
Assets
(cid:1354)Cash and cash equivalents
(cid:1354)Accounts receivable
(cid:1354)Real estate and acquired in place lease values, net of accumulated depreciation and amorti(cid:140)ation
(cid:1354)(cid:38)nconsolidated investments
(cid:1354)Investments in and advances to consolidated subsidiaries
(cid:1354)Other assets
Total assets
(cid:21)iabi(cid:1140)iti(cid:59)s
(cid:1354)Accounts Payable
(cid:1354)Accrued expenses and other liabilities
(cid:1354)Mortgage debt
(cid:1354)KW unsecured debt
(cid:1354)KWE unsecured bonds
(cid:36)o(cid:124)a(cid:1140) (cid:1140)iabi(cid:1140)iti(cid:59)s
q uity
(cid:1354)Kennedy-Wilson Holdings, Inc. shareholders(cid:317) equity
(cid:1354)Noncontrolling interests
Total eq uity
(cid:36)o(cid:124)a(cid:1140) (cid:1140)iabi(cid:1140)iti(cid:59)s and (cid:59)(cid:116)ui(cid:124)y
Parent
Kennedy-
Wilson, Inc.
Guarantor
Subsidiaries
Non-guarantor
Subsidiaries
Elimination
Consolidated
Total
Condensed Consolidating Balance Sheet
as of December 31, 2019
(cid:362) 30.8
(cid:362) 6.4
1,682.3
18.2
3,037.5
(cid:362) 1,713.1
(cid:362) 3,062.1
(cid:362) —
34.4
(cid:362) 0.9
247.2
1,131.7
(cid:362) 102.7
13.9
2,052.3
526.0
1,660.5
61.1
(cid:362) 4,416.5
(cid:362) 3.4
59.7
1,315.9
34.4
1,379.8
1,379.0
1,678.7
1,682.3
3,037.5
1,678.7
1,682.3
3,037.5
(cid:362) 434.0
38.2
3,027.9
782.3
210.7
(cid:362) 4,493.1
(cid:362) 16.1
176.7
1,325.1
1,274.2
2,792.1
1,660.5
40.5
1,701.0
(cid:362) (cid:332)
(6,380.3)
(cid:362) (6,380.3)
(cid:362) (cid:332)
(6,380.3)
(6,380.3)
(cid:362) 573.9
52.1
5,080.2
1,326.5
271.8
(cid:362) 7,304.5
(cid:362) 20.4
518.0
2,641.0
1,131.7
1,274.2
5,585.3
1,678.7
40.5
1,719.2
(cid:362) 1,713.1
(cid:362) 3,062.1
(cid:362) 4,416.5
(cid:362) 4,493.1
(cid:362) (6,380.3)
(cid:362) 7,304.5
0
2
0
2
t
r
o
p
e
R
l
a
u
n
n
A
/
n
o
s
l
i
W
y
d
e
n
n
e
K
/
134
(Dollars in millions)
Revenue
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Investment management, property services, and research fees
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:117)(cid:59)(cid:136)(cid:59)nu(cid:59)
E xpe nses
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Commission and marketing
(cid:1354)Compensation and related
(cid:1354)General and administrative
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)(cid:1354)Total expe nses
(cid:1354)Income from unconsolidated investments, net of depreciation and amorti(cid:140)ation
(cid:1354)Income from consolidated subsidiaries
(cid:1354)Gain on sale of real estate, net
(cid:1354)Transaction-related expenses
(cid:1354)Interest expense
(cid:1354)Other income
(cid:1354)(cid:1354)(cid:1354)(cid:17)nco(cid:108)(cid:59) b(cid:59)(cid:61)o(cid:117)(cid:59) (cid:114)(cid:117)o(cid:136)ision (cid:61)(cid:117)o(cid:108) inco(cid:108)(cid:59) (cid:124)a(cid:138)(cid:59)s
(cid:1354)Provision for income taxes
(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59)
(cid:1354)Net loss attributable to the noncontrolling interests
(cid:1354)Preferred dividends and accretion of preferred stock issuance costs
Parent
Kennedy-
Wilson, Inc.
Guarantor
Subsidiaries
Non-guarantor
Subsidiaries
Elimination
Consolidated
Total
Consolidating Statement of Income
For the Year Ended December 31, 2020
(cid:362) (cid:332)
(cid:362) (cid:332)
(cid:362) 190.1
28.5
218.6
72.5
2.8
37.4
11.2
79.9
203.8
(0.6)
294.0
65.9
(0.3)
(52.3)
(0.7)
320.8
(0.7)
320.1
68.0
17.2
1.5
86.7
0.6
320.1
(0.2)
(69.5)
2.2
166.5
(25.2)
141.3
33.5
33.5
141.3
107.8
107.8
(17.2)
(cid:362) (cid:332)
(cid:362) 213.8
13.9
4.6
232.3
(cid:362) (cid:1363)403.9
13.9
33.1
450.9
63.2
13.8
5.5
6.2
98.2
186.9
81.0
272.1
(0.4)
(89.4)
3.0
311.7
(17.7)
294.0
2.3
(755.4)
(755.4)
(755.4)
135.7
13.8
2.8
144.4
34.6
179.6
510.9
81.0
338.0
(0.9)
(211.2)
4.5
151.4
(43.6)
107.8
2.3
(17.2)
(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314) co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s
(cid:362) (cid:1363)90.6
(cid:362) 141.3
(cid:362) 320.1
(cid:362) 296.3
(cid:362) (755.4)
(cid:362) 92.9
K
e
n
n
e
d
y
W
i
l
s
o
n
/
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
0
/
135
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
E
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
(Dollars in millions)
Revenue
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Sale of real estate
(cid:1354)Investment management, property services, and research fees
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:117)(cid:59)(cid:136)(cid:59)nu(cid:59)
Ex pens es
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Cost of real estate sold
(cid:1354)Commission and marketing
(cid:1354)Compensation and related
(cid:1354)General and administrative
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:59)(cid:138)(cid:114)(cid:59)ns(cid:59)s
(cid:1354)Income from unconsolidated investments
(cid:1354)Income from consolidated subsidiaries
(cid:1354)Gain on sale of real estate, net
(cid:1354)Transaction-related expenses
(cid:1354)Interest expense
(cid:1354)Other income (loss)
(cid:1354)(cid:1354)(cid:1354)(cid:17)nco(cid:108)(cid:59) b(cid:59)(cid:61)o(cid:117)(cid:59) (cid:336)(cid:114)(cid:117)o(cid:136)ision (cid:61)o(cid:117)(cid:337) b(cid:59)n(cid:59)(cid:67)(cid:124) (cid:61)(cid:117)o(cid:108) inco(cid:108)(cid:59) (cid:124)a(cid:138)(cid:59)s
(cid:1354)(Provision for) benefit from income taxes
(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59)
(cid:1354)Net income attributable to the noncontrolling interests
(cid:1354)Preferred dividends and accretion of preferred stock issuance costs
Parent
Kennedy-
Wilson, Inc.
Guarantor
Subsidiaries
Non-guarantor
Subsidiaries
Elimination
Consolidated
Total
Consolidating Statement of Income
For the Year Ended December 31, 2019
(cid:362) (cid:332)
(cid:362) (cid:332)
(cid:362) 173.6
0.8
0.8
75.0
19.8
1.1
95.9
0.1
547.7
(3.1)
(69.5)
(0.3)
379.8
(26.9)
352.9
36.6
210.2
64.3
3.8
39.2
15.9
62.5
185.7
83.3
479.8
8.2
(0.2)
(49.2)
0.2
546.6
1.1
547.7
31.8
31.8
352.8
0.1
321.1
321.1
(2.6)
(cid:362) 273.8
80.5
1.1
3.3
358.7
88.6
60.1
1.2
5.8
6.7
124.0
286.4
96.3
426.2
(3.5)
(96.4)
0.4
495.3
(15.6)
479.7
(94.4)
(cid:362) (cid:332)
(1,380.3)
(1,380.3)
(1,380.3)
(cid:362) 447.4
80.5
1.1
40.7
569.7
152.9
60.1
1.2
3.8
151.8
42.4
187.6
599.8
179.7
434.4
(6.8)
(215.1)
0.4
362.5
(41.4)
321.1
(94.4)
(2.6)
(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314) co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s
(cid:362) 318.5
(cid:362) 352.9
(cid:362) 547.7
(cid:362) 385.3
(cid:362) (1,380.3)
(cid:362) 224.1
0
2
0
2
t
r
o
p
e
R
l
a
u
n
n
A
/
n
o
s
l
i
W
y
d
e
n
n
e
K
/
136
(Dollars in millions)
Revenue
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Sale of real estate
(cid:1354)Investment management, property services, and research fees
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:117)(cid:59)(cid:136)(cid:59)nu(cid:59)
E xpe nses
(cid:1354)Rental
(cid:1354)Hotel
(cid:1354)Cost of real estate sold
(cid:1354)Commission and marketing
(cid:1354)Compensation and related
(cid:1354)General and administrative
(cid:1354)Depreciation and amorti(cid:140)ation
(cid:1354)(cid:1354)(cid:36)o(cid:124)a(cid:1140) (cid:59)(cid:138)(cid:114)(cid:59)ns(cid:59)s
(cid:1354)Income from unconsolidated investments
(cid:1354)Income from consolidated subsidiaries
(cid:1354)Gain on sale of real estate, net
(cid:1354)Gain on sale of business
(cid:1354)Transaction-related expenses
(cid:1354)Interest expense
(cid:1354)Other income (loss)
(cid:1354)(cid:1354)(cid:1354)(cid:17)nco(cid:108)(cid:59) (cid:336)(cid:1140)oss(cid:337) b(cid:59)(cid:61)o(cid:117)(cid:59) (cid:336)(cid:114)(cid:117)o(cid:136)ision (cid:61)o(cid:117)(cid:337) b(cid:59)n(cid:59)(cid:67)(cid:124) (cid:61)(cid:117)o(cid:108) inco(cid:108)(cid:59) (cid:124)a(cid:138)(cid:59)s
(cid:1354)(Provision for) benefit from income taxes
(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59)
(cid:1354)Net income attributable to the noncontrolling interests
(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) inco(cid:108)(cid:59) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314) co(cid:108)(cid:108)on sha(cid:117)(cid:59)ho(cid:1140)d(cid:59)(cid:117)s
Parent
Kennedy-
Wilson, Inc.
Guarantor
Subsidiaries(1)
(cid:362) (cid:332)
(cid:362) (cid:332)
(cid:362) 168.4
41.9
210.3
62.3
5.9
55.1
21.2
56.9
201.4
60.3
332.7
61.4
40.4
(1.1)
(52.8)
0.1
449.9
1.4
451.3
37.1
37.1
249.2
212.1
212.1
71.3
20.3
1.3
92.9
(1.3)
451.3
(0.1)
(77.1)
13.3
293.2
(44.0)
249.2
(cid:362) 212.1
(cid:362) 249.2
(cid:362) 451.3
Consolidating Statement of Income
For the Year Ended December 31, 2018
Consolidated
Total
Elimination
Non-guarantor
Subsidiaries
(cid:362) 346.2
155.7
56.8
3.4
562.1
98.5
121.5
52.5
5.3
9.3
147.9
435.0
19.7
310.4
(0.5)
(108.3)
(0.3)
348.1
(15.4)
332.7
(62.1)
(cid:362) 270.6
(cid:362) (cid:332)
(1,033.2)
(1,033.2)
(1,033.2)
(cid:362) (1,033.2)
(cid:362) 514.6
155.7
56.8
45.3
772.4
160.8
121.5
52.5
5.9
168.8
50.8
206.1
766.4
78.7
371.8
40.4
(1.7)
(238.2)
13.1
270.1
(58.0)
212.1
(62.1)
(cid:362) 150.0
K
e
n
n
e
d
y
W
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n
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A
n
n
u
a
l
R
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p
o
r
t
2
0
2
0
/
137
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
(Dollars in millions)
Net income
Other comprehensive income (loss), net of tax:
(cid:1354)(cid:1354)(cid:38)nreali(cid:140)ed foreign currency translation gain (loss)
(cid:1354)(cid:1354)Amounts reclassified from accumulated other comprehensive income
(cid:1354)(cid:1354)(cid:38)nreali(cid:140)ed forward contract forward currency (loss) gain
(cid:1354)(cid:1354)(cid:38)nreali(cid:140)ed loss on interest rate swaps
Total other comprehensive income for the period
Comprehensive income
Comprehensive income attributable to noncontrolling interests
(cid:7)o(cid:108)(cid:114)(cid:117)(cid:59)h(cid:59)nsi(cid:136)(cid:59) inco(cid:108)(cid:59) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314)
(Dollars in millions)
Net income
Other comprehensive (loss) income, net of tax:
(cid:1354)(cid:1354)(cid:38)nreali(cid:140)ed foreign currency translation loss
(cid:1354)(cid:1354)Amounts reclassified from accumulated other comprehensive income
(cid:1354)(cid:1354)(cid:38)nreali(cid:140)ed forward contract forward currency gain (loss)
(cid:1354)(cid:1354)(cid:38)nreali(cid:140)ed loss on interest rate swaps
Total other comprehensive income for the period
Comprehensive income
Comprehensive income attributable to noncontrolling interests
0
2
0
2
t
r
o
p
e
R
l
a
u
n
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A
/
n
o
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138
Consolidated Statement of Comprehensive Income
For The Year Ended December 31, 2020
Kennedy-
Wilson, Inc.
Guarantor
Subsidiaries
Non-guarantor
Subsidiaries
Elimination
Consolidated
Total
(cid:362) 141.3
(cid:362) 320.1
(cid:362) 294.0
(cid:362) (755.4)
(cid:362) 107.8
Parent
(cid:362) 107.8
66.5
0.8
(37.8)
(5.3)
66.5
0.8
(37.8)
(5.3)
(3.5)
5.0
65.0
0.2
(42.8)
(128.0)
(1.0)
75.6
5.3
(cid:362) 24.2
(cid:362) 132.0
(cid:362) 24.2
(cid:362) 165.5
(cid:362) 1.5
(cid:362) 321.6
(cid:362) 22.4
(cid:362) (48.1)
(cid:362) 316.4
(cid:362) (cid:1363)(803.5)
1
.0
1
.5
3
.6
3
.1
(
.5
1.7
Consolidated Statement of Comprehensive Income
For The Year Ended December 31, 2019
Parent
Kennedy-
Wilson, Inc.
Guarantor
Subsidiaries
Non-guarantor
Subsidiaries Elimination
Consolidated
Total
(cid:362) 321.1
(cid:362) 352.9
(cid:362) 547.7
(cid:362) 479.7
(cid:362) (1,380.3 )
(cid:362) 321.1
(13.3)
10.4
38.7
(0.7)
35.1
(13.3)
10.4
38.7
(0.7)
35.1
16.1
(15.4)
0.7
(cid:362) 356.2
(cid:362) 388.0
(cid:362) 548.4
(4.7)
10.4
54.1
59.8
(cid:362) 539.5
(105.0)
1.9
(20.8)
(77.4)
0.7
(95.6)
(cid:362) (1,475.9 )
66.5
0.8
(37.8)
(5.3)
(cid:362) 24.2
(cid:362) 132.0
1.7
1
.7
(13.3)
10.4
38.7
(0.7)
35.1
(cid:362) 356.2
(105.0)
2
.2
(Dollars in millions)
Net income
Other comprehensive loss, net of tax:
(cid:1354)(cid:1354)(cid:38)nreali(cid:140)ed foreign currency translation loss
(cid:1354)(cid:1354)Amounts reclassified from accumulated other comprehensive income
(cid:1354)(cid:1354)(cid:38)nreali(cid:140)ed forward contract forward currency gain (loss)
Total other comprehensive loss for the period
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Consolidated Statement of Comprehensive Income
For The Year Ended December 31, 2018
Parent
Kennedy-
Wilson, Inc.
Guarantor
Subsidiaries
Non-guarantor
Subsidiaries Elimination
Consolidated
Total
(cid:362) 212.1
(cid:362) 249.2
(cid:362) 451.3
(cid:362) 332.7
(cid:362) (1,033.2)
(cid:362) 212.1
(62.6)
13.2
38.3
(11.1)
(62.6)
13.2
38.3
(11.1)
(45.7)
46.1
0.4
(cid:362) 201.0
(cid:362) 238.1
(cid:362) 451.7
(61.6)
18.3
(7.8)
(51.1)
(cid:362) 281.6
(65.4)
169.9
(31.5)
(76.6)
61.8
(cid:362) (971.4)
(cid:7)o(cid:108)(cid:114)(cid:117)(cid:59)h(cid:59)nsi(cid:136)(cid:59) inco(cid:108)(cid:59) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314)
2
.0
2
.1
4
.7
2
.2
(
.4
(62.6)
13.2
38.3
(11.1)
(cid:362) 201.0
(65.4)
1
.6
K
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d
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2
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/
139
(cid:7)o(cid:108)(cid:114)(cid:117)(cid:59)h(cid:59)nsi(cid:136)(cid:59) inco(cid:108)(cid:59) att(cid:117)ibu(cid:124)ab(cid:1140)(cid:59) (cid:124)o (cid:20)(cid:59)nn(cid:59)dy(cid:330)Wi(cid:1140)son (cid:15)o(cid:1140)din(cid:93)s(cid:311) (cid:17)nc(cid:314)
3
.2
3
.0
5
.4
4
.5
(
.9
—
—
—
—
—
—
—
$
3
2
$
6
5
$
2
1
$
1
8
$
8
0
3
)
$
3
3
—
—
—
—
—
—
—
$
5
6
$
8
8
$
4
8
$
3
4
$
1
,
4
7
5
)
$
5
1
—
—
—
—
—
$
1
0
$
3
8
$
5
1
$
1
6
$
9
7
1
)
$
3
5
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
(Dollars in millions)
(cid:1354)(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash (cid:114)(cid:117)o(cid:136)id(cid:59)d by (cid:336)us(cid:59)d in(cid:337) o(cid:114)(cid:59)(cid:117)atin(cid:93) acti(cid:136)iti(cid:59)s
(cid:7)ash (cid:89)o(cid:137)s (cid:61)(cid:117)o(cid:108) in(cid:136)(cid:59)stin(cid:93) acti(cid:136)iti(cid:59)s(cid:313)
(cid:1354)(cid:1354)Proceeds from collection of loans
(cid:1354)(cid:1354)Issuance of loans
(cid:1354)(cid:1354)Investment in marketable securities
(cid:1354)(cid:1354)Proceeds from sale of marketable securities
(cid:1354)(cid:1354)Net proceeds from sale of consolidated real estate
(cid:1354)(cid:1354)Purchases of consolidated real estate
(cid:1354)(cid:1354)Capital expenditures to real estate
(cid:1354)(cid:1354)Investing distributions from unconsolidated investments
(cid:1354)(cid:1354)Contributions to unconsolidated investments
(cid:1354)(cid:1354)Proceeds from settlement of foreign currency derivative contracts
(cid:1354)(cid:1354)Proceeds from development pro(cid:102)ect asset
(cid:1354)(cid:1354)Distributions from (investments in) consolidated subsidiaries, net
(cid:1354)(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash (cid:336)us(cid:59)d in(cid:337) (cid:114)(cid:117)o(cid:136)id(cid:59)d by in(cid:136)(cid:59)stin(cid:93) acti(cid:136)iti(cid:59)s
(cid:7)ash (cid:89)o(cid:137) (cid:61)(cid:117)o(cid:108) (cid:67)nancin(cid:93) acti(cid:136)iti(cid:59)s(cid:313)
(cid:1354)(cid:1354)Borrowings under line of credit/term loan
(cid:1354)(cid:1354)Borrowings under mortgage debt
(cid:1354)(cid:1354)Repayment of mortgage debt
(cid:1354)(cid:1354)Payment of loan fees
(cid:1354)(cid:1354)Borrowings (repayment) of shareholder loans to noncontrolling interests
(cid:1354)(cid:1354)Repurchase of common stock
(cid:1354)(cid:1354)Common stock dividends paid
(cid:1354)(cid:1354)Preferred stock dividends paid
(cid:1354)(cid:1354)Contributions from noncontrolling interests
(cid:1354)(cid:1354)Distributions to noncontrolling interests
(cid:1354)(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash (cid:336)us(cid:59)d in(cid:337) (cid:114)(cid:117)o(cid:136)id(cid:59)d by (cid:67)nancin(cid:93) acti(cid:136)iti(cid:59)s
(cid:1354)(cid:1354)Effect of currency exchange rate changes on cash and cash equivalents
(cid:1354)(cid:1354)(cid:1354)(cid:1354)Net change in cash and cash eq uivalents
(cid:1354)(cid:1354)Cash and cash equivalents, beginning of year
(cid:1354)(cid:1354)(cid:1354)(cid:1354)Cash and cash eq uivalents, end of year
0
2
0
2
t
r
o
p
e
R
l
a
u
n
n
A
/
n
o
s
l
i
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n
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140
Condensed Consolidating Statements of Cash Flows
For the Year Ended December 31, 2020
Parent
(cid:362) 3.4
Kennedy-
Wilson, Inc.
(cid:362) (136.9)
Guarantor
Subsidiaries
(cid:362) 14.4
Non-guarantor
Subsidiaries
(cid:362) 106.5
Consolidated
Total
(cid:362) (cid:1363)(cid:1363)(12.6)
(7.6)
(12.1)
10.2
4.0
(0.1)
45.9
40.3
200.0
(4.3)
167.5
(28.0)
(59.1)
44.1
(19.2)
15.5
2.7
123.5
84.0
(149.3)
(0.8)
162.9
162.9
(57.4)
(126.1)
(13.6)
(197.1)
195.7
(66.1)
(30.8)
30.8
(cid:362) (cid:332)
99.1
6.4
(cid:362) (cid:1363)(cid:1363)105.5
71.8
102.7
(cid:362) 174.5
34.1
(81.0)
660.3
(42.1)
(135.0)
129.4
(92.3)
2.2
(211.5)
264.1
212.4
(337.8)
(0.5)
1.2
4.5
(18.9)
(139.1)
19.6
251.1
434.0
(cid:362) 685.1
34.1
(88.6)
(12.1)
10.2
827.8
(70.1)
(194.1)
177.5
(111.6)
15.5
2.2
590.8
200.0
296.4
(487.1)
(5.6)
1.2
(57.4)
(126.1)
(13.6)
4.5
(18.9)
(206.6)
19.6
391.2
573.9
(cid:362) 965.1
(Dollars in millions)
(cid:1354)(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash (cid:336)us(cid:59)d in(cid:337) (cid:114)(cid:117)o(cid:136)id(cid:59)d by o(cid:114)(cid:59)(cid:117)atin(cid:93) acti(cid:136)iti(cid:59)s
(cid:7)ash (cid:89)o(cid:137)s (cid:61)(cid:117)o(cid:108) in(cid:136)(cid:59)stin(cid:93) acti(cid:136)iti(cid:59)s(cid:313)
(cid:1354)(cid:1354)Issuance of loans
(cid:1354)(cid:1354)Collections of loans
(cid:1354)(cid:1354)Net proceeds from sale of real estate
(cid:1354)(cid:1354)Purchases of and additions to real estate
(cid:1354)(cid:1354)Capital expenditures to real estate
(cid:1354)(cid:1354)Investing distributions from unconsolidated investments
(cid:1354)(cid:1354)Contributions to unconsolidated investments
(cid:1354)(cid:1354)Proceeds from settlement of foreign currency derivative contracts
(cid:1354)(cid:1354)Additions to development pro(cid:102)ect asset
(cid:1354)(cid:1354)Proceeds from development pro(cid:102)ect asset
(cid:1354)(cid:1354)(Investments in) distributions from consolidated subsidiaries, net
(cid:1354)(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash (cid:336)us(cid:59)d in(cid:337) (cid:114)(cid:117)o(cid:136)id(cid:59)d by in(cid:136)(cid:59)stin(cid:93) acti(cid:136)iti(cid:59)s
(cid:7)ash (cid:89)o(cid:137) (cid:61)(cid:117)o(cid:108) (cid:67)nancin(cid:93) acti(cid:136)iti(cid:59)s(cid:313)
(cid:1354)(cid:1354)Borrowings under line of credit/term loan
(cid:1354)(cid:1354)Repayment of line of credit/term loan
(cid:1354)(cid:1354)Borrowings under mortgage debt
(cid:1354)(cid:1354)Repayment of mortgage debt
(cid:1354)(cid:1354)Payment of loan fees
(cid:1354)(cid:1354)Repayment of shareholder loans to noncontrolling interests
(cid:1354)(cid:1354)Repurchase of common stock
(cid:1354)(cid:1354)Issuance of preferred stock
(cid:1354)(cid:1354)Common stock dividends paid
(cid:1354)(cid:1354)Preferred stock dividends paid
(cid:1354)(cid:1354)Contributions from noncontrolling interests
(cid:1354)(cid:1354)Distributions to noncontrolling interests
(cid:1354)(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash (cid:114)(cid:117)o(cid:136)id(cid:59)d by (cid:336)us(cid:59)d in(cid:337) (cid:67)nancin(cid:93) acti(cid:136)iti(cid:59)s
(cid:1354)(cid:1354)Effect of currency exchange rate changes on cash and cash equivalents
(cid:1354)(cid:1354)(cid:1354)(cid:1354)Net change in cash and cash eq uivalents
Cash and cash equivalents, beginning of year
(cid:1354)(cid:1354)(cid:1354)(cid:1354)Cash and cash eq uivalents, end of year
Condensed Consolidating Statements of Cash Flows
For the Year Ended December 31, 2019
Parent
(cid:362) (3.7 )
Kennedy-
Wilson, Inc.
(cid:362) (130.4)
Guarantor
Subsidiaries
(cid:362) 24.1
Non-guarantor
Subsidiaries
(cid:362) 90.5
Consolidated
Total
(cid:362)(cid:1363)(cid:1363)(cid:1363) (19.5)
(2.3)
0.6
27.6
(97.5)
(59.8)
80.6
(153.9)
33.4
160.3
(11.0)
3.5
(15.0)
(0.8)
0.8
(1.7)
210.8
209.9
125.0
(200.0)
(122.5)
(122.5)
(20.7)
295.2
(114.9)
(2.6)
157.0
(75.0)
(12.3)
30.8
(cid:362) 30.8
4.5
1.9
(cid:362) 6.4
0.8
101.9
(cid:362) 102.7
(0.4)
673.4
(113.4)
(131.3)
33.6
(110.4)
(1.2)
4.2
(248.6)
105.9
485.1
(376.4)
(4.0)
(11.2)
15.0
(264.0)
(155.5)
8.9
49.8
384.2
(cid:362) 434.0
(2.7)
0.6
701.0
(210.9)
(191.1)
115.0
(266.0)
33.4
(1.2)
4.2
182.3
125.0
(200.0)
488.6
(391.4)
(4.8)
(11.2)
(20.7)
295.2
(114.9)
(2.6)
15.0
(264.0)
(85.8)
8.9
85.9
488.0
(cid:362) 573.9
K
e
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2
0
2
0
/
141
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
(Dollars in millions)
(cid:1354)(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash (cid:336)us(cid:59)d in(cid:337) (cid:114)(cid:117)o(cid:136)id(cid:59)d by o(cid:114)(cid:59)(cid:117)atin(cid:93) acti(cid:136)iti(cid:59)s(cid:313)
(cid:7)ash (cid:89)o(cid:137)s (cid:61)(cid:117)o(cid:108) in(cid:136)(cid:59)stin(cid:93) acti(cid:136)iti(cid:59)s(cid:313)
(cid:1354)(cid:1354)Additions to loans
(cid:1354)(cid:1354)Collections of loans
(cid:1354)(cid:1354)Nonrefundable escrow deposits
(cid:1354)(cid:1354)Net proceeds from sale of real estate
(cid:1354)(cid:1354)Net proceeds from sale of a business
(cid:1354)(cid:1354)Purchases of and additions to real estate
(cid:1354)(cid:1354)Capital expenditures to real estate
(cid:1354)(cid:1354)Investment in marketable securities
(cid:1354)(cid:1354)Proceeds from sale of marketable securities
(cid:1354)(cid:1354)Investing distributions from unconsolidated investments
(cid:1354)(cid:1354)Contributions to unconsolidated investments
(cid:1354)(cid:1354)Proceeds from settlement of foreign currency derivative contracts
(cid:1354)(cid:1354)Purchases of foreign currency derivative contracts
(cid:1354)(cid:1354)Additions to development pro(cid:102)ect asset
(cid:1354)(cid:1354)Proceeds from development pro(cid:102)ect asset
(cid:1354)(cid:1354)Distributions from (investments in) consolidated subsidiaries, net
(cid:1354)(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash (cid:336)us(cid:59)d in(cid:337) (cid:114)(cid:117)o(cid:136)id(cid:59)d by in(cid:136)(cid:59)stin(cid:93) acti(cid:136)iti(cid:59)s
(cid:7)ash (cid:89)o(cid:137) (cid:61)(cid:117)o(cid:108) (cid:67)nancin(cid:93) acti(cid:136)iti(cid:59)s(cid:313)
(cid:1354)(cid:1354)Borrowings under senior notes payable
(cid:1354)(cid:1354)Borrowings under lines of credit/term loan
(cid:1354)(cid:1354)Repayment of lines of credit/term loan
(cid:1354)(cid:1354)Borrowings under mortgage debt
(cid:1354)(cid:1354)Repayment of mortgage debt
(cid:1354)(cid:1354)Debt issue costs
(cid:1354)(cid:1354)Repurchase of common stock
(cid:1354)(cid:1354)Dividends paid
(cid:1354)(cid:1354)KWE closing dividend
(cid:1354)(cid:1354)Contributions from noncontrolling interests
(cid:1354)(cid:1354)Distributions to noncontrolling interests
(cid:1354)(cid:1354)(cid:1354)(cid:1354)(cid:25)(cid:59)(cid:124) cash (cid:114)(cid:117)o(cid:136)id(cid:59)d by (cid:336)us(cid:59)d in(cid:337) (cid:67)nancin(cid:93) acti(cid:136)iti(cid:59)s
(cid:1354)(cid:1354)Effect of currency exchange rate changes on cash and cash equivalents
(cid:1354)(cid:1354)(cid:1354)(cid:1354)Net change in cash and cash eq uivalents
(cid:1354)(cid:1354)Cash and cash equivalents, beginning of year
(cid:1354)(cid:1354)(cid:1354)(cid:1354)Cash and cash eq uivalents, end of year
0
2
0
2
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Condensed Consolidating Statements of Cash Flows
For The Year Ended December 31, 2018
Consolidated
Total
(cid:362) (cid:1363) 93.1
Non-guarantor
Subsidiaries
(cid:362) 161.7
Guarantor
Subsidiaries
(cid:362) 66.3
Kennedy-
Wilson, Inc.
(cid:362) (133.7)
Parent
(cid:362) (1.2)
290.3
290.3
(177.9)
(111.2)
(0.9)
5.8
161.2
43.4
(242.3)
(27.9)
7.4
25.9
(92.9)
55.8
(64.5)
325.3
(278.1)
(2.0)
(5.0)
(0.2)
(1.2)
10.7
(0.6)
81.4
85.1
246.6
225.0
(450.0)
(4.5)
(289.1)
17.1
45.2
(31.5)
33.4
(cid:362) 1.9
47.0
54.9
(cid:362) 101.9
(cid:362) (cid:332)
(1.3)
1,224.9
(113.5)
(188.1)
37.8
(302.0)
(29.1)
81.0
(427.5)
282.2
399.7
(588.7)
(3.0)
(17.2)
23.2
(116.0)
(302.0)
(20.7)
121.2
263.0
(cid:362) 384.2
(2.2)
5.8
(5.0)
1,386.1
43.4
(355.8)
(216.0)
(0.2)
7.4
63.7
(396.1)
10.7
(0.6)
(29.1)
81.0
593.1
246.6
225.0
(450.0)
725.0
(866.8)
(9.5)
(177.9)
(111.2)
(17.2)
23.2
(116.0)
(528.8)
(20.7)
136.7
351.3
(cid:362) 488.0
NOTE 18—UNAUDITED QUARTERLY INFORMATION
(Dollars in millions, except earnings per share amounts)
Revenues
Expenses
Other income (expenses)(1)
Income (loss) before provision for income taxes
(Provision for) benefit from income taxes
Net income (loss)
Net income (loss) attributable to noncontrolling interests
Preferred dividends and accretion of preferred stock issuance costs
Net income (loss) attributable to Kennedy-Wilson Holdings, Inc. common shareholders
Basic earnings (loss) per share
Diluted earnings (loss) per share
Fourth
(cid:32)uarter
(cid:362) (cid:1363)106.5
149.0
268.9
226.4
(53.9)
172.5
1.8
(cid:362) (cid:1363) (4.3)
(cid:362) (cid:1363)170.0
(cid:362) 1.23
(cid:362) 1.21
Third
(cid:32)uarter
(cid:362) 114.2
116.3
(30.4)
(32.5)
12.8
(19.7)
(1.1)
(cid:362) (4.3)
(cid:362) (25.1)
(cid:362) (0.18)
(cid:362) (0.18)
Year ended December 31, 2020
Second
(cid:32)uarter
(cid:362) 106.9
115.8
(33.4)
(42.3)
3.2
(39.1)
1.3
(cid:362) (4.3)
(cid:362) (42.1)
(cid:362) (0.30)
(cid:362) (0.30)
First
(cid:32)uarter
(cid:362) 123.3
129.8
6.3
(0.2)
(5.7)
(5.9)
0.3
(cid:362) (4.3)
(cid:362) (9.9)
(cid:362) (0.07)
(cid:362) (0.07)
(1) The fourth quarter of 2020 includes $287.0 million of gain on sale of real estate, net relating to the sale of Baggot Plaza, Club Palisades and the sale of assets to the Industrial JV.
(Dollars in millions, except earnings per share amounts)
Revenues
Expenses
Other income(1)
Income before provision for income taxes
Provision for income taxes
Net income
Net loss (income) attributable to noncontrolling interests
Preferred dividends and accretion of preferred stock issuance costs
Net income (loss) attributable to Kennedy-Wilson Holdings, Inc. common shareholders
Basic earnings (loss) per share
Diluted earnings (loss) per share
Fourth
(cid:32)uarter
(cid:362) (cid:1363)142.3
155.0
177.9
165.2
(6.3)
158.9
1.6
(cid:362) (2.6 )
(cid:362) 157.9
(cid:362) 1.13
(cid:362) 1.12
Third
(cid:32)uarter
(cid:362) (cid:1363)143.0
147.9
34.5
29.6
(10.2)
19.4
1.3
(cid:362) (cid:332)
(cid:362) 20.7
(cid:362) 0.15
(cid:362) 0.15
Year ended December 31, 2019
Second
(cid:32)uarter
(cid:362) 143.7
143.8
162.2
162.1
(20.9)
141.2
(90.4)
(cid:362) (cid:332)
(cid:362) 50.8
(cid:362) 0.36
(cid:362) 0.36
First
(cid:32)uarter
(cid:362) 140.7
153.1
18.0
5.6
(4.0)
1.6
(6.9)
(cid:362) (cid:332)
(cid:362) (5.3)
(cid:362) (0.04)
(cid:362) (0.04)
(1) The fourth quarter of 2019 includes $112.4 million of gain on sale of real estate, net relating to two assets that the Company sold a 20% interest and are now deconsolidated and treated as unconsolidated investments.
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—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Notes to Consolidated Financial Statements (continued)
December 31, 2020, 2019 and 2018
NOTE 19—SUBSEQUENT EVENTS
On February 11, 2021, Kennedy-Wilson, Inc., issued (cid:362)500.0 million aggregate
principal amount of 4.750(cid:1143) senior notes due 2029 (the “2029 notes”) and (cid:362)500.0
million aggregate principal amount of 5.000(cid:1143) senior notes due 2031 (the “2031
notes” and, together with the 2029 notes, the “notes”). The notes will be senior,
unsecured obligations of Kennedy Wilson and will be guaranteed by Kennedy-Wilson
Holdings, Inc. and certain subsidiaries of Kennedy Wilson. The net proceeds from
the issuance and sale of the notes was approximately (cid:362)987.5 million, a(cid:91)er deducting
underwriting discounts and commissions and estimated offering expenses.
The notes accrue interest at a rate of 4.750(cid:1143) (in the case of the 2029 notes) and
5.000(cid:1143) (in the case of the 2031 notes) per annum, payable semi-annually in arrears on
March 1 and September 1 of each year, beginning on September 1, 2021. The notes
will mature on March 1, 2029 (in the case of the 2029 notes) and March 1, 2031 (in
the case of the 2031 notes), in each case unless earlier repurchased or redeemed. At
any time prior to March 1, 2024 (in the case of the 2029 notes) or March 1, 2026 (in
the case of the 2031 notes), Kennedy Wilson may redeem the notes of the applicable
series, in whole or in part, at a redemption price equal to 100(cid:1143) of their principal
amount, plus an applicable “make-whole” premium and accrued and unpaid interest,
if any, to the redemption date. At any time and from time to time on or a(cid:91)er March
1, 2024 (in the case of the 2029 notes) or March 1, 2026 (in the case of the 2031
notes), Kennedy Wilson may redeem the notes of the applicable series, in whole or in
part, at specified redemption prices set forth in the indenture governing the notes of
the applicable series, plus accrued and unpaid interest, if any, to the redemption date.
In addition, prior to March 1, 2024, Kennedy Wilson may redeem up to 40(cid:1143) of the
notes of either series from the proceeds of certain equity offerings. No sinking fund
will be provided for the notes. (cid:38)pon the occurrence of certain change of control or
termination of trading events, holders of the notes may require Kennedy Wilson to
repurchase their notes for cash equal to 101(cid:1143) of the principal amount of the notes
to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the
applicable repurchase date.
On January 27, 2021 the Company announced a tender offer for up to (cid:362)1.0 billion
aggregate principal amount of outstanding 2024 Notes. On February 9, 2021, (cid:362)576.5
million aggregate principal amount of the 2024 Notes had been validly tendered and
not validly withdrawn. Kennedy Wilson intends to redeem an aggregate principal
amount of 2024 notes that will cause the total principal amount of 2024 notes
purchased in the tender offer or redeemed to be at least (cid:362)1.0 billion. With the tender
premium, intention to redeem remaining 2024 Notes up to (cid:362)1.0 billion and the write
off of previously capitali(cid:140)ed loan fees associated with the 2024 Notes the Company
will recogni(cid:140)e approximately (cid:362)30 million of interest expense in 2021 associated with
bond refinancing transactions in the event that the Company purchases and redeems
a total of (cid:362)1.0 billion of the 2024 Notes.
On February 17, 2021 the Company repaid (cid:362)100.0 million on its revolving line of
credit and currently has an outstanding balance of (cid:362)100.0 million and has (cid:362)400.0
million available to draw.
0
2
0
2
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Kennedy-Wilson Holdings, Inc.
Schedule III—Real Estate and Accumulated Depreciation
December 31, 2020
(Dollars in millions)
Initial Cost
Costs Capitali(cid:140)ed
Subsequent to
Acquisition
Gross Balance at December 31, 2020(1)
Region
Encumbrances
Land
Building &
Improvements
Improvements
Land
Building &
Improvements
Accumulated
Depreciation
Depreciable
Life in Years
Date of
Construction
Date
Acquired(3)
Total(2)
Description
Commercial
Office
Retail
Southern California
Mountain States
(cid:362) 35.0
1.2
(cid:362) 11.2
0.5
(cid:362) 18.5
1.2
(cid:362) 34.6
0.4
(cid:362) 11.5
0.5
(cid:362) 54.1
1.6
(cid:362) 65.6
2.1
(cid:362) (7.5)
(0.3)
39 years
39 years
Retail
Retail
Retail
Commercial por(cid:127)olio
Commercial por(cid:127)olio
Office
Office
Retail
Office
Office
Retail
Office
Office
Office
Commercial por(cid:127)olio
Office por(cid:127)olio
Retail por(cid:127)olio
Retail
Office por(cid:127)olio
Retail
Office building
Retail
Office por(cid:127)olio
Office
Retail
Retail
Office
Mountain States
Mountain States
Southern California
(cid:38)nited Kingdom
(cid:38)nited Kingdom
Ireland
Ireland
Ireland
Ireland
(cid:38)nited Kingdom
(cid:38)nited Kingdom
Southern California
Southern California
Southern California
(cid:38)nited Kingdom
(cid:38)nited Kingdom
Spain
Spain
Italy
Mountain States
Ireland
Mountain States
(cid:38)nited Kingdom
Ireland
Mountain States
Pacific Northwest
Pacific Northwest
10.0
4.2
27.0
100.1
86.0
106.4
83.8
72.5
22.5
28.8
35.0
187.1
43.6
6.7
27.5
69.9
3.7
5.3
77.0
2.1
2.6
9.1
16.8
78.5
2.0
8.2
59.8
20.4
85.3
6.2
37.8
11.6
20.7
128.4
28.1
1.8
27.1
26.3
2.6
2.0
9.0
32.1
4.2
1.2
2.3
30.6
2.9
5.6
14.0
24.2
289.0
4.4
102.6
83.1
73.8
232.0
109.5
60.6
36.5
47.9
216.4
58.6
5.0
46.2
74.8
9.5
11.9
29.9
70.4
64.0
5.4
8.1
106.0
1.8
1.2
11.9
13.3
33.8
27.8
5.8
25.3
7.2
17.7
4.6
25.9
8.0
22.4
13.9
0.7
3.9
0.2
1.1
2.0
2.0
0.5
1.5
3.2
1.8
2.6
9.1
3.1
56.7
1.5
7.3
53.7
18.3
83.6
5.1
37.8
11.6
20.7
107.0
31.5
1.9
32.4
35.4
2.6
2.2
9.0
30.2
4.5
1.2
2.2
30.6
4.7
6.8
25.9
47.8
259.7
6.1
92.1
102.4
72.0
225.5
97.3
78.3
41.1
53.6
187.5
66.2
5.5
69.2
101.0
13.4
13.4
31.0
68.3
69.9
5.9
9.2
109.2
6.5
9.4
35.0
50.9
316.4
7.6
99.4
156.1
90.3
309.1
102.4
116.1
52.7
74.3
294.5
97.7
7.4
101.6
136.4
16.0
15.6
40.0
98.5
74.4
7.1
11.4
139.8
(0.6)
(1.1)
(3.5)
(7.8)
(46.5)
(1.0)
(15.0)
(12.4)
(13.1)
(46.0)
(16.1)
(12.0)
(7.8)
(8.4)
(27.9)
(6.9)
(0.7)
(8.6)
(12.6)
(1.2)
(1.5)
(3.4)
(8.2)
(8.1)
(0.6)
(0.7)
(9.8)
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
1955/1981/
1982
1981
1958/1974-
1976/1985/
1989/2006
1980/1983
1985
V arious
V arious
V arious
2003
1966/2005
1980
2003
2010
1982
1968
1982
V arious
V arious
V arious
1995
V arious
1961
2007
1984/2008
V arious
2009
1995/1996
1956
1999/2001
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2014
2014
2014
2015
2015
2015
2015
2015
2015
2015
2015
2016
2016
2016
2016
2016
2016
2017
2017
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—
—
—
—
—
—
—
—
—
—
—
Gross Balance at December 31, 2020(1)
(Dollars in millions)
Initial Cost
Kennedy-Wilson Holdings, Inc.
Schedule III—Real Estate and Accumulated Depreciation (continued)
December 31, 2020
(Dollars in millions)
Initial Cost
Description
Retail
Office
Office
Office
Office
Industrial
Mu(cid:1140)ti(cid:61)a(cid:108)i(cid:1140)y
450-unit asset
178-unit asset
217-unit asset
366-unit asset
203-unit asset
542-unit asset
324-unit asset
280-unit asset
Condo
208-unit asset
1,008-unit asset
460-unit asset
204-unit asset
168-unit asset
430-unit asset
386-unit asset
157-unit asset
Land
408-unit asset
300-unit asset
210-unit asset
Land
200-unit asset
264-unit asset
343-unit asset
Region
Mountain States
Ireland
Ireland
Southern California
Northern California
(cid:38)nited Kingdom
Mountain States
Northern California
Pacific Northwest
Mountain States
Pacific Northwest
Northern California
Mountain States
Pacific Northwest
Pacific Northwest
Southern California
Northern California
Southern California
Mountain States
Mountain States
Pacific Northwest
Southern California
Southern California
Southern California
Pacific Northwest
Mountain States
Pacific Northwest
Mountain States
Mountain States
Pacific Northwest
Pacific Northwest
Encumbrances
12.0
26.2
17.8
61.4
44.1
31.4
22.2
52.6
19.5
89.2
24.8
36.6
37.3
175.0
46.7
14.3
10.9
62.6
66.0
42.9
60.4
39.0
29.0
20.7
25.2
84.0
Land
4.1
4.9
11.0
27.4
23.5
18.4
12.3
2.6
9.1
2.6
38.3
3.2
6.0
9.3
62.3
13.2
2.0
1.8
12.8
14.5
0.6
9.3
4.8
11.0
0.2
1.4
6.4
26.8
Building &
Improvements
12.2
18.5
6.9
57.3
41.3
43.0
18.5
41.4
36.3
23.8
57.5
28.6
40.3
0.2
37.3
152.5
53.0
17.6
13.1
67.4
81.4
46.0
83.3
29.2
46.7
25.9
44.9
107.4
0
2
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Costs Capitali(cid:140)ed
Subsequent to
Acquisition
Improvements
0.2
7.9
43.3
5.7
0.3
Land
4.1
5.0
11.5
27.4
23.5
Building &
Improvements
12.9
27.1
43.3
12.6
57.6
41.3
7.8
9.4
3.9
11.3
2.7
10.8
7.5
2.7
5.7
21.1
5.1
3.0
2.7
4.0
8.3
1.3
4.1
4.8
0.9
0.8
4.3
18.4
12.3
2.5
9.1
2.6
38.3
3.2
6.0
9.3
62.3
13.2
2.0
1.8
12.8
14.5
3.8
9.3
4.8
11.0
4.6
1.4
6.4
26.8
52.1
28.9
43.0
47.6
27.2
68.9
36.0
43.0
1.0
43.0
173.6
58.1
20.6
15.7
71.3
89.8
47.3
87.4
34.1
47.6
26.7
49.2
107.9
Accumulated
Depreciation
(1.1)
(1.7)
(0.3)
(1.7)
(13.7)
(10.5)
(10.7)
(15.8)
(5.9)
(16.1)
(8.6)
(7.8)
(0.1)
(8.5)
(31.3)
(9.9)
(3.2)
(2.6)
(9.1)
(11.6)
(5.6)
(10.4)
(3.6)
(4.2)
(2.4)
(4.7)
(8.6)
Total(2)
17.0
32.1
54.8
40.0
81.1
41.3
70.5
41.2
45.5
56.7
29.8
107.2
39.2
49.0
1.0
52.3
235.9
71.3
22.6
17.5
84.1
89.8
61.8
3.8
96.7
38.9
58.6
4.6
28.1
55.6
134.7
Depreciable
Life in Years
39 years
39 years
39 years
39 years
39 years
39 years
Date of
Construction
1967/1983
1841
1840/2000
1956
2000
2006/2007
Date
Acquired(3)
2017
2017
2017
2018
2019
2020
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
1974
1975
2011
2000
2005
1987
1996
2004/2006
2005
2004
1988
1988
1999
1992
2006
2002
2013
N/A
1998
1995
2007
N/A
2012
1997
2016
2013
2012
2012
2012
2014
2014
2014
2014
2014
2015
2015
2015
2016
2016
2016
2016
2016
2018
2016
2017
2017
2018
2017
2017
2017
Region
Pacific Northwest
Mountain States
Mountain States
Mountain States
Mountain States
Mountain States
Mountain States
Mountain States
Mountain States
Mountain States
Mountain States
Mountain States
Mountain States
Encumbrances
33.0
8.6
59.2
8.0
19.9
13.5
20.5
28.8
26.9
52.7
40.1
Land
11.9
2.6
15.8
0.8
2.1
7.2
4.9
5.7
9.6
4.0
16.4
13.4
Building &
Improvements
47.4
10.4
63.2
28.8
19.7
38.6
65.7
53.6
Costs Capitali(cid:140)ed
Subsequent to
Acquisition
Improvements
0.2
1.0
5.2
0.7
6.0
0.2
1.4
0.2
Gross Balance at December 31, 2020(1)
Building &
Improvements
48.8
11.6
68.5
9.2
29.5
25.7
34.7
39.9
2.3
66.0
53.7
Land
11.9
2.6
15.9
0.7
4.3
7.2
4.9
1.9
9.6
50.0
16.4
13.4
Total(2)
60.7
14.2
84.4
9.9
4.3
36.7
30.6
36.6
49.5
50.0
2.3
82.4
67.1
Accumulated
Depreciation
(4.0)
(1.2)
(6.0)
(1.9)
(2.0)
(0.2)
(2.3)
(1.8)
(0.2)
Depreciable
Life in Years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
39 years
Date of
Construction
2013
1988
1985
N/A
N/A
1995
1985
N/A
1996
N/A
N/A
2015
2014
Date
Acquired(3)
2017
2018
2018
2018
2018
2018
2018
2018
2018
2019
2019
2019
2020
Ireland
88.0
54.0
114.3
37.9
50.8
148.1
198.9
(31.2)
39 years
1824/2005
2014
Spain
Ireland
Spain
Ireland
(cid:38)nited Kingdom
Ireland
Hawaii
Hawaii
18.1
0.5
17.2
4.2
31.7
16.5
34.7
3.4
13.9
1.3
3.8
11.9
23.4
6.8
0.1
0.7
0.6
18.6
4.1
32.2
16.5
49.0
34.1
15.1
6.8
0.5
1.3
4.3
49.0
34.7
15.1
25.4
4.6
1.3
36.5
16.5
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
V arious
N/A
N/A
N/A
N/A
1912
N/A
2015
2015
2017
2017
2018
2020
2010
2020
(2.0)
2
.4
1
.8
3
.3
5
.0
1
.1
3
.6
5
.7
(
.8
Description
179-unit asset
88-unit asset
492-unit asset
Land
Land
293-unit asset
188-unit asset
Land
222-unit asset
Land
Land
360-unit asset
260-unit asset
(cid:15)o(cid:124)(cid:59)(cid:1140)
Hotel
(cid:9)(cid:59)(cid:136)(cid:59)(cid:1140)o(cid:114)(cid:108)(cid:59)n(cid:124)
Retail
Office
Retail
Retail
Land
Office
2700 acres
3 Lots
G rand Total
(1) The tax basis of all the properties in aggregate totaled $4,620.9 million.
(2) Excludes acquired in place lease values.
(3) For assets that were consolidated the date acquired represents when the asset was presented as real estate not when initially acquired by Kennedy Wilson.
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—
—
—
—
—
—
—
—
—
—
—
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2
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6
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5
4
2
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—
—
—
Kennedy-Wilson Holdings, Inc.
Schedule III—Real Estate and Accumulated Depreciation (continued)
December 31, 2020
Performance Graph
Changes in real estate for the years ended December 31, 2020, 2019 and 2018 were
as follows:
Changes in accumulated depreciation for the years ended December 31, 2020, 2019
and 2018 were as follows:
(Dollars in millions)
Balance at the beginning of period
Additions during the period:
(cid:1354)Other acquisitions
(cid:1354)Improvements
(cid:1354)Foreign currency
Deductions during the period:
(cid:1354)Cost of real estate sold
Balance at close of period
For the year ended December 31,
2020
2019
2018
(Dollars in millions)
(cid:362) 5,430.5
(cid:362) 5,981.7
(cid:362) 6,578.6
Balance at the beginning of period
183.0
108.4
129.9
176.2
270.0
26.7
210.3
355.1
(191.7)
Additions during the period:
(cid:1354)Depreciation expense
Deductions during the period:
(cid:1354)Dispositions
(cid:1354)Foreign currency
(644.1)
(1,024.1)
(970.6)
Balance at close of period
5
.7
5
.5
5
.7
For the year ended December 31,
2020
2019
2018
(cid:362) 466.8
(cid:362) 406.5
(cid:362) 344.0
121.5
110.2
110.8
(54.5)
18.0
5
.8
(49.0)
(0.9)
4
.8
(36.0)
(12.3)
4
.5
See accompanying report of independent registered public accounting firm.
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The graph below compares the cumulative total return of our common stock from December 31, 2015 through December 31, 2020, with the comparable cumulative return of
companies comprising the S&P 500 Index and the MSCI World Real Estate Index. The graph plots the growth in value of an initial investment of (cid:362)100 in each of our common
stock, the S&P 500 Index, and the MSCI World Real Estate Index for the five-year period ended December 31, 2020, and assumes reinvestment of all dividends, if any, paid on
the securities. The stock price performance shown on the graph is not necessarily indicative of future price performance.
$200.00
$150.00
$100.00
$50.00
$-
KW
S&P 500
MSCI World
Real Estate
Index
5
1
0
2
/
1
3
/
2
1
6
1
0
2
/
9
2
/
2
6
1
0
2
/
0
3
/
4
6
1
0
2
/
0
3
/
6
6
1
0
2
/
1
3
/
8
6
1
0
2
/
1
3
/
0
1
6
1
0
2
/
1
3
/
2
1
7
1
0
2
/
8
2
/
2
7
1
0
2
/
0
3
/
4
7
1
0
2
/
0
3
/
6
7
1
0
2
/
1
3
/
8
7
1
0
2
/
1
3
/
0
1
7
1
0
2
/
1
3
/
2
1
8
1
0
2
/
8
2
/
2
8
1
0
2
/
0
3
/
4
8
1
0
2
/
0
3
/
6
8
1
0
2
/
1
3
/
8
8
1
0
2
/
1
3
/
0
1
8
1
0
2
/
1
3
/
2
1
9
1
0
2
/
8
2
/
2
9
1
0
2
/
0
3
/
4
9
1
0
2
/
0
3
/
6
9
1
0
2
/
1
3
/
8
9
1
0
2
/
1
3
/
0
1
9
1
0
2
/
1
3
/
2
1
0
2
0
2
/
9
2
/
2
0
2
0
2
/
0
3
/
4
0
2
0
2
/
0
3
/
6
0
2
0
2
/
1
3
/
8
0
2
0
2
/
1
3
/
0
1
0
2
0
2
/
1
3
/
2
1
Kennedy Wilson uses the MSCI World Real Estate Index, which includes international real estate companies as a comparable benchmark. The information under this caption,
“Performance Graph,” is deemed not to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that such filing specifically states otherwise.
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$
,
2
0
7
$
,
4
3
0
$
,
9
8
1
$
5
1
$
6
6
$
0
6
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Forward-Looking Statements
(cid:34)(cid:124)oc(cid:104) (cid:30)(cid:117)ic(cid:59) (cid:17)n(cid:61)o(cid:117)(cid:108)ation
Our common stock trades on the NYSE under the symbol “KW.”
(cid:33)(cid:59)c(cid:59)n(cid:124) (cid:34)a(cid:1140)(cid:59)s o(cid:61) (cid:38)n(cid:117)(cid:59)(cid:93)is(cid:124)(cid:59)(cid:117)(cid:59)d (cid:34)(cid:59)cu(cid:117)iti(cid:59)s
None
(cid:15)o(cid:1140)d(cid:59)(cid:117)s
As of February 22, 2021, we had approximately 102 holders of record of our common
stock.
E(cid:116)ui(cid:124)y (cid:7)o(cid:108)(cid:114)(cid:59)nsation (cid:30)(cid:1140)an (cid:17)n(cid:61)o(cid:117)(cid:108)ation
See Item 12(cid:332)“Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.”
(cid:9)i(cid:136)id(cid:59)nds
We declared and paid quarterly dividends of (cid:362)0.22 per share each quarters of 2020.
We declared and paid quarterly dividends of (cid:362)0.21 per share for the first three
quarters of 2019 and (cid:362)0.22 per share for the fourth quarter of 2019.
(cid:30)u(cid:117)chas(cid:59)s o(cid:61) E(cid:116)ui(cid:124)y (cid:34)(cid:59)cu(cid:117)iti(cid:59)s by (cid:124)h(cid:59) (cid:7)o(cid:108)(cid:114)any
Months
October 1(cid:332)October 31, 2020
November 1(cid:332)November 30, 2020
December 1(cid:332)December 31, 2020
Total
Total Number of Shares
Purchased
Average Price
Paid per Share
Total Number of Shares Purchased
as Part of Publicly Announced Plan(1)
Maximum Amount that May Yet
be Purchased (cid:38)nder the Plan(1)
338,700
216,867
156,992
(cid:362) 14.96
15.71
16.82
.6
1
17,835,941
18,052,808
18,209,800
(cid:362) 12,746,918
259,339,673
256,698,458
2
(1) On March 20, 2018, our board of directors authorized us to repurchase up to $250 million of our common shares, from time to time, subject to market conditions. On November 4, 2020, our board of directors authorized us to
repurchase an additional $250 million of our common shares, from time to time, subject to market conditions.
During the year ended December 31, 2020, the Company repurchased and retired a total of 3.4 million shares of its common stock at a weighted average price of (cid:362)16.88.
In addition to the repurchases of the Company(cid:317)s common stock made above, the Company also withheld shares with respect to the vesting of restricted stock that the Company
made to its employees. Shares that vested during the year ended December 31, 2020 and 2019 were net-share settled such that the Company withheld shares with value
equivalent to the employees(cid:317) minimum statutory obligation for the applicable income and other employment taxes and remitted the cash to the appropriate taxing authorities.
During the year ended December 31, 2020 and 2019, total payments for the employees(cid:317) tax obligations to the taxing authorities were (cid:362)11.6 million (571,983 shares withheld)
and (cid:362)16.4 million (764,909 shares withheld), respectively.
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Statements made by us in this report and in other reports and statements released
by us that are not historical facts constitute “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities
Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). These forward-looking statements are necessarily estimates
re(cid:89)ecting the (cid:102)udgment of our senior management based on our current estimates,
expectations, forecasts and pro(cid:102)ections and include comments that express our
current opinions about trends and factors that may impact future results. Disclosures
that use words such as “believe,” “may,” “anticipate,” “estimate,” “intend,” “could,” “plan,”
“expect,” “pro(cid:102)ect” or the negative of these, as well as similar expressions, are intended
to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance, rely on a
number of assumptions concerning future events, many of which are outside of our
control, and involve known and unknown risks and uncertainties that could cause our
actual results, performance or achievement, or industry results, to differ materially
from any future results, performance or achievements, expressed or implied by
such forward-looking statements. Although we believe that our plans, intentions,
expectations, strategies and prospects as re(cid:89)ected in or suggested by those forward-
looking statements are reasonable, we do not guarantee that the transactions and
events described will happen as described (or that they will happen at all). In addition,
this report contains information and statistics regarding, among other things, the
industry, markets, submarkets and sectors in which we operate. We obtained this
information and these statistics from various third-party sources and our own internal
estimates. We believe that these sources and estimates are reliable but have not
independently verified them and cannot guarantee their accuracy or completeness.
Any such forward-looking statements, whether made in this report or elsewhere,
should be considered in the context of the various disclosures made by us about our
businesses including, without limitation, the risk factors discussed in Part I, Item IA
of this Report in our 10-K filing with the SEC. Except as required under the federal
securities laws and the rules and regulations of the (cid:38).S. Securities and Exchange
Commission (the “SEC”), we do not have any intention or obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events, changes in assumptions, or otherwise. Please refer to “Non-GAAP Measures
and Certain Definitions” in Item 7. Management(cid:317)s Discussion and Analysis of Financial
Condition and Results of Operations for definitions of certain terms used throughout
this report.
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1
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,
5
5
9
$
5
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,
2
0
9
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8
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0
$
5
6
,
6
9
8
,
4
5
8
CORPORATE INFORMATION
Board Of Directors
William J. McMorrow
Chairman and Chief Executive Officer
Norman Creighton
Retired President and Chief Executive Officer
Imperial Bank (Now Comerica)
Mary L. Ricks
President
Todd Boehly
Co-Founder, Chairman, Chief Executive Officer
and Controlling Member
Eldridge Industries, LLC
Cathy Hendrickson
Retired President and Chief Executive Officer
Bay Cities National Bank (Now Opus Bank)
Richard Boucher
Former Group CEO
Bank of Ireland
Trevor Bowen
Former Director
Principle Management Limited
Corporate Headquarters
151 South El Camino Drive
Beverly Hills, CA 90212
+1 (310) 887-6400
Annual Meeting
Beverly Wilshire
9500 Wilshire Blvd.
Beverly Hills, CA 90212
9 a.m., Thursday, June 10, 2021
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Stock Listing
New Y ork Stock Exchange
Symbol “KW”
David A. Minella
Managing Member
Minella Capital Management LLC
Kent Y. Mouton
Executive Vice President and
General Counsel
Transfer Agent
Continental Stock Transfer
1 State Street - SC-1
New York, NY 10004
+1 (212) 509-4000
Independent Auditors
KPMG LLP
Legal Counsel
Latham & Watkins LLP
Sanaz Zaimi
Head of Global FICC Sales
Bank of America Merrill Lynch
Stanley Zax
Retired Chairman
Zenith National Insurance Corporation
Investor Information
A copy of our Annual Report on Form 10-K,
as filed with the SEC, will be furnished to
shareholders and interested investors free
of charge upon written request to us at
151 South El Camino Drive, Beverly Hills, CA
90212, Attention: Investor Relations
For more information
For more information on Kennedy Wilson, please
visit our website at www.kennedywilson.com
Executive Officers
William J. McMorrow
Chairman and Chief Executive Officer
Justin Enbody
Chief Financial Officer
Mary L. Ricks
President
Matt Windisch
Executive Vice President
Kent Y. Mouton
Executive Vice President and
General Counsel
In Ku Lee
Senior Vice President and
Deputy General Counsel
Certain of the matters discussed herein are discussed more fully in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K. We filed our Annual Report on Form 10-K for the year ended December 31, 2020,
with the SEC on February 26, 2021, which, in the section titled “Risk Factors,” contains a detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from any forward-looking statements contained herein.
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OUR LOCATIONS
U.S.
Bellevue
3055 112th Ave. NE, Suite 125
Bellevue, WA 98004
Beverly Hills
(Global Corporate Headquarters)
151. S. El Camino Drive
Beverly Hills, CA 90212
Boise
365 N. Whitewater Park Blvd.
Boise, ID 83702
Denver
6200 S. Quebec St.
Englewood, CO 80111
Portland
2270 NW Savier St.
Portland, OR 97210
Salt Lake City
1496 Spring Lane
Holladay, UT 84117
San Francisco
505 Montgomery St., Suite 1102
2nd Floor
San Francisco, CA 94111
Europe
Dublin
94 St Stephen’s Green
Dublin 2
Ireland
London
50 Grosvenor Hill
London, W1K 3QT
United Kingdom
Luxembourg
21, rue Philippe II
Luxembourg L-2340
Bellevue
Portland
Boise
Salt Lake City
Denver
San Francisco
Beverly Hills
Corporate
Headquarters
Madrid
C/ Fernando El Santo
17 3º Izq.
28010 Madrid, Spain
St. Helier
29 Broad Street
St. Helier, Jersey JE2 3RR
Channel Islands
Dublin London
St. Helier
Luxembourg
Madrid
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151 South El Camino Drive
Beverly Hills, CA 90212
Tel: +1 (310) 887-6400
www.kennedywilson.com
ANNUAL
REPORT
2020