Kennedy Wilson(KW)2024-08-08 18:57Financial Data and Key Metrics - Adjusted EBITDA for Q2 2024 totaled 283 million [12] - GAAP net loss for Q2 2024 was 0.46 per share of non-cash items [12] - Investment Management revenue grew by 37% to 1 billion in new originations and higher fee-bearing capital [12] - Estimated annual NOI grew by 5% to 27 billion, a 16% annual growth rate [6] - Fee-bearing capital grew to a record 15 billion [6] Business Line Performance - The credit platform deployed 16 million to estimated annual NOI [5] - The industrial portfolio acquired two platforms totaling 8.7 billion [22] Market Performance - U.S. multifamily portfolio saw same-property occupancy growth of 1.9%, revenue growth of 3.6%, and NOI growth of 3% [16] - California portfolio delivered 5% NOI growth, with Northern California bad debt dropping to the lowest level in two years [17] - Dublin portfolio stabilized two multifamily projects, adding 330 million generated from asset sales year-to-date [11] - The company is expanding its credit platform, with a pipeline of 700 million in signed deals [10] - The company is leveraging its global relationships, particularly in Japan, to raise capital and expand its investment management business [8][33] Management Commentary on Operating Environment and Future Outlook - Management highlighted improving liquidity in the U.S. apartment sector and beneficial shifts in interest rates, with the 10-year bond declining by 100 basis points [6][7] - The company expects lower interest rates to increase transaction volumes and provide opportunities for capital deployment [7] - Management expressed confidence in the multifamily market, citing a structural shortage of housing in the U.S., U.K., and Ireland [9] - The company anticipates flat to lower insurance premiums in the second half of 2024, following July renewals [16] Other Key Information - The company repurchased 600,000 shares in Q2, bringing the year-to-date total to 1.7 million shares [14] - The company closed its Spanish office after divesting its last wholly owned asset in Spain, generating 110 million remaining on its 500 million share repurchase authorization [14] Q&A Session Summary Question: Prospects for expanding the debt platform beyond construction lending - The company sees opportunities in construction lending but is also exploring longer-term debt solutions, including permanent and bridge lending [24] Question: Future of the development program - The company is shifting its development strategy to focus on construction management, with 5% to 10% equity stakes in new projects [25] Question: Progress on disposition goals - The company has a substantial pipeline of dispositions and expects to continue shifting its portfolio towards U.S. multifamily assets [26][27] Question: Rationale for including fair value adjustments in adjusted EBITDA - The company introduced baseline EBITDA as a more recurring operating metric, alongside adjusted EBITDA [29][30] Question: Rationale for reopening the Japan office - The company reopened its Japan office to strengthen capital-raising efforts, leveraging long-standing relationships with Japanese institutions [31][33] Question: Impact of declining interest rates on the credit platform - Lower interest rates are expected to increase construction starts and attract new entrants to the market, benefiting the company's credit platform [36][37] Question: Quantification of the Spanish property sale and cost savings - The sale of the Spanish property generated 35 million in cash, with negligible impact on Q3 earnings, and the closure of the Spanish office is expected to save 1.5 million annually [41][42] Question: Capital raised from Japan - The company has raised $100 million from Japan for its discretionary fund business, with ongoing discussions with major Japanese companies [40]