Kennedy-Wilson Holdings Inc.

Good day and welcome to the Kennedy Wilson first quarter 2021 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Devin Bovsar, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning. This is Devin Bovsar, and joining us today are Bill McMorrow, Chairman and CEO of Kennedy Wilson, Mary Ricks, President of Kennedy Wilson, Matt Windisch, Executive Vice President of Kennedy Wilson, and Justin Enbody, Chief Financial Officer of Kennedy Wilson. Today's call will be webcast live and will be archived for replay. The replay will be available by phone for one week and by webcast for three months. Please see the Investor Relations website for more information. On this call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. You can find a description of these items, along with a reconciliation of the most directly comparable GAAP financial measure and our first quarter 2021 earnings release, which is posted on the Investor Relations section of our website. Statements made during this call may include forward-looking statements. Actual results may materially differ from forward-looking information. discussed on this call due to a number of risks, uncertainties, and other factors indicated in reports and filings with the Securities and Exchange Commission. I would now like to turn the call over to our Chairman and CEO, Bill McMorrow.

Thanks, Devin, and good morning, everybody, and thank you for joining us today. I'm pleased with the Q1 earnings that we reported yesterday. As the fundamentals in our markets continue to recover from the pandemic, The strong momentum we had in Q4 carried into an active start for the year. We anticipate that the global economy will continue to rebound, and the strong institutional demand for well-located real estate assets bodes well for our existing portfolio and our strategic growth initiatives. And we have built an extremely robust investment and leasing pipeline that will drive growth for us for the balance of the year and beyond. Starting with our financial results in Q1, we had a gap loss per diluted share of $0.04 compared to a loss of $0.07 in Q1 of last year. Adjusted net income grew by 5% to $47 million. These results include the impact of a one-time $15 million loss on the early extinguishment of corporate debt in Q1 related to the refinance of our 2024 bonds which will result in $10 million of annual interest savings. Excluding this one-time loss, GAAP net income would have been $0.04 per diluted share, and adjusted net income would have been $58 million. Finally, adjusted EBITDA grew by 14% to $128 million. Our stabilized portfolio ended the quarter with $389 million in estimated annual NOIs. The operational performance across our largely suburban multifamily and office portfolio, which accounts for 82% of our estimated annual NOI, was strong as we continued to maintain high occupancy and, once again, collected 97% of our rents. In total, our office and multifamily same-store NOI was up 2.1% in Q1, due to strong results out of our Mountain States apartments and the burn-off of free rent in our office portfolio. These results compare very favorably against many of our peers. In Q1, we continued to grow our investment management platform and our fee-bearing capital, which has grown by 86% since the beginning of 2019 and now totals $4.1 billion. Growth in the quarter of 5% was primarily driven by the expansion of two new platforms we launched last year. In Q1, we completed $209 million of new investments in our urban logistics platform and $137 million in new loan investments via our debt platform. Both platforms have strong new deal pipelines, which we will detail in a moment. Our disposition program continued to take advantage of a strong real estate market, and we selectively are harvesting the value we created in our existing portfolio. We successfully sold $556 million of assets in Q1, which our share was approximately 50%. The key disposition for us was the $220 million sale of Friars Bridge Court, a wholly-owned 103,000-square-foot office property located in the South Bank sub-market of London. The sale was completed at a sub-4% cap rate and once again illustrates the high-quality nature of our real estate portfolio and the continued institutional demand for well-located office properties on long-term leases. The sale generated a net gain of approximately $65 million to Kennedy Wilson. And post quarter end, we're actively recycling the proceeds from our Q1 sales into new investments and have built a pipeline of approximately $514 million in gross investments, 70% of which has already been closed. In total, Our Q2 pipeline is expected to add another $9 million of estimated annual NOI to KW and $200 million in fee-bearing capital, which would bring our estimated annual NOI to $398 million and our fee-bearing capital to $4.3 billion after accounting for these Q2 transactions. Looking at our balance sheet, we continue to maintain $1.1 billion in pro-form liquidity with minimal debt maturities remaining in 2021. As I discussed on our last call, in Q1, we refinanced all of our 2024 bonds with a new $1.2 billion unsecured bond offering across two separate tranches with an weighted average coupon of 4.875% and a weighted average maturity of nine years. In April, we made further progress on our unsecured KWE bonds due in 2022 and repaid another $207 million with $300 million remaining. Proforma for both bond paydowns, our cost of debt improved from 3.7% at year end to 3.5%, and our weighted average maturity extended from 4.1 years to 5.9 years. These two transactions will reduce our annual interest expense by approximately $18 million. Now, as we begin to look beyond the pandemic, it's important to highlight our efforts over the last few years to simplify the Kennedy Wilson business model. Our headcount is down 60% through divesting of two non-core divisions, and we are coming out of COVID a much leaner and more focused company with ample dry powder to continue growing our business. Our strategic initiatives include significant growth for both our in-place property and our recurring fee income revenue. Over the last year, our U.S. debt platform has grown considerably since its launch in May 2020. This $2 billion platform is focused on loans secured by high-quality real estate in our existing U.S. investment markets. We have a number of advantages against our competitors in this space. First, we approach our loan investments through the lens of an owner-operator rather than purely a lender. Our debt platform leverages the expertise of our real estate underwriting teams as well as our relationship network that we have cultivated at KW over the past three decades. Finally, our loan portfolio is backed by large, well-capitalized institutional sponsors. We have a 9% ownership interest in our loan portfolio, which is generating double-digit, unlevered returns to KW. Post-quarter end, our debt platform grew to approximately 1.2 billion, and we have a strong pipeline that will allow us to continue growing this platform in 2021. Our $1 billion European logistics platform is less than six months old and off to a fast start. This platform is focusing on smaller, last mile facilities located close to city centers. The fundamentals in this asset class remain extremely positive as demand continues to be driven by higher levels of e-commerce and the need for efficient supply chains. The platform, which KW has an ownership interest of 20%, has $444 million of assets as of quarter end, and a robust pipeline of another $300 million of opportunities across the UK, Ireland, and Spain that we are evaluating. Given the additional capacity we have in all of our announced platforms, we have the potential to add another $2 billion of incremental fee-bearing capital to the existing $4.1 billion. With that, I'd like to turn the call over to Mary Ricks, our president, to discuss our multifamily and office portfolios in more detail.