10-Q 1 kw-20220331.htm 10-Q kw-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
  
(Mark One)                        
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .
Commission file number 001-33824
Kennedy-Wilson Holdings, Inc.
(Exact name of Registrant as specified in its charter)

Delaware 26-0508760
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
151 S El Camino Drive
Beverly Hills, CA 90212
(Address of principal executive offices)
Registrant’s telephone number, including area code:
(310) 887-6400

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $.0001 par valueKWNYSE
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.
(See definition of “large accelerated filer," "accelerated filer," "smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act). (Check one):
Large accelerated filer  Accelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     
The number of shares of common stock outstanding as of May 3, 2022 was 137,790,768.


Index
 



FORWARD-LOOKING STATEMENTS
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 reflecting the judgment of our senior management based on our current estimates, expectations, forecasts and projections and include comments that express our current opinions about trends and factors that may impact future operating results. Disclosures that use words such as “believe,” "may," “anticipate,” “estimate,” “intend,” “could,” “plan,” “expect,” “project” 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. These risks and uncertainties may include the risks and uncertainties described elsewhere in this report and other filings with the Securities and Exchange Commission (the “SEC”), including the Item 1A. “Risk Factors” section of our annual report on Form 10-K for the year ended December 31, 2021. 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 our filings with the SEC. Except as required under the federal securities laws and the rules and regulations of 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.
Non-GAAP Measures and Certain Definitions

    In addition to the results reported in accordance with U.S. generally accepted accounting principles ("GAAP") included within this report, Kennedy Wilson has provided certain information, which includes non-GAAP financial measures (including Adjusted EBITDA, Adjusted Net Income and Net Operating Income, as defined below). Such information is reconciled to its closest GAAP measure in accordance with the rules of the SEC, and such reconciliations are included within this report. These measures may contain cash and non-cash gains and expenses and gains and losses from the sale of real-estate related investments. Consolidated non-GAAP measures discussed throughout this report contain income or losses attributable to non-controlling interests. Management believes that these non-GAAP financial measures are useful to both management and Kennedy Wilson's shareholders in their analysis of the business and operating performance of the Company. Management also uses this information for operational planning and decision-making purposes. Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measures. Additionally, non-GAAP financial measures as presented by Kennedy Wilson may not be comparable to similarly titled measures reported by other companies.
    “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's consolidated subsidiaries.
    “KWE” refers to Kennedy Wilson Europe Real Estate Limited.  
    “Adjusted EBITDA” represents net income before interest expense, loss on early extinguishment of debt, our share of interest expense included in unconsolidated investments, depreciation and amortization, our share of depreciation and amortization included in investments in unconsolidated investments, provision for (benefit from) income taxes, our share of taxes included in unconsolidated investments, share-based compensation and EBITDA attributable to noncontrolling interests.  Please also see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP measures” for a reconciliation of Adjusted EBITDA to net income as reported under GAAP. Our management uses Adjusted EBITDA to analyze our business because it adjusts net income for items we believe do not accurately reflect 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 Adjusted EBITDA is useful to investors to assist them in getting a more accurate picture of our results from operations. However, Adjusted EBITDA is not a recognized measurement under GAAP and when analyzing our operating performance, readers should use Adjusted 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 Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, Adjusted EBITDA is not intended to be a measure of free cash flow for our management’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 Adjusted EBITDA also differs from the amount calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain
i

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. 
    “Adjusted Net Income” represents net income before depreciation and amortization, our share of depreciation and amortization included in unconsolidated investments, share-based compensation, net income attributable to noncontrolling interests, before depreciation and amortization, preferred dividends and accretion of preferred stock issuance costs and one-time tax remeasurement. Please also see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Certain Non-GAAP Measures and Reconciliations" for a reconciliation of Adjusted Net Income to net income as reported under GAAP.
    “Consolidated Portfolio NOI” refers to the NOI that is generated from the properties that we have an ownership interest in and are held in our Consolidated Portfolio business segment. Please also see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Certain Non-GAAP Measures and Reconciliations” for a reconciliation of Consolidated Portfolio NOI to net income as reported under GAAP.
"Equity partners" refers to non-wholly-owned subsidiaries that we consolidate in our financial statements under U.S. GAAP and third-party equity providers.
"Fee Bearing Capital" represents total third-party committed or invested capital that we manage in our joint-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 amortization, and net of noncontrolling interests.
    "Real Estate Assets under Management" ("AUM") 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 joint ventures. Our AUM is principally intended to reflect the extent of our presence in the real estate market, not the basis for determining our management fees. Our AUM 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 joint 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 AUM. The estimated value of development properties is included at estimated completion cost.
    “Co-Investment Portfolio NOI” refers to the NOI that is generated from the properties that we have an ownership interest in and are held in our Co-investments Portfolio business segment. Please also see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Certain Non-GAAP Measures and Reconciliations” for a reconciliation of Co-Investment Portfolio NOI to net income as reported under GAAP.
    "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 amortization 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 reflects 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.
    “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.      
ii

PART I
FINANCIAL INFORMATION
 
Item 1.Financial Statements (Unaudited)

Kennedy-Wilson Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in millions, except share and per share amounts)
March 31,
2022
December 31,
2021
Assets
Cash and cash equivalents$462.1 $524.8 
Accounts receivable (including $16.0 and $14.2 of related party)
39.1 36.1 
Real estate and acquired in place lease values (net of accumulated depreciation and amortization of $854.5 and $838.1)
5,067.4 5,059.8 
Unconsolidated investments (including $2,012.5 and $1,794.8 at fair value)
2,166.9 1,947.6 
Other assets188.8 177.9 
Loan purchases and originations143.5 130.3 
Total assets(1)
$8,067.8 $7,876.5 
Liabilities
Accounts payable$15.9 $18.6 
Accrued expenses and other liabilities575.1 619.1 
Mortgage debt3,029.1 2,959.8 
KW unsecured debt1,778.1 1,852.3 
KWE unsecured bonds606.4 622.8 
Total liabilities(1)
6,004.6 6,072.6 
Equity
Series A cumulative preferred Stock, $0.0001 par value, 1,000 per share liquidation preference, 1,000,000 shares authorized, 300,000 shares outstanding as of March 31, 2022 and December 31, 2021 and Series B cumulative preferred Stock, $0.0001 par value, 1,000 per share liquidation preference, 1,000,000 shares authorized, 300,000 shares outstanding as of March 31, 2022.
593.1 295.2 
Common stock, $0.0001 par value per share, 200,000,000 authorized, 137,790,769 and 137,955,479 shares issued and outstanding as of March 31, 2022 and December 31, 2021
  
Additional paid-in capital1,658.4 1,679.6 
Retained earnings191.6 192.4 
 Accumulated other comprehensive loss(405.6)(389.6)
Total Kennedy-Wilson Holdings, Inc. shareholders' equity2,037.5 1,777.6 
Noncontrolling interests25.7 26.3 
Total equity2,063.2 1,803.9 
Total liabilities and equity$8,067.8 $7,876.5 


(1) The assets and liabilities as of March 31, 2022 include $184.5 million (including cash held by consolidated investments of $11.6 million and real estate and acquired in place lease values, net of accumulated depreciation and amortization of $148.6 million) and $107.6 million (including mortgage debt of $101.4 million), respectively, from consolidated variable interest entities ("VIEs"). The assets and liabilities as of December 31, 2021 include $189.6 million (including cash held by consolidated investments of $11.5 million and real estate and acquired in place lease values, net of accumulated depreciation and amortization of $152.8 million) and $129.2 million (including mortgage debt of $103.3 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.
1

Kennedy-Wilson Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)
(Dollars in millions, except share and per share amounts)
Three Months Ended March 31,
20222021
Revenue
Rental$104.2 $88.9 
Hotel6.5 0.8 
Investment management fees (includes $11.3 and $7.3 of related party fees)
11.3 7.4 
Property services fees (includes $ and $0.1 of related party fees)
0.4 0.7 
Loan and other2.3 1.6 
Total revenue124.7 99.4 
Income from unconsolidated investments
Principal co-investments78.2 18.8 
Performance allocations27.2 (0.4)
Total income from unconsolidated investments105.4 18.4 
Gain on sale of real estate, net1.9 73.5 
Expenses
Rental35.7 33.0 
Hotel4.3 1.6 
Compensation and related29.0 27.0 
Share-based compensation7.1 7.7 
Performance allocation compensation11.8 — 
General and administrative7.9 6.8 
Depreciation and amortization43.3 44.4 
Total expenses139.1 120.5 
Interest expense(50.5)(51.6)
Loss on early extinguishment of debt (14.8)
Other loss5.8 (3.3)
Income before provision for income taxes48.2 1.1 
Provision for income taxes(8.2)(2.7)
Net income (loss)40.0 (1.6)
Net loss attributable to the noncontrolling interests0.1 0.3 
Preferred dividends(5.3)(4.3)
Net income (loss) attributable to Kennedy-Wilson Holdings, Inc. common shareholders$34.8 $(5.6)
Basic earnings (loss) per share
Earnings (loss) per share$0.25 $(0.04)
Weighted average shares outstanding136,815,290 138,772,819 
Diluted earnings (loss) per share
Earnings (loss) per share$0.24 $(0.04)
Weighted average shares outstanding150,420,132 138,772,819 
Dividends declared per common share$0.24 $0.22 

See accompanying notes to consolidated financial statements.
2

Kennedy-Wilson Holdings, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
(Dollars in millions)
Three Months Ended March 31,
20222021
Net income (loss)$40.0 $(1.6)
Other comprehensive income, net of tax:
Unrealized foreign currency translation loss(28.0)(23.8)
Unrealized foreign currency derivative contracts gain8.2 38.4 
Unrealized gain on interest rate swaps3.0 1.7 
Total other comprehensive (loss) income for the period(16.8)16.3 
Comprehensive income 23.2 14.7 
Comprehensive (income) loss attributable to noncontrolling interests0.8 0.5 
Comprehensive income attributable to Kennedy-Wilson Holdings, Inc.$24.0 $15.2 

See accompanying notes to consolidated financial statements.

3

Kennedy-Wilson Holdings, Inc.
Consolidated Statements of Equity
(Unaudited)
(Dollars in millions, except share amounts)
Three Months Ended March 31, 2022
 Preferred StockCommon StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
Noncontrolling Interests 
SharesAmountSharesAmountTotal
Balance at December 31, 2021300,000 $295.2 137,955,479 $ $1,679.6 $192.4 $(389.6)$26.3 $1,803.9 
Preferred stock issuance300,000 297.9 — — —  — — 297.9 
Restricted stock grants (RSG) — — 1,221,362 — — — — — — 
Shares retired due to RSG vesting— — (796,755)— (18.6)— — — (18.6)
Shares retired due to common stock repurchase program— — (589,317)— (9.7)(2.8)— — (12.5)
Stock based compensation— — — — 7.1 — — — 7.1 
Other comprehensive (loss) income:
Unrealized foreign currency translation loss, net of tax— — — — — — (27.3)(0.7)(28.0)
Unrealized foreign currency derivative contract gain, net of tax— — — — — — 8.3 — 8.3 
Unrealized gain on interest rate swaps, net of tax— — — — — — 3.0 — 3.0 
Common stock dividends— — — — — (32.8)— — (32.8)
Preferred stock dividends— — — — — (5.3)— — (5.3)
Net income— — — — — 40.1 — (0.1)40.0 
Contributions from noncontrolling interests— — — — — — — 0.6 0.6 
Distributions to noncontrolling interests— — — — — — — (0.4)(0.4)
Balance at March 31, 2022600,000 $593.1 137,790,769 $ $1,658.4 $191.6 $(405.6)$25.7 $2,063.2 



















4




Kennedy-Wilson Holdings, Inc.
Consolidated Statements of Equity
(Unaudited)
(Dollars in millions, except share amounts)
Three Months Ended March 31, 2021
 Preferred StockCommon StockAdditional
Paid-in Capital
Retained Earnings (Accumulated Deficit) Accumulated
Other
Comprehensive Loss
Noncontrolling Interests 
(Dollars in millions, except share amounts)SharesAmountSharesAmountTotal
Balance at December 31, 2020300,000 $295.2 141,365,323 $ $1,725.2 $17.7 $(393.6)$28.2 $1,672.7 
Shares forfeited— — (237,558)— — — — — — 
Restricted stock grants (RSG) — — 614,945 — — — — — — 
Shares retired due to RSG vesting— — (658,293)— (14.1)— — — (14.1)
Shares retired due to common stock repurchase program— — (10,281)— (0.2) — — (0.2)
Stock based compensation— — — — 7.7 — — — 7.7 
Other comprehensive (loss) income:
Unrealized foreign currency translation loss, net of tax— — — — — — (23.6)(0.2)(23.8)
Unrealized foreign currency derivative contract gain, net of tax— — — — — — 38.4 — 38.4 
Unrealized gain on interest rate swaps, net of tax— — — — — — 1.7 — 1.7 
Common stock dividends— — — — — (31.0)— — (31.0)
Preferred stock dividends— — — — — (4.3)— — (4.3)
Net loss— — — — — (1.3)— (0.3)(1.6)
Contributions from noncontrolling interests— — — — — — — 0.9 0.9 
Distributions to noncontrolling interests— — — — — — — (0.1)(0.1)
Balance at March 31, 2021300,000 $295.2 141,074,136 $ $1,718.6 $(18.9)$(377.1)$28.5 $1,646.3 

See accompanying notes to consolidated financial statements.
5

Kennedy-Wilson Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in millions)
Three Months Ended March 31,
20222021
Cash flows from operating activities:
Net income (loss)$40.0 $(1.6)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain from sale of real estate, net(1.9)(73.5)
Depreciation and amortization43.3 44.4 
Above/below market and straight-line rent amortization(1.2)7.1 
Uncollectible lease income1.8 2.1 
Provision for (benefit from) deferred income taxes5.7 (1.8)
Amortization of deferred loan costs2.1 6.4 
Amortization of discount and accretion of premium on issuance of the senior notes and mortgage debt
(0.2)1.6 
Unrealized net gain on derivatives
(7.5)(1.1)
Income from unconsolidated investments(105.4)(18.4)
Accretion of interest income on loans (0.3)
Operating distributions from unconsolidated investments18.0 16.4 
Deferred compensation15.3 2.6 
Share-based compensation7.1 7.7 
Change in assets and liabilities:
Accounts receivable(4.3)(0.6)
Other assets(10.7)(18.9)
Accounts payable, accrued expenses and other liabilities(61.0)(48.7)
Net cash used in operating activities(58.9)(76.6)
Cash flows from investing activities:
Proceeds from collection of loans0.1 19.8 
Issuance of loans(13.4)(12.9)
Net proceeds from sale of consolidated real estate33.9 228.3 
Purchases of real estate(103.7) 
Capital expenditures to real estate(26.6)(47.3)
Proceeds from (premiums paid) settlement of foreign derivative contracts5.8 (3.8)
Distributions from unconsolidated investments7.2 21.6 
Contributions to unconsolidated investments(149.6)(52.8)
Net cash (used in) provided by investing activities(246.3)152.9 
Cash flows from financing activities:
Borrowings under senior notes payable 1,204.3 
Repayment of senior notes payable (576.9)
Issuance of preferred stock, net of issuance costs297.9  
Borrowings under line of credit175.0  
Repayment of line of credit(250.0)(150.0)
Borrowings under mortgage debt102.7 50.4 
Repayment of mortgage debt(1.3)(67.7)
Payment of debt issue costs(1.4)(17.1)
Repurchase and retirement of common stock(31.3)(14.3)
Common dividends paid(36.1)(32.6)
Preferred dividends paid(4.3)(4.3)
Contributions from noncontrolling interests0.6 0.9 
Distributions to noncontrolling interests(0.4)(0.1)
Net cash provided by financing activities251.4 392.6 
Effect of currency exchange rate changes on cash and cash equivalents(8.9)4.6 
Net change in cash and cash equivalents(1)
(62.7)473.5 
Cash and cash equivalents, beginning of period524.8 965.1 
Cash and cash equivalents, end of period$462.1 $1,438.6 
(1) See discussion of non-cash effects in the supplemental cash flow information.
See accompanying notes to consolidated financial statements.
6

Kennedy-Wilson Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

Supplemental cash flow information:
Three Months Ended March 31,
(Dollars in millions)20222021
Cash paid for:
Interest(1)(2)
$68.6 $36.2 
Income taxes(0.2)2.2 

(1) $0.9 million and $1.1 million attributable to noncontrolling interests for the three months ended March 31, 2022 and 2021, respectively.
(2) Excludes $1.0 million and $0.8 million of capitalized interest for the three months ended March 31, 2022 and 2021, respectively.

    As of March 31, 2022 and December 31, 2021 the Company had $35.1 million and $24.2 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.  These reserves typically relate to interest, tax, insurance and future capital expenditures at the properties.

Supplemental disclosure of non-cash investing and financing activities:
Three Months Ended March 31,
(Dollars in millions)20222021
Accrued capital expenditures$9.0 $0.4 
Common dividends declared but not paid on common stock32.8 31.0 
Preferred dividends declared but not paid on preferred stock5.3 4.3 

    
See accompanying notes to consolidated financial statements.



7


Kennedy-Wilson Holdings, Inc.
Notes to Consolidated Financial Statements
(Unaudited)

NOTE 1—BASIS OF PRESENTATION
    Kennedy Wilson's unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") may have been condensed or omitted pursuant to SEC rules and regulations, although the Company believes that the disclosures are adequate to make their presentation not misleading. In the Company's opinion, all adjustments, consisting of only normal and recurring items, necessary for a fair presentation of the results of operations for the three months ended March 31, 2022 and 2021 have been included. The results of operations for these periods are not necessarily indicative of results that might be expected for the full year ending December 31, 2022. For further information, your attention is directed to the footnote disclosures found in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Throughout these unaudited interim consolidated financial statements “Kennedy Wilson” is referenced, which is defined as the Company and its subsidiaries that are consolidated in its financial statements under U.S. GAAP.  All significant intercompany balances and transactions have been eliminated in consolidation. "KW," “KWH,” “Kennedy Wilson,” the “Company,” “we,” “our,” or “us” are also referred to which are defined as Kennedy-Wilson Holdings, Inc. and its wholly-owned subsidiaries.
     In addition, throughout these unaudited interim consolidated financial statements, “equity partners” is referred to, which is defined as the non-wholly owned subsidiaries that are consolidated in the Company's financial statements under U.S. GAAP and third-party equity partners. 
    Kennedy Wilson evaluates its relationships with other entities to identify whether they are variable interest entities ("VIEs") as defined in the Accounting Standards Codification ("ASC") Subtopic 810-10, Consolidation, as amended by Accounting Standards Update ("ASU") 2015-02, Consolidation (Topic 810) - Amendments to the Consolidation Analysis, and to assess whether it is the primary beneficiary of such entities. If the determination is made that Kennedy Wilson is the primary beneficiary, then that entity is included in the consolidated financial statements in accordance with the ASC Subtopic 810-10.
Statement of Income Presentation

As the Co-Investment business has grown, the Company started updating the presentation of related items in the statements of income for all periods presented as this presentation reflects the prominence of this core part of its business and more closely represents how management evaluates results during an accounting period. The income from unconsolidated investments caption has been expanded to show principal co-investments and performance allocations. Principal co-investments consists of unrealized and realized gains on the Company's Co-Investments including any fair value adjustments and the Company’s share of net income and losses from Co-Investments. Performance allocations relate to special allocations to co-investments the Company manages based on the cumulative performance of the fund or investment and are subject to preferred return thresholds of its limited partners. These captions have been moved above expenses as the Co-Investments business is a significant part of the Company’s business. As the Company has compensation expense and general and administrative expenses relating to the management of this business, presenting these amounts before Expenses also provides a better understanding of the nature of those expenses. Based on the foregoing, the Company has concluded this change in presentation is justified by the circumstances thereby supporting presentation in a different position and in a different manner from its historical presentation.

The Company typically reports significant gains on sale of real estate, net. Previously, gains on sale of real estate were presented after expenses. These gains contribute to the Company’s compensation and related expenses and accordingly presentation of this significant, recurring component that is directly correlated to expenses should, in management’s view, precede those expenses on the statements of income. Furthermore, the Company accounts for gains on sale of real estate under ASC Subtopic 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets, and we have determined that the updated presentation complies with that standard.
    The preparation of the accompanying consolidated financial statements in conformity with U.S. generally accepted accounting principles 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. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.
8


Kennedy-Wilson Holdings, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
    REVENUE RECOGNITION — Revenue consists of rental and hotel income, management fees, leasing and commission fees, loan interest income and sales of real estate. ASC Topic 606, Revenue from Contracts with Customers, is a five step model to recognize 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 recognizes revenue when the performance obligations are satisfied. Management has concluded that, with the exception of performance allocations, the nature of the Company'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 recognized on a straight-line basis over the terms of the leases in accordance with ASC Topic 842, Leases. Hotel income is earned when rooms are occupied or goods and services have been delivered or rendered. Sales of real estate are recognized when title to the real property passes to the buyer and there is no continuing involvement in the real property.
    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 from the Company's auction sales and marketing business. The Company provides investment management 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's ownership interest.
    Commissions consist of acquisition and disposition fees and auction fees. 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 recognized upon the successful completion of an acquisition or disposition after all required services have been performed. In the case of auction and real estate sales commissions, the revenue is generally recognized 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.
Interest income from investments in performing loans which Kennedy Wilson originates or acquires are recognized at the stated interest rate plus any amortization of premiums/discounts or fees earned on the loans. Interest income from investments in loans acquired at a discount are recognized 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 recognized to the extent that cash is received from the loan.
    Sales of real estate are recognized when title to the real property passes to the buyer and there is no continuing involvement in the real property. Under ASC Subtopic 610-20, the Company recognizes the entire gain attributed to contributions of real estate properties to unconsolidated entities.
    REAL ESTATE ACQUISITIONS—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 reflected as noncontrolling interests. Real estate is recorded based on cumulative costs incurred and allocated based on relative fair value. Acquisition fees and expenses associated with the acquisition of properties determined to be business combinations are expensed as incurred. Acquisition fees and expenses associated with transactions determined to be asset acquisitions are capitalized as part of the real estate acquired.
    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.
9


Kennedy-Wilson Holdings, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
    UNCONSOLIDATED INVESTMENTS — Kennedy Wilson has a number of joint venture interests that were formed to acquire, manage, and/or sell real estate or real estate related investments. Investments in unconsolidated investments are accounted for under the equity method of accounting as Kennedy Wilson can exercise significant influence, 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’s share of income or loss, contributions, distributions and foreign currency movements. A decline in the value of an unconsolidated investment that is other than temporary is recognized when evidence indicates that such a decline has occurred in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures.
Kennedy Wilson elected the fair value option for 51 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.
    Additionally, Kennedy Wilson records its investments in commingled funds it manages and sponsors (the "Funds") that are investment companies under 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 reflect their investments at fair value, with unrealized gains and losses resulting from changes in fair value reflected in their earnings.
Performance allocations or carried interest are allocated to the general partner, special limited partner or asset manager of Kennedy Wilson's real estate funds based on the cumulative performance of the fund and are subject to preferred return thresholds of the limited partners. At the end of each reporting period, Kennedy Wilson calculates the performance allocation that would be due as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as performance allocation to reflect either (a) positive performance resulting in an increase in the performance allocation 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 recognized as income from unconsolidated investments, resulting in a negative adjustment to performance allocations to the general partner or asset manager. As of March 31, 2022, the Company has $196.9 million of accrued performance allocations recorded to unconsolidated investments that are subject to future adjustments based on the underlying performance of investments.
    The Company has concluded that performance allocations to the Company, based on cumulative performance to-date, represent carried interests. For equity method investments, these allocations 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 allocations are included in the determination of fair value under ASC Topic 820, Fair Value Measurement.
Performance allocation compensation is recognized in the same period that the related performance allocations are recognized and can be reversed during periods when there is a reversal of performance allocations that were previously recognized.         

    FAIR VALUE MEASUREMENTS — Kennedy Wilson accounts for fair value measurements of financial assets and financial liabilities and for fair value measurements of non-financial items that are recognized 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.
    FAIR VALUE OF FINANCIAL INSTRUMENTS — The estimated fair value of financial instruments is determined using available market information and appropriate valuation methodologies. Considerable judgment, 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 realized 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.

10


Kennedy-Wilson Holdings, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
    FOREIGN CURRENCIES — The financial statements of Kennedy Wilson's subsidiaries located outside the United 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 adjustments, to the extent not included in cumulative net income, are included in the consolidated statement of equity as a component of accumulated other comprehensive loss.
    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's operations. In order to manage currency fluctuations, Kennedy Wilson entered into currency derivative contracts to manage its exposure to currency fluctuations between its functional currency (U.S. dollar) and the functional currency (euro and the British pound) of certain of its wholly-owned and consolidated subsidiaries. KWE has also entered into currency derivative contracts to manage its exposure to euro to British pound currency fluctuations. See Note 5 for a more detailed discussion of Kennedy Wilson's currency derivative contracts.
LONG-LIVED ASSETS — 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 flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. If certain criteria are met, 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.
    RECENT ACCOUNTING PRONOUNCEMENTS
    For information regarding accounting standards that the Company adopted during the periods presented, see note 2 of the notes to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The Company did not adopt any new accounting standards during the three months ended March 31, 2022.
The FASB did not issue any other ASUs during the first three months of 2022 that the Company expects to be applicable and have a material impact on the Company's financial position or results of operations.

RECLASSIFICATIONS—Certain balances included in prior year's financial statements have been reclassified to conform to the current year's presentation    
NOTE 3—REAL ESTATE AND IN-PLACE LEASE VALUE
    The following table summarizes Kennedy Wilson's investment in consolidated real estate properties at March 31, 2022 and December 31, 2021:
 March 31,December 31,
(Dollars in millions)20222021
Land$1,286.5 $1,277.6 
Buildings3,806.6 3,744.1 
Building improvements499.3 545.6 
In-place lease values329.5 330.6 
5,921.9 5,897.9 
Less accumulated depreciation and amortization(854.5)(838.1)
Real estate and acquired in place lease values, net of accumulated depreciation and amortization$5,067.4 $5,059.8 
    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 a straight-line method over their estimated lives not to exceed
11


Kennedy-Wilson Holdings, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
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 6.3 years at March 31, 2022.
    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 transacted with willing third-party sellers.
During the three months ended March 31, 2022, Kennedy Wilson acquired the following consolidated properties:

(Dollars in millions)
Purchase Price Allocation at Acquisition(1)
LocationDescriptionLandBuilding
Acquired in-place lease values(2)
Investment debtNet Purchase Price
United KingdomOffice building25.5 74.1 6.9  106.5 
$25.5 $74.1 $6.9 $ $106.5 
(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 Sale of Real Estate, Net
    During the three months ended March 31, 2022, Kennedy Wilson recognized gains on sale of real estate, net of $1.9 million.
During the three months ended March 31, 2021, Kennedy Wilson recognized gains on sale of real estate, net of $73.5 million. These gains are primarily due to the sale of Friars Bridge Court, an office property in the United Kingdom.
    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 recognized on a straight-line basis over the lease term unless circumstances indicate revenue should be recognized on a cash basis. The majority of the Company's rental expenses, including common area maintenance and real estate taxes and insurance on commercial properties, are recovered from the Company'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 recognized 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 summarizes the minimum lease payments due from the Company's tenants on leases with lease periods greater than one year at March 31, 2022:
(Dollars in millions)Minimum
Rental Revenues(1)
2022 (remainder)$161.0 
2023151.3 
2024127.8 
2025107.4 
202688.0 
Thereafter274.9 
Total$910.4 
12


Kennedy-Wilson Holdings, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(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 joint venture interests including commingled funds and separate accounts, generally ranging from 5% to 50%, that were formed to acquire, manage, develop, service and/or sell real estate. Kennedy Wilson has significant influence over these entities, but not control. Accordingly, these investments are accounted for under the equity method.
Joint Venture and Fund Holdings
    The following table details Kennedy Wilson's investments in joint ventures by investment type and geographic location as of March 31, 2022:
(Dollars in millions)MultifamilyCommercialHotelFundsResidential and OtherTotal
Western U.S.$741.0 $79.8 $148.5 $183.8 $187.2 $1,340.3 
Ireland399.1 145.7  4.2  549.0 
United Kingdom 190.6  55.8 31.2 277.6 
Total$1,140.1 $416.1 $148.5 $243.8 $218.4 $2,166.9 
    The following table details Kennedy Wilson's investments in joint ventures by investment type and geographic location as of December 31, 2021:
(Dollars in millions)MultifamilyCommercialHotelFundsResidential and OtherTotal
Western U.S.$592.1 $81.0 $131.0 $189.2 $179.6 $1,172.9 
Ireland389.5 141.1  3.1  533.7 
United Kingdom 169.3  42.9 28.8 241.0 
Total$981.6 $391.4 $131.0 $235.2 $208.4 $1,947.6 
    During the three months ended March 31, 2022, the change in unconsolidated investments primarily relates to $149.6 million of contributions to new and existing unconsolidated investments, $25.2 million of distributions from unconsolidated investments, $105.4 million of income from unconsolidated investments, and a $9.5 million decrease related to other items which primarily related to foreign exchange movements. Please see below for additional details.
    As of March 31, 2022 and December 31, 2021, $2,012.5 million and $1,794.8 million, respectively, of unconsolidated investments were accounted for under fair value. See Note 5 for more detail.