In This Article:
Release Date: May 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Kennedy-Wilson Holdings Inc (NYSE:KW) deployed or committed approximately $1 billion of new capital in Q1, primarily driven by originations within their credit platform.
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Assets under management have grown by 26% over the past two years to $29 billion, producing approximately $575 million in estimated annual NOI and fees.
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The rental housing sector, a core focus for KW, represents 66% of their assets under management and is expected to grow to over 80% in the next three years.
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Investment management fees grew by 17% in Q1, reflecting strong performance in their credit platform and continued growth in equity platforms.
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KW has a strong pipeline of activity centered around rental housing, with a committed pipeline totaling $2.5 billion in loan originations and real estate equity acquisitions.
Negative Points
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GAAP EPS for the first quarter resulted in a loss of $0.30 per share compared to income of $0.19 per share in Q1 of 2024.
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There has been some downward pressure on loan origination spreads, with a decrease of 30 to 40 basis points on average due to increased competition.
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The company is focusing on reducing unsecured debt, which may limit the availability of cash for stock buybacks in the near term.
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Prepayments on loans were higher than typical, including a significant $200 million payoff on an office loan, which was somewhat out of the ordinary.
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Approximately 15% of tenants in the affordable housing portfolio have some sort of HUD backing, which could be impacted by changes in government policies.
Q & A Highlights
Q: Can you elaborate on your confidence in achieving the 20-25% annual growth in fee revenue this year? A: (Unidentified_5) The growth target refers to fees rather than fee-bearing capital. We achieved a 17% growth from Q1 to Q1, and based on our pipeline and future funding, we are confident in reaching the fee growth target. Timing differences in payoffs and funding can affect fee-bearing capital, but we are comfortable with our projections due to recurring investment management fees and origination fees.
Q: With liquidity returning to commercial real estate, how do you view partner capital costs and the ability to continue lending if competition increases? A: (Unidentified_5) We have a healthy pipeline and have seen some deals at lower spreads than a year ago. Competition has increased from life insurance companies, banks, and private lenders. However, our strong relationships and repeat business with sponsors and borrowers give us flexibility. We have adjusted pricing slightly and remain competitive, especially as some lenders exhaust their allocations mid-year.