Q4-19 Investor Update - (As of December 31, 2019) - Kennedy Wilson
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Q4-19 Investor Update (As of December 31, 2019)
Disclaimer/Forward-Looking Statements Statements made by us in this presentation and in other reports and ability to acquire additional real estate assets; continued high levels of, or statements released by us that are not historical facts constitute “forward- increases in, unemployment and a general slowdown in commercial activity; looking statements” within the meaning of Section 27A of the Securities Act our leverage and ability to refinance existing indebtedness or incur of 1933, as amended, and Section 21E of the Securities Exchange Act of additional indebtedness; an increase in our debt service obligations; our 1934, as amended. These for-ward-looking statements are necessarily ability to generate a sufficient amount of cash from operations to satisfy estimates reflecting the judgment of our senior management based on our working capital requirements and to service our existing and future current estimates, expectations, forecasts and projections and include indebtedness; our ability to achieve improvements in operating efficiency; comments that express our current opinions about trends and factors that foreign currency fluctuations; adverse changes in the securities markets; our may impact future operating results. Some of the forward-looking ability to retain our senior management and attract and retain qualified and statements may be identified by words like “believes”, “expects”, experienced employees; our ability to attract new user and investor clients; “anticipates”, “estimates”, “plans”, “intends”, “projects”, “indicates“, “could”, our ability to retain major clients and renew related contracts; trends in the “may” and similar expressions. These statements are not guarantees of use of large, full-service commercial real estate providers; changes in tax future performance and involve a number of risks, uncertainties and laws in the United States, Europe or Japan that reduce or eliminate our assumptions. Accordingly, actual results or the performance of Kennedy- deductions or other tax benefits; future acquisitions may not be available at Wilson Holdings, Inc. (the “Company”) or its subsidiaries may differ favorable prices or with advantageous terms and conditions; and costs significantly, positively or negatively, from forward-looking statements made relating to the acquisition of assets we may acquire could be higher than herein. Unanticipated events and circumstances are likely to occur. Factors anticipated. Any such forward-looking statements, whether made in this that might cause such differences include, but are not limited to, the risks report or elsewhere, should be considered in the context of the various that the Company’s business strategy and plans may not receive the level of disclosures made by us about our businesses including, without limitation, market acceptance anticipated; disruptions in general economic and the risk factors discussed in our filings with the U.S. Securities and business conditions, particularly in geographic areas where our business Exchange Commission (“SEC”). Except as required under the federal may be concentrated; the continued volatility and disruption of the capital securities laws and the rules and regulations of the SEC, we do not have and credit markets, higher interest rates, higher loan costs, less desirable any intention or obligation to update publicly any forward-looking loan terms, and a reduction in the availability of mortgage loans and statements, whether as a result of new information, future events, change in mezzanine financing, all of which could increase costs and could limit our assumptions, or otherwise. The information with respect to the projections presented herein is based on a number of assumptions about future events and is subject to significant economic and competitive uncertainty and other contingencies, none of which can be predicted with any certainty and some of which are beyond the company’s control. There can be no assurances that the projections will be realized, and actual results may be higher or lower than those indicated. Neither the company nor any of their respective security holders, directors, officers, employees, advisors or affiliates, or any representatives or affiliates of the foregoing, assumes responsibility for the accuracy of the projections presented herein. The modeling, calculations, forecasts, projections, evaluations, analyses, simulations, or other forward-looking information prepared by Property and Portfolio Research, Inc. (Licensor) and presented herein (the “Licensor Materials”) are based on various assumptions concerning future events and circumstances, all of which are uncertain and subject to change without notice. Actual results and events may differ materially from the projections presented. All Licensor Materials speak only as of the date referenced with respect to such data and may have changed since such date, which changes may be material. You should not construe any of the Licensor Materials as investment, tax, accounting, or legal advice. 1 Q4-19 INVESTOR UPDATE
Table of Contents Page
Strategic Review 3
Financial Performance Review 15
Western US Markets 19
European Markets 28
Appendix 35
2 Q4-19 INVESTOR UPDATE
Overview Strategic Review 3 Q4-19 INVESTOR UPDATE
About Kennedy Wilson
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. We focus on multifamily and office properties
located in the Western U.S., U.K., and Ireland.
Office: 150 El Camino Multifamily: Radius Mixed-Use: Capital Dock
Beverly Hills, CA, U.S. Seattle, WA, U.S. Dublin, Ireland
4 Q4-19 INVESTOR UPDATE
Kennedy Wilson (NYSE: KW) at a glance1
$18bn $421m $95m
IMRES AUM2,4 Estimated Annual 2019 Fees2,3
NOI2
318 14 4.4% $0.22
Total employees No. of offices Dividend yield5 Quarterly Dividend
1 Information shown at share as of December 31, 2019 4 Includes $2bn related to property services
2 As defined in definitions section in the appendix 5 Based on annual dividend of $0.88 and share price of $20.17 on 2/20/20
3 Includes $17m of fees from property services
5 Q4-19 INVESTOR UPDATE
Key growth initiatives
• Organic growth through value-add strategy and new
Grow Property acquisitions
1 • $105m of NOI from unstabilized and development
NOI
assets by YE-2023 - $16M expected in 2020
Grow Investment
• 2019: 39% increase in fee-bearing capital
2 Management
• 2020: Targeting $1b in gross new fee-bearing capital
Platform
6 Q4-19 INVESTOR UPDATE
The Kennedy Wilson Advantage
1 Globally diversified real estate portfolio in growing
markets with complementary investment management
platform
2 Long-term relationships with major institutions
3 Local expertise to accretively allocate capital
4 First-mover advantage from early entry in key target
markets
5 Proven 30-year track record as global real estate
investor and operator
7 Q4-19 INVESTOR UPDATE
Real Estate Portfolio and
Value Creation Opportunities
8 Q4-19 INVESTOR UPDATE
Two key investment segments
Investment Management Platform
Balance Sheet Portfolio
Commingled Fund Separate Account
Multifamily: Atlas Office: 111 BPR Office: West Hills Multifamily: The Grange,
Issaquah, WA, U.S. Victoria, London, UK Canoga Park, CA, U.S. South Dublin, Ireland
• Permanent capital vehicle focused on • Complementary platform generating recurring
maximizing property cash flow asset management fees and promotes
• Targeting investments with accretive • Primary investors include:
asset management opportunities • insurance companies
• Longer-term hold period • public and private pension plans
• family office and private equity clients
9 Q4-19 INVESTOR UPDATEExcellent scale across multifamily and office
79% Multifamily & Office
Sectors Geography
Multifamily: 46% Western US: 51%
$421m $421m
Office: 33% UK: 24%
Retail: 14% Ireland: 21%
Estimated Hotel & Estimated Italy & Spain: 4%
Annual NOI1 Industrial: 7%
Annual NOI1
319 29,705 22.0m 93.7%
No. of assets No. of multifamily Commercial Area (sq ft)3 Occupancy4
units2
1 As defined in definitions section in the appendix 4 Stabilized multifamily and commercial assets only and excludes unstabilized
2 Includes 550 unstabilized units and 3,816 units under development assets
3 Includes 2.0m sq ft of unstabilized assets and 0.9m sq ft under development
10 Q4-19 INVESTOR UPDATEDevelopment and leasing pipeline to add ~$105m in NOI
By YE-2021 2022-2023
+$34m +$70-73m
Stockley Park, UK Grange, Dublin Kona Village Resort, Kona, Hawaii
Clancy Quay Phase III, Dublin 8 Leisureplex, Co. Dublin Coopers Cross, Dublin
Hanover Quay, Dublin 2 One Westlake, Thousand Oaks, CA The Clara, Boise, ID
11 Q4-19 INVESTOR UPDATE
The scope of these projects are subject to change.NOI delivery from completion of development & future leasing
+$105m in Est. Annual NOI by 2023
$49
$50
$40
$28
$30
$22
$20 $18
$16
$11
$10
$10 $12 $21
$9 $11
$4
$0
2020 2021 2022 2023
US Europe
12 Q4-19 INVESTOR UPDATEInvestment Management Platform 13 Q4-19 INVESTOR UPDATE
Fee-Bearing Capital raised from broad institutional investor base
2020: Targeting $1bn of new fee-bearing capital
Investor Type Investor By Geography
Investor Type Geography
Insurance Company: 32% U.S.: 48%
$3.0bn $3.0bn
Pension Fund: 30% Canada: 18%
Private Equity: 18% Europe: 14%
Fee-Bearing Family Office: 12% Fee-Bearing Middle East: 13%
Capital1,2 RIA: 7% Capital1 Asia: 7%
Other: 1%
1 As defined in definitions section in the appendix
2 35% of Fee-Bearing Capital is through commingled funds
14 Q4-19 INVESTOR UPDATEOverview Financial Performance Review 15 Q4-19 INVESTOR UPDATE
Solid base with strong growth potential
Strong Adjusted EBITDA, Adj. Net Income and dividend growth
Adjusted EBITDA growth ($m) Adjusted Net Income growth ($m)
443
713 728 397
456 243
371 350 208 191
318
134
159 61
2013 2014 2015 2016 2017 2018 2019
2013 2014 2015 2016 2017 2018 2019
Dividend track record
$0.84 $0.88
$0.76
$0.70
$0.56
$0.48
$0.36
$0.28
$0.16 $0.20
Multifamily: Atlas Apartments, Issaquah, WA, USA
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
16 Q4-19 INVESTOR UPDATESolid balance sheet with good liquidity levels
Cash and Credit Facility Reduced floating rate risk
$1.1bn 94%
Cash: 53% Fixed: 81%
Revolving credit Hedged via interest
facility: 47% Fixed or rate cap: 13%
Cash and Lines
hedged debt Floating: 6%
of Credit (KW Share)
Strong credit profile
BB+ S&P corporate rating
$2.1bn Of unencumbered assets
3.8% Weighted average cost
of debt
4.9yrs Weighted average term to
maturity
17 Q4-19 INVESTOR UPDATEComponents of Value
Below are key valuation metrics as of December 31, 2019.
Investments Kennedy Wilson’s Share
Income Producing Assets Description Est. Annual NOI(1)(2)
1 Multifamily 25,339 units $ 194.4
2 Commercial 19.1 million sq ft of office, retail, and industrial 211.6
3 Hotels 2 Hotels 14.9
Total Estimated Annual NOI $420.9
Unstabilized, Development, and Non-Income Producing Assets
KW Gross Asset Value
550 multifamily units
4 Unstabilized: Multifamily and Commercial $550.2
2.0 million commercial sq ft
3,816 multifamily units
5 Development – Commercial, Multifamily, 0.9 million commercial sq ft 487.5
and Hotel One five-star resort
6 Loans, Residential, and Other 22 investments, 12 loan investments 349.3
Total Gross Asset Value $1,387.0
Annual Annual
Investment Management and Real Estate Services Adj. Fees Adj. EBITDA
7 Investment Management Management and promote fees $78.6 $59.3
8 Property Services Fees and commissions 16.5 1.3
Total $95.1 $60.6
Net Debt Total
10 KW Share of Debt $ 6,275.1
11 KW Share of Cash (617.3)
Total Net Debt $ 5,657.8
(1), (2): See definitions in appendix
18 Q4-19 INVESTOR UPDATEWestern US Markets 19 Q4-19 INVESTOR UPDATE
US portfolio
95% Multifamily & Office
Sectors Geography
Multifamily: 76% Pacific Northwest: 40%
$214m $214m
Office: 19% Mountain States: 23%
Retail: 5% Southern California: 20%
Estimated Estimated Northern California: 17%
Annual NOI1 Annual NOI1
1 As defined in definitions section in the appendix
20 Q4-19 INVESTOR UPDATEGrowth in high income renting households strongest in KW Western U.S. markets
Growth In Households Aged 15-34, Earning Over $100K
(2010-2019Q4)
84%
77%
76% 72%
68%
60%
60%
52% 52%
52%
44%
36%
28%
20%
Kennedy Wilson South U.S. Northeast Midwest
Core Markets
As of 19Q4
Sources: Neustar; U.S. Census; CoStar Portfolio Strategy
*Kennedy Wilson Core Metros: Los Angeles, Portland, Salt Lake City, San Francisco, Seattle
21 Q4-19 INVESTOR UPDATEWashington is KW’s largest U.S. market; represents 33% of U.S. portfolio NOI
2006
First acquisition in WA
9,959
Apartments
(incl.1,172 under
1
development)
2.4m
Office sq ft
$72m
Estimated Annual NOI2
to KW
1 There can be no assurances that such units will be fully developed
2 As defined in definitions section in the appendix
22 Q4-19 INVESTOR UPDATESeattle’s diverse employer base
64k
54k
52k
30k
18k
16k
16k
11k
11k
9k
9k
7k
0k 10k 20k 30k 40k 50k 60k 70k
Sources: Puget Sound Business Journal; CoStar Portfolio Strategy
Numbers are representative of full-time employees.
23 Q4-19 INVESTOR UPDATEVintage Housing: Growing our portfolio with minimal equity
35% growth in stabilized units by 4Q-22
At acquisition
(2Q-15) 4Q-19 4Q-2023 1
Communities
(stabilized)
30 38 49
Stabilized units 5,500 7,400 10,200
Vintage at Urban Center, Southside by Vintage, Vintage at the Crossing,
Lynwood, WA, US Seattle, WA, US Reno, NV, US
1 The figures below are projections. There can be no assurances that such projections will be realized, and actual results may be higher or lower than those indicated.
24 Q4-19 INVESTOR UPDATEMountain States NOI by State
As of 4Q-2019
$49m
Estimated Annual NOI
Other
8%
Nevada Alpine Meadows, Sandy, UT
19% Utah
51%
Idaho
22%
Whitewater Park, Boise, ID
25 Q4-19 INVESTOR UPDATEMountain States Portfolio growth
75% increase in Mountain States NOI over last 3 years
4Q-16 4Q-19
Est. Ann. NOI
(stabilized, at KW Share)
$28m 75%
$49m
Multifamily units 3,600 100%
7,200
Commercial sq.ft. 1.5m 80%
2.7m
26 Q4-19 INVESTOR UPDATEUtah Demographics
ECONOMY
Ranked #2 Best State
#1 STATE FOR for Business
ECONOMIC OUTLOOK – #1 Six out of the Last
(ALEC Report)
Nine Years
– Forbes , 2018
3.3%
#1 Best State for Fiscal
Utah Job Growth
3.2 Million Stability
People U.S.
DEMOGRAPHICS
Census 2.3% – US News and World Report,
2018
EMPLOYEMNT
Unemployment
30.6 1.9%
Lowest
Median Age Utah Population Growth
in the Nation
National Median
37.1
The State of Utah has a total population over 3 million with
roughly 2.4 million – almost 80% -- located in the Greater Salt
Lake Metro.
Source: CBRE and Kem C. Gardner Policy Institute 2019 Economic Report to the Governor
27 Q4-19 INVESTOR UPDATEEuropean Markets 28 Q4-19 INVESTOR UPDATE
Europe portfolio
92% Ireland and UK
Sectors Geography
Office: 47% United Kingdom: 49%
$207m $207m
Retail: 24% Ireland: 43%
Multifamily: 15% Italy: 4%
Estimated Hotel: 7% Estimated Spain: 4%
Annual NOI1 Industrial: 7% Annual NOI1
1 As defined in definitions section in the appendix
29 Q4-19 INVESTOR UPDATEIrish multifamily: market imbalance creates opportunity
Low institutional ownership
356,500
Private rental unitsIreland: growing market opportunity
KW’s dominant on the ground presence in Dublin
1
Capital Dock 2
Hanover Quay
Liffey Trust 3
1 12
8 Alliance
2 4
Northbank 3 State
4 5
Street 11
Alto Vetro 6
5
9
6 10 7
Coopers Cross
8
7 9
10
11
12
KW owned buildings
31 Q4-19 INVESTOR UPDATEIreland: growing market opportunity
Market overview
Record take-up combining with declining unemployment
One of the fastest growing 4
Dublin office take-up (m sq ft)
5
Unemployment rate (RHS)
EU economies
15.0%
5.7%
3.0
12.5%
(million sq ft)
2.0
2019 GDP output (real annual
10.0%
growth)1
1.0
Institutionalized market
7.5%
8%
2007 2017
85% 0.0 5.0%
Of investment institutional2
3.1% 4
High foreign direct investment Office Vacancy D2/D4
Top 3 3.3m sq ft
Country in the world for high value FDI3 4
Office Absorption TTM
1 European Economic Forecast Winter 2020
2 Based on CBRE data and KW estimates 4 Q4-19 CBRE Research Grade A Office
3 Global Locations Trends Report 2019, IBM 5 Central Statistics Office (CSO)
32 Q4-19 INVESTOR UPDATEStrong office fundamentals and favorable UK & Irish lease structures
UK & Irish leases KW UK & Ireland office portfolio
1
Long-term with 5-year
rent reviews
7.8yrs 43%
WAULT (to first Upward-only rent
Upward-only rent break) reviews or fixed
uplifts
reviews in UK (and pre-
2010 in Ireland) 8.7% 95%
Under-rented FRI leases
‘Full repairing and
insuring’ (FRI) leases
with minimal leakage
from gross rents
1 Stabilized assets only
33 Q4-19 INVESTOR UPDATERobust European office fundamentals driving future growth
Key European office markets for KW
Q3- Q34
M25 London 17
Q4-19 Watford
South East Q4-19
417
Harlow
Prime rents (£ psf) 110.00 Prime rents (£ psf) 39.00
1 M25
London Take-up (m sq ft) 12.8 Reading
Windsor Take-up (m sq ft)1 2.5
Vacancy (%) 4.0 Hook
Farnborough
Vacancy (%) 4.9
Q3-
Dublin 17
Q4-19
Prime rents (€ psf) 65.00
1
Take-up (m sq ft) 3.3
Dublin Vacancy (%) 5.1
1 Rolling 12-months
2 Source: CBRE
34 Q4-19 INVESTOR UPDATEOverview Appendix 35 Q4-19 INVESTOR UPDATE
Multifamily Portfolio: $194m of Estimated Annual NOI
U.S. Europe
$163.2m Boise $31.2m
Est. Ann. NOI Est. Ann. NOI
Assets Units Seattle WA Assets Units
10 2,3742
2
85 1
22,965 1
Portland Dublin
$67.2m OR
ID
$12.8m
Pacific Northwest (WA, OR) Dublin
Assets Units Assets Units Cork
Reno CA
43 10,121 6 1,158
San Francisco
Bay Area NV $10.7m
$40.5m UT County Dublin
Mountain States (UT, ID, NV) Assets Units
Assets Units
2 716
25 7,236 Salt Lake
City $2.7m
$27.8m Los Angeles Cork
Northern California Assets Units
Assets Units Las Vegas 1 206
7 2,404 $5.0m
UK
$27.7m Assets Units London
Southern California
1 294
Assets Units
10 3,204
1 Excludes 12 assets with 360 unstabilized units 2,559 units under development
2 Excludes 5 assets with 190 unstabilized units and 1,257 units under development
36 Q4-19 INVESTOR UPDATEOffice Portfolio: $138m of Estimated Annual NOI
U.S. Europe
$40.6m Seattle
$97.4m
Est. Ann. NOI WA Est. Ann. NOI
Assets Area (sq ft)
MT
Assets Area (sq ft)
20 6.5m
1 2
OR 32 3.7m
ID
$17.6m WY $50.4m
Pacific Northwest CA UK
Assets Area (sq ft) San NV
Francisco Assets Area (sq ft) Dublin
8 2.6m UT 14 1.8m
Bay Area CO
$12.3m
Southern California $38.0m
Assets Area (sq ft) Los Denver Ireland
AZ Assets Area (sq ft)
6 1.5m Angeles London
11 1.2m
$8.9m
Northern California $9.0m
Assets Area (sq ft) Italy Milan
3 1.1m Assets Area (sq ft)
7 0.7m
$1.8m
Mountain States Rome
Assets Area (sq ft)
3 1.3m
1 Excludes 1 unstabilized asset and 2 assets under development totaling with 0.6m sq ft
2 Excludes 7 unstabilized assets and 4 assets under development totaling 1.2m sq ft
37 Q4-19 INVESTOR UPDATEKW top 20 assets
Accounts for 39% of Estimated Annual NOI
KW share Commercial Units Acquisition
Asset name Location Region Sector of NOI ($m) (000 sq ft) /rooms date
1 Shelbourne Dublin Ireland Hotel 14.8 - 265 Aug-14
2 Bella Vista Richmond, CA Northern California Multifamily 14.7 - 1,008 May-11
3 90 East Issaquah, WA Pacific Northwest Office 13.9 587 - Jun-17
4 111 BPR London UK Office 13.1 223 - Nov-14
5 Club Palisades Federal Way, WAPacific Northwest Multifamily 9.0 - 750 Jan-11
6 Vantage Co. Dublin Ireland Multifamily 8.0 - 442 Mar-14
7 Kirker Creek Pittsburg, CA Northern California Multifamily 7.8 - 542 Jun-14
8 Hamilton Landing Novato, CA Northern California Office 7.8 406 - Nov-19
9 Towers Manchester UK Office 7.6 288 - May-16
10 Baggot Plaza Dublin Ireland Office 6.9 129 - Jun-14
11 Moraleja Green Madrid Spain Retail 6.9 328 - Dec-15
12 Capital Dock Dublin Ireland Office 6.7 216 - Dec-14
13 Friars Bridge Court London UK Office 6.4 98 - Jun-14
14 Heights London UK Office 6.3 350 - Dec-19
15 Clancy Dublin Ireland Multifamily 6.2 - 599 Jun-13
16 Russell Court Dublin Ireland Office 6.0 139 - Jun-14
17 Mission Hills Camarillo, CA Southern California Multifamily 5.9 - 386 Aug-16
18 La Vista Santa Maria, CA Southern California Multifamily 5.9 - 460 Dec-11
19 Stillorgan Co. Dublin Ireland Retail 5.9 155 - Jun-14
20 Belara Issaquah, WA Pacific Northwest Multifamily 5.7 - 430 Jul-16
165.5 2,919 4,882
38 Q4-19 INVESTOR UPDATEReconciliation of Net Income to Adjusted EBITDA
($ in m) 2019 2018 2017 2016 2015 2014 2013
Net income $321.1 $212.1 $138.0 $76.5 $59.0 $90.1 $13.9
Non-GAAP adjustments:
Add back:
Interest expense 215.1 238.2 217.7 191.6 155.7 103.4 51.7
Early extinguishment of corporate debt - - - - 1.0 27.3 -
Kennedy Wilson’s share of interest
expense included in unconsolidated
investments 32.1 26.0 23.0 23.0 28.1 35.5 45.0
Depreciation and amortization 187.6 206.1 212.5 198.2 166.3 104.5 17.4
Kennedy Wilson’s share of depreciation
and amortization included in
unconsolidated investments 8.2 13.2 16.2 20.8 28.1 47.1 46.7
Provision for (benefit from) income taxes 41.4 58.0 (16.3) 14.0 53.4 32.4 2.9
Share-based compensation 30.2 37.1 38.4 65.1 30.8 15.8 7.5
EBITDA attributable to noncontrolling (107.6) (78.0) (173.8) (239.3) (151.2) (138.3) (26.0)
interests
Adjusted EBITDA $728.1 $712.7 $455.7 $349.9 $371.2 $317.8 $159.1
39 Q4-19 INVESTOR UPDATEReconciliation of Net Income to Adjusted Net Income
($ in m) 2019 2018 2017 2016 2015 2014 2013
Net income $321.1 $212.1 $138.0 $76.5 $59.0 $90.1 $13.9
Non-GAAP adjustments:
Add back:
Depreciation and amortization 187.6 206.1 212.5 198.2 166.3 104.5 17.4
Kennedy Wilson’s share of depreciation
and amortization included in
unconsolidated investments 8.2 13.2 16.2 20.8 28.1 47.1 46.7
Share-based compensation 30.2 37.1 38.4 65.1 30.8 15.8 7.5
Preferred dividends and accretion of (2.6) - - - - - -
preferred stock issuance costs
Net income attributable to noncontrolling (102.0) (71.5) (117.8) (169.3) (76.0) (123.8) (24.4)
interests, before depreciation and
amortization
One-time tax remeasurement - - (44.8) - - - -
Adjusted Net Income $442.5 $397.0 $242.5 $191.3 $208.2 $133.7 $61.1
40 Q4-19 INVESTOR UPDATEAppendix DEFINITIONS: Adjusted EBITDA: represents net income before interest expense, our share of interest expense included in income from investments in unconsolidated investments, depreciation and amortization, our share of depreciation and amortization included in income from unconsolidated investments, loss on early extinguishment of corporate debt and income taxes, share-based compensation expense for the Company and EBITDA attributable to noncontrolling interests. Please also see the reconciliation to GAAP in the Company’s supplemental financial information included in this release and also available at www.kennedywilson.com. 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 acquisition-related gains) 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 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 Fees: Refers to Kennedy Wilson’s gross investment management, property services and research fees adjusted to include fees eliminated in consolidation and Kennedy Wilson’s share of fees in unconsolidated service businesses. Our management uses Adjusted fees to analyze our investment management and real estate services business because the measure removes required eliminations under GAAP for properties in which the Company provides services but also has an ownership interest. These eliminations understate the economic value of the investment management, property services and research fees and makes the Company comparable to other real estate companies that provide investment management and real estate services but do not have an ownership interest in the properties they manage. Our management believes that adjusting GAAP fees to reflect these amounts eliminated in consolidation presents a more holistic measure of the scope of our investment management and real estate services business. . Estimated Annual NOI: “Estimated Annual NOI" is a property-level non-GAAP measure representing the estimated annual net operating income from each property as of the date shown, inclusive of rent abatements (if applicable). The calculation excludes depreciation and amortization expense, and does not capture the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures, tenant improvements, and leasing commissions necessary to maintain the operating performance of our properties. Any of the enumerated items above could have a material effect on the performance of our properties. Also, where specifically noted, for properties purchased in 2019, the NOI represents estimated Year 1 NOI from our original underwriting. Estimated year 1 NOI for properties purchased in 2019 may not be indicative of the actual results for those properties. Estimated annual NOI is not an indicator of the actual annual net operating income that the Company will or expects to realize in any period. Please also see the definition of "Net operating income" below. The Company does not provide a reconciliation for estimated annual NOI to its most directly comparable forward-looking GAAP financial measure, because it is unable to provide a meaningful or accurate estimation of each of the component reconciling items, and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and/or amount of various items that would impact estimated annual NOI, including, for example, gains on sales of depreciable real estate and other items that have not yet occurred and are out of the Company’s control. For the same reasons, the Company is unable to meaningfully address the probable significance of the unavailable information and believes that providing a reconciliation for estimated annual NOI would imply a degree of precision as to its forward-looking net operating income that would be confusing or misleading to investors. Fee-Bearing Capital: "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. Investment Management and Real Estate Services Assets under Management (“IMRES 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 IMRES 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 IMRES 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 IMRES AUM. The estimated value of development properties is included at estimated completion cost. FOOTNOTES (as referenced on slide 19): (1) Please see above for a definition of Estimated Annual NOI and a description of its limitations. The Company does not provide a reconciliation for Estimated Annual NOI to its most directly comparable forward looking GAAP financial measure, because it is unable to provide a meaningful or accurate estimation of each of the component reconciling items, and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and/or amount of various items that would impact Estimated Annual NOI, including, for example, gains on sales of depreciable real estate and other items that have not yet occurred and are out of the Company’s control. For the same reasons, the Company is unable to meaningfully address the probable significance of the unavailable information and believes that providing a reconciliation for estimated annual NOI would imply a degree of precision as to its forward-looking net operating income that would be confusing or misleading to investors. (2) Based on weighted-average ownership figures held by KW. 41 Q4-19 INVESTOR UPDATE
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