Kennedy-Wilson Holdings Inc. completed a strong fourth quarter and generated records across many financial metrics, the Beverly Hills real estate investment company’s chief executive said.
During a conference call in February to discuss fourth-quarter earnings with analysts, Bill McMorrow said that the company’s earnings before interest, taxes, depreciation and amortization reached a record $928 million, while its investment transaction total reached a record $5.9 billion and its assets under management reached a record $22 billion.
“We’ve seen this momentum continue into 2022 with over $800 million of new investments that we have either closed or currently have under contract the majority of which will close in Q1,” McMorrow said.
Among the investments the company made during the fourth quarter was in the purchase of 3001 Park, a 528-unit garden-style apartment community in Henderson, Nev., for $155 million. The firm plans to make value-add improvements over the next four years, including unit and amenity upgrades. The community has one-, two- and three-bedroom units, according to a release from the company.
In October, Kennedy Wilson acquired two Seattle apartment communities totaling 547 units – The Bristol at Southport and Geo Shoreline – for a total of $265 million, and in November it teamed with Goldman Sachs Asset Management to acquire Arista Uptown in Broomfield, Colo., for $95 million. The company has a 20 percent stake in that community.
Kennedy-Wilson reported on Feb. 23 net income of $37.5 million (27 cents a share) for the quarter ending Dec. 31, compared with net income of $170 million ($1.21) in the same period a year earlier. Revenue increased by 22 percent to $131.4 million.
Over the past 52-week period, the share price increased by 20 percent. Shares closed at $23.69 on April 14.
The company will release its first quarter earnings on May 4.
One analyst who follows the company reiterated his “buy” rating for the stock in a research report put out after the fourth quarter earnings were announced.
Derek Johnston, a research analyst with Deutsche Bank Securities Inc. in New York, wrote that Kennedy-Wilson showed solid results across all asset types.
“However, market rate multifamily was the clear outperformer (up +13.7% vs +10.9% in 3Q) while affordable multifamily (up +7.4% vs +3.3% in 3Q) and office (up +3.6% vs +3.6% in 3Q) also contributed,” he wrote.
During the conference call, Johnston asked about affordable housing and for a reminder of what the company uses to determine rent increases.
“Are they tied to inflation or some measure where we can kind of understand and model the potential revenue and rent growth in the affordable segment?” he added.
Matt Windisch, executive vice president, responded that the affordable housing business is tied to area median income – and to inflation.
“If you think about these rents relative to market rate rents, I mean, you’re 30%, 40% below market rate,” Windisch said. “So, there’s room to the extent median incomes go up, generally you can pass through almost all of that to the tenants. And in some cases, they’re getting some government assistance to help with those payments as well.”