Good day ladies and gentlemen and welcome to the Fourth Quarter 2012 Kennedy-Wilson Earnings conference call. My name is Darcelle and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question and answer session. If at any time you require operator assistance, please press star followed by zero and we will be happy to assist you. I would now like to turn the conference over to your host for today, Ms. Christina Cha, Vice President of Corporate Communications. Please proceed.

Thank you. Good morning everyone. Joining us on today’s call are Bill McMorrow, Chairman and CEO of Kennedy-Wilson; Matt Windisch, Executive Vice President of Kennedy-Wilson; and Justin Enbody, Chief Financial Officer of Kennedy-Wilson. Today’s call is being webcast live and will be archived for replay. The replay will be available by phone for one week and by webcast for one year. Please see the Investor Relations section of our website for more information. Statements made during this conference call may be 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 will now turn the call over to Bill McMorrow.

Good morning everyone. Pleased to have you on the call, and what I’m going to do today is take you through what I call the body of the earnings release, and as I’ve said on previous calls what we’ve been doing in the supplement is continuing to add additional information so that you can analyze the company in a better fashion. So this year-end, as you’ll see when you have time to look through of everything, we’ve added a significant amount of additional information, particularly at the property level. So to begin the call, I would tell you we had an excellent year in 2012. Our EBITDA for the fourth quarter of 2012 was approximately $45 million, which represented a 51% increase from the same period of 2011. For the full year, our EBITDA was 100.3 million, which was a 41% increase over the 71.2 million for the same period of 2011. We also announced yesterday that we were increasing our dividend by 40% to $0.28 per common share on an annual basis. When you look at the investment business as of December 31, 2012, our investment account increased by 42% to $828 million from 583 million approximately at December 31, 2011. The change was comprised of 469.6 million of cash contributed to new investments offset by approximately $224 million of cash that was distributed from investments. When you think about the operating metrics of our investment business, during the year-end December 31, 2012, our investment business achieved an adjusted EBITDA of $88.5 million, which was a 68% increase from approximately 53 million in the same period of 2011. During the year of 2012, based on 9,000 same property multi-family units and rental revenue units, the net operating income increased by 3.6 and 5.9% respectively. In addition, based on 2.2…

[Operator instructions] Your first question comes from the line of Jason Ursaner with CJS Securities. Please proceed. Jason Ursaner – CJS Securities: Good morning. First I have a couple of specific questions on the existing properties in the investment portfolio. In the multi-family class, all your properties continue to perform very strongly and at a 5-cap it would like you are generating a pre-promote equity multiplier somewhere in the 1.4, 1.5 range on trailing NOI. So just looking out, can you maybe provide an update on expectations for continued NOI growth, any concerns you’d have regarding cap rate decompression in your markets, and then just lastly how you continue to think about the trade-off between managing growth there for higher exit prices down the road versus more near-term divestitures.

I’m going to answer part of it and then I’m going to ask Matt to answer part of it. But remember that from our investment philosophy that we like to invest in high barrier-to-entry markets, and so when you look at the multi-family markets that we have the majority of our assets in, it’s Seattle, San Francisco, Los Angeles, Tokyo. We have acquired two apartment buildings in Dublin in 2012, which by the way are both running at 100% occupancy and we’ve been increasing rents in those two Dublin assets on the order of 10 to 15% on all of our renewals; and in Tokyo, where I’ve mentioned earlier our occupancies are running 96%. But I would say, Jason, that the fundamentals in all of our markets continue to be really excellent and I would guess this year that our rent growth will be, depending on which markets you’re in, somewhere between 5 and 8%, depending on what the market is. We continue to look at our apartment portfolio where we now have almost 15,000 units and where we selectively are weeding out, I would say, some of the lower quality properties that we might have. We also this year are doing roughly $35 million worth of CAPEX at a whole variety of properties, which includes not only common area upgrades but also unit upgrades, and for the first year we’re actually seeing in most of our markets significant rent increases from what I’d call unit upgrades where we’re spending 5,000 to $7,000 a unit. So the—and then the last part of it is that even though the 10-year rates have moved somewhat, the financing for the multi-family assets continues to be very attractive and sub-4%. We did several loans last year that were in the 3.40 to 3.70 range all-in, and as I’ve said earlier in the call, on those assets that we’re keeping longer term, we’re going out as far as we can on the maturity schedule and we’re foregoing some current income in the sense that we’re not doing floating rate financing on the majority of the properties. We could probably be doing floating rate financing at plus or minus 100 basis points inside those numbers that I just gave you, but we’re trying to be very mindful of the fact that we’ve got some very, very attractive long-term rates that we’re taking advantage of right now. So Matt, do you have anything to add to that?

Yeah, I would say, Jason, in terms of the rental rate increases, what’s interesting, what we’ve found in our portfolio is that it really in the fourth quarter of 2012 is where we saw a lot of acceleration. So if you look on a year-over-year basis, our rents grew about 4% but if you look quarter-over-quarter, looking at the fourth quarter of ’12 versus ’11, we saw 6% rental growth and that’s on occupancy that’s basically flat. So we’re really starting to see an acceleration in the fourth quarter that has continued into the first quarter of this year. I’d also say in terms of kind of the weighing of holding versus selling, it’s interesting because on two of our assets now, we’ve been able to actual monetize part of our profit without actually selling the assets through refinancing on a long-term basis and pulling a significant amount of our equity out. And so we’re finding ways to monetize some of our investments without actually selling them. Jason Ursaner – CJS Securities: Okay. That’s great. And in the real estate secured loans class, just specifically on the $2.1 billion U.K. loan pool, you mentioned in your prepared remarks the pace at which it’s getting resolved through prepayments, that it’s faster than originally anticipated. So my question is just the accretion you’ve been accruing to date on the P&L, how much promote has been included in that and how should we think about the total accretion in relation to the actual return you’re now generating versus the actual cash inflow you’d expect to collect over the next year or so that could be used to fund the dividend and other acquisition opportunities?

I’m going to let Matt answer that question, Jason, but I think the bigger picture is when we bought that portfolio, we had put it into a three-year business plan in our mind. And with what we’ve been able to do and what we see happening right now, we think that there’s a reasonable probability that we’re going to be able to complete the three-year business plan this year. That clearly has some impact in terms of the question you just asked.

Yeah, so Jason, currently as you can see on the 10-K, we still have the accretion model set up on a three-year business plan. We have not adjusted that, even though we’ve resolved two-thirds of the pool. It’s still over a three-year plan, so if it turns out that we’re able to resolve things faster than expected going forward, that three-year plan could potentially change. If it takes longer, it wouldn’t expand out, so that still is in a three-year plan. In terms of the promote, the accretion line does not include any promote in terms of the accretion on the loan pool. That’s being treated separately as a fee. Jason Ursaner – CJS Securities: Okay. Appreciate all the details. I’ll let others have a chance to ask some questions. Thanks.

Your next question comes from the line of David Ridley-Lane from Merrill Lynch. Please proceed. David Ridley-Lane – Merrill Lynch: Sure. Maybe a quick numbers question. With the new debt in place, what’s your expectation for the quarterly run rate for interest expense?

I’m doing this real rough, David, but you can think about it in terms of total. The total corporate debt is roughly 450, and—

We’re just doing the math here

Yeah, we’re just doing the math here.

Are you saying on an annual basis— David Ridley-Lane – Merrill Lynch: Yeah, or an annual basis, either one.

It’s roughly 34 million, excluding mortgage debt. This is just corporate unsecured.

Right, so it’s 450 times what the average interest—450 million times the average interest rate. David Ridley-Lane – Merrill Lynch: Okay. And then the 50% sale of the U.K. shopping center that you completed after fourth quarter results, so this asset is no longer being consolidated. What was the rough amount of rental income you received from that asset in the fourth quarter?

None.

None. We closed that right at the end of the year and then we had a partner come into the venture right after year-end, so there was no income on it at all. David Ridley-Lane – Merrill Lynch: Perfect, okay. And then as a result of the consolidation of the KW Property Fund II, that’s going to boost your reported revenue in 2013 but it’s going to lower your reported JV income. I’m just wondering what the run rate is for rental income from that consolidation.

David, we’ll have to get back to you on the rental income number, but the equity in JV income actually will not really—it won’t have an impact on that to speak of because those properties are running basically break-even after depreciation. David Ridley-Lane – Merrill Lynch: Okay, so it doesn’t necessarily lower JV income but some amount of rental income can come onto your P&L?

We can follow up with you on that. David Ridley-Lane – Merrill Lynch: Okay. And then last quarter you were actively marketing three of the west coast apartment complexes and one west coast office building. Could we get an update on what you’re currently marketing now?

Yeah, I’m not sure exactly which ones you’re referring to right now, but we sold one of them in the fourth quarter, a northern California property. And one of the other properties fell into the bucket of what Matt was referring to – we were able to—I don’t know if I can explain this exactly correctly. We were able to resize the existing financing on the property – I can’t remember whether it was with Freddie or Fannie – and we took all of our equity, including our partners’ equity, out of the property at a very favorable interest rate on a long term, what they call supplemental financing. And so it’s a big asset in northern California – it’s over 600 units. We decided not to sell that because we were able to take out 100% of our equity through a refinance, and so we still own it and it’s producing well in excess of about a 12% cash-on-cash return after the new financing. So that’s what Matt was alluding to a little bit. What we’re doing in some of the cases, David—like, we’ve got two more apartments that we own in a 50/50 joint venture. One is in Seattle and one is in San Jose, and without—we’ve had such strong rental growth in both of those properties, we’re adding supplemental loans to both those properties and we’re taking out $10 million of equity return to us. And the other thing I think that I tried to stress when you look at the unwinding of that hedge and a large part of the distributions that we make every year, none of that goes to earnings. On that hedge that we unwound that we took $11 million roughly into KW, that all just went to reduced basis in our investment. So particularly on the apartment buildings where there is this attractive long-term supplemental financing out there, we’re electing in some cases – and like I said earlier, on the lower quality stuff we’re continuing to think about selling that – but some of it we’re actually just keeping and taking our equity out with low leveraged financing.

And on the example Bill was giving on that northern California asset where we refinanced, what’s interesting is that actually shows up on our investment account at zero basically because we pulled all of our money out, and so it’s really not even on our book, so to speak, where we own the property.

Right. And we have a meaningful—if you were to go sell it, we have a very meaningful gain on that asset but it’s on our books for zero now.

As well as continuing to produce operating distributions on a monthly basis.

Right. David Ridley-Lane – Merrill Lynch: Okay, great. And then one last bigger picture question – PWC has forecast out that they believe they’ll be €15 billion in European commercial real estate loan sales in 2013, up from about 12.5 billion in 2012. Does that kind of fit with your own expectations that you’ll see more commercial real estate loan activity this year than last year? Thank you.

Obviously this is nothing more than a judgment or forecast, but I think the number will actually be larger than the number you just said for 2013. Our radar or instincts or whatever you want to call it is that there will be some significant transactions that happen in Europe this year, and I think that the European banks particularly are anxious to try and get as much behind them this year as they possibly can. So I think the PWC number could end up being on the low end of what happens in Europe. David Ridley-Lane – Merrill Lynch: All right, thank you very much.

Your next question comes from the line of Will Marks with JMP Securities. Please proceed. Will Marks – JMP Securities: Thank you. Good morning, Bill. Good morning, Matt. Actually my first question is about the zero equity in that asset, brings up—just a follow-up would be if you have 828 million of equity, is that an anomaly? Are there a bunch of assets like that?

Well, I don’t know about anomaly, but if there are—because of the way we handle the majority of our accounting where we’re—like, I went through that example in Japan. We’re continuing to reduce our book basis through these distributions that we’re getting every year and obviously the depreciation also. So our assets are carried, generally speaking, at depreciated costs and so the longer you hold these assets, the more your book value in these assets is being reduced, and therefore if you go to sell these things and assuming the market is still there and all that sort of thing, the larger the gains should be. Do you want to anything?

I would just add to that typically because of depreciation and the way GAAP accounting works, we’re picking up losses out of joint ventures because of depreciation. So that’s reducing book basis, and then you’re getting operating distributions that are decreasing book basis. So we would have a handful of that that has a zero cost basis in our joint venture, but we still own the assets. Will Marks – JMP Securities: Right, okay. That’s helpful, thank you. A few other questions – I believe you talked about the asset sales in 2012 and I can’t remember if you gave a return number. But can you either repeat that and let me know if return on equity, if it includes the promote or not?

Hey Will, it’s Matt. Yeah, so on those asset sales, those were shorter term holds but they were 50% return on equity, and it does include the promote. But I would say those are anomalies in that some of them were very short hold periods, so that was the returns on those – 50%. Will Marks – JMP Securities: Okay, all right. And then on your P&L, you had a little less than $20 million of G&A, it looks like, in 2012. Do you feel like that’s a decent run rate? It was 19.4.

Yeah, it’s really interesting. When you look at our headcount at the end of the year, we were at about—at the corporate level we’re at 340 people, but if you look at what we’ve always tried to do at the company, we’re not only deploying—and I don’t mean this the way it sounds, but we’re deploying capital and human capital, and so the vast majority of the increase in the headcount really relates to what we’ve been doing in Europe. And as I had said on prior calls, we learned from going to Japan that you really have to build your own infrastructure there. You’re not like a private equity firm that might go to Europe with a checkbook and two or three people, and so today when you think about Europe, we’ve grown our headcount from 15 people—we have almost 40 people in Europe, primarily in the United Kingdom and Ireland. And the other part of this that—and it’s the same thing that happened to us when we went to Japan in the 90’s, the quality of the people that we’ve been able to attract to our company in Europe is just—they’re really fantastic people. So any growth that you see in headcount this year will primarily be related to what we’re doing in Europe. Will Marks – JMP Securities: Okay, thanks. And in terms of use of proceeds, is Europe 75% of it, do you think?

Yeah, I think that in our plans for the year, and like I always say, we’re not compelled to invest but we have a big pipeline right now, and when you look at what we have in our pipeline right now, roughly in that 80% of what we have in our pipeline relates to Europe. And while we’ll continue to see—because you still do have debt maturities coming in this year in the United States on the west coast where the LTVs are at 100 or higher, you’ll still continue to see opportunities like we did when we bought that Ritz Carlton in December. But our guess is, and it’s nothing more than a guess, that this year roughly 75 or 80% of the investment opportunities for our capital are going to be in Europe.

And if you look at where we are today, Will, it’s about—right now the investment account is about one-quarter Europe, even with all the activity we’ve done. We still have a significant investment in the U.S. and Japan, and so as Bill was mentioning, we would expect to see that European concentration tick up this year. Will Marks – JMP Securities: Okay, thanks. And related to that, my last question – I may have missed this, I don’t recall you giving details on the 1.2 billion since December 31 that’s under contract. Can you expand on that?

Sure, yeah. So to give you a sense of what’s included in that, as Bill mentioned, it’s roughly 80% Europe and it’s comprised of 1.6 million rentable square feet of real estate. Included in that is a commercial property and 725 apartment units, and it’s roughly 725 million of UPB of loans secured by real estate that are all in Europe, and then also 301 residential lots. So that’s what we’ve got under signed contract right now. Will Marks – JMP Securities: Okay, so the debt portion is 725. The rest would be equity investments?

That’s correct. Will Marks – JMP Securities: Okay. All right, that’s all from me. Thanks guys.

Your next question comes from the line of David Gold with Sidoti. Please proceed. David Gold – Sidoti: Hi, good morning. Just a quick strategic question. Presumably over the last few months and certainly the fourth quarter, you’ve been a lot more successful and obviously a lot busier at putting capital to work. And I guess I’d be curious about two things – one, when you think about the reasons for the success, is it more a function at this point of the environment, particularly in Europe where folk are de-levering, or is it more a function of you’ve spent the last couple of years expanding KW’s positioning and offices moving into Ireland and whatnot, so that you’re better positioned to see those opportunities? That’s question one, and then I have a follow-up.

Yeah, I think first of all, David, those are excellent points and I think it’s a combination of both of those things. But I think the best case study is when you think about what we’ve been able to do in Europe. We went to Dublin in November of 2010, and at the time it looked like Ireland was in deep trouble and I think a lot of people there felt if there was going to be a recovery, it was going to be extremely protracted. I keep referring to Japan, but because of what we’ve always done where we’ve kind of gone into markets that are out of favor, and when we saw that the equivalent of the resolution trust was set up in Ireland, it gave us—and we looked at kind of the fundamental underlying economy there, we had a conviction that that was the time to really lay the groundwork. But when you go into a country or an area like that where you’ve never done business before, it takes a while to create not only reputational—a good reputation, but it takes time to get yourself in front of the right financial institutions. As I think most of you know, the vast majority over the 25 years I’ve been here of opportunities that we’ve seen come out of the financial institutions when there’s a situation like you’ve got in Europe, so now if you kind of roll it forward here to 2013, we clearly—I would say that there are four or five of us that have really been able to develop our position in Europe reputationally where we’ve executed in a big way. So now as you kind of go forward, the banking system and the banks that are there look to you as kind of a…

Well as I alluded to a little bit, David, I think the focus of our investing activity is really the western United States and then the U.K. and Ireland. And we still think that for 2013 that when you think about Europe, it’s mainly going to be in those two markets. I’d said on a previous call that we have opened an office in Spain – Madrid – but to date we haven’t deployed any capital there. It’s been an option vehicle where we’re optioning properties for financial institutions, and what we’ve always tried to do in these markets that we go into – and that’s how we got into Japan in the first place – it started with our auction business. That allows us to get not only an income stream going but it allows us to get intelligence on the ground to really understand what’s really going on in the market where we’re marking properties for third parties where we’re getting paid a fee. But when you think about our investing this year, you can really confine it to mostly, as it sits right now, in Europe to the United Kingdom and Ireland. David Gold – Sidoti: Perfect, perfect. That’s helpful. Thank you.

As a reminder, ladies and gentlemen, if you have a question please press star followed by one on your phone. Your next question comes from the line of Ian Corydon with B. Riley & Company. Please proceed. Ian Corydon – B. Riley & Co.: Thank you. A lot of my questions have been answered, but first on the balance sheet, understanding that some of the proceeds from the offering will be used to pay down the revolver. Just given the deals in the pipeline, when do you expect to be drawing down that revolver again?

Hey Ian, it’s Matt. We can’t talk specifically on that question. We can’t talk about offering, but we use the revolver from time to time to finance our acquisitions, and we expect to continue to utilize it throughout the year and into the future. Ian Corydon – B. Riley & Co.: Okay. And then can we assume on the occupancy rates on the apartment buildings in your acquisition pipeline, are those quite high, similar to your existing portfolio, or are those properties where you’re going to need to work to increase occupancy?

Yeah, generally speaking on the apartment projects we’ve been buying and continue to have in the pipeline, they are stabilized in terms of occupancy but there are value-added components where we may put some capital in to try to improve the units or the common areas and try to get the rents higher. But generally speaking, the apartment buildings we’re buying are running the 90%-plus occupancy. There are a couple—there was one last year that we bought that was at 88%. We’ve gotten it up to 97 now. But that’s pretty much the lowest we’ve gone in terms of occupancy is in the high 80’s, if anything, recently. Ian Corydon – B. Riley & Co.: Got it. Thank you.

Your next question comes from the line of Eric Miller with Advisory Research. Please proceed. Eric Miller – Advisory Research: Congratulations, guys. Certainly a really great 2012. As you’ve discussed here about the shifting of focus more and more over to Europe, it seems – just a cursory observation – in some of your deals in Europe, you guys are taking a higher percentage of the transactions, whether it be on the discounted loans or the direct investments. Is that a function of you guys are being an early mover and seeing just some great opportunities, or is that a function of maybe your historical partners might change a bit as you do more European investments as compared to U.S.?

Yeah, I think Eric, it’s a combination of things. Number one, we felt that these were really great opportunities, and they actually in hindsight turned out to be that way. They were of a size, too, where we could digest these with one other partner, but I would say—like we just went non-refundable on an off-market set of loan purchases from one of the U.K. banks on Monday, and we’re doing that in a 90/10 structure. That deal will close this quarter and we’re getting paid a million sterling acquisition fee as part of that transaction. So it just depends on the situation, and I can’t speak for our partners but generally speaking our partners and us have done very, very well on everything that we’ve invested in in Europe, and so we’ve got happy partners. So the other part of what’s happened to the company from, say, 10 years or so ago was that we’ve shrunk the number of external partners that we tend to work with, but the partners that we have today all have bigger financial capacity than, say, the 25 that we worked with 10 years ago. And so what you’ll see happen this year and I think into the future is that we have a universe of six or seven partners in Europe that we’re working with, but they all have big financial capacity. So it just depends on the transaction. The two apartment buildings that we bought in Dublin, one was a €27 million purchase and the other was a €40 million purchase, and we did those 50/50 with Fairfax Financial. But the other thing I should mention too is that the debt markets in Europe for property-level financing have improved significantly in the last six months, and when we first started our acquisition…

As I may have said earlier, the supply—if you go back to the question that was asked about the PWC study of 15 billion for this year, and I think it’s actually going to be higher than that. There’s still a lot of supply, and if you look at Europe in its totality, and I’ve seen all kinds of different studies, but one of the accounting firms has estimated that there’s still $1 trillion of assets that have to be shed out of the entire European banking system, the vast majority of which is related to real estate. So there’s still a lot of supply. There is clearly more capital there than there was even a year ago, but prices are, I would stay, still rational. But we also believe that this is the year that you really have to try and get anything done that makes sense to do, and the United States is really a perfect kind of case study of how quickly these markets can turn. If you look at the things that we’d bought obviously in 2009 and ’10 and into ’11, and then you look at the pricing today here in the States, you look at New York City residential – I mean, that market’s gone through the roof, and if you look at San Francisco condominium projects, their pricing now is 20% above the peak that it was in 2007. So these markets tend to change very, very quickly and that’s why we believe that 2013 is a year where you really have to try and get done whatever you’re going to get done, because ’14 could be kind of a year where things have turned. Eric Miller – Advisory Research: Okay, great. Thank you.

There are no further questions at this time. I would now turn the call over to Mr. Bill McMorrow for final comments.

Well thank you all very much for listening in, and as always we appreciate all the support you’ve given us. So thanks very much.

Ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.