Good morning and welcome to the Kennedy-Wilson Fourth Quarter 2016 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Daven Bhavsar, Director of Investor Relations. Please go ahead.

Good morning and welcome to Kennedy-Wilson’s fourth quarter 2016 earnings conference call. This is Daven Bhavsar. And joining us today are Bill McMorrow, Chairman and CEO of Kennedy-Wilson; Mary Ricks, President and CEO of Kennedy-Wilson Europe; 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 1 week and by webcast for 3 months. Please see the Investor Relations section of Kennedy-Wilson's website for more information. On this call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. You can find a description of these items, along with the reconciliation of the most directly comparable GAAP financial measures in our fourth quarter 2016 earnings release, which is posted on the Investor Relations section of our website. Statements made during this conference call may include forward-looking statements. Actual results may materially differ from the 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 would now like to turn the call over to our Chairman and CEO, Bill McMorrow.

Thanks, Daven and good morning, everybody and thank you for joining us today. 2016 was another productive year for Kennedy-Wilson and we're pleased to report a solid fourth quarter highlighted once again by growth in recurring income and continued outperformance of our multifamily portfolio. As we normally do, we'll start by discussing our key financial highlights for the quarter and the year, along with the recently announced increase in our dividend and an update to our capital return program. Next we will review our real estate portfolio and the operating performance of our key segments, we'll then discuss our balance sheet before turning to a summary of our investment activity for the quarter. Next will give you an update on some of the major value enhancement projects that we have in progress, and finally we will discuss our views on the current market environment before opening it up to questions. So starting out with the financial highlights for the fourth quarter, adjusted EBITDA was $117 million compared to $222 million during Q4 2015. Our full year adjusted EBITDA was $350 million compared to $371 million last year. The composition of our adjusted EBITDA continues to improve and become more heavily weighted toward property cash flow and less so towards gains. For the year, our share of property level NOI grew by $35 million to $241 million, an increase of 17% from 2015. Our share gains and promoted interests were down by $55 million which was primarily due to having no promo for KWE during 2016. As a result of the continued growth in our recurring cash flow, we raised our quarterly dividend for the sixth consecutive year to $0.17 per quarter or $0.68 on an annual basis which represents a 21% increase. Our new dividend rate equates to 3.25 dividend…

[Operator Instructions] Our first question comes from Craig Bibb of CJS Securities. Please go ahead.

Hi guys. Another solid quarter. Commercial NOI in the U.S. jumped up. I think that's because of the properties that were stabilized during the year. Could you - if that's correct, great. And then, could you give us a perspective on how much additional NOI is coming in as more properties are stabilized? I know you have at least the El Camino will be later in the year.

Yes, you are right, Craig. So we did have two significant assets that came online, one in North Hollywood and one in Marina Del Rey in the fourth quarter. So that has certainly added to that NOI number and then if you look at Beverly Hills, El Camino as well as several other office and retail assets, we think there is significant upside coming in the NOI over the next six to 12 months.

Could you give us like a ballpark number annual wise?

Yes I think it is probably somewhere between $4 million and $6 million from those two to three buildings.

Okay. And then in the U.K. commercial NOI splits, I assume part of that is FX and you may have sold something is that correct?

Yes, it is a combination of some FX but also some of the portfolios in the U.K. we bought were slightly over rented and so as we have renewed the leases the rents have come back to market.

And then NOI at the Shelbourne slipped a little bit, is that you guys are doing renovation there and when will it be done?

So there is - part of that is a portion of that is FX as well as the Euro slipped, it was the biggest portion of that.

But we are Craig we are doing a roughly $20 million renovation there right dollars. And but when you think about that property roughly over the last three years the NOI there is probably gone up 60% to 70% but I think the most important take-away from the NOI increases is really to think about the projects that we're completing, that are under construction this year and next year. And we will be through the majority of all of these construction projects by the end of 2018 and into the early part of 2019. And so there is significant dollars that are being spent there that are going to create new NOI once we get those properties occupied and producing income.

Okay. Can you give us a ballpark on yield on the project - once all those projects are completed, yield should be $0.06, $0.07?

Yes, what we mentioned was that on our equity that we're investing, we are targeting 10% to 15% return on equity that is a levered return. So I think your number of seven is in the ballpark in terms of unlevered.

Great. Thanks a lot guys.

The next question comes from Vincent Chao of Deutsche Bank. Please go ahead.

Hi, good morning, everyone. Just wanted to go back to the capital allocation comments for 2016 about half into share repurchases and development CapEx and half in acquisitions. As we think about 2017, how do you think that mix will shake out and would you, given the current environment and volatility that you mentioned, would you expect to be a net seller here in 2017 again?

I mean it is always hard to tell sitting here in February exactly how the year is going to play out. Our business things just tend to unfold over the year, I mean we clearly have - and as I always say on these calls, we have no ever have any goals in terms of what we're doing on the acquisition side because you just got to see what opportunities unfold. We have last year as I said we did a little over $3 billion in total transactions and so anyway, I can't really give you any numbers, I can tell you though that the big, big focus of what we're focused on is the internal asset management of the completion of the construction projects that we have underway and the properties that we already own were as I said in my remarks the apartment buildings that we own, the communities that we own even though those are running at 94%, 95% occupancy each one of those have its own capital expenditure program and might be a finished building but we are redoing units, we are redoing common areas, and in each of those properties that can be up to $7 million to $10 million on the bigger properties. So, whether we buy anything or we clearly will sell some things this year, the main focus is really on the things that we currently own because there is big up lift in those properties.

Okay. Thanks for that. Maybe just sticking with the investment side for a second here, just as you think about, forget about what you might actually close, but in terms of the pipeline of deals that you're looking at, is there - has that been changing at all, shrinking, growing, same?

No, I think we you are always in our business, you are looking at you can pick whatever number you want, you are looking at 25 to 50 deals to find one that you think makes sense. And so but as I said we spent now three decades building relationships all over the world that have allowed us over that period of time to buy up market transactions and when you think about really the real secret to our growth success has been the ability to - on the acquisition side to buy probably 75% of our assets through relationships that we've created with whether that is a financial institution or developer, house to sell for whatever reason based on their capital. So I would say as we gotten more scale, we get shown more opportunities but we have an active, active group of people that are out in the market from the senior management on down looking for these opportunities. So the level of things that we're looking at is still the same, it's just as I said you got to be very selective and you got to recognize that we are stunning devoting a lot of time and go to the things we already own.

Okay. And on that front, I know the development pipeline as it stands today has about $230 million to complete. How much is budgeted for development CapEx this year?

Yes last year we spent $110 million in 2016, so we're planning to spend at least that amount in 2017 around that arrange maybe slightly higher.

Okay.

And remember too, there is some of assets there is debt at the property level so, that's not the total scale of the CapEx program that's just our share of what we’re putting in.

Right. That's your share. Okay, okay. Thanks. I'll jump back in the queue.

[Operator Instructions] The next question comes from David Ridley-Lane of Bank of America Merrill Lynch. Please go ahead.

Sure so, based on your current disposition plans, would you expect 2017 to be similar to 2016 in terms of the scale of dispositions?

Yes, David its Matt. I think as Bill mentioned it’s a little hard to predict these things but we do have a healthy pipeline of assets that we planned to sell in 2017, a few of which are currently on the market of few of which will go on later. But so we think we’ve healthy disposition pipeline but there is not a specific number that we want to put out there right now.

Yes, but I think what is fair to say unless there are external conditions that affect any market, every year we’re going to have assets that we're disposing of for a variety of reasons so but we can really put a number on what that might be this year.

Understood. And then, you've talked a lot on the development projects. Based on what you expect to deliver in 2017, can you talk about the rough recurring NOI that would come online from those?

Yes, we talked a bit about the - on the value add $4 million to $6 million of really commercial coming on. And if you look at 2017 we’re going to have a Clancy Quay, we're going to deliver some new units, we have some of the Vintage assets it will be completed, and then Capital Dock will have one of the buildings finished. And so I think you'll see some additional NOI this year from that but I think majority of its going to come in 2018.

Exactly.

Okay. And then, am I right? What was the share repurchase in the quarter itself?

Fourth quarter?

Yes.

I think was rough about 20.

Yes it was about 20, I think its $21 million in the quarter and we've done $50 million in 2016 with an average price of $20.50.

And then, is the thinking continue to use the remaining $50 million through the rest of this year?

Yes, I mean it's certainly - like you mentioned we have $50 million left depending on market conditions that certainly an option for us to spend capital in that manner.

Sure. And can I get a quick update on Fund 6 and the progress through there?

Yes, we're in the market with that now. We've had actually our first set of closings on that and I think I've said in the past that our target on that Fund is going to be somewhere between $500 and $750 million. We've had very fine results on Fund 3, 4 and 5 and so several of the larger key investors that are in those sets of bonds were basically - Fund 5 which is $500 million were fully invested in that except for $100 million and Fund 3 and 4 are all in their final stages of disposition with very good results. And so we got a number of the larger investors and when I say larger I'm talking in the $50 million range that are going to re-up into Fund 6. And so, I think you'll see by the end of this year we'll have most of the fundraising completed on Fund 6.

All right, thank you very much.

The next question is a follow-up from Vincent Chao of Deutsche Bank. Please go ahead.

Hi guys. Just curious, I didn't touch on the operating performance here, but we've seen a moderation in same-store revenue cross all U.S. you're more so than some of your peers. You guys have maintained pretty strong same-store rev growth, but still a little bit of moderation. I was just curious as some of the larger CBD markets have pulled off, are you starting to see a notable pickup in development activity in your markets?

No, I mean, I think the markets that you've seen most of the development activity on the West Coast have been in the CBD, downtown LA, downtown San Francisco. Clearly in Southern California you've got a tremendous amount of development going on in downtown Los Angeles that we don't want anything in. And so you’ve got activity going there and you do have activity going on the Seattle market of size but the big difference in Seattle and really the LA market for sure not so much San Francisco but the LA market is the amount of job creation that's going on there. And as I said in my remarks you got, you got more Fortune 500 companies in Seattle than you do in Los Angeles. And so you've got real job growth going on there that has the capacity to absorb the number of units that are being built and I think that Los Angeles that’s a whole different ballgame.

I think I was thinking more on the East Bay where San Francisco is also seeing a ton of supply and now rents are really starting to come down quite rapidly and you are seeing concessions and things like that. We had heard that East Bay was starting to see a little bit of a pickup in development. So curious what you are seeing there. And then also, to the extent that new developments are coming online in Oakland, could you give a comparison of what prices they're looking for rate-wise versus your in-place portfolio; because I know there's a huge discrepancy between the CBD and what you guys own in the East Bay but just curious on new developments in the East Bay, how the delta looks.

I'm going to let Matt answer part of it, but you're making a good point that in some of these markets where you've got new construction going on, the construction costs have gone up too and so we're fortunate - well several of the communities that we own in the East Bay are extremely high barrier entry products. But if you look at Bella Vista, that's on 50 acres of land in the East Bay that you could never get that entitle today. We have 1000 units in that one project and then if you look at the other big project we have in East Bay in Alameda, you've got almost 700 units of summerhouse. And so our projects in the East Bay generally are on big pieces of land, high barrier entry markets where there is a rent - good size rent differential between San Francisco on the East Bay. So we haven't seen the current challenges that you're talking about in our assets.

Yes. Then in terms of the performance of the Bay Area portfolio for the quarter our revenue growth on a same-store basis was 8.5% and NOI growth was over 10%. So it’s been a slight - it's been slightly slower than the say the Seattle market but continues to be extremely robust.

Okay, thanks guys.

And this concludes our question-and-answer session. I would now like to turn the conference back over to Bill McMorrow for any closing remarks.

So thank you everybody for joining us. And as always thank you for your support. Thanks.