Good morning and welcome to the Kennedy-Wilson Third Quarter 2018 Earnings Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask question. [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.

Thank you and good morning. 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 one week and by webcast for three months. Please see the Investor Relations 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 a reconciliation of the most directly comparable GAAP financial measure and our third quarter 2018 earnings release which is posted on the Investor Relations section of our website. Statements made during this call may include 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 would now like to turn the call over to our Chairman and CEO, Bill McMorrow.

Daven thanks. Good morning everybody and thanks for joining us today. We are pleased to report a record third quarter results for Kennedy-Wilson highlighted by our growth in property NOI, a continued strength in same property operating performance and continued progress on our property stabilization initiatives, which allowed us yesterday to announce an 11% increase in our dividend to $0.84 share on an annual basis. We also continue to make great progress on our third-party fee-bearing capital raising initiatives and the execution of our asset sale program. Starting with our record financial results for the. GAAP EPS was $0.09 per share, up from a loss of $0.08 a year ago, adjusted EBITDA was $142 million compared to $76 million during Q3, 2017. The increase in adjusted EBITDA was driven by a $41 million increase in our share of property NOI, which has significantly increased since the acquisition of KWE, which we completed in the fourth quarter of last year. We also had a $32 million increase in our share of net gains and promotes compared to the third quarter of 2017. We have now produced $535 million of EBITDA year-to-date in 2018 more than double the $255 million we produced for the first nine months of 2017. Adjusted net income for the quarter was $74 million compared to the $35 million in Q3 of 2017. For the year-to-date, adjusted net income totals $308 million compared to $125 million last year. I would like to review the highlights of our property operating results for the quarter before discussing our key global growth initiatives for the Company. Our total, our portfolio today has an estimated annual NOI of $416 million with 46% coming from the Western U.S. and 54% from Europe. We had another solid quarter of property operations with same property…

Great. Thanks Bill. In Europe we continue to make excellent progress in stabilizing assets and completing development projects. We added $8 million of estimated NOI in the quarter to leasing up the North Bank Apartments in Dublin and Pioneer Point Apartments in London, and stabilized the 100,000 square foot office building at Capital Dock in Dublin which is fully leased in deed for 20 years and is the first of the three office buildings in Capital Dock to complete. We remain on-track to complete remainder of Capital Dock by the end of the year. we materially derisked the entire single phase development by preleasing two of the three office buildings to indeed and by signing the third office building to owner occupier JPMorgan. Great progress has also been made on leasing the 25,000 square feet of retail space with the majority expected to open for business in the first half of 2019. These leases provide strong support our upcoming leasing program for the 190 premium multifamily units, which will open towards the end of this year. Similarly, we see our acquisition of CB3 which when complete will total approximately 450 multifamily units and 300,000 square feet Grade A office space as the next signature campus development for the Dublin's driving North Dock. And Hanover Quay, which is adjacent to Capital Dock, we received planning approval for 68,000 square feet of new Class A office space in Q2 and are currently in the design process in anticipation of beginning construction in Q4 of this year. All together, we are on target to deliver approximately $60 million out of our 100 million globally. An additional estimated NOI from European development and unstabilized assets by 2023 including $20 million by the end of next year. Our second key global initiative is to significantly…

Thanks Mary. So our third area of focus is our asset sale program on the recycling of capital. In Q3 we continue to selectively sell assets where we have either completed our business plan or the asset doesn't fit long-term for us strategically. We then redeploy that capital into higher return opportunities. During the quarter, we sold $321 million of assets of which our share was $250 million. Europe accounted for 96% of our asset sales including the largest sale in the quarter, which was an office building in Milan, which we sold for $81 million and a gain of $31 million. In total our sales generated $159 million of cash to KW for the quarter and year-to-date, we have generated $466 million of cash to KW. In terms of reinvesting these proceeds. Year-to-date, we have allocated capital as follows: 31% was allocated to our stock repurchase plan; 19% to property level CapEx, and 50% to new acquisitions. Our asset sale programs will continue to focus on selling smaller assets as well as non-core assets or assets where we have completed our value-add business plan. We expect to see an increase in transactional activity and what will be a very active for the quarter. As it relates to returning capital to our shareholders. So far in 2018, we have returned $269 million in the form of dividends and share repurchases, which equates to $1.88 per share. Year-to-date, we have purchased and retired 8.8 million shares at an average price of $17.92, with $103 million remaining on our share purchase program as of the end of the quarter. Additionally, as I mentioned yesterday, our Board of Directors declared a fourth quarter dividend of $0.21 per share which is an 11% increase from the prior quarter. We have now increased our annual…

[Operator Instructions] The first question will come from the Mitch Germain with JMP Securities. Please go ahead.

Good morning. I'm curious about in Dublin or maybe just even in Ireland itself. My understanding is that the ownership of many of the multifamily properties is highly fragmented. A, am I correct that a assessment and B, is there any larger portfolios that you could foresee maybe coming to the market down the road?

Hi Mitch, it's Mary. Highly fragmented, I think historically Ireland was when we first bought in, in 2011 that was true, because a lot of these buildings have been built to sell as individual apartments and then when the market turn down the banks and normal ended up with a lot of those buildings and actually we bought a lot of those, but they hadn't been broken up. So they had not been fragmented. There are a couple of players in the markets that do own more highly fragmented building, but for us, we basically control really the assets that we buy, we want to make sure that we are controlling the common areas, the amenities space, et cetera. So, in that market, I mean, you really need housing. As I said on the calls on my remarks, it's so underserved, that all the professional managed assets that are now in the market from various competitors and ourselves, I think being the largest if not one of the largest. It's really important to have that as an opportunity for those that live in Dublin.

And the positive capital that you are competing against. Is it foreign, is it local, is it private equity or institutional if you maybe provide some perspective there?

Yes. It's a good question. That market that sector has really become an institutional sector and it’s a very international now and so we are competing with everyone big names that you would all know a lot of sovereign, because it's a great asset class. I think our competitive edge is not only that we have as the best team in Ireland who have done a great job on everything that we have owned, we have been in the space for the longest period of time in Ireland and our ability to plan, to design and to deliver via development very high class premium multifamily product to the market is critical. We have all the relationships necessary to do that, we know what the market needs, what the demands are, where the price point should be. So our finger on the pulse of delivering developed projects, very high quality I think it second to none in Ireland and we will continue doing that. And the last thing I will say is, I think the testament to all that I said is really the asset joint venture to the best institutional investor in Europe, they are great partners and they chose to invest with Kennedy-Wilson. So we are really excited about the future growth in that business and the team continues to do really, really well.

And then too Mary you might add I mean the scale of our business both the multifamily and the office business that we have in Ireland, it's hard to get completes statistics niche, but we are clearly one of the top one, two or three owners across all asset classes in Ireland. And as Mary pointed out, it wasn't at the beginning of our time there, but it has become a very institutionalized market, but because of our scale and as Mary pointed out the great team of people that we have there, we just have a great ability to execute in that market.

Great. I know this obviously there was a sale of one of the properties that you have in Milan. I think you have about 800,000 square foot less in that market. You also have some in Spain. Both of those markets or maybe one of the other are those targets for additional sales down the road?

Yes. I mean on Italy we are working on a couple of sales right now. So that is definitely - and that is really from day one the plan there was to buy those assets and trade them opportunistically, which is the Milan deal was a great deal for us. The team executed on planning application, which added the value and then enabled us to sell that on to a developer, obviously make great profit on that sale and we are continuing to look to trade out. In the meantime we are flipping very good income on those assets. As it relates to Spain, we are in the midst of doing a fantastic job on our repositioning of L&G, which is our prime shopping center in North Madrid and a very excellent area. We have done about 50 lease transactions with regard to - when you think about new leases as well as rehears of our existing tenants, we have completely redone the whole and landscape the whole garden area and open up that space, which brought a lot of restaurants to the centers, which is an amenity not only for the housing owners in the area, but also for the business park office tenants. So that is one very, very well. And then we have some high street retail that are all very well located and let to a couple of different tenants in Spain. And again, I mean, I think, opportunistically as we execute a business plan with the market allows us to, we will continue to trade in and out of those assets in Spain as well.

Got you. Bill, you have always been a good market timer, what you have done in the West Coast Ireland. I'm curious though many of those markets were very institutional just kind of distressed when you are investing in them. I'm curious about markets like Boise, Reno, which never really had much of a real big institutional presence. Do you think that kind of getting in early maybe ahead of where the other institutional capital is getting in. I guess the question is, do they ever look at those markets or are you really kind of the only real player that is underwriting and buying in some of those markets today?

Yes, good question. See what is really going on here on the West Coast, when you look at California and look California is always going to be a great state with a population now of almost 40 million people. But you have to put it in context here with a tax rate now in California of 13.5% and you have got housing affordability, if it's not act, it's all time peak is very, very close to us all time peak. And you have got young people graduating from all the major universities here in the state of California. And, while they are finding jobs, it's challenging to find jobs that can support the level of housing affordability here. And so what is happening in these other states on the West Coast where there is a very, very high quality of living standards. And I'm talking about Salt Lake City, Boise, Seattle. And Seattle is a very good example, we started there almost 15 years ago. So it was well before Seattle and had been come on the map is being recognized by other people. We started in Salt Lake City probably five years ago, six years ago and there were really know what I would call institutional or institutionalized projects there and so we have been able to clearly demonstrate that by doing what I call the KW style asset management of putting in new leasing centers and renovating units and doing the common areas with fitness centers and so on. That we have been able to drive rents to extremely attractive returns. The Boise is a market that you can dominate, you can be a dominant player with say 2,000 units, 2,500 units, which is kind of our bogie that we are headed toward. We have about 1,800 units…

Thank you.

[Operator Instructions] Our next question is from Derek Johnston with Deutsche Bank. Please go ahead.

Good morning.

Good morning Derek.

How are you thinking through the best use of capital with the lighter share buybacks in 3Q. You guys have been active on the development and acquisition side as well as buybacks. But as I look ahead to 2019, how do you stack expected uses and which do you anticipate to be more active than the others going forward?

Well as always these decisions are - they are capital allocation decisions. And I think we have demonstrated not pretty good, a very good track record of being good stewards of shareholders' capital and our partners and so these decisions always lie and not so much what do you think is the best opportunity but the way you are allocating capital. As Mary has pointed out and I have try to point out, we have a very large CapEx at the existing properties and development initiative going forward and so you have got to way all these factors in. And we start from a standpoint that there is a minimum level of cash that we want to keep and where do we think are the places that we need to allocate capital. This year alone we have returned almost $300 million to the shareholders in the form of dividends or stock buybacks and we have been doing stock buybacks forever since we have been at Kennedy-Wilson. So it's clearly something that is on our radar screen, it just depends on where we are at in terms of allocating capital to the various opportunities.

Great. And just getting back to Mitch and the multifamily platform in the U.S. with the recent focus on the Mountain States, how do you feel that will impact the growth trajectory of revenue and NOI?

So I'm going to let now Windisch answer that Derek.

Thanks. So, I would say if you look at the past couple years, as you mentioned, we have purposely shifted the portfolio a bit out of California where we had some great success and produced great returns and shifted some of that capital towards the Mountain States and it's been a couple of reasons. Number one is affordability and the fact that the rents in those regions are 40% below our California portfolio. The second part is, these are underserved markets with growing populations and we think very vibrant economic growth in front of them. And if you can see from our results, in particular, this quarter, the Mountain State areas had NOI growth of 9% where the California markets are still very strong, but we are in the low to mid single-digits. So we think going forward as we continue to focus our efforts on those properties and continue to do our value-add, in those Mountains State properties which we bought relatively recently. We think we can continue to certainly outperform the market and has above market rent growth, particularly in the Mountain State area. So we think the outlook is very, very strong in the next couple years on the same property side, given the mix of the portfolio.

And, Matt, one thing if I could add to that to Derek, we have learned over the years are surprisingly little differential in rate, borrowing rates depending on these markets and so we are buying two properties in Salt Lake City, one on our found and one that we are exchanging into a Salt Lake and the borrowing rates there are roughly 4.25%, which for 10-year term loans, which is roughly the same that you would pay in a California market. And I think the other important thing to remember is that the rate differentials that you see in Ireland, particularly Mary, versus what we are borrowing at tyranny United States and so with the 10-year now here in the United States, say touching 320. Mary and her team just put in place a new loan on one of our apartment projects in Ireland there was a seven year term and we borrowed it 270 fixed for 10-years and so the interest only for seven years. And so we are able to borrow long-term on extremely high quality assets in Ireland, it's up 3%, we are able to borrow below the U.S. government borrowing raised here in the United States and so when you look at where we are allocating capital and how we are looking at these decisions is you know, we really don't like to play the interest rate market. We like to lock in fixed rate loans but there is a very big differential today between borrowing rates in the United States and here in Europe, but there is really no rate differential at all between borrowing in Salt Lake City and borrowing here in California on apartment projects.

Excellent point. Thank you. And just lastly for me is in light of rising tenure that you mentioned, what are your thoughts on cap rate trends in your U.S. markets?

Yes. We have very few new assets that we are interested in buying right now at cap rates and there has to be an adjustment period in our opinion on the buy side. We haven’t seen it yet to be fair, but you have to look at this tenure rate I think in terms of historical standards and even if the tenure stabilizes somewhere between where it's at 350, it's almost 300 basis points below the 100 year average for the tenure. And so even though I know everybody has been sensitized to this rate, these recent rate increases, but any historical standard they are still well below and there is still great ability and the way we do our business. There is great ability to make money for us and our shareholders with these rate levels at or near where is that right now.

And just to add to that too. Our portfolio is obviously 50% Europe, 50% U.S. and so in Europe as was mentioned earlier, the rate differential there is 200 basis points and so really half of our portfolios have seen some interest rate increase the other half hasn't at all.

Yes. I think Matt you are making a really good point. I think the diversity - the high quality nature of our portfolio but the diversity of it geographically at least in our opinion is very, very solid to way to spread a risk for shareholders. So that we are not entirely reliant on any one geographic area to sustain long-term returns.

Good points. And thank you.

Our next question comes from Craig Bibb with CJS Securities. Please go ahead.

Good morning it's actually Michael Hagan dialing in for Craig here. And Mary wanted to ask you a specific question. First of all congrats on your recent promotion.

Thanks.

But specifically we certainly believe that Kennedy-Wilson is an attractive partner for an institutional capital and this $2 billion that we are talking about a fee bearing asset is fantastic start. We are curious how much larger can your assets under management grow call it in a three to five year time range.

Well thanks for your complement. And we are focused on growing about a $1 billion a year is what we think is an achievable goal and I think we are well on our way to doing that not only with our discretionary funds, obviously we have our U.S. fund that we are going to wrapping up our latest funds. We are going to be launching what we called KW Europe Fund 2 which is a discretionary fund where we have got some good preliminary interest there and then obviously we have all these separate accounts including this core bucket that we have with the large insurance company. So yes, I think we are very, very focused there and we don't feel like we need to scale the team, we have got a really high quality team across the globe where we are operating. So I think we are well setup and well positioned with our people and I think reputation and we are doing great and Kennedy-Wilson is a name now that is known across different parts of the world. And I think it's interesting when you look at our most recent investors obviously access from France and we have had a lot of interest from the Middle East. We always have a big following in the U.S. So as you kind of look how we are spreading our wings if you will around the globe it's super encouraging. And I think for us it's we need to just keep executing on all of our asset management, on our development plans and keep attracting institutional capital partners that we see the world in the same way. So we are really, really optimistic.

Excellent. Thanks, Mary for that color. And actually the other questions we had were gestured. I appreciate your time this morning.

Thank you.

Thank you.

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

So everybody on the call and obviously those that are not but we have shareholders, we thank you for all your support. We have had a great year-to-date, and we will look forward to talking to you next quarter. Thanks again.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.