Good morning, and welcome to the Kennedy-Wilson Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I'd now like to turn the conference over to Daven Bhavsar, VP of Investor Relations. Please go ahead.

Thank you, and good morning. This is Daven Bhavsar. Joining us today from Kennedy-Wilson are Bill McMorrow, Chairman and CEO; Mary Ricks, President; Matt Windisch, Executive Vice President; and Justin Enbody, CFO. Today's call will be 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 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 measure, and our third quarter 2022 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.

Thanks, Daven. Good morning, everybody, and thank you for joining us today. Yesterday, we reported our third quarter results, which showed that our business and our portfolio continued to perform very well against the challenging macroeconomic environment stemming, in large part, from elevated global levels of inflation and the actions taken by the world's central banks. Our $22 billion in assets under management is comprised of over 37,000 multifamily units and 27 million square feet of commercial properties. Within our portfolio, we have many drivers that will contribute to our future growth. These include organically growing our multifamily net operating income, further expansion of our debt and industrial portfolios and the near-term completion of our $3 billion development pipeline, which is expected to produce $92 million of incremental NOI to KW, 83% of which we expect to be stabilized by the end of 2024. These areas of growth should meaningfully add to our $473 million of estimated annual NOI, which is up 9% for the year and up 15% from Q3 of '21; and to our $5.6 billion of fee-bearing capital, which has increased by 12% for the year and by almost 50% in the last 2 years. Roughly 2/3 of our NOI are from sectors where we are seeing strong cash flow growth, which include our apartment and logistics business, along with our loan portfolio in the Shelbourne Hotel. We continue to see impressive revenue growth of 9% from our multifamily same-property portfolio where top line rents outpaced inflation as the high cost of homeownership is boosting demand for rental housing. The logistics market continues to see positive rental growth rates driven by low vacancy across the U.K. Our global logistics portfolio, which now totals almost 11 million square feet, continued to remain almost fully occupied with occupancy at…

Thanks, Bill. Our Q3 results demonstrated the resilience of our portfolio. During the quarter, GAAP EPS totaled $0.12 a share. Adjusted net income, which adds back noncash expenses, such as depreciation, totaled $69 million or approximately $0.50 per share. Q3 adjusted EBITDA totaled $166 million. Year-to-date, we've generated GAAP EPS of $0.31 per share, adjusted net income of $196 million, or approximately $1.43 per share, and adjusted EBITDA of $444 million. We continue to see further improvement in our consolidated quarterly revenue, which is up 22% year-over-year and almost 3% on a sequential basis. Including unconsolidated investments, our share of recurring NOI, loan income and fees increased by 17% to $130 million in the quarter from Q3 of last year. In our consolidated portfolio, which is essentially all held at fair value, increases in interest rates and currency fluctuations resulted in an approximate 2% decrease in asset values during Q3. However, this was offset by an increase in net asset values from the mark-to-market on the associated property level debt. Turning to our balance sheet and debt profile. As Bill mentioned, we're very focused on managing our interest rate risk, primarily through being a fixed rate borrower and also through the use of interest rate hedges on our floating rate debt. The extreme fluctuations in rates in Q3 resulted in a $38 million increase in the value of our hedges for our consolidated portfolio, and this is included in other income on our P&L. Our interest rate hedges have a weighted average maturity of 2 years. Looking ahead to our debt maturities, in total, less than 10% of our debt matures before 2025, all of which are nonrecourse property-level financings. We also have a strong handle on our near-term debt maturities. In 2023, we currently plan to pay off over half of our maturities with proceeds from asset sales, a significant portion of which have already been completed. Lastly, our effective interest rates stood at 4% with a weighted average maturity of 5.9 years. At quarter end, we have $720 million in liquidity, which includes $420 million of consolidated cash and $300 million of availability on our $500 million line of credit. Post quarter end, we paid our line of credit down by an additional $25 million. With that, I'd now like to turn the call over to Matt Windisch to discuss our multifamily portfolio.

Thanks, Justin. Our global multifamily portfolio now comprises 56% of our estimated annual NOI. That's up from 42% back in 2018. In the U.S., strong demand for rental housing resulted in blended leasing spreads of 13% in Q3. This, in turn, resulted in another quarter of solid same property NOI growth of 9%. The strongest performance came out of our Mountain West portfolio, which is our largest apartment region, where revenue increased by 13%. The affordability of this region, coupled with other high-quality and amenity-rich communities, continues to attract renters, with rents increasing by 13% on new leases and 15% on renewals. While the Mountain West has been a big beneficiary of in-migration, there also continues to be solid job growth by well-known companies. For example, in September, Micron Technology broke ground on a new $15 billion chip manufacturing facility in Boise, which they expect to create over 17,000 local jobs. And in Arizona, both Intel and Taiwan Semiconductor are underway on large-scale, multibillion-dollar expansions. In New Mexico, Netflix and NBCUniversal have both built studios within the last year, and Intel is in process on a multibillion dollar expansion as well. With average rents in the Mountain West totaling $1,523 per month, rents continue to remain very affordable compared to higher-cost states, which we think bodes well for the long-term growth of this region. As Bill mentioned, our key wholly owned acquisition in the quarter was a 260-unit multifamily community in Albuquerque where we now own over 1,700 units. This value-add acquisition includes plans to renovate a majority of the units and a variety of other amenities. And again, we were able to assume attractive below-market fixed-rate debt at 3.64% as part of the purchase. The Albuquerque acquisition was part of our recycling plan as we sold an older urban…

Thanks, Matt. Similar to the growth of our debt platform, this year, we've seen rapid expansion in our logistics footprint globally, which has been an important component of building our investment management platform. In Q3, we acquired $150 million of logistics assets in Europe and $84 million in the U.S., in which our ownership share was 14%. These acquisitions added 7 assets across 2.1 million square feet and expands our industrial portfolio to 110 assets, totaling almost 11 million square feet, with total assets under management of $1.6 billion. 83% of our logistics portfolio is located in the U.K. where fundamentals remain strong. U.K. prime rental growth in 2022 has been 13%, above 2021 levels. We are seeing significant demand for good quality warehouse space from occupiers who are looking to address and improve their supply chain resilience. U.K. vacancy stood at 3.7% with many submarkets at below 2%, putting continued upward pressure on rent. This year, we have completed 300,000 square feet of industrial leasing in Europe with in-place rents increasing by 22%. Our occupancy remained solid at 99% with in-place rents 29% below market, which positions us well to continue delivering strong industrial rental growth. As capital markets and investment volumes fluctuate, we continue to discuss with our strategic partners, which include insurance companies and sovereign wealth funds, different ways we can capitalize and continue growing our industrial platform which may include acquiring assets with no initial leverage. Our well-capitalized partners are committed to this asset class long term, and we look forward to growing our industrial platform in the coming years. Currently, our investment management platform has $3.8 billion of nondiscretionary capital, which we look to deploy across all our announced platforms. This will add significantly to our existing $5.6 billion of fee-bearing capital today, which has…

Thanks, Mary. In closing, I'm very pleased with how KW is positioned today, and I remain very positive about the growth opportunities that exist across our business, including in our value-add multifamily portfolio, future growth of our debt and logistics platforms and the completion of the developments. I'm extremely confident in our team's ability to uncover opportunities that may arise as we have always maintained an opportunistic approach to investing and have a proven track record of creating value during periods of uncertainty. I'd like, in closing, to thank the global KW team and our shareholders, partners, and our Board for their support of Kennedy-Wilson. And with that, I'd like to open it up to any questions.

[Operator Instructions] Our first question will come from Anthony Paolone with JPMorgan.

My first question is, I guess, two parts. One, can you go around your product types and regions and perhaps comment on where you think cap rates or values have gone year-to-date? And two, somewhat related to that, you've talked about all the capital that you kind of have committed on the sidelines, if you will. Just where your appetite is to kind of deploy it into this market or if you want to wait, just your general pulse as regard as it relates to just putting out more money right now.

Well, Tony, thank you for the questions, good questions. I mean, I think we've said on last quarter's call that we're being very patient with the use of our capital right now. The one part of the business that we see great opportunities in right now is the growth of the debt business. And on the equity investing side, there's always a time lag between when you go into these periods of time and when the opportunities show up. And so it's kind of our belief that really the equity opportunities are not going to show up really this year, but we'll be into next year before that happens. And as we pointed out on the call, we've got a big commitment to, I would say, the final 15 months of the majority of our development pipeline, which we started working on really back 5, 6, 7 years ago. And as you can see from the comments that Mary made, we've been able to stabilize things like Kildare Street and Clara in Boise, Idaho, at well above cap rates that you could be buying out. As far as the cap rate environment, there's not a lot of empirical evidence at this point in time about what's really going on with cap rates. So I would say that there still is a great amount of capital that's available to invest. The only piece of evidence that we have really on our own backyard is really the apartment building that we sold in the third quarter close in August, but we sold that at a 4% cap rate. Now I'm not concluding from that that's where cap rates are. But I think there is somewhat of a feeling that people are willing to absorb the lower cap rates to get higher quality…

Got it. If I could just ask one more. Just with regards to the dividend, if we go into a period of time where perhaps you're seeing less in the way of gains and promotes and things like that, that you've typically had in the past, do the normalized property operations, as they sit today, provide enough cash flow and cushion to just keep the dividend where it is?

Yes. I mean we were comfortable with where the dividend level is right now. As you know, we just approved yesterday, I guess it was, a dividend to be payable in January. And it's obviously something any company looks at every quarter, but we're comfortable with where we're at cash flow-wise and the sales and so on that we have in the pipeline to see that sustained.

[Operator Instructions] Our next question will come from Wendy Ma with Evercore.

Just want to get some color about some trends that may impact the multifamily demand. So how should we think about the return-to-office trend, the impact on your Mountain West portfolio? And also given some risk views about some big tax firms considering layoffs or some hiring freeze. How do you think that will impact the demand for your multifamily portfolio, especially in California?

Thanks, Wendy. This is Matt. So on your first question with regards to the Mountain West, we've been investing in the Mountain West for almost a decade now. And we've always had a view that the lower-priced rents, the affordability, the lifestyle made sense in terms of investing there. And that region prior to the pandemic was outperforming our other regions. During the pandemic, you saw really an incremental increase in demand for those regions and we saw a very strong outperformance. Now that we're towards the end of the pandemic, we're still seeing very strong demand in those regions, but it's normalizing back to kind of where it was pre-pandemic in terms of the outperformance. . So as we mentioned in our prepared remarks, you've got a lot of job creation going on in a lot of these cities. You still have the affordability and you still have the lifestyle. So from our perspective, we're not seeing any letup in demand that's happening in those particular regions. And we still have a significant loss to lease across the board there. So we're very comfortable with those investments and continuing to find opportunities in those markets. With regards to California, we talked about Northern California a bit being weak this quarter, but that was really driven by the eviction moratorium coming off and occupancy temporarily dropping. We actually did see pretty good lease trade out in those markets, so it was really occupancy driven. And as we recover occupancy back to our more normal levels of 95%, 96%, we expect that region to perform quite well over the next year.

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

Yes. Well, listen, thank you, everybody, for your continued interest in Kennedy-Wilson, and thank you for joining the call today. Have a great day. Thanks. .

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