Good day, and welcome to the Kennedy-Wilson First Quarter of 2024 Earnings Call. Please note that today's event is being recorded. [Operator Instructions] And with that, I would like to now turn the call over to Daven Bhavsar. Please go ahead.

Thank you, and good morning. Thank you for joining us today. 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. With me today are Bill McMorrow, CEO; Matt Windisch, President; Justin Enbody CFO; and Mike Pegler, President of Europe. On this call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. You could find a description of these items, along with the reconciliation of the most directly comparable GAAP financial measure and our first quarter 2024 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 the 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, thank you. Good morning, everybody. Thank you for joining our call. Yesterday, we reported our results for the first quarter of 2024, which was highlighted by significant growth across our key financial metrics and positive momentum across all our business lines. Fee-bearing capital grew to a record $8.6 billion and investment management fees increased by 94% in Q1. We also successfully completed $360 million in non-core asset distributions. These sales enhanced our liquidity by generating $236 million of cash and led to gains of $106 million in the quarter. Since the end of Q3 2023, we have generated $320 million of cash to KW, and we are more than halfway complete against the target announced in December 2023 of $550 million to $750 million of cash generation from non-core asset sales by the end of the first quarter of 2025. We've made great progress towards completing our development pipeline of $2.5 billion, including finishing 2 remaining projects in Dublin. We delivered over 800 new apartment units in the U.S. and Ireland in the quarter. And in total, we have 4,100 units either undergoing lease-up or completing construction, which upon stabilization will add meaningfully to our estimated annual NOI. Our assets under management at quarter end totaled $25 billion. Transaction activity has picked up significantly this year. And in the first 4 months of the year, we completed $1.1 billion of loan originations with another $800 million in the process of closing. $160 million of new real estate acquisitions and $450 million of dispositions, resulting in $2.5 billion in gross investment activity. Proceeds from asset sales are being recycled into our investment management business and to pay down debt and repurchase securities. Turning to the future. We have built KW on the ability to adapt quickly in order to take…

Thanks, Bill. I'll start by reviewing our financial results and then discuss our balance sheet. Consolidated revenues grew by 3% to $136 million for the quarter. Investment Management revenue grew by 94% to $21 million in Q1, driven by origination fees from our debt business and higher levels of fee-bearing capital. Baseline EBITDA grew by 8% to $103 million. Additionally, in the quarter, across our co-investment portfolio, the values were largely stable in Q1. As Bill mentioned, we saw an increase in asset realization activity and sold a number of non-core wholly-owned assets in Q1, which generated $236 million of cash and $106 million of net gain on sale. In total, we had GAAP net income of $0.19 per share. Adjusted EBITDA totaled $203 million and adjusted net income totaled $71 million, all increasing significantly from a year ago. Turning to our balance sheet and debt profile. At quarter end, we had $542 million of consolidated cash. We paid down our line of credit by $60 million in April. And today, we have $188 million drawn on our $500 million line of credit. Our share of total debt is 98% fixed or hedged with a weighted average maturity of 5.2 years. We continue to collect cash as a result of our interest rate hedging activities, which, as a reminder, is not reflected in our financial statements as an offset to our interest expense. In Q1, we collected $12 million of cash, and over the last year, we've collected $45 million in cash from our interest rate hedging instruments. Our effective interest rate of 4.5% reflects a 60 basis point savings over our contractual rate due to our hedging strategy. After completing a number of successful refinances in Q1, our remaining 2024 debt maturities totaled $210 million, which are all nonrecourse at the property level. For example, in Dublin, we refinanced a construction loan at one of our recently completed multifamily projects with permanent financing, where the rate improved from 8% to 4.5% on a 5-year term. We also began repurchasing stock in the quarter, totaling 1.1 million shares at an average price of $8.76. As a reminder, since 2018, we now have bought back $385 million in stock totaling 21 million shares. We have $115 million remaining on our $500 million share repurchase authorization. With that, I'd now like to turn the call over to our President, Matt Windisch, to discuss our investment portfolio.

Thanks, Justin. Over the past several years, we've made a conscious effort to prudently shift our portfolio into higher quality assets in markets and product types that we believe will outperform over the long term. Today, our stabilized portfolio totals $464 million in estimated annual NOI with the majority of that NOI coming from multifamily properties, predominantly in the Western U.S. As an example of this shift over the past 5 years, retail has declined from 17% to a minor 4% today, while U.S. multifamily has grown from 39% to 52%. Roughly 3/4 of our NOI today is comprised of multifamily, credit or industrial assets, which continue to be our 3 main areas of focus. In total, our multifamily portfolio totals 38,000 units and has grown to approximately 60% of our stabilized portfolio, producing $273 million in estimated annual NOI to KW. Occupancy is strong at 94%. We have 4,100 units in our lease-up and development pipeline, which we expect to add $46 million to estimated annual NOI at stabilization. From an operating perspective, in the U.S., same-property revenue grew by 3%, operating expenses were up 5% and NOI was up 2.5% in our market rate apartment portfolio, as we continue to see underlying fundamentals improve from year-end. Looking at our results sequentially, we are seeing stable to improving operating expenses, which we are hopeful will continue for the remainder of the year. Our U.S. market rate portfolio, which is 90% suburban, saw leasing spreads of 2% and ended the quarter with a loss to lease totaling 3.5%. We've seen momentum pick up in asking rents, which have increased by approximately 4% from year-end. We have also seen some very large trades in the market, highlighting the desire for the multifamily sector, which bodes well for overall transaction volumes going…

[Operator Instructions] At this time, we will take our first question, which will come from Anthony Paolone with JPMorgan.

So my first question is, can you talk a bit about maybe expectations for additional asset sales over the next 12 months? And yes, just any sense as to how much you might have in the market for sale now?

Sure, Anthony. Tony, this is Matt. Yes. So as Bill mentioned, we had a target of $550 million to $750 million that we had announced in December that would take us through Q1 of '25, and we're already halfway through that, and we're confident that we're going to hit that target. And so we've got several assets on the market now that we expect to sell and several more that are in the pipeline to sell. We're definitely seeing an improvement in liquidity, as we mentioned. The transaction volumes, certainly for us and for others in the market, are stepping up here from where they were last year. And so we're confident we're going to hit that target.

I mean is there any thought towards doing more, I think probably since you put the program in place last year, the stock has been under some pressure. You still have room on the buyback. And so just trying to understand just the propensity to maybe lean more into the buyback if that liquidity is there to sell some things that you don't necessarily want to keep longer term.

Yes. Tony, I think that's certainly a possibility. Like I said, we're comfortable with the target. And if there's further opportunities to sell non-core assets and redeploy that into the areas we talked about, which would be our investment management business, paying down debt and buying securities, we're definitely focused on that.

All right. And then, Matt, on the debt platform, the originations have been pretty strong that you guys have done far in excess of the repayments. And if we look out the next couple of years, is there a stretch of time though where the repayment schedule gets pretty heavy, and we have to kind of watch how to net that against what the origination picture looks like?

Yes, it's a good question. And obviously, in the debt business, it's not -- these things are not permanent investments. And so you're successful when you get repaid. And so we're aware of that. I think given the level of originations that we're seeing and what we've done recently, we don't expect to hit that point anytime soon. But obviously, we need to continue to originate and find opportunities to grow the platform. With these construction loans, in particular, we're not -- as we originate, we don't necessarily deploy that capital right away because the equity tends to fund first. And so a lot of these newer originations, we haven't even deployed that capital into these loans yet. And so at the volumes we're doing now, certainly for the next 18 to 24 months, we feel like we can grow this business, and then, we'll have to see where the opportunities are, but we're confident we'll find them.

Okay. And then just last question on the debt and just maturities, perhaps over the next year or 2. I guess 2 parts. One, just any thoughts in terms of source of funds for the maturities over the next couple of years and just how you're thinking about that? And then 2, any equity gaps that you anticipate on the secured side where you need to fund something there?

Yes. Tony, on the debt repayments, in particular, the unsecured debt, I mean our primary source of that is going to be these asset sales like we've talked about. And so we're -- that's one of the main reasons we're focused on this asset sale program. In terms of the secured refinances -- there are some that will be cash in, and there's some that will be cash out, and so we don't see it certainly in the short term being a significant use of capital having to pay down loans on the secured side.

And our next question will come from Joshua Dennerlein with Bank of America.

Just kind of curious on the rationale for capital allocation in 1Q. You cut the dividend, but you leaned into share repurchases. Just kind of how should we think about that on a go-forward basis?

Yes, Josh. I mean, I think it's in line with what we said. I mean I think a combination of these asset sales as well as the resizing of the dividend, we'll -- those proceeds will be used for a combination of things. So it will be growing the investment management business where we can make 20% plus returns between the fees and the cash flow we're getting off the various investments. We did pay down the revolver in April. A lot of the asset sale proceeds we generated were very back-ended in the quarter. It was really end of March. So we really didn't have a chance to redeploy a lot of that yet. And so -- and then we obviously were somewhat active on the stock buyback program in the quarter as well. So those will -- that will be the focus for us in Q2 as well.

All right. And then maybe just a follow-up, just on the dividend resizing. Just like -- how did you come to that $0.12 per share for the latest dividend? Like how do you guys determine what's best for setting it on a go-forward basis?

Yes. I mean we did a deep analysis into this. And we looked at, obviously, the sales we had in the quarter, in Q1. And then our portfolio, I'd say, is in somewhat of a period of transition where we're selling assets and redeploying that into our various platforms. And so if you look at how we've grown the business over the past couple of years, especially the fees, where we're now up to almost $100 million annualized, and we're growing that at over 25% over the past couple of years. And then if you look at the development and lease-up assets, which are on track and in many cases, performing ahead of business plan and will be stabilized here shortly, we looked at all of that, and we anticipate having ample recurring revenue to cover the current level of our dividend, while taking into account our plans to reduce leverage in the overall business. So we did a deep dive and came to this conclusion. I would say that we're very comfortable with the sustainability of this dividend going forward.

[Operator Instructions] Our next question will come from Conor Peaks with Deutsche Bank.

I guess staying on the development front here, it's quite an active quarter with over 800 units delivered. Could you speak to the leasing activity and tenant demand here? And maybe going forward, if you kind of talk about how you plan to use these developments and how they fit indicative of this vision as investment management becomes a larger part of the business.

Well, I think as Matt said, we're seeing great leasing velocity at all of the assets here in the United States and in Dublin, and in the vintage platform. And I think a good example, we just finished a vintage -- it's a mixed-use project that we're calling Anacapa Canyon in Camarillo, and we just finished a 310-unit market rate. We just opened it for leasing here just a couple of weeks ago, and we opened a 170-unit vintage asset in that same development. And it's interesting because if you look at both of the buildings, you really -- you can't distinguish between what's senior and affordable and really what's market rate. But the vintage asset is essentially 100% leased right now in the first 3 months. And so the thing you see in the Senior and Affordable business is that within 2 or 3 months of opening, they generally get to almost 100% occupancy with a waiting list. The only limiting factor is how fast you can move people in. The market rate deal there of almost 310 units in the first 1.5 months or 2. We've already leased about 1/3 of the units there. And we're seeing -- we don't count these properties in stabilization until they get to 80%, but we've got a number of buildings now that are in lease-up that are in the high 60s and low 70s. And so you're going to see them come into the stabilized platform here in the third and fourth quarter. I would also tell you that pretty much overall, the leasing rates that we're achieving in these construction projects brand new, are ahead of our original business plan. We have a lot of embedded gains in these new developments. That doesn't mean that I'm telling you that we're…

And Bill, I would just add to that. We have best-in-class construction teams, both here in the U.S. as well as in Europe and with a great track record. And so we're confident we can attract third-party capital, continue to build these really best-in-class properties, but do it, as Bill said, in a more capital-light manner. So we're really excited about continuing to grow this business, just capitalizing it in a bit of a different way than we have historically.

Yes. In the past, we've either been 100% owners of these assets like Anacapa Canyon where we've generally been 50% owners. But we think there's a real opportunity with the skill set that's been developed over the last 10 years in both of these markets, the United States and in Ireland to transition that business into acting more as a construction manager, where we have an investment in the asset, a meaningful investment, but not nearly at the levels that we've had before, where we're earning different fee streams than we have in the past.

Yes. And looking at the Investment Management business, maybe from a higher level. You've got the build-out team with the Pac-West deal, the right-sized dividend to reinvest and dry powder to put to use. And I think you've kind of partially answered this question, but how fast can this business grow, and if there's any goals or milestones you're targeting here?

Well, I mean, look, I'll let Matt answer that. I mean we're in what I would call the perfect storm. The average size loan we're doing is approaching $80 million, and they're generally 55% loan to cost. So that requires a sponsor to have a lot of equity. And so the number of sponsors that can come up with that equity are the highest tier in the country, in the United States. They're really some of the best developers, well -- very well capitalized. And the backside of it is what we alluded to earlier, that you've got less competition in that market today. I would say, and Matt might answer it slightly differently, we don't set goals in terms of deploying capital into a lending business. We look for the right opportunities with the right sponsor in an asset class, where we're doing almost exclusively. We are doing exclusively this year multifamily and student housing pretty much. And so it just depends on whether you've got the right opportunities to deploy capital. But I've learned from my banking days, when you start setting targets for loan volume that's not -- you don't get the best outcome.

Yes, I will just add to that, that it's obviously going to be opportunity-driven, and we see significant opportunities in the second half of the year continuing. We've grown the overall fees at a clip of 25% compounded over the past 5 years, and we're confident we can keep that level or do better, assuming the opportunities exist, and we do think they exist.

I would -- Matt, I don't mean to keep going on here, but the -- I would also add that -- obviously, I have a bias, but we have a best-in-class team. And in all of our platforms, reputationally, it takes a very, very long time to build credibility for the company and for your teams. And I think that the -- because of our reputation, across these types of asset classes over 3 decades, we just -- we have a very big opportunity right now to grow the Investment Management business in a very meaningful way.

And maybe if I could sneak one more in here on the reduced dividends, which allows for generally higher and better use of capital. But were there any cash flow challenges that factored into this decision?

No. It was just -- it's a natural evolution of the business that we have. As we've gotten bigger, we have the ability to scale the business, and I think any company in the real estate business upscale, and I don't need to go through names, but there are obviously big public investment managers. They tend to be capital light in terms of their investment, and we plan to scale our assets under management and our fee income at a pace where you are going to -- you want to have third-party capital providers.

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

Well, thank you, everybody, for joining us today. And as I will say, we're always available for any follow-up questions you might have. So thank you very much.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.