Christina Cha - VP of Corporate Communication Bill McMorrow - Chairman and CEO Matt Windisch - EVP Justin Enbody - CFO Mary Ricks - President and CEO of Kennedy-Wilson Europe.

Jason Ursaner - CJS Securities Mitch Germain - JMP Securities Vincent Chao - Deutsche Bank David Ridley-Lane - Bank of America David Gold - Sidoti and Company Vance Edelson - Morgan Stanley.

Welcome to the Fourth Quarter 2014 Kennedy-Wilson Earnings Conference Call. My name is Venice and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

And I will now turn the call over to Christina Cha, Vice President of Corporate Communication at Kennedy-Wilson..

Good morning everyone. 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 one year. Please see the Investor Relations section of Kennedy-Wilson's 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..

Thanks Christina, and good morning everybody. So, as a starting point, the company reported it's EBITDA yesterday, EBITDA for the year of $317.8 million which is a 100% increase from $159 million for 2013. We also announced yesterday that we were increasing our dividend by 33% from $0.09 per share per quarter to $0.12 per share payable in April.

The adjusted net income was $133.7 million or a $1.50 per basic share which includes $27.3 million or $0.31 per basic share of loss on early extinguishment of corporate debt.

And just to amplify that a little bit, we paid off - Kennedy-Wilson refinanced its $350 million, and 8.75% senior notes due in 2019 this December, primarily with the proceeds from its $350 million of 5.875% senior notes due in 2024. So we lowered the interest rate by almost 300 basis points and extended the maturity out by five years.

As a result of the repayment of the 8.75 senior notes, the company recorded a loss on a early extinguishment of corporate debt of approximately $25.8 million which is a one time charge, and the refinancing will lower our interest expense by $10.1 million per year during the remaining term of the debt.

Also just such as a refresher in the third quarter of 2014, we paid-off $40 million of trust preferred which carried an interest rate of 9%. So we are saving $3.6 million and interest on that.

And then going forward, we have a $100 million convertible preferred with fair tax financial which is converting in May of this year and that carries a coupon of 6%. So that 6% will also go away beginning in May. Our GAAP net income to common shareholders was $13.8 million or $0.14 per basic share and $0.14 per diluted share.

That also includes $27.3 million or $0.31 per share, as I went through that debt extinguishment earlier. We had a really remarkable 2014, where we achieved our highest adjusted EBITDA in our history. We are in largest year of investment activity.

We raised $2.2 billion of equity capital on the London Stock Exchange for Kennedy-Wilson Europe and we refinanced as I said earlier, a large portion of our corporate debt at a lower interest cost. The other thing I'm going to talk about little later in this call was what we are doing at the property level in terms of debt refinances.

In terms of fourth quarter highlights, during the three months ended 12/31/2014 the company's equity partners completed $688.9 million of investment transactions. The company invested $110.1 million in $587.7 million of acquisitions and received $18.3 million from $101.2 million of dispositions.

In terms of the fiscal year 2014 highlights, during the year the company and its equity partners completed $4.3 billion of investment transactions. The company invested $600.7 million in $3.2 billion of acquisitions and received back into Kennedy-Wilson $184.9 million from $1.1 billion of dispositions.

As I said earlier, we've launched Kennedy-Wilson Europe about this time last year where we're closing the initial IPO which raised $1.7 billion. And then in October, we completed $565 million follow-on offering for Kennedy-Wilson Europe.

Note too, the initial IPO was the second largest real estate IPO in the 200 year history of the London Stock Exchange. As of December 31, 2014 Kennedy-Wilson owns approximately 14.9% of the share capital in KWE and Kennedy-Wilson Holdings serves as the external manager of KWE.

The further highlight for the year was the company raised record $5.4 billion of equity and debt during 2014 for itself and its investment platforms.

The company and its equity partners completed new investment level financings of $1.4 billion including $102 million of assumed debt, with a weighted average interest rate of 2.93% and an weighted average maturity of 5.8 years.

The company and it's equity partners also refinanced $300 million in investment level debt for the resulting weighted average interest rate of 3.27% in a weighted average maturity of 5.9 years. The loans prior to the refinancing were $271.2 million of debt with the weighted average interest rate of 4.57% and a weighted average maturity of 4.2 years.

The company also increased its capacity under our unsecured line of credit from $140 million to $300 million. Additionally, KWE in its inaugural year obtained a $225 million or $350 million unsecured line of credit.

And I thought we are coming up now on the fifth anniversary of our - going on the New York Stock Exchange which was April 14, five years ago now. And so I thought it would be useful to frame on what's happened over the last five years that Matt Windisch is going to take you through some of the highlights of the last five years.

Matt?.

Thanks Bill. So we obviously had a extremely active five years as a public company. At the end of 2014, we were approaching 15 billion of total acquisitions since going public and we have now crossed that threshold here into 2015. In terms of our assets under management, when we first went public we had $5.6 billion under management.

As of the end of 2014, we're at $18.1 billion. That's a 27% compound annual growth rate per year of assets under management.

Our investment account which has many of you know represents the money that Kennedy-Wilson has invested in the portfolio of properties and loans et cetera that we own with our partners, that investment account has grown from $212 million at the end of 2009 to $1.7 billion at the end of 2014. That's a 50% compound annual growth rate.

Looking at our adjusted EBITDA, we entered 2010 with $31 million of adjusted EBITDA for the full year 2009. And this year we had $317 million of adjusted EBITDA, that's a 59% compound annual growth rate. And so with that, I'll pass it back to Bill to goes through the investment business highlights..

Thanks, Matt. And before I get into the highlights I want to give you a little bit of a frame of reference for what we own.

So as of December 31 2014, we had an ownership interest in approximately 32.6 million square feet, which includes over 20,000 multifamily units, 14 million square feet of commercial rentable space, 177 residential units, 619 residential lots, and almost 1,000 hotel rooms.

The investment portfolio has a book value of 9.1 billion in assets, including 4.8 billion in equity, in which Kennedy-Wilson has approximately a 32% ownership interest.

In addition to our existing income-producing portfolio, we have entitled or are in the process of entitling over 3,000 additional multifamily units in the United States and Europe on land with little or no basis that we own within or adjacent to existing income producing assets.

And as Mary will update you on here in a little bit, between the acquisitions that we've done in KWE and the contemplated acquisition that we’ll talk about here in a little bit that we're doing with Winthrop, our total square foot is going to increase to over 40 million square feet with those acquisitions.

So, in terms of the investment business itself, for the quarter our adjusted EBITDA was $48.3 million, which was a 4% increase from the prior year. For same property multifamily units, total revenue increased 9%, net operating income increased 10% and occupancy remained flat at 95%.

For same property commercial assets total revenue increase 3%, net operating income increased 2% and occupancy increased 3% to 88%.

And remember in the commercial properties as I mentioned on earlier calls, a number of the assets that we bought were assets reposition that had very, very low vacancies or could have been empty buildings, entirely empty. For the year ended 12/31/2014 our adjusted was $278.5 million which was a 97% increase from $141.5 million.

For same property multifamily units, total revenue increased 7%, net operating income increased 10% and occupancy remained flat at 95%. On a commercial assets, total revenue increased 1%, net operating income increased 1% and occupancy increased 1% to 86%.

The company and it's equity partners acquired approximately $3.2 billion of real state related investments, including $2.4 billion acquired by Kennedy-Wilson Europe, in which the company invested little over $600 million of equity, representing an approximate 23% weighted average ownership stake.

The company's investments for the year were directed 69% to United Kingdom and Ireland and 31% to the Western U.S. The company and it's equity partner sold 19 commercial properties, three multifamily properties, ten condominium units and four residential investments which resulted in growth sale proceeds of $1.1 billion.

As I mentioned earlier, the company's share of these net proceeds was $184.9 million compared to a book value of $105.2 million. Over the last 12 months, we've added 8.5 million rentable square feet of real estate to our investment portfolio, including almost 3400 multifamily units and 42 commercial properties.

During that same period of time, we've been able to grow the investment level annual, multifamily NOI by approximately $43 million to $212 million. Additionally, we grow our commercial annual NOI by $65 million to $210 million.

Finally our investment account during the year grew by approximately $567 million to $1.7 billion which represents a 45% increase over the 12 month period. In terms of our service business, our adjusted fees were $121 million, a 67% increase from $72.4 million. Our adjusted EBITDA was $59.3 million, which represents an 87% increase from $31.7 million.

In terms of Kennedy Wilson Europe as Christina said Mary Ricks is on the line, Mary had her - in our earnings call early this morning, our time in Europe, so fresh of coming off that call, I'd like Mary to walk us through the highlights of Kennedy Wilson Europe..

Great. Thank you, Bill. During the fourth quarter Kennedy Wilson Europe completed a follow-on offering of approximately $565 million of ordinary shares. Kennedy Wilson acquired approximately $75 million of KWE's ordinary shares in the offering.

As of December 31 2014, Kennedy Wilson owns approximately 20.2 million shares of KWE with a cost basis of $333.8 million, which represents approximately 14.9% of KWE's total share capital. Since its launch in February 2014 through December 31 2014, KWE has acquired 82 direct real estate assets that was transacted in 16 different transactions.

The total of approximately 6.6 million square feet and five loan portfolios totaling $2.4 billion in purchase price, which KWE currently expects to produce approximately $141 million annualized net operating income.

And in its capacity as external manager of KWE, KWH will receive management fees, 50% of which are paid in KWE shares, equal to 1% of KWE's adjusted net asset value reported by KWE to be $2.1 billion at December 31 2014. Additionally in certain performance fees.

During 2014, KWH earned Kennedy Holdings $140 million management fees and no performance fees.

Annual management fees to KW now total approximately $22 million per year and KWE also announced this morning a 75% increase to its quarterly dividend from £4 to £7 which represents a 2.8% annually yield on the IPO price, which demonstrates a strong cash flows generated by the portfolio.

And I might just take you - bring you up to speed a little bit and take you to the two markets that we are operating in right now in the U.K. and in Ireland. And really what we have seen there in those two markets is considerable improvement in GDP. In the U.K., we have seen 2.6% increase in GDP which is really the best growth since the height.

And in Ireland we are seeing a lot of very, very good improvement in Ireland with GDP for 14 predicted to come in around, GDP growth 5% increase. We are also seeing prime Dublin office rents increasing significantly.

Experts predicting office rents to grow to €55 per foot at the end of 2015, and some experts are predicting Dublin office rents to go through the peak of €65 a foot at the end of the year or early in 2016. Additionally we have seen quite a bit of retail sale improvements in Ireland. Those are still 15% below the peak.

So there is good growth to come there. Dublin apartment rents grew 7% last year and Dublin office values are still below the peak and are trading at about the 15-year average. So we are seeing sort of all the drivers pointing to the right - in the right direction.

And then I think the last thing Bill I will say before hand it back to you, just in terms of what we have done post the periods or post the end of December, we have acquired two large portfolio, one portfolio from Aviva, we are calling that portfolio Gatsby and that portfolio was a £500 million portfolio with 180 asset spread throughout the U.K.

We acquired that at just below 7% yield and we fix the interest rate at sub 3%, - 2.96%. So we have a 400 basis point positive accretion which is obviously very good for returns. We have also increased the occupancy from 9.9% at year end to 94.5% today. As well as increasing the weighted average on expired lease term from 7.7 years to 8.2 years.

Mostly that comes through selling voids, as well as the Gatsby portfolio. And then the last thing that I might point out is the annualized NOI has gone from £90.6 million at year end to a £133.4 million today, a roughly $200 million. And as Bill said earlier, that's enabled us to increase our dividend yield..

So it's been quite an extraordinary performance out of Kennedy-Wilson Europe. So when you think about it, we were just closing the IPO about this time last year and so all the money from that IPO is now been deployed into properties that are going to produce slightly over $200 million a year and not operating income.

One other thing that I should mention on the call that that's not in the earnings releases what our debt strategy is. We talked a little bit about what we are doing at the corporate level but at the property level, we have similar opportunities to reduce our debt cost. And as a company, our leverage right now at the property levels roughly 45%.

And so is a policy we want to keep that leverage under 50%. But with these very low interest rates and again to give you a little bit of frame of reference, when we made our first visit to Ireland in December 2010, the tenure Irish interest rate was 14.5%. Today, this morning the tenure in Ireland was 0.88%, less than 1%.

Actually more than half of what we are paying here in the United States on our tenure. So, that creates opportunities to finance and refinance existing debt that we have. And so I want to take you through one example so you understand how we are looking at these individual properties.

So two years ago, we bought one of the largest apartment complexes in Salt Lake City and we were attracted to Salt Lake City where we have not been before because of the job growth, the great university system, and then the overall economy in Salt Lake City and the State of Utah.

And as we did in Ireland, and we did in Japan and many other markets, we always try and get into these markets early before other people, other institutional buyers are in those markets. So, we brought a 366 unit apartment project in Salt Lake City that sits on 35 acres of land in a prime residential neighborhood.

It's a land that could never be duplicated in Salt Lake City. So it had a high barrier entry. In any event, when we purchased that property, we bought it for $43.5 million in November 2012 and we paid a 7.34% cap rate.

We assumed $26.3 million of debt that had an interest rate of 4.71% and then we put on what's called the supplemental loan of $5.3 million at an interest rate of 5.43%. So, the combined debt on the property is roughly $32 million. So now you fast forward it to 2015. So during the period of our ownership, we have grown rents by 11%.

The NOI has gone from $3.1 million to $3.7 million which represents a 17% increase. And we have implemented almost $4 million for the renovations at the property level.

And so, what we trying to do at all of - particularly our apartment complexes here in United States and in Europe, is what I'll call, [re-monetize] [ph] these properties with fitness facilities and business centers. So that this drives the rent. So what we decided to do was sandpiper, this loan will close sometime in March.

So remember the number 32 million. We are not putting up $53 million loan on the property. And we have a prepayment penalty that we have to heed of 5 million. So we are going to cash out $17 million of equity out of that property, which represents our entire investment.

So we put a ten-year loan on with a fixed rate of 3.24%, it's interest only for five years. The interest payment on the 53 versus the 32 is almost identical but we have locked in that interest rate now for 10 years.

And then, Mary, similarly in Ireland, Mary and her team just completed the refinance of some assets that we have bought early on and our entry into Ireland. And so the original loan on those four properties was €82.5 million and the floating rate interest was slightly over 4%.

We just refinanced that portfolio of four buildings with $131 million euro line from a Life Insurance Company at a rate of 2.57% fixed for 10 years. And also as a frame of reference, that interest rate of 2.57% similar to what's happened with the tenure Irish treasury versus the U.S.

treasury is probably about at least a 100 basis point inside of what we could do here in the United States. And then to add on to Mary's point in real time, the first office building that we bought in Dublin in 2011 had leases with majority of the leases on the building were rolling in three to four years.

And so we underwrote that deal, that the leases as they matured, we would actually do new leases in the building of €17 per square foot. We've now essentially released almost the entire building but the rental rate that we underwrote at $17 a foot we did the leases, the new leases at 43 year olds. So, 17 turned into 43.

So, not only are we lowering our borrowing costs in many of these markets but the net operating income of the properties is exceeding what our original underwriting was.

So in terms of subsequent events, we've alluded to few of them but since December 31, the Company’s equity partners have completed total acquisitions of $806 million which included $764.3 million related to the Aviva portfolio that Mary mentioned and the Park's portfolio.

In addition, the company's equity partners have $631.7 million of investments under contract including $89 million in KWE.

I mentioned earlier that these investments will add approximately 9 million square feet to our portfolio and included in those acquisitions is another 5600 multifamily units, that are primarily here on the West Coast, concentration in the Seattle market, and post the closing of the - these acquisition in Seattle will have about 10,000 units.

Seattle is just doing extremely well with great job growth, many, many Fortune 500 companies headquartered there, in fact more Fortune 500 companies were headquartered in Seattle than here in Los Angeles.

So as we announced in our 8-K filings a couple of weeks ago in January, Kennedy-Wilson entered into a purchase agreement with a wholly-owned subsidiary Winthrop Realty Trust to acquire 61.5% interest in Vintage Housing holdings of approximately $86 million.

VHH owns certain interest in 30 multifamily properties totaling almost 5500 units which have been capitalized with tax credit financing. Upon the closing of the transaction, the property developer and current manager of VHH - of the equity interest, and we obviously are in the remaining 61.5%.

Included in this acquisition of the assumption of approximately $328 million - along with third-party equity interest and unrestricted stock. The total value of that acquisition is $486 million and we expect the acquisition to close sometime here in the first half of 2015.

Once we've completed that transaction on a pro forma basis we are on 26,000 apartment units. And then lastly in February 2015, KWE closed the acquisition, this is the same 163 of 180 mixed used properties located throughout the United Kingdom, this is the Aviva transaction.

The closing of the balance of the portfolio is under contract and that I will close here in the next 12 months. So with that overview, I'd like to open it up to any questions that anybody might have..

[Operator Instructions] And we have our first question from Jason Ursaner from CJS Securities..

Good morning, congratulations on a great finish to the year and in terms of the five year anniversary, I think to stay even active might be a bit of an understatement. First to focus on Europe and Ireland in particular, following up on some of your and Mary's comments.

You mentioned when you entered the market in 2011, the tenure was above 12% or there was no property level debt market, you're buying properties at mid teens cap rate. When you look at tenure now is sub 1% there.

What obviously seeing what its doing to financing and valuation on the properties you own, but do you see at limiting the opportunities that in terms of acquisitions going forward and may be how do you reconcile it with something like the Aviva portfolio were you still clearly found a pretty good deal on the 7% yield range..

Thank Jason. I’m going to let Mary answer that in just a second but I think that, what I was trying to obviously point out with the Sandpiper in the Salt Lake City transaction was, our timing and not to self congratulate, but our timing in getting into Europe and particularly Ireland and United Kingdom was spot-on.

And in addition to the real estate acquisitions that we did of course I think, most people know that we were instrumental and recapitalizing the Bank of Ireland itself which is also turned out to be a great investment for everybody that invested there. But what really took us to Ireland in the first place was the fact that there were 700 U.S.

companies that have their European headquarters in Ireland and the majority of the U.S. Tech companies, particularly the California Tech companies, Facebook, Google, LinkedIn, Twitter and on and on and on, have major operations in Ireland. And so that connectivity between California and Ireland was really what took us there in the first place.

Now Mary in terms of what you see is the investment outlook in both places, I'll turn that over to you..

Hi, Jason. I would think Kennedy-Wilson in Ireland, we've got - its not the largest, one of the largest platforms there, so we've got over 30 people on the ground. So we have local experts in Dublin that know the market inside and out, know the occupier market, know everything what's going on there. And I think that gives us a competitive advantage.

A lot of the competition that we're seeing are the private equity firms that are coming from New York or from the States with one or two people looking to team up with people in Ireland and people like ourselves, so that gives us one advantage. I think we’re still seeing a lot of very interesting opportunities.

You saw that we - you may have seen that we announced the Gardner House acquisition which was the loan that we acquired at the end of the year, and then we’ve now converted it just with only for less than 90 days we have taken title to that real estate and that's a great office building in Downtown, Dublin. And that was then off market.

That was a deal that we bought from an investment bank, we know quite well, who had acquired a whole portfolio of loans. So that was off-market. And then we did the Elliott transaction which was another off-market deal where we’re just working through now just if I fast-forward in terms of asset management.

We are working with borrower to consensually sell all the assets but we will be taking title to the three largest assets and that's the Iris Times building in Downtown, Dublin, the Herberton Apartments were basis is €150 a unit, which is sort of 50% of where multifamily trades today in Ireland and then retail centers that will own above a ten yield.

And so, I think the team on the ground and then with the knowledge and the relationships that we with the financial institutions, another - the governmental agencies, and insurance companies that are selling, will continue to find real interesting acquisition opportunities in Ireland.

Norma still has €16 billion worth of assets to sell, they've done a great job getting through their book but still a huge amount of assets that need to trade Downtown.

So we’re excited about the opportunities in Ireland and then the U.K., we even though we see the GDP growth and the regions improving, secondary markets outside of London which we've called very early, we have been a player in that market for long time in those markets.

We're seeing a lot of growth, yield compression, rents increased, we're seeing some assets being taken out of stock and converted from commercial to ready and that's just helping all the underlying fundamentals of real estate. So we continue to see really interesting opportunities in the U.K.

and rates like we have been talking about throughout the call, the rates are at historic lows and when we did the Gatsby financing, so that £500 million deal came with staple debt because Aviva, who was the lender for these assets over the past six and seven years, have taken title and have receivers in place, they wanted to stay involve with this portfolio to a very, very high quality, very good portfolio with almost a tenure volt showing off great income.

So, we structured a deal with them or they provided staple debt roughly £350 million of staple debt, and we did the debt in three different trenches. So its three year floater, a five year fixed and an eight year fixed and together the average rate is sub 3%. So when we fixed our five and eight year guild, the tenure was literally at historic lows.

I think we were a little lucky on that day but we just have unbelievably good positive accretion on all those fields. And we still see great opportunities in the U.K. and Ireland.

Yeah, I think too Mary, one of the things that you discussed on your call as true here in the U.S. but it is not readily apparent when you look our information or the asset management opportunities that we have on - not only existing properties but where we have land that we bough for basically nothing or very low basis.

You might talk a little this is an example, what's going on Ireland was Clancy Quay, which is an asset we own in Kennedy-Wilson Holdings..

So that's an asset that we bought from a couple of lenders and its got three phases. So the first phase is 423 apartment units, and there is a whole ongoing project there with regard to just taking units back and renovating units and then increasing the rents.

We did a major, major amenity package there and people here in Europe are very interested in and its been a really great thing in Ireland, takes the U.S. style of multifamily management with the tenant Jims and with the business centers and with the whole amenity packages and we brought that over to Ireland which has been so well received.

So we did that work, spent a couple million euros on that amenity package and really the occupancy has stayed so solid, so its been a great retention policy. So we've also been increasing rents and have seen double-digits increases and so that's obviously dropping to the bottom line.

And then we have a second site where we have 160 units, where we're planning for 160 units at Clancy Quay and we hope to be on site there and start construction a little later this year.

And then there is a third phase as well, that we don't have planning on yet but we think would be a great sort of grocery and another multifamily commercial project of Clancy Quay..

And I think if we could before we get off of that, I think one more example that I think is particularly relevant as what we did at the Rock in Manchester, where you brought that basically allocated nothing to the apartment yet..

The [indiscernible] project we bought the debt which was roughly £275 million, we paid £75 million for the whole project which included 750,000 square foot retail center which has all the big names, Debenhams, Marks & Spencer, Next, very, very strong covenants retail center.

And then above the retail there is residential units and the first one - actually first two phases have been sold off individual units. So they were three other phases of residential, that weren't build out yet, just the fissured was put in place but it also have planning.

We paid nothing for that, so we literally put as zero basis on that residential. We've not build out the first phase, 66 units they're fully let doing very well, yield on cost is roughly a 11%, and we're just completing the second and third phase now which will have the same kind of yield on cost..

Okay.

And just sort of following up on the question, the phenomenon obviously you think fine to Ireland, Japan ten year yields are below 50 basis points, ten year back board to Bill, you talked in your prepared remarks lot about what its doing on the financing side, with the corporate refinancing and also property level but you just if wondering if may be you could tied in with what you’re seeing in valuations and cap rates because I think on an nominal basis, when people read about cap rates 4.5%, 4% range it obviously has some level of concern but in real terms there is still a pretty big spread there, related to historical figures, so just wondering if you had any perspective on that?.

Well, I mean that there clearly is cap rate compression going on all over the globe is people looks for yield but I know you can see Jason from that’s too bigger transactions that one that Mary just completed, the two of which she just completed in Europe.

The Aviva transaction, the yield was slightly over 7% that the yield on the Park in transaction is over 9%, this is an unleveled yield that I’m talking about and if you look at the Winthrop transaction that were about to complete that’s slightly over 7% also and so have Mary and I – we’ve been doing, we’ve been here for 25 years plus and what happens I think to company like ours, once you get that kind of scale that we have.

You tend to see more transactions and the other part of our whole business philosophy is always been to buy things through off market transactions, Europe because its fresh up my mind, we transacted with 16 different financial institutions or receivers in Europe and I would say Mary probably 80 plus percent because its true on portfolio wide everything, run 80% of everything that we buy at an off market transaction.

And so we’re always looking for some normally some inefficiency in the market whether that somebody that needs to get read something at the end of a quarter, somebody that needs to rid something, why they don’t want fully marketed process going on, so we’re not what I would call the retail, we’re not your typical retail buyer and the other part of our whole strategy overall these years as to bend to build our infrastructure so that we had hit on the ground in market where we were finding these transactions our self.

We won’t just relying on the brokerage community to deliver a transaction to us, so we’re not, when we tell you about all these acquisition numbers and so on this is not meant to be like we’re just buying things for the sake of buying things, if there is not something that’s compelling to us in terms of the yield, there are what I call that has to be a storage of taxes to every deal that we do but there is not something compelling a tax to it then, we’re not going to do it.

But I think the reverse of it which we when I was trying to allude to is that with the compression in cap rates, it’s clearly impacted the value of the existing things that we own. And so you saw last year or even those not really, we sold the billion dollars worth of assets last year.

And so as a company not only are we using this opportunity to refinance corporate debt, refinance property level debt but also whether there is aspect that’s strategically don’t set and what we want to do, we’re selling them at very attractive cap price, for example we owned one office building in San Francisco whether was no reason for us to have one office building in San Francisco so we sold that last year.

Mary in that first, well in the last 60 days is probably sold over £20 million right, Mary, does that number?.

It also, yeah about close to £20 million of several smaller assets, just running through the portfolio but we made an 18% return in that short span of time, you will see more of that - Europe as well..

And so were here in the States we’re selling a few apartment buildings right now where we have smaller ownership interest and so as you can see, what we have been doing over the past three, four, five years is increasing our ownership interest in our assets but we’re, they don’t fit strategically or its an asset we don’t want to own the reverse of this, that the good news about this lower cap rates as we’re able to get out of these assets at a very attractive prices..

That all sounds great, appreciate the details. Thank you..

And thank you. Our next question comes from Mitch Germain with JMP Securities..

Good morning guys. Just may be some thoughts on Japan, I know its been while since we talked about your holdings there..

I let Matt answer that Mitch..

Thanks Mitch, So I think really [indiscernible] Bill and Mary, we’re talking about with interest rates, I mean clearly in Japan, there has been a low interest environment there for several years but in particular, past year or so, rates are at historical levels, you’ve also seen obviously significant weakening began over the past year.

We’re fully hedged against our position there in terms of the currency but that’s led to in dollar terms, cheaper assets for foreign buyers.

And so there has been some several large transactions, in Japan in the multifamily space at very attractive prices that we feel very good about, the valuation of our current assets are producing great cash flow, we got good leverage, positive leverage on that portfolio but certainly in our view that values there continue to increase, so we’re very happy with the portfolio we have and the value of it today..

Great and Bill, I spoke to Matt about kind of the view on the vintage portfolio but I love to get your view, seems a bit less traditional in some of the types of deals that actively do bit more in the steady cash flow side and opportunistic feel to it, so may be if you can just provide some perspective?.

Well, yeah, I mean this could be a long one to answer Mitch so I’m going to try and kind of highlight but we, I personally, I visit a lot of the assets that are in this portfolio and these are really very high quality assets in markets that we like, particularly this Seattle market.

And as I said earlier, when you think about Seattle where we will not have almost 10,000 units, you got, my – we got an apartment building directly across my – headquarters, you got Costco, you got Amazon, you got Safeco Insurance, you got Starbucks going on and on and on down the line. And so you’ve got population growth and job growth.

And so when you think about the, the Winthrop portfolio, it brings a couple of things to our company, obviously more concentration in the Seattle market but I think opportunities to refinance and recapitalize some of the existing wheels, even know there is very attractive financing on it, as this tax credit deals reach there 15 year term, there is a opportunities to buy out the tax credit owner and so there is many opportunities in this portfolio to what I call recapitalize some of the existing assets that they all.

So I mean that’s how I look at this deal, it’s a attractive real estate in the first place with opportunities recapitalize that are going in cap rate that is going to produce for us about a 14% cash-on-cash return.

And I also should have added earlier to it just as a general overview and then like that Aviva portfolio that Mary bought has producing a 15% cash-on-cash return and so in this zero and I think also Mitch, part of our perspective is that in this nearly zero interest rate environment, even though a lot of things that we’re selling right now, we’re putting up 18, 20, 30 and some cases 40% returns.

We don’t think it is a prudent period of time to be underwriting things upto what I would considered to be above market kinds of returns, does that means you are going further out on the risks spectrum and so what we very, very focused on really as producing current cash-on-cash returns, generally an excess of 10% with upsides through asset management but as I mentioned these larger deals what we just done, when you abandon together were to roughly 14.5% cash-on-cash return day one without any asset management..

So for departure from the typical 7% returns that mostly other multifamily reads are getting and then Mary I think was the first deal in Spain, I know you has announced joint venture there, may be just kind of talk about the effort that of growing KWE outside of the U.K. and Ireland and thanks. .

Sure. Thank you. So we have been focused and have been looking out for opportunities in Spain last year we under wrote several billion euros of assets loan portfolios etcetera and as well as in Italy we have been looking a bit as well the last fourth quarter.

And I think for us the interesting about our platform here in Europe is that it is crossed jurisdictional and in multi sector, so that really enables us to maintain pricing discipline and really focused on the best risk weighted return.

And so we really haven’t found anything super interesting in Spain but for we do like the opportunity of the commercial conversion to RESI in Madrid and Barcelona markets, we feel like that product type is that the RESI market has either bottom or just kind of touching bottom and so this company rent has well known operator in that space has been in Spain for over 20 years doing just that and came to us within opportunity and the other interesting thing about the deals, the specific deals itself is interesting but its also that rent- we have a one way option really on all of there opportunities.

And so there going to bring us everything that they see and so that could be to more interesting commercial conversion to RESI in those two cities and then as, I’m sorry we just add one other thing I think we do have an office in Madrid, its led by Christina Perez, who is phenomenal real estate and, you know, debt expert.

And then we also have an interest in Banco Popular servicing platform and we owned a piece of that as long as another private equity firm then employees 270 people and manages over €20 billion of assets for Banco Popular, so we got boots on the ground, we’ve got all the market knowledge, you got relationships, we certainly have at all get up and set up in Spain but we’ll just see if we like the returns that the Spanish deals bring to us this year..

Great. Thanks and congrats on a terrific 2014..

Thank you so much..

And thank you. Our next question is from Vincent Chao with Deutsche Bank..

Hi, thanks and good morning everyone, I just going back to the Winthrop deal for a minute here, I mean there in a process of liquidating, I just curious of that portfolio, sort of completely picked over at this point or is there potentially more to with those guys..

Matt?.

Sure Bill, we actually bought two things from Winthrop, we bought a loan back in 2014 about a $5 million loan for to buy an office building here in Los Angeles, which is kind of our first transactions with them in a way to create the relationship and then obviously we are doing the vintage deal, there are few more assets in the portfolio that are on the West Coast so its certainly possible, we have a great relationship with them, so will that goes, one of there concentration now is primarily on the east coast, so generally we would not be looking at that..

Okay, thanks.

And then just going back to commercial portfolio and I think Bill you kind of alluded to some of the work which you are doing and some of the assets you are buying which in some cases are empty but couldn’t help and notice I mean the same store NOI growth trends really shifted from last couple quarter, now that pool, I know changed quite substantially this quarter so that’s probably a big part of it but as we look forward, I think that the growth rate of that portfolio, how should we will be thinking about that in terms of just overall same store NOI growth over the next year or to, so when do you think some of those value add things which you are doing will kick in and will start to see some of that growth pick up..

Yeah, its probably, see when you think about, I mean just rattling of building up the top of my head but we bought a building in Marina del Rey, which is right near Playa Vista which is a very, very hot part of the LA market but when we bough that building which is 60,000 square feet, the tenant that was in there needed 120, so they moved to another building, person that owned the building had owned it for years, he didn't want to go through the whole rehab.

It takes about from the time you buy a building like that, let’s say as a 1980s vintage building, it takes you about at least a year to get your plans, approvals and everything together to complete the rehab, sometimes it’s as long as 18 months and so it takes you, when you look at a building like that is generally going to take you nine months to 12 months to leases.

So we had a building like that in Pasadena, the one I’m just talking about, one here in Beverly Hills, all three of those buildings were completely empty and so it that the cycle takes about really almost 2.5 to 3 years before you actually producing income out of those buildings but you are buying them in a way where it reflects that lead time and so the building that we bought in Marina del Rey, we bought it up per square foot price that was half of what the market would be for building may be even less than that.

So, I'd expect you will see really kind of starting next year rental growth and occupancy growth in the commercial portfolio because some of these buildings like Marina del Rey, Pasadena, there all being finished right as we speak and leased as speak, so you will see that income really coming in next year..

I guess I was more referring to U.K. and Ireland where we saw sort of dip in, in same store NOI growth in Ireland and it sounds like there is some rehab work to be done in those markets as well but, I just trying to figure out, how we should think about same-store NOI growth in those markets, more specifically I guess..

In the same store, this is Matt. The same-store pool as you mentioned was a big shift. We really have a lot of the Irish assets come on for the quarter, that were not there for there for the full year. And then in the U.K., as you can see the occupancy levels on the same store are relatively low so there is clearly a lease up strategy going on there.

And in Ireland in the particular quarter we shouldn't have a lot of role and so there wasn’t the opportunity to increase rents. So it’s really hard to look at as you know one quarter.

I think you have to look at that, what the same-store, properties were now long, really over the next year or two when you will see the metrics really starts to makes sense..

Right. And I'm going to say something stupid and obvious, but in the apartment buildings, since you've got a normal turnover in an apartment building complex it's a 30% to sometimes 50% per year, you are reprising that unit every day.

So you’re raising rents if that market is allowing you to do that almost every day, we ‘re in the office buildings particularly one that, even have occupancy, you might have three year - the building I mentioned you so called Brookline Building in Dublin, when we bought that building, we bought it at a 15% cap rate but we underwrote that the cap rate was going to go down to less than 10% because we underwrote to lower rents.

What’s happened obviously in Dublin is that $17 rents were now $44 and so the renewals that we’ve done in that building have kept the cap rate on our original basis at 15%.

But the office buildings are different animal than the apartment buildings because you got leases then there that have term less model, so it takes longer the to move the dial with these office buildings and it does on the apartment units..

Okay, thanks.

And then just one last question for me just, you kind of talked about the strong dollars in different parts of the call here today, but I just curious as we think about adjusted EBITDA, what was that the FX headwinds here on your reported EBITDA because think your hedges are more on the balance sheet side and then just what’s the sensitivity to some of the different rates out there..

Sure, yeah.

So if you look at -- I guess if you look in two steps, if you look at kind of our investments globally almost half of our investment account is in foreign investment so Japan, U.K., Ireland, et cetera and so we have a hedging strategy in place as you mentioned where we’re really hedging the balance sheet and not hedging the cash flows for say although the balance sheet had generally would be significantly larger than a cash flow hedge, so if you look through the EBITDA for the quarter, call it half of that is coming really from overseas.

And so the impact of the P&L is if you say there is a 10% appreciation of the dollar versus the foreign currencies, they take off the EBITDA and say, there is a 10% move on that, you are talking $23 million for the quarter that from currency.

Now have the dollar stayed even against those currencies our EBITDA would have been $2 million to $3 million higher for the quarter..

Right, okay. Thank you..

And thank you. Our next question is from David Ridley-Lane with Bank of America..

Sure, thanks and just a quick numbers question, roughly what does the that 750 Apartment conversion that was consolidated into your P&L in the fourth quarter at in terms of annualized NOI. .

Yeah, the NOI on that is approximately $9 million annually..

Okay. And then on the vintage housing transaction, should we start modeling in your share of that NOI stared and say that third quarter or you expecting and that’s close in the second quarter..

Yeah, I mean it could close anytime between 30 and 90 days from now depending on customer at closing condition, so you’d expect certainly by the end of the second quarter, it’s not sooner to have that in the company..

Yeah, it’s been loan assumptions that were going that consents and so on..

Got it, okay. And then after the closings of the Vintage housing transaction, I think that does take your cash balance, KWE holding done a bit, I know you still have your revolver then how do you think about sort of cash balance, given the transactions depending include in Vintage housing specifically at KWE holdings..

Yeah, well as I said early in the call, last year we sold the billon dollars of assets and generated for the company about a $186 million of cash, we have some similar plans afford this year, some of which will may be generated even more cash from and what I outlined at 186 and so when you think about our cash position, we got asset this positions that we already have underway that if can generate more than they did last year.

And this reason I went through that refinance exercise with your was to show you without increasing the leverage at the property level with these very low interest rates, we also have the ability to refinance some of our existing assets that have appreciate in the lot of the value and take cash out of that and so out of the four properties that we did in Europe, that’s a 50-50 venture with fair effects, we took almost $55 million of cash out of that refinancing.

The Sandpiper refinancing is 17 million and so and so forth and so we’ll generate some more around $75 million this year to KW holdings just our of refinances similar to what have done through here today..

Got, it. Thank you very much..

Thanks..

And thank you. Our next question is from David Gold with Sidoti and Company..

Hi, good morning. Just a couple of quick ones, I know we're running long.

The first one is in listening to or going through the presentation this morning on the European side, clear that there is lot of opportunity in a number different markets there and with just curious if you could give a little more color on how we’re thinking now about capital allocation both European markets and in the U.S..

You mean David in terms of where we’re going to invest our money?.

Right, right, how you’re thinking about allocating the capital..

I’m going back now at lease two years not may be three, at least two years we have been saying for that past two years that I thought that roughly we’re going to be doing 70% in Europe and 30% here in the United States and its finding all these thing turn up, that’s above what’s ended up happening and I would say that on a go forward basis, we have started the year very fast and you can’t really annualized the numbers that we’ve done through the first.

When you look at KWE and KW and you include the Winthrop acquisition in the first two months of the year, what we either have under contractor of costs $1,500 billion versus the $3.2 billion that were cost for all of last year, you can really annualized that number and but I suspected its going to be kind of the same 60, 40, 70, 30 year up but its all was with the overwriting carryout that if there is nothing them make sense to buy, we’re not going to buy anything.

We have so many assets right now, when you added up throughout the entire company, in terms of numbers, we probably have over 400 individual assets and so the asset management opportunities to increase NOI, to increase value to get a piece of land and title too we were rock type of apartment build out, we do a Clancy quay.

There are many, many, many of those opportunities in that 400 plus portfolio and so its not just a matter of continuing to do acquisitions, its really focusing on the things also that we all..

Right, fair but I guess sort I’m more trying to get a sense for is, when you think about the world being, you raise - even if thinking about more specifically, number of markets where get - different, stages of cycle, different opportunities sets, when you think about the dollars, I mean is it, obviously there is plenty number of dollars to allocate and they basically what the thought process that goes into whether its by country or is it purely a function of as you look at it, it's getting to certain return..

Yeah, it's not really by country in this sense that, we already have our footprint in the places that we want to be. And so in the places that we are already out which is West Coast the United States, primarily the United Kingdom and Ireland and to a lesser extent Japan, those would be the places that we would invest.

As I said, I think the splits are going to be 60, 40 or 70, 30 waited toward Europe but the fundamental root of everything right now is that we’re just being mindful of these very, very low interest rates and sometimes both the good and bad behavior that can come out of this lower interest rates.

And so we’re not trying to sort to speak stick our neck out in a way where we are trying to undo risk on these acquisitions.

So I think that's the biggest thing is just to keep in mind right now for us to extremes volatility that exists in the world, framed against the fact that we have a great, great platform, and then finding things like we're able to do their off market generally, where we can get above market returns, that are risk adjusted in a way where we're very, very comfortable that we’ve got the downside covered..

Okay. Fair enough. I mean just one other quick one numbers one for Matt or Justin. If I remember correctly the convertible in May converts about 8 million shares and if you add is that at the start of this May or mid May just for modeling perspective..

Mid May, I think May 15..

May 15 then 8 million..

And there was another piece of there to convert which is 32 million that converts into $3 million shares but that's not for I believe a couple more years..

We have the option to convert that in '17.

And so that fair facts will then be - they will be in a ownership position of a 11 million common shares but the preferred dividend that we've been paying among both of those pieces by '17 have gone away..

Perfect. Thank you both..

And thank you. Our next question is from Vance Edelson with Morgan Stanley..

Hi, thanks for taking the questions and congrats on the quarter. Back to the U.K. and 180 property portfolio acquired, you mentioned that globally for Kennedy-Wilson scale and buying off market are two benefits. Can you speak to some of your advantages that allowed you to come out on top versus the competition on the U.K.

portfolio, was it also your ability to obtain financing or anything else we should think about?.

Well, I think it's - I think we have one big advantage obviously, is having the captive capital, having capital in both our platforms sort to speak.

The other advantage that we’ve got right now over what I believe are the private - see a lot of times not to critique the private equity business, but that's a model built around having the trades stock all the time.

And in the case of the Aviva transaction, it was very important to the seller that they were able to provide staple debt as Mary outlined, but some of the staple debt that they wanted to provide had an eight year term on it.

So if you're a private equity firm or anybody that wants to trade things every two or three years, you can do a deal like that it. So that narrows down the universal people that are going to be interest in doing something like that which creates an even bigger inefficiency in the market.

And I think the same thing is true what the Winthrop acquisition we did, we look at that as a business we can build overtime not one where we would buy, the people that are going to own the 31.5% of that company, have owned that business for over 15 years and built that business.

So I have hunched that some of the other people that they might have been talking to were thinking about may be figuring out a way to liquidate the business. We want to build the business. And so having the capital and having a little bit longer term perspective, is a huge advantage to us right now..

Okay. That makes sense.

And then shifting gears, may be you’ve touched on it but for the recent transactions that have effectively seeing Kennedy-Wilson taking a larger stake in existing previously on consolidated investments, what is the mindset of your partners that are willing to partially sell, I’m sure it varies but are they generally wanting to diversify or harvest there their holdings or is it something else..

It could be a multitude at different things that they might be thinking about but I can't really speak for what they would be thinking about but its an opportunity presents itself and we think that its compelling as a long term investments like Palisades.

From our perspective when you can find roughly 750 unit great property in the Seattle market those are very, very few and far between, particularly these bigger assets. And so a couple of years ago, we bought out summer house, we bought our partners out of summer house in Alameda, which is near East Bay.

The kind of frame mode that I mean we’ve been able to significantly grow the NOI that property is also almost 700 units. But this coming year, not doing forecasting or anything, the NOI on that property is going to be probably close to above $9 million. That's an increase of almost of $1.5 million a year from the time we originally did that buy out.

So, sometimes the partners have other users, that they have for their own capital, I can't really speak to that but we look at these, particularly these bigger engines, an opportunity were we think we can continue to improve the bottom line, those are attractive opportunities for us.

And really unless if it is a good buy from our perspective, it's going to be a transaction that's good for both parties. We're not trying to take advantage of somebody. It's got to be good for both parties but we know these assets close. Now like you’re buying something that you have to get up the learning curve on.

And so that's another great advantage of buying some of these things were already invested in..

Okay. Fair enough. And then just quickly if you could just remind us on the dividend policy as you see it a nice increase announced yesterday.

How should we think about the dividend going forward?.

Well, we had two dividend announcements, KWE went up, as Mary said 75%, so £7 is roughly $0.11, so that's $0.44 a quarter, and that equates to a dividend yield of roughly 2.7%. Our dividend yield did now $0.48 on our current prices probably I have done, or have math with, something like 1.7%, 1.8%.

And so we don't have announced dividend policy, its just all going to depend on how we feel about returning money to the shareholders because we are very focused on creating a total return for all of the shareholders in both companies.

So, there is no specific policy, we're going to look at it every year this time in consultation with the board try and figure out what we think is most prudent for the coming year. So there is no specific policy..

Okay. I'll leave it there. Thanks again..

Thank you. We have no further questions. I will now turn the call over to Bill McMorrow for closing remarks..

Okay. So, thanks everybody very much. As Matt went through - as I said, where I want to be talking to all of you again until after we crossed over the five year anniversary. But it's been a terrific five years and we appreciate all the support that we've got from everybody. Thanks very much..

And thank you ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect..