Kennedy Wilson: $1.8B U.K. Deal ‘Is Our Largest’

Kennedy Wilson makes its biggest splash ever in the loan-acquisitions game with an agreement to acquire a performing portfolio from Bank of Ireland for a whopping $1.8 billion, with an eye toward continuing to acquire in the United Kingdom.

October 25, 2011
By Barbra Murray, Contributing Editor

Kennedy Wilson makes its biggest splash ever in the loan-acquisitions game with an agreement to acquire a loan portfolio from Bank of Ireland for a whopping $1.8 billion. The purchase of the performing pool of loans, collateralized by premier office, retail and multi-family assets in the United Kingdom, constitutes a major step in the real estate investment and services firm’s European growth strategy.

“We are very interested in expanding in metropolitan London and across Europe,” Mary Ricks, executive vice chair of Kennedy Wilson, told Commercial Property Executive. “Kennedy Wilson, over the years, has gone into different distressed markets — for example, going into Asia in the mid-‘90s. So we started looking at what was going on in Europe, and felt as though that was a location where we wanted to focus our efforts.”

The majority of the properties securing the loans are in London, with a few located in other parts of the U.K. Once the transaction closes, the company will have boosted the value of its assets under management to $12 billion. The initial phase of the deal, involving $1.4 billion, closed October 21 and the final $400 million phase is on track to reach completion at the end of November.

Kennedy Wilson is no stranger to loan portfolio acquisitions. Its many deals include the purchase of a $342 million loan portfolio from a large regional bank in February 2010. However, the size of the Bank of Ireland deal pales in comparison to any loan portfolio purchase Kennedy Wilson has ever made.

“It is our largest,” Ricks confirmed. “It was efficient because it’s a pool of large balances. The $342 million purchase that we executed in February of last year included 63 loans, but this is a much smaller number of loans, which I think will help the execution in terms of being efficient.” Kennedy Wilson is not presently identifying its partners on the Bank of Ireland transaction, but it has done business with the entities in the past.

Kennedy Wilson has done business with the Bank of Ireland in the past as well. In June of this year, the company bought Bank of Ireland Real Estate Investment Management, effectively adding $2.3 billion of European real estate assets to its management business in one fell swoop. The purchase laid the groundwork for the establishment of Kennedy Wilson Europe.

“We bought BOI REIM with the idea that not only would we have an immediate knowledge base with an excellent management team, but we would also use that platform to then grow our acquisition business off of that,” she said. “We’ve always invested in distressed markets, so we believe there’s a great opportunity in Europe to buy distressed assets or non-distressed assets from banks that need to de-lever their balance sheet.”

The Bank of Ireland portfolio acquisition is a gargantuan step in Kennedy Wilson’s European pursuits, but it’s only the beginning. In another move that will support the expansion of its presence in the region, the company is relocating one of its top executives to London. Ricks, who has been with Kennedy Wilson for two decades, will pack up and make the move to the city at the beginning of 2012.

“I’m going there not only to execute on this pool but also to look for other acquisition opportunities and work with other capital partners in the U.K. and throughout Europe.” Kennedy Wilson is just warming up.