Kennedy Wilson Europe RE Shells Out Big Bucks for Big UK Acquisition

Kennedy Wilson Europe Real Estate Plc has just added 3.5 million square feet to its young portfolio with a simple stroke of a pen.
Kennedy Wilson - Mary Ricks

Mary Ricks, Kennedy Wilson

Barbra Murray, Contributing Editor

Kennedy Wilson Europe Real Estate Plc has just added 3.5 million square feet to its young portfolio with a simple stroke of a pen. The property company, sponsored by Beverly Hills-based global real estate investment services firm Kennedy Wilson, acquired a 180-property mixed-use portfolio in the U.K. from Aviva Commercial Real Estate Finance for $758 million. In terms of pricing, the deal marks KWE’s single largest transaction since its $1.7 billion IPO one year ago this month.

The Kennedy Wilson name certainly has its advantages. “Despite a selective pre-marketing process to a small handful of potential buyers, we were able to agree exclusivity and avoid a competitive bidding process, allowing us to complete the deal on favorable terms and within a short timeframe,” Mary Ricks, president & CEO of Kennedy Wilson Europe, told Commercial Property Executive.

Though the bulk of the portfolio is located in England, with, by value, 54 percent weighted towards London and the South East, it also encompasses assets in Scotland and Wales. The sector types run the gamut. Retail assets, including food and convenience properties, account for 62 percent of the group, by value, and the remaining assets cover the industrial, office, hotel and leisure sectors. Among the properties in the portfolio are the Travelodge hotel in King’s Cross, London; the Waitrose Superstore in Saltash, Cornwall; and the Asda Superstore in Hemel Hempstead. All told, the collection boasts an occupancy level of 98 percent and a weighted average lease term of roughly 11 years.

KWE has completed the purchase of 163 of the Aviva properties, accounting for approximately $669 million, and will be able to call the remaining 17 assets its own, subject to certain customary closing conditions. To finance the gargantuan purchase, the company is relying on cash on hand and a $530 million senior debt facility with Aviva, the U.K.’s largest insurer, which was agreed upon concurrent with the acquisition. The secured loan facility, divided into three floating- and fixed-rate tranches, represents a loan-to-value of 70 percent and allows KWE the option to substitute assets over the life of the loans.

The Aviva collection may be relatively gigantic in size, but KWE is no stranger to major, high-quality portfolio purchases. In June, the company announced the completion of the acquisition of the mixed-use Fordgate Jupiter Portfolio, consisting of 21 assets across the U.K.; the Central Park Portfolio, a residential development in an affluent area of Dublin with 281 residential units, 31,000 square feet of ground-level retail and the potential to build an additional 166 units and 14,800 square feet of retail; and the 670,000-square-foot Opera Portfolio, featuring seven office properties and six retail assets in Dublin and Cork. The three transactions accounted for an aggregate consideration of just more than $1 billion.

Again, the Kennedy Wilson name, as well as KWE’s strong presence on the ground, played a role in the company’s access to such opportunities. Ricks said, “We have a team of over 60 real estate professionals based in London, Dublin and Madrid that are deeply embedded within their markets. Competition is fierce for portfolios of this quality but we have extensive networks and relationships and a strong pipeline of further opportunities.”

KWE still holds capital raised from the October follow-on offering, so additional acquisitions are likely not far off. And while the company’s portfolio has a major presence in England, KWE has no geographical preference. “We do not believe there is one market which provides the best long-term opportunity, rather we use our local expertise to derive long term value and our pan-European mandate to ensure we maintain disciplined in our capital deployment,” Ricks added.

To date, KWE’s real estate and real estate loan acquisitions total more than $2.9 billion. Kennedy Wilson owns approximately 14.9 percent of the company’s total issued share capital.