Kennedy Wilson Lands $300M Equity Investment

The strategic move is in the form of a perpetual preferred equity investment in the company by affiliates of Eldridge Industries.
Hanover Quay. Image courtesy of Kennedy Wilson

Affiliates of Eldridge Industries have led a $300 million strategic investment in Kennedy Wilson. The global real estate investment company reportedly plans to use the funds to pay down unsecured debt, including repaying its unsecured bank borrowings in full, and to fund its development pipeline.

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The private placement expands the relationship between Kennedy Wilson and Eldridge, including its affiliates Cain International and Security Benefit Life Insurance Co. Eldridge’s equity investment, along with a previously announced joint venture platform between Security Benefit and Kennedy Wilson, will increase its investment target from $500 million to $1.5 billion.

400 California St. Image courtesy of Kennedy Wilson

In its role as asset manager, Kennedy Wilson reportedly expects to continue investing alongside Security Benefit and its affiliates with a 20 percent interest in the joint venture’s investments and will earn customary fees. So far, the platform has acquired $227 million in assets.

 Eldridge is purchasing $300 million in convertible perpetual preferred stock carrying a 5.75 percent annual dividend rate, with an initial conversion price of $25.00 per share, which represents a premium of 15 percent to the daily volume weighted average price per share of Kennedy Wilson’s common stock over the 20 trading days ending, and including, Oct. 16. The preferred stock is callable by Kennedy Wilson on and after Oct. 15, 2024.

J.P. Morgan acted as exclusive placement agent and Latham & Watkins LLP acted as legal advisor to Kennedy Wilson. Morgan Stanley & Co. LLC acted as exclusive financial advisor and Sidley Austin LLP acted as legal advisor to Eldridge.

Diverse development locations

Just last month, the Kennedy Wilson–Security Benefit joint venture acquired its first property, the Sunset North office campus in Bellevue, Wash. A purchase price of $227 million got the joint venture a three-building, 464,000-square-foot asset that’s 99 percent leased.

Cain International invested alongside Kennedy Wilson in the 390,000-square-foot office portion of the Coopers Cross mixed-use project in Dublin, which is currently under development. Kennedy Wilson’s development pipeline also includes Capital Dock, Clancy Quay Phase III and Hanover Quay in Dublin; 400 California St. in San Francisco; and The Clara in Boise, Idaho.

The Dublin office market is seeing strong absorption, with 3.9 million square feet last year and 1.8 million in the first half of this year, according to a second-quarter report from Colliers International. Metro office vacancy is fairly steady at 6.5 percent. Although about 8 million square feet of speculative space is in development from this year through 2020 and beyond, half of all office space actually under construction is preleased.

In the past 12 months, half of all office absorption has been from the technology, media and telecom sector. All global flex office operators are now in the Dublin market, and WeWork is expanding aggressively there.