AROUND

THE
WORLD
WITH KENNEDY WILSON
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DISCLAIMER
The analyses and conclusions of Broyhill Asset Management, LLC (BAM") contained in this presentation are based on publicly
available information. BAM recognizes that there may be confidential information in the possession of the companies discussed in
the presentation that could lead these companies to disagree with BAMs conclusions. This presentation and the information
contained herein is not a recommendation or solicitation to buy or sell any securities.
The analyses provided may include certain statements, estimates and projections prepared with respect to, among other things, the
historical and anticipated operating performance of the companies, access to capital markets and the values of assets and liabilities.
Such statements, estimates, and projections reflect various assumptions by BAM concerning anticipated results that are inherently
subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative
purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, estimates or
projections or with respect to any other materials herein. Actual results may vary materially from the estimates and projected results
contained herein. Accordingly, no party should purchase or sell securities on the basis of the information contained in this
presentation. BAM expressly disclaims liability on account of any partys reliance on the information contained herein with respect to
any such purchases or sales.
Accounts managed by BAM and its affiliates have invested in the equity of Kennedy-Wilson Holdings, Inc (KW). It is possible that
there will be developments in the future that cause BAM to change its position regarding the companies discussed in this
presentation. BAM may buy, sell, cover or otherwise change the form of its investment regarding such companies for any reason.
BAM hereby disclaims any duty to provide any updates or changes to the analyses contained here including, without limitation, the
manner or type of any BAM investment.
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Forever Blowing Bubbles
Kennedy Wilson Does Europe
Net Asset Value
Introduction
Appendix
INTRO
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We are a boutique investment firm, established as a
family office and guided by a strict value orientation.
Our family office foundation provides the security of a
stable capital base.
We invest alongside our clients as partners in our
process. As a result, we do not feel the constant pressure
to gather assets, which ultimately results in poor short-
term decisions.
Capital preservation is first and foremost our overriding
priority. We seek to provide consistent returns with a
low probability of loss, through concentrated, long-term
holdings.
We do not follow the crowd, but instead remain
independent in our decision-making. We are willing to
accept short-term underperformance in exchange for
long-term success.
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If I could say one thing to your
investors, it's try to achieve balance.
- Ray Dalio,
Davos World Economic Forum
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GROWTH OF $10,000 INVESTED IN BROYHILL HIGH QUALITY COMPOSITE
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Cash is like oxygen. You dont
notice it 99% of the time, but if
its absent its the only thing you
notice.
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Our external investments with like-minded, long-term investors complement our internal
capabilities, expand our investable universe, and deepen our understanding of financial
markets. Simply put, External Managers, expand our circle of competence.
BLOWING
BUBBLES
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CONNECTING THE DOTS BETWEEN THE KING OF COOL & THE MAESTRO
I'm forever blowing bubbles
Pretty bubbles in the air
They fly so high, nearly reach the sky
Then like my dreams they fade and die
Fortune's always hiding
I've looked everywhere
I'm forever blowing bubbles
Pretty bubbles in the air
Source: Im Forever Blowing Bubbles
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Source: BIS, The Asset Price Bubble in Japan
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FIRST STOP JAPANESE BUBBLE
THIRD STOP IRELANDS BOOM
SECOND STOP US RECOVERY
NEXT STOP SPANISH CASTLES
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The best swimming in the financial
markets is when panic breaks loose. By
that time, the damage has been done and
those with the courage to dive in head
first will find it extremely rewarding.
The increasing number and magnitude of
crises begs the question of whether central
bank policies are fanning the flames of
destabilizing speculation.
Source: MarketWatch
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EUROPEAN BANKING SNAPSHOT
Source: E&Y
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A RECORD YEAR FOR NON CORE LOANS
Source: PwC
KW
DOES
EUROPE
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Wed like to introduce you to a very
talented swimmer we recently
discovered while surveying the
investment landscape for sharks.
Kennedy Wilson went public in 2009
and remains underfollowed and
misunderstood despite managements
investment success.
Management has a demonstrated nose
for value and a proven track record of
identifying and capitalizing on shark-
infested waters.
Previous investments have
systematically exploited the historical
cycle of boom and bust.
WHO IS KENNEDY WILSON?
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INVESTING IN OUR CIRCLE OF COMPETENCE
We generally think that asset management is a terrific business.
Theres a natural growth in global demand for financial assets and while the
barriers to entry are fairly low, the barriers to success are fairly high.
Brand, distribution and long-term performance make a big difference.
That results in established companies for the most part generating high margins,
high returns on capital and excellent free cash flow.
- Mario Gabelli
A SUSTAINABLE COMPETITIVE ADVANTAGE
Truly durable competitive advantages arise from the intersection of supply and
demand, from the linkages of economies of scale with customer captivity.
Competitive advantages based on economies of scale are in a class by themselves.
They tend to be far longer lived than the other types and therefore more valuable.
The best course is to establish dominance in a local market and then expand
outward from it. Economies of scale, especially in local markets, are the key to
creating sustainable competitive advantages.
The appropriate strategy is to identify niche markets, understanding that not all
niches are equally attractive. Ideally, it will also be readily extendable at the
edges. The key is to think local.
- Bruce Greenwald and Judd Kahn, Competition Demystified
STICKY ASSETS GENERATE DURABLE RETURNS
Those who seek to succeed as long-term investors need time, capital, and fortitude.
Time is important because gaps between fundamentals and expectations are not
always closed quickly.
A stable base of investment capital is also crucial because great investment ideas
arent worth anything if you have no money to invest.
Investors with a stable and countercyclical base of capital stand at a huge
advantage to those who work with fleet-footed capital.
Michael Mauboussin
SECULAR TAILWINDS
Alternative assets make up a small portion of global investable assets but are
outgrowing traditional assets for a number of reasons that we believe are likely to
continue for some time. With interest rates at generational lows and public market
volatility near generational highs, investors are diversifying away from conventional
asset classes with subpar returns.
The favorable return attributes of alternative assets are increasingly important as
many liability-matched funds face significant shortfalls. This problem is
exacerbated by high rates of expected returns on pension assets - a hurdle that is
increasingly difficult to reach in todays low return environment.
One way to achieve this return, however, is by committing assets for extended
periods of time to managers with proven track records.
- Me
Source: Broyhill Asset Management, Solid as an Oak
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KENNEDY WILSON SERVICES KENNEDY WILSON INVESTMENTS
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A PROVEN MODEL FOR CAPITAL ALLOCATION
Source: Company Filings
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RECENT EXITS DEMONSTRATE POTENTIAL FOR VALUE CREATION
Date
Acquired
Purchase
Price
($ millions)
Partners
Equity
($ millions)
KW
Equity
($ millions)
Property Name
Sales
Proceeds
KW
Gains
KW
Multiplier
Oct-08 $88.5 $27.8
$3.2
(3)
Saybrook Pointe, 324-unit apartment building,
San Jose, California
$140.8 $2.2 1.7x
Jun-09 $33.5 $5.8
$5.9
(3)
The Mercury, LA condominiums $52.2 $9.4 2.6x
Sep-09 $210.4 $54.7
$17.5
(3)
Four multifamily properties in Western US $243.0 $7.9 1.5x
Dec-09 $218.0 $32.2
$44.3
(3)
6 multifamily properties in Western US $251.7 $19.5 1.4x
Jun-10 $56.0
(1)
9.6
(2)
$6.4
NoHo, 180 unit apartment building; 11,000 sq. ft
retail space; increased NOI from $2.3 to $3.1
million
$74.0 $7.2 2.1x
(3) Assume 1.85x Leverage where inf ormation is unavailable
(1) Calculated using 4.1% cap rate at sale and $2.1 million of NOI bef ore acquisition
(2) Assume 40% participation in partnerships based on company f ilings
Source: Company Filings, Broyhill Asset Management Estimates
Major corrections create new opportunities that, if seized, can transform companies to even greater heights.
- Bill McMorrow, 2009 Letter to Shareholders
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VIA VERDE THE ARTISAN
Source: ShowMeTheRent
Source: The Artisan Apt Homes
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FAIRFAX ANNUAL LETTER EXCERPTS
We continued to purchase commercial real estate investments with Bill
McMorrow and his team at Kennedy Wilson. We purchased, 50/50
with Kennedy Wilson, perhaps the finest office building in Dublin,
built in 2009 and 100% leased to State Street Bank for 25 years, for
one-third of its construction cost with an unleveraged yield of
approximately 8.5%. We also own, with Kennedy Wilson, some of
the finest apartment buildings in Dublin with similar return
characteristics. Rest assured we return Bills calls very promptly!
As I mentioned to you last year, one such call from Bill in 2011 led to
our investment (along with W.L. Ross, Fidelity and Capital
Research) in Bank of Ireland the first significant investment in
Ireland by foreign investors since the financial market collapse. Only
one year later, Ireland and its economy have made significant strides
towards recovery. The Bank of Ireland has been one of our most
successful investments
1
We continued to invest with Bill McMorrow from Kennedy Wilson in
2013. We invested in the Clancy Quay apartments and some well-
leased office buildings in Dublin and we also invested in a U.K. loan
pool. We have invested a net cumulative $305 million in real estate
deals with Kennedy Wilson in California, Japan, the U.K. and
Ireland deals at significant discounts to replacement costs and with
excellent unlevered cash on cash returns, in which Kennedy Wilson is
the managing partner and an investor. Also, we continue to own a
fully diluted 10.9% interest in Kennedy Wilson.
2
1
Fairfax 2012 Annual Letter
2
Fairfax 2013 Annual Letter
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KW HISTORY IN EUROPE
Source: Company Filings
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KWE ACQUISITIONS SINCE IPO EXCEED 1 BILLION
Source: Company Filings, Broyhill Asset Management Estimates
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ACCELERATING DEBT REDUCTION
NAMA acquired EUR 74 billion of loans as
part of a major Irish asset relief scheme and
subsequent recapitalization program.
The agency has set a debt reduction target of
25% by 2013, 80% by 2017 and 100% by 2019.
Expect activity to heat up between now and
then as illustrated below.
DRIVING INCREASED TRANSACTION ACTIVITY
Source: National Asset Management Agency 2013 Annual Report
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DUBLIN PRIME LONG-TERM YIELDS
ANNUAL CHANGE IN PRIME DUBLIN OFFICE RENT
Source: Lisney Research
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UK YIELDS & INTEREST RATES
PRIME PROPERTY PERFORMANCE PRIME INVESTMENT YIELDS
Source: Cushman & Wakefield
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On December 27, 2013, Banco Popular, SA sold the real-estate
management business unit and some of the Banks debt related to the
property sector to a newly incorporated company, with a majority
shareholding by Vrde Partners, Inc. and Kennedy Wilson. The sale
includes the transfer of all resources required to independently carry
out the real-estate management business. This business had been
carried out by the group with the objective of maximizing the sale
price of property assets and maximizing the recovery of debt related
to the real estate sector. This will allow the Bank to benefit from its
partners broad management experience with these types of assets
with the objective of attaining the maximum yield from the
management of this business.
Investments in Europe have been sourced directly through extensive relationships with financial institutions in the
UK and Ireland. Going forward, we expect that KWs team in Madrid will provide a long runway for future
growth. In line with KWs time tested business model, management dusted off the Irish playbook and launched
its operations in Spain in 2012 through the real estate auction business followed by a major strategic acquisition
last year. Heres the summary from Banco Populars Annual Report:
On December 27, 2013, Banco Popular, SA sold the real-estate management business unit and some of the Banks debt related to
the property sector to a newly incorporated company, with a majority shareholding by Vrde Partners, Inc. and Kennedy Wilson. The
sale includes the transfer of all resources required to independently carry out the real-estate management business. This business had
been carried out by the group with the objective of maximizing the sale price of property assets and maximizing the recovery of debt
related to the real estate sector. This will allow the Bank to benefit from its partners broad management experience with these types of
assets with the objective of attaining the maximum yield from the management of this business.
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MODERN SECURITY ANALYSIS
It seems very hard to try to beat the market consistently
by trying to beat the market. Rather it seems to us a more
rational approach is to be value conscious rather than
outlook conscious.
- Martin J. Whitman, Modern Security Analysis
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$0
$5
$10
$15
$20
$25
$30
$35
$11
$32
$7
$4
$5
$5
$0
$5
$10
$15
$20
$25
$30
$35
Net LT
Investments
ST
Investments
KW
Services
KWE
Mgmt Fees
Incentive
Fees
Upside
Potential
NET ASSET VALUE & UPSIDE POTENTIAL
Source: Company Filings, Broyhill Asset Management Estimates
Valued at 1.4x-
1.6x Book
Value Net of
Debt and
Non-
controlling
Interests
Cash &
Receivables
14x18x
NOI
14x18x
NOI
Assuming
Fully
Invested
Assets
4x-8x
Incentive
Fee-Related
Earnings
Assuming
1.6x Multiple
Over 3 Year
Holding
Period
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KW TOTAL NET INVESTMENT ACCOUNT
Source: Company Filings, Broyhill Asset Management Estimates
APPENDICES
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KWE SENSITIVITY ANALYSIS
Annual Rent Growth
1.8 0% 2% 4% 6% 8% 10% 12% 14%
9.00% 0.63 0.74 0.87 1.00 1.13 1.28 1.43 1.59
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8.50% 0.72 0.85 0.98 1.11 1.26 1.41 1.57 1.74
8.00% 0.83 0.96 1.10 1.25 1.40 1.56 1.73 1.91
7.50% 0.95 1.09 1.24 1.40 1.56 1.73 1.91 2.10
7.00% 1.09 1.24 1.40 1.57 1.74 1.93 2.12 2.32
6.50% 1.25 1.41 1.58 1.76 1.95 2.15 2.36 2.58
6.00% 1.44 1.61 1.80 2.00 2.20 2.42 2.64 2.88
5.50% 1.66 1.85 2.05 2.27 2.49 2.73 2.97 3.23
5.00% 1.93 2.14 2.36 2.59 2.84 3.10 3.37 3.65
Source: Company Filings, Broyhill Asset Management Estimates
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DISCLAIMER
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
This material has been prepared solely for the purposes of illustration and discussion. Broyhill Asset Management is the marketing name for
the investment management business conducted by Broyhill Asset Management, LLC. and its affiliates. Broyhill Asset Management, LLC is an
SEC Registered Investment Advisor.
Under no circumstances should the information contained herein be used or considered as an offer to sell, or solicitation of an offer to buy any
security. Any security offering is subject to certain investor eligibility criteria as detailed in the applicable offering documents. The information
contained herein is confidential and may not be reproduced or circulated in whole or in part. The information is in summary form for
convenience of presentation, it is not complete and should not be relied upon as such.
Any information, data, statement, opinions, or projections made herein may contain certain forward looking statements, projections, and
information that are based on the beliefs of Broyhill Asset Management as well as assumptions made by, and information currently available to,
Broyhill Asset Management. Such statements reflect the view of Broyhill Asset Management with respect to future events and are subject to
certain risks, uncertainties and assumptions (including, but not limited to, changes in general economic and business conditions, interest rate and
securities market fluctuations, competition from within and without the investment industry, new products and services in the investment
industry, changes in customer profiles, and changes in laws and regulations applicable to Broyhill Asset Management). Should one or more of
these other risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those
described herein.
All information, including performance information, has been prepared in good faith; there are no representations or warranty expressed or
implied, as to the accuracy or completeness, of the information, and nothing herein shall be relied upon as a promise or representation as to the
past or future performance. This material may include information that is based, in part or in full, on hypothetical assumptions, models, and/or
other analysis (which may not necessarily be described herein). No representations or warranty are made as to the reasonableness of any such
assumptions, models, or analysis. The information set forth herein was gathered from various sources which are believed, but not guaranteed, to
be reliable. Unless stated otherwise, any opinions expressed herein are current as of the date hereof and are subject to change at any time.
Accordingly, neither Broyhill Asset Management nor its principals or affiliates make any representations as to the timeliness of any information in
this presentation.
Broyhill Asset Management
Christopher R. Pavese, CFA
chris@broyhillasset.com