Kennedy Wilson Europe Real Estate (KWE) eyes an expansion of its European real estate business into Italy and Spain this year, after posting a maiden annual post-tax profit of £78.5m this morning.
As well as in the UK and Ireland, KWE sees loan and direct property investment opportunities in Italy and Spain this year.
In Italy, KWE reported today that the firm sees investment opportunities from Italian real estate funds hitting their expiry dates and Italian government disposals, while in Spain from SAREB as well as additional Spanish banks which are starting to delever.
“According to the Bank of Spain, the total NPL market at the end of 2014 was €172.6bn,” noted KWE in its results this morning.
“2014 witnessed a record year for NPL transaction volumes and our preferred geographies represented 85% of volumes, mostly across commercial real estate and residential loans.
“Market expectations are for €60-70bn of total volume sales over 2015 with government asset management agencies expected to increase their level of disposals on the back of robust investor demand and improving property values, according to Cushman & Wakefield.
“Over 2014, KWE acquired £205.8m in NPLs and we expect 2015 to be another strong year with our ‘loan to own’ strategy providing us with a unique angle to the bidding process and leveraging the significant synergies between our real estate debt and direct property teams.”
KWE’s portfolio value was £1.48bn at the end of 2014, generating a £57.9m valuation surplus.
The property portfolio comprises 82 directly-owned assets across an area in excess of 6.6m sq ft (area excluding hotels and development assets) with a period-end value of £1.27bn and a further four loans secured by 29 assets with a period-end value of £211.0m.
In the period, the investment property portfolio generated rental income of £44.2m and recognised a fair value gain on investment and development property of £49.3m through the income statement.
Subsequent to the year end, KWE has closed the acquisition of the 163-strong £503.0m Gatsby portfolio from Aviva Commercial Finance, Gardner House for £35.2m and the Park Inn NPL for £62.5m, taking its aggregate portfolio to £2.07bn.
At 31 December 2014, KWE’s EPRA NAV was £1,382.4m and the EPRA NAV per share was 1,021.8 pence. EPRA earnings per share were 25.9 pence per share (£23.1m), up from 4.3 pence per share (£2.8m) in June 2014.
The Board announced a quarterly interim dividend of 7.0 pence per share, equating to £9.5m or 28.0 pence annualised.
Mary Ricks, president and CEO of Kennedy Wilson Europe, said: “The team’s ability to execute on £1.5bn of investments in 10 months highlights our sourcing capabilities and deep local relationships across the industry and with financial institutions.
“We believe the current European environment will lead to a prolonged period of low interest rates and profitable opportunities in our target markets where active asset management will generate attractive total returns. Our pan-European remit across multiple sectors means that we can leverage our platform across property cycles in different geographies as the path to recovery remains uneven across Europe.”
Kennedy Wilson also said it would keep reviewing its current financing arrangements, including a potential future unsecured corporate bond, to take advantage of ever-tightening credit spreads.