Kennedy-Wilson Holdings Inc(KW)
On Tuesday, KW hosted a successful investor tour of its Seattle propertiesincluding a review of its affordable housing business. Our key takes, which wediscuss below, were: 1) the high quality of the Seattle multi-family portfolio 2) thequality and depth of the KW management team which goes beyond the C-suite,3) a better understanding of the attractive economics of the affordable housingbusiness, and 4) the positive tone regarding 2Q performance including severallarge expected gains from announced asset sales. While, we were impressed bywhat we saw, we remain somewhat cautious near-term given the strong YTDperformance of the shares and DB's continued call for a 3.5% 10-year by YE18,which, if accurate, would provide a better entry point in the stock down the roadin our view. That said, we continue to see long-term value, given our $26 targetprice that should benefit as development and redevelopment projects commenceover the next 18 months. Given our near-term concerns, however, we are notinclined to chase the stock here and we are maintaining our Hold rating for now.
Quality of assets and management team on full display
On Tuesday, KW hosted a well-organized and successful investor tour of itsSeattle properties including a review of its affordable housing business. We werepleasantly surprised at the quality of the Seattle assets we visited in the attractivesubmarkets of Issaquah, Redmond, Mill Creek, Lake Union and South Lake Union.The tour included a mix of garden style and mid-rise market rate properties and amid-rise senior affordable property, which looked very much like its market rateunits. One criticism we hear on the name is the quality of the portfolio, whichstems from the generally higher cap rates that they have historically acquiredat, but the assets we saw were well-maintained, well amenitized and of highquality with a range of B to A assets. The company has also done a good jobof driving rent growth vi……[德意志银行]