The Company aims to acquire, through the services of the Investment Manager, real estate and real estate loans in Europe, initially in the UK, Ireland and Spain, and thereafter in these jurisdictions as well as other European countries on an opportunistic basis, with the intention of creating value for shareholders.
The Company will seek to invest in a diversified portfolio of commercial real estate (including office, retail, industrial, warehouse and distribution, leisure and recreational assets), and residential real estate (including multi-family, single-family and multi-tenanted assets). The Company may also consider investing in “mixed-use” real estate.
The Company will also invest in real estate loans. The Company may also invest in a mixed portfolio of real estate and/or real estate loans that may include other non-real estate related assets as part of the portfolio, provided that following the completion of the acquisition of any such non-real estate related assets, the Investment Manager will use its reasonable endeavours to dispose of such non-real estate related assets on commercially acceptable terms as soon as reasonably practicable.
In addition, the Company may originate real estate loans which are either floating or fixed rate and may also securitise pools of real estate loans. The Company may also invest in securities traded on a public exchange and in other public or private investment funds, in each case focused on the real estate sector.
The Company will invest its funds in these asset classes in the real estate sector where it sees an opportunity to create value for shareholders. The Company intends that its portfolio will comprise a mix of real estate and real estate loans, appropriately diversified by geography, real estate sector type, asset class, tenant exposure, tenure and location. The Investment Manager has been authorised by the Board to exercise its discretion in managing and diversifying the real estate asset classes identified above within the Company’s portfolio to the benefit of shareholders and ensuring that the funds available to the Company for investment are invested in such real estate assets.
Whilst the majority of the Company’s assets are expected to be wholly-owned, the Company will retain the ability to pursue its investments through a variety of investment structures, including joint ventures, acquisitions of controlling interests or acquisitions of minority interests, if considered suitable.
No single investment, or aggregate investments secured on a single property, will exceed 25% of the Company’s most recently published NAV, calculated at the time of investment, excluding the Company’s interests in the intermediate holding undertakings in the Group.
The aggregate value of real estate loans originated by the Company (excluding any loans made to Group entities and loans with equity characteristics) shall not exceed 10% of the Company’s most recently published NAV, calculated at the time of origination of any such loan.
The Company may consider a limited number of property development opportunities, including land site acquisitions, as well as property redevelopment opportunities. At any point in time, the aggregate development and redevelopment costs incurred in respect of assets under development and/or redevelopment at that time will not exceed 15% of the Company’s most recently published NAV. For the avoidance of doubt, renovation, restoration, fit-outs, internal reconfigurations, maintenance and engineering works and general up-keep of any existing and new investments by the Company will be classified as refurbishment activities undertaken by the Company and do not fall within the ambit of such development and redevelopment limits.
The Company will invest in real estate and real estate loans, including mixed portfolios of real estate and/or real estate loans that may include other non-real estate related assets, as set out above.
Where the Company invests in a mixed portfolio of real estate and/or real estate loans that includes other non-real estate related assets as part of the portfolio, the value of the non-real estate related assets in the portfolio being acquired, in combination with any other non-real estate related assets being held by the Company at the time of the applicable investment as a result of similar acquisitions, shall not exceed 15% of the Company’s most recently published NAV, calculated at the time of investment. The Investment Manager will use its reasonable endeavours to dispose of such non-real estate related assets on commercially acceptable terms as soon as reasonably practicable.
The Company intends to use gearing with a view to enhancing equity returns whilst maintaining prudent levels of interest cover and protecting shareholders’ funds. The Investment Manager intends to determine the appropriate level of borrowings on a deal specific basis and limit the lender’s recourse only to assets of the entity making the acquisition in question, thereby ring-fencing risk. The Investment Manager does not intend to impose a particular LTV ratio limit for each investment, but expects that on an overall basis, the Group’s LTV ratio will not exceed 50% at the time of borrowing (i.e. that the Group’s aggregate borrowings will not exceed 50% of the aggregate market value of the Group’s total assets (including cash)) and in any event, the Group’s LTV ratio will not exceed 65% at the time of borrowing. The Board may modify the Company’s gearing policy from time to time taking into account then prevailing economic and market conditions, fair value of the Group’s assets, acquisition and active management opportunities or other factors the Board deems appropriate. However, no modification of the Company’s gearing policy to allow the LTV ratio to exceed 65% shall occur without prior shareholder approval.
The Company will not enter into derivative transactions for purely speculative purposes. However, the Company’s investments will typically be made in the currency of the country where the underlying real estate assets are located. In the case of Ireland and Spain, this will largely be Euros. The Company may implement measures designed to protect the investments against material movements in the exchange rate between Sterling, being the Company’s reporting currency, and Euros, being the currency in which such investments are made. The analysis as to whether such measures should be implemented will take into account periodic interest, principal distributions or dividends, as well as the expected date of realisation of the investment. The Company may bear a level of currency risk that could otherwise be hedged where it considers that bearing such risk is advisable. The Company will only enter into hedging contracts, such as currency swap agreements, futures contracts, options and forward currency exchange and other derivative contracts, when they are available in a timely manner and on terms acceptable to it. The Company reserves the right to terminate any hedging arrangement in its absolute discretion.
FCA investment restrictions
The Company currently complies with the investment restrictions set out below and will continue to do so for so long as they remain requirements of the FCA:
- neither the Company nor any of its subsidiaries will conduct any trading activity which is significant in the context of the Group as a whole (but this rule does not prevent the businesses forming part of the investment portfolio from conducting trading activities themselves)
- the Company will avoid cross-financing between businesses forming part of its investment portfolio
- the Company will avoid the operation of common treasury functions as between the Company and investee companies (for this purpose "investee companies" does not include intermediate holding companies in the Group)
- not more than 10%, in aggregate, of the value of the total assets of the Company at Admission will be invested in other UK-listed closed-ended investment funds, except for those which themselves have published investment policies to invest not more than 15% of their total assets in other UK-listed closed-ended investment funds, and
- the Company must, at all times, invest and manage its assets in a way that is consistent with its object of spreading investment risk and in accordance with the published investment policy.
|Company or KWE||Kennedy Wilson Europe Real Estate Plc|
|Investment Manager||KW Investment Management Ltd.|
|LTV ratio||the ratio of the aggregate of any debt incurred by the Company or the Group in respect of any monies borrowed by, or advanced to, the Company or the Group, to the aggregate market value of the assets of the business or businesses (including cash) of the Company or the Group, as the case may be|
|Group||the Company and its subsidiary undertakings from time to time|
|Board||the board of directors of the Company|
|NAV||net asset value, or the total aggregate value of the Company’s and its subsidiary undertaking’s consolidated assets less liabilities measured in accordance with IFRS and the Group’s accounting policies|
|FCA||Financial Conduct Authority|
|IFRS||International Financial Reporting Standards as adopted by the EU|