UNCONSOLIDATED INVESTMENTS

The Company has unconsolidated investments through real estate related joint ventures and loan pool participations. The following table details its investments in joint ventures and loan pool participations as of March 31, 2014 and December 31, 2013:



	March 31,		December 31,
(Dollars in millions)	2014		2013
Investments in joint ventures	$	584.5	$	751.4
Investments in loan pool participations	35.2		34.7
Total	$	619.7	$	786.1

Investments in Joint Ventures

Kennedy Wilson has a number of joint venture interests, generally ranging from 5% to 50%, that were formed to acquire, manage, develop, and/or sell real estate and invest in loan pools and discounted loan portfolios. Kennedy Wilson has significant influence over these entities, but not control, and accordingly, these investments are accounted for under the equity method.

Joint Venture Holdings

As of March 31, 2014 and December 31, 2013, the Company's investment in joint ventures totaled $584.5 million and $751.4 million, respectively.

The following table details our investments in joint ventures by investment type and geographic location as of March 31, 2014:



(Dollars in millions)	Multifamily		Commercial		Loan		Residential		Other		Total
Western U.S.	$	136.9	$	159.2	$	50.7	$	49.0	$	9.7	$	405.5
Japan	67.9		—		—		—		—		67.9
United Kingdom	—		51.0		—		—		—		51.0
Ireland	—		33.3		—		—		—		33.3
Spain	—		—		—		—		26.8		26.8
Total	$	204.8	$	243.5	$	50.7	$	49.0	$	36.5	$	584.5

The following table details our investments in joint ventures by investment type and geographic location as of December 31, 2013:



(Dollars in millions)	Multifamily		Commercial		Loan		Residential		Other		Total
Western U.S.	$	133.3	$	160.3	$	50.3	$	48.7	$	8.0	$	400.6
Japan	68.8		—		—		—		—		68.8
United Kingdom	—		104.5		6.3		—		—		110.8
Ireland	48.2		96.1		—		—		—		144.3
Spain	—		—		—		—		26.9		26.9
Total	$	250.3	$	360.9	$	56.6	$	48.7	$	34.9	$	751.4

KW Residential LLC

The Company's largest joint venture investment, KW Residential, LLC ("KWR"), had a balance of $67.9 million and $68.8 million as of March 31, 2014 and December 31, 2013, respectively. KWR is a joint venture investment in a portfolio of 50 apartment buildings comprised of approximately 2,400 units, located primarily in Tokyo and surrounding areas. Kennedy Wilson owns approximately 41% of KWR, not including any promoted interests.

During the three months ended March 31, 2014 and 2013, the Company recognized $1.0 million and $4.3 million, respectively, in losses from foreign currency translation adjustments, net of hedges from its investment in KWR.

During the three months ended March 31, 2014 and 2013, the Company received the following cash distributions from its investment in KWR for the settlement of hedges, refinancing of property level debt, and operating distributions:



	Three Months Ended March 31,
(Dollars in millions)	2014		2013
Settlement of hedges	$	—	$	10.8
Refinancing of property level debt	—		1.0
Operating distributions	0.4		1.7
Total	$	0.4	$	13.5

The cash received as a result of unwinding KWR's hedges will not be realized in the statement of operations until the underlying investment is substantially liquidated.

As of March 31, 2014 and December 31, 2013, the Company did not have any other joint venture investments which individually exceeded 10% of the investments in the joint venture balance.

Joint Venture Consolidation

On March 31, 2014, the Company and one of its equity partners amended existing operating agreements governing investments for six investments in Europe which were accounted for using the equity method. As a result of obtaining control, the joint venture investments were consolidated as of March 31, 2014. The investments are presented as an unconsolidated investment for prior periods. See Note 4.

Contributions to Joint Ventures

During the three months ended March 31, 2014, Kennedy Wilson made $71.1 million in contributions to new and existing joint venture investments.

See the table below for a breakdown of contributions to new joint venture investments for the three months ended March 31, 2014:



	Multifamily			Commercial
(Dollars in millions)	Amount		No. of Properties	Amount		No. of Properties	Total		No. of Properties
Western U.S.	$	4.0	1	$	—	—	$	4.0	1
United Kingdom⁽¹⁾	—		—	57.2		14	57.2		14
Total contributions - new joint venture investments	$	4.0	1	$	57.2	14	$	61.2	15

⁽¹⁾Kennedy Wilson's contribution in a joint venture investment that was subsequently contributed into KWE as part of its initial investment. See note 1.

In addition to the capital contributions above Kennedy Wilson contributed $9.9 million to existing joint ventures to fund our share of a development project and for working capital needs.

Distributions from Joint Ventures

During the three months ended March 31, 2014, Kennedy Wilson received $17.3 million in operating and investing distributions from its joint ventures. Investing distributions resulted from the refinancing of property level debt and asset sales. Operating distributions resulted from operating cash flow generated by the joint venture investments.

The following table details cash distributions by investment type and geographic location for the three months ended March 31, 2014:



	Multifamily				Commercial				Residential and Other				Total
(Dollars in millions)	Operating		Investing		Operating		Investing		Operating		Investing		Operating		Investing
Western U.S.	$	2.3	$	1.5	$	1.5	—		0.8		$	1.9	$	4.6	$	3.4
Japan	0.4		—		—		—		—		—		0.4		—
United Kingdom	—		—		2.3		4.4		—		—		2.3		4.4
Ireland	—		—		1.2		—		—		—		1.2		—
Spain	—		—		—		—		—		1.0		—		1.0
Total	$	2.7	$	1.5	$	5.0	$	4.4	$	0.8	$	2.9	$	8.5	$	8.8

Variable Interest Entities

Kennedy Wilson has determined that it has investments in five variable interest entities ("VIEs") as of March 31, 2014 and has concluded that Kennedy Wilson is not the primary beneficiary of any of the investments. As of March 31, 2014, the five VIEs had assets totaling $184.9 million with Kennedy Wilson’s exposure to loss as a result of its interests in these VIEs totaling $71.1 million related to its equity contributions.

The Company determines the appropriate accounting method with respect to all investments that are not VIEs based on the control-based framework (controlled entities are consolidated) provided by the consolidations guidance in ASC Topic 810. The Company's determination considers specific factors cited under ASC 810-20 "Control of Partnerships and Similar Entities" which presumes that control is held by the general partner (and managing member equivalents in limited liability companies). Limited partners' substantive participation rights may overcome this presumption of control. The Company accounts for joint ventures it is deemed not to control using the equity method of accounting while controlled entities are consolidated.

Capital Commitments

As of March 31, 2014, Kennedy Wilson has unfulfilled capital commitments totaling $12.5 million to four of its joint ventures. We may be called upon to contribute additional capital to joint ventures in satisfaction of Kennedy Wilson capital commitment obligations.

Guarantees

Kennedy Wilson has certain guarantees associated with loans secured by consolidated assets or assets held directly or in various joint ventures. As of March 31, 2014, the maximum potential amount of future payments (undiscounted) Kennedy Wilson could be required to make under the guarantees was approximately $62.6 million which is approximately 1% of investment level debt of the Company. The guarantees expire through 2021, and Kennedy Wilson’s performance under the guarantees would be required to the extent there is a shortfall upon liquidation between the principal amount of the loan and the net sale proceeds from the property. Based upon Kennedy Wilson’s evaluation of guarantees under ASC Subtopic 460-10 "Estimated Fair Value of Guarantees," the estimated fair value of guarantees made as of March 31, 2014 and December 31, 2013 is immaterial.

Investments in loan pool participation

As of March 31, 2014 and December 31, 2013, the Company's investment in loan pool participations totaled $35.2 million and $34.7 million, respectively.

The following table represents the demographics of the Company's investment in the loan pools including the initial UPB and the UPB as of March 31, 2014.



(Dollars in millions)		Kennedy Wilson Ownership	Unpaid Principal Balance				Kennedy Wilson Initial Equity Invested		Investment Balance at March 31, 2014		Expected Accretion Over Total Estimated Collection Period
Acquisition Date	Location	Kennedy Wilson Ownership	Initial⁽¹⁾		March 31, 2014⁽¹⁾		Kennedy Wilson Initial Equity Invested		Investment Balance at March 31, 2014		Expected Accretion Over Total Estimated Collection Period		Accreted to Date
February 2010⁽²⁾	Western U.S.	15.0%	$	342.4	$	—	$	11.1	$	0.6	$	4.6	$	4.6
December 2011	United Kingdom	12.5%	2,174.6		31.8		61.2		—		19.2		19.2
April 2012	Western U.S.	75.0%	43.4		2.8		30.9		2.3		4.3		3.9
August 2012	Ireland	10.0%	496.6		347.6		7.0		8.4		1.7		0.6
December 2012	United Kingdom	5.0%	646.7		150.1		19.3		4.4		4.0		2.2
April 2013	United Kingdom	10.0%	193.8		131.6		13.0		11.0		3.2		0.9
August 2013	United Kingdom	20.0%	142.1		142.1		7.5		8.5		4.4		0.8
Total			$	4,039.6	$	806.0	$	150.0	$	35.2	$	41.4	$	32.2

⁽¹⁾ Estimated foreign exchange rate is £0.60 = $1 USD and €0.73 = $1 USD.

⁽²⁾ Equity invested represents guarantee claims against note holders in loan pool.

The following table presents the income from unconsolidated investments for loan pools and foreign currency gain and (loss) recognized by Kennedy Wilson during the three months ended March 31, 2014 and 2013 for the loan pools that were outstanding:



	Three Months Ended March 31,
(Dollars in millions)	2014		2013
Income from unconsolidated investments	$	2.1	$	2.5
Foreign currency translation gain (loss)	0.2		(3.9		)
Total	$	2.3	$	(1.4	)