REAL ESTATE AND IN-PLACE LEASE VALUE

The following table summarizes the Company's investment in consolidated real estate properties at June 30, 2014 and December 31, 2013:



	June 30,			December 31,
(Dollars in millions)	2014			2013
Land	$	935.5		$	187.8
Buildings	2,256.7			484.1
Building improvements	34.3			12.7
In-place lease value	384.3			29.8
	3,610.8			714.4
Less accumulated depreciation and amortization	(57.4		)	(26.3		)
Real estate, net	$	3,553.4		$	688.1

Real property, including land, buildings, and building improvement, are included in real estate and are generally stated at cost. Buildings and building improvements are depreciated on a straight-line method over their estimated lives not to exceed 40 years. Acquired in-place lease values are recorded at their estimated fair value and depreciated over their respective weighted-average lease term which was 5.3 years at June 30, 2014.

Consolidated Acquisitions

The purchase of property is recorded to land, buildings, building improvements, and intangible lease value (including the value of above-market and below-market leases, acquired in-place lease values, and tenant relationships, if any) based on their respective estimated fair values. The purchase price generally approximates the fair value of the properties as acquisitions are generally transacted with third-party willing sellers. Acquisition-related costs are expensed as incurred.

During the six months ended June 30, 2014, Kennedy Wilson and its consolidated subsidiaries acquired the following properties:



(Dollars in millions)				At Acquisition⁽⁵⁾
Date acquired	Type	Description	Location	Land		Building		Intangible assets		Investment debt		KWH Shareholders' Equity
1/20/2014	Commercial ⁽¹⁾	Portfolio of 14 commercial, retail, and industrial properties	United Kingdom	$	28.9	$	47.1	$	41.4	$	—	$	58.7
2/20/2014	Hotel	193 room hotel	Western U.S.	1.3		8.3		—		—		6.9
2/28/2014	Multifamily	24 apartment units, 2 penthouse units, and 1,000 square feet of retail	Ireland	0.6		15.1		0.4		9.6		6.5
3/28/2014	Commercial⁽²⁾	26 commercial properties throughout England and Scotland	United Kingdom	54.0		132.0		54.0		—		29.3
3/31/2014	Multifamily⁽³⁾	281 completed apartments and a partially completed residential block, 725k square feet of commercial space, and 7.4 acres of commercial development land	Ireland	32.7		80.9		1.2		78.9		35.9
4/1/2014	Commercial	98k square foot retail center	Western U.S.	2.4		5.8		0.4		6.0		1.9
4/30/2014	Multifamily	203 unit apartment building	Western U.S.	2.7		24.0		0.3		13.3		13.3
6/25/2014	Multifamily⁽²⁾	81 unit apartment building	Ireland	4.8		15.0		0.4		—		2.7
6/26/2014	Commercial⁽²⁾	13 commercial properties	Ireland	104.9		344.3		52.3		273.1		30.1
6/27/2014	Commercial⁽²⁾⁽⁴⁾	20 commercial properties throughout England and Scotland	United Kingdom	106.8		300.7		127.0		—		70.6
6/30/2014	Multifamily	542 unit apartment building	Western U.S.	38.3		57.5		0.6		77.2		18.6
				$	377.4	$	1,030.7	$	278.0	$	458.1	$	274.5

⁽¹⁾On February 28, 2014, the Company contributed its 50% interest in this portfolio to KWE as part of the Company's investment in KWE's initial public offering.

⁽²⁾These portfolios of properties were acquired by KWE.

⁽³⁾ This asset was sold to KWE on June 24, 2014.

⁽⁴⁾ KWE acquired subordinated notes on this property during the quarter and used its position as a debt holder to secure the transaction. The Company recognized an acquisition-related gain of $15.2 million on the transaction due to its ability to acquire the underlying real estate at a discount to its fair value.

⁽⁵⁾Excludes acquisition expenses and net other assets

Consolidation of previously unconsolidated investments

On March 31, 2014, the Company and one of its equity partners amended and restated existing operating agreements governing six separate joint ventures that hold real estate-related investments located in the U.K. and Ireland. The Company has an approximate 50% ownership interest in these investments.

On June 30, 2014, the Company and one of its equity partners amended and restated the existing operating agreement of KW Residential ("KWR") which governs 50 multifamily properties in and around Tokyo, Japan comprising approximately 2,400 units. The Company has an approximate 41% ownership interest in these investments.

These joint ventures were previously accounted for by the Company on an equity method basis due to substantive participation of the equity partners in the operational control over the real estate assets. The operating agreements of the investments were amended and restated to give the Company full operational control over the real estate assets while the equity partners retained only certain protective rights. Given that the Company now controls the joint ventures and the ultimate real estate assets held by the joint ventures under the amended and restated operating agreements, we concluded that it was required to change the accounting treatment of these joint ventures from the equity method to consolidated treatment pursuant to ASC 810 Consolidation.

As a result of gaining control, the Company was required to consolidate the assets and liabilities of these properties at fair value in accordance with FASB ASC Topic 805 Business Combinations. As the fair value of our interests in these properties were in excess of their carrying value of their ownership interest, we recorded acquisition-related gains in the accompanying consolidated statement of operations for the three and six months ended June 30, 2014 as further detailed below. See Note 6 - Fair Value Measurements for further detail of the methodology used to determine the fair value of the assets and liabilities acquired in these transactions.

The following table summarizes the assets and liabilities assumed as a result of gaining control of these properties and the acquisition-related gains recognized:



(Dollars in millions)
Property	Type	Location	Cash		Real estate and acquired in-place lease values, net		Accounts receivable and other assets		Accounts payable, accrued expenses, and other liabilities		Investment debt		Noncontrolling interests		Acquisition related gain
Three multifamily properties	Multifamily	Ireland	$	3.6	$	248.5	$	0.9	$	5.4	$	114.3	$	66.6	$	39.3
Two office properties	Commercial	Ireland	4.3		223.9		7.6		4.9		75.2		77.9		33.5
Two commercial properties and loans secured by real estate	Commercial & Loans	U.K.	9.6		195.0		5.6		8.1		100.8		62.0		11.9
50 multifamily properties	Multifamily	Japan	21.0		501.2		14.3		4.6		283.7		146.8		66.7
			$	38.5	$	1,168.6	$	28.4	$	23.0	$	574.0	$	353.3	$	151.4

Loans converted to real estate

In addition, during the quarter ended March 31, 2014, the Company foreclosed on a 133,000 square foot retail center and an adjacent 2.4 acre vacant lot in Van Nuys, CA. As a result of the foreclosure, the Company was required to consolidate the assets and liabilities of the retail center at fair value under FASB ASC Topic 805 - Business Combinations and recorded the vacant lot at fair market value. As the fair value of the assets was in excess of the basis in the previously held mortgage notes, the Company recognized a $3.7 million acquisition-related gain.

Pro forma results of operations

The results of operations of the assets acquired have been included in our consolidated financial statements since the date of their acquisition. The Company’s unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have occurred had this acquisition been consummated at the beginning of the periods presented.

The unaudited pro forma data presented below assumes that the acquisitions during the six months ended June 30, 2014 occurred as of January 1, 2013.



	Unaudited					Unaudited
	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in millions, except for per share data)	2014		2013			2014		2013
Pro forma revenues	$	113.6	$	78.3		$	209.1	$	140.5
Pro forma income from unconsolidated investments	27.1		(0.7		)	26.0		2.7
Pro forma net income (loss) attributable to Kennedy-Wilson Holdings, Inc. common shareholders	36.9		0.7			46.9		0.1
Pro forma net income (loss) per share:
Basic	$	0.41	$	0.01		$	0.53	$	—
Diluted	$	0.36	$	0.01		$	0.46	$	—