INVESTMENT DEBT

Investment debt at September 30, 2017 and December 31, 2016 consists of the following:



(Dollars in millions)		Carrying Amount of Investment Debt as of⁽¹⁾
Investment Debt by Product Type	Region	September 30, 2017			December 31, 2016
Mortgage debt
Multifamily⁽¹⁾	Western U.S.	$	1,202.1		$	1,180.8
Commercial	Western U.S.	385.9			290.2
Residential, Hotel and Other	Western U.S.	49.3			49.8
Commercial⁽¹⁾⁽²⁾	Ireland	446.5			331.5
Multifamily ⁽¹⁾⁽²⁾	Ireland	147.4			131.3
Residential and Other⁽¹⁾⁽²⁾	Ireland	42.9			28.0
Hotel	Ireland	85.1			75.7
Commercial⁽²⁾	Spain	94.2			84.4
Commercial⁽¹⁾⁽²⁾	United Kingdom	599.1			616.9
Secured investment debt		3,052.5			2,788.6

Unsecured investment debt ⁽¹⁾⁽²⁾	United Kingdom	1,315.6			1,192.4
Investment debt (excluding loan fees)		$	4,368.1		$	3,981.0
Unamortized loan fees		(27.3		)	(24.9		)
Total Investment debt		$	4,340.8		$	3,956.1

⁽¹⁾The investment debt payable balances include unamortized debt premiums (discounts). Debt premiums (discounts) represent the difference between the fair value of debt and the principal value of debt assumed in various acquisitions and are amortized into interest expense over the remaining term of the related debt in a manner that approximates the effective interest method. The unamortized loan premium (discount) as of September 30, 2017 and December 31, 2016 was ($0.4 million) and $0.9 million, respectively.

⁽²⁾Kennedy Wilson owned approximately 23.8% and 23.6% of the total issued share capital of KWE as of September 30, 2017 and December 31, 2016, respectively. See the table below for a detailed breakout.



(Dollars in millions)		Carrying amount of investment debt as of ⁽¹⁾
Types of Property Pledged as Collateral (KWE)	Region	September 30, 2017			December 31, 2016
Commercial⁽¹⁾⁽²⁾	Ireland	285.8			254.7
Commercial⁽¹⁾⁽²⁾	Spain	94.2			84.4
Commercial⁽¹⁾⁽²⁾	United Kingdom	528.0			551.4
Investment debt		$	908.0		$	890.5

Unsecured ⁽¹⁾⁽²⁾	United Kingdom	1,315.6			1,192.4
Investment debt (excluding loan fees)		$	2,223.6		$	2,082.9
Unamortized loan fees		(12.2		)	(13.3		)
Total Investment debt		$	2,211.4		$	2,069.6

⁽¹⁾The mortgage loan payable balances include unamortized debt premiums (discounts). Debt premiums (discounts) represent the difference between the fair value of debt and the principal value of debt assumed in various acquisitions and are amortized into interest expense over the remaining term of the related debt in a manner that approximates the effective interest method. The unamortized loan discount as of September 30, 2017 and December 31, 2016 was $4.3 million and $4.1 million, respectively.

⁽²⁾Kennedy Wilson owned approximately 23.8% and 23.6% of the total issued share capital of KWE as of September 30, 2017 and December 31, 2016, respectively.

The investment debt had a weighted average interest rate of 3.39% and 3.33% per annum at September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017, 68% of KW Group's investment level debt is fixed rate, 15% is floating rate with interest caps and 17% is floating rate without interest caps, compared to 75% fixed rate, 15% floating rate with interest caps and 10% floating rate without interest caps, as of December 31, 2016.

During the second quarter of 2015, KWE completed its inaugural bond offering of approximately $401.9 million (based on September 30, 2017 rates) (£300 million) in 3.95% fixed-rate senior unsecured bonds due 2022. During the third quarter of 2016, KWE completed an additional offering of approximately $268.0 million (based on September 30, 2017 rates) (£200 million) in 3.95% fixed-rate senior unsecured bonds due 2022. KWE effectively reduced the interest rate to 3.35% as a result of it entering into swap arrangements to convert 50% of the proceeds into Euros.

In addition, during the fourth quarter of 2015, KWE established a £2.0 billion (approximately $2.7 billion based on September 30, 2017 rates) Euro Medium Term Note ("EMTN") Programme. Under the EMTN Programme, KWE may issue, from time to time, up to £2.0 billion of various types of debt securities in certain markets and currencies. During the fourth quarter of 2015 and second quarter of 2016, KWE drew down under its EMTN Programme, with the issuances of senior unsecured notes for an aggregate principal amount of approximately $649.8 million (based on September 30, 2017 rates) (€550 million) (the "KWE Notes"). The KWE Notes were issued at a discount and have a carrying value of $645.9 million with an annual fixed coupon of 3.25%, and mature in 2025. As KWE invests proceeds from the KWE Notes to fund equity investments in new euro denominated assets KWE designates the KWE Notes as net investment hedges under FASB ASC Topic 815. Subsequent fluctuations in foreign currency rates that impact the carrying value of the KWE Notes are recorded to accumulated other comprehensive income. During the nine months ended September 30, 2017, KW Group recognized a loss of $17.9 million in accumulated other comprehensive income due to the strengthening of the euro against the GBP during the period. The KWE Notes rank pari passu with the KWE Bonds (as defined below), and are subject to the same restrictive covenants.

The trust deed that governs the bonds contains various restrictive covenants for KWE, including, among others, limitations on KWE’s and its material subsidiaries’ ability to provide certain negative pledges. The trust deed limits the ability of KWE and its subsidiaries to incur additional indebtedness if, on the date of such incurrence and after giving effect to the incurrence of the new indebtedness, (1) KWE’s consolidated net indebtedness (as defined in the trust deed) would exceed 60% of KWE’s total assets (as calculated pursuant to the terms of the trust deed); and (2) KWE’s consolidated secured indebtedness (as defined in the trust deed) would exceed 50% of KWE’s total assets (as calculated pursuant to the terms of the trust deed). The trust deed also requires KWE, as of each reporting date, to maintain an interest coverage ratio (as defined in the trust deed) of at least 1.50 to 1.00 and have unencumbered assets of no less than 125% of its unsecured indebtedness (as defined in the trust deed). As of September 30, 2017, KWE was in compliance with these covenants.

In August 2014, KWE entered into a three-year unsecured floating rate revolving debt facility ("KWE Facility") with Bank of America Merrill Lynch, Deutsche Bank, and J.P. Morgan Chase of approximately $301.5 million (£225 million) based on rates as of September 30, 2017. As of September 30, 2017, the unsecured credit facility was undrawn, with $301.5 million (£225 million) still available based on rates as of September 30, 2017. On July 11, 2017, KWE secured an extension to the terms of the KWE Facility. On October 20, 2017 the KWE Facility was terminated. (see Note 16 for further details).

During the nine months ended September 30, 2017, six acquisitions were partially financed with mortgages, one existing mortgage was refinanced, and one investment acquired supplemental financing.

The aggregate maturities of investment debt subsequent to September 30, 2017 are as follows:



(Dollars in millions)	Aggregate Maturities
2017	$	61.6
2018	173.5
2019	605.5
2020	269.5
2021	103.8
Thereafter	3,154.6
	4,368.5
Debt discount	(0.4		)
Unamortized loan fees	(27.3		)
	$	4,340.8