Real Estate and In-Place Lease Value

6 Months Ended

Jun. 30, 2023

The following table summarizes Kennedy Wilson's investment in consolidated real estate properties at June 30, 2023 and December 31, 2022:


	June 30,		December 31,
(Dollars in millions)	2023		2022
Land	$	1,309.5	$	1,319.2
Buildings	3,802.5		3,961.9
Building improvements	502.0		494.2
In-place lease values	295.5		295.0
	5,909.5		6,070.3
Less accumulated depreciation and amortization	(927.5)		(882.2)
Real estate and acquired in place lease values, net of accumulated depreciation and amortization	$	4,982.0	$	5,188.1

Real property, including land, buildings, and building improvements 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 6.8 years at June 30, 2023.

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 relative fair values. The purchase price generally approximates the fair value of the properties as acquisitions are transacted with willing third-party sellers.

During the six months ended June 30, 2023, Kennedy Wilson did not acquire any consolidated properties.

Gain on Sale of Real Estate, Net

During the six months ended June 30, 2023, Kennedy Wilson recognized gains on sale of real estate, net of $108.2 million. These gains were primarily due to (i) the Company's sale of a 49% of its equity interest in two previously wholly-owned market-rate multifamily properties into an existing joint venture platform managed by the Company and retained a noncontrolling 51% interest in such properties, which resulted in a gain on sale of real estate of $79.5 million; (ii) the sale of a Western United States property to VHH, pursuant to which the Company retains an interest in the asset through its ownership interest in VHH, which resulted in a gain of $15.1 million; and (iii) the remainder of gain on sale of real estate relates to the sale of non-core retail and residential properties in the Western United States and the United Kingdom. The gain on sale of real estate, net include an impairment loss of $10.6 million relating to non-core office and retail buildings in the United Kingdom and Ireland that were marketed for sale during such period.

During the six months ended June 30, 2022, Kennedy Wilson recognized gains on sale of real estate, net of $13.8 million which includes impairment loss of $5.0 million relating to non-core office and retail buildings in the United Kingdom that are being marketed for sale.

Leases

The Company leases its operating properties to customers under agreements that are classified as operating leases. The total minimum lease payments provided for under the leases are recognized on a straight-line basis over the lease term unless circumstances indicate revenue should be recognized on a cash basis. The majority of the Company's rental expenses, including common area maintenance and real estate taxes and insurance on commercial properties, are recovered from the Company's tenants. The Company records amounts reimbursed by customers in the period that the applicable expenses are incurred, which is generally ratably throughout the term of the lease. The reimbursements are recognized in rental income in the consolidated statements of operations as the Company is the primary obligor with respect to purchasing and selecting goods and services from third-party vendors and bearing the associated credit risk.

The following table summarizes the minimum lease payments due from the Company's customers on leases with lease periods greater than one year at June 30, 2023:


(Dollars in millions)	Minimum
	Rental Revenues(1)
2023 (remainder)	$	124.8
2024	136.1
2025	122.8
2026	103.7
2027	82.3
Thereafter	265.6
Total	$	835.3

(1) These amounts do not reflect future rental revenues from the renewal or replacement of existing leases, rental increases that are not fixed and exclude reimbursements of rental expenses.