Investments In Joint Ventures

9 Months Ended

12 Months Ended

Sep. 30, 2011

Dec. 31, 2010

Investments In Joint Ventures [Abstract]

Investments In Joint Ventures

NOTE 6—INVESTMENTS IN JOINT VENTURES

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

During the nine months ended September 30, 2011, Kennedy-Wilson invested in nine new joint ventures totaling $50.7 million and invested $2.7 million to buy out ownership interests from joint venture partners.

During the same period, Kennedy-Wilson made $35.3 million in contributions to existing joint venture investments. Of this amount, $14.2 million, including $0.5 million of noncontrolling interests, was contributed by Kennedy-Wilson to its joint venture in Japan for the purposes of refinancing a large portion of the Japanese multifamily portfolio, $4.5 million was contributed by Kennedy-Wilson to refinance two multifamily projects in Kent, Washington, $3.6 million was contributed to pay down a loan on an existing residential investment in Walnut Creek, California, and $7.0 million was contributed to increase its interest in a project in Northern California.

Additionally, during the nine months ended September 30, 2011, Kennedy-Wilson received $21.1 million in distributions from its joint ventures.

As of September 30, 2011, Kennedy-Wilson has unfulfilled capital commitments totaling $15.6 million to its joint ventures. As we identify investment opportunities in the future, we may be called upon to contribute additional capital to joint ventures in satisfaction of our capital commitment obligations.

Kennedy-Wilson has certain guarantees associated with loans secured by assets held in various joint venture partnerships. The maximum potential amount of future payments (undiscounted) Kennedy-Wilson could be required to make under the guarantees was approximately $21.4 million and $28.4 million as of September 30, 2011 and December 31, 2010, respectively. The guarantees expire through 2015 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 sales proceeds of the property. Based upon Kennedy-Wilson's evaluation of guarantees under Estimated Fair Value of Guarantees ASC Subtopic 460-10, the estimated fair value of guarantees made as of September 30, 2011 and December 31, 2010 is immaterial.

NOTE 7—INVESTMENTS IN JOINT VENTURES

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

Summarized financial data of the joint ventures is as follows:

	December 31, 2010
	KW Residential, LLC		Greater than 20% (1)		10% - 20% (2)		Other		Total
Balance sheets for equity method investments:
Assets
Cash and restricted cash	$	26,792,000	$	25,248,000	$	396,000	$	25,647,000	$	78,083,000
Real estate		609,430,000		215,473,000		119,252,000		1,787,396,000		2,731,551,000
Other		10,571,000		7,056,000		28,583,000		183,125,000		229,335,000
Total assets	$	646,793,000	$	247,777,000	$	148,231,000	$	1,996,168,000	$	3,038,969,000
Liabilities
Debt	$	338,228,000	$	81,544,000	$	66,198,000	$	1,351,208,000	$	1,837,178,000
Other		18,457,000		4,219,000		3,273,000		44,454,000		70,403,000
Total liabilities		356,685,000		85,763,000		69,471,000		1,395,662,000		1,907,581,000
Partners' capital
Kennedy Wilson		108,265,000		35,807,000		36,182,000		76,713,000		256,967,000
Other partners		181,843,000		126,207,000		42,578,000		523,793,000		874,421,000
Total partners' capital		290,108,000		162,014,000		78,760,000		600,506,000		1,131,388,000
Total liabilities and partners' capital	$	646,793,000	$	247,777,000	$	148,231,000	$	1,996,168,000	$	3,038,969,000

	December 31, 2009
	KW Residential, LLC		Other		Total
Balance sheets for equity method investments:
Assets
Cash and restricted cash	$	32,343,000	$	18,721,000	$	51,064,000
Real estate		548,927,000		1,759,495,000		2,308,422,000
Other		12,965,000		169,622,000		182,587,000
Total assets	$	594,235,000	$	1,947,838,000	$	2,542,073,000
Liabilities
Debt	$	307,877,000	$	1,045,862,000	$	1,353,739,000
Other		11,618,000		51,234,000		62,852,000
Total liabilities		319,495,000		1,097,096,000		1,416,591,000
Partners' capital
Kennedy Wilson		91,276,000		87,766,000		179,042,000
Other partners		183,464,000		762,976,000		946,440,000
Total partners' capital		274,740,000		850,742,000		1,125,482,000
Total liabilities and partners' capital	$	594,235,000	$	1,947,838,000	$	2,542,073,000

Total investments are comprised of the following:

	Year ended December 31, 2010
	KW Residential, LLC		Greater than 20% (1)		10% - 20% (2)		Other		Total
Equity method	$	108,265,000	$	35,807,000	$	36,182,000	$	76,713,000	$	256,967,000
Unrealized gain on fair value option		—		—		7,384,000		—		7,384,000
		108,265,000		35,807,000		43,566,000		76,713,000		264,351,000
Cost method		—		—		—		2,535,000		2,535,000
Total Investments	$	108,265,000	$	35,807,000	$	43,566,000	$	79,248,000	$	266,886,000

	Year ended December 31, 2009
	KW Residential, LLC		Other		Total
Equity method	$	91,276,000	$	87,766,000	$	179,042,000
Unrealized gain on fair value option				4,907,000		4,907,000
		91,276,000		92,673,000		183,949,000
Cost method		—		1,303,000		1,303,000
Total Investments	$	91,276,000	$	93,976,000	$	185,252,000

	Year ended December 31, 2010
	KW Residential, LLC			Greater than 20% (1)			10% - 20% (2)			Other			Total
Statements of income:
Revenues	$	34,784,000		$	24,059,000		$	11,214,000		$	130,884,000		$	200,941,000
Depreciation		11,857,000			4,461,000			2,369,000			38,143,000			56,830,000
Interest		12,235,000			6,177,000			3,041,000			45,765,000			67,218,000
Other expenses		15,920,000			18,695,000			5,968,000			71,702,000			112,285,000
Total expenses		40,012,000			29,333,000			11,378,000			155,610,000			236,333,000
Gains on extinguishment of debt		—			9,092,000			—			4,734,000			13,826,000
Net (loss) Income	$	(5,228,000	)	$	3,818,000		$	(164,000	)	$	(19,992,000	)	$	(21,566,000	)
Net income allocation:
Kennedy Wilson	$	(1,670,000	)	$	7,238,000		$	2,856,000		$	(353,000	)	$	8,071,000
Other partners		(3,558,000	)		(3,420,000	)		(3,020,000	)		(19,639,000	)		(29,637,000	)
Net (loss) income	$	(5,228,000	)	$	(3,818,000	)	$	(164,000	)	$	(19,992,000	)	$	(21,566,000	)

	Year ended December 31, 2009								Year ended December 31, 2008
	KW Residential, LLC		Other			Total			KW Residential, LLC			Other		Total
Statements of income:
Revenues	$	32,750,000	$	140,119,000		$	172,869,000		$	28,323,000		$	173,146,000	$	201,469,000
Depreciation		12,021,000		36,221,000			48,242,000			5,413,000			40,155,000		45,568,000
Interest		14,828,000		51,764,000			66,592,000			12,936,000			51,689,000		64,625,000
Other expenses		17,361,000		66,228,000			83,589,000			14,044,000			61,969,000		76,013,000
Total expenses		44,210,000		154,213,000			198,423,000			32,393,000			153,813,000		186,206,000
Gains on extinguishment of debt		28,320,000		—			28,320,000			—			—		—
Net (loss) Income	$	16,860,000	$	(14,094,000	)	$	2,766,000		$	(4,070,000	)	$	19,333,000	$	15,263,000
Net income allocation:
Kennedy Wilson		5,949,000		3,107,000			9,056,000			(694,000	)		4,812,000		4,118,000
Other partners		10,911,000		(17,201,000	)		(6,290,000	)		(3,376,000	)		14,521,000		11,145,000
Net (loss) income	$	16,860,000	$	(14,094,000	)	$	2,766,000		$	(4,070,000	)	$	19,333,000	$	15,263,000

(1) Investments in these joint ventures exceeds 20% of the total assets of Kennedy-Wilson as of December 31, 2010 or equity in income from the joint venture for the year ended December 31, 2010 exceeds 20% of Kennedy-Wilson's income from continuing operations before income taxes for the year ended December 31, 2010.

(2) Investments in these joint ventures exceeds 10% of the total assets of Kennedy-Wilson at December 31, 2010 or equity in income from the joint venture for the year ended December 31, 2010 exceeds 10% of Kennedy-Wilson's income from continuing operations before income taxes for the year ended December 31, 2010.

Equity in joint venture income for the years ended December 31:

	2010		2009			2008
Net income allocation	$	8,071,000	$	9,056,000		$	4,118,000
Unrealized gain on fair value option		2,477,000		(1,037,000	)		5,979,000
	$	10,548,000	$	8,019,000		$	10,097,000

In 2010, Kennedy-Wilson formed a new joint venture platform which provides for a capital commitment from a joint venture partner in the amount of $250 million with Kennedy-Wilson's capital commitment totaling $28 million. The commitment from the partner has a three-year investment period and each proposed investment within the platform is at the discretion of the joint venture partner. As of December 31, 2010, the partner has contributed $132.3 million of capital into three joint ventures. Through December 31, 2010, Kennedy-Wilson has contributed capital in the amount of $14.7 million, including $1.7 million of noncontrolling interests, into the three joint ventures. Of this amount, $12.7 million, including $1.3 million of noncontrolling interests, was used to buyout ownership interests from an existing joint venture partner in KW Residential, LLC ("KWR"). The remaining amount of $2.0 million, including $0.4 million of noncontrolling interests, was used to invest in new investments.

Additionally, during 2010, Kennedy-Wilson invested $14.2 million, including $4.4 million of noncontrolling interests, in six new joint ventures and recapitalized five joint ventures with $11.5 million, including $0.3 million of noncontrolling interests, to buyout ownership interests from existing joint venture partners.

Also, during 2010, Kennedy-Wilson made $31.0 million in additional contributions to existing joint venture investments. Of this amount $17.4 million was used by several joint ventures to pay down and/or refinance existing debt, which resulted in $5.3 million of gains from the early extinguishment of debt that is included in equity in joint venture income in the accompanying consolidated statements of operations and comprehensive income (loss).

In 2010, Kennedy-Wilson received $16.1 million in distributions from its joint ventures, of which $5.9 million was from operations and $10.2 million was return of capital.

In 2010, Kennedy-Wilson recognized $10.1 million in gains from foreign currency translation adjustments from its investment in KWR. The foreign currency gain is included in other comprehensive income, net of deferred income taxes of $4.1 million in the accompanying consolidated statements of income and comprehensive income (loss).

Kennedy-Wilson has determined that it has no investments in variable interest entities as of December 31, 2010 and had investments in two variable interest entities as of December 31, 2009 and has concluded that Kennedy-Wilson is not the primary beneficiary. As of December 31, 2009, the variable interest entities had assets totaling $132 million with Kennedy-Wilson's exposure to loss as a result of its interests in these variable interest entities totaling $7.0 million related to its equity contributions. In addition, as of December 31, 2009, Kennedy-Wilson had $14.2 million in the form of loan guarantees that represented 20% of the mortgage loans of the underlying variable interest entities.

Investments in which Kennedy-Wilson does not have significant influence are accounted for under the cost method of accounting. As of December 31, 2010 and 2009, Kennedy-Wilson had five investments accounted for under the cost method with a carrying value totaling $2.5 million and $1.3 million, respectively.

Distributions in excess of Kennedy-Wilson's basis in investments in joint ventures totaling $56,000 were deferred for the year ended December 31, 2008 due to continuing involvement in the real estate sold by the joint venture. Total deferred revenues and gains on sale of investments in joint ventures included in accrued expenses and other liabilities were $3,943,000 and $3,664,000 at December 31, 2010 and 2009, respectively.