The long game
Kennedy Wilson boss on staying tax-efficient — and staying here
THE president and CEO of Kennedy Wilson Europe, Mary Ricks, has confirmed her company’s interest in expanding its Irish property portfolio through the acquisition of assets from international private equity looking to cash-in on investments they made in Ireland during the financial crisis.
“There are always opportunities from people selling whether it’s private equity or a bank or whoever,” Ricks said in an interview with the Sunday Independent last Friday following the publication of KWE’s half-year results, which showed a 5pc rise in net asset value as the valuation of its assets exceeded stg£3bn (€3.54bn).
While the KWE chief acknowledged her company was an “opportunistic investor” which had timed the Irish market well when it began acquiring assets here in 2011, she stressed that Kennedy Wilson were “long-term real estate operators”. This she noted, made the company “quite different” to the private equity firms which typically hold assets for a limited period before selling them on again.
She said: “The biggest differential between what many people would call ‘vulture funds’ and what I would like to call private equity firms, and Kennedy Wilson Europe is that those private equity firms have a fixed life, and they’re looking for IRRs (Internal Rate of Return).
“Clearly to put up a higher IRR, the time value of money is involved in that. So you’ ll see a lot of these private equity firms come in and out of transactions [relatively quickly] because it’s helpful to the IRR. They have a fixed life, so they need to get out of the fund and do their next fund.”
Referring to KWE’s business model, Ricks added: “Kennedy Wilson is a permanent capital vehicle and we’ve been that very consciously. We want to make sure there’s no time pressure whatsoever to be selling, or trading out an asset. Sometimes you can leave money on the table or you can make poor decisions based on the lifespan of a fund or of a investment vehicle. That’s the biggest differential.”
Kennedy Wilson Europe acquired Bank of Ireland’s real estate business in 2011. Today, they have more than 200 commercial and residential leases in Dublin. Its Irish portfolio consists of high-profile assets such as Stillorgan shopping centre, Portmarnock Hotel and Golf Links, the Baggot Plaza office building in D4, and numerous multi-unit residential rental developments, including Clancy Quay, the Alto Vetro and Alliance buildings in Dublin city centre, and the Vantage in south county Dublin.
While the company said in its latest results that income derived from its Irish portfolio had fallen on an annual basis from €87m to €81m, its Irish-derived rental income totalled stg£19m at the end of June, compared to stg£13m for the same period last year.
Asked about international investors’ use of Section 110 of the 1997 Finance Act to avoid paying tax on profits made on the sale of Irish assets, Ricks said: “What I’ll say about that is that Kennedy Wilson is always looking to be the most tax-efficient company, but right now we just don’t know enough. We’re trying to be efficient in every way and trying to increase returns to our investors and to our shareholders.”
Kennedy Wilson Europe’s Irish investments are held through two qualifying investor alternative investment funds, making them exempt from any Irish taxation on income and gains.
Asked if Kennedy Wilson broaden its reach in the residential rental market beyond its existing high-end offerings in Dublin, Ricks said she hoped Kennedy Wilson was “doing our part in helping address the lack of housing supply”.
“We’re always looking for the best risk-adjusted returns. Clearly we’re investing quite a lot of capital in the deals we are buying, and providing amenities that our tenants can enjoy. Our residents rent by choice, so we’re trying to provide the best amenities that we can and be the best landlord we can.”