Kennedy-Wilson Holdings, Inc.KW
Kennedy-Wilson Holdings, Inc. Fair Value Disclosure
FAIR VALUE MEASUREMENTS AND THE FAIR VALUE OPTION
The following table presents fair value measurements (including items that are required to be measured at fair value and items for which the fair value option has been elected) as of December 31, 2025:
| (Dollars in millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Unconsolidated investments | $ | — | $ | — | $ | 1,789.9 | $ | 1,789.9 | ||||||||||||||||||
| Net currency derivative contracts | — | (34.6) | — | (34.6) | ||||||||||||||||||||||
| Total | $ | — | $ | (34.6) | $ | 1,789.9 | $ | 1,755.3 | ||||||||||||||||||
The following table presents fair value measurements (including items that are required to be measured at fair value and items for which the fair value option has been elected) as of December 31, 2024:
| (Dollars in millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Unconsolidated investments | $ | — | $ | — | $ | 1,884.4 | $ | 1,884.4 | ||||||||||||||||||
| Net currency derivative contracts | — | (1.2) | — | (1.2) | ||||||||||||||||||||||
| Total | $ | — | $ | (1.2) | $ | 1,884.4 | $ | 1,883.2 | ||||||||||||||||||
Unconsolidated Investments
Kennedy Wilson elected to use the FV Option for 73 unconsolidated investments to more accurately reflect the timing of the value created in the underlying investments and report those changes in current operations. Kennedy Wilson's investment balance in the FV Option investments was $1,664.4 million and $1,787.7 million at December 31, 2025 and 2024, respectively, which are included in unconsolidated investments in the accompanying balance sheets.
Additionally, Kennedy Wilson records its investments in its managed commingled funds (the "Funds") based upon the net assets that would be allocated to its interests in the Funds, assuming the Funds were to liquidate their investments at fair value as of the reporting date. The Company’s investment balance in the Funds was $125.5 million and $96.7 million at December 31, 2025 and 2024, respectively, which is included in unconsolidated investments in the accompanying consolidated balance sheets.
In estimating fair value of real estate held by the Funds and the 73 FV Option investments, the Company considers significant unobservable inputs to be the capitalization and discount rates.
The following table summarizes the Company's investments in unconsolidated investments held at fair value by type:
| (Dollars in millions) | December 31, 2025 | December 31, 2024 | |||||||||
| FV Option | $ | 1,664.4 | $ | 1,787.7 | |||||||
| Funds | 125.5 | 96.7 | |||||||||
| Total | $ | 1,789.9 | $ | 1,884.4 | |||||||
The following table presents changes in Level 3 investments, investments in investment companies and investments in joint ventures that elected the fair value option, for the years ended December 31:
| (Dollars in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Beginning balance | $ | 1,884.4 | $ | 1,927.0 | $ | 2,093.7 | ||||||||||||||
| Unrealized and realized gains, including carried interests | 196.7 | 142.2 | 111.5 | |||||||||||||||||
| Unrealized and realized losses | (103.8) | (178.1) | (377.4) | |||||||||||||||||
| Contributions | 114.6 | 105.3 | 168.8 | |||||||||||||||||
| Distributions | (374.9) | (97.2) | (143.9) | |||||||||||||||||
| Foreign exchange | 73.8 | (29.8) | 25.0 | |||||||||||||||||
| Other | (0.9) | 15.0 | 49.3 | |||||||||||||||||
| Ending balance | $ | 1,789.9 | $ | 1,884.4 | $ | 1,927.0 | ||||||||||||||
The Other balance for the year ended December 31, 2025 relates to activity at VHH. The Other balance for the year ended December 31, 2024 relates to the non-cash transfer of one consolidated multifamily property into VHH. The Other balance for the year ended December 31, 2023 primarily consists of non-cash contributions relating to two recapitalized multifamily investments into a separate account platform and one multifamily property into VHH. See notes to cash flow statement and Note 3 for further discussion regarding the sale.
The change in unrealized gains and losses on Level 3 investments during 2025 and 2024 for investments still held as of December 31, 2025 and 2024 were losses of $66.3 million and losses of $16.7 million, respectively. The change in unrealized and realized gains and losses are included in within income from unconsolidated investments on the accompanying consolidated statements of income.
Unobservable Inputs for Real Estate
The Company accounts for a number of unconsolidated investments under fair value, the accuracy of estimating fair value cannot be determined with precision and cannot be substantiated by comparison to quoted prices in active markets and may not be realized in a current sale or immediate settlement of the asset or liability. Recently, there has also been a lack of liquidity in the capital markets as well as limited transactions which has had impact on the inputs associated with fair values. Additionally, there are inherent uncertainties in any fair value measurement technique, and changes in the underlying assumptions used, including market-derived estimated capitalization rates, discount rates, liquidity risks, and estimates of future cash flows could significantly affect the fair value measurement amounts. All valuations of real estate involve subjective judgments.
Ongoing macroeconomic conditions, such as, but not limited to, elevated levels of inflation and interest rates, banks' ability and willingness to lend, recent adverse developments affecting regional banks and other financial institutions and the ongoing military conflicts around the world, continue to fuel recessionary fears and create volatility in our business results and operations. Any prolonged downturn in the financial markets or a recession, either globally or locally in the United States or in other countries in which we conduct business, could impact the fair value of investments held by the Company. As a result of the rapid development, fluidity and uncertainty surrounding these situations, the Company expects that information with respect to fair value measurement may change, potentially significantly, going forward and may not be indicative of the actual impact on our business, operations, cash flows and financial condition for the year ended December 31, 2025 and future periods.
In determining estimated fair market values, the Company utilizes two approaches to value real estate, a discounted cash flow analysis and direct capitalization approach.
Discounted cash flow models estimate future cash flows from a buyer's perspective (including terminal values) and compute a present value using a market discount rate. The holding period in the analysis is typically ten years. This is consistent with how market participants often estimate values in connection with buying real estate but these holding periods can be shorter depending on the life of the structure an investment is held within. The cash flows include a projection of the net sales proceeds at the end of the holding period, computed using a market reversionary capitalization rate. For our investment in VHH the Company fair values its general partner ("GP") interests net cashflows utilizing a levered discount rate.
Under the direct capitalization approach, the Company applies a market derived estimated capitalization rate to current and future income streams with appropriate adjustments for tenant vacancies or rent-free periods. These estimated capitalization rates and future income streams are derived from comparable property and leasing transactions and are considered to be key inputs in the valuation.
Other factors that the Company takes into account under both approaches may include transaction structuring efficiencies, tenancy details, planning, building and environmental factors that might affect the property.
The Company also utilizes valuations from independent real estate appraisal firms on some of its investments ("appraised valuations"), with certain investment structures requiring appraised valuations periodically (typically annually). All appraised valuations are reviewed and approved by the Company.
The Company has an investment in a Zonda, a technology based real estate business that offers residential construction data that is accounted for at fair value which is valued at the Company's share of the business using a multiple on trailing twelve months EBITDA.
The table below describes the range of inputs used as of December 31, 2025 for real estate assets:
| Estimated Rates Used For | |||||||||||||||||
| Capitalization Rates | Discount Rates | ||||||||||||||||
| Multifamily - Affordable | Income approach - discounted cash flow | 6.15% — 6.50% | 8.15% — 8.50% | ||||||||||||||
| Multifamily - Affordable GP interest | Income approach - discounted cash flow | N/A | 16.30% — 18.50% | ||||||||||||||
| Multifamily - Market Rate | Income approach - direct capitalization | 4.40% — 6.50% | N/A | ||||||||||||||
| Office | Income approach - discounted cash flow | 5.20% — 7.50% | 7.50% — 9.30% | ||||||||||||||
| Income approach - direct capitalization | 5.50% — 10.40% | N/A | |||||||||||||||
| Industrial | Income approach - discounted cash flow | 5.00% —6.30% | 6.30% — 7.80% | ||||||||||||||
| Income approach - direct capitalization | 4.00% — 9.50% | N/A | |||||||||||||||
| Hotel | Income approach - discounted cash flow | 5.50% | 9.00% | ||||||||||||||
In valuing indebtedness, Kennedy Wilson considers significant inputs to be the term of the debt, value of collateral, market loan-to-value ratios, market interest rates and spreads, and credit quality of investment entities. The credit spreads used by Kennedy Wilson to value floating rate indebtedness range from 1.60% to 3.80%, while the market rates used to value fixed rate indebtedness range from 4.10% to 9.30%.
There is no active secondary market for the Company's development projects and no readily available market value given the uncertainty of the amount and timing of future cash flows. Accordingly, determination of fair value of its
development projects requires judgment and extensive use of estimates. Therefore, the Company typically uses investment cost as the estimated fair value until future cash flows become more predictable. Additionally, the fair value of its development projects may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. If the Company were required to liquidate an investment in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the currently assigned valuations.
Currency Derivative Contracts
Kennedy Wilson uses foreign currency derivative contracts such as forward contracts and options to manage its foreign currency risk exposure against a portion of certain non-U.S. dollar denominated currency net investments. Foreign currency options are valued using a variant of the Black-Scholes model tailored for currency derivatives and the foreign currency forward contracts are valued based on the difference between the contract rate and the forward rate at maturity of the underlying currency applied to the notional value in the underlying currency discounted at a market rate for similar risks. Although the Company has determined that the majority of the inputs used to value its currency derivative contracts fall within Level 2 of the fair value hierarchy, the counterparty risk adjustments associated with the currency derivative contracts utilize Level 3 inputs. However, as of December 31, 2025 and 2024, Kennedy Wilson assessed the significance of the impact of the counterparty valuation adjustments on the overall valuation of its derivative positions and determined that the counterparty valuation adjustments are not significant to the overall valuation of its derivative. As a result, the Company has determined that our derivative valuation in its entirety be classified in Level 2 of the fair value hierarchy.
Changes in fair value are recorded in other comprehensive income (loss) in the accompanying consolidated statements of comprehensive income as the portion of the currency forward and option contracts used to hedge currency exposure of its certain consolidated subsidiaries qualifies as a net investment hedge under ASC Topic 815, Derivatives and Hedging. Changes in fair value on hedges associated with investments that are held at fair value are recorded through principal co-investments within income from unconsolidated investments. The Company has elected to amortize the spot to forward difference ("forward points") to interest expense over the contractual life of the hedges. On hedges associated with fair value investments the forward point amortization to interest expense is recorded as a component of principal co-investments.
The fair value of the currency derivative contracts held as of December 31, 2025 and 2024 are reported in other assets, net for hedge assets and included in accrued expenses and other liabilities for hedge liabilities on the accompanying balance sheet. See Note 15 for a complete discussion on other comprehensive income including currency forward and option contracts and foreign currency translations.
The table below details the currency forward contracts and currency option contracts Kennedy Wilson had as of December 31, 2025:
| (Dollars in millions) | December 31, 2025 | Year Ended December 31, 2025 | |||||||||||||||||||||||||||||||||||||||
| Currency Hedged | Underlying Currency | Notional | Hedge Asset | Hedge Liability | Change in Unrealized Losses | Recognized Losses | Interest Expense | Cash Paid | |||||||||||||||||||||||||||||||||
| Outstanding | |||||||||||||||||||||||||||||||||||||||||
| EUR | USD | € | 155.0 | $ | 0.2 | $ | 17.3 | $ | (1.0) | $ | (14.0) | $ | 1.6 | $ | — | ||||||||||||||||||||||||||
EUR(1) | GBP | € | 40.0 | — | 0.7 | — | — | — | — | ||||||||||||||||||||||||||||||||
| EUR | GBP | £ | 300.0 | 3.1 | — | (6.9) | — | 1.4 | — | ||||||||||||||||||||||||||||||||
| GBP | USD | £ | 597.0 | 0.4 | 20.3 | (19.9) | (3.8) | (0.1) | — | ||||||||||||||||||||||||||||||||
| Total Outstanding | 3.7 | 38.3 | (27.8) | (17.8) | 2.9 | — | |||||||||||||||||||||||||||||||||||
| Settled | |||||||||||||||||||||||||||||||||||||||||
| EUR | USD | — | — | — | (1.5) | 0.1 | (2.1) | ||||||||||||||||||||||||||||||||||
EUR(2) | GBP | — | — | (18.0) | — | — | — | ||||||||||||||||||||||||||||||||||
| GBP | USD | — | — | (9.7) | — | 0.1 | (10.0) | ||||||||||||||||||||||||||||||||||
| Total Settled | — | — | (27.7) | (1.5) | 0.2 | (12.1) | |||||||||||||||||||||||||||||||||||
| Total | $ | 3.7 | $ | 38.3 | $ | (55.5) | (3) | $ | (19.3) | $ | 3.1 | $ | (12.1) | ||||||||||||||||||||||||||||
(1) Hedge is held by KWE on its wholly-owned subsidiaries.
(2) Relates to KWE's Euro Medium Term Note. See discussion in Note 10.
(3) Excludes deferred tax expense of $13.6 million.
The gains and losses recognized through other comprehensive income (loss) will remain in accumulated other comprehensive income (loss) until the underlying investments they were hedging are substantially liquidated by Kennedy Wilson. During the year ended December 31, 2025, the Company reclassified a gain of $1.9 million from other comprehensive loss to gain on sale of real estate relating to the sale of office buildings in Ireland.
The currency derivative contracts discussed above are offset by foreign currency translation of the Company's foreign net assets. For the year ended December 31, 2025, Kennedy Wilson had a gross foreign currency translation losses on its net assets of $67.6 million. As of December 31, 2025, the Company has hedged 96% of the net asset carrying value of its euro denominated investments and 83% of the net asset carrying value of its GBP denominated investments. See Note 15 for a complete discussion on other comprehensive income including currency derivative contracts and foreign currency translations.
Interest Rate Derivatives
The Company has interest rate swaps and caps to hedge its exposure to rising interest rates. Changes in the value of interest rate swaps and caps that are undesignated are recorded to other income and had fair value loss of $2.6 million and fair value gain of $10.0 million for the years ended December 31, 2025 and 2024, respectively. Some of the Company's unconsolidated investments have interest rate caps, which resulted in a loss of $2.0 million and a gain of $0.4 million recorded in principal co-investments for the years ended December 31, 2025 and 2024, respectively.
The carrying amounts of cash and cash equivalents, accounts receivable including related party receivables, accounts payable, accrued expenses and other liabilities approximate fair value due to their short-term maturities. The carrying value of loans (excluding related party loans as they are presumed not to be an arm’s length transaction) approximates fair value as the terms are similar to loans with similar characteristics available in the market.
Debt liabilities are accounted for at face value plus net unamortized debt premiums. Debt assumed in an asset acquisition, or business combination, is recorded at fair value on the date of acquisition. The aggregate fair value as of December 31, 2025 and 2024 for mortgages, KW unsecured debt, and KWE unsecured bonds were estimated to be approximately $4.4 billion and $5.0 billion, respectively, based on a comparison of the yield that would be required in a current transaction, taking into consideration the risk of the underlying collateral and the Company's credit risk to the current yield of a similar security, compared to their aggregate carrying value of $4.5 billion and $5.6 billion as of December 31, 2025 and 2024, respectively. The inputs used to value mortgages, KW unsecured debt, and KWE unsecured bonds are based on observable inputs for similar assets and quoted prices in markets that are not active and are therefore determined to be level 2 inputs.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 27, 2017 | |
| 2015 | Feb 29, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.