Kennedy Wilson Raises $100M in Private Placement

BEVERLY HILLS, CA-Publicly held real estate services and investment firm Kennedy Wilson has entered into a preferred stock purchase agreement with Toronto-based Fairfax Financial Holdings Ltd. for a commitment by Fairfax to purchase up to $100 million of Kennedy Wilson convertible preferred stock in a private placement. Kennedy Wilson's description of the deal says that it "creates a new strategic relationship between Kennedy Wilson and Fairfax, which has a market cap of approximately $8 billion and total investment portfolio of approximately $20 billion."

William McMorrow, chairman and CEO of Kennedy Wilson, called the private placement "the single greatest event in Kennedy Wilson’s history thus far." He cites Fairfax's "extremely strong balance sheet and investing track record" and adds that the two companies "share the same long-term, value-investing philosophies and were both built from the ground up."

Beverly Hills-based Kennedy Wilson was originally established as an auction house and purchased in 1988 by a group led by McMorrow, who expanded the company into a full service commercial real estate investment and services company. Prem Watsa, chairman and CEO of Fairfax, and his partners transformed the Toronto-based firm from a small specialist in trucking insurance 25 years ago to become one of the world’s leading insurance and reinsurance and investment companies.

Watsa says that Fairfax believes this is the right time to begin selectively investing in commercial real estate, particularly in California. He notes that Kennedy Wilson has taken advantage of the current distress in the real estate market with purchases of note pools and hard assets totaling over $600 million since December of last year.

The preferred equity investment by Fairfax carries a dividend of 6% per year and has a mandatory conversion into Kennedy Wilson common stock by May 2015 at $12.41 per share.