REAL ESTATE AND IN-PLACE LEASE VALUE

The following table summarizes Kennedy Wilson's investment in consolidated real estate properties at June 30, 2018 and December 31, 2017:



	June 30,			December 31,
(Dollars in millions)	2018			2017
Land	$	1,450.1		$	1,509.4
Buildings	4,281.6			4,558.0
Building improvements	558.7			511.2
In-place lease values	391.3			417.3
	6,681.7			6,995.9
Less accumulated depreciation and amortization	(584.0		)	(552.2		)
Real estate and acquired in place lease values, net of accumulated depreciation and amortization	$	6,097.7		$	6,443.7

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 8.1 years at June 30, 2018.

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) based on their respective estimated fair values. The purchase price approximates the fair value of the properties as acquisitions are transacted with third-party willing sellers.

During the six months ended June 30, 2018, Kennedy Wilson acquired the following consolidated properties:



(Dollars in millions)		Purchase Price Allocation at Acquisition⁽¹⁾
Location	Description	Land		Building		Acquired in place lease values⁽²⁾		Investment debt		NCI		KWH Shareholders' Equity
Western U.S.	Two multifamily properties and one commercial property	$	45.8	$	80.5	$	0.6	$	83.7	$	—	$	43.2
United Kingdom	One residential property	4.2		—		—		—		—		4.2
Ireland	One multifamily property	11.1		96.0		2.1		61.3		—		47.9
		$	61.1	$	176.5	$	2.7	$	145.0	$	—	$	95.3

⁽¹⁾Excludes net other assets.

⁽²⁾ Includes above and below market leases in this table. Above and below market leases are part of other assets and accrued expenses and other liabilities.

Loans Converted to Real Estate

During the six months ended June 30, 2018, Kennedy Wilson gained control over a pool of loans secured by six hotels located in the United Kingdom that were previously accounted for as loan purchases. The assets and liabilities of these properties were consolidated in Kennedy Wilson's consolidated financial statements at fair value.

Gains on Sale of Real Estate

During the six months ended June 30, 2018, Kennedy Wilson recognized the following gains on sale of real estate (dollars in millions):



Description	Consolidated ⁽¹⁾		NCI		Net of NCI
15 commercial properties in the United Kingdom, three multifamily properties in Ireland, one residential property in Ireland and one residential property in the Western United States	$	230.0	$	69.0	$	161.0

⁽¹⁾Includes both gain on sale of real estate, and the sale of land and development projects, which is the net of sale of real estate and cost of real estate sold.

AXA Joint Venture

AXA Investment Managers - Real Assets ("AXA") and the Company entered into a joint venture agreement targeting multifamily assets (also referred to as Private Rented Sector ("PRS")) in Ireland. The AXA Joint Venture commenced with AXA investing in a 50% ownership stake in 1,173 multifamily units across three assets in Dublin, Ireland (“Current JV Assets”) previously held by the Company and a different equity partner (held in 50/50 joint ventures) and consolidated in the Company’s financial statements. The Company continues to hold the remaining 50% ownership interests in the Current JV Assets through its ownership in this new joint venture with AXA. As the Company does not control the new joint venture with AXA, the assets are no longer consolidated and its investment with AXA is accounted for under the equity method. Under ASC Subtopic 610-20, due to the deconsolidation, the Company recognized a gain of $149.3 million through gain on sale of real estate of which the Company's share is $82.5 million. Additionally, as such investments have been sold, the related accumulated other comprehensive income associated with foreign currency translation adjustments and hedge derivative instruments have been recognized in the consolidated statements of operations. The Company has elected the fair value option on its interest in the joint venture and will record the investment at fair value going forward.

Guarantees

Kennedy Wilson has certain guarantees associated with loans secured by consolidated assets. As of June 30, 2018, the maximum potential amount of future payments (undiscounted) Kennedy Wilson could be required to make under the guarantees was approximately $53.4 million which is approximately 2% of investment level debt of Kennedy Wilson and its equity partners. The guarantees expire through 2025, 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 sale proceeds from the property. Based on the Company's evaluation of guarantees under FASB ASC Subtopic 460-10 Estimated Fair Value of Guarantees, the estimated fair value of guarantees made as of June 30, 2018 and December 31, 2017 were immaterial.