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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 8-K

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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 13, 2009

KENNEDY-WILSON HOLDINGS, INC.
(Exact Name of Registrant as Specified in Charter)

(Former Name or Former Address if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)

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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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ADDITIONAL INFORMATION AND FORWARD-LOOKING STATEMENTS

        KENNEDY-WILSON HOLDINGS, INC. CLAIMS THE PROTECTION OF THE SAFE HARBOR FOR "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, AS AMENDED. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ARE NOT HISTORICAL FACTS. SUCH FORWARD-LOOKING STATEMENTS, BASED UPON THE CURRENT BELIEFS AND EXPECTATIONS OF MANAGEMENT OF THE COMPANY REGARDING, AMONG OTHER THINGS, THE BUSINESS OF THE COMPANY, ARE SUBJECT TO RISKS AND UNCERTAINTIES, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER FROM THE FORWARD-LOOKING STATEMENTS. THE FOLLOWING FACTORS, AMONG OTHERS, COULD CAUSE ACTUAL RESULTS TO DIFFER FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS: (1) DIFFICULTIES ENCOUNTERED IN INTEGRATING THE MERGED COMPANIES; (2) OFFICERS AND DIRECTORS ALLOCATING THEIR TIME TO OTHER BUSINESSES AND POTENTIALLY HAVING CONFLICTS OF INTEREST WITH THE COMPANY'S BUSINESS; (3) SUCCESS IN RETAINING OR RECRUITING, OR CHANGES REQUIRED IN, THE COMPANY'S OFFICERS, KEY EMPLOYEES OR DIRECTORS FOLLOWING THE MERGER (AS DEFINED BELOW); (4) THE POTENTIAL LIQUIDITY AND TRADING OF THE COMPANY'S PUBLIC SECURITIES; (5) THE COMPANY'S REVENUES AND OPERATING PERFORMANCE; (6) CHANGES IN OVERALL ECONOMIC CONDITIONS; (7) THE COMPANY'S ABILITY TO RAISE AND SUCCESSFULLY INVEST ADDITIONAL CAPITAL; (8) RISKS AND COSTS ASSOCIATED WITH COMPLYING WITH CORPORATE GOVERNANCE REGULATION AND DISCLOSURE OBLIGATIONS (INCLUDING PURSUANT TO SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002); (9) THE CONVERSION OF THE GUARDIAN NOTE (AS DEFINED BELOW); (10) THE COMPANY'S OBLIGATIONS PURSUANT TO THE GUARDIAN NOTE WHICH MAY NEGATIVELY AFFECT THE COMPANY'S FINANCIAL POSITION AND RESULTS OF OPERATIONS; AND (11) OTHER RISKS REFERENCED FROM TIME TO TIME IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND THOSE FACTORS LISTED UNDER "RISK FACTORS" IN THE DEFINITIVE PROXY STATEMENT/PROSPECTUS DATED AS OF OCTOBER 28, 2009 AND FILED WITH THE SEC. THE INFORMATION SET FORTH HEREIN SHOULD BE READ IN LIGHT OF SUCH RISKS. THE COMPANY DOES NOT ASSUME ANY OBLIGATION TO UPDATE THE INFORMATION CONTAINED IN THIS REPORT.

Item.    1.01 Entry into Material Definitive Agreement.

        On November 13, 2009, Kennedy-Wilson Holdings, Inc., formerly Prospect Acquisition Corp. (the "Company" or "KW Holdings"), announced that it had closed a business combination transaction (the "Merger") contemplated by that certain Agreement and Plan of Merger, dated as of September 8, 2009, as amended (the "Merger Agreement"), by and among Prospect Acquisition Corp. ("Prospect"), Kennedy-Wilson, Inc. ("Kennedy-Wilson"), and KW Merger Sub Corp., a wholly-owned subsidiary of Prospect ("Merger Sub"), whereby Merger Sub merged with and into Kennedy-Wilson, with Kennedy-Wilson continuing as the surviving corporation and a wholly-owned subsidiary of the Company.

        The Merger Agreement and the amendments thereto were filed as Exhibits 2.1 through 2.3 to Prospect's Registration Statement on Form S-4, declared effective by the SEC on October 28, 2009, which included Prospect's definitive proxy statement/prospectus (the "Proxy Statement/Prospectus").

        Prospect held special meetings on November 13, 2009 of its stockholders and warrantholders. At Prospect's special meeting of stockholders, Prospect stockholders (i) approved the Merger and the Merger Agreement, (ii) approved amendments to Prospect's amended and restated certificate of incorporation to provide for a name change to "Kennedy-Wilson Holdings, Inc.", to increase the

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Company's authorized shares, to provide for the Company's perpetual existence and to delete and replace Article Sixth, (iii) approved the 2009 Equity Participation Plan (the "2009 Plan"), and (iv) elected the seven director nominees.

        At the Prospect special meeting of warrantholders, Prospect warrantholders approved an amendment to the warrant agreement that governs all Prospect warrants to allow each Prospect warrantholder to elect, for each warrant purchased in its initial public offering (the "public warrants"), either to receive upon the closing of the Merger $0.55 in cash or to continue to hold his, her or its public warrant amended to provide for a new exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013, subject to adjustment and proration as described in the Proxy Statement/Prospectus; and to amend the terms of the warrants purchased by Prospect's sponsors (the "sponsors warrants") to provide for an exercise price of $12.50, a redemption trigger price of $19.50 and an expiration date of November 14, 2013, subject to adjustment and proration as described in the Proxy Statement/Prospectus.

        Of the 25,000,000 public warrants outstanding prior to the consummation of the Merger, holders of 13,411,867 public warrants elected to continue to hold amended warrants. However, because a minimum of 12,500,000 warrants were required to be redeemed for cash upon consummation of the Merger pursuant to the Merger Agreement, a total of 911,867 warrants were cutback, consisting of 655,338 public warrants and 256,529 sponsor warrants. Each public warrant holder that elected to continue to hold an amended warrant and each sponsor warrant holder received $0.0269 in cash and 0.9511 warrants for each warrant held by such holder.

Warrant Agreement Amendment

        The preceding summary of the warrant agreement amendment is qualified in its entirety by reference to the complete text of the amendment, the form of which is included as Annex B to the Proxy Statement/Prospectus.

Warrant Agreement

        On November 13, 2009, in connection with the closing of the Merger, KW Holdings entered into a new warrant agreement with Continental Stock Transfer & Trust Company, setting forth the terms and conditions of the new warrants to purchase shares of KW Holdings' common stock. Pursuant to the agreement, public warrants have an exercise price of $12.50, an expiration date of November 14, 2013 and are redeemable by KW Holdings, in whole or in part, at a price of $0.01 per warrant if the sale price of KW Holdings' common stock equals or exceeds $19.50 per share for any 20 trading days within a 30 day trading period. Pursuant to the agreement, the sponsors warrants have an exercise price of $12.50, an expiration date of November 14, 2013 and are redeemable by KW Holdings in whole or in part at a price of $0.01 per warrant if the sale price of KW Holdings common stock equals or exceeds $19.50 per share for any 20 trading days within a 30 day trading period and are subject to certain transfer restrictions. The public warrants and sponsors' warrants are subject to other customary adjustments and limitations.

        The preceding summary of the new warrant agreement is qualified in its entirety by reference to the complete text of the agreement, the form of which is included as Annex C to the Proxy Statement/Prospectus.

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Lock-Up Agreements

        In connection with the consummation of the Merger, William J. McMorrow, Mary Ricks, Freeman Lyle and Donald Herrema, executive officers of Kennedy-Wilson, entered into lock-up agreements with KW Holdings whereby each has agreed to not offer, sell, pledge or otherwise transfer:

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any of the shares of KW Holdings common stock received as Merger consideration for three months after the Merger; and



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90% of the shares of KW Holdings common stock received as Merger consideration and 100% of the shares of KW Holdings common stock received as management incentive shares in connection with grants to executives under the 2009 Plan, in each case, for one year after the Merger.

        The stockholders subject to the lock-up agreements may transfer their shares to any controlled affiliate, to any partner, stockholder or member of the stockholder, or for estate planning purposes only; provided in each case that any transferee agrees to be bound to the terms of the applicable lock-up agreement prior to any transfer.

        The preceding summary of the lock-up agreements is qualified in its entirety by reference to the complete text of the lock-up agreements, which a form of is filed as Exhibit 10.23 to the Registration Statement on Form S-4 that includes the Proxy Statement/Prospectus.

Item 2.01.    Completion of Acquisition or Disposition of Assets.

        On November 13, 2009, the Company announced that it had closed the Merger contemplated by the Merger Agreement. As a result of the Merger, Kennedy-Wilson became a wholly-owned subsidiary of Prospect and Prospect changed its name to Kennedy-Wilson Holdings, Inc.

        In connection with the Merger, the holders of Kennedy-Wilson common stock and preferred stock received an aggregate of 26 million shares of Prospect common stock (minus any dissenting shares) with each share of Kennedy-Wilson common stock automatically converting into the right to receive 3.8031 shares of Prospect common stock and each share of Kennedy-Wilson preferred stock automatically converting into the right to receive 105.6412 shares of Prospect common stock. A description of the Merger and the Merger Agreement is included in the Proxy Statement/Prospectus beginning on page 89 and page 140, respectively, which information is incorporated herein by reference.

        Disclosure responsive to Item 2.01(b) through (e) of Form 8-K is included in the Proxy Statement/Prospectus under "Business of Kennedy-Wilson" beginning on page 211, "Information Related to Prospect" beginning on page 195, "The Merger Proposal" beginning on page 89 and "The Merger Agreement" beginning on page 140, which information is incorporated herein by reference.

        Immediately following the consummation of the Merger, KW Holdings had 41,196,068 shares of common stock and warrants to purchase 17,750,000 shares of common stock outstanding. KW Holdings common stock and warrants are listed on AMEX under the new symbols "KWIC" and "KWIC.WS," respectively. Approximately $247.7 million was held in the trust account as of October 26, 2009, the record date for the Prospect special meeting of warrantholders and special meeting of stockholders. Upon consummation of the Merger, the funds were disbursed as follows: approximately $94.4 million to parties who executed certain Purchase Agreements with Prospect; approximately $44.0 million to Continental Stock Transfer & Trust Co. to be released to Prospect stockholders who voted against the transaction and properly elected to convert their shares to a pro rata portion of the trust account; approximately $6.9 million to Continental Stock Transfer & Trust Co. to be released to Prospect warrantholders who elected the cash amount in exchange for their public warrants or Prospect warrantholders who elected the amended warrant option and were pro-rata reduced in order to meet the minimum of 12,500,000 warrants electing the cash option. After payment of expenses incurred by

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Prospect and Kennedy-Wilson, which totaled approximately $13.7 million, approximately $88.7 million of net proceeds were retained by KW Holdings. Additional deal-related expenses of approximately $2 million are expected to be paid from the KW Holdings operating account post-close.

Business

        Descriptions of Kennedy-Wilson's and Prospect's businesses are included in the Proxy Statement/ Prospectus under "Business of Kennedy-Wilson" beginning on page 211 and "Information Related to Prospect" beginning on page 195, which information is incorporated herein by reference.

Risk Factors

        Certain risks associated with the businesses of Kennedy-Wilson and Prospect are described under "Risk Factors" beginning on page 46 of the Proxy Statement/Prospectus, which information is incorporated herein by reference.

Financial Information

        Certain financial information related to Kennedy-Wilson and Prospect is included in the Proxy Statement/Prospectus under "Selected Historical Financial Information" beginning on page 155, "Kennedy-Wilson's Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 224 and "Prospect's Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 205, which information is incorporated herein by reference.

        Reference is also made to the disclosure entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 15 of Prospect's Quarterly Report on Form 10-Q filed with the SEC on November 6, 2009, which information is incorporated herein by reference.

        Additional financial information related to Kennedy-Wilson is included with this Current Report on Form 8-K under the headings "Kennedy-Wilson's Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Qualitative and Quantitative Disclosures about Market Risk" , which information is incorporated herein by reference.

Properties

        Information regarding the properties of Kennedy-Wilson is included in the Proxy Statement/ Prospectus under "Business of Kennedy-Wilson" beginning on page 211, which information is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management

        The following table sets forth information known to KW Holdings regarding the beneficial ownership of KW Holdings' common stock immediately following the consummation of the Merger by:

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each person known by KW Holdings to be the beneficial owner of more than 5% of the outstanding shares of KW Holdings' common stock;



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each of KW Holdings' executive officers and directors; and



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all executive officers and directors of KW Holdings as a group.

        Several entities reported beneficial ownership of more than 5% of the outstanding shares of common stock of Prospect prior to the Merger. See "Beneficial Ownership of Securities" in the Proxy Statement/Prospectus beginning on page 265. Until such entities file reports on Schedule 13D or 13G

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with the Securities and Exchange Commission, KW Holdings is not able to determine whether such entities own more than 5% of KW Holdings outstanding common stock following the consummation of the Merger. The information set forth below with respect to entities that own more than 5% of KW Holdings is based solely upon information reported on Schedules 13D or 13G or amendments thereto filed with the SEC following the consummation of the Merger.

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Directors and Executive Officers and Certain Relationships and Transactions with Related Persons

        Effective upon the closing of the Merger, the following persons are officers of KW Holdings:

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William J. McMorrow, Chief Executive Officer;



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Freeman A. Lyle, Executive Vice President, Chief Financial Officer, Treasurer and Secretary;



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Barry S. Schlesinger, Co-CEO of KW Commercial Investment Group;



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Mary Ricks, Co-CEO of KW Commercial Investment Group;



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James A. Rosten, President of Kennedy-Wilson Properties;



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Donald J. Herrema, CEO of KW Capital Markets; and



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Robert E. Hart, President of KW Multi-Family Management Group.

        Effective upon the closing of the Merger, the following persons are the members of KW Holdings' board of directors:

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Cathy Hendrickson and Thomas Sorell in the class to stand for reelection in 2010;



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Jerry Solomon and David A. Minella in the class to stand for reelection in 2011; and



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William J. McMorrow, Kent Mouton and Norman Creighton in the class to stand for reelection in 2012.

        Information regarding the directors and executive officers of KW Holdings following the consummation of the Merger is included in the Proxy Statement/Prospectus under "The Director Election Proposal" beginning on page 186. Information regarding certain relationships and related transactions relative to the foregoing persons, to the extent applicable, is included in the Proxy Statement/Prospectus under "Certain Relationships and Transactions with Related Persons—Prospect Transactions with Related Persons" beginning on page 269 and "Certain Relationships and Transactions with Related Persons—Kennedy-Wilson Transactions with Related Persons" beginning on page 274, which information is incorporated herein by reference.

Executive Compensation

        Information regarding director and executive officer compensation of Kennedy-Wilson is included in the Proxy Statement/Prospectus under "Executive Compensation—Kennedy-Wilson Executive Compensation" beginning on page 243 and information regarding the compensation of Prospect's directors and executive prior to the completion of the Merger is included under "Executive Compensation—Prospect Executive Compensation" on page 243, which information is incorporated herein by reference.

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Director Independence

        Information regarding director independence is included in the Proxy Statement/Prospectus under "The Director Election Proposal" beginning on page 186, which information is incorporated herein by reference.

Legal Proceedings

        Information regarding certain legal proceedings relating to Kennedy-Wilson is included in the Proxy Statement/Prospectus under "Business of Kennedy-Wilson—Legal Proceedings" on page 222, which information is incorporated herein by reference.

Market Price of and Dividends on Common Equity and Related Stockholder Matters

        Historical market price information regarding Kennedy-Wilson's securities prior to the Merger is included in the Proxy Statement/Prospectus under "Price Range of Securities and Dividends—Kennedy-Wilson" beginning on page 286 and historical market price information regarding Prospect's securities prior to the Merger is included in the Proxy Statement/Prospectus under "Price Range of Securities and Dividends—Prospect" beginning on page 285, which information is incorporated herein by reference.

Recent Sales of Unregistered Securities

        Not applicable.

Description of Securities

        A description of Prospect's common stock and other securities is included in the Proxy Statement/Prospectus under "Description of Prospect Securities" beginning on page 278, which information is incorporated herein by reference.

Indemnification of Directors and Officers

        Information regarding indemnification of directors and officers of KW Holdings is included in the Proxy Statement/Prospectus under "The Merger Proposal—Indemnification of Directors and Officers" on page 93 and "The Merger Agreement—Indemnification of Directors and Officers" on page 153, which information is incorporated herein by reference.

Financial Statements, Supplementary Data and Exhibits

        Financial information relating to Prospect and Kennedy-Wilson is included in the Proxy Statement/Prospectus under "Financial Statements" beginning on page F-3 and F-31, respectively, which information is incorporated herein by reference.

        Additional financial information relating to Prospect is included beginning on page 2 of Prospect's Quarterly Report on Form 10-Q filed with the SEC on November 6, 2009, which information is incorporated herein by reference.

        Additional financial information relating to KW Holdings and Kennedy-Wilson and its subsidiaries set forth under Item 9.01 of this Current Report on Form 8-K is incorporated herein by reference.

        Except as otherwise provided herein, all exhibits required to be filed pursuant to Regulation S-K Item 601 hereto were filed as exhibits to the Registration Statement on Form S-4 that includes the Proxy Statement/Prospectus and are incorporated herein by reference.

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Item 2.03    Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

        In connection with the Merger, a convertible subordinated note with a principal amount of $30 million that was issued by Kennedy-Wilson to Guardian Life Insurance Company of America ("Guardian") in November 2008 (the "Guardian Note") became convertible into shares of KW Holdings common stock pursuant to the terms of the Guardian Note. The Guardian Note bears interest at a fixed rate of 7%, payable quarterly, and the outstanding principal is due on November 3, 2018. Under the terms of the Merger Agreement and a letter agreement entered into between Kennedy-Wilson and Guardian on October 8, 2009, following the consummation of the Merger, Guardian has an option to convert, in whole or in part, the outstanding principal balance and accrued interest into common stock at a conversion price of $9.86 per share any time prior to May 3, 2017. At any time on or after May 3, 2017 and prior to the due date, KW Holdings may demand that Guardian convert the note in accordance with its terms. As of October 22, 2009, the outstanding principal balance and accrued interest of the Guardian Note were $30 million and $466,666, respectively. Upon consummation of the Merger, the estimated number of shares of common stock into which the Guardian Note will be convertible is 3,042,466.

        The preceding summary of the Guardian Note and the letter agreement is qualified in its entirety by reference to the complete text of the promissory note and letter agreement, which were filed as Exhibits 10.28 and 10.118, respectively, to the Registration Statement on Form S-4 that includes the Proxy Statement/Prospectus.

Item 3.03    Material Modifications to Rights of Security Holders.

        A description of KW Holdings' common stock and other securities as in effect following the closing of the Merger is included under "Description of Prospect Securities" beginning on page 278 of the Proxy Statement/Prospectus, which information is incorporated herein by reference.

        Additionally, a description of changes to KW Holdings' sponsors' warrants and public warrants as in effect following the closing of the Merger is included under "The Warrant Amendment Proposal" beginning on page 86 of the Proxy Statement/Prospectus, which information is incorporated herein by reference.

Item 5.01    Change in Control of Registrant.

        Immediately following the consummation of the Merger, former Prospect stockholders will hold approximately 31% of the total combined voting power of KW Holdings' outstanding common stock. The information set forth in Items 1.01 and 5.02 of this Current Report on Form 8-K is incorporated herein by reference.

Item 5.02    Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

        Effective immediately upon consummation of the Merger, David A. Minella resigned as the Chairman and Chief Executive Officer of Prospect, James J. Cahill resigned as Chief Financial Officer of Prospect and Patrick J. Landers resigned as President of Prospect.

        The following persons were appointed as officers of KW Holdings effective upon consummation of the Merger:

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William J. McMorrow, Chief Executive Officer;



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Freeman A. Lyle, Executive Vice President, Chief Financial Officer, Treasurer and Secretary;



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Barry S. Schlesinger, Co-CEO of KW Commercial Investment Group;

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Mary Ricks, Co-CEO of KW Commercial Investment Group;



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James A. Rosten, President of Kennedy-Wilson Properties;



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Donald J. Herrema, CEO of KW Capital Markets; and



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Robert E. Hart, President of KW Multi-Family Management Group.

        Effective immediately upon consummation of the Merger, the following persons resigned as directors of Prospect: Michael P. Castine, William Cvengros, Michael Downey, Daniel Gressel, William Landman, Patrick J. Landers and John Merchant.

        Effective upon the closing of the Merger, the following persons are the members of KW Holdings' board of directors:

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Cathy Hendrickson and Thomas Sorell in the class to stand for reelection in 2010;



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Jerry Solomon and David A. Minella in the class to stand for reelection in 2011; and



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William J. McMorrow, Kent Mouton and Norman Creighton in the class to stand for reelection in 2012.

        Biographical and compensation-related information for each of the foregoing persons is included in the Proxy Statement/Prospectus under "The Director Election Proposal" beginning on page 186 and "Executive Compensation" beginning on page 243, and information regarding certain relationships and related transactions relative to the foregoing persons, to the extent applicable, is included in the Proxy Statement/Prospectus under "Certain Relationships and Transactions with Related Persons" beginning on page 269, which information is incorporated herein by reference.

        The audit committee, compensation committee and nominating committees of KW Holding's board of directors after the Merger are comprised of Messrs. Creighton and Minella and Ms. Hendrickson, with Mr. Creighton serving as chair of the audit committee and compensation committee and Ms. Hendrickson serving as chair of the nominating committee.

        In connection with the consummation of the Merger, KW Holdings adopted the 2009 Plan, which was approved by the Prospect stockholders on November 13, 2009. Information regarding the 2009 Plan set forth under "The Equity Participation Plan Proposal" beginning on page 176 of the Proxy Statement/Prospectus is incorporated herein by reference. A copy of the 2009 Plan is included as Annex E to the Proxy Statement/Prospectus.

        On November 18, 2009, the Company, William J. McMorrow, the Chief Executive Officer of KW Holdings, and Mary Ricks, Co-CEO of KW Commercial Investment Group, entered into a Waiver and Modification With Respect to Employment Agreement Amendments, pursuant to which: (a) Mr. McMorrow voluntarily waived his right to receive a $4.425 million bonus payment on January 1, 2011 upon the fulfillment of certain conditions as set forth in Section 12 of his employment agreement; and (b) Ms. Ricks voluntarily waived her right to receive a $1.0 million bonus payment on January 1, 2011 upon the fulfillment of certain conditions as set forth in Section 13 of her employment agreement.

        The preceding summary of the Waiver and Modification With Respect to Employment Agreement Amendments is qualified in its entirety by reference to the complete text of the Waiver and Modification With Respect to Employment Agreement Amendments, which a form of is attached to this Current Report as Exhibit 10.1 and is incorporated herein by reference.

Item 5.03    Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

        In connection with the Merger, on November 13, 2009, Kennedy-Wilson filed an amended and restated certificate of incorporation with the Delaware Secretary of State amending and restating its previous amended and restated certificate of incorporation. The form of the amended and restated

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certificate of incorporation as currently in effect was filed as Exhibit 3.3 to the Registration Statement on Form S-4 that includes the Proxy Statement/Prospectus.

Item 5.06    Change in Shell Company Status.

        The information under Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.

Item 9.01    Financial Statements and Exhibits.

(a)   Financial Statements of Businesses Acquired.

        Financial information relating to Kennedy-Wilson is included in the Proxy Statement/Prospectus beginning on page F-31, which information is incorporated herein by reference.

        Financial statements of KW Residential LLC and Subsidiaries for the fiscal years ended December 31, 2007 and 2008 are filed herewith beginning on page F-1.

        Financial statements of Kennedy-Wilson and Subsidiaries for the nine months ended September 30, 2009 are filed herewith beginning on page F-16.

(b)   Pro Forma Financial Information.

        Pro forma financial information relating to KW Holdings is filed herewith beginning on page PF-1.

(c)   Shell Company Transactions.

        The information included in Items 9.01(a) and 9.01(b) of this Current Report on Form 8-K is incorporated herein by reference.

(d)   Exhibits

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SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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KENNEDY-WILSON'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Kennedy-Wilson Consolidated Financial Results and Comparison of nine months ended September 30, 2009 and nine months ended September 30, 2008

        Kennedy-Wilson's revenues for the nine months ended September 30, 2009 and nine months ended September 30, 2008 were $60.3 million and $24.7 million, respectively. Total operating expenses for the same periods were $53.3 million and $22.7 million, respectively. Net loss attributable to the Kennedy-Wilson common stockholders was $7.4 million for the nine months ended September 30, 2009 compared to net income of $0.1 million attributable to the Kennedy-Wilson common stockholders for the nine months ended September 30, 2008.

Revenues

Services Segment Revenues

        In the nine months ended September 30, 2009, management and leasing generated revenues of $13.8 million (including related party fees of $6.8 million), representing 23% of Kennedy-Wilson's total revenue, compared to approximately $13.7 million (including approximately $5.8 million in related party fees) and 54% of total revenue in the nine months ended September 30, 2008. Comparing the two nine-month periods, management and leasing fees increased 1% primarily due to increased asset management fees associated with KW Property Funds II and III. Management and leasing fees include asset management, construction management, leasing services, engineering and other services to property owners.

        Commissions revenues in the nine months ended September 30, 2009 decreased to $4.7 million (including approximately $0.9 million in related party fees), representing 8% of total revenues compared to commission revenues in the nine months ended September 30, 2008 of $8.7 million (including related party fees of approximately $3.8 million). Acquisition fees decreased $3.7 million in the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008. The decrease can be attributed primarily to the current disarray in the debt and equity markets, which has caused a reduction in the acquisition of commercial and apartment properties and the related acquisition fees. Kennedy-Wilson's brokerage activities provide clients and Kennedy-Wilson with development and implementation of marketing plans, sealed bid auctions and open bid auctions.

Investments Segment Revenues

        Rental income increased 12% to $2.0 million in the nine months ended September 30, 2009 from $1.8 million in the nine months ended September 30, 2008. Rental income includes rental and other income from properties in which Kennedy-Wilson holds a controlling interest. The office property in Japan was the main cause for the increase in rental income because the property was acquired in mid-2008 and was included for all of 2009. Sale of real estate for the nine months ended September 30, 2009 produced gross revenue of $39.8 million related to the sale of 90 condominium units in Los Angeles, California and the sale of land in southern California to KW Property Fund III. Kennedy-Wilson has a 5% investment in KW Property Fund III.

Operating Expenses

        Operating expenses in the nine months ended September 30, 2009 were approximately $53.3 million, representing a 135% increase over $22.7 million in the nine months ended September 30, 2008. This increase was due to the cost of real estate sold associated with the sale of condominium units and land in southern California.

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Services Segment Operating Expenses

        Commissions and marketing expenses increased to $2.6 million in the nine months ended September 30, 2009 from $1.8 million in the nine months ended September 30, 2008. The increase in commission expense corresponds to the higher percentage of auction fees in commission revenues in the first nine months of 2009 compared to 2008, which incur the majority of commission expenses. As noted above, commission revenue for the first nine months of 2008 included a greater component of acquisition fees, which incur a relatively minor portion of expenses.

        Compensation and related expenses were approximately $15.6 million in the nine months ended September 30, 2009, up 5% from $14.9 million in the nine months ended September 30, 2008. The change was due primarily to the expense recognized for the stock option plan that was implemented in 2009.

        General and administrative expenses were $4.4 million in the nine months ended September 30, 2009, representing a 7% decrease from expenses of $4.8 million in the nine months ended September 30, 2008. During 2009, the company incurred $0.7 million of non-recurring merger-related costs, offset by a decrease attributable to the implementation of cost cutting measures.

Investments Segment Operating Expenses

        Rental operating expenses in the nine months ended September 30, 2009 and 2008 were approximately $2.0 million and $0.6 million, respectively. Rental operating expense includes operating expenses from properties, in which Kennedy-Wilson holds a controlling interest. The increase of 231% can be attributed to the operating expense from a condominium project that was acquired in June 2009 and a large apartment project acquisition in February 2008. The apartment project was included for nine months in 2009 in comparison to seven and a half months in 2008.

        Cost of real estate sold was $28.0 million for the nine months ended September 30, 2009 and relates to the disposition of condominium units and land in southern California. There were no such sales during the nine month period ended September 30, 2008.

Other Operating Expenses

        Depreciation and amortization expense increased to $0.8 million in the nine months ended September 30, 2009, a 15% increase from $0.7 million in the nine months ended September 30, 2008. The change was primarily due to the inclusion in 2009 of nine months' depreciation expense for the two properties acquired during 2008.

Investments Segment Equity in Joint Venture Income

        Investments in joint ventures generated income of $1.0 million during the nine months ended September 30, 2009, a decrease of 83% from income of $5.7 million recorded in the nine months ended September 30, 2009, due primarily to the fair value gain recognized in 2008.

Non-Operating Items

        Interest and other income was $0.3 million in the nine months ended September 30, 2009, compared to $0.5 million in the nine months ended September 30, 2008. The change was due to lower interest income on bank and escrow deposits, which resulted from decrease in interest rates. In addition, a note receivable was paid off in the first half of 2008.

        Interest expense was $10.8 million in the nine months ended September 30, 2009, an increase of 91% compared to $5.7 million in the nine months ended September 30, 2008. The increase was due to

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the interest expense on the debt incurred for the condominium project acquisition and the debt service on the $30 million subordinate convertible loan originated in November 2008.

        Other than temporary impairment on available-for-sale security of $0.3 million represents the write-down of the value of a stock investment during the nine months ended September 30, 2009. There was no write-down during the nine months ended September 30, 2008.

        The benefit from income taxes was approximately $2.0 million for the nine months ended September 30, 2009, compared to the income tax provision of approximately $0.9 million for the nine months ended September 30, 2008. The change was due to the decrease in income before provision for income taxes and the increase in income attributable to noncontrolling interest of $3.0 million for the nine months ended September 30, 2009.

Liquidity and Capital Resources

        Kennedy-Wilson's liquidity and capital resources requirements include expenditures for joint venture investments, real estate held for sale, distressed debt and working capital needs. Historically, Kennedy-Wilson has not required significant capital resources to support Kennedy-Wilson's brokerage and property management operations. Kennedy-Wilson finances its operations with internally generated funds and borrowings under Kennedy-Wilson's revolving lines of credit. Kennedy-Wilson's investments in real estate are typically financed by mortgage loans secured primarily by that real estate. These mortgage loans are generally nonrecourse in that, in the event of default, recourse will be limited to the mortgaged property serving as collateral. In some cases, Kennedy-Wilson guarantees a portion of the loan related to a joint venture investment, usually until some condition, such as completion of construction or leasing or certain net operating income criteria, has been met. Kennedy-Wilson does not expect these guarantees to materially affect liquidity or capital resources.

Historical Cash Flows

        Net cash used in operating activities totaled $12.9 million for the nine months ended September 30, 2009, an increase of $0.8 million as compared to the nine months ended September 30, 2008. The change was primarily due increase in gain on sale of real estate, the decrease in equity in joint venture income, and the increase in deferred and accrued income taxes as well as accruals for expenses and other liabilities during the nine months ended September 30, 2009.

        Net cash used in investing activities totaled approximately $8.4 million for the nine months ended September 30, 2009, a decrease of $87.1 million as compared to the nine months ended September 30, 2008. The decrease was primarily due to decreased investment activity during the nine months ended September 30, 2009.

        Net cash provided by financing activities totaled approximately $6.3 million for the nine months ended September 30, 2009, a decrease of $89.1 million as compared to the nine months ended September 30, 2008. The decrease was primarily due to no preferred stock issued during the nine months ended September 30, 2009. The change includes the payments of dividends to preferred stockholders, which were funded by the combination of cash from operations, borrowings from lines of credit, and proceeds from sale of investments.

        To the extent that Kennedy-Wilson engages in additional strategic investments, including real estate, note portfolio, or acquisitions of other property management companies, it may need to obtain third-party financing which could include bank financing or the public sale or private placement of debt or equity securities. Kennedy-Wilson believes that existing cash, plus capital generated from property management and leasing, brokerage, sales of real estate owned, collections from notes receivable, as well as its current lines of credit, will provide Kennedy-Wilson with sufficient capital requirements for the foreseeable future.

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        Under its current joint venture strategy, Kennedy-Wilson generally contributes property, expertise, and typically a fully funded initial cash contribution (without commitment to additional funding by Kennedy-Wilson). Capital required for additional improvements and supporting operations during lease-up and stabilization periods is generally obtained at the time of acquisition via debt financing or third party investors. Accordingly, Kennedy-Wilson generally does not have significant capital commitments with unconsolidated entities. Infrequently, there may be some circumstances when Kennedy-Wilson, usually with the other members of the joint venture entity, may be required to contribute additional capital for a limited period of time. Kennedy-Wilson believes that it has the capital resources, generated from its business activities and borrowing capacity, to finance any such capital requirements, and does not believe that any additional capital contributions to joint ventures will materially affect liquidity.

        Kennedy-Wilson's need, if any, to raise additional funds to meet its capital requirements will depend on many factors, including the success and pace of the implementation of its strategy for growth. Kennedy-Wilson regularly monitors capital raising alternatives to be able to take advantage of other available avenues to support its working capital and investment needs, including strategic partnerships and other alliances, bank borrowings, and the sale of equity or debt securities. Kennedy- Wilson expects to meet the repayment obligations of notes payable and borrowings under lines of credit from cash generated by its business activities, including the sale of assets and the refinancing of debt. Kennedy-Wilson intends to retain earnings to finance its growth and, therefore, does not anticipate paying dividends.

Contractual Obligations and Commercial Commitments

        At September 30, 2009, Kennedy-Wilson's contractual cash obligations, including debt, lines of credit, capital lease obligations and operating leases include the following:

Off-Balance Sheet Arrangements

        Kennedy-Wilson has provided 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 $37.0 million and $46.0 million at September 30, 2009 and December 31, 2008, respectively. During the nine months ended September 30, 2009, several loans were been paid down, which reduced the guarantees to approximately $37.0 million. The guarantees expire by the year end of 2011 and Kennedy-Wilson's performance under the guarantees would be required to the extent there is a shortfall in liquidation between the principal amount of the loan and the net sales proceeds of the property. If

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Kennedy-Wilson were to become obligated to perform on these guarantees, it could have an adverse affect on its financial condition.

Impact of Inflation and Changing Prices

        Inflation has not had a significant impact on the results of operations of Kennedy-Wilson in recent years and is not anticipated to have a significant impact in the foreseeable future. Kennedy-Wilson's exposure to market risk from changing prices consists primarily of fluctuations in rental rates of commercial and residential properties, market interest rates on residential mortgages and debt obligations and real estate property values. The revenues associated with the commercial services businesses are impacted by fluctuations in interest rates, lease rates, real property values and the availability of space and competition in the market place. Commercial service revenues are derived from a broad range of services that are primarily transaction driven and are therefore volatile in nature and highly competitive. The revenues of the property management operations with respect to rental properties are highly dependent upon the aggregate rents of the properties managed, which are affected by rental rates and building occupancy rates. Rental rate increases are dependent upon market conditions and the competitive environments in the respective locations of the properties. Employee compensation is the principal cost element of property management. Economic trends in 2009 were characterized by general decrease in commercial leasing volume in the U.S.

Qualitative and Quantitative Disclosures about Market Risk

        The primary market risk exposure of Kennedy-Wilson relates to changes in interest rates in connection with its short-term borrowings, some of which bear interest at variable rates based on lender's base rate, prime rate, and LIBOR plus an applicable borrowing margin. These borrowings do not give rise to a significant interest rate risk because they have short maturities. Historically, Kennedy-Wilson has not experienced material gains or losses due to interest rate changes.

Interest Rate Risk

        Kennedy-Wilson has established an interest rate management policy, which attempts to minimize its overall cost of debt, while taking into consideration the earnings implications associated with the volatility of short-term interest rates. As part of this policy, Kennedy-Wilson has elected to maintain a combination of variable and fixed rate debt.

        The tables below represent contractual balances of Kennedy-Wilson's financial instruments at the expected maturity dates as well as the fair value at September 30, 2009, and December 31, 2008. The expected maturity categories take into consideration actual amortization of principal and do not take into consideration reinvestment of cash. The weighted average interest rate for the various assets and liabilities presented are actual as of September 30, 2009, and December 31, 2008. Kennedy-Wilson closely monitors the fluctuation in interest rates, and if rates were to increase significantly, Kennedy-Wilson believes that it would be able to either hedge the change in the interest rate or to

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refinance the loans with fixed interest rate debt. All instruments included in this analysis are non-trading.

Recently Issued Accounting Pronouncements

        In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. SFAS No. 168 replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, to establish the FASB Accounting Standards Codification (the "Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in preparation of financial statements in conformity with GAAP. SFAS No. 168 is effective for interim and annual reporting periods ending after September 15, 2009. We have updated our references to accounting literature in these consolidated financial statements to those contained in the Codification.

        Effective April 1, 2009, we adopted the provisions of the Subsequent Events Subsections of FASB Codification Subtopic 855-10 that establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. FASB Codification Subtopic 855-10 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate or transactions that may occur for potential recognition in the financial statements, identifies the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that should be made about events or transactions that occur after the balance sheet date.

        Effective January 1, 2009, we adopted the provisions of the Noncontrolling Interests Subsections of FASB Codification Subtopic 810-10 which require that amounts previously reported as minority interests in our consolidated financial statements be reported as noncontrolling interests and included in equity. Noncontrolling Interests Subsections of FASB Codification Subtopic 810-10 is effective for periods beginning on or after December 15, 2008, and earlier adoption is prohibited. The adoption of this literature has no material impact to the accompanying consolidated financial statements.

        Effective January 1, 2009, we adopted the provisions of the Determining Useful Life of Intangible Assets Subsections of FASB Codification Subtopic 350-30 which provides guidance on factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The adoption of this literature has no material impact to the accompanying consolidated financial statements.

        Effective January 1, 2009, we adopted the provisions of the Equity Method Investment Accountings Subsections of FASB Codification Subtopic 323-10 which requires that

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other-than-temporary impairment testing by the investor should be performed at the investment level and that a separate impairment assessment of the underlying assets is not required. An impairment charge by the investee should result in an adjustment of the investor's basis of the impaired asset for the investor's pro-rata share of such impairment. In addition, Equity Method Investment Accountings Subsections of FASB Codification Subtopic 323-10 addresses the resolution on how to account for an issuance of shares by an investee that reduces the investor's ownership share of the investee. An investor should account for such transactions as if it had sold a proportionate share of its investment with any gains or losses recorded through earnings. Equity Method Investment Accountings Subsections of FASB Codification Subtopic 323-10 also addresses the accounting for a change in an investment from the equity method to the cost method after adoption of Noncontrolling Interests Subsections of FASB Codification Subtopic 810-10. Equity Method Investment Accountings Subsections of FASB Codification Subtopic 323-10 also requires cessation of the equity method of accounting and application of Accounting for Certain in Debt and Equity Securitites Subsections of FASB Codification Subtopic 320-10 or cost method under Equity Method Investment Accountings Subsections of FASB Codification Subtopic 323-10, as appropriate. The adoption of this literature did not materially impact Kennedy-Wilson's financial position or results of operations.

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INDEX TO FINANCIAL INFORMATION

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Management and Members
KW Residential LLC

        We have audited the accompanying consolidated balance sheets KW Residential LLC (a Delaware company) and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations and comprehensive income (loss), members' equity, and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidation financial position of KW Residential LLC and subsidiaries as of December 31, 2008 and 2007, and the results of their consolidated operations and their consolidated cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

/s/ GRANT THORNTON TAIYO ASG

Tokyo, Japan
October 22, 2009

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KW Residential LLC and Subsidiaries

Consolidated Balance Sheets

The accompanying notes are an integral part of these financial statements.

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KW Residential LLC and Subsidiaries

Consolidated Statement of Operations and Comprehensive Income (Loss)

The accompanying notes are an integral part of these financial statements.

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KW Residential LLC and Subsidiaries

Consolidated Statement of Members' Equity

For the three years ended December 31, 2008

The accompanying notes are an integral part of these financial statements.

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KW Residential LLC and Subsidiaries

Consolidated Statement of Cash Flow

The accompanying notes are an integral part of these financial statements.

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KW Residential, LLC and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008 and 2007

NOTE 1—ORGANIZATION

        KW Residential LLC, a Delaware corporation, and its subsidiaries, collectively referred to as "the Company", was established in August 2005 and is jointly owned by Kennedy Wilson, Inc. (35%) and Wachovia Development Corp., now a unit of Wells Fargo, Inc. (65%). Through its Japanese subsidiaries, namely KW Investment Co. Ltd ("KWI"), KIWI, KIWI 2, KIWI 3, KIWI 4, KIWI 5, and KIWI 6, the Company is a real estate investment and services firm. The Company's investments include a portfolio of multifamily real estate properties comprising about 2400 units in 50 properties, located primarily in Tokyo and surrounding areas. The Company also provides real estate services in Japan, including asset management and brokerage services to its own portfolio as well as to institutional investors, developers, and financial institutions. The Company has twelve employees, all located in its headquarters office in central Tokyo.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        BASIS OF CONSOLIDATION—The consolidated financial statements include the accounts of KW Residential LLC and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In addition, the Company evaluates its relationships with other entities to identify whether they are variable interest entities as defined by FASB Interpretation No. 46 (revised December 2003) Consolidation of Variable Interest Entities ("FIN 46R") and to assess whether it is the primary beneficiary of such entities. If the determination is made that KW Residential LLC is the primary beneficiary, then that entity is included in the consolidated financial statements in accordance with FIN 46R. Certain subsidiaries use different fiscal year-ends from the Company's fiscal year-end of December 31. Material differences in intercompany transactions and accounts arising from the use of the different fiscal year-ends are adjusted in consolidation, and were not material.

        OPERATING CURRENCY—The functional currency of the Japanese entities is the Japanese yen. Their financial statements are translated into US dollars by translating assets and liabilities at the closing rate on the balance sheet date and income statement items at average exchange rates during the year, with translation adjustments reported directly in members' equity.

        USE OF ESTIMATES—The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (US GAAP) requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosure about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the value of accounts receivable, income taxes, long-lived assets, and legal contingencies. These estimates and assumptions are based on management's best estimate and judgment. Management evaluates its assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile energy markets, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

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KW Residential, LLC and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

December 31, 2008 and 2007

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        REVENUE RECOGNITION—Management and leasing fees and commissions revenues are accounted for in accordance with the provisions of SEC Staff Accounting Bulletin 104. Management fees for property and asset management are recognized over time as earned based upon the terms of the management agreement. Leasing fees that are payable upon tenant occupancy, payment of rent or other events beyond the Company's control are recognized upon the occurrence of such events. In the case of real estate sales commissions, this generally occurs when escrow closes.

        Rental income from residents is recognized over the leasing period. Rental agreements are cancelable, by tenant, on one-month notice.

        Sales of real estate are recognized at the close of escrow when title to the real property passes to the buyer. The Company follows the requirements for profit recognition as set forth by Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate.

        CASH AND CASH EQUIVALENTS—Cash and cash equivalents consist of cash and all highly liquid investments purchased with initial maturities of three months or less.

        ACCOUNTS RECEIVABLE—Accounts receivable consists of rental income receivable. The Company evaluates collectability of accounts receivable monthly. Those that are determined to be uncollectable are written-off. As of December 31, 2008 and 2007 there were no material uncollectable accounts receivable.

        LEASE—The Company leases its headquarters under a cancelable operating contract with 180 days notice. Rent expense was $268,800, $214,307 and $204,071 for the year ended December 31, 2008, 2007 and 2006, respectively. Aggregated monthly lease costs are $21,721.

        REAL ESTATE—Real estate held for sale is stated at the lower of cost or market, determined by the identified cost method.

        The Company acquired its portfolio of multifamily real estate properties primarily for the purpose of selling for a profit within a short period of time, which was estimated to be one year or less. These assets are classified as real estate held for sale and financed with short term one-year bridge loans. No depreciation is recognized during the holding period.

        Due to the recent world wide economic recession and tight credit market, the Company found it necessary to revise its strategy. As the bridge loans approached maturity, the Company refinanced the properties with long term three-year financing, and at the same time reclassified the properties to rental property. Simultaneous with the real estate reclassification, the Company began depreciating the non-land portion of the properties.

        RENTAL PROPERTY—Rental property is stated at the lower of cost or market value at the date it was transferred from "Held for sale" status, based on appraised value. Major maintenance and improvements are capitalized; minor replacements, maintenance and repairs are charged to current

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KW Residential, LLC and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

December 31, 2008 and 2007

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

operations. Depreciation of property and equipment is computed on the straight-line method over the following estimated useful lives of the assets:

        Aggregate depreciation expenses for property and equipment for the years ended December 31, 2008, 2007 and 2006 were $5,413,136, $1,711,439 and $279,943, respectively.

        LONG-LIVED ASSETS—Management reviews its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with Statement of Financial Accounting Standards No. 144 Accounting for Impairment or Disposal of Long-Lived Assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or estimated fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale are presented separately in the appropriate asset and liability sections of the consolidated balance sheet.

        GUARANTEES—The Company was the beneficiary of a guarantee by Kennedy-Wilson Inc. and Wachovia Development Corporation, members of the Company, for an unsecured bank overdraft privilege by KWR (GK), a subsidiary of the Company. The maximum potential amount of future payments (undiscounted) that could be required under the guarantee was approximately $53 million at December 31, 2007. The guarantee expired in September 2008 since KWR (GK) repaid the bank overdraft and did not renew it.

        INCOME TAXES—Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Beginning with the adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48) as of January 1, 2007, the Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Prior to the adoption of FIN 48, the Company recognized the effect of income tax positions only if such positions were probable of being sustained. There was no impact upon adoption of FIN 48.

        FAIR VALUE MEASUREMENTS—On January 1, 2008, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) ASB Statement No. 157, Fair Value Measurements,

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KW Residential, LLC and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

December 31, 2008 and 2007

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Statement 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Statement 157 also establishes a framework for measuring fair value and expands disclosures about fair value measurements. The adoption of Statement 157 was not material.

        FAIR VALUE OF FINANCIAL INSTRUMENTS—The estimated fair value of The Company's financial instruments is determined using available market information and appropriate valuation methodologies. Considerable judgement, however, is necessary to interpret market data and develop the related estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material impact on the estimated fair value amounts. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities, accrued salaries and benefits, and deferred and accrued income taxes approximate fair value due to their short-term maturities. The carrying value of notes receivable approximate fair value as they are negotiated based upon the fair value of loans with similar characteristics.

        FAIR VALUE OPTION—Effective January 1, 2008, The Company adopted the provisions of SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. Statement 159 gives the Company the irrevocable option to report most financial assets and financial liabilities at fair value on an instrument-by-instrument basis, with changes in fair value reported in earnings. The Company has not elected to use this option.

        CAPITALIZED INTEREST—The Company capitalizes interest in accordance with Statement of Financial Accounting Standards No. 34, Capitalization of Interest Cost for assets that are undergoing development or entitlement activities in preparation for their planned principal operations. For qualifying equity investments, interest is capitalized in accordance with SFAS No. 58, Capitalization of Interest Cost in Financial Statements That Include Investments Accounted for Under the Equity Method (an amendment of FASB Statement No. 34). An appropriate interest rate is applied to the Company's cash investment in the qualifying asset. The interest is credited against interest expense and added to the basis in the investment. Interest is capitalized when the development or entitlement activity commences and ceases when the investment has begun its planned principal operations. The Company has not capitalized interest as of the balance sheet dates presented, as the properties accrued were fully developed and substantially leased.

        DERIVATIVE FINANCIAL INSTRUMENTS—The Company accounts for derivatives in accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which requires that all derivative instruments be recorded on the balance sheet at their respective fair values and the changes in the fair value of the derivative instrument be reported in current earnings. As of December 31, 2008 and 2007 the Company had derivative financial instruments arising from interest rate caps in the amounts of $224,369 and $55,678, respectively at fair value.

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KW Residential, LLC and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

December 31, 2008 and 2007

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        DEFERRED FINANCING COSTS—In accordance with the Accounting Principles Board Opinion 21 "Interest on Receivables and Payables", the Company recognizes debt issue costs on the balance sheet as deferred charges and amortizes the balance over the term of the related debt. The Company follows the guidance in the EITF 95-13 "Classification of Debt Issue Costs in the Statement of Cash Flows" and classifies cash payments for debt issue costs as a financing activity.

NOTE 3—RECENT ACCOUNTING PRONOUNCEMENTS

        In December 2007, the FASB issued SFAS No. 141(R), Business Combinations. Statement 141(R) requires identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at fair value. Statement 141(R) is effective for transactions occurring on or after December 15, 2008, and earlier adoption is prohibited. The adoption of Statement 141(R) will affect the total purchase price of future acquisitions, as acquisition costs will be expensed and the allocation of fair value to specific assets will be different. The Company is continuing to evaluate the impact the adoption of this statement will have on its consolidated financial statements

        In April 2008, the FASB issued Staff Position FAS 142-3, "Determination of the Useful Life of Intangible Assets." FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under Statement 142. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. Management is currently evaluating the impact, if any, of adopting FSP FAS 142-3 on its financial position and results of operations.

        In November 2008, the FASB's Emerging Issues Task Force reached a consensus on EITF Issue No. 08-6, "Equity Method Investment Accounting Considerations." EITF 08-6 continues to follow the accounting for the initial carrying value of equity method investments in APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, which is based on a cost accumulation model and generally excludes contingent consideration. EITF 08-6 also specifies that other-than-temporary impairment testing by the investor should be performed at the investment level and that a separate impairment assessment of the underlying assets is not required. An impairment charge by the investee should result in an adjustment of the investor's basis of the impaired asset for the investor's pro-rata share of such impairment. In addition, EITF 08-6 reached a consensus on how to account for an issuance of shares by an investee that reduces the investor's ownership share of the investee. An investor should account for such transactions as if it had sold a proportionate share of its investment with any gains or losses recorded through earnings. EITF 08-6 also addresses the accounting for a change in an investment from the equity method to the cost method after adoption of Statement 160. EITF 08-6 affirms the existing guidance in APB 18, which requires cessation of the equity method of accounting and application of FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, or the cost method under APB 18, as appropriate. EITF 08-6 is effective for transactions occurring on or after December 15, 2008. Management does not anticipate that the adoption of EITF 08-6 will materially impact the Company's financial position or results of operations.

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KW Residential, LLC and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

December 31, 2008 and 2007

NOTE 4—REAL ESTATE HELD FOR SALE

        The composition of real estate held for sale consisted on the following at December 31:

NOTE 5—RENTAL PROPERTY

        Rental property consists of the following:

NOTE 6—OTHER ASSETS

        The composition of other assets consisted on the following at December 31:

F-11

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KW Residential, LLC and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

December 31, 2008 and 2007