LOS ANGELES -- (Business Wire)
Kilroy Realty Corporation (NYSE: KRC) today reported
financial results for its first quarter ended March 31, 2013.
First Quarter Highlights
-
Funds from operations (FFO) per share of $0.62.
-
Net loss available to common stockholders of $0.02 per share,
primarily attributable to an increase in depreciation and amortization
expense.
-
Revenues from continuing operations of $117.5 million.
-
Stabilized portfolio was 90.3% occupied and 93.4% leased at March 31,
2013.
-
The company signed new or renewing leases on 434,000 square feet of
space.
-
The company acquired a two-building, approximately 321,000 square-foot
office property in the South Lake Union submarket of Seattle for
approximately $170 million, including the assumption of approximately
$84 million in debt.
-
The company completed a public offering of 3.8% senior unsecured
10-year notes for net proceeds of approximately $297 million.
Results for the quarter ended March 31, 2013
For its first quarter ended March 31, 2013, KRC reported FFO for the
period of $49.1 million, or $0.62 per share, compared to $33.0 million,
or $0.49 per share, in the first quarter of 2012. Net loss available to
common stockholders was $0.9 million, or $0.02 per share, compared to
net income available to common stockholders of $67.5 million, or $1.06
per share, in the first quarter of 2012. Net loss available to common
stockholders in the first quarter of 2013 included a year over year
increase in depreciation and amortization expense of approximately $11.0
million related to properties the company acquired in 2012 and 2013. Net
income available to common stockholders in the first quarter of 2012
included approximately $3.7 million of income from discontinued
operations, $72.8 million of net gains from property dispositions and a
$4.9 million charge for the early redemption of preferred stock.
The company's revenues from continuing operations in the first quarter
of 2013 totaled $117.5 million, up from $92.4 million in the first
quarter of 2012.
All per-share amounts in this report are presented on a fully diluted
basis.
Operating and Leasing Activity
At March 31, 2013, the company's stabilized portfolio, encompassing
approximately 13.6 million square feet of office space located in Los
Angeles, Orange County, San Diego, the San Francisco Bay Area and
greater Seattle, was 90.3% occupied, down from 92.8% at year-end 2012.
The decline was largely due to scheduled expirations. At the end of the
first quarter, KRC's stabilized portfolio was 93.4% leased. During the
first quarter, the company also signed new or renewing leases on
approximately 434,000 square feet of office space.
Real Estate Investment Activity
In January, KRC completed the acquisition of a two-building, 321,000
square-foot office property located in the South Lake Union submarket of
greater Seattle. The company paid approximately $170 million for the
property, including the assumption of approximately $84 million in debt.
The property is currently 100% occupied.
KRC currently has four 100% pre-leased development projects under
construction aggregating approximately 1.4 million square feet of space.
The company estimates its total investment in the four development
projects will be approximately $809.5 million. Scheduled completion
dates for the four projects range from fourth quarter 2013 to first half
of 2015.
Capital Financing Activity
In January, KRC completed a public offering of $300.0 million aggregate
principal amount of 3.8% senior unsecured notes that mature on January
15, 2023 for net proceeds of approximately $297.0 million. During the
quarter, the company also sold approximately $23.4 million, net of
selling commissions, of its common stock via its at-the-market stock
offering program.
Management Comments
“As our first quarter activity demonstrates, we remain focused on
building the long-term value of our portfolio through both opportunistic
acquisitions and well-executed development, while maintaining a strong
balance sheet,” said John Kilroy, Jr., the company's president and chief
executive officer.
“Our first-quarter purchase of Westlake Terry, a fully leased, premier
office property located in one of greater Seattle's most desirable
submarkets, strengthens our footprint in the region, continues our
strategic expansion into high quality West Coast markets, and
underscores the competitive advantage we believe we are gaining from a
larger operating platform and more visible franchise.”
Conference Call and Audio Webcast
KRC management will discuss updated earnings guidance for fiscal 2013
during the company's May 1, 2013 earnings conference call. The call will
begin at 10:00 a.m. Pacific Time and last approximately one hour. Those
interested in listening via the Internet can access the conference call
at http://www.kilroyrealty.com.
Please go to the website 15 minutes before the call and register. It may
be necessary to download audio software to hear the conference call.
Those interested in listening via telephone can access the conference
call at (888) 679-8033 reservation # 57852562. A replay of the
conference call will be available via phone through May 8, 2013 at
888-286-8010, reservation # 50797205, or via the Internet at the
company's website.
About Kilroy Realty Corporation
Kilroy Realty Corporation, a member of the S&P MidCap 400 Index, is a
real estate investment trust active in major West Coast office markets.
For over 65 years, the company has owned, developed, acquired and
managed real estate assets primarily in the coastal regions of Los
Angeles, Orange County, San Diego, the San Francisco Bay Area and
greater Seattle. At March 31, 2013, the company owned 13.6 million
rentable square feet of commercial office space. More information is
available at http://www.kilroyrealty.com.
Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are based on our current expectations,
beliefs and assumptions, and are not guarantees of future performance.
Forward-looking statements are inherently subject to uncertainties,
risks, changes in circumstances, trends and factors that are difficult
to predict, many of which are outside of our control. Accordingly,
actual performance, results and events may vary materially from those
indicated in forward-looking statements, and you should not rely on
forward-looking statements as predictions of future performance, results
or events. Numerous factors could cause actual future performance,
results and events to differ materially from those indicated in
forward-looking statements, including, among others, risks associated
with: investment in real estate assets, which are illiquid; trends in
the real estate industry; significant competition, which may decrease
the occupancy and rental rates of properties; the ability to
successfully complete acquisitions and dispositions on announced terms;
the ability to successfully operate acquired properties; the
availability of cash for distribution and debt service and exposure of
risk of default under debt obligations; adverse changes to, or
implementations of, applicable laws, regulations or legislation; and the
ability to successfully complete development and redevelopment projects
on schedule and within budgeted amounts. These factors are not
exhaustive. For a discussion of additional factors that could materially
adversely affect our business and financial performance, see the factors
included under the caption “Risk Factors” in our annual report on Form
10-K for the year ended December 31, 2012 and our other filings with the
Securities and Exchange Commission. All forward-looking statements are
based on information that was available, and speak only, as of the date
on which they are made. We assume no obligation to update any
forward-looking statement made in this press release that becomes untrue
because of subsequent events, new information or otherwise, except to
the extent required in connection with ongoing requirements under U.S.
securities laws.
KILROY REALTY CORPORATION
SUMMARY QUARTERLY RESULTS
(unaudited, in thousands, except per share data)
|
|
|
| Three Months Ended March 31, 2013 |
| Three Months Ended March 31, 2012 |
|
Revenues from continuing operations
|
$
|
117,497
| | |
$
|
92,397
| |
| | |
|
|
Revenues including discontinued operations
|
$
|
117,497
| | |
$
|
100,413
| |
| | |
|
|
Net (loss) income available to common stockholders(1) |
$
|
(903
|
)
| |
$
|
67,540
| |
| | |
|
|
Weighted average common shares outstanding - basic
|
74,977
| | |
63,649
| |
|
Weighted average common shares outstanding - diluted
|
74,977
| | |
63,649
| |
| | |
|
|
Net (loss) income available to common stockholders per share - basic (1) |
$
|
(0.02
|
)
| |
$
|
1.06
| |
|
Net (loss) income available to common stockholders per share -
diluted (1) |
$
|
(0.02
|
)
| |
$
|
1.06
| |
| | |
|
|
Funds From Operations (1), (2), (3) |
$
|
49,086
| | |
$
|
32,990
| |
| | |
|
|
Weighted average common shares/units outstanding - basic (4) |
78,039
| | |
66,371
| |
|
Weighted average common shares/units outstanding - diluted (4) |
79,725
| | |
67,156
| |
| | |
|
|
Funds From Operations per common share/unit - basic (1), (4) |
$
|
0.63
| | |
$
|
0.50
| |
|
Funds From Operations per common share/unit - diluted (1), (4) |
$
|
0.62
| | |
$
|
0.49
| |
| | |
|
|
Common shares outstanding at end of period:
|
75,350
| | |
68,350
| |
|
Common partnership units outstanding at end of period
|
1,827
|
| |
1,718
|
|
|
Total common shares and units outstanding at end of period
|
77,177
| | |
70,068
| |
| | |
|
| March 31, 2013 | | March 31, 2012 |
|
Stabilized office portfolio occupancy rates:(5) | | | |
|
Los Angeles and Ventura Counties
|
93.4
|
%
| |
87.0
|
%
|
|
Orange County
|
90.0
|
%
| |
93.3
|
%
|
|
San Diego County
|
87.2
|
%
| |
91.7
|
%
|
|
San Francisco Bay Area
|
94.5
|
%
| |
89.2
|
%
|
|
Greater Seattle
|
88.7
|
%
| |
90.3
|
%
|
|
Weighted average total
|
90.3
|
%
| |
90.0
|
%
|
| | |
|
|
Total square feet of stabilized office properties owned at end of
period:(5) | | | |
|
Los Angeles and Ventura Counties
|
3,488
| | |
2,981
| |
|
Orange County
|
497
| | |
541
| |
|
San Diego County
|
5,250
| | |
5,184
| |
|
San Francisco Bay Area
|
2,287
| | |
2,201
| |
|
Greater Seattle
|
2,048
|
| |
890
|
|
|
Total
|
13,570
| | |
11,797
| |
| | | | |
|
(1) Net Income Available to Common Stockholders includes a
net gain on dispositions of discontinued operations of $72.8 million for
the three months ended March 31, 2012. In addition, Net Income Available
to Common Stockholders and Funds from Operations for the three months
ended March 31, 2012 include a non-cash charge of $4.9 million related
to the original issuance cost of the Series E and F Preferred Stock
called for redemption on March 16, 2012.
(2) Reconciliation of Net (Loss) Income Available to Common
Stockholders to Funds From Operations and management statement on Funds
From Operations are included after the Consolidated Statements of
Operations.
(3) Reported amounts are attributable to common stockholders
and common unitholders.
(4) Calculated based on weighted average shares outstanding
including participating share-based awards and assuming the exchange of
all common limited partnership units outstanding.
(5) Occupancy percentages and total square feet reported are
based on the Company's stabilized office portfolio for the period
presented. Occupancy percentages and total square feet shown for March
31, 2012 include the office properties that were sold during the fourth
quarter of 2012.
KILROY REALTY CORPORATION CONSOLIDATED
BALANCE SHEETS
(in thousands)
|
| |
| |
| March 31, 2013 | | December 31, 2012 |
| (unaudited) | | |
ASSETS | | | |
|
REAL ESTATE ASSETS:
| | | |
|
Land and improvements
|
$
|
637,854
| | |
$
|
612,714
| |
|
Buildings and improvements
|
3,631,057
| | |
3,335,026
| |
|
Undeveloped land and construction in progress
|
747,679
|
| |
809,654
|
|
|
Total real estate held for investment
|
5,016,590
| | |
4,757,394
| |
|
Accumulated depreciation and amortization
|
(790,878
|
)
| |
(756,515
|
)
|
|
Total real estate held for investment, net
|
4,225,712
| | |
4,000,879
| |
| | |
|
|
Cash and cash equivalents
|
135,676
| | |
16,700
| |
|
Restricted cash
|
19,465
| | |
247,544
| |
|
Marketable securities
|
8,029
| | |
7,435
| |
|
Current receivables, net
|
10,666
| | |
9,220
| |
|
Deferred rent receivables, net
|
122,142
| | |
115,418
| |
|
Deferred leasing costs and acquisition-related intangible assets, net
|
196,525
| | |
189,968
| |
|
Deferred financing costs, net
|
20,501
| | |
18,971
| |
|
Prepaid expenses and other assets, net
|
16,571
|
| |
9,949
|
|
|
TOTAL ASSETS
|
$
|
4,755,287
|
| |
$
|
4,616,084
|
|
| | |
|
LIABILITIES AND EQUITY | | | |
|
LIABILITIES:
| | | |
|
Secured debt
|
$
|
570,676
| | |
$
|
561,096
| |
|
Exchangeable senior notes, net
|
165,022
| | |
163,944
| |
|
Unsecured debt, net
|
1,430,880
| | |
1,130,895
| |
|
Unsecured line of credit
|
—
| | |
185,000
| |
|
Accounts payable, accrued expenses and other liabilities
|
171,694
| | |
154,734
| |
|
Accrued distributions
|
29,106
| | |
28,924
| |
|
Deferred revenue and acquisition-related intangible liabilities, net
|
118,118
| | |
117,904
| |
|
Rents received in advance and tenant security deposits
|
37,251
|
| |
37,654
|
|
|
Total liabilities
|
2,522,747
|
| |
2,380,151
|
|
| | |
|
|
EQUITY:
| | | |
|
Stockholders' Equity
| | | |
|
6.875% Series G Cumulative Redeemable Preferred stock
|
96,155
| | |
96,155
| |
|
6.375% Series H Cumulative Redeemable Preferred stock
|
96,256
| | |
96,256
| |
|
Common stock
|
753
| | |
749
| |
|
Additional paid-in capital
|
2,149,052
| | |
2,126,005
| |
|
Distributions in excess of earnings
|
(157,211
|
)
| |
(129,535
|
)
|
|
Total stockholders' equity
|
2,185,005
|
| |
2,189,630
|
|
|
Noncontrolling Interest
| | | |
|
Common units of the Operating Partnership
|
47,535
|
| |
46,303
|
|
|
Total equity
|
2,232,540
|
| |
2,235,933
|
|
|
TOTAL LIABILITIES AND EQUITY
|
$
|
4,755,287
|
| |
$
|
4,616,084
|
|
| | | | | | |
|
KILROY REALTY CORPORATION CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
|
| |
| |
| Three Months Ended March 31, 2013 | | Three Months Ended March 31, 2012 |
|
REVENUES:
| | | |
|
Rental income
|
$
|
107,380
| | |
$
|
84,349
| |
|
Tenant reimbursements
|
9,887
| | |
7,180
| |
|
Other property income
|
230
|
| |
868
|
|
|
Total revenues
|
117,497
|
| |
92,397
|
|
| | |
|
|
EXPENSES:
| | | |
|
Property expenses
|
23,773
| | |
16,132
| |
|
Real estate taxes
|
10,337
| | |
7,665
| |
|
Provision for bad debts
|
95
| | |
2
| |
|
Ground leases
|
847
| | |
807
| |
|
General and administrative expenses
|
9,669
| | |
8,767
| |
|
Acquisition-related expenses
|
655
| | |
1,528
| |
|
Depreciation and amortization
|
50,391
|
| |
34,652
|
|
|
Total expenses
|
95,767
|
| |
69,553
|
|
| | |
|
|
OTHER (EXPENSES) INCOME:
| | | |
|
Interest income and other net investment gains
|
392
| | |
484
| |
|
Interest expense
|
(19,734
|
)
| |
(21,163
|
)
|
|
Total other (expenses) income
|
(19,342
|
)
| |
(20,679
|
)
|
| | |
|
|
INCOME FROM CONTINUING OPERATIONS
|
2,388
| | |
2,165
| |
| | |
|
|
DISCONTINUED OPERATIONS:
| | | |
|
Income from discontinued operations
|
—
| | |
3,697
| |
|
Net gain on dispositions of discontinued operations
|
—
|
| |
72,809
|
|
|
Total income from discontinued operations
|
—
|
| |
76,506
|
|
| | |
|
|
NET INCOME
|
2,388
| | |
78,671
| |
| | |
|
|
Net loss (income) attributable to noncontrolling common units of the
Operating Partnership
|
22
|
| |
(1,795
|
)
|
| | |
|
|
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION
|
2,410
| | |
76,876
| |
| | |
|
|
PREFERRED DISTRIBUTIONS AND DIVIDENDS:
| | | |
|
Distributions on noncontrolling cumulative redeemable preferred
units of the Operating Partnership
|
—
| | |
(1,397
|
)
|
|
Preferred dividends
|
(3,313
|
)
| |
(3,021
|
)
|
|
Original issuance costs of redeemed preferred stock
|
—
|
| |
(4,918
|
)
|
|
Total preferred distributions and dividends
|
(3,313
|
)
| |
(9,336
|
)
|
| | |
|
|
NET (LOSS) INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
$
|
(903
|
)
| |
$
|
67,540
|
|
| | |
|
|
Weighted average common shares outstanding - basic
|
74,977
| | |
63,649
| |
|
Weighted average common shares outstanding - diluted
|
74,977
| | |
63,649
| |
| | |
|
|
Net (loss) income available to common stockholders per share - basic
|
$
|
(0.02
|
)
| |
$
|
1.06
|
|
|
Net (loss) income available to common stockholders per share -
diluted
|
$
|
(0.02
|
)
| |
$
|
1.06
|
|
| | | | | | |
|
KILROY REALTY CORPORATION FUNDS FROM
OPERATIONS
(unaudited, in thousands, except per share data)
|
| |
| |
| Three Months Ended March 31, 2013 | | Three Months Ended March 31, 2012 |
|
Net (loss) income available to common stockholders
|
$
|
(903
|
)
| |
$
|
67,540
| |
|
Adjustments:
| | | |
|
Net (loss) income attributable to noncontrolling common units of the
Operating Partnership
|
(22
|
)
| |
1,795
| |
|
Depreciation and amortization of real estate assets
|
50,011
| | |
36,464
| |
|
Net gain on dispositions of discontinued operations
|
—
|
| |
(72,809
|
)
|
|
Funds From Operations (1)(2) |
$
|
49,086
|
| |
$
|
32,990
|
|
| | |
|
|
Weighted average common shares/units outstanding - basic
|
78,039
| | |
66,371
| |
|
Weighted average common shares/units outstanding - diluted
|
79,725
| | |
67,156
| |
| | |
|
|
Funds From Operations per common share/unit - basic (3) |
$
|
0.63
|
| |
$
|
0.50
|
|
|
Funds From Operations per common share/unit - diluted (3) |
$
|
0.62
|
| |
$
|
0.49
|
|
| | | | | | |
|
(1) The company calculates FFO in accordance with the White
Paper on FFO approved by the Board of Governors of NAREIT. The White
Paper defines FFO as net income or loss calculated in accordance with
GAAP, excluding extraordinary items, as defined by GAAP, gains and
losses from sales of depreciable real estate and impairment write-downs
associated with depreciable real estate, plus real estate-related
depreciation and amortization (excluding amortization of deferred
financing costs and depreciation of non-real estate assets), and after
adjustment for unconsolidated partnerships and joint ventures. Our
calculation of FFO includes the amortization of deferred revenue related
to tenant-funded tenant improvements and excludes the depreciation of
the related tenant improvement assets.
Management believes that FFO is a useful supplemental measure of the
company's operating performance. The exclusion from FFO of gains and
losses from the sale of operating real estate assets allows investors
and analysts to readily identify the operating results of the assets
that form the core of the company's activity and assists in comparing
those operating results between periods. Also, because FFO is generally
recognized as the industry standard for reporting the operations of
REITs, it facilitates comparisons of the company's operating performance
to other REITs. However, other REITs may use different methodologies to
calculate FFO, and accordingly, the company's FFO may not be comparable
to all other REITs.
Implicit in historical cost accounting for real estate assets in
accordance with GAAP is the assumption that the value of real estate
assets diminishes predictably over time. Since real estate values have
historically risen or fallen with market conditions, many industry
investors and analysts have considered presentations of operating
results for real estate companies using historical cost accounting alone
to be insufficient. Because FFO excludes depreciation and amortization
of real estate assets, management believes that FFO along with the
required GAAP presentations provides a more complete measurement of the
company's performance relative to its competitors and a more appropriate
basis on which to make decisions involving operating, financing and
investing activities than the required GAAP presentations alone would
provide.
However, FFO should not be viewed as an alternative measure of the
company's operating performance since it does not reflect either
depreciation and amortization costs or the level of capital expenditures
and leasing costs necessary to maintain the operating performance of the
company's properties, which are significant economic costs and could
materially impact the company's results from operations.
(2) FFO includes amortization of deferred revenue related to
tenant-funded tenant improvements of $2.4 million and $2.3 million for
the three months ended March 31, 2013 and March 31, 2012, respectively.
(3) Reported amounts are attributable to common stockholders
and common unitholders.
Contacts:
Kilroy Realty Corporation
Tyler H. Rose
Executive Vice
President and Chief Financial Officer
(310) 481-8484
or
Michelle
Ngo
Vice President and Treasurer
(310) 481-8581
Source: Kilroy Realty Corporation
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