Kilroy Realty Corporation Reports Fourth Quarter Financial Results

LOS ANGELES–(EON: Enhanced Online News)–Kilroy Realty Corporation (NYSE: KRC) today reported
financial results for its fourth quarter ended December 31, 2011, with
net income available to common stockholders of $39.9 million, or $0.68
per share, compared to $1.5 million, or $0.02 per share, in the fourth
quarter of 2010. Revenues from continuing operations in the fourth
quarter totaled $101.5 million, up from $79.3 million in the prior
year’s fourth quarter. Funds from operations (FFO) for the period
totaled $40.5 million, or $0.66 per share, compared to $29.5 million, or
$0.54 per share, in the year-earlier period.

“Our ongoing focus on leasing, portfolio enhancement and financial
strength really paid off in 2011”

For its fiscal year ended December 31, 2011, KRC reported net income
available to common stockholders of $50.8 million, or $0.87 per share,
compared to $4.5 million, or $0.07 per share, in fiscal year 2010.
Revenues from continuing operations in 2011 totaled $367.1 million, up
from $287.4 million in 2010. FFO for the year totaled $136.2 million, or
$2.29 per share, compared to $106.6 million, or $2.05 per share, in 2010.

Results for the fourth quarter and fiscal year ended December 31, 2011
include the receipt of a $3.7 million, or $0.06 per share, cash payment
under a bankruptcy claim related to a 2009 tenant default. Net income
for the fourth quarter and fiscal year ended December 31, 2011 includes
approximately $39.0 million and $51.6 million, respectively, of net
gains from property dispositions. In addition, results for the fiscal
year ended December 31, 2010 include a $4.6 million, or $0.09 per share,
charge for the early extinguishment of debt. All per share amounts in
this report are presented on a diluted basis.

During the fourth quarter of 2011, the company sold a 192,000
square-foot industrial building located in the El Segundo submarket of
Los Angeles for a sales price of approximately $42.2 million bringing
total 2011 disposition proceeds to $66.1 million. In addition, on
January 30, 2012, the company closed on the disposition of two office
properties in San Diego at a sales price of approximately $146.1 million
or $576 per square foot.

Also during the fourth quarter, the company completed the acquisition of
two office properties totaling just over 484,000 square feet, for an
aggregate purchase price of approximately $121.5 million. Both
properties are located in the South of Market (SOMA) district of San
Francisco, one of the top performing real estate markets in the country.
301 Brannan Street is 66.1% occupied and 100% leased. 370 Third Street
is 8.9% occupied and 36.8% leased, and is currently undergoing
redevelopment.

For 2011, KRC completed the acquisition of eight office projects
encompassing 11 buildings and approximately two million square feet for
an aggregate investment of $637.8 million. These properties are located
in the high-growth, gateway markets of San Francisco, San Diego, and
greater Seattle.

KRC reported its strongest annual leasing performance in the company’s
history as a publicly traded company during 2011. For the year, KRC
signed new and renewing leases on 2.6 million square feet of office and
industrial space. At December 31, 2011, the company’s stabilized
portfolio totaled approximately 14.8 million square feet and was 92.4%
occupied.

“Our ongoing focus on leasing, portfolio enhancement and financial
strength really paid off in 2011,” said John Kilroy, Jr., KRC’s
president and chief executive officer. “We successfully extended the KRC
franchise into the high potential, high value West Coast markets of San
Francisco and Seattle. We implemented an effective capital recycling
program to finance a portion of our acquisitions. We achieved the
strongest annual leasing performance in our history as a public company.
And the impact is apparent in our 2011 financial results, with
year-over-year increases in both FFO and same-store net operating
income, and a strong total return to shareholders.”

KRC management will discuss updated earnings guidance for fiscal 2012
during the company’s January 31, 2012 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 888-679-8034, reservation #51740166. A replay of the conference
call will be available via phone through February 7, 2012 at
888-286-8010, reservation #17959731, or via the Internet at the
company’s website.

Kilroy Realty Corporation, a member of the SP Small Cap 600 Index, is a
Southern California-based real estate investment trust active in the
office and industrial property sectors. For over 60 years, the company
has owned, developed, acquired and managed real estate assets primarily
in the coastal regions of Los Angeles, Orange County, San Diego, greater
Seattle and the San Francisco Bay Area. At December 31, 2011, the
company owned 11.4 million rentable square feet of commercial office
space and 3.4 million rentable square feet of industrial space. More
information is available at http://www.kilroyrealty.com.

 

KILROY REALTY CORPORATION

SUMMARY QUARTERLY RESULTS

(unaudited, in thousands, except per share data)

 

 

Three Months

 

Three Months

 

 

Ended

Ended

Year Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

2011

2010

2011

2010

Revenues from continuing operations (1)

$

101,458

$

79,309

$

367,131

$

287,396

 

Revenues including discontinued operations(1)

$

105,138

$

82,941

$

383,131

$

301,980

 

Net income available to common stockholders(1)

$

39,910

$

1,535

$

50,819

$

4,512

 

Weighted average common shares outstanding – basic

58,440

52,274

56,717

49,497

Weighted average common shares outstanding – diluted

58,440

52,274

56,717

49,497

 

Net income available to common stockholders per share – basic(1)

$

0.68

$

0.02

$

0.87

$

0.07

Net income available to common stockholders per share – diluted (1)

$

0.68

$

0.02

$

0.87

$

0.07

 

Funds From Operations (1), (2), (3)

$

40,528

$

29,485

$

136,173

$

106,639

 

Weighted average common shares/units outstanding – basic (4)

61,108

54,786

59,362

52,033

Weighted average common shares/units outstanding – diluted (4)

61,110

54,802

59,549

52,049

 

Funds From Operations per common share/unit – basic (1), (4)

$

0.66

$

0.54

$

2.29

$

2.05

Funds From Operations per common share/unit – diluted (1), (4)

$

0.66

$

0.54

$

2.29

$

2.05

 

Common shares outstanding at end of period

58,820

52,350

Common partnership units outstanding at end of period

1,718

 

1,723

 

Total common shares and units outstanding at end of period

60,538

54,073

 

December 31,

December 31,

2011

2010

Stabilized portfolio occupancy rates: (5)

Office

90.1

%

87.5

%

Industrial

100.0

%

93.9

%

Weighted average total

92.4

%

89.1

%

 

Los Angeles and Ventura Counties

83.5

%

89.9

%

San Diego County

92.5

%

86.4

%

Orange County

99.1

%

93.5

%

San Francisco Bay Area

93.3

%

84.3

%

Greater Seattle

89.9

%

100.0

%

Weighted average total

92.4

%

89.1

%

 

Total square feet of stabilized properties owned at end of period: (5)

Office

11,421

10,395

Industrial

3,413

 

3,603

 

Total

14,834

13,998

 

(1) Results for the three months and year ended December 31, 2011
include the receipt of a $3.7 million cash payment under a bankruptcy
claim related to a 2009 tenant default.

(2) Reconciliation of Net 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) The Company’s stabilized portfolio excludes two office buildings
classified as held for sale as of December 31, 2011.

 

KILROY REALTY CORPORATION CONSOLIDATED
BALANCE SHEET
S

(unaudited, in thousands)

 

 

December 31,

 

December 31,

2011

2010

ASSETS

REAL ESTATE ASSETS:

Land and improvements

$

537,574

$

491,333

Buildings and improvements

2,830,310

2,435,173

Undeveloped land and construction in progress

430,806

 

290,365

 

Total real estate held for investment

3,798,690

3,216,871

Accumulated depreciation and amortization

(742,503

)

(672,429

)

Total real estate held for investment, net

3,056,187

2,544,442

 

Real estate assets and other assets held for sale, net

84,156

Cash and cash equivalents

4,777

14,840

Restricted cash

358

1,461

Marketable securities

5,691

4,902

Current receivables, net

8,395

6,258

Deferred rent receivables, net

101,142

89,052

Deferred leasing costs and acquisition-related intangible assets, net

155,522

131,066

Deferred financing costs, net

18,368

16,447

Prepaid expenses and other assets, net

12,199

 

8,097

 

TOTAL ASSETS

$

3,446,795

 

$

2,816,565

 

 

LIABILITIES, NONCONTROLLING INTEREST AND
EQUITY

LIABILITIES:

Secured debt, net

$

351,825

$

313,009

Exchangeable senior notes, net

306,892

299,964

Unsecured senior notes, net

980,569

655,803

Unsecured line of credit

182,000

159,000

Accounts payable, accrued expenses and other liabilities

81,713

68,525

Accrued distributions

22,692

20,385

Deferred revenue and acquisition-related intangible liabilities, net

79,781

79,322

Rents received in advance and tenant security deposits

26,917

29,189

Liabilities and deferred revenue of real estate assets held for sale

13,286

 

 

Total liabilities

2,045,675

 

1,625,197

 

 

NONCONTROLLING INTEREST:

7.45% Series A cumulative redeemable preferred units of the
Operating Partnership

73,638

73,638

 

EQUITY:

Stockholders’ Equity

7.80% Series E Cumulative Redeemable Preferred stock

38,425

38,425

7.50% Series F Cumulative Redeemable Preferred stock

83,157

83,157

Common stock

588

523

Additional paid-in capital

1,448,997

1,211,498

Distributions in excess of earnings

(277,450

)

(247,252

)

Total stockholders’ equity

1,293,717

 

1,086,351

 

Noncontrolling Interest

Common units of the Operating Partnership

33,765

 

31,379

 

Total equity

1,327,482

 

1,117,730

 

TOTAL LIABILITIES, NONCONTROLLING INTEREST AND EQUITY

$

3,446,795

 

$

2,816,565

 

 

 

KILROY REALTY CORPORATION CONSOLIDATED
STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)

 

 

Three Months

 

Three Months

 

 

Ended

Ended

Year Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

2011

2010

2011

2010

REVENUES:

Rental income

$

89,504

$

73,112

$

332,489

$

261,534

Tenant reimbursements

7,492

5,576

27,976

22,918

Other property income

4,462

 

621

 

6,666

 

2,944

 

Total revenues

101,458

 

79,309

 

367,131

 

287,396

 

 

EXPENSES:

Property expenses

18,761

15,358

72,869

56,389

Real estate taxes

8,422

7,102

32,521

26,342

Provision for bad debts

503

129

644

16

Ground leases

513

336

1,779

984

General and administrative expenses

7,793

6,867

28,148

27,963

Acquisition-related expenses

1,224

624

4,053

2,248

Depreciation and amortization

38,022

 

28,225

 

133,220

 

99,611

 

Total expenses

75,238

 

58,641

 

273,234

 

213,553

 

 

OTHER (EXPENSES) INCOME:

Interest income and other net investment gains

299

261

571

964

Interest expense

(23,254

)

(19,044

)

(89,409

)

(59,941

)

Loss on early extinguishment of debt

 

 

 

(4,564

)

Total other (expenses) income

(22,955

)

(18,783

)

(88,838

)

(63,541

)

 

INCOME FROM CONTINUING OPERATIONS

3,265

1,885

5,059

10,302

 

DISCONTINUED OPERATIONS:

Income from discontinued operations

2,566

2,550

10,843

8,635

Net gain on dispositions of discontinued operations

39,032

 

949

 

51,587

 

949

 

Total income from discontinued operations

41,598

 

3,499

 

62,430

 

9,584

 

 

NET INCOME

44,863

5,384

67,489

19,886

 

Net income attributable to noncontrolling common units of the
Operating Partnership

(1,154

)

(50

)

(1,474

)

(178

)

 

NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION

43,709

5,334

66,015

19,708

 

PREFERRED DISTRIBUTIONS AND DIVIDENDS:

Distributions on noncontrolling cumulative redeemable preferred
units of the Operating Partnership

(1,397

)

(1,397

)

(5,588

)

(5,588

)

Preferred dividends

(2,402

)

(2,402

)

(9,608

)

(9,608

)

Total preferred distributions and dividends

(3,799

)

(3,799

)

(15,196

)

(15,196

)

 

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

$

39,910

 

$

1,535

 

$

50,819

 

$

4,512

 

 

Weighted average common shares outstanding – basic

58,440

52,274

56,717

49,497

Weighted average common shares outstanding – diluted

58,440

52,274

56,717

49,497

 

Net income available to common stockholders per share – basic

$

0.68

 

$

0.02

 

$

0.87

 

$

0.07

 

Net income available to common stockholders per share – diluted

$

0.68

 

$

0.02

 

$

0.87

 

$

0.07

 

 

 

KILROY REALTY CORPORATION FUNDS FROM
OPERATIONS

(unaudited, in thousands, except per share data)

 

 

Three Months

 

Three Months

 

 

Ended

Ended

Year Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

2011

2010

2011

2010

 

Net income available to common stockholders

$

39,910

$

1,535

$

50,819

$

4,512

Adjustments:

Net income attributable to noncontrolling common units of the
Operating Partnership

1,154

50

1,474

178

Depreciation and amortization of real estate assets

38,496

28,849

135,467

102,898

Net gain on dispositions of discontinued operations

 

(39,032

)

 

(949

)

 

(51,587

)

 

(949

)

Funds From Operations (1)

$

40,528

 

$

29,485

 

$

136,173

 

$

106,639

 

 

Weighted average common shares/units outstanding – basic

61,108

54,786

59,362

52,033

Weighted average common shares/units outstanding – diluted

61,110

54,802

59,549

52,049

 

Funds From Operations per common share/unit – basic (2)

$

0.66

 

$

0.54

 

$

2.29

 

$

2.05

 

Funds From Operations per common share/unit – diluted (2)

$

0.66

 

$

0.54

 

$

2.29

 

$

2.05

 

 

(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.

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) Reported amounts are attributable to common stockholders and common
unitholders.

Article source: http://eon.businesswire.com/news/eon/20120130006587/en

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