Kilroy Realty Corporation Reports Third Quarter Financial Results
LOS ANGELES–(BUSINESS WIRE)– Kilroy Realty Corporation today reported financial results for its third quarter ended September 30, 2012, with a net loss available to common stockholders of $2.8 million, or $0.04 per share, compared to net income available to common stockholders of $10.2 million, or $0.17 per share, in the third quarter of 2011. Revenues from continuing operations in the third quarter totaled $104.3 million, up from $86.4 million in the prior year’s third quarter. Funds from operations (FFO) for the period totaled $43.1 million, or $0.57 per share, compared to $33.9 million, or $0.56 per share, in the year-earlier period. Net loss available to common stockholders and FFO for the third quarter of 2012 included a one-time, non-cash charge of approximately $2.1 million, or $0.03 per share, in conjunction with the redemption of all of the company’s Series A Cumulative Redeemable Preferred Units.
Results for the third quarter of 2012 include $0.01 per share of acquisition-related expenses and also reflect the company’s public offering of 5.75 million shares of common stock sold at a price of $46.10 per share, which closed on August 13, 2012. Net loss available to common stockholders in the third quarter of 2012 also included an increase in depreciation and amortization expense of approximately $10.8 million attributable to depreciation and amortization for the company’s recent acquisition properties.
For the first nine months of 2012, KRC reported net income available to common stockholders of $64.0 million, or $0.92 per share, compared to $10.9 million, or $0.18 per share, in the first nine months of 2011. Revenues from continuing operations in the nine-month period totaled $293.8 million, up from $243.4 million in the same period of 2011. FFO for the first nine months of 2012 totaled $115.6 million, or $1.61 per share, compared to $95.6 million, or $1.62 per share, in the same period of 2011. Net income in the first nine months of 2012 included approximately $72.8 million of net gains from property dispositions. All per share amounts in this report are presented on a diluted basis.
KRC also announced that it has entered into agreements to sell its entire Orange County industrial portfolio and five additional Southern California office buildings. The transactions are expected to close by year-end 2012, subject to customary closing conditions. Accordingly, these assets have been reclassified as properties held for sale and their financial results are accounted for as discontinued operations in the 2012 third-quarter and nine-month financial statements.
At September 30, 2012, the company’s stabilized portfolio, encompassing approximately 12.7 million square feet of office space located in greater Seattle, the San Francisco Bay Area, Los Angeles, Orange County and San Diego, was 91.1% occupied.
As previously announced, KRC completed three operating property acquisitions since the end of the second quarter: Skyline Tower, a 24-story Class A office building in Bellevue, Washington; Sunset Media Center, a 22-story Class A office building in Hollywood; and Tribeca West, a three-story entertainment-oriented office building in West Los Angeles.
In addition, the company completed the acquisition of three development opportunities: 333 Brannan Street, a development site in San Francisco’s SOMA district; Columbia Square, an historic 4.7 acre media campus in Hollywood; and 350 Mission Street, a development site in San Francisco’s South of Market financial district.
Details of all these transactions are available in the News section on the company’s website.
Since the beginning of 2012, KRC has completed the purchase of 13 office buildings in six transactions aggregating approximately 1.7 million square feet of space for an aggregate purchase price of approximately $645 million. The company also has added four individual projects to its development and redevelopment pipeline, acquiring the four projects for an aggregate purchase price of approximately $210 million. The company estimates that its total investment, including land, in these four development and redevelopment projects will aggregate approximately $846 million.
“KRC continues to build the breadth, diversity, value and financial strength of its West Coast real estate operations,” said John Kilroy, Jr., the company’s president and chief executive officer. “We’re leveraging the expertise and local knowledge of our talented management team to acquire top quality properties and development opportunities in the West Coast’s most economically vibrant markets. We’re also pursuing an active disposition program to generate capital from the sale of non-strategic assets and maintain a conservatively leveraged balance sheet in what remains a highly volatile business environment.”
KRC management will discuss updated earnings guidance for fiscal 2012 during the company’s October 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) 680-0879 reservation # 76348175. A replay of the conference call will be available via phone through November 7, 2012 at (888) 286-8010, reservation # 10454808, or via the Internet at the company’s website.
About Kilroy Realty Corporation. Kilroy Realty Corporation, a member of the SP Small Cap 600 Index, is a real estate investment trust active in the office and industrial property sectors along the West Coast. 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 September 30, 2012, the company’s stabilized office portfolio encompassed 12.7 million rentable square feet and its held for sale portfolio encompassed 3.7 million rentable square feet of office and industrial 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, 2011 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 Federal securities laws.
KILROY REALTY CORPORATION
SUMMARY QUARTERLY RESULTS
(unaudited, in thousands, except per share data)
Three Months
Ended
September 30, 2012
Three Months
Ended
September 30, 2011
Nine Months
Ended
September 30, 2012
Nine Months
Ended
September 30, 2011
Revenues from continuing operations
$
104,293
$
86,399
$
293,800
$
243,371
Revenues including discontinued operations
$
111,375
$
97,806
$
315,712
$
277,995
Net (loss) income available to common stockholders(1)
$
(2,753
)
$
10,195
$
63,988
$
10,912
Weighted average common shares outstanding – basic
71,889
58,355
67,975
56,136
Weighted average common shares outstanding – diluted
71,889
58,355
67,975
56,136
Net (loss) income available to common stockholders per share – basic (1)
$
(0.04
)
$
0.17
$
0.92
$
0.18
Net (loss) income available to common stockholders per share – diluted (1)
$
(0.04
)
$
0.17
$
0.92
$
0.18
Funds From Operations (1), (2), (3)
$
43,142
$
33,878
$
115,641
$
95,648
Weighted average common shares/units outstanding – basic (4)
74,850
61,015
70,830
58,774
Weighted average common shares/units outstanding – diluted (4)
76,185
61,017
71,953
58,961
Funds From Operations per common share/unit – basic (1), (4)
$
0.58
$
0.56
$
1.63
$
1.63
Funds From Operations per common share/unit – diluted (1), (4)
$
0.57
$
0.56
$
1.61
$
1.62
Common shares outstanding at end of period:
74,693
58,464
Common partnership units outstanding at end of period
1,827
1,718
Total common shares and units outstanding at end of period
76,520
60,182
September 30, 2012
September 30, 2011
Stabilized office portfolio occupancy rates:(5)
Los Angeles and Ventura Counties
94.3
%
84.1
%
San Diego County
87.8
%
92.6
%
Orange County
95.6
%
91.4
%
San Francisco Bay Area
92.0
%
95.4
%
Greater Seattle
93.2
%
90.2
%
Weighted average total
91.1
%
90.6
%
Total square feet of stabilized office properties owned at end of period:(5)
Los Angeles and Ventura Counties
3,038
2,976
San Diego County
5,183
5,435
Orange County
497
541
San Francisco Bay Area
2,211
1,732
Greater Seattle
1,727
890
Total
12,656
11,574
KILROY REALTY CORPORATION CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
September 30, 2012
December 31, 2011
ASSETS
REAL ESTATE ASSETS:
Land and improvements
$
562,071
$
537,574
Buildings and improvements
3,169,224
2,830,310
Undeveloped land and construction in progress
668,058
430,806
Total real estate held for investment
4,399,353
3,798,690
Accumulated depreciation and amortization
(725,728
)
(742,503
)
Total real estate held for investment, net
3,673,625
3,056,187
Real estate assets and other assets held for sale, net
166,019
84,156
Cash and cash equivalents
16,113
4,777
Restricted cash
5,884
358
Marketable securities
6,812
5,691
Current receivables, net
7,113
8,395
Deferred rent receivables, net
110,128
101,142
Deferred leasing costs and acquisition-related intangible assets, net
187,307
155,522
Deferred financing costs, net
18,442
18,368
Prepaid expenses and other assets, net
24,398
12,199
TOTAL ASSETS
$
4,215,841
$
3,446,795
LIABILITIES, NONCONTROLLING INTEREST AND EQUITY
LIABILITIES:
Secured debt
$
520,867
$
351,825
Exchangeable senior notes, net
162,885
306,892
Unsecured debt, net
1,130,814
980,569
Unsecured line of credit
27,000
182,000
Accounts payable, accrued expenses and other liabilities
127,472
81,713
Accrued distributions
28,845
22,692
Deferred revenue and acquisition-related intangible liabilities, net
120,407
79,781
Rents received in advance and tenant security deposits
31,728
26,917
Liabilities and deferred revenue of real estate assets held for sale
4,455
13,286
Total liabilities
2,154,473
2,045,675
NONCONTROLLING INTEREST:
7.45% Series A Cumulative Redeemable Preferred units of the Operating Partnership
—
73,638
EQUITY:
Stockholders’ Equity
7.80% Series E Cumulative Redeemable Preferred stock
—
38,425
7.50% Series F Cumulative Redeemable Preferred stock
—
83,157
6.875% Series G Cumulative Redeemable Preferred stock
96,155
—
6.375% Series H Cumulative Redeemable Preferred stock
96,256
—
Common stock
747
588
Additional paid-in capital
2,114,774
1,448,997
Distributions in excess of earnings
(288,765
)
(277,450
)
Total stockholders’ equity
2,019,167
1,293,717
Noncontrolling Interest
Common units of the Operating Partnership
42,201
33,765
Total equity
2,061,368
1,327,482
TOTAL LIABILITIES, NONCONTROLLING INTEREST AND EQUITY
$
4,215,841
$
3,446,795
KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months
Ended
September 30, 2012
Three Months
Ended
September 30, 2011
Nine Months
Ended
September 30, 2012
Nine Months
Ended
September 30, 2011
REVENUES:
Rental income
$
95,405
$
79,673
$
268,228
$
223,853
Tenant reimbursements
8,665
6,387
23,947
17,382
Other property income
223
339
1,625
2,136
Total revenues
104,293
86,399
293,800
243,371
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