LOS ANGELES, Nov 01, 2011 (BUSINESS WIRE) –
Kilroy Realty Corporation


/quotes/zigman/171049/quotes/nls/krc KRC
+2.28%



today reported
financial results for its third quarter ended September 30, 2011, with
net income available to common stockholders of $10.2 million, or $0.17
per share, compared to a net loss available to common stockholders of
$126,000, or $0.01 per share, in the third quarter of 2010. Revenues
from continuing operations in the third quarter totaled $97.3 million,
up from $79.3 million in the prior year’s third quarter. Funds from
operations (FFO) for the period totaled $33.9 million, or $0.56 per
share, compared to $29.7 million, or $0.54 per share, in the
year-earlier period.

For the first nine months of 2011, KRC reported net income available to
common stockholders of $10.9 million, or $0.18 per share, compared to
$3.0 million, or $0.04 per share, in the first nine months of 2010.
Revenues from continuing operations in the nine-month period totaled
$276.4 million, up from $217.5 million in the same period of 2010. FFO
in the first nine months of 2011 totaled $95.6 million, or $1.62 per
share, compared to $77.2 million, or $1.51 per share, in the first nine
months of 2010. Net income available to common stockholders for the
three and nine months ended September 30, 2011 included a net gain from
property dispositions of $12.6 million, or $0.22 per share. Results for
the nine months ended September 30, 2010 included a one-time charge of
$4.6 million, or $0.09 per share, from the early extinguishment of debt.
All per share amounts in this report are presented on a diluted basis.

KRC signed new and renewing leases on approximately 530,000 square feet
of office and industrial space during the third quarter, bringing the
year to date leasing total to 1.2 million square feet. At
September 30, 2011, the company’s stabilized portfolio totaled 15.2
million square feet and was 92.8% occupied.

During the third quarter, KRC acquired a 311,545 square foot, 12-story
office building located at 201 Third Street in the South of Market
district of San Francisco for approximately $103.3 million. The property
is currently 90% occupied. The company also sold a two-building
RD/office facility located in the Sorrento Mesa submarket of San Diego.
The 90,558 square foot complex was sold for approximately $24 million,
resulting in a net gain of $12.6 million.

Through the first nine months of 2011, KRC has completed the acquisition
of six office projects, consisting of 9 buildings, adding just under 1.5
million square feet to its stabilized portfolio. The aggregate purchase
price of these transactions is approximately $516 million.

KRC remains in various stages of negotiations on three additional office
acquisitions that would have an aggregate estimated purchase price of
approximately $199 million, including the assumption of approximately
$55 million of secured debt. Two of these projects are in Northern
California and one is in Southern California. The company is also in
various stages of negotiations on the disposition of four Southern
California properties that would generate aggregate estimated proceeds
of approximately $205 million. No assurances can be made that the
company will complete the pending acquisitions and dispositions.

“We’re making strong progress on all fronts,” said John B. Kilroy, Jr.,
KRC’s president and chief executive officer. “We are on track to lease
more square footage in 2011 than in all of 2010. We continue to find
opportunities to acquire well-located, high quality assets at
economically advantageous prices, building the long-term value of our
portfolio. And there is good momentum with our capital recycling plans,
as we see good demand for our disposition properties.”

KRC management will discuss updated earnings guidance for fiscal 2011
during the company’s November 2, 2011 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 #58493051. A replay of the
conference call will be available via phone through November 9, 2011 at
(888) 286-8010, reservation #95754685, or via the Internet at the
company’s website.

Some of the information presented in this release is forward looking in
nature within the meaning of the Private Securities Litigation Reform
Act of 1995. Although KRC believes the expectations reflected in such
forward-looking statements are based on reasonable assumptions, there
can be no assurance that its expectations will be achieved. Certain
factors that could cause actual results to differ materially from KRC’s
expectations are set forth as risk factors in the company’s Securities
and Exchange Commission reports and filings. Included among these
factors are changes in general economic conditions, including changes in
the economic conditions affecting industries in which its principal
tenants compete; its ability to timely lease or re-lease space at
current or anticipated rents; changes in interest rates; changes in
operating costs, including utility costs; future demand for its debt and
equity securities; its ability to refinance its debt on reasonable terms
at maturity; its ability to complete potential acquisitions and
potential dispositions on the terms or by the dates currently
contemplated; its ability to complete current and future development
projects on schedule and on budget; its ability to successfully operate
properties; the demand for office space in markets in which KRC has a
presence; and risks detailed from time to time in the company’s
Securities and Exchange Commission reports and filings, including
quarterly reports on Form 10-Q, current reports on Form 8-K and annual
reports on Form 10-K. Many of these factors are beyond KRC’s ability to
control or predict. Forward-looking statements are not guarantees of
performance. For forward-looking statements herein, KRC claims the
protection of the safe harbor for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995. The company
assumes no obligation to update or supplement forward-looking statements
that become untrue because of subsequent events.

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 September 30, 2011, the
company owned 11.6 million rentable square feet of commercial office
space and 3.6 million rentable square feet of industrial space. More
information is available at
www.kilroyrealty.com .

                                                                          KILROY REALTY CORPORATION
                                                                          SUMMARY QUARTERLY RESULTS
                                                              (unaudited, in thousands, except per share data)
        ------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Three Months          Three Months           Nine Months           Nine Months
                                                                                       Ended                 Ended                 Ended                 Ended
                                                                                September 30, 2011    September 30, 2010    September 30, 2011    September 30, 2010
                                                                                ----------------      ----------------      ----------------      ----------------
        Revenues from continuing operations                                          $ 97,337              $ 79,276              $ 276,434             $ 217,469
        Revenues including discontinued operations                                   $ 97,806              $ 79,804              $ 277,995             $ 219,039
        Net income (loss) available to common stockholders                           $ 10,195              $   (126)            $  10,912             $   2,977
        Weighted average common shares outstanding - basic                             58,355                52,274                 56,136                48,562
        Weighted average common shares outstanding - diluted                           58,355                52,274                 56,136                48,565
        Net income (loss) available to common stockholders per share - basic         $   0.17              $  (0.01)            $    0.18             $    0.04
        Net income (loss) available to common stockholders per share -               $   0.17              $  (0.01)            $    0.18             $    0.04
        diluted
        Funds From Operations (1), (2)                                               $ 33,878              $ 29,690              $  95,648             $  77,154
        Weighted average common shares/units outstanding - basic (3)                   61,015                54,778                 58,774                51,106
        Weighted average common shares/units outstanding - diluted (3)                 61,017                54,782                 58,961                51,109
        Funds From Operations per common share/unit - basic (3)                      $   0.56              $   0.54              $    1.63             $    1.51
        Funds From Operations per common share/unit - diluted (3)                    $   0.56              $   0.54              $    1.62             $    1.51
        Common shares outstanding at end of period                                                                                  58,464                52,350
        Common partnership units outstanding at end of period                                                                        1,718                 1,723
                                                                                                                            ---------------       ---------------
           Total common shares and units outstanding at end of period                                                               60,182                54,073
                                                                                                                            September 30, 2011    September 30, 2010
                                                                                                                            ----------------      ----------------
        Stabilized portfolio occupancy rates:
           Office                                                                                                                     90.6 %                84.8 %
           Industrial                                                                                                                100.0 %                90.6 %
                                                                                                                            ------------------    ------------------
              Weighted average total                                                                                                  92.8 %                86.4 %
           Los Angeles and Ventura Counties                                                                                           85.1 %                90.2 %
           San Diego County                                                                                                           92.6 %                82.2 %
           Orange County                                                                                                              98.8 %                88.3 %
           San Francisco Bay Area                                                                                                     95.4 %                89.4 %
           Greater Seattle                                                                                                            90.2 %                  --
                                                                                                                            ------------------    ---------------
              Weighted average total                                                                                                  92.8 %                86.4 %
        Total square feet of stabilized properties owned at end of period:
           Office                                                                                                                   11,574                 9,810
           Industrial                                                                                                                3,605                 3,654
                                                                                                                            ---------------       ---------------
              Total                                                                                                                 15,179                13,464

        (1)   Reconciliation of Net Income (Loss) Available to Common Stockholders
              to Funds From Operations and management statement on Funds From
              Operations are included after the Consolidated Statements of
              Operations.
        (2)   Reported amounts are attributable to common stockholders and common
              unitholders.
        (3)   Calculated based on weighted average shares outstanding including
              participating share-based awards and assuming the exchange of all
              common limited partnership units outstanding.

                                                 KILROY REALTY CORPORATION CONSOLIDATED
                                                             BALANCE SHEETS
                                                        (unaudited, in thousands)
        ------------------------------------------------------------------------------------------------------
                                                                                   September 30, 2011          December 31, 2010
                                                                                   -------------------        ------------------
        ASSETS
        -----------------------------------------------------------------------
        REAL ESTATE ASSETS:
           Land and improvements                                                        $   537,973               $   491,333
           Buildings and improvements                                                     2,881,504                 2,435,173
           Undeveloped land and construction in progress                                    328,785                   290,365
                                                                                   -----------------          ----------------
              Total real estate held for investment                                       3,748,262                 3,216,871
           Accumulated depreciation and amortization                                       (732,162)                (672,429)
                                                                                   ------------------         -----------------
              Total real estate assets, net                                               3,016,100                 2,544,442
        Cash and cash equivalents                                                            15,481                    14,840
        Restricted cash                                                                      25,436                     1,461
        Marketable securities                                                                 5,213                     4,902
        Current receivables, net                                                              6,860                     6,258
        Deferred rent receivables, net                                                      103,668                    89,052
        Deferred leasing costs and acquisition-related intangible assets, net               155,757                   131,066
        Deferred financing costs, net                                                        19,638                    16,447
        Prepaid expenses and other assets, net                                               19,531                     8,097
                                                                                   -----------------          ----------------
              TOTAL ASSETS                                                              $ 3,367,684               $ 2,816,565
                                                                                   ====== =========           ===== =========
        LIABILITIES, NONCONTROLLING INTEREST AND
        EQUITY
        -----------------------------------------------------------------------
        LIABILITIES:
           Secured debt, net                                                            $   473,997               $   313,009
           Exchangeable senior notes, net                                                   305,115                   299,964
           Unsecured senior notes, net                                                      980,487                   655,803
           Unsecured line of credit                                                              --                   159,000
           Accounts payable, accrued expenses and other liabilities                          93,050                    68,525
           Accrued distributions                                                             22,565                    20,385
           Deferred revenue and acquisition-related intangible liabilities, net              95,120                    79,322
           Rents received in advance and tenant security deposits                            29,369                    29,189
                                                                                   -----------------          ----------------
              Total liabilities                                                           1,999,703                 1,625,197
                                                                                   -----------------          ----------------
        NONCONTROLLING INTEREST:
           7.45% Series A cumulative redeemable preferred units of the                       73,638                    73,638
           Operating Partnership
        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                                                                      585                       523
              Additional paid-in capital                                                  1,435,580                 1,211,498
              Distributions in excess of earnings                                          (296,476)                (247,252)
                                                                                   ------------------         -----------------
                 Total stockholders' equity                                               1,261,271                 1,086,351
                                                                                   -----------------          ----------------
           Noncontrolling Interest
              Common units of the Operating Partnership                                      33,072                    31,379
                                                                                   -----------------          ----------------
                 Total equity                                                             1,294,343                 1,117,730
                                                                                   -----------------          ----------------
              TOTAL LIABILITIES, NONCONTROLLING INTEREST AND EQUITY                     $ 3,367,684               $ 2,816,565
                                                                                   ====== =========           ===== =========

                                                                     KILROY REALTY CORPORATION CONSOLIDATED
                                                                            STATEMENTS OF OPERATIONS
                                                                (unaudited, in thousands, except per share data)
        ---------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Three Months          Three Months           Nine Months           Nine Months
                                                                                          Ended                 Ended                 Ended                 Ended
                                                                                   September 30, 2011    September 30, 2010    September 30, 2011    September 30, 2010
                                                                                   ----------------      ----------------      ----------------      ----------------
        REVENUES:
           Rental income                                                                $ 89,306              $ 72,135              $ 252,102             $ 196,883
           Tenant reimbursements                                                           7,683                 6,156                 21,469                18,261
           Other property income                                                             348                   985                  2,863                 2,325
                                                                                   --------------        --------------        ---------------       ---------------
              Total revenues                                                              97,337                79,276                276,434               217,469
                                                                                   --------------        --------------        ---------------       ---------------
        EXPENSES:
           Property expenses                                                              19,361                15,802                 54,548                42,255
           Real estate taxes                                                               8,360                 7,582                 24,878                20,035
           Provision for bad debts                                                            (5)                (857)                  141                  (843)
           Ground leases                                                                     503                   336                  1,266                   648
           General and administrative expenses (1)                                         6,355                 7,273                 20,355                21,096
           Acquisition-related expenses                                                    1,163                   354                  2,829                 1,624
           Depreciation and amortization                                                  36,152                29,951                 97,513                74,405
                                                                                   --------------        --------------        ---------------       ---------------
              Total expenses                                                              71,889                60,441                201,530               159,220
                                                                                   --------------        --------------        ---------------       ---------------
        OTHER (EXPENSES) INCOME:
           Interest income and other net investment gains                                     30                   337                    272                   703
           Interest expense                                                              (24,051)             (15,853)              (66,155)             (40,897)
           Loss on early extinguishment of debt                                               --                    --                     --                (4,564)
                                                                                   --------------        --------------        ---------------       ------------------
              Total other (expenses) income                                              (24,021)             (15,516)              (65,883)             (44,758)
        INCOME FROM CONTINUING OPERATIONS                                                  1,427                 3,319                  9,021                13,491
        DISCONTINUED OPERATIONS:
           Net income from discontinued operations                                           308                   350                  1,053                 1,011
           Net gain on dispositions of discontinued operations                            12,555                    --                 12,555                    --
                                                                                   --------------        --------------        ---------------       ---------------
              Total income from discontinued operations                                   12,863                   350                 13,608                 1,011
                                                                                   --------------        --------------        ---------------       ---------------
        NET INCOME                                                                        14,290                 3,669                 22,629                14,502
           Net (income) loss attributable to noncontrolling common units of the             (296)                   4                   (320)                (128)
           Operating Partnership
                                                                                   ------------  ----    ------------          -------------  ---    -------------  ---
        NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION                              13,994                 3,673                 22,309                14,374
        PREFERRED DISTRIBUTIONS AND DIVIDENDS:
           Distributions on noncontrolling cumulative redeemable preferred                (1,397)              (1,397)               (4,191)              (4,191)
           units of the Operating Partnership
           Preferred dividends                                                            (2,402)              (2,402)               (7,206)              (7,206)
                                                                                   ------------------    ------------------    ------------------    ------------------
                                                                                          (3,799)              (3,799)              (11,397)             (11,397)
              Total preferred distributions and dividends
        NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS                              $ 10,195              $   (126)            $  10,912             $   2,977
                                                                                   ====== ======         ====== ====== ====    ====== =======        ====== =======
        Weighted average common shares outstanding - basic                                58,355                52,274                 56,136                48,562
        Weighted average common shares outstanding - diluted                              58,355                52,274                 56,136                48,565
        Net income (loss) available to common stockholders per share - basic            $   0.17              $  (0.01)            $    0.18             $    0.04
                                                                                   ====== ======         ====== ====== ====    ====== =======        ====== =======
        Net income (loss) available to common stockholders per share -                  $   0.17              $  (0.01)            $    0.18             $    0.04
        diluted
                                                                                   ====== ====== ====    ====== ====== ====    ====== ======= ===    ====== ======= ===

        (1)   For the three months ended September 30, 2011, general and
              administrative expenses was reduced by a $0.5 million mark to market
              adjustment related to our deferred compensation plan liability. This
              reduction was offset by a related reduction in interest income and
              other net investment gains resulting from the mark to market of the
              marketable securities held for our deferred compensation plan.

                                                                        KILROY REALTY CORPORATION FUNDS FROM
                                                                                     OPERATIONS
                                                                  (unaudited, in thousands, except per share data)
        --------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Three Months          Three Months           Nine Months            Nine Months
                                                                                             Ended                 Ended                 Ended                  Ended
                                                                                      September 30, 2011    September 30, 2010    September 30, 2011     September 30, 2010
                                                                                      ----------------      ----------------      ----------------      ------------------
        Net income (loss) available to common stockholders                                 $ 10,195              $   (126)            $ 10,912                 $     2,977
           Adjustments:
              Net income (loss) attributable to noncontrolling common units of the              296                    (4)                 320                         128
              Operating Partnership
              Depreciation and amortization of real estate assets                            35,942                29,820                96,971                      74,049
              Net gain on dispositions of discontinued operations                           (12,555)                  --               (12,555)                        --
                                                                                      ------------------    --------------        ------------------    --------------------
        Funds From Operations (1)                                                          $ 33,878              $ 29,690              $ 95,648                 $    77,154
                                                                                      ====== ======         ====== ======         ====== ======         ========= =========
        Weighted average common shares/units outstanding - basic                             61,015                54,778                58,774                      51,106
        Weighted average common shares/units outstanding - diluted                           61,017                54,782                58,961                      51,109
        Funds From Operations per common share/unit - basic (2)                            $   0.56              $   0.54              $   1.63                 $      1.51
                                                                                      ====== ======         ====== ======         ====== ======         ========= =========
        Funds From Operations per common share/unit - diluted (2)                          $   0.56              $   0.54              $   1.62                 $      1.51
                                                                                      ====== ======         ====== ======         ====== ======         ========= =========

        (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, and gains
              and losses from sales of depreciable operating property, 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.

SOURCE: Kilroy Realty Corporation

        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

Copyright Business Wire 2011

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Article source: http://www.marketwatch.com/story/kilroy-realty-corporation-reports-third-quarter-financial-results-2011-11-01