Kilroy Realty Corporation Reports First Quarter Financial Results

Before you go, we thought you'd like these...
Before you go close icon

Kilroy Realty Corporation Reports First Quarter Financial Results

LOS ANGELES--(BUSINESS WIRE)-- Kilroy Realty Corporation 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 - basic74,97763,649
Weighted average common shares outstanding - diluted74,97763,649
 
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)78,03966,371
Weighted average common shares/units outstanding - diluted (4)79,72567,156
 
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:75,35068,350
Common partnership units outstanding at end of period1,827 1,718 
Total common shares and units outstanding at end of period77,17770,068
 
March 31, 2013March 31, 2012
Stabilized office portfolio occupancy rates:(5)
Los Angeles and Ventura Counties93.4%87.0%
Orange County90.0%93.3%
San Diego County87.2%91.7%
San Francisco Bay Area94.5%89.2%
Greater Seattle88.7%90.3%
Weighted average total90.3%90.0%
 
Total square feet of stabilized office properties owned at end of period:(5)
Los Angeles and Ventura Counties3,4882,981
Orange County497541
San Diego County5,2505,184
San Francisco Bay Area2,2872,201
Greater Seattle2,048 890 
Total13,57011,797
 

(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, 2013December 31, 2012
(unaudited)

ASSETS

REAL ESTATE ASSETS:
Land and improvements$637,854$612,714
Buildings and improvements3,631,0573,335,026
Undeveloped land and construction in progress747,679 809,654 
Total real estate held for investment5,016,5904,757,394
Accumulated depreciation and amortization(790,878)(756,515)
Total real estate held for investment, net4,225,7124,000,879
 
Cash and cash equivalents135,67616,700
Restricted cash19,465247,544
Marketable securities8,0297,435
Current receivables, net10,6669,220
Deferred rent receivables, net122,142115,418
Deferred leasing costs and acquisition-related intangible assets, net196,525189,968
Deferred financing costs, net20,50118,971
Prepaid expenses and other assets, net16,571 9,949 
TOTAL ASSETS$4,755,287 $4,616,084 
 

LIABILITIES AND EQUITY

LIABILITIES:
Secured debt$570,676$561,096
Exchangeable senior notes, net165,022163,944
Unsecured debt, net1,430,8801,130,895
Unsecured line of credit185,000
Accounts payable, accrued expenses and other liabilities171,694154,734
Accrued distributions29,10628,924
Deferred revenue and acquisition-related intangible liabilities, net118,118117,904
Rents received in advance and tenant security deposits37,251 37,654 
Total liabilities2,522,747 2,380,151 
 
EQUITY:
Stockholders' Equity
6.875% Series G Cumulative Redeemable Preferred stock96,15596,155
6.375% Series H Cumulative Redeemable Preferred stock96,25696,256
Common stock753749
Additional paid-in capital2,149,0522,126,005
Distributions in excess of earnings(157,211)(129,535)
Total stockholders' equity2,185,005 2,189,630 
Noncontrolling Interest
Common units of the Operating Partnership47,535 46,303 
Total equity2,232,540 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 reimbursements9,8877,180
Other property income230 868 
Total revenues117,497 92,397 
 
EXPENSES:
Property expenses23,77316,132
Real estate taxes10,3377,665
Provision for bad debts952
Ground leases847807
General and administrative expenses9,6698,767
Acquisition-related expenses6551,528
Depreciation and amortization50,391 34,652 
Total expenses95,767 69,553 
 
OTHER (EXPENSES) INCOME:
Interest income and other net investment gains392484
Interest expense(19,734)(21,163)
Total other (expenses) income(19,342)(20,679)
 
INCOME FROM CONTINUING OPERATIONS2,3882,165
 
DISCONTINUED OPERATIONS:
Income from discontinued operations3,697
Net gain on dispositions of discontinued operations 72,809 
Total income from discontinued operations 76,506 
 
NET INCOME2,38878,671
 
Net loss (income) attributable to noncontrolling common units of the Operating Partnership22 (1,795)
 
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION2,41076,876
 
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 - basic74,97763,649
Weighted average common shares outstanding - diluted74,97763,649
 
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 Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners

Gift Finder Promo
More to Explore
Sat, Dec 10
Set Your Location
City, State, or Zip