Kilroy Realty Corporation Reports First Quarter Financial Results

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.

⁽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.