Kilroy Realty Corporation Reports Fourth Quarter Financial Results
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|LOS ANGELES, Jan 26, 2009 (BUSINESS WIRE) -- Kilroy Realty Corporation (NYSE: KRC) today reported
financial results for its fourth quarter ended December 31, 2008 with
net income available for common stockholders of $5.9 million, or $0.18
per share, compared to $65.6 million, or $2.01 per share, in the fourth
quarter of 2007. The company's 2007 fourth quarter net income includes
net gains of approximately $61 million on the sale of properties.
Revenues from continuing operations in the fourth quarter totaled $72.4
million, up from $69.7 million in the prior year's fourth quarter. Funds
from operations (FFO) for the period totaled $27.2 million, or $0.78 per
share, compared to $29.7 million, or $0.85 per share, in the
For its fiscal year ended December 31, 2008, KRC reported net income available to common stockholders of $34.5 million, or $1.06 per share, compared to $104.2 million, or $3.20 per share, in fiscal year 2007. The company's 2007 full year net income includes net gains of approximately $75 million on the sale of properties. Revenues from continuing operations in 2008 totaled $290.0 million, up from $258.5 million in 2007. FFO for the year totaled $119.0 million, or $3.42 per share, compared to $110.6 million, or $3.18 per share, in 2007. The company's 2008 full year net income and FFO include approximately $7.2 million of one-time fees and non-cash rental revenues related to two lease terminations, and the company's 2007 full year results include approximately $3.5 million of one-time fees and non-cash rental revenues related to two lease terminations. All per-share amounts in this report are presented on a diluted basis.
"KRC delivered a solid performance in 2008, in particular achieving excellent leasing results despite an increasingly difficult economic environment," said John B. Kilroy, Jr., the company's president and chief executive officer. "This year, which promises to be even more challenging, our top priorities remain a strong balance sheet and an effective leasing program within our stabilized portfolio and our recently delivered development properties."
During 2008, KRC delivered just over 560,000 square feet of new and newly redeveloped office space to its stabilized portfolio. These six buildings, contained in five individual projects, represent an aggregate estimated investment of $193 million and are currently 75% leased.
The company also completed construction of its one remaining development project during the fourth quarter, a 51,000 square-foot medical office property located in the Sorrento Mesa submarket of coastal San Diego County. The property represents a total estimated investment of $24 million, of which $16 million has been spent to date, and is currently in lease-up.
KRC management will discuss earnings guidance for fiscal 2009 during the company's January 27, 2009 earnings conference call. The call will begin at 11:00 a.m. Pacific time and last approximately one hour. Those interested in listening via the Internet can access the conference call at 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) 679-8035, reservation #70011749. A replay of the conference call will be available via phone through February 10, 2009 at (888) 286-8010, reservation #64084481, 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 Kilroy Realty Corporation 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 Kilroy Realty'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; Kilroy Realty's 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 current and future development projects on schedule and on budget; the demand for office space in markets in which Kilroy Realty has a presence; and risks detailed from time to time in the company's SEC reports, 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 Kilroy Realty's ability to control or predict. Forward-looking statements are not guarantees of performance. For forward-looking statements herein, Kilroy Realty 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 S&P 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 and San Diego counties. At December 31, 2008, the company owned 8.7 million rentable square feet of commercial office space and 3.7 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 Year Year Ended Ended Ended Ended December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007 Revenues from continuing operations $ 72,437 $ 69,741 $ 289,968 $ 258,472 Revenues including discontinued operations $ 72,437 $ 72,155 $ 290,167 $ 268,784 Net income available for common stockholders (1) $ 5,892 $ 65,612 $ 34,513 $ 104,214 Weighted average common shares outstanding - basic 32,719 32,426 32,467 32,380 Weighted average common shares outstanding - diluted 33,077 32,633 32,670 32,527 Net income per share of common stock - basic $ 0.18 $ 2.02 $ 1.06 $ 3.22 Net income per share of common stock - diluted $ 0.18 $ 2.01 $ 1.06 $ 3.20 Funds From Operations (2), (3) $ 27,182 $ 29,672 $ 118,952 $ 110,584 Weighted average common shares/units outstanding - basic (4) 34,472 34,622 34,532 34,616 Weighted average common shares/units outstanding - diluted (4) 34,831 34,829 34,735 34,762 Funds From Operations per common share/unit - basic (4) $ 0.79 $ 0.86 $ 3.44 $ 3.19 Funds From Operations per common share/unit - diluted (4) $ 0.78 $ 0.85 $ 3.42 $ 3.18 Common shares outstanding at end of period 33,086 32,766 Common partnership units outstanding at end of period 1,754 2,189 Total common shares and units outstanding at end of period 34,840 34,955 December 31, 2008 December 31, 2007 Stabilized portfolio occupancy rates: Office 86.2 % 93.7 % Industrial 96.3 % 94.7 % Weighted average total 89.2 % 94.0 % Los Angeles 92.6 % 96.4 % Orange County 94.1 % 94.8 % San Diego 83.1 % 91.4 % Other 94.2 % 99.6 % Weighted average total 89.2 % 94.0 % Total square feet of stabilized properties owned at end of period: Office 8,650 8,089 Industrial 3,719 3,870 Total 12,369 11,959
(1) Net income after minority interests. (2) Reconciliation of Net Income 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 assuming conversion of all common limited partnership units outstanding.
KILROY REALTY CORPORATION CONSOLIDATED BALANCE SHEETS (unaudited, in thousands) December 31, December 31, 2008 2007 ASSETS REAL ESTATE ASSETS: Land and improvements $ 336,874 $ 324,779 Buildings and improvements 1,888,274 1,719,700 Undeveloped land and construction in progress 246,865 324,077 Total real estate held for investment 2,472,013 2,368,556 Accumulated depreciation and amortization (532,769 ) (463,932 ) Total real estate assets, net 1,939,244 1,904,624 Cash and cash equivalents $ 9,553 $ 11,732 Restricted cash 672 546 Marketable securities 1,888 707 Current receivables, net 5,753 4,891 Deferred rent receivables, net 67,144 67,283 Notes receivable 10,824 10,970 Deferred leasing costs and acquisition related intangibles, net 53,539 54,418 Deferred financing costs, net 6,131 8,492 Prepaid expenses and other assets, net 4,835 5,057 TOTAL ASSETS $ 2,099,583 $ 2,068,720 LIABILITIES & STOCKHOLDERS' EQUITY LIABILITIES: Secured debt $ 316,456 $ 395,912 Exchangeable senior notes, net 457,010 456,090 Unsecured senior notes 144,000 144,000 Unsecured line of credit 252,000 111,000 Accounts payable, accrued expenses and other liabilities 55,066 58,249 Accrued distributions 21,421 20,610 Deferred revenue and acquisition related liabilities 76,219 59,187 Rents received in advance and tenant security deposits 19,340 18,433 Total liabilities 1,341,512 1,263,481 MINORITY INTERESTS: 7.45% Series A Cumulative Redeemable Preferred units of the 73,638 73,638 Operating Partnership Common units of the Operating Partnership 28,368 38,309 Total minority interests 102,006 111,947 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 331 328 Additional paid-in capital 663,471 658,894 Distributions in excess of earnings (129,319 ) (87,512 ) Total stockholders' equity 656,065 693,292 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,099,583 $ 2,068,720
KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share data) Three Months Three Months Year Year Ended Ended Ended Ended December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007 REVENUES: Rental income $ 63,747 $ 62,125 $ 252,084 $ 229,672 Tenant reimbursements 7,887 7,320 31,035 25,322 Other property income 803 296 6,849 3,478 Total revenues 72,437 69,741 289,968 258,472 EXPENSES: Property expenses 12,690 11,255 48,875 43,306 Real estate taxes 5,959 5,137 22,108 19,539 Provision for bad debts 383 783 4,051 473 Ground leases 391 392 1,617 1,582 General and administrative expenses 10,210 9,353 38,260 36,580 Interest expense 11,478 10,765 40,366 37,502 Depreciation and amortization 21,212 20,259 83,275 72,815 Total expenses 62,323 57,944 238,552 211,797 OTHER INCOME AND EXPENSE: Interest and other investment income (285 ) 311 (93 ) 1,606 Total other income (285 ) 311 (93 ) 1,606 Income from continuing operations before minority interests 9,829 12,108 51,323 48,281 Minority interests: Distributions on Cumulative Redeemable Preferred units (1,397 ) (1,397 ) (5,588 ) (5,588 ) Minority interest in earnings of Operating Partnership (266 ) (524 ) (2,148 ) (2,129 ) attributable to continuing operations Total minority interests (1,663 ) (1,921 ) (7,736 ) (7,717 ) Income from continuing operations 8,166 10,187 43,587 40,564 Discontinued operations: Revenues from discontinued operations - 2,414 199 10,312 Expenses from discontinued operations 135 (1,648 ) 135 (6,521 ) Net gain on dispositions of discontinued operations - 61,031 234 74,505 Minority interest in earnings of Operating Partnership (7 ) (3,970 ) (34 ) (5,038 ) attributable to discontinued operations Total income from discontinued operations 128 57,827 534 73,258 Net income 8,294 68,014 44,121 113,822 Preferred dividends (2,402 ) (2,402 ) (9,608 ) (9,608 ) Net income available for common stockholders $ 5,892 $ 65,612 $ 34,513 $ 104,214 Weighted average shares outstanding - basic 32,719 32,426 32,467 32,380 Weighted average shares outstanding - diluted 33,077 32,633 32,670 32,527 Net income per common share - basic $ 0.18 $ 2.02 $ 1.06 $ 3.22 Net income per common share - diluted $ 0.18 $ 2.01 $ 1.06 $ 3.20
KILROY REALTY CORPORATION FUNDS FROM OPERATIONS (unaudited, in thousands, except per share data) Three Months Three Months Year Year Ended Ended Ended Ended December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007 Net income available for common stockholders $ 5,892 $ 65,612 $ 34,513 $ 104,214 Adjustments: Minority interest in earnings of Operating Partnership 273 4,494 2,182 7,167 Depreciation and amortization of real estate assets 21,017 20,597 82,491 73,708 Net gain on dispositions of discontinued operations - (61,031) (234) (74,505) Funds From Operations (1), (2) $ 27,182 $ 29,672 $ 118,952 $ 110,584 Weighted average common shares/units outstanding - basic 34,472 34,622 34,532 34,616 Weighted average common shares/units outstanding - diluted 34,831 34,829 34,735 34,762 Funds From Operations per common share/unit - basic $ 0.79 $ 0.86 $ 3.44 $ 3.19 Funds From Operations per common share/unit - diluted $ 0.78 $ 0.85 $ 3.42 $ 3.18
(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 to be insufficient by themselves. 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