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Kilroy Realty Corporation Reports 24% Increase In Second Quarter FFO Per Share

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Richard E. Moran Jr Tyler H. Rose
Executive Vice President and Chief Financial Officer Senior Vice President and Treasurer
(310) 563-5533 (310) 563-5531

LOS ANGELES, July 29, 1998 – Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its second quarter ended June 30, 1998, with funds from operations (FFO) of $17.9 million, or $0.57 per share, up 24% on a per-share basis from $8.0 million, or $0.46 per share, in the second quarter of 1997. Net income in the second quarter rose to $9.8 million, or $0.36 per share, up from $4.1 million, or $0.28 per share, in the year-earlier quarter. Revenues for the period totaled $33.5 million, compared to $14.6 million a year ago.

For the first sixth months of 1998, Kilroy reported FFO of $34.0 million, or $1.13 per share. Net income in the first half totaled $18.7 million, or $0.71 per share. Revenues were $62.5 million. In the year-earlier stub period from February 1 to June 30, 1997, the company reported FFO of $13.0 million, or $0.75 per share, net income of $6.8 million, or $0.46 per share, and revenues of $23.5 million. Kilroy completed its initial public offering on January 31, 1997. All per-share amounts are presented on a fully diluted basis.

"Southern California’s resurgent economy continues to strengthen local real estate fundamentals and enhance the value of our development program," said John B. Kilroy, Jr., the company’s president and chief executive officer. "With the number of premier sites we now control in the region’s most attractive submarkets, development is clearly the engine that will drive our growth over the next several years," he said.

Overall, Kilroy’s development program includes 1.5 million square feet of space currently under construction, and more than 3.0 million square feet of space in pre-construction phases of development. Principal submarkets for the company’s development projects include coastal San Diego, West Los Angeles, Burbank, the northwestern Los Angeles Interstate 101 Corridor, Long Beach, and Orange County.

The company also completed $87 million of building acquisitions in the second quarter bringing its year-to-date acquisition total to $221 million.

At quarter’s end, the company’s portfolio was 92% occupied. Taking into consideration leases that had been executed but had not commenced, the company’s portfolio was 95% leased at June 30.

 

KILROY REALTY CORPORATION CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share data)

June 30,

December 31,

1998

1997

ASSETS

INVESTMENT IN REAL ESTATE:

Land and improvements

$ 242,234

$ 177,118

Buildings and improvements

772,809

622,901

Land and construction in progress

86,188

34,671

Total investment in real estate

1,101,231

834,690

Accumulated depreciation and amortization

(133,037)

(121,780)

Investment in real estate, net

968,194

712,910

Cash and cash equivalents

7,851

8,929

Restricted cash

5,695

5,680

Tenant receivables, net

9,753

7,367

Note receivable

2,153

Escrow deposits

2,145

5,114

Deferred financing and leasing costs, net

14,774

13,053

Prepaid expenses and other assets

4,557

4,601

TOTAL ASSETS

$ 1,015,122

$ 757,654

LIABILITIES & STOCKHOLDERS' EQUITY

LIABILITIES:

Mortgage debt

$ 134,445

$ 131,363

Line of credit

223,000

142,000

Accounts payable and accrued expenses

10,601

9,711

Accrued distributions

12,815

10,804

Rents received in advance and tenant security deposits

13,172

11,441

Total Liabilities

394,033

305,319

COMMITMENTS AND CONTINGENCIES

MINORITY INTERESTS:

8.075% Series A Cumulative Redeemable

Preferred Units

74,480

Common Units

68,982

55,185

Total minority interests

143,462

55,185

STOCKHOLDERS' EQUITY:

Preferred stock, $.01 par value, 30,000,000 shares

authorized, none issued and outstanding

Common stock, $.01 par value, 150,000,000

shares authorized, 27,649,210 and 24,475,000

shares issued and outstanding

276

245

Additional paid-in capital

486,976

403,163

Distributions in excess of earnings

(9,625)

(6,258)

Total Stockholders' Equity

477,627

397,150

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY

$ 1,015,122

$ 757,654

 

KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)

 

 

Three Months

Three Months

Six Months

Period from

Ended

Ended

Ended

February 1, 1997 to

June 30, 1998

June 30, 1997

June 30, 1998

June 30, 1997

REVENUES:

Rental income

$ 28,988

$ 12,350

$ 54,448

$ 19,460

Tenant reimbursements

3,450

1,104

6,273

1,810

Interest income

409

1,004

883

1,975

Other income

673

111

867

296

Total revenues

33,520

14,569

62,471

23,541

EXPENSES:

Property expenses

5,066

2,036

9,037

3,275

Real estate taxes

2,068

574

3,754

927

General and administrative

2,143

1,450

3,702

2,175

Ground leases

290

279

595

464

Interest expense

4,593

2,546

9,379

4,077

Depreciation and amortization

6,565

3,000

12,419

4,744

Total expenses

20,725

9,885

38,886

15,662

Income before equity in (loss) income of

subsidiary and minority interests

12,795

4,684

23,585

7,879

Equity in (loss) income of subsidiary

(24)

192

(25)

135

Minority Interests:

Dividend on cumulative redeemable

preferred units

(1,554)

(2,254)

Minority interest in earnings

(1,432)

(768)

(2,642)

(1,254)

Net Income

$ 9,785

$ 4,108

$ 18,664

$ 6,760

Weighted average shares outstanding (Basic)

27,407

14,475

26,325

14,475

Weighted average shares outstanding (Diluted)

27,521

14,521

26,467

14,548

Income per common share (Basic)

$ 0.36

$ 0.28

$ 0.71

$ 0.47

Income per common share (Diluted)

$ 0.36

$ 0.28

$ 0.71

$ 0.46

 

KILROY REALTY CORPORATION

FUNDS AVAILABLE FOR DISTRIBUTION

(unaudited, in thousands, except per share data)

Three Months

Three Months

Six Months

Period from

Ended

Ended

Ended

February 1, 1997 to

June 30, 1998

June 30, 1997

June 30, 1998

June 30, 1997

Funds from operations

$ 17,894

$ 7,996

$ 33,955

$ 12,955

Adjustments:

Amortization of deferred financing costs

299

243

505

404

Tenant improvements, leasing commissions

and recurring capital expenditures

(937)

(320)

(1,422)

(532)

Net effect of straight-line rents

(915)

(80)

(1,572)

(75)

Funds available for distribution

$ 16,341

$ 7,839

$ 31,466

$ 12,752

Funds available for distribution per common share/unit (Basic)

$ 0.52

$ 0.46

$ 1.05

$ 0.74

Funds available for distribution per common share/unit (Diluted)

$ 0.52

$ 0.46

$ 1.04

$ 0.74

Some of the information presented in this release is forward-looking in nature. Although the information is based on the company’s current best judgment, actual results could vary from expectations stated here. Numerous factors will affect Kilroy’s actual results, some of which are beyond the company’s control. These include the timing and strength of regional economic growth, the strength of commercial and industrial real estate markets, competitive market conditions, future interest rate levels and capital market conditions. For further information, please see Kilroy’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.

Kilroy Realty Corporation, a Southern California-based real estate investment trust owns, operates and develops office and industrial properties, primarily in California. At June 30, 1998, the company owned 5.4 million square feet of commercial office space and 5.6 million square feet of industrial space.

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