Kilroy Realty Corporation (NYSE: KRC) today reported
financial results for its fourth quarter and full year ended
December 31, 2015.
Fourth Quarter
Highlights
Financial Results
- Funds from operations (FFO) of $0.80
per share, up 2.6% from $0.78 per share in the fourth quarter of
2014
- Net income available to common
stockholders of $0.27 per share
- Revenues of $147.4 million
Stabilized Portfolio
- Stabilized portfolio was 94.8% occupied
and 96.1% leased at December 31, 2015
- Signed approximately 398,000 square
feet of new or renewing leases
Development
- Delivered and stabilized two buildings
encompassing 340,000 rentable square feet at the Crossing/900
project in Redwood City. The office components of both buildings
are 100% leased to Box, Inc.
Finance
- Repaid $325.0 million of unsecured
senior notes at maturity in November
- Repaid, at par, two secured mortgages
totaling $90.1 million
Full Year 2015
Highlights
- Funds from operations (FFO) of $3.39
per share, which includes a $0.19 per share gain on a land sale,
was up 19% from $2.85 per share in 2014, which includes a $0.04 per
share gain on a land sale
- Signed approximately 1.5 million square
feet of new or renewing leases
- Delivered and stabilized two office
projects encompassing approximately 449,000 rentable square feet at
Phase 1 of the Columbia Square project in Hollywood and the
Crossing/900 project in Redwood City, which was stabilized in the
fourth quarter, as noted above
- Commenced construction on The Exchange
on 16th, an approximately 700,000 square-foot, four building
project in the Mission Bay submarket of San Francisco
- Acquired two land sites for
approximately $127.5 million of cash
- 100 Hooper is a fully entitled, 3.3
acre mixed-use development site in the south-of-market area of San
Francisco. The purchase price was approximately $78.0 million in
cash.
- 333 Dexter consists of four development
parcels aggregating 2.4 acres in the South Lake Union submarket of
Seattle. The purchase price was approximately $49.5 million.
- Completed $335.2 million in
dispositions, including nine buildings in San Diego, one building
in Greater Seattle and one land parcel in Orange County
- Received a one notch investment grade
upgrade to Baa2 and BBB from Moody’s and S&P, respectively
- Repaid a total of $475.3 million of
unsecured and secured debt at par
- Issued $138.2 million of net common
equity under the company’s at-the-market (ATM) offering
program
- Issued $249.6 million of net common
equity through a registered direct placement
- Issued $400.0 million of 10-year,
4.375% senior unsecured notes
Recent Developments
Capital Recycling
- In January 2016, completed the sale of
four San Diego operating properties encompassing 465,812 rentable
square feet for gross proceeds of $262.3 million
- Also in January 2016, completed the
sale of a non-strategic 7.6 acre land parcel in Carlsbad for gross
proceeds of $4.5 million
Results for the Quarter and Full Year Ended December
31, 2015
For its fourth quarter ended December 31, 2015, KRC
reported FFO of $76.7 million, or $0.80 per share,
compared to $69.8 million, or $0.78 per share, in the
fourth quarter of 2014. Net income available to common stockholders
was $25.3 million, or $0.27 per share, compared to
$27.5 million, or $0.32 per share, in the prior year period.
Net income in the fourth quarter of 2014 included an
$11.5 million gain from property dispositions. The company’s
total revenues in the fourth quarter of 2015 were
$147.4 million, up from $142.6 million in the fourth quarter
of 2014.
For its fiscal year ended December 31, 2015, KRC reported FFO of
$316.6 million, or $3.39 per share, compared to $250.7 million, or
$2.85 per share, for its 2014 fiscal year. Net income available to
common stockholders in 2015 totaled $220.8 million, or $2.42 per
share, compared to $167.0 million, or $1.95 per share in 2014. Net
income in 2015 included $127.1 million in gains from property and
land dispositions, while net income in 2014 included $125.4 million
of such gains. The company’s total revenues in 2015 were $581.3
million, up from $529.2 million in the prior year.
All per share amounts in this report are presented on a diluted
basis.
Operating and Leasing Activity
At December 31, 2015, KRC’s stabilized portfolio totaled
approximately 13.0 million square feet of office space located
in Los Angeles, Orange County, San Diego, the
San Francisco Bay Area and greater Seattle. During the fourth
quarter, the company signed new or renewing leases in its
stabilized portfolio totaling 397,736 square feet of space. At
year-end 2015, the portfolio was 94.8% occupied, compared to 95.6%
at September 30, 2015 and 94.4% at December 31, 2014, and
was 96.1% leased.
Real Estate Development Activity
In November, KRC delivered and stabilized its two-building,
340,000 square-foot office campus, Crossing/900, located in Redwood
City, California. The office component of the project is fully
leased to Box, Inc., a leading provider of secure cloud content
management services.
At December 31, 2015, KRC had five projects under
construction totaling approximately 1.9 million square feet of
space and representing a total estimated investment of
approximately $1.2 billion. The office portion of these five
projects is 50% pre-leased. The company also had one office
building in lease-up that has a total estimated investment of
approximately $45.0 million.
Management Comments
“KRC had another very strong year from an operating and
development perspective in 2015, beating every performance target
we had established for ourselves,” said John Kilroy, the company’s
chairman, president and chief executive officer. “Within our
stabilized portfolio, a solid leasing effort increased average
occupancy, delivered meaningful rental-rate growth and produced
solid gains in cash same-store net operating income. In
development, we delivered approximately 450,000 square feet of
fully leased office projects and selectively added to our pipeline.
We also executed a strategic capital recycling program in 2015,
completing approximately $335.0 million of dispositions that
allowed us to continue to fund our existing development program
while maintaining a strong balance sheet.”
FFO per Share Guidance
The company has provided an initial guidance range for
NAREIT-defined FFO per share (diluted) for its fiscal year 2016 of
$3.31 - $3.51 per share, with a midpoint of $3.41 per share. This
compares to FFO of $3.20 per share in 2015 after adjusting for a
$0.19 per share gain on a land sale.
These estimates reflect management’s view of current and future
market conditions, including assumptions with respect to rental
rates, occupancy levels and the earnings impact of the events
referenced in this release and otherwise referenced during the
conference call referred to below. These estimates do not include
possible future gains or losses or the impact on operating results
from other possible future property acquisitions or dispositions,
other possible capital markets activity or possible future
impairment charges. There can be no assurance that the company’s
actual results will not differ materially from these estimates. A
reconciliation of the company’s NAREIT defined FFO guidance range
to its projected net income range is provided at the company's
website http://www.kilroyrealty.com in
the quarterly supplemental report.
Conference Call and Audio Webcast
KRC management will discuss initial earnings guidance for fiscal
year 2016 during the company’s February 1, 2016 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 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) 713-4215 reservation #77144636. A replay
of the conference call will be available via phone through February
9, 2016 at (888) 286-8010, reservation #92036268, or via the
Internet at the company’s website.
About Kilroy Realty Corporation
With more than 65 years’ experience owning, developing,
acquiring and managing real estate assets in West Coast real estate
markets, Kilroy Realty Corporation (KRC), a publicly traded real
estate investment trust and member of the S&P MidCap 400 Index,
is one of the region’s premier landlords. The company provides
physical work environments that foster creativity and productivity
and serves a broad roster of dynamic, innovation-driven tenants,
including technology, entertainment, digital media and health care
companies.
At December 31, 2015, the company’s stabilized portfolio
totaled 13.0 million square feet of office properties, all
located in the coastal regions of greater Seattle, the San
Francisco Bay Area, Los Angeles, Orange County and San Diego. The
company is recognized by the Global Real Estate Sustainability
Benchmark (GRESB) as the North American leader in sustainability
and was ranked first among 155 North American participants
across all asset types. At the end of the fourth quarter, the
company’s properties were 47% LEED certified and 64% of eligible
properties were ENERGY STAR certified. In addition, KRC had
approximately 1.9 million square feet of office and mixed-use
development under construction with a total estimated investment of
approximately $1.2 billion. 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, 2014 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 EndedDecember 31, Year
EndedDecember 31, 2015 2014
2015 2014 Revenues from continuing
operations $ 147,413 $ 141,765 $ 581,275 $ 521,725 Revenues
including discontinued operations $ 147,413 $ 142,628 $ 581,275 $
529,222 Net income available to common stockholders (1)(2) $
25,323 $ 27,540 $ 220,831 $ 166,969 Weighted average common
shares outstanding – basic 92,160 84,767 89,854 83,090 Weighted
average common shares outstanding – diluted 92,791 85,956 90,396
84,968 Net income available to common stockholders per share
– basic (1)(2) $ 0.27 $ 0.32 $ 2.44 $ 1.99 Net income available to
common stockholders per share – diluted (1)(2) $ 0.27 $ 0.32 $ 2.42
$ 1.95 Funds From Operations (1)(3)(4) $ 76,673 $ 69,817 $
316,612 $ 250,744 Weighted average common shares/units
outstanding – basic (5) 95,095 87,809 92,816 86,123 Weighted
average common shares/units outstanding – diluted (5) 95,726 88,997
93,358 88,001 Funds From Operations per common share/unit –
basic (5) $ 0.81 $ 0.80 $ 3.41 $ 2.91 Funds From Operations per
common share/unit – diluted (5) $ 0.80 $ 0.78 $ 3.39 $ 2.85
Common shares outstanding at end of period 92,259 86,260 Common
partnership units outstanding at end of period 1,765 1,804
Total common shares and units outstanding at end of period
94,024 88,064
December 31,2015
December 31,2014
Stabilized office portfolio occupancy rates: (6) Los Angeles and
Ventura Counties 95.1 % 92.8 % Orange County 94.0 % 98.7 % San
Diego County 89.6 % 90.9 % San Francisco Bay Area 98.1 % 97.3 %
Greater Seattle 95.1 % 98.1 % Weighted average total 94.8 % 94.4 %
Total square feet of stabilized office properties owned at
end of period: (6) Los Angeles and Ventura Counties 3,614 3,506
Orange County 272 272 San Diego County 2,851 4,244 San Francisco
Bay Area 4,229 3,887 Greater Seattle 2,066 2,188
Total 13,032 14,097
________________________
(1) Net income available to common stockholders and Funds
From Operations for the year ended December 31, 2015 and 2014
includes gains on sale of land, net of $17.1 million and $3.5
million, respectively. (2) Net income available to common
stockholders for the year ended December 31, 2015 includes gains of
sales of depreciable operating properties of $110.0 million. Net
income available to common stockholders for the three months and
year ended December 31, 2014 includes gains on dispositions of
discontinued operations of $11.5 million and $121.9 million,
respectively. (3) Reconciliation of Net income available to common
stockholders to Funds From Operations and management statement on
Funds From Operations are included after the Consolidated
Statements of Operations. (4) Reported amounts are attributable to
common stockholders and common unitholders. (5) Calculated based on
weighted average shares outstanding including participating
share-based awards and assuming the exchange of all common limited
partnership units outstanding. (6) Occupancy percentages and total
square feet reported are based on the company’s stabilized office
portfolio for the periods presented. Occupancy percentages and
total square feet shown for December 31, 2014 include the office
properties that were sold during 2015 and held for sale at December
31, 2015.
KILROY REALTY
CORPORATION
CONSOLIDATED BALANCE
SHEETS
(in thousands)
December 31, 2015
December 31, 2014 (unaudited)
ASSETS
REAL ESTATE ASSETS: Land and improvements $ 875,794 $ 877,633
Buildings and improvements 4,091,012 4,059,639 Undeveloped land and
construction in progress 1,361,340 1,120,660 Total
real estate assets held for investment 6,328,146 6,057,932
Accumulated depreciation and amortization (994,241 ) (947,664 )
Total real estate assets held for investment, net 5,333,905
5,110,268 Real estate assets and other assets held for sale,
net 117,666 8,211 Cash and cash equivalents 56,508 23,781
Restricted cash 696 75,185 Marketable securities 12,882 11,971
Current receivables, net 11,153 7,229 Deferred rent receivables,
net 189,704 156,416 Deferred leasing costs and acquisition-related
intangible assets, net 176,683 201,926 Deferred financing costs,
net 17,628 18,374 Prepaid expenses and other assets, net 22,644
20,375 TOTAL ASSETS $ 5,939,469 $ 5,633,736
LIABILITIES AND
EQUITY
LIABILITIES: Secured debt $ 381,918 $ 546,292 Unsecured debt, net
1,856,590 1,783,121 Unsecured line of credit — 140,000 Accounts
payable, accrued expenses and other liabilities 246,323 225,830
Accrued distributions 34,992 32,899 Deferred revenue and
acquisition-related intangible liabilities, net 128,156 132,239
Rents received in advance and tenant security deposits 49,361
49,363 Liabilities of real estate assets held for sale 7,543
56 Total liabilities 2,704,883 2,909,800
EQUITY: Stockholders’ Equity 6.875% Series G Cumulative
Redeemable Preferred stock 96,155 96,155 6.375% Series H Cumulative
Redeemable Preferred stock 96,256 96,256 Common stock 923 863
Additional paid-in capital 3,047,894 2,635,900 Distributions in
excess of earnings (70,262 ) (162,964 ) Total stockholders’ equity
3,170,966 2,666,210 Noncontrolling Interests Common units of the
Operating Partnership 57,100 51,864 Noncontrolling interest in
consolidated subsidiary 6,520 5,862 Total
noncontrolling interests 63,620 57,726 Total equity
3,234,586 2,723,936 TOTAL LIABILITIES AND EQUITY $
5,939,469 $ 5,633,736
KILROY REALTY
CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months EndedDecember 31, Year
EndedDecember 31, 2015 2014
2015 2014 REVENUES Rental income $
133,463 $ 127,417 $ 525,355 $ 466,328 Tenant reimbursements 13,494
13,318 53,774 46,717 Other property income 456 1,030
2,146 8,680 Total revenues 147,413 141,765
581,275 521,725 EXPENSES Property
expenses 27,114 25,066 105,378 100,514 Real estate taxes 12,991
12,469 50,223 45,197 Provision for bad debts 256 — 545 58 Ground
leases 645 769 3,096 3,075 General and administrative expenses
12,065 12,346 48,265 46,152 Acquisition-related expenses 100 211
497 1,479 Depreciation and amortization 51,727 53,770
204,294 202,417 Total expenses 104,898 104,631
412,298 398,892 OTHER (EXPENSES) INCOME
Interest income and other net investment gain (loss) 66 (26 ) 243
561 Interest expense (13,121 ) (17,691 ) (57,682 ) (67,571 ) Total
other (expenses) income (13,055 ) (17,717 ) (57,439 ) (67,010 )
INCOME FROM CONTINUING OPERATIONS BEFORE GAINS ON SALES OF
REAL ESTATE 29,460 19,417 111,538 55,823 Gains on sale of land, net
(152 ) — 17,116 3,490 Gains on sales of depreciable operating
properties — — 109,950 — INCOME FROM
CONTINUING OPERATIONS 29,308 19,417 238,604
59,313 DISCONTINUED OPERATIONS: Income from
discontinued operations — 482 — 2,573 Gains on dispositions of
discontinued operations — 11,531 — 121,922
Total income from discontinued operations — 12,013
— 124,495 NET INCOME 29,308 31,430
238,604 183,808 Net income attributable to noncontrolling
common units of the Operating Partnership (489 ) (578 ) (4,339 )
(3,589 ) Net income attributable to noncontrolling interest in
consolidated subsidiary (184 ) — (184 ) — Total
income attributable to noncontrolling interests (673 ) (578 )
(4,523 ) (3,589 ) NET INCOME ATTRIBUTABLE TO KILROY REALTY
CORPORATION 28,635 30,852 234,081 180,219 PREFERRED
DIVIDENDS (3,312 ) (3,312 ) (13,250 ) (13,250 ) NET INCOME
AVAILABLE TO COMMON STOCKHOLDERS $ 25,323 $ 27,540 $
220,831 $ 166,969 Weighted average common
shares outstanding – basic 92,160 84,767 89,854 83,090 Weighted
average common shares outstanding – diluted 92,791 85,956 90,396
84,968 Net income available to common stockholders per share
– basic $ 0.27 $ 0.32 $ 2.44 $ 1.99 Net
income available to common stockholders per share – diluted $ 0.27
$ 0.32 $ 2.42 $ 1.95
KILROY REALTY
CORPORATION
FUNDS FROM
OPERATIONS
(unaudited, in thousands, except per share data)
Three Months EndedDecember
31,
Year EndedDecember 31,
2015 2014 2015
2014 Net income available to common stockholders $ 25,323 $
27,540 $ 220,831 $ 166,969 Adjustments: Net income attributable to
noncontrolling common units of the Operating Partnership 489 578
4,339 3,589 Depreciation and amortization of real estate assets
50,861 53,230 201,392 202,108 Gains on sales of depreciable real
estate — (11,531 ) (109,950 ) (121,922 ) Funds From
Operations (1)(2)(3) $ 76,673 $ 69,817 $ 316,612
$ 250,744 Weighted average common shares/units
outstanding – basic 95,095 87,809 92,816 86,123 Weighted average
common shares/units outstanding – diluted 95,726 88,997 93,358
88,001 Funds From Operations per common share/unit – basic
(3) $ 0.81 $ 0.80 $ 3.41 $ 2.91 Funds
From Operations per common share/unit – diluted (3) $ 0.80 $
0.78 $ 3.39 $ 2.85
________________________
(1) We calculate 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, gains and
losses from sales of depreciable real estate and impairment
write-downs associated with depreciable real estate, 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. Our calculation of FFO includes
the amortization of deferred revenue related to tenant-funded
tenant improvements and excludes the depreciation of the related
tenant improvement assets.
We believe that FFO is a useful
supplemental measure of our 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 our 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 operating performance to other REITs. However, other REITs may
use different methodologies to calculate FFO, and accordingly, our
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, we believe that FFO along with the required
GAAP presentations provides a more complete measurement of our
performance relative to our 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 our operating performance because 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 our properties, which are significant
economic costs and could materially impact our results from
operations.
(2) FFO includes amortization of deferred revenue related to
tenant-funded tenant improvements of $3.4 million and $3.3 million
for the three months ended December 31, 2015 and 2014, respectively
and $13.3 million and $11.0 million for the years ended December
31, 2015 and 2014, respectively. (3) Reported amounts are
attributable to common stockholders and common unitholders.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160201005680/en/
Kilroy Realty CorporationTyler H. Rose, 310-481-8484Executive
Vice President and Chief Financial OfficerorMichelle Ngo,
310-481-8581Senior Vice President and Treasurer
Kilroy Realty (NYSE:KRC)
Historical Stock Chart
From Sep 2024 to Oct 2024
Kilroy Realty (NYSE:KRC)
Historical Stock Chart
From Oct 2023 to Oct 2024