Exhibit 99.2
Contact: | FOR RELEASE: | |
| Richard E. Moran Jr. | July 24, 2002 | |
| Executive Vice President | ||
| and Chief Financial Officer | ||
| (310) 481-8483 | ||
| or | ||
| Tyler H. Rose | ||
| Senior Vice President | ||
| and Treasurer | ||
| (310) 481-8484 |
KILROY REALTY CORPORATION REPORTS
SECOND QUARTER FINANCIAL RESULTS
LOS ANGELES, July 24, 2002—Kilroy Realty Corporation(NYSE: KRC) today reported financial results for its second quarter ended June 30, 2002, with net income of $5.0 million, or $0.18 per share, on revenues of $51.3 million. KRC’s second-quarter earnings were reduced by a $5.3 million ($0.17 per share) charge to depreciation for capitalized leasing costs and a $1.5 million ($0.05 per share) charge to record development and bad debt reserves related to the financial condition Peregrine Systems, Inc., an existing tenant. In the second quarter of 2001, the company reported net income of $15.1 million, or $0.55 per share, on revenues of $58.2 million. Earnings in the second quarter of 2001 were increased by a $5.4 million ($ 0.18 per share) non-recurring lease termination fee.
For the first six months of 2002, KRC reported net income of $18.5 million, or $0.67 per share, on revenues of $103.9 million. In the same year-earlier period, the company reported net income of $21.5 million, or $0.79 per share, on revenues of $108.7 million.
KRC’s funds from operations (FFO) totaled $23.4 million, or $0.73 per share, in the second quarter of 2002, compared to $28.2 million, or $0.93 per share in the prior year’s second quarter. Second quarter FFO was reduced by the $1.5 million ($0.05 per share) charge to record development and bad debt reserves related to the financial condition of Peregrine Systems. For the first six months of 2002, FFO totaled $50.5 million, or $1.61 per share, compared to $50.1 million, or $1.64 per share, in the same period of 2001.
All per-share amounts in this report are presented on a diluted basis.
KRC added $49 million of new development to its stabilized portfolio in the second quarter of 2002, including an aggregate 213,900 square feet of space in three new office properties. At quarter’s end, the company’s stabilized portfolio was 94.8% occupied.
KRC has an additional 697,600 square feet of space currently in lease-up or under construction representing a total estimated investment of approximately $221 million. These properties are 42% leased or committed.
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; any failure of the general economy to recover timely from the current economic downturn; 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, 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 more than 50 years, the company has owned, developed, acquired and managed real estate assets primarily in the coastal regions of California and Washington. Principal submarkets for KRC’s current development program include West Los Angeles, El Segundo and coastal San Diego. At June 30, 2002, the company owned 7.6 million square feet of commercial office space and 5.1 million square feet of industrial space. More information can be found atwww.kilroyrealty.com.
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KILROY REALTY CORPORATION
SUMMARY QUARTERLY RESULTS
(unaudited, in thousands, except per share data)
Three Months Ended June 30, 2002 | Three Months Ended June 30, 2001 | Six Months Ended June 30, 2002 | Six Months Ended June 30, 2001 | |||||||||||
| Revenues | $ | 51,265 | $ | 58,234 | $ | 103,900 | $ | 108,701 | ||||||
Net income available to common stockholders(1) | $ | 4,957 | $ | 15,097 | $ | 18,464 | $ | 21,523 | ||||||
| Weighted average common shares outstanding—basic | 27,463 | 27,160 | 27,360 | 26,938 | ||||||||||
| Weighted average common shares outstanding—diluted | 27,805 | 27,380 | 27,678 | 27,177 | ||||||||||
| Net income per share of common stock—basic | $ | 0.18 | $ | 0.56 | $ | 0.67 | $ | 0.80 | ||||||
| Net income per share of common stock—diluted | $ | 0.18 | $ | 0.55 | $ | 0.67 | $ | 0.79 | ||||||
| Funds From Operations | $ | 23,358 | $ | 28,237 | $ | 50,510 | $ | 50,113 | ||||||
Weighted average common shares/units outstanding—basic(2) | 31,827 | 30,260 | 31,076 | 30,243 | ||||||||||
Weighted average common shares/units outstanding—diluted(2) | 32,169 | 30,481 | 31,394 | 30,482 | ||||||||||
Funds From Operations per common share/unit—basic(2) | $ | 0.73 | $ | 0.93 | $ | 1.63 | $ | 1.66 | ||||||
Funds From Operations per common share/unit—diluted(2) | $ | 0.73 | $ | 0.93 | $ | 1.61 | $ | 1.64 | ||||||
| Common shares outstanding at end of period | 27,744 | 27,266 | ||||||||||||
| Common partnership units outstanding at end of period | 4,421 | 3,063 | ||||||||||||
| Total common shares and units outstanding at end of period | 32,165 | 30,329 | ||||||||||||
June 30, 2002 | June 30, 2001 | |||||||||||||
| Occupancy rates: | ||||||||||||||
| California | 94.6 | % | 94.5 | % | ||||||||||
| Washington | 97.7 | % | 99.8 | % | ||||||||||
| Arizona | 100.0 | % | 100.0 | % | ||||||||||
| Nevada | 100.0 | % | ||||||||||||
| Weighted average total | 94.8 | % | 94.9 | % | ||||||||||
| Total square feet of stabilized properties owned at end of period: | ||||||||||||||
| Office | 7,570 | 7,235 | ||||||||||||
| Industrial | 5,086 | 5,606 | ||||||||||||
| Total | 12,656 | 12,841 | ||||||||||||
(1) | Net income after minority interests. |
(2) | 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)
June 30, 2002 | December 31, 2001 | |||||||
ASSETS | ||||||||
| INVESTMENT IN REAL ESTATE: | ||||||||
| Land and improvements | $ | 285,585 | $ | 269,366 | ||||
| Buildings and improvements | 1,220,923 | 1,140,499 | ||||||
| Undeveloped land and construction in progress, net | 172,331 | 191,129 | ||||||
| Total investment in real estate | 1,679,358 | 1,600,994 | ||||||
| Accumulated depreciation and amortization | (259,676 | ) | (241,665 | ) | ||||
| Investment in real estate, net | 1,419,163 | 1,359,329 | ||||||
| Cash and cash equivalents | 12,663 | 16,487 | ||||||
| Restricted cash | 5,811 | 5,413 | ||||||
| Tenant receivables, net | 29,511 | 32,151 | ||||||
| Deferred financing and leasing costs, net | 37,909 | 37,068 | ||||||
| Prepaid expenses and other assets | 5,520 | 6,781 | ||||||
| TOTAL ASSETS | $ | 1,510,577 | $ | 1,457,229 | ||||
LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
| LIABILITIES: | ||||||||
| Secured debt | $ | 455,302 | $ | 459,587 | ||||
| Unsecured line of credit | 306,000 | 155,000 | ||||||
| Unsecured term facility | 100,000 | |||||||
| Accounts payable, accrued expenses and other liabilities | 39,016 | 53,879 | ||||||
| Accrued distributions | 15,891 | 14,634 | ||||||
| Rents received in advance and tenant security deposits | 16,737 | 15,955 | ||||||
| Total liabilities | 832,946 | 799,055 | ||||||
| MINORITY INTERESTS: | ||||||||
| 8.075% Series A Cumulative Redeemable | ||||||||
| Preferred unitholders | 73,716 | 73,716 | ||||||
| 9.375% Series C Cumulative Redeemable | ||||||||
| Preferred unitholders | 34,464 | 34,464 | ||||||
| 9.250% Series D Cumulative Redeemable | ||||||||
| Preferred unitholders | 44,321 | 44,321 | ||||||
| Common unitholders of the Operating Partnership | 72,415 | 49,176 | ||||||
| Minority interest in Development LLCs | 15,869 | |||||||
| Total minority interests | 224,916 | 217,546 | ||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Common stock | 277 | 274 | ||||||
| Additional paid-in capital | 499,196 | 479,295 | ||||||
| Distributions in excess of earnings | (42,079 | ) | (33,163 | ) | ||||
| Accumulated net other comprehensive loss | (4,679 | ) | (5,778 | ) | ||||
| Total stockholders’ equity | 452,715 | 440,628 | ||||||
| TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | $ | 1,510,577 | $ | 1,457,229 | ||||
KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months Ended June 30, 2002 | Three Months Ended June 30, 2001 | Six Months Ended June 30, 2002 | Six Months Ended June 30, 2001 | |||||||||||||
| REVENUES: | ||||||||||||||||
| Rental income | $ | 44,435 | $ | 46,029 | $ | 89,730 | $ | 90,408 | ||||||||
| Tenant reimbursements | 6,714 | 6,170 | 12,332 | 11,690 | ||||||||||||
| Interest income | 86 | 277 | 371 | 713 | ||||||||||||
| Other income | 30 | 5,758 | 1,467 | 5,890 | ||||||||||||
| Total revenues | 51,265 | 58,234 | 103,900 | 108,701 | ||||||||||||
| EXPENSES: | ||||||||||||||||
| Property expenses | 7,529 | 7,330 | 15,230 | 14,312 | ||||||||||||
| Real estate taxes | 4,063 | 4,744 | 7,913 | 8,379 | ||||||||||||
| General and administrative expenses | 3,129 | 2,973 | 6,097 | 6,073 | ||||||||||||
| Ground leases | 333 | 375 | 716 | 767 | ||||||||||||
| Provision for potentially unrecoverable development costs | 519 | 519 | 100 | |||||||||||||
| Interest expense | 8,768 | 10,612 | 18,127 | 21,403 | ||||||||||||
| Depreciation and amortization | 18,502 | 12,695 | 31,368 | 26,295 | ||||||||||||
| Total expenses | 42,843 | 38,729 | 79,970 | 77,329 | ||||||||||||
| Income from operations | 8,422 | 19,505 | 23,930 | 31,372 | ||||||||||||
| Net gains on dispositions of operating properties | 896 | 1,234 | 896 | 1,539 | ||||||||||||
| Income before minority interests and cumulative effect of change in accounting principle | 9,318 | 20,739 | 24,826 | 32,911 | ||||||||||||
| Minority interests: | ||||||||||||||||
| Distributions on Cumulative Redeemable | ||||||||||||||||
| Preferred units | (3,375 | ) | (3,375 | ) | (6,750 | ) | (6,750 | ) | ||||||||
| Minority interest in earnings of Operating Partnership | (986 | ) | (1,796 | ) | (2,496 | ) | (2,641 | ) | ||||||||
| Recognition of previously reserved Development LLC preferred return | 3,908 | |||||||||||||||
| Minority interest in earnings of Development LLCs | (471 | ) | (1,024 | ) | (605 | ) | ||||||||||
| Total minority interests | (4,361 | ) | (5,642 | ) | (6,362 | ) | (9,996 | ) | ||||||||
| Net income before cumulative effect of change in accounting principle | 4,957 | 15,097 | 18,464 | 22,915 | ||||||||||||
| Cumulative effect of change in accounting principle | (1,392 | ) | ||||||||||||||
| Net income | $ | 4,957 | $ | 15,097 | $ | 18,464 | $ | 21,523 | ||||||||
| Weighted average shares outstanding—basic | 27,463 | 27,160 | 27,360 | 26,938 | ||||||||||||
| Weighted average shares outstanding—diluted | 27,805 | 27,380 | 27,678 | 27,177 | ||||||||||||
| Net Income per common share—basic | $ | 0.18 | $ | 0.56 | $ | 0.67 | $ | 0.80 | ||||||||
| Net Income per common share—diluted | $ | 0.18 | $ | 0.55 | $ | 0.67 | $ | 0.79 | ||||||||
KILROY REALTY CORPORATION
FUNDS FROM OPERATIONS
(unaudited, in thousands, except per share data)
Three Months Ended June 30, 2002 | Three Months Ended June 30, 2001 | Six Months Ended June 30, 2002 | Six Months Ended June 30, 2001 | |||||||||||||
| Net income | $ | 4,957 | $ | 15,097 | $ | 18,464 | $ | 21,523 | ||||||||
| Adjustments: | ||||||||||||||||
| Minority interest in earnings of Operating Partnership | 986 | 1,796 | 2,496 | 2,641 | ||||||||||||
| Depreciation and amortization | 18,311 | 12,030 | 30,446 | 25,000 | ||||||||||||
| Net gains on dispositions of operating properties | (896 | ) | (1,234 | ) | (896 | ) | (1,539 | ) | ||||||||
| Cumulative effect of change in accounting principle | 1,392 | |||||||||||||||
| Non-cash amortization of restricted stock grants | 548 | 1,096 | ||||||||||||||
| Funds From Operations | $ | 23,358 | $ | 28,237 | $ | 50,510 | $ | 50,113 | ||||||||
| Weighted average common shares/units outstanding—basic | 31,827 | 30,260 | 31,076 | 30,243 | ||||||||||||
| Weighted average common shares/units outstanding—diluted | 32,169 | 30,481 | 31,394 | 30,482 | ||||||||||||
| Funds From Operations per common share/unit—basic | $ | 0.73 | $ | 0.93 | $ | 1.63 | $ | 1.66 | ||||||||
| Funds From Operations per common share/unit—diluted | $ | 0.73 | $ | 0.93 | $ | 1.61 | $ | 1.64 | ||||||||
KILROY REALTY CORPORATION
FUNDS AVAILABLE FOR DISTRIBUTION
(unaudited, in thousands, except per share data)
Three Months Ended June 30, 2002 | Three Months Ended June 30, 2001 | Six Months Ended June 30, 2002 | Six Months Ended June 30, 2001 | |||||||||||||
| Funds From Operations | $ | 23,358 | $ | 28,237 | $ | 50,510 | $ | 50,113 | ||||||||
| Adjustments: | ||||||||||||||||
| Amortization of deferred financing costs | 442 | 399 | 1,220 | 780 | ||||||||||||
| Tenant improvements, leasing commissions and recurring capital expenditures | (1,302 | ) | (3,668 | ) | (1,637 | ) | (4,679 | ) | ||||||||
| Net effect of straight-line rents | 97 | (873 | ) | (1,131 | ) | (2,587 | ) | |||||||||
| Funds Available for Distribution | $ | 22,595 | $ | 24,095 | $ | 48,962 | $ | 43,627 | ||||||||
| Funds Available for Distribution per common share/unit—basic | $ | 0.71 | $ | 0.80 | $ | 1.58 | $ | 1.44 | ||||||||
| Funds Available for Distribution per common share/unit—diluted | $ | 0.70 | $ | 0.79 | $ | 1.56 | $ | 1.43 | ||||||||