Exhibit 99.2
Contact: | FOR RELEASE: | |
Richard E. Moran Jr. | February 3, 2003 | |
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 FOURTH QUARTER
EARNINGS AND ON KEY LEASE ISSUES
LOS ANGELES, February 3, 2003 – Kilroy Realty Corporation(NYSE: KRC) today reported financial results for its fourth quarter ended December 31, 2002, with net income of $14.0 million, or $0.50 per share, compared to $7.6 million, or $0.28 per share in the fourth quarter of 2001. Revenues from continuing operations in the fourth quarter totaled $51.7 million, compared to $48.0 million in the fourth quarter of 2001.
For its fiscal year ended December 31, 2002, KRC reported net income of $40.3 million, or $1.45 per share, compared to $38.4 million, or $1.40 per share, in 2001. Revenues from continuing operations in 2002 totaled $202.1 million, compared to $203.6 million in 2001.
KRC’s funds from operations (FFO) totaled $24.3 million, or $0.76 per share, in the fourth quarter of 2002, compared to $20.9 million, or $0.68 per share in the prior year’s fourth quarter. For the year, FFO totaled $97.9 million, or $3.09 per share, compared to $91.6 million, or $3.00 per share, in 2001.
On Tuesday, February 4, 2003, KRC management will discuss 2003 earnings guidance during its quarterly conference call. Based on management’s view of current market conditions and certain assumptions with regard to rental rates and other projections, an FFO per share range of $2.60 to $2.80 for the fiscal year 2003 will be discussed.
All per-share amounts in this report are presented on a diluted basis.
KRC stabilized $106 million of new development in 2002, adding an aggregate 436,000 square feet of space in six new office properties to its portfolio. At year-end, the company’s stabilized portfolio was 93.7% occupied.
KRC also disposed of $41.8 million of non-strategic real estate assets aggregating 468,000 square feet of space during the fourth quarter, including the sale of two office and two industrial properties that produced a net gain of $6.1 million for the period. The company used the proceeds from these dispositions to help fund its development program and finance the company’s stock repurchase program. In the fourth quarter, the company repurchased 508,200 common shares at an average price of $22.39 per share.
The company’s committed development pipeline, totaling 608,400 square feet of space in Southern California, represents a total estimated investment of approximately $198 million, and is currently 53% leased.
KRC Reports on Key Lease Issues
The company also reported today that Peregrine Systems has indicated it intends to file a motion in bankruptcy court seeking to reject its two remaining leases it has with Kilroy Realty totaling 241,747 square feet in the northern San Diego submarket of Del Mar. Approximately 65,000 square feet of this space is currently subject to subleases whose rental obligations are anticipated to continue.
The company also reported that on Thursday, January 30, 2003, numerous press reports announced that Brobeck, Phleger & Harrison LLP had decided to dissolve. Brobeck leases two properties from KRC in Del Mar totaling approximately 162,000 square feet, and representing approximately 2.4% of the company’s total annual base rental revenues. The company reported that it had not received any official statement from Brobeck, and that at this time it is uncertain how Brobeck’s reported actions may affect the company’s leases with Brobeck.
The company also reported today that it recognized a $4.1 million lease termination fee in January 2003 associated with a 68,000 square-foot office property located in the Sorrento Mesa area of coastal San Diego that was fully leased to Ericsson. KRC is actively re-marketing the property.
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 December 31, 2002, the company owned 7.4 million square feet of commercial office space and 4.9 million square feet of industrial space. More information can be found at www.kilroyrealty.com.
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KILROY REALTY CORPORATION
SUMMARY QUARTERLY RESULTS
(unaudited, in thousands, except per share data)
Three Months Ended December 31, 2002 | Three Months Ended December 31, 2001 | Year | Year | |||||||||||
Revenues from continuing operations | $ | 51,653 | $ | 48,024 | $ | 202,095 |
| $ | 203,610 |
| ||||
Revenues including discontinued operations | $ | 52,470 | $ | 49,598 | $ | 207,481 |
| $ | 209,645 |
| ||||
Net income available to common stockholders(1) | $ | 13,965 | $ | 7,625 | $ | 40,312 |
| $ | 38,431 |
| ||||
Weighted average common shares outstanding—basic |
| 27,453 |
| 27,426 |
| 27,450 |
|
| 27,167 |
| ||||
Weighted average common shares outstanding—diluted |
| 27,691 |
| 27,545 |
| 27,722 |
|
| 27,373 |
| ||||
Net income per share of common stock—basic | $ | 0.51 | $ | 0.28 | $ | 1.47 |
| $ | 1.41 |
| ||||
Net income per share of common stock—diluted | $ | 0.50 | $ | 0.28 | $ | 1.45 |
| $ | 1.40 |
| ||||
Funds From Operations(2) | $ | 24,262 | $ | 20,933 | $ | 97,940 |
| $ | 91,558 |
| ||||
Weighted average common shares/units outstanding—basic(3) |
| 31,689 |
| 30,487 |
| 31,443 |
|
| 30,349 |
| ||||
Weighted average common shares/units outstanding—diluted(3) |
| 31,928 |
| 30,606 |
| 31,715 |
|
| 30,555 |
| ||||
Funds From Operations per common share/unit—basic(3) | $ | 0.77 | $ | 0.69 | $ | 3.11 |
| $ | 3.02 |
| ||||
Funds From Operations per common share/unit—diluted(3) | $ | 0.76 | $ | 0.68 | $ | 3.09 |
| $ | 3.00 |
| ||||
Common shares outstanding at end of period |
| 27,420 |
|
| 27,426 |
| ||||||||
Common partnership units outstanding at end of period |
| 4,237 |
|
| 3,061 |
| ||||||||
Total common shares and units outstanding at end of period |
| 31,657 |
|
| 30,487 |
| ||||||||
December 31, 2002 | December 31, 2001 | |||||||||||||
Occupancy rates: | ||||||||||||||
Los Angeles |
| 86.4 | % |
| 89.8 | % | ||||||||
Orange County |
| 98.8 | % |
| 97.3 | % | ||||||||
San Diego |
| 93.1 | % |
| 100.0 | % | ||||||||
Other |
| 97.4 | % |
| 99.3 | % | ||||||||
Weighted average total |
| 93.7 | % |
| 95.8 | % | ||||||||
Total square feet of stabilized properties owned at end of period: | ||||||||||||||
Office |
| 7,448 |
|
| 7,225 |
| ||||||||
Industrial |
| 4,881 |
|
| 5,086 |
| ||||||||
Total |
| 12,329 |
|
| 12,311 |
| ||||||||
| (1) | Net income after minority interests. |
| (2) | Reconciliation of Net Income to Funds From Operations included at page 4. |
| (3) | Calculated based on weighted average shares outstanding assuming conversion of all common limited partnership units outstanding. |
1
KILROY REALTY CORPORATION CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
December 31, 2002 | December 31, 2001 | |||||||
ASSETS | ||||||||
INVESTMENT IN REAL ESTATE: | ||||||||
Land and improvements | $ | 288,228 |
| $ | 269,366 |
| ||
Buildings and improvements |
| 1,289,525 |
|
| 1,140,499 |
| ||
Undeveloped land and construction in progress, net |
| 108,465 |
|
| 191,129 |
| ||
Total investment in real estate |
| 1,686,218 |
|
| 1,600,994 |
| ||
Accumulated depreciation and amortization |
| (278,503 | ) |
| (241,665 | ) | ||
Investment in real estate, net |
| 1,407,715 |
|
| 1,359,329 |
| ||
Cash and cash equivalents |
| 15,777 |
|
| 16,487 |
| ||
Restricted cash |
| 6,814 |
|
| 5,413 |
| ||
Current receivables, net |
| 3,074 |
|
| 4,770 |
| ||
Deferred rent receivables, net |
| 29,466 |
|
| 27,381 |
| ||
Deferred leasing costs, net |
| 31,427 |
|
| 33,120 |
| ||
Deferred financing costs, net |
| 6,221 |
|
| 3,948 |
| ||
Prepaid expenses and other assets |
| 6,108 |
|
| 6,781 |
| ||
TOTAL ASSETS | $ | 1,506,602 |
| $ | 1,457,229 |
| ||
LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
LIABILITIES: | ||||||||
Secured debt | $ | 507,037 |
| $ | 459,587 |
| ||
Unsecured line of credit |
| 255,000 |
|
| 155,000 |
| ||
Unsecured term facility |
| — |
|
| 100,000 |
| ||
Accounts payable, accrued expenses and other liabilities |
| 43,917 |
|
| 53,879 |
| ||
Accrued distributions |
| 15,670 |
|
| 14,634 |
| ||
Rents received in advance, tenant security deposits and deferred revenue |
| 24,310 |
|
| 15,955 |
| ||
Total liabilities |
| 845,934 |
|
| 799,055 |
| ||
MINORITY INTEREST: | ||||||||
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 |
| 68,196 |
|
| 49,176 |
| ||
Minority interest in Development LLCs |
| — |
|
| 15,869 |
| ||
Total minority interests |
| 220,697 |
|
| 217,546 |
| ||
STOCKHOLDERS’ EQUITY: | ||||||||
Common stock |
| 273 |
|
| 274 |
| ||
Additional paid-in capital |
| 493,116 |
|
| 479,295 |
| ||
Distributions in excess of earnings |
| (47,629 | ) |
| (33,163 | ) | ||
Accumulated net other comprehensive loss |
| (5,789 | ) |
| (5,778 | ) | ||
Total stockholders’ equity |
| 439,971 |
|
| 440,628 |
| ||
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | $ | 1,506,602 |
| $ | 1,457,229 |
| ||
2
KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months | Three Months | Year Ended | Year | |||||||||||||
REVENUES: | ||||||||||||||||
Rental income | $ | 45,788 |
| $ | 43,754 |
| $ | 177,104 |
| $ | 175,266 |
| ||||
Tenant reimbursements |
| 4,798 |
|
| 4,092 |
|
| 21,799 |
|
| 21,125 |
| ||||
Interest income |
| 62 |
|
| 147 |
|
| 513 |
|
| 1,030 |
| ||||
Other income |
| 1,005 |
|
| 31 |
|
| 2,679 |
|
| 6,189 |
| ||||
Total revenues |
| 51,653 |
|
| 48,024 |
|
| 202,095 |
|
| 203,610 |
| ||||
EXPENSES: | ||||||||||||||||
Property expenses |
| 8,460 |
|
| 7,351 |
|
| 30,799 |
|
| 28,741 |
| ||||
Real estate taxes |
| 3,960 |
|
| 2,879 |
|
| 15,548 |
|
| 14,960 |
| ||||
General and administrative expenses |
| 2,975 |
|
| 2,823 |
|
| 12,557 |
|
| 11,692 |
| ||||
Ground leases |
| 319 |
|
| 361 |
|
| 1,354 |
|
| 1,507 |
| ||||
Interest expense |
| 8,615 |
|
| 9,579 |
|
| 35,640 |
|
| 41,457 |
| ||||
Depreciation and amortization |
| 14,468 |
|
| 13,174 |
|
| 59,781 |
|
| 51,460 |
| ||||
Total expenses |
| 38,797 |
|
| 36,167 |
|
| 155,679 |
|
| 149,817 |
| ||||
Income from continuing operations before net gains on dispositions |
| 12,856 |
|
| 11,857 |
|
| 46,416 |
|
| 53,793 |
| ||||
Net gains on dispositions of operating properties |
| 707 |
|
| 896 |
|
| 4,714 |
| |||||||
Income from continuing operations before minority interests |
| 12,856 |
|
| 12,564 |
|
| 47,312 |
|
| 58,507 |
| ||||
Minority interests: | ||||||||||||||||
Distributions on Cumulative Redeemable Preferred units |
| (3,375 | ) |
| (3,375 | ) |
| (13,500 | ) |
| (13,500 | ) | ||||
Minority interest in earnings of Operating Partnership attributable to continuing operations |
| (1,257 | ) |
| (751 | ) |
| (4,636 | ) |
| (4,185 | ) | ||||
Recognition of previously reserved Development LLC preferred return |
| 3,908 |
| |||||||||||||
Minority interest in earnings of Development LLCs |
| (1,549 | ) |
| (1,024 | ) |
| (3,701 | ) | |||||||
Total minority interests |
| (4,632 | ) |
| (5,675 | ) |
| (15,252 | ) |
| (21,386 | ) | ||||
Income from continuing operations |
| 8,224 |
|
| 6,889 |
|
| 32,060 |
|
| 37,121 |
| ||||
Discontinued operations: | ||||||||||||||||
Revenues from discontinued operations |
| 817 |
|
| 1,574 |
|
| 5,386 |
|
| 6,035 |
| ||||
Expenses from discontinued operations |
| (339 | ) |
| (755 | ) |
| (2,511 | ) |
| (3,016 | ) | ||||
Net gain on disposition of discontinued operations |
| 6,100 |
|
| 6,570 |
| ||||||||||
Minority interest in earnings of Operating Partnership attributable to discontinued operations |
| (837 | ) |
| (83 | ) |
| (1,193 | ) |
| (317 | ) | ||||
Total discontinued operations |
| 5,741 |
|
| 736 |
|
| 8,252 |
|
| 2,702 |
| ||||
Net income before cumulative effect of change in accounting principle |
| 13,965 |
|
| 7,625 |
|
| 40,312 |
|
| 39,823 |
| ||||
Cumulative effect of change in accounting principle |
| (1,392 | ) | |||||||||||||
Net income | $ | 13,965 |
| $ | 7,625 |
| $ | 40,312 |
| $ | 38,431 |
| ||||
Weighted average shares outstanding—basic |
| 27,453 |
|
| 27,426 |
|
| 27,450 |
|
| 27,167 |
| ||||
Weighted average shares outstanding—diluted |
| 27,691 |
|
| 27,545 |
|
| 27,722 |
|
| 27,373 |
| ||||
Net Income per common share—basic | $ | 0.51 |
| $ | 0.28 |
| $ | 1.47 |
| $ | 1.41 |
| ||||
Net Income per common share—diluted | $ | 0.50 |
| $ | 0.28 |
| $ | 1.45 |
| $ | 1.40 |
| ||||
3
KILROY REALTY CORPORATION
FUNDS FROM OPERATIONS
(unaudited, in thousands, except per share data)
Three Months December 31, 2002 | Three Months | Year | Year | |||||||||||||
Net income | $ | 13,965 |
| $ | 7,625 |
| $ | 40,312 |
| $ | 38,431 |
| ||||
Adjustments: | ||||||||||||||||
Minority interest in earnings of Operating Partnership |
| 2,094 |
|
| 834 |
|
| 5,829 |
|
| 4,502 |
| ||||
Depreciation and amortization |
| 14,303 |
|
| 12,634 |
|
| 59,265 |
|
| 49,757 |
| ||||
Net gains on dispositions of operating properties |
| (6,100 | ) |
| (707 | ) |
| (7,466 | ) |
| (4,714 | ) | ||||
Cumulative effect of change in accounting principle |
| 1,392 |
| |||||||||||||
Non-cash amortization of restricted stock grants |
| 547 |
|
| 2,190 |
| ||||||||||
Funds From Operations | $ | 24,262 |
| $ | 20,933 |
| $ | 97,940 |
| $ | 91,558 |
| ||||
Weighted average common shares/units outstanding—basic |
| 31,689 |
|
| 30,487 |
|
| 31,443 |
|
| 30,349 |
| ||||
Weighted average common shares/units outstanding—diluted |
| 31,928 |
|
| 30,606 |
|
| 31,715 |
|
| 30,555 |
| ||||
Funds From Operations per common share/unit—basic | $ | 0.77 |
| $ | 0.69 |
| $ | 3.11 |
| $ | 3.02 |
| ||||
Funds From Operations per common share/unit—diluted | $ | 0.76 |
| $ | 0.68 |
| $ | 3.09 |
| $ | 3.00 |
| ||||
KILROY REALTY CORPORATION
FUNDS AVAILABLE FOR DISTRIBUTION
(unaudited, in thousands, except per share data)
Three Months | Three Months | Year December 31, 2002 | Year | |||||||||||||
Funds From Operations | $ | 24,262 |
| $ | 20,933 |
| $ | 97,940 |
| $ | 91,558 |
| ||||
Adjustments: | ||||||||||||||||
Amortization of deferred financing costs |
| 970 |
|
| 532 |
|
| 2,647 |
|
| 1,720 |
| ||||
Tenant improvements, leasing commissions and recurring capital expenditures |
| (7,082 | ) |
| (4,249 | ) |
| (11,113 | ) |
| (11,168 | ) | ||||
Net effect of straight-line rents |
| (1,260 | ) |
| (2,272 | ) |
| (4,339 | ) |
| (6,786 | ) | ||||
Funds Available for Distribution | $ | 16,890 |
| $ | 14,944 |
| $ | 85,135 |
| $ | 75,324 |
| ||||
Funds Available for Distribution per common share/unit—basic | $ | 0.53 |
| $ | 0.49 |
| $ | 2.71 |
| $ | 2.48 |
| ||||
Funds Available for Distribution per common share/unit—diluted | $ | 0.53 |
| $ | 0.49 |
| $ | 2.68 |
| $ | 2.47 |
| ||||
4