Exhibit 99.2
Contact: | FOR RELEASE: | |
Richard E. Moran Jr. Executive Vice President and Chief Financial Officer (310) 481-8483 or Tyler H. Rose Senior Vice President and Treasurer (310) 481-8484 | April 28, 2003 |
KILROY REALTY CORPORATION REPORTS
FIRST QUARTER FINANCIAL RESULTS
LOS ANGELES, April 28, 2003 — Kilroy Realty Corporation(NYSE: KRC) today reported financial results for its first quarter ended March 31, 2003, with net income of $10.9 million, or $0.40 per share, compared to $13.5 million, or $0.49 per share in the first quarter of 2002. Revenues from continuing operations in the first quarter totaled $54.6 million, up from $51.1 million in the year-earlier period.
The company’s funds from operations (FFO) in the first quarter of 2003 totaled $26.3 million, or $0.83 per share, compared to $27.2 million, or $0.89 per share, in the first quarter of 2002.
KRC said financial results in both periods were increased by nonrecurring gains. In the current quarter, the company recognized a lease termination fee that added $0.13 per share to FFO. In the year-earlier quarter, KRC recognized $0.13 per share of preferred return income related to its buyout of a former partner’s remaining real estate interests in twelve properties.
At the end of the first quarter, the company’s stabilized portfolio was 92.2% occupied.
All per-share amounts in this report are presented on a diluted basis.
KRC continues to develop an additional 608,000 square feet of space in Southern California, with completion dates scheduled through 2003. This committed development pipeline, which represents a total estimated investment of approximately $196 million, is currently 60% leased. In addition, the company has four redevelopment projects underway in Southern California totaling 473,000 square feet of space. The estimated incremental redevelopment costs for these projects is approximately $48.7 million.
Earnings guidance for 2003 will be discussed by management on its Tuesday, April 29, 2003 earnings conference call. The conference call will begin at 11:00 am PDT and last approximately one hour. Those interested in listening via the Internet can access the conference call atwww.kilroyrealty.com. Please go 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 (800) 576-5247. A replay of the conference call will be available via phone through May 6, 2003 at (800) 633-8284, passcode #21136118 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; 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; 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 March 31, 2003, the company owned 7.1 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 March 31, 2003 | Three Months Ended March 31, 2002 | |||||||
Revenues from continuing operations | $ | 54,627 |
| $ | 51,080 |
| ||
Revenues including discontinued operations | $ | 54,627 |
| $ | 52,635 |
| ||
Net income available to common stockholders(1) | $ | 10,929 |
| $ | 13,507 |
| ||
Weighted average common shares outstanding—basic |
| 27,221 |
|
| 27,256 |
| ||
Weighted average common shares outstanding—diluted |
| 27,430 |
|
| 27,550 |
| ||
Net income per share of common stock—basic | $ | 0.40 |
| $ | 0.50 |
| ||
Net income per share of common stock—diluted | $ | 0.40 |
| $ | 0.49 |
| ||
Funds From Operations(2) | $ | 26,320 |
| $ | 27,153 |
| ||
Weighted average common shares/units outstanding—basic(3) |
| 31,453 |
|
| 30,317 |
| ||
Weighted average common shares/units outstanding—diluted(3) |
| 31,662 |
|
| 30,611 |
| ||
Funds From Operations per common share/unit—basic(3) | $ | 0.84 |
| $ | 0.90 |
| ||
Funds From Operations per common share/unit—diluted(3) | $ | 0.83 |
| $ | 0.89 |
| ||
Common shares outstanding at end of period |
| 27,475 |
|
| 27,572 |
| ||
Common partnership units outstanding at end of period |
| 4,222 |
|
| 4,458 |
| ||
Total common shares and units outstanding at end of period |
| 31,697 |
|
| 32,030 |
| ||
March 31, 2003 | March 31, 2002 | |||||||
Stabilized portfolio occupancy rates: | ||||||||
Los Angeles |
| 83.9 | % |
| 86.3 | % | ||
Orange County |
| 98.7 | % |
| 97.3 | % | ||
San Diego |
| 89.6 | % |
| 97.6 | % | ||
Other |
| 97.2 | % |
| 98.6 | % | ||
Weighted average total |
| 92.2 | % |
| 94.2 | % | ||
Total square feet of stabilized properties owned at end of period: | ||||||||
Office |
| 7,055 |
|
| 7,357 |
| ||
Industrial |
| 4,881 |
|
| 5,086 |
| ||
Total |
| 11,936 |
|
| 12,443 |
| ||
| (1) | Net income after minority interests. |
| (2) | Reconciliation of Net Income to Funds From Operations and management statement on Funds From Operations included at page 4. |
| (3) | Calculated based on weighted average shares outstanding assuming conversion of all common limited partnership units outstanding. |
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KILROY REALTY CORPORATION CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
March 31, 2003 | December 31, 2002 | |||||||
ASSETS | ||||||||
INVESTMENT IN REAL ESTATE: | ||||||||
Land and improvements | $ | 282,030 |
| $ | 288,228 |
| ||
Buildings and improvements, net |
| 1,258,593 |
|
| 1,289,525 |
| ||
Undeveloped land and construction in progress, net |
| 166,346 |
|
| 108,465 |
| ||
Total investment in real estate |
| 1,706,969 |
|
| 1,686,218 |
| ||
Accumulated depreciation and amortization |
| (290,365 | ) |
| (278,503 | ) | ||
Investment in real estate, net |
| 1,416,604 |
|
| 1,407,715 |
| ||
Cash and cash equivalents |
| 7,787 |
|
| 15,777 |
| ||
Restricted cash |
| 7,479 |
|
| 6,814 |
| ||
Current receivables, net |
| 2,821 |
|
| 3,074 |
| ||
Deferred rent receivables, net |
| 30,567 |
|
| 29,466 |
| ||
Deferred leasing costs, net |
| 32,145 |
|
| 31,427 |
| ||
Deferred financing costs, net |
| 5,394 |
|
| 6,221 |
| ||
Prepaid expenses and other assets |
| 8,400 |
|
| 6,108 |
| ||
TOTAL ASSETS | $ | 1,511,197 |
| $ | 1,506,602 |
| ||
LIABILITIES & STOCKHOLDERS' EQUITY | ||||||||
LIABILITIES: | ||||||||
Secured debt | $ | 514,115 |
| $ | 507,037 |
| ||
Unsecured line of credit |
| 262,500 |
|
| 255,000 |
| ||
Accounts payable, accrued expenses and other liabilities |
| 43,110 |
|
| 43,917 |
| ||
Accrued distributions |
| 15,776 |
|
| 15,670 |
| ||
Rents received in advance, tenant security deposits and deferred revenue |
| 19,434 |
|
| 24,310 |
| ||
Total liabilities |
| 854,935 |
|
| 845,934 |
| ||
MINORITY INTERESTS: | ||||||||
8.075% Series A Cumulative Redeemable |
| 73,716 |
|
| 73,716 |
| ||
9.375% Series C Cumulative Redeemable |
| 34,464 |
|
| 34,464 |
| ||
9.250% Series D Cumulative Redeemable |
| 44,321 |
|
| 44,321 |
| ||
Common unitholders of the Operating Partnership |
| 67,000 |
|
| 68,196 |
| ||
Total minority interests |
| 219,501 |
|
| 220,697 |
| ||
STOCKHOLDERS' EQUITY: | ||||||||
Common stock |
| 273 |
|
| 273 |
| ||
Additional paid-in capital |
| 493,244 |
|
| 493,116 |
| ||
Distributions in excess of earnings |
| (50,384 | ) |
| (47,629 | ) | ||
Accumulated net other comprehensive loss |
| (6,372 | ) |
| (5,789 | ) | ||
Total stockholders' equity |
| 436,761 |
|
| 439,971 |
| ||
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | $ | 1,511,197 |
| $ | 1,506,602 |
| ||
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KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
Three Months Ended March 31, 2003 | Three Months Ended March 31, 2002 | |||||||
REVENUES: | ||||||||
Rental income, net | $ | 44,264 |
| $ | 43,928 |
| ||
Tenant reimbursements |
| 5,779 |
|
| 5,431 |
| ||
Interest income |
| 46 |
|
| 285 |
| ||
Other income |
| 4,538 |
|
| 1,436 |
| ||
Total revenues |
| 54,627 |
|
| 51,080 |
| ||
EXPENSES: | ||||||||
Property expenses |
| 8,834 |
|
| 7,410 |
| ||
Real estate taxes |
| 3,934 |
|
| 3,712 |
| ||
General and administrative expenses |
| 3,858 |
|
| 2,968 |
| ||
Ground leases |
| 319 |
|
| 383 |
| ||
Interest expense |
| 7,744 |
|
| 9,325 |
| ||
Depreciation and amortization |
| 13,948 |
|
| 12,583 |
| ||
Total expenses |
| 38,637 |
|
| 36,381 |
| ||
Income from continuing operations before minority interests |
| 15,990 |
|
| 14,699 |
| ||
Minority interests: | ||||||||
Distributions on Cumulative Redeemable Preferred units |
| (3,375 | ) |
| (3,375 | ) | ||
Minority interest in earnings of Operating Partnership attributable to continuing operations |
| (1,686 | ) |
| (1,429 | ) | ||
Recognition of previously reserved Development LLC preferred return |
| 3,908 |
| |||||
Minority interest in earnings of Development LLCs |
| (1,024 | ) | |||||
Total minority interests |
| (5,061 | ) |
| (1,920 | ) | ||
Income from continuing operations |
| 10,929 |
|
| 12,779 |
| ||
Discontinued operations: | ||||||||
Revenues from discontinued operations |
| 1,555 |
| |||||
Expenses from discontinued operations |
| (746 | ) | |||||
Net gain on disposition of discontinued operations | ||||||||
Minority interest in earnings of Operating Partnership attributable to discontinued operations |
| (81 | ) | |||||
Total discontinued operations |
| 728 |
| |||||
Net Income | $ | 10,929 |
| $ | 13,507 |
| ||
Weighted average shares outstanding—basic |
| 27,221 |
|
| 27,256 |
| ||
Weighted average shares outstanding—diluted |
| 27,430 |
|
| 27,550 |
| ||
Net Income per common share—basic | $ | 0.40 |
| $ | 0.50 |
| ||
Net Income per common share—diluted | $ | 0.40 |
| $ | 0.49 |
| ||
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KILROY REALTY CORPORATION
FUNDS FROM OPERATIONS
(unaudited, in thousands, except per share data)
Three Months Ended March 31, 2003 | Three Months Ended March 31, 2002 | |||||
Net income | $ | 10,929 | $ | 13,507 | ||
Adjustments: | ||||||
Minority interest in earnings of Operating Partnership |
| 1,686 |
| 1,510 | ||
Depreciation and amortization |
| 13,705 |
| 12,136 | ||
Net gains on dispositions of operating properties | ||||||
Funds From Operations(1) | $ | 26,320 | $ | 27,153 | ||
Weighted average common shares/units outstanding—basic |
| 31,453 |
| 30,317 | ||
Weighted average common shares/units outstanding—diluted |
| 31,662 |
| 30,611 | ||
Funds From Operations per common share/unit—basic | $ | 0.84 | $ | 0.90 | ||
Funds From Operations per common share/unit—diluted | $ | 0.83 | $ | 0.89 | ||
| (1) | Management believes that Funds From Operations ("FFO") is a useful supplemental measure of the Company's operating performance. The Company computes FFO in accordance with the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). The White Paper defines FFO as net income or loss computed in accordance with generally accepted accounting principles ("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. Other real estate investment trusts ("REITs") may use different methodologies for calculating FFO and, accordingly, the Company's FFO may not be comparable to other REITs. |
Because FFO excludes depreciation and amortization, gains and losses from property dispositions, and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, providing perspective not immediately apparent from net income. In addition, management believes that FFO provides useful information to the investment community about the Company's financial performance when compared to other REITs since FFO is generally recognized as the industry standard for reporting the operations of REITs.
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 that could materially impact the Company’s results of operations.
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