Exhibit 99.1
First Quarter 2007 Supplemental Financial Report
Some of the enclosed information presented in this supplemental and on the Company’s April 24, 2007 conference call is forward-looking in nature, including information concerning project development timing and investment amounts. Although the information is based on Kilroy Realty Corporation’s current expectations, actual results could vary from expectations stated here. Numerous factors will affect Kilroy Realty Corporation’s actual results, some of which are beyond its 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. You are cautioned not to place undue reliance on this information, which speaks only as of the date of this report. Kilroy Realty Corporation assumes no obligation to update publicly any forward-looking information, whether as a result of new information, future events or otherwise, except to the extent it is required to do so in connection with its ongoing requirements under Federal securities laws to disclose material information. For a discussion of important risks related to Kilroy Realty Corporation’s business, and an investment in its securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking information, see the discussion under the caption “Risk Factors” in Kilroy Realty Corporation’s annual report on Form 10-K for the year ended December 31, 2006. In light of these risks, uncertainties and assumptions, the forward-looking events contained in this supplemental information and on the Company’s April 24, 2007 conference call might not occur.
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Table of Contents
Page | ||
Corporate Data and Financial Highlights | ||
Company Background | 1 | |
Financial Highlights | 2 | |
Common Stock Data | 3 | |
Consolidated Balance Sheets | 4 | |
Consolidated Statements of Operations | 5 | |
Funds From Operations and Funds Available for Distribution | 6 | |
Portfolio Data | ||
Same Store Analysis | 7 | |
Stabilized Portfolio Occupancy Overview | 8-11 | |
Leasing Activity | 12 | |
Stabilized Portfolio Capital Expenditures | 13 | |
Lease Expiration Summary and Lease Expirations by Region | 14-17 | |
Top Ten Office and Top Ten Industrial Tenants | 18 | |
Acquisitions and Dispositions | 19 | |
Development | ||
In-Process and Committed Development and Redevelopment Projects | 20 | |
Future Development Pipeline | 21 | |
Debt and Capitalization Data | ||
Capital Structure | 22 | |
Debt Analysis | 23-24 | |
Non-GAAP Supplemental Measures | 25-29 |
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Company Background
Kilroy Realty Corporation (NYSE:KRC) owns, develops, and operates office and industrial real estate, primarily in Southern California. The Company operates as a self-administered real estate investment trust. As of March 31, 2007, the Company’s stabilized portfolio consisted of 84 office buildings and 43 industrial buildings, which encompassed an aggregate of 7.8 million and 3.9 million square feet, respectively, and was 94.0% occupied.
Board of Directors | Senior Management | Investor Relations | ||||
John B. Kilroy, Sr.Chairman | John B. Kilroy, Jr. | President and CEO | 12200 W. Olympic Blvd., Suite 200 | |||
Edward F. Brennan, Ph.D. | Jeffrey C. Hawken | Executive VP and COO | Los Angeles, CA 90064 | |||
John R. D’Eathe | Richard E. Moran Jr. | Executive VP and CFO | (310) 481-8400 | |||
William P. Dickey | Conan Cotrell | Sr. VP Marketing and Leasing | Web: www.kilroyrealty.com | |||
Matthew J. Hart | John T. Fucci | Sr. VP Asset Management | E-mail: investorrelations@kilroyrealty.com | |||
John B. Kilroy, Jr. | Tyler H. Rose | Sr. VP and Treasurer | ||||
Dale F. Kinsella | Heidi R. Roth | Sr. VP and Controller | ||||
Steve Scott | Sr. VP San Diego | |||||
Justin W. Smart | Sr. VP Development |
Equity Research Coverage | ||||||
A.G. Edwards & Sons, Inc. | Green Street Advisors | |||||
David AuBuchon | (314) 955-5452 | Michael Knott | (949) 640-8780 | |||
Bank of America Securities | Merrill Lynch & Co., Inc. | |||||
Ross Nussbaum | (212) 847-5668 | Steve Sakwa | (212) 449-0335 | |||
Citigroup Investment Research | RBC Capital Markets | |||||
Michael Bilerman | (212) 816-1383 | Sri Nagarajan | (212) 428-2360 | |||
Deutsche Bank Securities, Inc. | Robert W. Baird & Company | |||||
Lou Taylor | (212) 250-4912 | David Loeb | (414) 765-7063 | |||
Friedman, Billings, Ramsey & Co., Inc. | Stifel, Nicolaus & Company | |||||
Wilkes Graham | (703) 312-9737 | John W. Guinee III | (410) 454-5520 |
Kilroy Realty Corporation is followed by the analysts listed above. Please note that any opinions, estimates or forecasts regarding Kilroy Realty Corporation’s performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of Kilroy Realty Corporation or its management. Kilroy Realty Corporation does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.
1
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Financial Highlights
(unaudited, $ in thousands, except per share amounts)
Three Months Ended | ||||||||||||||||||||
3/31/2007 | 12/31/2006 | 9/30/2006 | 6/30/2006 | 3/31/2006 | ||||||||||||||||
INCOME ITEMS (Including Discontinued Operations): | ||||||||||||||||||||
Revenues | $ | 64,077 | $ | 64,340 | $ | 63,058 | $ | 73,450 | $ | 63,479 | ||||||||||
Net Straight Line Rent(1) | 1,071 | 1,409 | 1,967 | 899 | 2,750 | |||||||||||||||
Lease Termination Fees(2) | 831 | 658 | 475 | 9,938 | 837 | |||||||||||||||
Net Operating Income(3) | 48,117 | 48,047 | 46,156 | 57,241 | 47,410 | |||||||||||||||
Capitalized Interest and Loan Fees | 4,757 | 3,866 | 2,984 | 2,398 | 2,061 | |||||||||||||||
Net Income Available for Common Stockholders | 16,478 | 9,184 | 31,574 | 17,975 | 13,529 | |||||||||||||||
EBITDA(3), (4) | 39,687 | 41,387 | 40,817 | 52,833 | 42,846 | |||||||||||||||
Funds From Operations(3), (5), (6) | 26,021 | 27,311 | 26,462 | 37,630 | 26,787 | |||||||||||||||
Funds Available for Distribution(3), (5), (6) | 23,461 | 21,575 | 21,002 | 29,765 | 22,010 | |||||||||||||||
Net Income per common share – diluted | $ | 0.51 | $ | 0.28 | $ | 0.98 | $ | 0.58 | $ | 0.46 | ||||||||||
Funds From Operations per common share – diluted | $ | 0.75 | $ | 0.79 | $ | 0.76 | $ | 1.11 | $ | 0.82 | ||||||||||
Dividends per share | $ | 0.555 | $ | 0.530 | $ | 0.530 | $ | 0.530 | $ | 0.530 | ||||||||||
RATIOS (Including Discontinued Operations): | ||||||||||||||||||||
Operating Margins | 75.1 | %. | 74.7 | % | 73.2 | % | 77.9 | % | 74.7 | % | ||||||||||
Interest Coverage Ratio(7) | 4.1x | 4.1x | 4.0x | 4.7x | 3.6x | |||||||||||||||
Fixed Charge Coverage Ratio(8) | 2.9x | 3.0x | 2.9x | 3.5x | 2.7x | |||||||||||||||
FFO Payout Ratio(9) | 74.5 | % | 67.4 | % | 69.5 | % | 48.9 | % | 64.7 | % | ||||||||||
FAD Payout Ratio(10) | 82.7 | % | 85.3 | % | 87.6 | % | 61.8 | % | 78.7 | % | ||||||||||
3/31/2007 | 12/31/2006 | 9/30/2006 | 6/30/2006 | 3/31/2006 | ||||||||||||||||
ASSETS: | ||||||||||||||||||||
Real Estate Held for Investment before Depreciation | $ | 2,165,355 | $ | 2,040,761 | $ | 2,005,713 | $ | 1,991,551 | $ | 1,964,418 | ||||||||||
Total Assets | 1,854,715 | 1,799,352 | 1,759,799 | 1,713,762 | 1,684,309 | |||||||||||||||
CAPITALIZATION: | ||||||||||||||||||||
Total Debt | $ | 930,230 | $ | 879,198 | $ | 837,005 | $ | 811,562 | $ | 929,578 | ||||||||||
Total Preferred Equity(11) | 201,500 | 201,500 | 201,500 | 201,500 | 201,500 | |||||||||||||||
Total Market Equity Value(11) | 2,577,291 | 2,707,958 | 2,615,609 | 2,508,333 | 2,525,219 | |||||||||||||||
Total Market Capitalization(11) | 3,709,021 | 3,788,656 | 3,654,114 | 3,521,395 | 3,656,297 | |||||||||||||||
Total Debt / Total Market Capitalization | 25.1 | % | 23.2 | % | 22.9 | % | 23.0 | % | 25.4 | % | ||||||||||
Total Debt and Preferred / Total Market Capitalization | 30.5 | % | 28.5 | % | 28.4 | % | 28.7 | % | 31.0 | % |
(1) | Represents the straight-line rent recognized during the period offset by cash received during the period that was applied to deferred rents receivable balances for terminated leases. |
(2) | For the three months ended June 30, 2006, lease terminations fees include approximately $9.8 million from an early lease termination with Qwest Communications, Inc. |
(3) | Please refer to pages 25 and 26 for Management Statements on Net Operating Income, EBITDA before minority interests, Funds From Operations and Funds Available for Distribution. |
(4) | EBITDA is reported before minority interests and net gain (loss) on dispositions. Please refer to page 28 for a reconciliation of GAAP Net Income Available for Common Stockholders to EBITDA before minority interests. |
(5) | Please refer to page 6 for a reconciliation of GAAP Net Income Available for Common Stockholders to Funds From Operations and Funds Available for Distribution. |
(6) | Reported amounts are attributable to common stockholders and unitholders. |
(7) | Calculated as EBITDA before minority interests divided by total interest expense, including discontinued operations. |
(8) | Calculated as EBITDA before minority interests divided by total interest expense, including discontinued operations, current year accrued preferred dividends and distributions on Cumulative Redeemable Preferred units. |
(9) | Calculated as current-quarter dividends accrued to common stockholders and common unitholders divided by Funds From Operations. |
(10) | Calculated as current-quarter dividends accrued to common stockholders and common unitholders divided by Funds Available for Distribution. |
(11) | See “Capital Structure” on page 22. |
2
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Common Stock Data (NYSE: KRC)
Three Months Ended | |||||||||||||||
3/31/2007 | 12/31/2006 | 9/30/2006 | 6/30/2006 | 3/31/2006 | |||||||||||
High Price | $ | 89.80 | $ | 83.42 | $ | 79.44 | $ | 76.00 | $ | 77.74 | |||||
Low Price | $ | 72.70 | $ | 71.53 | $ | 70.72 | $ | 65.33 | $ | 63.45 | |||||
Closing Price | $ | 73.75 | $ | 78.00 | $ | 75.34 | $ | 72.25 | $ | 77.26 | |||||
Dividends per share - annualized | $ | 2.22 | $ | 2.12 | $ | 2.12 | $ | 2.12 | $ | 2.12 | |||||
Closing common shares (in 000’s)(1) | 32,698 | 32,399 | 32,389 | 32,092 | 29,792 | ||||||||||
Closing partnership units (in 000’s)(1) | 2,248 | 2,319 | 2,329 | 2,626 | 2,892 | ||||||||||
34,946 | 34,718 | 34,718 | 34,718 | 32,684 | |||||||||||
(1) | As of the end of the period. |
3
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Consolidated Balance Sheets
(unaudited, $ in thousands)
3/31/2007 | 12/31/2006 | 9/30/2006 | 6/30/2006 | �� | 3/31/2006 | |||||||||||||||
ASSETS: | ||||||||||||||||||||
Land and improvements | $ | 293,059 | $ | 293,059 | $ | 315,113 | $ | 320,778 | $ | 321,235 | ||||||||||
Buildings and improvements | 1,494,184 | 1,484,051 | 1,472,438 | 1,481,215 | 1,490,006 | |||||||||||||||
Undeveloped land and construction in progress | 378,112 | 263,651 | 218,162 | 189,558 | 153,177 | |||||||||||||||
Total real estate held for investment | 2,165,355 | 2,040,761 | 2,005,713 | 1,991,551 | 1,964,418 | |||||||||||||||
Accumulated depreciation and amortization | (457,982 | ) | (443,807 | ) | (436,940 | ) | (425,708 | ) | (428,624 | ) | ||||||||||
Investment in real estate, net | 1,707,373 | 1,596,954 | 1,568,773 | 1,565,843 | 1,535,794 | |||||||||||||||
Properties held for sale, net(1) | — | 4,512 | — | — | — | |||||||||||||||
Total real estate assets, net | 1,707,373 | 1,601,466 | 1,568,773 | 1,565,843 | 1,535,794 | |||||||||||||||
Cash and cash equivalents | 5,167 | 11,948 | 7,750 | 8,583 | 11,395 | |||||||||||||||
Restricted cash | — | 494 | 1,302 | 614 | 649 | |||||||||||||||
Funds held at qualified intermediary for Section 1031 exchange | — | 43,794 | 43,794 | — | — | |||||||||||||||
Current receivables, net | 7,096 | 5,890 | 3,168 | 3,951 | 6,396 | |||||||||||||||
Deferred rent receivables, net | 62,201 | 61,929 | 60,535 | 58,579 | 57,692 | |||||||||||||||
Note receivable | 11,065 | 11,096 | 11,126 | 11,155 | 11,184 | |||||||||||||||
Deferred leasing costs and acquisition related intangibles, net | 48,598 | 49,019 | 48,790 | 49,108 | 48,853 | |||||||||||||||
Deferred financing costs, net | 5,545 | 5,100 | 5,754 | 6,396 | 4,828 | |||||||||||||||
Prepaid expenses and other assets | 7,670 | 8,616 | 8,807 | 9,533 | 7,518 | |||||||||||||||
TOTAL ASSETS | $ | 1,854,715 | $ | 1,799,352 | $ | 1,759,799 | $ | 1,713,762 | $ | 1,684,309 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Secured debt | $ | 455,230 | $ | 459,198 | $ | 463,005 | $ | 465,562 | $ | 468,078 | ||||||||||
Unsecured senior notes | 144,000 | 144,000 | 144,000 | 144,000 | 144,000 | |||||||||||||||
Unsecured line of credit | 331,000 | 276,000 | 230,000 | 202,000 | 317,500 | |||||||||||||||
Accounts payable, accrued expenses and other liabilities | 90,525 | 67,729 | 61,894 | 55,403 | 50,442 | |||||||||||||||
Accrued distributions | 20,605 | 19,610 | 19,610 | 19,610 | 18,533 | |||||||||||||||
Deferred revenue and other acquisition related liabilities | 29,923 | 25,353 | 25,162 | 24,938 | 22,598 | |||||||||||||||
Rents received in advance and tenant security deposits | 19,256 | 19,900 | 20,636 | 23,159 | 22,826 | |||||||||||||||
Total liabilities | 1,090,539 | 1,011,790 | 964,307 | 934,672 | 1,043,977 | |||||||||||||||
Minority Interests: | ||||||||||||||||||||
7.45% Series A Cumulative Redeemable Preferred unitholders | 73,638 | 73,638 | 73,638 | 73,638 | 73,638 | |||||||||||||||
Common unitholders of the Operating Partnership | 36,812 | 39,628 | 40,338 | 44,199 | 39,437 | |||||||||||||||
Total minority interests | 110,450 | 113,266 | 113,976 | 117,837 | 113,075 | |||||||||||||||
Stockholders’ Equity: | ||||||||||||||||||||
7.80% Series E Cumulative Redeemable Preferred stock | 38,425 | 38,425 | 38,425 | 38,425 | 38,425 | |||||||||||||||
7.50% Series F Cumulative Redeemable Preferred stock | 83,157 | 83,157 | 83,157 | 83,157 | 83,157 | |||||||||||||||
Common stock | 327 | 324 | 324 | 321 | 298 | |||||||||||||||
Additional paid-in capital | 652,580 | 671,484 | 670,715 | 664,860 | 531,852 | |||||||||||||||
Distributions in excess of earnings | (120,763 | ) | (119,094 | ) | (111,105 | ) | (125,510 | ) | (126,475 | ) | ||||||||||
Total stockholders’ equity | 653,726 | 674,296 | 681,516 | 661,253 | 527,257 | |||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,854,715 | $ | 1,799,352 | $ | 1,759,799 | $ | 1,713,762 | $ | 1,684,309 | ||||||||||
(1) | As of December 31, 2006, one industrial property and two office properties were classified as held for sale. These properties were sold in January 2007. Please refer to page 19 for further information. |
4
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Consolidated Statements of Operations
(unaudited, $ in thousands, except per share amounts)
Three Months Ended March 31, | |||||||||||
2007 | 2006 | % Change | |||||||||
REVENUES: | |||||||||||
Rental income | $ | 56,315 | $ | 55,600 | 1.3 | % | |||||
Tenant reimbursements | 6,558 | 5,486 | 19.5 | % | |||||||
Other property income | 1,106 | 937 | 18.0 | % | |||||||
Total revenues | 63,979 | 62,023 | 3.2 | % | |||||||
EXPENSES: | |||||||||||
Property expenses | 10,858 | 10,003 | 8.5 | % | |||||||
Real estate taxes | 4,739 | 4,732 | 0.1 | % | |||||||
Provision for bad debts | (172 | ) | 512 | (133.6 | %) | ||||||
Ground leases | 516 | 519 | (0.6 | %) | |||||||
General and administrative expenses | 9,048 | 4,934 | 83.4 | % | |||||||
Interest expense | 9,656 | 11,971 | (19.3 | %) | |||||||
Depreciation and amortization | 17,237 | 17,379 | (0.8 | %) | |||||||
Total expenses | 51,882 | 50,050 | 3.7 | % | |||||||
OTHER INCOME AND EXPENSE: | |||||||||||
Interest income | 619 | 252 | 145.6 | % | |||||||
Net settlement receipts on interest rate swaps | — | 194 | (100.0 | %) | |||||||
Loss on derivative instruments | — | (76 | ) | (100.0 | %) | ||||||
Total other income and expense | 619 | 370 | 67.3 | % | |||||||
INCOME FROM CONTINUING OPERATIONSBEFORE MINORITY INTERESTS | 12,716 | 12,343 | 3.0 | % | |||||||
MINORITY INTERESTS: | |||||||||||
Distributions on Cumulative Redeemable Preferred units | (1,397 | ) | (1,397 | ) | 0.0 | % | |||||
Minority interest in earnings of Operating Partnership attributable to continuing operations | (578 | ) | (804 | ) | (28.1 | %) | |||||
Total minority interests | (1,975 | ) | (2,201 | ) | (10.3 | %) | |||||
INCOME FROM CONTINUING OPERATIONS | 10,741 | 10,142 | 5.9 | % | |||||||
DISCONTINUED OPERATIONS: | |||||||||||
Revenues from discontinued operations | 98 | 1,456 | (93.3 | %) | |||||||
Expenses from discontinued operations | (20 | ) | (721 | ) | (97.2 | %) | |||||
Net gain on disposition of discontinued operations | 8,626 | 5,655 | 52.5 | % | |||||||
Minority interest attributable to discontinued operations | (565 | ) | (601 | ) | (6.0 | %) | |||||
Total income from discontinued operations | 8,139 | 5,789 | 40.6 | % | |||||||
NET INCOME | 18,880 | 15,931 | 18.5 | % | |||||||
PREFERRED DIVIDENDS | (2,402 | ) | (2,402 | ) | 0.0 | % | |||||
NET INCOME AVAILABLE FOR COMMONSTOCKHOLDERS | $ | 16,478 | $ | 13,529 | 21.8 | % | |||||
Weighted average shares outstanding - basic | 32,349 | 29,440 | 9.9 | % | |||||||
Weighted average shares outstanding - diluted | 32,485 | 29,608 | 9.7 | % | |||||||
NET INCOME PER COMMON SHARE: | |||||||||||
Net income per common share - basic | $ | 0.51 | $ | 0.46 | 10.9 | % | |||||
Net income per common share - diluted | $ | 0.51 | $ | 0.46 | 10.9 | % | |||||
5
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Funds From Operations and Funds Available for Distribution
(unaudited, $ in thousands, except per share amounts)
Three Months Ended March 31, | |||||||||||
2007 | 2006 | % Change | |||||||||
FUNDS FROM OPERATIONS:(1) | |||||||||||
Net income available for common stockholders | $ | 16,478 | $ | 13,529 | 21.8 | % | |||||
Adjustments: | |||||||||||
Minority interest in earnings of Operating Partnership | 1,143 | 1,405 | (18.6 | %) | |||||||
Depreciation and amortization of real estate assets | 17,026 | 17,508 | (2.8 | %) | |||||||
Net gain on dispositions of discontinued operations | (8,626 | ) | (5,655 | ) | 52.5 | % | |||||
Funds From Operations(2) | $ | 26,021 | $ | 26,787 | (2.9 | %) | |||||
Weighted average common shares/units outstanding - basic | 34,600 | 32,509 | 6.4 | % | |||||||
Weighted average common shares/units outstanding - diluted | 34,737 | 32,677 | 6.3 | % | |||||||
FFO per common share/unit - basic | $ | 0.75 | $ | 0.82 | (8.7 | %) | |||||
FFO per common share/unit - diluted | $ | 0.75 | $ | 0.82 | (8.6 | %) | |||||
FUNDS AVAILABLE FOR DISTRIBUTION:(1) | |||||||||||
Funds From Operations | $ | 26,021 | $ | 26,787 | (2.9 | %) | |||||
Adjustments: | |||||||||||
Amortization of deferred financing costs | 242 | 326 | (25.8 | %) | |||||||
Contractual cash rents received in advance of revenue recognition (3) | 16 | 326 | (95.1 | %) | |||||||
Non-cash amortization of share-based awards | 3,474 | 814 | 326.8 | % | |||||||
Loss on derivative instruments(4) | — | 76 | (100.0 | %) | |||||||
Revenue recorded for reimbursement of tenant improvements(5) | (641 | ) | (566 | ) | 13.3 | % | |||||
Amortization of above/below market rents(6) | (316 | ) | (308 | ) | 2.6 | % | |||||
Tenant improvements, leasing commissions and recurring capital expenditures | (4,264 | ) | (2,695 | ) | 58.2 | % | |||||
Net effect of straight-line rents(7) | (1,071 | ) | (2,750 | ) | (61.1 | %) | |||||
Funds Available for Distribution(2) | $ | 23,461 | $ | 22,010 | 6.6 | % | |||||
(1) | See page 26 for Management Statements on Funds From Operations and Funds Available for Distribution. |
(2) | Reported amounts are attributable to common shareholders and unitholders. |
(3) | Represents cash rents received for leases that have contractually commenced but for which tenant improvements are not substantially complete. |
(4) | Represents the non-cash loss on derivatives as a result of marking such instruments to market at the end of the period. |
(5) | Represents the revenue recognized during the period for tenant improvements reimbursed by the tenant. |
(6) | Represents the SFAS 141 adjustment related to the acquisition of buildings with above/below market rents. |
(7) | Represents the straight-line rent income recognized during the period offset by cash received during the period that was applied to deferred rents receivable balances for terminated leases. |
6
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Same Store Analysis(1)
(unaudited, $ in thousands)
Same Store Analysis (GAAP Basis)
Three Months Ended March 31, | |||||||||||
2007 | 2006 | % Change | |||||||||
Total Same Store Portfolio | |||||||||||
Number of properties | 126 | 126 | |||||||||
Square Feet | 11,627,994 | 11,627,994 | |||||||||
Percent of Stabilized Portfolio | 99.3 | % | 94.0 | % | |||||||
Average Occupancy | 94.1 | % | 94.8 | % | |||||||
Operating Revenues: | |||||||||||
Rental income | $ | 55,664 | $ | 54,653 | 1.8 | % | |||||
Tenant reimbursements | 6,439 | 5,042 | 27.7 | % | |||||||
Other property income | 1,105 | 934 | 18.3 | % | |||||||
Total operating revenues | $ | 63,208 | 60,629 | 4.3 | % | ||||||
Operating Expenses: | |||||||||||
Property expenses | 10,851 | 9,747 | 11.3 | % | |||||||
Real estate taxes | 4,688 | 4,599 | 1.9 | % | |||||||
Provision for bad debts | (172 | ) | 514 | (133.5 | %) | ||||||
Ground leases | 515 | 517 | (0.4 | %) | |||||||
Total operating expenses | 15,882 | 15,377 | 3.3 | % | |||||||
GAAP Net Operating Income | $ | 47,326 | $ | 45,252 | 4.6 | % | |||||
Same Store Analysis (Cash Basis) (2) | |||||||||||
Three Months Ended March 31, | |||||||||||
2007 | 2006 | % Change | |||||||||
Total operating revenues | 60,562 | 57,723 | 4.9 | % | |||||||
Total operating expenses | 15,882 | 15,377 | 3.3 | % | |||||||
Cash Net Operating Income | $ | 44,680 | $ | 42,346 | 5.5 | % | |||||
(1) | Same store defined as all stabilized properties owned at January 1, 2006 and still owned and in the stabilized portfolio at March 31, 2007. |
(2) | Please refer to page 27 for a reconciliation of Same Store Cash and GAAP Net Operating Income to Net Income Available to Common Stockholders. |
7
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Stabilized Portfolio Occupancy Overview
Portfolio Breakdown | Occupancy at:(1) | ||||||||||||||||||
# of Buildings | NOI (2) | Sq. Ft. | Total Square Feet | 3/31/2007 | 12/31/2006 | 9/30/2006 | |||||||||||||
STABILIZED PORTFOLIO: | |||||||||||||||||||
OCCUPANCY BY PRODUCT TYPE: | |||||||||||||||||||
Office: | |||||||||||||||||||
Los Angeles | 24 | 28.0 | % | 24.8 | % | 2,898,396 | 93.4 | % | 92.8 | % | 92.9 | % | |||||||
Orange County | 5 | 2.3 | % | 2.4 | % | 277,340 | 100.0 | % | 98.3 | % | 96.1 | % | |||||||
San Diego | 47 | 51.0 | % | 32.3 | % | 3,780,344 | 98.2 | % | 98.6 | % | 99.7 | % | |||||||
Other | 8 | 5.2 | % | 7.5 | % | 878,960 | 89.7 | % | 92.8 | % | 92.6 | % | |||||||
Subtotal | 84 | 86.5 | % | 67.0 | % | 7,835,040 | 95.5 | % | 95.8 | % | 96.2 | % | |||||||
Industrial: | |||||||||||||||||||
Los Angeles | 1 | 1.7 | % | 1.6 | % | 192,053 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||
Orange County | 42 | 11.8 | % | 31.4 | % | 3,677,916 | 90.5 | % | 95.6 | % | 95.6 | % | |||||||
Subtotal | 43 | 13.5 | % | 33.0 | % | 3,869,969 | 91.0 | % | 95.8 | % | 96.1 | % | |||||||
OCCUPANCY BY REGION: | |||||||||||||||||||
Los Angeles | 25 | 29.7 | % | 26.4 | % | 3,090,449 | 93.8 | % | 93.2 | % | 93.4 | % | |||||||
Orange County | 47 | 14.1 | % | 33.8 | % | 3,955,256 | 91.2 | % | 95.7 | % | 95.6 | % | |||||||
San Diego | 47 | 51.0 | % | 32.3 | % | 3,780,344 | 98.2 | % | 98.6 | % | 99.7 | % | |||||||
Other | 8 | 5.2 | % | 7.5 | % | 878,960 | 89.7 | % | 92.8 | % | 92.6 | % | |||||||
TOTAL STABILIZED PORTFOLIO | 127 | 100.0 | % | 100.0 | % | 11,705,009 | 94.0 | % | 95.8 | % | 96.2 | % | |||||||
AVERAGE OCCUPANCY - STABILIZED PORTFOLIO
Office | Industrial | Total | |||||||
Quarter-to-Date | 95.3 | % | 91.8 | % | 94.2 | % |
(1) | Occupancy percentages reported are based on the Company’s stabilized portfolio for the period presented. |
(2) | Percentage of year-to-date Net Operating Income excluding Other Property Income. |
8
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Stabilized Portfolio Occupancy Overview
City/ Submarket | # of Buildings | Square Feet | Occupancy | ||||||
Office: | |||||||||
Los Angeles, California | |||||||||
23925 Park Sorrento | Calabasas | 1 | 11,789 | 100.0 | % | ||||
23975 Park Sorrento | Calabasas | 1 | 100,592 | 93.1 | % | ||||
24025 Park Sorrento | Calabasas | 1 | 102,264 | 100.0 | % | ||||
26541 Agoura Road | Calabasas | 1 | 90,366 | 100.0 | % | ||||
Kilroy Airport Center, El Segundo | El Segundo | 2 | 595,131 | 100.0 | % | ||||
909 Sepulveda Blvd. | El Segundo | 1 | 241,607 | 64.8 | % | ||||
999 Sepulveda Blvd. | El Segundo | 1 | 127,901 | 98.0 | % | ||||
Kilroy Airport Center, Long Beach | Long Beach | 7 | 949,065 | 91.8 | % | ||||
12200 W. Olympic Blvd. | Los Angeles | 1 | 150,302 | 99.7 | % | ||||
12100 W. Olympic Blvd. | Los Angeles | 1 | 150,167 | 100.0 | % | ||||
12312 W. Olympic Blvd. | Los Angeles | 1 | 78,000 | 100.0 | % | ||||
1633 26th Street | Santa Monica | 1 | 44,915 | 100.0 | % | ||||
2100 Colorado Avenue | Santa Monica | 3 | 94,844 | 100.0 | % | ||||
3130 Wilshire Blvd. | Santa Monica | 1 | 88,338 | 93.0 | % | ||||
501 Santa Monica Blvd. | Santa Monica | 1 | 73,115 | 83.1 | % | ||||
Total Los Angeles Office | 24 | 2,898,396 | 93.4 | % | |||||
Orange County, California | |||||||||
4175 E. La Palma Avenue | Anaheim | 1 | 43,263 | 100.0 | % | ||||
8101 Kaiser Blvd. | Anaheim | 1 | 59,790 | 100.0 | % | ||||
Kilroy Center-Brea | Brea | 2 | 106,791 | 100.0 | % | ||||
111 Pacifica | Irvine Spectrum | 1 | 67,496 | 100.0 | % | ||||
Total Orange County Office | 5 | 277,340 | 100.0 | % |
9
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Stabilized Portfolio Occupancy Overview
City/ Submarket | # of Buildings | Square Feet | Occupancy | ||||||
Office: | |||||||||
San Diego, California | |||||||||
12340 El Camino Real | Del Mar | 1 | 87,405 | 100.0 | % | ||||
12348 High Bluff Drive | Del Mar | 1 | 38,710 | 100.0 | % | ||||
12390 El Camino Real | Del Mar | 1 | 72,332 | 100.0 | % | ||||
3579 Valley Center Drive | Del Mar | 1 | 52,375 | 100.0 | % | ||||
3611 Valley Center Drive | Del Mar | 1 | 130,178 | 100.0 | % | ||||
3661 Valley Center Drive | Del Mar | 1 | 129,752 | 100.0 | % | ||||
3721 Valley Center Drive | Del Mar | 1 | 114,780 | 100.0 | % | ||||
3811 Valley Center Drive | Del Mar | 1 | 112,067 | 100.0 | % | ||||
12225 / 12235 El Camino Real | Del Mar | 2 | 115,513 | 100.0 | % | ||||
12400 High Bluff Drive | Del Mar | 1 | 208,464 | 100.0 | % | ||||
6215 / 6220 Greenwich Drive | Governor Park | 2 | 212,214 | 100.0 | % | ||||
15051 Ave of Science | I-15 Corridor | 1 | 70,617 | 100.0 | % | ||||
15073 Ave of Science | I-15 Corridor | 1 | 46,759 | 100.0 | % | ||||
15378 Ave of Science | I-15 Corridor | 1 | 68,910 | 100.0 | % | ||||
15434 / 15445 Innovation Drive | I-15 Corridor | 2 | 103,000 | 76.4 | % | ||||
15231 Ave of Science | I-15 Corridor | 1 | 65,867 | 100.0 | % | ||||
15253 Ave of Science | I-15 Corridor | 1 | 37,405 | 100.0 | % | ||||
15215 Ave of Science | I-15 Corridor | 1 | 77,015 | 100.0 | % | ||||
13500/13520 Evening Creek Drive North | I-15 Corridor | 2 | 281,830 | 84.6 | % | ||||
4939 / 4955 Directors Place | Sorrento Mesa | 2 | 136,908 | 100.0 | % | ||||
5005 / 5010 Wateridge Vista Drive | Sorrento Mesa | 2 | 172,778 | 100.0 | % | ||||
10421 Pacific Center Court | Sorrento Mesa | 1 | 79,871 | 100.0 | % | ||||
10243 Genetic Center | Sorrento Mesa | 1 | 102,875 | 100.0 | % | ||||
10390 Pacific Center Court | Sorrento Mesa | 1 | 68,400 | 100.0 | % | ||||
6055 Lusk Avenue | Sorrento Mesa | 1 | 93,000 | 100.0 | % | ||||
6260 Sequence Drive | Sorrento Mesa | 1 | 130,536 | 100.0 | % | ||||
6290 / 6310 Sequence Drive | Sorrento Mesa | 2 | 152,415 | 100.0 | % | ||||
6340 / 6350 Sequence Drive | Sorrento Mesa | 2 | 199,000 | 100.0 | % | ||||
Pacific Corporate Center | Sorrento Mesa | 6 | 332,542 | 100.0 | % | ||||
5717 Pacific Center | Sorrento Mesa | 1 | 67,995 | 100.0 | % | ||||
4690 Executive Drive | University Towne Center | 1 | 47,636 | 100.0 | % | ||||
9455 Towne Center Drive | University Towne Center | 1 | 45,195 | 100.0 | % | ||||
9785 / 9791 Towne Center Drive | University Towne Center | 2 | 126,000 | 100.0 | % | ||||
Total San Diego Office | 47 | 3,780,344 | 98.2 | % | |||||
Other | |||||||||
Kilroy Airport Center, Sea-Tac | Seattle, WA | 3 | 532,430 | 84.6 | % | ||||
5151/5155 Camino Ruiz | Carmarillo, CA | 4 | 265,372 | 100.0 | % | ||||
2829 Townsgate Road | Thousand Oaks, CA | 1 | 81,158 | 89.8 | % | ||||
Total Other Office | 8 | 878,960 | 89.7 | % | |||||
Total Office | 84 | 7,835,040 | 95.5 | % |
10
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Stabilized Portfolio Occupancy Overview
City/ Submarket | # of Buildings | Square Feet | Occupancy | ||||||
Industrial: | |||||||||
Los Angeles, California | |||||||||
2031 E. Mariposa Avenue | El Segundo | 1 | 192,053 | 100.0 | % | ||||
Total Los Angeles Industrial | 1 | 192,053 | 100.0 | % | |||||
Orange County, California | |||||||||
1000 E. Ball Road | Anaheim | 1 | 100,000 | 100.0 | % | ||||
1230 S. Lewis Road | Anaheim | 1 | 57,730 | 100.0 | % | ||||
1250 N. Tustin Avenue | Anaheim | 1 | 84,185 | 100.0 | % | ||||
3125 E. Coronado Street | Anaheim | 1 | 144,000 | 0.0 | % | ||||
3130 - 3150 Miraloma | Anaheim | 1 | 144,000 | 100.0 | % | ||||
3250 E. Carpenter | Anaheim | 1 | 41,225 | 100.0 | % | ||||
3340 E. La Palma Avenue | Anaheim | 1 | 153,320 | 100.0 | % | ||||
5115 E. La Palma Avenue | Anaheim | 1 | 286,139 | 100.0 | % | ||||
5325 E. Hunter Avenue | Anaheim | 1 | 110,487 | 100.0 | % | ||||
Anaheim Tech Center | Anaheim | 5 | 597,147 | 100.0 | % | ||||
La Palma Business Center | Anaheim | 2 | 145,481 | 100.0 | % | ||||
Brea Industrial Complex | Brea | 7 | 277,456 | 100.0 | % | ||||
Brea Industrial-Lambert Road | Brea | 2 | 178,811 | 100.0 | % | ||||
1675 MacArthur | Costa Mesa | 1 | 50,842 | 100.0 | % | ||||
25202 Towne Center Drive | Foothill Ranch | 1 | 303,533 | 100.0 | % | ||||
12400 Industry Street | Garden Grove | 1 | 64,200 | 100.0 | % | ||||
12681 / 12691 Pala Drive | Garden Grove | 1 | 84,700 | 100.0 | % | ||||
7421 Orangewood Avenue | Garden Grove | 1 | 82,602 | 100.0 | % | ||||
Garden Grove Industrial Complex | Garden Grove | 6 | 275,971 | 100.0 | % | ||||
17150 Von Karman | Irvine | 1 | 157,458 | 0.0 | % | ||||
2055 S.E. Main Street | Irvine | 1 | 47,583 | 0.0 | % | ||||
1951 E. Carnegie Avenue | Santa Ana | 1 | 100,000 | 100.0 | % | ||||
2525 Pullman | Santa Ana | 1 | 103,380 | 100.0 | % | ||||
14831 Franklin Avenue | Tustin | 1 | 36,256 | 100.0 | % | ||||
2911 Dow Avenue | Tustin | 1 | 51,410 | 100.0 | % | ||||
Total Orange County Industrial | 42 | 3,677,916 | 90.5 | % | |||||
Total Industrial | 43 | 3,869,969 | 91.0 | % |
11
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Leasing Activity
Quarter-to-Date
1st & 2nd Generation | 2nd Generation | Weighted Average | |||||||||||||||||||||||
# of Leases(1) | Square Feet(1) | TI/LC Per Sq.Ft. (2) | Maintenance Capex Per Sq.Ft. (3) | Changes in Rents(4) | Changes in Cash Rents (5) | Retention Rates(6) | |||||||||||||||||||
New | Renewal | New | Renewal | ||||||||||||||||||||||
Office | 7 | 8 | 94,034 | 156,419 | $ | 24.31 | $ | 0.07 | 37.5 | % | 15.5 | % | 46.8 | % | 141 | ||||||||||
Industrial | 1 | 4 | 6,000 | 54,710 | 0.85 | 0.07 | 27.1 | % | 12.5 | % | 22.2 | % | 45 | ||||||||||||
Total | 8 | 12 | 100,034 | 211,129 | $ | 18.15 | $ | 0.07 | 36.3 | % | 15.2 | % | 36.4 | % | 122 | ||||||||||
(1) | Represents leasing activity for leases commencing during the period shown, net of month-to-month leases. Excludes leasing on new construction. |
(2) | Excludes tenant improvements constructed by the Company and reimbursed by the tenant upon completion of the improvements. |
(3) | Calculated over entire stabilized portfolio. |
(4) | Calculated as the change between GAAP rents for new/renewed leases and the expired GAAP rents for the same space. Excludes leases for which the space was vacant longer than one year. |
(5) | Calculated as the change between stated rents for new/renewed leases and the expired stated rents for the same space. Excludes leases for which the space was vacant longer than one year. |
(6) | Calculated as the percentage of space either renewed or expanded into by existing tenants at lease expiration. |
12
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Stabilized Portfolio Capital Expenditures
($ in thousands)
Non-Recurring Capital Expenditures: | |||
Q1 2007 | |||
Capital Improvements | $ | — | |
Tenant Improvements & Leasing Commissions(1) | 195 | ||
Total | $ | 195 | |
Recurring Capital Expenditures: | |||
Q1 2007 | |||
Capital Improvements | |||
Office | $ | 524 | |
Industrial | 279 | ||
803 | |||
Tenant Improvements & Leasing Commissions(1) | |||
Office | 3,431 | ||
Industrial | 30 | ||
3,461 | |||
Total | |||
Office | 3,955 | ||
Industrial | 309 | ||
$ | 4,264 | ||
(1) | Represents costs incurred for leasing activity during the period shown. Excludes tenant improvements constructed by the Company and reimbursed by the tenant upon completion of the improvements. |
13
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Lease Expiration Summary Schedule
($ in thousands)
Year of Expiration | # of Expiring Leases | Total Square Feet(1) | % of Total Leased Sq. Ft. | Annual Base Rent (2) | Annual Rent per Sq. Ft.(2) | ||||||||
OFFICE: | |||||||||||||
2007 | 42 | 571,406 | 7.7 | % | $ | 10,130 | $ | 17.73 | |||||
2008 | 62 | 536,122 | 7.3 | % | 11,757 | 21.93 | |||||||
2009 | 81 | 1,294,186 | 17.5 | % | 29,928 | 23.12 | |||||||
2010 | 68 | 1,196,767 | 16.2 | % | 30,548 | 25.53 | |||||||
2011 | 58 | 773,450 | 10.5 | % | 13,726 | 17.75 | |||||||
2012 | 23 | 405,151 | 5.5 | % | 11,959 | 29.52 | |||||||
2013 | 12 | 394,729 | 5.3 | % | 8,900 | 22.55 | |||||||
2014 | 17 | 662,922 | 9.0 | % | 17,381 | 26.22 | |||||||
2015 | 11 | 355,140 | 4.8 | % | 10,399 | 29.28 | |||||||
2016 | 7 | 410,442 | 5.6 | % | 11,119 | 27.09 | |||||||
2017 and beyond | 15 | 790,397 | 10.6 | % | 33,196 | 42.00 | |||||||
Subtotal | 396 | 7,390,712 | 100.0 | % | $ | 189,043 | $ | 25.58 | |||||
INDUSTRIAL: | |||||||||||||
2007 | 7 | 123,436 | 3.6 | % | $ | 1,027 | $ | 8.32 | |||||
2008 | 12 | 922,713 | 26.7 | % | 6,549 | 7.10 | |||||||
2009 | 14 | 766,945 | 22.2 | % | 4,836 | 6.31 | |||||||
2010 | 11 | 345,073 | 10.0 | % | 2,685 | 7.78 | |||||||
2011 | 10 | 408,402 | 11.8 | % | 3,156 | 7.73 | |||||||
2012 | 6 | 362,369 | 10.5 | % | 2,213 | 6.11 | |||||||
2013 | — | — | — | — | — | ||||||||
2014 | 1 | 49,178 | 1.4 | % | 420 | 8.54 | |||||||
2015 | 2 | 157,730 | 4.6 | % | 1,145 | 7.26 | |||||||
2016 | 2 | 233,278 | 6.8 | % | 3,274 | 14.03 | |||||||
2017 and beyond | 1 | 82,602 | 2.4 | % | 643 | 7.78 | |||||||
Subtotal | 66 | 3,451,726 | 100.0 | % | $ | 25,948 | $ | 7.52 | |||||
TOTAL PORTFOLIO: | |||||||||||||
2007 | 49 | 694,842 | 6.4 | % | $ | 11,157 | $ | 16.06 | |||||
2008 | 74 | 1,458,835 | 13.5 | % | 18,306 | 12.55 | |||||||
2009 | 95 | 2,061,131 | 19.0 | % | 34,764 | 16.87 | |||||||
2010 | 79 | 1,541,840 | 14.2 | % | 33,233 | 21.55 | |||||||
2011 | 68 | 1,181,852 | 10.9 | % | 16,882 | 14.28 | |||||||
2012 | 29 | 767,520 | 7.1 | % | 14,172 | 18.46 | |||||||
2013 | 12 | 394,729 | 3.6 | % | 8,900 | 22.55 | |||||||
2014 | 18 | 712,100 | 6.6 | % | 17,801 | 25.00 | |||||||
2015 | 13 | 512,870 | 4.7 | % | 11,544 | 22.51 | |||||||
2016 | 9 | 643,720 | 5.9 | % | 14,393 | 22.36 | |||||||
2017 and beyond | 16 | 872,999 | 8.1 | % | 33,839 | 38.76 | |||||||
Total | 462 | 10,842,438 | 100.0 | % | $ | 214,991 | $ | 19.83 | |||||
(1) | Excludes space leased under month-to-month leases and vacant space at March 31, 2007. |
(2) | Reflects annualized contractual base rent calculated on a straight-line basis. |
14
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Lease Expiration Schedule Detail by Region
($ in thousands)
Los Angeles County | Orange County | |||||||||||||||||||||||||
Year of Expiration | # of Expiring Leases | Total Square Feet(1) | % of Total Regional Sq. Ft. | Annual Base Rent (2) | Annual Rent per Sq. Ft.(2) | # of Expiring Leases | Total Square Feet(1) | % of Total Regional Sq. Ft. | Annual Base Rent (2) | Annual Rent per Sq. Ft.(2) | ||||||||||||||||
OFFICE: | ||||||||||||||||||||||||||
2007 | 20 | 55,787 | 2.1 | % | $ | 1,534 | $ | 27.50 | 6 | 14,088 | 5.2 | % | $ | 309 | $ | 21.93 | ||||||||||
2008 | 31 | 164,717 | 6.3 | % | 4,302 | 26.12 | 12 | 80,663 | 29.5 | % | 1,252 | 15.52 | ||||||||||||||
2009 | 38 | 586,691 | 22.3 | % | 14,448 | 24.63 | 15 | 121,777 | 44.6 | % | 3,023 | 24.82 | ||||||||||||||
2010 | 44 | 748,468 | 28.5 | % | 18,636 | 24.90 | 4 | 10,712 | 3.9 | % | 251 | 23.43 | ||||||||||||||
2011 | 35 | 233,287 | 8.9 | % | 6,570 | 28.16 | 4 | 14,767 | 5.4 | % | 351 | 23.77 | ||||||||||||||
2012 | 11 | 119,970 | 4.6 | % | 3,115 | 25.96 | 4 | 31,092 | 11.4 | % | 731 | 23.51 | ||||||||||||||
2013 | 7 | 131,119 | 5.0 | % | 3,033 | 23.13 | — | — | — | — | — | |||||||||||||||
2014 | 10 | 367,107 | 14.0 | % | 10,801 | 29.42 | — | — | — | — | — | |||||||||||||||
2015 | 4 | 132,560 | 5.0 | % | 3,982 | 30.04 | — | — | — | — | — | |||||||||||||||
2016 | 2 | 37,280 | 1.4 | % | 1,428 | 38.30 | — | — | — | — | — | |||||||||||||||
2017 and beyond | 2 | 52,938 | 1.9 | % | 1,972 | 37.25 | — | — | — | — | — | |||||||||||||||
Subtotal | 204 | 2,629,924 | 100.0 | % | $ | 69,821 | $ | 26.55 | 45 | 273,099 | 100.0 | % | $ | 5,917 | $ | 21.67 | ||||||||||
INDUSTRIAL: | ||||||||||||||||||||||||||
2007 | — | — | — | — | — | 7 | 123,436 | 3.8 | % | $ | 1,027 | $ | 8.32 | |||||||||||||
2008 | — | — | — | — | — | 12 | 922,713 | 28.3 | % | 6,549 | 7.10 | |||||||||||||||
2009 | — | — | — | — | — | 14 | 766,945 | 23.5 | % | 4,836 | 6.31 | |||||||||||||||
2010 | — | — | — | — | — | 11 | 345,073 | 10.6 | % | 2,685 | 7.78 | |||||||||||||||
2011 | — | — | — | — | — | 10 | 408,402 | 12.5 | % | 3,156 | 7.73 | |||||||||||||||
2012 | — | — | — | — | — | 6 | 362,369 | 11.1 | % | 2,213 | 6.11 | |||||||||||||||
2013 | — | — | — | — | — | — | — | — | — | |||||||||||||||||
2014 | — | — | — | — | — | 1 | 49,178 | 1.5 | % | 420 | 8.54 | |||||||||||||||
2015 | — | — | — | — | — | 2 | 157,730 | 4.8 | % | 1,145 | 7.26 | |||||||||||||||
2016 | 1 | 192,053 | 100.0 | % | 2,960 | 15.41 | 1 | 41,225 | 1.3 | % | 314 | 7.62 | ||||||||||||||
2017 and beyond | — | — | — | — | — | 1 | 82,602 | 2.6 | % | 643 | 7.78 | |||||||||||||||
Subtotal | 1 | 192,053 | 100.0 | % | $ | 2,960 | $ | 15.41 | 65 | 3,259,673 | 100.0 | % | 22,988 | $ | 7.05 | |||||||||||
TOTAL PORTFOLIO: | ||||||||||||||||||||||||||
2007 | 20 | 55,787 | 2.0 | % | $ | 1,534 | $ | 27.50 | 13 | 137,524 | 3.9 | % | $ | 1,336 | $ | 9.71 | ||||||||||
2008 | 31 | 164,717 | 5.8 | % | 4,302 | 26.12 | 24 | 1,003,376 | 28.4 | % | 7,801 | 7.77 | ||||||||||||||
2009 | 38 | 586,691 | 20.8 | % | 14,448 | 24.63 | 29 | 888,722 | 25.2 | % | 7,859 | 8.84 | ||||||||||||||
2010 | 44 | 748,468 | 26.5 | % | 18,636 | 24.90 | 15 | 355,785 | 10.1 | % | 2,936 | 8.25 | ||||||||||||||
2011 | 35 | 233,287 | 8.3 | % | 6,570 | 28.16 | 14 | 423,169 | 12.0 | % | 3,507 | 8.29 | ||||||||||||||
2012 | 11 | 119,970 | 4.3 | % | 3,115 | 25.96 | 10 | 393,461 | 11.1 | % | 2,944 | 7.48 | ||||||||||||||
2013 | 7 | 131,119 | 4.6 | % | 3,033 | 23.13 | — | — | — | — | — | |||||||||||||||
2014 | 10 | 367,107 | 13.0 | % | 10,801 | 29.42 | 1 | 49,178 | 1.4 | % | 420 | 8.54 | ||||||||||||||
2015 | 4 | 132,560 | 4.7 | % | 3,982 | 30.04 | 2 | 157,730 | 4.5 | % | 1,145 | 7.26 | ||||||||||||||
2016 | 3 | 229,333 | 8.1 | % | 4,388 | 19.13 | 1 | 41,225 | 1.2 | % | 314 | 7.62 | ||||||||||||||
2017 and beyond | 2 | 52,938 | 1.9 | % | 1,972 | 37.25 | 1 | 82,602 | 2.2 | % | 643 | 7.78 | ||||||||||||||
Total | 205 | 2,821,977 | 100.0 | % | $ | 72,781 | $ | 25.79 | 110 | 3,532,772 | 100.0 | % | $ | 28,905 | $ | 8.18 | ||||||||||
(1) | Excludes space leased under month-to-month leases and vacant space at March 31, 2007. |
(2) | Reflects annualized contractual base rent calculated on a straight-line basis. |
15
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Lease Expiration Schedule Detail by Region
($ in thousands)
San Diego County | Other | |||||||||||||||||||||||||
Year of Expiration | # of Expiring Leases | Total Square Feet(1) | % of Total Regional Sq. Ft. | Annual Base Rent (2) | Annual Rent per Sq. Ft.(2) | # of Expiring Leases | Total Square Feet(1) | % of Total Regional Sq. Ft. | Annual Base Rent (2) | Annual Rent per Sq. Ft.(2) | ||||||||||||||||
OFFICE: | ||||||||||||||||||||||||||
2007 | 13 | 466,489 | 12.6 | % | $ | 7,635 | $ | 16.37 | 3 | 35,042 | 4.5 | % | $ | 652 | $ | 18.61 | ||||||||||
2008 | 10 | 256,123 | 6.9 | % | 5,700 | 22.25 | 9 | 34,619 | 4.4 | % | 503 | 14.53 | ||||||||||||||
2009 | 15 | 517,085 | 14.0 | % | 10,949 | 21.17 | 13 | 68,633 | 8.8 | % | 1,508 | 21.97 | ||||||||||||||
2010 | 11 | 354,801 | 9.6 | % | 9,731 | 27.43 | 9 | 82,786 | 10.6 | % | 1,930 | 23.31 | ||||||||||||||
2011 | 7 | 88,963 | 2.4 | % | 1,699 | 19.10 | 12 | 436,433 | 55.7 | % | 5,106 | 11.70 | ||||||||||||||
2012 | 7 | 244,804 | 6.6 | % | 7,930 | 32.39 | 1 | 9,285 | 1.2 | % | 183 | 19.71 | ||||||||||||||
2013 | 3 | 245,316 | 6.6 | % | 5,484 | 22.35 | 2 | 18,294 | 2.3 | % | 383 | 20.94 | ||||||||||||||
2014 | 4 | 247,481 | 6.7 | % | 5,336 | 21.56 | 3 | 48,334 | 6.2 | % | 1,244 | 25.74 | ||||||||||||||
2015 | 3 | 172,572 | 4.7 | % | 5,471 | 31.70 | 4 | 50,008 | 6.3 | % | 946 | 18.92 | ||||||||||||||
2016 | 5 | 373,162 | 10.1 | % | 9,691 | 25.97 | — | — | — | — | — | |||||||||||||||
2017 and beyond | 13 | 737,459 | 19.8 | % | 31,224 | 42.34 | — | — | — | — | — | |||||||||||||||
Subtotal | 91 | 3,704,255 | 100.0 | % | $ | 100,850 | $ | 27.23 | 56 | 783,434 | 100.0 | % | $ | 12,455 | $ | 15.90 | ||||||||||
INDUSTRIAL: | ||||||||||||||||||||||||||
2007 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
2008 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
2009 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
2010 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
2011 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
2012 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
2013 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
2014 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
2015 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
2016 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
2017 and beyond | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
Subtotal | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
TOTAL PORTFOLIO: | ||||||||||||||||||||||||||
2007 | 13 | 466,489 | 12.6 | % | $ | 7,635 | $ | 16.37 | 3 | 35,042 | 4.5 | % | $ | 652 | $ | 18.61 | ||||||||||
2008 | 10 | 256,123 | 6.9 | % | 5,700 | 22.25 | 9 | 34,619 | 4.4 | % | 503 | 14.53 | ||||||||||||||
2009 | 15 | 517,085 | 14.0 | % | 10,949 | 21.17 | 13 | 68,633 | 8.8 | % | 1,508 | 21.97 | ||||||||||||||
2010 | 11 | 354,801 | 9.6 | % | 9,731 | 27.43 | 9 | 82,786 | 10.6 | % | 1,930 | 23.31 | ||||||||||||||
2011 | 7 | 88,963 | 2.4 | % | 1,699 | 19.10 | 12 | 436,433 | 55.7 | % | 5,106 | 11.70 | ||||||||||||||
2012 | 7 | 244,804 | 6.6 | % | 7,930 | 32.39 | 1 | 9,285 | 1.2 | % | 183 | 19.71 | ||||||||||||||
2013 | 3 | 245,316 | 6.6 | % | 5,484 | 22.35 | 2 | 18,294 | 2.3 | % | 383 | 20.94 | ||||||||||||||
2014 | 4 | 247,481 | 6.7 | % | 5,336 | 21.56 | 3 | 48,334 | 6.2 | % | 1,244 | 25.74 | ||||||||||||||
2015 | 3 | 172,572 | 4.7 | % | 5,471 | 31.70 | 4 | 50,008 | 6.3 | % | 946 | 18.92 | ||||||||||||||
2016 | 5 | 373,162 | 10.1 | % | 9,691 | 25.97 | — | — | — | — | — | |||||||||||||||
2017 and beyond | 13 | 737,459 | 19.8 | % | 31,224 | 42.34 | — | — | — | — | — | |||||||||||||||
Total | 91 | 3,704,255 | 100.0 | % | $ | 100,850 | $ | 27.23 | 56 | 783,434 | 100.0 | % | $ | 12,455 | $ | 15.90 | ||||||||||
(1) | Excludes space leased under month-to-month leases and vacant space at March 31, 2007. |
(2) | Reflects annualized contractual base rent calculated on a straight-line basis. |
16
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Quarterly Lease Expirations for 2007
($ in thousands)
# of Expiring Leases(1) | Total Square Feet (1), (2) | % of Total Leased Sq. Ft. | Annual Base Rent (3) | Annual Rent per Sq. Ft. (3) | |||||||||
OFFICE: | |||||||||||||
Q2 2007 | 16 | 176,093 | 2.4 | % | $ | 3,012 | $ | 17.10 | |||||
Q3 2007 | 14 | 330,895 | 4.5 | % | 5,509 | 16.65 | |||||||
Q4 2007 | 12 | 64,418 | 0.8 | % | 1,609 | 24.98 | |||||||
Subtotal 2007 | 42 | 571,406 | 7.7 | % | $ | 10,130 | $ | 17.73 | |||||
INDUSTRIAL: | |||||||||||||
Q2 2007 | 3 | 33,000 | 1.0 | % | $ | 306 | $ | 9.27 | |||||
Q3 2007 | — | — | — | — | — | ||||||||
Q4 2007 | 4 | 90,436 | 2.6 | % | 721 | 7.97 | |||||||
Subtotal 2007 | 7 | 123,436 | 3.6 | % | $ | 1,027 | $ | 8.32 | |||||
TOTAL PORTFOLIO: | |||||||||||||
Q2 2007 | 19 | 209,093 | 1.9 | % | $ | 3,318 | $ | 15.87 | |||||
Q3 2007 | 14 | 330,895 | 3.1 | % | 5,509 | 16.65 | |||||||
Q4 2007 | 16 | 154,854 | 1.4 | % | 2,330 | 15.05 | |||||||
Total 2007 | 49 | 694,842 | 6.4 | % | $ | 11,157 | $ | 16.06 | |||||
(1) | Represents leases expiring in 2007 for which renewals have not been executed. |
(2) | Excludes space leased under month-to-month leases and vacant space at March 31, 2007. |
(3) | Reflects annualized contractual base rent calculated on a straight-line basis. |
17
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Top Ten Office and Top Ten Industrial Tenants
($ in thousands)
Tenant Name | Annual Base Rental Revenues (1) | Rentable Square Feet | Percentage of Total Annual Base | Percentage of Total Rentable Square Feet | |||||||
Office Properties: | |||||||||||
The Boeing Company | $ | 8,825 | 675,979 | 4.0 | % | 5.8 | % | ||||
AMN Healthcare | 8,341 | 175,672 | 3.8 | % | 1.5 | % | |||||
DIRECTV Group, Inc.(2) | 6,350 | 207,166 | 2.9 | % | 1.8 | % | |||||
Intuit Inc.(3) | 6,106 | 302,452 | 2.8 | % | 2.6 | % | |||||
Fish & Richardson | 6,071 | 139,538 | 2.8 | % | 1.2 | % | |||||
Favrille, Inc. | 5,588 | 128,580 | 2.5 | % | 1.1 | % | |||||
Scripps Health(4) | 5,199 | 112,067 | 2.4 | % | 1.0 | % | |||||
Diversa Corporation | 5,158 | 136,908 | 2.3 | % | 1.2 | % | |||||
Accredited Home Lenders | 5,061 | 180,287 | 2.3 | % | 1.5 | % | |||||
Hewlett-Packard Company | 4,348 | 117,948 | 2.0 | % | 1.0 | % | |||||
Total Office Properties | $ | 61,047 | 2,176,597 | 27.8 | % | 18.6 | % | ||||
Industrial Properties: | |||||||||||
Mattel, Inc. | $ | 2,960 | 192,053 | 1.3 | % | 1.6 | % | ||||
Celestica California, Inc. | 2,501 | 303,533 | 1.1 | % | 2.6 | % | |||||
NBTY Manufacturing, LLC | 1,484 | 286,139 | 0.7 | % | 2.4 | % | |||||
Extron Electronics | 1,145 | 157,730 | 0.5 | % | 1.3 | % | |||||
Targus, Inc. | 1,053 | 200,646 | 0.5 | % | 1.7 | % | |||||
Progressive Marketing | 838 | 144,000 | 0.4 | % | 1.2 | % | |||||
Ricoh Electronics, Inc. | 810 | 100,000 | 0.4 | % | 0.9 | % | |||||
Arrow Industries | 798 | 153,320 | 0.4 | % | 1.3 | % | |||||
Printrak International Inc. | 753 | 84,185 | 0.3 | % | 0.7 | % | |||||
Southland Industries | 643 | 82,602 | 0.3 | % | 0.7 | % | |||||
Total Industrial Properties | $ | 12,985 | 1,704,208 | 5.9 | % | 14.6 | % | ||||
(1) | Reflects annualized contractual base rent calculated on a straight-line basis as of March 31, 2007. |
(2) | In addition, the Company is redeveloping 107,041 rentable square feet at 2240 E. Imperial Highway of which 77% has been pre-leased to DIRECTV Group, Inc. The lease is expected to commence during Q3 2007. |
(3) | In addition, the Company is developing 465,600 rentable square feet in San Diego County, which has been pre-leased to Intuit Inc. The 10 year lease agreement is expected to commence during Q3 2007, at which time Intuit Inc. is projected to become our largest tenant based on its percentage of total annual base rental revenues. |
(4) | In addition, Scripps Health has preleased an additional office building encompassing approximately 146,200 rentable square feet that the Company is constructing at 15004 Innovation Drive. The lease is expected to commence during Q3 2008. |
18
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
2007 Acquisitions and Dispositions
($ in millions)
ACQUISITIONS: | |||||||||||
Property | Location | Type | Month of Acquisition | Gross Site Acreage | Purchase Price (2) | ||||||
1st QUARTER: | |||||||||||
Sabre Springs Corporate Center | I-15 Corridor | Two Existing Office Buildings to be Redeveloped (1) | January | 5.6 | $ | 24.7 | |||||
Santa Fe Summit - Phase III | 56 Corridor | Land for Office Development | January | 10.5 | 28.0 | ||||||
Carlsbad Oaks | Carlsbad | Land for Office Development | February | 32.0 | 15.8 | ||||||
TOTAL YEAR-TO-DATE ACQUISITIONS | 48.1 | $ | 68.5 | ||||||||
DISPOSITIONS: | |||||||||||
Property | Location | Type | Month of Disposition | Square Feet | Sales Price (3) | ||||||
1st QUARTER: | |||||||||||
181 & 185 S. Douglas(4) | El Segundo, CA | Office | January | 61,545 | |||||||
2270 El Segundo (4) | El Segundo, CA | Industrial | January | 6,362 | |||||||
TOTAL YEAR-TO-DATE DISPOSITIONS | 67,907 | $ | 14.8 | ||||||||
(1) | Two existing buildings total approximately 104,500 rentable square feet on 5.6 acres of land. The Company began redevelopment of the existing buildings during the first quarter of 2007. See “Redevelopment Projects” on page 20. |
(2) | Excludes acquisition related costs. |
(3) | The Company sold these properties in a portfolio transaction in January 2007. The sales price shown represents the sales price for the entire transaction. |
(4) | These properties were classified as held for sale on the consolidated balance sheet as of December 31, 2006. |
19
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
In-Process and Committed Development and Redevelopment Projects
($ in millions)
DEVELOPMENT PROJECTS: | Location | Type | Estimated Construction Period | Est. Date(1) | Rentable Feet | Total Investment | Total Costs 3/31/2007(2) | % Leased | |||||||||||||
Project | Start Date | Compl. Date | |||||||||||||||||||
PROJECTS UNDER CONSTRUCTION: | |||||||||||||||||||||
Santa Fe Summit - Phase I(3) | 56 Corridor | Office | 4Q 2005 - 1Q 2006 | 3Q 2007 | 3Q 2007 | 465,600 | $ | 145.2 | $ | 125.0 | 100 | % | |||||||||
Pacific Corporate Center - Lots 3, 4 & 6 | Sorrento Mesa | Office | 3Q 2006 | 3Q 2007 | 3Q 2007 | 318,000 | 76.9 | 46.9 | 100 | % | |||||||||||
Kilroy Sabre Springs - Phase III | I-15 Corridor | Office | 3Q 2006 | 4Q 2007 | 4Q 2008 | 142,726 | 64.0 | 18.1 | 0 | % | |||||||||||
ICC - 15004 Innovation Drive | I-15 Corridor | Office | 3Q 2006 | 3Q 2008 | 3Q 2008 | 146,156 | 51.1 | 12.3 | 100 | % | |||||||||||
Sorrento Gateway-Lot 3 | Sorrento Mesa | Office | 4Q 2006 | 4Q 2007 | 4Q 2008 | 55,500 | 21.6 | 9.7 | 0 | % | |||||||||||
TOTAL PROJECTS UNDER CONSTRUCTION | 1,127,982 | $ | 358.8 | $ | 212.0 | 82 | % | ||||||||||||||
REDEVELOPMENT PROJECTS: | Location | Pre and Post Redevelopment Type | Estimated Construction Period | Est. Date(1) | Rentable Feet | Existing Investment(4) | Estimated Redevelopment Costs | Total Investment | Total Costs as of 3/31/2007(2) | % Leased | |||||||||||||||||
Project | Start Date | Compl. Date | |||||||||||||||||||||||||
PROJECTS UNDER CONSTRUCTION: | |||||||||||||||||||||||||||
2240 E. Imperial Highway - Kilroy Airport Center(5) | El Segundo | Lab to Office | 2Q 2006 | 3Q 2007 | 3Q 2008 | 107,041 | $ | 5.0 | $ | 14.8 | $ | 19.8 | $ | 8.7 | 77 | % | |||||||||||
Sabre Springs Corporate Center | I-15 Corridor | Office | 1Q 2007 | 3Q 2007 | 3Q 2008 | 104,500 | 24.7 | 9.4 | 34.1 | 25.4 | 0 | % | |||||||||||||||
TOTAL PROJECTS UNDER CONSTRUCTION | 211,541 | $ | 29.7 | $ | 24.2 | $ | 53.9 | $ | 34.1 | 39 | % | ||||||||||||||||
(1) | Based on management’s estimation of the earlier of stabilized occupancy (95%) or one year from the date of substantial completion. |
(2) | Represents cash paid and costs incurred as of March 31, 2007. Includes existing investment at the commencement of redevelopment. See footnote (4) below. |
(3) | Construction on two of the four buildings commenced in the fourth quarter of 2005. Construction on the remaining two buildings commenced in the first quarter of 2006. |
(4) | Represents the depreciated carrying value at the commencement of redevelopment for the space being redeveloped. See footnote (5) below. |
(5) | The Company will be redeveloping 107,041 square feet of this building given that The Boeing Company and its predecessor occupied the space for over 20 years. |
20
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Future Development Pipeline
($ in millions)
Project | Location | Type | Gross Site Acreage | Estimated Rentable Square Feet | Total Estimated Investment | Total Costs as of 3/31/2007 (1) | ||||||||
SAN DIEGO, CALIFORNIA: | ||||||||||||||
Carlsbad Oaks | Carlsbad | Office | 32.0 | 288,000 | $ | 82.7 | $ | 16.2 | ||||||
Kilroy Centre Rancho Bernardo(2) | I-15 Corridor | Office | 21.0 | 800,000 - 1,500,000 | 250.0 - 563.0 | 24.6 | ||||||||
Pacific Corporate Center - Lot 8 | Sorrento Mesa | Office | 5.0 | 95,000 | 32.5 | 9.5 | ||||||||
Santa Fe Summit - Phase II and III | 56 Corridor | Office | 21.8 | 600,000 | 300.0 | 58.3 | ||||||||
Sorrento Gateway - Lot 1 | Sorrento Mesa | Office | 4.2 | 54,000 | 19.0 | 5.4 | ||||||||
Sorrento Gateway - Lot 2 | Sorrento Mesa | Office | 6.3 | 80,000 | 31.6 | 9.7 | ||||||||
Sorrento Gateway - Lot 7 | Sorrento Mesa | Office | 7.6 | 57,000 | 24.5 | 8.6 | ||||||||
TOTAL FUTURE DEVELOPMENT PIPELINE | 97.9 | 1,974,000 - 2,674,000 | $ | 740.3 - 1,053.3 | $ | 132.3 | ||||||||
(1) | Represents cash paid and costs incurred as of March 31, 2007. |
(2) | This site includes entitlements to build approximately 1.8 million square feet of office or light industrial space. The Company currently anticipates it may develop the site in phases depending on lease activity and market conditions. |
21
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Capital Structure
At March 31, 2007
($ in thousands)
Shares/Units At March 31, 2007 | Aggregate Principal Amount or $ Value Equivalent | % of Total Market Capitalization | ||||||
DEBT: | ||||||||
Secured Debt (1) | $ | 455,230 | 12.3 | % | ||||
Unsecured Senior Notes | 144,000 | 3.9 | % | |||||
Unsecured Line of Credit(1) | 331,000 | 8.9 | % | |||||
Total Debt | $ | 930,230 | 25.1 | % | ||||
EQUITY: | ||||||||
7.450% Series A Cumulative Redeemable Preferred Units(2) | 1,500,000 | $ | 75,000 | 2.0 | % | |||
7.800% Series E Cumulative Redeemable Preferred Stock(3) | 1,610,000 | 40,250 | 1.1 | % | ||||
7.500% Series F Cumulative Redeemable Preferred Stock(3) | 3,450,000 | 86,250 | 2.3 | % | ||||
Common Units Outstanding(4) | 2,247,774 | 165,773 | 4.5 | % | ||||
Common Shares Outstanding(4) | 32,698,554 | 2,411,518 | 65.0 | % | ||||
Total Equity | $ | 2,778,791 | 74.9 | % | ||||
TOTAL MARKET CAPITALIZATION | $ | 3,709,021 | 100.0 | % | ||||
(1) | In April 2007, the Company issued $460 million in aggregate principal amount of 3.250% Exchangeable Senior Notes due 2012. In April 2007, a portion of the net proceeds received from the offering was used to pay down the $331 million balance of the unsecured line of credit and to pay down two other variable rate secured loans totaling $66 million that were included in secured debt on the balance sheet as of March 31, 2007. See page 24 for further details. |
(2) | Value based on $50.00 per share liquidation preference. |
(3) | Value based on $25.00 per share liquidation preference. |
(4) | Value based on closing share price of $73.75 on March 31, 2007. |
22
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Debt Analysis
At March 31, 2007
($ in thousands)
TOTAL DEBT COMPOSITION | ||||||||
% of | Weighted Average | |||||||
Total Debt | Interest Rate | Maturity | ||||||
Secured vs. Unsecured Debt: | ||||||||
Secured Debt | 48.9 | % | 6.0 | % | 3.5 | |||
Unsecured Debt | 51.1 | % | 6.4 | %(1) | 3.9 | |||
Floating vs. Fixed Rate Debt: | ||||||||
Fixed Rate Debt | 57.3 | % | 6.0 | % | 4.3 | |||
Floating Rate Debt | 42.7 | % | 6.4 | %(1) | 2.8 | |||
Total Debt | 6.2 | %(1) | 3.7 | |||||
Total Debt Including Loan Fees | 6.4 | %(1) | ||||||
UNSECURED LINE OF CREDIT | ||||
Total Line | Outstanding Balance | Expiration Date | ||
$550,000 | $331,000(2) | April 2010 |
CAPITALIZED INTEREST & LOAN FEES | ||
Quarter-to-Date | Year-to-Date | |
$4.8 | $4.8 |
(1) | At March 31, 2007, the interest rate on approximately $243 million or 73% of the outstanding unsecured line of credit borrowings was priced on a short-term basis given the expected closing of the Company’s 3.25% Exchangeable Senior Notes offering in early April 2007. In accordance with the terms of the unsecured line of credit, the interest rate for this $243 million of borrowings at March 31, 2007 was set at the prime rate of 8.25% instead of being based on LIBOR. As a result, the interest rate presented here is a weighted average rate for the month of March 2007. |
(2) | In April 2007, the Company issued $460 million in aggregate principal amount of 3.25% Exchangeable Senior Notes due 2012. In April 2007, a portion of the net proceeds received from the offering was used to pay down the $331 million balance of the unsecured line of credit and to pay down two other variable rate secured loans totaling $66 million that were included in secured debt on the balance sheet as of March 31, 2007. See page 24 for further details. After the pro-forma effect of the $460 million 3.25% Exchangeable Senior Notes offering and the aforementioned paydowns, 39% of the Company’s total debt will be secured debt, 100% of the Company’s total debt will be fixed rate debt and the Company’s adjusted weighted average interest rate will be approximately 4.7%. |
23
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Debt Analysis
At March 31, 2007
($ in thousands)
DEBT MATURITY SCHEDULE | |||||||||||||||||||||||||||
Floating/ Fixed Rate | Effective Rate | Maturity Date | 2007 | 2008 | 2009 | 2010 | 2011 | After 2011 | Total | ||||||||||||||||||
Unsecured Debt: | |||||||||||||||||||||||||||
Floating | 6.45 | % | 4/26/2010 | (1)(2)(3) | $ | 331,000 | $ | 331,000 | |||||||||||||||||||
Fixed | 5.72 | % | 8/4/2010 | 61,000 | 61,000 | ||||||||||||||||||||||
Fixed | 6.45 | % | 8/4/2014 | $ | 83,000 | 83,000 | |||||||||||||||||||||
392,000 | 83,000 | 475,000 | |||||||||||||||||||||||||
Secured Debt: | |||||||||||||||||||||||||||
Floating | 6.22 | % | 7/1/2008 | (2) | 35,500 | 35,500 | |||||||||||||||||||||
Floating | 6.42 | % | 1/1/2009 | (2) | 31,000 | 31,000 | |||||||||||||||||||||
Fixed | 6.51 | % | 8/12/2007 | 16,984 | 16,984 | ||||||||||||||||||||||
Fixed | 7.21 | % | 8/12/2007 | 4,278 | 4,278 | ||||||||||||||||||||||
Fixed | 3.80 | % | 8/1/2008 | 1,244 | 73,400 | 74,644 | |||||||||||||||||||||
Fixed | 7.20 | % | 4/1/2009 | 1,834 | 2,604 | 75,475 | 79,913 | ||||||||||||||||||||
Fixed | 6.70 | % | 12/27/2011 | 899 | 1,271 | 1,359 | 1,453 | 69,980 | 74,962 | ||||||||||||||||||
Fixed | 5.57 | % | 8/1/2012 | 926 | 1,296 | 1,370 | 1,449 | 1,532 | 71,517 | 78,090 | |||||||||||||||||
Fixed | 4.95 | % | 8/1/2012 | 425 | 592 | 622 | 653 | 687 | 29,754 | 32,733 | |||||||||||||||||
Fixed | 8.43 | % | 4/1/2007 | 53 | 53 | ||||||||||||||||||||||
Fixed | 8.13 | % | 11/1/2014 | 474 | 701 | 760 | 824 | 894 | 2,023 | 5,676 | |||||||||||||||||
Fixed | 7.15 | % | 5/1/2017 | 1,104 | 1,567 | 1,683 | 1,807 | 1,941 | 13,295 | 21,397 | |||||||||||||||||
28,221 | 116,931 | 112,269 | 6,186 | 75,034 | 116,589 | 455,230 | |||||||||||||||||||||
Total | 6.17 | % | $ | 28,221 | $ | 116,931 | $ | 112,269 | $ | 398,186 | $ | 75,034 | $ | 199,589 | $ | 930,230 | |||||||||||
(1) | At March 31, 2007, the interest rate on approximately $243 million or 73% of the outstanding unsecured line of credit borrowings was priced on a short-term basis given the expected closing of the Company’s 3.25% Exchangeable Senior Notes offering in early April 2007. In accordance with the terms of the unsecured line of credit, the interest rate for this $243 million of borrowings at March 31, 2007 was set at the prime rate of 8.25% instead of being based on LIBOR. As a result, the interest rate presented here is a weighted average rate for the month of March 2007. |
(2) | This balance was fully paid down in April 2007 with proceeds from the Company’s 3.25% Exchangeable Senior Notes. |
(3) | The maturity date does not reflect the one-year extension option. |
24
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Management Statements on Non-GAAP Supplemental Measures
Included in this section are management’s statements regarding certain non-GAAP financial measures provided in this supplemental financial report and, with respect to Funds From Operations (“FFO”), in the Company’s earnings release on April 23, 2007, and the reasons why management believes that these measures provide useful information to investors about the Company’s financial condition and results of operations.
Net Operating Income:
Management believes that Net Operating Income (“NOI”) is a useful supplemental measure of the Company’s operating performance. The Company defines NOI as operating revenues (rental income, tenant reimbursements and other property income) less property and related expenses (property expenses, real estate taxes, provision for bad debts and ground leases). Other real estate investment trusts (“REITs”) may use different methodologies for calculating NOI, and accordingly, the Company’s NOI may not be comparable to other REITs.
Because NOI excludes general and administrative expenses, interest expense, depreciation and amortization, other non-property income and expenses, gains and losses from property dispositions, discontinued operations, and extraordinary items, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a perspective on operations not immediately apparent from net income. The Company uses NOI to evaluate its operating performance on a segment basis since NOI allows the Company to evaluate the impact that factors such as occupancy levels, lease structure, rental rates, and tenant base, which vary by segment type, have on the Company’s results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about the Company’s financial and operating performance when compared to other REITs since NOI is generally recognized as a standard measure of performance in the real estate industry.
However, NOI should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect general and administrative expenses, interest expense, depreciation and amortization costs, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company’s properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company’s results from operations.
Same Store Net Operating Income:
Management believes that Same Store NOI is a useful supplemental measure of the Company’s operating performance. Same Store NOI represents the NOI for the stabilized properties that were operational for two comparable reporting periods. Because Same Store NOI excludes the change in NOI from properties developed, redeveloped, acquired and disposed of, it highlights operating trends such as occupancy levels, rental rates and operating costs on properties that were operational for two comparable periods. Other REITs may use different methodologies for calculating Same Store NOI, and accordingly, the Company’s Same Store NOI may not be comparable to other REITs.
However, Same Store NOI should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect the operations of the Company’s entire portfolio, nor does it reflect the impact of general and administrative expenses, interest expense, depreciation and amortization costs, other non-property income and expenses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company’s properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company’s results from operations.
25
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Management Statements on Non-GAAP Supplemental Measures
EBITDA:
Management believes that earnings before interest expense, depreciation and amortization, preferred dividends, minority interests and impairment loss (“EBITDA”) is a useful supplemental measure of the Company’s operating performance. When considered with other GAAP measures and FFO, management believes EBITDA gives the investment community a more complete understanding of the Company’s operating results before the impact of investing and financing transactions and facilitates comparisons with competitors. Management also believes it is appropriate to present EBITDA as it is used in several of the Company’s financial covenants for both its secured and unsecured debt. However, EBITDA should not be viewed as an alternative measure of the Company’s operating performance since it excludes financing costs as well as depreciation and amortization costs which are significant economic costs that could materially impact the Company’s results of operations and liquidity. Other REITs may use different methodologies for calculating EBITDA and, accordingly, the Company’s EBITDA may not be comparable to other REITs.
Funds From Operations:
Management believes that 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 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 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 on operating performance not immediately apparent from net income. In addition, management believes that FFO provides useful information to the investment community about the Company’s operating 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.
Funds Available for Distribution:
Management believes that Funds Available for Distribution (“FAD”) is a useful supplemental measure of the Company’s liquidity. The Company computes FAD by adding to FFO the noncash amortization of deferred financing costs and restricted stock compensation, the loss on derivative instruments, contractual cash rents received in advance of revenue recognition, the original issuance costs of redeemed preferred units, and the impairment losses on properties held for sale, and then subtracting tenant improvements, leasing commissions and recurring capital expenditures, revenue recorded for reimbursement of tenant improvements, the gain on derivative instruments, significant noncash gains, gains associated with insurance proceeds, and eliminating the net effect of straight-line rents, and above (below) market rents for acquisition properties. FAD provides an additional perspective on the Company’s ability to fund cash needs and make distributions to shareholders by adjusting for the effect of these non-cash items included in FFO, as well as recurring capital expenditures and leasing costs. Management also believes that FAD provides useful information to the investment community about the Company’s financial position as compared to other REITs since FAD is a liquidity measure used by other REITs. However, other REITs may use different methodologies for calculating FAD and, accordingly, the Company’s FAD may not be comparable to other REITs.
26
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Reconciliation of Same Store Net Operating Income to Net Income Available to Common Stockholders
(unaudited, $ in thousands)
Three Months Ended March 31, | ||||||||
2007 | 2006 | |||||||
Same Store Cash Net Operating Income | $ | 44,680 | $ | 42,346 | ||||
Adjustment: | ||||||||
GAAP Straight Line Rental Income | 1,006 | 2,774 | ||||||
Other Non-Cash GAAP Adjustments, net | 1,640 | 132 | ||||||
Same Store GAAP Net Operating Income | 47,326 | 45,252 | ||||||
Adjustment: | ||||||||
Non-Same Store GAAP Net Operating Income | 791 | 2,158 | ||||||
Net Operating Income including discontinued operations | 48,117 | 47,410 | ||||||
Adjustment: | ||||||||
Net Operating Loss (Income), as defined, from discontinued operations | (79 | ) | (1,153 | ) | ||||
Net Operating Income, as defined(1) | 48,038 | 46,257 | ||||||
Adjustments: | ||||||||
Other Expenses: | ||||||||
General and administrative expenses | (9,048 | ) | (4,934 | ) | ||||
Interest expense | (9,656 | ) | (11,971 | ) | ||||
Depreciation and amortization | (17,237 | ) | (17,379 | ) | ||||
Other Income and Expense: | ||||||||
Interest and other income | 619 | 252 | ||||||
Net settlement receipts on interest rate swaps | — | 194 | ||||||
(Loss) gain on derivative instruments | — | (76 | ) | |||||
Income from Continuing Operations | 12,716 | 12,343 | ||||||
Minority interests | (1,975 | ) | (2,201 | ) | ||||
Income from discontinued operations | 8,139 | 5,789 | ||||||
Preferred dividends | (2,402 | ) | (2,402 | ) | ||||
Net Income Available for Common Stockholders | $ | 16,478 | $ | 13,529 | ||||
(1) | Please refer to page 25 for Management Statements on Net Operating Income and Same Store Net Operating Income. |
27
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Reconciliation of EBITDA to Net Income Available to Common Stockholders
(unaudited, $ in thousands)
Three Months Ended March 31, | ||||||||
2007 | 2006 | |||||||
Net Income Available for Common Stockholders | $ | 16,478 | $ | 13,529 | ||||
Preferred dividends | 2,402 | 2,402 | ||||||
Adjustments for Continuing Operations: | ||||||||
Interest expense | 9,656 | 11,971 | ||||||
Depreciation and amortization | 17,237 | 17,379 | ||||||
Distributions on Cumulative Redeemable Preferred units | 1,397 | 1,397 | ||||||
Minority interest in earnings (loss) of Operating Partnership | 578 | 804 | ||||||
Adjustments for Discontinued Operations: | ||||||||
Interest expense | — | 90 | ||||||
Depreciation and amortization | — | 328 | ||||||
Net gain on disposition of discontinued operations | (8,626 | ) | (5,655 | ) | ||||
Minority interest in loss of Operating Partnership | 565 | 601 | ||||||
EBITDA Before Minority Interests(1) | $ | 39,687 | $ | 42,846 | ||||
(1) | Please refer to page 26 for a Management Statement on EBITDA before minority interests. |
28
Kilroy Realty Corporation
First Quarter 2007 Supplemental Financial Report
Reconciliation of Funds Available for Distribution to GAAP Net Cash Provided by Operating Activities
(unaudited, $ in thousands)
Three Months Ended March 31, | ||||||||
2007 | 2006 | |||||||
Funds Available for Distribution(1) | $ | 23,461 | $ | 22,010 | ||||
Adjustments: | ||||||||
Tenant improvements, leasing commissions and recurring capital expenditures | 4,264 | 2,695 | ||||||
Depreciation for furniture, fixtures and equipment | 211 | 199 | ||||||
Accrued preferred dividends | 2,402 | 2,402 | ||||||
Distributions on Cumulative Redeemable Preferred units | 1,397 | 1,397 | ||||||
Provision for uncollectible tenant receivables | (172 | ) | 271 | |||||
Net settlement receipts on interest rate swaps | — | (194 | ) | |||||
Changes in assets and liabilities(2) (3) | 3,799 | (73,346 | ) | |||||
GAAP Net Cash Provided by (Used in) Operating Activities | $ | 35,362 | $ | (44,566 | ) | |||
(1) | Please refer to page 26 for a Management Statement on Funds Available for Distribution. |
(2) | Includes changes in the following assets and liabilities and miscellaneous other adjustments: current receivables; deferred leasing costs; prepaid expenses and other assets; accounts payable, accrued expenses and other liabilities; rents received in advance, security deposits, and other deferred revenue; and other. The three months ended March 31, 2007 and 2006 have been adjusted for approximately $16,000 and $326,000, respectively, of contractual cash rents received in advance of revenue recognition, which is included in other deferred revenue and is added back for the purposes of calculating FAD. This adjustment is offset by the corresponding amortization which is reflected in the net effect of straight-line rents for the three months ended March 31, 2007 of approximately $11,000. |
(3) | Amount includes a $71.7 million cash award approved by the Executive Compensation Committee and paid to the Company’s executive officers in January 2006. The payment represents the amount earned by the Company’s executive officers under a special long-term compensation program for the approximate three-year period ended December 31, 2005. Amounts were previously reflected in FAD as compensation was expensed for financial reporting purposes. |
29