Exhibit 99.1
Third Quarter 2011 Supplemental Financial Report
Some of the enclosed information presented in this supplemental and on the Company’s November 2, 2011 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, many 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, our ability to timely lease or re-lease space at current or anticipated rents, future interest rate levels, our ability to complete potential acquisitions and potential dispositions on terms or by the dates currently contemplated, our ability to successfully integrate pending and recent acquisitions, 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, 2010. In light of these risks, uncertainties and assumptions, the forward-looking events contained in this supplemental information and on the Company’s November 2, 2011 conference call might not occur.
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Page | |
Corporate Data and Financial Highlights | |
1 | |
2 | |
3 | |
4 | |
5 | |
6 | |
Portfolio Data | |
7 | |
8-14 | |
Submarket Statistics | 15 |
16 | |
17 | |
18-21 | |
Top Fifteen Tenants | 22 |
23 | |
2011 Dispositions | 24 |
Development | |
In-Process Redevelopment Projects | 25 |
Future Development Pipeline and Other Land Holdings | 26 |
Debt and Capitalization Data | |
27 | |
28-29 | |
Debt Covenants | 30 |
31-35 |
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Kilroy Realty Corporation (NYSE: KRC), a member of the S&P Small Cap 600 Index, is a real estate investment trust active in the premier office and industrial submarkets along the West Coast. The Company owns, develops, acquires and manages real estate assets primarily in the coastal regions of Los Angeles, Orange County, San Diego County, greater Seattle, and the San Francisco Bay Area. As of September 30, 2011, the Company's stabilized portfolio consisted of 105 office buildings and 40 industrial buildings, which encompassed an aggregate of 11.6 million and 3.6 million rentable square feet, respectively, and was 92.8% 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 Los Angeles, CA 90064 (310) 481-8400 Web: www.kilroyrealty.com E-mail: investorrelations@kilroyrealty.com | |
Edward F. Brennan, Ph.D. | Chris Corpuz | Executive VP, Strategic Initiatives | |||
William P. Dickey | Jeffrey C. Hawken | Executive VP and COO | |||
Scott S. Ingraham | Eli Khouri | Executive VP and CIO | |||
John B. Kilroy, Jr. | Tyler H. Rose | Executive VP and CFO | |||
Dale F. Kinsella | John T. Fucci | Sr. VP, Asset Management | |||
Heidi R. Roth | Sr. VP and Controller | ||||
Steve Scott | Sr. VP, San Diego | ||||
Justin W. Smart | Sr. VP, Development |
Equity Research Coverage | ||||
Bank of America Merrill Lynch | JMP Securities | |||
James Feldman | (646) 855-5808 | Mitch Germain | (212) 906-3546 | |
Citigroup Investment Research | J.P. Morgan | |||
Michael Bilerman | (212) 816-1383 | Anthony Paolone | (212) 622-6682 | |
Cowen and Company | Morgan Stanley | |||
James Sullivan | (646) 562-1380 | Chris Caton | (415) 576-2637 | |
Credit Suisse Group | RBC Capital Markets | |||
Andrew Rosivach | (415) 249-7942 | Dave Rodgers | (440) 715-2647 | |
Deutsche Bank Securities, Inc. | Robert W. Baird & Company | |||
John N. Perry | (212) 250-4912 | David Aubuchon | (314) 863-4235 | |
Green Street Advisors | Stifel, Nicolaus & Company | |||
Michael Knott | (949) 640-8780 | John W. Guinee III | (443) 224-1307 | |
ISI Group | UBS Investment Research | |||
Steve Sakwa | (212) 446-9462 | Ross T. Nussbaum | (212) 713-2484 | |
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
Third Quarter 2011 Supplemental Financial Report
Financial Highlights
(unaudited, $ in thousands, except per share amounts)
Three Months Ended | ||||||||||||||||||||||
9/30/2011 | 6/30/2011 | 3/31/2011 | 12/31/2010 | 9/30/2010 | ||||||||||||||||||
INCOME ITEMS (Including Discontinued Operations): | ||||||||||||||||||||||
Revenues | $ | 97,806 | $ | 92,064 | $ | 88,125 | $ | 82,941 | $ | 79,804 | ||||||||||||
Lease Termination Fees | 280 | 280 | 280 | 277 | 186 | |||||||||||||||||
Net Operating Income (1) | 69,525 | 65,524 | 61,902 | 59,804 | 56,866 | |||||||||||||||||
Acquisition-related Costs | 1,163 | 1,194 | 472 | 624 | 354 | |||||||||||||||||
Capitalized Interest and Debt Costs | 2,398 | 2,065 | 1,979 | 1,932 | 2,690 | |||||||||||||||||
Net Income (Loss) Available to Common Stockholders | 10,195 | (317 | ) | 1,034 | 1,535 | (126 | ) | |||||||||||||||
EBITDA (1)(2)(3) | 62,037 | 56,948 | 55,054 | 52,574 | 49,576 | |||||||||||||||||
Funds From Operations (1)(4)(5) | 33,878 | 31,643 | 30,127 | 29,485 | 29,690 | |||||||||||||||||
Funds Available for Distribution (1)(4)(5) | 18,854 | 18,048 | 19,843 | 15,919 | 14,760 | |||||||||||||||||
Net Income (Loss) Available to Common Stockholders per common share - diluted | $ | 0.17 | $ | (0.01 | ) | $ | 0.01 | $ | 0.02 | $ | (0.01 | ) | ||||||||||
Funds From Operations per common share - diluted | $ | 0.56 | $ | 0.52 | $ | 0.55 | $ | 0.54 | $ | 0.54 | ||||||||||||
Dividends per share | $ | 0.35 | $ | 0.35 | $ | 0.35 | $ | 0.35 | $ | 0.35 | ||||||||||||
RATIOS (Including Discontinued Operations): | ||||||||||||||||||||||
Operating Margins | 71.1 | % | 71.2 | % | 70.2 | % | 72.1 | % | 71.3 | % | ||||||||||||
Interest Coverage Ratio (6) | 2.7x | 2.9x | 2.9x | 3.1x | 3.4x | |||||||||||||||||
Fixed Charge Coverage Ratio (7) | 2.3x | 2.4x | 2.4x | 2.5x | 2.7x | |||||||||||||||||
FFO Payout Ratio (8) | 62.2 | % | 66.6 | % | 62.9 | % | 64.2 | % | 63.7 | % | ||||||||||||
FAD Payout Ratio (9) | 111.7 | % | 116.7 | % | 95.5 | % | 118.9 | % | 128.0 | % | ||||||||||||
9/30/2011 | 6/30/2011 | 3/31/2011 | 12/31/2010 | 9/30/2010 | ||||||||||||||||||
ASSETS: | ||||||||||||||||||||||
Real Estate Held for Investment before Depreciation | $ | 3,748,262 | $ | 3,652,846 | $ | 3,266,197 | $ | 3,216,871 | $ | 2,964,429 | ||||||||||||
Total Assets | 3,367,684 | 3,264,787 | 2,841,933 | 2,816,565 | 2,535,684 | |||||||||||||||||
CAPITALIZATION: | ||||||||||||||||||||||
Total Debt (10) | $ | 1,776,900 | $ | 1,698,791 | $ | 1,482,553 | $ | 1,451,152 | $ | 1,174,421 | ||||||||||||
Total Preferred Equity and Noncontrolling Interests (10) | 201,500 | 201,500 | 201,500 | 201,500 | 201,500 | |||||||||||||||||
Total Common Equity and Noncontrolling Interests (10) | 1,883,714 | 2,376,609 | 2,102,354 | 1,972,035 | 1,791,973 | |||||||||||||||||
Total Market Capitalization (10) | 3,862,114 | 4,276,900 | 3,786,407 | 3,624,687 | 3,167,894 | |||||||||||||||||
Total Debt / Total Market Capitalization (10) | 46.0 | % | 39.6 | % | 39.2 | % | 40.2 | % | 37.1 | % | ||||||||||||
Total Debt and Preferred / Total Market Capitalization (10) | 51.1 | % | 44.3 | % | 44.6 | % | 45.8 | % | 43.5 | % |
(1) | Please refer to pages 31 and 32 for Management Statements on Net Operating Income, EBITDA, Funds From Operations and Funds Available for Distribution. |
(2) | Please refer to page 34 for a reconciliation of GAAP Net Income (Loss) Available to Common Stockholders to EBITDA. |
(3) | EBITDA for all periods presented includes the impact of acquisition-related expenses. |
(4) | Please refer to page 6 for a reconciliation of GAAP Net Income (Loss) Available to Common Stockholders to Funds From Operations and Funds Available for Distribution. |
(5) | Reported amounts are attributable to common stockholders and common unitholders. |
(6) | Calculated as EBITDA divided by interest expense (excluding amortization of deferred debt costs and debt discounts). |
(7) | Calculated as EBITDA divided by interest expense (excluding amortization of deferred debt costs and debt discounts), current year accrued preferred dividends and distributions on Cumulative Redeemable Preferred units. |
(8) | Calculated as current-quarter dividends accrued to common stockholders and common unitholders (excluding dividend equivalents accrued to restricted stock unitholders) divided by Funds From Operations. |
(9) | Calculated as current-quarter dividends accrued to common stockholders and common unitholders (excluding dividend equivalents accrued to restricted stock unitholders) divided by Funds Available for Distribution. |
(10) | See “Capital Structure” on page 27. |
2
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Common Stock Data (NYSE: KRC)
Three Months Ended | ||||||||||||||||||||||||
9/30/2011 | 6/30/2011 | 3/31/2011 | 12/31/2010 | 9/30/2010 | ||||||||||||||||||||
High Price | $ | 41.58 | $ | 41.94 | $ | 39.24 | $ | 36.72 | $ | 34.39 | ||||||||||||||
Low Price | $ | 30.01 | $ | 38.04 | $ | 36.61 | $ | 32.64 | $ | 27.54 | ||||||||||||||
Closing Price | $ | 31.30 | $ | 39.49 | $ | 38.83 | $ | 36.47 | $ | 33.14 | ||||||||||||||
Dividends per share - annualized | $ | 1.40 | $ | 1.40 | $ | 1.40 | $ | 1.40 | $ | 1.40 | ||||||||||||||
Closing common shares (in 000's) (1) | 58,464 | 58,464 | 52,419 | 52,350 | 52,350 | |||||||||||||||||||
Closing common partnership units (in 000's) (1) | 1,718 | 1,718 | 1,723 | 1,723 | 1,723 | |||||||||||||||||||
60,182 | 60,182 | 54,142 | 54,073 | 54,073 | ||||||||||||||||||||
(1) | As of the end of the period. |
3
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Consolidated Balance Sheets
(unaudited, $ in thousands)
9/30/2011 | 6/30/2011 | 3/31/2011 | 12/31/2010 | 9/30/2010 | |||||||||||||||||
ASSETS: | |||||||||||||||||||||
Land and improvements | $ | 537,973 | $ | 528,082 | $ | 498,963 | $ | 491,333 | $ | 432,289 | |||||||||||
Buildings and improvements | 2,881,504 | 2,820,766 | 2,470,989 | 2,435,173 | 2,245,618 | ||||||||||||||||
Undeveloped land and construction in progress | 328,785 | 303,998 | 296,245 | 290,365 | 286,522 | ||||||||||||||||
Total real estate held for investment | 3,748,262 | 3,652,846 | 3,266,197 | 3,216,871 | 2,964,429 | ||||||||||||||||
Accumulated depreciation and amortization | (732,162 | ) | (720,864 | ) | (695,548 | ) | (672,429 | ) | (652,675 | ) | |||||||||||
Total real estate assets, net | 3,016,100 | 2,931,982 | 2,570,649 | 2,544,442 | 2,311,754 | ||||||||||||||||
Cash and cash equivalents | 15,481 | 25,412 | 6,708 | 14,840 | 8,313 | ||||||||||||||||
Restricted cash (1) | 25,436 | 1,349 | 1,899 | 1,461 | 3,265 | ||||||||||||||||
Marketable securities | 5,213 | 5,654 | 5,425 | 4,902 | 4,481 | ||||||||||||||||
Current receivables, net | 6,860 | 4,732 | 4,816 | 6,258 | 4,055 | ||||||||||||||||
Deferred rent receivables, net | 103,668 | 97,958 | 93,392 | 89,052 | 83,563 | ||||||||||||||||
Deferred leasing costs and acquisition-related intangible assets, net | 155,757 | 153,231 | 129,578 | 131,066 | 96,691 | ||||||||||||||||
Deferred financing costs, net | 19,638 | 18,910 | 15,742 | 16,447 | 14,574 | ||||||||||||||||
Prepaid expenses and other assets, net | 19,531 | 25,559 | 13,724 | 8,097 | 8,988 | ||||||||||||||||
TOTAL ASSETS | $ | 3,367,684 | $ | 3,264,787 | $ | 2,841,933 | $ | 2,816,565 | $ | 2,535,684 | |||||||||||
LIABILITIES, NONCONTROLLING INTEREST AND EQUITY: | |||||||||||||||||||||
Liabilities: | |||||||||||||||||||||
Secured debt, net | $ | 473,997 | $ | 475,820 | $ | 446,539 | $ | 313,009 | $ | 315,150 | |||||||||||
Exchangeable senior notes, net | 305,115 | 303,374 | 301,652 | 299,964 | 298,295 | ||||||||||||||||
Unsecured senior notes, net | 980,487 | 655,929 | 655,866 | 655,803 | 330,941 | ||||||||||||||||
Unsecured line of credit | — | 245,000 | 57,000 | 159,000 | 205,000 | ||||||||||||||||
Accounts payable, accrued expenses and other liabilities | 93,050 | 66,664 | 78,847 | 68,525 | 66,814 | ||||||||||||||||
Accrued distributions | 22,565 | 22,563 | 20,443 | 20,385 | 20,383 | ||||||||||||||||
Deferred revenue and acquisition-related intangible liabilities, net | 95,120 | 90,149 | 78,992 | 79,322 | 68,251 | ||||||||||||||||
Rents received in advance and tenant security deposits | 29,369 | 28,117 | 26,433 | 29,189 | 23,776 | ||||||||||||||||
Total liabilities | 1,999,703 | 1,887,616 | 1,665,772 | 1,625,197 | 1,328,610 | ||||||||||||||||
Noncontrolling Interest: | |||||||||||||||||||||
7.45% Series A Cumulative Redeemable Preferred units of the Operating Partnership | 73,638 | 73,638 | 73,638 | 73,638 | 73,638 | ||||||||||||||||
Equity: | |||||||||||||||||||||
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 | 585 | 585 | 524 | 523 | 523 | ||||||||||||||||
Additional paid-in capital | 1,435,580 | 1,433,951 | 1,214,463 | 1,211,498 | 1,209,673 | ||||||||||||||||
Distributions in excess of earnings | (296,476 | ) | (285,916 | ) | (264,848 | ) | (247,252 | ) | (230,215 | ) | |||||||||||
Total stockholders' equity | 1,261,271 | 1,270,202 | 1,071,721 | 1,086,351 | 1,101,563 | ||||||||||||||||
Noncontrolling Interest | |||||||||||||||||||||
Common units of the Operating Partnership | 33,072 | 33,331 | 30,802 | 31,379 | 31,873 | ||||||||||||||||
Total equity | 1,294,343 | 1,303,533 | 1,102,523 | 1,117,730 | 1,133,436 | ||||||||||||||||
TOTAL LIABILITIES, NONCONTROLLING INTEREST AND EQUITY | $ | 3,367,684 | $ | 3,264,787 | $ | 2,841,933 | $ | 2,816,565 | $ | 2,535,684 | |||||||||||
(1)As of September 30, 2011, $23.3 million of net proceeds from the sale of two office buildings are temporarily being held at a qualified intermediary for the purposes of facilitating a potential 1031 tax deferred property exchange. See page 24 "2011 Dispositions."
4
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Consolidated Statements of Operations
(unaudited, $ in thousands, except per share amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Rental income | $ | 89,306 | $ | 72,135 | 23.8 | % | $ | 252,102 | $ | 196,883 | 28.0 | % | ||||||||||||
Tenant reimbursements | 7,683 | 6,156 | 24.8 | % | 21,469 | 18,261 | 17.6 | % | ||||||||||||||||
Other property income | 348 | 985 | (64.7 | )% | 2,863 | 2,325 | 23.1 | % | ||||||||||||||||
Total revenues | 97,337 | 79,276 | 22.8 | % | 276,434 | 217,469 | 27.1 | % | ||||||||||||||||
EXPENSES: | ||||||||||||||||||||||||
Property expenses | 19,361 | 15,802 | 22.5 | % | 54,548 | 42,255 | 29.1 | % | ||||||||||||||||
Real estate taxes | 8,360 | 7,582 | 10.3 | % | 24,878 | 20,035 | 24.2 | % | ||||||||||||||||
Provision for bad debts | (5 | ) | (857 | ) | 99.4 | % | 141 | (843 | ) | 116.7 | % | |||||||||||||
Ground leases | 503 | 336 | 49.7 | % | 1,266 | 648 | 95.4 | % | ||||||||||||||||
General and administrative expenses(1) | 6,355 | 7,273 | (12.6 | )% | 20,355 | 21,096 | (3.5 | )% | ||||||||||||||||
Acquisition-related expenses | 1,163 | 354 | 228.5 | % | 2,829 | 1,624 | 74.2 | % | ||||||||||||||||
Depreciation and amortization | 36,152 | 29,951 | 20.7 | % | 97,513 | 74,405 | 31.1 | % | ||||||||||||||||
Total expenses | 71,889 | 60,441 | 18.9 | % | 201,530 | 159,220 | 26.6 | % | ||||||||||||||||
OTHER (EXPENSES) INCOME: | ||||||||||||||||||||||||
Interest income and other net investment gains | 30 | 337 | (91.1 | )% | 272 | 703 | (61.3 | )% | ||||||||||||||||
Interest expense | (24,051 | ) | (15,853 | ) | 51.7 | % | (66,155 | ) | (40,897 | ) | 61.8 | % | ||||||||||||
Loss on early extinguishment of debt | — | — | 0.0 | % | — | (4,564 | ) | (100.0 | )% | |||||||||||||||
Total other (expenses) income | (24,021 | ) | (15,516 | ) | 54.8 | % | (65,883 | ) | (44,758 | ) | 47.2 | % | ||||||||||||
INCOME FROM CONTINUING OPERATIONS | 1,427 | 3,319 | (57.0 | )% | 9,021 | 13,491 | (33.1 | )% | ||||||||||||||||
DISCONTINUED OPERATIONS: | ||||||||||||||||||||||||
Net income from discontinued operations | 308 | 350 | (12.0 | )% | 1,053 | 1,011 | 4.2 | % | ||||||||||||||||
Net gain on dispositions of discontinued operations | 12,555 | — | 100.0 | % | 12,555 | — | 100.0 | % | ||||||||||||||||
Total income from discontinued operations | 12,863 | 350 | 3,575.1 | % | 13,608 | 1,011 | 1,246.0 | % | ||||||||||||||||
NET INCOME | 14,290 | 3,669 | 289.5 | % | 22,629 | 14,502 | 56.0 | % | ||||||||||||||||
Net (income) loss attributable to noncontrolling common units of the Operating Partnership | (296 | ) | 4 | 7,500.0 | % | (320 | ) | (128 | ) | 150.0 | % | |||||||||||||
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION | 13,994 | 3,673 | 281.0 | % | 22,309 | 14,374 | 55.2 | % | ||||||||||||||||
PREFERRED DISTRIBUTIONS AND DIVIDENDS: | ||||||||||||||||||||||||
Distributions on noncontrolling cumulative redeemable preferred units of the Operating Partnership | (1,397 | ) | (1,397 | ) | 0.0 | % | (4,191 | ) | (4,191 | ) | 0.0 | % | ||||||||||||
Preferred dividends | (2,402 | ) | (2,402 | ) | 0.0 | % | (7,206 | ) | (7,206 | ) | 0.0 | % | ||||||||||||
Total preferred distributions and dividends | (3,799 | ) | (3,799 | ) | 0.0 | % | (11,397 | ) | (11,397 | ) | 0.0 | % | ||||||||||||
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS | $ | 10,195 | $ | (126 | ) | 8,191.3 | % | $ | 10,912 | $ | 2,977 | 266.5 | % | |||||||||||
Weighted average common shares outstanding - basic | 58,355 | 52,274 | 11.6 | % | 56,136 | 48,562 | 15.6 | % | ||||||||||||||||
Weighted average common shares outstanding - diluted | 58,355 | 52,274 | 11.6 | % | 56,136 | 48,565 | 15.6 | % | ||||||||||||||||
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS PER SHARE | ||||||||||||||||||||||||
Net income (loss) available to common stockholders per share - basic | $ | 0.17 | $ | (0.01 | ) | 1,800.0 | % | $ | 0.18 | $ | 0.04 | 350.0 | % | |||||||||||
Net income (loss) available to common stockholders per share - diluted | $ | 0.17 | $ | (0.01 | ) | 1,800.0 | % | $ | 0.18 | $ | 0.04 | 350.0 | % | |||||||||||
(1) For the three months ended September 30, 2011, general and administrative expenses was reduced by a $0.5 million mark to market adjustment related to our deferred compensation plan liability. This reduction was offset by a related reduction in interest income and other net investment gains resulting from the mark to market of the marketable securities held for our deferred compensation plan.
5
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Funds From Operations and Funds Available for Distribution
(unaudited, $ in thousands, except per share amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||||||||||||||
FUNDS FROM OPERATIONS: (1) | |||||||||||||||||||||||||
Net income (loss) available to common stockholders | $ | 10,195 | $ | (126 | ) | 8,191.3 | % | $ | 10,912 | $ | 2,977 | 266.5 | % | ||||||||||||
Adjustments: | |||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling common units of the Operating Partnership | 296 | (4 | ) | 7,500.0 | % | 320 | 128 | 150.0 | % | ||||||||||||||||
Depreciation and amortization of real estate assets | 35,942 | 29,820 | 20.5 | % | 96,971 | 74,049 | 31.0 | % | |||||||||||||||||
Net gain on dispositions of discontinued operations | (12,555 | ) | — | 100.0 | % | (12,555 | ) | — | 100.0 | % | |||||||||||||||
Funds From Operations (2) | $ | 33,878 | $ | 29,690 | 14.1 | % | $ | 95,648 | $ | 77,154 | 24.0 | % | |||||||||||||
Weighted average common shares/units outstanding - basic (3) | 61,015 | 54,778 | 11.4 | % | 58,774 | 51,106 | 15.0 | % | |||||||||||||||||
Weighted average common shares/units outstanding - diluted (3) | 61,017 | 54,782 | 11.4 | % | 58,961 | 51,109 | 15.4 | % | |||||||||||||||||
FFO per common share/unit - basic (2) | $ | 0.56 | $ | 0.54 | 2.4 | % | $ | 1.63 | $ | 1.51 | 7.8 | % | |||||||||||||
FFO per common share/unit - diluted (2) | $ | 0.56 | $ | 0.54 | 2.4 | % | $ | 1.62 | $ | 1.51 | 7.5 | % | |||||||||||||
FUNDS AVAILABLE FOR DISTRIBUTION: (1) | |||||||||||||||||||||||||
Funds From Operations (2) | $ | 33,878 | $ | 29,690 | 14.1 | % | $ | 95,648 | $ | 77,154 | 24.0 | % | |||||||||||||
Adjustments: | |||||||||||||||||||||||||
Tenant improvements, leasing commissions and recurring capital expenditures | (9,755 | ) | (15,077 | ) | (35.3 | )% | (28,888 | ) | (40,995 | ) | (29.5 | )% | |||||||||||||
Amortization of deferred revenue related to tenant improvements (4) | (2,337 | ) | (2,333 | ) | 0.2 | % | (7,005 | ) | (7,108 | ) | (1.4 | )% | |||||||||||||
Net effect of straight-line rents (5) | (6,919 | ) | (3,071 | ) | 125.3 | % | (15,825 | ) | (8,491 | ) | 86.4 | % | |||||||||||||
Amortization of other deferred revenue, net (6) | (74 | ) | 284 | (126.1 | )% | (311 | ) | 83 | (474.7 | )% | |||||||||||||||
Amortization of net above market rents (7) | 121 | 664 | (81.8 | )% | 1,519 | 696 | 118.2 | % | |||||||||||||||||
Noncash amortization of exchangeable debt discount, net (8) | 1,470 | 1,284 | 14.5 | % | 4,364 | 4,763 | (8.4 | )% | |||||||||||||||||
Noncash loss on early extinguishment of debt | — | — | 0.0 | % | — | 4,564 | (100.0 | )% | |||||||||||||||||
Amortization of deferred financing costs and debt discounts/premiums | 1,344 | 1,510 | (11.0 | )% | 3,878 | 3,252 | 19.2 | % | |||||||||||||||||
Noncash amortization of share-based compensation awards | 1,126 | 1,809 | (37.8 | )% | 3,365 | 5,328 | (36.8 | )% | |||||||||||||||||
Funds Available for Distribution (2) | $ | 18,854 | $ | 14,760 | 27.7 | % | $ | 56,745 | $ | 39,246 | 44.6 | % | |||||||||||||
(1) | See page 32 for Management Statements on Funds From Operations and Funds Available for Distribution. |
(2) | Reported amounts are attributable to common shareholders and unitholders. |
(3) | Calculated based on weighted average shares outstanding including participating share-based awards (i.e. restricted stock units) and assuming the exchange of all common limited partnership units outstanding. |
(4) | Represents revenue recognized during the period as a result of the amortization of deferred revenue recorded for tenant-funded tenant improvements. |
(5) | 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 and the provision for bad debts recorded for deferred rent receivable balances. |
(6) | Represents amortization of deferred revenue related to cash received prior to or during the revenue recognition period in connection with tenants' contractual lease obligations, net of such amounts received. |
(7) | Represents the adjustment related to the acquisition of buildings with above and/or below market rents. |
(8) | Represents the amortization of the noncash debt discounts on the Company's exchangeable senior notes, net of amounts capitalized. |
6
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
(unaudited, $ in thousands)
Same Store Analysis (GAAP Basis)(2) | ||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||||||
Total Same Store Portfolio | ||||||||||||||||||||||||
Number of properties | 126 | 126 | 126 | 126 | ||||||||||||||||||||
Square Feet | 11,629,603 | 11,629,603 | 11,629,603 | 11,629,603 | ||||||||||||||||||||
Percent of Stabilized Portfolio | 76.6 | % | 89.4 | % | 76.6 | % | 89.4 | % | ||||||||||||||||
Average Occupancy | 92.3 | % | 86.0 | % | 91.5 | % | 84.7 | % | ||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||||
Rental income | $ | 62,578 | $ | 60,036 | 4.2 | % | $ | 185,913 | $ | 177,726 | 4.6 | % | ||||||||||||
Tenant reimbursements | 5,038 | 5,692 | (11.5 | )% | 16,058 | 16,696 | (3.8 | )% | ||||||||||||||||
Other property income | 328 | 799 | (58.9 | )% | 2,767 | 1,938 | 42.8 | % | ||||||||||||||||
Total operating revenues | 67,944 | 66,527 | 2.1 | % | 204,738 | 196,360 | 4.3 | % | ||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||
Property expenses | 12,364 | 12,444 | (0.6 | )% | 37,215 | 36,652 | 1.5 | % | ||||||||||||||||
Real estate taxes | 5,143 | 5,867 | (12.3 | )% | 16,536 | 16,981 | (2.6 | )% | ||||||||||||||||
Provision for bad debts | (5 | ) | (857 | ) | 99.4 | % | 141 | (843 | ) | 116.7 | % | |||||||||||||
Ground leases | 274 | 300 | (8.7 | )% | 906 | 673 | 34.6 | % | ||||||||||||||||
Total operating expenses | 17,776 | 17,754 | 0.1 | % | 54,798 | 53,463 | 2.5 | % | ||||||||||||||||
GAAP Net Operating Income | $ | 50,168 | $ | 48,773 | 2.9 | % | $ | 149,940 | $ | 142,897 | 4.9 | % | ||||||||||||
Same Store Analysis (Cash Basis) (2) | ||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||||||
Total operating revenues | $ | 62,191 | $ | 63,189 | (1.6 | )% | $ | 188,000 | $ | 182,907 | 2.8 | % | ||||||||||||
Total operating expenses | 17,781 | 18,611 | (4.5 | )% | 54,657 | 54,306 | 0.6 | % | ||||||||||||||||
Cash Net Operating Income | $ | 44,410 | $ | 44,578 | (0.4 | )% | $ | 133,343 | $ | 128,601 | 3.7 | % | ||||||||||||
(1) | Same store defined as all stabilized properties owned as of January 1, 2010 and still owned and in the stabilized portfolio as of September 30, 2011. |
(2) | Please refer to page 33 for a reconciliation of the Same Store measures on this page to Net Income (Loss) Available to Common Stockholders. |
7
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Stabilized Portfolio Occupancy Overview
Portfolio Breakdown | Occupancy at: (1) | ||||||||||||||||||||
# of Buildings | Year-to-Date NOI (2) | Sq. Ft. | Total Square Feet | 9/30/2011 | 6/30/2011 | 12/31/2010 | |||||||||||||||
STABILIZED PORTFOLIO: | |||||||||||||||||||||
OCCUPANCY BY PRODUCT TYPE: | |||||||||||||||||||||
Office: | |||||||||||||||||||||
Los Angeles and Ventura Counties | 28 | 19.4 | % | 19.6 | % | 2,976,006 | 84.1 | % | 82.9 | % | 89.3 | % | |||||||||
San Diego County | 61 | 51.0 | % | 35.8 | % | 5,435,280 | 92.6 | % | 88.4 | % | 86.4 | % | |||||||||
Orange County | 5 | 3.9 | % | 3.6 | % | 540,656 | 91.4 | % | 92.5 | % | 93.1 | % | |||||||||
San Francisco Bay Area | 5 | 12.4 | % | 11.4 | % | 1,731,805 | 95.4 | % | 93.1 | % | 84.3 | % | |||||||||
Greater Seattle | 6 | 4.9 | % | 5.9 | % | 890,497 | 90.2 | % | 90.4 | % | 100.0 | % | |||||||||
Subtotal | 105 | 91.6 | % | 76.3 | % | 11,574,244 | 90.6 | % | 87.9 | % | 87.5 | % | |||||||||
Industrial: | |||||||||||||||||||||
Los Angeles County | 1 | 1.2 | % | 1.3 | % | 192,053 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
Orange County | 39 | 7.2 | % | 22.4 | % | 3,413,354 | 100.0 | % | 97.4 | % | 93.5 | % | |||||||||
Subtotal | 40 | 8.4 | % | 23.7 | % | 3,605,407 | 100.0 | % | 97.6 | % | 93.9 | % | |||||||||
OCCUPANCY BY REGION: | |||||||||||||||||||||
Los Angeles and Ventura Counties | 29 | 20.6 | % | 20.9 | % | 3,168,059 | 85.1 | % | 84.0 | % | 89.9 | % | |||||||||
San Diego County | 61 | 51.0 | % | 35.8 | % | 5,435,280 | 5,362,398 | 92.6 | % | 88.4 | % | 86.4 | % | ||||||||
Orange County | 44 | 11.1 | % | 26.0 | % | 3,954,010 | 98.8 | % | 96.7 | % | 93.5 | % | |||||||||
San Francisco Bay Area | 5 | 12.4 | % | 11.4 | % | 1,731,805 | 95.4 | % | 93.1 | % | 84.3 | % | |||||||||
Greater Seattle | 6 | 4.9 | % | 5.9 | % | 890,497 | 90.2 | % | 90.4 | % | 100.0 | % | |||||||||
TOTAL STABILIZED PORTFOLIO | 145 | 100.0 | % | 100.0 | % | 15,179,651 | 92.8 | % | 90.2 | % | 89.1 | % | |||||||||
Average Occupancy - Stabilized Portfolio | Average Occupancy - Same Store Portfolio | |||||||||||
Office | Industrial | Total | Office | Industrial | Total | |||||||
Quarter-to-Date | 90.1% | 98.4% | 92.1% | Quarter-to-Date | 89.4% | 98.4% | 92.3% | |||||
Year-to-Date | 89.0% | 96.6% | 90.8% | Year-to-Date | 89.2% | 96.6% | 91.5% |
(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 and discontinued operations. |
8
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
City/ Submarket | Square Feet | Occupancy | |||||
Office: | |||||||
Los Angeles and Ventura, California | |||||||
23925 Park Sorrento | Calabasas | 11,789 | 100.0 | % | |||
23975 Park Sorrento | Calabasas | 100,592 | 84.4 | % | |||
24025 Park Sorrento | Calabasas | 102,264 | 95.7 | % | |||
26541 Agoura Road | Calabasas | 90,156 | 100.0 | % | |||
5151 Camino Ruiz | Camarillo | 187,861 | 0.0 | % | |||
5153 Camino Ruiz | Camarillo | 38,655 | 51.7 | % | |||
5155 Camino Ruiz | Camarillo | 38,856 | 51.4 | % | |||
2240 E. Imperial Highway | El Segundo | 122,870 | 100.0 | % | |||
2250 E. Imperial Highway | El Segundo | 293,261 | 97.6 | % | |||
909 N. Sepulveda Boulevard | El Segundo | 241,607 | 91.8 | % | |||
999 N. Sepulveda Boulevard | El Segundo | 128,504 | 86.9 | % | |||
3750 Kilroy Airport Way | Long Beach | 10,457 | 86.1 | % | |||
3760 Kilroy Airport Way | Long Beach | 165,278 | 96.1 | % | |||
3780 Kilroy Airport Way | Long Beach | 219,745 | 86.1 | % | |||
3800 Kilroy Airport Way | Long Beach | 192,476 | 93.6 | % | |||
3840 Kilroy Airport Way | Long Beach | 136,026 | 100.0 | % | |||
3900 Kilroy Airport Way | Long Beach | 126,840 | 91.8 | % | |||
12100 W. Olympic Boulevard | Los Angeles | 150,167 | 65.1 | % | |||
12200 W. Olympic Boulevard | Los Angeles | 150,302 | 99.7 | % | |||
12312 W. Olympic Boulevard | Los Angeles | 78,000 | 100.0 | % | |||
1633 26th Street | Santa Monica | 44,915 | 100.0 | % | |||
2100 Colorado Avenue | Santa Monica | 102,864 | 54.3 | % | |||
3130 Wilshire Boulevard | Santa Monica | 88,339 | 91.2 | % | |||
501 Santa Monica Boulevard | Santa Monica | 73,115 | 92.7 | % | |||
2829 Townsgate Road | Thousand Oaks | 81,067 | 88.8 | % | |||
Total Los Angeles and Ventura Counties Office | 2,976,006 | 84.1 | % |
9
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
City/ Submarket | Square Feet | Occupancy | |||||
Office: | |||||||
San Diego, California | |||||||
12225 El Camino Real | Del Mar | 60,148 | 97.8 | % | |||
12235 El Camino Real | Del Mar | 54,673 | 90.4 | % | |||
12340 El Camino Real | Del Mar | 87,405 | 86.9 | % | |||
12390 El Camino Real | Del Mar | 72,332 | 100.0 | % | |||
12348 High Bluff Drive | Del Mar | 38,710 | 100.0 | % | |||
12400 High Bluff Drive | Del Mar | 208,464 | 100.0 | % | |||
3579 Valley Center Drive | Del Mar | 52,375 | 79.0 | % | |||
3611 Valley Center Drive | Del Mar | 130,178 | 95.6 | % | |||
3661 Valley Center Drive | Del Mar | 129,752 | 99.4 | % | |||
3721 Valley Centre Drive | Del Mar | 114,780 | 100.0 | % | |||
3811 Valley Centre Drive | Del Mar | 112,067 | 100.0 | % | |||
6200 Greenwich Drive | Governor Park | 71,000 | 100.0 | % | |||
6220 Greenwich Drive | Governor Park | 141,214 | 100.0 | % | |||
15051 Avenue of Science | I-15 Corridor | 70,617 | 100.0 | % | |||
15073 Avenue of Science | I-15 Corridor | 46,759 | 100.0 | % | |||
15231 Avenue of Science | I-15 Corridor | 65,638 | 100.0 | % | |||
15253 Avenue of Science | I-15 Corridor | 37,437 | 100.0 | % | |||
15333 Avenue of Science | I-15 Corridor | 78,880 | 46.4 | % | |||
15378 Avenue of Science | I-15 Corridor | 68,910 | 100.0 | % | |||
15004 Innovation Drive | I-15 Corridor | 150,801 | 100.0 | % | |||
15435 Innovation Drive | I-15 Corridor | 51,500 | 63.5 | % | |||
15445 Innovation Drive | I-15 Corridor | 51,500 | 100.0 | % | |||
13280 Evening Creek Drive South | I-15 Corridor | 42,971 | 39.2 | % | |||
13290 Evening Creek Drive South | I-15 Corridor | 61,176 | 0.0 | % | |||
13480 Evening Creek Drive North | I-15 Corridor | 149,817 | 100.0 | % | |||
13500 Evening Creek Drive North | I-15 Corridor | 147,533 | 100.0 | % | |||
13520 Evening Creek Drive North | I-15 Corridor | 141,368 | 89.9 | % | |||
7525 Torrey Santa Fe | 56 Corridor | 103,979 | 100.0 | % | |||
7535 Torrey Santa Fe | 56 Corridor | 130,243 | 100.0 | % | |||
7545 Torrey Santa Fe | 56 Corridor | 130,354 | 100.0 | % | |||
7555 Torrey Santa Fe | 56 Corridor | 101,236 | 100.0 | % |
10
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
City/ Submarket | Square Feet | Occupancy | |||||
Office: | |||||||
San Diego, California (Continued) | |||||||
2355 Northside Drive | Mission Valley | 50,425 | 85.4 | % | |||
2365 Northside Drive | Mission Valley | 91,260 | 82.4 | % | |||
2375 Northside Drive | Mission Valley | 48,949 | 68.7 | % | |||
2385 Northside Drive | Mission Valley | 88,795 | 76.3 | % | |||
2305 Historic Decatur Road | Point Loma | 103,900 | 95.4 | % | |||
10020 Pacific Mesa Boulevard | Sorrento Mesa | 318,000 | 100.0 | % | |||
4910 Directors Place | Sorrento Mesa | 50,925 | 44.2 | % | |||
4921 Directors Place | Sorrento Mesa | 56,136 | 100.0 | % | |||
4939 Directors Place | Sorrento Mesa | 60,662 | 100.0 | % | |||
4955 Directors Place | Sorrento Mesa | 76,246 | 100.0 | % | |||
5005 Wateridge Vista Drive | Sorrento Mesa | 61,460 | 0.0 | % | |||
10770 Wateridge Circle | Sorrento Mesa | 174,310 | 97.5 | % | |||
10243 Genetic Center Drive | Sorrento Mesa | 102,875 | 100.0 | % | |||
6055 Lusk Avenue | Sorrento Mesa | 93,000 | 100.0 | % | |||
6260 Sequence Drive | Sorrento Mesa | 130,536 | 100.0 | % | |||
6290 Sequence Drive | Sorrento Mesa | 90,000 | 100.0 | % | |||
6310 Sequence Drive | Sorrento Mesa | 62,415 | 100.0 | % | |||
6340 Sequence Drive | Sorrento Mesa | 66,400 | 100.0 | % | |||
6350 Sequence Drive | Sorrento Mesa | 132,600 | 100.0 | % | |||
10390 Pacific Center Court | Sorrento Mesa | 68,400 | 100.0 | % | |||
10394 Pacific Center Court | Sorrento Mesa | 59,630 | 100.0 | % | |||
10398 Pacific Center Court | Sorrento Mesa | 43,645 | 100.0 | % | |||
10421 Pacific Center Court | Sorrento Mesa | 75,783 | 100.0 | % | |||
10445 Pacific Center Court | Sorrento Mesa | 48,709 | 100.0 | % | |||
10455 Pacific Center Court | Sorrento Mesa | 90,000 | 100.0 | % | |||
5717 Pacific Center Boulevard | Sorrento Mesa | 67,995 | 100.0 | % | |||
4690 Executive Drive | University Towne Center | 47,212 | 100.0 | % | |||
9455 Towne Center Drive | University Towne Center | 45,195 | 0.0 | % | |||
9785 Towne Center Drive | University Towne Center | 75,534 | 100.0 | % | |||
9791 Towne Center Drive | University Towne Center | 50,466 | 100.0 | % | |||
Total San Diego County Office | 5,435,280 | 92.6 | % |
11
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
City/ Submarket | Square Feet | Occupancy | |||||
Office: | |||||||
Orange County, California | |||||||
4175 E. La Palma Avenue | Anaheim | 43,263 | 79.8 | % | |||
8101 Kaiser Boulevard | Anaheim | 59,790 | 96.5 | % | |||
2211 Michelson Drive | Irvine | 271,556 | 92.3 | % | |||
111 Pacifica | Irvine Spectrum | 67,496 | 78.2 | % | |||
999 Town & Country | Orange | 98,551 | 100.0 | % | |||
Total Orange County Office | 540,656 | 91.4 | % | ||||
San Francisco Bay Area, California | |||||||
303 Second Street | San Francisco | 734,035 | 98.0 | % | |||
100 First Street | San Francisco | 466,490 | 94.3 | % | |||
250 Brannan Street | San Francisco | 92,948 | 100.0 | % | |||
201 Third Street | San Francisco | 311,545 | 90.3 | % | |||
4040 Civic Center | San Rafael | 126,787 | 93.1 | % | |||
Total San Francisco Bay Area Office | 1,731,805 | 95.4 | % | ||||
Greater Seattle, Washington | |||||||
601 108th Avenue NE | Bellevue | 488,470 | 88.1 | % | |||
10220 NE Points Drive | Kirkland | 49,851 | 89.5 | % | |||
10230 NE Points Drive | Kirkland | 98,982 | 83.6 | % | |||
10210 NE Points Drive | Kirkland | 84,641 | 90.8 | % | |||
3933 Lake Washington Blvd NE | Kirkland | 46,450 | 100.0 | % | |||
15050 NE 36th Street | Redmond | 122,103 | 100.0 | % | |||
Total Greater Seattle Office | 890,497 | 90.2 | % | ||||
Total Office | 11,574,244 | 90.6 | % | ||||
Industrial: | |||||||
Los Angeles, California | |||||||
2031 E. Mariposa Avenue | El Segundo | 192,053 | 100.0 | % | |||
Total Los Angeles County Industrial | 192,053 | 100.0 | % |
12
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
City/ Submarket | Square Feet | Occupancy | |||||
Industrial: | |||||||
Orange County, California | |||||||
1000 E. Ball Road | Anaheim | 100,000 | 100.0 | % | |||
1230 S. Lewis Street | Anaheim | 57,730 | 100.0 | % | |||
1250 N. Tustin Avenue | Anaheim | 84,185 | 100.0 | % | |||
3125 E. Coronado Street | Anaheim | 144,000 | 100.0 | % | |||
3130/3150 Miraloma Avenue | Anaheim | 144,000 | 100.0 | % | |||
3250 E. Carpenter Avenue | Anaheim | 41,225 | 100.0 | % | |||
3340 E. La Palma Avenue | Anaheim | 153,320 | 100.0 | % | |||
3355 E. La Palma Avenue | Anaheim | 98,200 | 100.0 | % | |||
4123 E. La Palma Avenue | Anaheim | 70,863 | 100.0 | % | |||
4155 E. La Palma Avenue | Anaheim | 74,618 | 100.0 | % | |||
5115 E. La Palma Avenue | Anaheim | 286,139 | 100.0 | % | |||
5325 E. Hunter Avenue | Anaheim | 110,487 | 100.0 | % | |||
1145 N. Ocean Boulevard | Anaheim | 67,500 | 100.0 | % | |||
1201 N. Miller Street | Anaheim | 119,612 | 100.0 | % | |||
1211 N. Miller Street | Anaheim | 200,646 | 100.0 | % | |||
1231 N. Miller Street | Anaheim | 113,700 | 100.0 | % | |||
950 W. Central Avenue | Brea | 24,000 | 100.0 | % | |||
1050 W. Central Avenue | Brea | 30,000 | 100.0 | % | |||
1150 W. Central Avenue | Brea | 30,000 | 100.0 | % | |||
895 Beacon Street | Brea | 54,795 | 100.0 | % | |||
955 Beacon Street | Brea | 37,916 | 100.0 | % | |||
1125 Beacon Street | Brea | 49,178 | 100.0 | % | |||
925 Lambert Road | Brea | 80,000 | 100.0 | % | |||
1075 Lambert Road | Brea | 98,811 | 100.0 | % | |||
1675 MacArthur Boulevard | Costa Mesa | 50,842 | 100.0 | % | |||
25202 Towne Center Drive | Foothill Ranch | 309,685 | 100.0 | % | |||
12681/12691 Pala Drive | Garden Grove | 84,700 | 100.0 | % |
13
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Stabilized Portfolio Occupancy Overview
City/ Submarket | Square Feet | Occupancy | |||||
Industrial: | |||||||
Orange County, California (Continued) | |||||||
7421 Orangewood Avenue | Garden Grove | 82,602 | 100.0 | % | |||
7091 Belgrave Avenue | Garden Grove | 70,000 | 100.0 | % | |||
12271 Industry Street | Garden Grove | 20,000 | 100.0 | % | |||
12311 Industry Street | Garden Grove | 25,000 | 100.0 | % | |||
7261 Lampson Avenue | Garden Grove | 47,092 | 100.0 | % | |||
12472 Edison Way | Garden Grove | 55,576 | 100.0 | % | |||
12442 Knott Street | Garden Grove | 58,303 | 100.0 | % | |||
2055 S.E. Main Street | Irvine | 47,583 | 100.0 | % | |||
1951 E. Carnegie Avenue | Santa Ana | 100,000 | 100.0 | % | |||
2525 Pullman Street | Santa Ana | 103,380 | 100.0 | % | |||
14831 Franklin Avenue | Tustin | 36,256 | 100.0 | % | |||
2911 Dow Avenue | Tustin | 51,410 | 100.0 | % | |||
Total Orange County Industrial | 3,413,354 | 100.0 | % | ||||
Total Industrial | 3,605,407 | 100.0 | % |
14
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Submarket Statistics as of September 30, 2011
Market | Market | KRC | KRC | |||||||
Direct | Total | Percentage | Percentage | |||||||
Submarket | Vacancy (1) | Vacancy (1) | Occupied | Leased | ||||||
SAN DIEGO | ||||||||||
Del Mar | 13.5% | 17.4% | 97.7% | 97.7% | ||||||
Sorrento Mesa | ||||||||||
Two- Three Story Corporate | 8.1% | 8.4% | 95.1% | 95.1% | ||||||
University Towne Center / Governor Park | ||||||||||
Two- Three Story Corporate | 16.0% | 22.8% | 89.5% | 89.5% | ||||||
I-15 Corridor | ||||||||||
Class A Office Market | 15.3% | 15.8% | 96.8% | 96.8% | ||||||
Two- Three Story Corporate | 15.8% | 16.9% | 79.6% | 79.6% | ||||||
Mission Valley | 17.7% | 18.2% | 78.6% | 79.9% | ||||||
Point Loma | 11.8% | 11.8% | 95.4% | 95.4% | ||||||
ORANGE COUNTY | ||||||||||
Office | 15.6% | 19.4% | 91.4% | 92.7% | ||||||
Industrial | 5.0% | 8.5% | 100.0% | 100.0% | ||||||
LOS ANGELES | ||||||||||
Westside | 14.8% | 17.9% | 83.6% | 92.7% | ||||||
El Segundo (Class A) | 22.5% | 23.5% | 94.4% | 95.3% | ||||||
Long Beach Airport (Class A) | 12.9% | 14.1% | 92.8% | 92.8% | ||||||
101 Corridor (Class A) | 18.2% | 19.3% | 60.9% | 62.0% | ||||||
SAN FRANCISCO BAY AREA | ||||||||||
South Financial District | 10.7% | 11.0% | 95.6% | 95.6% | ||||||
Marin County | 14.5% | 18.1% | 93.1% | 93.1% | ||||||
GREATER SEATTLE | ||||||||||
Eastside | 15.0% | 15.9% | 90.2% | 90.2% | ||||||
TOTAL | 92.8% | 93.4% | ||||||||
(1) Market direct and market total vacancy data was obtained from market research data from third parties. Kilroy Realty Corporation uses market
research data from third parties to analyze the current and projected real estate fundamentals in each of its existing submarkets as well as potential
acquisition submarkets. Recent market research data from third parties suggests improvement in real estate fundamentals in each of Kilroy
Realty's primary submarkets over the next few years. Please note that Kilroy Realty Corporation does not verify the market research data from third
parties and further that such data does not represent views or forecasts of Kilroy Realty Corporation or its management.
15
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Lease Commencement Information
For Leases That Commenced During the Three Months Ended September 30, 2011
1st & 2nd Generation | 2nd Generation | ||||||||||||||||||||||||||||||||
# 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) | Weighted Average Lease Term (Mo.) | ||||||||||||||||||||||||||
New | Renewal | New | Renewal | ||||||||||||||||||||||||||||||
Office | 19 | 15 | 251,372 | 157,432 | $ | 21.48 | $ | 0.22 | (3.5 | )% | (5.7 | )% | 81.7 | % | 107 | ||||||||||||||||||
Industrial | 3 | 5 | 88,200 | 193,665 | 8.85 | 0.11 | (18.9 | )% | (28.9 | )% | 100.0 | % | 62 | ||||||||||||||||||||
Total | 22 | 20 | 339,572 | 351,097 | $ | 16.05 | $ | 0.19 | (9.3 | )% | (14.1 | )% | 90.9 | % | 87 | ||||||||||||||||||
For Leases That Commenced During the Nine Months Ended September 30, 2011
1st & 2nd Generation | 2nd Generation | ||||||||||||||||||||||||||||||||
# 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) | Weighted Average Lease Term (Mo.) | ||||||||||||||||||||||||||
New | Renewal | New | Renewal | ||||||||||||||||||||||||||||||
Office | 56 | 32 | 618,821 | 276,761 | $ | 26.91 | $ | 0.48 | (7.7 | )% | (11.4 | )% | 40.6 | % | 84 | ||||||||||||||||||
Industrial | 8 | 7 | 233,470 | 285,431 | 7.74 | 0.36 | (18.5 | )% | (27.7 | )% | 97.9 | % | 72 | ||||||||||||||||||||
Total | 64 | 39 | 852,291 | 562,192 | $ | 18.63 | $ | 0.45 | (10.7 | )% | (15.7 | )% | 57.8 | % | 79 | ||||||||||||||||||
(1) | Represents leasing activity for leases that commenced during the period shown, including first and second generation space, net of month-to-month leases. |
(2) | Amounts exclude tenant-funded tenant improvements. |
(3) | Calculated over entire stabilized portfolio. |
(4) | Calculated as the change between GAAP rents for new/renewed leases and the expiring GAAP rents for the same space. Excludes leases for which the space was vacant longer than one year, or vacant when the property was acquired by the Company. |
(5) | Calculated as the change between stated rents for new/renewed leases and the expiring stated rents for the same space. Excludes leases for which the space was vacant longer than one year, or vacant when the property was acquired by the Company. |
(6) | Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration. |
16
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
($ in thousands)
1st Generation (Nonrecurring) Capital Expenditures(1): | ||||||||||||||||||
Q1 2011 | Q2 2011 | Q3 2011 | YTD 2011 | |||||||||||||||
Capital Improvements | $ | 1,347 | $ | 3,812 | $ | 4,629 | $ | 9,788 | ||||||||||
Tenant Improvements & Leasing Commissions | 3,488 | 2,210 | 758 | 6,456 | ||||||||||||||
Total | $ | 4,835 | $ | 6,022 | $ | 5,387 | $ | 16,244 | ||||||||||
2nd Generation (Recurring) Capital Expenditures: | ||||||||||||||||||
Q1 2011 | Q2 2011 | Q3 2011 | YTD 2011 | |||||||||||||||
Capital Improvements | ||||||||||||||||||
Office | $ | 1,335 | $ | 1,372 | $ | 2,249 | $ | 4,956 | ||||||||||
Industrial | 236 | 660 | 399 | 1,295 | ||||||||||||||
1,571 | 2,032 | 2,648 | 6,251 | |||||||||||||||
Tenant Improvements & Leasing Commissions (2) | ||||||||||||||||||
Office | 5,590 | 7,167 | 5,968 | 18,725 | ||||||||||||||
Industrial | 810 | 1,963 | 1,139 | 3,912 | ||||||||||||||
6,400 | 9,130 | 7,107 | 22,637 | |||||||||||||||
Total | ||||||||||||||||||
Office | 6,925 | 8,539 | 8,217 | 23,681 | ||||||||||||||
Industrial | 1,046 | 2,623 | 1,538 | 5,207 | ||||||||||||||
$ | 7,971 | $ | 11,162 | $ | 9,755 | $ | 28,888 | |||||||||||
(1) We generally categorize capital expenditures for newly acquired space, newly developed space, or change in use as 1st Generation. These costs are not subtracted in our calculation of Funds Available for Distribution.
(2) Represents costs incurred for leasing activity during the period shown. Amounts exclude tenant-funded tenant improvements.
17
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Lease Expiration Summary Schedule (1)
($ in thousands)
Year of Expiration | # of Expiring Leases | Total Square Feet | % of Total Leased Sq. Ft. | Annualized Base Rent (2) | % of Total Annualized Base Rent (2) | Annualized Rent per Sq. Ft. (2) | |||||||||||
OFFICE: | |||||||||||||||||
Remainder of 2011 | 8 | 66,433 | 0.5 | % | $1,351 | 0.4 | % | $20.34 | |||||||||
2012 | 79 | 790,207 | 5.6 | % | 22,021 | 6.5 | % | 27.87 | |||||||||
2013 | 87 | 1,149,860 | 8.3 | % | 32,839 | 9.6 | % | 28.56 | |||||||||
2014 | 86 | 1,398,332 | 10.1 | % | 38,133 | 11.1 | % | 27.27 | |||||||||
2015 | 123 | 1,993,201 | 14.3 | % | 61,115 | 17.9 | % | 30.66 | |||||||||
2016 | 55 | 644,833 | 4.6 | % | 15,855 | 4.6 | % | 24.59 | |||||||||
2017 | 42 | 1,453,362 | 10.5 | % | 42,947 | 12.5 | % | 29.55 | |||||||||
2018 | 18 | 835,526 | 6.0 | % | 35,437 | 10.4 | % | 42.41 | |||||||||
2019 | 19 | 577,175 | 4.2 | % | 20,283 | 5.9 | % | 35.14 | |||||||||
2020 | 14 | 577,961 | 4.2 | % | 16,586 | 4.8 | % | 28.70 | |||||||||
2021 and beyond | 20 | 812,697 | 5.9 | % | 28,725 | 8.4 | % | 35.35 | |||||||||
Subtotal | 551 | 10,299,587 | 74.2 | % | $315,292 | 92.1 | % | $30.61 | |||||||||
INDUSTRIAL: | |||||||||||||||||
Remainder of 2011 | — | — | — | — | — | — | |||||||||||
2012 | 9 | 354,994 | 2.6 | % | 2,491 | 0.7 | % | 7.02 | |||||||||
2013 | 10 | 665,357 | 4.8 | % | 4,857 | 1.4 | % | 7.30 | |||||||||
2014 | 19 | 574,386 | 4.1 | % | 4,604 | 1.3 | % | 8.02 | |||||||||
2015 | 11 | 655,351 | 4.7 | % | 4,314 | 1.3 | % | 6.58 | |||||||||
2016 | 5 | 139,845 | 1.0 | % | 825 | 0.2 | % | 5.90 | |||||||||
2017 | 4 | 149,482 | 1.0 | % | 888 | 0.3 | % | 5.94 | |||||||||
2018 | 3 | 186,878 | 1.4 | % | 1,189 | 0.4 | % | 6.36 | |||||||||
2019 | 3 | 196,910 | 1.4 | % | 1,664 | 0.5 | % | 8.45 | |||||||||
2020 | 1 | 50,842 | 0.3 | % | 577 | 0.2 | % | 11.35 | |||||||||
2021 and beyond | 5 | 631,186 | 4.5 | % | 5,677 | 1.6 | % | 8.99 | |||||||||
Subtotal | 70 | 3,605,231 | 25.8 | % | $27,086 | 7.9 | % | $7.51 | |||||||||
TOTAL PORTFOLIO: | |||||||||||||||||
Remainder of 2011 | 8 | 66,433 | 0.5 | % | $1,351 | 0.4 | % | $20.34 | |||||||||
2012 | 88 | 1,145,201 | 8.2 | % | 24,512 | 7.2 | % | 21.40 | |||||||||
2013 | 97 | 1,815,217 | 13.1 | % | 37,696 | 11.0 | % | 20.77 | |||||||||
2014 | 105 | 1,972,718 | 14.2 | % | 42,737 | 12.5 | % | 21.66 | |||||||||
2015 | 134 | 2,648,552 | 19.0 | % | 65,429 | 19.1 | % | 24.70 | |||||||||
2016 | 60 | 784,678 | 5.6 | % | 16,680 | 4.9 | % | 21.26 | |||||||||
2017 | 46 | 1,602,844 | 11.5 | % | 43,835 | 12.8 | % | 27.35 | |||||||||
2018 | 21 | 1,022,404 | 7.4 | % | 36,626 | 10.7 | % | 35.82 | |||||||||
2019 | 22 | 774,085 | 5.6 | % | 21,947 | 6.4 | % | 28.35 | |||||||||
2020 | 15 | 628,803 | 4.5 | % | 17,163 | 5.0 | % | 27.29 | |||||||||
2021 and beyond | 25 | 1,443,883 | 10.4 | % | 34,402 | 10.0 | % | 23.83 | |||||||||
Total | 621 | 13,904,818 | 100.0 | % | $342,378 | 100.0 | % | $24.62 | |||||||||
(1) | The information presented for all lease expiration activity reflects leasing activity through September 30, 2011. For leases that have been renewed early or space that has been re-leased to a new tenant, the expiration date and annualized base rent information presented takes into consideration the renewed or re-leased lease terms. Excludes space leased under month-to-month leases and vacant space as of September 30, 2011. |
(2) | Reflects annualized contractual base rent calculated on a straight-line basis in accordance with GAAP excluding the amortization of deferred revenue related to tenant-funded tenant improvements and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Amounts represent percentage of total portfolio annualized contractual base rental revenue. |
18
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Lease Expiration Schedule Detail by Region (1)
($ in thousands)
Los Angeles/Ventura Counties | Orange County | |||||||||||||||||||||||||||||||||||
Year of Expiration | # of Expiring Leases | Total Square Feet | % of Total Leased Sq. Ft. | Annualized Base Rent (2) | % of Total Annualized Base Rent (2) | Annualized Rent per Sq. Ft. (2) | # of Expiring Leases | Total Square Feet | % of Total Leased Sq. Ft. | Annualized Base Rent (2) | % of Total Annualized Base Rent (2) | Annualized Rent per Sq. Ft. (2) | ||||||||||||||||||||||||
OFFICE: | ||||||||||||||||||||||||||||||||||||
Remainder of 2011 | 6 | 62,567 | 0.4 | % | $1,297 | 0.4 | % | $20.73 | — | — | — | — | — | — | ||||||||||||||||||||||
2012 | 43 | 188,830 | 1.4 | % | 6,034 | 1.8 | % | 31.95 | 12 | 26,886 | 0.2 | % | 657 | 0.2 | % | 24.44 | ||||||||||||||||||||
2013 | 36 | 375,616 | 2.7 | % | 9,858 | 2.9 | % | 26.24 | 11 | 46,987 | 0.3 | % | 1,333 | 0.4 | % | 28.37 | ||||||||||||||||||||
2014 | 43 | 615,672 | 4.4 | % | 17,096 | 5.0 | % | 27.77 | 14 | 75,656 | 0.5 | % | 2,157 | 0.6 | % | 28.51 | ||||||||||||||||||||
2015 | 32 | 326,761 | 2.3 | % | 10,143 | 3.0 | % | 31.04 | 10 | 68,173 | 0.5 | % | 1,646 | 0.5 | % | 24.14 | ||||||||||||||||||||
2016 | 26 | 167,411 | 1.2 | % | 5,031 | 1.5 | % | 30.05 | 7 | 25,837 | 0.2 | % | 705 | 0.2 | % | 27.29 | ||||||||||||||||||||
2017 | 16 | 219,478 | 1.6 | % | 7,326 | 2.1 | % | 33.38 | 4 | 59,769 | 0.4 | % | 2,466 | 0.7 | % | 41.26 | ||||||||||||||||||||
2018 | 2 | 33,363 | 0.2 | % | 1,149 | 0.3 | % | 34.44 | 2 | 106,935 | 0.8 | % | 3,307 | 1.0 | % | 30.93 | ||||||||||||||||||||
2019 | 3 | 185,555 | 1.3 | % | 6,825 | 2.0 | % | 36.78 | 1 | 61,885 | 0.4 | % | 2,775 | 0.8 | % | 44.84 | ||||||||||||||||||||
2020 | 2 | 41,284 | 0.3 | % | 937 | 0.3 | % | 22.70 | 1 | 13,397 | 0.1 | % | 438 | 0.1 | % | 32.69 | ||||||||||||||||||||
2021 and beyond | 4 | 155,661 | 1.1 | % | 4,346 | 1.3 | % | 27.92 | — | — | — | — | — | — | ||||||||||||||||||||||
Subtotal | 213 | 2,372,198 | 16.9 | % | $70,042 | 20.6 | % | $29.53 | 62 | 485,525 | 3.4 | % | $15,484 | 4.5 | % | $31.89 | ||||||||||||||||||||
INDUSTRIAL: | ||||||||||||||||||||||||||||||||||||
Remainder of 2011 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
2012 | — | — | — | — | — | — | 9 | 354,994 | 2.6 | % | 2,491 | 0.7 | % | 7.02 | ||||||||||||||||||||||
2013 | — | — | — | — | — | — | 10 | 665,357 | 4.8 | % | 4,857 | 1.4 | % | 7.30 | ||||||||||||||||||||||
2014 | — | — | — | — | — | — | 19 | 574,386 | 4.1 | % | 4,604 | 1.3 | % | 8.02 | ||||||||||||||||||||||
2015 | — | — | — | — | — | — | 11 | 655,351 | 4.7 | % | 4,314 | 1.3 | % | 6.58 | ||||||||||||||||||||||
2016 | — | — | — | — | — | — | 5 | 139,845 | 1.0 | % | 825 | 0.2 | % | 5.90 | ||||||||||||||||||||||
2017 | — | — | — | — | — | — | 4 | 149,482 | 1.1 | % | 888 | 0.3 | % | 5.94 | ||||||||||||||||||||||
2018 | — | — | — | — | — | — | 3 | 186,878 | 1.3 | % | 1,189 | 0.3 | % | 6.36 | ||||||||||||||||||||||
2019 | — | — | — | — | — | — | 3 | 196,910 | 1.4 | % | 1,664 | 0.5 | % | 8.45 | ||||||||||||||||||||||
2020 | — | — | — | — | — | — | 1 | 50,842 | 0.4 | % | 577 | 0.2 | % | 11.35 | ||||||||||||||||||||||
2021 and beyond | 1 | 192,053 | 1.4 | % | 3,638 | 1.1 | % | 18.94 | 4 | 439,133 | 3.2 | % | 2,039 | 0.6 | % | 4.64 | ||||||||||||||||||||
Subtotal | 1 | 192,053 | 1.4 | % | $3,638 | 1.1 | % | $18.94 | 69 | 3,413,178 | 24.6 | % | $23,448 | 6.8 | % | $6.87 | ||||||||||||||||||||
TOTAL PORTFOLIO: | ||||||||||||||||||||||||||||||||||||
Remainder of 2011 | 6 | 62,567 | 0.4 | % | $1,297 | 0.4 | % | $20.73 | — | — | — | — | — | — | ||||||||||||||||||||||
2012 | 43 | 188,830 | 1.4 | % | 6,034 | 1.8 | % | 31.95 | 21 | 381,880 | 2.7 | % | 3,148 | 0.9 | % | 8.24 | ||||||||||||||||||||
2013 | 36 | 375,616 | 2.7 | % | 9,858 | 2.9 | % | 26.24 | 21 | 712,344 | 5.1 | % | 6,190 | 1.8 | % | 8.69 | ||||||||||||||||||||
2014 | 43 | 615,672 | 4.4 | % | 17,096 | 5.0 | % | 27.77 | 33 | 650,042 | 4.7 | % | 6,761 | 2.0 | % | 10.40 | ||||||||||||||||||||
2015 | 32 | 326,761 | 2.3 | % | 10,143 | 3.0 | % | 31.04 | 21 | 723,524 | 5.2 | % | 5,960 | 1.7 | % | 8.24 | ||||||||||||||||||||
2016 | 26 | 167,411 | 1.2 | % | 5,031 | 1.6 | % | 30.05 | 12 | 165,682 | 1.2 | % | 1,530 | 0.4 | % | 9.23 | ||||||||||||||||||||
2017 | 16 | 219,478 | 1.6 | % | 7,326 | 2.1 | % | 33.38 | 8 | 209,251 | 1.5 | % | 3,354 | 1.0 | % | 16.03 | ||||||||||||||||||||
2018 | 2 | 33,363 | 0.2 | % | 1,149 | 0.3 | % | 34.44 | 5 | 293,813 | 2.1 | % | 4,496 | 1.3 | % | 15.30 | ||||||||||||||||||||
2019 | 3 | 185,555 | 1.3 | % | 6,825 | 2.0 | % | 36.78 | 4 | 258,795 | 1.8 | % | 4,439 | 1.3 | % | 17.15 | ||||||||||||||||||||
2020 | 2 | 41,284 | 0.3 | % | 937 | 0.3 | % | 22.70 | 2 | 64,239 | 0.5 | % | 1,015 | 0.3 | % | 15.80 | ||||||||||||||||||||
2021 and beyond | 5 | 347,714 | 2.5 | % | 7,984 | 2.3 | % | 22.96 | 4 | 439,133 | 3.2 | % | 2,039 | 0.6 | % | 4.64 | ||||||||||||||||||||
Total | 214 | 2,564,251 | 18.3 | % | $73,680 | 21.7 | % | $28.73 | 131 | 3,898,703 | 28.0 | % | $38,932 | 11.3 | % | $9.99 | ||||||||||||||||||||
(1) | The information presented for all lease expiration activity reflects leasing activity through September 30, 2011. For leases that have been renewed early or space that has been re-leased to a new tenant, the expiration date and annualized base rent information presented takes into consideration the renewed or re-leased lease terms. Excludes space leased under month-to-month leases and vacant space as of September 30, 2011. |
(2) | Reflects annualized contractual base rent calculated on a straight-line basis in accordance with GAAP excluding the amortization of deferred revenue related to tenant-funded tenant improvements and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Amounts represent percentage of total portfolio annualized contractual base rental revenue. |
19
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Lease Expiration Schedule Detail by Region (1)
($ in thousands)
San Diego | San Francisco Bay Area | |||||||||||||||||||||||||||||||||||
Year of Expiration | # of Expiring Leases | Total Square Feet | % of Total Leased Sq. Ft. | Annualized Base Rent (2) | % of Total Annualized Base Rent (2) | Annualized Rent per Sq. Ft. (2) | # of Expiring Leases | Total Square Feet | % of Total Leased Sq. Ft. | Annualized Base Rent (2) | % of Total Annualized Base Rent (2) | Annualized Rent per Sq. Ft. (2) | ||||||||||||||||||||||||
OFFICE TOTAL: | ||||||||||||||||||||||||||||||||||||
Remainder of 2011 | — | — | — | — | — | — | 1 | 750 | 0.0 | % | $31 | 0.0 | % | $41.33 | ||||||||||||||||||||||
2012 | 13 | 465,233 | 3.3 | % | 12,283 | 3.6 | % | 26.40 | 7 | 56,633 | 0.4 | % | 1,875 | 0.5 | % | 33.11 | ||||||||||||||||||||
2013 | 12 | 312,463 | 2.2 | % | 7,458 | 2.2 | % | 23.87 | 20 | 273,152 | 2.0 | % | 10,243 | 3.0 | % | 37.50 | ||||||||||||||||||||
2014 | 13 | 480,026 | 3.5 | % | 10,874 | 3.2 | % | 22.65 | 11 | 186,438 | 1.3 | % | 6,889 | 2.0 | % | 36.95 | ||||||||||||||||||||
2015 | 21 | 637,509 | 4.6 | % | 15,671 | 4.6 | % | 24.58 | 37 | 589,988 | 4.2 | % | 23,784 | 6.9 | % | 40.31 | ||||||||||||||||||||
2016 | 15 | 345,214 | 2.5 | % | 6,662 | 1.9 | % | 19.30 | 3 | 32,394 | 0.2 | % | 1,563 | 0.5 | % | 48.25 | ||||||||||||||||||||
2017 | 17 | 1,138,372 | 8.2 | % | 31,958 | 9.3 | % | 28.07 | 3 | 23,394 | 0.2 | % | 887 | 0.3 | % | 37.92 | ||||||||||||||||||||
2018 | 11 | 635,304 | 4.6 | % | 29,166 | 8.5 | % | 45.91 | 1 | 11,046 | 0.1 | % | 444 | 0.1 | % | 40.20 | ||||||||||||||||||||
2019 | 4 | 121,586 | 0.9 | % | 3,843 | 1.1 | % | 31.61 | 8 | 167,841 | 1.2 | % | 5,722 | 1.7 | % | 34.09 | ||||||||||||||||||||
2020 | 7 | 350,174 | 2.5 | % | 10,678 | 3.1 | % | 30.49 | 4 | 173,106 | 1.2 | % | 4,533 | 1.3 | % | 26.19 | ||||||||||||||||||||
2021 and beyond | 7 | 525,970 | 3.8 | % | 20,213 | 5.9 | % | 38.43 | 7 | 120,297 | 0.9 | % | 3,893 | 1.1 | % | 32.36 | ||||||||||||||||||||
Total | 120 | 5,011,851 | 36.1 | % | $148,806 | 43.4 | % | $29.69 | 102 | 1,635,039 | 11.7 | % | $59,864 | 17.4 | % | $36.61 | ||||||||||||||||||||
Greater Seattle | ||||||||||||||||||||||||||||||
Year of Expiration | # of Expiring Leases | Total Square Feet | % of Total Leased Sq. Ft. | Annualized Base Rent (2) | % of Total Annualized Base Rent (2) | Annualized Rent per Sq. Ft. (2) | ||||||||||||||||||||||||
OFFICE TOTAL: | ||||||||||||||||||||||||||||||
Remainder of 2011 | 1 | 3,116 | 0.0 | % | $23 | 0.0 | % | $7.38 | ||||||||||||||||||||||
2012 | 4 | 52,625 | 0.4 | % | 1,172 | 0.3 | % | 22.27 | ||||||||||||||||||||||
2013 | 8 | 141,642 | 1.0 | % | 3,947 | 1.2 | % | 27.87 | ||||||||||||||||||||||
2014 | 5 | 40,540 | 0.3 | % | 1,117 | 0.3 | % | 27.55 | ||||||||||||||||||||||
2015 | 23 | 370,770 | 2.7 | % | 9,871 | 2.9 | % | 26.62 | ||||||||||||||||||||||
2016 | 4 | 73,977 | 0.5 | % | 1,894 | 0.6 | % | 25.60 | ||||||||||||||||||||||
2017 | 2 | 12,349 | 0.1 | % | 310 | 0.1 | % | 25.10 | ||||||||||||||||||||||
2018 | 2 | 48,878 | 0.4 | % | 1,371 | 0.4 | % | 28.05 | ||||||||||||||||||||||
2019 | 3 | 40,308 | 0.3 | % | 1,118 | 0.3 | % | 27.74 | ||||||||||||||||||||||
2020 | — | — | — | — | — | — | ||||||||||||||||||||||||
2021 and beyond | 2 | 10,769 | 0.1 | % | 273 | 0.1 | % | 25.35 | ||||||||||||||||||||||
Total | 54 | 794,974 | 5.8 | % | $21,096 | 6.2 | % | $26.54 | ||||||||||||||||||||||
(1) | The information presented for all lease expiration activity reflects leasing activity through September 30, 2011. For leases that have been renewed early or space that has been re-leased to a new tenant, the expiration date and annualized base rent information presented takes into consideration the renewed or re-leased lease terms. Excludes space leased under month-to-month leases and vacant space as of September 30, 2011. |
(2) | Reflects annualized contractual base rent calculated on a straight-line basis in accordance with GAAP excluding the amortization of deferred revenue related to tenant-funded tenant improvements and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Amounts represent percentage of total portfolio annualized contractual base rental revenue. |
20
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Quarterly Lease Expirations for 2011 and 2012(1)
($ in thousands)
# of Expiring Leases | Total Square Feet | % of Total Leased Sq. Ft. | Annualized Base Rent (2) | % of Total Annualized Base Rent (2) | Annualized Rent per Sq. Ft. (2) | ||||||||||||
OFFICE: | |||||||||||||||||
Remainder of Q4 2011 | 8 | 66,433 | 0.5 | % | $1,351 | 0.4 | % | $20.34 | |||||||||
Q1 2012 | 20 | 214,512 | 1.5 | % | $5,769 | 1.7 | % | $26.89 | |||||||||
Q2 2012 | 24 | 313,765 | 2.2 | % | 8,717 | 2.6 | % | 27.78 | |||||||||
Q3 2012 | 16 | 168,171 | 1.2 | % | 4,391 | 1.3 | % | 26.11 | |||||||||
Q4 2012 | 19 | 93,759 | 0.7 | % | 3,144 | 0.9 | % | 33.53 | |||||||||
Subtotal 2012 | 79 | 790,207 | 5.6 | % | $22,021 | 6.5 | % | $27.87 | |||||||||
INDUSTRIAL: | |||||||||||||||||
Remainder of Q4 2011 | — | — | — | — | — | — | |||||||||||
Q1 2012 | 2 | 114,861 | 0.9 | % | $1,012 | 0.3 | % | $8.81 | |||||||||
Q2 2012 | 1 | 12,000 | 0.1 | % | 128 | 0.0 | % | 10.67 | |||||||||
Q3 2012 | 3 | 60,000 | 0.4 | % | 380 | 0.1 | % | 6.33 | |||||||||
Q4 2012 | 3 | 168,133 | 1.2 | % | 971 | 0.3 | % | 5.78 | |||||||||
Subtotal 2012 | 9 | 354,994 | 2.6 | % | $2,491 | 0.7 | % | $7.02 | |||||||||
TOTAL PORTFOLIO: | |||||||||||||||||
Remainder of Q4 2011 | 8 | 66,433 | 0.5 | % | $1,351 | 0.4 | % | $20.34 | |||||||||
Q1 2012 | 22 | 329,373 | 2.4 | % | $6,781 | 2.0 | % | $20.59 | |||||||||
Q2 2012 | 25 | 325,765 | 2.3 | % | 8,845 | 2.6 | % | 27.15 | |||||||||
Q3 2012 | 19 | 228,171 | 1.6 | % | 4,771 | 1.4 | % | 20.91 | |||||||||
Q4 2012 | 22 | 261,892 | 1.9 | % | 4,115 | 1.2 | % | 15.71 | |||||||||
Subtotal 2012 | 88 | 1,145,201 | 8.2 | % | $24,512 | 7.2 | % | $21.40 | |||||||||
(1) | The information presented reflects leasing activity through September 30, 2011. For leases that have been renewed early or space that has been re-leased to a new tenant, the expiration date and annualized base rent information presented takes into consideration the renewed or re-leased lease terms. Excludes space leased under month-to-month leases and vacant space as of September 30, 2011. |
(2) | Reflects annualized contractual base rent calculated on a straight-line basis in accordance with GAAP excluding the amortization of deferred revenue related to tenant-funded tenant improvements and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Amounts represent percentage of total portfolio annualized contractual base rental revenue. |
21
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
($ in thousands)
Tenant Name | Product Type | Annualized Base Rental Revenue (2) | Rentable Square Feet | Percentage of Total Annualized Base Rental Revenue (2) | Percentage of Total Rentable Square Feet | ||||||||||||
Intuit, Inc. | Office | $ | 15,126 | 536,812 | 4.4 | % | 3.5 | % | |||||||||
Bridgepoint Education, Inc. | Office | 15,099 | 317,678 | 4.4 | % | 2.1 | % | ||||||||||
Scripps Health | Office | 12,562 | 262,868 | 3.7 | % | 1.7 | % | ||||||||||
Delta Dental of California | Office | 10,832 | 249,115 | 3.2 | % | 1.6 | % | ||||||||||
CareFusion Corporation (3) | Office | 10,087 | 459,709 | 3.0 | % | 3.0 | % | ||||||||||
DIRECTV, Inc. | Office | 8,956 | 329,339 | 2.6 | % | 2.2 | % | ||||||||||
AMN Healthcare, Inc. | Office | 8,192 | 175,672 | 2.4 | % | 1.2 | % | ||||||||||
Wells Fargo (3) | Office | 7,586 | 221,249 | 2.2 | % | 1.5 | % | ||||||||||
Hewlett-Packard Company | Office | 6,187 | 171,921 | 1.8 | % | 1.1 | % | ||||||||||
Fish & Richardson P.C. | Office | 6,071 | 139,538 | 1.8 | % | 0.9 | % | ||||||||||
BP Biofuels North America LLC | Office | 5,128 | 136,908 | 1.5 | % | 0.9 | % | ||||||||||
Epson America, Inc. | Office | 4,915 | 136,026 | 1.4 | % | 0.9 | % | ||||||||||
Avnet, Inc. | Office | 4,163 | 132,929 | 1.2 | % | 0.9 | % | ||||||||||
Scan Health Plan (3) | Office | 4,075 | 140,538 | 1.2 | % | 0.9 | % | ||||||||||
Mitchell International, Inc. | Office | 3,775 | 141,214 | 1.1 | % | 0.9 | % | ||||||||||
Total Top Fifteen Tenants | $ | 122,754 | 3,551,516 | 35.9 | % | 23.3 | % | ||||||||||
(1) | The information presented is as of the date of this filing. |
(2) | Based upon annualized contractual base rental revenue, which is calculated on a straight-line basis in accordance with GAAP, for leases for which rental revenue is being recognized by the Company as of September 30, 2011. |
(3) | The Company has entered into leases with various affiliates of the tenant name listed above. |
22
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
2011 Acquisitions
($ in millions)
COMPLETED ACQUISITIONS (1) | |||||||||||||||||
City/Submarket | Type | Month of Acquisition | No. of Buildings | Rentable Square Feet | Purchase Price | ||||||||||||
Property | |||||||||||||||||
1st Quarter: | |||||||||||||||||
250 Brannan Street | South Financial District | Office | January | 1 | 92,948 | $ | 33.0 | ||||||||||
San Francisco, CA | |||||||||||||||||
2nd Quarter: | |||||||||||||||||
10210, 10220, and 10230 NE Points Drive; 3933 Lake Washington Boulevard NE | Kirkland | Office | April | 4 | 279,924 | 100.1 | |||||||||||
Kirkland, WA | |||||||||||||||||
10770 Wateridge Circle | Sorrento Mesa | Office | May | 1 | 174,310 | 32.7 | |||||||||||
San Diego, CA | |||||||||||||||||
601 108th Avenue N.E. | Bellevue | Office | June | 1 | 488,470 | 215.0 | |||||||||||
Bellevue, WA | |||||||||||||||||
4040 Civic Center Drive | San Rafael | Office | June | 1 | 126,787 | 32.2 | |||||||||||
San Rafael, CA | |||||||||||||||||
3rd Quarter: | |||||||||||||||||
201 Third Street | South Financial District | Office | September | 1 | 311,545 | 103.3 | |||||||||||
San Francisco, CA | |||||||||||||||||
TOTAL | 9 | 1,473,984 | $ | 516.3 | |||||||||||||
(1) These properties were added to the Company's stabilized portfolio upon acquisition.
23
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
2011 Dispositions
($ in millions)
City / Submarket | Type | Month of Disposition | No. of Buildings | Rentable Square Feet | Sales Price | |||||||||||
Property | ||||||||||||||||
1st Quarter: | ||||||||||||||||
NONE | ||||||||||||||||
2nd Quarter: | ||||||||||||||||
NONE | ||||||||||||||||
3rd Quarter: | ||||||||||||||||
10350 Barnes Canyon and 10120 Pacific Heights | Sorrento Mesa | Office | September | 2 | 90,558 | $ | 23.9 | |||||||||
San Diego, CA | ||||||||||||||||
TOTAL | 2 | 90,558 | $ | 23.9 | ||||||||||||
24
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
In-Process Redevelopment Projects
($ in millions)
Estimated Construction Period | |||||||||||||||||||||
Redevelopment Project | Location | Start Date | Compl. Date | Estimated Stabilization Date (1) | Estimated Rentable Square Feet | Existing Investment (2) | Estimated Redevelopment Costs | Total Estimated Investment | Total Costs as of 9/30/2011 (3) | % Committed (4) | |||||||||||
UNDER CONSTRUCTION: | |||||||||||||||||||||
2260 E. Imperial Highway | El Segundo | 3Q 2010 | 3Q 2012 | 3Q 2012 | 299,000 | $9.1 | $49.2 | $58.3 | $22.4 | 100% | |||||||||||
3880 Kilroy Airport Way (5) | Long Beach | 3Q 2011 | 2Q 2012 | 2Q 2013 | 98,000 | 6.3 | 13.0 | 19.3 | 7.4 | 50% | |||||||||||
5010 Wateridge Vista Drive (6) | Sorrento Mesa | 3Q 2011 | 3Q 2012 | 3Q 2012 | 111,000 | 22.2 | 16.6 | 38.8 | 23.6 | 100% | |||||||||||
508,000 | $37.6 | $78.8 | $116.4 | $53.4 | 90% | ||||||||||||||||
(1) | Based on management's estimation of the earlier of stabilized occupancy (95%) or one year from the date of substantial completion. |
(2) | Represents the depreciated carrying value at the commencement of redevelopment for the space being redeveloped. |
(3) | Represents cash paid and costs incurred as of September 30, 2011. Includes existing investment at the commencement of redevelopment. |
(4) | Percentage Committed includes executed leases and signed letters of intent, calculated on a square footage basis. |
(5) The redevelopment will occur in two phases and the existing tenant will occupy approximately 50% during both redevelopment phases. Capitalized carry costs will be prorated based on occupancy during redevelopment.
(6) The existing investment for this redevelopment project includes the cost basis of one of the Company's undeveloped land parcels, Sorrento Gateway Lot 7.
25
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Future Development Pipeline and Other Land Holdings
($ in millions)
Future Development Pipeline | Gross Site | Estimated Rentable | Total Costs as of | |||||||||||
Project | Location | Type | Acreage | Square Feet | 9/30/2011 (1) | |||||||||
SAN DIEGO, CALIFORNIA | ||||||||||||||
Carlsbad Oaks - Lots 4, 5, 7 & 8 | Carlsbad | Office | 32.0 | 288,000 | $ | 18.2 | ||||||||
Pacific Corporate Center - Lot 8 | Sorrento Mesa | Office | 5.0 | 170,000 | 11.3 | |||||||||
Rancho Bernardo Corporate Center | I-15 Corridor | Office | 21.0 | 320,000 - 1,000,000 | 27.2 | |||||||||
One Paseo (2) | Del Mar | Office | 23.0 | 500,000 | 119.7 | |||||||||
Santa Fe Summit - Phase II and III | 56 Corridor | Office | 21.8 | 600,000 | 77.4 | |||||||||
Sorrento Gateway - Lot 2 | Sorrento Mesa | Office | 6.3 | 80,000 | 11.1 | |||||||||
SUBTOTAL | 109.1 | 1,958,000 - 2,638,000 | $ | 264.9 | ||||||||||
GREATER SEATTLE, WASHINGTON | ||||||||||||||
Plaza at Yarrow Bay - Building 5 | Kirkland | Office | 1.1 | 74,000 | $ | 2.6 | ||||||||
TOTAL FUTURE DEVELOPMENT PIPELINE | 110.2 | 2,032,000 - 2,712,000 | $ | 267.5 | ||||||||||
Other Land Holdings | Gross Site | Estimated Rentable | Total Costs as of | |||||||||||
Project | Location | Type | Acreage | Square Feet | 9/30/2011 (1) | |||||||||
IRVINE, CALIFORNIA | ||||||||||||||
17150 Von Karman (3) | Irvine | N/A | 8.5 | N/A | $ | 6.9 | ||||||||
(1) | Represents cash paid and costs incurred as of September 30, 2011. |
(2) | Estimated rentable square feet reflects existing office entitlements. The Company is currently pursuing mixed-use entitlements for this project which, if successfully obtained, would increase the estimated rentable square feet. |
(3) | During the third quarter of 2011, the Company began demolition of the industrial building at this site to prepare for the possible sale of the land since the Company successfully obtained entitlements to reposition this site for residential use. The Company's ultimate decision to sell this site and the timing of any potential future sale will depend upon market conditions and other factors. |
26
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Capital Structure
As of September 30, 2011
($ in thousands)
Shares/Units As of September 30, 2011 | Aggregate Principal Amount or $ Value Equivalent | % of Total Market Capitalization | ||||||||||||
DEBT: | ||||||||||||||
Unsecured Line of Credit | $ | — | 0.0 | % | ||||||||||
Unsecured Exchangeable Senior Notes due 2012 (1) | 148,000 | 3.8 | % | |||||||||||
Unsecured Exchangeable Senior Notes due 2014 (1) | 172,500 | 4.5 | % | |||||||||||
Unsecured Senior Notes due 2014 | 83,000 | 2.1 | % | |||||||||||
Unsecured Senior Notes due 2015 (1) | 325,000 | 8.4 | % | |||||||||||
Unsecured Senior Notes due 2018 (1) | 325,000 | 8.4 | % | |||||||||||
Unsecured Senior Notes due 2020 (1) | 250,000 | 6.5 | % | |||||||||||
Secured Debt (1) | 473,400 | 12.3 | % | |||||||||||
Total Debt | $ | 1,776,900 | 46.0 | % | ||||||||||
EQUITY AND NONCONTROLLING INTERESTS: | ||||||||||||||
7.450% Series A Cumulative Redeemable Preferred units (2) | 1,500,000 | $ | 75,000 | 1.9 | % | |||||||||
7.800% Series E Cumulative Redeemable Preferred stock (3) | 1,610,000 | 40,250 | 1.0 | % | ||||||||||
7.500% Series F Cumulative Redeemable Preferred stock (3) | 3,450,000 | 86,250 | 2.2 | % | ||||||||||
Common units outstanding (4) | 1,718,131 | 53,778 | 1.4 | % | ||||||||||
Common shares outstanding (4) | 58,464,412 | 1,829,936 | 47.5 | % | ||||||||||
Total Equity and Noncontrolling Interests | $ | 2,085,214 | 54.0 | % | ||||||||||
TOTAL MARKET CAPITALIZATION | $ | 3,862,114 | 100.0 | % | ||||||||||
(1)Represents gross aggregate principal amount due at maturity before the effect of the unamortized discounts and premiums as of September 30, 2011.
(2)Value based on $50.00 per unit liquidation preference.
(3)Value based on $25.00 per share liquidation preference.
(4)Value based on closing share price of $31.30 as of September 30, 2011.
27
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Debt Analysis
As of September 30, 2011
($ in millions)
TOTAL DEBT COMPOSITION | |||||||||
% of | Weighted Average | ||||||||
Total Debt | Interest Rate | Maturity | |||||||
Secured vs. Unsecured Debt: | |||||||||
Unsecured Debt (1) | 73.4 | % | 5.1 | % | 5.0 | ||||
Secured Debt | 26.6 | % | 5.4 | % | 3.3 | ||||
Floating vs. Fixed-Rate Debt: | |||||||||
Floating-Rate Debt (2) | — | % | — | — | |||||
Fixed-Rate Debt (1) | 100.0 | % | 5.2 | % | 4.6 | ||||
Total (Stated Rate) (1) | 5.2 | % | 4.6 | ||||||
GAAP Effective Rate (3) | 5.6 | % | |||||||
Total GAAP Effective Rate Including Debt Issuance Costs | 6.0 | % | |||||||
CAPITALIZED INTEREST, LOAN FEES, AND DEBT DISCOUNTS | ||
Quarter-to-Date | Year-to-Date | |
$2.4 | $6.4 |
(1) | Excludes the impact of the amortization of any debt discounts/premiums. |
(2) | Floating rate debt is calculated at an annual rate of LIBOR plus 1.75% at September 30, 2011. No interest rate is presented since the Company's only floating rate debt is the Unsecured Line of Credit and there were no borrowings outstanding under the Unsecured Line of Credit at September 30, 2011. |
(3) Includes the impact of the amortization of any debt discounts/premiums, excluding debt issuance costs.
28
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Debt Analysis
As of September 30, 2011
($ in thousands)
DEBT MATURITY SCHEDULE | |||||||||||||||||||||||||||||||||||
Floating/ Fixed Rate | Stated Rate | GAAP Effective Rate (1) | Maturity Date | Remaining 2011 | 2012 | 2013 | 2014 | 2015 | After 2015 | Total (2) | |||||||||||||||||||||||||
Unsecured Debt: | |||||||||||||||||||||||||||||||||||
Fixed | 3.25% | 5.45% | 4/15/2012 | $ | 148,000 | $ | 148,000 | ||||||||||||||||||||||||||||
Fixed | 4.25% | 7.13% | 11/15/2014 | 172,500 | 172,500 | ||||||||||||||||||||||||||||||
Fixed | 6.45% | 6.45% | 8/4/2014 | 83,000 | 83,000 | ||||||||||||||||||||||||||||||
Fixed | 5.00% | 5.01% | 11/3/2015 | 325,000 | 325,000 | ||||||||||||||||||||||||||||||
Fixed | 4.80% | 4.83% | 7/15/2018 | 325,000 | 325,000 | ||||||||||||||||||||||||||||||
Fixed | 6.63% | 6.74% | 6/1/2020 | 250,000 | 250,000 | ||||||||||||||||||||||||||||||
— | 148,000 | — | 255,500 | 325,000 | 575,000 | 1,303,500 | |||||||||||||||||||||||||||||
Secured Debt: | |||||||||||||||||||||||||||||||||||
Fixed | 6.70% | 6.70% | 12/27/2011 | 68,825 | 68,825 | ||||||||||||||||||||||||||||||
Fixed | 5.10% | 6.13% | 4/1/2012 | 52,000 | 52,000 | ||||||||||||||||||||||||||||||
Fixed | 5.57% | 5.57% | 8/1/2012 | 390 | 71,517 | 71,907 | |||||||||||||||||||||||||||||
Fixed | 4.95% | 4.95% | 8/1/2012 | 175 | 29,754 | 29,929 | |||||||||||||||||||||||||||||
Fixed | 4.94% | 4.00% | 4/15/2015 | 246 | 1,011 | 1,062 | 1,116 | 26,205 | 29,640 | ||||||||||||||||||||||||||
Fixed | 6.51% | 6.51% | 2/1/2017 | 215 | 892 | 952 | 1,016 | 1,084 | 65,563 | 69,722 | |||||||||||||||||||||||||
Fixed | 7.15% | 7.15% | 5/1/2017 | 498 | 2,084 | 2,238 | 2,404 | 2,581 | 3,988 | 13,793 | |||||||||||||||||||||||||
Fixed | 4.27% | 4.27% | 2/1/2018 | 2,075 | 2,358 | 2,461 | 128,106 | 135,000 | |||||||||||||||||||||||||||
Fixed | Various | Various | Various | 22 | 45 | 46 | 49 | 51 | 2,371 | �� | 2,584 | (3) | |||||||||||||||||||||||
70,371 | 157,303 | 6,373 | 6,943 | 32,382 | 200,028 | 473,400 | |||||||||||||||||||||||||||||
Total | 5.15% | 5.64% | $ | 70,371 | $ | 305,303 | $ | 6,373 | $ | 262,443 | $ | 357,382 | $ | 775,028 | $ | 1,776,900 | |||||||||||||||||||
(1) | The rate at which interest expense is recorded for financial reporting purposes, which reflects the amortization of any discounts/premiums, excluding debt issuance costs. |
(2) | Amounts presented reflect the gross principal balances before the effect of any unamortized discounts/premiums. As of September 30, 2011, the aggregate net unamortized discounts totaled approximately $17.3 million. |
(3) Represents balance outstanding related to public facility bonds (the “Bonds”) issued in February 2008 by the City of Carlsbad. The Bonds have annual maturities beginning on
September 1, 2012 through September 1, 2038, with interest rates ranging from 4.60% to 6.20%.
29
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Debt Covenants
As of September 30, 2011
($ in millions)
KEY DEBT COVENANTS | |||||
Credit Facility (as defined per Credit Agreement): | Covenant | Actual Performance as of September 30, 2011 | |||
Total debt to total asset value | less than 60% | 39% | |||
Fixed charge coverage ratio | greater than 1.5x | 2.3x | |||
Unsecured debt ratio | greater than 1.67x | 2.34x | |||
Unencumbered asset pool debt service coverage | greater than 2.0x | 3.5x | |||
Unsecured Senior Notes due 2015, 2018 and 2020 (as defined per Indentures): | |||||
Total debt to total asset value | less than 60% | 45% | |||
Interest coverage | greater than 1.5x | 2.8x | |||
Secured debt to total asset value | less than 40% | 12% | |||
Unencumbered asset pool value to unsecured debt | greater than 150% | 234% |
30
Kilroy Realty Corporation
Third Quarter 2011 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 November 2, 2011 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, acquisition-related expenses, other nonproperty income and losses, and gains and losses from property dispositions, 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, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, 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, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, 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.
31
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Management Statements on Non-GAAP Supplemental Measures
EBITDA:
Management believes that earnings before interest expense, depreciation and amortization, gain/loss on early extinguishment of debt, net gains and losses on disposition of discontinued operations, net income attributable to noncontrolling interests, preferred dividends and distributions, and impairment losses (“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, including the impact of general and administrative expenses and acquisition-related expenses, 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:
The Company calculates FFO in accordance with the White Paper on FFO approved by the Board of Governors of NAREIT. The White Paper defines FFO as net income or loss calculated in accordance with GAAP, excluding extraordinary items, as defined by GAAP, 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.
Management believes that FFO is a useful supplemental measure of the Company's operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of the Company's activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, the Company's FFO may not be comparable to all other REITs.
Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, management believes that FFO along with the required GAAP presentations provides a more complete measurement of the Company's performance relative to its competitors and a more appropriate basis on which to make decisions involving operating, financing and investing activities than the required GAAP presentations alone would provide.
However, FFO should not be viewed as an alternative measure of 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 and could materially impact the Company's results from 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, debt discounts and share-based compensation awards, adjustment to GAAP gain/loss on early extinguishment of debt, amortization of above (below) market rents for acquisition properties and contractual cash rents received in advance of revenue recognition, then subtracting recurring tenant improvements, leasing commissions and capital expenditures, and eliminating the net effect of straight-line rents, amortization of deferred revenue related to tenant improvements and cash received prior to revenue recognition. FAD provides an additional perspective on the Company's ability to fund cash needs and make distributions to stockholders by adjusting FFO for the impact of certain cash and noncash items, as well as adjusting FFO for 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.
32
Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Reconciliation of Same Store Net Operating Income to Net Income (Loss) Available to Common Stockholders
(unaudited, $ in thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||
Same Store Cash Net Operating Income | $ | 44,410 | $ | 44,578 | $ | 133,343 | $ | 128,601 | |||||||||
Adjustments: | |||||||||||||||||
GAAP Operating Revenues Adjustments, net | 5,753 | 3,338 | 16,738 | 13,453 | |||||||||||||
GAAP Operating Expenses Adjustments, net | 5 | 857 | (141 | ) | 843 | ||||||||||||
Same Store GAAP Net Operating Income | 50,168 | 48,773 | 149,940 | 142,897 | |||||||||||||
Non-Same Store GAAP Net Operating Income | 18,950 | 7,640 | 45,661 | 12,477 | |||||||||||||
Net Operating Income excluding discontinued operations | 69,118 | 56,413 | 195,601 | 155,374 | |||||||||||||
Net Operating Income from discontinued operations | 407 | 453 | 1,350 | 1,320 | |||||||||||||
Net Operating Income, as defined(1) | 69,525 | 56,866 | 196,951 | 156,694 | |||||||||||||
Adjustments: | |||||||||||||||||
General and administrative expenses | (6,355 | ) | (7,273 | ) | (20,355 | ) | (21,096 | ) | |||||||||
Acquisition-related expenses | (1,163 | ) | (354 | ) | (2,829 | ) | (1,624 | ) | |||||||||
Depreciation and amortization (including discontinued operations) | (36,251 | ) | (30,054 | ) | (97,810 | ) | (74,714 | ) | |||||||||
Interest income and other net investment gains | 30 | 337 | 272 | 703 | |||||||||||||
Interest expense | (24,051 | ) | (15,853 | ) | (66,155 | ) | (40,897 | ) | |||||||||
Loss on early extinguishment of debt | — | — | — | (4,564 | ) | ||||||||||||
Net gain on dispositions of discontinued operations | 12,555 | — | 12,555 | — | |||||||||||||
Net Income | 14,290 | 3,669 | 22,629 | 14,502 | |||||||||||||
Net (income) loss attributable to noncontrolling common units of the Operating Partnership | (296 | ) | 4 | (320 | ) | (128 | ) | ||||||||||
Preferred distributions and dividends | (3,799 | ) | (3,799 | ) | (11,397 | ) | (11,397 | ) | |||||||||
Net Income (Loss) Available to Common Stockholders | $ | 10,195 | $ | (126 | ) | $ | 10,912 | $ | 2,977 | ||||||||
(1) | Please refer to page 31 for Management Statements on Net Operating Income and Same Store Net Operating Income. |
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Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Reconciliation of EBITDA to Net Income (Loss) Available to Common Stockholders
(unaudited, $ in thousands)
Three Months Ended September 30, | ||||||||||
2011 | 2010 | |||||||||
Net Income (Loss) Available to Common Stockholders | $ | 10,195 | $ | (126 | ) | |||||
Interest expense | 24,051 | 15,853 | ||||||||
Depreciation and amortization (including discontinued operations) | 36,251 | 30,054 | ||||||||
Net income (loss) attributable to noncontrolling common units of the Operating Partnership | 296 | (4 | ) | |||||||
Net gain on dispositions of discontinued operations | (12,555 | ) | — | |||||||
Preferred distributions and dividends | 3,799 | 3,799 | ||||||||
EBITDA (1) | $ | 62,037 | $ | 49,576 | ||||||
(1) | Please refer to page 32 for a Management Statement on EBITDA. |
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Kilroy Realty Corporation
Third Quarter 2011 Supplemental Financial Report
Reconciliation of Funds Available for Distribution to GAAP Net Cash Provided by Operating Activities
(unaudited, $ in thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||
Funds Available for Distribution (1) | $ | 18,854 | $ | 14,760 | $ | 56,745 | $ | 39,246 | ||||||||||
Adjustments: | ||||||||||||||||||
Tenant improvements, leasing commissions and recurring capital expenditures | 9,755 | 15,077 | 28,888 | 40,995 | ||||||||||||||
Depreciation for furniture, fixtures and equipment | 309 | 234 | 839 | 665 | ||||||||||||||
Preferred distributions and dividends | 3,799 | 3,799 | 11,397 | 11,397 | ||||||||||||||
Provision for uncollectible tenant recievables | 274 | (127 | ) | 420 | (113 | ) | ||||||||||||
Changes in operating assets and liabilities and other adjustments, net (2) | 24,609 | 3,797 | 15,776 | 2,738 | ||||||||||||||
GAAP Net Cash Provided by Operating Activities | $ | 57,600 | $ | 37,540 | $ | 114,065 | $ | 94,928 | ||||||||||
(1) | Please refer to page 32 for a Management Statement on Funds Available for Distribution. |
(2) | Primarily includes changes in the following assets and liabilities: marketable securities; current receivables; other deferred leasing costs; prepaid expenses and other assets; accounts payable, accrued expenses and other liabilities; and rents received in advance and tenant security deposits. |
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