Kilroy Realty Corporation (NYSE: KRC) today reported
financial results for its fourth quarter ended December 31,
2021.
Fourth Quarter
Highlights
Financial Results
- Net income available to common stockholders per share of
$0.40
- Funds from operations available to common stockholders and
unitholders (“FFO”) per share of $1.05
- Both net income available to common stockholders per share and
FFO per share included an $0.11 per share charge for the early
extinguishment of debt, inclusive of additional interest expense,
related to the redemption of the company’s 3.800% unsecured senior
notes due January 2023
- Revenues of $261.1 million
Stabilized Portfolio
- Stabilized portfolio was 91.9% occupied and 93.9% leased at
December 31, 2021
- Signed approximately 312,000 square feet of new and renewing
leases
- Includes an eight-year lease with a major media company for
80,000 square feet in Los Angeles executed in November
- GAAP and cash rents increased approximately 20.2% and 6.9%,
respectively, from prior levels
Dispositions
- In December, completed the sale of Sabre Springs Corporate
Center, a two-building, approximately 102,000 square foot office
campus in the I-15 Corridor of San Diego for gross proceeds of
$37.0 million
Development
- During the quarter, commenced GAAP revenue recognition on 100%
of Kilroy Oyster Point - Phase 1, an approximately 661,000 square
foot office and life science campus in South San Francisco that is
100% leased to two tenants, Cytokinetics and Stripe
- In connection with the execution of three new life science
leases totaling 330,000 square feet, in December, commenced
construction on the first of three redevelopments, the 96,000
square foot life science conversion of 12340 El Camino Real in the
Del Mar submarket of San Diego
Balance Sheet / Liquidity Highlights
- In October, completed a public offering of $450.0 million of
12-year senior unsecured green bonds at 2.650% due November
2033
- In October, completed the early redemption of all $300.0
million of 3.800% unsecured senior notes due January 2023 for a
price of approximately $313.4 million, including make whole
redemption fees and other related costs
- As of the date of this release, the company had approximately
$1.4 billion of total liquidity comprised of approximately $290.0
million of cash and cash equivalents and full availability under
the $1.1 billion unsecured revolving credit facility
- No significant debt maturities until December 2024
Full Year 2021
Highlights
Operations
- Executed approximately 1.3 million square feet of office and
life science leases, including leases on development properties,
with strong increases in rental rates compared to prior rates
- GAAP and cash rents increased approximately 20.8% and 7.0%,
respectively, from prior levels
- 67% new leases and 33% renewal leases with an average term of 7
years
- With strong, consistent leasing performance, the company is
entering the new year with average lease expirations of
approximately 7.1% annually through 2025
Capital Allocation
- Generated gross proceeds of approximately $1.1 billion from the
company’s capital recycling program including the disposition of
The Exchange on 16th for approximately $1,440 per square foot and a
gain on sale of $457.8 million
- Redeployed the capital generated from dispositions into five
off-market acquisitions of operating and development properties
totaling $1.2 billion
- Among these transactions was the acquisition of Indeed Tower, a
newly constructed 734,000 square foot office tower located in the
central business district of Austin, Texas, marking the company’s
entry into the Southwest region
- Expanded the company’s life science platform with the execution
of 330,000 square feet of life science leases and in connection
with these leases, committed three buildings in San Diego to our
redevelopment program: 12340 El Camino Real and 12400 High Bluff
Drive in the Del Mar submarket and 4690 Executive Drive in the
University Towne Center submarket, which will be converted in
phases from office to life science use
Development
- Added more than $1.0 billion of new development to the
stabilized portfolio
- 9455 Towne Centre Drive, a $95.0 million, approximately 160,000
square foot office project located in the University Towne Center
submarket of San Diego; the project is 100% leased to a global
technology company
- One Paseo Office, a $210.0 million, approximately 288,000
square foot component of our One Paseo mixed-use project in the Del
Mar submarket of San Diego, which is 100% leased
- Oyster Point Phase I, a $570.0 million, approximately 661,000
square foot 3-building office development project located in South
San Francisco. The first building was delivered to Cytokinetics at
the end of September. The remaining two buildings were delivered to
fintech giant Stripe in November
- Jardine, the $185.0 million, 193-unit luxury residential tower
in Hollywood that was completed in April and is currently 84%
leased
- The company now has 1,001 residential units that are
approximately 96% leased
- Commenced construction on $1.0 billion of new development
projects
- Kilroy Oyster Point - Phase 2, a $940.0 million, approximately
875,000 square foot life science project located in South San
Francisco
- 9514 Towne Centre Drive, a $60.0 million, approximately 71,000
square foot office project located in the University Towne Center
submarket of San Diego; the project is 100% leased
Financial and Balance Sheet
- Increased the size of the company’s unsecured revolving credit
facility from $750.0 million to $1.1 billion, reduced borrowing
costs and extended its maturity to July 2025, with two six-month
extension options
- Increased the annual dividend on the company’s common stock by
4.0% to $2.08 per share
- Completed a public offering of $450.0 million, 2.650% 12-year
senior unsecured green bonds
Sustainability
- Maintained industry leadership position in sustainability, as
measured by accredited organizations and ranking systems, including
the GRESB 2021 Real Estate Assessment, NAREIT’s Leader in the Light
award, the Dow Jones Sustainability World Index (DJSI), and ENERGY
STAR Partner of the Year Sustained Excellence
- Debuted on the U.S. EPA’s National Top 100 List of largest
green power users
- International WELL Building Institute WELL Portfolio Class of
2021
Results for the Quarter Ended December 31, 2021
For the fourth quarter ended December 31, 2021, the company
reported net income available to common stockholders of $47.6
million, or $0.40 per share, including a $0.05 per share gain on
sale of operating properties, compared to $78.6 million, or $0.67
per share, including a $0.31 per share gain on sale of operating
properties in the fourth quarter of 2020. FFO in the fourth quarter
of 2021 was $125.5 million, or $1.05 per share, compared to $112.7
million, or $0.95 per share, in the fourth quarter of 2020. Net
income available to common stockholders and FFO in the fourth
quarter of 2021 included an $0.11 per share charge for the early
extinguishment of debt, inclusive of additional interest expense,
related to the redemption of the company’s 3.800% unsecured senior
notes due January 2023. Prior period net income available to common
stockholders and FFO per share included a reversal of revenue of
$0.03 per share net charge due to co-working, advertising and
residential tenant creditworthiness related to the COVID-19
pandemic.
All per share amounts in this report are presented on a diluted
basis.
Net Income Available to Common Stockholders / FFO Guidance
and Outlook
The company is providing a guidance range of NAREIT-defined FFO
per diluted share for the full year 2022 of $4.35 to $4.55 per
share, with a midpoint of $4.45 per share.
Full Year 2022 Range
Low End
High End
Net income available to common
stockholders per share - diluted
$
1.76
$
1.96
Weighted average common shares outstanding
- diluted (1)
117,850
117,850
Net income available to common
stockholders
$
208,000
$
231,000
Adjustments:
Net income attributable to noncontrolling
common units of the Operating Partnership
2,200
2,600
Net income attributable to noncontrolling
interests in consolidated property partnerships
26,500
28,500
Depreciation and amortization of real
estate assets
318,000
318,000
Funds From Operations attributable to
noncontrolling interests in consolidated property partnerships
(37,500
)
(38,500
)
Funds From Operations (2)
$
517,200
$
541,600
Weighted average common shares/units
outstanding – diluted (3)
119,000
119,000
Funds From Operations per common
share/unit – diluted (3)
$
4.35
$
4.55
Key 2022 assumptions:
- Dispositions of $200.0 million to $500.0 million
- Same Store Cash NOI growth of 4.5% to 5.5% (2)
- Year-end occupancy of approximately 91.0% to 92.0%
- Total development spending of approximately $550.0 million to
$650.0 million
________________________
(1)
Calculated based on estimated weighted
average shares outstanding including non-participating share-based
awards.
(2)
See management statement for Funds From
Operations at end of release.
(3)
Calculated based on weighted average
shares outstanding including participating and non-participating
share-based awards, dilutive impact of stock options and
contingently issuable shares, and assuming the exchange of all
common limited partnership units outstanding. Reported amounts are
attributable to common stockholders and common unitholders.
(4)
See management statement for Same Store
Cash Net Operating Income on page 36 of our Supplemental Financial
Report furnished on Form 8-K with this press release.
The company’s guidance estimates for the full year 2022, and the
reconciliation of net income available to common stockholders per
share - diluted and FFO per share and unit - diluted included
within this press release, reflect management’s views on current
and future market conditions, including assumptions with respect to
rental rates, occupancy levels, and the earnings impact of the
events referenced in this press release. Although these guidance
estimates reflect the impact on the company’s operating results of
an assumed range of future disposition activity, these guidance
estimates do not include any estimates of possible future gains or
losses from possible future dispositions because the magnitude of
gains or losses on sales of depreciable operating properties, if
any, will depend on the sales price and depreciated cost basis of
the disposed assets at the time of disposition, information that is
not known at the time the company provides guidance, and the timing
of any gain recognition will depend on the closing of the
dispositions, information that is also not known at the time the
company provides guidance and may occur after the relevant guidance
period. We caution you not to place undue reliance on our assumed
range of future disposition activity because any potential future
disposition transactions will ultimately depend on the market
conditions and other factors, including but not limited to the
company’s capital needs, the particular assets being sold and the
company’s ability to defer some or all of the taxable gain on the
sales. These guidance estimates also do not include the impact on
operating results from potential future acquisitions, possible
capital markets activity, possible future impairment charges or any
events outside of the company’s control. There can be no assurance
that the company’s actual results will not differ materially from
these estimates.
Conference Call and Audio Webcast
The company’s management will discuss fourth quarter results and
the current business environment during the company’s February 1,
2022 earnings conference call. The call will begin at 10:00 a.m.
Pacific Time and last approximately one hour. Those interested in
listening via the Internet can access the conference call at
https://events.q4inc.com/attendee/813755000. It may be necessary to
download audio software to hear the conference call. Those
interested in listening via telephone can access the conference
call at (844) 200-6205 and enter access code 734934 five to 10
minutes prior to the start time to allow time for registration.
International callers should dial (929) 526-1599 and enter the same
passcode. In order to bypass speaking to the operator on the day of
the call, please pre-register anytime at
https://www.incommglobalevents.com/registration/q4inc/9126/q4-2021-kilroy-realty-corporation-earnings-conference-call/.
A replay of the conference call will be available via telephone on
February 1, 2022 through February 8, 2022 by dialing (866) 813-9403
and entering passcode 009720. International callers should dial
(929) 458-6194 and enter the same passcode. The replay will also be
available on our website at
http://investors.kilroyrealty.com/shareholders/investor-events/default.aspx.
About Kilroy Realty
Corporation
Kilroy Realty Corporation (NYSE: KRC, the “company”, “Kilroy”)
is a leading U.S. landlord and developer, with operations in San
Diego, Greater Los Angeles, the San Francisco Bay Area, the Pacific
Northwest and Austin, Texas. The company has earned global
recognition for sustainability, building operations, innovation and
design. As pioneers and innovators in the creation of a more
sustainable real estate industry, the company’s approach to modern
business environments helps drive creativity and productivity for
some of the world’s leading technology, entertainment, life science
and business services companies.
The company is a publicly traded real estate investment trust
(“REIT”) and member of the S&P MidCap 400 Index with more than
seven decades of experience developing, acquiring and managing
office, life science and mixed-use projects.
As of December 31, 2021, Kilroy’s stabilized portfolio totaled
approximately 15.5 million square feet of primarily office and life
science space that was 91.9% occupied and 93.9% leased. The company
also had more than 1,000 residential units in Hollywood and San
Diego, which had a quarterly average occupancy of 88.9%. In
addition, the company had one 96,000 square foot in-process life
science redevelopment project with total estimated redevelopment
costs of $40.0 million and five in-process development projects
with an estimated total investment of $2.2 billion, totaling
approximately 2.6 million square feet of office and life science
space. The in-process development and redevelopment office and life
science space was 46% leased.
A Leader in Sustainability and Commitment to Corporate Social
Responsibility
The company is listed on the Dow Jones Sustainability World
Index and has been recognized by industry organizations around the
world. The company’s stabilized portfolio was 73% LEED certified,
37% Fitwel certified, 76% of eligible office properties were ENERGY
STAR certified, and 80% of our eligible stabilized residential
properties were ENERGY STAR certified as of December 31, 2021.
The company has been recognized by GRESB as the listed
sustainability leader in the Americas for eight of the last nine
years. Other honors have included the National Association of Real
Estate Investment Trust’s (NAREIT) Leader in the Light award for
eight consecutive years and ENERGY STAR Partner of the Year for
eight years as well as ENERGY STAR’s highest honor of Sustained
Excellence, for the past six years.
A big part of the company’s foundation is its commitment to
enhancing employee growth, satisfaction and wellness while
maintaining a diverse and thriving culture. For the third year in a
row, the company has been named to Bloomberg’s Gender Equality
Index—recognizing companies committed to supporting gender equality
through policy development, representation, and transparency.
More information is available at
http://www.kilroyrealty.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements are based on our current
expectations, beliefs and assumptions, and are not guarantees of
future performance. Forward-looking statements are inherently
subject to uncertainties, risks, changes in circumstances, trends
and factors that are difficult to predict, many of which are
outside of our control. Accordingly, actual performance, results
and events may vary materially from those indicated or implied in
the forward-looking statements, and you should not rely on the
forward-looking statements as predictions of future performance,
results or events. Numerous factors could cause actual future
performance, results and events to differ materially from those
indicated in the forward-looking statements, including, among
others: global market and general economic conditions and their
effect on our liquidity and financial conditions and those of our
tenants; adverse economic or real estate conditions generally, and
specifically, in the States of California, Texas and Washington;
risks associated with our investment in real estate assets, which
are illiquid, and with trends in the real estate industry; defaults
on or non-renewal of leases by tenants; any significant downturn in
tenants’ businesses; our ability to re-lease property at or above
current market rates; costs to comply with government regulations,
including environmental remediation; the availability of cash for
distribution and debt service and exposure to risk of default under
debt obligations; increases in interest rates and our ability to
manage interest rate exposure; the availability of financing on
attractive terms or at all, which may adversely impact our future
interest expense and our ability to pursue development,
redevelopment and acquisition opportunities and refinance existing
debt; a decline in real estate asset valuations, which may limit
our ability to dispose of assets at attractive prices or obtain or
maintain debt financing, and which may result in write-offs or
impairment charges; significant competition, which may decrease the
occupancy and rental rates of properties; potential losses that may
not be covered by insurance; the ability to successfully complete
acquisitions and dispositions on announced terms; the ability to
successfully operate acquired, developed and redeveloped
properties; the ability to successfully complete development and
redevelopment projects on schedule and within budgeted amounts;
delays or refusals in obtaining all necessary zoning, land use and
other required entitlements, governmental permits and
authorizations for our development and redevelopment properties;
increases in anticipated capital expenditures, tenant improvement
and/or leasing costs; defaults on leases for land on which some of
our properties are located; adverse changes to, or enactment or
implementations of, tax laws or other applicable laws, regulations
or legislation, as well as business and consumer reactions to such
changes; risks associated with joint venture investments, including
our lack of sole decision-making authority, our reliance on
co-venturers’ financial condition and disputes between us and our
co-venturers; environmental uncertainties and risks related to
natural disasters; our ability to maintain our status as a REIT;
and uncertainties regarding the impact of the COVID-19 pandemic,
and restrictions intended to prevent its spread, on our business
and the economy generally. These factors are not exhaustive and
additional factors could adversely affect our business and
financial performance. For a discussion of additional factors that
could materially adversely affect our business and financial
performance, see the factors included under the caption “Risk
Factors” in our annual report on Form 10-K for the year ended
December 31, 2020 and our other filings with the Securities and
Exchange Commission. All forward-looking statements are based on
currently available information and speak only as of the dates on
which they are made. We assume no obligation to update any
forward-looking statement made in this press release that becomes
untrue because of subsequent events, new information or otherwise,
except to the extent we are required to do so in connection with
our ongoing requirements under federal securities laws.
KILROY REALTY CORPORATION
SUMMARY OF
QUARTERLY RESULTS
(unaudited; in thousands, except
per share data)
Three Months Ended December
31,
Year Ended December
31,
2021
2020
2021
2020
Revenues
$
261,085
$
229,332
$
955,040
$
898,397
Net income available to common
stockholders
$
47,646
$
78,642
$
628,144
$
187,105
Weighted average common shares outstanding
– basic
116,462
115,730
116,429
113,241
Weighted average common shares outstanding
– diluted
117,110
116,243
116,949
113,720
Net income available to common
stockholders per share – basic
$
0.41
$
0.67
$
5.38
$
1.63
Net income available to common
stockholders per share – diluted
$
0.40
$
0.67
$
5.36
$
1.63
Funds From Operations (1)(2)
$
125,477
$
112,703
$
462,314
$
433,356
Weighted average common shares/units
outstanding – basic (3)
118,365
118,330
118,349
116,233
Weighted average common shares/units
outstanding – diluted (4)
119,012
118,843
118,868
116,711
Funds From Operations per common
share/unit – basic (2)
$
1.06
$
0.95
$
3.91
$
3.73
Funds From Operations per common
share/unit – diluted (2)
$
1.05
$
0.95
$
3.89
$
3.71
Common shares outstanding at end of
period
116,464
116,036
Common partnership units outstanding at
end of period
1,151
1,151
Total common shares and units outstanding
at end of period
117,615
117,187
December 31, 2021
December 31, 2020
Stabilized office portfolio occupancy
rates: (5)
Greater Los Angeles
86.1
%
88.1
%
San Diego County
95.9
%
85.2
%
San Francisco Bay Area
92.4
%
94.5
%
Greater Seattle
97.2
%
94.7
%
Weighted average total
91.9
%
91.2
%
Total square feet of stabilized office
properties owned at end of period: (5)
Greater Los Angeles
4,437
4,395
San Diego County
2,427
2,147
San Francisco Bay Area
6,212
6,276
Greater Seattle
2,381
1,802
Total
15,457
14,620
________________________
(1)
Reconciliation of Net income available to
common stockholders to Funds From Operations available to common
stockholders and unitholders and management statement on Funds From
Operations are included after the Consolidated Statements of
Operations.
(2)
Reported amounts are attributable to
common stockholders, common unitholders and restricted stock
unitholders.
(3)
Calculated based on weighted average
shares outstanding including participating share-based awards (i.e.
nonvested stock and certain time based restricted stock units) and
assuming the exchange of all common limited partnership units
outstanding.
(4)
Calculated based on weighted average
shares outstanding including participating and non-participating
share-based awards, dilutive impact of stock options and
contingently issuable shares, and assuming the exchange of all
common limited partnership units outstanding.
(5)
Occupancy percentages and total square
feet reported are based on the company’s stabilized office
portfolio for the periods presented. Occupancy percentages and
total square feet shown for December 31, 2020 include the office
properties that were sold subsequent to December 31, 2020.
KILROY
REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
December 31, 2021
December 31, 2020
ASSETS
REAL ESTATE ASSETS:
Land and improvements
$
1,731,982
$
1,628,848
Buildings and improvements
7,543,585
6,783,092
Undeveloped land and construction in
progress
2,017,126
1,778,106
Total real estate assets held for
investment
11,292,693
10,190,046
Accumulated depreciation and
amortization
(2,003,656
)
(1,798,646
)
Total real estate assets held for
investment, net
9,289,037
8,391,400
Cash and cash equivalents
414,077
731,991
Restricted cash
13,006
91,139
Marketable securities
27,475
27,481
Current receivables, net
14,386
12,007
Deferred rent receivables, net
405,665
386,658
Deferred leasing costs and
acquisition-related intangible assets, net
234,458
210,949
Right of use ground lease assets
127,302
95,523
Prepaid expenses and other assets, net
57,991
53,560
TOTAL ASSETS
$
10,583,397
$
10,000,708
LIABILITIES AND
EQUITY
LIABILITIES:
Secured debt, net
$
248,367
$
253,582
Unsecured debt, net
3,820,383
3,670,099
Accounts payable, accrued expenses and
other liabilities
391,264
445,100
Ground lease liabilities
125,550
97,778
Accrued dividends and distributions
61,850
59,431
Deferred revenue and acquisition-related
intangible liabilities, net
171,151
128,523
Rents received in advance and tenant
security deposits
74,962
68,874
Total liabilities
4,893,527
4,723,387
EQUITY:
Stockholders’ Equity
Common stock
1,165
1,160
Additional paid-in capital
5,155,232
5,131,916
Retained earnings (distributions in excess
of earnings)
283,663
(103,133
)
Total stockholders’ equity
5,440,060
5,029,943
Noncontrolling Interests
Common units of the Operating
Partnership
53,746
49,875
Noncontrolling interests in consolidated
property partnerships
196,064
197,503
Total noncontrolling interests
249,810
247,378
Total equity
5,689,870
5,277,321
TOTAL LIABILITIES AND EQUITY
$
10,583,397
$
10,000,708
KILROY
REALTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except
per share data)
Three Months Ended December
31,
Year Ended December
31,
2021
2020
2021
2020
REVENUES
Rental income
$
259,145
$
228,195
$
948,994
$
892,306
Other property income
1,940
1,137
6,046
6,091
Total revenues
261,085
229,332
955,040
898,397
EXPENSES
Property expenses
45,519
39,070
165,702
155,118
Real estate taxes
21,681
24,294
93,209
92,218
Ground leases
1,862
2,125
7,421
8,891
General and administrative expenses
23,267
23,085
92,749
99,264
Leasing costs
876
721
3,249
4,493
Depreciation and amortization
87,309
72,990
310,043
299,308
Total expenses
180,514
162,285
672,373
659,292
OTHER INCOME (EXPENSES)
Interest income and other net investment
gain
230
1,845
3,916
3,424
Interest expense
(18,726
)
(20,976
)
(78,555
)
(70,772
)
Loss on early extinguishment of debt
(12,246
)
—
(12,246
)
—
Gains on sales of depreciable operating
properties
5,297
35,536
463,128
35,536
Total other (expenses) income
(25,445
)
16,405
376,243
(31,812
)
NET INCOME
55,126
83,452
658,910
207,293
Net income attributable to noncontrolling
common units of the Operating Partnership
(463
)
(1,012
)
(6,163
)
(2,869
)
Net income attributable to noncontrolling
interests in consolidated property partnerships
(7,017
)
(3,798
)
(24,603
)
(17,319
)
Total income attributable to
noncontrolling interests
(7,480
)
(4,810
)
(30,766
)
(20,188
)
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS
$
47,646
$
78,642
$
628,144
$
187,105
Weighted average common shares outstanding
– basic
116,462
115,730
116,429
113,241
Weighted average common shares outstanding
– diluted
117,110
116,243
116,949
113,720
Net income available to common
stockholders per share – basic
$
0.41
$
0.67
$
5.38
$
1.63
Net income available to common
stockholders per share – diluted
$
0.40
$
0.67
$
5.36
$
1.63
KILROY
REALTY CORPORATION
FUNDS FROM
OPERATIONS
(unaudited; in thousands, except
per share data)
Three Months Ended December
31,
Year Ended December
31,
2021
2020
2021
2020
Net income available to common
stockholders
$
47,646
$
78,642
$
628,144
$
187,105
Adjustments:
Net income attributable to noncontrolling
common units of the Operating Partnership
463
1,012
6,163
2,869
Net income attributable to noncontrolling
interests in consolidated property partnerships
7,017
3,798
24,603
17,319
Depreciation and amortization of real
estate assets
85,628
71,512
303,799
290,353
Gains on sales of depreciable real
estate
(5,297
)
(35,536
)
(463,128
)
(35,536
)
Funds From Operations attributable to
noncontrolling interests in consolidated property partnerships
(9,980
)
(6,725
)
(37,267
)
(28,754
)
Funds From Operations(1)(2)(3)
$
125,477
$
112,703
$
462,314
$
433,356
Weighted average common shares/units
outstanding – basic (4)
118,365
118,330
118,349
116,233
Weighted average common shares/units
outstanding – diluted (5)
119,012
118,843
118,868
116,711
Funds From Operations per common
share/unit – basic (2)
$
1.06
$
0.95
$
3.91
$
3.73
Funds From Operations per common
share/unit – diluted (2)
$
1.05
$
0.95
$
3.89
$
3.71
________________________
(1)
We calculate Funds From Operations
available to common stockholders and common unitholders (“FFO”) in
accordance with the 2018 Restated 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, gains and losses from
sales of depreciable real estate and impairment write-downs
associated with depreciable real estate, 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. Our calculation of FFO includes the amortization of
deferred revenue related to tenant-funded tenant improvements and
excludes the depreciation of the related tenant improvement assets.
We also add back net income attributable to noncontrolling common
units of the Operating Partnership because we report FFO
attributable to common stockholders and common unitholders.
We believe that FFO is a useful
supplemental measure of our 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 our 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, our
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, we believe that FFO along with the required
GAAP presentations provides a more complete measurement of our
performance relative to our 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 our operating performance because 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 our properties, which are significant
economic costs and could materially impact our results from
operations.
(2)
Reported amounts are attributable to
common stockholders and common unitholders.
(3)
FFO available to common stockholders and
unitholders includes amortization of deferred revenue related to
tenant-funded tenant improvements of $3.5 million and $5.1 million
for the three months ended December 31, 2021 and 2020,
respectively, and $16.5 million and $22.5 million for the year
ended December 31, 2021 and 2020, respectively.
(4)
Calculated based on weighted average
shares outstanding including participating share-based awards (i.e.
certain time based restricted stock units) and assuming the
exchange of all common limited partnership units outstanding.
(5)
Calculated based on weighted average
shares outstanding including participating and non-participating
share-based awards, dilutive impact of stock options and
contingently issuable shares, and assuming the exchange of all
common limited partnership units outstanding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220131005762/en/
Tyler H. Rose President (310) 481-8484
Michelle Ngo Senior Vice President, Chief Financial Officer and
Treasurer (310) 481-8581
Kilroy Realty (NYSE:KRC)
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