EX-99.2 4 dex992.htm PRESS RELEASE Press Release

Exhibit 99.2

 

Contact:

  

FOR RELEASE:

Richard E. Moran Jr.

  

February 3, 2003

Executive Vice President

and Chief Financial Officer

(310) 481-8483

or

Tyler H. Rose

Senior Vice President

and Treasurer

(310) 481-8484

    

 

KILROY REALTY CORPORATION REPORTS FOURTH QUARTER

EARNINGS AND ON KEY LEASE ISSUES

 

LOS ANGELES, February 3, 2003 – Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its fourth quarter ended December 31, 2002, with net income of $14.0 million, or $0.50 per share, compared to $7.6 million, or $0.28 per share in the fourth quarter of 2001. Revenues from continuing operations in the fourth quarter totaled $51.7 million, compared to $48.0 million in the fourth quarter of 2001.

 

For its fiscal year ended December 31, 2002, KRC reported net income of $40.3 million, or $1.45 per share, compared to $38.4 million, or $1.40 per share, in 2001. Revenues from continuing operations in 2002 totaled $202.1 million, compared to $203.6 million in 2001.

 

KRC’s funds from operations (FFO) totaled $24.3 million, or $0.76 per share, in the fourth quarter of 2002, compared to $20.9 million, or $0.68 per share in the prior year’s fourth quarter. For the year, FFO totaled $97.9 million, or $3.09 per share, compared to $91.6 million, or $3.00 per share, in 2001.

 

On Tuesday, February 4, 2003, KRC management will discuss 2003 earnings guidance during its quarterly conference call. Based on management’s view of current market conditions and certain assumptions with regard to rental rates and other projections, an FFO per share range of $2.60 to $2.80 for the fiscal year 2003 will be discussed.

 

All per-share amounts in this report are presented on a diluted basis.

 

KRC stabilized $106 million of new development in 2002, adding an aggregate 436,000 square feet of space in six new office properties to its portfolio. At year-end, the company’s stabilized portfolio was 93.7% occupied.

 

KRC also disposed of $41.8 million of non-strategic real estate assets aggregating 468,000 square feet of space during the fourth quarter, including the sale of two office and two industrial properties that produced a net gain of $6.1 million for the period. The company used the proceeds from these dispositions to help fund its development program and finance the company’s stock repurchase program. In the fourth quarter, the company repurchased 508,200 common shares at an average price of $22.39 per share.

 

The company’s committed development pipeline, totaling 608,400 square feet of space in Southern California, represents a total estimated investment of approximately $198 million, and is currently 53% leased.

 

KRC Reports on Key Lease Issues

 

The company also reported today that Peregrine Systems has indicated it intends to file a motion in bankruptcy court seeking to reject its two remaining leases it has with Kilroy Realty totaling 241,747 square feet in the northern San Diego submarket of Del Mar. Approximately 65,000 square feet of this space is currently subject to subleases whose rental obligations are anticipated to continue.

 

The company also reported that on Thursday, January 30, 2003, numerous press reports announced that Brobeck, Phleger & Harrison LLP had decided to dissolve. Brobeck leases two properties from KRC in Del Mar totaling approximately 162,000 square feet, and representing approximately 2.4% of the company’s total annual base rental revenues. The company reported that it had not received any official statement from Brobeck, and that at this time it is uncertain how Brobeck’s reported actions may affect the company’s leases with Brobeck.

 

The company also reported today that it recognized a $4.1 million lease termination fee in January 2003 associated with a 68,000 square-foot office property located in the Sorrento Mesa area of coastal San Diego that was fully leased to Ericsson. KRC is actively re-marketing the property.

 

Some of the information presented in this release is forward-looking in nature within the meaning of the Private Securities Litigation Reform Act of 1995. Although Kilroy Realty Corporation believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that its expectations will be achieved. Certain factors that could cause actual results to differ materially from Kilroy Realty’s expectations are set forth as risk factors in the company’s Securities and Exchange Commission reports and filings. Included among these factors are changes in general economic conditions, including changes in the economic conditions affecting industries in which its principal tenants compete; any failure of the general economy to recover timely from the current economic downturn; Kilroy Realty’s ability to timely lease or re-lease space at current or anticipated rents; changes in interest rates; changes in operating costs, including utility costs; future demand for its debt and equity securities; its ability to refinance its debt on reasonable terms at maturity; its ability to complete current and future development projects on schedule and on budget; the demand for office space in markets in which Kilroy Realty has a presence; and risks detailed from time to time in the company’s SEC reports, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K. Many of these factors are beyond Kilroy Realty’s ability to control or predict. Forward-looking statements are not guarantees of performance. For forward-looking statements herein, Kilroy Realty claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 

Kilroy Realty Corporation, a member of the S&P Small Cap 600 Index, is a Southern California-based real estate investment trust active in the office and industrial property sectors. For more than 50 years, the company has owned, developed, acquired and managed real estate assets primarily in the coastal regions of California and Washington. Principal submarkets for KRC’s current development program include West Los Angeles, El Segundo and coastal San Diego. At December 31, 2002, the company owned 7.4 million square feet of commercial office space and 4.9 million square feet of industrial space. More information can be found at www.kilroyrealty.com.

 

#########################

KILROY REALTY CORPORATION

SUMMARY QUARTERLY RESULTS

 

(unaudited, in thousands, except per share data)

 

      

Three Months Ended December 31, 2002

     

Three Months Ended December 31, 2001

     

Year
Ended December 31, 2002

       

Year
Ended December 31, 2001

  

Revenues from continuing operations

     

$

51,653

     

$

48,024

     

$

202,095

 

     

$

203,610

 

Revenues including discontinued operations

     

$

52,470

     

$

49,598

     

$

207,481

 

     

$

209,645

 

Net income available to common stockholders (1)

    

$

13,965

     

$

7,625

     

$

40,312

 

     

$

38,431

 

Weighted average common shares outstanding—basic

     

 

27,453

     

 

27,426

     

 

27,450

 

     

 

27,167

 

Weighted average common shares outstanding—diluted

     

 

27,691

     

 

27,545

     

 

27,722

 

     

 

27,373

 

Net income per share of common stock—basic

     

$

0.51

     

$

0.28

     

$

1.47

 

     

$

1.41

 

Net income per share of common stock—diluted

     

$

0.50

     

$

0.28

     

$

1.45

 

     

$

1.40

 

Funds From Operations (2)

    

$

24,262

     

$

20,933

     

$

97,940

 

     

$

91,558

 

Weighted average common shares/units outstanding—basic (3)

    

 

31,689

     

 

30,487

     

 

31,443

 

     

 

30,349

 

Weighted average common shares/units outstanding—diluted (3)

    

 

31,928

     

 

30,606

     

 

31,715

 

     

 

30,555

 

Funds From Operations per common share/unit—basic (3)

    

$

0.77

     

$

0.69

     

$

3.11

 

     

$

3.02

 

Funds From Operations per common share/unit—diluted (3)

    

$

0.76

     

$

0.68

     

$

3.09

 

     

$

3.00

 

Common shares outstanding at end of period

                       

 

27,420

 

     

 

27,426

 

Common partnership units outstanding at end of period

                       

 

4,237

 

     

 

3,061

 

                        
    

Total common shares and units outstanding at end of period

                       

 

31,657

 

     

 

30,487

 

                    

December 31, 2002

       

December 31, 2001

  

Occupancy rates:

                                        

Los Angeles

                       

 

86.4

%

     

 

89.8

%

Orange County

                       

 

98.8

%

     

 

97.3

%

San Diego

                       

 

93.1

%

     

 

100.0

%

Other

                       

 

97.4

%

     

 

99.3

%

                        
    

Weighted average total

                       

 

93.7

%

     

 

95.8

%

Total square feet of stabilized properties owned at end of period:

                                        

Office

                       

 

7,448

 

     

 

7,225

 

Industrial

                       

 

4,881

 

     

 

5,086

 

                        
    

Total

                       

 

12,329

 

     

 

12,311

 

 

(1) Net income after minority interests.
(2) Reconciliation of Net Income to Funds From Operations included at page 4.
(3) Calculated based on weighted average shares outstanding assuming conversion of all common limited partnership units outstanding.

 

1

 

KILROY REALTY CORPORATION CONSOLIDATED BALANCE SHEETS

 

(unaudited, in thousands)

 

    

December 31, 2002

     

December 31, 2001

  

ASSETS

                  

INVESTMENT IN REAL ESTATE:

                  

Land and improvements

   

$

288,228

 

   

$

269,366

 

Buildings and improvements

   

 

1,289,525

 

   

 

1,140,499

 

Undeveloped land and construction in progress, net

   

 

108,465

 

   

 

191,129

 

    
  

Total investment in real estate

   

 

1,686,218

 

   

 

1,600,994

 

Accumulated depreciation and amortization

   

 

(278,503

)

   

 

(241,665

)

    
  

Investment in real estate, net

   

 

1,407,715

 

   

 

1,359,329

 

Cash and cash equivalents

   

 

15,777

 

   

 

16,487

 

Restricted cash

   

 

6,814

 

   

 

5,413

 

Current receivables, net

   

 

3,074

 

   

 

4,770

 

Deferred rent receivables, net

   

 

29,466

 

   

 

27,381

 

Deferred leasing costs, net

   

 

31,427

 

   

 

33,120

 

Deferred financing costs, net

   

 

6,221

 

   

 

3,948

 

Prepaid expenses and other assets

   

 

6,108

 

   

 

6,781

 

    
  

TOTAL ASSETS

   

$

1,506,602

 

   

$

1,457,229

 

    
  

LIABILITIES & STOCKHOLDERS’ EQUITY

                  

LIABILITIES:

                  

Secured debt

   

$

507,037

 

   

$

459,587

 

Unsecured line of credit

   

 

255,000

 

   

 

155,000

 

Unsecured term facility

   

 

—  

 

   

 

100,000

 

Accounts payable, accrued expenses and other liabilities

   

 

43,917

 

   

 

53,879

 

Accrued distributions

   

 

15,670

 

   

 

14,634

 

Rents received in advance, tenant security deposits and deferred revenue

   

 

24,310

 

   

 

15,955

 

    
  

Total liabilities

   

 

845,934

 

   

 

799,055

 

    
  

MINORITY INTEREST:

                  

8.075% Series A Cumulative Redeemable

Preferred unitholders

   

 

73,716

 

   

 

73,716

 

9.375% Series C Cumulative Redeemable

Preferred unitholders

   

 

34,464

 

   

 

34,464

 

9.250% Series D Cumulative Redeemable

Preferred unitholders

   

 

44,321

 

   

 

44,321

 

Common unitholders of the Operating Partnership

   

 

68,196

 

   

 

49,176

 

Minority interest in Development LLCs

   

 

—  

 

   

 

15,869

 

    
  

Total minority interests

   

 

220,697

 

   

 

217,546

 

    
  

STOCKHOLDERS’ EQUITY:

                  

Common stock

   

 

273

 

   

 

274

 

Additional paid-in capital

   

 

493,116

 

   

 

479,295

 

Distributions in excess of earnings

   

 

(47,629

)

   

 

(33,163

)

Accumulated net other comprehensive loss

   

 

(5,789

)

   

 

(5,778

)

    
  

Total stockholders’ equity

   

 

439,971

 

   

 

440,628

 

    
  

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

   

$

1,506,602

 

   

$

1,457,229

 

    
  

 

2

 

KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS

 

(unaudited, in thousands, except per share data)

 

    

Three Months
Ended
December 31, 2002

     

Three Months
Ended
December 31, 2001

     

Year

Ended
December 31, 2002

     

Year
Ended
December 31, 2001

  

REVENUES:

                                    

Rental income

   

$

45,788

 

   

$

43,754

 

   

$

177,104

 

   

$

175,266

 

Tenant reimbursements

   

 

4,798

 

   

 

4,092

 

   

 

21,799

 

   

 

21,125

 

Interest income

   

 

62

 

   

 

147

 

   

 

513

 

   

 

1,030

 

Other income

   

 

1,005

 

   

 

31

 

   

 

2,679

 

   

 

6,189

 

    
  
  
  

Total revenues

   

 

51,653

 

   

 

48,024

 

   

 

202,095

 

   

 

203,610

 

    
  
  
  

EXPENSES:

                                    

Property expenses

   

 

8,460

 

   

 

7,351

 

   

 

30,799

 

   

 

28,741

 

Real estate taxes

   

 

3,960

 

   

 

2,879

 

   

 

15,548

 

   

 

14,960

 

General and administrative expenses

   

 

2,975

 

   

 

2,823

 

   

 

12,557

 

   

 

11,692

 

Ground leases

   

 

319

 

   

 

361

 

   

 

1,354

 

   

 

1,507

 

Interest expense

   

 

8,615

 

   

 

9,579

 

   

 

35,640

 

   

 

41,457

 

Depreciation and amortization

   

 

14,468

 

   

 

13,174

 

   

 

59,781

 

   

 

51,460

 

    
  
  
  

Total expenses

   

 

38,797

 

   

 

36,167

 

   

 

155,679

 

   

 

149,817

 

    
  
  
  

Income from continuing operations before net gains on dispositions

   

 

12,856

 

   

 

11,857

 

   

 

46,416

 

   

 

53,793

 

Net gains on dispositions of operating properties

            

 

707

 

   

 

896

 

   

 

4,714

 

    
  
  
  

Income from continuing operations before minority interests

   

 

12,856

 

   

 

12,564

 

   

 

47,312

 

   

 

58,507

 

    
  
  
  

Minority interests:

                                    

Distributions on Cumulative Redeemable Preferred units

   

 

(3,375

)

   

 

(3,375

)

   

 

(13,500

)

   

 

(13,500

)

Minority interest in earnings of Operating Partnership attributable to continuing operations

   

 

(1,257

)

   

 

(751

)

   

 

(4,636

)

   

 

(4,185

)

Recognition of previously reserved Development LLC preferred return

                     

 

3,908

 

         

Minority interest in earnings of Development LLCs

            

 

(1,549

)

   

 

(1,024

)

   

 

(3,701

)

    
  
  
  

Total minority interests

   

 

(4,632

)

   

 

(5,675

)

   

 

(15,252

)

   

 

(21,386

)

    
  
  
  

Income from continuing operations

   

 

8,224

 

   

 

6,889

 

   

 

32,060

 

   

 

37,121

 

Discontinued operations:

                                    

Revenues from discontinued operations

   

 

817

 

   

 

1,574

 

   

 

5,386

 

   

 

6,035

 

Expenses from discontinued operations

   

 

(339

)

   

 

(755

)

   

 

(2,511

)

   

 

(3,016

)

Net gain on disposition of discontinued operations

   

 

6,100

 

            

 

6,570

 

         

Minority interest in earnings of Operating Partnership attributable to discontinued operations

   

 

(837

)

   

 

(83

)

   

 

(1,193

)

   

 

(317

)

    
  
  
  

Total discontinued operations

   

 

5,741

 

   

 

736

 

   

 

8,252

 

   

 

2,702

 

    
  
  
  
                                     

Net income before cumulative effect of change in accounting principle

   

 

13,965

 

   

 

7,625

 

   

 

40,312

 

   

 

39,823

 

Cumulative effect of change in accounting principle

                              

 

(1,392

)

    
  
  
  

Net income

   

$

13,965

 

   

$

7,625

 

   

$

40,312

 

   

$

38,431

 

    
  
  
  

Weighted average shares outstanding—basic

   

 

27,453

 

   

 

27,426

 

   

 

27,450

 

   

 

27,167

 

Weighted average shares outstanding—diluted

   

 

27,691

 

   

 

27,545

 

   

 

27,722

 

   

 

27,373

 

Net Income per common share—basic

   

$

0.51

 

   

$

0.28

 

   

$

1.47

 

   

$

1.41

 

    
  
  
  

Net Income per common share—diluted

   

$

0.50

 

   

$

0.28

 

   

$

1.45

 

   

$

1.40

 

    
  
  
  

 

3

 

KILROY REALTY CORPORATION

FUNDS FROM OPERATIONS

 

(unaudited, in thousands, except per share data)

 

      

Three Months
Ended

December 31, 2002

       

Three Months
Ended
December 31, 2001

       

Year
Ended
December 31, 2002

       

Year
Ended
December 31, 2001

  

Net income

     

$

13,965

 

     

$

7,625

 

     

$

40,312

 

     

$

38,431

 

Adjustments:

                                            

Minority interest in earnings of Operating Partnership

     

 

2,094

 

     

 

834

 

     

 

5,829

 

     

 

4,502

 

Depreciation and amortization

     

 

14,303

 

     

 

12,634

 

     

 

59,265

 

     

 

49,757

 

Net gains on dispositions of operating properties

     

 

(6,100

)

     

 

(707

)

     

 

(7,466

)

     

 

(4,714

)

Cumulative effect of change in accounting principle

                                      

 

1,392

 

Non-cash amortization of restricted stock grants

                

 

547

 

                

 

2,190

 

      
    
    
    

Funds From Operations

     

$

24,262

 

     

$

20,933

 

     

$

97,940

 

     

$

91,558

 

      
    
    
    

Weighted average common shares/units outstanding—basic

     

 

31,689

 

     

 

30,487

 

     

 

31,443

 

     

 

30,349

 

Weighted average common shares/units outstanding—diluted

     

 

31,928

 

     

 

30,606

 

     

 

31,715

 

     

 

30,555

 

Funds From Operations per common share/unit—basic

     

$

0.77

 

     

$

0.69

 

     

$

3.11

 

     

$

3.02

 

      
    
    
    

Funds From Operations per common share/unit—diluted

     

$

0.76

 

     

$

0.68

 

     

$

3.09

 

     

$

3.00

 

      
    
    
    

 

KILROY REALTY CORPORATION

FUNDS AVAILABLE FOR DISTRIBUTION

 

(unaudited, in thousands, except per share data)

 

      

Three Months
Ended
December 31, 2002

       

Three Months
Ended
December 31, 2001

       

Year
Ended

December 31, 2002

       

Year
Ended
December 31, 2001

  

Funds From Operations

     

$

24,262

 

     

$

20,933

 

     

$

97,940

 

     

$

91,558

 

Adjustments:

                                            

Amortization of deferred financing costs

     

 

970

 

     

 

532

 

     

 

2,647

 

     

 

1,720

 

Tenant improvements, leasing commissions and recurring capital expenditures

     

 

(7,082

)

     

 

(4,249

)

     

 

(11,113

)

     

 

(11,168

)

Net effect of straight-line rents

     

 

(1,260

)

     

 

(2,272

)

     

 

(4,339

)

     

 

(6,786

)

      
    
    
    

Funds Available for Distribution

     

$

16,890

 

     

$

14,944

 

     

$

85,135

 

     

$

75,324

 

      
    
    
    

Funds Available for Distribution per common share/unit—basic

     

$

0.53

 

     

$

0.49

 

     

$

2.71

 

     

$

2.48

 

      
    
    
    

Funds Available for Distribution per common share/unit—diluted

     

$

0.53

 

     

$

0.49

 

     

$

2.68

 

     

$

2.47

 

      
    
    
    

 

4