Kilroy Realty Corporation Reports Fourth Quarter Financial Results

Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its fourth quarter ended December 31, 2020.

COVID-19 Pandemic Key Business Update

Operations

• Collected 96% of contractual fourth quarter rent billings across all property types, including 98% from office and life science tenants. Excluding rent relief provided to certain tenants, collected 97% across all property types, including 98% from office and life science tenants
  • The collection rate for January across all property types was 95%, including 97% from office and life science tenants, as of the date of this release. Excluding rent relief provided to certain tenants, collected 96% across all property types, including 97% from office and life science tenants
• Limited lease expiration exposure with an average of approximately 6.3% of total rentable square feet expiring per year through 2025

Balance Sheet / Liquidity Highlights

• As of the date of this release, the company had approximately $1.5 billion of total liquidity comprised of approximately $700.0 million of cash and cash equivalents on hand and full availability under the $750.0 million revolving credit facility
• No significant debt maturities until 2023, excluding the company’s revolving credit facility, which matures in the third quarter of 2022
• Weighted average debt maturity of approximately 7.2 years

Development

• $1.6 billion of projects under development
  • 89% leased across office and life science space
  • As of the date of this release, all in-process projects were under active construction
  • Remaining spending to complete the projects of approximately $500.0 million, fully funded with cash on hand

Fourth Quarter Highlights

Financial Results

• Net income available to common stockholders per share of $0.67
• Funds from operations available to common stockholders and unitholders (“FFO”) per share of $0.95
  • Both net income available to common stockholders per share and FFO per share included a $0.03 per share net charge primarily due to co-working, advertising and residential tenant creditworthiness as a result of the COVID-19 pandemic
• Revenues increased to $229.3 million, including the charge noted above

Stabilized Portfolio

• Stabilized portfolio was 91.2% occupied and 94.3% leased at December 31, 2020
• Signed approximately 60,945 square feet of new or renewing leases
  • GAAP and cash rents increased approximately 28.4% and 13.9%, respectively, from prior levels

Dispositions

• In December, completed the sale of an approximately 87,000 square foot operating property in the Mountain View submarket of the San Francisco Bay Area for gross proceeds of $75.9 million, or $871 per square foot, and a GAAP gain on sale of operating properties of $35.5 million

Development

• In November, completed construction on and added Netflix // On Vine, an approximately 361,000 square foot office development project located in Hollywood, CA to the stabilized portfolio. The project is 100% leased to Netflix, Inc.

Full Year 2020 Highlights

• Fully stabilized The Exchange on 16th, a $585.0 million, approximately 750,000 square foot office development project, located in the Mission Bay district of San Francisco. The office component is 100% leased to Dropbox
• Completed construction on $1.0 billion of office projects that were delivered or turned over to tenants for tenant improvements, a record year
  • Netflix // On Vine, a $300.0 million office project, located in the Hollywood submarket of Los Angeles; the project is 100% leased to Netflix, Inc.
  • 333 Dexter, a $410.0 million office project in Seattle; the project is 100% leased to a Fortune 50 publicly traded company
  • One Paseo Office, a $205.0 million component of our One Paseo mixed-use project in the Del Mar submarket of San Diego, which is 93% leased
  • 9455 Towne Centre Drive, a $105.0 million office project located in the University Towne Center submarket of San Diego; the project is 100% leased to a Fortune 50 publicly traded company
• Completed construction on $245.0 million, or 371 units, at the residential development of our One Paseo mixed-use project in the Del Mar submarket of San Diego, which are 51% leased
• Increased the annual dividend on the company’s common stock by 3.1% to $2.00 per share
• Fully physically settled equity forward sale agreements in connection with the February 2020 common stock public offering of 5,750,000 shares priced at $86.00 per share and 3,147,110 shares of common stock in connection with a forward transaction under the ATM program
  • Generated aggregate net proceeds of $722.2 million
• Issued $775.0 million of debt across two transactions
  • Private placement of $350.0 million, 10-year, 4.270% senior unsecured notes
  • Public offering of $425.0 million, 12-year, 2.500% senior unsecured green bonds
• Completed the sale of an approximately 87,000 square foot operating property in the Mountain View submarket of the San Francisco Bay Area for gross proceeds of $75.9 million, or $871 per square foot
• Executed 731,000 square feet of leases, including development properties, with strong increases in rental rates compared to prior rates
  • GAAP and cash rents increased approximately 36.5% and 18.4%, respectively, from prior levels
• Maintained industry leadership position in sustainability, including repeat awards from GRESB, NAREIT, the EPA and Green Lease Leaders
  • Achieved Carbon Neutral Operations in 2020; KRC was the first North American REIT to make this commitment
  • Largest Fitwel portfolio among all non-government organizations in the world
  • Listed in the Dow Jones Sustainability World Index for the fourth year and included in the Bloomberg Gender Equality Index

Results for the Quarter Ended December 31, 2020

For the fourth quarter ended December 31, 2020, KRC reported net income available to common stockholders of $78.6 million, or $0.67 per share, including a $0.31 per share gain on sale of operating properties, compared to $72.5 million, or $0.67 per share, in the fourth quarter of 2019, including a $0.28 per share gain on sale of operating properties. FFO in the fourth quarter of 2020 was $112.7 million, or $0.95 per share, compared to $109.5 million, or $1.00 per share, in the fourth quarter of 2019. Current period net income available to common stockholders and FFO per share included a $0.03 per share net charge primarily 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.

Conference Call and Audio Webcast

KRC management will discuss fourth quarter results and the current business environment during the company’s February 2, 2021 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://services.choruscall.com/links/krc210202.html. 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 (866) 312-7299. International callers should dial (412) 317-1070. In order to bypass speaking to the operator on the day of the call, please pre-register anytime at