Kilroy Realty Corporation (NYSE: KRC) today reported
financial results for its fourth quarter ended December 31,
2019.
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 $1.00
- Revenues of $220.2 million
Stabilized Portfolio
- Stabilized portfolio was 94.6% occupied and 97.0% leased at
December 31, 2019
- Signed approximately 244,000 square feet of new or renewing
leases, bringing the full year total to 1.8 million square
feet
Acquisitions
- In October, acquired an office campus totaling approximately
152,000 square feet that is 100% leased to creative tenants and is
located at 3103-3243 La Cienega Blvd. in the Culver City submarket
of Los Angeles for $186.0 million. The company plans to
significantly increase the square footage of the campus through
redevelopment over time
Dispositions
- In October, completed the sale of a 272,000 square foot
operating property located at 2211 Michelson, the company’s last
remaining Orange County property, for gross proceeds of $115.5
million and a gain on sale of operating properties of $29.6
million
Development
- In October, executed a 12-year lease with Stripe, Inc. for
approximately 421,000 square feet of space at Kilroy Oyster Point -
Phase I, which is now 100% leased
- During the quarter, completed construction and commenced GAAP
revenue recognition on the second phase of The Exchange on 16th,
which represents approximately 30% of the 750,000 square foot
development project located in San Francisco’s Mission Bay
district. As a result of the completion of the first two phases of
the project in 2019, the company was recognizing GAAP revenue on
82% of the project at year-end. The office component of the
project, approximately 738,000 square feet, is 100% leased to
Dropbox
- In December, executed a long-term lease with a major technology
company for 100% of 9455 Towne Centre Drive, a 160,000 square foot
development project in the University Towne Center submarket of San
Diego
- In December, completed the acquisition of a 1.4-acre land site,
located at 500 and 600 Olive Way, 601 Stewart Street, 1825 7th
Avenue and 1818 16th Avenue, in the central business district of
Seattle for a cash purchase price of $133.0 million. The company
plans to seek entitlements to develop a mixed-use project over
time
Finance
- During the fourth quarter, executed 12-month forward equity
sale agreements under the ATM program for 1,945,906 shares at a
weighted average sales price of $82.64. As of the date of this
release, the company had not drawn down any portion of the shares
sold under these forward equity sale agreements
Full Year 2019 Highlights
- Achieved a company record in annual leasing, signing 3.5
million square feet of leases, including just over 1.8 million
square feet of new or renewal leases in the stabilized portfolio
and 1.7 million square feet in the in-process development pipeline
- Fully leased 333 Dexter, a 635,000 square foot office project
in Seattle
- Fully leased Kilroy Oyster Point, Phase 1, a 656,000 square
foot office and life science project in South San Francisco
- Fully leased 9455 Towne Centre Drive, a 160,000 square foot
office project in San Diego
- Completed construction on 237 of 608 residential units, the
first of three phases of the residential development at the
company’s One Paseo mixed-use project in the Del Mar submarket of
San Diego. Phase I of the residential development was 63% leased as
of the date of this release
- Acquired approximately $359.0 million of operating properties
and land
- Generated gross proceeds of approximately $133.8 million from
the company’s capital recycling program through the disposition of
non-core assets
- Issued $500.0 million of 10-year, 3.05% senior unsecured
notes
- Executed 12-month forward equity sale agreements under the ATM
program for 3,147,110 shares at a weighted average sales price of
$80.08
- Increased the annual dividend on the company’s common stock by
6.6% to $1.94 per share
- Maintained industry leadership position in sustainability,
including repeat awards from GRESB, NAREIT and the EPA
- First North American REIT to have made commitment to be carbon
neutral operations by year end 2020
- Selected for inclusion in the 2020 Bloomberg Gender-Equality
Index (GEI). The GEI is currently comprised of 325 companies
headquartered across 42 countries with a combined market
capitalization of over $14 trillion. The GEI measures gender
equality across five pillars: female leadership and talent
pipeline, equal pay and gender pay parity, inclusive culture,
sexual harassment policies, and pro-women brand
Results for the Quarter Ended December 31, 2019
For the fourth quarter ended December 31, 2019, KRC reported net
income available to common stockholders of $72.5 million, or $0.67
per share, including a $0.28 per share gain on sale of operating
properties, compared to $160.2 million, or $1.58 per share, in the
fourth quarter of 2018, including a $1.41 per share gain on sale of
operating properties. FFO in the fourth quarter of 2019 was $109.5
million, or $1.00 per share, compared to $81.3 million, or $0.78
per share in the fourth quarter of 2018.
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 an initial guidance range of
NAREIT-defined FFO per diluted share for its fiscal year 2020 of
$4.01 to $4.21 per share with a midpoint of $4.11 per share,
reflecting management’s views on current and future market
conditions, including assumptions with respect to rental rates,
occupancy levels, and the earnings impact of events referenced in
this press release.
Full Year 2020 Range
Low End
High End
Net income available to common
stockholders per share - diluted
$
2.01
$
2.21
Weighted average common shares outstanding
- diluted (1)
109,000
109,000
Net income available to common
stockholders
$
219,000
$
241,000
Adjustments:
Net income attributable to noncontrolling
common units of the Operating Partnership
4,300
4,700
Net income attributable to noncontrolling
interests in consolidated property partnerships
20,500
23,500
Depreciation and amortization of real
estate assets
233,500
233,500
Gains on sales of depreciable real
estate
—
—
Funds From Operations attributable to
noncontrolling interests in consolidated property partnerships
(32,000
)
(35,000
)
Funds From Operations (2)
$
445,300
$
467,700
Weighted average common shares/units
outstanding – diluted (3)
111,000
111,000
Funds From Operations per common
share/unit – diluted (2)(3)
$
4.01
$
4.21
Key 2020 assumptions include:
- Dispositions of approximately $150.0 million to $300.0
million
- Same store cash net operating income growth of 6.5% to
7.5%
- Year-end occupancy of 93.0% to 94.0%
- Total development spending of approximately $500.0 million to
$600.0 million
_______________
(1)
Calculated based on estimated weighted
average shares outstanding including non-participating share-based
awards.
(2)
See management statement for FFO 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, contingently
issuable shares, and shares issuable under forward equity sale
agreements and assuming the exchange of all common limited
partnership units outstanding. Reported amounts are attributable to
common stockholders, common unitholders and restricted stock
unitholders.
The company’s guidance estimates for the full year 2020, 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
KRC management will discuss updated earnings guidance for fiscal
year 2020 during the company’s February 4, 2020 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/krc200204.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
http://dpregister.com/10136114. A
replay of the conference call will be available via telephone on
February 4, 2020 through February 11, 2020 by dialing (877)
344-7529 and entering passcode 10136114. International callers
should dial (412) 317-0088 and enter the same passcode. The replay
will also be available on our website at http://investors.kilroyrealty.com/CustomPage/Index?KeyGenPage=1073743647.
About Kilroy Realty Corporation
Kilroy Realty Corporation (KRC), a publicly traded real estate
investment trust and member of the S&P MidCap 400 Index, is one
of the West Coast’s premier landlords. The company has over 70
years of experience developing, acquiring and managing office and
mixed-use real estate assets. The company provides physical work
environments that foster creativity and productivity and serves a
broad roster of dynamic, innovation-driven tenants, including
technology, entertainment, digital media and health care
companies.
At December 31, 2019, the company’s stabilized portfolio totaled
approximately 13.5 million square feet of office space located in
the coastal regions of Los Angeles, San Diego, the San Francisco
Bay Area and Greater Seattle and 200 residential units located in
the Hollywood submarket of Los Angeles. The stabilized portfolio
was 94.6% occupied and 97.0% leased. In addition, KRC had under
construction six projects totaling approximately 2.3 million square
feet of office and life science space that were 89% leased and 564
residential units. KRC also had 237 residential units in lease-up,
which was 50% leased, and two projects in the tenant improvement
phase, The Exchange on 16th, totaling 750,000 square feet, and One
Paseo retail, totaling 96,000 square feet, that were both 100%
leased.
The company’s commitment and leadership position in
sustainability has been recognized by various industry groups
across the world. In December 2019, the company was recognized by
GRESB as the sustainability leader in the Americas across all asset
classes for the sixth time. Other sustainability accolades include
NAREIT’s Leader in the Light award for the past six years and the
EPA’s highest honor of ENERGY STAR Partner of the Year Sustained
Excellence award for the past four years. The company is listed in
the Dow Jones Sustainability World Index. At the end of the fourth
quarter, the company’s stabilized portfolio was 64% LEED certified
and 70% of eligible properties were ENERGY STAR certified under the
new scoring methodology. 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 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; and our ability to maintain our status as a
REIT. 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, 2018 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,
2019
2018
2019
2018
Revenues (1)
$
220,235
$
190,842
$
837,454
$
747,298
Net income available to common
stockholders (1)
$
72,500
$
160,220
$
195,443
$
258,415
Weighted average common shares outstanding
– basic
106,013
100,747
103,201
99,972
Weighted average common shares outstanding
– diluted
106,748
101,380
103,849
100,482
Net income available to common
stockholders per share – basic (1)
$
0.68
$
1.59
$
1.87
$
2.56
Net income available to common
stockholders per share – diluted (1)
$
0.67
$
1.58
$
1.86
$
2.55
Funds From Operations (1)(2)(3)
$
109,518
$
81,330
$
418,478
$
360,491
Weighted average common shares/units
outstanding – basic (4)
109,138
103,892
106,342
103,167
Weighted average common shares/units
outstanding – diluted (5)
109,872
104,524
106,991
103,677
Funds From Operations per common
share/unit – basic (1)(3)
$
1.00
$
0.78
$
3.94
$
3.49
Funds From Operations per common
share/unit – diluted (1)(3)
$
1.00
$
0.78
$
3.91
$
3.48
Common shares outstanding at end of
period
106,016
100,747
Common partnership units outstanding at
end of period
2,023
2,025
Total common shares and units outstanding
at end of period
108,039
102,772
December 31,
2019
December 31,
2018
Stabilized office portfolio occupancy
rates: (6)
Greater Los Angeles
95.2
%
95.1
%
Orange County
N/A
89.6
%
San Diego County
89.7
%
89.3
%
San Francisco Bay Area
95.0
%
96.4
%
Greater Seattle
97.7
%
93.6
%
Weighted average total
94.6
%
94.4
%
Total square feet of stabilized office
properties owned at end of period: (6)
Greater Los Angeles
4,026
3,956
Orange County
N/A
272
San Diego County
2,048
2,046
San Francisco Bay Area
5,600
5,161
Greater Seattle
1,802
1,798
Total
13,476
13,233
_______________
(1)
Effective January 1, 2019, the company
adopted ASC 842 “Leases.” Please refer to our consolidated
statements of operations for a description of the changes made to
our consolidated financial statements. In accordance with the
adoption of the new standard, previously reported periods are not
restated for the impact of the standard.
(2)
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.
(3)
Reported amounts are attributable to
common stockholders, common unitholders, and restricted stock
unitholders.
(4)
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.
(5)
Calculated based on weighted average
shares outstanding including participating and non-participating
share-based awards, dilutive impact of stock options, contingently
issuable shares, and shares issuable under forward equity sale
agreements and assuming the exchange of all common limited
partnership units outstanding.
(6)
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, 2018 include the office
properties that were sold subsequent to December 31, 2018.
KILROY
REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
December 31, 2019
December 31, 2018
ASSETS
REAL ESTATE ASSETS:
Land and improvements
$
1,466,166
$
1,160,138
Buildings and improvements
5,866,477
5,207,984
Undeveloped land and construction in
progress
2,296,130
2,058,510
Total real estate assets held for
investment
9,628,773
8,426,632
Accumulated depreciation and
amortization
(1,561,361
)
(1,391,368
)
Total real estate assets held for
investment, net
8,067,412
7,035,264
Real estate assets and other assets held
for sale, net
—
—
Cash and cash equivalents
60,044
51,604
Restricted cash
16,300
119,430
Marketable securities
27,098
21,779
Current receivables, net
26,489
20,176
Deferred rent receivables, net
337,937
267,007
Deferred leasing costs and
acquisition-related intangible assets, net
212,805
197,574
Right of use ground lease assets (1)
96,348
—
Prepaid expenses and other assets, net
55,661
52,873
TOTAL ASSETS
$
8,900,094
$
7,765,707
LIABILITIES AND
EQUITY
LIABILITIES:
Secured debt, net
$
258,593
$
335,531
Unsecured debt, net
3,049,185
2,552,070
Unsecured line of credit
245,000
45,000
Accounts payable, accrued expenses and
other liabilities
418,848
374,415
Ground lease liabilities (1)
98,400
—
Accrued dividends and distributions
53,219
47,559
Deferred revenue and acquisition-related
intangible liabilities, net
139,488
149,646
Rents received in advance and tenant
security deposits
66,503
60,225
Liabilities and deferred revenue of real
estate assets held for sale
—
—
Total liabilities
4,329,236
3,564,446
EQUITY:
Stockholders’ Equity
Common stock
1,060
1,007
Additional paid-in capital
4,350,917
3,976,953
Distributions in excess of earnings
(58,467
)
(48,053
)
Total stockholders’ equity
4,293,510
3,929,907
Noncontrolling Interests
Common units of the Operating
Partnership
81,917
78,991
Noncontrolling interests in consolidated
property partnerships
195,431
192,363
Total noncontrolling interests
277,348
271,354
Total equity
4,570,858
4,201,261
TOTAL LIABILITIES AND EQUITY
$
8,900,094
$
7,765,707
_______________
(1)
Effective January 1, 2019, the company
adopted ASC 842 “Leases,” which requires right of use assets and
liabilities for leases in which the company is the lessee to be
presented on the company’s consolidated balance sheets.
KILROY
REALTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except
per share data)
Three Months Ended December
31,
Year Ended December
31,
2019
2018
2019
2018
REVENUES (1)
Rental income
$
217,140
$
166,957
$
826,472
$
656,631
Tenant reimbursements
—
20,511
—
80,982
Other property income
3,095
3,374
10,982
9,685
Total revenues
220,235
190,842
837,454
747,298
EXPENSES
Property expenses (1)
42,044
34,386
160,037
133,787
Real estate taxes (1)
21,534
18,399
78,097
70,820
Provision for bad debts (1)
—
(1,029
)
—
5,685
Ground leases (1)
1,978
1,450
8,113
6,176
General and administrative expenses
22,365
33,872
88,139
90,471
Leasing costs (1)
2,016
—
7,615
—
Depreciation and amortization
69,513
64,860
273,130
254,281
Total expenses
159,450
151,938
615,131
561,220
OTHER INCOME (EXPENSES)
Interest income and other net investment
gain (loss)
1,436
(1,706
)
4,641
(559
)
Interest expense
(13,932
)
(12,436
)
(48,537
)
(49,721
)
Loss on early extinguishment of debt
—
(12,623
)
—
(12,623
)
Gain on sales of land
—
11,825
—
11,825
Gains on sales of depreciable operating
properties
29,633
142,926
36,802
142,926
Total other income (expenses)
17,137
127,986
(7,094
)
91,848
NET INCOME
77,922
166,890
215,229
277,926
Net income attributable to noncontrolling
common units of the Operating Partnership
(1,343
)
(3,185
)
(3,766
)
(5,193
)
Net income attributable to noncontrolling
interests in consolidated property partnerships
(4,079
)
(3,485
)
(16,020
)
(14,318
)
Total income attributable to
noncontrolling interests
(5,422
)
(6,670
)
(19,786
)
(19,511
)
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS
$
72,500
$
160,220
$
195,443
$
258,415
Weighted average common shares outstanding
– basic
106,013
100,747
103,201
99,972
Weighted average common shares outstanding
– diluted
106,748
101,380
103,849
100,482
Net income available to common
stockholders per share – basic
$
0.68
$
1.59
$
1.87
$
2.56
Net income available to common
stockholders per share – diluted
$
0.67
$
1.58
$
1.86
$
2.55
_______________
(1)
Effective January 1, 2019, the company
adopted ASC 842 “Leases,” which required the following changes for
all periods beginning and subsequent to January 1, 2019. In
accordance with the adoption of the new standard under the modified
retrospective method, previously reported periods are not restated
for the impact of the standard.
- All lease related revenue required to be
reported as a single component within rental income. For the year
ended December 31, 2019, rental income includes $33.1 million of
tenant reimbursements and $0.4 million of gross lease termination
fees. For the year ended December 31, 2019, rental income includes
$115.6 million of tenant reimbursements and $10.9 million of gross
lease termination fees.
- Rental income to be presented net of
provision for bad debts. For the three months and year ended
December 31, 2019, rental income includes a provision for bad debts
of $0.3 million and a recovery of provision for bad debts of $2.9
million, respectively.
- All property expenses paid directly by
the company and reimbursed by the tenant to be presented on a gross
basis. For the three months and year ended December 31, 2019,
rental income and property expenses both include $3.8 million and
$13.9 million, respectively, of additional tenant reimbursements
and the related property expenses, which were previously shown net
in property expenses in prior periods. This change has no impact to
net income, Net Operating Income or Funds From Operations.
- Non-tenant parking income to be
presented in other property income instead of rental income since
recognized under ASC 606 “Revenue from Contracts with Customers”
and outside the scope of ASC 842 “Leases.”
- Real estate taxes for properties where
the company is a lessee under ground leases to be presented in
ground leases instead of real estate taxes. For the three months
and year ended December 31, 2019, ground leases includes $0.5
million and $1.9 million, respectively, of property taxes for
properties where the Company is a lessee.
- Indirect leasing costs to be expensed as
incurred and reported in leasing costs.
KILROY
REALTY CORPORATION
FUNDS FROM
OPERATIONS
(unaudited; in thousands, except
per share data)
Three Months Ended December
31,
Year Ended December
31,
2019
2018
2019
2018
Net income available to common
stockholders
$
72,500
$
160,220
$
195,443
$
258,415
Adjustments:
Net income attributable to noncontrolling
common units of the Operating Partnership
1,343
3,185
3,766
5,193
Net income attributable to noncontrolling
interests in consolidated property partnerships
4,079
3,485
16,020
14,318
Depreciation and amortization of real
estate assets
68,078
63,640
268,045
249,882
Gains on sales of depreciable real
estate
(29,633
)
(142,926
)
(36,802
)
(142,926
)
Funds From Operations attributable to
noncontrolling interests in consolidated property partnerships
(6,849
)
(6,274
)
(27,994
)
(24,391
)
Funds From Operations(1)(2)(3)
$
109,518
$
81,330
$
418,478
$
360,491
Weighted average common shares/units
outstanding – basic (4)
109,138
103,892
106,342
103,167
Weighted average common shares/units
outstanding – diluted (5)
109,872
104,524
106,991
103,677
Funds From Operations per common
share/unit – basic (2)
$
1.00
$
0.78
$
3.94
$
3.49
Funds From Operations per common
share/unit – diluted (2)
$
1.00
$
0.78
$
3.91
$
3.48
_______________
(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, common unitholders, and restricted stock
unitholders.
(3)
FFO available to common stockholders and
unitholders includes amortization of deferred revenue related to
tenant-funded tenant improvements of $4.2 million and $4.7 million
for the three months ended December 31, 2019 and 2018,
respectively, and $19.2 million and $18.4 million for the twelve
months ended December 31, 2019 and 2018, respectively.
(4)
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.
(5)
Calculated based on weighted average
shares outstanding including participating and non-participating
share-based awards, dilutive impact of stock options, contingently
issuable shares, and shares issuable under forward equity sale
agreements and assuming the exchange of all common limited
partnership units outstanding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200203005805/en/
Tyler H. Rose Executive Vice President and Chief Financial
Officer (310) 481-8484 or Michelle Ngo Senior Vice President and
Treasurer (310) 481-8581
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