KRC Kilroy Realty Corporation

Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its third quarter ended September 30, 2024.

Financial Results

• Revenues grew 2.2% to $289.9 million for the quarter ended September 30, 2024, as compared to $283.6 million for the quarter ended September 30, 2023
• Net income available to common stockholders of $0.44 per diluted share, as compared to $0.45 per diluted share for the quarter ended September 30, 2023
• Funds from operations available to common stockholders and unitholders (“FFO”) of $140.4 million, or $1.17 per diluted share, an increase of 4.5% as compared to $134.0 million, or $1.12 per diluted share, for the quarter ended September 30, 2023

“I’m pleased to report on a strong quarter of execution across our platform as we continue to navigate the recovery that is taking hold in our markets,” commented Angela Aman, CEO. “In addition to solid third quarter leasing activity, we have also been active on the capital allocation front, acquiring a small office campus located strategically adjacent to our One Paseo mixed-use project in San Diego.”

Leasing and Occupancy

• Stabilized portfolio was 84.3% occupied and 85.8% leased at September 30, 2024
• During the quarter ended September 30, 2024, signed approximately 436,000 square feet of leases, comprised of 48,000 square feet of new leasing on previously vacant space, 38,000 square feet of new leasing on currently occupied space, and 350,000 square feet of renewal leasing
  • Includes 209,000 square feet of short-term leasing, primarily comprised of 198,000 square feet of short-term renewal leasing
• During the quarter ended September 30, 2024, DermTech, which filed for bankruptcy during the quarter ended June 30, 2024, rejected its lease and Kilroy executed a 110,000 square foot short-term lease with the successor entity to facilitate DermTech’s interim operations. This lease has been excluded from the leasing productivity statistics above
• During the quarter ended September 30, 2024, GAAP rents on signed leases increased 26.0% and cash rents increased 7.1% from prior levels on second generation leasing, excluding short-term leasing

Acquisition Activity

• In September, completed the acquisition of Junction at Del Mar, an approximately 104,000 square foot office property, comprised of two buildings in the Del Mar submarket of San Diego, for $35.0 million. The buildings, which are located adjacent to the Company’s One Paseo mixed-use project, are 96% leased with a weighted average lease term of 4.7 years

Balance Sheet / Liquidity

• In September, repaid the full amount outstanding on the $120.0 million term loan, which had an initial maturity date of October 3, 2024
• As of September 30, 2024, the Company had approximately $1.7 billion of total liquidity comprised of approximately $0.6 billion of cash and approximately $1.1 billion available under the fully undrawn unsecured revolving credit facility

Dividend

• The Board declared and paid a regular quarterly cash dividend on its common stock of $0.54 per share, equivalent to an annual rate of $2.16
• The dividend was paid on October 9, 2024 to stockholders of record on September 30, 2024 (the ex-dividend date)

Net Income Available to Common Stockholders / FFO Guidance and Outlook

The Company is providing an updated Nareit-defined FFO per diluted share guidance for the full year 2024 of $4.38 to $4.44 per share, with a midpoint of $4.41 per share.

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2024 Range as of July 2024

 

Full Year 2024 Range as of October 2024

 

 

 

Low End

 

High End

 

Low End

 

High End

 

 

 

$ and shares/units in thousands, except per share/unit amounts

 

 

Net income available to common stockholders per share - diluted

$

1.50

 

 

$

1.59

 

 

$

1.61

 

 

$

1.66

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted (1)

 

118,000

 

 

 

118,000

 

 

 

118,150

 

 

 

118,150

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

$

177,000

 

 

$

188,000

 

 

$

190,000

 

 

$

196,000

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling common units of the Operating Partnership

 

1,800

 

 

 

1,900

 

 

 

1,900

 

 

 

2,000

 

 

 

Net income attributable to noncontrolling interests in consolidated property partnerships

 

20,500

 

 

 

21,000

 

 

 

20,250

 

 

 

20,750

 

 

 

Depreciation and amortization of real estate assets

 

338,000

 

 

 

339,000

 

 

 

346,000

 

 

 

347,000

 

 

 

Gains on sales of depreciable real estate

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

Funds From Operations attributable to noncontrolling interests in consolidated property partnerships

 

(31,500

)

 

 

(32,000

)

 

 

(31,500

)

 

 

(32,000

)

 

 

Funds From Operations (2)

$

505,800

 

 

$

517,900

 

 

$

526,650

 

 

$

533,750

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

120,200

 

 

 

120,200

 

 

 

120,250

 

 

 

120,250

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

4.21

 

 

$

4.31

 

 

$

4.38

 

 

$

4.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Assumptions

 

July 2024 Assumptions

 

October 2024 Assumptions

 

 

Change in same store cash NOI (4)

 

(3.0%) to (4.0%)

 

(1.5%) to (2.0%)

 

 

Average full year occupancy

 

82.75% to 83.75%

 

83.75% to 84.25%

 

 

General and administrative expenses

 

$72 million to $80 million

 

$74 million to $76 million

 

 

Total development spending (5)

 

$225 million to $275 million

 

$250 million to $275 million

 

 

Weighted average common shares/units outstanding – diluted (in thousands) (3)

 

120,200

 

120,225

 

 

 

 

 

 

 

 

________________________

(1)

Calculated based on estimated weighted average shares outstanding, including non-participating share-based awards and the dilutive impact of contingently issuable shares.

(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, and the dilutive impact of contingently issuable shares, and assuming the exchange of all common limited partnership units outstanding. Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.

(4)

See management statement for Same Store Cash Net Operating Income on page 32 of our Supplemental Financial Report furnished on Form 8-K with this press release.

(5)

Remaining 2024 development spending is $50 million to $75 million.

The Company’s guidance estimates for the full year 2024, 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. These guidance estimates do not include the impact on the Company’s operating results from potential future acquisitions, dispositions (including any associated gains or losses), capital markets activity, impairment charges, or any events outside of the Company’s control, as the timing and magnitude of any such events are not known at the time the Company provides guidance. 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 third quarter results and the current business environment during the Company’s October 29, 2024 earnings conference call. The call will begin at 10:00 a.m. Pacific Time and last approximately one hour. To participate and obtain conference call dial-in details, register by using the following link, https://www.netroadshow.com/events/login?show=f1c41247&confId=58186. Those interested in listening via the Internet can access the conference call at https://events.q4inc.com/attendee/193901324. It may be necessary to download audio software to hear the conference call.

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, Los Angeles, the San Francisco Bay Area, Seattle, and Austin. The Company has earned global recognition for sustainability, building operations, innovation, and design. As a pioneer and innovator 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 September 30, 2024, Kilroy’s stabilized portfolio totaled approximately 17.1 million square feet of primarily office and life science space that was 84.3% occupied and 85.8% leased. The Company also had approximately 1,000 residential units in Hollywood and San Diego, which had a quarterly average occupancy of 92.0%. In addition, the Company had two life science redevelopment projects in the tenant improvement phase totaling approximately 100,000 square feet with total estimated redevelopment costs of $80.0 million and one approximately 875,000 square foot in-process development project with a total estimated investment of $1.0 billion.

A Leader in Sustainability and Commitment to Corporate Social Responsibility

Kilroy has a longstanding commitment to sustainability and continues to be a recognized leader in our sector. For over a decade, the Company and its sustainability initiatives have been recognized with numerous honors, including earning the GRESB five star rating and being named a sector and regional leader in the Americas. Other honors have included the Nareit Leader in the Light Award, being listed on the Dow Jones Sustainability World Index, being named ENERGY STAR Partner of the Year, and receiving the ENERGY STAR highest honor of Sustained Excellence.

Kilroy is proud to have achieved carbon neutral operations across our portfolio since 2020. The Company also has a longstanding commitment to maintain high levels of LEED, Fitwel, and ENERGY STAR certifications across the portfolio.

A significant part of the Company’s foundation is its commitment to enhancing employee growth, satisfaction, and wellness while maintaining a diverse and thriving culture. For four consecutive years, the Company has been named to Bloomberg’s Gender Equality Index, which recognizes 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, including periods of heightened inflation, 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, including bankruptcy, lack of liquidity or lack of funding, and the impact labor disruptions or strikes, such as episodic strikes in the entertainment industry, may have on our tenants’ businesses; our ability to re-lease property at or above current market rates; reduced demand for office space, including as a result of remote working and flexible working arrangements that allow work from remote locations other than an employer's office premises; 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; changes in interest rates and 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; risks associated with climate change and our sustainability strategies, and our ability to achieve our sustainability goals; 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, 2023, 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 September 30,

 

Nine Months Ended September 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenues

$

289,938

 

$

283,594

 

$

849,250

 

 

$

860,678

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

$

52,378

 

 

$

52,762

 

 

$

151,509

 

 

$

164,957

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

117,830

 

 

 

117,185

 

 

 

117,516

 

 

 

117,133

 

Weighted average common shares outstanding – diluted

 

118,244

 

 

 

117,495

 

 

 

117,955

 

 

 

117,411

 

 

 

 

 

 

 

 

 

Net income available to common stockholders per share – basic

$

0.44

 

 

$

0.45

 

 

$

1.27

 

 

$

1.40

 

Net income available to common stockholders per share – diluted

$

0.44

 

 

$

0.45

 

 

$

1.27

 

 

$

1.40

 

 

 

 

 

 

 

 

 

Funds From Operations (1)(2)

$

140,448

 

 

$

134,047

 

 

$

406,758

 

 

$

421,859

 

 

 

 

 

 

 

 

 

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

 

119,702

 

 

 

118,934

 

 

 

119,798

 

 

 

118,894

 

Weighted average common shares/units outstanding – diluted (4)

 

120,115

 

 

 

119,245

 

 

 

120,237

 

 

 

119,172

 

 

 

 

 

 

 

 

 

Funds From Operations per common share/unit – basic (2)

$

1.17

 

 

$

1.13

 

 

$

3.40

 

 

$

3.55

 

Funds From Operations per common share/unit – diluted (2)

$

1.17

 

 

$

1.12

 

 

$

3.38

 

 

$

3.54

 

 

 

 

 

 

 

 

 

Common shares outstanding at end of period

 

 

 

 

 

118,047

 

 

 

117,240

 

Common partnership units outstanding at end of period

 

 

 

 

 

1,151

 

 

 

1,151

 

Total common shares and units outstanding at end of period

 

 

 

 

 

119,198

 

 

 

118,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2024

 

September 30, 2023

Stabilized office portfolio occupancy rates: (5)

 

 

 

 

 

 

 

Los Angeles

 

 

 

 

 

76.7

%

 

 

81.2

%

San Diego

 

 

 

 

 

87.9

%

 

 

86.1

%

San Francisco Bay Area

 

 

 

 

 

91.1

%

 

 

91.1

%

Seattle

 

 

 

 

 

80.4

%

 

 

83.5

%

Austin

 

 

 

 

 

74.2

%

 

 

—

%

Weighted average total

 

 

 

 

 

84.3

%

 

 

86.2

%

 

 

 

 

 

 

 

 

Total square feet of stabilized office properties owned at end of period: (5)

 

 

 

 

 

 

 

Los Angeles

 

 

 

 

 

4,338

 

 

 

4,345

 

San Diego

 

 

 

 

 

2,877

 

 

 

2,770

 

San Francisco Bay Area

 

 

 

 

 

6,171

 

 

 

6,170

 

Seattle

 

 

 

 

 

2,996

 

 

 

3,000

 

Austin

 

 

 

 

 

759

 

 

 

—

 

Total

 

 

 

 

 

17,141

 

 

 

16,285

 

________________________

(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 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.

KILROY REALTY CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited; in thousands)

 

 

September 30, 2024

 

December 31, 2023

ASSETS

 

 

 

REAL ESTATE ASSETS:

 

 

 

Land and improvements

$

1,750,820

 

 

$

1,743,170

 

Buildings and improvements

 

8,573,332

 

 

 

8,463,674

 

Undeveloped land and construction in progress

 

2,254,628

 

 

 

2,034,804

 

Total real estate assets held for investment

 

12,578,780

 

 

 

12,241,648

 

Accumulated depreciation and amortization

 

(2,747,494

)

 

 

(2,518,304

)

Total real estate assets held for investment, net

 

9,831,286

 

 

 

9,723,344

 

 

 

 

 

Cash and cash equivalents

 

625,395

 

 

 

510,163

 

Marketable securities

 

27,144

 

 

 

284,670

 

Current receivables, net

 

11,218

 

 

 

13,609

 

Deferred rent receivables, net

 

455,613

 

 

 

460,979

 

Deferred leasing costs and acquisition-related intangible assets, net

 

226,991

 

 

 

229,705

 

Right of use ground lease assets

 

129,492

 

 

 

125,506

 

Prepaid expenses and other assets, net

 

73,495

 

 

 

53,069

 

TOTAL ASSETS

$

11,380,634

 

 

$

11,401,045

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

LIABILITIES:

 

 

 

Secured debt, net

$

599,478

 

 

$

603,225

 

Unsecured debt, net

 

4,401,678

 

 

 

4,325,153

 

Accounts payable, accrued expenses and other liabilities

 

354,785

 

 

 

371,179

 

Ground lease liabilities

 

128,606

 

 

 

124,353

 

Accrued dividends and distributions

 

64,844

 

 

 

64,440

 

Deferred revenue and acquisition-related intangible liabilities, net

 

151,670

 

 

 

173,638

 

Rents received in advance and tenant security deposits

 

71,033

 

 

 

79,364

 

Total liabilities

 

5,772,094

 

 

 

5,741,352

 

 

 

 

 

EQUITY:

 

 

 

Stockholders’ Equity

 

 

 

Common stock

 

1,181

 

 

 

1,173

 

Additional paid-in capital

 

5,203,195

 

 

 

5,205,839

 

Retained earnings

 

175,962

 

 

 

221,149

 

Total stockholders’ equity

 

5,380,338

 

 

 

5,428,161

 

Noncontrolling Interests

 

 

 

Common units of the Operating Partnership

 

52,441

 

 

 

53,275

 

Noncontrolling interests in consolidated property partnerships

 

175,761

 

 

 

178,257

 

Total noncontrolling interests

 

228,202

 

 

 

231,532

 

Total equity

 

5,608,540

 

 

 

5,659,693

 

TOTAL LIABILITIES AND EQUITY

$

11,380,634

 

 

$

11,401,045

 

KILROY REALTY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per share data)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

REVENUES

 

 

 

 

 

 

 

Rental income

$

285,951

 

 

$

280,681

 

 

$

836,760

 

 

$

852,094

 

Other property income

 

3,987

 

 

 

2,913

 

 

 

12,490

 

 

 

8,584

 

Total revenues

 

289,938

 

 

 

283,594

 

 

 

849,250

 

 

 

860,678

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

Property expenses

 

63,593

 

 

 

59,445

 

 

 

180,192

 

 

 

168,233

 

Real estate taxes

 

26,677

 

 

 

28,363

 

 

 

84,925

 

 

 

84,868

 

Ground leases

 

2,977

 

 

 

2,390

 

 

 

8,725

 

 

 

7,172

 

General and administrative expenses (1)

 

18,066

 

 

 

24,761

 

 

 

54,596

 

 

 

71,356

 

Leasing costs

 

2,353

 

 

 

1,852

 

 

 

6,751

 

 

 

4,550

 

Depreciation and amortization

 

91,879

 

 

 

85,224

 

 

 

267,061

 

 

 

269,262

 

Total expenses

 

205,545

 

 

 

202,035

 

 

 

602,250

 

 

 

605,441

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

 

 

 

 

 

 

Interest income

 

9,688

 

 

 

7,015

 

 

 

32,962

 

 

 

11,896

 

Interest expense

 

(36,408

)

 

 

(29,837

)

 

 

(112,042

)

 

 

(81,891

)

Total other expenses

 

(26,720

)

 

 

(22,822

)

 

 

(79,080

)

 

 

(69,995

)

 

 

 

 

 

 

 

 

NET INCOME

 

57,673

 

 

 

58,737

 

 

 

167,920

 

 

 

185,242

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling common units of the Operating Partnership

 

(509

)

 

 

(515

)

 

 

(1,469

)

 

 

(1,612

)

Net income attributable to noncontrolling interests in consolidated property partnerships

 

(4,786

)

 

 

(5,460

)

 

 

(14,942

)

 

 

(18,673

)

Total income attributable to noncontrolling interests

 

(5,295

)

 

 

(5,975

)

 

 

(16,411

)

 

 

(20,285

)

 

 

 

 

 

 

 

 

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

$

52,378

 

 

$

52,762

 

 

$

151,509

 

 

$

164,957

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding – basic

 

117,830

 

 

 

117,185

 

 

 

117,516

 

 

 

117,133

 

Weighted average shares of common stock outstanding – diluted

 

118,244

 

 

 

117,495

 

 

 

117,955

 

 

 

117,411

 

 

 

 

 

 

 

 

 

Net income available to common stockholders per share – basic

$

0.44

 

 

$

0.45

 

 

$

1.27

 

 

$

1.40

 

Net income available to common stockholders per share – diluted

$

0.44

 

 

$

0.45

 

 

$

1.27

 

 

$

1.40

 

________________________

(1)

The three and nine months ended September 30, 2023 includes $5.8 million and $12.1 million, respectively, of retirement costs for our former CEO and former President, primarily comprised of accelerated stock compensation expense.

KILROY REALTY CORPORATION

FUNDS FROM OPERATIONS

(unaudited; in thousands, except per share data)

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net income available to common stockholders

$

52,378

 

 

$

52,762

 

 

$

151,509

 

 

$

164,957

 

Adjustments:

 

 

 

 

 

 

 

Net income attributable to noncontrolling common units of the Operating Partnership

 

509

 

 

 

515

 

 

 

1,469

 

 

 

1,612

 

Net income attributable to noncontrolling interests in consolidated property partnerships

 

4,786

 

 

 

5,460

 

 

 

14,942

 

 

 

18,673

 

Depreciation and amortization of real estate assets

 

90,243

 

 

 

83,518

 

 

 

262,292

 

 

 

263,662

 

Funds From Operations attributable to noncontrolling interests in consolidated property partnerships

 

(7,468

)

 

 

(8,208

)

 

 

(23,454

)

 

 

(27,045

)

Funds From Operations(1)(2)(3)

$

140,448

 

 

$

134,047

 

 

$

406,758

 

 

$

421,859

 

 

 

 

 

 

 

 

 

Weighted average common shares/units outstanding – basic (4)

 

119,702

 

 

 

118,934

 

 

 

119,798

 

 

 

118,894

 

Weighted average common shares/units outstanding – diluted (5)

 

120,115

 

 

 

119,245

 

 

 

120,237

 

 

 

119,172

 

 

 

 

 

 

 

 

 

Funds From Operations per common share/unit – basic (2)

$

1.17

 

 

$

1.13

 

 

$

3.40

 

 

$

3.55

 

Funds From Operations per common share/unit – diluted (2)

$

1.17

 

 

$

1.12

 

 

$

3.38

 

 

$

3.54

 

________________________

(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 depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. The reconciling items include amounts to adjust earnings from consolidated partially-owned entities and equity in earnings of unconsolidated affiliates to FFO. 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 $4.9 million for the three months ended September 30, 2024 and 2023, respectively, and $15.1 million and $15.0 million for the nine months ended September 30, 2024 and 2023, 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 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/20241028090358/en/

Jeffrey Kuehling Executive Vice President, Chief Financial Officer (310) 481-8440 or Taylor Friend Senior Vice President, Capital Markets and Treasurer (310) 481-8574