KRC Kilroy Realty Corporation

Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its fourth quarter and full year ended December 31, 2023.

Fourth Quarter and Full Year Highlights

Financial Results

• Revenues of $269.0 million
• Net income available to common stockholders of $0.40 per diluted share
• Funds from operations available to common stockholders and unitholders (“FFO”) of $129.3 million, or $1.08 per diluted share

Leasing and Occupancy

• Stabilized portfolio was 85.0% occupied and 86.4% leased at December 31, 2023
• Signed approximately 588,000 square feet of new and renewal leases during the quarter, including short-term leases, the highest quarterly leasing volume since Q2 2019
  • GAAP and cash rents increased 21.7% and 1.6%, respectively, from prior levels in the stabilized portfolio, excluding short-term leases
• For the full year, signed approximately 1,347,000 square feet of new and renewal leases, including short-term leases, the highest annual leasing volume since 2019

Development

• Added approximately $750.0 million of new development properties to the stabilized portfolio throughout the year
  • During the fourth quarter, added Indeed Tower, a $690.0 million, approximately 759,000 square foot office building in the Austin CBD, which is currently 78% leased and 65% occupied
  • During the third quarter, added 9514 Towne Centre Drive, a $60.0 million, approximately 71,000 square foot office building in the University Towne Center submarket of San Diego, which is 100% leased and occupied

Balance Sheet / Liquidity

• During the first quarter, increased the borrowing capacity of the unsecured term loan facility to $520.0 million, which was fully outstanding at December 31, 2023
• During the third quarter, entered into an eleven-year, non-recourse mortgage note for $375.0 million. The mortgage note bears interest at a fixed rate of 5.90% and matures on August 10, 2034
• As of the date of this release, the company had approximately $2.2 billion of total liquidity comprised of approximately $1.1 billion of cash and short-term investments and approximately $1.1 billion available under the unsecured revolving credit facility

Dividend

• The company’s Board of Directors (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

Sustainability and Corporate Social Responsibility

• Achieved carbon neutral operations across the portfolio for the fourth consecutive year
• On-site solar at company properties has the capacity to generate over six megawatts of clean electricity, which is equivalent to the annual electricity use of over 1,200 homes
• Listed on U.S. EPA’s National Top 100 List of largest green power users
• For the eighth consecutive year, awarded the ENERGY STAR Partner of the Year Sustained Excellence Award
• Named the GRESB Regional Sector Leader in the Americas for Development (Diversified), earning the highly competitive GRESB 5 Star designation
• For the fifth consecutive year, included in Bloomberg’s Gender Equality Index

Recent Developments

• On January 12, 2024, completed a public offering of $400.0 million of 12-year unsecured senior notes at an interest rate of 6.250% due January 2036
• On January 21, 2024, John Kilroy retired as Chief Executive Officer (“CEO”) and effective January 22, 2024, Angela Aman assumed the CEO role and joined the Board. John Kilroy will serve as an advisor through the end of 2024 and will remain Chair of the Board through his current term

Net Income Available to Common Stockholders / FFO Guidance and Outlook

The company is providing Nareit-defined FFO per diluted share guidance for the full year 2024 of $4.10 to $4.25 per share, with a midpoint of $4.18 per share.

 

 

 

 

 

 

 

 

Full Year 2024 Range

 

 

 

Low End

 

High End

 

 

 

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

 

 

Net income available to common stockholders per share - diluted

$

1.45

 

 

$

1.61

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted (1)

 

118,000

 

 

 

118,000

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

$

171,000

 

 

$

190,000

 

 

 

Adjustments:

 

 

 

 

 

Net income attributable to noncontrolling common units of the Operating Partnership

 

1,900

 

 

 

2,000

 

 

 

Net income attributable to noncontrolling interests in consolidated property partnerships

 

20,500

 

 

 

21,000

 

 

 

Depreciation and amortization of real estate assets

 

330,000

 

 

 

330,000

 

 

 

Gains on sales of depreciable real estate

 

—

 

 

 

—

 

 

 

Funds From Operations attributable to noncontrolling interests in consolidated property partnerships

 

(30,000

)

 

 

(32,000

)

 

 

Funds From Operations (2)

$

493,400

 

 

$

511,000

 

 

 

 

 

 

 

 

 

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

 

120,250

 

 

 

120,250

 

 

 

 

 

 

 

 

 

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

$

4.10

 

 

$

4.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Assumptions

 

2023 Actuals

 

2024 Assumptions

 

 

Change in same store cash NOI (4)

 

4.4%

 

(4.0%) to (6.0%)

 

 

Average full year occupancy

 

87.3%

 

82.5% to 84.0%

 

 

General and administrative expenses

 

$93 million

 

$72 million to $80 million

 

 

Total development spending

 

$394 million

 

$200 million to $300 million

 

 

Weighted average common shares/units outstanding – diluted

(in thousands) (3)

 

119,241

 

120,250

 

 

 

 

 

 

 

 

________________________

(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, 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 33 of our Supplemental Financial Report furnished on Form 8-K with this press release.

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 fourth quarter results and the current business environment during the company’s February 6, 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=87605277&confId=57126. Those interested in listening via the Internet can access the conference call at https://events.q4inc.com/attendee/931384027. It may be necessary to download audio software to hear the conference call. A replay of the conference call will be available via telephone on February 6, 2024 through February 13, 2024 by dialing (866) 813-9403 and entering passcode 236874. International callers should dial (929) 458-6194 and enter the same passcode. The replay will also be available on our website at https://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, Greater 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 December 31, 2023, Kilroy’s stabilized portfolio totaled approximately 17.0 million square feet of primarily office and life science space that was 85.0% occupied and 86.4% leased. The company also had approximately 1,000 residential units in Hollywood and San Diego, which had a quarterly average occupancy of 92.5%. In addition, the company had two in-process life science redevelopment projects 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 the fifth year in a row, 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 the 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; 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, 2022 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,

 

 

2023

 

 

2022

 

 

2023

 

 

 

2022

 

Revenues

$

269,016

 

$

284,344

 

$

1,129,694

 

 

$

1,096,987

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

$

47,284

 

$

52,625

 

$

212,241

 

 

$

232,615

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

117,240

 

 

116,878

 

 

117,160

 

 

 

116,807

 

Weighted average common shares outstanding – diluted

 

117,816

 

 

117,389

 

 

117,506

 

 

 

117,220

 

 

 

 

 

 

 

 

 

Net income available to common stockholders per share – basic

$

0.40

 

$

0.45

 

$

1.80

 

 

$

1.98

 

Net income available to common stockholders per share – diluted

$

0.40

 

$

0.45

 

$

1.80

 

 

$

1.97

 

 

 

 

 

 

 

 

 

Funds From Operations (1)(2)

$

129,257

 

$

139,855

 

$

551,116

 

 

$

556,631

 

 

 

 

 

 

 

 

 

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

 

118,896

 

 

118,568

 

 

118,895

 

 

 

118,586

 

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

 

119,473

 

 

119,079

 

 

119,241

 

 

 

118,999

 

 

 

 

 

 

 

 

 

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

$

1.09

 

$

1.18

 

$

4.64

 

 

$

4.69

 

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

$

1.08

 

$

1.17

 

$

4.62

 

 

$

4.68

 

 

 

 

 

 

 

 

 

Common shares outstanding at end of period

 

 

 

 

 

117,240

 

 

 

116,878

 

Common partnership units outstanding at end of period

 

 

 

 

 

1,151

 

 

 

1,151

 

Total common shares and units outstanding at end of period

 

 

 

 

 

118,391

 

 

 

118,029

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

December 31, 2022

Stabilized office portfolio occupancy rates: (5)

 

 

 

 

 

 

 

Greater Los Angeles

 

 

 

 

 

79.0

%

 

 

85.2

%

San Diego County

 

 

 

 

 

88.6

%

 

 

86.2

%

San Francisco Bay Area

 

 

 

 

 

91.0

%

 

 

95.5

%

Greater Seattle

 

 

 

 

 

83.4

%

 

 

97.7

%

Austin

 

 

 

 

 

64.9

%

 

 

—

%

Weighted average total

 

 

 

 

 

85.0

%

 

 

91.6

%

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Greater Los Angeles

 

 

 

 

 

4,345

 

 

 

4,332

 

San Diego County

 

 

 

 

 

2,770

 

 

 

2,698

 

San Francisco Bay Area

 

 

 

 

 

6,170

 

 

 

6,164

 

Greater Seattle

 

 

 

 

 

3,000

 

 

 

3,000

 

Austin

 

 

 

 

 

759

 

 

 

—

 

Total

 

 

 

 

 

17,044

 

 

 

16,194

 

________________________

(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)

 

 

December 31, 2023

 

December 31, 2022

ASSETS

 

 

 

REAL ESTATE ASSETS:

 

 

 

Land and improvements

$

1,743,170

 

 

$

1,738,242

 

Buildings and improvements

 

8,463,674

 

 

 

8,302,081

 

Undeveloped land and construction in progress

 

2,034,804

 

 

 

1,691,860

 

Total real estate assets held for investment

 

12,241,648

 

 

 

11,732,183

 

Accumulated depreciation and amortization

 

(2,518,304

)

 

 

(2,218,710

)

Total real estate assets held for investment, net

 

9,723,344

 

 

 

9,513,473

 

 

 

 

 

Cash and cash equivalents

 

510,163

 

 

 

347,379

 

Marketable securities

 

284,670

 

 

 

23,547

 

Current receivables, net

 

13,609

 

 

 

20,583

 

Deferred rent receivables, net

 

460,979

 

 

 

452,200

 

Deferred leasing costs and acquisition-related intangible assets, net

 

229,705

 

 

 

250,846

 

Right of use ground lease assets

 

125,506

 

 

 

126,530

 

Prepaid expenses and other assets, net

 

53,069

 

 

 

62,429

 

TOTAL ASSETS

$

11,401,045

 

 

$

10,796,987

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

LIABILITIES:

 

 

 

Secured debt, net

$

603,225

 

 

$

242,938

 

Unsecured debt, net

 

4,325,153

 

 

 

4,020,058

 

Accounts payable, accrued expenses and other liabilities

 

371,179

 

 

 

392,360

 

Ground lease liabilities

 

124,353

 

 

 

124,994

 

Accrued dividends and distributions

 

64,440

 

 

 

64,285

 

Deferred revenue and acquisition-related intangible liabilities, net

 

173,638

 

 

 

195,959

 

Rents received in advance and tenant security deposits

 

79,364

 

 

 

81,432

 

Total liabilities

 

5,741,352

 

 

 

5,122,026

 

 

 

 

 

EQUITY:

 

 

 

Stockholders’ Equity

 

 

 

Common stock

 

1,173

 

 

 

1,169

 

Additional paid-in capital

 

5,205,839

 

 

 

5,170,760

 

Retained earnings

 

221,149

 

 

 

265,118

 

Total stockholders’ equity

 

5,428,161

 

 

 

5,437,047

 

Noncontrolling Interests

 

 

 

Common units of the Operating Partnership

 

53,275

 

 

 

53,524

 

Noncontrolling interests in consolidated property partnerships

 

178,257

 

 

 

184,390

 

Total noncontrolling interests

 

231,532

 

 

 

237,914

 

Total equity

 

5,659,693

 

 

 

5,674,961

 

TOTAL LIABILITIES AND EQUITY

$

11,401,045

 

 

$

10,796,987

 

KILROY REALTY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per share data)

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

REVENUES

 

 

 

 

 

 

 

Rental income

$

265,643

 

 

$

281,688

 

 

$

1,117,737

 

 

$

1,086,018

 

Other property income

 

3,373

 

 

 

2,656

 

 

 

11,957

 

 

 

10,969

 

Total revenues

 

269,016

 

 

 

284,344

 

 

 

1,129,694

 

 

 

1,096,987

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

Property expenses

 

60,731

 

 

 

55,323

 

 

 

228,964

 

 

 

202,744

 

Real estate taxes

 

21,000

 

 

 

27,151

 

 

 

105,868

 

 

 

105,869

 

Ground leases

 

2,560

 

 

 

2,092

 

 

 

9,732

 

 

 

7,565

 

General and administrative expenses (1)

 

22,078

 

 

 

25,217

 

 

 

93,434

 

 

 

93,642

 

Leasing costs

 

1,956

 

 

 

1,404

 

 

 

6,506

 

 

 

4,879

 

Depreciation and amortization

 

86,016

 

 

 

91,396

 

 

 

355,278

 

 

 

357,611

 

Total expenses

 

194,341

 

 

 

202,583

 

 

 

799,782

 

 

 

772,310

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

 

 

 

 

 

 

Interest and other income, net

 

10,696

 

 

 

1,264

 

 

 

22,592

 

 

 

1,765

 

Interest expense

 

(32,325

)

 

 

(23,550

)

 

 

(114,216

)

 

 

(84,278

)

Gain on sale of depreciable operating property

 

—

 

 

 

—

 

 

 

—

 

 

 

17,329

 

Total other expenses

 

(21,629

)

 

 

(22,286

)

 

 

(91,624

)

 

 

(65,184

)

 

 

 

 

 

 

 

 

NET INCOME

 

53,046

 

 

 

59,475

 

 

 

238,288

 

 

 

259,493

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling common units of the Operating Partnership

 

(471

)

 

 

(588

)

 

 

(2,083

)

 

 

(2,283

)

Net income attributable to noncontrolling interests in consolidated property partnerships

 

(5,291

)

 

 

(6,262

)

 

 

(23,964

)

 

 

(24,595

)

Total income attributable to noncontrolling interests

 

(5,762

)

 

 

(6,850

)

 

 

(26,047

)

 

 

(26,878

)

 

 

 

 

 

 

 

 

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

$

47,284

 

 

$

52,625

 

 

$

212,241

 

 

$

232,615

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

117,240

 

 

 

116,878

 

 

 

117,160

 

 

 

116,807

 

Weighted average common shares outstanding – diluted

 

117,816

 

 

 

117,389

 

 

 

117,506

 

 

 

117,220

 

 

 

 

 

 

 

 

 

Net income available to common stockholders per share – basic

$

0.40

 

 

$

0.45

 

 

$

1.80

 

 

$

1.98

 

Net income available to common stockholders per share – diluted

$

0.40

 

 

$

0.45

 

 

$

1.80

 

 

$

1.97

 

________________________

(1)

The three months and year ended December 31, 2023 includes $4.9 million and $17.0 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 December 31,

 

Year Ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income available to common stockholders

$

47,284

 

 

$

52,625

 

 

$

212,241

 

 

$

232,615

 

Adjustments:

 

 

 

 

 

 

 

Net income attributable to noncontrolling common units of the Operating Partnership

 

471

 

 

 

588

 

 

 

2,083

 

 

 

2,283

 

Net income attributable to noncontrolling interests in consolidated property partnerships

 

5,291

 

 

 

6,262

 

 

 

23,964

 

 

 

24,595

 

Depreciation and amortization of real estate assets

 

84,402

 

 

 

89,536

 

 

 

348,064

 

 

 

350,665

 

Gain on sale of depreciable real estate

 

—

 

 

 

—

 

 

 

—

 

 

 

(17,329

)

Funds From Operations attributable to noncontrolling interests in consolidated property partnerships

 

(8,191

)

 

 

(9,156

)

 

 

(35,236

)

 

 

(36,198

)

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

$

129,257

 

 

$

139,855

 

 

$

551,116

 

 

$

556,631

 

 

 

 

 

 

 

 

 

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

 

118,896

 

 

 

118,568

 

 

 

118,895

 

 

 

118,586

 

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

 

119,473

 

 

 

119,079

 

 

 

119,241

 

 

 

118,999

 

 

 

 

 

 

 

 

 

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

$

1.09

 

 

$

1.18

 

 

$

4.64

 

 

$

4.69

 

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

$

1.08

 

 

$

1.17

 

 

$

4.62

 

 

$

4.68

 

________________________

(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 $5.7 million and $5.1 million for the three months ended December 31, 2023 and 2022, respectively, and $20.7 million and $19.3 million for the year ended December 31, 2023 and 2022, 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/20240205426452/en/

Eliott Trencher Executive Vice President, Chief Financial Officer and Chief Investment Officer (310) 481-8587 or Bill Hutcheson Senior Vice President, Investor Relations & Capital Markets (415) 778-5678